Posted by Michael Kennedy on January 19th, 2013 (All posts by Michael Kennedy)
Bill Kristol (corrected thanks to Joe) has an excellent column today on where Republicans could go in the next four years. I have little confidence that the House GOP can bend Obama to their will on the deficit or spending. He is riding high with the aid of the mainstream press and TV. The public does not understand the spending issue, or at least not enough of us do. The Republicans represent the “Eat your vegetables or there will be no dessert” philosophy and that is not popular right now. What do we do ? Here is one suggestion.
He quotes UN Ambassador Pat Moynihan in 1975.
The United States goes into opposition. This is our circumstance. We are a minority. We are outvoted. This is neither an unprecedented nor an intolerable situation. The question is what do we make of it. So far we have made little—nothing—of what is in fact an opportunity. We go about dazed that the world has changed. We toy with the idea of stopping it and getting off. We rebound with the thought that if only we are more reasonable perhaps “they” will be. . . . But “they” do not grow reasonable. Instead, we grow unreasonable. A sterile enterprise which awaits total redefinition.
I feel much the same way. I would have much preferred the GOP to have voted “present” when the “fiscal cliff” matter was before the House. I would like to see them do the same when the debt ceiling issue is voted on. Let Obama have his way but show that we do not agree.
unapologetic opposition means openly and aggressively making the case for free markets as unequaled engines of economic opportunity and growth; it means advocating government policies that are “limited in their undertakings, concrete in their means, representative in their mode of adoption, and definable in terms of results”; and it means showing a commitment to “speaking for political and civil liberty, and doing so in detail and in concrete particulars.” Making these arguments would be “liberating” for American diplomats and for American foreign policy, Moynihan claimed. “It is time, that is, that the American spokesman came to be feared in international forums for the truths he might tell.”
Part of our problem is the fact that a significant segment of the Republican Party belongs to the current “ruling class”. I expect them to roll over in hopes that they will seem less “confrontational” to the low information voter. Some of them are “appropriators” in the purest sense. They “bring home the bacon.” Some of them are sincerely mistaken in their position. One of those is John McCain on foreign policy. Andy McCarthy goes into some detail on NRO.
I doubt we will convince anyone about the risks of our policy toward radical Islam until some disaster occurs. Right now, our worst risk is the economic policy of Obama, which may change the entire course of our history. From Kristol’s column:
Surely, then, it is time for Republican spokesmen to come to be feared in our national forums for the truths they might tell. Truths about the consequences of our weakness abroad and of our debt at home. Truths about the scope of reform necessary to improve health care. Truths not just about liberalism but about crony capitalism, not just about big government but about big business and big education.
I would add the fatal attraction of the financial community which has captured the Fed and may run our economy into the ground. Another excellent piece from the Weekly Standard goes into detail.
If the GOP wants to be the party of sound money—not only as a vital tenet of government fiscal responsibility but also as the ethical foundation for free-market capitalism—Republicans should start focusing on the harmful consequences of unwarranted money creation by our central bank. People need to understand how the Fed’s efforts to “stimulate” economic activity through monetary policy are fomenting a destabilizing fissure between the real economy and the precarious world of high finance.
When money creation is out of sync with productive economic growth, the link between honest effort and reward is damaged. It is disheartening to keep working away at providing real goods and services while others are seen to receive arbitrary gains whenever the Fed bestows its latest quantitative easing gifts on financial markets. And it’s discouraging to plan carefully for the future only to have seemingly prudent economic decisions transformed into disappointing, life-altering mistakes.
The article is worth reading, especially for the GOP House members.
Today we are witnessing an increasingly divisive tension between high-profit activities conducted at trading desks for big money-center banks and next-to-nothing returns offered to average savings account holders. The Fed’s aggressive liquidity injections are showing up as asset bubbles in sophisticated global financial markets even as domestic consumer price indices show only modest increases; this two-tier effect favors “whales” who can wager millions on exotic credit instruments while stiffing modest savers with negative real returns.
According to the latest semi-annual report issued by the Bank for International Settlements, the gross market value of outstanding over-the-counter derivatives is $25.4 trillion—yes, trillion—with 75 percent of the contracts linked to interest rates: forward rate agreements, swaps, options. In June 2008, shortly before the crash, the gross market value of outstanding OTC derivatives was $20.4 trillion, with 46 percent linked to interest rates.
So what has actually changed since the pre-crisis financial situation? Instead of tamping down speculative betting on interest rates in favor of rational market pricing of loanable funds, the Fed’s monetary policies are stimulating it. No wonder traditional financial intermediation—the kind that used to channel depositor funds toward promising new businesses—is now oriented toward gaming various hunches about the Fed’s next move. Even smaller banks are learning to churn their Treasury holdings rather than make loans to private-sector borrowers—especially since federal regulators are evaluating their portfolios.
Why are “too-big-to-fail” banks still supported by the government ? Why shouldn’t the GOP oppose these giant speculation machines ? The principals didn’t vote for them. My children, at least three of the five, will have great difficulty ever buying a house. My younger son, a fireman, is the only one without a college degree but I helped him buy a condo in 1993 when the real estate market was going through a weak spot, and he was able to get into the game of musical chairs and now has a nice home.
I am very afraid of what is coming. The Republican Party would do well, I think, to anticipate this and stand for principle rather than expediency, as they seem to be doing. I know their job is to get elected, not govern, but for once they could stand on principle. It might even work out well for them, if not for the country, as Obama’s policies crash the economy. Finally;
If we want to preserve the morality of a free-market system, we cannot permit our central bank to carry out monetary policy in ways that play favorites. It’s especially egregious that the Fed has become complicit in drawing off capital into the abyss of deficit financing; clearly, our central bank is catering to the political class, bailing out Washington itself through massive purchases of government debt obligations. Monetary policy today delivers the biggest benefits to the world’s largest borrower—our federal government.
If we continue to allow the Fed to underwrite deficit spending and inflict the resulting monetary distortions on the people who actually contribute real value to the economy, who live and work in the belief that saving is a virtue, we will witness the steady demoralization of democratic capitalism.