Friday, August 31, 2012

POLITICS: Is it Time to Scrap the National Political Conventions?

Thanks to our friends at the Huffington Post for first running this piece on August 27, 2012:

Washington, DC -- When Republicans and Democrats meet at their national conventions to anoint Mitt Romney and Barack Obama as their Party nominees for President of the United States, few Americans will bother to interrupt their summer vacations long enough to watch more than a speech or two from either side. It's not just that voters are tired after almost a full year of non-stop campaigning. The fact is, conventions themselves, staged meticulously by strategists and media consultants, have become increasingly stale for outsiders, looking more like extended televised pep rallies for party activists, lobbyists, politics junkies and media celebrities.

Is it time to scrap them? Or stop covering them? Not by a long shot....

It is easy to forget that, not long ago, these conventions used to be among the most anticipated, exciting, and consequential events in American politics. From the 1830s through the 1950s, conventions refused simply to coronate candidates. They picked them, while also tackling key public issues from Civil War to prohibition to civil rights to the Viet Nam War to tax policy.

Waves of reform since the early 1900s have stripped these gatherings of any real decision-making power. No national party convention has gone beyond a single ballot since Democrats took three to nominate Adlai Stevenson in 1952. None has voted on a platform plank or credentials fight since 1992. Gone are the days when freewheeling multi-ballot conventions gave us some of our best presidents: Franklin D. Roosevelt in 1932 (four ballots), Woodrow Wilson in 1912 (46 ballots), and Abraham Lincoln in 1860 (three ballots).

Party conventions represented a great reform when they first appeared in 1832. Credit for the first goes to the National Republicans, meeting in Baltimore that year to nominate Kentucky Senator Henry Clay; Clay would lose to the incumbent, Democrat Andrew Jackson, also nominated by convention that year. Originally, presidential candidates was chosen by a few party elders meeting behind closed door. Conventions threw the doors open to delegates from across the country and invited the public to watch. In their golden age, they could be dazzling spectacles rivaling a modern Super Bowl or World Series -- the speeches, the deal-making, the surprises. The delegates, proud political professionals, made real choices, and usually good ones. Critics called them "bosses," but they saw their job as winning elections and usually preferred capable, mainstream leaders.

Lincoln's convention in 1860 showed the old system at its best, a three day, three ballot carnival of music, fireworks, and politics in frontier-era Chicago. Lincoln, a long-shot, used the setting to out-hustle better-known rivals led by New York's U.S. Senator William Seward, who led on the first two ballots. Lincoln's team used every trick in the book - packing the galleries, manipulating floor seats, cutting deals for votes -- but mostly they just talked. They buttonholed delegates and explained personally to each why their man deserved support. It was the kind of inside politics that made reformers cringe, but it gave us one of the best presidents in American history.

Voters finally rebelled. Florida held the first binding presidential primary in 1904, and a dozen states soon followed. Party leaders fought the tide. In 1912, for instance, former President Theodore Roosevelt won eight out of 11 primaries for that year's Republican nomination, but backers of incumbent President William Howard Taft used their control of the Party's national committee and credentials process and deny seats to some 235 Roosevelt delegates from contested states - enough to block any challenge. In 1968, Democrats nominated Hubert Humphrey, the sitting Vice President to the incumbent Lyndon B. Johnson saddled with the widely unpopular war in Vietnam, despite the fact that Humphrey had not run in a single primary (though had he endorsed "favorite son" stand-ins in several states who won on his behalf). This contributed to violence in Chicago and prompted major party reforms.

Today, Democratic and Republicans both require each state to choose delegates in an open process, primary or caucus. The long state-by-state slog, starting more than a year before Election Day, has replaced the conventions for settling party fights. By the time the conventions come in late summer, the arguments are done. The candidates are picked, they have announced their Vice Presidential running mates, and the platforms are prepackaged

So what's left for the conventions themselves? Aside from the lavish parties, social regalia, and good times for those lucky enough to attend, I see three things that make them still compelling for voters across the country:
  1. The big speeches: After months of over-exposure, negative attacks, and sore feelings from the nomination fights, the candidates deserve the chance to reintroduce themselves before the final push, and the public deserves to see it. The convention gives each party one last clean opportunity to make its case, feature his best speakers, tout its top issues, and show its enthusiasm. Prime time convention speeches usually give the candidates a full hour to address voters directly without interruption. These speeches are often been the best and most memorable of the campaigns. The cacophony, spin, and nit-picking will start soon enough.  
  2. A window on the next administration: But there's more. Politics is a team sport. A vote for Romney or Obama elects not just the one man but also his friends and Party. As president, Romney would choose thousands of appointees to staff the federal government, just as Obama has: judges, agency heads, commissioners, generals, Cabinet members, and all the assistants and deputies. Those delegates in the room represent the prime talent pool for the incoming administration. They are on the ballot just as much as the candidates, and this is our chance to take a good look at them.
  3. A limiting factor on the fall campaigns. Finally, simple logistics demand that the final, full throttle campaign cannot start until the conventions are over. Candidates must be named, platforms adopted, and party organizations set. By pushing the starting gun until Labor Day, the conventions give us one last chance to enjoy the summer and not worry too much they about politics.
National conventions have a different role today than historically, but it's still am important one. So let's enjoy it, and then buckle up for an exciting race.

Wednesday, August 15, 2012

How an Act of Congress Killed the US Gold Market

A view inside the New York Gold Room from Harper's Weekly, October 1869.
 Thanks to our friends at Bloomberg Echoes for  first running this post last week on August 2, 2012.

When President Abraham Lincoln acted in December 1861 to suspend the national gold standard -- the legal right to convert paper money into gold coin or “specie” -- he wasn’t trying to start a fight with financial speculators in New York.

Lincoln had a bigger headache at that moment: trying to finance his rapidly growing Union Army in its fight against the South.

Within three years, though, Lincoln’s decision would bring a defining moment that would shape the federal government’s relationship with Wall Street. It came in June 1864 when Congress passed the Gold Act -- the single time in U.S. history that Congress used its power to directly close a major financial market in the middle of active trading. It was such a failure that Congress never tried again.

The Gold Act was Washington’s response to a case of extreme profiteering during one of the bloodiest periods of the Civil War. After Lincoln had suspended the gold standard in 1861, he immediately asked Congress to float about $450 million in paper currency for the government to pay its bills. These steps created a temporary dual-currency system: paper “greenbacks” as legal tender for domestic debts, and gold coin as the currency of the world, needed for foreign trade, tariffs and custom duties.

Confederate Victories

Without government backing, the value of paper floated freely against gold. Within a few weeks, there was a brisk market on Wall Street for trading between gold and dollars. Each Confederate military victory sent gold prices soaring.

Speculators, stock traders, rebel and Union sympathizers, and government officials soon dominated the market, far outnumbering the bankers, exporters, importers and other commercial gold users. Daily price fluctuations affected the national war effort because rising gold prices directly eroded the value of the federal Treasury.

A Philadelphia banker, Jay Cooke, called the New York gold traders “General Lee’s left flank.” The New York Stock Exchange agreed; it considered gold trading disloyal and refused to allow it under its roof. This forced gold speculators to form a separate Gold Exchange on nearby William Street.

Gold prices spiked in June 1864 to $200 in paper -- a 50 percent devaluation of the nation’s paper currency. That spring marked the culmination of General Ulysses Grant’s “Wilderness campaign,” a particularly bloody set of encounters as the Army of the Potomac pursued Confederate General Robert E. Lee across Virginia toward the Confederate capital of Richmond. Casualties on both sides were enormous, about 40,000 killed and wounded for the Union and another 70,000 for the Confederacy.

Gold prices peaked just as Grant’s army reached Petersburg, Virginia, to begin a desperate seven-month siege. The spectacle of New York financiers profiting from this carnage particularly outraged the public, and Congress decided it had to act.

The result was the Gold Act, passed with little debate on June 17, 1864. It was designed to close the Gold Exchange immediately and thereby end the speculative bubble in prices. To the surprise of senators and Treasury officials, however, it did nothing of the kind.

In fact, closing the Gold Exchange only made matters worse, by encouraging hoarders and fueling a panic. Kinahan Cornwallis, a British-born writer working in New York during the war as a reporter for the New York Herald, described how “the real holders of gold were thus isolated,… and purchasers had to run from office to office, inquiring the price at which holders were willing to sell … The whole country was alarmed by the rocket- like ascent of the [gold] premium, including Congress, amazed and rebuked by the advance.” Finally, he wrote, “Leading merchants and bankers, who had urged upon Congress this prohibitory legislation, now wrote and telegraphed to Washington, imploring the repeal of the Gold bill.”

Price Spikes

Gold prices would touch almost $300 before Congress would finally reverse course, repeal the Gold Act, and reopen the Exchange on July 2 -- barely two weeks after the law was passed. Even after the Gold Room reopened, chaos continued with further corners and price spikes. Only the capture of Atlanta by General William T. Sherman in August 1864 finally broke the bull market in gold. By the time Lee surrendered to Grant at Appomattox Courthouse on April 9, 1865, the gold price was $144, less than half its wartime high.

In the 148 years since the Gold Act, Congress has developed extensive systems to regulate Wall Street --including the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve, and the latest additions under the Dodd-Frank law, the Consumer Financial Protection Bureau and Financial Stability Oversight Council -- but never again has it shut an actively trading market. Closing a market can turn excitement into fear and transform a bubble into a panic.

The Gold Act episode taught a simple lesson. In a crisis, politicians and financial regulators should follow the same rule as physicians: First, do no harm.

For Kinehan Cornwallis's full story of the of the 1864 Gold Act episode, see the new reissue of his classic account -- The NEW YORK GOLD ROOM: Wall Street's Big Gamble on the Civil War.

Saturday, August 11, 2012

Paul Ryan for Vice President -- Three quick comparisons

Mitt Romney and Paul Ryan, the 2012 Republican ticket.    Photo from CNN.
Mitt Romney may get a nice bounce in public opinion polls from announcing 42 year-old Wisconsin Congressman Paul Ryan as his vice presidential running mate.  And why not?  Ryan, though very conservative, has many appeals.  He is young, energetic, articulate, and, as chairman of the House Budget Committee and author of its recent controversial ten-year plan, has made himself an intellectual leader of Congressional Republicans on the financial issues.  He will give Joe Biden a tough VP debate come October, bring knowledge on fiscal matters, and unify the Republican Tea Party faction behind Romney's campaign.

Already, the optics seem to work: Romney the father figure, Ryan the smart protege (about the same age as Romney's own eldest son Tagg).  What could go wrong?  

Watching the announcement this morning, three comparisons came quickly to my mind, all with the same idea, but very different ends:

Dwight Eisenhower and Richard M. Nixon, 1952.
Eisenhower and Nixon, 1952
Probably the best use of father-son optics in recent decades was engineered by General Dwight Eisenhower in 1952 when he picked a smart, young, 39-year-old California U.S. Senator named Richard M. Nixon as his running mate.  Eisenhower not only was relatively old -- 62 years old -- but a political newcomer, a career soldier.  Nixon, like Paul Ryan, was a rising intellectual leader of the Republican right who had starred in House and Senate anti-Communist investigations.  He offered Eisenhower a bridge to the Party's Congressional wing and beautiful optics as a young family man with two cute daughters.

Nixon weather an early storm over a financial scandal resulting in his famous "Checkers Speech," (click here to see it).  But after that, the strategy worked.  Eisenhower and Nixon won two terms, and it wasn't until later, when Nixon sought the Presidency on his own, the Nixon's full set of eccentricities came into full flower, culminating in Nixon's 1974 resignation in disgrace from the hite House   in the Watergate scandal.

Kerry and Edwards, 2004:
John Kerry in 2004 also decided to pick a younger man, though the age difference between him and campaign rival John Edwards was much smaller than Eisenhower and Nixon.  Kerry was 61 years old in 2004, while Edwards was 51.  Still, Edwrad, a North Carolina U.S. Senator and acomplished courtroom lawyer, had made a good impression during the primaries that year and brought energy to the ticket.

The criticisms of Edwards came later.  Many backers were disappointed by Edwards's lackluster debate in October 2004 against Republican Dick Cheney.  And since then, Edwards has shown himself to be a remarkably duplicitous character, chearing on his wife Elizabeth during his 2008 presidential campaign as she was dying with cancer and covering it up with campaign contributions, resulting in the recent criminal trial.

Reagan and David Stockman, 1980:
Ronald Reagan and  David Stockman.
But to my mind, Ronald Reagan, as usual, made the best decision in this type of situation.  Reagan's list of potential running mates in 1980 included a particularly smart young Michigan Congressman named David Stockman, 34 years old but already an intellectual leader of House Republicans on budget issues.  Reagan decided not to make Stockman his running mate -- Stockman wasn't old enough in any event.  He chose for the job a more experienced hand, future president George H.W. Bush.

Instead, Reagan gave Stockman a more appropriate role in his White House: Director of his Office of Management and Budget.  This allowed Stockman to take full direct control of Reagan's early effort to cut taxes and cut spending, a major accomplishment of Reagan's presidency.

Stockman mostly did a fine job, but he was too much a purist.  When Congress passed Reagan's tax cuts in 1981 but failed to adopt enough spending cuts -- producing unprecedented budget deficits throughout the 1980s -- Stockman went rogue. In gave an interview to Atlantic Monthty  in which he openly criticized the outcome and acknowledged "None of us really understands what's going on with all these numbers."   Reagan took Stockman "to the woodshed" -- yes, that's how they described it.  Stockman ultimately had to resign, and afterward, he wrote a book called The Triumph of Politics: Why the Reagan Revolution Failed. 

By making Stockman his OMB Director rather than VP, Reagan had made the best managerial choice.  He allowed Stockman to focus on his signature budget issues, but where Reagan could jettison him the minute he malfunctioned.  

Bright young man can be great things, but pose risks as well.  Will Paul Ryan be a purist like David Stockman, pushing candidate (or president) Romney farther right then he really wants?   Will Ryan be a secret cad like John Edwards, with lingering skeletons in the closet?  Will he serve faithfully like Richard Nixon, then let his own ambition take control when he gets the chance to run for himself?  

Most likely, it's none of the above.  History never really repeats itself; each situation is new and different.   For now, let's hope that Paul Ryan is just what he seems, a smart, idealistic, articulate advocate of conservative fiscal views who, agree with him or not, is ready to defend them in good faith and good spirit.  Let the games begin.

Wednesday, August 8, 2012

How negative can a campaign get? Thomas Nast's attacks on Horace Greeley, 1872

Horace Greeley,  pictured by Nast as an out-of-touch nitwit in oversized coat and hat, oblivious to the sea of dead Union solidiers at notorious Andersonville Prison as he tries to  reconcile with the South.  The scrap of paper in his pocket reads "What I know about shaking hands over the bloodiest chasms, by H.G."  Harpers Weekly, September 21, 1872.

Yes, we've seen presidential campaigns get pretty nasty, with the 2004 "Swift Boat" ads turning John Kerry, a decorated war hero, into a virtual traitor, probably representing the low point of recent years.  Negative campaigns have been a staple in America since the days of Thomas Jefferson and Abraham Lincoln.  So, looking forward to the finale of 2012, how low can it go?  Hold on to your seats....

Nast's fawning view of Grant from 
an 1866 Harper's Weekly cartoon.
My vote for the meanest ever baseless attack against a presidential candidate goes to Thomas Nast, the brilliant cartoonist for Harper's Weekly whose satires helped destroy New York City's notorious Boss Tweed.  (Click here for some of Nast's famous Tweed cartoons.)  In 1872, Nast, a staunch Republican, turned his pencil against Horace Greeley, the brilliantly eccentric publisher of the New York Tribune who that year had won the presidential nominations both of the Democratic Party and the Liberal Republicans, a splinter group of Republicans who opposed incumbent President Ulysses S. Grant.

The irony, of course, was that Greeley had been an original founder of the Republican Party in 1856, an early abolitionist and harsh critic of rebels during the War, but he bolted in 1872 over Grant-era scandals, Grant's reconstruction policy against the South, and Greeley's own unique combination of vanity and  ambition.

Thomas Nast, circa 1870.
Thomas Nast adored Ulysses Grant, considered him a national hero for winning the Civil War, and detested anyone who questioned Grant's honest.  By 1872, Nast's fame over helping to topple Boss Tweed had given him an enormous national following.  Senators, Congressmen, and Presidents all courted him, knowing that literally a million Americans could be swayed by a single Nast cartoon.

For Nast, Greeley made an easy target.  Just seven years after the Civil War, resentments ran deep.  They called it "waving the bloody shirt," and nobody did it better than Tommy Nast.  Over 600,000 soldiers had died in the Civil War,  touching almost every American family North and South, and bitter memories lingered.  By accepting the nomination from Democrats, Greeley had hitched himself to Southern diehards, and Nast had no problem using guilt by association to paint Greeley's hands bloody.  Greeley himself virtually invited the charge by making reconciliation with the South central to his campaign -- "grasping hands across the bloody chasm," as he put it.  Greeley had also contributed bail money to former Confederate president Jefferson Davis.

Greeley shaking hands with a Confederate murderer stepping on a dead Union soldier.  The dead soldier is identified as from the Massachusetts 6th Regiment, four of whose members were killed in April 1861 by a street mob in Baltimore, the same site as the 1872 Democratic Convention that chose Greeley.  Harper's Weekly, July 3, 1872.  
Greeley was easy to draw as a cartoon.  His rumpled clothes, wispy beard, wire glasses, and shifting politics all played into Nast's talent for caricature.  One critic called him "a self-made man who worships his creator."  What Nast did to Boss Tweed, he now did to Horace Greeley.  

Nast didn't hesitate to throw in a bit of anti-Semitism.  The Shylock in this cartoon is August Belmont (born Jewish in Germany, though converted to Christianity in the 1840s after settling in the US), who represented the Rothschild banking firm in New York and chaired the Democratic Party during this period.   Harper's Weekly, July 6, 1872
Greeley lost in a landslide.  (Click here for results.)  Even worse, his wife Mary died just a few days before the vote, on October 30.   The pressure was too much, and Greeley himself passed away on November 29, just three weeks after Election Day.  "I thought I was running for the presidency, not for the penitentiary," Greeley told friends when asked about the Nast cartoons.  More than a few people pointed fingers at Thomas Nast's attacks as one factor driving Greeley to the grave.

Thomas Nast's legacy runs deep in American journalism, his ability to use cutting-edge technology (back then it was mass-produced wookcuts) to drive a hard-edged partisanship of personal attacks.  It's good that he used this talent to help drive Boss Tweed from office.  But not-so-good that he used it to destroy the reputation of Horace Greeley.  For more Nast cartoons from the 1872 campaign, click here.    

Monday, August 6, 2012

Great portrait of Abraham Lincoln, 1860

He still looks young and vaguely handsome in this print, published by New York's Currier and Ives in May 1860.  With sensitive eyes dominating the placid, sad face, Lincoln looks every bit the affluent, successful lawyer, representing Chicago railroads and corporations as well as small-town neighbors and friends around his home in downstate Springfield, Illinois.

Lincoln that month had won a stunning victory, surprising the country by capturing the Republican nomination for President of the United States.  His name suddenly on the front page of every newspaper, people clamored to see his face.  And with TV, newsreels, and even mass-produced photographs still far in the future,  Currier and Ives easily could demand $1.50 to $3.00 apiece (about $75 in modern money) for a portrait like this, especially during a hot political season.

Lincoln had won the nomination in a three day, three ballot convention widely considered the most exciting in America up to that time.  It came complete with marching bands, fireworks, and a good-time carnival atmosphere that drew some 40,000 people to frontier Chicago.  Lincoln himself was considered a long-shot underdog.  By all appearances, the Republican nomination in 1860 had been locked up in advance by another candidate, William Seward, the New York former governor and United States Senator.

But Lincoln captured the prize with nerve, ambition, and brass tacks.  His team played the kind of hardball politics that usually made reformers cringe -- packing the hall, planting rumors, trading for votes, manipulating seats, and the rest.  Still, it gave of one of the best presidents in American history.   (I try to capture the excitement of this story in my own new eBook Lincoln's Convention: Chicago 1860, told mostly through the eyes of newspaper writers.)

His four years as President would not be kind to Abraham Lincoln.  By the time he arrived in Washington to take the oath as President on March 4, 1861, the country had already split apart.  Seven Southern states had bolted to form the Confederate States of America.  Lincoln would preside over a long, bloody Civil War that would cost the country billions of dollars in treasure and 600,000 deaths before the Union was restored and slavery abolished.  Lincoln would see his own son Willie die in the White House of typhoid fever at just 12 years old as his wife Mary Todd Lincoln edged closer to mental instability.  By the time John Wilkes Booth shot him in April 1865, Lincoln's hair and beard would be largely grey, his face crisscrossed with lines and wrinkles.

But that was in the future in May 1860, as the handsome Illinois lawyer peered out from his Currier and Ives portrait at his moment of great achievement.  Abraham Lincoln always joked about his looks.   Accused once of dishonestly, he shot back "If I had two faces, do you think this is the one I'd be wearing."  His face perhaps wasn't a pretty one, but it was good one.      

Thursday, August 2, 2012

Why I hate this year's Presidential campaign !!

Some of you have noticed that I've written very little -- almost nothing -- in this Blog lately about what usually is my favorite topic: politics.  Yes, one reason is that I'm lazy, it's summer, and I've been busy  with other things -- more on that later.  But here's the basic truth:  I am finding this year's 2012 presidential contest a pathetic disappointment.  The candidates are shallow: Romney and Obama both.  The debate over "issues" is pointless chatter.  The news coverage is insipid.    The time spent on it -- sixteen months to pick a president -- is ridiculous. (In France or Britain, the whole campaign lasts two months.)   The free-reign influence of big money is cheapening the whole affair.  And the actual task of governing the country and dealing with the real economic crisis is treated as a boring afterthought.  (In fact, the actual decisions that Congress will make in this year's "lame duck" session after Election Day -- not talked about by either candidate -- may prove far more important to the future of the country that the presidential choice itself.)

Yes, the Republicans have been particularly terrible this year with their incoherent economics and right wing social views.  (Why couldn't we have George Romney as the candidate instead of Mitt?) But the process itself is out of control and off-putting.

So why have I been silent about this?  Frankly, I don't like having to sound like a crabby, cynical, nasty, grouchy old man on the Internet.  But when it comes to this 2012 presidential election, I don't know how to avoid it.   

So, in the spirit of straight talk,  I have decided to break my silence and start laying out my case.  It may take a few weeks and many posts -- using my usual historical comparisons --  but I'll give it my best.  And maybe in the process we'll discover some silver lining to this awful-looking mess.

So stay tuned to this spot.  More is coming.  All the best. --KA