Tag Archive for: economics

‘Kamala Harris Is Running a Giveaway Campaign’: Economist

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As presidential hopefuls Donald Trump and Kamala Harris approach their first debate on Tuesday, their campaigns have unveiled economic policies that seem in some ways diametrically opposed — and only one could stimulate “robust economic growth,” a leading economist has warned.

Harris has proposed imposing price controls on food, undoing the Trump tax cuts of 2017 by raising the top tax rate to 39.6%, hiking corporate taxes and capital gains taxes to 28%, giving first-time homebuyers $25,000, and doubling down on Obamacare by raising taxpayer-funded subsidies for those who buy their plans from the exchange.

She also proposed one tax cut to benefit small businesses. “I want to see 25 million new small business applications by the end of my first term,” said Harris last week. “So, part of my plan is we will expand the tax deduction for startups to $50,000.”

In a speech at the Economic Club of New York last Thursday, former President Trump proposed unleashing the power of the free market by maintaining the 2017 tax cuts and further slashing the corporate tax from 21% to 15%, cutting red tape, protecting U.S. manufacturing by raising tariffs on imported goods, clawing back all unspent funds from the Biden-Harris administration’s Inflation Reduction Act, and making more jobs available to U.S. citizens by deporting illegal immigrants who lower wages and compete for jobs.

Both candidates agree on ending federal taxation on tips, a policy first proposed this presidential race by Trump and parroted by Harris.

“Kamala Harris is running a giveaway campaign,” Paul Mueller, a senior research fellow at the American Institute for Economic Research (AIER) told “Washington Watch” guest host Joseph Backholm last Thursday. “Of course, the Biden administration has been trying to cancel various forms of student debt for years now. And her approach, I think, to stimulating the economy is more of what we’ve seen over the past four years, which is extensive government involvement, huge amounts of spending. It’s not really an organic growth within the economy.”

Artificial stimulus raises prices, a major problem over the course of the Biden-Harris administration. “When you subsidize people’s ability to buy things — whether that’s higher education or health care — and we give people money in the form of loans or grants or scholarships to do that, what it does is boosts demand. And so what we see over time in both of those areas is rising costs. The cost of higher education has grown much faster than everything else in the economy. The rate of increase for health care has increased very rapidly,” Mueller stated. “And so this $25,000 credit for first-time home buyers, while it sounds nice, it’s actually going to continue to put upward pressure on the price of housing overall.”

The entire amount of the subsidy is “actually going to be eaten up by rising prices,” Mueller noted.

Even a putatively pro-business tax policy like a small business tax credit could backfire. “There are a lot of small business owners who maybe will close down their existing business and start a new one just to get the tax credit,” Mueller warned.

On the other hand, “President Trump’s agenda” has the potential to spur “robust economic growth” in an organic way, said Mueller. “He has talked about wanting to roll back regulations.”

Mueller noted he opposed Trump’s tariff policy, “and, then, he hasn’t really addressed runaway government spending. And the more money that is spent by the federal government, the less money there is for people in the private sector to spend on their businesses, their houses, their projects.”

Backholm suggested the greatest vacuum in economic dialogue involves America’s $35 trillion national debt. “So far, we are not seeing a lot of politicians raise their hand and say, ‘I’m the guy that’s going to give you less so we can save the future.’ I think that might be what we need. We’re not getting that from anybody at this point.”

AUTHOR

Ben Johnson

Ben Johnson is senior reporter and editor at The Washington Stand.

RELATED VIDEO: MUST WATCH: Tulsi Gabbard on Dick Cheney endorsing Kamala

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2024 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

‘My Grammar’s Not Always Correct’: Fact-Checking Harris and Walz’s CNN Interview

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A full 39 days after being anointed the Democratic Party’s presumptive leader, Democratic presidential nominee Kamala Harris sat down for her first in-depth interview. As CNN’s Dana Bash rattled off numerous flip-flops and apparent lies, Harris said her “values have not changed,” that she is “very proud” of her record on inflation and illegal immigration, and that she has no regrets over describing Joe Biden’s mental health as “strong” in late June. Meanwhile, vice presidential candidate Tim Walz blamed his misstatements about serving “in war” on poor grammar and before pivoting to an alleged “national abortion ban.”

Unlike most presidential candidates, who are elected in primaries and vetted by voters, Kamala Harris — who received the nomination through a virtual roll call 27 days ago — has yet to hold an extended in-person interview. To date, she has not held an in-depth interview or press conference on her own, opting to have Walz at her side throughout the process.

Word Salad

The interview got off to a rocky start. When asked what she would do on day one, Harris replied she would “do what we can to support and strengthen the middle class,” to “look at the aspirations, the goals, the ambitions of the American people,” and provide “a new way forward” filled with “hope and optimism.”

“So, what would you do day one?” Bash repeated.

Twice, Harris said she represents “a new way forward” from polarization “dividing our nation,” because “the last decade … I believe has been contrary to where the spirit of our country really lies.” Bash pointed out Harris has served as vice president for 40% of the last decade.

In a question about her apparently evolving views on fracking and climate change (see below), Harris said: “I believe it is very important that we take seriously what we must do to guard against what is a clear crisis in terms of the climate. And to do that, we can do what we have accomplished thus far.”

Harris also received mockery for saying, since “the climate crisis is real, that it is an urgent matter,” the U.S. government “should apply metrics that include holding ourselves to deadlines around time.”

Perhaps the most memorable comments of the interview came, not from Harris, but from Walz, when he tried to explain allegations of stolen valor.

Walz Blames ‘Stolen Valor’ Claim on Poor Grammar

Tim Walz has stated he carried “weapons of war … in war,” allowed others to say he served in active combat zones during the War on Terror without correction, and claimed for two decades to have retired from the National Guard at a higher rank than he earned. Critics accuse him of stolen valor, which is viewed as perhaps the most shameful activity among veterans. The Harris-Walz campaign claimed the Minnesota governor “misspoke” in his remarks.

In his CNN interview, Walz blamed poor English skills.

“You said that you were in war,” pressed Bash. “Did you misspeak, as the campaign has said?”

“Yeah,” replied Walz. “My wife the English teacher told me my grammar’s not always correct.”

Walz taught English during a stint in the People’s Republic of China, leading to a long series of trips to the communist nation.

Walz’s explanation was “hilarious,” said former collegiate athlete Riley Gaines, scoffing at the notion that falsely “claiming you fought in war is just a silly grammar mistake.”

“I certainly own my mistakes when I make them,” claimed Walz, moments after replying he made counter-factual statements, because “I speak like” the American people.

Bash also asked about Walz’s erroneous remarks that he conceived through IVF. Walz replied his comments cut “quite a contrast [against] folks that are trying to take those rights away from us.” Ultimately, Walz refused to offer any remorse for his statements, saying, “I won’t apologize for speaking passionately, whether it’s guns in schools or protection of reproductive rights.”

Walz then pivoted to a hypothetical “abortion ban.” Most Americans, he said, are not splitting “hairs on IVF or IUI. I think what they’re cutting hairs on is an abortion ban and the ability to be able to deny families the chance to have a beautiful child.”

Donald Trump — who has repeatedly announced he opposes any abortion ban at the federal level during his second term — earlier in the day announced during a rally in Potterville, Michigan, that “under the Trump administration, your government will pay for, or your insurance company will be mandated to pay for, all costs associated with IVF treatment, fertilization for women.” During an unscripted interview, he also implied he would vote for Florida’s Amendment 4 to institute an on-demand abortion regime in Florida before his campaign released a statement walking his remarks back.

‘My Values Have Not Changed’ about Fracking, et. al.

Faced with a series reversals and flip-flops from her previous policy proposals, Harris repeated a variation of the phrase “My values have not changed” three times.

“Let’s be clear. My values have not changed” on “the Green New Deal,” which she supported as a 2020 presidential candidate and co-sponsored as a U.S. senator. “I have always believed and I have worked on it, that the climate crisis is real,” she said. She repeated the phrase on her anti-fracking stance.

Harris forcefully rejected the notion that she had changed her mind on fracking, despite recordings showing her saying there is “no question” fracking should be banned.

“No, and I made that clear on the debate stage in 2020, that I would not ban fracking,” answered Harris. “In 2020 I made very clear where I stand. We are in 2024, and I have not changed that position, nor will I going forward. I kept my word, and I will keep my word.”

Harris appears to be referring to her debate with then-Vice President Mike Pence at the University of Utah in Salt Lake City on October 7, 2020. Yet she did not say she opposed a fracking ban during the debate — commenting only that Pennsylvania native Joe Biden did.

“Joe Biden will not end fracking,” said Harris in 2020. Later, she repeated, “Joe Biden will not ban fracking. That is a fact. That is a fact.”

“Nowhere in there does she make clear that she had abandoned her previous support for a fracking ban,” noted CNN fact-checker Daniel Dale about an hour after the interview. “Rather, she repeated that Joe Biden, the head of the Democratic ticket at the time, would himself not ban fracking.”

During the campaign, Harris had endorsed a fracking ban. At a 2019 town hall meeting, a participant asked Harris, “Will you commit to implementing a federal ban on fracking your first day in office, adding the United States [to] the list of countries [that] have banned this devastating practice.”

“There’s no question I’m in favor of banning fracking. Yes,” replied Harris.

“It makes perfect sense that at the time she was speaking on behalf of Biden, the president, not the vice president,” said Dale. “I certainly did not hear anywhere in there Kamala Harris saying she personally had abandoned her 2019 view rather she was speaking for Joe Biden.”

Did Kamala Harris Reduce Illegal Immigration?

Harris defended her record on illegal immigration, as well.

“Why did the Biden-Harris administration wait three and a half years to implement sweeping asylum restrictions?” asked Bash.

“Thee root causes work that I did as vice president, that I was asked to do by the president has actually resulted in a number of benefits,” replied Harris. “The number of immigrants coming from that region has actually reduced since we’ve began that work.”

It’s not clear that is correct. After being appointed Border Czar by Joe Biden, Harris raced to pare down the job, saying she merely examined the “root causes” of “migration” from the three countries in Central America that had historically provided the largest share of illegal immigrants aside from Mexico: the “Northern Triangle” nations of El Salvador, Guatemala, and Honduras.

The number of apprehensions at the southern border fell from 684,000 in fiscal year 2021 to 447,000 in 2023. But experts say those statistics alone do not tell the full story.

The number of illegal immigrants from the Northern Triangle processed for removal under Title 8 exploded from 177,000 in fiscal year 2022 to more than 309,000 in 2023, and the Border Patrol is “on track to make about 418,600 Title 8 apprehensions by September 30,” reported the Center for Immigration Studies. At the same time, illegal entrants from the region who were denied admission at ports of entry steadily rose from about 17,000 in fiscal year 2021, to 21,000 in the following year, to about 48,000 in fiscal year 2023. “In other words, while total apprehensions FY2022-24 (projected) declined by roughly 20 percent, apprehensions under Title 8 grew by 138 percent over the same time period,” states CIS.

In raw numbers, Title 8 expulsions rose by 241,000 in just one year of the Biden-Harris administration, not including other illegal entries. Nor does this include Biden-Harris programs to expedite the legal entry of putative “refugees” from these and other countries.

There are two additional reasons to question the relevance of the statement: While most illegal immigration has come from Mexico and the Northern Triangle, “in December 2023, 54% of encounters involved citizens of countries other than these four nations,” according to the Pew Research Center. And the number of illegal immigrants has broken historic records each consecutive year since Joe Biden and Kamala Harris took office.

No Regrets about Telling Americans Joe Biden Is ‘Extraordinarily Strong’

“Right after the debate, you insisted that President Biden is extraordinarily strong. Given where we are now, do you have any regrets about what you told the American people?” Bash asked.

“No, not at all,” replied Harris, reiterating, “Not at all.”

A mere 63 days earlier, Harris not only described Joe Biden as the picture of health but placed an onus on those who questioned his acuity. Moments after Biden’s disastrous June 27 debate with former President Donald Trump, Harris told ABC News Biden had “a slow start, but a strong finish.”

“Joe Biden is extraordinarily strong, and that cannot be debated,” she quipped.

The legacy media have revealed it was precisely the threat of a cognitive test that helped force Biden out of the presidential race. The New York Times reported that, according to two attendees of a July 11 meeting between Biden and U.S. senators, Senator Jack Reed (D-R.I.) issued an ultimatum (in the Times’ words): “If Mr. Biden wanted to stay in the race after a disastrous debate performance that underscored concerns about his condition and mental acuity, he should submit to examination by two independent neurologists who were willing to report their findings at a news conference.”

Harris ‘Very Proud’ of Bidenomics

“You have been vice president for three and a half years. The steps that you’re talking about now, why haven’t you done them already?” Bash asked Harris.

“I’m very proud of the work that we have done that has brought inflation down to less than 3%,” the vice president responded.

“So, you maintain Bidenomics is a success?” asked Bash.

After rattling off a list of the administration’s putative accomplishments, Harris concluded, “I’ll say that that’s good work. There’s more to do, but that’s good work.”

Inflation for 2023 stood at 4.1%, a marked increase from the 1.2% the Biden-Harris administration inherited. Wages have barely kept pace with inflation, as groceries, gasoline, and other household staples have increased by double digits — the highest inflation level in 40 years.

Despite pressing for clear answers from the pair, many observers faulted Bash for not following up on key assertions made by both Harris and Walz, as well as her question choice. Megyn Kelly noted Bash asked “not a single Q on the Emotional Support Governor’s radical trans policies.”

CNN also appeared to make a few misstatements about the interview. Although the network prerecorded the interview, the network’s feed claimed it was aired “live.” After the interview, anchor Abby Phillip referred to the closed-doors segment as a “town hall” event.

Despite reports that CNN would not offer a transcript of the interview, CNN has issued its official transcript of the historic interview.

Kamala Harris will debate former President Donald Trump on ABC News September 10 at 9 p.m.

AUTHOR

Ben Johnson

Ben Johnson is senior reporter and editor at The Washington Stand.

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EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2024 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

U.S. Households Continue to Struggle under Nagging Inflation, Sky-High Interest Rates

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Financial reports continue to indicate that in the three and a half years that have elapsed since the Biden-Harris administration came into office, the percentage of American households that have become financially insecure has grown. Experts say that the administration’s economic policies have contributed to the increase in poverty, particularly by exacerbating inflation through massive federal spending increases, which in turn caused interest rates to spike.

Following a sharp increase in federal spending as part of an emergency COVID relief package that former President Donald Trump signed in December 2020, the Biden-Harris administration and congressional Democrats continued the same level of spending in 2021 and 2022 instead of letting the emergency spending expire, spending $5.9 trillion more than what was spent in pre-pandemic 2019. As pointed out by economic expert J.T. Young, this “excessive spending has helped over-weight demand relative to the supply of goods — too much money chasing too few goods,” causing prices to rise.

When Biden took office in January 2021, inflation was at 1.4%. By March, it had risen to 2.6%, and by January 2022, it ballooned to 7.5%. Six months later, it peaked at 9.1%, a 40-year high. But by December 2022, the rate was still at 6.5%. Currently, the rate is at 3%, which Young noted is still well above the Federal Reserve’s acceptable target rate of 2%.

As Young went on to observe, this was “only half of Americans’ pricing squeeze. The other half comes from the huge jump in interest rates that the Federal Reserve had to implement to cool Biden’s spending-infused inflation inferno. Eleven times the Fed was forced to hike rates, taking them from 0.25-0.50 percent in March 2022 to 5.25-5.50 percent in July 2023,” where it remains currently.

“So, Americans are trapped between inflation’s twin pressures: The prices they pay and the money they borrow,” Young added.

According to data that has recently come to light, the economic situation is continuing to have enormous financial consequences for vast swaths of U.S. households. As reported Wednesday by The Epoch Times, a nonprofit that tracks household budgets called United For ALICE (UFA) has estimated that, according to its most recent available data from 2022, 42% of American households are facing an impossible choice every month: “Pay the rent or put food on the table.”

While the data for 2023 and 2024 has yet been published, recent trends indicate that the struggles have only continued. A Forbes Advisor survey from last year found that 40% of respondents reported living paycheck to paycheck, with 29% saying they could not cover standard expenses. In July of this year, financial services provider LendingTree reported that since 2022, financially insecure households have grown from 34.1% to 36.4%.

“It shouldn’t be terribly surprising,” remarked Matt Schultz, LendingTree’s chief credit analyst. “The perfect storm of record debt, sky-high interest rates, and stubborn inflation have resulted in many Americans’ financial margin of error shrinking to virtually zero.”

Another factor that is hampering millions of households is stagnant growth in wages. Kristen Rotz, president and CEO of United Way of Pennsylvania, told The Epoch Times that 2023 and 2024 have seen virtually no change. “Inflation is slowing, but wages, though increasing somewhat, are still lagging. The cost of the basics outpaced wage growth.”

As a result, food banks from Brooklyn, N.Y. to Michigan are experiencing record demand. A Port Huron, Michigan food bank told the Epoch Times that it recently served a record 38 families in one day. “Groceries are so expensive,” a volunteer observed, stating that the average value of a food pick-up per family is $150. “That amount does not even cover their whole weekly grocery bill. We supplement their food budget so they can pay the rent or car expenses. It’s inflation and the economy that is driving people to us.”

In Brooklyn, about 2,500 people come to the Council of Peoples Organization every week for food, a vast increase from the few dozen that came weekly before the pandemic. According to Chief Executive Officer Mohammad Razvi, many of those coming for the food aid cite sky-high housing costs as a primary reason for not being able to afford groceries. Since the pandemic, home prices have soared 54%.

Republican lawmakers are contending that the financial struggles millions of American households have been experiencing under the Biden-Harris administration are unlikely to change if Vice President Kamala Harris is elected president.

“Every day, the American Dream moves further out of reach, and hardworking Americans are feeling the consequences of the Harris Price Hikes everywhere — from the grocery store, to paying rent, to filling up their cars to get to work,” stated Senator Rick Scott (R-Fla.) last week.

House Ways and Means Committee Chair Jason Smith (R-Mo.) expressed similar sentiments. “One thing Democrats cannot change is the Biden-Harris economic record: 20 percent rise in prices and skyrocketing interest rates preventing families from buying a home and small businesses from growing. Whether it was supporting the trillions of dollars in Democrat spending that overheated the economy or endorsing the absurd claim that inflation was transitory, Kamala Harris has been in lockstep with every one of Joe Biden’s radical economic policies.”

AUTHOR

Dan Hart

Dan Hart is senior editor at The Washington Stand.

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2024 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

Americans’ Inflation Worries Deepen as Biden Claims Economic Victory

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With the November presidential election 24 weeks away, an index measuring consumer sentiment on the economy dropped to a six-month low after its largest decline since 2021. The plummeting confidence comes as President Joe Biden recently shrugged off the concerns while falsely claiming for the second time in less than a week that inflation was at 9% when he took office.

On Sunday, The Washington Post reported that the index of consumer sentiment, which measures the economic perceptions of Americans, dropped sharply amid nagging inflation and rising gas prices. In April, inflation remained well above the Federal Reserve’s target of 2%, hitting 3.4%. While the number is well below the high of 9.1% that was reached in June of 2022, inflation has remained above 3% every month since last summer.

Economic concerns have consistently ranked as the top issue for American voters ever since ever since 2021, when inflation began rising steadily due to a massive uptick in government spending enacted by the Biden administration. A Gallup survey released at the end of March revealed that inflation was the top most worrisome issue for Americans, followed closely by immigration.

The price of consumer goods also continues to rise. Last week, the latest Consumer Price Index summary was released, revealing that the price of all goods rose 0.3% in April, having risen 3.4% over the last 12 months. Overall energy prices rose 2.6% in the last 12 months, while food prices saw an increase of 2.2% in the last year.

Meanwhile, gas prices have also remained consistently high. With a current average price of $3.61 per gallon, gas has shot up 50 cents since the start of the year. Under the Biden administration, the average price of gas has fluctuated wildly, reaching a peak of over $5 a gallon at the start of 2022. The current average price per gallon remains over 60 cents higher than it was when President Donald Trump left office in January 2021.

Popular companies such as McDonald’s, Home Depot, Under Armour, and Starbucks have recently reported underwhelming earnings due to increasingly modest consumer spending with few signs that the economic outlook will improve any time soon. In addition, Walmart, Target, and discount grocer Aldi have recently begun slashing prices of goods in hopes of attracting more business.

“We continue to feel the impact of a more cautious consumer,” said Starbucks CEO Laxman Narasimhan last month. “Many customers are being more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent.”

Notably, some Biden administration officials are beginning to acknowledge the financial struggles and low consumer confidence of ordinary Americans after the president appeared to dismiss them earlier this month, claiming that “[w]e’ve already turned [the economy] around.”

“Families are still struggling with prices that are too high,” admitted Jared Bernstein, chair of Biden’s Council of Economic Advisers. “We’ve made a lot of progress in the right direction, and we are going to keep fighting to lower costs for families and make billionaires and corporations pay their fair share.”

A spokeswoman for the Trump campaign remarked that the 45th president would “uplift all Americans” by reducing taxes and increasing wages. “The American people cannot afford four more years of Bidenomics.”

In comments to The Washington Stand, Oliver McPherson-Smith, director of the Center for Energy & Environment at the America First Policy Institute (AFPI), contended that consumers have little reason to be confident in America’s economic outlook under Biden.

“It’s no surprise that consumers across the country are feeling pessimistic about the economy,” he observed. “Bidenomics means overregulation and prolific spending — both of which drive up consumer prices. Under Bidenomics, household energy costs are on average 22% higher than under President Trump’s America First policies. Gas prices are up on average 39.7%.”

McPherson-Smith continued, “The May measurement of the University of Michigan’s index of consumer sentiment is a searing indictment of the Biden administration’s economic mismanagement. Even during the uncertainty of the early pandemic months, at no point during the Trump administration were American consumers this pessimistic about the economy.”

Michael Faulkender, Chief Economist at AFPI, further expanded on the repercussions that rising inflation has incurred on American pocketbooks.

“The Bidens will keep blaming everyone but themselves for the inflation devastating Americans’ budgets,” he told TWS. “As published recently in Bloomberg, if one looks at inflation-adjusted disposable income — how far paychecks go in purchasing power terms — it rose 12% under Trump and is at 3% under Biden. Once you incorporate the effect of interest rate increases on anyone borrowing money to buy a car, home, or place a purchase on their credit card, Americans are worse off. Those effects are even greater for the most vulnerable in our society.”

“No amount of deflection, demagoguery, or gaslighting will alter the economic harm the American people have suffered under the far-left policies of the Biden administration,” Faulkender concluded.

AUTHOR

Dan Hart

Dan Hart is senior editor at The Washington Stand.

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EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2024 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

5 More Lies in Joe Biden’s 2024 State of the Union Address

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The fallout continues over President Joe Biden’s 2024 State of the Union address, and his errors, lies, and misstatements continue to pile up. Here are five more false claims Biden made on Thursday night.

1. Biden Claims He Has Created 15 Million Jobs and 800,000 New Manufacturing Jobs

In speaking about his economic record, Biden boasted of creating “15 million new jobs in just three years,” including “800,000 new manufacturing jobs in America and counting.”

Most of the jobs Joe Biden has taken credit for “creating” were merely jobs destroyed by the 2020 COVID-19 pandemic lockdowns.

The economy under Joe Biden actually created about one-third that many new jobs: The economy added 5.49 million jobs above pandemic level in three years. President Donald Trump’s economy created 6.7 million jobs in the three years before the pandemic. Similarly, Joe Biden has added 114,000 manufacturing jobs, compared to the pre-pandemic level of February 2020. President Trump created 400,000 manufacturing jobs in the same period.

American workers have enjoyed little of this job growth. The U.S. workforce added 2.9 million foreign-born workers (legal or illegal), while there were 183,000 fewer U.S. citizens in the workforce between the fourth quarter of 2019 and the same period in 2023.

Some of this job growth is illusory, since a total of 8.3 million Americans hold multiple jobs, and 386,000 Americans are working two full-time jobs — a number that reached a 30-year high of 447,000 last September. More than two million people work two (or more) part-time jobs. And the number working-age Americans who are working, the labor force participation rate, remains below pre-pandemic levels.

2. Wages Are Up and Inflation Is Down under Biden?

Joe Biden touted his economy as a boon for middle-class workers, adding, “Wages keep going up. Inflation keeps coming down. Inflation has dropped from 9% to 3% — the lowest in the world and trending lower. … Consumer studies show consumer confidence is soaring.”

Real wages remain lower under Biden, thanks to soaring inflation sparked in part by massive rounds of stimulus-level government spending. Americans under Biden need to earn an extra $11,434 a year to maintain the same level of income they had before he took office. The average American, of course, has not closed the gap.

“Bidenflation” shows up in everyday prices: The cost of dairy products has risen 59 cents since February 2021. A loaf of bread costs more dough — 49 cents a loaf more. Other staples, utilities, and necessities have risen, including chicken (41 cents a pound), a dozen eggs (92 cents), gasoline (72 cents a gallon), home heating gas (29%), and electricity (21%).

Rather than address these concerns, Biden focused on shrinkflation and “junk fees.” Even Biden’s speechwriters felt the need to sell the public on their policy’s relevance, insisting, “It matters. It matters.” Biden’s focus invited withering criticism from his chief rival for the presidency. “Biden talked about the SNICKERS bars, before he talked about the border!” posted former President Donald Trump on Truth Social.

The Biden administration did give some indication of who benefitted from its policies: The White House invited Shawn Fain — president of the United Auto Workers, which had delayed its endorsement of Biden’s reelection — to the State of the Union address.

3. The Myth of Trump’s Muslim Ban

In his section on immigration, Biden attempted to distinguish himself from “my predecessor” by saying, “I will not ban people because of their faith.”

Biden is alluding to President Trump’s so-called “Muslim travel ban.” In December 2015, candidate Trump called for a “total and complete shutdown of Muslims entering the United States until our country’s representatives can figure out what is going on.” Then-President Barack Obama had admitted 12,500 scantly-vetted “refugees” from Syria. Trump also cited widespread, anti-American sentiment and terrorist activity throughout the Islamic world for decades, including a poll of Muslims from the Center for Security Policy which found “25% of those polled agreed that violence against Americans here in the United States is justified as a part of the global jihad.” But he never pursued such a policy in office, using model policies enacted by the Obama-Biden administration.

In his first week in office, Trump signed Executive Order 13769, placing a 90-day moratorium on some immigration from Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen. It also required vetting of people hailing from nations whose background checks do not meet U.S. standards. The move was far from unprecedented. Under the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015, Barack Obama imposed similar restrictions on anyone who was “present, at any time” in Iraq, Sudan, Syria, Libya, Somalia, and Yemen in the past four years. Yet activist courts initially ruled Trump could not impose the same policy, eventually accepting an amended version that barred immigration from Iran, Libya, Somalia, North Korea, Syria, Venezuela, and Yemen.

In 2020, Trump broadened this net of protection by excluding the terror-tied nations of Kyrgyzstan, Myanmar, Eritrea, Nigeria, Sudan, and Tanzania. (Muslims make up a mere 4% of Myanmar’s population, 0.3% of Venezuela’s population, and officially zero percent of North Korea’s.) The Supreme Court upheld the policy, Presidential Proclamation 9645, in Trump v. Hawaii (2017). Biden rescinded the executive order on his first day in office: January 21, 2021.

The threat proved to be anything but illusory. Authorities arrested a Syrian refugee, 21-year-old Mustafa Mousab Alowemer, for plotting to blow up a Christian church in Pittsburgh, Legacy International Worship Center, to support ISIS.

4. Making the Rich ‘Pay Their Fair Share’ of Taxes?

Joe Biden promised to enact “a fair tax code” by “making big corporations and the very wealthy finally begi[n] to pay their fair share. Look, I’m a capitalist. If you want to make, you can make a million or millions of bucks, that’s great. Just pay your fair share in taxes.”

The top 1% of income earners paid 42.3% of U.S. income taxes in 2020, the most recent year available, according to an analysis from the nonpartisan Tax Foundation. The top 10% paid 73.7% of income taxes. All told, the top half of income earners paid 97.7% of all taxes, while the bottom half paid 2.3%.

By contrast, a growing number of Americans paid no income tax. An estimated 57% of Americans paid nothing in federal income taxes in 2021, according to the Tax Policy Center.

By any just reckoning, the wealthiest Americans are paying their fair share of income tax — and a good deal of our share, as well.

5. Biden Has Not Raised Federal Taxes on Anyone Making Less than $400,000?

“Under my plan nobody earning less than $400,000 a year will pay an additional penny in federal taxes,” Biden claimed. “Nobody. Not one penny. And they haven’t yet.”

If Joe Biden has not squeezed more money out of those making less than $400,000, it’s not for lack of trying. Biden and congressional Democrats have endorsed numerous proposals that would have extracted more of the federal budget from those beneath Biden’s alleged income threshold. Those proposals include:

  • Expanding the number of items that must be registered under the National Firearms Act, with a $200 fee for each item
  • Reinstating the Affordable Care Act’s individual mandate and $695-per-person penalty, which President Trump eliminated
  • Imposing a carbon and/or methane tax. One proposal would charge companies $1,800 per ton of methane they handle (not emit), with the cost rising 2% above inflation each year
  • Increasing corporate taxes, which pass on approximately one-third of increased costs to consumers by raising prices (and another third by reducing payroll costs/hours)
  • Hiking cigarette taxes, which fall disproportionately on the working class

The greatest way Biden has funded the federal budget at the expense of the middle class is through inflation. As Henry Hazlitt explained in his classic book “Economics In One Lesson”:

“Inflation is a form of taxation. It is perhaps the worst possible form, which usually bears hardest on those least able to pay. … It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. It often makes it more profitable to speculate than to produce.”

Here is the previous collection of “14 Lies and Myths in Joe Biden’s 2024 State of the Union Address.”

AUTHOR

Ben Johnson

Ben Johnson is senior reporter and editor at The Washington Stand.

RELATED ARTICLE: More Misleading White House Statistics on Unemployment

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EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2024 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

High Consumer Prices among Top Concerns as Voters Lose Confidence in Biden, Polls Show

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As new polls indicate that American voters remain worried about the persistently high cost of goods and have largely lost confidence in President Joe Biden’s handling of the economy, a leading economist is pointing out that the economies in red states that feature free market policies are outpacing the economies of blue states.

An NBC News poll published Sunday revealed that Biden lagged behind former President Donald Trump by over 20 points on the question of “which candidate would better handle the economy.” Overall, the poll found that Biden’s approval rating has reached the lowest point of his presidency at 37%.

The survey comes as voters say that the economy is among their top concerns going into the November elections. A recent Harvard CAPS-Harris poll found that inflation was the primary worry for 32% of respondents, a close second behind the border crisis at 35%.

While inflation has largely leveled off since reaching a high of 9.1% in June 2022, consumers are still worried about the persistent rising costs of virtually all goods since the 2020 pandemic that have not come back down. As reported by CNN, “More than 90% of the items tracked in the Consumer Price Index are more expensive than they were in February 2020, with most price increases landing north of 20% and some (fuel and margarine) approaching 55%.” Overall, food prices have risen almost 25%.

Stephen Moore, distinguished fellow in Economics at The Heritage Foundation, joined “Washington Watch” last week to discuss the current economic outlook in America.

“What’s happening in America today is you’ve got red states with low taxes, less regulation, [and] right-to-work that are doing extraordinarily well,” he explained. “You know, they’re actually booming [in] Texas, Florida, Tennessee, Utah, Idaho. So many of these states, [like] South Carolina, the southern states are doing amazing. … [B]y the way, the South now is the number one leading region in the economy. It used to be the northeast for 100 years. But the northeast is losing its people, its businesses, its capital. And they’re going to states like Florida and Texas and Arizona … because the taxes are lower [and] there’s a more pro-business atmosphere. They follow free market policies. That’s what American businesses want. That’s what workers want.”

Moore, who also serves as a senior economist at FreedomWorks, went on to argue that the Biden administration’s federal spending policies have negatively affected the economy.

“[T]he question becomes, ‘Why don’t we do, on the national level, what works in the states? Why don’t we cut our taxes, reduce our regulations? Why don’t we get our budget under control?’ We’re running a $1.5 trillion debt. … It’s because we’ve got a president who is spending and printing and borrowing a trillion and a half dollars a year — it’s as obvious [as] the sun ris[ing] in the East and set[ting] in the West when you have that kind of out of control spending. You know what? You’re going to get inflation.”

At an event last week, Biden accused grocery stores of “ripping people off” through “price gouging, junk fees, greedflation [and] shrinkflation.”

“That’s the way all these Democrats are,” Moore responded. “They keep saying, ‘Oh, the profits are too high.’ Why don’t you go out there and show you can make a profit? It ain’t so easy to do it. These are businesses that are providing jobs, providing growth for our economy, putting food on our table. I’m sick of him criticizing American businesses.”

AUTHOR

Dan Hart

Dan Hart is senior editor at The Washington Stand.

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2024 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

Some Facts about Israel You Might Have Missed

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In terms of its natural resources, Saudi Arabia is one of the wealthiest nations on earth. Holding known oil reserves of roughly 265 billion barrels, this nation of 37 million boasts a landmass of 830,000 square miles, and Saudi’s people have a per capita income of about $34,000.

Israel’s total area is about 100 times smaller than Saudi Arabia — 8,600 square miles. The Jewish state has about 14 million barrels worth of proven oil reserves; statistically, this equals to 0% of the total known oil reserves in the world (although Israel is seeking to optimize its oil resources nonetheless). Since its inception as an impoverished nation in the late 1940s, Israel’s per capita income is now better than $53,000 — the highest, by far, in the Middle East.

My point is not to disparage the Arab countries surrounding Israel. Rather, it is to recognize that the people of this tiny nation have taken a historically underdeveloped region and built a thriving country. Writing for Stanford University’s Hoover Institution, scholar Peter Berkowitz notes that since the early years of the 20th century, “Jewish residents of Palestine and then Israeli citizens have planted over 250 million trees, and Israel has become a world leader in desalination and irrigation. A booming wine industry and large offshore gas fields contribute to the diversification of Israel’s economy.”

Additionally, the Bloomberg Innovation Index ranks Israel as having the second-highest level of technological research and development in the world (South Korea is number one). Idan Adler of the consulting and accounting giant Deloitte writes that Israel is “one of the hottest innovation and technology hubs in the world. With over 6,000 active startups and an economy dominated by industrial high-tech and entrepreneurship, Israel certainly [has] earned its nickname ‘The Startup Nation.’”

So far, so good. But what about the 700,000 Palestinian Arabs who, in 1948, either left what is now Israel or were forced to flee? Is it fair of the Jews in Israel not to allow the descendants of those who left, now numbering around six million people, not to return?

First, no one should underestimate the difficulties experienced when people have to flee from their homes, leaving behind what they have known for the uncertainties of exile. At the same time, bear in mind the context of the original flight: Arab military resistance to the new Jewish state was intense. As the U.S. State Department reports, on May 13, 1948 — the day before the State of Israel was formally created — the Jewish people in Israel were attacked by “Arab armies from Lebanon, Syria, Iraq, and Egypt. Saudi Arabia sent a formation that fought under the Egyptian command.” Also, various Arab leaders called on Palestinian Arabs to flee, and many Palestinians left with the defeated Arab armies. And since 1948, Israel has fought several major wars with its Arab neighbors and been under continuous assault from Islamist terrorists on its borders.

So, should Israel allow those who left and their now millions of descendants back in? Consider three essential and generally unacknowledged realities. First, as scholar and journalist Fareed Zakaria has written, “anti-Semitism has spread through the Islamic world like a cancer. … Anti-Semitism is now routine discourse in Muslim populations in the Middle East and also far beyond.” The fact that every Arab nation is virtually Jew-free makes this point vividly. And nowhere was this more evident than in the demonstrations supporting Hamas’s horrific attack on Israel of last month in Lebanon, Iran, Iraq, Turkey, and Yemen, not to mention “people, including children, waving Palestinian and Hamas flags, dancing and singing in the streets” in “major Palestinian cities, including Ramallah, Hebron, Nablus, and Jenin.”

For Israel to invite people possessed by an acute hatred for the Jewish people to enter its territory would be little more than national suicide.

Second, why have the Arab nations all around Israel not thrived as has the Jewish state? Why have the heirs of the Palestinian migration not rebuilt their lives as fully as the Jews of Israel, a ragged and brutalized people who sought only to live in their ancestral homeland after the Holocaust? Could it not be that the Arab cultures in which they live — oppressive, autocratic, religiously constrictive — discourage the kind of personal liberty and economic innovation that have built Israel into the thriving society it now is? Or that erstwhile Palestinian leaders have siphoned-off the billions in aid they have received to line their own pockets?

Finally, the persecuted Jewish people, for centuries driven from pillar to post in many regions of the world, just want a place to call their own. One need not believe in the demonic origin of anti-Semitism, as do I, to simply acknowledge that an irrationally hated people group, the longtime brunt of pathological maltreatment from Germany to Iran, deserve a place where they can breathe easily and live normal lives.

America is such a place — and must always be — but Israel is uniquely and deservedly so. Long may the flags of both nations wave.

AUTHOR

Rob Schwarzwalder

Rob Schwarzwalder, Ph.D., is Senior Lecturer in Regent University’s Honors College.

RELATED ARTICLE: Professor Suspended for Saying “Hamas Are Murderers”

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2023 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

As Homeownership Costs Soar and Inflation Persists, Americans Sour on Biden’s Economy

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President Joe Biden turned 81 years old on Monday, and he was greeted with the lowest approval rating ever recorded by NBC News at 40%. While a large part of the number is due to Democrats’ disapproval of Biden’s handling of the Israel-Hamas conflict, it’s also likely a reflection of an economy that continues to struggle under the weight of persistent inflation, skyrocketing mortgage rates, a decline in full-time jobs, and ever-expanding federal debt.

The president has continued to tout “Bidenomics” in recent weeks, despite stating last week that he acknowledges there is a “disconnect between the numbers and how people feel about their place in the world right now.” Polls show that the American public is indeed not connecting with the White House’s messaging on a massive scale. A Fox News survey taken last week revealed that almost 80% of Americans rate the economy negatively.

As economists are pointing out, the raw economic numbers are a tremendous cause for concern. Joel Griffith, a research fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, joined “Washington Watch” last week to give a snapshot of where things currently stand.

“The typical family has lost more than $4,000 in real inflation, just adjusted income since President Biden took office, and that $4,000 pay cut is not even taking into account the rising home ownership costs,” he observed. “… [A]s [we]’ve seen real income decline, we’ve also seen credit card balances hit an all-time record $1 trillion. That’s about a $3,000 a family increase over the past year and a half, even as savings rates have plunged near all-time lows. Bidenomics has been a disaster for American families.”

Polls show that Americans are continuing to feel economic pain when they compare their income with prices. An Associated Press poll last month found that “three-quarters of respondents described the economy as poor,” with two-thirds saying their expenses have risen and only one quarter saying their income had also gone up. Compounding the problem is that the prices of many of the items that Americans most commonly buy have inflated substantially. Since February of 2020, the average price of a gallon of milk is up 23% ($3.93), a pound of ground beef is up 33% ($5.35), and a gallon of gas is up 53% ($3.78).

As Griffith went on to explain, one of the primary reasons for the decline in real income currently being experienced by Americans is the exploding cost of home ownership.

“If you’re looking to get a mortgage right now on a standard middle class home, that mortgage payment is costing you about $1,000 per month more than it would have cost you just a year and a half ago,” he noted. “… These are the worst economic conditions since the 1970s. … [T]hat was a time when we also had declining real income, and we also had sky high inflation. So arguably, it’s even worse now than it was then because it’s never been less affordable to buy a home. If you look to buy a home, it costs you about half of your income just to make the mortgage payments and the property taxes. It has never been this bad in terms of home ownership.”

Griffith further illustrated how reported job growth numbers are misleading. “[E]very month, the Biden administration loves to tout these jobs growth numbers. But what they fail to tell us is actually that over the last six months, we’ve actually seen a decline in full-time jobs. The only reason why we have seen the top line jobs growth numbers positive is because we’ve seen a surge in part-time jobs, meaning we have a lot more people today working double jobs just to pay the bills.”

As the national debt approaches $34 trillion, Griffith underscored how runaway federal spending is leading to unyielding inflation.

“[S]pending is out of control — it’s been out of control a long time,” he said. “The interest we’re paying right now on the federal debt is $10,000 per family per year. The amount of money that we’ve borrowed over the prior year is $25,000 per family of four. We cannot keep this up. A big part of the reason why families today are suffering from this inflation … is because for the last three years, we have spent wildly beyond our means, and we relied on our central bank to print the dollars to buy that debt.”

“We have to change this trajectory now, and I’m hopeful Congress will actually attempt to do so once they come back from Thanksgiving and Christmas break,” Griffith concluded.

AUTHOR

Dan Hart

Dan Hart is senior editor at The Washington Stand.

RELATED ARTICLE: We Need to Talk about Joe: Dems Show Growing Concern over Aged, Inept Biden

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2023 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

Exiled Cuban Journalist: ‘Socialism Is Institutionalized Envy’

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Approximately 36% of young Americans, ages 18 to 22, hold a positive view of socialism. However, for exiled Cuban journalist Yoe Suárez, this positive view of socialism is not based on reality. On a recent episode of the Outstanding podcast hosted by Joseph Backholm, Suárez and Washington Stand Editor-in-Chief Jared Bridges discuss their firsthand experiences with socialism and its wide-ranging consequences.

“The first time I ate a tangerine in years was here in [the] USA,” Suárez said. “It’s amazing because Cuba is a tropical island, you know? It should have fruits there. That’s an image that can maybe portray what’s happening in Cuba.” Suárez went on to discuss the various crises Cubans endure, including blackouts, inaccessible medicine, and a lack of necessities like food and milk for families. When Backholm asked Suárez what the government’s objective was, he replied, “The principal goal is political control. And then they have to build a narrative of goodness behind that.”

Bridges shared his experience living under a socialist government in Minsk, Belarus. “At the time, the things I ran into was just seeing how that system for that long a time oppressed people,” he said. He discussed his inability to find prescribed medicine after going to seven different pharmacies. “To put it in perspective today, here in America, I’ll go to the drug store and get upset if I have to wait 15 minutes.” Bridges further noted that his experience shed light on how, rather than everyone being equal in their belongings and opportunities under socialism, people are stripped of basic needs including medicine. “What became evident to me was that something is not what it says it is,” Bridges stated.

Backholm wondered how to change the phenomenon happening “here in the United States where you have a growing number of young people who actually seem enthusiastic about socialism,” with Bridges adding how this enthusiasm takes place amongst Christians as well.

“The saddest thing is that socialism takes a lot from envy,” Suárez said. People want what they can’t have, and, for Suárez, socialism feeds the flame of envy toward those who have more. “Socialism is institutionalized envy. It’s that. Socialism is just that.” He went on to observe that the fundamental issue is when too much power is centralized in one place. Sharing is good, but it must come from a place of voluntary charity. As Suárez stated, “If it’s voluntary, it’s charity. And charity is good.” But as Backholm added, “Compelled generosity is not generosity, it is theft. It is totalitarian. It is robbery.”

Backholm further pointed out how our sinful nature, whether living under capitalism or socialism, leads to the exploitation of others and often manifests into greed. “If our hearts are unregulated, we will take advantage of other people to our own benefit,” Backholm stated. “What a biblical worldview argues for is a decentralization of power. … The free marketplace, by nature, decentralizes power.” In response, Bridges reflected on how a free market society also gives us the ability to speak out.

When the discussion turned to equality, it was noted that the desire for ultimate equality does not have an end because nothing will ever be enough to satisfy. Suárez, for instance, was kicked out of his home country for speaking out against socialism. As Bridges pointed out, this socialist view of equality does not lead to actual equality, but rather a totalitarian sense of political control where the government tells you what you can and cannot do with your goods, needs, and opinions.

For Backholm, Suárez, and Bridges, the ability to distinguish between voluntary charity and compelled generosity is the difference between socialism and capitalism. Neither is without flaw, but as Suárez stated, “The solution to a headache is not cancer.”

AUTHOR

Sarah Holliday

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2023 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

No, You Can’t Invoke the 14th Amendment to Raise the Debt Ceiling

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Earlier this month, Treasury Secretary Janet Yellen warned the U.S. could run out of money to pay its bills by June 1 if Congress does not raise the debt ceiling. This has led to a game of chicken between the White House and the Republican-controlled House of Representatives.

President Biden has demanded Congress pass legislation that raises the debt ceiling without any changes to the way the federal government spends money. House Republicans passed a budget bill that would raise the debt ceiling but would also return government spending to 2022 levels. In addition, citing the fact that Social Security is on pace to be insolvent by 2035, the Republican spending plan proposes modifications to Social Security that would increase its chances of long-term sustainability. The White House has opposed all of it.

Instead of compromising with the majority of Republicans in the House, some on the Left have come up with a theory that would allow them to act unilaterally. In fact, Senate Democrats held a press conference encouraging President Biden to “invoke the 14th Amendment” so they can raise the debt ceiling without the involvement of the Congress.

As a matter of habit, the U.S. spends more money than we bring in. As a result, we’re forced to borrow money each month to pay the bills, which means that next month’s bill is always higher than last month’s bill. The U.S. debt is now over $31 trillion dollars, which represents more than $94,000 per citizen. It was only $12 trillion in 2010.

Because of our habitual overspending, Congress routinely considers legislation to raise the debt ceiling. In fact, Congress has raised the debt limit 13 times since 2000. Despite our familiarity with debt limit debates, no one has ever proposed “invoking the 14th Amendment” as a way of raising the debt limit before. The reason no one has ever proposed it before is because it’s nonsense.

The 14th Amendment does many things, but the relevant section for this discussion is Section 4, which says:

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations, and claims shall be held illegal and void.”

The 14th Amendment was passed right after the Civil War in 1868 and sought to put the issues of the Civil War in the past in several ways. It clarified that all people, regardless of their skin color, would enjoy equal protection under the law. In addition, to avoid any attempts to revive the struggle, it prohibited civil and military officers who had supported the Confederacy from holding any state or federal office again. Most relevant to this discussion, it also said the debts of the Union “shall not be questioned” but the Union was not going to pay the debts of the Confederacy.

Now, you have most Democrats in the U.S. Senate claiming that this language — which was unambiguously a promise to pay Union debt but not Confederate debt — somehow gives President Biden the power to ignore Congress when it comes to debt ceiling legislation in 2023.

While this interpretation is absurd on its face, it’s worth remembering the Supreme Court was recently convinced the word “sex” actually means “gender identity,” and by extension the word “woman” actually means “anyone who wants to be a woman.” Once you’ve accepted the progressive claim that language can mean anything you want it to mean, the only limits to the Constitution are the limits to your creativity.

To be fair, even if there was an attempt to “invoke the 14th Amendment” to unilaterally raise the debt ceiling, legal challenges would follow and the Supreme Court would likely halt the effort as the unconstitutional abuse of power it would be.

The good news is, there are points of agreement in this debate. Both the president and Congress agree a default on U.S. debt would be terrible. But whatever the problem is, consolidating political power into the hands of one man and destroying the checks and balances our system is built upon is not the solution.

If Democrats doubt this, they would do well to remember that once upon a time, they didn’t love the president, and that guy is trying to be president again. If they don’t want to live in a world where a crazy old guy is doing whatever he wants from the White House, they shouldn’t try to create a world in which a crazy old guy is allowed to do whatever he wants in the White House.

AUTHOR

Joseph Backholm

Joseph Backholm is Senior Fellow for Biblical Worldview and Strategic Engagement at Family Research Council.

RELATED ARTICLE: Yellen: 14th Amendment Can’t Appropriately Be Used to Raise Debt Ceiling

EDITORS NOTE: This Washington Stand column is republished with permission. All rights reserved. ©2023 Family Research Council.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

What Is Fractional Reserve Banking and Is It Good or Bad?

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After the collapse of Silicon Valley Bank (SVB), I received several questions related to the collapse. One by Dr. Michael Overfield caught my eye. He says:

“The question I have is about fractional reserve banking. This is more in the news following the failure of the Silicon Valley Bank. [Some] feel we should outlaw fractional reserve banking. This policy would assure that our banks would have our funds secure whenever any of the depositors want them. But the depositors would have to pay a fee, or negative interest rate to get this service. Additionally funds would not be available for loans for business, homes, education and other needs. I have not seen the issue of fractional reserve banking addressed in the FEE newsletter which I read daily. Thank you in advance for your consideration.”

Before I highlight what I think about fractional reserve banking (FRB) we should spend some time dissecting what it is.

Ever wondered what happens to your money when it gets deposited at the bank? Or maybe you’ve just always assumed that the bank keeps it all on hand?

Think again. When you go to the bank and put your money in, economists call this money bank deposits. Today in the United States, banks do not typically keep 100% of deposits on hand. Instead, when you deposit your money, some of it is kept in the bank, but the bank lends the rest out to borrowers looking for funds.

Economists call this system fractional reserve banking because only a fraction of total deposits are kept in the bank’s reserves. This is in contrast to full reserve banking, in which 100 percent of deposits are kept in the bank’s reserves.

To give an example of fractional reserve banking, imagine I deposit $100 in FEEBank. FEEBank can decide they want to keep 20% of my money on hand ($20) and lend out 80% ($80) for a year to earn 5% interest from a borrower.

At the end of the year when the loan expires, FEEBank earns $4 from the loan they gave and pays me 1% interest ($1) for my money.

This is a win-win-win. I earn money while my money is idle. The bank earns money on the loan. The borrower is able to borrow money at an acceptable rate.

Despite the upsides, you may have noticed a potential issue with the above example. Let’s scale the bank up a bit to see this issue manifest in a more realistic example.

Imagine FRB on a larger scale. Ten people put in $100 each for a total of $1,000 in FEEBank’s reserves. If the bank wants to keep 20% in reserves, they keep $200 on hand, and they can lend out $800.

Now imagine one customer goes in and wants to take their $100 out. FEEBank has lent out $800 of the $1000 and they have $200 on hand. They give the first customer $100 of the $200 and are left with $100.

But now say a second customer comes in and wants their $100 back too. You probably see where this is going. If the second customer withdraws all funds, the bank is left with $0 on hand.

If any other depositors come in and ask for money, the bank is in trouble. FEEBank has no way of giving depositors the money they request! They can’t simply call back the $800 loan. If this happens, FEEBank goes under. In our modern economy, regulators would come and take over bank operations and FEEBank owners would lose their investments (unless they get bailed out or can borrow the money).

So FEEBank has a decision to make when engaging in FRB. The larger the percent of deposits kept on hand, the smaller the chance that depositors will clean them out. On the other hand, having a larger percentage of deposits means banks can’t make as much money from lending.

Customers experience a trade off too. Banks are able to hold money and offer the customers interest because the bank lends out their deposits. So customers are more at risk when their banks lend out their funds, but they receive a better return.

So, given the risk to customers, should FRB be prohibited? I don’t think so. But I also think that’s the wrong question.

The bank hypothetically not being able to pay back depositors is no big issue. A lot of our financial system is built on risk. When you loan money, you may not get your money back. When you loan money through an intermediary (like a bank), it’s possible they don’t get paid back. And, so long as customers are made aware of the risk that FRBs may run out of money, I don’t see any problem with letting customers take that risk.

If we think people should be able to turn their money into poker chips at casinos, I think it’d be odd to say they shouldn’t be able to turn it into fractional bank deposits.

But, as I said, I think this is at least partly the wrong question. I do think FRBs would exist in a modern competitive system, but I can’t be sure because our banking system is not competitive.

Government facilitated deposit insurance, depositor bailouts, ballooning regulatory codes, and bailouts for banks deemed “too big to fail” make it difficult to know what the banking system would look like in the modern US absent the visible hand of government.

All of this ignores the even bigger government intervention in the world of finance—a monopoly on the production of currency. Economist Lawrence White has written extensively on both the theory and history of banking in a world with competing monies.

In a freer system, I think it would likely be easier to find banks who keep all money on hand and charge a yearly fee, similar to what Dr. Overfield mentions in his question above.

Similarly, economist Robert Murphy has proposed a full reserve system which doesn’t require yearly fees and allows for lending by having depositors agree to lock in their funds for a specific amount of time which matches with the loan maturity.

Of course, this system still runs the risk of companies not being able to pay back their loans therefore making banks unable to pay back depositors. But it is, at least, an alternative option to the somewhat bland world of banking choices available today.

In summary, I don’t find FRB to be illegitimate, ethically or economically. Businesses constantly manage and weigh risks every day that, under certain circumstances, could blow up in the faces of owners or customers.

So long as customers are not defrauded by promises of it being completely risk free, my assumption is some successful entrepreneur will be able to effectively manage the risk of fractional reserves to provide depositors with a relatively high return.

But I am bothered by how standardized the banking industry is today and how few options there are for customers. It seems unlikely to me that in a world free of layers of subsidization, regulation, and monetary monopoly that our banking system would look like it does today.

AUTHOR

Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education at George Mason University.

RELATED ARTICLE: A Billionaire Progressive Has Transformed America—by Destroying It

RELATED VIDEO: How to Survive a Bank Collapse

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

Why We Should Let Bad Banks Fail

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Bad banks need consequences. Let them fail.

By now, you’ve likely heard about regulators closing down Silicon Valley Bank (SVB) and now Signature Bank as well.

While I’m not going to go into all the details, the basic story is described well in this article on Seeking Alpha. Essentially, SVB received a large influx of deposits as the Federal Reserve flooded the market with dollars during COVID.

From there, SVB went out and bought government bonds to store that money. But then, the Federal Reserve started enacting policies which moved interest rates up. The problem? As interest rates rose, the bonds SVB purchased in the past declined in value.

Bond prices and the interest rate have an inverse relationship. If interest rates increase, you can earn a higher return on financial assets purchased today. When that happens, bonds issued at a previously lower rate must sell at a discount to compete.

So when rates rose, SVB’s assets (composed largely of old lower-rate government bonds) plummeted in value.

The key question now is, what are we going to do about it?

I have a modest proposal—let them fail.

Allowing banks to fail may sound extreme, but it’s really the most reasonable solution. It’s true there will be some costs if the banks fail. Any time a business fails, other investors tied financially to the company lose.

But here’s the rub—people who invest in bad businesses should lose. SVB’s failure is a reflection of the fact that it was a wealth shredder. It took depositors’ perfectly good cash, and converted it into now severely devalued bonds.

Banks that destroy wealth shouldn’t be allowed to continue to do so indefinitely. And when depositors make a “run” on bad banks, they’re performing a public service.

At this point, a bank bailout not only would mean the taxpayers will be left holding the bag for bankers’ mistakes—it would mean screwing up incentives in the banking industry even more.

To see the incentive problem, consider an example. Imagine a world where, no matter the circumstances, the government will pay to fix cars after every accident. What do you think this would do to the number of car accidents per year? It would sky-rocket.

If you never need fear paying a price for crashing your car, why drive carefully? There is still some incentive to avoid serious accidents due to injury, but the point is this system lowers the cost of risky behavior, and therefore lowers an individual’s incentive to be careful. Economists call this a moral hazard problem.

And this is the primary issue with bank bailouts. If the government sets a precedent that all bank failures will be ameliorated by using taxpayer money, banks will engage in risky behavior which they otherwise would not. Why be cautious with depositors’ money if you get a bailout no matter what?

You cannot have a healthy free market when you privatize the profits and socialize the losses. The taxpayer’s wallet, if treated like common property, will be subject to the tragedy of the commons.

And I don’t just mean that I’m against a formal bailout to save investors. I’m opposed to taxpayer dollars being reallocated to save the bottom line of anyone involved. Some may worry about small depositors, but the FDIC already insures up to $250,000 (regardless of what I or anyone else thinks about that policy), meaning every depositor who has less than that in their account is getting their money back already.

And for the larger depositors? Business deals have risks. We cannot pay people to ignore that fact. If you want to house more than a quarter of a million dollars in any one institution you should be very careful in picking.

If some individual wants to come along and buy SVB or these other failing banks and try to resuscitate them, I invite them to try. Maybe there is a profit opportunity there. But if the choice is between a bailout and letting them fail, the answer is clear to me.

If they can have the profits, they should have the losses as well.

AUTHOR

Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education at George Mason University.

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

CBO: Interest on Debt to Triple by 2033, Surpass Defense Spending by 2028

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Here’s one ballooning problem the military can’t simply knock out of the sky: net interest payments on the U.S. government’s debt are projected to triple over the next 10 years, totaling 300% of 2022 outlays in 2033, according to a new report published this week by the Congressional Budget Office (CBO).

According to CBO projections, interest on the debt (which claimed 7.5% of federal government spending in 2022) will rise sharply to 10.3% of spending in 2023 and then continue rising steadily, surpassing defense spending (11.9% of spending in 2022) in 2028 and reaching 14.4% of spending by 2033.

This bad news on rising interest costs comes amid another, short-term crisis regarding the debt ceiling. The U.S. government hit its statutory debt limit of $31.4 trillion on January 19 of this year. Treasury Secretary Janet Yellen has resorted to “extraordinary measures” to “borrow additional funds without breaching the debt ceiling,” the CBO explained, but they estimate that “the Treasury would exhaust those measures and run out of cash sometime between July and September of this year” unless Congress acts to raise the debt ceiling. For every penny Congress raises the debt ceiling, it will only aggravate the interest problem more.

The increase in net interest payments has two primary causes: interest rates and deficit spending.

First, the Federal Reserve’s interest rate hikes to fight inflation contribute to higher interest rates the U.S. must pay on preexisting debt, with a small lag in time. The Federal Reserve has raised the federal funds interest rate eight times in the past 12 months, from a targetrange between 0.25%-0.00% in January 2022 to a range between 4.50%-4.25% today.

“Net outlays for interest, which rose by 35 percent last year, are projected to increase by 35 percent again this year,” said the CBO. “The projected increase in 2023 occurs primarily because the average interest rate that the Treasury pays on its debt has risen sharply this year and is expected to rise further as maturing securities are refinanced at rates that are higher than those that prevailed when they were initially issued. For example, the interest rate on 10-year Treasury notes averaged 1.3 percent in 2021 and 2.4 percent in 2022; that rate averages 3.8 percent in 2023 in CBO’s current economic forecast.”

Second, continued deficit spending increases the volume of debt on which the U.S. government must pay interest. (To clarify, “debt” is the total, cumulative amount owed, while “deficit” is the difference between expenditures and revenues over a given period of time.) “Debt held by the public (in nominal terms) is on track to increase by 6 percent from 2022 to 2023,” said the CBO, which “projects a federal budget deficit of $1.4 trillion for 2023.”

In fact, the CBO projects the federal government will run an annual deficit of $1.4 trillion-$2.8 trillion (amounting to 5.4%-7.3% of estimated Gross Domestic Product [GDP]) for every year, 2023-2033. In their February report, the CBO added 20% to their projected deficit over the next 10 years, due to changing economic and legislative factors.

Assuming that “current laws governing taxes and spending generally remained unchanged,” CBO projects that “federal debt held by the public is projected to increase in each year of the projection period and to reach 118 percent of GDP in 2033 — higher than it has ever been.”

Rising interest payments will only exacerbate the U.S. government’s budget shortfalls. According to the CBO project, the percentage of the budget devoted to paying interest will nearly double from 2022-2033. Other slices of the pie must get smaller as a result. But, as Figure 1 shows, the decreases won’t come from mandatory spending (it’s mandatory, after all), which is already a majority of federal spending. Instead, the increasing interest payments mean a smaller slice of the pie is left over for discretionary spending — including a vital subset, defense spending. The CBO estimates that defense spending will decline from 13.2% of federal expenditures in 2024 to 11.1% in 2033 (with nondefense spending declining proportionally), as interest payments increase from 11.5% to 14.4% over the same period.

VIEW: Figure 1: CBO Projection – Spending by Category (in Pct.)

Of course, one often overlooked feature of the spending “pie” analogy is that the pie can grow in size — through either expanding revenues or assuming additional debt. As Figure 2 makes clear, the CBO doesn’t predict that discretionary spending — either for defense or nondefense purposes will shrink in absolute terms. Rather, it will grow more slowly than interest payments, mandatory spending (mostly Social Security, Medicaid, and Medicare), and by implication, the whole economy as well.

VIEW: Figure 2: CBO Projection – Spending by Category (in $Billions)

One major asterisk to CBO estimates is their assumption that “current laws governing taxes and spending generally remained unchanged.” There’s nothing wrong with projecting from that assumption — it’s their job at the Congressional Budget Office, actually. But a lot can change over 10 years. For one thing, “forecasting interest rates is particularly challenging,” the CBO admitted in 2020. Three presidential elections and two midterm elections give plenty of time for political coalitions to change “current laws.”

It’s not implausible that America might experience a recession, or even two, over a 10-year period; this, too, could radically alter taxation and spending priorities. Foreign events may also interject themselves; a foreign conflict with, say, China could substantially increase military spending. All these plausible variables could dramatically alter the shape of actual government spending, 10 years down the road.

What the CBO projection can tell us is that our current policies are needlessly backing us into a corner. Just paying the interest on our current national debt will cost more and more, and the government continues to overspend its revenues to the tune of trillions (with a “T”) per year. Meanwhile, the CBO predicts mandatory spending will increase by 60% from 2023 to 2033, primarily due to the population aging into Social Security benefits. The combined pressure of these factors will reduce the federal government’s freedom to spend discretionary funds (on everything else), trimming them from 26.5% of total spending in 2022 (and somehow 29.1% in 2024) to 23.9% of total spending in 2033.

If the CBO’s projection is accurate, when Congress gets around to allocating funds in 2033, they will have less than a quarter to work with out of every dollar that they spend. That quarter must cover all discretionary spending, including defense spending.

Net interest payments are far from the most expensive category of federal spending, as Figures 1 and 2 illustrate, so why do they matter so much? One reason is that they perpetuate the deficit spiral. The CBO called the “net interest outlays increase … a major contributor to the growth of total deficits.” These deficits add to the debt, which then increases the interest the U.S. government must pay even further.

Another reason is the irresponsible folly it implies. The U.S. government is in the situation of a person who has gotten up to their eyeballs in credit card debt. Yet the government not only continues to finance purchases with credit, but only ever pays the interest that comes due, and never pays down the ever-growing principal. Sooner or later, those chickens will come home to roost, and, when they do, everything will smell like chicken houses.

A third reason to worry about the growing interest payments is that it complicates the math for any plan to reach a balanced budget. “Opportunities to trim costs are limited, with only about one-third of federal spending labeled as discretionary,” wrote analysts at The Wall Street Journal. Those opportunities shrink further as discretionary spending is crowded out by interest payments.

A fourth, and related, reason is it leaves us less prepared for any crisis. Apart from possible military crises, the CBO forecasted last month that Social Security will become insolvent in 2033, 10 years away. Analysists have recognized for decades that the entitlements time bomb is most likely to kill us when it finally detonates, but America lacks the political will to address that issue yet.

Still, the U.S. government can be better or worse prepared when that time comes. Our best escape route is to free up some funds to deal with the ultimate insolvency of Social Security. Instead, we continue to spend money we don’t have. It’s as if we are trapped in a corral with a deadly bull lying fast asleep. We could choose to flee before the bull awakes. Yet America has not only remained in the ring, but we have backed ourselves into a corner, limiting our chances to dodge its gory horns. And, on top of that, we occupy ourselves by stringing barbed wire across our best escape route. When the bull finally awakes, we will deserve all the consequences of our folly.

If America’s fiscal situation is dangerous, even desperate, why haven’t we confronted our fiscal irresponsibility yet? One reason is that historically depressed interest rates kept legislators from feeling the consequences of their actions. For 11 out 14 years from 2008-2020, the federal funds effective rate lay under 1% (and most of that time it was under 0.2%). In 2015, the interest rate on a three-month Treasury bill, which averaged almost 5% in 2007, had dropped to 0.03%. This created an era of cheap debt, where Congress could overspend with hardly any consequences. Now, as interest rates rise, as we always knew they would, the U.S. government not only has to shoulder an interest burden to which it is unaccustomed, but it has also lost the habit — or even the façade — of fiscal restraint.

According to the latest CBO report, 2028 represents a shocking threshold: the year when the U.S. government will have to spend more paying the interest on our $31.4 trillion of debt than it will spend on national defense. Whether we reach this landmark a few years early or late, the point is that our profligate legislature is spending our country into a pointless crisis.

Just as no one wants to be the team down by three touchdowns at the two-minute warning, no country should willingly bury itself under so much debt that it’s mathematically impossible to escape. Alas, the only similarity between wisdom and Washington is that both begin with “W.”

AUTHOR

Joshua Arnold

Joshua Arnold is a staff writer at The Washington Stand.

EDITORS NOTE: This Washington Stand column is republished with permission. ©All rights reserved.

The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

Today’s Anti-Capitalists Want to Regulate What You Can Eat, How Often You Drive, and the Size of Your Home

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It may sound cruel to say so, but such thinking closely mirrors that of the Khmer Rouge in Cambodia.

Planned economics is enjoying yet another revival. Climate protection advocates and anti-capitalists are demanding that capitalism be abolished and replaced with a planned economy.

Otherwise, they claim, humanity has no chance of survival.

In Germany, a book called Das Ende des Kapitalismus (English: The End of Capitalism) is a bestseller and its author, Ulrike Hermann, has become a regular guest on all the talk shows. She openly promotes a planned economy, although this has already failed once in Germany—just like everywhere else it has been tried.

Unlike under classical socialism, in a planned economy, companies are not nationalized, they are allowed to remain in private hands. But it is the state that specifies precisely what and how much is produced.

There would be no more flights and no more private motor vehicles. The state would determine almost every facet of daily life—for example, there would no longer be any single-family houses and no one would be allowed to own a second home. New construction would be banned because it is harmful to the environment. Instead, existing land would be distributed “fairly,” with the state deciding how much space is appropriate for each individual. And the consumption of meat would only be allowed as an exception because meat production is harmful to the climate.

In general, people should not eat so much: 2,500 calories a day are enough, says Herrmann, who proposes a daily intake of 500 grams of fruit and vegetables, 232 grams of whole meal cereals or rice, 13 grams of eggs, and 7 grams of pork.

“At first glance, this menu may seem a bit meager, but Germans would be much healthier if they changed their eating habits,” reassures this critic of capitalism. And since people would be equal, they would also be happy: “Rationing sounds unpleasant. But perhaps life would even be more pleasant than it is today, because justice makes people happy.”

Such ideas are by no means new. The popular Canadian critic of capitalism and globalization, Naomi Klein, admits that she initially had no particular interest in climate change. Then, in 2014, she wrote a hefty 500-page tome called This Changes Everything: Capitalism vs. the Climate.

Why did she suddenly become so interested?

Well, prior to writing this book, Klein’s main interest was the fight against free trade and globalization. She says quite openly: “I was propelled into a deeper engagement with it partly because I realized it could be a catalyst for forms of social and economic justice in which I already believed.” She calls for a “carefully planned economy” and government guidelines on “how often we drive, how often we fly, whether our food has to be flown to get to us, whether the goods we buy are built to last … how large our homes are.” She also embraces a suggestion that the most well-off 20 percent of the population should accept the largest cuts in order to create a fairer society.

These quotes – to which many more such statements in Klein’s book could be added – confirm that the most important goal of anti-capitalists such as Herrmann and Klein is not to improve the environment or find solutions for climate change. Their real goal is to eliminate capitalism and establish a state-run, planned economy. In reality, this would involve the abolition of private property, even if, technically, property rights continued to exist. Because all that would be left is the formal legal title of ownership. The “entrepreneur” would still own his factory, but what and how much it produces would be decided by the state alone. He would become an employed manager of the state.

The biggest mistake planned-economy advocates have always made was believing in the illusion that an economic order could be planned on paper; that an authority could sit at a desk and come up with the ideal economic order. All that would be left to do would be to convince enough politicians to implement the economic order in the real world. It may sound cruel, but the Khmer Rouge in Cambodia also thought that way.

The most radical socialist experiment in history, which took place in Cambodia in the mid to late 1970s, was originally conceived in the universities of Paris. This experiment, which the Khmer Rouge leader Pol Pot (also referred to as “Brother 1”) called the “Super Great Leap Forward,” in honor of Mao’s Great Leap Forward, is most revealing because it offers an extreme demonstration of the belief that a society can be artificially constructed on the drawing board.

Today, it is often claimed that Pol Pot and his comrades wanted to implement a puritan form of “primitive communism,” and their rule is painted as a manifestation of unrestrained irrationality. In fact, this couldn’t be further from the truth. The Khmer Rouge’s masterminds and leaders were intellectuals from upstanding families, who had studied in Paris and were members of the French Communist Party. Two of the masterminds, Khieu Samphan and Hu Nim, had written Marxist and Maoist dissertations in Paris. In fact, the intellectual elite who had studied in Paris occupied almost all of the government’s leading positions after the seizure of power.

They had worked out a detailed Four-Year Plan that listed all the products the country would need in exacting detail (needles, scissors, lighters, cups, combs, etc.). The level of specificity was highly unusual, even for a planned economy. For example, it said, “Eating and drinking are collectivized. Dessert is also collectively prepared. Briefly, raising the people’s living standards in our own country means doing it collectively. In 1977, there are to be two desserts per week. In 1978 there is one dessert every two days. Then in 1979, there is one dessert every day, and so on. So people live collectively with enough to eat; they are nourished with snacks. They are happy to live in this system.”

The party, the sociologist Daniel Bultmann writes in his analysis, “planned the lives of the population as if on a drawing board, fitting them into pre-determined spaces and needs.” Everywhere, gigantic irrigation systems and fields were to be built to a uniform, rectilinear model. All regions were subjected to the same targets, as the Party believed that standardized conditions in fields of exactly the same size would also produce standardized yields. With the new irrigation system and the checkerboard rice fields, nature was to be harnessed to the utopian reality of a fully-collectivist order that eliminated inequality from day one.

Yet the arrangement of irrigation dams in equal squares with equally square fields in their center led to frequent floods, because the system totally ignored natural water flows, and 80 percent of the irrigation systems did not work—in the same way that the small blast furnaces did not work in Mao’s Great Leap Forward.

Throughout history, capitalism has evolved, just as languages have evolved. Languages were not invented, constructed, and conceived, but are the result of uncontrolled spontaneous processes. Although the aptly named “planned language” Esperanto was invented as early as 1887, it has completely failed to establish itself as the world’s most widely spoken foreign language, as its inventors had expected.

Socialism has much in common with a planned language, a system devised by intellectuals. Its adherents strive to gain political power in order to then implement their chosen system. None of these systems have ever worked anywhere—but this apparently does not stop intellectuals from believing that they have found the philosopher’s stone and have finally devised the perfect economic system in their ivory tower. It is pointless to discuss ideas like Herrmann’s or Klein’s in detail because the whole constructivist approach—i.e. the idea that an author can “dream up” an economic system in their heads or on paper—is wrong.

The historian and sociologist Rainer Zitelmann is the author of the book IN DEFENCE OF CAPITALISM which is being published in 30 languages.

AUTHOR

Dr. Rainer Zitelmann

Dr. Rainer Zitelmann is a historian and sociologist. He is also a world-renowned author, successful businessman, and real estate investor. Zitelmann has written more than 20 books. His books are successful all around the world, especially in China, India, and South Korea. His most recent books are The Rich in Public Opinion which was published in May 2020, and The Power of Capitalism which was published in 2019.

RELATED ARTICLE: New Hampshire Bakery Ordered to Remove Mural Because It Depicts Pastries

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

Young Montana Entrepreneur Is Being Legally Barred from Hauling Trash Because Established Players Don’t Want the Competition

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If it sounds crazy that established players get a say on who is allowed to compete with them, well, it should.

When Parker Noland launched his trash-hauling business at age 20 in the summer of 2021, he was excited about the opportunities that lay before him. After taking out a loan from a local bank, the Montana native bought a truck and some dumpsters and got to work promoting his services. The business plan was simple: he would deliver dumpsters to construction sites looking to get rid of debris and then transport the dumpsters to the county dump once they were full.

Things quickly got complicated for Noland, however. Though he had registered his business, gotten the proper insurance, and complied with all public health and safety standards, he was still missing one thing, a Certificate of Public Convenience and Necessity. As a result, right when he was about to get his business off the ground he was given a cease and desist order by the Montana Public Service Commission, the agency responsible for administering the Certificate law.

Noland applied for the Certificate shortly thereafter on September 8, 2021, but his troubles were just getting started. Two national garbage companies—his would-be competitors—protested his application, which they are allowed to do under the law. The companies issued various demands, such as data requests, and Noland’s legal expenses to fight the protests were soon thousands of dollars and counting.

On November 9, 2021, Noland made the difficult decision to withdraw his Certificate application, seeing as he could not afford the mounting legal expenses involved with fighting the protests. To this day, Noland remains ready and willing to run his trash-hauling business, but he is legally barred from doing so until he gets the Certificate.

On November 15, 2022, Noland teamed up with the Pacific Legal Foundation (PLF) to file an official complaint with Montana’s eleventh judicial district court, seeking a permanent injunction against further enforcement of the law on the ground that it violates his Constitutional rights.

If it sounds crazy that established players in an industry are empowered by the government to bury would-be competitors in unnecessary legal fees, well, it should. As PLF argues, these laws practically amount to a “competitor’s veto.”

“Montana’s Certificate of Public Convenience and Necessity law allows established garbage companies to keep potential competitors like Noland out of the market,” PLF writes in their complaint. “Noland applied for a Certificate, but was forced to withdraw his application after some of the largest garbage companies in the nation protested his application, which imposed massive delays and created enormous financial costs. The Certificate provisions challenged in this case prevent Noland and other would-be entrepreneurs from working—not because they are unfit to operate—but to protect incumbent garbage companies from having to compete fairly.”

“Incumbents can protest for the bare reason that they do not want to face new competition,” PLF continues. “The Montana Public Service Commission is further empowered to reject an applicant because it believes there is no ‘need’ for a new company, and therefore that a new business would take away from the incumbent’s profits. Together these provisions create a Competitor’s Veto over those who wish to exercise their right to earn a living as a Class D hauler. This blatant economic protectionism is prohibited by the Montana and U.S. Constitutions.”

In sum, “the Competitor’s Veto allows existing garbage companies to force an applicant to undergo the time and expense of an administrative hearing that has nothing to do with the applicant’s public safety record, or any other matter related to public health or safety, but instead simply because existing garbage companies seek to restrict market competition.”

Noland is hardly the only entrepreneur running into this problem. As PLF notes, there were eight applications for a Class D (trash hauling) Certificate in Montana between January 1, 2018 and September 8, 2021. All eight faced protests. As a result of the protests, four of the applications were withdrawn, one was denied, and two were granted the Certificate only after agreeing to reduce the scope of their business.

The story of the one successful applicant who didn’t have to reduce their scope is revealing.

“The only applicant who succeeded in securing a Certificate over a protest, and without reducing the scope of its business, was L&L Site Services, Inc., on December 15, 2020,” PLF notes. “After a lengthy legal fight before the Commission, which involved extensive discovery, including 13 supplemental responses to Allied Waste Services’ data requests, a 5-day evidentiary hearing requiring legal representation, and contentious oral argument, L&L’s application was granted on April 29, 2022, over two dissenting votes from Defendants Brad Johnson and Randy Pinocci.”

The garbage company which protested their application has since filed a Motion for Reconsideration, which remains pending.

“Over the past 3 years,” PLF concludes, “the strongest predictor for getting permission to enter the trade of dumpster servicing was agreeing to reduce one’s operating authority to not compete with incumbents. And even though one applicant was able to afford the time and expense of the legal battle required by an incumbent’s protest, the challenged provisions still allowed the incumbent to inflict significant costs and delay on its potential competitor for purely anti-competitive reasons.”

Laws requiring a Certificate of Public Convenience and Necessity (CPCN) cover a variety of industries in different states—from trash collection to telecommunications to natural gas—but they all have similar impacts. They are closely related to Certificate of Need laws (CON laws) which create similar barriers in the healthcare industry (hospitals, nursing homes, ambulances, etc.) and in other industries such as transportation (specifically moving companies).

The justification for these kinds of laws is twofold. For one, proponents argue that allowing businesses to compete without demonstrating a “need” will lead to duplicative services, that is, an overabundance of supply in a given area. The problem, they contend, is that this will lead to higher prices because companies will charge more for the capacity they do use to compensate for the unused capacity. If a company builds a hospital, for example, but realizes it can’t fill half its beds because the market is already saturated with hospitals, it will ostensibly hike prices for the beds it does fill to compensate for its loss.

The other argument is that by restricting entry into “saturated” markets, politicians can use CPCN and CON laws to encourage entrepreneurs to set up shop in areas that tend to have less access to these services, such as rural areas.

These arguments may sound plausible at first glance, but upon closer inspection they are rather spurious. For one, how does a bureaucrat determine when a market is too saturated? There are no objective criteria here. What’s more, the very fact that an entrepreneur is planning to enter a market is evidence that, at least from their perspective, there are needs that are currently not being met by established players.

Another major problem with this analysis is the assumption that businesses can unilaterally raise prices in order to cover their costs. This is not how prices work. Prices are set by supply and demand. If anything, a greater supply in a region will lead to lower prices.

The idea that these laws are needed to push entrepreneurs to “lower access” regions is also dubious. An entrepreneur, almost by definition, is seeking to meet needs that haven’t already been satisfied. Thus, they naturally gravitate to precisely these “low access” regions. If they successfully set up shop in a supposedly “saturated” market, it is evidence that the market wasn’t, in fact, saturated. If their business in that region fails, on the other hand, the market will quickly usher them elsewhere all on its own.

Noland’s story is a case in point on this. As PLF notes, construction companies specifically sought out Noland because the large incumbent companies weren’t picking up bins in a timely manner. In other words, there was a market need that was clearly going unfulfilled. The market was not saturated, and that’s precisely why Noland was setting up shop in the first place. Further, Noland’s more compact truck “allowed him to offer services to areas where the incumbent companies did not,” something he was no doubt planning to take advantage of.

There’s a curious irony here. Though the Certificate law was intended to increase services in underserved areas, its practical impact is to restrict services in evidently underserved areas.

There’s an irony on the price front too. Though the law was intended to keep prices down, by restricting entry it is actually creating opportunities for incumbents to keep prices up!

Thus, on both issues, these laws are not only unnecessary, but counterproductive. They are hurting the very consumers they were supposed to protect, not to mention the would-be competitors like Noland who are effectively prohibited from entering the market.

The economist Murray Rothbard summarizes the effect of these policies well in his book Power & Market.

“Certificates of convenience and necessity are required of firms in industries—such as railroads, airlines, etc.—regulated by governmental commissions. These act as licenses but are generally far more difficult to obtain. This system excludes would-be entrants from a field, granting a monopolistic privilege to the firms remaining; furthermore, it subjects them to the detailed orders of the commission. Since these orders countermand those of the free market, they invariably result in imposed inefficiency and injury to the consumers.”

While the Certificate law in Noland’s story is certainly troubling, the deeper problem this story highlights is the belief that government restrictions of the market can help consumers. The reality is exactly the opposite. The best way for the government to help consumers is to get out of the way, and in particular, to stop enforcing regulations that protect established players from new entrants. Let entrepreneurs compete. Let consumers have choices.

America was built by the Parker Nolands of the world, young entrepreneurs full of dreams and ambitions.

It would be a shame if we strangled that spirit with red tape.

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AUTHOR

Patrick Carroll

Patrick Carroll has a degree in Chemical Engineering from the University of Waterloo and is an Editorial Fellow at the Foundation for Economic Education.

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