Wednesday, May 11, 2016

The Last Republican President

Republicans used to stand for fiscal responsibility, balanced budgets, God, Country, and the Tariff.  What has changed over time?

One odd aspect of American politics is how the two parties in our two-party system have nearly flipped positions 180 degrees over the last Century - and appear ready to flip again.  The Republican party, whose roots are steeped in the Whigs and Lincoln, started out as a party of the North - the party of industry and manufacturing as well as abolitionism.   One of the main planks on the party platform was "the Tariff" - an import duty slapped on all imported goods since the revolution, in order to protect fledgling American industries from low-cost imports.

It seems that, unlike our Canadian neighbors to the North, Americans wanted to actually make things, and not just be a source of raw materials for the factories of Europe.  So the fine materials and manufactured goods from Europe were subject to tariff and Americans made do with homespun and home-made things.   This Tariff arguably acted as an incubator for the inveterate Yankee tinkerers.   In places like Massachusetts and Connecticut (particularly the latter) clock makers and instrument makers sprung up.   American industry was born and it would be a century or more before Connecticut reverted to a mere suburb of New York City.

(There is a reason why Pratt & Whitney was headquartered in Connecticut, and why nearly half of all ball bearing manufacture was centered there at one time.   Today, the ball bearing plant I worked at is a warehouse and ESPN is the largest employer in that area).

The Democrats, on the other hand, were the party of the South and to some extent, the party of labor in the North - an odd and uneasy alliance if there ever was one.   As the labor movement became more Leftist and even Communist, folks in the South became more uneasy.   It wasn't until the 1950's that the schism really started to make itself known, when the "Dixiecrats" who were for segregation, conflicted with their labor-based brethren in the North who wanted equal rights for blacks.

Nixon was probably the first President to crack the "Solid South" and take away the Democratic vote.   Today, the South is solidly Republican, and most young people today would tell you with a straight face it was always so.  It is more than ironic that today, racists identify with the party that freed the slaves, while 60 years ago, no proper Southerner would dare be called "Republican."

The picture above is of Calvin Coolidge - old "Silent Cal" whose biography I am reading.  It is pretty dry reading.  A staid Vermonter, Coolidge believed in thrift and saving, and when he took over the White House (on the Death of Warren G. Harding) he faced a huge deficit and debt left over from World War I.   In what was typical Republican practice at the time, he set out to whittle down that debt, decrease the size of the Federal government, and deliver balanced budgets year after year.   Grover Norquist would have loved him.

But Coolidge, like all old-line Republicans, was for the Tariff.  And in recent years, economists have argued that restrictive tariffs are not helpful to an economy, but in the long run, harmful.   Free trade helps everyone, they argued, by allowing each country to produce the most of what it produces best, and then import other items from countries that produce those items best.

Republican orthodoxy changed over the last few decades, and "the Tariff" was removed from the platform and replaced with "Free Trade".   And many Democrats (Bill Clinton, Barack Obama) also got on the bandwagon as well.   It seems the only folks who were for tariffs were the Unionists, who believe that restrictive tariffs would help "save our jobs".

Of course, the issue with tariffs is complicated.   When we eliminate tariffs, it allows other countries to ship goods here at low cost.   The problem arises when those other countries don't lower their tariffs as well.   In the 1980's we opened the doors to Japanese imports, but the Japanese didn't reciprocate with imports from our country.   Today, the same could be said to be true for China.   Oddly enough, the economies of both countries are hurting right now - China's GDP is almost back down to where it was in 2009.  So maybe tariffs do hurt, in the long run.

Eliminating trade tariffs has meant that products are far, far cheaper to purchase today than in the past.  I harp on that a lot in this blog because people don't remember how difficult it was to buy basic things like furniture or a television or even a barbecue grill back in the 1950's through the 1970's.   We had a lot less "stuff" back then because "stuff" was expensive because it was made in the United States in union factories with horrific overhead costs.   If you want to see restrictive tariffs re-enacted, be prepared to live with a lot less "things" in your life.   Your $599 iPhone will cost over $1000, perhaps $2000 if made in America in a union shop.    Think about how that would affect your monthly cell phone bill and whether you would upgrade.

Already, the big-3 carmakers have thrown in the towel and given up (largely) on even making cars as their bloated union labor overhead means that only high-margin SUVs and trucks are profitable to make in rust-belt States.    Carmaking has moved to South of the border in most cases, and we are back to where we were in 2007, when Chrysler had an all-SUV lineup and was blindsided when the price of gas shot up to $5 overnight (which itself was a replay of 1979 when gas was rationed and no one wanted one of Chrysler's new "fuselage" whale-shaped cars.  In both cases, the company went bankrupt).

Everyone would like to make a pile of money, that is true.  But when everyone makes a pile of money, money is worth a lot less.   And in the 1970's that is exactly what we had - stag-flation.   The economy tanked, but prices shot up, killing the savings of Americans.   American made products were shoddy at best, and when better quality imports became available, people flocked to them.   Trust me when I say you don't want to go back to the "good old days" of 1975 or thereabouts.   Life sucked back then in a way you can't even imagine today. 

Today, though, the new Republican party is attracting a lot of white, working class males, who are particularly attracted to Donald Trump.   The things that Trump is saying scare the shit out of the Republican party, however.   And it is not the racism or misogyny or Islamophobia that bothers them (indeed, these have been hallmarks of the GOP for the last three decades).   It is the idea of restrictive tariffs that are making the Koch brothers nervous.    You see, as the party of "big business" the GOP shed its tariff policy when big business realized that tariffs did indeed stifle trade and stifle the economy.   So "free trade" is (or was) a major plank in the GOP platform.

And part of this was a reaction to unionism.   Back in the 1970's my Dad's factory went on strike.   It was frustrating as his company was very small and having trouble competing with their nearest competitor who was about five times their size.  The factory was old and the machinery outdated (the newest machines dating from WW II).   With the huge union wages, benefits, and restrictive work rules, there was no money left over to invest in new machinery or factories.

And when the union went on strike, the company could do nothing other than negotiate some sort of compromise - or be crippled by lack of production.   I asked my Dad at the time, "Why not just tell them to fuck off and close the factory?" and he pointed out to me than the NLRB would not allow such a thing (I was apparently ahead of my time).   Today, of course, that is exactly what has happened.   Factories close and then reopen (under a new name) as non-union plants in the South, or as factories overseas. 

When I was at GM, we were pulling huge forge machines out of the ground and putting them on flatcars to take to the coast, where they were loaded on freighters and sent to India.   The union workers were like deer in the headlights - convinced that GM would "never close" the factory, even as it hemorrhaged cash, because "they have too much invested."  One by one, the machines left.   One of my classmates, as his senior thesis (we had to present a thesis during the five-year bachelorate program) was that it would save money if we got rid of the "ball shop" where we made the balls, and then just import them from Japan instead.

They implemented his idea, and the German-made ball grinders were auctioned off one day and the ball shop shut down.   I confronted him about this and said, "Well, why not get rid of the ring line as well?  We could just import rings and then assemble the bearings.   And while you are at it, why not just import the finished bearings?"   And all he did was nod and say, "You're getting the idea."

We couldn't close the plant for fear of union ire, but we could whittle it down one department at a time.   And those jobs "went overseas" because the factory was losing money and the factory was losing money because the UAW wages were double what other union plants were paying, and people were showing up for work late, drunk, or not showing up at all.

If you want to go back to that world, be my guest.   But this explains why the GOP had a change of heart over the tariff.  The tariff no longer protected American industry, it protected union workers and union workers were Democrats, not Republicans!

So Trump appeals to the working-class GOP voter, who likes the misogyny, racism, Islamophobia and whatnot.  They also like the idea that huge import tariffs will bring back these cushy "no-show" union jobs that went away over the years.   Trump is selling pay with no work and something-for-nothing - what for many is the real "American Dream."

The problem with this dream is that it would be a nightmare, of course.   And most Americans are not very pro-union.   It sticks in our craw, as Americans, that someone should get paid 2-3 times market wages for substandard work simply by blackmailing a company with a strike.   An assembly line worker should not make as much - or more than - a Doctor.

On the flip side, moderate Democrats like Hillary are largely in favor of free trade (although for the election cycle, she may claim to be against the TPP as it seems dead in the water anyway).  But free trade was a cornerstone of her husband's Presidency, along with a lot of other "conservative" values such as welfare reform.   Like old Silent Cal, Billy-Bob Clinton shrank the size of government when he was President and actually balanced the budget and created surpluses.   Hard to believe, but just before he left office, economists were concerned that the budget surpluses were dangerous as the government could end up paying off its debt and then end up as the largest investor in the free markets.    Fortunately, a few years of Bush spending put those fears to rest, and eight years of Obama spending was icing on the cake.

The split in the Democratic Party in the 1950's - when the Dixiecrats first started to realize that they had little in common with the union side of the North - seems to be repeating today.  Bernie Sanders is pushing a socialist agenda that, other than the lack of racism, and Islamophobia - seems closer to the platform of Trump than Clinton (both Sanders and Trump score well with white male voters who feel that prosperity has been "taken away" from them).  The Democratic party is once again divided, this time into a far-Left wing of neo-Communist union types and a more moderate centralist wing.

The Republicans seem similarly divided, with the Trump people (and Tea Party) more interested in "bringing our jobs back" and punishing China than with the interests of "big business".   Oddly enough, this new emphasis on the Tariff, balanced budgets, eliminating the debt, and smaller government, goes right back to the values of old Calvin Coolidge, who arguably was the last real "Republican" President who not only espoused those values but actually carried through with them.

Of course, the problem with old Silent Cal, is that months after he left office, the economy tanked in October of 1929 - "Black Friday".   The stock market was overheated and overvalued.   And the warning signs were there throughout the decade of the 1920's.   Farmers were going bankrupt in the roaring 20's, and farm aid packages were all vetoed by Coolidge as "unnecessary spending."   This created a domino effect, as the rural farmers struggled and went bankrupt and stopped buying goods and machinery, which in turn lead to recession of the industrial sector.

Oh, but I forgot.  According to Fox News, the great depression was caused by Franklin Roosevelt.  Silly me.