Tuesday :: May 24, 2005

Investing In The Bell Curve

by pessimist

For a while now - in fact, since before the Rise of Reagan - I've been anticipating the arrival of a viable third party in the American political spectrum. Many countries already have such a structure in place, for instance Canada and Great Britain, so it isn't much of a stretch to imagine the United States' political spectrum evolving in a similar manner. All it needed was a catlyst.

We may now have that catalyst.

The compromise over the nuclear option itself demonstrates that there is enough of a concensus in the middle between the traditional social agenda of the Democrats and the radical-religious (anti-)social agenda of the Republicans to wield the balance of power - something which I expect any viable third party to use to some effect. But what portion of the American political spectrum could perform such a role?

How about the business community?

Business Groups Tire of GOP Focus On Social Issues

From Wall Street to Main Street, the small-government, pro-business mainstay of the Republican Party appears to be growing disaffected with a party it sees as focused on social issues at its expense.

"I'm inclined to support the Republican Party, but the question becomes, how much other stuff do I have to put up with to maintain that identification?" asked Andrew A. Samwick, a Dartmouth College economics professor who until recently was chief economist of Bush's Council of Economic Advisers.

"I don't know a single business group involved in the judicial nominees," said R. Bruce Josten, an executive vice president of the U.S. Chamber of Commerce. "Nada, none, zip."

And they are getting tired of waiting for their needs to be met. They may want thus to make a change.

Since the election, Washington Republicans resemble the German military during World War I, opening new fronts before old battles are resolved, said John E. Silvia, chief economist at Wachovia Corp. and a former top GOP economist for the Senate Banking Committee and the Joint Economic Committee. One week it's Social Security, the next week it's Schiavo, then steroids, then judges, he said. "It's an unbalanced domestic agenda," Silvia said. "If you're going to go to the wall on one particular issue, you're telling me you're going to sacrifice other issues, and history is full of stories of battles won at the cost of missing issues that have lost the war."

Mark A. Bloomfield, whose business-backed American Council for Capital Formation pushes for lower taxes on savings, investment and inheritances, said the business community is no longer the GOP's base. Washington's focus has shifted from fiscal issues to more narrow concerns backed vociferously by social conservatives: the Terri Schiavo case, the nomination of John Bolton as ambassador to the United Nations and, most of all, the fate of the Senate's ability to filibuster judicial nominees. "The potential for high-minded policy reforms to fix entitlements and spur growth and prosperity has degenerated into a hopeless morass," Republican economist Lawrence Kudlow wrote yesterday on the National Review's Web site.

It has become clear the judicial showdown could doom initiatives on taxes, legal liability protections, Social Security and other priorities. Last week, NAM spokesman Darren McKinney said not only would the group stay out of the fight, but "we hope that leveler heads prevail" before the confrontation virtually shuts down the Senate.

It was the 'moderates' of both parties who negotiated the fillibuster settlement - and it has been my personal experience that it is the moderates who tend to be more focussed on the issues of the business community. It's my guess that these moderate Senators were 'convinced' by their corporate sponsors to deal with this pending impasse over extremist judges and the resulting shutdown of the government by taking control of the center and forcing both sides to back off of their positions - and thus ease the threat such positions pose to profitability.

As we all know - money talks and political male bovine excrement walks. The next major political battle isn't going to be between Democrats and Republicans over control of the government and the nation. It will be between the radical evangelicals and the business community over control of the Republican Party:

Evangelical Christians had grown leery of a Republican Party that courted their interests in election years, then turned its legislative attention to business and economic concerns as soon as the polls closed, said Gary L. Bauer, a former presidential candidate and president of American Values, a conservative religious advocacy group. After the 2004 election, for example, some evangelical leaders groused that the administration had launched a public relations blitz for its Social Security restructuring, not a constitutional amendment to ban gay marriage. "Social conservatives expect their agenda to win out," Bauer said.

For social conservatives, the turnabout is fair play. But the shift in emphasis may be taking a toll on Republican political support. [Professor] Samwick said the disenchantment of small-government conservatives has been building since the passage of the USA Patriot Act, which some saw as infringing on individual liberties, and the Medicare drug benefit, which created future government liabilities that exceed the entire projected Social Security shortfall.

Economic conservatives grew restless during the first Bush term, when federal budget surpluses turned to yawning deficits, federal spending soared and the Republican-controlled Congress passed a Medicare drug benefit that marked the largest new federal entitlement since Lyndon B. Johnson was president. The president's stated priorities were to control spending, address Social Security's long-term financing problems and simplify the tax code. But since then, the drive to restructure Social Security has stalled. Efforts to rein in federal spending have been upended by a highway bill that exceeds Bush's promised price tag and a budget resolution passed Congress that rebuffed the toughest entitlement cuts demanded by the White House.

"Some of these outcomes are really starting to alienate people who might be Republican because they are for limited government," Samwick said.

Both parties have inspired the image that they are in favor of larger government - the Democrats though Lyndon Johnson's welfare legacy, and the Republicans through their 'zipless' oil war on 'Terra'. The business community isn't too keen on replacing the individual welfare state with that of a military welfare state as both cost money - lots of it. They certainly understand the practical considerations of deficit spending even if their favored politicians do not. They will want to compel changes in governmental priorities that will protect them from the folly of those who would (in their opinion) squander everything they have by whatever means.

One thing that such a group has going for it is the vast sums of corporate money available for political influence. There would be little effort involved in raising funds for a 'business party' that promised to look after the corporate agenda without cluttering up the landscape with all of the social issues that tend to alienate certain customer groups and which may even affect profitability. They could merely cut back on the funds they give to the existing major parties and instead direct these funds to a more centrist/business-oriented organization [CBO].

Who could be a part of this CBO? Think John McCain, for example. His involvement with Charles Keating during the Lincoln Savings debacle demonstrates in the most basic way a concern for business and its issues (we'll leave aside the ethical difficulties of that particular association for now).

Another possibility would be Hillary Clinton, whose family was involved in business. As some blogs point out today in discussing the fillibuster compromise (sorry - didn't get to saving the links), only Hillary has enough support to defeat McCain. But it doesn't have to be so - they could forge an alliance.

McCain and Hillary are friendly, and certainly they are both ambitious. Both desire winning the presidency. And I suspect that Hillary would accept the VP spot, because it would not only make her the first female to be elected that office, it would enhance her own chances to win the White House for herself as the incumbent VP by 2016.

Hillary's recent appearances with both McCain and Newt Gingrich demonstrates the ability to set aside partisanship in order to forge a concensus with opponents - something this nation sorely needs right now. If, as some suggest, the GOP splits, it wouldn't be much of a stretch to also suggest that the release of so much organized oppositional pressure arrayed against the Democrats could allow the deep fractures formed between the DLC and the rest of the party to cause a similar divide in the Democrats. This would provide the opportunity necessary for a McCain-Clinton candidacy, which can be shown to potentially win in 2008 against all other comers, as suggested by this scenario:

Tracey Schmitt, a spokeswoman for the Republican National Committee, conceded that the past few months have not been "hospitable to either party."

In an NBC News/Wall Street Journal poll last week, 57 percent of the people polled said Bush had different priorities for the country from their own. Only 35 percent said he shared their priorities. The poll found the president's approval rating at 47 percent, but Congress's rating stood at just 33 percent. Among Republicans, approval of Congress's performance has dropped 11 percentage points since April.

"A big part of the base is pretty disappointed," Kudlow said. "Is this irreparably damaging anything? Probably not yet. But this has been a dreary political springtime.

That may be so this year, but isn't necessarily going to be the case in the future. Suppose for a moment that I'm basically right in my assumptions that the conditions necessary for a viable third party actually exist, and that there is sufficient financial support to allow it to compete against the others. Suppose also that the moderates of both parties choose to move to this CBO. Suppose they took the position that their attention was going to the economy and all directly-related issues - for instance, health care, retirement, and the deficit - and that all other social issues were going to be relegated to the states for resolution should any local population feel so inclined.

Is it so hard to see that they could stand a good chance of winning?

Sure - I'm making many assumptions, some of which aren't going to happen. But in a time when nothing is certain anyway, might it not be a good thing to imagine a better situation than the one we now have?

What say you?

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