Good Riddance To Rep. Eric Cantor: Bagman For Wall Street And The War Party

by David Stockman

Its possible to describe Rep.Eric Cantor as a serial sell-out. But that would be giving an unprincipled politician driven by an unalloyed ambition to climb the greasy pole of Washington power too much credit. In truth, Cantor never campaigned for any recognizable principle; he merely maneuvered his way to the top of the House GOP hierarchy by following in the tawdry footsteps of modern GOP bagmen like Tom DeLay and Roy Blunt.

One commentator had Cantor pegged right on the money, as it were, years ago. One the heels of the 2010 GOP landslide, it was evident that Cantor’s true ambition was to accumulate a massive war chest to further his own ambitions, not to seize on the tea party momentum to fundamentally reverse the tide of Big Government:

Hand-picked by Majority Whip Roy “Abramoff-R-Us” Blunt early in his tenure to be a deputy whip, sort of an official water-carrier, Cantor moved up swiftly through the ranks as a Blunt protégé, because he was cheerfully obedient when sitting in the room with Friends of Abramoff and because he was unusually good at the money. “He’s about the money,” one wag offers admiringly.

But he was never about conservative principles. Instead, Cantor is one of those post-Reagan Republicans who have managed to reduce conservative policy to such grandiose, content-free platitudes that there is never any danger that their stump speeches at home, or even on the floor of the House, will get in the way of doing Washington business as usual.

There are certain litmus tests that cogently demonstrate the difference between platitude and principle—-and one of them pertains to the matter of crony capitalist subsidies and tax breaks for big business. On that score, I once heard Cantor give a stem-winder in behalf of free markets at a conference full of business and financial types who nodded, applauded and whooped it up. But that was just a pro forma sermon. The next day he was back in Washington making sure that the Ex-Im bank authorization was extended for another 3-years.

In this case, Washington business as usual amounts to salving the spurious complaint of Boeing and General Electric lobbyists that the Brits, EU and Japan subsidize export finance for aircraft, jet engines and heavy capital equipment—-so American taxpayers need to level the playing field. Well, yes, if US policy is to be driven by the statist and socialist mistakes of foreign governments then by all means tax American farmers and bus drivers so that Boeing will make its quarterly EPS.

There is an alternative. Let Boeing and GE suffer a hairline reduction in EPS by providing their own concessional pricing to customers, while shielding millions of innocent US taxpayers and business from being dunned for the tab on April 15. Then let the free market decide where to allocate capital; and let America’s businesses, not Washington bureaucrats, discover where they have the greatest competitive advantage in both domestic and foreign markets, including the ones that are rigged by foreign governments which have an addiction to wasting taxpayer money.

What the beltway statists like Cantor do not understand is that there is no magic level of GDP, or Washington enabled quarterly rate of growth to get there. And most certainly there is no reason to believe that higher taxes on most of the economy to boost a thin but politically noisy sub-segment— commercial aircraft and jet engines—will make the GDP bigger and the nation wealthier.

The true conservative touchstone, therefore, is to let the free market decide how much GDP and how much growth. These should be an unplanned outcome on the free market, not a consequence of Washington-divined targets and beltway-directed policy interventions.

And the political rhetoric that goes with that proposition would intuitively resonant with the American public. Namely, that Washington meddling, regulating, subsidizing and taxing will make things worse, not better; and that the job of generating economic growth and employment belongs to the collectivity of American business, labor, entrepreneurs, savers and investors, not a handful of fixers inside the beltway. That is, twin peas-in-a-pod like Senator Chuck Schumer on the Left and Rep. Eric Cantor on the Right.

So his record speaks for itself. Rep. Cantor was a statist who had learned to lip-sync the platitudes of the modern Republican right. But on the defining issues of our times, he did not trust the free market for a moment, and did not have the slightest clue as to what fiscal rectitude requires after decades of Keynesian borrow and spend.

The fraught moment came on October 3, 2008 when he helped Hank Paulson, the Goldman Sachs plenipotentiary then occupying the 3rd floor of the Treasury Building, force the House GOP rank-and-file into a catastrophic retreat. That is, after properly rebuking the White House demand to bail-out the Wall Street gambling houses by voting “no” on the first TARP consideration, House Republicans were forced into a shameful about face on the second vote.

As much as anyone else, Eric Cantor bears the blame for this final and irreversible triumph of Big Government. It marked the full-dress return of the Keynesian policy model—-the prior defeat of which had been the one and only victory that the Reagan era actually accomplished on the battlefield of ideas. But Cantor’s platitudinal conservatism was so shallow that in the hour of crisis when principle actually matters, he could not recognize that he was being led down the primrose path by an out-and-out Keynesian money printer at the Fed and an economically illiterate Wall Street front-man at the Treasury.

And this goes to the heart of the phony economic conservatism of the Eric Cantor’s and Paul Ryan’s. Both voted for TARP and the auto bailouts because they are complete ignoramuses about the elephant in the room which is leading the Washington policy assault on free markets and fiscal rectitude. Namely, the Federal reserve and the monetary central planning model that has become national policy since the Greenspan era.

But that’s why we had the September 2008 crisis. It did not reflect a fundamental flaw of capitalism, or an outbreak of unusual greed, or insufficient regulation of investment banks—and most especially not a once-in-a-hundred-years outbreak of something called “contagion” that required throwing away the rules of the free market to save it, as the clueless occupant of the White House then phrased it.

No, it was just another central bank enabled financial bubble bursting. That is the inherent and inexorable result of destroying honest price discovery on Wall Street and placing “puts”, props and pegs under the price and yields of securities in the capital and money markets.

In short, the Fed has turned Wall Street into a dangerous gambling casino and Washington into ceaseless fiscal auction. And that’s where Cantor’s real sin comes into play. Not once after the financial crisis did Cantor or the so-called establishment GOP leadership take on the elephant in the room. Never did he even remotely recognize that the monetary politburo ensconced in the Eccles Building has accomplished what amounts to an economic coup d tat.

Stated differently, financial repression, ZIRP, QE, wealth effects and the Greenspan/Bernanke/Yellen “put” under the stock market and risk assets generally are not just a major policy mistake; they are a full-throttle assault on the heart and soul of conservative economics.

You can not expect to have fiscal rectitude in a modern democracy, for example, when the central bank since the year 2000 has monetized nearly $4 trillion of public debt—and once Paulson’s “bazooka” failed in September 2008, the GSE securities among that total most surely are de facto public debt. Indeed, financial repression makes the carry cost of the public debt so painless—-that is, probably about $400 billion per year less than it would be under a regime of free market interest rates—that not one in a hundred politicians can see they virtue of fallen on the fiscal sword in the here and now in behalf of unborn generations of taxpayers who will carry the burden of today’s fiscal folly.

So it has been Keynesian central bankers, ironically, that have enabled platitudinous conservatives like Cantor to have their cake and eat it, too. To be sure, the latter have never missed an opportunity to scold the self-avowed big spender currently in the White House for his sorry fiscal record, but look what they have done instead.

Year after year they have proposed phony baloney budgets based on accounting fairy dust and pie-in-the sky economic assumptions two or more decades down the road that give constituents not a single clue as to the sacrifices and pain that will be needed to tame the endless profligacy of the nation’s Welfare State and Warfare State. At the same time, they have folded like a lawn chair every time push has come to shove on continuing resolution and debt ceiling crises in the here and now.

Cantor’s record on this score is so horrendous that he ought to spend the next decade in sackcloth and ashes doing penance to the god of fiscal rectitude, if there is one. On the first point, he has been an avid backer of the serial “Ryan” budgets, but each and every one of these dopey plans have significantly increased defense spending and given a free pass to the nation’s massive social insurance system. Yet the latter costs $1.5 trillion per year and embodies the sheer myth that social security and Medicare are earned retirement insurance and are funded out of “assets” that have been accumulated over decades.

In fact, there is nothing in those trust funds except Treasury IOUs. And there are few things more destructive of job creation in the high-cost American economy than the 15% payroll tax that currently underfunds the system, and which will inexorably become even more economically destructive as it rises in the future.

So there is no alternative accept to call the social insurance Ponzi for what it is and to impose a sweeping means test on the millions of affluent retires getting combined social security/Medicare benefits of upwards of $50,000 per year which they didn’t earn. That could then be accompanied with a switch to general revenue funding from a consumption tax—so that the  onerous payroll levy which parades as an “insurance premium” could be sharply reduced or eliminated.

Yet Cantor and Ryan just pretended that social insurance didn’t matter: Social Security got a free pass forever and Medicare was always to be fixed after a decade into the future—a point which never comes. Instead, they made their numbers add up with savage cuts in the means tested safety net, but even these cuts were phony.  They were to occur by block granting food stamps, Medicaid and other welfare programs and then returning them to the states with a 20-25% haircut.

House Republicans invented that ploy way back in the early 1980s in order to duck voting for real reforms, but the political scam was immediately self-evident. Not a single GOP governor wanted the task of being the “out-sourced” budget cutter!

The same has been true ever since. So the Ryan-Cantor position on the entire $2.5 trillion domestic budget is to punt on the huge social insurance portion and to scam on  the rest.  Yet once actual defense increases are thrown into the budget pot, the fraudulence of the Cantor-Ryan fiscal position becomes all the more evident.

Without providing an iota of honest disclosure or even a semblance of a credible outline for shrinking a Federal budget which will spend upwards of $50 trillion over the next decade, they insist that taxes are too high and that the secret to the fiscal challenge is even more tax cuts so that we get even more rosy scenario economic growth than is built into the CBO’s Keynesian economic forecasts to begin with.

In short, this is just kidstuff. Cantor and Ryan have effectively removed the GOP from the field of fiscal battle by serving up budgetary platitudes for home consumption by the rank and file. At the same time, they have whiffed each and every time they have faced an action forcing deadline. In the spring of 2011, for example, in connection with the CR expiration crisis, the served up $39 billion in “cuts” that were so transparently phony that the CBO scored them as saving $4 billion at best. And then spending as usual resumed.

In the summer of that year they caved again—this time on the debt ceiling crisis. The solution of the budget super-committee and the automatic sequester speaks for itself.  The latter never had any possibility of producing a real budget shrinkage plan. And when the sequester threatened to actually bite into spending, it was Ryan and Cantor who lead the charge in  behalf of a compromise to restore $22 billion of spending for defense by giving the liberals $22 billion in higher spending for domestic programs.

At the end of the day, that ignominious Ryan-Murray compromise goes to the very heart of Cantor’s betrayal of the cause of free markets and small government. He has been an unabashed servant of the Washington War Party during his entire career. Time and time again, he helped whip the GOP rank and file into a frenzy of militaristic bombast about imaginary threats to America’s security in places all over the globe which are none of our business. That absolute nonsense of sanctions and unrelenting hostility to the regime in Tehran is perhaps the most egregious example.

So Eric Cantor made a career of milking the Warfare State and pandering to Wall Street. This brought him nearly to the top of the Washington heap. But in the end, it did not fool his constituents.  And most certainly it set back the conservative cause immeasurably.