The following question was in response to the Selfish Citizenship post Open Letter to Gary Johnson:

Going back to the Reagan Administration through today, why is it that the Republicans and Democrats have been able to grow government without an effective electoral challenge from the Libertarian Party?

First, let’s looks at the history of fiscal policy issues. During the Reagan Administration, we were still in the Cold War so it was not a period of peacetime spending; we would spend what was necessary to win. With the end of the Cold War, during the first Bush Administration, there was an effort to cut back federal spending and deficits; these were the days of Graham-Rudman-Hollings deficit targets and sequestration, Sec. of Defense Dick Cheney implementing large cuts in defense spending, and President Bush breaking his no new taxes pledge to strike a deficit reduction deal with Rep. Leon Penetta (then Chairman of the House’s budget committee, now Obama’s Sec. of Defense).

There were two relevant tax events that financed the growth of our federal government from the 1980s through the beginning of the 21st century, and it wasn’t the Bush-Penetta tax increases.

The first tax event was the payroll tax increases for Social Security that came out of the Greenspan Commission (1983), which resulted in large cash surpluses for Social Security; these surpluses were converted into federal debt so that the cash could be spent on other current programs. On net and through the paper shell game, the Social Security revenue (including interest income from previously acquired federal bonds) still remains slightly higher than expenses; in 2011, this financed $69 billion in additional federal spending (see recent Trustee’s report).

The second tax relevant event was the capital gains tax cut in 1997, which was the actual cause of ending federal deficit spending during the Clinton years. The capital gains rate had been punitively high, instead of being set for the purpose of raising revenue; once the punishment was reduced, then federal revenues increased and deficits were turned into surpluses. One of the Democratic arguments (as made by Rep. Dick Gephardt, House Minority Leader) against cutting the capital gain tax rate was that revenue increases would be short lived, as occurred. However, surpluses from higher tax revenue led the Congress to spend more and create new higher spending baselines for future years. In the early part of the second Bush Administration, we saw the combination of realizing the predicted losses from diminished capital gains tax revenue and higher spending baselines combine to re-establish federal deficit spending.

Second, let’s relate that fiscal history to concurrent political activity occurring historically, especially outside of the Democratic and Republican parties. Before President Reagan, popular discontent with punitive taxes led to property tax rate caps in California through Prop 13 and the congressional Republican Kemp-Roth legislation, which became the “Reagan” tax cuts after his election. However, with the prominence of the Cold War as a campaign issue, an effective third party alternative would not gain traction at the national level.

By the 1992 election cycle, the Cold War was over and public frustration with bipartisan failure coalesced into the Ross Perot candidacy. In June 1992, Perot actually led both the Republican Bush and the Democratic Clinton in polls, and he ended that campaign with the highest support for a third party candidate since Theodore Roosevelt in 1912. While Perot’s anti-deficit message established the Reform Party and still won signification votes for a third-party in 1996, the Reform party was essentially dead in 2000, after the federal deficit had become surpluses.

Recently, we have seen the Tea Party movement, which seems to me to be a renewal of the Reform movement, but without a Perot-like leader. However, up to this time, the Tea Party has substantially chosen to act within the two-party system as a primary election opponent of existing party leaders. In contrast, the Occupy movement is not in this same category as they are simply relabeled protesting extreme leftists who rebrand and tailor their message to the meme of the moment.

After the Cold War, instead of third parties, the American electorate opted to throw the bums out and turn to the other of the two major political parties.

In 1992, Americans fired the Republican President, thus ending divided government to allow Democrats a freer hand on legislation.

In 1994, Americans fired the Democratic Congress, and restored divided government as a check on expansive government; this led to so-called welfare reform, capital gains tax cuts, and elimination of the federal deficit.

In 2006, Americans fired the Republican Congress for excessive spending, and restored divided government; Speaker Pelosi’s subsequent leadership resulted in legislative corruptions that facilitated the economic collapse in 2008.

In 2008, Americans fired the Republicans from the presidency, thus ending divided government to allow Democrats a freer hand on legislation.

In 2010, Americans fired Speaker Pelosi and the Democratic Congress, thus restoring divided government as a check on an expansive federal government.

Finally, let us look at why the Libertarian Party has not been able to realize these opportunities to establish electoral success. Figuratively speaking, the Libertarian Party is not a real political party; they are a cargo cult political party; for example, see the anarchy at the 2012 Libertarian Party convention over the election of a new national party chairman . The 2012 election is the Libertarian Party’s 11th presidential campaign; every party that has won the presidency not only did it in many fewer cycles, but those parties enjoyed electoral success at the state level and in Congress before winning the presidency, which is not remotely true of the Libertarian Party. In the 2000 presidential election, the Libertarian Party had fewer votes then the dying Reform Party led by Pat Buchanan.

While I have substantially said that the Libertarian Party is inept, I think that I am the only one who spells out how the Libertarian Party can gain policy victory in the face of a failure to win the contested office; so in my opinion, everybody else is missing the real potential of the Libertarian Party in this election, which might explain why the Libertarian Party has not gained traction since 1972, before most of its supporters were born.

Extra Point: If your personal understanding benefited from this Q&A, check out the original post: Open Letter to Gary Johnson, which directs:

focus the message better than your opponents, go after your opponents weaknesses, and set a realistic objective that could influence future policy.

This is what he should be hearing from his campaign staff with Labor Day approaching.

Caveat, to be explicit about the context: This is simply a nitty gritty review of the contemporary political issues and events without attempting to drill down and examine the underlying philosophic ideas in play.