As the emotionalism of the election results fades, our curiosity demands an objective analysis of the state of our national politics. In most general terms, 2012 appears to have been a status quo election, with both candidates achieving fewer votes than in 2008, and the Senate and House being returned to the same party control. The only real defeat was at the top of the Republican ticket for Romney/Ryan. The other uncontestable conclusion is that there were also far fewer enthused voters going to the polls for either candidate.
Besides the rationalization of déjà vu all over again, this must be considered a defeat for the Republican party in light of the weak performance of Obama’s first term. So, what went wrong? Early voting analysis confirms that the loss can be mostly attributed to traditional, white, Republican voters who stayed home. There were 7 million fewer voters in this cohort of voters compared to 2008. One would have thought that the voters disappointed with Obama would have been motivated to turn out for Romney. One can point to the dismal economic performance, the high unemployment that must be laid on Obama’s economic policies, and the antipathy for Obamacare as the motivating factors. Apparently not.
There was obviously a lukewarm feeling about Mitt Romney and one wonders where it was lodged. Both bases turned out fairly strongly for their parties, the difference was with the middle, the independents and party moderates. These voters were primarily focused on the economy as the primary factor in the election and it appears that Romney’s ineffective economic message, and Obama’s interpretation of that message, can largely explain the marginal difference in the outcome.
The Obama campaign’s negative attacks started early and were expected. But for many months they were largely ignored as Romney was forced to consolidate his general election campaign. This also was expected. The problem is that little was done about it and thus the residual negative impression of the candidate lasted through the summer and the conventions, deep into the election season. Only the first debate seemed to dispel this caricature of the “Bain capitalist vulture,” but it was not enough. I believe we can attribute this to the fact the most effective propaganda holds an element of truth and this applies to both sides. Obama was very vulnerable on the economy, healthcare, and entitlement reform, so he steered clear of these issues. Romney and Ryan both attacked his positions and record. However, the American public has endured almost 25 years of growing crony capitalism enabled by both political classes as well as the monetary institutions of the Federal Reserve and the Treasury. As a turnaround, private equity specialist, Romney was incredibly successful in exploiting the economic policies of the past three decades. Many ideological Democrats met or exceeded this level of success as well, but the constant harping on the Bush years and the traditional Republican support of business elites allowed the Obama campaign to pin all transgressions on the Republican poster boy for success. Want somebody to blame? Blame Greenspan and Bernanke.
Now comes the crucial point: I see little evidence that the Republican establishment understands or credits these failures within its own policy agenda or campaign message. When voters hear Republican candidates extol economic growth, they foresee more winner-take-all success leaving them relatively worse off. They see bankers and financiers with fat bonuses and golden parachutes, leaving the true stakeholders in American capitalism—workers, entrepreneurs, and small shareholders—with the crumbs and the pink slips. This has all been enabled by cheap debt that leverages ownership and control into few hands—the very hands in fact of private equity and leveraged buyout principals. The irony is that the Obama administration has been the architect of these policies as much as any other administration. Goldman Sachs alumni populate the administration’s financial appointments and reap the tax benefits for their investment banking winnings. Apparently what’s good for Goldman Sachs is now good for America.
Wait, stop. This is not an anti-capitalist screed. On the contrary, the argument is pro-capitalist and pro-free market. A clear understanding of the 1980’s buyout era recognizes it was a necessary response to the corporate cronyism of the 1970s. The growth of private equity is also a response to world-wide competitive pressures to avoid the growing costs of regulation. But it also reflects poor policy design from Washington that is primarily motivated by politics. Cronyism doesn’t start and end in the board room, in extends all through the elected political class, the legislature, and the regulatory bureaucracies.
The Obama agenda does not address this cronyism, and therein lies the Democrats’ true weakness. Their only policy prescription is to “sock it to the fatcats,” and “redistribute the wealth,” even though most of the fatcats are paying for the re-elections of the politicians and redistribution is mostly redistributing the pain to taxpayers. It’s a charade. But the GOP’s failure can be traced to its ignorance of what drives democratic politics in this age of winner-take-all economics. A large section of American voters are being left out of the winner’s circle, they no longer buy into “trickle-down” economics, if they ever did, and they have witnessed an unfair and unequal playing field. The GOP must champion free capitalism in a free society, not just successful capitalists. And every member of a free capitalist society should participate at some level as risk-takers and residual claimants. There are many policies that can be applied to reinforce the basic principle of capital accumulation and the rights of ownership. It’s not a giveaway, ownership participation is always earned.
We might ask, what’s fair? Fair is receiving the rewards of successful risk-taking and suffering the consequences of failure. Nobody asks for more than a fair shake. One of the cardinal sins of the rich, powerful, and connected is to rig the system where every gamble is “heads we win, tails you lose.” This is the definition of immorality in a capitalist society, and the political party that puts a stop to it will have no problem gaining the votes of a grateful citizenry.