Warning Signs

In his column in the Wall Street Journal Joseph C. Sternberg points to some indicators I hadn’t thought of before that there may be some trouble on the horizon:

Insight emerges from a browse through Adam Fergusson’s 1975 history of Germany’s hyperinflation, “When Money Dies.” The run-up in consumer prices was only part of the way the monetary excesses of the early 1920s destroyed German society. Other evils abounded.

Middle-class investors found the value of and income from their capital wrecked by a phenomenal bid-up in prices for financial assets, whose nominal gains masked inflation-adjusted plunges. Financial disorder stoked growing unease bordering on panic on the part of a bourgeoisie that had relied on its capital investments to fuel German economic growth and also to fund its consumption.

A consequence of chaotic financial markets was a new boom in speculation. The economic miseries of the era were not uniformly distributed, and the divergence between new classes of haves and have-nots stoked political and personal resentments alongside rampant corruption. Does any of this sound familiar?

In other ways too, faint but eerie echoes of the Weimar era are starting to sound. A curious phenomenon of that time was the emergence of Notgeld, or emergency money, printed by local governments or larger corporations to facilitate commerce amid the collapse of national money. Is bitcoin the Notgeld of our day? Elon Musk might think so, given Tesla’s recent $1.5 billion bet on the alternative currency and his tweet contending: “Bitcoin is almost as bs as fiat money.”

Taking a broader view, Western democracies have not for at least 15 years acted like societies where economic conditions are benign, despite all the data professional economists cite to the contrary. We are witnessing vicious political polarization, rapidly deteriorating social trust, a breakdown in economic relations between the generations—even peasants’ revolts as varied as Brexit and GameStop.

Going back at least to the 14th century, such events most often have occurred in an environment where malfunctioning price signals (read: inflation) make it impossible for a society to allocate its resources with any rationality or fairness.

As I’ve been saying for some time, my concern for the foreseeable future isn’t ordinary inflation (interpreted as increases in consumer prices). That inflation is mild and will probably remain so. My concern has been for a catastrophic loss of confidence in the currency.

The actions of the Congress, the White House, and the federal reserve for the last half dozen years have been far from Keynesian. What Keynes wrote was that a gap between aggregate product and potential aggregate product could be made up for with government spending. Basically, the government’s extending credit to itself and pouring the created money into the economy can make up for that production gap. If money greater than the production gap were deployed, it should show up somewhere in the form of inflation.

The sums being disbursed now exceed anybody’s calculations of the production gap. Something has to give.

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Just Because They’re Lawyers

At Reason Josh Blackman and Seth Barrett Tillman, not particularly Trump fans and not Republicans, after critiquing the House managers’ views on the First Amendment in their trial of former President Trump make a good point:

The House’s article of impeachment does not mention or use the Brandenburg standard to charge the President. A draft version of the article relied on something akin to Brandenburg, but the adopted article removed that standard. Instead, the House made up a standard out of whole cloth: that Trump “willfully made statements that, in context, encouraged—and foreseeably resulted in—lawless action at the Capitol.”

The House chose that standard—they have nailed their colors to the mast. And that decision now binds the House, the Managers, and the Senate. Given the sole article of impeachment, the Managers are precluded from raising an alternate argument based on Brandenburg. In other words, the Managers cannot seek to convict Trump based on some other charge or theory of liability, even one akin to a lesser-included offense.

If the House cannot secure a conviction based on the legal theory it has put forward, then the Managers cannot argue that Trump could still be convicted under other legal theories not alleged in the Article of Impeachment.

At OTB James Joyner, also no fan of Trump’s and teetering on the brink of being a former Republican, doesn’t think that the House managers are making their case:

As to the merits of the case, it’s not obvious to me who was supposed to be persuaded by it that wasn’t already on board.

I believed on January 6 and continue to believe that Trump’s repeated attempts to overturn the legitimate vote, urging of various officials to commit crimes to keep him in office, and repeated fanning of the flames of illegitimacy with his supporters warranted his impeachment, removal from office, and bar from future office. But the sensationalism of the impeachment managers’ presentation actually detracted, in my judgment, from the notion that Trump incited the riot.

Indeed, they reinforced my view that the storming of the Capitol on January 6 was not, as it appeared in real time, simply a bunch of zealous Trump supporters pushed over the edge by a speech that morning but rather multiple, overlapping events—including pre-planned terrorism by various Patriot Militia and white supremacist extremist groups that were clearly operating independently from Trump.

while Ann Althouse remarks:

I was not willing to sit through the hours and hours of presentation of other things that I already knew. I wanted them to focus on the decisive question: Trump’s responsibility. Some people have a low standard and think that if Trump stirred up the crowd and made them feel energized to do what they independently decided to do, he’s responsible enough. But they’re choosing, I think, to offer nothing to those of us who think Trump needs to have specifically intended the breaking into the Capitol. Can anyone point me to the part of the trial where my concern is addressed? I’m not willing to stare at a smokescreen.

The divisions in the United States are broad and deep and aren’t as simple as “Trump fans” vs. “lovers of democracy” or Republicans vs. Democrats. I don’t see how Humpty Dumpty can be put together again.

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It’s Up To You

I found it outrageous to be reading an article about Centreville, Illinois in the Guardian but I’m glad I did. I presume the purpose of the article is to point out what a nasty, racist place the United States is but I took something different away from it. IMO it illustrates everything that’s wrong with our government and politics.

Centreville has a flooding problem. Here’s a snippet from the piece:

Sharon Smith has to plunge her toilet to get it to flush. On rainy days, wastewater spills into her yard from nearby drainage ditches. Twice in the last year her house has flooded, leaving behind the sickening smell of sewage, she said.

Her carpets are ruined, the floorboards are buckling, the bathroom wall is pulling away from the tub, she said. In the laundry room, the worst-hit part of the house, the smell of mold lingers. “I want to move, because this flooding is ridiculous,” said Smith, 59.

For decades, residents of Centreville, a nearly all-Black town of 5,000 in southern Illinois, just a 12-minute drive from downtown East St Louis, have been dealing with persistent flooding and sewage overflows. The smell of it is in the air all over town after a rain, and bits of soggy toilet paper and slicks of human waste cling to the grass in neighborhoods where children used to play on warm days, locals said. Kids don’t play outside any more. Gardens don’t grow.

and its conclusion:

Patricia Greenwood, 71, estimated that she spent at least $500 a year on bleach, sandbags and other items. But nothing ever gets the smell of mold out of the walls in her home. Her brother, who lives across the river in St Louis, stopped by her house last July, shortly after a flood, and noticed the mixture of mud and feces smeared across her lawn. “I wish I had enough money to buy you a house and get you out of here,” she remembered him saying.

“Who wants everybody to know that your house smells? That your room is caving in? Who wants to tell people you have bugs? You want to be like everyone else, to sit on your porch. You don’t want them to know that you want to vomit when you walk inside,” Greenwood said.

Greenwood said that when her family moved to Centreville in the 1960s, things were different. “If all of those white people were still here, this wouldn’t happen,” she said.

Let me provide a little context. Centreville is in downstate Illinois, is the poorest town in the state, and 95% of its inhabitants are black. Median income is under $20,000. Its mayor, police chief, and all of its city council are black. Its rate of violent crime is the highest in the state.

Centreville is in St. Clair County which is about 2/3s white and 1/3 black with a population of about 250,000.

The mayor of Centreville has declined to meet with our U. S. Senator, Tammy Duckworth. He won’t talk to the press. I haven’t been able to discover what he’s being paid (I assume he’s not a volunteer) and it’s being alleged that he’s been raking it in from kickbacks from major building projects in the town.

When your sewer backs up, it’s primarily your responsibility to get it repaired. After that it’s the city’s responsibility, then the county’s. The state has practically no role and the federal government even less.

Centreville lies entirely in the floodplain of the Mississippi. I have written about this at length. The floodplain floods. Land is cheap in the floodplain for that reason. If it didn’t flood, Centreville’s residents probably couldn’t afford to live there. Subsidizing living in the floodplain is a mistake.

Practically everybody involved in this story is a Democrat from the residents of Centreville to its mayor and city council to the members of the county board and its chairman to the governor of the state, its primarily Democratic legislature, and both of its U. S. senators. Why aren’t Centreville’s problems being resolved? Everybody seems to be looking for somebody else to solve their problems. I think that racism is a factor in the poverty of Centreville’s residents but not the reason its problems aren’t being solved.

Centreville is not DeTocqueville’s America.

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Shut Down the Subways Not the Restaurants

A study by MIT economist and physician Jeffrey E. Harris found that New York City’s subways were a major vector of the spread of COVID-19:

New York City’s multipronged subway system was a major disseminator – if not the principal transmission vehicle – of coronavirus infection during the initial takeoff of the massive epidemic that became evident throughout the city during March 2020. The near shutoff of subway ridership in Manhattan – down by over 90 percent at the end of March – correlates strongly with the substantial increase in the doubling time of new cases in this borough. Subway lines with the largest drop in ridership during the second and third weeks of March had the lowest subsequent rates of infection in the zip codes traversed by their routes. Maps of subway station turnstile entries, superimposed upon zip code-level maps of reported coronavirus incidence, are strongly consistent with subway-facilitated disease propagation. Reciprocal seeding of infection appears to be the best explanation for the emergence of a single hotspot in Midtown West in Manhattan.

When people point to the success that China had in controlling the spread of the virus, they generally ignore how tightly the country shut down transport to and from Wuhan and its environs as well as within the city.

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Diversity Is Our Strength

An opinion poll conducted by the Zogby organization finds a disturbing percentage of Americans believe we are on the brink of a civil war:

Nearly half (16% very likely and 30% somewhat likely combined) of likely voters believe the country will have another civil war, while 42% (24% very unlikely and 18% somewhat unlikely combined) did not think we were headed for another civil war; 11% of survey respondents were not sure.

The younger you were the more likely you were to believe civil war was near (Age 23-29: 53%; age 65+: 31%). Those living in large cities thought it more likely as well. (City: 55%; suburbs: 36%).

Most interesting there were differences of opinion among different racial and ethnic groups:

Hispanic   53%
Black 49%
White 43%

Presently, our percent of immigrant population is pushing 15% and, if present trends continue, that will continue to grow. Not only does that put stress on the society, those arriving here have frequently seen civil war at first hand.

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What Goes Up Doesn’t Always Come Down

It’s ironic that I agree with John Tamny’s conclusion in this piece at RealClearMarkets but think he’s arriving at it in the wrong way. He’s right that even if federally subsidized educational loans were abolished, prices for higher education will not decline.

If you constrain the supply and increase willingness to pay, prices will rise. Even if you decrease willingness to pay by, for example, abolishing federal subsidies, the prices still won’t go down because the supply is constrained and there is a nasty little thing called the downwards inelasticity of wages. Keynes wrong about it. Mr. Tamny should look into that.

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The Road to Perdition

After kvetching for quite a while about California’s newly-updated curriculum standards at Law & Liberty, Greg Weiner makes a point worth considering:

This is among the fundamental problems with seeing education as a handmaiden of activism. It is invariably politicized, and those who do the politicizing invariably succeed only because they already have the power to do so. This is a classic study in power replicating itself under other guises. That the guise is “resistance” is one of the oldest tricks in power’s book. It is why the Cuban “Revolution” is still called one more than six decades after it won, and why Mexico managed to get “institutional” and “revolutionary” into the name of the one party that dominated its politics for most of the 20th century.

Power operates in its own interest. But it might serve the interest of those who possess power over the curriculum of California’s public universities not to adopt a language and course of study in which most people—including those whose rights are supposedly being vindicated—do not recognize themselves. (Consider that just three percent of Latino Americans use the curriculum’s preferred “Latinx”; among the minority of Latinos who have heard the term, only a third endorse its use.)

More broadly, the problem with the curriculum is not its political imbalance. Were that the case, the solution would be to balance it with other perspectives. The real problem is that it is politicized in the first place.

It would be nice if public education were actually educating students, preparing them for productive lives, and making the U. S. more competitive with other countries not so burdened with nonsensical thinking and grievances. Sadly, that’s not the case and the consequence will be more people with unhappy, dissatisfied lives and an impetus to importing more workers without the impediments of young people educated in the U. S.

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Splitting the Baby

The editors of Bloomberg attempt to outline the contours of a comprehensive immigration reform package that they think might actually get enacted into law. After praising President Biden’s early rescinding of President Trump’s executive orders related to immigration, they’re more critical of his views on comprehensive reform:

Long-term immigration reform is a different matter. The challenge here is to strike a difficult balance — one that resolves the status of the millions of people living in the country illegally, builds a system to promote the additional immigration the country needs, and ensures that future illegal immigration is kept under control. Biden’s proposal rightly provides an eight-year pathway to citizenship for most of the 11 million people thought to be living in the U.S. without legal status, but it lacks an effective plan to strengthen immigration enforcement alongside. Critics who deride the plan as “amnesty first, enforcement never” have a point. As it stands, the proposal risks aggravating the problem of illegal immigration. Its prospects of becoming law look minimal.

Biden and his team need to start over.

The components they propose include:

  • Obligatory universal E-Verify
  • Complete an entry-exit system for travel and student visa holders as was mandated by Congress decades ago

I agree with both of those but I would add the following:

  • Add a guest worker program, with particular expansion for Mexican workers
  • Substantial penalties on employers for violating the E-Verify requirements
  • Abolish the lottery
  • Abolish the family ties and sponsorship program
  • Establish requirements for legalization of the status of individuals brought to the U. S. illegally as children, potentially including a path to citizenship for them. Enforce them.
  • Impose penalties on public officials who do not show due diligence in enforcing immigration laws
  • Greatly curtailed or abolished H1-B and L1 visa programs. They absolutely, positively should not be stalking horses for driving wages lower as is the case now.

Contrary to what some believe I think that a comprehensive immigration reform bill that included substantial provisions for enforcement could gain bipartisan support. I also think that activists who will accept nothing less than open borders are as much an impediment to immigration reform as those who don’t want any immigration at all. The preponderance of the evidence suggests that most Americans are somewhere in between and that’s what the contours of the reform should be, too.

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Reckless

In a piece at Project Syndicate Eric Posner echoes points I’ve been making around here for the last month and a half:

Republican senators must weigh the risk of losing votes to challengers in party primaries if they vote to convict Trump against the risk of losing the support of moderates in the general election if they vote to acquit him. Because most conservative states will send Republicans to the Senate, most Republican senators will be warier of primary challenges and vote against conviction.

In fact, those senators would rather not vote at all – and not be tarnished in the general election – which is why all but six Republicans preferred to vote that the Senate lacks jurisdiction to try Trump. But Democrats may have done them a favor by overreaching in another respect: by alleging in the single article of impeachment that Trump incited an insurrection.

In both ordinary language and legal terms, an insurrection is an uprising against the government. The House managers argue that Trump incited a mob to overthrow the government. In a technical sense, we might call the mob action an insurrection, even though at the time Trump was the head of the government that he supposedly sought to overthrow.

At least some members of the mob hoped to kill, abduct, or intimidate members of Congress and (somehow) prevent Congress from certifying the election. The argument is that Trump not only sparked the mob’s march on the Capitol, but also anticipated such a result and deliberately brought it about. Then, once the violence began, he did too little to stop it.

Maybe. But the better reading of events is that Trump was being Trump. By the standards of previous American presidents and virtually all American politicians, he was extraordinarily reckless in insisting for two months that the election was stolen and then in using inflammatory language with the crowd that had gathered to protest the election results.

But he did not directly ask the crowd to engage in violence, and there is no evidence that he anticipated that they would. Trump, like everyone else, must have expected that the police would keep the crowd under control, and would not have expected them to invade the Capitol (something that has not happened since the War of 1812, when British troops occupied Washington).

concluding:

The real reason to disqualify Trump is that he is a menace to American institutions whose reckless, power-mad antics almost undermined an election and will sow mischief for years to come. This should be plainly said.

As I’ve also said by dwelling on disqualification and forcing Republican senators to suffer consequences rather than focusing on conviction on the single charge, they’re actually undermining their own case. At this point they’re just wasting valuable time. They should have voted to censure on January 7, enacted laws that would prevent similar situations in the future, and left it at that.

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Long-Term and Short-Term Effects

The editors of the Wall Street Journal point out that the aid that the Biden Administration will be doling out to state governments will, in many cases, come on top of state revenue increases:

Governors—especially from Democratic states—have been pleading revenue poverty since the pandemic began. But as we approach the anniversary of Covid-19 in America, that tall tale is becoming more difficult to sell.

Even the left-tilting media are beginning to figure out what we’ve been reporting for some time. One of our sources is Dan Clifton, of Strategas Research Partners, who has been tracking state revenue trends and Covid relief from the beginning. His latest analysis shows that state revenues have been doing far better than advertised, especially states that have kept their economies largely open.

He estimates that a majority of the 50 states are seeing revenues arrive above their pre-Covid levels despite the 2020 economic damage. The big exceptions are states that had the most restrictive business lockdowns (New York), those that rely on sales taxes and have no income tax (Florida and Texas), and those that depend on travel and tourism (Nevada).

Add the $350 billion windfall that will soon flow to state and local governments from the $1.9 trillion Biden relief bill, and the states will be swimming in cash. Mr. Clifton projects that the states overall will have a combined budget surplus. The federal aid formula would provide an average of 20% of all state tax revenue.

If Illinois’s past is any gauge, additional revenue will be used to increase the pay of state employees, increase their number, or both. Since public employees are paid lavish pensions, that will increase future liabilities.

Unless the model of government is continued nationalization of state budgets, at some point that federal revenue will dry up and the states will be left with increased liabilities they have no way of addressing.

What’s the solution? Much narrower definitions of how the money can be used and stricter federal oversight than has been the case in decades.

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