Sunday, January 11, 2009

The Coming Economic Strom and What Conservatives Can Do

Most Republicans and far too many Conservatives are getting ahead of themselves, thinking about “Who should be the GOP standard bearer in 2012?”

For me, that's not even an issue at this point, and one thing that Conservatives SHOULD NOT do, is to act like far-Left, fringe Democrats did with G W Bush. It’s wrong to look for ANYthing and at EVERYthing to bash the Obama administration over and what’s more that’s usually a very counter-productive strategy.

While it’s wrong, in my view to bash Obama for “coming around on lower taxes being good for the economy,” I’d prefer to consider that enlightenment, rather than hypocrisy, as I don’t like looking a gift-horse in the mouth.

Now, it’s NOT at all wrong to note and deride the proposed “$500 for every working individual and $1,000 for every working couple tax cut,” as a “INCREASED WELFARE SPENDING,” as the EITC is, in effect, a “welfare program” as it sends to checks to people who don’t pay income taxes to begin with!

As I've said, I don't see Obama as "the AntiChrist" or the incoming administration as "evil" by any means.

We HAVEN'T had a free market here in America since about 1912...almost 100 years now.That's something that most Americans both on the Right and Left either refuse to acknowledge OR are just plain unaware of.

In FACT, we have the SAME economic model as all of Western Europe and Japan has - a "Corporatist" (for lack of a better word) economy, one that is market-based but heavily government regulated.
Within that Corporatist framework there is a sliding scale, with Supply-Side market-emphasis on the one side and Keynesianism government-emphasis on the other. Some people erroneously call Keynesian Corporatism (like France, Germany and Sweden) "socialism," and America's, Australia's and Hong Kong's as "free market"...when NEITHER is the correct.

Europe appears more Keynesian lately, but we were just as Keynesian up UNTIL it imploded under Jimmy Carter amidst the burden of bailouts and stimulus packages, along with tax hikes. Ironically enough, Carter’s very Keynesian administration was preceded by a Republican Keynesian administration (Nixon’s) which thought “inflation primed the economic pump,” and engaged in all manner of over-regulation, even wage and price controls, which NO administration has had the guts to return to since! Ironically enough, Obama is now following another Keynesian Republican, who managed as a Keynesian his entire second term, and like Carter, Obama is faced with a Congress top-heavy with misguided Liberals.

A lot of today’s Congressional Democrats (Frank, Dodd, Pelosi, Waxman, Reid, Frank and Rangel, among others) want to move us back to a decidedly Keynesian path (more like France and Sweden and less like America) and a lot of Moderate/"Rockefeller-wing" Republicans want the same.

For now, a majority of the American electorate has bought into the nebulous concept of "change" and will probably go along with some of that leftward, Keynesian tilt, UNTIL or UNLESS it results in even worse economic dislocation. There’s no reason to expect different results from the same policies that imploded the economy in the 1970s. I accept that as inevitable.
I also accept the failure of Keynesian policies as inevitable as that is well documented;
The post-Gingrich Republican Congress abandoned the small government, low tax principles that Gingrich used to deliver some of the lowest Misery Indexes in over four decades!

G W Bush’s ONLY Supply Side action was his across the board tax cuts early on in his administration. Along with that he embarked on one of the largest federal spending programs in history!

The NCLB Act, the prescription drug boondoggle, the massive Homeland Security apparatus that sucked in huge amounts of federal spending all helped to increase government spending and balloon the national debt, although NONE of those nearly as much as his signing onto last spring’s “stimulus package and the current bank bailout!

The Bush administration has spend like Keynesians and were fortunate that the across the board tax cuts increased tax revenues to such an extent that until 2006, they’d actually halved the deficit over the previous three years!
The difference in the Misery Indexes those periods delivered is astounding;

The prime Supply Side years:

1995: 8.40

1996: 8.34

1997: 7.28

1998: 6.05 * (LOWEST Misery Index since 1956)

1999: 6.41

2000: 7.35

2001: 7.59

SEVEN YEAR Supply-Side AVERAGE ANNUAL Misery Index = 7.34

The prime Keynesian years:

1974: 16.67

1975: 17.68

1976: 13.45

1977: 13.55

1978: 13.69

1979: 17.07

1980: 20.76

SEVEN YEAR Keynesian AVERAGE ANNUAL Misery Index = 16.12
That pretty much says it all! Keynesianism DOESN'T WORK!

The fact is that we are, at this point, a VERY spoiled country and the FACT is that the vast majority of Americans haven’t felt the economic tsunami that appears headed our way. Right now, states from Illinois to California to New York to Michigan are teetering on insolvency and with or without bankruptcy, many states are already laying off workers, in advance of the massive Municipal layoffs that would accompany harder times. New Jersey just passed its first state budget EVER which is smaller than the year before’s! New York is looking at serious pension reform and Chicago’s, like California’s state pension systems are the nation’s most underfunded and least solvent systems.

Think things are bad now?

Wait till we see tens of thousands of cops, teachers and other Municipal workers getting pension “buyouts” of pennies on the dollar, screaming about the “broken trust.”

The sad thing is that years of tax cuts have expanded tax revenues and resulted in even MORE bloated federal, state and local governments, meaning that their ONLY response to real hard economic times is going to be massive layoffs and pension overhauls...this has the possibility of getting very, VERY ugly, not too far down the road.

All that may be inevitable.
What ISN'T inevitable is how we Conservatives react. If we react as petulant juveniles and try to do what the far-Left appears to have done successfully with G W Bush, we will fail.

We're just not as good at that and the people (the vast middle) won't accept that from those who claim the "moral high ground."

We can only offer insights and help people see the light....railing against "evil Democrats" and calling opponents "Stalinists" and "socialists" will ultimately marginalize us as much as the fringe Left marginalized itself by deriding those they disagreed with as "nazis."

We HAVE to be better....because ultimately, we have far less room for error.

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