Long-Term Trends of our Political Parties
A New Counterweight to the Democratic Party?
A Healthcare Stock for our Changing Times
One of the dangers of life in our hyper-connected world, where electronic technologies keep us apprised of the latest developments all over the world, is that we lose a sense of perspective.
We don't take time to reflect, and to put into context the events of the moment.
We grow to prize immediacy but in the process we lose our sense of proportion.
What does it matter that we can learn of events nearly instantaneously (from the riots in Iran and China to the passing of Michael Jackson) if we do not take the time to evaluate them from a longer-term perspective?
Thoughts like this occur to me from time to time as I attempt to digest the flood of news coming into my life through the electronic fire-hose that is the Internet, and the idea returned two weeks ago as events transpired in the disappearance and reappearance of South Carolina Governor Mark Sanford.
Much of the analysis since then has focused on the details of the governor's affair with an Argentinean woman, the danger of leaving the state "unmanaged" for six days (it seems to have survived just fine), and the damage that the disappearance has done to Sanford's political career.
And now we've got Sarah Palin's surprising announcement that she will resign as governor of Alaska, and the resultant guessing about her plans. Do they include another run for the White House, a book or the lecture circuit? Time will tell.
I've been working on a bigger perspective, wondering whether the Republican Party has become so weakened in recent years that it's created an opportunity for a new counterweight to the Democratic Party. I pledge allegiance to neither, but deep interest in both; after all, they have the power. But change happens; in fact, you can't stop change from happening. So today I want to look at the potential for major change on the political party front in the years ahead.
I start by gathering some facts.
The United States has not always been run by the Democratic and Republican parties.
Our first president, George Washington, was a member of no particular political party, and he hoped that they would not be formed; he feared conflict and stagnation. Smart man.
Our second president, John Adams, was a member of the Federalist Party, a party focused on fiscal prudence and strong nationalism ... and the only Federalist to ever become President.
He was succeeded by four Democratic-Republicans.
Interestingly, the word Democrat comes from Greek, meaning "rule of the people," while the word Republican comes from Latin, and means "concern for the people." Not much difference there.
In those early days, while the nation was fast expanding, the weight was clearly with the people. The urban nationalists of the Federalist Party didn't have a chance against the party that looked to the interests of the farmers and westward-trekking little people. And those four Democratic-Republicans--Thomas Jefferson, James Madison, James Monroe and John Quincy Adams--served the nation well.
But the party split in the election of 1824, with the backers of Andrew Jackson, hero of the War of 1812, gradually evolving into the Democratic Party and the backers of John Quincy Adams--joined by members of the Federalist Party--evolving into the Republican Party.
Jackson and Martin Van Buren took the next two elections as Democrats, after which the Republicans were absorbed into the Whig Party.
(The term Whig originated in Britain during the Wars of the Three Kingdoms--England, Ireland and Scotland. Derived from "whiggamore", the Scottish word for a cattle or horse drover, it was used to refer derisively to the Kirk Party, a radical Presbyterian faction of Scotland. The army of the Kirk Party, for whom religious zeal was sometimes more valued than military experience, was routed by Cromwell's Army at the Battle of Dunbar in 1650, but the name Whig lived on to be borrowed by Americans who supported the supremacy of Congress over the executive branch.)
Taking a page from the Jacksonians, the Whigs took the next election by running William Henry Harrison, the non-political hero of the War of 1812. Unfortunately, Harrison died a month after taking office, and was succeeded by Vice President John Tyler, a long-time Democrat-Republican.
He was followed by James Polk, a Democrat, but Polk was followed by Zachary Taylor, a Whig in principle though often not in practice, and then his Vice President Millard Fillmore, the last Whig to be President.
After that, the Republicans absorbed the Whigs, and since then, it's been all Democrats and Republicans ... 13 of the former and 18 of the later.
But below the surface there have always been smaller parties trying to get a seat at the head table.
Parties that have disappeared since the end of the Whig Party include the following.
. American Party ("Know-Nothings") (c.1854-1858)
. Opposition Party (1854-1858)
. National Union Party, (1864-1868)
. Readjuster Party (1870-1885)
. Greenback Party (1874-1884)
. National Equal Rights Party (1884-1888)
. Populist Party (1892-1908)
. Silver Party (1892-1902)
. National Democratic Party/Gold Democrats (1896-1900)
. Silver Republican Party (1896-1900)
. Social Democratic Party (1898-1901)
. Socialist Party of America (1901-1973)
. Independence Party (1906-1914)
. Progressive Party ("Bull Moose Party") (1912-1914)
. National Woman's Party (1913-1930)
. Farmer-Labor Party (1918-1944)
. Communist League of America (1928-1934)
. American Workers Party (1933-1934)
. Workers Party of the United States (1934-1938)
. American Labor Party (1936-1956)
. America First Party (1944) (1944-1996)
. States' Rights Democratic Party ("Dixiecrats") (1948)
. Progressive Party (1948-1955)
. Vegetarian Party (1948-1964)
. Constitution Party (1952-1968?)
. American Nazi Party (1959-1967)
. Puerto Rican Socialist Party (1959-1993)
. Black Panther Party (1966-1970s)
. Communist Workers Party (1969-1985)
. People's Party (1971-1976)
. U.S. Labor Party (1975-1979)
. Concerned Citizens Party (1975-1992)
. Citizens Party (1979-1984)
. New Alliance Party (1979-1992)
. Populist Party (1984-1994)
. Looking Back Party (1984-1996)
. Grassroots Party (1986-2004)
. Independent Party of Utah (1988-1996)
. Green Party USA (1991-2005)
. New Party (1992-1998)
. Natural Law Party (1992-2004)
Many of those parties above failed to gain much traction. More notable are the parties have been well enough organized to actually nominate candidates in the past century.
. American Party (1969)
. America First Party (2002)
. America's Independent Party (2008)
. Boston Tea Party (2006)
. Independence Party of America (2007)
. Jefferson Republican Party (2006)
. Moderate Party (2006)
. Marijuana Party (2002)
. Party for Socialism and Liberation (2004)
. Peace and Freedom Party (1967)
. Reform Party of the United States of America (1995)
. Socialist Equality Party (2008)
. Socialist Party of the United States of America (1973)
. Socialist Workers Party (1938)
. Unity Party of America (2004)
. Workers World Party (1959)
. Working Families Party (1998)
Most of these, however, didn't stand a chance.
For a party's nominee to actually have a chance of becoming President, (by majority vote of the electoral college as opposed to the even more convoluted ways), the candidate must be on the ballot in states whose collective electoral vote total is at least half of the Electoral-College votes. To do that takes both organization and money.
In the 2008 Presidential election, three parties (aside from the Democrats and Republicans) cleared that hurdle.
* Constitution Party (founded in 1992)
* Green Party (founded in 1996)
* Libertarian Party (founded in 1971)
These three are my focus today.
As of March 2008, The Constitution Party had 384,722 registered members, the Greens had 261,754 and the Libertarians had 225,529.
However, according to Richard Winger, editor of Ballot Access News, nearly all of the 328,261 California voters affiliated with the Constitution Party are actually registrants of California's American Independent Party and most registered thinking they were registering as independents (not associating with any political party). Trouble is, the American Independent Party is actually a remnant of the segregationist party George Wallace founded in 1968! In the past decade, the AIP merged--sort of--with the Constitution Party ... (it's complicated).
In reality, therefore, the Greens have a slight edge in membership over the Libertarians, while the Constitution Party is a distant third.
Another measure of political power is, of course, its ability to raise money.
In the last election, here's what the various parties raised for their candidates.
Barack Obama (Democratic) $976,830,398
John McCain (Republican) $604,951,924
Bob Barr (Libertarian) $1,405,899
Chuck Baldwin (Constitution) $262,010
Cynthia McKinney (Green) $240,360
Here are the vote tallies.
Barack Obama (Democratic) 69,498,215
John McCain (Republican) 59,948,240
Bob Barr (Libertarian) 523,713
Chuck Baldwin (Constitution) 199,437
Cynthia McKinney (Green) 161,680
Clearly, money matters ... but you already knew that.
Also, circumstances matter.
In 2008, the legacy of George W. Bush meant the Democrats had a relatively easy path to the White House.
Today, with the Democrats spending money like it was water and undertaking revolutionary change in multiple spheres of American life, thanks in part to the crisis atmosphere that followed the collapse of the financial sector, the pendulum is swinging far to the left, for better or worse, and when it comes time for the pendulum to swing back, I'm not sure the Republican Party will be best positioned to take advantage of that shift.
The recent headlines about Mark Sanford and Sarah Palin and the accompanying lack of central leadership in the Republican Party are just the most recent symptoms of a party that's lost its focus.
At the core, you've got a party that used to be known for fiscal prudence, but sold out long ago (like the Democrats) to special interest groups and their lobbyists.
What's left in the Republican Party is an uneasy alliance of economic conservatives--many of whom hold moderate views on social issues--and social conservatives whose strong religious positions have driven many moderates out of the party and into the Independent column.
In short, the party is shrinking. It lacks a leader. And it lacks a credible center.
So the question today--keeping in mind our country's history-- is whether any of those three second-tier parties--in conjunction with increasing numbers of alienated independent voters--can take a page from the Whigs. Can they join together, pull some more voters out of the weakened Republican Party, and form a party that will offer a credible--and financially powerful--counterweight to the Democrats?
The Greens won't do it. The Greens' positions, neatly laid in 10 "authoritative guiding principles" are as follows:
1. Grassroots democracy
2. Social justice and equal opportunity
3. Ecological wisdom
6. Community-based economics
7. Feminism and gender equality
8. Respect for diversity
9. Personal and global responsibility
10. Future focus and sustainability
These core values are somewhat to the left of the Democrats'--but not far to the left. Given reason, the Green Party might merge into the Democratic Party ... or be left inconsequential by the evolution of the Democratic Party.
The Constitution Party is less well known. It values the Declaration of Independence, The Constitution, the Bible and the Bill of Rights. Its leaders want to abolish the income tax, as well as federal expenditures for health care, education and welfare. The party supports paying off our national debt, opposes providing foreign aid and supports the collection of all foreign debts owed to the U.S. It opposes intervention in foreign affairs, and supports increased controls over illegal immigration. It opposes euthanasia, abortion, pornography and government-sponsored gambling. And it supports the right to bear arms ... in accordance with the Second Amendment.
The Constitution Party (founded as the U.S. Taxpayers' Party in 1992) could certainly absorb some of the religious right from the Republican Party, and if the current administration's spending spree fails to pull us out our economic hole, it's conceivable growing numbers of voters might find solace in the party's inward-looking nationalistic defensive stance. But at present, the party remains quite small ... and several times less powerful than the Libertarians.
The Libertarian Party, organized since 1971, has one overarching principle: "respect for individual rights." The Party favors strong civil liberties, minimally regulated migration across borders, the repeal of drug prohibition--including restrictions on tobacco and alcohol--and the elimination of laws that interfere with private activities like gambling and prostitution ... rather liberal stuff.
On the other hand, Libertarians also support minimally regulated, laissez-faire markets, favor a non-interventionist foreign policy that respects freedom of trade and travel, support the right to bear arms, oppose entitlement programs--including Medicare and Medicaid--and support the repeal of the income tax and a wholesale shrinkage of the federal government, including the elimination of whole parts of it ... rather conservative stuff.
Thus, while the Greens can be pigeonholed on the far left of the current political spectrum and the Constitution Party can be shelved on the far right, the Libertarian party avoids simple categorization.
Yet it is the strongest of the three second-tier parties, and it's conceivable that it could grow more powerful in three main ways.
One is by attracting numerous disenfranchised Republicans for whom smaller government is still a goal and religion is a private issue.
Two is by attracting numerous Democrats who value personal liberties but think the current spending wave--including military spending--has gone too far.
Three is by attracting numerous independent voters who have been put off by the loss of ethics in both major parties, the lying and the cheating and the general embrace of the philosophy that maintaining political power is more important than doing what's right.
To do this, the Libertarians would need to moderate some of its positions; I can't for example, envision the income tax or Medicare disappearing anytime soon. But intelligent compromise on its most abrasive positions could pay big dividends.
From today's perspective, the odds against the Libertarians are huge, but if the Republican Party continues to flounder, and if growing numbers of voters in the years ahead see the need for a new counterweight to the Democratic Party, it could happen.
As the history of the United States reminds us, political parties do not last forever. Change happens. Think about it.
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Speaking of change, last week the market told us that investors in medical stocks are afraid that Obama will pull the rug out from under stocks in an attempt to reduce the country's health care bills. They're dropping some of these stocks--especially drug stocks and medical device stock--just like they were dropping financial stocks a year ago!
But there is one sub-sector of medical stocks that's still attractive, and that's the companies that are expected to help rein in those medical costs in the future.
One of them is Express Scripts, the company that provides pharmacy benefit management services to managed care organizations.
Express Scripts (ESRX) was a great growth stock from 1992 to 2007, but over the past two years it's been laid low by the bear market; it's now trading 16% below its peak of 2008, despite the fact that earnings are still growing! In fact, in the first quarter of 2009, earnings grew 25%, despite the fact that revenues shrank 1% to $5.4 billion. To me, it looks like a good bargain; I think Express Scripts is one of the good guys in the health care establishment. And my opinion is seconded by our expert bargain-hunter, editor J. Royden Ward of Cabot Benjamin Graham Value Letter.
Here's what Roy wrote in his June issue:
"Express Scripts (ESRX) is the nation's leading pharmacy benefit manager (PBM) and provides a full range of retail drug card programs and specialty disease management programs. ESRX also sells prescription and generic drugs through its retail network and mail order services. The company has been growing at a rapid 30% pace for the past 10 years but will slow somewhat in the future. The company is well positioned in one of the fastest growing segments of the health care sector. Express Scripts has agreed to acquire the in-house PBM division of WellPoint for $4.7 billion. The purchase will provide additional sales and earnings growth in future years. We forecast EPS growth of 19% for the next 12-month period. At 16.4 times forward EPS, ESRX shares are very reasonably priced. Buy."
When Roy wrote that, in early June, the shares of ESRX were trading at 64. Since then they've been up to 69 and now they've pulled back a little. I think buying in the mid-60s will work out well in the long run.
Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory
Editor's Note: You can read more about Express Scripts and get continuing coverage in Cabot Benjamin Graham Value Letter. There you'll not only find buy and sell advice for ESRX, you'll get dozens of other excellent value stock recommendations from J. Royden Ward each and every month. Roy applies the strategy of the father of value investing, Benjamin Graham, to find the market's best-undervalued stocks. This year he's already uncovered several stocks that were sold for double-digit profits! Don't miss out on his next recommendations ... click here now to get started today!