Michael B. Duff

Lubbock's answer to a question no one asked

Archive for the ‘Politics’ Category

Gridlock 2: This time it’s personal

Okay Republicans, here’s your mandate:

1. Clean up this health care mess, but don’t touch my Medicare!

2. Cut government spending, but don’t touch my Social Security!

3. You can kill Cap and Trade but I need you to pretend to believe in Global Warming, at least while the cameras are on.

4. You can extend the Bush tax cuts, but pretend they’re not for rich people.

5. Keep us safe from terrorists, by frisking grandmothers and restricting the flow of toothpaste across state lines.

6. Punish those fat cats on Wall Street, without jeopardizing your “relationship” with their lobbyists.

7. Remember, only crazy people worry about the Federal Reserve. They’re over there doing lots of smart economics stuff and they don’t need you asking questions or messing things up. Ben Bernanke taught at PRINCETON for God’s sake. He doesn’t need you screwing up the market by going on TV and trying to pronounce big economic words.

8. War? What war?

9. Unleash the populist might of the Tea Party, but don’t let them say anything weird on TV.

10. Create lots of new jobs without cutting anything, spending anything or repealing anything.

11. And while you’re doing all that, please raise millions of dollars for the next election. 2012 is right around the corner.

Got it? Okay. Ready. Set. Govern!

Written by Michael B. Duff

November 3, 2010 at 00:41

Posted in Politics

A quick explanation of the current crisis

The current crisis was caused by monetary policy. That is, by how much it costs banks and businesses to borrow money. In the old days the supply of money was connected to a physical commodity. Money was backed by gold, so when banks started to run low on gold, they had to stop lending money. The economic growth charts looked like a mountain range, spiking up as banks lent money and diving back down when they stopped.

This was actually a healthy process. When money got tight, businesses that weren’t making a profit failed and went bankrupt. They sold off their land and equipment to other businesses and their workers got jobs at places that actually were making a profit.

And since the supply of money was finite, banks had to be careful about who they loaned it to. Only people with good reputations, with a proven track record of borrowing money and paying it back had access to credit.

Malinvestment

Then some economists came along and said we didn’t have to live with all these contractions in the market. We could sever the connection between money and gold and have a permanent credit boom. Those scary peaks and valleys on the growth chart could be replaced by one smooth line, forever sloping up. Banks would have lots of money to loan out and everybody would have access to cheap credit.

But this creates a problem. Not every loan is a good loan. Not all business ventures will make a profit. And when money is easy to come by, business owners can afford to take risks that they wouldn’t take in a time when credit is hard to get.

It would be better for everybody if failing businesses were allowed to go bankrupt, so their labor and equipment can be redirected to smarter things. But when money is cheap, businesses can delay the consequences of bad decisions and keep rolling debt over in hopes that things will magically turn around.

That’s where we are now. Decades of cheap credit have created bubbles of fake prosperity, brought about, not by real sustainable profits, but by shaky promises backed up by cheap money. “Innovators” on Wall Street have invented new ways to bet on the outcome of these loans, and many of them have committed outright fraud, lying about the quality of the mortgages people were betting on — pretending they were all good loans made to reliable people, when most of them were just crap.

Economic calculation at the Fed

In the days before we had a central bank, interest rates were determined naturally, going down when banks had excess gold in their vaults and spiking up when they started to run low. The money supply was finite, so banks knew exactly how much they had to lend and could predict approximately how much they could expect to get back. The finite nature of the money supply provided reliable information to everybody lending money and helped them set the price of credit accordingly.

Now interest rates are decided by central planners at the Federal Reserve. This same kind of central planning failed in the Soviet Union because without organic feedback from the market, there’s no way to calculate an appropriate price for goods and services. The bureaucrats have to guess. When the planners produce too much you get waste and surplus. When they don’t produce enough, you get shortages.

The same dynamic applies to interest rates. Without feedback from the market, there’s no way for economists at the Fed to know what the “right” interest rate is. They have to guess. It’s a fool’s game even when everybody’s honest, but the process of setting interest rates is also vulnerable to political influence and outright corruption. Politicians love low interest rates. When rates are low, it’s easier for governments to borrow money, and since borrowing is easier than raising taxes, politicians have a strong incentive to keep rates low.

Consumer spending and the Real Estate Boom

Low rates make it cheap for people to borrow money, but they also make it hard for people to save money. When savings accounts and CDs barely pay enough to keep up with inflation, investors have to put their money in riskier types of investments in order to get a decent rate of return.

For the past ten years that investment capital has been put into real estate. Republicans and Democrats got together and agreed on the idea of an “ownership society.” They set up programs that would encourage people to buy houses. The price of houses shot up and all these investors, driven out of safer things by low interest rates, decided that real estate would be a great place to put their money.

Housing prices exploded. The housing market became so lucrative, ordinary people started buying big houses and borrowing against the expected future value of their homes. They cashed out the value of equity they hadn’t actually paid in yet and used it to buy boats, cars and flat screen TVs.

Banks lowered their lending standards because, hey, what’s the worst that could happen? Worst case, the bank forecloses on the house and ends up with an asset that is skyrocketing in value. The risk to the bank was negligible, as long as those housing prices kept going up.

This created a giant short-term boom in the economy and made everybody think they were rich for a while. Governments, business owners and private individuals scrambled to keep up, hiring new people and changing their production schedules to build all this new stuff people were asking for. But this wasn’t true sustainable growth. This was a bubble caused by the availability of easy money and the response to low interest rates.

The appliance stores who hired new staff, the boat-builders who bought extra materials and the car dealers who started stuffing their inventories with high-end SUVs were all preparing for a future that never happened. Now the money from all those home equity loans has been spent, the mortgage payments are piling up and people are scared of losing their jobs.

The car dealers are stuck with lots full of cars that won’t sell, the boat-builders are stuck with warehouses full of materials they don’t need and the appliance stores are laying off employees that don’t have enough to do.

This buildup of inventory, labor and capital goods based on artificial market conditions is malinvestment — the inevitable consequence of a bubble.

Moral hazard

There’s plenty of evil and corruption at work here, but the root of the problem is moral hazard. That is, creating conditions that encourage stupid risks and reward people for doing stupid things. The auto and bank bailouts are prime examples of this.

If the free market was allowed to work, all these bankers who made bad loans would fail and go bankrupt, and the next generation of bankers would learn from their mistakes. But government won’t let them fail. Government is rewarding them for doing all these dumb things because the credit bubble has grown so big, a lot of people are going to lose their jobs when it pops.

The politicians don’t want to get blamed for the collapse of this giant monetary bubble, so they’re trying to delay it — desperately pumping money, credit and government stimulus into the economy to try and push back the collapse.

But all spending is not equally good for the economy. You have to invest in smart things that will produce profit in the long term. If your investments are not sustainable, the money is going to be wasted and the bubble will start to collapse again, as soon as the flow of new credit stops.

Playing musical chairs with government debt

Remember, all this stimulus money has to be borrowed from somewhere. When governments borrow too much, people start to doubt the government’s ability to pay that money back. When that happens the government can’t find people to buy its bonds anymore. It has to offer a higher rate of return and promise to pay the money back faster. That means the government has to use bigger and bigger percentages of its current income to pay interest on debt, restricting the amount it has to spend here and now. In extreme cases governments default, admitting that they can’t afford to pay back what they owe — filing the nation-state equivalent of bankruptcy.

That’s happening in Greece, Spain, Portugal, Ireland and Italy right now. These countries have borrowed way more than they can pay back and the rest of Europe is buying bonds to prop them up, even though they know those bonds will never pay off.

But Germany and France have big debt loads, too, and if they spend too much bailing out other countries, lenders will lose faith in them too. It’s like a huge game of musical chairs right now, with big countries bailing out smaller countries, federal governments bailing out state governments and state governments bailing out city governments, until finally someone says enough and admits that they can’t do it anymore.

Great Britain is starting to cut back on spending but it probably won’t be enough. Most of the other countries are still borrowing and spending like they always have, desperately trying to prop up this bubble and pretend that everything will be okay.

But this bubble has been growing for decades. Trillions of dollars have been invested in things that will never pay off. We have to get back to basics and redirect our resources into things that are going to make money in the long term.

That means a lot of people are going to have to change jobs. A lot of equipment will have to be sold off. And a lot of buildings are going to come down. The economy must be allowed to contract and regroup, so we can shift our focus to things that actually produce value for people, instead of just shuffling cheap credit around.

Written by Michael B. Duff

July 9, 2010 at 10:02

Posted in Politics

Good news from libertarian optimist Greg Swann

There are a lot of libertarian pessimists out there today. It looks like debt-based government expansion has reached its inevitable end, but nobody can say when we’ll have our Berlin Wall moment.

It may still be 10 years away. But everything is so connected now. Financial markets change literally within milliseconds. So when that Berlin Wall moment happens, the reaction will be that much more dramatic.

It’s the drama that scares me — the possibility of social unrest and civil disorder. Germany and Great Britain are making noises about austerity, but they’re basically just pledging to spend 36% more than they take in instead of the usual 40%.

The unfunded liabilities, in terms of pensions, health care and welfare programs are so huge we can’t even comprehend them. And instead of dealing with the problem honestly, our politicians have abdicated their responsibility.

The California legislature can’t even pass a budget right now. The U.S. congress is about to do the same. There are no easy places to cut these budgets. There’s lots of easy pork, but even if you cut every dime of it, it wouldn’t be enough to make a dent.

The only expenditures big enough to matter are left in “untouchable” programs. Every cut will require a big courageous policy decision. If you want to cut enough defense spending to matter, you’ve got to take a stand on Afghanistan and the Iraq war. You’ve got to stand up in front of the American people and say, “We can’t afford this anymore.” Or you have to pretend it’s for foreign policy reasons and reverse 10 years of Neocon rhetoric.

This debt crisis is happening on every level. Every state government, every city government and every part of our Federal government is in the red. Illinois is even worse than California and even less willing to deal with it.

We’ve got some very hard choices coming; choices that will require decisive action from politicians who are willing to take risks. But the job of governing has been so easy for so long, our current crop of politicians does not have what it takes to make those choices.

For decades all they’ve had to do is get elected and spend from an infinite supply of government credit. The money was so easy, Republicans abdicated their symbolic pose as guardians of government spending and started competing with Democrats to see who could run up the biggest deficit.

Spending money for votes is relatively easy. For decades the primary job of a U.S. congressman has been to quietly collect bribes from special interests and convince voters they were still on their side.

The choices facing our political class now are an order of magnitude harder than what they’re used to dealing with. I could almost feel sorry for Obama, if he hadn’t ridden into town promising to solve every problem with government money.

We’re dealing with decades of malinvestment here. Cheap money and government bailouts have led people to take risks that they never would have taken in a “normal” economic climate.

Now all those bad investments are collapsing, all at once. All the projects that started in a climate of easy money, based on the assumption of cheap credit forever are starting to collapse.

The banks are hiding trillions in bad loans that we haven’t even talked about yet. We desperately need a recession. All these companies that made bad decisions need to fail and go bankrupt, so the labor and capital they have can be redirected to enterprises that will actually be sustainable in the long run.

But every politician in Washington, every pundit on the national news, and every crooked banker on Wall Street wants to keep the easy money coming, so they can line their own pockets and shift their losses to some other sucker before that Berlin Wall of Debt comes down.

This isn’t just a matter of greed and corruption. Economists, politicians and power brokers all over the world have built their reputations on the idea that governments can spend forever, that all spending is “good” and that we can borrow forever without paying it back.

Paul Krugman won’t be the only Nobel Prize winner caught with his pants down when this bubble pops.

So yeah, I’m a pessimist. But there’s a bigger picture than the one I usually look at, and there are actually a few libertarian optimists out there, smart enough to give me hope.

Here a couple choice quotes from libertarian optimist Greg Swann.

First, a warning, and an eloquent statement of the problem:

Governments destroy wealth best with wars, but they destroy wealth with almost everything they do. Anything that a government does that makes it harder for an honest trader to either produce, purchase or sell a marketable good or service is a net destruction of wealth. Money is not wealth, but money is the seed stock of new wealth, so, by despoiling the currency, by taxing productivity, and by rewarding stupidity, waste and sloth at the expense of wisdom, thrift and enterprise, governments systemically destroy wealth. This is all painfully obvious — by which I mean, the less obvious is it to you, the greater your pain.

Now the good news:

The productive capacity of the world has not changed. If anything, it continues to go up, even if perhaps at a temporarily slower pace. Wealth is not money. Wealth is goods and the intellect and husbandry and manufacturing capacity to produce more goods. Every bit of the real wealth we had yesterday, we have today. A lot of people have lost a lot of money, but our store of produced goods and our fixed capital base for producing more goods is undiminished.

Do you understand? If there had been a war, and if some significant fraction of the world’s capacity for producing goods and services had been destroyed, that would be a very bad thing. That would be a cause, going forward, for concerns about systemic poverty.

This hasn’t happened. We are richer today than we have ever been, expressed in terms of our ability to produce goods and services, and — because of the spread of data-processing, because of the enterprise of the Chinese, and because of the intellectual renaissance in India — we will be quite a bit richer — by those same standards — as soon as tomorrow. I mean that literally: Tomorrow.

I don’t necessarily share Greg’s optimism about the economic value of data processing or the educational value of people reading random stuff on the Internet. I don’t think the average person has been studying manufacturing techniques and engineering blueprints.

But once reality sets in and changes the reward structure, information technology will make it much easier for us to adapt. I think we’re going to see a lot of people grabbing cheap online degrees in the next few years, struggling to start 2nd, 3rd, or 4th careers when their pensions are cut off.

I particularly like what Greg said about the nature of real wealth. There hasn’t been a war (yet). Our population is smart, literate and healthy, more or less. Technology has given us a much more efficient baseline to start from and the buildings are still standing.

America has been on the wrong track for a long time, but once we have our moment of clarity, the turnaround should be very fast.

But when will that moment come, when every government, every bank, every school, and every media voice is working to delay it?

I’m confident that we can bounce back, but the longer we wait, the harder the fall will be. And if we fall too hard, we could trigger a breakdown of civil order and destroy the framework we need to rebuild.

Hopefully the Wall will fall in Europe first, and give us time to wake up.

Written by Michael B. Duff

July 5, 2010 at 15:45

Posted in Politics

Regressive Party Manifesto

Here’s the problem. All the good names are taken.

We used to be “classical liberals” but that name was appropriated and then discarded by the other side. “Liberal” is like an old sock that your brother stole out of your dresser. Twenty years later you find it in his closet and he says, “Oh yeah, I guess that is yours. It’s kind of gray and stiff now, but you can have it back if you want.”

Modern liberals want to be called progressives now. I guess Rush Limbaugh finally destroyed the l-word.

I’m not really a conservative, although I’ve been to some of their pot lucks. Libertarian is accurate, but that label has been appropriated by hippies, gun nuts and people who never quite got over Ayn Rand.

So, I would like to propose a new label. I want to be a Regressive. I don’t want to create bold new policies for the future. I want to go back to old, forgotten policies that seem boring and simplistic now.

Our slogan will be “Regress…TO THE FUTURE!”

Still deciding on our campaign vehicle. I don’t know if I should go with a DeLorean, an A-Team van, or a 1918 Ford Landolet. Technically I should use a horse and buggy, but I think we’ll have enough trouble getting on the ballot without adding animal permits to the mix.

I know what you’re thinking. How are you going to convince people to adopt economic policies that America rejected in World War I?

By never explaining what those policies are. We’ll have it on the web, you know. For obsessive types who like to read. But for the public and mainstream media, nothing but empty platitudes and obscure historical jargon. We can’t possibly WIN anything, so this will be a movement based on spectacle. Bowler hats and gold pocket watches. Ridiculous moustaches and vintage fabrics. Our goal is to entertain the public and suck up TV time that should be going to legitimate candidates.

Not a legitimate party. More like a historical LARP.

Our most highly paid employee will be the graphic artist who makes everything look like a patent medicine ad from 1918. Our TV ads, if we ever get to afford TV, will be sepia-toned and silent, with everything written on placards that no one will read. Can you imagine the impact of that? Utterly silent TV commercials? Maybe with some sloppy piano music in the background?

When Rachel Maddow asks us if we would preserve the Civil Rights Act we will say “absolutely!” But that 19th Amendment has got to go.

Written by Michael B. Duff

June 21, 2010 at 19:54

Posted in Humor, Politics

A Texan walks into an investment bank

I was talking about how much I was enjoying Zerohedge lately and made a comment about how naive I had been about the market before I started reading ZH and Michael Lewis.

I don’t actually invest in anything, but if I did I think I would be like a white trash version of this guy.

A Texas oil billionaire walks into an investment bank.

TEXAN: I’m here to invest a chunk o’ money! Who wants to get off their ass and sell me somethin’?

SALESMAN: I’ll help you, sir. What kind of portfolio did you have in mind?

TEXAN: Well son, I believe in three things: God, Guns and Gold. I invest in God every Sunday. I want you to set me up with the rest.

[One lovely aside here. Putting the words “smith and wesson stock” into Google brings up a report about their financial instruments, with no reference to the physical “stocks” they make. Investing in SWHC is no doubt much easier, requiring much less paperwork, than acquiring physical guns made by the company. A sign of our times, I think.]

SALESMAN: We can certainly help with that. Just so happens we have an equity position in Smith & Wesson, available at 4.3. But I should warn you, this stock can be kind of…

TEXAN: End of the world, son. That stock has nowhere to go but up.

SALESMAN: Yes, sir.

[Two months later, three magazines and five rifle designs made by Smith & Wesson are outlawed by a new federal statute. SWHC stock value drops to 2.8.]

SALESMAN: We also have a very popular gold fund that has performed very well this year. We could set up a standing buy order and add to your holdings every month.

TEXAN: Now just a minute! If I buy gold I want GOLD! The shiny kind that smells good!

SALESMAN: Oh, it’s all real gold, sir. We have certificates, contracts, London guarantees and a picture of the vault!

TEXAN: Sign me up!

[Two months later: “Hey guys, Jerry has a customer dumping $1 million in GLD on the 3rd Friday of every month at 10 a.m.. Program the HFT to buy $1 million GLD every 3rd Friday at 9:59:59:30 at +.10 and sell it to him. We’ll make ~.10 cents off every dollar he buys and off every dollar that follows him.]

[Two years later: The SEC orders a physical audit of GLD bullion holdings, revealing that they can only make physical delivery on 60% of what they hold. The price of real gold jumps 40%. GLD shares drop to nothing. SALESMAN has been promoted six times and can no longer be reached for comment. Texas billionaire has lost $12 million. Salesman has earned $3 million in bonuses.]

[Notice that the one thing the Texas billionaire did not invest in was oil, the one commodity he knows something about.]

Written by Michael B. Duff

June 21, 2010 at 14:58

Posted in Politics

Duff predicts doom for the Euro, in 1999

People spend a lot of time making predictions on the Internet, but are rarely, if ever, called upon to account for those predictions. Recently, I’ve admitted that libertarianism has a credibility problem. We predict doom and gloom so often, we become economists who cry wolf — easily dismissed during long, dramatic boom periods.

The effects of Keynesian economic stimulus (government spending) take effect relatively quickly, but the consequences occur on a whole different time scale. These policies can extend for a very long time, as long as you can find another source of cash to prop them up. Globalization gave governments a tremendous amount of capital to borrow on, and on an emotional level, everybody WANTS this to work. Everybody in the system from the government officials at the top to the bankers in the middle to the individual investor at the bottom wants to believe that money is the same as wealth, and that easy credit is the key to prosperity.

So, here’s a series of predictions I made in 1999 — predictions that sounded utterly ridiculous at the time and actually looked dumber every year thereafter, as Europe benefited from a global economic boom and the Euro was heralded as a tremendous success.

I posted this to alt.politics.jaffo on January 1, 1999, referring to a Forbes article that is, shockingly, still available:

I’m not nearly as worried about Y2K as am about this unified European currency.

Europe is a collection of seriously fucked-up welfare states. You don’t make a ward full of sick people healthy by stapling them together. All you get is one giant sick person.

This article explains how the Euro will pave the way for one giant Neosocialist economy in Europe.

The next decade could be very tough for Europe and America. We might see a global recession.

If Y2K doesn’t kick our asses, the European currency will.

It’ll take about 2 to 5 years for the shit to hit the fan.

The amusing part is by the time everything goes to hell, the guys who voted for it will all be gone.

Look for economic booms in Greece, Ireland, Spain, and the other European nations leaning on France and Germany.

Those booms are totally artificial, like the American boom in the 1920’s.

The Roaring 20’s weren’t based on real growth, they were based on permissive monetary policy. Eventually, the debt will catch up with them, and they’ll have a recession or depression.

The little economies around Germany and France will fall over like dominos.

Then the big boys suffer from trying to bail them out.

This will be an ugly, icky 10 years for Europe, and America could end up in the same boat if we’re not careful.

My error? The consequences took almost twice as long as I thought they would. I believe the same thing is happening now.

On February 25, 1999 I wrote:

I have been predicting disaster for the Euro since the beginning,
based strictly on political factors.

It’s too early to know if my prediction is accurate, but this early
sign of weakness provides some evidence for my position.

The fact is, the European economy is SICK. Double digit unemployment,
preposterous budget deficits, and worst of all, a huge European
bureaucracy eager to regulate every minute detail of this new “free
trade.”

The Euro is inherently unstable as a monetary unit because the
economies underneath it are Neosocialist nightmares.

We’ll see if the evidence matches my prediction over time.

You’ll see that I’ve created a Predictions category in my del.icio.us bookmarks now. I invite you to check back from time to time to see who ends up being right and wrong as this giant 10-year curve begins to turn down. It may take another 10 years, or one unlikely event could trigger a panic and fire off 10,000 stock market algos all at once.

We shall see.

Written by Michael B. Duff

June 19, 2010 at 12:05

Posted in Politics

Good news for Libertarians; we don’t have to win the argument

Rand Paul’s implosion has made it cool to make fun of libertarianism this week, as this tone-deaf idiot decides to “champion freedom” by defending one of the most despicable companies on Earth (British Petroleum) and by attacking one of the most popular pieces of legislation ever passed (the Civil Rights Act of 1964.)

Libertarianism is an easy target in today’s climate. Rand’s decline shows just how absurd it is to try and defend abstract political principles in a world that is hopelessly dependent on government and willfully ignorant about economics.

Rand Paul’s implosion, and the gleeful reaction to it, has convinced me of something I’ve known for a while but never quite put into words. The Libertarians are never going to win this argument.

We’re never going to gain a foothold in the culture, we’re never going to move the hearts of the electorate, and we’re never going to elevate the level of discourse on economic issues.

Politically and culturally we are impotent. The left dominates the hearts and minds of the young, the old, the rich, and the poor. The right appeals to a narrow band of disaffected rednecks and angry senior citizens, but these voters aren’t really doing anything but rebelling against tax increases.

Culturally, the Tea Party people are a joke. They’ve been written off as a band of angry Southern racists, and they can’t be taken seriously, even when they win elections.

There is no credible force fighting for free markets and smaller government today. The Democrats are locked in battle with the Republicans of course, but these are Republicans who bailed out the banks and created a new Medicare entitlement.

Greece is rioting. The European economies are about to collapse under their own debt. The American debt to GDP ratio is approaching critical mass. Our economic “recovery” is based on a nested series of lies and accounting tricks. And no one is really talking about it.

Certainly no politicians are running on it. No one in the mainstream media is taking this seriously. And the best the free market champions can muster is a bumbling idiot who wants to kick MLK out of his lunch counter.

I’ve had to accept that no matter how bad the economy gets, the libertarians (of whatever party) are never going to win the argument. But it doesn’t matter. Because the opposition isn’t at war with “us” the opposition is at war with reality, and reality is going to happen anyway.

Arguments, theories, philosophies, and debates are all irrelevant. We’re out of money and no amount of rhetoric can make it come back. The only question remaining is how long we can shift the bad debt around, and who is going to suffer the consequences first.

These pensions, welfare benefits and health care schemes are not sustainable. Somebody’s going to have to cut them. And most of the cutting will be done by Democrats. Republicans are assumed to be heartless bastards who want to kill off the elderly and starve the poor.

We’ll probably give them the ball first. Some hard-assed Republican will cut spending by a meager amount and take the political heat for it. The Democrats will crucify him and kick him out in one term. Then they’ll take the White House and realize the situation is even WORSE than the Republicans said it was.

The Democrats will end up cutting more programs more deeply than the Republican did, but they’re Democrats so they can hide behind the notion that however bad their cuts are, the Republican cuts would have been worse.

The cultural deck is stacked so that libertarians will never have power and the electorate won’t tolerate cuts from Republicans so the most severe cutbacks in American history will be sponsored by Democrats. Because no one else can do it.

It’s possible no one will do it, of course. We might go the way of California and just keep denying reality until the checks bounce, but that seems unlikely.

Europe will give us a crystal-clear preview of the disaster to come and the American media will demand a response. Cuts that would seem cruel coming from a Republican will be praised as “brave” when they come from a Democrat, and tons of moderate voters would cross the line to vote for a conservative Democrat.

So no, the coming crisis won’t change any fundamental assumptions in the electorate. It won’t lead to a Libertarian Renaissance. But it will set the stage for the Second Coming of Bill Clinton, a Democrat who can cut spending and make you like it.

We don’t need a libertarian messiah. We need a Democrat who can lie — a Democrat who will break every campaign promise and sell out every constituency until the job is done.

We need a new FDR. FDR ran right and governed left, and the people made him a god. What will people think of a Democrat who runs like Obama and cuts like Reagan? Angel or devil, his day is coming.

And in the meantime, we can all make fun of Rand Paul.

Written by Michael B. Duff

May 23, 2010 at 15:36

Posted in Politics

Rand Paul illustrates why Libertarians can’t govern

Rand Paul ended his political career yesterday. Pwned by Rachel Maddow in less than 24 hours.

Paul had been on Maddow’s show before, treated with the amiable contempt that leftists reserve for right-wing types who criticize Republicans and have no real chance of getting elected. But the instant this libertarian clown became a credible candidate, Rachel took the gloves off.

The video is excruciating to watch, as Rand dodges the question over and over again. He’s articulating the standard libertarian position on such things, opposing institutionalized racism like the Jim Crow laws, insisting that the government treat everyone as equal under the law while leaving private businesses free to discriminate.

Maddow knows exactly where the weak point is and she has him dead to rights. But he won’t admit it.

And this is precisely why libertarians (under any label) will never be a credible force in American politics. Libertarianism is a collection of political principles, principles that carry the force of religious commandments in the hearts of the faithful.

But modern politics leaves no room for principle. Modern politics is a game of artifice, strategy, and power. You stick your finger in the air and say what it takes to get elected. Once you’re in office, you carefully ride the line between constituents and campaign donors and hope you survive long enough to champion something you actually believe in.

There is no room for sentiment in this process. Principled convictions are weak spots to be exploited by the opposition. Any firmly stated principle is going to alienate 43% of the country, so the most successful politicians in modern history have believed in nothing at all.

Bill Clinton and Barack Obama may hold authentic leftist convictions in their hearts. Their staffers certainly do. But their first priority is to keep power. And they never take their eyes off that ball.

They say whatever it takes to get elected and they avoid arbitrary statements of principle, knowing that any absolute declaration can be used against them in a campaign.

Libertarians don’t think like this. They’ve been out of power so long, they don’t know how to think like politicians. The idea of compromising principles to gain power is repulsive to them.

“And that,” says Karl Rove Yoda, “is why you fail.”

This is not an Internet forum thread. This is not a dorm room bull session. This is not an afternoon debate at The Federalist Society. This is American political theater. It’s a dirty, despicable game that plays to the worst instincts of the electorate, and Rachel Maddow is on the front line.

There is no room for nuance, hypothetical situations, or historical fantasy here. This is war. A brutal war for the soul of the country, with a trillion-dollar prize at the end. Pandering to the electorate is the only way to win.

I understand the philosophical foundation of Rand’s position and I know what he was trying to say. He believes discrimination is morally wrong. Believes it more deeply than your average Southern Democrat. But he’s morally opposed to the use of force. He understands the overwhelming power of government and thinks it should only be used when it is absolutely necessary.

He knows that every use of government power comes with a laundry list of unintended consequences, and that many of those consequences will hurt the people he’s trying to help.

He is horrified by the idea of government-sanctioned discrimination and would fight like hell to make sure everyone was treated fairly under the law.

But fundamentally, libertarians think people have the right to be stupid. You have the right to destroy your life with drugs. You have the right to smoke until your lungs fall out. You have the right to allow smoking or ban it in your place of business. And you have the right to decide who you sell your goods and services to, as long as you don’t threaten people with violence or try to impose your views on the business next door.

I expect Rand believes, like I do, that a country that allowed businesses to discriminate would end up looking a lot like our world today. Business owners would learn that discrimination is bad for business. Open-minded people would boycott racist business owners and shame them into opening their doors.

And when that society had driven out all but the most backwards and intransigent holdouts, it would be healthier and more benevolent towards minorities, precisely because that change was voluntary.

Can I prove this? Not really. There are so many variables here I’d have to invent a time machine to test it properly. I was going to try and use discrimination against the Irish as an example of prejudice that had been overcome naturally, but it’s not a perfect fit.

Like most libertarians, I base my position on some fundamental observations of human nature. When people are forced to do the right thing by government, they resent it, and the pressure builds. But when they are shamed into doing the right thing by their friends, their neighbors, and the general climate of their culture, it feels natural and it tends to stick.

There is less resentment, and ultimately less violence when people have the freedom to be stupid and the choice to be virtuous.

A complicated, nuanced position with tremendous room for disagreement and debate. I’m disgusted by the idea of discrimination and would certainly be tempted to use government power as a shortcut, but I think it would be better for society as a whole, and better for the people we’re trying to protect, if we let people grow into the idea.

You think I could fit that statement into a sound bite on Maddow? You think it would convince Democrats in her audience? You think it would garner support from Republicans who are fighting tooth and nail against the agenda of our first black president? You think the mass of Tea Party people, who are already assumed to be racist until proven innocent would rally behind me for saying it?

Hell no.

The narrative on Civil Rights is firmly established in the popular imagination. Discrimination was evil and the power of the federal government stopped it. The end.

There is no room for nuance in this opinion. The overwhelming majority of Americans are happy with the results of this legislation and the few that aren’t think it didn’t go far enough.

Rand Paul has thrown his career away in support of a position that absolutely does not matter. This battle is over and the government side has already won. It’s never going to come up in the Senate. He’s never going to vote on it. It would cost him nothing to lie about this issue and keep his mouth shut. But he’s a libertarian, and libertarians stick to their principles, no matter what it costs. (Or at least until their campaign managers sit them down with a pair of dolls and a stack of poll numbers and explain the Facts of Life.)

If Rand had misrepresented his opinion and expressed enthusiastic support for the Civil Rights Act, what would have happened? Eighty libertarians on a mailing list would call him a hypocrite, and then it would be over.

He could have ridden the Tea Party momentum into office and opposed government spending for the next 20 years. He could have advocated free market solutions to health care and pension problems at a crucial moment in American history. He could have voted against corporate welfare and taken a stand against government bailouts at a time when greed and cronyism are tearing this country apart.

But now he’ll be forgotten until he comes back to endorse his own son in 2054.

We’d like to believe in a world where voters reward consistency and admire people who stick up for what they believe in, but that only works in the movies. In the real world, you have to measure what the majority believes and position yourself precisely between left and right.

Modern politics is a street fight. These guys are walking around with pistols and switchblades, sneaking around in the dark and performing rhetorical drive-bys.

Rand Paul showed up in full SCA gear and started swatting people with a cardboard tube. Nice tabard, Rand, but you’re in the real world now.

You can try to backpedal, but once you let the racist cat out of the rhetorical bag, it’s over.

Written by Michael B. Duff

May 21, 2010 at 09:00

Posted in Politics

Lessons from the Scott Brown mess

I’ve been trying to stay away from the political stuff, but Scott Brown’s stunning upset victory in Massachusetts is making my pundit zone itch.

Most of the people reading this already know where I stand on the issues, but there’s nothing particularly interesting about my opinions.

What’s interesting to me is how this Senate race has stunned Washington and sent pundits on both sides scrambling to make sense of it.

I think this race reveals something deep and important about our national character, but nobody has quite figured out what that something is.

Let’s break it down:

REPUBLICAN SPIN: This vote was a national referendum on Obama’s presidency. Voters rejected deficits, voters rejected health care, voters rejected big government and after just one year of empty promises, they have firmly rejected Obama. Voters want someone to fix the economy and give them their jobs back.

DEMOCRAT SPIN: Coakley was a lackluster candidate who made some terrible mistakes. Scott Brown ran a great campaign with the entire force of the RNC behind him. Democrats didn’t take the race seriously, so the flood of GOP money and GOP talent overwhelmed them. Republicans treated this like a national election; Democrats took it for granted, so the Republicans won. Wacky independent voters (blithely dismissed as “teabaggers”) are upset about the economy and the Democrats stayed home to punish Obama for not being liberal enough.

REPUBLICAN CONCLUSIONS: We’ve got ’em on the ropes. Health care is dead. Big government is dead. Obama’s honeymoon is over and 2010 is gonna look like 1994. All those crazy independents were actually STEALTH REPUBLICANS and if the Dems don’t shut down everything and do what we say, the people are gonna rise up and give us our majority back!

I even heard one Republican whackjob say that Brown’s election meant that Massachusetts voters were PRO-TORTURE! He called it “enhanced interrogation.” Yeah, and crashing into a telephone poll is “enhanced parking.”

DEMOCRAT CONCLUSIONS: Full speed ahead! We’ve only got 59 seats but guess what, that’s STILL A MAJORITY! Let’s push through everything we want and go down fighting! Shove health care down their throats and make them love us! Stop all this wussy compromise and bet-hedging crap and WIN SOMETHING! Make the Republicans filibuster and let the American people see them holding up health care. Obama’s flailing because he lost his base. Stick to your guns and become the guy we elected! Democrats are losing elections because they’re timid and afraid! But we have the power! Let’s use it and put some points on the board!

My raw material for all this comes from comparing the Dennis Miller and Rachel Maddow podcasts today.

Miller is smarter than the average Republican and Maddow is smarter than the average Democrat. Which is just my shorthand way of saying they are both willing to nod in the direction of reality, even when they’re charged up and emotional.

The most amusing thing between them? They both agree on Maddow’s proposed course of action. Maddow wants the Democrats to charge full speed ahead and so does Miller. He thinks Americans are terrified of health care legislation and will run the Democrats out of town on a rail if they push it through. Thus, he wants them to try it, almost as badly as Maddow does.

The really interesting thing? Senate Democrats are buying into the Republican spin. This election scared the hell out of them. And I confess, anything that puts the fear of God into an American politician has got to be a good thing.

Do you know how long it’s been since we’ve seen a politician AFRAID of his constituents, genuinely afraid of losing power because of something they did? It’s a lovely thing, and I wish we could see it more often.

The Democrats are so afraid, they’re going to bend over backwards to accomodate Brown and punt health care all the way back to the drawing board.

Victory for the Red team, right? Wooooolveriiiiinees!

I’m going to unpack this and see if I can figure out where reality is.

PREMISE 1: 70% of voters don’t know what the hell is going on. That leaves 30% who actually care enough to follow the news, beyond what they hear from Jon Stewart. 15% of Republicans and 15% of Democrats are passionate, plugged-in and well-informed. They read blogs, attend meetings and pontificate about political issues with their friends.

PREMISE 1B: 10% of the passionate, “well-informed” people on each side believe things that are ABSOLUTELY WRONG. The people who are supposed to be fact-checking things and sorting out truth from lies decided that was too hard, so no matter how stupid the quote is, if it comes from an elected politician, they’ll run it, pair it with a denial from the other side and say their job is done.

As a result, even the people who try to keep up with this stuff are liable to take ridiculous things as articles of faith.

For example, most of these passionate Democrats honestly believe that state-run medicine would be cheaper, better and more accessible than a private system.

On the other side, Republicans honestly believe we can “win” the war in Afghanistan and turn Iraq into a functioning democracy.

PREMISE 2: Voters are old.

Twitter, Facebook and SMS all you like but the people who actually show up and vote are people who have a stake in the system and have time to study it. That means OLD. Retired people are the heart of the electorate. They have time to attend meetings, time to organize protests and time to fill message boards with political nonsense.

PREMISE 3: That 70% doesn’t show up at the polls unless they’re scared of something or angry at something.

Combine Premise 2 and 3 and you realize the quickest way to get booted out of office is to scare or offend old people.

Conclusion? Old people are terrified of health care reform. They don’t care about the poor because they live in gated communities where they are sheltered from poverty, just as surely as they’re sheltered from rain, wind, and edgy TV.

They don’t care about health care because they already have health care. A retired voter can lecture you about the evils of socialized medicine while sitting in the lobby of the Medicare office. Reference Premise 1B above.

Those three premises contain all the information you need to unpack the election of Scott Brown. You might think this points to a Republican sweep in 2012 but don’t forget Premise 4.

PREMISE 4: Because voters are ignorant and confused, they fear any kind of dramatic change. The minute any kind of change gets too radical or too confusing, the 70% will rise up and squash it. That applies to Democrats trying to push health care through in 2010 and to Republicans trying to cut spending in 2012.

Republicans trying to cut spending? Sorry, I need to use more realistic examples. I meant, “Republicans trying to send more troops to Iraq in 2012.”

So, the trick is, soothe the voters’ desire for change without actually changing anything.

WHAT IS CHANGE?

That’s the flip side to running on “change.” Voters love change because change, by itself, doesn’t actually mean anything. Change means something different to each voter. Obama voters thought change meant, “Ending the war.” Other Obama voters thought change meant, “Standing up to fat cats on Wall Street.”

Some Republicans even voted for Obama because they thought change meant, “Cutting wasteful government spending.”

Change is a nonsense word, a variable that means whatever you think it means. That’s why it’s so easy to promise. You promise it up front but you don’t have to define it until you actually get in office.

Do the voters want change? Voters will ALWAYS want change. That’s what change is. Change is a variable that stands for “things that voters want.”

When a politician promises change he’s basically promising, “I’m going to give you whatever you think you want right now!”

That works great until he gets in office and that nebulous variable has to take the form of actual policy. “But you guys said you wanted health care, right?”

In conclusion, Scott Brown was elected by angry, frightened old people who thought that Obama was going to screw up their health care. They hated the lazy, entitled witch who ran on the Democrat side and they’re angry at Obama for promising them the moon and bailing out Wall Street instead.

A WARNING TO REPUBLICANS: DEFINE YOURSELVES OR DIE

This does NOT translate into automatic support for Republicans, however. This election is a mandate for change, but change doesn’t actually mean anything.

The real challenge for Republicans is to associate this nebulous idea of “change” with an actual set of policies that people can agree on. Newt Gingrich did this with something called the Contract with America. He took the idea of “change” harnessed all the energy from it, and told voters, “Change means all the stuff on this list, right?”

Newt was careful to put things in that document that the majority of focus group participants voters could agree on, so they said, “Sure!” and put him in office.

If Republicans want to take power again, they have to define themselves as a broad, open coalition that believes in a clear list of popular things.

And for the rest of you, the undifferentiated mass in the 70%? You have to figure out what you want. Citizens are so burned out on politics now, they’re not even bothering to decide what they believe in anymore. They’re actually waiting for politicians to tell them what they should want.

It’s like expecting a job applicant to invent his own job.

LESSONS FROM SCOTT BROWN

Don’t take your base for granted.
Don’t rouse the sleeping 70%.
There is no such thing as a “mandate” anymore.

And finally, if you promise change in 2008, you damn well better CHANGE SOMETHING by 2010.

Apologies for the giant political rant. I promise I won’t do this again before November.

Written by Michael B. Duff

January 21, 2010 at 19:43

Posted in Politics

The Red State Purple Team Blues

If this column was a song I’d call it “The Red State Purple Team Blues.”

The two biggest obsessions on the web are sex and politics. If you can’t fill your web site with pictures of celebrities in bathing suits, the best way to drum up traffic is to post about politics. Pick a side and join the eternal war of Red vs. Blue.

Post for a few weeks and you’ll notice a pattern. The closer you get to the party line (either of them) the more you’ll attract comments and site traffic. The meaner you are to the other side, the more the faithful will flock to you. You’ll get consistent hits from people “on your team” and your opponents will waste more of their time defending themselves against you.

This works as long as you stick to the talking points. Comment on the hot issues of the day and parrot whatever you see on Fox News or MSNBC. But don’t go too far off message. Don’t let your team catch you sounding too moderate or too radical. Stay in that sweet spot of mainstream Republican or Democratic thought and don’t let yourself lean too far right or left.

I know this strategy works because I’ve benefited from it myself. In 1994 I was a rabid Newt Gingrich supporter, caught up in the promises of the 104th Congress. I listened to Rush Limbaugh every day and cheerfully drank the kool-aid. I sat in the front row and pestered my political science professor with quotes from The Heritage Foundation.
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Written by Michael B. Duff

August 6, 2009 at 15:49

Posted in Politics