“But Donald Trump…”

But Donald Trump…

The instant progressive rejoinder to almost any criticism of Joe Biden’s shambolic presidency is “But Donald Trump…”. Which in turn is followed up by a litany of accusations about Mr. Trump’s conduct in office. Many of these accusations are unquestionably correct. Trump was, and is, appallingly ignorant about—well pretty much everything. And he routinely lied about pretty much everything as well. 

But through it all there were some policy successes, some important.  The rapid development of COVID vaccines is a notable one. The signing of the Abraham accords is another. The reduction in tax rates and the appointment of 3 originalists to the Supreme Court should be counted as well. But none of the constructive things Trump did strayed very far from what used to be called Republican orthodoxy. 

The two questions Republicans need to ask themselves are these: (1) were the costs of the Trump presidency worth the benefits, and (2) what is the path forward? Those are the questions the party has to sort out by 2024. Although it is virtually certain that the Republicans will re-capture the House, and possibly the Senate in 2022, such a result would simply represent a typical “throw the bums out” mid-term reaction against the party on power. It will not reflect a Republican governing philosophy simply because they don’t have one, or at least haven’t annunciated one this side of sanity. 

While the Republicans lack even a semblance of coherence, the Democratic leadership has enforced a brutal consistency across the party. Elected Democratic office holders and activists are passionate and committed believers who are pretty much wrong about almost everything. Since a good many of them are facing tough re-election fights, they are finally waking up to the fact that the party’s approach has been thoroughly rejected by the vast majority of independents and Republicans, not to mention a substantial minority of registered Democrats. 

Hence the “But Donald Trump…” dodge designed to rally the base and remind suburbanites what they revolted against. But it is a dodge not least because it implies that all questions are at root binary. One answer is to embrace Donald Trump in full; the other is to embrace progressive politics. That formulation is simply nonsensical. 

More importantly, the “But Donald Trump…” motif is an exercise in turning off any semblance of critical thinking in favor of cartoonish framing of policy issues. In the minds of committed partisans, every question implicitly becomes one of comparing two (and only two) possible outcomes. The first is the End-of-Democracy presided over by Donald Trump and a coterie of White Supremicists. The alternate is a just and progressive society informed by science and reason, governed by all-knowing and benign experts. 

With respect to the (alleged) pending extinction of democracy it is worth reflecting on what the term democracy is supposed to mean. For instance, the Washington Post, which has made a habit of publishing Democratic talking points and referring to it as journalism first began running the slogan “Democracy Dies in Darkness” on its front page in February of 2017, shortly after Donald Trump took the oath of office. 

It is a slogan that perfectly captures the mindlessness of the zeitgeist. Dean Baquet, executive editor of the New York Times, commented rather insightfully, that the slogan “sounds like the next Batman movie”. As to its meaning, well, who knows? All we can deduce is that its focus group inspired virtue signaling has been enthusiastically embraced by proponents of right-think.

But what does the term democracy really mean, or more to the point, what is the proper definition when used correctly? First, what it does not mean is that temporary majorities just get their way on any and all matters by the simple expedient of controlling 50% of the vote plus 1. Or to put it more bluntly, mob rule is not democracy. 

Second, Democracy spelled with a capital D is part of a process—but only a part—whose purpose is to protect liberty. Other factors that come into play are the rule of law, norms, culture, values, a separation of powers, property rights, free markets and a legal system independent of politics. 

Here is where it gets interesting. Interesting because those factors and values are part and parcel of classical liberalism but antithetical to progressivism. Consider for instance that classical liberalism is concerned with individuals and their natural-law rights and obligations. Progressivism on the other hand, is concerned with (ever shifting) group rights and outcomes. Consequently laws that are neutral on their face have to be evaluated with respect to their distributional impact on favored and disfavored groups. Which is to say, it encourages legal rent seeking.

By the language of the 14th amendment all Americans are supposed to enjoy equal protection of the laws. (Technically a better statement of equal protection is found in the Privileges and Immunities Clause of Article IV. Not only is it is direct; it avoids the clash between the administration of equal rights legislation and the Bill of Rights). 

Leaving aside the technicalities, the question remains, are all U.S. citizens equal under laws that are neutral on their face?  Obviously not. The new segregationists, otherwise known as social justice warriors, proponents of affirmative action, woke activists etc, favor actions by the administrative state specifically designed to achieve desired racial, ethnic and gender based outcomes in things like college admissions, the acquisition of broadcast licenses and access to capital. Hardly equal protection.

Or how about what progressives insist on referring to as “reproductive rights?” The way the law is currently interpreted, women, compliments of the so-called living constitution, have a court manufactured right to abort their unborn children without so much as a second thought about the father of the about to be extinguished child. Much less the child. However impolitic it is to mention it, women don’t get pregnant by themselves, a fact the law seems to think is irrelevant. 

How about the administration of vaccines? It may be foolish in the extreme to refuse vaccination, but that doesn’t necessarily give the federal government, which lacks the police power reserved to the states, the right to impose vaccination mandates. 

Not only are the unvaccinated treated like second-class citizens, they are rapidly approaching the point where they will be denied the possibility of earning a living or traveling in public unless for a state sanctioned activity. Remember during the lockdowns that social justice demonstrations were just fine, but going to church wasn’t? Even now, the unvaccinated are treated like lepers even thought the vaccinated can infect others as well. It is increasingly clear that the chief benefit of vaccination is not that it prevents infection, although it may reduce the odds; it is that vaccination mitigates the severity of potential infection.  

And while we are on the subject of unequal treatment, let’s not forget that the right to bodily autonomy (see abortion above) suddenly goes right out the window when it comes to vaccination. It seems that bodily autonomy only counts for abortion. Progressives seem intent on acquiring the power to make a person’s life and livelihood dependent on the whims of administrative agencies. Run by non-political experts of course. 

And how about those political norms that Donald Trump routinely violated? Progressives certainly wouldn’t do that. Or would they?

Well, the Biden Administration with an able assist from AG Merrick Garland and the Teachers Unions decided to start treating parents who objected to the indoctrination of their children as potential terrorists. 

Or the Biden Administration’s take  on the legality of vaccine mandates. After the 5th circuit  Court of Appeals blocked Biden’s order, the administration decided to carry on anyway hoping to buy time to accomplish its objectives despite the Court’s observation that “the petitions give cause to believe there are grave statutory and constitutional issues with the Mandate.” And not to put too fine a point on it, the Biden Administration issued the order through the Occupational Safety and Health Administration (OSHA) citing an emergency, but didn’t get around to specifying rules for a solid three months after the supposed emergency was declared. 

Then there is the Biden Administration’s flatly illegal extension of the eviction moratorium issued through, of all places through the CDC. It should be noted that the eviction moratorium was first started by that constitutional scholar, Donald Trump. And let’s not leave out the filibuster that the progressives are trying to dismantle as they continue their penchant for changing the rules when they can’t otherwise get their way. 

Let’s not forget the Great Gerrymandering Scare of 2022. It now turns out that, despite previous claims of the pending End-of-Democracy as we know it due to Republican Gerrymandering, it is Democrats who may very well benefit from redistricting as a result of the 2022 census–and wait for it–Gerrymandering. All of a sudden the dire threat seems to have receded in press coverage. (Then again, when the Democrats do it, it’s redistricting; when the Republicans do it, it becomes diabolical and racist Gerrymandering.)

I could go on, but I won’t. Suffice it to say that as the facts change, the Red and Blue teams do not change with them; they merely adjust their arguments (if they do even that) to accomplish their pre-ordained political goals. Facts are utterly irrelevant to their policy arguments.  

And first among the progressive arguments is “But Donald Trump…” which serves to turn off the brain (a necessary pre-condition of progressivism) and allow the faithful to believe what they wish to believe despite actual conditions here on planet Earth.  And let’s not leave out the Republicans. Their first argument is: I am not a Democrat. Which may be enough to get them elected in 2022, but not in 2024. Just like Biden’s argument: I am not Donald Trump was enough to get him elected in 2020 as a caretaker, but not to actually govern as anything more than that. That is a lesson he is starting to learn the hard way.

JFB

Progressive Collapse

The chaos that is the defining feature of the Biden presidency is not the result of one man’s incompetence. Nor,  by itself, is it the consequence of his intellectual shallowness, advanced age, cognitive dissonance or general mediocrity, though all of these factors have played a role. 

The chaos is the result of Biden’s choice to align himself with the progressive wing of his party. And since the party has pretty much been captured in toto by said progressives, group think reigns supreme. Consider the reaction to Senator Joe Manchin’s refusal (thus far) to buckle under and support the “Build Back Better” bill. 

The headline in the Washington Post sums up the story: “Democratic bitterness, rage follow Manchin’s ‘no’ on Biden bill.” According to the Post, Representative Alexandria Ocasio-Cortez (D-NY) accused Manchin of a ”betrayal of working families across the country… and an egregious breach of the trust of the president.”

After accusing Manchin of being a liar, White House Press Secretary Jen Psaki went on to say “Senator Manchin will have to explain to those families paying $1,000 a month for insulin why they need to keep paying that, instead of $35 for that vital medicine. He will have to explain to the nearly two million women who would get the affordable day care they need to return to work why he opposes a plan to get them the help they need. Maybe Senator Manchin can explain to the millions of children who have been lifted out of poverty, in part due to the Child Tax Credit, why he wants to end a program that is helping achieve this milestone—we cannot.”

For his part, Senate Majority Leader Chuck Schumer, looking over his shoulder at a potential primary challenge in 2022 by Squad leader AOC, announced that the Build Back Better Bill would be subject to a vote on the Senate floor. Schumer is taking this extraordinary step even though the bill has no chance of passing and will damage the prospects of Senators in swing states in the upcoming mid-terms. Then again, Senator Bernie Sanders (I. Rolling Stone) demanded the vote. 

Senator Sanders reportedly said “…that Manchin should have to vote publicly and that he would “have a lot of explaining to do to the people of West Virginia” about his opposition. So it appears that Senators Sanders and Schumer along with AOC actually believe that Manchin, a fellow Democrat (which by the way Sanders, the self declared democratic socialist is not) will be punished by West Virginia’s voters. This, even though Donald Trump carried the state by 40 points in 2020, and recent polling indicates that upwards of 70% of West Virginians oppose the bill. 

Meanwhile, not to be outdone, Speaker Nancy Pelosi weighed in by saying “Well, we never give up,” Pelosi said. “This will happen, it must happen, and we will do it as soon as we can. There are conversations that are ongoing, but we cannot walk away from this commitment. The Build Back Better [Act] is about transforming our society.”

It has apparently not occurred to Pelosi et.al. that the American public is not at all interested in “transforming our society”. What the American public wants is stable prices, good schools, safe streets and reasonably competent public administration. The Democrats, have delivered none of these. 

In fact, progressive policy, with a large assist from Republican Federal Reserve Chair Jay Powell, has set off an explosion of inflation that shows no signs of abating. Parents across the country are protesting the take-over of the public schools by woke activists while school test scores (where they still have tests) continue to deteriorate rapidly. And the murder rate in big cities has skyrocketed 30% year-over-year, a record. And we haven’t even broached foreign policy. 

The reason for the chaos is the underlying (and preposterous) progressive conceit that not only can the administrative state micro-manage a dynamic free-market economy and local institutions; it can also do so competently and efficiently.  Which is to imply that bureaucrats know better than you how you should live your life. And they have the regulations to do the trick. 

Except that all they have created is economic and social destruction. The one major policy success of the last few years is the astonishingly rapid discovery and deployment of vaccines to fight the COVID pandemic. And that success was brought to you compliments of those creatures of the free-market, the drug companies. 

JFB

The Jawbone of an Ass

[The White House] is considering whether to escalate an attack on parts of corporate America over rising consumer prices, according to an administration official and three people with knowledge of the discussions who spoke on the condition of anonymity to reflect private meetings.

—The Washington Post, Front Page, November 20,2021.

As surely as night follows day, the Biden Administration, a breeding ground for economic illiteracy, is once again looking for someone to blame for its policy errors. The latest search is necessitated by a sharp rise in inflation. 

Up until recently the Biden Administration denied the existence of an inflation problem. When that didn’t work they, along with the Fed, erroneously described inflation’s rise as merely transitory. Now transitory is being redefined upwards to a date uncertain. 

Funny thing though, the rise in prices has been relentless and broad based.  According to the Bureau of Labor Statistics (BLS):

“The monthly all items seasonally adjusted increase [of the Consumer Price Index] was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors. The energy index rose 4.8 percent over the month, as the gasoline index increased 6.1 percent and the other major energy component indexes also rose. The food index increased 0.9 percent as the index for food at home rose 1.0 percent.” 

In response to the bad news, the Biden Administration has decided to jawbone corporate America. After all, that approach worked so well for Lyndon Johnson, Richard Nixon, Gerald Ford and Jimmy Carter, none of whom served 2 full terms. Moreover since the rise in inflation has become broadly based and embedded in the minds of consumers, Mr Biden will apparently have to jawbone corporations in every sector of the American economy. 

Which will all have precisely the same effect: Zero. 

The fact is that the rise in inflation is directly attributable to (1) policy actions the White House has taken and (2) policy decisions implemented by the Fed that the White House has cheered on. This year alone Congress, at the behest of the White House, has continued to spend money with gusto—and the Fed has accommodated the exercise by purchasing about half the Treasury bonds used to finance the enterprise. 

The result is a huge increase in the money supply and consumer demand. At the same time the Biden Administration and its allies have constrained the production and distribution of  goods and services. For example, the Administration is at war with domestic producers of fossil fuels, but begs OPEC to produce more. Mr. Biden’s nominee for comptroller of the currency, Cornell Law Professor Saule Omarova, has said that she wants to “…basically get rid of these carbon financiers…by [starving] them of their source of capital”. 

And then there are the executive orders the Administration is issuing that will increase regulatory costs on producers. Those costs will inevitably be passed on to consumers. Not only that,  Mr Biden has decreed that regulators no longer even need be constrained by cost – benefit analysis. Regulators may rely on aspirational but vaguely defined goals when imposing new rules on businesses. How’s that for increasing the costs and risks of doing business, not to mention handing out favors to friends?

So the net of it is that the Biden Administration is busy increasing demand and reducing supply. Any freshman student in economics will tell you what will happen as a result: Prices will rise. There isn’t any mystery here. 

It is, or should be, crystal clear that the Biden Administration is (1) simply  trying to change the subject, (2) remarkably illiterate in matters of basic economics or (3) both. My money is on 3—both.  

What is truly unfortunate is that the Biden Administration actually seems to think, despite a mountain of evidence to the contrary, that the government is actually capable of micro-managing the $23 trillion U.S. economy. But what they have actually demonstrated beyond all reasonable doubt is gross incompetence, even in executing legitimate governmental functions. 

Under the circumstances, the idea that the Administration is going to jawbone prices lower is simply ludicrous. 

At the moment the U.S. has issued over $22 trillion in outstanding (and headed higher) publicly held debt. A lot of that debt is held by foreign governments, including China. Which also means that those bond holders also hold dollars. That doesn’t leave a lot of room for policy error, a consideration which seems not to have occurred to the Biden Administration. 

A loss of confidence in the U.S. would be devastating. High and sustained inflation could be the spark that provokes such a loss. In turn that would likely cause a run on the dollar as it did when Jimmy Carter was President. And the performance of President Biden, whose Administration increasingly resembles that of Mr. Carter’s with each passing day, isn’t helping any. The U.S. Treasury may be a lot closer to the edge of a financial cataclysm than the public thinks. 

JFB

Made in Washington DC: Inflation

An impressive list of problems has descended on the Biden presidency. Almost all of them have been brought about or exacerbated by—Joe Biden. Not only that, the Biden method for dealing with them is to (1) insist that the problem doesn’t exist, and then insist that (2) enacting his agenda is just what is needed to remedy the non-existent problem. 

Take inflation. This morning the Bureau of Labor Statistics (BLS) reported that year-over-year inflation surged to 6.2%, the highest it has been in 30 years. The surge in inflation is no statistical fluke. It simply continues the trend that has been in train since January of this year. Moreover the rise in inflation is accelerating and becoming more broad based. 

According to the BLS report:

“The monthly all items seasonally adjusted increase was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors. The energy index rose 4.8 percent over the month, as the gasoline index increased 6.1 percent and the other major energy component indexes also rose. The food index increased 0.9 percent as the index for food at home rose 1.0 percent.” 

Back in July, Biden was dismissive of the inflation threat (See #1 above in paragraph 1). Bloomberg reports “President Joe Biden dismissed concerns that the U.S. would experience persistent inflation as the economy emerges from the pandemic…” He went on to say “There will be near-term inflation” because the economy is picking back up, [He] said Wednesday night at a CNN town hall in Cincinnati. But most economists believe that “it’s highly unlikely that it’s going to be long-term inflation that’s going to get out of hand,”. 

Well, here we are 4 months later and inflation is becoming both pervasive and persistent. But not to worry says President Biden.  Enacting his agenda is all we have to do. (See point #2 in the first paragraph). 

Consider for example the musings of Transportation Secretary Pete Buttigieg, only one of the many incompetents who serve in the Administration. In a breathtaking display of economic illiteracy, Buttigieg actually said that, among other things, paid family leave is part of the Biden Administration’s tool kit to fight inflation. He went on to say that passing the Biden agenda would bring inflation down.

Said Buttigeig:

“Because if we can act to reduce the costs that Americans face: The cost of childcare, the cost of schooling, cost of access to pre-K, just literally putting more money in people’s pocket with the child tax credit that represents thousands of more dollars a year for most families with kids. That’s something that can help at a time when we see other issues like what’s going on in global oil markets increasing the prices people face,”.

Nothing like stoking up demand to reduce price pressures.

Never one to miss an opportunity to mutter a non sequitur, President Biden headed off to Baltimore to argue that the spending (in the $1 trillion infrastructure bill) “…can strengthen global supply chains to help lower prices, reduce shortages and add union jobs…”. How exactly this miracle is supposed to happen was left unstated. 

In any event, Mr. Biden suddenly decided that addressing rising inflation (that didn’t exist until this morning) is a “priority” for his administration.

We are now about at the stage where the kid in the crowd points out the obvious, namely that the emperor has no clothes. The fact is Mr. Biden and his advisors, with the exception of Treasury Secretary Janet Yellin, are clueless as to why the inflation rate has taken off, and why it is liable to be persistent. 

Secretary Yellin has already signaled that she is a team player, so it is unlikely that she will spoil the party by telling Mr. Biden that the problem is largely his fault along with the progressives that have been leading him around by the nose.   

Quite simply, rising prices—inflation—is the result of too much money chasing too few goods. There is too much money floating around for 2 reasons. The first is that the Fed has been recklessly printing money for going on 2 years.The second is that the Fed has kept short term rates near zero while buying an astonishing amount of Treasury debt. As of July 2021, the Fed held $8.3 trillion in Treasury securities, an increase of $3.6 trillion from March of 2020. 

The result has been to blur the line between fiscal and monetary policy thus drastically reducing incentives for fiscal sobriety. Mr. Biden and Congressional progressives have, not surprisingly, taken this as a green light and have ramped up spending on Bernie Sanders wish list of progressive causes. 

Printing all that money stokes demand.  At the same time, the supply side is constrained. To be sure, some of the supply side is hindered by COVID effects. But plenty of the constraints are the result of policy choices. For example, President Biden shut down the Keystone Pipeline in one of his first official acts as president. He is considering doing the same to the Michigan pipeline. 

World oil and gas prices have exploded and now the President of the United States is reduced to begging OPEC to ramp up production. All this while he is deliberately reducing domestic production of U.S. energy. 

Similarly, the ports on the coast have been backed up for months. One of the reasons is union rules that restrict the time they can be open. Another is that they are not nearly as automated as they should be because that would threaten union jobs. And we can’t have that. In fact the infrastructure bill—really an exercise in corporate welfare—spends money not to automate, but to subsidize the use of more manpower. 

The list of policy errors is almost endless. But the point is that the inflation problem we most assuredly have didn’t just fall out of the sky. It is the result of policy error. And those policy errors are likely to continue because the progressive wish list has a price tag that extends to infinity. 

The progressives are quite clear that they mean to transform the structure of the U.S. economy. Which means command and control from Washington, D.C. 

Strap in because it is going to get worse before it gets better. 

JFB

Janet Yellin Scores a D Minus

Ignorance and enthusiasm make a dangerous combination. It’s even worse when people who should know better nevertheless agree to make wildly implausible sales pitches designed to justify foolish policy proposals. In the end a once respectable reputation gets dented and maybe shattered. 

Enter Janet Yellin, PhD. Ms Yellin earned her undergraduate degree in economics at Brown University; she earned her MA and PhD degrees in economics from Yale University. Before serving as Chair of the Fed, and then as Treasury Secretary, she worked as a professor at UC Berkeley, one of the nation’s top schools. 

Janet Yellin

At Berkeley she had a joint appointment at the Haas School of Business and the Economics Department. She was the second woman at Berkeley to receive tenure (1982) and the rank of full professor (1985).  She has also served as a member of the National Science Foundation’s panel in economics and as a fellow at the Brookings Institution. 

And yet, in promoting the Biden Administration’s “Build Back Better” proposal she came up with this doozy:

“It will boost the economy’s potential to grow, the economy’s supply potential, which tends to push inflation down, not up,” she said. “For many American families experiencing inflation, seeing the prices of gas and other things that they buy rise, what this package will do is lower some of the most important costs, what they pay for health care, for child care. It’s anti-inflationary in that sense as well.”

Let’s unpack this remarkable series of assertions, provided without evidence, as the Washington Post used to say (correctly) about Trumpian policy claims. First: the Biden package will “boost the economy’s potential to grow…which tends to push inflation down”. Second, the package will subsidize consumption of health care and child care, which she claims is anti-inflationary in that it reduces consumer costs.

I would be willing to bet that a student at Berkeley who made those preposterous arguments in a class taught by Professor Yellin would earn a solid D-. Consider: The entire thrust of the Biden proposal is to raise the tax burden on the most productive people in the country in order to stimulate consumption by the least productive segment of the population.  

After all, raising taxes on high income earners reduces the savings pool and therefore investment. That reduces the potential supply of goods and services. Moreover, even if it were true (which it manifestly is not) that the supply of goods and services would be increased by the plan, that eventuality is years down the road. The inflation problem is here now.  

Let’s take a look at the demand side. How in the world does subsidizing the consumption of child care and health care services  bring down costs for those services? If I subsidize Mary thus lowering her costs, I have to charge somebody else thereby raising those costs. All else equal, I have not lowered costs, I have merely shifted them. Consequently prices will not accurately reflect production costs and capital will be misallocated. Capital  misallocation reduces efficiency; as a result prices tend to be higher than they would otherwise be.

Leaving aside theory, there is history here. When the Affordable Care Act (ObamaCare) was passed in 2010, the average employer cost for family health insurance coverage was $9,773. By 2020 it had risen to $15,754; an increase of more than 60%. Average insurance costs per worker rose from $3,997 to $5,558; an increase of just under 40%. According to Kaiser Permanente, as of July 2020 the average cost for health care insurance is $21,342. About 75% of that is paid for by the employer, which is another way of saying that the worker’s cash wages are reduced by that amount. 

Some statistics on health care costs can be found here, here and here.

To be fair, there is still a vigorous debate over the true impact of ObamaCare on insurance premiums. Some premiums went up, some went down—after accounting for subsidies. Actually the system is not really insurance at all. Instead it is an after-the-fact payment system coupled with income transfers and increased taxes.  That said, ObamaCare was marketed as a way to reduce premiums, and that  it did not do by any stretch of imagination. 

So there is no reason for anybody to take seriously Ms. Yellin’s assertion that throwing more federal subsidies at health care will lower costs. It will just redistribute them, and probably in an inefficient way. 

Similarly, subsidizing child care will not lower costs, it will simply transfer those costs. There is no reason to suppose that federal subsidies for baby sitters (which is what we are really talking about here) will increase economic productivity, much less reduce inflation. 

Ms. Yellin certainly knows that what she is arguing is transparent nonsense. She is probably just repeating talking points dreamed up by some communications flak in the White House.  But she is doing President Biden no favors. The country and Mr Biden would actually be much better off if she were to talk some sense into him. But that, unfortunately, does not look like it’s going to happen. Apparently it is Bernie Sanders and Elizabeth Warren et. al. who have the President’s ear.

JFB

The Debt Ceiling, Again…

Of course Congress should raise the debt ceiling and avoid a default. And of course throughout history the parties have been absolutely hypocritical about when they will and when they will not vote to do so. The chief criteria are twofold: (1) what is the best way to embarrass the other side and (2) gain electoral advantage in the process?

Today we have (nominally) unified government under Democratic control. Naturally enough, the Republicans are refusing to cooperate in raising the debt ceiling on a bipartisan basis. Also naturally enough, the Democrats are pretending to be hopping mad about the Republicans’ bad faith in refusing to cooperate in what is normally a bipartisan effort.

Except that the Democrats’ claim about historic bipartisanship is simply not correct. As recently as 2006 when the federal government was controlled by Republicans, not a single Democratic Senator voted to increase the debt limit–led by among others — wait for it — then Senator Joe Biden.

Below, see the speech minority leader Mitch McConnell (R, KY) made today, quoting then Senator Biden, on the subject. It is fairly amusing. Especially since it is a given that in the not too distant future a Democratic Senator will be quoting Senator McConnell when the roles of the parties are reversed.

JFB

The State of Play

There are plenty of things to rue about the Biden Administration. There is, for instance, old fashioned incompetence, an equal opportunity employer.  But the Administration’s slipping-on-a-banana-peel habit has become so routine that even its most enthusiastic defenders (AKA the press) is having a difficult time maintaining the fiction that the adults are back in charge. It wouldn’t matter all that much if we didn’t live in a tinder box, primed for a match. Be that’s where we are. 

Consider the state of foreign policy. The Trump administration was rightly castigated for its inflammatory and ignominious rhetoric about longstanding U.S. allies and institutions, including NATO. The Biden Administration has done him one better. Not only was the retreat from Afghanistan shambolic; the U.S. left plenty of U.S. citizens and green card holders behind to the tender mercies of the Taliban. Not to mention leaving our allies in a lurch with virtually no warning.

While the Biden Administration frets about the number of women in the new Afghan Government (none) and the dismantling of its gender programs, a founder of the Taliban has announced that they plan to bring back executions and amputations. Nooruddin Turabi, a founder of the Taliban told the Associated Press that “Cutting off of hands is very necessary for security”. In that regard the Taliban is now considering whether to resume the practice at a Kabul sports stadium. 

Then there is the way the Biden Administration presented the new trilateral security partnership among Australia, the UK and the United States (AUKUS). The deal itself is one that makes a lot of sense. But, like the precipitous withdrawal from Afghanistan, it was announced without sufficient (if any) consultation with NATO allies. 

The fecklessness with which it has attempted to implement its as yet unarticulated foreign policy goals has opened up a significant chasm between America and Europe and left other American allies unsure of America’s will and its word. 

On the domestic front, things are no better. This week the leadership of the Democratic Party is working mightily to get its members to unanimously agree to spend $4.5 trillion—$1 trillion for infrastructure and $3.5 trillion to expand on Lyndon Johnson’s utopian vision of the Great Society. In this regard it should be acknowledged that the programs that the Great Society spawned represent one of the most spectacular failures in domestic public policy in the history of the republic.  

Unfortunately, that is not the worst of it. 

The Biden Administration like the progressive movement in general, has jettisoned the individualism of classical Liberalism in favor of collectivist, illiberal, group-based intersectionality. That has led to the poisonous race-based rhetoric the Administration routinely employs as it tries to advance its agenda. 

The damage this does to the polity is on full display in the video below that, as they say, has gone viral. Perhaps eventually, there will be enough adults in the room to put a stop to the now pervasive insanity that dominates every crevice of American public life. If not, the road ahead is going to get a lot rockier. 

JFB

Progressive Good Crime

Coinciding with the Biden Administration’s push for higher taxes on wealthy individuals and a greatly expanded IRS, ProPublica published documents that purport to show private tax information of several high profile billionaires including Jeff Bezos, Bill Gates, Michael Bloomberg and others. 

Leaking these documents is, of course, illegal. And just like the Lois Lerner episode, no one will be punished for committing this crime. That’s because in the progressive mind this is Good Crime. Chances are, the perpetrators will never be revealed. 

ProPublica has said that it doesn’t know the source of the documents. Fat chance of that, by the way. If ProPublica doesn’t know its source, there is be no way they could have authenticated the documents or determined their accuracy. But they printed the documents anyway, undoubtedly because it furthers the story—fiction really—that the rich don’t pay their “fair share”. 

Among other stunning revelations, the documents, if accurate, show that (1) wealthy individuals (like everybody else) didn’t pay income taxes when their reportable income was zero; (2) wealthy individuals (like everyone else) didn’t pay capital gains taxes in years when they didn’t realize any capital gains by selling assets, and (3) wealthy individuals used plenty of lawyers and accountants to make sure that they legally minimized their tax bills. Which is to say that the behavior of these individuals was both legal, proper and rational. 

On the other hand, amid all the faux indignation, it should be noted that the documents that were leaked were leaked illegally. In so doing the leakers (1) violated the privacy of those whose documents were leaked and (2) demonstrated for the umpteenth time the gross incompetence of the IRS when it comes to guarding citizen privacy. More likely it is worse; the IRS simply followed the orders of its political masters to weaponize the agency, as in the recent case of Lois Lerner. Which is not to leave out Richard Nixon and Lyndon Johnson. 

As to the substance of the matter: Congress is supposed to determine tax policy. For some reason or other all those lefties wailing about “saving our democracy” don’t seem to think much of our democratic processes.  If they did they wouldn’t be cheering on the clearly illegal leaking of documents designed to gin up outrage against success while running around the legislative process. 

As it turns out, progressives are at least half-right when they assert that the rich do not pay their fair share of the tax burden. The rich pay far too much. It is the middle class that is undertaxed. 

Consider the following statistics, using the latest available data. In 2017 the top 50% of taxpayers paid 97% of all federal income taxes. They bottom 50% paid the remaining 3%. The top 1% paid 38.5% of individual income taxes; the bottom 90% paid only 29.9%. The top 5% paid 59%; the top 10% paid 70%. As these numbers make clear, the tax income burden is shouldered by the wealthy, not by the middle class. These data are available in greater detail here

The middle class, as it turns out, is by far the greater net beneficiary of federal largesse. Lower income Americans on balance receive net cash benefits from the government. That is offset by the junky schools they have to put up with and inadequate police protection in poor neighborhoods. All the cash payments do is create a permanent dependent class. This is the vote buying operation that is the hallmark of progressive politics (tax, spend and vote). It remains firmly in place, and has so since the days when it was instituted by FDR. 

If progressives were truly interested in tax fairness, which they manifestly are not, they would specify ahead of time what tax shares would constitute fairness for the different deciles of the income distribution. But of course they never do that. Moreover, there is a simple way to ensure that everybody pays the same tax rate. The tax code could be amended so that everyone earning $25,000 per year or more would be required to pay 17% of their income in tax. No exemptions, no deductions. Period.

The mere hint of a flat tax where everybody pays the same rate would have progressives screaming bloody murder along with tax lawyers, accountants and lobbyists. I should say other lobbyists. The reason is simple. Progressives are not interested in either tax fairness or tax efficiency. What they are really interested in is command-and-control of the nation’s economy. Progressives want to use the police power of the federal government to commandeer private resources so that they can regulate and transform America into a little socialist utopia. No matter how long they have to goose-step their way toward the goal.  

JFB

Peak Biden?

When President Biden released his budget proposal this past Friday he listed his priorities in the following statement. (The budget document can be found here.)

Biden’s list of priorities is typical in that it studiously avoids talking about trade-offs. Everything is a priority. Not only that, the priorities are expressed in focus group tested aspirational language meant to please the progressive base while remaining vague enough to avoid measurable results. Biden will for instance, take action, control, provide, tackle, advance, reform and restore. From a policy perspective this is meaningless blather. 

Which begs the question: Why did the Administration decide to release this on the Friday afternoon before Memorial day when it would receive minimal coverage? Larry Kudlow provides a plausible explanation. The accompanying numbers in the tables of the OMB budget release give away the game. 

In its own budget documents the Biden Administration admits (1) that it is planning for an increase of $14.5 trillion in accumulated debt by the year 2031; (2) it assumes that federal government outlays will increase to 24.5% of GDP through 2031 versus a long term average of about 19.3%, and (3) after a Covid re-opening spurt, real GDP growth will range from 1.8% to 2% from 2023 through 2031. 

Let’s think about the implications of all this. The Biden Administration intends to spend gargantuan amounts of money, in the process greatly expand the size and scope of both the federal government and the national debt. For its efforts the Biden Administration projects that it will match the Obama Administration recovery. So how does the Obama record stack up?

1.Measured by real GDP growth, job creation or wage expansion, the Obama record was somewhere between subpar and pretty miserable. 

2. From the expansion that began in June 2009, real GDP grew at only 2.1% per annum, the slowest growth rate during an expansion since 1949. 

3. Net job creation grew by 8.6% during the Obama years.  Total employment grew by more than that, and sometimes substantially more, in 5 of the prior 10 expansions since 1949. 

4. Similarly, inflation-adjusted wages increased by more in 5 of 10 prior recoveries since 1949. More detailed data is available here. 

So here we have a situation in which the Biden Administration intends to upend much of American society by (1) significantly  raising marginal tax rates, (2) substantially re-regulating great swaths of the economy, (3) launching new fronts in the culture wars and (4) using federal power in an attempt to equalize outcomes across groups defined by race and sex rather than by effort and opportunity in complete contravention of the bedrock Constitutional principle of equality before the law. 

And for all this, by its own admission, the Biden Administration expects the results to be mediocre at best. Actually, the Administration’s policy agenda virtually guarantees poor results if the Congress is foolish enough to pass it.  

The likely result of all this is that economic performance will fall short of even the low expectations of the Administration. Add to that a widening gap between promises and results and the stage is set for rising populist discontent, increased racial tensions, decreasing civility and further erosions of individual freedom. 

But think of the bright side. This could be Peak Biden.

JFB

Magical Thinking

Republicans complain that Democrats are hypocrites. Democrats reply that Republicans are hypocrites. They are, of course, both correct in a generic sense. All politicians routinely say things they know or suspect to be false, especially if they think it affords tactical advantage. In that sense, both parties are drenched in hypocrisy.

When all is said and done, it is reasonably clear that the Republicans don’t believe a word they are saying. So with respect to hypocrisy, they are guilty as charged; egregiously so. On the other hand, the Democrats appear to actually believe their talking points. If so, they are not the hypocrites that Republicans make them out to be. They are simply guilty of magical thinking. Unfortunately, magical thinking can be very expensive.

Consider for instance the Democratic outrage on display over the prospect that the Republican engineered tax cuts of 2017 would add $1.5 trillion to the national debt over 10 years. The proposed budget that the allegedly centrist President Joe Biden just released projects a deficit of $1.8 trillion this year and after that about $1.3 trillion every year for the next decade. This, by the way, from a President who vowed that he would not increase the deficit “by one penny”.  

This amounts to a proposed $15 trillion in deficit spending over the next 10 years. But now we suddenly discover this is not deficit spending at all—it is investment. And all this “investment” will drive publicly held debt from 79% of GDP in (pre-pandemic) 2019 to 110% in 2021 to 117% by 2031. By the end of the decade, debt service will more than double to 11% of GDP and that assumes that interest rates remain fairly stable. 

The Administration projects that revenues will average 19.3% of GDP even though historically revenues have averaged about 17.3% since the 1970s. Spending, which averaged 19.4% in the post-War pre-Covid era is projected to increase and remain just under an astounding 25% of GDP. Which begs the question: How can the Administration claim that it will collect revenues of 19% of GDP and spend 25% of same and not increase deficit spending? 

Even if the Biden Administration believed its own propaganda about tax collections it still wouldn’t bring revenues into line with expenditure—not by a long shot. There still remains a 6 percentage point gap between revenue and expenditure. 

To call this reckless would be an understatement. The Biden Administration is attempting a huge increase in entitlement spending; a large expansion of the regulatory regime, and political subservience of the Fed, both as regulator and as Central Bank, so that the Biden political agenda can be financed and enforced. 

We have seen this movie before and it never ends well. The longer it takes this one to come to an end, the messier it will be. 

JFB