Straight Talk from Phil Gramm; Rebuke from McCain
Long before he was a national figure…and, seemingly aeons before he was slapped down by John McCain…I began a Phil Gramm fan: when he was a little known, folksy Democratic congressman from Corsicana, Texas with a fondness for a product Quaker Oats made, Wolf Brand chili. When he succeeded a tiger in the House in that south Texas district in 1978—a tiger literally—“Tiger” Teague, a conservative Democrat with a congressional medal of honor—I happened to drop in on him in his tacky freshman quarters at the Longworth House Office building, the same building I had worked in twenty years earlier as a House staffer. Wolf Brand Chili was made in Corsicana and I brought a box of it with me as an introduction to our newest congressman.
Ethical purists would say I tried to bribe a congressman with an unsolicited gift but he leapt out of his chair, pumped my hand and made a delicious concoction for both of us to eat. I must admit now that Mexican hot spicy chili isn’t my thing—but it is…at least was…Gramm’s. As I managed to gulp down chili which caused my eyes to water and nostrils to run wet from its strength, Gramm, a Ph.D in economics but who hides it well, asked if I had read a book about Wolf Brand. I hadn’t but he produced it from his shelf propped next to a tract he had written for his doctorate on with the title “Laissez-Faire and the Optimum Quantity of Money” republished in the magazine “Economic Inquiry” of March, 1974. It was well-thumbed and called “A Bowl of Red.”
After hearing his lesson on the economy, expressed in down-to-earth southern talk (he was born in Georgia, an army brat, at Fort Benning), I became a fan and am so now. He was the first one to instruct me on the Dickie Flatt test to determine what federal programs are worthwhile. Dickie Flatt was a printed in Mexia, Texas, who never finished high school but in Gramm’s eloquent twang represented the problems small businessmen have with taxation, regulation and government spending.
Like Dickie Flatt, who still lives in Mexia and whom I was to meet years later, I became hooked on Phil Gramm. I was delighted that one of his hard-nosed fiscal sense existed in the Democratic party and hoped he’d stay because as most know who read my stuff, I want to have a strong two-party system instead of a one-party system where commonsense resides mostly in the Republicans and nuttiness and far-left goofyness with the Democrats, the reason being when the pendulum swings…as it inevitably does…we want a Democratic party to be able to think straight. Phil Gramm agreed with me but he was pessimistic that he would ever amount to much as a Democrat, even though he WAS one at the time.
Well, you know what happened. Ronald Reagan got in two years later and Gramm fell in love with Reagan conservatism. When Reagan presented his budget and Tip O’Neill began to ridicule it, Gramm, a member of the Budget committee, had no qualms about becoming a mole inside the Democratic House for Reagan. So honest was he that it was no surprise because in the House Democratic caucus session on the budget, he made the same case Reagan was making.
So he was called up short and told by the House leadership: you have to make a choice. Do you want to be loyal to the president or to Tip O’Neill?
Gramm answered in his south Georgia twang transferred to south Texas: “You mean ah have to vote like y’all? Hell no!”
So he was stripped of his Budget committee job. That happened to be the very day that I stopped in to see him once again, as part of my regular itinerary on the Hill—hoping he would give me more primer lessons on the economy.
Instead, he said: “No lesson today. Ah’m resignin’!”
I said: Resigning as a Democrat and moving the seat over to the Republicans? The tradition in the congress for members who grow alienated from their party was to move to Independent status…ala Wayne Morse of Oregon (elected as a Republican but announced he’d be an Independent and in the next election ran as a Democrat). Since then, Vermont’s William Jeffords moved to Independent and most recently Connecticut’s Joe Lieberman to Independent-Democrat.
He stunned me by answering: “Nope. The voters of the 6th district elected me as a Democrat and ah cain’t do that to them. Ah’m resignin’ from the Congress. They’ll gotta call a special election and ah’m going to do the right thing—run as a Republican.”
I said: Phil, it’ll be pretty unpopular to do because a special election’ll cost money to put on.
“Money well spent,” he said. “Anyhow, ah gotta do it. Only right thing to do.”
The 6th district of Texas had been Democratic since the Civil War. The district was strongly conservative but super-strongly Democrat. Many conservative Democrats were likely standing in line for Phil’s job and the Republican party in that Texas district was about as weak as the Republican party is in…let’s say…Cook county, Illinois. I worried a good deal about it, even tried to dissuade him in the name of pragmatism but he convinced me what he was doing was right. I decided a good man is going to leave the Congress and not return.
But he did win and the 6th district of Texas, becoming the first Republican to represent the district since it was created and Republicans have represented it ever since. He won by telling the people in his twang: “Ah had a choice either represent Tip O’Neill up there or y’all and ah decided for y’all.” That kind of folksiness and guts got him elected. Speaking with the same kind of frankness and in economic terms the average guy can understand, in 1984, Phil Gramm went on to the Senate, defeating Congressman Ron Paul in the primary and Democrat Lloyd Doggett in the general. As a senator he continually called for and fought for reduced spending and lower taxes. He joined with others to pass the Gramm-Rudman-Hollings act as a means of cutting the budget across-the-board of targets weren’t met. Some aspects of the act were ruled unconstitutional by a liberal Supreme Court.
When he got frustrated with the Senate (as anyone of any intelligence would have to), he decided to run for the presidency. I am proud to say I got on his team early although I had the feeling that a deep Georgia twang, rimless spectacles and a guy who looks like the butcher who answers the bell you ring in a supermarket, beaming, friendly, but definitely not sexy, not charismatic, wasn’t going to play in an era of coiffed hair and p. r. advisers. But we wouldn’t have him change for a moment. He was an American-Texan natural with sayings like
“If you’re willin’ to tackle the tough issues, you don’t need to worry about steppin’ on anyone’s toes; they’ll stand aside and shove you to the front” and
“Ah have as many guns as ah need but ah don’t have as many guns as ah want.”
He got to know John McCain when the two of them teamed up to help kill Hillary Clinton’s elaborate and bureaucratic health care maze. The two hit it off immediately and when Gramm ran for president McCain was his national campaign chairman and tagged along on his plane, planning to run later. That actually was the REAL straight talk express.
All of us shuddered…McCain as well…when Phil unloaded with his candid twang. He raised a lot of money but failed. He told McCain, “all yours, pal.” But in 2000 he couldn’t support the Arizonan against George W. Bush of Texas. The two fell into disrepute but got back together by 2004. Now the situation is turned: Gramm is general chairman of McCain’s campaign and stood by his friend when last year the McCain campaign went broke and his candidacy was all but called a dead letter by pundits.
Gramm is still there—and will be…unless…
Unless his remark about whining causes McCain to toss him under the so-called Straight Talk Express. It would be a shame because impolitic as he was, Gramm is right. For one thing, although the mainstream media don’t specify, he didn’t imply the country was whining but the media is—something the media hesitate to clarify. To hear the radio and read some of the major newspapers, we’re in a recession right now. Nonsense. U. S. economic expansion may slow to the weakest pace in six years in the fourth quarter but the world’s largest economy will still be growing, albeit slowly—0-.5% annualized growth from October to December, down from 1% last month. If you really want to know what a recession is, reckon that the one that began in July, 1981 and lasted to November, 1982 was the sharpest since the Great Depression. As the Fed’s Paul Volcker began to wring inflation out of the economy by slowing the rate of growth of the money supply and hiking interest rates, unemployment hit 10.8% in December, 1982, higher than at any time in the postwar era.
Ronald Reagan’s popularity sank to 35% in January, 1983, approaching Richard Nixon’s and Jimmy Carter’s levels. The Reagan economic program took it on the chin but worked. From a high of 10.8% unemployment improved until it fell to 7.2% on election day,1984 and inflation fell from 10.3% in 1981 to 3.2% in 1983. Corporate earnings rose by 20% in July, 1983 compared to the same month the year preceding.
Was Phil Gramm impolitic? Hell, yes! It’s a miracle that he was elected to office at all given his proclivity for candor. He said, “We’ve sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline. You’ve heard of mental depression. This is mental recession.” He pointed to the media as spreading unnecessary anxiety about the economy. “Misery sells newspapers. Thank God the economy is not as bad as you read in the newspaper every day.”
I understand why John McCain corrected him. McCain’s running for the presidency and when you do that you don’t want to stand by ambiguous statements like Phil’s. But if he tosses Phil under the bus, I’ll be disappointed. That will leave only Jack Kemp whereas the two-man team of Gramm and Kemp is ideal—Gramm the professional economist with an unmatched sense of budget responsibility that goes with tax reduction…and Kemp…Kemp? I got it: Kemp the bouffant-haired JFK wannabe with a degree in physical education from Occidental who nevertheless can sail free-spirited before a crowd with the same aplomb as Barack Obama.
So in summary, McCain should and has given his pal Phil a kick in the pants. Well he should. But if he lets him go and tosses him under the bus…and on the off-chance he gets to be president, vetoes Phil for treasury secretary because of his bad p. r…., I’ll be gravely disappointed.
_______________________________-
Thomas F. Roeser is chairman of the editorial board of The Chicago Daily Observer.
From what I understand, Phil Gramm has little to say about the bill he authored and slipped through in 1999 that pretty much created the conditions for the current financial meltdown. Dubbed the “Financial Services Modernization Act”, the bill repealed much of the Glass-Steagall Act which regulated the very parts of the banking industry that launched the Great Depression. His wife, a former Enron board member, made huge bucks off the unregulated trading that was enabled by Phil’s Bill.
Hope I don’t sound like a whiner when I trash morally bankrupt and self-serving politicians who refuse to acknowledge the effects of their “lawmaking.”
So, Phil, take your pick: was it your stupidity or venality that inspired your monumental bill? Or will you admit to a total lack of inspiration and put it on the doorstep of the financial lobbyists who helped you write the bill?
Your choice dude.
Yes Jahlen,
Your facts are wrong and you are assigning blame to others for problems an individual is perfectly capable of dealing with, which is pretty much the definition of a whiner.
JBP
I find it interesting that you column mentions Dickie Flatt. I had just told my husband this morning about the speech that Gramm made at the 1992 convention where he highlighted Dickie Flatt, who sat in the audience grinning like the village idiot. I never did understand why I should want to save the world for Dickie Flatt. Gramm’s economic message is the typical mean-spirited Republican message – I’ve got mine and I’m going to protect it. If there are children going hungry even though their parents are working 2 minimum wage jobs, that’s not my problem.
Even Stephen Moore of Club for Growth asked Gramm about his role is passing laws that allowed the banking industry to pursue usurious, needlessly speculative, and unethical practices.
Phil Gramm has done nsome good in exposing the danger of a uncontrolled big spending government. However, he has done much more evil by creating the conditions that have led to a total breakdown of the commercial banking system.
Thomas F. Roeser does a disservice to his readers by ignoring these negative and corrupt aspects of Gramm’s policies. What a clown!
John Powers:
No, my facts are not wrong, just too briefly stated.
In no way do I support the deadbeats who apply for credit knowing full well they can’t meet the terms. Additionally, I don’t support those who don’t first do the research before amassing huge debt.
Nor do I place all the blame on the low grade credit hustlers who gave loans to deadbeats.
I do assign blame to politicians like Gramm who create an environment where these two groups thrive off of each other. Additionally, there are the investors (supposedly responsible financial “experts”) who bought up all the bad securities thinking they could make a quick buck. At the top of the financial food chain are the CEOs and CFOs who turned a blind eye to everything going on below, presumably in interest of keeping their shareholders happy.
My point is that deregulation tends to allow all the crap that would normally reside at the bottom to the cesspool to rise to the top and drive the environment.
If P. Gramm failed to see that when he attached his act to a major spending bill, then exactly what does tha make him?
Jahlen,
More people own their own homes today than ever before in the history of the United States. This is due (within a context of economic prosperity) to a general relaxation of regulation in the banking industry, thanks to Sen. Phil Gramm.
Free people make bad choices as well as good choices. Some of them chose to buy homes they could not pay for, and in many cases second homes they could not pay for. The point is, they made those choices themselves.
The professional whiners of the media and politics will always want to blame someone else (greedy executives etc) for poor decisions.
When its time to grow up and accept some responsibility, rather than blame, perhaps we can accept that the individual knows quite a bit more than the politician does about his own economic preferences.
–as an aside Investment Bankers and the very rich (Joe Lewis, Jimmy Cayne etc) lost 95%+ of their net worth on housing investments…did anyone who walked away from a negative value mortgage even lose a dime?
JBP
“The professional whiners of the media and politics will always want to blame someone else (greedy executives etc) for poor decisions.” (from JPB’s July 12 post)
That’s exactly my point. P. Gramm, a “professional whiner”, seems to pointing fingers at the American public for imagining hard times. Yet he’s mum on the effects of his deregulation bill.
You say that more people own homes today than any other point in history and that this is the result of deregulation. This is true. But does this factoid justify the near destruction of the banking and financial system? Probably not. I’d rather see slow steady growth with a lot of renters than a volatile economy that falls as quickly as it rises.
By the way, Jimmy Cayne walked away from Bear Stearns with 61 million dollars — quite a pay day for someone who tanked a company. And who knows what other assets he has stashed elsewhere. Also, I doubt you’ll see Joe Lewis living out of his car or standing in line at the soup kitchen any time soon.
Realistically, what kind of risk do types like Cayne and Lewis face? Is having to opt for gold plated bathroom fixtures on their yachts rather than platinum really a risk? Or how about having to downsize their collectible car collection from 25 Rolls Royces to 10?
Choices, choices. Life is so hard.
So go ask the average Joe if it’s fair that he gets laid off with no compensation while some CEO collects millions in severance for driving a company into the ground.
Derugulation worked. It is up to the individual to behave responsibly.
Calling for responsible behavior is not whining. Blaming others (Cayne, Lewis etc) is whining. The average individual can take all the risks he likes, but only folks like Cayne and Lewis get scorn when things go wrong.
JBP
Geographic correction: Corsicana and the 6th District are in East Texas, not South Texas.
http://en.wikipedia.org/wiki/Image:TX06_109.gif#filelinks
If deregulation worked, we would not be in the current mess we’re in now.
One thing I learned in the navy is that ultimate responsibility for a ship lies with one individual — the captain. How can anyone give kudos to Cayne and Lewis during the good times, but when their decision making falls flat, place the blame elsewhere?
I admire the average individual who goes out there to hustle an honest buck. If he/she fails, I have no scorn.
To believe that Cayne and Lewis were clueless about the hundreds of millions they were raking is amazingly naive. Am I supposed to believe they had no concept of “subprime”?
You remember that old game called “Time Bomb”? The one where you passed a “bomb” around til it blew up in someone’s hands? Well, that sums up the subprime mess. A bunch of investors passed the sub-prime backed securities around. Their only hope was that they weren’t going to be the one they blew up on. Unfortunately, it all got out of hand to the point that everyone was holding the time bomb.
Nice judgement on their part.
Jahlen,
We still have one of the the highest percentages of home ownership in US History. Massive areas of the country have been cleaned up, developed, planted over with gardens and yards, allowing people the ability to enjoy the fruits of their own abilities without government telling them where they can and cannot live.
Deregulation worked, the average homeowner pays less in ownership costs than she would with regulation. Homeowners became captains of their own ship, responsible for their own affairs, and in general succeeded.
The mess hits Jimmy Cayne John Lewis etc hardest, and as you say, they will not come out in poverty Investors who took risks lost big.
Homeowners took relatively few risks (there is nearly no risk on a 100% financed mortgage), and lost next to nothing.
JBP
First off, the period in which home ownership percentage took off was during the 90′s, when Glass-Steagall was in place. Also, there was slow but steady rise from 1960 to 1980. It was during the early 80′s that the S&Ls were deregulated — they were allowed to enter the same markets as the banks but did not have to play by the same rules as the banks.
The idea behind regulation is not to have the government tell people where they can and can’t live. Regulation is simply a set of rules that force financial institutions to make prudent decisions.
History seems to have proven that if left to their own devices, financial institutions will undoubtedly screw things up. That’s the nature of the beast.
Let’s put it this way. You clone a boxer — make an exact carbon copy and put them in the ring. The only difference is that one has box by the Marquis of Queensbury rules. The other gets to thumb, gouge, rabbit punch, head butt and hit below the belt. The referee, let’s name him…Mr. Congress, gets paid under the table by the neer do well to look the other way.
Now which boxer are you going to put your money on?
The same thing goes for business and investment. Who’s going to make more money, the prudent play-by-the-rules leader or the one who cheats?
Now since the bottom line is everything, who’s going to attract more investment?
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