The Luck of the Liberals

You've got to hand it to our liberal friends. They've had an amazing run of luck. After mucking up the economy throughout the 1930s they managed to persuade the American people that they saved the economy in those years with their brilliant stimulus spending on the CCC and the WPA and the TVA and Grand Coolee Dam.

Then, for the last half century, it always turned out that a Republican was in the White House during a recession: 1958, 1969, 1974, 1981, 1990, 2001. Those stupid Republicans, we are reminded again and again. How could they keep screwing it up.

You could also think of the Luck of the Liberals. They always manage to be on vacation when there is real work to be done.

Let's think of liberals more as the uncouth Baron Ochs auf Lerchenau in Der Rosenkavalier. He had a remarkably high opinion of himself, even though his name translates as "ox of the lark-meadow." And he had a favorite rollicking waltz, "The Luck of the Lerchenaus." Eventually, the Baron's luck ran out and he was roundly humiliated to the satisfaction of everyone.

But now the liberals are in charge in the worst recession for a while, and it is a recession combined with a banking crisis, a particularly nasty combination. In such a situation, you need to get it right, otherwise things are going to be really nasty--kinda like the unending Great Depression of 1929-39, America's lost decade.

I felt and I wrote, back in early 2009, about my foreboding when the Obama administration did not change course after winning the election and continued with its entitlement and regulation agenda during the aftermath of the Crash of 2008. Not good, I thought. You chaps need to fix the economy first.

But the courtiers were all egging the Obamis on, and on they went. Now, of course, everyone is predicting a double-dip recession and deflation and a lost decade like Japan's in the 1990s, and Democrats are waking up the the prospect of an electoral tsunami in October. (A tsunami? Another proof of global warming, I should think.)

The sensible strategy is to repeal ObamaCare, repeal the Dodd-Frank financial re-regulation bill, enact sharp spending cuts, extend the Bush tax rate cuts, enact corporate income tax rate cuts, and watch the stock market turn on a dime.

But that, I would guess, is politically impossible for the Democrats. If they were to do that it would announce to the voters and the world that everything they stand for is rubbish and always has been.

The problem, I think, was encapsulated in a recent Wall Street Journal article by businessman Michael P. Fleischer about the problem he faces in the Obama economy. He talks about the cost of "Sally," the median employee at his business. She has a high-school education plus some specialized training. He goes on and on for several paragraphs adding up all the taxes and fees he must pay for.

When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year.

Think of it this way. Government puts a 33 percent jobs tax on every job in America.

Now do you wonder why business is slow to hire new employees in the aftermath of the Great Recession?

I'm reading A History of Central Banking in Great Britain and the United States by John H. Wood right now. Don't laugh, it's a real page-turner. Here's an important take-away. Every time there's a financial panic or crash, it seems that the big question is "confidence." Market players look for a magic bullet to restore "confidence." Another word for "confidence" is "credit" or faith.

In other words, the economy runs on more than the numbers. It runs on confidence and credit and faith and trust. It runs on the faith in the counter-party, that he is good for his commitments.

Governments and financial "plungers" tend to take advantage of other peoples' trust to hoodwink and deceive. But the market economy, at bottom, runs on trust, the trust that things will turn out all right and that the other guy will not try to run away from his commitments.

That's why J.P. Morgan told the Congress this in 1913:

[A] man I do not trust could not get money from me on all the bonds in Christendom.

This statement merely states the obvious. The problem with lending money arises not when things are going well but when things are going badly. What will a man do about the money he owes me when things are going south?

America's businessmen right now are in a quandary. They are making money, because they have ruthlessly pared back their operations to make sure they can turn a profit. But they are looking forward and they just don't have the confidence in the future to take a risk on expansion.

Not with President Obama in the White House and Pelosi and Reid leading Congress.

And so it looks like the Luck of the Liberals is running out, just like the Luck of the Lerchenaus. You just don't want to let the oxen loose in the lark meadow. Not if you want larks in it.

Central Bankers Don't Know Nothing

August 9 was a red-letter day in the Chantrill household. You'll never guess why.

Yep, yesterday was the day that A History of Central Banking in Great Britain and the United States arrived from Amazon.

I can tell you, it is a real page-turner. Seriously.

I'm afraid that I've only got through the first four chapters so far, so I can't give a full report on the book. In fact, the story so far only includes the history of the Bank of England up to 1844.

But the story so far is pretty simple. Central bankers are clueless when it comes to stabilizing the economy. Central banks are vehicles for lubricating government finance, and in Britain and the US they have done this job very well. Good work, chaps!

But we expect more of the central bankers. We expect them to lean against the wind. We expect them to lean against bubbles and booms and we expect them to step in to prevent collapse during banking crises.

Central bankers are very good at doing their job of acting as the government's banker. Unfortunately, they are lousy at doing what we want them to do, and that is to stop the big booms before they turn into bubbles and busts.

We think of the Bank of England as an august body with the wisdom of Solomon. Not a bit of it. The story of the Bank of England is one clueless mess after another. 1720 and the South Sea Bubble. 1745 and the panic of Bonnie Prince Charlie. 1797 and suspension of the gold standard in the Napoleonic Wars. 1819 and the deflation on the resumption of gold payments after the Napoleonic Wars. The crash of 1825.

But the Bank did a bang-up job of acting as the government's banker. The Brits ran the National Debt up to 250 percent of GDP by the battle of Waterloo. You can credit the Bank of England for that.

What excitement! What suspense! And there are still 300 pages left to go!

Learning Lessons Good and Hard

Democracy is the theory that the common people know what they want, and deserve to get it good and hard. That was H.L.Mencken's clever quote.

Let's combine his line with a related quote from Benjamin Franklin: "Experience keeps a dear school, yet Fools will learn in no other."

The welfare state is the theory that the people should pay for the folly of the liberal elite good and hard.

The great question in democracy is how to get it through the thick heads of the liberal ruling class that its ideas and policies stink. Like right now.

The liberal elite has given us trillions in stimulus and bailouts but the economy is barely making headway. Obviously the elite has made a mistake. You do not revive the economy with handouts to the darlings of the politicians. Those darlings are already wasting money big time. You want to give them more money to waste?

We have known that this policy, Keynesianism, doesn't work. We have known it at least since the days of Reaganomics when the economy shot up like a rocket about three months before the Reagan tax cuts kicked in in 1983. And then continued to rocket.

There are lots of articles out today about the folly of Keynesianism, and the common sense of Reaganomics. Liberals should read them here and here. They might learn something.

But liberals never learn. So now they are going to get their heads handed to them in the mid-term elections. I am going for the long bomb on this: 80 seats in the House of Representatives, biggest since 1938. The experience of electoral defeat is a hard school. But politicians will learn in no other.

The Culture of Compulsion

What is the center of the conservative critique of liberalism? It is, I believe, that liberalism has replaced the community of social relationship with a rigid mechanism of administrative bureaucracy.

Of course, the old ways of traditional face-to-face community had its problems. It was often unreflectingly conservative and often hardened hierarchy into oppression. The question at the beginning of the modern era was how to replace the often oppressive hierarchy of the old regime with a new web of freedom.

In the adventure of freedom the Anglo-Saxons attempted a balance of powers that tried to compromise between national power and local loyalty, and set the different branches against each other in a separation of government powers. The French attempted to erect an empire of Reason, and it led directly to the guillotine and the Terror. The Germans erected an empire of rational hierarchy from schools to state bureaucracies to the armed forces. They turned a nation of poets and thinkers into an army. It was an army that could conquer the French any time it wanted to, but it led to the ruin of 1945.

You'd think that everyone would get the message but they didn't. In all the great areas of political life we moderns have marginalized instinctive, cooperative voluntarism and built up huge structures of rational administration.

We have built up huge government pension programs wonderful in their mechanical completeness but utterly unconnected to underlying economic reality. That is to say, we have decreed what is to be paid to older people in benefits and what is to be paid by younger workers in taxes and contributions, but we have no way of balancing the two. In all western nations, the government pension program is breaking down.

We have built up huge government health care programs. The British National Health Service is the largest administrative organization in the world after the Indian Railways. Each administrative system reflects the latest ideas from the politicians, from the health producer interests, and political interest groups. But it cannot respond to the day-by-day needs of ordinary people and adjust itself to their priorities. It is subsidized at the point of delivery but ruinously expensive overall.

We have built up huge government education systems. These systems require that children be sent upon compulsion for most of their childhood and youth to government custodial facilities to learn--not very much. The education system is designed around the needs and notions of the educated professional class. Thus it assumes that every child should prepare for a college education, ignoring the fact that most people learn by doing. The system responds, as any government program, to political winds and desperate attempts by politicians to respond to the latest disaster. But it cannot respond to the individual needs of parents and children. It pits parents against each other as its centralized administrative structure forces it towards one-size-fits-all.

We have built up huge government welfare systems. These systems treat the poor as passive objects of compassion that either qualify or do not qualify for benefits. But humans are not passive objects. They are resourceful creatures, descendants of a species that has hacked a habitat out of a nature that only rains down its blessings upon the adaptable. Thus the poor and the not-so-poor develop a cunning knowledge of the system and learn how to adjust their lives to qualify for benefits. They become world experts in qualifying for government pensions when youthful twenty-somethings; they expose the lie of an intelligent elite assisting helpless victims proving themselves intelligent exploiters of a mechanical monster.

These vast administrative structures marginalize ordinary people. They make them into cogs in a vast machinery. The administrative state turns people from free citizens responsibly serving their fellows in voluntary cooperation into dependent drones anxiously searching for the right shaped benefit outlet in which to plug in for a battery charge.

There must be a better way. There must be a way of building a society in which the ordinary person has a social and responsible role, something with more dignity than an insecure dependence on a government program.

Call it Perry v. Eastwood

This week Judge Walker found for gay marriage in his decision against California's Proposition 8. His decision in Perry v. Schwarzenegger centers on numerous findings of fact in favor of gay marriage.

Conservatives are united in regarding these findings of fact as irretrievably biased in favor of the plaintiffs.

James Taranto thinks that appellate judges will find it hard to argue against findings of fact, however risible. And then the case comes to a Supreme Court split 4-4 with Justice Kennedy in the middle. Taranto predicts that Kennedy will vote in favor of gay marriage.

If that occurs, I realized yesterday, Perry v. Schwarzenegger will probably turn out to be Roe v. Wade II. Only this time the Supreme Court will know what it is doing.

Back in 1973 the US Supreme Court, in finding a right to privacy and a right to abortion in the US Constitution, did not expect to stir up a hornet's nest. It assumed, along with all right-minded people, that legal, accessible, value-free abortion was a sensible and practical individual right. The Court did not understand that, for millions of ordinary Americans, babies are sacred.

There's a reason for the disconnect between ordinary Americans and elite Americans on the social issues. For elite Americans the hope of immortality rests in the hope of becoming a footnote to history with a great creative achievement: a law, a work of art, a scientific discovery. But for ordinary Americans the only hope of immortality outside religious faith is their children. For such people, children and babies and marriage become a transcendent issue.

Gay marriage is the abortion issue all over again. In elite America, gay marriage is no big deal. It's a lifestyle choice. But for ordinary Americans it threatens the hope for immortality in children.

Gay marriage advocates are clear that the basis of gay marriage is the universal right to marry the one you love. For ordinary Americans marriage is rather different. It is the framework within which you can lay down your hope for immortality, your children.

Conservative partisans should wish that the tough guy defendant in Perry v. Schwarzenegger were not Conan the Barbarian but Dirty Harry. For if Justice Kennedy doubles down on Roe v. Wade we might as well call the gay marriage case Perry v. Eastwood.

Politically, a pro gay marriage decision will likely create a new movement of rejection against liberalism as persistent and as fervent as the pro-choice movement. It might be enough to create a conservative political majority in the United States for the next generation. So conservatives might well say, with Dirty Harry, Go ahead, make my day.

But that would be a shame. For the sake of social peace it would be better for the Supreme Court to fudge the issue, as it did in the famous Bakke decision on racial preferences.

On the other hand, we must recognize that the social issues cannot be kicked down the road forever. The US tried that with slavery. In retrospect, it would have been better to tackle slavery sooner rather than later.

You'll remember that it was the South's intransigence that prevented a peaceful solution, or even a fudge, on slavery. Kinda reminds me of the intransigence of today's liberal judges and their liberal activist cheerleaders.

Imperial Judiciary

The great liberal innovation is using the courts to force the pace of "social change."

Traditionally, judges were small "c" conservative. You had to drag them kicking and screaming into the modern world. In this way, of course, they provided a kind of social "ballast," curbing the enthusiasms of power politicians and wild-eyed activists.

But liberals have changed all that. Ever since Brown v. Board of Education they have used the courts to do what they couldn't get done in the legislatures.

The purpose of the Brown decision was to force the pace on the civil rights of Negroes, as they were then called. In rejecting the "principle" of "separate but equal" in education the US Supreme Court set in motion decades of school busing to achieve racial balance in the classroom. The price of this win was the ritual humiliation of the South and the unintended consequence of enraging white ethnic enclaves like South Boston.

Let's stipulate that Brown was the right decision, particularly as it dealt with America's original sin, African slavery.

But Brown was followed by the Miranda decision on the right of an accused suspect to remain silent. OK, maybe, although the job of the police is to whack young lower-class males upside the head.

Then Goldberg v. Kelly conferred property rights on entitlement benefits like welfare. Was that really a good idea? At some point shouldn't we tell benefit recipients to go get a job.

There were the decisions giving public school students due-process rights, Tinker v. Des Moines School District and Goss v. Lopez. Really? End summary discipline in the schools?

Then there was Roe v. Wade on abortion, and various decisions limiting religious expression in government schools. That is what created the Reagan Revolution, sending millions of Roosevelt Democrats into the Republican camp.

In these cases, the US Supreme Court was not mopping up a confusion in the law, or correcting a flagrant injustice that had festered for decades. It was forcing the pace, implementing the moral/cultural agenda of the liberal ruling class by judicial ukase.

Now we have the gay marriage issue, Perry v. Schwarzenegger, in which a federal judge just overturned a California state constitutional amendment defining marriage as a union between and man and a woman. Again, the courts are clearly forcing the pace.

Maybe all these decisions are for the best. But the problem is that they haven't been decided by persuasion. They have been declared from the bench and imposed on society from above without the consent of the governed.

That's not how America is supposed to work.

It's Conservative Nostalgia Time Again

A recurring theme in conservatism is a nostalgia for the good old days. What happened to the good old days when conservatives were high-toned philosophers like Bill Buckley and Irving Kristol?

David Klinghoffer's piece in the Los Angeles Times is just the latest in the genre. He deplores the new generation of conservatives like the "potty-mouthed Internet entrepreneur Andrew Breitbart".

Liberals have an identical nostalgia. Not for the good old days when The New Republic and Herbert Croly bestrode the world like a colossus, but when conservatives were gentlemanly and consensual--like Bill Buckley.

Iowahawk David Burge delightfully burlesques the high-toned conservative brigade in the persona of T. Coddington Van Vorhees VII. who is always getting together with his pals "Dame Peggy Noonan" and the two Davids, Brooks and Frum, to grumble snobbishly about the rubes taking over the movement.

I never seem to hear of liberals deploring their potty-mouthed publicists. They seem to be quite happy letting the philosophers get on with philosophizing and the street fighters get on with their hand-to-hand verbal combat.

Why don't the liberals tut-tut about the low-rent liberals, from the MSNBC ranters like Keith Olbermann to the racist Reverends Jesse Jackson and Al Sharpton?

There was a time when liberals were exclusively high-toned. That was in the days of the Progressive Era, that flourished presidentially from Theodore Roosevelt (R) to Woodrow Wilson (D). But in the 1920s the Progressives went out of favor with the American voters. It was the genius of Franklin Roosevelt to create a coalition of the high-minded Progressives and the street-fighting big city machines in the Democratic Party and call it liberalism.

However they were presented to the American people, all Democratic presidents since FDR except Jimmy Carter have been frank products of political machines. Truman came from the Prendergast machine, Kennedy from the Boston Irish Mafia, Johnson from the solid Democratic South, Clinton from an Arkansas machine that he turned into a personal political machine, and Obama, the perfumed product of the Chicago machine.

These machine politicians have understand that there are always plenty of high-toned publicists ready to perfume the air around them with high-toned words. Behind the propaganda, they get on with the job of wheeling and dealing, holding their friends close and their enemies closer, and looting the public fisc.

In my view, the last few years have seen a breakout in the power of the low-rent conservatives. The unexpected eruption of the Tea Party movement is canonical. It's the power of the Internet synergizing with genuine political bottom-up rebellion.

It is telling that the Democrats all thought the Tea Parties were a put-up job, "astroturf" organized by Republican political operatives. In fact, the Republican establishment was just as surprised by the Tea Parties as anyone else, and not a little afraid of the movement.

Conservatism will never be exclusively high toned again, so the Van Vorhees chaps had better get out the air freshener.