Streetwise Professor

Donald Trump’s post-election blitzkrieg (see! He is Hitler!) has shocked and awed the ruling class. One of his moves that has attracted the most attention is his announcement of a “Department of Governmental Efficiency” (“DOGE”) to be headed by Elon Musk and Vivek Ramaswamy.

Musk has promised to use the yet-to-be-formally-established non-department department to trim trillions of dollars from federal spending (although it is somewhat unclear if this is an annual number or a cumulative total over some period).

The mechanism by which this laudable goal can be accomplished is unclear, given Congress’ power of the purse, and previous Supreme Court rulings regarding things like impoundment by which the president can thwart Congressional appropriations. Various stratagems have been floated, but these will set up a Constitutional clash, which, ironically, will get bogged down in the political and judicial quagmire that is the source of much inefficiency.

Moreover, it must be recognized that the room for budgetary maneuver is quite limited. Entitlements plus interest (including spending on veterans in entitlements) consume about 53 percent of federal spending. Discretionary spending accounts for “only” $1.6 trillion, half of which is for the Pentagon. Even axing entire departments, like the Department of Education, would only free up modest sums: Department of Education spending accounts for 4 percent of the budget, and no doubt closing down the entire monstrosity would result in a lot of that spending being shuffled elsewhere. (The case for eliminating Education rests–and rests quite firmly–on non-budgetary grounds, namely its destructive effects on American education at all levels).

Looking at trends, the Covid spending spikes (which added appreciably to debt and per the Fiscal Theory of the Price Level were a major contributor to inflation) stand out, but so does the increase in the growth rate of federal spending under Biden.

Notably, Federal spending plateaued during the post-2010 period of divided government, then ticked up under Trump (no budget hawk he), and accelerated markedly under Biden.

Therefore, the best outcome is to try to recapture the (relative) budget discipline that prevailed post-GFC, and post-Republican capture of the House in 2010. This is something that will have to come from Congress, and from Trump. Not from Elon and Vivek.

This is not to say that DOGE is futile. It can–and should–focus on non-spending sources of government inefficiency, but particularly on the inefficiencies that the government inflicts on the private sector through regulation. Especially during the Biden administration, the administrative agencies have run amok in imposing new rules, interpreting existing ones in pernicious ways, and regulating by enforcement. The new administration has considerable–though not untrammeled–power to cut back on this thicket, and pretty much complete discretion at not adding to it.

This is exactly the domain which exercised Musk most, as epitomized by his Parable of the Sharks and Whales:

Gulliver Musk’s SpaceX in particular (but Tesla too) has been attacked by regulatory Lilliputians. And X would clearly have been in a Harris administration’s regulatory cross hairs.

Here DOGE can perform yeoman’s service to propose, but it will still be up to the agencies to dispose. And those efforts will also trigger protracted legal battles. But there are battles that must be waged, and DOGE can perform a vital role of identifying the most egregious problems, the fixing of which would generate the most benefits.

This is also the area where the name-and-shame aspect of DOGE can work best. Lacking any real authority, DOGE can best serve as a bully pulpit (and hopefully a bullying pulpit) to galvanize public support for anti-regulatory efforts. As a strategy guide, I recommend Alinsky’s Rules for Radicals. Virtually all of them could be quite useful to DOGE, including “ridicule is man’s most potent weapon” and “pick the target, freeze it, personalize it, and polarize it.”

Back in the day, Senator William Proxmire had his Golden Fleece Award that ridiculed particularly absurd examples of government spending. DOGE should initiate something like that, perhaps even on a weekly basis. It could echo Proxmire’s focus on spending, but it should especially focus on regulatory outrages and absurdities.

It could also serve as a clearinghouse for complaints about regulatory abuse. You know, sort of like from the days when the doges ruled Venice:

No doubt the most useful information would come from within the agencies themselves, as many of the apparatchiks within said agencies will no doubt be waging guerrilla war against de-regulatory efforts and only their peers will be able to expose them.

There are two ways to rescue the United States from its parlous fiscal circumstances: cut spending, or increase growth. I doubt DOGE can do much regarding the first, but can contribute materially to the second. Attacking regulation-induced economic sclerosis would provide a much needed fillip to the American economy, which would spur federal revenues and help boost primary surpluses. This would also have salutary effects on inflation, again per the Fiscal Theory of the Price Level.

I wish Musk and Ramaswamy and those they attract to DOGE the best. They have set for themselves the Herculean task of cleaning the Augean Stables in DC. The best way to perform it is to prioritize and to optimize the use of the tools at hand. Given the numerous obstacles to tackling spending directly, this dictates a focus on regulation, and the mobilization through transparency of popular awareness of its myriad perversities.

Note. According to Wikipedia, the word “doge” “originally referring to any military leader, becoming in the Late Roman Empire the title for a leader of an expeditionary force formed by detachments (vexillationes) from the frontier army (limitanei), separate from, but subject to, the governor of a province, authorized to conduct operations beyond provincial boundaries.” That actually seems quite appropriate here, especially the authorization to conduct operations beyond boundaries.

On Tuesday, the American people gave a new reason to remember, remember the 5th of November. Unlike the original Gunpowder Plot memorialized in the English verse, however, the 2024 version succeeded, and blew the establishment/ruling class/elite all to hell.

There was definitely a V for Vendetta vibe about this too. Ordinary people revulsing against a censorious and controlling regime.

To put it in a more American idiom, it was Jacksonians Strike Back. A populist hoi polloi giving the finger to their alleged betters. And Trump is–as I have said since his political emergence in 2016–the closest thing to Andrew Jackson in American politics since the man hisself 200 years ago. In personality, surely.

Trump’s triumph represents an extreme act of will, and his vendetta against the establishment forces arrayed against him. Any normal person would have collapsed in the face of the multi-front war waged on him by the powers that be. Just as Andrew Jackson’s rage against the machine that he believed had done him wrong in 1824 drove him forward in 1828, through grim determination Trump’s rage at the machine he believes did him wrong in 2020 propelled him to victory four years later. And as Jackson’s victory in 1828 was decisive and his loss in 1824 was extremely suspect, the same can be said of Trump in 2024 and 2020. And both men waged their campaigns in a fashion that violated contemporary rules of political decorum, to the outrage of their foes.

Jackson transformed American politics for decades, but he had two consecutive terms to engineer this transformation. The nature of Trump’s political career–with his two terms interrupted by that of a regime placeholder–will make it more difficult for him to have the same effect. But it is almost certain that American politics and government will not be the same.

The recriminations of the losers–in the Democratic Party and its media adjunct–have begun. It is quite a spectacle. Given the characters involved, unsurprisingly these recriminations have a strongly identitarian cast. It was the white bitches that did it! No! It was the misogynist black dudes! No! It was the racist Latinos!

They just don’t get it. It was them. They have yet to learn the wisdom of Pogo:

I wrote in the summer of 2016 that the “elite”/regime/establishment created Trump. He was a reaction to them. Without them, he would not exist as a political force. The Biden interregnum only reinforced the popular disgust with the regime, and powered Trump to a decisive victory. Trump’s victory is a repudiation driven by revulsion of a discredited regime.

But the Democrats/regime/establishment cannot bring themselves to face this reality. Normal people would react to such a humiliating defeat by taking a hard look at themselves. Or in the words of Chuck Leavell:

And it’s agonizing reappraisal,
Says Dusty Rhodes
And he’s the American Dream.

But no. They live so far up their own asses that honest self-appraisal is impossible for them. Perhaps not surprisingly, because they really don’t believe in the American Dream.

Normal people would say: “How did we possibly lose to the worst person in the world, Mr. Literally Worse Than Hitler? We must really suck. A lot of people must really hate us.”

But they are not normal people. Their answer is: “YOU really suck.”

They are in desperate need of a 12 Step Program–the first step of which is to admit one has a problem. But in their narcissism, they are constitutionally incapable of this.

I am of mixed minds on this. On the one hand, it will delay, and quite possibly prevent, their political rehabilitation. On the other, it condemns us to yet more years of hysterical (in the neurotic sense of the word) ranting and obstructionism and political and legal warfare.

Some leftist recognize all this. From the Nation, of all places: “This Time We Have to Hold the Democratic Party Elite Responsible for This Catastrophe”:

Democrats will need to radically reform themselves if they want to ever defeat the radical right. They have to realize that non-college-educated voters, who make up two-thirds of the electorate, need to be won over. They need to realize that, for anti-system Americans, a promised return to bipartisan comity is just ancien régime restoration. They need to become the party that aspires to be more than caretakers of a broken system but rather is willing to embrace radical policies to change that status quo. This is the only path for the party to rebuild itself and for Trumpism—which without such effective opposition is likely to long outlive its standard-bearer—to actually be defeated.

The Democrats are not the only ones who need to have a Come to Jesus moment. The regime adjacent, controlled opposition, traditional Republicans need to change as well. The Grand Old Party is just old. The nation’s political polarity has shifted completely, and the traditional Republican base has flipped to D, and the traditional Democratic base has flipped to R. The Mitch McConnells et al need to go away, and new people that align with the current political realities must replace them. (J.D. Vance provides a good role model here). In the words of Oliver Cromwell: “In the name of God, Go!”

The timing and the magnitude of the changes cannot be predicted with any precision. But they will come. And when they do, remember, remember the 5th of November. Because that will be the catalyst of those changes.

Yesterday Joe Biden called Trump supporters garbage.

No, you called us garbage. It's on tape. pic.twitter.com/bxb4UDnteN

— End Wokeness (@EndWokeness) October 30, 2024

This, mind you, happened about the same time that Harris was giving her “closer” “Trump=Hitler” speech on the Ellipse.

In one of the great “Oh Shit!” moments of all time, Dementia Joe’s outburst triggered an epic cycle of spin. The gaslights were turned all the way up. You dummies–there was an apostrophe in “supporters”. He was referring to one guy, the comedian who made the stupid Puerto Rico joke at Trump’s MSG rally! Not eighty million people! Come on!

Of course that makes no sense. If he was referring to one guy, he would have said “the only garbage out there I see is his supporter.” The possessive would have referred to the supporter’s joke, which makes no sense in this context.

But who are you gonna believe? Them or your garbage eyes and ears?

We know that this is the opinion that Biden, Harris, and the Democrats actually hold of about half the electorate. Biden basically said as much in his speech (with production assistance from the ghost of Leni Riefenstahl ) in front of Independence Hall a couple of years ago. It’s an echo of Hillary’s “basket of deplorables” and Obama’s “bitter clingers.” And more media and celebrity examples than you can shake a stick at.

It’s what they believe. Truly believe.

Joe’s timing was exquisite. The Democrats were trying desperately to leverage an insult comedian’s remark into a campaign issue. Then Joe blew that up completely. There’s a big difference between a professional clown making a remark about a place and a president making a similar remark about half of the people in his country.

Trump of course jumped on it, in his showman’s fashion, jumping into a garbage truck before a campaign event, donning a garbage man’s reflective vest, and then giving a jokey speech in it. It was a move to rival his McDonald’s gambit. The man is a living, breathing meme and as a result his showmanship goes viral on a scale no other politician can match.

Biden’s remark is just a particularly crass and ill-timed part of a broader Democratic campaign theme to demonize Trump as Hitler, and therefore to paint anyone who supports him as a Nazi, or at least a Nazi adjacent enabler. It’s not working, and even many Democrats now realize it’s not working and are pleading Harris to stop.

But why would they think it would work? There is in fact some logic to it, but that logic has a fatal weakness that seems to be manifesting itself now in a major way.

The reason for this trash talk is to stigmatize anyone who expresses support for Trump: if you do, you’re a Nazi, and everyone will despise you. No, this won’t deter his hardcore supporters. But it can potentially appeal to those who are particularly afraid of ostracism. This would include those who may have sympathies with Trump on some issues (and by my reading, particularly on immigration) but who live and/or work among vocal–and often vicious–leftists. It also includes the naturally wishy-washy, who instinctively follow the crowd. Such folk hide their preferences under a bushel basket, which leads to an understatement of public support for Trump. And that can lead those who are naturally followers to go with the apparent in-crowd and vote for Harris.

That is, the rhetoric is intended to create preference falsification. Preference falsification allows authoritarian regimes to retain popular support even if many individuals’ true preferences are opposed. Every one goes along, not because they truly believe, but because they think everyone else is going along too.

But the weakness in this strategy is that even if a modest number of people stop falsifying their preferences, it can trigger a cascade of such repudiations. Roughly speaking, preference falsification has two equilibria: most people falsify, or most people don’t. A jump from one equilibrium to another is the death knell of regimes that rely on preference falsification to maintain their facade of authority–and who rely the threat of social stigma to enforce it.

I think we are experiencing such a cascade. Why? I think that the assassination attempt was the first crack in the falsificaiton wall. It got a lot of people to acknowledge their admiration for how he handled it, and to recognize that the vicious rhetoric against him was extremely dangerous: it created an atmosphere in which unstable personalities were encouraged to take acts that could spark a political and social calamity.

Moreover, the rhetoric had been used for so long that its narcotic effect had worn off. And perhaps most importantly, it clashed with what people saw in his self-created memes, like the McDonald’s episode, this Al Smith Dinner speech, and his riffs at rallies. These things humanized him and clashed with the Hitler image.

Hitler wasn’t funny. Trump can be very funny. Common Americans can relate to Trump in ways that it would be impossible for a Hitler to do. There was a disconnect between what many people saw in Trump and their image of Hitler.

Biden’s garbage remark will only reinforce the cascade. Even those who have continued to conceal their true beliefs until now will realize that the Democrats really despise them, and definitely do not have their interests at heart. Pride, self-respect, and self-interest will combine to overwhelm the fear among many of social stigma. And the more that happens, the less powerful the effect of social stigma, which only accelerates the process.

There’s the old Michael Kinsley quip that a gaffe is when a politician tells the truth. That’s what Biden did. And by talking trash and thereby telling the truth he could well have broken the spell of preference falsification that has been the foundation of a Harris campaign that can offer nothing positive either in program or personality.

In my recent post enumerating the reasons to vote for Trump, the First and Second Amendments were at the top my list. And not only mine. Consider El Gato Malo: “and if you want to know why you should be a one issue voter on censorship and a free internet this election, THAT is why. it’s not just about this election, it’s about every election after it and who gets to speak.” (Emphasis in original). If there is one thing that red pilled Elon Musk, it is the First Amendment/censorship/free speech. Or look at people like Matt Taibbi or Michael Shellenberger or Glenn Greenwald: definitely not right wingers who have been strident critics of attacks on free speech under this Democratic administration.

It is therefore beyond outrageous to see Harris say that the Constitution, and the Bill of Rights in particular, is the reason to vote against Trump:

NEW: Kamala Harris says black men need to vote for her because Donald Trump will take their guns and free speech away.

You can't make this up.

Shannon Sharpe: Blacks for Trump. They feel that Trump is better for the black community. Can you explain that?

Harris: Right. That's… pic.twitter.com/B3xc9KiAIW

— Collin Rugg (@CollinRugg) October 28, 2024

When has Trump ever said any of those things? Why didn’t he do them when he had the chance?: he was, after all, president for four years. Just didn’t get around to it? Or what?

This is the epitome of the Big Lie. Another irony given the non-stop Trump=Hitler 24/7 mantra.

But we’re the ones spreading disinformation, dontcha know.

The Democrats have been pushing for censorship hard for the past four years. They have created an entire parallel government structure to attempt to circumvent the First Amendment in order to censor social media. John Kerry and Hillary Clinton recently said the quiet part out loud: free speech is a problem, and must be restricted. The Democrats pant after the kind of system the EU has set up, unrestricted by any right to free speech. The belief that speech must be restricted is an article of faith on the left: just visit any college campus. “Your speech is violence.”

And spare me the “I’m in favor of the Second Amendment. I don’t believe we should be taking anybody’s guns away” crap. To anyone who believes that: Hey, I’m a Nigerian prince and I’ll make you unbelievably wealthy if you just give me access to your bank account: just drop it into the comments. Harris’ record–and Biden’s record–on gun control is crystal clear.

In sum, this pitch is as Orwellian as it gets. An inversion of truth.

The only bright spot here is that Harris feels compelled to cosplay as a stalwart defender of your Constitutional rights: it’s an implicit admission that she has nothing positive to offer, and that she is vulnerable on these issues. It’s also telling that she clearly feels it necessary to be spend the waning days of the campaign trying to secure black men’s votes. Her utterly outrageous pitch of a few weeks ago (Hey, brothas: vote for me and I’ll give you free money, a leg up in the weed business, and crypto!) which went over like a fart in church and Obama’s scolding (which generated a lot of outrage among those he was trying to cajole) are other examples.

Yesterday the Washington Commanders beat the Chicago Bears on a last minute Hail Mary. Harris gives every impression of attempting to do the same. Yeah, it sometimes works, but it’s a low probability play that is only resorted to out of desperation.

Kueen of Inkoherence Kamala has been asked about immigration on several occasions, and her rope-a-dope answer (emphasis on the dope) is always along the lines of “the immigration system is broken, we need a law that offers a clear path to citizenship.”

This begs the question of “a clear path to whom?” The path to citizenship for legal immigrants is already clear, although it is complex. Therefore, Kamala can only mean a clear path to citizenship for people who entered the country illegally at some point.

Harris offers this policy as a way of dodging the question of securing America’s borders. By dodging she implicitly suggests that these issues are separate. They are anything but.

One can perhaps make an argument for some sort of amnesty–and that is what a “clear path to citizenship” for illegal immigrants is–given the difficulties of deporting millions, many of whom have been here for years, have anchor children, etc. Perhaps.

But that is a way of addressing–and effectively admitting–past failures to secure the borders. The only way to prevent future failures–and eliminate the need for future amnesties–is to secure them now and in the future.

By answering questions about reducing the flow of illegal immigrants–and don’t give me any of this don’t say illegal say “undocumented” or “refugee” crap–with palaver about “a clear path to citizenship” Harris–and the Democratic party generally–is clearly indicating that she has (and they have) no intention of reducing the flow. A “clear path to citizenship” for illegals, combined with policies that result in massive increases in their number (like we have observed since day 1 of the Biden administration) is an open invitation to a mass incursion. Which is what we have experienced since 2021.

Which raises the question “why?” The charitable answer is that this is the product of fuzzy humanitarianism. But given their track record the people pushing this deserve no charity whatsoever. The far more likely explanation is that they are using gauzy humanitarian rhetoric to conceal a far more malign agenda. Namely, to change the country fundamentally.

Their motives for this are likely overdetermined. Partly it is a crude political calculation, based on the belief that the newly minted citizens will vote Democratic. But there is something more sinister than that. The left despises traditional America. They hate American culture, especially non-urban American culture (to the extent that they are even willing to admit that there is such a thing). The quickest way to change the culture is to overwhelm it with vast numbers from completely alien cultures. Just look at where the Biden administration has dumped them–in places like Springfield, OH, and Charleroi, PA. The type of places that leftists despise that are inhabited by the type of people leftists disdain.

I seriously doubt that if elected, Trump could carry through on his pledge to deport millions. However, it is almost certain that he will dramatically reduce the inflow, just be restoring the executive orders that Biden flamboyantly rescinded immediately upon assuming office.

Then, and only then, can there be a serious discussion about any form of amnesty. And any “paths to citizenship” that are adopted should be closed to anyone who enters the country illegally after its passage. Even a bill with such a restriction is dubious, however, given that passage of an amnesty benefitting past trespassers suggests that any promise not to so benefit future ones is not credible.

If this means that millions are consigned to legal limbo, so be it. That is a small price to pay for maintaining the integrity of the country, tattered though it may be.

The election nears. Although I’m not wild about the choices, to me the choice is completely clear. I’ve been very critical of Trump on economics, but since Harris is likely worse, this is no reason to vote for the latter and not the former, although it could be a push. However, when it comes to virtually every other issue that matters to me, it is not a push. Trump>Harris. And it’s not even close.

I decided to put it in list form. Here are the issues where I think Trump is better for America–a lot better:

1. 1A. The Democrats are virulently anti-free speech, and not shy about saying so. This could be the most important issue of our time. Free speech is under attack, and a Harris victory would go a long way towards making that attack successful. Trump lets it rip, and if he’s president he’s likely to let us let it rip. This is the first freedom. If it goes, the rest of them follow.
2. 2A. The Democrats are virulently anti-right to bear arms.
3. The Constitution generally. There is a major undercurrent of hostility (and sometimes not so under) among Democrats to the Constitution, including most especially the Supreme Court (now that it does not do their bidding), the Electoral College, the Senate, and the separation of powers. All of these are fundamental pillars of our system, and pulling them down would have extremely baleful effects, potentially including disunion and civil war.
4. Freedom generally. Kamala babbles about freedom (including using some insipid Beyonce song with that title as her theme song), but her idea of freedom is NOT freedom from the dictates and whims of the state. With the possible exception of the freedom to terminate a pregnancy. Instead it is the Orwellian progressive idea of positive “freedoms” where the state gives you stuff–but there are always strings attached. You become not a free person, but a dependent one.
5. Judges. The Supreme Court gets all the attention, but the real work gets done in the District and Appeals courts. Compare, for example, Judge Chutkan with Judge Cannon.
6. Immigration. No comment necessary.
7. The deep/administrative state. Now I seriously doubt that if elected Trump will be able to make inroads into the deep/administrative state. Indeed, he will be lucky to keep it from destroying him–as it has been attempting to do since he declared his candidacy in 2015. But a stalemate would be better than the alternative under Harris: I guarantee that the administrative/deep state will run rampant in a Harris administration. Indeed, it will be the Harris administration. As it is currently the Biden administration: you don’t think Biden is president, do you? And you don’t think Harris will be, do you?
8. Regulation. This is a corollary of 7. Trump’s main virtue in his first term was cutting back on some regulation. I anticipate that he would continue these efforts if elected. I guarantee that the regulatory agencies, notably EPA, SEC, and FCC, not to mention many others you’ve probably never heard of, would run rampant under Harris. The elimination of Chevron deference would help some in controlling the flood, but not very much–especially if the courts are stocked with progressive judges (see 5 above): progressive judges will continue to defer, even if they don’t have to.
9. DEI. Especially in the military. Here is someplace I think Trump can really make inroads, although again he will face organized resistance from within the Pentagon and within the cadres of flag officers promoted under a pro-DEI regime. A good place to start would be the service academies. They need to be torn down to the studs and rebuilt to something like they were decades ago: doing so would be highly visible and send a strong signal while being more manageable than trying to take on the entire Pentagon. Moreover, DEI has penetrated the federal government so deeply (look at recent stories regarding its impact on the Department of the Treasury and the National Science Foundation) that it is a target rich environment. Trump will be able to beat it back, perhaps considerably. Under Harris, it would only metastasize.
10. Climate and energy. Trump would pull back hard on climate insanity, and relatedly get out of the way of development and employment of fossil fuels. Both of these would be conducive to growth and prosperity, whereas the Democratic/progressive alternatives of renewables and myriad restrictions on fossil fuels are a recipe for penury. Just look at German or the UK–or California.
11. A more restrained, less interventionist foreign policy. Yes, Trump is a loose cannon on these matters, but in some respects that is conducive to peace: unpredictability, impulsiveness, and yes even craziness, have strong deterrent effects. For evidence of what a traditional, supposedly non-crazy foreign policy has wrought, just look around. The world is on fire, whereas it was not 3.5 years ago. If that’s the product of sanity, I’ll take crazy any day. Trump’s overall instinct is to look out for America’s interests, not to save the world, even if he hurts feelings (especially Euroweenie feelings) when doing so. Trying to save the world, or remake it in America’s image, has brought nothing but grief to us, and a lot of misery to the rest of the world.

I could probably add a few more things, but these are at the top of my priorities.

This really is a pivotal election. Not so much for what Trump could accomplish if he is elected, but for what Harris (or more accurately her regime/ruling class masters) would do if she is. I really do believe that this is a real fork in the road, and if the nation takes the left one there will be no turning back–and there will be a cliff at the end of it. Trump may not lead us to the promised land, but he can keep us from falling into the the abyss, at least for a while.

As a small example of the joys of Californication that would spread to the entire US under a Harris administration, a couple of days ago Gavin Newsom signed legislation that would empower the state’s Clean Air Board to require California refiners to hold certain levels of. inventory. The objective of this legislation is to prevent the price spikes that periodically occur in the state.

Implicit in this legislation is the idea that inventories are too low. Why would that be? What market failure is there that induces such allegedly suboptimal behavior? None has been provided.

And no, the existence of price spikes is not evidence of inefficiency, and in particular inefficiently low inventories. In fact, in an efficient market for a storable commodity, price spikes should occur periodically: their absence would be evidence of excessive inventory holding.

The intuition is straightforward. Spikes occur when there are stockouts–when inventories fall to low levels due to supply and demand shocks. But it is optimal to have stockouts. If you didn’t, that would mean that you have produced something that is never consumed, which is obviously wasteful. So inventories should be drawn down to low levels periodically, and prices should spike then. Therefore, prices should spike periodically.

The cover of my book on commodity price dynamics based on the theory of storage has a graph of a simulated efficient, competitive market price for a storable commodity. It has spikes.

Forcing excessive stockholding is inefficient. Moreover, it tends to raise prices on average even if it reduces the frequency of price spikes. The only way to increase inventories that are consumed in certain periods is by reducing consumption during other periods. That requires higher prices in these other periods.

But spikes are politically salient, whereas higher prices most of the time get treated as the baseline, as being normal. The fact that those baseline prices are higher than they would be absent the mandated stockholding is hidden from most voters. So politicians can claim credit for shaving off some of the highly visible spikes, and aren’t blamed for the hidden cost (i.e., higher everyday prices).

That’s all assuming the legislation has the intended (if inefficient) effect of raising inventories. But it might not. As I understand it, the mandate applies to refiners. But non-refiners–traders in particular–hold stocks too. Indeed, those are most likely to be the “speculative stocks” that are used to smooth out supply and demand fluctuations, thereby reducing price volatility.

Mandating higher refiner stocks is likely to result in a reduction in these speculative stocks, thereby reducing the effect of the regulation. Given that holding excessive inventories is inefficient, this offsetting is a good thing. Indeed, it is possible that the offset will be 100 percent, meaning that every increase in refiner stocks is offset exactly by a decline in non-refiner stocks, thereby vitiating entirely the effect of the law.

So, the possibilities are: (a) the regulation will increase what consumers pay for gasoline, or (b) it will have no effect. Making consumers better off is not one of the possibilities.

Newsom has used the legislation to demonize oil companies, whom he claims make too much money, as evidenced by the high prices Californians pay for fuel, relative to those who live elsewhere.

Riddle me this, Gavin: if being in the refining business in the Golden State is so damned lucrative, why have 7 refineries in the state shut down in the last decade? Indeed, hot on the heels of Newsom’s crowing over the law, Phillips66 announced it is closing its refinery in California.

Note to the slow learners (and no learners): exit is not a sign of excess profits. Quite the contrary.

But this is the type of deep economic thinking that infests progressives, and which they want to inflict on all of us. Oh, if what happens in California were to stay in California, what happiness there would be for the rest of us. But the Democratic party wants to Californicate all of America instead.

So the ILA strike settled yesterday–almost immediately after I posted about it. (You can thank me later).

Well, sort of settled–more like it was punted past the election (imagine that): the strike is merely suspended until January 15.

Great news! Well, not when you consider how this oh-so-politically convenient outcome was achieved: lawfare rather than the law (specifically the Taft-Hartley law).

The Biden administration threatened USMX, the consortium of carriers, terminal operators, and port authorities that negotiates with the longshoreman with an investigation of “any price gouging activity that benefits foreign ocean carriers, including those on the USMX board.”

There they go with the “price gouging” bullshit again. And using the threat of an investigation of such ill-defined conduct to dragoon the carriers, terminals, and ports to capitulate to union demands.

Presumably the administration’s brushback pitch was intended to signal to the USMX that they could not pass on the inevitably higher costs they incur as a result of any strike to customers through surcharges. Thus, the carriers would be forced to eat demurrage and the like.

It is clear whose side the administration took:

It is time for USMX to negotiate a fair contract with the longshoremen that reflects the substantial contribution they’ve been making to our economic comeback.

It is important to note that the ILA’s demands are not just about wages. The ILA also wants to prohibit automation of ports. This despite the fact that US ports are among the world’s least efficient. Actually, it’s probably because US ports are among the world’s least efficient: they are less efficient because they are far less automated.

The inefficiency of US ports and supercompetitive wages paid to longshoremen are a tax on trade, and a tax that falls broadly across the entire US economy in order to benefit an extremely small (25,000 actual workers on the docks on the East Coast) constituency. This tax is paid in the form of higher prices for imported goods and lower wages for workers: the tax reduces the derived demand for labor services by increasing the cost of complementary inputs (e.g., imported parts).

It is therefore a travesty to claim that supporting the ILA is to support labor generally. In fact, the exact opposite is the case. The ILA membership is feasting, and everybody else is paying the bill.

The potentially extortionate power of transportation union, and the impact of the exercise of this power on the nation in rail strikes in particular, is precisely why the national emergency provisions of Taft-Hartley exist. But Biden (or whoever decides for Biden) chose not to use it. He says “I don’t believe in Taft-Hartley.” Harris apparently agrees. And Trump can only blurt out: “American workers should be able to negotiate for better wages, especially since the shipping companies are mostly foreign flag vessels, including the largest consortium ONE [a Singapore-based consortium of Japanese carriers Nippon Yusen Kaisha, Mitsui O.S.K. Lines, and K Line].” A statement that illustrates yet again Trump’s dim economic understanding.

(I also note that US flag shipping has always been an also-ran. In the 19th and early-20th centuries European–especially British–carriers dominated. In recent decades Europeans (e.g., Maersk, MSC) have continued to play a primary role, and have been joined by Asian ones (Japanese, Chinese, and Taiwanese in particular.). J.P. Morgan tried to play his consolidation game to create a major US liner firm in the early-1900s but that failed miserably. )

In sum, a collection of full retards posing as friends of the working man, who are anything but.

The International Longshoreman’s Union has gone on strike at East Coast ports, from Maine to the Rio Grande. The Biden Administration supports the strike. Harris supports the strike. Trump supports the strike.

These people have apparently forgotten a crucial lesson:

Why is supporting the ILA here full retard?

Presumably they are falling over themselves to support the strike in order to curry favor with organized labor. Yes, despite its radically diminished size (as compared to the 50s and 60s) it could be a swing constituency in 2024’s election. But, this strike will screw far more union members than it will help.

There are 47,000 ILA members on strike. But far more union members–and wage workers who are not unionized–will be hurt.

Consider, for example, the Teamsters. No ships unloading, no need for trucks–and truckers–to haul the cargo to market. Ditto railway workers. And consider factory workers impacted by a cutoff of imported parts and/or by an inability of their employers to ship out what the workers produce.

The strike will reduce the derived demand for every good and input in the US–including notably the derived demand for labor of every skill level and union status.

This of course is not to mention the serious inconveniences–and in some cases real hardships–that tens of millions of Americans will suffer due to the supply change disruption caused by the strike. A disruption, I might add, that will outlast the strike itself. (Panic buying has already led to empty shelves for many staples).

In sum, the beneficiaries of this strike are vastly outnumbered by the victims, and whatever monetary gains the strikers extract, the monetary costs inflicted on others–including other union members–will vastly outstrip these gains.

Not to mention that the ILA exemplifies the worst of organized labor, and its President, Harold Daggett, personifies it. This guy is a first ballot unanimous selection for the Asshole Hall of Fame, and if he played the corrupt union boss/thug in a movie, it would be so over the top you wouldn’t believe it.

So yeah. Full retard to support this strike.

This action is just what the national emergency provisions of the Taft-Hartley Act (Section 206 of the Act, codified at 29 U.S.C. § 176) were designed for: to deal with a strike affecting “trade, commerce, transportation, transmission, or communication” that “imperil[s] the national health or safety.” ILA strikes resulted in the last two uses of this provision–by Nixon in 1971 and Bush in 2002. By going over some procedural hurdles, the President can order the workers back for an 80 day period during which they must negotiate. It should be invoked here as well.

I guarantee that invoking this measure would result in widespread popular support, just as Reagan’s actions against the air traffic controllers in 1981 did. But Biden and Harris are going full retard instead.

Trump seldom misses an opportunity to miss an opportunity, and here is an example. He could just say, as he has on many issues: “This wouldn’t have happened if I were President. I would have done the deal months ago.” He can support ordering the ILA back to work by saying he wants to protect other union workers and the American people. He can paint Daggett as the bad guy.

All low hanging fruit. But no.

Harris is obviously scared to death of appearing anti-union, although as I’ve just pointed out she could easily show that intervention would be pro-union and pro-worker. But well, we know that girl ain’t right.

Biden’s inaction–or more accurately, his deciders’ inaction–could be seen as just falling into line behind Harris. But is it?

Maybe ironically Joe is the only non-retard here. This could be part of his Sampson strategy to bring down the pillars on all those he believes shafted him. That would definitely include Harris and the Democratic establishment. But it could also include the American people who hold him in ridicule and contempt. That would be evil, perhaps–but not dumb.

Regardless, idiotic political calculations are going to inflict massive pain on ordinary Americans.

There’s a lot of ooh-ing and aah-ing and cheering over China’s recently announced (Keynesian) stimulus. All of this cheering has things exactly backwards. The stimulus won’t return China to its growth path and may not even stave off a downward spiral.

Yes, many of the cheerleaders think this is just the thing required to make China grow again. This is a category error.

Keynes and Keynesian economics are about the business cycle (the “trade cycle” in the terminology of Keynes’ time). Keynes has diddly squat to say about economic growth, and Keynesian stimulus won’t generate real long-term growth: indeed, it arguably is anti-growth (for reasons I will discuss below).

I’ve mentioned before that I took Bob Lucas’ (undergraduate!) growth course in 1981. Lucas had of course gained prominence in macroeconomics for his analyses (Keynes-debunking analyses in fact) of business cycles. The growth class marked a pivot in his research: the reason he taught the class was to provide an impetus to read up on and understand the growth literature and to structure his thinking about it. As he told the class, and as he said publicly later, when you grasp the real importance of growth–long term increases in per capita economic output–all other issues, including cycles around trend, pale in comparison

Using Keynesian logic to draw conclusions about growth qua growth is profoundly ignorant. Like I say, a category error: mistaking an epiphenomenon for the real important phenomenon.

What China has done–in a nutshell, changing reserve requirements and the like to encourage shaky banks to lend to shaky corporates and injecting state capital into the shaky banks–is a signal–a clear signal–that Xi and his economic mandarins realize that the system is on the brink of collapse. This is a daisy chain bailout (government to banks to corporates and local governments) to stave off such a collapse by moving risk onto the government’s balance sheet. And its not as if the government’s balance sheet is so amazeballs.

Massive bailouts are a sign of massive problems. So the alleged massiveness being applauded should be a sobering warning instead.

The perceived necessity for this intervention reflects a recognition that China’s growth model has failed. I would argue (and have argued for over a decade) that it was fundamentally flawed from the start. The investment/infrastructure driven model generated growth in an income accounting sense (I adds to measured GDP, so growing I leads to growing measured GDP). But a vast proportion of this investment that looked great on national income accounts was malinvestment–a huge misallocation of capital.

That capital is now, in effect, being marked to market, with the effects being recorded on bank and local government finances. Austrian business cycle theorists (including Hayek) or even Minsky have a lot more insights to provide about this than Keynes. Government interventions of various sorts (including financial repression and other measures that distorted the price of capital) led to this misallocation.

As Herb Stein said, something that can’t go on forever will stop. Massive capital misallocations cannot go on forever–the marking to market eventually comes. So the “growth” model built on these misallocations has stopped.

I said earlier that the intervention may actually be anti-growth. Here’s why. To the extent that it is an effort to extend and pretend–and it certainly looks that way–it is extending a failed model and pretending that it will actually fix it. But the failed model is inimical to real, sustainable growth. So extending it and pretending that it isn’t a failure is anti-growth. To achieve real growth the system needs purging of bad investments and a reset based on totally different–and market-based–principles.

To reprise my old analogy, more stimulants didn’t make Michael Jackson healthier. They just kept him going. But they couldn’t keep him going forever, so he stopped. Living.

I am deeply skeptical that a committed communist such as Xi or the army of ideological true believers he has put in virtually all leadership positions is capable of making the fundamental changes necessary to achieve growth. They are too invested in, and believe too fervently in, the state directed development model, and are too inveterately hostile to a privately directed one, to pivot from the one to the other. So they will continue to try to patch the leaks in the boat that got them here. That will buy some time, but only some.

Meaning that eventually, the Chinese economy will wind up on the bottom–just like its new sub that sank at the dock.