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Republicans are thrilled

Republicans are thrilled about the upcoming election. They might want to rethink that.

True, the Democrats have spent the entire time since the 2008 elections pissing off the American people. True, Republicans can probably win just by not being Barack Obama, Nancy Pelosi, or Harry Reid.

But is that really what they want?

Absolutely not, but they seem not to understand it. This is a Herbert Hoover moment. Republicans already have one Herbert Hoover moment, namely the election and administration of Republican President Hoover in 1928—a year before the stock market crash that began the Great Depression.

No Contract With America

In 1994, Democrat Bill Clinton was president. Republicans were in the minority in the House of Representatives as they had been for 40 years. In an effort to win a majority, House Republicans drew up the Contract With America. It was an uncharacteristically detailed set of campaign promises, mostly conservative.

I am libertarian, not conservative or Republican.

The Contract With America worked. Republicans gained a majority in the House for the first time in 40 years.

Do Republicans have another Contract With America this election season? Nope.

Some Tea Party guys are doing a Contract From America, but like most Tea Party stuff, it is rather unfocused. It is a list of the top ten things American voted for as policy changes.

More importantly, no candidate seems to be running on the Contract From America list of campaign promises.

Victory without mandate

The lack of a specific Republican platform means their expected victory in November will be mandateless. It will be politics as usual at a time when politics as usual is more hated than ever and at a time of great financial peril for America.

Winner’s curse

Republicans are very likely to get lambasted by the winner’s curse in November 2010.

Here’s the problem. The federal government is borrowing and spending for a fall. It’s like a game of musical chairs. Only in this one, the part sitting in power when the bond market music stops loses.

Incumbents get blamed for recessions and depressions and hyperinflations. When will the bond market reject U.S. Treasury bonds? Congressman Paul Ryan says in a “few years.” Harvard economist and This Time Is Different co-author Kenneth Rogoff said“ five years not ten.” NYU economist and author of Crisis Economics Nouriel Roubini says we have a single-digit number of years until the bond market rejects U.S. bonds. I believe I also heard Harvard Financial historian and Ascent of Money author Niall Ferguson say we had about five years in an interview with Fareed Zakhria.

To this day, Republican Hoover still gets blamed for the Great Depression and Democrat Roosevelt gets credit for saving America from it. The truth? The Smoot-Hawley Tariff probably caused the stock market crash and the resulting 1929-30 recession. But Roosevelt’s New Deal policies, and his taking forever to get rid of the tariffs, deepened and prolonged the recession and turned it into a depression. World War II ended the Great Depression, but indirectly, not because of federal government deficit spending on the war. If federal government deficit spending caused prosperity we would be rolling in dough today. Because we are spending at World War II levels in terms of the ratio of deficit spending to GDP and national debt to GDP. The Depression ended because the war caused Roosevelt to stop bad-mouthing business, reverse the anti-business laws that they had passed, and because the Federal Reserve loosened up the money supply out of fear that the public would think tight money was anti-war effort and anti-U.S. servicemen.

Whoever is in control of the White House and Congress when the federal government can no longer borrow money will either be forced to hyperinflate the dollar or default on the national debt and cut federal spending (Social Security, federal pensions, federal employees, Medicare, Medicaid, and so on about 50%. Hyperinflation causes the dollar to become worthless, e.g., a gallon of milk costing $900. Don’t laugh. If you doubt that, ask someone who lived through hyperinflation in places like Argentina, Israel, Zimbamwe.

What a party who wants to win power after the ’flation hits the fan need to do now is adopt a principled platform that mainly cuts entitlements and other federal spending. They should do that whether or not it is a winning formula for 2010. If they win on that platform, they have a mandate to cut which will head off the disaster. If, as I expect, the public is not ready for that, let the Democrats keep control of the Congress. Federal spending is a runaway train. Let it fly the Democrat flag as it runs off a cliff if the American people will not support fiscally responsible Republican Party.

And if and when it does go off the cliff, the Republicans will be positioned as the party to save the day. Given that scenario, I expect the Republicans would sweep the first national elections after the federal financial collapse. Furthermore, they would have a mandate and plan to correct the financial crisis as soon as possible.

As it stands now, there appear to be only three Congressional candidates who embrace entitlement cuts: Ryan, Cantor, and Sharron Angle (Republican NV senate candidate). If the Republican 2010 message is nothing but “We’re not Obama/Pelosi/Reid,” the American people will probably turn to a third party if and when the bond market stops buying U.S. bonds. Republicans have been too close to Dems when it comes to deficit spending so they will have no credibility when that spending crushes our federal government.

It is questionable as to whether things have already gone too far for the Republicans to regain credibility as the fiscally responsible party. They need to embrace Ryan’s Roadmap for America’s Future right now. There is no evidence they will.

R.I.P.

If they just win in 2010 on “we’re not them,” my question for the victory party ceebrators will be,

Exactly what did you win? The honor of being blamed for 77 years of mostly Democrat irresponsible spending?

John T. Reed