Where Do We Go From Here?

(ED Note: Correction - Israel sent 1 billion pounds of food to Gaza (not 1,000,000). Apologies also - for the variation in font in the last post)

Codify in Law

For ever and ever, Free Market Capitalism has proven itself a superior economic system. Certainly compared to socialism and it's evil step brother, Communism.

Fairly applied, FMC makes all the sense in the world. Consumers get to choose what they consume. Suppliers compete to provide the most desired goods and services at the best prices. Government stays on the sidelines. What could make more sense?

One, however, would have to go back to the Stone Age to find FMC in a pure sense. Today we are a long way from there. In fact, I would guess there has never been a more contaminated Free Market system in the US than what we find today.

Consider the perversions:

• The Fed controls the cost of money and thereby the fuel on which this and any economy runs.

• Government spending is totally out of control, driving inflation and risking the future.

• Corporations are in bed with the government and, with the right influence, benefit mightily from regulation, subsidies and other preferential treatment.

• Government picks winners and losers based on votes.

• Interest rates drive housing affordability.

• Politically motivated boondoggles like climate change, EVs, solar sap American wealth and dictate priorities.

• Healthcare is almost totally beholding to the government via Medicare, Medicaid and Obamacare.

• DEI is promoting incompetency and destroying motivation. In really important places, like education and war.

Hardly Free Market Capitalism. Free markets and democracy, supposedly the inseparable twins, have never been so assaulted.

Nevertheless, Trump, in his efforts to do the right things and MAGA, must take care NOT to inadvertently spawn market distortions that cannot be reversed. As soon as any Administration acts like it knows better than the market what's good and fair, I hear the 9 Most Terrifying Words.

Take, for example,

• VP JD Vance introducing the “Stop Subsidizing Giant Mergers Act,” which makes it harder for companies to merge and aims to levy additional taxes on corporate mergers.

• Josh Hawley of RI is bent on “Busting Up Big Tech,” proposing to break up major technology companies despite possible consumer harm in the form of higher prices. 

• Matt Gaetz of Florida hopes to drive more companies into bankruptcy to rein in out of control government spending; while calling for onerous antitrust enforcement and regulation of the nation’s leading financial institutions. (Not sure how, he no longer has status).

• MAGA intellectual Sohrab Ahmari advocates for a resurrection of New Deal-era labor empowerment programs including re-establishing regional “wage boards” and beefing up the National Labor Relations Act of 1935 to transfer power from businesses to workers.

• Newly nominated Labor Secretary Chavez supported the PRO Act, which seeks to restrict Right to Work and other freedoms.

• Senator Ron Johnson attacked The Lego Movie and Senator Ted Cruz went after Barbie as examples of why Hollywood needs to be reined in.  

And these were all BEFORE Trump was re-elected. Now he promises massive interventions regarding regulations, trade, taxes, energy etc.

Most CME readers (plus 76 million voters) applaud the Trump policies as we believe RADICAL REFORM is essential. Still there is much to be said for government wielding a light touch.

The market will always perform for the greater good if allowed. Many longtime Republicans are repulsed by the anti-corporate direction MAGA partisans clamor for, “the idea of having the government take more control over the economy, allocate capital, pick winners and losers, even set some wages and prices and tell Americans from whom they can buy and sell things….there is nothing new about these policies. What is new is there are now Republicans advocating for this attack on economic freedom and the free enterprise system.” 

Remember the outrage when Harris promised price controls on food?

The U.S. Market is fragile. It suffer disruption from every new Administration. While it recovers somewhat, it never gets all the way back to the point intended. Ten cuidado, President Trump. And, most importantly, be sure to codify the good things in law so the next Liberal in 1600 can't undo them with a pen. Above all reforms, make sensible, comprehensive, enforceable immigration law one of the top priorities.

Tariffs, Tariffs, Tariffs

Donald Trump’s proposal to impose tariffs as high as 60 percent on imports from China, and a global tariff of 10 to 20 percent has drawn resounding mockery from economists, and, in turn, from the mainstream media. “Trump Is Proposing a 10% Tariff. Economists Say That Amounts to a $1,700 Tax on Americans,” a CBS News headline declared.

The uniform mistake of Haters is to gabble on only about the costs of tariffs, and not the benefits.

The basic premise of tariffs is that domestic production has value beyond what market prices reflect. A corporation deciding whether to close a factory in Ohio and relocate manufacturing to China, or a consumer deciding whether to stop buying a made-in-America brand in favor of cheaper imports, will likely not consider the importance of making things in America. The individual actor typically does whatever saves the most money. But, collectively, suborning American-made goods can create significant economic, political, and societal damage. Tariffs help combat those harms.

Many opponents of tariffs ignore their benefits because they don’t believe that manufacturing things domestically matters. Adam Posen, the president of the Peterson Institute for International Economics, has called Trump’s proposal “lunacy” and “horrifying.” American manufacturing is “the general fetish for keeping white males of low education outside the cities in the powerful positions they’re in.” Similarly, Michael Strain, the head economist at the American Enterprise Institute, believes that tariffs “would be a disaster for the U.S. economy.” In his view, the United States cannot be a manufacturing center again, “and we should not want to be.” Ouch.

These arguments are wrong. As the fallout from globalization has illustrated, manufacturing does matter. It matters for national security, ensuring both the resilience of supply chains and the capacity of the defense-industrial base. We have clear and undeniable enemies. If we rely on them for things we need to survive, we will find ourselves up sh__ creek, if not there already.

Manufacturing products also matters for growth. “Countries grow based on the knowledge of making things,” Ricardo Hausmann, the director of the Growth Lab at Harvard, has said. “It’s not years of schooling. It’s what products do you know how to make?”

Manufacturing drives innovation. As the McKinsey Global Institute has noted, the manufacturing sector plays an outsize role in private research spending. When manufacturing heads offshore, entire supply chains and engineering know-how follow. The tight feedback loop between design and production, necessary to improvements in both, favors firms and workers positioned near the factory floor and near competitors, suppliers, and customers. And the rudimentary matters as well as the advanced. When Apple tried to make its high-end Mac Pro in Texas, the effort foundered on a paucity of screws.

Production in the physical economy, whether manufacturing or agriculture or resource extraction, also has an outsize effect on economy-wide productivity growth. It anchors local economies in a way that personal services cannot. It preserves economic balance, so that trade is genuinely trade, instead of a lopsided exchange of cheap goods for financial assets. When manufacturing is lost, communities deteriorate and disappear.

The second big trap economists fall into when discussing tariffs is an obsessive and uncharacteristic focus on short-term consequences. Generally, economists encourage people to think about long-term impacts. Will a free-trade deal cause factories to close? Yes, economists concede—but in the long run, they argue, the efficiency gains created by free trade will lead to new and better jobs.

Strangely, economists have little patience for assessing tariffs in the same way. Many emphasize the new tax’s drag on growth, but ignore even the possibility that higher import prices might encourage investment in domestic production. Or force importers to lower prices.

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How soon they forget what happened when the Reagan administration negotiated import quotas on Japanese automobiles, which in the 1980s posed an existential threat to Detroit. Halting any further growth in imports did cause the price of the imported cars to increase initially by 5 to 10 percent. But it also caused the Japanese automakers to make enormous investments in building production capacity in the American South—first assembly plants, then entire supply chains, and eventually research and development facilities as well. Innovation follows manufacturing. Within just a few years, the quotas were lifted because they were not needed. Prices had returned to normal, and imports no longer flooded the market. The cars were being made in the U.S. by American workers.

Finally, the assessment of tariff's must consider where the money goes. If 1 million consumers each pay a $5 tariff, $5 million has not been set on fire—it has moved from their pockets to the U.S. Treasury. This means other choices. Some other tax could be reduced by $5 million. The $5 million could be rebated to consumers. It could be invested in some other activity—say, building a new bridge—that might have benefits greater than the cost.

If none of that happens, the money should be used to reduce the federal deficit and the need for borrowing. This would be no small thing given the federal government’s current fiscal crisis. Shouldn’t the fact that a tariff that could raise hundreds of billions of dollars in annual revenue merit some mention?

Will tariffs spur inflation? Only if importers pass on the cost to consumers and consumers keep buying at the higher prices. Maybe that will happen for a while. Or maybe what will happen will be the same as when Trump invoked tariffs in his first term. Importers adjusted and absorbed, not wishing to be shut off from the Golden Goose. And inflation was 1.9%.

(Credit to Oren Cass. A while back I reported on his book, The Once and Future Worker.)

One Lesson for Sure

Polls lie. Pollsters Lie. Political Analysts Lie

A top DNC official confirms they were lied to by the Harris campaign as regards internal polling. Apparently Harris WAS NEVER AHEAD. Yet the campaign kept insisting they were looking good. They would flip Iowa, they would win PA, etc. etc. Lied to their own people.

Why? C'mon man. You know why. To keep the donor pocketbooks open. And maybe keep some Trump voters home.

How'd that work?

"No one is above the Law" (Joe Biden on multiple occasions.)

Yeah right.

Not only is this administration the worst in our lifetime, it's officially the most corrupt. In yet another Biden/Harris 180, Biden has granted son, Hunter, a blanket pardon for all illegal acts in the past, regardless of whether they have charged yet and not..

This comes despite Jean Pierre issuing emphatic, "No's" during six different press conferences when asked if Biden would pardon Hunter. Joe Biden pardoned his son Hunter Sunday night, a reversal for the president, who repeatedly said he would not use his executive authority to pardon his son or commute his sentence.

"No reasonable person who looks at the facts of Hunter’s cases can reach any other conclusion than Hunter was singled out only because he is my son — and that is wrong. There has been an effort to break Hunter — who has been five and a half years sober, even in the face of unrelenting attacks and selective prosecution. In trying to break Hunter, they’ve tried to break me — and there’s no reason to believe it will stop here. Enough is enough.

I believe in the justice system, but as I have wrestled with this, I also believe raw politics has infected this process and it led to a miscarriage of justice — and once I made this decision this weekend, there was no sense in delaying it further"

It's one thing to forget how to walk off the stage, but did this nitwit forget it was his Justice Department? A miscarriage of justice? If this wasn't a slam dunk, black and white, no brainer, no court in Delaware or DC would have convicted him in the first place. For two crimes.

What's next? Full pardon for the Biden Crime Family? Talk about a miscarriage of justice. The now dead, Jack Smith documents' cases alone cost the taxpayer's $50 million!

What about the 51 former intelligence officials who penned the famous letter saying the Hunter laptop was Russian disinformation? And all the Lamestream and Social Media outlets who gave that bogus allegation "air"?

Some pundits opine that Biden did this to prevent Trump from doing it later and looking like "the good guy."

You know things are bad ...when the Democratic governor of Colorado criticizes Biden for the Hunter pardon: 'Put his family ahead of the country'.

Alas, reality is nobody's given a tinker's damn what Joe Biden has done for most of his four years in office. Hell, his own party gave him the boot.

Guess What Nobody's Talking About All of a Sudden?

You got it. Ending the filibuster. Stacking the Court.

Be Patient, Be Stalwart.

Much of what needs doing requires time to produce lasting benefit. Many important gains will not be evident during Trump's Presidency, but in years to come. If and only if they are not undone by future administrations. Doesn't do much good to get the Border secured only to have the next Biden come along and squander it all. We learned from the Reagan years that the cost and pain of radical, fundamental change occurs up front with the greatest benefits coming later. Reagan was despised much of his first term and revered thereafter as the payoffs he promised came rolling in.

Of course, the Left will be not be graceful, because the Left cannot be graceful. They will undermine and thwart at every turn. They will deride, distort and brand every slip with I told you so. Just as they have done every single day since Obama lost the 2020 midterms.

To be, or not to be, that is the question:

Whether 'tis nobler in the mind to suffer

The slings and arrows of outrageous fortune,

Or to take arms against a sea of troubles,

And by opposing end them.

(HOT FLASH: Walmart rolling back DEI).