Raising the Conservative Game

Ring out the old, ring in the new. 2010 was a great year for conservatives, as this center-right nation lurched away from a left-liberal central government. But what about the future? What really is our vision; what do we want to accomplish for America and what do we want America to become?

Here are some basic ideas for raising our game.

• No more Moral Equivalent of War. Way back, a century ago, philosopher William James proposed to replace war (which, in 1906, seemed on its way out) with the Moral Equivalent of War to inspire the youth of the world with high purpose. It sounds like a wonderful idea until you start to think about it. If you are going to rally the youth of America to some great political project, and you screw them up to a moral-equivalent-of-war fever, then you are bound to set up a moral equation: good vs. evil, us vs. them, inclusion vs. exclusion. At least, in the old days of the nation state, the us vs. them was Americans vs. the rest of the world. But when you do the moral equivalent of war instead of real war, you end up dividing America; you end up with the moral equivalent of civil war. Thus, people that oppose the war on poverty are mean-spirited; the people that oppose civil-right legislation are racists; the people that oppose saving the planet are deniers. Conservatives believe in something higher than the moral equivalent of civil war.
• Yes, there is a free lunch. When Milton Friedman and other economists railed that "there is no such thing as a free lunch," they were opposing the typical welfare state politics that takes money from Peter to give Paul a free lunch. Paul's lunch ain't free, chaps. Peter paid for it. But, as Deirdre McCloskey writes, again and again, there really is a free lunch, Virginia. It is the free lunch we have gotten from a bourgoisie, innovative and free. Today, food costs less than 10 percent of income, against 80 percent in 1800. We have tons of clothing, rather than one suit of clothes for work, and one for Sunday. Life expectancy at birth is 80 instead of 30. And it takes 10 hours to travel from London to Seattle instead of 10,000 hours. If that isn't a free lunch, I don't know what is.
• The difference between state and society. Scratch a liberal and when they talk about the needs of society they are talking about government programs. Surely, we can understand that the only thing the government can do is declare war and break things, or take money from Peter to pay Paul. But the whole point of society, of social cooperation, is what goes on between consenting adults outside the cockpit of force. We conservatives long for a society in which force, government force, is constantly being pruned back, instead of luxuriantly growing, year on year.
• The war on the poor. A century ago, you could say that something had to be done about the poor suffering in squalid slums. In fact, of course, they were doing much better than a century before, at least in the developing West. So now we have showered material goods on the poor so that the poor are fat and the rich are thin. But in doing so, we have demolished the culture of the poor. Their families are reduced to mother and children; their work culture has been ruined by government welfare, and their authentic institutions, the benefit club, the labor union, the ethnic association, have been bombed out of all recognition. Liberals did this, and they need to understand that their cruel, corrupt, unjust, wasteful, and deluded government programs are the bombers that devastated the poor.
• The Greater Separation of Powers. Our American founders gave us a government of three branches. They created this divided government as a defense in depth against political power. But now we need to go further, to construct a new bastion against power. We need to extend the idea of the separation of church and state into a separation of the political sector and the moral/cultural sector. Liberals have a meme that describes what we must avoid: "legislating morality." Yet they do it all the time, writing criminal laws to criminalize behavior they regard as immoral or unethical. Let conservatives counter with a new meme: "Don't criminalize immorality." We've got to find ways for naming and shaming bad behavior rather than criminalizing it. We also need to separation economy and state. The last 100 years is a story of the exploitation of the economic sector by the political sector, and it stinks. Money is worth 1-2 percent of its value a century ago, and politicians plunder the economic sector at will. This must end. The economic sector needs clear signposts and rules; it cannot thrive in a thicket of activist-inspired regulation.

Conservatives have one great near-term goal, the repeal of ObamaCare. That's great, but then what? In Governor Chris Christie (R-NJ) we have a champion of spending restraint, as he cuts waste and shames the bureaucrats that repose on their sinecures. But you can't change America just by pruning and cutting. You've got to have a vision of the future. And we know, after the century of Big Government, that the great social needs of humans just don't get met by the liberal culture of compulsion.

Force: Liberals Playing With Fire

First we thought it was just ordinary government incompetence. Now we understand that the slow snow removal in New York City after the Christmas snowstorm was actually a work slowdown organized by the supervisors in the city Sanitation Department. According to reporters for the New York Post:

Selfish Sanitation Department bosses from the snow-slammed outer boroughs ordered their drivers to snarl the blizzard cleanup to protest budget cuts -- a disastrous move that turned streets into a minefield for emergency-services vehicles, The Post has learned.

The supervisors are upset, apparently, over "a raft of demotions, attrition and budget cuts."

This shows, in a graphic way, the problem with allowing the government to do anything beyond fighting wars. Everything in government comes down to a power play. You would think that, in an emergency, the natural human instinct to come together would rule over petty interests and bureaucratic battles. But it turns out that in the modern centralized administrative state even the most basic functions of government, the recovery from a natural disaster, ends up sacrificed to the god of political power.

Conservatives and political scientists take note. This is the Achilles heel of our liberal friends. They just don't have a clue that government is force, and politics is power. If you let the government perform some service then it will turn it into a fight.

The great question for mankind, the social animal, is to find out how to limit the brutal cost of force and compulsion. In The Faith Instinct Nicholas Wade tells how, in hunter-gatherer societies, religion played a vital role in reducing the need for force. One strategy is the concept of divine punishment. "In small societies, the person who takes on the role of enforcer exposes himself to general resentment, not to mention retaliation from the miscreant or his relatives." It's usually best to get everyones' agreement and have the miscreant killed by one of his relatives. Alternatively, you can persuade everyone that God will punish miscreants, that God knows everything we do, and will punish misdeeds either in this life or the life to come.

A system of supernatural punishment carries enormous advantages for a primitive society. No one has to assume the thankless taks of meting out punishment and risk being killed by the offender or his relatives; the gods perform this chore willingly and vigilantly.

No legislation is needed. No police force is required. The question that must come to every concerned citizen is: Why do we have the expensive apparatus of legislation, police, courts, jails, and parole officers? And why have we dispensed, in a significant degree, with the notion of divine punishment? In my view, it is because we can afford it. We can afford the enormous expense of the force machine, whereas the primitive society cannot.

But, you may say, can we afford it? Can we save the planet when we are wasting precious resources on policemen, hangmen, and jailers? It's a good question.

Historically, of course, the development of penal institutions have paralleled the attack on divine punishment conducted by our liberal friends. Liberals wanted to do a bunch of things that the gods had traditionally disliked. They wanted to free themselves from social control, particularly on the sex front. Liberal men wanted multiple sexual partners. Liberal women wanted liberation from exploitation by the patriarchs. But the problem is that you can't limit the damage. If the gods don't care about sexual license then what do they care about? And when the gods aren't in control, you have to erect the vast apparatus of government compulsion that is so much a feature of our modern age, and which creates so much resentment among the non-liberal citizenry.

My advice to our liberal friends is to get back to some kind of supernatural punishment system. Maybe Gaia cares so much about the planet that she will punish people for environmental crimes without needing an expensive EPA. And if she cares about saving the planet, maybe she will expand her powers to other important areas of social control.

Either way, it is clear that the more government we have, the more we will place ourselves at the mercy of bloody-minded sanitation workers and their ilk, for whom nothing exists except their selfish needs and the satisfactions of wielding political power.

McCloskey Wrapup: Big Fact vs. Big Mistake

The great theme that runs through Deirdre McCloskey's Bourgeois Cycle thus far--in The Bourgeois Virtues and Bourgeois Dignity--is the Great Fact. In the past two centuries the prosperity of the average human has risen from a life at $1-$3 per day to the present $30-$137 per day in constant dollars. For the average human, the difference is at least an order of magnitude. If you isolate on the fortunate United States and you account for improvement in products and services, e.g., airplane travel, the difference is two orders of magnitude, meaning that the average person swings 100 times the products and services that his ancestor enjoyed two centuries ago. This has never happened before in history. Never.

Back to start: Conservatism's Big Problem.

Now you would think that everyone would be sitting back gob-smacked, as the Limeys say, but in fact they are not. In fact just about everyone is pretty peeved about the whole thing, from conservatives that mourn the corruption of manners to Marxians--McCloskey prefers "marxoid"--insisting that the whole thing has been achieved on the backs of the workers. But for me the most telling objection to the Great Fact is the responsible prediction that McCloskey extracts in Bourgeois Dignity from John Stuart Mill's Principles of Political Economy. Call it the Big Mistake.

Mill again: "It is only in the backward countries of the world that increased production is still an important object: in those most advanced, what is economically needed is a better distribution, of which one indispensable means is a stricter restraint on population."(p.384)

Here we see the foundation of the 20th century and its centralized administrative state, supervised by a wise and disinterested educated elite. Here we see a forthright manifesto of force--benevolent, sensible, avuncular force, of course, but force nonetheless. Mill was saying that the only way to extend the benefits of the industrial revolution to the poor was by force, and the only way to prevent a population explosion was by force.

And Mill was wrong. Dead wrong. At the moment he was writing a nobody of the name John D. Rockefeller was just starting to reduce the cost of illuminating oil from 80 cents per gallon to 8 cents, and a nobody of the name of Andrew Carnegie was about to reduce the price of steel by two-thirds. Not to mention that in 1871 a chap called Orville Wright was born in Ohio. Not to mention that in 1870-71 about four people in four different countries reinvented economics with the marginal revolution.

On the population front, of course, we now know that middle-class people possessed of fantastic prosperity don't fill the world with an excess population. If anything, they need to be firmly walloped with a wet noodle and told to get a life and get some kids on the ground.

What we know today is that all that political force of the last century was unnecessary. The modern economy, driven by a bourgeoisie dignified and free, would have covered the poor in riches without all the government programs because, indeed, the staggering rising tide of the modern free lunch, the free lunch of cheap energy, cheap steel, cheap travel, cheap food, cheap everything, created a world in which the poor are fat and the rich are thin. And all the while nobody noticed. Or if they did, they complained because it wasn't good enough.

Let's say it again. Governments in the United States, as faithfully recorded and broadcast by usgovernmentspending.com, spends the following in FY 2011.

	Government Pensions	$1.0 trillion
	Government Health Care	$1.2 trillion
	Government Education	$0.9 trillion
	Government Welfare	$0.8 trillion

If the poor get rich along with everyone else, what's the point of four trillion dollars of compulsion every year?

Yes, you say, but what about government education? Surely that is worthwhile. Not really. Not according to Deirdre McCloskey. Once a family gets literacy, she argues, it never loses it.

Then male literacy in England rose to perhaps 30 percent in 1580 and to 60 percent by... the 1750s... My father was the first in his family to graduate from university... All of his three children did likewise... [B]oth of my two did, and doubtless my two grandchildren will, too.

McCloskey's Norwegian ancestors "were reading by the late sixteenth century, and never stopped." And all of this without compulsory government education.

But McCloskey is perhaps too optimistic. Perhaps there is a way to extinguish literacy. It is called the welfare state. Here is the testimony of police Inspector Gadget in Britain:

I once saw a bloke in custody, who was in my year at Ruraltown Comp[rehensive]. The Sergeant asked him if he could read and write before offering him the custody record to sign. He said he couldn’t. I interjected. ‘I was at school with you buddy, you can read and write for God’s sake’ he said ‘I used to be able to but I forgot how’. He hadn’t had to read or write anything for 20 years, so he simply forgot how. An ‘agency’ for everything, all on a plate. A filthy mean little plate, but a plate none the less.

The reason that most people acquired literacy over the past millennium is that it was useful to them, very useful. It kept them out of the mine and the stone pit. It qualified them for good jobs indoors. But when the government will give you money for nothing, what's the point?

The point is: when you find you are doing something wrong, something stupid, stop doing it.
Three hundred years ago slavery was ubiquitous; 150 years later it had become a scandal. Two hundred years ago, absolute government and its centralized administrative bureaucracy was a scandal. Today it is ubiquitous.

But big government doesn't have to stay ubiquitous. We can change it. We can make it a scandal again.

If we believe in the "bourgeois virtues" and if we believe in "bourgeois dignity" that people should have the dignity and the freedom to innovate for the benefit of each other, then there is only one thing to say about the vast centralized administrative state inspired by the Great Mistake of good old buffers like John Stuart Mill and what we might call the Great Lie of the not-so-good folks like the post-1848 clerisy of intellectuals and activists.

The saying has a familiar ring to it: "This Shall Not Stand."

And now, five years later, Bourgeois Equality, here.

The Wrong "Road to 60"

Some Republicans are learning the wrong lesson from the filibuster-proof Senate of 2009-10. Grover Norquist is mapping out "The Road to 60" for the next two election cycles.

Social Security reform failed in 2005, on his view, because Republicans only had 55 seats in the US Senate and Democrats absolutely refused to countenance any reform. So Republicans are going to have to get to 60 so that they can ram reform down the Democrats' throats just like the Democrats rammed ObamaCare down Republican throats.

(My recollection was the Republicans couldn't even get Social Security reform out of the House in 2005.)

But this gets it all wrong. There is no point in reforming entitlements unless Republicans can forge a bipartisan majority with moderate Democrats. It would be a terrible mistake to craft a plan and ram it down Democratic throats. That would create a Democratic rejectionist movement and years of rancorous division.

Anyway, Republicans aren't going to need to get to 60 to pass entitlement reform. Back in 2005 Democrats never imagined that we'd be in a situation where states were going bankrupt, public pension plans were underwater, and the federal debt would be heading for 100 percent of GDP. They know, at least in a semi-conscious way, that their programs are in trouble.

When the Republicans start on Rep. Ryan's Roadmap and start to tentatively reform entitlements they will start be able to find Democratic votes. And if they can't find them in 2013 or 2015 they will find them sooner or later.

Republicans must understand that they are moving into a strategic advantage. If these entitlements go belly up it will be Democratic voters that will suffer most. The sooner the Democrats do a deal the better their voters will do out of it. The longer they wait, demagoguing the "cuts," the worse it will be for the "little people."

Democrats don't yet realize that their breakout effort in 2009-10 was a strategic blunder of monumental proportions. They have created issues that Republican candidates will run on for a generation. ObamaCare is going to kill them, because anything that goes wrong in health care will get blamed on ObamaCare and Democrats. And now that Democrats don't have the legislative power they had before the election they are trying to do everything by administrative ukase: instituting "death panels" at the Department of Health and Human Services and pushing carbon dioxide regulation at the Environmental Protection Agency. They couldn't have thought up a better way to creat Republican voters if they had tried.

The centralized administrative state has had an amazing run during the last century. But now it is running up against the reality that it is profoundly undemocratic and profoundly unjust. Democrats have no idea the trouble they are in. Not yet.

The Six Government Mistakes That Led to the Meltdown

One thing our liberal friends seem to be determined to do is to turn their faces away from the truth of the Great Recession.

No, Virginia and New York Times readers, it wasn't greedy bankers or even stupid borrowers. That is mixing up the symptoms for the cause. The cause of the Great Meltdown was government. In fact there were six, count 'em, six different government mistakes, according to Mark J. Perry and Robert Dell in The American.

1. Bank misregulation "incentivized (not merely “allowed”) the creation and highly-leveraged systemic accumulation of the highest yielding AAA- and AA-rated securities among banks globally. Mostly, these banks acquired securitized US mortgages."
2. Continually increasing leverage. "Creditors with the lowest cost of capital generally drive underwriting and leverage standards within the segment in which they compete. In the residential mortgage market, with government entities [Fannie and Freddie] historically being the low-cost providers of capital and the dominant purchasers and guarantors of loans and securities, it is reasonable to hold government accountable for system-wide leverage."
3. Abandonment of proven credit standards and the "enlargement of the riskier subprime and Alt-A mortgage markets by Fannie and Freddie." Government was forcing banks to make high-risk loans.
4. Creditor bailouts by "FDIC, Federal Reserve, Treasury Department, and Congress" starting in the 1980s. Creditors normally control business lending through a variety of devices. But when they are protected by, e.g., deposit insurance, they don't bother.
5. The increase in deposit insurance. It was not just FDIC but the "unchecked expansion of coverage up to $50 million under the Certificate of Deposit Account Registry Service beginning in 2003."
6. Low interest rates from 2001 to 2005. This encouraged the teaser rates on Alt-A and subprime mortgages that made "the rollover or refinancing of short-term instruments all the more precarious" in 2006 and 2007.

The rhetorical problem for conservatives is to boil this sophisticated analysis down into a sound bite. Because we really need to create a meme and a national consensus that government was to blame for the Great Meltdown. It needs to go something like this. Look, you can't fool me. Greedy bankers are always greedy bankers. The problem here is that greedy politicians encouraged greedy bankers and borrowers to become stupid greedy bankers and borrowers. "Government turned greedy bankers into stupid greedy bankers. And that's no error."

And there is no excuse for that.

McCloskey Week: The Messenger

The message of Deirdre McCloskey's mammoth Bourgeois Cycle -- in The Bourgeois Virtues and Bourgeois Dignity -- is that good old bourgeois culture and ideas are a mammoth blessing on humankind. Whatever middle-class people say about middle-class prudence, the bourgeoisie is not a One Big Thing class. It practices all the virtues, devoted to the sacred as well as the profane. And it is the triumph of bourgeois dignity, the success of innovation and the good old college try--over aristocratic pride and peasant doggedness--that has elevated humankind from a perilous life consuming $3 per day to the present US consumption rate of $120 per day, a change that has particularly benefited the poor.

Back to start: Conservatism's Big Problem.

But what about the messenger? Deirdre McCloskey is perhaps more interesting than her message, for Deirdre McCloskey started out life in 1942 as Donald. Only in the 1990s did s/he take the plunge and decide to become a woman.

Thus we have the most unapologetic apology for the bourgeois culture and capitalism being written by a transsexual. The conservative heroine of our time is a LGBT chappie or chappette.

And not just that. McCloskey is a multi-disciplinary writer, an economist, expert in economics and economic history who is also well-read in philosophy and literature and culture. On top of that, she affects a girlish style that no woman-writer-wanting-to-be-taken-as-seriously-as-a-man would ever dare to essay.

In my view, we conservatives have needed a Deirdre McCloskey for decades. We have needed a serious political philosopher that knew the foundations of the grand western project but also knew all the ins and outs of recent cultural thought, the modernisms and post-modernisms that leaves most conservatives non-plussed and resentful.

The great question of the coming years is what comes after the century of big government and the centralized administrative state. Its ruling class has been, in McCloskey's words, the post-1848 clerisy, the cultural and intellectual movement that appeared on the radar in the revolutions of 1848 and has dominated culture and politics ever since. Our task is to delegitimize this cruel, corrupt, unjust, wasteful and deluded movement and substitute something else in its place. We cannot do this without thinkers that "know the best that has been said and thought in the world" in the words of Matthew Arnold, and are not afraid to shout it from the mountain-top.

Something tells me that the utterly shameless Deirdre McCloskey is just what the world has been waiting for. God does indeed play dice, and He does indeed like a cosmic joke. So the idea that the conservative future should be midwifed by a flaming transsexual girlishly arguing for a return to the virtues and a celebration of bourgeois culture and dignity is so crazy that it must be right.

And Deirdre McCloskey has only just begun. Volume three of the Bourgeois Cycle is already written, and three more volumes are planned.

McCloskey calls her books "The Bourgeois Era," but I think she is mistaken. Her project is of Wagnerian scope, and her bourgeois project is just as over-the-top as the Ring Cycle. So, for me, her bourgeois project is nothing less than "McCloskey's Bourgeois Cycle."

Next: Big Fact vs. Big Mistake.

McCloskey Week: It's Not What You Think

What was it that propelled the economic Hockey Stick of the last 200 years, the step change in economic prosperity from $3 per day back than and since forever, versus the $120 per day in economic prosperity we enjoy today?

Back to start: Conservatism's Big Problem.

Never mind that. What about the things it was not, the plausible reasons for modern prosperity that writers from Marx to Weber floated before the world, and that turned out to be wrong, wrong, wrong?

Most of the second volume in Deirdre McCloskey's Bourgeois Cycle, Bourgeois Dignity: Why Economics Can't Explain the World, is given over to exploding the "reasons" that the educated class have come up with for modern prosperity. It was not:

• Thrift, Greed, Protestant Ethic. Sorry chum. There is no indication that thriftiness was uniquely in fashion in the 18th century. In fact it is likely that the crucible of the industrial revolution, Britland, has always been moderately un-thrifty. Same with greed. You think that people were less greedy in ancient times? How about the plains of Ilium? And recent scholarship says that Catholics have just as much of a Protestant Ethic as Protestants.
• Capital Accumulation. A lot of people have assumed that the industrial takeoff could not have occurred without a lot of saving, a storing up of capital to finance the takeoff. But it didn't happen. The textile revolution was financed out of personal savings and modest capital improvements.
• Oppression, Stealing. It wasn't financed by starving the workers, or the profits from the slave trade, or the ill-gotten gains of the enclosure movement. For one thing, a lot of the industrial revolution took place away from the center in out of the way places, organized by nobodies, where economic regulation could not find it.
• Transportation. It wasn't transportation improvements, although they didn't hurt.
• Coal. Nor coal. Although it helped.

No, it wasn't all the economic materialist reasons that all the experts want to believe. It wasn't education either, because innovation is typically transfered directly from one person to another.
No, according to Deirdre McCloskey, it all comes down to dignity--just like in Singin' in the Rain. It was dignity and liberty for ordinary people. She quotes Dr. Johnson:

That the attempts of such men [projectors] will often miscarry, we may reasonably expect; yet from such men, and such only, are we to hope for the cultivation of those parts of nature which lie yet waste, and the invention of those arts which are yet wanting to the felicity of life. If they are, therefore, universally discouraged, art and discovery can make no advances.

Any new project, Johnson goes on, exposes "its author to censure and contempt" and if people were discouraged by contempt or stopped by censure nothing would ever get done.

And that is exactly McCloskey's point. If anything is to change in this world, people have to believe in change, and the rest of us have to resist our instinct to prevent it. We have to take the attitude of Samuel Johnson and look with tolerance, even approval, upon the mad projects of the projectors.

Next: The Messenger.

McCloskey Week: The Moral Case Against Obamanomics

Writes Peter Wehner in Commentary and The Weekly Standard about the current political situation:

[I]t does strike me that a compelling moral argument on behalf of conservative economics specifically, and capitalism more broadly, has been sorely missing from the public debate.

Well, you could start with the moral case put forward by Deirdre McCloskey in her Bourgeois Cycle -- The Bourgeois Virtues and Bourgeois Dignity. She says, more or less, that the difference between our modern middle-class society and the previous oppressive regimes is the revaluation of the things that bourgeois, middle-class persons do.

Back to start: Conservatism's Big Problem.

Under the old regime we had an "elite of Brahmins and warriors [living] by the dignified collection of rents and taxes imposed on the lower classes."

So now in the liberal welfare state we have liberal Brahmins and tenured class warriors living on the dignified proceeds of the progressive tax and regulatory system.

What is needed, in McCloskey's terms, is a reevaluation of the worth of liberal activities: taxing, spending, regulating, dividing, blaming, subsidizing when compared with bourgeois activities like innovating, producing, serving, building, anticipating, trusting, cooperating, competing.

It seems, against all odds, as though this is actually happening. That is why the Democrats are sitting around in a state of shock. Because, against all odds, the Great Recession of 2007-2009 has resulted not in a frightened populace eager to be led to safety but an angry Tea Party pointing the finger at bailouts and handouts to favored Democratic political constituencies.

The heart of McCloskey's argument is that it was not thrift, or a Puritan ethic, or the transport revolution, or the piling up of capital, or coal, or the slave trade, or imperialism that created the freedom of the past two centuries. That's not what created the economic Hockey Stick of the last two hundred years that has built an economy where the average American spends $120 per day instead of $3 per day, and can live a life of greater scope and moral depth than under the old daiy necessity of getting food.

The difference was that, for the first time, the bourgeois code of innovating and inventing and adjusting was valued and appreciated rather than considered low and dishonorable. It is not surprising that the central idea in left-wing rhetoric from Marx to the Fabians to today's "progressives" is to damn the middle class, the higgling of the market, and the people that bury us in goods and services, the evil corporations. The whole point of the class warfare strategy is to marginalize the people that respond to market changes, that anticipate the needs of the consumer and make a lot of money out of it.

The net-neutrality push by liberal foundations is a prime example of this. God forbid that internet providers should start charging a premium to people downloading movies and videos. People have rights!

A central argument of McCloskey is that we are what we think. We got the society of freedom and the economy of innovation because people got out there and said freedom is good, innovation is good. Liberals are going around saying regulation is good, free stuff from the government paid for by the rich is good.

The moral case against Obamanomics centers around the moral case for freedom and the right of people to order their lives without getting permission first from the government.

This shouldn't be that hard. Government screws up everything it does, and the policy of force that is buried in every government program always leads to tears. If we conservatives and libertarians can't convince the American people of the moral and practical worth of our ideas for each individual American, then we deserve a generation of Obamas and their big government delusions.

Next: It's Not What You Think.

McCloskey Week: Bourgeois Dignity

What did it? What was the cause of the Hockey Stick? No, we are not talking about Michael Mann's hockey stick, the spurious "hide-the-decline" surge in global temperatures in the last century. We are talking about the real hockey stick, the extraordinary surge in human well-being in the last two hundred years.

Back: Conservatism's Big Problem.

As Deirdre McCloskey reminds us, time and again in her Bourgeois Cycle, right through volume one, The Bourgeois Virtues, and volume two, Bourgeois Dignity, we are talking about a staggering change. In 1800 humans on average subsisted on about $3 per day in today's dollars. Today, in the United States, we each of us get to dispose of $120 per day. That is forty times the spending of two centuries ago.

And even that really underestimates the change. I recently watched the promo movie at the Boeing visitor center at Paine Field, Washington. They had a shot of a Mayflower-style ship. In the days of sail, it took thousands of hours to get from London to Seattle. Now you can do it in ten. And there are a whole bunch of other things we have today which weren't available to the richest and most powerful of humans two hundred years ago.

The key thing that changed, according to McCloskey, was not technological change, but a cultural, rhetorical change. About three hundred years ago, around the North Sea, societies started to respect the commercial bourgeoisie and the things that it did. It allowed, for the first time, the bourgeoisie to do what comes naturally, to innovate and change things.

That's why McCloskey would rather not call our present economic system "capitalism." The real essence of the modern era is not capital, piles of money, or ruthless accumulation. It is the spirit of innovation, of seeing an opportunity and taking it. "I seen my opportunity, and I took it," said the ward-heeler George Washington Plunkitt. We should call our modern system "innovation," she writes. What happened is that, about three hundred years ago, people stopped ragging on the bourgeoisie.

People stopped sneering at market innovativeness and other bourgeois virtues exercised far from the traditional places of honor [in religion, politics, and war].

All of a sudden, the traders and the merchants were according a dignity and a liberty they had never had before.

Even so, people really didn't realize what was happening. In the mid 19th century, the classical economists didn't really grasp that everything had changed. It was Macaulay, the last of the Whig historians, who really understood.

If any person... after the crash in 1720 [had told that] in 1830 the wealth of England would surpass all their wildest dreams,... that London would be twice as large... and mortality would have diminished to one-half,... that men would be in the habit of sailing without wind and would be beginning to ride without horses, our ancestors would have given as much credit... as they gave to Gulliver's Travels.

Of course our lefty friends still don't want to credit what has happened. That is because they can't get beyond the first stage of every capitalist improvement. The first person to benefit from a new idea is the capitalist innovator and his profit. But then the competitors rush in and everyone benefits from the innovation.

[T]he profits from innovation go in the first act mostly to the bourgeois rich. But in the second act... the poor get better off in real terms.

Of course, some people do suffer from innovation, and we have often not done enough to help them. Our liberal friends, the folks that McCloskey calls the clerisy, in the years after the failed revolutions of 1848--and indeed ever since--insisted upon seeing the capitalist economy as cruel and unjust.

But surely you cannot say that the principal cause of a rise in income from $3 per day to $120 per day was the cruelty of the capitalists in grinding the faces of the poor working class. Or indeed that it was the legislation of the welfare state. The increase in wealth was caused by innovation, middle-class entrepreneurs released from the bonds of age-old prejudice against risk-taking innovation, and allowed, finally, to do their stuff without being put in the stocks.

And when the opponents of the bourgeoisie got their way, in Russia, in Germany, in China, in Cuba, misery and poverty ensued.

You can't say all that enough, and Deirdre McCloskey, in her Bourgeois Cycle, says it. Again and again.

Next: The Moral Case Against Obamanomics.

McCloskey Week: Conservatism's Big Problem

There's a problem at the heart of the modern project of conservatism in America, and it's a simple problem. How can you hope to convince liberals of the truth of conservatism when conservatism is based upon three-hundred-year-old ideas?

F.S.C. Northrop identified the problem precisely in his Meeting of East and West.

The primary thing to keep in mind about German and Russian thought since 1800 is that it takes for granted that the Cartesian, Lockean or Hueman scientific and philosophical conception of man and nature... has been shown by indisputable evidence to be inadequate.

The secular religion and the politics of our liberal friends is based upon this faith. British empiricism and the American founding fathers are all very well, but they cannot speak for the modern era. Hence the need for an educated elite, a "living constitution," and a big federal government. As if to underline this, Russell Kirk's The Conservative Mind: From Burke to Eliot has absolutely no references to Immanuel Kant.

Sorry chums. If the conservative mind has nothing to say about Kant, whose transcendental idealism points in a straight line to Einstein, relativity, and quantum mechanics, then it's not going to appeal to the broad community of thinkers and doers of the modern era.

So what conservatives have needed, like an oasis in the desert, is a thinker to put the conservative case in the context of the entire three-ring circus of modern thought, starting where Hume left off with Kant, continuing through Hegel, Marx, Nietzsche, Heidegger, Sartre and the preenings of the postmodernists, and then ending up saying: well, that's all very well, but these chaps ultimately missed the point, and here's why!

I am pleased to announce that this prophet of conservatism has now emerged. Her name is Deirdre McCloskey, and her work is a grand apology for the middle class, an over-the-top Bourgeois Cycle built upon Wagnerian principles just like the Ring Cycle. That is to say: it is long, it is ambitious, it is insufferable, and it is brilliant. And it may never get finished. McCloskey is now 68ish, and has only finished the first two volumes of her multi-volume epic.

OK, so what is all the fuss about?

In the first volume, The Bourgeois Virtues: Ethics for an Age of Commerce, McCloskey argues for a return to virtue, all seven of them. Although the bourgeoisie insists that it is a practical venture, an effort of pure prudence, bourgeois actions belie this. The commercial middle class practices all the virtues, the four cardinal, masculine, pagan virtues of: Prudence, Temperance, Courage, and Justice; and it also practices the Christian, theological, feminine virtues: Faith, Hope, and Love.

The trouble is that the clerisy, particularly the post-1848 clerisy, has turned against a multi-faceted faith in all the virtues, and has plumped instead for the One Big Thing. In Kant, it was Duty.

Kant made a mistake in rejecting as a constituent of ethics the unreasoning particularities of philosophical anthropology or philosophical psychology.

A very guy thing to do, of course. No woman in her right mind would or could come up with a One Big Thing narrative of meaning. Although some have tried.

In Bentham the one big thing is utility. In Marx, the big thing is labor. It is a materialist view of life:

If virtues cannot be connected to self-interest or genetics, to utility or power, they are, in the early twentieth century philosophical term of Vienna and Cambridge, simply "meaningless."

McCloskey calls this the "Prudence Only" approach of the modern era. But Prudence-Only is not how the world works, and particularly not how the bourgeois middle class works. That's important because it is the commercial bourgeoisie and its virtues that has brought the western world from $3 a day of real material consumption in 1800 to $120 a day in the US today. Meanwhile the Prudence Only materialism of socialism and communism has created nothing out of nothing. What is needed is a return to the virtues, as the movement of virtue ethics has been doing since 1958.

You can see, very easily, how this sort of thinking solves the conservatism problem. It is exactly what conservatism has needed. We want a thorough discrediting of the One Big Thing ethos, which for modern American liberals means that liberals get to call all the big shots because they are more educated, more evolved, and more knowledgeable than the average bitter clinger. We want someone who can argue the hind tails off the liberals all day, and then go out and party all night. And now we have got it.

Next: Bourgeois Dignity.

A Century of Bad Faith

On the day after the Obama tax increase was averted, and the day after the $1.1 or $1.3 trillion omnibus spending bill was withdrawn in the Senate, it's time to think about what comes next.

Walter Russell Mead would like to create a Liberalism 5.0, and rescue the good name of liberalism from its betrayers. "Can the L-Word Be Saved?" he wonders. He would like to reform liberalism and learn the lessons of the last century.

But I think we need to grasp the profound bad faith that has been a part of liberals and liberalism almost from the start of what Mead calls Liberalism 4.0 in the late 19th century.

Obviously, the post-civil war era raised up new questions of power in society.

In the late nineteenth century, the rise of huge industrial corporations created yet another force that threatened to crush individual liberty; 4.0 liberals began to think about the state as a possible ally to defend individuals from unaccountable private power.

Yes, that's true, but I think it true to say that by 1910, when giant combines like Standard Oil had been broken up, and J.P. Morgan had personally, with the richest men in the US, bailed out the economy in the Crash of 1907, people of good faith should have concluded that the new giants of business were not robber barons but responsible servants of the market. After 1910 it was an act of bad faith to rouse up the common people against the power of the corporations. Take the BP oil disaster. Mother Jones has run an end-of-the-world cover story on BP's coverup. But the central fact about the BP oil disaster was that when President Obama said: "Jump," BP said: "How High?" and agreed to cough up $20 billion, sight unseen. That tells you who calls the shots between politics and business.

Again:

[T]he industrial revolution and mass immigration threatened to divide society into paupers and millionaires... A society including millions of impoverished urban workers from radically different cultural backgrounds could not be run exactly the same way as in the past; the situation grew even more complex as millions of African-Americans left Dixie for the big northern cities after World War I...

The development of a professional, bureaucratic civil service and the regulatory state were intended to preserve individual autonomy and dignity in a world dominated by large and predatory corporate interests[.]

Yes, but. Let's allow that some sort of emergency centralization was needed to manage the vast migration to the cities, and ward off the threat of revolutionary socialism. It has surely been obvious at least since the end of World War II that the heavy hand from the center is not really needed. The migrants to the city settled down pretty well, and didn't revolt despite the utter failure of centralized government in the Great Depression (spun by liberals as a stunning success). The capitalist system has rained down prosperity upon the once huddled masses, instead of impoverishing them as liberals prophesied. Instead liberals came up with more and more reasons to centralize society into the administrative state which, not coincidentally, gave more power to liberals.

(Yes, for one shining moment, liberals midwifed the civil rights revolution. But then they went back to patronage/clientage politics and the expansion of big government.)

Now think of the ways that liberals have brought a murrain down upon the people that trusted them with their vote.

Liberals told us that we needed a central bank. The result has been two gigantic financial meltdowns and the loss of 98 percent of the value of the dollar.

Liberals told us that we needed government operation of mutual aid and charity. The result has been the demolition of the mutual-aid associations and the conversion of labor unions into raw political pressure groups.

Liberals told us we needed government operation of old-age pensions. The result has been a bankrupt system and the conversion of the savings of the people into a political slush fund, for that is what the "surplus" of Social Security is used for.

Liberals told us that old people and poor people could not get access to health care without massive government management and taxation. The result is a corrupt and wasteful system that is already utterly failing the poor and will soon fail the ageing poor.

None of this is remarkable. we have always known that governments are incompetent and corrupt. But liberals said: Trust us, we will be different. We will staff government with a professional civil service and credentialed experts. Well, we ended up with a unionized civil service that loots government at all levels, and experts that cannot see further than the next government grant.

So I really wonder whether it makes sense, after this century of liberal bad faith, to resurrect the liberal concept. It's time acknowledge the truth, that liberal politics is a canard. For the last century it has almost always meant centralized power, incompetence, and corruption. The time has come to make a break with the failed past and open a new chapter in the story of democratic capitalism. We must acknowledge that the basic parameters of the market economy, its markets, its ethos of fair dealing, its culture of trust, need to he honored and respected and taught. And the educated elite that has refused to accept and honor the wealth-generating and trust-extending wonders of capitalism needs to be rusticated and its cruel fingers prized away from the levers of political power.

As we start the New Year in 2011, the lesson of the last two years of Obama/Reid/Pelosi is surely that liberalism is not liberal, and never can be. It is all about political power, corruption, and the culture of compulsion. And it always will be.

Let us proclaim this to the reverberate hills: Limited government is the system of government that limits the power of the political elite, whether that elite is a royal family, an aristocratic cabal, a business elite, or an educated elite. And we the people demand it.

Three Liberal Delusions

Liberals have erected an elaborate apology to justify the centralized administrative state run by liberals. They need this apology because at the heart of liberalism is a profound contradiction, writes Peter Berkowitz.

The paradox of American progressivism, old and new, is rooted in the gap between its professed devotion to democracy, or the idea that the people legitimately rule, and its belief that democracy consists in a set of policies independent of what the people want.

In order to deal with this contradiction, believing in democracy in the abstract, but determined to impose their agenda anyway, liberals have come up with three ideologies, says Berkowitz.

The first is John Rawls and Deliberative Democracy. John Rawls is famous for his Theory of Justice in which he sets up a contract theory of politics that justifies liberal politics.

According to Rawls, justice concerns the principles that free and equal citizens would adopt to govern themselves if they thought impartially, objectively, and rationally about their condition as human beings. It has two basic parts: fundamental and inviolable liberties, and an obligation on the part of the state to adopt "measures ensuring for all citizens adequate all-purpose means to make effective use of their freedoms" [emphasis added]...

But unofficially and in practice, Rawls's theory of justice, certainly as adopted by professors of practical ethics and applied to public affairs, is distinguished by more. It also purports to derive from "public reason," or the abstract principles and rules that structure public debate, substantive public policies and disqualify others. It's as if the rules of baseball told you not only how to play the game, but also who ought to win and who ought to lose.

Very convenient. It lets liberals decide what is legitimate and what is not. They know what the people would choose, "were it not for their poor education, combined with passions and prejudices corrupted by the imperfections of social life and the inequities of the market economy."

Then there is Richard Rorty and Pragmatism. This notion seeks to equate liberal progressive reform with justice itself. It is not so much pragmatic as picking up where the pragmatists like John Dewey left off, proposing democracy as a kind of civic faith: "democracy is neither a form of government nor a social expediency, but a metaphysic of the relation of man and his experience in nature." Rorty argues that:

the proper aim of American politics is nothing less than to embody in social and political life "a new conception of what it is to be human." And the utopian overtones are no accident. This new conception, Rorty reveals, rejects all claims to "knowledge of God's will, Moral Law, the laws of History or the Facts of Science." All the better, exhorts Rorty, to make "shared utopian dreams" the guide to pragmatic and progressive politics.

As with Rawls's ideas, Rorty is just providing a crude apology for the liberal faith. Liberalism is democratic because liberals call their program and their faith "Democracy."

Finally, Berkowitz calls up the "empathy" brigade, that we last saw justifying the liberal jurisprudence of Sonya Sotomayor. This Empathy, according to President Obama, is "a call to stand in somebody else's shoes and see through their eyes." The problem is that we are only called to empathize with the eyes of a "wise Latina." White middle class men need not apply.

The problem with these three liberal delusions is not that it deludes liberals into thinking that theirs is the only true democratic thought. The problem is that it does not engage with the real problem, the daily clash with reality: what do you do when things do wrong?

Government is force, politics is power. It is OK to use government for things that require force, like wars and policing. But what about things that don't require force? How do you fix a Social Security system that is going bankrupt? How do you balance the need of senior citizens for health care with the need of young parents for education for their children? How do you balance the desire of some parents for a creative education for their children and other parents for a Three Rs education? Centralized administrative government by an educated elite wants to set up a permanent, one size fits all answer to any political problem, and thus has no answer for these questions. For the truth is that all economic activity is characterized by ceaseless change and adaptation to new and unexpected conditions.

That is why liberals today are flummoxed and in denial. There is no allowance in their system for the reality that, as soon as their comprehensive mandatory program for health care, or education, or welfare is in place, it is immediately overtaken by events. From that moment on, the program finds itself trying to catch up with events and never succeeding.

Now you know why liberals are forced into demonizing their political opponents as racists and haters. For it cannot be, it must not be that the failures of all those government programs mean that a whole century of centralized liberal government has been one long disastrous error for which ordinary Americans are about to pay the terrible price.

"Class Warfare in Moral Terms"

Why not tax the rich until the pips squeak? After all, there are desperately poor people that need the money. You need to "spread the wealth" as then Candidate Obama told Joe the Plumber in 2008.

Well, now President Obama has bowed to political necessity and urged Congress to continue the Bush federal income tax rates, including the 35 percent top rate that Bush passed, reducing the Clinton 39.4 percent rate, but not yet getting back to the 28 percent top rate in the Reagan 1986 tax bill.

President Obama apparently accepts the notion that, in practical terms, now is not the time to raise tax rates, not while the nation is struggling out of a severe recession. But once the economy is out of danger, why not cream the rich and make them pay?

First, the facts. At the American Thinker today, my "Incomes Taxes, Millionaires and Billionaires" makes the point that the richest one percent, at current rates, already pay about 40 percent of federal income taxes while the bottom 50 percent pay about three percent. How much is enough?

But that is just a practical argument. Let us argue the point in moral terms as William McGurn argues in "Billionaires on the Warpath." And what better way to do it than with the seven virtues, starting with prudence?

Prudence is the practical virtue, and prudence argues that we don't want to distort the economy with high rates targeted at the rich. You end up with the monstrous tax code we have now, because people keep coming to Congress to get special exceptions. I've been looking through the Revenue Acts of the 1930s and 1940s as the tax rates were soaring during the New Deal and World War II. It is staggering so see the dozens of exceptions and special cases starting to appear in the code. Because, of course, when Congress enacts high tax rates then economic interests of all kinds find themselves harmed and go to Congress for relief.

Temperance. We shouldn't have swingeing anything. Especially in today's economy, the rich are not aristocratic families with vast land-holdings that exist upon the sweat of serfs. The rich hold their wealth and make their incomes from building economic wealth in startups and the great corporations that shower products and services on the American people. Moderation in all things, even for the taxation of the rich.

Courage. We should be courageous in opposing the hateful class warriors that gin up envy against the rich. Envy, remember, is one of the seven deadly sins.

Justice. If justice means anything, it means one set of rules for all leavened with the yeast of equity, the understanding that inflexible rules can sometimes result in the most awful injustice.

Faith. If we have faith in our fellow humans we must believe that there is good in the rich, good in the middle class, and good in the poor. To tax anyone with penal rates is to lack faith in the human project. It is to say that we are monsters, and monsters must be eliminated.

Hope. High tax rates and big government are not the policies of hope. They are the policies of despair, that the poor can never thrive on their own energy and labor. Instead the rich must be bled so that the poor can receive a transfusion. Without the transfusion, all hope for the poor is gone.

Love. How can you love anyone when you sicc the tax collectors on them? Love means wishing the best for other people in their terms, not yours. Socialists think they know what is best for everyone according to a universal rule of equality of results, but never ask what other people might want for themselves.

What we want from the rich is not a pound of flesh, cut from them by penal taxation. We want them to contribute openly and voluntarily in a million acts of kindness and generosity to the general welfare of the American people. As well as create jobs, products, and services with their businesses and their economic ideas.

Oh, and one other thing. The problem with high tax rates is that they protect the today's rich from competition from tomorrow's rich. High tax rates make it very hard to get rich.

Liberals Please Step Aside

Everything is set for a new century of growth, writes Walter Russell Mead, except for America's political class.

America has everything it needs for success in the twenty-first century with one exception: a critical mass of thinkers, analysts and policy entrepreneurs who can help unleash the creative potential of the American people and build the new government and policy structures that will facilitate a new wave of private-sector led growth.

It's the intellectual class that's the problem. It is backward looking and reactionary. In several ways.

• Support for statism. "Since the late nineteenth century most intellectuals have identified progress with the advance of the bureaucratic, redistributionist and administrative state. The government, guided by credentialed intellectuals with scientific training and values, would lead society through the economic and political perils of the day. " Yeah. I'll say.
• Interest and class. "Most intellectuals today still live in a guild economy. The learned professions – lawyers, doctors, university professors, the clergy of most mainline denominations, and (aspirationally anyway) school teachers and journalists – are organized in modern day versions of the medieval guilds. " Actually, I would say that the liberal guilds are caricatures of the old medieval guilds, which were, at bottom, self-governing social organizations perched perilously under the warrior aristocrats that ruled the age. The liberal guilds are little more than political pressure groups. They are not true "mediating structures."
• Training gap. "We are much less effective at teaching and supporting people who are able to master the essentials of many complex subjects, integrate the insights from this kind of study into a coherent social or political vision, and communicate what they have learned to a broad general lay audience. " Hmm. The trouble with this sort of thinking is that it assumes the continuation of the current bureaucratic administrative elite. Suppose that the new elite to come doesn't operate that way. Suppose it operates more by spontaneous association and the promotion of ideas and leaders from below instead of the top-down processes of today. Suppose that the future is Tea Party, not Anointed Ones?

Actually, all this is beside the point. The big question, in my mind, is whether our current liberal elite--the "clerisy," the Class of 1848, the New Class, the educated elite, whatever you want to call them--will have the decency to leave the stage without pulling the scenery down around them, and the rest of us as well.

The foundational assumptions of American intellectuals as a group are firmly based on the assumptions of the progressive state and the Blue Social Model. Those who run our government agencies, our universities, our foundations, our mainstream media outlets and other key institutions cannot at this point look the future in the face.

Who cares? Don't look the future in the face, liberals, if you don't want to. The trouble is that liberals don't want to let the rest of us, who do want to look the future in the face, take power and get on with America's future. Because the whole point of modern liberalism since its invention in the culture of the revolutions of 1848 is political power. It wasn't ever really about the working class, or women, or minorities, or gays, or whatever. It was always and only about the power of the intellectual class.

What these chaps cannot face is that the ordinary chaps who really made a difference in the industrial age, men like the Rothschilds, the Rockefellers, the Carnegies, the Edisons, were not men from the intellectual class, nor did they have pretensions about themselves. Nor were they interested in political power. They just wanted to build their businesses in the intoxicating days of the 19th century. When they had strutted their hour upon the stage they were quite happy to go home and let someone else take over.

Unlike today's intellectual class.

The Liberal Syllabus of Errors

Whether or not President Obama has done a number on Republicans (by increasing spending in the tax-cut compromise) or betrayed his Democratic base (by abandoning his promise to raise taxes on the rich) the fact is that the Bush tax rates continue. And the battle for the mind of America continues.

Absolutely critical is what the professionals call "messaging." We conservatives need to hammer away at the fundamental things that liberals have got wrong and persuade the American people, the moderates in the middle, that the liberals have got it wrong. As in:

• Corporations are evil. Corporations are big institutions that make products and deliver services to people. Since the limited liability corporation emerged in the mid 19th century the prosperity of the ordinary person that works for or buys from big corporations has sky-rocketed at a rate unprecedented in human history. Ordinary people that have been protected from big corporations in socialist countries and in the Third World have not done so well. This is evil?
• The rich should pay their fair share. The rich already pay more in tax as a percent of reported income than the middle class. How much more do you want? The record is that as you lower tax rates on the rich they mysteriously report more income. So, it seems from a practical point of view that if you want to tax the rich you should find a sweet spot that encourages them to fire the lawyers and tax accountants and just pay up.
• Inequality is the problem. Hey, it's morally tricky that some people make more money than others. Some people make obscenely more. But all we know is that, in the last two hundred years, the societies that didn't worry too much about inequality experienced the most increase in general prosperity while the societies that worried most about inequality experienced the least increase in prosperity. Anyway, once you let the government start messing with equality it merely starts to shovel money at the government supporters, irrespective of need. Government supporters just come to get defined as deserving and government opponents defined as undeserving. How unequal is that?
• The rich are getting richer and the poor are getting poorer. The majority of the poor in the United States cool their houses with air conditioning and own automobiles, and live in houses that, on average, are the same size as the the average house in Europe. And, of course, the poor benefit from the startling increase in life expectancy of the last two centuries. The poor are immeasurably richer than they were two hundred years ago. But then so are the rich.
• Americans are racists. Let us put it this way. In the last two hundred years there has been a sea change in the way that humans think about people who look different from them. Call it the influence of the Enlightenment or global commerce. In this move liberals were often a couple of inches in front of the rest of us. But often liberals have exploited race for political power, as in Affirmative Action, diversity, and racial quotas. In general, ordinary Americans have shut up and kept their heads down in the race wars while liberals have pontificated and shamed and blamed. Except for one shining moment in the 1960s liberals have plenty to be ashamed about when it comes to race.

Well, that will do for today. But it is an important subject. If we are to curb liberal political power we have to persuade the American people of the utter folly and utter delusion of liberal ideas and liberal talking points. And the next two years, as liberals try to squirm out of the mess they have got into, will be crucial.

Olby's Indictment, Clause by Clause

MSNBC host Keith Olbermann has done us all a favor. In his rant last Tuesday, after President Obama's own presser rant, he has delivered a bill of indictment against President Obama. He--or his writing team--has detailed the specific ways in which the liberal base feels betrayed. For that, we owe him a huge debt of gratitude. It takes a true believer to locate the emotional pulse of the liberal base and report on its flutterings.

So here is Olbermann's bill of particulars:

• Rendition and domestic spying. Olby hits the "refusal of even the most perfunctory of investigations of rendition or domestic spying or the other crimes of the Bush Administration". Nothing has been achieved: any future administration can do the same.
• Afghanistan. Liberals don't understand why we are there.
• Continuation of Gitmo. Liberals don't get that either.
• Single payer and public option. Olby faults the president's "preemptive abandonment."
• Don't Ask Don't Tell. Olby faults "foot-dragging."
• Getting less than he could have. Olby feels that the president expects liberals to be happy that the president isn't John McCain and that he saved us from another Great Depression. Given those amazing achievements, the president expects liberals to forgive him for settling for less than he could have on health reform and taxes.

In Olbermann's rage we see the elected Democrats starting to pay the price of riding the Angry Left bronco through the mid 2000s. By fanning the left's rage about President Bush and his forward strategy against radical Islam the Democrats set themselves up for an expectations crisis once they got back to power. The beltway Democrats knew that Bush wasn't a rogue president. Almost certainly they were consulted as Bush developed the nuts and bolts of his response to 9/11, including Gitmo and rendition. But they acted as if they were "shocked, shocked" that these decisions had been taken, and showed up in force at Michael Moore's agit-prop Fahrenheit 911 mockumentary.

Now they are paying the price. You'd have to search pretty hard to find any of Bush's strategy that hasn't been reluctantly confirmed by the Obamis. And the clearly different directions they took, most obviously the "reset" strategy of open arms to thug dictators, has been a disaster.

For chaps like me that voted for Obama precisely because we wanted the Democrats to be confronted with reality on the War on Terror, all this is good news. The reluctant embrace of the Bush strategy was always likely. But the rage in the Democratic base is a bonus.

The idea that Obama could have got a better deal from the Republicans on taxes does have merit. Sean Trende of RealClearPolitics thinks that Obama could have got a better deal. He could have dared Republicans to walk into the coffin corner of voting for a cold Xmas for the unemployed while sticking up for millionaires and billionaires.

Either way, the Democratic base is livid. And that can only for good for a center-right nation that wants to curb the excesses of big government.

It Ain't WikiLeaks' Fault

It's great fun to run around accusing Julian Assange of espionage or, better still, of failing to use condoms. After all, that's what politicians do when they are not actually running for election. They run around accusing other people of the most frightful crimes and misdemeanors even as the government totally screws up everything it does.

Now, admittedly, failing to use a condom is one of the worst crimes in the liberal calendar.

But hey fellas, if you chaps in the State Department don't want everyone reading your cables for breakfast then you need to apply proper security precautions.

State Department cables are exchanged on SIPRNet, apparently. And about 3 million people have access. No problem, chaps. But clearly, it should be impossible for anyone to get their hands on 150,000 cables as WikiLeaks has done. How hard is this?

Now, admittedly, it was great fun to leak everything in sight when the media were busy embarrassing the hated Bush administration back in the 2000s. And it was only right to hit Vice-President Cheney in the keister. The liberal renegades in the State Department and their bribed apologists in the media were delighted to see the Bushies embarrassed. But didn't they think about the moment when some chap like Julian Assange would take advantage of the opportunity to embarrass a Democratic administration. For chaps like that, noble Democrats aren't much different from eevil Republicans. It's not unprecedented. Back in the 1940s we had Commie physicists getting their hands on US nuclear secrets and handing them over to Uncle Joe Stalin. Hello? Was anyone home back then?

What we don't want to do is make Julian Assange into a martyr like the sainted Rosenbergs. Prosecuting the Rosenbergs turned into a political bonanza for liberals and lefties, and they postured and pretended for years that the Rosenbergs were as innocent as fresh-laid snow and victims of eevil McCarthyism.

No. What we need is for a few heads to roll at the State Department and a few dozen inter-agency committees devising new methods of limiting access to State Department cables. Also, I dare say it wouldn't hurt to trigger an alarm when anyone starts trying to assemble a whole bunch of cables all at once. After all, who needs to set up their own private vault of State Department cables?

Market Says Ho Hum on Tax Package

The "framework" for a tax deal struck between President Obama and Republican leaders yesterday seems to satisfy neither the Democratic base nor the Republican base. So it probably represents the best deal that either side can hope for on December 6, 2010 in a lame-duck Congress.

The most telling reaction, of course, is from the stock market. On the buy-on-rumor, sell-on-news theory, we can assume that the market, that rose strongly last week and today is flat, thinks the package is so-so.

That is not good news for President Obama, who needs a pretty strong economy starting early in 2011 to get a decent economy in 2012 for reelection.

Of course, the tax package, which more or less extends the Bush tax cuts, doesn't do anything about the real big drag on the economy, which is ObamaCare.

The stage is now set for the political argument of the next two years. Should the economy be based on the privilege-and-subsidy state of the liberals, on the belief that ordinary people cannot get a fair shake without a heavy government leaning on the exchange relationships of employer and employee, producer and consumer? Or should it be based on a level playing field of low tax rates and low spending, on the assumption that capitalism is basically a win-win proposition where service and trustworthiness is repaid in a decent return on labor, on capital, on the consumer dollar, and on the investment of trust in the system?

This is the Great War that has raged since 1848, when the educated youth upped and declared that the whole thing stank. They declared that the bourgeois were exploiters and that students and workers were victims. Special interventions were needed to save the workers from a fate worse than death, and the educated youth were the only chaps with the moral standing to do it.

Now, more than ever, it is time to really evaluate what the century and a half of economic interventions has really delivered and what it can hope to deliver in the future. Or is big government just big government whether it is run by absolute monarchs or absolute politicians?

Now more than ever, it is time for the lovers of liberty to strain every brain cell and every sinew to persuade the American people first, that the liberal world view is wrong and second, that its politicization of everything is cruel, corrupt, unjust, wasteful, and deluded.

End the Fed?

Why do we have a central bank, asks Gerald O'Driscoll of the Cato Institute? It's not actually necessary for a modern financial system. The US didn't have a true central bank until 1913. Canada didn't have one at the beginning of the Great Depression, and its banks sailed through the crisis without failure (But the Canadians legislated one in 1935).

The simple answer is that a central bank is really convenient for the government. It helps to get the government out of a jam and it helps the government to market its debt.

In wartime, a central bank is invaluable, because it helps the government commandeer the nation's resources for the struggle. And in a financial crisis it can act as lender of last resort to help financial institutions facing liquidity problems, i.e., a run on the bank.

After the Bank of England got started in the 1690s, it became evident that there was another benefit of a central bank, provided it was combined with sensible government fiscal policies. Government debt became highly regarded collateral, and rock-solid debt is the foundation of a well-functioning financial system. That was the basis of Alexander Hamilton's successful launch of the US National Debt in the first Washington administration.

The problem is that the government abuses the advantages of a central bank. The ease of floating debt creates a temptation to float more of it. Then the day comes when market actors wonder just how solid the government's debt is. Then they start to demand higher interest rates. Then the government gets into a sovereign debt crisis. Then the government defaults on its debt. Given this vicious cycle, maybe it is best to get rid of the central bank and get rid of the temptation for bad behavior.

The thing about debt comes down to the old saw about banks. The bank will only lend money if you don't need it. When you are in trouble, the bank will demand outrageous guarantees and collateral.

Well, of course. Credit works when everyone knows you are good for it. That means that you keep your debt levels low enough that you can always meet your obligations, even in the middle of a financial crisis. Financial crises, large and small, occur when debtors get in a jam. The solution to financial crises is for every actor to keep debt and equity properly balanced and keep risk capital and working capital clearly separate.

(That's easy to say, of course. In real life, consumers and businesses make mistakes and they put off doing something about it. Then, all of a sudden, it's too late, you are underwater, and you are facing bankruptcy.)

OK, so what should we do about the Fed? In my view we need to limit the Fed to the one job that central banks do well, and that is acting as the government's banker.

But it is time to move away from the temptations. Lender of last resort? Maybe, but the financial system should not rely on that. Printing money? Maybe, but we have seen that central banks can't be trusted to maintain the value of money. There has to be a better way, and I suspect we will see another way develop with the new ETFs for gold and other commodities.

The one thing we must stop is the failed policy of goosing the economy with the central bank and easy money. That is pure inflation, and that is wrong. Economies that need goosing are economies that have been distorted by bad government programs. Getting the central bank to paper over the government's failed subsidies and privileges doesn't solve anything.

Trust in the Slum

Suppose we accept that in the rarified air of high commerce that the economy runs on trust.

But what about life at the bottom? What is it like in the mean streets of the western inner city What about commerce in the slums of the third-world city? There, surely, you will find naked capitalism, where the rich get richer, the strong survive, and the poor go to the wall.

The poor don't write, but researchers do, and we have recent research on life on the mean streets of the underclass city. According to Hernando De Soto, commerce in the informal economy of Lima, Peru, is all about gaining the trust of the consumer. According to Sudhir Alladi Venkatesh, life on the South Side of Chicago, where President Obama used to community-organize, people struggle along with a remarkably entrepreneurial will. And in the third-world slums of Hyderabad and Africa, enterprising education entrepreneurs run schools that outperform the government schools. When there are any.

Hernando De Soto described the informal economy of Lima, Peru, in The Other Path twenty years ago. He tells the story of the Andean peasants moving to Lima in the teeth of bumbling opposition from the political system and the formal business sector.

The peasants needed property rights, to build houses, to earn a living, and the political system, oriented towards the exchange of favors, did not understand. The politicians and the bureaucrats made it almost impossible, mainly by suffocating bureaucracy, for migrants to live and work in the city legally. What could the migrants do?

One way that peasants could earn a living was by selling goods as a street vendor.

Street vending is illegal, but the peasants did it anyway. In 1986 when De Soto conducted a census of street vending in Lima, he found over 91,000 vendors. Street vendors start as "itinerant" vendors, with no fixed location. Vendors soon establish a fixed route every day so they can establish a reputation for reliability and earn the trust of their customers and credit from suppliers. But, of course, itinerant vending with a limited supply of goods cannot earn as much as vending from a fixed location on the street, so successful vendor soon finds a place to set up a barrow or a stall illegally on the sidewalk. If it's a good pitch, he is soon joined by other vendors. This competition is beneficial, because it helps create a critical mass: "vendors realize that the safety, cleanliness, quality, and variety of goods available" affect the volume of customers and the power of numbers helps to defend them against the government and competing interests. Eventually the successful street vendors combine to build a "minimarket" and then move off the street into permanent markets that they have combined to build and operate. Denied access to the institutions that are supposed to reward trust and reliability, the newcomers to the city must create their own culture of trust without the assistance of the formal legal system. The process is clear. These rural peasants combine to win formal property rights out of a society that hardly knows they exist, and resists their attempts to earn a living from the burgeoning city.

Informal trading is not the only off-the-books activity in Lima. New housing is typically built by "invasions" of state-owned land on the periphery of the city. Mass transit is furnished by informal bus companies that operate in a curious no-mans-land between legality and illegality. And there is a vast economy of small-scale manufacturing that operates outside the law in order to hide from expensive labor laws and business regulations.

The story in The Other Path is clear. The immigrants to the city want to establish property rights for themselves. But they find that they must deal with a political system for which power and the exchange of favors is the only true reality. So they must fight for the right to acquire property rights in their housing and their employment.

That's a sober thought for Tea Party Americans as we struggle with the favor factory of the modern administrative state. How do we convert this corrupt culture of compulsion and its divisive political warfare into a culture of social cooperation, a world where people can abandon the trenches of political attrition and work together to serve each other and benefit society with their wealth-creating skills? How do you reform a political system so that there is less politics?

Warren, Tell 'em It Ain't So!

So now we know why Warren Buffet is such a goo-goo about the estate tax, and why he thinks it's such a good idea to keep it.

Any guesses?

It turns out, according to Jonathan Strong, that the life insurance industry, one of the strongest lobbies in Washington, DC, is against the repeal of the estate tax.

Now, why in the world would the life insurance industry care about the estate tax? Their job is life insurance, not railing about inequality and family dynasties, right?

Wrong. It appears that ten percent of the life insurance industry's revenues come from from people using life insurance to reduce their estate tax exposure. Life insurance proceeds don't count as part of an estate; thus the heirs get the money without paying a cut to Uncle Sam.

And wouldn't you know: Warren Buffet, presumably through Berkshire Hathaway, owns six life-insurance companies.

Really, the stench is getting unbearable. Another famous proponent of the estate tax is Bill Gates, Sr. He is a lawyer, and apparently notable as an estate-planning expert.

Estate planning is a phrase that means: rearranging your assets with an expensive lawyer so you can reduce your estate-tax exposure.

The joke about all this is that these days, unlike in the old days of the landed aristocracy, you don't need to worry about wealthy dynasties. The money accumulated by a successful billionaire entrepreneur usually gets dissipated in the next generation. Sometimes it gets dissipated early by his widow.

The estate tax does have the effect of making it very difficult to pass down a family business to the next generation, or worse, forcing the heirs to sell the business to Warren Buffet at fire-sale prices.

Oh, you didn't know that? Yes, it appears that one of Warren Buffet's specialties is buying family businesses on the cheap. It's a cosy little niche that exists because of the estate tax. Almost any family business worth a few million will have to be sold quickly in order to pay Uncle Sam's estate tax. And when you have to sell the family business quickly, chances are that you are not going to get a good price on it.

It's a universal law. Anything the government gets into ends up as a cesspool of corruption and crony capitalism. Because government is force, and politics is power.

Personally, I'm all in favor of the estate tax. But not at 55 percent. I'd say that an estate tax at a rate of five to ten percent would collect a nice little chunk of change but still keep family businesses going in the family. Alternatively, it would help heirs of a creative turn of mind become famous scientists and artists, as happened so often in the 19th century.

But an estate tax that low would put the noses of Warren Buffet and Bill Gates, Sr. out of joint. Not to mention the life-insurance industry.

He's Out of Ammo; She's Loaded for Bear

If you want to know how much trouble President Obama is in, look no further than his federal pay freeze. It's a gimmick, and it shows that he's out of ammo. The glorious days of 2009 when liberals seemed to be converting liberal shibboleths into government programs at a rate of a billion dollars an hour are over. All he's left with is a symbolic pay freeze and doing a deal on the Bush tax cut extension.

According to Rich Galen, the deal is tax cuts extension for unemployment benefit extension. That is not so good for Democrats because, compassionate though it may be, extending unemployment benefits will delay the return of the unemployed back into the labor force. That will delay the recovery. That will lower the chances for President Obama to get reelected. (On the other hand, the equity markets are up two percent today).

Then there is Sarah Palin. She's got another book out, America by Heart, and she's loaded for bear. I notice in her new book that she has stopped calling herself a commonsense conservative. "Commonsense Conservatism" was the line in her first book, Going Rogue. In the last chapter of her new book she calls for "Commonsense Constitutional Conservatism." Well now. What would that be all about do you think? I will tell you.

Sarah Palin is not the clueless trailer trash that our liberal friends want her to be. Instead she is a skilled elected politician who has done it the hard way, working up from city council to mayor to governor without friends in powerful places. She understands that it no longer enough to be a commonsense conservative. Not after two years of the Tea Party.

Palin understands that the fulcrum of the Tea Party movement is not specific issues but the general demand that we return to the concept of limited government, a government of laws rather than a government of programs.

How do you get limited government? You start with a constitution and a people that believe in it. For the last century, beginning with Progressives like Teddy Roosevelt and Woodrow Wilson, our liberal friends have advanced the idea of a "living constitution" that could be adapted to the times. The real meaning is, of course, that the constitution could be changed on the fly rather than the laborious process of constitutional amendment.

Notice that the "living constitution" theory means that the government can do anything. It reduces government to a pure contest of power. One year the government may change the constitution as the behest of the popular will, another year the government may change the constitution at the behest of the educated elite.

The result is what we have today. It is a government that can't say no, a government that has promised pensions and benefits to the people that can never be delivered and will result in a train wreck at some point. After the train wreck the liberal clients will find that the promises are worth nothing.

But now the people, through the medium of the Tea Party movement, are telling the progressive elite that they demand a return to constitutional government, a limited government not a living government.

Sarah Palin is one street-smart politician. And that is why she is now a "commonsense constitutional conservative."