Back to Basics

OK. We’ve congratulated President-elect Barack Obama on his victory. Now it’s time to get back to basics.

It’s the old question after a defeat in battle. What are we here for?

For the conservative movement the answer is the same as it was always been since Edmund Burke invented conservatism in 1790 with his Reflections on the Revolution in France.

Conservatives stand for a balanced understanding of human life and human meaning. We assert a fundamental ignorance about our human destiny. That is why we stood against the French Revolution, as Burke did. We also stand against communism, fascism, socialism, and all the secular religions of the modern world, including the progressive religion of our liberal friends, the educated elite.

In putting flesh on the bones of this bare understanding of the human condition I turn to the ideas of Michael Novak in The Spirit of Democratic Capitalism.

In Spirit Novak develops the idea I call the Greater Separation of Powers. There are three differentiated sectors in modern society: the political, the economic, and the moral/cultural. They are and ought to be separate and individual centers of power, and need to be separate and independent of each other. Each has its power, and each is checked and balanced by the jealous critique of the other sectors. But no one sector should ever obtain dominance over the others, and no two sectors should be allowed to gang up on the third sector.

Viewing our society through the lens of the Greater Separation of Powers we can see that our society suffers from three major diseases.

The first I call The Rape of Honor. It is a disease of the moral/cultural sector. In his book Honor: A History, James Bowman begins by defining honor. He says that, in men, it is bravery, the courage to stand in line with your brethren and not run away in the face of danger. In women, it is chastity, the reputation for right action, that is, the good opinion of other women. In our society we have allowed a sustained attack on these two anchors of right living, and the more that people allow their lives to deviate from the practice of honor the more their lives wither and decay.

The second disease I call The Weight of Government. It is a disease of the political sector. Our governments in the world today are too big, too powerful, too ineffective, and too bossy. “It’s the spending, stupid,” you might say. And if you don’t believe me, go to usgovernmentspending.com. Big government infantilizes us, and subsidizes the Rape of Honor, because people without honor are people who cannot live outside the sheltered liberal plantation of big government.

The third disease I call The Sweating of Business. It is a pollution of the economic sector by the political and moral/cultural sectors. Back in the 19th century, everyone knows, the world was full of sweatshops that worked people long hours for low pay and no benefits. Well, today, businessmen and women are like the sweatshop workers of old. The political sector uses business like a piggy bank, and the moral/cultural sector uses business like a punching bag. The other two sectors have ganged up on business to humiliate it and to reduce its reputation and its power.

Our conservative destiny to to cure these three diseases of the body politics, and right three great wrongs. We must rise up to end the degradation and the violence of the Rape of Honor, to reform and remove the great Weight of Government, and to liberate our Sweating Businesses.

It’s not that complicated, now, is it?

A Great Day for America

Yesterday the voters of the United States elected their first non-white president. Although I wouldn’t exactly say that there has been a racial “barrier” to the presidency as our liberal friends seem to think today is an historic moment, a marker that says that the old tribal ways of the world are slowly dissolving.

At this moment on November 5, the New York Times shows that President-elect Obama is leading by 349 to 162 votes in the Electoral College. In the popular vote he leads by 63.0 million votes to 55.8 million for Sen. John McCain (R-AZ). That’s 53.0 percent to 47.0 percent. It’s a solid victory for Sen. Obama.

It’s also a solid victory for Democrats as they increase their majority in the US Senate to 56-44 (including three seats in which Republicans are leading) and 252-173 (with 10 undecided) in the House of Representatives.

For Democrats the eight years of frustration as they railed against the illegitimate or unintelligent President Bush have been redeemed with a return to power. And it looks like it is First and Ten for Democrats as the financial markets signal an end to the meltdown. So now they’ll have the opportunity to complete the welfare state with a government takeover of health care.

But this election is also the best of all possible worlds for Republicans. Sen. Obama won the presidency witha solid win, but not a landslide. Democrats have made gains in the Senate, but nowhere near a filibuster-proof 60 seats. And 22 Senate Democrats will be up for reelection in 2012.

The Duke of Wellington is the guy to look to at a time like this. The great test of a general, he wrote, is “to know when to retreat, and to dare to do it.” Republicans today have been beaten in battle. The challenge now is to dare to retreat and get the exhausted troops to a safe stronghold. With a good retreat we can return to the political battlefield in two or four years refreshed, retrained, and eager to win.

Am I Still a Conservative?

I did it. I ventured out into a nest of happy voting Democrats in the heart of Baghdad Jim McDermott’s Washington 7th Congressional District and voted for Sen. Barack Obama (D-IL).

Not because I think he’ll make a good president. No, I think that Obama has all the wrong fashionable liberal opinions on everything, from his youth as a community organizer in the cruel and unjust template of Saul Alinsky’s Rules for Radicals, to his oh-so-fashionable views on global warming.

No. To me it’s a matter of political hygiene. I think that the voters should switch parties about once every eight years (and definitely after twelve years).

There are two reasons to do this. First of all, any party gets corrupt, and we need to sweep the rascals out on a regular basis, on principle.

But the main reason is this. You just don’t do any serious thinking when you are in office. All you do is try to stay in office, and we can see where that got the Republicans.

There are great and worthy reforms that Republicans and conservatives need to offer to the American people, but right now the Republicans need to go into winter quarters at some modern version of Valley Forge and think about how to talk to the American people about their vision of the future.

In four years, or maybe eight years, the American people will be ready to listen to Republicans again, and then we can hope to start on a new age of conservative reform, and truly begin to roll back the cruel and unjust politics of the welfare state.

Vote for Barack Obama? Or Fred Smith?

If you vote for Sen. Barack Obama (D-IL) maybe he’ll spread the wealth around. He’ll take money from the rich earning more than $250,000 a year and give it to 95 percent of the American people. Obama is a student of Saul Alinsky, who wrote Rules for Radicals. Alinsky’s idea was that you organize poor people to demand justice and their share of the economic pie. You can read all about Obama and community organizing from Stanley Kurtz.

Or you could vote for Fred Smith. Fred Smith is the guy who wrote a paper in business school on the idea of an overnight package business. Today FedEx Corporation owns 300 planes and employs 290,000 people. But back in the day his business school prof didn’t think the idea would work.

Fred Smith is frustrated. He’s built his company on blue collar and community college types, according to an interview with Stephen Moore at the Wall Street Journal. The high flyers won’t go to work at ordinary industrial companies. They want to earn the big bucks in the finance industry. Or they did.

He says that most of FedEx’s first line managers come not from the top flight universities, but out of community colleges and the military. "The top talent has wanted to go to Wall Street."

But if you want to spread the wealth, according to Fred, you want to forget about Obamanomics.

"The politicians deplore the fact that we have a disparity of income," he says, but "the only way to make a blue-collar person earn more is to invest in capital, training and infrastructure. So the more you tax capital, the more you hurt workers." He estimates that about 70% of the return from FedEx capital expenditures is captured by workers in the form of higher wages as their productivity rises.

You mean that the way to help ordinary Americans is not by government spread-the-wealth but by corporate invest-in-capital-training-and-infrastructure? My, that’s radical!

Notice that Fred doesn’t mention education. The way to make a blue-collar person earn more is to invest in capital, training and infrastructure, he says.

Fred Smith deplores the high leverage in the financial industry.

"Rather than in our business where you have to have a dollar of equity for, 10 cents or 15 cents of debt," he explains, "it’s exactly the opposite in the financial sector where you have one dollar of equity for 10, 25, 50 times risk."

The thing about having 1 to 10 debt to equity rather than 10 to 1 like the finance industry is that, when things go south, you get to survive. In today’s economy that has to mean something.

Fred argues that the way to encourage corporations to reduce debt load and increase equity is to tax equity less, starting with lowering the corporate income tax rate from 38 percent down to 25 percent.

Now that would be something.

The Rest of the Credit Story

Here in the US we are naturally concerned about the damage that the mortgage meltdown has done to the domestic US economy.

Just on cue, as the federal government announced a 0.3 percent decline in real GDP last quarter, the stock market this week seems to a have turned a corner, starting with a 900 point climb in the Dow in the aftermath of the short squeeze on Volkswagen stock.

Don’t look now, but when the US catches cold the rest of the world gets wiped out. The Asia Times columnist Spengler has the story.

The financial crash exposes the fragility of large swaths of the world. The political consequences will be terrible... Worst affected are the most populous Muslim countries, and Russia’s "near abroad".

In the US we have had a credit squeeze. But you can still get a mortgage to buy a house. In the rest of the world the credit faucet has been completely turned off, and many emerging countries are facing economic Armageddon as their currencies tank. Spengler uses the cost of five-year default protection as a gauge of just how bad things are going to get. For countries like Argentina and Venzuela, it’s not available.

The solution is pretty obvious. The US is going to have to use its credit to bail out not just the banks but a number of nations, especially including the countries that escaped recently from the old Soviet Empire. Already the Fed and the IMF are working to spread money out around the globe.

[Treasury Secretary] Paulson said he welcomes the Fed’s decision to create swap lines with four central banks as well as the IMF’s decision to establish a short-term liquidity facility to provide various countries with loans. The Fed Wednesday announced swap lines totaling up to $120 billion with Brazil, Mexico, South Korea and Singapore.

Let’s propose that the bank bailout is working, that the major credit markets in the US and Europe are returning to normal as LIBOR rates decline from the mid 4s to the mid 2s.

That is fine and dandy. But the rest of the world is still completely frozen. The next step is to help them.

Because it doesn’t do the US any good if the rest of the world suffocates on a total credit seize-up.

And it also looks like the gleeful reports of the end of the US hegemony were greatly exaggerated.

Poisoning the Chalice

For the past thirty years conservatives have been trying to reform the vast empire of government subsidy and patronage we call the welfare state. Conservatives have worked to ease the distortions built into the economy from a peverse tax system. They have worked to enable the forces of “creative destruction” through deregulation. They have tried to unwind the cruel and unjust system of welfare benefits. They have tried to introduce choice into the monolithic system of compulsory education. And they have tried to move away from the first dollar free-at-the-point-of-delivery model of health care.

Not surprisingly, our liberal friends have resisted the forces of change. A century ago they began their program of legislation to provide free education, free health care, generous assistance because they believed that it was the right thing to do. They enacted their program confident in the knowledge that every educated, progressive-minded person agreed with them.

But now, a century later, their rigid programs of education, health care, and welfare assistance are long past their sell date. Initiated with boundless hope they have slowly wound down, year by year, and how exist mainly as patronage programs by which our liberal friends maintain themselves in their sinecures and their clients in their pensions.

In the last decade, especially, our liberal friends have struck out with remarkable venom against those who would seek to reform their welfare state colossus, and in doing so they have poisoned the chalice of US democracy. By blocking all reform, especially in the subsidies for home mortgages, they have brought on a perfect financial storm, and true to the chapter and verse of their tactics manual, have ruthlessly blamed it all on the incumbent Republicans.

That means that Americans will likely elect Sen. Barack Obama (D-IL) next week to be president. And he has promised more of the same: more pensions for Democrats, more subsidies for liberal-favored constuencies and initiatives, and more government direction of the national life.

Conservatives believe that we are already long overdue for root-and-branch reform of the welfare state. We believe that Americans should be in charge of the efforts to enhance and improve their communities. We believe that government programs are the least effective way of adapting to the future. We think that the bureaucracy-and-subsidy model has be tried and has failed.

But our Democratic friends are determined to give it one more college try, and if they win they will have a mandate to do so. Unfortunately they will be handed a chalice that they have tarnished and poisoned. In their intransigence they refused, while in opposition, to allow it to be refreshed and renewed. We saw this intransigence before, in 1990, when Democrats led by Senate Majority Leader George Mitchell refused to allow a capital gains tax reduction to ease the pain of recession.

The American people are fed up with the poisoned chalice that politicians in Washington have been soiling for the last decade. They want sensible, practical reform. Next week, most probably, they will call for a change in the national executive branch. That is the one great power they possess.

But they will expect that change to lead to reform. If it doesn’t—and we believe here at Road to the Middle Class that they are unlikely to get it from President Obama, Speaker Pelosi, and Majority Leader Reid—they will be back in two years or four years with a firmer demand for change.

That is what democracy is all about.

Spread-the-Wealth

Conservatives have been pushing the Obama-is-a-socialist meme pretty heavily in the last few days.It’s probably the only thing that can pull the election out of the bag for John McCain. A recent Gallup Poll shows that, if you ask the right question, Americans oppose fixing the economy with spread-the-wealth programs by 84% to 13%. As Gallup report it:

When given a choice about how government should address the numerous economic difficulties facing today’s consumer, Americans overwhelmingly — by 84% to 13% — prefer that the government focus on improving overall economic conditions and the jobs situation in the United States as opposed to taking steps to distribute wealth more evenly among Americans.

And, of course, the Obama program leans heavily on finding ways to spray money at its supporters through tax credits and the like. (Of course, elite liberals get a look in with a renewed tax credit for buying a hybrid car.)

It’s not so much the spread-the-wealth that annoys me. After all, Republicans spread the wealth to Republicans with tax rate cuts. It is merely an incidental factor that lower marginal tax rates benefits not just Republicans but all Americans.

It’s the subsidies that I don’t like, and the distortions they introduce into the economy. First dollar health coverage. Subsidies for alternative energy. Subsidies for low-income homebuyers. “Free” education.

Everyone wants to help poor people, but how? Subsidies? Welfare? Free this and free that? It all seemed so simple a century ago when social democracy really got started. Everyone agreed on the problem: the poor lacked material resources. Give them the resources, and justice would reign.

It didn’t turn out that way. The poor did not just lack material resources. They lacked “spiritual resources,” as Robert William Fogel put it in The Fourth Great Awakening and the Future of Egalitarianism.

The way that the poor build up their spiritual resources is with religion and with love and with hard work and intact families. The welfare state has been a stunning success in breaking up families and turning low-income young men into feral beasts.

That is why we here at The Road to the Middle Class have just two words for the welfare state: Cruel and Unjust.

Because there is another way.