Getting The Wrong People To Do The Right Things

BeeLine posts have been few and far between the last couple of weeks.  The holidays and some vacation time are my primary excuse.  However, observing what has been going on in Washington has not helped my motivation level. Is there anyone in Washington that has any sense whatsover?

For the last two years I offered the Republicans a lot of advice on positioning themselves for the fiscal cliff at the end of 2012.  The extension of the Bush tax cuts in December 2010 set the stage for certain fireworks.  The failed debt ceiling discussions in the summer of 2011 that also kicked the can to the end of 2012 guaranteed that there would be a lot of smoke and fire in the show.  With two years to plan for the battle and develop solutions that actually might address our fiscal problems, how come the result is a bill that raises taxes $41 for every $1 of spending cuts and actually increases our budget deficit by $4 trillion over the next 10 years?

Here are a few reasons that come to mind.

1.  The American people have not demanded action

• Various polls indicate that people are concerned about the budget deficit but they are more concerned about their tax breaks, entitlements and government goodies.  The biggest poll over the last year -the Presidential election- seem to suggest to our elected officials to tax the rich and stay away from you and me.  Our politicans are very good at giving you what you want.  That is actually what we are getting.

2. The President of the United States has not led on the issue

• President Obama has almost done nothing to convince the American people of the need to deal with our massive deficits other than to state that we need the rich to pay "their fair share".  He ignored the recommendations of his own deficit reduction commission (Bowles-Simpson).  He blew up the budget deficit deal he had with Speaker Boehner in 2011 by asking for more revenues after they had a handshake deal.  He has never suggested any meaningful spending reductions.  It is hard to get the American people to pay attention to something if the President is not leading on the issue by talking about it and selling the reasons to the American people.  

3.  John Boehner and the Republicans never articulated a simple and reasonable objective in the Fiscal Cliff negotiations

• John Boehner did an excellent job in defining the debt ceiling talks in 2011 by stating very clearly the simple premise that the Republicans would expect that any increase in the debt ceiling needed to be matched by a corresponding decrease in spending over the 10-year budget cycle.  This was a very effective strategy and it came to be accepted by all parties as the negotiations proceeded. 
• In the fiscal cliff negotiations, Boehner never put that type of marker on the table.  After the election, it was not reasonable to think that any deal would not have some type of revenue increase.  However, Boehner never made any clear statement of his objectives. My suggestion would have been to tie any revenue increases to spending reductions and make that clear from the outset to Obama and the American people.  For example, for every $1 of revenue increase there needed to be $4 (or $3 or $2 or $1) of spending cuts.  It would have given Obama revenue but every dollar he raised would also cost him at the same time.  This would have assured a more balanced approach and also have shifted the onus on Obama and the Democrats to come forward with spending reductions.  Since the Republicans had no offensive strategy they ended up playing defense the entire game.

4. The Republicans have done a terrible job of developing messages that support their positions

• Many voters do not pay much attention to the issues.  They only catch snippets of news from television or social media.  They do not read newspapers, read blogs or watch "Meet the Press".  However, almost all would think that the rich are not paying their fair share because President Obama has been saying it over and over for the last four years.  
• Obama and the Democrats know that political messaging is a lot like consumer advertising.  You need to consistently pound your message.  Consistency results in familiarity.  Familiarity results in favorability.  These are the basic principles that increase a brand's power in the marketplace.  Politics is no different.  The more often people hear something, the more they feel comfortable with it and believe it.
• The Democrats pound away everyday on two basic messages.  The rich need to pay their fair share ( of course, "fair" is never defined) and we need to help those that can't help themselves (the poor, our children, the elderly, the unemployed etc, etc).  They have also been doing this for years.  The Republicans seem to talk about jobs a lot and about the budget deficit but the message is never delivered in the same, simple manner like the Democrats do.  
• If I was Speaker Boehner or Minority Leader McConnell I would get everyone in my caucus together and stress the importance of simple messaging around 3 or 4 points.  In every speech or media appearance they would need to recite at least one of those key messages.  The Republicans cannot win the policy battles until they start doing better in the public relations arena.  They are at a distinct disadvantage compared to the President because of his national stage and media bias but that makes the need for more consistent, coordinated messaging even more critical.
• I am big on using concrete and credible facts to provide context to my messaging.  These would be three messages that I would keep pounding away on.
• The United States already has the most progressive tax system in the world.  Rich people pay more in taxes relative to their income than anywhere in Europe.  What does President Obama consider to be a fair share?  If he wants us to be like Europe, it is the middle class that is going to see their taxes rise substantially.  That is where we are headed with the Democrats.
• The Democrats act like there is nothing that can be cut in our federal budget.  Did you know that we could balance the federal budget in 10 years with no increase in taxes if we held overall spending increases to 2% per year.  That's right I said we could increase spending 2% per year and still balance our budget.  Many Americans would love to know they could increase their own spending by 2%.  How come we can't fix this budget mess with that in mind?
• Did you know that the average per capita income in Washington, DC is $73,000.  For the nation as a whole it is less than $42,000.  There are a lot of good, hard working people in Washington but it has no manufacturing base.  There are no farms.  It has no oil wells or coal mines.  It does produce computer chips.  It produces almost nothing of value in a traditional economy.  Yet, its residents have the highest per capita income in the country.  What more is needed to know that something is seriously amiss in our country?

All in all, I don't think the Republicans did badly if you look just at the tax side of the equation.  Getting the Bush tax cuts made permanent for those making less than $400,000, doing the the same for the estate tax exemption and retaining preferential rates for investment income were major victories.  However, the problem is that they traded their best bargaining chip and got nothing on the other side of the equation-spending.

The good news is that the debt ceiling limit debate looms before us in a couple months.  Let's hope that they do a better job in developing their messaging and strategy on that score.

If it were me I would start right now with some simple, easy-to-understand messaging to the American people.

Obama's First Course

"Mr. President, you have your tax increases on the rich.  We now take you at your word that we will see the balanced approach you keep talking about.  We didn't think it wise for you to have your dessert without eating your vegetables.  But that's what you did.  It's time for the peas and carrots.  The balanced plan you keep talking about.  We will wait on your proposal.  

In the meantime, we will also proceed in drafting a House proposal that cuts all federal spending across the board in the amount necessary to achieve the 4 to 1 goal and also raises the debt ceiling commensurately.  We want to send a clear signal that the United States will meet its obligations if you cannot gain the necessary support for your proposal in the U.S. House of Representatives.  We know this is not ideal, however, if you cannot lead us to a better result it seems the fairest way to proceed is to have all Americans share in making the sacrifices that are necessary to get our financial house in order. We look forward to working with you for the good of the American people." 

Does Obama Have Any Appetite Left?

I will close with a quote I saw recently from Milton Friedman who was asked once whether the problem in Washington could be solved by simply throwing all the bums out.  Friedman understood that replacing one bum with another will not do anything.

"It's nice to elect the right people, but that isn't the way you solve things. The way you solve things is by making it politically profitable for the wrong people to do the right things."
                                                        -Milton Friedman