Projection for 2016 U.S. Election: a Republican President


Any sensible person would think that even pundits have not yet finished analyzing Tuesday, November 6th US election, who is this lunatic daring to make projection for the 2016 election, and at the top against all odds: for a Republican President. Odds that the ground reality has now shifted towards Latinos, Asians, and single educated white women whose proportion in the total population has been increasing and they overwhelmingly voted for Obama. A dominant proportion of Blacks have historically been voting for Democrats. While proportion of white male, evangelicals and social conservatives (who tend to vote two to one to Republicans) have been declining. So what is the rational for such daring projection of a Republican President in 2016 US election: the “economy” stupid.

Economy was also the top election issue in this election, but Democrats were successful in convincing more than half of the electorates that the loss of jobs and falling income that nation is struggling today, are direct results of 2008 financial crisis, mortgage mishaps, mounting debt, and overseas military misadventures. All were undertaken by the Republicans and W. Bush administration. The population is harvesting thorn now for the seed which was sown yesterday. Bad things happen with time lag. Moreover, if President Obama would have not undertaken fiscal stimulus package, population would have paid even higher price in terms of loss of jobs and falling income.

But by the year 2016, present reasons or explanations would be obsolete and go to history dustbin. Population would just see the prevailing state of economy, their jobs and earnings. And the economy would not be better in 2016 than what Americans are experiencing now. The past growth and prosperity could not be repeated in the future irrespective of who occupy the White House. Days of about 3% plus GDP growth and real improvement in living standard has long gone due to shift in economic gravity from the West to the East. Now there is hardly any commodity of comparable quality that East (more specifically China and India) cannot produce and sell at a price which is at least half of the cost to produce in the West. In a globalized competitive world, one cannot ask for more than whatever is the value of one’s output or contribution. This implies falling income and loss of jobs for US in tradable commodities and services. And due to exponential progress in technology, transportation and communication, there are not very many tradable goods and services protected from global competition.

And even in areas where Americans exceed in productivity from competitors, their income would hardly budge, because increasing share of their hard work will go in pockets of big bosses, who have already greatly skewed the US taxation structure and regulations in their favour by massive lobbying effort  and providing enticement to politicians in Washington. While average working Americans pay 21.9% of their earnings as income and payroll taxes, top 1% pay only 18.9% and top 0.01% pay less than 10% or nothing due to various deductions and loopholes (Johnston) . The top income tax rate used to be 70% until Reagan administration, who decreased it to 50%. The top rate was 39.6% during Clinton administration, which W. Bush decreased to 35%. The Obama administration would like to see the top rate to go back to 39.6%, for which Republicans are dead against. At the same time, the share of total income of the top 1% of income earners has increased dramatically, from 9% in 1970 to 23.5% in 2007, the highest level on record since 1928 and much higher than other Western countries.

There are ample examples in US recent history that the economy grew and real income increased when taxes were high: during first Bush and Clinton era. Just opposite happened during W. Bush when taxes on top income were decreased. That is the reason that experts (Diamond and Saez) calculate that the optimal top tax rate should be in the range of 50% to 70%, based on fairness, economic efficiency and behavioral responses.

Unfortunately, the harm top 1% has inflicted on American economy and society in terms of deteriorating purchasing power of poor and middle class has not yet sinked in average American psyche. Americans often fail to connect their distaste for inequality with support for policies that would tend to decrease it–”from higher taxes on the rich to greater social spending on the poor. Actually one survey (Kuziemko and Norton) shows that support for redistribution has fallen from 68% (beginning of recession in April 2008) to 58% in October of 2008. This is the period when unemployment rate almost doubled while the largest banks were bailed out by taxpayers.

The American political system appears to be rotten: politicians and lawmakers at Washington turned into indirect employee of lobbyists and Wall Street. They defend and protect tooth and nail the privileges of top 1% at the expense of the rest, 99%. Things have become so dismal that even Paul Volcker (past chairman of the Federal Reserve) questioned “Can it really be true that our government is for sale?”

Elections have become perfect arena to buy vote through the wealth of a candidate and party. It is now perfectly legalized by Supreme Court ruling: “corporations are people” and so corporations are free to make unlimited contributions in election campaign –” Super PACKs. As Reich wrote: “Our courts and public officials have stood the First Amendment on its head. Money is considered speech, and corporations are considered People…If money is speech, those who have the most money have the loudest and most powerful speech. If corporations are people, the biggest corporations are the most politically privileged people in the land. The voices of average Americans can’t be heard because most of us don’t have the dough to break through, and none of us are corporations.”

So where does it all lead to? Influence of Super PACs, big business, broken Washington, globalized ruthless competitive world, out sourcing of jobs, shrinking middle class, rising unemployment and falling income –” straight to a “sick economy.” And Democrats would get full blame for it in 2016 election. And they would not be able to escape by passing the blame game to past administrations (which would be history by that time).

Even changing demography and rise of Latinos in electorate would not save Democrats. American public would fail to accept the shift in ground reality: being uncompetitive in global market place and a failed tainted political system at home. Instead of in depth look at the soul of the problem: mounting debt, corruption of whole political institutions and houses being effectively dictated by plutocrat and oligarch 1%, they would switch the horse –” a Republican President, with the hope that he/she would take 360 degree turn around and bring back USA’s days of past glory and economic prosperity again. But this would be a pipe dream, unless both US political and economic systems are not radically reformed.


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