The Meaning of the Wisconsin Recall Election

The most surprising aspect of the current presidential race – to me at least — is not that Mitt Romney appears to be clawing his way into contention, after an extremely divisive Republican season, but rather that he is not yet far ahead.

President Obama’s two most important legislative “triumphs” – Obamacare and the $800 million stimulus bill – are both unpopular with a large majority of the electorate. Despite promises of the salutary effect of the stimulus, unemployment has remained over 8% for almost the entirety of the Obama presidency. The President has not offered one single proposal aimed at cutting long-term fiscal debt, besides tax increases. Recovery from the recession has been so sluggish as to be unnoticed by most Americans, and things could get significantly worse in the coming months if the eurozone implodes. The only sector producing significant new jobs is the brown energy sector towards which the Obama administration has always cast a jaundiced eye.

Yet despite all this, President Obama retains a narrow lead in most polls, including in the crucial battleground states.

Yuval Levin in the Weekly Standard last month offered an insightful explanation of why “I’m not Obama” has not yet proven sufficient for Romney: Americans suspect that the post-war prosperity is a thing of the past and that old models no longer apply. From 1960-1999, economic growth averaged 3.5% a year. From 2000-2009, it was less than half that, and since 2009, it has been only .6%.

Old economic models appear broken beyond repair. Higher education appears to be the next overpriced bubble waiting to pop. A college education no longer guarantees a job: For the first time ever, half the unemployed have some college education. But while the economic value of that college education may be declining its cost is rising at twice the rate of the cost of living, and many recent graduates are beginning their working lives saddled with enormous debt loads.

Some of the countries most prestigious law firms have gone bankrupt, and it is far from clear whether the old models of major law firm practice make any sense. I choose these two examples merely as metaphors for a rapidly changing world in which formerly safe paths to a level of financial security appear to be drying up.

In the face of great uncertainty about the future, even Americans who are convinced that the President is clueless about how to prepare America for a better future are skeptical that just throwing the bums out is enough. They are waiting to hear whether Romney has any new ideas for a new world.

Romney’s background in equity capital, where success depends on identifying potential added value in underperforming or failing companies, should help him in this regard. But so far he has not made the case for a new vision to deal with a rapidly changing world. A belief in free markets and entrepreneurship as the keys to innovation and adaptation is certainly part of that vision. But it will also require drawing on and explaining the public policy work done by market-oriented think tanks. Romney must emphasize he supports free markets not big business. Support of the latter too often degenerates into crony capitalism, in which the government puts its hands on the scales to aid certain well-connected large firms.

THE FIRST STEP IN THE ROMNEY strategy must be to portray the Obama economic vision as backward-looking and incapable of generating the needed innovation. In that regard, Scott Walker’s victory in the last week’s Wisconsin recall election is a favorable omen. Walker was able to appropriate the reformer label for himself. Romney must do the same: Show himself capable of offering solutions to endemic problems, just as many state governors, who do not have the luxury of being able to print money, have had to do.

The second plum handed Romney last week was President Obama’s press conference, in which the President claimed that the “private economy is doing fine,” butthe public sector needs bolstering at the state and municipal level. To that end, Obama urged greater government spending to protect public sector jobs. In a week in which voters in the second and third largest cities in irremediably blue California voted to cut public employee pensions, Providence, Rhode Island reneged on pension commitments, and public employees in other blue states began to face the fact that their promised pensions will likely never materialize, Obama appeared to call for more federal funding to maintain public sector employment at its present levels and with all its benefits.

Wisconsin voters signaled their approval of Governor Walker’s reforms, which enabled him to clear a $3 billion deficit, without cutting public services or raising taxes. But the message fell on deaf ears in the White House. In addition, the President still does not appear to grasp that without private sector growth there will be no money to pay for, much less expand, public sector employment.

Obama’s economic vision is profoundly retrograde. As Levin puts it, “His express objectives are to protect our existing entitlement system from structural reform, to increase the tax burden on investment and employment, to further empower and liberate regulators – and to bring more of the economy into the public sector.”

Public employee unions, which are one of the principal cash cows of the Democratic Party, effectively marry the party to government and bureaucracy. Their perpetual goal, in the words of Walter Russell Mead, an Obama voter in 2008, is “more government mandates and more government jobs – with more security, higher wages and better benefits all the time. . . . The civil service state is a solution permanently in search of new problems to solve.”

The goal of the public service unions is to prevent all but the most superficial change. They seek, as Mead points out, ever growing subsidies to the postal service, the public school system, higher education, even health care, while opposing any reforms designed to make these sectors more efficient, cheaper, or to provide better services. To the extent that the Democratic Party is thrall to the public service unions, it is the status quo defender of government service providers against the consumers of those services.

The Wisconsin results provide encouraging evidence that the segment of the population most adversely affected by the defense of the status quo – the young – is beginning to wake up to the fact that “hope and change” are not to be found on the Left. A majority of voters under 25 voted for Governor Walker.

The current entitlement system – social security, Medicaid, and Medicare – represents a tremendous generational transfer of wealth from younger (and poorer) workers to the elderly (and richer). The current rates of unemployment among college graduates have helped convince young graduates that happy days will not soon return without serious changes in American economic governance. (In Spain, and other European social welfare states, the levels of unemployment among younger workers are so high that they threaten a social explosion not too far down the line.)

Romney’s task going forward is to stick the label of reactionary on President Obama, and then to enunciate his own market-based solutions for reenergizing the American economy and freeing its animal spirits.

This article was first printed in Yated Ne’eman.