Monday, December 31, 2012

“Death of the GOP?”

Sydney M. Williams

Thought of the Day
“Death of the GOP?”
December 31, 2012

It was Mark Twain who wrote thirteen years before his death in 1910: “The report of my death was an exaggeration.” Similarly, there have been a slew of premature obituaries written for the Republican Party, following their defeat for the White House in November. The latest appeared in last Thursday’s Financial Times. The editorial repeated conventional thinking: “Republicans look like the 1950s – their most loyal voting block is over 65.” Usually they are described as white and male, as well as being over 65. The FT went on: “Today’s Republican Party is a bit like a headless body striking out blindly against change.” The last is a non sequitor, in that it is change that Republicans want. They see Benghazi as a cover-up; the lack of drilling on Federal lands as a deterrent to economic growth, as well as regulations that have become ridiculous in their impediments to growth. They look upon Obamacare as another expensive and unfunded entitlement, and they see an Administration with claims toward openness, yet mired in secrecy. They recognize that the path Washington is on leads inexorably toward a welfare state like Greece. They want to change direction.

It is true that Republicans are disjointed. Tea Party members in Congress performed hara-kari in denying John Boehner a vote on Plan B a few days ago. The race for a Republican nominee seemed to have been more a race to the bottom than a dash to the top, with some of the sorriest contenders I have ever seen. Republicans, contrary to what they showed the country in the nominating process, have a deep bench. A list of attractive, modern younger Republicans would include Mitch Daniels, Nikki Haley, Jeb Bush, Scott Walker, Rick Snyder, John Kasich, Paul Ryan, John Thune, Jen Brewer, Marco Rubio and Chris Christie. When forecasting the death of the Republican Party, keep in mind that in victory, Mr. Obama became the first person in recent memory to win re-election by garnering fewer votes than he did during his initial run. And Republicans kept control of the House, while picking up an additional Governorship, giving them thirty. That doesn’t sound like a Party that is ready for the funeral pyre.

The truth of the matter is that politics (and political parties) are evolutionary; a natural process that smug Democrats proclaim is beyond the understanding of provincial Republicans. Precipitate mourners make much of the fact that in the last seven Presidential elections only one Republican received more than 50% of the popular vote – George W. Bush in 2004. They conveniently forget the role of third party candidates and the overwhelming advantage Democrats have in terms of registration. They ignore a mainstream media that yodels for the Left no matter their policies, and the role of universities in creating a homogenous cadre of graduates. As Victor Davis Hanson recently wrote in “An Anatomy of a Most Peculiar Institution,” “there is no diversity of thought on the vast majority of university campuses.” The cost of an education has risen at double the rate of healthcare, and it is producing students who are instructed in what to believe, not taught to think independently.

Both Parties have extremists in their midst. Among Republicans, they are represented by the 25 or so truculent House members. In the Democratic Party, however, the extremist sits in the White House, immune from critics within his own Party. The Left tends to be an overly sensitive bunch that places political correctness above moral rigor. Their fear of being labeled racists has given Mr. Obama a green light in terms of fiscal irresponsibility. He has created a spending spree that threatens our economy and the dollar. For four years, Mr. Obama has incurred trillion dollar deficits. The last time Mr. Obama submitted a budget was in 2011. It was voted down in the Senate 97-0.

Mr. Obama’s approach to the “fiscal cliff” has been cavalier, divisive and redistributionist. In demanding higher tax rates for “millionaires and billionaires,” he ignored the far fairer policies of streamlining the tax code, limiting deductions and credits. And he offered no cuts in spending, other than including existing defense cuts commensurate with winding down the wars in Iraq and Afghanistan, and suggesting any further cuts were subjects for future negotiations. The cliff we approach tomorrow is only a precursor of far higher ones to come. Without an economy that can grow at better than 3% on a sustainable basis, deficits will only worsen. The Federal Reserve, in keeping interest rates abnormally low, has masked the true costs of Mr. Obama’s wastrel policies. In a period of unusually low interest rates, most borrowers would be extending maturities, trying to lock-in low rates for as long as possible. The U.S. has been shortening maturities so that interest expense can be kept as low as possible. Rates will change. They will go up. No one can predict when, but when they do our annual deficits will become far worse. It is a game being played by politicians concerned with the present; it is our future that is at risk.

The bell will certainly be tolling, but I am not sure it is for the Republican Party. For years, many Republican politicians in Washington have neglected their roles as fiduciaries. It has not just been Democrats who have brought us to this place. Unless we address not only the current deficits, but the far more serious ones surrounding entitlements, we risk a sharp decline in the dollar and an equally sharp spike in interest rates. It seems more likely that the bell is tolling for a way of life that demands low tax taxes and generous government services. Honesty will have to become part of the political conversation. Personal freedom may already have disappeared. Debts are obligations of all of us. Redistribution may give the country a few years, but it will not ensure its long survivability. It is a problem from which we will not be able to hide much longer. The one official in Washington who has tried to address it has been Representative Paul Ryan. He has been dismissed by mainstream media and largely ignored by his own Party. If the GOP is in its death throes, the coroner will likely rule suicide.

My hope is that my pessimism overstates the case – that a way will be found which will deny the country a financial day of reckoning that seems to me so inevitable. Markets are anticipatory mechanisms. The great bull market ended in the last year of the Clinton Administration. Since then markets have risen and fallen. Today the S&P 500 is below where it was in March 2000. But markets will also, at some point, anticipate positive change. The future is never clear, and one can be influenced by one’s political biases. That is very possible in my case. Regardless, it is my devout hope that 2013 proves to be individually healthy and collectively peaceful.

Happy New Year!

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