Monthly Archives: November 2013

End term limits? How about a one-term limit?

Writing in the Washington Post, Jonathan Zimmerman endorses the idea of ending presidential term limits. Great idea? Hardly.

Zimmerman’s argument is odd on a few counts. For instance, he suggests that a re-electable president is less likely to be criticized from within his own party, something Zimmerman oddly seems to view as a good thing. Because of course, we should encourage more criticism to be muffled along partisan lines. What a novel idea!

But the crux of Zimmerman’s argument to abolish presidential term limits must be answered in this way:

Does America really need a chief executive with lots of experience in garnishing power for himself? Should the executive branch ever be entrusted year-after-year to the same eminent personality that Americans have developed a convergent affection for? No; it should be just the opposite. A free republican government needs an executive who is less experienced, less relevant, less loved, and less ingrained in the establishment. The president’s reign of power needs to be short, so that he personally stands to benefit less from usurping authority into the executive branch of government.

But my argument goes beyond the defensive. Zimmerman argues that the president should be allowed to continually face the possibility of re-election, so that he always has to answer to the wishes of “the people.” As a libertarian who is cynical of democracy, I would prefer to see more of the contrary. In fact, I would argue that we should ideally have a six-year, one-term presidency. Consider this:

  • We would likely get more honesty from presidents, and less pandering to voter blocs and special interests while in office.
  • Sitting presidents would never have to waste their time campaigning when they should be making governing decisions.
  • There would be no awkward divergence in the credibility of a first-term president vs. a lame duck president.
  • We would be less likely to get expansionary monetary/fiscal policy for the sake of presidential re-election.

(The last point is something that arguably took place under Clinton and Bush II, and the absence of which may have led to the defeat of Bush I. Update: Here is evidence to confirm that Nixon explicitly did do this in 1972.)

This idea is nothing new. In fact, it was proposed and rejected at the Constitutional Convention in 1787. Many fear that a one-term presidency would make any incumbent president totally unaccountable to the people, leaving the president more able to impose a number of undesirable policies. But with the irrational voters that we have, and two-term presidents who have gotten away with so many bad policies in their first terms (e.g. PATRIOT Actindefinite detention), that ship appears to have already sailed.

If anything, I believe that a one-term presidency might pressure voters to give more scrutiny to presidents before they are elected. Furthermore, fewer presidential elections and no presidential re-elections might lead them to pay comparatively more attention to Congress, and possibly make them more likely to pressure Congress to use impeachment. Insofar as a president being unanswerable to re-election is problematic, it can hardly be worse than what we already get with every two-term president’s second term.

In a 1986 New York Times op-ed against the six-year, one-term presidency, historian Arthur Schlesinger Jr. wrote, “it is profoundly anti-democratic in its implications…It assumes that the democratic process is the obstacle to wise decisions.”

Yes, it is anti-democratic, and that’s sort of the point. Democracy is a mechanism for empowering low-information swing voters and the political agents that are most effective at pandering to their rash misconceptions about public policy and social science. That is not to say that no democratic voting processes should exist in a government; but at the very least, the excesses should be curbed by indirect methods of appointment and constitutional limitations.

We really shouldn’t trust “the people” (whoever they are) with the power to re-elect presidents, especially not for more than a second term. Many Americans’ adoration of political personalities on the basis of brand-name familiarity (see: Hillary Clinton) suggests that they shouldn’t be trusted with the power to re-elect ad infinitum; moreover, their scrutiny of presidents and their actions will be better when they aren’t habitually confining themselves to the same familiar name for terms on end, like they have for many members of Congress.

As Friedrich Hayek once wrote in The Constitution of Liberty (1960):

“Perhaps the fact that we have seen millions voting themselves into complete dependence on a tyrant has made our generation understand that to choose one’s government is not necessarily to secure freedom.”

P.S. We need term limits for Congress, too.

fdr term limits

Austrians Are Not Always Deflationists

What many libertarian followers of Austrian Economics might take for granted or assume to be true is the notion that most or all Austrians have a Rothbardian, hard-money view of monetary economics, believing that virtually all price deflation is good, and nearly all monetary expansion is bad. In reality, professional Austrian economists have disagreements and diverging views amongst themselves on this subject.

One group of Austrian economists, called the “Monetary Equilibrium Theorists,” emphasizes the importance of the “demand for money.” That is, money is a good whose supply should respond to changes in the demand to hold it, rather than be arbitrarily limited to a fixed quantity based on natural constraints. This view was articulated by Ludwig von Mises in his Theory on Money and Credit (1912), and was generally shared by Friedrich Hayek. Today, its leading proponents include Steve Horwitz, Larry White, and George Selgin.

These Austrians believe that a free banking system without a central bank would provide competing private currencies in the amount that would be necessary to satisfy the demand for money. That is, when people are feeling less certain and want greater access to liquidity, private banks would augment the supplies of their currency to accommodate this demand, and vice versa. A competitive private currency market would lead to this outcome as banks would keep in check the frequency with which people seek to redeem their notes on demand.

This arrangement would lead to generally stable growth in the product of money supply times money velocity, or M*V. From this, it follows that the least bad policy of any existing central bank would be to pursue this outcome by following an NGDP target, since the equation of exchange posits that MV=PY=NGDP, where P represents prices, and Y is output or real GDP. This equation is true by definition.

It is the belief of MET Austrians that malinvestments come about not solely through the creation of new money, but through the creation of money in excess of the demand to hold it. During a recession (especially a financial crisis), it can be desirable to increase liquidity in accordance with stabilizing M*V in order to prevent unnecessary economic contraction.

The problem only comes about when the central bank is excessive in the amount of liquidity it provides, as the Fed under Greenspan surely was when it held interest rates “too low for too long.” That a central bank is so prone to mistakes is exactly why it should, in my idealist view, be ended and replaced with private currencies.

Now, it is theoretically possible that in lieu of expanding the money supply, prices could fall in order to bring about an increase in the real value of existing money, thereby satiating money demand. However, real world circumstances make the deflation option quite costly, as sticky wages bring about unemployment and fixed debt obligations bring about a wave of defaults.

But is all deflation bad? No. This is where the distinction arises between “good deflation” and “bad deflation.” Good deflation is that which is merely the result of increased productivity, as more goods and services compete for the same amount of money (leaving M*V unchanged).

Bad deflation is that which is precipitated by a shortage of money, whether it’s an outright contraction of available money, or the absence of a money supply increase during a period of elevated money demand (e.g. when people spend less during a recession, and the increased savings in the bank is held as excess reserves rather than lent out). Note how good deflation, being a supply-side phenomenon, does not run up against the constraints of sticky wages or fixed debt obligations, whereas bad deflation does.

So hopefully this has offered some of you a fresh new (Austrian) perspective on the issue of monetary economics. I was originally going to make this a post on my Facebook page, but as I wrote more and more, I decided it would be best suited as a blog post here.

Here’s a good lecture from Steve Horwitz teaching Monetary Equilibrium Theory.