The Midterms

All the signs are beginning to point to a big midterm rebuke of Biden Administration polices—and may be more. Much more. One election cycle is not the be all and end all. But this one may set the stage in 2024 for a full scale rejection of the radicalism that has taken over the Democratic Party. 

That will depend on Republicans acting like adults assuming they take power. That is always a shaky bet. And speaking of acting like adults, it assumes that ex President Donald J. Trump remains ex President Trump; that he does not run for the Republican presidential nomination, and if he does so he fails to get it. Otherwise, all bets are off.

It is fairly routine for the party that controls the White House to lose seats although not necessarily the control of the House in midterm elections. Over the last 100 years, the president’s party loses about 28 contests in the House and 4 in the Senate.  Over the last 100 years, the president’s party has picked up House seats only 3 times; in the Senate 6 times. Only twice has the president’s party picked up seats in both Houses of Congress.

In 2020 the Republicans gained a net of 12 seats even while losing the White House. That was a clear rejection of Donald J Trump’s conduct as President. Partly as a result of Republican pickups in 2020 and partly because of Democratic Congressmen taking jobs in the Biden Administration, the Democrats now have only about a 5 seat margin in the House. It is therefore a virtual certainty that the Republicans will hold the Speaker’s gavel in the next Congress.

The Republicans seem to have developed momentum over the last few days. The issues that favor them—crime, inflation and the border are at the top of voter’s minds. The issues that favor Democrats—abortion rights and climate change—are slipping rapidly down the priority scale. Plus, parents are hopping mad about the state of public schools and are in the mood to punish Democrats who side with teachers unions versus Republicans who have emphasized parental rights. 

Put it all together and there is the real possibility of a red tsunami on November 8. Expect the Republicans to pick up 30 to 40 seats in the House.  

The Senate is a bit trickier. The Republicans are poised to pick up 3 Senate seats and maybe 5—even with some relatively low quality candidates. Speaking of which, Herschel Walker is beginning to pull ahead in the polls even though he has no political experience, various (plausible) allegations of scandal have been leveled against him, and his son, a conservative activist, has denounced him. 

It is starting to look like Adam Laxalt (R) is beginning to pull away from incumbent Catherine Cortez (D)  in Nevada.  The polls have also tightened considerably in Arizona and New Hampshire.  The contest between incumbent Mark Kelly (D; AZ) and challenger Blake Masters is separated by 1 or 2 percentage points—well within the margin of error. 

After having a comfortable lead of 8 to 11 points in September, the incumbent Democrat from New Hampshire, Maggie Hassan is up only 3.4 points in the average of published polls in October. She is running against retired General Don Bolduc (R), a Trump style candidate whom the DNC backed in the primary on the theory he would be easy to beat. 

There are a couple of potential surprises lurking out there. In Colorado the DNC is working overtime to label Republican Joe O’Dea a Trump acolyte even though Trump has denounced O’Dea because of his refusal to kiss the ring. For instance he has called O’Dea a RINO (Republican in Name Only). Referring to O’Dea he said  “MAGA doesn’t vote for people with big mouths”. 

So why are Colorado Democrats trying to tie Trump around O’Dea’s neck? The only reasonable conclusion is that they believe the Democratic incumbent Michael Bennett is more vulnerable than he seems.  Similarly there have been one or two polling scares for Democratic incumbent Patty Murray in Washington State. 

Then there is Pennsylvania where the Democratic candidate John Fetterman imploded on the debate stage Tuesday night. He is obviously struggling to recover from the stroke he suffered from just before he won his primary. While any decent human being wishes him well and hopes for a full recovery, the fact remains that the debate ripped away the shield that the press protectively wrapped around him.  That is worth thinking about. 

The mainstream press was well aware of Fetterman’s condition. And they covered it up. They did so deliberately in order to influence the election. That much is obvious. It is pretty much what they did with the Hunter Biden laptop story. And so the real take-away from the Pennsylvania election is this question: what else is the press lying about? 

The press has consistently downplayed the surge in crime, especially in big cities run by Democrats. They have played footsie with the CDC and its ever changing policy dictates concerning COVID-19. They have pretended that shutting the schools down at the behest of the teachers’ unions was a costless exercise. And of course, every time there is a change in the weather they ring climate change alarm bells.   

The net of it is that in all probability the Republicans are going to win somewhere in the vicinity of 30 to 40 House seats and 2 or 3 Senate seats. Surprises will be in the upside for Republicans. That won’t mean that the voting public has signed onto Republican orthodoxy, primarily because there isn’t one. But, at least temporarily,  there is the possibility that it will put a halt on the ongoing public policy fiasco that is the Biden Administration. 


Ukraine and the Coming Progressive Revolt

Apparently random events may not be random at all. A look under the surface may reveal a pattern that points to a larger truth.  That is especially true in politics. The politics of the Russo-Ukraine war, combined with climate hysteria in the West, speaks volumes about the sorry state of US politics and the internal contradictions of progressivism. 

Consider Russia’s war against Ukraine, the US response to it and how it is characterized by the mainstream stenographers who call themselves journalists. They are covering it like a basketball game with almost no serious thought about the geopolitical ramifications of the war and its conduct.

To recount: In February of 2022, six months after America’s chaotic withdrawal from Afghanistan, Vladimir Putin launched an invasion of Ukraine after massing Russian troops on the border.  In response, the Biden Administration issued threats of sanctions against Russia and its leaders that would take effect if Russia actually launched an invasion. 

All the while President Biden kept (1) assuring Putin that the US wouldn’t present a serious military challenge to Russia, while (2) simultaneously supplying Ukraine with military hardware, which the US gradually escalated in its reach and lethality. 

In the event Russia launched its invasion and to the surprise of “experts” Ukraine did not fold in a few days. Instead it fought back aggressively to the point where those same experts are now saying that Ukraine has the upper hand. Meanwhile the Biden Administration refuses to articulate American goals for the effort that are not immediately walked backed by White House staffers. 

Remember Biden’s ruminating about the difference between a small incursion vs an invasion? Or perhaps Biden calling Putin a war criminal (which he undoubtedly is); or how about Biden announcing on March 26, 2022 that Putin “cannot remain in power” in the Kremlin, only to have the White House announce a day later that Biden was not seeking regime change in Russia. 

Putin, who has presumably taken his measure of Biden, has doubled down on his war aims and has taken to renewing his nuclear saber-rattling.  In turn,  Biden, who routinely blurts out whatever is on his mind, offhandedly referred to the possibility of nuclear Armageddon at a Democratic Party fund raising cocktail party. Publicly (and privately if he is to be believed) Biden has warned of “serious consequences” if Putin were to order the use of a tactical nuclear weapon in Ukraine. 

The problem is that nobody on planet earth really believes that Biden would respond in kind were Putin to deploy tactical nukes in Ukraine. After all, Biden routinely folds when confronted by the slightest progressive pressure. What are the chances that he would seriously consider trading the destruction of New York for Kiev? To ask the question is to answer it.

It may very well be the case that the stakes in the conflict for Russia are large while the stakes for the United States are small. That raises several possibilities, some of them quite  unpleasant. First, as a result of differing perceptions of costs and benefits, there is the real possibility of miscalculation leading to the catastrophe of a nuclear exchange. 

Second, the presumed unwillingness of the US to risk a nuclear war with Russia over Ukraine may result in a frozen conflict that is locked in place for years to come. Third, the prospect of a long drawn out proxy war with Russia exposes the folly of the West’s war on fossil fuels. Fourth, the US political commitment to Ukraine is unsustainable over the long run given the current environment. 

The commitment to Ukraine is unsustainable because its underlying rationale is in direct conflict with the dominant strains of policy making in the US. Those strains are isolationism and progressivism. JD Vance, Republican candidate for Ohio’s open Senate seat epitomizes the isolationist right. He has said “I gotta be honest with you. I don’t really care what happens to Ukraine one way or another.” That pretty much sums up the isolationist position.

The progressive position is even more problematic, for 2 reasons. First, progressive ideology posits the United States as being irredeemably racist, sexist, borderline fascist, a threat to democracy, and worst of all, capitalist. The progressive mindset is utterly incapable of seeing beyond its own delusional rhetoric and is therefore unable to support a defense of Western liberalism in general and the United States in particular. 

Secondly, progressive policymaking is so dominated by climate hysteria that progressives are unswayed by the very real prospect of a cold dark winter in Europe as Russia shuts down its gas deliveries to the West. One likely consequence of a European continent facing a severe power shortage is a revolt by angry citizens who would be perfectly happy to drop their opposition to Russia in return for light and heat.  Another  likely consequence is a rupture between the US and continental Europe leading to a weakening or a breakup of NATO. That is a goal long sought by Putin.

A third possibility is a total collapse of Neo-liberalism which leads to a strengthening of autocracies around the world. Western liberalism is now under assault by China, Russia, Iran, their various minions, and useful idiots in academia.  And yet, the Biden Administration continues to use Russia as a go-between in negotiations with Iran, not to mention begging Saudi Arabia and Venezuela to increase oil production while  suppressing production of fossil fuels in the United States. 

The underlying problem is that progressive ideology is trumping reason, as it usually does. And as surely as night follows day, the progressive caucus has begun to voice its lack of support for Ukraine. It did so by releasing (and then un-releasing) a letter suggesting that Biden negotiate with Putin, over Ukraine’s head, to end the war. 

The progressive position in one sense is entirely consistent. The only way it makes sense for the US to support Ukraine is a whole hearted embrace (or re-embrace) of Neo-liberalism and the commitment of the resources needed for the job. That implies a large scaling up of the US Defense budget. It also implies abandoning climate alarmism, utopian income redistribution schemes, while shoring up international free-trade agreements and defense alliances like NATO. 

These policy changes are all anathema to the progressive left; some are despised by the Neo-isolationists on the right. But they are nevertheless necessary if the West is to remain free and prosperous. 


Financial Market Fragility

The recent meltdown in the British Gilt market that provided the rationale for the Bank of England to intervene in the markets by buying government bonds has raised the question now being asked rather uneasily by policy makers: could the same thing happen in the US ? 

Of course it can. In fact it’s a virtual certainty unless steps are taken to reform both US fiscal policy, financial regulations and US financial infrastructure. 

A dreary recitation of the numbers that describe the state of the public fisc has a tendency to fall on deaf ears, probably because various warnings have been issued for decades but disaster hasn’t arrived yet, or has been averted in the short term. But that is only on the surface. Putting off reform now just disguises the real cost of our fiscal folly and ultimately makes it more costly than it needs to be. 

The truth is we have a structural deficit that will not be ameliorated by mere tactics. Under the current policy regime unsustainable growth in debt and deficits are baked into the cake for the foreseeable future.  The deficit and accumulated debt will retard economic growth and make solving the problem more difficult. 

Consider the current state of affairs and projections for the future absent significant policy changes. According to the Treasury  Borrowing Advisory Committee (TBAC) accumulated Treasury debt has doubled since 2015 and, according to the CBO is projected to reach 180% of GDP by 2050. This will require increasing ownership of Treasury securities by the private sector reaching about 25% by 2030. (See the graphs below). 

By definition that means that funds that would ordinarily go to the private sector, where they could fund investment, are going to the public sector where they mostly finance income transfer. These income transfer programs discourage savings and therefore investment needed to finance economic growth. 

The biggest liabilities are in Social Security and Medicare. They contain unfunded promises to pay benefits of $60 and $100  trillion respectively, expressed in terms of present value. Those numbers, which dwarf accumulated Treasury debt of about $30 trillion, are off balance sheet. But off balance sheet or no, the Treasury needs cash to pay beneficiaries.  

That’s one reason why the increasing fragility of financial markets   is becoming problematic. With the rise in inflation to 40 year highs, the Fed has been aggressively raising interest rates.  They have already raised overnight rates about 3 percentage points and before the end of the year those rates will probably be around another 1 % higher. Intermediate and longer rates have also risen about 3.5 percentage points in anticipation of additional Fed tightening. 

But while rates have risen along with Treasury financing requirements, bond dealers have pulled in their horns. According to the Treasury Advisory Borrowing Committee, bank capital has fallen sharply as a percentage of Treasury market size.  

In November of 2008 during the cataclysmic events leading to the Great Recession, bank capital was about 22% of publicly held Treasury debt. Now it’s a shade under 5%. Similarly, over the same time period, primary dealer transactions in Treasuries fell from about 14% to 2% of outstanding Treasury securities. (See the accompanying graphs.)

At the same time, there has been a substantial pick up in Treasury market volatility and diminished market liquidity.  Data from JP Morgan, shown in the graphs below, illustrate a rapid rise in Treasury market volatility and corresponding fall off in market depth. 

This is where the rubber meets the road.  Theorists can argue all day long about what type of stress the market can handle. As a practical matter though, Treasury needs to sell securities to finance all the spending that Congress has ordered. And someone has to buy those very same securities. Standing between those buyers and sellers is the dealer community. 

There are 25 primary dealers in government securities. Primary dealers are authorized to trade with the Fed. They also serve as market makers and make underwriting bids at Treasury auctions. According to data published by the Federal Reserve of New York, the top quintile of dealers—5 in total—account for about 50% of dealer transactions in Treasuries. The top 10—which includes the 1st and 2nd quintiles—account for about 75% of the volume. 

The current weighted average maturity (WAM) of outstanding Treasury debt is about 74 months. The weighted average duration (WAD) of the debt is about 5 years. The CBO projects yearly deficits north of $1 trillion for years to come. If we take into consideration rolling over the existing debt along with financing deficits of $1 trillion plus for the foreseeable future, then we are talking about something in the neighborhood of $6 trillion worth of Treasury securities being sold through the dealer community every year for a very long time. 

Remember there are only 25 dealers and 5 of them account for about half the trading volume. That means there will be about $500 billion worth of Treasuries every month being marketed by a very small number of players. And keep in mind that bank capital as a percentage of outstanding Treasury debt has been dropping like a stone. Also keep in mind that primary dealer transactions in Treasuries now constitute a mere 2% of outstanding Treasury debt, down from 14% a little over a decade ago. Combine that with a sharp rise in volatility and with shrinking market depth and we have the recipe for a financial calamity. 

Could a meltdown like the one in Britain happen here? Sure it can. The elements that could touch it off are present. All it needs is a spark. The wise course would be to begin to reform our budgeting processes and strengthen our financial infrastructure before there is a spark. Which means that substantial policy reforms are due now, before it’s too late. 


The Midterms come to PA

We are about 3 weeks away from the midterm elections and to date there has been very little by way of substantive discussion of policy by the candidates. On the other hand, there has been extensive posturing, sloganeering and bad argumentation, heavily influenced by insights gleaned from analysis of focus groups.  

So let’s talk about Pennsylvania. The results from the Keystone State will be particularly interesting, but not because control of the Senate rests with Pennsylvania voters. It doesn’t. The results will be interesting because there are two elections in Pennsylvania that couldn’t be more different. The gubernatorial race pits a genuinely moderate Democrat (Josh Shapiro) against a tin-foil hat Trumpkin Republican (Doug Mastriano) who insists that the 2020 Presidential election was stolen.  

For example, Mr. Shapiro has come out in favor of a private-school choice bill that passed the Republican controlled Pennsylvania state house with only 1 Democratic vote. He is in favor of lowering corporate taxes and spending more money on police. He also disavowed at least some of outgoing governor Tom Wolf’s restrictive Covid policies. 

But Shapiro is not exactly an Eagle Scout. He and his allies spent something like $840,000 on ads designed to help Mastriano secure the Republican nomination, the theory being that Mastriano would be a relatively easy opponent to beat in the general election. Leaving aside the ethics of this, it does make all the rhetoric about the supposed threat to democracy more than a little bit suspect. 

On the other hand Mr. Mastriano appears to be a true believer. He is all-in on the laughable Trump claim that the 2020 election was stolen. This is where we get into tin-foil hat territory: Mastriano appears to actually believes this nonsense. It isn’t just posturing. At the very least this indicates that his prudential judgement is deeply flawed—and that is being charitable. If he really believes this baloney he certainly doesn’t belong in the Governor’s chair.  

Mastriano’s policy positions tend to be on the rightward cultural edge of conventional Republican politics. But his rhetoric tends toward the inflammatory; you might say Trumpian. And his rhetoric suggests that at the very least he is a bit off. One writer from the Atlantic referred to him as “a nutjob”. 

It is hard to really pin Mastriano down because he avoids direct contact with the press; his campaign is full of innuendo, and the press, which obviously favors Shapiro, interprets Mastriano’s pronouncements in the least favorable light.  So it is difficult to tell what he is really all about. That said, the available evidence suggests the Atlantic writer is probably correct: Mastriano is  nuts. 

Compare the gubernatorial race with the Senate race. Like the gubernatorial election there is no incumbent. That’s pretty much where the similarity ends. In the gubernatorial race the vacating governor is a Democrat; in the Senate race, the retiring Senator is a Republican. 

The Democratic nominee, lieutenant Governor John Fetterman, clobbered his moderate rival, Connor Lamb, in the Democratic primary. He has staked out positions on the far left of the progressive wing of the party. You might say that he is firmly in the AOC camp. 

He is, for instance, in favor of a $15 minimum wage; he is opposed to fracking, although he is trying to soft-pedal earlier remarks. According to his website he is going to hold Washington “accountable” through his 5 point “plan” which is quoted below.

Mr. Fetterman’s plan includes this gem: “All across Pennsylvania we’re seeing soaring prices, hollowed out communities, getting ripped off by corporate greed.” 

Here is his 5 point plan to fix things:

  • Make more sh*t in America (This is a direct quote including the spelling).
  • Cut taxes for working people
  • Ban Congress from trading stocks
  • Slash “out of pocket” health care costs
  • End immoral price gouging

We have come to expect politicians to say stupid things. And John Fetterman has jumped into the stupid sweepstakes with gusto. 

Fetterman’s positions are so extreme or pointless or both that he and his handlers have decided to make the campaign about abortion and identity politics. He has taken to wearing a sweatshirt emblazoned with a “John Fetterwoman” Logo that is supposed to emphasize his support for abortion rights. 

Funny thing though, in the end abortion regulation is going to be decided by 50 state legislatures, not the Feds so if he is really all that interested in furthering abortion rights he would be attempting to do so at the state, rather than federal level. But he isn’t. 


Because on top of being a buffoon (see the 5 point plan above)  he is also a hypocrite. He makes a big deal about his working class sympathies, spent years as Mayor of a small working class town and best of all he routinely outfits himself in a pair of shorts and a hoodie. As the stenographers that make up the political press put it: He wears this outfit Even in winter! Well, Holy Smoke: How’s that for street cred?

So let’s talk about the publicity machine that Fetterman built over the years as a way to create a persona that bears little resemblance to the actual person. Start with the working class bit, and grant the log cabin routine is a perennial in American politics. 

John Fetterman earned his first paycheck—other than the $150 per month he earned as Mayor—when he was 49 years old. That paycheck came from his job as Lieutenant Governor. Until then he  was supported by an allowance funded by his wealthy family. Like most working class people he earned his bachelors degree from Albright College; his MBA from the University of Connecticut and his Master’s in Public Policy from Harvard’s Kennedy School. 

After his sojourn at the Kennedy School he ran for Mayor of Braddock, PA and won. There he stayed from January 2006 until January 2019 when he became Lt. Governor of PA. 

After his election as Mayor of Braddock, Fetterman launched what Wikipedia calls “a failed campaign to attract new residents to the area from the artistic and creative communities.” He also initiated other revitalization efforts. They failed as well. 

Today Braddock looks pretty much the same as it looked when Fetterman was Mayor. It has a tiny population of about 2,000 people. Median household income is about $18,500; per capita income is only about $13,100 according to US Census data. Some 35% pf the population lives below the poverty line including 54% of those under 18 years old. 

On top of all this, Fetterman suffered a stroke a few days before the primary. His campaign covered up the extent of the damage for as long as it could, but eventually the details began to emerge as they almost always do. It turns out that as a result of his stroke, Fetterman has problems processing spoken words and so he insists on using a closed captioning aid when he has the rare interview. 

NBC News reporter Dasha Burns quizzed Fetterman the other day about the state of his health now and noted that Fetterman had not released his medical records relating to the stroke. She also reported that it”…wasn’t clear [Fetterman]was understanding the part of their conversation when he didn’t have the aid of a captioning device.”

As social justice warriors are wont to do, the Fetterman campaign immediately went on the attack in an effort to intimidate anyone who would dare to question the bona fides of the candidate. They wheeled out his wife, Gisele Fetterman, who announced the interview left her “in a rage”; accused the reporter of doing a disservice to journalism for the “appalling” report which was, she maintained appalling to the entire disability community. Then for the coup de grace she urged that there be “consequences” for the reporter. 

Note that the argument quickly went from “nothing to see here; all is fine” to an argument that questions about the candidate’s health status are all of a sudden off-bounds.

That about sums it up. Candidate Fetterman is a fraud as well as being a failed Mayor, a policy buffoon and hostile to the first amendment. The only thing he’s got going for him is that he is running against—Dr Mehmet Oz.

Dr. Mehmet Oz is a celebrity celebrity doctor and political neophyte endorsed by Donald J Trump. In the Republican primary Dr. Oz beat David McCormack, a hedge fund manager, by about 1,000 votes. 

Unlike Fetterman, Oz doesn’t try to hide either his wealth or background. Disclosure forms indicate his wealth is over $100 million, and could be multiples of that. He was born in Turkey (he holds dual citizenship), went to Harvard for his undergraduate degree and the University of Pennsylvania for both his MBA and MD degrees. 

Much has been made about his wealth, largely a function of the money he makes as a reality talk show host, and his upper class tastes. The Fetterman camp, for instance, has made a big deal about Oz referring to crudités, insisting that “real” Pennsylvanians use terms like veggie platter. Why that should matter, other than a crude appeal to envy, is beyond me.  

That aside, Oz has descended into promoting medical quackery. An article published by McGill University’s Office for Science and Society documents Oz’s fall from respected surgeon to circus barker. For example, Oz has championed “energy medicine” for which he won the Pigasus Award. It is an award that, as McGill puts it, recognizes achievements in pseudoscience. 

He has hyped diet pills without any evidence they actually work. He has apparently lent credence to the idea of talking to the dead. And he has relentlessly hyped his “Dr. Oz’s homeopathic starter kit” which is based on using non-existent molecules  to treat real diseases. 

Among other things, Oz has suggested that there are dangerous levels of arsenic in apple juice (there are not); that green coffee is a miracle cure for obesity (it isn’t) and has hinted that genetically modified  foods are cancer causing (they are not). 

Lest anyone think these are mere political hits, reeking of bias, the AMA Journal of Ethics took him to task for the coffee and obesity claims back in 2017 when Oz was playing at being “America’s Doctor”. That was  well before Donald Trump—or anybody else—came up with the idea of Oz  running for the Senate.

So there you have it. Pennsylvania has a pair of wealthy frauds running for its open Senate seat; in its gubernatorial race a moderate Democrat is facing off against a Trumpian election denier. What to make of it?

My guess is that Shapiro, the moderate Democrat will convincingly trounce the election denier Republican Mastriano, for the Governor’s office. On the other hand, Oz will narrowly defeat Fetterman. If Oz wins the contest, the spread between the vote totals of Shapiro and Fetterman will capture the attention of analysts. 

To the extent that Shapiro wins convincingly and Fetterman loses (or perhaps just squeaks by) the conclusion will be that a moderate Democrat can be formidable in a blue-collar swing state. At the same time a defeat for a far-left Senatorial candidate would suggest that voters in the Keystone state are looking for moderation in their politics. 

There is a certain irony in all this. To the extent that Democrats have focused their attention on abortion, the race that matters most to them is (ore should be) the race for the statehouse. In the wake of Dobbs v. Jackson overturning Roe v. Wade, abortion regulation will be decided at the state level, not the national level, absent a Constitutional amendment. The Governor’s race is therefore more important in that respect. 

The Democrat’s focus on nationalizing abortion regulation has also left them extremely vulnerable. While 2 months ago abortion concerns were among the top priorities for voters, now those concerns have fallen to about 4th or 5th place, behind, inflation, crime and the economy in general. 

If, instead of running on local issues, the Democrats lose their bet on nationalizing abortion regulation, what is left for them to run on? Abortion will have lost some of its salience in the national debate and the Democratic Party infrastructure will be left in tatters. 

One last note. In some ways, the Georgia Gubernatorial and Senatorial elections are a mirror image of Pennsylvania. More on that in a future post.