This is the second best book ever, after the Bible of course, according to Mr. Trump. So I decided to take a look. Here's what I found.
It as published in 1987, almost thirty years ago. Based on the Donald Trump I found there, he hasn't changed much during that period. He still seems to be pretty much the same guy now as he is portrayed in the book by himself and co-author Tony Schwartz. And the way he operates hasn't changed much either. All in all, it is a remarkably candid self portrait.
It is also an easy read with a smooth, breezy style. I was able to knock the whole thing off in one long day. I would definitely recommend it to friend and foe alike. But if you don't want to make the investment you can go with my summary and analysis below. It relies heavily on direct quotes from the source so you can check my conclusions.
One caveat, it is not a deep dive into deal making. It is mostly war stories about this deal or that. And you should not be surprised to learn that Mr. Trump comes off as the smartest and most talented player in each story. Why write a book if you are not going to make yourself look good? I am going to begin where Mr. Trump began, with his philosophy.
[I am going to provide the page number for each quotation, should you wish to look any or all of them up. They are from the edition I read. Page numbering may differ slightly from edition to edition. But this should tell you approximately where to look regardless of the edition you use. As a further assist, I can tell you that in my edition the main body of the text ran to a total of 367 pages and started on page 1.]
Page 1 - "Most people are surprised by the way I work. I play it very loose. I don't carry a brief case. I try not to schedule too many meetings. I leave my door open. You can't be imaginative or entrepreneurial if you've got too much structure. I prefer to come to work each day and just see what develops."
Page 2 - "I try to learn from the past. But I plan for the future by focusing exclusively on the present. That's where the fun is. And if it can't be fun, what's the point."
Page 50 - "I never get attached to one deal or one approach."
See what I mean. I think this is pretty much the guy we see on the campaign trail. Then there's this:
Page 51 - "I like to think I have that instinct. That's why I don't have a lot of number cruncher's, and I don't trust fancy marketing surveys. I do my own surveys and draw my own conclusions."
That's what he wrote thirty years ago. But it could also be lifted from innumerable recent stump speeches and interviews.
If you want someone who goes with his gut, does not spend much time doing his homework, changes direction frequently, and does not put much value in stability or long term relationships, he's your guy. Next, let's see what he has to say about the press:
Page 56 - "One thing I have learned about the press is that they're always hungry for a good story, and the more sensational the better. It's in the nature of the job and I understand that."
Page 58 - "I play to people's fantasies."
Page 176 - "Good publicity is preferable to bad, but from a bottom line perspective, bad publicity is better than no publicity at all. Controversy, in short, sells."
It would be nice if commentators and editorial page writers understood the situation as well as Mr. Trump does. And, given that they write for a living, it would be nice if they put things as clearly, directly, and concisely as Mr. Trump does here. And this is how he saw things thirty years ago. He hasn't had to change his strategy because it still works. Every day in every way he proves that his understanding of the situation is still spot on. Consider:
Page 133 - "I worried about growing opposition, but publicly my posture was to take the offensive and concede nothing to my critics."
He continues to make this approach from thirty years ago work for him today.
I wish things were better now than they were thirty years ago. I wish that the press did a better job of telling us what we need to know and why we need to know it. I wish the press didn't spend all of its time chasing the shiny object of the moment. But, if anything the situation has gotten worse in the intervening period. That's not his doing. That's the press's doing. They richly deserve the low esteem they are currently held in by the public.
And speaking of old approaches that still work, here's what he had to say about Ed Koch, then Mayor of New York City. Mr. Koch was, shall we say "unhelpful" when it came to a number of projects Mr. Trump was trying to move forward at the time.
Page 306 - "What you have to understand about Ed Koch is that he is a bully, pure and simple. Bullies may act tough, but they're really closet cowards."
Page 343 - "Koch has achieved something that is quite miraculous. He has presided over an administration that is both pervasively corrupt and [italics in original] totally incompetent."
Ouch! Mr. Trump seems to have evolved (or perhaps devolved is a better word) here. Now he often resorts to the personal. "He's low energy." "Would you look at that face." But he often goes back to charges like "crooked". And thirty years ago he actually provided credible evidence. In his book he lists a number of Koch Administration officials who were put in jail, or at least lost their jobs, due to legal and ethical lapses. Now he relies on at best questionable sources like The National Enquirer, blog posts, conspiracy-theory web sites, and the like. And that's when he bothers to cite any source at all.
The book contains very little about the actual art of the deal. And what it does have to say is not particularly insightful or original. If you are interested in what little he does have to say on the subject you'll have to read the book. But I do want to point out two business practices I found very troubling.
He spends a lot of time on gambling casino deals he did in Atlantic City, New Jersey. The first of these involved what eventually became the Trump Plaza Hotel and Casino. He started out in a 50 - 50 partnership but eventually bought Holiday Inn out. He sold bonds to the public to finance this. This increased costs by $7 million per year. So why did he do it?
Page 220 - "To me it was money well spent. By relieving me of personal financial liability, it assured I'd sleep better at night."
This was how he always operated. Make sure that if things went wrong, someone else would be left holding the bag. In fact, with respect to a second casino deal he admitted that:
Page 238 - "In return, I did something I'd never done before: I personally guaranteed the loan."
Both of these deals eventually went south. But less than six months after Mr. Trump made his personal guarantee he again floated a bond issue in order to be relieved of personal responsibility. So when these two deals went south bond holders lost hundreds of millions of dollars. Mr. Trump suffered minor losses at most. And then there's Chapter 4.
Chapter 4 concerns Mr. Trump's first deal as an adult. It took place in Cincinnati, Ohio. Again, if you want all the details you'll have to read the book. I want to focus on "a fabulous man I'll call Irving" (page 85). "He was one of the greatest bullshit artists I've ever met" (page 85). So what's the problem? "[H]e wasn't the most trustworthy guy in the world" (page 85). In fact, "Irving had done all sorts of con jobs and swindles" (page 86). In Donald's book "[s]tealing is the worst" (page 86). And "I figure he managed to steal at least another $50,000 a year" (page 86). So why didn't Trump ever fire him? "Irving had it running well" (page 89). As long as Mr. Trump was doing ok employing crooks wasn't a problem. And another thing:
Page 60 - "You can't con people, at least not for long."
Page 60 - "If you can't deliver the goods, people will catch on."
But:
Page 60 - "Ronald Reagan is another example. He is so smooth and effective a performer that he completely won over the American people. Only now, nearly seven years later [remember, this was written in 1987], are people beginning to question whether there's anything beneath the smile."
So according to Trump Ronald Reagan was a con man that people saw through starting in 1987. That statement is manifestly untrue within the ranks of the GOP. Reagan was elevated to sainthood shortly after he left office a year or so after the above statement was made. He has stayed there ever since.
And how has Mr. Trump done with respect to delivering the goods? Let's look at the deals he discusses in the book.
Trump Tower was built with massive tax breaks and involved taking advantage of numerous loopholes. The book notes that "the city amended its zoning laws to prevent others from doing the same thing in the future" (page 172). Some of the breaks have yet to expire. At least one has another ten years to run from when I write this in 2016. So with lots of government help Trump Tower continues to be a success. Okay, what else?
The book talks about two major casino deals Mr. Trump has done in Atlantic City and mentions a third. The first one was the Trump Plaza Hotel and Casino. This was originally a 50 - 50 deal with Holiday Inn. But Trump bought them out using a bond issue to finance the transaction. It went through bankruptcy in 1992 and thereafter staggered along under various management regimes before eventually closing for good in 2014. Needless to say, the original bond holders lost a bundle.
His second deal was for Trump Castle. He bought it from Hilton for $320 million just before it opened. This was the "personally guaranteed" deal. And, as I indicated above, he quickly floated a bond issue that allowed him to get out of his personal guarantee. The bonds went into default in '91. Bondholders again lost their shirts. Various reorganizations followed, some involving Trump. It eventually went completely bankrupt in 2009 and was sold for $38 million.
Mr. Trump was also involved with the Trump Taj Mahal. It merits a brief mention, "I hope to have the Taj open by October 1988" (page 357) because at the time of the book's writing it was only a deal he hoped to do. But he did the deal and it opened in '88. It went bankrupt in '91.
Several other real estate deals were discussed. The only one for which I have been able to determine how things eventually turned out was "Television City". This was a large piece of prime real estate that featured, among other things, spectacular views of the Hudson River. Mr. Trump took a couple of runs at this piece of property. The first one petered out with no result. He discusses the second one in some detail in the book. At the time of writing it was still in progress.
His main idea was to erect the "world's tallest building" (page 339) as a centerpiece. Architect Helmut Jahn was put in charge. There would also be "seven other buildings" (page 339). The project ran into trouble so Trump dumped Jahn and replaced him with Alex Cooper. Other changes were made like moving the world's tallest building from the center to one end. At the end of the book Mr. Trump is still optimistic the project would be built.
We all know that this particular world's tallest building was never built. Things have since dragged on for years. The project has slowly evolved into something called "Riverside South" and Mr. Trump is no longer involved.
Finally, let me mention the US Football League. Never heard of it? That's because it was only around for a short time. But it was around long enough for Mr. Trump to buy the New Jersey Generals, pour a lot of money into them, and watch that team and the whole league fold around him. If you want the details, they are found in "Chapter 11 - Long Shot: The Spring and Fall of the USFL".
So based on the track records of Ronald Reagan, a man who Mr. Trump characterized in 1987 as a con man, and Mr. Trump himself, a self-described "great business man" who actually has a spotty record of business success, you can con people over a long period of time and they don't ever seem to catch on.
Now let me turn to Mr. Trump's personal life. He was the second son of Fred Trump, a very successful real estate developer. He grew up in the business. That's why he could say "when I graduated from college, I had a net worth of perhaps $200,000, and most of it was tied up in buildings in Brooklyn and Queens" (page 93). $200,000 was a whole lot of money in 1968. His dad also provided the reputation necessary to be considered, most of the financing for, and a lot of hands on help with his first deal, the "Cincinnati" project discussed at great length in chapter 4.
At the time the book was written he was married to Ivana. He lavished praise on her throughout the book but that didn't stop him from divorcing her in '91. He then married and divorced Marla Maples. He has been married to Melania since 2005.
So from the perspective of 1987 what did the future hold? "The biggest challenge I see over the next twenty years is to figure out some creative ways to give back what I've gotten." He has not much to show for himself on this, unless of course you count "The Apprentice". And, as the summary of how his deals turned out above indicates, it has not been smooth sailing in the business arena.
There is an aphorism about banking that goes: "If you owe $10,000 the bank owns you. If you owe $10,000,000 you own the bank". Mr. Trump has gotten into serious financial trouble several times. But each time he as been able to convince the banks that they would be better off if they did not force him into personal bankruptcy. But this has caused him to evolve his business strategy from one based on real estate deals to one based on licensing deals. He has rented his name to a wide variety for products and projects. He has been very successful doing this in spite of the fact that many of the projects he has licensed his name to have failed. But the licensing fees he has collected have made him a quite wealthy man.
So what's the bottom line? Mr. Trump is an opportunist. In the context of real estate development this is a good thing. The idea is to find deals where you can buy low and sell high, to find an opportunity. He has had very mixed success at this, however. He personally has done well. But he has left a trail of investors and customers who have done badly, often very badly. They have suffered losses, sometimes losses running to hundreds of millions of dollars. For these people a bet on Trump has been a bad bet.
Mr. Trump now aspires to the highest office in the land. We have a "representative" form of government. Elected officials are supposed to represent our interests even when they conflict with the office holder's personal interests. This is called "altruism". There is precious little altruism on display in "The Art of the Deal". Mr. Trump does discuss charitable activities. But for the most part they are small bore and self serving. They are designed to result in good publicity. He does discuss one larger project, Wollman Rink. In fact, he devotes an entire chapter (Chapter 12 - Ice Capades: Rebuilding Wollman Rink) to it. And this project was of genuine benefit to the community. He deserves to be commended for it.
But that's pretty much it. Instead we see not altruism but narcissism on display. The bulk of the book is devoted to chronicling his "pursuit of gratification from vanity or egotistic admiration of one's own attributes". And that's the dictionary definition of narcissism.
Mr. Trump could make a positive contribution because he actually is good at the art of the deal. One way we know this is by observing how successful he has been at minimizing his personal losses when a deal goes bad. But the job he aspires to involves much more than just deal making. And on nearly every other measure of suitability he falls far short. And he is the same man he was thirty years ago. Expecting him to now change his spots, to put the good of the country or his supporters ahead of his own good, is like expecting a leopard to become a vegetarian.
Monday, May 23, 2016
Tuesday, May 17, 2016
A Brief History of Political Parites
This post is inspired by recent events in the Presidential Campaign but is only very peripherally about it. Instead it is a high level look at political parties. It is inspired by the haggling about caucuses and delegates.
On the Republican side the Cruz people proved more adept at manipulating the system set up by the Republican party to govern the nomination process. This resulted in them getting more delegates than the results of the popular vote indicated. The outrage from the Trump people followed immediately. There has also recently been squabbling on the Democratic side. Most recently the Nevada state convention got downright ugly. Here it was the Sanders people who felt they were being mistreated. And again the blame fell to manipulation permitted by, and some would say encouraged by, Democratic party rules.
So in some sense "it's the party's fault". And not the GOP or the Democratic party but the whole party system. So what's going on? How did we get to this place? That's what I am going to investigate.
Before the American Revolution we had the thirteen colonies. They were governed from afar. Some foreign entity, a government, whatever, appointed a governor. There was often some kind of legislative body but it was strictly advisory. The governor and other appointed officials held all the power. In this environment there was no place for political parties and there were none.
This system morphed in a series of steps that occurred during the run up to the Revolutionary War, the prosecution of the War, and the immediate post-War period into the "Continental Congress" system. The appointed governors of each state were replaced by some more local government. That government appointed delegates to the Continental Congress and the Continental Congress ran the War and the immediate post-War aftermath.
But by design the Continental Congress was extremely weak. (See http://sigma5.blogspot.com/2015/12/civics-101.html for more discussion of this.) The states retained most of their power and ceded only limited power to the Continental Congress. Since all the delegates were chosen by the states there was no politics in the traditional sense within the Congress. So again there was no need for political parties and nothing that we would now recognize as a political party existed at the time.
But the weaknesses of this system quickly became apparent. This resulted in the convening of the group that wrote the Constitution that governs us now. Again there was no need for parties within the Convention but then they released their report, the draft of the Constitution, and a need arose. If it was going to be adopted there would need to be an organized push behind it. The group that came together to do this quickly became known as the Federalists. And they constituted the first US political party.
And where there is a force a counter-force often develops. A much more loosely organized group coalesced as the anti-Federalists. This was the genesis of our two party system. The system evolved quickly. The anti-Federalists did not last long as a group. The Federalists lasted longer but not long. The US system of political parties evolved quickly. The current Democratic Party was founded in 1828. The current Republican Party was founded just before the Civil War.
Since the 1860's we have had two main parties, the same Democratic and Republican parties that dominate the landscape today. Smaller parties have formed and dissolved along the way. But none has been successful enough to capture the Presidency nor more than the odd House or Senate seat here and there. The current US Senate currently lists two members as Independents, neither Democrats nor Republicans. But one of them, Bernie Sanders of Vermont, is running to become the standard bearer for the Democratic party. He is doing well enough that he has a real shot at capturing the nomination.
So in the most general way how do these parties operate? Well, the answer has changed over time. For a long time the stereotype of power brokers operating out of public view in smoke filled rooms was pretty accurate. Generally speaking, powerful groups organized at the state level. In the 1800s it was possible to attend a legislative session but practical considerations dictated that this was rarely done. The press existed but running a newspaper is expensive and, relatively speaking, it was much more expensive at the time. So press coverage was a spotty thing.
Part of the way a publisher funded his press operation at that time was to associate himself with one or another political faction. So many papers of the time had "Democrat" or "Republican" in their names. You knew you could get the Democratic spin on an issue in the Democratic paper and the Republican spin was available in the Republican paper. But things were less homogeneous. There tended to be the Farmers paper for the farmers, or the Cattleman's paper, or the Miner's paper, etc. But in every case none of these papers had the resources or interest to cover the legislature consistently and completely. So generally it was easy to get a group of players an a room and horse trade your way to an outcome.
And at this point in time all US Senators were appointed by state legislatures. So who got the job and what his agenda was came from the people who put him there and not the voters.
And to a great extent all this did not matter much. If you want to see what a truly tiny government looks like then the US government of the 1800s, especially the early 1800s, is a classic example. The government was funded primarily from tariffs collected by "Customs Houses" at seaports. Smuggling was pretty easy to get away with so this did not bring in much money. As a result the roads were terrible. Mail service was only a little better. There were no regulations. And, other than the odd US Marshall in the Old West, there wasn't much in the way of Federal law enforcement.
The size of the Federal government at that time meant that it had little direct impact on most people's day to day lives. So people did not think it important to keep political parties under close scrutiny. There were two long standing areas of conflict at the Federal level. The first one was the obvious one, slavery. The second one is now little discussed. But its visibility has recently risen due to of all things a Broadway show, in this case "Hamilton". This second issue is monetary policy. I figure everyone is already familiar with the slavery issue so I am going to confine myself to discussing monetary policy.
The two (there are always two -- we don't seem to be able to deal with three or more and, if there is only one side there is no conflict) sides of this issue have the nicknames of "hard" and "soft" money. And we have a modern (well, twentieth century) term for the numb of the issue, inflation. Is inflation a good thing or a bad thing? Hard money people come down on the side of bad and soft money people come down on the side of good. Currently political chatter takes it for granted that the hard/bad side is the only legitimate side so let me take a minute to make the case for the soft/good side.
Consider a mortgage on a farm. The banker wants hard money so that the money the farmer will pay to retire the mortgage will be worth close to the same as the money the banker originally loaned out. The farmer, on the other hand, loves inflation. That means that the real value of the money he needs to eventually raise to pay off the mortgage with will be low. So it will be easy to come by. The mediating factor here is the interest rate. If the banker can charge a high interest rate, higher than inflation, then he will get enough money back to end up with more value than he started with. He will turn a "real profit", a profit after inflation is allowed for.
The hard money people argue that in a soft money environment they will have to raise interest rates so high that the farmer will not be able to afford the mortgage so the farmer is disadvantaged in a soft money environment so he shouldn't support soft money. This argument has been persuasive at times and unpersuasive at others. Hamilton was a hard money proponent and Jefferson was a soft money man. So Hamilton set up the first Bank of the United States and Jefferson later destroyed it. We have been arguing about this ever since.
The Hamilton/Jefferson cycle was not the only round in this battle. A Second Bank of the United States was set up after Jefferson left office by a new group that believed in hard money. But it too was later destroyed when soft money people came into power. After some backing and filling the current Federal Reserve System was set up in 1914 (actually December of 1913). It endures to this day in more or less its original form. And one if its mandates is to keep inflation under control (maintain a hard money posture). "Fed" critics often argue with considerable justification that the Fed behaves a lot of the time like this is its only mandate. But officially it has a second mandate. That is to maintain full employment. A lot of the time these two mandates conflict and there is no agreed upon solution for what to do when they do.
So the main things the two political parties argued about in the 1800's were slavery and monetary policy. Which party was on which side of the monetary policy fight is not something historians have spent much time on so I frankly do not know much about the politics of this issue. The politics of the slavery issue are more well known.
At some point before the Civil War the Democratic party became associated with the pro-slavery faction. The Republican party was formed in large measure to be the anti-slavery party. This was cemented by the simultaneous association of Lincoln with the anti-slavery movement and the Republican party. But then Lincoln was assassinated and his moderate policies toward the South in the postwar period were supplanted by "Radical Republican" policies. As a result the "Solid South" was pushed into the arms of Democrats for about a hundred years.
Starting roughly in the 1960's the roles have become reversed. The Democratic party is now the pro-civil rights (roughly anti-slavery) party and the Republican party has become the pro-states rights (roughly the pro-slavery) party. The South is still solid but it is now solidly Republican.
But there is more to the 1800's than just monetary policy and slavery. The railroads were the first large corporations that ran multi-state operations. Prior to their emergence a "corporation" was a state chartered entity. This worked fine before railroads because few if any of these early corporations did business in more than one state. But railroads are inherently multi-state. So corporate charters are still issued by states but mostly they operate according to uniform laws emanating from the Federal Government. And it turns out corporations love regulation. They say they hate regulation but this is just political posturing.
Consider railroads again. There is something associated with railroad track called "gage". It is a measure of the distance separating the rails. Equipment built to use one gage can't be used on tracks constructed using any other gage. So all the regular (there are exceptions for use in mines and other constrained environments) railroad trackage in the US has the same gage. That means locomotives, rail cars, etc. can use any regular rail line in the country. That made it feasible to hook all railroad track together regardless of who owned it. The result was a rail system that spanned the entire nation. This was not true at the start of the Civil War. During the War a lot of non-conforming track was ripped up and replaced with "standard gage" track. And by the end of the war everything was standard gage. It has been ever since.
There are many, many, details that need to be standardized to make something like the rail system work. But I will confine myself to one more example, time zones. Before railroads there were no time zones. Every city and town had its own time. Typically a jeweler would set up a big clock as an advertisement and everyone else in town would "synchronize their watches" to that clock. That worked fine before railroads because by the time you got from one town to the next setting your watch ahead or back a few minutes was not a big deal. But it was a big deal for the railroads.
So they got the Federal Government to pass "time zone" regulations. Now every small town had to set its local time to the "time zone" time and railroads could publish schedules that were easy to use and contained reliable information. The simultaneous introduction of the telegraph also made it possible to synchronize clocks over a wide area. Finally, there is a little mentioned benefit to corporations of complex regulations. Over time the corporation develops techniques and methods for profitably operating in a regulatory environment. But figuring out how to deal with complex regulations represents a significant barrier to entry into the market that must be shouldered by potential competitors.
Over time starting roughly in the middle of the nineteenth century Federal laws and regulations got a lot more complicated in response to the needs of large corporations. So the Federal government and its activities became very important to these companies. But the late nineteenth century evolved into the era of the "robber barons". A few people made a lot of money (sound familiar?). Prominent among them were Carnegie (steel), Vanderbilt (railroads), and Rockefeller (Oil), to list some names that are still recognizable. Railroads had an obvious impact on consumers. But railroads were somehow special so people did not think in terms of some kind of government response to the behavior of the men who ran them.
Oil was different in that consumers saw nothing special about it. It was just another commodity and they came to resent the kind of blatant market manipulation that was so conspicuously on display. And people forget that this before the car became common. The "Oil" that the fight was about was to fuel lamps so that people could stay up in the evening. So Oil was prominent in the evolution of people's thinking into "us" (consumers) and "them" (the companies that sold stuff to consumers). And the reason this is important to the discussion at hand is that the political parties got involved. The Democrats became the "champions of the people" and the Republicans became the "champions of business interests".
There was an argument about this division that paralleled the hard money argument. It was encapsulated a few generations later as "what is good for General Motors is good for the USA". In the same way that hard money was ultimately good for farmers, it had been argued, a business friendly environment was good for consumers, it was now argued. Left alone businesses would innovate, the argument continued. This would cause prices to fall and more and better products to be made available. And this argument was successful for a long time. Generally speaking Republicans did well in the late 1800's and the early 1900's. Teddy Roosevelt, the "trust buster" was the Republican exception that proved the rule.
But one side effect of all this turmoil was scrutiny of the "smoke filled room" approach that both parties had used. An early reform was direct elections of Senators. Now people voted directly rather than the state organization picking someone. Another reform was the open caucus. This operated roughly like caucuses do now. Voters registered with parties. Any voter that was properly registered with a party could attend the caucus. This opened up the process.
Most state parties adopted a three stage system. Precinct caucuses (open to all registered party members who lived in the precinct) elected delegates to a county or district convention. County/district conventions elected delegates to the state convention. State conventions elected delegates to the national convention. The national convention selected the candidate. All of these conventions were open so it was a big improvement over the previous closed sessions involving only a few power players. But it was not enough for some.
The next evolution was the primary. The idea was a US Senate-like election to select the candidate. But the devil is in the details. What actually happens is a bunch of national delegates go to the national convention and they select the candidate. In an effort to deal with this inconvenience various rules that "bind" delegates to vote a certain way have been adopted. And, of course, each state does it a slightly different way.
And we see a wide variation in how primary votes translate into national convention delegates. The simplest scheme is "winner take all". The candidate that wins the primary gets all the delegates allocated to that state. But that means all the votes that went to any of the other candidates are ignored. In many states Republicans are using a modified winner take all procedure. There is a pool that is allocated using a winner take all rule for the state wide vote. Then there is a pool that is allocated to each congressional district. The winner of a particular district gets all the delegates allocated to that district. In most states the Democrats use a proportional system. If you win 60% of the votes you get 60% of the delegates. But there are rounding and other complexities that result in one candidate getting a couple more or a couple less delegates than the strict math would appear to dictate.
Woah! That's a lot of complexity. And whichever system you pick, someone is unhappy. So why are the parties doing this? Theoretically, the goal is to select a candidate that will win the election and make the party look good. That's what the boys in the smoke filled rooms were trying to do a hundred or so years ago. What we are arguing about is what is the best method of achieving the goal (win and look good)? Getting as close to direct election, the "democratic" solution, as possible is supposed to do the trick. But there is scant evidence that increasing the amount of democracy in the process works any better than the old "smoke filled room" approach.
And there are other considerations. The whole business of winning elections is hard. Governing is hard. And it is not supposed to be just a "winning is everything" thing. What attracts people to put in the blood, sweat, and tears is usually not a person but an idea. This idea is good. That idea is bad. So parties are supposed to stand for something. If a party's ideas are popular then they win elections and implement their ideas during the "governing" phase. If a party loses consistently then they should revise their suite of ideas and try again. Over time this should cause good ideas to triumph and bad ideas to be left by the way side. So party regulars are in it for the ideas.
Assume being an elected official is a glamorous job that many people covet. For those people winning is the reward. But for each elected official there is an army of party people toiling behind the scenes working to get him or her elected. In the old days having a seat at the table where decisions were being made in that proverbial smoke filled room (or having the ear of such a person) was the reward the soldier got.
In the modern era and in most elections the caucus goer is in the main a party stalwart who has invested in his or her party beyond just occasionally attending a caucus or voting in a primary. So they get to exercise undue influence because only a small percentage of voters actually can be bothered to attend. And I've been to caucuses. They are a lot of work and involve tolerating a lot of boredom as person after person drones on about something you don't care about. So in a perverse sense caucuses are a reward for party stalwarts. But there's more.
The election we are currently in features two "insurgent" candidates. Neither Donald Trump nor Bernie Sanders are stalwarts of their respective parties. That's not good. But what's worse is that a large percentage of their supporters are people who rarely participate. They have no experience. No one wins all the time and losing is always both a painful experience and an educational experience. You emerge from the experience both humbler and wiser. And this election process would be substantially improved by a large increase in both humility and wisdom. So I am in favor of caucuses. I think all in all they attract a better class of voter.
Finally, boiled down, a lot of the complaints are that the process is undemocratic. But no one is talking about the most undemocratic aspect of the whole process. That's the Electoral College. We don't vote for President. We vote for electors who vote for President. And the "allocation rule" for electors is almost as arcane as the allocation rules for delegate to the party conventions. There is a "winner take all" rule in place. If a candidate wins a state by a margin of just one vote they get all the votes for that state and none of the rest of the votes count.
But wait. It's worse. Your vote doesn't count if you vote for the loser. It doesn't really fully count even if you vote for the winner. The votes that count are all the votes that match the next highest vote getter and one more. The rest of the votes have no effect on the outcome. But wait. It's worse. We are all familiar with the whole "red" state, "blue" state, "swing" state thing. If you are in a state that is reliably red or reliably blue your vote doesn't really count. The only votes that count are votes in a swing state. And in most recent elections that boils down to about five states. And only one or two states turn out to be critical.
Now how would things work if we went to direct election of the President? All of a sudden every vote by every voter in every state would have equal value. If you were a Republican in Oklahoma, currently the reddest state when it comes to Presidential elections, your vote would count. And if you were a Democrat in Massachusetts, typically a reliably blue state, your vote would count. And in each case your vote would count equally with an Ohio or Florida voter's or that of an Oklahoma Democrat or a Massachusetts Republican. That is not the current situation. Look at where the Obama and Romney campaigns spent their money in 2012. They spent pennies in most states and dollars in swing states. Why? Because votes in most states were the next thing to worthless. Votes in the swingiest of swing states like Ohio were worth a bloody fortune.
The degree to which the worst state primary or caucus is unfair pales to insignificance when compared to the spectacular degree to which the Electoral College system is unfair. It would be nice if voters figured this out and applied pressure on their elected officials. By any measure the non-swing states far outnumber the swing states and could easily provide all the votes necessary to make it so. This should result in quick passage and ratification of a Constitutional Amendment to replace the Electoral College with direct election of the President. But voters don't care and everyone else has gotten used to the current system.
On the Republican side the Cruz people proved more adept at manipulating the system set up by the Republican party to govern the nomination process. This resulted in them getting more delegates than the results of the popular vote indicated. The outrage from the Trump people followed immediately. There has also recently been squabbling on the Democratic side. Most recently the Nevada state convention got downright ugly. Here it was the Sanders people who felt they were being mistreated. And again the blame fell to manipulation permitted by, and some would say encouraged by, Democratic party rules.
So in some sense "it's the party's fault". And not the GOP or the Democratic party but the whole party system. So what's going on? How did we get to this place? That's what I am going to investigate.
Before the American Revolution we had the thirteen colonies. They were governed from afar. Some foreign entity, a government, whatever, appointed a governor. There was often some kind of legislative body but it was strictly advisory. The governor and other appointed officials held all the power. In this environment there was no place for political parties and there were none.
This system morphed in a series of steps that occurred during the run up to the Revolutionary War, the prosecution of the War, and the immediate post-War period into the "Continental Congress" system. The appointed governors of each state were replaced by some more local government. That government appointed delegates to the Continental Congress and the Continental Congress ran the War and the immediate post-War aftermath.
But by design the Continental Congress was extremely weak. (See http://sigma5.blogspot.com/2015/12/civics-101.html for more discussion of this.) The states retained most of their power and ceded only limited power to the Continental Congress. Since all the delegates were chosen by the states there was no politics in the traditional sense within the Congress. So again there was no need for political parties and nothing that we would now recognize as a political party existed at the time.
But the weaknesses of this system quickly became apparent. This resulted in the convening of the group that wrote the Constitution that governs us now. Again there was no need for parties within the Convention but then they released their report, the draft of the Constitution, and a need arose. If it was going to be adopted there would need to be an organized push behind it. The group that came together to do this quickly became known as the Federalists. And they constituted the first US political party.
And where there is a force a counter-force often develops. A much more loosely organized group coalesced as the anti-Federalists. This was the genesis of our two party system. The system evolved quickly. The anti-Federalists did not last long as a group. The Federalists lasted longer but not long. The US system of political parties evolved quickly. The current Democratic Party was founded in 1828. The current Republican Party was founded just before the Civil War.
Since the 1860's we have had two main parties, the same Democratic and Republican parties that dominate the landscape today. Smaller parties have formed and dissolved along the way. But none has been successful enough to capture the Presidency nor more than the odd House or Senate seat here and there. The current US Senate currently lists two members as Independents, neither Democrats nor Republicans. But one of them, Bernie Sanders of Vermont, is running to become the standard bearer for the Democratic party. He is doing well enough that he has a real shot at capturing the nomination.
So in the most general way how do these parties operate? Well, the answer has changed over time. For a long time the stereotype of power brokers operating out of public view in smoke filled rooms was pretty accurate. Generally speaking, powerful groups organized at the state level. In the 1800s it was possible to attend a legislative session but practical considerations dictated that this was rarely done. The press existed but running a newspaper is expensive and, relatively speaking, it was much more expensive at the time. So press coverage was a spotty thing.
Part of the way a publisher funded his press operation at that time was to associate himself with one or another political faction. So many papers of the time had "Democrat" or "Republican" in their names. You knew you could get the Democratic spin on an issue in the Democratic paper and the Republican spin was available in the Republican paper. But things were less homogeneous. There tended to be the Farmers paper for the farmers, or the Cattleman's paper, or the Miner's paper, etc. But in every case none of these papers had the resources or interest to cover the legislature consistently and completely. So generally it was easy to get a group of players an a room and horse trade your way to an outcome.
And at this point in time all US Senators were appointed by state legislatures. So who got the job and what his agenda was came from the people who put him there and not the voters.
And to a great extent all this did not matter much. If you want to see what a truly tiny government looks like then the US government of the 1800s, especially the early 1800s, is a classic example. The government was funded primarily from tariffs collected by "Customs Houses" at seaports. Smuggling was pretty easy to get away with so this did not bring in much money. As a result the roads were terrible. Mail service was only a little better. There were no regulations. And, other than the odd US Marshall in the Old West, there wasn't much in the way of Federal law enforcement.
The size of the Federal government at that time meant that it had little direct impact on most people's day to day lives. So people did not think it important to keep political parties under close scrutiny. There were two long standing areas of conflict at the Federal level. The first one was the obvious one, slavery. The second one is now little discussed. But its visibility has recently risen due to of all things a Broadway show, in this case "Hamilton". This second issue is monetary policy. I figure everyone is already familiar with the slavery issue so I am going to confine myself to discussing monetary policy.
The two (there are always two -- we don't seem to be able to deal with three or more and, if there is only one side there is no conflict) sides of this issue have the nicknames of "hard" and "soft" money. And we have a modern (well, twentieth century) term for the numb of the issue, inflation. Is inflation a good thing or a bad thing? Hard money people come down on the side of bad and soft money people come down on the side of good. Currently political chatter takes it for granted that the hard/bad side is the only legitimate side so let me take a minute to make the case for the soft/good side.
Consider a mortgage on a farm. The banker wants hard money so that the money the farmer will pay to retire the mortgage will be worth close to the same as the money the banker originally loaned out. The farmer, on the other hand, loves inflation. That means that the real value of the money he needs to eventually raise to pay off the mortgage with will be low. So it will be easy to come by. The mediating factor here is the interest rate. If the banker can charge a high interest rate, higher than inflation, then he will get enough money back to end up with more value than he started with. He will turn a "real profit", a profit after inflation is allowed for.
The hard money people argue that in a soft money environment they will have to raise interest rates so high that the farmer will not be able to afford the mortgage so the farmer is disadvantaged in a soft money environment so he shouldn't support soft money. This argument has been persuasive at times and unpersuasive at others. Hamilton was a hard money proponent and Jefferson was a soft money man. So Hamilton set up the first Bank of the United States and Jefferson later destroyed it. We have been arguing about this ever since.
The Hamilton/Jefferson cycle was not the only round in this battle. A Second Bank of the United States was set up after Jefferson left office by a new group that believed in hard money. But it too was later destroyed when soft money people came into power. After some backing and filling the current Federal Reserve System was set up in 1914 (actually December of 1913). It endures to this day in more or less its original form. And one if its mandates is to keep inflation under control (maintain a hard money posture). "Fed" critics often argue with considerable justification that the Fed behaves a lot of the time like this is its only mandate. But officially it has a second mandate. That is to maintain full employment. A lot of the time these two mandates conflict and there is no agreed upon solution for what to do when they do.
So the main things the two political parties argued about in the 1800's were slavery and monetary policy. Which party was on which side of the monetary policy fight is not something historians have spent much time on so I frankly do not know much about the politics of this issue. The politics of the slavery issue are more well known.
At some point before the Civil War the Democratic party became associated with the pro-slavery faction. The Republican party was formed in large measure to be the anti-slavery party. This was cemented by the simultaneous association of Lincoln with the anti-slavery movement and the Republican party. But then Lincoln was assassinated and his moderate policies toward the South in the postwar period were supplanted by "Radical Republican" policies. As a result the "Solid South" was pushed into the arms of Democrats for about a hundred years.
Starting roughly in the 1960's the roles have become reversed. The Democratic party is now the pro-civil rights (roughly anti-slavery) party and the Republican party has become the pro-states rights (roughly the pro-slavery) party. The South is still solid but it is now solidly Republican.
But there is more to the 1800's than just monetary policy and slavery. The railroads were the first large corporations that ran multi-state operations. Prior to their emergence a "corporation" was a state chartered entity. This worked fine before railroads because few if any of these early corporations did business in more than one state. But railroads are inherently multi-state. So corporate charters are still issued by states but mostly they operate according to uniform laws emanating from the Federal Government. And it turns out corporations love regulation. They say they hate regulation but this is just political posturing.
Consider railroads again. There is something associated with railroad track called "gage". It is a measure of the distance separating the rails. Equipment built to use one gage can't be used on tracks constructed using any other gage. So all the regular (there are exceptions for use in mines and other constrained environments) railroad trackage in the US has the same gage. That means locomotives, rail cars, etc. can use any regular rail line in the country. That made it feasible to hook all railroad track together regardless of who owned it. The result was a rail system that spanned the entire nation. This was not true at the start of the Civil War. During the War a lot of non-conforming track was ripped up and replaced with "standard gage" track. And by the end of the war everything was standard gage. It has been ever since.
There are many, many, details that need to be standardized to make something like the rail system work. But I will confine myself to one more example, time zones. Before railroads there were no time zones. Every city and town had its own time. Typically a jeweler would set up a big clock as an advertisement and everyone else in town would "synchronize their watches" to that clock. That worked fine before railroads because by the time you got from one town to the next setting your watch ahead or back a few minutes was not a big deal. But it was a big deal for the railroads.
So they got the Federal Government to pass "time zone" regulations. Now every small town had to set its local time to the "time zone" time and railroads could publish schedules that were easy to use and contained reliable information. The simultaneous introduction of the telegraph also made it possible to synchronize clocks over a wide area. Finally, there is a little mentioned benefit to corporations of complex regulations. Over time the corporation develops techniques and methods for profitably operating in a regulatory environment. But figuring out how to deal with complex regulations represents a significant barrier to entry into the market that must be shouldered by potential competitors.
Over time starting roughly in the middle of the nineteenth century Federal laws and regulations got a lot more complicated in response to the needs of large corporations. So the Federal government and its activities became very important to these companies. But the late nineteenth century evolved into the era of the "robber barons". A few people made a lot of money (sound familiar?). Prominent among them were Carnegie (steel), Vanderbilt (railroads), and Rockefeller (Oil), to list some names that are still recognizable. Railroads had an obvious impact on consumers. But railroads were somehow special so people did not think in terms of some kind of government response to the behavior of the men who ran them.
Oil was different in that consumers saw nothing special about it. It was just another commodity and they came to resent the kind of blatant market manipulation that was so conspicuously on display. And people forget that this before the car became common. The "Oil" that the fight was about was to fuel lamps so that people could stay up in the evening. So Oil was prominent in the evolution of people's thinking into "us" (consumers) and "them" (the companies that sold stuff to consumers). And the reason this is important to the discussion at hand is that the political parties got involved. The Democrats became the "champions of the people" and the Republicans became the "champions of business interests".
There was an argument about this division that paralleled the hard money argument. It was encapsulated a few generations later as "what is good for General Motors is good for the USA". In the same way that hard money was ultimately good for farmers, it had been argued, a business friendly environment was good for consumers, it was now argued. Left alone businesses would innovate, the argument continued. This would cause prices to fall and more and better products to be made available. And this argument was successful for a long time. Generally speaking Republicans did well in the late 1800's and the early 1900's. Teddy Roosevelt, the "trust buster" was the Republican exception that proved the rule.
But one side effect of all this turmoil was scrutiny of the "smoke filled room" approach that both parties had used. An early reform was direct elections of Senators. Now people voted directly rather than the state organization picking someone. Another reform was the open caucus. This operated roughly like caucuses do now. Voters registered with parties. Any voter that was properly registered with a party could attend the caucus. This opened up the process.
Most state parties adopted a three stage system. Precinct caucuses (open to all registered party members who lived in the precinct) elected delegates to a county or district convention. County/district conventions elected delegates to the state convention. State conventions elected delegates to the national convention. The national convention selected the candidate. All of these conventions were open so it was a big improvement over the previous closed sessions involving only a few power players. But it was not enough for some.
The next evolution was the primary. The idea was a US Senate-like election to select the candidate. But the devil is in the details. What actually happens is a bunch of national delegates go to the national convention and they select the candidate. In an effort to deal with this inconvenience various rules that "bind" delegates to vote a certain way have been adopted. And, of course, each state does it a slightly different way.
And we see a wide variation in how primary votes translate into national convention delegates. The simplest scheme is "winner take all". The candidate that wins the primary gets all the delegates allocated to that state. But that means all the votes that went to any of the other candidates are ignored. In many states Republicans are using a modified winner take all procedure. There is a pool that is allocated using a winner take all rule for the state wide vote. Then there is a pool that is allocated to each congressional district. The winner of a particular district gets all the delegates allocated to that district. In most states the Democrats use a proportional system. If you win 60% of the votes you get 60% of the delegates. But there are rounding and other complexities that result in one candidate getting a couple more or a couple less delegates than the strict math would appear to dictate.
Woah! That's a lot of complexity. And whichever system you pick, someone is unhappy. So why are the parties doing this? Theoretically, the goal is to select a candidate that will win the election and make the party look good. That's what the boys in the smoke filled rooms were trying to do a hundred or so years ago. What we are arguing about is what is the best method of achieving the goal (win and look good)? Getting as close to direct election, the "democratic" solution, as possible is supposed to do the trick. But there is scant evidence that increasing the amount of democracy in the process works any better than the old "smoke filled room" approach.
And there are other considerations. The whole business of winning elections is hard. Governing is hard. And it is not supposed to be just a "winning is everything" thing. What attracts people to put in the blood, sweat, and tears is usually not a person but an idea. This idea is good. That idea is bad. So parties are supposed to stand for something. If a party's ideas are popular then they win elections and implement their ideas during the "governing" phase. If a party loses consistently then they should revise their suite of ideas and try again. Over time this should cause good ideas to triumph and bad ideas to be left by the way side. So party regulars are in it for the ideas.
Assume being an elected official is a glamorous job that many people covet. For those people winning is the reward. But for each elected official there is an army of party people toiling behind the scenes working to get him or her elected. In the old days having a seat at the table where decisions were being made in that proverbial smoke filled room (or having the ear of such a person) was the reward the soldier got.
In the modern era and in most elections the caucus goer is in the main a party stalwart who has invested in his or her party beyond just occasionally attending a caucus or voting in a primary. So they get to exercise undue influence because only a small percentage of voters actually can be bothered to attend. And I've been to caucuses. They are a lot of work and involve tolerating a lot of boredom as person after person drones on about something you don't care about. So in a perverse sense caucuses are a reward for party stalwarts. But there's more.
The election we are currently in features two "insurgent" candidates. Neither Donald Trump nor Bernie Sanders are stalwarts of their respective parties. That's not good. But what's worse is that a large percentage of their supporters are people who rarely participate. They have no experience. No one wins all the time and losing is always both a painful experience and an educational experience. You emerge from the experience both humbler and wiser. And this election process would be substantially improved by a large increase in both humility and wisdom. So I am in favor of caucuses. I think all in all they attract a better class of voter.
Finally, boiled down, a lot of the complaints are that the process is undemocratic. But no one is talking about the most undemocratic aspect of the whole process. That's the Electoral College. We don't vote for President. We vote for electors who vote for President. And the "allocation rule" for electors is almost as arcane as the allocation rules for delegate to the party conventions. There is a "winner take all" rule in place. If a candidate wins a state by a margin of just one vote they get all the votes for that state and none of the rest of the votes count.
But wait. It's worse. Your vote doesn't count if you vote for the loser. It doesn't really fully count even if you vote for the winner. The votes that count are all the votes that match the next highest vote getter and one more. The rest of the votes have no effect on the outcome. But wait. It's worse. We are all familiar with the whole "red" state, "blue" state, "swing" state thing. If you are in a state that is reliably red or reliably blue your vote doesn't really count. The only votes that count are votes in a swing state. And in most recent elections that boils down to about five states. And only one or two states turn out to be critical.
Now how would things work if we went to direct election of the President? All of a sudden every vote by every voter in every state would have equal value. If you were a Republican in Oklahoma, currently the reddest state when it comes to Presidential elections, your vote would count. And if you were a Democrat in Massachusetts, typically a reliably blue state, your vote would count. And in each case your vote would count equally with an Ohio or Florida voter's or that of an Oklahoma Democrat or a Massachusetts Republican. That is not the current situation. Look at where the Obama and Romney campaigns spent their money in 2012. They spent pennies in most states and dollars in swing states. Why? Because votes in most states were the next thing to worthless. Votes in the swingiest of swing states like Ohio were worth a bloody fortune.
The degree to which the worst state primary or caucus is unfair pales to insignificance when compared to the spectacular degree to which the Electoral College system is unfair. It would be nice if voters figured this out and applied pressure on their elected officials. By any measure the non-swing states far outnumber the swing states and could easily provide all the votes necessary to make it so. This should result in quick passage and ratification of a Constitutional Amendment to replace the Electoral College with direct election of the President. But voters don't care and everyone else has gotten used to the current system.
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