Warming up to Newt Gingrich

            I definitely didn’t think I would be seriously thinking about supporting Newt Gingrich when he jumped into the Republican presidential nomination race. Despite his accomplishments as Speaker of the House, he came into the race with some baggage. He struck me as a guy that had his shot and washed out. Like many conservatives, I was also ready to dismiss Gingrich completely after his comments on the Ryan Plan for reforming entitlements. He seemed to have handled the situation horribly at the time, and his attempts at damage control made him seem like a weasel.

            Based on his record as governor, Rick Perry was my first choice when he got into the race. Although it’s hard to know without further research how much credit to give Perry for the Texas success story, I figure it’s a safe bet to give him some of that credit based on the length of his tenure. In light of Perry’s meltdown in the debates after joining the race, I’ve been looking at the other options while still keeping Perry as my top pick. I have to say, I am starting to come around to Newt. I first started to take Gingrich seriously after his string of good debate performances. I am quite impressed with his decision to go back to the strategy that catapulted him to Speaker of the House. His new contract with America is just the type of thing that could put a Republican in the White House with a strong mandate for real change and large majorities in the House and Senate riding in on the coattails of the contract. Combined with the momentum from the Tea Party, this new contract gives me a new optimism for our nation’s future in these dark times. The new contract is quite bold in charting a new direction for America with a renewed focus on prosperity and liberty.

            After seeing the Cain-Gingrich debate on entitlements, I think I might now be sold on Gingrich. I had to go back to his interview on Meet the Press to be sure though. Politicians don’t have a good reputation for being trustworthy, and I do my homework so I’m not fooled by some slick sales pitch by a RINO that is going to govern like a liberal once in office. That’s one of the reasons why I will never get on the Romney bandwagon until he walks back his past positions and builds a new track record in public office to prove his conservative credentials, preferably not in the White House and not in my state. After familiarizing myself with the new 21^st Century Contract with America and his plan for reforming entitlements, I find myself in agreement with the comments that Gingrich made on Meet the Press about the Ryan Plan. The key insight from the Gingrich contract is that we have to propose solutions that don’t just fix the problems, but are so much better than the status quo that people will willingly opt-in to a system that is also fiscally sound. An opt-in model is our chance to demonstrate that the free market can do things better and cheaper. I think hyperbole is what got Gingrich into trouble. He could have staked out his position and disagreed without appearing to demagogue the Ryan Plan. Paul Ryan had a lot of courage to put forth a real solution for reforming entitlements, and he deserves the support of conservatives for going out on a limb despite the political risks to start an adult conversation about entitlements. The Cain-Gingrich debate is evidence that Paul Ryan succeeded in getting the conversation started.

            If conservative solutions to our nations problems are not just fiscally responsible, but better, Americans will willingly choose the conservative option when given the choice. After seeing the Cain-Gingrich debate on entitlements, I’m starting to believe that entitlements can actually be reformed without some of our most vulnerable citizens getting the shaft or being coerced into a more fiscally sound system. Giving Americans a choice also makes it much more difficult for liberals to demagogue much-needed reforms (although we know that it still won’t stop them from trying). Many of the important reforms to entitlements and taxes in the new Contract with America allow people to opt-out. And unlike Obama’s hollow promises that people could keep what they have now with Obamacare, these opt-out provisions aren’t undermined by other policy provisions to drive one of those options out of business. This kind of option model might also be a really good idea for practical reasons rather than just politics. It forces the politicians to come up with ideas that are good enough for people to willingly opt-in.

            Given my new perspective on his criticism of the Ryan Plan, I’m going to have take a second look at some of the baggage that Gingrich had coming into the race. Some of this baggage may not be as bad as it is portrayed. But even if it is, Gingrich seems like the only candidate with a comprehensive plan to turn America around and the ability to explain that plan clearly and persuasively.

            As I’ve said before, I don’t think it’s enough for a candidate to have the right values or good ideas. In normal times, I could accept a nominee lacking a firm grasp of the problem, a clear solution, or political acumen. Good conservative values are probably enough in good times to keep us on the right path. Unfortunately, our nation is not experiencing good times. This country desperately needs a real leader to replace the empty suit that currently resides in the Oval Office. We need a president that can communicate conservative values and policies clearly and persuasively. Even if Republicans keep the House and take control of the Senate, that doesn’t guarantee a majority in support of a conservative agenda. I think we are close to the point of no return on the road to socialism and fiscal ruin. It will take a lot of work to turn things around, and we don’t have much time. We need a conservative president that can put pressure on the legislature by making the case directly to the people. We need a president with the right solutions and enough political acumen to make it happen. We need someone who can fight for conservative principles in the face of a hostile media and uninformed public. I’m starting to think that Newt Gingrich might be the one candidate that is up to the task.

Cross-posted at Redstate.com

Reality check on the debt

Our country has a problem with debt. With the situation our economy is in, it’s a problem that won’t be going away on it’s own anytime soon. The massive deficits we are currently running aren’t helping either. The options on the table to deal with this problem seem to range from ignoring the problem and continuing a program of reckless spending to forcing an immediate balancing of the budget. If we ignore the problem, our situation will quickly deteriorate until it cannot be ignored any longer and drastic measures become necessary. Immediately reforming entitlements and balancing the budget will also have negative consequences. There is a large constituency that has come to rely on Uncle Sam’s largesse, and a lot of financial pain can be avoided if we wean them from government dollars gradually.

Social security, Medicare, and Medicaid are major drivers of federal spending, but people depend on these entitlements. No one wants to see seniors subjected to abject poverty or children suffer because they aren’t receiving the most basic medical service. Even if we had to choose between cutting off these entitlements and destroying the economic engine of our country, there isn’t the political will to completely end entitlements. Entitlements support strong voting constituencies. Forced to make the decision, the politicians will inevitably choose to destroy our economy while laying the blame somewhere else.

Even if we do get to the point where major cuts become a political necessity, it’s not just the fat that’s going to get cut. There are vocal constituencies for all of the programs supported by discretionary spending as well. It is not politically feasible to only cut programs where conservatives think government has no business to meddle. Balancing the budget is going to require cuts to important government functions such as national defense. Although it’s annoying to hear the constant whining about “fairness”, too many people have become dependent on the government to ignore it. The only way to keep the entitlement mentality in check in the face of deep cuts is to make cuts that are roughly even across the board. Across the board cuts will be the only way forward when our government enters crisis mode and a compromise needs to be reached quickly for action to be taken. These across the board cuts will happen whether they are the result of real cuts or papered over by inflation.

For the time being, we can thank the economic turmoil in Europe for keeping us afloat. Until the Europeans get their act together, we can keep the current teaser rate on our national credit card without the Fed printing massive amounts of money to buy up treasury bonds to keep the yields low. Although the Fed has already been monetizing the debt to some extent, the printing presses haven’t been working overtime yet.

If there was a better place to park large sums of money, we’d be in serious trouble right now. As much as I hate to wish ill on others, we can only hope that Europe teeters on the brink without a wave of defaults long enough for us to get our house in order. If we’re lucky, we’ll avoid having to make tough decisions with some sensible reforms to entitlements, modest cuts in government spending, and some drastic action to clear the way for the private sector to grow the economy. If we’re unlucky, Washington will avoid the tough decisions with the printing press.

Cross posted at RedState

Liberal Leadership = Demonize Conservatives

From time to time, I find it worthwhile to take a good look at the liberal point of view. It’s important to avoid getting stuck in conservative echo chambers and taking a look at what our liberal friends have to say. The other day, I stumbled upon this little gem by Drew Westen.

The overarching theme of the article is that liberals are disappointed with Obama because he hasn’t taken a leadership role in demonizing conservatives or Wall Street. I’ve had a hard time understanding the liberal narrative that Obama is too conservative or why liberals aren’t happy with Obama. But if this is the kind of leadership that liberals are looking for, it’s no wonder that they are disappointed. The president has a lot more work to do if he is going to match the level of vitriol demonstrated here, here, or here.

I don’t want to get into the author’s claim about the growing gap between rich and poor. Thomas Sowell has done an excellent job of pointing out the problems with that claim, and I have nothing further to add to the conversation.

I do want to pick apart the author’s narrative for the causes of our economic troubles and the liberal solution.

"'This was a disaster, but it was not a natural disaster. It was made by Wall Street gamblers who speculated with your lives and futures. It was made by conservative extremists who told us that if we just eliminated regulations and rewarded greed and recklessness, it would all work out. But it didn’t work out.'"

You can’t blame investment bankers on Wall Street for rationally acting in their own self-interest. The root of the problem doesn’t lie with the moral failings of investment bankers, but with the incentives for risky speculation provided by the government and the marketplace. Attempting to place all of the blame for deregulation on Republicans is also problematic (see the vote tallies for the repeal of Glass-Steagall, for example). The claim that only Republicans are in bed with Wall Street doesn’t pass the smell test either. Despite the problems with Mr. Westen’s analysis, let’s temporarily suspend our disbelief and take a look at the rest of his argument.

"Yet instead of indicting the economic policies and principles that had just eliminated eight million jobs, in the most damaging of the tic-like gestures of compromise that have become the hallmark of his presidency — and against the advice of multiple Nobel-Prize-winning economists — he backed away from his advisers who proposed a big stimulus, and then diluted it with tax cuts that had already been shown to be inert. The result, as predicted in advance, was a half-stimulus that half-stimulated the economy."

It’s not like we didn’t see this one coming. First they tried to claim that the stimulus worked, but that narrative was quickly overrun by reality. Aside from admitting that Keynesian economics is a sham, the only other option is to double down and claim the stimulus wasn’t big enough. It’s hard to tell if this is solely the product of delusional thinking or a shrewd ploy, knowing that there’s no chance in hell that another stimulus will be passed to test this hypothesis.

But even if more money had been wasted on stimulus, where would that money go? There weren’t any enough shovel-ready jobs for the money that was spent. Would any of that additional stimulus go towards rewarding more of those greedy and reckless corporations by bailing them out? I thought that only Republicans were interested in rewarding greed and recklessness. Or is Mr. Westen only referring to the second stimulus, since Democrats had nothing to do with the TARP bailout (despite controlling both houses of Congress)?

Let’s see what else the president could have done to make things right.

"When he wants to be, the president is a brilliant and moving speaker, but his stories virtually always lack one element: the villain who caused the problem, who is always left out, described in impersonal terms, or described in passive voice, as if the cause of others’ misery has no agency and hence no culpability."

 "Instead of indicting the people whose recklessness wrecked the economy, he put them in charge of it."

Let me see if I have this right. The economy is in the tank, people are out of work, and our nations credit rating has been called into question. And the solution is to demonize conservatives and put Wall Street bankers in prison for greed? I hate to break it to Mr. Westen, but this plan isn’t going to solve any of our problems. Liberals can scream all they want about conservatives bringing about some kind of “Christian sharia”, but it sounds like liberals are the ones who want to criminalize greed, one of the seven deadly sins. Although I think it is important to engage the liberal point of view, I can’t help but thinking these people lack any capacity for critical thinking.

cross posted at RedState

Style Over Substance

            The average American is no political pundit. Widespread voter apathy certainly doesn’t help the matter. Even my liberal friends that can be reasonably grouped with the intellectual elite are for the most part uninformed about important political issues. Many times I have had a heated political discussion only to discover later that the same liberal talking points appeared the prior evening on Jon Stewart’s Daily Show. It makes me suspicious. Are these intelligent, thoughtful, and educated people really getting their talking points from a second rate political program disguised as entertainment? It would be unfair to say these friends get all of their talking points from Jon Stewart. They do discuss issues from the occasional debate or interview as well. But you can’t complain about Republican candidates for having uninformed opinions about evolution and in the same breath criticize the Ryan Plan without reading it. If this is how “thoughtful” people approach politics, there isn’t much hope for the apathetic.

            The lack of informed voters creates a serious problem for a country where elections have political consequences. It is difficult enough for informed voters to make good decisions since politicians are often trying to tell us what we want to hear. It is too easy for elections to be determined by who gives the best speech rather than who does the best job. Those two people are not necessarily the same individual.

            One of the common criticisms of President Obama is the focus on style over substance. During the 2008 election, many pundits described the president as “articulate”. Although this word carries racial overtones when used to describe a black man, I think this description is intended to be interpreted at face value. The current president is certainly capable of giving a good speech. He may be having problems demonstrating this ability recently, but he has certainly demonstrated the capability in the past.

            Despite his recent rise to national prominence, there has been some criticism from conservatives of Governor Christie as well. He has provided fodder for frequent YouTube videos, and many conservatives applaud Governor Christie for his style. While no one doubts his fiscally conservative credentials, a deeper look at where he stands on other issues turns up some positions that are more aligned with the liberal platform. Some have complained that many conservatives are enamored with Governor Christie because of his style rather than his substance.

            I think too many people associate style with “empty suit”, and it concerns me. Although style alone can’t get the job done, style is an important factor in delivering on substance. Our nation has a tough road ahead. For too long, our government has taken the path of least resistance to lead us into the ditch we find ourselves in. It’s going to be an uphill battle to climb our way out. Just supporting the right policies is not enough. We need politicians that can actively advocate for the conservative vision.

            The importance of style can be seen in the contrast between Governor Walker and Governor Christie. Governor Walker has a lot to be proud of. In the face of intense national pressure and scrutiny, Republicans in Wisconsin have taken some important steps towards getting the state’s finances in order. While these policies haven’t been in effect for very long, they seem to be having positive effects on the economy of Wisconsin and the finances of local government. In spite of what they have accomplished, Governor Walker and the Republicans in the legislature still find themselves under constant attack from a massive pushback by liberals in the state with support from liberal interest groups around the country. Governor Walker himself has said that he has learned some important lessons about the importance of selling his policies to the people. As much as I like what he has accomplished in office, his performance in communicating his policies comes across flat.

            In contrast, Governor Christie has managed to accomplish quite a bit of his agenda despite Democrats controlling the legislature in New Jersey. He’s not afraid to take his case to the people in town hall meetings and on television. And when the host tries to set him up as some kind of angry, unpopular hypocrite, he challenges the narrative and knocks it out of the park with his response. Whether or not you think Governor Christie is presidential material for conservatives, you have to give the man credit for his leadership and style as governor. He makes a clear and compelling case for his vision for New Jersey, and he doesn’t get sucked into the questions loaded with liberal spin.

            As the Republican presidential primary approaches, I’m keeping an eye out for the conservative candidate that can also talk the talk. As much as we may prefer for results to speak for themselves, our country desperately needs a real leader that can communicate clearly and persuasively. For the sake of our nation, I hope that one of the conservative candidates is up to the task.

The Keynesians and Cargo Cult Economics

During World War II, the modern militaries of the United States and Japan fought for territory in the Pacific theatre where many indigenous peoples had been left behind by the Industrial Revolution. Massive amounts of military equipment and supplies arrived on the islands shortly after the soldiers came ashore. After the war, the soldiers left the islands. The islands also stopped receiving military cargo from airdrops and airlifts. Knowing nothing of industrial factories, the natives came up with a spiritual explanation and the Cargo Cults were born.

The Cargo Cults believed that the airdropped cargo was a gift from the gods. They believed that the cargo would return if they imitated the rituals performed by the soldiers. Followers of the Cargo Cults built airstrips, wore clothing resembling military uniforms, and made fake radios out of local supplies. Although most of the Cargo Cults have disappeared, a few are still around today. To those of us living in industrialized nations, the Cargo Cults seem ridiculous. Building airstrips does not cause cargo to fall from heaven by parachute. However, the human mind is easily fooled.

The economic policies of many modern nations share a lot in common with the Cargo Cults. Many politicians, policy experts, and economists seem to believe that it is possible to create prosperity without really understanding how wealth and prosperity are created. These people seem to think that we can create prosperity by imitating some of the attributes of a prosperous economy. Ultimately, these attempts at imitation pervert the nation’s economy and lead to problems like the current economic crisis.

Among liberals, the Keynesians are the dominant Cargo Cult Economists. The Keynesians believe that inefficiencies in a free-market system lead to the booms and busts of the business cycle. The Keynesian proscription for fixing these inefficiencies is for government to intervene to smooth out the booms and busts. One of the big problems with this proscription is that you have to assume the politicians and bureaucrats in Washington are a hell of a lot smarter than the businessmen and consumers on Wall Street and Main Street. The bigger problem is with how Keynesians attempt to smooth out the booms and busts.

Like the followers of the Cargo Cults that saw the arrival of cargo from heaven after the soldiers built airstrips, the Keynesians saw the rise in demand for goods during the booms and the decline in demand during the busts. To smooth out business cycle, Keynesians advocate smoothing out the cycle in demand by increasing government spending during the busts and increasing taxes during the booms. The problem with this policy is that demand in the macroeconomic sense does not create prosperity. The busts in the business cycle don’t happen because people suddenly decide they don’t want to buy stuff. The busts happen because of the misallocation of resources during the boom. When the market comes to its senses, the prices that were bid up to the stratosphere during the boom plummet back to Earth. The bust is the process for reallocating resources that were poorly allocated during the boom, and a lot of people that invested poorly lose a lot of money in the process. Demand doesn’t decrease during the bust because people decide not to buy stuff. Demand decreases because people are broke, and there are stronger incentives for saving and investing wealth than spending.

A lot of wealth is destroyed during the boom even as people think they are getting rich, and during the bust there is a lot less wealth available to invest in productive businesses. People with jobs in the previously booming sector also have to find more productive ways to earn a living during the bust. The Keynesian solution to this problem is for government to come along and start haphazardly spending money. At just the time when people need to be saving capital to invest in the productive businesses, government goes on a spending spree and increases the money supply. Inflation caused by the increasing money supply decreases the incentives for saving and short-circuits the recovery.

There are also usually bailouts for those industries that are hardest hit during the bust. In many cases, these are the same industries that caused both the boom and the bust. These are exactly the industries that need to shrink rather than grow. Too many resources were misallocated into these industries during the boom. Propping up the failing industries further prevents resources from being reallocated to productive businesses.

            Just as the Cargo Cult fetish for airstrips has done nothing to bring prosperity to the indigenous peoples in the South Pacific, the Keynesian fetish with macroeconomic demand will not bring us economic prosperity. Unlike the mostly harmless rituals of the Cargo Cults, the Keynesian imitations of prosperity are making us poor.

Strategery

I have to admit, I was one of those people that gave John Boehner the benefit of the doubt after the budget negotiations in early April. At the time, it seemed as though Republicans were playing their cards perfectly. With a Republican majority in the House and Democrats controlling the Senate and presidency, Republicans did not have the power to enact a budget unilaterally. House Republicans were forced to play a game of chicken with Democrats. If neither side flinched, Republicans would have had to choose between going along with the liberal status quo and shutting down the government. While the decision is obvious if we are making a last stand for sane fiscal policy or if the outcome of this standoff is the sole determining factor of America’s future, I don’t think we are quite at that point yet. We’re certainly close, but we’re not quite there yet. There will still be a few more chances to rectify America’s finances before we find ourselves in the same boat as Zimbabwe.

It does us little good to win the battle if we lose the war. Who would “win” this sort of showdown would be determined by the shifting whims of voters, particularly those fickle undecided voters. Although the 2010 elections sent a strong message to Washington and produced a lot of positive changes, 2012 was always the year that we were going to get a crack at fundamentally shaking things up. The 2012 election will give Republicans a chance to take the White House and a very good chance to take back the Senate. In 2012 and 2014 we will finally have the opportunity to take back the big gains that Democrats made in wave elections in 2006 and 2008. It doesn’t do us any good to balance the budget in 2011 if we lose the election in 2012 and return to reckless spending.

While stalwart conservatives might cheer a government shutdown, fickle independents will always take into consideration the circumstances. Those fickle voters will particularly consider which side is more “reasonable” in any stalemate. While $61 billion might be chump change for the government, it “seems” like a big number to your average voter. If Democrats offered up a compromise and Republicans held fast, most of those fickle independents would blame any government shutdown on Republicans. Under the circumstances, Republicans were stuck between a rock and a hard place. They could have either appeased the base and alienated other voters, or they would have to reach some sort of compromise and angered the base.

The one-week and two-week continuing resolutions seemed like a strategic stroke of genius. Instead of giving Democrats the option of choosing between $61 billion in cuts and a government shutdown, Democrats would have to choose between a few measly billion and a shutdown. Although the cuts were proportional to the $61 billion when you consider the duration of the continuing resolution, Democrats were forced to choose between a death of a thousand cuts and government shutdown. The fact that this ploy worked shows how effective it was. The Democrats couldn’t lay claim to being the most reasonable if they were willing to shut down the government over a few billion dollars.

            When it was announced that John Boehner had reached a compromise with Democrats for $38 billion, I was a little disappointed that Republicans had given up the leverage they had gained by chipping away at Democrats with one-week continuing resolutions. However, I was happy with the compromise. The recurring doomsday countdowns for the 2011 budget were distracting us from the 2012 budget in which we would get a chance to reform some of the major drivers of the budget deficit such as entitlements. Although Republicans had promised us $100 billion in cuts in their first year, that year was always the 2012 budget year for me. Since Democrats didn’t pass a 2011 budget when they had the chance (and the majorities in Congress), there wasn’t much room for painless cuts in the 2011 budget after the continuing resolution passed by Democrats expired. Even if Republicans had cut every penny of spending for the rest of 2011, federal spending is so out-of-control that the budget still wouldn’t be balanced. The pro-rated $61 billion in cuts are a good start for 2011 in my opinion.

            Although the proposed $38 billion cuts fell short of even the pro-rated Republican promises, Republicans would get a second chance to get the full $61 billion in cuts in exchange for raising the debt ceiling. Up until this point in time it seemed as though the Republican leadership had executed the perfect plan to get the pro-rated $61 billion in promised cuts for the first year, in spite of not having a chance to pass a budget for the full year. They had shown independent voters that they were willing to make compromises while moving the budget closer and closer to the goal posts that conservatives were expecting. To top it all off, Boehner had even forced Democrats to allow an up or down vote on controversial issues such as funding for Obamacare, Planned Parenthood, and NPR. While it would have been nice if Republicans had tied the funding of these liberal causes to any continuing resolution, it would have given Democrats an excuse for shutting down the government. An up or down vote forces Democrats up for re-election in red and purple states to go on the record for these issues. It also forces some of our newly elected Republican senators to go on the record. These are two good reasons for happily bargaining for up or down votes. Even if the votes don’t go our way, we can identify easy targets for the 2012 primaries and general elections.

            For those of you that haven’t been paying attention, it sounds like accounting gimmicks were used to get to $38 billion and the real figure for cuts is closer to $300 million. There are also murmurs that the 2011 budget has slightly more spending than the 2010 budget. This is unacceptable. Up until this point, I was willing to give Boehner the benefit of the doubt. He hadn’t delivered on promises that were made, but I was willing to accept that he would ultimately deliver on those promises, even if we were talking about $61 billion in cuts rather than $100 billion. It’s starting to sound like my faith in Boehner was misplaced. I’ll have to take a look at the alleged accounting gimmicks before I decide.

            Republicans will get a second chance though. We are quickly approaching the debt ceiling, and the next election is more than a year away. Now is the time for redemption. We can’t throw them out before the next election, so we might as well see what they can do between now and then to turn this country around. The leadership in the Republican Party will have two more opportunities to deliver, and they better deliver big when we reach the debt ceiling or pass a 2012 federal budget. It won’t be long before it is too late to fix our nation’s financial problems.