And the race drags on...

This week's Economist.com KAL cartoon.


As you might have heard, Hillary Clinton won Pennsylvania on Tuesday. I was hoping for her to lose so that this race could be over. So, that didn't happen. Instead she's still in the race, brandishing her unique brand of populism. Chris Matthews suggested that Obama be more of a "firebrand" and a "torch-bearer" speaking for the working man. It really made me think about the contrast of this race. If you know some political science, then you know that the bulk of the voters are in the center. On the extreme left and extreme right are the minority. Most of the time the one who becomes elected President is the one most successful in collecting the majority of the center (moderates). But, this isn't so in these Primaries, why not?.

It seems that both Hillary Clinton and Barack Obama used to be far more center than they are today. Perhaps it was their centrist appeal that made them each "inevitable," albeit it at different times. Hillary was unstoppable when she declared her candidacy in 2006. How far she has fallen. Barack Obama seemed inevitable after a decisive Wisconsin vote, remember? Then a shellacking in Ohio, Texas(popular vote) and lately, Pennsylvania. It seems they've each flown from the center to the left. It seems the longer this race goes on, the more populist it becomes.

Look at the key issues, Universal Health Care, the Economy and good ole fashioned gossip! Each of these issues offers a vision for a better tomorrow, what they fail to mention is the cost. Populist sermons tend to leave out those pesky details. But who really cares about that when we hear that someone's preacher gave a bad sermon, or that someone conjured up memories of past battle in Bosnia? This is what the race has come down to: who can appeal most to both a populist media (Thank you Glenn Beck, Chris Matthews and Lou Dobbs), and a blue-collar worker who just lost his job. This is a recipe for some government intevention. That is why Hillary Clinton will be the next FDR.

Social Programs, Price Controls (she proposed them in her previous medical care plan in 1994), and so on can be relied upon if she is elected. She will have a friendly congress, she will probably have a friendly majority. Spend, Spend, Spend. Historically, this has gotten us into big trouble. We're just coming off a spending Republican Congress and President. In with a spending Democrat? I may not like either candidate right now, but I can't see Hillary as president, it's a scary proposition. I just hope the one who is the least left wins. Democrat or Republican, our economy will thank you in the end.
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A Public/Private Economy

In intro economics, many students (myself included) learned about Keynesian economics (named for John Maynard Keynes). That is, National Income (GDP) is made up three distinct contributaries: Consumption, Investment and Government spending. During times of feast, the government is to raise taxes and cut spending; during times of famine, the government is to spend its revenue, raised from taxes and increase spending to prop up the economy. In other words, it is up to the government, not the consumers or investors to pull an economy up out of a down cycle.

In order to see why this argument is not the best cure for a down cycle, we have to remember what government spending is. It is a sort of indirect consumption. That is, after a government taxes its constituents, it spends money on "public goods," which can be broadly defined from military and police to a more leftist version with employment programs, welfare and medicare for the elderly and poor. Government spending, for all its pomp and circumstance, is inefficient. Simply stated, the government is spending your money for you. For politicians and bureaucrats, it is more or less monopoly money. It is not earned, it is taken. Because it is not earned, it is not spent with the same frugality and wisdom as someone spending the money he or she earned according to the individual's preferences (private consumption). It is not government spending that props up an economy, it is private consumption. Cutting taxes and allowing consumers to spend their money is the best cure for a downcycle, not indirect consumption as some Keynesians may have you believe.

Nothing will top a free market when it comes to an economy. When people are allowed to exercise their consumption preferences, investors may follow the signals to invest in serving consumers (business investment). A private economy is the most efficient. When people are not allowed to follow their preferences and are forced to surrender a growing portion of their earnings to someone who will spend it less wisely, how does this rescue an economy? It is important to consider this when many politicians say that raising taxes and more spending are the only ways to fix our economy. The government's rightful place is protecting investment and consumption from fraud, not to participate actively in an economy. Such participation only ensures further inefficiency and a further drop in the economy.

I know this isn't the most thorough examination of this topic, but no one came here to read a book ;) If anyone would like a further examination, please let me know and we'll discuss some more.
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