By George Landrith • Red State
After returning to Washington from a week away in San Francisco, House Speaker Nancy Pelosi brought her caucus’ new demands for passing a coronavirus relief bill. While the focus of the bill is supposed to be helping the American people through this pandemic, the Speaker’s bill is filled with special handouts to her political supporters, donors and well-connected California friends.
Pelosi is following the advice of House Majority Whip Jim Clyburn, who argued that the rush to enact legislation to assist the American people is a political opportunity to “restructure things to fit out vision.”
Take the solar subsidies section of the House bill. While they do little to help the hospitals and families that are supposed to be a focus of these efforts, they do help Pelosi’s well-connected California cronies like Elon Musk and his corporations.
This wouldn’t be the first time Musk received hefty payments from federal coffers. Under President Obama, Musk was able to secure billions for his solar operation, even though his company still nearly went bankrupt. It was only after merging with Tesla that SolarCity’s insolvency came to light. After that merger, the company also had to settle with the Department of Justice for nearly $30 million because of allegations that it cheated the government, including by deliberately overstating the cost of its installations to receive inflated government grants off the taxpayers’ backs.
Tesla’s go at solar has been equally as abysmal as SolarCity’s. Reports earlier this month showed that Tesla’s energy partner was pulling out of their agreement because of the company’s failing (and heavily subsidized) solar factory in New York. The company is struggling to meet the terms of its current subsidies with the state of New York, and now, with sales dropping, Elon could apparently use another bailout.
Pelosi coming to the aid of Musk, her home state business interest whose companies have a history of misleading the government and investors to receive more aid, with government subsidies and corporate giveaways, is par for the course. In the past, when electric vehicle tax credits were phasing out, the Speaker singled out electric vehicle manufactures like Tesla for renewed subsidies. These EV subsidies benefit no one other than Musk and the overwhelmingly wealthy Americans who make six figures or more a year that purchase his cars. It’s money that could’ve went to vulnerable Americans instead. Then again, Pelosi has a history of putting her political interests above those of the American people, so her cozy relationship with Musk shouldn’t surprise anyone.
If these direct bailouts to “green” energy interests within the Democrats’ COVID-19 relief demands aren’t enough, they’re also adamant about passing other radical parts of the Green New Deal within this package. They’re tying relief loans to the airline industry to new, stricter emission standards. It’s only a matter of time before more significant automotive restrictions enter the arena as automakers rush to deal with shuttered factories and tapering sales.
By playing along with Pelosi’s shameful D.C. insider games, House Democrats this time around have shown they’ve learned nothing from past mistakes and want to take needed funding away from struggling small businesses and give it to the protected billionaire class.
Whether it’s expanding unrelated subsides or putting burdensome regulations in place, these so-called “lawmakers” are making it clear the only interests they represent are of those who fill their pockets and fall in line. As our country faces a once in a generation crisis, we must hope that our representatives use their place of power to advance the best societal interests, not for those of the already well-off. As the corona aid enters the final stage, lets’ hope Congress takes a stand for the hard-working American people and passes a clean relief bill. The nation is watching.
By Dr. Larry Fedewa • DrLarryOnline
President Donald John Trump, 45th president of the United States of America, has just made the biggest gamble of his career.
On the unanimous recommendation of the public health professionals, he decided to close down the US economy in a manner more severe than any other measure ever taken by a U.S. president, with the possible exception of Abraham Lincoln’s declaration of martial law on September 15, 1863.
Clearly, no one can reasonably disapprove of the need to save American lives by containing the deadly coronavirus. If the next few weeks occur as expected by the public health experts, the virus will peak and begin to recede, allowing normality to return. If that sequence of events is delayed much longer than a total of 30 days or so, the country risks falling into a recession that could rival the Great Depression of the 1930’s – 25% unemployment, long bread lines, starvation staring out of the hallow eyes of children.
The President is fully aware of this danger. He knows he is risking becoming another Herbert Hoover, who was unjustly blamed for the Depression and lost the presidency by a landslide in 1932. One big difference is that Hoover was a victim of circumstances, whereas Trump’s fate will be seen as the inevitable result of his own decision.
Closing down the economy was not the only choice that could have been made. Woodrow Wilson did nothing to affect the Spanish Influenza pandemic of 1918-20, and the result was the Depression of 1920. Wilson was in his second term and could not run again (although this did not stop Franklin Roosevelt in 1940 and 1944). Wilson’s Democrat party lost the 1920 election in a landslide.
George Bush did invoke a few measures to mitigate the immediate effects of the 9-11-2001 attack but concentrated his primary efforts on foreign policy actions. He survived the temporary shutdown and won re-election in 2004. Barak Obama did very little to fight the outbreak of West Africa Ebola of 2013-16, which ultimately killed 11,310 victims but was not a candidate in 2016.
President Trump could have followed any of these strategies. Instead, he gave the public health experts full reign over the nation’s response to the threat of the new virus. Their prescription for countermeasures has had temporarily catastrophic effects on the economy. These people have dedicated their lives and talents to saving and enriching all our lives by seeking effective cures for the diseases which threaten us and identifying the best preventative measures to mitigate the ones that cannot be cured. These are truly noble goals.
However, that perspective has its limitations. It emphasizes one dimension of human life, namely, physical health — often to the exclusion of all other factors. Among those other factors are the economic and social needs which are also shared by all people. The compromise we are now living out is “Let’s follow the public health scientists until we beat the virus, and then we will revert to normal life.” The gamble is: “Will normal life still be possible after we beat the virus?”
For President Trump, the stakes are very high. If he wins, he will be the Savior who rescued the nation from disaster. If he loses, he will lose everything, including his second term, the destruction of all his innovations, as well as his reputation. His legacy will be remembered as either victory or tragedy.
For the American people, the stakes are even higher. Never before have we faced the near shutdown of the economy, even for a day, let alone a month. The closest we have come is the Great Depression, when things were so desperate that Russian communism was openly advocated. We don’t know if the damage will be permanent, overcome quickly, slowly, this year, or if it will take years to regain our momentum.
What we have to remember, especially in this perilous time, is that we Americans have survived many other crises in our history. We have flourished throughout the ages no matter the obstacles. In fact, America’s history is the story of crises happening and crises overcome.
Our greatest crisis was the Civil War, when we fought ourselves and lost an estimated 650,000 lives, a whole generation of young men. But the newly reunited nation came roaring back in the Gilded Age (c.1870 – 1900), a period of extraordinary growth in all areas of American life, including technology, manufacturing, transportation, and higher learning, among many other areas.
In the 1930’s, the Great Depression nearly destroyed America’s will to survive. Yet the country rallied out of the Depression when the Japanese Navy destroyed the Pearl Harbor naval base in 1942, proving that the American spirit was not only not dead but so filled with vitality that we won both the war with Japan and saved Europe from the Nazis – at the same time! And it took us only three years to go from a dead stop to overdrive.
We are seeing much of the same spirit of unity in the “war”, as was evidenced in WWII, as political opponents join forces (except the Governor of Michigan) with companies and whole industries to shore up scarce supplies and bring supply chains back home. Likewise, stories of outstanding generosity and kindness on the part of individuals and local businesses are beginning to surface. This generation is proving that the American spirit of our forebears is still alive as we rally to save our country from disaster.
The moral of the American story is that Americans can overcome every threat we have ever faced, and we will overcome this one – whichever way it goes!
This is not an emergency virus bill. It is a Democratic election wish list, at a time hundreds are dying, thousands are losing their businesses, and millions are out of work in the United States.
By Christopher Bedford • The Federalist
The weekend began with a bipartisan plan. People were hopeful. Outside of Washington, business owners told The Federalist they finally saw light in all the darkness. They thought they’d be able to hire their employees back again. These are employees who have families, mortgages, and lives; people who have never once asked for public assistance and never thought they’d have to.
The mood in Washington was optimistic as well. “We’re having good bipartisan agreements,” Senate Minority Leader Chuck Schumer told CNN Saturday, predicting a Monday passage of their plan. “The initial bill Leader [Mitch] McConnell put in didn’t have any Democratic input and we were worried that we just try to put it on the floor and not consult Speaker [Nancy] Pelosi because the House still has to pass this, but actually, to my delight and surprise, there has been a great deal of bipartisan cooperation thus far.”
On Sunday, Schumer met four times with Secretary of the Treasury Steven Mnuchin to continue negotiations.
And then Pelosi came back to town from her week-long vacation and announced the rare, rare bipartisan cooperation the country had seen in the Senate would end with her — and election politics would begin.
“Oh, I don’t know about Monday but we are still talking,” she said Sunday evening. “It’s on the Senate side now because that’s their deadline for a vote but we’ll be introducing our own bill and hopefully it’ll be compatible with that they discussed on the Senate.”
It was difficult to guess how she’d do this with the House in recess, but on Monday her office miraculously introduced a 1,400-page bill. Miraculous, until it became clear she’d simply unloaded the Democratic Party’s election platform into a bill intended to save Americans from bankruptcy and death in the face of a global pandemic.
The list of unrelated provisions is truly incredible. Pelosi’s emergency virus bill includes “collective bargaining… for federal workers,” a federal “study on climate mitigation efforts,” tax credits for wind and solar energy, and demands that the airlinesinvolved buy carbon credits “to fully offset [their] annual carbon emissions.” It includes “same day [voter] registration,” national early voting and “grants for conducting” election audits.
Pelosi’s emergency virus bill legislates “funding standards for community newspaper” retirement plans, cancels $10,000 off peoples’ college debts, and forces a $15 minimum wage and permanent paid leave on aid recipients. It awards more than $33 million to the National Oceanic and Atmospheric Administration “for necessary expenses to prevent, prepare for, and respond to coronavirus,” and $35 million to Washington’s Kennedy Center for the Performing Arts.
Pelosi’s emergency virus bill cancels the Post Office’s considerable debt to taxpayers and grants it “additional borrowing authority.” It gives Washington oversight of the “corporate board diversity” for the companies involved, mandates “a comparison of pay amongst racial and ethnic minorities… as compared to their white counterparts and comparison of pay between men and women,” orders the companies to start “diversity and inclusion offices” and give those offices “officials and budget dedicated to diversity,” and it establishes a program “to expand the use of minority banks and minority credit unions.”
This, it is clear, is not an emergency virus bill. It is a Democratic election wish list, politically poisoned at a time when hundreds are dying, thousands are losing their businesses, and millions are out of work in the United States.
“This,” House Majority Whip Jim Clyburn told Democrats Thursday, “is a tremendous opportunity to restructure things to fit our vision.”
It’s truly an incredible political act by the speaker, and the entire Democratic Senate fell in step behind her. By Monday afternoon, while Republican after Republican took the floor to speak on the bill, most Democrats were not even in the chamber.
“I thought we were doing great work,” Sen. Jim Inhofe lamented to a half-empty chamber. “Everything was great until last night.”
Everything had been great for Pelosi and the Democrats’ political fortunes as well. Early in the crisis, the speaker took a lead role, passing a Democratic wish list with the first round of emergency aid. Republicans in the House and Senate passed her bill despite its severe problems and near-complete lack of compromise.
McConnell was absent from early negotiations, providing zero cover while Mnuchin, a former Democrat with a bipartisan reputation as a terrible negotiator, surrendered on the president’s asks. The president himself fluctuated between defensive and tired, giving an Oval Office address that was so poorly received he rebooted his communication strategy. Today, McConnell and Republicans are at the forefront, the president’s handling of the crisis is popular across the country, and even Pelosi’s allies in the corporate media are struggling to explain her actions.
The New York Times changed their Sunday headline three times, starting correctly with “Democrats Block Action On $1.8 Trillion Stimulus,” then shifting the truth to “Democrats Block Action On Stimulus Plan, Seeking Worker Protections,” and finally editing the headline to pure farce with “Partisan Divide Threatens Deal On Rescue Bill.”
“Take us inside the politics here,” MSNBC’s Stephanie Ruhle asked after the speaker’s Monday speech quoting the pope to justify her actions. “How about this: What was the point of that?”
“Well,” correspondent Garrett Haake replied, “this is an opportunity for Democrats to show what their priorities are in this crisis.”
Indeed. And Americans are unlikely to be thrilled with those priorities while our economy careens toward devastation.
“Today, 102 Americans died while the Democrats blocked consideration of this bill,” Sen. Ted Cruz yelled from the floor of the Senate in a fiery response. “One Texan died while this chamber decided not to show up for work and do their job!”
“What the hell do the emissions standards on airplanes have to do with thousands of people dying and millions of people out of work in the coronavirus epidemic!?”
“What in the hell does a windmill have to do with this crisis, other than there are some Democratic lobbyists getting fat and rich and they’re willing to extort a crisis for a political agenda!?”
“One of the reasons the Democrats think they will get away with this,” Cruz closed, “is they expect the media to be utterly complict.” The corporate media is doing its best.
“For the moment,” Schumer had told CNN just 36 hours earlier, “we’re just trying to work together for the good of the country.”
The moment was brief, their miscalculation tremendous, and the political impact could — and should — be lasting.
By George Landrith • Townhall
The coronavirus was originally thought of as a health care issue. But then the stock market started to tank, and it became an economic issue. Now with the nation on virtual lockdown, the economic losses are not just paper losses in the nation’s stock portfolio. Hourly employees at America’s ballparks and arenas, restaurants, hotels, malls, airports, etc. are all facing economic disaster. But it doesn’t stop there — the economic slowdown will impact us all. Even if we never become infected, we are all victims of the virus.
This economic destruction is difficult to imagine, given that only a few weeks ago, our economy was strong and growing rapidly and all the indicators were that it was going to continue. But now economic catastrophe is staring us in the face as extraordinary measures are taken to protect the public health and the gears of our economy grind to a virtual halt.
The good news is that we can mitigate the severity of the outbreak so as to not strain the health care system to its breaking point. But in so doing we can’t let sectors of our economy that were vibrant until just last week be destroyed forever. This moment will require extraordinary measures by the U.S. government to protect and defend not only the public health, but also the waiters, waitresses, and hourly workers across our country who are in trouble. It will also require aid to some very large, very established companies — whose employees and the innovation and global competitiveness they support — are also at risk. In many cases, this isn’t just an economics question, it is also a matter of national security.
Some might call the emergency actions that need to be taken to inoculate the nation’s economy against the Coronavirus a “bailout” (and as a conservative, my default position is to oppose bailouts). Subsidizing bad economic decisions is wasteful and unwise. But to be completely candid, this crisis is not akin to the bank bailouts of 2008, which I strenuously opposed. This economic downturn wasn’t caused by foolish business decisions. Rather, we are now facing a shock and downturn similar to that caused by the 9/11 attacks — only this may be far worse in size and scope.
One of the sectors whose plight has been most acute is commercial aviation. With airlines slashing flights and grounding fleets, there are cascading impacts across the flight attendants, baggage handlers, mechanics, ticket and counter representatives who serve the industry. Beyond these front lines are an additional 17,000 companies and 2.5 million good paying jobs responsible for building the airplanes. In the midst of this crisis, domestic and foreign airlines will not be buying more planes and they may not be able to pay for the planes they have already committed to.
We can’t afford to allow the health of our aerospace manufacturing sector to languish. These manufacturers and their high-tech suppliers are also a critical part of our national security apparatus and a foundational part of our ability to defend ourselves. Our nation’s leadership in aerospace is not something we can take for granted, as competitors in Europe and China work every day to outcompete our aerospace and defense capabilities. To cede this sector for the long term would do serious damage to our nation’s economy and security, as well as millions of workers in all 50 states.
The change would ensure that the business of Congress could go on during crises such as the coronavirus pandemic.
By DAN MCLAUGHLIN • National Review
Multiple members of the House have reported positive tests or exposure to the coronavirus, the worst being 45-year-old Utah Democrat Ben McAdams, who was hospitalized with breathing troubles over the weekend. In the Senate, Rand Paul has tested positive, and Amy Klobuchar reported that her husband is hospitalized and receiving oxygen.
It’s time for Congress to follow the rest of the country and work remotely. That means taking unprecedented steps that both houses have resisted for years. While it would be a good thing to expand remote voting capacity permanently, now is not the time to leverage a crisis into long-term reforms; short-term measures that prove workable can be assessed later for their long-term viability. Remote voting should be passed immediately as a short-term emergency measure and reevaluated after the present crisis has passed.
Remote voting could never be a full substitute for the presence of Congress in Washington. Our representatives frequently need to meet with each other and their staffs and receive briefings, many of them involving information that is more securely delivered in person in the Capitol than over any network. Public hearings require physical presence. But much of Congress’s staff work could already be done outside of D.C., and the challenges of security for 535 people voting on bills are not significant. If necessary, each member could still have a (younger, D.C.-resident) staff proxy on site to verify the vote cast. Remote voting would ensure that the business of Congress could go on without large physical gatherings of infected or vulnerable representatives. If it proves workable, it could also lengthen the amount of time members of Congress could spend in their home states and districts without ignoring their core duties.
The need is bipartisan, but it would prevent the vagaries of illness from unsettling the partisan balance of power. President Trump has supported the idea, and Dick Durbin and Rob Portman have proposed a resolution:
Durbin called for establishing “a verifiable technology and procedure so members do not have to be physically present.” “Five of our Senate colleagues were unable to come to the floor of the Senate and vote because they’re in self-quarantine at this moment,” he said. “The numbers could grow to the point it could reach an extreme where there’s a question of an actual quorum on the floor of the Senate.”
Portman and Durbin’s resolution would give the Senate majority and minority leaders joint authority to allow secure remote voting for up to 30 days during emergency situations such as the current pandemic. Under the measure, the Senate could vote to extend the initial authority in additional 30-day increments.
The need in the case of the Senate should be particularly obvious: Five Senators are between the ages of 83 and 86, and more than a quarter of the chamber is age 70 or over. Senate traditionalists such as Mitch McConnell and Roy Blunt have thus far proven resistant, given their hesitance to open broader questions about changing the rules, but they should reconsider given the exigencies of the situation.
The Constitution should not be an insuperable obstacle, although it might preclude either House from going to remote voting without the other. Article I, Sections 4-5 provide:
The Congress shall assemble at least once in every Year, and such Meeting shall be on the first Monday in December, unless they shall by Law appoint a different Day [which they have]. [In each House], a Majority of each shall constitute a Quorum to do Business; but a smaller Number may adjourn from day to day, and may be authorized to compel the Attendance of absent Members, in such Manner, and under such Penalties as each House may provide. Each House may determine the Rules of its Proceedings. . . . Each House shall keep a Journal of its Proceedings, and from time to time publish the same, excepting such Parts as may in their Judgment require Secrecy; and the Yeas and Nays of the Members of either House on any question shall, at the Desire of one fifth of those Present, be entered on the Journal. Neither House, during the Session of Congress, shall, without the Consent of the other, adjourn for more than three days, nor to any other Place than that in which the two Houses shall be sitting.
Obviously, when the Framers wrote the requirements that Congress “assemble” and do so in the same “Place,” and that various rules be determined by those “present,” they anticipated physically assembling in the same location. But nobody in 1787 would have thought that this excludedpresence by telecommunication, as no such thing was possible at the time. The best methods of long-distance communication in America in 1787 were crude tools such as smoke signals. Samuel Morse’s telegraph would not be invented for another half a century; its French predecessor was not publicly demonstrated until 1793. Constitutional interpretation typically tries to apply old rules to new technology by finding analogous Founding-era practices, but there is really no contemporary analogue to being present in a legislative chamber by remote technology. The best answer is instead to leave interpretation of these requirements to the House and Senate themselves.
The Supreme Court, in its 2014 decision in NLRB v. Noel Canning, ruled that President Obama could not make recess appointments during pro forma sessions. Those pro forma sessions, at which no Senate business was conducted, were held precisely to prevent short recesses in the Senate’s calendar from giving Obama an excuse to make recess appointments. Calling short recesses and interrupting them with pro forma sessions were practices unknown at the Founding, when it was not practical for senators to travel to and from the capital in a few days.1
The Court gave strong weight to the Senate’s determination that it was not in recess during the pro forma sessions, notwithstanding the fact that it was transparently engaged in a legalistic interpretation of a “session” in order to thwart the president. The Court stressed “the Constitution’s broad delegation of authority to the Senate to determine how and when to conduct its business”:
The Constitution . . . gives the Senate wide latitude to determine whether and when to have a session, as well as how to conduct the session . . . when the Journal of the Senate indicates that a quorum was present, under a valid Senate rule, at the time the Senate passed a bill, we will not consider an argument that a quorum was not, in fact, present.
The Court emphasized that its deference may not be absolute in every case, but in Noel Canning, it considered the question closed so long as the Senate was sufficiently present to be capable of doing business. If both chambers changed their rules to consider remotely present members to be present and able to vote, that standard would be satisfied.
The business of the nation requires Congress to remain on duty during a crisis such as this one. Changing the rules to ensure the functioning of the national legislature is the responsible thing to do.
By David R. Henderson • Hoover Institution
Crude oil prices fell dramatically over the weekend. Between March 4 and March 9, Brent crude, the international benchmark, fell from $51.13 to $34.36 per barrel, a drop of 32.8 percent. As of this writing (the afternoon of March 10, EDT), the price has recovered to $36.89 per barrel. The price of U.S. West Texas Intermediate crude, the standard measure of U.S. oil prices, fell from $46.78 on March 4 to $31.13 on March 9, a drop of 33.5 percent. Pippa Stevens at CNBC wrote that “U.S. West Texas Intermediate crude and international benchmark Brent crude are both pacing for their worst day since 1991.”
Why worst? Implicit in Stevens’s statement is the idea that low oil prices are bad. All other things equal, of course, low oil prices are bad for oil producers. But also, all other things equal, low oil prices are good for oil users. And the latter includes all of us. How do we assess whether the net effect of the plunge in oil prices is good or bad? We have to look at why they fell suddenly. We pretty much know why: a temporary collapse of the Organization of Petroleum Exporting Countries (OPEC.) For that reason, the drop in oil prices over the weekend is good. It’s roughly a wash for the U.S. economy and it’s good for the overall world economy.
A most useful principle I learned in my Ph.D. economics program at UCLA, about which Professor Benjamin Klein never failed to remind his students, is “Never reason from a price change.” Scott Sumner, an economist at the Mercatus Center and one of my co-bloggers at EconLog, often points that out in his posts.
Let’s apply that lesson here. There are three (and only three) reasons that oil prices drop: (1) demand decreases, (2) supply increases, or (3) the monopoly power of oil producers falls.
When economists say that demand decreases, we mean something very specific—that at any given price, the amount demanded decreases. There are two main ways that can happen: a slowing of the world economy or an increase in the supply of a substitute.
If the world economy slows—and it certainly looks as if it has slowed, or will, due to the COVID-19 virus and people’s reaction to it—the demand for oil will fall. With a given supply, that will cause the price of oil to fall. The fall in the price of oil is not bad per se; rather, it’s a consequence of something bad, namely, the slowing of the world economy. And it certainly appears that a fall in demand due to a slowing economy caused prices to fall before last weekend. But it’s unlikely that there was a sudden fall in demand last weekend. We have to look elsewhere.
The other possible cause of a fall in the demand for oil is an increase in the supply of a substitute for oil. If, for example, solar or nuclear energy became more competitive, the demand for oil would fall. In that case, the fall in oil’s price would be a sign of something good happening in the economy. Did solar, nuclear, or any other energy source suddenly become more competitive over this weekend? No. So that’s not it.
How about an increase in supply? If supply increases, then, with a given demand, prices will fall. Notice that I’m using the word “supply” to mean not the quantity supplied, but the whole supply curve. When an economist says that supply increased, he means that at any given price, the quantity supplied has increased. The whole supply curve has shifted to the right. This sounds wonky and may remind you of an old economics class in which the professor insisted on the distinction between a shift in supply and a movement along a stable supply curve. But here we need a little wonkiness to help us analyze.
But there were no major discoveries of oil or breakthroughs in technology over the weekend that would cause the supply to increase. So that’s not what drove prices down.
There’s one culprit left: a decrease in monopoly power. If buyers and sellers in the stock market think that a major monopolist in the world market has lost market power, the world price of oil will fall. So let’s look more carefully at OPEC to see what went on last weekend.
First, recall that OPEC is a cartel. Government officials of the member countries get together and try to agree on a price. They want a price above what the competitive, non-colluding price would be. To achieve that cartel price, the members must produce an output below the output they would ideally like to produce. Each firm or, more accurately, government (since we’re talking about OPEC) would like to produce more and have every other country produce less. The members of OPEC meet regularly in Vienna to hash out their differences and try to reach an agreement. This time, though, there was real tension between Saudi Arabia’s desires and those of Russia. OPEC lists its members on its website, and although the Russians attended the latest meeting, and typically attend OPEC meetings, Russia is not, and never has been, an OPEC member.
Saudi Arabia is the most important OPEC producer; Russia is the most important non-OPEC producer that attends the meeting. This time, the Saudis and the Russians had a big disagreement. The Saudis wanted to slow or stop the price erosion that had happened due to the drop in demand by cutting output: that of OPEC members and that of other countries that attend OPEC meetings but are not members. The Russians wanted the output cut too but didn’t want to be the ones doing the cutting. As CNBC’s Brian Sullivan put it on Friday, they wanted to have their cake and eat it too. In that respect, the Russians are like the non-Saudi members of OPEC: all of them want the Saudis to cut output. Although the violin I will play for the Saudis’ predicament is very tiny, it is true that they have traditionally been the “swing producer:” the country that sucks it up and reduces output to maintain the price while many other members of the cartel cheat like crazy. At times, the Saudis have produced as little as 4 million barrels a day to support the price; at other times, they have said the hell with it and have produced as much as 10 million barrels per day.
This time the Saudis said the hell with it. They will produce more and the Russians will produce more. Thus the lower price. And it doesn’t take a whole lot more production to drop the price. The reason is that the demand for oil is inelastic: a one percent increase in output will lead to a ten percent drop in price. So all it takes for a 30 percent drop in price is a three percent increase in output.
Is it bad that the price of oil will drop due to a reduction in monopoly power? No, it’s good. Ever since the fall of 1973, when OPEC raised the world price of oil from $3 per barrel to $11, OPEC has had some monopoly power in the world oil market. This causes the price to be higher than the competitive price would be and we oil users respond by using less oil than we would use at that lower competitive price. When the monopoly power comes about, not due to innovation or invention, but due to collusion, as with OPEC, economists almost unanimously object to monopoly: it holds output off the market for which consumers would pay an amount greater than the cost of production. This underproduction causes what economists call a “deadweight loss,” a loss to consumers that is not captured by producers. That’s what OPEC does. In his article on monopoly for The Concise Encyclopedia of Economics, the late Nobel Prize winner and University of Chicago (and Hoover) economist George Stigler laid out the reasoning behind deadweight loss.
So the cut in the price brings the world oil market closer to the competitive price.
Does that mean that the price cut is good for the United States? No. The price cut is good for any country that is a net importer of oil. In recent decades, therefore, the United States would have gained big time from the cut in the world price. The loss to U.S. producers would have been less than the gain to U.S. consumers because we consumers would have gained on every barrel we used and the producers would have lost on the smaller number of barrels they produced.
But something important has happened in the last decade: fracking. As I noted in my most recent Defining Ideas article, fracking substantially increased the U.S. supply of oil and natural gas. In December 2019, the United States became, for the first time since 1949, a net exporter of oil. So the drop in prices is bad for the U.S. economy as a whole: the loss to the producers will exceed the gain to consumers. But it’s only slightly bad because the United States is barely a net exporter.
For the world economy as a whole, then, the drop in oil prices due to demonopolization is a net plus. That should be no more surprising than the fact that the increase in competition in the retail sector is a net plus.
So why has the stock market fallen so much? Part of the reason is, no doubt, the increased panic, possibly justified, about the loss in output due to the Covid-19 virus. You might expect that if the only event affecting the stock market was OPEC’s temporary loss in monopoly power, the losses to industries that produce energy would be only slightly larger than the gain to industries that use energy as an input. But that ignores the fact that a large percentage of the gain from the drop in price is to final consumers, and most of us consumers don’t sell stock in our wealth. There’s no stock called David Henderson, Inc., for example. So a large part of the gain is not visible on the stock market.
French economist Frederic Bastiat wrote, back in the 1840s, that we should always take account of the unseen as well as the seen. The seen is the stock market losses of energy producers. The unseen is the gain to ultimate consumers.
We don’t know what will happen in the next few months, either with the Covid-19 virus, the world economy, the stock market, or oil prices. As Danish physicist Niels Bohr said, “Prediction is very difficult, especially about the future.” But we should be clear that the drop in oil prices due to OPEC’s loss of pricing power is a gain to the world, and close to a wash for the United States.
By Steve Forbes • Real Clear Policy
Democrat presidential candidate Bernie Sanders recently told “60 Minutes” it would be “unfair” to say “everything is bad” about Cuba’s Fidel Castro and the Communist revolution he staged during the 1950s. Even fellow Democrats could not believe their ears. Sanders went so far as to describe Castro as a man of accomplishment, noting how Castro started a “massive literacy program” for the people of Cuba. Sure he did, right after he wiped out thousands of his political opponents, created forced labor camps, seized the property of all dissidents, and imposed country-wide religious repression. Sanders sounds like the defenders of Benito Mussolini, the fascist dictator of Italy, who praised Mussolini for making the trains run on time and draining the malarial swamps around Rome.
Bernie conveniently ignores how the brutality of Castro’s government forced millions of Cubans to flee their homeland, leaving behind all their possessions. And let’s be clear, Sanders’ commentary was not a mistake. Even the New York Times notes how Bernie has a long history of lauding Castro’s government, expressing “…praise not only for Mr. Castro in Cuba but also support for the Sandinistas in Nicaragua. Sanders’ remarks likely cost him the recent Florida Democratic primary given the widespread opposition to communism and socialism within the Latino community.
The sad reality is that Bernie Sanders honestly believes Cuba’s model of government should be replicated all over the world. This process is happening in Venezuela, where another brutal dictator, Nicolas Maduro, with the backing of Cuban security forces, is destroying the nation he is supposed to represent.
The situation in Venezuela is tragic. The country has experienced near-total economic and social collapse under Maduro’s corrupt regime. President Trump is correctly acting to oust Maduro by imposing harsh economic sanctions against Maduro’s government and the Russian and Cuban businesses helping him. The tough sanctions are placing massive pressure on Maduro, and the president should stay the course.
But the Trump administration should take care not to eliminate America’s presence in Venezuela as part of a strategy to drive Maduro from power. America has maintained a century-long relationship with Venezuela — specifically with Venezuela’s energy industry. Venezuela sits on the world’s largest oil fields, and it’s imperative that Russia, China and Cuba are not allowed to gain unconstrained access to these oil fields. If American companies remain in the country, they will be able to help the next democratic Venezuelan government rebuild quickly.
Some of President Trump’s advisors believe it might be a good idea to force American companies to exit Venezuela and further tighten the economic screws on Maduro. But if American companies leave Venezuela, it will likely make it harder for the Trump Administration to remove Maduro and his criminal regime from power. An American exit would only empower Maduro and strengthen Russia, and Cuba’s hold on the country.
We certainly don’t want Venezuela to become another Cuba, but this could happen if America withdraws completely. If American companies leave, it will remove the last barriers to a complete Communist takeover by Cuba, financed by Russia, drug cartels and other criminals.
President Trump has wisely imposed crippling sanctions against Venezuela’s Maduro and the international actors that support him. The Trump team should let this process play out while preserving America’s Venezuelan presence for the future.
Sanders’ flippant remarks are a sharp contrast with President Trump’s tough but fair approach to Venezuela. Hopefully, America will continue to stand strong against Maduro while keeping the door open for a future relationship with a democratic Venezuela.
Column: Is American society ready for the coronavirus pandemic?
By Matthew Continetti • The Washington Free Beacon
A few months after September 11, 2001, David Brooks went back and looked at coverage of Pearl Harbor for an article in the Weekly Standard (“After Pearl Harbor,” December 10, 2001). What he saw intrigued him. A sense of unity and patriotism followed both surprise attacks. But media after Pearl Harbor had none of the sorrow, sensitivity, and angst that filled the news, with reason, after 9/11. Recognizing the inevitable costs of war, Americans on the home front at the outset of World War II were nonetheless eager to carry on as usual. They did not apologize or second-guess. They soldiered on. “When you step back and contemplate the range of post-Pearl Harbor media,” Brooks wrote, “you are struck by how extraordinarily proud of itself America then was.”
I revisited Brooks’s article this week while thinking about the differences between America during the Spanish flu pandemic of 1918-1919 and America during the Wuhan coronavirus pandemic today. Some of the distinctions are self-evident. America is far more wealthy, free, and technologically advanced than it was then. We enjoy the benefits of incorporating half the population into our economy and society, of ending de jure anti-black racism, of attracting the best and most ambitious talent from across the globe. We are no longer a rising power but a reluctant hegemon. A raw deal awaits any American who trades places with a doppelgänger from midway through Woodrow Wilson’s second term.
What changed is the American ethos. Expressive individualism replaced self-restraint. Narcissism and the therapeutic sensibility triumphed over the reticence and sense of tragedy that comes from living in places and times where there is no safety net and death is a constant presence. The culture of debunking, revisionism, and repudiation informs education, entertainment, art, and occasionally sport.
The size, scope, and ambition of the federal government and its managers is far greater now than it was then. So are the public’s expectations of government capabilities and performance. The institutions that stand between the individual and state have weakened where they have not crumbled. Family, community, religion, and voluntary association attenuate as modernity deprives them of their traditional functions.
The United States is beginning to shut down and self-isolate. Its G7 partners range from states of quarantine (Italy) to lockdown (France) to closed borders (Germany). Countries do not make such decisions on a lark. Nor is the reason for these extraordinary measures a secret. What terrifies the authorities is the prospect of surges in infection that would push public health systems beyond capacity and result in mass death. To prevent a medical catastrophe, the authorities guarantee an economic one.
The social capacity of America has received less attention. The worst-case scenarios anticipate an epidemic that lasts until a vaccine can be mass produced 18 months from now. Do we believe that American society could withstand until then the additional pressures that have been put on it over the past week?
The typical discussion of how coronavirus will change your life focuses on a specific practice or sector of industry. You hear a lot about telework, home schooling, vote by mail, or movies released on Video on Demand rather than in theaters. This piecemeal approach is understandable. Perhaps the problem is so complex, the potential extent of the disruption so massive, that the way to approach it is to study one aspect at a time.
But an extended lockdown will affect more than activities. It will warp institutions. There is a debate over how Congress might operate under social distancing. What about churches, synagogues, and mosques? Church attendance was falling before the virus. Even if the pandemic were to revive the religious impulse, would-be prodigal sons won’t be able to attend services. Church finances—nonprofits in general—will be harmed. In some cases, the damage will be irreparable.
The family enters this crisis beleaguered. My American Enterprise Institute colleague Nicholas Eberstadt writes in National Affairs of “the collapse of work for adult men, and the retreat from the world of work of growing numbers of men of conventional working age.” The recent improvements in the overall labor force participation rate will disappear if the economic fallout of the pandemic is large and enduring. Long-term joblessness and lack of prospects are barriers to marriage and to family formation. And the two-parent family is the seedbed for the character formation of young people. The social costs are enormous. And they are mounting.
Bill de Blasio’s indecision over whether to close New York City schools revealed that these institutions perform parental functions as much as educational ones. The school has become much more than a place of instruction. It is the site of feeding, caring, and supervision (if not disciplining) of children. Deprived of the shelter of the local school, children and young adults will have to look to parents for meals, instruction, and surveillance. Are parents ready to fulfill the responsibilities assumed by the state? What will happen when parents return to work or look for new employment? Will teenagers obey a guidance or curfew that is not enforced under penalty of law?
Large pools of nonworking or truant males are not associated with social or political stability. But they loom large in our future. The economic self-isolation of America can continue only for so long as American society permits. And if Americans, as they have tended to do, revolt against strictures from above, how will authorities respond? None of the answers are comforting. If the coronavirus overwhelms America’s social capacity, our government won’t be in a position to choose between an economic crisis or a pandemic. It will have both.
No, the federal government shouldn’t 'take over the supply chain' for medical equipment, and yes, states can in fact govern themselves.
By John Daniel Davidson • The Federalist
Watching the media react to federal and state government responses to the Wuhan coronavirus over the past few days, you would think they secretly wished we had an executive branch with unlimited powers—their hatred of President Trump notwithstanding. You would also think they have only a vague idea of what federalism is and how it’s supposed to work.
Many reporters and pundits, for example, seem to think states are almost entirely dependent on the federal government in emergency situations like this. CNN’s Jim Sciutto mused about whether the president will soon be pushing for a national curfew, seemingly unaware that the president has no power to impose such a thing.
But governors do. New Jersey Gov. Phil Murphy on Monday stopped just short of issuing a curfew on businesses, instead signing an executive order that strongly urges all non-essential businesses to close at 8 p.m. every night. He also activated the New Jersey National Guard to help carry out his order.
Local governments are going one step further. Portland’s city manager announced an emergency curfew on Monday, shutting down restaurants, bars, clubs, movie theaters, and any other establishments where people gather. Six counties in the San Francisco Bay area announced a “shelter in place” order for all residents—a population of some 6.7 million people—to remain in effect until April 7. It wasn’t exactly clear how the order would be enforced, but it did call on sheriffs and chiefs of police to “ensure compliance.”
Similar measures have gone into effect across the country in recent days. In New Orleans, police cleared crowds on Bourbon Street, ordering people back to their homes and hotels via loudspeaker. Lockdowns of various sorts were ordered in cities from Florida to Washington state, mostly affecting bars, restaurants, and other places crowds gather.
But here’s the thing: the president of the United States doesn’t have the power to order these things. For as much as we might think of the federal government as all-powerful, it really isn’t. The founders wisely chose a federal republic for our form of government, which means sovereignty is divided between states and the federal government.
The powers of the federal government are limited and enumerated, while all powers not granted to the feds are reserved for the states, including emergency police powers of the kind we’re seeing states and localities use now. Local governments, as creations of the states, can exercise state police powers as well.
Much of the media seems wholly unaware of this basic feature of our system of government. Exemplifying the ignorance was a widely panned tweet from an editor at The Daily Beast who seemed to think states can’t “govern themselves” without permission or direction from the president.
So the states are basically governing themselves because our president doesn’t know how to president at all?
After the Trump administration’s announcement on Monday of new, stricter guidelines to stop the spread of the virus, a media chorus arose that it wasn’t enough. “Ok. Someone finally talked some sense into the President two months into this. That’s good. But we need huge amounts of coordinated federal *action* *assistance* and *mobilization* along with the shift in rhetoric,” tweeted MSNBC’s Chris Hayes.
An attitude of shock and outrage pervaded The New York Times’ coverage—as well as misleading tweets from some NYT editors—of a conference call in which Trump told governors that they should try to get ventilators and respirators for themselves. Many of the tweets left out the full context of what Trump said: “We will be backing you, but try getting it yourselves. Point of sales, much better, much more direct if you can get it yourself.”
Asked about the Times report later in the day at the press conference, Trump explained that many governors might have a more direct line on this equipment and if so they should go ahead and acquire it themselves, no need to wait on Washington, D.C.
This is of course exactly the way federalism is supposed to work. Besides the media not getting it, many Democrats don’t seem to grasp federalism, either. A group of House Democrats on Monday urged Trump to invoke war powers to order the production of more facemasks and ventilators. New York City Mayor Bill DeBlasio went on cable news and declared that the federal government needs to “take over the supply chain right now” for needed medical supplies.
As the coronavirus get worse, we’re going to see a lot more actions being taken by cities, counties, and states—many more than we’ll see from the feds, in fact. That’s as it should be. We should expect the government power that’s closest to affected communities to be the most active, while Washington, D.C., concern itself with larger problems, like developing a vaccine and controlling our borders and ports of entry.
To put it another way, President Xi Jinping of China can order every Chinese citizen to stay in his or her home under threat of arrest. He can shutter every business in China by fiat. He can “take over the supply chain” of any industry whenever he wants. President Trump can’t do any of that. You’d think Democrats and the media would be relieved about that—and they might be, if they knew the first thing about federalism.
By Peter Roff • Newsweek
As the nation edges toward full-blown panic over the spread of the coronavirus, there are people and institutions upon whom we depend for leadership and information who should be ashamed of themselves for feeding it. Their response, loaded as it has been with worst-case scenarios and predictions of dire consequences, only compounds the fear many Americans are now experiencing.
So far, the virus has killed more than 6,500 worldwide, according to Monday’s report from the World Health Organization, and there have been about 165,000 confirmed cases. There are likely many more that are unconfirmed, as people can be ill and not show any symptoms. A large study in China found that more than 80 percent of confirmed cases had fairly mild symptoms, and under 5 percent of cases were critical.
That’s insufficient reason for rational people to panic. “Caution” should be the word of the moment. Thought leaders, politicians and medical professionals should be doing their best to prepare people for what might happen rather than pronouncing our doom—and attacking the president, as we saw in Sunday night’s debate between Senator Bernie Sanders and former Vice President Joe Biden, neither of whom had anything positive to say about the steps taken by the administration thus far.
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President Donald Trump declared a national emergency on Friday that could free up $50 billion to help fight the virus. On Monday, New York Governor Andrew Cuomo praised his response to the outbreak in the state, as Governor Gavin Newsom did with regard to California.
Nevertheless, most of the folks who have never quite adjusted to the fact that Trump is the president of the United States are quick on the trigger with their criticism no matter what he does. They continue to overstate the lack of response by the U.S. government and blame the president for it.
That’s fair, at least to some degree. As Republican communications expert Rich Galen, my old mentor and former boss, used to remind me back when I was doing politics for a living rather than writing about it, the president gets to take a lot of credit he doesn’t deserve when good things happen, and he has to take a lot of the blame for things well beyond his control.
But remember: Trump didn’t cause the coronavirus and didn’t cause it to spread.
While the president is trying to act like the adult in the room, his opponents are going after him like vultures feeding on roadside carrion. It’s unseemly, and, more than that, the attacks on him undermine the public’s confidence in the national systems we’re depending on to keep us safe and help us manage our lives at a time when many of us can’t go to work, can’t go to our places of worship and can’t send our kids to school.
Recall, for example, Senator Chuck Schumer’s press conference last month in which he called the administration’s response to coronavirus totally inadequate. He also has been demanding expanded free coronavirus testing for anyone who wants it when he knows full well not enough test kits are available.
Likewise, new legislation negotiated by Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi, who took the president’s request for $2.5 billion in emergency funding and blew it up into an $8.3 billion aid package, passed the House on Saturday. Democrats initially failed to ensure that abortion services weren’t eligible to receive funds, and they reportedly attempted to establish a permanent paid sick leave entitlement for all families, a longtime Democratic Party desire. What former Chicago Mayor Rahm Emmanuel once said about not letting a crisis go to waste is fully on display, and it’s shameful.
To be sure, caution is in order—along with hand washing, avoiding crowds, staying home if you’re sick, covering coughs with your arm and other sensible measures. As for panic, why don’t we ask a person who has had the coronavirus? A 37-year-old woman in Seattle was reportedly “surprised” to learn she’d had the virus, after thinking it was the flu and treating it with over-the-counter medications, rest and plenty of water. Her message: “Don’t panic.”
Or consider what Franklin Delano Roosevelt famously said: “The only thing we have to fear is fear itself.” His fellow Democrats and a more than few Republicans would do well to remember those words at this time, given that all they seem to have to offer now is fear.