Jeff  Carter
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Been reading some blogs here and there. The big CPAC convention is in Washington DC this weekend. All the major domo conservatives will be there to give speeches and network. Invariably, when you read a conservative blog post from time to time, you will read a comment like this, “Sigh, I miss Ronald Reagan.”.

Newsflash: He passed away. He’s not coming back. He was great, and he articulated conservative values better than 99% of the people today.

The other thing many conservatives fail to realize is that the world has changed 180 degrees from when Reagan was in power. What was the greatest threat in 1980 to the US? If you answered communism and the Cold War you got it right. Reagan won the Cold War.

Quick, what’s the greatest threat to America today? If you answered terrorism, you are not correct. The absolute greatest threat to America today is government debt. Debt to GDP ratios have steadily escalated to out of control levels. The amount of unfunded liabilities on the books of every level of government threatens to overwhelm taxpayers. It cannot go on. Eventually the math of net present value catches up to you.

Many of these liabilities were ensconced in budgets years ago. The reason that they didn’t bubble up was two fold. First, the rate of growth in the broader economy masked them. When a public pension fund imputed a rate of return on investment of 6-7% over time, it looked conservative given the growth rate of the US macroeconomy from 1982-2000. Pick the right basket of stocks and you could easily jump that hurdle rate. In the last ten years though, it’s been a bit tougher.

Combine a slow growth economy with demographic changes. The baby boomers are retiring and becoming consumers of government services rather than producers for government services. Any accountant that played it straight would tell you both Medicare and Social Security are flat broke. Only government accounting machinations and judgements show they aren’t. If you believe them, then I have a bridge in Brooklyn that I’d like you to bid on.

All this consternation brings many conservatives back to Reagan. He was the last truly conservative President we had. That’s the wrong approach.

What conservatives need to do is apply the same basic principles to the situation today. What’s the best way to fight the war on debt? How do we win? How do we win the arguments against people that believe government and government programs are the only way out?

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Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.