Explaining the Closeness of the Election redux

OK Students, here we go again and I hope it does not disappear again as I know I do not have another one in me.

My slowness in returning to this is indicative of what will happen in the future.  I have returned to the workforce to seek my shot at returning to the 2%.  I know, you are thinking who are they? Well they are the 1% and those working stiffs who fall just short of being in the 1%.  I, fortunately, have spend most of the last 20 years earning enough to make it to the 2% but never made it to the 1% (except possibly for the year in which I got a boatload of stock in my last employer which became worthless so I don't count that).

I am basically working for the cost of health insurance plus my cost of commuting and not being at home for breakfast or lunch.  I am also contributing a little to Medicare, social security and the income tax authorities to pay public servants, the park system, and help those who make less than I do.

However, it is eye opening to work for so little because I am earning 2x the poverty level.  Once I buy an individual health care policy (because my employer cannot afford to buy it for me and keep me employed), I have only enough to cover the cost of commuting.  So when I go buy a couple of weekend dinners in the grocery store, I suddenly find I have spent $120 which I have not made (thankfully, I have been a saver all my life and have savings to cover the cost of life).  However, it puts into perspective, the challenge people who make less than I do have in covering the cost of life while saving any money for their elder years.  Not to mention, why they create costs, that the rest of us pay for, in hospital E.R.'s when they need service and do not have health insurance.

How does this translate into the closeness of the election?

Well, the electorate is a complicated mass of interests. If only it were as simple as it was when we were growing up.  Then it was, who will help business around the margin or, who will help workers around the margin.

Now it is filled with complex mixtures of who care about social issues above all else, who cares only about cutting taxes above all else, who cares about a strong military above all else and so on.  Throw in a little hatred for the other side in terms of personalities and a belief that power is the force to rule by and thwart rule by and you have the political system in the U.S. of today.

The election is close because many people's minds are rooted in the economy they grew up in .  They believe that somehow the U.S. can return to that economy and they believe that Washington can create policies that will return the U.S. to that economy.  Less Taxes and less regulation for the Republicans and fair taxes and prudent regulation for the Democrats.  However, it is not that simple.

The driving forces of economic growth in the 1990's were tax increases that balanced the budget combined with the peace dividend from the USSR's collapse combined with Federal Reserve success in reducing inflation.  The tech bubble burst all that so Bush II's fiscal stimulus threw tax cuts shortened that recession, but then the War on Terror started and that boosted the fiscal stimulus by borrowing 100% of the War on Terror without raising tax revenues to pay for it.  This created the housing bubble (along with a failure to regulate prudently) and when real estate bubbles burst, everyone loses.

Add to that the realization now that the productivity improvements in the private sector that have been generated over the last 20 years and raised pay for those who remain employed in the private sector have not been matched by productivity improvements in the public sector, but pay has gone up in the public sector.  Now property taxes have reached their limits, municipalities cannot honor promises they made and people want a solution that stabilizes local finance.  Many people are attracted to the belief that if you starve the beast of government by not allowing any tax increases you will force a solution.  However, a near equal number of people believe government does good and should be paid for.  They also believe transitions should be managed and gradual.

Now people are angry, disappointed, desperate in some cases and feeling lost by the system.  That is why this election is so close and why it is so important that President Obama be reelected.  I believe in managed gradual solutions.  That is what is good for business, good for employment and good for people

There are limits on what the government can do.  Real estate collapses take 5 to 10 years to work through.  The U.S. is probably only half way through this mess. Yet, the realities of the fiscal framework require that a long term solution to restoring fiscal balance be found.  It must include increases in revenues with a fix for entitlements.  But you cannot fix entitlements without finding health insurance for the uninsured. I once remember a figure of something like $2,000 of health insurance premium goes to pay for the uninsured.  So Medicare is paying $2,000 per retiree to cover the uninsured.  That alone will not fix Medicare, but it will help.