Presidential Rumble II

Before we get back to important stuff like baseball, let’s talk about the election now that we seem destined for The Donald versus The Frontrunner II. We still advise the Democrats in the White House and Congress to take out or force out our current president, The Frontrunner, and make the Vice-President, Triple A, President before the convention. Barring that or some stoke of luck we are stuck with The Donald versus The Frontrunner II.

Jeffery Blehar at NRO says Charlie Cooke at the same site was eloquent when he said the loser this fall will be forever stained. Charlie concludes

Even before the election, it is rare that one meets a voter who is enthused by the choices on offer. Once the contest is over, it will be a veritable impossibility — and the aspirant who loses will be forced to start looking at impenetrable compounds high up in the Swiss Alps.

Jeff is just in disaster mode as he concludes:

That’s it, that’s all that’s on the itinerary for us in November. [The Donald versus The Frontrunner II]. The course is locked in. There can be no deviation from the path now, absent death or disability. One way or another, the result will incinerate the social fabric of the country. Set the controls for the heart of the sun.

Check out Jeff and Charlie and NRO. Time will tell but we think Charlie has it exactly wrong. We think the winner of The Donald versus The Frontrunner II will be forever stained. In part because Jeff is right about the election and that fraying social fabric will set the opposition to the winner. If one of them had the ability to heal that fraying fabric it would give us a candidate to root for but both of them are such fools that the winner will have a disastrous presidency. Our prediction is the winner will be forever stained while the loser can say you shoulda voted for me. We hope we are wrong and Charlie is right.

A Good Step In Argentina

We’ve been reading Guide To The Perfect Latin American Idiot. It is instructive about all the socialists, fascists, and others that have come to power in Latin America. The idiots are the folks that tolerate, vote for, or recommend those in power. It is both hard to finish and hard to recommend the book because it is so damn depressing. It is a continent and a half where the voters and sometimes the gunmen put people in power that ruin countries economically. Argentina is an excellent example but there are many others. The Heritage 2023 index of Economic Freedom combines North and South America in one region. Check out this list. Faced with triple digit inflation and a 40 percent poverty rate, Argentina did the unexpected sensible thing: It elected pro-capitalist Javier Milei as president. Dominic Pino at NRO has posts here and here about Javier.

In the former, Dominic discusses why Javier is not The Donald. We think he leaves out two of the superficial connections between Javier and The Donald. As the picture at the start of this post from the Toronto Sun shows, Javier’s hair is not quite as carbon copy of The Donald but we find it strikingly similar to his. And his girlfriend certainly will remind folks of The Donald’s wife, Melania. Javier and The Donald have superficial similarities but are much closer to being political opposites.

Sidebar: It is hard to be sure of what policies The Donald favors. As somebody said, The Donald has moods rather than policies. The two things we can be relatively sure about The Donald is that he is in favor of tariffs and against immigration. Javier is the opposite. In fact, like MWG, he is in favor of unilateral reductions in tariffs. End Sidebar.

Javier faces daunting challenges to change Argentina to a functioning market economy. Peronism has run rampant in Argentina for almost 80 years. Javier has so much to fix and limited authority to do it. He is the president but he doesn’t control the parliament. And, as we remember with Reagan and Thatcher, the benefits of a market economy take time to manifest themselves. The idiots, perfect and imperfect, will ramp up the political pressure soon after Javier takes office. We wish him and the people of Argentina smooth sailing to a market economy but they face enormous headwinds from the idiots.

Two Reminders On Tariff Stupidity

Our two reminders on tariffs come from Scott Lincicome in his Capitolism newsletter at The Dispatch. We usually eschew the S word in favor of foolish but tariffs fully merit being called stupid. Tariffs are not the most important policy issue in the 2024 campaign but surely we deserve at least one candidate that isn’t on the stupid side. The two reminders are first that tariffs are stupid and second that both our current president, The Frontrunner, and our former president, The Donald, foolishly favor raising tariffs.

You should read all of Scott’s post (paywall alert) and most everything he writes. His work is worth subscribing to The Dispatch. Scott starts out with the terrible news:

[M]ultiple news outlets reported last week that [The Donald] is actively considering a “universal baseline tariff”: a 10 percent “ring around the U.S. economy” that would automatically apply to all imports, regardless of source—and, presumably, above and beyond all the current tariffs already in place. The plan’s details are unsurprisingly non-existent, but [The Donald] did gleefully confirm the idea in a subsequent interview.

We are gobsmacked that anyone in the GOP is even considering such stupidity. Even worse, Scott notes that none of The Donald’s opponents seem to be taking advantage of his stupidity so Scott starts by reminding us of the facts. First, China is a big trading partner but is only involved in 10-20 percent of our trade. Second, tariffs were a bad idea for Calvin Coolidge a hundred years ago and a necessary evil for Alexander Hamilton over two hundred years ago (because there were few other taxes to support government) but they are even more stupid now because of changes like global supply chains.

Then Scott runs through the data on the self-harm from US tariffs and concludes with a study on The Donald’s proposal:

Adding up these harms, the Tax Foundation’s Erica York calculates that [The Donald’s] tariff “ring” would amount to a $300 billion annual tax hike, reducing the size of the U.S. economy by 0.7 percent and eliminating 505,000 jobs. She notes that—again consistent with plenty of research and recent history—these harms would occur through a combination of higher prices for companies and consumers and a stronger dollar (which would offset some consumer pain but in the process make U.S. exports less competitive abroad). And if the rest of the world retaliated in kind (as most of them would), U.S. GDP would shrink by another 0.4 percent, and an additional 322,000 jobs would be lost. 

To summarize: taxes up, economy down, jobs down. Brilliant! How can anyone be surprised that raising taxes is bad for the economy? And it would anger our allies too and their reaction will make all of the problems worse. The second part of Scott’s post is about how The Frontrunner has supported The Donald’s tariff increases and the administrative mechanisms used to increase them. Here is a summary:

As we’ve discussed, for example, [The Frontrunner] administration has barely touched [The Donald’s] Section 232 and Section 301 tariffs, even though the president could remove them all with the stroke of a pen. The White House has also doubled down on protectionist Buy America rules, the Jones Act, and new domestic content mandates and subsidies for federally funded renewable energy and infrastructure projects—none of which target just China, by the way. And, far from being embarrassed about these actions, the administration—even Biden’s trade representative!—is bragging about them in advance of the 2024 election

As one of the commenters says, it is a race to the bottom on tariffs. Part of the reason to defeat The Donald is to remove his toxicity and give the GOP a chance to survive but we also need to remove his stupidity from the GOP. We need to make economically stupid politically stupid. And now we hope we shall retire the S word for some time.

Energy Policy Needed

At the beginning of the month we said that the GOP really needed an energy policy. Kevin D. Williamson just joined The Dispatch and his first post makes an excellent point that it doesn’t have to be a GOP energy policy. It could be a US energy policy. Kevin first makes the important point that the market is driven by much more than the decisions of US presidents. Even bad decisions like stopping or good decisions like starting Keystone XL are still relatively small potatoes. Then he gets to the important part:

But there is a great deal that policymakers could do to create a more reliable and efficient energy industry in the United States. And while everybody is talking about price today, we should be talking about reliability and security.

No gas, no electricity, or no natural gas are much bigger problems than a high price for gas. We need to work towards sensible policies that have long lead times for both the policies and the business projects. The problem we have is that investors see that that Democrats do one thing and the GOP does the opposite so they are unwilling to spend the millions and billions of dollars necessary to provide reliable and secure energy.

Sidebar: Our choice would be to have the government just get out of the way but that isn’t going to happen. Markets will solve most of the problems of secure and reliable energy if we allow them to. Congress needs to find a solution that includes markets and a little tinkering like a carbon tax to reach agreement. End Sidebar.

We think there is an opportunity for moving US energy policy in the direction of secure and reliable. The charge might be GOP led but it must have support on both sides of the aisle for the policy to hold. Two recent examples of why there is an opportunity are the New England governors and Talib versus Dimon. Colin Gabow at Cato At Liberty reports that the six New England governors are formally requesting relief from the Jones Act:

Although geographically part of the U.S. mainland, in terms of energy New England is almost an island. Lacking pipeline connections to refining centers outside the region, it also has insufficient pipeline capacity to transport natural gas—New England’s dominant fuel for electricity production—from other parts of the United States during wintertime spikes in demand. Instead, the region must turn to marine deliveries of liquefied natural gas (LNG) to meet its needs. That means imports. While the United States is one of the world’s top exporters of LNG, there are no ships to transport it to New England. More accurately, there are no ships to transport it that comply with the Jones Act. [paragraph eliminated]

As the Colin points out, New England has pipeline and shipping problems. Building pipelines while there are exceptions to the Jones Act would be OK with us. Most of the New Englanders in Congress are Democrats but they are not all of the Bernie Sanders or Elizabeth Warren ilk. There are opportunities to find support for sensible energy policies.

Michael Brendan Dougherty at NRO says it is the first time he felt like applauding Jamie Dimon, the CEO of JP Morgan for standing up to Rashida Tlaib, one of The Squad.

Rep. @RashidaTlaib challenges bank CEOs to agree to stop funding fossil fuels, is rejected by every single one Jamie Dimon: “That would be the road to Hell for America”

Policies for secure and reliable energy must include fossil fuels. There is a good reason why Michael hadn’t wanted to applaud Jamie as banks have long been susceptible to demagogs like Rashida. Jamie having a backbone is a big deal for creating limited support for fossil fuels. If the bankers are willing to stand up to the crazy elements of the Democrat party then maybe some of the Democrats can too. And, of course, the GOP will need to do the same.

What needs to happen is for Congress to remember that it is Congress. There might be some presidential leadership but that doesn’t seem likely until after the 2024 elections. Congress is the legislative body. They need to legislate. They should legislate (probably more than once) in the direction of reliable and secure energy for the US.

The Lack Of A GOP Agenda

We just got a letter from the GOP National Committee. It is all about stopping our current president, The Frontrunner, from taking foolish actions. The fundraising survey is entitled 2022 [The Frontrunner’s] Agenda Survey. Yup, the GOP National Committee is admitting they have no agenda of their own. The GOP has no goals of its own; it only exists to stop The Frontrunner. There are two good reasons for this. First, The Frontrunner and his friends have many truly awful ideas. Second, the right that the GOP tries to represent is fractured, distracted, and home to lots of ideas that aren’t much better.

Let’s start with the Democrats. There was this strange cartoon from Joe Heller in the paper today about bailed out folks being unhappy with the student loan bailout. We’re not sure what Joe’s point is as the people with a real complaint are the responsible and less credentialed that will pay for the bailout. The student loan debacle isn’t hurting Bill Gates and his friends. Is it that the rich are not cohesive as they don’t want any more transfers to stop before the rich college students get a bailout from the lower classes? Joe seems to think once the government has a bailout then they need to bailout everyone who asks and perhaps some that don’t. The student loan bailout is a particularly evil transfer from the poor or responsible to the rich or irresponsible accomplished by, at best, questionable legal authority. It is one the worst ideas in history made even more reprehensible by the method of enacting it.

Then there is the ludicrously named Inflation Reduction Act (IRA) that was actually passed by Congress. It adds thousands of IRS agents that has Treasury Secretary Janet Yellen concerned about increasing middle class audits. According the the NY Post Janet tried to calm the waters but gave herself and the IRS lots of wiggle room when she said:

“Specifically, I direct that any additional resources—including any new personnel or auditors that are hired—shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels,” [Emphasis added]

Checking out the bold we can see that the translation is that Janet hopes the IRS won’t set a record for the percentage of audits that are on small businesses and folks under the $400,000 threshold. That the number of audits will go up for such folks is a given. Expect to see much print given to the definition of an IRS audit to make Janet’s edict stick.

You probably knew that the IRA is mostly about subsidies for unreliable energy sources and making corporate tax compliance more expensive. Did you know that it also added a tax on stock buybacks at the insistence of Kyrsten Sinema? Do read all that Jon Hartley has to say at the link. We used to think that Kyrsten was pretty and smart. Now we just go with the former. A tax on stock buybacks doesn’t rate as high on the economic stupidity meter as the other parts of the IRA but why are Democrats so focused on throwing sand in the economic machine?

In our switch to the problems of GOP we will limit ourselves to protectionism and teaching. The Donald bears substantial responsibility for the continuing infant formula shortage by preventing Canadian infant formula reaching the US via the new NAFTA. Like socialism, despite its myriad failures, protectionism has many fans on the right, center, and left.

The Democrat attacks on education via school closings, support of teacher unions, support of transgenderism, and CRT have created a GOP opportunity. So what do we get from the right? Cries to ban CRT (here is the search) and proposals to increase the credentials required for teaching. Banning CRT is a problem for the GOP as it is nominally the party of free speech.

As much as it hurts us to say it, with the GOP fractured and distracted by The Donald and his legal problems, the best the GOP can do is oppose stupid stuff that the Democrats create in astounding quantity. We hope it is enough to make some gains in the 2022 elections but they really need to get their act together by 2024.

The Donald And Energy

While reading the frustrating attempt by Kurt Schlichter trying to convince somebody (perhaps himself) of The Case For [The Donald] in 2024 we came across something interesting. One of the silliest arguments he tries out is that The Donald and his cronies will have the advantage of two election campaigns. The problem is that The Donald et al. are getting worse at campaigning over time. He eked out a victory in 2016, lost in 2020, and then lost the Senate for the GOP in 2021. Why on earth would a GOP supporter want him to try again?

But while reading that dreck we came across a link from Ed Morrissey to the American Petroleum Institute’s (API) list of 10 in 2022: Ten Policies To Unleash American Energy And Fuel Recovery. They call on the administration of current president, The Frontrunner, to do all these things in 2022. Unfortunately, none of the proposals are going to happen in 2022. The GOP, however, needs an energy policy. They need to do more research but here is an off-the-shelf energy policy to adopt at least in part. We are not convinced on number seven:

Congress should expand and extend Section 45Q tax credits for carbon capture, utilization, and storage development and create a new tax credit for hydrogen produced from all sources.

As we oppose specific energy subsidies it seems like a bad choice. Number ten also seems suspect:

Congress and the Biden administration should support the training and education of a diverse workforce through increased funding of work-based learning and advancement of STEM programs to nurture the skills necessary to construct and operate oil, natural gas and other energy infrastructure.

We think the energy companies can do most of that on their own. The other eight might need an adjustment or two but they look pretty solid. So, take those two out and add a modest carbon tax replacing the gas tax and eliminate all (well, at least many) energy subsidies and you have a sensible ten-point energy program. The GOP is welcome! Now get to it. If the GOP has something to run on rather than just running against the disaster that is The Frontrunner they can ignore The Donald, win, and do something useful for the country.

False Alarm By Bjorn Lomborg II

In part one we properly gave False Alarm by Bjorn Lomborg a glowing review. It is a great book but it isn’t perfect or perfectly adaptable to the US although it is clearly focused on the US. In this post we discuss how the carbon tax Bjorn wants and we support should be adapted to the US. The four issues we want to cover are how the tax is implemented, how much the tax will be, what to do about green incentives, and how to deal with a regressive tax.

The first issue is that Bjorn wants a world-wide carbon tax. It is a great idea for the world but it is not within our ken. We need to look at the US specifically. The US, and most (many?) other countries have a gas and diesel fuel tax. We need to eliminate those taxes and replace them with a single tax on all carbon so that coal isn’t favored over alternatives such as gasoline, diesel, and natural gas. Such a tax might lead to lower carbon natural gas becoming a competitive vehicle fuel.

Because we can only pass a carbon tax in the US then there are concerns that companies will offshore the carbon intensive elements to reduce taxes. It seems likely that we will need a carbon tariff to prevent such tax avoidance.

Sidebar One: Yes, we are highly anti-tariff but we don’t see an alternative unless we can convince other countries to implement a carbon tax. End Sidebar One.

A longer term solution is to make the implementation of carbon taxes part of trade agreements. We were going to write free trade agreements but the agreements that reduce some tariffs with lots of pages of restrictions aren’t really free trade agreements. For now, it seems to us that a carbon tariff must be part of a carbon tax in the US .

The second issue is how much the tax will be initially and what it will be in the future. Bjorn gives us lots of alternatives but his sweet spot for a carbon tax seems to be $36 per ton now and $270 in 2100. Bjorn estimates that $36 per ton works out to 30 cents per gallon of gas. We will put our proposals as pennies per gallon but remember the tax is on all carbon.

The current federal gas tax per gallon is 18.3 cents on gas and 24.3 cents on diesel. There are also state gas taxes that are generally more than the federal tax but we are not proposing any change there. So the eliminating the current 18.3 cent tax and replacing it with a 30 cent tax would mean an increase of less than 12 cents per gallon. Our previous position was replacing the the gas tax with an equal carbon tax. Bjorn has convinced us to go for a higher carbon tax somewhere between 30 and 39 cents per gallon. He has not convinced us to schedule it out for the next eighty years up to over two dollars per gallon. Bjorn says adaptation is a crucial part of human functioning and we think the carbon tax should be adapted over time. So we will go to 35 cents now and perhaps another nickel in 2029.

Sidebar Two: The proposed carbon tax is really free for the GOP. If they can undo the mischief in the markets and transportation of fossil fuels during the last few decades, the outcome should be lower gas prices even after an increased carbon tax. The GOP mantra should not be “Drill baby drill,” but carbon tax, free markets, and consistent regulation. End Sidebar Two.

The third issue is what to do about green incentives is easy for us and should be easy for Bjorn. He is the one saying we have had 30 years of failed Climate Change policies. We would eliminate all energy specific incentives. That would include tax incentives and requirements that so much energy come from specific sources. The one partially green incentive we would keep and expand is federal dollars for basic research. Bjorn is a fan and we agree with him and the Gipper:

Ronald Reagan once recalled that quarterback Ken Stabler’s interpretation of Jack London’s personal credo, meant “throw deep. ” 

The federal government can include some high risk projects that markets might not be able to support until the basic research is done. Completion rates from throwing deep are low but there are touchdowns too. The reduced cost for the federal government from eliminating incentives should pay for increased research several times over.

The last issue is that a carbon tax is regressive and has disproportionate impact on low-income folks. The WSJ often says (trust us this is too many to link-it might be a macro for the WSJ editorial page) that increased revenues from a carbon tax should be used to reduce taxes on the productive side of the economy. We are big fans of prosperity and, like Bjorn, think that prosperity is an important policy to deal with Climate Change. In this case, however, we are content to create many prosperity enhancements despite missing a few. We need to hire a few economists to do the arithmetic but the idea is to reduce FICA (Social Security) taxes on low-income folks. We could exempt the first X dollars of income from FICA. The important point is to eliminate the negative impact of a regressive tax.

A carbon tax of 30 plus cents combined with eliminating energy subsidies and consistent regulation would be a combined energy policy and Climate Change policy that would be a vast improvement over where we are now. The additional questions are: Will anyone make a serious proposal? and What will the voters think?

Smart People Versus Smart Systems

An economic system with free markets uses prices as a signal. Buyers and sellers both change their behavior when prices change. Observers, like the folks in government, also see the signal and hear about it from the buyers and sellers. William A. Galston at the WSJ (behind paywall) takes our current president, The Frontrunner, to the woodshed for the inability of his administration to have insight in the infant formula shortage. As William is a Brookings guy, criticism of The Frontrunner by him is big news but we think this criticism is consistent with the Progressive mind. That is, progressives believe if there are really smart experts in government, people like William, they will figure out all of the right policies including infant formula. So when William says:

Three months ago, most Americans were unaware of these facts about the infant formula industry, but it stretches credulity to believe that the White House wasn’t. When the Abbott plant shut down, alarm bells should have gone off at 1600 Pennsylvania Avenue, and planning should have begun to avert the inevitable shortages. Judging by the scramble of the past 10 days, whatever plans there were didn’t get very far.

He is right that the administration failed on infant formula but he is missing the bigger point. It is hard to be smart about the right thing. We want smart people but smart systems like free markets are more important. People everywhere tend to work in their own self-interest. It is especially true in government that self-interest for most folks has not rocking the boat high on the list. So somebody in the FDA saying, “Hey, we need to put everyone to work on temporarily reducing restrictions on importing infant formula,” is not a suggested career move. It is a better career move for FDA employees to shut down the infant formula plant until they are absolutely sure that there is nothing that can be blamed on them. And, of course, that is what happened

Earlier in his post William notes the tariffs and other regulatory barriers to bring infant formula in to the US. William doesn’t mention The Donald’s responsibility on trade so we will. The blame needs to be bipartisan. He also notes there are some “unnecessary rigidities” in the WIC program to provide infant formula to the needy. At the link you will see that the USDA claims WIC serves about half of the infants born in the US. Half! Expanding programs is in the self-interest of those working for the program.

Right on Progressive cue, Wisconsin’s governor, The Suit, has issued an executive order against price “gouging” on infant formula. We thought the scare quotes were necessary. Here is the start of the story:

Vendors cannot sell baby formula at “unreasonably excessive prices” for the next 90 days under an executive order [The Suit] signed Thursday to address shortages affecting Wisconsinites and people across the nation.

Remember, the needy and nearly needy are already taken care of by WIC. So what is The Suit doing other than sending a signal? We hope that nobody in Wisconsin state or local government will actually be trying to find and prosecute “unreasonably excessive prices” for infant formula. If they do we would like to be on the legal defense team as the state tries to define “unreasonably excessive prices.”

FDA policies, tariffs, trade barriers, and unnecessary rigidities lead to shortages. Shortages lead to price controls. Who could have seen it coming? Well, lots of people saw it but not William, The Frontrunner or The Donald.

We need people like fictional Jack Bauer and real Winston Churchill in government but we call much of government bureaucracy (check out the second and third definition) and most government employees bureaucrats for a reason. The variation of prices in a free market creates a very effective alarm bell. They alert everybody without the need for special insight.

We agree with William that The Frontrunner has failed on infant formula and The Donald is part of the problem. The easy and small part of the solution is a new administration that excludes The Frontrunner and The Donald. Surely cognitive limitations mean that the new administration will be blind to and blindsided by some new crisis. The big and difficult part of the solution is free markets. The reason creating free markets is difficult is that the buyers come to the government for succor when the prices go up and the sellers come when the prices go down. The administration and the bureaucrats always hear those alarms.

Tiny Steps Toward Sanity

In are last post we suggested that both parties could benefit from big thinking. And lo and behold, Tom Cotton was doing just that on foreign policy although it was at a National Review Institute (NRI) event. We are not denigrating NRI but we realize that is what they do all the time. But it is nice to see a practicing GOP pol do it.

On the other side of the aisle, The Frontrunner’s administration has eliminated the tariff on Ukrainian steel. This is the smallest of small steps but doing anything sensible is always a good idea. It is such a small step because the suspension is only for one year and the largest Ukrainian steel operation has been turned into rubble as the link suggests. It also says that “some” of the mills have started producing steel again. So eliminating the tariff for one year is not going to have much, if any, impact because the Ukraine is likely to need that steel but it is less foolish than keeping the tariff.

Let’s hope there are trends towards serious proposals and small improvements.