Freedom Line Blog

The GOP presidential nomination campaign is a highly volatile thing, with one exception: No matter what happens, Mitt Romney coasts along in the high teens or low 20s, unmoved in the polls by all the other sturm und drang.Right now it is Herman Cain who, like a super ball, is bouncing extremely high — just as Rick Perry did before him, just as Michelle Bachmann did before that, and just as Cain himself did (to a slightly lesser extent) in the Spring. Of the others in the field, Ron Paul will keep his 10-12 percent of support no matter what, but will never exceed that, and thus has no prayer. Also prayerless are Jon Huntsman, Gary Johnson, almost certainly Bachmann (who has fallen almost off the map), and others like Buddy Roemer and Fred Karger.

Does that mean it is now a three-way race between Cain, Perry, and Romney? No.

Romney and Perry both have the money and clout to stay in all the way. Cain has mojo going for him, along with a winning personality, but his campaign organization is an absolute mess and he also is finally about to get vetted, for real, for the first time. He may or may not have staying power.

Meanwhile, three others still have a shot. Person one is MYSTERY MAN, meaning a still-possible, as-yet-unknown, entrant into the field. If Cain falls as fast as Bachmann did (not likely, but possible) and if Perry still hobbles along without regaining his polling momentum, there is still room for somebody with a certain profile to enter the race and catch fire. It would need to be somebody already well known or somebody unique. The three who come to mind are, 1) despite his protestations, Jeb Bush; 2) Rudy Giuliani; and 3) Bobby Jindal, once he wins re-election as Louisiana governor on Oct. 22 with about 83 percent of the vote. The latter would need to find a way to gingerly extricate himself from his endorsement of Perry, but he’s clever enough to do it if he wants.

Person two, surprisingly, is Newt Gingrich, who has been slowly and steadily gaining polling strength, returning from the absolute dregs into which he had cast himself with his ill-considered slam of Paul Ryan’s budget followed by sheer mendacity, and then cussedness, about what he had said. Would Republicans really be foolish enough to rally around a man he repeatedly through the years has bashed conservatives in harsh terms, who few people with whom he served in Congress trust entirely, who can be abrasive as heck, who has led the GOP into deep unpopularity in the past, and who has a sordid personal history? Well, some people long have called Republicans “the stupid party.” Gingrich has reinvented himself as everybody’s favorite uncle in the field, and attention spans are so short that a few good debate performances (see: Herman Cain) can make people go gaga no matter what a candidate’s history is.

Longshot-but-still-possible person three is Rick Santorum. Why? Hasn’t he consistently ranked well down in the polling single digits? Yes. But he also is the only one who has performed well in almost every debate. He also is the only one who has outperformed expectations in both major straw polls so far, beating Cain, Perry, Romney and Gingrich in Iowa (finishing fourth overall) and beating Paul, Gingrich and Bachmann in Florida (again finishing fourth overall, with a decent 11 percent of the vote).  And he has a history, on election day, of outperforming expectations. He won in major upsets his races in 1990, 1994, and 2000, and beat another incumbent when redistricted into a district with a Democratic congressman in 1992.

So, the question is, who, if anybody else, can catch fire? Whether Cain stays high, or whether Gingrich, Santorum or Jindal emerges, the main challenger(s) will need to contend with the steady Romney regardless. Stay tuned for more twists and turns.

A new coalition of major corporate executives has formed to push for a lower corporate income tax rate. Called RATE (Reducing America’s Taxes Equitably), the group has been rather vague about how much to cut the corporate rate, but the fact that an influential group is organizing at all is good news. As I have argued in person for four years and in print for at least 3 1/2 years, I think there is actually a good case to be made for not just reducing, but completely eliminating, the corporate income tax. Presidential candidate Rick Santorum, to his credit, goes almost as far, calling for cutting the rate in half in general, and completely eliminating it for manufacturers.  Megan McArdle at The Atlantic agrees with me that the whole thing should go.

But back to RATE, which isn’t so bold, but still is a valuable step in the right direction…. It really merits a full column, and will receive one here in the coming weeks. But as RATE notes at its web site, there really is no good political reason not to cut corporate rates, because leaders throughout the political spectrum have agreed it should be cut.  The problem, I think, is that they keep holding it in abeyance, wanting to include the corporate rate cut in some “grand bargain” that includes all sorts of other taxing and spending changes.

This is the wrong way to go about it. Grand bargains are almost always the wrong way to go about things. Better to do things cafeteria style selection by selection. If everybody agrees on something, go with it — especially if it is good policy. Good policies shouldn’t wait on extraneous matters.

Anyway, again, there is far more to be said for RATE. But for now, we should welcome this group to the table and thank it for coming. It’s a coalition that could do some real good.

In addition to agreeing with Jennifer Rubin, here, I have the following, ultra-summary, reactions to last night’s debate and the state of the GOP presidential nomination race:

Herman Cain: When he talks foreign policy, he seems completely lost. When he talks economics, he is wonderful. He’s also incredibly likable. If he doesn’t get the nomination, he should be Secretary of the Treasury. His combination of practical business experience and chairmanship of the Kansas City branch of the Federal Reserve gives him great qualifications for that position.

Michelle Bachmann: You gotta love her passion and principles. Not so much her knowledge. She is actually way out in right field to say that Romneycare is “unconstitutional.” It’s not — not at the state level. The problem isn’t that it violates the Constitution; the problem is that the individual mandate tramples on liberty and completely upends the American understanding of individual choice and personal responsibility — not to mention the practical drawbacks of Romneycare as a whole.

Newt Gingrich: He shines in most of the debates. But his personality, temperament, and philosophical benders are probably not suited to the presidency.

Jon Huntsman: Condescending, unctuous, and with a nasty streak. And unconservative to boot.

Rick Perry: As I wrote last night, the man had a very bad evening.  I saw multiple other analysts say the same. He needs to improve his game, and fast, or else he could enter Fred Thompson-ville. (I like Thompson, by the way; this is in terms of political trajectory, not personal candidate preference.)

Mitt Romney: Plastic.

Ron Paul: When he’s right, he’s really right. But when he’s wrong, he’s in outer space, in fact in another galaxy. He was hurt politically very badly last night by Rick Santorum’s apt criticism of Paul’s goofball statements relating to 9/11.

Rick Santorum: Okay, I’m a big Santorum fan. This is the third straight debate in which I am hardly alone among pundits in saying that he really was impressive. Isn’t it time people stop saying: “He did great; too bad he can’t win,” and instead start saying: “He did great; maybe he might have a chance to win”?

Well, Paul Ryan is out of the presidential race without having entered it.  For those of us who value limited government and want to see fiscal discipline in Washington, and who desperately want a candidate who can articulate the need for and details of reforms, it is a disappointment that Rep. Ryan will not enter the race.

It does occur to me that of the candidates who are in the race, the one whose record and platform both match most closely with Ryan’s is former Sen. Rick Santorum. Far be it from me to issue any endorsement, especially considering that candidate selection involves political considerations in addition to mere analysis of records and platforms, but my prediction — as an analyst — is that Santorum will at least attempt to make a big move to attract activists who had been waiting on the sidelines to see what Ryan would do. Santorum remains a long shot, but he’s steadily creeping up in terms of public consciousness and support.

Of course, both Rick Perry and Michelle Bachmann also would claim the mantle of Ryan-esque conservative reformers (although, frankly, Bachmann doesn’t fit because Ryan is an institutionalist and legislator whereas she is consciously an outsider and back-bencher), and the immediate benefit may flow to Perry as the most Ryan-like front-runner (the bandwagon effect is alive and well).  But in terms of persona, geography, personal backgrounds, style, and mastery of the substance of national issues, Santorum and Ryan are indeed a close fit.

It will be interesting to see if any other boomlet starts to try to recruit yet another candidate into the race (other than Sarah Palin, who has always been a possibility) — or, if, finally, the field (other than Palin) starts to settle down and the attention at last turns to those actually in the race rather than to those on the outside that some people wish would get in.

Despite its August recess, Congress remains technically in session. Its leaders of both parties should consult with President Obama and act to try to talk sense into S&P, which has caused a market meltdown with its understandable but not-technically necessary downgrade of U.S. bonds.  Rather than berate S&P publicly, American political leaders should consult with S&P privately to see if a few quick steps would convince the rating agency to call off the dogs.

Here are three steps I believe could be done rather quickly, without necessitating extensive hearings or debate, that would help the debt outlook. First, it would be a relatively easy affair for Congress to pass a law instituting a temporary cut in corporate income taxes for repatriated businesses down to 5 percent, as presidential candidate Rick Santorum has proposed. This actually, by all accounting, would create both a short-term revenue gain (5 percent of something is always more than zero percent of anything) and, in the long-term (as the special repatriation rate ends), would continue to generate more revenue if any of the repatriated firms actually remain in the U.S.A.  (Some groups argue that the immediate boost in revenues would be about $50 billion, but that it would lose money in the long run. I buy into only the first assessment; I don’t see how one can count as a revenue loss some revenue that otherwise would never come at all.) If I remember rightly, such an approach has been used in the past, and it worked.

Even liberal Democrat Chuck Schumer has proposed such a step, albeit with a spending idea attached to it. Considering the need to mollify S&P, though, perhaps Schumer can be persuaded to drop his “infrastructure bank” idea for now with promises that it will be at least on the table for the “supercommittee” budget talks coming up.

The second easy step would be to adopt a “chained Consumer Price Index” government-wide, as proposed by the Gang of Six. Forget the technical details for purposes of this blog post; all that’s necessary to understand is that by adopting some tiny changes in how government calculates its cost-of-living adjustments and its tax-rate indexing, spending in the out years can be reduced while revenues creep up just a bit faster, without really changing any economic incentives in any appreciable way.

The third step is one I’m not sure of, procedurally. As of February, the government had on its books  more than $700 billion in “unobligated” funds. I think a small amount of these were rescinded in the Continuing Resolution deal this spring, but I believe that tens of billions of dollars more remain readily available. While I absolutely do not approve of frequent use of presidential Executive Orders, I am under the impression — and this could be entirely wrong, but I think procedurally it would be okay — that at least a portion of these funds could be wiped off the books by executive order, without further congressional action. Either way, congressional action itself shouldn’t be too too hard to expedite, if needed. And none of it should be controversial.

So there: Implement a cut-rate repatriation tax, adopt a chained CPI, and cut unobligated funds. Together, these steps obviously won’t come close to solving the long-range debt problems, but they will reassure markets, perhaps impress S&P enough to give the rating agency an excuse to undo its damage, and reassure the world that the dollar is a currency that won’t collapse. Slow, steady accretions of savings may just be the best way to steady not just the budget numbers, but the entire economy.

Medicare Part D is a good model for the Ryan Medicare plan.

To be clear up front: Congress was wrong to pass Medicare Part D, the prescription drug program, without more broadly reforming Medicare. As a new entitlement, it is extremely costly, and has exacerbated the government’s debt problem.

That said, the free-market aspects of the plan — the private-sector competition part of it, without a government option — have worked beyond almost the wildest dreams of free marketers.  The liberals were so sure that costs to seniors and the government would rise astronomically without government there to “negotiate” premium” prices that they originally proposed to have government “set” the premium price at $35 with a built-in hike each year for inflation. Lo and behold, in the third year of the program it turned out that the average premium price was still down below $25, ten dollars less than what the libs had wanted to set as the base price. In other words, competition worked to keep prices about 30% lower than government planners had predicted.  What the libs wanted as a limit would instead have been a huge burden.  When the libs in 2007 tried desperately to append a government “negotiation” provision to the program, the attempt was filibustered to death in large part based on those amazing early results.  Thank goodness. Competition, as usual, had worked wonders, and it was not to be messed with — which is why the Dems made no serious attempts thereafter to force the government negotiation option back onto the table. Even four years later, the average premium still is $30, or five dollars below what the libs assumed could be achieved only by government intervention.

It is true that some people have cherry-picked statistics to claim that premiums are skyrocketing, but that’s only because they pick the sorts of plans whose costs have risen, not the average of all plans. James Capretta explains it well today at NRO.

Meanwhile, as Capretta explains, the cost to government — meaning to you and I, Joe Taxpayers — is a whopping 31% less than had been projected. Now, granted, that’s still a ton of money that should not have been spent unless it was part of a larger Medicare overhaul that used competition to save money on the rest of the program as well, but even so, the overall lower costs are a tribute to the virtues of competition.

Moreover, as Rick Santorum explained in the GOP presidential debate last week, the Medicare reforms in Rep. Paul Ryan’s budget proposal are based largely on the competitive aspects of Medicare Part D. They basically apply Part D’s system to all of Medicare — which means they could serve to produce a huge majority of seniors who are satisfied with the program, at a remarkably lower cost.

That’s why and how the Ryan plan can be politically sellable — because seniors happy with Part D can be expected to react at least somewhat favorably to a plan modeled on Part D, as long as the connection is made clear.