Republicans Need To Fix The Economy In Order To Survive

America has been fundamentally transformed over the past century. It no longer resembles the America that laid the foundation for being great, and instead looks like a bunch of idiots consuming that greatness instead of being willing to maintain it.

In other words, when the teacher leaves the room, the children sacrifice tomorrow for today and become emboldened by the need to assert that there will never be a comeuppance, even though any child who has passed the marshmallow test knows that eventually, teacher will return and punishment will be handed out like candy.

You remember the marshmallow test? It measures time preference:

Mischel and his colleagues presented a preschooler with a plate of treats such as marshmallows. The child was then told that the researcher had to leave the room for a few minutes, but not before giving the child a simple choice: If the child waited until the researcher returned, she could have two marshmallows. If the child simply couldn’t wait, she could ring a bell and the researcher would come back immediately, but she would only be allowed one marshmallow.

In children, as well as adults, willpower can be thought of as a basic ability to delay gratification. Preschoolers with good self-control sacrifice the immediate pleasure of a chewy marshmallow in order to indulge in two marshmallows at some later point.

What percentage of any population do you think can handle any degree of delayed gratification? Maybe ten percent; the rest are not that bright, and understand only what they have in their hands at the moment or what is promised to them by some kind of hard rule or big entity. They do not think of the future; it is a mystery to them.

Democracy serves as a means of suicide for aging empires because it enables an inverted society. Instead of the smart people in charge, the majority are in charge, which always means the people with an inability to defer gratification. They want cash or promises and anything else is Greek to them.

The West fundamentally gave up after WWI because we fought this giant war to end all wars in the name of democracy, and afterwards, nothing really great happened. We beat back the last vestiges of the kings, true, and forced everyone else to basically put their aristocrats out to pasture, and then… nothing. Life went on.

Life went on, in other words, in the same grinding “progress” — back then, it meant the expansion of industry — that had been eating up the country for a half-century at that point. Little innocent towns full of good-hearted people got swallowed up by suburbs and cities, churning out hollow-eyed neurotics.

There was a sense of a truth glimpsed briefly for a moment that was too profound to linger in memory from those postwar years, like for an instant people could see that this war for democracy had helped the bad and not the good. After all, democracy makes people into isolated egomaniacs, as we knew 2400 years ago:

This, then, seems likely to be the fairest of States, being an embroidered robe which is spangled with every sort of flower. And just as women and children think a variety of colours to be of all things most charming, so there are many men to whom this State, which is spangled with the manners and characters of mankind, will appear to be the fairest of States.

…See too, I said, the forgiving spirit of democracy, and the ‘don’t care’ about trifles, and the disregard which she shows of all the fine principles which we solemnly laid down at the foundation of the city –as when we said that, except in the case of some rarely gifted nature, there never will be a good man who has not from his childhood been used to play amid things of beauty and make of them a joy and a study –how grandly does she trample all these fine notions of ours under her feet, never giving a thought to the pursuits which make a statesman, and promoting to honour any one who professes to be the people’s friend.

…And when they have emptied and swept clean the soul of him who is now in their power and who is being initiated by them in great mysteries, the next thing is to bring back to their house insolence and anarchy and waste and impudence in bright array having garlands on their heads, and a great company with them, hymning their praises and calling them by sweet names; insolence they term breeding, and anarchy liberty, and waste magnificence, and impudence courage. And so the young man passes out of his original nature, which was trained in the school of necessity, into the freedom and libertinism of useless and unnecessary pleasures.

In other words, we go from delayed gratification to instant gratification, which makes everyone narcissistic and unable to commit to long-term strategies, flitting from one extreme to the next, looking for self-expression and a sense of self.

That was the feeling in those years after WWI when people noticed a sudden emptiness to the West, as if its soul had been removed by a fratricidal war. It lost its spirit. People became dissolute, hiding a secret hopelessness, and figured that all was lost and nothing would ever be right again.

Then, they promptly fell into democratic habits, mainly focusing on themselves as if they were actors in a spotlight. Their entire worlds revolved around how to make themselves look and feel good, and how to justify ignoring the crisis around them. Denial, like morphine, served up a warm and distant feeling.

After that, the second world war came around and people had no choice but to double down on their political and economic systems. It was either that or admit that their societies were going down a bad path, which is a sign of their imminent death. The war ended well for democracy, the more numerous side, and so progress could recommence.

With the fall of National Socialism in 1945, nothing stopped us from going further Left except the rise of the Soviet Bloc and its totalitarian, murderous rule. When that died in 1991, we assumed that we had dodged that bullet, and that our mix of capitalism, consumerism, welfare socialism, and civil rights was the winner.

In fact, Francis Fukuyama wrote about this in the early 1990s, hypothesizing that liberal democracy had won the competition for the system under which humans would live. Everything else had died out; now all that was left was what we had, and we doubled down on that, expanding capitalism to globalism and civil rights to diversity.

Somewhere in the middle, from halfway through the 1950s through the mid-1960s, however, we began to compete with the Soviets on the basis of what they offered citizens, which was cradle-to-grave care and ethnic equality. Thus we desegregated schools, implemented affirmative action, and doubled down on our 1930s-era welfare state.

However, our exploration of Soviet-like ideas had Soviet-like consequences, namely the onslaught of stagnation in wages:

After adjusting for inflation, however, today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

It took about a decade for this to kick in, but that is consistent with most big economic changes; ten years after the law or policy is made, we start to see its effects trickle down.

The most important factor here is purchasing power. All other statistics absent, what do you get for your dollar? We see ourselves in the midst of “shrinkflation,” which is what happens when quality and quantity of what you can buy are reduced in order to keep the prices roughly the same.

Shrinkflation seems to be one of those classic traps that life has to offer in that it comes about through what appears to be success. It occurs because we pursue a Leftist style “demand-based” currency, which increases the value of currency as an investment by spreading it more widely and taking on debt.

Policies like affirmative action, civil rights, welfare, union protection, and heavy regulation are designed to “spread the wealth” but require that we implement a tax-and-spend policy to fund them at the same time they increase the costs of every action, no matter how small, in our economy. That spreads wealth and accelerates the motion of currency, but also makes the economy sluggish and stagnant because it is regulated more by government than responsive to market forces, which leads to a decline in quality and efficiency.

All Leftist policies lead to something like shrinkflation. They succeed at first because interest rates drop and the amount of money zooming around the market increases, causing people to spend more acquiring that currency because the rate of transactions has increased, and therefore prices get bumped up and we have more borrowing power. Over time however this prioritizes currency trading over productivity while simultaneously slowing everything down and removing wealth from the action centers of the economy to pipe through government.

In other words, tax-and-spend creates a circular Ponzi scheme where government dumps money on citizens to “prime the pump,” causes spending on things that do not generate tangible value, and then taxes that, gaining more presumed value each cycle. Then ten years later, the economy tends to crash hard because all of that phantom value is not backed by anything more than flighty demand.

Our 1980s market followed the changes made in the late 1960s and early 1970s; our 2000 market and 2008 crash followed the early and later Clinton years, given that it takes a decade or a dozen years for the changes to sink in. In other words, our boom-and-bust cycle is caused by our reliance on the Leftist circular Ponzi scheme of fast-money policy.

In other words, the marshallow-eaters won out over the marshmallow-waiters, and they get away with it for a little while before it comes crashing down. (It should be mentioned here that the Great Depression came eleven years after the end of the first world war.)

This downward crash results in catastrophic economic detonations:

September and October of 2008 was the worst financial crisis in global history, including the Great Depression.” Ben Bernanke, then the chair of the U.S. Federal Reserve, made this remarkable claim in November 2009, just one year after the meltdown. Looking back today, a decade after the crisis, there is every reason to agree with Bernanke’s assessment: 2008 should serve as a warning of the scale and speed with which global financial crises can unfold in the twenty-first century.

…The trouble began in 2007 with a downturn in U.S. and European real estate markets; as housing prices plunged from California to Ireland, homeowners fell behind on their mortgage payments, and lenders soon began to feel the heat. Thanks to the deep integration of global banking, securities, and funding markets, the contagion quickly spread to major financial institutions around the world.

The Great Depression of the 1930s is remembered as the worst economic disaster in modern history—one that resulted in large part from inept policy responses—but it was far less synchronized than the crash in 2008. Although more banks failed during the Depression, these failures were scattered between 1929 and 1933 and involved far smaller balance sheets. In 2008, both the scale and the speed of the implosion were breathtaking. According to data from the Bank for International Settlements, gross capital flows around the world plunged by 90 percent between 2007 and 2008.

That is not a mere meltdown; a 90% drop in gross capital flows is an economic apocalypse.

How did we get there? 1997 seemed like such happy times; money was flowing, people were getting paid well, and as long as you got more money in than you spent fighting off the race riots and increasing crime, you made out like a bandit. Some people even made money selling their old homes and moving to new gated communities!

But, as said above, when you transfer money from things of productive value to things of speculative value, you create phantom value based on the buyer alone — that is the “demand-based” part — and when those buyers spook, everything comes crashing down, brutally.

We sacrificed ourselves at the altar of easy money, and it almost destroyed us:

Overall an estimated nine million jobs and nearly $20 trillion in household wealth were lost. Job levels finally recovered but most of those who suffered from the Great Recession—and particularly current and former middle-income homeowners—did not see their wealth restored when the economy turned around.

Perhaps worst of all, the recession undermined our traditional belief in a better day ahead. Just one in five Americans is confident that life for today’s children will turn out better than it did for their parents, according to a 2014 survey conducted by NBC News and the Wall Street Journal. Nearly three in five Americans expect today’s children to be worse off, according to a 2017 Pew survey.

…Wages for working and middle class people, at least until this year, have stagnated. Overall, only upper-income households have recovered financially from the Great Recession, while the vast majority of middle-income and lower-income households have yet to recover their pre-recession wealth, according to Pew.

Upper-income households recover because they have investments, where the middle and working classes have only paychecks and bank accounts. When you have money in a business, a stock portfolio, a money management fund, or even land, you can expect that as the economy rises, you will also rise.

This places us back into the trap of lower purchasing power and stagnant wages where we have been since the mid-1960s. It seems that the bigger government gets, the smaller wages get, mainly because government has enacted a “death of a thousand cuts” to wages by making everything in business more expensive.

Your employer now is paying for affirmative action, buying off unions, healthcare, regulatory compliance, and a dozen other ideological initiatives imposed by government. Each of these hits every transaction, and there are dozens of those before employees see that paycheck.

Your paycheck goes straight to buy goods and services that have the same problem. Everyone must have lots of insurance now because of the explosion of incompetence and grifters that afflicts industry. Whoever sells to you suffers from the same expenses as your employer, just as the people who sell to them do.

Government may have had its hand in a dozen transactions that occur before you buy a box of cereal and notice that it feels lighter than it usually does. At every stage, it siphons off just enough wealth to make the economy unwell, even if it stops short of killing it.

Look how this manifests in a brew of toxic conditions waiting to flare up:

These include: the Federal Reserve’s ultralow interest rates, a fundamentally weak recovery from the dot-com collapse, the housing boom and bust, huge amounts of financial leverage, securitization of mortgages, the embrace of derivatives and reckless deregulation of the financial industry that enabled much of the above, and more.

The housing boom and bust was caused by government policies to favor minority home ownership. Federal Reserve rates were part of the fast money policies during the Clinton years, mirroring Obama’s “quantitative easing.” The financial industry gained power because of Leftist policies that favored currency as an investment over currency as backed by productivity (a view known as “supply-side economics” or “trickle-down economics” for the idea that raising that value of our currency gives people more purchasing power and thus a greater chance to escape poverty). Dot-com failures then and now reflect our zeal for speculative investment based on demand, not actual productivity, and so when big web firms go the way of MySpace or, we all pay for what the billionaires realized as actual wealth and then spirited away to invest in actual productivity. The successful dot-com investor cashes out early and buys land, farms, factories, and businesses that produce necessities.

So where does this leave us now?

For starters, Republicans face a rapidly-closing window: they have to show tangible fixes to the economy quickly before the Left is able to buy off the voters with promises of free stuff, which is what desperate people cling to because they have lost hope. This is an inbuilt flaw in democracy that makes marshmallow-eaters out of us all.

Voters need to see tangible effects of the boom and not just improved statistics:

“The economy” may be roaring, but for most voters their economy is not.

…”Fifty-one percent of the electorate lives paycheck-to-paycheck,” explains David Winston, a strategist for GOP leaders battling to save their House majority. “Their issues are wages and the cost of living. Ultimately for those folks, the question is, are those paycheck-to-paycheck dynamics getting better?”

…The decades-long stagnation in working-class incomes has repeatedly rattled whichever party holds power.

There you see the crisis of America right now. Our problem is not inequality, but the fact that only those with investments thrive, and everyone else is suffering from their paychecks being savaged. We have been unable to solve this for decades, and until we do, the Left will keep buying away those voters who are not already permanently committed to Leftism by virtue of being of third world origins.

Our instinct in times of crisis is to be marshmallow-eaters, but if we want to survive, we must brush this aside. Our addiction to marshmallow-eater policies — the welfare state, pensions, healthcare, “job-creating” regulations — has condemned our paychecks to death by a thousand cuts. We will not recover purchasing power until we end the Free Stuff Army’s rampage through our institutions and budget.

To see an example of this in the small, look toward what is killing one of America’s oldest retailers:

Lampert said Sears has paid almost $2 billion into pension plans in the past five years, and $4.5 billion since Sears and Kmart merged in 2005 to form Sears Holdings (SHLD). The company pays retirees about $300 million a year, filings show.

If Sears could have put that money into operations, “we would have been in a better position to compete with other large retail companies, many of which don’t have large pension plans,” Lampert wrote in a blog post.

…Sears, once the nation’s largest employer, has an estimated 100,000 retirees still eligible for benefits under the pension plans, according to a federal regulator. By comparison, the company had only 89,000 employees as of February, and many of them have since left the company because of store closings.

…Sears is getting about $900 million by selling its Craftsman tool brand to Stanley Black & Decker (SWJ). Under a settlement with the PBGC, Sears must contribute about $250 million of that into its pension plans.

This company finds itself in a death cycle. It has dead-end obligations — ones which will never return any value to the company — which subtract from the wealth it needs to invest in growth and adaptation to a changing market. As a result, it will die, simply because it lacks the cash to act or ability to act quickly with this boat anchor around its neck.

Our Western economies are the same way, and Trump knows it. He saved us from the utter abyss by gutting Obamacare, removing burdensome red tape/regulations, cutting immigration which depresses wages, and slashing the size of government, reducing its manipulation of the economy.

However, to win at the ballot box in the short term, Republicans will have to go further. It is time to point out that our “salvation” in the form of marshmallow-eater programs is in fact what is sabotaging our economy to the point where every time we get a little bit ahead, something yanks us back into the abyss.

In other words, we incorporated socialism as a program within capitalism; we made Communism into a product for consumers to buy. However, like anything illusory, eventually the piper must be paid, and that comes in the form of sickening crunches every time we collide with reality, about every ten years or so.

If the American voters knew what was good for them, and they do not, they would elect the most radical conservatives — note I wrote “conservatives,” not necessarily Republicans — to office for the mid-terms so that Trump will have the votes necessary to start repealing these psychotic Leftist drains on our economy.

We could start with affirmative action, which compels employees to hire incompetents who happen to be of minority backgrounds so that those employers do not get sued by the government. Then, maybe peel back the decades of red tape, taxes, civil rights, and other impositions which savage our ability to move quickly and effectively.

It is unlikely that the American voters will figure this one out. As in Europe, they run from one side of the floor to the other, blaming whichever party is in power for a failing system and figuring the other will bail them out, then turning on it when it cannot immediately repeal a century of bad law and policy.

Possibly Trump can fix this through the courts. A Supreme Court which went originalist on the Constitution would repeal all of the civil rights era laws as an unjust imposition of government interests over private liberties, and our industry could breathe again.

In the broader sense, however, we see that America has chosen a hill to die upon, and that hill is equality and diversity. When your government shifts from Social Darwinism to a commitment to social engineering so that everyone is equal, we have entered an infinite maze in pursuit of a goal we can never achieve. We are chasing symbols and feelings, not reality.

Let us hope that we get lucky and Trump gets a Republican Congress filled with actual conservatives so that these bad laws can go away. If not, we go right back into the cycle of greed followed by panic, writing laws to “prevent” crises that we then make inevitable.

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