What’s This Presidential Election All About?

Obama vs. Romney: Does It Really Matter?

by Elliott Morss, Morss Global Finance

Introduction

The election is coming. Does it really matter who wins? After all, neither candidate will take away my Medicare or Social Security. And for younger people, well, when I was younger, I had no idea what Medicare and Social Security were. I just figured I should work hard enough to put bread on the table with little regard for old age.

But beyond my narrow financial interests, the question is important. Below, I list issues that trouble me and speculate on whether they should make me favor one candidate over the other.

Going to War for Foolish Reasons

In the 20th and 21st Centuries, the US has been at war far more than any other nation. And starting with the Vietnam War, they have been increasingly unfocused and unproductive. Was Eisenhower right to warn us about the military/industrial complex?

• Vietnam – China has been invading Vietnam since the beginning of time. Consequently, Ho Chi Minh wanted the US to recognize Vietnam. John Foster Dulles said no. The result? 55,000 Americans died, 1,000,000 Vietnamese killed, US forced out in 1975 when North Vietnam captured Saigon. Nothing accomplished.

• Iraq – Saddam Hussein removed, destabilizing that part of the Middle East. With the US out, more bombings in Iraq and Iran will take over. The situation there is far more dangerous than it was before the US invasion.

• Afghanistan – The US went in to get Bin Laden. Got engaged in a ground war that will accomplish nothing. Got Bin Laden. Still engaged.

Why all of this? Eisenhower was right – the military-industrial complex needs feeding and with the Afghanistan war winding down, it is looking to create another war. And according to Open Secrets, it has 400 lobbyists working in DC.

Arab-Muslim Terrorism

Why all the hatred for the US from Arabs and Muslims? Is Islam really a terrorist religion?

The hatred came from the US arming Israel to be its US policeman in the Middle East. Israel used its power to occupy and seize lands from its neighbors. Of course there were provocations. But Israel has been condemned by the UN Security Council for aggressive acts 29 times, far more than any other country in the history of the UN. Consider Israeli settlements in what were supposed to be Palestinian territories.

The first US veto favoring Israel was in January 1976 when Syria, Egypt and Jordan brought a resolution to the Security Council calling for a two-state Jewish/Palestinian settlement on the international border. The resolution incorporated the wording U.N. Security Council Resolution 242 that passed unanimously in 1967. UN 242 said Israel would give back the lands it seized during the six-day war and that the resulting borders would be the basis for the Palestinian state. The US supported the 1967 resolution but vetoed the 1976 resolution.

More recently, CBS News reported:

“The U.S. was the sole veto of a recent U.N. Security Council Resolution, condemning Israel’s settlement activities in the Palestinian territories, including East Jerusalem – a Resolution calling the settlements illegal and a major obstacle to peace. The vote of at the U.N. was 14 – 1 with the U.S. exercising its first veto since President Obama came to office — and the only negative vote at the Security Council.”

The Jewish lobby is very powerful. For documentation on this and how it has worked against US security interest, see Mearsheimer and Walt.

Assault Weapons

Machine guns are illegal in the US, but not assault guns. Assault guns allow one to fire bullets by pulling the trigger. How many bullets? Depends on the size of the magazine holding the bullets – 60 to 90 bullets per magazine is common.

We hear read the same headlines about every two months – another shooting. Another distressed soul who was to able to legally purchase an assault weapon. Last summer in Aurora, earlier in Tucson, it never stops. And following each, we briefly hear calls for gun reform. Nothing happens.

We hear read the same headlines about every two months – another shooting. Another distressed soul who was to able to legally purchase an AK-47 equivalent machine gun. Last summer in Aurora, earlier in Tucson, it never stops. And following each, we briefly hear calls for gun reform. Nothing happens.

Bill Moyers reminds us:

“in my lifetime alone, far more Americans have been casualties of domestic gunfire than have died in all our wars combined”.

Every year, over 50,000 Americans are killed by guns.

No other developed country allows citizens to possess machine guns. But the US has the National Rifle Association, and no President will take them on. The National Rifle Association goes to great lengths (and spends a huge sum of money) to defend the right to bear arms. It is opposed to virtually every form of gun control, including restrictions on owning assault weapons, background checks for gun owners, and registration of firearms. NRA’s influence is felt not only through campaign contributions, but through millions of dollars in off-the-books spending on issue ads and the like.

How much evidence do we need? Two Kennedys’ and Martin Luther King killed by nut cakes. I quote from Wiki:

“There have been over 20 known attempts to kill sitting and former Presidents. Four died. They almost got Reagan. Truman was shot at as was Teddy Roosevelt and FDR.”

The 2^nd Amendment to the US Constitution states:

“A well regulated militia being necessary to the security of a free State, the right of the People to keep and bear arms shall not be infringed.”

If our forefathers knew how this amendment was being interpreted today and its effects, they would turn over in their graves.

Make Banks Safe

US banks effectively collapsed in 2008. That resulted in a global panic and a stock market loss of $36 trillion. The global recession followed. What was the remedy? Bush got legislation passed to bail out the banks. And the 2,300-page Dodd-Frank Bill was passed in 2010 under Obama. As I and others have asserted, the banks are no safer today than they were before their collapse.

All you have to do is look who the key Presidential advisers are and the financial lobbyists in DC. Who did Obama recruit to help him with the banks?

• Tim Geithner – cheated on his taxes, got caught, and paid fines. That in itself should have disqualified him for the Treasury Secretary position. Geithner was in charge at the Federal Reserve Bank of New York at the time of the AIG bailout (under the Bush presidency). You might remember that AIG staff thought they could get banks to agree to settle for 60 cents on the dollar. Geithner said no, pay the banks in full. That decision cost the American taxpayers $37 billion. Yet somehow, Geithner’s track record was not enough to deter Obama from appointing him.

• Larry Summers – brought in as Director of the White House National Economic Council. His recent background? Following a short stint as President of Harvard University, Summers worked in the financial industry. Glenn Greenwald reports that before being appointed, Summers:
  

  “…collected roughly $5.2 million in compensation from hedge fund D.E. Shaw …and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . .Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for a one-day visit to Goldman Sachs.”

Both Geithner and Summers came to the Obama administration from the financial community and will go back to it when they leave government (Summers already has). The two operated as a team. They kept Volcker away from Obama and made sure the Volcker Rule (banning proprietary trading by banks) was not included in the financial reform bill.

And who is Romney’s top economic adviser? Glenn Hubbard who was recently profiled by the New York Times as a highly paid consultant to the financial industry. Are there not any good economists that are not hired guns of the financial industry? Of course there are. But do Presidential appointments even matter when Open Secrets tells us there are 760 lobbyists working for the financial industry in DC?

Education

The US spends as much as any country per capita on education, but US test scores on reading, math, and science rank 18th among developed nations. And yes, Chinese scores are higher.

New York Governor Cuomo has pointed out that education has become a business in New York and only the students lack a union. Radical change is needed. When MCAS test scores are analyzed, it is clear that charter schools outperform regular high schools. Will we get radical change under either candidate? Don’t hold your breath. Open Secrets reports that there are 1,226 education lobbyists working in DC and many more in every state.

Health

The US spends far more than any other developed nation on health care, and its health outcomes are the worst of any developed nation. Why should this be? As I have reported, the findings of John Wennberg on how to reduce US health costs and improve performance are reflected in the Obama Health Care Bill. The bill calls for the elimination of over $700 billion in unnecessary payments. Unfortunately, that is not all that is included in the 1,017 page bill. Before any action suggested by Wennberg can be implemented, the Bill requires “stakeholder” approval. Who are the stakeholders? Drug companies, hospitals, nursing homes, health professionals, health service delivery companies, and insurance. And Open Secrets reports that together, they have 3,766 lobbyists walking the halls of Congress.

Energy

When Obama was elected, there was considerable hoopla about converting to renewable energies, reducing pollution and the US dependence on foreign oil. What has happened since then? As I have reported, very little. US dependence on coal has increased, and oil imports, while down a bit, continue at high levels. And the US use of renewable energies remains insignificant. It remains unclear what the US energy future will be. But two things are certain:

1. The world is about to lose the battle on global warming as fossil fuel consumption skyrockets in China and India. Time to prepare for more weather extremes;
2. Oil companies have more venture capital money for energy than any other group. They also have 795 lobbyists in Washington. They will determine America’s energy future.

Paying People Too Much

No other country in the world matches the US in what it pays CEOs. And it does not matter whether they are doing a good job. Blankfein, the CEO of Goldman Sachs, took home $43 million in 2008. Pandit, the CEO of Citigroup, took home $38 million in 2008. What happened to US banks in 2008? They collapsed! The amounts are obscene. In short, I am troubled the financial industry paying its leaders tremendous amounts both before and after it caused the greatest global recession since 1929. Kaplan and Rauh point out that the share of investment bankers among the top 0.1% is larger than the share of all senior executives. And America’s top 25 hedge-fund managers make more than all the CEOs of the S&P 500 combined.

Obama vs. Romney – My Conclusions

Having set forth the problems that bother me, let me return to the question posed at the beginning of this piece: does it really matter whether we elect Obama or Romney? My conclusions are presented in the following table where a “+” means a candidate is better, a “-” means a candidate is worse, and a blank cell means it does not matter.

It is troubling there are so many blank cells in the table. They mean the US democracy is broken. Special interest groups have taken over. And the US public is so ignorant and/or apathetic about what is happening that it will stay this way for a long time.

I give Romney a minus on going to war. While it is nearly always true that Presidential candidates are more bellicose than incumbents, I still feel Obama will be more hesitant to launch a new war than Romney. But whoever is elected, the military-industrial complex will be at work looking for that next war. I give Obama a plus for health. Obamacare was a great legislative achievement. And even though the health stakeholders are already complaining about cost-savings cuts, I believe Obama understands what reforms are needed and will keep working to achieve them. I also give Obama a plus on paying people too much. I just hope that this time, he does not give in and does increase the top marginal rates.

©2012 by Elliott Morss

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About the Author

Elliott Morss has a broad background in international finance and economics. He holds a Ph.D.in Political Economy from The Johns Hopkins University and has taught at the University of Michigan, Harvard, Boston University, Brandeis and the University of Palermo in Buenos Aires. During his career he worked in the Fiscal Affairs Department at the IMF with assignments in more than 45 countries. In addition, Elliott was a principle in a firm that became the largest contractor to USAID (United States Agency for International Development) and co-founded (and was president) of the Asia-Pacific Group with investments in Cambodia, China and Myanmar. He has co-authored seven books and published more than 50 professional journal articles. Elliott writes at his blog Morss Global Finance