Tag Archives: political economy

That’s the Point

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Recall that one of New York City’s Progressive-Democrat Mayor Zohran Mamdani’s goal was a plethora of city government-run grocery stores to sell groceries at “affordable prices”—which, for Mamdani, meant “cheaper than what existing grocery stores were selling.” He could mean only that, else he’d be conceding that those prices already were affordable.

The outcome of such a move is laid out in the subheadline:

His socialist supermarkets could put New York’s little grocers out of business.

That’s the point.

Like any good socialist, Mamdani wants government to control the producers. Especially if it’s the particular socialist’s government. Getting rid of the little businesses demonstrates to the larger stores and the chains—whose individual stores generally are franchises run by moms and pops or collections of them run by small- or mid-sized businesses—that they’d better kowtow to the socialist government or leave. In either case, that would increase government’s control over the remains.

A Reformed Fed

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David Malpass, Undersecretary of the Treasury during Trump I and World Bank President during the reign of ex-President Joe Biden (D), correctly noted that the Federal Reserve Bank as currently constituted is using the wrong economic models and, as a result, has been a singular failure in controlling inflation and that it has been a failure all of this century.

He proposed some remedies.

  • Current models…need to be replaced with economic models that welcome strong investment, innovation, and job growth and recognize dollar stability as a prerequisite for price stability.
  • shrink its balance sheet to allow private-sector liquidity markets to rebuild
  • reduce staff and buildings
  • include the dollar in its inflation models
  • disentangle the Fed from fiscal policy
  • extract itself from the climate regulatory morass
  • allow regulatory innovations in banking and liquidity markets

A capitalist Federal Reserve Bank—what a concept.

There’s another reform, though, that’s an even more critical Critical Item, but this one is firmly on us citizens; it’s the responsibility of We the People. That is to reform Congress by firing those Representatives and Senators who disdain or are indifferent to the imperatives—and the intrinsic morality—of capitalism, and replace them with those who actively support capitalism.

As a man once said, that’s what elections are for. We the People are the electors.

They Knew…

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…or they did not. Regarding the massive welfare fraud going on in Minnesota, a (Republican-led) House Oversight and Accountability Committee report says that Minnesota’s Progressive-Democratic Party governor, Tim Walz, and the State’s Progressive-Democratic Party Attorney General, Keith Ellison, knew all about it from early on and made the conscious decision to do nothing about it, instead choosing to punish those officials rude enough to object to the fraud.

There are two possibilities here. One is for Walz and Ellison to deny all knowledge, either directly or via weasel-word deflections. In this case, the two would be lying through their teeth.

The other possibility is that they wouldn’t be lying in denials, and they really didn’t know about all that fraud occurring under that not so watchful eyes. In this case, they would be confessing their incompetence and unfitness for senior (or any other) government position.

With either possibility and with the Progressive-Democratic Party’s continued support for them or for either of them, Party will be demonstrating its general unfitness for any leading role in our government.

“Bound to Add Upward Pressure”

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An American Enterprise Institute letter-writer wrote in Monday’s Letters section of The Wall Street Journal about his concerns regarding David Malpass’ view that the Federal Reserve needs to seriously set about reducing its balance sheet.

With the budget deficit projected at about $2 trillion a year and with foreign investors seeming to be losing their appetite for US Treasury bonds, any attempt by the Fed to reduce its balance sheet size today is bound to add upward pressure to long-term interest rates.

This, despite his stated position in his immediately prior paragraph that

David Malpass is certainly correct to argue that Fed balance sheet reduction is a worthy monetary policy objective[.]

If not now, though, then when? There’ll always be an excuse for today to put off the shrinkage until later, but there’ll always be some Next Big Thing coming up later that wants more delay. The letter-writer headlined his missive with the position that the Fed needs to take a long view in its determination of when to shrink its sheets.

It’s just barely possible, though, that the new Director has just that perspective. The longer the balance sheet reduction is delayed, the more expensive and disruptive to our economy that reduction will be when it is put into action. It’s the suboptimal short-term view to wait until later to begin for today’s convenience.

No, either way, short-term upward pressure will be added to interest rates. Better to grunt through that disruption now, before it gets really expensive.

Tradeoffs

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We, as a nation, have three questions that we must answer in order to proceed optimally into the future, according to Matthew Slaughter, of Dartmouth‘s Tuck School of Business, and David Wessel, of Brookings‘ Hutchins Center on Fiscal & Monetary Policy. They’re largely correct, but they miss one Critical Item without which our path into a prosperous and growing future would be severely constrained, if not blocked altogether.

In their question regarding “walls or bridges,” the two argue against walls—tariffs—and for trade globalization as the path to prosperity via competition and its heavily encouraged innovation rates that such free trade creates.

[R]esearch has long shown that globally engaged companies tend to create the good jobs at good wages for which so many Americans are yearning. In 2023, the US parent companies of US-based multinational companies paid their 29.9 million workers in America an average total compensation of $97,078—about 20% above the average in the rest of the private sector.

They didn’t address, though, the downside of their largely unfettered free trade regime. That downside was amply illustrated by the recent Wuhan Virus situation, during which our dependence on the People’s Republic of China’s medicines—and not just for Virus medical supplies, but also for over the counter pain killers and anti-inflammatories, even a variety of flu medicines—was exposed, along with the world’s dependence on the PRC even for simple things like face masks.

The downside was graphically demonstrated much more recently by the PRC’s control over rare earths, from ore through processed rare earths to finished products, and its use of that control to throttle their export and thereby threaten our economy and that of Japan’s.

The Critical Item is this tradeoff. Carry out free trade globalization; it is valuable, but do it within this framework. There are a few items that are critical to our national security and to our economy (there is a lot of overlap between them): those rare earths, the raw materials for medicines. For these, we need to have our own supply paths, wholly contained within our borders, that stretch from dirt in the ground through final product deliverable to the domestic end user. These nationally-contained supply lines need not be the only sources for these materials; it’d be sufficient for them to be in place, actively used, and able to be rapidly expanded during periods when overseas sources become constrained.

That tradeoff will be expensive, but that cost is simply—and necessarily—a cost of maintaining our national security, our ability to defend ourselves, whether militarily or economically. The cost of being unable to will be far greater, and not only fiscally.