Thursday, December 28, 2017

Blue State Blues. The High-Income, Liberal California Professoriate Will Pay Higher Taxes Thanks To President Trump

The most wonderful sight of this Holiday Season is watching high-income residents in Blue states squirm over losing some, in many cases a lot, of their prized deduction for state and local taxes to a $10,000 cap.  These are the same people, especially the professoriate in the top 2% of the income distribution, who have been clamoring, indeed begging, for higher taxes on the rich to reduce inequality and foster social justice.  Now they will be taxed more thanks to President Trump and red-state Republicans.  (Don’t hold your breath waiting for them to thank President Trump.)

We are told that the new normal is 2% economic growth.  The reason is that 2% was the best achieved under President Obama.  The economists who worked for or advised him, along with others in the never-Trump or just plain don’t like Trump camps, will choke on 3-4% growth under President Trump.  Will they sing a different song if growth of 3-4% becomes the new, new normal over the next five years?  Will they admit that they were wrong or that their models were incomplete?  Will they cheer new job creation and higher wages?  (Don’t hold your breath waiting for them to thank President Trump.)

Presidents Bush and Obama launched three wars in the Middle East and North Africa, squandering trillions in treasure while inflicting death and destruction on both local populations and American armed forces. President Trump, in marked contrast, has virtually obliterated ISIS in Iraq and Syria with minimal expenditure and loss of life under the brilliant leadership of General James Mattis.  (Don’t hold your breath waiting for the Bush and Obama foreign policy and national security establishments to thank President Trump.)

Don’t forget the pollsters who predicted Hillary Clinton in a cakewalk victory.  These are the same people talking up a blue wave return to control of one or both houses of Congress in the mid-term 2018 elections.  (When they are wrong in 2018 as they were in 2016, don’t hold your breath waiting for them to acknowledge their failures.)

Persuading members of the academic, political, and media industrial complex (APMIC) to acknowledge the success of President Trump is akin to lecturing rats on the benefits of proper hygiene to control plague.  No matter how strong the economy and success of his foreign policy, APMIC will never acknowledge his achievements.  Were they to do so—oh, just dreaming!

Wednesday, December 27, 2017

Taking Stock Of 2017. Keep Winning In 2018.

2017 was a great year.  Donald Trump was inaugurated as President of the United States.  That alone is reason enough to break out your best champagne on New Year’s Eve.

First is a great tax cut for the American people (save the whiners in high-tax blue states, who advocate redistribution of income to reduce inequality except for this time, when they have to pay the price of their own ideology).

Second is a great Supreme Court appointment in Neil Gorsuch and numerous other conservative district and appeals court justices.

Third is the rollback of regulations, especially those that were imposed by President Barack Obama, which have been stifling the American economy.

Fourth is the successful military operation against ISIS.

Fifth is reestablishing the rule of law throughout the federal executive government.

Sixth is the ouster from power of those who served with or supported Obama and Hillary.  Hopefully they will never return to positions of influence or power.  Ditto for those in the several Bush camps who were members of the never-Trumpers, anti-Trumpers, or any of the myriad fellow travelers who opposed and continue to bash Trump.

Seventh is the attempt to improve race and ethnic relations in the light of Obama’s divisive actions and statements, which set race relations in America back 50 years.

Eighth did I say that Hillary Clinton is not president!  To the voters I say thank you, mille grazie, merci beaucoup, xiexie, muchas gracias, todah arbah, obrigado, arigato gozaimas, gamsa hamnida, tak, and thanks in every other language you know.

Goals for 2018

First is to retain Republican control of both Houses of Congress.

Second is to continue to fill the federal courts with Gorsuch-like appointments.

Third is to accelerate the deregulation of every sector of the American economy.

Fourth is to continue to keep our adversaries on the run.  I am proud of my former Hoover colleague General James Mattis as Secretary of Defense.

Fifth is to show African-Americans and Spanish-speaking Americans that Trump’s policies are of much greater benefit to them than living under the Democrat Party’s plantation mentality.

Sixth is to begin the serious business of eliminating wasteful, redundant government spending.  I dream that one day the U.S. will pull out of the United Nations, close its offices, and encourage it to move to Moscow and/or Beijing.   Ditto to slash, not trim, foreign aid.

Seventh is for the Department of Justice to go after the real destroyers of our democracy, namely, the Clintons, the FBI, the NSA, and the Justice Department, and all the others scattered throughout the Executive Branch who used their government positions of trust under Obama trying to fix a presidential election.

Eighth is perhaps only a dream that conservative ideas will be widely heard, equalizing the current dominance of liberal ideas, on America’s university and college campuses.  Maybe that’s A Bridge Too Far in 2018, but perhaps by 2024!

Wishing those of you who believe in low taxes, limited government, a minimum of only essential regulations to insure health and safety, protection of private property, and the rule of law (not rule by law) a happy, healthy, and prosperous New Year.  To the never-Trumpers and their like-minded in blue or red, may you have an even more miserable 2018 (2019, 2020, 2021, 2022, 2023, and 2024).

Thursday, November 23, 2017

Giving Thanks

First and foremost, Donald J. Trump, NOT Hillary R. Clinton, is president.  That is reason alone to celebrate every day as Thanksgiving.

Trump appointed Neil Gorsuch to the Supreme Court, not an ideological clone of Ruth Bader Ginsburg or Sonia Sotomayor that Hillary Clinton would have appointed.  With luck, Trump will appoint two or three more Gorsuch-style justices, thus preserving and protecting the Constitution of the United States.

President Trump has halted, and begun to roll back, the federal regulatory steamroller that has suppressed initiative, entrepreneurship, economic freedom, and growth.  Seven more years of deregulation will liberate Americans for a generation.

President Trump may succeed in slashing tax rates and improve incentives for work, saving and investment.  Hillary Clinton would have raised tax rates to advance her socialist redistribution program.

The legacies of President Bush and Obama are defined by invasions of Afghanistan, Iraq, Libya, the rise of ISIS, thousands of military and civilian deaths, hundreds of thousands of military and civilian wounded, over a million displaced persons, and trillions of dollars of wasted expenditure, leaving the Middle east and North Africa (MENA) worse off than before Bush took office.  President Trump has (so far) avoided the mistake of invading another MENA country and trying to replace it with a democracy, which failed in every case. 

On the domestic front, Bush presided over the greatest financial and economic crisis, known as the Great Recession, since the Great Depression.  Obama, for his part, presided over eight years of sub-standard growth. President Trump is presiding over stronger growth, lower unemployment, and a booming stock market.

Much remains to be done.  Seven more years of Trump, if he stays the course, will MAGA!

Happy Thanksgiving.

PS.  To those of you who supported other Republican presidential candidates or Hillary Clinton in 2016, or just plain don’t like Trump, may you enjoy this day of feasting before resuming your tweeting, blogging, writing, and speaking against Trump.  Resistance is futile.  You will be TRUMPED.

Friday, October 20, 2017

Guys and Dolls With 2017 Characteristics

I love Trump a bushel and a Pence
A bushel and a Pence  and a Gorsuch on the Bench
A Gorsuch on the Bench and a tax cut on the way
A tax cut on the way and we all can say Hooray

I love Trump, I love Trump

Tuesday, October 3, 2017

Conserving Water With California Characteristics

The 2016-17 rainy season in California broke a five-year drought.  During those dry years, the state and local governments imposed a number of regulations to conserve water.  For example, new homes could not have lawns, watering outdoor plants was limited to specific hours of the day two days a week, and washing cars with running water was forbidden.  Some restrictions have been eased while others remain in place.  There are no guarantees when it comes to predicting annual rainfall in California.  Better to sustain conservation in case another multi-year drought materializes, especially since the state government shows little inclination to build dams or otherwise increase water storage facilities.

Restrictions on water use were also accompanied with incentives to conserve water.  Homeowners were offered rebates to tear outlawns and put in drought tolerant plans. In Palo Alto, for example, the current rebate is $2.00 per square foot for the first 1,000 square feet and $1.00 per square foot thereafter, up to the project cap per home.  The rebate requires a minimum of 50% plant coverage consisting of low water using plants from the Santa Clara Valley Water District’s Approved Plant List.

There are also rebates to switch from pop-up sprinklers to drip irrigation and irrigation equipment upgrades.

Several years ago, in the midst of the drought, the BTW (beautiful talented wife) and I were tired of dethatching, seeding, fertilizing, weeding, applying insecticides, mowing, watering, and repeating the cycle.  We were also tired of spending money in pursuit of golf greens in our front and back yards, which was impossible to achieve on a twice-weekly watering regimen.

We decided to go whole hog.  We ripped out the front and back lawns, covering the bare soil with tarps and redwood bark.  Instead of saving at least 50% on water consumption, we were going to save 100%, permanently.  (We left the irrigation system in place in case a future homeowner would like to install drought-tolerant landscape.)

I phoned the Santa Clara County Water Department to request the rebate based on the square footage of lawn we removed.  I asked the polite gentlemen who answered if he would take my request to the Water Board.  He did so, but the Board rejected my request.  Getting the rebate requires that 50% of the area be replaced with water-tolerant plants.  The county retains the right to reclaim the rebate if it discovers that a homeowner overplants or replaces approved plants with those not on the list.

I thought my request was reasonable.  Redwood bark is in widespread use as ground cover.  By not replanting, I would be maximizing water conservation compared with homeowners covering 50% of their former lawn area with drought tolerant plants that still need watering.

Oh well!

Thursday, August 24, 2017

President Trump Goes To War: Afghanistan Redux

In his maiden foreign policy speech of August 21, 2017, President Donald Trump sketched out his plan for “winning” the war in Afghanistan.  Trump also warned Pakistan that if it did not stop harboring terrorists, he would cut off several hundred million dollars in aid and attack Taliban sanctuaries inside Pakistan.  His plan marks a continuation of the war as fought under presidents Bush and Obama, but with changes in the rules of military activity favoring U.S. forces.

Trump’s decision to send more troops to Afghanistan, staying as long as necessary to “win,” reversed his campaign pledge to withdraw.  As he put it, campaigning is one thing, but sitting behind the desk in the Oval Office facing reality is another.  (Why any voter would ever choose a candidate on the basis of his or her foreign/military policy proposals put forth during a campaign is a great mystery.)

In one bold move, Trump intensified the war on Islamic terrorism in Afghanistan and extended it to another Muslim country, Pakistan.  The tone and manner of his speech were very presidential.

Now we are entangled in an even greater war against Islamic radical terrorism, from Libya in the West to Pakistan in the East, with Saudi Arabia, the Emirates, Qatar, Bahrain, Iraq, Iran, Syria, and Russia in between, not to mention the boatloads of Arab and North African migrants, some terrorists among them, pouring into Europe by land and sea.

Moments after Trump’s speech, China’s Foreign Ministry announced China’s continued support for Pakistan.  President Xi Jinping has already pledged $48 billion in contracts for Pakistan as part of his  “One Belt, One Road” initiative.

Pakistan’s gross domestic product is around $300 billion.  Its government spends about $40 billion.  U.S. economic and military aid to Pakistan is less than one percent of its budget.  Threatening its cutoff will not frighten Pakistan.  China will likely make that up and more in additional aid to Pakistan.

What if Pakistan requests military assistance from China, including troops and equipment to be stationed inside Pakistan near the Afghanistan border?  U.S. military activity in Syria is constrained by the risk of hitting Russian troops or engaging Russian aircraft in combat.

Lots to think about.  Only time will tell if the results from Trump’s approach to Afghanistan will be any more successful than those of his two predecessors.  I’m from Missouri, the “show me” state.

PS.  Someone forgot to inform Secretary of State Rex Tillerson that Trump twice proclaimed “we will win” in his speech.   At his briefing of August 22, 2017, Tillerson acknowledged that the U.S. might not win, but that neither would the Taliban.  The stalemate would force the Taliban to the negotiating table.

Sunday, August 20, 2017

What Did Trump Do Wrong?

Trump did not launch two wars in Afghanistan and Iraq

Trump did not overthrow Libyan leader Colonel Muammar Gaddafi, who had abandoned his nuclear weapons, and thrust Libya into civil war.

Trump did not displace over a million civilians from their homes in Syria and the Middle East

Trump did not cause hundreds of thousands of civilian casualties in Afghanistan, Iraq, Syria, Libya, and other countries.

Trump did not involve the U.S. in the Saudi War in Yemen.

Trump did not sign a deal with Iran, putting it on the road to acquiring nuclear weapons.

Trump did not kick the North Korean, nuclear-armed ICBM threat down the road for the 16 years of Presidents Bush and Obama, and President Clinton before that.

As John R. MacArthur so aptly put it in his Article, “Living With Trump” (reproduced in Harper’s Magazine, August 19, 2017):

“Loathing for Trump makes people forget that, among other horrors, a coalition of Republicans and Democrats has already wasted around $3.7 trillion in Iraq and Afghanistan, sacrificed the lives of nearly 7,000 American soldiers, and wounded more than 52,000. Today, Bush is considered a practically serious portrait painter and Hillary a feminist martyr. Obama, the architect of the famous 2009 so-called surge in Afghanistan—a military intensification that accomplished nothing other than polishing up his image as commander-in-chief—is admired and missed like no other political figure.”

The Middle East is in much worst shape in 2017 than it was in 2001.

On the domestic front, Trump did not preside over the worst financial and economic crisis since the Great Depression.

Trump did not preside over the slowest economic recovery in modern American history.

Trump did not make a mess of the U.S. health care system and insurance market.

So, what did Trump Do Wrong?

Trump won the election.  He kept Hillary Clinton from assuming her “rightful place” in the White House.

Trump does not speak nicely like other politicians.

Trump is rolling back excessive regulations.

Trump wants to downsize the federal government.

Trump appointed a conservative, Neil Gorsuch, to the Supreme Court and continues to appoint conservative jurists to federal district and appeals courts.

Trump wants to cut tax rates.

Trump is presiding over large gains in the stock market.

Trump is presiding over job gains and stronger economic growth.

Trump is presiding over a rise in consumer confidence.

There it is.  Maybe if Trump invades a Middle-East country or two, presides over a financial crash and appoints liberal jurists, he will become acceptable.  But he will also have to speak nicely, stop tweeting, and act presidential.  Will those measures and gestures turn the tide?

Thursday, July 27, 2017

Ten Steps To Increase Conservative Ideas On Campus

Diversity has been and remains the watchword on America’s college and university campuses for half-a-century.  In practice, diversity means affirmative action to increase the number and percentage of women and minorities among undergraduate and graduate students, faculty, and high-level administrators.

Progress has been substantial but uneven.  U.S. Department of Education data show that degrees awarded to women in 2017, at all tertiary levels from Associates to Bachelors, Masters, and Doctoral, outnumbered those awarded to men by a ratio of 141/100 (58.5% female).  Women earned 62.1% of Associates, 56.7% of Bachelors, 58.3% of Masters, and 52.2% of Doctoral degrees.  Men remain a majority in STEM (science, technology, engineering, mathematics).

Turning from gender to minorities, there has also been substantial progress in all tertiary levels.  Here are the percentages of enrolled students by race and ethnicity.

                                                               1980      2014
White:                                                     84           57
Black:                                                       5            13
Hispanic:                                                  2              8
Asian:                                                       2             7
Other (mixed, undefined):                         6           16

Black enrollment now matches the Black percentage of the U.S. population.  Chinese enrollment now slightly exceeds its U.S. percentage.   The most notable change is that Non-Hispanic White enrollment has declined by 25% among all students, putting it below Whites who constitute 62% percent of the U.S. population.

Progress has been much slower for women and minorities among faculty and high-level administrators.  One reason is that it has taken time to create a pipeline of doctoral women and minority students to move in and up the ladder of faculty and administrative ranks.  Universities are exerting great effort to recruit women and minority faculty and elevate them to high-level administrative posts.

Diversity is still largely defined in terms of gender, race, and ethnicity, with LBGTQ added to the mix.


This brings us to diversity of ideas, ideology, politics, or intellectual diversity in general.  University faculty is overwhelmingly liberal/Democrat in political orientation, as high as 90 percent in top-ranked schools.  There is growing concern among some educators, commentators, and politicians that universities no longer provide students with a diversity of ideas, as evidenced in violent student protests against conservative speakers on campus.

As noted in a previous post, Stanford’s former Provost John Etchemendy (2000-17) has described the monolithic political culture at Stanford (and other universities) as the “enemy within.”  The following excerpts [shorted for brevity] are from his remarks to the Board of Trustees in February 2017.

"But I’m actually more worried about the threat from within.  Over the years, I have watched a growing intolerance at universities in this country – not intolerance along racial or ethnic or gender lines – there we have made laudable progress. Rather, a kind of intellectual intolerance, a political one-sidedness that is the antithesis of what universities should stand for. It manifests itself in many ways: in the intellectual monocultures that have taken over certain disciplines [emphasis added]; in the demands to disinvite speakers and outlaw groups whose views we find offensive; in constant calls for the university itself to take political stands. We decry certain news outlets as echo chambers, while we fail to notice the echo chamber we’ve built around ourselves.
"This results in a kind of intellectual blindness that will, in the long run, be more damaging to universities than cuts in federal funding or ill-conceived constraints on immigration.
"It will not be easy to resist this current. As an institution, we are continually pressed by faculty and students to take political stands, and any failure to do so is perceived as a lack of courage. But at universities today, the easiest thing to do is to succumb to that pressure.  What requires real courage is to resist it
"The university is not a megaphone to amplify this or that political view, and when it does it violates a core mission. Universities must remain open forums for contentious debate, and they cannot do so while officially espousing one side of that debate.
"But we must do more. We need to encourage real diversity of thought in the professoriate, and that will be even harder to achieve [emphasis added].  It is hard for anyone to acknowledge high-quality work when that work is at odds with, perhaps opposed, to one’s own deeply held beliefs. But we all need worthy opponents to challenge us in our search for truth. It is absolutely essential to the quality of our enterprise.
"I fear that the next few years will be difficult to navigate….The first step is to remind our students and colleagues that those who hold views contrary to one’s own are rarely evil or stupid, and may know or understand things that we do not. It is only when we start with this assumption that rational discourse can begin, and that the winds of freedom can blow.  (Stanford’s motto is Die Luft der Freiheit weht (The wind of freedom blows.)"
On June 30, 2000, nearly installed President John Hennessy and Provost John Etchemendy issued a statement on diversity, which Hennessy read at a Faculty Senate meeting.

The key points in the statement are reproduced below.  To show how this statement can be used to increase diversity of ideas, I have struck out the words “women and minority (ies),” replacing them with “conservative(s).”

For many years Stanford University has had a commitment to enhancing the diversity of its faculty. This commitment is based, first and foremost, on the belief that a more diverse faculty enhances the breadth, depth, and quality of our research and teaching by increasing the variety of experiences, perspectives, and scholarly interests among the faculty. A diverse faculty also provides a variety of role models and mentors for our increasingly diverse student population, which helps us to attract, retain and graduate such populations more successfully.

“The President and Provost wish to emphasize Stanford's continuing interest in and commitment to increasing the diversity of our faculty and to providing access to equal opportunities to all faculty independent of gender, race, or ethnicity political ideas. More specifically, we assert our commitment to the following steps, some of which reaffirm existing university policies, and others that extend those policies:

“1. Faculty searches are obligated to make extra efforts to seek out qualified women and minority conservative candidates and to evaluate such candidates. It is the obligation of the search committee to demonstrate that a search has made a determined effort to locate and consider women and minority conservative candidates….Department chairs and deans have the responsibility to make sure that these obligations have been fulfilled.

“2. We will make use of incentive funds and incremental faculty billets to encourage the appointment of candidates who would diversify our faculty, such as women and minorities conservatives in fields where they continue to be underrepresented….[we] hope to accelerate this process by encouraging departments and schools to take advantage of opportunities to appoint additional equally qualified candidates from underrepresented groups conservatives who are identified during searches but who (for reasons such as their area of specialization) may not be the first choice of the search committee.

“3. The Provost has established an Advisory Committee on the Status of Women Faculty Conservatives and is in the process of forming an Advisory Committee on Faculty Diversity Conservatives.  These committees will work with the Provost and his staff to explore ways in which we can foster the goals of diversity of gender, racial and ethnic ideas.

“4. We will continue to monitor and report on the representation of women and minorities conservatives on the faculty, as well as their tenure and promotion rates, on a yearly basis to the Faculty Senate.

“5. We will support and mentor all junior faculty conservatives, and we will continue to use a review process for tenure and promotion that is based on a candidate's contributions to research and teaching and that is appropriate for the candidate's area of scholarly interest.

“6. We will continue to evaluate faculty salaries, with special emphasis on women and minority conservatives faculty salaries, through an objective methodology (the so-called quintile analysis). Any inequities in salaries for women or men, minorities or non-minorities conservatives will be sought out and corrected.

“7. We will also monitor the distribution of University resources that support individual faculty research programs, including both research funds and space, to ensure that the distribution of the University's resources is not based on improper factors (such as gender, race, or ethnicity conservatives). Any such inequities discovered will be corrected.

“8. We seek to increase the representation of women and minority faculty conservatives in leadership positions in departments, schools, and the University administration.  Such criteria will also form a part of the yearly review of all faculty leaders.

“9. Attracting and retaining the best faculty members in an increasingly diverse society requires us to have a university that is supportive of faculty diversity, both in the composition of the faculty and in their scholarship. Stanford University seeks and promotes an academic environment for each faculty member that is collegial, intellectually stimulating, and respectful of his or her contributions and accomplishments. Such an environment should enable the highest quality scholarship and teaching, and provide every faculty member a voice in department decision-making.

“10. Realizing that small pool sizes and pipeline problems continue to affect the availability of talented women and minority conservative faculty candidates in many fields, Stanford will continue a strong effort to seek out and support graduate students who bring diversity to our university. As an institution, we will encourage women and minority conservative students to pursue academic careers.

We call upon all our colleagues to engage actively in this important effort.

See how easy that was.  An eleventh step would be to lunch a monthly president/provost sponsored conservative speaker program on campus.


We’ll see.  He will state that Stanford subscribes to the principle of academic freedom, the free and open exchange of ideas. Time will tell if conservatives and conservative ideas are increasingly a reality at Stanford and other colleges and universities.  I will be delighted should they come to pass.  I’m from Missouri, the “show me” state.

Monday, July 3, 2017

Make China Great Again

Every Chinese knows the outlines of Chinese history from its founding four thousand years ago as the most advanced civilization in the world, to its decline under Western imperialism in the 19th century, to its rebirth in the late 20th century.

Beginning with paramount leader Deng Xiaoping’s economic reforms in the late 1970s, continuing through the presidencies of Jiang Zemin, Hu Jintao, and now Xi Jinping, China has been transformed from an impoverished, backward nation into a modern economic, military, and political powerhouse.

President Xi does not wear a baseball cap with the words “Make China Great Again” stitched on the front.  But he has a Trumanesque wooden desk sign with the characters “Make China Great Again” carved into it.

Think about it.  President Trump’s keywords are “Make America Great Again,” to fix what ails the United States after the past two presidencies of continuous war, the worst financial crisis since the Great Depression, and subpar growth.  Opposing Trump’s agenda of tax cuts, deregulation, and reducing government intervention in private affairs are all Congressional Democrats, many House and Senate Republicans, establishment Republican politicians who lost to Trump in the primaries and their donors, government bureaucrats, the media, the professoriate, liberal and conservative think tankers, Hollywood, and many foreign leaders who want the United States to pay for their defense and climate agenda.

Now look across the Pacific.  President Xi’s keywords are “Make China Great Again,” to the restoration its dominant historical position in Asia.  Supporting him are tens of millions of Chinese Communist Party members, the People’s Liberation Army, the media, and the vast majority of hard working Chinese people who want a better life for themselves and their families.

The American commentariat is working overtime to explain away and cover up the failures of the past 16 years.  President Trump is working hard to create an environment conducive to sustained higher growth through lower tax rates on firms and individuals, reducing burdensome regulations on economic activity, and limiting the intervention of the federal government in private affairs.  He is running a high hurdle race hoping to get through the first heat in his first two years without tripping over every hurdle.

Meanwhile, President Xi wakes up every morning knowing that he has five more years left in the ten-year term of a Chinese president to “Make China Great Again.”  If all goes as planned, in October 2022 he will hand power and his desk sign to the next decade of Chinese leadership that will strive to "Make China Great Again."

Saturday, July 1, 2017

China's President Xi Jinping Reads The Riot Act To Hong Kong

Mid-morning, on July 1, 2017, twenty years to the day after China recovered sovereignty over Hong Kong from the United Kingdom, China's President Xi Jinping issued his "4-NOTS" doctrine to an assembly of Hong Kong's elite.

1.  Hong Kong people shall NOT challenge the authority of the Central People's Government in Beijing or the absolute sovereignty of the Chinese nation, which includes Hong Kong.

2.  Hong Kong people shall NOT use the territory to carry out infiltration and sabotage against the mainland.

3.  Hong Kong people shall NOT push for more autonomy or independence from China.

4.  Hong Kong people shall NOT tear Hong Kong apart by deliberately creating differences, internal rifts, provoke confrontations, and engage in any reckless moves (in short, shall NOT push for more democracy than China is willing to tolerate).

Transgressing the 4-NOTS crosses Xi's "red lines"and is absolutely impermissible.  (President Xi does not suffer red-green color blindness.)

What if Hong Kong people flout Xi's warnings?  If that happens, Hong Kong will quickly lose its autonomy and likely be absorbed into Guangdong Province, or come under direct rule of the Central People's Government well before 2047.

In 1997, Hong Kong was important to China.  Its economy was equal to 18.4% of mainland China's GDP.  Twenty years later, due to sustained high growth in the mainland, it has fallen to 2.8%.  By 2030, it will be on the order of 1% or so.  Hong Kong will have lost its previous importance to Chna.

To repeat, If Hong Kong people behave themselves and obey Xi's 4-NOTS, they can enjoy a prosperous and satisfying life.  If not, they have been warned.

Xi Jinping is not a typical Western-style president, prime minster, or chancellor.  He means what he says and will act on his words.

Tuesday, June 6, 2017

Don’t Let The Revenue-Neutral Mongers Block Tax Cuts

We can’t have tax cuts, cry the economic naysayers, because they will explode the deficit, raise interest rates, crowd out private investment, and increase unemployment.  (Funny that these concerns never warrant reducing spending, or even stop spending increases, on politically popular infrastructure, defense, entitlements, and most other federal government programs.)

But these same naysayers tell us that we will have low interest rates as far as the eye can see (or farther, as in the 30-year T-bond rate).

In the past 15 years, the federal government‘s public debt has quadrupled from $5 trillion to $20 trillion.  But none of the alleged adverse effects of sharply rising public debt have materialized.   Indeed, the unemployment rate has fallen from 10% in late 2009 to 4.3% in May 2017, while the 30-year Treasury bond rate has declined from 5.28% in June-July 2007 to 2.8% in early July 2017.  Hmmmm!

Maybe the naysayers’ fears will materialize sometime in the not-too-distant future, but that future does not seem to be around the corner.  The above data suggest that we can have a trillion or more dollars in cuts in marginal tax rates on business and individuals in an attempt to spark growth from a paltry 2% or less over the past 10 years to a more robust 3%.  And, we will be able to sleep at night without having to worry about inflation and unemployment rearing their ugly heads.

Monday, June 5, 2017

Revenue-Neutral Tax Reform Is A Bad Joke On The American Taxpayer

On June 2, 2017, the Bureau of Labor Statistics released the May 2017 jobs report.  Against estimates of 175,000 net new jobs, it reported only 138,000. If economic forecasters are so far off on one month, how can the Congressional Budget Office produce a ten-year (120 months) forecast of revenue and expenditure that is even remotely accurate?

Answer?  It can’t.

The ten-year rule (Byrd Rule) of revenue neutrality that follows a reduction in tax rates, which determines if tax cuts expire or continue after ten years, is arbitrary.   There is no scientific way to project that revenue and expenditure will balance over one year, much less ten.  Let’s be honest about this.

Revenue-neutrality is a game Members of Congress play to pretend they are serious about not allowing tax cuts to increase public debt.  But they are rarely serious about balancing the federal budget under any circumstances. 

Congress enabled the Bush and Obama administrations to pile up $15 trillion in public debt.  Indeed, Congress has presided over a deficit-free (actually surplus) budget only 4 times since 1970. To sacrifice tax cuts on the altar of revenue neutrality, and the possibility of pushing growth up from 2%, where it has been stuck since the Great Recession of 2008, to 3%, is a case of crocodile tears

By definition, revenue neutral means no net tax cut.  In principle, broadening the tax base would permit lower tax rates with no loss in revenue, but good luck with that.  Republicans in blue states vigorously oppose eliminating the deduction for state and local taxes ($1.3 trillion in less revenue to the Treasury over 10 years), and almost no one wants to eliminate the health insurance exclusion.

In 1993, at the age of 23, Paul Ryan began working for Jack Kemp as a speechwriter and for two years at his research organization Empower America.  Ryan first entered Congress in 1999, four years later.  As Speaker, he seems to have forgotten everything Kemp taught him about tax cuts. 

Kevin Brady, for his part, is enjoying his position of power as Chairman of the House Ways and Means Committee too much to give up his love of the Border Adjusted Tax.  He projects it would collect $1 trillion in taxes over ten years facilitating revenue-neutral tax reform.

Et tu, Greg Mankiw?   (NYT, op-ed, June 3, 2017)  For Bush, tax cuts were OK but not for Trump.

Members of Congress keep searching for the Holy Grail of revenue-neutral tax cuts/tax reform, but your friendly proprietor really doubts they want to find it.  Gary Cohn, chairman of the National Economic Council in the White House, cannot answer with a straight face if he would accept a cut in the corporate tax rate if that were the only measure Congress would approve.  No, he has to maintain the fiction of comprehensive tax reform to claim that any cut in tax rates will not increase the public debt or expire over the next ten years. 

Tuesday, May 30, 2017

Permanent Tax Cuts Are An Illusion

The House Ways and Means Committee is holding hearings in the course of preparing to mark up a tax cut/tax reform bill.

There are several schools of thought on how to proceed.  The biggest division is between those who want bold, pro-growth cuts in business and personal tax rates without regard for deficits and those who want smaller cuts that will achieve budgetary balance after 10 years. If the 10-year cycle is in deficit after a decade, the tax cuts will expire. The alleged benefit of the ten-year balance rule is that the tax cuts will not expire (sunset) and thus will be permanent (under Congressional rules). The second group points to the example of the expiration of the 2001 Bush tax cuts in 2011 (extended for two years until 2013 by President Obama).

This argument is a will-o'-the-wisp.  The Congress can legislate changes in tax rates any time it can muster the votes.  To be clear, THERE IS NO SUCH THING AS PERMANENT TAX CUTS. Changes in tax rates have been a regular feature since the adoption of the (16th) Income Tax Amendment in 2013.

Your friendly proprietor is wondering whether the goal of "permanence" is just a ruse to block massive tax-rate cuts in order to block President Trump's agenda?

Thursday, February 23, 2017

Beware of Pollsters Forecasting (Wrong) Election Results

Pollsters have fallen on hard times.  They were wrong on Brexit (Britain’s withdrawal from the European Union).  They were wrong on Trump.  They are likely to be wrong on Marine Le Pen, who is campaigning for president of France.  Why have the pollsters been, and are likely to continue to be, wrong?

Polls are taken for two purposes.  One is to sample public opinion on candidates, elected officials, policy choices, etc.  The second is to make news, to use the results of polls to emphasize a political trend or point of view for or against a specific politician or policy.

Years ago, most polls consisted of the first kind, to know what the public really thought.  Today, most are of the second kind, to try to sway public opinion in favor of one candidate or set of issues over others.

But it’s not the case that poll results are wrong half the time in one direction (say, liberal) and half in the opposite direction (conservative).  Rather, they are increasing wrong in favor of the liberal-centrist established order.

There is in the United States and other Western democracies a left-leaning (with a bit of centrism mixed in) “Academic, Media, Political Industrial Complex,” APMIC for short.  This interwoven political system is guilty of lying to the electorate, as President Trump would say, BIG TIME.  The voter’s trust in politicians sits at, or near, an all-time low, mirroring that of the main street media and leftist professors holding court in colleges and universities.

The pollsters, with few exceptions, are an integral part of APMIC.  The political establishment is its clients.  It’s hard, for some impossible, to acknowledge that one is part of a dishonest (lying) enterprise.

Pollsters have gotten recent elections wrong because voters have taken to lying to them, either face-to-face, over the phone, or online.  The pollsters don’t know how to compensate for lying.  It’s not part of standard polling methodology.

If pollsters were honest and admitted that they have no scientific basis to correct their measurements for lying, they would be hard pressed to earn a living.  Better to blame a wrong forecast on a “shock” they couldn’t measure or anticipate, and which their colleagues also got wrong.

With few exceptions, pollsters want their results to support APMIC.  As members of APMIC, they are contemptuous of nationalist movements, denigrating them and their leaders by calling them populist.  A survey of the pollsters themselves would likely show that they accept an outcome in which Marine Le Pen will come in first in the initial round of the April French presidential election.  However, they will forecast that she will lose by a large margin in the second round to the more mainstream second place winner in a runoff election two weeks later in May.  Your friendly proprietor thinks that pollsters will be wrong on Le Pen, much as they were on Brexit and Trump.

Stay tuned.

Tuesday, February 21, 2017

How To Repeal And Replace Obamacare And Pass Tax Cuts/Tax Reform By April 15, 2017

The first law of Congressional dynamics states that Congress will delay action on any important policy as long as possible until it’s too late to pass legislation in any given two-year Congressional session.  As an illustration, the last overhaul of the federal income tax was President Reagan’s Tax Reform Act of 1986, 31 years ago.

Republican members of Congress have discussed repealing and replacing Obamacare for the past six years, but have been (seemingly) unable (unwilling) to design its replacement.

What’s needed is a good, swift White House kick in the a** to force Republicans in Congress to act, NOW!

There is a model to achieve that goal.  Recall that a major financial crisis, which erupted in 2008, was threatening to shut down the U.S. banking system.  (Details are described in a NYT article by Mark Landler and Eric Dash entitled “Drama Behind a $250 Billion Banking Deal,” dated October 14, 2008.)

On Sunday, October 12, 2008, Treasury Secretary Henry M. Paulson, Jr. called the heads of the nine largest banks in the United States, inviting them to a meeting at the Treasury to be held at 3:00 p.m. on Monday October 13, 2017.  Joining them were Paulson, Federal Reserve Chairman Ben Bernanke, and president of the Federal Reserve Bank of New York, Timothy F. Geithner.

The nine banking heads were presented with an ultimatum to accept a $700 billion bailout package, supplemented with a government guarantee of $1.5 billion in new senior bank issued debt, and government insurance for $500 billion in non-interest bearing deposit accounts held by the banks.  They were told these confidence measures were necessary to sustain bank lending.

The meeting was contentious, but by 6:30 p.m. the nine bank executives signed the agreement.

Back to Congress, which will return from a weeklong break on February 28, 2017.  The White House should issue an (mandatory) invitation to the chairmen and one or two other key members of the House Ways and Means and Senate Finance committees and the House and Senate Leadership (Speaker, House Majority Leader, Senate Majority Leader) to meet with top administration officials (Treasury Secretary, Chairman of the National Economic Council).  A few number-crunching and legislative drafting aides as required would be included.

President Trump would inform these men that, like a jury, they would be sequestered in a room until they agreed unanimously to specific legislation for tax cuts/tax reform and to repeal and replace Obamacare.  Each person would also be required to sign a pledge to support this agreed-upon legislation.  They would be provided with food, cots, clothing, an hour of outdoor exercise per day in a fenced area, and other necessities.  They would be permitted to retain their mobile phones to communicate with family at specific times of the day.  But like a jury, they would not be permitted to go home or discuss their deliberations with anyone until they reached a deal.

At that time, President Trump would join them at a press conference in which the signed agreements would be displayed.  Members of Congress would then return to their respective chambers and promptly proceed to pass the legislation to be delivered to the president for signing.  Any member who changed his mind would be placed in a stock for public humiliation and punishment, which would be part of the overall agreement.

Desperate times require desperate measures.  Congress must not be allowed to dilly-dally.