Is the Biden Economic Plan on the Right Track?

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.

The Newsmaking Machinery Behind the Popular Song

This last weekend, I had a tiny and depressing demonstration about the facile nature of local news – the news making machinery behind the popular song as the pop song used to go. I did local news-gathering myself as an in-house broadcast professional, doing a daily radio news program for Armed Forces Radio, Seoul Korea edition. I know how the pudding is made; have the basic framework for the story, go out and talk to people for the bits that fill in the story already mentally mapped out in your mind – and go and do it again the next day, and the day following. Daily news is sausage; stuff that casing with whatever the story requires, a judicious combination of meat or filler.

There was a house fire last Sunday afternoon in our neighborhood – the first I knew of it (since I was working the final edit of Luna City #9) was when the Daughter Unit flung open the door, saying that a nearby house was on fire, that the dogs from the house were running loose on the street, and could I bring some doggie treats and help everyone catch them?

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Smashing the Soapbox

The attack on free speech is gaining speed. Indeed, we shouldn’t expect the Internet to be a realm of free expression for much longer. Consider, for instance, an initiative named Stop Hate for Profit, which is calling on Facebook to “find and remove public and private groups focused on white supremacy, militia, antisemitism, violent conspiracies, Holocaust denialism, vaccine misinformation, and climate denialism” and to adopt “common-sense changes to their policies that will help stem radicalization and hate on the platform”; an allied group named Change the Terms has helpfully provided definitions of these so-called common-sense changes and says they should apply to Internet platforms for social media, video sharing, public or private group communication, message boards, online payments, ticket purchasing, marketing, advertising, blogging, website hosting, and domain name registration.

In the revolutionary environment we find ourselves in, where definitions change almost weekly and purity spirals are the order of the day, this is chilling. Consider, for instance, white supremacy, which theorists like Robin DiAngelo have transformed from something like “a violently fascistic ideology based on the purported natural superiority of lighter-skinned people” into something like “the global, modern society that emerged in mostly Christian Europe and North America based on reason, science, objectivity, individual autonomy, free thought, and free markets.”

Let’s put two and two together, shall we? (Yes, I realize mathematics is racist too, but so be it.) If expressing any fact or opinion that doesn’t conform to the ever more rigid ideology of anti-racism can subject you to effective removal from the Internet, then free speech is dead.

Way back in 1996 at the dawn of the Internet Age, John Perry Barlow penned A Declaration of the Independence of Cyberspace, which among other things proclaimed “We are creating a world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity.”

How quaint.

Conformity and Intimidation

(I mentioned these links before, in comments to this post, but I believe they are important enough to merit inclusion in a top-level post)

According to a poll conducted by YouGov on behalf of the Cato Institute, almost 2/3 of Americans are afraid of sharing their political views. And with some reason, it seems: among strong ‘liberals’, 50% would support firing a business executive who had privately donated to the Trump campaign. Among strong conservatives, 36% would support firing an executive who donated to Biden. Even among those who identify as just ‘liberal’ rather than ‘very liberal’, 43% would be in favor of firing a Trump donator…22% of conservatives would be in favor of firing a Biden donor.

See also this very interesting piece by the entrepreneur and venture capitalist Paul Graham: The Four Pillars of Conformism. Read the whole thing.

Systems Thinking

Update Below

I have not forgotten that I am going to write on systems-thinking and its problems in Christian theology.  I am thinking about it a lot, actually.  But in the interim, I have noticed something about how people think of good things versus bad things in their respective cultures.  PenGun  mentioned either here or at Assistant Village Idiot about a serious medical condition he had, and how grateful he was to the Canadian Health System that everything went well.  I have noticed the same thing from the Brits*, that when they recover from something it is because of the NHS. Scandinavians say such things about almost everything, actually. They perceive their system of everything to be better: policing, military, diplomacy, education, healthcare, traffic. When I went to Romania to pick up my boys for adoption, I went to the schools they had been attending to discuss how they were and what material was being covered to help integrate them to the private Christian school they would be attending in America.  None of the teachers were able to discuss what they were covering this year, and none knew anything about my two children individually.  They all wanted to talk about how the Romanian system was so superior to what we were doing in America. 

You might think that just by law of averages alone that the Americans could have gotten something right, seeing as by objective measures…

My cousin-in-law from Belgium would speak in similar fashion, that the system of schooling she was used to from childhood was so far superior to the schools she was sending her children to now (Concord, NH, very good.  Their boys went on to do well at MIT and UChicago).  Relatives of my sons who moved to Norway for better jobs took their girls out of Tromso abruptly and moved back to Transylvania, with part of the reason being that they felt the school system was much better. Similarly, when I speak to people from Quebec (and thus maybe all of Canada, or maybe not) it’s the same thing.  They believe that Quebecois everything is better in general. Stores, food, politeness – oh let me guarantee you that this is not so.  They have old-world gestures and customs but are solidly insulting – This attitude is so strong among Swedes that even other Scandinavians notice it, and resent it.  It is considered arrogant to put yourself forward as better at anything in any way, but there is this universal idea that their systems, their way of doing foreign policy, or religion, or serving food, or crossing the street is simply better. It is fascinating that all of these cultures consider Americans arrogant because individuals are boastful, or because we notice that we clearly have aspects of our culture that show considerable success – such as a longer life expectancy than any other country  after receiving a cancer diagnosis, regardless of what your income level is – and say so.  To most other places, you can brag about your culture in extreme fashion, but you should not give the merest hint of excelling in yourself. It’s an interesting value.  Once adopted, people outside of that will seem unconscionably rude, sure. We offend them in this way, and that we do not change even after they have pointed this out repeatedly just infuriates them more.

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