Friday, July 29, 2011

Nationalism, the U.S. debt, and the "party of business"

I've been avoiding writing anything about the whole debt ceiling situation, because it just depresses me too much...not just because a U.S. default/downgrade will have a seriously negative impact on my upcoming job search, but because it represents the final nail in the coffin of American exceptionalism, and I am a very strong nationalist.

At this point, it matters a bit, but only a bit, whether a deal is cobbled together, whether Obama uses the constitutional option, or whether we mint a bunch of huge platinum coins. Much of the real damage has, it seems to me, already been done. The interest rates at which a nation can borrow are an inverse function of the strength of bond investors' belief that the nation will pay the money back. And the events of this debt ceiling crisis have brought new information to light that will deeply shake investors' belief in the creditworthiness of the U.S. government.

In particular, one piece of information is crucial above all others. This is the fact that the Republican Party is willing to seriously entertain the option of a sovereign default.

Before this crisis, it seems to me that most people believed the Republican Party to be the "party of business" - that is, that corporations and businesspeople held ultimate sway over the party's decisions. Whatever happens with the debt ceiling, it is now clear, as Brad DeLong points out, that the GOP is not the "party of business." They are the party of Someone Else (more on this later).

This fact is not precisely "new information." There were many, many warning signs. Most recently, there was the rebellion of the House Republicans against the TARP bailout. Before that, there were the massive deficits run up by the Bush 2 and Reagan administrations - deficits that the Nixon or Eisenhower (or Coolidge, or Harding, or Hoover) administrations would never have contemplated. Yet despite these troubling signs, a bedrock belief in the "party of business" label persisted. Conservatives and liberals alike believed that Republican tax cuts were rewarding today's rich people rather than penalizing tomorrow's rich people.

Now that people are finally starting to question the political priorities of the Republican Party, the U.S. Treasury market, and a bunch of other markets that use the Treasury as the risk-free benchmark, are going to be disrupted, platinum coins or no platinum coins. Whether we default this week or in five or ten years, the bond markets now know that it will be the GOP that pulls the trigger.

Without patting myself on the back, I have to say that I always strongly suspected that the Republicans were not the "party of business." This is not because of any knowledge of political theory on my part, but because I grew up in College Station, Texas, one of America's most conservative towns (and the home of Texas A&M, which is sort of a feeder school for the Republican Party). College Station has a few businesspeople, but they tend to be pretty moderate. The real movers and shakers in local politics are "social conservatives."

This has national-level implications. Social conservatives dominate the South, and the South dominates the GOP. Since 1992, the Republicans have won 21 percent of the electoral votes outside of the South. You heard that right: one fifth. The GOP lives and dies not by the campaign contributions of CEOs and investment bankers, but by the votes of Southern white middle- and working-class social conservatives. This is a fact that the world, and bond markets, are just now beginning to understand.

I haven't looked at the names of the House Republican rebels who are blocking John Boehner's attempts to cut a deal on the debt ceiling, but I:m willing to bet dinner that they are even more Southern than the GOP as a whole. I have some evidence to this effect, so you probably shouldn't take the bet.

And this is why we have a debt crisis.

Which leaves one big question: Why are Southern white middle- and working-class social conservatives so eager to embrace a debt default? The effects on the real economy of a U.S. debt downgrade would hit every Southerner in the pocketbook. I suppose this is generally the case in debt default situations - the same working-class populists who think a default represents "free money" end up being the people who lose their jobs. But usually this only happens in poor countries with sclerotic political systems - Latin America, etc.

It seems to me - and this part is a guess and a supposition - that white Southern conservatives just don't have a lot of nationalism - at least, not for the nation they currently inhabit. They seem to feel, instinctively, that the United States of America is only "their country" when one of their own is in power. As soon as a liberal takes office, off come the U.S. flag bumper stickers, and on go the Confederate flag bumper stickers. When Southern white conservatives talk about the "real America," or cry "I want my America back!", my instinct says that they are talking about an America that the United States has never been - a white racial nation. That America did exist, briefly, before it got stomped by the United States. But its flag still flies, and now it is getting its revenge.

Like I said...just a hunch. But do you have a better explanation why 60 house Republicans are dead-set on ending America's status as the center of the global economy?


  1. Anonymous6:14 AM

    How is the US South not a set of "poor countries with sclerotic political systems"?

  2. Anonymous11:35 AM

    I agree with you, Dr. Smith (trying to encourage you to finish your dissertation - from a Buckeye PhD to a Wolverine PhD candidate)...

    I'm a black man. I was laid off by a bigot, shortly after Obama was elected. A guy who read the Drudge Report every morning at his desk, first thing. Militantly proud Christian conservative. He seemed offended that I'm also a Christian, as if I didn't deserve to claim it for myself. I'm guessing you know what that means; I certainly do.

    What's been happening since 11/08 is what I've called "the Obama backlash," and I compare it to the aftermath of the period known as Reconstruction following the Civil War.

    I also recently commented that this fight is akin to the fight over slavery that became the Civil War. That fight prompted the formation of the Republican Party, and the election of its first President, who opposed slavery. It was the Confederates who fired the first shot - at Fort Sumter. And that fight was, from their perspective, not about morality but about economics.

    John Nichols observed in his recent book, "The S-Word," that the issue was originally economic: in the philosophical struggle between capital and labor, on the side of those who believed in the superiority of capital, was the position that capital can literally own its labor - that's slavery. Extreme to its opponents; business as usual, literally, to its advocates, and extreme only in the extent to which they would go to hold onto it.

    As you suggest without being more explicit, that kind of belief is again prominent, prompted by the election of a black president. History is in some respects repeating itself.

    Post-racial America? Not from where I sit. Quite the contrary.

  3. Anonymous2:07 PM

    The electoral vote count doesn't make much sense since it is a "winner-take-all" system. Looking at the popular vote, Republicans still garnered ~42% of the popular vote outside of the south. And that's just the presidency, to get a majority of house members voters outside the south must have sent Republicans to congress.

    Also recall that Democrats ramped up spending but then failed to increase the debt ceiling on purpose. From Reuters:

    “Let the Republicans have some buy-in on the debt. They’re going to have a majority in the House,” said Reid. “I don’t think it should be when we have a heavily Democratic Senate, heavily Democratic House and a Democratic president.”

    Defaulting is a terrible, terrible idea but it's not surprising we're having this battle when the 2010 elections were a referendum on government profligacy. Remember, none of the freshman house members voted on the spending increases! Tying it to the south and some sort of racial politics is a bit absurd.

  4. Anonymous3:54 PM

    "This is the fact that the Republican Party is willing to seriously entertain the option of a sovereign default."

    Obama threatened to veto the current (albeit struggling) Republican plan . They aren't the only ones willing to entertain that option.

    Statements like the above, exhibiting polarizing willful blindness, are really annoying.

  5. Anonymous8:03 PM

    It's a valid line of thought, and being foreign I don't know enough to dispute the line of logic. I'm gonna suggest, however, that the causality might also be going the other way. The party's existing policy interests might dictate where it seeks it's votes.

    Whatever the GOP could be standing for (businesses, wealth, banks) that does not really benefit the majority of common people, the "cheapest" votes to get (in terms of real policy concessions) are the votes of people who are easily swayed by some random immigrant/gay/atheist/muslim crap and disregard actual policy that hurts them.


  6. Anonymous3:10 AM

    A. Lincoln is usually considered to our greatest President because he saved the Union.

    Is it possible that's wrong? What if we had let the South separate? Eventually, slavery would have ended through international pressure...just as in South Africa.

    The South would now probably be a less developed country on border. The North might have a social safety net on par with Europe.
    It might be really cheap to vacation in Florida....

  7. SteveT8:46 AM

    Anonymous said at 2:07 p.m.
    ". . . but it's not surprising we're having this battle when the 2010 elections were a referendum on government profligacy."

    Reading the polls, it actually looks like the far-far-Right Teaparty Republicans were swept into office on a wave of misinformation.

    Large numbers of voters were voting to repudiate the Democrats for "nationalizing" the health care system (they didn't), for increasing their taxes (they cut almost everyone's taxes), for "doubling" the national debt (not even close) and for nominating a president who was a terrorist-loving, secretly-Muslim, fascio-communist, illegal alien.

    What can be done when a significant portion of the electorate lives in an alternate-reality bubble?

  8. I think there's a related phenomenon: government and government spending are seen by modern Republicans as helping the 'other': 'real' Americans don't receive government aid (even though they do). That is part ideology and part bigotry and separatism.

  9. Steve T- dont't forget putting their government hands on their Medicare. That was a huge issue in the 2010 campaign, which Republicans very cynically exploited, just as they had during the Heath care debate, (notwithstanding given half a chance they would explode the program, as ably demonstrated in their unanimous Ryan budget vote, wherein, amongst other things, they made their views about the program known by exempting current retirees).

    It's a party that believes in autocracy by it's members, and scorched earth insurrection otherwise. In other words, a sham with a Southern, traitorous heart.

  10. Anonymous1:19 PM

    Judging from comments of the Tea Party Republicans who aren't Southern, the Tea Party Republicans think that the U.S. economy and society is much like the economy and society of Kansas or Alabama. They don't understand that the U.S. has a huge, complex industrial economy whose prosperity is interdependent with the world economy. Unfortunately, a large portion of American voters and the media are just as uncomprehending.

  11. Eric L5:51 PM

    I grew up in a rural area outside the South (less than 50 miles outside, but still) and judging by the way people went nuts about the Clintons, I don't think the issue is anything specifically to do with the South or with race. Honestly, the difference between then and now is that the GOP has gotten more responsive to their base.

    What I do know is this: They hate him. Hate him hate him. This has nothing to do with the deficit or the size of government or any ideological principle. What they want is to see the smirk wiped off his face as they give him the middle finger; they want to see Boehner give him a black eye, they want him to hate every minute of it. Boehner gets this. That's why he put in the title of his bill that it was about stopping Obama -- what happened to stopping the nation from defaulting? That's why he sells it based on how much Obama, Reid, and Pelosi hate it.

    Obama doesn't get this. He thinks he is negotiating with people who have strong principled positions about the way the country ought to be run. He's trying to find common ground, but to make the tea party happy the GOP needs to make sure it is not common ground, that Obama hates everything about it and has to do it anyway. And Obama has made their job very difficult by being so damn reasonable.

    If the president wanted to increase the space Republicans had to make a compromise in, he should have been much more hostile to everything even a little bit conservative; he could have laid out a very broad area that was absolutely unacceptable to him. Then Republicans and some blue dogs could have made a deal that clearly violated his terms, and he could have acted as embarrassed as possible to be signing it, and Republicans could have gotten the satisfaction they wanted out of the deal.

    But instead his reasonableness has forced them to take extreme measures.

  12. I wonder if Obama could get a good deal if he just promised not to seek a second term?

  13. Eric L2:49 AM

    I don't think that would work. It isn't what they want. They want a pound of flesh, they want to feel that the GOP has stood up to him, they want to see him wounded, they want to see him beaten. If he wants to get anything done with this crowd, he needs to make every compromise look like a loss for him, not a success. Giving them anything else is beside the point; a deal means he succeeded; they can only demand more in that situation. They don't want a deal; they want victory.

  14. Another common denominator seems to be the literal belief in religious texts, e.g. the earth was created 6,000 years ago. In Texas, the same people still fight about teaching creationism in school.

    Antimodernism is not confined to evangelical Christians. The modern credit-driven capitalist economy is anathema to Jews, Muslims, and Christians alike who truly believe their various holy books are the revealed word of the one true God. And their resulting cultural isolation, if not outright poverty, merely reinforces their religious zeal. They *must* be right, because the world is against them!

  15. Anonymous6:28 PM

    They are the "party of business" because they are the ones that actively pursued deregulation, before the rise of the corporatist Democrats.

  16. Anonymous8:48 PM

    the republicans are the party of their donors (big business, not 'business'). the democrats are the party of their donors (unions).

    i hope that the american electorate realize this, but the evidence thus far is not promising.

  17. Anonymous7:18 PM

    White Southern conservatives are racists who are willing to destroy this country in order to get a black man out of the White House. They cannot be truly white if a black man is President. Better to bring the whole country down than to live with this insult. An analogy would be the city of Detroit from the late 40s through the early 1960s.