SARAH PAHLIN AND THE REPUBLICANS / THE MARKET TICKER

The Market Ticker


Sunday, July 5. 2009


Posted by Karl Denninger in Politics at 13:18


Sarah Palin And The Republicans


Since its Sunday (and the 5th of July) I think I'll take a foray into somewhere that I know will generate much controversy.

First, let's start with Sarah Palin, who as everyone knows announced her resignation with 18 months left to go in her term as Alaska's Governor, sparking every possible theory imaginable as to why (including rumors that she was about to be indicted - rumors that led her attorney to make what I believe was a monstrous gaffe, and one that The Daily Kos immediately - and in my opinion correctly - jumped all over.)

Let's dispense with the realities here right up front: If Sarah's departure is followed by the eruption of any scandal, no matter what it is, she is finished on the national political stage. Period. If she doesn't understand this she has an IQ smaller than her shoe size; the only way you can win as a political figure in such a circumstance is to stand and fight, winning the battle - you come out scarred, but in one piece. If you run, especially if you run in front of the eruption, you're done.

So let's assume for the sake of argument that she's intelligent enough to know this and there is nothing about to hit the spotlight of a particularly-embarrassing nature (and by the way, I consider anything related to her children to be absolutely out of bounds, even though the media won't - during the campaign such snipes were good for instantaneous and permanent bans on my forum and will remain so.)

The other view, held by many, is that Sarah is setting up for some sort of political assault in 2012, possibly on the White House.

I will simply repeat what I said to John McCain's campaign through the summer and into the fall of 2008:

There is no possible path to victory for the Republicans until and unless the fraud and bad debt are both excised from the economic and political system.

It is a mathematical impossibility for the economy to recover on a sustainable basis until the bad debt has been either paid down or defaulted. Taking on more debt and shuffling around where the debt resides does not remove a single dollar of it from the economy; such policy decisions as taken by both Bush and Obama cannot and have not resulted in a positive outcome.

Increasing The Bezzle in the system in an insane attempt to further paper over the losses will not solve the underlying problem - that is, the fact that the debt service ratios are too high. There are only two ways to reduce that debt service requirement - default debt or pay down debt. The latter requires years, not weeks or months, and when it comes to mortgages (both commercial and residential) we're talking a decade or more.

The last time we took this path we had The Great Depression. The last time Japan took this path they suffered more than a decade's worth of economic malaise, and still haven't recovered.

There has never been a nation in history that has managed to get out of a credit-led recession through taking on more debt.

Someone has to eat these losses - someone with actual equity interest. Trying to force anyone to eat them who has to borrow the money is not only futile, its stupid - that doesn't cause recognition of the loss at all, it only refinances it, putting it on someone else's back. The bad debt is still there.

The people with equity interest are the bondholders in these banks and other related institutions.

They, ultimately, must eat the loss if we are going to have a sustainable economic recovery.

Yes, this means that Pension Funds are in a lot of trouble. It means that bondholders of these firms who did imprudent things will be severely damaged or even wiped out, and many of these institutions must be closed.

It means that we must insist on a cramdown of these institutions as I have been calling for repeatedly.

The Republican Party was trounced not because we had an economic downturn.

It was trounced because The Republican Party refused to hold to account, over the space of more than a decade and two terms of George Bush's Presidency, those who intentionally created a property bubble to siphon off wealth from the average American citizen, and when that bubble exploded those who committed fraud upon the public were bailed out instead of being imprisoned.

The miscalculation of the Republican Party was that because The Democrats were not calling for imprisonment of the malfeasors (after all, many of them were Democrats!) the Republicans didn't have to go after "their friends" either. That was a serious mistake and it is why they lost. The mantra of "change" won not because The Democrats had superior ideas but because The Republicans had allowed their cronies to rob the American People repeatedly and nobody in their right mind votes for the guy who is wearing the ski mask!

The American People voted for the unknown getaway car driver because there was no cop on the ballot to vote for.

I have heard exactly nothing out of The Republicans since the election that shows me that they "get it." I receive beg-surveys literally every week asking for money and listing a litany of Obama's policies, asking if I support them, and get push-poll calls almost as often. Here is what the latest put forward as the Republican Agenda:

1.Tax relief to stimulate the economy.
2.Domestic energy exploration.
3.Full funding for border security and missile defense.
4.Support for small businesses that create jobs.

Nice rhetoric. Note that we did #1 under George Bush and it was ineffective in preventing the mess. Note also that #3 was claimed after 9/11 but in fact wasn't done, but there were multiple attempts to pass "in the dark of night" amnesty for the illegal aliens, when in fact it would take nothing more than computer verification of SSN records to start sending out THOUSANDS of ICE workers to arrest and deport illegals. #4 is a nice premise too, but let's face it - "small business" and "illegal immigrant labor" are joined at the hip, and this is yet another codeword for amnesty.

Oh, and this "missive" asks for a donation of up to $1,000 too.

What's important is what's missing from this missive.

• Any understanding or admission that it was fraud that fueled the economic mess, not "too high taxes", and yet The Republicans have steadfastly refused to demand that those who committed that fraud go to prison.
• Any understanding of the fiscal realities of a $2 trillion budget deficit that came about due to too much spending, and that cutting taxes, while it sounds nice, just makes that worse.
• Any admission that Gingrich promised among other things to rid us of the Education Department; instead The Republicans more than doubled its size and George Bush allowed Senator Kennedy to write the Education Bill in the last Congress.
• Any admission that Medicare Part D was the largest single entitlement program ever passed by any Administration in the history of the nation, and George Bush was its proponent and chief architect!

If The Republicans want to gain in the 2010 mid-term elections and have a shot at unseating President Obama in 2012, they need to do all of the following:

• Begin pushing hard for investigation and prosecution of everyone, individual and corporate, who did and still is falsifying any form of accounting or other financial matter. This includes all off-balance-sheet games, it includes all banks that are intentionally re-categorizing delinquent loans as "not delinquent" by changing the time they can be overdue before they're counted, it includes every member of any regulatory agency who knew of insolvency and either buried it or actively conspired with management to hide it (including in agencies like The Fed, OTS, et.al.) No amnesty, no games, no BS. The Republicans are supposed to be the party of law and order; if this is not just smoke and mirrors or a strict "war on some drugs" then let's see special prosecutors, investigations, indictments and prison sentences.
• Demand that those who made bad investments in insolvent firms be forced to EAT THEM. This means no more bailouts - instead, it means cramdowns. Lots of cramdowns. If pension funds are caught short by this (including PUBLIC pension funds) then they are.
• Demand that PUBLIC SERVICE EMPLOYEES be cut back to the same standards as PRIVATE SECTOR employees, both for retirement benefits and current working benefits and salary. The "gold-plated" games MUST END as WE DON'T HAVE THE MONEY. This includes but is certainly not limited to Representatives and Senators.
• Return ALL entitlement and education programs to the states and END THEM at the federal level. The Department of Education should be dissolved; there is no Constitutional mandate for same. Social Security and Medicare are not properly federal programs and it is their federal locus that makes them non-portable, unowned by the individual and impossible to fix. No citizen would accept a Social Security system at the state level that disappeared if they moved; they would instead insist on individual ownership, vesting, and investment of that account in actual assets (e.g. Treasury bills or notes) and they'd get it too. The Federal Government is able to steal the contents of Social Security annually (and does) precisely because it is cheating on the accounting - that is, the entirety of the program as currently constituted is a lie! STOP IT.
• Cut Federal spending to match the budget. Yes, I know, you'd have to lay off thousands upon thousands of "government employees" in Washington DC and elsewhere. So what? Let's cut The Federal Government back to 1990 levels of employment and spending - right now, today. "Spending cuts" are not decreases in the rate-of-increase - they are actual cuts! Practice what you preach - if we don't have the money, we can't spend it. Period.
• Push HARD to institute The Fair Tax. Yeah, I know some people don't like it. Here's the facts folks: It inexorably ties federal income to GDP and is the only way to do so transparently, containing the tax code for individuals literally in one line of text. It bankrupts nearly all of the lobbying interests on "K" Street immediately. It incentivizes capital formation (no tax on capital gains) and dis-incentivizes going into debt, as there is no tax advantage to taking on debt. It removes all federal tax burden from those who earn less than a poverty level income and eliminates hundreds of billions of dollars of embedded compliance cost in every good and service produced in this nation. It makes America the manufacturing and business tax haven of the world, and will bring millions of jobs back from overseas overnight.
• RE-INSTATE GLASS-STEAGALL IN ITS ENTIRETY and force the break-up of each and every financial institution that currently is in violation of what it would mandate. Commercial banking and lending is a public utility function; the regulations imposed post-Depression was exactly correct, and it is their dismantlement that caused this mess.
• STOP ILLEGAL IMMIGRATION AND SEND ALL OF THEM HOME. Period. This begins with MASSIVE enforcement against employers of these people; send them all to PRISON. We have some 16% of our population out of work (U6) and more than 20% of our youth. These are US Citizens who want jobs and can't find them - it is an outrage that we have illegals in this country taking jobs from these citizens primarily on the basis of working under the table for less than minimum wage, paying no taxes, then showing up in the emergency room for free treatment when they shoot a nail through their own foot!
If The Republicans want to win, this is the populist message that will win elections.

You've got 16% of the citizens of this nation, fifty-two million Americans, that are unemployed and will vote for you if you get rid of the illegal immigrants and send them home so the unemployed can find jobs.

You've got tens of millions of Americans who have lost their homes, retirement accounts and/or financial security due to the fraudulent and outrageous actions of people in the real estate, financial and insurance industries over the last twenty years. All of them will vote for you if you lock those fraudsters up, confiscate their ill-gotten gains, and make damn sure that this does not happen again.

You take those two blocks of people and turn them into Republican Voters and you win all 50 states, you win back The Senate and House, and The Democrats go home with their tails between their legs.

You fail to do so and you will continue to play at the margins picking off 1 and 2% of the vote at a time, and this time around The Democrats are in charge of the Census and both can and will guarantee you have no chance in The House post 2010, possibly for a generation, exactly as happened the last time.

The Republicans made promises with The Gingrich Revolution they failed to keep and thus far are utterly unapologetic in regards to their intentional misdirection and fraud.

They neither got out of the pocketbooks of Americans nor did they roll back the size of government. Their "tax cuts" were not balanced by what they promised, that is spending cuts and the shut down of government departments, but instead were fraudulently subsumed by huge budget deficits and borrowed money from China, enabling the off-shoring of more than half of our productive capacity and the decimation of virtually all of our industrial output - the source of the solid middle-class income that made America great.

The Republicans got away with it for more than ten years, but when the check for that outrageous and fraudulent behavior was finally laid upon the table the people said ENOUGH! and threw them out of office.

There is only one way to regain Americans' trust, and that is through the four pillars of Christian forgiveness:

1.Admit you have sinned, listing your violations of trust.
2.Show true remorse for your sins.
3.Make penance where possible for the harm you have done.
4.Promise not to sin again.

I've seen none of the four and neither has the rest of America.

It is The Republicans' choice to make, but until and unless they do the above, they will argue over the scraps that fall from the table instead of sinking their teeth into the meat thereupon.