My core theory of US politics can be summed up with two, very optimistic principles. The first is that the US electorate as a whole is very wise, notwithstanding the less-than-wise nature of many individuals. The second is that the US political system, as devised by the Constitution and its collective amendments, is self-healing; it is the greatest application of complexity theory in the history of the world. I realise these two principles go against the grain of much educated thought, but they have proven themselves over time, having really failed only once (in 1860). I can go more into these principles and why I believe in them in some future post.

Previous writings from the Dynamist: from realignment to backlash

Back in 2010, I wrote two pieces analyzing the state of politics. In the first from March 2010, "The GOP will not repeal ObamaCare", I first walked through why I thought the outright repeal of Patient Protection and Affordable Care Act ("PPACA" or "ObamaCare") would not really be a winning political issue for the GOP in the end, even though the nature of the Democrats' overreach on the issue was certainly helping the GOP in the 2010 midterms. I then ran through the laundry list of remaining issues (from the perspective of the electorate) and found 4 favoring the Republicans, 2 favoring the Democrats and 3 mixed. In the second from October 2010, "The Middle Class is Still Up For Grabs", I previewed the Democrats' upcoming defeat (where I believe I was the first to use the term "shellacking", but received no attribution from President Obama). I put that defeat into the context of building political coalitions, and how neither party had built a platform that truly builds up the middle class.

Both of these articles represented an adjustment from my 2008 writings which posited that 2008 might have been a "realigning election" that created a new majority coalition in favor of the Democrats and the northern, "blue" states. If I had to reflect on the realignment theory today, I would instead say it happened in two steps. First, in the late 1960s and early 1970s, when the "New Left" was forming in opposition to Vietnam and Jim Crow and in favor of women's rights, environmentalism and affirmative action, it could just as easily formed within the Republican Party as the Democratic Party. At the time, it was the Southern, socially-conservative Democrats that had gotten us into Vietnam and had defended segregation in the South. The Republican Party made the choice, however, to shortcut a longer term realignment in favor of uniting with Southern conservatives to implement an economically conservative agenda which has since become dominant in our politics, achieving realignment in 1980 with Ronald Reagan and gaining in strength during the 1990s and early 2000s under Clinton and Bush II. While the New Left would become marginalized during the Nixon and Reagan years, it eventually mellowed a bit and strenghened during the Clinton years before achieving realignment status under Obama.

The political framework today – stalemate?

Demographic changes have given the New Left its boost over the top in the Obama years, as the coalition of strong support for Obama among African-Americans, Latinos and single women on social issues will likely outweigh the decay of Obama's support among white men and married white women over economic issues over the past four years. The other factor keeping the Democrats in the game, however, appears to be the holdover of the economic Old Left in the industrial Midwest that is not being won over by the GOPs purist free market orthodoxy, particularly led by a former leveraged buyout impresario.

In many ways, the GOP has become a victim of its own success. It's dominant Presidential or Congressional coalitions of the 1970s through the 2000s faded as the party racked up victories on the wedge issues that divided the Democrats: deregulation, free trade, monetarism and inflation, income taxes, the Cold War and defense, urban crime, gun control, illegal immigration, welfare reform, capital gains taxes, the estate tax, the War on Terror and gay marriage. In each case, either the Democrats conceded the issue (gun control, crime, welfare reform, defense) or the GOP took the issue too far (illegal immigration, the War on Terror). Now the parties have fought to a draw on defense (both basically settling in on the center-right) and social issues (by region, with a slight center-left electoral college advantage to the Democrats).

I continue to believe that the economic agenda of the future is still up for grabs, however. The Republicans have become too rigid in their free market orthodoxy, being overly focused on promoting capital formation while mostly ignoring human capital development, which in the new economy can just as, if not more, important as pure capital formation. This is why the regions that have benefitted the most economically from the new economy like New York, Boston, Chicago, the Bay Area, Los Angeles, greater DC don't favor the GOP even though they have done very well under the era of conservative economics. As discussed above, the nearly complete victory of capital over labor in the old economy in the last thirty years has also weakened the GOP economic argument in electorally-rich Midwestern industrial states like Michigan, Ohio, Pennsylvania, and Wisconsin.

The Democrats, on the other hand, still have vestiges of the Old Left in their approach to economics, favoring the kind of centralized approaches to problem-solving that served them well in the industrial, mass-market world of the 1930s through the 1960s, but that are less appropriate for the decentralized, networked world of today. In the long term, the Democrats have an advantage in that they have more flexibility with their base on economic issues than the Republicans, while the Republicans have an advantage in that their basic philosophy is closer to the ulimate endgame if they can back off their fealty to capital and focus more on the middle class (promoting progressive goals with conservative, market-driven means). Until one of the parties seizes the advantage, we have basic stalemate with plodding progress.

Scenarios and issues

With a pretty evenly divided electorate we can be highly confident that the GOP will retain control of the House. Because of two decades of GOP-friendly redistricting, the Democrats need to win the generic House vote by more than 3% or so to flip control. This is pretty important in that the President really doesn't have that much power on domestic issues, and with a GOP House (particularly this GOP House), there isn't much chance of Obama passing any more big agenda items over the next four years. In addition, the Senate is likely to remain evenly divided, so no matter which party nominally has control, there isn't much chance of a president Romney getting the 60 votes necessary to pass any radical policy changes either.

For the next two years at least, the electorate is not voting for either Obama or Romney's agenda. It is instead voting for the type of compromises it wants to see occur. If Romney is elected, the compromises will be as center-right as the Senate will allow. If Obama is reelected, the compromises will be as centrist as the House will allow. If you think about it, this makes much of the apocalyptic rhetoric we've been hearing from both parties seem pretty silly, doesn't it?

Through that lens, the issues:

• Foreign affairs – Here is an area the president does control. Obama is operating in the non-ideological conservative internationalist tradition of Dwight Eisenhower, Richard Nixon (perish the thought) and GHW Bush. After the adventurism of the GW Bush years, Obama's approach pretty well suits the country's mood, which is probably why you saw Romney embrace Obama's positions in the third debate. Despite some of Romney's hawkish talk on the campaign trail, I doubt he would differ much from Obama, but you don't really know, so advantage Obama.
• Social issues – If you vote on social issues, you know who you're voting for. It appears that these issues are helping Obama a bit more, but I'm not going to wade into this, because I don't really vote on social issues and you don't know who won these until you see the turnout on election day.
• Individual Taxes – Polls say people favor seeing the wealthy pay more, which is why Obama isn't being hurt by his stance. Although we can quibble with the math, I think Romney's general approach of flatter rates with less deductions for wealthy is superior. Since I highly doubt the Senate will pass a 20% cut in nominal rates most of Obama's attacks on Romney's "$5 trillion tax cut" aren't really operative. I also think the odds of a "fiscal cliff" disaster would be much lower under Romney as there would be less of a fundamental standoff between him and the House. By the way, this is under the radar screen but both guys are planning to let the payroll cut lapse this year. Advantage Romney.
• Corporate Taxes – Both parties realize that the nominal corporate rate needs to come down to be internationally competitive, offset by a reform of loopholes. Romney favors moving to a territorial tax (focusing on domestic activities only), while Obama wants to tax overseas earnings like domestic earnings (as opposed to only when they are repatriated). While Obama's plan sounds better (taxing companies that "move jobs overseas"), it's not very realistic, since no other country does that and it would therefore encourage foreign takeovers of US companies to save on taxes by moving the corporate domicile abroad. In the end, under Obama, the House will either insist on a territorial tax or nothing will happen. Under Romney, I'm pretty confident we'll see reform pass, so advantage to Romney.
• Fiscal policy in general – I don't think the markets or the economy want a sharp fiscal consolidation in the near term. I think the combination of a slightly revenue-positive tax reform, long term entitlement reform and discretionary spending controls without sharp cuts (aka something like "Simpson-Bowles") is probably the best outcome. While I think Romney would be better at finding a compromise on taxes, I think Obama would have a better chance to craft a broadly-acceptable reform of entitlements if he's willing to do so. Obama has the opportunity to reclaim the Democrats' brand equity on fiscal prudence by crafting a "grand compromise" and a GOP House is likely to go along with it this time around. Advantage Obama.
• Trade policy – Both candidates would be more activist on promoting US exports than the Clinton and Bush administrations, with Romney promising to get tough on China's currency (which I agree with). In the end I think they would both be fine. Toss-up.
• Monetary policy – The next president will get to appoint the next Chairman of the Fed. I would be in favor of reappointing Ben Bernanke or someone like him. It is no longer 1980, where inflation was the big threat and taxes were too high. Now deflation is the threat and tax collections are the lowest since before World War II. We need to move from the default of tight monetary policy and loose fiscal policy favored by the Republicans to a default of loose monetary policy and tighter fiscal policy more favored by Democrats. Advantage Obama.
• PPACA / ObamaCare - The idea of repealing the PPACA with nothing to replace it doesn't seem realistic in the context of our history. Besides, since the Senate is unlikely to repeal the non-budget items, the idea of just starving it seems like a recipe for chaos. While it's a deeply flawed bill, it is probably among the least bad of a bunch of crappy options available to us until we reform the way health care is ultimately paid for. Since the PPACA maintains a "competitive" private system, it leaves the door open for pro-market reforms that could bring costs down while sustaining innovation. If Obama is reelected, keeping the PPACA is place is the only thing that he could really describe as a mandate. Advantage Obama.
• Medicare reform – Medicare will bankrupt this nation if it is not reformed. I actually like the Paul Ryan voucher approach for Medicare in the long run, but ironically I also think that it would need the PPACA in place to succeed. Basically there needs to be a competitive marketplace for individual coverage that can't deny you for pre-existing conditions (like being old). The only way that really works is to have the individual mandate for the PPACA so everyone is in the pool. Ultimately we need to reform the way Medicare pays for health care to move away from the current fee-for-service if we ever want to use competition to drive down costs, so the Ryan plan and ObamaCare go hand-in-hand. Kumbaya! Toss-up.
• Social Security reform – We only need to tweak Social Security to make it solvent. Everyone knows the ultimate solution will be a combination of reduced benefits for the wealthy and a gradual increase in the retirement age, so let's just get on with it already. Advantage Romney.
• Education – Obama and his Education Secretary Arne Duncan have been doing a good job building on Bush's No Child Left Behind reforms, gradually introducing competition to the system. Obama has coopted a bit of the GOPs reform mantle here, but it works. Otherwise, most of the real battles in education reform are at the state and local level. Advantage Obama.
• Energy – We need to ride the fracking, shale oil and deepwater drilling boom as hard as we can without harming the environment too much. While Romney would let it run harder, Obama gets more cover from environmentalists. While I think the idea of millions of "green-collar jobs" is a joke, I'm not totally against investing in research on green energy (solar and wind, not biofuels) and conservation (electric cars, green architecture). Toss-up.
• Infrastructure investment – Obama blew his big opportunity here with his boondoggle of a stimulus bill. If he has focused on bread and butter spending like bridges, airports, roads and local transit, he could have built a strong coalition for a multi-year increase in infrastructure spending. Instead the bill was known for esoteric stuff like high-speed intercity rail and poorly-invested green energy loan guarantees that left people scratching their heads. To me this was the biggest disappointment of Obama's first term. Romney doesn't really talk about this, so I'd still say advantage Obama.
• Financial reform – The Dodd-Frank financial reform bill is a bad bill that can rightly be attacked from both the left and the right. I would have focused on simpler, but more fundamental reforms (like limiting the size of an bank's liabilities relative to GDP and increasing the required capital cushion beyond what is currently contemplated). Instead we have a byzantine mess that was nevertheless better than no reforms at all. Since the GOP hasn't articulated a realistic alternative, I'd have to begrudgingly say advantage Obama.
• Other stuff – Beyond the above on budget issues I'd prefer the GOP's approach. The Federal government should be made to be better at a smaller number of things, with more devolution of responsibility to the states (or to international bodies, where appropriate). I know not everyone agrees with that, but I think it's more appropriate for the decentralized world we live in today. Advantage Romney.

My quasi-endorsement of Mitt Romney

So looking at the above, it looks like I favor Obama, but I don't. While I voted for Obama last time, I intend to vote for Romney this time around. Personally, I am most focused on macro economic issues where I tend to prefer Romney's approach. I also think he will be better at crafting compromises with Congress and therefore there would be less of a chance of the kind of stalemate disaster scenarios that have a small chance of occuring under Obama. I am also more familiar with Romney's business background than most and so respect his skill and acumen and think he might make a better problem solver than Obama. That said, I also think neither party nor candidate really has a set of policies to build up the actual employment and earnings of the middle class. I like Obama enough and think he has done a good job on some things and I understand why he is favored to win reelection. As I said before, either man would be pretty hemmed in by Congress if elected. So while I slightly favor Mitt Romney, I'm probably one of the few people in the country who thinks it won't really matter that much in the end.

All opinions expressed herein are my own, and are not meant to represent the views of any organization with which I am affiliated.