The Very Radical Idea of Capitalism

Posted on September 9, 2025 by Joe Benning

The results of a poll released by the Gallup Organization on Monday were very instructive. In the poll they asked each respondent if they had a positive image of capitalism “just off the top of your head”.  They also asked the same question about socialism. 

The results are illustrated in the Table below. 

DemocratsRepublicansIndependents
Positive View of Capitalism42%74%%51%%
Positive View of Socialism66%14%38%

Let’s grant that the terms are undefined; let’s also stipulate that the proverbial man on the street basically knows very little, if at all, about economic theory. That said, the results of the poll are more than a little illuminating. 

Only 42% of self-identified Democrats reported a positive image of capitalism. This stands in contrast to 74% of Republicans and 51% of independents. Where Socialism is concerned, a majority of Democrats (66%), said they had a positive image. This is in contrast to only 14% of Republicans and 38% of independents. 

These results go a long way towards explaining our current political malaise, but not in a way that is apparent at first blush. Consider the following hypothesis. Assume the Democratic Party has fully embraced socialism. Such a stance would explain Democratic enthusiasm for the command-and-control policies they clearly prefer. Now consider that only a bare majority of independents (51%) say they favor capitalism. 

That explains why HRH Donald J Trump championed a 10% government stake in Intel; a 15% export tax on Nvidia and AMD; and a golden share of US Steel, not to mention the whole tariff regime with its continually shifting rationale. Or, for that matter his full throated embrace of industrial policy, which is to say picking winners and losers. 

It also explains why the debates about social policy are so intense. A good deal of what we laughingly call social policy has to do with interest groups competing over budget allocations that can be divvied up among “providers”. You can look high and low to find the benefits that allegedly accrue to those in need and you will come up empty handed. 

For instance, take the school system. It routinely produces failure, especially in the big cities. Today’s New York Times reports that “The reading skills of American high school seniors are the worst they have been in three decades…The results, from the National Assessment of Educational Progress, long regarded as the nation’s most reliable, gold-standard exam, showed that about a third of the 12th-graders who were tested last year did not have basic reading skills.”  

Math skills were abysmal as well. The Times reports that “In math, nearly half of the test takers scored below the basic level, meaning they may not have mastered skills like using percentages to solve real-world problems.” Percentages. About half the kids are not even equipped to deal with percentages, much less calculus. 

The real question is why is anyone surprised by this since the results are absolutely predictable. They are simply a continuation of a trend that has been in motion for a very long time. Obviously this is a management problem. And a leadership problem. At least part of the reason is that public schools, especially in the inner cities, are run for the benefit of teachers unions, not the kids. 

The Times goes on to report that Republicans generally have devoted their efforts toward supporting vouchers.  That might conceivably deal with the management issue indirectly, although that possibility is not discussed in the paper of record. But financing is only the first step. It can be a contributor to a solution, but it is not, by itself, the solution. 

A solution to the problem requires management, backed by strong political leadership. Fortunately we know what management steps work; it is leadership that is lacking. The management steps needed are:  (1) more instruction time, (2) high expectations, (3) frequent teacher feedback, (4) data-driven instruction and (5) high-dosage tutoring. Ronald Fryer, an economics professor from Harvard,  explains all this in fuller detail in an op-ed piece in today’s Wall Street Journal. 

Of course while Republicans seem to have grasped the importance of school reform, they have proven to be quite adept at spouting off nonsensical pieties that satisfy their base. See for instance the arguments about tariffs. Or the war on foreign aid; a war that in budgetary terms doesn’t even rise to the level of a rounding error. 

On the other hand, the Democrats, according to the Times, are more focused on social supports for students (like nutrition and mental health counseling) than they are on academic rigor. But this is all just a distraction; a sop to the teachers unions. The real point is to avoid true reform. 

If the nature of the problem really had to do with a lack of  “social supports” then test scores would have risen with the advent of social supports. But they haven’t. As the Times noted, “For about 10 years, declines have been most pronounced among low-performing students, indicating that the floor of academic achievement has fallen.”    

The school system really represents a microcosm of modern progressivism. Progressivism is a materialistic  weltunschauung that sees everything through the lens of class. And it absolutely refuses to admit failure or especially, accountability.  So it blithely goes on while blaming all its myriad failures as stemming from racism, sexism, ableism, hatred, misinformation, climate denialism, phobias about transgender claims, Islam, (or any phobia you’d care to dream up). Anything but accountability and effort.   

Which, when you think about it, is what capitalism is really all about. Risk taking and individual effort for the possibility, not the probability, of outsized returns. A radical restructuring of the idea of rights as inherent to the individual, not to a class. A very new idea that began during the Age of the Enlightenment.

Socialism, on the other hand, represents turning back the clock to a very old idea, one that dominated human thought for most of existence. It harkens back to the time when your fate was determined by your birth, i.e.—race, class, gender. Effort and accountability didn’t count, except in exceedingly rare circumstances. And so what it produced was mediocrity, tyranny and wars of conquest. 

Which is pretty much what it produces today. 

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Political Economy, Politics | Tagged , , | Leave a comment

The Embarrassing Senator Kaine

Posted on September 5, 2025 by Joe Benning

Tim Kaine, Virginia’s junior Senator decided to assert himself. At a Senate hearing for the nominee to be assistant secretary of State for democracy, human rights, and labor,  he pushed back against the nominee, Mr. Riley Barnes. Mr Barnes apparently committed the grave offense of uttering a politically incorrect opinion. He said “We are a nation founded on a powerful principle, and that powerful principle is that all men are created equal, because our rights come from God our Creator — not from our laws, not from our governments.”

The Senator, incredibly, decided to take issue with that opinion. He said in response “The notion that rights don’t come from laws and don’t come from the government, but come from the Creator, that’s what the Iranian government believes,” Kaine said. “It’s a theocratic regime that bases its rule on Shia law and targets Sunnis, Bahá’ís, Jews, Christians and other religious minorities.” 

He went on to dig himself a deeper hole by saying “So, the statement that our rights do not come from our laws or our governments is extremely troubling.” He then went on to say that he (Kaine) was a [“strong believer in natural rights”]  but noted that if natural rights were to be debated by people within the committee room with different views and religious traditions, [“there would be some significant differences in the definitions of those natural rights.”]

Where to begin. 

Let’s start with this: Mr Barnes is precisely correct. You don’t have to take my word for it—you might try out what another Virginian by the name of Thomas Jefferson had to say on the subject. Mr Jefferson, the author of the Declaration of Independence, said in that document that “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness…”. 

That would seem to settle that. 

Beyond the narrow historical point that seems to have eluded Mr Kaine is a far more troubling issue. The good Senator seems to believe that we have, for instance, free speech and equality before the law solely because he as a sitting Senator joined the majority in saying so. After all, how else are we to interpret Kaine’s insistence that our rights actually come from government, not externally.  And how does  Mr Kaine square government’s denial of equality before the law in the Jim Crow South with his insistence that rights emanate from that very same government? 

Leaving all that aside, Mr Kaine claims that he is a  “strong believer in natural rights”. Except that it takes only a moment’s reflection to dismiss his claim (strong believer or not). It is perfectly obvious to everyone (excepting of course Mr Kaine), that any claims to  natural rights depend on inherency. Their existence does not, and can not, depend on government. Moreover it should be clear that there is an inherent tension between government and rights. 

Which brings up another point. In the Declaration Jefferson made the point that Governments are instituted among men to secure—not to grant–these rights. Moreover he said, Governments derive their just powers from the consent of the governed. But when government becomes destructive of the goal of securing these rights, it is the right of the people to alter or abolish the government. 

And then there is Mr Kaine’s unfortunate inability to distinguish between the how the US and Iran differentiate between church and state. By way of (tortured) explanation he says of the notion that rights come from the Creator not government  “…that’s what the Iranian government believes…”.  So by implication, someone who believes in natural rights (as Mr Kaine claims, see above), is just another bloodthirsty killer. 

Let’s not belabor the point. Senator Kaine made an unforced error. Rather than figure out a way to back out gracefully he decided to dig himself in deeper. 

That leaves the residual question of what Mr Kaine actually believes. The citizens he claims to represent really are entitled to know. If he actually believes our fundamental rights really do emanate from government we should be aware of that fact. If so we should understand that this whole business was more than an embarrassment, but a governing philosophy.  And then we have something to worry about. 

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Politics | Tagged , | Leave a comment

Article One, Section 8 of the US Constitution. 

Posted on August 27, 2025 by Joe Benning

“The Congress shall have Power …To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…”.

It seems pretty clear to me that Article 1 Section 8 of the US Constitution (quoted above) gives Congress the power to coin money and regulate its value. Nowhere in the document, does the constitution give the President the right or power (either explicitly or implicitly) to define how the value of money is to be maintained. So why does President Trump think that this power has been granted to him?

The easy smart-aleck answer is that he doesn’t think at all. A possibly more accurate answer is that he wants the Fed to bring down interest rates. But that presents a problem. The Fed is actually powerless to bring down the general level of interest rates, absent a sustained reduction in inflation. 

For some reason or other the popular press insists on reporting that the Fed began lowering interest rates in September of 2024. And sure, it’s fair to say that the Fed began to lower overnight rates in September of 2024. The Federal Open Market Committee (FOMC) cut the overnight rate ½ of a percent  on September 18 and followed up with further rate cuts in November and December. By the end of time December they had lowered the overnight rate by a full percentage point. 

But the general level of interest rates did not go down; in fact, except for short-term rates, bond yields rose. Right before the Fed slashed the overnight federal funds rate by 50 basis points, the 2-Year Treasury note was trading around 3.59%; the 10year Treasury was trading around 3.65%. 

But now, almost a year after the Fed lowered the overnight rate by a full percentage point, Treasury 2-year and 10-year rates went up.  For example, Treasury just auctioned off 2-year notes at a yield of 3.64. And 10-year notes are trading to yield 4.28%. Which is to say that rates went up, not down. And just to be clear, consumer rates are priced off Treasury rates. If Treasury rates go up, consumer rates will tend to follow. 

The rise in long term rates is not a random event. Their is a reason for it, which is:  Investor expectations are changing. Treasury securities, and the dollars they are denominated in, used to be thought of as the world’s safest investment instruments. Perhaps global investors are starting to have second thoughts.

There are at least two explanations for this. The first is the huge (and growing) quantity of debt that must be serviced by the US Treasury. Treasury debt now amounts to about $37 trillion. The costs associated with servicing that debt  is now putting pressure on the US Treasury.  And that doesn’t count all the implicit promises Treasury has made. Nor does it count the remittances the Treasury no longer gets from the Fed—because the Fed is bleeding cash on its $6.5 trillion portfolio that is now underwater. 

  As it stands now, we are on track to spend at least $1 trillion dollars in Gross Interest Costs for FY 2025. That projection is about the same as the military budget for FY 2025, which clocks in at $1.045 trillion. 

There is a reason for the huge and growing debt service cost: the population votes for it, at least indirectly. People in the  middle class have convinced themselves that (1) they have “paid into” the programs that drive federal spending, namely Social Security and Medicare and (2) tax rates can be raised on “the rich” to fund any shortfalls. 

But the middle class has not paid in; not by a long shot. And raising taxes on “the rich” wouldn’t come close to filling the gap. In fact, without large middle class tax increases or benefit cuts Social Security and Medicare are due to run out of money in the early 2030s. They are effectively middle class welfare programs. 

A second reason why longer term rates have risen is that lenders are becoming more and more skeptical of both the competence of the Fed (think transitory) and with President Trumps attacks on it. Consequently, investors demand a higher rate as compensation for the risk they take by buying long dated Treasuries. 

When President Trump attacks the Fed and its governors, the players understand exactly what he is doing, which is to threaten the independence of the Fed. (See the opening paragraph above). We have seen this movie before and it never ends well. It is a sure fire recipe for an increase in inflation. Such an increase would serve to devalue US dollar holdings. 

Let’s face the reality of where we are. Donald Trump’s hero is Andrew Jackson, who put the Second Bank of the United States out of business. With his attacks on the Fed, Donald Trump is simply going down a well trod path that sacrifices institutional stability for (hoped for) short term political gain.  

In so doing, President Trump consistently displays an attitude toward the Fed that is reminiscent of Wright Patman, the Texas populist who served in Congress from 1929 until 1976. Like Patman, President Trump has no understanding of monetary theory or policy. He just wants rates to be lower and he thinks (wrongly) that the Fed has the power to bend the market to its will. 

But the Fed is powerless to bend the market to anybody’s will. Which, if he gets his way, President Trump may be about to find out, the hard way. Unfortunately, a lot of people are liable to get hurt in the process.

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Economics, Politics, Public Finance | Tagged | Comments Off on Article One, Section 8 of the US Constitution. 

Socialism with an (R)

Posted on August 25, 2025 by Joe Benning

Republicans have a very slim majority in Congress. They are trying to maintain said majority by, among other things, gerrymandering. That effort may be successful in the short run by allowing them to pick up a few more Republican leaning districts. Hence the Democratic squawking. 

But the time honored practice of gerrymandering isn’t really all that important. What is important though, is that nationally, the Republican party has effectively adopted socialism as its raison d’être.  How else to explain comrade Trump’s decision to take a 10% equity stake in the Intel corporation?

Or, for that matter, how to explain his taking a 15% cut of Nvidia’s sales to China of certain computer chips. Not to mention the same deal with Advanced Micro Devices. Or Kevin Hassett (former Chairman of the Council of Economic Advisors and one of the front runners to be Fed chief) proclaiming that the White House is likely to continue seeking similar deals with other companies. How else do we understand why Trump, referencing the Intel deal, today said on his social media feed that  “I will make deals like that for our Country all day long.” 

All actions taken (of course) without Congressional authorization.  And not to put too fine a point on it, the Trump administration allowed Nippon Steel to buy US Steel only after Nippon acceded to certain political demands. 

While Republicans are tripping over themselves preparing to run a national campaign against the self-declared Democratic Socialist running for mayor of New York, they ought to glance at a mirror.

The Republicans claim to be different. For example they point to Candidate Zohran Kwame Mamdani’s promised rent freezes, fare-free buses (why not subways too?), public grocery stores, universal child care, and a $30 minimum wage, financed (at least in part) by taxing the “wealthy”.  The term wealthy is, of course, routinely left undefined. 

Before the Republicans get too carried away with themselves while busily scorching Mamdani they ought to ask themselves this question: How are they any different? They like to either deny or push off costs too. 

Remember that border wall that Mexico was going to pay for. How did that work out? Or take Trump’s trial balloon about controlling drug prices. How is that different from rent freezes? Or the trial balloon about variable rates for patent fees. Leaving aside the fact that Section 8 of the US Constitution clearly requires Congressional authorization for this, notwithstanding Trumpian bombast, it would effectively be a flat out tax on innovation and next to impossible to administer. 

Then there are the ever changing tariffs that fluctuate with Presidential whims. Interestingly enough, Trump argues simultaneously that (1) tariffs won’t slow global trade, even though it is perfectly obvious to any freshman Econ student that the opposite is true; (2) the revenue derived from the tariffs will substantially reduce the budget deficit  (it won’t) and (3) the tariffs will generate foreign investment and therefore reduce the trade deficit. 

That last argument is particularly amusing in that trade deficits and foreign source  investments are two sides of the same coin. Consequently, any increase in foreign investment necessarily increases the trade deficit. Trump, who insists on referring to country specific trade deficits despite modern supply chains, clearly doesn’t understand this. 

Speaking of the devil, Trump has also decided to impose tariff duties on countries where America has a trade surplus. The US, for instance, has a trade surplus with Brazil, but at last count His Majesty threatened to impose a whopping 50% tariff on all Brazilian goods. His rationale was that  ex Brazilian President Bolsonaro was being treated unjustly, which even if true, has absolutely nothing at all to do with Brazil’s trading position. 

Anyway with respect to his threat to impose a 50% tariff on all Brazilian goods, here is what Trump wrote on his badly misnamed Truth Social: “[Bolsonaro’s arrest] is nothing more, or less, than an attack on a Political Opponent — Something I know much about! It happened to me, times 10…”. 

So, as it turns out, Trump now claims to be offended by the way the Brazilian establishment has behaved with respect to a political opponent.  Let’s see. That’s the same Donald J Trump who cancelled secret service protection for John Bolton (former Trump National Security Advisor), Mike Pompeo (former CIA Director and Secretary of State), Brian Hook (former top aid) Dr. Anthony Fauci (former NIAD Director), Retired General Mark Milley (former Chair of the Joint Chiefs), and former DHS Secretary Alejandro Mayorkas. 

He also revoked the security clearances of lawyers critical of him, including New York Attorney General Letitia James, Manhattan prosecutor Alvin Bragg and private lawyer Andrew Weissmann. Arguably Letitia James and Alvin Bragg used their official positions to unjustifiably attack Trump. But that doesn’t justify Trump doing the same thing.

And we know he didn’t sleep with Stormy Daniels. After all, he said he didn’t. And we all know he wouldn’t lie. Nor would he weaponize the justice system the way it was weaponized against him. Otherwise he would pardon all the January 6 rioters without examining their cases. Oops—he did just that. 

So the question of the day is: how exactly, are we to distinguish today’s Republicans from today’s progressives? At least Mamdani is right upfront about the stupid things he apparently believes. (And they are without question, undeniably stupid.) 

The Republicans, however, are unwilling to say what they believe. Probably because they don’t believe in anything other than getting re-elected.  

In a pinch, the Republicans act just like the progressives. They have demonstrated they will do whatever it takes to stay in power. Their only substantive difference with progressives is that they have different constituencies to promise all the “free” goodies to.  But there is no real philosophical difference between the two. 

America can pull itself out of this mess. It is a choice. America’s political leadership has to start acting like it. It could start by experimenting with telling the truth. Which is that (1) America’s love affair with deficit spending has to stop and (2) America is critical for preserving a Liberal world order; the alternative is pretty grim, and our allies are critical for the effort. 

The choice is ours to make. 

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Politics | Tagged , | Comments Off on Socialism with an (R)

A Day in the Life

Posted on August 12, 2025 by Joe Benning

Where to begin. Perhaps a partial review of what His Majesty Donald J Trump stirred up recently would be a good start.

On Tuesday August 12, 2025, His Majesty President Donald Trump said Goldman Sachs CEO David Solomon should either replace his economist or “just focus on being a DJ.” (David Solomon sometimes volunteers his time to serve as a DJ for charitable events.)

Apparently Jan Hatzius, Goldman’s chief economist, warned in a research note on Sunday that American consumers will end up absorbing an increasing share of the cost of the tariffs that Trump decided to impose. Of course they will. Anyone who took (and passed) freshman economics could tell you that.

Getting rid of Hatzius would be shooting the messenger, which is what Trump habitually does when he encounters news he doesn’t want to hear. Which is precisely what he did when he fired Chief Economist Erika McEntarfer of the Bureau of Labor Statistics, when the BLS reported unemployment numbers he didn’t like. And oh yes. The numbers were “rigged” against him.

Then again on August 8 he claimed that Intel CEO Lip-Bu Tan was “highly conflicted” and demanded that Lip-Bu Tan be fired. Three days later, after a meeting at the White House, Trump apparently had an change of heart adding that  Lip-Bu Tan’s  “success and rise is an amazing story.”

On Friday, Trump promised (you know what a Trump promise is worth) a “major lawsuit” against the Fed over its building renovations. He took the opportunity to once again bash Fed Chairman Jerome Powell and demand that the Fed cut interest rates. 

Obviously His Majesty is not quite aware that the Fed does not actually determine interest rates; it can only change the overnight rate. Since the Fed started “lowering rates” in September of 2024, pretty much all Treasury rates longer than two years have gone straight up. 

Ten year treasury rates that are used to price mortgages are about ½ point higher in yield. And the dollar has depreciated about 10% against the Euro since Trump took the oath of office, thus making US Treasury securities less attractive to foreign investors. Which also reduces foreigners willingness to fund the US budget deficit.

The great negotiator also has leaned on Nvidia and Advanced Micro Devices so that the US Government gets a 15% cut on their sales, presumably to China. The people in the Mafia who run the protection rackets couldn’t have done it any better. 

And while we are on the related subject of law enforcement, Mr. Trump decided he was going to take over the Metropolitan Police Department, at least temporarily, in order to rid Washington DC of crime. So now Police Commissioner Trump, who as we know is acutely sensitive to due process, will be responsible for bringing down crime in the District.  Now that Federalism has been tossed overboard—in another “emergency”—the question becomes what Mr Trump will do if the criminals decide not to cooperate. 

As far as I know, no one in the White House has actually enunciated a new strategy for dealing with the problem. Maybe he will give DC criminals a good talking to on Truth Social and threaten to fire them. 

To cap off a week of applied ignorance, according to the Wall Street Journal the White House announced on Friday that it would vet 19 Smithsonian Museums in Washington to “Fit Trump’s Historical Vision”. Interesting that Trump now claims to have a vision of history at all. He ought to share it with us if his staff can dream one up in time. 

All of this since just last Friday, August 8. I  shudder to think of what next week will bring.   

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Politics | Tagged | Comments Off on A Day in the Life

The Pyrrhic US Tariff Victory

Posted on August 1, 2025 by Joe Benning

President Donald J Trump and his minions are celebrating the great win they achieved in the trade war they set off.  The win is that, by statute, they raised the average tariff rate the US charges for the importation of goods from Europe from something like 3% to 15%. Which is to say that US consumers will pay higher prices for those imports. In other words he is raising taxes. 

In return for raising taxes on US consumers, representatives of the European Union (EU) promised to invest some thing like an additional $750 billion in America. Two things are of note here. First, EU countries were bound to invest more in America anyway, although the exact amount is in doubt. Secondly, additional investment by foreigners will raise the trade deficit, not lower it. 

The trade deficit and foreign investment simply offset each other; they are two sides of the same coin. Say Foreign Country X sells Y products to the US for $1 million dollars. What then does country X do with the money? Essentially, it has 2 choices. It can either take the money and spend it in the US, or it can invest it in the US. Or it can combine the two. But it can’t avoid transacting in dollars. Nor can it avoid the issue by repatriating the funds. It got paid in dollars, it has to use those dollars one way or another.

If it decides to spend the money in the US, there is no trade deficit. But it will have to spend less than it otherwise would have because the higher prices that result  from the tariffs will surely dampen demand. This will be only partially offset by the cut the US government takes (the tax). Economists refer to the difference between what consumers pay in aggregate and the combination of the tax take and country X’s revenues as a dead-weight loss. 

On the other hand, country X could decide to invest the proceeds in the US either by (for instance) building factories (direct fixed-investment);  by investing in US securities (passive investment) or some combination of each. But in either case the trade deficit rises, and the dead weight effect still applies.

In addition, there are other non-trivial considerations.  The US may suffer a reduction in its competitiveness because of a perception that it has reduced its reliability as a supplier. Similarly, the US dollar may be damaged in FX markets, although its status as the world’s reserve currency probably won’t be challenged. At least not yet. But it is worth noting that the dollar has already depreciated about 10% since Trump took office.

We also frequently hear the refrain “Where’s the recession?”  from Trump’s acolytes. But that is not necessarily the right measure to use. The imposition of tariffs on the global trading system will surely reduce growth rates, and may increase the inflation rate by more than just a one-shot. Those effects may not be instantly noticeable, depending on their severity. But the compounding effects over the years of either (or both) reductions in growth and increases in inflation can be very large. 

Finally, the reduction of trade barriers and of tariffs ushered in a world of greatly increased prosperity. In 1990 about 36% of the population of the world (1.9 billion people) lived in extreme poverty with income of about $2.15 per day measured in 2022 dollars. By 2019, that number was reduced to about 650 million people from 1.2 billion or about 8.4% of the world’s population. 

So the Trump trade agenda, even if successfully implemented, will necessarily fail according to its own criteria. If, for instance, foreign investment in the US increases, so will the trade deficit. If trade barriers (like tariffs) are erected and successfully implemented, global trade will slow more than it ordinarily would have and the world, including the United States, will be poorer. While the affluent countries of the West, including Japan, may feel a pinch, the brunt of the effects of slower growth are likely to be felt by countries in the global south. In turn that may produce political instability. 

The geopolitical victors from a growth slowdown could very well be the elites, but not the people, of China, Russia, North Korea, Iran and Venezuela. 

Congratulations Mr. Trump.

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Politics | Tagged , | Comments Off on The Pyrrhic US Tariff Victory

Here We Go Again

Posted on June 10, 2025 by Joe Benning

Back a couple of years ago we were treated to the spectacle of CNN (among others) referring to the “mostly peaceful protests”that followed in the wake of George Floyd’s murder at the hands of Derek Chauvin of the Minneapolis police department. It was a spectacle because the news was presented Baghdad Bob style. Viewers could clearly see the city burning as the news people insisted that the protests were “mostly peaceful” despite the obvious violence. 

We are now getting a repeat performance in LA. In the wake of President Trump’s federalizing California’s national guard to quell anti-ICE protests, the violence has resumed. Anyone who doubts this simply has to look at the pictures taken at the scene, some of which are reproduced below.

LA Riots

LA Rioters

There are some things here that should be blindingly obvious: (1) the “protests” have (predictably enough) become riots, (2) the protesters have become a mob that engaged in violence, (3) Trump’s order to federalize the California National Guard is perfectly legal, and (4) the protesters (and their supporters in the press) make no distinction between legal and illegal immigrants, albeit for different reasons. 

Unsurprisingly local California Democratic officials have adopted rhetoric whose aim is to attempt to (1) minimize or deny the protesters willful use of violence and (2) blame the violence on Trump’s decision to call in the National Guard (and now the marines). 

As it happens, I have no use for Donald Trump. I have never voted for him, and think that on his best day he is a national embarrassment. Moreover I think both the Republicans and the Democrats are dead wrong in their respective approaches to immigration policy. Regardless, violence should have no place in the debate.

It is clear to me that we should welcome qualified immigrants, and especially university students, into the US.  But neither party seems to make a distinction between legal and illegal immigration. Nor do either of them appear to be willing to seriously engage in a reform effort by introducing a realistic bill in Congress.

But facts are facts and one simple fact is both true and largely unrecognized or even acknowledged.  It is that lately partisans have accepted the use of violence as a legitimate political tool. Witness not just the rioting going on in LA; look at the fact that a would be assassin lurked outside the home of Supreme Court Justice Bret Kavanaugh. Or that candidate Trump was nearly assassinated. 

Similarly, look at the people who have announced they are “supporters” of Luigi Mangione. This is a man whose chief claim to fame is that he murdered an insurance executive in cold blood in Manhattan. And while we are at it, let’s not forget the January 6 rioters, virtually all of whom were pardoned by Donald Trump. 

Then there are the supporters of Hamas, mostly found on elite college campuses, who celebrated the violence that Hamas visited on innocent Israelis and others. Some of the campus advocates for Hamas participated in campus violence themselves.  Or how about the protesters who parked themselves outside of Anthony Blinken’s home in Virginia, and courageously decided to pour fake blood in front of the vehicles driving his children to pre-school. Those children were 3 and 4 years old. 

Outside Secretary of State Anthony Blinken’s Home

It is not like these incidents are rare. There is a very long list of politicians, judges, executives and others who have faced actual violence or threats designed to intimidate or cancel them. 

What is so amazing about all this is that it is political malpractice, committed no less, by people who consider themselves political professionals. Do they really think that the vast majority of voters really want to see their cities overrun and set on fire by a mob? 

Perhaps these alleged professionals haven’t had time to view last November’s election result. And they haven’t let it sink in that they are performing a great service for advocates of illiberalism.

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Culture, Politics | Tagged , , | Comments Off on Here We Go Again

The Problem with Modern Politics

Posted on May 24, 2025 by Joe Benning

There is a problem with politics (as it is practiced) in virtually all the Western democracies, including the United States. The problem is not that Donald J Trump, the US president, is an idiot—although he is. Nor is the problem that his major organized opposition, the Democratic party is delusional—which it is. 

The problem is that the way for politicians to get elected is to tell people what they want to hear. And so we get a lot of feel good rhetoric about vague generalities. Or rhetoric about how awful the other guy is. And probably both. Nowhere are their clear statements of principle that anyone can hang their hat on. For instance, all politicians are opposed to deficit spending—when the other guy is in office. But when my people are in office there are vital needs to be met. 

As a result, politicians get elected without having the slightest idea of what they will actually do once in office other than to follow the party line, whatever it is at the moment. More importantly, they are blissfully unaware of (or don’t care) what consequences are likely to result from their decisions. As long as the policy can be “spun” to sound good.  (Another word for “spin” is lie). But that is a subject for another time.

Anyone who doubts that the parties don’t know or care about the quality of their decisions should put tribal instincts aside and examine the evidence. For instance, after examining the evidence what rational person can actually believe that the imposition of large tariffs will simultaneously increase revenue and decrease imports? Or, how is it possible to increase foreign investment in the United States without simultaneously raising the trade deficit? After all, they are opposite sides of the same coin; one has to balance out the other.  

Or, who could possibly believe that public schools in the major cities are actually educating the nation’s children? Or who really believes that sex is simply a matter of choice, which is to say, a social construct? That people can choose the sex they would like to be, physical characteristics, including DNA, aside?

Take the matter of political parties. For the last 50 years or so, the Republican party stood four square for free trade. That is now officially out the window. With rare exceptions (Mitch McConnell being one) elected Republicans publicly back the trade restrictionism of Donald Trump. 

Or take Civil Rights. Since the 1960s after throwing off the shackles of its “Solid South” the Democratic Party has claimed to be the Civil Rights party. And yet, when it came to a choice between improving the public schools and backing the teachers’ unions, the party backed the unions every time to the detriment of the students. And to anybody who claims the schools are doing their job: Just look at the history of the test scores. 

The point of all this is not an ode to ideological purity. Nor is it that politicians are hypocrites—which by and large, they are. The point is that the political system is giving the public pretty much what it asked for. Which is the illusion of something for nothing. There are no policy trade-offs to consider in this fantasy world, just free stuff.

But the real world has this tendency to (eventually) rear its ugly head. And it appears to be getting ready to do that. Remember when Donald Trump was going to end the Russian war on Ukraine  in 24 hours? How is that working out? Remember how Donald Trump (like every other candidate for President) was going to end the deficit? How does that pair up with a pledge not to touch the major deficit drivers, namely Social Security, Medicare or Medicaid? 

The bond market might have something to say about fiscal policy. Long term rates have been rising ever since the Fed started easing policy in September of 2024. The Treasury 10-year note and 30-year bond now yield 4.51% and 5.03%. Those yields are higher by about three-quarters of a percent and 1 percent respectively.   

And now for the Democrats, the party that voted against NAFTA and every other free trade measure that came down the pike over the last 50 years. Not only are they firmly in denial over the 2024 election; they are now all-of-a-sudden resolutely opposed to Trump’s tariffs. Not to tariffs generally speaking, but Trump’s tariffs. (There is that pesky principles thing again.) Actually Joe Biden, when he was nominally in charge, kept Trump’s tariffs and added some more trade blocks. 

And speaking of Joe Biden, remember when various spokesmen for the party claimed that Old Joe was “sharp as a tack” and ready to run for another 4 years. Until the debate meltdown when Biden’s decline became irrefutable and it became CYA time. And how about the way the Washington Post defended Biden—that is the newspaper that continues to run the banner “Democracy Dies in Darkness” on the front page. The newspaper that ran column after column attacking Robert Hur, the special prosecutor, as a partisan hack.  Perhaps a little throat clearing is in order here. 

And Democrats are really, really upset over DOGE. Why? Despite the claims (some legitimate) about the lack of due process, they want to spend even more money on various government give aways. Due process and the rule of law be damned. There is, for instance, the matter of the student loan give aways that were repeatedly slapped down by the courts, including the Supreme Court. But it didn’t stop the effort. 

So we have met the enemy and the enemy is us. And it is getting pretty late if we want to turn the boat around. 

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Culture, Politics | Tagged , , , , | Comments Off on The Problem with Modern Politics

The Biggest Lie. Ever.

Posted on December 22, 2024 by Joe Benning

It is by now beyond dispute that Joe Biden’s mental and physical health were in serious decline from the earliest days of his presidency. It was obvious, or should have been, to even the most casual observer. And there were plenty of voices, usually conservative ones, that pointed out early on that something was amiss. 

The commentators who pointed out the obvious were treated to the usual slanders reserved for “the enemy”.  Among other things, they were accused of being in cahoots with cabals of right-wing conspiracy mongers.  

The usual suspects, including The NY Times, the Washington Post, CNN, MSNBC, NPR and virtually the entirety of the Democratic Party—including its highest ranking officials—participated in the slander. And it was slander; the big lie.  Because they knew that Biden was incapacitated and they desperately tried to cover it up, to the point that they supported Biden’s attempt to run for a second term. 

It was only because of Biden’s meltdown during his June 2024 debate that the whole enterprise came crashing down. And even then, party elders arranged for Biden’s Vice President, Kamala Harris, to get the party’s nomination for President. That would be the Kamala Harris who assured us that Biden was just fine. The same Kamala Harris who attacked special prosecutor Robert Hur for what she claimed were his political motivations for his report on his investigation of Biden. Of course, after the transcript was released, Hur was shown to be correct in his assessment. 

Now consider the front page story published by the Wall Street Journal the other day. 

“If the president was having an off day, meetings could be scrapped altogether. On one such occasion, in the spring of 2021, a national security official explained to another aide why a meeting needed to be rescheduled. “He has good days and bad days, and today was a bad day so we’re going to address this tomorrow,” the former aide recalled the official saying.”

So as early as the spring of 2021—the beginning of Biden’s term—he was having “good days and bad days” such that meetings with national security officials had to be postponed. And all the while we were being assured that Biden was as “sharp as a tack” and that 40 year olds “couldn’t keep up with him” etc etc. The mainstream press for its part acted like an obedient  Greek chorus repeating the lie. Right on cue, they went on the attack against anyone who even suggested that Biden’s mental and physical health were problematical. 

There are only 2 possibilities here. The first is that the The NY Times, its sycophants and the people who worked closely with Biden actually bought the bit. They really believed that Biden was just fine. If that’s the case, they—and I mean the whole bunch of them—are just plain useless. 

The second possibility is far more plausible. The mainstream press, the people who are forever complaining about misinformation, the “fact checkers”, top level bureaucrats, high Democratic officials and other assorted hangers on, knew exactly what the score was. They simply decided to cover it up.  

They decided to cover it up to the point that they were willing to nominate and support a senile old man to be Commander-in-Chief. This while the U.S. was involved in 2 wars, each of which had (and still has) the potential to spiral into a nuclear conflagration.  So great was their lust for power, that they were willing to make that wager to save their positions. 

So here is the obvious question: Why would anybody, anywhere ever trust these people again? Why would anybody ever believe a word they say? Why would anybody ever put these people near the levers of power again? 

They shouldn’t be trusted. Full stop. Or put anywhere near the levers of power. Ever again. 

And, oh yes. Biden is still (at least nominally) the Commander-in-Chief until January 20 at noon. It would be nice to know who is actually running the store until then.

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Politics | Comments Off on The Biggest Lie. Ever.

Trouble to Come?

Posted on December 19, 2024 by Joe Benning

Yesterday, the Fed announced a 25 basis point reduction in the Federal Funds rate target. In the event,  the S&P 500 sold off about 3%, while market interest rates spiked upward. Two-year Treasury notes ratcheted up about 12 basis points to 4.35%, while 10 year T-notes rose about 8 basis points to 4.5%. 

Let’s put this in perspective by emphasizing bond market behavior. The Fed began its latest easing cycle at the September 18, 2024 Federal Open Market Committee (FOMC) meeting. At that meeting,  the FOMC cut the target rate for Fed Funds by ½ percent to 4 ¾ %. Subsequently, at the next 2 meetings, they voted to lower the target rate another ½ %. They did so in two steps for a cumulative reduction of 1% from the September meeting. 

The press, including the financial press who ought to know better, insists on referring to these policy steps as the Fed “lowering interest rates”. However, immediately after the Fed began its easing cycle, two-year Treasury yields began their ascent from about 3.6% to 4.32% where they are today. Similarly, ten-year Treasuries  began their rise from 3.69% to 4.57% where they are today. 

Certainly, some of the prior run-up in bond prices and reduction in yields is attributable to over enthusiastic bond traders looking for more rapid Fed rate reductions. But a rise of anywhere from 72 to 88 basis points in market yields during a time in which the FOMC reduced its Fed Funds target rate by a full 1% is extraordinary.  

Which may portend trouble to come.  

As it now stands gross Federal debt stands at about $35 trillion. Moreover inflation reports have been hotter than expected for the last several months or so. In addition, the labor market has remained fairly strong, although slightly weaker than it was a few quarters ago. 

That said, DOGE or no, entitlements are the driving force behind federal spending. According to the Economic Report of the President, Social Security, Medicare,  Medicaid  and other Health spending is projected to amount to $4.3 trillion in FY 2025. Add in another $965 billion for interest payments on the debt and we get to about $5.3 trillion, or about 73% of the federal budget. Which, by the way, assumes another $1.7 trillion in deficit spending. 

Now assume that the average maturity of the debt is about 4 years. That requires about $8.75 trillion annually to finance maturing debt. Add to that $1.7 trillion in new debt and we have $10.45 trillion in financing every year for the foreseeable future. 

How in the world is the market supposed to handle that when rates have already risen about three-quarters of a percentage point while the Fed is nominally easing policy? 

The upshot of it is that there is a good case to be made that the financial markets are in for a rough time unless Congress drastically changes the structure of our budgetary woes. That means cutting spending, especially with respect to entitlements.

Neither party has shown any inclination to do that. Trump has promised (for whatever that’s worth) to spare Social Security. The Democrats want to spend even more on entitlements and quite a few of them want “Medicare for All” added into the mix.  Certainly a recipe for disaster if ever we needed to be reminded. 

Time to be very cautious. 

JFB

Please follow and like us:
fb-share-icon
Tweet
Posted in Politics | Comments Off on Trouble to Come?