When he’s right, he’s wrong… No free lunch… Speaking of healthcare

 

When he’s right, he’s wrong

It’s easy to watch way President Trump behaves and conclude he’s wrong.  And, once you come to that conclusion often enough, it’s easy to conclude he’s wrong about everything.  Easy but also lazy. 

The president promised the abandoned blue-collar population constituting his base that he would reverse trade deficits.  That will never happen so long as the U.S. remains the world’s largest economy and so long as consumption rather than savings and investment drive our economy. 

But it’s fair to observe that Trump’s focus on China and its misbehavior has resonated beyond his base. China is stealing intellectual property from American companies.  China is using its comparative advantage in manufacturing to build cash reserves that serve its One Belt One Road initiative. They are building a regional navy to challenge U.S. sea power along critical trade routes through the S. China Sea and the Straits of Malacca.  They are challenging the sovereignty of our allies by claiming islands from them and building military facilities.  So, Trump is right to challenge China.

However, even when he’s right, he’s wrong.  The way to challenge China’s global position is to form a coalition to counter their moves. You don’t build a coalition by insulting the leaders of our traditional allies and threatening to undermine the global order.  What Trump has done, both in Europe and Asia, is position the U.S. as an unreliable partner. For example, he followed through on his campaign promise to pull the U.S. out of the Trans-Pacific Partnership (TPP).  He wasn’t alone in his analysis of TPP, of course. Members of Congress and presidential candidate Bernie Sanders (that font of economic wisdom) also criticized it. Ultimately, the popular pressure even got Hillary Clinton to join the chorus.  (Hillary might be the last globalist we’ll see on presidential ticket for a while.)

Here’s what the TPP would have done for the U.S.: (1) joined us in a trade pact with all the economic powers of Asia (constituting 40% of global GDP) save one – China, (2) improved our access to the markets of those nations by lowering tariffs and other trade barriers and (3) created closer bonds with our trade partners to isolate China.

Now, the remaining countries of the original TPP have formed their own pact without the U.S.  So, instead of buying American beef and soybeans, for example, they’ll buy from Canada and Australia.  American farmers and ranchers could have used the income during our Trumped up trade war with China.  

No free lunch

Ever notice that the only items in your household budget where inflation is out of control are those where there is a pile of government money available?  If you’re caught in the middle class squeeze, you know I’m talking about health insurance and college tuition.  So-called progressives have a solution: make it free.  Of course, nothing is truly free.  They’re really talking about socializing the cost of those items.

There’s a good argument to be made for government support of a healthy, well-educated middle class.  Unfortunately, government programs designed to help the middle class afford health insurance and college tuition seem to work like the carrot that the donkey can never reach.  It moves away as fast as one tries to reach it.  

I am generally supportive of government programs that are both means tested and based on merit.  However, the free lunch promised by politicians (now table stakes for Democrats running for president) doesn’t work for me.  Tell me how you’ll address the structure that is driving up costs, tell me the criteria to qualify for it and I’ll listen to your ideas.

Otherwise, you’re just making an ass of yourself.  

Speaking of healthcare

A common trope among Republican politicians addressing healthcare is to allow the free market to do its work.  I’ve wondered how that might look and have scanned the globe (Okay.  So, I just searched on Google) for a good example.  I haven’t been able to find one – no example of healthcare being provided in a free market in an industrialized country.  If you can find one, please let me know.  

I was, however, able to find a system that seems to work better than the rest:  Singapore!  Mandatory health savings accounts (Medisave) are the backbone of the system.  Everyone pays a percentage of their income into an account in their own name.  It’s supplemented by Medifund, an endowment set up by the government to pay the expenses of the poorest 10%.  And Eldershield provides supplemental care to the elderly and those with chronic conditions or disabilities.  Everyone has some skin in the game.  Families spend their own money for care from their Medisave accounts; so, they are careful how they spend.  Providers are, therefore, incentivized to provide good outcomes at affordable prices. 

It’s not perfect and it may not work on a large diverse population like that of the U.S. However, there’s a lot we can learn from it.

WHO WILL LEAD? 

Gillette and Mothers of sons… Inventing economics… How did we get here?

Gillette and Mothers of sons

My new razor

In a new TV commercial, Gillette promotes the idea that we as a society have an obligation to fight “toxic masculinity.”  Like its forebear “testosterone poisoning,” this outrageous sexist term is accepted in everyday conversation as though the behaviors of a few bad men are the result of simply being born male.  

A generation of boys and young men are suffering by virtue of what is now defined as “social constructivism.” The theory goes that there is no difference between men and women other than that imposed by society.  So, we should discourage behavior that is stereotypically male to ensure women are treated equally.  As a result, boys are growing up in a culture that is questioning what’s wrong with them and casually derides them. 

Popular culture has followed suit.  Slang terms like “mansplaining” and “man flu” are in common use.  Popular TV shows once elevated Dads like Robert Young’s character on “Father Knows Best” and now deride them in shows like The Simpsons and Everybody Loves Raymond. 

For the last couple of generations, many fathers have raised their daughters to fearlessly be the best they can be.  An acquaintance of mine raised three girls all of whom were All-American lacrosse players in college and have gone on to success in business.  It’s time for mothers of sons to take the same approach. My mother raised three sons to have the courage of our convictions, to value achievement based upon merit and make moral judgments based upon fairness.  We were never ashamed of being male. 

What are you teaching your  sons? 

Inventing economics

Have you heard of Modern Monetary Theory (MMT)?  Probably not.

It’s a theoretical model based on absolutely no experience being used by the “progressive” left to justify unlimited deficit spending.  Using Quantitative Easing (QE), the practice of central banks monetizing debt to inflate asset prices, MMT would be used as the basis to simply let deficits grow.  No doubt, MMT would be used to justify Medicare for All (M4A), free college tuition and God knows what else.  What’s interesting is that QE has created much of the income inequality about which the left complains.  Low interest rates make assets like real estate and other investments more affordable. No doubt the progressive response will be to take money from those who have earned it and give it to those who haven’t. 

Politically, MMT would enable politicians pass these massive programs without dealing with the nagging question, “how will we pay for it?”  Eventually, MMT calls for taxes to be raised when inflation gets out of control. By taking money out of the economy, inflation and growth would slow.  Well, at least they understand supply side theory even if they pay it no mind. 

I wonder how the public will react when they are told their taxes are being raised to fight inflation.

How did we get here? 

If you can carve out 20 minutes in your day (It’s tough, I know) to read a short story, I recommend “How This All Happened” by Morgan Housel.  It’s a very easy and fun read, an overview of Post-WWII history of American society and our economy.  

Each of us would take something different from it.  What I found it remarkable is how much the growth of debt was a factor in our economic growth.  From 1945 to 1965, US household debt grew from $49.4B to $331.2B.  That’s a modest sum by today’s standards but it’s 1.5 times faster than the growth in debt during 2000’s debt bubble. 

The momentum continues, of course.  As I wrote in “The Next Bubble to Burst Will Be…” global debt is now more than 300% of global GDP.  A truism about debt is that the more you have the less you get from it.  At manageable levels, it can enable economic growth, the acquisition of assets or high-return investments.  However, the larger the debt burden, the lower the return from each additional dollar of debt.  A clear manifestation of this phenomenon was the build up of excessive government deficits during the George W. Bush administration.  Each dollar of GDP growth was matched by a dollar of government debt. No multiplier effect at all.  Now that government debt exceeds 100% of GDP, each additional dollar of debt will subtract from GDP growth.  

What started as sound fiscal practice has become an addiction.

WHO WILL LEAD? 

Competing for immigrants... My original sin... An MLK slip of the tongue

Competing for immigrants

I recently wrote to the senior senator from New York, minority leader Chuck Schumer. My message was simple: “Fight for what matters; let go of what doesn’t.  Fight for DACA; give him his damn wall.”  But, that ain’t gonna happen.  

Before I go on, here’s a two-sentence economics lesson.  (Two sentences, I promise.)

Growth in GDP is the sum of changes in productivity plus the change in population.  That’s not a theory; it’s a definition.  Two sentences! 

To keep the economy growing, we need economic policies that promote innovation (free market capitalism) and immigration policies that admit more immigrants.  There are other ways to grow the population than immigration of course. But, birth rates in the industrialized world are declining.  

Politicians, especially the president, stir up our worst fears about immigration – they take your jobs, kill your neighbors, and sell drugs. But those fears are unfounded. I lived in South Florida for 18 years among legal immigrants from Cuba.  I can assure you that Cuban-Americans are just like every other group of those descended from immigrants: aspirational.  Florida’s economy thrives not only because of low taxes and good weather but also because it provides a welcome environment for anyone who moves there whether they’re from Chicago or Bogotá. 

We have nothing to fear from legal immigration and everything to gain.  Our Canadian neighbors understand this and plan to welcome 1 million immigrants over the next few years.  We should emulate them. 

In short, if we expect our economy to continue to grow, we need to start competing for immigrants. 

My original sin

I’m a classic swing voter. I haven’t voted for a winning candidate in a presidential election since 1996.  Most everyone I know says they are conservative on fiscal matters and liberal on social issues.  It’s a suburban mantra.  So, why does neither party ever give us a candidate who fits the profile?  A friend who worked on political campaigns in New York, says, “there aren’t enough of you” to gain the attention of the major political parties.

Philosophically, I am more aligned with libertarians than with Republicans and find myself most in agreement with Republicans on economics and defense.  On social issues, not so much. Yet, I can’t vote Democrat because of economic policies designed to undermine the free enterprise system. What’s worse is the religious right and the politically correct left both wish to impose their values on the half of the population that disagrees with them.   

As both the Democrat and Republican parties drift (some would say gallop) to the extremes, I have become politically homeless.  I am not alone on this.  An academic study done by More in Common suggests I am part of the “exhausted majority.”

I refuse to be part of a political party that embraces hypocritical economic policies (tariffs, deficits), isolationist foreign policies and abhorrent social policies (anti-women, anti-gay).  Alternatively, I refuse to embrace politically correct culture.  Use the wrong phrase or express the wrong view and you’ll be hounded off college campuses or reviled in mainstream media.  For a white male to be accepted in this subculture, one must be “woke.” Why would I want to be a member of a political party that treats being a white male as an original sin?

The MLK slip of the tongue

A local controversy has gone viral.  Weatherman Jeremy Kappell has been fired for describing a local park as “Martin Luther Coon King, Jr. Park” during a live broadcast.  It was a slip of the tongue that went by so fast you may not have noticed it had it not been caught by Rochester’s African-American mayor, Lovely Warren. The mayor called for his dismissal and got her way. 

You have to wonder how a professional on-air broadcaster could make such an error.  I don’t!  I suspect (I have no evidence) that he hung out with bro’s sometime in his youth – high school, college or young adulthood – who used the phrase consistently without the self-correcting addition of “King” following the gaffe.  

It’s interesting that Bernice King (MLK’s daughter) has advocated he shouldn’t have been fired.  Suggesting that “we’re just moving people around the board” when we “just fire them,” she advocates rehabilitation. I confess I don’t know what that means in this case.

In making this assertion, Ms. King is channeling her father’s best instincts.  MLK gained national attention and empathy for his cause, in no small part, because he showed us how our behavior was misaligned with our stated values.  Today, media, both mainstream and social, would rather divide us than remind us to find the better angels of our nature. 

WHO WILL LEAD?

Broadband… AOC… Pelosi… Ryan… WTF!

No, you don’t have a right to broadband Internet

Like anything, once the majority has something, everybody wants in.   The Wall Street Journal reports House Democrats have cobbled together an infrastructure proposal that includes “$40 billion in ‘direct federal funding to connect all of America to affordable high speed Internet.’” Meanwhile, in a report titled “If you think you have issues with your broadband internet, you’re not alone,” our local paper reports on the frustration of those who have eschewed an urban/suburban lifestyle, moving to rural counties where they are unable to get a consistent broadband connection.  

With scant attention to the cost of extending broadband to areas where it would be underutilized, the article tells us of the misfortune of the poor folks looking for five acres of land where they can raise chickens and bees without sacrificing their connection to cyberspace. A group advocating for extending broadband service, promotes the idea that broadband is “a utility now and we need universal access.”  The article closes with a quote from a frustrated schoolteacher saying, “Internet is no longer a privilege… it’s a right.”  The statement makes a now common error by confusing goods and services with “rights.”

To be clear, goods and services are not the same as human rights.  They may be (and generally are) unequally distributed.  For example, few rural communities have big shopping malls, big name entertainment or five star restaurants.  Rights, on the other hand, must be distributed equally.

Let’s not confuse the efforts to ensure equal rights with the desire to socialize the cost of providing services to those who can and do make informed choices. 

AOC

From the “Much Ado About Nothing” department comes a 12 second video of youngest woman ever House member Alexandria Ocasio-Cortez (now dubbed AOC by the media, social and otherwise). Like almost everything, the video is at ground zero in the culture wars and is likely to remain there for at least a few more seconds.

Of greater concern to me is the Paul Krugman defense of AOC’s suggestion of top tax rates of 70 or 80%. How else will the government pay for free everything – healthcare, college education, whatever?  Citing studies done by Peter Diamond and Christina Romer, he uses a marginal utility analysis to explain why rates that high wouldn’t matter.  He fails to mention that Diamond’s study was done in the 1960’s when the highest rate, 91%, was lowered to 70%.  Nor, does he mention that Romer was run out of the Obama administration after its first year because she dared advocate that higher rates would dampen economic growth.

Nancy Pelosi (left) and AOC (right, no not really)

Pelosi and Ryan

So, long as I’m taking shots at politicians, I’ll close with some observations about two oft-mentioned names.

It’s fair to say that Nancy Pelosi’s politics are way too liberal for me to even contemplate.  I set that aside yesterday watching CBS’s Jane Pauley interview her.  There was one word that occurred to me at its end: resiliency.  She dismissed the target placed on her back during the recent campaign season saying, “once you step into the arena” you should expect it. She further asserted she would “go home” once her “mission” was accomplished and not before.  She sets a great example for young women – at least for those who venture forth from their safe spaces.

While my head is still spinning, I should point to one of my former heroes, Paul Ryan. Once the stalwart advocate of both low taxes and a balanced budget, he has departed Washington with a legacy that reflects neither.  As perhaps the most well informed member of leadership during two years of Republican control of government, he leaves us with a tax reform that is a mixed bag of good and evil along with a $1 trillion dollar annual deficit.  

I’m having a WTF moment. 

WHO WILL LEAD?