Trump's Budget: More for Defense

President Trump's FY18 Budget Blueprint came out this morning.

And the numbers are up on usgovernmentspending.com. You can compare the Trump FY18 budget numbers for 2018 to Obama FY17 budget numbers for defense here.

Well, you can't see the whole budget but just the "discretionary" portion of the budget. And the message is simple. There is $54 billion more for defense and $54 billion less for everything else.

Let's see. $54 billion in a $1,065 billion discretionary budget? That's a change of about five percent. Or one percent over the whole $4 trillion budget. Yay!

But, of course, it gores a bunch of liberal sacred cows:

Agency	FY18 Change in $ billion
Agriculture	-4.7
Commerce	-1.5
Defense	+52.4
Education	-9.2
Energy	-1.7
Health and Human Services	-12.6
Homeland Security	+2.8
HUD	-6.2
Interior	-1.5
Justice	-4.0
Labor	-2.5
State and Intl Aid	-10.9
Corps of Engrs	-1.0
EPA	-2.6

It's all in Table 2. 2018 Discretionary Overview by Major Agency, in the Trump Budget Blueprint.

All this is in "Budget Authority," which is not the same as actual spending, or "Outlays." And it represents $1,065 billion out of a $4,000 billion budget. The remaining $3 trillion in "mandatory" spending is yet to come.

And with the rest of the budget will come the all-important Historical Tables on which the data in usgovernmentspending.com is based.

What about the mandatory spending? Right now, FY18 spending for Social Security is budgeted at $1,031 billion and Medicare at $608 billion. President Trump says he is not going to touch them, so that's all right. Then there is Medicaid at $568 billion and I don't know what will happen there, what with Trumpcare and all.

I suppose all liberals all over the nation are going to be screaming their heads off at this budget. Why is this?

The answer is that the programs that liberals really love are the regulatory programs that employ liberals to order the rest of us around. Most of the federal budget consists of handouts of free stuff to middle-class people that cannot be touched. But where liberals really live is where the power lies. And for the last 100 years, power issues from the arbitrary rules and regulations of the administrative state. To make us safe. To save the planet.

I am always amazed at how we manage to scream and yell about the tiniest things in politics. Wow! A cut of $2.7 billion at the Environmental Protection Agency! It's the End of the World!

If only.

But I tell you what intrigues me. It's the $4.0 billion cut at the Department of Justice. There is nothing about this in the one-page summary for the Department of Justice in the Blueprint. There is a cryptic note about "mandatory spending changes involving the Crime Victims Fund and the Assets Forfeiture Fund." So what is going on?

Could it be that the Trumpists are taking the "negative spending" from fines and asset forfeitures away from the Justice Department and putting them into the general revenue -- you know, taxes -- that goes direct to the Department of Treasury.

If I were president, I would eliminate all "negative spending" where individual agencies get to keep monies like fees and fines and Medicare premiums instead of the money going to the Treasury.

In my administration all money collected by the Feds would be general revenue, and all money would go through the Treasury.

Why Personal Debt is Different from Government Debt

This morning I got an email from a reader who asks about the prudent limit of personal debt vs. government debt. He writes:

it would be reasonable for a couple with annual income of $115,000 to carry debt of $400,000 on a home mortgage, $30,000 in car loans and $15,000 in credit card and $10,000 still owed on college loans for a total debt of $455,000. It could therefore be said that their debt is 4 times their annual income. If we look at our national debt of 16 trillion and our federal annual income from taxes and other sources at an estimated 4 trillion then the ratio of total debt to annual income is 4 times; the same as my household example.

Now I disagree with this, on the grounds that personal debt is very different from government debt. But first of all I must set forth my fundamental belief about debt, that I got from Walter Bagehot's 19th century classic about the credit markets, Lombard Street.

Bagehot proposes two things needed to avoid a credit crash.

First, people with debt must be able to service their debt. Obviously, if people do not pay their interest then the whole credit system goes upside down.

Second, debt must be properly collateralized, so that it can be liquidated when a borrower fails to service the loan. This is a confidence issue.

You can see that both notions applied to the real estate crash of 2008. In reports of the developing crash you heard a lot about "counterparty risk," the worry that the other party in a financial transaction was solvent. This applied both to the risk that the other party might stop servicing the loan, and also that the loan could not be liquidated by selling the collateral. Just as Bagehot wrote.

Now I believe that personal debt is not the harmless act we are taught to think it is. Personal debt is, in fact, a high-risk bet on the future. The family that takes out a big mortgage is betting that it will still have a job in 5-10 years, or that the price of its home will still be high enough in 5-10 years to liquidate the debt if the family had to sell. Obviously this is not true during a crash when home prices decline and jobs are scarce.

In fact, I believe that a family home is an equity play. If you need to get money to buy the home then the investor in your home ought to have an equity share, rather than be a simple creditor. Same thing with student debt. A student has no clue what kind of income he/she is going to earn in the future; nor does the student have any way of liquidating the debt, because there is no collateral. Student debt is an equity play; people financing students should be equity partners in the student's future earnings.

National debt is a horse of a different color. The national debt is in fact the ruling class betting the whole country on its policy. Normally, of course, the national debt is accumulated in a war, where the bet is pretty obvious. Win the war, and the government pays off the debt. Lose the war, and the government repudiates the debt and impoverishes the people.  The other big use of government debt is in the wake of a financial crash. The same principle applies: the government bets the whole country with an increase in debt to avoid a total credit collapse. You can see that on this view government should be running surpluses except during war or financial panic.

(By the way, the $700 billion TARP bailout was the least of the government's actions to rescue the economy. The total bill of bailouts and guarantees was more like $20 trillion. See my TARP bailout.)

When the government diverts a flood of credit to keep insolvent borrowers afloat after a crash it may rescue the borrowers and the credit system, but there is a cost. The cost is what we have seen in the Obama economy, with growth struggling along at 1-2 percent per year. The same thing happened after the Crash of 1873, the Crash of 1929. Moreover a ton of distressed borrowers after 2008 struggled along in their underwater houses, did not move to a better job opportunity, could not use their home equity to start a business. But this cost is better than the alternatives of wholesale debt default or hyperinflation.

So my opinion is that both high personal debt and high government debt are bad. There is far too much personal debt out that that is not properly collateralized and this debt puts the whole credit system in peril, and government debt is not debt at all, but a kind of national equity play. In my view we should convert a lot of debt, personal and governmental, into equity, where the investor is knowingly betting on a high risk proposition.

Is the current government debt dangerously high? No, but it makes it harder to pay for entitlements and more likely that government will default on its debt to pay Social Security and Medicare, and default on Social Security and Medicare with monetary inflation.

Could government have got out of the Great Recession with a bigger and better stimulus program? I doubt it. Government spending goes to powerful and politically connected interests. If their plans and projects were so brilliant they would not need government credit and subsidies. So it is likely that most stimulus spending is crowding out more beneficial uses of the nation's treasure to pay for the wasteful plans of the rich and powerful.

The go-to book on crashes is Reinhart and Rogoff's This Time is Different. They argue that government typically increases national debt by up to 100 percent after a financial crash. And they also point out that governments default on their debt all the time. In the Great Depression the US government went off gold, giving holders of US dollars a haircut, and it reset the interest rate on war bonds from World War I, giving widows and orphans a haircut. They argue that whenever a government gets to a debt of about 100 percent of GDP it is getting into dangerous territory. Note that The New Yorker thinks that Reinhart and Rogoff are all wet.

Anyway, my view is that personal debt is too high, and insufficiently collateralized when you can get 100% mortgage loans. Government should not borrow except for wars and crashes, and the high rate of government spending makes it harder to fight wars and recover from financial crashes.

We ought to convert a lot of the present personal debt and government debt into equity and recognize the real risk in many financial transactions.

Oh No! 14 Million Will Lose Their Insurance!

Considering that the Congressional Budget Office is the very incarnation of the expert-led administrative state, it is amazing how they manage to provoke end-of-the-world headlines.

Apparently, under Ryancare, 14 million Americans will lose their health insurance.

Oh wait.

[T]he assessment by the CBO... said most of the immediate increase in the uninsured would occur as a result of doing away with the individual mandate. "Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums," explains the CBO summary.

Ah so! What we have here is sensible Americans without significant assets that sensibly understand that they get nothing from health insurance. So why sign up?

But wait! These people are free-loaders, deadbeats, that are trying to weasel their way out of paying their fair share of the nation's health care costs.

So? What about people on Medicaid? What about geezers like me on Medicare? When is the nation going to get into a tizzy about us failing to pay our fair share?

After all, this is the welfare state. The whole principle of the welfare state is to hand out free stuff to the people in exchange for their vote.

Very well. But two can play at this game. If you ruling class grandees aren't handing out the free stuff to me, directly, in cold hard cash, then why in tarnation should I submit to your evil tax and compel regime without a peep? Just so you can get the support of some other freeloaders and get elected once again?

Because if I am a white working class deplorable without significant assets then the sensible freeloader thing for me to do is to skip health insurance, dump myself in the ER when I get sick, and then declare bankruptcy when the bills come due.

People do that, all the time. I had an acquaintance down the street that had run up tons of bills on credit cards and dumped the whole thing in bankruptcy with the help of a friendly attorney. But he got to keep his car, because people need a car to get to work. And, of course, he didn't have a home mortgage, he rented.

More and more, I am liking the idea of Donald Trump. Instead of throwing up his hands and saying "Oh no! 14 million uninsured!" he is saying that we need to let the sucker "implode." Really, that is what we are paying for when we vote for a president. Genuine brass balls, Queens edition.

The cunning in that kind of strategy is that the freeloaders need to be afraid before they are willing to deal. It is easy to demand your entitlements when everything is copacetic. But when the writing is on the wall, and the whole health care system is going down the tubes, we welfare-state freeloaders are likely to be willing to compromise on half a loaf instead of the whole entitlement loaf we are used to demanding as our "right."

But here is a question. I'd have to think that the people losing out on Ryancare were never going to vote for a Republican anyway? So I wonder how much of a downside occurs if the 14 million become uninsured.

Maybe the difference is that the losers get angry and actually get out and vote.

Deep State? What Deep State?

My man Kevin D. Williamson had some fun Sunday with the eternal need for culprits and demons. First it was "neocons," he explained -- not to mention Jewish bankers, etc. Now it's the Deep State, the criminal cabal deep in the heart of the intelligence community and the federal government.

But the next day, Monday, he wrote about how almost all corporate execs are patsies for the liberals. Apart from the fact that they all went to the same schools as the liberals, there is the unfortunate fact that, as William H. Whyte wrote about The Organization Man in the 1950s,

the capitalists are not prepared to offer an intellectual defense of capitalism or of classical liberalism. They believe in something else: the managers’ dream of command and control.

So those eevil corporate CEOs, who the left has never ceased anathematizing, are part of the Deep State as well!

The truth is worse than that. First,

Liberals believe in an elected administrative state, with top-down command and control.

Lefties believe in a revolutionary administrative state, with top-down command and control. and finally,

Corporate CEOs believe in a corporate administrative state, with top-down command and control.

So everyone agrees, right?

Well, I don't. I think the top-down argument is bollocks, as the Brits say.

I take my text from people like Deirdre McCloskey, who argues that the unprecedented Great Enrichment of the last 200 years came not from top-down administrative ukase but from innovation from below.

Or from Matt Ridley, whose Evolution of Everything makes the same point, only follows the Eisenhower doctrine of making the problem bigger.

The point that McCloskey and Ridley are making is that nobody can stop the world and make it comfortable for themselves and their progeny forever. The world changes; the rules change; and you'd better be ready to change with it, or you are toast.

In other words, the top-down command and control culture is utter folly. There is no way you can run the world, or the universe, from the top. While you are focusing your executive energy on one problem the world will be coming to an end from the host of problems that you and your crack assistants have neglected.

The rise of Trump is a prime example of the folly of top-down thinking. Here we had coastal liberals living in their coastal bubble and making the rules for the rest of us in our own best interest. Everything was under control with the lightworker President Obama.

Meanwhile the white working class was dying of despair in the coal belt and the Rust Belt. Who knew?

Actually, Obama knew. When he talked about "bitter clingers" back in 2008 he was talking about exactly that, the factory towns where the jobs left 20, 30 years ago and never came back.

But he didn't do anything about it. Because he believed that the answer to America's problems was top-down race politics, top-down healthcare politics, and top-down financial politics. The plight of the white working class came way down the list. And anyway nobody in the liberal activism world cared about the white working class.

Never mind that the despairing white working class is the victim of the previous generation's top-down welfare state class politics which won working-class votes by giving the white working class free stuff, and then cast them off when liberals switched from class politics to race and gender politics.

So yeah. The Deep State notion misses the point. It's not just a few liberal bureaucrats that are the problem. It is just about everybody, because there are very few people in this world who honestly and consistently vote for and believe in the bottom-up notion of evolution and innovation.

The reason is quite simple. Nobody can get their heads around the notion that, sooner or later, their life, their family, their tribe, their civilization, their species, will be over. Surely there must be eternal life to take care of that.

But Steve Bannon believes just that, at least as far as the admininstrative state is concerned.

The reclusive mastermind behind President Trump’s nationalist ideology and combative tactics made his public debut Thursday [at CPAC], delivering a fiery rebuke of the media and declaring that the new administration is in an unending battle for “deconstruction of the administrative state.” 

Yay.

Can Trump Save the White Working Class? Or America?

Who is right? Is it the globalist elite that tells us to abandon the nation state and submit to the fierce tides of the global economy?

Or is it Trump, who promises to invigorate the national economy and national spirit and Make America Great Again?

The short answer is: Neither.

I'd say that the global elite is right that the global economy is going to transform everything, no matter what local populists say. On the other hand I'd say that a global administrative elite is not the model that any wise Latina would choose to govern the world of the future.

I'd say that President Trump is right to propose a regulatory rollback and tax-rate cut. And I dare say he is right to halt the crony capitalist trade deals. But we are never going to get the white working class back to the good old days of graduating high school and getting a job-for-life at the unionized steel plant down the street.

Moreover, while it is true that the globalist vision of global governance by a wise and evolved bureaucratic elite is rubbish, it is also true that today's nation states will one day go the way of the German Empire. And the Soviet Union. And the Ming dynasty.

We all like to rag on the alt-right, but they are right when they say that migration equals invasion.

Who do you think the Lombards were? They didn't always live in Lombardy in northern Italy. They were migrants that invaded across the Alpine passes. Or the Vikings. They were running all over northwest Europe for about 300 years from 800 to 1100. When they had finished Britland had a Viking monarchy by way of Normandy -- because the Normans were Vikings that the Franks allowed to settle in northern France.

Or North America. There was a migration! It utterly wiped out and swept aside the inhabitants of North America and substituted a migrant culture from northwest Europe. Hello USA!

So what about today's migrations out of Africa and the Middle East into Europe, and out of southern and central America into the United States?

Let's look at the record of northwest European migration of the last half millennium.

Where Europeans encountered nomadic or early agricultural cultures they generally wiped them out; and it helped when European diseases wiped out the original inhabitants. When the Europeans encountered Africa, where the diseases killed Europeans, or where the Europeans encountered the great civilizations like India and China, the Europeans dominated for a century or two, but eventually retreated. India is still India today; China is still China.

The histories of India and China are salutary. India has suffered successive invasions from the Asian steppe, yet every time has lived to tell the tale. China has suffered successive times of troubles, including the Yuan dynasty from Mongolia and the Manchu dynasty from Manchuria. But Chineseness has always succeeded in the end.

And even the end of the Roman Empire was not really the end. The Franks and the Germans thought of themselves as inheriting the Roman Empire and carrying it on. That is what curious notions like the Holy Roman Empire of the German Nation were all about.

Let us just say this. The rise of migration in recent decades coupled with the aging of the left's welfare state and the decline of metal-bending manufacturing has put everything in flux and created a feeling that things are not copacetic, and that Something Must Be Done.

What is the right response, culturally, economically, and politically?

That's a good question, Senator.

Even Good Liberals Miss the Point

A reader alerted me yesterday to a piece by a Good Liberal in The American Scholar. William Deresiewicz, a college teacher, rightly takes apart the whole political correctness movement as a pure power play that wants to silence the opposition. And he also recognizes that elite colleges are seminaries that teach ruling class orthodoxy.

Without mentioning Charles Murray he points out that today's elite colleges are segregating by class, and the few that come from lower classes are pretty quickly taught the liberal ruling-class orthodoxy.

But then he goes off the rails.

There is systemic racism and individual bigotry in the United States, and colleges are not immune from either. There is systemic sexism and sexual assault in society at large, and campuses are no exception. 

So the agenda of the left is based "in legitimate concerns."

But as soon as you say that you are legitimizing the ruling class to "do something" about it. And the only thing the ruling class understands is the clunking fist of government power.

Let's back up and remember how we got here. In the US South, after the Civil War, after the Republican Party retreated from Reconstruction and left the black freedmen to the tender mercies of the Democratic Party street thugs in the Ku Klux Klan the resulting domination over the Negro race was still not enough for the Southrons. And the reason was capitalism. Hey, if Negroes got paid less than the going wage for whites, then why not hire the Negro and make more money!

That was intolerable, and so the South implemented what we now call Jim Crow laws. Those were the laws that forced blacks to sit at the back of the bus. It wasn't the bus company that did it; it was government.

When the Civil Rights Acts of the 1960s were being debated the question arose whether the civil rights laws should apply to government only or to the private sector as well. Should the law forbid government to discriminate by race, or should it forbid the private sector to discriminate by race as well. The consensus among ruling-class liberals was that the laws should apply the to private sector: corporations, dontcha know.

But Sen. Barry Goldwater (R-AZ), the man who had integrated the Arizona National Guard, voted against the Civil Rights Act of 1964. He believed that the law should apply only to government, not to private citizens. And for that he was branded a racist.

We are now seeing that he was right. Today liberals of all stripes are using civil rights law to beat up their political opponents wherever they find them: in government, in non-profits, in the private sector. Elite ruling-class gays are using civil rights law to beat up Christian bakers that don't want to service a gay wedding.

I argue that the liberal approach to civil rights in fact encourages racism and sexism and homophobia. By raising the question of race on everything from professional sports to diversity in tech companies, liberals are forcing Americans to think about race every waking hour. They are forcing race consciousness into every corner of society.

I would call that "systemic racism." And, of course, the whole diversity racket is simply racism by another name.

I think that leftist politics is the most cruel and unjust religious and political movement ever, because it builds roadblocks on the Road to the Middle Class. In that book I argue that people coming to the city need to shuck off their tribal and peasant ways and become responsible individuals in the city.

The Great Enrichment of the last 200 years is the most amazing thing ever for ordinary people. But to get the full benefit, I argued in Road, you need to slough off your old ways and learn the culture of the city.

But the left, ever since its official birth in 1848, has encouraged the workers and peasants, the People of the Subordinate Self, to stay in their tribal enclaves. And modern identity politics has further encouraged the lower classes to identify by race and gender rather than shuck off that skin and become responsible middle-class citizens that obey the law, go to work, and follow the rules.

We know why the left does that. It wants to lead the workers and peasants in the streets; it wants them to switch from being the subordinates of the old land owners to become the subordinates of politicians, crime bosses, community organizers, and race hustlers: the soldiers in their political armies.

And this is cruel, unjust, and vile.

Here's what I want. The government shall write no law respecting a race, a gender, or a class. The rest of us are free to discriminate all we want.

And so we do. If we are tech companies we hire East Asians over hillbilly whites. If we are football teams we hire African Americans over whites and Asians. If we are baseball teams we hire Hispanics from the Caribbean.

As long as the government stays out of it people find their niche and everything works out in the end.

If you want to talk about "systemic racism" then you are talking about liberals sticking their racist noses into everything in America and teaching people to hate each other.

And dear William Deresiewicz doesn't have a clue.

Obamacare-lite Debuts

I suppose that "repeal and replace" where Obamacare was concerned was always a pipe-dream. That is because, once the government has started a program it is almost impossible to stop it. The clients of the program will tear down the state rather than give up their free stuff.

So the Obamacare subsidies for people buying health insurance on the exchanges won't go away in the new Ryan health plan.

And there won't be a national health insurance market. And the special status of corporate health plans, with their tax-deductibility that puts individual plans into such a bind: that won't go away.

On the other hand the plan does propose to "do something" about Medicaid by moving to a per-capita grant from the Feds to the states instead of the current system.

It will be interesting to see what happens next, because conservatives and libertarians are outraged and naturally a chap like Sen. Chuck Schumer (D-NY) had his sound bite all ready. Said he:

Trumpcare doesn’t replace the Affordable Care Act, it forces millions of Americans to pay more for less care.

Chuck is probably right. Whenever the government changes its spending, it is going to make life easier for millions on the one hand, and make life harder for millions on the other hand.

And since tens of millions are getting a break from their corporate plans, and tens of millions a break from Medicaid, and tens of millions like me a break from Medicare you can see that there is not just one third rail that a politician doesn't want to touch, but several. Because I can tell you, all of us demand that nobody lay a finger on our health plans.

No doubt Rep. Paul Ryan (R-WI) and his assistants are trying to put together a plan that insulates him and the GOP from electric shock as far as possible.

And no doubt the master negotiator President Trump will get in the act to finalize the deal.

But I am trying to think about the bigger picture. How do we get out of the box canyon of the administrative state, where government programs and processes are almost impossible to adapt and change before the inevitable pileup into the canyon wall, as in Venezuela?

If you are an underappreciated genius, this would be the miracle of the ages. How to escape the civilizational cycle that ends up in financial collapse because the government has promised too much to too many people and can't reduce the free stuff for anyone.

There is one method that seems to work. You declare a group to be the enemy of all good people. Marx and Engels did a good number on the bourgeoisie back in the 19th century and created the space to tax and punish the bourgeoisie and make them pay for benefits for the working class. And modern liberals in the 1960s demonized whites as racists so they could dump the white working class and give benefits instead to blacks and women.

So who do we demonize so we can reduce the huge burden of the modern state? The liberals? The cognitive elite?

Maybe that is what Trumpism is doing, provoking the left's bully boys to come out into the streets and beat up women college professors, as at Middlebury College last week.

Frankly, I prefer the workings of the market. The worst thing it can do is drive you into bankruptcy. That is much gentler, and more civilized than the demonizing and Othering and "mostly peaceful" protests of the political world.