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Tuesday
Nov112014

An Open Letter to Senator Elect David Perdue

Dear David Perdue:

Congratulations on winning a seat in the US Senate.  You have six years to prove you are one of the good guys.

Georgians are not sending you to Washington to breeze through your term without causing any trouble.  In fact, we expect you to make enemies—many of them—as you hammer through reforms and speak up for the principles of free enterprise, morality, de-centralized power, and individual responsibility. 

Washington is a mess—rife with incompetence, greed, corruption, and selfish ambition.  Many of your colleagues in the Senate have no principles and no determinable skills beyond the unfortunate cleverness they use to win reelection.  You must stand out from this mob.  Be a man of virtue and principle, stiff-necked and determined; speak up for the values that made our country great, and do so loudly. 

Now go make us proud.

 

John Prothro

Thursday
May162013

The Big Reveal

The Reason Behind the Benghazi Deception

In General Lee’s Army, Joseph Glatthaar tries to explain why young men in the south, some with no slaves and even relatives in the Union Army, volunteered to fight with the Confederates.  The answer is multi-faceted, but the author notes that many men joined the Rebel army in essence to test their mettle—to discover how they would react in a firefight.  Verbal bluster and talk of honor, they knew, meant nothing if they panicked and ran away when bullets started flying.

Which brings us to the Obama Administration’s handling of the Benghazi killings.  At the time of Benghazi, the Obama reelection team was hyping the Osama bin Laden killing and Obama’s strong, decisive, and “gutsy” leadership. Unlike the killing of Osama, however (which was a long-planned and long-deliberated no brainer) Benghazi was Obama’s first real fight.  This was a fight requiring quick action and characterized by imperfect information and a rapidly changing environment.

And when the time came to test Obama’s mettle, did he make the “gutsy call” and order his military to do everything it could, including scrambling fighters, to save our people under attack?  No, he ignored the calls for help, demurred responsibility, and (as far as we know) went to bed. 

If Benghazi was a shining moment in Obama’s leadership, we would know about it.  We would have pictures from the situation room, lengthy speeches from Obama about everything he did, and never ending reminders of his daring leadership.

Instead, we get obfuscation and deceit:  proof positive that Obama was tested with Benghazi and failed miserably.   

Wednesday
Nov072012

Dignity Lost Last Night

It used to be that American presidential campaigns were contested over big ideas, at least partly.  Dignified statesmen from right and left presented their visions and pitched their ability to accomplish them.  The campaign staffs may have gotten dirty, but they at least tried to keep the candidate clean.

In 2008, for instance, Obama appealed to the good in America.  He asked us to believe the country could come together in common purpose and change the country for the better.  He won because he was the candidate of hope.

What a difference one term makes.  This time—after four years of failure—Obama won reelection with invective, deceit, demagoguery, and divisiveness.  Instead of the high-minded rhetoric of 2008, Obama gave us the petty cynicism of 2012.  It worked, of course, but at what cost?

Obama campaign staffers may be happy this morning, but it is hard to believe they are proud.  I imagine they feel like a salesman who wins a big contract but inside is ashamed at how he won it.

Or maybe the Obama team is incapable of shame.  The realpolitik of the Chicago machine may be all they know.  This is the group, after all, that won Obama’s first elections by leaking opponents’ divorce records. In the past year, Obama has ridiculed business owners, derided the wealthy, smeared his opponent, bribed defense contractors, and placated voting blocs with scornfully-timed policy ploys.

And what about the tone of Obama’s campaign speeches?  College arenas were fitting backdrops for his small, wisecracking, and undignified talks.  Pity the young dupes in the audience who laughed and booed Romney, unaware they were voting against their futures, unaware in the real world cool is no substitute for competence.

This election was billed as a game-changer, and it was.  It didn’t just solidify our slide toward more intrusive government; it changed what we require in a President.  We used to demand our leaders at least possess leadership qualities.   Now we only demand they play the game of politics well.

It’s a sad result of the campaign.  And a sad day for America. 

Friday
Jun292012

Roberts’ Decision Will Outmaneuver Obama Long-term

Chief Justice John Roberts had a choice to make in approaching his ruling on the Affordable Care Act: 1. Deliver a short-term blow to the Obama administration and risk an enormous backlash; or 2. Deliver the long-term death blow to the Obama administration and to the progressive cause of steadily increasing the government's role in healthcare until we get to single-payer. 

He chose option 2, and played a difficult situation brilliantly. Looking at the decision and the political fallout, I see Roberts' maneuvering as shrewd, pragmatic, and beneficial to the conservative cause. Chief Justice Roberts wrote a readable and historically-rich opinion. Even though the Act's individual mandate was upheld as a "tax," Roberts did several things conservatives should immediately applaud and much that conservatives will applaud long into the future. 

The Opinion

Roberts immediately smacked down the administration's argument that the Affordable Care Act's individual mandate was constitutionally permissible under the commerce clause. Critics rightly argued allowing the government to regulate people not purchasing health insurance would create a virtually limitless power of government regulation under the commerce clause. Roberts settled this argument on the side of conservatives and upheld needed limits on the commerce clause.

The Affordable Care Act provides an enormous expansion of Medicaid, essentially extending it as a tax-payer funded healthcare option to adults who cannot afford private insurance. Along with this expansion, the Act contained a provision in which the federal government can deny funding for existing Medicaid programs to states who refuse to participate in the Medicaid expansion from the Affordable Care Act. Because the federal government provides so much of the states' existing Medicaid funds, this functions as federal bullying at its worst. In the opinion, Roberts strikes this down as well. 

Chief Justice Roberts upholds the Affordable Care Act's individual mandate under the administration's alternative argument—that the "penalty" charged to people who do not buy insurance in actually a "tax" permissible under the power of Congress to tax. Whatever you think of his argument, Roberts is on constitutionally solid ground here. He correctly points out that if there is a way to read a statute as constitutional, it is the court's job to do so irrespective of whether a "tax" is mislabeled as a "penalty." Congress' taxing power is broad, and Roberts rests on this to uphold the Act. 

In doing so, Roberts gives us a narrow opinion which does little more than uphold Congress' power to tax. In addition to what I previously mentioned Roberts struck down, he goes out of his way to highlight some of the more outrageous parts of the Affordable Care Act. If one does not know the parade of horribles in the Obamacare law, Roberts' opinion is an excellent primer. I do not think that is an accident. Roberts also mentions several times that it is not his job to comment on whether or not the law is good public policy. The implication is clear—he does not think it is. Lastly, Roberts did nothing to close the door on future challenges to the bill over religious freedom, more good news for those on the right. 

The Politics

There are five political takeaways I see from the ruling.

First, Chief Justice Roberts is very aware of our particular moment in history. He knows the country is divided, and the court has been criticized (rightly or wrongly) as being too politicized. With his ruling, Roberts removed the whiff of partisanship and obstructionism from the court. Striking down the law in its entirety would have invited the media drumbeat up through election day that the conservative-activist-racist wing of the Supreme Court could not wait to strike down the central achievement of the first black president.  

Secondly, by ruling it a tax, Roberts forces President Obama to run on the Affordable Care Act in the worst way possible. Striking down the entire law would have energized the left and allowed Obama to run against the court as well as Congress. Upholding the entire law would have been a validation of Obama. Instead, Roberts found a way to quietly fence Obama into a very difficult position. When he mentions the Affordable Care Act, President Obama will be reminding the country it is a massive tax increase even though he assured us it would not be. Good luck with that, Mr. President.

Thirdly, the ruling struck down the expansion of government power conservatives most feared—the limitless expansion of federal power under the commerce clause. Leaving it as a tax will refocus the right’s efforts on repealing and replacing it. House and Senate candidate now have a prominent new campaign issue, one that won a Republican Senate seat in Massachusetts for Scott Brown. It is now much more likely that Republican keep the House, win the Senate, and Mitt Romney is inaugurated in January. Any base apathy about Mitt Romney at the top of the tickets seems to have now been cured. Romney raised $5 million in the 24 hours after the ruling. Interestingly, Roberts also went out of his way at least twice to mention that similar mandates imposed by individual states are more easily permitted because they do not face the same constitutional constraints. I read that as a nod to Romney's Massachusetts healthcare plan in distinguishing it from Obamacare.

Additionally, by not accepting the commerce clause argument or the necessary and proper clause argument (which I have not discussed, but please read about in the opinion), Roberts has removed two huge weapons out of the progressive arsenal. These two constitutional clauses have long served as ways for progressives to sugarcoat ever-expanding federal government power. Roberts essentially calls out this tactic and forces progressives to be honest about what is foundational to their agenda—raising taxes. 

Lastly, I think his handling of this situation reveals something about Roberts’ political philosophy. He would rather these sorts of things be handled legislatively, by elected representatives, instead of being parsed by judges. Roberts does little to disguise his distaste for the Affordable Care Act, but simply believes at this moment in our nation it is better to be handled by the legislature.

Greg Maddux was one of my favorite pitchers of all time because what he lacked in pure athletic talent, he made up for in intelligence and precision. Once, in a meaningless regular season game late in the year, Maddux was facing Houston Astros star Jeff Bagwell. Maddux knew he would face Bagwell in a much more important spot in the playoffs in a little over a month. Maddux purposefully threw him a pitch which Bagwell launched into the stands for a home run. Sure enough, the same situation arose the next month in the playoffs, and Maddux got Bagwell out each time because Bagwell kept looking for the pitch he had hit over the fence a month earlier. Chief Justice Roberts is pulling the equivalent of that here. He eschewed a short term win for a more satisfying and meaningful long-term victory.

Bravo, Mr. Chief Justice. Those applauding you on the left do not realize they are being sandbagged, and those on the right decrying you will soon appreciate your wisdom and foresight.  

Monday
Jun182012

The PE Man vs. the Statist

President Obama is trying to demonize private equity as an ugly cabal of fund managers (like Romney) who devour family businesses and ship jobs overseas.  Contrasting his own experience with Romney’s, Obama touts government “investments” that supposedly keep jobs at home while supporting the future of innovation. 

Obama wants America to believe his interventionism is a kinder and gentler alternative to the profit driven ruthlessness of Romney’s past.  But the choice here is really between Obama’s state capitalism—the misnomer that encourages public intervention into private industry—and true capitalism from which private equity was conceived. 

Obama’s argument could work.  On the surface, statism appears nobler than capitalism.  After all, the statist has the luxury to make decisions based on subjective feelings like social justice and fairness.  The capitalist, on the other hand, is a slave to economics and sometimes makes tough decisions to improve the bottom line. On an emotional level, the statist looks virtuous, but in reality the capitalist is the one most responsible for the greater good.

Unlike Obama’s state capitalism, private equity survives on the efficient and prudent use of capital and thus must focus investment into areas most likely to benefit humankind.  In a free economy, a company only profits when customers voluntarily choose to use its product or service, presumably because that product or service benefits them in some way.  A company’s balance sheets and financial statements, then, are objective markers that measure how effectively a company makes life better for people.  For this reason, value-driven private equity investment cannot be divorced from the greater good.

The state, however, has a very different model.  Rather than relying on the market to satisfy consumer preferences, the state allocates capital based on the whims of political actors.  Sometimes these whims are well intentioned, but often they are not.  State capitalism is extremely vulnerable to cronyism, prejudice, fraud and many other breeds of corruption that arise when power players have access to taxpayer dollars.  Witness the underhanded corruption of the banana republics, China, Russia, and the Middle East—places where state capitalism is celebrated—and one can easily see the harmful results of state power inserted into the market.

Perhaps the greatest distinction between private equity and state capitalism is the assumption of risk.  Private equity managers not only risk their careers when they invest; they often put their own money into deals, making them doubly motivated to make sound investments.  Government patronage is an entirely different matter.  Under Obama’s system, the unsuspecting taxpayer underwrites the financial play-acting of the politician.  And if the taxpayer is fortunate enough to realize he has been cheated, his only recourse is the ballot box.  Unfortunately, his vote is not worth what it was before the politician used the voter’s money to buy the support of special interests.

Despite these differences, however, there is one interesting and exciting correlation between private equity and American politics.  Many startup private equity funds fail after their first attempt.  Untested fund managers may be given an opportunity to prove themselves, but their investors have little patience for failure.  If a new fund fails to produce a strong rate of return, its principals are left to search for another job. Given the dismal performance of Obama’s investments—i.e. Solyndra, the Volt, Green Jobs, Abound Solar, the Stimulus, Cash for Clunkers—one can only hope Obama enjoys a similar fate.