Wednesday, June 17, 2009

The Response

On the website, recently, I little debate was sparked about my political leanings. Two members of the site accused me of slipping to the left of the political spectrum and becoming more reliant on government as a means for addressing societal and market dilemmas.

Greg Ledet wrote…
I'm not saying that you have to blindly follow everything that the republicans stand for. What I am saying is that you have moved left... You voted for Obama and you have said that you don't mind paying extra taxes. Those are just 2 things that show a move left. I'm not calling you a lib, I am calling you not as much of a republican as you once were.

And Jon wrote…
For starters you where a firm supporter of Obama, who ran on the most liberal pro-government platform any presidential candidate has run on in our lifetime. A person of your intellect does not strongly support a guy like that without a clear understanding of his ideals and those ideals are clearly, decisively and apologetically liberal.

You have supported corporate welfare in the forms of both the Bush and Obama bailouts, something that is a slap to the very face of freemarket capitalism.

You stated in an email you sent out to many after Obama's election the need for a heavy dose of Keynesian economic policies i.e. government spending. Keynesian policies empower government not freemarkets.You supported the "stimulus package".

You are in support of the creation, use and legitimization of the Amero and possibly some other form of global or regional currency. Such a currency provided by a central bank outside of the oversight of the American people is grossly unconstitutional and seriously compromises the sovereignty of the United States. Yeah I know the Fed isn't exactly subject to any meaningful oversight but I oppose the Fed as it is currently structured and advocate for a thorough audit of the Fed, which brings me to the next issue.

You oppose a thorough audit of the Federal Reserve. While the US citizenry has to account and report every dime they come in contact with to the IRS under the threat of imprisonment, the Federal Reserve can print, spend and borrow from whomever, whenever for whatever and we the people who are accountable for this debt are completely shut out from any real oversight. That's unacceptable and it sure as hell isn't free market capitalism.

You have not yet stood up against cap and trade or socialized medical care; both huge, overreaching, widespread government empowering proposals.

You have criticized those who support enforcement of current immigration laws.

Well, for what I wanted to say in response to these two charges, the forum was no place for a long speech. Fortunately, I have this blog, and it is perfect for just that. (It sucks that I am using my 200th blog post for this purpose, but that's okay. I love writing, anyway, and we can celebrate when I hit #500.)

For the record, I consider myself to be a genuine and practicing capitalist. In fact, I think my many years of serial entrepreneurship strongly attest to that fact more than anything else. Through AxSA, I have committed my life to helping people build and rebuild the small and middle-market businesses that are the very cornerstone of our economy. Through ventures like Tempest and my literary unit, I've been able to monetize my own creativity. And these few efforts are just the beginning when it comes to the ways that I plan to harness the free market in the years to come.

From my youth, I have been an ardent believer in the private sector and the freedom it offers for any man to advance by his own volition. As an adult, I have taken risks that few are willing to take. And in the process, I have employed talent, made payrolls, adhered to budgets, exercised the judgment to make tough choices, brought ideas and concepts into fruition, and made profits in the process. But none of this is to ever say that, because of my faith in the viability of free markets, I would ever recognize free-market capitalism as something of an absolute truth, a solution to all things that ail our society. Indeed, for many mature and practicing capitalists, the unfortunate reality is that, for all of its benefits, the free market falls woefully short in some areas, and those areas are where government’s role must come into play.

Now I am not going to spend anytime dispensing lofty ideals here. Rather, I am going to address each of Jon’s points directly. But before I do that, I better address one from Greg Ledet.

To be sure, I hate taxes more than anyone, but when I told you that I was tolerant of more taxes, it is because I am looking at the bigger picture here. When one considers our current obligations and our mounting debts, excluding those generated in since 2007, it is hard to determine how this country will be able to rise from its malaise without additional tax revenues to compensate. That said, however, I think a more pro-market tax structure could be beneficial to growth. Maybe a flat tax or maybe something that is consumption-oriented like a VAT. But seeing as how neither party has the gonads to make such a “radical” shift, I think we all had better become more accustom to the idea of additional taxation or hordes of additional debt or both.

Now for Jon’s points.

On the bailouts, let me say that, I was initially opposed to them on philosophical grounds; however, after one truly powerful conversation with a member of this forum, that position changed. From a philosophical standpoint, the bailouts were wrong, and I will not deny that they were even mishandled to cloud the actual positions of weak banks. However, from a practical standpoint, I think that it was necessary, particularly for AIG. The reason is that the potential for systemic risk was too great to ignore, and a systemic failure would have wiped out millions of Americans, as banks failed, and as the country collapsed into depression.

In 1907, when a similar banking crisis took shape, J.P. Morgan personally oversaw the audits of the books of weak banks and coordinated their bailouts via stronger banks. Since that time, however, we have had few men as keen or as personally vested in the system as Morgan was, and the Fed was established, just a few years later, no matter how nefariously, to act as an institutional version of the man. Now has the Federal Reserve mucked up by simply printing more and more currency to act in concert with a Treasury issuing more and more debt? Of course, it has, and I have written about that on this forum and elsewhere. However, should we politicize the nature of the Fed? No, I do not think so, just as I do not think that it would service us any better to enact any other regulatory constraints on the financial community. In this instance, I have little faith that government, and especially Congress, has the gravitas necessary to be an effective policeman of an industry that it barely understands. If it did, then Congressional oversight would have been enacted many decades ago…I believe that my stance here is still very much free-market oriented.

Now, all of that said, Treasury has been working hard to fulfill the resource requirement of our stimulus spending. Did I support the stimulus? Yes, categorically, on the grounds that some of it would have been effective and truly appropriate in the wake of a financial crisis. The right types of stimuli could have kept certain portions of the real economy moving, if only long enough for real economic demand to pick up again. Were all allocations of the stimulus package well-positioned for economic sustainability? Of course not, and I have conceded that fact to you personally, Jon, as I recall. But a dose of Keynesian economics, at least in such a juncture, was better than doing nothing. Now should it have continued unabated? No, and I have expressed that fact in my opposition to the 2010 budget.

The problem with continued spending is that it is worsening our debt burden, and that does not come at a good time for our country. Excessive and “toxic” commercial and consumer debts have led to a financial crisis and a deficit of trust in credit markets. The lack of credit has provoked a real economy crisis, and it has prompted some excessive actions by our government, which only served to raise concerns about America’s fiscal situation. Thus far, that prediction has come to pass, but I actually can take it further: when those concerns mount, and when holders of U.S. debt and currencies shift from it, they will provoke a dollar crisis, which could lead to a real political crisis. In order to avert that type of upheaval, the kind that can lead to bloodshed and losses of life, as the dollar’s value sinks, real discussion can begin about replacing the greenback with another broader currency. So, with that said, am I advocating the creation of the Amero? Well, as a holder and investor of a waning currency, yes, I think that I am tolerant of new options.

I do not readily believe that any of these beliefs demonstrate a significant reliance on government. Rather, if anything at all, they speak to a conscience acceptance that government, in some ways, plays a necessary role in our society and even in our business world. This is not to say that government should always seek to expand its role when there is a vacuum of leadership. It cannot lessen the role of risk in our investment lives, and it should not attempt to over-regulate markets, whether those markets are financial or industrial. It also cannot easily seek to offer any programs that seem to benefit any individuals but also worsen the overall fiscal position of the country. Sure, I might not be crying foul about cap-and-trade initiative or health-care reforms, but no one who really knows me should question my positions on these issues.

Are there any others? Oh, of course—immigration reform. Yes, I do totally support a radical departure from our current quote rules, our time-consuming filing processes, and our costly deportation efforts. If foreigners want to come to this country and participate in the experience that is America—then let them, dammit! We need their productivity and their tax dollars in the years to come. But is this belief a liberal one? I would imagine that it is actually more a pro-market one, inasmuch as businesses stand to gain most from any paradigm shift in immigration laws.

I think that this will go a long way to address Jon’s points. Indeed, while it might not seem like it at times, I appreciate his conservative—pardon me, “independent”—points of view, and the challenges they spawn. These debates help to remind me why it is important to know what you stand for and why you stand for it.


Jonathan B. Melancon said...

I'll comment further when I get the chance, but first I want to point out two things really quickly.

1st, I support immigration, LEGAL immigration. Please understand there is a vast difference between the two. I had a conversation this past Sat. with an immigrant of South America (can't remember if he was from Paraguay or Uruguay) who is of full Japanese decent who is a productive and wonderful addition to this country and society. And he too is very upset about ILLLEGAL immigration because he had to jump through hoops to come to this country while others slip through the back door. Please Gary do not frame the debate as though I or those who think this way are simply anti-immigration because that is not the case at all and it is unfair to frame the debate under such a premise.

2nd, I have no problem with the conservative label in the context of fiscal and constitutional matters because that is where my conservatism is rooted, in conserving the constitution and sound fiscal policies which would further label me as a libertarian or a classical liberal. Its the Republican and Democrat label I reject because I stand for ideals and principle not polling, focus grouped, marketed and branded political parties.

Mike Carson said...

I think this is another good piece, Gary. You certainly know how to make a convincing argument.

Shannon said...

I am digging that Jesse Rose song. Who is that?

Tyler L. said...

Well, Gary, you can be sure that I will never mistake you for someone on the left.

Mashoud said...

"...I was initially opposed to them on philosophical grounds; however, after one truly powerful conversation with a member of this forum, that position changed."

Hm. I wonder who that member was. Oh, wait, that's me! LOL.

Jonathan said...

Your response justifying your positions on the above issues only highlight the fact that you have indeed moved to the left. I guess that's a hard pill to swallow Gary but come on dude, every justification you gave was based on the assumption that government intervention was a righteous and needed influence in order to tame the free markets. When in fact it was the lack of a free market environment that caused these problems.

I just don't understand how such a well informed, intelligent person as yourself can vote for Obama and not acknowledge that their views have shifted left.

Popular Posts

The Invisible Hand: Management, Economics and Strategy for the Thinking Person (Audio only)