Where's the Good Cop in the Standoff? The Debt Ceiling, Gov't Shutdown, and Obamacare

President Obama is wrong about not negotiating. He already is already negotiating. It's just that the position he's taking in the negotiation is that he won't talk to anybody. It's really that he's not talking to anybody *yet*. But he'll talk if forced to. He's a stubborn and power-loving lawyer, but not an idiot. If he takes this to the point of idiocy, it's up to Republicans to undertake a PR program to show it for what it is. Regardless of all the talking John Boehner and the Republicans are doing, it's not enough. Republicans are not pounding hard enough on the federal debt problem and its relationships with the shutdown, with excessive regulation, with the debt ceiling, and with Obamacare costs.

The President says he won't negotiate this way so as to not establish a pattern? The pattern is already established. It was started in 1995, was confirmed in 2011 and has already continued. Sorry, Mr. President, but brinksmanship, grandstanding, and legislative guns to heads is very much part of the pattern for both sides. So come off the pretend pedestal and get real.

It's a pretty sorry position for the chief executive in the executive branch to take. The executive branch should be herding the supposedly childish legislators to the table and keeping them talking and establishing priorities and negotiable items, the way it is said that LBJ did. If an executive does that, he/she can then say "See, I was a good executive and did everything I could to move the process forward, get the sides together and solve the problem." The President's chance to say that is already gone. He's been an  obstructionist so far, and that's all.

Why Harry Reid and Barack Obama have not played any version of "Good Cop-Bad Cop" puzzles me. They're both willing to be seen as complete obstructionists. The key is making one of them feel enough heat that they're forced to talk to the sides and start some substantive deal-making.

In the present scenario the Republicans and John Boehner are missing opportunities to paint the President for what he is. However, it's a slightly long and complicated message. Some education of the electorate would be called for. It couldn't be done with one 10-second sound bite.

Of course John Boehner can be painted with the obstructionist brush also. But we should keep in mind what the mission is. The original mission is to slow down the rise in federal deficits and the accumulation of federal debt. And subsidiary to that is finding a way to stop or at least slow the damage of Obamacare.

The Democratic side says people like Obamacare. Well, yes, there are some good insurance rules and many givaways for consumers of medical services in the bill. Likewise there are government benefits in many other pieces of legislation. But the vote-buying and the handouts, if you will, are only half of the argument. The costs and inefficiencies to the economy, and forgone wealth and income creation, not to mention the future financial viability of the country and the by extension the world economy are on the other side of the argument. Just poll the Japanese and ask them if they wouldn't like to have seen some economic and banking decisions made differently starting in about 1989.

Again, the mission is based on the fact that the federal debt is too high, and it's rising too fast. And the projections for staying on this course show that this level of government is unsustainable.

That's for two key reasons. The debt cannot be allowed to rise to too high a percentage of GDP. Also, having fiscal policy very much out of sync with monetary policy creates market distortions, the effects of which are large, have long lags, and result in a lot of wealth and income not being created. But these last two issues have been explored by others and are widely known in reasonable economic circles.

The Democratic side essentially says Obamacare is law, it's court approved, the debate's over, let's move on, and we got our prize so keep your hands off it! Well, not so fast. Anyone who was paying attention as the law was being created and passed will recall that it was a highly flawed, and I would observe actually dishonest affair.

A low point was when then-Speaker Nancy Pelosi famously said "We have to pass the bill so that you can find out what is in it - away from the fog of the controversy." She wasn't referring to San Fransisco bay fog, but to DC fog. The catch is that the controversy was legitimate. The bill was rammed through the process.

The vote should have been held up, and time provided to read the bill and debate its points. Then the proper conferences should have been held to either craft something that was financially sound and market-oriented enough for Republicans to support or to kill the bill in that congress. Harry Reid and Nancy Pelosi may have to answer for their effective but defective guidance of the legislative process some day. I hope they do.

Later the Supreme Court gave Obamacare a pass, but with a wink and a kicker. The kicker essentially said that the law stinks but that the problem must be solved legislatively.

Which brings us to the present standoff.

Balance? We're nowhere near it! Lower Spending!

When you're in the situation pictured below, you take some boxes off the cart. You don't go get a bigger donkey!  Cutting spending is like removing some boxes, of course. Increasing taxes resembles getting a larger donkey, and also has a suspicious resemblance to getting more of our present government.

So the question is Balance? Taxing versus spending balance? We're so far from that, it makes a mockery of the word. While others debate 3 dollars of spending cuts for 1 dollar of tax increases, I think it should be somewhere above 10 dollars of spending cuts for each dollar of tax increases. That's if it's not all spending cuts, pure and simple. Government spending simply needs to be a smaller percentage of GDP. As Speaker Boehner's recent spending chart showed, spending is the problem, not taxation.

The problem with the taxation side is that we're taxed enough already. Yes, that spells TEA, as in TEA party. The meaning of the phrase "TEA party" has evolved quite a bit since it first emerged. It's had a lot of help in that evolution from people who neither like nor understand what it stands for.

By what measure are we taxed enough already? A good measure is whether the level at which entities in the economy are taxed, cause them to alter their behavior significantly to avoid taxes. Of course, rational economic actors will alter their behavior at any level of taxation, from a little to the truly crippling. That's the foundation of the saying "tax anything and you'll get less of it!" But above significant behavioral changes, markets get so distorted that people's wealth is reduced and overall economic performance suffers.

Back to balance. I'm with CNBC's Rick Santelli on balance. For another illustration see his videos using watermellons and a pea as props to illustrate how little Congress is dealing with the spending side of this "balance".  

Todd Akin, Republicans and Winning Elections

The Two Personalities of the Republican Party

The Todd Akin brouhaha brings into focus something I've thought about the Republican party for a long time. The Republican party is a mash-up of economic thought and socio-religious thought.

As you read this, recall those circular drawings you saw way back in about forth grade. You were studying the intersection of sets. There is the set of economic conservatives who vote Republican. And there is the set of social conservatives who vote Republican. The Republicans seem to assume at times that their voters are at the intersection of those sets. I don't assume that, and as I listen to peoples' commentary I suspect that most are outside the intersection of these sets.

That is, they vote Republican for economic reasons *or* because they are socially conservative. Often I think the social conservatives don't care about economic issues and the economically-minded or free-market voters stay Republican in spite of the socially conservative platform planks.

I worry about the limiting effect of the intersection of those sets. As I survey the American scene it appears to me that the set of social conservatives is shrinking. They may be hard-core and vocal, but small in numbers. And the rise of Hispanic voters may render them less important than otherwise.

What about those who are economically conservative and socially liberal, such as myself? We are sometimes called Libertarians. The only catch with voting Libertarian is that they don't have the juice to win - and a vote Libertarian is basically a split from a Republican candidate or issue that might win. 

Into all of this comes Todd Akin

The Republican assumption seems to be that it must have hard-core religious social conservatives in the tent (with Todd Akin suddenly excepted). I don't agree - instead, the whole fiasco is just another exhibit illustrating the wisdom of separating religion and state. I could mention Islam at this point, but I won't.

George W. Bush's strategy was brilliant at the time, I thought. He said a lot of nice things to keep social conservatives in the tent, but did very little in terms of trying to change policy. I liked it that way.

I believe that in America today, and given the ways it is trending, the closer Republicans move to a Libertarian-style platform the better they will do. That's because hard-core church attendance and socially conservative believers are declining in numbers. And young people who are not constrained by any such belief systems are increasing in numbers. And those same young people can no longer assume affluence will be theirs in middle age. They  hear the constant drumbeat in the media about the economy. Some of them will give economics systematic study, and come around to free-market thinking.

I'd celebrate if the entire abortion plank were dropped from the platform. To wit, if Todd Akin does not want an abortion, he does not have to get one. :-)

In my personal experience I've seen that a woman does not get an abortion lightly. That's even if that woman fights vehemently for the right for women to have them. It seems the right to have them is important, but theoretical, before a woman is pregnant. But when the fetus is hers, a lot of feelings, hormones, religious beliefs, fears, medical risks and facts, social concerns, and advice from loved ones suddenly come into her equation. And that's probably how it should be.