Tag: the economy

The Piper must eventually be paid

No, Ms. Janet Yellen, the Fitch downgrade of the U.S. credit rating is not “arbitrary.” Mr. Paul Krugman, the downgrade is not “bizarre” either. And you both know it.

Fitch, one of three major global credit agencies, told it like it is on August 1, 2023, and slapped a downgraded credit rating of AA+, down from AAA, to the United States of America. The temerity! Well, it took guts, since the last time a downgrade happened – that one in 2011 by S&P, another of the three major global credit agencies – the U.S. Justice Department launched an investigation on S&P that resulted in the firing of the agency’s CEO.

Fitch’s downgrade elicited predictable reactions

The current downgrade by Fitch was predictably met with fire and brimstone by the Biden administration and its assorted allies. The New York Times had a short summary of criticisms:

The Biden administration and others pushed back. Treasury Secretary Janet Yellen called the downgrade “arbitrary,” noting that Fitch had shown U.S. governance deteriorating as far back as 2018 but hadn’t moved until now. “The American economy is fundamentally strong,” she added.

Paul Krugman, the Times Opinion columnist and Nobel laureate, said the move was “bizarre.” And Larry Summers, the former Treasury secretary, told Bloomberg, “I can’t imagine any serious credit analyst is going to give this weight.”

Fitch will be pilloried by most members of Congress,” Henrietta Trey, director of macroeconomic policy research at Veda Partners, told The Times.

Predictably also, experts like Janet Yellen commenting on the downgrade focused on the visible economic strength of the U.S. economy. Fair enough, since most folks are driving nice cars, consuming prodigiously, and paying taxes. But these experts mostly ignored the underlying weaknesses mentioned on the Fitch report.

Main points of the Fitch report were,

  • Steady deterioration in standards of governance over the last 20 years.
  • Repeated debt-limit political standoffs and last minute resolutions that have eroded confidence in fiscal management.
  • Successive debt increases over the last decade
  • Limited progress in tackling medium-term challenges related to rising costs of Social Security and Medicare
  • Rising general government deficits, reflecting cyclically weaker federal revenues, new spending initiatives and a higher interest burden.
  • Rise in general government debt. The 112.9% debt to GDP on report date is over two-and-a-half times higher than the ‘AAA’ median of 39.3% of GDP and ‘AA’ median of 44.7% of GDP.
  • Absence of policy reforms to address medium-term fiscal challenges: Increased interest service burden due to rising debt and rising interest rates. An aging population that will increase mandatory spending on Medicare and Social Security, depleting these funds by 2035.
  • Risk of recession due to projected tighter credit, weakening business investment, slowdown in consumption, and slowdown in GDP growth

These challenges did not develop yesterday or three years ago.

These weaknesses pointed by Fitch are structural deficiencies that have developed over the last 20 years, which absent deep reforms will render the current appearance of abundance unsustainable. Janet Yellen, Paul Krugman, Larry Summers, Henrietta Treyz, and all other talking heads certainly know this. They are not stupid. However, they choose to focus on superficial appearances of plenty and deflect blame.

They focus only on the readily visible and ignore the foreseeable.

In July of 1850, French economist Frédéric Bastiat wrote an essay called What is Seen and What is Not Seen. Here is a piece from that essay.

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

Perhaps Frédéric Bastiat only meant to call the “bad” economists “incompetent.” But economists as well as politicians who referred to the downgrade uncalled for, arbitrary, or bizarre – while surely being aware of unattended serious structural weaknesses – are more than merely incompetent. They are deceitful.

They know people have children to raise and mortgages to pay, which precludes adding the burden of sacrifice today for a greater tomorrow. So, the experts lie, voters vote for the status quo, and the unseen untreated rot continues to eat into the fabric of our nation.

Socialism: A self-inflicted wound

Political commentator Bruce Bialosky recently wrote that progressive U.S. cities like San Francisco, Seattle, Portland, Chicago are at the vanguard of social and economic deconstruction. He compares these once great cities to the former economic powerhouse, Venezuela.

Dependence on government largess is the hallmark of a socialist populace. Unfortunately, sources of largess are not unlimited, and eventually government leaders run out of money. Then, inevitably moral and economic collapse ensues. Examples going back to the fall of the Roman Republic and beyond abound. Sadly, the U.S., once the bedrock of true capitalism, is going the way of Venezuela.

Bruce Bialosky, CPA and political commentator, recently wrote on flashreport.org that progressive U.S. cities like San Francisco, Seattle, Portland, Chicago are at the vanguard of social and economic deconstruction. He compares these once great cities – no longer clean, safe, or worth visiting – to the former economic powerhouse, Venezuela. This South American nation, Bialosky says, is now a “full-blown humanitarian crisis.” On We Are Becoming Venezuela (flashport.org, May 21, 2023) he wrote,

At one point not too long ago, Venezuela had the best economy in Latin America and was in the top 20 economies in the world. It has the largest oil reserves in the world. In the last two decades of the 20th century, the economy started to decline. It was still a country with which many people I know did business and visited regularly. I wanted to vacation there. I heard wonderful things about Caracas, the capital.

Then Hugo Chavez became president promising a Bolivian (socialist) revolution. He indeed provided a revolution until he died. A revolution of despair. The current leader, Nicolas Maduro, took over the country and finished destroying any semblance of civilized life. Human Rights Watch has reported there is a full-blown humanitarian crisis lacking safe water, basic nutrition, and healthcare. Whoever can get out has gotten out.

Yet, Mr. Bialosky, says, U.S. cities continue to follow the socialist path. He cites Chicago.

There is another city I am thinking of adding to the list. Just 18 months ago after numerous prior visits, we were in Chicago. We were there when possibly the worst mayor in American history was in office – Lori Lightfoot. She was so bad her constituency gave her only 17% in the election primary, thus eliminating her from the general election.

Given an opportunity to begin correcting the malaise Lightfoot created, the residents of Chicago doubled down by electing someone who could easily become worse. With a failing school system they elected someone who received 95% of his contributions from public employee unions, largely from the teachers’ union.

Bruce Bialosky is referring to Brandon Johnson, elected Mayor of Chicago in a runoff election April 2023, and on whom Bialosky does not place much faith:

Mr. Johnson won his election largely on the back of two groups voting for him – blacks and, you guessed it, the most dangerous group in America – white liberals.

Harsh words! Bialosky elucidates on the source of the devolution experienced by declining cities.

You cannot blame any of this on blacks or other minorities as they represent a minor portion of the population in these cities. No, the dismal decline of these cities is caused by the most dangerous people in America – white liberals. They have voted for hard-core Leftists to come into office with their extreme policies. They think they are doing well for others allowing the public-school systems to corrode while sending their own children to private schools. They believe criminals should not have ramifications for their crimes because crimes were just a manifestation of their challenging past.

Let that sink in, “the most dangerous people in America – white liberals.” Mr. Bialosky denounces white liberals for implementing destructive leftist ideology. The Just Vote No Blog would like to excoriate white liberals, as well as their opportunistic counterparts of color, even further.

Look around, look them up on the Internet, what are the liberals saying? Are they encouraging the populace to practice self-reliance and self-discipline? Are they talking about Black or Latino entrepreneurs, educators, authors, nurturing fathers and mothers? Did they ever mention businesswoman and philanthropist Sheila Johnson, the first Black woman billionaire? No, white liberals, along with Black opportunist like Al Sharpton and Nikole Hannah-Jones, promote victimhood. Victimhood, synonymous with dependence, propagates the socialism for which liberals crave.

The U.S. is today at a forked road with three, not two, divergent paths. One path will lead to the U.S. becoming yet another failed socialist state like Venezuela; the other path will lead to the mirror image of liberal extremism which is repressive conservative extremism; and the third path could lead to a productive self-reliant populace, prosperity, individual liberty, and true help for the few who are unable to provide for themselves.

We still have ballot boxes, and what is placed in them in the next few years will determine which path our country will take.

North Carolina, rent control is not a solution

State Senator Linda Grafstein recently introduced Bill 255 aimed at repealing North Carolina’s prohibition of rent control. Surely, Senator Grafstein is aware of the inefficiencies inherent in rent control?

Recently North Carolina state Senator Lisa Grafstein (Democrat – Senate District 13), submitted Bill 255, Act to Permit Local Governments to Enact Rent Control. Bill 255, if enacted, will repeal Statute 42-14-1 Rent Control, and allow municipalities to enact any form of rent control.

Statute 42-14-1 prohibits North Carolina jurisdictions from implementing rules that interfere with the rental of private property:

No county or city as defined by G.S. 160A‑1 may enact, maintain, or enforce any ordinance or resolution which regulates the amount of rent to be charged for privately owned, single‑family or multiple unit residential or commercial rental property.

Senator Grafstein’s reason for introducing this bill is the usual one: rising rental costs are causing financial hardships. Indeed, that is the case, especially since the start of the Covid-19 pandemic in 2019. Rent control is the easiest way to show constituents a representative is “doing something.”

Rent control is also an inefficient way to address housing costs.

Unfortunately, rent control is also plagued with consequences and uneven results. Renters under rent control love their housing cost stability. Lower-income workers with hopes of stable housing costs support rent control. On the other side of the coin, landlords who are unable to pass their rising costs to tenants due to rent control seek solutions detrimental to tenants: poor property maintenance, raising rents on units not under control (thus raising overall rental costs), or withdrawal from the controlled market.

Given rent control’s uneven consequences, opinions on it vary widely. Here are two seemingly heart-felt quotes.

…our family was always able to afford a roof over our heads, because we were living in a rent-controlled building. That most minimal form of economic security was crucial for our family. Senator Bernie Sanders, CNN Opinion, July 30, 1919.

In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing. Assar Lindbeck, The Political Economy of the New Left, 1972.

While lower-income residents, especially those in more progressive cities, support rent control in hopes of stabilizing their housing costs, economists generally agree controls are destructive. Here is a good summary of the challenges economists see in rent control. The author is economist John Phelan in his essay 81% of economists agree that rent controls are bad policy, Center of the American Experiment, December 18, 2018.

… there are, in fact, areas where the economists’ cacophony dies down and they speak with more or less one voice.

One such area is rent control. This proposal – to cap the price landlords can charge tenants – crops up perennially as a solution to high rents. This is mistaking the symptom for the illness. When prices are high they are sending you information. They are telling you that demand is high relative to supply. If you want to do something about this, act to either reduce demand or increase supply. Either way, trying to fiddle with the signal makes no more sense then trying to slow down your car by breaking the speedometer.

But fiddling with the signal is expedient if not effective.

Decreasing demand for housing or increasing supply are solutions to high rents more complex than implementing rent control. Decreasing demand requires decreasing population growth, a solution not embraced by governors or legislators. Increasing supply (and growth) sounds good to state leaders, but their efforts are very often met with public outcry from residents rejecting loss of open spaces, increased traffic, and change in neighborhood character.

Thus, legislators sometimes opt for rent control – even though rent control seldom works as intended.

At present, two states, California and Oregon, plus the District of Columbia have state-wide rent control ordinances. Seven states allow local rent control: California, New York, New Jersey, Maryland, Maine, Oregon, and Minnesota. California, New York and New Jersey have the highest rents in the nation.

Most certainly Senator Linda Grafstein is aware of challenges inherent in both rising rents and rent control. Hopefully, so are her constituents.

Pictured: From widely circulated videos of protesters in Charlotte, NC, on January 25, 2023. Protesters were demanding accountability from corporate landlords; specifically, a stop to the growing ownership of homes by corporate landlords, improved building maintenance, and a 3% cap on rents.

Biden’s 2024 Budget: 5 loaves and two fish

The current trajectory of the U.S. national debt could be attributed to Keynesian Economics or to Modern Monetary Theory. However, a more accurate description would be Kicking the Can Down the Road.

Annually, our national leaders repeat the ritual: The President presents a budget, Congress frets over it, after a lot of fretting the budget is adopted, and a couple of trillion dollars are added to the already unsustainable national debt.

Democrat President Joe Biden presented his generous $6.8 trillion spending plan on March 9, 2023. $4.7 trillion in taxes on corporations and high earners is also in the budget. As is a promise to cut deficits by $3 trillion over the next 10 years. Republicans controlling the House of Representatives immediately declared the budget dead on arrival.

Many articles have been written on how this budget would achieve its goal of reducing deficits (the shortfall between revenues and expenditures: $722.6 billion so far this fiscal year). Some have pointed that this budget will not reduce the national debt (the accumulation of years and years of deficits: $31.4 trillion as of 03/16/23).

Here, it will suffice to say that Jesus fed 5,000 people with 5 loaves and two fish (John 6:1-14), and perhaps President Biden truly believes he can accomplish something similar.

Barring miracles, can the U.S. sustain its current debt?

In its Financial Report posted on January 31, 2023, the U.S. Department of the Treasury, Bureau of the Fiscal Service, said the following,

The current fiscal path is unsustainable … The debt-to-GDP ratio was approximately 100 percent at the end of FY 2021, and under current policy and based on this report’s assumptions is projected to reach 701 percent in 2096.

The national debt is the nation’s credit card.

Just like an individual’s credit card, the national debt can avoid immediate full payment of obligations. Also, just like an individual’s creditor (the bank or credit union that issued the credit card), creditors that hold U.S. debt (China, for instance), will not lend indefinitely. At some point, creditors start worrying about losing their money and stop lending.

Credit card companies watch your credit balance in relation to the money you said you make. This will give them an idea whether you can pay down your balance or not. Creditors of the United States do the same. They watch the U.S. national debt as a percentage of the U.S. Gross National Product. By traditional metrics, when the Debt to GDP ratio reaches 77%, its time to worry. The U.S. Debt to GDP at the end of the 4th quarter 2022 was 120%. When there is not enough money in the kitty to pay creditors, “full faith and credit” does not mean much.

How about infrastructure and benefits?

The higher the national debt, the more revenue goes toward paying interest on the debt, and less revenue goes toward infrastructure or benefits like healthcare.

Lowering interest rates makes it easier to pay back debt but will unleash inflation. The current rising interest rates will suck money away from other government expenditures.

Why is it practically impossible to lower the national debt?

Politicians depend on donors and voters to keep their job. Dependence on government largess is widespread, and nobody likes to pay taxes.

The most a President and Congress can do is prepare a complex budget that promises to lower deficits over 8 or 10 years (which means nothing when a new President and new Congress comes into power), raise the debt limit each year, and hope that when the day of reckoning arrives they will be long dead.

Accepted economic theories

The current trajectory of the U.S. national debt could be attributed to Keynesian Economics or to Modern Monetary Theory. However, a more accurate description would be Kicking the Can Down the Road.

Views from a happy California expat

California boasts of being an economic powerhouse and a compassionate sanctuary. So, why are so many Californians moving to other states?

Thank you to Richard Eber, frequent contributor to California Political News & Views, for his article on reasons people are leaving California, and for including the Just Vote No Blog editor’s views. Actually, the article wonders why anyone would choose to stay in the once Golden State.

Certainly, there are reasons not to join the California exodus — family ties, a good job, balmy weather, lovely scenery, world-class art and music venues, health constraints, dependence on California’s generous welfare, or reliance on bountiful flow of drugs. However, as Richard Eber’s article points out, the reasons to leave are mounting.

Although Californians are leaving mainly because of exorbitant taxes, housing prices, and living costs, many are rejecting the principal underlying cause of those costs – the all-enveloping far-left one-party rule.

The resulting inefficiencies of the one-party rule make California less desirable than, say, North Carolina, one of the destination states mentioned in Eber’s article. Sure, there are Republicans, Greens, and Libertarians in California. But they have descended into near irrelevance given the power of the Democrat machine. Power of such magnitude, regardless of what party or faction holds it, empowers, and inspires extremes.

Richard Eber’s article is reproduced below:

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Leaving California, by Richard Eber, published September 22, 2022, in California Political News & Views

It’s no secret families of all economic classes from the poor to the super rich are leaving California in droves. From illegal aliens to billionaire Elon Musk folks of all backgrounds are quickly putting the former “Golden State” in their rear view mirrors

Libertarian types like me would like to attribute the migration of about half a million people each year to Texas to be politically motivated. In reality this is not the case. Spurred by the socialistic government headed by Governor Gavin Newsom, high taxes, housing costs, energy costs, crime, and poor schools, are more important than politics.

Migrating businesses are following as well. Texas has been the main beneficiary of what amounts to a wealth transfer of billions of GNP each year welcoming 500,000 new residents. It is no coincidence Austin is quickly gaining the reputation of becoming the Silicon Valley of the South.

Typical is the family of my daughter’s best friend and her family who packed their life and moved to Texas after Lexi graduated from high school. Despite both of her parents having decent jobs, they could not afford to purchase a house in the Bay Area.

This soon changed in Texas when they bought a 2500 square foot home for less than half of what it might cost in California. If Lexi’s family would have stayed, it is doubtful they could even have purchased sardine like dwelling in a Priority Development Area (PDA) Sacramento believes people prefer to single family homes.

Prospering with an upper middle class standard of living, my daughter’s friends have never regretted bolting California. They are pretty much apolitical believing their standard of living and lifestyle is more important than living under expensive Progressive social values.

The truth of the matter is Bill Clinton’s campaign advisor James Carville’s remark in the 1992 Presidential election “It’s the economy stupid” is in the forefront of the exodus of folks departing for greener pastures. While this phenomenon has been partially balanced by immigrants settling in California from South of the border, there is major disparity in tax revenue being taken in.

Last week it was reported government revenues declined 11% in the last quarter. While Sacramento might sugar coat these statistics blaming Covid-19 for the drop, many economists believe this will be a preview of coming attractions as the land of Hollywood is fast losing its luster.

Apparently, Gavin Newsom with his fixation with promoting the use of electric vehicles doesn’t care if it costs up to $35.00 dollars more to fill up ones tank compared with several other states. This is but a tip of the iceberg families pay to live in a so called sunny paradise.

If those departing California were really interested in staying rather than being fitted for PF Fliers, they would try to change the Progressive agenda which dominates politics in all but a few rural communities. What then prevents voters from supporting more rational policies that would lower their cost of living?

There is no clear answer for middle of the road and conservative individuals who might want to change the current system. There doesn’t seem to be a clear path for those who wish to slow down going all in on climate change, Sanctuary Cities, defunding the police, reducing the influence of public employee labor unions and paying for costly social programs.

Apparently, this growing group of disenfranchised citizens doesn’t feel the Republican Party of California has the ability to elect candidates to carry out their wishes.

In contrast we have my friend Marcy Berry who recently departed San Francisco to live near her daughter’s family who relocated to North Carolina. As a Libertarian, she has been delighted with the political environment there. After a few months, here is her report from the land of Tar Heels and Blue Devils:

Hello from a transplanted Californian in North Carolina. Why are y’all still in California? Family ties, great job? Legitimate reasons. Barring that, anyone who stays must love California’s all-enveloping progressive reign. Just sayin’. And here are some more unsolicited opinions:

California’s all-enveloping progressive reign is the state’s most salient characteristic, and is what makes California so politically different from North Carolina, a swing state. Folks in a swing state just behave differently than those in a dominant regime.

North Carolina has a Democrat governor, and a majority-Republican but not veto-proof state legislature. Governor Roy Cooper navigates a peaceful balance, without the histrionics that Governor Gavin Newsom can perpetrate in his all-Democrat dominion.

Voter profile in North Carolina is currently 34.6% Democrat, 30.3% Republican, 1% Libertarian, and a whopping 34.5% unaffiliated. The unaffiliated contingent could account for the majority-Democrat voters and majority-Republican legislature. Let’s see what happens in the 2022 midterm elections, with unaffiliated voters residing mostly in the most populous counties.

North Carolina, not having (yet?) a dominant political party, is awash in both right and left-leaning voices. The local newspaper in my county leans left, my neighbors lean right, I am told that transplants arriving daily from California due to North Carolina’s rapidly expanding technology sector lean semi-left (they are aware of the mess they left behind but are not sure how else to think).

Unlike Republicans in California, Republicans in North Carolina are vocal and determined. Current and aspiring political candidates know they matter. They know they have a shot at making the state legislature veto proof and of turning the U.S. Senate majority-Republican.

Is there still hope to bring the two-party system back to California? Will the domination of the three quarters Democratic legislature and all State office holders continue indefinitely? The answer to this question is unequivocally “yes”. My only regret is wondering if such a change might occur in my lifetime.

I would suppose GOP State Chairwoman Jessica Patterson and her inept followers will eventually be replaced (if there is still a Republican Party). In a similar vein it is likely if Gavin Newsom and his successors continue to run the State into ground with their Marxist-Lite policies, needed changes will eventually occur.

There are so many “could have should of” scenarios to contend with in predicting California’s future. All we can do is hope.

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Picture: Meme from Babylon Bee, a publication that never tires of having fun at California’s cost.

CA AB 257 vs Fast Food Industry

A more sustainable way to guarantee good wages and benefits is to encourage workers to obtain marketable skills, rather than engage in a never-ending battle with the realities of the market.

The California Legislature passed Assembly Bill 257, the Fast Food Accountability and Standards Recovery Act, on August 29, 2022. If Governor Gavin Newsom approves AB 257, California will be the first state in the nation to broadly regulate wages and working conditions for an entire industry. Fight for $15 and the Service Employees International Union (SEIU) California sponsored AB 257. Their hope is the bill will lead to European-style industry-wide unionization, and end company-by-company efforts. The fast-food industry predictably opposes the bill.

Although states, as well as the federal government, regulate several industries, like banking and petroleum, these regulations do not set minimum wage and labor standards. They do not attempt to regulate social inequities. That is why the bill is being touted by the media as “first in the nation.”

A Super Agency in the Making

AB 257 creates a council comprised of government officials appointed by the Governor, business leaders, and worker representatives. The council will draw regulation to apply to all fast food restaurants with 100 or more establishments nationally that share a common brand. The bill has broad powers to repeal or amend existing regulation to accomplish its mission of establishing wage and labor standards.

AB 257 claims its intent is not to usurp legislative powers by creating or amending statutes. However, sections of the bill seem to send a contradictory message.

Section 4 (d) (1) (B) Nothing herein restrains the Legislature from enacting legislation that prevents a standard, repeal, or amendment from taking effect.

This wording seems to say elected representatives of the people do not have the power to simply veto regulations presented by the council, but instead can if they choose create legislation that would amend or repeal the regulation.

The council created by AB 257 seems in reality to be a super-agency, whose unelected members have de facto power to make and enforce law. As such, voters have no say in rules and regulations this super-agency implements. The only recourse of unhappy voters is appeal to their California legislators to try to enact more legislation that modifies or repeals the “law” created by the council – a council they themselves created.

The council will succeed where no agency has before?

California already has numerous laws, rules and regulations regarding wages and working conditions. However, AB 257 correctly states that enforcement is ineffective and problems in the workplace abound.

Section 2 (j) Furthermore, because existing enforcement and regulatory mechanisms have proved inadequate in ensuring fast food restaurant worker health, safety, and welfare, the Legislature concludes that sectorwide minimum health, safety, and employment standards, including standards concerning wages and other working conditions, identified by an expert body with subject matter expertise and experience in the fast food sector and which can represent the demographic diversity of the state’s fast food restaurant operators and employees, are necessary to protect, maintain, and ensure the health, safety, and welfare of, and to supply the necessary cost of proper living to, fast food restaurant employees.

So, AB 257 creates a super-agency (without discontinuing any of the ineffective agencies) and claims it will do the job none of the other numerous agencies have succeeded in doing. Seems this endeavor could only be accomplished either by amazing efficiency, for which government agencies are not well known, or tyrannical power over the fast food industry, approaching a takeover.

Interesting background of AB 257

AB 257 was originally authored by then Assemblymember Lorena Gonzalez, who resigned from office in January 2022 to take the position of chief officer of the California Labor Federation. Ms. Gonzalez is also the author of Assembly Bill 5, signed into law September 2019, which reclassified numerous California workers from independent contractors to employees.

AB 5 caused enormous upheaval, like upending supply chains by curbing the work of hundreds of independent truckers. AB 5 has also spawned numerous high-profile lawsuits, the most prominent of which are those initiated by ride-sharing company Uber, the California Trucking Association, and the International Franchise Association.

It would not be unreasonable to expect the same upheaval from AB 257, given the bill’s unusually broad powers.

After Assemblymember Lorena Gonzalez’s resignation from office, Assemblymember Chris Holden reintroduced the bill in January 2022.

There is a better way

Government micromanagement of industries, promising “living wages” and a plethora of “benefits” might seem to low-wage workers like a dream come true.

Unfortunately, they do not realize that life will find a way. The marketplace is a living thing that survives the harshest conditions – ask any underground entrepreneur thriving in the world’s tyrannies. Another quote is “money goes to where it is treated best.” Ask the many major companies that have left California for more business-friendly states. The cure promised by AB 257 might be worse than the ailments.

Another way to view low-wage workers, like those in the fast food industry, is that there are too many of them. Although sometimes denied by today’s progressives, supply and demand do determine prices. If companies see too many people with non-marketable skills (like graduates of California’s low-rated school system or graduates from Stanford with degrees in philosophy) then companies can pay their workers low wages without fear of exhausting the worker supply.

A more sustainable way to guarantee worker respect, good wages, and benefits is to encourage workers to obtain marketable skills. Never-ending battles with the realities of the market only serve to grow government power, increase taxation necessary to maintain bureaucracies, and divert resources from helping the populace obtain good skills.

Hardfire asks – “Ukraine: Weapons or Immigration?”

The Hardfire show deals with thought questions on out of the box issues — “what if,” “would you want it?” “what stands in the way?” “what could make it work?” Watch this one. Only 30 minutes long.

Cameron Weber – economist, historian, professor – has a show called Hardfire. Dr. Weber likes thought questions. What are thought questions? They are “what if,” “would you want it?” “what stands in the way?” “what could make it work?” questions. They are questions the Founding Fathers must have asked when someone must have said, “Man, we really need to get rid of King George!” Or maybe questions like President John Kennedy asked when he pledged to put a man on the Moon before the decade ended. For sure, not all thought questions end in successful endeavors – some do, some don’t.

The latest Hardfire show asked the following:

On May 19, 2022, the U.S. Senate approved a $40 billion emergency military and humanitarian aid package to Ukraine in support of Ukraine’s fight against Russian invasion. That is not the first package and probably not the last.

From a pragmatic cost-benefit point of view, would it not be cheaper to offer Russian conscripts tasked with fighting in Ukraine immigration into the U.S. plus $100K?

Discussions would need to include cost-benefits of immigration. And cost-benefits of distressing Vladimir Putin any more than he is distressed already.

Here is a link to the Thursday, July 7, 2022, Hardfire show – only about 30 minutes long.

Ukraine: Weapons or Immigration

Quotable Quotes from George Soros

George Soros, founder of Open Society Foundations, once said, “The main obstacle to a stable and just world order is the United States.” His many quotable quotes clearly explain what Soros wants.

To those right of center, George Sorors is evil incarnate. Whatever goes wrong, it’s Sorors fault. Given such position, the specifics of what he does goes unaddressed.

George Soros, the billionaire investor and philanthropist founder of Open Society Foundations, has made his philosophy, objectives, and modus operandi perfectly clear, especially in the numerous very quotable quotes in his books, speeches, and public conversations.

Soros is an intellectual who is considered one of the best hedge fund managers in the world. His fortune, estimated at $8.6 billion, attests to his acumen. His Open Society Foundations, endowed at around $18 billion, is a grant-making machine amply capable of transforming markets and societies.

His objectives, as clearly expressed in his own words, matter.

A man with a mission

Soros objectives could be boiled down to two of his quotes:

When I had made more money than I needed for myself and my family, I set up a foundation to promote the values and principles of a free and open society.

An open society is a society which allows its members the greatest possible degree of freedom in pursuing their interests compatible with the interests of others.

Back in the late 1970s, when Soros started his philanthropic work, he funded educational initiatives for Black South Africans and gave financial support to dissidents of the Communist regime in the European Eastern Block. When South African apartheid dissolved and the Soviet Union collapsed, Soros turned his attention to other “enemies of open societies.”

The main obstacle to a stable and just world order is the United States.

According to information on its website, Open Society Foundations spends approximately one in five dollars in the United States.

Why? Because most people, including George Soros, view the U.S. as the hot bed of capitalism.

The main enemy of the open society, I believe, is no longer the communist but the capitalist threat.

Capitalist threat?

Such view of capitalism espoused by someone who made his fortune in the world’s capital markets is surprising.

However, today, Soros views his same theory of reflexivity that led to his success in the capital markets as a destabilizing force that needs government regulation.

Reflexivity is the “gap between perception and reality.” According to Soros markets often operate on perception, so prices reflect perception not reality. Reliance on past performance and ideas of how markets should behave can become useless when perceptions of the day interfere with prices.

Add to reflexivity what Soros sees as a tendency of markets toward excess, and we have, according to Soros, a recipe for instability, uncertainty, and economy mayhem.

His solution is to regulate institutions and the market

Throughout the 19th century, when there was a laissez-faire mentality and insufficient regulation, you had one crisis after another. Each crisis brought about some reform. That is how central banking developed.

A global regulatory system would be even better, as Soros explains in one of his books, The Crisis of Global Capitalism.

To stabilize and regulate a truly global economy, we need some global system of political decision-making.

In short, we need a global society to support our global economy.

Soros explained during his remarks on October 1, 2013, at the Global Economic Symposium,

Behind the invisible hand of markets lurks the visible hand of politics. Both the markets and the authorities are fallible; that is what makes their interaction reflexive.

The downside? According to Soros, reflexivity applies to society as a whole, not just to capital markets. He willingly admits that his views and actions are a result of his perceptions of reality. As his perceptions change given new information or new developments, he recalibrates.

Unfortunately political decision makers are seldom blessed with such wisdom. Their perceptions mushroom into eternal rules

More downsides

* Soros view of the ideal society “which allows its members the greatest possible degree of freedom in pursuing their interests compatible with the interests of others” clashes with his desire to achieve stability through heavy regulation. Nevertheless, he acts on his perception that wide-spread regulation is desirable.

* The perception is that capitalism, especially American capitalism, is the cause of imbalance, uncertainly, and economic disaster. The reality is that capitalism has been transformed into cronyism. Already excessive regulation exclude competitors from markets, low interest rates facilitate acquisitions and monopolies, largess showered on the populace disincentivizes workers.

* Power corrupts. Thus, it stands to reason that politicians with the power to heavily regulate and control markets, especially on a global scenario, face temptations to act in corrupts ways.

* Soros is quick to clarify that when he refers to global decision makers, he means a decision-making body that supports sovereign open societies. A nation that must take orders from a global decision maker cannot be called sovereign, whether it is an open society or not.

Watch who supports your political candidates

George Soros’ Open Society Foundations aim to transform economic and social systems in America. Some systems like the creation of elites through inflated stock or real estate prices, for example, could use improvement. But transformation from a sovereign nation with still some semblance of free markets and still some semblance of individual freedom into a subsidiary of a global decision-making body is not what we should want.

Open Society Foundations has created a vast network of grant-making entities that target candidates who will support George Soros’ vision of what America should look like.

Voters need to pay attention for whom they vote. Voters that reject the U.S.’s form of capitalism as does Soros are certainly free to vote for Soros-supported candidates. However, voters who still place faith in our markets and our sovereignty, might want to choose other candidates.

In this article the JVN blog discussed Soros’ economic objectives and how he is advancing those objectives in the U.S. In an earlier article, published in California Political News & Views, JVN discussed Soros’ focus on transforming America’s judicial system by funding selected candidates for district attorney.

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Pictured: This picture, from a timeline of initiatives on the Open Society Foundations website, shows Step by Step, an early childhood education institution funded by Open Society. These institutions are now in 120 countries, including the U.S.

Source of Soros’ Quotable Quotes: Most of the quotes in this JVN article come from Everyday Power: Daily Inspirational Quotes

CBDC: Where Angels Should Fear to Tread

CBDC is not like Bitcoin or Stablecoin or any other form of private digital currency in existence today. CBDC is government issued, and government controlled to stay in concert with government objectives.

CBDC stands for Central Bank Digital Currency, and President Joe Biden, along with other heads of state are on a roll to get CBDC implemented.

“My Administration places the highest urgency on research and development efforts into the potential design and deployment options of a United States CBDC.” Executive Order, March 9, 2022.

The Fed’s White Paper

The Federal Reserve had already been tasked with preliminary exploration, and on January 20, 2022, the Fed released Money and Payments: The U.S. Dollar in the Age of Digital Transformation, a surprisingly balanced white paper.

The paper mainly lists the forms CBDC could take, and the benefits and risks of implementation. That is all the paper could do, since the key issue – the form CBDC could take – is at this time undetermined.

However, Money and Payments is clear on the following points,

* CBDC is a liability of the U.S. government, just like paper money. The general public and private institutions such as banks carry no liability. The white paper does not discuss that a U.S. government liability is a public liability – when government functions sour, Joe Q. Public pays the price in taxes or soup lines.

* CBDC can be designed to achieve various levels of privacy, stability, surveillance, crime fighting, inclusion, risk, transparency, permanency, cross-border availability. The white paper does not discuss the likely levels of each. Numerous articles found on the Internet simply assume the shapes CBDC will take without any basis for such assumptions.

In other words, CBDC is not like Bitcoin or Stablecoin or any other form of private digital currency in existence today. CBDC is government issued, and government controlled to stay in concert with government objectives.

Today, several countries have launched pilot CBDC programs, and 9 countries – 8 in the Caribbean plus Nigeria – have fully functioning CBDC.

Rushing to where angels should fear to tread

It is not just Internet pundits imagining what CBDC would look like.

The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology are collaborating on Project Hamilton to explore CBDC design.

Some members of Congress have introduced legislation on CBDC. Not the kind of authorizing legislation that Chairman Powell would like to have, but what could be called preemptive legislation. Examples:

On January 12, Representative Tom Emmer (R-MN) introduced a bill prohibiting the Federal Reserve from issuing a central bank digital currency directly to individuals.

On March 30, Senator Ted Cruz (R-TX) introduced a bill, companion to Rep. Emmer’s, in the U.S. Senate. The Federal Reserve is already prohibited by Constitution and statute from issuing money directly to the public; which might be the reason Senator Cruz emphasizes his concern for individual privacy and his desire to keep the market competitive

“U.S. Sen. Ted Cruz (R-Texas), member of the Senate Commerce Committee, today introduced legislation to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals. Sen. Cruz’s bill was cosponsored by Sens. Braun (R-IN) and Grassley (R-IA).

Specifically, the legislation prohibits the Federal Reserve from developing a direct-to-consumer CBDC which could be used as a financial surveillance tool by the federal government, similar to what is currently happening in China. The bill aims to maintain the dollar’s dominance without competing with the private sector.“

On March 28, Representative Stephen Lynch (D-M), with co-sponsors Jesús “Chuy” García (D-IL), Rashida Tlaib (D-MI), Ayanna Pressley (D-MA), and Alma Adams (D-NC), introduced a bill calling for an “ECash” prototype that would be distributed directly to the public by the U.S. Treasury.

The Fed treads more lightly

The Fed Board of Governors so far has stuck to what it was mandated to do: produce a preliminary study.

On several occasions Fed Chairman Jerome Powell indicated that he will not proceed with CBDC on his own. He wants specific authority from Congress in the form of legislation, concurrence from the Administration, and acceptance from the general public.

When issuing those statements, Powell might be referring to the fact that the U.S. Constitution clearly says that the power “to coin money, regulate the value thereof…” belongs to Congress. Also, although the Federal Reserve is tasked with ensuring the efficiency and safety of payment systems, it does not have the power to unilaterally implement a totally new payment system or engage in transactions with the public directly.

Powell also might be noting that implementation of CBDC could, as the white paper states, “fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank.” Not something the Federal Reserve should undertake without support from the public and their representatives in Congress.

What is Biden proposing exactly?

We don’t know what Biden is proposing, and at this point neither does he. U.S. CBDC could be designed in many forms and to accomplish many diverse objectives.

The Money and Payments white paper comment section illustrates how widely interpreted is CBDC. Comments vary from viewing CBCD as a pig in a poke, a solution looking for a problem, another step in the evolution of the current U.S. payment system, a great opportunity for inclusion, and so on.

Informed consent from Congress in the form of adopted legislation (if that ever happens) with the approval of the President will provide cover for Chairman Powell.

But can do little to ensure,

  • Individual privacy
  • Economic good health
  • Sustainable national debt

Guaranteed Income: California’s Next Horizon

Guaranteed income pilot programs, emerging throughout California, are being promoted as remedy for the state’s significant income gap. Taxpayers need to read the fine print.

Guaranteed income pilot programs are emerging throughout the state of California. The programs differ in who is selected and how much recipients get. None have strings attached.

The concept of a guaranteed income gained publicity during the 2020 elections, when presidential contender Andrew Yang made it a central part of his campaign. In California, additional exposure came from Michael Tubbs, who founded Mayors for a Guaranteed Income in June 2020, a coalition that advocates implementation of guaranteed income trials.

Three Sample Guaranteed Income Programs

Michael Tubbs, when mayor of the City of Stockton implemented one of the first guaranteed income pilot programs in the state, with great fanfare and a lot of private donations. The program gave $500 a month to 125 selected low-income residents and ran for two years (February 2019 to January 2021).

Oakland Mayor Libby Schaaff launched her pilot guaranteed income program in March 2021. The privately-funded program will give low-income families $500 per month, for 18 months. Families selected are of color, in an effort to close the racial wealth gap.

On April 19, 2021, Los Angeles Mayor Eric Garcetti, proposed a $24 million tax-payer funded one-year guaranteed income pilot program. The program will give $1,000 per month to 2,000 low-income families adversely affected by Covid-19.

The Selling Points

A guaranteed income, with no strings attached, given in addition to established public assistance programs takes aggressive selling in some communities. In Stockton, for example, Mayor Tubbs was not re-elected in spite of accomplishments. His defeat was in part (there were other adverse circumstances) because some of his constituents were not ready for agendas as progressive as a guaranteed income.

The promotional efforts are convincing, but debatable in some regards. Here is a sample of the press California’s guaranteed income programs have received, followed by clarifications that might be helpful.

  • “The idea of the government providing poor residents with some basic level of income has been floated by a number of prominent people over the years, including civil rights leader Martin Luther King Jr., libertarian economist Milton Friedman and Republican President Richard Nixon.” L.A. could soon become the largest city in the U.S. to offer guaranteed income for poor residents.” L.A. could soon become the largest city in the U.S. to offer guaranteed income for poor residents, Fortune, April 19, 2021.

Martin Luther King criticized the existing welfare system as fragmented and designed to affect root causes of poverty, not mitigate poverty itself. He did propose a guaranteed income as remedy. However, his plan came with strings attached. Government needed to create “social good” jobs for individuals who the market economy left behind. Dr. King’s plan, therefore, differs from the current “no strings” proposals.

Milton Friedman proposed a negative income tax, not a guaranteed basic income. Under Friedman’s plan, people file their tax returns, and depending on their income level, they either pay taxes or receive cash from the government. Also, Friedman’s plan was intended to replace existing welfare programs not supplement them. Today’s guaranteed income plans require nothing of recipients and supporters intend to avoid cannibalizing other public assistance programs.

Richard Nixon introduced in 1969 The Family Assistance Program (FAP), which aimed to implement a negative income tax that would benefit working parents with household incomes under a certain level. Unlike today’s guaranteed income proposals, FAP had a work requirement that applied to most recipients (there were exceptions to mothers with small children at home). The proposal passed the House of Representatives, but failed in the Senate.

  • “There’s a number of ways to pay for guaranteed income, from a sovereign wealth fund in which citizens benefit from shared national resources like the Alaska Permanent Fund, to bringing tax rates on the wealthiest Americans to their 20th century historical averages.” Mayors for a Guaranteed Income

Alaska’s principal source of revenue is crude oil. Residents receive an “oil dividend” from a natural resource that theoretically belongs to all residents. It might be difficult for California to come up with a comparable natural resource dividend.

California already has one of the highest tax rates in the nation. Several large employers have recently left California citing high taxes and high costs, among them California icons like Hewlett-Packard and Tesla. Texas and Arizona are among low or no-tax states that are happy to welcome California’s wealthy expatriates.

An objective of Mayors for a Guaranteed Income and others is to establish a federal guaranteed income program. The federal government can print copious amounts of money, redistribute revenue from low-spending to high-spending states, and does not need constituents’ approval to raise taxes. The only catch is that residents of low-spending states might not be happy with this plan.

  • Preliminary analysis of Stockton’s guaranteed income program: “Results gathered from the first year, which spanned February of 2019 to February of 2020, found recipients obtained full-time employment at more than twice the rate of non-recipients. Recipients were less anxious and depressed, both over time and compared to the control group … Recipients had a greater ability to pay for unexpected expenses …” University of Tennessee, College of Social Work, March 5, 2021.

“Asian/Pacific Islanders and homeowners comprised a larger share of the debit-card recipients than of the control group , which could have biased the results…The study’s small sample and reliance on self-reported outcomes are bigger problems. It’s difficult to assess a statistically significant effect on employment among such a small group over a one-year period—from Feb. 2019 to Feb. 2020—especially given high labor-market turnover among lower earners.” Universal Basic Income Hype, Wall Street Journal, March 22, 2021.

Conclusion

The highly-promoted Stockton experiment is serving as a catalyst for the proliferation of guaranteed income trials in California. However, it is difficult to see how a study of 125 folks, among them homeowners, can apply to California’s large population of low or no-income residents.

The state of California has a poverty rate of 11% compared to lower-poverty states like New Hampshire at 4.9%. Also, California has the third largest rate of homelessness of all states in the U.S. (after New York and Hawaii).

Guaranteed income programs in California will prove expensive. Local and state jurisdictions will have difficulty finding sources of cash. The federal government, with its ability to create debt, would be a reasonable source, but would low-spending states be willing to subsidize high-spending states?

Lyndon Johnson’s expensive Great Society sounded wonderful, but nothing really got fixed. It will be worth carefully reading the fine print on guaranteed income programs.