Bush, Akin, and Sandy

Republicans and conservatives looking for reasons why Mitt Romney lost the election might consider the trio of Bush, Akin, and Sandy.

Barack Obama spent so much time during his first term dodging responsibility and blaming George W. Bush – often falsely - for whatever was going wrong in the country that it became something of a national joke. Still much that went wrong in the last dozen years  really was Bush’s fault,  and that may include Romney’s losing the election to Obama. Polls showed that a majority of Americans thought the economy was in bad shape, and the country was heading in the wrong direction. However, polling of voters also showed that a higher percentage of voters blamed Bush for the mess, even after almost four years of Obama’s administration, than blamed Obama. This suggests a quite unusually high  residue of hostility toward Bush. It seems to be almost a parallel to the 1930’s when, despite years of continuing depression under Roosevelt, voters continued to blame Hoover for their troubles and reelected Roosevelt in both 1936 and 1940. Republicans and conservatives looking for reasons for Romney’s defeat should consider that a main reason might be that he had to run with George Bush hanging around his neck. (Even  the odd business of  so many voters telling  exit polls that Obama’s response to Hurricane Sandy influenced their decision may have been an echo of the dissatisfaction over Bush’s politically maladroit handling of Katrina. ) Bush’s legacy of unnecessary wars, increased spending, ballooning deficits, a greatly expanded federal government,  a vigorous  embracing of the social agenda of the religious right, infringement of civil liberties, and an appearance of bumbling, tone deaf political ineptitude, all capped by a once in a generation financial crisis may have been too much for his party to live down.

Then there were the social issues, well symbolized by Todd Akin, the Republicans’ candidate for the senate in Missouri, but by no means restricted to him. The case of a couple of Obama voters I know illustrates the situation well. They are professionals in their mid-thirties. She is a successful physician, and he is an administrator at a university. They have two children. She is an at least partial libertarian whose favorite economist is Thomas Sowell. He is a gun owning moderate with a number of libertarian sympathies. They are the sort of self supporting people with bright economic futures who are among those most threatened by Obama’s policies. Romney should have had to contend only with Gary Johnson for their votes. Yet they voted for Obama, or to be precise, they used a vote for Obama as a vote against the bigoted, dogmatic, ignorant, anti-science yahoo-ism they see as endemic in the Republican Party. They have mentioned gay rights, women’s choice on abortion, statements by various Republicans about America having been founded as a Christian nation with religious freedom restricted to choice among various Christian sects, claims  by some Republicans that states have a right to ban contraceptives, and of course Akin’s notions on avoiding pregnancy during rape as examples. Their objections seem almost as much aesthetic as political, since their concerns and irritation are not limited to proposals that have even a small chance of being enacted. There is evidence that they are not atypical but rather representative of many  people who voted against their interests and better judgment on economic and geopolitical questions because they could not accept what the Republicans were saying on social issues.   These people, many of whom are too young to remember the Cold War or the economy of the 1970’s, seem less likely than their elders  to hold their noses on the social issues and vote for Republicans because they are better on the economy and national defense.  They are people Republicans will need to  win elections, and it will take a some changes to get them.

Finally there was simple bad luck. Polls showed that many voters said  their decision was influenced by Hurricane Sandy, and most of them voted for Obama. One may object that only a fool would base his vote in a presidential election on photo ops after a hurricane, but that seems to be what happened. It is likely that by late October the differences between the policies, records, character, and ideologies of the two candidates had been displayed  clearly and obviously enough that most people who  thought about those things probably had made up their minds or at least decided the tradeoffs and criteria upon which they would make up their minds. That left the battle over turnout and the feelings vote. Sandy seems to have helped steer a good part of the feelings vote to Obama. There is nothing for Republicans to do about that except hope for better luck next time.

Perspective on the Election

Conservatives and Republicans are still offering opinions on  Romney’s loss to Obama. Some of the more gloomy and pessimistic are proclaiming that the country is just plain lost – that given Obama’s execrable political beliefs, obnoxious personality, and awful record and given that Romney ran a fairly competent campaign and drew an explicit contrast between his less statist and Obama’s more statist views and plans, it is time to conclude that the quality and moral fiber of the citizenry have declined irreparably from the heights of earlier times.  Where formerly we were told that conservatism wins every time it is tried, now we are hearing that the American people just aren’t  good enough any more to do the right  thing. Some conservatives blame this on what they see as  morally lax baby boomers and gen –X and –Y ‘ers, who make up most of the electorate.   Others think there are just too many blacks and Hispanics in the country for things ever to be made right.  Some of these pundits get downright apocalyptic, which would not matter much if not for the risk that too many decent citizens might  take  them seriously.  A look at history can help people to calm down and look at the problems and dangers more realistically. People do not even need to look back that far.

Forty eight years ago in 1964 the country elected Lyndon Johnson – a man fully as arrogant, personally repugnant, corrupt, and power mad and every bit as big a statist as Barack Obama -  president in a historic landslide over Barry Goldwater. The differences between the candidates were clear and well drawn. Goldwater campaigned on an explicitly stated agenda of more liberty and respect for individual rights, and Johnson campaigned on an agenda of expanding the power of the state.  (Social issues were largely irrelevant in the election and mainly ignored in the campaigns.)   Goldwater carried only a handful of states, and the Republicans were hammered in contests for seats in the house and senate. Johnson won his victory without the vote of a single gen –X or –Y slacker or self indulgent baby boomer. (The voting age at that time was still twenty one, and the oldest boomers were only eighteen.) He won with an electorate made up overwhelmingly of white people and mainly of members of the so-called greatest generation and their elders in a nation as yet untouched by the alleged moral rot of the late 1960’s and following years.  Conservatism of the limited government sort was tried, and it did not win. There clearly was not a majority among voters for either more freedom or for restraining the growing power of government.

Some  people  saw that election as a final and irreversible victory for a continually expanding government. Of course that is not how things turned out, and, while Johnson did a great deal of damage, the country eventually was able to change course and recover. Those facts are worth remembering to help put Obama’s victory and threat into perspective. Sometimes bad candidates with bad ideas win elections. That leads to bad results, but bad is not the same as fatal. There is always another election later, and voters are notoriously fickle.  The sky may be dark, but it is not falling in. Things can turn around and get better. They have before.

 Obama is bad enough that it may make sense to take precautions against some really bad, though unlikely, outcomes, just as a person might buy insurance against his house burning down without thinking it is going to happen. That is quite different from expecting the worst or giving up on the country and its people. Conservatives should remember that there is more to a person’s character than the way he votes, more to a culture than its politics, and more to a society than its government. It is okay to tell people to keep their powder dry. It is not  time to tell them to head for the hills. 

Christmas Cheer and Holiday Phonies

I am again annoyed by all the retailers’ ads about “holiday shopping” and “holiday gifts” when everyone knows that it is Christmas shopping and Christmas gifts that  they are hoping people will do and buy. What bothers me is the utter hypocrisy and dishonesty of it all. I simply don’t like the cowardly phoniness. If the characters running the retailers are so cravenly afraid of giving offense to someone by mentioning the word “Christmas”,  they should put their money where their mouths are and not stock up for or run ads for Christmas shopping instead of trying  to make their numbers from the holiday of which they dare not speak the name.

The whole business is mainly absurd political correctness anyway. Christmas is  at least  as much a secular holiday as a religious one. Indeed the things people enjoy most about Christmas – the good cheer, the presents, the tree, the decorations, Santa Claus, Rudolph, Frosty, Christmas dinner, time off from work, and so on – are completely secular and enjoyed by millions of people who are not Christians. (I often wonder if the real reason so many of the politically correct among us dislike Christmas has nothing  to do with religion but rather is simply a manifestation  of a general,  puritanical disapproval of ordinary people having too much unstructured, unsupervised, spontaneous fun.)

It has been objected that, while all this may be true, there are still a few people who would be offended by mentioning Christmas, and sensitivity demands catering to their feelings. It is interesting to consider an example of  where a consistent application of this principle would lead. There is a national holiday in January to honor Martin Luther King. There are also those who do not approve of Martin Luther King, might be offended by mentioning the holiday in his honor, and might rather celebrate, say, Elvis’s January birthday instead.  If people were to  approach this situation with  the same sensitivity that is said to be necessary in the case of Christmas, they would need to avoid mentioning Martin Luther King Day and refer instead to the “January holiday” to avoid offending someone.  I doubt if that is something  the sensitivity police would favor, but it is where one arrives applying the standard they recommend. 

Hunkering Down

As Obama  and company strut toward a second term, full of vigor and unfettered by fear of facing another election, many people are wondering what to do to stay out of the firing line and preserve as much as possible of their freedom, wealth, and income.  Some things are obvious, such as staying off the EPA’s and DOJ’s radar and  trying to keep one’s number of employees below the threshold for Obamacare. Others are less obvious, and people should share their ideas on things one might do. I have a few preliminary thought on the subject.

The first one is to realize that making investments is going to be difficult for a while. John Bogle has called this the toughest investing environment he has seen, and people such as Jim Rogers are even more pessimistic. Bonds prices are in a bubble phase after a  thirty year secular bull market. Continuing monetary inflation from the fed and large deficits from the government seem likely to lead to price inflation and higher interest rates that will be bad for bonds and particularly bad for bond funds. Cash is guaranteed to depreciate against inflation at present money market rates. Precious metals are subject to the high “collectibles” capital gains rates. American stocks could be driven down or at least held back by government actions that stifle the economy, retard growth, and make businesses less profitable. Owning real estate, even farm land, can make an investor a target for regulators of all sorts. People might consider putting a larger fraction of their portfolios into stocks of foreign countries. Certainly many foreign countries are even less free than Obama wants to make this country, but they have been that way for a good while, and those conditions are already priced into their markets. I would look particularly for opportunities in countries that are moving toward freer economies and more nearly pro-growth policies. It might also make sense to look at the bonds and currencies of nations that seem likely to have less inflation and slower rates of debasing their currencies than the U.S. Precious metals and other collectibles could do well if inflation gets really serious, even with the unfavorable treatment of capital gains on them. Some real estate and farm land might be good as well, but probably should be owned through a corporate structure that gives some protection against ruinous regulatory persecutions. Of course these are just  guesses. I don’t know what will happen, and in my ignorance I am staying diversified. The key fact is that investors should realize that there has been a fundamental change.  For about a quarter of a century beginning early in Reagan’s first term, the United States enjoyed a benign political environment for savings and investing. That began changing a few years ago, and now the benign environment had definitely been replaced by a hostile one. 

I would also suggest that people start taking their privacy a bit more seriously, and protecting it a bit more diligently. The government is going to be looking for newer ways  to shake its citizens down, grab more of their wealth and income, and control more of their activities. We can expect a bigger and more vicious IRS, a burdensome assortment of new reporting requirements, and possibly an increase in out and out surveillance of ordinary, taxpaying Americans. People should consider consciously minimizing the paper (and electronic) trails  they leave. It might make sense for people to get in the habit of doing a larger fraction of their daily business in cash and a smaller amount with credit or debit cards. Purchases that might lead to unfavorable attention from the government,  such as buying ammunition or “seditious” or “red flag raising” books and publications probably should be made only with cash. People should remember that email systems are not private and avoid using email for anything  that needs to be kept private. This of course applies all the more so to social media sites. Political comments at web sites, at least inflammatory  ones, are probably best done using a nom de plume. The notion that the names on those secession petitions that have been in the news are being fed directly into the IRS’s audit database is just a humorous fancy today. In a couple of years, who knows? We can also expect greater interest by the government in finding targeted citizens in technical violation of obscure or even contradictory rules to keep them under control and dampen dissent. People need to be aware of this and take precautions. So, If you choose to be a vocal critic of the administration, and you receive a six dollar check for jury duty, by golly report that windfall on your tax return, just in case.

There are many goods and services that people can either purchase or provide for themselves. People decide what to do  based on a number of factors including differences in nominal costs, inclination or disinclination to do the work involved, and time and effort required to earn enough money to purchase the good or service versus time and effort required to provide it themselves. As taxes and regulations increase, the values of some of these variables change. As a simplified illustration of this, suppose that you want a faucet installed in your bathroom, that  Bob the plumber  is willing to do that job if he can clear twenty dollars on it, and that both of you are taxed at twenty percent at the margin.  To clear his twenty dollars, Bob will have to charge you twenty five. To pay Bob his twenty five dollars, you will have to earn $31.25 from your business or job, a small enough amount that you may easily decide that hiring Bob is well worth it. If you and Bob are both taxed at fifty percent, Bob now has  to charge you forty dollars to clear his twenty, and you have to earn eighty dollars to cover his bill. This removes a good part of the comparative advantage of hiring Bob, and you may think about doing the job yourself. If we progress to Obama’s dream world where you both face a ninety percent marginal rate, Bob will have to charge you two hundred dollars to clear twenty, and you will have to earn two thousand to pay him. At that point, unless your time is very valuable indeed, you probably will be getting out your wrenches, and Bob will be losing your business. Increasing the regulatory costs per dollar earned on either or both of you has a similar effect.

With higher taxation and more regulatory costs, improving one’s life and increasing one’s wealth  through the “money economy” becomes progressively more difficult and expensive, while doing so by non-monetary means often does not. In the light of that people need to reconsider what things they want to acquire with money, and what things they would be better off handling themselves. Increased taxes and regulation stimulate  another underground economy besides the one where money changes hands in unreported  and untaxed transactions – the quite legal underground  economy where people work and cooperate to make their lives better without any money changing hands or goods being bartered. Food at the grocery store will get more expensive. Food people grow in their  gardens will not. Tables and chairs from a retailer will cost more. Tables and chairs made at a wood shop at home will not. (Ikea and stuff like it would fall in between.) Hiring an electrician or house painter will get more expensive. A group of friends helping each other out with wiring or painting will not. Doing more things by himself or in cooperation with friends has a side benefit of expanding a person’s set of skills at performing various basic tasks and thus making him more self reliant and less dependent on the economy’s running smoothly. This by itself could be valuable if things get really rough.

I don’t think things will get really rough. I think the chances of that are small. However they are not negligible, as they have been for most of my adult life, and I think it makes sense to consider what might happen. The risks are there. Obama’s policies are based on false notions and will not produce the results that are being promised. Continued monetary inflation could lead to really bad price inflation. A deepening recession could lead desperate governments to resort  to direct confiscation of people’s assets to keep themselves  going. Increasing poverty, decreasing opportunity for advancement, and a realization that Obama has not delivered the paradise he promised could lead to “civil unrest” among his welfare constituents. Weakness and poor policy in foreign  affairs and defense could lead  to wars, oil embargos, or other damaging crises.  Strikes, “green” pogroms against producers of food and energy, and simple bureaucratic screw ups could lead to the disruption of the production and delivery of basic goods and services. Civil liberties could be curtailed in the name of homeland security and maintaining order, particularly the civil liberties of  those dangerous right wingers.

The question everyone needs to work on is what sort and amount of insurance a person might reasonably want to acquire against these possibilities. It seems clear that it is not time to grab the musket and head for a hideout in the hills, but it seems imprudent to do nothing. For the first time since the 1970s, it is important for reasonable and sensible  people to tackle this problem in a serious way. 

A Word to Obama Voters

What one might say to various Obama voters:

To the young voter influenced by social issues:

Yes, the Republicans are often on the wrong side on social issues. Some of their policies and a good many of their voters and candidates are hostile to homosexuals, women’s rights to control their bodies, and even the availability of contraceptives. A couple of their candidates for the senate this year were outrageous yahoos and showed it with their comments on rape and abortion. There are a lot of religious zealots in the party who do want to force their views onto their fellow citizens. However, I suggest that these things are largely irrelevant in terms of actual policy and potential government action and that voting on the basis of them is beating a dead horse. A Republican administration and congress would not persecute homosexuals, restrict women’s rights, or interfere in people’s bedrooms, despite having members and supporters who might want to. That war is over, and the social conservatives lost. On the other hand, threats to freedom from an over controlling, over regulating, and economy strangling federal government and bureaucracy are quite real.  Young people at the start of their careers are the ones who most need a society with freedom and economic opportunity. That is what young people should be voting to secure. The social issues will be okay.

To the low income people who supported Obama:

While it is possible that those receiving subsidies of various sorts from the government will get bigger payoffs in the short run, Obama’s policies will harm low income people in the long run.  His inflationary and anti-growth policies and regulations will retard economic growth, restrict innovation and technological progress, make basic goods such as food and energy more expensive than they would have been otherwise, and push investors to move money, business facilities, and opportunities for employment overseas. Even in the short run, any serious downturn in the economy that his actions might cause will hit low income people first and disproportionally hard. People with high skills and incomes and plenty of money will not be first victims of Obama’s economics, regardless of what he does on tax rates.

To the government employees who supported Obama:

You may do well for a while as Obama squeezes you fellow citizens a bit harder and perhaps shares the loot with you. However his policies will retard economic growth and innovation and in the long run leave less money available for spending in the public sectors than there would have been otherwise. It is also probable that many of his heavy handed policies and regulations will produce a backlash against oppressive government. If that happens, and the pendulum swings back, it will swing back right at you.

To the wealthy who supported Obama:

Whether your motivation was to assuage your guilt over unearned success, to maneuver to get payoffs or favors from the government, to protect yourself from reprisals, or simply because you think a powerful, controlling central government  is a good idea or at least good for you, I can’t find much in the way of excuses for you. I hope he double crosses every one of you, and you get the government you wished on the rest of us, good and hard.

1980 and 2012

My generation, the boomers, has been a lucky one. Today, after an election that probably means some rough luck for the country, it is appropriate to honor the man who was responsible for much of our good luck. Thirty two years ago in 1980 the country was in much worse shape  than it is today. The economy was in a debilitating inflationary depression with double digit inflation and high unemployment. Mortgage and other interest rates were in the mid teens.  The country was in a losing Cold War struggle with an aggressive and expansionist Soviet Union. Statist, anti-growth, left wing policies had dominated recent administrations of both parties, and pundits of all sorts were pronouncing that the nation was in a terminal decline. 

That November the country  elected Ronald Reagan president and gave his party a majority in the senate. He gave the government new policies, new directions, and a new viewpoint. Within a few years inflation came under control;  interest rates declined; anti-growth policies were changed; and the nation began a quarter century of growth and prosperity. The Soviet Union was completely defeated in the Cold War, and the occupied nations in central and eastern Europe were liberated.

We early boomers got to spend much of our working years  in times that were more prosperous, more full of opportunity, and freer from the threat of nuclear war than almost anyone would have guessed in 1980 – a lucky bunch of people indeed. Reagan gave us peace and a quarter century respite from many of the depredations of rapacious government, and many of us used that respite to put the lie to the commonplace belief of 1980 that  most of our generation would have less success and lower standards of living than their parents. Now, the country is again plagued by statist, anti-growth, left wing policies and has just re-elected a president in the mold of Jimmy Carter and Richard Nixon.

We can be grateful indeed for the respite Reagan helped give us and hope that our children and grandchildren will someday be as lucky. We owe it to them to try to make that happen. We also owe it to them and ourselves to use our wealth, knowledge, and experience to prepare for the possible rough times ahead and to help the people we care about get through them as well as they can.

The Election

Some thoughts about yesterday’s election:

Abortion may be  the new gun control. Gun control is an article of faith among leftist Democrats. For years it was also a major part of their programs and campaigns. Then they started losing elections because of it and dropped it as a national issue, perhaps deciding pragmatically that while anyone adamantly in favor of gun control was likely to vote for them anyway, people opposed to gun control who might otherwise have voted for Democrats were being  driven to the Republicans. That seems to be where the Republicans are on abortion.  They lost two senate races yesterday in Indiana and Missouri that should have been easy victories because of dogmatic yahoo-ish statements by their candidates about abortion. The question could also have been a factor in Romney’s losing among women in several states where the overall totals were close and a better showing among women would have made Romney the winner.  It may be time to for the Republicans to realize  that they are not winning with this and drop opposition to abortion as a national issue. (They could of course still use it as a local issue in places where it is popular, just as the Democrats have done with gun control.)

I hoped Romney would win and thought he would win, though realizing that the issue was much in doubt.  However I am not surprised that I was wrong. Defeating an incumbent president is very difficult in this country. Since 1900 there have been only two incumbent, elected presidents who lost elections in which there was not a strong third party candidate - Herbert Hoover and Jimmy Carter.  While the country is not in good shape just now, it is in nowhere near the bad shape it was in in 1932 or 1980.  In the same period, all former vice presidents who had assumed the presidency after the death of a president and then sought re-election won.  Also since World War II, the Republicans and Democrats have alternated holding  the presidency in eight year intervals every time but one (Carter’s loss in 1980).

Still I hoped that  the difficulties with the economy, coupled with Obama’s execrable views, unpopular policies, and unpleasant personality would allow a Romney to pull it off. Well they didn't, and the country will suffer for that failure.  But the man is not really a Duce or a Generalissimo for life with unlimited powers. He only behaves as though he wishes he were. We can hope that a Republican house and an alert citizenry can keep the damage to a repairable level.