Well, Freddie My Fannie!

 | 

A recent piece in the Wall Street Journal, buried by the brouhaha surrounding the election and the Libya cover-up, indicates that the Federal Housing Administration (FHA) is in profound financial trouble. Indeed, it seems to be following its siblings Freddie Mac and Fannie Mae into the swamps.

The FHA has been around for nearly 80 years, and gives taxpayer backing to loans for homebuyers who put as little as 3.5% down. But more recently, the FHA has been used to reinflate the housing market by allowing lots of mortgages to be written. It now guarantees a staggering $1.1 trillion in loans.

The FHA is supposed to use its reserves to cover losses of the loans that go bad. As late as last year, it was estimated that after covering losses, the FHA would have $2.6 billion left in reserves. But, especially because of dicey loans issued between 2007 and 2009, the FHA is projected to lose $46.7 billion this year. That exceeds the $30.4 billion in reserves. The $16.3 billion deficit will almost certainly have to be covered by tax dollars from the budget. This is on top of the $137 billion already ripped off from taxpayers to cover the rescue of those Twin Towers of Corruption, Freddie Mac and Fannie Mae.

In fact, independent housing economist Thomas Lawlar states bluntly that “if [the FHA] were a private company, it would be declared insolvent and probably put under receivership like Fannie and Freddie.”

There is no doubt even more of this to come. The federal housing agencies (FHA, Freddie, Fannie, and lesser ones such as the VA) now back 90% of all new home loans, and the Fed continues to pump out the money ceaselessly. God help us if there is another major “correction” in the housing market.

In a better world, we would amend the Constitution to require that after ten more years (say), the federal government will have ended all housing subsidy programs and be permanently banned from any involvement in the housing market from that point on.

But this is far from a better world.




Share This


The Indie Revolution

 | 

I would like to give Liberty’s readers an update about technological progress regarding a device that some thought would never change: the book.

A number of years ago Amazon.com, the huge online bookstore, developed an invention, the Kindle, which was a mini-computer (what would now be called a “tablet”) for reading books. Once the technology was perfected, the Kindle represented a paradigm shift in the book publishing industry. Previously the price of a book had been deeply connected with the cost of printing it. The bigger the print run, the more the publisher could achieve an economy of scale and lower the per-book marginal unit production costs. This meant that in order to be cost-effective a print run had to be large. And because of this a small group of highly successful publishers came to dominate the book publishing industry.

This group, sometimes called the “Big Six,” was, for aspiring authors, “both the gatekeeper and the gate.” If you found a literary agent who had connections to editors then you could get your foot in the door and get published and get into bookstores. If not, you were shut out. Self-publishing developed a horrible stigma, but this is simply because it was not cost-effective and there was no economic impetus to change popular perceptions.

Enter Kindle. The Kindle works by downloading electronic files from Amazon.com, which can then be read on the device itself — no printing costs. This made Kindle ebooks much cheaper than print books. Amazon.com began by instituting a practice of dramatically slashing the retail price of its ebooks, such that most of them cost $0.99 to $3, whereas comparable print books cost $10 to $14.

The Big Six rebelled. They used their pressure to switch ebooks to the “agency” pricing model. Under the traditional pricing model the publisher sets the list price, which is basically the wholesale price that the publisher receives, while the retailer sets the retail price, which is the price that consumers actually pay. Under the agency model, the publisher, not the retailer, sets the retail price. The agency model enabled the Big Six to force Amazon to sell ebooks at prices roughly comparable to paper books. The Department of Justice and FTC recently launched an antitrust lawsuit arguing that the Big Six were trying to prevent Amazon.com from competing on price. Several Big Six publishers have agreed to settle the antitrust litigation, although a few of the Big Six continue to fight in court. The antitrust litigation is interesting and complicated, and it also involved Apple, which used its iBooks store to help the Big Six exert pressure upon Amazon. It is still unclear how ebook pricing will look in the future.

Self-publishing once carried a horrible stigma, but this is simply because it was not cost-effective and there was no economic impetus to change popular perceptions.

Kindle instituted another major change. Now, with no production manufacturing costs, you can self-publish on a zero-dollar budget. In 2010 a young woman named Amanda Hocking wrote a “paranormal romance” novel (half fantasy, half romance) and self-published it on Kindle, using Amazon’s newly developed self-publishing program, “Kindle Direct Publishing” (KDP). She was working as a waitress at the time, and put her novel up on Kindle after many rejections from agents and publishers. She didn’t spend any money to promote her book, which she titled “Switched.” She just sent review copies to a handful of book blogs. Initially she sold several thousand copies, and she considered this a success.

Then in late 2010 and early 2011, her sales rose to several hundred thousand copies. From 2011 to 2012, estimates are that she sold over one million copies of her novels. Her books, priced from 99 cents to about $3, have made her a self-published millionaire. I have read what Hocking wrote about her success, and I don’t think even she knows how she sold so many copies, other than by writing a high-quality novel in what was then a wide-open market. These days the many thousands of novelists (me included) who have been rejected by the gatekeeper Big Six and their literary agents have been lured by the Amanda Hocking dream into self-publishing. We don’t even call it self-publishing anymore; we call it indie publishing, “indie” meaning “independent.”

When I decided to self-publish my own novel, Rob Seablue and the Eye of Tantalus (which can be found on Amazon), the selling points of going “indie” were simple. You make a royalty rate per sale of about 65%, in contrast to the Big Six’s typical 25% or less (not including the literary agent’s cut), you get published immediately instead of waiting three years for your book to come out (6–12 months to get an agent, 6–12 months for the agent to land a book deal, and one year of pre-release publicity), and you have a very tiny possibility of success either way. You typically have to do your own book promotion, even if you can get a Big Six book deal, because the Big Six care mainly about their established bestsellers, not their unproven debut authors. Within the last two years I estimate that at least 10,000 books have been indie published, and the number grows every day.

The Big Six are very much afraid of losing the “browse” effect. Most book sales used to happen, so it was said, from consumers browsing through shelves in a bookstore. Browsing’s ebook replacement is the book blogging community: there are now over 2,000 book blogs, where bloggers write a constant stream of reviews. The Big Six have some advantage in promoting their ebooks, but the book bloggers don’t favor them as heavily as the browse effect did.

Most successful indie authors write romance novels. The frequency with which e-readers like Kindle are used for this genre has prompted some to speculate that women feel less embarrassed reading soft-core erotica on Kindle than reading a print book with half-naked men on the cover. But indie fantasy and science fiction (which is what I write) are also growing. Hocking herself has said she thinks book publishing is moving toward a model in which most debut authors go indie, then successful ones attract the attention of the Big Six and sign major book deals, leaving the many unsuccessful authors to fade away. Hocking herself signed a major book deal, although she still uses an indie format for some of her books.

A postscript: enjoy your local bookstore while it still exists. After Borders went bankrupt, Barnes & Noble emerged as the only major chain bookstore left. B&N has come out with an e-reader, the Nook (which is very nice, but doesn’t sell as well as Kindle). It has a self-publishing program called PubIt, although it doesn’t yet care about PubIt as much as Amazon cares about KDP. Barnes & Noble’s fate is deeply connected to the Big Six, and to the public’s continuing to go to “brick and mortar” retail stores to buy books made out of paper. B&N is caught in a tight spot between clinging to the paper book business model and getting 100% behind Nook and the e-reader business model. I go to my local Barnes & Noble a lot, mainly to drink coffee and look at magazines, and the place still looks as if it does a lot of business in-store. But Barnes & Noble is in danger, and knows it: it has hedged its bets by promoting the Nook heavily within its stores.

Your local library won’t be around forever, either. The Google Books Project has tried to scan every book in ten libraries, so as to create a huge digital and searchable public library. Google ran into legal trouble about the copyrights of old books and is stalled by ongoing litigation, but it is only a matter of time before paper libraries are replaced by more efficient online digital ebook file repositories.

As for book publishing, it isn’t clear what the future will look like. But I think the indie movement and ebooks are not going away. The summer of 2012 might be looked upon as the birth of the indie movement. History has shown that technology and economics are two hugely powerful forces behind social change. So don’t be surprised if a dramatic shift happens within the next five to fifteen years, not unlike the “dotcom” shift of the 1990s, when the internet took off: the Big Six and paper bookstores will collapse, and the book universe will consist of hundreds of thousands of indie titles, all available for 99 cents with the push of a button.




Share This


The French Disease

 | 

The French were just handed an affront to their out-sized pride. Moody’s has just downgraded their national debt. France has now lost its sterling AAA rating, dropping a notch to Aa1.

Moody’s cited a number of reasons, including France’s rigid (i.e., over-regulated) labor market, its lack of innovation, and its high level of national debt. The first two factors seem likely to lead to the undermining of its industrial base, and the last leaves it open to the bad debt problems of Greece and Spain, the agency noted.

Of course, it is unlikely that the new, avowedly socialist regime of Francois Hollande will alleviate any of these problems — in fact, it will likely exacerbate them by further poisoning the economic system with statist nostrums.

But lest we laugh too loudly at the French, we need to remember that we have the same disease. The neosocialist regime of Obama has also massively proliferated restrictions on the labor market. Start most notoriously with Obamacare, whose onerous provisions become fully operational in 2014, and which will slap huge new expenses on companies for employees working 30 or more hours a week (at least for companies with 50 or more employees). Add the aggressive use of the NLRB to force unions on hapless employees and businesses, insane new regulations on fossil fuel energy (especially coal production), the Lilly Ledbetter Act, dramatically expanding the ease of filing sex discrimination lawsuits, and so on, and you have the same fate in store for our productivity and innovation.

Regarding our national debt, we are already worse than France, not just in absolute amounts (we are a bigger country), but as a percentage of GDP. The French are at about 90% debt to GDP ratio, while we exceeded 100% early in Obama’s profligate tenure.

No doubt this is what has moved Treasury Secretary Tim Geithner to call for a radical new change in our legal system. He recently proposed that America should just eliminate the limit to debt altogether, knowing that the existing limit will be hit in the very near future, and not relishing a congressional fight over the matter. Let’s just borrow money with no limitations, until we spend ourselves into prosperity.

Jason’s Law of Karma in political ethics is that people get the government they deserve. This is just as true for us as it is for the French. We are all Greeks now.




Share This


Kelo: The Unintended Consequences

 | 

I chuckle whenever I hear Rush Limbaugh warn that the reasoning behind the Supreme Court’s Obamacare decision (National Federation of Independent Business v. Sebelius)can now lead to legislatures mandating the eating of broccoli. No more. The July 21 issue of the Economist reports how one California jurisdiction is taking the Kelo v. City of New London decision where few imagined it would go. And it is well to remember that where California innovates, the rest of America often follows.

In Kelo, the Supreme Court held that eminent domain could be used to transfer land from one private owner to another as a permissible "public use” to further economic development for the general benefits of a community under the “takings” clause of the 5th Amendment of the Constitution. It was a 5-4 decision, with Justice Kennedy providing the swing vote.

Traditionally, the power of eminent domain had been interpreted to justify the taking of private property only for direct government use — for roads, railways, government buildings, and such. But this concept had been undermined over the years, first by Berman v. Parker (1954), which allowed the taking of private property to combat “blight” (in the broadest sense), then by Hawaii Housing Authority v. Midkiff (1984), which allowed takings to break up oligarchies. Both concepts were vague, and subject to pure demagoguery. Subsequently, scores of in flagrante takings were never properly contested — until Kelo.

The majority opinion’s reasoning was based on the concepts of “minimum scrutiny,” the idea that government policy need bear only a rational relationship to a legitimate government purpose; and “judicial restraint,” the idea that judges should hesitate to strike down laws that are not obviously unconstitutional (though what counts as obviously unconstitutional is itself a matter of debate). Precedent also plays a major role in the application of “judicial restraint.” Even though a law may seem a clear breach of constitutional precepts, if it’s the result of a long-established and generally accepted trend, then “judicial restraint” can be used to uphold it — a curious, priority-reversing application of the principle. Applied in this manner, “judicial restraint” becomes a recipe for specious reasoning and sophistry. The same applies to “minimum scrutiny,” but with fewer qualifications.

In response to the Kelo decision, many states passed laws limiting or prohibiting the use of eminent domain to take private property for conveyance to another private owner. California, however, was not one of those states.

When housing prices burst in 2008, California took the biggest hit, and San Bernardino County was punched particularly hard. Entire neighborhoods were “blighted” by foreclosed properties, with boarded-up windows and unkempt facades. Property values plummeted, in some cases by 50% or more. Nearly half the mortgages in the county are now “underwater,” meaning that the value of the outstanding loan exceeds the market value of the properties.

“So,” the Economist explains, “the county and two of its cities (including Ontario) are considering an innovative proposal: to use the powers of eminent domain to seize underwater mortgages from investors and chop them down to size.”

The scheme was hatched by Mortgage Resolution Partners (MRP). As theEconomist elaborates, this is what would happen:

MRP would work with officials to identify mortgages ripe for seizure; at first, only homeowners who were up-to-date on their repayments would be eligible. MRP would drum up private investment to finance the mortgage purchases at prices determined in court (as in all eminent-domain cases). Once the loan is bought, the principal would be cut and the repayment terms eased. A win for the homeowner; a win for the local economy, thanks to growing consumer spending and (with luck) a revived construction industry; and a win for MRP, which earns a juicy fee from each transaction.

But there would be losers: mortgage providers and investors in mortgage-backed securities. If the scheme were implemented, the American Securitization Forum (the industry’s round table organization) fears it would choke off credit and depress house prices. And there are other problems.

As the Economist notes, “Thomas Merrill at Columbia Law School thinks MRP might struggle to convince a court that it has satisfied the ‘just compensation’ clause of the Fifth Amendment.” Additionally, affected mortgage providers could sue San Bernardino County and MRP for interference with valid contracts. It could be a costly nightmare for the municipalities that implement the proposed plan.

For these reasons the plan may go nowhere. County officialshave emphasized that no decision has been made, and there are signs that the process is stalled. However, merely the concocting of such a plan may open a door for some very ingenious applications of the already broad Kelo decision.

Are these really “unintended consequences”? No. Something like them could easily be predicted. To judicial originalists they are — with a nod to Donald Rumsfeld — unwelcome “known unknowns.” That is why, anticipating them, originalists advocate parsimony in the interpretation of law. To modern-liberal jurists, the consequences might also be “unknown unknowns,” but they are unknowns redolent with creative possibilities for increasing the power of the state to provide what modern liberals regard as social justice.




Share This


Crony Car Capitalism Capper

 | 

Obama’s reelection hardly negates the fact that his regime is one of the most corrupt in American history. This fact is by now obvious to all but the most partisan Obamistas. Crony green energy deals, crony college deals, crony car industry deals — the list is long.

But among the most egregious was the rigged bankruptcy of GM and Chrysler, in which the legitimate secured creditors were cheated out of what they were due under settled law in favor of the UAW — which had conveniently contributed tens of millions of dollars to Obama’s coffers. The UAW was to begin with the biggest reason that American auto companies became basket cases, and it received massive amounts of stock in both companies. It was then allowed to liquidate its stock before the taxpayers were allowed to liquidate theirs. The taxpayers ate billions of bucks in losses.

All this dirty business was done to protect grossly inefficient, overpaid, greedy auto union workers, most of whose jobs would likely have been saved (albeit at lower compensation) in a regular bankruptcy.

Finally we learned what has to be the ultimate joke. In the corrupt crony bankruptcy, Chrysler — after being bailed out with billions of taxpayer dollars — was essentially given away free to an Italian car company, Fiat. Fiat used the opportunity to expand its presence in America. And the most recent news is that Fiat will likely move some of the Jeep operations to China, and the rest of the Jeep and Chrysler operations to Italy.

As the report explains, “To counter the severe slump in European sales, [Fiat] is considering building Chrysler models in Italy, including Jeeps, for export to North America. The Italian government is evaluating tax rebates on export goods to help Fiat.”

So the Italian taxpayers will pay the highly unionized Italian auto workers to make cars at a cheap subsidized price — to put American auto workers out of work, and ensure that the American taxpayers get the ultimate hosing.

The stench from this corrupt deal grows in intensity every day, with each new permutation of the putrid process.

Is it too much to hope that the House of Representatives will mount a serious investigation into the whole crony crowd responsible for this abortion? I mean (to name names) Obama, “auto czar” Steve Rattner, the management team of GM and Chrysler, including Sergio Marchionne (CEO of Fiat), and especially all the leaders of the UAW?

Alas, it probably is too much to hope. The crime of the century will likely be swept under the carpet of history.




Share This


FFBs Light the Way!

 | 

One of the more interesting stories to emerge from the Hurricane Sandy disaster is out of Port Newark. It is yet more data on the usefulness of the oh-so-green hybrid vehicles.

Sixteen or so of the snooty Fisker Karma hybrids — which cost over $100,000 each! — were flooded by Sandy’s surge while they were parked, awaiting distribution. The amazingly well-made cars proceeded to explode and burn. It turns out that flooding apparently shorts out their electrical systems, which then set fire to their gasoline systems. It also turns out that this problem is nothing new — indeed, Fisker hybrids, so chock full of lithium-ion batteries, have quite a habit of shorting and burning. Who could have predicted that large numbers of batteries submerged in water could prove problematic?

Fisker has responded that while it doesn’t know what caused the fires, it has confidence in the Fisker Karma. Confidence.

Perhaps it would help future consumers to rename the brand “Fisker Fire Bombs.” That might alert future consumers to a potential problem.

Fisker, recall, was one of the “winners” that Obama selected to receive massive taxpayer support in The Great Green Cause. But The Cause just continues to bomb out.




Share This


The Libertarian Party Vote

 | 

Three days after the national election, Gary Johnson's total vote is 1,139,562, which is 0.9%, or less than the difference between Barack Obama and Mitt Romney. Google's Politics & Elections web page has Johnson's state percentages as follows:

3.5 NM
2.9 MT
2.5 AK
2.2 WY
2.0 ME

1.9 IN
1.8 KS
1.6 ND
1.6 SD
1.6 MO

1.5 AR
1.4 ID
1.4 NE
1.3 CO
1.3 AZ

1.2 OR
1.2 UT
1.2 VT
1.2 NH
1.2 MN

1.2 GA
1.1 NV
1.1 TX
1.1 IL
1.1 MD

1.0 CA
1.0 WA
1.0 MA
1.0 RI
1.0 NC

0.9 LA
0.9 PA
0.9 OH
0.9 HI
0.9 DE

0.9 WV
0.9 KY
0.8 IA
0.8 CT
0.8 VA

0.8 TN
0.8 SC
0.7 WI
0.7 NY
0.6 NJ

0.6 AL
0.5 MS
0.5 FL
0.0 OK (not on ballot)
0.0 MI (not on ballot)

The high percentage is in New Mexico, where Johnson was governor for two terms. The next four states are 2% to 2.9%. All are wide-open-spaces states: Montana, Alaska, Wyoming and Maine. Johnson's worst states were in the deep South — Alabama, Mississippi, Florida — and in the urban East: New York and New Jersey.

The correlation with "red" and "blue" states is fairly weak. Vermont is the "bluest" state in the union, and Utah is the "reddest." Johnson's share in each was 1.2%.

Gary Johnson did not affect the outcome of the election or the electoral vote. In none of the battleground states won by Obama — Colorado, New Hampshire, Nevada, Pennsylvania, Ohio, Iowa, Virginia, Wisconsin or Florida — would the Johnson vote have flipped the state to Romney, if Romney had won all of it.

In the "battleground" states that decided the election — and in which Johnson could be a spoiler — his share was in the lower two-thirds of the distribution, ranging from 1.3% in Colorado to 0.5% in Florida. This cannot be proved, but probably a state’s being a "battleground" depressed the Johnson vote by a few tenths of a percentage point of the total vote.




Share This


The Politics of Yes

 | 

President Barack Obama’s victory was secured by a politics of yes. Telling voters yes is essential to victory since most voters do not like to be told no. The key to political victory is figuring out how to tell the most people yes and the fewest people no. The president secured a second term by successfully employing this strategy.

There are two groups of voters that gave him a second term: women and Latino voters. Women voters do not want to be told no when it comes to their bodies. What put women voters in the president’s camp was such social issues as abortion. As long as abortion is put in terms of women’s health and rights, Republicans will not be able to capture a large enough portion of independent women voters in swing states to win the White House. The Republicans have three options: (1) adopt a pro-choice stance, (2) let the issue fade into the background so that it no longer plays a pivotal role, (3) reframe the debate over abortion from a woman’s health issue to a fetal health issue.

The first option will not, and perhaps should not, happen. Option number three will be a difficult maneuver and may prove too nuanced to change anyone’s mind. This leaves option number two as the only good option for capturing the votes of women who voted for President Obama because of the Republican stance on abortion. At a minimum, though, Republicans need to do a better job of keeping people like Richard Mourdock of Indiana and Todd Akin of Missouri from making inane comments on the topic.

Latino voters, either in fact or in rhetoric, were told yes by Democrats and no by Republicans. Whether it was Arizona’s controversial immigration law SB 1070 or Mitt Romney’s policy of self-deportation, Latino voters saw the Republican Party telling them, “We don’t want you here.” Rick Perry was crushed by the Right during the primary season for his decision as Texas governor to support a bill that would offer in-state tuition to some undocumented students. In other words, when a Republican tried to say yes to the Latino community, the base of the Republican Party turned against him.

Latino voters understood the Republican Party to be telling them no, which is why they went with the president by a 75-23 margin nationally. In an up for grabs Colorado they went his way by a margin of 87 to 10; in Ohio by 82 to 17. Just as with women voters, the GOP needs to find a way to appeal to Latino voters by either changing its stance on controversial issues, emphasizing new issues that may appeal to Latino voters, or reframing the existing debate. The most effective and consistent strategy would be for Republicans to find issues about which their ideas align with the Latino-voting population and push those to the center of the debate.

The evidence is clear; voters want to be told yes. Colorado voters want to be told that, yes, they may smoke what they want, while Maine and Maryland voters want to be told that, yes, they may marry whomever they choose. Victory in 2012 went to the party that told more people yes and fewer people no. The point is not which party has policies that are better for the country, but it is about which party makes voters feel as if they were being told yes.

For those who care about the quality of the proposals this is problematic in that there is no assessment of what is good but only what is politically expedient. Some ideas that are good are not expedient. This is an inherent problem with popular government. James Madison, the author of The Federalist No. 10, knew this to be true, which is why he argued for a republican form of government rather than a democracy: only within a republic where power is divided horizontally and vertically can the capricious nature of the electorate be tempered. Perhaps the safeguards have eroded over time or they were insufficient to begin with, but it appears that Madison's “factions” have found a welcome home within the American political process.

Nobody wants to hear that it is in the nation's best interest, or in the best interest of liberty, to let an industry go bankrupt, to let housing prices fall, or to tell retired people that their financial stability is not the government's responsibility. What most voters want to hear, according to what happened on November 6, is that when we need help we should ask the government and the government should always pronounce a resounding yes!




Share This


The Election and the Future

 | 

It’s not that conservatism isn’t a governing philosophy, it’s that lunacy isn’t a governing philosophy.

 — Joe Scarborough

The election of 2012 is over and Obama and the Democrats have given Romney and the Republicans a sound thrashing. After the Republican sweep in the 2010 Congressional elections, this analyst wondered whether 2012 would be a repeat of 1980 (when the challenger swept out a weak incumbent) or 2004 (when a weak incumbent fended off a weak challenger). Once the Republican field took shape, I felt certain we would witness a repeat of 2004.

I was wrong. Despite a weak economy and the shadow of Benghazi hanging over his administration, Obama won handily. He won an absolute majority of the popular vote, and garnered almost 3 million more votes than Romney. His electoral vote count will probably reach 332, a decline from 2008 to be sure, but still impressive. Democratic gains in the Senate were equally impressive. With Democrats in 23 of the 33 Senate seats up for grabs, there was every expectation that the Republicans would gain at least four seats, giving them control of the Senate. Instead Republicans lost ground, and were defeated in senatorial contests in the red states of Indiana, Missouri, and Montana.

The Republicans have no one but themselves to blame. Mitt Romney ran possibly the worst presidential campaign in our history. He tried to pander and lie his way to the White House, and the electorate called him on it. All politicians pander and lie. Mitt was the first to do nothing but. The better Romney came through in his concession speech — the first and only honorable act of his campaign. The man clearly lacks an inner core of character and belief, and the nation is well off without him in the top job.

Voters were also wise enough to reject Republican loonies such as Todd Aiken (the “legitimate rape” candidate) and Richard Mourdock (who maintained that a pregnancy resulting from rape is God’s will). One Republican shibboleth after another went down in disgrace on Tuesday. There was no voter fraud — indeed, the only electoral fraud perpetrated during this cycle consisted of Republican legislative moves to suppress voter turnout. The voters didn’t buy the contention that 47% of their fellow citizens — including veterans and serving soldiers, sailors, and airmen — are parasites. Gay marriage was endorsed by voters in Maine, Maryland, and Washington, and yet the sky did not fall. It is now clear that full equality for gays and lesbians can only be delayed, not denied.

It is difficult to see how the far right of the party can reconcile itself to moderation. Pragmatists win elections, but fanatics prefer to go down in flames.

Even on Tuesday night there were rumblings from Tea Partiers that the defeat was caused by the Republican establishment’s determination to foist a moderate upon them. This is an illusion that the far right of the party will continue to cling to, perhaps to its dying breath. It is quite clear that had Mike Huckabee run in 2012, he would’ve won the nomination. It is equally clear that Obama would have beaten him, and by an even wider margin. The fact is, despite mass unemployment and huge budget deficits, only a truly moderate Republican — fiscally conservative, socially liberal — could have beaten Obama. The real Mitt Romney — the Massachusetts moderate of ten years ago — could’ve won this election. But that Romney would never have gotten the nomination. This is the dilemma the Republican Party must solve if it is to remain a force nationally.

The country has changed. Whites of European descent no longer dominate our politics, at least when it comes to electing presidents. Romney got 60% of the white vote and still lost. Had Romney been able to garner the same percentage of the Hispanic vote as McCain in 2008, he would’ve been elected. Yet he failed to clear even that low bar. Hispanics, young people, and women are trending not so much for the Democrats, but rather against the far right that now dominates the Republican Party. The not-so-subtle playing of the race card (Sarah Palin’s “shuck and jive” comment; John Sununu’s “learn to be an American” diatribe) fell flat with an increasingly nonwhite, female, and tolerant electorate. White males no longer constitute a big enough bloc to win national elections. The Republican Party must recognize this, or die.

Prospects for 2013

Obama’s victory and the hard blows suffered by the Tea Party ensure that a budget deal will be struck in 2013, probably along the lines proposed by Obama in the summer of 2011. That is, tax increases as well as spending cuts will be enacted. The Republicans are desperate to prevent sequestration, as the defense cuts will hurt their home base in the South disproportionately. The Tea Party caucus will not be able to exercise a veto on the House Republicans as a whole, given that the 2012 election results represent a repudiation of its ideology. A compromise will be reached, unless Obama doubles down yet again on revenues. The need on both sides for a deal is so great that something will almost certainly get done. Whether it will be the best deal for the nation or a band-aid solution remains, of course, to be seen.

In terms of foreign policy, Obama’s reelection causes the prospect of war with Iran to recede somewhat. Time is in fact on the side of the US and Israel, rather than Iran. Should Iran persist in its present course, its economy will collapse before it can obtain a nuclear delivery system capable of striking its neighbors. The Obama administration realizes this. The John Boltons of the world, who would’ve been empowered by a Romney victory, don’t.

This is not to say that Obama’s victory represents morning in America. The US faces almost insurmountable problems — economic, fiscal (any likely budget deal aside), and in terms of foreign policy (we seem to be addicted to a world policy that we can no longer afford to carry on). The $2 trillion American businesses have been keeping on the sidelines will be put in play over the next few years, albeit with less enthusiasm than would have been the case had Romney prevailed. But even this will not guarantee that an economy buffeted by debt, globalization, and structural problems in education and healthcare will recover its place as the dynamo of the world.

Prospects for 2016

The Republican Party must become more moderate if it is to have a chance of recapturing the White House in 2016. It is difficult to see, however, how the far right of the party can reconcile itself to such a move. Pragmatists win elections, but fanatics prefer to go down in flames. The problem is complicated by the fact that the far right is itself divided between libertarians and social conservatives. Presidential contenders from the right wing of the party in 2016 will probably include Rick Santorum (who finished second to Romney in the primaries), Paul Ryan, and Rand Paul (whose libertarianism makes him the most interesting of the three). Each of these men is capable of winning the Republican nomination, but none of them is likely to win a national election. New Jersey governor Chris Christie and Florida senator Marco Rubio both possess a more broad-based appeal, but neither will be seasoned enough for a successful presidential run in 2016. Christie, of course, would find the primaries hard going after his embrace of President Obama during Hurricane Sandy. The possibility exists that an intramural brawl could wreck the Republican Party for 2016 and beyond.

The one candidate who could unite the Republicans in 2016 is Jeb Bush. The nomination is probably his for the taking, if he wants it. A Bush-Rubio or Bush-Christie ticket would be a formidable one, particularly as the George W. Bush administration fades from the national consciousness. A battle of the titans, Jeb versus Hillary, would be a spectacle beyond even the 2008 campaign. If the Democrats succeed in muddling through the next four years, it’s hard to see how Hillary could be beaten; the gender gap would be just too much for Jeb to overcome. That these two might be contesting for the right to preside over a nation and empire in decline probably would not deter them. The cheers of the crowd will drown out the sound of creaking floodgates.




Share This


Victories Against the War on Drugs

 | 

Washington and Colorado have become the first states to pass laws legalizing marijuana. In the election just ended, Washington's Initiative 502 and Colorado's Amendment 64 each are passing by about 55% of the vote. A similar measure in Oregon is failing, with only 45% of the vote. Massachusetts became the 17th medical marijuana state by passing Question 3, with 63% support.

Why Washington and Colorado? Was it because these were the two states in which Libertarian nominee John Hospers made the ballot in 1972? Probably not.

Washington and Colorado were among the earliest medical marijuana states, with ballot measures passing in 1998 in Washington and in 2000 in Colorado. They were not the first, however. California was first, with a ballot measure for medical marijuana in 1996. California voters were offered a legalization measure in 2010, and they rejected it.

Each case comes with specific reasons, and I can speak only for those in Washington, where I live. Medical marijuana has come out of the closet here, with open "dispensaries" all over Seattle. Police shut them down in Spokane and some other cities, but in liberal Seattle they thrive. We have a "Hempfest" here — a huge public music-and-weed celebration, every August. In the middle of the last decade, Seattle voters approved a measure making marijuana possession the lowest priority crime, and the new city attorney, Pete Holmes, stopped prosecuting simple possession cases in 2010.

Still, legalization was a battle — though not so much with the supporters of prohibition. Two more radical efforts to legalize, in 2010 and 2011, didn't get enough signatures to make the ballot. These measures would have repealed all state marijuana laws affecting people over age 18 and replaced them with nothing. The sponsors said the measures were bulletproof to federal challenge, because they created no law. They simply erased. But to Seattle liberals, having no regulation of the private marijuana market was too radical, and the sponsors could raise almost no money.

Then came the mainstream effort for I-502. It was not full legalization. It legalized possession of one ounce for adults over 21, continued the ban on private growing, and ordered the state to set up a system of licensing commercial growers, distributors and marijuana shops. The measure was backed by City Attorney Holmes, a Democrat; the former George W. Bush-appointed US Attorney in Seattle, John McKay, a Republican; travel entrepreneur Rick Steves, who has written extensively about Amsterdam; and the ACLU of Washington. The effort raised lots of money, got on the ballot, and was cheered on by the state's largest newspaper, the Seattle Times.

Mainstream politicians, however, were wary of it: Gov. Christine Gregoire, Democrat, opposed it, as did the Democrat and Republican candidates to replace her — because the measure conflicts with federal law.

Legalization was a battle — though not so much with the supporters of prohibition.

Initiative 502's most vocal enemies were the sponsors of the more radical measures of the two years before. Their beef was that 502 creates a "per se" standard of intoxication of 5 nanograms of active THC per milliliter of blood. They noted that the Colorado initiative did not have this. They said the standard was unscientific, and would cause medical marijuana patients to lose their right to drive. These opponents had support in the medical marijuana community, part of which was against marijuana prohibition but for a "no" on 502.

The more mainstream supporters of 502 argued that the 5 ng/ml standard was not the main issue, and that legalization was. Vote for legalization, they argued, and if 5 ng/ml is the wrong standard, we'll fix it later.

The conservatives' argument against 502 was that smoking marijuana is bad, and that legalizing it for over-21 adults would encourage more people, especially more teens, to smoke it. They didn't spend any money on ads. And they lost.

The Colorado and Washington initiatives both appear to conflict with federal law. Now we shall see what the federal government does about it.




Share This
Syndicate content

© Copyright 2013 Liberty Foundation. All rights reserved.



Opinions expressed in Liberty are those of the authors and not necessarily those of the Liberty Foundation.

All letters to the editor are assumed to be for publication unless otherwise indicated.