Entries for August 2008

Sarah Palin doesn't tick off all the boxes—notably foreign policy experience. But she ticks off quite a few. She is pro-life. She will appeal to economic conservatives. (Here is what Club for Growth President Pat Toomey says: "At a time when many Republicans are still clinging to pork-barrel politics, Governor Palin has quickly become a leader on this issue. She is a principled reformer who understands how badly wasteful spending has marred the Republican brand.") And as far as national security goes, energy is at the center of that issue—a Palin strength. If early reaction is any indication. St. Paul will be rocking.

Although there seems to be a last minute buzz bomb for former eBay CEO Meg Whitman, my sources tell me that Tim Pawlenty seems almost certain be McCain's running mate. Pawlenty is like a mini-me McCain, more of a balanced-budget guy than a tax cut guy. (Though he's vetoed tax increases as governor.) Plus he's a greenie. Pawlenty's also pro-life and has a working-class background. Expect him to be deployed to the Big Ten states—Michigan, Pennsylvania, Ohio, Wisconsin, and, of course, Minnesota.

Jimmy P. at the DNC— OK, so I am here at Invesco/Mile High Stadium and I finally have an up-close view of "The Temple," the Greek-column backdrop for Barack Obama's acceptance speech tonight. Actually, it looks like a tiny chunk of a mini-Parthenon. Sorry, but I can't help thinking of the "rockumentary" film This is Spinal Tap when instead of an 18-foot replica of Stonehenge being lowered on stage behind the rock group, an 18-inch replica comes down from the ceiling during a concert. But hey, I am sure it will look like a million bucks on television. I also saw singer Sheryl Crow warming up, as well as Olympic gymnast Shawn Johnson.

Jimmy P. at the DNC—I took another poll of 24 DNC delegates. I asked them "What should 'the rich' pay in income taxes." Here is what they told me:

1. 50 percent said "25 percent"
2. 25 percent said "20 percent"
3. 12 percent said "30 percent"
4. 12 percent said "35 percent"

Average: 25.6 percent

Me: Of course, 25.6 percent is actually lower than what the top rate is today. Barack Obama, by contrast, wants to raise it to 39.6 percent. None of the delegates said that the rate should be higher than 35 percent. That is exactly what the top rate is currently thanks to the Bush tax cuts of 2001 and 2003. And a fair number of people thought that income tax rates for wealthy Americans were actually lower than for middle class folks. I think they were confusing capital gains rates with income tax rates thanks to Warren Buffet saying he paid a lower tax rate than his secretary. A fair number of people also thought that as long as rich people paid more in total taxes, it didn't matter what the rates were. That's right, they like the idea of a flat tax. Fascinating stuff.

Jimmy P. at the DNC—The broad strokes of the economic picture the Democrats have been painting here in Denver are as follows: (1) We're on the verge of the Great Depression 2.0; (2) Markets and the private sector (Wall Street) have failed working people; (3) Barack Obama is the new FDR who will save the economy with a "green" New New Deal. (At least that is the wiseguy version.)

So how terribly inconvenient is it that the Commerce Department reported today that the economy grew at a revised 3.3 percent in the second quarter. Was it all about the government rebates? Nope. Here is Mike Englund over at Action Economics: "It turns out that a hefty 4.8 percent real growth rate was seen for real final sales in Q2, with the bulk of the strength in the net export component that defies the explanations that the gain was 'all due to rebates.' The rebates likely did boost nominal consumption growth with a gain split between price gains and real growth. Yet, Q2 was clearly poised for a solid performance anyway, led by trade, nonresidential construction, and a bounce in government spending there were all likely insensitive to the rebate program." Yes, yes, I know, global growth is slowing. But a lower "oil tax" on consumers will help growth. And we'll see if John McCain in St. Paul amps up his growth agenda with any new proposals. His skimpy middle-class tax cut has been getting hammered here. Hard.

Just bumped into Leon Panetta, noted budget hawk and former Clinton chief of staff. He urged Barack Obama to focus more on cutting the budget deficit. "He has got to take the hit in his first term," Panetta says. That means higher taxes and bigger spending cuts. (Obama so far has taken an "investment first, deficit second" approach.) Panetta says he and other former Clinton economic advisers are especially concerned that the issue of the budget deficit, which he believes could be $600 billion or more next year, has gotten almost zippo attention at the convention so far. Panetta also thinks Obama would be smart to go after entitlement reform right away.

Jimmy P. at the DNC—My sources tell me that Mitt Romney will not be John McCain's running mate. Joe Lieberman, Kay Bailey Hutchinson, Meg Whitman still in the mix. Developing...

Jimmy P. at the DNC—Another staple of the many convention speeches is the claim that Obamanomics, via government "investment," will create five million "green collar" jobs. But here's the thing: These jobs are, for the most part, not the kind of gigs many middle class folks would have much interest in doing: bike repair, hazardous material cleanup, landscaping, tree cutting, attic insulation, large-scale green waste composting.

Then again, these jobs really aren't geared toward the middle class to begin with. A 2007 report by the city of Berkeley—of course!—described the potential pool of applicants for green collar jobs this way: "Youth and adults who do not have a high school degree, have been out of the labor market for a long time, were formerly incarcerated, have limited education and/or labor market skills." So basically we're are talking about matching low-skill folks with low-wage jobs. For the really high-paying green jobs, you have to look at the firms being created by entrepreneurs and financed by venture capital, with or without federal tax subsidies. But there's been no mention of that in Denver.

Jimmy P. at the DNC—I keep hearing a lot of this sort of pessimism, both in the speeches and among the delegates: "America is facing its greatest economic challenges since the Great Depression." Really. That's a pretty big stretch given that we've only had one quarter of negative economic growth in the past year, unemployment is still below 6 percent, incomes were growing briskly from 2003-2007, and productivity has averaged more than 2.5 percent a quarter during the past year and a half. Some perspective, people!

And why go back to the Great Depression, anyways? For a really bad economic climate, just go back to 1980, the last year of the Carter administration. The Misery Index (unemployment rate plus inflation rate) was 20.8. Today, the MI is at 11.3. (We were also at the start of a productivity slowdown that took a generation of smarter tax, regulatory and monetary policy to help turn around.) By the way, a new forecast from a respected group of University of Michigan economists predicts the economy will grow 2.6 percent in the first half of 2009, 3.3 percent in the second half, and 3.6 percent in 2010. But that doesn't fit into the gloomy meme here in Denver.

Jimmy P. at the DNC—This from Mark Warner's keynote: "You know, America has never been afraid of the future, and we shouldn't start now. If we choose the right path, every one of these challenges is also an opportunity. Look at energy. If we actually got ourselves off foreign oil, we can make our country safer. We'll start to solve global warming. And with the right policies, within 24 months, we'll be building 100 mile-per-gallon plug-in hybrid vehicles right here - with American technology and with American workers."

Me: Where's the energy going to come from to power all those millions of cars plugged in every night across America? Renewables? Not yet. I don't see how this happens without more nukes, an idea Obama is decidedly cool on.

Jimmy P. at the DNC—Earlier today, a top Obama campaign adviser I was talking to seemed to relish the idea of Mitt Romney being picked as veep. Democrats certainly have their rhetoric ready. During the economic-themed speeches tonight, I keep hearing the phrase "country club economics." That seems made for millionaire Mitt and multiple-home McCain. As it is, expect veep Biden, unions, and outside liberal groups to push the class-warfare angle hard.

Jimmy P. at the DNC—I took a poll of 24 Democratic delegates. I asked them how much money a person had to make a year to be considered "rich." Their choices were $250k or more, $500k or more, $750k or more, or $1 million or more. The results: 38 percent said $250k, 13 percent said $500k, 25 percent said $750k and 25 percent said $1 million. What's interesting about this is that their candidate sees $250,000 as the magic level at which wealthy people need to pay higher taxes. But 60 percent of Obama's own delegates don't seem to think that level of income makes one wealthy. I'll have a new poll tomorrow.

Jimmy P. at the DNC—I chatted briefly yesterday with Obama economic adviser Austan Goolsbee while we were both roaming the halls at the Pepsi Center. I told him I would write a post about five good things in his boss's economic plan. (He didn't charm me. I was going to do it anyway. Really.) I already touched on this earlier today but I wanted to expand on it just a smidge. So here goes:

1. Obama cuts taxes for the middle-class.
2. Obama thinks growing the economy is an imperative.
3. Obama thinks protectionism is bad.
4. Obama hasn't bought into the theory that investment income should be taxed at the same high level as labor.
5. Obama seems willing to consider a corporate tax reduction if subsidies and tax exemptions also were eliminated.

So there you go.

Jimmy P. at the DNC—The focus is on the economy today. Interesting timing. First, you had yesterday's IRS numbers which showed that taxpayer incomes finally rose above their 2000 level in 2006. Now today, the Census Bureau reports that "real median household income in the United States climbed 1.3 percent between 2006 and 2007, reaching $50,233... This is the third annual increase in real median household income." Even better, income inequality decreased. Of course, the economy has weakened thanks to higher oil prices and the credit/housing crunch. But I think this is more evidence that a growing economy tends to solve a lot of the problems they are worried about here at the convention like income inequality.

Jimmy P. at the DNC—The economy is tonight's theme here in Denver. (The formal title is "Renewing America's Promise.") So, in honor of that, I thought I would point out a positive in Barack Obama's economic agenda: Obama realizes that economic growth is good.

Now, that sounds like a joke, but it isn't. As a former aide to President Clinton told me yesterday, one of his boss's big accomplishments was to convince his party that growing the economic pie, not just redistributing wealth, was indispensable. (Now, this is a battle that Democratic centrists may have to refight given the growing hostility of many environmentalists to economic growth.)