The View from Right Field

Economic Illiteracy At the Top (Still)

It looks like the Biden administration has found a way to cut oil prices: Come up with a new Covid-19 variant.  More seriously, President Biden said, in addition to just about begging OPEC+ for more production (it’s not a good look for a U.S. president to be publicly asking Saudi Arabia and Russia for, in effect, political help¹), and this gets to the point of this post, that the problem of high oil prices was “because oil supply has not kept up with demand as the global economy emerges from the pandemic.”² 

Except that is wrong.  It’s not that supply is lower than demand.  Supply and demand will always meet³; it’s just that some people may not like where they meet.  Supply might not be high enough for supply and demand to meet at a price people want to pay, but that doesn’t mean they won’t meet.

An Alternate Covid History

Here’s a thought experiment or maybe, more accurately, a possible alternate history of Covid in the United States:

• Donald Trump wins re-election in November of 2020.  (It was possible.  As I noted here, Joe Biden’s margin of victory was only 66,000 votes.¹)

Helping the Rich, Democratic-Style

House Democrats finally passed, 220 to 213, President Biden’s $1.8 trillion¹ “Build Back Better” plan.  You have to be a political geek to know what’s in it, though it doesn’t really matter yet because the Senate hasn’t passed it.  They’re going to make changes in it, and then it will have to go back to the House for another vote.  So, trying to figure out what is in it at this point doesn’t make all that much sense.  The only things we know for sure are that (i) the price tag is totally made up, (ii) the revenue it raises is calculated on bases that won’t actually happen, and (iii) there won’t be any unexpected consequences because if you don’t know what is in the bill, you can’t know what is expected, and if you don’t know what is expected, there can’t be anything unexpected.

Still, one thing we do know about what the Democrats are doing is who is going to benefit.  And that is the upper middle class.  The Biden/Pelosi bill increases the limit on the amount of state and local taxes you can deduct from $10,000 per year to $80,000.  With a standard deduction of about $25,000, this won’t help average people – or even somewhat above average people.  It’s just a tax break for the upper middle class, especially those in states that have high local taxes (i.e., states with Democratic governors and legislatures).

China Does Care (A Little) About World Opinion

In a November 2 post on social media, Chinese tennis star Peng Shuai accused former vice-premier Zhang Gaoli of sexually assaulting her on at least one occasion.  The post was promptly taken down, all mention of Ms. Shuai was taken off Chinese social media, and she went incommunicado.  Pro tennis players around the world started wondering where she was and how she was doing.  And unlike the NBA, which folded like a cheap tent when a Houston Rockets general manager supported Hong Kong in a tweet, they didn’t back down.

China normally doesn’t respond to these kinds of complaints.  Ask the Uighurs.  For that matter, ask the Dali Lama.  But with the Winter Olympics coming up in February and tennis stars continuing to ask where Ms. Shuai was (before China tried to ban tennis players, the Women’s Tennis Association said it would pull out of China), China gave in – at least partially.

“Shoppers Increase Spending, Despite Inflation”. Huh?

“Shoppers Increase Spending, Despite Inflation” was the headline of a lead article in Wednesday’s print edition of The Wall Street Journal.¹  Except, shoppers aren’t “increasing spending despite inflation”; they are increasing spending because of inflation.  Things cost more, so people have to spend more to get them.  They may be buying the same amount of stuff, but, because of inflation, they have to pay more, i.e., they have to increase their spending, to get them.

The article also said: “J.P. Morgan said it was upgrading its growth expectations, raising its forecast for fourth-quarter U.S. gross domestic product to 5% from 4%.”  That makes sense, too; it just doesn’t necessarily mean what it seems to imply.  If the prices for goods and services are higher, i.e., if we have inflation, and the amount of goods and services is the same, then the total amount paid for those goods and services will be more, because their prices are higher.  That may make it look like the economy is growing, when really we are just paying more for the same amount of stuff.

To Successfully Address Climate Change, Elites Need to Convince Real People

With COP-26 continuing in Glasgow, the commenters and others are pitching in with their idea.  Martin Sandhu, a columnist in the Financial Times, made this suggestion on Monday: He noted that, while Europe’s “intention to decarbonize is genuine … the continent remains highly dependent on natural gas, and would become more so by weaning itself off coal.”¹   Mr. Sandhu suggested one solution is to use natural gas as feeder stock for hydrogen.  The only problem, he noted, is that all that “is missing is infrastructure and a market.”  Which is the problem with so many of the ideas proposed by climate experts and elites.

It is easy for experts and elites to come up with plans to solve the carbon problem.  The problem they have is convincing people.  As Mr. Sandhu noted in his column, “even a population as climate-conscious as Norway’s has nowhere near a majority for phasing out fossil extraction.”¹ 

Other Countries Can Get Competent Leaders. Why Can’t We?

You would think that a country as big as the United States, with as many people as we have, could have really good people at the top of its government.  But look at our current president and his predecessor.  They are both embarrassing.

Compare them, either of them, with Sir John Key, former Prime Minister of New Zealand (from 2008-2016), who spoke on “Walking the path to the next global financial crisis” in this panel discussion hosted by The New Zealand Initiative:

Irresponsible Governance – Chicago and Washington

A couple of weeks ago, I wrote about how the Democrats in Congress were trying to pass a package of new social programs.  Obviously, they have been having a bit of a problem getting the bill passed.  Some Democrats only want to set up programs they can pay for.  A lot of others want to set up as many programs as possible, even if it is just for a year or two.  They are willing to spend all the money required to set up lots of new programs, even if the programs have to shut down after a couple of years because there’s no future money to continue them.  In other words, irresponsible governance.

But it’s not only Washington where you see this kind of irresponsible governance.  It’s happening in Chicago, too. For example, for a moment last week, I thought that Chicago had not only solved its huge pension liability¹ but also figured out a way to replace its hundreds of thousands of lead water pipes.² 

The Republican Party’s Got Trouble

To paraphrase (poorly) Robert Preston singing Meredith Willson’s song “Ya Got Trouble” in “The Music Man”:  

“[The Republican Party’s] got trouble!
Right here in River City
Trouble with a capital "T"
And that rhymes with "P" and that stands for … former President Trump.”

Donald Trump is going around telling everybody that the 2020 election was stolen from him.  He calls it the “Presidential Election Fraud of 2020.”  Except the election was not stolen from him.  He lost because Joe Biden won a majority in the Electoral College.¹  But former President Trump can’t seem to handle that fact.  He wrote a long letter to the editor in The Wall Street Journal on Thursday listing all kinds of problems with the vote count in Pennsylvania.  The WSJ listed just some of the errors in former President Trump’s list in an editorial on Friday, but it is impossible to respond to all of his claims.  But that doesn’t mean they’re right.  He just says things.  Trying to respond to them all is a fool’s errand.

How Many New Government Programs Do You Want – And How Many Are You Willing to Pay For?

The Wall Street Journal reported last week that polls showed broad support among Democrats for Joe Biden’s big spending proposals.  According to two different polls, 75% of Democrats favored President Biden’s original $3.5 trillion plan.  Of course, we really don’t know how the question was asked.  If it was just: “Do you support spending $3.5 trillion on new social programs and have it paid for by rich people and big corporations?”, of course, Democrats would say yes.  Maybe independents and even Republicans would, too.  After all, most people like something for free.

But I wonder what the response(s) would have been, even among Democrats, if several different formulations of the question would have been asked.  For example:

Tax Reform Versus the 2021 Democratic Congress

In 2017, the Republican Congress passed real tax reform legislation.  Democrats claimed it was just tax cuts for the rich, but they pretty much always say that.  What is funny about that claim (“funny” in the bizarre sense, not funny in the ha-ha sense) is that one of the things the Democrats objected to the most in the reform was the limitation on the deduction of state and local taxes (i.e., the “Salt deduction”) to $10,000 for a couple, even though the legislation also doubled the standard deduction.  For most people, and especially middle class and below, this was a great deal.  It made tax filing simpler, and it saved them some money.  For upper middle class people in states with high local taxes, i.e., Democratic states, it wasn’t.  So, Democrats from states like California, New York, New Jersey, etc., have been pushing hard to reinstate the full SALT deduction ever since, even though it would almost entirely benefit the upper middle class.¹ 

In any case, then-House Speaker Paul Ryan and other Republicans did real tax reform.²  They were trying to make the tax system better: simpler, easier to comply with, less inefficient, raising the most money with the fewest negative impacts on the economy.  In other words, real tax reform.

“Treat Them Mean, Keep Them Lean” Is Terrible Advice for Any Situation – Political, Economic, or Personal

A week ago, Chris Giles wrote in the Financial Times about the belief, fashionable in both politics and economics, “that companies respond best to a ‘treat them mean, keep them lean’ approach.”¹  Mr. Giles concluded his piece:

“While there are some exceptions, making life difficult for business does not improve corporate performance.  ‘Treat them mean, keep them lean’ is terrible advice for healthy relationships.  It is just as bad in economic policy.”

Which I agreed with in a letter than was published in Tuesday’s FT, making a point I have made before (since FT has a very high paywall, here is the letter, as published):

Is This the Way to Set Up New Social Programs?

As Democrats scramble to come up with a bill of social and climate-related programs that can pass, two big questions seem to dominate.

First, while normally you would think that government should decide what it needs to do and then come up with a way to pay for it, that is not what Democrats are doing.  Rather, they are figuring out how much they want to spend first.  Actually, it’s not how much they want to spend.  It’s what number sounds good politically.  $3.5 trillion was too high for some people.  Joe Manchin said $1.5 trillion was okay, but that’s too low for the progressives.  So they will probably come up with some number in between, though apparently closer to $1.5 trillion than $3.5 trillion.  Still, their first question isn’t what to do; it’s how much to spend. 

JB Pritzker, Redistricting, and the Illinois Way

In the 2018 campaign, then-candidate JB Pritzker said he supported an amendment to the Illinois constitution to have state legislative redistricting done by an independent commission.  If an amendment wasn’t adopted, he said the legislature should set up an independent commission, and he pledged he would veto any maps “drafted or created by legislators, political party leaders and/or their staffs or allies.”

Governor Pritzker first broke his pledge earlier this year when he approved redistricting maps passed by Springfield Democrats for state legislative districts.  Now, I am sure, he is set to break his promise again on the Congressional remap drawn up by Democratic “legislators, political party leaders and/or their staffs”.¹

National Health Insurance – The Other Kind

When people think of health insurance, they normally think of the insurance that pays their medical bills.  And when they think of national health insurance, they think of a national system that either provides people health care or pays their bills.  England has a National Health Service that does the former.  The United States has Medicare, which does the latter.¹

But I would suggest there is another kind of national health insurance.  The purpose of this kind of national health insurance isn’t to pay bills or provide services.  It is, rather, to make sure there is enough capacity in the health care system so that you can get care when you need it, separate and apart from who pays for it.

Electric Cars, Ice Storms, and the Grid

I was driving home from Lincoln, Nebraska, last weekend.  (We were there to meet a beautiful new granddaughter.)  As I drove back, I remembered another drive back from Nebraska.  It was in 2006 or 2007.  This time we were in Omaha, visiting our son who was going to Creighton University.  We drove home the day after a massive snow/ice storm hit Iowa.  As we were driving on I-80 across Iowa, we saw the effects of the storm: piles of snow, semis in the ditch, etc.  It was sort of scary, except we were a day after the storm, so the roads were clear, and it didn’t affect our driving.  

The only real problem for us was that electricity was out all along I-80, and we were starting to run low on gas.  (Note to self: In the winter {or spring or fall}, don’t let your gas tank get too low.  You never know when stations might be closed.)  Fortunately, we finally found a gas station that was open: It had a generator, so it had electricity and its gas pumps worked.  To say we were happy – and relieved – is an understatement.

“Don’t Worry About Inflation. It’s Transitory.”

That’s what Jerome Powell, Chair of the Federal Reserve, and most leading economists are telling us.  The idea is that the surge in inflation reflects the fact that last year at this time prices were down due to the pandemic.  The stay-at-home orders, the fact people wanted to avoid contact with other people, etc., cut demand and prices were down.  Now, demand is up, plus there are kinks in supply chains, which is pushing prices up.  Once those things are over, inflation will go back down.  Which may be true.

But what that explanation misses is that, while the rate of inflation may go back down, those increased prices, which the surge in inflation gave us, are going to stay up.  Just because the rate of inflation goes back down at some point in the future, doesn’t mean that the prices on groceries or anything else are doing to go back down to where they were.

If You Want to Win, You Have to Hit the Ball

A quick follow-up on yesterday’s post about the Cubs’ 2021 season.  With two games to go (I am posting this before Saturday night’s game), the Cubs have already set a team record for most strikeouts in a season (by batters, unfortunately, not pitchers), and they are only fourteen strikeouts away from setting a major league record.  Which they should be able to do since they are averaging 9.88 strikeouts a game.

While it may be obvious that you have to hit the ball to win,¹ it is actually more obvious than you think.  Consider the New Look Cubs’ seven-game winning streak from August 31 to September 6.  Two of those wins came on balls that were hit, but should have been outs.  On September 2, a whiffed pop up to the infield resulted in the winning run scoring in the bottom of the eleventh.  A strike out wouldn’t have done it, but when you hit the ball, you never know (see at 7:40):

@Cubs: 2021 Is Over. 2022 Is "Hopes and Ifs"

There were, I think, three high points of the season for the 2021 Cubs.  The first was their 19-8 record in May (the best in the NL).  The second was the Davies-Tepera-Chafin-Kimbrel combined no-hitter against the Dodgers on June 24.  Even with a not-so-stellar June, the Cubs were still tied for first place in the NL Central after that win.  But then, disaster hit, in the form of an 11-game losing streak, ultimately resulting in the July 29-30 trade-o-rama.  Which indirectly led to the third high point of the season: The seven-game winning streak by the “New Look” Cubs from August 31 to September 6: two against the Twins, a four-game sweep of the Pirates, and one against the Reds.  Only the Reds were above .500, but seven straight is seven straight, and it was fun to see the guys who have never had a chance in the majors, get a chance to play – and win – at least for a while.¹

But now that the season is over, it’s time to look to 2022.  President of Baseball Operations Jed Hoyer says the Cubs will be “really active” in the free agent market “in a thoughtful and intelligent way,” whatever that means.  And however much it will help. 

Biden Said No One Advised Him to Keep Troops in Afghanistan. Top Generals Say They Did.

Joe Biden said, back in August, that, as far as he could recall, his military advisers did not recommend to him that we should keep 2,500 troops in Afghanistan.  Yesterday, top generals, including Gen. Kenneth "Frank" McKenzie, the commander of U.S. Central Command, testified before Congress that they recommended that exact thing to President Biden.¹ 

Obviously, I could see Donald Trump doing something like this.  That is one of the reasons he needed to lose last November.  But Joe Biden wasn’t supposed to do this kind of thing.  He was supposed to be better than former President Trump.