Right now things flat-out aren’t going well for the Republicans (and libertarians, of which I’d probably classify myself) right now. Not only do the Democrats have the presidency, and both houses of congress, but they also have the media (mostly) cheer leading them on and a big financial mess on their hands which they can (rightly or wrongly) blame on the Republican administration.
While many / most of the liberal politicians ran on a “middle of the road” and “financial responsibility” message, once in power they are rapidly socializing everything in sight, raising our debt to monstrous levels, and still planning more socialization when it comes to health care and a carbon tax to further cripple our manufacturing economy. And don’t forget about new corporate taxes which will punish those few US businesses managing to eke out profits, to boot.
We have seen this in Illinois for years. Remember, Rod Blago, our impeached and disgraced governor, RAN AS A REFORMER, as did mini-Stroger, who raised our sales taxes to over 10% and packed his department with the most blatant cronies imaginable. The Democrats used their power to gerrymander seats so that they control all institutions of power, and are pretty much running the entire state into the ground, for all to see.
The difficulty with the left, however, is that they have little long-term credibility in the financial markets. The last state of Illinois bond issue was bought completely by JP Morgan Chase, who happens to be a big beneficiary of Federal bailout $ and who also has Mayor Daley’s brother as a major officer. Else the state of Illinois might have started to see the wheels come off then and there.
Watch the US debt market as they try to push these billions or frankly trillions of dollars of debt down into a weak market. The markets know that the left is lying when they say that they have fiscal discipline – they are looking at the actions, not just the talking. While the current administration gets some points for trying to clean up messes in the market that they inherited (from the prior administration and congress) they are going far beyond that by continuing to push an agenda that is fiscally irresponsible (health care nationalization, for one).
In a parallel manner, other pillars of the left are continuing their totally hypocritical ways. Look at the Edge, the guitarist for U2, who wants to build houses “on spec” (for profit for unnamed buyers) in an environmentally sensitive habitat in Malibu – and even the left is all over him for that. And Ted Kennedy sees no confusion behind his push for nationalization of health care (which logically and always results in rationing and queues) with the fact that he is 77 years old and undergoing very expensive treatment for cancer – which would likely be “denied” under the national health care system he dreams of if he weren’t able to push for preferential treatment because he wouldn’t meet the characteristics for being worth the investment.
Even though it looks bleak now, with huge debts, vast new government programs, nationalization of GM and the banks, and impending “cap and trade”, “card check” and “health care nationalization” coming soon, our big hope is that 1) the debt markets refuse to keep funding this crap and push back 2) that people notice the hypocrisy and that promises aren’t being kept, just more noise and giant, fat, inefficient government reigns.
Our best hope is that when the bills come due that the Republicans have some strong, principled and viable candidates to fight back. As a libertarian (mostly), the Democrats are just killing us.
I have a daughter who is a freshman at a state university (Arizona). I have been assisting her with some of her course work; enough to recognize what has happened since my last child was a college student ten years ago. Her class on US history was riddled with historical revisionism (The pioneers survived because they learned to live like the Indians who, by the way, had no agriculture). The only textbook was a polemic on the white male and “whiteness studies.” She was taught that Nixon’s “silent majority” was opposed to the Civil Rights Act and opposed the New Deal. No mention of why Nixon called them that. On her last day in class, her instructor (a grad student) spent the period for review on a rant about how Ronald Reagan was an actor and was only playing a part. Then she announced that she had lost all their grades for the semester when her lap top was stolen.
My point ? I’m not sure there is a majority of college graduates under 40 who are capable of recognizing the risks Obama is running. I can only hope that they are capable of learning enough from life to cancel out most of their college education.
don’t be surprised when a man wearing a “kick me” sign on his back gets kicked.
I alternate between:
1) If the Republicans were capable of running reasonable candidates Obama and the Democratic Congressional majority wouldn’t be in charge, and
2) The Republican Party, like the Democrats, is merely responding to an American electorate that has become increasingly willing to support big-govt wealth transfers and other reckless spending.
I’m leaning toward explanation 2. Thanks to our corrupt schools and to decades of peaceful prosperity, most voters under 40 have no idea how bad things can become if the govt abandons the low-tax, pro-enterprise policies that created the long boom. At the same time, decades of bad policy that increased the progressivity of income-tax payments have created a large class of voters who pay no federal income tax and thus have no stake in cutting tax rates. A lot of these people are going to continue to vote for redistributionist Democrats long after it becomes obvious to the rest of us that the Democrats’ policies are doing tremendous damage to the country.
I hope that we get a rejuvenated Republican Party, and a soft political landing in 2010 and 2012 as voters come to realize how destructive the Obama Democrats have been. However, it seems quite possible that things won’t play out this way. If there are widespread bond defaults or other undeniable evidence of the failure of the Democrats’ program, Obama and the Congressional leadership will blame the failure on everyone but themselves, and many voters will believe them.
If the bond market vomits on the dems’ proposals then they will likely have to start cutting back on their socialization programs which will start a civil war in the Democratic party, unless they are able to maintain a level of unity all out of proportion of what has been done in the past.
The best chance for the Republicans is for the Dems to start smashing each other to pieces and likely the loony left will bolt entirely, leaving the Republicans a decent chance to go in and try to arrest the damage.
This is a sad scenario for the country, certainly, but it doesn’t seem feasible that the markets will keep ponying up $ to float this level of debt for long, especially since the Dems have no real plan to pay it back and in fact are looking to expand the programs.
At the extreme, the govt can print money if it can’t borrow in the markets. The cycle can continue for a while because many voters won’t understand that the govt is to blame, and will believe the scapegoating. From a politician’s POV scapegoating often works. Otherwise the spendthrift pols in California and Illinois wouldn’t be able to get away with their reckless behavior. And unlike Blago, Obama can print money.
American voters may wise up, and maybe soon, but there’s no guarantee. We all know the saying about how markets can move farther than investors can remain solvent. The political corollary is that shameless elected officials can hold on to power longer than anyone thinks. Maybe the Democrats will implode if they can’t easily sell bonds but I wouldn’t count on it. I think that some of the leadership would not hesitate to inflate the currency further if they are faced with a choice between inflation and losing their jobs.
All delusional political philosophies eventually crash on the rocks of reality. What makes the current hard left so dangerous is that they’re immune to logical argument, having taken up the idea that logic is not universal but rather based on consciousness (originally class but now race, sex, and gender based as well). The bourgeoisie anti-socialist may tell a compelling tale using his own logic but as it does not conform to proletarian logic, well, it just doesn’t matter.
You can’t crack that sort of hermetic system. All you can do is delegitimize it, drive it from the seat of power, and treat it as the dangerous delusion that it actually is until, embarrassed, its adherents stop passing it on and subjective logic just dies out from shame at the damage it has caused.
A chink in an armor is absolutely no good unless you have an appropriate knife to slip into it.
What’s your knife? How does it kill off the left? I’m a bit unclear on that.
“…some of the leadership would not hesitate to inflate the currency further…”.
Is the Fed under such rampant political control?
What really scares me is that Western Europe has gone further in the socialist direction than even Obama and the Democrats are proposing. But the leftist parties there have such a hammerlock on their governments because of entitlements like socialized health care and strong labor unions that the opposition parties have almost no hope (if they haven’t already co-opted the Left’s policies, like Britain’s Conservatives have done). So things could still get a lot worse here, and they could last for generations. Maybe the declining birthrates in Europe indicate that the citizens have, in a sense, given up on the future, or think that someone else’s children will fund their entitlements.
I’m afraid that the only hope is a major catastrophe on the scale of the late ’70s that brought Thatcher and Reagan to power, even though I wouldn’t feel too good rooting for that.
Is the Fed under such rampant political control?
I think it’s under political control to some degree. Think of Bernanke and Paulson pressuring Ken Lewis regarding BofA’s acquisition of Merrill. If we’re lucky the Fed will resist political pressures for easy money. But even if the Fed is conscientious it may miscalculate (again).
The Australian Fed is under a rule to keep the inflation rate within a range. Obviously a very imperfect constraint, but at least the flashing lights go off if it is broken, and because of the existence of the rule, the public have been sold the idea that high inflation is unequivocally a bad thing. Under these circumstances it is very difficult for a government to inflate their way out of debt obligations.
I’m not sure what the situation is for the US Reserve.
Interesting, I didn’t know that about Australia. The US Fed has no such formal constraints. Also, as there hasn’t been a serious inflation here since the 1970s, many Americans aren’t sensitive to inflation as an issue.
I wish I could be as sure as you that the consequences of leftist policies lead to their rapid refutation but history suggest it takes decades. Europe seems to be unable to throw off the yoke of these policies even though Europe is clearly in long term decline. Europe hasn’t been the source of any major cultural, technological or business innovation since WWII but this doesn’t seem to make much of impact on the Europe psyche.
Likewise, the fall of the Great Lake states suggest that people can’t see that a dominate political ideology is the source of their troubles. Every presidential election we get treated to the spectacle of the people of Ohio wondering why the state is no longer a major manufacturing center. Suggestions that high taxes, draconian unions and invasive regulation destroy jobs are met with blank stares.
America didn’t really turn away from the increasing socialism in the post war period as it relocated people and work out of those areas. When the Great Lakes region imploded in the 70’s the country didn’t recover because the Great Lakes region reformed but because businesses and people relocated to less socialist states. That’s a trick we can only pull off a couple of times before we run out of states.
We survived the implosion in the 70’s only because of the compartmentalization of work laws in states. If we’d had federalized unionization, the entire country would look like the Great Lakes.
The thing about inflation is that it destroys financial assets. Even a relatively modest inflation of 5-6% would destroy vastly more wealth in the bond markets than has been lost to date in the current bear stock market. And those losses would be concentrated in the most politically active group in the US – senior citizens – all of whom experienced the stagflation 70s. This group may not yet be fully aware of what is going on, but when the bond markets start to weaken the pressure on Congress will be intense to get things under control. The Tea Parties are bringing out the more economically aware in protest – if the government tries to inflate its way out of this mess the “rationally ignorant” will come out in force.
The Democrats can probably blame Bush for the current recession, but they will never shake off responsibility for a serious inflation. There are certainly members of the Democratic caucus who don’t care, but the suburban and swing members a fully aware of the consequences. So in the end, I am still hopeful that there are limits to what the Administration and Congressional leadership can get passed.
The point is that I think that the bond markets don’t take the current administration seriously.
When the markets choke on huge debts, then the dems won’t know what to do – they don’t want to cut their own pet programs, and they will likely devolve into a huge civil war between the semi-pragmatic and the rest of them.
Agreed that the republicans have to seize this opportunity when it arises. But this is their best chance to do so.
We won’t have to wait 20-30 years like they did in Europe – our left came to power rapidly, but the unraveling current situation is a time bomb for them that they should handle carefully. They won’t, and it will detonate in their hands.
Blaming the republicans and prior administration won’t wash after a couple of years of continued failure. They will stand for re-election and the Republicans have a good chance of making sustained gains.
The real issue is – what would the republicans do then? Squander their opportunity IN power like they did for the last 8 years under W, as they let the economy get less and less competitive while financial re-engineering went awry?
The blue dog Democrats are getting nervous about all this spending. Reagan passed a lot of his legislation with blue dog Democrats, especially in the House. There is a chance that Republican fiscal and national security hawks, few of the former as there are left, can ally with the blue dogs to mitigate the worst ideas, health care being one of them, cap and trade the other.
One serious problem is that, when the Republicans fell off the wagon on spending under Hastert, the only remaining prominent characteristic was the social conservatives. This resulted in a toxic vision of Republicans as theocrats. It is overdone but it affects a lot of moderates who would otherwise be with us on spending and defense. It isn’t that the social conservatives took over the party, as the left alleges; it is that there was nothing else that looked Republican by 2006. The rest of the party turned to mush on issues.
The sad fact of the matter is that so long as Cook county is part of this state, nothing will change.
I’m packing my bags and going to Texas as soon as I can get the transfer.
I wouldn’t say that nothing is changing.
We are going broke.
Carl, I hope that you are right about effective negative political feedback for spendthrift Democrats.
Kudlow on Monday night had a guest, Mike Pento, who discussed the possibility that the Fed will use its current huge reserves to prop up the bond mkt, i.e., monetize the debt. Pento tends to be alarmist about inflation, but his scenario could come to pass if the Fed and the Obama administration have sufficiently poor judgment, which they may have. We are eventually going to find out, so let us hope that they are not so foolish.
“Europe hasn’t been the source of any major cultural, technological or business innovation since WWII but this doesn’t seem to make much of impact on the Europe psyche.”
Assuming that major means influential, are you joking? Cultural? All of the nasty acedemic theory, the holy trinity of Derrida, Foucault, and Lacan… and on the other hand, the intellectual overcoming of Communism has come from Europe, more than from America.
Technological–nuclear power, high speed trains, the SSC, I don’t know…
I’ll tell you this–rising Asia looks to America for dynamism, to Europe for examples. All you have to do is compare the cities. For densely populated Asia, it’s no contest whose urban culture they’ll imitate.
I wouldn’t say that nothing is changing.
We are going broke.
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Touche.
Jonathan Says:
May 10th, 2009 at 10:41 pm
At the extreme, the govt can print money if it can’t borrow in the markets.
………….
J: they already have. They doubled the cash in circulation since August 08. Doubled. The Chinese are cutting back on purchasing Fed bonds. Your “extreme” circumstance is now.
tom