Category Archives: political economy

Right Idea, Wrong Plan

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Alexandra de Hoop Scheffer, German Marshall Fund of the US President, says three things must occur in order to redress Europe’s defense situation, a situation which I believe currently threatens its ability to survive a war as a collection of sovereign, independent nations. Some of these steps apply to us, and we are also, I believe, in the same war-losing peril of our own sovereignty and independence.

First, Europe must rearm, and fast.

Indeed. But even today, I see little stomach for that in too many of the continent’s nations critical to the continent’s survival against a Russian attack. Both France and Germany are in financial crisis and are showing no political will to correct that. The UK is even worse off; its political management doesn’t even seem aware of the depth of its failure. Until they do gain the awareness and the will to act—and then act—they’ll be unable to be serious about rearming, much less hardening their digital and material (water, fuel, and heating distribution) infrastructure against cyber attacks. Only those nations still fresh from the Russian boots on their necks—Poland, the Baltics, Slovakia, Hungary, Romania, and Moldova—remember what that life was like. Poland and the Baltics are serious about rearming, but they’re smaller even than Ukraine compared to the barbarian’s hordes and equipage. And they have a knife poised at their back in the form of Hungary, which is busily toadying up to Russia in its own effort to mitigate the consequences of being conquered again. Rearming is necessary, but it doesn’t seem promising, much less occurring any time soon.

Second, defense innovation must become a shared transatlantic mission. Neither side of the Atlantic can out-innovate geopolitical rivals alone.

De Hoop Scheffer fleshed this one out a bit; however, she’s mistaken in her proposed execution.

The US leads in emerging technologies, but Europe brings industrial capacity and advanced manufacturing. Joint work on protecting critical infrastructure, countering hybrid threats, and developing secure telecommunications and next-generation defense technologies must continue regardless of political noise.

Yes, and no. The US certainly can out-innovate our enemies alone. That’s how we ran the Union of Soviet Socialist Republics out of existence. We can—and we must—do so again, for all that we’re facing an aggressive Russia and an innovative People’s Republic of China. Our economic players’ freedom to innovate as they see fit gives them, and us as a nation, much more flexibility, and the ability to profit from their innovations, gives them much more incentive to innovate and to run the risks necessary for innovation than can any centrally planned process.

We need, though, to do our own manufacturing. Europe can never be an arsenal of democracy, especially with respect to modern weapons and cyber and space threats. Additionally, the industrial powerhouse of Europe, Germany, is not that anymore. Their industrial capacity is shrinking, and it’s becoming ever more expensive and unreliable as the German government insists on unreliable and expensive “renewable” energy sources while disdaining cheap, reliable oil, natural gas, coal, and nuclear energy sources.

Aside from that, we’re too likely to have to fight two or three wars simultaneously; we need our own manufacturing capacity to meet those equipment expenditure needs.

That doesn’t mean we should not share innovations with our friends and allies; of course, we should and they should with us. Accumulating best practices speeds innovation. We just need to guard against becoming dependent on others. Our dependence on the PRC for far too many items critical to our economy, our health, and our defense capability demonstrates the destructive folly of that. Friends and allies may be less likely to cut us off at critical moments, but that’s a non-zero proposition. See, for instance, an earlier France kicking our military out of that nation. See the German bureaucracy getting in the way of serious training exercises, including joint exercises.

Nor does that mean we shouldn’t buy European manufactures, also. We just can’t be dependent on them. Aside from the continent’s incapacity, two world wars showed vulnerability of US weapons flowing to Europe. That threat applies to the flow of manufactures from Europe to us in the event of another shooting war.

Third, Washington and European capitals must accept that their alignment is no longer automatic.

This is especially true given that fully a third of the European NATO members continue to welch on their financial and equipment obligations to NATO (and in so doing betray the other members of NATO) and continue to freeload off American money and our promise of American blood in defense of NATO Europe, legitimate members and scofflaws alike.

They need to build flexible coalitions outside the usual trans-Atlantic circle based on shared benefits, not only historical ties.

This is especially true for us. We need to stand up a new mutual defense arrangement that incudes the nations of the Three Seas Initiative, us, and the UK; although the latter’s inclusion should depend on its getting its fiscal house in order and then plussing up its defense establishment to something firmer than a secondary school football team. Absent both of those, the UK would be a net drain and so should not be considered.

Right Idea, Bad Plan

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Progressive-Democrat New York City Mayor-elect Zohran Mamdani wants to send $6 billion of city taxpayer money to a fancy, glittering new infrastructure of child care centers that he wants to build so mothers of small children—6 weeks old to 5 years old—can get back to work. (As if mothering children isn’t work in its own right, but that’s beyond the scope of this article). Erica Komisar, a psychoanalyst, wants that money sent, instead, directly to the parents for their use in raising their children their way.

That’s the right idea, but it’s a decidedly suboptimal plan.

Instead, reduce the city’s taxpayer bill by those $6 billion. Let all of the city’s taxpayers hang onto their money, instead of giving it up to the city’s government for spending on the favorite programs of whomever happens to be sitting in Gracie Mansion. Those parents of toddlers will benefit at least as much, from the increased city economic activity that tax reduction would generate, activity that would include increasing job availability; increasing wages; increasing availability of child care and babysitters at prices those parents actually could afford; increasing availability of employer-provided child care, not from government mandate but from it being a good business practice.

That economic flow-through won’t quickly develop; there’s a lot of economic destruction from prior city administrations’ Big Government impositions that needs to be corrected. That, though, simply puts a premium on getting a $6 billion reduction in city taxes enacted.

Republicans and Health Care

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Republican Congressman Jen Kiggans (VA) laid out the problem and in the process exposed an all too typical Republican timidity:

We run on this every time, there’s not an election that comes up where we don’t get beat up on healthcare[.]

Republicans far too routinely cower away from directly addressing healthcare, identifying who’s responsible for the problem, or what to do about it.

Some party elders now say Republicans’ best strategy might now be to avoid the issue altogether.

They’ve had this hide-under-their-desks posture ever since their one serious attempt at health care coverage reform went down in flames via ex-Senator John McCain’s late night showboating No vote killing a bill that would have rescinded Obamacare and restored the then-status quo ante.

A few days ago, Republicans in the Senate (which the press routinely and dishonestly characterizes as “Republican controlled”) offered a bill that would have redirected expiring Affordable Care Act subsidies to individual taxpayers’ Health Savings Accounts, which the bill also expanded explicitly to accommodate those payments. The bill failed on a cloture vote as the minority Progressive-Democratic Party’s Senators bloc-voted against it (thereby demonstrating that a majority of Senators does not confer on that majority party “Senate control”).

Asides aside, what’s shamefully cowardly is that, both during the Republican proposal’s runup to the vote and since the vote, all of those Republicans have been silent on one Critical Item: the Progressive-Democrats’ constant demand for subsidies for the ACA proves how unaffordable is their health care coverage program and how desperately that program needs reform. True, a few Republicans mentioned that the Progressive-Democrats had designed their subsidies to expire at the end of this month, but those were just occasional afterthoughts in other conversations.

It would be good for Republicans, and it would be good for our nation, if Republicans individually and as a political party—including at the State level as well as national—would but screw their courage to the sticking place, and they’ll not fail—not at health care reform, not at getting elected and reelected, and not at maintaining their majorities.

It’s clear that Obamacare/ACA is an utter failure at making health care coverage affordable—even with those taxpayer-funded subsidies, too many premiums in the government’s health coverage market are sky high, and deductibles and the out-of-pocket costs (even capped) are significant fractions of the incomes that the government defines as poverty-level. It’s also clear that Medicaid is rife with fraud and abuse (and waste, but the other two are the most rampant).

Republicans need to talk about health care loudly, frequently, and in specific terms, naming both the outlandish health coverage expenses and the politician they’re campaigning against who favors those expenses and favors keeping Americans dependent on any government they run. Republicans also need to explain in clear, no uncertain terms, that the cuts to Medicaid and the rules for eligibility that they passed in the One Big Beautiful Bill Act actually make things better for legitimate Medicaid recipients. Those reforms cut out those ineligible, like illegal aliens in sanctuary States; add income caps to eligibility; and require the able-bodied to work, actively seek work, train for work, or volunteer. Those reforms make more money available for those truly needing Medicaid.

In parallel, Republicans need to push a specific, concrete health coverage reform package that drastically modifies ACA or outright replaces it. This one requires the Chaos Caucus and the entrenched leadership to get off each other’s throats and coalesce around a specific, concrete package.

Republicans have wasted enough time bickering among each other under their collective House/Senate desk.

Dueling Mischaracterizations

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David Kennedy, Stanford University Emeritus Professor, responded to The Wall Street Journal‘s Holman Jenkins in Kennedy’s Letters letter in Tuesday’s Wall Street Journal. Kennedy said Jenkins mischaracterized his book regarding Franklin Roosevelt’s handling of government during the Great Depression.

Mr Jenkins has me arguing that “Franklin D Roosevelt didn’t end the Depression, he used it to enlarge the federal government.” True enough but too reductive.
Roosevelt didn’t simply “enlarge” the federal government; he right-sized and reformed it for the conditions of modern society. His initiatives rescued and dramatically upgraded capitalism, as witnessed by the unmatched performance of the US economy in the post-World War II decades. The New Deal gave to the exceptionally fortunate “greatest generation” a scaffolding of institutions and practices that reduced risk in sector after sector of American life, brought stability and predictability to millions, nurtured the shared prosperity and consequent trust that ended the Jim Crow era, and positioned the US for world leadership to century’s end and beyond.

Kennedy’s own mischaracterizations begin with his Roosevelt didn’t simply “enlarge” the federal government; he right-sized and reformed it for the conditions of modern society. This is his cynical arrogance of presenting that claim as though it’s received fact rather than the matter of opinion that it so plainly is.

Kennedy’s other serious mischaracterization is his risible claim that Roosevelt’s New Deal created the conditions for US leadership in producing global prosperity and stability. This is a just-as-cynical omission of the simple fact that in the aftermath of WWII and the war’s global destruction of assets and of lives (the latter far beyond the merely killed), during those decades of the Greatest Generation, the US was the only economy in the world that could function. Nearly any “scaffolding” would have put us in the global economic driver seat.

How much better could we and the world have done without Roosevelt’s wage and price controls, still intact today in one form or another (minimum wage laws directly controlling wages, and price controls indirectly in place with Roosevelt-populated Supreme Court rulings like Wickard v Filburn, which made it illegal for farmers to grow for their personal (and so wholly intrastate) consumption without counting it in their interstate commercial production, a ruling that also called a farmer’s strictly intrastate commercial production a part of interstate commerce)?

Roosevelt’s expansion both artificially created jobs for a bloated civil service, it straitjacketed our free market capitalist economics.

Actually, Some of Us Do

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Greg Ip, writing in The Wall Street Journal, has an extensive article delineating how the People’s Republic of China is growing economically at the direct expense of the rest of the world.

Far from missing the opportunities of an international free market process whereby everyone gains, the PRC is doing this deliberately. Its overtly stated goal is to economically dominate (not effectively compete with) us. Its unstated but longer term goal is to economically dominate the rest of the world.

And with economic domination comes political domination.

Ip’s subheadline, though, isn’t entirely accurate:

No one knows how to cope with Beijing’s “beggar thy neighbor” economic model

Some of us do know how. The PRC is an enemy nation. This is amply demonstrated by the PRC’s control and use as national security-threatening weapons of such Critical Items as rare earths, both ore and processed, and of the basic components of medicines. The PRC’s enmity toward us is corroborated by their “graduate students'” efforts to smuggle into our nation, via university labs, fungi that if loosed would severely damage if not wipe out, much of our food plant agriculture.

We should be doing no economic business with the at all; the cease and desist will eliminate the PRC’s economic weapons. It will be extremely expensive and disruptive for us to pull our supply chains entirely out of the PRC and to stop selling anything at all to the PRC or its companies and buying anything from them, but it will only grow more expensive as we delay moving. But those expenses will pale compared to the cost of having our economy and our politics controlled by the PRC.