As with most people, my introduction to libertarian thought began with Ayn Rand. But unlike many people it didn’t end there either. Rand’s books have always been semi-popular; ranking in the lower triple digits on Amazon and constantly in print. But with the rise of the Tea Party Movement, her books are back in center stage, pushed by the times and by conservative book of the month clubs, that flog Beck, Levitt, Kristol, Palin ect. to the heights of the best-seller lists.

At the time of publication, her work stood athwart global currents that all seemed to be pushing relentlessly towards a centrally controlled economic Leviathan as an ‘ideal’ way to organize society. Because of her vantage point as an economically-advanced Jew living in Ukraine during the rise of Soviet power, her books are filled with a moral indignity that served well to expose the inhumanity of the socialist model and popularize her idealized moral-captain of Industry.

However, Rand had two fatal flaws, which in her lifetime limited her appeal into the political mainstream. One was her personality, which has been noted far and wide for its ability to peel the paint off any room she entered. It drove away admirers and gave critics an easy target to screed against. The other was that she was a dyed in the wool atheist. And this made her untenable to much of the GOP movement, at the time centered on Barry Goldwater, with whom she shared an ardent anti-Communism sentiment.

And thus, Libertarianism was regulated to the ‘other parties’. It became a popular fringe movement that associated, and became associated with, other fringe movements. Like the neo-leftist New Party AND the American National Socialist Workers Party in Delaware! But as allies are apt to do, the shortcomings were overlooked and the movement keeps moving, but never growing.

Meanwhile, in the Ivory Towers libertarian thought took on a new respectability with Hayek winning the Nobel in 1973 and Milton Freedman shortly after that. Other notable academics included the great Ludwig van Mises. Together they started the study of Austrian Economics, funded the Reason Foundation, and opened the CATO Institute.

But alas, two other Academics, Murry Rothbard and Lew Rockwell, saw an opening in 1992, and sought to establish a viable 3^rd party they only way they saw possible, by combining all the ‘fringe groups’ under one banner. And who was the standard bearer of that banner? Pat Buchannan.

And here is my problem with Libertarianism. As an academic, moral, and political philosophy it is very convincing and powerful. I would even argue it is ‘true’. But as a political movement ideology it has toxified itself by association. Far too often libertarian arguments are employed to defend racists and unjust policies. Often times, the speaker isn’t even aware of the full implications what they are saying. Furthermore, Rand, Hayek, Mises, and Friedman all recognized that the government does exist, and should be dealt with as such. To pretend like every government action is a stepping stone to absolute state control is asinine. Ever since Rome, the government has built the roads. Three of the biggest insurers in America are Medicare, Medicaid and the VA. Then to argue that the US Healthcare SQ is great, but that the government should not play a role is to willfully deny reality.

After reading my Rand, following up on Hayek, and understanding what it means to be ‘conceived in liberty’, to me, Libertarianism says that the IDEAL world is one where government is no longer necessary. But we don’t live in that world. And as such, the better libertarian thinkers, like David Freedman, have been proposing libertarian minded policy; like ending the ‘War on Drugs’, reforming our penal system, or proposing Free Trade in both goods and labor to update NAFTA and US immigration. Yet, the people reading Ayn Rand today, who shout Socialism! at the top of their lungs, wouldn’t even consider a single one of those Freedman suggestions. ‘War on Drugs’ is tough on crime, prisoners OUGHT to be raped (it’s a feature not a bug), and why do we need more brown people?

To put it in a phrase: everyone favors liberty until their privilege is in jeopardy, and then no one does.

After the euphoria of the 2008 elections, Obama’s first year in office was going to feel like the end of a sugar-high no matter what he did or how well it was done. In the era of 20min news cycles a year can seem like an eternity, but in reality it’s a very short-time. Even so, after 12 months of hard slogging Obama’s promise seems quite dulled by political reality. All the while certain segments of American Society either believe the end of America is imminent, or are willing its end to be, if only to hang it on Obama’s (and the liburls) head.

The feeling now might be that Obama is down in the polls and the Dems are heading for a gutting in November. Part of this is simply the magnitude of problems faced upon entering office. But can anyone name one thing that Obama wanted that he didn’t get? (Maybe the public option, but he never fully committed to the idea publicly). A new Supreme Court Justice, a stimulus, and eventually (after 30 years and many months) a landmark healthcare reform; it hasn’t been easy, or neat, or clean, but ‘he will has been done’.

Though far from perfect and incomplete; 2009 seems to be a hugely successful year.

The Domestic Economy

The TARP, the auto-bailout, ‘stress-tests’, and the stimulus were all measures taken to stabilize an economy that was still mostly in a panicked freefall when Obama first entered office last January. That panic has now subsided, the market has rebounded.

This may seem like a small thing but it’s not; namely, because it ‘cost’ almost nothing. The TARP specifically has come back almost in full, with the exception of the money that went towards the Auto-bailout. These measures, combined with the stress test, did one thing: suture the large banks structural wounds.

It was in fact the Treasury and the Fed, under the TAF, that extended the real lifeline to unload trillions of dollars worth of mortgages, aka the transfusion. In a rough and ready sense, the Fed became the new Fannie and Freddie, buying up all of the mortgage securities off the bank’s balance sheets. This allowed them to fix their capital positions, but we have no idea what these MBS’s are worth, or what was paid for them, nor to whom. This is quite worrying, but the Fed’s intransience has been a problem for nearly 100 years now, and this is nothing new. (Though, in light of the unending revelations regarding AIG use of bailout money to pay off counter-parties at 100 cents on the dollar, this problem could come under a bright light very soon, see below.)

Yet, any fears that we ‘spent’ trillions of dollar is simplistic, we lent trillions of dollars, mostly to home owing American Residents. Worst case the Fed *could* hold the mortgages until maturity, and vast majority will pay-out.

Because of its balance sheet expansion, and its Zero-Interest-Rate-Policy (ZIRP) the Fed has also devalued the dollar relative to the rest of the world (save China). This has let housing get a floor under itself, and allowed for the first expansion of American Exports in nearly 20years. Some say that Fed actions have only served to re-inflate a real estate bubble that they largely created themselves. Perhaps true, but the immediate worry is the Fed’s ability to deal with yet ANOTHER crisis, if it doesn’t unload at least some of the assets it has taken onto its balance sheet, and interest rates still at zero, this is an acute worry.

In other words, the fire is out, but smoke and water damage remain and there is no more water in the tower, to fight another fire. This has not been dealt with at all. Many people, from Barry Ritholtz to the Cunning Realist have been livid with the Obama administration’s lack of cleanup in the financial sector. These are the ‘independents’ whom supported Obama last year, but where likely Regan-iets 20 years ago. This to me, is the issue where most of the independent support has left the great Hope-n-Changer, to disillusionment.

Healthcare

The reason why it has not been dealt with was twofold, first the economy is/was still fragile, and second health-reform was put upfront in year one, where it was deemed politically safer to make concessions to get a bill completed.

Healthcare was placed first because it, like the banks, was declared ‘too-big-to-fail’. It was a Dem goal since the 1970’s and was the main unifying feature of the Democratic Primary. It was the one thing all Democrats wanted. But as a result of healthcare being a ‘must-pass’ priority you also allow yourself to be extorted, and that has been the biggest failing of this whole process. Repeatedly, things have been removed (Medicare expansion, public option) or added (no abortion funding for anyone ever from any plan that receives any government money) that make the legislation better for ONE person, regardless of what the other supporters think. Thus, the least committed are the most influential.

Once the tea-party protests in August hit fevered pitch, it became impossible for any member of the GOP to vote in favor or help in anyway. Cutting themselves out has meant that NO GOP proposals entered the legislation. Tort reform, interstate competition, even expanding HAS’s were never mentioned. The GOP believes that this stance will pay dividends in the Congressional races later in 2010, perhaps it will; but it still seems like winning a battle but losing the war.

Healthcare reform will pass and entitlements have this funny habit gaining popularity, see Social Security and Medicare. Furthermore, the crux of the GOP argument has centered on the expense and the deficit. By all accounts, including the CBO, the bill reduces the deficit, and starts to ‘bend-the-cost-curve’. If EITHER happens, the Democratic Party can claim victory, and cast the GOP as a do-nothing party, that would allow us to slowly bleed to death, rather than take corrective action. (Framed as a policy doctor, this will be a damaging line of attack)

The GOP can only win the war, hold POTUS and a majority, if everything fails. But since this was a must win/will win for Democrats this isn’t going to happen. The bill will pass, Obama will sign it, and short of catastrophe will reduce the deficit and will reduce costs. This will be certifiable. The more you yell socialism the less impact it will have, especially in light of expanded coverage/reduced cost reality.

The 2010 Elections

Lastly, Obama decision to move healthcare first, and let financial reform wait until 2010 has a brilliant political strategy implication; true the economy was weak this past year, and yes healthcare reform was more politically fraught, but financial reform has a wonderful populist feel to it.

Healthcare had to be passed by Congress; it’s simply the name of the game, and rules we live by. But Obama runs the executive branch and all its departments. Many things can be changed by executive order and fiate through the SEC, the FTC, Treasury, FDIC, ect. Congress on the other hand gets to play the role of vender of constituent anger. A few round of banker-bashing and popular sentiment is apt to switch sides rather quickly. If the GOP joins in the bashing fine, but the Dems still control congress and will be running the show. If they don’t, and play defenders of the rich (or defenders of capitalism, or fighters of socialism) it would square nicely with a narrative of protecting corp interest, along with their obstinacy on healthcare reform.

In other words, the GOP will have to be onboard with the Dem financial reform agenda or risk a rift within the party between the Tea Party and the GOP faithful. (Which they may face anyway if they go along with the Democrats) The point is this: financial reform is Uber-popular and populist. By pushing it to 2010, Obama has given the Dem a rallying call to unite behind after the monumental effort it took for healthcare. But this particular call helps to not only gin-up the Dem base, but it places the GOP on tenuous footing. Go along and lose the Tea Party Base, or fight and most likely lose independents.

It’s a beautiful divide and conquer strategy.

Of course one should still account for the unknowns. Namely, that Obama has Ben up for reappointment to the Fed, and Tim Geithner was his first choice to head up Treasury. It the hearings start to tarnish those two and their major roles in putting out the fire, this could al backfire on the Dems and the Administration. Only time will tell.

Check, but not Mate

As the out party the GOP has made quite a stir in the media, and whipped their base into activity on par with what Obama was able to achieve in his campaign run. Yet, policy wise they have stopped, improved, and hindered nothing. Furthermore, by stoking the base as they have, base elements have come to personify the party in the public imagination. Old and white are the adjectives most likely to be used to describe the GOP. In 1980, that won the election, in 2009 your John McCain.

Based to pure political tectonics, the GOP will pickup seats in 2010. It will be a limited victory. But look to 2012 and the picture darkens again. The one true leader of the GOP, is giving the Keynote at the 1^st ever Tea Party Convention, which is looking more-and-more 3^rd party, everyday. Then you have Mittens, Huck, and Tim each of whom is untenable to at least one major GOP constituency. Suddenly, in a flash of neon colors it says 1992 all over again.