Politics, et Cetera

A publication from The Political Forum, LLC

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Tuesday,October 8, 2013

They Said It:

Forget the politicians. The politicians are put there to give you the idea you have freedom of choice.  You don’t.  You have no choice.  You have owners.  They own you.  They own everything.  They own all the important land, they own and control the corporations that’ve long since bought and paid for, the senate, the congress, the state houses, the city halls, they got the judges in their back pocket, and they own all the big media companies so they control just about all of the news and the information you get to hear.  They got you by the balls.  They spend billions of dollars every year lobbying to get what they want.  Well, we know what they want.   They want more for themselves and less for everybody else.  But I’ll tell you what they don’t want.  They don’t want a population of citizens capable of critical thinking.  They don’t want well informed, well educated people capable of critical thinking.  They’re not interested in that.  That doesn’t help them.

George Carlin, “Life is Worth Losing,” 2005.



For our money, the biggest “news” story published during the first week of the government shutdown was one that almost no one read.  This is likely because it didn’t have anything to do with Republicans being mean and nasty to the poor, to minorities, to women, or even to welfare recipients.  Nor did it have anything to do with nonagenarians having to storm Obamaha Beach to pay their respects to their fallen comrades.  And it didn’t have anything to do with the fact that 99% of people who tried to register for Obamacare were unable to do so because three-and-a-half years isn’t enough time to set up a government web site.  Rather, it was a simple, subtle story about changing allegiances in Washington.  It came from the Associated Press and read, in part, as follows:

Business leaders are taking sides with Democratic President Barack Obama after failing to persuade their traditional Republican allies in Congress to avert a government shutdown.

Obama, whose health care and regulatory agenda they have vigorously opposed, is embracing the business outreach, eager to employ groups like the U.S. Chamber of Commerce and Wall Street CEOs to portray House Republicans as out of touch even with their long-established corporate and financial patrons.

Yet, the partial closing of the government and the looming confrontation over the nation’s borrowing limit highlight the remarkable drop in the business community’s influence among House Republicans, who increasingly respond more to tea party conservatives than to the Chamber of Commerce . . .

Interviews with House Republicans from all regions of the country demonstrate the corporate community’s waning clout.

Now, as one might expect, given the AP’s insistence on bending over backward to accommodate Barack Obama and the rest of the Democratic Party, this story is deeply flawed in many ways.  For example, the second paragraph about the “vigorous opposition” of business leaders to the passage of Obamacare and to the Obama regulatory state more broadly is patently and demonstrably false, a reflection of the ease with which the credulous young practitioners of the journalists’ trade today innocently accept as truth the liberal myth de jour.  As a whole, however, the general theme of the story is accurate, fascinating, and among the most heartening things we’ve read in years.

For years, of course, the GOP had been thought of – caricatured, really – as the party of the plutocrats, a wholly owned subsidiary of Big Business.  Republicans support capital; Democrats support labor.  Republicans support the rich; Democrats favor the poor.  Republicans do whatever business wants; Democrats follow their hearts and look after the needs of the people.  None of this was ever an accurate portrayal of the essence of the two parties.  It was, in fact, an example of the use of one of the most powerful weapons in the liberal arsenal, that which Georges Sorel described as a “social myth” and which Max Eastman defined as “an idea not valid, but necessary to set the masses in motion.”  It harkens back to Plato’s famous observation in Phaedrus that “from opinion comes persuasion and not from truth.”

The myth began to fall apart in the 1990s when Bill Clinton rolled into town, bringing with him Bob Rubin, the co-chairman of Goldman Sachs, and openly declaring that the “New Democrats” were going to compete just as hard as the Old Republicans for the support and the patronage of Big Business.  And true to his word, Bill used whatever means necessary to convince the nation’s moneyed interests – from Wall Street to Newark to Silicon Valley and especially Redmond, Washington – that the old paradigm was no longer operative; that, to paraphrase Calvin Coolidge, the business of the Democratic Party was business.

This did not mean that the Republicans fled from Big Business.  Quite the contrary, in fact.  George W. Bush enforced steel tariffs for Big Steel, eviscerated “Freedom to Farm” on behalf of Big Agribusiness, and, in line with the views and interests of his Vice President, the erstwhile CEO of Halliburton, pushed energy projects and tax breaks for Big Energy.  In short, Bush, more or less, carried on much as Republicans had always carried on, arguing that Big Government was the GOP way of helping Big Business and promoting the wonders of “free enterprise.”

And lo, by the time Rubin and Clinton and Bush and Cheney had worked their magic on Washington, everyone loved Big Business.  And, wouldn’t you know it, everyone loved Big Money even more.  Hence, a former CEO of Goldman went on to be the Democratic Senator and then Governor of New Jersey.  A second CEO of Goldman went on to become the Republican Secretary of the Treasury.  And as you may recall, the latter, in his official capacity, engineered the bailout of the industry in which he had worked for more than three decades, saving, among others, his very own firm.  Nice work if you can get it, eh?

Needless to say, this marriage of convenience worked so well that Barack Obama’s first Treasury Secretary was a devotee and a pupil of the aforementioned Rubin.  He also happened to be the erstwhile Chairman of the New York Fed, which made him a co-engineer of the Big Bank Bailout also known as TARP (the Troubled Asset Relief Program).  Obama, as he so proudly noted in his reelection campaign, pushed the bailouts of two of the “Big Three” American automakers.  He pushed a “stimulus” bill that did little more than line the pockets of his business and government cronies.  And then, of course, he “took on” the health care and financial services industries by pushing and then signing bills that were remarkably Big Business-friendly.

Above, we noted that the AP’s claim that business leaders have “vigorously opposed” Obama’s regulatory regime is patently false.  In the case of health care, of course, Big Pharma (i.e. the drug companies), Big Insurance, and even the Biggest Company on the Face of the Earth (Walmart) all vigorously SUPPORTED Obama’s “reform.”  To this day, the Left complains that the “Republicans” killed the “public option,” which is to say a government-run insurance plan.  This is another “social myth.”  Joseph Lieberman, the Democratic/Independent Senator from Connecticut – the traditional homeland of insurance companies – killed the public option and he did so in order to support the current “reform” which his patrons also supported.

As for financial services “reform” – a.k.a. Dodd-Frank – it’s hard to imagine a more BIG Business friendly bill.  “Too Big to Fail” – which is to say the mindset that no big bank should be allowed to fail, given the consequences of the Lehman collapse – was enshrined as law by two of the sleaziest Big-Business-extorting Democrats in recent memory.   Chuck Schumer, another Democrat, did everything within his power to ensure that his patrons on Wall Street were protected.  And he succeeded.  The Big Banks not only now have the symbolic guarantee of the United States Government, they also have a host of new rules and regulations that will, naturally, hamper and shutdown their small competitors far more meaningfully.

The list, of course, goes on and on (and on . . . and . . . on).  Big Tech pushes immigration reform because the California school system is incapable of turning out students who can even do simple math problems.  (Go figure!)  Big Retail (e.g. Amazon, and again, Walmart) push the internet sales tax because it will benefit them and kill their competitors.  Whereas once business was seen as a bulwark against government, it is now a partner of government.  Big Business and Big Government, sitting in a tree . . . k-i-s-s-i-n-g . . . well, you get the picture.

As you may know, we’ve never been huge fans of Ron Paul, the GOP’s crazy old uncle who may well be its First Father someday.  One thing Paul nailed, though, was his characterization of Obama.  “No he is not a socialist,” Paul declared.  “What he is is a corporatist.”

Paul is also correct in noting that the Republican Party is no different.  It too is corporatist. Or at least it has been for the last several decades.

We have written a great deal about the corporatist nature of the federal government over the last few decades.  Last January, we wrote an article detailing how this plays into the new Obama and post-Obama economy.  Specifically, we wrote:

The Obama economy is very much shaped by the age and by his belief in the necessity and efficacy of government on a massive scale.  The Obama economy is, for all intents, the “service economy” on steroids.  The key players and the principal job providers are those that deal not in manufacture or creation of tangible goods, but those that deal in ideas, creative ventures, finance, and, most important, government services.  Obama and his fellow Leftists decry the decline of American industrialization and bemoan the “outsourcing” of good manufacturing jobs.  And yet their economic policies and priorities promote nothing except big banks, big IT companies, and big government.  Small business, manufactures, and start-ups, by contrast, are singled out for retribution . . .

The net effects of this type of economy, naturally, include a greater number of Americans without jobs and a greater emphasis on the growth of government, at all levels and across all professions.  On the private economy side of things, success is measured in terms of productivity and efficiency.  How much can be done with how little?  How much can be accomplished with how few workers?  This is the nature of technological change, of course.  But its impact on the workforce is both notable and hugely significant.  This is all the more relevant when small business, which is the overwhelming provider of new jobs in this country, is given short shrift.  The economy can, for a while at least, chug along, but it does so needing fewer and fewer workers.

On the public sector side of things, “austerity” is a completely foreign concept.  More is better.  Bigger is better.  The larger and more extensive is government, the more people who can be employed in government “service.”

In both cases, the cost of government has to rise significantly, either to provide benefits or to provide jobs.  And that, in turn, means that taxes have to rise, in order to pay for increased benefits or to pay for jobs, all without upsetting the debt markets or their herald, the credit ratings agencies.

Now, please note that in Obama’s worldview, there is nothing even remotely improper or distasteful at all about this.  Indeed, it may well be as close to an ideal situation as possible.  Sure, the rich get richer.  But they are the “right kind” of rich, those who will willingly give a good chunk of their massive fortunes back to the government in gratitude for their success.  The government, in turn, uses this money – and far more borrowed money – to hire those whose education, background, and skills make them suitable for “public service.”  It also uses the money to permit those who aren’t suitably employable to remain unemployed, but to do so with “dignity.”  Win-win-win.

This is not, we should note, what Obama’s Progressive forefathers had thought would be the result of their policies.  But, as in most cases, the Progressives were remarkably shortsighted and were thus remarkably poor oracles.

An example of the inevitable consequences of Progressivism can be seen in California, which has been a veritable liberal/Progressive laboratory for the last three-plus decades.  Last week, Joel Kotkin, the Distinguished Presidential Fellow in Urban Futures at Chapman University, detailed the development of what he calls California’s “new feudalism” and, in the process provided a preview of sorts of the nationwide impact of the Obama-Corporatist economic model.  To wit:

California has been the source of much innovation, from agribusiness and oil to fashion and the digital world.  Historically much richer than the rest of the country, it was also the birthplace, along with Levittown, of the mass-produced suburb, freeways, much of our modern entrepreneurial culture, and of course mass entertainment.  For most of a century, for both better and worse, California has defined progress, not only for America but for the world.

As late as the 80s, California was democratic in a fundamental sense, a place for outsiders and, increasingly, immigrants — roughly 60 percent of the population was considered middle class.  Now, instead of a land of opportunity, California has become increasingly feudal.  According to recent census estimates, the state suffers some of the highest levels of inequality in the country.  By some estimates, the state’s level of inequality compares with that of such global models as the Dominican Republic, Gambia, and the Republic of the Congo.

At the same time, the Golden State now suffers the highest level of poverty in the country — 23.5 percent compared to 16 percent nationally — worse than long-term hard luck cases like Mississippi.  It is also now home to roughly one-third of the nation’s welfare recipients, almost three times its proportion of the nation’s population.

The emerging class structure of neo-feudalism, like its European and Asian antecedents, is far more complex than simply a matter of the gilded “them” and the broad “us.”  To work as a system, as we can now see in California, we need to understand the broader, more divergent class structure that is emerging . . .

The Oligarchs: The swelling number of billionaires in the state, particularly in Silicon Valley, has enhanced power that is emerging into something like the old aristocratic French second estate.  Through public advocacy and philanthropy, the oligarchs have tended to embrace California’s “green” agenda, with a very negative impact on traditional industries such as manufacturing, agriculture, energy, and construction.  Like the aristocrats who saw all value in land, and dismissed other commerce as unworthy, they believe all value belongs to those who own the increasingly abstracted information revolution than has made them so fabulously rich.

The  Clerisy: The Oligarchs may have the money, but by themselves they cannot control a huge state like California, much less America.  Gentry domination requires allies with a broader social base and their own political power.  In the Middle Ages, this role was played largely by the church; in today’s hyper-secular America, the job of shaping the masses has fallen to the government apparat, the professoriat, and the media, which together constitute our new Clerisy.  The Clerisy generally defines societal priorities, defends “right-thinking” oligarchs, and chastises those, like traditional energy companies, that deviate from their theology.

The New Serfs: If current trends continue, the fastest growing class will be the permanently property-less.  This group includes welfare recipients and other government dependents but also the far more numerous working poor.   In the past, the working poor had reasonable aspirations for a better life, epitomized by property ownership or better prospects for their children. Now, with increasingly little prospect of advancement, California’s serfs depend on the Clerisy to produce benefits making their permanent impoverishment less gruesome.  This sad result remains inevitable as long as the state’s economy bifurcates between a small high-wage, tech-oriented sector, and an expanding number of lower wage jobs in hospitality, health services, and personal service jobs.  As a result, the working class, stunted in their drive to achieve the California dream, now represents the largest portion of domestic migrants out of the state.

The Yeomanry: In neo-feudalist California, the biggest losers tend to be the old private sector middle class.  This includes largely small business owners, professionals, and skilled workers in traditional industries most targeted by regulatory shifts and higher taxes.  Once catered to by both parties, the yeomanry have become increasingly irrelevant as California has evolved into a one-party state where the ruling Democrats have achieved a potentially permanent, sizable majority consisting largely of the clerisy and the serf class, and funded by the oligarchs.  Unable to influence government and largely disdained by the clerisy, these middle income Californians are becoming a permanent outsider group, much like the old Third Estate in early medieval times, forced to pay ever higher taxes as well as soaring utility bills and required to follow regulations imposed by people who often have little use for their “middle class” suburban values.

One might argue, and not without some justification, that this is not exactly the result of “Progressive” politics, since Republicans too have been deeply and firmly entrenched in the corporatist governing structure.  This is true, obviously.  But that’s not the point.  The point is that the Republicans appear to be pulling out of their corporatist funk, even as the Democrats are diving in deeper.

Over the weekend, Tim Carney, the senior political columnist for the Washington Examiner, noted that in 2006, when his book on corporate welfare was published, no one on the Republican side would dare to speak positively about the book in public.  And certainly no one wanted his or her name associated with such a book.  Carney wrote that he “asked a couple of conservative Republican congressmen to give blurbs,” but he had no takers.  “Who do you think funds his campaigns?” one Congressional staffer whispered to Carney about her boss.  Who indeed.

Today, things have changed on the Republican side of Capitol Hill.  Carney also quoted a Politico piece in which one “Wall Street lobbyist” whines that many Republicans are impossible to reach anymore.  As the lobbyist put it “I don’t think Justin Amash [a first-term Tea Party Republican from Michigan] cares if Bank of America gives to him or not.”  As Carney noted, a Republican who doesn’t care about BofA would have been impossible even to imagine a few years ago.

At the same time, the Democrats seem to be moving in the other direction.  If the AP story on Republicans running from corporate cash had a competitor for “story of the week,” it came in the form of a New York Times profile of Bill de Blasio, New York’s presumed mayor-to-be.  The title of the piece is telling:  “De Blasio Focuses on Inequality as He Courts Business Elites.”  The body of the piece is even more so:

In a whirlwind tour this week, Mr. de Blasio sat down with leaders in finance, real estate and technology — including Lloyd C. Blankfein and Philippe P.  Dauman, the chief executives of Goldman Sachs and Viacom — to tell them face to face that his brand of liberalism is unapologetic but pragmatic, and can accommodate the value of business in a global city . . .

Industry leaders are now lining up for time with Mr. de Blasio; weeks after dismissing the Democrat as a long shot, some are even boasting to friends about their ties to the man who could be New York’s next mayor.

Mr. de Blasio spoke on Monday at the headquarters of Gilt Groupe, the digital retailing concern, with dozens of leaders in the city’s nascent technology industry.  On Wednesday, he was at the Yale Club in Midtown, meeting with financiers who are prominent Democratic donors, including the investment banker Blair W. Effron and the hedge fund manager Orin S. Kramer.

This week, Mr. de Blasio also spoke with Rupert Murdoch and Robert Thomson of News Corporation; Mortimer B. Zuckerman, the real estate mogul and publisher of The Daily News; Mr. Blankfein; and Mr. Dauman, who hosted a meeting at his office at Viacom.

Next week is already looking busy.  Mr. de Blasio is set to attend a wine-tasting in his honor on Tuesday at a real estate investment firm in Midtown.  The suggested contribution is $4,950, the maximum allowed by the city.

Think about that for just a minute.  De Blasio is not your average Democrat.  Heck, he’s not even your average Leftist.  He’s a full-blown socialist.  He is what would, in the bad old days, have been called a “comsymp” (i.e. Communist Sympathizer).  De Blasio brags of the influence that Jesuit-Leftist “Liberation Theology” had on him.  He spent time as a youth working with and singing the praises of Danny Ortega and the Sandinistas in Nicaragua.  He is as close to an old-school Communist as exists anywhere in the world right now.  Even the Cubans and Chinese look at him and say, “Wow.  That guy is nuts!”

And yet . . . here he is hanging out with, sucking up to, and being sucked up to by old Lloyd Blankfein and the rest of Big Business.  They love him.  He loves them.  Only the Republican candidate, ol’ Wotshisname, is left out in the cold.

Interestingly, the De Blasio story was not the only political piece in which Blankfein appeared last week.  He was also, it turns out, one of the Big Business Big Shots who met with President Obama last week and then emerged from the White House to tell the world how stupid, ignorant, misguided, icky, yucky, cootie-laden, and gross the Republicans in Washington are.  Reuters reported that Blankfein stressed that “the business leaders who met with Obama represented diverse political views,” and yet they were all united in their belief that the Republicans should quit playing politics with . . . ummm . . . politics!

Is anyone surprised?

Here’s the deal:  Lloyd Blankfein is in the business of making money – for his firm, for its clients, and for himself.  And anything that threatens to keep him from making money is in itself undesirable.  There’s nothing particularly interesting or controversial about that.  What is interesting, though, is the fact that the government should be such a critical player in whether Blankfein, his firm, and his clients are able to make money.  Not only does Big Business love Big Government, Big Business needs Big Government.  The two, as they say, go together like peas and carrots.

That this is bad for government should go without saying – although it doesn’t, which is why we have to write pieces like this one.  But at some point, you would figure that someone, somewhere – maybe in the hallowed halls of Goldman Sachs, even – would figure out that this is bad for business as well.

Saturday evening, James Pethokoukis, the money-and-politics columnist/blogger for the American Enterprise Institute and a former columnist for Reuters, posted some excerpts from a Goldman research note detailing the potential impact of the government shutdown and especially the debt-limit situation.  We like Pethokoukis very much.  And we have no reason whatsoever to think that the analysts and economists at Goldman aren’t perfectly honest and accurate in their predictions.

Still, we wonder if it ever occurred to anyone involved that maybe the CEO of Goldman Sachs shouldn’t be running around Washington and New York, yucking it up with the Democratic President and the Leftist presumptive mayor and bashing Republicans.  We wonder if they’ve thought that maybe . . . just maybe . . . such behavior might cause outside observers to question the firm’s overall objectivity.

Just a thought.

Three years ago, in a piece for City Journal, Luigi Zingales, addressed the subject of Republicans, Big Business, and the post-recession direction of the party.  Zingales, for the record, is the Robert C. McCormack Professor of Entrepreneurship and Finance and the David G. Booth Faculty Fellow at the University of Chicago’s Booth School of Business, which is to say that he’s a smart guy.  He is also the leading conservative anti-corporatist writing today.  Zingales urged the following:

The Republican Party today . . . has to move from a pro-business strategy that defends the interests of existing companies to a pro-market strategy that fosters open competition and freedom of entry.  While the two agendas sometimes coincide — as in the case of protecting property rights — they are often at odds.  Established firms are threatened by competition and frequently use their political muscle to restrict new entries into their industry, strengthening their positions but putting their customers at a disadvantage.

A pro-market strategy aims to encourage the best conditions for doing business, for everyone.  Large banks, for instance, benefit from trading derivatives (such as credit default swaps) over the counter, rather than in an organized exchange: they can charge wider spreads that way, and they can afford to post less collateral by using their credit ratings.  For this reason, they oppose moving such trades to organized exchanges, where transactions would be conducted with greater transparency, liquidity, and collateralization — and so with greater financial stability.  This is where a pro-market party needs the courage to take on the financial industry on behalf of everyone else.

A pro-market strategy rejects subsidies not only because they’re a waste of taxpayers’ money but also because they prop up inefficient firms, delaying the entry of new and more efficient competitors.  For every “zombie” firm that survives because of government assistance, several innovative start-ups don’t get the chance to be born.  Subsidies, then, hurt taxpayers twice.  A genuinely pro-market party would have resisted more vigorously the Wall Street bailouts, in line with popular sentiment.

And a pro-market approach holds companies financially accountable for their mistakes — an essential policy if free markets are to produce sound decisions.  A pro-market party will fight tirelessly against letting firms become so big that they cannot be allowed to fail, since such firms may take risks that ordinary companies would never dream of . . .

We have long believed much the same thing.  We’re just not as authoritative or as smart as Zingales.  Moreover, we’re not in the business of telling the Republican Party what it should do.  Rather, as you know, we’re in the business of trying to predict what the Republican Party will do and how that will affect markets going forward.

It really didn’t occur to us that ever the twain would meet.

Over the years, you may note, we have been duly skeptical of the Tea Party movement, and with just cause.  At the same time, we have also sung its praises, to an extent, largely because it represents something new and powerful in American politics, namely a vigorous and resilient conservative populist movement.  Last week, we wrote that the Tea Party and its Congressional representatives threaten the Republican status quo.  That’s true enough.  But what this means is that, by extension, the Tea Party also threatens the country’s corporatist status quo; it threatens the cozy, bipartisan relationship between Big Government and Big Business.  No wonder so many people hate ‘em.

We have no idea whether the Tea Party movement and the related Republican anti-corporatist streak will endure.  We have no idea whether the GOP can rebuild itself as a populist movement dedicated to markets and liberty rather than business and wealth.

We do know, though, that guys like Ted Cruz, Rand Paul, Mike Lee, and the rest of the Tea Party darlings represent both a real break from politics as usual and real hope for the future of the nation.  None of these men is perfect, of course.  Far from it.  But each brings something new and potent to the political mix.  And what they bring is important for the survival of the American republic AND for the survival of American business.

Big Business completely sheltered from new competition grows stale, slow, and soft.  The corporatist bent of contemporary American politics should scare everyone, just as much as the “new normal” of less than 2% annual GDP growth should scare everyone.  The two phenomena are directly related.  And they are not going to fix themselves.  If anything, they are self-reinforcing.  Big Business has no reason to change, since that 2% goes mostly into its pockets.  And Big Government has no reason to change, since the taxes on that 2%, combined with massive borrowing, can still produce a rather comfortable set-up for the new clerisy class.

What the country desperately needs is someone – anyone! – to stand up to the status quo and declare that this whole arrangement is untenable in the long-term.  The Tea Party does this.

And for that, it and its Congressional allies have our gratitude.  If they can also manage to break the corporatist logjam in Washington, they’ll have our astonishment and admiration as well.  That’s a tall task, of course, but for the first time in a long time, there’s hope.  Real hope.

After all, we now have Congressmen who don’t care about Bank of America.  That’s amazing – and promising.


Copyright 2013. The Political Forum. 8563 Senedo Road, Mt. Jackson, Virginia 22842, tel. 402-261-3175, fax 402-261-3175. All rights reserved. Information contained herein is based on data obtained from recognized services, issuer reports or communications, or other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness, and we are not responsible for typographical errors. Any statements nonfactual in nature constitute only current opinions which are subject to change without notice.