Why the growing Hispanic electorate could lock the Republicans out of the White House forever

It's the demography, stupid.

Back in August, former Florida governor Jeb Bush issued a frank warning to the Republican party:

"Our demographics are changing, and we have to change. Not necessarily our core beliefs, but the tone of our message and the intensity of it for sure"

"There has to be a concerted effort to reach out to a much broader audience than we do today"

With the Hispanic community passing the 50 million mark in 2010, the shifting complexion of America’s electorate heralds an epochal change too monumental to ignore. As the US’s fastest growing minority, the number of registered Latino voters has doubled to 11 million since 1994, whilst the white share of the vote has dropped steadily by an average of 3 per cent in each election since 1992

As Latinos become a more decisive force in America’s electoral future, one thing is sure to ruffle the feathers of all Republicans: the vast majority are voting Obama.

In the 2008 election, Obama won roughly 68 per cent of the Hispanic vote. This proved crucial in Obama edging victory in various bellwether states as Nevada, New Mexico and Colorado all turned blue, the latter for the first time since 1992.

These trends show no sign of reversing either. According to a impreMedia/Latino Decisions poll conducted in September, Obama is currently predicted to take 61 per cent of the Hispanic vote in key battleground states and 73 per cent of the national share.

Romney, on the other hand, is estimated to have the support of just 21 per cent of the Latino community, falling far short of his campaign target of 38 per cent. The yawning gulf between the two candidates presents an all-but-impossible obstacle for the former Massachusetts governor to surmount, and his rhetoric on the campaign trail has done him no favours.

Through various appeals to the far-right during the Republican primaries, Romney dealt a considerable blow to his standing among the Hispanic community. Among them was a promise to veto the DREAM act: a piece of legislation that provides a path to citizenship for hispanic youths brought into the US illegally as children. He also voiced his opposition to Sonia Sotomayor’s appointment as the first Hispanic Supreme Court justice and proposed an unrealistic ‘self-deportation’ plan as a solution to the US immigration issue.

If these policy promises hadn’t send out a negative message to Latinos, the lexicon certainly did. His systematic use of the words ‘illegals’ and ‘aliens’ to describe unlawful immigrants reduced a deeply complex political issue to pejorative labelling, reflecting a certain contempt that earned him no friends in the Hispanic community.

Despite backpedaling somewhat on his opposition to the DREAM act, it’s simply a matter of too little, too late.  Wednesday’s debate didn’t help him either, as the topic of immigration was all but absent from the schedule, denying Romney invaluable airtime to project a more palatable message to alienated Latinos.

Overall though, to focus solely on this year’s election is to miss the point. Since Bush, the Republican party has upheld a tough stance toward undocumented immigrants, usually accompanied by harsh rhetoric that has the capacity to dent the GOP’s image far beyond this election.

To make matters worse, a Pew Hispanic Centre Poll revealed earlier this year that the challenges facing the Republican party extend far beyond issues of immigration to more profound structural trends.

According to the poll, 75 per cent of Latinos said they favoured bigger government, in stark contrast to the 41 per cent of the general US public that shared the same view. The study also showed that 30 per cent of Latino adults claimed to hold liberal views, 9 per cent higher than the overall population. Hispanic voters are also younger voters of a generation more likely to vote Democrat.

To put it bluntly, the forecast looks bleak for the GOP. The popularity enjoyed by the Republicans under Bush has eroded. Since he claimed 44 per cent of the Hispanic vote in 2004, a staunch anti-immigration agenda has seen this share plummet to 31 per cent under McCain in 2008, right down to a projected 25 per cent for Romney.

For the Democrats, the ballooning support among the growing Latino community could be as crucial as the New Deal, which ushered in a wave of Democratic dominance following the Great Depression.

For the Republicans, the seismic shift in the complexion of the US electorate could put the presidency well out of reach for the foreseeable future.

No longer can the White House be won without the Hispanic vote, and the GOP needs to wise up. With their popularity in terminal decline among the next generation of Latinos, the Republican party must tame the anachronism of its far-right to embrace a model of progressivm more in tune with the times we live in.

Otherwise, they’ll find themselves squarely on the wrong side of history.

Hispanic delegate at the Democratic National Convention. Photo: Getty

Alex Ward is a London-based freelance journalist who has previously worked for the Times & the Press Association. Twitter: @alexward3000

Getty
Show Hide image

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?