Running Against Wall Street

In post back in June ("Lessons from the European Parliament Elections") I wrote,

A third area where (some) Republicans may be able to draw a favorable contrast with Democrats, if they are willing to do so, is by running against Wall Street, or more accurately, running against the incestuous relationship between some major Wall Street firms and Washington. I suspect New Jersey's GOP gubernatorial nominee Chris Christie will try a version of this while running against our incumbent governor, former Goldman Sachs CEO Jon Corzine.

Today I got an e-mail from the Christie campaign which included this video:

The Hispanic New Haven Firefighter Plaintiff Speaks

Tucked away on p. A-20 of Friday's New York Times was a profile of Lieutenant Ben Vargas (pictured above, with his wife and one of his sons), the lone Hispanic fireman among the 18 plaintiffs in the Ricci case, "Bias Suit a Test of Resolve for Hispanic Man". Below are some excerpts.

NEW HAVEN — The two dozen firefighters who packed into Humphrey’s East Restaurant were celebrating a coming marriage, drinking and jawboning in the boisterous style of large men with risky jobs, but Lt. Ben Vargas spent the evening trying to escape the tension surrounding his presence.

During a trip to the bathroom, he found himself facing another man. Without warning, the first punch landed. When Lieutenant Vargas awoke, bloodied and splayed on the grimy floor, he was taken to the hospital.

Lieutenant Vargas believes the attack, five years ago, was orchestrated by a black firefighter in retaliation for his having joined a racial discrimination lawsuit against the city over its tossing out of an exam for promotion that few minority firefighters passed. (No arrests were made in the attack, and the black firefighter vigorously denies having been involved.)

When the Hispanic firefighters’ association and its members — including Lieutenant Vargas’s brother — refused to publicly stand behind him, he quit the organization.

Lieutenant Vargas, who posted the sixth-highest score on the exam, was ridiculed as a token, a turncoat and an Uncle Tom — all of which, he said, “made my resolve that much stronger.”

When the United States Supreme Court ruled this week in the firefighters’ favor, Lieutenant Vargas, 40, the son of Puerto Rican parents, found himself celebrating amid an awkward racial dynamic: As the lone Hispanic among the 18 plaintiffs who had challenged an affirmative action policy, he had also challenged an appeals court decision joined by Judge Sonia Sotomayor, the first Hispanic nominee to the Supreme Court.

“She’s from Puerto Rico, and I’m from Puerto Rico,” he said. “She obviously feels differently than I do.”

[...]

“I consider myself an American — I was born and raised here,” he said in an interview on the porch of his home in the wooded suburb of Wallingford. “I love my people. I love my culture. I love our rice and beans, our salsa music, our language — everything my parents raised us with. But I am so grateful for the opportunity only the United States can give.”

[...]

Lieutenant Vargas decided to follow the path of an older friend, John Marquez, whom he looked up to. Mr. Marquez had worked his way out of the neighborhood by joining the Fire Department.

“I used to tell him, ‘You know where I came from — if I can make it, anyone can,’ ” Mr. Marquez, now a deputy chief in the department, said in an interview. “ ‘But don’t expect anything to be handed to you. Work for it.’ ”

But Lieutenant Vargas’s aspirations were stymied by a 1988 lawsuit, filed by black firefighters, that shut down hiring for years. The lawsuit challenged a written test that relatively few nonwhites passed. In 1994, the city agreed to disregard the test, over union complaints, and hire 40 firefighters — 20 white, 10 black and 10 Hispanic, according to The New Haven Register.

Lieutenant Vargas was among those hired. That later led some people to criticize him as trying to shut the door that welcomed him, though he maintained that it was impossible to know how he would have done under the old hiring process.

[...]

In 2003, Lieutenant Vargas was one of 56 people in the department who passed a test for promotion; 15 were black or Hispanic. When city officials discovered that only two of those were likely to be immediately promoted, they decided to throw out the test, citing concerns that minority candidates might again sue, alleging discrimination.

Instead, a group of white firefighters sued. The results had been posted by race, without names, and when Lieutenant Vargas learned that a Hispanic firefighter had scored sixth among 41 lieutenants on the test to become a captain, he joined the suit. Only later did he discover that the score was his.

“I would have carried the load all by myself,” he said of filing the suit. “Luckily there were enough people out there who felt like I did that we could stand together.”

But Lieutenant Vargas bore more than his share of the criticism, said Lt. Matthew Marcarelli, who was among the plaintiffs and has known Lieutenant Vargas since they were classmates at the fire academy. “Why the other guys viewed him as a turncoat I really don’t understand. He did it because he’s principled and he thought it was the right thing to do. Benny’s nobody’s token.”

Chief Marquez said his old protégé was “an easy target because he didn’t fall in line.”

“It seems that if you’re not the right type of minority, you get hammered,” he said.

The president of the black firefighters’ group in New Haven did not return calls seeking comment.

[...]

[Lt. Vargas noted] that the Hispanic firefighters’ association reversed course in February, after the Supreme Court agreed to hear the case, and publicly endorsed his position.

Gesturing toward his three young sons, Lieutenant Vargas explained why he had no regrets. “I want them to have a fair shake, to get a job on their merits and not because they’re Hispanic or they fill a quota,” he said. “What a lousy way to live.”

If there's anyone in the Connecticut GOP with two brain cells to rub together, they will have already invited Lieutenant Vargas and his family to a Fourth of July barbecue this weekend and they'll encourage him to run for elective office -- maybe city council in New Haven, for starters.

The photo above, of Lt. Vargas and his wife and son, was credited to Christopher Capozziello of the New York Times.

Lesson's from The European Parliament Elections

I meant to post a link to this earlier this week, but didn't get around to it. From Salon, here is Michael Lind's take on the victory of rightist parties across Europe in the European Parliament elections last week: "A warning for Democrats? The right just won all across Europe, thanks to nationalism, populism and recession. It could happen here too.".

Below is an excerpt from Lind's essay, followed by a few thoughts by me.

[I]t has become something of an orthodoxy among bien pensant progressives on both sides of the Atlantic that territorial nation-states are immoral because they privilege the identity of one cultural nation over others (the nation part) and because they favor the well-being of their citizens over foreigners who may be poorer (the territorial state part). Most progressives favor ending agricultural subsidies in Europe and the U.S., claiming that this would help poor peasant farmers in the global South export their way to prosperity (of course this would really benefit multinational agribusiness, not romanticized peasant farmers, but never mind). In debates about immigration, as in debates about trade, elite progressives whose own positions and incomes are secure frequently demonstrate their altruism by suggesting that it is acceptable if immigration somewhat lowers the wages of their less-fortunate fellow nationals, as long as poor foreign immigrants and receivers of remittances are thereby made better off. How generous of them!

The new pro-capitalist, anti-nationalist center-left finds allies in investment banks and college campuses but has little to offer ordinary people who view the nation-state as their agent and protector in a dangerous world. Nobody should be surprised when, in a period of economic crisis, significant parts of the population should turn to unabashed nationalists of the right, as opposed to progressives who fret that helping out their fellow citizens might be a form of discrimination against more deserving foreigners. It's true that toxic forms of racism and illiberal nationalism drive the anti-immigrant politics of the far-right parties that have benefited from protest voting in Europe. But the economic case for limiting the inflow of new workers into an economy at a time of mass unemployment is likely to seem commonsensical to many non-racist voters who do not share the new center-left's unease with national patriotism.

Lind makes some astute observations here, and Republicans can draw some lessons from this if they are willing to part company with Democrats on some of their shared orthodoxies (e.g., embrace of large scale unskilled immigration). The way to do this would be to acknowledge the challenges posed by globalization to the American middle class and offer some constructive solutions. In a recent post ("How Not to Create Broad-Based Prosperity"), we mentioned one Democrat (Matt Miller of the Center for American Progress) who acknowledged these challenges but didn't offer constructive solutions to them (e.g., Miller's proposed replacement for manufacturing jobs lost to outsourcing was to replace them with service jobs such as hospice aids; Miller proposed this without acknowledging the extent to which these jobs are currently filled by immigrant workers). I've made these points before, but two specific areas where Republicans can draw a contrast with Democrats are on immigration policy and energy policy.

On immigration policy, Republicans would be smart to buck the Chamber of Commerce's demands for cheap unskilled immigrant labor and advocate a transition to an immigration system similar to those of Australia or Canada, one that selects for immigrants with high levels of human capital. While unemployment is high, immigration should perhaps be further limited to foreign entrepreneurs who have the capital and intent to start businesses here and create jobs for American workers. To counter the inevitable accusations that anyone advocating an economically rational immigration policy is advocating it because of racism, Republicans ought to do two things. First, they ought to scrupulously distance themselves from anyone who advocates restricting immigration based on race. Racist immigration restrictionists may win elections in Europe, but they will be the kiss of death to any plans to institute a Canadian- or Australian-style immigration policy in America. Second, Republicans ought to point out that it is often minorities who are most harmed by the effects of our current immigration system. Let Democrats explain why we should import more unskilled immigrant laborers when, for example, 39.4% of African American teens are unemployed (Hat tip to Dr. Mark Perry for the chart below).



On energy policy, Republicans would be smart to continue advocating efforts to develop more domestic sources of oil, gas, and coal, while advocating an increase in nuclear power as well. Increasing domestic supplies of energy would create more high-paying jobs in the energy sector, and ensuring a large supply of relatively inexpensive energy would facilitate the creation of jobs in energy-intensive industries such as manufacturing (we noted the effect of lower energy prices on employment in a post last fall, "A Tale of Two States: Utah versus Rhode Island").

A third area where (some) Republicans may be able to draw a favorable contrast with Democrats, if they are willing to do so, is by running against Wall Street, or more accurately, running against the incestuous relationship between some major Wall Street firms and Washington. I suspect New Jersey's GOP gubernatorial nominee Chris Christie will try a version of this while running against our incumbent governor, former Goldman Sachs CEO Jon Corzine. Republicans would be smart to look for economic advisers from among the smart bankers and investors who haven't required government rescues. I don't know what John Hussman's politics are, but to the extent his policy prescriptions (e.g., making big banks eat some losses) have been ignored by the current administration, I bet Dr. Hussman would welcome a chance to advise a Republican candidate willing to listen to him. Another potential economic adviser might be Andy Beal, the self-made billionaire Texas banker who successfully navigated the credit bust.

Following "Dutch" versus "Going Dutch"

Over the weekend, South Carolina Senator Jim DeMint, in an op/ed in the Wall Street Journal ("How Republicans Can Build a Big-Tent Party"), argued that small government, low tax conservatism (which he summarized as "freedom") should be the focus of Republicans as they work to expand the party:

[T]he organizing principle and the crucial alternative to the Democrats -- must be freedom. The federal government is too big, takes too much of our money, and makes too many of our decisions. If Republicans can't agree on that, elections are the least of our problems.

In other words, the GOP should advocate the policies of President Ronald "Dutch" Reagan today. The "freedom" agenda -- the smaller government, lower taxes, and fewer regulations¹ -- advocated by Reagan did (along with his spectacular political talents) win him the presidency, and a landslide reelection, but it's worth remembering that when he won the presidency in 1980, it was after decades of government overreach that built upon FDR's activist response to the Great Depression; during the Depression, Reagan himself voted for FDR.

Sen. DeMint continued:

If the American people want a European-style social democracy, the Democratic Party will give it to them. We can't win a bidding war with Democrats.

Coincidentally, the New York Times Magazine published an article on a European-style social democracy over the weekend, a report by Russel Shorto, an American ex-pat living in The Netherlands, on his experiences with the Dutch welfare state ("Going Dutch"). I'm going to address a few points from that article in another post, but first I'll make two meta-points.

The first meta-point is that Sen. DeMint's focus on freedom (with respect to economic policy) despite its merits, may be a tough sale today, given that we are in the longest post-WWII recession, unemployment is headed for double digits, and most Americans have seen the values of their homes and retirement accounts drop more steeply than they have in generations. I think a more common response to this sort of economic uncertainty is a desire for more security, not more freedom. If I were a Democratic political strategist, I'd have a field day with DeMint; the talking points almost write themselves. E.g., "We want to give you affordable health care; Sen DeMint and the Republicans want you to have the freedom to pay for it yourself." Certainly, Republicans ought to propose market-based alternatives where possible, but keeping in mind the current economic uncertainty, a better way to frame these alternatives might be to use a phrase such as "choice² and security".

The second meta-point is that, despite the views of hardcore libertarians, capitalism can and does coexist with welfare state policies of one form or another. Social democracies such as Denmark and The Netherlands score highly on the Heritage Foundation's Index of Economic Freedom (numbers 8 and 12, respectively, out of 179 countries ranked), and even Hong Kong and Singapore -- the highest rated countries on the index -- have social safety net policies (although they are based more on enforced savings than income redistribution). To his credit, Shorto makes a similar point in his New York Times Magazine article, noting that the Dutch have a long history of being innovative capitalists, and remain capitalists today.

¹Today, "regulation" often connotes a law designed to promote public safety, but it's worth remembering that a number of the regulations Reagan (and Carter before him) opposed were ones designed more to limit competition and fix prices (e.g., regulations on airfares and stock commissions).

²Conservative advocates of school vouchers have already co-opted the word "choice" from liberal advocates of unrestricted abortion by calling voucher plans "school choice".

New GOP Tack: Running Against Wall Street?

That's the tack New York State Assemblyman Jim Tedisco is taking in his campaign against Democratic venture capitalist Scott Murphy to win the seat in New York's 20th Congressional District vacated by Kirsten Gillibrand, who was appointed to replace Hillary Clinton in the U.S. Senate. From Tedisco's campaign website ("Tedisco Holds Main Street Walk, Blasts Wall Street AIG Values Of Scott Murphy"):

“Today, I am listening to the people on Main Street about what their needs are and how together, we can create jobs and put our economy on the Road to Recovery. Unfortunately, Main Street is hurting because of the unchecked greed on Wall Street and incompetence in Washington that has allowed companies like AIG to receive millions of dollars in executive bonuses,” Tedisco said.

“My opponent continues to evade answering the question of whether he supported AIG handing out $165 million bonuses or just rubber-stamped a bill he didn’t read,” Tedisco said. “The choice in this race is clear between Main Street jobs and Wall Street greed.”

Even though the race is for an upstate district, New York City-area talk radio station WABC has been airing ads for Tedisco hammering that point about the AIG bonuses. According to MSNBC, RNC Chairman Michael Steele has been pouring a lot of resources into Tedisco's campaign.

The photo above comes from Tedisco's website.

Missing from McCain's Speech

Another area where there seems to be little daylight between the major party candidates is in the conceit that government-sponsored training or education is an all-purpose solution for economic advancement. McCain had a better real-life example of economic advancement in the audience, in his running mate's husband Todd Palin. Todd learned one of his trades from the company he worked for, BP -- not from a government-sponsored training program (I doubt he learned his other trade, commercial fishing, from a government program either). McCain could have used the opportunity to point out that allowing more domestic energy production will create more high-paying jobs like the one Todd Palin had, but I guess that would have conflicted with the line elsewhere in his speech where he made bogeymen of big oil companies.

Although increasing domestic energy exploration and production will create more high-paying jobs, of course it won't be a panacea either for those whose jobs are lost to outsourcing. That said, the idea that the government is going to retrain laid off workers for jobs that "won't go away" isn't serious. How would the government know what skills will be needed five or ten years down the road? A better approach from the government would be to enact policies that will encourage more companies to set up shop and hire people in this country.

Unskilled Immigration and Economic Statistics

Robert Samuelson ("The Real Economic Report Card") brings up a point that ought to be obvious but isn't made more often: unskilled immigration makes economic statistics such as poverty levels and the number of those without health insurance worse. It seems like common sense that if you import more poor people whose likely jobs (landscaper, busboy, non-union construction worker) usually don't include health insurance, you will end up with more poor, uninsured people in the country than you would otherwise. Perhaps the reason this point isn't made more often is that immigration is one area where there currently is no significant policy difference between the major party presidential candidates.

It makes some sense, from a political perspective (if not from an economic perspective), for Democrats to be in favor of increasing unskilled immigration. If unskilled immigrants become citizens, they are more likely to be net recipients of government benefits, and thus more likely to vote for the party that favors more progressive taxation and more generous spending on social services. Unskilled immigration makes less sense politically for Republicans, but it makes economic sense for certain Republican constituencies, e.g., the small business owners who hire the busboys, landscapers, etc. From the perspective of these small employers, the GOP offers the best of both worlds: support for cheap labor and support for pro-business policies such as lower taxes. Of course, over the longer term, it's hard to see how an embrace of unskilled immigration won't consign the GOP to permanent minority status, unless somehow these immigrants are never given a chance at citizenship, which seems unlikely.

The real estate bust, by drying up the demand for residential construction laborers, seems to have put this issue on the back burner for now, which helps John McCain, since his stance on immigration is one of the areas where he is against his base.