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February 05, 2009

Republican Study Committee's Hopeful Message to Conservatives

The Republican Study Committee (RSC) is the caucus for conservative Republican House of Representative members. It was initially founded as a legislative study group in 1973, the same year as the founding of the Heritage Foundation. Having a long tradition of using conservative ideals to fashion legislation and legislative agendas, including those that gave us President Reagan and the original Republican Majority in Congress, last fall the RSC was the only legislative group offering free-market solutions to the economic crisis (ignored by the Democratic Congressional majority and the Bush Administration) that made any sense.

On February 4th 2009, the Chairman of the RSC, Rep. Tom Price M.D., sent out an open letter to members of the RSC's mailing list. Whenever letters like that go out, one assumes that a request for funds can be found somewhere inside. But this letter was different, and wasn't a plea for money. Rep. Price was asking conservatives for support - but in the form of optimism and determination to get the GOP back to its conservative foundation, asking them to once again firmly embrace "conservative solutions-based traditions".

It's a message that the public seems increasingly ready to accept. As the public becomes more educated about the scam that President Obama and the Democrats are trying to pull over on the taxpayer with their economic 'stimulus' legislation, support is plummeting - now down to 37%. A surprising 50% of Americans now say that the stimulus plan is going to make things worse. A recent poll from Rasmussen shows that in light of the House Republicans' unanimus stance on turning Obama's economic recovery legislation into a true economic stimulus, the GOP now trails the Democrats in the Generic Congressional Ballot by only 4 points, 38% to 42%. Another poll from last week shows that Republicans are appreciative of the new conservative direction of the party - and that they overwhelmingly (55%-24%) feel that the future of the GOP lies not with the 'moderate' and populist brand of Republicanism represented by failed Presidential candidate John McCain, but by the conservative brand represented by his running mate Sarah Palin.

In the most telling evidence of how receptive the general public is to traditional Republican conservatism, pollster Scott Rasmussen took on Nobel Laureate Economist and NYT gadfly Paul Krugman head-on over a statement the columnist recently made. In an op-ed, Bad Faith Economics, Krugman said:

Next, write off anyone who asserts that it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.

Rasmussen took one look at that statement, remarkably arrogant even by Krugman's standards, and decided to take the exact quote and poll the American public on it:

Do you agree or disagree with the following statement… it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money?

The results? 50% agree with the statement that taxpayers know how to spend their own money best, and only 24% agree with the Nobel Laureate. I would also bet that the remaining respondants who had "no opinion" lean more towards keeping their own money rather than let Nancy Pelosi spend it for them.

Even with the economic crisis, it's surprising that the American public seems so receptive to conservative positions, so soon after they repudiated the GOP brand at the polls. It's clear that even if this stimulus plan passes - as the Democrats can do without help from the GOP - a clear majority of taxpayers are going to be very unhappy with it. That is a great base for the Republicans to operate from, regardless of what the drive-by media claims.

The RSC, specifically Chairman Tom Price, recognizes this. And so we have his letter to conservatives, titled From the Desk of an Eternal Optimist: An Open Letter to Conservatives. An excerpt:

The Republican Party is at its best when its leadership has a bold vision and is rooted to conservative principles: personal responsibility, liberty, limited government, traditional values, providing for the common defense, and optimism about the future.  But Republicans seem to have lost the ability to intelligently or ideologically define these principles and convey them to the American people.

What should Republicans and right thinking Independents do to change that? Here's Dr. Price's prescription:

•     Back to basics: The first step starts with a little bit of self-reflection and “re-learning” the core principles of conservatism.  Only through understanding the past can our core principles be applied and developed into meaningful solutions to tackle the challenges facing America.
•     Party of Solutions: A new Republican platform of ideas and language must be created and championed, built on a foundation of conservative solutions.  It will also need to be built from the ground up from fresh and innovative ideas.
•     Rebuild the party’s infrastructure and coalitions: There must be a specific focus on nurturing the grassroots, shoring up ties with existing coalitions and leading thinkers, and creating new infrastructure to meet the challenges of politicking in a new century.
•     Hold Democrats accountable: This begins with a proactive and coordinated strategy between elected conservative leaders and outside allies.  Americans need to be reminded on a daily basis that Democrats want to play politics and centralize power, raise taxes, cut defense spending, and undermine traditional values.
•     Go on offense, engage and educate: Yes, Virginia, someone in Washington is fighting for you.  And when Republicans stay on offense and engage, then it garners attention and provides opportunities to educate every American on conservative solutions that work.  Look no further than the Energy Revolt on the floor of the House of Representatives this past August which gave Republicans a needed voice and identity.
•     Remain unified and disciplined: Hostile Democrat majorities and liberal special interests are more energized than they have been in decades.  Without unity and discipline, the differences between the two parties become blurred, and conservatives have every right to question allegiance to Republicans.
•     Reclaim the American lexicon: Democrats have been successful in altering the mindset of what made this nation great through language and institutions. Once, Americans valued “responsibility,” “self-determination,” and “hard work.”  Now, these ideals have been replaced by fuzzy appeals to “diversity,” “fairness,” and “social justice.”  No longer can Republicans cede the language or institutions.
•     Broaden the appeal: Republicans win elections when they run on an across-the-board conservative solutions-based agenda. However, the appeal must be broadened to acknowledge and embrace the demographics in our country.  Failure to do so will relegate the party to permanent minority status.

It all about staying true to your conservative ideals - and message, message, message. As has been shown with Obama's economic stimulus package, it's pretty easy to peel away the rhetoric and show such a bill for what it is - a giant payback by the President and the Democrats to their special interests, the ones that got them elected. Alternate plans, proffered by entities like the RSC and the Heritage Foundation and promoted to the public by Rush Limbaugh, Sean Hannity and the conservative blogosphere, makes sense to the majority of Americans - even with the drive-by media's overwhelming promotion of the Democrats' plan.

Time for all of us to take Rep. Price's message to heart, and prepare for 2010.


February 04, 2009

End of the World is Here - George Soros is Right!

To say that I'm not a fan of George Soros would be an understatement. My animus is not solely because of his support, overt and covert, of the Left and the Democrats, but also at his way of doing business. He literally created the hedge fund business - a business whose transparency issues rival those of official Washington, contributing mightily to the current economic crisis.

But when he comes out of the shadows with straight forward financial advice he is often brilliant (albeit self-serving), and it would be foolish to not admit when he is right. And he is very right in a 2/4/09 op-ed in the Wall Street Journal, We Can Do Better Than a 'Bad Bank'.

The financial fiasco that the world finds itself in today started with problems within the housing sector of our economy. Those problems, specifically with the housing markets, were created by the federal government and Democrats in Washington, specifically Barney Frank in the House and Chris Dodd in the Senate. In their infinite wisdom well over a dozen years ago, they decreed that home ownership was a human right, and mandated by law that anyone, regardless of their credit worthiness or ability to pay, be allowed to purchase a home. Hence the creation of the sub-prime market.

Over the past decade plus, that resulted in hyper-inflated housing prices and the collapse of affordable rentals. When the predictable occurred, and people who had no ability to repay a loan defaulted on their mortgages in huge numbers, the secondary mortgage security markets and derivatives associated with it collapsed. Then followed the freeze-up of the overall world-wide credit market, and the collapse of housing prices.

While Soros doesn't explain it that way (he really doesn't explain it at all), he does recognize that the results of the above - the stagnation of the housing and credit markets and the trillions of dollars in illiquid assets - needs to be addressed immediately for us to get out of this mess, and that no real plan so far has been put forth to do so.

The GOP has been pushing for the federal government, via their now wholly owned GSEs Fannie Mae and Freddie Mac, to revitalize the housing market by purchasing home mortgages in the secondary market - loans that would be originated at between 4% and 4.5%. George Soros agrees:

The Obama administration should come out of the gate with a comprehensive economic program that has two pillars in addition to a fiscal stimulus package. One would prevent housing prices from overshooting on the downside by making mortgages cheaper and more available and reducing foreclosures to a minimum.

As such a push from the GSEs would affect both home buyers and people who choose to refinance their existing mortgages, the Republicans' plan would jump start the housing market and immediately stimulate the economy more so than anything the Obama Administration or the Democrats have proposed so far. Hopefully the Democrats are smart enough to allow this to be included in their stimulus plan. That leaves the second issue - what to do with the toxic assets currently held by financial institutions. The idea d'jour that has been floated around is the creation of a "bad bank" that would own all of the bad mortgages and securities. But that's not necessary. There have always been mechanisms within easy reach, via either the temporary suspension of certain regulations or very simple Congressional legislation, that could take care of both the existing bad assets and the recapitalization of banks - relying not on the federal government, but on the private sector. From Soros:

For these reasons it would be a mistake to take the "bad bank" route, especially when there is a way to adequately recapitalize the banks with currently available resources. The trick is not to remove the toxic assets from the banks' balance sheets but instead put them into a "side pocket," as hedge funds are doing with their illiquid assets. The appropriate amount of capital -- equity and unsecured debentures -- would be sequestered in the side pocket.

This would cleanse bank balance sheets and transform them into good banks but leave them undercapitalized. The same $1 trillion that is now destined to fund the bad bank could then be used to infuse capital into the good banks.

Although the amount needed to recapitalize the banks would be more than $1 trillion, it would be possible to mobilize a significant portion of the required total amount from the private sector. In the current environment, a good bank would enjoy exceptionally good margins. Margins would narrow as a result of competition, but by then the banking system would be revitalized and nationalization avoided.

This seems to be an intelligent way to solve the fundamental problems currently freezing the credit and housing markets. It is also comprised of programs that the Democrats have not promoted or included in their 'stimulus' bill, which places Soros in opposition to the Democrats - an odd place for him to be.

Instead, Democrats like Harry Reid, Chris Dodd, Nancy Pelosi, and Barney Frank - with assistance from Obama Administration members Timothy Geitner at Treasury and Sheila Blair at FDIC - seem intent an nationalizing both the housing sector and the banking system.

Let's hope that Soros and the Republicans can convince them otherwise.