Any
quick read of my recent articles and forum posts
(on Spengler.atimes.net)
would show my growing concerns about the
trajectory of the United States economy and its
polity, which have been pushed to the general area
of despair in recent times. Since 2007, there has
been a visible lack of political leadership in the
US across both the major parties, as they folded
to the dictates of greedy banks and impecunious
mortgage borrowers.
More specifically, I
believe that allowing Lehman Brothers to fail was
altogether a positive thing, but panicking after
that and allowing the rescue of AIG and a number
of big banks was quite simply beyond the pale.
While the right-wing party abandoned its
free market principles, the left-wing apparently
decided to cosy up to big business and
banks, effectively
creating a rather confusing and mixed picture of
the overall policy direction in the US. I have
been disappointed for pretty much all of the last
four years in terms of how the Republicans have
flip-flopped on various issues central to the
precepts of fiscal rectitude.
So it was a
welcome relief to read last week that Mitt Romney,
the presumptive Republican candidate to challenge
President Barack Obama in November, had chosen as
his running mate Paul Ryan, from Wisconsin. Romney
doesn’t inspire much faith in people like me. As a
serial flip-flopper whose ideological core appears
rather similar to that of the incumbent, added to
a certain amount of reticence on personal taxes
that have cast doubts on the path to his
prosperity, he appears to be a classic case of
someone attempting to please too many masters. And
yes, strapping the dog to the roof of his car
doesn't help matters.
In contrast to the
rather weak Romney, I like whatever is being
published in the media about Ryan, whether it is
intended to be negative or positive. A strong
proponent of the Austrian school of economics in
the US political context, he has presented in the
past an alternative vision of where the US could
go, if the country's political system were to ever
break out of its current political straitjacket.
By challenging universal medical care sponsored by
the government and cutting back other welfare
measures to fund a smaller government relying on
lower taxes, Ryan has cast himself firmly on the
iconoclastic side of US government.
There
are a number of criticisms levied against Ryan,
not the least of which is that his proposed
alternative federal budget - the Ryan Budget -
would have taken an inordinately long time to
balance the current deficit trend in the US while
more personal charges highlight the support given
by Ryan for various proposals such as the Bush tax
cuts that helped to balloon up the US deficit in
the first place.
Given that Ryan is a
fairly young congressman, the criticisms belie
exaggerated expectations to start with. That
aside, I am not entirely sure that they are valid
in any event because most of Ryan's critics have
their own axe to grind; chief amongst them being
the Republican gadfly Paul Krugman who can be
easily trusted to make up convenient stories and
assumptions as he goes along.
As with most
of his "analysis", Krugman forgets first- and
second-order effects that in the case of the Ryan
budget may vastly help to reduce the deficit
faster. For example, removing certain types of
free healthcare may help motivate the habitually
indolent to get back to even low-paying jobs, in
turn reducing both their own health risks (from
increased physical activity) and also taxes from
their earnings.
Criticism of his support
for the George W Bush tax cuts is also misplaced
as it represents ideological consistency at the
very least, even if the eventual effect on
deficits as exaggerated by the failed wars and
misjudging the nature and depth of the economic
collapse in 2007 and then on.
Sure there
are other reasons to question his credentials -
supporting the government bailout of the car
industry, for example which was clearly aimed at
protecting the jobs of his constituents in
Wisconsin - but overall, Ryan seems eminently
plausible as not just a fiscal hawk but also an
innovative leader with real ideas.
'You
didn't do that' Think of the debate about
jobs for example. In a speech that may well
characterize the exact breaking point of the
American public's confidence in Obama were he to
lose this November, the president chastised
business owners for imagining they were central to
job and wealth creation by pointing out the role
of supportive government policies and investments
that lay behind the success of many an
entrepreneur.
That argument, while
seductive to communists and others who believe in
big government, is also patently untrue.
Government spending is itself driven by the taxes
of productive people, but even leaving that nuance
aside, individual entrepreneurs deal with the same
variables as those around them and yet come out on
top; partly as a result of work ethic and partly
due to innovative ideas. To take away those
achievements with a bland "you didn't do that"
that suggested that "anyone" else could have
achieved the same thing under the same conditions
is both immoral and wrong.
Lower direct
taxes can act as the engine of innovation as
workers focus on maximizing their productive
potential within the ambit of a working life that
isn't always under their control. That is the
context of America's greatness; not the mile-wide
highways and bridges to nowhere that idiotic
governments lavished their attention on over the
past few decades.
The point of having
people like Ryan in the political firmament is to
ensure that governments go to what they do best
which is to attempt the least possible damage
whilst ensuring that sufficient infrastructure
exists for innovators and entrepreneurs to thrive.
Split with Europe There is a
well-grounded fear amongst many bond market
investors that American policy is fated to take
the country closer than is comfortable to the
experience of France, Italy and Spain due to
widening fiscal deficits, low levels of innovation
and a lack of policy distinction with those being
followed by now-failing economies in Europe.
That is exactly where Ryan comes in,
particularly as he bravely challenges the status
quo in pushing out unnecessary and potentially
counter-productive spending on universal
healthcare as proposed by Obama. The example of
Europe is clear - providing universal healthcare
and other welfare approaches has vastly improved
the quality of life, but has come at the cost of
serious second-order effects such as labor
indolence and low entrepreneurial dynamism.
The first-order effect of European welfare
policies arguably was rudely healthy thugs roaming
the streets of London, as I wrote last year (see
"London
riots reduce lies of the left to ashes", Asia
Times Online, August 16, 2011), rather than
well-adjusted individuals ever grateful to a
munificent state as was imagined by communist
ideologues over a century ago. Of course, similar
trends have also been witnessed in other European
cities such as France, Spain and Greece over the
past 10 years.
In contrast, leaving out
promises of government support on healthcare would
likely change the basic working approach of
citizens, and promote both healthier lifestyles
and higher workforce participation as seen in the
US for the past few decades. The relaxation of
such rules since the Bush era (another ideological
drift by the Republicans) helped to accentuate the
depth and longevity of the current crisis in my
view.
All in all, Ryan appears the right
person to challenge the market's fears of
political deadwood infecting the US government for
the next few years. It is to some regret that I
note he will not be the likely candidate for
president directly this year - depending on the
outcome we may have to wait another four or eight
years for that outcome.
Meanwhile though,
investors can take heart in the idea of a
President Ryan in the not-too-distant future of
the US.
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