Elections

Is the Biden Economic Plan on the Right Track?

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It promises to improve economic well-being relative to current economic policy for average and particularly less well-off citizens now and in the future, and to do the same for citizens of other countries including all immigrants. Can it deliver?

The Mock Democratic Platform was released in February, the Biden-Sanders Unity Task Force a few weeks ago, and the draft 2020 Platform a few days ago. The economic plan is the most ambitious progressive anti-capitalist agenda at least since FDR’s New Deal and arguably in American history. It consistently proposes numerous government carrots and sticks to achieve its economic objectives, doubling down on the New Deal and Great Society methods.

Causes and Consequences of Reducing Capital and Labor Productivity

Potential national wealth is limited only by the amount of capital (national savings) and the incentive to maximize the productivity of capital (e.g., with new technology) and labor (through appropriate education and training). Politics often distorts individual incentives for the worse.

Politically Re-directed Investment

The US national savings rate hovered around 3% after turning negative in 2007-2009 and again now. The Biden economic plan for politically re-directing resources to, e.g., conservation, clean energy, transportation, manufacturing, infrastructure, affordable housing, etc. by subsidizing public and taxing private investment more has some merit. However, it may have problematic economic returns and the total cost is many multiples of total national savings.

Education and School Choice

Biden would limit the competition with public schools by restricting higher performing charter schools. Higher education would be made either affordable or free with reduced entrance requirements to compensate for a poor primary education, but higher education only contributes to individual and national wealth to the extent it improves productivity, e.g., with more STEM graduates.

Labor Market Intervention

By traditional measures, the country was fully employed prior to the Covid-19 epidemic, but the Biden plan calls for the “creation” of multiple millions of new high paying jobs, both in the nominally still private sector and the public sector. Pay would be raised by eliminating the right to work without being forced to join a union, something private sector unions have demanded since the passage of the Taft Hartley Act of 1947. But Biden plans to go beyond that, forcing all states to unionize public employees as well. For those that fall out of this broad union net, the federal minimum wage would start at $15/hour, superseding state laws. These are the tools that progressives historically used to keep blacks, other minorities and recent immigrants out of the labor force, and is is difficult to see how they would do otherwise this time around.

Trade Protection

As these politically inflated domestic labor costs will again be uncompetitive internationally the Biden plan opposes any trade deals, calling for manufactured goods to be sourced and stamped “made in America.” Consumer prices would have to rise commensurate with labor costs.

Immigration

Borders would be relatively open and immigrants incentivized to come both by the decline in export-related jobs and the benefits of the U.S. social welfare state. But they would be excluded from the formal job market by the union and minimum wage requirements once inside the U.S. border.

Taxation, Debt and Money Printing: The Limits of Expropriation

All senior mob leaders know two things well: 1. There is only so much extortion money to go around (gangster killings are usually over excessive greed), and 2, There are limits to how much you can extort without killing a business. At their peak in the 1980s the New York Mafia “owned” the labor unions that extorted from business, enabled by a symbiotic relationship of both with the Democratic Party. Sooner or later taxpayers and consumers always pay.

Debt and Taxes

State and local governments are in dire straits and blue states are technically insolvent, demanding a bailout. Federal funding has morphed the states into Soviet era oblasts with the federal government the funding source of first resort.

Current federal debt is $27 trillion, exceeding that of WW II as a percent of the economy, with over $200 trillion in additional contingent liabilities.. The current federal deficit for this fiscal year is over $3 trillion, to which the Democrat-proposed Heroes Act would add an additional $3 trillion. Candidate Biden has offered tiny constituent groups, e.g., caregivers, almost $1 trillion, large constituent groups such as the environmentalists’ Green New Deal could cost upwards of $100 trillion, with lots of constituent promises falling in between.

The Biden plan calls for reversing the Trump corporate tax cut that stimulated investment and exports. Taxing the “rich” will raise some revenue in the short run but reduce investment and growth in the longer run. Middle class taxes will follow, although he is committed to restoring the (blue) state and local income tax deduction for the relatively wealthy.

The Federal Reserve and Modern Monetary Theory

Having gone past the limit, a gangster may turn to counterfeiting as a last resort. The Federal Reserve is already “printing” enough money to be the primary buyer of Treasury debt and at the current pace would own it all in two years. Under the Modern Monetary Theory espoused by the Sanders campaign and now implicitly incorporated into the Biden economic plan, debts and deficits don’t matter so long as the Fed can print money to purchase them. The Biden plan adds “racial equity” to the Fed’s full employment and price stability goals to reduce differences in wages and unemployment.

Biden’s Plan is an Extortion Racket on the Left-Behind Track

Across time and space the evidence supports competitive market capitalism as the source of virtually all human economic progress. The Biden economic plan is essentially an extortion racket that fails to recognize its inherent limits, doubling down on the bad policies of the current Administration while eliminating the good, apparently because the Party’s octogenarian leaders either never learned the limits or have lost control to the young radical left. This plan so far exceeds the limits that even partial success could easily lead to hyper-inflation.

There is a sense that America can always turns things around if it gets derailed but the progressive perspective dominates America’s intellectual elite and media. Argentina was once on the capitalist fast track parallel to the U.S., but progressive President Juan Peron switched tracks in 1946, and Argentina has been left behind ever since.

Kevin Villani

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Kevin Villani was chief economist at Freddie Mac from 1982 to 1985. 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 how politicians and bureaucrats with no skin in the game caused the sub-prime lending bubble and systemic financial system failure.

What do Democrats Want ?

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I have been watching the gradual, then sudden, dissolution of a political party. My parents were Democrats. They were shocked when they learned I had voted for Richard Nixon in 1960. Jimmy Carter was a failure as a President but I wasn’t really worried about the country when he was in office. His actions with Iran and the Panama Canal were harmful but they were a matter of policy. Ronald Reagan, not a governor I was fond of in California, was a successful president. He was able to work with the Democrat Party in spite of some far left loonies like Chris Dodd. Many of the far left members of the Democrat Party favored communists like the Sandinistas but they were kept in line by the old pols to whom graft and spending were more important. Tip O’Neill would let Reagan win the Cold War as long as Reagan let the Democrat Congress run up the deficit.

Bill Clinton changed much of this dynamic in two ways. First, he was a lot more ideological than previous presidents and second he was incompetent at it. Clinton is a very smart man but his wife, Hillary, was far too obvious in her corruption. First the 900 FBI files, then the White House Travel Office. Both were scandals that primed him for a big loss.

Then the 1994 elections turned the Congress over to the Republicans and we learned how little they were interested in Conservatism. They accomplished nothing before being ousted by Democrats in 2006. This, of course, was followed by the housing and mortgage collapse of 2008. There was some attempt by Bush administration officials to rein in Congress and the debt explosion but it was probably too late anyway. The 2008 election placed Congress in Democrats’ hands for the first time with a Democrat president since 1974. Clinton’s two years did not result in much happening. The first Obama Congress spent like drunken sailors but were quickly reined in in 2010.

What might happen if Biden won the presidency and the Democrats got a majority in the Congress ?

In the past until now, there was zero chance that the hard Left would ever win an American election. No socialist has ever come close. Even Bernie Sanders accepted that the Democratic establishment for six years broke rules, leveraged candidates to drop out, and warped the media to ensure that he would remain a septuagenarian blowhard railing at the wind from one of his three houses. George McGovern was buried by a landslide. Most Democrats, after Kennedy and until Obama, never won the popular vote unless possessed of a Southern-accented hinting at centrism.

Only the Great Depression and World War II ensured four terms of FDR, who still knew enough not to let his house socialists ruin the wartime U.S. economy.

But in perfect storm and black swan fashion, the coronavirus, the lockdown, the riots, anarchy and looting, all combined with Trump Derangement Syndrome to be weaponized by the Left—and the media far more successfully than with their failed pro forma, legalistic efforts with Robert Mueller and impeachment to destroy the Trump presidency—have pushed socialism along.

I thought Obama was an empty suit. Biden is an empty head.

Who is behind all this and why ?

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Sell Your Soul or Lose Your Livelihood (updated)

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Every day, people are losing their jobs because of political opinions or assertions about reality which are considered unacceptable.  David Shor, a political data analyst, lost his job after tweeting a summary of research indicating that nonviolent protest tactics tend to be more effective than violent tactics. At  the Poetry Foundation, both the president and the chairman resigned after being heavily attacked because their statement on the current situation…which said that the members “stand in solidarity with the Black community, and denounce injustice and systemic racism”…was vague and lacked any commitment to concrete action.  An Illinois high school principal  finds her job under attack after advising students that, if they protest, they should refrain from violence and looting. The list could be expanded indefinitely and includes people in all industries and at all levels.

This isn’t new. For the last two decades, the ‘progressive’ left has loudly insisted that dissenting voices (dissenting from the Prog worldview, that is) must be suppressed. But the trend has accelerated sharply.

I am reminded, as I often am, of the memoirs of Sebastian Haffner, who grew up in Germany between the wars. One very affecting section of the book describes what happened to Haffner’s fathera civil servant under both Weimar and the Kaiserfollowing the Nazi takeover. The elder Haffner, long-since retired, had considerable accomplishments to his credit:  “There had been great pieces of legislation in his administrative area, on which he had worked closely. They were important, daring, thoughtful, intellectual achievements, the fruits of decades of experience and years of intense, meticulous analysis and dedicated refinement”and it was extremely painful to him to see this work ruthlessly trashed by the new government. But worse was to come.

One day Mr. Haffner received an official letter. It required him to list all of the political parties, organizations, and associations to which he had ever belonged in his life and to sign a declaration that he ‘stood behind the government of national uprising without reservations.’ Failure to sign would mean the loss of his pension, which he had earned through 45 years of devoted service.

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Protest or Insurrection?

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The protests that quickly morphed into rioting and mass looting began with an arrest of a career felon for trying to pass a counterfeit bill. He had been convicted of felony home invasion and robbery in Texas and served 5 years in prison. According to several unreliable sites, he was”turning his life around” and was involved with a church. That argument is somewhat diminished by the fact that he had Methamphetamine and Fentanyl in toxic levels at autopsy. The reaction in Minneapolis was extreme and horrific.

Some of the destruction can be seen here the next day.

It got worse, much worse.

The spineless leftist Mayor is now seeking $55 million form somebody to repair damage he might have prevented.

Minneapolis mayor Jacob Frey will seek state and federal aid to rebuild city structures following over a week of looting and rioting, the Minneapolis Star Tribune reported Friday.

Some 220 buildings have been damaged and require at least $55 million in repairs, the city’s Community Planning & Economic Development department said earlier this week, noting that the city was “not yet ready to produce a credible estimate.” City Council members warned that the costs will likely be far higher, while Mayor Frey said damages could reach into the “hundreds of millions.”

Typically, he tried to seek approval from black rioters and was expelled from the meeting.

He was elected on a platform of fighting “global warming.”

A pretty good explanation of what is behind all this.

For white liberals, a black identity shaped by rage is not only to be condoned, but celebrated. All politics is identity politics to liberals, because the whole object of their existence is to invent one’s identity according to therapeutic needs. That is why the progressive movement took up the cause of transgender rights with such passion: To change one’s gender is the ultimate expression of self-invention in defiance of nature and tradition.

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If you think Congress does not work, thank John McCain

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John McCain was elected to the Senate in 1986, taking Barry Goldwater’s seat after two terms in the House. In 1987, as a rather naive =freshman Senator, he was involved in the “Keating Five” affair This involved assistance to a constituent of McCain’s but was, in fact, a Democrat influence peddling matter. McCain was included chiefly to make it “bipartisan.”

The five senators—Alan Cranston (Democrat of California), Dennis DeConcini (Democrat of Arizona), John Glenn (Democrat of Ohio), John McCain (Republican of Arizona), and Donald W. Riegle, Jr. (Democrat of Michigan)—were accused of improperly intervening in 1987 on behalf of Charles H. Keating, Jr., Chairman of the Lincoln Savings and Loan Association, which was the target of a regulatory investigation by the Federal Home Loan Bank Board (FHLBB). The FHLBB subsequently backed off taking action against Lincoln.

Lincoln Savings and Loan collapsed in 1989, at a cost of $3.4 billion to the federal government (and thus taxpayers).

This experience affected McCain severely, making him obsessed with his reputation and leaving him open to more manipulation by Democrats. What followed was The McCain Feingold Act also known as the “Bipartisan Campaign Reform Act.” It made a huge change in the way Congress conducted business.

McCain-Feingold tilted influence in our political system toward the ideological extremes. For centuries, political parties played a moderating role: Because they comprise a broad coalition of interests, parties had to mediate among competing constituencies, looking for ­middle-ground positions that would draw maximum support. Traditionally, they used their preponderance of resources to impose discipline on extremists who threatened party comity.

That description is pretty much nonsense. What it really did was to place legislation in the hands of Congressional staffs and lobbyists. Congress members spend their days and months raising money while staffs and lobbyists write the laws. That is why Nancy Pelosi told us that “we have to pass the bill to find out what is in it.” She was referring to Obamacare but it applies to all legislation the past 18 years since McCain Feingold.

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