Thursday, April 29, 2021

Economy Heats Up; Will Inflation be Transitory?

The first look at Q1 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 6.4%, versus the Bloomberg consensus estimate of a 6.7% gain after the unrevised 4.3% increase in Q4. Personal consumption rose by 10.7%, compared to forecasts of a 10.5% gain, and following the unadjusted 2.3% increase recorded in Q4.

On inflation, the GDP Price Index came in at a 4.1% increase, above expectations of 2.6% gain, and versus the unrevised 2.0% rise seen in Q4, while the core PCE Index, which excludes food and energy, moved 2.3% higher, compared to expectations of a 2.4% increase, and following the unadjusted 1.3% gain in Q4.

Weekly initial jobless claims came in at a level of 553,000 for the week ended April 24, compared to the Bloomberg estimate of an acceleration to 540,000 from the prior week's upwardly revised 566,000 level. The four-week moving average declined by 44,000 to 611,750, and continuing claims for the week ended April 17 increased by 9,000 to 3,660,000, north of estimates of 3,590,000. The four-week moving average of continuing claims declined by 23,250 to 3,684,000.

Pending home sales rose 1.9% m/m in March, short of estimates calling for a 4.4% m/m increase after February's unfavorably revised 11.5% decrease. Sales were 25.3% higher y/y, slightly below the 27.5% increase expected, and compared to February's negatively revised 3.8% decline. Pending home sales reflect contract signings and are a gauge of the pipeline of existing home sales.

Yesterday, the Federal Open Market Committee (FOMC) opted to leave its stance and interest rates unchanged, as was widely anticipated, while also noting that economic activity and employment have strengthened amid progress on vaccinations and strong policy support. In his scheduled press conference following the statement, Chairman Jerome Powell once again said the Fed is committed to achieving its dual mandate of price stability and full employment, and that it maintains the flexibility to provide further accommodation. Powell further reiterated the Fed’s commitment to using its full range of tools to help ensure a robust recovery.

The Fed strengthened its outlook for the economy, noting in the FOMC’s statement, “Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened.” In addition, the Fed highlighted that the “sectors most adversely affected by the pandemic remain weak but have shown improvement.” With regard to one of the hottest topics lately—inflation—the Fed used a word we expect to hear/read a lot over the next few months: “Inflation has risen, largely reflecting transitory factors.”

Wednesday, April 28, 2021

Will the Housing Market Frenzy Die Down?

I live on the outskirts of Austin, TX, and just received my notice of property value, and coupled with market statistics I get every month, I see my home has increased in value 25.9% in the last year. Astounding, to say the least! The Austin housing market is hot, as a many markets are around the U.S. My neighborhood was built four years ago, and the same model as mine across the street sold for more than 30% of original prices. 

Mortgage rates are low, and inventory is tight. It's a sellers market. The supply-and-demand curve is working as predicted.

The coronavirus pandemic raised the temperature considerably on the nation’s housing market. The past year has been marked by soaring prices, logic-defying offers over asking price, and steep competition as sellers have been hesitant to put their homes up for sale.

But the heart-pumping, bank account–depleting housing market frenzy could die down—at least a little—in the coming months as more sellers list their properties and inventory slowly increases. About 10% of current homeowners plan to put their homes on the market this year—and more than half are more affordably priced, according to an exclusive survey conducted by®. An additional 16% expect to list their properties within the next two to three years.

About 4,000 people were surveyed online, including 1,000 new homeowners and more than 650 potential sellers.

“There is a brighter light at the end of the tunnel for many weary buyers,” says Senior Economist George Ratiu.

“A large influx of homes for sale would be welcome news for housing, especially as shrinking affordability has placed a wedge between many young buyers and their desired neighborhoods,” he adds. “More new homes would mean less competition, which would translate into a slowdown in the steep price growth we’ve experienced.

Typically, only about 8% of homeowners put their homes up for sale a year. This is about a 25% anticipated increase, which translates into about 1.5 million more homes. The increase may be due to folks holding off on selling their homes during the worst of the coronavirus pandemic.

It still won’t be enough to fully relieve the current historic housing shortage—compounded by the fact that builders haven’t been able to put up enough homes to keep up with the increasing population, particularly millennials who are now in prime home-buying years. But it’s a start.

“In a market that right now only has close to half a million listings, a big boost in inventory can mean more choices for buyers and potentially a slowdown in price growth,” says Ratiu. He was quick to add that prices won’t drop, but the double-digit growth may taper off. “It’s signaling a return to normal for the economy and the housing market.”

Nationally, the median list price was $370,000 in March—up 16% annually, according to As buyers duke it out, sale prices have gone much higher in many parts of the country. Historically low mortgage rates have helped to offset those high prices, as average rates fell to 2.97% for 30-year fixed-rate loans last week. But prices are still climbing much faster than incomes.

That’s why having more affordably priced homes hit the market is key. Roughly 58% of sellers who plan to list this year have homes valued below $350,000, according to the survey. This is expected to help first-time buyers get a toehold in the market.

About 63% of those who plan to sell this year have already listed their homes or plan to do so within six months. More than three-quarters have taken steps to begin the process, such as getting their homes into shape and reaching out to real estate professionals.

There would be even more homes coming online this year if sellers were confident they could find another home within their price range. In this turbocharged market, that can be difficult. Sellers are also worried about the economy and had concerns about showing their property during the pandemic, among other reasons.

“For many sellers, especially those who are looking to trade up, the shortage of homes has been just as challenging as for first-time buyers,” says Ratiu. “That’s a Catch-22 exacerbating the inventory situation, because the sellers don’t want to list and then not have a place to live after they sell their home.”

And that’s why even when these additional properties hit the market, they won’t be enough to end the housing shortage. Not yet, anyway.

“As we look to the year ahead, the demand wave will continue outpacing the supply inflow, even with more sellers coming to market,” says Ratiu. “We will not solve a decade’s worth of underbuilding and lack of listings in one year.”

Clare Trapasso at contributed most of this story.  See also These are the Top 10 Housing Markets of 2021.

Monday, April 26, 2021

Two Views on Race Theory

Critical Race Theory: The Enemy of Reason, Evidence, and Open Debate

By Peter J. Wilson

On September 22, 2020, President Trump issued Executive Order 13950, “Combating Race and Sex Stereotyping.” The order contained the kind of emotionally charged language about critical race theory that is seldom seen in these legalistic documents: “This ideology is rooted in the pernicious and false belief that America is an irredeemably racist and sexist country; that some people, simply on account of their race or sex, are oppressors; and that racial and sexual identities are more important than our common status as human beings and Americans.”

The order quoted from training materials being used by government agencies and from statements of the agencies themselves, such as this from the Treasury Department: “Virtually all White people, regardless of how ‘woke’ they are, contribute to racism.” The department, according to the order, “instructed small group leaders to encourage employees to avoid ‘narratives’ that Americans should ‘be more color-blind’ or ‘let people’s skills and personalities be what differentiates them.’” Trump’s order was revoked by President Biden on his first day in office.

By this time, however, the ideas that had prompted Trump’s concerns had already begun to disturb the lives of the American people who encountered them. In a suit filed in the U.S. District Court for the District of Nevada on December 20, 2020, Gabrielle Clark, the mother of William Clark, a twelfth-grader in a Nevada charter school, complained about the school’s refusal to accept her son’s objection to what was being taught in a recently revised civics course. Ms. Clark, a widow, is black. Her son’s father, however, was white, and her son was light-skinned enough to be considered white.

Read full article here.

The Left's Systemic Exploitation of Race

By David LimBaugh

When I occasionally complain about the left politicizing race, fellow conservatives often say to me, "Don't worry about this. They've lost all credibility on the issue, trivializing it by overuse. They're getting no traction with it."


You'd have to be blind and deaf to deny that this tactic is working for the left politically and that it has caused great harm. Democrats and the left bring up race every five minutes to demonize Republicans and profit politically. It is nothing more than a raw power grab.

Indeed, if you want to talk about shameful behavior on race, look no further than the liberal politicians and the media who smear half the country as racists daily because of their views on economic, political, and cultural issues. If you champion American sovereignty, advocate border control, support the indispensability of law enforcement, promote our free market economy, and cherish America's founding principles — and if your skin happens to be white (unless you're a progressive) — you are presumptively racist.

Friday, April 23, 2021

Western Civilization, the Recovery of Greek Wisdom, and Today

As Americans know from their own illustrious history, any nation’s well-being hinges on only a few factors. Its prosperity, freedom, and overall stability depend on its constitutional and political stability. A secure currency and financial order are also essential, as is a strong military.
Perhaps most important is a first-rate inductive educational system. 

Of course, nothing is possible without general social calm (often dependent on a reverence for the past) and secure borders.

The following article by Dr. Victor Davis Hanson and YouTube presentation are well worth the time.

Western Civilization, the Recovery of Greek Wisdom, and Today

Thursday, April 22, 2021

Some Raw Data on People Killed by Police

This is in no way meant to be an in-depth analysis, but just a cursory examination of the data would conclude that the leftist narrative of systemic racism in America is wrong. After the chart, I include a story on reactions by the Detroit Police Chief over comments by a congresswoman. 

For 2020:

Total number: 1,021

White: 44.5% (60.1% of population)

Black: 23.6% (13.4% of population)

Hispanic: 16.6% (18.5% of population)

Other: 2.7% (8% of population)

Unknown: 10.9% (unknown percent of population)

Conclusion: Blacks have slightly more incidents of killing by police, but numbers don't show "systemic" racism in police departments. No one with any intelligence could conclude this from the actual data. 

If blacks have a higher ratio of crimes committed, the easy -- yet wrong -- conclusion is racism. Yet, socioeconomic factors have more influence on potential crime rates than anything else. 

Detroit police chief fires back at Tlaib’s ‘shameful’ rhetoric

Detroit Police Chief James Craig said Wednesday that officers under his command remain “fully engaged” in their duties because they know he and city officials support them even as police in other major cities are being disciplined and fired for doing their jobs.

In an interview with Newsmax TV’s Greg Kelly, James also blasted Democratic Rep. Rashida Tlaib, whose district includes Detroit, over a recent tweet in which she claimed that police and prisons can’t be “reformed” and that all should be defunded.

“It wasn’t an accident,” she tweeted following the death of 20-year-old Daunte Wright, who was shot and killed by former officer Kim Potter after she appeared to mistake her service weapon for her Taser as he resisted arrest. “Policing in our country is inherently & intentionally racist.”

“I was really shocked that she said this,” Kelly said, adding that Tlaib has made outrageous statements in the past before asking James to respond.“Ridiculous, reckless, kneejerk,” James began. “Not surprising, but I will tell you, it’s also self-serving. Because really, when you think about it, Detroit residents, they don’t want to dismantle the Detroit Police Department. They don’t agree with defunding. And they certainly don’t agree with closing down prisons so that everybody can just be, you know, like ‘Summer of Love,’ like in Portland and Seattle.”

Read entire article here.

Economic Indicators Show Growth Ahead

Existing home sales fell 3.7% month-over-month (m/m) in March to an annual rate of 6.01 million units, a seven-month low, versus expectations of a decline to 6.14 million units from February's upwardly revised 6.24 million rate. However, existing home sales were up 12.3% year-over-year (y/y).

Compared to last month, the National Association of Realtors (NAR) said buying activity in all the major regions fell, but all regions rose y/y. Sales of single-family homes and purchases of condominiums and co-ops were both down month-over-month (m/m), but higher y/y. The median existing home price jumped 17.2% from a year ago to $329,100, marking the 108th straight month of y/y gains as prices rose in every region. Unsold inventory came in at a 2.1-months pace at the current sales rate, nudging off last month's 2.0-months pace, and down sharply from the 3.3-months pace a year earlier. Existing home sales reflect contract closings instead of signings and account for a large majority of the home sales market.

NAR Chief Economist Lawrence Yun said," Consumers are facing much higher home prices, rising mortgage rates, and falling affordability, however, buyers are still actively in the market," adding that, "The sales for March would have been measurably higher, had there been more inventory," he added. "Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising."

The Conference Board's Index of Leading Economic Indicators (LEI) for March rose 1.3% m/m, above the Bloomberg consensus estimate calling for a 1.0% m/m increase from February's downwardly revised 0.1% decrease. The LEI was positive for the tenth-straight month after the plunges in March and April of last year, due to all ten components contributing positively, suggesting economic momentum is increasing in the near term.

Weekly initial jobless claims came in at a level of 547,000 for the week ended April 17, compared to the Bloomberg estimate of an acceleration to 610,000 from the prior week's upwardly revised 576,000 level. The four-week moving average declined by 27,750 to 651,000, and continuing claims for the week ended April 10 decreased by 34,000 to 3,674,000, north of estimates of 3,650,000. The four-week moving average of continuing claims declined by 41,750 to 3,713,000.

The April Kansas City Fed Manufacturing Activity Index is set to come out shortly and is expected to rise to 28 from March's 26 level, moving further into expansion territory as denoted by a reading above zero.

Thursday, April 15, 2021

Retail Sales Strong, Jobless Claims Fall

From Kelly Evans @ CNBC

The retail sales report came out this morning.

How's a 10% surge in spending sound? Because that's what just happened in the month of March (okay, 9.8%, to be precise). And don't be fooled into thinking that number only sounds big because it's compared with last March, the nadir of the pandemic. No, no. U.S. retail sales surged that much in March from February. In one single month. If they kept up that pace, that's a nearly 120% annualized increase, or in other words, a more than doubling of total U.S. spending on retail items.

Now, of course that pace won't be kept up. But it helps to illustrate just how strong March sales were. Even if you average it out with the decline we saw in February and add in the nearly 8% surge in January, we're now talking about a 35% annualized spending pace in the first quarter. I mean, that is really, really, extraordinary, unusual, jaw-dropping stuff. If you're curious, March sales were up 28% from the prior (pandemic) year.

Where is this all coming from? Stimulus payments "were a definite positive, but the main force driving sales up was an outsized increase in earned wages and salaries in March," wrote economist Brian Bethune. Recall the U.S. added nearly a million jobs last month. Bethune thinks we could now hit 7% GDP growth this year.

The reopening is absolutely gaining traction, and force. President Biden may want to spend another $2.3 trillion on the economy, but it's unclear the economy needs it. For the first time in recent memory, risks could be tilted on the side of doing too much this year, instead of too little. The monthly budget deficit for March just hit $660 billion dollars. And that's before the President's $1.9 trillion Covid package hits, since it was only just signed last month. Not to mention another $2.3 trillion on top of that.

The strong sales report comes as initial jobless claims fell again and after record-breaking reports on service-sector and manufacturing activity already this month (I wrote about that last week). The bond market may have already priced this in; the 10-year yield is actually slipping today below 1.6%. Perhaps traders think there's no way another mega-spending bill gets passed. And if the economy stays this strong, perhaps they'll be right.

Wednesday, April 14, 2021

Why We Need Liberals AND Conservatives

 Dr. Jordan Peterson, in this brief 10-minute video, explains personality, extroversion, liberals, and conservatives, and why we need both. But maybe not at the same time. 

Democrats Eye Provision of Inheritance Tax Law

President Biden vows to eliminate the so-called “stepped-up basis” rule for inherited property. The president refers to this as a “loophole” which allows the rich to “game the system.” Yet it is NO loophole! In fact, it is a specific rule of law under Internal Revenue Code §1014. This law was not a part of the TCJA. It has been on the books since 1954 but is only now under attack by Democrats looking for ways to take more of our money.

Here’s how it works.

Suppose your parents own a home worth $200,000. They purchased the home decades ago for, say, $50,000. If they gift the home to you prior to their passing, your basis in the home is the same as theirs: $50,000. That means if you sell the home for its current value of $200,000, you must pay capital gains tax on the profit of $150,000 – the difference between basis and sale price.

By contrast, if you inherit the home after their death, your basis is equal to the fair market value of the property as of the date of death – in this example, $200,000. [See: IRS Code §1014(a)(1).] Now if you sell the property for $200,000, there is no capital-gains tax because there’s no gain (sale price minus basis equals gain).

This is what we refer to as the stepped-up basis. And the rule absolutely does not apply only to “rich people.” The operation of Code §1014 is not controlled by one’s annual income, the value of the inherited asset or the total value of one’s estate. It applies across the board. Every American taxpayer enjoys the benefit of stepped-up basis on inherited property.

If Code §1014 were repealed in its entirety, all gains on inherited property would be taxed at the capital-gains rate. In general, the gain would be calculated on the difference between the sale price and the price at which the deceased person paid for it (plus any capital improvements that add to the cost basis).

To go back to the parents’ home example: Let’s say the parents paid $50,000 for it originally, and transferred it to you before their death. Subsequently, you sell the house for $200,000; in that case, the $150,000 profit would be subject to capital gains tax. This is precisely what the Biden administration wants to eliminate the stepped-up basis rules to collect more taxes.

One possible consolation, however, is the White House has hinted it might be contemplating exempting the first $1 million in unrealized gains from these new rules. This would be nice, of course, but I will be quite surprised if President Biden and the Democrats actually do it. In addition, you can expect the capital gains tax bill to be calculated at a much higher rate than currently in effect.

The point is, the elimination of stepped-up basis will be a huge tax increase for millions of Americans – and not just wealthy people – despite Biden’s claims to the contrary.

Elimination of Stepped-up Basis Bad For Middle Class

According to Gallup, as of 2017, 82% of Americans over age 65 own their own homes. That is the highest rate of homeownership for any age group. When these people die, their property most often passes to their heirs. With Baby Boomers increasingly passing away in the next decade, economists and demographers predict a gigantic transfer of wealth in the years just ahead.

Yet if President Biden and the Democrats have their way, the coming huge wealth transfer will be: NOT from parents to children (as it should be) – but from parents to the federal government!

Senators Cory Booker (D-NJ), Chris Van Hollen (D-MD), Bernie Sanders (I-VT), Sheldon Whitehouse (D-RI) and Elizabeth Warren (D-MA) have announced a bill designed to close the stepped up basis tax provision.

Other tax changes increases being considered
  • Corporate rate 21->28% 
  • Global min tax to 21%
  • Top income rate to 39.6%
  • End fossil fuel subsidies
  • Tax investment gains > $1M as wage income
  • Tax assets passed on at death

Tuesday, April 13, 2021

Inflation Hits 2.6% Annual Rate

The Consumer Price Index (CPI) increased 0.6% in March, the most since August 2012, and above the consensus of 0.5%. It was led by a 5.0% jump in energy prices, the most since September 2017, while food prices were up a small 0.1%. Core CPI, which excludes energy and food, increased 0.3%, also above the consensus of 0.2%. 

Most core CPI components increased. Shelter was up 0.3%, led by a 3.8% rebound in lodging away from home. It was the biggest rise in this component since October 2005, reflecting the gradual reopening of the economy and an increase in travel and hotel stay. Car insurance prices rose 3.3%, its third consecutive gain. Used car and truck prices rose 0.5%, but new vehicle prices were flat. There were notable price gains in household furnishings and operations, recreation, and personal care. On the flip side, there were price declines in apparel and education. 

On a year-over-year basis, CPI increased 2.6%, the most since August 2018, while core CPI rose a more moderate 1.6%. Both reflect the early stages of the pandemic that depressed prices last spring. Due to the base effect in calculating annual price growth, headline CPI inflation will approach 3.5% in the next few months, while core inflation will exceed 2.0%. Although this effect should be transitory, expect reopening of the economy, a strong recovery, and ongoing shortages of raw materials and products to lead to moderately higher CPI inflation of about 2.2% at the end of this year, compared to 1.4% last year.

Economists say that inflation numbers are expected to have a kind of sticker-shock effect in the coming months because of base effects. The year-over-year numbers will appear to be large because the comparable 2020 months were at the heart of the economic shutdown.

There are also fundamental concerns, though, with supplier demand outstripping supply, as seen in the ISM numbers, heightening concerns about bottlenecks, that, and pent-up demand for services, could find its way into retail prices.

The March PPI raised some eyebrows last week. Wholesale prices jumped 1%, double expectations, while the Core PPI rose 0.7%, well above the consensus of 0.2%. The headline annual wholesale inflation rate hit 4.2%. ”This is beyond the base effects,” Allianz adviser Mohamed El-Erian said after the report. “This is something between demand pull and cost push and its something to pay attention to.” ”The ever rising cost of product procurement” is showing up in government numbers, Peter Boockvar of Bleakley Advisory Group says. “The y/o/y jump ... is more than base effect as the m/o/m numbers are up sharply too.” That said, the stock and bond markets settled down quickly after an initial reaction to the PPI report.

Monday, April 12, 2021

Biden Appointees Equate Energy Production with Racism

In February, Beverly Wright linked the legacy of slavery and the Jim Crow era with energy development. In March, President Joe Biden appointed Wright to his White House Environmental Justice Advisory Council.

Wright, the founder of the Deep South Center for Environmental Justice, is joined on the council by Jade Begay of the Indigenous Environmental Network, who co-wrote a 2018 op-ed in EcoWatch contending that climate change is “colonialism” and “cultural genocide.”

In February, Vox reported on Wright’s conflating racial discrimination and energy development.

“People often forget the legacies of slavery, of Jim Crow segregation, and out of that chain, laws that were deeply entrenched within the social structure of the Southern environment that worsened our quality of life,” she told Vox.

“That legacy resulted in communities that had been inundated with toxic facilities, impacting our health, the value of the homes where people live, causing them to have higher cancer rates, and to eventually be relocated from within the midst of these facilities,” Wright said.

Days before her March 29 appointment to the White House council, Wright gave testimony at a Department of Interior forum, asserting racism is “central” to fossil fuel operations, saying that she hopes Interior Secretary Deb Haaland takes action.  

Biden has named several activists that tie energy development to racial bigotry to the Environmental Justice Advisory Council.

The council has 26 members representing six regions across the country as well as Puerto Rico, plus officials from the EPA and the White House Council on Environmental Quality.

The Biden administration’s budget proposal includes $1.4 billion on “environmental justice” initiatives.“The [fiscal year] 2022 discretionary request for EPA makes historic investments to tackle the climate crisis and to make sure that all communities, regardless of their [ZIP] code, have clean air, clean water, and safe places to live and work,” EPA Administrator Michael S. Regan said Friday in a statement.

Biden also appointed Susana Almanza, founder of the Austin, Texas-based People Organized in Defense of Earth and Her Resources, to the council.

A mostly favorable 2019 article in Hilltop Views, the student newspaper of St. Edward’s University in Austin, noted that Almanza’s office had a poster on the wall of Che Guevara, a murderous military commander in Fidel Castro’s Cuban communist regime.
Susanna Almanza in her Austin Office

The article quoted Almanza saying of energy companies, “we are fighting big monsters; they’re not little ones.” She added that zoning of polluting chemical plants “look[ed] at people of color as indispensable [sic] … like ‘it’s OK if we pollute them and if they die or if they get cancer.’”

Whether actual policy gets developed and enacted from this advisory council remains to be seen, but if so, will have long-lasting affects on energy production and how the government attempts to pick winners and losers. The bottom line could be much higher energy costs for the consumer -- gas prices and prices for heat and electricity. These type of policies always have unintended consequences, usually adverse and usually negatively impacting the people they pretend to help.

Saturday, April 10, 2021

Say It Ain't So!

The Truth Behind Voter Laws

It looks like Democratic-led campaigns against new voter laws are beginning to lose their appeal. Even some liberals are now questioning their tactics. I keep hearing that Republicans are trying to "suppress the vote," yet in reading the proposed new laws and those already passed, I find no evidence of this. In some cases, voting has been made easier. 

I have to conclude that Democrats want wide-open voting, with no requirements for ID, or any checks to prevent fraud similar to their open borders policy. Yet 72% of Americans in a recent poll support voter ID requirements. To say that requiring a voter ID is racist or discriminatory is to say that minorities are not capable of getting or having an ID. That sounds racist and is, of course, a lie.

The campaign against Georgia's new law’s specific provisions has been just as dishonest, as well as in West Virginia and Texas. Democrats leaned heavily on false claims about a provision barring food and drink handouts to people voting, which responded to real issues. The barrage of lies about “voter suppression” has gotten so bad that even media liberals have had to take notice. Glenn Kessler of the Washington Post awarded “Four Pinocchios” to Joe Biden’s false claim that the law “ends voting hours early so working people can’t cast their vote after their shift is over.” Kessler even branded Biden a “recidivist” when the president repeated the same lie after Kessler pointed it out. The Atlanta Journal-Constitution issued a correction after making a similar claim.

In his first press conference in March, President Joe Biden claimed Republicans seeking to ensure election integrity in Georgia and other states “makes Jim Crow look like Jim Eagle,” insinuating the GOP is worse than segregationists. The president has continued to parrot this illegitimate sentiment, claiming the newly passed Georgia election bill mandating voter ID for absentee ballots, among other things that should be uncontroversial, is “Jim Crow in the 21st century.” Speaking on ESPN’s “SportsCenter,” Biden said the measure was “Jim Crow on steroids.”

The bad-faith comparisons Biden is making are perverse. Apparently, weekend voting, asking people to provide a driver’s license on an absentee ballot, and attempting to secure drop boxes are all “Jim Crow.” Not only is the president misleading the American people when he says this, but he is disrespecting black Americans whose ancestors endured legitimate discrimination at the hands of actual oppressive laws.

In reality, S.B. 202 beefs up Georgia’s power to force localities (which control individual polling places) to add more precincts and more voting machines, addressing a specific, longstanding complaint by Democrats about the state’s current voting system. More broadly, while the bill modestly shores up election security and efficiency, it also expands weekend voting statewide, permanently authorizes ballot drop boxes, adds more state oversight of local officials, requires pre-canvassing of mail-in ballots to expedite vote counting on Election Night, expands eligibility to be a poll worker, lets illiterate people have others help fill out their absentee ballots, and requires jails to give access to eligible inmates to apply for absentee ballots. On the whole, it creates broader access to voting in Georgia than existed before 2020, and bars nobody from voting. That may help explain why national polling shows that the Democrats’ effort is failing, and that voters are skeptical of corporations directing boycotts at it.

Losing the argument on both rhetoric and facts, critics have fallen back to their last refuge: arguing that it does not really matter what is in the bill or what its effects are, because it derives from bad motives. Just a few examples:

  • Delta Airlines CEO Ed Bastian: “The entire rationale for this bill was based on a lie: that there was widespread voter fraud in Georgia in the 2020 elections. This is simply not true. Unfortunately, that excuse is being used in states across the nation that are attempting to pass similar legislation to restrict voting rights.”
  • Chris Hayes on MSNBC: “Georgia turns Trump’s Big Lie into law.”
  • Zachary Wolf at CNN: “The same week that a major backer of former President Donald Trump’s false election fraud narrative admitted it was unreasonable, Republican lawmakers in Georgia turned legislation inspired by the false narrative into law.”
  • Tessa Stuart at Rolling Stone: “How Trump’s Big Lie Is Fueling the Voting Rights Battle in Georgia.”
  • Eric Kleefeld of Media Matters: “The Georgia legislation exists because of Democratic victories propelled by Black voters — plus Trump’s Big Lie.”
  • Jon Allsop at Columbia Journalism Review: “The why of the restrictive voting bills is also vital, arguably as much so as the what. Republicans across the country have pitched new laws as correctives to public fears about election ‘integrity’—even though such fears were, for the most part, simply made up by Donald Trump and his enablers in the right-wing political and media firmament.”
  • Eric Levitz at New York Magazine: “When you account for context — and acknowledge the bill’s most nefarious provisions — the left’s purported ‘double standard’ disappears. The leading lights of Georgia’s Republican Party spent the past five months validating baseless allegations of a stolen election and demonizing their own secretary of State for refusing to do the same. The GOP’s 2020 standard-bearer is still decrying the treachery of Republican election officials who failed to abuse their powers at his behest.”
Attacking motives is fair-enough game when you are explaining the origins of genuinely bad policy, but it is also a convenient crutch when you are unable to make that case on the merits. After all, nobody can ever really disprove a charge that they are operating from bad motives — especially when a bill is the product of two houses of an entire legislature plus a governor, and thus reflects the thinking of a lot of different people. The charge has the double benefit of tying the bill to Donald Trump with voters who might agree with its provisions, but mistrust or despise the former president.

It is also a way of dodging inconvenient facts. Many Democratic-run states have similar anti-electioneering laws and less early voting than Georgia. Stacey Abrams herself admits that she previously — and successfully — supported cutting the number of early-voting days in Georgia in half. It is “OK when we do it” if you simply argue that the same conduct is different because our people have pure hearts, and yours do not.

In reality, it is quite clear that — as usually happens with proposals that make it all the way into legislation — there are multiple reasons why this bill passed, and the lingering belief that the 2020 election was stolen is only one of those. The bill changed quite a bit from some earlier proposals after many hours of hearings, suggesting that this was not simply a headlong “do something” rush. There were at least three other factors at work in passing S.B. 202 that are hard for any serious person to deny:

First, Republicans have been arguing for decades in favor of voting rules that protect the security of elections, require identification of voters and the maintenance of accurate voter rolls, and otherwise defend the system of registered voters. Very little of what is in S.B. 202 is genuinely new, and a number of its ideas were once areas of bipartisan agreement. Progressives are overreaching by arguing that Donald Trump makes it illegitimate to continue standing for exactly the same things many Republicans already stood for. It’s like saying a politician must have been bribed because he voted for something he already believed in.

Second, the 2020 election was a highly unusual one. Democrats like to forget this now, but there was a pandemic on in 2020, and many innovations in mail-in voting and the use of drop boxes were brand-new experiments, adopted on the fly. Drop boxes were not even authorized by Georgia law; they were emergency measures, and new legislation was required to continue using them post-pandemic. There is nothing unusual about reviewing how new emergency measures worked, and tweaking them before enacting them permanently.

Third, it is seriously amnesiac to argue that public controversies over the legitimacy of Georgia elections began in 2020. As Georgia secretary of state Brad Raffensperger has detailed, the false and misleading attacks launched by Abrams on the legitimacy of the 2018 gubernatorial election in Georgia followed much of the same script as Trump’s attacks on the 2020 election. Governor Brian Kemp was broiled by Democrats and the national media at the time on the theory that his role as secretary of state made the entire election illegitimate. Placing the state’s elections on a footing that is more defensible from attacks from either side is an entirely legitimate goal.

All of this pollical "maneuvering" can only backfire. At least I hope.

Friday, April 9, 2021

The Woke Revolution is Powered by Elites

By Victor David Hanson, Ph.D.
Stanford University

Ed Bastian made $17 million in 2019 as chief executive officer of Delta Air Lines, Georgia’s largest employer. Bastian just blasted Georgia’s new voting law. He thinks it is racist to require the same sort of ID to vote that Delta requires for its passengers to check in.

Yet most Americans believe voting is a more sacred act than flying Delta and, moreover, may have noticed that Delta has partnerships with systemically racist China. Also, a recent Associated Press poll showed that 72% of Americans favor requiring photo ID to vote.

The most privileged CEOs of corporate America—those who sell us everything from soft drinks and sneakers to professional sports and social media—now jabber to America about its racism, sexism, and other assorted sins.

The rules of cynical CEO censure are transparent.

First, the corporation never harangues unless it feels it has more to lose—whether by boycotts, protests, or bad publicity—than it stands to gain in staying neutral and silent.

Second, class concerns are never mentioned. Bastian made about $65,000 for each working day of 2019. In a sane world, he might seem a ridiculous voice of the oppressed.

Third, CEOs never fear offending the conservative silent majority, who are assumed not to boycott or protest.

The woke revolution is not a grassroots movement. It is powered by a well-connected and guilt-ridden elite. Yet the religion of wokeness assumes that these high priests deserve exemptions. Their wealth, credentials, contacts, and power ensure none are ever subject to the consequences of their own sermons.

Multimillion-dollar NBA stars blast America’s “systemic racism.” They utter not a word about Chinese reeducation camps, the destruction of Tibetan culture, or the strangulation of Hong Kong’s democracy.

Player salaries depend on coaxing a huge Chinese market. Players’ domestic endorsements hinge on a young, woke American clientele. Defending the professional sports lifestyles of rich and famous stars apparently requires loud penance by blasting an unfair America.

Examine almost any woke hot spot and a growing class divide is clear.

Academia? Tenured administrators and university presidents pulling down seven-figure salaries are far more likely to virtue signal their universities’ “racism” than are untenured, poorly paid, part-time lecturers.

It is easier for a college president to blather about his own “unearned privilege” than to support the rights of exploited part-time faculty—much less resign to give someone else a spot.

The woke media? Its clergy are elite network newsreaders, not so much reporters on the beat.

The military? The retired and current officers who lecture us on the evils of Donald Trump or promise to ferret out “insurrectionists” among the ranks are mostly generals and admirals—and some retired top-brass multimillionaires.

We don’t hear much about privates, corporals, sergeants, and majors pushing through subsidies for transgendered surgeries or petitions to garrison a quiet Washington with barbed wire and National Guardsmen.

The richest people in America—the heads of our biggest corporations—are the most likely to voice their derision for the unwoke lower and middle classes. Ditto the multimillionaires of politics—Al Gore, Dianne Feinstein, John Kerry, and Nancy Pelosi.

Celebrity billionaires such as Jay-Z, George Lucas, Paul McCartney and Oprah Winfrey weigh in often about the oppression of the supposedly rigged system they mastered, but rarely about the plight of the less-well-paid in their own professions.

So wokeness is medieval. Sin is not given up as much as atoned for—and excused—through loud confessionals.

Self-righteous elites rant about carbon footprints, needless border security, defunding the police, gun control, and charter schools. But they rarely forgo their private jets, third and fourth homes, estate walls, armed security guards, and prep schools. Apparently, the more you rant about “privilege,” the less you need to worry about your own.

Wokeness is an insurance policy. The louder the damnation of American culture, the more likely a career will be saved or enhanced.

Wokeness is classist and elitist. Those who made or inherited a fortune, got the right degree at the right school, made CEO or a four-star rank, live in the right ZIP code, or know the right people believe they have earned the right to decide what is moral for their inferiors.

So, some of them have created an entire vocabulary—“deplorables,” “irredeemables,” “clingers,” “dregs,” “chumps,” and “Neanderthals”—for the peasants and losers who must do as they are told.

Wokeness is not really about fairness for minorities, the oppressed, and the poor, past or present. It is mostly a self-confessional cult of anointed bullies, and hypocrites of all races and genders, who seek to flex, and increase, their own privilege and power. Period.

Victor Hanson blog

Is This the Beginning of Increased Inflation?

Producer prices surge 

The Producer Price Index (PPI) for final demand jumped 1.0% in March, the second most since December 2009, and double the consensus of 0.5%. Nearly 60% of the increase was attributed to a 1.7% surge in the goods PPI, the most on record, led by energy. 

The services PPI advanced 0.7%, its third consecutive gain, led by machinery and vehicle wholesale margins. PPI for final demand ex-energy and food was up 0.7%, also the second most on record, and exceeding the consensus of 0.2%. 

On a year-to-year basis, the PPI for final demand increased 4.2%, the fastest pace since September 2011, while core PPI was up 3.1%, a record jump. Both goods and services producer prices surged from a year ago. The broad-based increase reflects rising demand amid ongoing supply chain challenges that are creating shortages and bottlenecks. Indeed, intermediate prices soared across the production flow, suggesting a significant buildup in pipeline pressures. Some of these pressures will be transitory and should subside as supply chains improve and trade flows normalize. But it will take more than a couple of months for this to resolve. 

The base effect in calculating PPI year-to-year changes in March was negligible, as the lockdowns last year did not depress prices until April and May. As a result, PPI inflation will exceed 5.5% year-to-year in April. 

The PPI for final demand personal consumption, which correlates strongly with the CPI, surged 3.8% year-to-year, also the most since September 2011, and implies a jump in consumer price inflation, when the report is released next week.

Ken Moraif of Retirement Planners of America discusses inflation and the Fed in this video: 

Paycheck-to-Paycheck: Get Out of the Cycle

I too once lived paycheck to paycheck. It's a hard way to live, at least financially. But I got out. Here are some suggestions on how you can too. 

Living paycheck to paycheck isn't uncommon these days. Recent studies suggest many Americans are doing just that, which in turn makes it next to impossible to save and invest. Overspending can be part of the problem, but even more often people get squeezed through no fault of their own—low wages, unpredictable income and high costs for essentials like childcare, healthcare, housing and college. On the other hand, even people with high incomes can find themselves caught in a seemingly never-ending cycle.

When you’re in this situation and just barely making ends meet each month, it can seem as though you’re on an endless financial treadmill. So how do you jump off? It's a combination of attitude and action. First realize that you can do it—then take these steps to make it happen.

Budgets are key

Start by tracking your spending with an eye toward saving

To get a handle on your money, you first need to know where it's going. Tracking your expenses—for at least 30 days—will give you a realistic picture of how you're spending and help you prioritize and make changes.

Start with essential costs for housing (rent/mortgage, utilities), food, insurance, and work down from there. Is savings on your list? If not, it should be. In fact, it's the essential that's going to break the paycheck to paycheck pattern. So one of the first important steps is to make savings a priority. It's okay to start small. Research from FINRA and SaverLife shows that households with as little as $100 in savings are generally more satisfied with their finances. The key is to save consistently.

Now take a closer look. What are you spending on nonessentials? Ordering out or multiple streaming subscriptions may be nice-to-haves, but these are the things you can control and cut back—and move that money to savings.

Take a good look at your debt—and your attitude toward it

It’s okay to borrow. I’ve talked before about good debt and bad debt. You can barely get by without a credit card these days. Most students need to borrow money for college. Most homebuyers take out a mortgage. That kind of borrowing can make sense.

The danger comes when you borrow too much or use borrowed money to pay for an unsustainable lifestyle. New research shows that some people get into trouble because they think of borrowed money as their own. But it’s not. It’s the lender’s. And eventually the lender wants that money back—with interest.

High interest consumer debt like credit cards is just about the worst kind—and will keep you on that financial treadmill. So if you have it, the next step is to get out of it. How exactly? Again, it's that important combination of attitude and action.

Start by cutting down on using cards. Pick one or two and put the others away. Commit to using cash or a debit card whenever possible. Then come up with a realistic repayment plan, focusing extra money on your highest interest card while paying the minimum on any others. Set up automatic payments where possible. Debt consolidation can also be a solution, but make sure you understand how it works.

As for paying down debts when you’re really pinched, prioritize secured debt like a mortgage and car payments over unsecured debt like credit cards. Talk to your service providers and lenders to let them know of your situation if you’re struggling.

Most of all, don't take on more debt—no matter how enticing the offer.

Expect the unexpected

When you're juggling to pay for what's happening now, it can seem impossible to put anything toward what might happen in the future. But if you don't, the unexpected—a job loss, accident or illness—could put you in an even bigger financial bind. That's why an emergency fund is a must for everyone. While I encourage people to target 3-6 months of essential expenses in a rainy day fund, if you’re just starting out aim for $1,000-$2,000.

And while you're thinking about emergencies, don't forget about insurance. Health insurance is a must, as well as auto insurance, homeowners or renters insurance, and possibly disability insurance. Sure, there’s a cost, but insurance can save you money by protecting you from financial disaster. Shop around, and get the right coverage in place.

Look for ways to increase income and opportunity

If you’ve cut expenses to the bone and are still having a hard time saving, look for ways to increase your income. This can mean part-time employment, side-hustles, or turning a hobby into a money-making enterprise. Consider improving your skills with advanced designations, higher education or training that can make you more valuable to an employer.

You might even be able to make more with your current skills. The Federal Reserve has a new tool to help you look for higher paying jobs similar to the one you have. It's worth checking out.

Avoid lifestyle creep

Not living paycheck to paycheck means you have extra money—not just to spend but to save. That's where your mindset is especially important. For some people, having more money automatically means spending more. It's called lifestyle creep. Don't fall for it. Before you buy, ask yourself if the purchase will move you forward or set you back. Because no matter how much you earn, if you always spend as much—or more—than you make, you'll never break the cycle.

Set some goals

There's nothing like having something to save for to keep you motivated. Whether it's a special night out next month or a big purchase next year, put a price tag on it and give yourself a timeline for achieving it.

And don't forget about long-term goals like retirement. Take advantage of a 401(k); contribute what you can to an IRA. Knowing you're working toward the future can make you feel more confident today.

Be positive—and patient

Struggling with money is stressful, but I believe you have the power to turn things around. Start with small positive steps. Think of the money you save rather than spend as paying yourself. And as it all adds up—and it will—put your savings to work by investing. All of this takes time and commitment, but you can do it. You just have to start.

Thursday, April 8, 2021

Fast and Loose with the Definition of "Infrastructure"

Sen. Kirsten Gillibrand (D-N.Y.) took the bold step of expanding the definition of infrastructure to an unrecognizable state on Wednesday, as she and other Democrats work hard to sell Americans on President Joe Biden's $2 trillion "infrastructure" plan that includes a whole lot of non-infrastructure-related initiatives.

Gillibrand declared on Twitter, "Paid leave is infrastructure. Child care is infrastructure. Caregiving is infrastructure."

However, a quick search reveals that infrastructure "is often considered to refer to transportation, roads, bridges and items of that nature." Merriam-Webster's Dictionary says infrastructure is "the system of public works of a country, state, or region," or "the underlying foundation or basic framework (as of a system or organization)."

NBC News published an analysis April 7 acknowledging that Biden "threw everything, including the kitchen sink, into his $2 trillion-plus 'infrastructure' proposal," adding that "loading up a bill with Democratic priorities in addition to more bipartisan policy goals, such as rebuilding roads and bridges, has put Biden in danger of capsizing his own plan."

Playing with Financial Fire

By Trish Regan
American Consequences

(April 2, 2021) In 1933, with the country mired in the depths of the Great Depression, Franklin Delano Roosevelt set his sights on creating the most comprehensive infrastructure program in our nation’s history.

It was a “new deal for the American people,” he told voters.

Earlier this week, in an attempt to channel FDR’s legacy, President Joe Biden echoed similar promises.

In an afternoon press conference, 88 years after the New Deal, Joe Biden unveiled his $2 trillion “American Rescue Plan.” The massive proposal includes:
  • $621 billion to modernize transportation infrastructure,
  • $400 billion to help care for the aging and those with disabilities,
  • $300 billion to boost the manufacturing industry,
  • $213 billion on retrofitting and building affordable housing and,
  • $100 billion to expand broadband access.
Additionally, there will be:
  • Twenty thousand miles of roadway modernized and 500,000 electric vehicle charging stations added throughout the country.
  • Lead pipes and service lines will be replaced with new-age alternatives, and home care expansion for the elderly and ill.
  • An energy transition to low-carbon sources, an effort to eliminate carbon emissions by 2035.
It sounds good, right?

But we know better. After all, the government has repeatedly shown us that it is hardly the best allocator of resources.

So, forgive me when I say I have little faith in this $2 trillion plan.

A Raw Deal

In fact, instead of this being an actual “new deal for America,” this economic stimulus will ultimately prove to be a “raw deal” for American taxpayers and American corporations.

Historically, we’ve seen the poor results of too much government invention over and over again. In fact, you have only to look to the aforementioned FDR himself.

FDR’s New Deal was not the brilliant piece of legislation that so many progressive academics believe resurrected the American economy. Instead, his policies held the country back — the massive spending coupled with tons of regulations hindered growth in the end. Despite FDR spending three times the federal budget, unemployment still topped 14% eight years into his Presidency. Meanwhile, industrial production and national income fell by almost one-third during the 30s.

As economic historian Amity Shlaes writes incisively in her book The Forgotten Man: A New History of the Great Depression, FDR’s big-government policies prolonged America’s financial crisis for years. High taxes on individuals (90% for the highest earners), rules that prevented companies from firing people (and therefore prevented companies from hiring), along with price regulations and large government welfare programs had the unintended effect of slowing growth.

At the time, FDR’s policies expanded the welfare state and stymied actual economic expansion, while the New Deal’s legacy now remains in Social Security checks and unemployment benefits.

It wasn’t until the ramp-up in legitimate manufacturing needed to fight World War II that the American economy began an engine of growth that propelled us into the economic (and military) hegemonic force in the world.

The question now is, will this be deja vu?

I think we can all agree we don’t ever want to see a World War as a catalyst to break a weak economic cycle — so, why not take charge now and demand accountability from lawmakers?

I’m not saying we couldn’t use a bit of a tune up on our infrastructure. Heck, I’m convinced we need massive help on our electric grid front, for instance.

Nonetheless, a trillion here, a trillion there …this adds up to real money. As a reference point, our economy generates about $21 trillion a year in GDP growth. Our national debt level is higher than that, leaving us with a debt to GDP ratio of 102%. All while we continue running a deficit of over $3 trillion.

When we consider spending $2 trillion in infrastructure upgrades on the heels of $1.9 trillion in stimulus soon followed with an estimated $2 trillion for healthcare and childcare in the coming months, it doesn’t take a clairvoyant to see America’s on a dangerous financial course.

Financial Russian Roulette

It’s the reason former Clinton Treasury Secretary Larry Summers cautions that this is the most irresponsible fiscal policy in 40 years and that the U.S. could face, “A dramatic fiscal-monetary collision.”

He recently told my former employer Bloomberg Television that, “What is kindling is now igniting.” We have the former head of the National Economic Council for the Obama Administration explaining that there’s a “one-in-three chance that inflation will accelerate in the coming years” — and the U.S. could face stagflation.

He also said there might be no inflation because the Fed would hit the brakes hard, pushing us into a recession.

He explained that the final possibility is that somehow the Fed and Treasury will get it all right (ahem), and we’ll see rapid growth without inflation.

But why are we playing with such fire? Especially when we’re (fingers crossed) at the end of the coronavirus crisis? And with Summers predicting only a 1-in-3 chance of this stimulus effort working, the odds are decidedly not in our favor.
Caution: Slippery Economic Slope Ahead

And Mr. President, how exactly will we pay for this financial Frankenstein?

Don’t worry, the White House says. The President’s proposal will be paid for over 15 years by simply raising the corporate tax rate to 21% to 28% and increasing taxes on companies’ foreign earnings.

As a free-market capitalist, I will remind you: raising taxes to pay for government projects is typically not a recipe for success. Corporate earnings will be affected — these should theoretically decrease as a result of taxation.

And never forget inflation.

I give the odds of inflation in asset prices, energy and food prices, and housing pricing a near 100% chance of happening.

How could it not? Remember the Obama-Biden years. Though we saw no inflation in real wages, there was plenty in equity markets, leading to a disproportionate increase in the wealth gap and furthering our hourglass economy. The rich got richer. The poor got more government benefits.

And the middle class got squeezed.

If the government pumps more and more money into the Federal Reserve system, the dollar’s value will decline, meaning we’ll all need yet more dollars to buy our stocks. As such, the market will move higher. Bernstein Research had a market prediction this week: 8000 on the S&P 500 by the end of the decade.

I’ll take it one step further — I wouldn’t be surprised to see 10,000 on the S&P 500 by 2030.

Nonetheless, is this “tax and spend” sustainable?

Of course not.

It’s a fragile model that leaves us vulnerable to any looming economic wrong turns. The key as an individual is to protect yourself and your assets. There will be winners and losers in the years ahead, and the government will likely have a big hand in the winners. If you want a real deal, invest accordingly.

The Fed: Things are Looking Good

Minutes from the last Fed meeting saw FOMC members point to a brighter outlook for the economy, while agreeing to provide continued support via near-zero interest rates and large monthly bond purchases. Several of them even noted that the recent $1.9T pandemic relief package could improve the position of small businesses slammed by the pandemic, boost consumer spending and contain long-term damage to the labor market. That builds on the latest hiring surge in March, as well as an unemployment drop and business reopenings. 

Similar viewpoint: The outlook was echoed by Jamie Dimon, who estimated the coming economic boom could last until 2023. In his annual letter to shareholders on Wednesday, the JPMorgan CEO said strong consumer savings, huge deficit spending, more QE, expanded vaccine distribution and a $2.3T infrastructure plan could lead to a "Goldilocks moment" of fast, sustained growth alongside inflation and interest rates that drift slowly upward. The permanent effect of that growth will depend on the "quality, effectiveness, and sustainability of the infrastructure and other government investments," he added. "Spent wisely, it will create more economic opportunity for everyone."

Investors responded in kind, as the S&P 500 notched a fresh closing high of 4,079.95 on Wednesday. Stock index futures climbed further overnight, with contracts linked to the S&P 500 up another 0.4%, and the Dow and Nasdaq ahead by 0.2% and 0.8%, respectively. Further helping sentiment was a statement from the U.S. Treasury, which said Biden's tax proposals would generate about $2.5T over 15 years in an effort to pay for eight years of infrastructure spending.

On tap: Fed Chair Jay Powell speaks at an IMF event later today, where he is likely to share his views on the global recovery and monetary policy outlook. Investors will also be tracking the latest Labor Department update on the number of Americans filing for unemployment benefits for the first time. Economists expect the downward trend to continue given the rehiring across the economy, with first-time claims totaling 680K during the week ended April 3.

Note as of 8:30 am April 8:  In the week ending April 3, the advance figure for seasonally adjusted initial claims was 744,000, an increase of 16,000 from the previous week's revised level. The previous week's level was revised up by 9,000 from 719,000 to 728,000. The 4-week moving average was 723,750, an increase of 2,500 from the previous week's revised average. The previous week's average was revised up by 2,250 from 719,000 to 721,250.

Tuesday, April 6, 2021

Biden Infrastructure Plan will Hurt Economy

By Gary D. Halbert
Halbert Wealth

President Biden’s massive $2.25 trillion infrastructure bill is on the tracks, rolling toward what many in Washington believe will be speedy passage in the House and Senate. There are many problems with this historically large spending bill, but chief among them is the fact that less than 6% of the $2.25 trillion will actually be spent on roads and bridges. If we include all spending related to transportation, the amount only increases to just over one-third of the total.

Much of the so-called “infrastructure” spending will fund some liberal pork barrel spending projects which are loaded up in this Trojan Horse of a bill – including direct government giveaways, Green New Deal-style initiatives and programs to improve racial inequality, just to name a few. The president says his new bill will create millions of new jobs and will be a boon for the economy when it is enacted.

But many argue just the opposite: that the massive bill will be bad for the economy, jobs and quite likely for the stock markets as well. Here’s why: Biden’s “American Jobs Plan” would hike America’s corporate tax rate to 28% from 21%, thus giving us what will be the highest corporate tax rate in the developed world. The repercussions will likely be severe.

Worse still is the likelihood the infrastructure bill may cost substantially more than $2.25 trillion. Initially, President Biden said he wanted $4 trillion for his infrastructure bill, then he trimmed it to $3 trillion, now it’s $2.25 trillion. 

There’s more not to like about President Biden’s infrastructure plan than there is to like. 

What Biden Says His Massive Infrastructure Plan Will Do

Before I criticize the president’s infrastructure plan he introduced last week, let me begin with the promises he made for the American Jobs Plan when he unveiled it last Wednesday. First of all, President Biden said his $2 trillion infrastructure plan is:

“A transformational effort that could create the most resilient, innovative economy in the world. It is not a plan that tinkers around the edges. It is a once-in-a-generation investment in America.”

The president said his infrastructure plan would repair 20,000 miles of highways and thousands of smaller major bridges, along with the 10 most economically important bridges in the country. If this doesn’t sound like much for $2.25 trillion, you’re right. That’s because less than 6% of the $2.25 trillion is going toward roads and bridges. I’ll come back to that later.

If, in addition to roads and bridges, we add public transit, ports, airports and electric vehicle development, the proposed spending increases to $621 billion or just over one-third of the $2.25 trillion. Even this seems low for a so-called infrastructure bill.

The president said his bill would improve drinking water infrastructure and quality, expand broadband access, upgrade electric grids, build affordable housing, retrofit existing homes, upgrade schools, increase job training and numerous others.

Those sound like good ideas but we’ll have to see how much money actually goes into these efforts. Why? Because the president also said the plan would accelerate the fight against climate change by hastening the shift to new, cleaner energy sources, and would spend a lot to help promote increased racial equality in the economy.

Finally, the spending in the infrastructure plan would take place over eight years, the president said, and the tax increases would more than offset that spending in 15 years, leading to an eventual reduction of the budget deficit. How many times have we heard that before, only to see cost overruns, revenue shortfalls and ever higher budget deficits?

What Not to Like in President Biden’s Infrastructure Bill

The president says his unprecedented infrastructure plan would create millions of new jobs, stimulate the economy and substantially increase spending on climate change, among others. Yet rather than stimulate American jobs and our economy, President Biden’s infrastructure plan could cripple our economy and substantially harm our ability to compete internationally.

To pay for its initial $2.25 trillion in spending, the White House’s plan raises the federal corporate tax rate to 28% from the current 21%. This change puts us above even notoriously entrepreneurship unfriendly countries like England (at 19%) and nations fallaciously hailed by the left as positive examples of socialist tendencies, including Finland (20%), Sweden (21.4%), Norway (22%), Denmark (22%) and even China at 25%.

In fact, the US corporate tax rate will be the highest of the 37 countries in the Organization for Economic Cooperation and Development (OECD) once France implements their reduction to 25.83% over the next year. Sweden and the Netherlands are likewise reducing their tax rates further on businesses to help them recover from COVID-19 difficulties.

These dramatic increases to corporate income taxes may help provide funding for the infrastructure bill’s provisions in the short term but will hinder the economy’s growth and therefore the government’s long-term ability to accrue revenue. The United States holding so relatively high a corporate tax rate will be detrimental to entrepreneurship and investment.

I’ll explain how it could be detrimental to investors in a moment.

As noted above, the massive $2.25 trillion infrastructure plan devoted only 6% to rebuilding and repairing roads and bridges. Even if we include spending on public transit, ports, airports and electric vehicle development, the proposed spending only increases to just over one-third of the $2.25 trillion. When have we ever seen an “infrastructure” bill which allocates almost two thirds of its spending to “non-infrastructure” projects and programs? Never.

This huge tax increase on American corporations will undoubtedly negatively affect their rate of job creation but also increases the likelihood they could actually cut jobs. With so many foreign governments reducing their corporate tax rates, we also run the risk that US companies could move their operations offshore.

When President Trump and Republicans slashed the corporate tax rate from 35% to 21% in 2017, it proved quite successful in convincing US companies operating offshore to bring those jobs back home. If President Biden gets this infrastructure bill passed, it could indeed reverse that trend in the next few years.

Finally, I mentioned in the Overview above the likelihood President Biden will want substantially more than $2.25 trillion for his infrastructure plan. In fact, the president admitted later on last week that this $2.25 trillion is really just the first half of his overall plan for infrastructure spending over the next decade. Already, some in Congress are complaining the $2.25 trillion is not enough.

Why Biden’s Infrastructure Plan is Bad For Markets & Investors

Obviously, higher corporate taxes are bad for business. Worsening business conditions usually mean lower stock prices. While corporations like to pass along price increases to consumers, I don’t believe they will be able to pass along all of this big tax increase, at least not all at once. This will likely mean a hit to profits and thus, will not be bullish for stocks.

As I discussed in my March 4 Blog, stocks are very overbought and thus quite vulnerable to a trend reversal. Take a moment to look at my March 4 posting and the charts therein, if you haven’t already.

While most market forecasters have turned more bullish on equities over the last month or so, it won’t surprise me if we see a correction (or worse) if the president gets his massive infrastructure bill passed just ahead.

The correction over the infrastructure bill could then be intensified with the passage of Mr. Biden’s tax increases on those individuals or couples making over $400,000 a year, which could sail through the Democrat-controlled Congress.

Things could then get even worse for the stock markets if Biden gets his way on increasing the capital gains tax to the level of ordinary income, which can rise to 35% for individuals or couples making just over $400,000 a year. This could be quite bearish for stocks.

Monday, April 5, 2021

When corporations become political

Updated on April 7, 2021

Woke Capitalism Strikes Again in Georgia

If the problem of “woke capitalism” wasn’t apparent before, the battle over Georgia’s new election integrity law has drawn it out into the open.

The law, which adds voter ID requirements to absentee voting, extends some early voting, and places some restrictions on activist activities at polling places, has been billed by Democrats and President Joe Biden as Jim Crow 2.0.

Regardless of the merits of the law or the offensive absurdity of comparing it to the actual rampant voter suppression under Jim Crow, it’s clear that opposition to the law is coming almost entirely from the left.

1 Investor With 1 Share Can Call Out Corporate Leftism 

You can’t just pick up the phone and take on one of the most powerful CEOs in the world. Or can you?

It could be that easy if you own just one share of stock in a publicly traded corporation. It’s a David-versus-Goliath strategy that conservatives don’t use enough to make a difference in the culture wars.

And with American companies now repudiating the principles and values that once made them great, we need all the help we can get right now.

I called into the Walt Disney Co.’s virtual shareholder meeting and caught CEO Bob Chapek off guard when I accused him of blacklisting anyone not adhering to Hollywood’s left-wing agenda.

Corporate Activism

From Seeking Alpha: Back in March, we reported on the Nasdaq's (NASDAQ:NDAQ) board diversity plan, which created tensions between those advocating for greater corporate diversity and those seeing it as an industry quota system. The same argument played out this week in other areas of Corporate America, which is increasingly becoming a dominant political force. Once upon a time, the business world sought to maximize profits of shareholders in the political sphere via lobbying or marketing efforts, but their newfound power is developing into a kind of governance system, while many investors are buying into the vision.

One doesn't have to look far to the permanent suspension of President Trump on Twitter (NYSE:TWTR), whose stock is up 30% since the ban in January, as well as Parler's removal from the Apple (AAPL) and Google (GOOG) app stores and web hosting by Amazon (AMZN). The corporate world has also brought in activists to their success, like Colin Kaepernick, who has been a prominent endorser for Nike (NYSE:NKE) - the stock of the sneaker giant is up 175% since the partnership first began in late 2018. Kaepernick has also gone on to work with global brands like Netflix (NASDAQ:NFLX), Beats by Dre, Medium, Electronic Arts (NASDAQ:EA), Audible and Ben & Jerry's (NYSE:UL).

Down to Georgia... The state made changes to its voting laws this week, including new ID requirements for absentee voters, shortened absentee voting, guaranteed (but limited) drop boxes, expanded early voting and bans on handouts for people waiting in line to vote. GOP lawmakers said the bill was necessary to restore election confidence, though Democrats feel the measure will restrict voting rights, and some have even called it "Jim Crow 2.0." Soon after the decision, the MLB announced it would no longer hold the 2021 All-Star Game in Atlanta, and other corporations were quick to jump on board. Dozens of executives have come out to blast the new law, including leaders at Apple, American Express (NYSE:AXP), Coca-Cola (NYSE:KO), Delta (NYSE:DAL), Merck (NYSE:MRK) and Microsoft (NASDAQ:MSFT).

Thought bubble: While companies have long sought to influence policies that directly impact their business, recent trends suggest CEOs are now injecting themselves into political debates or activism that could indirectly affect their bottom line. In an age of cancel culture, and where ideas are carried on social media within minutes, they may have to, though others warn of potential risks and consequences of picking sides. On that note, JPMorgan (NYSE:JPM) CEO Jamie Dimon will release his annual shareholder letter today, which is expected to outline ideas for tax and social policies, a day after Amazon (NASDAQ:AMZN) CEO Jeff Bezos came out in support of President Biden's corporate tax hike and infrastructure plan. (121 comments)

Rand Paul torches MLB, corporate America for latest 'woke' stance

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