*Written by Tho Bishop.

Romney’s inevitable nomination is slipping through his well-manicured fingers. While the media has been telling us for months that no one has a shot against Prince Willard’s well funded political machine, it is clear that the voters are less impressed. After defeats in Iowa, South Carolina, Nevada, Missouri (even though Missouri really doesn’t count delegates until later), Minnesota and Colorado, and a victory in Maine that required some Chicago-style shenanigans to edge out Ron Paul, Romney is now fighting off Rick Santorum for the lead in national polls.

This article, however, isn’t about the Santorum surge; nor is it an analysis on why Mitt is having difficulty connecting with Republican voters (the latter being the key factor to the former.) Instead let’s discuss the potential consequences of an intensely contested primary battle ending with Romney falling short of the 1,144 delegate threshold.

Let’s talk about a brokered convention.

Since the last brokered convention was the infamous Democratic Convention of 1968, many Americans may not be familiar with the concept or what could emerge from such an event.

During the first ballot at the Republican convention, the state elected delegates are required to vote for whomever they are pledged (though, as Paul’s campaign understands, caucus delegates enjoy a bit more leeway). After that though? All bets are off.

Now it is possible that Romney, after losing the nomination by a few votes, could simply convert some Gingrich or Santorum pledged delegates and then seal the deal. That, however, depends upon genuine interest in Romney being the nominee. If we can take away anything from his primary difficulties, it is that Romney has done little to excite the Republican base.

What about Santorum or Gingrich? If Gingrich wasn’t so personally disliked, he would potentially lock up the nomination outright. Santorum on the other hand, terrifies many outside of a specific demographic of Republican voters.

This is why it is important to point out that a brokered convention does not limit delegates to choose between those currently seeking the GOP nomination. In 1968, for example, the Democratic nomination went to Hubert Humphrey, the serving VP who did not participate in a single primary.

So who in the broader GOP could benefit?

People are quick to respond with Chris Christie. Consider, however, that the governor not only refused multiple attempts to jump into the primary contest, but has played bulldog for Romney throughout most of the campaign. This will immediately make it difficult to win over Newt backers and, combined with some of his social views, won’t endear him to Santorum delegates.

Mitch Daniels? Another executive who opted against entering the race months ago, Daniels has so far been hesitant to subject his family to the hardships of national political exposure. While people, to say nothing of politicians, always have the ability to change their mind, I think it is unlikely in this Hoosier’s case.

Though I don’t fully understand the bizarre obsession many establishment Republicans have with Jeb Bush, I do think they are right to look south towards Florida. The candidate best situated to emerge from a brokered convention is Senator Marco Rubio.

Though some may bristle at nominating a young, inexperienced senator with a razor thin record of accomplishment, demographic-conscious Republican strategists dream of the GOP electing the first Latino President. He could also be unique in creating an energized, united front amongst the three establishment candidates. Remember that Rubio worked with Newt on his book 100 Innovative Ideas for Florida’s Future, shares Santorum’s Catholic faith and defended Romney during the Florida primary. Rubio would be rewarded for staying out of the endorsement game.

If he harbors any Presidential aspirations, Rubio will never find a better opportunity to act on them. He would be going against an unpopular administration and have the enviable position of being spared the long, exhausting process of primary politics. To those who would question whether Rubio, who showed no interest in running for the nomination before, would suddenly take the nomination, look at the calendar. A traditional primary run would have sacrificed the opportunity to do anything in the Senate and forced Rubio back into the electoral game roughly four months after a difficult and expensive senatorial contest. An August nomination spares him almost two years before diving back into campaigning.

The scenario above is still very unlikely – but unlikely describes the GOP nomination process to date. One thing that can’t be questioned, however, is the appeal Rubio has with a large section of Republicans, both in the establishment and the grassroots. At a time where friction has never been higher between these two classes, I believe Rubio can unite and inspire quite like no other GOP figure can.

That potential should not be overlooked.

*Written by Tho Bishop.

Giving us another example of what happens when you mix ego and poor primary performance, the major story going into the South Carolina primary is the new line of attack being employed by Newt Gingrich and Rick Perry on Mitt Romney. Failing to win over voters by attacking Romney’s record as governor, the pair has turned their sights on Romney the CEO. While Rick Perry has introduced us to “Vulture Capitalism”, Gingrich is employing a 22-minute film criticizing Mitt’s time at Bain Capital, depicting Romney as “worse than the evil banker in “It’s a Wonderful Life.””

This approach has appeared to backfire with the conservative base.

Though their critiques on Bain Capital seem more appropriate coming from Chicago, Perry and Gingrich’s underlying instincts are correct. The primary, insofar that it is a referendum on the establishment-favorite, has little to do with Governor Romney, whose only real noteworthy achievement is the despised Romneycare. No, the candidacy of Mitt Romney is based entirely on his history in the private sector. It is his success as a CEO that allows him to claim he is the one candidate who understands “the real economy”.

Unfortunately for the country, Romney’s economic literacy is the biggest myth of the primary.

It would be too easy to highlight the fact that Romney subscribes to the same flawed belief that “fair and affordable housing should be a right, not a privilege,” a major contributor to the environment that created the disastrous housing bubble (after all, he said that as Governor, and Candidate Romney is nothing like Governor Romney). Instead, let’s take a look at one of Candidate Romney’s favorite topics: China.

If you have tuned in to any of the GOP debates, you should already know that he is not a big fan. On the subject of trade policy, his website highlights a plan on “Confronting China,” including the aggressive action of labeling the pseudo-Communist nation as “currency manipulators.” He goes on to criticize the Obama Administration’s “acquiescence to the one-way arrangements the Chinese have come to enjoy.” America, he believes, must be we must be “willing to say “no more” to a relationship that too often benefits them and harms us.” To anyone who would argue that there are benefits to our current relationship with the Asian power, you are being “played like a fiddle.”

As such, it is interesting that one of his top economic advisers is Harvard professor Greg Mankiw.

In 2009, Mankiw took to the New York Times to criticize the Obama Administration for threatening much of the same policy his candidate now advocates. In what would be a fitting response to Romney’s accusation of “cheating”, Mankiw writes:

“Like many economists, I cringe whenever I hear the term “fair trade.” It is not that I am against fairness — who is? — but the word “fair” is so amorphous in this context as to defy definition. Most often, the slogan “fair trade” is little more than a rallying cry for protectionism.”

Protectionism? From the man who believes he is the only one who can save capitalism from Barack Obama? Adam Smith is rolling in his grave.

But what of China’s “currency manipulation” Professor Mankiw?

“Perhaps the oddest thing about [the criticism of currency manipulation] is that [the] complaint seems out of date. The yuan-dollar exchange rate has moved considerably in recent years. After a long period of completely fixing the exchange rate, China allowed its currency to start moving in July 2005. Since then, it has appreciated by 21 percent.” (Since this article was written in 2009, it is worth noting the information is not out of date. The Chiense yuan hit an 18-year high in April of 2011.)

So according to Romney’s own expect, his major claim against China is a complete fabrication.

A cynic may argue that Romney doesn’t believe any of the baloney he preaches about China. That he is using our economic rival as a scapegoat for a public looking for someone to blame for their economic pain. This would contradict a POLITICO report that “Romney is dead serious about…putting new tariffs on Chinese imports,” but information from unnamed insiders isn’t always reliable.

So we must conclude that either Romney doesn’t fully understand the trade policy he advocates, or Romney is a demagogue not above misleading the American people to win an election. Sadly even the latter explanation doesn’t defend the governor from Mankiw’s criticism:

“Directing attention to the China currency issue amid a worldwide recession and growing fears of depression is more than a distraction. It is downright counterproductive.”

If we are to brand Romney an economic expert because of his success in the private sector, how does the GOP defend itself from the criticism of Warren Buffet? Or Bill Gates? Being a good President is different than being a savvy CEO. The failure of Romney’s opponents to credibly attack Romney’s credentials in the economy is the reason Romney’s candidacy has the strength it does today. Interestingly, the candidate who is criticized for “crank economic theory”, almost as frequently as Romney is praised for his understanding, is the only one in the GOP field who identified the housing bubble years before it crippled the US economy – Ron Paul.

*Written by Tho Bishop.

Herman Cain’s 9-9-9 plan has caught the political world on fire, best demonstrated with his prominence in the latest Republican debate. Though few viewers could likely recite any answer Mitt Romney gave, anyone who follows politics has likely heard about Bachmann’s evoking the dreaded mark of the beast, or Huntsman’s latest lame attempt at a memorable debate joke. (Off topic: How pissed is he that Gary Johnson, in one debate, accomplished what Huntsman has failed to do in four months?) In spite of the attacks from his critics, Cain’s 9-9-9 plan has catapulted him to the top of the polls and now even carries the support of noted economist Arthur Laffer. But is it REALLY a good idea?

In the interest of full disclosure, I am a proud supporter of the FairTax movement. If you aren’t familiar with the FairTax, it is a 23% national sales tax that would replace all federal taxes on personal and corporate income (for some of the finer details try Google). Of the 2012 Republican nominees, only Gary Johnson and Herman Cain has voiced support for this proposal with Cain offering the 9-9-9 plan as a transitional step towards implementation of a full FairTax. It was this very issue that initially gave me a favorable opinion of Cain’s candidacy. Unfortunately, while I sympathize with what Cain is trying to do, if the 9-9-9 plan ever became reality it would likely be one of the gravest mistakes in many decades.

On the surface there is a lot to like here. Assuming it would pass as is, 9-9-9 would completely flatten the tax code, eliminating horrific 20,000+ pages of tax code that no one truly understands. Not only would this save incalculable man hours in filling out repetitive tax forms, but millions of dollars in the cost of tax compliance for families alone. Further, with a genuinely flat tax code, lobbying will decrease as tax credits disappear. These are all reasons why I support the FairTax.

There are also a lot of poorly thought-out criticisms of 9-9-9 (and sales tax in general). Relying on the political go-to move of the demagogue, defenders of the status quo describe horror stories of poor people being forced to starve due to the added cost placed on goods with the sales tax. While it is true that a sales tax will increase the retail price of goods and services, this line of reasoning typically only looks at one side of the equation. Since payroll taxes are gone, people have more take home pay. Since corporate taxes are reduced in 9-9-9 (or eliminated completely in the FairTax), the price of producing goods goes down (which is reflected in prices). The ease of tax compliance makes administration costs go down (which is reflected in prices).

But is it regressive? Since Americans typically spend a greater amount of their income the less wealthy they are, some critics complain the tax benefits the wealthy at the expense of the rich. While it is possible that a greater percentage of income will be taxed, the less wealthy also enjoy the greatest benefits of this sort of reform. A flat 9% corporate tax attracts foreign industry more likely to employ new blue collar workers than white collar executives. No pay check withholding means working class Americans are no longer deprived of potential interest on earned wages. Most importantly, with a flat tax rate, the working class will be on the same playing field with more powerful groups who can currently take advantage of tax code loopholes though costly political manipulation. This isn’t tax regression, but tax equality.

If I can dismiss some of the most common criticism of Cain’s plan, why can’t I support it? Unfortunately 9-9-9 is dangerously naïve and tragically short-sighted.

Grover Norquist best highlighted the flaw in Cain’s proposal when he said recently, “Having three taxes, all of which can grow – it’s like having three needles in your arm taking blood out, it’s much more dangerous than having one.” If you are going to open a door for government to collect revenue by way of a sales tax, you have to slam shut others. 9-9-9 leaves the income tax wide open.

Now Cain would probably respond by saying that he would never raise income taxes, and that 9-9-9 is only a stepping stone to a true sales tax. Unfortunately his word isn’t enough. Herman Cain, should he win the Presidency, won’t hold the office forever. As Obama has learned, the ability to accomplish a key campaign promise early in your presidency, doesn’t mean you will be able to follow through on others later. 9-9-9 plays a dangerous game of Trust Washington and I have no interest in playing. Though Cain’s lack of true government experience has served to be a political weapon, it is this same inexperience that may be the source of his apparently legislative naivety. I have a hard time seeing anyone familiar with Washington gridlock making a proposal heavily reliant on legislative restraint and future promise the focal point of his campaign.

Herman Cain should be celebrated for his continuing to highlight the need for serious, bold tax reform and applauded by his continued insistence to bring new proposals to the conversation. But, as Michelle Bachmann would probably delight in reminding the former CEO, the road to hell is paved with good intentions.

*Written by Tho Bishop.

According to the mainstream media, the battle for the GOP nomination is a two man race between Texas Governor Rick Perry and former Massachusetts Governor Mitt Romney. The fact that Republicans are increasingly souring on Governor Perry, and have long had issues with the candidacy of Romney, is often swept aside in favor of the issue of “electability”. As is so often the case with the current two-party system, the belief is that no matter the quality of your party’s candidate, no one is worse than the other guys. For most Republicans, 2012 is ABBO – anybody but Barack Obama.

But is this really the case? Let’s consider the past two presidential elections. In 2004 President George W. Bush defeated Senator John Kerry. Republicans win, Democrats lose – right? Wrong. A short term defeat for the Dems gives way to massive gains in 2006 and culminates in winning the White House and both branches of congress in 2008. But this victory is also short lived. Frustration with government leads to the Tea Party coming to Washington in 2010 with Democrats losing Congress and expectations of even greater losses 2012.

The moral of the lesson? Victories are only victories when there is substance to support them. Bush maintaining his previous residence in 2004 may have kept a Republican as president, but one that governed progressively with massive government spending and dramatic increases to the size of the federal government. President Obama was supposed to usher in a new age of Democratic domination, but weak leadership and a lack of economic solutions have undermined the President – and his party by proxy.

So the main question Republicans should be asking themselves is not “can ____________ beat Obama”, but “can __________ fix the economy”. If they aren’t convinced of the latter, the former is irrelevant. In fact, a president that can’t fix the economy is likely to cause more damage to their cause (be it the cause of party or country) than anything the election of Barack Obama could do.

I contend that neither Rick Perry nor Mitt Romney have any idea what is truly wrong with the American economy. Perry’s talk about a “treasonous” Ben Bernanke aside, neither pays much attention to matters of monetary policy. In spite of Romney’s reputation as a businessman, neither have demonstrated a sound understanding of economics (best demonstrated when Romney starts a sentence advocating the wonders of “free trade” while ending it with attacks on doing business with China.) Neither was able to identify the dangers of housing bubble before it popped. Rick Perry has run massive deficits; Mitt Romney has a bad track record of job creation and none of them have any truly substantive plan of action – Romney’s vague Kindle-friendly collection of bullet points aside.

Take a second and imagine the consequences of electing a Republican to the White House, in the middle of a double-dip recession/depression, who is unable to solve the economy. Frustration with “socialism” becomes frustration with “capitalism” by a country ready to believe such over-simplifications. The gains Republicans made in 2010 are replaced with Democratic gains in 2014. 2016 comes with a Republican party essentially handcuffed to a President who has the anchor of economic crisis firmly strapped to his ankle.

Take it one step further, who benefits most from this frustration? It would need to be someone likable, as Americans will be looking for someone that can give them hope. The nation will have endured twelve years of unpopular Presidents and even less-regarded congresses, so it will have to be an “outsider” who understands that Washington is broken. With the rich still comfortable and the poor still supported, it will be the middle class who suffers the greatest brunt of the pain, so they will naturally be looking for an advocate.

My fear is that Elizabeth Warren could be that advocate. A Harvard Professor with an irritatingly effective folksy charm, Warren is the most dangerous sort of radical progressive – one who rarely offends. She will be sold as a “grandmother from Oklahoma”, who warned of the “collapse of the middle class before anyone else”. A “consumer advocate” who went to Washington to try to “make it easy for families to understand the fine print on their credit cards”. A champion “for the cause of the angles” (as at least one Democratic congressman has described her) who was overlooked by Obama due to “the wishes of Tim Geithner and the big banks that feared her.” All of this is total crap, but it sure does sound good. By the time 2016 comes around, she is likely to have had four years in the Senate and a record in government since 2008. With Obama failing to nominate her to lead the Consumer Financial Protection Bureau (CFPB) she personally crafted, Warren can simultaneously point to her time in the administration as “executive experience” without being tarred by a connection with Obama.

If Warren isn’t the Democrat of choice in 2016, someone similar will be. A Democratic base spurned by the “moderate” Obama isn’t going to elect Tim Kaine. The Progressive intellectuals have already set their pieces for the long term better, the unprecedented stimulus package passed in 2009 was “too small” according to their go-to economist Paul Krugman. Any pragmatic Republican must take such a future into consideration. Elections have consequences, policy decisions matters.

How many times must history repeat itself before people start taking its lessons to heart? Holding your nose at the polls to elect your party guy isn’t practical, it’s tragically short sighted.

*Written by Tho Bishop.

For the second time in as many weeks Paul Krugman has pronounced the economic advantages of disaster. Last week the Noble winning economist made headlines for arguing that a fictional extraterrestrial threat would serve as an effective stimulus for the wobbly economy. Yesterday, after the 5.8 magnitude earthquake rattled the inexperienced east coast, Krugman regretted that the event was not larger and more destructive. He wrote on his twitter, “[I]n all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.” (NOTE: Krugman has since denied making this quote.)

If androids dream of electric sheep, then it seems Keynesian economists dream of alien attacks and devastating disasters. But does the Krug have a point? Wouldn’t both actions spur spending and boost GDP? Do we need a disaster to pull us out of the Krugman-dubbed “Lesser Depression”?

The answer is no. Krugman has instead demonstrated that having a Nobel Prize on your mantle does not make you immune from stumbling over basic illogic.

There is nothing revolutionary or unique about these proposals. Following Japan’s devastating March tsunami, a disaster far greater in scale than anything Krugman would ever conceive, former Team Obama member Larry Summers looked for a similar silver lining. “In the wake of the earlier Kobe earthquake Japan actually gained some economic strength,” he told CNBC.

These prominent 21st Century economists would do well to read the works of 19th Century French economist Frédéric Bastiat. In his essay That Which Is Seen and That Which Is Unseen, Bastiat writes of a much repeated situation involving a shopkeeper whose child breaks one of his store windows. Luckily a 19th Century Paul Krugman consoles the shopkeeper by asking him, “What would become of the glaziers if panes of glass were never broken?” The destruction was a blessing! Because the shopkeeper needs a new window, the glazier gets his business and the glazier will have more money, possibly to buy from the shopkeeper’s store. Everyone wins, right?

Not so, says Bastiat:

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.

It is not seen that as our shopkeeper has spent six francs upon [fixing the window], he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

Before the accident, the community had a shop with all its windows and a shopkeeper with six francs plus the rest of his money. After the window is fixed, we have a shop with all its windows, a shopkeeper without his six francs and a glazier with an extra six francs, minus the cost of replacing the window. When something of use is broken, the value of that object to all of society is lost. Economies grow, not when spending is up, but when the value of the overall economy is up.

The problem with the logic of Krugman and Summers is that it only takes into account what is seen, not what is unseen. This is the most common economic fallacy there is. It is on display when politicians point out the fact that spending a billion dollars created 5,000 jobs paying an average salary of $60,000. It is great for those five thousand newly employed people, but their jobs cost everyone else $200,000 dollars per position. Could that money have been put to better use elsewhere?

But what about the alien attack? No destruction, just spending. Wouldn’t that bring the best of both worlds? No. Spending on what sort of goods would correlate with an alien invasion? Weapons. So everyone goes out and arms themselves to the teeth, spending a quarter of their savings on firepower. The weapons industry is rolling in cash; their employment goes up – GDP rises high. But when the aliens don’t show up, we have a populace stacked with guns they have no use for. Americans would have sacrificed a quarter of their wealth on a good that now has far less utility. Spending may have momentarily gone up, but overall value in the economy has dropped dramatically.

If plots of fake alien schemes and advocating natural disaster seems awfully strange to you, consider that this sort of asinine logic is what has driven macroeconomic philosophy in this country for decades now. It’s the logic behind the stimulus plans of both Bush and Obama. Scariest of all, Krugman and Summers are both prestigious economic professors! The men shaping the minds of the best and the brightest in the economic field actually believe this dribble.

And we wonder why the American economy is where it is?

*Written by Tho Bishop.

The first GOP debate may have occurred almost two weeks ago, but the 2012 field made a big step towards clarity this weekend. Newt Gingrich is in, Mike Huckabee is out. The question is “which matters more?” Huckabee leaves a large group of voters without their Spring 2011 first-choice candidate. Newt Gingrich, on the other hand, brings with him the perception of policy wonk (a Washington nerd for those outside the Beltway) who started his campaign criticizing DC Republican’s current attempts to reform entitlements like Medicare and Medicaid.

The subject of 2012 is a strange one, especially as someone new to living within the District. Talk to the majority of Republicans up here and you will find a group that has already conceded 2012 to President Obama; venture back to what Sarah Palin would call “real America” and you get the sense that anyone can take down Barack. This disconnect between Republicans “in the know” and the grassroots may end up having larger consequences than anyone is considering.

It has often been pointed out that the Republican nominees tend to inherent their title. Nixon was a former VP. Gerald Ford defeated “outsider” Ronald Reagan in ’76, and then watched Reagan take the party in 1980. Reagan was followed by his Vice President who, of course, was the father of the next Republican President. John McCain ran in 2000 before 2008. Even Bob Dole, the Party’s choice in 1996, was a campaign veteran – serving as Ford’s VP candidate in ’76.

This, along with his well documented advantage in personal wealth, has placed Mitt Romney as the perceived favorite. Others say that a bad economy benefits a man with the private sector experience Romney holds. Romney certainly “looks Presidential”, whatever that may mean, and has the charisma to carry a room. His strength, I believe, is over-stated. In the end, Mitt Romney has all the factors working against him in 2008, with the added gorilla of Romneycare clawing at his back. It is true that the economy ways higher in the minds of GOP voters, but it has yet to be proven whether Romney will be able to best take advantage of that environment.

Romney still has the perception of being a John Kerry-like flip-flopper. His past views on abortion, along with a bias against Mormonism, will hurt him in Middle-America Iowa. Romney’s may have success in New Hampshire, but he failed to win the state in 2008. Romney’s campaign reminds me of Rudy Giuliani’s in 2008. Like 2012 Mitt, Rudy was viewed as the front runner throughout Spring of 2007 before failing to win a single Republican primary. Some would credit Rudy’s decision to place all his eggs in a Floridian basket as the cause of his downfall, but Giuliani campaign was reacting to reality of the earlier contests in Iowa, New Hampshire and South Carolina.

So if not Romney, who? Conventional wisdom would make former Minnesota Governor Tim Pawlenty as the establishment’s choice. A two time executive, Pawlenty is handsome, disciplined and, outside of support for Cap-and-Trade that he now apologizes for, has a perfectly acceptable legislative record. In other words, “TPaw” is safe. An astute friend of mine calls him “Captain Vanilliastein”, a man whose best strength is being inoffensive.

In the under-attended May 5th GOP debate, Pawlenty stood out in his inability to stand out. More than anyone else, Pawlenty reverted to white-washed political rhetoric. He seemed to field every question like a 5 minute campaign commercial rather than a chance to shed light on what he genuinely believed. While Ron Paul made headlines with his defense of liberty in a question about heroin, and Rick Santorum and Herman Cain’s passion and fire caught the attention of conventional conservative figures like Rush Limbaugh and Sean Hannity, the reaction to Tim Pawlenty’s performance was purely based on his perception as the “only legitimate candidate” on the stage.

But does the GOP want such a sterile candidate? 2010 saw Republican voters side with Christine O’Donnell and Rand Paul over “safer” GOP candidates. Now these candidates did not always find success, but the Tea Party movement indisputably breathed life into the party. Substance won out over political pragmatism.

The real world will also be important. Beyond the GOP’s interest in the ever expanding debt, other economic factors are worth noting. Inflation continues to rise. In June, the Federal Reserve will end its QE2 program which has it being the largest purchaser of Treasury securities. Meanwhile Japan is likely to be required to start selling their US treasuries as they pay for earthquake reconstruction and China has cooled in their interest in our bonds. PIMCO’s Bill Gross, one of the most influential voices in investment, has made his disinvestment of US bonds well known. The consequences of this will push the subject of monetary policy into the national conversation.

The results are likely voter frustration and a change in the debate. This is where two dark horses begin to look rather interesting.

Herman Cain has a chance to tap into conservative populism. He has never been elected to office, speaks with passion, has proven to be more-than-willing to go after the throat of President Obama and brings with him a plan to eliminate the IRS. He has inroads with Tea Party grassroots and a history of success in the private sector. He is the sort of candidate DC Republicans will be quick to dismiss, which is one of the reasons he is an intriguing player in 2012. Money will be an issue, but he may be more popular than Newt Gingrich in their shared home state of Georgia. A strong showing in one of the earlier states and he could be a major player.

In terms of substance, no candidate can better Congressman Ron Paul. His 2008 economic advisor, Peter Schiff, famously predicted a dire collapse in housing while many in the media laughed it off. He has just released a book outlining his philosophy on a number of political positions from Abortion to Zionism. He has been the largest opponent of the Federal Reserve in Washington and now uses his position as Chairman of the Domestic Monetary Policy Subcommittee to berate it regularly. He has an army of young, energetic followers, ready to storm social media with user-generated content. And he has proven to be a solid fundraiser with often-copied “money bombs”. If the focus of 2012 is about issues instead of perceived electability, Ron Paul is the greatest beneficiary. Perhaps, for this reason, Newt Gingrich’s presence helps Dr. Paul.

Or perhaps the GOP nominee has yet to enter the race. While Michelle Bachman is contemplating her own campaign, it is Indian Governor Mitch Daniels who most people are focusing on. Though being courted by supporters, Daniels appears to understand all too well the personal consequences of such a run. If he does throw his hat into the ring, it will certainly change the picture.

In the middle of May, only one thing is clear about the path to the RNC Convention in Tampa – nothing is clear.

*Written by Tho Bishop.

Paul Krugman has a Bachelors from Yale, a PhD from MIT, writes daily for the New York Times and probably has his Nobel Prize in Economics prominently displayed in his parlor (though I have yet been invited to his manor.) He is also a proud progressive and an excellent resource for those on the left looking for a prominent economist to lend intellectual credence to ridiculous notions like Obama’s 2009 Stimulus plan.

He is also prone to intellectual laziness.

For example, in an article whose premise I otherwise support, Krugman makes this comment, “You say that reintroducing what amounts to slavery is unacceptable? Well, that’s just your ideology — and a significant number of Americans probably don’t share that ideology.” Krugman is implying, if not out-right declaring, that if you at all sympathize with the South in the Civil War you support slavery. Ignore the arguments about State’s Rights; ignore such trivial details such as Lincoln’s tripling of tariffs (of which the South paid most of, while the North received the majority of the projects they funded); ignore the fact that the founding of America itself was itself an act of Southern-like secession – if you have any sympathy to the Confederate cause, you advocate reintroducing slavery.

This is not the first time that Krugman gets all limp-minded whenever the Civil War is involved. When Domestic Monetary Policy Chairman Ron Paul had economist, historian and Senior Fellow at the Mises Institute Thomas DiLorenzo testify at his first DMP hearing, Krugman dismissed it all as “Johnny Reb economics”. DiLorenzo, author of Lincoln Unmasked, is extremely critical of Abraham Lincoln’s economic policy, which offends Krugman who advocates our 16^th President’s canonization. Not happy with simply criticizing DiLorenzo, Krugman also brings up Congressman Paul Ryan for stating, “There is nothing more insidious that a country can do to its people than to debase its currency.” For daring to speak out about the dangers of inflated currency, a policy advocated by Lincoln, Krugman accuses the two men of supporting a return to “the antebellum era.”

In his article February 8^th article on the Paul hearing, Krugman makes the curious choice to bring up Amity Shales, the author of The Forgotten Man, a book critical of FDR’s New Deal policies. This is curious because the two authors have no connection. As Robert Wenzel of EconomicPolicyJournal explains:

To Krugman, if you think FDR policies were failed policies (as does the Mises Institute), then you are part of the MI circle.

How’s that for a tight connection?

In truth, as far as I know, and I know the Mises group fairly well, I don’t think any of them know Shlaes personally. And, there is probably a good part of the group that don’t know her work at all. So why is Krugman making the broad swipe to link Shlaes to the dishonest Clay attack, when the linking is absolutely absurd?

Unfortunately this sort of sloppy, erroneous content has become the standard for Krugman. Instead of engaging in a healthy discussion of debate, he resorts to generalizations, straw men or simply half truths. Should anything more be expected of a guy who apparently believes that in a time with the internet you can get away with lying about your record.

*Written by Tho Bishop.

A public school in Chicago has put in place a new policy that increases the role the State plays in the lives of young Americans. The Chicago Tribune reports the school no longer allows kids to pack their own lunches without a documented medical excuse. The reason? To save children from the irresponsible dietary decisions of their parents. Meanwhile, in Florida, State Legislatures are said to be close to passing a law that would ban saggy pants. Perhaps “E Pluribus Unum” should be replaced with “Tutto nello Stato, niente al di fuori dello Stato.”

Elsa Carmona, the principal at Little Village Academy and person responsible for the lunch ban, claims she is only looking to do what is best for her students. “Nutrition wise, it is better for the children to eat at the school. It’s about the nutrition and the excellent quality food that they are able to serve (in the lunchroom).” It seems the kids may have a different opinion on the quality of the school provided lunches. The Tribune reports that, “During a recent visit to the school, dozens of students took the lunch but threw most of it in the garbage uneaten. Though CPS has improved the nutritional quality of its meals this year, it also has seen a drop-off in meal participation among students, many of whom say the food tastes bad.”

As typical with heavy-handed government policy, an arbitrary regulation leads to tragic unforeseen consequences. Kids who don’t like the school’s signature slop are reduced to going hungry or risk any disciplinary measures that are included with the new policy.

Though many would argue that the freedom to eat what you would like is more important than defending the ability to sag, the likely to be implemented Florida law does more than simply require violators to pull up their pants. A student caught out of code could face in-school-suspension, an indication that legislatures place a higher value on students confirming to arbitrary law than actual intellectual enlightenment. Even this punishment doesn’t go far enough for State Senator Gary Siplin, who proposed a bill in 2005 that would have made the possession of sagging pants a second-degree misdemeanor. Possible punishment? Up to $50 in fines and ten days in jail. A choice of fashion leading to incarceration – the State at work.

This is the progressive ideal in action, force individuals into the institutions of government (public schools) and then use those services to regulate their actions. Students will eat what the State wants them to eat. Students will dress how the State wants them to dress. Students will learn what the State wants them to learn. And all for the good of those students! “It makes a lot of sense to me. A lot of kids will be able to do a lot more with two hands,” says one government advocate for the pants law.

These incidents are not without some beneficial results.  As is so often the case, totalitarian rule sparks open rebellion.  In Chicago we are treated with the wonderful sight of students discovering the righteous cause of liberty. I give you Fernando Dominguez, a new personal hero of mine. The seventh-grader and new freedom fighter is fighting the dietary oppression. “Who thinks the lunch is not good enough?” asks our young rebel in both English and Spanish. The question is followed by the chants of his supporters, “We should bring our own lunch! We should bring our own lunch! We should bring our own lunch!” I can’t help but smile at the image.

Another student articulates the logic of liberalism. Says Yesenia Gutierrez, “They’re afraid that we’ll all bring in greasy food instead of healthy food and it won’t be as good as what they give us at school. It’s really lame. If we could bring in our own lunches, everyone knows what they’d bring. For example, the vegetarians could bring in their own veggie food.”

Government once again proves to be the best advocate for its opposition by overstepping any rational boundary. Students have been joined by their parents in criticizing the ban on outside lunches. Said one parent, “Some of the kids don’t like the food they give at our school for lunch or breakfast. So it would be a good idea if they could bring their lunch so they could at least eat something.”

And asked what they would prefer for lunch, the students demonstrate the unique preferences of individuals. Seventh Grader Ashley Valdez wants Subway. Second-grader Gerardo Ramos says he would “bring a banana, orange and some grapes.”Fourth-grader Eric Sanchez? “I would bring a juice and like a sandwich.” And perhaps the most honest of the bunch, second-grader Julian Ruiz responded, “Sometimes I would bring the healthy stuff, but sometimes I would bring Lunchables.”

I have often been critical of the quality of education in public schools; inadvertently, the actions of overreaching government officials may give these affected students an important lesson – the value of individual freedom.

*Written by Tho Bishop.

This chart should scare every person in America.

What is it? This is the Federal Reserve’s measurement of the American money supply. It charts the amount of dollars printed by our government. Note the general increase. This is the reason why penny candy no longer exists, why Krystal burgers use to cost a 10 cents and why Gone With the Wind’s $189,523,031 box office is considered to be an even stronger performance than Avatar’s $749,766,139.

And then do you notice how things get really crazy in 2009? That’s when the Federal Reserve’s QE1  spent over a trillion dollars buying up toxic assets and then followed with QE2 which printed up an additional $600 billion. As James Grant,

a witness at a subcomittee meeting on inflation said, the term “quantative easing” should be outlawed and replaced with the more accurate return of “printing money”.

You want to know why gas prices have gone up? And food prices? Why Abercrombie and Fitch will be raising prices, as well Kraft, Haynes McDonalds? ( http://finance.yahoo.com/news/Rising-wholesale-prices-spur-apf-2005267013.html?x=0)

Greedy capitalists you say? Lets look at commodity prices:

Pre QE2:
Gas: $2.64 US Gasoline Price (August 2010)
Cotton: $85 (Contract Size 50,000 pounds)
Copper: $3.25 a pound
Lumber: $200 (Futures Contract –Contract Size 110,000 board feet)
Sugar: $17.50 (Futures Contract-Contract Size 112,000 Sugar #11)
Cattle: $92 (Futures Contract-Contract Size 40,000 pounds)
Milk: $14 (Futures Contract-Contract Size 200,000 pounds Class III)

Post QE2:
$3.50 US Gasoline Price
Cotton Prices at $215 (Futures Contract -50,000 pounds)
Copper Prices $4.50 a pound
Lumber Prices at $303 (Futures Contract)
Sugar Prices at $30 (Futures Contract)
Cattle Prices at $114 (Futures Contract)
Milk Prices at $19.50 (Futures Contract)

It’s a basic role of money that the more you print, the less valuable it becomes.

This means that one of two things are going to happen. Either the Fed maintains or further increases the money supply, meaning that the prices of all goods will eventually rise to reflect the new value of the dollar OR the Fed will have to contract the money supply. Either one will create a bad economic enviroment as the economy has to filter out all the crap and malinvestments from the Federal Reserve’s monetary policy.

You will often hear politicians, and even the Federal Reserve Chairman, talk about how banks are not lending this freshly printed money. Though this is frustrating for individuals seeking a new loan, this has actually been a blessing for the economy and been a check on inflation. Again, look above at the chart – we are talking about an unpredented increase in money, it is better for it to be sitting out in a bank vault (or more accurately, on the banks account ledger at the Federal Reserve) rather than out in the economy where it can do real harm.

This will not last forever.

The economic crisis of 2008 has not passed, it has simply been delayed and made worse. Be ready.

*Written by Tho Bishop.

Hamilton’s Tragedy:

Last week’s blog on Thomas DiLorenzo’s Hamilton’s Curse reminded me of the objections I had with his book. None of these objections deal with DiLorenzo’s critique of Hamiltonian economic policy; in fact DiLorezno’s book was my first exposure to the Ludwig von Mises Institute and DiLorenzo’s brilliant explanation of the consequences of Hamiltonianism was so effective that it completely changed my perspective of American history and stressed to me the importance of sound economic understanding. This is typically one of the first books I recommend to people interested in learning more about the credibility of revisionist history.

My complaint with DiLorenzo’s work deals mainly in his portrayal of Alexander Hamilton – the man. Those otherwise unfamiliar with General Hamilton would leave DiLorenzo’s work with the impression that Hamilton was a manipulative schemer who laughed maniacally in his dungeon as he carefully orchestrated the eventual enslavement of America. In fact DiLorenzo couldn’t even bring himself to give Hamilton credit for his abolitionist views. As biographer Ron Chernow points out, Hamilton was a proud and active member of the abolitionist New York Manumission Society and that as a legal adviser, “helped defend free blacks when slave masters from out of state brandished bills of sale and tried to snatch them off the New York streets.” Though his work as an abolitionist does not absolve the faults of Hamiltonianism, I fail to see the benefit of unfair criticisms. It seems to me that DiLorenzo’s goal in Hamilton’s Curse went beyond pointing out the fallacies of Hamilton’s policy objectives and instead sought to trarnish his legacy in general. I contend that DiLorenzo overreaches.

Hamilton the Man:

What attracted me to DiLorenzo’s book was actually the brilliance of Hamilton’s life. I admired Hamilton and wanted a different viewpoint. The story of Alexander Hamilton is a uniquely American one: the bastard son of a disgraced Scot of noble blood, Hamilton came to this country due to the charity of the inhabitants of his Caribbean island who recognized young Alex’s natural talent. Entering New York’s King’s College on the back of the charity of others, Hamilton would grasp the opportunity and never look back. As a collegiate, Hamilton wrote letters in defense of American independence that were so eloquently written that many prominent New Yorkers thought they stemmed from the pen of John Jay. When shots were fired in Lexington and Concord, Hamilton took arms in the defense of colonial liberty. In short time young Hamilton caught the eye of General George Washington, and at age 22 he would become the campe-de-aide for Washington and entrusted him with the most sensitive of missions. Hamilton would finally be allowed to lead his own battalion during the decisive Battle of Yorktown where he characteristically rose to the opportunity.

After the Revolutionary War, Hamilton became an extremely successful New York attorney after choosing self-instruction rather than the more typical route of apprenticeship. Demonstrating his belief in the necessity of protecting the rights of all Americans, the veteran Hamilton made a mark defending the rights and property of loyalist-New Yorkers. Washington’s colonel became a devoted nationalist during his military service and was recognized for his devotion to his adopted country. It was inevitable that Hamilton would work his way into early-American politics and worked closely with James Madison to call for the Constitutional Convention.

In Philadelphia, Hamilton unveiled his vision for American government: a President serving for life on good behavior, Senators serving for life on good behavior, and an Assembly elected every three years. In Hamilton’s vision, the President would have absolute veto, the Supreme Court would have immediate jurisdiction of all lawsuits and the Federal government would appoint the State governors. As Hamilton expected his proposal went nowhere, but Hamilton would fight for the ratification for the product created at the Convention, most notably as chief writer of the Federalist Papers. In spite of his preference for centralized power, Hamilton will be forever known as the founder of the ironically named Federalist Party.

It was as Treasury Secretary that Hamilton would leave his most disastrous mark in American history. Inspired by Jean-Baptiste Colbert, Chief Finance Minister of the “Sun King” Louis XIV, Hamilton encouraged an economic policy consisting of a central bank, government subsidization of industry and protectionist tariffs. Though Hamilton himself can be praised for his being above corruption while at the Treasury, his actions directly led to privileged men “in the know” to enrich themselves from his policy. In describing Hamiltonian economic policy, I will defer to DiLorenzo who writes:

Hamilton was an American mercantilist, and he and his party (and its political heirs, the Whigs and Republicans) advocated special-interest policies that would primarily benefit politically connected merchants, manufactures, speculators, and bankers at the expense of the rest of the public.

Though Hamilton himself did not serve (nor get along with) Federalist President John Adams, Hamilton was a favorite amongst Adams cabinet – much to Adams disgust. Hamilton’s Federalist Party would lose the White House to Thomas Jefferson in the election of 1800 and the philosophy of the Federal government followed; Hamiltonian nationalism replaced by Jeffersonian liberalism. The American public reacted well to the change: Virginian Jeffersonians controlled the White House for the next 24 years, 1816-1824 became known as the “Era of Good Feelings” and Jefferson’s Republican Party became the sole political party in the country until the controversial election of 1824 (an election where the Jefferson-backed William Crawford received more electoral votes than future-Whig leader Henry Clay and likely would have won the Presidency if not for a debilitating stroke.)

The defeated Hamilton would spend his final years focusing on religion and attacking the Jefferson Administration, mainly through the creation of the newspaper known today as the New York Post. Hamilton was famously killed in a duel with the Vice President of the United States at the same site his firstborn son, Philip, dueled to the death three years earlier.

DiLorenzo’s Hamilton:

Hamilton’s impressive narrative inspired me. If Hamilton could begin to change his world by the time he turned 22, so would I. After reading DiLorenzo’s book, however, I was forced to take another look at my new hero. As I took to studying economics, DiLorenzo’s critique of Hamiltonian policy held up – his characterization of Hamilton doesn’t.

DiLorenzo’s Hamilton is a devoted enemy of liberty who fancied himself something of an American Napoleon. DiLorenzo often relies upon the opinion of Thomas Jefferson and his allies in painting Hamilton’s character. For example, in pointing to Hamilton’s lengthy defense of a national bank, DiLorenzo writes: “He authored another long-winded report on the supposed constitutionality of the bank, a report that Jefferson believed was, like the others, intentionally confusing.” Obviously using the opinion of Hamilton’s greatest rival to decipher Hamilton’s intention is questionable scholarship. DiLorenzo again points to a Jeffersonian perception of Hamilton as he point outs, “historian John C. Miller noted that Jefferson’s party had ‘suspicions that the army had been strengthened in 1798 not to fight Frenchmen but to suppress opposition to Federalist policies.”

Four times in his book DiLorenzo quotes Hamilton’s description of the Constitution as a “frail and worthless document”, the implication that the author of the Federalist Papers had little use for the document and that he merely played the role of advocate so he could boost his own political power. Did DiLorenzo catch a slip-up from the duplicitous Hamilton? Let’s look at the quote, found in a letter to Gouverneur Morris, in context:

Mine is an odd destiny. Perhaps no man in the U States has sacrificed or done more for the present Constitution than myself. And contrary to all my anticipations of its fate, as you know from the very beginning, I am still labouring to prop the frail and worthless fabric. Yet I have the murmur of its friends no less than the curses of its foes for my rewards. What can I do better than withdraw from the scene? Every day proves to me more and more that this American world was not made for me.

This letter was written during the darkest days of Hamilton’s life following the death of his son and after Jefferson’s success had relegated Hamilton into a political outcast. Does this sound like an enemy of the Constitution? Or does it sound like a defeated man tired of constantly being painted as its enemy? The recipient of his letter would later state at Hamilton’s funeral that, “His speculative opinions were treated as deliberate designs and yet you all know how strenuous, how unremitting, were his efforts to establish and preserve the Constitution.

Hamilton’s Curse:

Though Hamilton was a product of the island of Nevis, he was perhaps the loudest voice advocating America to resemble European powers. Though I disagree with DiLorenzo’s view of Hamilton, I cannot deny the reality that Alexander Hamilton was a nationalist mercantilist. How did Revolutionary America create such a leader? I point to Hamilton’s upbringing and intellectual development. Where DiLorenzo sees a manipulative power hungry politician, I see a well-meaning patriot who dedicated himself to creating the best country possible for his fellow Americas. Where DiLorenzo sees intentional malice, I see the tragedy of a guy who simply got it wrong.

Lets start with Hamilton’s upbringing.  As Ron Chernoff notes: “Island life contained enough bloodcurdling scenes to darken Hamilton’s vision for life, instilling an ineradicable pessimism about human nature that infused all his writing.” Even as a boy, Hamilton’s writings are tainted with this darkness. Noted young Hamilton, “And let me tell you, in this selfish, rapacious world, a little discretion is, at worst, only a venial sin.”  His worldview led Hamilton to always be attracted to the philosophy of David Hume.

Where most Founding Fathers held a very romantic view of the American Revolution, Hamilton recognized the horrors of the mobs that helped sparked it, often resorting to barbarous measuring such as tarring and feathering and riding the rail. Hamilton’s loyalist college president, Dr. Myles Cooper, was a target of one of these mobs when collegiate Hamilton bravely stood before them and spoke. He admonished the mob, telling them their actions “disgrace and injure the glorious cause of liberty.

Occurrences such as this made Hamilton fear the chaos of anarchy and he viewed that government needed to be strong enough to calm the passions of men. In the Federalist Papers Hamilton would later write: “In a nation of philosophers a reverence for the laws would be sufficiently inculcated by the voice of an enlightened reason. But a nation of philosopher is as little to be expected as the philosophical race of kings wish for by Plato. And in every other nation, the most rational government will not find it a superfluous advantage to have the prejudices of the community on its side.”

This view of mankind explains the fundamental difference in philosophy between Hamilton and Jefferson. Jefferson viewed government as an institution that threatened the rights of man; Hamilton viewed it as a means to ensure a peaceful and prosperous society – as long as it accurately represents the interest of its subjects.

But did this necessarily force Hamilton to be a nationalist? The elder Hamilton certainly was, which explains his rejection of the Kentucky and Virginia Resolutions. I think it is interesting, however, to look at Hamilton’s collegiate writings. In his first great success, The Farmer Refuted, Hamilton sounded rather Jeffersonian when he wrote, “The nations of Turkey, Russia, France, Spain, and all other despotic kingdoms in the world, have an inherent right, whenever they please, to shake off the yoke of servitude (though sanctioned by the immemorial usage of their ancestors), and to model their government upon the principles of civil liberty.” Throughout the article Hamilton frequently speaks of the sanctity of human rights. “I am inviolably attached to the essential rights of mankind and the true interests of society. I consider civil liberty, in a genuine, unadulterated sense, as the greatest of terrestrial blessings. I am convinced that the whole human race is entitled to it, and that it can be wrested from no part of them without the blackest and most aggravated guilt.”

What do I attribute to this reversal of philosophy? Hamilton’s military service.  A liberal government is best suited for peace, not war and the difficulties General Washington had in securing appropriate funds from the Continental government is well documented. Hamilton had a first hand view of these difficulties. The nature of military service to lead great American minds to nationalism over liberalism is further validated by an American President DiLorenzo speaks favorable of: Andrew Jackson. Though Jackson, as Murray Rothbard noted, held sound economic philosophy, he combined it with a nationalist governmental philosophy. When South Carolina threatened to secede over the issue of tariffs, Jackson threatened to invade the state.

DiLorenzo implies that Hamilton’s monarchist visions are incompatible with Jefferson’s liberalism. When I first encountered Hamilton’s vision for government, I too found myself a bit turned off. It was an article from Mises Daily that forced me to reconsider its merits. Hamilton understood the danger of democracy, fearing that such a system would produce demagogues who, as Chernoff writes, “fed off poplar confusion while proclaiming popular rights.”

Of course it is Hamilton’s economic policy that draws the majority of DiLorenzo’s scorn and for very good reason. In order to understand how a man of Hamilton’s talent could produce such a terrible economic program, we must recognize that he did not benefit from the experiences, nor the writings, of Ludwig von Mises or the rest of the Austrian School. In fact the economic science as a whole was still new with Richard Cantillon’s Essai sur la Nature du Commerce en Général written just 25 years before Hamilton’s birth and the Wealth of Nations 20 years after. Furthermore the British Empire, who had the most powerful economy in the world and whose success Hamilton aspired to replicate, was founded on mercantilism that contradicted Smith’s vision. Hamilton educated himself with voracious reading; unfortunately, as Murray Rothbard points out, “The mercantilists, dominant in economic thought for the preceding century or two, were special pleaders whose tidbits of analysis were pressed into the service of political ends, either in subsidizing particular interests or in building up the power of the state.” Hamilton gobbled down these works, fueling his mercantilist visions.

Conclusion:

It is easy to demonize those we disagree with – especially for classical liberals, like myself, whose philosophical foundation forces us to view the advocates of large and energetic government as enemies to our natural rights. Though Hamilton’s economic philosophy cannot be defended, and though I recognize the consequences of it and his intellectual heirs as the source of great injustice in today’s world, we must constrain ourselves to attacking ideas – not the character of those behind them. Not only do I reject DiLorenzo’s portrayal of Hamilton, but I also believe it undermines the greatest lesson we can learn from it. Alexander Hamilton represents the ideal government bureaucrat: a brilliant man beyond corruption who dedicated his life to serving his country. And even he was wrong. If Alexander Hamilton couldn’t successfully micromanage our economy, how can we place such faith in any leader?