President Trump is making a post-election push of his MAGA agenda.
An executive order of Nov. 12 cuts off American investments in Chinese “military-controlled” companies, banning them from American stock and investment markets, and from being held in pension fund portfolios, effective in January.
Americans have subsequently been told to divest themselves within a year of their holdings in those stocks and securities as well.
In the wake of this executive order and to little surprise, prices quickly plunged in China and Hong Kong’s stock market.
The ban is a follow-up to this summer’s Pentagon report that listed 31 major Chinese companies doing business in the United States while assisting the Chinese military — which controls those corporations. Congress ordered the list — which is heavy with companies involved in electronics, space and aviation, communications, construction and shipbuilding — to be compiled.
The Defense Department additionally determined that each company “supports the modernization goals of the People’s Liberation Army (PLA) by ensuring its access to advanced technologies and expertise acquired and developed by even those PRC companies, universities, and research programs that appear to be civilian entities.”
Trump’s executive order is a blow to two major initiatives of China’s Communist Party:
1. Its “Made in China 2025” strategic plan to expand the manufacturing sector of the PRC (People’s Republic of China), and
2. Its Belt and Road Initiative (BRI) plan to control global trade and transportation infrastructure
The Belt and Road Initiative, with a presence in over 100 countries, involves $1.3-trillion dollars spent by China to build or buy control of the transportation and logistics facilities that are critical to global trade.
That dollar figure comes from Australian conglomerate BHP, which says the BRI is seven times larger than the Marshall Plan funded by America to rebuild Europe after World War 2.
As Forbes puts it, China has been on a “seaport shopping spree” buying control of major port facilities worldwide. Furthermore, another Department of Defense report says the BRI is “leveraging civilian construction for military purposes; and . . . logistics . . . for military purposes.”
A new assessment by the Center for Strategic and International Studies notes that China’s state funding is building over a third of the world’s ocean-going merchant ships, producing 96 percent of the world’s shipping containers, and controlling the largest port and logistics company in the world, all to serve as “the maritime supply arm of the People’s Liberation Army.”
The result is that China builds about 1,200 merchant ships a year, while the United States only builds eight.
With regards to combat ships, an October report from the Congressional Research Service warns Congress that China’s fast-growing navy is now “a major challenge to the U.S. Navy . . . in the Western Pacific — the first such challenge the U.S. Navy has faced since the end of the Cold War.”
Since 90% of global trade travels by ship, China is developing a chokehold that it could apply to threaten the economies of every nation, including the United States, in order to enforce its Communist will.
Sadly, there are some who want to invite China to expand its grip on America by repealing the Jones Act a, law prevents any vessel from conducting internal trade within American waters unless it’s American-built, American-owned and American-crewed.
This applies to cargoes carried on our waterways, along the intercoastal canals, and between American ports.
It would require a major U.S. commitment to reverse the trend of Chinese dominance of global trade. But keeping the Jones Act prevents China from accelerating the trend by taking control over our internal waters. Homeland security would be at risk if any foreign power infiltrated into the American economy in that way.
Keeping the Jones Act by itself will not remedy the problem of China’s militant expansionism. Cutting off U.S. funds from China’s commercial/military complex may help.
However, to develop real solutions, a first step is that the American people must be better-informed about what China is doing.
Large unexpected expenses are never welcome. No one likes a costly surprise. That may explain why Congress is talking about government imposing a “fix” to “protect” patients from surprise medical bills.
That may sound good, but healthy skepticism is warranted. One only needs to remember how the Obama-Biden administration repeatedly promised to save us all thousands of dollars every year and allow us to keep our health insurance and our doctor. None of that turned out to be true.
We need a solution to surprise medical bills that rescues consumers from being caught in between the doctor’s or hospital’s bill and the insurance company’s refusal to pay it. But we also need a solution that empowers consumers, not government bureaucrats, and that promotes innovation and harnesses the power of the marketplace to ensure high quality care at the lowest prices.
We must be 100% sure that we avoid government mandated procedures that effectively impose price controls because they also reduce the likelihood of future healthcare innovations and slow the development of promising medicines and procedures. Government mandates almost invariably shift power to government bureaucrats and health insurance companies, rather than giving consumers more control over their own healthcare.
The most common cause of a surprise medical bill is when a person uses a healthcare provider that is not in their insurance plan’s network of providers. While it doesn’t happen often, it is a real challenge for consumers when it does happen. Insurance companies have contracts with healthcare providers to provide medical services at discounted rates. That makes them “in-network.” The “out-of-network” providers charge a price without any pre-negotiated discounted rates. The problem arises when consumers get stuck between the insurance company that doesn’t want to pay and the doctor who should be paid.
The best way to solve the nation’s surprise medical bill problem is to implement a fair and open independent dispute resolution (IDR) process. A fair IDR process simply means that both sides of the out-of-network bill dispute, the physician and the health insurer, are allowed to submit all relevant information to make their case. Then the arbitrator or decision-maker can weigh the evidence and provide a fact specific resolution to what the insurance company should pay and what the doctor should accept.
This would relieve the patient of worrying about the bill, and it would make sure that difficult or complex medical procedures and treatments don’t become devalued or more difficult to find.
Sens. Lamar Alexander and Bill Cassidy are rumored to be working on a “compromise” that purports to use a form of IDR. But we should be on high alert because all indications are that the “compromise” will include a rigged or sham IDR process that puts the heavy hand of government on one side of the scales of fairness and justice. There is no reason to use a process that from the start tips the scales in favor of either the doctor or the insurance company.
This “compromise” will favor insurance companies over doctors. If the government-imposed process ends up being a price control system, it will simply be a step toward socialized medicine and will make finding doctors to treat you more difficult. What we should all want is a fair and balanced process.
A fair and impartial IDR process that resolves the pricing dispute would prevent the consumer from getting caught in the middle. It would also empower consumers, not government.
Additionally, it would harness the power of the marketplace to keep quality up and prices down. It is important to remember that government regulations don’t have a track record of reducing costs. Moreover, government mandates will do nothing to reward innovation, or to empower consumers.
Regardless of what their true motives were or are, the results we have witnessed in the last 50 years from politicians promising “fixes” has been that things end up costing a lot more than promised, and government gets more and more control. Those who can afford lobbying efforts may escape the costly impact of these government mandates. But rarely do these promised fixes on balance help the average citizen.
Instead of continuing to empower government, insurance companies, and those who can afford lobbyists to protect their interests, let’s try reforms that put economic power back in the hands of healthcare consumers. Let’s trust the marketplace to do what it does so well — boost quality and keep prices comparatively low. We trust the marketplace to provide us with food, housing, technology, and thousands of other very important things. Why not our healthcare, as well?
We can do all of this with a fair and balanced IDR process that allows both sides of the out-of-network bill dispute to submit all relevant information to make their case. If this happens, we protect consumers from surprise medical bills and we keep burdensome government mandates out of our healthcare choices. That’s a win-win!
The Democrats included huge cash handouts for wealthy constituents in predominantly liberal areas in their emergency response package.
At some point, when the election chaos is finally settled, Congress will likely turn to passing another COVID-19 stimulus/relief bill. (Despite the last one being plagued by rampant fraud and dysfunction). One starting point for negotiations will be the “HEROES Act,” a $2.2 trillion bill the House passed in October on a party-line vote by Speaker of the House Nancy Pelosi and her fellow Democrats.
One of the most significant aspects of the HEROES Act is that it allocates nearly $700 billion in federal money for state, local, and tribal governments.
Proponents say this gives localities the funds they need to pay emergency responders and fund programs necessary to protect their communities. Critics point out that much of this money is used to “bail out” blue states that were already mismanaging their budgets and running up large unfunded pension programs before the pandemic.
Indeed, the left-leaning Brookings Institution has projected that “state and local government revenues will decline $155 billion in 2020, $167 billion in 2021, and $145 billion in 2022.” Simple math shows us that the CARES Act gives states and localities hundreds of billions more in federal money than they are actually projected to lose due to pandemic-related decreases in revenue.
This alone should be a red flag. Yet a new analysis also reveals that Pelosi and her fellow “progressives” snuck millions of dollars in cash for some of the nation’s wealthiest zip codes into their emergency COVID-19 package.
Watchdogs from OpenTheBooks.com inspected the fine print of the HEROES Act and found that it allocates $350 million to the 50 richest communities in America. The average annual income in these areas ranged from $262,988 to $525,324.
“It’s unclear why such wealthy neighborhoods need so much money to weather the storm,” Adam Andrzejewski of OpenTheBooks.com wrote.“Should American taxpayers from lower-income areas be subsidizing the lifestyles of the rich and famous?
Some might reasonably look at a figure like $350 million and conclude that, in the context of a $2.2 trillion bill, it is a relatively small amount of money. But we mustn’t forget that this figure is only looking at a tiny sample size. It is not all the money this bill allocates to wealthy zip codes, just a snapshot.
We can extrapolate from this figure that the HEROES Act would dole out many hundreds of millions if not billions more to other wealthy towns and cities.
It’s not even the only provision of the bill that can be fairly characterized as a handout for the rich. The package also includes items such as student debt relief, which further burdens cash-strapped taxpayers yet only helps a relatively well-educated and well-off subset of society.
But wait: Aren’t Democrats supposed to be the progressive party fighting for the working class? That’s certainly what their rhetoric would suggest. Yet the Democrats included cash handouts for wealthy constituents in predominantly liberal areas such as Wellesley, Mass., Malibu, California, and Old Greenwich, Conn. in their emergency response package nonetheless.
This offers another painful reminder that government officials—no matter their professed partisan or ideological principles—will always and inevitably end up wielding their power in a manner prone to favoritism and clientelism.
“There is no such thing as a just and fair method of exercising the tremendous power that interventionism puts into the hands of the legislature and the executive,” Austrian economist Ludwig von Mises wrote. “In many fields of the administration of interventionist measures, favoritism simply cannot be avoided.”
Humans are fallible beings—and power corrupts. This is why, from tax loopholes to crony regulations to spending bills, sweeping government interventions will always end up skewing in favor of powerful constituencies. However, when power is left to the individual level rather than government, that decentralization helps limit abuses.
It’s not a matter of electing the right people. Fundamentally, progressive and conservative government officials alike face the same incentive structures.
The only way to really prevent the abuse of government power and expenditure of taxpayer resources in favor of the well-off and well-connected is to limit the scope of the government itself.
Progressive Democrats have dominated San Francisco’s city government for the last 20 years, a time during which homelessness, drug abuse, the cost of living, and the city budget have skyrocketed. San Francisco is becoming an increasingly obvious problem for the national Democratic party, with vice president-elect Kamala Harris, Speaker of the House Nancy Pelosi, and Senator Dianne Feinstein all from the Bay Area.
As a succession of city governments have tacitly tolerated drug abuse and the crimes that go with that, a de facto thriving drug-based economy tragically plays out in the open on city streets every day. The city spends a small fortune each year collecting millions of used hypodermic needles from city streets and pays city workers about $185,000 annually to clean up feces from the sidewalks.
This is why $8 million in campaign money was poured into local elections earlier this month to convince San Francisco voters to replace progressive Democrats with more moderate Democrats on the city’s Board of Supervisors, and to vote down a number of local tax initiatives that would make San Francisco even more expensive and less desirable as a business location than it presently is.
The party strongly backed more moderate candidates with the view that San Francisco could make progress if a moderate majority board was elected who would in turn work productively with San Francisco mayor London Breed, who has a much better understanding of the city’s problems than the current board.
The party’s investment in bringing about more responsible governance and policies didn’t work. It wasn’t even close. The most progressive Board of Supervisors candidates won, which means that the board’s majority remains highly progressive, and thus likely will continue to block many housing proposals. Why? Because most developments would gentrify neighborhoods by replacing very old, low-density housing with new, high-density housing. And for progressives, gentrification is not an option.
Blocking new development means constraining supply, which in turn means San Francisco housing costs remain ridiculously high. How high? How about $1.1 million for about 1,000 square feet in the city’s Mission District, San Francisco’s highest crime neighborhood? For comparison, a similarly sized home in in a low-crime Atlanta neighborhood is yours for $174,900. In rapidly growing Denver, a similar home costs about $250,000.
The blocked housing developments in San Francisco would be so valuable that those residents who might be displaced could be substantially compensated. The devil is always in the details, but the status quo of keeping the economic pie much smaller than it could be is never the solution.
For decades, San Francisco’s politicians have blocked new housing to prevent highly aid tech and finance workers from moving in and changing old-school neighborhoods. Yes, the 1950s-era Italian American diner serving spaghetti with red sauce and sausage, as delicious as it is, would be gone, and would be replaced by a higher-priced restaurant with a menu tailored to serve new residents. But times and people change, and so will neighborhoods.
It is grossly expensive to prevent new development, because new development helps everyone by expanding the city’s housing stock. Build it, no matter what it is, and supply expands. As more housing opportunities open, people move, freeing up existing homes for others to move into. California grew from about 7 million people in 1940 to about 20 million by 1970, but home prices, adjusted for inflation, did not skyrocket, because new construction kept up with demand. Prices did not enter the stratosphere until local government began to block development.
Local progressives have drawn a line in the sand: no new housing unless it is new housing that they personally find acceptable. Meanwhile, about 17,000 homeless people live in the streets, according to the National Homeless Information Project, roughly twice as many as the official count. And there are now more drug users within the city than there are high school students.
San Francisco’s failure to effectively govern is a growing problem for the national Democratic party, and for reasons that go beyond the human tragedies that unfold every day in plain view, and which remind everyone that the Democrats own this.
Former San Francisco mayor and old-school Democratic politician Willie Brown knows this as well as anyone. Brown recently was interviewed and argued very candidly that the Democratic party has lost its way, and that it provides little of interest to voters outside of Sunday morning political talk shows. He openly worries about the fate of San Francisco and his party, a political party that is increasingly being dominated by wealthy elites and one that is moving far from the ideas that he represented.
Brown knows that San Francisco and, more broadly, California have run the experiment of very liberal governance, and that experiment has clearly failed. He also knows that California voters made a right turn two weeks ago by voting down tax increases and the restoration of affirmative action, and by voting to restore the right of gig workers to work as independent contractors by passing Proposition 22. By passing this proposition, voters told elite Democratic lawmakers they didn’t approve of the legislature stealing economic freedom and making it illegal for many to work as independent contractors.
California’s failure to effectively govern is a teaching moment for the rest of the Democratic party. The progressive agenda failed in California, and it will fail nationally. Without the perfect foil of Trump to hide behind, Democrats must now deliver without the benefit of simply saying that they are working 24/7 to fight against everything Trump.
Willie Brown and other old-school Democrats know that if Biden and Harris are to succeed, the party must move against its progressive wing that includes Bernie Sanders, Alexandria Ocasio-Cortez, Rashida Tlaib, and Ilhan Omar, all of whom favor policies that would sharply reduce economic freedom, economic growth, and our quality of life.
The national Democratic party has plenty of problems to address. The global pandemic remains. China is China. Iran is Iran. Russia is Russia. And 70 million voters remain skeptical that the party even knows they exist. What has happened in San Francisco scares the national party, because they understand San Francisco’s fate can happen anywhere if the old guard can’t find a way to take control of the party and implement moderate policies.
It is good that the national party is worried about what has happened in San Francisco. Sadly, San Francisco’s plight will continue for the time being. But we can hope that its lessons will help promote better national policies in the Biden-Harris administration.
Whether due to the COVID-19 pandemic that began in Wuhan, China, or thanks to Beijing’s increasingly intimidating, if not aggressive, behavior in recent years, one of the more dramatic shifts in global opinion has started a long-overdue reconsideration of the liberal world’s relationship to the People’s Republic of China. In addition to a raft of high-level policy statements from the Trump administration, including the 2017 National Security Strategy, the 2019 Department of Defense Indo-Pacific Strategy report, and the 2020 “United States Strategic Approach to the People’s Republic of China,” a number of independent reports have been tracking Beijing’s predatory and threatening policies, whether in economics, security, or civil society. After decades of turning the other cheek to Beijing’s abuse of the free world’s open societies, all in order to maintain trade relations that themselves were turning increasingly one-sided, liberal states have begun the process of recalibrating their ties to China.
This is no easy task for America or other states, after nearly a half-century of engagement. How to reduce supply chain vulnerability without crashing current manufacturing models, how to support Taiwan and Hong Kong in the face of Beijing’s aggressive actions, whether to keep admitting hundreds of thousands of Chinese students to American universities, how to keep doing business with Chinese firms while defending rampant theft of intellectual property, the “to do” list goes on and on. The difficulty is a testament to just how thoroughly the post-Mao PRC intertwined itself with free economies and societies around the world, while at the same time resisting much, if not all, pressure to liberalize in turn. Despite decades of optimistic comments from Western leaders, including U.S. presidents, China under current Chinese Communist Party (CCP) general secretary Xi Jinping has become an even more repressive and insular state, committed to the Leninist control by the CCP, and steadfastly opposed to liberal notions of free speech and free association. The PRC’s techno-authoritarian surveillance state has taken the world’s leading technologies, many originated in Western research institutes and universities, and twisted them into a comprehensive network of social control. Western businesses, media, universities, and the like have all submitted to Beijing’s pressure, self-censuring and apologizing for remarks critical of the PRC.
The great question facing the free world is how to deal with the PRC in this new era of competition. One answer is provided in a new “handbook” for democracies, published this week by the Halifax International Security Forum (HFX) to coincide with its annual conference. The handbook, entitled “China Vs. Democracy: The Greatest Game,” is a primer on how the PRC threatens the open global society that is the source for most of its own wealth and power (full disclosure: I am the senior advisor for Asia at HFX, and was part of the team that produced the handbook). Divided into chapters that look at the CCP’s oppression inside China, influence campaigns against democracies, the battle over global economic domination, the race for technological supremacy, and the military competition that may determine war or peace, the handbook is one of the first comprehensive attempts to chart the broad China challenge.
As the handbook notes, this is not the competition, or tension, that the liberal world wanted or expected when it opened its doors to Chinese leader Deng Xiaoping and his reform plans back in the 1970s. Betting on China made sense during the Cold War and in light of what appeared to be legitimate reform inside China. The failure of Washington and its allies to conduct due diligence over the succeeding decades, questioning whether Beijing was living up to its promises and was becoming a cooperative nation upholding international norms, gave the CCP a free hand to build up its global power while eliminating any threats to its continued control. By the end of the Obama administration, the severity of the challenge could no longer be ignored or explained away as the result of a China still attempting to find its way in the world.
Yet, it is in the hands of democracies to deal with the China challenge in a way that not only protects their interests, but also may one day help the people of China. As HFX president Peter Van Praagh, who initiated the project, notes in his introduction:
Working in concert, the world’s democracies have overwhelming advantages that China cannot meet. The challenge is no longer about trying to cooperate with a rising China governed by autocrats. The real China challenge for the world’s democracies is how to cooperate effectively with each other.
Indeed, that theme of the HFX China Handbook — democratic cooperation — is one increasingly echoed by other Western reports and studies on China. Despite the disruptions of 2020, from pandemic to elections, liberal societies and free states remain stronger and yes, more peaceful, than their authoritarian counterparts. Their politics may be messier and often inefficient, but they remain laboratories of innovation and magnets for those fleeing repressive systems. They remain more committed to equality and the long-term improvement of their governing mechanisms than states run by unelected oligarchs. More pertinently, democracies may find a renewed appreciation for the moral worth of their systems by working together to defend common interests, whether economic, social, or security, against a PRC that seeks to subvert liberal norms and make the world safe for autocracy.
Perhaps the most innovative part of the handbook is the “HFX China Principles,” a set of seven pledges to not be complicit in Beijing’s assault on democracy. The Principles include a pledge not to censor or self-censor criticism of China, not to punish those who critique the PRC, not to support Chinese businesses that participate in the oppression of the Chinese people, and not knowingly to patronize businesses that benefit from Chinese slave labor. Public pledges to adhere to the China Principles by governments, multinational corporations, universities, media companies, and ordinary citizens would be a beginning in right-sizing the world’s relations with the PRC, giving hope to those in Hong Kong and Xinjiang, and bolstering democratic states in Asia, from the Philippines to Japan. As a form of thinking globally and acting locally, the Principles may give the free world the confidence to begin defending itself against the China challenge.
The following is adapted from John H. Cochrane’s remarks at the European Central Bank’s Conference on Monetary Policy: Bridging Science and Practice. His full presentation about the challenges facing central banks is here.
Central banks are rushing headlong into climate policy. This is a mistake. It will destroy central banks’ independence, their ability to fulfill their main missions to control inflation and stem financial crises, and people’s faith in their impartiality and technical competence. And it won’t help the climate.
In making this argument, I do not claim that climate change is fake or unimportant. None of the following comments reflect any argument with scientific fact. (I favor a uniform carbon tax in return for essentially no regulation, but this essay is not about carbon policy.)
The question is whether the European Central Bank (ECB), other central banks, or international institutions such as the International Monetary Fund, the Bank for International Settlements, and the Organization for Economic Co-operation and Development should appoint themselves to take on climate policy—or other important social, environmental, or political causes—without a clear mandate to do so from politically accountable leaders.
The Western world faces a crisis of trust in our institutions, a crisis fed by a not-inaccurate perception that the elites who run such institutions don’t know what they are doing, are politicized, and are going beyond the authority granted by accountable representatives.
Trust and independence must be earned by evident competence and institutional restraint. Yet central banks, not obviously competent to target inflation with interest rates; floundering to stop financial crisis by means other than wanton bailouts; and still not addressing obvious risks lying ahead; now want to be trusted to determine and implement their own climate change policy? (And next, likely, taking on inequality and social justice?)
We don’t want the agency that delivers drinking water to make a list of socially and environmentally favored businesses and start turning off the water to disfavored companies. Nor should central banks. They should provide liquidity, period.
But a popular movement wants all institutions of society to jump into the social and political goals of the moment, regardless of boring legalities. Those constraints, of course, are essential for a functioning democratic society, for functioning independent technocratic institutions, and incidentally for making durable progress on those same important social and political goals.
It’s Not About Risk
The European Central Bank and other institutions are not just embarking on climate policy in general. They are embarking on the enforcement of one particular set of climate policies—policies to force banks and private companies to defund fossil fuel industries, even while alternatives are not available at scale, and to provide subsidized funding to an ill-defined set of “green” projects.
Let me quote from ECB executive board member Isabel Schnabel’s recent speech. I don’t mean to pick on her, but she expresses the climate agenda very well, and her speech bears the ECB imprimatur. She recommends that
[f]irst, as prudential supervisor, we have an obligation to protect the safety and soundness of the banking sector. This includes making sure that banks properly assess the risks from carbon-intensive exposures. . . .
Let me point out the unclothed emperor: climate change does not pose any financial risk at the one-, five-, or even ten-year horizon at which one can conceivably assess the risk to bank assets. Repeating the contrary in speeches does not make it so.
Risk means variance, unforeseen events. We know exactly where the climate is going in the next five to ten years. Hurricanes and floods, though influenced by climate change, are well modeled for the next five to ten years. Advanced economies and financial systems are remarkably impervious to weather. Relative market demand for fossil vs. alternative energy is as easy or hard to forecast as anything else in the economy. Exxon bonds are factually safer, financially, than Tesla bonds, and easier to value. The main risk to fossil fuel companies is that regulators will destroy them, as the ECB proposes to do, a risk regulators themselves control. And political risk is a standard part of bond valuation.
That banks are risky because of exposure to carbon-emitting companies; that carbon-emitting company debt is financially risky because of unexpected changes in climate, in ways that conventional risk measures do not capture; that banks need to be regulated away from that exposure because of risk to the financial system—all this is nonsense. (And even if it were not nonsense, regulating bank liabilities away from short term debt and towards more equity would be a more effective solution to the financialproblem.)
Next, we contemplate a pervasive regime essentially of shame, boycott, divest, and sanction
[to] link the eligibility of securities . . . as collateral in our refinancing operations to the disclosure regime of the issuing firms.
We know where “disclosure” leads. Now all companies that issue debt will be pressured to cut off disparaged investments and make whatever “green” investments the ECB is blessing.
Last, the ECB is urged to print money directly to fund green projects:
We should also consider reassessing the benchmark allocation of our private asset purchase programs. In the presence of market failures . . . the market by itself is not achieving efficient outcomes.
Now you may say, “Climate is a crisis. Central banks must pitch in and help the cause. They should just tell banks to stop lending to the evil fossil fuel companies, and print money and hand it out to worthy green projects.”
But central banks are not allowed to do this, and for very good reasons. A central bank in a democracy is not an all-purpose do-good agency, with authority to subsidize what it decides to be worthy, defund what it dislikes, and force banks and companies to do the same. A central bank, whose leaders do not regularly face voters, lives by an iron contract: freedom and independence so long as it stays within its limited and mandated powers.
The ECB in particular lives by a particularly delineated and limited mandate. For very good reasons, the ECB was not set up to decide which industries or regions need subsidizing and which should be scaled back, to direct bank investment across Europe, to set the price of bonds, or to print money to subsidize direct lending. These are intensely political acts. In a democracy, only elected representatives can take or commission such intensely political activities. If I take out the words “green,” the EU member states, and EU voters, would properly react with shock and outrage at this proposal. If the ECB bought different countries’ bonds at different prices and in different quantities to reward those making greater progress on “green” policy implementation, there would likely be an outcry.
That’s why this movement goes through the convolutions of pretending that defunding fossil fuels and subsidizing green projects—however desirable—has something to do with systemic risk, which it patently does not.
That’s why one must pretend to diagnose “market failures” to justify buying bonds at too high prices. By what objective measure are green bonds “mispriced” and markets “failing”? Why only green bonds? The ECB does not scan all asset markets for “mispriced” securities to buy and sell after determining the “right” prices.
Here are two interpretations of the ECB’s proposal:
One: we looked evenhandedly at all the risks to the financial system, and the most important financialrisk we came up with just happens to be climate.
Two: we want to get involved with climate policy. How can we shoehorn that desire into our limited mandate to pay attention to financial stability?
Who Gets the Green Light?
How should we judge the proposal? I think it’s pretty obvious that the latter interpretation is true—or at least that the vast majority of people reading the proposal will interpret it as such. Feeding this perception is the central omission of this speech: any concrete description of just how carbon sins will be measured.
At face value, “carbon emitting” does not mean just fossil fuel companies but cement manufacturers, aluminum producers, construction, agriculture, transport, and everything else. Will the carbon risk and defunding project really extend that far, in any sort of honest quantitative way? Or is “carbon emitting” just code for hounding the politically unpopular fossil fuel companies?
In the disclosure and bond buying project, who will decide what is a green project? Already, cost-benefit analysis—euros spent per ton of carbon, per degrees of temperature reduced, per euros of GDP increased—is lacking. By what process will the ECB avoid past follies such as switchgrass biofuel, corn ethanol, and high-speed trains to nowhere? How will it allow politically unpopular projects such as nuclear power, carbon capture, natural gas via fracking, residential zoning reform, and geoengineering ventures—which all, undeniably, scientifically, lower carbon and global temperatures—as well as adaptation projects that undeniably, scientifically, lower the impact on GDP? Well, clearly it won’t. The ECB is embarking on one specific kind of green policy, popular at the cocktail parties at Davos, but having little to do with cost-benefit analysis or science of climate policy.
In sum, where is the analysis for this program? I challenge the ECB to calculate how many degrees this bond buying plan would lower global temperatures, and how much it would raise GDP by the year 2100, in any transparent, verifiable, and credible way. Never mind the costs for now: where are the benefits?
And how would the ECB resist political pressure to subsidize all sorts of boondoggles? If the central bank does not have and disclose neutral technical competence at making this sort of calculation, the project will be perceived as simply made-up numbers to advance a political cause. All of the central bank’s activities will then be tainted by association.
This will end badly. Not because these policies are wrong, but because they are intensely political, and they make a mockery of the central bank’s limited mandates. If this continues, the next ECB presidential appointment will be all about climate policy: who gets the subsidized green lending, who is defunded, what the next set of causes is to be, and not interest rates and financial stability. Board appointments will become champions for each country’s desired subsidies. Countries and industries that lose out will object. This is exactly the sort of institutional aggrandizement that prompted Brexit.
If the ECB crosses this second Rubicon—buying sovereign and corporate debt was the first—be ready for more. The IMF is already pushing redistribution. The US Federal Reserve, though it has so far stayed away from climate policy, is rushing into “inclusive” employment and racial justice. There are many problems in the world. Once you start trying to shape climate policy, and so obviously break all the rules to do it, how can you resist the clamor to defund, disclose, and subsidize the rest? How will you resist demands to take up regional development, prop up dying industries, subsidize politicians’ pet projects, and all the other sins that the ECB is explicitly enjoined from committing?
A central bank that so blatantly breaks its mandates must lose its independence, its authority, and people’s trust in its objectivity and technical competence to fight inflation and deflation, regulate banks, and stop financial crises.
A Narrow Role, and Essential
Working for a central bank is a bit boring. One may feel a longing to do something that feels more important, that helps the world in its big causes. One may feel longing for the approval of the Davos smart set. Why does Greta Thunberg get all the attention? But a central bank is not the Gates Foundation, which can spend its money any way it likes. This is taxpayers’ money, and regulations use force to transfer wealth between very unwilling people. A central bank is a government agency, and central bankers are public servants, just like the people who run the DMV.
Central banks must be competent, trusted, narrow, independent, and boring. A good strategy review will refocus central banks on their core narrow mission and let the other institutions of society address big political causes. Boring as that may be.
On November 13th, the U.S. Postal Service reported its Fiscal Year (FY) 2020 results. This revealed many insights about the agency with the largest takeaway being a disappointing $9.2 billion net loss. USPS, like so many other operations, has been adversely affected by the Covid-19 pandemic; mail volume, for example, declined 13.8 billion pieces. However, it is important to note that the USPS financial troubles far predate the coronavirus pandemic.
Frontiers of Freedom president George Landrith states, “The USPS has been consistently losing money year after year and has requested up to $75 billion in taxpayer money to remain solvent, but until thoughtful postal reform is completed, this money will merely kick the problem down the road.” He continues, “If we give USPS the money they are requesting, but allow the agency to continue with failed policies, we will inevitably have to bail them out again in the future.”
The agency states in the report that losses within the management’s control was $3.8 billion this year. This is a $334 million increase from the controllable loss in 2019. The agency is trending in the wrong direction and without postal reform it will only continue to decline.
In fact, although operating revenue has actually increased by nearly $2 billion due to a surge in e-commerce and greater package demand, the USPS’ out-of-date pricing system means the agency is unable to afford package costs or make a profit on these deliveries. Further, USPS calls shipping and packages its most “labor-intensive” effort, which is especially true during Covid-19, but how and to what extent that translates to its costs and full accounting picture continues to be unclear.
Landrith concludes, “In order to effectively manage and reduce the agency’s $160 billion debt, the USPS must update its policies and work with the incoming Biden administration to create thoughtful reform that will help preserve and ensure the success of our most important public institutions.”
Heavy-handed bureaucracy is set for a comeback under Biden
Barack Obama had a nickname for the highly credentialed economists who surrounded him during his first term. He called them “propeller heads.” It was his way of joshing—and asserting superiority over—figures such as Larry Summers, Peter Orszag, Austan Goolsbee, Jason Furman, and other wonks with impeccable CVs and intimidating confidence in their own opinions. The label reduced these résumé gods to propeller-beanie geeks. Like most Obama statements, it was also a self-flattering way for the president to demonstrate the value he places on intellection, data, and expert knowledge. He and his fellow progressives love the idea that reason, logic, and science legitimize the power they wield through law and bureaucratic diktat.
The public wasn’t so enamored. The weaknesses of the propeller heads became evident over time. No doubt because of their glorious self-image, the propeller heads assumed that government could easily implement their ambitious theories and complicated schemes. They assumed that human beings could be “nudged” into desired behaviors. They placed one set of values—efficiency, equality, safety, carbon or gender neutrality—ahead of others, especially individual freedom and religious liberty. They neglected or waved away unanticipated consequences. They treated disagreement or disobedience as irrational or pathological—a manifestation of racism or sexism or greed. They often went ahead with their plans regardless of disapproval or rejection.
The propeller-head mentality is “we know best.” It dominated the administration. It produced a stimulus that did not stimulate, an unpopular health care plan, a contraceptive mandate that inspired lawsuits against nuns, a cap-and-trade bill that never became law, a financial reform that squeezed community banks, a GM bailout that stiffed non-union pensioners, a series of coal and water regulations that put miners and farmers out of business, an immigration amnesty by fiat that set off a rush for the border, and a nuclear deal that rewarded Iran for its malign behavior. Perhaps the most significant consequence of the imperious and heavy-handed manner in which experts ruled during the Obama years was the political reaction it inspired. The propeller heads like to believe they are the stewards of a healthier, cleaner, safer, saner world. But they are really the midwives of national populism, the doulas of Donald Trump.
And now they are set for a comeback. When you read the Biden-Sanders unity task force recommendations, go over Biden’s potential cabinet picks, or examine the membership of Biden’s COVID-19 advisory board, you see the outlines of an administration committed to the same technocratic principles and top-down, uniform, centralized style of governance as its Democratic precursor. In some cases—if Susan Rice becomes secretary of state, for example—the very same people will be in charge. In other cases, the personalities will be new, but the methods will be similar.
The center-left views of academic, media, and cultural and foreign-policy elites will be ratified as sacrosanct. Officials will attempt, not always successfully and with unpredictable effects, to turn these opinions into policy, through legislation if possible but through regulation mostly. Dissenting forces will be problematized as disingenuous, malevolent, or not entirely sane. The one place where the public will be able to register its opposition is the voting booth.
Many opinion leaders in Washington dispute the above scenario. They point to Biden’s reputation as a moderate, to his decades-long relationship with Mitch McConnell, to the constraints he will face with a narrow House majority and a potential Republican Senate. They hope that the establishment, restored to its former fading glory, will reassert its control and “turn down the temperature.” Biden, they add, will have a “caretaker presidency.” He and McConnell will work out some small-bore tax changes. Maybe an infrastructure plan will pass. Otherwise things will drift merrily along, with Trump tweeting furiously from the sidelines.
My pundit friends forget the nature of the propeller heads. The propeller heads know they are right—their degrees and titles and offices and accolades prove it. They know that government exists to perform the functions of social uplift and rational control. They are not about to sit back and let the Delaware gang and the apex predator of American politics run the show. There’s a virus to crush, a climate to save, a liberal international order to rebuild.
Two of Biden’s appointees to the COVID-19 transition advisory board, for instance, support another national lockdown. Will Biden overrule them as cases mount and the media call for something to be done?
Biden’s deputy campaign manager told Chuck Todd the other day that her boss “campaigned on an incredibly progressive and aggressive agenda” and that “he’s going to make good on those commitments,” including his “big, aggressive” climate plan. Will Biden stand aside as this agenda runs into the maw of Joe Manchin and the Senate Republicans? Or will he say that he, too, has “a pen and a phone” and instruct his EPA and Energy Departments to act accordingly?
It was recently disclosed that Iran has 12 times the nuclear material allowed under the 2015 Joint Comprehensive Plan of Action and installed advanced centrifuges in its underground research facility. The theocratic government of Ayatollah Khamenei is isolated internationally. Its economy is under tremendous strain from American sanctions. And Biden and his team are ready to reenter the nuclear deal if Iran will have them, rewarding an authoritarian state sponsor of terrorism in order to demonstrate to Europe that “America is back.”
“There’s nothing more dangerous than a propeller head who doesn’t know his limitations,” David Brooks wrote in 2009. Today’s propeller heads are more ambitious than they were a decade ago. And far more moralistic. Come January, they will return to their old offices and resume their old games. Sure, a few of the names will be different. But the results will be the same.
For a variety of reasons, the U.S.-China rapport established by Richard Nixon has cooled considerably over the past few years. Some experts believe a return to what seemed to be a mutually beneficial status quo is possible once the Trump-era trade war comes to an end.
That’s a fantasy. The relationship between the two superpowers has been on the decline for some time, largely due to unfair trade practices on the part of the Chinese. They do not play fair and no amount of waiting on the part of the U.S. will cause them to change their stripes.
China makes billions by forcing U.S. companies to turn over valuable intellectual property in exchange for entry to its markets. Refusal to cooperate cuts off access to more than a billion potential customers. If America’s leaders aren’t demanding a change, a demand backed up with action, then what incentive is there for Beijing to change its policy?
Most American businesses have been advised by policymakers to wait. They’re stuck, hoping for relief — from international trade organizations to which the Chinese belong (thanks to the U.S. insisting they be admitted) or from U.S. politicians. Nothing will happen unless the pressure on Beijing is maintained.
When President Donald Trump talked about bad trade deals, he usually didn’t mention the World Trade Organization, the U.S. International Trade Commission, and the other multi-national and U.S. governmental bodies that are supposed to referee disputes. Maybe he should have, so that what these organizations accomplish – or more importantly fail to accomplish – will get the scrutiny needed.
Changes must occur. The ITC, for example, continues to show itself to be toothless. It’s failed to be tough on the non-practicing business entities known as “patent trolls” that exist almost solely to make the potentially lucrative charge that deep-pocketed entities have infringed on intellectual property rights so how can we expect tough action from them against China.
Patent trolls are a serious problem and a danger to economic growth and to consumers. They hinder innovation and can force higher prices on consumer technology and other goods now considered critical to life in the 21st century. Yet the ITC refuses to crack down on them, leaving China well-positioned to benefit from the mess they cause.
The commission is currently considering claims lodged by the Irish patent troll Neodron that its patents were infringed upon by major global tech companies including Apple, Microsoft, and Dell. It wants the ITC to grant an exclusion order baring these companies from selling all their major touchscreen mobile devices in the U.S. market.
What’s happening has been likened by some to extortion, with the productive companies being pressured to pay the complaining troll off rather than leave things to the ITC to decide.
Imagine if the ITC decides the issue in Neodron’s favor. The cost of smartphones, tablets, computers, and other devices covered by its order would immediately skyrocket to provide the rents Neodron is demanding. According to some estimates, nearly 90% of smartphones and tablets currently available in the U.S. market would disappear, be replaced by devices from China. The range consumers have when choosing a device would be narrowed while the prices for what they could buy would rise.
China already has a clear lead in developing and deploying 5G wireless devices. Given the critical technology race between the U.S. and China over who will dominate in 5G, how can a U.S. agency even consider a litigation outcome that forces U.S. consumers to buy their 5G devices (as well as their other touchscreen devices) only from China?
Tensions between the world’s two largest economies are already heightened, in part because the U.S. accused China of sponsoring criminal hackers trying to gain access to private data from biotech firms around the world working on coronavirus vaccines and treatments. The FBI said the Chinese government was acting like “an organized criminal syndicate.”
Neodron’s complaint to the ITC places the proverbial thumb on the scale for the Chinese and the technology they manufacture. If they win it would devastate the U.S. tech sector while helping Chinese tech companies gain a greater share of the global market, probably permanently. Like all patent trolls, Neodron’s claim cannot justify this kind of disproportionate and devastating result.
The ITC doesn’t have to go along with this. They can institute policy revisions that will thwart the efforts of Neodron and other patent trolls like them to use the ITC for monetary gain. Those changes should be made now before any more damage is done. There are bigger fish to fry.
The Supreme Court may strike down the Affordable Care Act’s individual mandate but appears poised to uphold most of the law against a constitutional challenge from a coalition of red states backed by the Trump administration.
A majority of justices were skeptical that a 2017 Republican tax bill endangered the entire statute. While that law created doubts about the continued legality of the controversial mandate to buy health insurance, other popular provisions, such as coverage for preexisting conditions, do not appear to be in danger.
The High Court’s new composition seemed to have little effect on the fate of Tuesday’s challenge. Justice Brett Kavanaugh telegraphed that he thinks the bulk of the health care law should stand even if the individual mandate is struck down. Justice Amy Coney Barrett raised doubts that one set of plaintiffs even had a right to be in court. Those developments follow dire warnings from Senate Democrats that Barrett’s confirmation would endanger health care coverage for millions of Americans.
The Court’s apparent direction greatly simplifies the health care agenda for President-elect Joe Biden. A decision striking down the ACA would send the new administration back to the drawing board on health care, while it faces the likely prospect of a GOP-controlled Senate. Biden favors a plan that would make government-funded health care available alongside private plans.
The case arose in December 2017 when congressional Republicans passed the Tax Cuts and Jobs Act. The law effectively zeroed out the individual mandate, setting the financial penalty for failing to purchase health insurance at zero dollars. The Supreme Court said in 2012 that the ACA’s requirement to buy health insurance could be upheld as a tax. In turn, a group of red states and a few individuals brought a fresh legal challenge. They reasoned that because the mandate is no longer generating revenue, it cannot be legitimated on tax grounds.
In a highly unusual move, the Trump Justice Department declined to defend Obamacare in court, so a group of blue states led by California intervened to do so.
The biggest issue in Tuesday’s case is the question of what happens if the mandate is unconstitutional. The answer turns on a legal doctrine called “severability,” or a general preference for preserving as much of Congress’s work as possible when courts find particular parts of a statute unlawful. Two conservative members of the Court, Justice Brett Kavanaugh and Chief Justice John Roberts, plainly indicated that they think the mandate can be severed from the ACA if it has been rendered unconstitutional by the tax law.
“Looking at our severability precedents, it does seem fairly clear that the proper remedy would be to sever the mandate provision and leave the rest of the Act in place, the provisions regarding preexisting conditions and the rest,” Kavanaugh said in a key exchange.ADVERTISING
Roberts had even more pointed words for Texas solicitor general Kyle Hawkins, who argued for the red states. The chief justice said the Court shouldn’t step in to scuttle Obamacare when the Republican Congress itself did not repeal the law, even as it zeroed out the mandate.
“I think, frankly, that they wanted the Court to do that,” Roberts said. “But that’s not our job.”
“Congress left the rest of the law intact when it lowered the penalty to zero. That seems to be compelling evidence on the question,” he added.
Critically, however, the chief justice did not give away his thinking on the continued legality of the mandate. He asked only about severability and whether the plaintiffs had a basis for being in court.
Donald Verrilli, the former solicitor general who defended the ACA in court for the Obama administration, appeared before the justices again Tuesday, this time on behalf of congressional Democrats. He noted that millions of people are covered under the ACA and that the entire health insurance sector has operated for years in compliance with its requirements.
“To assume that Congress put all of that at risk when it amended the law in 2017 is to attribute to Congress a recklessness that is both without foundation in reality and jurisprudentially inappropriate,” Verrilli said.
As to the legality of the mandate itself, the red states say it cannot be sustained as a tax if it doesn’t raise money for the government.
“The mandate as it exists today is unconstitutional. It is a naked command to purchase health insurance, and, as such, it falls outside Congress’s enumerated powers,” said Hawkins.
The liberal justices sparred with Republican lawyers on this point. Justice Elena Kagan questioned how a toothless mandate could amount to unlawful strong-arming.
“How does it make sense to say that what was not an unconstitutional command before has become an unconstitutional command now, given the far lesser degree of coercive force?” Kagan asked.
Justice Samuel Alito later countered that there aren’t other examples of a zero-dollar tax penalty in federal law, making the mandate suspect in its current form.
“Are you aware of any provisions in the [U.S. Code] in which Congress has purported to use its taxing power to say you must do this, and we’re going to tax it and we’re going to set the tax at zero?” he asked acting solicitor general Jeff Wall, who argued for the Trump administration.
Another issue is whether the plaintiffs even had a legal basis, called standing, for getting to court. In court papers, the blue states said that harm is a necessary prerequisite for a lawsuit, but a mandate penalty of zero dollars isn’t harming anybody.
“It is legally clear that absolutely nothing will happen to them if they choose to go without coverage,” the blue states wrote of the individual plaintiffs in court papers. Even if the individual plaintiffs don’t have standing, the red states say they do because the mandate effectively requires them to spend more on health care.
A decision in the case, No. 19-840 California v. Texas, is expected in the spring or early summer.
The combustible politics of a coronavirus ‘dark winter’
For the past half decade, Europe has acted as a preview of coming attractions in American politics. The reaction to the confluence of immigration and terrorism on the continent foreshadowed the direction the Republican Party would take under Donald Trump. The surprise victory of “Leave” in the Brexit referendum hinted at Trump’s unexpected elevation to the presidency. The terrible images from coronavirus-stricken Italy last March offered a glimpse into New York City’s future. This week, when Italian authorities reimposed curfews, restrictions on business, and bans on communal gatherings, violent protests broke out in Turin, Milan, and Naples. Consider it a taste of the next populist revolt.
Lockdowns remain the preferred tool of governments whose public health authorities decide the coronavirus is out of control. In September, Israel shut down for a month during the Jewish holidays to reduce its coronavirus infection rate. In October, New York City targeted certain neighborhoods. In recent days, Newark ordered “nonessential” businesses to close at 8 p.m., a county judge imposed a curfew on El Paso, and Massachusetts has gone back-and-forth on whether schools should be open or closed.
This response has placed the public under extraordinary strain. When officials tell businesses to close, they not only deny individuals who can’t work from home the opportunity to earn a living. They also impose social costs that much of the public is increasingly unwilling to bear. The Centers for Disease Control and Prevention report that depression, substance abuse, and suicidal ideation increased during the spring. Extended families limited contact. Religious practice was curtailed. Having canceled spring holidays, Americans are now informed that Halloween, Thanksgiving, and Christmas need to be reconsidered as well. When individuals inevitably question, disregard, or disobey the commands of science, they are censored, stigmatized, condescended to, or punished.
Nor is expert authority the only form of power at work. In spite of evidence that schools are not sites of widespread transmission and remote education harms children in incalculable ways, only 39 of the 50 largest school districts have reopened for at least some in-person instruction. In Fairfax County, Va., the teachers’ union has called for schools to remain closed at least until September 2021. Amidst the many Biden-Harris lawn signs are a few for #OpenFCPS, a parent-driven campaign to resume in-person instruction. The parents are circulating a petition to recall members of the school board who oppose bringing the students back.
Governments resort to shutdowns to impose discipline on an unruly population. But shutdowns do not solve the problem. They turn public health crises into economic and social ones. After a while, the price of shutdowns grows too high. The government reopens the economy. The virus returns. Before long, the cycle repeats.
There are plenty of ways to think about the politics of the Trump era. You can analyze the parties according to the traditional left-right axis. You can study public debate through the prism of liberal democracy versus authoritarianism. You can understand recent elections as pitting establishment insiders against populist outsiders. You can see the ideological contest as a three-way grudge match between common-good conservatives, neoliberals in both parties, and woke progressives. Coronavirus has spawned yet another interpretive framework. In this frame, politics is the struggle between the faction that wants to keep the economy and society relatively open during the pandemic and the faction that is ready and willing to shut them down.
Joe Biden has been able to straddle these two poles. He says you can have a (relatively) open society as well as a public health system that reduces infection to a negligible level. He says he will “shut down the virus, not the country.” What he hasn’t explained is how that can happen in the absence of a widely administered vaccine. Only Taiwan and South Korea contained outbreaks without nationwide lockdowns. It is hard to see the United States replicating their success. Taiwan benefited from its rapid response at the outset of the crisis. South Korean authorities rapidly approved tests while enjoying access to cell phone data. None of that happened here.
If Biden takes office during the “dark winter” he prophesied at the final presidential debate, he will have to decide, in addition to his national mask mandate, whether to put the country through another “30 days to slow the spread.” The bureaucratic pressure to shut down will be immense. The media, entertainment, and technology sectors will be sure to support and promote his decision. Polarization between “red” states and the nation’s capital will intensify. The commanding heights of culture and business will consign the Republican Party to the ash heap of history. And opposition to the restoration of progressive rule will manifest itself as a populist revolt whose character, magnitude, disposition, and endgame can only be imagined.
The American economy is roaring back according to numbers released Thursday showing a record-breaking increase in U.S. gross domestic product of just over 33 percent on an annualized basis for the third quarter of 2020. The numbers are the highest ever recorded, more than double the previous record set back in 1950 while Harry Truman was president.
The surge, which is attributable to the end of lockdowns in the typically referred to “red states” is leading to what appears very much like the V-shaped recovery President Donald J. Trump promised would occur once businesses reopened and people were allowed to go back to work.
The top Republicans on the House Ways and Means Committee, U.S. Rep. Kevin Brady of Texas, described the news as ratification of Trump and GOP economic policies. “After Covid-19 devastated America’s strong economy almost overnight, the Trump economy did the impossible – it battled back with the largest single quarter of economic growth in America’s history. This smashes expectations, beating economists’ original growth estimates by a stunning 400 percent.”
The news is especially bright given that all the growth came in the private sector, with private spending increasing by 40 percent and private investment up by an astounding 83 percent. Growth in the government sector, meanwhile, was slightly down in the third quarter, suggesting the need for additional federal stimulus dollars may be abating.
According to the Bureau of Economic Analysis, real GDP in the third quarter grew by 7.4 percent, a figure that considerably exceeds even the most favorable market expectations. This follows the sharpest single quarter economic contraction on record in the second quarter of 2020 due to pandemic-induced lockdowns.
The numbers should calm those who fear the economy is on the edge of a recession thanks to the considerable increase in the numbers of people testing positive for the COVID-19 virus. The United States has now, in a single quarter, recovered two-thirds of the economic output lost due to the pandemic-imposed lockdowns imposed by many of the nation’s governors from march onward. By comparison, it took four times as long to regain the same share of lost economic output during the anemic Obama recovery that followed the implosion of the U.S. housing market.
Real consumer spending rose 8.9 percent — 40.7 percent at an annualized rate — in the third quarter, which is also the largest increase on record. Goods and services both experienced steep increases, suggesting consumer and business confidence is on the rebound and explaining, perhaps, the recent Gallup numbers showing 56 percent of Americans believe they are better off now than they were four years ago. Greater spending on recreation, food, and accommodation services – sectors acutely impacted by lockdowns – alone accounted for one-fifth of total GDP growth in the third quarter.
The government also reports residential investment rose by 12.3 percent – 59.3 percent at an annualized rate – with most of the increase due to real estate commissions generated by rebounding home sales.
The increase in residential investment, the largest since 1983, was echoed somewhat less rosily by an increase in business investment, which rose 4.7 percent — 20.3 percent at an annualized rate — with a steep increase in equipment more than offsetting declines in structures and intellectual property products.
In President Trump’s first three years in office, the economy grew by $310 billion more than what was expected before the 2016 election. In contrast, in Obama-Biden’s second term, the economy grew by $640 billion less than what was expected prior to the 2012 election. “We still have a way to go in our recovery,” Brady said, adding “there is no question Speaker Pelosi is working to sabotage America’s economy ahead of the election. But look at the contrast — the worst economic recovery in our lifetimes under Obama-Biden, the strongest labor market recovery from an economic crisis under President Trump.
Up until the Trump presidency, politicians regularly talked about the need to make America energy independent. That talk has stopped, largely because the goal has been reached. The U.S. is now a net energy exporter, thanks almost entirely to the development of new technologies that allow us to find fossil fuels where they could not be found before.
The oil and natural gas boom brought about by fracking has not only ended the nation’s reliance on crude oil imports, it also put an end to the domestic coal industry. As a result, U.S. carbon emissions are down significantly, lower even than the targets fixed in the international Paris Climate Accord from which President Donald J. Trump withdrew the nation shortly after entering office.
Rather than cheering these developments, former Vice President Joe Biden wants to bring them to an end. He wants the nation to be depended on synthetic and renewable fuel substitutes that are not yet developed and wind and solar power that is expensive to build, even more expensive to maintain in good working order, and which has proven harmful to birds and other wildlife – all to appease Luddite environmentalists who fill his campaign coffers with money and his campaign offices with activists.
To what should be his shame, Biden can’t be clear with the American public about what he has in mind for U.S. energy production save for statements about his plan to end our reliance on fossil fuels to heat and cool our homes and businesses and power our factories within several decades.
The technology to do all this is unproven, at least at the commercial-scale required to produce the base power load needed. Yet he dismisses technologies like fracking that are proven as environmentally harmful and unnecessary.
Contrary to what he’s said while debating Mr. Trump, Mr. Biden has said repeatedly he would end fracking in the United States. He’s been caught on tape more than once making this promise. In a July 2019 interview with CNN’s Dana Bash, Mr. Biden said he would eliminate fracking. “Would there be any place for fossil fuels including coal and fracking in a Biden administration?” she asked. Mr. Biden responded, “No, we would work it out. We would make sure it’s eliminated.”
In his October 22 debate with Mr. Trump, Mr. Biden again promised he would shut down the entire American oil industry. Here’s this, from the transcript, so you can read it yourself:
President Donald Trump: Would you close down the oil industry?
Former Vice President Joe Biden: By the way, I have a transition from the old industry, yes.
President Donald Trump: Oh, that’s a big statement.
Former Vice President Joe Biden: I will transition. It is a big statement.
President Donald Trump: That’s a big statement.
Former Vice President Joe Biden: Because I would stop.
Moderator Kristen Welker (NB): Why would you do that?
Former Vice President Joe Biden: Because the oil industry pollutes, significantly.
Whether or not he used the word “ban” is irrelevant. If he can’t ban it, he’ll tax and regulate and sue it out of existence by raising the costs involved with it to a level when it no longer makes economic sense to do it.
If Mr. Biden’s plan prevails, it won’t just devastate the economies of Pennsylvania, Ohio, Texas, Colorado, and New Mexico, and it won’t just send millions of Americans whose jobs depend on the fracking industry onto the unemployment lines, it will produce higher prices at the pump for every American while making the nation once again reliant on foreign oil imports coming from politically unstable parts of the world. If that weren’t enough, the biggest beneficiary of the Biden plan will be Russia’s Vladimir Putin, who just can’t wait to get the rest of the world, particularly eastern Europe, dependent once again on his country’s crude and natural gas.
No amount of spin or clean up from Mr. Biden or his team can explain away what he’s promised to do. The former Vice President said “Yes” when the president asked if he would close down the oil industry. Mr. Biden’s stance towards almost everything that goes into U.S. energy independence shows him to be a job killer, a friend to the oil sheiks and eastern European oligarchs and others who’d like nothing better to have their knees on the necks of U.S. industry by controlling the nation’s supply of energy.
Joe Biden likes to claim his plan to repeal the Trump tax cuts won’t cause most Americans to see their taxes rise. That’s wrong, say both a famed rapper and a noted anti-tax activist – a position backed up by a newly released study that also projects wages for an average American household will decline if his plan is enacted.
An analysis of the Biden plan released by Grover G. Norquist’s Americans for Tax Reform said the passage of Biden’s plan would lead to a top marginal rate of more than 60 percent on many households and small businesses.
This news did not sit well with the rapper 50 Cent – commonly known as “Fitty” – who threw his support to President Donald Trump, saying on Twitter “Yeah, I don’t want to be 20 Cent. 62 percent is a very, very bad idea.”
Under the Biden plan higher earners like the rapper, who was born Curtis James Jackson III, who are New York City residents could see their top rate go as high as 62 percent. “Are you out of ya (expletive deleted) mind?” he said through his social media account.
A separate study by Boston University economics professor Laurence J. Kotlikoff for the non-partisan Goodman Institute looked at the tax and Social Security changes that would occur under the Biden plan found that wages would decrease by $1,000 per year for households with income of $50,000 and by $2,000 per year for a two-earner couple making $100,000. Additionally, because the $400,000 threshold in the former vice president’s plan is not indexed, couples who start out with a modest income in their 20’s could end up “paying the Biden tax by the time they are in their 50’s.”
The Goodman study also found the tax discriminated based on age, with younger entrepreneurs facing “six times the extra burden on retirees with the same income in their 60’s, living off accumulated wealth.”
Biden has vowed to steeply raise personal income taxes and impose an additional 12.4 percent payroll tax (along with a doubling of the capital gains rate to 40 percent). New York has an 8.82 percent income tax and New York City takes another 3.876 percent. Ironically, his plan would have the biggest impact on taxpayers in blue cities and states – his base of support in the upcoming election – because they typically impose a higher tax burden on their residents.
“50 Cent speaks the truth when he says no one should have 62 percent of any dollar they earned taken by government. 50 Cent speaks not just for rappers but for millions of small businessmen and women who would be hit by the high tax rates threatened by Biden and New York,” Norquist said.
Other studies that have looked at the Biden plan, including those from The Tax Foundation, the Tax Policy Center, and Penn/Wharton all projected taxes will rise on all income groups if the Biden plan becomes law.
In Washington, bad ideas are like bad pennies: They keep turning up.
In early 2019 a group of well-connected Washington insiders was suggesting with the utmost sincerity that it would be best to have the Pentagon in charge of the push to 5G, the next-level communications network. The primary reason for this, they said, was national security and the threat posed by China.
President Donald J. Trump, a man who is in no way soft on China, wisely rejected their advice. In a Rose Garden press conference with Federal Communications Chairman Ajit Pai, he rejected the government-led approach, calling it “not as good, and not as fast.” Instead, he committed to a 5G buildout that would be “private sector driven, and private sector led,” ending talk of a nationalized network.
Or so we thought. The Wall Street Journal recently reported that the idea of a 5G network run out the Pentagon is once again on the table. A new proposal for a government-managed system under the supervision of a single company is once again under discussion. And, as before, the firm the DoD has in mind has little to no experience managing large information clusters.
The reason the idea’s come back has more to do with the swamp-dwellers who profit off big government contracts than with the science involved, the efficiency needed to bring 5G to life quickly, or the ability of firms in the private sector to make it all happen. It’s crony capitalism at its worst.
The best way to get to 5G is to allow the best minds and best engineers in the best firms to develop competing technologies – with the winner to be chosen in the marketplace. The plan being pushed yet again by the DoD gives one company – in this case, most likely Rivada Networks – control of the spectrum and its allocation as well as access to the protected intellectual property of those who’d be doing the job if the Pentagon had not taken the project over. At least that’s the opinion of 19 U.S. Senators who wrote the department complaining the way it wanted to move forward “contradicts the successful free-market strategy that has embraced 5G.”
Somehow what President Donald J. Trump likes to call “the race to 5G” is again in danger of being taken over by the officials in charge of it. Instead of fair competition, a vital future national and economic security project is being influenced unfairly by what leading congressional Democrats including House Energy and Commerce Committee Chairman Frank Pallone, D-N.J., say is a plan “specifically crafted to enrich President Trump’s cronies.”
Partisan hyperbole aside, it’s easy to see Pallone’s point. Building a national 5G network requires more than influential political connections. Rivada Networks, the company lobbying hardest to win the bid, is not exactly known for its ability to build out and manage broadband networks. Its proposal to manage FirstNet, a nationwide public safety broadband system, was shot down due to concerns at the Interior Department over concerns about the insecurity of its technology.
One might think this would give the Pentagon pause, yet Rivada’s advocates within the department say they are confident the company can get the job done and have an operating network functioning within three years. Of course these are some of the same people who have already spent more than a decade and hundreds of billions or more on the development of the new multi-service Joint Strike Fight and still haven’t gotten it right.
Chairman Pai, a national hero for his work preventing the Internet from coming under the thumb of the U.S. government as a regulated utility, has dismissed the effort to get to a nationalized 5G run by the Pentagon as being a costly and counterproductive distraction from what America ought to be doing. The federal government moves slowly by design. Processes that work quickly in an authoritarian country like China don’t work in America. Here, roadblocks and rulemaking are the order of the day. Washington can’t compete with the U.S. private sector. In Beijing, the private and public sectors are indistinguishable.
Thanks to President Trump, Chairman Pai, and others who understand the stakes, America is a lot farther down the road to a working 5G network than people might believe. Thanks to a competitive market where the nation’s three largest carriers have all prioritized building the nation’s biggest, fastest 5G network, we’ll get there faster and in better shape than if we let the government do it.