• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

By Moshe Silver

Election time kicks off with something for everyone – from Donald Trump ( all Circus, no Bread) to Bernie Sanders (Bread on every table and free Circus tickets for everyone.) 

Are You A Democrat Or A Socialist? - z 44

If you thought the average voter is not politically sophisticated, we offer Representative Debbie Wasserman Schultz, the chairwoman of the Democratic National Committee, who in a television interview was unable to articulate the difference between a Democrat and a Socialist.

America’s political multiple personality disorder goes back to the debate over the Constitution; the Federalists wanted to keep the loose confederation of states under the Articles of Confederation, and were opposed by James Madison’s Virginia faction who arrived in Philadelphia in 1787 determined to create a strong central government. If the Federalists were lilies in a pond — all drawing nourishment from the same pool, yet all free to float independent of the rest — the constitutional faction envisioned a wheel with the central government at its hub and the states as spokes; each distinct, yet joined in a single structure.

In the debate the term “federal” underwent a metamorphosis until the original Federalists (supporters of the Articles) were transformed into Anti-Federalists (opponents of the Constitution).  Within days of the draft constitution being submitted to the Continental Congress, critical pamphlets appeared under Roman pseudonyms, emphasizing the republican values of their authors (the first were signed “Cato” and “Brutus.”)

Into the fray leapt Alexander Hamilton.  Wielding one of the most brilliant and prolific pens in history, Hamilton oversaw the creation of the cornerstone of American political thought, The Federalist Papers. The (new) Federalists were much better organized, and had a more robust program than their antagonists. The Anti-Federalists were, after all, arguing for the status quo and against change; the Federalists were arguing for a document that would forge a nation.

The core of Hamilton’s vision was a national bank and a strong central government that would assume the debts of the states, collect tariffs, field a standing military, and allocate the nation’s resources among the states as required, and not in proportion to their population or ability to raise funds. Hamilton insisted that only the full faith and credibility emanating from a strong central bank would make America a full member of the club of nations.

Jefferson and his Republicans opposed Hamilton’s Federalists, rejecting the notion of a central government, a central bank, and a standing military. The end of the Napoleonic wars in Europe also reduced tension in America, and a growing sense of national unity reduced domestic partisanship. The Federalists withered, while the remaining Republicans rallied around Andrew Jackson, and in the early 1830s were renamed the Democratic Party, which it remains.

Jackson was hostile to the notion of a central bank and a paper currency. Thus it is something of a hoot that Jackson will remain on the $20 bill while Hamilton  is bounced for a player to be named later, a victim to the very system he created.

Today’s Democratic Party website says they

“… believe that we’re greater together than we are on our own — that this country succeeds when everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules. Our party, led by President Obama, is focused on building an economy that lifts up all Americans, not just those at the top.”

Historians trace the origins of socialism to the French Revolution and the labor abuses of the Industrial Revolution. The Socialist Party USA homepage wants

“… to establish a radical democracy that places people’s lives under their own control… non-racist, classless, feminist socialist society… where working people own and control the means of production and distribution through democratically-controlled public agencies, cooperatives, or other collective groups… where the production of society is used for the benefit of all humanity, not for the private profit of a few…”

So are you a Democrat or a socialist?

Today’s Democratic party occupies Hamilton’s hub and spokes position, seeking to strengthen the hub against the excesses of moneyed interests. (Positioning yourself as the party of the common person is difficult when your front-runner — nay, only-runner —complains that she has it tough, in a year where she and her husband took in some $25 million in speaking fees.  At the same time, a focus group of Trump supporters, all white, and mostly working-class, declared with passion “he’s one of us!” Did we sleep through something?)

Democrats place their faith in centralized of control over resources, restraint on excessive local interests, with guarantees of local autonomy where consistent with the national interest. The imperfection of elected leaders is balanced by the separation of powers, and the guarantee of regular elections which gives us an opportunity to throw the bums out.

If you think legitimate private and local interests need to be held in check and administered by a strong central government for the benefit of all, you could be a Democrat.

If, on the other hand, you believe in Philosopher Kings capable of magnanimously administering resources so that everyone is guaranteed to be a productive and valued member of society, then you may be a socialist.

If you are still not sure whether you are a Democrat, Republican or Socialist — or even too confused to call yourself “undecided” — don’t worry. The candidates are in the same boat as you.  But unlike you, one of them will be our next president.

 — Publius Puer

Moshe Silver is a Managing Director at Hedgeye and author of Fixing a Broken Wall Street.