The Shredding Of The Paper Tigers

It was Mao Zedong's favorite thing to say about the United States as he led the Communist revolution in China. "The United States," he would say, "is very powerful in appearance, but in reality it is nothing to be afraid of. It is merely a paper tiger."

The irony. 

Now, nearly 70 years later, China's Potemkin Village, complete with empty office buildings, brand new unrented condos, and vacant pre-planned cities, is on the verge of collapse. The Chinese government (ever optimistic) has revised its growth projections from 10% down to 5%. By comparison, the United States has been growing at about 2% since 2008. The Chinese stock market has dropped 42% since June. Again, to put that in perspective, the Chinese stock bubble of 2007 only led to a 9% correction in the Shanghai market. In the United States, the stock market crashes of 1929 and the financial crisis of 2007 saw drops of approximately 54% over a 15 month period. Unless there is a substantial turn around in the Chinese market, it is not at all out of the realm of possibility that we could see another 12% in losses.

China's economy is centrally planned by its government. In other words, rather than allowing market forces to dictate the outcome of events, the government micromanages all sectors of the economy. They order buildings to be built, factories to be built, condos to be built. They directly invest in the their own stock market and are heavily invested in state run companies. And while many books have been written about the migration of global manufacturing to China, they can mostly be summed up by this: Large western companies, trying to avoid higher labor costs and unnavigable labor laws, decided to leave. The Chinese government, playing the long game, was more than willing to accept the gift, even if they never would be able to effectively manage it. This migration then confirmed Mao's observation, although not in the way he intended. The West has now joined China as paper tigers.

One obvious question is where the wealth went. China has the second largest economy in the world yet it is not a rich country. The obvious answer is that the wealth created by its new manufacturing base has been spent. It was spent building vacant offices and condos. It was siphoned off by corrupt government officials. It was spent on the largest military buildup of any nation since World War II. While the plight of the working class Chinese has no doubt improved, that improvement is limited, and the massive loss of revenue to the United States and Europe cannot be understated. We still manufacture things, but not on the same scale as we did 20 years ago. Instead we finance manufacturing that takes place in other nations. Our wealth is quickly being reduced to paper rather than tangible goods and, since most Americans don't participate in the paper economy, most do not profit from it.

Even conservatives agree that, in this country, wealth has become concentrated in the hands of a very few. Bankers, financiers, intuitional investors, money managers, and venture capitalists make much, much more than small or even medium sized manufacturing operations. The days of Andrew Carnegie building a new steel mill so that he could increase his already enormous wealth are over. So too are the days where a man could go to work in that steel mill and earn enough money to support a family, buy a car, and enjoy a new TV. Creating paper does not create jobs for Americans. It creates jobs for Chinese and Mexicans, and it creates enormous wealth for the paper holder.

Since 2008, the American economy has been propped up by artificially low interest rates, "quantitative easing" (which means money printing), and blind faith in a global economy it no longer owns. There are solutions. There are things that can be done, but there is no political will to do them. We could reform the tax code, but most people don't want to see the rich get richer without also seeing a direct benefit. We could reform our labor and employment laws to restore some balance to the employment relationship, but the labor unions, government sector employees, and self-proclaimed champions of the working-class would block it. We could reform our trade policies, to punish trading partners that devalue their currency, effectively taxing American imports. And, yes, we could tax the paper-makers at the same rate the rest of us pay.

America's greatness is not valued in dollars, but rather in the values of its people. America is great because of the fundamental principles upon which is was founded - limited, Constitutional government, individual liberty, and a basic respect for the dignity of all humanity. Even though we have managed to stand by and allow those principles to erode as of late, the trend is not irreversible. There is still time to shred the paper tigers and breathe new life into that old, ferocious animal that used to be our economy. Until then, however, we will continue to be at the mercy of every whim conjured by a foreign government. I, for one, find that unacceptable.

A Look At The Second Tier Republican Debate

Several readers have asked me what I thought about the candidates' performance in the second tier debate, which was held earlier the same day. The truth is, these candidates are polling so badly that it is very unlikely at this point that one of them would get the nomination. What's so interesting however, is that in any other election year these candidates would be favorites to win. Bobby Jindal, Rick Perry, and George Pataki all served two terms as governors of their states. They all have impressive records in their respective states, and they all have fairly significant organizational support behind their campaigns. Rick Santorum nearly took the nomination from Mitt Romney in 2012, winning 11 states and earning 4 million votes. To think of him now as an "also ran" is probably premature. Lindsey Graham has been a fixture in Washington for decades. One would think that based on his long record, he would be considered a more serious candidate. Finally there is Carly Fiorina. Ms. Fiorina has a short and poor record in politics. Her only effort was a race against Dianne Feinstein in California, which resulted in a landslide loss. As discussed more fully below, however, she is a very impressive candidate.

One candidate with no chance is former Virginia Governor Jim Gilmore. He has already been cut from the next Republican debate.

Winners

In the winners corner were Bobby Jindal and Carly Fiorina, both of whom should be considered strong Vice Presidential picks should this race be decided before the Republican Convention. Fiorina in particular stood out as someone with the ability to clearly articulate conservative principles. She was firm without sounding shrill. While comparisons to Margret Thatcher are premature, they may not be for long. She has that rare combination of tone, message, and wit needed for a Republican woman to stand up to the inevitable media assault on her as a person. 

Fiorina's biggest drawback is her record, or lack thereof. It goes without saying that one unsuccessful Senate run does not a politician make. However, this is an odd election cycle. Voters are rejecting insiders and career politicians in favor of the likes of Donald Trump. It would not be a stretch to imagine Fiorina vaulting to the top and then helping one of the career politicians keep his hold on the base during the general election. It also doesn't hurt that she's a woman.

Bobby Jindal was on the short list for VP in both 2008 and 2012. His record in Louisiana is impressive, although his poll numbers have dropped over the last two years. He was reelected in a landslide in 2011, but his failure to pass his tax reform plan and the partisan battle that took place over that proposal took its toll on him politically. Still, he is articulate, conservative and has a compelling personal story. He spoke so clearly during the debate that I had to remind myself he wasn't the front runner. He demonstrated a command of the issues and the ability to articulate a conservative vision.

Losers

Rick Perry and Lindsey Graham clearly lost the debate. Rick Perry has been a real disappointment as a presidential candidate. Perry has an exceptional record as governor. Texas is a great state and leads the nation in a number of economic categories. Perry has had a lot to do with that. In an informal setting, Perry seems articulate and confident. He moves gracefully from voter to voter sharing his vision for a conservative America. He seems like a regular guy who just wants to do the right thing for the country. Unfortunately, when he gets on a stage, Perry can't find a complete sentence with two hands and a flashlight. Same holds true for any formal interviews. You would think that, after ten years as governor, after being the president of the governor's association and after being a professional politician for most of his adult life, he would be able to speak clearly. But, he got on that stage and just like his aborted run in 2012, he fell completely flat. He looked like a golfer trying to find his swing in the middle of a bad round. When addressing some questions he looked like a deer in the headlights. On others he flailed his arms wildly trying to make his point. On substance he also appeared lost. Some of his answers made no sense at all. He's like the kid who everyone knows is a genius, but just "doesn't test well." It is unfortunate, but I think this ends his political career.

Graham just looked like a ghost, repeating over and over that he wants to take the fight to ISIS, "whatever it takes." As I discussed in my last post, "whatever it takes" is poor policy. Graham is unlikely to find a majority of Americans who will agree with his proposal to re-deploy a massive military force in the middle east to defeat ISIS. To be sure, that day may come, but a campaign focused exclusively on war is not going to be a winner. My guess is that he is not really serious about running for President and instead is looking for a position in the cabinet should the Republicans win.

Neutral

The rest of the field was fairly consistent. Rick Santorum and George Pataki are both experienced campaigners and polished speakers. Santorum has a gift for articulating a Reaganesque blue-color conservative vision for America. His best issue is his passion for the restoration of American manufacturing, which is probably the single most important domestic issue facing this nation. Sadly, Santorum is the only one talking about it. His plan for revitalizing American manufacturing is sound and based on conservative principles. It is an attractive message that will appeal to conservative Democrats and may earn some swing votes in the general election. While he hasn't polled well so far, my money is on Santorum finishing in the top five.

George Pataki has always been an enigma to me. On one hand, you cannot question his competence. He did a fine job in New York, which is a solid blue state. He was a champion of conservative principles but, due in large part to the make up of the legislature, he was forced to compromise one too many times for most of the Republican base. He also didn't do much except help guide the state through 9/11. If he wants to move up in the polls, he will have to do a better job of explaining how his record would translate into a conservative vision for America.

Winners and Losers of the Republican Debate

Last week's Republican debate was the most viewed primary debate in history. More than 24 million Americans tuned in to watch 10 men and three journalists spar over their records and the issues. Earlier in the evening another 7 candidates in the second tier got their chance in front of 5 million viewers. As most of you know, I try to keep the content of this blog unique. I'm not doing this to simply regurgitate the analysis of professional pundits and, in the case of these debates, there is plenty of analysis out there. Most of it is regurgitation - literally and figuratively. Here are my thoughts on the winners and losers.

Fox News - Winner

With a combined 29 million viewers between 5pm and 11pm, Fox News was obviously a winner. There is no question that this was a huge media grab for the network. The styling was gameshow slick, the stage was bright and colorful, and the hosts made Bob Barker look like a boring news anchor. In short, the showmanship was superb, if you believe politics is entertainment.

Fox News - Loser

But, Fox News may have also finally jumped the shark. Yes, the ratings were high. Yes, there was substance to the debate and some of the questions were good. But 24 million viewers did not tune in to watch Megyn Kelly. In fact, the American people tuned in to watch the next President emerge from the pack - whoever that may be. Fox News would do well to remember that drawing a huge crowd is only one part of success. You can fall flat too. If you appear too slick, or too partisan or too agenda driven, everyone sees it and you've lost more than you ever could have gained from a single ratings bonanza. 

I have been a loyal Fox viewer from the beginning. I've appreciated their success in restoring some balance to the media. But after watching that debate, I really question the future of the network and really all news media in general. The repeated questions about abortion - as if that were the only issue in America - the gotcha questions lobbed at Trump, and the general focus on everything except the actual issues really showed a lack of seriousness. 

We already knew that everyone on that stage was opposed to the Iran deal. We already knew that everyone on that stage was pro-life. We already knew that everyone on that stage thinks Obama has done a terrible job. Tell us something we don't know. Having failed to do that, and having turned American politics into something just short of a scene from Hunger Games or Running Man, Fox News failed the American people. My guess is most people tuning in for the first time may also have tuned in for the last time. Nothing truly newsworthy came out of the event and the network spent three hours afterwards analyzing a handful of 30 second snippets from the candidates.

Trump - Winner

Trump obviously survived his first debate. In a twisted way, he was lucky that Fox focused on his personal statements rather than pressing him on policy. My guess is Trump probably had no idea  who General Sulemani is, what army he leads or why it was bad that he went to Russia. Those who believe that Trump is qualified to be President because he hates politicians and has been reasonably successful in business are wrong. 

Donald Trump is not a self made man. He inherited $300 million from his father. He then used that to become a billionaire. Good for him. But the idea that he scraped his way to success through cunning and the "Art of the Deal" is just part of the Trump myth, which is carefully maintained to keep the Trump brand valuable. He has not demonstrated any command of any issue. Instead he channels the rage of the American people and uses that as leverage to remain relevant. 

Americans, and I am one of them, are absolutely finished with both parties. The establishments of both parties are made up of self-serving liars. They line their own pockets with our money and almost none of them is serious about solving any problems beyond their own. They take us for fools and continue to interfere with our daily lives to a degree usually only achieved by authoritarian regimes. Americans are fed up and Donald Trump is that voice. But rage is not a strategy and "to Hell with all of them" is not a policy. Trump is a showman and entertainer. He has excelled in this media-driven, gameshow environment. Eventually, however, Americans will settle down and select someone who has both the anger and the skill necessary to be effective. Trump just isn't that guy.

Rand Paul - Loser

Rand Paul represents the Libertarian wing of the party. The libertarian wing is extremely important to the party, but is constantly marginalized by the establishment. Rand Paul was overlooked in the debate, and when given the chance to interject, he failed to make a compelling case for himself. To be fair, it is easy to be shouted down by Chris Christie. Christie is a professional loud mouth and was determined to show Paul, who is usually measured, that he can shout down anyone with emotional anecdotes. Paul's strength is his measured demeanor and his intellect. In the future he needs to rely on that if he wants to succeed.

Chris Christie - Loser

Christie shouldn't even be in the race. Bridge-gate disqualified him, but the moderates in the party never gave up. Christie demonstrated both his greatest strength and his greatest weakness in that exchange with Rand Paul. Christie is bombastic. He is rotund. He likes to throw his weight around. He is also just plain wrong on many of the issues, and he is not a conservative. 

Christie favors broad gun-control, has raised taxes and fees in New Jersey, and was partly responsible for Mitt Romney losing the election after he endorsed President Obama with a hug. Christie told us during the debate that he favors unlimited surveillance to "keep Americans safe." His "whatever it takes" argument is not new. In fact, Lindsey Graham said exactly the same thing just a few hours before in the second tier debate. The problem is, "whatever it takes" is bad policy and ultimately these candidates can't possibly believe in it.

Does "whatever it takes" include lobbing nukes at ISIS? Does it involve declaring martial law? Does it include stop and frisk of all Americans any time, anywhere? Does it include reading every email communication? Does it include suspension of habeas corpus? 

Of course it doesn't. Anyone making a "whatever it takes" promise is foolish and ultimately lacks the intellectual discipline to be President. Either that or they are lying about their true position. Combine that with Christie's constantly raised voice and you get an unelectable candidate. Imagine that exchange with Hillary Clinton. He'd lose a huge chunk of the vote because most people don't like yelling, no matter who is doing it. 

Marco Rubio - Winner

Rubio is young, but he is by far the most articulate and well studied candidate on the stage. He has a command of the issues and has a gift for delivering his message. It doesn't hurt that he's handsome. The question for Rubio has been whether he has the gravitas to stand on that stage with older, more experienced candidates. I think he answered that question with a resounding "yes." He is conservative, ran against the establishment in Florida and embarrassed them in the process. He still has enough establishment support, however, to survive the nomination process, and he has sound policies for the future. In the short time that he had, he acquitted himself very well.

Jeb Bush - Winner

Jeb Bush did not distinguish himself. His squishy record on conservative issues should have been the target of every candidate on that stage. His brother's failure in his last two years as President, when he suddenly became a big government Republican, and his father's failed presidency should have been issue one for the rest of the field. The chances are exceptionally high that Jeb Bush will govern the same way his brother and father did. Now if you're the establishment in the Republican party, you like that - a lot. The Bushes were responsible for the largest deficit increases in the history of the country until Obama. Bill Clinton spent less. The Bushes play ball with Congress, handing out goodies and pork to get their big government agendas passed. They reach across the aisle to the likes of Ted Kennedy in an effort to "legacy build." They pass terrible bi-partisan legislation and give massive bailouts to their buddies. 

Jeb Bush is the establishment favorite. The party power brokers just hope he stays under the radar and avoids being obliterated by the conservatives in the race long enough to get to the Convention. Any debate that Bush walks away from is a good debate for him. In that sense, with all the attention focused on Trump, Bush got a free pass. That makes him a winner.

The Field - Neutral

The rest of the field survived. They did not distinguish themselves, but they didn't entirely self-destruct either. Ted Cruz and Mike Huckabee are solid conservatives and both are articulate. Neither, however, had a real opportunity to lay out his policies.

Ben Carson looked like a fish out of water because he is. He is great for the party, and he is a great addition to the debate. His answer on the race question and his closing argument were brilliant, reflecting a true genius. He probably helped himself a little with his performance, but he will continue to be eclipsed by the professional politicians and Donald Trump.

Scott Walker will not be President. He managed to breathe new death into the pro-life movement with his answer to Megyn Kelly's 187th question on abortion. When asked whether he would force a mother to die rather than allow her to have an abortion, he had no answer. Instead be began prattling on about the wonders of modern medicine as if that circumstance would be exceptionally rare. Rare or not, his position on the issue is Medieval. Either he failed to articulate his position clearly, or he really doesn't favor any exceptions to a total ban on abortion. If he really does not believe in a "life of the mother" exception, then he is done. Women are not going to vote for a man who would rather them die than have an abortion. It's really that simple.

Finally, there is John Kasich. Kasich is a conservative and has a long record as a Congressman and Governor. There is no question that he is competent and he would make an excellent President. Unfortunately, he didn't really do anything to distinguish himself. But that's not really his style. Kasich is a policy guy. He really knows the issues and wants to talk about the issues. Unfortunately, with 9 other men on that glitzy stage, he just looked like the working-class guy he is. He can't stand out until the field narrows, but I suspect he will continue to rise in the polls.