Gary North's REALITY CHECK
Issue 394 November 9, 2004
THE WELL-GROUNDED PANIC OF THE MEDIA
Andy Rooney said it best on "60 Minutes" (Nov. 7):
Television did a good job Tuesday night, I thought. I
know a lot of you believe that most people in the news
business are liberal. Let me tell you I know a lot of
them, and they were almost evenly divided this time.
Half of them liked Sen. Kerry; the other half hated
President Bush. (http://snipurl.com/ah98)
He is old enough not to care what anyone thinks. He is too
popular for CBS to fire him. So, he went public with the
obvious.
Members of the American Establishment media are now panic-
stricken because of "values voters," which to them means "far
right evangelical Protestant" voters. They simply cannot believe
that Catholics in Peoria, let alone Massachusetts, don't want the
civil government to define homosexual unions as marriage.
The success of all eleven state propositions to define
marriage as between a man and a woman was, in the eyes of the TV
pundits, the mark of the evangelical beast. It does not seem to
occur to them that most voters are married heterosexuals:
Latinos, blacks, Catholics, and Protestants. It does not occur
to them that these voters don't like it when a minority interest
group of maybe 1% of the voters uses the courts to gain public
acceptance against the beliefs of the vast majority of voters.
The media's spokesmen are aghast.
The extent to which the media are outside the loop never
ceases to amaze me. They are completely out of touch. It is not
just that they are self-consciously out of touch. They are
persuaded that most Americans share their core values. They are
unable to understand the reasons behind the digital handwriting
on the wall: "You have been weighed in the balance and found
wanting." The free market keeps taking subscribers away from the
newspapers and viewers away from the Big Three networks.
Why are they so blind? Because they are self-screened.
Like the department of English at a local university, their tight
little community is the product of decades of monopoly funding
and ideological prejudice. Here is an example. Howard Phillips,
who heads up the Constitution Party, used to be co-anchor of a
political debate show with the "Crossfire" format. On one
occasion, he launched into a critique of homosexuality. He was
fired at the end of the show. The producer told him, "Take a
look at who is on the other side of the cameras." The producer
knew who buttered his bread.
Voters in the voting booths sent a message to people on both
sides of the cameras. I call it Anita Bryant's revenge. Anita
is no longer selling Florida orange juice for the stand she took,
but people in voting booths don't face these sorts of career
pressures. In effect, the voters were sticking it to the Supreme
Court of Massachusetts. And, while they were at it, they stuck
it to the junior Senator from Massachusetts. If the courts now
reverse these votes, the media can get ready for a Constitutional
Amendment.
The Presidential election was about the U.S. Supreme Court.
It always is. That's because a 5-to-4 majority of the unelected
Court is really the supreme legislature of the United States.
The Left has used the Supreme Court to extend its political
agenda ever since the 1950s. Voters know this. The Democrats
are now facing a re-structuring of the Court, and the main
political tool they possess is their ability to filibuster the
Senate. This is risky. If they begin to be perceived by voters
as being minority party obstructionists, they will face the Tom
Daschle effect.
Kerry was a mush-mouth. He really is a flip-flopper. This
is at the core of his being. "Newsweek" had assigned a reporter
to each of the national campaign officers. The two could not say
anything until after the election. The reporter assigned to
Kerry's staff has now said that it was utter chaos. Kerry kept
reversing himself. At one point, his staff took away his cell
phone.
Kerry could not publicly oppose the legalization of
homosexual marriage without alienating the media. The media are
at the heart of the Democrats' power base. So, he had to avoid
the issue. Bush did not face this constraint. The media hate
him, so he can ignore them. This drives them into a fury.
The Federal Communications Commission can no longer
guarantee a monopoly to the networks. New technologies are
overcoming the value, both economic and political, of the
networks' Federal licensure. Nielsen poll by Nielsen poll, the
TV networks are losing market share. The power of the Democratic
Party is dribbling away. The Democrats bet on the wrong
communications pony, which is fading in the stretch.
BRING US TOGETHER!
Have you noticed how the main theme of the media is "bring
us together"? This comes from the people who did their best to
tear us apart. John Edwards' stump speech was about the two
Americas: class warfare. He received no challenge from the
networks.
"Bring us together" means "vote the Democrats' agenda." It
means "don't take advantage of your majority." It means "lay off
until we get the votes to stick it to you."
Well, just for the record, the two parties have been voting
together since 1949 to stick it to the taxpayers. Both parties
have invoked the idea of the State as the great healer, the
lender of last resort, the safety net. The total tax burden is
in the range of 40% of income -- local, state, and federal. The
State's regulations are endless. The bureaucracies are permanent
and growing. Roll back the system? Reagan talked the talk, but
he vetoed few spending bills. Bush has vetoed none.
The Republicans want to cut taxes, but are unconcerned by
the rising deficit. They spend with abandon. The Democrats cry
crocodile tears about the huge deficit, but they want to expand
spending by the federal government. They want to tax the rich.
No national politician is calling for lower taxes to be matched
by lower spending. No national politician is willing to tell the
truth about Medicare.
"Bring us together" means "spend more money on the
Democrats' special interest groups and raise taxes on Republican
interest groups." This is unlikely to happen. Mr. Bush owes
nothing to the media. The media understand this, and shudder.
CONFLICTING VALUES AND A GUN IN MY BELLY
The debate was about values: conflicting values. Bottom
line: it was a really debate over the high moral ground of
political wealth redistribution. Each party wants to stick a gun
in my belly.
On the Sunday morning broadcast of "The Today Show,"
interviewer Campbell Brown -- who, unlike Katie Couric, is
beautiful, self-controlled, and does not interrupt people --
asked two spokesmen about the values vote.
William "jackpot" Bennett discounted it. It doesn't mean
"right wing evangelicals," he assured her.
Then she asked Jesse Jackson what the Democrats can do about
losing the values vote. Jesse got right to the point: values are
about feeding the poor. She tried again: What can the Democrats
do to recover? Jesse droned on: help the helpless. She tried a
third time. Same response. She gave up.
Jesse made it clear: Democratic values are about sticking a
gun into a successful person's belly, taking his wallet, removing
an unstated percentage of the money, and handing the wallet back.
"See you at the next election."
I had heard another Democrat on TV make the same point
immediately after the election. "We are for values: the value of
helping the poor." In reality, this is the value of filling
immense government bureaucracies with college-educated, mostly
white, Civil-Service-protected, union-protected employees, who
then extract money from taxpayers, absorbing at least half for
administrative costs, and handing out most of the rest to middle-
class voters. This procedure is whitewashed -- and I do mean
WHITEwashed -- in the name of helping the poor. The middle
classes feel good about their compassion, not to mention $270
billion a year to send their kids to college. Not many ghetto
kids are in college.
The political problem that the Democrats face is that the
official beneficiaries -- welfare State dependents -- tend not to
vote. They also tend not to be able to read. The system's
actual beneficiaries -- liberal college students -- also do not
tend to vote. But they do enjoy free Bruce Springsteen concerts.
The vocal representatives of the Democrats, whose interests
alienate married, income-earning, tax-burdened voters, are a
liability. These spokesmen represent non-voters. The goal of
politics is to represent voters.
The Democrats are now betting the farm on Hispanic voters.
They will lose this bet. Hispanics are either illegal aliens who
do not vote or else they are replacing African-Americans in the
work force and home ownership. They are also pro-family, and so
do not resonate to the social issues selected by the Democrats'
spokesmen. They tend to move into the middle classes after two
generations, and so will probably vote Republican in greater
numbers. At some point, they are going to figure out that too
large a percentage of their wages is being extracted to support a
bunch of Anglo retirees. They will begin to ally themselves with
younger Anglo workers who have figured out the same thing. When
this happens, political defenders of the real welfare State --
the Social Security/Medicare boondoggle -- will come under attack
in the voting booth. That will hurt the Democrats more than it
will hurt the Republicans.
WHAT THE NUMBERS REALLY MEAN
The vote for the President was split 51%-48%. The Senate is
split 55-44-1. The House had a 4-seat increase for the
Republicans: 231-200-1, or 53%-47%.
Because of "winner take all" in politics, this puts
considerable power into the hands of Republicans. In the free
market, a 51-48 difference would mean that two companies are just
about even, and each has good prospects. Also, members of each
group of consumers get what they want. Neither consumer group is
hurt, and the losing company is doing well. But because of
winner take all, political losers feel as though they have been
cast into outer darkness.
Politics is a zero-sum game: winners profit at the expense
of losers. The free market is not a zero-sum game: an increase
in one consumer's wealth does not come at the expense of another
consumer's wealth, with the lone exception of futures contracts.
Anyone who knows about zero-sum games knows that the winners
are the bookies and the house. So, who are the political
winners? The promoters. Who are the losers? The taxpayers.
But because the game of politics looks exciting, and it appears
to the players to be winner take all, the illusion of having won
prevails among the victorious 51%, and the reality of losing is
blamed on the winners by the most recent losers. Meanwhile, the
promoters deposit most of the gate's receipts.
Have you ever wondered why tax day is April 15, but election
day is in early November? It's because voters are allowed 7
months to forget after filing their tax forms. That delay proves
sufficient. They also have five months for euphoria of winning
to wear off and reality intrude.
In Parliamentary systems, small parties get members elected.
This creates the need for party alliances in countries where
there is a wide range of opinion. The nation of Israel has never
produced a clear majority winner. Coalitions govern. This pulls
voting in Parliament toward the middle.
In the American system, a two-party system reigns. But,
unlike Parliamentary systems, the American system has relatively
weak control over Congress's voting, and this weakness increases
as incumbents in the House of Representatives gain a lock on
their seats through gerrymandering at the state level. So, a
national party's platform in a Presidential election year is an
exercise in futility, and is rarely mentioned. It's for show,
not action, and these days, not even for show.
The muddled political middle reigns supreme, officially.
What in fact reigns supreme is the economic self-interest of the
promoters. Thus it has been from the beginning. If you doubt
me, read Philip Burch's 3-volume study, "Elites in American
History." It begins with George Washington and ends with Jimmy
Carter. It follows the money. It names names. It is rarely
mentioned in scholarly circles.
The game will go on. It amuses the victims and enriches the
promoters.
--- Advertisement ---
Bush Presidency Act Two: The Depression
He Won... But 3 Signs Show He Can't Save the Economy!
Almost everything you buy could double in price... overnight.
$4 for a gallon of gas... $5 for a gallon of milk!
Imagine the Dow at 6,000, the Nasdaq under 1,000. Individual stocks
could do worse! In some areas, home values could drop 50%. Thousands
of investors could default on their home loans.
Buy These 7 Investments Before Jan. 21, 2005 - Or kiss your money
goodbye... Forever
http://www.agora-inc.com/reports/DRI/WDRIEB14
-----------------------
IT'S THE ECONOMY, STUPID
This phrase, attributed to Clinton's operative James
Carville in 1992, is true most of the time. A war that goes sour
can lose the Presidential election for the party of the
Presidential incumbent, as it did for Harry Truman's party in
1962 and Gerald Ford in 1976. But, most of the time, American
voters vote their pocketbooks. This means that a few voters at
the margin switch to the party of the outsiders, on the
assumption that a change will help the economy. The swings of
the business cycle have more effect on politics than any other
factor.
The voters assume that the President has a major effect on
the economy. This is an illusion. The decisions of central
bankers have far more effect on the economy than a President
does. These days, the decisions of Japanese and Chinese central
bankers have more effect on interest rates than Alan Greenspan
does. But the complexity of cause and effect in the modern
economy precludes this information from getting to the voters.
In any case, what could they do about it? Central bankers are
not up for election.
Kerry kept saying he would take steps to reduce the
outsourcing of jobs. He never said what he would do, other than
to reduce tax breaks for corporations hiring foreign workers. He
never explained how the existing tax code promotes a significant
movement of jobs off shore.
If a company wants to make a profit by reducing labor costs,
and another company off shore can supply this labor cheaper than
it can be supplied in America, the American company can simply
buy the finished product of the foreign company and retail it
here. It can buy the product abroad and put its own label on the
box. This has nothing to do with the tax code. This is free
trade in action. Other than imposing tariffs or import quotas,
thereby reducing freedom of choice by consumers, what can any
government do to reduce outsourcing? Nothing. But Kerry was not
calling for tariffs or import quotas. Democrats at the highest
levels are officially free trade advocates. They can safely
ignore pro-tariff industrial trade unions, who are in the
Democrats' hip pocket.
In any case, it is American consumers who are behind
outsourcing, not American businesses. Consumers tell businesses,
"Sell it to us cheaper." Businesses must respond or die.
Consumers are saying, "I don't care where retailers buy it; just
sell it to us cheaper." Consumers are therefore saying, "I'd
rather buy from Wong than Jones." Businessmen follow orders.
No Presidential candidate is willing to say the following in
public: "Don't blame big business. Blame yourself every time you
buy an imported product just because it's cheaper, better, or
more convenient. It's your decision. It's not the government's
decision to tell you what to do." That's because politicians
believe that it really is government's job to tell consumers what
to do whenever there is significant political action committee
(PAC) money available for telling consumers what to do. But pro-
tariff special interest groups are growing weaker politically.
This will continue as the international division of labor
expands.
When the economy is expanding, as it was during Clinton's
years, the incumbent President will be re-elected. When the
economy is sputtering, as it was in 2000, the rival party's
candidate can be elected. The economy today is slowly moving
into expansion phase, so Bush was re-elected. The recovery is
the slowest on record, but interest rates are low because of
Asian central bank policies of buying U.S. Treasury debt, and
also because most American businesses have hesitated to borrow in
order to expand production.
ARE THE DEMOCRATS FINISHED?
The voters are clearly divided. They are closely divided.
The two main issues are the economy and the war. Both have to do
with rival values. Until voters feel pain from both of these
sources, the Republicans will maintain their edge. But it is
only an edge.
I don't think this pain can be deferred for another four
years. The federal deficit is huge. The trade deficit is even
more huge. Asian central banks will not fund both of these
deficits forever, which they are now doing. Interest rates are
today at historic lows. When Asian central banks cease funding
the twin deficits, interest rates will rise.
It looked as though Republicans were forever condemned to
minority status in the 1932-80 era. After Watergate, the
Congress went even more Democrat. But Carter's defeat and the
capture of the Senate by the Republicans in 1980 revealed the
underlying economic shift. Americans were getting richer, and
the rhetoric of the New Deal was losing support. This has
continued. Jesse Jackson and Al Sharpton keep the faith, but
they represent a constituency that does not vote. Meanwhile,
Clinton gutted federal funding of urban welfare.
The Republicans will continue to win elections until the
economy sags or the mess in Iraq escalates to the point where
voters demand a pull-out. Then the Democrats will have another
shot at the Presidency and maybe even the Senate. But the House
looks safe until after the 2010 census, which will enable
Democrats to gerrymander Republican districts at the state level
if they win the 2010 elections.
THE MORE THINGS CHANGE. . . .
Income taxes will not be raised under Bush. Social Security
and Medicare will extract ever-more money, but this has been the
will of the people. Oldsters vote. They are also the winners in
the "poor us" political sweepstakes. They, too, talk about
values. But they have a stronger argument than Jesse and Al do.
"We paid for our benefits." It's a self-serving myth, of course.
The benefits received more than outweigh whatever funding today's
retirees paid into the system. This has always been true, from
the day that the first retiree, Ida Fuller, pulled $22,000 out of
Social Security based on $22 in payments. But, when it comes to
rhetoric, it's tough to argue against granny's political agents.
The Democrats defend values, which for them mean more
welfare, more taxes, more money to their core constituencies.
The Republicans also defend values, which for them mean more
welfare, lower income taxes and corporate taxes, more federal
debt, and more money to their core constituencies.
If the economy starts goring more oxen -- fatted calves,
really -- the Democrats will win. If the elections in Iraq don't
bring peace, and American troops are not allowed to come home,
the Democrats will win.
The size of the existing federal debt now guarantees that
there will be no major new welfare programs in the future. This
will undermine the Democrats' vision of moral victory: no more
fatted calves to sacrifice. Paying for the existing programs
will absorb most tax revenues, plus even more debt. The great
political debate will be over which party's subsidized
constituencies will be led to the slaughter through concealed
default. Inflation is the long-proven method for maximum
concealment.
When a constituency is bipartisan, and when its members vote
in large numbers, it will get the lion's share of the funding
until such time as the taxpayers finally scrap the politics of
wealth redistribution in the name of self-defense. This
constituency today is obvious: people over age 64. Jesse and Al
will have to live on the scraps that fall from the welfare
State's table. (Personally, Jesse and Al will continue to do
quite well. I mean their constituencies.)
I think we can safely conclude that over the next few years,
the twin deficits will continue, Social Security/Medicare will
continue, and the insurgency in Iraq will continue. What will
not continue is low interest rates.
Asia is now the economic arena of American politics. Most
voters are unaware of this fact. Asian central bankers and Iraqi
insurgents have more say about which way American politics will
go than the Democratic National Committee or the Republican
National Committee.
Voters may think that one or another political party can
reduce their pain, but they are misguided. Both political
parties are committed to extending the taxpayers' pain, either
directly (Democratic tax hikes) or indirectly (Republican
deficits).
CONCLUSION
One thing is certain: Andy Rooney's peers are doomed to
minority status. The Internet and cable TV are eroding their
market share. This will not change.
The IQ scores of the networks' viewers are indirectly
measured by the continuing popularity of "reality TV." This is
World Wrestling Entertainment for the middle class. That's the
available audience for Tom, Peter, and Dan. Every time I see a
reality show promo spot featuring some scantily clad woman eating
a handful of live maggots, I imagine a network anchorman doing
the same thing. It helps make my day.
-------------
-- Been to the Daily Reckoning Marketplace Yet? --
If not, you ought to see what you've been missing.
Want to read more from our regular contributors? This
is the place to find it.
We've collected some of the best financial advice and
commentary available anywhere and presented it to you
all in one place. Take a look:
http://www.dailyreckoning.com/marketplace.cfm
-------------
To subscribe to Reality Check go to:
http://www.dailyreckoning.com/sub/GetReality.cfm
-------------
If you enjoy Reality Check and would like to read more
of Gary's writing please visit his website:
http://www.freebooks.com
-------------
If you'd like to suggest Reality Check to a friend,
please forward this letter to them or point them to:
http://www.dailyreckoning.com/sub/GetReality.cfm
-------------
E-mail Address Change? Just go to Subscriber Services:
http://www.dailyreckoning.com/RC/services.cfm
and give us your new address.
*******
Please note: We sent this e-mail to:
<[EMAIL PROTECTED]>
because you or someone using your e-mail address subscribed to this service.
*******
To manage your e-mail subscription, use our web interface at:
http://www.agoramail.net/Home.cfm?List=RealityC
To cancel or for any other subscription issues, write us at:
Order Processing Center
Attn: Customer Service
P.O. Box 925
Frederick, MD 21705 USA
*******
Nothing in this e-mail should be considered personalized investment advice.
Although our employees may answer your general customer service questions,
they are not licensed under securities laws to address your particular
investment situation. No communication by our employees to you should be
deemed as personalized investment advice.
We expressly forbid our writers from having a financial interest in any
security recommended to our readers. All of our employees and agents must
wait 24 hours after on-line publication or 72 hours after the mailing of
printed-only publication prior to following an initial recommendation.
Any investments recommended in this letter should be made only after
consulting with your investment advisor and only after reviewing the
prospectus or financial statements of the company.
