What this Campaign is About

There are two excellent articles in the New York Times this morning that I think clearly articulate the central fulcrum of this election.  The first by Tyler Cowen focuses on how America has begun to move from a wealth generating society into a wealth taking society by focusing too much of our energy on the political fight over how the pie is divided up, and not enough on actually enlarging the size of the pie.  The second by Chrystia Freeland compares the US to Venice in the 14th Century, and how the US is in danger of, as Venice did then, moving from an inclusive economy where there were opportunities for risk takers to enter the ranks of the elite, to a closed system where the elite just sucked as much wealth out of everyone else as they could and closed off opportunities to the rest of society to join their ranks.

Mitt Romney has recently been trying to apologize for and walk back his comments about the "47%" of Americans who are "takers" as opposed to "makers" in our economy.  A recent survey showed that 96% of Americans have received direct benefits from the government at some point in their lives (Mitt Romney's own father was on welfare at one point in his life), so the idea that there is one portion of society that takes and another that makes is absurd.  But beyond the absurdity of his comments, and the absurdity of his apology for them (Romney's first reaction to the public finding out about his 47% comments was to stand behind them), lies I think the essence of what this campaign is about.

Romney, even in his recent "moderate" incarnation, clearly believes that he and wealthy people like him are the primary engine of our economy.  He believes that the wealthy people, by putting their money at risk in the market help to grow the economy and create jobs through their support of new innovative ideas.  It's why Romney sees nothing wrong with his effective tax rate being far lower than most working class Americans.  In contrast the President  has always said that he "wants to grow the economy from the middle out."  Now Mitt Romney would always say that the middle class is important,  and that his policies will do more for them than the president, but let's go back to his comments on the 47% of Americans.  Think about the audience for those comments.  Mitt Romney made his makers and takers distinction before some of his very wealthy campaign donors, people who were spending thousands of dollars just to hear him talk and ask him a few questions. His message to them was that even though they and other people like them had been by far the greatest beneficiaries of the US's economic growth over the last half century, that it was the poor and the working class, who have hardly benefitted at all from that economic growth, who deserved to pay more in taxes.

This is the whole campaign. Mitt Romney is pretty vague about his policies, but one thing he has not been vague about is that he thinks that wealthy people like him are so important to our success as a country that we should keep cutting taxes on them to allow them to put more money into the economy and help it to grow.  What are the consequences of such a policy?  Well, there are really two possibilities.  If you want to cut taxes on the rich, or even just leave them where they are, you either have to raise taxes on everyone else, or you have to borrow more money which will eventually force everyones takes to go up.  The bottom line is that for the rich to pay less everyone else has to pay more.  That hurts social mobility.  If you have to pay more in taxes, you really aren't able to worry about taking a risk and starting a new business, or getting education to learn a new skills.  We need more people taking risks not less, and right now the system is set up to really only favor those at the top, whose only real concern seems to be to stay on top.  Which is why they're all too happy to hear from Romney that he sees them as the makers, and those who are the most vulnerable are the takers.  It absolves them of their responsibility to pay their fair share.  Can you close the budget deficit just by taxing the wealthy? No, but if you don't raise taxes on the wealthy, you have to make up the difference some place else, and all of the other options tend to hurt those Americans who can least afford it the most.

The consequences of such a policy put into action would be disastrous.  We have already seen how much the deck is stacked in favor of the wealthy with this recession. Wall Street gets a bailout and they're already back to making big profits.  Meanwhile, the payroll tax credit, which is a huge benefit to working families, will likely die at the end of this year, with neither party lifting a finger in its defense. If the President wants to win reelection, he needs to make this distinction clearer.  It's great to talk about growing the economy from the middle out, but Obama needs to provide a clearer vision of what that means.  America should be able to provide a quality education to all of its citizens. It should be able to provide anyone with a good idea the ability to put that idea into action in the marketplace. But those things are not true right now for any number of reasons. Obama has to show himself to be the president who will help change that, who will fight to make the system work for its citizens. We all have an ownership stake in America.  We don't need a president who absolves those who have benefitted the most from their responsibility to their fellow citizens, we need a president who fights so that everyone has the opportunity to achieve their version of the American dream.