Is there a Difference between Democrats and Republicans?

I saw an interview of Nancy Pelosi last night. Ms. Pelosi was discussing the Iraqi War. She stated that the Bush administration should not defend the elected Iraqi government and instead limit the military to fighting terrorism. It is difficult for me to understand Ms. Pelosi's point. There is a fine line between fighting terrorism and supporting the Iraqi government. While Ms. Pelosi claims that her position is a major departure from President Bush's, the difference seems vacuous.

Is there a difference between Democrats and Republicans? In the late 18th and 19th centuries there was a debate between federalists and anti-federalists. The federalists, led by Hamilton, were elitist. They believed in central banking, supported the interests of the wealthy and believed in limiting democracy. In contrast, the anti-federalists, led by Jefferson, opposed a central bank (what today is the Federal Reserve Bank), believed in maximizing democracy and believed in supporting the common man, who was a farmer. The Jeffersonian anti-federalists were often more racist than the federalists. Ultimately, the Jeffersonians were allied with early labor unions (and the Workingmen's Parties) but also with the southern "slave power".

Through their successors, the Whigs and then the Republicans, the federalists allied business and northern religious interests, northern farmers and abolitionists. The anti-federalists, through the Democrats, allied labor interests, the white working class of big northern cities like New York, southern interests and the "slave power".

Today, it would seem that the federalists have won a complete victory for two reasons. First of all, central banking is no longer debated, although it ought to be. The public has accepted the Keynesian monetary project.

Second, the New Deal reinvigorated the federalist concept that an elite was necessary for the US economy to work. In the progressives' view, the elite is comprised of university-trained experts. But the knowledge that enables such experts to make decisions has never been specified. The reason is that it does not exist. Business schools have multiplied in number, but competence to manage the New York City subways, for example, has eluded both Democrats and Republicans for seven decades.

What struck me about Ms. Pelosi was that she evinced no indication of the slightest grasp of military strategy or anything else relevant to the War in Iraq, but she is entirely convinced that she is expert concerning it. Is Ms. Pelosi's arrogance peculiar to the Democrats, or do both the Republicans and the Democrats implicitly favor Pelosian elitism? Are both parties alternative versions of neo-federalism?

Both favor inflationary Federal Reserve policies. More than $10 trillion have gone gone into circulation around the globe, with less than $2 trillion in circulation here in the US. We are sitting on an inflationary time bomb. With demand for stocks inelastic because of loose credit, companies have followed easy, low-risk cost strategies of moving jobs overseas to to nudge up stock prices, inflating executive compensation but leaving average Americans feeling alienated. Jefferson would turn in his grave.

Both parties favor regulation. The Democrats say they do, the Republicans say they don't, but after three Republican presidents and a decade and a half of a Republican Congress there is as much regulation now as there was under Jimmy Carter. Since 1980, government has markedly expanded in cost and scope.

The difference is that the Democrats would have unemployed American workers dependent on them for welfare, while the Republicans would have underemployed American workers working for Wendy's. Both are willing to support policies that encourage home buyers to borrow five times their annual incomes to purchase homes; both oppose policies that would permit Americans to keep their paychecks to pay cash for their homes.

It is difficult for me to see the difference.

Pamela Hall in Washington, DC

Pamela Hall of the United American Committee spoke on June 1o, 2007 in Washington, DC at a rally. Her speech is available on Youtube here. She concludes: "God bless America. God bless Israel." And God bless Pamela.

Interlocking Boards of Trustees and University Presidents

I have just been going through some biographical information about college presidents. Two points appear salient. First, of the top 50 schools, better than 80 precent of college presidents are outside hires. That means that college presidents' pay ought to be largely a market phenomena as opposed to being driven by "internal equity" or organizational culture considerations. I was somewhat surprised that most top tier university presidents are outside hires as opposed to promotions from within. That may be because inside hires bring past political baggage with them, or it may be because there is a glamour to outsiders, i.e., "familiarity breeds contempt" and "the grass is always greener on the other side of the fence".

The second interesting point is that many of the top tier schools' presidents serve on corporate boards as well as boards of other colleges. This would be consistent with the idea that social pressure plays a role in pay determination. Since interlocking or cross-serving boards suggest the presence of social pressure and cognitive dissonance, such factors may be playing a role. Jensen and Fama might argue that college presidents are hired to corporate boards because of their management expertise. If this is so, then why are their salaries so much lower than corporate executives'? (The order of magnitude is that corporate presidents' salaries are around ten times higher than college presidents').

In other words, there seems to be a contradiction. If presidential skill levels are so scarce as to warrant high salaries in the corporate world, why are skills of college presidents, who earn one tenth those amounts, in demand for corporate boards?

Would a President Giuliani Cut Taxes?

Norma Segal and I have been debating the merits of Rudy Giuliani. I have some concerns about Rudy. Specifically, he tended to obsess on minor conflicts. For instance, there was a battle with the taxi drivers that I recall caused him to redirect all of the police one day to a taxi demonstration. This was a conflict that Giuliani precipitated, similar to his threatened law suit over a New York Magazine ad. Giuliani's anti-crime initiative of ticketing minor offenses was intrusive. I recall getting parking tickets for parking five feet instead of six feet from a hydrant on 87th Street, or something like that.

Steve Malanga of City Journal argues that:

"Giuliani changed the primary mission of the police department to preventing crime from happening rather than merely responding to it...William Bratton, reorganized the NYPD, emphasizing a street-crimes unit that moved around the city..."

But I have had a long conversation with several NYPD officers and executives who said that Giuliani did not support the police in substance and left the police department with low morale and in weak organizational shape.

I am skeptical that reductions in crime rates during the 1990s were due to anything other than demographic shifts. In particular, the aging of the baby boomers reduced the percentage of the population most likely to engage in violent crimes. Also, Mario Cuomo had invested in expensive prisons during the 1980s, and these likely kept felons off the streets. I think it is a stretch to attribute reduced crime rates in New York City to Mayor Giuliani.

Malanga agrees with Norma about Giuliani's tax policies. He argues that Giuliani is a "conservative" because he cut city spending by 1.6 percent his first year in office. He also contends that Giuliani:

"reduced or eliminated 23 taxes, including the sales tax on some clothing purchases, the tax on commercial rents everywhere outside of Manhattan’s major business districts, and various taxes on small businesses and self-employed New Yorkers."

In a city that suffers from taxphilia to the degree that New York does a 1.6 percent cut in spending is a major improvement. In the scheme of things it is small change given that New York's spending is out of line and that much of it goes into wasteful government operations and mismanagement.

On August 4, 2001 Marcia van Wagner of the Citizen's Budget Commission wrote the following letter to the New York Times.

"...The common perception that Mr. Giuliani has reined in spending results from misleading city budget reporting practices that omit increased spending on debt service and do not adjust for the transfer of one year's surplus to the next.

"Accurately reported, New York City spending grew 6 percent a year from fiscal year 1997 to 2001, while inflation averaged 2.3 percent. In a comparable period (1985 to 1989) under Mr. Koch, spending grew 6.7 percent a year while inflation averaged 4.5 percent.

"New Yorkers should not believe that the recent growth in the number of police officers and teachers was accomplished with budget restraint."

According to the New York City Independent Budget Office , the city's spending increased from $32.1 billion to $36.0 billion, or 12 percent from June 1996 to June 2000. During the same period the Consumer Price Index increased by nine percent, from 157.8 to 173.7. Thus, Mayor Giuliani did not cut spending during his last four years in office, although he did not increase it very much. There may be budget shenanagans that cause these numbers to be understated, as Ms. van Wagner argues. In any case, these numbers do not qualify Mayor Giuliani as a tax cutter or as a supporter of limited government. It is true that holding the line in tax-and-spend New York is an achievement.

Can a small government Republican emerge from tax-and-spend New York?

Regarding spending, Mayor Giuliani probably is better than President Bush. But he is not a standard bearer for reductions in the scope of government or free markets. If he aims to be, he needs to make a stronger case that he is.