In an op-ed in the Wall Street Journal Richard R. Smith and Arafat Kabir call attention to a risk of generative artificial intelligence:

This month’s lackluster employment numbers spurred talk that artificial intelligence is destroying jobs. Whether or not that is showing up in the statistics, AI presents a different challenge than past technological disruptions—in large part because it is eliminating the entry-level positions that traditionally served as stepping stones to career advancement.

This shift helps explain a troubling pattern in workforce anxiety. A recent Pew Research survey shows that more than half of employed adults worry about how AI may be used in the workplace. A September Deutsche Bank survey reports that 24% of workers under 35 express high concern about losing their jobs to AI, compared with only 10% of those over 55.

It’s been historically true that younger workers embrace new technologies while older workers resist change. But AI seems to have flipped this dynamic. When AI automates routine tasks, organizations often find they need experienced employees who can combine AI capabilities with years of business knowledge. What those organizations don’t need is entry-level employees learning the basics. Data shows rising unemployment since 2022 among 22- to 25-year-olds in AI-affected sectors—even while employment for older workers remains stable.

The traditional bottom rung of the career ladder is disappearing. We need to think about how younger workers will be affected in an AI-driven future to ensure that we have enough talent to replace retiring workforces.

They present two possible remedies:

This begins with companies recognizing that AI represents a fundamental shift rather than merely another tool. One example could be focusing on “AI native” tracks in which, instead of starting new employees with routine tasks that AI can handle, they begin with AI oversight and optimization roles. They learn to train, monitor and improve AI systems while simultaneously building domain expertise—combining technical fluency with business acumen.

A second option can be a mentor-intensive development program that pairs junior workers directly with senior professionals—letting AI handle the routine tasks that used to fill a junior employee’s day. Instead of learning by doing grunt work, juniors learn judgment and strategy by working alongside experienced colleagues on higher-level problems from day one, building the business acumen and strategic thinking that AI can’t replicate.

In short they’re warning about a problem that is already emerging but will become dire in ten or twenty years and advising managers “don’t let that happen”. Rather than relying on an implicit moralism that assumes managers can simply choose to behave differently without facing personal or professional penalties, I wish they had focused on the political and economic realities that underpin the behaviors they are warning about.

That reminded me of a conversation I had with my boss (a regional manager for a Fortune 500 company) nearly 50 years ago. When I pointed out the risks and adverse consequences of the course of action he was advocating, he told me “If I don’t focus single-mindedly on my numbers for next quarter, my boss will put someone in here who will” or, in other words, “long term be damned!”. That was one of the things that convinced me to leave the corporate world and strike off on my own.

The question I wish that Dr. Smith and Mr. Kabir had addressed is why managers would act in the way they prescribed. For the last forty years at least short term thinking has dominated and people are very strongly predisposed to keep doing what has worked for them in the past.

It’s not enough that they’re risking cutting off the pipeline that would provide senior engineers, technicians, or managers in the future. Their focus is on the bottom line and stock prices because those are the incentives they have. How would incentives need to change for managers to do what the authors propose?

Absent changes to compensation structures, promotion criteria, or market expectations, exhortations to “think long term” are empty. Managers respond rationally to incentives, and for decades those incentives have rewarded short-term extraction over institutional continuity.

Last night as we were channel-surfing my wife said to me “We can watch President Trump’s address” to which I responded “That depends on your operative definition of ‘can'”. We didn’t watch it.

Did I miss anything?

In his most recent Substack Scott Sumner lists nine principles he continues to favor despite their fall from favor in the present “economic consensus”:

1. Fiat money central banks can always boost nominal GDP, if they choose to do so. They can also restrain inflation, if they choose to do so.
2. We should not pay interest on bank reserves.
3. We should not use fiscal stabilization policy.
4. We should balance the budget, at least in real terms.
5. We should have free trade with countries that don’t invade their neighbors.
6. Anti-trust should focus on high prices, not low prices.
7. We should avoid so-called industrial policies. (Check out Richard’s Hanania’s post on the subject.)
8. We should avoid rent controls, price controls and government ownership of business.
9. We should end residential zoning restrictions and move toward school choice, health saving accounts, carbon taxes, congestion pricing and progressive consumption taxes.

By and large I agree with him.

This post is a rejoinder to a remark by a commenter to the effect that “the stock market doesn’t always go up”.

How to read the graph above:

• The x-axis spans nearly four decades.
• The y-axis barely moves.
• Long flat plateaus dominate meaning there are many consecutive positive years.
• Increases occur only in crisis clusters:

• 2000–02 (dot-com / accounting scandal regime)
• 2008 (global financial crisis)
• 2018 (policy tightening scare)
• 2022 (inflation + rates shock)

Over the last 38 years the S&P 500 has only shown year-on-year decreases seven times.

That’s certainly not random behavior and it differs markedly from the behavior over preceding decades.

If the stock market “does not always go up” in any meaningful probabilistic sense, we would expect negative years to occur with some regularity. Instead, since 1987, negative S&P 500 years have been rare and highly clustered. The market goes up almost every year and only declines during systemic crises. In the previous period the stock market posted year-on-year declines a third of the time. The present pattern is incompatible with randomness and inconsistent with a market primarily driven by earnings.

However, it is completely consistent with a stock market that is underwritten by policy, both monetary and fiscal, and structural changes. The vertical annotations in the graph illustrate Federal Reserve interventions.

That has implications including decrease in “real investment”, e.g. building factories, greater income inequality, and increasing dependence of indices on a handful of stocks.

I think that Brown University is making a mistake.

Once an institution advertises (or allows it to be known) that it has:

• Extensive camera coverage
• Card access logs
• Campus police
• Integration with city law enforcement

it implicitly creates an expectation that post-event reconstruction should be fast and decisive. Silence invites speculation that they know more than they’re saying.

Law enforcement can plausibly cite an “ongoing investigation.” Universities cannot do so as easily. They are not neutral actors. They are reputational actors.

Any institution that relies on public trust and stakeholder confidence (donors, alums, students, faculty, etc.) is taking a substantial risk. It invites speculation that the institution knows more than it is saying, even when that may not be true. In a high-information vacuum, narrative fills the gap, and rarely in the institution’s favor.

As I said in my post yesterday I think that Democrats are likely to run on “affordability” in the 2026 midterms if not in the 2028 general election as well. IMO the issue is a will o’ the wisp if not a poisoned pill for Democrats.

I speak and write idiomatically. A “will o’ the wisp” is (figuratively) a misleading or elusive goal or hope. A “poisoned pill” refers to a solution that imposes considerable damage on the one who applies it.

The reason “affordability” is misleading or elusive is that our political and economic systems depend on continued inflation. Without inflation quietly reducing the real burden of debt and obligations, the political system would be forced to make hard choices—explicit tax increases or explicit spending cuts—that neither party is willing to own. The Republicans don’t want to balance the budget because it would require higher taxes. Democrats don’t want to balance the budget because too many in the party depend on federal spending and they are aware that they will pay a political price if they raise taxes. Few actually believe that the primary beneficiaries of increased federal spending are the poor and the “working class” (by which is generally meant the lower and middle section of the working class). That’s part of the “poisoned pill”.

The other part of the poisoned pill is that the Biden Administration’s policies produced the highest inflation in over a generation. Following the Trump Administration’s tax cuts, increased spending, and the supply shocks caused by COVID-19, Biden’s policies amplified forces already well underway.

There is another aspect of our conundrum that is rarely mentioned and is a bit contentious but which I think is central. The Federal Reserve which maintains the interest rate levers that manage inflation famously has a “dual mandate”: stable prices and low unemployment. For the last generation at least the Federal Reserve has behaved as though it has a third mandate: ensuring that asset prices always rise. Examples include quantitative easing, its post-2008 policy, the “Fed put”, and its policy during the COVID-19 pandemic. That is in direct conflict with stable prices.

Ensuring that stock prices always rise is also in direct conflict with greater domestic production. If there is zero risk of decreases in stock prices, why risk capital by building factories or enhancing productivity? The result is constrained productive capacity, weaker supply growth, and higher prices for goods that actually matter to households—precisely the opposite of affordability.

The City Council and the mayor are continuing to squabble over the city’s budget. At NBC Chicago Mary Ann Ahern and Rose Schmidt report:

An alternative budget proposal without a head tax is moving forward, as the stalemate continues at City Hall.

Members of the City Council got creative in how they made up for the revenue lost by taking out the head tax and replacing it with plans to add restaurant video gaming and sell new ads on light poles and other infrastructure.

After four hours of debate Tuesday, the Committee on Finance approved the alternative budget plan 22 to 13, but it’s still several steps away from final approval.

The proposal is different from Mayor Brandon Johnson’s plan, which includes a tax on the largest companies in the city. Under Johnson’s plan, employers with 500 or more employees would pay a $33 per employee per month tax.

The editors of the Washington Post put it succinctly—”Chicago has lost its mind”:

Chicago has long-term structural problems with its finances, thanks in large part to wildly underfunded pensions. The country’s third-largest city has a history of using short-term gimmicks to paper over its problems, such as a notorious 2008 deal that sold off 75 years of future parking meter revenue for $1.15 billion, which was quickly spent. That deal is still hurting finances today, which should have taught local politicians that there is no substitute for serious fiscal reform. Alas, apparently not.

The city’s net operating budget increased almost 40 percent between 2019 and 2025, “subsidized in large part by temporary federal pandemic funding that kept the City financially afloat,” according to Grant McClintock of the Civic Federation. “The pandemic is over, but many of the programs and personnel positions established during that time remain, and without the benefit of the federal funding that previously supported them.”

Mayor Brandon Johnson (D) proposes to offset a $1.15 billion shortfall by taxing the businesses that anchor Chicago’s economy, borrowing and more gimmicks.

The mayor proposes to increase the tax on the lease of “personal property” like computers, vehicles and software from 11 percent to 14 percent, and to bring back the city’s “head tax,” which would result in large employers paying $33 per worker, per month.

By making it more expensive to do business or hire workers in the city, these measures threaten Chicago’s future economic growth and tax collections. These moves are especially reckless given that the Chicago Fed’s 12-month hiring outlook is the weakest it’s been since the pandemic. Gov. JB Pritzker (D) says the head tax would penalize employment.

It’s illustrated with a big picture of Brandon Johnson.

Neither of those pieces touches on the impending calamity if the city fails to enact a budget and, perhaps, even if it does given the shenanigans.

A move by credit ratings agencies to further reduce Chicago’s credit rating to Not Investment Grade, i.e. junk, would make it expensive and maybe even impossible for the city not merely to borrow to fill in its budget deficit but even to refinance its existing debt.

But wait. There’s more. The State of Illinois is very nearly at the limit of what it can do legally or politically to help Chicago. It cannot absorb Chicago’s obligations without risking an additional downgrade of its own. Illinois already has very nearly the worst credit rating of any state. It cannot reduce accrued pension benefits without violating the Pension Clause of the state’s constitution. It cannot authorize Chapter 9 lightly without political upheaval and/or constitutional challenges.

Once markets perceive that the city cannot act alone or what it can do alone is inadequate, the state is politically disinclined to act visibly, and legal constraints prevent clean restructuring, it will inevitably impose higher borrowing costs.

The most likely state action is to create a sort of state oversight board and put Chicago into what amounts to receivership. But there’s a problem there, too.

We rather obviously have a governor who is running for president. That will turn Chicago’s problems into a monkey on the back of national politics, feeding an image of Blue State fecklessness. Since that’s the last thing that Pritzker needs, my guess is that he keeps Chicago’s problems as distant from himself as he can.

In his Substack today Nate Silver introduces a taxonomy of the factions in the modern Democratic Party as a jumping-off point for his critique of Heather Cox Richardson and the faction she represents. Here’s the taxonomy:

I’d argue that there are three main factions of the Democratic Party as the jockeying is already underway for the 2026 and 2028 primaries. First, there’s the Capital-L Left: populist, deservedly feeling recharged by the success of Zohran Mamdani and a backlash to the increasingly politically assertive billionaire class.

Next, there’s what you might think of as the Abundance Libs: technocratic, more willing to find common ground with Republicans, and more sympathetic to market-based solutions. I’m a big fan of Ezra Klein and Derek Thompson, the authors of Abundance, but I think the project is more neo-liberal than left-wing — to me, not such a bad thing! That’s a subject for a different newsletter, however.

The third faction Richardsonism or a term I’ll treat as synonymous with it: #Resistance Libs. They’re older, with extremely high educational attainment, predominantly female, and very highly politically engaged. This is the audience for a cluster of political activism encompassing things such as the No Kings protests and some highly popular anti-Trump Substacks along with certain prominent podcasts and much of Bluesky.

I think that Nate’s taxonomy is fine as a political science exercise but it suffers from some defects in helping us understand today’s Democratic Party and the challenges it faces.

The alternative taxonomy I would propose also consists of three factions:

1. People who want something from the government

   This group includes poor and middle income beneficiaries, students, and people whose primary political calculus is distributive. Their moral logic is “Government exists to help people like me.”

2. People who see politics and government as a way of making a living, even becoming wealthy

   This group consists of politicians, bureaucrats, NGOs, consultants, defense contractors, and regulators. Their moral logic is cloaked in public purpose but is essentially self-interested. It is a very large and powerful group.

3. People who want to accomplish things that require government intervention

This group is small but not non-existent and is frequently overruled by the other two factions. Their moral logic is that some problems cannot be solved without state power.

There are a number of differences between Nate’s taxonomy and mine. My taxonomy points to the political economy of the Democratic Party, pointing out that there are large groups that are economically dependent on government expansion regardless of ideology and why failure does not lead to reform. Nate’s taxonomy does a better job of explaining electoral coalitions and messaging strategies and explaining why Democrats squabble so bitterly among themselves even when their material interests align.

Nonetheless, I think my taxonomy has a number of strengths. For one thing it explains why win or lose Democratic campaigns are so expensive. If my view is correct, it suggests that voters are noticing that the Democrats promise outcomes but deliver procedures and funding to intermediaries and are tired of it which leads to declining turnout, particularly in midterm and off-year elections, ticket splitting, and the rise of “burn it all down” candidates.

We’ll soon have an opportunity to test my hypothesis in the 2026 midterms and the 2028 general election. In 2026 Nate’s model would predict that #Resistance purists re-activate around Trump, democracy, courts, and norms and that Democrats regain some ground through turnout and if Democrats lose, the party will adjust its ideas. My model on the other hand predicts that Democrats will run on affordability, ironically since the policies they espouse have the opposite effect, in the midterms campaign spending will be very great, possibly unprecedentedly so. Outcomes will underperform relative to spending, surprise pundits, and evoke post-mortems without reform. If the Democrats fail they will blame it on “the rich” or “corporations”.

In 2028 Nate’s model predicts a better message, a better candidate, and favorable conditions will produce an electoral recovery.

My model predicts that barring external developments in the form of a charismatic outsider, a financial crisis, or generational upheaval, etc. the election will be quite close. The Democratic standard-bearer may well be a billionaire.

Democrats are not losing because they have the wrong ideas; they are losing because the people who depend on how the party works are not the people who depend on it winning.

As you undoubtedly know by this time actor and director Rob Reiner and his wife have died, apparently stabbed to death by their own son. At Variety Chris Morris laments:

Rob Reiner, who segued from starring in “All in the Family” to directing movies including “This Is Spinal Tap,” “A Few Good Men” and “When Harry Met Sally…” was found stabbed to death Sunday afternoon in his Brentwood home alongside his wife Michele Singer. He was 78.

The LAPD said in a statement that “Nick Reiner, the 32-year-old son of Robert and Michele Reiner, was responsible for their deaths.” Nick Reiner is being held at Twin Towers Correctional Facility in Los Angeles after being booked for murder.

“It is with profound sorrow that we announce the tragic passing of Michele and Rob Reiner. We are heartbroken by this sudden loss, and we ask for privacy during this unbelievably difficult time,” his family said in a statement.

Reiner’s most recent film was “Spinal Tap II: The End Continues,” the sequel to the 1984 classic “This Is Spinal Tap.”

The son of the noted writer, director and comedian Carl Reiner, he first attracted attention as Michael “Meathead” Stivic, hippie son-in-law of Carroll O’Connor’s bigoted, blustering blue-collar worker Archie Bunker, during nine seasons of CBS’s topical sitcom. He collected Emmys as best supporting actor in a comedy in 1974 and 1978.

With credits as a writer on “The Smothers Brothers Comedy Hour,” “Happy Days” and “All in the Family” and a pair of TV movies under his belt, Reiner moved into big screen work as a director, writer and co-star in 1984’s “This is Spinal Tap,” the cherished, improvisational mockumentary about a thick-headed heavy metal band.

That project was succeeded during the next decade by a run of box office hits and popular favorites, which demonstrated his uncommon assurance working in a variety of genres. These included “Stand By Me” (1986), a coming-of-age drama with a youthful cast, adapted from a Stephen King short story; the fantasy “The Princess Bride” (1987); the new-look romantic comedy “When Harry Met Sally…” (1989); another King adaptation, the thriller “Misery” (1990); and the Tom Cruise-Jack Nicholson court martial drama “A Few Good Men” (1992).

That run of films is remarkable not simply for its commercial success but for its range. Few directors have demonstrated comparable confidence moving between genres without leaving a signature of strain or self-consciousness behind. Reiner did not impose a stylistic “brand” on his films so much as an assurance of craftsmanship: a feel for structure, pacing, and performance that allowed very different kinds of stories to work on their own terms.

What is especially striking in retrospect is that several of these films have aged better than many more formally ambitious works of the same period. The Princess Bride and When Harry Met Sally… in particular have become cultural touchstones, quoted and revisited across generations, while Stand by Me and Misery remain effective because they take their material seriously rather than ironically. A Few Good Men now feels almost like a period piece—not because of its themes, but because of its confidence that institutions, however flawed, are still capable of producing moral drama.

I’ve read a number of encomiums of him but none made this particular point which I consider vital. Like Jackson Browne in popular music, Rob Reiner’s films portrayed the peculiar voice of his generation, the Baby Boomers, with uncanny accuracy. Ironic without being negative or, worse, nihilistic. Idealistic without being fatuous. In his films the hero always wins but the victory is frequently diluted with sorrow.

Consider, for example, the famous courtroom scene in A Few Good Men. Tom Cruise and Jack Nicholson are stand-ins for their respective generations: Cruise, a Baby Boomer, coddled, opinionated, cocky, and right; Nicholson, of the Silent Generation, bitter, equally opinionated, and right in his own way but also tragically wrong.

We shall not see his like again. Just images flickering on a screen but images that will not be forgotten.