Earlier this week, head of the European Central Bank (ECB) Mario Draghi announced the start of a quantitative easing program that aims to stave off deflation in the Eurozone. Over the objections of the Germans who want a strong currency that they were promised when they signed off on joining the euro many years ago, Draghi plans to flood the market with up to 1.1 trillion euros over the next 16 months in the hope of stimulating the economy and preventing deflationary spiral. Unfortunately, this action and the risks that it entails, is merely the latest attempt to paper a Europe that is economically stagnating.

That being said, one can appreciate the conundrum that Draghi finds himself in. For years he has tried to exhort the national governments to engage in fundamental economic reforms to make their economies more dynamic, to no avail. The reason that European economies are stagnating is largely due to the fact that they are over-regulated. In any case, the simple fact of the matter is that the current regulatory state in Europe has created a lot of powerful winners in the system, and these are preventing any serious reform efforts that would fundamentally change the trajectory of the European economy from a sclerotic, stagnant one to a dynamic one. A stagnating (or recessionary) economy is one that is going to be susceptible to deflation (see Japan). Draghi is certainly right to be concerned about deflation. Once a country or region enters a deflationary spiral and expectation of deflation become embedded, it can be very hard to reverse. History has shown that prolonged deflation leads to depression, and in extreme cases can lead to political instability, wars, revolutions, etc.

However, what Draghi is doing is trying to use monetary policy to take the place of economic reforms. Since the national governments won’t act, he is doing what he can to try and mitigate the damage. Some might plausibly argue that he has no choice. However, one should not view what he is doing as a long-term positive development for the European economy. By mitigating the pain, he is reducing the impetus for reform. As difficult as it is for some to admit, recent history has shown that most European governments will only engage in reform when they absolutely have no choice. And even then it will be the least amount of reform that they can get away with at that moment. Perhaps in the coming years a global recovery generated by the U.S. or China or some other region will come along and lift the European economy a bit. But until the national governments engage in a full blown economic reform program which they and their populations show no indication of being willing to embrace, Europe will never be a dynamic leader and driver of global economic expansion. Rather it will get pulled along by economic forces generated outside of it, for better or worse. All of the monetary stimulus in the world won’t change that.

Earlier this week, the Swiss rocked the global financial markets by suddenly ending monetary measures designed to prevent the Swiss franc from appreciating beyond a certain amount, relative to the euro. That a central bank which represents a country of 8.1 million people with a GDP ranked 20^th in the world (behind such countries as Turkey, Mexico, and South Korea) could spark global financial unrest around the world and days of commentary comes as a huge surprise, even to those who follow such things. The action and the resulting turmoil provides a lesson to the dynamics involved in central bank intervention in international currency markets along with revealing Switzerland’s unique place in the global financial plumbing.

The first thing to notice is that Switzerland took the action that it did, likely because it feared that  the Swiss National Bank (SNB) was printing too many francs to purchase euros, the value of which were continuing to decline. This means that holding large amounts of euros was a losing proposition over time. Another way to think of it is that the Swiss stopped buying a stock that was losing value and that looked to be losing value for the foreseeable future. A central bank that holds large amounts of foreign currency that loses value can eventually find itself in a position like any other bank that holds too many bad assets, i.e. on the verge of collapse. Given that Switzerland’s position in the global economic financial system is due only to the perception of fiscal probity and stability, allowing even the hint of doubt to be allowed to diminish that perception is not something Switzerland can afford.

The second thing to notice is that Switzerland’s actions caused its own stock market to lose 8% in a single day. The reason for this is that a depreciating franc helps Swiss manufacturers remain competitive with their E.U. competitors. With a rising Swiss franc as the result of this week’s action, Swiss manufacturers (most of whom are export-oriented) will face competitive headwinds resulting in lower economic growth.

The third thing to notice is despite Switzerland’s small size, the fact that it (and the Swiss franc) is seen as a safe haven means that what Switzerland does to its currency has an impact globally. The primary factor driving up the value of the Swiss franc is that instability around the world (Russia) and deliberate devaluation (the E.U.) means that investors are again looking for something stable that will hold its value. As long as this continues, the Swiss franc is likely to continue to remain strong.

So what is the matter with Switzerland? Really nothing. They are a country with a well-deserved reputation for fiscal sanity and stable political system. While this can create some economic headaches from time to time such as an over-valued franc hampering export, and hence economic, growth, it is a lot better than the alternative. Switzerland could do a lot worse.

One of the problems with our public intellectuals that write columns in certain newspapers and appear on certain cable new shows is that they are often merely political hacks masquerading as disinterested, thoughtful people. In many ways, one can often predict what they are going to say before they say it. In the recently released GDP growth numbers (5.0% annual growth rate over the 3^rd quarter) which shows an economy that appears ready to take-off after all of these long years, a certain Nobel Prize-winning economist took to the airwaves and editorial pages to declare that President Obama’s (and by extension his own) policy prescriptions were working. It was not so long ago that this same Nobel Prize-winning economist was declaring that GOP-induced gridlock was preventing Obama’s economic policies from becoming law, was causing the sluggish recovery, and might even push us into a recession. This same individual claimed that the 2009 stimulus would work and then, when it didn’t produce the desired result, stated that it should have been even bigger.

This is not to say that the stimulus should not have been larger. Maybe it should have been. And maybe President Obama’s policies, had they been passed by the GOP House, would have shortened this sluggish period and had the U.S. economy back on track sooner (if indeed it actually is back on track). Or maybe the GOP gridlock, as others are claiming, prevented Obama’s worst policies from becoming law and has allowed the economy to emerge from its slump. What we do know, is that Obama’s desired policies that were not passed by the GOP, as the Nobel Prize-winning economist wanted, were not the policies that drove the recovery. We also know that 4 years of GOP-induced gridlock has not pushed us into a recession in any case. Making a wrong prediction, ignoring it, and declaring that your guy who has been stymied was the cause of the good news is the hallmark of the political hack. That he is a Nobel-Prize-winning economist doesn’t make him any less of one.

As life goes on and years go by, we often learn things that we never knew before. We also learn that what some things we thought that we knew isn’t so. The following is a partial list of things that we learned in 2014.

1.)    The IRS is more corrupt than anybody thought.

Although the IRS has largely stymied the investigation into its targeting political opponents of the current administration, it is becoming clear that this was in fact done, that it was done from the top, and almost certainly with at least some coordination with the White House. Also we learned that it is extremely uncertain that anybody will be held to account for this.

2.)    That several other government agencies are corrupt and incompetent.

From the V.A. scandal with veterans dying waiting for care and the V.A. altering records to the general apparent incompetence of the Secret Service, the idea a government-run operation can be competent and efficient for its intended beneficiaries has taken a serious hit. Like other religious notions that can persist despite overwhelming evidence to the contrary, these revelations are unlikely to dent the faith of the true believers.

3.)    The 19^th century notions of state power still have relevance in the 21^st century.

Vladimir Putin has managed to invade a sovereign country and annex part of it while the world howls in protest.

4.)    That 21^st century notions of state power still have relevance too.

Concerted serious sanctions and a concerted effort to lower the oil price can undercut a petro-state like Putin’s Russia making the adventure in eastern Ukraine costly.

5.)    That there are still enough people who believe in 7^th century version of Islam to turn large swaths of the Middle East into a hell hole.

The Islamic State (IS) has managed to suddenly carve out its own state in the Middle East. It is the most powerful and organized terror group that we have ever seen, and is now effectively a petro-state.

6.)    Politics makes strange bedfellows.

The U.S. and Iran are more or less working together to fight IS in Iraq.

7.)    The world keeps changing.

When historians look back over the last 5 or 6 years, they will likely conclude that this was a time when we finally realized that economic systems that worked for 50 years no longer do and that the power of forces that we never counted on or considered to disrupt the existing order was greater than it had been in a long time.

Happy New Year!!!!

Over the last 6 months, the world has been treated to a front row seat as to how economic policy can be used to seriously undermine enemies in the modern world. Specifically, the fall in the price of oil has fallen from around $110 dollars in July to about $56 now (a decline of 49%). For countries such as Russia, Iran, & Venezuela, who need oil prices north of $100 to balance their budgets, a drop of this magnitude is devastating and will hinder the ability of these countries. Given that none of these countries are friendly to the U.S. and given that lower oil prices mean that U.S. consumers are paying less at the pump (the equivalent of a tax cut for them), the low oil prices are a win-win-win for the U.S.

However, even more fortuitous for the U.S., and problematic for Russia & Iran, is that these developments are not the result of some temporary unique factors like a freak weather event, but rather are the result of several factors. One factor is that with fracking and drilling technology advancing, the U.S. has more natural gas but is also drilling more oil (as a percentage of world production) than it has in decades which is creating downward pressure on prices. While nobody can (or did) predict when a new technology (or an advance in an old technology) will arrive on the scene and completely upend a market, this is what has happened since the middle of the last decade. Although the new technology is like a freak accident from the point of view of energy producing countries, its effects are permanent.

Another factor is that Saudi Arabia is standing in the way of OPEC reducing production to prop up prices, and indeed seems determined to drive prices down. While there are several theories being put forth to explain why Saudi Arabia seems to be acting against its own economic self-interest in driving prices down, there are really a couple of factors. One long-term consideration is that Saudi Arabia would like to make the new wells that have come on-line in the U.S. un-economical and take them out of the game so to speak. The idea is that with lower U.S. production, Saudi Arabia will have more influence in world oil markets and can drive the price higher. The effects of this gambit remains to be seen, but with the U.S. and Russia being number 3 and number 1 respectively in oil production as of 2013 (i.e. two non-OPEC countries), Saudi Arabia is unlikely to exert the impact on world oil prices to the extent that it did in the 1970’s. The second consideration is that lower oil prices hurt Iran and Russia. While Saudi Arabia unlikely sees a rival in Russia in that it is siding with a Saudi rival in Syria (and by extension Iran), it sees an existential threat in Iran with its nuclear program (much like Israel). Anything that hurts Iran, creates political/economic instability for them, and thereby hampers their ability to obtain nuclear weapons while also reducing their influence throughout the Middle East is something that can be considered a vital interest of Saudi Arabia’s.

A final factor is the actions of the Federal Reserve. While perhaps not directed at the price of oil, the winding down of the quantitative easing and indications that the low interest rate policy of the U.S. will not be kept for forever is having the effect of strengthening the U.S. dollar in foreign currency markets. Because oil prices are denominated in U.S. dollars, a strengthening dollar has the effect of lowering oil prices across the board, all things being equal. As the U.S. dollar strengthens, we can expect to see lower oil prices than would otherwise prevail in any given set of market conditions.

In summary, we normally think of military build-ups or military action as the way to combat implacable enemies like Iran and rivals like Russia and China. Certainly, those actions have their place. But economic policies also have a place and can be used to undermine enemies without having to blow things up. And when an economic policy can help you (low oil prices for U.S. consumers) while creating economic & political instability in your enemies, that is an unbelievably positive development.

Over the last week, the talk of the punditry is the apparent monumental shift in U.S. policy towards Cuba since JFK was President. It appears that the U.S. will begin down the path of normalizing relations with Cuba. While some (especially on the right) are upset about this change and some (also on the right) believe that this is yet more confirmation that Obama is a closet socialist, the policy change is long overdue and one that Americans should embrace if they want Cuba to be a free, open, and economically prosperous society.

The first reason for embracing this policy is that the fact that Cuba is willing to respond positively to these overtures is recognition that they need the United States. Another way of looking at it is that it is a tacit admission that the socialism the Cuba thought would bring it economic prosperity hasn’t. While America hasn’t really thought much about Cuba over the last 30 years or so, Cuba has thought a lot about America. For a country that has viewed the U.S. as a mortal threat for so long and who the government has blamed for its economic woes, normalized relations that will likely open the country up to American tourists, American dollars, and American influence, could very well have the effect of undermining the regime. The historical record tends to be that once a country/economy that is closed to the United States opens to it, economic improvement (if not always political freedom i.e. Vietnam, China, etc.) tends to follow. Once people have a taste of prosperity, they tend to want it to continue, and this can be very destabilizing to autocratic regimes. Even China, as imposing as the Communist Party still looks on the outside, owes its legitimacy to the tacit bargain that it has stuck with the population that it will keep the prosperity growing in exchange for power. If it fails in this, the regime could become quite unstable, something that would likely be positive for U.S. geopolitical goals in the region. It would be ironic if it was the scrapping of the U.S. embargo on Cuba which was intended to bring down Castro that ending up setting in motion the forces that led to the end of single party rule in Cuba.

The second reason for ending the embargo and normalizing relations with Cuba is that embargo simply hasn’t worked. Its goal was to end the Castro regime and communism in Cuba and it simply hasn’t happened. Keeping it in place for 3 more years, or 5 more years, or 10 more years isn’t likely to have the desired effect. Even if communism were to collapse in that time, a subsequent claim that it was due to the embargo would be highly suspect. To put it another way, when people have been born, grown up, lived lives, had kids, and then passed on, all the while a certain policy was in place, it is hard to credit any subsequent ‘victory’ for that specific policy. I don’t think that the embargo was put in place with the idea that Castro (or the Castros to be more accurate) would still be in power in 2014. Consequently, as embarrassing as it might be to some and as painful as it maybe for some to hear the Castros spinning the détente’ as the U.S. giving up in failure, leaving a failed policy in place doesn’t promote U.S. interests.

Whatever else one thinks of President Obama’s policies, changing this policy is more likely to help U.S. interests in the region than damage them. Historically, opening to the U.S. has often (Eastern Europe) but not always (China, Russia, Vietnam) led to freer government & populations friendly to the U.S. as the people have tasted the economic benefits of a freer market. Even in those countries whose governments aren’t exactly friends of the U.S., the opening of the country to U.S. trade has benefited the population and contact with American businesspeople and tourists likely led to an improved American image in those countries among the general population. Over time, this is likely to lead to more trade with the U.S. and also to governments that are, if not friendly, at least less hostile to the U.S. To take a hostile and closed off enemy and turn them into a trading partner and, maybe eventually, a friend, strengthens the U.S. economically and politically.

Changing U.S. policy towards Cuba has the potential to accomplish both of these goals.

When economic historians review the last 10-15 years, one observation that is likely to come to the fore is that this was a period when the assumptions as to what was necessary to obtain personal prosperity began to change. To be sure, the economic forces underlying the changes had been in process for some time. However, it is only in recent years that people have actually started to recognize that the rules had, in fact, changed.

One assumption that more and more people are starting to question is the rule that you have to get a college degree. To be sure, those with a degree make more on average than those who don’t over an entire lifetime. However, people are starting to notice that whereas any degree was valuable before, today it depends on what you are studying as to whether a degree is worthwhile. Degrees in math, science, and engineering are often worth the money, but those in 17^th century French literature are not. Furthermore, college has become more expensive and a student can end up leaving school with a degree and the equivalent of a mortgage payment. For degrees that will give you a good job, this might be a worthwhile trade off. For someone with a useless degree, having to make the equivalent of a mortgage payment (that could have gone to a real mortgage payment) can seriously hobble their attempt to build a future.

The second assumption that is being called into question is that prosperity requires that you buy a home. When it seemed that housing prices could only increase, then buying a home was a form of forced savings. Even today, buying a home in certain places can still be a good investment. However, as the economic downturn taught us, buying a home is not a “sure thing”, and in some places can still be a wealth-killing investment. Buying a home is no longer the automatic key to prosperity that it once was.

The third assumption that has been called into question is that the next generation will be more prosperous than the one before it. Through the baby boom generation, the experience was that the next generation was materially better off than the generation before it. However, with the economic downturn and subsequent anemic recovery, this assumption is also being called into question. There are several factors that are driving this pessimism. Globalization and the shortage of well-paying manufacturing jobs have meant that engine of economic prosperity for the middle class has been shifted into a lower gear. In addition, large school debt has meant that college graduates are now graduating having to pay off loans, which hampers their ability to build savings. The debt & consumer culture that emphasizes having it now means that many have gone into debt to buy “toys”, as well as the fact that Generation X is having to raise their kids, prepare to take care of aging parents, save for junior’s college, and suffer from stagnating wages, and the economic headwinds are overwhelming for many people.

Going forward, many Americans will have to (and indeed already are having to) recognize that what is possible is somewhat more limited than it was in the past. Reduced expectations and more realistic planning can help to navigate this new reality. For example, it may be that for many, kids, a great house in a great neighborhood AND a comfortable retirement may simply not be possible and they will have to make trade-offs. For Americans raised to believe that they can have it all, the new reality is the biggest assumption change of all.

On this Thanksgiving weekend, people have traveled to family and friends, enjoyed good meals, probably watched some football, some movies, etc. And for those dear ones who we couldn’t visit, there were phone calls, text messages, Facebook posts, etc. Some of the more patriotic among us might have expressed thanks for living in the United States, etc. But one major factor that was left out, and may not have even been given a thought is this: You should be thankful that you live in the 21^st century!

By living in the 21^st century (in the West, anyway), you are living better (even if you are considered poor) than more than 99% of people who have ever lived on planet earth. How so? Well, for one thing indoor plumbing did not exist for most of human existence. Even in 1940 in America, half of American houses didn’t have hot piped water and 1/3 didn’t have flush toilets. Imagine not being able to take a hot shower every day, or having to stumble out into the open air on a cold night to take a trip to the outhouse when there is snow on the ground. Most of us in the U.S. have never had to have that experience, but it was a reality for most of human existence (and still is in some parts of the world).

How about transportation? Did you have to drive 3 or 4 hours to a person’s home? Did you have to fly? For most of human existence, most people lived their lives within a 30 mile radius of where they were born. Today, with modern transportation possibilities, you have more geographic mobility than the richest people, even 100 years ago.

Communication? How about cell phones and the internet? These technologies have shrunk the world in ways unimaginable even 25 years ago. We can organize ways to meet a group of people on the spur of the moment in ways we couldn’t before. My boss met his wife on a double date in the late 80’s. His wife later said that she wanted to cancel, but wasn’t able to contact anyone and didn’t want to just not show up. With cell phones, Facebook, and text messages, she would have been able to get ahold of someone to cancel and they would never have met. His kids actually owe their lives to the fact that these technologies hadn’t been invented yet. When my sister was in Iraq, she would call my dad occasionally on a cell phone. For most of humanity, soldiers had no way of communicating with their families. Then, for several generations, they would have to write letters which would be weeks or months in transit. Today, they can talk with their families while their base is under rocket attack.

Hygiene? While movies may depict life in Medieval or Colonial Times as just like ours today except that people wore different clothes (and seemed to often speak with English accents), the truth is far different. They didn’t bathe often (you wouldn’t either if cold baths were often the best that you could do), their dental hygiene left a lot to be desired (which left a lot of toothless middle-aged people with bad breath), and most had their skin exposed to the elements more than we do today. Think of those homeless guys and gals that you see. Most people looked (and smelled) a lot like that (give or take some of the alcohol smell) for a large fraction of human history.

Health? Health awareness and the ability to maintain health and to be cured of disease is better today than at any time in human history. Even in the United States in a lot of areas, people seem to age slower today than even 45 years ago (A 45 year-old in 1970 often seems to look about 8-10 years older than a similar person today). There may be several reasons for this including less industrial pollution and the fact that people don’t smoke as much today as they did then, among others. And the ability to detect cancer, perform extremely delicate surgery, and other health advances mean that people are enjoying active productive lifestyles far longer than they were at any time in the past.

In short, the wealth of the West, that has been the result of economic growth, has provided a standard of living unequaled in human history. Today in the West is the best time to be alive in all of human history. If you want to be thankful for something, be thankful that you are alive today to experience it.

Often in the popular press, which up until the invasions of Afghanistan and Iraq really had very few people with any understanding of military matters, economic policy is often seen as being completely separate from foreign policy and light years from waging war. However, these are in fact very closely related. If you are able to strangle your enemy’s economy, you in fact reduce his capacity to effectively wage war against you. That is one reason why the U.S. engaged in strategic bombing against the cities of Germany and Japan in WWII; to destroy the factories that were building tanks, planes and ships. In fact, the reason Japan suddenly attacked Pearl Harbor was not, as is often assumed, to eventually conquer the U.S., but rather to get the U.S. to sue for peace that would include relaxing its oil embargo which was strangling Japan economically. In this light, what is currently happening to oil prices is of massive strategic importance to us in relation to our enemies, specifically Russia and Iran.

Recently, the Federal Reserve ended its bond buying program, also known as quantitative easing. The impact of this has been to reduce the downward pressure on the U.S. dollar. This, coupled with the fact that the world is still economically weak and in political turmoil (i.e. the Middle East, the Ukraine, etc.) and the fact that the U.S. economy (although admittedly sluggish) is still better than most, means that the U.S. is still seen as a safe haven which has the effect of strengthening the U.S. dollar. Because international oil prices are still quoted in U.S. dollars, a strengthening of the dollar has the effect of lowering oil prices.

Also of note is that increased U.S. oil production (the highest in 30 years) is also driving down the oil price. Normally, OPEC would cut production in order to prop the price of oil up. However, Saudi Arabia has indicated that it is completely willing to live with a low oil price (currently in the mid-70s, down from over $100). Why? Because a low oil price is undercutting Saudi Arabia’s mortal enemy’s (Iran) ability to support its economy, which is very dependent on oil exports. In addition, from our perspective, the low oil price is hurting several of our enemies. For example, Venezuela needs $120/barrel oil to keep its economy afloat, Iran needs $136/barrel, and  Russia needs oil to be somewhere around $110/barrel. Keeping oil prices low hampers the ability of these governments to grow their economies thereby undermining support for the regimes and also reducing the ability and incentive of these states to make mischief over the long term, something which is in our best interest.

Now are any of these things Obama’s doing? Given that he has, to say the least, not shown a lot of leadership and toughness on the world stage (and that everyone seems to ignore him) certainly allows for some skepticism in this regard. However, the fact that the independence of the Federal Reserve from political pressure has been called into question in recent years along with the fact that he appointed Janet Yellen to head the Fed (as opposed to simply holding over Ben Bernanke from the Bush Administration) at least leaves open the possibility that he is having more influence than he theoretically should. And if he isn’t having this influence, at least he doesn’t appear to be actively trying to undermine the positive effects that a stronger dollar is having on the geopolitical stage. Whatever the case, more oil production and a stronger dollar are undermining our enemies. Obama should either keep doing what he is doing on this front, or at least not get in the way of these positive developments.

Over the last week, many on both the left and the right have made suggestions to the GOP on what they should try and accomplish with their newfound majority in the Senate. So in keeping with the punditry spirit, here are my suggestions as to what I would do if I were the GOP leadership:

1.)    Repair the damage to the Senate.

Harry Reid inflicted damage to the Senate as an institution in an attempt to gain partisan advantage. As their first step, the Republicans should restore the 60 vote filibuster rule for judicial nominations, and restore all other procedural rights for the minority party that were stripped by Harry Reid and the Democrats. The reason to do this is that it really doesn’t cost the Republicans anything. The Republicans can still block Obama’s judicial nominations on a party-line vote, and anything else can already be filibustered. Repairing the damage allows the Republicans to position themselves for the 2016 run as the mature political party. It allows them to show the moderate and swing voters that they will need in 2016 to hold their majority and capture the White House that they are about making sure all sides get heard (in implied contrast to Harry Reid Democrats who are only about making sure that their side gets heard).

2.)    Approve the Keystone pipeline.

This is a project that has been languishing for years. It has broad support and would pass easily, likely with some Democrat support. Most importantly, it will create good middle-class jobs in a way that can be easily understood by voters. If Obama vetoes it, especially if the project has some Democrat support, he (and by extension a Democrat in the White House) becomes viewed as the obstructionist. If he doesn’t, then the Republicans look like the party that can get things done.

3.)    Reduce environmental regulation, but change the messaging.

For years, Republicans have been harping on “small government/less regulation”, which many have interpreted to mean “no government”. Rather, Republicans should talk about eliminating “excessive regulation”. One reason (among several) that many manufacturing jobs have been offshored is the excessive environmental regulation here. While environmentalists may imagine that they are helping the environment by piling more regulations on American businesses, sending factory jobs to China or other places with laxer environmental controls does nothing for the environment, and perhaps might even end up hurting it. Often what happens is that we export our pollution. While the air over Cleveland might be cleaner, the industrial impact on the climate is the same whether the pollution is “Made in China” or “Made in the USA”. The American people want more middle class jobs, and the environment is one of their lesser concerns. A program of reducing regulations along with a PR campaign promoting the reason for reducing regulations (increase well-paying industrial jobs), could be a win for the economy and a win for the Republicans politically.

4.)    Prepare an immigration reform bill.

The Republicans should be ready with some sort of immigration reform bill that is in line with their party’s priorities as well as being based on reality. While some in the Republican caucus want to shut down the southern border, round up all illegal aliens, and shove them on a bus back to Mexico, such an action simply isn’t going to happen. However, the fear of many on the right is that if you couple legalization first and border security later, you will see the legalization and not the border security. This is a legitimate concern. Consequently, the Republicans should expand immigration allowances for high skilled workers from other countries, who the U.S. desperately needs.  At the same time the bill should contain a solid, guarantee- to-happen, border security provision with acceptable verification. Upon verification (which should likely require that the governors and legislatures of the border states sign off that the border is acceptable secure), all illegal aliens should be legalized. While this would grate on law-and-order types (they are rewarded for breaking the law), they will have to be ignored. Stopping the flow of illegal aliens (i.e. low-skill labor) will reduce downward pressure on wages at the low end of the scale (a concern of the labor leader Cesar Chavez), and make the U.S. more secure.

While such a bill would be unlikely to be signed by Obama, it would mark a real attempt to fix the border. Furthermore, it would allow the Republicans to combat any executive action Obama takes on the subject, as it would show that Republicans were willing to put forth a serious bill and Obama wasn’t willing to work with them. It would also show the Republicans to be the more mature political party. In addition, such a bill would be a signal to the Hispanic community that Republicans are willing to work with them and aren’t just a “go back home where you came from” type of party where illegal immigrants are concerned.

5.)    Work to mitigate the worst effects of Obamacare.

Let’s face it. Obamacare isn’t popular and isn’t going to be popular. At the same time, a full repeal isn’t going to happen as long as Obama is in office. Consequently, the Republicans should pass bills that would mitigate the worst effects of the law. At the same time, Republicans HAVE to develop an alternate plan. “Repeal And Replace” can’t be allowed to simply be “Repeal And Maybe Someday In The Distant Future We Will Think About Coming Up With Some Reforms”.  By working to mitigate the worst effects, which is also likely to undermine the law, the Republicans will again show that they are serious about governing.

6.)    Put A Muzzle On Ted Cruz.

The Republicans won the Senate and Ted Cruz did not dominate the airwaves. There is a reason for this. The American people as a whole simply do not respond well to rhetorical “bomb throwers”, and Ted Cruz (and people like him) are the sort of people who can take a good idea and turn people off to it. It doesn’t mean that Cruz or others like him have no good ideas, but a political party that has strident people like that as its face is not one that is going convince anyone and will turn a lot of the moderate and swing voters off. The Republican Party, if it wants to be the majority and win the White House in 2016, has to be seen as a responsible governing party, not a party that wants to blow up the government.

In short, neither political party has much trust from the American people. The Democrats have squandered the trust that they had in 2008. The Republican Party has been given another chance, not because voters necessarily like them better, but rather there is no other major political party that voters can turn to at this time. If Republicans want to improve their standing in the eyes of the American people, they need to show that they are the party of responsible governing, and that they have honest solutions to offer. If they do this, they may convince many of the moderate and swing voters (partisan Democrats will never be convinced) that they can govern. If they do this, they may find 2016 may be a good year for them as well. If not, then the voters will likely turn back to the Democrats in 2016 and the Republicans will deserve their defeat.