[Vision2020] The Death of Republican Philosophy

[nickgier at roadrunner.com]

Greetings:

"When the going gets tough, the Republicans become socialists." Banning short selling "reverses 1,000 years of theory about how free markets should work."

Thanks Andreas for that excellent primer for understanding the Bail Out.  What I can't understand is why the government does not get the good with the bad.  As one commentator put it, assuming all this bad debt is the financial equivalent of Yucca Mountain.

If Bush wants to socialized the debt, why can't we also socialize the profits.  That simply does not seem fair to the tax payers.  The banks get to keep their profits, but we are saddled with their debts.

Nick Gier

Hale Stewart, "The Death of Republican Philosophy," The Huffington Post, September 21, 2008

Last week was historic. It is a week that financial and economic people will study for generations. It also marked the end of certain elements of the Republican Party's ideology. Below are statements the Republican party can no longer claim as part of their core ideology.

We are the party of small government

Actually, this week simply added to the the end of this claim. Under Bush II, discretionary spending has increased from $640 billion to $1.040 trillion dollars. Also remember that Bush had a Republican controlled congress for 6 of those years. However, Paulson will send a package to Congress which totals $800 billion. The Treasury will create a new agency to buy bad debt (which the WSJ's Marketbeat blog has called the Treasury Garbage Machine). In short, when the Republicans control all branches of government they spend like drunken sailors.

We Support Free Markets

Last week the SEC banned short-selling in financial shares: The Securities and Exchange Commission has announced a ban on short-selling financial stocks over the next two weeks. Short-selling is essentially betting that a stock's price will go down. The SEC hopes the ban will reduce downward pressure on the market, but some think it will backfire. Wall Streeter Barry Ritholtz tells Madeleine Brand that the SEC action reverses 1,000 years of theory about how free markets should work.

In short, markets are supported when they are going up. But when they are going down, we're going to do everything we can to prevent them from going down. 

We Are the Party of Fiscal Responsibility.

No they aren't. No Republican president has ever balanced a budget. While Republicans have argued that Reagan had to contend with Democrats, Bush II did not for 6 years. Under this scenario where the Republicans controlled all branches of government they never even came close to balancing a budget. 

We are the Party of Personal Responsibility

No you're not. When companies make really stupid decisions the Federal government bails them out. Just ask any shareholder of AIG. Or any taxpayer who will not help to finance the latest government bail-out. Simply put, this week has demonstrated a key point: when the going gets tough, the Republicans become socialists:

If you are a fan of irony, consider this: The conservative movement has utterly hated FDR, and his New Deal programs like Medicaid, Social Security, FDIC, Fannie Mae (1938), and the SEC for nearly 80 years. And for the past 8 years, a conservative was in the White House, with a very conservative agenda. For something like 16 of the past 18 years, the conservative dominated GOP has controlled Congress. Those are the facts.
We now see that the grand experiment of deregulation has ended, and ended badly. The deregulation movement is now an historical footnote, just another interest group, and once in power they turned into socialists. Indeed, judging by the actions of the conservatives in power, and not the empty rhetoric that comes out of think tanks, the conservative movement has effectively turned the United States into a massive Socialist state, an appendage of Communist Russia, China and Venezuela. 
Whenever a Republican talking head says they are for any of the above mentioned things they should be questioned to explain how that statement (I'm for free markets) jibes with banning short selling of an entire sector of the market. Whenever a Republican says he is for smaller government, have him explain the nearly doubling of discretionary spending when the Republicans controlled all branches of government. 
Simply put, this week demonstrated how hollow many of the Republican values are. They sound great on paper, but aren't put into practice when that result might cause financial harm to another Republican.