The Tale of Two Campaign Strategies

It is now clear what the campaign styles are going to be with Governor Romney and President Obama.  I decided I would write about this because a lot of impatient Republicans are getting anxious and demanding that Romney goes on the attack in a way that John McCain never did.  However, if you understand the strategy as I think I do (though I could be completely wrong), you’ll have a great appreciation for what the Romney camp is doing.

First, I wanted to discuss the Obama campaign strategy, which is very much like Obama’s presidency: spend, spend, spend and talk, talk, talk.  The Obama campaign knew all along that their only way of winning was to flood media with negative ads on whomever the competition would be.  It is not a coincidence that Obama spent the last 3.5 years raising money for his re-election.  Already, the Obama campaign is spending millions of dollars trying to define Romney early, much like Bush did against Kerry.  There are three main problems with this portion of their strategy:

• Money is not coming in as fast as Obama would like; Romney actually raised more money than Obama the past two months and Romney has a lot of Super PAC money backing him too.
• The number of battleground states are growing, increasing the need for money.  At this point in the election, the Obama campaign would hope that the race would be narrowing, now opening up.
• The Obama campaign has outspent the Romney campaign by leaps and bounds and yet, the polls reflect a tie right now.  If you’re going to try to start the race fast and hold on to the lead, you need to have a lead to hold onto.

The second piece of the Obama campaign strategy is to get Obama out talking to as many folks as possible.  The one thing Obama has going for him is that his likeability numbers are pretty good, so they want to get him out there to shake hands and kiss babies.  You’ll see a lot of talks so that he can get 30 second clips in the media with him rallying crowds.  The main problem with this is that people have seen Obama talk a million times and each time, it loses its luster and coverage.

Now, onto the Romney strategy.  Imagine if you will a slingshot; at first it would appear that the projectile is going backwards as it slowly gets pulled back, but then in an instance, it is catapulted forward.  Romney runs his campaign very similar.  Do you remember the primaries?  Romney wasn’t aggressive, played it pretty safe, and did not make any big mistakes.  After Newt Gingrich got in the lead and threatened Romney, the Romney campaign (and its supporting Super PACs) overwhelmed the Gingrich campaign with a shock and awe styled campaign and took Gingrich out of the race quickly.  I would look for Romney to hold onto their money until it really matters and then go wild.  In the primaries, he showed he can go after people in the debates, can be just as dirty as the Obama campaign is right now, and he knows when to turn it on.

There are three good reasons why I believe Mitt Romney should not get overly aggressive (as many Republicans are suggesting) at this point in the election:

• In the summer, most people (besides me) are not hanging on every word that is said in the Presidential election and are probably sick of all the Obama ads already.  They are waiting for the initial noise to stop and the presidential candidates to offer real solutions and policy.
• The items that the Obama campaign is going after are small potatoes.  They talk about how he carried his dog on vacation, how he may have picked on a kid over 30 years ago, how his company may have outsourced some jobs overseas over ten years ago, and the list goes on.  These are not the issues that are make or break issues for president.  Although it can help paint a narrative, a well timed response in a debate or speech can offset millions of advertisements in an instance.
• The traditional role of the vice presidential candidate is that of the attack dog.  Usually, the vice presidential candidate is the one that goes after the other presidential candidate and Romney has not picked his VP yet, although it is coming soon.  Allow Romney the time to pick his VP and then let his VP go to town on Obama, without hurting Romney’s likeability ratings.

Romney has a lot of money in his campaign war chest and is using it conservatively.  I would imagine they have plenty of ads ready to go to convince independents to go Republican.  Statistics show that the majority of undecideds at this point will go for the challenger because they know enough about the incumbent, that if they aren’t behind Obama now, there is not much he could possibly do to swing their vote. So relax, the statistics thus give the edge to Romney when the polls are tied and Republicans are in a good position to win!

Capital Gains Tax Rate – Just Leave It Alone

There has been a lot of talk about the tax rates of Warren Buffet, Mitt Romney, and President Obama.  Most people don’t remember this, but when then Senator Obama ran for office, he said was going to pay for all his campaign promises by ending both wars (Iraq & Afghanistan), increasing taxes on the rich (by letting the Bush tax cuts expire), and increasing the capital gains tax rate.

Income made on investments get taxed at a 15% rate vs. income from a job, which reach as high as 35%.  However, when Obama got into office, there was a recession going on, which crushed our stock market.  Essentially, there were little capital gains to tax, they wanted to encourage people to invest in companies, and a tax hike on capital gains in his first year during a recession would have been toxic politically.

Now that the dust has settled and we are seeing a small recovery, President Obama wants to increase taxes on capital gains and on the rich as he goes back into campaign mode.  Adversely, some Republicans and conservative blogs say that we should get rid of capital gains to increase the incentive to invest in the marketplace.  I believe the government does play a role in producing an environment that promotes economic growth, but they also need to be careful about putting too big of incentives on either side so as not to disrupt the balance of reasonableness and the power of the free market.

I do not believe we should increase the capital gains tax rate because for the majority of Americans, it is double taxation.  We get taxed when we earn income from our jobs, and then that money gets taxed again if we make any money with it on an investment (note: that same money gets taxed a third time when you die).  Further,  I think it is good to have an incentive (lower taxes) for people to invest in companies.  Financial investments in corporations lead to hiring, innovation, and profits.

It is not good policy in my mind, to promote too much risk by having a 0% tax rate on capital gains.  Too many people would try to make all of their money on investments so they do not have to pay taxes, which could be dangerous at the macro level.  Investing in the stock market is no guarantee and can be extremely risky.  If you don’t believe me, ask the thousands that had to come out of retirement because their portfolio shrunk to nearly nothing when the recession hit.

The current 15% capital gains tax is fine in my mind — not too high, not too low.  I definitely think we can talk about capital gains tax rates if we are talking about restructuring the entire tax code, but it is a low priority topic right now in my mind.

The Election Begins: Obama vs. Romney

After months of being dormant on the blogosphere, I am back.  Bored and confused by the primaries, the Republicans finally have a candidate to go against President Obama.  Although there are a plethora of topics I’d love to dive into, I thought I’d start with framing up the 2012 Presidential Election.  So far, I’ve heard this election is about the women vote, the independent vote, the hispanic vote, the swing states vote, the religious conservative vote, and just about every other option.  So which group is it?  The truth is that it cannot be about one group of people, it is about what candidate do you trust to improve our country.

A few comments on the aforementioned groups:

• Women vote – I believe both candidates underestimate the diversity of thought among women.  To put all women in a group and say they have a collective set of key issues is vastly misplaced and demeaning in my view.  Like men, women have a variety of views and issues.
• Independent vote – most believe independents are people right in the middle.  The truth is, most have strong views on the left and strong views on the right that leave them conflicted – for example, they may be socially liberal but pro-life.  The candidates who spend time arguing their points versus bad mouthing their opponent will convince independents to vote for the strong view on that candidate’s side.
• Hispanic vote – a large majority of Hispanics are Catholic and have a lot of conservative principles.  However, Republican have not typically come alongside Hispanic voters.  Bush carried 45% of Hispanic votes vs. McCain only getting 31%.  Romney is in the drivers seat on this one.
• Swing State votes – these 12 states will ultimately decide the election, but their key issues are quite diverse.  Because of their diversity, there ends up being little difference between a general election campaign and a 12 state campaign.  The only real difference is that they will have more visits in these states.  With today’s 24-7 media coverage, it doesn’t really matter where presidential candidates stop because even if they were in your home town, you probably wouldn’t see the events live anyway.  The only interaction you’d have is waiting in traffic longer.  On a side note, I do think this could affect Romney’s VP choice.
• Religious conservative vote – Even though Romney has flip flopped on some religious conservative stances, he has aligned with their views and will still be much closer to their views than President Obama.  Like other sects of the population, although they have viewpoints they are passionate about, they will look to the candidate that they feels gives the United States the best chance at success.

In 2004, Democrats hated Bush with a passion.  I believe Republicans disapprove of Obama’s leadership in a similar fashion in 2012.  Many Republicans are counting on that passion to win the election.  However, like in 2004, you cannot win an election based on hatred of the other candidate.  People do not vote against a candidate in the booth, they vote for a candidate in the booth.  If they are not mildly excited about the direction that candidate is going to attempt to steer the country towards, they will not show up to vote for their candidate–this is especially true with independents.

If you ask people today what John Kerry’s top issues were, they’ll rarely be able to tell you because his campaign focused on Bush bashing rather than casting a vision.  You can see the power of casting a vision by looking at the 2008 Obama campaign, which casted a vision of Republicans and Democrats holding hands, Washington working together to cut deficit spending, and more.

President Obama’s strategy this time around appears to be one of divide and conquer.  He is trying to divide the country and get enough sects of the population to support him in order to get a majority.  He does this by alienating groups and demonizing Romney.  For example, he’s willing to lose the “rich” group if he gets the middle and poor class by calling Romney a rich person not in touch with the American people.

For Romney to win, he needs to focus on casting a clear vision of where he wants to bring America.  It will take a lot of discipline to stay on message and use every opportunity he has to share his vision, especially with the onslaught of distractions and attacks from the Obama campaign.  I personally believe Obama has been worse than Jimmy Carter because Carter’s failures didn’t cost $5 trillion in four years.  Although Ronald Reagan pointed out factual information that showed Carter’s shortcomings, the main reason Reagan beat Carter was because of the positive vision he cast for the United States that rallied people on both sides of the aisle.

It is going to be a very close election…should be fun!

Debt Debate – Who Will Win?

Amidst all of the debate about the debt ceiling, my big question is, who will win?  I think this question is particularly interesting because most Americans do not know what side they are on.

First of all, Americans are desperately looking for a solution in Washington and are not finding it from either party.  In 2008, the electorate ran from President Bush and the Republican party to heavily endorse the Democrats.  Two years later, Republicans recorded the biggest turnaround in our history.  Yet, despite the pendulum swinging back and forth, the Congressional approval rating is currently sitting at 18%, according to Gallup polls.

If you look at the debt crisis, 69% of Americans say Congress should not raise the debt ceiling, according to a recent CBS poll.  The debt ceiling has been raised 74 times, but this time it would seem to be different.  Further, 73% say spending too much is to blame for the debt crisis (vs. not taxing enough), according to a Gallup poll.

It would seem that Americans support reducing the deficit by reducing spending.  However, when people are polled about whether they still support cutting spending when the spending cuts affect them personally, the tide changes quickly.  More specifically, people get really nervous when cuts to entitlements (Social Security, Medicaid, Medicare), which make up over 50% of the budget, are discussed.  According to Gallup, 66% are worried about cuts to Medicare, and 65% are worried about cuts to Social Security.

Gallup polls also show that Americans are looking for their leaders to make compromises and work together.  I have to give credit to President Obama for announcing today that he is open to increasing the age for Medicare eligibility from 65 to 67, which goes against his party lines.  John Boehner also seems to be willing to negotiate on a lot of issues as well.

Even if Boehner and Obama develop a compromised plan, it is not a guarantee that Congress will vote for it.  When it comes to voting, the politicians that toe the party lines are often the ones that get re-elected.  Michelle Bachmann has become quite popular for voting against compromises, despite her one vote never being a deciding vote.

So who wins in this battle?  I think the only potential victor is the American people if three things happen:

• An agreement is reached by August 2nd so we do not default on our debts and hurt our credit rating.
• We need major, but gradual cuts to the long-term budget.  Our annual deficit is conservatively $1.5 trillion, which is $15 trillion of additional debt over the next 10 years or roughly $29 trillion in total debt.  Congress and President Obama have discussed reducing the deficit (not the debt) by $4 trillion over 10 years, which would still make our debt be around $25 trillion in 10 years.  We need major cuts.
• Entitlement programs have to be changed in a humane, but impactful way.  The entitlement programs are the ticking time bomb, growing at uncontrollable, exponential rates.  If these programs are not changed, then we do not have much hope for a legit solution to our budget issues.

It is going to be difficult to find a solution for this one.  Ultimately, all of the solutions above involve self-sacrifice and personal responsibility by all Americans.  We can either be a nation that fights through a tough problem or we can be a nation that pushes the problem down the road.  Either way, we’re going to have to face these issues eventually.

Oil Prices…Ugh!

About a week ago, I discussed how Obama’s release of our strategic petroleum reserves was idiotic and would have no long term benefit.  Well, in just a week, the price of oil is already going up again (is now a good time to say, “I told you so?”).  Consider this another Obama “stimulus” that did not stimulate anything but more debt.

The price of gas is up $0.80 per gallon from the same week last year.  When Obama took office in 2009, the price per gallon was at $1.84.  The average price per gallon is now at $3.55, a 92.9% increase in gas prices.

The White House has given two responses to the high gas prices:

1. Excuses – President Obama blamed the wars in the Middle East and Japan earthquake.
2. Aspirations – President Obama said green energy is the solution, but that infrastructure will not be set up in a long time.

The only thing the White House has not offered…a solution.

How’d We Get into this Budget Mess?

Making a budget is kind of like trying to lose weight.  If you have ever tried to lose weight, you will find there are a million ways to do so.  You can try this work out or that, this diet or that, or this tool (such as a lap band) or that.  Because all these different options make different people money, the options become more complex.  However, the equation is pretty easy: if you burn more calories than you eat, you’ll lose weight.

Just as money confuses losing weight, politics/power ruin efficient and effective government in Washington.  Government budgets are easy – spend less than you receive.  There are a lot of ways to do that, but we’re still not there.  Instead, games have been played by the Democrats to force Republicans to make the cuts so the Democrats can brand them as the bad guys and try to keep the power through irresponsible governing, inaction, and deceit.

Luckily, there are conservative blogs like this one that tell you the real story about the budget!

Let me walk you through how we got into this budget mess:

• Federal Gov’t’s fiscal year is October-September.  Last year, the Democrats (who owned the House, Senate, and Presidency) did not pass a budget before the year started.
• After Democrats lost the election, they passed a budget during the lame duck session (time between election and when election winners take office in January), but the budget was only to last until March 8.
• When Republicans took over the House, they passed their own budget for the rest of the year that had $61 billion in cuts to discretionary spending (which had seen an 83% increase under Obama).
• The Senate is supposed to either pass it or pass their version of it and send it back to the House (to begin the negotiating process).  After about 1.5 months, the Senate didn’t pass anything.
• Approaching a deadline, Republicans in the House extended the budget for another two weeks to give Democrats time to either pass their budget or create their own budget.
• The Republicans made an offer, but Democrats didn’t like it.
• President Obama sends VP Biden to met with the House leadership – Biden has one meeting and then leaves the country for two weeks.
• Approaching another deadline, the Republicans extend the budget another 3 weeks.
• This Friday, we are now facing yet another deadline and the Democrats still haven’t proposed anything.  There is even Democrat leaders on record saying they are hoping for a shut down to make Republicans look bad.
• On Tuesday, President Obama had one meeting to discuss the budget and then he left town.
• Today (Wednesday), most likely bothered by the bad press, President Obama decided to come back and now had another meeting tonight.  Earliest reports indicate they didn’t reach a decision and are talking about another extension to give them more time to figure out the budget.

A few facts to think about:

• Republicans’ $61 billion in cuts proposal in a $3.5 trillion budget is about 1.7% of the budget.
• The $3.5 trillion budget has a $1.65 trillion deficit – $61 billion is about 3.7% of just the annual deficit.
• It took 3 deadlines before President Obama decided to step in.

Democrats have had every opportunity to make a budget and they have not.  If there is a shut down, it is the Democrats fault.  It is amazing that the Democrats still own the Senate and the White House and we don’t know their plan.  Even more amazing is that instead of the Senate passing their own version and starting the debate publicly, 3 people (Obama, Boehner, and Reid) have to sit in private to negotiate a $3.5 trillion budget.  Where are the elected officials from other states?

On the bright side, although the Democrats did not pass a budget on time last year, Republican Paul Ryan has already proposed a budget for next year that actually tries to curb spending.  I am still waiting to hear a real Democrat plan…if they have one.

Do Our Politicians Ever Think?

I am often amazed by our politicians’ inability to take a second to think things through.  I want to give two examples that illustrate our politicians’ inability to see the big picture – one state government example and one federal example.

Example 1: In Minnesota, there is a huge Ford plant that is about to close.  The Ford plant obviously employees many Minnesotans, so many politicians want to keep them here.  To entice the Ford plant to keep it open,  politicians from both parties in Minnesota have agreed and offered the Ford plant a special tax break to keep them here.  Essentially, if the plant stays open, then they will pay lower taxes than everyone else.  Is it fair that one company gets a “special deal,” when no else can?  Why is it that our politicians do not see that lower taxes for all businesses would help employment for ALL businesses and not just this one?  The United States has the second highest business taxes in the world and we wonder why jobs are going abroad.

Example 2: President Obama has recently stated that he is going to try to give tax breaks for research and development.  Further, he is thinking about adding hiring incentives and a payroll tax ‘holiday.’  The plan has an estimated cost of $100 billion and they are going to pay for it by closing up tax loop holes, according to White House officials.

I have four big problems with this line of reasoning that leads me to believe they are not thinking.

First, research and development are pretty broad terms; regardless of how well they write the tax code, do they think more tax loop holes will not develop as a result of this bill? They have written similar bills in the past, but the fact remains that the root cause of tax loop holes are the complexity of our tax system and they are going to make it even more complex.  

Second, I hate it when politicians talk about tax breaks for those hiring because it is a gimmick to make it look like they are helping create jobs.  Imagine a struggling company hiring people to get the tax incentive and then go under the next year because they do not annualize the hiring tax break.  The companies that hire are the successful companies – these gimmicks never lead to long term success!   Hiring will happen if there is a business need and they can afford the investment for the long haul, not just the next 6 months.

Third, I also get frustrated with a payroll tax ‘holiday.’  Essentially, the administration is saying that they believe less payroll taxes will drive the economy forward.  However, they only want our economy to improve a little bit, so they are going to make this tax break a holiday, or temporary, just to get people back on their feet.  If it is good for our economy, why wouldn’t they make it permanent?  Our country takes advantage of successful businesses and then cries for help when they are failing at the macro level.

Fourth, they keep paying for stuff in ways that sound good, but are impossible to track instead of just spending less on something else.  They are going to pay for it by closing tax loop holes.  How is that tracked?  If the economy is truly the opportunity that we need government to focus on, we should cut in other areas and prioritize the dollars toward the economy.  It is easy just to spend and spend and spend to try to solve problems, but a true leader makes the tough decisions.

It appears that politicians are starting to realize that tax breaks are good for business (which is a good thing), but they will not go all the way and just pass a bill reducing the tax rate; every proposal is temporary or just for a few types of businesses (i.e. green jobs, road work).  The result is that they are not treating every business equally, they are complicating our tax structure, and they are not maximizing the government’s ability to allow businesses to be successful by getting out of the way.

Long story short, micromanaging macroeconomics does not work.  Ronald Reagan once said, “The most terrifying words in the English language are: I’m from the government and I’m here to help.”

Health Care Legislation Context Makes Summit Moot

This conservative blog has stayed busy reporting when President Obama fails to keep his campaign promises.  During Obama’s campaign and his State of the Union Address, President Obama stated that he was going to tear down the walls in Washington and get both sides to work together.  President Obama did get both sides in one room during the Health Care Summit and I commend him for that.  However, I do not think it torn down many walls.

Republican’s big problem with President Obama’s approach is that he thinks that every time someone disagrees with him, it is political and not genuine disagreement. The big headline from the Summit was when President Obama said to John McCain, “The election is over” after McCain tried to make an argument for starting over in health care, being that Republicans have been left out of the process.

In November, the House passed their version of the health care bill (H.R. 3962) 220-215, with 39 Democrats voting “nay” and only one Republican supporting the bill.  The Senate passed their version 60-39 in December, with zero Republicans supporting the bill (one was absent during the vote).  Then, Democrat representative from both Houses sat behind closed doors to produce their final health care bill, deliberately leaving out Republicans.

Once the Democrats essentially had their final bill, they held the Health Care Summit.  When Republicans asked to start over, hoping to have an opportunity to be a part of the process this time , President Obama stated “We cannot have another year long debate over this.  If we can’t [agree on something in the next several weeks], then we’ve got to make some honest decisions, and that’s what elections are for.”

Because Democrats refused to let Republicans play a part in the process and were unwilling to be swayed by Republican ideas during the Summit, it was somewhat pointless to have the Summit.  Congresswoman Michelle Bachmann said, “We accomplished more at the White House Beer Summit than we accomplished today at the White House Health Summit.”

I do think the elections will help Democrats see who supports their Health Care bill and I do not think President Obama will like the results.

Republicans ‘Blocking’ Legislation?

President Obama has made an important switch politically that Democrats are rallying around; he is starting to blame Republicans for our troubles a little bit more and blame President Bush a little less.  Additionally, he is going with the strategy he used in his campaigns of trying to be the outsider in Washington who attacks ‘politics.’  Every time the Republicans disagree with the President, he is stating they do it for political reasons rather than substantive disagreement.

This conservative blog has always admitted that both parties play the blame game.  I do think this strategy for Obama is a smart short-term political move that could rally his base.  However, I think this strategy will fail in the long run for three main reasons: the Democrats are in control, majorities are agreeing with Republicans on the issues, and Obama is not an ‘outsider.’

The Democrats have big majorities in the House and Senate and own the White House.  They had the ability the entire first year to pass any bill they wanted.  They passed the Stimulus and other bills that were supposed to stimulate the economy, but the economy has not really improved (particularly when you see the unemployment rate).  The Democrats cannot keep blaming Republicans for the troubles when they are in charge.

When you look at the stances Republicans are taking, it is quite amazing that they can get everyone to vote against some of these bills.  The Obama administration still does not understand that people do not like some of his policies.  Even after all of the town hall meetings, Obama dismissed the outrage as people uninformed.  Why else would Obama keep going on television than to try to simply inform everyone of his opinion.  He feels that if he can just talk to people, they’ll get it.  The problem for Obama is that they do get it and they don’t want it.  Republicans are voting “no” because they believe the policies are not good for America.

Lastly, Obama is not an ‘outsider.’  He won his Senate seat in 2004 and has been there ever since.  He has already broken so many campaign promises that people simply view him as another politician that had great potential.  Further, people want a leader to get things done rather than try to blame the other party.

Watch for the language from Democrats as we get closer to the election; watch how they blame the Republicans when they’ve had the biggest majority in quite some time.  Leaders do what it takes to get the job done rather than just complain about the difficulties.

Truly Out-of-Control Spending

President Obama is now proposing $3.8 Trillion in spending for his 2011 budget.  We are currently projected at a $1.6 trillion deficit for this fiscal year and $1.3 trillion for 2011.  Many have been upset with the out-of-control spending by the Obama administration so far.  Obama tried to address critics of his proposed budget by announcing there would be a spending freeze on a portion of the budget.

President Obama’s plan puts a 3 year freeze on discretionary spending, but is that enough?  The freeze would essentially cover about $15 billion per year, which is about 4% of the budget.  Net-net, the budget is not frozen at all and this is essentially just for show.

The freeze does not include defense, national security, social security, medicare, and medicaid (the fastest areas of growth in the budget).  Minnesota Governor Tim Pawlenty stated this about Obama’s spending freeze: “It’s kind of like somebody eating three Big Macs and then deciding they are going to control their weight by ordering a diet coke.”

I like a freeze vs. increased spending; however, I am typically against a spending freeze because it does not involve the government asking, “What areas are we wasting money?”  It is a temporary political tactic to get people to feel good about the budget. Freezing implies that there is no area that can be cut or more productive.  I believe freezing the budget is cowardly, especially when Obama is only freezing a little area.

Many do not remember this, but when Obama was beginning to campaign for president, he was able to make all of these promises because he was going to raise capital gains taxes, corporate taxes, and taxes on the rich.  However, then the economy tanked and raising capital gains and corporate taxes would be economic and political suicide.  So, President Obama has decided to go forward with his spending spree without the additional revenue, putting us deep into debt!