Thursday, July 28, 2011

The History of Compromise

The History of Compromise

Americans have always been inclined to join groups in order to fulfill a particular ideal. These groups stem from the abolitionists to prohibitionists, from civil service reformers to civil rights activists. But, it is also important to take into consideration an American inclination to compromise. Even before our modern American government was instituted the federalists and anti-federalists were fighting for their governmental ideals only to produce a compromise: the constitution. Compromise is essential to insure that the best option for everyone can be met. Now, I am going to briefly discuss the most important compromise in America’s history along with the consequences of a political stalemate.

The Federalists and the Anti-Federalists

The Federalists supported a strong central government with a national bank and strong ties to England (through the passage of the Jay Treaty). Opposed to the Federalists, the Anti-Federalists supported a decentralized government along with support for France over England. When the Constitutional Convention of 1787 began, both sides argued for their particular ideals. The Federalists denied any plans that did not create a strong central government while the anti-federalists boycotted the formation of any constitution out of fear that it would create a monarchy in the United States. The anti-federalists were strictly supportive of states’ rights under a weak central government (like that under the Articles of Confederation). Though both factions had conflicting ideologies, in the end, a compromise created the U.S. Constitution. The Connecticut Compromise (also known as The Great Compromise) created a bicameral legislature in which the upper house consists of a senate in which every state gets an equal amount of senators (derived from the New Jersey Plan) and in which the lower house consists of a house of representatives in which the amount of representatives is determined by population size (derived from the Virginia Plan). However, the real compromise is located in probably the most referenced part of the Constitution.  Though five of the thirteen states had easily ratified the Constitution, a Massachusetts, influenced by Anti-Federalists, would not ratify the Constitution until the Constitution carried some provisions. These provisions later became the bill of rights. Thus, in the end the Federalists got their central government through the ratification of the Constitution and the Anti-Federalists got a clear protection of their rights through the instatement of the Bill of Rights. Compromise on issues despite two opposing parties or factions is what has shaped the country since the beginning.

Thomas Jefferson: “Half a loaf of bread is better than no bread at all”

The Effects of Party Division

It becomes very difficult to find a compromise when there are factions in one group. In American Politics, discussion with two parties can lead to a compromise in the middle. Sometimes the compromise leans left or right due to which party has more seats in congress or in the senate, but for the most part, important decisions end with compromise. However, factions do not only hinder the efficiency of government, but they also cause the opposite party to win. In my opinion, the most significant faction turned third party ticket was the bull-moose party ticket for the election of 1912. The bull-moose party is important because it began long before the actual election of 1912, about thirty years before the election.  By the early 1880s, the Republicans were a powerhouse party. There had been a Republican president in all, but one instance since Abraham Lincoln had been assassinated up until Cleveland was elected. However, there was deep division in the Republican Party at the time between those Republicans who wanted to remain within a system of political machines and Republicans who wanted to see civil service reform. The zenith of the dispute could be seen during the Republican National Convention of 1884. When James G. Blaine was elected as the Republican candidate for the party (a man who had been known for his shady dealings), a large group of Republicans, known as “mugwumps,” briefly switched parties to support Grover Cleveland’s ticket for the presidency. Of course, with this added support, Grover Cleveland won the election to become the only president from the Democratic Party within a period of 44 years (1869- 1913, he won twice for a total of 8 years). The most important symbol to come out of this separated Republican Party was Theodore Roosevelt. The most progressive president of his time, Theodore Roosevelt also experienced a time of Republican political dominance in the first decade of the 20th century. Upon returning from a trip to Africa, and finding that his friend William Howard Taft’s policies had changed his ideal country, Theodore Roosevelt began the Bull Moose Party (Progressive Party) to challenge for the presidency of the United States once more. The Bull Moose Party called for a national health service, social insurance, an 8 hour work day and women’s suffrage (amongst many other progressive ideals) to fight what Roosevelt thought as Taft’s conservative policies. Ultimately, Woodrow Wilson, the Democrat, won the election once the Republican faithful split the vote between the Bull Moose Party and the Republican Party. Even though Theodore Roosevelt was once a strong Republican, divisions in the party caused him to help a Democrat candidate win in both the election of 1884 and the election of 1912. Division proves to be ultimately detrimental for any side.

Why the Tea Party Faction’s Destiny is Dictated by History

My opinion of the Tea Party caucus in the Republican Party is less than good. However, I’m going to reference the Bull Moose Effect of 1912. The upcoming election is in 2012 and it is exactly 100 years after Theodore Roosevelt split the Republican vote to help Woodrow Wilson win the election of 1912. In 2010, the Tea Party came into the scene in response to what many people saw as a government that was not solving the problems of the economy for the liking of the American people. Remember, in 2010, the Tea Party during the 2010 congressional elections was an inexperienced caucus. Though libertarian type politics had taken form through candidates like Ron Paul, no one had officially taken office as a member of the Tea Party. After the Republicans won the house in 2010, and taking into consideration the Tea Party’s conservative ideals (which showed some change from the classic Republican Party), I could see that there was a possibility that a repeat may occur in 2012. For example, if Michelle Bachman (Tea Party Caucus founder) wins the Republican nomination, more moderate Republicans might choose to vote for Barack Obama, thus splitting the vote amongst moderate and more conservative republicans. A deep division in the Republican party would not help solidify a win.
Lack of Compromise Creates an Inefficient Government
A faction can ruin the aspirations of a political party, but the lack of compromise can destroy the well-being of a nation. The debt ceiling had never been an issue before until now. I guess that in everyone’s minds regardless of where everyone’s ideologies lay, no one could disagree that protecting the United State’s credit and paying off the nation’s debt was a priority. Yet, the country did not have to deal with the Tea Party before. The Tea Party is threatening not to vote to raise the debt ceiling without major cuts in spending. The Democrats obliged. The Democrats offered 1.5+ trillion dollars in cuts; however, the Republicans would not put tax revenues into discussion. It’s not the Republicans fault because I would like to believe that the Republicans would love to compromise on this issue. The Democrats offered trillions in cuts, which is a big step considering the Democrats strongly support many of the programs they are cutting from. Nonetheless, the Tea Party will not budge to neither raise taxes on the rich nor end subsidies on some of the companies with the biggest revenues (oil companies in particular). The Republicans do not want to compromise because they are trying to keep the Republicans united while the more radical tea party members seem to stick to this misplaced idea that no compromise is the most efficient route. The Republican Party has always been known for being a very united party, but after this dilemma, who knows what future of the Tea Party and the classic Republican Party will become. The country was never meant to completely stick to the arguments of one party. Even from the beginning, two opposing parties would come together to create the most efficient solution for the country through elected officials. Like Thomas Jefferson stated before, “Half a loaf of bread is better than no bread at all.” Since when was a small fraction of a party given the power to hog everyone’s bread? An efficient government stems from efficient discussion ending in some type of compromise. Throughout American Politics, both Democrats and Republicans have been able to somehow (though admittedly difficulty at times) find a way to defeat strongly opposed ideological views. Our American democracy is simply built on an effort to compromise.

- WSQ

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Wednesday, July 20, 2011

What if the USA were to default on its debts?

 What if the USA were to default on its debts?
Recent talk has been harboring amidst the stalemate between the Democrats and Republicans on passing a budget deal. No one knows what a United States in bankruptcy would look like since every government up to the contemporary one have passed a debt ceiling to let the United States fulfill its fiscal obligations. Though much political party fervor revolves around the issue in an ideological storm, the effects of an American default can further be scrutinized through a discussion of Argentina’s economic woes in the late 1990s and early 2000s. Argentina, so far, has been the largest sovereign nation to undergo a default. If the United States is to be next, we should understand any repercussions and even if we should allow a default.
Background
Coming into 1990, Argentina was already facing a heavy round of hyperinflation. The initial measures of the early 1990s (administered by Domingo Cavallo) included a fixed value of the Argentinean currency to the American dollar (at 10,000 Argentine pesos per US Dollar). The initiative was further solidified by La Ley de Convertibilidad in which the Argentine Peso was restored on a fixed rate to the US Dollar. The effects were drastic: inflation dropped and prices were insured while the quality of life amongst Argentineans improved.
The Problems
The fixed rate made imports very cheap. In response, the government increased imports to the point that Argentinean industry decreased to cause higher unemployment. Government spending continued to rise along with internal corruption in the government. The main problem, in my opinion, was Argentina’s dependence on other nations: The peso had a fixed rate on the dollar (so the peso would do well as long as the dollar did well in the market and vice versa) and Argentina could not depend on its own industries since it invested so much in imports (Brazil and Mexico were Argentina’s two biggest trading partners).  The problem with having a fixed exchange rate is that the country has no control over the money in circulation. For example, in the United States, if inflation is high in the economy the government can essentially buy the money back to add value to the money in circulation. Conversely, if deflation is rampant, then the government can attribute more money into circulation. The treasury department has some control over the economy. The main argument against a fixed exchange rate is the lack of control of a country’s economy (Argentina had a fixed exchange rate, thus it had no control of its money). Unfortunately for the Argentinean government, the American dollar was strong in the late 1990s, so that made the peso strong as well in as time when Brazil’s currency fell in value. Thus, Argentinean exporters had a difficult time exporting goods to one of its main trading partners. With high unemployment and less revenue the future of the Argentinean economy looked grim. By December 2001, street protests were common, the president resigned his position, and Argentina defaulted. The Peso immediately fell in value.
The United States
Obviously, the case between the United States and Argentina is very different. First of all, the United States does not operate on a fixed rate. So, the Federal Reserve can control the circulation of money by buying and selling bonds when the situation is appropriate. Second of all, an American default depends on the decision of the government, and it is not an inevitable consequence of bad economic policies. Now, let’s look at some of the consequences of a default for the United States. If the United States were to default, the value of the American dollar would drop drastically. Then, interest rates would increase, making future borrowing more expensive for the United States in the long run.  Also, exports would become cheaper for other countries while imports would become more expensive. But, one must also take a perspective in international relations. Most countries would not be positive to the fact that their assets in American dollars all of a sudden lost a tremendous amount of value. Not only would countries be weary of conducting future business with the United States (seeing that the default was not necessary in the first place), but Americans would experience two economic crisis within five years. I do not believe that the world, nor Americans, is prepared for the effects of the default of the world’s biggest economy. We must withhold the needs of the country before the needs of any political party.

- WSQ

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