The Lead Story

No it's not about the Mass. elections, I'll get to that. It's about a dinner Bob Gates had this past week with Boeing executives. Secretary of Defense Gates informed the executives that he will try and persuade the White House to have regular increases in defense spending for "many years to come". Since the U.S. defense expenditures total 45% of the world's entire defense spending, what's he want to hit 50%?

Few remember the speech on September 10,2001 by then Secretary of Defense Donald Rumsfeld at a dinner of defense contractors where he said,"We have met the enemy and he is us." Rumsfeld told his dinner guests that there was $1.3 trillion in Pentagon spending and weapons systems which were unaccounted for. He vowed to get to the bottom of this problem and strip defense procurement of its waste. The next day happened and we put our foot to the pedal and have been clocking about $1 trillion a year on security ever since without the corresponding side effect of creating jobs or saving our manufacturing base. Instead, the $1 trillion in the Iraq War had no revenue sources.

Now Massachusetts. The Coakley loss has some practical political campaign elements to it. First, after the Democratic primary, the Western Democratic Party from which she hailed never made peace with the Boston party, which had backed Capuano. There was no coordination of phone banks or the merging of voter lists. As the Boston crowd said, "We didn't like her." After the primary, when Coakley's lead kept dissipating she went on a long Christmas vacation without tracking polls to keep her up to date. The reason the African-American community and the Hispanics didn't come out--which is the Republican plan this year--is there was absolutely no outreach to them. None, nada, zip. The Hispanic mayor of Lowell asked Martha Coakley as Attorney-General to swear him in but he said he was brushed off. Coakley made 16 campaign appearances to Brown's 66. You have to ask for the vote.

A couple of strange items. For those who had made up their minds one month before the election, Coakley was the candidate. For those who made up their minds in the last 24 hours it was Coakley. The Obama fly-in and the Clinton appearance did help. Obama unleashed Organizing for America's network ,which made over 1 million calls. Interestingly, they focused on Democratic women, who seem to be very hesitant about Coakley. The results paid off--the loss would have been worse. 22% of Democrats actually voted for Brown. They were working class Catholic voters who seemed to be interested in jobs. The voter reaction post election was that the Mass voters were tired of the "give-aways" to Wall Street and wanted more for the American people. Obama's congratulatory phone call to Brown pointedly mentioned that he hoped they could work together for working Americans. Not.

Our new Republican Governor of Virginia gave his state of the state address, which prefigures Republican approaches around the country. The photogenic governor hid his long-term ties to Pat Robertson from the electorate and sounded moderate even though he is a hardcore social conservative. His speech was masterful, emphasing creating jobs and making Virginia a competitive place for business investment. He talked about offshore drilling, investing in our wine and film industries. We have to make these sacrifices for the future of the state. Well, what sacrifices? Government services will be cut, teachers will be laid off, school budgets through the state system must be slashed. On top of that the budget has a massive deficit from the Kaine years. Of course, there will be no new taxes. As Assemblyman Dave Englin from Alexandria noted,"That was an impressive list of projects he has but he never mentioned how he was going to pay for them." As Dick Cheney, the avatar of the New Republican Party, said," Deficits don't matter." They are just a strategy to shrink the social welfare network and cut needed government services. But expect this to be the latest line for 2010 elections both at a state and congressional level. Well, as Orrin Hatch said about the Bush deficits, "That was in the days when we didn't have to pay for anything." The Governor has informed the electorate that he has to go to Congress to get permission for off-shore drilling in Virginia. A minor detail.

What does the Mass vote mean for healthcare reform? Obviously, it shouldn't in the real world. Democrats still have 47 plus Bernie Sanders and the Senator from Aetna. It only takes 51 votes to pass the healthcare bill in the Senate. The reason is that the Byrd Rule, which calls for a supermajority if a bill has an impact on the deficit, doesn't apply. The CBO reports on both the Senate and House bills show they reduce the deficit and really reduce the deficit in the out ten years. However, for cloture--which the Republicans used a record 111 times this past year--one needs 60 votes. (Even during the bitter fights over the Civil Rights bills the Senate averaged 6 to 8 filibusters per year.) Now the tricky thing here is that Senators vote their conscience for bills but for parliamentary motions it is expected that Senators obey party discipline. But certainly there must be a Republican somewhere who would buck the tide, even if it means voting against the bill later.

Democrats have formed a circular firing squad on this. My Senator Jim Webb has called for Obama to start over on health care reform. Politically, that's not viable for his presidency. While I favor the House Bill, a fusion of both bills or even the Senate bill alone would bring immediate relief to millions of people and in a few years dramatically improve the fate of about 30 million uninsured people. Since Webb has spent no time on this, he doesn't understand the thousands of hours spent in developing these bills.

The simple fact of the matter is that the equivalent number of Americans who died in the entire Vietnam conflict die every year because of the lack of medical attention. That is obscene. Likewise, about 1 million Americans a year declare bankruptcy primarily because of medical bills. And without health care reform, health costs in this country will grow from around 17% of our GDP to 22% in a few years. We should expect our health insurance premiums to rise about 33% over the next few years. On a personal note, if I or my wife suffers any serious illness. We are bankrupt. Full stop.

Calls for Obama to move right are ludicrous since that would exacerbate the country's problems and in a dramatic way. The dirty secret is that our vaunted private sector created no jobs over the past decade. Our small business sector has dwindled to 6% of the private sector, the lowest in the developed world. There are literally no more tax cuts to be made that would have any positive effect on the economy. Remember only 26% of our corporations pay any taxes. Over $1.5 trillion in actual tax monies (not taxable revenues) from companies are parked overseas. No less an expert than Carly Fiorina of Hewlett-Packard fame and new California politician admitted this during the 2008 campaign. In fact, as part of the stimulus bill, Republicans acted as conduits for the corporations, offering one-third of this amount to the government in return for tax holidays. Another $1.3 trillion is salted away by our richer citizens in tax havens.

Alas, we are left with the resources of our government. With the massive deficits that Obama inherited--something that Republicans simply will not admit, even to me--goverment must be the generator of jobs and economic growth. Today, we saw a miraculous event--David Stockman, Reagan's OMB director, write an op-ed calling for taxing Wall Street. It's interesting to see all the old Reaganites come around on the economy. Bruce Bartlett, one of the father of supply-side economics, has been forceful in urging Obama to spend more to get the economy up and running. Paul Volcker backed Obama early on. There is a strong awareness that the era of Reagan ran its course--almost a generation--but that once the Fed runs out of tricks we must go back to Keynesian economics. But that is not what we are seeing among today's Republicans. For them, there is no social contract. You are on your own.