Whither the Republicans?

Probably the most difficult lesson for Republicans to accept from the results of the 2012 election is that this was no ordinary swing of the pendulum.   Republicans entered into this race with two huge advantages.  First, they were campaigning against a president presiding over a failed economy, high unemployment and mind-boggling increases in debt.  Second, in this election cycle the Republicans enjoyed a large enthusiasm advantage among their base supporters and this was a turnout election.  One might also mention that the Republicans fielded a highly articulate, competent candidate who in terms of sheer marketability was probably their best choice since Reagan.  Because of the dismal economic conditions prevailing in the months leading up to the election, highly refined electoral college prediction models based on economic data correlated with the results of past elections forecasted an easy and decisive Romney win.  The fact that prediction models which had been so accurate in the past failed dismally this election and the overwhelming Republican base enthusiasm advantage proved inadequate suggests that the voter culture has changed to the point where redistributionists now make up the majority of the voting public. 

The bad news for Republicans is that the current rather narrow plurality of redistributionist voters is only going to get larger with the implementation of Obamacare.  The whole point of Obamacare was not to improve medical delivery services for Americans but to make Americans dependent upon the federal government for those services.  Once more and more Americans get used to subsidized health care, more and more Americans will become part of the Democrat base who dutifully vote for the government party in every election no matter what the prevailing issues of the day.  Such is the power of entitlements.

On the most fundamental level the election of 2012 was a contest between two starkly different visions of how to ensure economic well being for the American people.  The first is the traditional American vision that is based on liberty and focuses on the individual and how that individual might best become prosperous.  This vision promotes constitutional constraints and free markets so that the individual is free to pursue his dreams and ambitions without government regulations so numerous and complex that they constitute government harassment and government taxes so onerous that they constitute government theft. This vision teaches that the most effective anti-poverty program is the anti-poverty program that the individual creates for himself and his family.  This vision, needless to say, encourages the individual to cultivate the whole array of economic virtues such as diligence, frugality, dependability, punctuality, persistence and prudence and it talks about the importance of education and learning a marketable skill.  But it also preaches that the family is the prime vehicle of social security throughout life in this turbulent world.  It instructs the individual to get married and then stay married.  The fact that this vision works in the real world is shown by studies that demonstrate that marriage alone, even among minorities, reduces the statistical chance of poverty by 75 percent and is the single most important lifestyle choice that any individual can make to avoid poverty.  The liberty vision continues its sermon by emphasizing the need for private charity.  If a restrained, frugal constitutional government has limited means and authority to make transfer payments to those in need, then the majority with means are told to step in a help the minority whose lives have somehow gone astray.  The liberty vision does not preclude government help for the needy but relegates it to last place in the safety net system behind individual self help and private charity.  The liberty vision is indifferent to the question of inequality.  It simply is looking for the best way to achieve the most economic well being for the greatest number of people and because this is its focus, inequality is not. 

The second and competing vision of economic well being in the 2012 election is based on equality and is focused on the role of the collectivity rather than the role of the individual.   The vision shifts responsibility for ensuring economic well-being from the individual to the collectivity which for all practical purposes means the government.  (See Obama's outline of this vision in his speech at Osawatomie.) The collectivist vision instructs that everyone in the collectivity takes care of everyone else under the supervision of the government and in order to ensure that everyone in the collectivity has enough, the government forcibly redistributes resources from those who have to those who have less.  Safety and security reside in the collectivity, that is to say the government, and not in the family or individual.   The redistribution effort also serves to foster the goal of relative economic equality and it is difficult to discern which is the more important of the two objectives, economic well-being or economic equality, because the two are simply assumed to be perfectly compatible.  

The practical effect of the egalitarian and collectivist vision is that it produces massive numbers of government workers whether they are productive or not, and programs such as food stamps, child care, medical care, housing subsidies, telephone services, 99 week unemployment compensation and when the 99 weeks run out, lifetime unemployment compensation disguised as disability payments.  Because this vision seeks to replace the family with the government as the basic means of economic security, it ignores the vital social role of the family, weakens and even denigrates it by expanding the definition of marriage to include non-heterosexual couples, by making divorce convenient and easy, and by subsidizing out of wedlock births and single parenthood.

The advantage of the egalitarian and collectivist vision of economic well being to any political party that promotes it is that it creates a class of government dependent citizens who will reliably vote for that party in every election.  The disadvantage of the vision is that it creates perverse incentives that discourage work, energy, creativity, striving, ambition, innovation and economic growth.  By destroying work incentives and family cohesion, it destroys human lives and deprives the society of the human capital needed to build and maintain a prosperous economy. In due course the government finds it has more and more dependents to support which means more electoral success for the government party.  But over time the number of producers declines and the number of dependents increases and the government runs short of money.   The federal government can paper over this problem for a surprisingly long period of time by borrowing and printing money but eventually this will dissolve into Financial Crisis II, that is to say, the bond market will rebel or a financially destructive inflation will ensue. 

In the aftermath of a heartbreaking, hard fought 2012 contest, Republicans are reeling from a loss in an election they lost but   should have won and their prospects for at least the presidential (high turnout) elections ahead look decidedly grim. Shell shocked and discouraged Republicans can address this situation in two ways.  First, they can give into to the new political reality, declare themselves a more efficient version of a compassionate redistributionist party and compete with the Democrats for the same block of dependent voters.  This Democrat-lite approach would be very  attractive to some career politicians whose primary vocational goal in life is to get elected and then reelected again and again. 

But the prospect of Financial Crisis II gives Republicans quite a different alternative. There will come a time our redistributionist state will not be able to pay all of its bills.  The federal government already has to borrow an astounding 40% of its budget just to pay for current promises, and the Obamacare entitlement and baby boomer retirement bulge will soon make the fiscal situation even worse.  The trigger will come when the bond market finally decides that lending money to such a profligate spender at near zero interest rates is a poor risk/reward ratio and begins to demand higher interest rates.  The Congressional Budget Office outlines a 2015 scenario where if the market were to demand interest rates at the historical norm of 4.5 percent, the federal government would have to pay 920 billion in interest payments which would precipitate what the CBO calls a financial crisis and what I call Financial Crisis II. Printing money will not solve this dilemma because that will only precipitate an inflation crisis.  We do not know when this government liquidity crisis will happen but given the state of federal finances, it is no longer decades but years. 

If Republican politicians recognize the inevitability of Financial Crisis II then they will have an alternative to not diving in and swimming with the redistributionist tide.  They can set themselves up as a party apart, a party with a different vision of economic prosperity, the same vision that enabled previous generations of Americans to build the most flexible, vibrant economy on the planet.  Once the crisis hits, the dismayed and enraged voters, like those in the election of 1932, will want to throw out the party in power and replace it with the party out of power.  More importantly, the voters might be willing to follow Republican leaders who can credibly argue that the government redistributionist vision has failed and that the only path to prosperity will be to curb the state and liberate the individual. 

On the other hand it is also possible that the voters of the dependent class will have become so corrupt that they will take to the streets and, like the Greeks, demand money from a government that has no money.  In this scenario they are likely to accept a government that is more authoritarian than any they would have tolerated in the past in the hopes that government can solve the problems caused by government.  And they will have leaders ready and able to lead.   Democrat Party political elites are, after all, proven past masters at "Never letting a crisis go to waste."

In truth we do not know what will happen or when it will happen but quite simply, Republicans need to realize that liberty is worth the gamble.  It is better that Republicans publicly promote traditional American traditions of strong families and the self reliance of individuals even if they have to toil in the political wilderness for a few years.  America does not need two redistributionist parties competing with one another at the margins.  Because professional politicians in their desperation to hold office too often succumb to the expedient, it is up to Republican primary voters to choose candidates who hold fast to the traditional American vision of economic prosperity.  It is the vision that works and it is the vision that America will need if it is to rise from the ashes of Financial Crisis II.

Probably the most difficult lesson for Republicans to accept from the results of the 2012 election is that this was no ordinary swing of the pendulum.   Republicans entered into this race with two huge advantages.  First, they were campaigning against a president presiding over a failed economy, high unemployment and mind-boggling increases in debt.  Second, in this election cycle the Republicans enjoyed a large enthusiasm advantage among their base supporters and this was a turnout election.  One might also mention that the Republicans fielded a highly articulate, competent candidate who in terms of sheer marketability was probably their best choice since Reagan.  Because of the dismal economic conditions prevailing in the months leading up to the election, highly refined electoral college prediction models based on economic data correlated with the results of past elections forecasted an easy and decisive Romney win.  The fact that prediction models which had been so accurate in the past failed dismally this election and the overwhelming Republican base enthusiasm advantage proved inadequate suggests that the voter culture has changed to the point where redistributionists now make up the majority of the voting public. 

The bad news for Republicans is that the current rather narrow plurality of redistributionist voters is only going to get larger with the implementation of Obamacare.  The whole point of Obamacare was not to improve medical delivery services for Americans but to make Americans dependent upon the federal government for those services.  Once more and more Americans get used to subsidized health care, more and more Americans will become part of the Democrat base who dutifully vote for the government party in every election no matter what the prevailing issues of the day.  Such is the power of entitlements.

On the most fundamental level the election of 2012 was a contest between two starkly different visions of how to ensure economic well being for the American people.  The first is the traditional American vision that is based on liberty and focuses on the individual and how that individual might best become prosperous.  This vision promotes constitutional constraints and free markets so that the individual is free to pursue his dreams and ambitions without government regulations so numerous and complex that they constitute government harassment and government taxes so onerous that they constitute government theft. This vision teaches that the most effective anti-poverty program is the anti-poverty program that the individual creates for himself and his family.  This vision, needless to say, encourages the individual to cultivate the whole array of economic virtues such as diligence, frugality, dependability, punctuality, persistence and prudence and it talks about the importance of education and learning a marketable skill.  But it also preaches that the family is the prime vehicle of social security throughout life in this turbulent world.  It instructs the individual to get married and then stay married.  The fact that this vision works in the real world is shown by studies that demonstrate that marriage alone, even among minorities, reduces the statistical chance of poverty by 75 percent and is the single most important lifestyle choice that any individual can make to avoid poverty.  The liberty vision continues its sermon by emphasizing the need for private charity.  If a restrained, frugal constitutional government has limited means and authority to make transfer payments to those in need, then the majority with means are told to step in a help the minority whose lives have somehow gone astray.  The liberty vision does not preclude government help for the needy but relegates it to last place in the safety net system behind individual self help and private charity.  The liberty vision is indifferent to the question of inequality.  It simply is looking for the best way to achieve the most economic well being for the greatest number of people and because this is its focus, inequality is not. 

The second and competing vision of economic well being in the 2012 election is based on equality and is focused on the role of the collectivity rather than the role of the individual.   The vision shifts responsibility for ensuring economic well-being from the individual to the collectivity which for all practical purposes means the government.  (See Obama's outline of this vision in his speech at Osawatomie.) The collectivist vision instructs that everyone in the collectivity takes care of everyone else under the supervision of the government and in order to ensure that everyone in the collectivity has enough, the government forcibly redistributes resources from those who have to those who have less.  Safety and security reside in the collectivity, that is to say the government, and not in the family or individual.   The redistribution effort also serves to foster the goal of relative economic equality and it is difficult to discern which is the more important of the two objectives, economic well-being or economic equality, because the two are simply assumed to be perfectly compatible.  

The practical effect of the egalitarian and collectivist vision is that it produces massive numbers of government workers whether they are productive or not, and programs such as food stamps, child care, medical care, housing subsidies, telephone services, 99 week unemployment compensation and when the 99 weeks run out, lifetime unemployment compensation disguised as disability payments.  Because this vision seeks to replace the family with the government as the basic means of economic security, it ignores the vital social role of the family, weakens and even denigrates it by expanding the definition of marriage to include non-heterosexual couples, by making divorce convenient and easy, and by subsidizing out of wedlock births and single parenthood.

The advantage of the egalitarian and collectivist vision of economic well being to any political party that promotes it is that it creates a class of government dependent citizens who will reliably vote for that party in every election.  The disadvantage of the vision is that it creates perverse incentives that discourage work, energy, creativity, striving, ambition, innovation and economic growth.  By destroying work incentives and family cohesion, it destroys human lives and deprives the society of the human capital needed to build and maintain a prosperous economy. In due course the government finds it has more and more dependents to support which means more electoral success for the government party.  But over time the number of producers declines and the number of dependents increases and the government runs short of money.   The federal government can paper over this problem for a surprisingly long period of time by borrowing and printing money but eventually this will dissolve into Financial Crisis II, that is to say, the bond market will rebel or a financially destructive inflation will ensue. 

In the aftermath of a heartbreaking, hard fought 2012 contest, Republicans are reeling from a loss in an election they lost but   should have won and their prospects for at least the presidential (high turnout) elections ahead look decidedly grim. Shell shocked and discouraged Republicans can address this situation in two ways.  First, they can give into to the new political reality, declare themselves a more efficient version of a compassionate redistributionist party and compete with the Democrats for the same block of dependent voters.  This Democrat-lite approach would be very  attractive to some career politicians whose primary vocational goal in life is to get elected and then reelected again and again. 

But the prospect of Financial Crisis II gives Republicans quite a different alternative. There will come a time our redistributionist state will not be able to pay all of its bills.  The federal government already has to borrow an astounding 40% of its budget just to pay for current promises, and the Obamacare entitlement and baby boomer retirement bulge will soon make the fiscal situation even worse.  The trigger will come when the bond market finally decides that lending money to such a profligate spender at near zero interest rates is a poor risk/reward ratio and begins to demand higher interest rates.  The Congressional Budget Office outlines a 2015 scenario where if the market were to demand interest rates at the historical norm of 4.5 percent, the federal government would have to pay 920 billion in interest payments which would precipitate what the CBO calls a financial crisis and what I call Financial Crisis II. Printing money will not solve this dilemma because that will only precipitate an inflation crisis.  We do not know when this government liquidity crisis will happen but given the state of federal finances, it is no longer decades but years. 

If Republican politicians recognize the inevitability of Financial Crisis II then they will have an alternative to not diving in and swimming with the redistributionist tide.  They can set themselves up as a party apart, a party with a different vision of economic prosperity, the same vision that enabled previous generations of Americans to build the most flexible, vibrant economy on the planet.  Once the crisis hits, the dismayed and enraged voters, like those in the election of 1932, will want to throw out the party in power and replace it with the party out of power.  More importantly, the voters might be willing to follow Republican leaders who can credibly argue that the government redistributionist vision has failed and that the only path to prosperity will be to curb the state and liberate the individual. 

On the other hand it is also possible that the voters of the dependent class will have become so corrupt that they will take to the streets and, like the Greeks, demand money from a government that has no money.  In this scenario they are likely to accept a government that is more authoritarian than any they would have tolerated in the past in the hopes that government can solve the problems caused by government.  And they will have leaders ready and able to lead.   Democrat Party political elites are, after all, proven past masters at "Never letting a crisis go to waste."

In truth we do not know what will happen or when it will happen but quite simply, Republicans need to realize that liberty is worth the gamble.  It is better that Republicans publicly promote traditional American traditions of strong families and the self reliance of individuals even if they have to toil in the political wilderness for a few years.  America does not need two redistributionist parties competing with one another at the margins.  Because professional politicians in their desperation to hold office too often succumb to the expedient, it is up to Republican primary voters to choose candidates who hold fast to the traditional American vision of economic prosperity.  It is the vision that works and it is the vision that America will need if it is to rise from the ashes of Financial Crisis II.

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