Republican Base Enraged About Budget Deal

Once again, the pundits are enraged at the stitch-up omnibus budget deal brokered by Congressional Republicans led by Speaker Paul Ryan. The American Spectator's Jeffrey Lord speaks for most, in "Speaker Paul Boehner," when he quotes Alabama Senator Jeff Sessions:

There is a reason that GOP voters are in open rebellion. They have come to believe that their party’s elites are not only uninterested in defending their interests but — as with this legislation, and fast-tracking the President’s international trade pact — openly hostile to them. 

Lord goes on to list all the things that are funded in the budget deal: DREAMers, Sanctuary Cities, refugee resettlement, K1 visas (used by the San Bernardino terrorists), Planned Parenthood, etc. What's the point of voting Republican? He goes on to talk about the "socialist ratchet" described by Margaret Thatcher. Conservative politicians talk a good line, but the left always manages to ratchet the goalposts leftwards. When are we going reverse the ratchet and implement a conservative ratchet?

Well, yes. It's frustrating. It's monstrous. But let's try to give Paul Ryan the benefit of the doubt.

• Republicans obviously don't want to get into a government shutdown situation, which Democrats always seem to win.
• Red flag issues like reducing funding for the state Church of Abortion would have required the president to veto the spending bill.
• And a government shutdown would take the oxygen out of the room for the GOP presidential candidates.
• So their strategy is: Let's just lie low until we elect a Republican president in 2016, then we'll see.

On the other hand, perhaps there is cunning here. After all, it wasn't until years later that we learned that the GOP in the 1990s may have lost the government shutdown face-offs with President Clinton. But they did cut a lot of spending, under the radar; they flooded the zone with spending reductions, and Clinton could only bring up one or two in the shutdown battles.

Or maybe there is even more cunning going on. Maybe Ted Cruz is a stalking horse for the GOP establishment. Maybe the establishment doesn't hate him like we've all heard tell. Maybe they see that the supposed battle between Cruz and the establishment is just what the doctor ordered to keep the base all riled up for 2016. Maybe everyone is playing their part, playing the Victorian maiden and gasping on camera "I can't believe what Cruz just said" while winking at their pals behind the camera.  Maybe even Trump...

Let's at least understand the difficulty of what Republicans are supposed to do: cut spending and taxes and subsidies. The natural thing for any ruling class to do is to seize power, tax the people, and reward its supporters with pensions and sinecures. The hardest thing for any ruling class to do is to take away the goodies they handed out in the past.

The Republican base is all riled up to cut the spending -- except our own Social Security and Medicare. Hey, we paid for that with our FICA taxes!

So Republican politicians have to shuck and jive, just like Democrats. They have to practice, not Trump's Art of the Deal, but the Art of the Possible. But what is possible in 2016?

That's what we have elections to find out.

Unwinding the Fed's Tangled Web

Yesterday the Federal Reserve Board announced it was raising its base interest rate by 0.25% and would continue to increase interest rates slowly in the months ahead.

The last time that the Federal Reserve Board started raising rates after a big recession it raised them so slowly that we ended up in a housing bubble and the Crash of 2008. The problem was that the Fed was much too timid in raising rates when it started in 2003 and so borrowers got themselves into a bunch of home mortgages that they couldn't service as the Fed seriously tightened in 2006-2007.

So what will happen this time? The answer is that nobody knows. The Fed increased its holdings of US government debt enormously in the aftermath of the Great Crash, as the following chart shows:

Now, apparently, the Fed will be paying banks to keep their excess reserves at the Fed rather than lending to borrowers. That would be to stop a credit binge like the mid-2000s. Some observers fear that many global billionaires have got themselves overleveraged on 0% debt and are in for a shock.

What is going to happen? Will the Fed precipitate a credit crisis as it brings interest rates off zero? Or is the correction years away? Who knows? But what we do know is this:

1. The Zero Interest Rate Policy was fiscal repression designed to help the federal government deal with the huge increase in debt that came after the Crash. The policy lowers the interest costs of the federal government.
2. That's what the Fed is for: getting the federal government out of a jam.
3. "Nobody knows nothing," and that certainly applies to the Fed since its founding. 
4. The federal government usually likes to have nice compliant placeholders at the Fed, and that is what it usually gets.
5. The next crash will not come from what the conventional wisdom expects.

Other than that, I don't have a clue what is coming next. But I do think this:

1. The conventional wisdom is that we need a central bank to cure capitalism's excesses. That is wrong. We need a central bank to deal with government's excesses. The big swings in credit are due to governments trying to get back to normal after wars, e.g., the deflation in Britain after the Napoleonic Wars; the deflation in the US after the Civil War; the worldwide deflation after World War I. 
2. And then there is just flat out incompetence as in 1929-33 and the promotion of home mortgages to sub-prime borrowers approximately from 1990-2006.
3. Government should not muck with the credit system except when it is fighting a war and needs to grab all the resources it can. So no peacetime deficits. After the war it should not try to return to the old parity with gold to make creditors whole. Wars are about seizing all the resources you can to fight the war. The money is gone.
4. Governments shouldn't be mucking up the credit system by offering credit subsidies and guarantees. They just make the credit system more fragile.
5. Government should be at least 50% smaller. Big government makes the whole economy unwieldy, and more fragile.

Other than that, I don't know nothing.

The Real Failure of Our Ruling Class

Yesterday I put out a piece on American Thinker advising America's Muslims not to become "little darlings of the liberals." After all, look what happened to the white working class.

But really this is just part of a bigger issue that has been rattling around in my brain for years. It has just come to the boil in the last few days as I've read a Marxist history of capitalism, The Origin of Capitalism: A Longer View by Ellen Meiksins Wood.

I've already blogged on Wood's book here, and I may analyze the whole book, chapter by chapter, later. The point of Capitalism is to point out that capitalism didn't begin with the Industrial Revolution and wasn't a natural evolution. "I was pushed," said Eeyore after finding himself in the river, and so were we in the agrarian capitalism of the 16th and 17th century in England, in which landowners and their tenants "improved" and enclosed their farmland and drove the surplus population off the land.

Everything is "exploitation" in Marxism, and Wood argues that capitalism replaces the age old exploitation by military and political compulsion of kings and lords and conquerors with a new, economic compulsion.

Stripped of its Marxist warpaint this argument is true. Eric Hoffer says it more elegantly when he says that we have two options when it comes to getting the world's work done. Either the boss tells us what to do, or we have to direct ourselves. In Wood's terminology, "the boss tells us" is how military and political compulsion works; "we have to direct ourselves" is how economic compulsion works.

Of course, by "economic compulsion" we really mean the market. The whole point of the modern global economy is that, instead of subordinate people sitting around waiting for the boss or the lord to tell us what to do, we go out and offer our skills and ideas to the world. The price system tells us if our skill or idea is any good. This is what a Marxist like Ellen Meiksins Wood objects to. As she writes in closing her Capitalism:

The hope of achieving a humane, truly democratic, and ecologically sustainable capitalism is becoming transparently unrealistic. But although the alternative is unavailable, there remains the real alternative of socialism.

This kind of sentiment is based on the idea that before capitalism the rural poor lived a humble but decent life as retainers in the collective of some lord, and scraped a living with traditional rights of gleaning after the harvest and grazing on the common land. Maybe they did, although I have my doubts, particularly after reading Marriage and Family in the Middle Ages by Frances Gies and Joseph Gies. In their compilation of marriage practices and the various practices of dowries and dowers, you get the strong impression that nobody got married unless they had the wherewithal, and that usually meant land, either from the groom, the bride, or both. So it is likely that people that lived by gleaning and grazing on the Commons were people on the downward slide to nothingness, and always had been.

So I reckon that social humans always have and always will live under some kind of "compulsion." Either we live at the beck and call of lords -- or their modern equivalent, politicians and bureaucrats and CEOs -- or we live on our own responsibility. But in the context of a modern, interdependent economy based on specialization, that places on each of us the responsibility, the "compulsion" to find work that pays. Work is a service that we provide for other people, in return for which we get paid.

I just wish that modern elites and their nominees, the politicians, were honest enough to tell that to the people. Either you go to work for the government or a big corporation and do what the boss tells you or you develop yourself, your skills, your knowledge, and you figure out, on your own, how to contribute to society. Society, in the form of the market and the price system, will pretty clearly tell you what you and your skills and your ideas are worth.

There is no escape from this into "social justice" or humane and genuine democracy. There is no escape into "the real alternative of socialism." There is only working for a boss or working for the market.

And when our ruling class teases working people with raising the minimum wage, or retailing the fantasies of labor unions, or taxing the workers on one hand and giving them benefits out of the other, they are failing in their duty. In the context of today's global market, there is only submission to the will of the market. That is all.

The Strategic Folly of the Left's Culture War

Most conservatives fear the culture of war from the left. We think it is a threat to America and everything we love. Here is Dennis Prager warning conservatives that the enemy is the Left.

But I think that the left is making a strategic error. When you mobilize for war you'd better make sure to win the war. That's because any agent that mobilizes for war and starts to attack someone creates opposition. The belligerent agent forces people who might be on the fence or who might be tempted to ignore the situation to decide whose side they are on.

A declaration of cultural war is a declaration to fight until victory. If you oppose or are indifferent to the program of the cultural warriors then you find yourself, almost against your will, obliged to join the opponents of the cultural warriors. So unless you are ruthless enough to press the war without limit, you are making a strategic mistake; your aggression will create its own head of rebellion.

Sun Tzu says that warfare is the art of deception, and the best war is the war won without a fight. The general does not do the obvious thing; the general does the unexpected thing. The general does not attack a prepared position; the general attacks when least expected.

On this view the tactics of the Obama administration and its supporters since 2008 are foolish and counterproductive. President Obama deliberately riles up his opponents; he deliberately humiliates them. His agents in the federal bureaucracy enact policy to deliberately humiliate and alienate people that do not adhere to the liberal line. And both President and administration seem to think that laws are optional for them. If you want to know why the American people are fit to be tied in December 2015, that is your reason. Unless you are a card carrying liberal the present government of the United States is messing with you in a way that you don't accept. You don't like it's hectoring tone; you don't like the way it harasses its political opponents. And you really don't like  the way it ignores settler  and creates law by administrative fiat. Consequently if you are a non political moderate you probably think it is time for a change. If you are a conservative then you probably think it is Time for a Change.

After an election the foolish ruler runs roughshod over the opposition; the wise ruler says we are all Americans now. After an election the foolish ruler passes partisan legislation like Obamacare without a single vote from the opposition; the wise ruler frames legislation with the help of the opposition so he can characterize it as bipartisan, and claim that the legislation represents the national consensus.

Is this real or is it Memorex? We will discover the answer in November 2016. If the election is close or if the Democrats win, then the culture warriors will know that they can continue their culture war to the utmost. If Republicans win in a landslide then the reason will be clear. Do not rile up the opposition if you want to win national elections.

Marxists in the Garden of Eden

Over the years I have learned to consider the Garden of Eden story as an allegory about the agricultural revolution. The serpent speaks to Eve and humans get sent out from the bliss of hunter-gathering into the hard work of plowing and sowing and reaping.

So let's think about the Marxist account of capitalism as a garden of Eden story about the Industrial Revolution. Imagine happy peasants living in collectives enjoying their traditional grazing rights on the Commons. Now imagine rich landowners enclosing the Commons and sending happy peasants into the hell of the proletarian city.

In The Origin of Capitalism author Ellen Meiksins Wood tells a grand story about how this happened and how the innocence of the pre-industrial world and its political and military compulsion was converted into the hell of economic compulsion under capitalism.

But Wood wants to propose an innovation. She wants us to know that capitalism started not with the Industrial Revolution and the growth of the factory but 100 years or more earlier when the rich landowners of England started converting their estates from feudal domains into profit-making enterprises. This "agrarian capitalism" was inspired by a culture of improvement that celebrates improving the land under your care in a productive manner and that, she says, goes back to John Locke and his linking of rights in property to the labor involved in improving it.

But there's a sinister aspect to this improving culture because it says that only he who improves the land has the right to own it. Thus the Native Americans in the North American continent that did not improve their land do not deserve it and the industrious white man that does improve it has a right to own it instead. Thus did John Locke and Co. justified  their conquest of the world. This all ties together capitalism, colonialism, and imperialism as one single grand exploitation project. Yay!

Thus does a Marxist enlarge upon the Marxian version of original sin and damn the modern west for everything. But we have to ask what happens next. After all, in the biblical version of original sin mankind somehow manages to carry on and by the time of Christ imagine a way to atone for sin. But what kind of atonement would the Marxists allow for capitalism? Well we know the answer to that. The only possible atonement is of course socialism and nothing else will do.

Let us concede the Marxist indictment but not the atonement. Because now we know two to three centuries later that capitalism yielded an increase in per capita income of something like 30 times the per capita income of the pre-capitalist era and that on a population of 7 billion humans on the planet. And we also know that socialism has yielded misery and poverty and conflict and military and political compulsion of extraordinary ferocity wherever it has been tried.

Yes, capitalism has put everyone on the earth under economic compulsion. But there's another way to describe this economic compulsion. It is that we all live under the principle of serving others before we serve ourselves. What could be more socialistic than that?

If it weren't for Marxists perhaps we'd have to invent them. Otherwise we could not know the worst that could possibly be imagined about the extraordinary world in which we live.

Yeah. Why Not Make Uber Drivers Join a Union Say Liberal Dinosaurs in Seattle

You really gotta love the special-interest friendliness of the long-distance liberal.

Here we have the Seattle City Council considering an ordinance that "seeks to complel independent contractors (taxi, for-hire drivers, and Lyft and Uber drivers) to collectively bargain through the Teamsters union."

Yeah, I kid you not.

I suspect that the ordinance is just a sop to the labor unions. But, of course there's a problem. Just like with Seattle's recent minimum-wage law, pushed by activist and now council-member Kshama Sawant, the liberals on the council find it difficult to vote against stupidities that supposedly "help" the workers.

We know, because the science is settled on this, that minimum-wage laws kill jobs and especially harm unskilled minority workers. But many people find the temptation to "force" employers to pay higher wages irresistible.

We know, because the decline of private-sector unions is right before our eyes, that introducing labor unions into an industry is like introducing a parasite into a living organism. If you are not careful it will kill the host.

People in politics seem to confirm every day St. Augustine's dictum that the only difference between a government and a criminal gang is the "addition of impunity."

"Hey, pal! You wanna run a business in Seattle? You betta pay $15 an hour, or your kids'll know the reason why."

"Hey, pal! You wanna work in Seattle? You betta join this nice little union here, or you can forget your dreams of earning a little extra money to help pay the bills."

It's comical. The whole political class gets its knickers in a twist over Donald Trump suggesting that we need a moratorium on Muslim immigration, but can chomp down on rotten 72-oz steaks of special interest red meat without even a hint of discomfort.

Yet what can possibly violate "our values" more than the idea that workers must bang their heads on the ground in submission before a government official or a union boss before they can offer their labor to the consumer?

Oh Yeah. Things Are So Great in Scandinavia

I danced around the issues with a good solid liberal yesterday, and he was still doing the "Scandinavians seem to like it" two-step.

Oh yeah. Things are just great as the Scandis are beside themselves as Muslims come in and just sit there in their no-go areas on welfare.  How great is that!

So let's rehearse the reasons why the social-democratic state does not work.

First of all, if you smother the workers in rigid government benefits and lifetime employment there is a problem. Suppose the economy changes, and steady lifetime-employment wage work isn't available any more. You've just spent a century teaching the workers that they don't need to do anything but just show up for work and get in line for their government benefits. Where are they going to find the enterprise and the resilience to adapt to the new workplace? How are they going to learn how to look after their own welfare rather than just let the government do it for them? How good is that promise that you pay in now to collect your benefits later? Because politicians are in the business of making promises to get elected now. They don't really care if there is any money to pay benefits 30 years from now.

In other words, the very culture of social insurance makes people unprepared for change. The ideologues and the politicians tell people that they are owed, that all they need to do is vote for the right party and stand in line for their benefits. But that is a lie. Nobody knows what is coming in the future; nobody knows what workplace skills will be needed in the future. As they say about forecasting Hollywood blockbusters. Nobody knows anything.

Well we now know what happens after a century of social protection. The white working class drinks and drugs itself to death and "Asians" rape their underage daughters and nobody does anything about it.

Then there is what I call my "little darlings" theory of politics. It's a lovely thing to become the little darlings of the ruling class, as the workers used to be. Hey, the politicians said, you workers are the finest people in the world. It is your sweat and your strength that makes the economy go. So we are going to take care of you. Yeah! The woikers are the salt of the earth!

But then comes a Pharaoh that knew not Joseph. Then comes a day when the ruling class falls out of love with their little darlings, the workers. The workers are not the salt of the earth, not at all, the fashionables say. In fact they are racist, sexist bigots, just like Archie Bunker. So what do the workers do then, poor things, as the firemen jobs go to African Americans, as factory jobs dry up and move to China?

Well, it takes them 40 years, but eventually the workers get a clue and fall in love with Donald Trump.

The thing is that rank-and-file liberals are clueless about all this. They believe in their shibboleths, they really do, and they get daily booster shots from NPR and The New York Times. They still believe in their top-down administrative one-size-fits-all government programs, even as the wheels are coming off Obamacare, even as the wheels are coming off Obama's foreign policy, even as the economy struggles against the headwinds of the regulatory state.

And it's not as if the science isn't settled on all this. We know the administrative state doesn't work. We know that the benefit state is running out of money. We know that the economy changes all the time and the government cannot make guarantees about 40 years in the future. We know that the whole western imperialist/colonialist dogma is a crock.

Actually, I believe that liberals are in the position of soldiers retreating from Moscow in 1812. Should they stay in their ranks in the army? Or is it sauve qui peut, every man for himself? The point is, I think, that soldiers tend to stay in their ranks until it is way too late. It's like they say: when the Jews leave, it is time to go. When the Portuguese leave, it is too late.

People are making all kinds of predictions about the future and the elections next year. But I think that the only thing to be sure about is that nobody knows nothing. Liberals are going to get louder and louder pushing their cruel and unjust narrative, and you won't be able to hear a thing over the noise. But the foundations are shaking, and the liberals know it in their bones, if not in their minds.