Keystone | More Liberty - Less Government

By: George Noga – December 7, 2014

Eons ago, I spent considerable time in politics at the local, state and national levels. I learned a great deal and have been an acute observer ever since. I always had believed Truman’s observation that voters could always spot a phoney. That was before Barack Obama. America can survive a Barack Obama who, after all, is merely a pathological narcissist; our beloved republic is less likely to survive an electorate that enabled him – not once, but twice. In the end, Truman was vindicated; most Americans now understand Obama is a phoney; it just took them far too long and only after great damage to the republic. Following are some of the other enduring lessons I learned from my time in politics.

Enduring Principles of American Politics

So, what is the true state of American politics today? Nearly everything promulgated by the media is both pap and spurious to boot. Four principles I learned many decades ago and which remain valid today are:

There are no permanent majorities: There never has been, is not now, and never will be a permanent majority in American politics. You can put that in the bank! The media like to claim and progressives like to dream that, given present demographics of race, gender and class, Democrats have built a permanent electoral majority. These are the same charlatans who in 1992 said the GOP had a permanent majority. Anyone believing in permanent majorities is ignorant of history and also of Madison’s genius in writing the Constitution. In Madison’s words:“Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have common motive . . . or if such motive exists, it will be more difficult to act in unison.” Issues, positions, alliances and demographics continually shift and minority parties skillfully adapt. In a nation as vast and diverse as 2014 America, any electoral coalition is inherently short term and unstable.
The longer a party is in power, the more likely it is to lose: This principle is straightforward and has held up throughout the 238 years of our republic. It remains true despite any and all issues and demographics. The longer a party is in power, the odds continue to get ever higher and higher that it will lose. Power corrupts.
Economics trumps everything: Recall Bill Clinton’s mantra: “It’s the economy, stupid“. Far more so than any other issue, economics is paramount. Demagoguing the rich is absolutely of no benefit if the average voter perceives the economy as tepid. The US has experienced stagnant living standards for the vast majority of Americans and there is a downward trend in take home pay. Business is not investing and worker productivity suffers as a result. Wages increase when each worker uses more capital, as his marginal productivity rises. Democrats are okay with low growth as they continue to strangle business, oppose Keystone, thwart energy development, keep corporate taxes high and support unions. When Democrats try to soak the rich, they drown the middle class.

“When Democrats soak the rich, they drown the middle class.”
The roll of money is significant but overstated: Money is important and can be effective; however, its marginal utility decreases as spending increases; there is a point at which the marginal utility of money turns negative.

Political Campaigns Versus Governing

A few things have changed since my heyday in politics many decades ago. By far the biggest is that political campaigns have become permanent and there no longer is any meaningful distinction between campaigning and governing. This is an uber serious problem and no solution is in sight; it affects both political parties. This overemphasizes short term politics and severely shortchanges the true interests of the country. There are clear and significant differences between public opinion in polling and focus groups and the long term best interests of the people.

“We must recreate a way to govern in the long term best interests of the nation.”

Something needs to change or the perpetual campaign mentality will result in more hostility between factions and confusing political formulations for objective reality. Our current system rewards those adept at campaigning at the Iowa state fair while devaluing their ability to govern. Madison anticipated something like this may happen; he wrote: “We will wait in vain for public-spiritedness to become a pervasive motive in our politics. Instead, we must create – and if necessary recreate – institutions that channel human nature as it is toward promoting the permanent interests of the community.”Therefore, it is up to us to recreate a way for America to govern in the long term best interests of the nation or we will live out our lives in a perpetual political campaign where everything is determined by polls and focus groups.

Political Calculus in America Today

While bearing in mind the principle cited supra that there are no permanent majorities in American politics, let’s take a look at the political calculus following the November 2014 election. Following is my take on where things stand.

Most pundits relegate Republicans to permanent minority status because of their low share of the black, latino, Asian. millennial and women’s vote. Democrats should be far more worried about their very low support from white males – currently 35% and in free fall. It will be far easier for Republicans to increase their share of the Asian, latino, women. millennial and even black vote than for Democrats to reverse the trend among white males.
The media is right on about a political party being dragged down by extremists – however, it is the Democrats who have by far the greater problem is this regard. Their contretemps with radical socialists and environmentalists eclipses any issues the Republicans have with the tea party. The situation already is so bad that Democrats cannot truthfully campaign (or even govern) based on what they really want for America.

“There is a political party dragged down by extremists, the Democrats .”
The Democrats cannot win with their present economic agenda; yet they are wedded to perpetual low economic growth by virtue of their inflexible, socialist ideology. Attacking the rich and ramping up class warfare have lost whatever traction they once may have possessed. Their race, class and gender warfare is no longer effective.
Demography has been ballyhooed as the enemy of Republicans. Democrats have crowed that the future belonged to them as their lock on ascendant voter groups would overwhelm aging Republicans. This was dispelled by the 2014 election as Republicans made substantial gains among women, hispanics, Asians and millennials. The Democrats (or any other party) ignore James Madison and American political tradition at its own peril!

Readers should take away four main principles: (1) there are no permanent majorities in America; (2) the longer a party remains in power, the more likely it is to lose; (3) economics always trumps every other issue; and (4) do not read too much into any one (or two) election result. Finally, we must heed Madison’s words and recreate a way to govern America in the long term best interests of all Americans – and not strictly with polls and focus groups.

By: George Noga – November 1, 2014

Throughout its 238 years, the US economy has grown by over 3.0% annually, although data for the early years are problematic. For the 60 years from 1940 to 2000, the US economy grew at a rate of 3.6%. For the following 14 years from 2001 to the present, GDP grew by 1.8%, exactly half that rate. If growth remains tepid, Americans will not recover the ground they lost and their children and grandchildren will, for the first time, be worse off than the previous generation.

America has transmogrified into Europe which is in permanent recession due to its failed economic policies. Even stalwart Germany is beginning to stagnate. France is destroying its economy in a fit of socialistic angst. Italy has a lower GDP per capita than it had 15 years ago. Meanwhile in Brussels, Jean-Claude Junker continues to strangle EU countries with bureaucrats and regulations. In Europe a 2% growth rate is seen as optimistic, 1.5% as acceptable and no growth as possible. The average European in one generation fell 25% behind the average American due solely to differences in GDP growth. As I wrote last month, just in the past 5 years, the average American has been impoverished by 17% due to the low growth rates coming out of the recession compared to the historic growth rates in similar times. In short, we already have become like Europe although Europe continues to plumb ever new depths. We are well along in suffering a lost decade on the path to a lost generation; our progeny, like Europeans today, will lead lives of quiet desperation.

“Failure to grow America’s economy is a choice; decline is not inevitable.”

Failure to grow our economy is a choice; decline is not inevitable. It is a choice made by our political leaders solely because they prefer to demagogue inequality, class warfare and corporate profit for perceived electoral gain. It is a choice made by the media because they are lazy, economically illiterate and prefer to flog dead camels. It also has been a choice made by ordinary Americans in the voting booth for all of the aforementioned reasons advanced by politicians and the media. There are strong signals however that ordinary Americans now are beginning to want economic growth.

Economic Growth as the Panacea

As trumpeted by the headline of this blog post, economic growth is a panacea; indeed, it is the only solution for every problem (real and perceived) that we face today and for the coming generation. It is apropos that Panacea is the Greek Goddess of healing because strong economic growth will heal everything; to wit:

The crisis of spending, debt and deficits: A sustained period of strong economic growth (combined with some spending restraint) will enable the US to restore fiscal balance and to stabilize its debt thereby gradually lowering the Debt/GDP ratio to its long-term historical level of around 30%.
Climate change and environment: If in the distant future climate change causes some issues, the best antidote is a vibrant economy that will easily enable us to spend whatever is needed to mitigate any such problems. Only countries with strong economies can afford to spend copiously on the environment.
National security: The single greatest asset (weapon) we possess for our national security is a growing, resilient economy. This enables us to spend whatever is necessary to deter any possible adversaries and to defend ourselves should that be necessary. Weakness invites aggression and fosters terrorism.
Jobs, poverty and inequality: It is economic growth, not government, that creates jobs. It is sustained growth that fulfills the American dream and eliminates poverty; moreover, growth is the great equalizer.
Unfunded mandates: The USA is facing $350 trillion (over one-third of a quadrillion) in unfunded commitments in the next 50 years for Social Security, Medicare, government pensions, Obamacare and other programs. Absent a high rate of growth, these promises not only cannot be kept but will require drastic reductions in programs.

Recipe for Economic Growth

Okay, so economic growth is the panacea; what must we do to achieve it? The answer is straightforward and attainable. If we do the following we will achieve vigorous, long-lasting economic growth.

Political consensus: Probably the single most difficult hurdle for achieving growth is reaching a political consensus. Politicians and the media must agree to pursue policies that maximize growth and agree to stick with such policies for the long term. They can continue to argue over how to divide the wealth that results; that is what politics is about. Absent some consensus however, achieving sustained growth becomes problematic.
Tax and fiscal policy: Taxes (personal and corporate) must be reduced, simplified and stable. People and businesses must be able to plan ahead and certainty about taxation is indispensable to investment and job creation. In the same vein, spending needs to be restrained.
Eliminate uncertainty: Business hates uncertainty; it stifles planning and results in gridlock. There needs to be a broad and sustained political understanding about taxes, regulations and new initiatives.
Sound money: The Fed should focus only on maintaining sound money and fighting inflation. A strong, stable and sound dollar are indispensable for a vibrant economy.
Regulation: The economy is being strangled by regulation and litigation. We need to have a moratorium on new regulations while we gradually reform and roll back existing ones. Our tort system needs to be reformed.
Energy: We should develop every possible energy source including ANWR, offshore and shale and natural gas on federal and state lands. We should export LNG immediately from many terminals and, of course, construct the Keystone XL Pipeline. Such a policy will create jobs, make us energy independent, stimulate the economy and, importantly, prove to be a potent weapon in keeping Putin and Russia in check.
School choice: I include this because educated, trained workers are a potent economic resource. Further, school choice will bring about more equality and reduce poverty. It also is a panacea.

The choice is ours. We can continue on our present slow growth trajectory which will condemn future generations to a downward spiraling economy and reduced living standards; they will experience untold miseries as the crisis of spending, debt and deficits culminates in a meltdown. They will inhabit a Clockwork Orange nation drowning in taxes, regulation and uncertainty. They will have part time jobs for low wages. At best they will collect 65% of the present Social Security benefits deferred until they are age 70; Medicare and Obamacare (also age 70) will be busted; health care rationed and long waits common for poor treatment. They will inherit a volatile, dangerous world where nuclear weapons proliferate, a revanchist, aggressive Putin-led Russia and all without the resources for adequate national defense.

Or, we can make a different choice; we can choose to reject decline and to embrace high-growth policies. This would lead to a virtuous circle of better education, abundant and cheap energy, and to a far safer and more secure nation and world. It would result in fixing the debt crisis and funding all the promises we have made for the future. Most of all, it would help ordinary Americans. As year after year of high growth enriches America, the politicians can fight over how to best divide up this cornucopia – including addressing any inequality issues.

Firstoff however, we must make the right choice. This gets us right back to the heart of Alexander Hamilton’s question: “Whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend on accident and force.” Is America today still capable of putting politics aside when self preservation is at stake? Or, do we heed the Siren song of politicians advocating failed ideologies, searching for Utopias and demagoguing political correctness, class warfare and inequality?