U.S. Treasury Secretary Janet Yellen told House Speaker Nancy Pelosi Friday that unless Congress acted quickly to raise the statutory limit on the amount of money the federal government can borrow, she would be forced to “start taking certain additional extraordinary measures” to prevent the United States government from defaulting on its financial obligations.
In a letter sent to Pelosi and other members of the congressional leadership in both parties, Yellen asserted that an increase or continued suspension of the debt limit “does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures.”
With just days to go before the statuary suspension of the debt limit ends at noon on July 31, the need for congressional action has already become a political football. Both parties are trying to use the issue on Capitol Hill to gain leverage over the other to either stop or move through to final passage several pieces of legislation that are a top priority for the Biden Administration.
The full text of the letter is as follows:
Dear Madam Speaker:
As you know, the Bipartisan Budget Act of 2019 suspended the statutory debt limit through Saturday, July 31, 2021. I am writing to inform you that beginning on Sunday, August 1, 2021, the outstanding debt of the United States will be at the statutory limit.
Today, Treasury is announcing that it will suspend the sale of State and Local Government Series (SLGS) securities at 12:00 p.m. on July 30, 2021. The suspension of SLGS sales will continue until the debt limit is suspended or raised. If Congress has not acted to suspend or increase the debt limit by Monday, August 2, 2021, Treasury will need to start taking certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations.
Increasing or suspending the debt limit does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures. The current level of debt reflects the cumulative effect of all prior spending and tax decisions, which have been made by Administrations and Congresses of both parties over time. Failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans. Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011. This is why no President or Treasury Secretary of either party has ever countenanced even the suggestion of a default on any obligation of the United States.
The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future, exacerbated by the heightened uncertainty in payments and receipts related to the economic impact of the pandemic. Given this, Treasury is not able to currently provide a specific estimate of how long extraordinary measures will last. However, there are scenarios in which cash and extraordinary measures could be exhausted soon after Congress returns from recess. For example, on October 1 alone, cash and extraordinary measures are expected to decrease by about $150 billion due to large mandatory payments, including a Department of Defense-related retirement and health care investment.
In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support. I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.
It is highly unlikely members in either party will allow the deadline to be reached without reaching some kind of compromise agreement to forestall the U.S. defaulting on its debt. Such a move would, most economists agree, that even a technical default would put in motion a disruption in the global financial markets of what one economist called “a global disruption of unknown and unknowable proportions.”
Such a collapse, which would provide China an ample boost in their campaign urging the replacement of the dollar as the global reserve currency, would likely be blamed on the Republicans. Fear that it might in turn limits the ability of spending restraint advocates to argue the deadline should be allowed to come and go unless reforms are made.
This game of economic chicken has been tried before, with the first one to blink generally considered the loser.
The specter of inflation haunts Joe Biden’s presidency
Treasury Secretary Janet Yellen got into trouble Tuesday for telling the truth. That morning, at a conference sponsored by the Atlantic, she raised the possibility that one day the Federal Reserve may raise interest rates “to make sure our economy doesn’t overheat.”
Anyone with a basic understanding of economics knew what she was talking about. The combination of President Joe Biden’s gargantuan spending and the accelerating economic recovery may well lead to a rise in consumer prices and hikes in interest rates. But an end to the Federal Reserve’s program of easy money would hurt asset prices and possibly employment as well.
Which is not what most investors want to hear. When Yellen’s words reached Wall Street, the market tanked. By the afternoon she was in retreat, telling the Wall Street Journal CEO summit that she had been misunderstood. “So let me be clear,” she said. “That’s not something I’m predicting or recommending.”
No, of course not. But it still might happen anyway.
A specter is haunting the Biden administration—the specter of inflation. Past inflations have not only harmed consumers, savers, and people on fixed incomes. They have also brought down politicians. Among the risks to the Democratic congressional majority is a rise in prices that lifts inflation to near the top of voters’ concerns, coupled by the type of Fed rate increase that hits stocks and housing. Inflation is one more signpost on the road to Republican revival, along with illegal immigration, crime, and semi-closed public schools embracing far-left critical race theory.
The classic definition of inflation is too much money chasing too few goods. That might also describe America sometime soon—if not already. The economy has started its post-virus comeback. Jobs and growth are on the upswing. U.S. households sit on a trillion-dollar pile of savings. Over the last year, on top of its regular spending, the federal government has appropriated a mind-boggling amount of money: a $2 trillion CARES Act, a $900 billion COVID-19 relief bill, and a $2 trillion American Rescue Plan. And President Biden wants to spend about $4 trillion more.
Surging this incredible amount of cash into an economy that is rapidly approaching capacity may have unintended and harmful consequences. But the Biden administration is either unconcerned about inflation or afraid of bringing it up in public.
Why? Well, one reason is that earlier warnings, after the global financial crisis in particular, didn’t seem to come true. (The inflation may have shown up in the dramatic ascent in prices of stocks and bonds, as well as in odd places such as the market for high-end art.) Another reason is that some economists think a little bit of inflation would be a good thing. But the main explanation may be related to status-quo bias: Inflation hasn’t been a driving force in our economic and public life for decades, and so we blithely assume it won’t be in the future.
Which is why an experienced leader worries about repeating the mistakes of the past. And yet, for a politician who came to Washington in 1973, Joe Biden has a lackadaisical attitude toward inflationary fiscal and monetary policy. Was he paying attention? It was the great inflation of the ’60s and ’70s, caused in part by high spending, the Arab oil embargo, and spiraling wages and prices in a heavily regulated and unionized economy, that helped ruin the presidencies of Gerald Ford and Jimmy Carter.
Inflation led to bracket creep, with voters propelled into higher income tax brackets by monetary forces over which they had no control. And bracket creep inspired the tax revolt, supply-side economics, and the Reaganite idea that, “In this present crisis, government is not the solution to our problem; government is the problem.” The eventual cure for inflation was the painful “shock therapy” administered by Federal Reserve chairman Paul Volcker and what at the time was the worst recession since the Great Depression.
Why anyone would want to repeat this experiment in the dismal science is a mystery. Biden, however, is fixated not on inflation but on repudiating the legacy of the man known for describing it as “always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Milton Friedman, whose empiricism led him to embrace free market public policy, was the most influential economist of the second half of the 20th century. But Biden has a weird habit of treating Friedman as a devilish spirit who must be exorcised from the nation’s capital. For Biden, Friedman represents deregulation, low taxes, and the idea that a corporation’s primary responsibility is not to a group of politicized “stakeholders” but to its shareholders. “Milton Friedman isn’t running the show anymore,” Biden told Politico last year. “When did Milton Friedman die and become king?” Biden asked in 2019. The truth is that Friedman, who died in 2006, has held little sway over either Democrats or Republicans for almost two decades. But Biden wants to mark the definitive end of Friedman and the “neoliberal” economics he espoused by unleashing a tsunami of dollars into the global economy and inundating Americans with new entitlements.
The irony is that Biden’s rejection of Friedman’s teachings on money, taxes, and spending may bring about the same circumstances that established Friedman’s preeminence. In a year or two, the American economy and Biden’s political fortunes may look considerably different than when Janet Yellen blurted out the obvious about inflation. Voters won’t like the combination of rising prices and declining assets. Biden’s experts might rediscover that it is difficult to control or stop inflation once it begins. And Milton Friedman will have his revenge.
The beleaguered U.S. Postal Service again comes under scrutiny this Thursday as the House Oversight and Government Reform Committee begins consideration of legislation to hopefully, once and for all, put the USPS on the path to sound footing.
The hearing will inevitably get political, and needlessly so. Too much anger remains over the 2020 presidential election (in which the USPS played a significant role thanks to the emergency procedures taken by states to permit mail-in voting on a scale never before seen) for it not to happen.
With any luck though, the committee’s chairman and ranking Republican will be able to keep things on track and prevent the hearing from denigrating into a shouting match. Everyone’s attention will be required to produce a plan to rescue the Postal Service without a bailout.
The hearing is an opportunity to examine the reforms already put in motion by U.S. Postmaster General Louis DeJoy. A controversial choice when he was selected, DeJoy has been attacked relentlessly as a “political hack” put in place by then-President Donald Trump and Republicans on the Postal Board of Governors to tilt the election in Trump’s favor.
His partisan pedigree is undeniable. He was a major donor to the GOP and to Trump, which led many high-profile Democrats to call for his ouster and, when the Board of Governors refused to remove him, for its ouster as well.
It didn’t happen but that doesn’t mean DeJoy is safe. The White House has sent the names of three labor-backed nominees to the Board that, when they’re confirmed by the U.S. Senate, would give the Democrats the majority and the ability to terminate him – even though he deserves considerable credit for having remained focused on the job at hand – keeping the USPS operating in the middle of lockdowns imposed during a pandemic – all the while cutting costs where he could.
DeJoy’s been following the plan, “Delivering for America,” a multi-faceted ten-year program to get things on track that he’s driven with the Boards’ approval. It, and he, deserve a chance to see where things go.
The plan is focused primarily on helping the USPS do what it is intended to do: deliver mail and packages efficiently to every address in America six days per week, rain or shine, sleet or snow, and, if necessary, “in the gloom of night.” By recommitting the Postal Service to this fundamental tenant and recognizing it is a core strength, DeJoy and the Board have put the USPS on the path to recovery without a taxpayer bailout.
That’s what we want – the ability to send and receive mail and packages throughout the country, direct to another address without someone at the other end having to travel to a drop-off and pick-up point, affordably and efficiently. I still send letters; and I receive lots of packages from online shopping (this year more than ever, just like most Americans). Some of my relatives receive vital medications via the Postal Service. And millions of small businesses depend on the Postal Service to ship their products – a function which will expand nearly exponentially if efforts to bring broadband to rural America happen as the White House wants.
Fortunately, neither the “Delivering for America” plan nor the draft of the legislation about to be considered in committee adopts any of the dangerous proposals to force the USPS to increase package prices by arbitrarily assigning that part of the business costs which the Postal Service then must pay for. As required by law, the Postal Service already covers cost caused by delivering packages as well as a share of the overhead. Driving artificial package price increases above levels set in the market would kill the one part of the Postal Service business that is succeeding and helping to keep mail service going – by more than $10 Billion last year over and above the costs of providing the package delivery service.
Less positive are the plan’s proposal calling for mail rates to increase several times the rate of inflation, while at the same time reducing first class mail service standards from 3 to 5 days (by substituting trucks for airplanes). People don’t want to have to pay more for less. Moreover, the actual savings from the service change are uncertain and pressure to raise mail rates would be less if USPS took a more aggressive stance on controlling labor costs.
The USPS has already begun implementing the plan taking preliminary steps to consolidate mail processing facilities and announcing planned investments to better deal with growing package volumes. It is also proceeding with the procurement of new delivery trucks (the existing ones you see on the street are over 20 years old, are falling apart, and represent a safety hazard to the people who must drive them).
Rather than being criticized, DeJoy should be commended for keeping his eye on the ball and not jumping into the political debate into which so many people tried to drag him.
Today is one hell of a hump day already: New government figures show that the Biden administration is getting it wrong on the border, getting it wrong on the economy and job creation, and getting it wrong on inflation.
No, Mr. President, This Is Not the Usual Seasonal Migration
I told you, back on April 19, that this month’s immigration numbers were going to be high, and represent a blinking red light. On May 4, I reminded Jen Rubin that no, nothing “happened” to the border crisis, the media just stopped discussing it. On Monday, I pointed out that the federal government’s official statistics were undermining Biden’s argument that what Americans were seeing on the border was just a routine seasonal pattern.
“The truth of the matter is, nothing has changed,” President Biden insisted in his press conference on March 25. “It happens every single, solitary year: There is a significant increase in the number of people coming to the border in the winter months of January, February, March. That happens every year.”
I’m sorry, Mr. President, but that is a load of bull. It is not a regular seasonal pattern to break a two-decade-old record two months in a row. In the month of April, U.S. Customs and Border Protection caught 178,622 individuals attempting to cross the U.S.–Mexico border, one month after they had caught an eye-popping 173,348 individuals.
The Biden administration is going to try to take a victory lap over the fact that the number of unaccompanied minors dropped from 159 in March to 134 in April. (That’s what NBC News chose to spotlight in this headline.)
(Over at the Center for Immigration Studies, Andrew Arthur wondered why it took until May 11 to release the numbers for April. No doubt it takes time to check and collate all of the data, and as of now, there’s no indication of any deliberate delay from CBP. But any time that new information that makes the administration look bad takes a while to get released, some people will fairly wonder if someone in the chain of command was dragging his feet.)
On April 30, when asked about March’s numbers, Biden insisted in an interview with NBC News, “Look, it’s way down now. We’ve now gotten control.” But the April numbers are not way down; they’re up a bit over the previous month’s record. At the time of that interview, did Biden genuinely believe that CBP encounters at the border had dramatically declined? (The other day a commenter on our site had a good observation: Biden’s usual reflexive denial of making a mistake and his habitual fuzziness with the facts make it very tough to tell when he’s lying, when he’s misinformed, and when he’s having any memory issues.)
Biden told NBC News that he “inherited a Godawful mess” from Trump at the border, but in January, CBP had only 78,443 encounters at the southern border. The first big jump came in February when it rose to 101,120, and then it continued rising into March. Hey, what happened in late January?
These are cold, hard numbers which prove that Biden’s assessment of the situation in late March was completely wrong. Whether or not Biden wanted to tell Central America that the border is open, his first moves on immigration — halting construction of border fencing, new guidelines to ICE agents to sharply curb arrests and deportations, an attempted moratorium on deportations, proposing a path to citizenship — all sent a signal to migrants and human traffickers that the door was wide open and everyone was welcome.
Recall this anecdote at the border, reported in the New York Times in mid March:
Jenny Contreras, a 19-year-old Guatemalan mother of a 3-year-old girl, collapsed in a seat as Mr. Valenzuela handed out hand sanitizer.
“I did not make it,” she sobbed into the phone as she spoke with her husband, a butcher in Chicago.
“Biden promised us!” wailed another woman.
Many of the migrants said they had spent their life savings and gone into debt to pay coyotes — human smugglers — who had falsely promised them that the border was open after President Biden’s election. [Emphasis added]
There is only one way that people in the poorest and most isolated communities in Central America will disbelieve the false promises of human smugglers and coyotes and understand that the border is not open. It requires the U.S. president to send a clear signal, loudly, frequently, and publicly, that U.S. immigration laws are still enforced, and that those caught crossing the border illegally will be criminally charged and quickly deported. I suspect that deep down, Biden and many other Democrats think those actions are inherently mean and unjust. This is why half the Democratic presidential field supported a repeal of the criminal statute for entering the country without permission. Additionally, almost all Democrats believe illegal immigrants should be covered by a government-run health-care plan, and they’re iffy at best on the use of E-Verify.
Many Biden supporters will insist that a continuing wave of migrants wasn’t the intended consequence of his early actions on immigration, and many Biden foes will insist this was precisely the intended consequence of his early actions on immigration. But that argument is almost moot; the waves of migrants are coming — and still coming.
Usually, a Record Number of Job Openings Would Be Good News
Yesterday, the U.S. Bureau of Labor Statistics reported that the number of job openings across the country had reached 8.1 million, the highest that the agency had ever recorded.
On Monday, President Biden said, “Families — families who are just trying to put food on the table, keep a roof over their head — they aren’t the problem. We need to stay focused on the real problems in front of us: beating this pandemic and creating jobs.”
But the BLS numbers show we’re already doing pretty darn well at creating jobs, or at least creating job openings. An economy in which there are a record number of job openings is not one that is sluggish, or struggling, or that desperately needs another round of stimulus spending. What it needs are the currently nonworking job applicants to walk through the door. Right now, in Massachusetts, the maximum weekly unemployment-benefit amount is $855 per week. In a 40-hour work week, that comes out to $21.37 per hour.
Meanwhile, Prices Keep Going Up . . .
The updated unfilled-jobs numbers released Tuesday morning were bad. The updated immigration numbers released Tuesday evening were bad. Guess how the updated inflation numbers released Wednesday morning look?
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in April on a seasonally adjusted basis after rising 0.6 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment. This is the largest 12-month increase since a 4.9-percent increase for the period ending September 2008.
The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase. The food index increased in April, rising 0.4 percent as the indexes for food at home and food away from home both increased. The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas.
The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.
The all-items index rose 4.2 percent for the 12 months ending April, a larger increase than the 2.6- percent increase for the period ending March.
In other news: Jennifer Granholm, during a press conference yesterday about the hack of the Colonial Pipeline, said, “We have doubled down on ensuring that there’s an ability to truck oil in — gas in. But it’s — the pipe is the best way to go. And so that’s why, hopefully, this company, Colonial, will, in fact, be able to restore operations by the end of the week as they have said.”
Oh, pipe is the best way to go, huh? Safer, more secure, more efficient, less risk of accidents? Then maybe this administration shouldn’t be canceling pipeline projects!
As slogans go, “build back better – which Joe Biden used to define his 2020 bid for the presidency – lags well behind “Happy Days Are Here Again,” “Make American Great Again,” and “I Like Ike” in clarity and vision. It’s not even close to “It’s the economy, stupid,” the unofficial campaign mantra of Bill Clinton’s successful run in 1992.
What Biden’s been doing during his first one hundred suggests even he didn’t understand what he meant. If he planned to create millions of new jobs – good jobs at good wages with good benefits as the Democrats used to say – the April jobs report indicates he’s failing.
What’s gone unreported is that jobs that are coming back – and there are some – are coming back as lockdowns are ending. The economic downturn that appears now to be ending was not the product of an expected downturn in economic activity but the direct result of state-by-state lockdowns that forced businesses to curtail operations or close as part of an ill-conceived effort to slow the spread of the coronavirus.
To supplement lost income, the Pelosi-led Congress joined first with Donald Trump and then with Biden to put the nation on relief. It’s no wonder, therefore, that business leaders are complaining they can’t find people to fill the jobs they have available once the Washington politicians incentivized joblessness instead of work by extending and enhancing unemployment benefits. It should be obvious that when you pay people not to work, they won’t work but somehow the experts in D.C. missed this.
Biden and the Democrats are nevertheless still all in. They said their $1.9 trillion “American Rescue Plan” would save the economy. Instead, it looks like it’s dragging it back down while inflation, a monster the U.S. Federal Reserve was thought to have tamed, is once again rearing its ugly head. The price of goods and services on which the American people rely are increasing, suddenly and sharply, as the impact of trillions in new spending during the pandemic comes home to roost.
Now, according to the Washington Post and other outlets, the Democrats are having trouble building support for their latest $4 trillion tax and spend program. Moreover, Democratic Congressional Campaign Committee Chairman Sean Patrick Maloney, D-N.Y., is now warning the White House its planned tax hike “could hurt vulnerable House Democrats up for re-election in 2022.”
It’s an important message for Biden – who’s apparently sending it back marked “Return to Sender.” The president, it seems, remains intent on raising taxes on as many people, goods, and services as he can convince Congress to accept.
Biden’s initial proposal to take the corporate tax rate from 21 percent to 28 percent landed with such a resounding “thud” he was forced to offer up 25 percent as a compromise. Even so, that would still move the United States back into an uncompetitive position with the world’s other industrialized economies. What is being omitted thus far from the discussion is that, when state-corporate levies are added in, the average U.S. combined national and subnational tax rises to 25.77 percent.
At 25 percent, what Biden has now put on the table, the combined rate would be 29.5 percent, higher than what is levied by China and higher than the average rate for countries in the OECD.
Moreover, says Americans for Tax Reform, a non-partisan group opposed to tax increases, “Workers, consumers, and shareholders will bear the burden of an increased corporate tax rate. Such a hike will cause businesses to invest less in the United States and more overseas, resulting in fewer job opportunities and lower wages for American workers:”
According to ATR:
–A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.
–A 2012 Harvard Business Review piece by Mihir A. Desai notes that raising the corporate tax lands “straight on the back” of the American worker and will see a decline in real wages.
–A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003.
–Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.
Biden’s insistence the corporate tax be raised, the cornerstone of his economic plan, will not create jobs, reduce debt, or bring increased revenues into the U.S. Treasury. It will however be a boon to almost every one of America’s competitors in the global marketplace.
The COVID-19 pandemic introduced an unprecedented amount of uncertainty into transportation infrastructure planning. Travel fell significantly across all modes and remains depressed, particularly for shared transportation modes such as commercial air travel and mass transit. Changes in travel behavior may persist long after the coronavirus pandemic finally ends, particularly for commuting trips given that a large share of employees may continue working from home. Given this uncertainty, investments in new infrastructure meant to provide service for decades into the future are incredibly risky. As Congress considers surface transportation reauthorization in this low-confidence era, it should adopt a preference for the lowest-risk class of projects: maintaining and modernizing existing infrastructure under a “fix it first” strategy.
COVID-19 led to dramatic changes in travel behavior. By April 2020, when much of the country was under stay-at-home orders, road traffic fell 40%, mass transit ridership fell 95%, and air travel fell by 96%. Since then, road travel has largely recovered, with vehicle-miles traveled back to within 10% of the pre-pandemic baseline.
However, travel by shared transportation modes, such as commercial aviation and mass transit, was still down by approximately two-thirds year-over-year by the end of 2020, according to data collected by the Bureau of Transportation Statistics.
Travel is expected to continue its rebound as the number of people vaccinated grows and the pandemic wanes, but changes in travel behavior driven by factors such as the rise of remote work are likely to persist. To what degree pandemic-spurred changes in travel demand are permanent is unknown at this time, and this uncertainty has rendered pre-pandemic infrastructure planning and investment models nearly useless as accurate guides to the future.
While the drop in transportation demand and the fixed nature of transportation infrastructure supply has significantly reduced the productivity of existing transportation infrastructure, some are calling for large new investments by claiming that the nation’s infrastructure networks are crumbling. However, a review of the available evidence suggests a different and more complicated picture of infrastructure asset quality.
For example, Reason Foundation’s most recent Annual Highway Reportfound, “Of the Annual Highway Report’s nine categories focused on performance, including structurally deficient bridges and traffic congestion, the country made incremental progress in seven of them.”
Similarly, a June 2020 National Bureau of Economic Research (NBER) working paper on transportation infrastructure concluded, “Not only is this infrastructure, for the most part, not deteriorating, much of it is in good condition or improving.”
However, Reason’s Annual Highway Report shows large variation across states and the NBER analysis is limited in that it fails to account for transit infrastructure beyond rolling stock. Rail guideway assets such as tracks and signals have deteriorated in many cities. To be sure, there are sizeable transportation infrastructure needs in the United States. Reconstructing the Interstate Highway System alone has been estimated by the National Academy of Sciences to cost at least $1 trillion over two decades and mass transit’s maintenance backlog likely exceeds $100 billion.
Given all we know about existing transportation infrastructure needs and the uncertainty surrounding future travel activity, Congress should adopt a risk-minimizing “fix it first” strategy to restore our existing transportation assets to a durable state of good repair. This approach has been endorsed by organizations and think tanks across the political spectrum, from the progressive Transportation for America to the free market Competitive Enterprise Institute.
Building new infrastructure that will last three to five decades based on pre-pandemic travel modeling is fundamentally imprudent at this time. Physical capacity expansions such as highway widening and new rail lines should at the very least face heightened scrutiny from policymakers until there is more confidence in post-pandemic travel behavior that can be used in transportation infrastructure planning and investment decisions.
This past week, President Joe Biden unveiled his new $2 trillion infrastructure plan, scheduled for implementation over the next eight years. He delivered a pep talk about it before a union audience in Pittsburgh: “It’s a once-in-a-generation investment in America. It’s big, yes. It’s bold, yes, and we can get it done.” One central goal of his program is to tackle climate change by reaching a level of zero net carbon emissions by 2035. Many of Biden’s supporters gave two cheers for this expansion of government power, including the New York Times columnist Farhad Manjoo, who lamented that the program is too small to work, but too big to pass. Huge portions of this so-called infrastructure bill actually have nothing whatsoever to do with infrastructure.
In one classic formulation by the late economist Jacob Viner, infrastructure covers “public works regarded as essential and as impossible or highly improbable of establishment by private enterprise.” Classical liberal theorists like Viner believe it is critical to identify a limited scope of business activity appropriate for government. And even here, while government intervention may be necessary to initiate the establishment of an electric grid or a road system, oftentimes the work is completed by a regulated private firm, overcoming government inefficiency in the management of particular projects.
Biden’s use of the term “infrastructure” is merely a rhetorical flourish, the sole purpose of which is to create an illusion that his proposed menu of expenditures should appeal just as much to defenders of small government as it does to progressive Democrats. A quick look at the proposed expenditures shows that they include large transfer payments to preferred groups that have nothing to do with either infrastructure or climate change. Consider this chart prepared by NPR, which breaks down the major categories of expenditure:
“Home/community care” and “affordable housing” constitute over 30 percent of the budget at $613 billion. Much of this money is for child and elder care. Both are traditional forms of transfer payments, which are already available in abundance. Why more? Why now? After all, these cash transfers are not taxable compensation for work done. They increase the motivation to stay out of the workforce, in fact, and thereby reduce the size of the tax base as overall expenditures are mushrooming. Moreover, large doses of home/community care are difficult to target exclusively to the needy. A correct analysis seeks to determine whether such payments are directed toward the truly needy and whether they induce people to leave the workforce to become tax recipients rather than taxpayers.
A similar analysis applies to affordable-housing expenditures, both for renters and owners. In the Biden plan, those expenditures operate as a combined program of disguised subsidies and disguised price controls. An affordable-housing mandate typically requires a developer to build some fraction of total units held for sale or lease at below-market rates to individuals who fall within certain broad income categories. In some programs, the losses to the developer may be offset in part by government subsidies.
These programs are not only costly but also a massive disincentive to new construction, especially when the fraction of affordable units is set too high, at which point the developers cannot recoup their losses on the affordable units by their profits on their market-rate units. A far more sensible regime that reduces both rent controls and subsidies over time allows housing resources to be allocated cheaply and sensibly by market forces. Housing markets are like all others insofar as people are willing to spend other people’s money for their own benefit, which leads to overconsumption. Similarly, price controls reduce the incentive to produce housing that people want, thereby creating systematic shortages, and the long queues and political intrigues that accompany them.
The rest of the initiative’s priorities include investments in electric vehicles at $174 billion, roads and bridges at $115 billion, the power grid at $100 billion, public transportation at $85 billion, and railways at $80 billion. There is absolutely no reason to believe that these expenditures will be made in a responsible fashion, given the political forces that will descend on Washington if the proposed funds become available. Nor is there anything inherently desirable about electric vehicles, for example, that merits their subsidization. To be sure, there is a constant risk of pollution from vehicles powered by fossil fuels, but the correct response is to tax the externality in order to reduce its incidence, not to guess which alternative technology merits a subsidy. Indeed, it is especially wrongheaded to subsidize both electric cars and public transportation when they should be allowed to compete with each other. More generally, any massive subsidy for energy investment is a bad idea for the same reason that it’s a bad idea for housing: it leads to overconsumption, such that total social costs exceed total social benefits.
Shifting to wind or solar energy—both centerpieces of the Biden strategy—is also a bad idea. Those energy sources are too precarious to make more than a dent in the overall energy market. As the US Energy Information Administration reports, fossil fuels account for about 80 percent of total energy production in the United States, as well as raw materials for making “asphalt and road oil, and feedstocks for making the chemicals, plastics, and synthetic materials that are in nearly everything we use.” Keeping crude oil and natural gas in the ground is not a winning strategy. Indeed, relying on wind and solar carries risks, as these forms of energy can respond poorly in extreme situations, a reality that became clear with the breakdown of the Texas power grid recently during an extreme cold snap.
The correct path to environmental soundness lies in the more efficient production and consumption of fossil fuels. This is why one of the best ways to deal with the externalities of fossil fuel consumption, such as air pollution and spills, would be to allow the development of the Keystone XL pipeline. Given how central fossil fuels are to the energy market, any small improvement in their production and distribution will result in enormous benefits. The effort to wean an entire economy off fossil fuels over the next two decades will provide short-term dislocations without any durable long-term relief.
The dubious nature of the Biden plan is made still more evident by looking at its rickety financing. As always, the two favorite targets for new taxation are increases in the corporate income tax and the income tax rates for wealthy individuals. The claim is that these targeted taxes will spare the rest of America from financial pain. Senator Elizabeth Warren made that case for her ultra-millionaire tax, saying her wealth tax would have no impact on 99.9 percent of the population. But that is one strong reason to reject her program or others like it: it encourages majorities to confiscate the wealth of the most productive. Those majorities, of course, would be far less eager if their own taxes were to rise at the same time.
Biden has rightly rejected that approach, but the price of his new, once-in-a-generation expenditure is an increase in the overall corporate tax rate from 21 to 28 percent. Yet this proposal has dangerous consequences too. The United States constantly competes with other nations for corporate investment. Biden’s policy will reduce the level of foreign investment in the United States while simultaneously increasing the level of American investment abroad. This in turn will reverse the beneficial effects of the Trump corporate tax cuts, which notably translated into higher wages. Additional taxes on the wealthy will barely make a dent in the anticipated financial shortfall.
Worse still, it is simply false advertising to say that even if these deferred revenues could be generated, they would cover the full costs of the Biden program. The public expenditures will take place over an eight-year period. As NPR reports, the government plans to keep the corporate tax in place for fifteen years to balance the books. That move will require the treasury to borrow money to cover the anticipated revenue shortfall. And there is no reason to think that the government will meet any of its revenue targets, let alone be able to find the revenues to cover the items on the Biden agenda.
At this point, Republican skepticism about the plan may perhaps peel away some Democratic support. To avert that result, Biden would be well-advised to unbundle the strange bedfellows in his omnibus bill, so that each component can be evaluated on its own merits. The likely result is a smaller program with better outcomes, both for Biden and everyone else.
California businesses are leaving the state in droves. In just 2018 and 2019—economic boom years—765 commercial facilities left California. This exodus doesn’t count Charles Schwab’s announcement to leave San Francisco next year. Nor does it include the 13,000 estimated businesses to have left between 2009 and 2016.
The reason? Economics, plain and simple. California is too expensive, and its taxes and regulations are too high. The Tax Foundation ranks California 48th in terms of business climate. California is also ranked 48th in terms of regulatory burdens. And California’s cost of living is 50 percent higher than the national average.
These statistics show why California’s business and living climate have become so challenging. But the frustrations that California entrepreneurs face every day present a different way of understanding their relocation decisions.
Erica Douglas, a young tech entrepreneur, moved her company, Whoosh Traffic, from San Diego to Austin, Texas, a few years ago. Here is what she had to say:
“I’m leaving you. I’ve struggled with a government that is notoriously business-unfriendly—with everything from high taxes on earning to badgering businesses to work more to comply with bureaucracy. I paid enough in California income tax in one year alone to hire another worker for my business. And you charge me $800 annually as a corporation fee, when most states charge just a few dollars.”
Not surprisingly, California businesses tend to relocate from the counties with the highest taxes, highest regulatory burdens, and most expensive real estate, such as San Francisco, and they tend to relocate to states where it is easier to prosper. Texas imposes just a 0.75% franchise tax on business margins, compared to California’s 8.85% corporate tax. As if this large difference weren’t enough of an incentive to leave, the city of San Francisco imposes a 0.38% payroll tax, and a 0.6% gross-receipts tax on financial service companies. Yes, if your business is in San Francisco, not only are your profits taxed by the state, but your payroll and your output are taxed as well. Not to mention that Texas has no individual income tax, compared to California’s current top rate of 13.3%, which may rise to 16.3% soon, and which would apply retroactively.
Speaking of California entrepreneurs leaving the state, there is Paul Petrovich. If you live near Sacramento, chances are your life has been made easier by Paul. He is a major commercial real estate developer whose projects include facilities involving Costco, Target, Walmart, McDonalds, Wells Fargo, and Verizon, among other major firms. But Petrovich has announced he will soon be leaving. For . . . drumroll please . . . Texas.
You see, California is discussing a wealth tax that may hit Petrovich. Known as AB 2088, lawmakers are so proud of this 0.4% tax on wealth that they proudly market it as “establishing a first-in-nation net-worth tax” that “will generate $7.5 billion in revenue.” Complicated as all get-out, it involves not just financial assets but real estate, farmland, offshore holdings, pensions, art, antiques, and other collectibles. Europe tried taxing wealth, and it has failed, leading almost all countries to abandon it. And the idea that it will generate $7.5 billion in revenue is laughable, though it will create additional income for tax attorneys and CPAs. The state also intends to make this law follow you for up to a decade should you leave. Clever politicians? Maybe, but just how will they convince other states to cooperate once you relocate? Not to mention whether this future provision is constitutional.
I am surprised that Petrovich stayed in California so long. As a developer specializing in developing infill projects, meaning developing unutilized or underutilized land, he has been involved in many lawsuits challenging his right to develop.
One has involved a mixed-use development project that includes a Safeway supermarket, senior living, shopping, and a gas station on a site of a former railway station, polluted and abandoned. What is not to like? For the city council, it is the gas station.
Petrovich has been involved in a legal battle over this project since 2003. All over a gas station. Twenty lawsuits and over $2 million in legal fees later, Petrovich appears to be winning, and winning against a city council that broke the law.
A state appeals court recently ruled that the Sacramento City Council denied Petrovich a fair hearing several years ago by acting in a biased manner. Sacramento Superior Court judge Michael Kenny wrote that one councilman demonstrated “an unacceptable probability of actual bias” and failed to have an open mind. The court found that the councilman was trying to round up votes against the gas station before it came before a hearing. Rather than accepting this ruling, the city council will appeal. They appear to be doubling down not only on bad behavior but on wasting resources as well .
Readers often ask me how California politicians have changed over time. An important and often overlooked factor is that politicians now have personal agendas that they aim to impose on other Californians, often without transparency or accountability. This is what is going on now with Petrovich, and is what is going on with AB 5, the new law that prevents many Californians from working as independent contractors that began on January 1. Voters must begin to hold politicians accountable for this if California is ever able to reform.
Mr. Petrovich, if you leave, I will be sorry to see you go. Your developments made life much easier and more prosperous for thousands. Thanks for your service. Your potential departure will be a loss for all of us.
The issue driving the populist revolt has disappeared in 2020
It is a sign of the times that immigration has not been mentioned in three hours of debate between the presidential tickets. A review of the transcripts of both the presidential and vice-presidential encounters finds no questions asked nor answers proffered about an issue that until only recently defined much of our politics and distinguished our two parties. Needless to say, both moderators wanted to know where the candidates stand on climate change, which routinely drifts toward the bottom of any list of public priorities.
Why the omission? It is tempting to say that immigration did not come up because the elites who manage the presidential debates are uncomfortable with the topic, are worried that the issue favors Republican border hawks, and are more interested in subjects relevant to their cultural coterie. But it is also true that presidential debates tend to focus on current events and pressing challenges, and that immigration just does not seem as great a concern today as the coronavirus, the economy, race relations and civil unrest, and California brushfires.
The apparent irrelevance of immigration and border security to the election might also be attributed to the achievements of the Trump administration. But these achievements are partial, tenuous, and dependent on events and relationships and court decisions. And they are easily reversed. What should worry the president is that the somnolence on the border deprives him of the very issue that propelled his rise to power, and that drove the populist revolt against the Washington establishment whose offshoots included the Ron Paul candidacies, the Tea Party, and Republican victories in 2014 and 2016. Immigration is next only to the economy and to the courts as a place where the president can contrast his record and agenda with Biden’s and appeal to national solidarity and historical tradition. His parlous electoral status may be related to the fact that immigration is not much of a factor in this most unusual campaign.
There is no gainsaying immigration’s importance to the Trump presidency. It was immigration that triggered the grassroots rebellion against the George W. Bush and Barack Obama administrations, and against congressional supporters of amnesty for illegal immigrants, culminating in Trump’s 2016 primary victory. Immigration became the touchstone of Trump’s campaign on day one and served as the cudgel by which he defeated Jeb Bush and other Republicans for whom the Bush-Obama approach to legalization was correct. The border wall was not only a rallying cry but also a symbol of how a Trump presidency would privilege American citizens above all else. And Trump fused immigration to economics, by opposing H-1B visas; to crime, by highlighting gang activity; and to national security, by enacting his travel ban against countries that sponsor terrorism.
When Kamala Harris offhandedly mentioned the travel ban during the vice-presidential debate, it almost seemed like an anachronism, so far removed are we from the world of January 2017. The coronavirus imposed its own sort of prohibition. It radically interrupted the mechanisms of globalization, including the flow of labor. Global air travel plunged, and so did apprehensions along the southwest border. The virus ushered in a condition of emergency, in which the Trump administration tightened visa and asylum procedures.
The pandemic accelerated an ongoing trend. The growth in the illegal immigrant population appears to have stopped abruptly during the 2008 global financial crisis and has trended slightly downward since. The composition of that population has also changed, from able-bodied men seeking work to women, children, and the impaired fleeing gangs and state collapse. Border crossers are less likely to be Mexican and more likely to be from Central America or Asia. The Trump administration’s wide-ranging actions, in particular its Migration Protection Protocols, further discouraged unauthorized entry. By 2019, according to the Brookings Institution, the net increase of immigrants in the U.S. population was at its lowest level in years. (And, it might be added, the best job market in half a century was producing income gains across the population.) There is every reason to expect that the combined effects of the pandemic, the lockdowns, and executive orders will keep the number of migrants low.
But for how long? Harris attacked Trump for his “Muslim ban,” but she did not say on stage what the Biden administration would do about it. For answers, one has to turn to the Biden-Harris campaign website. There, the Democrats write that they would “rescind the un-American travel and refugee bans, also referred to as ‘Muslim bans.'” They would “end Trump’s detrimental asylum policies,” including the Migrant Protection Protocols. They would reverse the public charge rule, which makes it harder for welfare beneficiaries to become permanent residents. They would halt construction of the border wall and “direct federal resources to smart border enforcement efforts, like investments in improving screening infrastructure at our ports of entry.” They would reinstate the DACA protections for illegal immigrants brought here as children, and for their parents. And Biden and Harris would “create a roadmap to citizenship,” not permanent legal residency, for the remaining millions of illegal immigrants “who register, are up-to-date on their taxes, and pass a background check.”
In short, a President Biden would return immigration policy to the status quo before Trump. With this difference: Biden, unlike Obama, would be dealing with a Democratic Party whose left wing has been radicalized and includes prominent officials who support such extreme measures as decriminalizing border crossing and abolishing U.S. Immigration and Customs Enforcement. Senator Harris herself has called for “restructuring” ICE (and for abolishing private health insurance, banning fracking, and imposing universal background checks for gun purchases through administrative fiat). The leftward drift of the Democrats makes immigration politics more fraught, and more polarizing. Having learned nothing from the Trump phenomenon, Biden and Harris are eager to reinstate the exact policies that gave birth to it.ADVERTISING
The failure to control the border and to think politically, rather than economically, about immigration was part of a larger failure. Republican and Democratic elites neither recognized nor acknowledged that the globalized world of the 21st century, while beneficial to them, carried costs for large parts of the population far greater than they had assumed. It is therefore ironic that a pandemic originating in China, which America treated for too long as a “responsible stakeholder” rather than a revisionist great power, has overwhelmed practically every issue but the economy in the final month of the election.
If the Trump campaign fails to raise the question of immigration, the Democratic establishment that stands to gain from the public’s judgment of the president’s coronavirus response will happily ignore it. But they will not be able to avoid immigration forever. Or the furies it unleashes.
Is feudalism our future?
The closer the 2020 election comes, the more urgent the necessity for understanding the wealth gap which underlies the entire debate.
The fundamental issue at stake in this election is how America will deal with the fact that the American Dream we all pursue has in fact become unattainable for many Americans. With most national politicians in their 70’s – or even older – the reality is that they simply do not understand that too many Americans today face a gloomy future. They are at a loss to explain why the nightly riots and violence can happen at all let alone why the public officials at least tacitly, and some openly, support such chaos.
What they don’t understand is that there is a great deal of anger in our land, that the traditional mantras of the American ethic just don’t work anymore for a segment of the American population. “Work hard, keep your nose clean, and you too can live the American dream” just isn’t true for these folks, and hasn’t been for a long time.
Who are these people? And why are they so desperate for change?
One of the oldest questions in the American lexicon is, “What happens to the manual workers when the American quest for labor-saving technologies finally succeeds and the need for human labor ends?”
Now we know the answer to that question: The many American workers who have lost their jobs to technology are still there. But now they have nothing – not even their pride.
There is, of course, another segment of our society which has done somewhat better financially through these years. They are the so-called “upper middle class” who have adapted to the technological society, although they are concentrated now in the service industries, since manufacturing has all but disappeared.
Even their children, however, have been affected by their estrangement from two work-alcoholic parents, whose closeness to their children is questionable as is their loyalty to each other. Many of the protesters are white, middle class youths, whose sympathies lie closer to their African American comrades than to their befuddled parents.
It is well known that a coalition opposing this President exists, consisting of the Democrat Party, the Deep State bureaucracy, and the Press, as well as the dedicated Far Left organizers and followers, who have coalesced around the issues of class and race so prominently featured in the violent summer of 2020.
It is clear that while these players have picked by various names the wealth gap as the key issue in this campaign, their timing of the current crisis was not dependent on their discovery of this issue. They have simply taken advantage of the uproar as it occurred.
So, what did happen?
What happened was the transfer of the asset wealth of the American population from the middle class (approximately 50% of the population) to the super rich (1% of the population). (The term, “assets”, is used instead of “income” because income can go up and down while assets tend to be more stable.)
How did this happen? Many factors came together and finally created one of the worst nightmares Americans have ever faced. The most obvious of these factors are three:
The result of this movement on the US working man was catastrophic. As the factories left American soil, the skilled workers were left behind with no job, no marketable skill, and eventually no hope.
The principle victims of this exodus were American men. Whereas their place in society and the family had always been respected and secure, they lost that place in both as they sought and were forced to take lower paying jobs or welfare.
Their self esteem followed their decline. Divorce rates soared along with family abuse, alcoholism, drug addiction, desertion, homelessness, and suicide and the decline of our cities left social services rare and bankruptcy all too common.
Through all this, the latch-key children bounced around helplessly, caught up in the whirlwind that their life had become. As they grew older, they asked “Work hard?” –“At what?” “College?” — “OK” and then no jobs available. “American dream?” — “What a crock!”
What they want is change. The old system isn’t working for them. Why is socialism suddenly becoming so popular? After all, it has been around since the 1930’s. Franklin Roosevelt’s Vice President, Norman Thomas, was an avowed socialist. Few believed in socialism as long as we had the American dream. People believe in socialism now because for them the American dream is gone. And socialists are the only ones listening to the cries of our suffering youth.
First, we must all recognize the underlying problem: it is the transfer of wealth! Prosperity for all tends to reduce all social tensions, as the Trump economy was beginning to show before COVID.
Secondly, if we do not want to watch our beloved country go the way of Venezuela, we had better face the realities of our situation and find a solution.
Finally, while some our people were caught in a vortex of tribulation, others were developing a new way, a new path to the American dream.
A third way: Luckily, many of these pioneers of a new capitalism have been not only inventing a new type of business process, but also organizing a potentially vast new movement to what will become, in my estimation, a new America, open to all races, genders and religions.
The most advanced of these renewed American businesses seem to be the Conscious Capitalistorganization, currently with 16,000 member companies, representing 3 million workers.
It aspires to become a new kind of business, one which is driven by its service to the community – whether that be a local factory, a retailer, or a worldwide marketplace.
The idealism of this brand of business is appealing to the young, who may not know socialism from a community swimming pool, but who do know that they are Americans who value their personal freedom and the room to grow into a happy future without a government telling them what they can and cannot do.
The dilemma facing this country is that conscious capitalists see politics, as do most Americans, in the light of partisanship. As a result, they want to be apolitical so that all sides feel welcome.
Nevertheless, in today’s America, you are either a socialist or a capitalist, either in favor of big government controlling the transfer of wealth from the 1% or in favor of devising a solution which is voluntary and based on merit rather than welfare.
Unfortunately, there are no candidates running for national office who present new alternatives to the socialist programs of the Democrats. The Republican alternative stands for continuing to implement Reagan economics, believing that the wealth gap will solve itself in time.
It seems clear that this is a better alternative than the opposition. At least a victory here would buy us time. By 2024 perhaps a “third way” capitalist will come forward.
As Alexander Pope wrote in 1734, “Hope springs eternal in the human breast.”
It makes a lot of sense for Republicans to run a unified campaign going into the next election—with the intent to not just hold the White House and the U.S. Senate, but to regain control of the U.S. House of Representatives, as well.
Many election forecasters would say that if the election were held today, that’s a bridge too far. And they’d be right. House Republicans under Kevin McCarthy have offered little in the way of meaningful contrasts on most of the major pieces of legislation taken up over the past few months. But establishing a meaningful contrast with the way the other party runs things (or would run them) is a key component of any winning strategy and, thanks to Speaker Nancy Pelosi’s considerable overreach in the last coronavirus bill, Republicans now have a chance to make such a contrast.
The American public is highly dissatisfied with the job Congress is doing. According to Gallup, just 20 percent of those recently surveyed expressed approval of Congress. Even Democrats are unhappy, with just a quarter telling Gallup that things under Pelosi were going well.
Part of this is attributable to the increasing polarization of the American electorate. As veteran electoral analyst Michael Barone has written repeatedly, the number of people who split their vote between the major parties as they move down the ballot has declined steadily since the Bush/Gore election in 2000.Ads by scrollerads.com
Republicans can make polarization work to its benefit, especially in the upcoming election, if they run a campaign based on the idea that the two parties have dramatically different visions of what the nation should be like in the future—a vision clearly defined by what Pelosi and her allies narrowly managed to get through the House in the last COVID-19 relief bill.
That legislation contains lots of wedges issues the GOP can exploit to its benefit. For example, with more people out of work at any time since the Great Depression, it’s highly unlikely most voters would support the distribution of their hard-earned tax dollars to unemployed people here in America who did not go through the legal immigration process. It’s the kind of excess progressives generally favor, but which leaves most Americans probably thinking twice about voting for any member of Congress who supports it.
Likewise, the Pelosi-built bill included an extension of the so-called bonus payment being given to many unemployed workers who now find themselves making more money while out of work than they did while gainfully employed. That’s bad policy, not just because it adds considerably to the annual deficit, but because it is also a perverse incentive to stay out of the labor market just as job openings are once again about to become plentiful.
Throughout the political activities related to COVID-19 relief, the Democrats have insisted on all kinds of new spending, adding to the budgets of agencies that are not involved in fighting the pandemic and liberally passing out money to friends and favored interests. Most everything Democrats have accused President Donald J. Trump of doing for his so-called “billionaire buddies,” they’ve themselves done for the interests that keep them in power.
All this creates a contrast with Republicans, who, at least at one time, used to argue for responsible spending and balanced budgets. Trump was never part of that, but he did take the lead, by cutting the corporate tax rate and deregulating industries, in getting the American economy growing at something like the level it is supposed to during good times.
Pelosi’s plan for America, like Joe Biden’s, is the anthesis of that. Incredibly, the former vice president recently proposed taking the corporate tax rate back up to a level higher than even China’s. So much for global business competitiveness during a time when the pressure will be high on America’s manufacturers to come home to the United States.
A coherent, well conceived and executed plan could get the GOP within striking distance of a House majority. It could even push Republicans over the top if they make the effort to produce the proper policies. The money and the organization are there. If they have ideas to go with it, Pelosi may have to pass the gavel next January—which would be good for America.
The opportunity exists for the Trump administration to do something now about Nigeria that would lead to real progress in the fight against religious persecution and repeated violations of the rule of law, would help to root out corruption, and deal a significant blow to the Boko Haram terror group.
The lever available to the U.S. government to do this is $300 million in stolen monies soon to come under U.S. control currently frozen in British and Crown of Jersey accounts at America’s request. Nigeria wants it back and, before America acts, the pressure it’s applying to President Muhammadu Buhari for reforms needs to be stepped up.
If successful, it would be a big win. U.S. authorities should be dubious about transferring monies back to Nigeria’s control considering there’s a good chance it would be passed back to back to ruling-party officials who were complicit in the original theft. More than that, considering the longstanding corruption in the government of Africa’s most populous nation and the disturbing pattern of human rights abuses committed by Buhari’s regime, it’s not clear the U.S. should turn the money over at all unless and until real reforms are adopted.
Look at the record. According to the Humanitarian Aid Relief Trust, over the past two years, thousands of Nigerian Christians have been murdered. The European Parliamentrecently blasted the government over ongoing human rights violations. Amnesty International issued a condemnation over the use of “security agents and (the) judiciary as a tool for persecuting people who voice dissenting opinions.” Innocent reform advocates like Grace Taiga, a retired civil servant and practicing Christian, and opposition Senator Shehu Sani have been targeted by the regime and journalists critical of it like Omoyele Sowore has been jailed.
These actions and others led the U.S. government to put Nigeria on a special watch list. Washington must now use its leverage to demand change. Instead, under a plan worked out with Buhari, America may soon green-light the release of these funds back to Nigeria where, in a defeat for the cause of justice, it ultimately may be disbursed to local projects run by contractors with a questionable and corrupt history in violation of the Foreign Corrupt Practices Act.
Rather than allow this, the U.S. government must push Buhari to end his government’s blatant disregard for the rule of law, institute real anti-corruption efforts, and stop the ongoing attacks on Christians and other religious minorities by Boko Haram and other groups.
That the decision on the disposition of the funds in question rests with Attorney General William P. Barr rather than the U.S. State Department of State is comforting. Barr is someone for whom, criticism from the left notwithstanding, the rule of law matters. And he’s shown he can swing the hammer hard when he wants to.
Before deciding what to do, Barr should look at a similar case involving the Justice Department, which is refusing to hand over $100 million in stolen, laundered money it says can be traced back to Atiku Bagudu, the current governor of Nigeria’s Kebbi State and a prominent member of Buhari’s ruling APC party. In recent U.S. court filings, Nigeria asserted a 17-year-old deal could lead to the funds being given directly back to Bagudu. Another agreement, made by Buhari’s people in October 2018 would transfer a sizeable portion of an investment portfolio worth $155 million to Bagudu if it ever again came under Nigeria’s control.
Any agreement regarding the repatriation of these stolen assets must be carefully weighed against the escalating human rights violations and the corruption that persists throughout Nigeria. A detailed assessment is needed to determine whether the penalties allowed under the Global Magnitsky Act and Frank R. Wolf International Religious Freedom Act should be invoked to address the gross human rights violations spearheaded by President Buhari’s inner circle like those targeted at Christians and other religious minorities.
Attorney General Barr and the U.S. government have a powerful lever to use to move the Nigerians toward getting their act together. They should do so forthwith. The U.S. must uphold the rule of law to stop the persecution and send a signal to the Nigerian Government that human rights are essential and violations of such will be to the detriment of any strong government-to-government relationship.
For us tail-end baby boomers, it’s probably true our view of what life might be like now was influenced by the “Back to the Future” series. Watching ‘Doc’ Brown and Marty travel just a few decades forward in time to a place where the Cubbies won the World Series, hoverboards were ubiquitous, and sneakers laced themselves seemed so wonderfully realistic we believed it was possible.
To be sure, some of the things depicted in “Back to the Future II” did come to pass. The Cubs did win a World Series – though not in the year predicted in the film. And technology has brought about other changes that, while not exactly like what was seen on screen, come close enough for government work that filmmakers Bob Zemeckis and Stephen Spielberg deserve a pat on the back for the visionary insight into how things might be.
One thing they got wrong was the whole business of flying cars. In the movie, they seemed to be standard transportation. In reality, they are just as tethered to the nation’s highways and byways as ever, with most of the innovations going toward fuel economy and alternative power plants. The idea of the airborne vehicle just never got off the ground.
Innovation, especially in the wireless sector, makes up for some of the disappointment. Surprisingly though, the intersection of communications technology and the automotive industry has not developed in the way people thought it might 20 years ago. That’s when the Federal Communications Commission established technology-specific rules for what it called “Dedicated Short Range Communications” in the 5.9 GHz band, reserving the space to allow cars, as it was put at the time, “to talk to one another” and to develop safety-related technologies.
A worthwhile effort to be sure, but other than a few heavily subsidized pilot projects that seem to hold little promise, there hasn’t been much movement toward the original vision, especially in the area of auto safety. At the same time, automakers have used other parts of the spectrum not reserved for these purposes to produce tremendous advances popular with consumers (like radar) and are using non-spectrum dependent tech like lidar, sensors, and cameras. Moreover, new auto communications technologies like CV2X want to access the 5.9 GHz band but can’t under the current rules that allow only for the original DSRC.
FCC Chairman Ajit Pai, who deserves great credit for keeping adaptations to the Internet from being slowed by bureaucratic impulses, is poised to break the logjam. Rather than allow for the 5.9 GHz band to continue to go unused, he’s apparently ready to engage in rulemaking that would carve off the lower end of the band for additional wireless broadband use, while preserving the upper reaches for future automotive safety needs.
Putting new Wi-Fi in 45 MHz of the 5.9 GHz band will create the country’s first contiguous 160 MHz channel, something that is critical to the deployment of next-generation Wi-Fi 6, which is expected to bring gigabit and high-capacity Wi-Fi to American consumers. The unlicensed spectrum available in this area can be used to support 5G deployment. Cisco reportedly expects 71 percent of 5G mobile data will be offloaded to Wi-Fi by 2022 – meaning current unlicensed spectrum resources will be insufficient to keep up with the changes.
It’s an excellent compromise, one that leaves the door open to future developments while recognizing the need for new broadband spectrum that exists today. In the two decades since the DSRC allocation, Wi-Fi has become a core communications technology relied upon in homes, businesses, factories, airports, and hospitals across the globe. It contributes more than $525 billion to the U.S. economy on an annual basis.
It’s earned the opportunity to expand even further.
A survey of 2,504 French adults found that 69 percent of respondents would not buy products labeled ‘made in Israel.’
Europe’s highest court isn’t exactly telling everybody to boycott Israeli food and wine. But they’re doing their darnedest to ensure Europeans don’t buy them.
For anyone who missed the news, the Court of Justice of the European Union (CJEU) ruled last week that food and wine produced by Jewish Israelis beyond the Green Line must be explicitly marked: “‘Israeli settlement’ or equivalent needs to be added, in brackets, for example. Therefore, expressions such as ‘product from the Golan Heights (Israeli settlement)’ or ‘product from the West Bank (Israeli settlement)’ could be used.”
Eugene Kontorovich, director of the Center for International Law in the Middle East at George Mason University Scalia Law School, considers the new labels “a new kind of Yellow Star on Jewish-made products.” He told The Federalist that the CJEU’s labeling requirements “are not geographic—they are not about where something was made but by whom.” Kontorovich added, “They’re not even pretending that the rules they’re applying to Israel are the rules they’re applying to the rest of the world.”
Readers may recall that when the court’s advocate general suggested such labeling earlier this year, his reasoning was that consumers needed “neutral and objective information.” But this outcome is neither neutral nor objective. As Marc Greendorfer, president of Zachor Legal Institute, which battles Israel boycotts, emailed, “That the court contravened established principles of international law to wrongly stipulate the status of the disputed areas (as occupied) exposes the fact that this ruling was about taking sides in a political dispute.”
“Labels are not the place to engage in political debate,” Brooke Goldstein, executive director of the Lawfare Project, which participated in this case, told The Federalist.Indeed, product labeling is supposed to be about health and safety. Labels also help consumers shop “ethically” or “responsibly.” But if a consumer factors politics into those decisions and wants to avoid Israeli goods, why is it so important to specify where in Israel those goods are produced?
According to a 2017 poll conducted by Opinion Way for the Lawfare Project, a survey of 2,504 French adults found that 69 percent of respondents would not buy products labeled “made in Israel.” That number rose to 75 percent if labels read “West Bank, Israeli colony/settlement.” So more detailed labeling would clearly shift some shoppers’ habits, but those figures are already startlingly high.
While the CJEU may not be declaring a boycott with this ruling— after all, it remains legal to import Israeli goods — they are nudging consumers in that direction. Even the U.S. State Department, which typically avoids criticizing allies, expressed “deep concern,” calling “the circumstances surrounding the labeling requirement . . . suggestive of anti-Israel bias.” They also rightly noted that “this requirement serves only to encourage, facilitate, and promote boycotts, divestments, and sanctions (BDS) against Israel,” a movement Germany’s own parliament considers antisemitic, and even Nazi-like.
This decision is not focused on informing consumers about unconscionable behavior across the globe (e.g., the Chinese government’s treatment of Uyghurs) or highlighting the world’s many disputed territories (see: Western Sahara, Cyprus, and Crimea for starters). It is about ostracizing the world’s only Jewish nation and unilaterally redrawing Israel’s borders via economic pressure.
The aforementioned French survey underscores just how widespread popular prejudice against Israel is in France, long home to Europe’s largest Jewish community. Rather than calm that prejudice, the CJEU panders to it, inflames it, and now embeds it in law. So it won’t be surprising if antagonism to Israel keeps rising in France and the rest of Europe. Stigmatizing Israel now has the gloss of official, legal respectability.
The whole episode is offensive. Consider, this long-awaited decision was scheduled for release on November 12. The U.S. Holocaust Memorial Museum reminds us that date is significant, as “just 2 days after the end of Kristallnacht [in 1938], the Nazi government issued the Decree on the Elimination of the Jews from Economic Life. Banned from owning shops or selling any kind of good or service, most Jews lost their livelihoods entirely.”
Further, by establishing a unique standard for Israel, this decision fits the internationally accepted definition of antisemitism, cited in the United Nations’ recent report on global antisemitism. So it’s rich for the European Commission to tell Fox News, “Any suggestion that indication of origin on products coming from Israeli settlements in the occupied Palestinian territory or in the occupied Golan has anything to do with targeting Jews or anti-Semitism is unacceptable. The EU stands strongly and unequivocally against any form of anti-Semitism.”
Check out that loaded word choice. Then consider that such critiques are fair game. The EU does not stand unequivocally against antisemitism. There are bright spots, like Austria’s second largest city banning support for BDS. However, European Jews are acutely aware that antisemitism is widespread and dangerous.
EU officials like Michael O’Flaherty, director of the European Union’s Fundamental Rights Agency, know that in spite of the many reported antisemitic crimes across the EU, 80 percent remain uncounted. “As one person asked [O’Flaherty], ‘Why would I report antisemitism to an antisemite?’” Over in Britain, which has not quite left the EU, nearly half of British Jews have said they “would ‘seriously consider’ emigrating if [Labour Party leader Jeremy] Corbyn is elected prime minister [in December].”
Seventy-four years after the Holocaust’s end, the EU is no haven for Jews. Nor is it a particularly reliable friend to Israel. Calling the decision “disgraceful,” Sen. Ted Cruz (R-TX) told The Federalist, “This labeling singles out Jews who live in communities where Europeans don’t think they should be allowed to live and identifies them for boycotts. It is reminiscent of the darkest moments in Europe’s history.”
Indeed, the CJEU may have forgotten, but world Jewry hasn’t. We also know that discrimination and other harms that start with Jews never end with us. So whether or not the timing was coincidental, Secretary of State Mike Pompeo’s announcing a reversal of Obama-era policy regarding Israel’s settlements certainly looks fortuitous, because this fight is far from over.
Column: The political contradictions of progressivism
“The fact is there is no more money. Period,” says Chicago mayor Lori Lightfoot.
She’s talking about the teachers’ strike that has paralyzed her city’s public schools—enrollment 360,000—for the past week. The public employee union is demanding more: more money for salaries (only eight states pay teachers more than Illinois), more support staff (Illinois ranks first in spending on administrators), more teachers per student. Their cause has attracted national attention. Elizabeth Warren joined the picket line.
Which is ironic. Lightfoot is not some stingy Republican. Nor is she a centrist Democrat like her predecessor Rahm Emanuel. She’s as progressive as you can get. But she now finds herself in the same position as many of her political brethren: facing criticism for failing to reconcile the contradictions in the left’s agenda.
Lightfoot has discovered that there is no limit to the appetite of the constituencies generated by government spending. She has learned that the special interests bargaining for higher benefits also desire policies that make such benefits unattainable. I hope she’s taking notes.
Chicago Public Schools has run a deficit for the past seven years. Why? Pensions granted to earlier generations of teachers are expensive. And the cost is growing. A quarter of the school budget is devoted to benefits—money that can’t be spent on classrooms, facilities, and instruction. Expect that number to rise as America goes gray and the bill comes due for the promises we made to ourselves.
The federal government can put Social Security and Medicare on the credit card for as long as demand for U.S. Treasuries is high. States and municipalities don’t have that luxury. There is an upper bound to what even the most progressive mayors and governors can grant the lobbies that mobilize voters for their campaigns. But it’s a glass ceiling. Public sector unions are eager to break it.
Nor does being woke protect you. It’s impossible to appease fully the groups fighting to claim resources and honor. They often won’t take yes for an answer. GM might tout to investors the fact that it is “leading in gender equality.” That didn’t stop the UAW from striking.
Public policy inspired by the ethic of social justice inflames the tension between progressive leaders and the voting public. Andrew Cuomo might sympathize with Mayor Lightfoot. His fealty to environmental groups has backed him into a corner. Banning fracking and canceling pipelines hasn’t just denied New York revenues, jobs, and lower energy bills. It also led energy supplier National Grid to cancel gas hookups in Long Island. Cuomo had to retaliate before the company restored service. Want to be a progressive? Claim credit for resolving a crisis of your own making after threatening to unleash state power on private actors responding to price signals. Cuomo makes it look easy.
Gavin Newsom also has been struggling to reduce the conflict between the imperatives of the new progressivism and the quality of life of everyday people. He has his hands full. Rising numbers of homeless have led to a breakdown of public order in areas of Los Angeles and San Francisco. Land-use regulations have restricted the supply of housing, leading to high prices and shortages, and Newsom’s answer is statewide rent control that will make things worse. California’s budget depends so heavily on revenues from the wealthy that it might not recover from another out-migration like the one the state experienced after a 2012 tax hike.
Pacific Gas & Electric is a case study in the progressive self-own. The state-regulated utility spent years deferring maintenance while it invested in renewable energy and promoted the ideology of diversity, equity, and inclusion. Among the consequences of its neglect were terrible wildfires that devastated communities. The ensuing legal bills drove PG&E into bankruptcy. It says it’s been forced to engage in “de-energization”: purposeful mass blackouts to prevent further damage and legal action. In early October more than two million people were left in the dark. No house, no power, no prospects—welcome to the California Republic.
The contradictions of progressivism generate crises of affordability and governance. But the political class suffers few consequences. Chicago, New York, and California remain Democratic strongholds. What scattered opposition exists is internal to the political machine. On rare occasions parts of the coalition splinter from the whole and are able to defeat radical measures. Think of Bill de Blasio’s stalled plans to cancel entrance exams for New York City’s magnet schools. For the most part, though, the Democrats’ hold on power continues. It’s one monopoly progressives don’t seem to mind.
Are the voters in these communities merely complacent? Are they so content with the patchwork of benefits and status the jerry-rigged welfare state provides that they tolerate dysfunction? Or is the partisan alternative so appalling they won’t even consider it?
Questions worth pondering as progressives prepare to scale up their model nationwide. Who knows? One day, President Warren might be on the other side of that picket line.