The debate was again very stimulating, and again I had trouble sleeping, more out of excitement this time, not because I was fighting against despair, as was the case after the first Obama – Romney confrontation.

This debate turned the election back to its substantial fundamentals. Obama’s September advantage has evaporated. It was perhaps inflated by the Democrats excellent convention performance and the Republican’s very poor one, and also by Romney’s 47% put down. Now there is a real contest between a centrist who is trying to move the center to the left (think Obamacare), and a professional candidate with unknown political orientation, clearly against Obama, though not clear what he is for.

Three competing approaches to governance, in fact, have been presented in the campaign. If Romney had won last night, he would likely win the election. Then there would be a contest between Romney, the Massachusetts moderate, and Romney, the severe conservative. There’s no telling what the result would be. But because Obama prevailed, he is still in there, and for three reasons I think that he will likely prevail. It’s a matter of authenticity, common sense and American identity.

Moderate Romney won the first debate because he performed well and because the President didn’t. That was reversed last night. The President was sharp, answering questions accurately and with authority, responding to Romney’s attacks precisely, most evident in the way he turned his greatest vulnerability, his administration’s handling of the attacks on the diplomatic mission in Benghazi, Libya.

Romney tried to use the same technics to dominate and shape the discussion as he did the last time.  But it was off putting. He insisted on talking when moderator Candy Crowley tried to keep him within the time limit, first with success, then failing. His attempt to bully a woman didn’t look good, as was noted on social media. And then there was the unfortunate turn of phrase “binders full of women,” a phrase that took off on the web immediately, revealing as it does a patronizing approach to woman and a view from on high of human beings as pages that fit into binders.

Romney was not nearly as weak as Obama was in the first debate. But Romney’s second performance reveals the unattractive technics he used successfully in his first performance, perhaps lessening the earlier success.

In the first debate, Romney pivoted. His move to the center thrilled Republican moderates and operatives, apparently making him attractive to independents and undecided voters. It confused Obama, who responded poorly. But prepared for this now, Obama effectively responded and Romney now wasn’t able to cogently account for his proposals or for himself.

Romney was caught between his supply side fantasies of cutting taxes on the “job creators” to stimulate economic growth, and a promise that he wouldn’t favor the rich, when job creators = rich. He declared that his move to cut tax rates and radically increase military spending will be paid for by closing unspecified loopholes, but wouldn’t or couldn’t provide evidence. Obama was particularly sharp in criticizing this.

“Now, Governor Romney was a very successful investor. If somebody came to you, Governor, with a plan that said, here, I want to spend $7 or $8 trillion, and then we’re going to pay for it, but we can’t tell you until maybe after the election how we’re going to do it, you wouldn’t take such a sketchy deal and neither should you, the American people, because the math doesn’t add up.”

Romney used an authoritative tone to trump such contradictions in the first debate. It didn’t work last night. And there was a big difference between his weak performance and Obama’s. Obama’s identity, his character, like it or not, is consistent. Romney’s isn’t. After campaigning for President for six years, it is still not clear whether he is severely conservative Romney or moderate Mitt. Strong performance can hide this, but the weak performance raised serious doubts.

Romney tests common sense both in the specifics of his major policy ideas and in presentation of self. His strongest move in the debate was to use every bad statistic about the economy, sometimes questionably cooked, and claim it is the fault of Barack Obama, from employment statistics to the price of gasoline. Without recognizing the larger historical and global context of hard times, it is all Obama’s fault. Some of this seems pretty compelling. It is his best argument, but I have my doubts that it can work when the alternatives Romney proposes so obviously most directly benefit the most privileged and so closely resemble the policies of George W. Bush. The Governor’s inability to distinguish himself from Bush and his policies, I think, was a notable low point in Romney’s performance

Women played a special role in this debate. There was a stark contrast in the way that Romney spoke about and to woman and the way that the President spoke: women in binders versus “women as heads of households,” as the President answered the question of equal pay for equal work. What was remarkable about the women in binders gaffe, is that it revealed a candidate who seems to be removed from America as it is and as it is becoming: less white, Protestant, Anglo, heterosexual, socially equal and mobile, and educated, than Romney and the Republicans imagine, with more suffering that demands government action. Obama and the Democrats speak to the America that is becoming, while the Republicans are in denial.

I realize this may be the most politically momentous night of my life. The differences between Romney’s and Obama’s approaches to America and its problems are stark and the choice was clearly revealed. Obama won the contest, in my judgment and according to the early polls.  As a partisan, I am very pleased. As a sociologist of political culture, I am intrigued.

In my next post, I will further consider the debate and focus on the positive vision that Obama expressed. I heard many commentators last night declare that the President has still not presented his plans for a second term. I don’t think this is accurate and will explain.

Beyond the 1937-like craze in Congress today over cutting the budget deficit, there is a more serious debate going on in the US over how to stimulate aggregate economic demand in order to spur more rapid job growth. In this debate, there are competing views over whether to raise spending or cut taxes – sometimes referred to as left Keynesians and right Keynesians. Macroeconomists have mainly favored the spending route because the historical evidence is that spending gives more bang for the deficit buck since the initial impact brings a one-for-one boost to demand, while a tax cut initially loses some bang because tax cut recipients initially save a part of their higher disposable income. But there is agreement among those who engage in this debate that tax cuts too will stimulate demand and job growth, especially when they are aimed at lower income Americans who spend more of their disposable income on the margin than do the rich.

In fact, the greatest moment of success of Keynesian policy in the history of the United States is not the New Deal, as is often claimed by proponents of greater deficit spending in the current crisis. The height of the influence and success of Keynesian policy advisers was the Kennedy administration’s income tax cut of $13.5 billion over three years. The policy was strongly urged by President Kennedy’s Council of Economic Advisers, led by the great American Keynesian economists James Tobin, Walter Heller and Arthur Okun. Facing unemployment rates around 7 percent, the economists sought to bring it down to 4 percent. By early 1964 (after Kennedy’s death), the proposal was passed into law. The tax cut is attributed with moving the economy to 4 percent unemployment and a very high rate of capacity utilization. In his history of that era, Michael Bernstein (A Perilous Progress) writes that “by the fall of 1964 the success of the tax cut was so apparent that, in the words of Arthur Okun, ‘economists were riding about as high a crest of esteem and respect …as had ever been achieved.’ ” It was the bold advice of Democrats Heller, Tobin and Okun that initially established the Council of Economic Advisers as an important political institution.

Kennedy had the luxury of a Congress controlled by the Democrats. Today, President Obama does not have this luxury. Thus, a leader who understands the desperate need for stimulating demand also faces a Congress that will not move an inch in the direction of left Keynesianism. Obama’s jobs proposal recognizes the essential need for demand stimulus, that fallacy of the right-wing argument that a higher deficit in the short-run creates damaging psychological uncertainty, and the political reality that right Keynesianism may be the only route to demand stimulus. While the proposal of $447 billion in deficit stimulus, $253 billion of which takes the form of tax cuts, is too small and comes disappointingly late in the business cycle, it nonetheless represents a very positive step in the current landscape of economic policy. In two senses, then, President Obama has done the right thing.

The failure of economics in the runup to and aftermath of the Great Recession has generated a lively debate about how to reform economics and more specifically about the renewed relevance of Keynesian economics, which had fallen out of favor since the 1970s. The Keynesian message, so important in this latest round of political wrangling over the increase in the US debt ceiling, is that cutting government spending in a slump will only worsen the unemployment problem. The role of expansionary fiscal policy, according to Keynesianism 101, is to provide demand for goods (and thus for employees to produce those goods) when the main sources of demand in a capitalist economy — households and businesses – are not providing a level of demand necessary to generate a socially acceptable level of unemployment.

Keynesianism 102 is about the multiplier effect of changes in spending. This is the notion that an increase in demand (from any source, not just government but certainly including government) will impact employment and incomes with a ripple effect. This includes a direct impact and then a secondary impact when the direct incomes are then spent (in some fraction) and an additional fraction of that is spent, etc.

There are two corollaries to the lesson of Keynesianism 102 that are worth mentioning because they have been raised in the current policy debate. The first is about the differential multiplier effect of a spending increase compared to a tax cut. Empirical studies show that the multiplier effect of the former is greater than the multiplier effect of the latter. The second is about the differential multiplier effect depending on the income of the recipients. Since the poor are more likely to spend a higher percentage of additional disposable income than the rich, a tax cut that benefits low-income people will have a bigger multiplier effect than a tax cut that benefits the rich.

These lessons have not been integrated into current economic policy in the US, where deficit spending and progressive tax reform and expanded benefits for the poor and unemployed have been successfully resisted by the Republican congress. Nonetheless, they are well-established lessons of Keynesianism that most professional economists would accept.

The argument against Keynesianism 101 revolves around the psychology of investor confidence in the face of a rising fiscal deficit. The argument is that business people will reduce their investment spending when they see the government deficit becoming very large because it signals the likelihood of some detrimental future adjustment – either in interest rates, tax rates or government outlays – that will be detrimental for future profits. There is simply no empirical evidence to support this theory compared to Keynesianism 101.

But all this is sideshow in comparison to the lesson of Keynesianism 103.  The fundamental economic point of Keynes’s 1936 General Theory of Employment, Interest and Money was not about fiscal policy or the multiplier or income distribution.  It was about the fact that economic equilibrium (a stable condition from which no economic change would occur without external impetus of some sort) will not necessarily be characterized by full employment. Economists prior to (and some subsequent to) Keynes thought that free market economies would naturally adjust to full employment, as an excess supply of labor would lead to a lowering of wages and a corresponding increase in the amount of employment. Keynes explained that the natural state of a capitalist economy is “unemployment equilibrium,” and without a shock to aggregate demand conditions, there was no reason why the economy would not stay at this unemployment equilibrium. Keynes’s insight implied that the wage reduction strategy was not just theoretically wrong but, if implemented, would likely make the situation worse, since it involved a reduction in household buying power and thus would reduce business confidence.

A prospect as disastrous as the second “dip” that the American economy is about to experience is that of a long period of high unemployment that has no natural tendency to reverse itself. We should not stop our analysis at Keynesianism 101 and 102, since the great social problems facing America are understood best by Keynesianism 103.

So what is to be done? Paul Krugman has been a superb critic of the politicians’ focus on the deficit and the debt rather than on job creation. But he has been relatively quiet about what could be done if in fact the political winds were to shift. Robert Reich has been more explicit. His proposals for job creation include:

1. An additional cut in the payroll tax on employees and employers
2. An increase in infrastructure investment

My guess is that President Obama’s speech this evening will address these issues. If it does, it should be understood as not just a political maneuver, but as a serious attempt to tackle our economic problems.

When I heard President Obama’s Press Conference on June 29, 2011, I wondered if corporate jet tax policies were being driven by a simulacrum or pragmatism. The references to corporate jets seemed to be more aligned with a simulacrum; and the tax policy aspects seemed to be driven by pragmatic concerns with a smattering of campaign type rhetoric. Consequently, the President’s comments generated some strong reactions from associations/lobbyists, the private sector, and unions.

On June 29, 2011, the President and CEO of the General Aviation Manufacturers Association, and the International President of the International Association of Machinists and Aerospace Workers issued a news release with an attachment of a letter addressed to President Obama which was critical of his remarks about corporate aircraft and proposed changes to the tax code. After complementing President Obama on his emphasis on manufacturing, new technology and innovation, they expressed concern that his rhetoric and proposed tax changes would negatively impact the United States general aviation industry which has about 1.2 million jobs linked to it, contributes about $150 billion annually to the U. S. economy, and is a major source of exports.

During the severe economic downturn in 2008, ill-informed criticism of corporate jets and business aviation exacerbated the challenges facing our industry, which led to depressed new aircraft sales and jeopardized very good, high-paying jobs throughout the United States.  More than 20,000 highly skilled IAM members were laid off in this industry.

As our industry looks to begin a recovery and the workforce returns to their high-skilled jobs, we are very concerned that the rhetoric coming from some in your Administration will lead to similar economic difficulties. While such talk may appear to some as good politics, the reality is that it hurts one of the leading manufacturing and exporting industries in the United States. And it adds to the pain so many working families have endured.

Ed Bolen, The President and CEO of the National Business Aviation Association, a lobbyist, which represents more than 8,000 companies which serve the business aviation community, used even stronger language:

“The Obama proposal is bad policy and cynical politics. We will oppose the idea vigorously, and we call on Congress to reject it. We need to focus on policies that foster the growth of business aviation, so that it can continue serving citizens, companies and communities across the U.S.”

Here we see how difficult it is to separate tax policy and fiscal policy from electoral politics. As expected, associational groups including unions want policies in place which support growth in corporate aviation. President Obama proposed a tax code change, which would lengthen tax depreciation on corporate jets  (5 years) to the same schedule used for commercial aviation (7 years). Some people in the Treasury Department have been pushing for years to eliminate accelerated tax depreciation and replace it with the depreciation schedules used in financial accounting.  It is a battle over which entity will get the financial benefits associated with alternative approaches to amortization. Many believe a shorter amortization schedule favors jet owners and fosters higher economic growth while a longer amortization schedule increases taxes sooner, but slows the sale of jets and economic growth.

The situation is further complicated by having included the reauthorization of it in the President Obama’s stimulus bill. Complicating the situation even further, the American Recovery and Reinvestment Act enacted in February 2009, allowed some qualifying capital purchases to be written off in 2009, even more favorable than accelerated depreciation. The most commonly cited estimate of the benefits to the government  is that this would increase tax revenues by $3 billion over ten years prior to considering any negative impacts that this change might have on the industry, i.e. fewer airplanes being made, sold, operated and maintained.

President Obama’s comments in his press conference on June 29, 2011 raised serious policy tax policy issues; however the references made to describe business situation was populist in nature, and may be a simulacrum. The characterization of business aviation was thin, and is at variance with actual practices. Is the “fat cat” characterization of corporate jets a simulacrum? The image imparted was that of a privileged few being pampered while others less fortunate suffered. While some of this may be true, for the most part, it is at variance with why and how corporate jets are used as documented in a Harris Interactive study. Some of the key findings are: “small companies operate the majority of business aircraft … managers and other mid-level employees are the typical passengers on business aircraft … a company’s business airplane use is wide-spread among employees … employees use their time on board company aircraft more efficiently and productivity than when they are in the office or on commercial flights … companies using business aviation typically operate a single aircraft … a large majority of business aircraft flights (80%) are made into secondary airports or airports with infrequent or no scheduled airline service.” The major reasons given for using business aircraft are, “support schedules not met with scheduled airlines, 64%, reach locations scheduled airlines do not serve, 19%, industrial or personal security, 6%, make connections with scheduled airline flights, 1%, and miscellaneous other reasons (cost effective, convenience, combining travel with company trips, flexibility, convenient for clients, personal travel, other), 9%. In addition, many flights incorporate passengers for humanitarian reasons. In 2008, 15,000 were documented, many of which were coordinated by organizations like the Corporate Angel Network, the Veterans Airlift Command, and others.

Balancing what is right for public and private concerns is a difficult task. Fiscal and tax policies have legitimate alternatives; but both a better served when more deliberately considered. Simplifications and simulacrum tend to complicate resolutions of these issues. It appears simulacrum, pragmatism and electoral politics are all involved.

Many of Obama’s critics from the left, including Martin Plot I’m sure, do recognize the accomplishments of Obama and the Democrats.  But they are understandably frustrated with how things are going.  While I think we got a much better stimulus package under Obama than we would have under Republican leadership, that’s not saying much.

A significant effort to address structural problems with the economy, including its escalating inequalities, was not forcefully presented and defended as being economically wise and socially just.  The attack on the human rights abuses of the Bush era was too quiet at best, nonexistent at worst.  Given Martin’s experience with the Argentine dictatorship this is a particularly important point for him.  I understand and respect this.

And disappointment goes further: there was no climate change legislation, no immigration reform, and no labor law, making it easier to organize (The Employee Free Choice Act).  The Republicans succeeded in blocking numerous legislative actions and now they have control of the House and have the Senate under control, even more than before in the age of the ubiquitous filibuster.

So Plot’s critique is important.  Does this prove that the power in the United States is stacked against progressive change?
That power is not an empty space as Martin chooses to put it?  That the space, where power is exercised, is permanently occupied by corporate power and Republican interests?  I think not, primarily because it is easy to imagine things developing differently if the Democrats play their game better, and crucially if Obama had succeeds in (what I take to be his central political project) changing the nature of the center of American politics.  Further, I am far from sure that continued failure is on the horizon.  Things can turn around.

Indeed, I think they will.

With the election of Barack Obama the conversation about race and identity has changed.  We celebrate our diversity with our unity, rather than homogeneity. To be sure there is resistance, but it seems to me that this is clearly a rear guard action, as I have explained in earlier posts.

On the other hand, Obama, like Clinton before him, had as a task to demonstrate the importance of government in a democratic society and in the lives of its citizens.  Clinton failed and Obama is not doing so well in response to Republican–but especially Tea Party–opposition.  But I am not convinced that this is necessarily a lost game for those of us who are on the left of the center, and who want to change the center.

Even yesterday’s compromise has promising aspects.  While it stimulates the economy (however modestly), it will set the stage for a debate during the Presidential elections about the connection between the Republicans and the  wealthy and the connection between Democrats and those are hurt most by the economic crisis.

The rational approach to our economic situation is to stimulate now, address deficit problems in the middle and long term.  The Republican part of the bargain insisted on tax cuts for the wealthy, the Democrats part insisted on aid for the unemployed.

Two years from now, when the issue is to address the long term deficit, the Republicans will argue for continued advantages for the wealthy.  This could help move the center to the left.  Changing common sense is a long cultural march, and the events of the past days may in the end contribute to it.

And I am quite convinced that a third party, which I think Martin was hinting at in his first post, given the institutionalized arrangements in the U.S., would be a recipe for defeat.   Rather, Obama must find his voice.  And people on the left shouldn’t mourn, but organize, in support of the Democratic alternative in general, critical of specific policies and priorities when necessary.

I think ultimately the reason why the Republicans won this past round, beyond the anti-incumbent mood that is a result of the economic crisis, is that they successfully mobilized in opposition to the alternatives that were appearing in Washington under Obama’s leadership.  More democratic mobilization is the answer, not another party or a despairing diagnosis of American politics.