Third party by John T. Reed

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People are not discussing a third political party correctly.

We are about to have third-party rule

I predict we will have a victorious third-party presidential candidate and maybe a Congressional majority of that party that year or in the next mid-term election. How will this happen?

Going to hit a financial wall

The U.S. government will finally hit the financial wall that has been predicted for decades with increasing alarm. The American people will, when that happens, finally wake up to the fact that current government spending is a runaway train and that spending cuts in entitlement programs are required—not just one possible solution. Both the Republican and Democrat parties will be totally discredited when it happens. They and the various presidents have been virtually incapable of cutting entitlement programs. The Dems are far more guilty than the Republicans, but the Republicans are not innocent.

When?

When will this happen? I am not sure. I increasingly see big-time economists on TV and in live speeches make predictions along the lines of,

[Pause to think about the question] Five years, not ten.

Can’t borrow anymore

In other words, their best estimate is financial collapse of U.S. government (inability to sell bonds to anyone but the U.S. Federal Reserve who gets the money to buy them by “printing” it) in four (2014), five (2015), maybe six (2016) years, but surely not as long into the future as ten (2020) years. “Printing” that much money causes high inflation or hyperinflation, which will drive the two incumbent parties out of existence. Inability to sell U.S. government bonds means inability to deficit spend and inability to rollover the already existing national debt when the various bonds we sold in the past mature. That, in turn, means the government’s checks will bounce.

The government will be forced to increase taxes and/or cut spending, but neither will be enough to make the government’s check stop bouncing because the debt has grown so large (approaching 100% of the nation’s gross domestic product, that is, all the money made by all the private citizens and businesses in America in a year.)

The politicians will probably try to avoid tax increases and spending cuts by three illegitimate gimmicks, namely,

• hyperinflation (all your bank accounts become worth zero—the public will riot)
• default on the national debt (announcing your government bonds are worthless and that the government deposit insurance is out of money—which it already is, actually)
• financial repression—that is, sort of forcing you to put your money into banks that pay little or no interest then forcing those banks to buy U.S. government bonds for more than they are worth

Dems and Republicans both out

Like I said, all of this nonsense will obliterate the Democrats and Republicans off the face of the earth, and deservedly so. The nation will then be ruled by a third party as a result.

Capitalist or socialist?

Will the third party be capitalist or socialist? It could go either way. Hyperinflation in Germany in 1920 to 1923 arguably led to Adolf Hitler winning election as chancellor in 1933. His party was fascist (same as socialist only they let private business continue to own their companies but tell them how to operate them). 20th century revolutions in various countries led to socialist or communist governments.

Essentially, it will be a more extreme version of the 2008 election where the left said the crisis was caused by not enough government control and the right said it was too much government control. The left won that election, but may not have been able to win a rematch within a year of inauguration of their crowd. Fundamentally, capitalism is the only system that works and the only one that can allow people to live in freedom. Although socialists initially won in places like the Soviet Union, China, and Cuba, the fact that socialism does not work ultimately crushed those governments and replaced them with capitalist (Russia) or quasi-capitalist (China, Vietnam) governments. So we may get less government intrusion in the economy after the federal government financial collapses—or more. It took the Soviet Union 69 years to collapse.

It will be a key moment in U.S. history and there will probably be a capitalist third party and a socialist third party vying to take over. The winner will not be decided by who’s the best party. It will be decided by political power. The meek shall not inherit the United States.

Split your side’s votes and thereby elect the guy you hate the most

The typical comment is that third parties elect the opponent of their members because they split their side’s vote. That has happened. Ross Perot took 19% of the 1992 vote, mostly from Republican George H.W. Bush, thereby electing Democrat Bill Clinton. Ralph Nader took 2.74% of the 2000 vote running on the Green Party ticket. Most notably, he took votes away from Al Gore in NH and FL. Gore lost both states by tiny margins. Had he won either, he would have been elected president.

However, it must also be noted that Ross Perot’s sole issue was balancing the budget. And it must be noted that the U.S. government ran a surplus during Clinton’s administration in 1999 and 2000 and in the first year of Republican George W. Bush’s administration, 2001. George W. Bush is the son of the George H.W. Bush who was defeated because he let Perot own the budget-balancing issue. I suspect Clinton ran relatively small deficits and two surpluses in part because he was afraid of losing the voters who voted for Perot.

Wasting your vote

Another knock on third parties is that you are wasting your vote if you ever vote for one. That is almost certainly not true. Take the 2008 election. I voted for the Libertarian. Obama won my state, California, by 8,274,473 to 5,011,781. Nader got 108,381 votes; Libertarian Bob Barr, 67,582. I was one of the 67,582.

Those who say I wasted my vote want me to vote for McCain. In view of the fact that he lost by more than 3 million votes, why would my vote for McCain not have been wasted? The same thing would apply if I had voted for Obama.

Once, my wife and I voted against a local bond issue. After several recounts, it lost by two votes. In that election, my vote was not wasted. But my vote was insignificant in every other government election I ever voted in. Basically, your vote only matters if the election is really close.

By voting for a third-party candidate in a non-close election, you send a message. The message is: this party is more what I want. That is precisely the message sent by Perot voters in 1992, and Clinton got the message with regard to the budget. No politician with a brain ignores the issue that got a presidential candidate 19% of the vote.

The Democrats and Republicans were third parties once

The 1824 presidential election in the U.S. was between John Quincy Adams and Andrew Jackson. Oddly, both represented a party known as the Democratic-Republican Party. I kid you not. Other major parties in the 1700s and 1800s included the Federalists and the Whigs.

The first Democrat party election was 1828 when Andrew Jackson won. The Republican Party was founded in 1854 by a then kooky fringe group of anti-slavery activists.

So the notion that all third parties are nutcakes perpetually tilting at windmills is wrong. Most are, but the current two major parties were once third parties.

Also, some windmill tilters, like Perot and the Socialist party, never won in the U.S., but they did influence the guy who did win. It has been noted that the FDR New Deal was essentially the Socialist Party platform of 1901. As part of my research for the book I am writing on inflation and deflation, I studied the New Deal. Much of it was the old deal, that is, a continuation of the policies of FDR’s Republican successor Herbert Hoover.

Parties can change and have

When I was a kid, negroes were almost all Republican. The Democrat party, especially their split-off the Dixiecrats, were the party of segregation. Then, in the 1960s, Martin Luther King, Jr. was arrested and Democrat presidential candidate John F. Kennedy called King in jail. Four years later, Democrat President Johnson got the Civil Rights At of 1964 enacted into law and some other similar laws. Johnson did it because it was the right thing to do, and he was worried about his legacy, but he noted it “will cost us the South,” which it did. During the 1968 campaign for president, Republican Richard Nixon ran in part on a restoration of “law and order.” In 1967, there had been many race riots in U.S. cities. The majority was extremely angry about that. The phrase “law and order” was interpreted as code referring to being anti-black rioters and looters.

Since then, negroes became blacks and very few ever vote Republican. The former Confederacy generally now votes Republican, indeed, in 2008, pundits said the Republicans had become a Southeastern regional party only.

If the Tea Party wants to have a positive effect, they need to do something like what Kennedy and Johnson did to the Democrat party with regard to civil rights.

Another issue is there is too much abstract talk. Talk radio callers and hosts incessantly say that the Republican Party needs to become more conservative.

I don’t know about that. When they get talking to each other, conservative radio callers and hosts can convince themselves that everyone is conservative. They are not. Plus, the word “conservative” rarely appears on a U.S. ballot. Power in U.S. politics goes through candidates, not parties. As soon as the presidential candidate in named, he becomes the leader of the party. And most party-backed candidates think little of abandoning the platform of their party even during the campaign. If the Tea Party wants to take over the Republican party, they need to back a candidate who wins the Republican nomination. Running their mouths and waving signs means nothing.

It may be fun to endlessly talk about abstractions like conservative and liberal, but if you are in the changing-politics business, you need to drop the abstractions and find a candidate. You can’t beat somebody with nobody.

Wait in the wings

The other thing a third party that really wants to effect change, rather than just run their mouths, can do, is prepare for the crisis that causes their agenda to become mainstream. The Libertarian party seems content to be a debating society. The public might be willing to embrace their ideas if and when the U.S. government goes bankrupt. But the Libertarian Party is not prepared to run a true campaign. They are philosophers. They have no real political expertise, no get-out-the-vote machinery, no registration mechanism, no capacity to make commercials, and so on.

The third party that will inherit the nation will be the one that gets ready for the fiscal collapse. When that happens, the mainstream of America will be ready to turn to the third party. Indeed, the third party will actually be the first party and the Republicans and Democrats will overnight become third parties.

Larry King Live

The American people are not quite ready to elect a third-party candidate president. But they are closer than most believe.

In 1992, Ross Perot was the leader in the polls before he suddenly dropped out because he heard a rumor his political enemies were planning to disrupt his daughter’s wedding. Then he got back in and still got 19% of the vote in spite of his dropping out being perceived as nutty.

Furthermore, Perot did not plan to become a candidate. It happened because of a casual question he was asked on Larry King Live. Larry asked Perot if he would run and Perot said he would if there was a popular outcry for him. As a result, a third party formed overnight for the purpose of nominating him. As I said above, Perot was AHEAD IN THE POLLS—ahead of both the ultimate loser in the election, George H.W. Bush—the incumbent president at the time—and ahead of the ultimate winner in the 1992 election: Bill Clinton.

Larry King Live is a pretty famous TV show nowadays, but it wasn’t always. I was the guest on the show on 1/26/87 along with a then get-rich-quick real estate investment guru named Dave DelDotto who used to appear in TV infomercials from the beach in Hawaii. He went bankrupt since. I got the impression the show hurt Del Dotto. He now has a winery in Northern California. (I remember the date because my third son Mike was born three weeks early on that day and I missed the birth because I was down in Hollywood to be on Larry King.)

Larry was so pleased that he wanted us to do the show again and called me to do it. I agreed but predicted DelDotto would decline, which is what happened. Then, on February 22, 1992, long after the 1992 presidential campaign had begun, Larry asked Perot that famous question. Since then, Larry no longer has little people like me on as guests. If you could get a chronological list of his guests, you would see a stark jump in degree of celebrity status after the Perot appearance. Apparently, the TV viewing world was so impressed by his launching of Perot that they tuned in to see what was happening on that show. Larry was Perot’s political meal ticket and Perot was Larry’s big break.

Let me summarize this to make sure you understand it. In late February 1992, as a result of a casual question by Larry King on his TV show, a brand new third party spontaneously erupted and nominated a candidate who was leading all other candidates in the polls until he dropped out of the race!!! And he was more or less a one-issue candidate: balancing the budget.

[Note: My wife and I and a number of other Harvard MBA students had supper with Ross Perot in 1977. I was co-president of the Harvard Business School New Enterprise Club so I sat directly across from him and got a lot of one-on-one conversation. He is a graduate of the U.S. Naval Academy and I of the U.S. Military Academy. He tried to get me to bet on that year’s Army-Navy Game with him. I told him my heart was with Army on game day but my head, educated on sound investments at Harvard, was not about to bet on a severe underdog for sentimental reasons. At that time, Perot was a billionaire and as far as we knew, the only one in the world. The famous Forbes 400 list of the richest people in the world had not yet been created. In other words, when we had supper with him, he was the Bill Gates of the era.]

John T. Reed