September 30, 2022

Economix Blog: Newt Gingrich, Gold and Property Rights


Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

Newt Gingrich wants to broaden his primary appeal by invoking traditional conservative values and by extending his list of recommended policy changes. Unfortunately, he has chosen to follow the lead of Ron Paul in moving toward the gold standard, rather than pick up on the ideas of Jon Huntsman — who emphasized the need to re-establish property rights in the United States.

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Perspectives from expert contributors.

Ron Paul is right to question the balance of power that lies behind our monetary system (as I wrote here three weeks ago). And he is also correct that the current operating principles of the Federal Reserve tilt the playing field far too much in favor of very large banks.

But proposing the gold standard — or a commission to study how to reinstate the gold standard — is no kind of solution to these issues. The imbalance of power in the United States at the end of the 19th century, under gold, was just as extreme as it is today.

And the idea that pegging the value of the dollar or any currency relative to gold leads to financial and economic stability is an illusion. During the 19th century the dollar was freely convertible into gold — except when it wasn’t. There were serious “suspensions” of convertibility about every 10 to 15 years; most of these were the outcome of boom-bust cycles in the private sector and had nothing to do with the government, which had a very limited monetary role before the Civil War. (James Kwak and I have a new book out in April; Chapter 2 goes through this monetary history.)

The gold standard is just a rule and rules are broken by powerful people under all monetary systems. Assuming that this won’t happen in any future arrangement just encourages illusions.

Mr. Gingrich’s other economic ideas, for example as seen in the latest debates, also seem to be edging toward the less serious side of Republican policy proposals — including very large tax cuts that would greatly increase the deficit.

There is a better way for Mr. Gingrich and other Republican candidates to appeal to the kind of ideas that really did make America strong.

Jon Huntsman argued that homeowners need effective protection against being expropriated — by banks or anyone else (including presumably a government that is beholden to the financial sector lobby). Mitt Romney may be edging in a similar direction (see this intriguing moment spotted by Dylan Ratigan and Eliot Spitzer).

Specifically, Mr. Huntsman argued that banks should be held accountable for all their wrongdoing during the mortgage boom. With regard to mortgages, he stated the need to address how homeowners were mistreated by lenders (including with the robo-signing scandal) and framed the issue exactly right:

“This is a basic question of rule of law; in this country no one is above the law. There are also serious issues involving potential violations of the securities laws, particularly with regard to fair and accurate disclosure of the underlying loan contracts and property titles in mortgage-backed securities that were sold. If investors’ rights were abused, this needs to be addressed fully. We need a comprehensive settlement that puts all these issues behind us, but any such settlement must include full redress of all legal violations.”

On Tuesday night, President Obama took a big step in this direction — in particular by announcing that he would establish a federal-state task force to investigate abuses in mortgage practices (presumably both the homeowner dimension and also the nature of securities sold to investors). Eric Schneiderman, New York’s attorney general, will reportedly be co-chairman of the panel.

This is a natural conservative agenda — and the Republican candidates should not cede this territory to the president.

Without secure property rights, no investor is really willing to put money into a project. This is true for entrepreneurs but it is just as true for families.

Even worse, if a family already has most of its wealth in the form of housing, then anything that makes this wealth uncertain — like questions about clear legal title and who really is the owner — will seriously disrupt savings and consumption decisions.

Mr. Gingrich seems to feel the need to expand his conservative policy proposals. That’s logical when the Florida primary matters so much — a defeat there for Mitt Romney could really change the course of the election.

But Mr. Gingrich of all people should recognize the historical context of secure property rights. This has long been a relatively strong part of the American economic model. We allowed this to be undermined by sharp practices (and worse) in some parts of the financial system.

It’s time to enforce the law and protect property rights, something Mr. Schneiderman has been emphasizing. If Mr. Gingrich wants to steal a march on his remaining rivals and win Florida, he should follow suit.

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You’re the Boss: Newt Gingrich, Small-Business Owner

Newt Gingrich on “Face the Nation.”Chris Usher/CBS-TV, via Associated PressNewt Gingrich on “Face the Nation.”
The Agenda

Last Sunday, Newt Gingrich, the former House speaker and current Republican presidential candidate, told America that he was a small-business owner. The revelation came on CBS’s “Face the Nation,” as the candidate tried to deflect questions (PDF) from Bob Schieffer, the host, about his recently revealed debts to Tiffany and Company.

After Mr. Schieffer posited that the debt “just sticks out like a sore thumb,” Mr. Gingrich responded: “If the U.S. government was debt-free as I am, everybody in America would be celebrating. I think I have proven I can manage money. As a small-business man, I run four small businesses. They have been profitable. They’ve employed people. You know, this is the opposite of the Obama model.”

It turns out that Mr. Gingrich — whose interest in small businesses has been previously noted in this blog — has operated at least five companies, according to his spokesman, Rick Tyler. The companies, with one notable exception, mostly appear to be in the business of marketing Newt Gingrich.

For example, Gingrich Communications was responsible for promoting Mr. Gingrich’s public appearances, said Mr. Tyler, including his Fox News contract (canceled when Mr. Gingrich declared his candidacy) and his Web site, “It was built on Newt as a brand,” he said. At its height, the company employed 15 people, Mr. Tyler said. However, the company was dissolved once Mr. Gingrich began his campaign. “You can’t have a company manage a brand while you have a campaign manage a brand,” Mr. Tyler said. The campaign has taken over the Web site.

Some of the Gingrich Communications employees went to the campaign, others to a separate company, Gingrich Productions. According to the company’s Web site, it is “a performance and production company featuring the work of Newt and Callista Gingrich. Newt and Callista host and produce historical and public policy documentaries, write books, record audio books and voiceovers, produce photographic essays, and make television and radio appearances.”

Gingrich Productions, Mr. Tyler said, is largely about Callista Gingrich. “It was her company, her vision,” he said. It was originally formed in 2007 as a subsidiary of Gingrich Communications, and today has about five employees. Another former Gingrich Communications subsidiary, FGH Publications, was “responsible for production of historical and fictional novels,” Mr. Tyler said in an e-mail.

Gingrich Holdings, with about three employees, provided back-office support for the other companies in the Gingrich portfolio. Mr. Tyler said that the campaign had not paid the Gingrich companies for anything, including the Web site.

Yet the oldest Gingrich business doesn’t fit this mold — or any other. When Mr. Gingrich organized the Gingrich Group, in 1999, it was a standard-issue ex-legislator consultancy with a diverse roster of corporate clients. (Technically, it was not a lobbying firm.) But eventually Mr. Gingrich became interested in health care reform and “in having an organization that could attract those kinds of cutting edge companies that were providing solutions to some of the biggest problems in health care,” said David Merritt, Gingrich Group executive vice president. “Over time, those nonhealth clients were dropped, and then the Gingrich Group became the Center for Health Transformation.” (Mr. Gingrich sold his interest in the business to his partners when he became a presidential candidate.)

The Center for Health Transformation is now, as Mr. Tyler described it, a “for-profit membership organization” that seeks to foster an innovative, intelligent, and, above all, free-market health care system. About 80 to 90 member companies and organizations pay $5,000 to $200,000 to help shape the debate and, as Mr. Merritt put it, “to participate in developing some of the solutions that we think will transform the system.” A handful of companies remain consulting clients.

It’s an innovative proposition in a couple respects. As a post-Congressional career, Mr. Merritt said, it’s unusual for being “solutions-based and not based on lobbying for a particular company or carrying somebody’s water.” Similarly, he noted, it stands apart from many member-based organizations, which typically take direction from the membership. Finally, it’s a novel model for a public policy organization, since most are nonprofit and tax-exempt.

Mr. Tyler agreed. “I think we invented it,” he said.

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