Category: US business

An accurate look at the economy

Tyler Durden has a look at the economic report you didn’t read from the mainstream national media this morning:

Today’s first estimate of Q1 GDP growth is expected to show the US economy growing at a whopping 8.5% rate as government aid and vaccinations fuelled spending. The problem, as discussed recently, is that it’s all downhill from here with Goldman recently slashing its GDP outlook and expecting growth to slide to a muted trendlike 1.5%-2.0% by the end of 2022. Of course, as Bloomberg’s Laura Cooper notes, slowing momentum from an exceptionally strong level doesn’t mean a stalled recovery with the Atlanta Fed’s nowcast still pointing to still-robust activity in July. High-frequency gauges suggest consumer spending remains strong. And solid job gains can extend as workers return to the workforce, with the labor market outlook “very strong”, according to Powell. Of course, risks remain given stumbles towards herd immunity with only half of the country fully vaccinated. And hesitancy is becoming a more prominent risk. But while the variant spread alongside rising infection rates can slow the recovery, it’s unlikely to derail it – even if more data surprises are in store.

And while few would really care about GDP as a result, the BEA managed to shocked market watchers when it reported that in Q2 GDP rose just 6.5% SAAR, a huge miss to the expected 8.5%, and just barely higher than Q1’s 6.4% annualized rate. The print was such a surprise many were wondering if someone at the BEA had a fat finger accident.

What was behind the huge miss: the main cause was an unexpected drop in inventories, which subtracted 1.13% from the bottom line GDP print. This number was expected to be positive (more below). Another reason is that the GDP Price Index (deflator) rose 6% annualized, vs 5.4% forecast. This subtracted a further 0.6% from the annualized GDP print.

Digging through the numbers, the second-quarter increase in real GDP reflected increases in consumer spending, business investment, exports, and state and local government spending that were partly offset by decreases in inventory investment, housing investment, and federal government spending. Imports, a subtraction in the calculation of GDP, increased.

  • The increase in consumer spending reflected increases in services (led by food services and accommodations) and goods (led by other nondurable goods, notably pharmaceutical products).
  • The increase in business investment reflected increases in equipment (led by transportation equipment) and intellectual property products (led by research and development).
  • The increase in exports reflected an increase in goods (led by non-automotive capital goods) and services (led by travel).
  • The decrease in inventory investment was led by a decrease in retail inventories.
  • The decrease in federal government spending primarily reflected a decrease in nondefense spending on intermediate goods and services.In the second quarter, nondefense services decreased as the processing and administration of Paycheck Protection Program(PPP)loan applications by banks on behalf of the federal government declined.

A look at the numbers reveals the following:

  • Real Personal Consumption came in at 7.78%, higher than the 7.74% in Q1. On an annualized basis it came in at 11.8%, far above the 10.5% expected and above the 11.4% in Q1. In other words, consumer were not the reason for the big miss in Q2. Final sales to private domestic purchasers q/q rose 9.9% in 2Q after rising 11.8% prior quarter
  • Fixed Investment contributed just 0.57% to the bottom line GDP print, a big drop from the 2.25% in Q1. Nonresidential fixed investment, or spending on equipment, structures and intellectual property rose 8% in 2Q after rising 12.9% prior quarter
  • A big surprise was in the change in Private Inventories, which shrank -1.13% on expectations of an increase. It followed last quarter’s 2.62% inventory destocking, and suggests that there will be a lot of pent up inventory rebuilding growth in the quarters ahead.
  • Trade, or net exports (exports less imports) subtracted another -0.45% from the headline GDP print, as exports turned positive 0.64% reversing Q1’s -0.30% drop. But it was continued imports – a GDP detractor – which subtracted -1.09% from the headline number.
  • Finally, government consumption subtracted another -0.27% from the headline print, a big drop from the 0.77% boost earlier. …

Elsewhere, the BEA reported that real disposable personal income (DPI) — personal income adjusted for taxes and inflation— decreased 30.6% in the second quarter after increasing 57.6percent (revised) in the first quarter. A more updated number will be revealed tomorrow when we will get the personal income and spending data for June.

According to the BEA, the Q2 drop in current-dollar DPI primarily reflected a decrease in government social benefits related to pandemic relief programs, notably direct economic impact payments to households established by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act. Personal saving as a percent of DPI was 10.9 percent in the second quarter, compared with 20.8 percent (revised) in the first quarter.

But perhaps most important was the inflation/PCE data in the report, which revealed that the GDP price index rose 6% in 2Q after rising 4.3% prior quarter, and well above the 5.4% expected, while core PCE q/q rose 6.1% in 2Q after rising 2.7% in the prior quarter, in line with expectations.

The BEA added that prices of goods and services purchased by U.S.residents increased 5.7% in the second quarter after increasing 3.9%. Energy prices increased 20.6% in the second quarter while food prices increased 2.0% •Excluding food and energy, prices increased 5.5% in the second quarter after increasing 3.2% in the first quarter.

Overall, this was a surprisingly poor GDP pring, but it had two silver linings: personal consumption was far stronger than expected as households continued to drain those $2.5 trillion in excess savings; second the drop in inventory means that in the current and future quarters, retailers will have to restock inventories which will of course boost GDP, in other words, today’s GDP shortfall will translate into stronger GDP contributions in future quarters.

Tim Nerenz adds:

This was not supposed to happen. Two massive stimulus bills, rapid drops in Covid, rapid increase in vaccination, reopening of businesses and schools, and a general euphoria brought about by the change in administration.

While the experts were surprised, ordinary folks are not. We see the higher prices, restricted hours of operation, empty storefronts and commercial office spaces, unfilled jobs, shortages of all sorts of things from disrupted supply chains. 13 million remain jobless 15 months after the 2020 lockdown crash.

Surveyed confidence in the direction of the economy has fallen steadily in recent weeks from 60% to 40%, and the President’s approval rating – rightly or wrongly – has fallen accordingly.

I recently read an interesting old article defending Say’s Law (the law of markets) which proposed that there is no “cause” for poverty – it is the default setting and natural state of idleness. It is prosperity that can and must be “caused”; and it is caused by the the production and exchange of valuable goods and services.

That is why the growth of “P” in GDP is so important; it is a measure of our prosperity and living standards.

“Lockdowns” can be better described as forced idleness to understand their impact on prosperity and poverty. Unlike partisan political matters which benefit one faction to the detriment of another, economic prosperity policies cut across party and ideological affiliations.

Economics is not red or blue; it is either sound or unsound, and markets – not politicians – pass judgment on particular theories and policy prescriptions. We are all economic actors in our market economy; we are the P in real GDP.

My favorite economist joke: economists and meteorologists both use complex mathematical pattern models to predict future events. The difference is that meteorologists have not yet fooled themselves into believing they can make it rain.

If economic growth is 6.5 percent but inflation is 6 percent, then real economic growth is only 0.5 percent. That’s Barack Obama levels of “recovery.”


Journalism and education today, such as they are

Kevin D. Williamson writes about the New York Times 1619 project and draws conclusions about journalism education:

What to make of the case of Nikole Hannah-Jones, organizer of the New York Times’ sloppy and troubled 1619 Project, who has been denied, at least for the moment, tenure for a professorship at the University of North Carolina after a pressure campaign from conservative critics? …

It is a truth universally acknowledged that professors of journalism are among the most genuinely worthless specimens walking God’s green earth and that any halfway self-respecting society would exile them to the moon, and I am not at all sure that an advanced degree in journalism is more of a qualification than a disqualification when it comes to instructing students. (Set aside for the moment that journalism is not something that can be learned in a classroom. It is a trade, not an art or a science, and journalism degrees are some of the purest lab-grade bunkum ever produced.) …

And, of course, the more persuasive criticism of Hannah-Jones is about that — her practice of journalism, which is distinct from scholarship, though the two intersect at points. The National Association of Scholars sent an open letter to the Pulitzer committee (who are weasels in full, or at least mustelid-adjacent) demanding that they revoke the prize given to Hannah-Jones, and their account, along with the case made here at National Review and elsewhere, is damning. One of the Times’ own fact-checkers on the project, historian and African-American studies professor Leslie M. Harris of Northwestern University, warned the Times that key claims of the work were unsupportable. She listed other mistakes that she had communicated to the Times before the project was published but that went uncorrected.

When the Times did get around to amending the report, it did so in a guilty, sneaky, underhanded way — “stealth edits,” or unacknowledged corrections — for obviously political reasons. Donald Trump, running for reelection as president, had made a pet cause of the 1619 Project, some Democrats worried that the 1619 Project was giving him rhetorical ammunition, and the editors of the Times buckled under the consequent pressure. Hannah-Jones did the cable-news circuit claiming, preposterously, that the 1619 Project had never said what it said, and the Times reworked critical passages in an attempt to deny Trump a talking point. This is intellectual dishonesty — it is intellectual dishonesty in scholarship, it is intellectual dishonesty in journalism, and it is intellectual dishonesty in any other context. …

As usual, our focus on the personality in question — on the hate object with a face and a name — leads us astray. As an ideological and cultural matter, how much does it really matter who, exactly, sits in the Knight Chair in Race and Investigative Journalism? Because the chances are 104 percent that the Knight Chair in Race and Investigative Journalism is going to be a semi-maniacal ideologue of approximately the Hannah-Jones kind in any case. The ideology is built into the position, and so is the bias. They aren’t going to hire Charles Murray. The Associated Press is going to go right on being a biased and at times incompetent organization with or without Emily Wilder.

If you want to cancel something, cancel the UNC Hussman School of Journalism and Media in toto. People who want to work as reporters should study economics, history, Victorian novels, French poetry, art, physics — almost anything but what is taught in journalism schools. You can’t go building a bullsh** farm and plant it thickly with bullsh** and then act surprised when there’s bullsh** under foot. In many years of interviewing college students and recent graduates for journalism jobs, I have never once met a journalism major who could tell me what “millage” is, though I have heard them hold forth on privilege and intersectionality and whatever the bullsh** chef’s special is down at the bullsh** market.

A UW friend of mine asked for my opinion about this, 33 years after I departed UW–Madison with a double-major (journalism and political science, which makes me, yes, one of those liberal arts graduates) bachelor’s degree and toward my 33-year career in this silly line of work.

In Britain, journalism is a trade, the sort of thing you get at a British equivalent of a Wisconsin technical college or a community college in other states. That would seem to disagree with Williamson’s assertion about going to school to learn economics (two classes), history (minor), Victorian novels, French poetry, art, physics (negative to the last four), etc.

I was a student of the UW School of Journalism and Mass Communication in the 1980s. Highlights included:

  • An assignment to go to a public place and ask 10 random people what they thought of journalism. I hated the assignment, but it served a valuable purpose. If you can’t go up to strangers and ask them questions they may not want to answer, you cannot do this job.
  • The same professor who graded weekly assignments on a scale of 1 to 10, with each error (generally Associated Press Stylebook errors) subtracting one point. He wrote that the piece was actually well written, and too bad about the errors reducing the score to a 7. A light bulb went off in my head. I ended up getting an A.
  • I got a B/C in my Law of Mass Communications course. Fortunately I have avoided doing things in my career (so far) that led to a lawsuit, though I have been threatened. (One thing we were taught: Truth is an absolute defense to libel, and if you’re going to say something about someone’s alleged criminal activities, you better have the criminal complaint as your source.)
  • A broadcast journalism course taught by a Madison TV anchor. That was fun. (The after-final party at Paisan’s in Madison, which included pitchers of sangria, was also fun. After that I decided to go cover a girls basketball game. I finally, uh, started paying attention in the fourth quarter, halfway through which the team I was covering trailed by 12 in the era before the three-point shot. But my showing up was worthwhile because the 12-point deficit led to a furious comeback win.)
  • A TV news class that included my anchoring debut. It’s on a VHS tape somewhere in my house.
  • A public affairs reporting class taught by a New York Times correspondent. The syllabus included a long list of stories we were supposed to cover. At the time I was working part-time at a Madison-area weekly newspaper. I asked the prof if I could submit the stories I was writing for the paper. He said that would be fine. That led me to one of my first career goals, to get paid twice for the same work. That also works well if, for instance, you work for a newspaper covering sports and announce sports on radio on the side.)

The 33 years since graduation have proven that journalism is like most lines of work where you get better at it by doing it. I got hired for my first full-time job because I was getting a journalism degree (which made me, I think, one of the few J-school graduates to have a job lined up before graduating, which made for a pleasant final six weeks of college.)

Journalism classes were about one-sixth of my UW Bachelor of Arts credits. The idea was to be broadly educated in areas beyond my major, which is what Williamson claims to support. It’s difficult to get hired, though, if your employer has to train you from ground zero. (Though I have come to the conclusion that if I had someone with superior work ethic, I could teach them what they need to do. More on that later.)

There was a lot about journalism I learned after I left UW. J-school did not cover such subjects as how you handle threats to your health from people who don’t like your work. (Short term: Carry an aluminum baseball bat in your car. Today, I honestly believe reporters should conceal-carry handguns for their own safety.) The reason more than anything is the reality of learning by doing, or experiencing. Here, for instance.

Back in 1999, the New York Times reported:

This summer, the Reader Inc. Editorial Training Center plans to open its doors in Oshkosh, Wis., to its first class of 20 students. All will be recruited by some of Thomson’s 56 newspapers, all committed to going back to work at those newspapers.

”Our hope is we can recruit some good people with roots in the community,” said Stewart Rieckman, the executive editor of the Oshkosh Northwestern (circulation 27,000).

As soon as traditional journalism-school graduates hit the newsroom, Mr. Rieckman said, ”they’re looking for the next stepping stone.”

Terry Quinn, a senior vice president of Thomson Newspapers, said the program would teach journalistic skills, but also explain in detail the medium’s business side.

Trainees will ”spend a week in their home newspaper office being acclimatized and electronically hooked up,” Mr. Quinn said. ”Then they go for 12 weeks to the training center in Wisconsin and then they go back for a further six weeks’ training” at the sponsoring newspaper.

Their reward, if they make the grade, will be a job at a starting salary of $17,000 to $22,000.

(Side note: I reached that salary a decade before that.)

Michael Janeway, director of Columbia University’s program for Journalism in the Arts, called Reader Inc. ”a shot at short-cutting” a good journalism education. ”They’re rationalizing their own paltry investment in news editorial instead of investing in salaries,” he said.

But Mr. Quinn contends that traditional journalism schools impart a subtle snobbery about small-town journalism that has hurt the profession. ”I call them ‘wannabe’ Woodward and Bernsteins,” he said. ”They turn up their noses at the kind of community journalism that connects with readers.”

Thomson Newspapers, the former (and unlamented) owner of eight Wisconsin daily newspapers, then sold all their Wisconsin daily newspapers to Gannett and exited the newspaper business. I had predicted the sale in print, except I got the order of buyer and seller wrong.

Two decades later, Quinn had a partial point about “‘wannabe’ Woodward and Bernsteins,” except that Quinn’s perspective came from the owner of daily newspapers that had multiples of circulation more than The Post~Crescent, the largest Wisconsin daily Thomson owned. Appleton is not a small town. Small towns do not have daily newspapers. Small towns have, or are covered by, newspapers printed less often than every day that cover things like city council and school board meetings, school concerts, local events, etc.

If journalism had too many “Woodstein” (what the Washington Post’s Bob Woodward and Carl Bernstein were called by their editor, but you knew that from the movie “All the President’s Men,” right?) types, that would be one thing. Similar to small-market sports teams, the thing for their bosses to do is to get the best possible work out of them to benefit where they are working now, which would have the side benefit of making their résumés look good.

The bigger problem is the J-school graduates who are out to change the world, or so they think. They bring an agenda with them, which is not necessarily (in fact, it usually isn’t) what their audience wants to know about — what is happening in their area in ways that affect them. They also bring with them their generation’s qualities, if that’s what you want to call them, of fragility and inability to cope with people who don’t like them.

I have written often in this space about the failings of those now in my line of work. This piece, for instance, notes my brief days at a daily newspaper. If I may quote myself (and of course I can, because this is my blog):

I worked in a daily newspaper newsroom in the early 1990s, as one of four reporters (in addition to a sports reporter). The number of married reporters in that office totaled zero. The number of reporters with children in that office totaled zero. The number of homeowners among the reporting staff totaled zero. The number of regular churchgoers among the reporting staff probably totaled zero. You can’t cover your community without, to use a cliché, skin in the game beyond a regular paycheck.

That, of course, is advice that late-1980s Steve would have ignored. Late-’80s Steve worked and lived in a community where, it’s safe to say, the number of people like me — college-educated and unattached — could be counted with, at most, two hands, out of a community of more than 4,000. (I dated two of them. Didn’t work out.) Some would also argue that entanglements prevent reporters from being impartial and unbiased. Impartiality is dangerously close to apathy, and eliminating bias is probably impossible among human beings, but being fair is not.

I have had some mentoring opportunities in my career. A local high school graduate who was switching her online college major to journalism asked to do some writing. So I hired her to do such mundane things as covering government meetings, which she did with more enthusiasm than I ever mustered. She got her degree, and she has been a weekly newspaper editor and a TV news producer. She told me she learned more from me than she ever learned in journalism school.

I have spoken to numerous journalism and communication classes about the various adventures of my job. One of those was not the local university’s late communications department, whose chair believed that weekly newspapers were beneath him. I outlasted his career.

There will always be people who don’t like your work, because they don’t want to read what they disagree with. (Mark Twain wrote that if you don’t read the newspaper you are uninformed; if you read the newspaper you are misinformed.)

If I were teaching journalism I think I would teach such subjects as:

  • The five Ws and one H, and why “why” and “how” get you the most interesting answers.
  • How to interview someone — have a few things you want to find out, but otherwise have a conversation with your source, and where it goes is where it is supposed to go. Part 2: How to get what you want without getting the phone slammed down.
  • The important things in who and what you’re covering.
  • How taxes work.
  • How your media outlet makes money, and finessing that reality while you do your job.
  • Why cynicism is your friend.
  • You need to learn how to present stories with words, sound and video, because media outlets, even newspapers, use all three, thanks to the Internet.
  • Attribution, or, one way to avoid being successfully sued.
  • Where your opinion belongs, and does not belong.
  • People aren’t going to like you. Get over it, or get out now.

Again, though, you get better at this by doing it, but not merely by doing it, but by having your work professionally judged and corrected. (I suspect that saved me in my early days from unpleasant conversations with people I was reporting on, though I have had at least my share of those over the years.) That is what editors are supposed to do. I sometimes wonder based on what I read if editors (particularly copy editors) exist anymore. Certainly one thing that’s harder to find is living, breathing institutional memory, the people who covered stories years ago and can provide context to current affairs. They get laid off because some suit thinks they make too much money, or they have bad attitudes, or whatever.

A friend of the inspiration of this post posted a photo of a roll of toilet paper, saying it had more use than news reporting today. Today’s newspaper is inevitably the next day’s recycling. The media has such an important role in our lives that it is the only line of work constitutionally protected. But people in my line of work need to listen to their critics, particularly those who don’t get paychecks from media companies. Some of them are too arrogant to do that, particularly to listen to those with a different ideological worldview.

The reason to do this work is because the work is necessary. You will get paid little, a lot of people won’t like you, and a lot of your work will go unnoticed. As John F. Kennedy put it, life is unfair.



James Freeman:

Inflation is surging as Washington prints and spends money at historic levels. Meanwhile Covid-related policies are still making it hard for businesses to staff up and increase production. A former Trump economic adviser isn’t the only one concerned that too much money chasing too few goods may be more than a temporary problem.

The former Trump adviser, Kevin Hassett, served as chairman of the White House Council of Economic Advisers. Now he’s outside government and watching the feds shovel cash to consumers while making life more difficult for producers. Today Mr. Hassett writes via email that “the Biden Administration is providing the biggest positive stimulus to demand since WWII, and at the same time doing everything it can to suppress supply. Higher [unemployment insurance] benefits, closed schools (which keep one parent at home), and promised corporate tax hikes practically guarantee that supply can not keep up with demand. It is a recipe for an inflation shock we have not seen in the U.S. in a generation.”

It’s not just the Biden administration’s reckless fiscal policy at issue. On the monetary side of the Beltway swamp, the Federal Reserve continues to maintain emergency easy-money policies even though the U.S. economy has been rebounding since last summer. And all of the money the Fed has created is not just showing up in markets for virtual coins and actual beach houses. Some Fed officials have dismissed general inflation as merely “transitory” following the pandemic. The Journal’s Gwynn Guilford reports today:

Consumer prices surged in April by the most in any 12-month period since 2008 as the recovery picked up, reflecting both rising demand as the Covid-19 pandemic eases and supply bottlenecks.

The Labor Department reported its consumer-price index jumped 4.2% in April from a year earlier, up from 2.6% for the year ended in March. Consumer prices increased a seasonally adjusted 0.8% in April from March…

U.S. stocks fell and government bond yields rose after the inflation data was released. Investors are concerned that rising prices could prompt the Federal Reserve to move on interest rates sooner than expected.

This column has been surprised that America’s asset managers have not reacted more aggressively in response to the inflation threat. Perhaps it is because so many of the people who run money are too young to remember the inflation of the 1970s or have only vague childhood memories of their parents’ anguished discussions on the topic. But if bond investors demand higher yields, consumers feel the pain when they borrow at higher interest rates. If both investors and consumers come to expect higher prices in the future, the problem will not be transitory.

Richard Fisher does remember the 1970s. As a young economist he joined the Carter Treasury Department while inflation was raging. More recently he spent a decade running the Federal Reserve Bank of Dallas. He’s undeclared on the question of whether the current inflation spike is transitory or not and says “we’re in a tug-of-war” between big near-term price pressures and long-run inflation expectations. “I hope the Fed is right,” he says in a Wednesday phone call.

Mr. Fisher respects his former Fed colleagues while also noting the “risk they are running” in waiting before taking measures to fight inflation—like raising interest rates or shrinking the Federal Reserve’s balance sheet to drain cash out of the financial system. He notes that it takes time for Fed policy changes to “work their way into the real economy” and so by the time Fed officials recognize a problem it’s possible that producers and consumers will already expect long-term inflation, which in itself can create more than a temporary problem. He also noted the challenges for businesses that now must make investment decisions in an environment of rising costs for raw materials.

Maybe some Fed officials are beginning to appreciate the risks they’ve been running. Now the Journal’s Paul Kiernan reports from Washington:

A top Federal Reserve official said on Wednesday he was surprised by a larger-than-expected jump in inflation last month, but stressed that more data would be necessary for the central bank to begin scaling back its easy-money policies.

“I was surprised,” Richard Clarida, the Fed’s vice chairman, said of the 4.2% increase in consumer prices in April from a year earlier. “This number was well above what I and outside forecasters expected.”

Perhaps Mr. Clarida and his Fed colleagues will consider the idea that they’ve already created enough money.

Much of the easy-money crowd wants the Fed to run loose until unemployment falls much further. But increased unemployment benefits that discourage work are not the only reason the money-printers may not get the job creation they want in return for the inflation they’ll tolerate. Research from San Francisco Fed economist Marianna Kudlyak and Stanford’s Robert Hall suggests that Washington’s ability to manage the speed of hiring within a recovery is limited:

A remarkable fact about the historical US business cycle is that, after unemployment reached its peak in a recession, and a recovery begins, the annual reduction in the unemployment rate is stable at around one tenth of the current level of unemployment. For example, when the unemployment rate was 7 percent at the beginning of a year, the unemployment rate fell by 0.7 percentage points during the year. The economy seems to have an irresistible force toward restoring full employment.

As for the forces who run the Fed, let’s hope that their current inclination not to act against inflation won’t create irresistible problems for the rest of us.

“The Fed has to be hoping that their nonchalance is reassuring rather than destabilizing for inflation expectations. I hope they’re right,” says former Richmond Fed President Jeff Lacker.

During the 1970s inflation helped end the presidencies of Gerald Ford (whose “Whip Inflation Now” campaign didn’t stop the 5.76 percent inflation rate) and Jimmy Carter. Carter seized on economist Arthur Okun’s “misery index” to criticize Ford’s economy, when the sum of the inflation rate and the unemployment rate (which should be the U6 number instead of the popularly quoted unemployment rate) was 12.7. By June 1980, Carter’s misery index was 21.98. (Which is why Ronald Reagan defined a recession as when your neighbor loses his job, a depression as when you lose your job, and a recovery as when Carter loses his job.)

By the way, the misery index as of April is 15.03.



Still true a quarter century later

Back in my business magazine days (the end of which begat this blog) I argued that businesses don’t pay taxes; business’ customers pay taxes.

Ryan Young proves I was right then and now:

A mammoth infrastructure bill is on the way from Congress, and policy-makers are touting a corporate-tax-rate hike to help pay for it. Treasury secretary Janet Yellen even proposed a global minimum corporate-tax rate this week. These are both bad ideas for three reasons.

First, corporations do not pay any corporate tax — individuals do. That is because companies pass on their costs. Some of the tax is paid by consumers, who pay higher prices. Company employees pay some of the tax through lower wages. And investors’ retirement accounts pay some of the tax through lower returns.

So, while it might be good politics to stick it to big corporations — or at least to posture that way in front of voters and television cameras — a corporate tax-rate hike would not accomplish its intended goal. Instead, taxes are paid by individuals who then get less for their money, receive smaller paychecks, and have a harder time saving for retirement.

In a 2020 study by Scott R. Baker of Northwestern University, Stephen Teng Sun of City University of Hong Kong, and Constantine Yannelis of the University of Chicago estimate that 31 percent of the cost of an increase in corporate taxes is borne by consumers, 38 percent by workers, and 31 percent by shareholders, or about a third each. Other studies have found different ratios. A 2020 Tax Policy Center study, a joint effort between the Urban Institute and the Brookings Institution, estimates an 80–20 split between investors and labor. The Tax Foundation’s Stephen J. Entin estimated in 2017 that labor pays 70 percent or more of the corporate tax. Differences aside, these studies share a common conclusion: Ultimately, corporations themselves pay no corporate tax.

A second problem involves Secretary Yellen’s proposed global minimum corporate-tax rate. She floated the proposal this week at an IMF/World Bank spring meeting in Chicago and would like to have an agreement among G20 countries by July.

For decades, the U.S. long had one of the world’s highest corporate-tax rates, at 35 percent. Former President Trump cut the rate to 21 percent, which is close to the global average of 23.85 percent. A global minimum tax would excuse the U.S. from competitive pressure to make further cuts by giving companies fewer tax havens to which they could flee.

A third problem is that a global minimum corporate-tax rate would open up a fresh rent-seeking opportunity for U.S. corporations — rent-seeking being economists’ term for getting special government favors.

It is not difficult to imagine a U.S. company lobbying heavily to raise its rivals’ taxes in lower-tax countries. This would make the U.S. company more competitive, but in strictly relative terms. Such a lobbying win could aid a company without it having to do the hard work of improving its products or offering consumers better deals.

At the same time, though, foreign companies could lobby to raise U.S. corporate-tax rates for similar reasons. Why bother improving your own company when you can just hurt your rivals instead? That is the real race to the bottom.

The federal government has already amassed a debt larger than America’s annual gross domestic product. The new administration has already increased that burden with a $1.9 trillion COVID spending bill and is proposing to add even more debt over the next 15 years with an infrastructure spending bill of at least $2 trillion.

The revenue to pay for these projects should be raised honestly and transparently. Individuals pay all corporate tax, but its cost is hidden: It never shows up as an item on their shopping receipts, paychecks, or investment statements the way sales taxes and other fees do.

That explains the corporate tax’s political appeal. So does its mistaken “sticking it to the big guys” image. But it is a false image. If lawmakers want something funded, they should tax people directly, so we can better see the connection between what we pay to the government and what we get from it in return.

Of course, that would require honesty on the part of government and politicians.

Garion Frankel adds:

Not only has President Joe Biden threatened to eliminate former President Donald Trump’s signature Tax Cuts and Jobs Act of 2017 — which a National Association of Manufacturers (NAM) news release found significantly increased manufacturing jobs, wages, spending and output by the end of its first year in place — but Biden has also pledged to bump corporate taxes up to 28 percent.

In addition, Biden is committed to increasing marginal tax rates, removing the 20 percent pass-through deduction and much, much more. All of this would be a betrayal to the American people who have suffered so much in the past year — a position shared by leading political figures.

Self-inflicted wounds, media division

Christopher Bedford:

A lot of politicians and businessmen don’t understand that the press only has so much power as we give them. If people don’t trust corporate media — if people don’t respect them — then they don’t have much power at all.

Reporters in particular don’t seem to understand this give and take. By and large, reporters think of themselves as very important, very noble people putting their lives at risk to save American democracy in between brunch dates. Close your eyes and you can almost see chubby little Washington Post journos dramatically whipping their bangs out of their eyes as they whisper: “Democrathy dythe in darkneth.”

Elon Musk gets it, though. When a Washington Post reporter emailed him for comment on a story on how investors are worried he is stretched too thin — a story the reporter almost certainly finished writing before bothering to reach out — Musk replied, “Give my regards to your puppet master.”

“Puppet master” refers to Jeff Bezos, the book-burningdissent-crushingMain St.-wastingChina-loving left-wing billionaire who owns The Washington Post. And “alpha” refers to Elon Musk, who just perfectly demonstrated how to respond to a hostile and dishonest corporate media no matter the story.

I admit I was once very skeptical of Musk. SolarCity was a disaster for the American taxpayer. Teslas are cool if you have subsidies and like screens a lot, but they won’t do you much good when the bombs drop. And then one day, while I was in the middle of an important conversation, I found myself somehow distracted by a television in the background showing a Falcon 9 booster returning to land on the Earth. That was the day I stopped rolling my eyes at that electrical man from Pretoria, even if his technology will destroy us all someday.

Now compare landing space ships to the world of news journalism I joined a bit over a decade ago, where laziness and based stupidity go hand in hand with self-importance.

It’s a profession where it’s noble to print private neighborhood texts and take photographs of children to get just one more scoop on the already known story of Sen. Ted Cruz going Mexico, yet a story about Gov. Andrew Cuomo killing thousands of your parents in your own state is ignored until President Joe Biden can be safely elected.

It’s a world where Brian Stelter feels comfortable talking about how he “crawled into bed and cried,” where journalists think covering Trump was “thrilling in the way that I imagine storming Omaha Beach must have been,” where Brian Williams smiles and waves to a crowd at a Ranger’s game while the jumbotron tells the completely fake story of that time he was super brave and his helicopter was shot down in Iraq.

It’s a place where The New York Times can print falsehood after falsehood about President Donald Trump, and where its reporters can proudly claim credit for starting deadly race riots, while the editor in chief claims Trump “puts [reporters’] lives at risk” by calling “them names.”

It’s a field that builds the “Newseum,” a massive monument to its own importance, while executives and board members pay themselves millions to run the place into the ground.

It’s an industry owned by men like Jeff Bezos.

It’s a thing that doesn’t deserve your respect.

And people like these make my job that much more difficult, since people assume I am just like them, when I am not.


On GameStop and … Trump?

Michael Smith:

I didn’t pay much attention to the GameStop situation [Wednesday] – but oh, baby, after taking some time this morning to look, this was a massive takedown of huge hedge funds guys by a small army of internet day traders – regular folks. The hedge funds had decided to drive GameStop into the dirt and kill it while taking profits along the way and a few determined souls put a stop to it.
I was ready to mock CNN’s Chris Cillizza because he twisted the story to make it all about Trump – I think it may be a law that CNN can’t do a report without mentioning Trump in a negative way, but after reflection, he was sort of right for all the wrong reasons.
The GameStop thing has MAGA written all over it. Small, independent investors with little more than their own wits battling with hedge fund giants with banks and banks of computers and massive amounts of data – and borrowing power…and the little guys put the hedge guys in a several billion dollar hole.
Then the big guys went whining to their buddies in the government and had trading shut down.
It’s a story of the individual against the establishment.
Like I said, it has MAGA written all over it.

Then Smith wrote:

I have no problem with short sellers – in theory – the problem here is that it seems the powerful short selling hedge funds got caught in a naked shorting pinch (a naked short is the practice of short selling shares that have not been affirmatively determined to exist) and when the price started rising, they got their tits in a wringer and panicked.
Naked shorting is illegal, and it seems clear when 140% of the GameStop stock was shorted (expected to go down), some of that just might have been going on.
But it’s not about what is legal or illegal, or who made money, lost money or participated in this process, it’s about the massive hedge funds having the ability to pressure those who manage and control the exchanges to change the rules to their benefit in the middle of the game.
Imagine a college basketball game between Gonzaga, the current #1 team in the nation, and Screw U, a tiny private university that doesn’t even have scholarships. Now let’s say we are deep in the second half and Screw U is miraculously up by 40 points because they are shooting 80% from the field and throwing up nothing but 3 pointers.
With 5 minutes left, Gonzaga calls time out and confers with the refs and after the time out, the refs head over to to the Screw U bench and tell the coaches and players that Gonzaga will be allowed to keep playing, every bucket the Zag players make (no matter from where) now will count for 3 points; however, only 2 points will be awarded to Gonzaga – BUT 1 point will be DEDUCTED from Screw U’s total score for each bucket the Zags make. And to top it off, the Screw U players can’t go back on to the court until 30 seconds remain in the game.
That is the best description I can think of for how I perceive the GameStop situation has played out.
The big hedge funds were losing billions and they received favorable treatment from those who “manage” the markets that an individual investor would never get. We can talk about triggers and circuit breakers all we want but the fact is it certainly appears the stop in trading was done solely to allow the hedge funds time to stop the bleeding and cover their bets.
Of course, since this happened during the Biden administration, me bringing this up is probably misinformation, a danger to democracy and I’ll be put on a list with QAnon conspiracy theorist domestic terrorists.
Let’s not kid ourselves – the Democrats will try to spin this as wealthy Republican Wall Streeters once again taking advantage of the little guy – but the fact is, these hedge funds have become big Democrat donors.
Tom Steyer, who ran for the Dem nomination last round, made his fortune running a hedge fund. Janet Yellin, as Jen Psaki would remind us – our first woman Secretary of the Treasury, has made over $7 million in “speaking fees” from Wall Street, and Citadel, one of the largest hedge funds paid her a little over $800,000 of that.
This is just an example of the necessity of the MAGA movement created by President DJT and why it isn’t going away any time soon. Trump’s 4 years heightened America’s awareness of Swamp Dwellers trying to put one over on the little guy. People have wised up and are paying attention now, thanks to President Trump continually being proven right by the actions of Democrats, the corporate media and the Tech Oligarchy.
This biblical level David vs. Goliath stuff – and that is what MAGA is all about.

Then read this (bad language and all), posted by Will Flanders …

No photo description available.

… who adds:

If it’s true that the White House pressured Robinhood to stop allowing GameStop purchases—interfering with the free market—he should have to answer to the millions of Americans who lost a potential mortgage payment, rent, or car payment to benefit Wall Street fat cats.


Another thing voters rejected Nov. 3

James Freeman:

President Donald Trump didn’t start the dishwasher rebellion. But after hearing the legitimate complaints of consumers, he has led this nonviolent movement to an entirely peaceful series of victories for common sense.

Two years ago this column noted that a band of stout-hearted liberty advocates at the Competitive Enterprise Institute was petitioning the government for a redress of dishwashing grievances. Federal regulations on appliances were making household chores more difficult, time-consuming and expensive. Team Trump took up the cause and began to seek public comment on how to improve the rules. Numerous consumers shared their views, including someone named Gregory, who wrote to the Department of Energy:

Please mother of God, allow someone to make a dishwasher that will get my dishes for a family of 5 clean enough, fast enough to empty the dishwasher by bedtime! Currently, to get a load clean, we have to run it on the hour long cycle, then the four hour cycle to get them clean. This saves neither time, water or electricity.

The Trump administration has now reformed not just dishwasher rules, but other bureaucratic annoyances as well. This week the Department of Energy reports it has completed two additional final rules:

The first rule ensures that Americans can have access to high-performance, time-saving clothes washers and dryers. The second rule ensures access to showerheads that can provide enough water for quality showers.

“Today the Trump Administration affirmed its commitment to reducing regulatory burdens and safeguarding consumer choice,” said Secretary of Energy Dan Brouillette. “With these rule changes, Americans can choose products that are best suited to meet their individual needs and the needs of their families.”
The department is concerned that cycle times for washers and dryers could become very long in the future—reducing the value of these critical time-saving devices. The final rule on washers and dryers allows manufacturers to offer new products that meet consumer demand for clothes washers and dryers that have shorter cycle times. The rule establishes separate product classes for residential clothes washers and clothes dryers with cycle times of less than 30 minutes (45 minutes for front-loading clothes washers)…
“Today’s final rulemakings allow consumers to choose products that can make their lives easier, more comfortable, and save them time,” said Deputy Secretary of Energy Mark W. Menezes. “That time and effort saved can be better spent on the more important things in life.”

“This is good news for those who like a more powerful shower, as well as those who like a less powerful government,” summarizes Ben Lieberman of the Competitive Enterprise Institute.


You are reading the work of the household’s dishwasher, so I can’t attest to that. I can attest that modern clothes washers and dryers are crappy, taking too much time to clean, not always adequately rinsing, and frequently needing more than one cycle to completely dry clothes. Energy efficiency completely misses the point if things have to be washed and dried twice because they’re not adequately designed.

Of course, the presidential administration that finally took the side of consumers over radical environmentalists is leaving Jan. 20, to be replaced by an administration from a party that bends over for the tree-huggers. This rule probably will be changed in minutes after Jan. 20.



The unneeded post-COVID economic fixes

James Freeman:

The arrival of a highly effective vaccine seems like as good a time as any for politicians to consider pausing their massive interventions in the U.S. economy. The Journal’s Peter Loftus, Melanie Grayce West and Christine Mai-Duc report:

The first U.S. Covid-19 vaccinations outside of clinical trials began Monday, kicking off the most urgent mass immunization campaign since polio shots were rolled out in the 1950s…

Pfizer is shipping out nearly three million doses in this first wave, with more expected in coming weeks. Pfizer expects 25 million doses will be available in the U.S. by the end of the month.

Another Covid-19 vaccine, from Moderna Inc., could add to the supply of doses this month if it is authorized, which could happen later in the week. Both vaccines are given in two doses, three or four weeks apart.

…Federal officials expect about 100 million Americans will get immunized against Covid-19 by February or March. The general public could be inoculated in the spring or summer.

Stocks rallied Monday morning on the vaccine news. And for some reason many investors also seem to want another round of debt-fueled Washington spending. It seems likely that at some point there will be a reckoning in the value of the dollar and/or the size of federal tax bills from the 2020 Beltway Covid response. But for now unfortunately the question is whether the response should be expanded still further. Fortunately not everyone is eager to accept Beltway premises.

“Do We Need More Stimulus?,” asks Donald Luskin of TrendMacrolytics in an investment research note today. Mr. Luskin writes:

In client calls this week, we’re hearing a strong consensus that the economy is in a sustainable V-shaped recovery, and that 2021 will be a very good year. We’re not going to say this consensus is wrong. Indeed, it’s what we were nearly alone in predicting all the way back in March and April… Will there be short-term setbacks? Of course, and the formation of a consensus is what usually provokes one…
If anything, our biggest difference from the optimistic consensus is that we’re now thinking past recovery to expansion, and we don’t see it as a stretch that 2021 could be a downright boom.

A downright boom? Mr. Luskin continues making his case:

US households have accumulated $2.5 trillion in personal savings this year, unable or too cautious to spend the prior stimulus money. That’s a moneybomb of pent-up demand equal to 11.8% of GDP, and it will detonate next year when the “third wave” of Covid-19 tops out and 50 million inoculations with the new vaccine are administered through January.

State and local politicians have devastated businesses they consider nonessential, but a lot of money is still sloshing through the economy. We just need to let people use it. Big banks are certainly flush with cash and ready to lend if politicians will allow businesses to operate. And the Journal’s Orla McCaffrey reports that small banks are also in great shape:

Profit at community banks—small, local lenders—jumped 10% in the third quarter from the same time last year, according to the Federal Deposit Insurance Corp. Total loans rose 13.4% in the third quarter, compared with 4.9% for the industry. Deposits surged 16.7%. Noncurrent loan rates have risen slightly this year but are still far below levels seen during the last financial crisis.

Do you think Donald Trump will get any credit for any of this? Of course not.

Biden’s tax and money lies

Joe Biden claims that he will not raise middle-class taxes if he’s elected president tomorrow (or whenever the election becomes official).

Biden is lying as much as he is lying about the bad effects of Biden/Harris policies on your wallet.

Example number one from Jordan Davidson:

A new study shows that Democratic Presidential Nominee Joe Biden’s proposed economic plan would significantly hurt the long-term American economy if implemented.

While many mainstream media outlets claim Biden’s plan will target the wealthy and save the middle-class money, the 50-page study released by the Hoover Institution shows different results.

“Economists have paid too little attention to the economic effects of the Biden plan,” said Casey B. Mulligan, professor of economics at the University of Chicago. “Our report, which focuses on taxation, health insurance, regulation, and energy policy, suggests that these effects are potentially very large indeed.”

The study conducted by a group of financial and economic experts including Mulligan, former Chief Economist of the White House Council of Economic Advisers, and Kevin Hassett, Chairman of the Council of Economic Advisers since 2017, demonstrates how Biden’s plan will hurt everyone.

“We conclude that, in the long run, Vice President Biden’s full agenda reduces full-time equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent,” the report stated.

If Biden’s proposed changes are implemented, the economists warn that, according to the Congressional Budget Office’s projections, 2030 may yield “4.9 million fewer employed individuals, $2.6 trillion less GDP, and $1.5 trillion less consumption in that year alone.” The economists also note that the median household income in 2030 would fall by $6,500 despite Biden’s promises to prioritize the middle class.

In the study, the economists’ main findings center on three conclusions. First, that for Biden to achieve the “ambitious plans to further cut the nation’s carbon emissions,” 1.3 million net additional energy workers will need to be added into the transportation and electrical industries.

“Biden’s plans are ambitious,” says Mulligan. “Unless people drive a lot less, the electrification of all or even most passenger vehicles would increase the per capita demand for electric power by about 25 percent. Simultaneously, more than 70 percent of the baseline supply (i.e., electricity generated from fossil fuels) would be taken offline and another 11 percent (nuclear) would not expand.”

The study also concludes that “labor wedges are increased by proposed changes to regulation as well as to the ACA.” Because of the subsidations, the study found the average marginal tax rate on labor would rise by 2.4 percentage points.

“Labor falls primarily due to new and high implicit taxes associated with more generous health insurance assistance delivered in the framework of the Affordable Care Act (ACA),” the study reads.

“Our quantitative findings for the ACA should be no surprise given what had been found for previous efforts in the U.S. and other countries to expand health insurance coverage,” the study adds.

Lastly, the study concludes that Biden’s plan “reduces capital intensity by increasing average marginal tax rates on capital income.”

“Biden’s plan to raise personal income and payroll tax rates would push their federal rates from below 40 percent to, often, above 50 percent, and these are on top of state income taxes,” the study states, which would hurt small businesses, their employees, and consumers substantially.

While Biden and his VP Nominee Kamala Harris previously promised that they will not “raise taxes on anyone who makes less than $400,000,” they have also promised to repeal the tax cuts made by President Trump, which gave 80.4 percent of all taxpayers a cut and 91 percent of the middle quintile a cut.

“On Day One, Joe Biden will repeal that tax bill. He will get rid of it,” Harris said during the vice presidential debate in early October.

Repealing a tax cut is a tax increase, as those who enjoyed Barack Obama’s allowing the Great Recession payroll tax cuts to expire should know.

Example number two is from John Joyce: posts something determined accurate by Politifact:

Did you know Biden wants to get rid of something called “stepped up basis”? How does this affect you! When your parents pass and leave you the family house, normally you would inherit that property at what it is worth today. If you were to sell that house you would only pay taxes on the gain from what it is worth today and what it sells for. If Biden does away with “stepped up basis,” you will inherit the property for what your parents paid for the property. If you decide to sell you will pay taxes on the difference between the original purchase price and what it sells for today. Here is what this looks like!
Inherited House at Current Value – $200,000
Sells for $205,000

Taxable income = $5000

Taxes Due – 20% of $5000 = $1000

Profit to you = $204,000

Biden Policy

Inherited House at original purchase price – $40,000

Sells for $205,000

Taxable income = $165,000

Taxes Due – 20% of $165,000 = $33,000

Profit to you = $172,000

If your parents were to have sold this property prior to passing, they would have paid no taxes because it was their primary residence.

So much for helping the middle class get ahead.

My educated guess would be that at least 95% of Americans don’t even know Biden has proposed this. We are talking tens of thousands of more tax dollars for the average sold after inheritance! Wow, google “Biden stepped up basis” and educate yourself because this is a biggie!

Example three and more come from the Wall Street Journal:

‘I don’t see red states and blue states,” said Joe Biden in the final presidential debate, borrowing a line from Barack Obama. He must not have examined the policies that he and Democrats in Congress are pushing that would do disproportional harm to Republican states, especially in the South, while favoring Democratic states. Let’s examine four policies in particular:

• A $15 national minimum wage. Mr. Biden supports it and House Democrats last year voted to raise the federal minimum in $1.10 annual increments to $15 per hour in 2027 from the existing $7.25 floor.

Mr. Biden says a federal $15 minimum won’t harm small businesses. But the labor market isn’t national. It varies by state and region based on the dominant industries, labor supply and cost of living. The Labor Department says 21 states plus Puerto Rico had a $7.25 minimum wage as of Sept. 1. Ten of those are Southern states with lower per capita incomes than the Northeast or West Coast.

Their small businesses would be hurt far more than New York ($11.80 minimum wage) and California ($12), where the state minimum is already headed to $15. Seven blue states and 28 cities have imposed a minimum of $15 or higher that will kick in over the next seven years.

A new study from the Employment Policies Institute (EPI) estimates the House legislation would result in two million job losses across the U.S. Fewer than 10% of the losses would be in states with a Democratic governor and legislature. Layoffs would be especially heavy in Texas (370,664), Pennsylvania (143,402), Florida (133,328), North Carolina (121,581), Ohio (108,312) and Georgia (106,427). They’d also be high in 16 other states where the minimum wage isn’t set to rise above the current federal floor.

Labor makes up a smaller share of business operating costs in blue states because rents and utility bills are higher. Businesses in wealthier areas also have more flexibility to raise prices to offset higher labor costs. Most workers on the job for more than a few months earn more than the minimum wage, and a higher minimum discourages businesses from hiring less-experienced workers—or those with criminal backgrounds.

The EPI study estimates that about 60% of job losses from a $15 federal minimum wage would occur among workers between the ages of 16 and 24. No matter. Liberals want to equalize hiring burdens nationwide so Democratic states aren’t less economically competitive.

The blunt reason some people don’t make $15 per hour is either because they don’t provide $15 per hour of value to their employer (labor costs are the number one cost of small businesses), or they cannot be replaced by someone who will work for less than $15 per hour. Employees who don’t like that should improve themselves. The purpose of a business is to provide goods or services to its customers, not to employ people.

• Banning right to work nationwide. That’s also the logic behind the plan to abolish right-to-work laws in the 27 states that prohibit employers from requiring workers to join unions. Most right-to-work states are in the South and West, though West Virginia, Wisconsin and Michigan joined the club more recently.

Right-to-work states have added more jobs and population this past decade, though they also tend to impose lower taxes and other burdens. Boeing announced a few weeks ago it would consolidate its 787 Dreamliner assembly in right-to-work South Carolina after shifting some production there a decade or so ago from Washington state to avoid strikes by its machinist union.

States have been able to pass right-to-work laws since Congress passed the Taft-Hartley Act in 1947. Democrats want to repeal that right to help unions in non-right-to-work states.

• Restoring the state and local tax deduction. The pandemic is accelerating the flight of businesses and high-earners from blue states. By capping the SALT deduction at $10,000, the 2017 tax reform exposed the well-to-do to the full pain of high taxes in blue states. Democrats want to restore the full state-and-local tax (SALT) deduction, albeit with much higher federal tax rates.

In 2017 California, New York and New Jersey accounted for 40% of SALT deducted, according to IRS data, with only 20% of the country’s population. Texas, Florida, Arizona, South Carolina and Montana accounted for about 20% of the U.S. population and a mere 10% of the SALT deducted. Red states tend to have much lower income and property taxes.

• Another bailout for state politicians. House Democrats passed the Heroes Act in May that provides $915 billion to state and local governments. Senate Republicans oppose this blowout after the $150 billion in direct aid plus $90 billion for schools, public transit and Medicaid that flowed to state and local governments under the Cares Act in March.

Democrats will certainly pass another bailout in 2021 if they win the election. This will amount in effect to a red-state subsidy for public-union governance in states like California, Illinois and New York. The Heroes Act would also help blue states by raising the federal Medicaid match by 14 percentage points, and overall bailout funds are mostly allocated based on state population and unemployment.

Democratic states that stayed locked down longer and have higher unemployment have drawn more federal aid. According to our calculations based on Bureau of Economic Analysis data, annualized per capita government transfer receipts in the second quarter after the Cares Act passed were significantly higher in New Jersey ($14,033), Illinois ($9,223), New York ($9,030), California ($8,673), Washington ($8,511) and Oregon ($8,258) than Texas ($6,450), Indiana ($6,085), Tennessee ($5,430), Florida ($5,399), Georgia ($5,353) and Arizona ($5,326).

Mr. Biden is right when he says the government shouldn’t pit states against one another. But he ignores that the national policies Democrats are pushing have the effect of systemically discriminating against red states.

While this state veers politically like someone who has had too many Brandy Old Fashioned, the vast majority of this state outside the Axis of Evil (Madison and Milwaukee) is politically and culturally conservative. So votes for Biden are votes to hurt a majority of this state.

The real COVID catastrophe (which is not about a virus)

Antony Davies and James R. Harrigan:

It has been five months since the American people were told they would be under house arrest for three weeks to “flatten the curve.” Under the guise of protecting us from Covid-19, America’s politicians completed one of the greatest nonviolent power grabs in US history, pushing the lockdowns well beyond the initial three-week prediction, thereby taking control of 330 million lives.

To justify this, they shifted the goal posts from flattening the curve, to halting transmission of the coronavirus entirely. Some even talked about maintaining lockdowns, at least in part, until a vaccine is developed. That could take years.

Quelle surprise.

How did it come to pass that a nation of 330 million was effectively imprisoned, with virtually every sector of the economy shut down either in part or in total? The answer to this question is as clear as it was wrong: In the early days of Covid-19, politicians and experts lined up to tell us that, if we did nothing, up to 2.2 million Americans would die over the balance of 2020.

As of late August, there have been fewer than 170,000 Covid-19 deaths in the United States. If the 2.2 million projection was accurate, then the US lockdown saved in the neighborhood of 2 million lives. But at what cost?

In early March, the Congressional Budget Office predicted that the economic output of the United States economy over the period 2020 through 2025 would total $120 trillion. Just four months later and because of the Covid lockdown, the CBO reduced its projection by almost $10 trillion. That $10 trillion difference is income Americans would have earned had the lockdown not happened, but now won’t.

Economists outside the CBO have estimated this loss at almost $14 trillion. For perspective, the median US household earns $63,000. A $10 trillion loss is equivalent to wiping out the incomes of 30 million US households each year for more than five years.

Our desire to keep people safe, no matter the cost, has already resulted in 10 million Americans being unemployed. By the time things have returned to normal, the total price tag, just in terms of lost incomes and adjusted for inflation, will have exceeded the costs of all the wars the US has ever fought, from the American Revolution to Afghanistan – combined.
And the costs are staggering. As of August, estimates from Chambers of Commerce indicate that around one-third of the 240,000 small businesses in New York City have permanently closed. If that ratio holds for small businesses elsewhere, we could see around 10 million small businesses close permanently across the country. Major retail bankruptcies in the US have been every bit as disconcerting.

All in, the effort to save two million lives from Covid-19 will end up costing us somewhere in the neighborhood of $7 million per life saved. People generally assume the lockdown was worth this massive cost, but there are a couple of things to consider before drawing that conclusion. First, for the same cost, could we have saved even more lives than we did by doing other things? Second, how plausible was the prediction of two million dead in the first place?

If saving lives simply, rather than saving lives from Covid-19 were our goal, we could have likely saved more than two million lives and at a lower cost. How so? For every $14,000 spent on smoke and heat detectors in homes, a life is saved. For every $260,000 spent on widening shoulders on rural roads, a life is saved. For every $5 million spent putting seat belts on school buses, a life is saved.

Each year, 650,000 Americans die from heart disease, 600,000 die from cancer, 430,000 die from lung disease, stroke, and Alzheimer’s. To fight these diseases Congress allocated $6 billion for cancer research to the National Cancer Institute and another $39 billion to the National Institutes of Health in 2018.

The lockdown will cost us more than three hundred times this amount. For a three-hundred fold increase to NCI and NIH budgets, we might well have eradicated heart disease, cancer, lung disease, and Alzheimer’s. Over just a couple of years, that would have saved far more than two million lives.

The lesson here is a simple one: There is no policy that just simply “saves lives.” The best we can do is to make responsible tradeoffs. Did the lockdowns save lives? Some people claim they did – at a cost of $7 million per life saved if the initial estimates were correct – while others fail to establish any connection between lockdowns and lives saved.

Regardless, there are all manner of other tradeoffs here. The lockdowns didn’t just cost millions of people’s livelihoods, they also cost people’s lives. Preliminary evidence points to a rise in suicides. Nationwide, calls to suicide hotlines are up almost 50 percent since before the lockdown. People are less inclined to keep medical appointments, and as a result life-saving diagnoses are not being made, and treatments are not being administered. Drug overdoses are up, and there is evidence that instances of domestic violence are on the rise also.

But what if the lockdown actually didn’t save 2 million lives? There is strong, if not irrefutable, evidence that the initial projections of Covid-19 deaths were wildly overstated.

We can refer to a natural experiment in Sweden for some clarity. Sweden’s government did not lock down the country’s economy, though it recommended that citizens practice social distancing and it banned gatherings of more than 50 people. Swedish epidemiologists took the Imperial College of London (ICL) model – the same model that predicted 2.2 million Covid-19 deaths for the United States – and applied it to Sweden. The model predicted that by July 1 Sweden would have suffered 96,000 deaths if it had done nothing, and 81,600 deaths with the policies that it did employ. In fact, by July 1, Sweden had suffered only 5,500 deaths. The ICL model overestimated Sweden’s Covid-19 deaths by a factor of nearly fifteen.

If the ICL model overestimated US Covid-19 deaths merely by a factor of ten, the number of Americans who would have died had we not locked down the country, but instead practiced social distancing and banned gatherings of more than 50 people, would have been around 220,000.

To date, the CDC reports around 170,000 covid deaths in the United States. In other words, adjusting – even conservatively – for the ICL model’s demonstrated error, it appears that the $14 trillion lockdown perhaps saved about 50,000 US lives. If that’s the case, the cost of saving lives via the lockdown was not $7 million each. The cost was over a quarter of a billion dollars each.

Finally, there is mounting evidence that even if targeted closures had been necessary, a general lockdown wasn’t. Eighty percent of Covid-19 deaths in the US are among those 65 and older. Even if ICL’s flawed model had been correct, and we had been facing the possibility of 2.2 million deaths, only 400,000 of those would have been among working-age Americans. That’s less than two-tenths of one percent of working-age Americans. Social distancing and mandatory masks might have reduced that further. We could have quarantined the elderly, saved nearly all the lives that even the most dire predictions anticipated, and let the economy continue on as usual.

But we didn’t.

Of course, in March, we knew a lot less than we do now. In the face of 2.2 million likely deaths, many claimed that locking down the economy was the right thing to do. Over the subsequent weeks, as data emerged that the threat was far less deadly and far more focused than it had at first appeared, politicians could have released the lockdown.

But they didn’t.

They didn’t because politicians invariably feel the need to “do something.” Despite volumes of evidence from disparate fields like economics, social work, ecology, and medicine, it never seems to occur to politicians that sometimes doing less, or even doing nothing, is by far the better approach. Why should it occur to them? When politicians act and their actions do more harm than good, they always say the same thing: “Imagine how bad it would have been had we not acted.”

But this time, we have evidence. We can compare what happened where politicians reacted with a heavy hand to what happened where they reacted with a light touch. And the evidence we have so far points to the same conclusion: Our politicians destroyed our economy unnecessarily.

This won’t stop our politicians from congratulating themselves, of course. Nothing ever does. When the next crisis comes along they will land on the same sorts of heavy-handed solutions they did this time. The only thing that will chasten them is the anger of the American people. Politicians did far more harm to Americans than Covid-19 did, and that’s what the American people need to remember next time our politicians start down the same pointless road.

Because they will.