by | ARTICLES, BLOG, ECONOMY, ELECTIONS, POLITICS
I was shocked to read “Get Ready for the Biden Stock Boom” in the pages of the Wall Street Journal, written by a former editor of Barron’s, no less. Ed Finn really, really wants you to support Joe Biden and his article is full of so much wishful thinking that it reads like a Disney Fairy Tale — except in reality, there will be no happy ending.
To be fair, Ed Finn does acknowledge that the stock market will certainly experience some turbulence if Joe Biden is elected — but that’s because smart investors know that socialist policies are coming in the form of higher taxes, strangling regulation, and ridiculous legislation such as the “Green New Deal.” You think Obama was bad for the economy? Wait until Biden gets in there.
Yet after laying out the coming economic reality, Ed Finn still wants you to believe in Joe Biden, and the rest of his analysis is basically dependent on the word IF. You can’t make this up:
“IF a President Biden can control the federal budget deficit, IF he can forge better relationships with America’s trading partners, IF he can reverse some of President Trump’s anti-immigration policies, IF he can bring a less combative atmosphere to Washington and the nation, there is no reason to think that during his term average annual stock returns, including dividends, can’t be in the 10% range, as they have for the past 95 years.”
It should be noted that even with all the “if’s” coming true, they have no positive economic consequence. They would be nice, but not economically powerful.
How does he spell out how Joe Biden’s going to improve the economy: “Given Mr. Biden’s ambitious plans to use increased tax revenue to fund more spending on green energy, health care and infrastructure, it’s conceivable he could spur the U.S. economy enough to push annual stock returns to 15%.” Ed Finn must think that the readers of the Wall Street Journal are stupid. To think that anything relating to “green energy” isn’t detrimental to the economy is economically illiterate. We already have efficient fossil fuels, but the Democrats would happily pay three times as much for less energy to be environmentally woke — and that’s supposed to improve the economy? That’s either ignorant or socialist or both. And see how Finn continues to use wishful language: “it’s conceivable he could spur the U.S. economy enough to push annual stock returns to 15%.” That’s because neither Finn’s analysis nor Biden’s policies are actually grounded in any sort of economic reality, only fantasy.
On the other hand, what we do know is that there are multiple policy proposals that WILL have negative economic consequences, none of which will come close to offsetting any of the rosy positives that Finn is pinning his hopes on. The main threats Biden poses to the stock market are increased regulation and higher taxes. Increased regulation will inevitably result in slowed economic growth, and with that decreased profits and a less robust stock market. But that’s not even the worst of it. Two specific initiatives will affect the stock market both in the short- and long-term: 1) Raising taxes on corporate profits from 21% 28% and 2) Nearly doubling the capital-gains tax from 20% to 39.6% on income over $1 million/year — and don’t forget the investment-tax surcharge of 3.8%! Of course, Biden plans to raise taxes on nearly every taxpayer regardless.
Ed Finn ought to be ashamed for penning such an unrealistic economic outlook with Joe Biden at the helm. Increased taxation, crushing regulation, and impudent legislation never improves the economy or the lives of the American people.
by | ARTICLES, ECONOMY, ELECTIONS, FED, GOVERNMENT, OBAMA, POLITICS, POTUS, SOCIAL SECURITY, TAXES, TRUMP
Are we past the tipping point for economic reform? I would argue that Obama’s budgets and spending accelerated the deficits beyond repair. Some people will go back to Reagan and say that the deficit and the debt ballooned during the Reagan Administration and they will blame it on his tax cuts. But what is actually true is that the tax cuts generated a large increase in revenue, and the only reason why he had deficits was that the Democrat-led Congress increased spending even over the increased revenue. The same thing happened with the Bush tax cuts which were very pro-growth; the revenue went up sharply, but spending went up even faster. But at this point the debt was still manageable.
Then you come to Obama. At the beginning of his administration, we had the deep recession -which arguably could have benefited by one year of stimulus. The concept of a stimulus is supposed to be a one-off event. In other words, you engage in big one-time expenditures to get the economy on track and then spending goes back to previous levels as the recovery occurs. The problem is that Obama didn’t put things in for just one year. He did long term things, like food stamps, teacher’s compensation, etc., knowing full well that once put into effect they could not easily be withdrawn. And it was pretty clearly his intent all along, for political reasons, to bake them into the budget. So now when we started to have a recovery, you had ballooning deficits — even with a growing economy. Then by the time Trump was elected, the locked-in recurring spending with its locked-in annual increases made the deficit – and the debt – almost impossible to rein in.
Now we have the pandemic and we have no place to go. There’s no surplus to go to the deficit. Millions of Americans are unexpectedly unemployed, which means they’re not paying into Social Security. At the same time, we see older workers who have lost their jobs choose to draw their benefits as soon as they become eligible. This will speed up the insolvency train. But then Trump did something that was very stupid (though his political motivation is clear). He said that entitlements are off the table. If entitlement reform is off the table at this point, we’re headed to bankruptcy.
We’ve been talking about the coming insolvency of the Social Security and Medicare programs for many, many years now and Congress has done nothing to stave off the inevitable. Couple that with Obama budgets, Trump’s lack of action, and the pandemic, and the deficits are even larger now. Anyone seriously looking at the situation knows that absent a major change to entitlements, the mandated annual increases, both because of cost of living adjustments and demographics, will bankrupt both programs in the next ten to fifteen years. It’s very safe to say that absent major entitlement reform, we’re basically past the tipping point.
by | BLOG, ELECTIONS, POLITICS
For years I have been following the candidates that have been supported by the Club for Growth, contributing to both their campaigns and to the Club. Although overall they do a decent job finding and supporting candidates , there are two areas in which they are weak.
The Club For Growth has always been an advocate of the free market, limited government, and low taxes — the same thing that the Tea Party originally intended to be. However, within this realm, there are four things that the Club For Growth does not focus on, but they need to. These are: immigration, tariffs, the Jones Act, and ethanol. So you can have a good libertarian, free market candidate, but if that person turns out to also have unfavorable stances in one or more of those areas, they weaken their position. The Club For Growth needs to expand their vetting to include these four areas in their overall approach.
Additionally, the Club For Growth needs to continue to monitor those who have taken office. While it is understandable that with somewhat limited resources, they want to use most of those resources to find new candidates, it does no one any good if the people they have recommended end up going off the rails. There has to be some sort of follow up. For instance, Marco Rubio, Tom Cotton, and Josh Hawley are all examples of people elected in no small part by the Club, but for which we now have serious buyers remorse. These three have taken inexcusable positions on tariffs, free markets, big government, etc.
It is disappointing and unacceptable to see Club For Growth focus only on getting new people elected while neglecting to hold these and other candidates accountable for their changed positions. It would be wise for the Club For Growth to practice better vetting and consistent follow up if they want to maintain being a trusted voice in the political landscape.
by | BIDEN, BLOG, BUSINESS, ECONOMY, ELECTIONS, TRUMP
Democrat Presidential Candidate Joe Biden not only wants to return capital gains to Obama-era rates, but furthermore he would increase them while simultaneously returning the top rate on ordinary income. Biden has said, “I believe we should, in fact, the capital gains tax should be at what the highest minimum tax should be; we should raise the tax back to 39.6 percent instead of 20 percent.”
Add to that the 3.8% Obamacare tax (NIIT) instituted in 2013, and he would have some taxpayers effectively paying a 43.4% long-term capital gains tax! The current total top rate is 23.8%
Biden should know better. The actual impact of raising the capital gains rate by the Obama administration was devastating to the economy. By discouraging the sale of assets, there was reduced capital available for new projects and opportunities, reducing job creation and wages, and resulting in lower revenue collection. Furthermore, the expected after tax rate of return on new projects went down, assuring that fewer of them went forward.
Additionally, there were a number of localities, like the state of California and New York City, which have tax rates of 12% or more and also a large concentration of wealthy people and high performing businesses. Obama’s capital gains rates of more than 37% brought elective capital projects to a crawl. And Biden wants to raise them even higher?
Shame on Biden. Why sell an asset to fund further investment and opportunity when the government takes a large share of the gain with the loss remaining all yours? It makes virtually no economic sense to do so. A higher capital gains rate put a stranglehold on risk-taking and available capital, and would negatively impact the economy.
by | BLOG, ELECTIONS, POLITICS
For years I have been following the candidates that have been supported by the Club for Growth, contributing to both their campaigns and to the Club. Although overall they do a decent job finding and supporting candidates , there are two areas in which they are weak.
The Club For Growth has always been an advocate of the free market, limited government, and low taxes — the same thing that the Tea Party originally intended to be. However, within this realm, there are four things that the Club For Growth does not focus on, but they need to. These are: immigration, tariffs, the Jones Act, and ethanol. So you can have a good libertarian, free market candidate, but if that person turns out to also have unfavorable stances in one or more of those areas, they weaken their position. The Club For Growth needs to expand their vetting to include these four areas in their overall approach.
Additionally, the Club For Growth needs to continue to monitor those who have taken office. While it is understandable that with somewhat limited resources, they want to use most of those resources to find new candidates, it does no one any good if the people they have recommended end up going off the rails. There has to be some sort of follow up. For instance, Marco Rubio, Tom Cotton, and Josh Hawley are all examples of people elected in no small part by the Club, but for which we now have serious buyers remorse. These three have taken inexcusable positions on tariffs, free markets, big government, etc. It is disappointing and unacceptable to see Club For Growth focus only on getting new people elected while neglecting to hold these and other candidates accountable for their changed positions. It would be wise for the Club For Growth to practice better vetting and consistent follow up if they want to maintain being a trusted voice in the political landscape.
by | BLOG, ELECTIONS, FREEDOM, HYPOCRISY, TRUMP
Democrat Kamala Harris is the latest Presidential candidate to peddle the myth about “pay gaps” for female workers, going so far as to make this an essential part of her platform. Harris has a plan to require larger companies with 100 or more employees to obtain an “equal pay certification” every two years in order to ensure that men and women are paid equally.
There are many reasons a pay gap to exist — but it isn’t because of one’s gender. It has been shown time and again that many women have alternative career paths by choice: different jobs, amounts of time worked, lifestyle flexibility, and risks in occupation to name a few; therefore, any difference in the pay is a result of those choices and not discrimination.
Taking these items into consideration, the pay gap myth shrinks almost entirely, likely no more than a 2% variance. This empirical analysis should not be surprising — in fact, it should be what any normal person, certainly any business person, would expect. Because the simple economic reality is that if women actually did make 23% less than men in wage costs for the same work, businesses would almost entirely hire women as a means to minimize labor costs and maximize profits. Since this does not actually happen, it is obvious that the 23% wage disparity merely a distortion perpetuated by the Left to score easy talking points.
It is also a false conclusion that a gender pay gap is damaging to women because women will likely have substantially less money saved and earned over her lifetime. Those such as Harris that push such nonsense don’t even consider that, for many women, working full time may be “damaging” to women who have alternative life goals — such as raising a family — and that amassing retirement funds might not be the ultimate end focus. Voters should reject Harris “equal pay certification” proposal as economic nonsense.
by | ARTICLES, BLOG, ELECTIONS, FREEDOM, GOVERNMENT, LAW, POLITICS, TAXES
Taxpayers have been long bamboozled into making generous commitments to the retirement systems of public service workers. All over the country, in all levels of federal and state governments, these defined benefit plan pension plans have proven to be vastly untenable. To sustain the plans in their current arrangements and cover the obligations that have already been promised, the rest of society will be compelled to contribute to the retirement of those public service workers via higher taxes. This is turn makes the rest of the populace poorer — because their hard-earned money is being levied to the promised public pensioner, and not available to be saved for themselves.
The grand scheme is becoming unhinged. One must realize that the more people continue to buy into the idea that they are supposed to “retire at 65”, the more they are suckered into continuing to make their retirement years poorer and subsequently make the retirement years of public service employees richer. People see a public service worker being able to retire at that age and they think, “I should be able to also do so”. This idea needs to change.
There are two reasons why most people think that such pension programs are still sustainable and normal: 1) the exorbitant pension costs are buried in the category of “education costs” which allow advocates to falsely argue that higher education costs mean better education, and 2)the costs are largely buried in the larger budget process of federal/state/local governments (and how many people pay attention?).
In the private sector, costs are held in check by the fact that out-of-control costs make the overall cost of the product too high in the marketplace, and will bring the company down. The employees negotiate with company officials who are responsible to a board of directors and shareholders who need to provide a competitive product. But in the public sector, with no competition, costs become whatever the public sector unions can squeeze out of the elected officials who they have helped elect, and who are more accountable to them than to the taxpayers who pay the bill.
The costs to keep public employee pension plans afloat are borne by all the rest of society — the taxpayers. This arrangement enables a small group of people to be paid a sizeable and continuous pension until death. It is not out of the ordinary anymore for a person to receive $65K- $100K for the rest of his or her life. But the actuarial cost to provide that promised benefit is astronomical, and unfair to hard-working private sector employees.
by | ARTICLES, BLOG, ELECTIONS, GOVERNMENT, POLITICS
Kamala Harris, the junior Senator from California, has been fueling speculation that she might be a Democrat contender for President in 2020. For months now, she has been holding fundraisers with high-dollar big-wigs, and now there are indications that she will be “knocking on doors in Iowa” according to former Los Angeles Mayor Antonio Villaraigosa, who is running for Governor in California in 2018.
Harris first came on my radar in 2015, when she partnered with the Department of Education to close some for-profit colleges in California when she was the Attorney General. In an earlier post on the subject, I noted that Harris worked in conjunction with the Department of Education specifically targeting the Corinthian College system. According to the Wall Street Journal, “Last summer the Education Department began to drive Corinthian out of business by choking off federal student aid for supposedly stonewalling exhaustive document requests. The Department claimed to be investigating whether Corinthian misrepresented job placement rates as California Attorney General Kamala Harris alleged in a lawsuit.”
Corinthian agreed to turn over their education centers to other non-profits, but Kamala Harris refused to release any buyer of potential future liability, meaning anyone purchasing would be under constant threat of a lawsuit. Last November, “the nonprofit Education Credit Management Corporation (ECMC) “agreed to buy more than 50 Corinthian campuses for $24 million plus $17.25 million in protection money to the feds for a release from liability. But ECMC passed up Corinthian’s 23 schools in California because Ms. Harris wouldn’t quit.” The alternative to having no buyer for these particular schools would ultimately be to shut them down.
It was in April 2015 that Corinthian was slapped with the $30 million fine, which effectively drove the final nail in the coffin of the remaining schools because no one in their right mind would shoulder the liability. As for the hefty penalty, “The Department assessed the maximum fine of $35,000 per regulatory violation, which its bureaucrats count as each student that was improperly counted.” By the end of the month, all the rest of the schools indeed closed, throwing out of employment and school, thousands of people.
What makes this whole affair particularly odious is that that “the federal government [didn’t] specify how for-profits calculate their job placement rates. States and accrediting agencies have disparate and often vague rules, which notably don’t apply to nonprofit and public colleges.” Thus, Corinthian Colleges was really just a part of the larger assault on for-profit colleges by the Obama Administration, all tied to his recently implemented “Gainful Employment” rules.
Part of the new regulation change dealt with colleges and federal aid, and it appears Corinthian was a ripe target. What’s more, the Department of Education found a ready and willing partner in Kamala Harris, who just happened to be running for a very important Senate seat in California at the time, the seat of retiring Barbara Boxer. She was elected a year later. Harris has demonstrated her willingness to play along to get along — so it’s important to keep an eye on her in the many months ahead.
by | ARTICLES, ELECTIONS, FREEDOM, OBAMACARE, POLITICS
Following in the footsteps of several major insurance companies in the past two years, Humana announced today that it will not be participating in the Obamacare exchanges in 2018, citing rising costs and risk pools.
“The company said in a press release it has tried for the past several years to keep selling policies where it could offer “a viable product.” It said it increased premiums, exited markets and tightened provider networks in hopes of stabilizing its individual market business.
But an initial analysis of its 2017 consumer base found that it remained riskier than Humana could tolerate. So the company is exiting all 11 states where it sells individual policies, both on the Obamacare exchange and outside of it.
“We are again seeing signs of an unbalanced risk pool based on the results of the 2017 open enrollment period, therefore we’ve decided that we can’t continue to offer this coverage in 2018,” said Bruce Broussard, Humana’s chief executive, in a conference call with investors.”
This decision was done in conjunction with Humana’s possible merger with Aetna, which was canceled today as well. This in turn lead to the announcement of another merger breakup; in response to the Humana news, Cigna and Anthem decided not to pursue their changes as well.
Obamacare continues to spiral out of control. It’s telling that we have not heard any initial numbers regarding the amount of enrollees this year. Obamacare has consistently missed its target enrollment figures — some by nearly 50%. If we are going to repeal it, we need to replace it with something better.
by | ARTICLES, BLOG, ELECTIONS, GOVERNMENT, POLITICS, TRUMP
Newt Gingrich warned that Trump’s “Drain the Swamp” verbiage was really a lot of bluster. His presidential appointments seems to be reflecting that — but is it really Trump’s fault? Or are his hands tied? Or a mix of both? Jay Cost over at The Weekly Standard, gives some insight into the history of presidential appointments and how the system works. It’s definitely worth a read in its entirety:
As a candidate, Donald Trump promised sweeping change in the way Washington functions. He would tell voters that the system is rigged, it’s broken, it’s run by losers, and only he could fix it. And yet, for all this rhetoric, it is striking how typical his presidential appointments have been: Jeff Sessions, Mike Pompeo, John Kelly, Rick Perry, Elaine Chao, Steve Mnuchin, Wilbur Ross, Andrew Puzder, Nikki Haley, Seema Verma. Most of these appointees are conservative, of course, but they are conventionally conservative. It is striking, indeed, that the most controversial appointment so far is Rex Tillerson to the State Department. He is an outsider to the ways of Washington but he is still the CEO of a company with $380 billion in total assets and 75,000 employees. A populist barbarian storming the establishment gate, Tillerson is not!
Little wonder that Politico reported last week, “Donald Trump’s White House-in-waiting is already being roiled by divisions, with the conservative outsiders who helped power his historic victory colliding with a Republican Party establishment muscling its way in.”
Something similar happened eight years ago. Barack Obama promised a major break with the previous practices of both parties. Still, his appointments were conventionally liberal: Hillary Clinton, Tim Geithner, Robert Gates (who was actually a holdover from the George W. Bush administration), Eric Holder, Ken Salazar, Tom Vilsack, Gary Locke, Kathleen Sebelius, and so on. Obama largely sampled from the upper echelon of Democratic politicians and policymakers in forming his cabinet—certainly an ideological change from the Bush era but not a fundamental break from past practices.
The system, as it turns out, is much more resilient than presidential candidates on the trail want voters to believe. Electing a new president certainly changes the course of public policy in Washington, but presidents are nevertheless constrained actors. Presidential candidates want us to think they have free rein to make over the government, but the truth is that the occupant of the Oval Office is boxed in from all sides, including in the appointment process.
Trump faces several challenges in using the appointment power to reshape the government. The first is Congress. The Senate possesses the constitutional authority to review certain appointments and reject those nominees it thinks are unfit. This could be why Trump passed over Rudy Giuliani for a cabinet appointment; he may have judged that the confirmation process would be a difficult one for the former mayor of New York City. This might also explain Trump’s decision to make Michael Flynn his national security adviser: The Senate does not review or confirm West Wing appointments.
Congress imposes broader constraints as well. The cabinet departments are, after all, legislative creations, and Congress has the power to write legislation regulating which employees are and are not subject to the appointment process. Starting with the passage of the Pendleton Civil Service Reform Act in 1883, Congress sharply curtailed the presidential nominating power, setting the overwhelming majority of executive department employees outside the discretion of the commander in chief. By and large, the same civil servants who worked under George W. Bush and Barack Obama will continue to work under Donald Trump, without worry that the president can dismiss them.
John F. Kennedy summarized the limits the president faces better than anybody:
The fact is that I think the Congress looks more powerful sitting here than it did when I was there in the Congress. . . . When you are in Congress, you are one of a hundred in the Senate or one of 435 in the House . . . but from here I look at . . . the collective power of the Congress . . . and it is a substantial power.
Executive appointments are just the tip of the iceberg. When Trump enters office, he will find Congress to be a potentially implacable foe on any matter where his will runs contrary to its own.
And Trump—or for that matter any outsider president looking to effect sweeping change—must confront the problem of asymmetric information. The federal government is so complicated that one must possess a great deal of technical, specialized information to manage it properly. The president typically does not possess that information, at least not outside a few policy domains (for instance, as Dwight Eisenhower did with the military). He must appoint officials who possess such knowledge. But where do people acquire this? They usually gain it from participating in the affairs of state—the very same affairs that the president has promised to alter.
There are, of course, experts who are nonetheless looking for big changes—for instance, Rep. Tom Price, whom Trump nominated to head the Department of Health and Human Services, and who came to Congress after a successful career as an orthopedic surgeon, is intent on rolling back Obamacare—but the president still faces a substantial challenge. Oftentimes, those whom he taps to change the system have been longtime participants in sustaining it. This problem is compounded when one considers the large number of lower-level appointments the president is authorized to make, where he can only afford to spend a small amount of face time with his nominees. Quite often, he is forced to trust that the people he has delegated responsibility to will, in turn, make good appointments.
Expertise, in other words, can create a subtle bias for the status quo, which was on full display in the aftermath of the 2008 financial crisis. As Ron Suskind reports in Confidence Men, President Obama wanted to reorganize Citigroup in 2009 and instructed Treasury Secretary Geithner to put together a plan. But, per Suskind, Geithner never followed through. As one high-level banking executive explained to Suskind: “The president had us at a moment of real vulnerability. At that point, he could have ordered us to do just about anything and we would have rolled over. But he didn’t—he mostly wanted to help us out, to quell the mob. And the guy we figured we had to thank for that was Tim. He was our man in Washington.”
The irony is that the president, in many respects, is less able today to fulfill his constitutional duty to “take care that the laws be faithfully executed” than he was in George Washington’s time. The Senate constrains him, via its advisory role, as always. But now the vast bulk of the executive branch is outside his aegis, easily able to resist his political or ideological agenda. Moreover, the technical expertise required to manage the government means that the relative handful of appointments he does get to make is often from the “establishment” he ran against.
All of this runs contrary to the image of the presidency that candidates wish to cultivate on the campaign trail. They want voters to think of the president as a kind of superman—able to work his will on any policy issue that confronts him. But this is just not the case. The president, in truth, is a restricted government agent, just as all officials are in our system of checks and balances. In this nomination process, we are witnessing an early glimpse of how our system of government will constrain and frustrate Trump, just as it has his predecessors.
