With his remarks in Israel, Mitt Romney is consolidating his hold on fringe voters

Romney is behaving as if he's still fighting a Republican primary.

Before he set off for a seven-day trip to Britain, Israel and Poland, Mitt Romney aimed to show voters back home what a real statesman looked like, not someone who "apologises" for American greatness.

Yet within hours of setting foot in London, the campaign for the Republican presidential hopeful was downplaying his overseas tour, saying Americans don't pay much attention to what happens beyond our borders — especially what the foreign press says about Romney.

This is true. We don't pay much attention to international news. We don't even pay much attention to our own news. But when big-deal newsmakers like Romney do something dumb and embarrassing and easy to mock, well, that's when we tend to pay attention.

Of course, I'm talking about Romney's remarks just before the opening of the 2012 Olympics in which he expressed worry that London wasn't up to the job of hosting the winter games. This aroused the various shades of indignation among the British punditocracy, harsh words from Prime Minister David Cameron and — most delicious of all — ridicule from London's theatrical mayor.

"There's a guy called Mitt Romney who wants to know whether we are ready. Are we ready? Yes we are!" Boris Johnson yells at a crowd of 60,000. All that was missing was a soundtrack by Gary Glitter.

Over the course of a day, Romney blew up his own case against President Barack Obama's foreign policy — which was, in brief, that Obama has somehow diminished America's standing abroad, and publicly expressed shame for American military might.

That was already a fairly weak case given the president's record on Libya, Tunisia, and Egypt — and on the killing of Al-Qaeda leader Osama bin Laden. About the only thing Romney has sunk his teeth into is the Obama administration's "bragging" after the terrorist's death, and frankly, that's weak too — however much he "bragged," only those who already hate Obama would hold that against him.

So whatever credibility Romney had in his case against the president's foreign policy withered away after David Cameron said it's easy to host an Olympics in the middle of nowhere, a dig at Romney's tenure at the 2002 summer games in Salt Lake City, Utah.

London, however, was fun-and-games compared to Israel, and it is there that we probably find Romney's real agenda. Indeed, it's the agenda he's had from the beginning of his White House run — locking in support from the GOP's conservative and radical right wings. 

Here's the typical pattern of American presidential elections. During primaries, candidates appeal to the margins of their parties, but once the general election begins, as it now has, candidates broaden their message to appeal to centrist voters. Obama has been doing that, but Romney, contrary to expectation, hasn't. Sometimes, in fact, is feels like he's still competing in the Republican primary.

A case in point. Earlier this month, Romney spoke to the annual convention of the NAACP (National Association for the Advancement of Colored People), our highest-profile civil rights organisation. Other than making the rounds, as politicians do, many wondered why. Depending on the poll, Romney has the support of one or three per cent of African Americans, so he didn't go there to win votes. To the contrary, he ended up pissing people off, this time by saying he'd get rid of "nonessential" programs like "Obamacare".

Using the word "Obamacare" in another setting wouldn't have been controversial. But champions of civil rights know "dog-whistling" when they hear it, and "Obamacare" has quickly become part of the lexicon of white nationalism. This is not to say that Romney is a racist. I don't think he is. But he wasn't speaking to the NAACP. He was talking to that part of the Republican Party — probably working-class white Southerners — that responds well to a white candidate appearing to "stand up" to educated and affluent blacks.

Same thing in Israel. There, Romney said Jerusalem was the true capital of Israel. He also said no American president should publicly disagree with Israel. And later, he said Israeli "culture" is the reason for its prosperity relative to appalling poverty among Palestinians.

Yeah, these are not statements made by a man carving out a place in the middle of the political spectrum. To the contrary, Romney is consolidating his influence over the fringe — to wit, two kinds of outer-wing voter: 1) white evangelical Christians to whom Israel plays a central role in the biblical story of the apocalypse, and 2) ultra-conservative Jews who believe that Israel can do no wrong.

Obama has presided over the deepest economic nadir since the Great Depression, and as the first African-American president, he's the object of various and sundry forms of racism and conspiracism (think: birthers). Romney is hoping to build a coalition among disillusioned mainstream voters as well as energised fringe voters. In another context, Romney would be a lamb to the slaughter, but as it is, most of the polls show him dead-even with the president.

So, yeah, it was fun to watch Romney trip and fall in Britain, but as his spokespeople said, Americans don't pay attention to the foreign press. Hopefully, they will pay attention soon before it's too late.

 

Mitt Romney during his recent visit to Jerusalem. Photograph: Getty Images

John Stoehr teaches writing at Yale. His essays and journalism have appeared in The American Prospect, Reuters Opinion, the Guardian, and Dissent, among other publications. He is a political blogger for The Washington Spectator and a frequent contributor to Al Jazeera English.

 

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?