Last Tuesday’s gubernatorial races in Virginia and New Jersey resulting in the defeat of Democratic incumbents is an exact reflection of what took place one year after Clinton’s 1992 electoral victory. Very notable last week was the shift to the GOP of independent voters whom had previously voted for Obama last year. With New Jersey, those independents had favored Obama by a margin in the area of the mid single digits whereas for Virginia last year, that same voting bloc leaned towards Obama by barely more than a point but still enough for Obama to be the first Democratic Presidential candidate to take Virginia since 1964.
Tuesday of last week shows a reversal in New Jersey of fivefold and higher insofar as the plus five percentage points of independents who voted for Obama last year actually voted for the GOP candidate by a margin in the mid twenties. Virginia’s example demonstrates an even larger differential. Both states also had very low turnout in voters under the age of 30 as well as minorities, both demographics of which had been massively in favor of Obama in the Presidential Election. Anecdotally, Fairfax County, with the exceptions of Arlington and Alexandria and populated mostly by civil servants who lean Democratic, went to the GOP for the first time in quite a long time.
The 23rd Congressional District for New York, situated near the US-Canadian border, provided an eventful horserace. Last month, the GOP candidate was an incumbent state Senator, Dede Scozzafava, who received the blessings from the RNC and establishmentarian Republicans such as Gingrich. What ensued, however, is a far different story. As a result of the prospective GOP federal officeholder being a RINO or Republican In Name Only as well as a social liberal, a third party candidate soon emerged on a competing ticket under the label of the Conservative Party. The competitor, Hoffman, was backed by people such as Dick Armey and talk radio hosts including Limbaugh and Sean Hannity along with a group by the name of the Club for Growth.
Stephen Moore of the Wall Street Journal founded the Club ten years ago while he was at Cato. The Club is akin to the Business Roundtable and the Chamber of Commerce when it comes to philosophy but it takes a very special interest in the primary elections for Republican candidates. Its objective is to ensure that GOP candidates in the primaries are not mealy-mouthed and wishy-washy consolation prizes or RINOs. The Club wants all such candidates to be genuine supply-siders and their attacks on RINOs include Rockefeller Republicans from the Northeast and Midwest such as Olympia Snowe and George Voinovich, the latter of whom also represents a retiring Republican in next year’s mid-term election.
Limbaugh speaks of a desired self-destructive bestiality involving conjugal relations of sorts between RINOs and Blue Dawg Democrats. The very graphical imagery used by Limbaugh is unpleasant to put it mildly.
Although she was given initial endorsements from DC-based GOP institutional names such as Gingrich and the Republican National Committee, Scozzafava came off as a liberal or “progressive” on virtually every issue despite her being an elected GOP state Senator in New York. The uproar became so loud that she removed herself from the race and Hoffman then took the quickly re-evaluated support from the RNC. However, because she was still on the ballot as of Tuesday, she ended up syphoning enough votes from Hoffman that the election was won by a Democrat for the first time in 150 years. Validating the thesis that American third party candidacies are not electable but they do destroy the incumbents, the independent gubernatorial candidate in New Jersey drew several percentage points and slightly more than the net difference between the incumbent Democratic Governor versus the GOP challenger, thereby helping to elect into office a new GOP governor. With New Jersey property taxes that have been rocketing higher and higher, the GOP candidate took the election by a factor of four percent.
The RINO phenomenon deserves further exploration and its development ultimately stems from the Bush Administration straying from the traditions of the Austrian School and supply-side economics. Although the tax cuts of 2001 and 2003 were fundamental reductions in most marginal rates, the wars were surreptitiously paid for with Emergency Spending Authorizations that were off-budget and off-balance sheet. Even with such an attempted masquerade, there was no disguising of a deficit that became a moonshot not too different from the deficits that affected George H.W. Bush in 1992 also during a recession. Last year, Bush acted to extend umemployment benefits by almost twice the statutory maximum of six months, a move of which necessitates more deficit spending at the state level and one of which is mandated at the federal level of oversight; Bush was paying people not to work and to stay in that capacity. In the latter years of the second Administration for Dubya, an unlikely rebirth of Keynes manifested itself with the one-off giveaway tax rebate stimulus checks to the tune of a number that exceeded $145 billion and was neither deficit-neutral nor revenue-enhancing.
Such a practice of rebate-style checks rather than reductions in marginal rates is antithetical to the doctrine of supply-side and is indeed reminiscent as well as typical of an approach that Carter deployed without any ROI in 1978. All of these actions explain why Cato, the Club for Growth, and other constituents within what used to be the base for the GOP all departed over the past half decade plus and now all find themselves once more as nomads inside the American two-party system. With this return of the Perotistas and the affiliated anger against the deficits and the debt, leaks have arised today that the State of the Union speech in just over two months time will declare a “war on deficits.” How much of that declaration and the follow-through (or lack thereof ) proves to be substantive rather than rhetorical will be the subject of a new debate for 2010.
A truly Keynesian aspect of Dubya was his creation of Medicare Part D, a program designed to give prescription drug coverage to senior citizens. Medicare, in its original form from 1965, was invented by LBJ as part of his Great Society agenda. The unfunded mandates for LBJ’s Medicare Parts A and B are $40 trillion. Dubya’s Medicare Part D represents an additional unfunded mandate of $7 trillion. Republicans hence doubled the national debt in the first six years of this decade.
Inadvertently working at times in concert with but also against the Club for Growth is the more recently founded Tea Party Express. Their activists represent a patchwork of citizens all over the map. Their presence was very apparent during a town hall gathering for Senator Lindsay Graham of South Carolina earlier in the Fall. Stacked throughout the bleachers of a high school auditorium, many activists yelled at Graham that he was a war criminal and further that he was no conservative but that the only conservative and the true conservative was Ron Paul.
Congressman Paul describes the present political landscape as one of oxymoronic conservative Keynesians versus liberal Keynesians with a dearth of Austrian alternatives. Such a statement is an eery reminder of Nixon’s comment in 1971, “We’re all Keynesians now ” and thus stands in marked contrast to GOP Congressman Paul Ryan’s statement, “We are not Keynesians.” There is yet another coincidence from the same period. Congressman Ryan, it is rather moreso that we are all Japanese now and the Emperor still has no clothes. Where’s the growth outside of ZIRP?
By the mid-1970s, Jack Kemp stood alone by himself as the sole person to offer supply-side economics as an alternative. Almost exactly at the same time, the core and hard line constituencies within the base of the GOP rallied behind an effort to nominate Reagan as the challenger to Gerald Ford during the 1976 primaries. These dynamics have yet to fully play out at present but the Tea Party Express coupled with movements of independents towards the right and then reinforced with the Club for Growth‘s actions are increasing the number of third party candidates. Rather than immediately creating the potential for a newly resurgent GOP, there is some fratricidal bloodletting at work that has the short-term effect of electing the opposition but ultimately also provides the Darwinian flush of ex-communicating the Keynesians.
Because of the outcome in New York’s 23rd District having occurred multiple times over the years, retired GOP Congressman Tom Davis has referred to the Club as the “Club for Democratic Growth”. His opinion stems from the assertion that the influence of the Club serves to split the Republican vote and elect, by default, a Democrat. The matter becomes further complicated by the a place where the Club faces it next test.
The incumbent Republican governor in Florida, Charlie Crist, faces a primary battle in next year’s race for the open Senate seat. His challenger is Marco Rubio, the young and former House speaker from within the Florida House of Representatives. A Miami-born Cuban-American, Rubio gained huge traction in supply-side circles when he pounded the table with legislative proposals for the abolition of the personal property tax on primary residences in exchange for a flat consumption tax in the state of Florida. Rubio now officially has the backing of not only the Club for Growth but also CPAC, the Conservative Political Action Conference. Problematic to all these guys however and all American supply-siders for that matter is how hopeless they all are when it comes to a VAT or a consumption-based gas tax of any kind which further exacerbates their utter lack of credibility related to all forms of accretive revenue-gathering.
The Internal Revenue Code of the US gets so pillaged through rebates, credits, depreciation allowances, and deductions that in spite of higher American marginal rates for either personal income or corporate taxes compared to Australia and a number of other competing nations, the US collects a lower percentage of GDP in tax revenues! The Administration, with the assistance of Volcker, is assaulting the myriad of deductions within the IRC along with the private sector’s ability to complete debt offerings in capital markets and then expense the capital raise as a means of paying an effectively lower corporate income tax rate.
But the Florida race becomes still ever more divided due to the fact just this week that the Tea Party has now registered in Florida as a third party. Consequently, the conservative or Republican vote is now split three ways with the GOP, the Club for Growth, and the newly formed Tea Party. To wit, Goldwater’s landslide loss in 1964 allowed for the base to reconstitute itself by the time of the next Presidential election. The only difference with 1976 is that Ford did not get his arse kicked nearly as hard as Goldwater. Gallup polling data now shows a 10-point shift towards the GOP in going from a deficit of six points against them to four points in their favor over a timeframe from the summer until now. Independents also now indicate a positive bias towards the GOP exceeding 20 points based on Gallup polls which matches the moves that independents exercised towards the victorious Virginia and New Jersey GOP candidates.
These times similarly necessitate reflection on that which is analagous to the last occurrence when reported unemployment soared into the double digits, the 1982 mid-term elections when Reagan lost a couple dozen seats in the House. Probabilites right now point to an expectation of something almost identical for next year’s mid-terms vis-a-vis the Democrats. Also reinforcing such a forecast is where the present “Misery Index” would be right now as opposed to when Carter had to face it. Thirty years ago, the combination of the unemployment rate plus the inflation rate yielded a number that was in the mid-20s. Take the U-6 unemployment rate in the upper teens and then add to it the decline in median family income over the past decade and today’s Misery Index is actually worse on some levels.
Take that Misery Index; look into the camera and ask, “Are you better off than you were four years ago?”
Reagan’s momentum in 1980 and movement towards him in the polls came immediately after he posed that question. These moves will come into play next year and then again in 2012. Likewise, a revival of over-arching pocketbook issues is thus now supplanting the more tertiary agenda of green energy and climate change although the Chamber of Commerce is conceding that they will support a carbon tax in lieu of cap-and-trade.
Conventional wisdom posits that pragmatism and compromise require the acceptance of what is attainable in the here and now versus the ethereal ideal that proves more elusive. As such, ideologues and partisans are told that the waters have to be muddied for the sake of political expediency. In effect, they argue, to luxuriate in the purity of one’s irrelevance is to accomplish nothing whilst maintaining steadfastly held positions which they believe to be tactically counter-productive.
With Keynes having provided the theoretical underpinnings for the Administration’s approach with Dr. Summers and Dr. Romer, the Administration has lately revealed its fear of a 1937-style double-dip recession within a Depression. These views became particularly self-evident after the publication of Dr. Romer’s op-ed in The Economist where she articulated that very concern in more diplomatic tones. They argue that an Austrian approach of non-intervention on behalf of the public sector would lead to catastrophic crashes equating something along the lines of the 16th Century and martial law as per Hank Paulson’s two page TARP memo from last year. For these reasons, they seek no premature withdrawal of any fiscal or monetary stimuli which runs contrary to the now expected announcement in January of a “war on deficits.”
Alas, however, we have established earlier that it is not possible to be a little bit pregnant; you either are Keynesian or you are Austrian but you cannot be both at the same time lest you become a deviant by-product of Limbaugh’s fantasies. Even the buggery of one John Maynard K would see such a combination as heretical.
Tags: Club for Growth, Dubya, George H. W. Bush, George W. Bush, GOP, Keynes, Keynesian, Perotista, Reagan, RINO, Ron Paul, Volcker
