After two days of violent and escalating riots in Los Angeles during which an unspecified number of federal agents and LAPD officers were injured and which the LAPD chief characterized the LAPD as being “overwhelmed”, President Trump called in the National Guard to protect federal officers and property. He is being widely criticized as certainly breaking precedent and possibly the law in doing so.

I was deeply saddened by the riots. The demonstrations from which they materialized were clearly very carefully planned, organized, and financed, no doubt by people who were at no risk of being arrested themselves for reasons of their own. The ensuing riots were violent and out-of-control and federal LAPD officers were injured. I have been unable to determine exactly how many.

Throwing Molotov cocktails and waving Mexican and Palestinian flags are probably not the most effective way of demonstrating your bona fides as new residents of the United States. Especially not in a city that is struggling to recover from weeks of wildfires. The innocent will be swept along with the guilty.

What is clear to me from the public statements from officials is that somebody is tone deaf, misreading the room. Is it Trump or Newsom and Bass? Both?

Trump is fomenting riots

Robert Reich, The Guardian
Stephen Collinson, CNN

Newsom and Bass are fomenting riots

Nicole Russell, USA Today
Miranda Devine, New York Post

If I had to make a prediction, it would be that the courts will find that Trump acted illegally in sending in the National Guard but the legal recourse will end there. Public opinion, at least among registered voters, is likely to support Trump—that appears to be what the overnight polls are showing.

One last point. If you don’t like that the president is invoking old and rarely-used laws to justify his actions, have fewer laws granting the president swepping and vaguely-defined authority.

For the last several days I’ve been devoting some time and even more of my limited energy to sorting through some of the papers that descended on me when my mom died. As I think I’ve mentioned before, one of my family’s vices is that we keep everything. I’ve been going through century-old bank statements, handwritten notes, IOUs, tax statements, and many other documents. I don’t believe they’ll hold any value for my nephews, nieces, and their children. Some of that is generational change. Some of them have no meaning to any living person.

For example:

What the heck is that? I have hundreds of them, many with the same date. Some are for what appear to be the same parcel of land but the payees are different.

I’m hesitant to throw anything away if I don’t know what it is.

Update

I’m not throwing everything away. For example, among the scraps are my parents’ and my paternal grandparents’ wedding certificates. I’m keeping those. I’m also resisting the temptation to track down the descendants of some of the people whose hundred-year-old IOUs I have. Some of the more than century-old IOUs are definitely not for bar bills—they’re for what much have been considerable sums in the 1920s. I can only speculate that my grandfather and great-grandfather were operating as a sort of informal bank.

I found John West’s recent remarks about David Daokui Li’s China’s World View: Demystifying China to Prevent Global Conflict at ASPI’s The Strategist very thought-provoking. Here’s a snippet:

So what is China’s world view?

According to Li, there would be four main aspects to the mainstream perspective of China’s world view.

First, China believes in mutual respect between countries for political and ideological diversity, meaning the West should not interfere in Chinese politics. There is no mention of Chinese interference in other countries using grey zone and other activities.

Second, economic collaboration should be the cornerstone of international cooperation, since politics can be divisive.

Third is historical conservatism, meaning that China does not seek to overturn history, such as Russia’s seizure of Chinese lands during the 19th century. But accepting history does not limit Chinese claims to Taiwan, the Senkaku Islands and the South China Sea.

Fourth, China does not seek to expand its territory (!).

Read the whole thing.

I will refrain from responding or reacting to that characterization. I’ll leave that to the experts. Take them for what they’re worth.

It would be fun to produce a corresponding list describing Russia’s worldview. Maybe in another post.

I want to focus on thinking about America’s worldview. The first part of these remarks will be my list of U. S. interests. Following that I’ll reflect on those a bit.

I think there are five main aspects to the American worldview.

First, the United States believes it is its duty to maintain freedom of navigation. That refers primarily to navigation of the seas but also extends to the air and space.

Second, the United States believes in promoting its social, political, and economic views in other countries.

Third, the Unites States believes in maintaining its military supremacy.

Fourth, the United States believes in free trade.

Fifth, the United States does not seek to expand its territory.

In beginning my reflection I hasten to point out that these are not my views. In fact, I think you’d be hard put to find many Americans who believe in all of those things. Some don’t believe in any of them. They are the views that I have observed the United States pursuing.

I suspect that the goals or objectives listed above emerge from the competing interests that Walter Russell Mead delineated in an article of his in The National Interest almost thirty years ago: Jacksonians (pessimistic realists), Hamiltonians (optimistic realists), Wilsonians (optimistic idealists), and Jeffersonians (pessimistic idealists). But I think it is pretty clear that the U. S. has been pursuing those goals for the last 80 years if not longer.

I also want to point out that many of President Trump’s executive orders, statements, and actions during the first four months of his second term of office are directly contradictory of those objectives. The most dramatic and controversial have been his remarks about Greenland and Canada. Have we had a president who was more openly expansionary since Teddy Roosevelt?

I don’t know what the eventual outcome of those EOs, statements, and actions will be. Maybe they will effect permanent changes in our national objectives. Maybe they will eventually be thought of as an eccentric divergence from our actual goals and objectives.

I look forward to responses in comments to change or withdraw some of those goals in the U. S. worldview or add others. You may notice, for example, that I did not list anything about international law in the list of goals and objectives that comprise the U. S. worldview. That’s because the U. S. has so frequently violated international law over the last 60 years it’s pretty hard to mention it without including an asterisk or parenthetical expression.

My problem with Robert D. Atkinson’s op-ed in the Wall Street Journal on the likely impact of artificial intelligence on jobs and our daily life:

Anthropic CEO Dario Amodei said last week that artificial intelligence could eliminate half of all entry-level white-collar jobs within five years and cause unemployment to skyrocket to as high as 20%.

He should know better—as should many other serious academics, who have been warning for years that AI will mean the end of employment as we know it. In 2013 Carl Benedikt Frey and Michael A. Osborne of Oxford University produced a research paper estimating that 47% of U.S. employment was at risk of being eliminated by new technologies.

Before we resign ourselves to obsolescence at the hands of our new robot overlords, we’d do well to recognize that humans have experienced technological disruptions before, and we adapted to meet them. AI won’t be any different.

In the first half of the 20th century, tens of thousands of men and boys across America worked as pinsetters in bowling alleys. In 1946 AMF introduced an automatic pin-setting machine, and by the mid-1950s those jobs were mostly gone. Similarly, there was a time when the elevators in hotels and office buildings across the country were staffed by human operators. In the 1920s and ’30s, elevator companies began installing “robot elevators” with automatic controls, and eventually elevator operators all but disappeared.

Data from the Census Bureau’s American Community Survey tell countless other similar stories—from the decline of agricultural field workers due to motorized tractors to the rise and fall of “motion picture projectionists,” who operated projectors in movie theaters. Entire categories of jobs were wiped out, yet automation has never created a mass lumpenproletariat.

AI doomsayers frequently succumb to what economists call the “lump of labor” fallacy: the idea that there is a limited amount of work to be done, and if a job is eliminated, it’s gone for good. This fails to account for second-order effects, whereby the saving from increased productivity is recycled back into the economy in the form of higher wages, higher profits and reduced prices. This creates new demand that in turn creates new jobs. Some of these are entirely new occupations, such as “content creator assistant,” but others are existing jobs that are in higher demand now that people have more money to spend—for example, personal trainers.

is that I agree with him. I think that in the long run artificial intelligence will increase productivity and create new jobs that we can’t even imagine today. There are, however, some problems with the rosy scenario that he paints. Chief among those are timeframe and that the benefits of that automation will not be distributed evenly through the population.

We shouldn’t forget John Maynard Keynes’s wry warning: in the long run we’re all dead. Although in the long run I deeply agree that this new automation will increase productivity and economic welfare, in the short term it is likely to cause enormous dislocation.

The first sector in which that is likely to happen is information technology. Indeed, it is happening right now. Not only are their large numbers of layoffs but there is tremendous uncertainty. Neither workers nor even their managers have any real idea of what will happen. I suspect that when the dust has settled it will be much like previous such developments—the effect of AI will be to make developers more productive rather than to eliminate developers.

The examples Mr. Atkinson provides are terrible: agricultural stoop laborers, elevator operators, insurance customer service. The first two are unskilled work and I would be willing to bet a shiny new dime (how long until dimes are abolished, too?) that AI is not deployed to replace insurance customer service workers for the foreseeable future—they’ve already largely been replaced by offshore call center workers and autoresponse systems.

The real potential of generative AI is in making highly skilled workers much more productive and effective—physicians, lawyers, accountants, and so on. Whether GAI will be allowed to do that is another question. I suspect that physicians, lawyers, etc. will resist such efforts strongly and, since they control what is allowed to be done, it’s an open question.

That brings me to another issue: who will capture the economic surplus provided by more efficient artificial intelligence? Is there a single investor anywhere who wants to invest in AI to increase workers’ wages? Or is the motivation to increase the compensation of those at the top of the economic pyramid? I think it’s obvious.

That brings me to my final observation. Mr. Atkinson observes:

Further, there is a great deal of work that only humans can do. Self-driving school buses will still need an adult to watch the kids. As for police, AI robots won’t be arresting criminals anytime soon. It’s a similar story for fish and game wardens, fashion models, priests, stonemasons, plumbers and flight attendants. Most occupations involve working with other people, with things or with ideas that are too complex for AI to handle alone. People in the last category include legislators, CEOs, antitrust attorneys and so on.

I think that’s almost the diametric opposite of reality. There are lots of jobs that are too complex for people to handle without AI. I would also mention that none of the examples he mentions (fish and game wardens, fashion models, etc.) are growth occupations. There are fewer of all of those than there were 50 years ago.

In an op-ed in the Washington Post Norman J.W. Goda and Jeffrey Herf argue that Israel’s war in Gaza does not meet the definition of “genocide”:

Recent weeks have brought a flood of new genocide accusations against Israel. The trigger has been Israel’s recent blockade of aid to Gaza (now lifted), as well as its latest military actions there. But in fact, the charges of genocide began shortly after the Hamas massacres of Oct. 7, 2023. The accusations can be found everywhere, including in podcasts, TV interviews, op-eds and social media posts. Among the accusers are politicians, activists and influencers who hail from the Middle East, Europe and North America. Many today insist that it is critical — even morally required — that we use the word “genocide” to describe Israel’s war in Gaza. No other term will do. Those not joining the chorus are allegedly complicit in genocide. Those questioning the nature of the accusation are labeled genocide deniers.

Why this insistence? Efforts to delegitimize Israel as colonial and racist began before the state was declared in 1948. Genocide, meanwhile, is the crime of crimes; a state committing genocide is forever illegitimate. Given this history and gravity, we should pose some questions. Israel’s war against Hamas in the urban environments of Gaza has led to thousands of civilian casualties. But is genocide really the correct way to describe the war? Do the accusers define genocide accurately in terms of law, or have they stretched the definition of the crime? Is their evidence reliable? Finally, can we say that the genocide accusation, made against Israel and its supporters in this way, is antisemitic?

Their conclusion, rather obviously, is that it is not genocide. They do make one good point:

Those accusing Israel of genocide avoid describing Hamas’s exterminatory ideology and the genocide, commenced on Oct. 7 and then interrupted, that followed from it. They also avoid facing the now extensively documented facts regarding the genocidal nature of actions of Hamas and other terrorist organizations in Gaza on Oct. 7. Further, the genocide accusation made from the earliest days of the war was an effort to force Israel to end, Becker said, “operations against the ongoing attacks of an organization that pursues an actual genocidal agenda.” Becker further described Hamas’s cynical strategy of waging war amid civilians who were denied access to the safety of its massive underground tunnel system, and he observed that “the appalling suffering of civilians — both Israeli and Palestinian — is first and foremost the result of this despicable [Hamas] strategy; the horrible cost of Hamas not only failing to protect its civilians but actively sacrificing them for its own propaganda and military benefit. And if Hamas abandons this strategy, releases the hostages and lays down its arms, the hostilities and suffering would end.” Those accusing Israel of genocide fail to point to the responsibility of the aggressor, Hamas, for starting and continuing this war.

It’s certainly not a literal genocide. Genocide is from the Latin, gens, a nation in the sense of a people, plus occidere, to murder. In other words to kill a whole people. Neither the Gazans nor Hamas claim that the Gazans are a people; they claim that they are a part of the Arab nation and there is no evidence that the Israelis are trying to exterminate all Arabs. Note the Israelis’ amazing restraint with respect to the 20% of Israel’s population who are Arabs.

There is no question as to whether Hamas is genocidal; it is. Their hatred of the Israelis is in their founding manifesto.

It isn’t even a metaphorical genocide, e.g. “cultural genocide” since the Gazans are not a distinct culture.

But it’s a Humpty Dumpty world and words are just projectiles hurled at your opponents. It makes little difference whether the projectiles are suitable to task.

I agree that the war is homicidal and too many people are being killed. I also think that the Israelis have a right to live which distinguishes my view from those of Hamas.

I got a surprise this week. We received a package which I assumed was something my wife had ordered. I left it unopened until she returned from her long weekend. When she returned home she saw the package and inquired what it was.

When we opened it I was surprised to learn that it was from American Express and even more surprised to learn that it was a present from American Express in recognition of my 50th anniversary in having an American Express Gold Card.

My dad never had a credit card. My mom never did until after I had a credit card for years. As I’ve mentioned before they operated with a bank line of credit secured by various financial assets they owned.

I got my first credit card when I started traveling for work. I’ll tell you the whole story of that some other time. Fifty years ago having a credit card made international travel much easier and an American Express card was the card to have. Outside the U. S. most hotels, restaurants, etc., if they accepted credit cards at all, accepted American Express and Diners Club and that was it.

Here’s a telling quote from this piece by Catherine Baab at Quartz:

Since the start of 2023, more than half-a-million tech workers have been laid off, according to industry tallies. Headlines have blamed over-hiring during the pandemic and, more recently, AI. But beneath the surface was a hidden accelerant: a change to what’s known as Section 174 that helped gut in-house software and product development teams everywhere from tech giants such as Microsoft (MSFT) and Meta (META) to much smaller, private, direct-to-consumer and other internet-first companies.

Now, as a bipartisan effort to repeal the Section 174 change moves through Congress, bigger questions are surfacing: How did a single line in the tax code help trigger a tsunami of mass layoffs? And why did no one see it coming?

For almost 70 years, American companies could deduct 100% of qualified research and development spending in the year they incurred the costs. Salaries, software, contractor payments — if it contributed to creating or improving a product, it came off the top of a firm’s taxable income.

The deduction was guaranteed by Section 174 of the IRS Code of 1954, and under the provision, R&D flourished in the U.S.

Microsoft was founded in 1975. Apple (AAPL) launched its first computer in 1976. Google (GOOGL) incorporated in 1998. Facebook opened to the general public in 2006. All these companies, now among the most valuable in the world, developed their earliest products — programming tools, hardware, search engines — under a tax system that rewarded building now, not later.

The subsequent rise of smartphones, cloud computing, and mobile apps also happened in an America where companies could immediately write off their investments in engineering, infrastructure, and experimentation. It was a baseline assumption — innovation and risk-taking subsidized by the tax code — that shaped how founders operated and how investors made decisions.

In turn, tech companies largely built their products in the U.S.

Microsoft’s operating systems were coded in Washington state. Apple’s early hardware and software teams were in California. Google’s search engine was born at Stanford and scaled from Mountain View. Facebook’s entire social architecture was developed in Menlo Park. The deduction directly incentivized keeping R&D close to home, rewarding companies for investing in American workers, engineers, and infrastructure.

That’s what makes the politics of Section 174 so revealing. For all the rhetoric about bringing jobs back and making things in America, the first Trump administration’s major tax bill arguably helped accomplish the opposite.

When Congress passed the Tax Cuts and Jobs Act (TCJA), the signature legislative achievement of President Donald Trump’s first term, it slashed the corporate tax rate from 35% to 21% — a massive revenue loss on paper for the federal government.

To make the 2017 bill comply with Senate budget rules, lawmakers needed to offset the cost. So they added future tax hikes that wouldn’t kick in right away, wouldn’t provoke immediate backlash from businesses, and could, in theory, be quietly repealed later.

The delayed change to Section 174 — from immediate expensing of R&D to mandatory amortization, meaning that companies must spread the deduction out in smaller chunks over five or even 15-year periods — was that kind of provision. It didn’t start affecting the budget until 2022, but it helped the TCJA appear “deficit neutral” over the 10-year window used for legislative scoring.

The delay wasn’t a technical necessity. It was a political tactic.

There are many conclusions that might be drawn from that. One is that our tax code is so complex that there is, effectively, no way of determining what it is actually doing. Modify at risk.

IMO the ideal solution is to stop taxing income at all and start taxing consumption but the implications of that would be so devastating I can’t imagine it happening. That’s why I recommend tweaking our tax code rather than taking a meat axe to it.

I’ve never been that much of an Elon Musk fan. I’ve basically thought he made his fortune through rent-seeking.

The editors of the Wall Street Journal have noticed that, too, and produced an amusing retort to Mr. Musk’s bitter complaints about the House’s budget bill:

Elon Musk’s work at the Department of Government Efficiency made him persona non grata in the Beltway, and most criticism was nasty and unfair. That’s what Washington does to outsiders who want to shrink its power. But that makes it all the more unfortunate that Mr. Musk is now joining the Beltway crowd in trying to kill the House tax bill.

“This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination,” the Tesla CEO tweeted Tuesday, as the Senate begins considering its version of budget reconciliation. “Shame on those who voted for it: you know you did wrong. You know it.”

[…]

But the House bill does avoid a $4.5 trillion tax hike next year and cuts spending by some $1.5 trillion over 10 years by making some useful reforms to Medicaid, student loans and food stamps. It also ends most of the Inflation Reduction Act’s green-energy subsidies.

Ah, but Mr. Musk doesn’t want to eliminate that pork. “There is no change to tax incentives for oil & gas, just EV/solar,” he said on X.com last week, retweeting another user post that said “slashing solar energy credits is unjust.”

For my part I did not support either Bush II’s or Mr. Trump’s tax cuts. It’s not that I oppose tax cuts on principle but that I thought that they would be more effective in producing economic growth had they been more targeted. I do think that we should limit our spending to what we’re willing to pay for plus the increase in aggregate product. And that’s our problem. We don’t produce enough of what we consume.

But preservation of Trump’s tax cuts come as no surprise—cutting taxes is practically the only thing on which Republicans can agree.

A big chunk of our budget problem is one that has been festering for three-quarters of a century: the Baby Boomers are retiring and those IOUs that fill the Social Security “trust fund” are being redeemed. Government spending has been paid for with Social Security withholding for some time. I see the federal cuts in employment as the federal government engaging in the belt-tightening that private companies have been doing for 40 years.

We have no idea how many U. S. jobs are offshored, i.e. performed by people who are sitting in other countries performing them. None. It could be the 300,000 that is the guesstimate sometimes provided. That’s guesswork based on the belief that 60% of businesses offshore at least one department.

It’s unlikely to be less than 300,000. It could be 3,000,000. It could be 30,000,000. We really don’t know.

There are no U. S. specifically governing jobs offshored. There is no reporting requirement other than a requirement to report what you’re spending and the balance sheet requirements.