Republican Decision 2010

The interesting primary this September 14 is the GOP's race between Rick Lazio and Carl Paladino even though Democratic candidate-designate Andrew Cuomo leads both.  A September 11 Siena poll finds that Lazio leads Paladino by one percent, 43 to 42. Paladino leads with 53 percent among Upstate New Yorkers while Lazio leads with a similar margin downstate.  Paladino leads among Tea Partiers 47 to 42 percent.  This slim margin suggests that the appellation Tea Party is amorphous. The Tea Party is neither small government- nor Rockefeller- Republican.  For while Paladino advocates a twenty percent cut in New York's budget, Lazio's record does not put him in the small government camp.

Carl Paladino

 Paladino is a Buffalo-based real estate developer who attended St. Bonaventure University and Syracuse Law.  He is a tough, inspiring speaker who befriends but challenges his audience.

Paladino built a real estate empire from scratch. His current net worth is about $150 million.  While overseeing 15 office buildings is not an executive responsibility with as much latitude as the governor's, Paladino has had more at risk personally than any governor. As a result, he has developed management skills that would be more likely to benefit the public than those of a lifelong politician.

Paladino is accused of forwarding racist and sexist e-mails to friends. The New York Times has endorsed Rick Lazio over Paladino saying that the e-mails alone are grounds for rejecting Paladino. However, writing of Jesse Jackson's having called New York City "Hymietown", Times reporter Jodi Kantor implied on May 22, 2008 that Jews should not hold the epithet against Jackson because he has apologized.  Although Paladino has similarly apologized for forwarding e-mails the Times applies a different standard to him. 

Like Lazio, Paladino opposes construction of the Ground Zero mosque.  He has run advertisements saying that as governor he would use eminent domain to foreclose the mosque.  I questioned him on this point because many conservatives oppose eminent domain.  At an Ulster County Republican appearance in late August Paladino insisted that he is opposed to private use eminent domain and that he would like to see less use of eminent domain more generally.

Paladino is running on a specific platform of 20 percent budget cuts.  Although Lazio also states that he would like to reduce government, his promises are not so specific.  The chief targets for Paladino's cuts are welfare and Medicaid, whose per capita costs in New York are double those in California.  There are in fact many areas where Medicaid and other aspects of New York's budget could be cut without loss in public welfare.

Rick Lazio 

Lazio grew up in West Islip on Long Island.  He attended Vassar College and American University Law School.  He worked as a Suffolk County prosecutor. He was elected to the Suffolk County legislature in 1989 and to Congress in 1992. He resigned his congressional post to oppose Hillary Clinton for Senate in 2000.  His website states that he expanded public housing for seniors and the disabled.  He also boasts of having increased the number of welfare-related Section 8 housing vouchers. In other words, Lazio's track record includes winning votes by expanding welfare benefits. He also has endorsements from the Sierra Club.

According to his Website Lazio favors three chief positions. The first, "getting our financial house in order," involves a property tax cap of 2.5% and instituting regional control of Medicaid. Also, Lazio aims to reduce public sector pension benefits for new employees and to reform Medicaid.  Second, Lazio aims at job creation. He favors lower taxes, but unlike Paladino does not offer a specific target for tax or budget relief. Nor does he offer targets for Medicaid cuts. Lazio's third position is improvement of ethics in government.

This last position is puzzling given evidence that the Village Voice has uncovered about Lazio's dealings at JPMorgan, for whom Lazio has worked as a lobbyist. During his eight-year congressional tenure Lazio collected more in contributions from financial service firms than any other Congressman. He was chair of the House housing subcommittee and through Louis Ranieri, his campaign manager, linked to the real estate bubble of the Bush administration.  On March, 18 2008, six months prior to the financial crisis of 2008, the New York Times reported that JPMorgan’s stock had increased ten percent, roughly equal to a $12 billion handout it had received in part from the Federal Reserve Bank. JP Morgan also received $25 billion in TARP funds during the crisis, which it repaid in 2009.   The Albany Times Union reported that Lazio's 2008 JPMorgan Chase salary was $325,000, with a bonus of $1.3 million.

According to the Village Voice, both Congressman Lazio and Democrat Andrew Cuomo as head of HUD worked on rules that legalized bonuses paid to real estate brokers who steered customers to more expensive real estate and higher-end mortgages.  This marked the inception of the sub-prime crisis.  The Voice also reports that in 2007 Lazio used his influence with Charles Millard, head of the Pension Benefit Guarantee Corporation, to secure a $900 million PBGC investment in JPMorgan's real estate management division.  The PBGC insures private pension plans. The untimely 2008 investment led to significant losses.  Moreover, in dealing with Millard, Lazio violated laws concerning communication during the bid process.  The PBGC's Inspector General has investigated the case and has referred it to a prosecutor.

Analysis

Liberals dislike Paladino's style, which I would describe as Jacksonian.  Andrew Jackson was a people's candidate who infuriated upper class Whigs, the 1820s' and 1830s' equivalent of today's Rockefeller Republicans and Soros Democrats.  Jackson, like today's libertarians, advocated elimination of the biggest government program of then and now: the central bank. Like Lazio, Jackson's opponent, Henry Clay, supported big government and was friendly to banking interests.  Jackson was an unabashed racist who was responsible for the Trail of Tears and whose Supreme Court appointee, Chief Justice Roger B. Taney, wrote the Dred Scott decision.  But unlike the Jackson of 1828 and like the Jackson of 1984, Paladino has apologized for forwarding the e-mails.

Paladino's opponent, Rick Lazio, has been involved in marginally illegal activity in his role as JPMorgan lobbyist, and was very much associated with the bailout. Yet, he aims to get the state's fiscal house in order and clean up the state ethically.  Paladino appeals to non-racist Jacksonians in the Tea Party who are righteously indignant about the Bush and Obama administrations' massive transfer of wealth to Wall Street.  What is most puzzling about Lazio is his appeal to self-described Tea Party activists.

Mitchell Langbert is associate professor, Brooklyn College and is a member of the Ulster County Republican Committee. This essay was presented to the Kingston-Rhinebeck Tea Party on September 12, 2010.

On Andrew Jackson

David's "Death of Socrates"



Jackson was great but had serious flaws, such as his treatment of the Cherokees. His appointee was Chief Justice Taney, writer of the Dred Scott decision, which furthered slavery and led to the Civil War. The spoils system was a kind of democratization but was an error, leading to the special interest politics of today.

His great act was abolition of the national bank. But his advocacy of democracy led to Progressivism within a century, even though he was a libertarian. He could not conceive that more democracy would lead to less liberty,a strategic blunder.

Many still think with Jackson that more democracy is consistent with greater liberty, but the facts do not bear out his theory. The founding fathers knew so, which is why they constituted a republic, not a direct democracy. Socrates had learned this in 399 BC as well. To maximize individual liberty, a conservative state is necessary. Jackson had not studied history as had Jefferson and Hamilton. Although Hamilton was a socialist, his emphasis on republicanism would have led to greater freedom in the long run than the trend toward greater democracy that Jackson initiated. Jackson focused on structure, the central bank and the powers of the central government, and was right in his ideas on those issues, but he ignored historical processes that ultimately subverted his libertarian democratic ideal.

Romans and Barbarians in American History

The qualities of the Roman Empire fulfilled the expectations of the ancient western mindset. First of all, slavery was the basis for economic profit, and military expansion, imperialism, was the method by which economic growth was achieved. Roman society was based on hierarchy, with the elite senatorial class followed by the equestrian class, citizens, freemen and then slaves. Centralization was viewed as necessary because the economy depended on military conquest and exploitation. The Romans were catholic because their Empire encompassed multitudinous ethnic groups, nationalities and religions.

The qualities of the barbarians, the Franks, Picts, Jutes, Goths, Vandals, etc. was also warlike. However, they were tribally focused and more decentralized than the Romans. They did not choose decentralization over centralization for strategic or economic reasons. Rather, tribal or ethnic prejudice was at the root. When they occupied the various parts of the Empire they wanted to emulate the Romans and to enjoy the economic benefits of Romanism, but they were not interested in a catholic worldview. Charlemagne's conquest of Germany and Italy was in the name of Frankish or Carolingian power, not in the name of re-establishing a catholic empire.

Thus, there were two important effects of the barbarian conquest of western Europe. First, the Empire became decentralized. This led to 15 centuries of economic progress. Secondly, tribalism became instituted in European culture. The European ruling classes continued to see themselves as Frankish or Norman until the 19th century, when aristocratic tribalism was transformed into nationalism.

In American history the two impulses of Romanism and tribalism followed a similar pattern. The Romans were the Federalists, Whigs, Progressives and social democrats, who were anti-racist and less nationalistic than the decentralizers, at least until the twentieth century when the Progressives adopted some of the racism, nationalism and imperialism that was characteristic of the Democrats in the 19th century.

The decentralizers in American history were the Anti-Federalists and Democrats in the 19th century. The southern Democrats were most famously for states' rights. As well, Andrew Jackson was responsible for the Trail of Tears; hated Indians; and was a racist. In contrast, the abolitionists were Whigs. The racists in 19th century America were characteristically working class Democrats. For instance, the draft riots in New York City were an anti-African American protest by working class Democrats who lynched a number of African Americans, including a number of children.

However, like the Barbarians of Europe, the working class Democrats in America were responsible for innovation and economic growth. Their pattern was similar to the Barbarians. They favored decentralization, aggressive expansion (the Mexican American War and the Indian Wars were very much Jacksonian).

The Barbarians were the innovators. The Romans the advocates of scale economies. Both principles are useful, and there is always a danger that one will proceed too far. Flexibility in the creation and destruction of economic institutions is therefore important to re-balance excessive centralization or excessive competition.
But this is best accomplished through capitalist, private institutions that are flexible and can be allowed to go bankrupt. Government, the Romanizing power in America, refuses to terminate any of its programs. Therefore, America, once the product of Barbarian thinking, especially of Montesquieu, the Physiocrats and Adam Smith, has become increasingly elitist and Romanized as the New Deal Democrats have instituted Roman philosophies.

President Andrew Jackson on The Limits of Federal Power

Woe is me. We need another president like Andrew Jackson. Although President Jackson favored states' rights, he opposed nullification, i.e., the idea that South Carolina tried to abrogate the tariffs of 1828 and 1832. Although there were things about Jackson that I don't like, such as his disregard for Indian rights, he was the best president in American history. The following excerpt from his 1837 farewell address is quoted in Harry L. Watson, Andrew Jackson vs. Henry Clay: Democracy and Development in Antebellum America*:

"In the legislation of Congress also, and in every measure of the General Government, justice to every portion of the United States should be faithfully observed. No free government can stand without virtue in the people and a lofty spirit of patriotism, and if the sordid feelings of mere selfishness shall usurp the place which ought to be filled by public spirit, the legislation of Congress will soon be converted into a scramble for personal and sectional advantages...Justice--full and ample justice--to every portion of the United States should be the ruling principle of every freeman, and should guide the deliberations of every public body, whether it be State or national.

"It is well known that there have always been those amongst us who wish to enlarge the powers of the General Government, and experience would seem to indicate that there is a tendency on the part of this Government to overstep the boundaries marked out for it by the Constitution. Its legitimate authority is abundantly sufficient for all the purposes for which it was created, and its powers being expressly enumerated, there can be no justification for claiming anything beyond them...From the extent of our country, its diversified interests, different pursuits and different habits, it is too obvious for argument that a single coordinated government would be wholly inadequate to watch over and protect its interests; and every friend of our free institutions should be always prepared to maintain unimpaired and in full vigor the rights and sovereignty of the States and to confine the action of the General Government strictly to the sphere of its appropriate duties.

"There is, perhaps, no one of the powers conferred on the Federal Government so liable to abuse as the taxing power. The most productive and convenient sources of revenue were necessarily given to it, that it might be able to perform the important duties imposed upon it...But...Congress has no right under the Constitution to take money from the people unless it is required to execute some one of the specific powers intrusted to the Government; and if they raise more than is necessary for such purposes, it is an abuse of the power of taxation, and unjust and oppressive...

"Plain as these principles appear to be, you will yet find there is a constant effort to induce the General Government to go beyond the limits of its taxing power and to impose unnecessary burdens upon the people. Many powerful interests are continually at work to procure heavy duties on commerce and to swell the revenue beyond the real necessities of the public service, and the country has already felt the injurious effects of their combined influence. They succeeded in obtaining a tariff of duties bearing most oppressively on the agricultural and laboring classes of society and producing a revenue that could not be usefully employed within the range of the powers conferred upon Congress, and in order to fasten upon the people this unjust and unequal system of taxation extravagant schemes of internal improvement were set up in various quarters to squander the money and to purchase support. Thus one unconstitutional measure was intended to be upheld by another, and the abuse of the power of taxation was to be maintained by usurping the power of expending the money in internal improvements. You can not have forgotten the severe and doubtful struggle through which we passed when the executive department of the Government by its veto endeavored to arrest this prodigal scheme of injustice and to bring back the legislation of Congress to the boundaries prescribed by the Constitution. The good sense and practical judgment of the people when the subject was brought before them sustained the course of the Executives, and this plan of unconstitutional expenditures for the purpose of corrupt influence is, I trust, finally overthrown.

*Boston: Bedford St. Martin, 1998, pp. 243-4.

Americans Are Unfit for Self-Government

President Andrew Jackson suggested that when expedience became the basis on which the Constitution was interpreted, then Americans would no longer be fit for self governance. That day passed a century ago.

I have watched the City of New York, once a great industrial, artistic, cultural, and port center deteriorate and all of its vibrancy wither. It has become a cash cow for real estate and Wall Street interests. All of its innovative callings have fled. This was done in accordance with mandates of the City's democratic vote: urban renewal, taxes, corruption, city projects, expressways, rent control, and mismanagement.

I have watched the nation raise taxes on its citizens so that Americans are no longer free, but are wage slaves to the government, paying half or more of their incomes to corrupt, morally depraved programs like Social Security and the Department of Education.

I have watched Americans accept the debasement of their currency without effort to understand the relationships among banking, Wall Street, the Federal Reserve Bank and diminishing American expectations.

I have watched Americans allow their educational system become a plaything for extremist cranks who indoctrinate, brainwash and defraud, but do not educate.

I have watched Americans passively accept waste and failed bureaucracies: the Department of Labor; the Department of Energy; the Department of Education; the Department of Health Education and Welfare. The taxes extracted to subsidize these are paid without protest by brainwashed fools, made dull witted by the American educational system.

I have watched American culture deteriorate to the point where the flagrant stupidity that passes as entertainment and the ignorance that passes as news shocks and disorients the observer, and makes me wonder about the possibility of some widespread mental contagion.

Because Americans are unfit for self government, they have allowed a succession of special interests, Wall Street, education, employers' associations, labor unions and health care lobbies to dictate spending and taxation levels, government programs and tax systems, silently and smugly accepting the abuses of corrupt lobbies.

If future generations might look back and recall the contribution of 20th century Americans to the course of history, they will remark that this was a people that was given a great nation, and through cupidity and stupidity proved that republicanism does not work.

President Andrew Jackson on Infrastructure Improvement

"...I will not detain you with professions of zeal in the cause of internal improvements...for I do not suppose there is an intelligent citizen who does not wish to see them flourish. But though all are their friends, but few, I trust, are unmindful of the means by which they should be promoted; none certainly are so degenerate as to desire their success at the cost of that sacred instrument with the preservation of which is indissolubly bound our country's hopes...When an honest observance of constitutional compacts can not be obtained from communities like ours, it need not be anticipated elsewhere, and the cause in which there has been so much martyrdom, and from which so much was expected by the friends of liberty, may be abandoned, and the degrading truth that man is unfit for self-government admitted. And this will be the case if expediency be made a rule of construction in interpreting the Constitution...."

----President Andrew Jackson, on the veto of the Mayville Road, 1830. In Henry L. Watson, Andrew Jackson vs. Henry Clay, Boston: Bedford St. Martin's, p. 179.

Decentralization, Banking and the Two Party System

The American party system has changed four times, and three of the changes were linked to money and banking. Moreover, three of the changes were linked to the issue of decentralization and states' rights. The current tremors surrounding monetary policy and the Federal Reserve Bank coincide with increasing questioning of why the Democrats and Republicans have failed to question the subsidization of investment and commercial banks and the recent Federal Reserve Bank inflation of the monetary base. One key difference between the current crisis in the American party system and past crises is the absence of a competent press or media. These were central to political debate in America until the 1930s. However, the transition from passive to active electronic media has reinvented, downsized and in a sense traditionalized the press from the centralized mainstream media that was prevalent in the 1950s to websites and blogs that are reminiscent of early newspapers.

The changes in the American party system were as follows. First, the establishment of the Federalist and Democratic Republican parties in response to Alexander Hamilton's advocacy of the First Bank and federal subsidies to manufacturing. Second, the split between the National Republicans and the Democratic Republicans, which became the split between the Whigs and the Democrats in 1836 specifically in response to Andrew Jackson's removal of federal assets from the Second Bank and his veto of the Second Bank. Note that decentralization played a role both in the Federalist-Democratic division in the 1790s and the Whig-Democratic division of 1836. Both the Federalists and the Whigs were elitist centralizers and the Democrats were decentralizers, pale copiers of the earlier anti-Federalists.

The third party formation was of course in the 1850s, the formation of the Republican Party, the centralizing party that inherited Whig elitism but reformulated its ideology to combine (a) surface advocacy of laissez faire, in imitation of Jackson with (b) the traditional Whig advocacy of centralization. The Civil War was fought not over banking but slavery. It was here that the centralization issue came to the fore.

The fourth party formation occurred in 1896, when William Jennings Bryan reinvented the Democratic Party as the party of inflation and free silver. Many of the subsequent centralizing ideas of Franklin D. Roosevelt were included in Bryan's philosophy. In 1896 the debate between centralizers and decentralizers died. Although the southern Democrats continued to advocate decentralization, the majority of the two major parties became committed to reform on a centralized basis.

This transformation was reinforced in the 1930s, when Roosevelt accelerated the Democrats' insistence on centralization.

Of the four changes, only the establishment of the Republican Party did not involve banking. However, the Republicans' insistence on intensification of centralization, not only concerning the Union but also the National Banking Act, led to establishment of the Federal Reserve Bank five decades later.

The development of American politics, then, has been toward centralization. But in management, business, economics and political theory, centralization was increasingly shown to be an inferior solution during the past eight decades.

One of the pivotal moments in American politics was Andrew Jackson's formulation of the Democratic Party. Until then, parties barely existed in America. Jackson identified the special interest of privilege linked to paper money and held that the formation of an organized party of common Americans was necessary to forestall privilege and banking interests. He was not certain that the average American was capable of withstanding the onslaught of paper money advocacy and privilege associated with central banking. The power of Jackson's vision was great, and the powerful party organization of the nineteenth century and the public's commitment to sound money permitted survival of the Jacksonian system for nearly eight decades.

However, the ideas of Fabian socialism, Bismarck's social democracy and Progressivism provided American elites with new ammunition that the Jacksonian model could not contemplate. These included the use of pretense of supporting the common man in the name of elite privilege as a tool to wrest control of banking and money in favor of economic elites. This was accomplished in the context of modest reform in areas such as workers' compensation and then in the 1930s minimum wages and social security, all with dubious value to the average American.

Nor was Jacksonian democracy itself free of special interest characteristics. There have been wrinkles and overlap in all of the American party formulations. The Jacksonian Democrats were cruel racists. Jackson oversaw the Trail of Tears march and the insistent American racism traces its resonance to Jacksonian Democracy. Jacksonian Democracy itself was a form of special interest formulation, of the common white male identifying himself as superior to blacks and native Americans.

As Louis Hartz correctly points out, the brilliance of the Whigs was the use of the Lockean imagery in the interest of mercantilist philosophy. This has been the artifice of the Republicans since the Civil War. But all of American party ideologies have been self-contradictory, and the Republican is as well. Jackson claimed to be a democrat, yet he forestalled South Carolinian nullification. He claim to be for states' rights, yet he created rigid national party organization.

Today, the Republicans claim to be for free markets yet institute socialism. Much like the Democratic Republicans in 1836, the Republicans are at the breaking point.

Andrew Jackson on the Second Bank of the United States

"Money is power."

-President Andrew Jackson
Quoted in Richard McCormick, "The Discovery that Business Corrupts Politics".

John McCain's Political Suicide--First Step to a New Jacksonian Revolution?

By identifying with the Bush/Paulson bailout John McCain has effectively handed the election to Barack Obama. McCain's task in this election was to distance himself from the Bush administration, but instead he has chosen to embrace it.

The Constitution established the House as the more responsive of the two legislative bodies, and the two-year cycle was important for Monday's vote on the bailout. Congressmen feared public retribution. However, that does not mean that the public's will will be done.

In the past week, the Federal Reserve Bank increased the number of treasury bonds it is holding by 18%. That is a supernatural jump, and it means that it has injected a tremendous quantity of money into the banking system. Monetary reserves have increased by 6%, which is also huge. There is no reason for a Congressional bailout if the Fed increases the money supply dramatically. Moreover, there is still a good chance of the bail out bill's passage in the Senate and then in the House, with the House using the Senate as cover.

In the nineteenth century the public understood that its interests DID NOT COINCIDE with those of commercial and investment banking. As a result, the central bank, the Bank of the United States, was abolished in the 1830s. Today, the public is unwilling to learn a few simple facts about the relationships among money supply, inflation, real wages and real economic growth. Real economic growth is impeded by monetary inflation because, in a form of reverse rationing, less optimal projects receive funding because those with political connections (e.g., Wall Street) get the first dibs on capital instead of those who can produce the highest returns, for instance, creative but risky inventors.

I have seen quite a few blogs and spoken to several Ivy-League-trained Ph.D. economists in the past few weeks, and I can say with assurance that the widespread support for the bailout among academics, the media and the establishment is based on junk ideas, quack theory and opportunism. The public is smarter than the "experts", and if problems with the economy continue to escalate, and the bailout will perpetuate and enhance them, then perhaps we will see the beginnings of a new Jacksonian revolution.