Browsing the blog archives for August, 2011.

Splitting the GOP

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I try to focus my blog on issues, not politics or personalities, but something has become too obvious to avoid any longer. The GOP has split into two factions and they don’t seem to be getting along very well. I’m oversimplifying here to make a point, but follow along and let me explain.

In one camp, faction 1 has been around for a while and follows a consistent theme:

  1. Defending the establishment. Washington’s not too bad; it just needs a tune-up.
  2. Pro-business. We need business-friendly legislation to get our economy moving.
  3. Global intervention. Like it or not, the US is the world’s policeman. Military involvement is part of the package.

However, faction 2 shares many of the same values as faction 1 and even talks the same language at times. But when conversations and campaigns get a little deeper, you start to see the distinctions:

  1. Defending the establishment as it was meant to be in the beginning. Washington needs an overhaul and return to Constitutional principles, not a tune-up.
  2. Pro-liberty. We don’t need more corporate tax breaks and incentives. In the long term, business is strongest when Washington stays out of the way.
  3. Global leadership. We can’t afford to be the world’s policeman and it’s not cost-effective anyway. We can exert leadership without excessive meddling.

The split between these two factions has widened during the last few decades. In fact, Reagan seemed to straddle the two camps quite effectively. Washington was certainly dysfunctional in his day, but fixing it without a major restructuring seemed possible then. He made some progress, but only got so far.

With today’s burgeoning debt, ongoing economic stagnation, Middle East turmoil, and a federal bureaucracy more confiscatory than ever, a large number of “conservatives” have abandoned faction 1. Many distance themselves from the GOP altogether, preferring to call themselves Constitutionalists, libertarians, tea-partiers, or (small-r) republicans. To them, faction 2 is the only rational alternative. We tried faction 1 (McCain) in 2008 and lost.

This factional split is evident in the fight for the Republican presidential nomination. Faction 1 is anchored by the likes of Romney, Huntsman, and Gingrich, faction 2 by Paul, Bachmann, and Johnson. Perry might be the consensus candidate, but it’s still very early to tell, and straddling these two camps will become more difficult as the campaign intensifies.

I’m aware that there are real intra-factional differences among all of the candidates; illegal immigration policy is a good example. But the left smells blood here, which is why the tea party (faction 2) seems to be replacing Bush as their favorite boogeyman. Now is the time for vigorous debate, but we can’t let Obama split the party. The election is still over a year away, and it’s ours to win…or lose.

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Governor Perry & the Fed

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Texas Governor Rick Perry  raised eyebrows Tuesday when he said he would consider it almost treasonous if Ben Bernanke plays politics by printing more money between now and the election to boost the economy. Eager to castigate the Republican presidential candidate as a rogue, unpolished Texas radical, the “mainstream media” was quick to reframe the statement as a threat. It would make sense to ask Governor Perry to explain this comment, as many Americans–including members of the press–don’t understand the huge role played by the Federal Reserve in our economy.

Perry’s Texas vernacular aside, there are several takeaway points here. First, he is right. It would be treasonous for any Fed chairman to “play politics” when conducting its affairs. The Federal Reserve is supposed to be an independent body, but many of its financial decisions are not made public. Perry expanded his comment today by calling for greater transparency, ostensibly supporting Ron Paul’s effort in the House to demand that the Fed open its books. Paul has made this argument for years, but it’s a breath of fresh air to see others follow suit.

Second, the Fed does a lot to damage our economy. QE1 and QE2 were analogous to printing money, something that always devalues existing currency. Keeping interest rates artificially low encourages malinvestment by directing investment capital to projects that don’t always have the best prospects for success. All of this has been addressed in previous posts, but suffice to say that most Americans continue to vastly underestimated the Fed’s role in the economy.

Finally, the response to Perry’s comment points to a growing demarcation between two factions in the Republican party. On one side, Karl Rove and other “conservatives” called his comments irresponsible, but these establishment Republicans are really moderates at best. These same commentators argued that the Boehner debt ceiling deal wasn’t all that bad after all, ignoring the fact that it barely makes a small dent in Washington’s spending addiction. While they want to tweak the current approach to government, those on the other side–Ron Paul, Michelle Bachmann, and the tea party in general–want to change it altogether. Both factions are powerful wings of the party and it will be difficult for any Republican to win the White House without support from both sides.

I don’t agree with all of Perry’s positions, but I applaud his willingness to raise the Fed issue. Perhaps others in the field would like to engage in a serious debate about Fed policy. Mitt Romney would be a great place to start.

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State of the Union

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I had an interesting discussion with Bradley Rees on the Sons of Liberty show the other day. The last two weeks have been interesting to say the least, so we took a few steps back to do our own state of the union assessment.

I’m astonished that the American people appear to be spreading the blame for the present economic malaise across both Democrats and Republicans, and between the White House and Congress. Of course, the Republicans didn’t manage the debt ceiling negotiations well. After passing the Ryan budget and receiving no counters from the President, they proceeded to develop a watered down proposal on their own to—as Boehner put it—stave off economic catastrophe. As it turned out, investors focused on global economic problems and were not just interested in getting a deal. The S&P downgrade and market tumble demonstrates that people who put their own money on the line are not impressed with 10-year budget plans and special committees. Obama and the Democrats are certainly culpable, but the Republicans lacked the courage to tag them with the majority of the blame for their fiscal irresponsibility, at least since the 2008 election. Apparently, many Americans don’t understand the details and just see this as another case of Washington as usual. This is unfortunate.

Indeed, the economic logic advanced by John Maynard Keynes has been flawed from the beginning, but even Lord Keynes wanted to balance budgets and save capitalism from what he saw as its fundamental weaknesses. Today’s twisted notion of Keynesianism is even worse, replete with unsustainable deficit spending, heavy central economic planning, and a big dose of class warfare. One might think that a reasonable person would examine the world today and reject this neo-Keynesian mentality outright, but this doesn’t seem to be happening.

Perhaps we might need to articulate our case more effectively, but there is a fundamental problem we must face. About 50% of Americans don’t pay federal income taxes in the first place, and many in this group have become accustomed to the notion that wealth redistribution is an appropriate function of government. They appear unwilling or unable to consider economic reality if it means entitlement cuts. In other words, the national debt doesn’t matter if you won’t have to pay it back. Obama’s numbers might be trending down, but true conservatives are facing an uphill fight.

To make things worse, the battle for the Republican presidential nomination is still anybody’s guess and the current frontrunner has been largely quiet about the crisis. But Marxist thinking is on the ropes and can be defeated. The last two weeks should be a solemn reminder that a middle-of-the-road response to Obamanomics is not only bad economic policy, but it also fails to make the clear distinction between philosophies that is essential if we are going to make the kind of advances in 2012 necessary to return to a fiscally sound, Constitutional form of government.

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