Friday, February 29, 2008

Obama has the wrong facts but the right message

From Financial Times:

Until a few weeks ago Barack Obama’s economic platform was the most centrist of the three Democratic contenders remaining after John Edwards, the flag-bearer of the left, dropped out in late January.

Since Super Tuesday on February 5, that has changed. Scenting, perhaps, the chance of settling the nomination next week (when Ohio, Texas, Rhode Island and Vermont go to the polls), Mr Obama has indulged in a bidding war with Hillary Clinton to see who can rail most strongly against globalisation.

Campaign veterans say much of the rhetoric can be discounted as classic primary season politicking that will be diluted when it comes to the general election. But sympathetic economists have expressed concern about proposals Mr Obama has unveiled in the past two weeks since campaigning began in earnest to woo the workers of Ohio.

Last week Mr Obama came out against “open trucking” with Mexico in which freight lorries would drive across the border instead of unloading on to American trucks. His new stance coincided with the endorsement of the Teamsters union, which is opposed to competition in road freight.

In addition to attacking the North American Free Trade Agreement, which Mr Obama says has cost the US “millions of jobs”, both candidates have alarmed America’s neighbours by threatening to opt out of Nafta.

“Threatening to repudiate international agreements would have serious foreign policy consequences which would undermine Mr Obama’s broader foreign policy goals,” says Susan Aaronson, professor at George Washington university and a former adviser to Bill Richardson, who dropped out of the race in January. “Some of this may be normal pandering for the primaries. But it has gone much further than expected.”

Mr Obama’s proposal to levy lower corporate tax on companies that reverse the offshoring of jobs has caused disquiet. “Patriot employers” was unveiled when Mr Obama had already become the favourite to secure the nomination. Some say it is unworkable.

“It just isn’t clear why the Obama campaign felt the need to bring this out now,” one Democratic economist says. “It might have political merits in the primaries but there are many more effective and less bureaucratic ways than this to incentivise the creation of new jobs.”

Mr Obama’s terminology has also raised eyebrows. “What he is effectively saying is that companies that offshore jobs are unpatriotic,” says Gary Hufbauer, senior fellow at the Peterson Institute of International Economics. “This is serious language.”

Tacking to the left on the economy would be vindicated in the eyes of many if Mr Obama won in either Ohio or Texas next Tuesday. But officials on John McCain’s Republican campaign believe Mr Obama has given them ammunition for the general election.

Mr McCain, whose core selling point is strength on national security, has been mocked for a self-confessed weak grasp of economics and for having suggested last month that spending cuts should be part of any fiscal stimulus package – a measure that would further depress growth.

But advisers to Mr McCain believe that Mr Obama would present a juicy target as nominee. “We see him as a classic liberal whose proposals come straight out of the 1970s,” says Douglas Holtz-Eakin, senior McCain adviser. “It is hard to understand his stance on trade. Access to the US market is a vital element of our foreign policy.”

If Republican strategists think that they are going to be able to use Obama's positions on issues like this to frighten off voters in this election cycle I'm afraid that they are in for a nasty surprise.

I know a lot of people in this little corner of Western North Carolina who normally vote Republican - people who are church going Christians who want lower taxes and who support the military and want victory in Iraq - who are planning to vote for Obama because of economic issues like this.

They believe that cheap Chinese imports and trade deals like NAFTA are killing the economy of the region, taking their jobs and shipping them overseas and taking food out of their children's mouths. They also see Mexicans flooding the area and taking the jobs which are left. Promising to withdraw from NAFTA and prevent cheap Chinese textile imports from finishing off the few textile mills that still survive in the South and not letting Mexican truck drivers take jobs away from US truck drivers is not going to cost B. Hussein Obama one vote in this region.

Of course the nation is better off as a whole with free trade but any economic change will bring some disruption and cause some pain and the pain is easier to see than the benefits.

I'm not suggesting that the Republicans pander to the left on economic issues. That would do more harm than good. What I am saying is that Republicans need to understand that there are some arguments that they are not going to win even if they are right. Obama is telling a large segment of the voting public what it desperately wants to believe. If McCain tells them that Obama is wrong they will not believe him. Instead they will think he has "sold out" to the international corporations. If McCain proves to the people that he is right and Obama is wrong the people will hate him for it because people hate having their world view convulsed and their most cherished illusions shattered.

During this election cycle with the mood of the nation what it is Republicans have one thing going for them and that is the issue of national security. If they can convince the public that the threat of terrorism trumps every other concern they can win the White House - maybe.