Well, as the Republican Presidential roadshow moves on to South Carolina, I must admit that the disappointment I expressed in my last post is turning, slowly, to a begrudging acceptance of the looming reality we face.  No matter how much I still hope that another candidate will emerge during the primaries, or at the convention, whose views and experience show him or her to be a real Conservative reformer, history shows that such a development is highly unlikely now.  Therefore, I must prepare to support Mitt Romney if he wins the nomination, because I can not stand by and let Obama’s Democratic Party win this election.

But, bowing to such reality does not mean that I, and those of you who agree with me, must drop our desire for reform based on Reagan’s New Republican Party blueprint of 1977, and the recent 10^th Amendment movement.  Instead, we should work to give Governor Romney (or whoever may still emerge from this process) the tools and support he will need to make the reforms we want:  retention of the GOP’s House majority; gaining a GOP majority in the Senate and changing the filibuster rules once and for all to allow the basic business of government, like the passage of a budget, to be done; and retention and expansion of our majority in state houses and governorships.  Above all else, we must continue to remind Governor Romney of what we want to see our party accomplish if it wins this election.

To that last end, here is my open letter to the Governor:

Dear Governor Romney:

As a supporter of another candidate in the GOP field this year, I congratulate you on your victories to date, and on the progress you are making toward winning the nomination of our party for the Presidency.  Though there are many contests still to be fought in this process, and through those contests I will remain part of the loyal opposition, I want you to know that, as a Reagan Conservative, I will support you and work for your election if you win the GOP nomination.  That said, I want to share some thoughts with you about this race from someone who has not supported you to date.

I have been told from a close friend who worked with you after you took over the 2002 Winter Olympics, that you are one of the finest managers of people and of business with whom he has ever worked.  That is high praise, indeed.  Moreover, your history of accomplishments in the private sector, and as Governor of a very Democratic state, supports this praise of your managerial skills.  But, many of us believe that we need more than just a better manager to fix what ails this country, and we desperately hope that you are ready for the challenges you must face if you win this election.  In light of this concern, I, for one, was impressed by one of the answers you gave in a recent debate in which you outlined what you believed to be the core issue against Obama as a conflict of visions of this country and for its future.

I hope you will expand on this theme over the coming months in the context of addressing the deep, structural problems that we as a people must address, debate, and resolve if we are to climb out of the whole we have dug for ourselves over the last few years.  Although others may articulate these problems differently, I believe we face three fundamental problems that underlie virtually every problem you and your fellow Republican candidates have been discussing and debating during this campaign:

• The American people need to decide what role they want government to have in their lives, in the lives of their families, and in the lives of their communities—and why government should have such a role.  To make this decision, we will need to take a hard look at how and where we (currently, and will in the future) live and work in the 21^st Century, and what activities must remain within the responsibility of individuals, their families, and their private organizations and churches to address.  Once we take that hard look, we then will need to determine what activities need the attention of the collective responsibility of government (by itself or in coordination with the private sector), as opposed to remaining solely within the responsibility of the private sector.  My guess is that the outcome of this debate will result in a different allocation of responsibility than what our ancestors, and even our parents, would have made, but we will never be able to address the future spending and revenue needs of the public sector of this country unless we have a candid discussion of this issue.
• Once this basic decision is made, we need to determine which responsibilities involve international or interstate activities, and which involve local or intrastate activities.  Based on that determination, we need to apply our constitutional rules to determine which level of government should address each responsibility.
• Once this determination is made, the federal government needs to be reformed—branch by branch, and department by department—to address its international and interstate responsibilities efficiently and cost-effectively, and state and local governments need to be encouraged to do the same.  Then, budget and tax policies need to be reformed to provide the resources needed to address these responsibilities in a manner that recognizes that wealth and property, in the first instance, belong to those who created them.

Governor, my guess is that most people will want government to continue to take responsibility for many of the activities that government programs currently attempt to address.  The difference will be that such responsibilities should be, and will be re-allocated so that they are addressed more efficiently and cost-effectively at the local and state levels, and at those levels will be more likely to share their work with the private sector in each community.  Moreover, such re-allocation will naturally cut from government much of the bureaucratic duplication that leads to the growth in the size, cost and debt of government at all levels. Finally, if people realize that the GOP doesn’t want to throw their grandparents into poverty, or abandon safety nets for our neighbors in true need, but, instead, wants to reform government consistent with its properly limited structure to make it more effective and to engage our citizens again to become active participants in the lives of the neighbors and neighborhoods, much of the wind will be taken from the sails of the great Democratic argument that has portrayed Republicans as unfeeling and uncaring extremists for generations.

That last point leads me to the final part of this letter.  You recently have been criticized over the activities of Bain Capital while you managed that company.  While some conservative commentators are wringing their hands over this development, I believe that this criticism, coming now, is a blessing to your candidacy, because it gives you an opportunity to turn this criticism into a strength during the rest of the election cycle.  To create this strength, you need to understand the fears that the stereotypes underlying these criticisms arouse, and address the country about how the free market works and how you would apply your experience from your role in the free market to reform the government.

Ever since Commodore Vanderbilt took advantage of the economic depression of the late 1830s at the dawn of the railroad boom, Americans have had a love-hate relationship with those who have provided the financial capital within our free market system.  We know that we have needed the Vanderbilts, the Morgans, the Carnegies, the Mellons, … and the Bain Capitals, along with banks and bondholders, to provide the loans, the bonds and the equity entrepreneurs need to turn their ideas into products and services—and wealth. In turn, we know that the wealth that is created employs people, whose earnings support their families, their communities and their states, and the nation.  But most Americans have never embraced the bankers and investors as the positive image of the free market.

Instead, we tend to identify the free market with the “Horatio Alger” story of the entrepreneur—the man or woman who has the initial idea, who puts his or her own money and labor into the development of the idea into a product or service, and who creates a successful business that employs people, and builds and spreads wealth, from such efforts.  Meanwhile, we have come to view the bankers and the investors as necessary evils in the free-market process who obtain their wealth without rolling-up their sleeves and building a business, and who retain the interest and dividends they were paid even after the businesses fail.  Indeed, a popular post-war novel that was later made into a popular movie—Cash McCall—had as its central character such an investor, who endured many of the same criticisms that are now being leveled at you and Bain Capital.

But the ending of that story is instructive.  McCall buys a business that appears to be about to fail, and then merges it with its main customer and receives what appears to be a fast, windfall return for his investors.  The founder of the business who sold it to McCall is irate and feels swindled, until he realizes that McCall’s fresh set of eyes found a nugget of value that the founder never understood and would have never marketed—patents on the products he had developed.  Those patents, locked away and forgotten, had hidden value in the market for the company, and it took an outsider to find it.  Companies like Bain Capital bring that fresh pair of outside eyes that are able to objectively reassess the value of an entity and reform it to make it more effective, in return for a fee and/or a dividend.

Like McCall, sometimes Bain’s efforts work, and sometimes there is no long-term value to find or develop and the company fails.  Anyone who has ever laid-off or fired an employee, or closed a business, knows how hard that is—you’re not just asking a person to leave, you are ending a source of income and benefits that supports a family, and that indirectly supports a community. When that happens, stresses are put on families, neighborhoods, schools and churches—and governments—to help these people through their time of transition.  In part, investors use many of the dividends they receive to pay, through contributions and taxes, to support the organizations and governments that provide the support to individuals in time of need and to create the infrastructure in our communities.  In the end, investors and banks that provide capital play an indispensible role in the creation of wealth and employment in a free market, and in the maintenance of our communities.

Your experience from providing that fresh pair of eyes in the evaluation of businesses can translate well to the need we now have for reform—and you need to tell the American people about the relevance of that experience to the challenges we face.  We need a fresh pair of eyes to look at the responsibilities that the federal government has assumed, and to re-allocate them; to look at how the federal government is structured, and to reform it; and to look at how the money is raised and spent by the federal government, and to stop deficit spending.  The only difference between your time at Bain and the challenge you face is this—you can’t just close the federal government; but you can, and you must, close agencies and departments, and stop paying for activities, if their missions no longer fit the proper allocation of federal responsibility or an efficient allocation of federal resources.

Governor, you have been given a great opportunity to tell this story of the free market, of how your experience in the free market (coupled with your unique experience as a Republican Governor of an archetypal Democratic state) applies to the challenges you will have to address, and how our Republican vision contrasts with the economic vision of the Democrats.  Please use the criticism you are now getting to further refine a positive narrative before the general election campaign, so that we truly can present a vision to the American people this fall that competes with the socialist vision of capitalists and the free market as evil.  If you develop such a positive message that dovetails with a positive plan for government reform, you can carry the Reagan mantle into the fall election.  I hope you will.

Sincerely,

Ed Hubbard