The Meaning of the Republican Victory

 

Who predicted the Republican sweep ? Nobody I can think of, despite the fact that it was obvious the average guy was pretty unhappy with the existing state of affairs.

The question now is whether the new majority is really going to smash the State, or whether it'll prove to be just a bunch of right wing collectivists who prefer to spend money on prisons and warfare, rather than regulations and welfare. This is an important question; it could have as much impact on your investments as the so-called Reagan Revolution in 1980.

The elections took place during Jim Blanchard's annual New Orleans conference, at which I was a speaker. Its timing was fortuitous in that it offered me a welcome chance to do some political field research; the conference was graced by the presence of two Republican notables, Robert "Bud" McFarlane and Richard "Dick" Cheney (I was amused at how both men's nicknames appeared in quotes, as if to identify their membership in a crime syndicate which is actually pretty much the case).

They're typical of high-level Republicans and, what with the euphoria over the elections and such, I took the opportunity to assess the nature of America's new rulers.

If you voted, you almost certainly did not vote Democrat. That's likely because you despise Bill, Hillary, and their minions, and you want to see the State rolled back, not augmented. That means you probably voted for the Republicans.

I'll forgo my traditional biennial declamation against government as an institution and voting as a practice. But I do have some data that you may not have on a few well known Republicans. Of course you dislike the Clintonistas, who may be generally characterized as pear-shaped left-wing welfare state wonks of often indeterminate sexual orientation who hate the idea of America. But do you really like the Republicans, who can be characterized as right-wing macho-style war-fare state zealots who don't so much dislike the idea of America as they really like the idea of the American State?

 

Let's get personal

Let's look at the facts on a few of them. I'll skip over my comments on the pathological William Bennett (that's an accurate description, despite the fact that the Book of Virtues, which he compiled, is excellent) and Robert Dole (accurately described by Newt Gingrich as "a tax collector for the welfare state"). My own bete-noire has always been Jack Kemp. Not because he's any worse than the others, but because his blow-dried and shirt-sleeved poses are just so appallingly smarmy.

Jack may be the most effectively handled and spin-doctored collectivist in government. He likes to say he's opposed to big government, but was secretary of HUD during the Bush years. How did he do with an agency in need of total abolition" He increased its budget from $14.3 billion to $27.8 billion, or from 1. 1 % to 2% of federal outlays. Jack added scads of new bureaucracies within HUD, including HOPE, PASS, REVIVE, RESTORE, Operation Occupancy, Choice in Management, and Moving to Opportunity. He mounted a sting operation against private lenders for not giving "enough" money to minorities. He reclassified numerous projects under the Davis-Bacon Act, so they required the use of union labor at a tripling of costs. He demonstrated his views on privatization when he opposed the sale of Los Angeles International Airport. In his last year, Congress cut his appropriation request by $500 million; part of the money he got was ear marked as $300,000 in bonuses for 51 career bureaucrats and political appointees who oversaw this debacle. Jack has never been a friend of freedom generally. He endorsed numerous Clinton boondoggles, ranging from Head Start to the ban of so called assault rifles. He opposed both a balanced budget and term limits.

I also had a few words to say about Bud McFarlane, who was there to promote an embarrassing and terminally boring self-justification his publishers called Special Trust. McFarlane, you may recall, was a top member of the so-called "intelligence community." They're the folks who keep files on you, monitor your overseas phone calls, put "covers" on your mail, commit assassinations at home and abroad, and have set up a drug-financed government within a government riddled with people like Aldrich Ames. Bud, a self-admitted Valium junkie (who looks like he's traded up to Prozac), was retired in disgrace for having sold arms to Iran, but not before he rolled over under pressure and squealed on everybody else in a plea bargain. I'm no great fan of Gordon Liddy, but you can't take away the fact that he was a stand up guy under heat. No point in spending time on McFarlane: this empty suit is a proven incompetent, liar, hypocrite, stool pigeon, and general lightweight,

 

The main course

Unfortunately, Dick Cheney isn't a proven incompetent or lightweight, which is why he's so dangerous. Like Jack Kemp, Dick very much wants to be president. Let's look at this darling of big government conservatives.

To start with, Dick has never in his whole life, until just now, had a job outside government. He is, in other words, a professional political hack. He's just been hired by Morgan Stanley (undoubtedly for seven figures) not because he knows the first thing about investment or finance, but to retail the connections he garnered in a lifetime of politicking.

Dick started out as a Ph.D. candidate in politics at that bastion of the free market, the University of Wisconsin. From there he solicited a job at the Office of Economic Opportunity, one of the very most destructive of bureaucracies, where he was an apparatchik for years. His next step was to seek election as the congressman for Wyoming, where he always voted to raise the debt ceiling, kited checks at the House bank, and always voted yea on tax increases. Dick is on the board of the Council for Foreign Relations (a club for big government internationalists), and both the Boston Globe and the New York Times have referred to him as a "pragmatic conservative" (translated, that means someone who votes for big, military and has no abiding principles),

Dick has made the intelligence community (see comments above on "Bud" McFarlane) and the military his hobby, although he's never been in the military. He wants to keep a full complement of troops stationed in both Europe and Asia, he involved the military in the War on Drugs, and he considers revitalizing the U.N. and its "peacekeeping" forces an achievement. Dick knows that war is the health of the State, and approves.

He fancies himself a foreign policy expert, but his experience consists completely of talking to his opposite numbers in foreign bureaucracies-which is to say , ambitious political hacks like himself. I'd say he could double his knowledge of the real world just by taking a two-day hike in Mexico and talking to some common working people.

There's more-and nothing good that I can determine. You probably would not. have heard much of this elsewhere, because Cheney's (like most politicians') spin doctors try to make sure that conservative audiences only hear what will appeal to them, and liberal audiences only hear the things they'll like.

 

What now!

Many are jubilant about the Republican victory; I'm pleased myself, because they're an improvement in some ways. But it's most unlikely they'll roll back the State; they'll slow its growth in some areas, but augment It 'In others. The idea of a flat 17% income tax is a great one (for openers), but already it seems like they're more interested in imposing their social values. All Gingrich really has to do 'is shut up, reduce taxes and regulations radically, and he'd be the most popular mar; in the country. Will he'? The Republicans have always found a way to blow it in the past, and just come across as me-tooers who are really just moderate, as opposed to radical, collectivists. At best, they talk the talk but rarely walk the walk.

Bill Bradford recently pointed out that even if the Republicans eliminated all entitlements except Social Security and Medicare (which account for $512 billion in 1995, and are skyrocketing as the population ages), federal spending would drop by $323 billion. That would cover the estimated '94 deficit of $203 billion. But they're not going to eliminate all entitlements, they are going to add spending for lots more police and prisons, orphan asylums and, almost beyond belief, more billions for the bloated military and intelligence communities.

I don't doubt that some of the Republicans have good intentions and true hearts. But the system itself is completely out of control and, as with the Reaganauts, even the sincere reformers will be co-opted into the system, or drop out in disgust. In any event, the Republican party's nomenklatura are people like Kemp, Dole, Bennett, Cheney and hundreds of others like them. They're entrenched, and aren't interested in anything like a free-market revolution.

From a personal perspective, I think it's important to let these types know they're not loved and respected. At least I don't love or respect them. I say that not to be a wet blanket in the face of the positive things about the Republican victory, but because the essence of government in Washington is unlikely to change.

For my part, when I talk the talk, I like to walk the walk. At a small private gathering in New Orleans, for instance, when Cheney was introduced to me, I refused to shake hands with him, and told him why. He took it like a practiced pol, but I'm sure it threw him off stride for the next 24 hours. These types live for the adulation of the public; when you treat them with contempt, it can cave in their precarious mental balance. It's your patriotic duty as an American to politely, but firmly, make these people feel disdain.

Anyway, to give you some idea how hip Cheney is, he thought (at first) that I rebuffed him because I was a Democrat!

If you're not part of the solution, you're part of the problem. The solution is to show these power mongers zero tolerance, personally as well as professionally.

 

Newt

The current Man of the Hour, of course, is Newt Gingrich. It's hard to fault most of his rhetoric: Bill and Hillary--counterculture McGovemiks," the White House staff-" left- wing elitists," Democrats" the enemy of normal Americans," Washington- "a large open conspiracy to take away the money and freedom of citizens of this country." These sentiments favorably incline me toward the man, and offer hope of real change. Unfortunately, his words appear somewhat at odds with his past actions. Don McAlvany (Box 84904, Phoenix, AZ 85071) did some telling research on portions of Newt's voting record, and it's not reassuring. Here's a sampling of boondoggles and atrocities he's voted for.

1. Welfare-5/22/90, the Americans with Disabilities Act. 6/13/90, $2.76 billion for various AIDS programs. 3/21/9 1, the S&L bailout, 6/26/9 1, $52.6 billion for agricultural programs, subsidies and food stamps. 10/5/92, $66.5 billion for housing and community development. 9/22/94, $250.6 billion for the Departments of Labor, HHS and Education

2. Foreign Aid--6/27/90, $15.7 billion in foreign aid for FY9 1; 6/1-0/9 1, $12.4 billion for FY92; 6/25/92, $13.8 billion for FY93; 9/29/93. $12.9 billion for FY94; 8/4/94, $13.8 billion for FY95. In addition, on 8/6/92, $12.3 billion for the IMF and $1.2 billion for republics of the former U.S.S.R.

3. Environment-5/16/79, the Alaska Lands Bill, locking up 68 million acres. 12/17/87, $307 million for the Endangered Species Act. 3/28/90, elevation of the EPA to cabinet-level status. 5/23/90, the Clean Air Bill.

4. Education-5/10/79, the creation of the Department of Education. 5/9/89, $1.4 billion for vocational education. 5/16/90, $2.9 billion (rising to $7.7 billion in 1994) for Head Start and Follow Through programs. 7/20/90, $1.3 billion for a variety of educational programs. 5/12/94, $3.3 billion for Head Start, and $2.6 billion for FY95 low-income and child abuse programs.

5. Law Enforcement- 10/22/9 1, the (unsuccessful) crime bill that would have established a National Police Corps. He did not vote for the $30 billion 1994 Crime Bill, but Representative Susan Molinari (R-NY). one of his big supporters, explained on Crossfire, "If it wasn't for Newt Gingrich, you wouldn't have a crime bill."

I don't have Newt's record regarding military/intell;laence matters, but I suspect it's equally sorry. I'm sure Newt has voted against the increase of state power on some occasions, but the above votes alone make him seem a hypocrite, or an opportunist, at best. I don't kno" what the actual fact of the matter is. I prefer to give Gingrich the benefit of the doubt, because I believe that most people are basically good, and reform of character is possible. But, on the other hand, Newt has bccn a professional politician for two decades now. We'll see.

There was a November 27 article by Katherine Seelye of theNew York Times that's worth repeating in part: "Many who knew him in that period (when he ran for Congress as a liberal in 1974 and 1976-Ed.) attribute his adoption of a conservative agenda and his 'exploitation' of 'family values' to his political ambition, not to a belief in core conservative values... Bill Shipp, who writes a newsletter on Georgia politics, said: 'When I first knew Newt in the '70s, when I was on the Atlanta Constitution's liberal editorial board, and we were looking for a liberal to get behind, we chose to endorse Newt Gingrich because we thought he was progressive.'

"'Why did he switch? Public opinion polls, what do you think?' Shipp said. 'Liberal went out, conservative went in.' Richard Doyle, who was dean of Arts and Sciences at West Georgia when Gingrich taught there said of his switch to the political right: - I think his motivation was ambition and need for power.' James T. Gay, who still teaches at the college, said: 'I'm not sure whether he has principles. He reads polls a lot and adjusts to them.'

"His former minister, the Rev. Brantley Howell, said: '(Newt) saw that swinging to the right as Reagan did was the way to get the goal he wanted, which was Speaker. He sees what will help him; whether he believes it or not, he uses it.' Kip Carter, a former Gingrich aide, said: '(Newt) is a moderate when helpful, he's right wing when that's helpful, he's bipartisan when that's helpful. Whatever it takes for power, that is what he'll do.' Carter said that Gingrich told him why he wanted a divorce from his first wife, Jackie, in 1980. He said: 'She's not young enough or pretty enough to be the wife of the president. And besides, she has cancer.'"

 

What does this all mean?

What does this mean for investments? My friend Mark Skousen sees it all as the start of a new boom in the markets. He believes that the Republicans are going to set the ship of State right - much in the manner of what's been going on throughout the Third World in recent years. In other words, taxes, spending, regulation, and the size of the State will be cut. As a result, the economy and the markets will all take off.

Despite the questionable characters and motives of the Republicans themselves, they very well may take serious steps to roll back parts of the State. After all, they are politicians, and will find it hard to run counter to what's likely to prove the spirit of the new century. The government is increasingly seen as an irrelevant and dangerous nuisance by more and more people, and it will eventually either wither away or violently implode, regardless of what politicos do.

However, I think all the good things the Republicans might conceivably do in the near-term have already been discounted by the markets - stocks, bonds, gold, what have you. The discounting of a Republican failure to reform the government has yet to begin. At the same time, the world is still feeling warm and comfortable about the evaporation of communism and Russia as meaningful threats. But it hasn't started to discount what's likely to happen in places like the Muslim world or China.

Does the Republican victory change my view of the markets? No. The markets are a lot bigger than the Republican Party.

P.S. Cheney, as I'm sure you know, dropped out of the presidential race in late December. Was it due in any part to my actions? We'll probably never know (unless I'm soon visited at dawn by a SWAT team on some trumped up charges, which is always a risk when you confront these types). But I prefer to think the answer is "Yes."