Big Government

Fear of Freedom?

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Stuart Schneiderman links to an article by a therapist who has a lot of experience working with millennials…

On any given day, a handful of millennials will come into my office and express their most pressing concerns: “I’m worried I’ll never make enough money to retire.” “I feel like a failure.” “I don’t know if I’m setting up my adult life the right way.”

But the complaint they bring up the most? “I have too many choices and I can’t decide what to do. What if I make the wrong choice?”

Now, I think that ‘generational’ explanations of social phenomena should be taken with multiple carloads of salt:  individual differences are IMO much more significant than generational differences.  And the people this therapist has been working with are not just millennials, but San Francisco area millennials.  Still, this pushback against having too many choices is unpleasantly reminiscent of the young German who was quoted as saying, shortly before the outbreak of World War II: “We Germans are so happy.  We are free of freedom.”

To the extent that this phenomenon is real and is general, I would suspect several factors of being implicated. Specifically:

***The focus on “self-esteem building”, which seems to have the effect of producing people whose self-esteem is brittle and cannot withstand failure or contradiction.

***The trend toward child-raising in organized group settings…usually for-profit organized group settings…which may tend to create more orientation toward group conformity and less individuality than the more traditional “artisanal” at-home child raising.

***Increasing years of schooling, which can delay growing up.  Peter Drucker observed that when you’re in school, it’s all about you, unlike the working world where it’s all about doing things that are of value to others.  (FWIW, Drucker also said he observed striking levels of immaturity in many medical students because of this factor.)

Anecdotal evidence only, but I have observed that people with many years of education–specifically, people with graduate degrees–are often reluctant to try new approaches to things.  Whether it’s an MBA or a Masters in Computer Science, they often want to stick close to the paradigms they were given in the classroom.  It would be interesting for someone to systematically study the relationship between education and mental rigidity.

***Finally, there is general social change and disorganization.  Stuart writes:  “Back in the day, when society was organized and where people understood their duties and obligations, these decisions were far less difficult and far less onerous”…the decisions were less onerous, but of course many people felt constrained–and often were constrained–in ways they did not want to be.

Someone writing in an aviation magazine observed that “if you do anything with your airplane that is not consistent with the Pilot’s Operating Handbook, then you are a test pilot.”  In a society, the equivalent of the POH is the aggregate of laws, customs, and implicit expectations that guide behavior.  There is no doubt that any society’s POH needs constant updating, and sometime major changes–but when major changes do occur, they will be disorienting to many people, and it seems that a nontrivial number of them will react by wishing for more constraints.

Some people thrive as test pilots–either of aircraft or in a societal setting–but many do not, including many people who would be perfectly adequate or even excellent pilots in a more-defined setting.

One of the major problems we have in America today is that so many of the people who have taken it upon themselves to totally rewrite the societal POH are people who are lacking in practical experience, historical knowledge, and ‘skin in the game.’  To continue the aviation analogy, it is as if a POH was rewritten by people who had no background in aeronautical engineering, no experience or minimal experience in flying aircraft, and (in many cases) absolutely no intent of either flying or flying in those aircraft being operated in conformity with their documents.

What proportion of the people in a society can lose belief in the value of individual freedom before they destroy that freedom for everyone, including those who do value it, and how close are we to that point?

 

 

Bernie Sanders Won the Debate

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(WSJ: Bernie Sanders Won the Debate)
 
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The 20 candidates in the Democratic debates on June 26 & 27 accepted Sanders’s fundamental vision of Democratic Socialism.

Bernie Sanders’s June 12 speech at George Washington University proposing “a 21st Century Economic Bill of Rights (EBR)” to “a decent job that pays a living wage; quality health care; complete (higher) education; affordable housing; a clean environment; and a secure retirement” all “regardless of his or her income” started a competition among the current democratic candidates for the 2020 Democratic nomination with promises of free stuff. This new Democratic socialism makes two promises:

“It is free to the masses.”

“If you like your democratic system of government, you can keep it.”

This isn’t new and isn’t true.

The ideological Cold War between the socialist totalitarian countries and the capitalist social democracies ended with the economic and political bankruptcy of virtually all of the former. The latter expanded their welfare states by taxing the economic fruits of capitalism, contracting when going too far, with symptoms including declining investment and innovation and rising public deficits and debt burdens. The proposed EBR to expand the welfare state to socialist extremes while maintaining democracy will erode both living standards and liberty.

The Unintended Consequences of the Economic Bill of Rights

The market system is based upon individuals responding to incentives, mostly embodied in market prices. Contemporary economists have done Nobel-worthy research demonstrating that individuals don’t always respond rationally. But the EBR promising free or cheap stuff well below cost with wages and income determined well above productivity is incompatible with a market economy and individual liberty. It would severely distort work and consumption incentives: already declining labor force participation would collapse and productivity stagnation would worsen. Costs of health care, education and housing would rise. The Green New Deal environmental proposal would cost up to $100 trillion while providing negligible environmental benefit. Private household saving would shrink further with the right to a secure retirement.

States that raise income taxes on high net worth businesses and/or firms face an exodus of both. Individuals and firms similarly shift their tax residence outside the U.S. reducing U.S. domestic innovation. Trade deficits widen. The cost of the EBR exceeds the revenue from these types of taxes by orders of magnitude. The progressive states are already voting themselves into bankruptcy, anticipating a federal bailout.

Modern Monetary Theory: Old Fashioned Money Printing

To avoid the political consequences of massive middle class taxation, the Modern Monetary Theory (MMT) promoted by a Sanders campaign economic advisor proposes debt financing. Wall Street prognosticators forecast the end of the debt supercycle in 2011 and the collapse of the international monetary system in 2014, going code red. But the debt supercycle has continued, so proponents of the MMT assume that interest rates will remain low indefinitely so the cost can be financed with no long term consequence, whether bought by domestic or foreign creditors or the Federal Reserve.

They may be right about America’s creditors continuing to accept debt in the near term, but excessive debt always ends, suddenly and badly: the longer it goes on the bigger the bust. As the world’s reserve currency the debt can’t simply be inflated away. The consequences of a U.S. international default, no matter how delivered, would be catastrophic.

Democratic Socialism and Individual Freedom

The socialist EBR is the responsibility of the administrative state, which requires totalitarian political power to deliver. What, then, do democratic socialists mean by “democracy”?

The ancient Greek city-states began experimenting with democracy (literally, “people power” in Greek) about 2500 years ago, limited to males selected on merit. After about a century of experimentation, Greek philosophers concluded that democracy was a form of mob tyranny that undermined individual freedom and the rule of law. United States exceptionalism is rooted in the U.S. Constitution, an experiment in a representative federal republic held in check by a limited list of enumerated powers to protect individual freedoms and prevent mob rule.

The extension of voting rights to former slaves and over a half century later to women was overdue. The 14th Amendment was necessary to restrict the ability of Southern states from inhibiting their voting rights but has since been interpreted to give the federal government virtual total supremacy. The direct election of Senators in the 17th Amendment of 1912 further expanded populist democracy.

Marx promised democracy and universal suffrage. Trotsky promised a peoples democracy, as did Mao. The current progressive platform on voting rights; opposing voter registration, supporting immigration of dependents with voting rights rather than working rights, eliminating the Electoral College, reducing the voting age to 16 years old, registering prisoners, and drive-by voter registration would complete the transition from a representative republic to a peoples democracy.

Kevin Villani

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Kevin Villani, chief economist at Freddie Mac from 1982 to 1985, is a principal of University Financial Associates. He has held senior government positions, has been affiliated with nine universities, and served as CFO and director of several companies. He recently published  Occupy Pennsylvania Avenue  on the political origins of the sub-prime lending bubble and aftermath.

A New Insult-Meme!

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In a discussion of ‘alternative energy’ at a social media site, someone raised the practical issue of the difficulties involved in high-volume energy storage.  Someone else came back at him with a comment to the effect that “climate-solution deniers are as bad a climate change deniers.”

This is probably just the leading edge of a new insult-meme:  I expect to see a lot more of the climate-solution-denier accusations being made.  We are getting uncomfortably close to a pervasive climate of Lysenkoism.

In Arthur Koestler’s novel Darkness at Noon, set in the Soviet Union, his character Rubashov (an old Bolshevik who is now on trial for his life) muses:

“A short time ago, our leading agriculturist, B., was shot with thirty of his collaborators because he maintained the opinion that nitrate artificial manure was superior to potash. No. 1 is all for potash; therefore B. and the thirty had to be liquidated as saboteurs. In a NATIONALLY CENTRALIZED AGRICULTURE, the alternative of nitrate or potash is of enormous importance: it can decide the issue of the next war. If No. I was in the right, history will absolve him, and the execution of the thirty-one men will be a mere bagatelle. If he was wrong …”

and

“We know that virtue does not matter to history, and that crimes remain unpunished; but that every error had its consequences and venges itself unto the seventh generation. Therefore we concentrated all our efforts on preventing error and destroying the very seeds of it. Never in history has so much power over the future of humanity been concentrated in so few hands as in our case. Each wrong idea we follow is a crime committed against future generations. Therefore we have to punish wrong ideas as others punish crimes: with death. We were held for madmen because we followed every thought down to its final consequence and acted accordingly. We were compared to the inquisition because, like them, we constantly felt in ourselves the whole weight of responsibility for the super-individual life to come. We resembled the great Inquisitors in that we persecuted the seeds of evil not only in men’s deeds, but in their thoughts. We admitted no private sphere, not even inside a man’s skull. We lived under the compulsion of working things out to their final conclusions. Our minds were so tensely charged that the slightest collision caused a mortal short-circuit. Thus we were fated to mutual destruction.” (emphasis added)

The assertions now being made that anyone who challenges catastrophic CO2-caused climate change is complicit in the deaths of thousands/hundreds of thousands/millions parallel the above rather closesly.

Koestler’s Rubashov also observed that it had become “necessity to drill every sentence into the masses by vulgarization and endless repetition; what was presented as right must shine like gold, what was presented as wrong must be as black as pitch; political statements had to be coloured like ginger-bread figures at a fair.”    

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Mice in a Maze

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Arnade, Chris. Dignity: Seeking Respect in Back Row America. Penguin Publishing Group, 2019.

Chris Arnade certainly seems to have been called, and may well have been chosen, to help mitigate one of the great divisions of our time. Dignity complements, among others, Charles Murray’s Coming Apart with interviews and photos from what Murray would call “Fishtown,” or rather its extreme margin, whose inhabitants are simultaneously transient and rooted, strategizing to survive in ways often incomprehensible to the more cognitively gifted and emotionally stable. Learning to extend compassion and respect rather than mere pity (in its more negative variant), glib political “solutions,” and outright contempt is a challenge far too few Americans are willing to undertake. Matthew 22:14 seems unnervingly relevant in this context, and while the church as it is depicted among the people Dignity portrays is an overwhelmingly positive influence, more “front row” believers might take a moment to consider just how much better than the vast majority of us Arnade, a secular liberal, has done at reaching out to desperate communities. My advice to them is to buy and read this book, pray over it, maybe lend it out to others for discussion, and—without reinventing the wheel—do the Tocquevillian thing and organize/volunteer, with an eye to Luke 15. Because if the parables in that chapter aren’t about “back row” people, they don’t mean a damned thing.

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Our ‘Xanatos Gambit’ President’s Energy Export Strategy Tree

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In my last post — President Trump’s ‘Xanatos Gambit’ Trade Policy — I spoke to how President Trump has set up his political strategy on trade policy to make any outcome on the USMCA Trade agreement that he negotiated to replace the NAFTA agreement would be to his advantage over House Democrats and the “purchased by the multi-national corporation China Lobby” GOP Senators.   In this post I am going to lay out President Trump’s “Global   Energy Dominance” export policy’s “Xanatos Gambit” strategy tree vis-à-vis the 2020 presidential elections.

To start with, I’m going to refer you back to this passage from my last post on how the Trump Administration is “gaming” economic growth measurements:

This is where Pres. Trump’s ‘Xanatos Gambit’ strategy tree kicks in via a macroeconomic and trade policy manipulation of the very simple economic equation of gross domestic product:

GDP = US ECONOMIC ACTIVITY + EXPORTS + FOREIGN INVESTMENT   IMPORTS EXTERNAL INVESTMENT

The American economy just grew 3.2% in the 1st quarter of 2019.   It would have grown another 0.3% but for the 30-odd day federal government shut down.    The “markets” were expecting 2.5% GDP growth.   The huge half-percent GDP “miss” boiled down to:

1. The USA exported more.

2. The USA imported less and

3. There was more external foreign investment than expected.

All three were the result of a combination of Trump administration policies on oil/LNG fracking, tax & regulatory cuts and trade/tariffs.

The Trump Administration upon coming into office in January 2017 had a huge windfall of energy projects that the Obama Administration had held up approval of in the Federal Energy Regulatory Commission.    This windfall neither began nor ended with the  Keystone XL oil pipeline.   There was a whole cornucopia of oil and natural gas energy infrastructure projects that Democratic Party interests, only some of them environmental, that the Obama Administration was using the FERC to sit on for a whole lot of reasons that I refer to as “The Economic Cold Civil War.”

While the media was spending a great deal of time talking about things like the Congressional votes to open the Arctic Wildlife Refuge in the early days of the Trump Administration’s energy policy implementation.   President Trump spent a great deal of his early political capital on getting his earliest political appointments through the Senate to the FERC to get those projects turned loose as a part of President Trump’s “Global   Energy Dominance” export policy.    The first fruit of this export infrastructure energy policy focus started paying off with the  Louisiana Offshore Oil Port (LOOP) coming on-line in 2018.    See this Apr 16, 2019 article by Julianne Geiger at Oilprice.com:

U.S. Doubles Oil Exports In 2018

The United States nearly doubled its oil exports in 2018, the Energy Information Administration reporting on Monday, from 1.2 million barrels per day in 2017.

The 2.0 million barrels of oil per day exported in 2018 was in line with increased oil production, which averaged 10.9 million barrels per day last year, and was made possible by changes to the Louisiana Offshore Oil Port (LOOP) which allowed it to load VLCCs (Trent Note: Very Large Crude Carriers) .

The changes to LOOP and to the sheer volume of exports were not the only changes for the US crude oil industry. The destination of this oil shifted in 2018 as well, and even shifted within the year as the trade row between China and the United States took hold.

Overall, Canada remained the largest buyer of US oil in 2018, at 19% of all oil exports, according to EIA data. During the first half of 2018, the largest buyer of US crude oil was China, averaging 376,000 barrels per day. Due to the trade row, however, US oil exports to China fell to an average of just 83,000 barrels per day in the second half, after seeing zero exports to China in the months of August, September, and October.**

[**Please note above the nice thing about energy exports is how futile a energy user embargo is against it.   China’s economic embargo of US crude products only hurt itself.]

The impact of the Trump Administration’s energy export policies from those early days of his administration in terms of liquefied natural gas (LNG) export facilities are now impacting the American economy. A large part of the extra 0.7% GDP growth achieved over the 2.5% Wall Street forecasts in the first quarter of 2019 came from the Corpus Christ 1 and Sabine 5 LNG export facilities coming on-line in late 2018 and making their first full export capacity quarter in Jan – Mar 2019.   The Cameroon 1 and Elba Island 1-6 LNG export facilities were also scheduled to come on-line in Late Feb-Early March 2019, and were very likely large contributors to LNG export surge.

This is how CNBC described 2019’s 1st quarter:

Robust demand for Texas oil and gas in the first two months of 2019 pushed the state’s export activity into high gear, strongly outpacing the national rate and contrasting with a slight decline by California.

Texas represented nearly 20% of all U.S. exports in the January-February period while California accounted for roughly an 11% share.

California has seen its share of total U.S. exports fall in recent years while Texas has been growing its share due mainly to the new oil boom.

CNBC table of US Exports in the 1st Quarter of 2019 Source: https://www.cnbc.com/2019/04/25/texas-exports-boosted-by-oil-rise-3-times-faster-than-us-increase.html
CNBC table of US Exports in the 1st Quarter of 2019   Source: https://www.cnbc.com/2019/04/25/texas-exports-boosted-by-oil-rise-3-times-faster-than-us-increase.html

And this is only the beginning for the US economy in 2019. See the following text and LNG export facility graphic from a Dec 10, 2018 report by the US Federal government’s Energy Information Administration:

U.S. liquefied natural gas export capacity to more than double by the end of 2019

U.S. LNG exports continue to increase with the growing export capacity. EIA’s latest Short-Term Energy Outlook forecasts U.S. LNG exports to average 2.9 Bcf/d in 2018 and 5.2 Bcf/d in 2019 as the new liquefaction trains are gradually commissioned and ramp up LNG production to operate at full capacity. The latest information on the status of U.S. liquefaction facilities, including expected online dates and capacities, is available in EIA’s database of U.S. LNG export facilities.

EIA projection of Liquefied Natural Gas Export Capacity from 2016 - 2021. Date of projection Dec 2018
EIA projection of U.S. Liquefied Natural Gas Export Capacity from 2016 – 2021. Date of projection, Dec 2018.

Given the above information, barring a war or serious election year intervention to kill the economy by the Federal Reserve, the cascade of LNG export infrastructure coming on-line in the 2nd and 4th quarters of 2019   will mean something on the order of a full percentage increase in GDP growth (in a range of 4.0% to 4.5%) in Jan – Mar 2020 over Jan – Mar 2019.   That is what going from 3.6 billion cubic feet per day (Bcf/d) of natural gas export capacity to to 8.9   Bcf/d in Dec 2019 does for you.

This extra 1% GDP will be happening just in time for the Iowa caucuses and New Hampshire primary.

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