Jay Reding.com

Sen. Arlen Specter of Pennsylvania is now officially becoming a Democrat. There isn’t much of a shock to this—Specter has always been an erstwhile Republican, and he would have lost in the Pennsylvania GOP primary to Pat Toomey. Specter’s argument that somehow the GOP has moved too far to the right for his liking is really just political cover—this is all about his own political self-preservation.

The problem for Specter is that there’s a good chance that he won’t win the Democratic primary. As NRO’s Jim Geraghty notes, why would the Democrats want a former Republican with a lifetime ACU rating in the 40s who opposes the union-backed “Employee Free Choice Act” and has ties with President Bush? Pennsylvania Democrats don’t need Arlen Specter nearly as much as Arlen Specter needs Pennsylvania Democrats.

The GOP should have gotten rid of Specter in 2004 when they had the chance. Specter’s claim that the GOP has moved too far to the right is based largely on his vote on the stimulus bill—which is opposed by far more than just Republicans. The GOP needs to remake its image, and jettisoning the old guard is probably better in the long run. What is needed now is a party that is more self-confident in their ideology and in their policies. The GOP right now is at war with “moderates” who barely identify with Republican principles and hard-liners who have failed to identify with the American people. That’s not a good position for a party to be in, especially not with a Democratic Congress and a President who could be caught on national TV greedily consuming a mewling infant and still get a 60% approval rating.

The GOP needs to get its act together and fast. Doing so without excess baggage is probably better over the long term, even if it is a huge problem over the short term. Specter was not the sort of person who could motivate the GOP base or the American people. His party switch hurts the Republicans in the short term, to be sure. But it is quite possible than even this Hail Mary play won’t be enough for Specter to keep his political career afloat.

Rep. Keith Ellison (D-MN) has been arrested in Washington D.C. for disorderly conduct after a protest in front of the Sudanese Embassy. Rep. Ellison was protesting the Sudanese government’s decision to expel aid groups from the Darfur region. Rep. Ellison was arrested along with 4 other members of Congress and other activists.

While this protest was for a noble cause—the Sudanese government is undeniably complicit in the killing of tens of thousands of Darfuris, what is the point? Rep. Ellison could do far more by lobbying the Obama Administration to get tough on the Sudanese than by a show protest.

All the protests in the world won’t change the situation in Darfur. The only way that it will change is if the regime in Khartoum has to pay such a high price for its acts that it has no choice but to stop. The international system is so broken at this point that there is little hope of that happening any time soon. When serial human-rights abuser like the Sudan can sit in high positions in the United Nations—including on the Human Rights Commission itself, the problem is with the U.N.

While Rep. Ellison’s heart is in the right place, it would perhaps be more beneficial for him to have protested at the U.N. than at the Sudanese Embassy.

Bill Maher flaunts his ignorance once again over the issue of the Tea Party protests. Like many who live in a comfortable cocoon of left-wing orthodoxy, Maher fails to understand that the reaction to the Obama Administration is about matters of substance. Maher rants:

t’s been a week now, and I still don’t know what those “tea bag” protests were about. I saw signs protesting abortion, illegal immigrants, the bank bailout and that gay guy who’s going to win “American Idol.” But it wasn’t tax day that made them crazy; it was election day. Because that’s when Republicans became what they fear most: a minority.

The conservative base is absolutely apoplectic because, because … well, nobody knows. They’re mad as hell, and they’re not going to take it anymore. Even though they’re not quite sure what “it” is. But they know they’re fed up with “it,” and that “it” has got to stop.

Here are the big issues for normal people: the war, the economy, the environment, mending fences with our enemies and allies, and the rule of law.

Mr. Maher, here is what “it” is, in a way that even you can understand:

This is what President Obama is doing to this country. Former President Bush was fiscally irresponsible enough, but what Obama is doing is sheer madness. Trying to use government to fix the economy will not work. The bailouts are failing. The housing market is still in the toilet. Lenders are still holding back. If that isn’t a reason to be worried about the future, then it is time to pull your head out of the sand and look at the numbers.

When it was politically convenient, liberals pretended to care about the effect of massive deficits on the future of America. Now that Obama is in office, who cares about a few trillion here or there?

The Tea Party movement is not a partisan movement. There is great anger at the GOP for not leading on the issues of our time and allowing government to grow out of control during their tenure in office. This is a protest based on principles: in fact, it is a protest based on the classically republican principles that the United States should have a limited federal government of enumerated powers.

Maher, like many, think that just because Obama won an election, that means his policies are 1) popular and 2) right for the country. Neither are true. Winning an election doesn’t vindicate your policy prescriptions now any more than it did in 2004. Obama’s ham-handed handling of the economy, his Quixotic campaign against the Bush Administration on torture, and his constant prostrations before America’s enemies from Iran to Venezuela all demonstrate how radical he truly is. His popularity is being supported by a fawning media and a public that is hardly paying attention. Obama’s gotten the same honeymoon that most new Presidents get. But in time, his star will fade, as all Presidents do.

When that happens, the arrogance of Mr. Maher may come back to bite him. Politics in America is cyclical, and given the radical course that President Obama has set for this country, it may well be the Tea Parties that get the last laugh.

In The Spectator, Fraser Nelson has a searching piece on the myth that laissez-faire conservatives led to the current economic troubles:

So while it’s a statement of the obvious, the obvious can’t be stated enough at a time when we’re fighting (or should be) for the future of capitalism and the open society. The last ten years were not laissez-faire, as even Gordon Brown suggests. The crash was the result of bad regulation, not insufficient regulation. Brown told the Guardian last month that “laissez-faire had its day” and it did – in the 1880s. The problem this time was a blind, almost fundamentalist, faith in rules-based economics – the idea that, if inflation was low, everything else would be fine. And this stems from a blind faith in the power of governments.

He’s right. The crash was caused not be “Wild West capitalism” or anything similar. It was caused by a regulatory climate that encouraged systemic risk. The mortgage meltdown was not the product of evil capitalists meeting in smoky rooms to screw over everyone, it was the product of government meddling in the economy.

Our system of financial regulations has been based on a rules-based approach. Far from being unregulated, the financial markets are covered by a number of regulatory agencies—the Securities and Exchange Commission regulated the trade of stocks and other securities, along with FINRA (formerly the NASD) acting as a quasi-private regulatory body. Banks were governed by a massive amount of regulations by bodies like the Federal Deposit Insurance Company (FDIC) and the U.S. Treasury. Corporate books were governed by the Sarbanes-Oxley bill that was passed in the wake of the Enron and Worldcom scandals. The housing markets were heavily regulated by the Housing and Urban Development department, the Community Reinvestment Act, and the presence of Fannie Mae and Freddie Mac (who everyone know were “too big to fail” and would be bailed out by the government if things got too bad).

With all that going on, the argument that somehow the financial markets were totally unregulated is hardly justified by the facts. Quite the opposite, the government was doing plenty to tilt the market for various social policy reasons. Since President Carter signed the Community Reinvestment Act in 1977, it’s been government policy to expand home ownership to minorities and low-income people. President Bush’s “ownership society” was hardly a new direction from government policy, but rather a continuation of what came before.

Tilting the Playing Field: Why the Rules-Based Approach Failed

There are two rather huge problem with the rule-based approach: first, it gives incentives for industry to try to tilt the rules to their benefit, and secondly such an approach can’t work fast enough to effectively regulate a modern economy.

On the first point, it’s obvious to all that there was a cozy relationship between the regulators of the financial markets and those people they were supposed to be regulated. Take the example of Sen. Chris Dodd, who while having been supposed to be in charge of regulating the financial industry was getting sweetheart loan deals from Countrywide and raking in tons of cash from AIG. This is, sadly, not a case of one bad apple in a bunch—Rep. Barney Frank was one of the biggest impediments to reforming Fannie Mae and Freddie Mac and fixing the problems with the mortgage market.

This cozy relationship meant that efforts at substantive reform like the Federal Housing Enterprise Regulatory Reform Act of 2005 could never get off the ground. The regulators were in the pockets of the regulated agencies like Fannie Mae and Freddie Mac, and no way would they allow the world to inspect their books and see just how deeply in trouble they were.

Even if federal regulators were uniformly brilliant and far-sighted (and some of them are), they’re no more insulated from political pressure than the corrupt politicians. Regulatory capture remains a major and persistent problem. There is enormous political pressure, not only from the financial companies, but from special interest pressure groups like ACORN and the unions to push rules through that try to expand home ownership to those who would be enable to afford it. In the end, it wasn’t just about turning a profit, it was about “helping the poor” by lowering lending standards so that more people could buy homes they couldn’t otherwise afford.

A rules-based approach will always produce these results. Ban the giving of money and the transactions go under the table. There’s no way to prevent this kind of influence-peddling so long as there is influence to be peddled. As long as people like Barney Frank, Chris Dodd, and the rest of our corrupt legislative class can tilt the playing field, entities like AIG, Fannie Mae and Freddie Mac, and others will have every incentive to see that the rules get tilted in their favor. That is human nature, what James Madison called “faction” all the way back in Federalist #10 in 1787.

The other problem with a rules-based approach is that it’s slow. The process of passing a new federal regulatory rule takes at least a year on average. Yet the financial markets move much faster. New financial equations and methods like David X. Li’s Gaussian copula function (which Wiredcalls “the formula that killed Wall Street”) is something that is difficult for anyone, especially federal regulators to understand and predict. Trying to craft a rules-based approach to deal with a modern financial system in the Internet age is ultimately futile: by the time there’s been a rule that’s survived the rule-making process, the system has already changed.

It’s not possible to have a regulatory system that works fast enough to meet the demands of today’s economy. Even if it were, we don’t want to have a system that produces rules without time for interested parties to have some say. Even worse than our deliberative rule-making process is one that pushes through rules without considering the potential ramifications.

Preventing the Next Crisis: Make Regulations Simpler, Fairer, and Automatic

The rules-based approach is not going to work in the 21st Century, at least not in the form that we have it now. There’s too many opportunities for regulatory capture and the system cannot keep pace with the needs of a rapidly-evolving market. We need a better approach to the financial system.

That approach should come in the form of a smarter system of regulations. Gary Becker wisely suggests that regulations be automatic rather than subject to the discretion of regulators—such as capital requirements that keep financial institutions from getting “too big to fail”. This approach would reduce regulatory capture, but it may be difficult for regulators to set the right ratio of assets to capital. Still, it’s a step in the right direction.

In addition to that, what we need is a set of financial rules that are dramatically simpler. The more complexity there is in a rule-based system, the easier it is for companies to find loopholes. The large and sophisticated players can find their way around the rules, the smaller and less sophisticated players are easily caught up in a system they can scarcely understand. That tilts the playing field away from smaller competitors and towards the bigger ones. That is not a smart way to run any kind of economic system.

We need to clear away the layers of over-complicated, overlapping, and over-burdensome regulations and replace them with a comprehensive system based on simpler rules that anyone can follow. That will naturally be met with huge cries from both the government agencies and the companies that have captured them, but it’s a necessary step to fixing this mess.

We also have an urgent need to reduce moral hazard. Fannie Mae and Freddie Mac knew they could get away with anything because they were “too big to fail” and their close ties with government would mean they would be the recipients of a federal bailout. That means that they could take far more risks than was safe, and once they did it, others started to follow suit. In a functioning free market system, there has to be a system in which smart risks get rewarded and dumb risks get punished—otherwise everyone will start making dumb and risky moves.

Finally, we have to recognize that more government is not the right solution. More bad regulations will only make the system worse. They will continue to create even more problem with regulatory capture and corruption, and it’s quite likely that they will have a host of negative side effects that won’t be foreseeable for quite some time. Too much bad regulation got us into this mess, and trusting the same government actors that created the mess in the first place to get us out is a fool’s errand.

This crisis was not the result of laissez-faire capitalism, it was the result of bad regulation and corrupt government. In order to repair the damage and move ahead we must stop the culture of bailouts and expanding the power of the corrupt technocrats and move to a system that is fairer, less needlessly complicated, and less prone to regulatory capture. That will not make people like Chris Dodd and Barney Frank happy, nor will it be very welcome within the industries that have grown accustomed to buying favor with the government. But for the future of the American economy, it is the right thing to do.

Sometimes, a concept can be so obvious that even David Brooks sees it. Brooks, the New York Times’ wishy-washy man of the Right no wakes up to the obvious and that Barack Obama is not a moderate at all and that he and the Democratic Party are engaged in an orgy of spending and ideological experimentation.

Brooks and other erstwhile conservatives—I’m looking at you, Chris Buckley—are just figuring out what should have been obvious all along: Barack Obama is not a moderate, and never was. He just played one on TV.

As Brooks puts it:

Those of us who consider ourselves moderates — moderate-conservative, in my case — are forced to confront the reality that Barack Obama is not who we thought he was. His words are responsible; his character is inspiring. But his actions betray a transformational liberalism that should put every centrist on notice. As Clive Crook, an Obama admirer, wrote in The Financial Times, the Obama budget “contains no trace of compromise. It makes no gesture, however small, however costless to its larger agenda, of a bipartisan approach to the great questions it addresses. It is a liberal’s dream of a new New Deal.”

Where were these people during the campaign? What in Obama’s background suggested that he would be anything more than a doctrinaire left-wing liberal? His Senate voting record was the most liberal in the Senate by any objective measure. He grew up in the Chicago political machine. He was raised in a comfortable liberal orthodoxy. His books are filled with grand liberal planning. He’s a devotee of left-wing radical Saul Alinsky. And yes, Gov. Palin was right, he was “pallin’ around” with such esteemed “moderates” as Rev. Jeremiah Wright and admitted left-wing terrorist Bill Ayers.

What did these “moderates” expect?

They let their own gauzy feelings dictate their choices rather than evaluating Obama as he really is. They used Obama as an empty vessel into which they poured their vision of the ideal candidate. Of course, their idealized version of Barack Obama had little do with the real Barack Obama once one gets beyond the superficial elements. They thought that because Obama was so intelligent and articulate that he wouldn’t be so radical. How little did they know…

President Obama is not a moderate. He never was, no matter how fervently ersatz conservatives like David Brooks and Chris Buckley wanted him to be. Now that Obama has power, he is showing his true spots. The real Barack Obama is the most radical President in American history, even more so than LBJ. He aims to fundamentally transform American culture and society into something akin to a European welfare state. He does not believe in limited government, he believes in the expansive state. He does not believe in moderation, but in radical transformation. He does not need the support of people like Brooks or Buckley, he has the power he needs, and he will wield it.

Obama will not listen to Brooks’ proposed “moderate manifesto”—he doesn’t need to. He has his power. He has a Congress that is equally committed to left-wing experimentation. He has a media that is utterly supplicant to him. He has a populace that has yet to see through his charming façade. The more the markets sink in reaction to his dangerous experimentation, the more he can use the crisis as a justification.

Obama’s critics were dismissed as reactionaries for not recognizing his brilliance—and now it looks like those of us who questioned the President’s much-vaunted moderation were right. Brooks and the others who were so swept away by Obama’s surface appeal are not belatedly coming to see what others saw from the beginning. The problem is that it’s too late—Obama was figuratively and literally given a blank check, and now the “moderates” no longer matter.

For those who want to know what our future will look like, here’s a brief preview. F.A. Hayek’s brilliant The Road to Serfdom in a short illustrated form.

I’ve never been more bleak about the future of this country. The road to serfdom isn’t obvious. Nobody intentionally elects a dictator for the purpose of electing a dictator. Instead they pour the ill-conceived hopes and dreams into a Leader who promises them the world so long as they give him the power to create it.

Now, I don’t necessarily think that Barack Obama is a dictator. But the point is that he doesn’t have to be. He’s just creating the ideal conditions for one. What truly saddens me, what truly sickens me, is if that Obama passed the “Fairness Doctrine” to silence his critics, created “civilian work corps” to put an army of young men and women into his service, and arrested business owners, nearly half of the county would go along. Nearly half are so filled with irrational love for Obama that they’d let him become a Caesar. It isn’t about issues, it isn’t about the country, it’s about some gauzy notion of “hope.”

To hell with “hope.”

As Charles Murray says, everything Obama is promising has already been tried and failed. There’s nothing new. This isn’t “change we can believe in” this is “I can say whatever the hell I want and you simpletons will slurp it up.” It’s the wish list of every statist in the last 40 years, and it represents a radical and dangerous turn away from tested principles and towards abject statism.

Universal healthcare? It means the government will have to ration what we get. That’s the only way such a system can possibly work. Even worse, it doesn’t scale up at all. Which means America’s larger population will make the endemic and innate problem with universal healthcare worse than in a smaller country like Sweden or even Canada. Which means that we had better get used to dying in lines, and forget risky or experimental treatments.

Universal college education? For most people, a four-year college degree is a waste of time and money. I believe in a liberal arts education, but I’m not so arrogant as to say that it’s right for everyone. But now Obama will make the value of that degree effectively zero—and a four-year college degree is already worth nowhere near what people pay for it. My suspicion is that the real reason for this is ideological: make everyone go through the like-minded public university system and you’ll have an ideologically “pure” citizenry. Even if that’s not the plan, that will be the effect. A better solution would be to make our existing system actually work, but that doesn’t concentrate any political power into the President’s hands.

A cap-and-trade system for carbon emissions? It’s already been tried and failed. It’s a way of creating a stealth tax increase on energy consumption. A more honest approach would be to just slap a tax on energy. But Obama doesn’t want to be honest, he wants to play to the mob. That cap-and-trade programs hurt the Third World doesn’t seem to matter.

I don’t like to ascribe the worst motives for people, but even so President Obama is taking this country farther down the Road to Serfdom than it even has been. It may take decades for America to recover from what he is doing. He is pouring sugar into the engine of American prosperity, and we will suffer for it.

I love this country. I want this country to succeed, regardless of who is the occupant of the Oval Office or what party is in power. But the end result of what Obama wants will be a United States that is following the disastrous path of statism. At best America will suffer a “Lost Decade” like Japan.

At worst? America takes the road to serfdom to its inevitable conclusion.

I wish this were merely sour political grapes. But the future of this country truly is in deep peril. The way to the future is through individualism, hard work, limited government, thrift, ingenuity, and political pluralism. Today, we have a President who wants a cradle-to-the-grave welfare state and has the audacity to not only hope for one, but to say it in no uncertain terms.

I fear that if we continue down this road, the future will belong to India and China, while this nation lives out its twilight years in increasing obsolescence.

Yuval Levin has why “partisanship” is a healthy thing in a democracy:

Our deepest disagreements coalesce into two broad views of human nature that define the public life of every free society. In a crude and general way our political parties give expression to these views, and allow the roughly like-minded to pool their voices and their votes in order to turn beliefs into action.

To ridicule these disagreements and assert as our new president also did in his inaugural that “the time has come to set aside childish things” is to demean as insignificant the great debates that have formed our republic over more than two centuries. These arguments—about the proper relationship between the state and the citizen, about America’s place in the world, about the regard and protection we owe to one another, about how we might best reconcile economic prosperity and cultural vitality, national security and moral authority, freedom and virtue—are divisive questions of enormous consequence, and for all the partisanship they have engendered they are neither petty nor childish.

Levin’s words match my own thoughts on the issue. Our current working definition of “non-partisan” seems to be more based on shutting up and getting with the program than anything else. When the President calls for an end to “childish” partisan disagreements, what he means is that everyone should accept his views on the proper role of the state and be done with it. The problem with that is that a large segment of the American population doesn’t accept the basis of his worldview, and they have a legitimate right to have their voices heard.

We don’t need “non-partisanship” at this point in our history. We need vigorous partisan debate. Democratic debate is a crucible that helps extract the truth—and today’s society is becoming less about democratic debate and more about cultural balkanization. We have a media elite that is overwhelmingly uniform in their worldview. With the exception of specialized media outlets like Fox News and talk radio, conservative voices are marginalized and diminished. Not only does this harm conservatism by denying it a forum, but it diminishes liberalism as well. Without a counterbalancing force, any ideology becomes stagnant and increasingly irrelevant. Liberalism, by constantly defining itself as the only valid worldview, has ceased being a vital political philosophy. Is it any wonder than that the banner of today’s liberalism is the empty slogans of “hope” and “change” and it’s ultimate rationale the accumulation of power? When President Obama spoke with GOP members of Congress his message was simple: “I won”. While that counts for a lot in politics, winning an election does not vindicate the rightness of a worldview.

This isn’t to say that conservatism is perfect. Many, if not possibly most of conservatism’s wounds are self-inflicted. Conservatism stopped, by and large, being intellectually vital during the Bush Administration. By going along with Bush’s “compassionate conservatism”, the conservative movement lost sight of it’s small-government origins. By becoming more stridently anti-gay rather than pro-family, conservatives alienated much of their own audience. The Republican leadership that has become the standard-bearers for conservatism lost the ability to connect to the American public because they became too ingratiated with power and defending their own record. That President Bush spent most of his second term allowing the opposition to control the public imagination helped bring conservatism in America to a new low.

But liberalism is making the same mistake. At this moment, liberalism is embodied in President Obama in a way that is fundamentally unhealthy. Just as conservatism tied itself to the political fortunes of President Bush, liberalism has become the Ideology of Obama, with the President as its pontifex maximus.

This is particularly unhealthy for a democracy. The combination of ideological arrogance and a cult of personality surrounding one great leader is a dangerous thing. The President, much to his credit, has tried to create a “team of rivals” to challenge his beliefs, but has yet been able to demonstrate more than a token commitment to that end.

Instead of trying to be aloof and above-the-fray, Obama should embrace respectful partisan disagreement as part and parcel of democracy. Instead of putting himself in an ideological cocoon, Obama should engage with the conservative movement. Instead of having The Huffington Post ask him pre-approved questions at his press briefings, he should invite prominent GOP and libertarian bloggers to grill him. It would be interesting to see how he would respond to questioning from someone like Glenn Reynolds or William Safire.

Obama has the bully pulpit of the Presidency, and he has a large hand in setting the tone. If he is serious about leading this nation, and he certainly is, he should be embracing partisanship rather than decrying it. The past President was accused, probably with merit, of living in an ideological bubble. He, like Obama, promised to be a unifying leader. If the President wishes to avoid the same problems that befell his predecessor, he needs to realize that you can’t strengthen your arguments without accepting the arguments of others as valid. For all his promising talk in this regard, his Administration has scarcely wavered from Democratic politics as usual.

Democracy cannot survive in a political monoculture or in a state where only one side is given legitimacy. Liberalism needs conservatism and vice versa. Partisanship is a crucial part of a healthy democracy, and right now American democracy is increasingly unhealthy. If we are to set things right, we need more reasoned disagreement, not mindless and rigid ideological conformity.