"Identify problems but offer no solutions"

A commenter on my "I Want a President That's a 'Strong Leader.' Not!" piece complained about people "who just identify problems but offer no solutions."

Good point. So here are my solutions. Part One is stuff that can be done in 2017 with any Republican president and Congress. Part Two is the agenda for the rest of the president's term. Part Three is what I really believe.

What Is To Be Done, Part One

First, the easiest. Reverse as many Obama era regulations and executive orders as possible as soon as possible on the Macchiavellian principle that you should do all the dirty work right away. There will be a huge hullaballoo, but the president can argue that his election is a mandate to roll back Obamism.

Then, the economy. The problem here is that government spending is a weight on the economy and government regulation is a brake on the economy, and monetary activism is a distortion of the economy.

So the president should send a mini-budget to the Congress that rolls back as much domestic spending as possible, right now, starting with green energy. Then he should do as much as possible with executive actions to make welfare and disability unattractive, and make it as easy as possible to hire new workers. He should make a start on simplifying the tax code by reducing marginal tax rates as much as politically possible.

Then he should start an attack on all the anti-growth regulations of the Obama era, starting with the National Labor Relations Board and the regulation of the internet with the FCC. Sarbanes-Oxley should be on the chopping block.

Then we have financial regulation and monetary policy. The president should gut Dodd-Frank and the Consumer Financial Protection Bureau and return to a rules-based monetary policy with a return to normal interest rates. We should dial back the mad policy of subsidizing sub-prime mortgages which are a constant dagger pointed at the financial heart of America.

What is to be Done, Part Two

There are four big trillion dollar functions of government in the United States. See my usgovernmentspending.com for details. The four big functions costing about $1 trillion each per year are: Government pensions, including Social Security; Government healthcare, including Medicare and Medicaid; Government education, K thru graduate school; and Defense. Non-Medicaid welfare comes in at about $0.5 trillion a year.

So the first thing to do is to reform Social Security and Medicare. Social Security should be started on the road to a real personal savings program, with subsidies for the working poor; Medicare should be moved to a normal health insurance program with subsidies for the elderly poor. We should start to disassemble the education monopoly with education choice. And on welfare we should be looking at fixing its perverse incentives. Right now, a welfare recipient trying to get off welfare typically faces a marginal tax rate of 50%, higher than a billionaire.

What is to be Done, Part Three

Government is force, so we need to ask, with every government program, is force really called for? On retirement savings, the answer is yes if someone willfully refuses to provide for themselves; but most people should provide for their own. On elderly healthcare, we don't want grannie neglected by cruel children; but most people should provide for their own. On education, we don't want children neglected by their parents and refused a chance to rise in the world; but most children want to grow up and at least be like their parents, and today they can get a pretty good education from a tablet, especially if they have to become literate to learn how to play the games. On welfare, we don't want the poor thrown on the streets, but most people could take care of that by belonging to mutual-aid societies as they did a century ago before the welfare state put them out of business. Maybe anyone that ever went on welfare should be forced to belong to a mutual-aid society.

This program would only be possible in an America where the vast majority of people said to politicians and government: you can put that free stuff and those subsidies where the sun don't shine.

But the truth is that humans love free stuff. That's why we have coupons and sales and supermarket specials and affinity programs. And what people really love is getting free stuff from the government. So the world I imagine is not yet.

OK: there it is. That's my three point program!

Are Political Cycles Unnecessary?

We in the West that think that the US is exceptional and that the Western Way is irreplaceable are feeling a little pessimistic these days.

Why wouldn't we when America and much of Europe is governed by men and women that don't seem to "get it." Maybe it's just the civilizational cycle.

Victor Davis Hanson writes that it is all so unnecessary.

Bounty to boredom to decadence to panic to reawakening to ascendance has always been the cyclical way of the West.

Its curse has been that the cycles of nihilism are as long as they are unnecessary.

Well, I'm not so sure about that. Given that the central fact of life is the cycle of conception to birth to growth to reproduction to decay and death and repeat, I'd say there is something necessary and sufficient in the great cycle of generation.

In other words, things can't go on in some Panglossian best of all possible worlds. On the contrary, the old is always getting flushed out, and that's the way that the world gets renewed.

And there always seem to be opposing and opposite forces. In the last two millennia we had the church and state as rival power centers. And probably a good thing too, because we know what happens when church and state get united as in Stalinism and Hitlerism and Castroism.

In our day it seems that there is an endless argument between the constant renewal of the Great Enrichment and the constant critique of the socialist reactionaries that want to return the West to the pre-individualism of the feudal estate or even the hunter-gatherer tribe.

For me as an individualist -- experiencing individualism as a new and remarkably social way of life -- it is hard to deal with the constant backward force of the progressive. The progressive talks about Change but actually wants to pour society into a concrete form, there to set for all eternity.

The problem with all the old empires is that their central political elites were too powerful. They had the power to stop change all over the empire.

But the innovation of the West, intensified in the US, is that change, by the very nature of the market economy, is baked right in. The market is pitiless to old established economic interests. As soon as a new and better idea comes along it relegates the old dominant actors to the sidelines. They can yell and scream and get politicians to pass subsidies and privileges for them, but in the end it doesn't matter. There is no escape from renewal and the verdict of the market.

And yest, contra Hanson, at some point in the cycle there is nihilism. People on the down cycle, in a culture or a market past its prime think there is nothing good in the world, and they tell everyone how awful everything is, and how right and proper it all was when they were young.

(I am experiencing that feeling directly myself as I am reading Nevil Shute's A Town Like Alice about how everything was young and fresh and new in Aussieland in the years of renewal after World War II).

And the glorious cause for hope in 2015 is that President Obama has been such a hopeless president that anyone except a New York Times reader and an NPR listener feels it in their bones and right now is fit to be tied about America and its prospects.

Really, if you wanted a Republican resurgence after the election of the nation's First Black President in 2008 what would you figure it would take?  Something like a stupid "stimulus," a stupid expensive Obamacare, a stupid Dodd Frank to mew up the financial system with regulatory bureaucrats, a stupid green energy program to raise energy prices on the poor. But, you would say, the Democrats can't be that stupid.

The nihilism stage of the cycle has its uses. As H.L. Mencken wrote, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

The Straight Line from The Klan to #BlackLivesMatter

The reason for the rise of Black Lives Matter, the black racist "protest" group, is plain, according to Victor Davis Hanson.

Threats of unrest and collective violence by the urban underclass often come in handy.

In Hanson's interpretation, the Black Lives Matter agitations serve the interest of the "black elites." But I think that he is thinking too narrowly. It's the whole liberal ruling class that likes to have mobilized rent-a-mobs ready to "protest" before the cameras. And the purpose of it all is intimidation.

That's why I link the Ku Klux Klan to Black Lives Matter.

The purpose of the Klan as it developed in the decade after the Civil War was intimidation. By killing a few blacks and scalawags the Klan succeeded in intimidating millions of blacks and Republican whites in the South. And it succeeded in erasing the political power of the victorious North and the policy of Reconstruction. Notice that it did not challenge the power of the federal government directly, as the South had done in the Civil War. No, the idea was just to intimidate the North's supporters in the South.

Notice that it does not matter if the Klan was a part of the Democratic Party in the South or not. It served the purpose of the white Southerners in making it very costly and dangerous for blacks and scalawags to do politics and even business in the post-war South. The key to understanding the whole thing is that the Klan succeeded because the white power structure winked at the crimes of the Klansmen.

The next stop, obviously, in the Nazis in Germany. But before them was the guerrilla war against British rule conducted by the Boers in South Africa at the turn of the 20th century. The Brits won that one. That is to say, they declared victory and then went home and left South Africa to the Boers.

In Weimar Germany both the Nazis and the Commies operated formal armies of street thugs. And the purpose was intimidation, to make Germany ungovernable. Hey, it worked! And the Nazi street gangs couldn't have succeeded in their extralegal violence without the passive acquiescence of the powers-that-be.

Let's talk about labor unions. The whole point is to be able to intimidate workers and employers -- with a nod and a wink from the liberal ruling class. The problem with unions, though, is that they are parasites that kill their hosts. And these days private-sector workers just aren't interested in unions.

Then we get to the Sixties and the anti-war movement. Liberal Parents, Radical Children wrote Midge Decter. The mainstream media wrote about the heroic kids rebelling against the hypocrisy of their conformist Fifties parents. But in fact the liberal parents shielded their children from the strong arm of the law. Barack Obama's mentor Bill Ayers was the son of an executive at Commonwealth Edison. And his terrorist activities didn't disqualify him from a career in the academy. The purpose of the anti-war movement and the New Left was intimidation. And it worked.

Now you know why lefty groups like the Southern Poverty Law Center are paranoid about right-wing extremism. They think that the right wing is just like they are, and eager to use political intimidation to advance its agenda.

But the right isn't really interested in political intimidation. The right is overwhelmingly middle-class and just wants the government to do its job protecting the nation from enemies foreign and domestic.

The Tea Party proves the point. The left immediately assumed that the Tea Party was a radical group of extremists and mobilized (hey Lois Lerner!) to keep them down on the farm. In fact the Tea Party quickly became a part of the Republican Party and organized to promote Tea Party candidates for political office. How boring.

But Occupy Wall Street and Black Lives Matter are simple intimidation groups informally condoned by the liberal ruling class. Else how come that Occupy Wall Street was allowed to occupy a city park in New York City for weeks in violation of all the sacred health regulations? Good luck to the Tea Party trying that.

Black Lives Matter got almost direct encouragement from President Obama and black protesters were allowed to riot with a nod and a wink from city authorities. And Black Lives Matter is trying directly to intimidate police into easing up on the policing of black urban neighborhoods in informal cooperation with liberal office-holders like NY Mayor Bill DeBlasio.

And then we have the Social Justice Warriors. Their whole shtick is to intimidate ordinary middle class Americans into silence and political and cultural serfdom.

The Question is: Will It Work? Will the liberal ruling-class wink for Occupy Wall Street and Black Lives Matter work as the Klan and the Nazi Sturmabteilung and the anti-war movement did back in the day?

Nobody can tell for sure. But the collapse of Democratic Party electoral power since the accession of President Obama is surely telling us something. I would say that the Democratic electoral collapse is directly connected to the fact that the US is overwhelmingly a middle-class nation and it doesn't like street thugs of any description.

Oh, and let me tell you. Middle-class women really hate street thuggery.

Social Justice? Because Politicians Gotta Divide

Isn't it interesting, writes Instapundit Glenn Reynolds, that in the administration of divider-in-chief Barack Obama and in the year of #BlackLivesMatter we have ordinary people coming together with love and forgiveness?

Reynolds cites the multiracial 15,000 that showed up in the streets after the Charleston shooting. He cites the multiracial 20,000 that showed up at Glenn Beck's "All Lives Matter" rally in Birmingham, Alabama. And the 1,000 that showed up at an "impromptu memorial for murdered Sheriff’s Deputy Darren Goforth" in Houston, Texas.

Writes Reynolds:

The American people have a strong spirit of egalitarianism and kindness, one that shows over and over again. But our political class sees more gain in promoting hatred and division.

Well, yes. That's because politics is all about division. There's nothing good or bad about that. It's just the way it goes. When you have an election, or any political issue, the whole point is to have the good guys that want change on this side and the bad guys who want to return to the evils of the past on that side. Or vice versa. You think you can trust those bad guys? I gotta bridge to sell you.

Now I think that the Big Thing about the modern era is that it has radically extended the frontiers of trust. Used to be that you would only trust your kin, or your village, or your tribe, knowing rightly that everyone else could descend on your kin, or village, or tribe without a moment's warning.

But now that has changed. Now, under modern capitalism, the way to thrive is to trust anyone that demonstrates trustworthiness. And the modern information age has extended this principle about as far as it can go by having everyone report on the other guy's trustworthiness in ratings on Ebay and Uber.

This New Trust would have sounded the death knell of divisive politics except for one thing.

Left-wing reactionary geniuses determined to tell the industrial working class that they were famously exploited just as the lower class was emerging from 4,000 years of brutal oppression from the beginning to the end of the agricultural age.

And the working class listened! Bit of a shame really, because wherever left-wing economic policies have been implemented the people have perished.

After a while the working class realized that it was dong OK really, so it didn't need to come out in the streets to protest at the behest of left-wing revolutionaries. So left-wing reactionary geniuses came up with another idea. Just as blacks were coming out of centuries of slavery and oppression the geniuses told them they were famously oppressed. And the blacks believed them. Just as women were being liberated from involuntary childbirth by modern contraception the geniuses told them they had been historically oppressed by the patriarchy. And women believed them. Just as gays... Well the gay thing is such absolute baloney. Self-conscious homosexuality is a modern elite thing, an argument within the elite. It is just a liberal conceit.

On my reading, social justice politics is a last, desperate attempt to maintain the primacy of politics in an age that really doesn't need it. We don't really need to be armed against our fellow men: only against those that haven't accepted the capitalist ethos that you trust everyone that can be trusted. It will fail because it is a lie.

According to Marx,

Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce.

I wonder if #BlackLivesMatter is going to be the farce that makes a stupid joke out of social justice. The point is that African Americans are divided on the question. Some are enraged at the po-lice, but others are enraged at violent young men. And I wonder if President Obama's "legacy" will be to discredit social-justice Alinksy tactics as brutally divisive and un-American, something that every American just wants to forget and put behind them.

You see, I think that the average politician knows that it's all very well to divide the electorate during the campaign, but that after the campaign you want to bind up the wounds and get everyone on the same page again. Problem is that the Democrats of the last few years have bought into the full Alinsky and the permanent campaign, perhaps in confirmation of the Extraordinary Popular Delusions and the Madness of Crowds. I think that the average American doesn't really buy into the Alinsky game. I think that the average American gets tired of endless political war just as the average person tires of a shooting war. Indeed, politicians know that the biggest problem in fighting a shooting war is keeping the morale of the troops up in the field and the support of ordinary people back home. War-weariness is the great enemy of the warmonger.

But if politicians can't divide us over class, and race, and gender, what will they divide us over next? Good point. But, like Scarlett O'Hara, I'll think about that tomorrow.

"Doug's" Version of Derb's "Cold Civil War"

OK. So I was clicking back on a series of links from Dear Old Derb -- John Derbyshire to you -- on his "Cold Civil War" meme. And he quoted this piece from a comment by "Doug" at EconLog :

Let`s say you were to immigrate to a new country which is essentially divided between two hostile tribes engaged in perpetual low-intensity warfare. We`ll call them Hutus and Tutsis. You have no previous allegiance or affiliation with either tribe.

Let`s also say that one tribe, Tutsis, holds a hegemony on all organs of education and opinion, virtually the entire government bureaucracy and all of popular culture. Many of the most prestigious institutions in the country consist of 95%+ Tutsis. Tutsi organizations like “Harvard University” and “The New York Times” are widely respected by even ardent Hutus.

Now of course there are Hutu organizations and no shortage of powerful Hutu people. But, unlike the reverse, there are virtually no prestigious institutions where Tutsis are excluded. I.e. some prestigious and powerful institutions, like “General Electric” or “Goldman Sachs” may be 2:1 Hutu at most. But any with a 10:1 ratio or more are virtually guaranteed to be far inferior, second-rate and low status institutions or organizations. Examples of these pariahs are “Oral Roberts University”, “Fox News” and “Amway.”

This leads to a strange asymmetry where it is certainly possible to succeed in this society while being Hutu, it almost never hurts to be Tutsi. For example just the other day there was a Tutsi ceremony called “The Academy Awards” that almost exclusively honors Tutsis. Despite this, this ceremony is observed and recognized by Hutus around the country.

A rational, self-interested immigrant to this society would of course choose align himself as a moderate, but reliably loyal Tutsi. Unless you`re a Tutsi extremist, leaning Tutsi will almost never hurt your career or standing except in all but the most malformed, backwards and irrelevant Hutu organizations.

But failure to demonstrate at least general sympathy to the Tutsi side will almost undoubtedly lock you out of many career options and generally draw attention to you in most corners of polite society.

Oy. And Oy. When you read that you think to yourself: why do  I bother? Why belong to the Out group when the scales are so decidedly set in favor of the Ins? Why not just chuck it in and join the progressive ruling class.

OK. There was one thing that is almost encouraging. Doug points out that the "rational, self-interested immigrant" notices that the institutions that are 95% Tutsu are often highly successful places like "Harvard University" whereas institutions that are 95% Hutu are often places like "Oral Roberts University" or "Fox News." Why would you want to associate with Hutus?

But you know what? I think that the 95% game is a mistake. Because the 95% institutions are becoming stupider over time. That will happen to you when you shut yourself up away from the push and shove of opposing ideas. It's better to live in the open-outcry world and deal with the opposition mano-a-mano. You know what I mean: inbreeding; Hapburg lip, etc.

Having said that, the question remains. Why would any discerning immigrant align with the Hutus? In Sean Trende's handy election calculator we get the 2012 presidential election results as: Blacks: 94% Dem; Hispanics: 72% Dem; Asians: 68% Dem.

What is wrong with these people? Why don't they all vote 94% Dem like the African Americans?

I suppose the answer is that the advantage of identifying Tutsi only applies if you are a top-level ruling class type or if you are a client of the welfare state on benefits. And so about 30% of Hispanics and Asians voted for the GOP in 2012, because, well because they actually believe in truth, justice, and the American Way, even if it doesn't pay. There will, of course, be more of them in 2016.

Will #BlackLivesMatter Split Blacks in 2016?

I get the Black Lives Matter movement. Back in 2009 African Americans thought they had gone to heaven. Something had happened that they never thought that they would see in their lifetimes. A racist America had elected its First Black President.

Unfortunately, nothing has changed. African Americans kids still do badly at lousy urban schools. 70+ percent of black babies are still born out of wedlock. Rampant violence still obtains in African American neighborhoods.

And of course African Americans got hammered worse than most by the housing meltdown because Democratic housing policy decreed that they should get low-down mortgages even though they didn't really qualify for them. So they lost everything when the housing market collapsed (Still, you can imagine the house hunger among African American women must be huge).

And, of course, we have President Obama and the US Justice Department feeding black frustration about urban policing with Alinsky-style community organizer rhetoric.

Wanna know why blacks are so angry about the po-lice? The problem is that blacks don't testify against their local hoodlums because the gangs intimidate them. So the police arrest the hoodlums for minor offences. So the average black is mad that the police don't solve the murders but is angry that the police harass young black men "for driving while black." I've written about this before.

The racist rhetoric from President Obama makes sense, from his point of view. Since he has done nothing for African Americans he has to keep them angried up about racism. Otherwise they ain't gonna come out to vote in 2016.

But maybe Black Lives Matter is not such a good idea.

Two out of three black people prefer the term “all lives matter” to “black lives matter,” according to a Rasmussen poll[.]

This means that Republicans have a chance to split the black vote (which will be demoralized anyway in 2016).

African Americans have voted with remarkable tribal unity since the end of slavery. First they all voted Republican and the Republicans left them to the tender mercies of Jim Crow after the dead-heat 1876 election. So that worked out real well. Then they all voted for FDR and Democrats and the benefit state. And LBJ and the affirmative action state. And Barack Obama and the First Black President state. The result is that Hispanics and Asian immigrants are eating their lunch. So the black love affair with the Democrats has ended up no better than their earlier fling with Republicans.

One fine day African Americans will realize that government benefits are a poisoned chalice. They will realize that politicians and activists don't care about them; they only care about their vote. And on that day, they will finally be free.

You Can't "End the Fed" Unless You "End Big Government"

Count me as a critic of the Federal Reserve System. So I should be encouraged by the recent Jackson Hole Summit held by critics of the Fed at the to coincide with the Kansas City Fed's traditional August symposium at Jackson Hole, Wyoming.

Here's John Fund in National Review. 

A growing number of people believe the Federal Reserve has hurt rather than helped the recovery. It has pursued zero-interest-rate policies that have perversely made it impossible for many businesses to get credit to expand.

Here's Chriss W. Street in Breitbart writing about Ben Steil, speaker at the critics' "sold-out" Summit. Steil blames it all on the Bretton Woods monetary conference at the end of World War II.

Keynes fully understood that although Bretton Woods claimed to be establishing a post-war economic order where the value of money would be fixed, the agreement gave governments a capability to unfix monetary values every time there was a “crisis”.

And then there is the perennial critic of the Fed, Ron Paul, with his critique on fractional reserve banking.

OK. So why is the Federal Reserve persisting with its zero interest rate policy? Probably because it cuts about $500 billion a year out of the federal government's interest rate cost.

And why did Bretton Woods usher in an ability to "unfix monetary values?" Because modern big government is always getting in a jam, and the easiest way to get out is by devaluation of the currency.

Originally, central banking was invented by the Dutch to help them fight their war of independence against Spain. Central banks are good for managing the government's debt and helping create a market for the national debt. The Brits liked it so much that they founded the Bank of England in the 1690s and then went out to fight and win the Second Hundred Years War against the French at the end of which their national debt hit 250% of GDP.

Alexander Hamilton knew about all this, and that's why he founded the Bank of the United States.

All very nice, but you can see that the central bank is clearly intertwined with the credit needs of the government. In fact a central bank merely formalizes the fact that in a nation state the credit system is subordinated to the needs of the government. One could say that in wartime the credit system must be subordinated to the needs of the government. And once that principle is established, it's hard not to use the power in peace time.

I would say that the rise of the welfare state means that now the credit system must be subordinated to the needs of the government even in peacetime. The best way to get a handle on this is to use Ludwig von Mises' term for the modern state: the interventionist state.

The modern state intervenes in all economic relationships, favoring one party here and another party there. The result of this interventionism is that the modern state is always unbalancing the economy, always setting it up for failure. The obvious recent occasion for this was the Crash of 2008 caused by the unbalancing of the credit system in the US by the promotion of low-down-payment mortgages for people with bad credit. Came the day when these borrowers couldn't service their mortgages; then came the day that their foreclosed mortgages couldn't be liquidated. Result: the worst financial crash since the Great Depression of the 1930s.

Why is that a problem? I go to Lombard Street by Walter Bagehot. He wrote that a healthy credit system needs two things: people that can be trusted to make their payments, and loans that are adequately collateralized. If you don't have that then you'll get a crisis of confidence that might develop into a full-scale panic.

These days everyone thinks that they are qualified to intervene in the economy and disturb ordinary economic exchange relationships. Politicians, activists, and subsidy seekers all think it is the right thing to do to muck around with the credit system to advance their agenda. So long as that culture obtains we will need a central bank "to unfix monetary values every time there [is] a 'crisis'."

Unwind big government; undo crony capitalism. Then you can think about "ending the Fed."

But you'll still need some sort of "lender of last resort" to right the system after a credit crisis. And you'll still need a way of mobilizing the nation's productive capacity in the event of war.