Mitch McConnell’s Surrender In The Debt Ceiling Fight Opens The Floodgates For Dems’ $3.5 Trillion Spending Bill

Estimated Reading Time: 5 minutes

Republicans caving on the debt ceiling paved the way for Democrats to focus the rest of the fall on their tax-and-spending spree.

In July, Senate Minority Leader Mitch McConnell, R-Ky., pledged “a hell of a fight” to stop Democrats’ $3.5 trillion spending blowout, which “is not going to be done on a bipartisan basis.” That “fight” lasted for less than three months.

On Wednesday, McConnell began negotiating an agreement with Minority Leader Chuck Schumer, D-N.Y., to raise the debt limit until some point in December. McConnell’s offer also attempted to force Democrats to use the budget reconciliation process to pass a longer-term debt limit increase, but Democrats quickly rejected that element of his proposal out of hand.

As part of this agreement, McConnell got Democrats to vote to increase the debt limit by a specific amount (i.e., authorize so many billions or trillions in new borrowing), rather than suspend it to a certain time (i.e., suspend the debt limit until December 16, 2022, as Democrats originally proposed). Some may consider this a meaningful concession, one that more readily allows for political attack ads, but in reality, anyone who votes to suspend the debt limit votes for all the debt incurred during that period of time regardless.

In exchange, McConnell 1) got no policy concessions at all; 2) gave Democrats the time and space to ram through their massive spending bill; and 3) created the reasonable expectation that Republicans will cave on the debt limit a second time when it comes up in December. (Congressional leaders will probably try to cram that debt limit increase into an omnibus spending bill totaling thousands of pages.)

Just as important, McConnell violated the letter that he and 45 other Senate Republicans signed on August 10, when they said that “We will not vote to increase the debt ceiling, whether that increase comes through a stand-alone bill, a continuing resolution, or any other vehicle.” McConnell and several of his colleagues will now have to vote to help the Democrats pass a debt limit increase, which they said two months ago they would not do.

This isn’t savvy legislating; it’s an all-out surrender, and one the Biden administration was publicly banking on all along. Generally, when both Democrats and Republicans think you caved — one GOP senator said “you could hear a pin drop” when McConnell explained his debt limit offer to his Republican colleagues — that’s exactly what you did.

Republicans Had Leverage…

It’s worth dispensing with the main McConnell talking point about the debt limit: that Democrats had all the votes they needed to raise the debt limit unilaterally. That was true at first, but Democrats surrendered that advantage more than six weeks ago when the House formally adopted Senate Democrats’ budget resolution on August 24.

Once the House and Senate agreed to a concurrent budget resolution — one that did not provide for a debt limit increase via budget reconciliation — they gave control of the issue to Republicans. For the uninitiated, the reconciliation process, which has strict parameters, allows the Senate to pass fiscal matters with a simple majority of 51 votes (in this case, 50 Democrats plus Vice President Kamala Harris), rather than the 60 votes normally needed to break a filibuster.

Guidance issued by the Senate parliamentarian earlier this spring permitted Democrats to revise that budget, to allow for a debt limit increase to pass on a party-line basis via reconciliation. But amending the budget first requires a vote in committee — and that committee process requires Republican cooperation.

Senate rules require a majority of committee members to be physically present for any committee markup. But the 50-50 divide in the Senate this Congress led party leaders to split committee assignments evenly between Republicans and Democrats, giving neither party a majority. If all Republicans boycotted a Budget Committee markup, Democrats would have no quorum necessary to report their revised budget — and therefore no ability to increase the debt limit via reconciliation.

… And Now Have Complicity

While the general public might not have understood the procedural details, McConnell’s team knew since mid-August that raising the debt limit would require Republican cooperation to smooth the reconciliation process along, if not Republican votes. And what policy concessions did McConnell request, knowing that his party would have to bear at least some of the political burden of the debt limit increase? As McConnell himself wrote to the president on Monday, “We have no list of demands.”

McConnell’s only “ask,” if one can call it that, was that Democrats use the reconciliation process to raise the debt limit, attempting to force Democrats to use a more circuitous route that involved additional Senate votes. That didn’t amount to a substantive policy request as much an attempt to play “gotcha” politics.

I wrote several weeks ago that a vote to raise the debt limit amounted to a vote for Biden’s $3.5 trillion tax-and-spend monstrosity. And Senate Republicans knew full well the link between the two issues. Here are a few examples.

Minority Whip John Thune, R-S.D., said, “A lot of our members are very uncomfortable doing anything that would make it easier” for Democrats to raise the debt limit.

Sen. Mitt Romney, R-Utah, who serves on the Budget Committee: “Republicans are not going to want to vote procedurally to [raise the debt limit] because then we become complicit and that’s not something we want to do.”

Sen. Susan Collins, R-Maine: “Some Republicans would vote to raise the debt limit if they knew the Democrats were going to abandon the $3.5 trillion package.”

After McConnell’s surrender, Democrats recognized the same dynamic — that Republicans caving on the debt ceiling paved the way for them to focus the rest of the fall on their tax-and-spending spree:

[Sen. Tammy] Baldwin, D-Wis., argued that the deal will allow Democrats to avoid wasting weeks of floor time on raising the debt ceiling under the reconciliation process when they would prefer to be working on a reconciliation package to implement President Biden’s $3.5 trillion Build Back Better agenda.

“I believe that Mitch McConnell is trying to steer [us] into this reconciliation process because it takes away from the main Biden Build Back Better agenda,” she said. “We intend to take this temporary victory and then try to work with the Republicans to do this on a longer-term basis.”

“McConnell caved,” Sen. Elizabeth Warren, D-Mass., declared after the [Democratic] caucus meeting. “And now we’re going to spend our time doing child care, health care, and fighting climate change.”

So much for “a hell of a fight” to stop the spending blowout.

‘Nuclear’ Threat Prompted a Cave

McConnell’s surrender came mere hours after Biden and other Democrats signaled a willingness to re-examine the Senate filibuster if the debt limit standoff continued. Biden’s comments Tuesday represented a 180 from his position as recently as last week — a remarkably quick flip-flop, even by his standards.

Likely the McConnell camp believes that he had to pursue this tactical retreat, lest Democrats deploy this “nuclear” option to destroy the filibuster, which would open the way to other harmful legislation. But that claim belies the fact that even after Biden’s comments Tuesday, “operatives within the [Democratic] party are skeptical that senators will ultimately scrap the filibuster rules at this moment.”

Moreover, Sen. Joe Manchin, D-W.V., said on Wednesday he opposed changing the filibuster rule to resolve the debt limit standoff. Politico reports that Manchin’s public comments came after McConnell called Manchin, giving him advance notice of the former’s debt limit offer — a fact likely leaked by the McConnell office, to advance the narrative that McConnell’s offer prevented Democrats from going “nuclear.”

But given that on Monday, Manchin said that “The filibuster has nothing to do with [the] debt ceiling” and that “we have other tools [i.e., reconciliation] that we can use and if we have to use them we should use them.” Manchin seemed unlikely to cross the filibuster rubicon on this issue irrespective of McConnell’s gambit, meaning the latter surrendered both unilaterally and unnecessarily.

Regardless, McConnell knew or should have expected earlier this summer that a debt limit standoff could precipitate a further showdown regarding the filibuster. If he didn’t want to fight that battle, he shouldn’t have started it in the first place. But he did, and he caved. Now, Democrats will have every reason to expect him to cave again come December.

Ordinary citizens hate Washington politicians because they talk a big game and rarely if ever deliver. That’s exactly what conservatives expecting an actual fight from Mitch McConnell over the spending binge got: another “all hat and no cattle” moment. If Democrats do end up passing their tax-and-spend legislation later this year, conservatives should remember that this moment and Mitch McConnell helped bring it about.

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This article was published on October 8, 2021, and is reproduced with permission from The Federalist.

“Shortages” Aren’t Causing Inflation. Money Creation Is

Estimated Reading Time: 5 minutes

For central bankers and mainstream analysts, the recent inflation outburst is only a transitory phenomenon that has nothing or very little to do with the massive monetary and fiscal stimuli unleashed during the pandemic. Although the Fed has recently conceded that price pressures are persisting longer than expected, the surge of inflation is allegedly due to supply bottlenecks caused by the pandemic. This superficial diagnosis serves as a convenient excuse for politicians to keep in place damaging growth stimuli and draconian public health measures.

Inflation Is Not Driven by a Shortage of Supply

Mainstream economists define inflation as an increase in consumer prices which occurs when the growth of money supply outpaces economic growth.1 In other words, too much money is chasing too few goods. If the recent surge in inflation were driven by a shortage of goods rather than an increase in the money supply, then aggregate output would be shrinking. But this is not the case, because global economic output is projected by the Organisation for Economic Co-operation and Development to grow by 5.7 percent in 2021 after having dropped by 3.4 percent in 2020. This year, the output lost during the pandemic is expected to be recovered in both advanced and emerging economies, including in the US (graph 1). As a matter of fact, inflation was accelerating this year at the same time that industrial production was recovering to prepandemic levels in both the US and the EU (graph 2). The alleged shortage of supply at an aggregate level appears to be a myth.

Graph 1: Real GDP growth

Real GDP growth
Source: IMF World Economic Outlook.

Graph 2: Inflation and industrial production

Inflation and Industrial Production
Source: FRED and Eurostat.

The invoked shortage of supply is primarily based on anecdotal evidence about unmet demand and rising prices in specific economic sectors, such as semiconductors, cars, furniture, and energy. But those who claim that supply is insufficient do not bother to analyze whether the squeeze of supply chains is due to chronic shortage of production or to excess demand. Moreover, even if supply were short for certain goods due to production lockdowns, changes in consumer schedules, or environmental greening policies, a surge in the aggregate price level would not take place if the money supply and aggregate demand remained broadly unchanged. The squeeze on some individual supply chains would be compensated for by lower demand for other goods and services, and only relative prices would change in the economy.

Let us have a closer look at specific cases of widely perceived supply bottlenecks. The shortage of shipping containers and logistic problems at several ports in the US and Asian countries seems central to many other supply chain bottlenecks. Shipping costs have soared indeed, but shipped volumes have increased as well (graph 3).2 This does not indicate a lack of supply, but rather buoyant demand for international transport. Experts from leading shipping groups report that major US ports, container groups, and logistics companies can barely handle the surge in international trade. This is not surprising given that both US imports and its trade deficit surged by more than 20 percent year on year in the first seven months of 2021, as consumers rushed to spend their stimulus checks. United Nations Conference on Trade and Development experts claim that the global demand for manufactured consumer goods increased throughout the pandemic, boosting the demand for container shipping and raising transportation costs. The surge in global demand has not only rearranged international trade flows to the advantage of China and other Asian economies, but has also pushed international trade volumes to new highs (graph 4).

Graph 3: Global TEU shipping volume and price index

Global TEU Shipping Volume
Source: Container Trades Statistics.

Graph 4: Global volume of trade

Global Volume of Trade
Source: World Trade Organization.

The shortage of semiconductors, which affects car production, is also blamed on the inability of chip manufacturers to deal with an order backlog swollen by covid-19 and shipping disruptions. But the global semiconductor market expanded by 7 percent in 2020 and is projected to grow by another 20 percent this year (graph 5) and almost double in size by 2028. So, again, the shortage is being caused by a relatively rigid supply which cannot accommodate buoyant demand. The latter has increased not only from the automotive sector, in particular as electric vehicles use more chips, but also from manufacturers of computers and other consumer electronics, the consumption of which has surged during the pandemic.

Graph 5: Global market for semiconductors

Global Market for Semiconductors
Source: Statista 2021.

The recent rally in energy prices, with coal and European gas hitting record highs and crude oil pushing above $80 a barrel, is also attributed to a constrained supply and perceived as a threat to the economic recovery. But the global supply has not shrunk; on the contrary, the world production of energy has been on a steady upward trend (graph 6). After growing by about 2.4 percent per year for the past three years, energy production fell by 3.5 percent in 2020 due to the lockdowns, but is expected to rebound by 4.1 percent in 2021.

Graph 6: World energy production

World Energy Production
Source: Enerdata.

The global energy supply would have been much higher and better balanced among sources and across regions had it not been for government-mandated green policies and carbon emission targets. In Europe, coal plants have been gradually phased out, as have nuclear power plants in Germany. They have been replaced by wind turbines and other renewable energy sources which underperformed recently due to adverse weather conditions. Together with lower gas deliveries from Russia, this has created a perfect storm in the European energy market. At the same time, China’s strict emissions targets and rising coal prices have also generated a power crunch, disrupting factory activity.

In the same way that green government policies have undermined the production of energy, the lockdowns and stimulus paychecks generously handed out during the pandemic have created an artificial shortage of labor that is likely to exacerbate further inflationary pressures. Due to forced business closures, the US economy lost about 20 million jobs by April of last year. Despite the economic recovery, some 5 million jobs have not yet been filled, as millions of Americans have been paid to stay home or have left the labor force altogether. In Europe, trade unions are already asking for pay increases while surveys show that inflation expectations are rising.

Excessive Demand Stimulus and Money Creation Are the Real Culprit

The growth stimuli applied during the pandemic have been truly unprecedented in size and outreach. Massive government support and budget deficits monetized by central banks have been poured over economies weakened by recurrent lockdowns. Despite the loss of jobs and market incomes, US household wealth has increased by a staggering $32 trillion since the beginning of the pandemic, fueling consumer spending and aggregate demand. Together with an increase in the broad money supply by more than a third over the same period (graph 7), this indicates that the inflation is actually driven by too much money rather than too few goods.

Graph 7: Money supply

Money Supply
Source: FRED.

The rapid rise in inflation is also raising inflation expectations.3 Inflation depends not only on the mechanical outcome of changes in the supplies of money and goods, but also on the demand for money. If the public realizes that its cash holdings are being eaten away by significant price increases, it will move away from cash. In this case, inflation would accelerate beyond the pace of money creation, which is obviously the nightmare of all central bankers.

Conclusions

The current surge in inflation is neither due to a shortage of supply nor transitory, as central banks want us to believe. It is primarily due to soaring consumer demand fueled by excessive growth stimuli and monetary creation. Government-imposed lockdowns and clean energy policies constraining output have exacerbated price increases. We are witnessing a consumption boom and persistent distortions in the structure of production, all bearing a striking resemblance to the boom that preceded the Great Recession.

 

1.This definition is disputed by Austrian economists because price inflation lumps together monetary and nonmonetary causal factors, which have different consequences for the structure of production, incomes, and individual wealth. Therefore, Austrian economists define inflation as an increase in the supply of money beyond an increase in specie, i.e., commodity money such as gold or silver.

2.According to the Financial Times, it costs more than $20,000 to ship a standard container from China to the East Coast of the US today, up from less than $3,000 two years ago.

3.In the US, Consumer Price Index inflation advanced by 5.3 percent in August, housing prices grew by almost 20 percent year on year as of July, and the S&P 500 Index was up by almost 29 percent year on year at the end of September.

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This article was published on October 7, 2021, and is reproduced with permission from the Ludwig von Mises Institute.

They’re Coming for You

Estimated Reading Time: 4 minutes

For years, politicians have claimed that the rich weren’t paying their “fair share.” While it’s taken a decade or more for voters to catch wind of the truth, people are finally beginning to realize that the rich actually pay far more than the rest of us. According to Congressional Budget Office figures, the average household in the top one percent earns 120 times what the average poor household earns, but pays 2,000 times the taxes. Even after deductions, exemptions, write-offs, income deferrals, and whatever other accounting and legal arcana the rich throw at their tax returns, in the end, the typical one-percenter paid 32% of his income (all sources combined) in 2018 versus 13% for the typical middle-class household and almost 0% for the typical poor household.

It’s clear that Americans have figured out the truth about who pays, because politicians are shifting the goalposts. Elizabeth Warren shifted the conversation from what fraction of income the rich paid to what fraction of wealth they paid. President Biden has upped the ante by talking about taxing unrealized capital gains.

This is unprecedented. The federal government has no constitutional authority to tax wealth, and never have unrealized gains been considered income – either in the realm of accounting or economics. An unrealized gain is simply an investment “in process.” What shows up as a gain today can easily turn into a loss tomorrow. Ask anyone who invested in Bitcoin in March 2021, or gold in August 2011, or housing in 2007. An investment’s tale isn’t told until the investor cashes out. Unrealized gains aren’t gains. They are hypotheticals.

What politicians want is to foment class warfare. If they can get the middle class and poor to resent the rich, those same politicians can expand the scope of federal taxation into areas it has never before touched.

But watch out. Politicians are only partially interested in the rich. They are very interested in the middle class. In 2018, middle and upper middle class households, combined, earned double what the top one percent earned. And the federal government currently taxes the middle classes at rates less than half of what it taxes the one percent. Politicians see the middle class as a largely untapped revenue source.

While President Biden says that a tax on unrealized gains would apply only to billionaires, once instituted, there is nothing stopping the government from applying it to everyone else. If it did so, the middle class would find itself awash in taxation. Most middle class wealth is tied up in home values. The median sale price of existing homes shot up 14 percent just in the past year. If the government applied an unrealized capital gains tax to all homeowners, the median homeowner would get socked with a $7,000 tax bill. And that’s for just one year. The value of the median home rises more than 3.5 percent per year. At current capital gains tax rates, the median worker would get hit with an additional $1,500 federal tax each year simply because his home was, on paper, worth more than the year before. The average 401K or IRA account is worth $135,000. Given stock market gains last year, the average saver would have seen around $13,000 in unrealized capital gains – and a $2,000 tax bill if those unrealized gains were taxed.

And what of higher education? The typical four-year college graduate earns over 60 percent more than the typical worker with only a high school education. Currently, the median difference is over $500 per week. Over a 40 year career, that wage difference adds up to more than $1 million. Should that be taxed?

The college graduate has made an investment in his education that has increased his expected future earnings by $1 million. Of course, the graduate hasn’t earned that money yet. But that simply makes it an unrealized gain. If the government can tax other investments before their gains materialize, why can’t it tax the graduate’s increased income before it materializes? The tax bill there, by the way, would be around $150,000.

What’s really going on is that politicians see a coming fiscal storm, and they are desperate to find new sources of revenue before it hits. The Congressional Budget Office estimates that by 2031 the federal debt will have reached almost $36 trillion. Historically, the CBO’s ten-year debt projections have underestimated future debt by more than a factor of two. If the CBO’s current estimate is off by that same factor, the debt will actually be over $80 trillion by 2031. That’s equivalent to running a $5 trillion deficit each year over the next decade. While that sounds unbelievable, it’s consistent with what we’ve seen in the past. Since the late 1960s, the federal debt has grown at an average annual rate of almost 9 percent. If the debt continues to grow at that historical average, by the end of the decade, it will be more than $65 trillion. That’s equivalent to running a $3.5 trillion deficit each over the next decade. For comparison, the federal government collected $3.4 trillion in taxes in 2020.

Federal spending is out of control. Politicians know it and they know that they can’t stop it.

Those same politicians have realized that raising taxes isn’t enough. They need new sources of tax revenue that haven’t existed before. Their first step is to institute new taxes on wealth and unrealized capital gains. Once established, their next step will be to expand those taxes to the middle class.

A day of reckoning is coming. Politicians hope that we’ll keep pointing fingers at the rich so we don’t notice who the real culprits are.

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This article was published on October 4, 2021, and is reproduced with permission AIER, The American Institute for Economic Research.

Biden’s Build Back Better Agenda Would Impose The Country’s Highest Tax Hike Since 1968

Estimated Reading Time: 2 minutes

Evidence is clear that tax hikes, especially those on income, are very harmful to economic growth since they are more distortionary to productive economic activity than other taxes. Income taxes work by reducing the incentive for individuals to work and invest in building capital.

Tax hikes come in different shapes and sizes, however. Some factors like the structure and size of the tax hike also contribute to how the economy is affected. So, how does President Joe Biden’s Build Back Better proposal compare to other past tax proposals?

The Tax Foundation analyzed this question by comparing tax revenue as a percentage of GDP from the tax proposals to those of the past.

According to their analysis, “compared to previous tax changes, this House tax plan would impose the largest gross tax increase since President Lyndon Johnson’s tax hike to help fund the Vietnam War in 1968.”

According to a report from the Treasury Department, between 1940 and 2012, Congress enacted 21 major tax bills that increased federal tax revenues over at least one fiscal year. Of these 21 revenue-raising tax bills, the five largest tax increases since 1940 raised annual federal revenue in the range of 1.33 percent of GDP up to 5.04 percent of GDP (see accompanying table).

The Build Back Better Act tax proposals include about $2.06 trillion in corporate and individual tax increases on a conventional basis over the next 10 years, which is worth about 0.72 percent of GDP. Looking at the first year alone, it raises about $175.1 billion of gross revenue, or about 0.76 percent of GDP. Under both measures, the proposal would be the largest gross tax increase since the Revenue and Expenditure Control Act of 1968.

Tax Bill Revenue Effect as a Percentage of GDP (first fiscal year unless otherwise indicated)
Revenue Act of 1942 5.04%
Revenue Act of 1941 2.20%
Revenue and Expenditure Control Act of 1968 1.74%
Revenue Act of 1951 1.52%
Revenue Act of 1950 1.33%
$3.5 Trillion in Gross Revenue Raisers (2022-2031) 1.22%
Current Tax Payment Act of 1943 1.16%
House BBBA Gross Revenue Raisers in 2022 0.76%
House BBBA Gross Revenue Raisers (2022-2031) 0.72%
Crude Oil Windfall Profit Tax Act of 1980 0.44%
Tax Equity and Fiscal Responsibility Act of 1982 0.53%
Tax Reform Act of 1986 0.41%
Omnibus Budget Reconciliation Act of 1990 0.41%
House BBBA Net Revenue Raised (2022-2031) 0.37%

Contrary to what Biden claims, the Build Back Better plan does not cost Americans $0, it would be one of the costliest bills the country has seen in a long time.

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This article was published on October 6, 2021, and is reproduced with permission from American Experiment.

Tucson v. Arlington on Immigration and Amazon

Estimated Reading Time: 3 minutes

Musings and questions from a left-wing socialist who is also a right-wing supremacist.

Americans are so divided on immigration and other issues that one risks being typecast as either a left-wing socialist or a right-wing supremacist for daring to send something around that one side or the other dislikes. Given that I believe that both political parties have failed to develop sensible immigration policies, I must be a left-wing socialist and a right-wing supremacist. 

My perspective on immigration is parochial, stemming from living close to the border in Tucson for the last four years, formerly living in metro Phoenix for 30 years, and, before that, in the barrio of San Antonio for five years, where I once got caught in the middle of a gun battle.

The problem with today’s massive influx of poor and poorly educated immigrants is similar to what it was a hundred years ago with my Italian forebears: It’s a net positive for the nation as a whole in the long run but can put a strain on local communities in terms of increased costs for education, medical care, social welfare, and law enforcement. In other words, such immigration is an example of concentrated costs and dispersed benefits.

The City of Tucson can’t afford the concentrated costs. It already suffers from a poverty rate twice the national average, a rate of property crimes near the top nationally, horrendous test scores in most k-12 schools, rundown and unkempt public and private property, crumbling streets from decades of deferred maintenance, and a brain drain of young talent that moves to Phoenix and other vibrant cities for opportunities. These problems are compounded by Tucson being largely bypassed by big, rich companies as a location for headquarters or major offices, even though the companies claim to value diversity and care about the poor.

The blame for Tucson’s travails shouldn’t be put on migrants, however—not when most of the travails are due to shortsighted, poorly managed, and highly partisan city and county governments, enabled by voters who have voted for the status quo for decades and by a media that doesn’t seem to know how badly the governments and the metropolis compare to well-run locales in key measures.

By the measure of the cost of municipal services, it doesn’t compare well at all For example, when my wife and I moved for family reasons from metro Phoenix to metro Tucson, to a house of equal value, our combined cost for property taxes, water, fire service, and trash pickup increased by 50% while the quality of public services and amenities fell significantly.

That doesn’t include the value of the time we spend picking up litter along a busy street every morning on our daily five-mile walk, a chore not done by government or by property owners that front the street, including retail businesses, apartments, condos, a gated HOA, a private and expensive golf course, an upscale resort, and a public school. Clearly, something is amiss with civic pride in the Tucson metropolis.

Amazon selected leafy, clean, prosperous Arlington, Virginia, as the location for its second headquarters for its highly paid professional and managerial employees. Arlington is next door to the imperial city of Washington, D.C., where bad immigration policies are hatched and imposed on the provinces. 

At the same time, local media celebrated when Tucson was selected as the location for two low-wage Amazon warehouses, which are two out of over 900 Amazon facilities across the U.S. They don’t question why Amazon doesn’t locate highly paid professional employees in Tucson but does locate them in Arlington and in scores of other cities across the nation, including Phoenix.

Pop Quiz: Do you think that Arlington or Tucson can better afford the costs of assimilating and aiding large numbers of poor and poorly educated migrants? Hint: The median household income in Arlington is $120,000, versus $43,400 for Tucson; the poverty rates are 7.6% and 22.5%, respectively; and the percentages of adults with a bachelor’s degree are 75.3% and 27.4%, respectively.

If your answer is Arlington, then that raises the question as to why, as a matter of immigration policy, migrants without visas aren’t transported to Arlington or similar wealthy towns for temporary living and follow-up actions instead of a poor city like Tucson.

Of course, by raising the question, I’m showing that I’m a left-wing socialist and a right-wing supremacist.

Biden Destroying Debt Ceiling Filibuster Breaks Campaign Promise To Restore Decorum

Estimated Reading Time: 3 minutes

Editors’ Note: Since this article was published October 6th at Independent Women’s Forum, Senator Mitch McConnell and ten other U.S. Senators ‘caved’ (on 10/7) to allow Democrats to raise the debt ceiling until December, kicking the ‘can down the road’. This was unnecessary given that even with Biden’s and Schumer’s threat of killing the filibuster, Senators Joe Manchin (very adamantly) and Kyrsten Sinema (most likely) would have prevented the nuclear option of no longer requiring 60 votes to pass most Senate legislation. The Democrats are now mocking McConnell and pushing ahead with their destructive legislative agenda. We reproduce this article to demonstrate the problem with the Republican Party and the enabling behavior for the Left they invariably demonstrate in grave matters for the America we love.

 

Biden railed against Trump for violating norms, abuse of power

While campaigning for the White House, candidate Joe Biden promised to right the ship, restore “normalcy,” decorum, and steadiness to the Oval Office. Yet from the Afghanistan debacle to spiking inflation and border chaos, President Biden’s done anything but that.

Biden’s latest norm-breaking move: his threat to change Senate rules to prevent a GOP filibuster on the eye-popping $28.4 trillion debt ceiling. On Tuesday, by calling shattering Senate norms on the filibuster “a real possibility,” Biden again eroded his campaign image as a Senate-forged institutional man of civility, respectability, and process, yet now he wants to shatter the filibuster, an important Senate rule requiring 60 votes to proceed on most legislation. Senators created the rule to make sure that one majority party didn’t dominate too far over the minority.

Though it appears Wednesday evening that Biden might get a reprieve, as POLITICO reports, “McConnell will let Democrats raise the debt ceiling into December without filibustering the bill, kicking the can on the fight over the debt.” However, The Wall Street Journal summarizes Biden’s filibuster hypocrisy well:

“Democrats keep telling Americans they have the votes and a mandate to pass the biggest tax increase since 1968 and the biggest domestic spending bill ever. Yet they also claim they’re helpless to raise the federal debt ceiling without Republican votes.

It’s a preposterous position, albeit of the sort this Administration often tries to sell. Such as: The soaring number of illegal border crossings in Texas is merely “seasonal,” the Afghanistan withdrawal was a success, and the cost of the $3.5 trillion reconciliation bill is “zero.”

Yet the White House is sticking to the line that the minority party is at fault for the majority party’s failure to raise the limit. The press-office wizards rolled out President Biden on Monday to portray the GOP’s reluctance not to cooperate as “so reckless and dangerous,” along with the usual parade of potential horribles: a credit downgrade, a run on the dollar, and a potential default on U.S. securities….But no one is preventing Democrats from doing their job. The Democrats can pass anything they want in the House. In the Senate they have 50 votes, plus the Vice President, to pass anything budget related through reconciliation. The GOP can’t filibuster such a budget bill—a fact Democrats are counting on to pass their multi-trillion-dollar tax and spending binge. The parliamentarian has already said that Democrats can use reconciliation to raise the debt limit, so why won’t they do it? As it happens, Mr. Biden gave that game away when he was asked Monday why Democrats aren’t using reconciliation.”

The Journal goes on to explain that Biden’s blocking reconciliation because it would force Democrats to go on record about a number of other, unrelated votes that would put Democrats on record taking unpopular positions.

The good news is that changing filibuster rules would require support from all Senate Democrats, and Democratic Sen. Joe “Manchin’s office confirmed for [POLITICO] Playbook, however, that the senator hasn’t changed his opposition to a filibuster carveout. Even if he did, Democrats would still have to deal with Sen. KYRSTEN SINEMA (D-Ariz.), who’s broadly against getting rid of the filibuster because she thinks it would lead to wild swings in policy as control of Congress moves between parties.”

Cheers to Manchin and Sinema assuming the roles of grownups in the room. Here’s hoping they hold the line. 

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This article was published on October 6, 2021, and is reproduced with permission from the Independent Women’s Forum.

Bombs Away !! A Razor Thin Congressional Democrat Majority Is About to Transform and Break America and Must Be Stopped: Here’s How

Estimated Reading Time: 6 minutes

The U.S. House and Senate Democrats are attempting to ram through over 2,500 pages of transformational legislation with a Senate reconciliation vote (50 + VP) and a House vote that has a 5 vote Democrat majority (smallest in past century). THERE IS ABSOLUTELY NO MANDATE FOR THIS. It is our belief that Nancy Pelosi and Chuck Schumer know their majorities are at great risk in November 2022 and with the disastrous record of President Biden thus far (Afghanistan, foreign policy, Covid, southern border, inflation, economy, energy, etc., etc.), they are desperate to cement their goal of permanent Democrat power with an entitlement state that cannot be reversed and irrevocably alters America and our individual sovereignty. Enormous increases in federal debt, crushing  tax burdens for all citizens, severe inflation beyond what is now occurring and economic stagnation are just some of the very predictable near and long term results. This progressive, socialistic legislation will cement this Democrat dream. It is the centerpiece of a Bernie Sanders and Alexandria Ocasio-Cortez socialist conquest of America. IT MUST BE STOPPED.

The TAKE ACTION box below addresses this assault on Americans in greater detail. Be assured that the majority of U.S. citizens do not want this legislation. Please refer to the paragraphs in the TAKE ACTION link below. How can we stop this assault on American families, their values, individual liberty, citizenship, energy, small business, and future opportunity and economic growth for future generations? We must inform our U.S. Representatives and Senators that it is absolutely unacceptable to do this. We suggest the following themes in short emails easily sent (please cut and paste the messages below) to legislators from the TAKE ACTION link below. The email portals and phone numbers for the Arizona U.S. Representatives and Senators Sinema and Kelly (up for reelection in 2022) are there. It takes only a few minutes to inform them how you, your families, your neighbors and so many you know are against this perverse effort to transform America. Please do not hesitate – we are moving toward this cliff very quickly. Senator Sinema may (??) stay strong and not vote for it. Senator Manchin from West Virginia has said no to this but he has caved in the past – he should be contacted and strongly reminded his state is a deep red state and his constituents are vehemently against this. Senator Kelly is facing election in 14 months – his vulnerability is essential to point out. All U.S. Representatives face election every two years – make it clear that they are all at significant risk.

Here are four suggested messages for each of the following groups – 1. Senators Sinema and Manchin, 2. Senator Kelly, 3. AZ Democrat Representatives (5) and 4. AZ Republican Representatives (4). Please move on this – repetitively and forcefully make your voices heard and felt as often as possible. If this disaster is foisted on the nation, there is little chance to turn it back – entitlements are never removed. Ergo – BOMBS AWAY. Let it rip and do not relent in informing  them until this assault on every American and our great Republic is stopped.

(1) Senator Sinema (or Manchin),

Dear Senator Sinema (or Manchin),

I ask that you reject the pending legislation in the Senate that is moving toward a reconciliation vote (50 + the Vice-President). It is not a true reconciliation process but rather transformational legislation that has absolutely no bipartisan support and intended to produce one-party rule in America, truly an un-American legislative goal. As we move through the Covid pandemic of the past 18 months and recover the nation’s economy and some semblance of normal American life, passing this legislation will not benefit the nation, your constituents or our children’s future. Intellectual honesty demands that it be rejectedif this ‘budget’ reconciliation bill becomes law, every current issue or crisis in America will be worsened (debt, energy, strong inflation, immigration, taxes, healthcare, etc.) and the blame will be on the party that forced it into being – you and your party.

You have publicly stated your objections to this attempt to transform America with a single party vote with its huge expansion of the federal government, vastly more crushing debt and taxes on all, yes all, citizens. You are in an historic moment and I implore you to vote no on this legislation. You represent Arizonans (or West Virginians) but your vote greatly impacts all American citizens. The majority of your constituents are polling strongly against this legislation and its intended purpose. Please stay strong and vote no on what is clearly Bernie Sander’s vision of  America’s future.

(2) Senator Kelly:

Dear Senator Kelly,

You are at an historic moment in this nation’s history. As a new freshman Senator with an impending election, you have the ability to determine the outcome of the reconciliation bill being pushed through the Senate. Arizonans know that it is not a true reconciliation process but rather transformational legislation that has absolutely no bipartisan support and intended to produce one-party rule in America, truly an un-American legislative goal. As we move through the Covid pandemic of the past 18 months and recover the nation’s economy and some semblance of normal American life, passing this legislation will not benefit the nation, your constituents or our children’s future. Intellectual honesty demands that it be rejected – if this ‘budget’ bill becomes law, every current issue and crisis in America will be worsened (massive debt, energy, strong inflation, immigration, crushing taxes, healthcare, etc.) and the blame will be on the party that forced it into being – you and your party.

November 2022 is less than 14 months away. This legislation will determine the outcome of next year’s election despite multiple issues of great distress for the American people. I implore you to reject Senator Schumer’s (and Senator Bernie Sander’s) legislative attempt to transform America to one-party rule and vote no on what should never be passed without bipartisan support for all constituents of our Republic.

(3) Democrat U.S. Representatives (AZ):

Dear Representative …..,

As an Arizonan and American, I implore you to vote no on the pending 10,000 page (yes, 10,000 pages!) legislation in the U.S. House that will be subjected to a Senate reconciliation vote (50 + the Vice President) to pass. You know very well, as Speaker Pelosi does, that it is not a true reconciliation process but rather transformational legislation that has absolutely no bipartisan support and intended to produce one-party rule in America, truly an un-American legislative goal. As we move through the Covid pandemic of the past 18 months and recover the nation’s economy and some semblance of normal American life, passing this legislation will not benefit the nation, your constituents or our children’s future. Intellectual honesty demands that it be rejected – if this ‘budget’ bill becomes law, every current issue and crisis in America will be worsened (massive debt, energy, strong inflation, immigration, crushing taxes, healthcare, etc.) and the blame will be on the party that forced it into being – you and your party.

November 2022 is less than 14 months away. This legislation will determine the outcome of next year’s election despite multiple issues of great distress for the American people. I implore you to reject Speaker Pelosi’s and Senator Schumer’s (and Senator Bernie Sander’s) legislative attempt to transform America to one-party rule and vote no on what should never be passed without bipartisan support for all constituents of our Republic.

(4) Republican U.S. Representatives (AZ):

Dear Representative …..,

We know that the 10,000 page House bill that will be treated as a reconciliation bill in the Senate (50 + the Vice President) will get absolutely no Republican votes. I thank you for that. Arizonans know that it is not a true reconciliation process but rather transformational legislation that has absolutely no bipartisan support and intended to produce one-party rule in America, truly an un-American legislative goal. As we move through the Covid pandemic of the past 18 months and recover the nation’s economy and some semblance of normal American life, passing this legislation will not benefit the nation, your constituents or our children’s future.

I humbly implore you to publicly and forcefully call this egregious legislative attempt what it is – an attempt by a leftist dominated Democrat Party desperate to transform the nation to a progressive, socialist ruling class and one-party dominance. It is un-American, it is wrong and it is against everything this Republic with its founding principles is about.

The battle is now joined, the polling is not with the Democrats and despite your minority status, it is time to shout out the truth loud and clear to the public, to every U.S. House and Senate member and to the media – this is a Bernie Sander’s socialist assault on the nation and its citizens that will diminish our liberty, our people and our children’s future. Stand strong, be loud and clear and please influence every Democrat House member who is not radical – if this process becomes law, it will be disastrous  for their party and for each of them in 14 very short months but with incalculable and permanent damage to our nation and its future.

Hillsdale Imprimis: The Disaster at Our Southern Border

Estimated Reading Time: 4 minutes

The following is adapted from a speech delivered on July 22, 2021, at Hillsdale College’s Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship in Washington, D.C., as part of the AWC Family Foundation Lecture Series.

In just a few short months, the Biden administration has created a disaster on the southern border of the United States. It did so by methodically—and by all indications intentionally—undoing every meaningful border security measure that had been in place. As a result, we have had five straight months of over 170,000 illegal immigrants apprehended at the border. The number in June was the highest in over 20 years. And Immigration and Customs Enforcement (ICE) has been effectively shut down.

Our national discussion of border security is generally misleading, and it is designed to be misleading by those who favor open borders. They frame the issue as if the American people face a binary choice: either let all immigrants in because they are “looking for a better life” or close our borders completely and inhumanely. But this is a false choice. The unspoken alternative is to enforce the law, taking in immigrants who enter the U.S. legally while securing our borders against those who attempt to enter illegally—particularly those meaning to do us harm.

Illegal immigration is, of course, nothing new. It has been a problem in our country for many decades. What is relatively new is the total lack of concern we see in the Biden administration, especially in terms of the national security aspect of border control.

Unbelievable as it may seem to us today, it was only 15 years ago—with the 9/11 terrorist attacks still fresh in our minds—when Congress came together in a bipartisan effort to pass the Secure Fence Act of 2006. The Secure Fence Act directed the Department of Homeland Security to take appropriate actions to achieve “operational control” over U.S. land and maritime borders to “prevent unlawful entry.” It defined operational control as the prevention of all unlawful entries into the U.S., including terrorists, instruments of terrorism, narcotics, and other contraband. And it specifically set the goal of “provid[ing] at least two layers of reinforced fencing, installation of additional physical barriers, roads, lighting, cameras, and sensors.” It added thousands of Border Patrol personnel, mandated the acquisition of new technologies, and resulted in the construction of more than 650 miles of physical barrier along the southern border of the U.S. between 2006 and 2011.

To repeat, this legislation was passed in a bipartisan spirit, with 80 members of the U.S. Senate voting to approve it. This included Senator Barack Obama, who said in 2005: “We simply cannot allow people to pour into the United States undetected, undocumented, unchecked, and circumventing the line of people who are waiting patiently, diligently, and lawfully to become immigrants in this country.” It included Senator Chuck Schumer, who said in 2009: “Illegal immigration is wrong, plain and simple. . . . People who enter the United States without permission are illegal aliens and illegal aliens should not be treated the same as people who enter the U.S. legally.” And it included Senator Joe Biden, who said in 2006: “Let me tell you something, folks, people are driving across that border with tons, tons—hear me, tons—of everything from byproducts from methamphetamine to cocaine to heroin, and it’s all coming up through corrupt Mexico.”

Some attribute the breakdown of the bipartisan consensus on securing the border to the fact that Democrats came to look on illegal immigrants as much-needed Democrat voters. For whatever reason, a decade later these same Democratic leaders were lambasting President Trump’s border wall policy as “immoral and ineffective,” even “racist,” and fiercely opposing any and every serious proposal aimed at enforcing immigration law.

***

When I say that the Biden administration methodically undid every meaningful border security policy that it inherited, what specifically do I mean? I’ve mentioned the border wall. And it is a demonstrable fact that border walls, placed in strategic locations, act as effective impediments and improve the ability of law enforcement to drive and dictate the behavior of criminal organizations rather than being driven and dictated to themselves. One of the most ridiculous criticisms I’ve heard is that the wall is “a fourteenth century solution for a twenty-first century problem.” The same could be said of the wheel, which also still works pretty well.

In any case, the first bullet point of President Biden’s budget for the Department of Homeland Security this year trumpets the fact that not a cent will go towards the construction of border walls.

Yet despite the amount of intense debate the border wall engendered, it was not the only or even the most important border security measure instituted under the Trump administration. Let me outline two other key game changers.

Prior to Trump’s presidency, a combination of three things had the effect of forcing the Department of Homeland Security to institute a “catch and release” policy for illegal immigrants: the Trafficking Victims Protection Reauthorization Act of 2008, which mandated that the U.S. detain all unaccompanied minors from non-contiguous countries (countries other than Mexico and Canada); Deferred Action for Childhood Arrivals, an executive policy adopted in 2012 to allow some of the migrants brought into the country illegally as children to receive a renewable deferred action from deportation; and the Flores Settlement Agreement, a 1997 court decree that was reinterpreted in 2015 to prevent the U.S. from detaining migrant families and unaccompanied minors for more than 20 days. In addition to catch and release, these things combined to bring about a demographic shift in illegal immigration that was immediately exploited by smuggling organizations—a shift from the influx of predominantly single adult males from Mexico to an explosive influx of families and unaccompanied minors from far and wide, and particularly from Central America. By 2016, the message had been sent and received that America’s southern border was wide open.

In response to this, the Trump administration negotiated the Migrant Protection Protocol, a bilateral agreement with Mexico more commonly known as the Remain in Mexico Program….

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Continue reading this article, published August 2021 at Imprimis.

Mark Morgan is a visiting fellow at the Federation for American Immigration Reform and at the Heritage Foundation. He served as acting commissioner of U.S. Customs and Border Protection and acting director of U.S. Immigration and Customs Enforcement in the Trump administration and as chief of U.S. Border Patrol in the Obama administration. A Marine veteran and a former officer in the LAPD, he served for over 20 years in the FBI, including as the assistant section chief of the National Center for the Analysis of Violent Crime Branch; deputy on-scene commander in Baghdad, Iraq; special agent in charge of the El Paso Division; and assistant director in charge of the FBI Academy in Quantico, Virginia. He has a B.S. in engineering from Central Missouri State University and a J.D. from the University of Missouri, Kansas City.

Book Review: Faustian Bargain-The Soviet-German Partnership And The Origins of the Second World War

Estimated Reading Time: 6 minutes

Author: Ian Ona Johnson.  Published by Oxford University Press.

It would be safe to say that World War I set up the circumstances for The Great Depression and World War II and that World War II set the stage for the Cold War and the growth of the worldwide welfare state. Thus the two wars coming some twenty years apart, with the worldwide depression in between, really does much to explain both the 20th century and even the 21st century.

For these reasons, studying both wars and the Depression is worthwhile. Insofar as World War II history is concerned, both the history profession and popular culture have been German-centric. For example how many movies have you seen featuring Nazis as opposed to movies that feature Stalin?

After reading this book, it is also fairly obvious that WWII really started almost immediately after WWI, and the team that started it, at least in Europe, were Russia and Germany. Aggression was not limited to Hitler.

We earlier reviewed Sean McMeekin’s magnificent Stalin’s War, a book heavily relying on recent access to Russian archives, that has reshaped our view of World War II. It was indeed Stalin’s War, in that he helped start it and profited the most from it. The West went to war (or at least Britain and France did) to save Poland. In the Pacific region, the U.S. got crossways with Japan over their atrocities in China. At the end of the conflict, Russia got Poland, the rest of Eastern Europe, half of Germany, North Korea, and China. Not a bad haul for having a hand at starting the whole thing.

McMeekin’s book concentrates on the role of U.S. Lend-Lease programs, Roosevelt’s diplomatic bungling, and the Soviet spy penetration of the Roosevelt Administration. He certainly mentions the pre-war relationship between two strange bedfellows, Nazi Germany and Soviet Russia. But this relationship was not the primary focus of his book.

Professor Ian Ona Johnson of Notre Dame University fills in additional details about the pre-war relationship with another breakthrough work that again concentrates on the recently available Soviet archives.  

Most of us think of this relationship as starting with the Molotov-Ribbentrop treaty or what is commonly called the Hitler Stalin Pact, which dates from 1939.

However, military cooperation between the new Soviet Union and Germany began as early as 1919, right after the end of the Great War. It was codified in the Treaty of Rapallo in 1922. Military, technological, and economic ties grew deeper throughout the 1920s and early 1930s, long before the rise of Hitler

Both nations felt slighted by the English-French order established for Europe and so they decided to form a strategic partnership between the aristocratic German military and the new Russian revolutionary government that openly declared the goal of worldwide communism. On the German side, this continued even during the period of the Weimar Republic, often without full knowledge of the fleeting democratic government.

Germany built large bases to build and perfect aircraft at Lipestak and a large base for tank development at Kama. The earliest cooperation was to develop poison gas, aircraft, and aircraft engines.

Germany got a secret place to develop air superiority tactics, new radio coordination of armor and tactical air assets, and new tank technology. Russia got technology that they both purchased and stole, and developed much on their own through reverse engineering of German designs, especially of aircraft and aircraft engines. Germany got raw materials, while Russia got loans, cash flow, technology, machine tools, and an officer corps trained in Germany.

It was a Faustian Bargain because never in history have two countries done more to build up each other’s military, only to turn it on each other with incredible ferocity. What made it even stranger was the unlikely union between Junker aristocracy from the German side making an alliance with class hating Bolshevik Russia on the other.

Germany was thus able to evade many of the restrictions of the Versailles Treaty, all the while Socialist governments in England pursued appeasement and France produced a cavalcade of weak and ineffectual governments. Once Germany decided to openly re-arm, they had much of the technology and tactics in place having honed both of them in Soviet Russia.

As it became more clear that Germany needed to be confronted about rearmament and treaty violations, the West was paralyzed and pursued disarmament. Much like today, the International Left held the view that arms races create international tension, instead of the more realistic view that international tension creates arms races. They felt then, as they do today, that signing agreements with partners that have no interest in honoring agreements, leads to peace. As it became more clear what Germany’s intentions were, the West did not want to spend money on the military but rather their socialist experiments at home. Appeasement of Hitler and actual reduction in military spending occurred. France decided early on they could not move to blunt Germany by herself but could only do so with Britain.

The most powerful military in Europe, that could have confronted Germany, was Russia. But these two countries were partners in crime for what they viewed as their own strategic interests.

As Professor McMeekin points out, Russia wanted war in Europe, feeling they could exploit the chaos. They certainly did, but almost perished in the process. If not for U.S. Lend-Lease, they would have.

At the outbreak of the War, the two gangster nations split Poland. Germany struck West conquering France, Belgium, Denmark, Norway, and Holland,  followed by attacking England while Russia struck Lithuania, Estonia, Latvia, Finland, and reached into Rumania, Yugoslavia, and Bulgaria.

It would not be an understatement that the German war machine in the early part of the war during the Blitzkrieg and the Battle of Britain phase, was supplied with Russian fuel. Industrial production was supported with Russian metals, and both civilians and the military were fed with Russian grain.

Russia in turn got money, technological transfers, and training. They even reorganized their general staff and officer education along German lines.

Even as Hitler made his statements about eliminating Jewish Bolshevism, the two countries maintained an uncomfortable but significant alliance. About 75% of each countries trade was with each other, which again bursts the myth that countries that trade with each other have too much to lose to go to war.

German dependence on Soviet oil came to a head when Stalin made moves towards Romania, Germany’s only non-Russian source of oil. The two gangster nations then went to war with Hitler making the first overt military moves while Stalin was attempting the economic asphyxiation of Germany.

Several lessons come leaping out of the book. Disarmament is a hoax as is relying on the “international community” to do anything to really stop aggression.

It is not a good idea to be dependent on Russia for energy.

Civilian control of the military is very important. At least from the German perspective, the ability of the military to operate outside the scrutiny of the elected officials during the period of the Weimar Republic was quite astonishing. 

Trade and commerce do not forestall war, and in fact, can promote it.

When a country is brutal to its own people, it will very likely be brutal with its neighbors. Countries that turn a blind eye to internal brutality and aggressive behavior just for the benefit of trade or to avoid the cost of a robust defense, are enablers of dictators.

Businessmen want to sell products and sometimes do so to the detriment of their own country. It is not analogous to the parasite that kills its host. We don’t even have a good word for it when the host promotes and feeds the adversary that soon kills the host.

Be wary of businessmen who get state financing and credit guarantees to enable trade.

Be wary of governments that provide state financing and take the risk out of business judgment.

Weak leaders can promote war almost as effectively and belligerent leaders.

Never underestimate the ability of people to delude themselves about the nature of tyrannical governments.

Ideological differences did not stop close alliances between countries, both between Russia and Germany, and later Russia and the U.S.

Secular ideology is easily as persuasive to both populations and political leaders as religious wars, although the secular ideologue is so arrogant he can’t see the commonality.

Finally, it was astonishing that after Hitler went after his domestic political opposition, killing about 84 people (the night of the long knives), an inspired Stalin went on his rampage of purges of both the party and the Russian military that he killed millions. Ironically, the self-inflicted loss of his German-trained officer corps very nearly cost him the entire country.

Although current conditions are not completely analogous, as I read the book I kept thinking about present-day U.S. relations with Communist China. We are currently building up a rival just as surely as Russia built up Germany and Germany built up Russia. We hear many of the same arguments made about trade and the cost of military build-up.

The elites in this country have been very pro-Communist China and many of our universities and communications companies, sports leagues, film studios,  have lucrative deals with China. The business ties many of our political leaders have with China are disturbing.

We both sell technology and allow the Chinese to steal our technology. American business invests heavily in China, even as the Chinese brutally crackdown on their own people. Again we see the willingness to grant favors to a country that kills its own people for political and religious reasons. We even subsidized their biological warfare capability and helped unleash Covid-19 on ourselves. 

It would seem we have made a Faustian Bargain of our own. Let us hope it does not turn out the same way as the last one.

My “Wealth Effect Monitor” for the Money-Printer Economy: Holy Moly, October Update

Estimated Reading Time: 2 minutes

Editor’s Note: It is amusing, if not tragic, that those who complain the most about “inequality”, pursue monetary, fiscal, and tax policies, that make it much worse for the poor.  Asset price inflation favors obviously those with the means to own assets: stocks, bonds, and real estate. While inflation is a tax on all of us, and a regressive tax at that, lacking the ability to own assets means the poor get hurt the worst by precisely the economic fallacies peddled by those who say they help the poor.

 

The bottom 50% need not apply. They just get to eat the soaring costs of housing. How the Fed totally blew out the already gigantic wealth disparity during the pandemic.

On Friday, the Fed released the detailed data about the wealth of households by wealth category for the 1%, the 2% to 9%, the “next 40%” (the top 10% to 50%) and the “bottom 50%” for the second quarter, after having released less detailed figures on September 23. You read the stories at the time about how the Fed’s money-printing and interest-rate-repression has enriched American households.

But the detailed data, just now released, show whose wealth jumped the most, and who got left endlessly further behind. It wasn’t households in general that benefited, but only the richest households with the most assets. The more assets they had, the more they benefited.

My Wealth Effect Monitor divides the wealth (assets minus liabilities) for each wealth category by the number of households in that category, which produces average per-household wealth within each category. The wealth of the bottom 50% is reflected by the jagged green line on the bottom, essentially on top of the horizontal axis:

Not shown separately are the truly rich – the 0.01% – and the Billionaire Class.  The Fed wisely doesn’t provide any information on them separately, but includes them in the Top 1%.

But according to the Bloomberg Billionaires Index, the top 30 US billionaires are worth on average $69 billion per household currently, having gained on average $2.2 billion in wealth each over the quarter.

The bottom 50% of US households (green line above) – 63.2 million households – are worth on average $47,900 per household. But this includes $25,970 in “durable goods” (cars, phones, furniture, etc.), which for consumers are normally considered consumables, not assets, because their values are declining, and they don’t produce incomes.

The bottom 50% gained $7,900 per household over the quarter, and those gains included $2,085 from purchases of durable goods!

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Continue reading this article at  Wolf Street.