The GOP is Imploding

February 18, 2012

The 2012 Republican presidential race has been, so far, one of the most intriguing contests in recent memory. It has consisted of multiple frontrunners, a sex scandal, one state and potentially a second state changing who it declared the winner of its caucus weeks after voting, the resignation of two state party chairman, and a candidate who is less interested in winning elections than he is in accumulating delegates to win the nomination. Put together, this has not been your typical Republican primary where a frontrunner is declared early and is swept through the primaries with little challenge all the way to their coronation moment at the party’s convention. Instead, this year we are witnessing the implosion of the Republican Party.

By implosion I am not saying the Republican Party is going to disintegrate into nothing. What I am saying is that by the time the party crowns its nominee this summer it may look a lot different than it does today.

As most Ron Paul supporters know, the Good Doctor kept much of his campaign apparatus in place from 2008. This included his allies in the various states being elected or appointed to party positions. This seems to have paid off since his former state campaign co-chair A.J. Spiker was just elected as the new chairman of the Iowa Republican Party in the aftermath of the previous chair’s demise for voting irregularities in this year’s Iowa Caucuses. Additionally, Nevada’s Republican state chair also resigned due to allegations of irregularities during that state’s caucus. It’s been reported that several Ron Paul backers are poised to step up to fill the void.

Then there is the turmoil surrounding Maine state chair, Charlie Webster. He is being censured by that state’s Republican Party and forced to recount votes from the caucuses statewide as well as include Washington County’s in the final vote tally. The new result could force the Maine GOP to change its declared winner of the caucus from Mitt Romney to Ron Paul. In all three instances, Ron Paul loyalists called out the Establishment and will potentially overthrow the old regime by supporters of sound money, a non-interventionist foreign policy, and support for civil liberties.

But, perhaps the biggest reason why the GOP is imploding is because it’s chosen one has faltered. 2012 was supposed to be Mitt Romney’s turn and he was expected to cruise to the nomination. The rules were even fixed in his favor. With strong support in the Florida, Nevada, and Arizona contests, they were moved up in the calendar to benefit Romney. Realizing he would win very few contests in the Bible Belt those contests were changed from winner take all to proportional allocation.

Yet Romney has struggled losing 6 of 9 contests and 4 in a row (yes, I am counting Maine because with potential widespread corruption he still could only out poll Ron Paul by 194 votes). Current polls in his boyhood state of Michigan have him trailing Rich Santorum. And let’s face it, there are still many southern primaries to come and your typical Evangelical voter is not going to vote for a Mormon. Things are looking grim for the Romney campaign.

As all 4 Republican candidates have vowed to stay in the race all the way to the convention, it is looking more and more like a brokered convention in Tampa. If none of the candidates has enough delegates to win the nomination, intense horse trading would ensue. However, I can’t see any of the current combatants for the nomination cutting a deal and dropping out. They all represent vastly different wings of the party and after spending so much time, energy, and money to win the thing through a grueling primary season it seems unlikely that enough could be given to make that happen.

At that point, other party candidates would be offered as a compromise. Delegate totals for each candidate would be diluted with the exception of Congressman Paul. Because of his strategy of winning delegates by out hustling his opponents and because his supporters would never switch allegiance he could become a kingmaker. He may not get the nomination himself, but the party would be changed. His delegates could influence the eventual nominee, change the platform, and return to their states and become the party’s leaders.

The consequences of such a scenario would lead to a future run by a Ron Paul heir. As the Barry Goldwater campaign paved the way for the Conservative “Revolution” of 1980, what could transpire this year could pave the way for a Libertarian Revolution in the future.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina


Romney is Focusing on the Wrong Mechanism

February 14, 2012

Coming off derogatory remarks he recently made about the underclass in America, Republican presidential hopeful Mitt Romney apparently felt the need to throw them a bone. Last week, he reaffirmed his support for linking regular increases in the minimum wage to the rate of inflation. Given that Romney has held this position since he ran for governor of Massachusetts in 2002, one could assume that he really believes the proposal would go a long way to helping the working poor. But, what he is really doing is focusing on the wrong mechanism to help them.

On the surface, Romney’s proposal seems reasonable. As prices increase, so should wages. After all, aren’t Social Security benefits indexed for price inflation?

However, the first realization that must be acknowledged is that government economic policy causes the price increases that allegedly make the minimum wage necessary for some to live a minimal existence. In other words, if the federal government would simply live within its means and cease using the Federal Reserve to monetize huge amounts of debt and maintain artificially low interest rates there would be little or no need for a minimum wage.

As the late, Austrian economist, Murray Rothbard pointed out in his book, The Mystery of Banking, from the mid-eighteenth century until 1940 prices in the United States actually fell on average from year to year with the exception being during war years. Since 1940, the Federal Reserve which became responsible for maintaining price stability and the value of the dollar through monetary policy oversaw a decline in the dollar’s value by more than 93 percent. That calculates to a 1506% annual rate of inflation change! It’s no wonder we have become a society with a low savings rate and two partners working to make ends meet.

What was the difference between these two economic epochs in our nation’s history? The first had a Gold Standard and the second was based on a fiat dollar standard.

The bottom line is that minimum wage laws are a reaction by politicians to their own historical bungling of the economy. If Mitt Romney and his ilk really wanted to help the working poor in America they would endorse a sound money policy instead. In particular, a gold backed currency that would alleviate the ability of politicians and central bankers to devalue the dollar and cause price inflation by printing money and running deficits. In short, a return to the Gold Standard would stabilize and eliminate the need for a minimum wage.

Romney Does Dislike the Working Poor

February 9, 2012

Many on the Republican right do not trust Mitt Romney.  That’s a foregone conclusion.  Recently he made a policy statement which will only increase that mistrust.  Last week Romney announced that his position on the federal minimum wage has not changed.  When he ran for governor of Massachusetts in 2002 he affirmed his support for the state’s minimum wage and proposed linking automatic increases in it to inflation; as a Republican candidate for president in 2008 he affirmed his support for the federal minimum wage and you guessed it, took the position that it ought to automatically increase based on inflation.  With his latest pronouncement, it appears flip-flopping Mitt is immoveable when it comes to his stand on government wage rate fixing.  This policy of his is consistent with his distaste for the poor since it will hurt them the most.

You see, government price fixing of any variety simply doesn’t work.  Most of the time it hurts those it was intended to help the most – the working poor.  In the 1970s, Richard Nixon placed ceiling prices on beef.  The price of beef continued to rise anyway and many small plans went out of business because they found themselves selling on smaller and smaller margins.  Many of the working poor lost their jobs.

Rent controls are another form of government price fixing that always ends in disaster.  Because there is no incentive to provide decent housing at below market rates, laws mandating artificially low rent levels produce squalid units and shortages in housing for those that need it the most – again the working poor.

So it is with minimum wage laws.  Their intention is good, but they always hurt those they are meant to help – the working poor.  By fixing the minimum price for labor above market value, employers are less willing to hire workers.  Looking at a simple supply and demand graph, where the vertical axis represents price, it is easy to see that when the minimum wage is north of equilibrium the quantity of workers supplied is greater than the quantity of workers demanded.  This equals more unemployment and particularly more unemployment at the lower end of the socio-economic ladder.

Now imagine as Romney proposes, the minimum wage increasing with the rate of inflation.  It would increase every year and given how much new money has been created out of thin air by Ben Bernanke at the Fed, an increase in the minimum wage based on price inflation could be significant very soon.  As the minimum price of labor continues to rise above the market price hiring would become even more scarce at the lower socio-economic level.
At the end of the day, you have to question the commitment to the free market of any candidate that endorses the minimum wage let alone indexing it to the rate of price inflation.  Price fixing of goods and services by government is what ultimately destroys socialist states.  Besides that, it mostly hurts the working poor.  Given Romney’s recent remarks about that group, it is consistent that he would support the minimum wage.