Forget the economy, health care, even which party controls Congress. The most far-reaching effect of the 2010 midterm elections could be felt at the state level. By casting their ballots in dozens of gubernatorial and hundreds of legislative races, voters will decide whether Democrats or Republicans dominate the redrawing of state and federal political borders for the new decade -- a process known as redistricting. And the results could be even more far-reaching for Democrats than the outcome of the midterm elections.
That's not hyperbole. Given the country's closely divided electorate, the political fortunes of each party chiefly hinge on how redistricting pans out. That, in turn, hinges on how well Democrats and Republicans fare at the state level. The reason: in most states, legislators are responsible for creating, and governors responsible for signing into law, redistricting plans that reflect population shifts documented in the census. The party in command has enormous clout.
With about a dozen of the nation's state legislatures closely split along partisan lines and 18 governor's races in the "toss up" category this year, big changes could be in store. Factoring in the tenuous political atmosphere adds even more spice to the mix. So far, the ground game is shaping up nicely for the GOP, but there are still fundraising and organizational storm clouds on the horizon.
The Cook Political Report lists five governorships now held by Democrats as either "leaning" Republican or "likely" Republican. Of those five states, four of the legislatures are Republican and one is split between the parties, giving the GOP a good chance to control the redistricting process. Conversely, Cook lists only one governor's race -- for Republican Linda Lingle's office in Hawaii -- as leaning in the Democrats' favor, and none in the "likely" or "solid" Democrat category. There are no redistricting implications, though, because the Aloha State redraws political lines by independent commission, not legislative edict.
In 17 state legislatures, meanwhile, Democrats maintain a slim advantage in at least one chamber. In a good Republican year, several of those could flip. Even if a Democrat occupies the governor's office or controls one legislative chamber, the GOP could significantly influence the process and curtail partisan gerrymandering by capturing at least part of the state government. Both national parties understand the implications, which is why they're pouring $20 million apiece into competitive legislative races, with an eye toward strengthening their hand in redistricting.
Aside from the favorable lineup of races, the political trend is also in Republicans' favor. Even in the strongly anti-GOP election year of 2008, Republicans managed to defend all of their governorships up for grabs except one in Missouri. Since then, Republicans have been victorious in special elections in Virginia and New Jersey, states where Democrats had a nearly decade-long winning streak in gubernatorial elections.
Reapportionment is another factor upping the stakes. That process moves congressional seats from states that lost population to states that gained. Here again, Republicans have reason to be optimistic. The Washington, D.C., based firm Polidata predicts that 10 states will gain at least one congressional seat and 10 lose at least one after the 2010 census. Of those, all of the losing states except one are in the predominantly Democratic northeast and upper Midwest. On the other hand, all but one of the states gaining seats is in the Republican-friendly Sunbelt, including a projected four-seat pickup for Texas.
The hands that redraw district borders are some of the most powerful in politics. Aside from a handful of state and federal requirements, lawmakers can finagle district lines however they choose. Legislative and congressional districts must be contiguous -- meaning all parts touch and none are detached -- and each must have an equal number of residents. The federal Voting Rights Act also ties legislators' hands by requiring them to draw some districts to grant minorities greater electoral power.
Beyond that, the majority party has a wide degree of latitude and the capacity to shut out the minority from the process. To top it off, advances in technology have made it possible to secure almost foolproof partisan advantage by drawing lines down to the minutest detail. The result: gerrymandering such as North Carolina's 12th Congressional District, alternatively called the "lightning bolt" and "spaghetti" district and dubbed "political pornography" by the Wall Street Journal.
Despite the favorable political tides, however, Republicans should be cautious. Democrats appear to have a better redistricting apparatus on the ground to prime for inevitable legal challenges, and the party seems to be outpacing Republicans in the fundraising department as well. Liberals don't want a repeat of the last round of redistricting, which led the GOP to historic gains in the 2002 midterms.
In addition, a number of states, including Colorado and California, are weighing ballot measures that would ease partisanship in redistricting. Advocates have long called for independent commissions to handle this important job, but since the lawmakers who benefit from gerrymandering control the process, the cause often gets trampled underfoot.
In the end, though, the political dynamics this year should encourage conservatives. At worst, the GOP will make inroads and expand its influence over the process. And it's a good thing, too. When the history books are closed, state-level races could be the untold story of 2010 -- a story that will be felt for years to come.
We know, based on economic experience, theory, and logic, how to create another economic boom that will last 25 years, or a generation into the future. We achieved that in America from the end of 1982 to the end of 2007, with only two, short, shallow recessions that barely interrupted sustained, robust, economic growth. But that was not the only instance of success. Several times in the last 100 years, whenever the nation's economic policies adhered to the timeless principles of economic growth and prosperity, our economy has boomed. When it has departed from those policies, it has fallen into stagnation, or worse.
Moreover, as we will discuss next week, such booming economic growth is much more beneficial for working people and the poor than counterproductive, socialist redistribution to achieve equality of results. A booming market economy produces a much higher standard of living for working people and the poor. This is especially so when policies are structured to channel the flows of booming economic growth through working people and the poor, as we will explain. Economic experience, theory, and logic shows that outdated, throwback, socialist redistribution, by contrast, inevitably leads to lower standards of living, stagnation and decline.
America today once again desperately needs to return to the timeless principles of economic growth, to restore our traditional, world leading prosperity, and the American Dream. This should be the central argument and theme for this fall's elections.
A Hundred Years of Supply-Side Economics
Last year, the Intercollegiate Studies Institute produced a brilliant, overlooked book that recounted the history of supply-side economics -- Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity, by Brian Domitrovic. As explained in that book, the roots of supply-side economics go back to 1913, when the national income tax and the Fed were first adopted. "For restraining the institutions created that year -- the income tax and the Federal Reserve -- is the essence of supply-side thinking," Domitrovic writes.
It didn't take long for trouble to brew. The top tax rate of 7% soared to 77% by 1918. Moreover, the income tax, sold as a tax on the rich, began to apply at just $1,000 in income (equivalent to about $20,000 today). In addition, during World War I, the Fed essentially doubled the money supply relative to the economy. Inflation consequently soared by 84% over the 4 years from 1916 to 1919. The Fed then slammed on the brakes, draining 60% of the excess money, and throwing the economy into steep recession as a result. Unemployment soared to 12%, 50% higher than in any previous recession.
Warren Harding, newly elected President in 1920, appointed the enormously successful Pittsburgh banker Andrew Mellon Secretary of the Treasury, with the duty of fixing the economy. Mellon adopted what became the supply-side economic formula. He slashed the top income tax rate to 25%, and the bottom rate from 8% to 1%, increasing the income level to which it first applied by 50%. Moreover, Mellon led the Fed to stop the money supply drain, return interest rates to standard levels, and devote itself to stable prices. The Fed would look to market price levels, particularly commodities, including gold, for its guide.
The result was the Roaring '20s, the greatest boom in American history to that point, essentially beginning the modern American economy. Real output galloped, stock prices tripled, real wages advanced with productivity increases, and prices were stable. "It was in the twenties that Americans bought their first car, their first radio, made their first long distance telephone call, took their first vacation," as Domitrovic quotes Richard Vedder and Lowell Galloway.
Domitrovic explains, "The essence of supply-side economics lies in using the two levers of governmental economic leverage for the specific uses at which they are most adept. Monetary policy is capable of maintaining the price level. Tax policy is capable of spurring growth. The 'policy mix' of stable money plus tax cuts is the secret to escaping stagflation."
Tax policy spurs growth by reducing tax rates, as Mellon did. The lower rates spur incentives for productive activity, like savings, investment, work, business creation and expansion, and job creation, by allowing the productive to keep a higher proportion of what they produce. These incentives, moreover, apply to every economic decision with every dollar in the economy, at home and around the world in regard to the American economy, not just to the amount of any tax cut. Supposed tax cuts involving credits or rebates are just giveaways like welfare and other government spending, without the powerful incentive effects of rate cuts.
Monetary policy controls the price level because inflation is too many dollars chasing too few goods, everywhere and always caused by printing up too much money in relation to the demand for money. The one and only solution to inflation is to restrain money supply growth to equal money demand. Maintaining stable prices means also avoiding deflation by maintaining money growth to keep pace with money demand. The Fed should follow this policy by monitoring market prices, particularly the most sensitive prices such as commodities, including gold.
Monetary policy cannot be used to stimulate the economy because in the long run it just washes out in affecting only the overall price level, and not the level of real output. In the short run, trying to control the economy by monetary policy just adds to instability, sometimes grievously, causing booms and busts, bubbles and crashes. Keynesian economics is even more inept, because economic prosperity is not caused by increasing government spending and deficits, which are at best a wash, and more likely a drag, as the private sector would use the resources more productively and efficiently than central-planning government bureaucracies lacking market incentives for guidance.
These are the timeless principles of economic growth and prosperity.
Going Off the Rails: The Depression Keynesian Blunder
The Depression arose and worsened as America departed from these pro-growth policies. Instead of maintaining stable prices, the Fed allowed the money supply to decline precipitously, even while dollar demand was soaring as the world sought a stable store of value. This created ruinous deflation. Mellon's tax rate policies were also ruinously reversed, with the top income tax rate raised first to 63%, and then to 79%, with the lower tax rates raised even more in percentage terms. The Smoot-Hawley tariff added another tax burden that killed international trade. President Roosevelt tried to restore prosperity with soaring Keynesian government spending and deficits, which failed miserably as the Depression dragged on for over 10 years. By 1933, unemployment was at 25%, and GDP was down 57% nominally, 22% in real terms.
The Bretton Woods global monetary regime agreed to in 1944 essentially took Mellon's monetary policy focus on stable prices worldwide. The dollar was convertible to gold at $35, and all other currencies were convertible to the dollar at fixed exchange rates. As long as that was maintained, prices would be stable, as they were until overly expansive U.S. monetary policy caused the system to break down completely in 1971. Bretton Woods also essentially nullified Keynesian stimulus policies, as sustained high deficits for any country were inconsistent with the fixed exchange rates and dollar gold convertibility.
This price stability augured a 25-year, postwar, worldwide economic boom. Domitrovic writes, "There can be no mistake that in the high years of the Bretton Woods system, roughly 1950-70, the world economy established incredible feats. European and Japanese growth was sustained at a nearly 7% rate, and the United States (which had started at a higher basis) enjoyed long booms over 4%." Supply-side, free market, policies produced in particular the postwar German "economic miracle."
Kennedy's Supply-Side Economics
But with recessions in 1953, 1957, and 1960, a true economic boom was not restored in America until the Kennedy tax cuts of the 1960s. Kennedy was surrounded by Keynesians who were willing to support some tax cuts focused on stimulating demand. But President Kennedy himself had a supply-side understanding focused on tax rates, saying, "It is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the tax rates…. [A]n economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs or enough profits."
Domitrovic explains that in 1958 a young Robert Mundell, destined to win the Nobel Prize in 1999, first began to explicitly advocate the supply-side policy mix, first from his perch at the IMF, then as a Professor of Economics at the University of Chicago. Domitrovic quotes Mundell as explaining that President Kennedy overruled his Keynesian advisors and "reversed the policy mix to that of tax cuts to spur growth in combination with tight money to protect the balance of payments," the exact supply-side agenda Mundell had been advocating, though Mundell disclaims having influenced Kennedy directly. Mundell continues, "The result was the longest expansion ever [up to that time] in the history of the U.S. economy, unmatched until the Reagan expansion of the 1980s."
Kennedy's business tax cuts were adopted in 1962, and the personal rate cuts in 1964. The top income tax rate was slashed from 91% to 70%, with the lower rates reduced by similar proportions across the board. The next year, economic growth soared by 50%, and income tax revenues increased by 41%! By 1966, unemployment had fallen to its lowest peacetime level in almost 40 years. U.S. News and World Report exclaimed, "The unusual budget spectacle of sharply rising revenues following the biggest tax cut in history is beginning to astonish even those who pushed hardest for tax cuts in the first place." Arthur Okun, the administration's chief economic advisor, estimated that the tax cuts expanded the economy in just two years by 10% above where it would have been.
The 1970s: Return to Keynesian Fallacies
The postwar boom ended as the liberal Johnson Administration abandoned the hugely successful supply-side policy mix. Federal spending started to soar in 1965, and President Johnson demanded and got a loose monetary policy focused on supposedly maintaining growth rather than stable prices. The tax increases started in 1968 with the 10% income tax surcharge, the alternative minimum tax, and increased capital gains levies, followed by bracket creep once inflation kicked in.
By 1969, 6.2% inflation resulted, along with the 1969-70 recession, and the economic miracle of stagflation had arrived, supposedly impossible under the doctrine of Keynesian economics. For the rest of the decade, Keynesian monetary policy kept trying to boost the economy out of decline, only to have to reverse course when inflation soared, causing the economy to fall into recession again. This resulted in further recessions in 1973-75, 1980, and 1981-82.
It finally came to an end when President Reagan explicitly abandoned Keynesian economics, and openly embraced the supply-side. He adopted 25% across the board income tax rate cuts, and then tax reform in 1986 that reduced the top rate from 70% in 1981 to 28%, with only one other rate of 15%. He bravely endorsed tight money through the teeth of the recession to stop inflation, which worked spectacularly. While prices rose 25% in just two years from 1979-80, annual inflation collapsed by half to 6.2% by 1982, and half again to 3.2% by 1983.
Reagan added deregulation to the policy mix, which reduced the cost burden on production, further stimulating it. The Reaganomics formula also included domestic spending cuts, which even with the defense buildup that won the Cold War without firing a shot, reduced total federal spending as a percent of GDP by 10% by 1989.
The results were so spectacular they astonished and surprised everyone, from opponents who wouldn't admit it, to the architects of Reaganomics themselves. Besides slaying inflation which most thought by then couldn't be done without destroying the economy, by the end of 1982 the economy took off on the above mentioned, 25-year economic boom, what Reaganomics gurus Art Laffer and Steve Moore have rightly called "the greatest period of wealth creation in the history of the planet." These results have been recounted in this column several times in the past, and the complete story is too long to do it further justice here.
The Bush/Obama Great Recession
What needs to be recounted at this point is that the Great Reagan Boom ended when, again, the supply-side policy mix was abandoned. Soon after Bush was elected, the Fed returned to using monetary policy to stimulate and manage the economy rather than focusing on price stability. The loose monetary policy from 2001 to 2006 even kept real interest rates below zero for 2½ years during that period, which effectively subsidized excessive risk and leveraging. The result was the housing bubble, which created the financial crisis when it popped in 2008.
Equally promoting the bubble was the Clinton Administration/liberal Democrat "affordable housing" policies, creating the subprime mortgage market. Fannie Mae and Freddie Mac were dragooned to finance the bubble to its eventual scary dimensions. Reregulation forced banks to contribute more financing to subprime mortgages and the housing bubble as well, and further contributed to the crisis with mandatory mark to market accounting, and privileged status for the credit rating agencies that rated subprime mortgage backed securities AAA.
Spending also began to race out of control during those Bush years. Finally, when the crisis hit, instead of resorting to the supply-side tool of reducing tax rates to promote growth, the Bush Administration peculiarly reached back to the 1970s with a Keynesian government spending, tax rebate package in February 2008. Every one of the planks of Reaganomics had been abandoned at that point.
Barack Obama had personally supported every one of these steps leading to the financial crisis, going back to the Clinton era. Once elected President, he simply reupped every one of these disastrous policies multiple times. He led enactment in February 2009 of basically the same Bush/Keynesian stimulus of a year prior, only 6 times as large. He exploded government spending and deficits to record shattering levels. He embraced re-regulation with a vengeance. And starting next year he has scheduled sharp increases in every significant federal tax rate.
Following with such devotion the opposite of every plank of Reaganomics, we can only expect exactly the opposite results, as Art Laffer has so rightly predicted. The economic history of the 20th century as recounted above backs him up quite thoroughly.
Next week we will discuss in full detail how to avert this disaster, and restore for all traditional American prosperity and the American Dream that has drawn hundreds of millions to these shores over the last 400 years.
Last year, the Intercollegiate Studies Institute produced a brilliant, overlooked book that recounted the history of supply-side economics -- Econoclasts: The Rebels Who Sparked the Supply-Side Revolution and Restored American Prosperity, by Brian Domitrovic. As explained in that book, the roots of supply-side economics go back to 1913, when the national income tax and the Fed were first adopted. "For restraining the institutions created that year -- the income tax and the Federal Reserve -- is the essence of supply-side thinking," Domitrovic writes.
It didn't take long for trouble to brew. The top tax rate of 7% soared to 77% by 1918. Moreover, the income tax, sold as a tax on the rich, began to apply at just $1,000 in income (equivalent to about $20,000 today). In addition, during World War I, the Fed essentially doubled the money supply relative to the economy. Inflation consequently soared by 84% over the 4 years from 1916 to 1919. The Fed then slammed on the brakes, draining 60% of the excess money, and throwing the economy into steep recession as a result. Unemployment soared to 12%, 50% higher than in any previous recession.
Warren Harding, newly elected President in 1920, appointed the enormously successful Pittsburgh banker Andrew Mellon Secretary of the Treasury, with the duty of fixing the economy. Mellon adopted what became the supply-side economic formula. He slashed the top income tax rate to 25%, and the bottom rate from 8% to 1%, increasing the income level to which it first applied by 50%. Moreover, Mellon led the Fed to stop the money supply drain, return interest rates to standard levels, and devote itself to stable prices. The Fed would look to market price levels, particularly commodities, including gold, for its guide.
The result was the Roaring '20s, the greatest boom in American history to that point, essentially beginning the modern American economy. Real output galloped, stock prices tripled, real wages advanced with productivity increases, and prices were stable. "It was in the twenties that Americans bought their first car, their first radio, made their first long distance telephone call, took their first vacation," as Domitrovic quotes Richard Vedder and Lowell Galloway.
Domitrovic explains, "The essence of supply-side economics lies in using the two levers of governmental economic leverage for the specific uses at which they are most adept. Monetary policy is capable of maintaining the price level. Tax policy is capable of spurring growth. The 'policy mix' of stable money plus tax cuts is the secret to escaping stagflation."
Tax policy spurs growth by reducing tax rates, as Mellon did. The lower rates spur incentives for productive activity, like savings, investment, work, business creation and expansion, and job creation, by allowing the productive to keep a higher proportion of what they produce. These incentives, moreover, apply to every economic decision with every dollar in the economy, at home and around the world in regard to the American economy, not just to the amount of any tax cut. Supposed tax cuts involving credits or rebates are just giveaways like welfare and other government spending, without the powerful incentive effects of rate cuts.
Monetary policy controls the price level because inflation is too many dollars chasing too few goods, everywhere and always caused by printing up too much money in relation to the demand for money. The one and only solution to inflation is to restrain money supply growth to equal money demand. Maintaining stable prices means also avoiding deflation by maintaining money growth to keep pace with money demand. The Fed should follow this policy by monitoring market prices, particularly the most sensitive prices such as commodities, including gold.
Monetary policy cannot be used to stimulate the economy because in the long run it just washes out in affecting only the overall price level, and not the level of real output. In the short run, trying to control the economy by monetary policy just adds to instability, sometimes grievously, causing booms and busts, bubbles and crashes. Keynesian economics is even more inept, because economic prosperity is not caused by increasing government spending and deficits, which are at best a wash, and more likely a drag, as the private sector would use the resources more productively and efficiently than central-planning government bureaucracies lacking market incentives for guidance.
These are the timeless principles of economic growth and prosperity.
Going Off the Rails: The Depression Keynesian Blunder
The Depression arose and worsened as America departed from these pro-growth policies. Instead of maintaining stable prices, the Fed allowed the money supply to decline precipitously, even while dollar demand was soaring as the world sought a stable store of value. This created ruinous deflation. Mellon's tax rate policies were also ruinously reversed, with the top income tax rate raised first to 63%, and then to 79%, with the lower tax rates raised even more in percentage terms. The Smoot-Hawley tariff added another tax burden that killed international trade. President Roosevelt tried to restore prosperity with soaring Keynesian government spending and deficits, which failed miserably as the Depression dragged on for over 10 years. By 1933, unemployment was at 25%, and GDP was down 57% nominally, 22% in real terms.
The Bretton Woods global monetary regime agreed to in 1944 essentially took Mellon's monetary policy focus on stable prices worldwide. The dollar was convertible to gold at $35, and all other currencies were convertible to the dollar at fixed exchange rates. As long as that was maintained, prices would be stable, as they were until overly expansive U.S. monetary policy caused the system to break down completely in 1971. Bretton Woods also essentially nullified Keynesian stimulus policies, as sustained high deficits for any country were inconsistent with the fixed exchange rates and dollar gold convertibility.
This price stability augured a 25-year, postwar, worldwide economic boom. Domitrovic writes, "There can be no mistake that in the high years of the Bretton Woods system, roughly 1950-70, the world economy established incredible feats. European and Japanese growth was sustained at a nearly 7% rate, and the United States (which had started at a higher basis) enjoyed long booms over 4%." Supply-side, free market, policies produced in particular the postwar German "economic miracle."
Kennedy's Supply-Side Economics
But with recessions in 1953, 1957, and 1960, a true economic boom was not restored in America until the Kennedy tax cuts of the 1960s. Kennedy was surrounded by Keynesians who were willing to support some tax cuts focused on stimulating demand. But President Kennedy himself had a supply-side understanding focused on tax rates, saying, "It is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the tax rates…. [A]n economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs or enough profits."
Domitrovic explains that in 1958 a young Robert Mundell, destined to win the Nobel Prize in 1999, first began to explicitly advocate the supply-side policy mix, first from his perch at the IMF, then as a Professor of Economics at the University of Chicago. Domitrovic quotes Mundell as explaining that President Kennedy overruled his Keynesian advisors and "reversed the policy mix to that of tax cuts to spur growth in combination with tight money to protect the balance of payments," the exact supply-side agenda Mundell had been advocating, though Mundell disclaims having influenced Kennedy directly. Mundell continues, "The result was the longest expansion ever [up to that time] in the history of the U.S. economy, unmatched until the Reagan expansion of the 1980s."
Kennedy's business tax cuts were adopted in 1962, and the personal rate cuts in 1964. The top income tax rate was slashed from 91% to 70%, with the lower rates reduced by similar proportions across the board. The next year, economic growth soared by 50%, and income tax revenues increased by 41%! By 1966, unemployment had fallen to its lowest peacetime level in almost 40 years. U.S. News and World Report exclaimed, "The unusual budget spectacle of sharply rising revenues following the biggest tax cut in history is beginning to astonish even those who pushed hardest for tax cuts in the first place." Arthur Okun, the administration's chief economic advisor, estimated that the tax cuts expanded the economy in just two years by 10% above where it would have been.
The 1970s: Return to Keynesian Fallacies
The postwar boom ended as the liberal Johnson Administration abandoned the hugely successful supply-side policy mix. Federal spending started to soar in 1965, and President Johnson demanded and got a loose monetary policy focused on supposedly maintaining growth rather than stable prices. The tax increases started in 1968 with the 10% income tax surcharge, the alternative minimum tax, and increased capital gains levies, followed by bracket creep once inflation kicked in.
By 1969, 6.2% inflation resulted, along with the 1969-70 recession, and the economic miracle of stagflation had arrived, supposedly impossible under the doctrine of Keynesian economics. For the rest of the decade, Keynesian monetary policy kept trying to boost the economy out of decline, only to have to reverse course when inflation soared, causing the economy to fall into recession again. This resulted in further recessions in 1973-75, 1980, and 1981-82.
It finally came to an end when President Reagan explicitly abandoned Keynesian economics, and openly embraced the supply-side. He adopted 25% across the board income tax rate cuts, and then tax reform in 1986 that reduced the top rate from 70% in 1981 to 28%, with only one other rate of 15%. He bravely endorsed tight money through the teeth of the recession to stop inflation, which worked spectacularly. While prices rose 25% in just two years from 1979-80, annual inflation collapsed by half to 6.2% by 1982, and half again to 3.2% by 1983.
Reagan added deregulation to the policy mix, which reduced the cost burden on production, further stimulating it. The Reaganomics formula also included domestic spending cuts, which even with the defense buildup that won the Cold War without firing a shot, reduced total federal spending as a percent of GDP by 10% by 1989.
The results were so spectacular they astonished and surprised everyone, from opponents who wouldn't admit it, to the architects of Reaganomics themselves. Besides slaying inflation which most thought by then couldn't be done without destroying the economy, by the end of 1982 the economy took off on the above mentioned, 25-year economic boom, what Reaganomics gurus Art Laffer and Steve Moore have rightly called "the greatest period of wealth creation in the history of the planet." These results have been recounted in this column several times in the past, and the complete story is too long to do it further justice here.
The Bush/Obama Great Recession
What needs to be recounted at this point is that the Great Reagan Boom ended when, again, the supply-side policy mix was abandoned. Soon after Bush was elected, the Fed returned to using monetary policy to stimulate and manage the economy rather than focusing on price stability. The loose monetary policy from 2001 to 2006 even kept real interest rates below zero for 2½ years during that period, which effectively subsidized excessive risk and leveraging. The result was the housing bubble, which created the financial crisis when it popped in 2008.
Equally promoting the bubble was the Clinton Administration/liberal Democrat "affordable housing" policies, creating the subprime mortgage market. Fannie Mae and Freddie Mac were dragooned to finance the bubble to its eventual scary dimensions. Reregulation forced banks to contribute more financing to subprime mortgages and the housing bubble as well, and further contributed to the crisis with mandatory mark to market accounting, and privileged status for the credit rating agencies that rated subprime mortgage backed securities AAA.
Spending also began to race out of control during those Bush years. Finally, when the crisis hit, instead of resorting to the supply-side tool of reducing tax rates to promote growth, the Bush Administration peculiarly reached back to the 1970s with a Keynesian government spending, tax rebate package in February 2008. Every one of the planks of Reaganomics had been abandoned at that point.
Barack Obama had personally supported every one of these steps leading to the financial crisis, going back to the Clinton era. Once elected President, he simply reupped every one of these disastrous policies multiple times. He led enactment in February 2009 of basically the same Bush/Keynesian stimulus of a year prior, only 6 times as large. He exploded government spending and deficits to record shattering levels. He embraced re-regulation with a vengeance. And starting next year he has scheduled sharp increases in every significant federal tax rate.
Following with such devotion the opposite of every plank of Reaganomics, we can only expect exactly the opposite results, as Art Laffer has so rightly predicted. The economic history of the 20th century as recounted above backs him up quite thoroughly.
Next week we will discuss in full detail how to avert this disaster, and restore for all traditional American prosperity and the American Dream that has drawn hundreds of millions to these shores over the last 400 years.
In fiscal crises in a number of countries around the world, investors have lost confidence in governments’ abilities to manage their budgets, and those governments have lost their ability to borrow at affordable rates. With U.S. government debt already at a level that is high by historical standards, and the prospect that, under current policies, federal debt would continue to grow, it is possible that interest rates might rise gradually as investors’ confidence in the U.S. government’s finances declined, giving legislators sufficient time to make policy choices that could avert a crisis. It is also possible, however, that investors would lose confidence abruptly and interest rates on government debt would rise sharply, as evidenced by the experiences of other countries.
Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States. In a brief ("Federal Debt and the Risk of a Fiscal Crisis") released today, CBO notes that there is no identifiable “tipping point” of debt relative to the nation’s output (gross domestic product, or GDP) that would indicate that such a crisis is likely or imminent. However, in the United States, the ratio of federal debt to GDP is climbing into unfamiliar territory—and all else being equal, the higher the debt, the greater the risk of such a crisis.
Over the past few years, U.S. government debt held by the public has grown rapidly. According to CBO’s projections, federal debt held by the public will stand at 62 percent of GDP at the end of fiscal year 2010, having risen from 36 percent at the end of fiscal year 2007, just before the recession began. In only one other period in U.S. history—during and shortly after World War II—has that figure exceeded 50 percent.
Further increases in federal debt relative to the nation’s output almost certainly lie ahead if current policies remain in place. The aging of the population and rising costs for health care will push federal spending, measured as a percentage of GDP, well above the levels experienced in recent decades. Unless policymakers restrain the growth of spending, increase revenues significantly as a share of GDP, or adopt some combination of those two approaches, growing budget deficits will cause debt to rise to unsupportable levels, as shown in the figure below. (For more details, see CBO’s recent report The Long-Term Budget Outlook.)
Note: The extended-baseline scenario adheres closely to current law, following CBO’s 10-year baseline budget projections through 2020 (with adjustments for the recently enacted health care legislation) and then extending the baseline concept for the rest of the long-term projection period. The alternative fiscal scenario incorporates several changes to current law that are widely expected to occur or that would modify some provisions that might be difficult to sustain for a long period.
Although deficits during or shortly after a recession generally hasten economic recovery, persistent deficits and continually mounting debt would have several negative economic consequences for the United States. Some of those consequences would arise gradually—but a high level of federal debt, combined with an unfavorable long-term budget outlook, would also increase the probability of a sudden fiscal crisis prompted by investors’ fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation. The resulting abrupt rise in interest rates would create serious challenges for the U.S. government. For example, a 4-percentage-point across-the-board increase in interest rates would raise federal interest payments next year by about $100 billion; if those higher rates persisted, net interest costs in 2015 would be nearly double the roughly $460 billion that CBO currently projects for that year. Such an increase in rates could also precipitate a broader financial crisis because it would reduce the market value of outstanding government bonds, inflicting losses on mutual funds, pension funds, insurance companies, banks, and other holders of federal debt.
Options for responding to a fiscal crisis would be limited and unattractive. The government would need to undertake some combination of three actions. One action could be changing the terms of its existing debt. This would make it difficult and costly to borrow in the future. A second action could be adopting an inflationary monetary policy by increasing the supply of money. However, this approach would have negative consequences for both the economy and future budget deficits. A third action could be implementing an austerity program of spending cuts and tax increases. Such budgetary adjustments, in the face of a fiscal crisis, would be more drastic and painful than those that would have been necessary had the adjustments come sooner.
This brief was prepared by Jonathan Huntley of CBO’s Macroeconomic Analysis Division.
When Judge Susan Bolton granted an injunction halting the enforcement of key provisions of the Arizona immigration enforcement law, she ruled in favor of the Justice Department's position, but against the president's political interest.
Had the judge sustained this law, it would have made moot Obama's opposition to the Arizona law. As it is, she has transformed the law into a big campaign issue against Obama. Now the president is standing in the way of a state that wants to enforce the law that he won't.
The Arizona law is massively popular in the United States. Over 60 percent of all American voters support it. But the president has sought and has succeeded in stopping it from taking effect. Now this majority -- close to two-thirds of the electorate -- that backs the law will be able to focus their blame for its non-enforcement squarely on the president of the United States.
In the long term, the Bolton decision will likely be overturned by the U.S. Supreme Court and Arizona will find itself vindicated. But, in the meantime, the decision endangers the re-election chances of three Democratic Congressmen from Arizona. Their constituents will not be satisfied with statements from these Democrats supporting the Arizona law. They will become embittered because Obama's Justice Department has overridden their will.
Why did Obama bring the suit in the first place if it hurts him? Because he was seeking to increase the turnout of Latino voters and trying to win them by the same huge margin (2:1) that they delivered to him in 2008. Since he took office, Obama's approval among Hispanics has dropped to 54%, foreshadowing a massive abandonment of his Congressional candidates in November.
But what Obama miscalculated was the intense support from among most voters that the Arizona law has elicited. As he bid for Latino votes, he has sacrificed much of his liberal, Democratic base.
July 10, 2010 Graph of the Day for July 10, 2010 Randall Hoven "Now, many of these plans will cost money, which is why I've laid out how I'll pay for every dime: by closing corporate loopholes and tax havens that don't help America grow.
But I will also go through the federal budget line by line, eliminating programs that no longer work and making the ones we do need work better and cost less, because we cannot meet 21st-century challenges with a 20th-century bureaucracy. (APPLAUSE)" Barack Obama, acceptance speech at the Democratic National Convention, 2008.
Recent Federal Deficits (by Fiscal Year quarters)
Source: Congressional Budget Office. (The Fiscal Year starts in October.)
Hoven's Index for July 10, 2010
Federal deficit for first 9 months of FY 2010: $1 trillion
July 10, 2010 Graph of the Day for July 10, 2010 Randall Hoven "Now, many of these plans will cost money, which is why I've laid out how I'll pay for every dime: by closing corporate loopholes and tax havens that don't help America grow.
But I will also go through the federal budget line by line, eliminating programs that no longer work and making the ones we do need work better and cost less, because we cannot meet 21st-century challenges with a 20th-century bureaucracy. (APPLAUSE)" Barack Obama, acceptance speech at the Democratic National Convention, 2008.
Recent Federal Deficits (by Fiscal Year quarters)
Source: Congressional Budget Office. (The Fiscal Year starts in October.)
Hoven's Index for July 10, 2010
Federal deficit for first 9 months of FY 2010: $1 trillion
July 17, 2010 Graph of the Day for July 17, 2010 Randall Hoven "It is against this backdrop of Oil at Any Price that Jimmy Carter and the leaders of Western Europe, Canada and Japan will sit down next week in Tokyo for two days of talks on energy and the imperiled world economy. Exactly 48 hours earlier in Geneva, the 13-nation Organization of Petroleum Exporting Countries will also gather-and take a step that will surely make the energy squeeze worse: another increase in price. Meanwhile, demands are rising both in the Congress and from the U.S. public that Washington launch a war-effort type of national program of cooperation by Government and industry to end U.S. dependence on OPEC and its oil." Time Magazine, 1979.
"When affordable oil gives out, we're in real trouble -- I mean the collapse of civilization, within 15 to 20 years." Larry Hagman, 2010.
Source: US Energy Information Administration, Annual Energy Outlook 2010.
Hoven's Index for July 17, 2010
Crude oil production in the US in 2007: 5.08 million barrels per day Projected in 2035: 6.27 million barrels per day Oil imports in 2007, net: 10.00 million barrels per day Projected in 2035: 8.65 million barrels per day Source: US Energy Information Administration, Annual Energy Outlook 2010.
"So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted." Barack Obama, 2008.
"CCS [clean coal] technologies offer more potential to reduce CO2 emissions than efficiency improvements alone but could raise electricity costs, increase demand for water, and could affect the ability of individual plants to operate reliably." GAO, June 2010.
Source: GAO.
Hoven's Index for July 18, 2010
Increase in cost of electricity generated from coal by using Carbon Capture and Storage (CCS), or "clean coal":
MIT estimate using post-combustion capture: 61%
DOE estimate using post-combustion capture: 83%
MIT estimate using pre-combustion capture: 27%
DOE estimate using pre-combustion capture: 36%
Increased use of water for post-combustion CCS: almost 100%
Increased use of water for pre-combustion CCS: 73%
"Now, I happen to believe that we should pass a comprehensive energy and climate bill. It will make clean energy the profitable kind of energy... Reducing our dependence on foreign oil is still the right thing to do for our security. We can't afford to spin our wheels while the rest of the world speeds ahead." President Obama, February 2010.
"Advancing biomass and biofuel production holds the potential to create green jobs, which is one of the many ways the Obama Administration is working to rebuild and revitalize rural America." Agriculture Secretary Tom Vilsack, February 2010.
Source: Congressional Budget Office.
Hoven's Index for July 20, 2010
Cost to taxpayers for replacing a gallon of gasoline or diesel with biofuels:
Corn ethanol: $1.78
Cellulosic ethanol: $3.00
Biodediesel: $2.55
Gallons of ethanol to produce same energy as a gallon of gasoline: 1.48 gallons
CO2 produced from burning a gallon of gasoline: 12 kg
CO2 produced from burning equivalent (1.48 gallons) corn ethanol: 10 kg
July 26, 2010 We the Serfs By John Lilly The Constitution of the United States of America under President Barak Obama is being transformed from a nation of "We the People" to "We the Serfs."
If we look at the flow of rights from a historical perspective, it would look something like a pyramid, with the king at the top and the serfs at the bottom.
All of the rights came from God. God delivered all of the rights and property into the hands of the king. The king was the owner of all of the land in his realm. Based on their loyalty and prowess in battle, the nobility would earn from the king titles and lands. The serfs worked the land for the nobility, and the nobility let the serfs keep a portion of what they produced for themselves. The remainder was paid to the nobility in tribute. The nobility then passed part of the production of the serfs back to the king. Rights flowed from the king to the nobility and then down to the serfs, who had virtually no rights and certainly no property.
The founding fathers knew that rights flowed from God to individuals, not the king. These are natural rights. The founders inverted the pyramid to look like the following.
The founding fathers looked to the writings of John Locke and others. Locke's Second Treatise of Government, Concerning the True Original Extent and End of Civil Government, states:
The state of nature has a law of nature to govern it, which obliges every one: and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions: for men being all the workmanship of one omnipotent, and infinitely wise maker[.]
This foreshadows the most famous line in the Declaration of Independence.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
To secure these rights, individuals formed larger groups to protect these rights. The collection of individuals became towns, then states, and ultimately a nation. The founding fathers designed a Constitution in which the individual is supreme.
Modern-day progressives, now known as liberals, have come to dominate the current Democratic Party. President Obama seeks to flip the pyramid back to the historical perspective.
Under this administration, we have seen government takeover of large companies, the implementation of a pay czar to determine compensation in private companies, a health care insurance mandate where you will be forced to purchase insurance or have the IRS withholding your refund or garnishing your wages, cap-and-trade legislation, and the EPA regulation of carbon, which will determine where we can set our thermostats in our own homes.
The Obama administration has managed to move us back in time to the medieval days, where the king reigned supreme, and the fruits of the serfs' (taxpayers, producers in society, the middle class, entrepreneurs, etc.) labor belong to the government, who determine how much we shall keep.
Frederick Bastiat wrote The Law in 1850 at the time of the French Revolution. His deductions are as relevant today as they were at that time. Our life -- physical, intellectual, and moral life -- is a gift from God. Man can live and satisfy his wants only by ceaseless labor. Every day I work, a day of my life is used up, never to return. The compensation that I am paid in exchange for that day's labor is equivalent to that piece of my life that is now gone. If I have a right to life, then I have a right to that compensation which I have exchanged for a portion of my life. This process is the origin of property. But man may also live and satisfy his wants by seizing and consuming the product of the labor of others. This process is the origin of plunder. Since man is naturally inclined to avoid pain, it follows that men will resort to plunder whenever plunder is easier than work.
The proper purpose of law is to use the power of its collective force to stop this tendency to plunder instead of work. The law should protect property and punish plunder. The law, whether made by one man or one group of men, operates with the sanction and support of a dominating force, and this force must be entrusted to those who make the laws. Legal plunder occurs when the law takes from one person and gives to another. The law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. If such a law is not abolished, it will spread, multiply, and develop into a system.
As Frederick Bastiat noted in The Law,
But it is upon the law that socialism itself relies. Socialists desire to practice legal plunder, not illegal plunder. Socialists, like all other monopolists, desire to make the law their own weapon. And when once the law is on the side of socialism, how can it be used against socialism? For when plunder is abetted by the law, it does not fear your courts, your gendarmes, and your prisons. Rather, it may call upon them for help.
When law and force keep a person within the bounds of justice, they impose nothing but a mere negation. They oblige him only to abstain from harming others. They do not violate his life, his liberty, or his property. They safeguard all of these. They are defensive; they defend equally the rights of all. The Constitution lists negative rights.
But when the law imposes upon men a requirement to work, then the law is no longer negative; it acts positively upon people. It substitutes the will of the legislator for the individual's own will. When this happens, the people lose their life, their liberty, and their property.
The government does not get any money for the benefit of one group unless another group has been forced to give it to the government. The law can be an instrument of equalization only as it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder. With this in mind, consider the protective tariffs, subsidies, guaranteed profits, guaranteed jobs, relief and welfare schemes, public education, progressive taxation, free credit, and public works. You will find that they are always based on legal plunder, organized injustice. This is what President Obama calls positive rights that he finds in the Constitution.
It seems that Frederick Bastiat had the modern-day liberals pegged 160 years ago.
John Lilly, MBA, D.O. is a family physician and president of The Y.O.U.N.G. Conservatives of America and can be reached at drjohnlilly.com or tycoa.com. Contribution by Colin McCord.
The Anti-Drilling Commission By Jeffrey Folks The commission appointed by President Obama to investigate the Gulf oil spill (the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling) does not include a single member with specialized knowledge of petroleum engineering. This is akin to performing a heart transplant with a surgical team that has never set foot in an operating room.
Of the seven members appointed to the commission, not one is a petroleum engineer, and all have long-standing ties to the environmental movement. This is certainly the case with Frances Beinecke, Donald Boesch, Terry Garcia, and Frances Ulmer, all of whom have close ties to environmentalist research and policy groups. Beinecke, in fact, is president of the Natural Resources Defense Council, while Ulmer is a member of the Union of Concerned Scientists. How's that for an unbiased commission on drilling?
If the president's intention was to prevent future leaks, why would he appoint a commission with no knowledge of drilling? The answer, it would seem, is that this commission was never meant to perform the task it was officially charged with. It was never really intended to be a commission on drilling safety, but rather a group of environmental activists intent on regulating and taxing the oil and gas companies out of business. Its report is unlikely to focus on improved safely measures with the intent of increasing oil and gas exploration and production. It will more likely issue a blueprint on how to restrict drilling while extorting profits from oil companies by way of new fees and regulation.
Even as the commission hears impassioned testimony from Gulf Coast residents about the economic devastation of Obama's ban on deep-water drilling (his second ban, the first having been ruled illegal by a federal court), its members continue to register their opposition to drilling of any sort. Following recent testimony in New Orleans, during which prominent Gulf leaders pleaded for a resumption of offshore drilling, the commission's directors, William Reilly and Bob Graham, offered lip service to the resumption of drilling. But where were Ms. Beinecke and the commission's other environmental activists during these hearings? From all accounts, they have been silent about the economic damage caused by Obama's drilling ban.
There are two crucial lessons to be learned from the Deepwater Horizon accident, but it is doubtful whether the commission will comprehend either of them. The first is that "best practices" exist which, had they been strictly adhered to, may have prevented the Deepwater Horizon accident. It is for the commission to determine whether they were followed in that case, but it is incontrovertible that best practices have prevented significant accidents on all of the other 40,000 wells drilled in the Gulf. These practices, with continual improvement, should prevent spills in the future as well.
The second lesson, and one that no one in government or the mainstream media seems to have considered, is that the Deepwater Horizon, however flawed its management might have been, had the capacity to produce a great deal of oil and gas. Based on the enormous flow of oil from the Deepwater Horizon and others among the 33 deep-water rigs operating in the Gulf, it is clear that vast reserves of oil and gas exist off America's shores. These reserves are enough to make the United States energy-independent. They are enough to revive our flagging economy, enough to produce jobs for hundreds of thousands of workers and to create secondary and tertiary jobs for millions of others.
Estimates of oil flow from the Deepwater Horizon have come in at between 40,000 and 100,000 barrels. Taking a mean estimate of 70,000 barrels, the annual production from the well, not counting natural gas and condensates, would have amounted to 25,555,000 barrels per year. One hundred such deep-water wells in the Gulf, producing equal quantities of oil, would produce over 2.5 billion barrels per year, enough to supply one-third of the petroleum needs of the United States. This new production alone would add over $175 billion to annual GDP, and it would cut America's annual trade deficit by the same amount. Combined with increased onshore drilling, conservation measures, and increased production of natural gas made possible by advances in drilling technology, offshore drilling would render the United States energy-independent for the first time in a half-century.
Moreover, deep-water drilling has the potential to transform America from the slow-growth, high-unemployment welfare state that President Obama envisages into a prosperous, full-employment economy. This new economy would not only be energy independent, but it might well become an exporter of oil and gas -- as it is now an exporter of coal.
Expansion from the current 33 wells to 100 is a realistic goal, since it would not be necessary to drill 100 deep-water wells annually. Oil flow from wells such as the Deepwater Horizon continues for ten to thirty years, or even more (as it has in the North Sea). Ten additional deepwater wells per year, combined with fracking for natural gas on shore, would soon move the country toward energy independence.
For most Americans, new drilling and the energy independence that comes with it seem like a good thing, but that is the very reason why the president has appointed a commission hostile to increased drilling. The success of the free market in the United States depends to a great extent on the availability of cheap energy. By cutting off the supply of oil, natural gas, and coal, Obama ensures a continuation of high unemployment and an extended period of slow growth, and with these, the expansion of the socialist welfare state.
Nothing could be further from the interests of the modern-day Democratic Party than the transformation of the American economy into a flourishing free-market economy powered by cheap and reliable fossil fuels. The fight over drilling, in this sense, is nothing less than a struggle for the future of capitalism in America.
Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan. He has published many books and articles on American culture and politics.
Atlas Shrugged's Timeless Moral: Profit-Making Is Virtue, Not Vice
By YARON BROOK Posted 07/20/2010 06:44 PM ET
In the years leading up to 2008—09's financial meltdown, government control over mortgages, interest rates and America's banking system was at an all-time high.
And yet when crisis struck, free enterprise took the blame.
The cure, therefore, was to give government even wider powers. Washington can now bail out any company, fire CEOs, override contracts and print billions of dollars to "stimulate" the economy — all in the name of the public interest. The result? Our deficits and debt continue to mount, and there's a real possibility of a future like Greece's.
This is the state of our world today. It's remarkably similar to the state of the world in Ayn Rand's "Atlas Shrugged," a mystery story about a future America whose economy is disintegrating and whose government is accumulating power faster than anyone thought possible. This parallel is a big reason a record 500,000 people bought "Atlas Shrugged" last year.
So what can we learn from a book that foresaw in 1957 what few believed possible in 2007? We can learn a lesson the heroes of the novel learn: the cause of the government's greater, destructive control of business. And we can learn how to oppose it.
Many of the heroes in "Atlas Shrugged" are the kind of men and women who built, and continue to build, America into the economic power that it is — inventors such as Edison, industrialists in the mold of Rockefeller and Carnegie, business visionaries reminiscent of Bill Gates and Steve Jobs.
In logic and justice, the heroes of "Atlas Shrugged" should be admired and appreciated for their efforts; instead, they're demonized and shackled.
Man Of Steel
Take the case of Hank Rearden, the leading industrialist in "Atlas Shrugged" and inventor of Rearden Metal, an alloy superior to steel. Rearden is denounced and forced to surrender his iron and coal businesses because an "Equalization of Opportunity Bill" demands he create business "opportunities" for struggling competitors.
His production of Rearden Metal is capped by a "Preservation of Livelihood Law" designed to keep other steel makers afloat. Key businesses can't buy enough Rearden Metal because Rearden's forced to give every customer an equal portion under the "Fair Share Law."
Each new government scheme to control Rearden's industry brings a new crisis, and each new crisis brings a new scheme.
The result is the accelerating collapse of Rearden's business empire — and of all the other productive enterprises that depend on Rearden's enormous productivity. The only beneficiaries of this orgy of government authority are power-lusting politicians and the pseudo-businessmen who lobby for and profiteer from these laws.
The Vast Left-Wing Media Conspiracy Everyone knew most of the press corps was hoping for Obama in 2008. Newly released emails show that hundreds of them were actively working to promote him.
By FRED BARNES
When I'm talking to people from outside Washington, one question inevitably comes up: Why is the media so liberal? The question often reflects a suspicion that members of the press get together and decide on a story line that favors liberals and Democrats and denigrates conservatives and Republicans.
My response has usually been to say, yes, there's liberal bias in the media, but there's no conspiracy. The liberal tilt is an accident of nature. The media disproportionately attracts people from a liberal arts background who tend, quite innocently, to be politically liberal. If they came from West Point or engineering school, this wouldn't be the case.
Now, after learning I'd been targeted for a smear attack by a member of an online clique of liberal journalists, I'm inclined to amend my response. Not to say there's a media conspiracy, but at least to note that hundreds of journalists have gotten together, on an online listserv called JournoList, to promote liberalism and liberal politicians at the expense of traditional journalism.
My guess is that this and other revelations about JournoList will deepen the distrust of the national press. True, participants in the online clubhouse appear to hail chiefly from the media's self-identified left wing. But its founder, Ezra Klein, is a prominent writer for the Washington Post. Mr. Klein shut down JournoList last month—a wise decision.
It's thanks to Tucker Carlson's Daily Caller website that we know something about JournoList, though the emails among the liberal journalists were meant to be private. (Mr. Carlson hasn't revealed how he obtained the emails.) In June, the Daily Caller disclosed a series of JournoList musings by David Weigel, then a Washington Post blogger assigned to cover conservatives. His emails showed he loathes conservatives, and he was subsequently fired.
This week, Mr. Carlson produced a series of JournoList emails from April 2008, when Barack Obama's presidential bid was in serious jeopardy. Videos of the antiwhite, anti-American sermons of his Chicago pastor, the Rev. Jeremiah Wright, had surfaced, first on ABC and then other networks.
WSJ.com Columnist John Fund reports on a media scandal. Also, Columnist Mary Anastasia O'Grady breaks down the President's pledge to end bailouts and analyzes the Fed Chairman's latest visit to Capitol Hill.
JournoList contributors discussed strategies to aid Mr. Obama by deflecting the controversy. They went public with a letter criticizing an ABC interview of Mr. Obama that dwelled on his association with Mr. Wright. Then, Spencer Ackerman of The Washington Independent proposed attacking Mr. Obama's critics as racists. He wrote:
"If the right forces us all to either defend Wright or tear him down, no matter what we choose, we lose the game they've put upon us. Instead, take one of them—Fred Barnes, Karl Rove, who cares—and call them racists. . . . This makes them 'sputter' with rage, which in turn leads to overreaction and self-destruction."
No one on JournoList endorsed the Ackerman plan. But rather than object on ethical grounds, they voiced concern that the strategy would fail or possibly backfire.
Among journalists in general, there's always been a herd instinct. Eugene McCarthy, the Minnesota senator and Democratic presidential candidate, once described political writers as birds on a telephone wire. When one bird flew to the wire across the street, they all did. In Mr. Ackerman's case, I'm glad none of the birds joined him across the street.
We've often seen media groupthink in campaigns. In 1980, most of the media decided that President Jimmy Carter was being mean-spirited in his re-election effort with his harsh denunciations of Ronald Reagan, his Republican opponent. The media turned the meanness issue into major story. In 1992, journalists treated the economy as if it were dead in the water, though a recovery from a mild recession had begun early the previous year. I could go on.
I think JournoList is—or was—fundamentally different, and not simply because one of its members proposed to make palpably false accusations. As best I can tell, those involved in JournoList considered themselves part of a team. And their goal was to make sure the team won. In 2008, this was Mr. Obama's team. More recently, the goal seems to have been to defeat the conservative team.
Until JournoList came along, liberal journalists were rarely part of a team. Neither are conservative journalists today, so far as I know. If there's a team, no one has asked me to join. As a conservative, I normally write more favorably about Republicans than Democrats and I routinely treat conservative ideas as superior to liberal ones. But I've never been part of a discussion with conservative writers about how we could most help the Republican or the conservative team.
My experience with other conservative journalists is that they are loners. One of the most famous conservative columnists of the past half-century, the late Robert Novak, is a good example. I knew him well for 35 years. He didn't tell me what stories he was working on nor ask what I was planning to write. He never mentioned how we might promote Republicans or aid the conservative cause, nor did I.
What was particularly pathetic about the scheme to smear Mr. Obama's critics was labeling them as racists. The accusation has been made so frequently in recent years, without evidence to back it up, that it has little effect. It's now the last refuge of liberal scoundrels.
The first call I got after the Daily Caller unearthed the emails involving me was from Karl Rove. He said he wanted to talk to his "fellow racist." We laughed about this. But the whole episode was also sad. I didn't sputter at the thought of being called a racist. But it was sad to see what journalism, or at least a segment of it, had come to.
Mr. Barnes is executive editor of the Weekly Standard and a commentator on Fox News Channel.
GREEN POWER: Britain faces years of blackouts and soaring electricity bills
Monday July 19,2010 By Sarah Westcott and Mark Reynolds
BRITAIN faces years of blackouts and soaring electricity bills because of the drive toward green power, a leading energy expert warned last night.
A growing obsession with global warming and “renewable” sources threatens the stability of our supply.
Derek Birkett, a former Grid Control Engineer who has a lifetime’s experience in electricity supply throughout Britain, warned that the cost of the crisis could match that of the recent banking collapse.
And he claimed that renewable energy expectations were now nothing more than “dangerous illusions” which would hit consumers hard in the pocket.
“We are going to pay a very heavy price for the fact there has been a catalogue of neglect by the former Government which has focused on renewable energy sources,” Mr Birkett said.
“We need a mix of sources and this takes time. Renewables have the problem of being intermittent, particularly wind, and we need more back-up capacity. By having all our sources in one basket we are risking disruption.
“There is a lot of over-enthusiasm by governments to push global warming, which makes me very suspicious.” Less than five per cent of our energy comes from renewable sources but the “disproportionate” cost of implementing green technology runs into many millions of pounds, he said.
In a new book, When Will the Lights Go Out, published this month, Mr Birkett claims things will only get worse. He said the “lavish incentives” being offered to developers of green energy are being passed on to customers as the UK struggles to meet EU directives on carbon emissions.
He also warned that a growing reliance on renewable energy is creating widespread uncertainty in the electricity supply chain.
With many nuclear power stations and coal plants ending their lives and being taken out of service we “can’t rule out” people being left without power. The real problem is the cost of making sure this does not happen, and Britain’s lights “do not go out”, he warned.
“The country is going to have to make a choice whether to go along with green ideas of renewable generation or go back to coal and nuclear power.”
Documents show media plotting to kill stories about Rev. Jeremiah W... By Jonathan Strong - The Daily Caller 1:15 AM 07/20/2010
Jeremiah WrightIt was the moment of greatest peril for then-Sen. Barack Obama’s political career. In the heat of the presidential campaign, videos surfaced of Obama’s pastor, the Rev. Jeremiah Wright, angrily denouncing whites, the U.S. government and America itself. Obama had once bragged of his closeness to Wright. Now the black nationalist preacher’s rhetoric was threatening to torpedo Obama’s campaign.
The crisis reached a howling pitch in mid-April, 2008, at an ABC News debate moderated by Charlie Gibson and George Stephanopoulos. Gibson asked Obama why it had taken him so long – nearly a year since Wright’s remarks became public – to dissociate himself from them. Stephanopoulos asked, “Do you think Reverend Wright loves America as much as you do?”
Watching this all at home were members of Journolist, a listserv comprised of several hundred liberal journalists, as well as like-minded professors and activists. The tough questioning from the ABC anchors left many of them outraged. “George [Stephanopoulos],” fumed Richard Kim of the Nation, is “being a disgusting little rat snake.”
Others went further. According to records obtained by The Daily Caller, at several points during the 2008 presidential campaign a group of liberal journalists took radical steps to protect their favored candidate. Employees of news organizations including Time, Politico, the Huffington Post, the Baltimore Sun, the Guardian, Salon and the New Republic participated in outpourings of anger over how Obama had been treated in the media, and in some cases plotted to fix the damage.
In one instance, Spencer Ackerman of the Washington Independent urged his colleagues to deflect attention from Obama’s relationship with Wright by changing the subject. Pick one of Obama’s conservative critics, Ackerman wrote, “Fred Barnes, Karl Rove, who cares — and call them racists.”
Michael Tomasky, a writer for the Guardian, also tried to rally his fellow members of Journolist: “Listen folks–in my opinion, we all have to do what we can to kill ABC and this idiocy in whatever venues we have. This isn’t about defending Obama. This is about how the [mainstream media] kills any chance of discourse that actually serves the people.”
“Richard Kim got this right above: ‘a horrible glimpse of general election press strategy.’ He’s dead on,” Tomasky continued. “We need to throw chairs now, try as hard as we can to get the call next time. Otherwise the questions in October will be exactly like this. This is just a disease.”
(In an interview Monday, Tomasky defended his position, calling the ABC debate an example of shoddy journalism.)
Thomas Schaller, a columnist for the Baltimore Sun as well as a political science professor, upped the ante from there. In a post with the subject header, “why don’t we use the power of this list to do something about the debate?” Schaller proposed coordinating a “smart statement expressing disgust” at the questions Gibson and Stephanopoulos had posed to Obama.
“It would create quite a stir, I bet, and be a warning against future behavior of the sort,” Schaller wrote.
Tomasky approved. “YES. A thousand times yes,” he exclaimed.
The members began collaborating on their open letter. Jonathan Stein of Mother Jones rejected an early draft, saying, “I’d say too short. In my opinion, it doesn’t go far enough in highlighting the inanity of some of [Gibson's] and [Stephanopoulos’s] questions. And it doesn’t point out their factual inaccuracies …Our friends at Media Matters probably have tons of experience with this sort of thing, if we want their input.”
Jared Bernstein, who would go on to be Vice President Joe Biden’s top economist when Obama took office, helped, too. The letter should be “Short, punchy and solely focused on vapidity of gotcha,” Bernstein wrote.
In the midst of this collaborative enterprise, Holly Yeager, now of the Columbia Journalism Review, dropped into the conversation to say “be sure to read” a column in that day’s Washington Post that attacked the debate.
Columnist Joe Conason weighed in with suggestions. So did Slate contributor David Greenberg, and David Roberts of the website Grist. Todd Gitlin, a professor of journalism at Columbia University, helped too.
Journolist members signed the statement and released it April 18, calling the debate “a revolting descent into tabloid journalism and a gross disservice to Americans concerned about the great issues facing the nation and the world.”
The letter caused a brief splash and won the attention of the New York Times. But only a week later, Obama – and the journalists who were helping him – were on the defensive once again.
Jeremiah Wright was back in the news after making a series of media appearances. At the National Press Club, Wright claimed Obama had only repudiated his beliefs for “political reasons.” Wright also reiterated his charge that the U.S. federal government had created AIDS as a means of committing genocide against African Americans.
It was another crisis, and members of Journolist again rose to help Obama.
Chris Hayes of the Nation posted on April 29, 2008, urging his colleagues to ignore Wright. Hayes directed his message to “particularly those in the ostensible mainstream media” who were members of the list.
The Wright controversy, Hayes argued, was not about Wright at all. Instead, “It has everything to do with the attempts of the right to maintain control of the country.”
Hayes castigated his fellow liberals for criticizing Wright. “All this hand wringing about just how awful and odious Rev. Wright remarks are just keeps the hustle going.”
“Our country disappears people. It tortures people. It has the blood of as many as one million Iraqi civilians — men, women, children, the infirmed — on its hands. You’ll forgive me if I just can’t quite dredge up the requisite amount of outrage over Barack Obama’s pastor,” Hayes wrote.
Hayes urged his colleagues – especially the straight news reporters who were charged with covering the campaign in a neutral way – to bury the Wright scandal. “I’m not saying we should all rush en masse to defend Wright. If you don’t think he’s worthy of defense, don’t defend him! What I’m saying is that there is no earthly reason to use our various platforms to discuss what about Wright we find objectionable,” Hayes said.
(Reached by phone Monday, Hayes argued his words then fell on deaf ears. “I can say ‘hey I don’t think you guys should cover this,’ but no one listened to me.”)
Katha Pollitt – Hayes’s colleague at the Nation – didn’t disagree on principle, though she did sound weary of the propaganda. “I hear you. but I am really tired of defending the indefensible. The people who attacked Clinton on Monica were prissy and ridiculous, but let me tell you it was no fun, as a feminist and a woman, waving aside as politically irrelevant and part of the vast rightwing conspiracy Paula, Monica, Kathleen, Juanita,” Pollitt said.
“Part of me doesn’t like this shit either,” agreed Spencer Ackerman, then of the Washington Independent. “But what I like less is being governed by racists and warmongers and criminals.”
Ackerman went on:
I do not endorse a Popular Front, nor do I think you need to. It’s not necessary to jump to Wright-qua-Wright’s defense. What is necessary is to raise the cost on the right of going after the left. In other words, find a rightwinger’s [sic] and smash it through a plate-glass window. Take a snapshot of the bleeding mess and send it out in a Christmas card to let the right know that it needs to live in a state of constant fear. Obviously I mean this rhetorically.
And I think this threads the needle. If the right forces us all to either defend Wright or tear him down, no matter what we choose, we lose the game they’ve put upon us. Instead, take one of them — Fred Barnes, Karl Rove, who cares — and call them racists. Ask: why do they have such a deep-seated problem with a black politician who unites the country? What lurks behind those problems? This makes *them* sputter with rage, which in turn leads to overreaction and self-destruction.
Ackerman did allow there were some Republicans who weren’t racists. “We’ll know who doesn’t deserve this treatment — Ross Douthat, for instance — but the others need to get it.” He also said he had begun to implement his plan. “I previewed it a bit on my blog last week after Commentary wildly distorted a comment Joe Cirincione made to make him appear like (what else) an antisemite. So I said: why is it that so many on the right have such a problem with the first viable prospective African-American president?”
Several members of the list disagreed with Ackerman – but only on strategic grounds.
“Spencer, you’re wrong,” wrote Mark Schmitt, now an editor at the American Prospect. “Calling Fred Barnes a racist doesn’t further the argument, and not just because Juan Williams is his new black friend, but because that makes it all about character. The goal is to get to the point where you can contrast some _thing_ — Obama’s substantive agenda — with this crap.”
(In an interview Monday, Schmitt declined to say whether he thought Ackerman’s plan was wrong. “That is not a question I’m going to answer,” he said.)
Kevin Drum, then of Washington Monthly, also disagreed with Ackerman’s strategy. “I think it’s worth keeping in mind that Obama is trying (or says he’s trying) to run a campaign that avoids precisely the kind of thing Spencer is talking about, and turning this into a gutter brawl would probably hurt the Obama brand pretty strongly. After all, why vote for him if it turns out he’s not going change the way politics works?”
But it was Ackerman who had the last word. “Kevin, I’m not saying OBAMA should do this. I’m saying WE should do this.”
