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Philip Mause
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My name is Phil Mause. I am a Senior Advisor with the Pacific Economics Group, focusing on energy, regulatory and valuation issues. I retired from 40 years of law practice earlier this year. I am a yield oriented investor and in the last two years, I have done reasonably well in junk bonds,... More
  • The Four Republican Parties 8 comments
    Jun 15, 2014 7:44 PM

    Recent events have made it clear that the Republican party really contains four distinct groups increasingly at war with one another. It is possible for an individual to be a member of more than one of the four groups but the four groups tend to have very different thematic agendas. The four groups are listed below.

    1. Libertarians - This group generally wants to reduce the size of government and reduce the intrusiveness of government regulations. It is epitomized by Ron and Rand Paul but includes many other Republicans. It generally advocates legalization of marijuana and generally supports what could be called an isolationist foreign policy. It is a group which can garner a great deal of support among young voters.

    2. Social Conservatives - This group - led by Rick Santorum and to a lesser extent Mike Hukabee - focuses on moral values issues. It would oppose the legalization of marijuana, gay marriage, abortion, perhaps some forms of birth control, gay rights in general, legalized gambling, and other measures viewed as encouraging immorality. It implicitly supports a greater role for the government in supervising matters which the libertarians consider to be "nobody else's business." Some elements of this group are strong supporters of Israel based on scenarios drawn from the Book of Revelations.

    3. Foreign Policy Hawks - This group generally supports a "tall in the saddle" foreign policy and a robust national security apparatus. McCain and Bush 2 were probably in this group. It tends to support increased defense spending and intervention in foreign disputes. Together with the libertarians, the inclusion of this group in the Republican party oddly puts the most dovish (libertarians) and the most hawkish Americans together in the same political party.

    4. Pro-Business Republicans - Calvin Coolidge once said that "the business of America is business." This is the Chamber of Commerce, Wall Street, retirees who invest in the stock market, etc. Romney is in this group. So too, Boehner, Steve Forbes, Trump, Bloomberg, and many Republicans from Blue states. Coolidge won be one of the largest majorities of any Republican in history. This group generally favors policies that help American business. This can sometimes mean less big government and it can sometimes mean more big government. Similarly, in foreign policy, it can sometimes mean more intervention aboard but it usually means less. The group would generally support things like the legalization of gambling at the state level because this would bring business to the state and reduce the need for taxes. It is now beginning to be skeptical about the national security state because that may make it harder for some US companies to do business abroad.

    There are more and more issues on which these four groups tend to come into conflict. Immigrations cuts across the different groups. Issues like the Export Import Bank pit libertarians against business Republicans. Getting tough with Russia tends to pit foreign policy hawks against business Republicans and libertarians. The four groups have created a public policy minefield for Republican politicians who must constantly be wary of taking positions which may offend one or more of the groups. In some situations, it is impossible to find a position which does not offend at least one of the groups. Immigration is probably such an issue.

    The Democrats should try to emphasize "wedge" issues which divide these various groups but are more likely to stumble into positions which allow the groups to unite. For example, providing federal funding for sex change operations is one of the few issues on which social conservatives and libertarians are likely to be able to unite in opposition. Republicans can also likely unite in opposition to bureaucratic bungles (the VA situation, possibly Bergdahl, Benghazi, etc.) and so we will hear more about these things going forward.

    On foreign policy, the Democrats are generally reactive. Ever since LBJ replaced JFK, Democrats prefer domestic policy and see foreign policy issues as distractions. They tend to follow an "evening news" approach, being forced to focus on issues highlighted by the media without having any overall strategy. They also are terrified that foreign policy hawks will depict them as "wimps" and so they tend to stumble into things like Vietnam, the Soviet grain embargo, support for the Arab Spring, voting in favor of the Iraq War, etc. without having any strategic vision of how such measures fit into some definition of the national interest and without a clear plan for ultimate resolution. This allows Democrats to be simultaneously attacked by hawks and doves (as happened in Vietnam) because the basic problem is one of competence.

    The Republicans have to hope that their internal fissures are papered over by the Democrats delivering them on a silver platter some issues which they can use to unite the troops. The Democrats will probably be up to the task but the fissures among Republican groups are becoming so wide that we may begin to see them become irreconcilable.

    What does this mean for financial markets? First of all, I would not count on the ability of the Republicans to come running if there is need for another "bail out." Libertarians and probably social issue conservatives would not likely support such action. Try to stay away from companies with too much leverage. Secondly, government contracting may become a tricky area as the Republicans (in search of issues on which they can unite) will focus more and more on "oversight" of government agency action in the hopes of uncovering bureaucratic corruption or bungling.

    The Republican party is evolving in new directions and the next couple of cycles will be of critical importance. We have seen this evolution in the past (from Lincoln to the pro-business gilded age Republicans to the Progressives to the anti-New Deal Republicans to the Eisenhower Republicans, etc., etc.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Comments (8)
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  • Anyoption
    , contributor
    Comments (1367) | Send Message
    Very good breakdown. It seems that these factions are proving to be what's hurting Republicans the most--divided, they fall
    16 Jun 2014, 08:52 AM Reply Like
  • Philip Mause
    , contributor
    Comments (4286) | Send Message
    Author’s reply » Thank you. Of course, to appeal to some of these groups all the Republicans have had to do so far is to NOT be the Democrats.
    16 Jun 2014, 11:36 AM Reply Like
  • Envoy Global Research
    , contributor
    Comments (591) | Send Message
    This is an interesting article. I disagree about future bailouts, because nearly all Libertarians are like atheists in a foxhole and when it comes to their personal portfolios they will always cry for a bailout in the worst case. 2008-2009 proved this beyond a shadow of a doubt.


    Anyway, my take is that the Democratic party today now stands for exactly what the Republican party used to stand for. This has confused the Republican party dramatically, so they are no longer sure what to support and this is what is causing all the havoc.


    For example, it is Republicans that crafted the major tenets of Affordable Care Act (which is a huge giveaway to insurance and pharmaceutical companies), and then lo and behold, Obama comes along and usurps this idea and calls it Obamacare. Quite confusing. So the Republicans predictably rail against it, even though they created it.


    There are many more examples of this type of flip flopping over the last decade between the parties.


    If Republicans were smart (am I dreaming?), and less curmudgeonly they would also flip their ideology around a bit and campaign on lower taxes for everyone, and expanded benefits for the poor. Already most Democrats have been convinced of the insane idea that cutting spending on everything that helps the poor/middle class is the appropriate way to grow the economy, so I don't see why Republicans need to defend that nonsensical idea anymore. Blame the Democrats for that nonsense and then call for lower taxes. Pretty much a platform of lower taxes plus better benefit programs would totally confuse Democrats, which would lead to a clear victory for the Republicans.
    16 Jun 2014, 06:49 PM Reply Like
  • Philip Mause
    , contributor
    Comments (4286) | Send Message
    Author’s reply » Lower taxes is a very good unifying theme for the Republicans with the exception of the deficit hawks. The problem with their recent strategy of "debt limit terror" is that it leads to a "compromise" involving temporary spending cuts and permanent tax increases so that the main impact of the Tea Party has been to enact permanent tax increases which, in the long run, will help finance permanent growth in the government.
    24 Jun 2014, 11:11 AM Reply Like
  • dk0131
    , contributor
    Comments (136) | Send Message
    I think this article is somewhat accurate. With that being said I think most or all Republicans feel that government is not the solution to most of their problems. Any thoughts about an article on how many Democrats parties there are ?
    21 Jun 2014, 01:58 PM Reply Like
  • Philip Mause
    , contributor
    Comments (4286) | Send Message
    Author’s reply » Group #1 definitely believes that the government is not the solution to its problems. But the other three groups are all willing and indeed anxious to use the government to achieve objectives they consider important. I think that the Democrats are more a party of pre-existing groups - minorities, gays, environmentalists, unions, etc. - rather than a party of ideologies. I think it is generally correct that the Democrats tend to see government action as a solution but in most cases it is different government action than the actions that the Republicans seek. The problem for the Republicans is that the four ideological groups are, in many ways, seeking such different things that they are almost bound to come into conflict with one another.
    22 Jun 2014, 09:27 AM Reply Like
  • dk0131
    , contributor
    Comments (136) | Send Message
    I appreciate the concern for the Republican Party and it being divided. I can assure you of one thing that unites the party and that is not having another Democratic like the one that is currently in the White House. The Democrat party seems to have a pretty simple play book. Throw a bone to each of groups that you mention…….. Minorities, gays, environmentalists, unions etc. and you will get their vote. In many cases these groups vote because of only one issue. The Democrat party for many years has assume that they will continue getting their votes of these groups and nothing has changed.
    The Republican Party needs to be more inclusive and to market the ideals of capitalism and not government central planning solutions.
    22 Jun 2014, 01:57 PM Reply Like
  • Philip Mause
    , contributor
    Comments (4286) | Send Message
    Author’s reply » I agree that the Republicans are united in wanting someone other than the current President. One problem is that they may not be united on whether to run someone who is not closely enough aligned with each of the groups even if he or she has the best chance of winning. They pretty much painted Romney into a corner in the primaries and the Democrats just had to repeat some of the themes established by his Republican opponents. I can remember 1952 when much of the party wanted to run Taft rather than Eisenhower even though it was pretty clear who would do better in the general election. So a constant theme will be whether a given candidate is a RINO and therefore should be denied the nomination even if he has the best chance of winning.
    I think that the Republicans best chance is in developing a compromise immigration strategy that takes the issue off the table, emphasizing their support for a broad based Energy Independence program for the USA, and constantly pointing out inefficiencies and other problems in government programs as part of a theme which is "the government should do fewer things but it should do them well." As long as they resist any compromise on immigration and threaten to throw the country into default over the debt ceiling, it will be tough for them in national elections. On social issues, they should move in the libertarian direction as many Republicans now advocate.
    23 Jun 2014, 01:03 AM Reply Like
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