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Letter from America | 7
Is the American
Republic Becoming
a People’s Republic?
by Charles Lewis Sizemore, CFA
Chief Investment Officer,
Sizemore Capital Management LLC
www.sizemorecapital.com
W
e ask the question above in 2008 was the result of systemic moral haz- ourselves, it always pains us a little to say that.
tongue-in-cheek, of ard in which risk had become divorced from Texans, due to their past experiences living
course. Despite the occa- return, and in which decision makers faced no under dictatorship, have always preferred
sional bout of populism, real consequences for their actions. Large weak executives in the state governor’s man-
the United States remains banks and corporations deemed “too big to sion. If we don’t trust our own politicians to
an open economy and fail” could enjoy the benefits of a high-risk, wield power responsibly at the state level, it’s
has, with relatively few (but notable) excep- highly-geared strategy when that strategy was difficult to imagine them being suitable at the
tions, held fast to the Anglo-Saxon tradition of successful. But if it failed, the government national level).
the rule of law. While we respect the enthusi- would be there to bail them out. Hence, a Under President Bush, federal budgeted
asm for low taxes and limited government “heads I win; tails you lose” mentality began expenditures rose by well over 50%. Worse,
exhibited by the attendees of the various “Tea to pervade the economic system. future generations will have to pay for the
Parties” that erupted across the country on Likewise, individual Americans became almost unfathomably large liability added to
April 16—the day that Americans are required increasingly risk tolerant and, it must be said, the national balance sheet in the form of
to file their federal tax returns—we would like lacking in good judgment regarding their Medicare Part D, the state-funded prescription
to reiterate that things are not quite as bad as finances. The savings rate actually turned neg- drug benefit for seniors.
they might seem. That said, the demonstrators ative during the mid-2000s. Home equity was Sadly, it gets worse. As we have mentioned
do raise several valid points, and we believe “extracted” and used for current consump- in prior months, in a case of true Orwellian
that many of their criticisms are warranted. tion. Purchases that would have been consid- doublespeak President Barack Obama pro-
This month, we are going to take a hard look at ered frivolous in prior decades—such as a $5 posed the largest and most bloated federal
the condition of economic freedom in the coffee delivered via a Starbucks drive-through budget in the history of the Republic—at $3.5
United States and analyse the significance of window—suddenly became “necessities.” trillion—and had the audacity to call it a
recent developments. But perhaps the greatest moral failings “New Era of Responsibility.” It is difficult for
belong to the US Federal Government. Former us to understand how incurring massive debts
State of the Union, 2009 President George W. Bush was arguably the to fund current spending is “responsible,” or
Passions are running high on this side of the most fiscally irresponsible president since the even “new” for that matter.
Pond. There is an increasingly widespread last Texan to hold the office, Lyndon Baines In his first 100 days in office the new presi-
belief that the collapse of the financial system Johnson. (Being born and raised in Texas dent, like his predecessor, has become a rather
www.investmentinternational.com May 2009 Investment International
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