Monthly Archives: August 2023

Biden’s Attack on American Free Markets

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The Biden administration’s OMB is moving to eliminate consideration of opportunity costs from the administration’s estimates of the costs of proposed regulations, a move that would make those regulations seem cheaper than they are.

Opportunity costs are at the core of free market economics, and The Wall Street Journal‘s editors offer a succinct definition [emphasis added].

Consider a business that spends $1 million obeying a regulation by making an upgrade, installing new equipment, hiring lawyers, and whatever else compliance entails.
[O]pportunity cost is what the $1 million would have been used for absent the regulation. It might have been spent on research and development, hiring, increasing output, or paying bonuses to employees, who in turn would spend it on something else.
An accountant would say the cost of this regulation is $1 million, and this is basically how President Biden’s OMB wants regulators and the public to think as well. A good economist knows better and would account not only for the dollars spent but also the forgone rate of return on activities never taken up due to regulatory compliance.

Thus, opportunity cost estimating is a critical way in which businessmen—not just economists—estimate the value of a variety of potential moves in an effort to identify the one (or two in concert with each other) that make the most business sense/provide highest and most likely return(s) on the actual dollars that would actually be committed.

Biden’s move is not just an attempt to…mislead…us ordinary Americans regarding the costs of the Biden regulatory state, it’s an outright attack on our free market economy and an attempt to replace it with his regulatory state, economic decisions from the center, economy.

Biden’s Tightrope

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That’s what the editors over on The Wall Street Journal calls President Joe Biden’s (D) move to bar US investments in certain People’s Republic of China technologies and enterprises.

President Biden’s executive order on Wednesday restricting US investment in Chinese military technologies tries to balance national security and business interests. The problem is that Beijing doesn’t distinguish between the two, which is why business risk in China is rising.

This is the fallacy of the editors and of Biden: since the PRC does not distinguish between national security interests and business interests—does not separate out military utility from civilian utility—when it comes to technology there is no balance for our government to seek. All tech, in the PRC’s eyes, has military utility, therefore all tech American businesses and those of our friends and allies might sell or otherwise transfer into the PRC has military utility, and all such American sales and transfers should be barred, and those of our friends and allies should be jawboned against. The transfers threaten our national security as well as that of our friends and allies.

The White House concern is that the Communist Party will weaponize US venture and private-equity investment in technologies such as artificial intelligence.

In a heartbeat the CPC will. Biden’s bar reflects some understanding of PRC President Xi Jinping’s avowed goal, which he facilitates by eliminating

barriers between civilian and commercial sectors and military and defense industrial sectors, not just through research and development, but also by acquiring and diverting the world’s cutting-edge technologies, for the purposes of achieving military dominance.

But then Biden shied away from taking the full step.

open global capital flows create valuable economic opportunities and promote competitiveness, innovation, and productivity.

And:

Auto makers will still be able to invest in Chinese self-driving systems. Drug makers can join with Chinese companies to develop new drugs.

Never mind that self-driving technology has obvious uses in the PLA’s mechanized/armored ground forces, the PLA’s air forces, the PLA’s naval forces. Never mind, either that the tech used in developing new drugs supports the PLA’s ability to develop drugs for treating PLA diseases and casualties and to develop drugs and other biologics for offensive use.

The editors join him in that failure to follow through:

A complete de-coupling of the US and Chinese economies probably isn’t possible, or desirable, given their interdependence.

Yes, it is, and it’s more than desirable, it’s critical to our national economic and military security, and so to our political security. There will be some economic disturbances as our businesses relocate their supply chains—from ore and minerals in the ground up through final assembly components and end products—out of the PRC, and there will be some economic disturbances as our businesses buy and sell technologies with other customers than the PRC. Those temporary disturbances, though, need to be balanced against the long-term costs of being dominated by the PRC.

There’s no tightrope here, except in Biden’s timidity.

Right, But for a Different Reason

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The Wall Street Journal‘s editors’ headline and subheadline is on a reasonable track:

Punishing Banks for Regulatory Failure
Regulators want to saddle midsize banks with new capital rules.

The editors the proceed to disparage the regulators’ move, and they’re correct about that. They’re mistaken in their lede, though, and that leads them to the erroneous aspect of their disparagement:

Silicon Valley Bank failed owing to rising interest rates and lapses by regulators, not a shortage of capital.

It’s true that a shortage of capital did not cause SVB’s failure, except as the proximate outcome of the real cause of the failure, an outcome that made the failure inevitable.

SVB did run short of capital value, and that meant it couldn’t survive the rapid outflow of cash through depositor withdrawals. But rising interest rates were only the means of that capital shortfall and bank failure, not the cause. Nor were lapses by regulators—and there were some serious ones, including their lack of oversight diligence, which should have led to better enforcement of existing rules—involved in the bank’s failure.

The bank’s managers failed in their own fiscal duties, overbalancing as they did the nature of their capital holdings in the face of those rising interest rates: those managers chose not to balance the interest rate risk related to their deposits and the rates they were paying against the interest rate risk related to their capital holdings and the way rising rates were devaluing their holdings.

Those managers could see as well as any of us, and as well as their depositors, what rising rates were doing to their bank’s capital, and those managers could see as well as any of us, and as well as their depositors, the increasing risk to the bank of the decreasing interest rate spread between what the bank paid depositors and what it earned on its loans, loans the bank was increasingly unable to make in the face of those rising interest rates. And that exacerbated the impact of the bank’s decreasing capital holdings, which those managers could see as well as any of us, and as well as their depositors.

Nor did lack of overt regulator intervention have much of anything to do with SVB’s failure. Bank managers, any enterprise managers, are paid to act on their own initiative, not to wait until they’re told what to do and then, subsequently, told to go ahead and do it.

SVB’s managers were no exception to that.

This was an SVB management failure, and Regulators have no place for writing new capital rules. It’s sufficient for the market place to apply the appropriate sanctions, even if that deprives government bureaucrats of an opportunity to feel good about themselves by Doing Something.

The Fix is In

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Recall that Delaware Federal Prosecutor David Weiss is the prosecutor who agreed to a wrist-slap plea deal regarding Hunter Biden’s tax failures and his illegal possession of a firearm. That deal was so soft, and so shady—Weiss even tried to slide an indemnity against any further prosecution on any matter into the rehab program Weiss had agreed—that the judge presiding on the case tossed it the day it was formally presented to her.

Now, Attorney General Merrick Garland, President Joe Biden’s (D) wingman in DoJ has appointed a special counsel to oversee the continuing/renewed investigations into Hunter Biden’s shady foreign dealings (many of which border on, if not actually are, FARA violations), money laundering, and influence peddling, all of which have implications regarding Joe Biden’s involvement.

That special counsel is…David Weiss. That David Weiss.

This is move does two things: it sets the stage for whitewashing the Biden family, and it actively interferes with the House investigations into Hunter Biden’s dealings and those dealings’ implications regarding Joe Biden. Now the principles and other witnesses have cover to refuse to testify before the House’s investigating committees: “it interferes with an ongoing investigation.”

Sure.

And one more thing. The appointment of Weiss as special counsel is a sham. Special counsels, by statute, must come from outside government, not just outside DoJ. Weiss is not and he will not be outside of anything as a result of this move of Garland/Biden.

One more one more thing: all a special council can do, all the teeth that one has, is write up a report on his findings. He cannot require, or even recommend, prosecution or exoneration. Nor is there a deadline even for that senior thesis to be delivered.

Dishonest Press

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The New York Times and the tabloid’s cronies in the journalism guild ran long and hard about Justice Clarence Thomas’ gift from Dallas Cowboys’ owner Jerry Jones, a gift the NYT and its parrots claimed was an authentic Cowboys Superbowl ring. The Fort Worth Star-Telegram and The Dallas Morning News are among the Texas tabloids that repeated the rumor, and joined the NYT in masquerading their rumor as fact.

Never mind two trivial, if actual, facts.

The ring Jones gave Thomas was a $12 replica.

Thomas reported even that tiny gift in his 1994 ethics form, which he filed with the Court.

Mark Paoletta, longtime friend of Thomas who worked on his 1991 confirmation:

I expect the New York Times to issue a retraction on this falsehood, and an apology to Justice Thomas[.]

And

How could New York Times reporters get this so wrong?

Good luck with that apology. The NYT made no “mistake;” this was the outlet’s, and that of its fellow rumor mongers’, deliberate smear of a Supreme Court Justice whom they view as nothing more than an uppity black man who left the Liberals’ and their press’ plantation and runs his mouth too much. Thomas, shamefully, is their 21st century Dred Scott to the press’ Chief Justice Roger Taney.