Obama wins the convention contest – Romney faces make-or-break moment in presidential debates

Posted by Shyam Moondra

Both Republicans and Democrats just finished their back-to-back conventions that seem to give President Barack Obama an edge over the Republican challenger Gov. Mitt Romney. The political party conventions provide a staged platform for introducing their respective candidates, highlighting their visions, and energizing their respective party faithfuls. The Republican Convention was held in Tampa, Florida followed by the Democratic Convention in Charlotte, North Carolina. In 2008, Obama narrowly won both of these states when he ran against Republican candidate Sen. John McCain; this time, Florida is a must-win state for Obama to prevail in November.

The Republican convention, partially disrupted by the tropical storm Isaac, turned out to be a missed opportunity for Romney and his running mate, Rep. Paul Ryan. The convention organizers used most of the convention time focusing on reasons for not re-electing Obama as opposed to articulating why people should vote for Romney. The convention was a perfect setting for Republicans to present what the undecided voters were craving for – Romney/Ryan’s vision for the future, especially how they would speed up the economic recovery and create lots of jobs. Romney and his wife, Ann Romney, did a good job in telling the audience who they are, what values they live by, and what role their Mormon faith plays in their lives. However, Romney said nothing about his core convictions and his positions on various issues that seem to have evolved over time. Ryan, supposedly an “idea man,” turned into an “attack dog.” Ryan used up all of his speech to criticize Obama; since then there has been extensive reporting on many of the things he said that turned out to be untrue (more recently, Ryan even lied about his time of marathon that he ran when he was younger).

The Republican convention was the least forward looking convention in recent history. Basically, Romney’s message was “elect me first and then I will tell you what I would do.” This was an important opportunity for Romney and Ryan, with tens of millions of people watching on televisions at homes, to clearly explain what they would do to create jobs or what their policies would be on Medicare, tax cuts, and spending cuts. Given that the U.S. armed forces are still fighting a war in Afghanistan, it was stunning that both Romney and Ryan neglected to acknowledge the sacrifices of men and women in uniform (very odd for Republican Party known to be strong on defense and security). And then there was Hollywood legend Clint Eastwood who gave a bizarre stand-up comedy performance that seemed so out of place at a serious forum. After the convention ended, people were still talking about the Eastwood episode and Romney’s message got lost in the noise.

Recent polls have shown that Romney is running behind Obama among female voters; therefore, most convention speakers talked about women issues. However, that focus seemed kind of forced and unauthentic. Several speakers talked about repealing Obamacare but without explaining what they would replace it with. The speakers aroused the enthusiasm of the delegates by repeating President Ronald Reagan’s line “Are you better off today than four years ago?” which he used against then Democratic incumbent President Jimmy Carter. Judging from the response of the audience, the convention appeared to have succeeded in energizing the Republican base. However, to win the election, they needed to impress the independents and moderates; it appears that they utterly failed to do so. Republicans made the case why people shouldn’t vote for Obama but they didn’t make the case why they should vote for Romney. Given the lackluster Republican convention, it’s not surprising that Romney got no lift in the polls from the convention, as is normally the case. Romney’s flip-flopping and Ryan’s tendency to lie make Romney and Ryan as the least trustworthy candidates of modern times.

In a recent post-convention speech, Romney used the word “God” several times, suggesting that he doesn’t believe he solidified the support of conservative Republican evangelicals, as yet. Also, Romney conceded that certain parts of Obamacare are desirable and he would like to keep them in his new health care plan that would replace Obamacare. Romney also said that Congressional Republicans made a mistake by agreeing to mandatory $1.5 trillion worth of across-the-board spending cuts. Romney's recent comments seem to suggest that he is trying to move to the center to gain support of the independents and moderates.

Democrats, on the other hand, did a much better job in putting up a good show at their convention. They had several good speakers, notably First Lady Michelle Obama, who delivered one of the most effective convention speeches ever, and former President Bill Clinton, who delivered another remarkable speech in which he explained complicated policy issues in a way that people could easily understand. Clinton said that the relevant question is “are you better off today than two-and-a-half years ago?” (and not “are you better off today than four years ago”). The reason being, as Clinton argued, Obama’s first one-and-a-half years were used up to deal with the worsening recession caused by the severe financial crisis left behind by Obama’s predecessor, President George W. Bush. During the Bush’s final year, we lost 2.6 million jobs. In the last two-and-a-half years, Obama has created 4.5 million new jobs. In recent months, the data seems to suggest that the housing market has finally started to recover and the average housing prices are beginning to rise. So the Democrats’ message was that we are on the right track and Obama should be given four more years to finish the job.

Bill Clinton has been at odds with Obama since Obama defeated Hillary Clinton in the Democratic Primary elections of 2008. Recently, Bill Clinton made some comments that seemed to support Romney (Romney campaign even used Bill Clinton in their political ads); although later Bill Clinton backtracked on those comments. The theory behind Bill Clinton’s strong support for Obama at the convention seems to be that Hillary Clinton would fare better in the presidential election in 2016 against a new Republican candidate rather than running against incumbent President Romney; so Bill Clinton is doing everything he can to get Obama re-elected.

Sen. John Kerry, in one of the best speeches he has ever delivered, outlined Obama’s foreign policy successes and he painted Romney as utterly inexperienced and naive in foreign affairs. Romney’s following statements were cited as examples to show that he is not ready for the job he is seeking: On Day 1 he will declare China as the currency manipulator, Russia is our enemy number one, he will order the U.S.  military involvement in Syria and Iran (the American people have no appetite to get involved in more large scale wars and by the way how would Romney pay for these new wars?), and that on Day 1 he will move the U.S. embassy from Tel Aviv to Jerusalem.

Obama’s speech was good but not as effective and inspiring as in 2008. To his credit, he touched upon his vision going forward that Romney neglected to do. Vice President Joe Biden stayed out of trouble which is good enough for him; although he did come up with a catchy sound bite “Osama bin Laden is dead and GM is alive.” Democrats did a good job in pointing out that Romney has a record of his constantly changing positions on issues, so it is hard to pinpoint his core beliefs, if he has any. Obama’s main problem is economy and the recent jobs report, which showed that only 96,000 new jobs were created last month (although unemployment rate went down from 8.3% to 8.1%), crystallizes that problem.

Democrats had many more interesting and effective speakers than Republicans did. All in all, Democrats won and Obama came out of the convention season with a slight edge over Romney.

The next critical phase of the 2012 presidential election consists of a series of one-on-one debates in October, the first of which is scheduled for Oct 3rd in Denver, Colorado to be moderated by PBS’ Jim Lehrer. Obama is currently ahead in the polls by a few points in terms of popular votes and comfortably ahead in terms of electoral votes; therefore, the burden is on Romney to demonstrate in the first debate that he is ready for the highest office in the land. If Romney stumbles in the Denver debate, it would be awfully hard for him to recover.

Outrageous ideas for speeding up economic recovery and job creation

Posted by Shyam Moondra

This Thursday, the Federal Reserve Board (FED) is likely to announce a new Quantitative Easing program (QE3) through which they will infuse liquidity into the monetary system, inducing investors to go after more risky assets rather than park their money in fixed-income instruments that they consider as safe haven in the present uncertain environment. The earlier similar programs (QE1 and QE2) have had some positive effect on economy but they provided only a temporary lift. What if the FED takes a different approach this time?

Here is a recap of where things stand right now:

• The stock prices are historically low with S&P 500 PE hovering at around little over 15. At the last market peak, it was over 30. When the market goes up, the investors feel wealthy and more secured about the future. That leads to their increased spending which fuels the economy.

• The housing prices are improving, but they are still very depressed from their historic averages. Higher housing prices have the same wealth effect as higher stock prices; homeowners start borrowing against home equity which leads to increased spending that boosts the economy.

• The corporations have the best balance sheets in a generation, hoarding cash of the order of $3 trillion. They are ready to invest in capital projects and hire more workers, but two things are holding them back: gridlock in the Congress that creates uncertainty (and corporations hate uncertainty) and tepid consumer spending.

• Having lost tons of money in the 2008-2009 market crash, the investors have parked their cash in government securities that pay almost no interest and corporate bonds that are barely keeping up with inflation. So what we have is a fixed-income bubble that would eventually burst, as all bubbles do.

Given the above facts, this is what we can do to increase the rate of economic recovery and speed up job creation:

• The voters need to take a decisive action in November and give control of all three government entities, the White House, the Senate, and the House of Representatives, to the same party so we can finally get rid of gridlock. Under Obama, we have made progress in terms of job creation from the depth of severe recession left by the former President George W. Bush (4.5 million new jobs created in the last 30 months compared with 2.6 million jobs lost in the final year of the Bush presidency). Obama has demonstrated that he is the absolute champion of the middle-class (that accounts for 70% of consumer spending) and protector of Medicare and Social Security safety-net programs. Therefore, the voters should put Democrats in charge of all three parts of the government. In the past, the voters preferred a divided government to have checks-and-balances and to avoid ideological domination by any single political party. However, in the current circumstances, getting rid of gridlock is much more important than worrying about ideological domination. In the absence of gridlock, the government will be able to swiftly move on tax reforms and adopt a long-term balanced plan to reduce federal budget deficit and debt.

• The FED has been buying treasuries and mortgage-based securities to infuse more liquidity into the system with the hope that investors would go for more risky assets such as equities. The FED actions have had limited success in achieving their goals and these actions have largely benefited the financial sector which is in much better shape today than it was in 2008. Therefore, may be the FED should buy equities instead of treasuries and mortgage-based securities to encourage the investors to move their money from less risky instruments to more risky equities. The previous government investment in equities by the Treasury Department under the bailout program TARP (e.g., in auto companies and financial companies) has produced good returns for the taxpayers; FED’s equity purchases now when the market prices are relatively low should prove to be profitable for the taxpayers as well as beneficial for the overall economy. The FED purchases of equities (they could buy the stocks in various indices such as Dow Jones, S&P 500, NASDAQ) will move the stock market up and create wealth. By the same token, the FED should snap up foreclosed properties (rather than buy mortgage-based securities that benefit only the banks) to reduce supply of homes and thus give a boost to the housing prices, thereby creating the wealth factor on that front as well. The Congress would have to revise the Federal Reserve Act authorizing the FED to buy equities and foreclosed properties and also increase funding for the FED so that it will have the necessary resources to effectively execute the plan of investing in equities and foreclosed properties.

• The FED has stated that it will keep interest rates close to zero at least through 2015. The idea was to nudge investors away from fixed-income securities and towards more risky assets and encourage corporations and consumers to borrow and spend. Unfortunately, the low interest rates are not having an appreciable stimulative effect on economy; corporations don't need to borrow much because of their huge cash pile and consumers are reluctant to borrow because they don't feel secured in the current economic environment with high unemployment rate. Also, the potential home buyers are putting off their real estate purchases thinking that interest rates will remain low for some time so it's better to just wait for lower real estate prices. Therefore, the FED’s low interest rate policy is actually having unintended negative impact on economy. May be the time has come for the FED to try a different tack and start increasing interest rates and force these waiting potential homeowners to start buying homes now which will have a big impact on job growth. Higher interest rates will also increase the spreads for banks that will allow them to make fatter profits and thus become financially more stronger than they are now.

Since the 2008 recession, we have had the slowest recovery on record. It’s time the voters and FED try different approaches to improve economy and create lots of jobs faster.