Monday, September 15, 2008

If You Like Michigan's Economy, You'll Love Obama's

Despite the federal government's growing economic dominance, individual states still exercise substantial freedom in pursuing their own economic fortune -- or misfortune. As a result, the states provide a laboratory for testing various policies.

In this election year, the experience of the states gives us some ability to look at the economic policies of the two presidential candidates in action. If a program is not playing in Peoria, it probably won't work elsewhere. Americans have voted with their feet by moving to states with greater opportunities, but federal adoption of failed state programs would take away our ability to walk away from bad government.

Growth in jobs, income and population are proof that a state is prospering. But figuring out why one state does well while another struggles requires in-depth analysis. In an effort to explain differences in performance, think tanks have generated state-based economic freedom indices modeled on the World Economic Freedom Index published by The Wall Street Journal and the Heritage Foundation.

The Competitiveness Index created by the American Legislative Exchange Council (ALEC) identifies "16 policy variables that have a proven impact on the migration of capital -- both investment capital and human capital -- into and out of states." Its analysis shows that "generally speaking, states that spend less, especially on income transfer programs, and states that tax less, particularly on productive activities such as working or investing, experience higher growth rates than states that tax and spend more."

Ranking states by domestic migration, per-capita income growth and employment growth, ALEC found that from 1996 through 2006, Texas, Florida and Arizona were the three most successful states. Illinois, Ohio and Michigan were the three least successful.

The rewards for success were huge. Texas gained 1.7 million net new jobs, Florida gained 1.4 million and Arizona gained 600,000. While the U.S. average job growth percentage was 9.9%, Texas, Florida and Arizona had job growth of 18.5%, 21.4% and 28.9%, respectively.

Remarkably, a third of all the jobs in the U.S. in the last 10 years were created in these three states. While the population of the three highest-performing states grew twice as fast as the national average, per-capita real income still grew by $6,563 or 21.4% in Texas, Florida and Arizona. That's a $26,252 increase for a typical family of four.

By comparison, Illinois gained only 122,000 jobs, Ohio lost 62,900 and Michigan lost 318,000. Population growth in Michigan, Ohio and Illinois was only 4.2%, a third the national average, and real income per capita rose by only $3,466, just 58% of the national average. Workers in the three least successful states had to contend with a quarter-million fewer jobs rather than taking their pick of the 3.7 million new jobs that were available in the three fastest-growing states.

In Michigan, the average family of four had to make ends meet without an extra $8,672 had their state matched the real income growth of the three most successful states. Families in Michigan, Ohio and Illinois struggled not because they didn't work hard enough, long enough or smart enough. They struggled because too many of their elected leaders represented special interests rather than their interests.

What explains this relative performance over the last 10 years? The simple answer is that governance, taxes and regulatory policy matter. The playing field among the states was not flat. Business conditions were better in the successful states than in the lagging ones. Capital and labor gravitated to where the burdens were smaller and the opportunities greater.

It costs state taxpayers far less to succeed than to fail. In the three most successful states, state spending averaged $5,519 per capita. In the three least successful states, state spending averaged $6,484 per capita. Per capita taxes were $7,063 versus $8,342.

There also appears to be a clear difference between union interests and the worker interests. Texas, Florida and Arizona are right-to-work states, while Michigan, Ohio and Illinois are not. Michigan, Ohio and Illinois impose significantly higher minimum wages than Texas, Florida and Arizona. Yet with all the proclaimed benefits of unionism and higher minimum wages, Texas, Florida and Arizona workers saw their real income grow more than twice as fast as workers in Michigan, Ohio and Illinois.

Incredibly, the business climate in Michigan is now so unfavorable that it has overwhelmed the considerable comparative advantage in auto production that Michigan spent a century building up. No one should let Michigan politicians blame their problems solely on the decline of the U.S. auto industry. Yes, Michigan lost 83,000 auto manufacturing jobs during the past decade and a half, but more than 91,000 new auto manufacturing jobs sprung up in Alabama, Tennessee, Kentucky, Georgia, North Carolina, South Carolina, Virginia and Texas.

So what do the state laboratories tell us about the potential success of the economic programs presented by Barack Obama and John McCain? Mr. McCain will lower taxes. Mr. Obama will raise them, especially on small businesses. To understand why, you need to know something about the "infamous" top 1% of income tax filers: In order to avoid high corporate tax rates and the double taxation of dividends, small business owners have increasingly filed as individuals rather than corporations. When Democrats talk about soaking the rich, it isn't the Rockefellers they're talking about; it's the companies where most Americans work. Three out of four individual income tax filers in the top 1% are, in fact, small businesses.

In the name of taxing the rich, Mr. Obama would raise the marginal tax rates to over 50% on millions of small businesses that provide 75% of all new jobs in America. Investors and corporations will also pay higher taxes under the Obama program, but, as the Michigan-Ohio-Illinois experience painfully demonstrates, workers ultimately pay for higher taxes in lower wages and fewer jobs.

Mr. Obama would spend all the savings from walking out of Iraq to expand the government. Mr. McCain would reserve all the savings from our success in Iraq to shrink the deficit, as part of a credible and internally consistent program to balance the budget by the end of his first term. Mr. Obama's program offers no hope, or even a promise, of ever achieving a balanced budget.

Mr. Obama would stimulate the economy by increasing federal spending. Mr. McCain would stimulate the economy by cutting the corporate tax rate. Mr. Obama would expand unionism by denying workers the right to a secret ballot on the decision to form a union, and would dramatically increase the minimum wage. Mr. Obama would also expand the role of government in the economy, and stop reforms in areas like tort abuse.

The states have already tested the McCain and Obama programs, and the results are clear. We now face a national choice to determine if everything that has failed the families of Michigan, Ohio and Illinois will be imposed on a grander scale across the nation. In an appropriate twist of fate, Michigan and Ohio, the two states that have suffered the most from the policies that Mr. Obama proposes, have it within their power not only to reverse their own misfortunes but to spare the nation from a similar fate.


Barack Obama under fire for ignoring advice on how to beat John McCain

Barack Obama and his senior advisers are under fire for ignoring the advice of Democratic senators and governors who are concerned that they do not know how to beat John McCain

The Democratic presidential candidate's slump in the polls has sparked pointed private criticism that he is squandering a once-in-a-generation chance to win back the White House. Party elders also believe the Obama camp is in denial about warnings from Democratic pollsters that his true standing is four to six points lower than that in published polls because of hidden racism from voters - something that would put him a long way behind Mr McCain.

The Sunday Telegraph has learned that senators, governors and union leaders who have experience of winning hard-fought races in swing states have been bombarding Obama's campaign headquarters with telephone calls offering advice. But many of those calls have not been returned. A senior Democratic strategist, who has played a prominent role in two presidential campaigns, told The Sunday Telegraph: "These guys are on the verge of blowing the greatest gimme in the history of American politics. They're the most arrogant bunch Ive ever seen. They won't accept that they are losing and they won't listen." After leading throughout the year, Mr Obama now trails Mr McCain by two to three points in national polls.

Party leaders and commentators say that the Democrat candidate spent too much of the summer enjoying his own popularity and not enough defining his positions on the economy - the number one issue for voters - or reaching out to those blue collar workers whose votes he needs if he is to beat Mr McCain. Others concede that his trip to Europe was a distraction that enhanced his celebrity status rather than his electability on Main Street, USA.

Since Sarah Palin was unveiled as Mr McCain's running mate, the Obama camp has faced accusations that it has been pushed off message and has been limp in responding to attacks. A Democratic National Committee official told The Sunday Telegraph: "I really find it offensive when Democrats ask the Republicans not to be nasty to us, which is effectively what Obama keeps doing. They know thats how the game is played."

Mr Obama tried to answer that critique on Friday when he responded in kind, issuing an attack advert depicting his Republican opponent as out of touch and mocking the 72-year-old Mr McCain's confession that he does not know how to use email. He rammed home the point during a rally in New Hampshire, pointing out Mr McCains recent admission that he was divorced from some of the challenges of ordinary Americans. Mr Obama's campaign manager, David Plouffe, called it the first day of the rest of the campaign.

But that was the fourth time in the last nine months that Mr Obamas team have been forced to declare that the gloves are coming off. And Mr Plouffe's dismissal of Democratic doubts as hand-wringing and bed-wetting only served to reinforce the growing doubts about what some see as a bunker mentality among Obama's inner circle - where outside advice, even from highly experienced people, is not welcomed. The Democratic strategist told The Sunday Telegraph: "They think they know best. They don't return calls. There are governors and senators calling them up with ideas. They don't get back to them. "These are senior people from the border states and the South who know how to beat Republicans, and they're being ignored. They ignored everyone during the primaries and they came through it, so they think they can do the same again."

Mr Obama has never won an electoral contest against a strong Republican candidate. David Axelrod, his chief strategist has been hailed as a political genius for beating the Clinton machine, but Democrats now point out that he has never run a successful campaign in the heartland states like Ohio, Pennsylvania, Michigan and Virginia, which will decide the election. His expertise is in mobilising young, educated and black voters in urban areas.

Mark Cunningham of the New York Post summed up the private views of many: "If it suddenly seems like the Obama campaign doesn't have any idea what it's doing, maybe that's because it doesn't."

Party elders are also studying internal polling material which warns the Obama camp that his true standing is worse than it appears in polls because voters lie to polling companies about their reluctance to vote for a black candidate. The phenomenon is known in the US as the Bradley effect, after Tom Bradley, a black candidate for governor of California who lost after leading comfortably in polls. The strategist said: "I've seen memos where they've been told to factor in four to six points for the Bradley effect, but they're in denial about it. They say the polls also underestimate the enthusiasm of young voters and African Americans and they believe that balances things out. But that's a wing and a prayer stuff. There's previous evidence for the Bradley effect."

Other Democrats are openly mocking of Mr Obama's much vaunted "50-state strategy", in which he spends money campaigning throughout the US in the hope that it will force Mr McCain to divert funds to previously safe states. Critics say a utopian belief in bringing the nation together has trumped the cold electoral calculus that is necessary to triumph in November. Doug Schoen, a former pollster for Bill Clinton, last week declared it insanity not to concentrate resources on the swing states. The Democratic strategist said: "My Republican friends think its mad. Before Sarah Palin came along we were investing money in Alaska, for Christ's sake, that could have been spent in Ohio and Pennsylvania. "It assumes Republicans are stupid and, when it comes to winning elections, they're not."

The one thing everyone agrees the Obama camp have woken up to is the toxic effect on their chances of Mrs Palin's arrival on the national scene. Polls show that white women voters, attracted to her down home virtues, now support Mr McCain by a margin of 12 points, the same lead among white women that George W. Bush enjoyed over John Kerry in 2004. Until recently, Mr Obama led among that group of voters by six points.

A senior aide to one of the most powerful Democrats in the House of Representatives voiced the fears of many: "Palin doesn't just play to the Republican base. She has much broader appeal." The aide said that her repeated mockery of Mr Obama's boasts about his time as a community organiser in Chicago are "the most effective criticisms of Barack Obama we have yet seen." He said: "Americans in small and medium size towns dont know what the hell a community organiser is. Real Americans graduate from high school or college and get a job that pays a wage. Campus radicals go off and organise a community."

Peggy Noonan, the former Reagan speechwriter, blamed the defection of women voters from Mr Obama on the atom bomb of ritual abuse by left-wing bloggers and Democratic officials, painting Mrs Palin as a bad mother and religious weirdo. Ms Noonan wrote: "The snobbery of it, the meanness of it, reminded the entire country, for the first time in a decade, what it is they don't like about the Left."

The Republican strategist Dan Schnur said that the effect was to repel blue collar, family-oriented voters. "They didn't like Obama in the primaries and voted for Hillary. And they still don't like him now so they're voting for Palin. "Obama can still win these voters over, but his difficulty in establishing an emotional connection with them is probably his greatest challenge between now and election day."

On Thursday Mr Obama did take advice from Bill Clinton, who is understood to have suggested ways to show those workers that he cares, an area where the former president excelled. But it is a measure of his plight that the man who derailed the ambitions of Mrs Clinton, the most powerful woman in Democratic politics, now needs help from her husband to overcome the popularity of another alpha female who may be an even greater risk to his White House ambitions.


Obama investment in Florida not paying off

Barack Obama could be on the verge of falling out of contention in Florida. Despite spending an estimated $8-million on campaign ads in America's biggest battleground state and putting in place the largest Democratic campaign organization ever in Florida, Obama has lost ground over the summer. Florida has moved from a toss-up state to one that clearly leans toward John McCain, fueling speculation about how much longer the Democratic nominee will continue investing so heavily in the state.

... Obama allies say he has about 350 paid staffers in the state and about 50 field offices, including in places not known as fertile ground for Democrats, such as Sun City Center, Lake City and Sebring.

But for all the attention to Florida from the Obama campaign, there's little tangible evidence it's paying off. He is farther behind in the state than John Kerry was at this point in 2004, even though McCain began buying Florida TV ads only last week. By this time in 2004, the Bush-Cheney campaign had spent $13-million on Florida TV. In the rolling average of Florida polls compiled by the Web site, Obama has never taken the lead over McCain in Florida, and the latest average shows him behind by 5 percentage points. They were tied in early August. Four Florida polls came out this week, with one showing a tied race, the others showing McCain leading by 5 to 8 percentage points.

"They've had everything going for them - momentum, enthusiasm, money, a complicit national press, a stiff wind at his back for a long time, and he hasn't been able pull ahead in Florida,'' said Republican strategist Alberto Martinez of Tallahassee. "I think Florida is one of those states that's taken off the board pretty soon, as they start focusing resources on states they can win."...

Democrats are still whistling past the graveyard putting on a competitive face on a bad situation. In some ways Florida is like a lot of states where Obama spent a lot of money and still lost in the primaries. His ads are not buying votes. With McCain finally devoting some resources in Florida he should be able to plant his flag there in November.


Ohio Slipping Away from Obama?

The latest polls in Ohio show that John McCain is establishing a consistent lead in the state. Ohio is a bellwether; no Republican has won the White House without it. If McCain can take Ohio, as well as Florida (where he also leads), he probably comes very close to re-creating the winning Bush map of 2004.

Beyond the poll numbers, former Democratic House and Senate candidate Paul Hackett thinks Obama may already have lost the state. The reason? Racism:
While the polling is close I believe it is far worse than the numbers reflect given social apprehension of middle of the road uncommitted respondents to appear racist by not supporting Obama. There has been much speculation across America regarding this phenomenon and as such can impact the accuracy of polling by at least 5 points. Thus instead of being down in Ohio by 3 or 4 points I would argue that for planning purposes the working assumption should indicate that Obama is down in Ohio by roughly 10 points. That's a lot of ground to make up in less than 60 days, and as such there must be an aggressive offense to cover such a distance.

If you think that Hackett isn't doing the Obama campaign any favors by accusing Ohio voters of racism, wait until you hear his advice for turning the race around:
The solution rests with local surrogates on the ground spreading the attack face to face coupled with an air campaign via radio and TV. The message is simple and the professionals can refine it but essentially it should contain these elements:

"Sarah Palin? Can't keep her solemn oath of devotion to her husband and had sex with his employee. Sarah Palin? Accidentally got pregnant at age 43 and the tax payers of Alaska have to pay for the care of her disabled child. Sarah Palin? Unable to teach her 16 year old daughter right from wrong and now another teenager is pregnant. Sarah Palin? Can you trust Sarah Palin and her values with America's future? John McCain? Divorced from his first wife one month and marries a billionaire influence peddler and convicted felon. John McCain, a record of rash and impulsive decisions. That's not change that's more of the same."

Stay classy, Democrats. It's clearly working great so far.


Obama locked into past while McCain sprints by him

Barack Obama knows it. The election he had in the bag is slipping away. The selection of Alaska Gov. Sarah Palin as John McCain's running mate has so thrown him off stride, as it has most other Democrats, that all the momentum he had has vanished. He's getting panicky advice from everywhere. He intends to launch more and sharper attacks, abandoning any pretense of a new and different, more civil campaign.

Democrats know something, and desperation is setting in. They have a novice campaigner who wanders off message. With every advantage in the primaries, Obama couldn't win the big states - New York, New Jersey, Ohio and Pennsylvania - against Hillary Clinton, even when he got to define the rules for running against him. She could never risk alienating the base she'll need in 2012; John McCain and Sarah Palin have no such constraints - hence the panic.

For a "change" candidate, Obama appears to be a man locked in time, unable to move past criticism, unable to move from the grip of the Democratic left, unable to adapt to the changed reality that the campaign is not the referendum on the war in Iraq or on the administration of George W. Bush that he'd envisioned.

He's begun to sound dated. Last week, for example, he devoted valuable campaign days - less than two months remain - into explaining a silly "lipstick on a pig" line. The McCain campaign had reacted, accusing him of making the reference to Palin. "I don't care what they say about me," Obama responded. "But I love this country too much to let them take over another election with lies and phony outrage and `Swiftboat politics.' Enough is enough," he said. (The Swiftboat reference is from the 2004 campaign of John Kerry).

The Democratic left is still seething from the Kerry campaign's loss and is determined to see Bush expelled from the White House in disgrace - the reason it is locked in to making this a referendum on the administration now ending.

It barely worked when the maverick McCain, no darling of the Bushites, got the nomination. With Palin, the Washington outsider, the "third term" argument is plainly absurd. But Obama can't let go, just as the lefties can't let go of the Swiftboat Veterans for Truth defeat of Kerry. He can't move on.

Obama has the habit, too, of reminding voters of their doubts about him, as he did in reminding a Detroit audience that he's been accused of being less interested in protecting you from terrorists than reading them their rights. And, when he professes love of country as his basis for refusing to allow the McCain campaign to attack his words, he raises questions about why he finds the affirmation of love necessary....

Obama got this far by winning small states and Southern states he has no chance of carrying in November. In Georgia, for example, the latest Insider Advantage poll has McCain pulling 56 percent of the vote to 38 percent for Obama, numbers that are not likely to change more than 4 percentage points in November. The undecideds and those who intend to vote for third-party campaigns are at 6 percent....

The MoveOn Democrats who gave Obama the nomination are also locked into the past on Swiftboating and on Iraq. It is the latter problem that has cost Obama his credibility on the war issue and not some perceived slight to his patriotism. He was dead wrong on one of the central issues of our time and he is trying to win an election based on his superior judgment.


The left denigrates the surge to help Obama

There is a recent trend in the mainstream media now that it is clear that we are winning in Iraq to say that the surge was not that important to our success. Here is Tim Rutton in the LA Times:
The Times' story confirms the most sensational revelation contained in Bob Woodward's new book, "The War Within: A Secret White House History 2006-2007," which was published this week. Woodward revealed the technology's existence but, heeding requests from intelligence officials, declined to describe its operations except to say that it had allowed U.S. forces to locate and kill decisive numbers of senior Al Qaeda operatives and Iraqi insurgents. In what may be the book's most controversial claim, Woodward argues that the secret technology and the so-called Anbar Awakening -- in which counterinsurgency techniques developed by the Marines won over tribal leaders in that crucial Sunni-dominated province -- had as much or more to do with stabilizing Iraq as the "surge" in U.S. troop numbers.

Beyond the purely military considerations, there are potentially significant political implications. First and most obvious is the question of the surge's efficacy. The answer matters, particularly to John McCain, who has been one of the surge's most resolute supporters. If it turns out that it was only one -- and, perhaps, the least consequential -- in a confluence of successful American initiatives, then McCain could go from steadfast to stubborn in voters' minds.

This is liberal rationalization to try to cover the fact that McCain was right about the surge and Obama was dead wrong. The surge was just one aspect of a policy that Obama and most liberals opposed in Iraq--winning. The liberal alternative was not to introduce high tech efficiency to the Predators, it was to cut and run--retreat. This new narrative of the left on the surge falls on its face when you compare it to the liberal insistence on withdrawing forces.


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