Becoming Conservative

I was born into a labor union family in the San Francisco Bay Area; therefore, being a Democrat was a given. As I matured and had a family of my own I became increasingly progressive socially. Counterintuitively, I took a job in banking before continuing on to finish post graduate studies. I never intended this to be my career. Funny how life turns out. 40+ years later I am mostly retired from my high level career in finance, as an executive in capital markets. While I maintained my socially progressive foundation throughout, my years in finance, involving budgeting, management, forecasting, economics and making risky, market decisions shaped me into a fiscal conservative. I like to think that these two sides have been in balance. However, lately I sense that I am tilting a little towards conservatism.

I started out believing that conservatism was mostly about money. A older conservative once told a young version of me that young people were more liberal because they had not yet built wealth…they didn’t yet have much to conserve. Now in retirement, I see myself getting more conservative with my money. I need it to last as long as I will. As an older guy, I won’t likely be able to earn a lot back if I lose it. Yes, I’m getting more conservative financially, at least in how I manage my investments.

However, as I have studied conservative and progressive philosophies, and watched conservative and progressive politicians act, I’ve come to believe that the differences are less about money and more about societal ideals. And the ideals of conservatives seem all too often to have little to do with being ‘conservative’. Is this hypocrisy? A politically convenient lie? Sure, Republican politicians have preached ad nauseum about the ‘tax and spend’ Democrats, claiming that Democrats are irresponsible with fiscal budgets. Sounds like money is pretty important to conservatives. But as a student of economics, history shows that the only balanced budget in the last 50 years was under a Democratic President. Turns out both conservative and progressive leaders spend like wild Banshees.

The main difference between them is whether taxes are high enough to pay for the spending or whether the government is willing to spend far beyond the revenue it has booked and ‘pay’ for the spending with debt. Trump cut taxes massively and then spent massively, causing the federal debt to soar before anyone even heard the acronym Covid. Bush II had 9/11 occur 8 months into his Presidency. Despite his march into two wars, he cut taxes significantly causing the federal debt to balloon. The outlier conservative was Bush I, who seemed to care about keeping the federal budget in some sort of balance and was roundly criticized by his fellow conservatives for modest tax increases. The pioneer of this ‘spend and borrow’ tradition of conservatives was Reagan who for the first time since WWII slashed income taxes and at the same time instigated a new form of war with the Soviet Union…”we will destroy them by outspending them”. When Reagan did outspend the Soviets, the federal debt grew faster than at any time previously since WWII. Reagan's’ iconic Chief Economic Advisor, Art Laffer (Yes, the namesake of the Laffer curve, which was the inspiration for ‘trickle-down economics’, since soundly debunked), famously stated “federal debt doesn’t matter…it’s an accounting fiction”.

Now I’m in a quandary. I see myself as financially conservative which means to me that I gauge my spending carefully according to what I can afford. Because of this approach, I don’t carry a lot of debt…never have. Running up debt and spending far beyond what I take in feels irresponsible, the antithesis of conservatism. Moreover, it feels more ‘honest’ to live within my means. Seems to me that our government should decide how much it wants to spend and raise taxes if necessary to afford that level of spending, which would require government to stand in the spotlight and defend its’ choices Vs the more covert approach of building debt in the shadows while taking the politically easy move of cutting taxes. To live and project a lifestyle beyond ones means but through increasing debt tastes like a lie. Wouldn’t you agree Donald?

Perhaps the ideology that matters in distinguishing conservatives from progessives has to do with incentives. It is true that while both types of political leaders spend like there is no tomorrow, how they spend varies dramatically. Conservatives appear to hate paying for any governmental program that provides safety net services or that provides support for basic living costs in becoming productive citizens. I understand the conservative rationale regarding spending to be based on a philosophy of incentives. The philosophy goes something like this: if the government provides support, our citizens will rely on that federal support rather than working harder and smarter to earn success in life on their own. Governmental support is not good for the healthy development of its citizens (from a paternalistic perspective) nor a necessary or wise use of our finite government resources. To use a circus analogy, trapeze acrobats trained without a net would learn much faster…their fear of failure would drive them to excel. The conservative mantra for years has been ‘pull yourself up by your own bootstraps’… or perhaps ‘sink or swim’?

As I shared earlier, I am a markets based guy. In my extensive markets experience, I believe open, fair markets are highly effective in determining how money should be spent. Incentives are fundamental in how and why markets work well. As a manager/leader of hundreds of employees throughout my career, I also believe incentives are very important in motivating workers to excel. Sounds like my conservatism is showing. I agree…

However, while incentives motivate workers to excel, I am troubled by our ‘conservation’ of resources that results from conservative leaders’ focus only on incentives. The most valuable resource of American is its’ people, just like we used to say in corporate business, that the most valuable assets of the company ride the elevator up and down every day. A logical and foreseeable result of having our government focus on incentives instead of having a balance of incentives, support and safety net is our horrific and growing wealth gap while a huge and growing portion of Americans are not thriving and are vastly underproductive relative to their potential. We are under supporting our people, not helping them develop into their potential. This is just the macro view…don’t get me started on how important it is to level the playing field and work to end structural racism in our country. Safety net services essentially provide risk management help against some of the challenges of life which frequency derail many of our most fragile.

To use my perhaps somewhat extreme, previous analogy to make the point; if I was the head of the new trapeze department of the circus, and I started with say, 10 new recruits, would it be best to use a ‘sink or swim’ strategy with no support/training or safety net? It is possible that one of the ten recruits might be made of such special stuff and driven to figure it all out on her own (while being very lucky?) so that she becomes a star? Perhaps. It is equally possible that five of the other recruits crash…literally? Of course. The incentives focus does work to create ‘stars’, maybe 10 percent of the time. More likely 1 per cent of the time. Is this not similar to the unsustainable stratification of wealth in the US? Granted, an incentives only approach is aggressive and some businesses are built on that model and expect to experience a high rate of employee failure. However, from a country perspective, with hundreds of millions of citizens, I find that an aggressive, incentives only model for America is not conservative at all. Aggressiveness is not conservatism in my book. As we have experienced, the failure rate of its people, our people, is too high. We are not conserving our most precious resources.

As I think this through it is clear that I have a conservative perspective for the US, financially. As I get older, this perspective seems to be getting clearer. However, I am greatly troubled that my definition of financial conservatism is so different than those leaders in Washington who call themselves conservative. Call me a ‘kitchen table conservative’ I suppose…Perhaps I’m just too old fashioned

Socially? Bleeding heart…guilty as charged.