U.S. Political Review - The Tea Party

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HELPING OUR ASIAN CLIENTS UNDERSTAND AMERICAN POLITICS

Many of our Asia-based clients include blue-chip corporations, governments, and institutional investors that are interested in making substantial investments in the United States. As with any investor, they want to know the political environment in the country in which they are making an investment into. Galaviz & Company assists its Asia-based clients in understanding U.S. politics and assists them in forecasting the future of it. The mid-term U.S. elections in November 2010 are fast approaching - the entire U.S. House of Representatives will be up for election, as will 1/3 of the U.S. Senate. We feel it is now a good time to give our summary opinions on this topic.

WHAT IS THE TEA PARTY?

One of the more unique dynamics of this upcoming U.S. election cycle is the impact of the Tea Party movement. The Tea Party is not a formal political party in America, but rather, a clustering of different grassroots organizations made up of citizens that are advocating a strong reform agenda. The Tea Party is no friend of either the Republican Party, or the Democratic Party. To the Tea Party, both political parties are contributors to what they see as major structural problems in how the U.S. government operates. Furthermore, the Tea Party movement does not see itself as a traditional conservative movement, but rather, as a transformational movement that goes beyond the modern conservative definition.

The impact of the Tea Party movement in the 2010 election cycle, will be significant, pronounced, and in some cases, revolutionary in our view. The Tea Party essentially had it origins from the Ron Paul campaign in the 2008 presidential Republican primary season (see below for further background). However, Ron Paul is not an active leader of the Tea Party movement, but remains within its ideological domain. The Ron Paul campaign was unique in 2007-08 by attracting a huge amount of youthful activism that continues till this day - this strong support was primarily a derivative of Ron Paul's anti-war, non-interventionism message during that time.

The Tea Party is advocating ideas such as cutting the U.S. federal budget, restricting the federal government to only its constitutionally authorized role, and to end 'corporate welfare' as its known in U.S. politics. Furthermore, they generally seek to expand the rights of individual U.S. states and to respect the privacy rights of U.S. citizens. In many ways, the Tea Party movement is very similar to the U.S. libertarian political ideology. This movement is not a lower, middle, or upper-class movement; it has amassed a very broad economic cross-section of citizens.

In our view, calling the Tea Party a conservative movement would be like calling President Barrack Obama a Republican, it is a wrong classification. Activists within the Tea Party generally don't like calling themselves traditional 'conservatives' either. Tea Party members do not want gradual or slow change, and they surely don't want to keep things the same. The collection of Tea Party organizations in the U.S. have some different views from each other, but they have a common-platform of ideas. However, these ideas are anything but conservative. In fact, these ideas are essentially classic liberalism; the idea that substantial change in government is required.

TEA PARTY AGENDA: POSITIVE FOR BUSINESS, OVERALL

We believe that the involvement of the Tea Party movement into U.S. national politics is positive, from a business perspective. Much of the agenda of the Tea Party, is in fact, an economic agenda. Several renowned international economists have directly, or indirectly, supported the ideas that are aligned with the Tea Party: cut government spending, reduce unessential military spending overseas, and to begin the process of figuring out how social security, medicare, and other government programs can be reformed (or eliminated), for long-term financial health of the country. No foreign investor is going to be comfortable making huge private sector investments into a country with a $1.4 trillion dollar annual budget deficit, with no end in sight.

It is natural for Americans to respond to what they may see as central economic planning, i.e. corporate bailouts, bank bailouts, and expanded U.S. federal budget deficits. In essence, there are many Americans that feel that the country is going in a very wrong direction, and they hold both the Democrats and Republicans responsible. From the economic side, a new poll shows that a majority of Americans now align themselves with the idea that cutting the U.S. federal budget will actually increase the amount of private sector jobs - we agree with them.

TEA PARTY MOVEMENT IS NOT A REPUBLICAN MOVEMENT

It's also very important for our clients to know that the Tea Party is not a Republican sponsored movement. The various grassroots leaders of the Tea Party acknowledged, at an early stage, the reality that the U.S. is a firmly entrenched system of two-parties. The Tea Party movement has not wanted to become a 3rd political party because of the practical reality of current political party structure in America. So, for the most part, it was determined that the Republican Party would be the best political party platform to use in pushing the movement agenda into office.

Of course, at the same time, this has scared the entrenched Republican Party leadership, and rightfully so. The Tea Party is taking no prisoners even when it comes to long-time elected senior Republicans. In fact, many incumbent Republicans have lost their re-elections in this primary election season. This has shown that the Tea Party participation in the Republican Party nomination process has been significant, highly mobilized, and well-funded by normal everyday citizens.

We believe it's healthy for Americans to look at the people in the traditional party leadership of both the Republican and Democratic parties, and to ask themselves, whether these individuals really represent the best interests of America, or the best interests for themselves. While some money and resources have recently become aligned between the Republican Party and the Tea Party; these are illustrations of strategic necessity, rather than choice, by the Tea Party movement.

THE ORIGINS OF THE TEA PARTY

In 2007, a candidate by the name of Ron Paul (a Republican Congressman from Texas) began his candidacy for President of the United States via campaigning for the Republican Party nomination. At the time, little was thought of Paul, as he was considered a fringe candidate with libertarian ideas (the principal concept of libertarianism is maximum social freedom combined with maximum economic freedom). While Paul has not formally expressed significant support for the Tea Party movement, he is certainly the one that catalyzed its development.

During the 2007-08 time period of U.S. presidential primary elections, the U.S. was engaged in highly charged military exercises in both Iraq and Afghanistan and Congressman Paul was the only anti-war Republican candidate running for the nomination. This essentially created a situation in which if you were a Republican, and anti-war, the only candidate advocating such a position was this relatively unknown Congressman from Texas. In fact, Ron Paul communicated the ideas that the U.S. should not be involved in foreign wars so well that he attracted a tremendous support from members of the Democratic Party whom saw their own party as being out of alignment with anti-war views.

Paul's anti-war and reformist agenda energized a huge amount of support from Americans not normally involved in the political process. In fact, Paul was not only against the wars in Iraq and Afghanistan, he was suggesting a total withdraw of U.S. military presence in order to reduce the U.S. budget deficit, and to essentially reposition the U.S. as a 'friend of all countries and all cultures'. While Paul did vote for post-Sept 11 military action in Afghanistan, he did not vote for a greater expansion of the Afghan war - he also voted against the Iraq war.

On December 16, 2007, a campaign 'money-bomb' was established by the grassroots supporters of the Ron Paul presidential campaign over the Internet. It was organized so that all financial donations to the campaign would take place on a single day - the day was the 234th anniversary day of the Boston Tea Party, an event that helped ignite the U.S. Revolution. So, on December 16, 2007 the Ron Paul campaign broke several online fund-raising records, and on that same day, the birth of the modern U.S. Tea Party movement started.

OUR PREDICTION: REPUBLICANS WIN U.S. HOUSE IN 2010

We believe that the Republican Party will win control of the U.S. House of Representatives, by a very slight margin (perhaps with as few as a 5 seat majority), changing the leadership of the U.S. House in very substantial ways. We believe that the Senate side of the U.S. Congress will remain in control by the Democrats, but by a very slim majority (perhaps as few as 3 seats).

We believe these election outcomes will be driven, in large part, by the Tea Party movement. It is our view that this upcoming 2010 election cycle will not be the last that is heard from the Tea Party. If the Tea Party movement remains as a genuine grassroots effort after the 2010 election cycle, then its impact on the 2012 presidential elections could be very, very significant.