Volume 4, Issue 34
Today we are 150 days away from the inauguration of the 45th President of the United States. We find ourselves in a political cycle wherein an unprecedented percentage of Americans have a negative opinion of the standard bearers of both the Republican and Democratic Parties. These negatives are largely driven by perceptions of personalities. One candidate represents business as usual; the other candidate represents uncharted change. The problems facing the United States today are not static, they are progressive. The debt continues to grow. Health care costs rise unchecked. The middle class feels abandoned. Minorities feel ignored. Small business owners feel betrayed. There is no such thing as business as usual, holding matters current. To believe in the status quo means to believe that greater control and growth of government will solve all problems. The status quo concept is not a snapshot of a current situation. It is a single frame of a film recording a process moving toward an ultimate goal of total government management.
Change means restructuring. As in 1860, change provoked fear as to the results. Those who had the most to gain from business as usual cared less for those who didn’t participate in the benefits of that current system. Now, as then, the debate is about freedom. But now, rather than then, freedom is debated in the context of the empowerment of government versus the empowerment of the individual. Then the issues centered on the definition of law and the balance of free and slave states. Now the issues center on the constitutional definition of first amendment rights, free enterprise, a strong national defense, disciplined immigration policy, local control of schools, and states’ rights versus the federal government’s rights to dictate outcomes. The people don’t trust one candidate, and they can’t relate to the other.
How then do you govern democracy?
Citizens must take control of their own destiny by deciding what they believe, not just what they are afraid of. It is part and parcel of a citizen’s responsibility to vote, and to vote intelligently. On the great issues of the day, do you believe in more or less government? Too simple you may say. Not if you consider the concepts as benchmarks. The founding documents of the Declaration of Independence and the Constitution which followed thirteen years later, based their imperative on the postulate that government was necessary, but should be limited. And the expansion of government was always referenced through the impact on individual liberty. Progressives today believe that the overall good is collective and not individual, that only through the expansion of government can liberty for all be achieved, and that the precept is that government is paramount over individual liberty.
For example, in an effort to realize egalitarianism, the federal government has implemented economic policy to guarantee general economic benefits. Free enterprise has not been trusted. Government programs have been instituted to achieve perceived economic results that have not produced the desired outcome. And this policy has not only resulted in accumulated federal debt, but also in ongoing structural deficits. To perpetuate this idea that only government can solve problems, quantitative easing (QE) was instituted by the Federal Reserve. QE is in theory designed to lower interest rates. Lower interest rates would then in turn stimulate growth. The Fed ignored the economic anchor of too much debt.
Milton Friedman, one of the most distinguished economists of our time, used to say that every action of the government, in an attempt to regulate the economy towards a desired outcome, has an equal and opposite effect on the economy. The metaphor he used was an inflated balloon. You can take your finger and press on the surface. The balloon will either expand as the pressure is applied, or a bubble will pop out at a weak spot on the balloon. Continued pressure (or in this case, government policy) to change the configuration of the balloon (the economy) will result in the balloon bursting. In the situation at hand, QE is not working.
What is the opposite reaction generated by QE policy? Extended periods of low interest rates impact bonds, annuities, and other financial instruments. Approximately 20% of the overall economy is represented by the financial services industry. This sector depends on the checks and balances between equity markets and bond markets. Since 1850, the optimum cost of capital for government purposes has been 4.3%. That is the optimum interest rate that monetary policy should be seeking to stabilize interest rates for a healthy economic balance. The current cost of capital to government is well below 1%. That has caused the distorted displacement of capital into the equity markets.
The headline on the front page of yesterday’s Wall Street Journal was “Stimulus Efforts Get Weirder.” Federal Reserves are now implementing QE for corporations, not just banks. Certain Federal Reserves have actually implemented negative interest rates (you pay them to keep your money). This will not work in the long term.
Freedom may be in the eyes of the beholder. And government is necessary to balance freedoms. But in regulation, it must be always pertinent to the mindset that freedom starts with individual freedom. Dr. Friedman also used to say that you cannot have religious freedom without economic freedom. Jim Garlow, an evangelical national leader, has added that, without political freedom, you cannot have religious freedom. Both are statements that should be contemplated in deciding one’s vote on November 8th. Business as usual is not working. What then will?
Our Founding Fathers desired to orchestrate a new beginning for how a sovereign government established a relationship with those that it governed. Freedom was the essence of the equation. In political freedom, there is life. In religious freedom, there is liberty. In economic freedom, there is the opportunity for the pursuit of happiness. One freedom cannot survive without the other. The lifeblood of a positive relationship between a government and individuals depends upon protection of individual freedom.
On January 20, 2017, when the next President of the United States is inaugurated, whether or not a divided nation follows the leadership of this new President depends on their own understanding of what they believe. Voting for the lesser of two evils, and depending upon that lesser evil to produce prosperity, without a vision for the purpose of that prosperity, is not short sighted, it is senseless.
Following the gold medal performance of the U.S. men’s basketball team, Carmelo Anthony became emotional in stating that he’d seen the best and the worst of a lot of things, that it was time for America to come together, and that he was proud that his teammates represented America in these games the way they did. We should be proud of him.
Following Abraham Lincoln’s election in 1860, South Carolina inaugurated secession from the Union in December of that same year, three months before President-elect Lincoln’s inauguration. Abraham Lincoln ascended to the Presidency of a country on the brink of civil war. A horrific price was then paid to save the Union.
The key to governing democracy is unity in vision. On January 20th next year, Americans must come together through exercising their citizen responsibility of committing to determine what they believe. They must have voted for the candidate most likely to advance the belief of that vision. And if the next President of the United States is not their first choice, they must accept the compromise of the ballot box.
In the quest for unity, freedom is the essence of truth. Now versus then, having faith that our Founding Fathers were righteous is what will save our Union.
My name is Marc Nuttle and this is what I believe.
What do you believe?