flwyd: (1895 USA map)
The Conscience of a Conservative, Senator Barry Goldwater's 1960 slim volume (ghostwritten by L. Brett Bozell, Jr.) advocating for conservative values, had more impact on right-wing and Republican politics in postwar America than any book besides The Bible and, perhaps, Atlas Shrugged. I sought the book out because I wanted to understand where conservatives are coming from and be able to have more productive political conversations. Since my political thinking operates with a different set of frames I was expecting to disagree with a lot of what Goldwater wrote, and I did. My focus in this review is therefore not to critique the book but to characterize it and highlight its arguments.

The book is an easy read. It's short and readable in an afternoon. My 50th anniversary copy, with foreword (George F. Will) and afterword (Robert F. Kennedy, Jr.) is 137 pages of roughly mass-market paperback size. It is not a work of technical political theory and is thus accessible to almost any American adult. It takes a personal and casual tone, clearly the broad appeal words of a politician and not the jargon of an academic. I think this accessibility is at least as important to the book's success in the conservative movement as any specific policy idea expressed in its pages.
The book starts with a few chapters on general principles followed by several chapters applying those principles to specific domestic issues that were prominent in the late 1950s.

Goldwater argues for Conservatism in opposition to Socialism and also in opposition to Liberalism and the (then-ascendant) moderate wing of the Republican Party. He starts by quoting Vice President Nixon, Republican candidates should be economic conservatives, but conservatives with a heart, and President Eisenhower, I am conservative when it comes to economic problems but liberal when it comes to human problems. Goldwater is conservative on both fronts and emphasizes that Conservatism isn't just about economics: The Conservative believes that man is, in part, an economic, an animal creature; but that he is also a spiritual creature with spiritual needs and spiritual desires. What is more, these needs and desires reflect the superior side of man's nature, and thus take precedence over his economic wants. Growing up in an Arizona which had recently gained statehood and in which the wild west didn't seem so long ago, it's not surprising that the focus of Goldwater's philosophy is individual freedom. Man's most sacred possession is his individual soul—which has an immortal side, but also a mortal one. The mortal side establishes his absolute differentness from every other human being. Only a philosophy that takes into account the essential differences between men, and, accordingly, makes provision for developing the different potentialities of each man can claim to be in accord with Nature. We have heard much in the time about “the common man.” It is a concept that pays little attention to the history of a nation that grew great through the initiative and ambition of uncommon men. The Conservative knows that to regard man as part of an undifferentiated mass is to consign him to ultimate slavery. (Despite this emphasis on spirit and soul, Goldwater did not want the church to be actively involved in politics and he did not like the rise of the Religious Right.)

Goldwater's political framework is focused on the Constitution and a limited federal government. While some people's political approach is to devise a solution to a problem first and then shape it to match the law, one gets the sense that Goldwater would prefer to start with what's constitutional and then work out a solution which is permitted. In the way that some folks on the right treat the Second Amendment as the most important while some on the left elevate the First, the Tenth Amendment is, I think, most fundamental for Goldwater. (The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.) Goldwater objects to several federal programs not because they're bad policies but because he thinks the states should implement them, with structure and prioritization driven by local voters and legislators, not a nationwide legislature and bureaucracy. He argues against federal involvement in education because the Constitution doesn't grant any federal powers over education, thus leaving the subject up to states. Yet if there were a constitutional amendment in place regarding education, Goldwater would seem to have no objection to the execution of it.

Many on the left, citing rhetoric of the Confederate and Jim Crow South, characterize the phrase “states’ rights” as an innocuous phrase meant to mask an underlying policy of racial discrimination. Goldwater acknowledges this perception, writing It is quite true that the integration issue is affected by the State's Rights principle, and that the South's position on the issue is, today, the most conspicuous expression of the principle. So much so that the country is now in the grips of a spirited and sometimes ugly controversy over an imagined conflict between State's Rights, on the one hand, and what are called “civil rights” on the other. He goes on to argue that civil rights are not universal rights granted by virtue of our humanity but rather a right defined in law: Unless a right is incorporated in the law, it is not a civil right and is not enforceable by the instruments of the civil law. There may be some rights—“natural,” “human,” or otherwise—that should also be civil rights. But if we desire to give such rights the protection of the law, our recourse is to a legislature or to the amendment procedures of the Constitution. We must not look to politicians, or sociologists—or the courts—to correct the deficiency. Goldwater was not a racist, and although he spends much of the chapter on civil rights arguing against federal efforts to desegregate schools and questioning the legitimacy of the Supreme Court's ruling in Brown vs. Board of Education, he speaks in favor of the principle of desegregation.

In a political world following Goldwater's philosophy, one might expect a great many constitutional amendments be proposed. (He argues against high tax brackets, for instance, but not against income tax itself, since that power is granted by the Sixteenth Amendment.) Addressing an issue like education, air pollution, or Internet crime would start by passage of an amendment granting federal jurisdiction on the matter. Yet amending the Constitution is hard, and in the half century since The Conscience of a Conservative was published, the Constitution was only amended five times—thrice regarding voting rights, once regarding presidential succession, and once regarding congressional compensation. Only the latter came after Ronald Reagan and Goldwater's intellectual heirs took power in Washington (and that one was proposed with the initial Bill of Rights). Many more amendments have, of course, been proposed but not passed in Congress—depending on one's perspective, this might speak in favor of or against an amend-first model.

Reading the book after it influenced half a century of politics provides an interesting sense of retrospective. For instance, a book written today wouldn't focus so much on the power of unions, yet it is precisely this book's arguments about unions which provided the framework for the legislation that weakened union power. Goldwater's arguments reverberate through contemporary conservatives: reading Goldwater's complaints about depression-era laws paying farmers to not grow crops (and thus avoid a market crash) reminded me of several folks I've heard rail against the same practice, even though it was ended by the 1996 Farm Bill.

Unfortunately, some of Goldwater's advice was not heeded by conservatives. He ends the “Freedom for Labor” chapter by saying Let us henceforth make war on all monopolies—whether corporate or union. The enemy of freedom is unrestrained power, and the champions of freedom will fight against the concentration of power wherever they find it. The Republicans who came to power with the help of Goldwater's rhetoric duly set about disarming the power of labor unions, yet they simultaneously enacted policies to boost the power of capital and corporations. Conservative-championed deregulation has led to a handful of companies controlling most broadcast and publishing media outlets, granting significant power and control of information to corporations. And despite the breakup of Ma Bell in the mid-80s, many consumers have no choice over telecommunications providers and the companies wield near-monopolistic power (Comcast revenues exceed every state government but California).

Goldwater's recommendations in “Taxes and Spending” were likewise only followed half-way. Goldwater wanted to reduce taxes by cutting back on federal programs: The government must begin to withdraw from a whole series of programs that are outside its constitutional mandate—from social welfare programs, education, public power, agriculture, public housing, urban renewal and all the other activities that can be better performed by lower levels of government or by private institutions or by individuals. I do not suggest that the federal government drop all of these programs overnight. But I do suggest that we establish, by law, a rigid timetable for a staged withdrawal. Yet the oft repeated mantra of today's Republican party is Reagan taught us that deficits don't matter, and Republicans have tended to propose tax cuts without spending cuts, program elimination without reducing taxes, and spending increases (particularly for military expenditure) without corresponding tax increases. While academic fiscal conservatives decry these policies, the party doesn't seem to care: tax cuts are a good way to get elected and eliminating popular programs are a good way to get voted out of office.

Goldwater's last chapter, “The Soviet Menace,” consumes the final third of the book and feels the most incongruous with the modern world. Goldwater begins in no uncertain terms: And still the awful truth remains: We can establish the domestic conditions for maximizing freedom, along the lines I have indicated, and yet become slaves. We can do this by losing the Cold War to the Soviet Union. He rails against the policies then in place to combat the USSR, from NATO and the UN to negotiation and diplomacy to foreign aid. He proposed instead an offensive (and quite so) strategy, The key guidepost is the Objective, and we must never lose sight of it. It is not to wage a struggle against Communism, but to win it. He proposed development and use of “small, clean nuclear weapons.” Recalling his fiscal conservatism, he writes As a Conservative, I deplore the huge tax levy that is needed to finance the world's number-one military establishment. But even more do I deplore the prospect of a foreign conquest, which the absence of that establishment would quickly accomplish. One wonders if he would similarly quiet his objections to spending on social programs if it were presented as a choice between liberal welfare or the election of an American communist or socialist party to congress. Goldwater's commitment to conservative constitutional law was also conspicuously absent from this chapter: socialist regimes generally installed a new constitution and American support for anti-socialist rebels would presumably violate the laws under which they found themselves.

While the flashpoints, proxy wars, and immense military buildups that characterized the Cold War definitely bore Goldwater's influence, the mechanism of victory fortunately took a significantly different tack than Goldwater's plan. He writes We may not make foreign peoples love us—no nation has ever succeeded in that—but we can make them respect us. And respect is the stuff of which enduring friendships and firm alliances are made. Yet despite the trillions of dollars spent on military hardware, the Socialist states collapsed not because of a respect-as-fear of U.S. power and might but thanks to a love-as-admiration we were able to foster in the people. While leaders threatened each other with weapons, support for the state was whittled away rock 'n' roll, hip young people, material comforts, and the gradual awareness that there was a world where grocery stores were always full of food.

The Conscience of a Conservative deserves a place in collections of key American documents, alongside The Federalist Papers and the speeches of Martin Luther King, Jr. Like the others it took relatively few words to influence generations of political action and government policy. Many on the left believe its ideas were taken too far; many on the right that they weren't taken far enough. But taken they certainly were, and they continue to frame contemporary discourse.
flwyd: (Om Chomsky)
The Pope made a speech to the Queen of England which could be interpreted as comparing atheists to Nazis.
As we reflect on the sobering lessons of atheist extremism of the 20th century, let us never forget how the exclusion of God, religion and virtue from public life leads ultimately to a truncated vision of man and of society and thus a reductive vision of a person and his destiny.

I leave open the question of whether Pope Benedict XVI prefers the sobering lessons of religious extremism from the 16th and 17th Centuries. It's true that many of the violent extremists of the 20th Century were explicitly atheistic: Stalin and other Soviets, the Chinese Cultural Revolution, and the Khmer Rouge. But many other violent extremists were religious, even if their target selection wasn't motivated by religion. U.S. segregationists and South African apartheid advocates, conflicts in Rwanda, Guatemala, Vietnam... World Wars I and II were not about religion, but aside from the Soviets, all the major players were at least nominally religious. And regardless of the private views of Nazi leaders, their extremist persecutions were largely ethnic and social, not religious: being a nonpracticing Jew didn't buy reprieve, nor did they distinguish between Christian and atheist homosexuals.

Leonard Shlain wrote something interesting in The Alphabet vs. The Goddess: the conflicts between communism/socialism and capitalism in 19th and 20th Century Europe can be seen as a new phase in the continent's history of religious warfare. The communists don't believe in God, but they have religious texts (Das Kapital, for instance), prophets, and a sometimes-violent fervor based on a set of ideas.

So far the 21st Century has provided one major ideological conflict: Wahhabists and other extremist Islamic groups in a decentralized fight against imperialism and secular and insufficiently-religious governments. And there are conflicts which mix nationalism with religion that have spilled over from the last century: Israelis and Palestinians in the near east and Muslims and Hindus in Pakistani/Indian border lands. But the bloodiest conflicts, in eastern Congo and southern Sudan, are about concerns much older than religious conflict: land and resources. And as the world population grows and the climate gets more volatile, these sorts of conflicts can only be expected to spring up more often. The important thing isn't what the folks involved believe, it's what they have and what they want.
flwyd: (mathnet - to cogitate and to solve)
[livejournal.com profile] mackys asks
What is a reasonable estimate for the ACTUAL value of the mortgage-backed "junk" securities that $810 billion of my tax dollars bought?
The answer to that question has fluctuated every few days recently, so note that everything I say could be wrong soon.

First, a timeline.
  1. US Financial System: OMG! We paid way too much for all these mortgages and nobody wants to buy them from us! O noes!
  2. US Treasury Secretary: You guys are too big to fail. I'll save you!
  3. Lehman Brothers: Save us, Henry!
  4. US Treasury Secretary: Wait, not you, Lehman.
  5. Lehman Brothers: <is dead>
  6. US Financial System: OMG! Did you see what just happened to Lehman, guys?!? I'm not going to give you any of the money I don't have in case you're the next Lehman.
  7. US Treasury Secretary: Ruh roh.
  8. US Treasury Secretary: I has a 3-page plan; let me show you it! Let me offer you a $700 billion "bailout" by buying all your "toxic waste." No oversight, no accountability. Sounds great, huh fellas?
  9. US Taxpayers: WTF?!? You're bailing out a bunch of bankers by buying toxic waste?
  10. Karl Rove: What happened to the Bush administrations public relations team after I left? That's the worst sales job ever.
  11. Senate Banking Chairman: Hey, I've got an 8-page better idea. The government should buy shares in banks. They'll get a liquidity injection and the government will make money when the banks do.
  12. US Financial System: <flail wildly>
  13. John McCain: In my many years in Warshington, I've fought wasteful government spending. And as president... Wait. For the next two days, I don't want to be president. I need to rush off to help the government hastily approve $700 billion in spending.
  14. Political Pundits: You're not a maverick. You're a loony.
  15. US President, US Treasury Secretary, Federal Reserve Chairman, Speaker of the House, Committee Heads, Attention Whores Presidential Candidates: Buying $700 billion of toxic assets sounds great. Here's a 100-page proposal.
  16. House Representatives in Tight Races: O noes! Our constituents found our phone numbers! Halp! I want to get reelected, screw this bailout.
  17. US Financial System: Well shiiiiiit.
  18. Emergency Conference Meeting: You know what people think is tasty? Bacon. Let's add 350 pages of pork.
  19. Somebody In The Meeting: *psst* Let's slip the stock purchase option back in there.
  20. US Senate: Tastes great, we're willing!
  21. US House of Representatives: Okay, I guess...
  22. Financial Commentators: So... the government is going to invent a price for a bunch of stuff which has no market value because nobody wants to buy it.
  23. Economists (some): Something must be done. This is something, therefore, it must be done.
  24. Economists (others): This is a terrible idea.
  25. Economists (still others): This might work, but I've got a better idea.
  26. US Financial System: I'm going to drink heavily for a week and then turn on MTV and the radio at the same time.
  27. US Treasury Secretary: I know I said there might not be an economy by Monday, but I'll need five weeks and some Wall Street executives on staff before I can do anything.
  28. Germany: Scheise! Now our banks are in trouble. Immediate action! Your money is safe in German banks!
  29. Europeans: Hey, now we have to guarantee our banks!
  30. Economists: Hey... that sock purchase plan is in the bailout plan. Let's try that.
  31. United Kingdom: Bollocks! Now our banks are in trouble. Immediate action! We'll take major shares in you chaps. kthxbai.
  32. World Financial System: Whoa... I think I'm still drunk.
  33. World's Major Central Banks: All together now: lower interest rates! That usually works!
  34. World Financial System: Crap! I mean Great! I mean... maybe?
  35. Iceland: We're melting! And not just because of global warming.
  36. US Treasury Secretary: World leader huddle!
  37. World Financial Leaders: Okay... we're not making progress running straight into the line. Let's run the option.
  38. US Treasury Secretary: But I hate the option. My fans always boo.
  39. World Financial Leaders: Henry... you can run the option or you can lose the game.
  40. US Treasury Secretary: Fine! I'll run the stupid option.
  41. World Financial Leaders: Okay, everybody. I know we've all trumpeted the wonders of the free market system for years. But the free market is having trouble, so we need to save it. Our plan is often called "nationalization." We're going to become part owners of major banks so they'll have money they can use to lube the wheels of the economy.
  42. Financial Commentators: Wow. The best option is socialism.
  43. John McCain: I'm gonna go ahead and NOT mention that in my campaign.
  44. US Financial System: Well... okay... I guess. But I won't move until everybody else moves too.
  45. US Treasury Secretary: Dear diary... the last month has sucked ass. But I think we're going somewhere.
So... what's the value of what taxpayers are buying? Like most questions in finance, the answer is "That depends on the future market." What are the pieces?

Henry Paulson (Secretary of the Treasury) wanted to solve the problem by spending $700 billion to buy mortgage-backed assets. (Essentially, that's a bunch of assets tossed in a pile. Except then somebody pulled pieces out of each mortgage and stuck them into other piles. It's like everybody in a neighborhood having spaghetti, but each noodle is really long and is on everybody's plate.) What would the value of these assets be? In some approaches to value, something is worth exactly what someone else is willing to pay. So in a sense, we'd be buying $700 billion of mortgage assets because we're willing to pay $700 billion. But then they'd be immediately worth much less because nobody else wants to pay $700 billion for them. In fact, nobody wants to pay much of anything for them. Part of the problem is that, under mark-to-market accounting rules, if nobody wants to buy a bank's piles of mortgages, banks can't pretend they have a bunch of money instead. And if they can't pretend they have a bunch of money, they have problems doing their normal bank activities like borrowing and lending money.

Under other approaches to value, the piles of mortgages are worth significantly more than nothing. Some percentage of the people who mortgaged their homes are making monthly payments, so the piles of mortgages are earning income. But investors don't think they can make a good guess about how many people will keep paying their mortgages, so they aren't willing to gamble on invest in them. If the U.S. government owned them, they wouldn't have to worry as much about accounting rules. The government would get the money that homeowners pay each month, meaning they'd have some real value. After a few years, once the economy settled down and investors felt like buying stuff again, the government would sell the piles of mortgages back and recover some of the taxpayer's money. In the mean time, the federal government would be the country's biggest landlord and end up owning a bunch of houses. I'll come back into that in a bit.

The main problem with the Paulson plan (aside from the world's worst marketing job) is that it put the government in the role of a really dumb investor. One of the main goals of the "OMG, save the banking system!" plans is to inject liquidity (i.e., money that's easy to spend) into financial system. If the government drove a hard bargain (what a private investor would do), they'd get a bunch of really cheap mortgages (great for the budget when the market improves later!), but banks wouldn't get much money they could spend. If they paid enough to get the money flowing (what a government would do), they'd probably end up losing a bunch of money in the end. The government has some smart people working out some rules for a reverse auction The federal government is good at losing money (call it an Investment Portfolio to Nowhere), but a lot of economists looked into the proposal and thought it wasn't very good.

Finally, Paulson bit the bullet and followed the European lead to the government buying major shares in banks. Some key things to note:
  • The government gets "preferred stock." That means that the government gets company profits (from dividends or sale of assets in case of a collapse) before normal shareholders.
  • The Treasury has said, on their honor, that they won't use the shares to influence the decisions of the bank.
  • This provides an immediate infusion of liquid cash (technically it's electronic, which is kind of like liquid... there's electrons flowing through wire instead of water flowing through pipes...)
  • Nobody has to make up a price for the piles of mortgages. The government's buying shares which currently have a market value.
  • If the banks get better, the government makes money when they sell the shares.
  • If the banks fail, the government gets a chunk of their assets.
  • This guy thinks there are some devilish details the banks can twist to connive with the sudden infusion of taxpayer money. (He lists "rotisserie baseball" as an interest. I hope that doesn't involve hitting a chicken with a stick.) Listen to the Planet Money podcast for his points. (As usual, Adam Davidson does a better job than I do at explaining this stuff.)
  • I think Treasury is still planning to buy "toxic assets," but their total available cash for toxic waste and bank stock is around $350 billion and the latter will take about $200 billion.
So what's the real value of the mortgage-backed securities taxpayers are buying? Hard to say. But we aren't spending $700 billion on them. What's the value of the bank stock we're spending $200 billion on? Hard to say, but if things get better the value should be more than $200 billion. The bankers don't really like the stock plan, but their collective overvaluing of the market got us into this mess, so tough cookies.


A caricature of the Soviet economic system is that everybody gets an identical place to live (owned by the government) and gives most of their money to the State. America, these caricaturists say, is better because we let each person decide what house to buy with their own money. But in the end, everybody ended up buying a house that looked just like all the other houses in their subdivision. And under the Paulson plan, the government would've owned a bunch of them and everybody would've paid their mortgages to the State. Under socialism, government men start with a plan to exploit their fellow men. Under capitalism, it just ends up that way.

Part of me thinks it would be really interesting for the government to own a whole bunch of suburban real estate. They could embark on projects to create local centers of employment and commerce, reducing the distance people would have to drive and thereby reducing dependence on foreign oil. They could turn vacant McMansions (in Denver lingo "Prairie Palaces") into housing cooperatives. The other part of me thinks housing cooperatives and local community development must grow bottom-up to have a chance of success. The federal government is good at doing big things like running national parks. A half-dozen hippies are good at doing small things like organizing a house inhabited by a half-dozen hippies. But I think there's a chance that the anonymous sprawl suburbs will become the new ghettos while former industrial buildings (aka lofts) become the hip expensive places to live. Centennial will be a really swank ghetto, but it'll still be a ghetto. Maybe we'll be listening to rap songs entitled "Straight Outa Rancho Cucamonga."


I've come to understand some interesting things about macroeconomics in the last few years, but hard-core capitalism still bothers me. At its root, it's a bunch of people doing stuff in exchange for imaginary pieces of paper. The main advantages of money are that you can do math with it and it can be exchanged multiple times. If you give me $10, I can later give the $10 to somebody else. Or I can divide it in half and give $5 to two people. But money isn't the only thing that can be exchanged. Much of the time, it stands in for time, effort, or information. If I give you an afternoon of my time and energy moving all your stuff from one apartment to another, you can't necessarily give that afternoon to somebody else. If you and I have sex for ten minutes, it has no (necessary) impact on your ability to have sex with somebody else for ten minutes... or two other people for five minutes. If I tell you a funny story and you want to tell it to two other people, there's no need to tell each only half the story.

Money is a tool to enable zero-sum games. But a very effective path to success is for multiple individuals to team up and play a game that's not zero-sum. Maybe that's why society gets so skittish about prostitution: it tries to mix a zero-sum game (paying money) with a non-zero-sum game (two people helping each other have an orgasm).

Remember that investing is essentially gambling with two important differences: Nobody's quite sure what the odds are and the house doesn't always win in the long run. When you invest money, you might get more of it back or you might get less of it back. When you invest time (hanging out with friends, playing games, having sex, relaxing in the sun on the porch) you know that hour of time won't come back, but you also know it won't suddenly turn into just half an hour. Remember that money isn't the only thing in the world worth exchanging with another person.


So that's all the economics questions I was asked on my original post. If I didn't bore you to tears and you didn't learn what you want to know from Planet Money, ask more questions!
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