Tag Archives: political economy

Erroneous Analysis

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John Cogan, a Senior Fellow at Stanford University’s Hoover Institution, has one. In his Tuesday Wall Street Journal op-ed regarding a suggestion for fiscal federalism in government spending—an otherwise sound idea for leaving State and local projects to be funded solely by the States and local jurisdictions doing the projects—he had this:

My analysis of federal budget data shows that the chronic federal budget deficits since the 1950s are due to the federal government’s failure to raise tax revenues required to finance its spending on state and local activities.

No. The chronic federal budget deficits have been caused by the Federal government nationalizing the spending on those State and local activities, not by any failure to raise taxes to pay for spending that ought not to have been done in the first place.

It’s not too late to go back to the restraints that federalism places on government spending, but let’s not lose sight of the fact that that federalism never should have been abandoned in the first place. That’s how we have a chance to learn the lessons of that error, rather than repeating it in future.

It’s Worse Than That

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Seth Jones, President of the Center for Strategic and International Studies’ Defense and Security Department, is worried about our ability to deter war with the People’s Republic of China.

[M]y colleagues and I led members of the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party in a simulation of a Chinese invasion of Taiwan. The goal was to understand how the US defense industrial base would perform in a protracted war with China and to assess the implications for deterrence. The results weren’t reassuring.
The simulation began with a Chinese amphibious invasion of Taiwan in 2026. Both sides suffered heavy losses, but the US defense industrial base was severely stressed. The US military spent its entire inventory of Long-Range Anti-Ship Missiles by the end of the first week and ran out of Joint Air-to-Surface Standoff Missile-Extended Range missiles after a month.

Running out of critical ammunition in the middle of a war means we no longer even can fight that war. With the PRC well aware of that likelihood, Jones is correct that we’re losing our ability to deter the PRC.

It’s much worse than that, though, and it’s surprising that Jones didn’t take the next step in his analysis. Such a military strait means we’re losing our ability to defeat a PRC attack, and unlike Japan after its devastating attack on us at the outset of our participation in WWII, the PRC has the wherewithal and the will to follow up its initial attack(s), win outright the war—proximately over the Republic of China, but really a proxy war against us—and impose its will on us.

Why Would We Want To?

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Toyota Motor North America’s COO, Jack Hollis, has a plan for how Trump Can Get EVs Back on Track. The question is why would Trump, or any of us average Americans, want to? Hollis’ subheadline is promising:

Ditch the mandates and subsidies. Let consumer choice drive the market.

Then he goes off the rails.

Our approach provides consumers with many choices: hybrids, plug-in hybrids, fuel-cell electric, and battery-electric vehicles. We believe this is the best way to achieve meaningful emissions reductions while meeting customer needs.

What about the emissions from mining, transporting, smelting, transporting, transforming into relevant parts, transporting, assembling into the final vehicle that occur in the production of lithium, cobalt, nickel, copper—and all that oil that’s used for plastic materials production?

What about the other forms of pollution—from mining to spent battery disposal: all those tailings, the handling of those intrinsically toxic metals (lithium, cobalt, nickel, even copper), the pollution of landfills by all that lithium, cobalt, nickel in those spent batteries?

What about the false claim that atmospheric CO2—plant food—is a pollutant in the first place? That’s never addressed except via the pseudo-science of an erstwhile head of the EPA; this is an underlying assumption that is made only tacitly and conclusorily?

All of these are blithely elided by the pushers of EVs and the punishers of internal combustion engine-powered vehicles.

I haven’t even gotten to the need to expand our electric grid to support the demands a sound EV market would impose. We need to expand, upgrade, and harden our electric grid, along with our electricity production capabilities, for a whole host of reasons beyond just supporting battery-charging.

That brings me back to my opening question: why would we want to put EVs on any sort of track, much less on Hollis’ original one? Ditch the mandates and subsidies, and let consumer choice drive the market, indeed. Add into the free market decision that heretofore omitted information regarding the intrinsically destructive nature of EV production and disposal.

The Left loves to talk about externalities and the need for pricing them into the final product—except when that’s inconvenient to their demands on the rest of us.

Tariffs as Foreign Policy Tools

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President-elect Donald Trump’s nominee for Treasury, Scott Bessent, understands the nature of properly done tariffs. In a recent speech, he noted, as cited by The Wall Street Journal,

…Bessent argued for increasing tariffs on national-security grounds and for inducing other countries to lower trade barriers with the US. He criticized trade policy with China for enriching Wall Street, weakening domestic industrial might, and failing to lead to Chinese economic overhauls.
Bessent called for tariffs to resemble the Treasury Department’s sanctions program as a tool to promote US interests abroad. He was open to removing tariffs from countries that undertake structural overhauls and voiced support for a fair-trade block for allies with common security interests and reciprocal approaches to tariffs.
“President Trump is right that actual free trade is desirable,” Bessent said in prepared remarks at the time. “It might seem counterintuitive from a free market perspective, but he is also right that in order to actually create a freer and more extensive trading system over the long term, we need a more activist approach internationally.”

Yewbetcha, to coin a phrase. Bessent, and Trump, are among the few who understand that international trade is not only about economics—in fact it has little to do with economics—and is mostly about foreign policy.

Even protectionist tariffs—when not done solely for mercantilist reasons—have their foreign policy uses: that removing tariffs from countries that undertake structural overhauls and voiced support for a fair-trade block for allies bit, for instance.

Bessent has serious weaknesses, though, and I did not support his open, public campaigning for the position. That politicking, his penchant for speaking out of turn, is the sort of behavior that was so counterproductive in Trump’s first term. Hopefully, he’ll curb his tongue once installed (if he’s confirmed).

Still, I look forward to his reopening Trump’s proposal to the G-7, made during his first term, of a no-tariff-at-all free-trade agreement.

“No tariffs, no barriers. That’s the way it should be. And no subsidies. I even said, ‘no tariffs’,” the US president said, describing his meetings with fellow Group of Seven leaders as positive “on the need to have fair and reciprocal trade[.]”

That offer was wholly ignored at the time, except by the executives of the German car industry.

We’ll see.

Drilling and Restrictions

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President-elect Donald Trump (R) wants to greatly relieve, if not eliminate, Federal restrictions on oil and natural gas producers so they can “drill, drill, drill.” Lots of folks, including shortsightedly, lots of major (and not so major) oil and gas producer executives think that’s a bad idea.

But some donors grimace when they hear Trump promise that under his watch, crude-oil producers would open the floodgates. He has also promised to cut Americans’ energy costs by 50% or more.
Oil backers’ skepticism stems from the fact that Wall Street has successfully pressured chronically indebted frackers to stop burning through cash, and return it to shareholders via buybacks and dividends instead of reinvesting it to frack more wells.
“Our stocks will be absolutely crushed if we start growing our production the way Trump is talking about it,” said Bryan Sheffield, a Texas oilman who contributed more than $1 million to Trump’s latest campaign.

That argument is a bit of a non sequitur, and so it presents no reason to not remove the restrictions. The removal wouldn’t force the oil and gas producers to drill with abandon or to increase drilling or to drill at all. It would, however, let the producers adjust their drilling from sound business reasons rather than be confined to Government’s political reasons for any adjustment.