Rebuilding the Grand Old Party

I am a firm believer in competition.  And not just for consumer goods and football teams.  The marketplace of ideas, when it is viewed, used and pursued objectively, is in many ways the ultimate resource of society.  And right now the United States no longer has a competitive market for ideas at the national level.

The Grand Old Party was once the party of Lincoln; egalitarian, progressive, enlightened and inclusive.  Today it is the party of Rove; divisive, exclusive, deluded, and blind.  The Democratic Party, while not as disciplined or focused as the Republican Party, will increase its majority of the electorate until even the heavily gerrymandered boundaries of the House of Representatives fall under the weight of an inevitable future.  At least, if things do not change.

The status quo does no good for those of us who want to see the best of the marketplace of ideas put to its best and highest use in the field of policy.  The status quo is the GOP yearning for the future to be a mirror of the past, and it allows the Democratic Party to not need to look deeply into the marketplace of ideas since its only competitor is simply daydreaming in an increasingly geriatric fashion.  For the benefit of the country as a whole the GOP must be re-birthed.  And to do so, it should look back to its revolutionary, enlightened origins.

The origins of the GOP was a look at the status quo of its time, and in disgust it announced that it was time for the Enlightenment to reach the shores of America.  Its founders looked objectively at the state of the world and the country, and decided that it was for the benefit of the nation and humanity not to sweep under the rug the injustices of the present, to embrace the realities of the Industrial Age, and move ahead.  Even, and especially, in the South.  If you look at the borders of the Red states today it is the bounds of the old realm of intolerance that the party originally came to break down.  It has become what it despised.  So, let us look at the present with an Enlightened eye at social injustices, at the realities of the Information Age, and move ahead.

What are the injustices of today in the context of the Information Age?  To define an injustice we have to have an ideal for a just society.  Let us take a somewhat Libertarian, but ultimately an American ideal as the model: if we pride our selves on being a country in which one can "pull ones self up by the bootstraps", what does it take in the Information Age to do that?  It takes education. It requires the means to participate in society, and fully.  And it requires that the climb to personal prosperity be a ladder more than a slippery slope. The Republican Party of today has defined itself as being in opposition to improvement in all of these things.

The GOP has forgotten that the best times for the country, and indeed for the GOP itself, was the period in the 20th Century when taxes were high, the government regulated broad swathes of the economy from industry to banking, and the middle class rose with the wages extracted by Labor Unions.

But remember the context of the times- America stood alone, the sole power on earth not scorched by World War II, and had actually benefited from it both in real and even more so in relative terms.  From that standpoint we can say that America has not prospered necessarily because of the greatness of her institutions, but in spite of them.  The rest of the industrial world had been bombed flat and was mired in the debt of war and reconstruction.  Today America is one nation among many powers that are modern.  But we are at a position of weakness with dated infrastructure; we have rested on our laurels far too long.

Those who are wealthy today grew that wealth in a time of great prosperity for the nation as a whole.  The nation invested mightily in infrastructure, in education, in the fight against poverty, in the fight against racial inequality and racism as a political institution.   In the area of the market place of ideas, America was pouring on the progress.

So what has changed in the last 20 to 30 years?  First, the context in which America defines itself has changed.  We are not a beacon of freedom relative to a despotic Soviet block.  The collapse of that competition of ideas has led to perhaps some incorrect conclusions, at least in magnitude if not direction.  The contest of ideas with Communism was fought on the grounds of the quality of life for the working class.  Capitalism won, relative to Communism, but only because Capitalism gave up its winner-take-all origins of the Industrial Revolution and its Dickensian workhouses and age of Gild and Robber Barons.  Instead workers shared in the benefits of Industrial Capitalism, and the benefits were immense, certainly relative to the shared benefits available to those under Industrial Communism.  But as soon as Communism collapsed, the part about the need to share those benefits was forgotten by those who wanted, and were able to command, a larger slice of them.

Organized Labor was deemed as un-American rather than as a competitive resource that provided a skilled and educated workforce.  Glass-Stegall came to be viewed as an impediment to competition rather than as a safeguard of the saved earnings of the country.  Education and healthcare were never reformed nationally as in other industrial democracies because we could, for so long (perhaps too long), afford the inefficiencies of the systems we had.  But our head start is now long gone.  We had succeeded in many areas in spite of ourselves, not because of ourselves, and because the rest of the world had not yet had the chance to catch up.

The GOP has a chance now to reset itself.  The problem is that its coalition is divided on the solutions to the problem.  And the difference is the "truth" of the lessons of history.  How does one reconcile the viewpoints of: "America must deregulate the banks and energy industry to compete", "America must put God in the class room to restore lost glory", and most notably, "We must undo what the other side has accomplished even though they put our ideas into place."

It is a crisis of identity that can only be resolved by one fact.  These views individually and collectively lost, and they will continue to do so, probably more vociferously and completely, in future.

So let us assume we can rebuild the GOP from scratch, in a position relative to what it was in Lincoln's day: ahead of its time.  Let us look at the injustices of the Information Age:  education,  the means to fully participate in society, and that the climb to personal prosperity be a ladder more than a slippery slope.

All of these things require not just support for, but expansion of and re-envisioning of, the social safety net.  But there is a single, simple perspective that can be taken.  To be wealthy is basically to have a fallback- to be insured against an unpleasant tomorrow.  Maybe tomorrow we don't feast in plenty, but we won't starve.  If we are to truly have a wealthy society then we must have a society in which the individuals are insured against that unpleasant tomorrow.  Free, quality public education and affordable but excellent higher education is the first row of insurance.  To participate in society today means you must be tech savvy and have access to the internet; in Finland communications bandwidth is recognized as a right, and the fact is that without access to it you simply can not function or participate in society fully.  Similar things may be said of transportation, housing, food and clothing.  None of these things are free, but neither are they shatteringly expensive to provide, either.  Finally, the slippery slope of American society must be corrected.  There is no justice in a medical system that is the leading cause of bankruptcy.  There is no justice in a social security of welfare system that will not help to stop your fall from the middle class, or even the lower class, into total destitution before it will provide so much as a food stamp.  The first party to support a strong fix for these growing gaps, and the Democrats have already made a strong showing, will profit in the polls.

Modern industrial and agricultural technologies allow a small fraction of the population to produce all the needs of the entire population.  This simple fact demands that, without a re-envisioning of the social safety net, the world will become increasingly divided between the haves and have-nots.  As any good capitalist will remind you, production requires demand.  Ultimately it is to the benefit of the producers to have those who can afford the fruits of production.  This does not necessarily mean whole sale hand outs of cash to unproductive people.  But, it may well mean a change in the notion of what productive means.  Let us consider the "productive" leveraged buyout specialist or hedge fund operator.  Do their efforts add any value to society?  Are there more or better roads, healthcare, technologies, more competitive businesses in this country?  Largely the answer is no.  This class of wealth "production" is merely a free market form of wealth distribution in that it produced nothing, merely takes.  If a welfare mother is by that definition a "thief" then the masters of the financial world are simply larger scale and more clever and politically connected thieves.  This should be recognized and the first political party to do so and act will have a very large and dedicated base of voters.

Ideologically, if the GOP is to be a national political power, it has to confront the realities of todays world.  Imaginary or contrived problems like voter fraud are not going to sweep a party to victory.  Nor will it help to look at the past through rose colored lenses; it is gone and will not return.  Some say that history repeats itself, but that is incorrect.  People, or societies, or generations repeat history because they did not learn from history, or believe history to be repeating, rather than evolving and living in an eternally changing now.

The marketplace of ideas is not empty- it is added to continuously.  But just because an idea was added 50 or 100 or 200 years ago does not make it relevant or viable today regardless of the idealogical purity one may attribute to it.  The GOP was the first national party in American history from the time of the Revolution and the Constitution to reach deeper into the marketplace of ideas that the Framers themselves.  The name of the party is merely a label to a collection of ideas.  It is time of the ideas to change.

Push on a string or pull on a rope.

The Fed is not going to save us from this economic contraction. It can't. It has done everything conceivable to prevent things from getting worse by buying government debt and at one point backing essentially the entire commercial paper market (might still be for all we know). If the economy was going to spring to life from monetary action it would be sprinting and tap dancing.

UNLESS...

the economy is in a different mode from what it has been in since the end of World War II. Which it is. An economy operates in two different modes. Normally, when things are going well, the intent is to maximize profits (if you are a company) by expanding production or utility (if you are a consumer) by buying and taking on consumer debt in the form of credit and loans.

But there is another mode- instead of maximizing profit/utility the current mode (again, not seen in the US since the Great Depression) is to minimize debt. This insight, made by Richard Koo from his analysis of the Japanese economy and the Great Depression, aligns perfectly with the behavior we are seeing now. The Fed, now as in the 30's is in a position where it can make the situation worse by forcing further contraction, but cannot drive expansion. like a string, you can pull on it, but can not push against it.

The reason is simple- if you are leveraged to the hilt as a consumer, and someone offers you another loan the only reason you would take it (sensibly) is if you could refinance an existing loan at a lower interest rate. And if you are unemployed then your options are even more limited. Businesses are in the same boat, particularly in the banking sector. Bank of America is hesitant to make loans because it needs all the cash it can hold on to, after all, the bad loans it made (or Countrywide made) need to be written down, and the last thing it needs on its books is more risk. So companies and households hoard cash.

What sector is left to push the economy forward? You guessed it- government. And here's the most infuriating part of that- all through the '00s the government should have been battening down the hatches against debt and instead it fanned the flames with regressive tax cuts, two wars, and deregulating the finance industry to allow it to expand leverage (debt) by using peoples savings as collateral.

Its no wonder that trust in government is so low, but here is another grain of salt to rub into the mood. In this day and age if you don't have the backing and protection of a strong central government then you are going to lose on the global stage. If you think small government is better and no government is best, then take a look at Somalia. If you think bigger stronger government is worse then look at China.

I know, I know- every Tea Party whiner will cry about "government spending" and "wasteful spending". You think the private sector isn't wasteful? I think HP just blew billions of dollars on its WebOS investment. I've worked at firms where rivers of money flow off cliffs, so it is foolish to pretend that governments are always wasteful and the private sector isn't.

Finally, there is a difference, and a crucial difference, between spending and INVESTING. Instead of an economy where people buy trinkets and cheap imported shoes and too much sugary snacks at the level of the retail environment (buying imported crap) there is an alternative. Is is perfectly viable to have an economy driven by spending on infrastructure investment that promotes a virtuous cycle of domestic spending on steel and concrete to repair and replace our crumbling highways and bridges, make trains and rail lines, high density housing and water and sewage systems, fiber optic cable for improved telecom, and the jobs and worker skills needed for all of that.

Its our collective choice, America- a third world lifestyle buying someone else's cheesy exports or get a decent tax structure in place, control the waste in our healthcare system (socialize it) and rebuild the country our grandparents built that made this country great. And if you DO need a new BluRay player you might pay a little more, but at least you are more likely to have a job to pay for it in the first place.