How Inflation Has Been Driving Wealth Inequality In the United States

How Inflation Has Been Driving Wealth Inequality In the United States

“There is enough for all. The earth is a generous mother; she will provide in plentiful abundance food for all her children if they will but cultivate her soil in justice and in peace.”- Congressman William Bourke Cockran (D-NY)

With the massive oncoming rush of poverty as a result of government-imposed shutdowns, Americans can expect that the progressive left will shout again in a loud chorus about how capitalism has failed the poor. But the increasing global poverty brought about by the heavy hand of government mandates to close down the capitalist system cannot be leveled against the market system itself. You can’t blame a depression on the failure of the market system when official government policy was to shut the markets down.

It would surprise some people on the left to learn that the capitalist, free market system not only brings increasing general prosperity—something even many on the left begrudgingly acknowledge—it also brings up the wages of the poor and has its own kind of safety net system in place for frugal, working people in times of economic distress. While many on the left—such as academics Emmanuel Saez and Thomas Piketty, politicians such as Bernie Sanders and the “Squad,” and leftist media outlets—like to talk about how there’s an increasing concentration of wealth in the hands of the rich, they’re only partly right.

The increasing number of billionaires around the world is largely a simple consequence of our increasingly globalized economy. If a man is able create a new and innovative product and sell it for a one-dollar profit to 1/3 of all Americans under the old protective national economy, he earns a little more than $100 million. But if an innovator sells a product to 1/3 of the people of the world in the global economy for a one-dollar profit each, he becomes a multi-billionaire. Sure, there are some crony billionaires like Elon Musk, who has been the recipient of more than $5 billion in government subsidies. And how could Musk not be rich after receiving so much largesse transferred from workers and taxpayers to his bottom line? But it is folly to claim the free market was at work in making Musk a billionaire. And despite the corporate subsidies exception, it perhaps shouldn’t be surprising that those most able to sell to the world with little restrictions—like tech companies—are producing the greatest number of billionaires.

This latter category of billionaires are not taking money from the working people through the tax system; they are profiting by providing new products that working people actually want. And in some cases, like Facebook’s Mark Zuckerberg or Twitter’s Jack Dorsey, they are becoming billionaires by offering a service to consumers for free.

Here’s where Piketty and Saez are wrong: the concentration of wealth globally is gradually declining, but the concentration of wealth in rich economies—including Europe—has been increasing. Most of this has been because of an increasing global free market in labor, as the dynamic capitalist economy shifts jobs to those most desperately in need of a boost in living standards. There’s a reason living standards have increased dramatically in China, much of Eastern Europe, Chile, and Mexico in the last three decades. And because of the diversion of jobs from rich countries to poor countries, it has put some stress on wage growth for middle and lower income workers in what the IMF calls the “advanced economies.” Meanwhile, many of those increasingly rich business innovators selling to the entire world are still coming from the advanced economies. One anecdote that follows along these lines are that Apple’s Steve Jobs and Arthur Levinson in the United States became billionaires even as they shifted much of the production of iPhones to China’s increasingly wealthy laborers.

The capitalist mechanism to raise people out of poverty doesn’t discriminate against people because of national borders or ethnicity.

The research by Piketty and Saez have contributed to a false narrative in another sense: the growing disparity between the wealth of the super-rich and the working class in America today began in the mid-1970s, not after the Reagan tax cuts (which didn’t take effect until 1982), as many on the left have been led to believe. A more careful study of charts published by Thomas Piketty and Emmanuel Saez reveals the trend toward increasing centralization of wealth in the U.S. began shortly after the dollar was severed from the gold standard (and inflation initiated) and the Tokyo round of GATT (which decades later became the World Trade Organization). Both had an impact: the former by stealing the wealth of the creditor-workingman and transferring it to the debtors in the financial sector, and the latter by reallocating some of the dynamism of the U.S. economy globally to alleviate the conditions of extreme poverty in then-poor countries. In the 1970s, that meant lifting extremely poor nations like South Korea, Ireland, and Taiwan out of poverty.

It shouldn’t be surprising that as the globe has further embraced capitalism and free markets—however imperfectly—global income inequality has decreased in the past three decades. Revealingly, capitalism alleviates poverty in nations in proportion to the amount that the nations practice capitalism and free markets. Thus, since the 1990s, the economies of the Baltic states (Lithuania, Latvia and Estonia), the Czech Republic, and Slovenia took off while Belarus and Ukraine lagged behind.

But Piketty and Saez have a point when they argue the divergence between the rich and poor in the United States is growing faster than in European countries and other advanced economies. It’s true that the divergence in wealth concentration is increasing at a faster pace in the United States. And all of that difference can’t be chalked up to globalization, even though U.S. laborers’ wages were the highest in the world in the 1970s (and would therefore presumably have the highest stress from opening up the global free market in labor) and the U.S. has had the most technology innovators.

So what explains the rest of the difference?

There are a couple of reasons, and none have anything to do with capitalism.

The first is the cronyism already mentioned, which is far more rampant in the U.S. than other countries. Whenever government gives $5 billion to one man after taking it from the tax dollars of millions of working Americans, inequality is going to increase. And the level of cronyism in the U.S. has increased dramatically since 2008, with bailouts of the financial sector in 2008-12 and another, larger bailout ($4 trillion in subsidized loans) in 2020 hidden in the COVID-19 bailout CARES Act.

The second reason is inflation, which is an increase of the money supply that decreases the purchasing power of the dollar. Creditors are hurt and debtors are helped when the value of the dollar falls through inflation. Here’s an example from my personal history that helps to explain how creditors are hurt by inflation and debtors are helped by it:

I first moved out on my own in 1989 and rented a cheap one-bedroom apartment in Appleton, Wisconsin and thereafter visited home in Massachusetts where I told my father I was able to rent the apartment right across the river from Lawrence University for the incredibly cheap price of $290 per month.

He almost turned white, and eventually sputtered out, “That’s more than my mortgage.”

He had bought his big colonial-style home for his wife and five kids with a low interest rate in 1971, just as hyper-inflation was about to rear its ugly head. Over time, it became much easier to make payments on his 30-year mortgage (though our family struggled financially during this hyper-inflationary period on other necessities). In essence, the lender had been cheated out of the value of their loan to my father by the hyper-inflation.

My father had been lucky in a way I wasn’t. A few years later I bought a house with a loan where the interest rate was nearly nine percent (8.875%, with excellent credit and 20% down), at a time when the CPI was only increasing by four percent annually (and it would fall from there). The lenders had built the risk of inflation into their interest rates since the 1970s, and had over-compensated a bit.

And while the financial sector is the business of being in debt and managing other people’s money, the working man—especially the poor working man—is primarily a creditor. This may seem counter-intuitive: how can a poor man with no money extend credit?

The answer: his labor.

The working man generally only has his wages to sell. And he credits his employer for a week or two of his wages in perpetuity, always advancing his labor before he receives his pay. While this loan of $1,000 or so worth of labor to his employer every week may not seem like much, keep in mind that the largest line item on the ledger of almost every corporation in America is the wage line. Collectively, working people—even when they have no ability to borrow from others because they “have no credit”—are themselves huge creditors. Working people’s wages amount to a rolling loan of at least $160 billion (a week’s worth of $8.4 trillion in wages annually), a deposit level larger than that held by Goldman Sachs! The level of deposits credited to employers by wage-earners comfortably ranks among the 20 largest banks in the U.S.

While the financial sector has frequently failed the economy (though this has often been in response to bad government incentives), there’s one bank that’s never failed to keep credit flowing: laborers.

The poorer a man is, the more he is forced to be a creditor. While much of the middle class owns their own homes (or finances the purchase of them through debt), the poor working man must also extend his credit to his landlord, paying in advance a month’s rent for his apartment or home and typically advancing an additional month’s worth as security deposit.

Inflation takes away the value of these credited items, silently stealing from the poor working man by percentages rather than at the end of a gun. For the working poor, it takes value from everything they have: from their wages, from their rent, from the meager dollar deposits in their checking accounts (collectively, laborer/wage-earners are also among the greatest creditors to banks), and even the cash in their wallets. The richer a person is, the higher the proportion of his or her assets which are protected against currency inflation. Rich people generally a hold very small percentage of their assets in cash and instead have their wealth vested in inflation-protected hard assets like real estate, stocks, and commodities.

In essence, inflation is the most “regressive”—to use a term of the left—of any tax: The poorer you are, the higher proportion of your income it takes. Meanwhile, that which worker and creditors lose, borrowers—especially the financial sector—gain.

The financial and banking industries like to think of themselves as essential to the economy, and they are. But the financial and banking industries are essential only to the extent that they can properly price time and interest in the markets. Financiers and bankers don’t actually produce products consumed by people or manufacture food or physical products or provide services that contribute to people’s standard of living. Once they misallocate wealth and create a recession, their misuse of society’s abundant resources is exposed and the capitalist economy takes their wealth away and gives it to the worker by creating a recession and deflation of prices.

Deflation in a recession is a redistribution of wealth to the poor, especially the working poor. There’s a kind of “preferential option for the poor”—to borrow a term from the Catholic Church’s social teaching—in the pure capitalist pricing mechanism. Deflation acts a cushion for the frugal working man, letting his meager savings go further through the storm of a recession created by others.

One of the best signs a society is run by oligarchs is that its policy is dominated by rabid avoidance of deflation and strong encouragement of inflation. But this policy is unfortunately the priority of both parties in Washington. Congress’ first act during the coronavirus shutdown was to prop up prices for the financial sector with a giant $4 trillion subsidized loan program through the Federal Reserve Bank. The appropriately named “CARES Act” (even if it was only ironically appropriate) showed very precisely who Congress cares most for, and it was not the working man or the free market. The bill was passed unanimously in the senate and by voice vote in the House—despite efforts led by Representative Thomas Massie of Kentucky—and signed by President Trump. Notably, all the leftist congressmen and senators who squawk loudest about income inequality—Senators Bernie Sanders and Elizabeth Warren, the “Squad,” Ro Khanna—voted in favor the bill that, as Massie tweeted out the day after the vote, was “the biggest wealth transfer from common folks to the super-rich (Wall Street and bankers) in the history of mankind.”

And when global oil prices fell at the beginning of the current oncoming depression, one of the first acts of President Trump was to broker a deal to re-empower the OPEC cartel to raise prices on consumers. Of course, lower gasoline prices amounts to one of the few financial benefits for consumers during the current government-imposed shutdown.

Avoiding falling prices has been the official policy of the U.S. government since 1930. The entire economic efforts of the Hoover Administration and Roosevelt’s New Deal were attempts to artificially prop up prices paid by the working man. In essence they were saying to the poor: “No, we won’t let you working people have your deflationary purchasing power back. We’re going to print new money and put it back in the hands of the same people who created the economic trouble in the first place.”

President Herbert Hoover initiated the Reconstruction Finance Administration, which loaned government money to the same mismanaged banks and utilities that had created the problem. President Franklin Delano Roosevelt and his compliant Congress passed the National Recovery Act, and the resulting National Recovery Administration arrested tailors for sewing pants for ten cents less than the regulated price and arrested chicken farmers for letting customers pick their own chickens they would buy (because the latter violated high-price-fixing regulations imposed by FDR’s rule-makers).

FDR also supported and signed the Agricultural Adjustment Act, which bought and destroyed agricultural produce before it could be sold in the market in order to keep consumer prices artificially high at the supermarkets. The idea that government would deliberately destroy perfectly good food in an economic depression when so many were going hungry in order so that the poor would have to pay a higher price at the cash register was just as insane a policy as it sounds, and it was a policy later lamented by folk singer Woody Guthrie.

And while official government policy was designed to rob the working man by keeping prices high at the the check-out counter, these government interventions also incompetently fiddled with the market pricing system and—this shouldn’t have been a surprise—extended the Great Depression until long after World War II had started.

By the way, paying farmers to produce nothing is a policy still practiced by the U.S. Department of Agriculture today, though in most cases it takes the form of subsidies for farmers not to plant in the first place. Dozens of farmers take in tens of millions of dollars in order not to plant crops at all, again, with the idea that this will raise prices in the supermarket for consumers.

Let’s go back to the point that the income inequality is increasing at a faster pace in the U.S. than in Western Europe. One might argue: how can anyone say that inflation is making the margin of wealth wider than European countries when European countries have inflation rates about the same as Americans (and in some cases worse)?

The answer is a little more complex, but it can be loosely summed up this way: The position of the U.S. dollar as the world’s reserve currency means that currency inflation is not only increasing the wealth of the banking and financial sectors at the expense of the American working man, but also at the expense of the working men in other countries that use the U.S. dollar as their international exchange currency. In short, the inflationary dollar system robs the working people of the world for the U.S. financial sector while the inflationary Euro, Ruble, or Pound only robs the working men of the countries where their currency circulate.

Sure, the U.S. banking and financial sectors benefit from the inflationary increase in the money supply of the dollar, as one would expect from debtors who are the first to receive new credit in an economy and are the first to use that purchasing power before it is diminished at the retail level. As a result, the U.S. financial sector is the richest in the world.

But the unseen impact of this currency inflation is that the laborer has had his wages and his savings robbed at the hand of the government at a time when the free market sought to return it to him, and at a time when the working man needed it most. It’s time for policy makers end the anti-labor price-fixing on behalf of the financial sector, especially in the current economic crisis. This should be a broad issue on which the ideological left and right, as well as libertarians, could agree upon.

New Global Data Shows Economic Lockdowns Have No Impact On Coronavirus Spread

New Global Data Shows Economic Lockdowns Have No Impact On Coronavirus Spread

The United States and much of the world may have initiated a business shutdown—resulting in tens of millions of unemployed domestically, along with all of unemployment’s other negative side effects—for no statistically measurable benefit in tamping down COVID-19. (See Figure 1 )

Figure 1A multivariate analysis of the 95 countries which had their first COVID-19 infection on or before March 15 and whether they had a “non-essential business” shutdown before April 7 yields a smaller infection rate coefficient for non-shutdown countries even after controlling for variables such as population density, percent of urban population, income levels and Asia-Pacific cultural differences (which includes higher proportional mask-wearing). Nor is there a statistically significant increase in death rate from COVID-19 among non-shutdown countries, though many nations with large elderly populations did experience higher death rates. (See Figure 2)

Figure 2While non-shutdown countries actually had lower infection rates, the study did not find that this difference was statistically significant (See Tables 1, 2 and 3 in the data discussion portion of this article below).

Much of the world panicked under inaccurate near-doomsday scenario theoretical models, shutting down businesses deemed “non-essential” in March and early April. But several dozen countries took the different path of engaging in social distancing and canceling large venues but leaving most businesses to operate with more modest restrictions.

The modeling scenarios predicting millions of deaths in the U.S. were predicated upon the unrealistic expectation that Americans would stupidly act socially precisely as they had before the virus, as if COVID-19 was no threat. However, even before regional shutdowns were imposed across the United States in the middle of March, large venues such as the NBA had canceled events, and Americans had begun mask-wearing even as officials such as CDC official Dr. Anthony Fauci and the World Health Organization were still counseling Americans not to wear masks when venturing out in public.

In short, the American public led the state and federal government response to the virus, providing an example of how decentralized individual responsibility make the country safe while government officials are still oblivious and providing bad advice in order to hoard masks.

With several months of data, it’s now possible to scientifically measure the results of the shutdowns. Since we now possess real-world data on the impact of the shutdowns, there’s no excuse to fall back on theoretical models or the patchwork historical Spanish Flu data from 1918 to run a study of the impact of business shutdowns. There’s never a scientific reason to dismiss the factual for the counter-factual. Indeed, to fall back on the old theoretical models at this point would be statistical malpractice: good scientists never discard actual results for a failed theoretical model or a tangential issue.

Of the six variables analyzed in the global data, only “percent urban population” and “advanced economy” registered as statistically significant (a 95% confidence that there is a positive affect). Both of these may be related, as the virus is transmitted primarily through human contact. Urban populations tend to have more personal interactions, and advanced economies are more likely to travel internationally. In general, advanced economies received their first infection earlier than lesser developed countries.

This study also attempted to isolate mask-wearing culture in the Asia-Pacific variable, and although Asia-Pacific nations tended to have lower infection coefficients, the differences were not found to be statistically significant.

An analysis of the 50 U.S. states and the District of Columbia, three of which didn’t engage in a business shutdown (Nebraska, South Dakota and Wyoming), yielded a negative coefficient on a two-variable analysis (Tables 4) but a five-variable analysis yielded a positive infection coefficient for states that didn’t shut down (Tables 5 and 6). But like the global data the business shutdown, neither was statistically significant with regard to infection rates.

Data Discussion: Methodology, Sources, and Tables

The goal of this paper is to study whether the shelter-in-place orders in the early months of the break out of COVID-19 in the United States saved lives in comparison with established scholarly research that opioid deaths increase by 0.19 per 100,000 population in the U.S. with a one percent increase in the unemployment rate. This amounts to 629 additional opioid deaths per year, per one percent increase in the unemployment rate in the United States.

This study measured only the marginal impact of “stay-at-home” orders and closure of “non-essential” businesses at the global, national, and U.S. state levels, not the impact of closure of schools, social distancing practices, prevalence of mask-wearing or mandatory closure of large venues such as sporting events, worship services, and concerts. The latter have largely been universal, and these latter restrictions clearly will also result in substantial long-term unemployment. The former—encompassing three U.S. states and at least 23 foreign countries—are also believed to be responsible for substantial unemployment, including substantial long-term employment.

In measuring which countries are “shutdown” countries and which are not, the following criteria were used:

Only countries that had their first COVID-19 infection before March 15 were considered in this study, countries with their first infection after that time were discarded in order to have approximately 8 weeks of infection data to measure (i.e., the beginning of the outbreak when—presumably—there was little time to accommodate scarce hospital beds and ventilators for the infected in the breakout).

“Shutdown” countries are nations (or states) that imposed national or regional closure of what were deemed “non-essential” businesses on or before April 7, according to a metric published by the BBC on April 7 (and hand-collected data by the author for U.S. states). Three nations had imposed shutdowns (including China) early in the outbreak but lifted them well before April 7, and they therefore count as “non-shutdown” nations. The lone exception to this rule of following the BBC story list is Singapore, which was listed as a non-shutdown nation on the BBC story, but imposed its first shutdown on April 7, just too late for the BBC press deadline, so it is included as a shutdown nation. The idea behind using April 7 as a metric was that the BBC provided a handy guide, and it would give more than a month of data on the spreading of the virus after a shutdown had been imposed.

The hypothesis to be tested is the following: “The economic shutdowns in the United States saved lives because they prevented at least an additional 627 COVID-19 deaths in the US with a 95% confidence level.” This hypothesis was rejected, though it is still statistically possible that the shutdowns did have a small positive impact in the infection rate. Note: The working assumption for this study is that the purpose of the shutdown is not to stamp out the disease, but to prevent a spike in deaths related to hospital capacity—i.e., the assumption that the number of infections (as opposed to deaths) will be the same whether the curve is a spike or a long, flat curve unless it involves over-capacity hospitals. Moreover, it is presumed that the closure of non-essential businesses will contribute to at least a one percent increase in the unemployment rate for at least one year.

Regarding hospital capacity, the United States had a relatively high level of capability compared with the nations of the world, leading the world in per capita intensive care beds. Moreover, because hospital ICU capacity was generally at 60% before the COVID-19 crisis, health care experts suggested that “if the infection rate is only 20 percent (low end of current estimates), we would largely be able to meet the needs for inpatient care if we flatten the curve to 12 months.” None of these capacities were exceeded in the actual infection, nor are any of them expected to be exceeded without a shutdown.

Country and state data was gathered from Worldometers.info and matched to a list of shutdown/no-shutdown nations published by the BBC April 7. 95 nations for which COVID data and shutdown information met the criteria, including 72 that had shutdown orders by April 7 and 23 nations that did not. Other information regarding percent of urban population or population density were gathered from the World Bank or the U.S. Census Bureau (2010). The “advanced economy” dummy variable was manually created by the author using the International Monetary Fund’s list of “advanced economies,” and the Asia-Pacific dummy variable was created by the author for nations on the Asia-Pacific rim or in Southeastern Asia.

All of the statistical regressions used for this study were run on Stata (version 16), and the graphs were generated using that software program (though the labels were enhanced using a graphics program). The working spreadsheets used for this study can be found here (world) and here (states/DC). The Stata commands used to generate the results can be found here.

Table 1. World data through May 20 – 2 variables

  TotCases/MilPop  Coef.  St.Err.  t-value  p-value  [95% Conf  Interval]  Sig
 No national or regional shutdown order -412.231 312.202 -1.32 0.190 -1032.202 207.740  
 Constant 1041.014 176.066 5.91 0.000 691.381 1390.647 ***
 
Mean dependent var 941.211 SD dependent var 1439.202  
R-squared 0.015 Number of obs 95.000  
F-test 1.743 Prob > F 0.190  
Akaike crit. (AIC) 1652.787 Bayesian crit. (BIC) 1657.895  
 
*** p<0.01, ** p<0.05, * p<0.1  

 

Table 2. World data through May 20 – 6 variables

  TotCases/MilPop  Coef.  St.Err.  t-value  p-value  [95% Conf  Interval]  Sig
No national or regional shutdown order -245.001 280.258 -0.87 0.384 -801.869 311.866  
Advanced economy (IMF) 1618.017 370.701 4.37 0.000 881.44 2354.591 ***
Asia-Pacific -102.237 69.230 -1.48 0.143 -239.795 35.321  
Percent urban population (World Bank 2018) 12.153 4.313 2.82 0.006 3.583 20.723 ***
Population density (people/sq. kilometer) -0.085 0.048 -1.78 0.078 -0.180 0.010 *
 Constant -217.357 221.373 -0.98 0.329 -657.221 222.506  
 
Mean dependent var 941.211 SD dependent var 1439.202  
R-squared 0.423 Number of obs 95.000  
F-test 7.888 Prob > F 0.000  
Akaike crit. (AIC) 1610.042 Bayesian crit. (BIC) 1625.365  
 
*** p<0.01, ** p<0.05, * p<0.1  

 

Table 3. World data through May 20 – Side-by-side table – 6 variable regression

  (1) (2) (3) (4) (5)
   TotCases/MilPop  TotCases/MilPop  TotCases/MilPop  TotCases/MilPop  TotCases/MilPop
           
No national or regional shutdown order -412.2 -543.3 -492.6 -242.6 -245.0
  (-1.32) (-1.81) (-1.61) (-0.86) (-0.87)
           
Percent urban population (World Bank 2018)   29.93*** 31.04*** 12.28** 12.15**
    (5.05) (5.06) (2.85) (2.82)
           
Population density (people/sq. kilometer – World Bank)     -0.0484 -0.0916 -0.0850
      (-0.99) (-1.95) (-1.78)
           
Advanced economy (IMF)       1631.8*** 1618.0***
        (4.40) (4.36)
           
Asia-Pacific         -102.2
          (-1.48)
           
_cons 1041.0*** -844.7** -903.0** -254.0 -217.4
  (5.91) (-2.85) (-2.98) (-1.16) (-0.98)
           
N 95 95 95 95 95
           
t statistics in parentheses      
=”* p<0.05  ** p<0.01  *** p<0.001″    

 

Table 4. US States and DC Two-variable linear regression

  TotCases/MilPop  Coef.  St.Err.  t-value  p-value  [95% Conf  Interval]  Sig
 No statewide shutdown order -507.375 984.315 -0.52 0.609 -2485.430 1470.680  
 Constant 3580.708 549.649 6.51 0.000 2476.147 4685.270 ***
 
Mean dependent var 3550.863 SD dependent var 3674.961  
R-squared 0.001 Number of obs 51.000  
F-test 0.266 Prob > F 0.609  
Akaike crit. (AIC) 985.015 Bayesian crit. (BIC) 988.879  
 
*** p<0.01, ** p<0.05, * p<0.1  

 

Table 5. US States and DC through May 27 –  5 variable linear regression

 TotCases/MilPop  Coef.  St.Err.  t-value  p-value  [95% Conf  Interval]  Sig
  No statewide shutdown order 670.906 918.241 0.73 0.469 -1176.357 2518.170  
Population density people/sq. kilometer (2010 US Census) 0.454 0.238 1.91 0.063 -0.025 0.934 *
Percent urban population  (2010 census) 10260.014 3672.727 2.79 0.008 2871.439 17648.589 ***
 Constant -4259.323 2318.506 -1.84 0.073 -8923.556 404.910 *
 
Mean dependent var 3550.863 SD dependent var 3674.961  
R-squared 0.246 Number of obs 51.000  
F-test 6.555 Prob > F 0.001  
Akaike crit. (AIC) 974.670 Bayesian crit. (BIC) 982.397  
 
*** p<0.01, ** p<0.05, * p<0.1  

 

Table 6. US States and DC through May 27 – side-by-side table

  (1) (2) (3) (4)
   TotCases/MilPop  TotCases/MilPop  TotCases/MilPop  TotCases/MilPop
         
 No statewide shutdown order -507.4 -211.6 670.9 996.6
  (-0.52) (-0.22) (0.73) (1.21)
         
Population density persons per sq. kilometer   0.784** 0.454 0.304
    (2.77) (1.91) (1.55)
         
Percent Urban population (2010 US Census)     10260.0** 7781.4*
      (2.79) (2.62)
         
Tests/Mil pop       0.140**
        (3.31)
         
_cons 3580.7*** 3273.8*** -4259.3 -6357.6**
  (6.51) (6.33) (-1.84) (-2.80)
         
N 51 51 51 51
         
t statistics in parentheses =”* p<0.05   ** p<0.01  *** p<0.001″    

For multicollinearity


Table 7.
Variance inflation factor check for world data

    VIF   1/VIF
Advanced economy (IMF) 1.552 .644
 Percent urban population (World Bank 2018) 1.529 .654
 Population density (people/sq. Kilometer – World Bank) 1.148 .871
 No national or regional shutdown order 1.078 .928
 Asia-Pacific 1.02 .98
 Mean VIF 1.266 .

 

Table 8. Variance inflation factor check for 50 states and DC

    VIF   1/VIF
 Percent urban population (2010 centus) 1.178 .849
 Population density persons per sq. kilometer 1.127 .888
 Tests per 1 million population 1.077 .928
 No statewide shutdown order 1.027 .974
 Mean VIF 1.102 .
The Biggest Heist in Human History

The Biggest Heist in Human History

As he valiantly tried to get a recorded vote on House passage of the $2.2 trillion coronavirus bill (the CARE Act), Rep. Thomas Massie learned once again last month the chief difference between the members of Congress and the inmates of a maximum security prison: Supermax prison inmates have better character than members of Congress. 

He should have known this already, since few inmates of a maximum security prisons would say that the ongoing drone-killing of children and warring on al-Qaida’s behalf is morally necessary, as the majority of congressmen did

In this instance, however, the congressional moral turpitude was financial. It’s unimaginable to think of prisoners bragging about how their actions just swindled a gaggle of plumbers, waitresses and department store clerks out of their homes, but if you listened to the speeches of congressmen passing the bill, you’d think those clerks who will lose their homes should be grateful.   

Sure, lots of prisoners have been incarcerated for robbery, but they almost always rob from the rich. Congress used this bill to rob from the poor and working people in order to subsidize mega-corporations and banks from the tips of waitresses. “Some will rob you with a six-gun, and some with a fountain pen,” Woodie Guthrie once sang, but “as through your life you roam, you will never see an outlaw drive a family from their home.”  

The bill admittedly contained $300 billion in cash payments to citizens, but – thanks in part to a $454 billion accordion program through the Federal Reserve Bank – more than ten times that amount will go in the form of cash subsidies and discount loans to big banks and giant corporations. The bill is not really a $2.2 trillion bill, but is instead a $6 trillion bill, the overwhelming majority of which will go to politically-connected corporations and banks.

$454 billion into $4 trillion

The New York Times explained how the Fed can get $454 billion and turn it into $4 trillion: “Legally, the Fed is not allowed to buy debt that is not backed by the government. To achieve a degree of separation, it sets up a special purpose vehicle and then lends into it — which is why all of these programs are called ’emergency lending.’ The vehicle then snaps up bonds or makes loans to the private sector.” 

This, of course, is pretty much the definition of how money-laundering works. 

 The $1,200 “bailout” payment amounts to food money for the working stiffs about to lose their houses to the taxpayer-funded top 1% and bankers (but I repeat myself), who will take working people’s homes when assets are most depreciated and at fire-sale prices. It is, as Thomas Massie has repeatedly said, “the cheese in the trap.”

But the food money is necessary. Why? Because, as any shepherd knows, you can’t kill a sheep you want to keep fleecing.

The few leftists who comprehend economics understand how this will work. “It’s an abomination beyond all comprehension,” Dylan Ratigan explained on the March 26 Jimmy Dore podcast. “This is a further consolidation of wealth among the super-rich by giving only the super-rich money at a time when asset prices are down and everything is depressed so that the super-rich can take the taxpayer’s money and buy more of all the assets to increase their stranglehold and hammerlock on America.” 

Ratigan is a leftist, at odds with free market principles. But he’s not wrong. 

Ratigan even offered an interesting thought-experiment as an analogy: “Imagine, again, if I bankrupt everybody in Los Angeles, but only give a small group of people that are politically connected a bunch of money to go buy all the assets afterwards, who do you think is going to own all the businesses in Los Angeles a year from now?”

If you don’t think the financial sector is really psyched about the shutdown and their upcoming subsidies, you haven’t been paying attention. They’re laughing at the plebes over on K Street and Wall Street. And this has happened before.

The amount of crony-capitalism in this bill dwarfs the 2008 TARP bailout program, but even government’s actions during the 2008-09 crisis turned many major cities from home-owning cities to renting cities. It also turned the American people from, on average, employees of small businesses to employees of big businesses

Matt Taibbi of Rolling Stone magazine noted in his podcast “Useful Idiots” April 3 that: 

“The main thing that people will have to understand that what happened with this rescue package is that it commits the government to an unprecedented amount of support of Wall Street in particular. In the same way we saw in post-2008 all sorts of crazy profiteering and opportunities for banks and financial companies to make basically risk-free money, that stuff is completely baked into this rescue package that passed unanimously. 

“And just to take one small example for people to think about: One of the new forms of assistance that was different in this bill from 2008 is that the Fed and the Treasury are now going to be buying corporate bonds. So last time around the government basically spent a lot to prop up the mortgage markets. They bought mortgage-backed securities; they took bad mortgage assets off the books of the banks. That was one of the big things they did. This time they are expanding that activity to buying the debt of companies and supporting the bond market, which is a whole new galaxy of support.” 

Taibbi noted that financial giant Blackrock has been hired to disperse the loans, in many cases it’s likely the loans will go to companies whose debts they already manage. “It’s hard for people to even wrap their heads around the opportunities for profiteering and manipulation,” the exasperated Taibbi explained.

And that’s only one part of the bailout bill. There are other programs the Federal Reserve Bank has initiated to support banks that aren’t even part of the bill. The Fed has announced the availability of $1 trillion for overnight loans to banks, in addition to $1 trillion in 14-day loans it already announced, and at near-zero interest rates. Plus, they’ve eliminated the requirement for banks to have any reserves in their vaults to cover consumer and business deposits, an historical first. Because the Fed has lowered banks’ reserve requirements to zero, banks can loan out unlimited amounts of money to their wealthy friends, regardless of the amount of deposits in their vaults. So banks can issue debt out of thin air for nothing and with nothing. In effect, every member bank has become an inflationary Federal Reserve Bank, buying up depreciated assets the unemployed plebes can’t afford to keep any more. 

And just in case you think the corporate media will tell the American people the truth about what’s going on, when the Federal Reserve announced an additional $2.5 trillion corporate bailout program, CNBC went to a Blackrock official to get its “unbiased” opinion for its story. The corporate press “watchdog” is an obedient and highly trained lapdog of the establishment.

The establishment does this kind of bailout and corporate media cover-up every time there’s a recession. Whenever a certain set of rich, politically-connected cronies seem to be at risk of losing some of their money, the American public is informed “the whole economy” is going to collapse, and the taxpayer – particularly working people – need to pony up billions or trillions to the rich to buy up devalued assets during a recession. It has almost become an American tradition, like road rage, morbid obesity and undeclared wars against countries citizens can’t find on a map.

At least in the wake of the 2008 financial crisis, when nearly 10 million people were thrown out of their homes, a significant proportion of the homeowners bore the blame. With the NINA loans (no income, no assets), there were a lot of people buying houses who should never have expected to keep them. In the wake of the coronavirus shutdown, the majority of homeowners who lose their homes had stable incomes, if not for the panic-induced government-mandated economic shutdown. 

Nobody can blame homeowners today for buying homes just before the government tells them they aren’t allowed earn a living any more. But now the heavily taxed tips of waitresses will fund mega-banks to buy up the houses of those same waitresses who have recently become unemployed. Even if the waitresses are not actively paying taxes any more, the newly created money – through the mechanism of currency inflation – will crowd out the value of what remains of the working class’ homes and other hard assets. 

And congressmen will no doubt expect a thank-you for the food money they’ll give the proles back so they can survive … until the next fleecing. It’s important to stress that the CARE Act passed the Senate unanimously, with only Rand Paul (who was sick with coronavirus) and three other Republicans not voting. Sen. Bernie Sanders, that great class warrior and supposed enemy of the 1%, voted in favor of it, as did Sen. Elizabeth “Billionaire Tears” Warren. And even though he railed against the pork in the bill earlier in the week, Sen. Ted “Grandstand” Cruz voted in favor of the bill. 

There are some bright spots of good news, however miniscule. I suppose I should be grateful to appreciate small favors, to wit, that the Commonwealth of Massachusetts where I live views liquor store clerks as “essential workers.” But I’m also just cynical enough to think that it’s only because the government wants to keep us fat, drunk and stupid enough to accept unquestioningly the zombie quaranqueen shutdown propaganda.

It’s also good news that not all of the job losses will be permanent. As soon as the government-mandated shutdown ends, there will be a jobs “snap-back” and a lot of people will be re-hired to their old jobs, along with the reopening of a lot of shuttered businesses. 

The bad news is that the end of the shutdown will be too late, economically speaking, for many. And so long as the shutdown continues, the economic crisis will worsen. We know that of the average five million people who are losing their jobs per week during the shutdown, a proportion of them won’t be re-hired. We know it won’t be 100%, but it’s also not 0%. Nor is it a static number; it’s a rising percentage. The longer shuttered businesses accumulate fixed costs with no revenue, the more likely they are to close permanently. 

Moreover, huge downstream job losses are being created by this shutdown. The shutdown will kill the domestic economy of tens of millions of Americans, who will not be buying products they otherwise would have purchased later this year, leading to layoffs in every manufacturing and raw material industry from automobiles to zinc mines. And because the shutdown contagion is not only an American affliction, businesses relying on global trade will also find themselves during the global recession cutting back on both production and employment. 

Some free market economists like David Stockman and Gene Epstein are convinced that our private sector is dynamic and will snap back from the shutdown insanity. A few others (notably Peter Schiff) are more bearish because they are convinced that coronavirus simply pricked the bubble that had been forming anyway, and there’s no putting Humpty Dumpty back together again. 

They both have a point. Schiff is right that we were due for a recession anyway, though I doubt it would have been as severe as he was predicting, and this is largely because Stockman and Epstein are right about the market economy being dynamic. However, just because the private sector is dynamic doesn’t mean we’ll snap back to anything like full employment for many years. The market is dynamic but the government is not; look to the 2008-09 recovery as an example. Government “stimulus” intervention kept the recovery from snapping back a decade ago, as it had during the Great Depression of the 1930s. It took almost 10 years to recover from the 2008-09 financial crisis. It’s wishful thinking the markets will not have to navigate a minefield of government “assistance” once the recovery begins. 

Fiscally speaking, the $2.2 trillion COVID-19 bailout bill, combined with massive government shutdowns that will result in a sharp reduction in tax revenue, is more evidence that Trump is running the federal government like his casino – which filed for bankruptcy four times. The federal government will probably run a deficit close to $3 trillion for fiscal 2020.

In the past, America had politicians who only thought ahead to the next election. The coronavirus shutdown shows that today politicians only think as far in advance as the daily press conference. 

Of course, it’s the perfect storm for the politicians, since nobody can protest within our national leper colony right now because most of the nation under the equivalent of house arrest. It’s hard to gather in groups to protest the robbery of the working poor and middle classes when healthy people are supposed to be ringing a bell and yelling out “Unclean, unclean!” anytime we leave the house. 

If you want a specimen of how corporate media is definitely not on the side of liberty, consider this story from CNN on April 10, with the headline “Sweden challenges Trump – and scientific mainstream – by refusing to lock down.” The claim that the whole “scientific mainstream” is behind the economic shutdown is not based upon any real scientific experiments – you know, using the scientific method. No nation has ever in history even attempted a complete economic shutdown; there’s nothing they could study. Nor is it based upon polling actual scientists about their views. The whole “scientific mainstream” referred to in the article is about the “establishment political mainstream” supported by corporate media satraps. 

Sweden is not engaging in a reckless experiment; it’s doing what nations have always done in the face of pandemics: isolating the sick and those exposed to the sick and taking prudent measures to limit large crowds and protect the vulnerable. It’s the US, which copied Italy (run by “Stupid Mussolini,” who made the trains not run), China and most of Europe that are running the reckless experiment that’s trying to – economically speaking – turn the globe into a Thanos-post-snap world.

Indeed, nations that tracked both those with the disease and those exposed to the sick and didn’t shut down their whole economy – for example, South Korea, Taiwan and Singapore – have had better results controlling COVID-19 than the advanced nations which committed economic hari-kari by turning themselves into a leper colony archipelago. 

The reality is that panicked Karen government officials engaged in an insane experiment of national economic shutdown without any understanding of the science of what would happen. The government officials were never asked by the corporate media any of the following questions: 

1. If the “flatten the curve” strategy isn’t part of the federal government’s official strategy (and it’s NOT even mentioned in official documents), how can it work nationally?

2. How long do you think you can keep the shutdown going before food riots begin? How much of a new Great Depression are you willing to create in order to keep this shutdown going?

3. Do you expect your shutdown/“social distancing” campaign to abolish the virus completely?

4. At what point do you return to people working? How many infections – domestically and internationally – is the minimum number that keeps the shutdown going?

5. Do you really think Bangladesh, South Sudan and Haiti will “flatten the curve” by shutting down their economies to fight coronavirus? What do you do when poor countries understandably don’t follow our lead because they don’t want famine?

6. What do you do after the shutdown ends and that virus comes back out of control, either in the US domestically or internationally? If internationally, do you impose a blockade and create a famine in poor nations with tens of millions of dead? Bomb them into submission?

7. Do you think the disease will become less contagious once the shutdowns end? How can you guarantee we won’t have to re-impose a shutdown?

8. How do you re-impose a shutdown while we’re already in a depression with 20% unemployment and a bankrupt government? How do you think workers will take a new shutdown when Washington has no more money to dole out?

But government officials still need to be made to answer these questions, and should have before they imposed the shutdown. Americans need to grab a pair of Rowdy “Roddy” Piper’s glasses from “Them,” wake up the zombie quaranqueens, and demand answers to these questions along with an end to the economic shutdown to limit the accumulating damage. 

Then, they need to put a stop to the greatest heist in the history of the world. The $2 trillion in bailouts for Wall Street is only the beginning. Unfortunately, more is coming unless the people demand it stop.

This Martial Law Will End, and End Badly

This Martial Law Will End, and End Badly

First, let’s get the three principles for the post-COVID-19 world out there:

  1. If you think COVID-19 is fake, or not really scary, you don’t know science and are an ignorant person.
  2. If you post cavalierly about frolicking socially with your friends, you have no empathy for the elderly and other vulnerable populations and are a horrible person.
  3. If you think we only had two options to fight COVID-19 – “A. Destroy the economy, or B. Grandma dies.” – you are sheeple-level stupid, and the media programming has brainwashed you. There were options C, D, E and F.

Now that I’ve offended everyone on social media, let’s talk about that last principle, which also happens to be the one no one in the media or Washington wants you to talk about. Politicians and their media spokesliars call their policy “social distancing,” but that’s just the political marketing angle for an economic and social shutdown we’ve always called martial law. 

The other options could have included a two-stage isolation of the infected and separately isolating the vulnerable elderly and immuno-compromised populations. The latter self-isolate in their own communities in many cases anyway. For those that don’t already self-isolate, all those empty hotel rooms today could have provided sanctuary, or the federal government could have cleared out all those ICE detention centers and welcomed boomers into them. Today’s closed casinos – already famous for feting seniors – could also have become a refuge for the oxygen-tank-and-walker set. 

Moreover, Trump using his bully-pulpit to call for greater ICU capacity to accommodate COVID-19 cases would have been helpful. The pandemics of a century ago – polio, the Spanish flu, smallpox and cholera outbreaks – should have provided historical clues that increasing hospital capacity is key. The data thus far from Italy and China shows COVID-19 has taxed the capacities of hospitals, as the elderly and the younger with pre-existing conditions need hospitalization many multiples more frequently than the regular flu virus. 

The unfolding disaster of martial law

The plebes – to their credit – know intuitively the economic reality which dictates there is no bottom in a market economy based upon closing the markets. Thus, they knew they had better stock up on food, guns and other necessities. And it will be bad: Great Depression-level bad. Last week, Tyler Cowen of George Mason University rather off-handedly posited that if current policy is maintained until August, the result would be 20 percent unemployment – not for months – but for years. 

This false choice of “a new great depression or grandma and two million more dies” has already aged worse than a dead tuna on a hot summer day, so it shouldn’t be a surprise the Trump administration has already pulled lead on suppressing the dire jobs numbers. It will only stink more as time goes on. But that doesn’t mean people with a brain stem no more complex than a box jellyfish won’t defend the martial law status quo. I turned on Fox News the other night to hear that twit Sean Hannity agree with Sen. Lindsay Graham’s call for the federal government to – not end the closure of markets – but reimburse wages for people being prevented by federal and state mandates from producing the goods and services we all want.  Meanwhile, Mitt Romney and Donald Trump have embraced Andrew Yang’s UBI platitude. With what money, neither pair said. Nor did they have to; there isn’t any money in a federal government already running a $1 trillion deficit whose tax revenue income source is about to hit the far slope of K2. So much for “conservative” small government principles. All politicians and mass media corporate whores are Keynesians now.

Democrats never pretended to have small government principles, but Joe Biden and Bernie Sanders likewise opted to cynically lie to the American people in the most recent Democratic debate rather than tell inconvenient truths. Biden claimed of people who have lost income to the virus shutdown: “We can make them whole now, now, and put in process a system whereby they all are made whole.” Sanders also deployed nearly identical language: “We have got to say to the American people, if you lose your job, you will be made whole.” 

There are now two kinds of people in the world: 1. Those who believe the Democratic candidates for President, and 2. Adults. There’s no going back to the old economy or old jobs, and Biden and Sanders are both knowingly lying to you.

But the above at least confirms we will never have any relief from the politicians of either party in Washington or the establishment corporate media. 

If working Americans want an end to the looming great depression, they’ve got to rise up in a revolution and end it themselves. Expect the stock market to lose a minimum of 5-10% per week and the effective unemployment rate (the unemployed plus furloughed employees no longer receiving a check) to increase 2% per week until that revolution happens. Much of that effective unemployment – maybe even half – will be permanent once the shutdowns are lifted, as leveraged or marginal firms shutter after accumulated fixed costs and no revenue make re-openings impossible. 

The end of martial law will come, as the status quo becomes increasingly unbearable and a new Great Depression emerges. I’m convinced the workers will rise up, even if “social distancing” does make protests and riots more difficult. And the riots will come once the peaceful protests are inevitably ignored by Washington.

This end was known, or at least should have been obvious, owing to the likelihood that Trump had no clue. America is not just ruled by fascists; we are governed by dumb fascists. 

If Trump had possessed the stones, and even a whiff of economic sense, he would have called out Italian President Sergio Mattarella as a lunatic for ruining his country by putting the entire nation on lockdown. He would have quipped that Mattarella is really “Stupid Mussolini”: Mussolini made the trains run on time, but Mattarella is dedicated to making sure the trains don’t run. Trump could have then recommended the voluntary isolation of the elderly in the US, and encouraged the markets to provide spaces for sanctuary to seniors. Instead, America’s Mango Mussolini decided to show solidarity with the Eurocratic democratic socialists ruining their nations by aping their stupid fascist policy of economic suicide. 

This shutdown was probably the inevitable result of letting scientists set government policy: What else would one expect from a socially awkward group of pencil-necks with no knowledge of regular human social interaction, or, for that matter, economics? Of course scientists were going to suggest ruining society; these dweebs never understood human society in the first place. All that mattered was their “human social interaction” computer models about how the virus might spread. Scientists are like Bill Murray in the movie “Caddyshack,” blowing up the whole golf course in order to stop a gopher infestation. But it’s emblematic of any government by so-called “experts,” who will “solve” the problem but inevitably show shortcomings in areas in which they are not experts, creating greater overall misery.

Even Wall Street has also been slow on the uptake; it has certainly been behind the prols mobbing the grocery stores. If you happened to turn on CNBC, Bloomberg or any other financial network last week (or even yesterday), you were treated to the highly-paid and delusional chattering class telling us that the bottom is near. Yes, I’m talking about you, Jim Kramer. All they see are percentages and profit margins, and the directives of their corporate masters. But the plebes knew there is no bottom to a market when nobody is making things or providing services and everybody is still consuming them. The bottom won’t happen until the shutdowns end. 

If there’s a “sheeple,” it’s the media class. Sure, there were lots of people who stupidly accepted the incremental state-based martial law in reaction to the COVID-19 virus, and blindly repeated the political talking points. But most workers intuitively know that’s not true, even when they’re repeating those same talking points. It’s actually the people who are America’s greatest chance for ending the  madness. It’s time those workers lead, and demand an end to the charade and reopen the markets. The longer they wait, the greater the economic damage.

Workers of the world, unite … to reinstate capitalism!

 

Thomas R. Eddlem is a freelance writer, a graduate of Stonehill College, and is enrolled in the applied economics master’s program at Boston College. 

The Libertarian Case Against Immigration Controls

The Libertarian Case Against Immigration Controls

Libertarians have long held the view that free trade is an absolute net benefit. There is no economic model demonstrating that barriers to trade increase aggregate wealth. Free trade as a net benefit is actually one of the few areas where economists of every school of thought – from Austrians to Keynesians to Behaviorists to Monetarists – all agree. 

But some want to make a single exception to this economic universal, even a few libertarians. Only in the instance where people are the good crossing international borders are those barriers not necessarily beneficial, say the bordertarians.

This worldview does not even amount to the pretense of an economic argument; it’s always made as a blatantly political argument. The political argument made by bordertarians generally goes along one of the following four lines (or sometimes, a combination of these lines): 

  1. High levels of immigration to a country bring higher crime rates, as evidenced in European countries such as Sweden and Germany.
  2. Immigrants will impoverish America by moving here, going on welfare, and bankrupting the nation because they will be such strong net-tax-takers.
  3. Immigrants largely come from nations with low IQs, and will bring that low intelligence to bear at the voting booth by stupidly voting for socialist policies, destroying the nation through their votes.
  4. The last argument is like the previous, but is a cultural argument rather than an intelligence argument: Immigrants come to the United States today from third world countries without the kind of Western cultural heritage in elections and freedom that past generations had, and they threaten to overwhelm the native population with the pro-socialist/pro-authoritarian votes they’ve brought here from their native countries.

Immigrants and Crime

About 10 years ago, I was approached by a private party to write a harder-hitting series of articles against “illegal” immigration than was being published by The New American magazine, the publication to which I was then sending most of my writing. I initially agreed, noting that this would require a lot of primary source research. The person who contracted with me wanted to start with a piece on crime. This made perfect sense to me, since intuitively our open border with Mexico would attract both the ambitiously good immigrants that America wanted as well as those evil men on the run from their crimes who would drive up US crime rates. Criminals do in fact freely cross our porous southern border, and it made intuitive sense that immigration would increase the crime rate. I also thought a law-and-order type approach – “illegal” immigrants should follow the law and get in line like everyone else – was a good approach for a second exposé. 

My intuition proved wrong on both counts.

First, I was surprised to find the data showed precisely the opposite with regard to the incidence of immigrant criminality. While immigrants are more likely to be in federal jails because of immigration infractions, there was no evidence that immigration had increased actual crime rates – violence and theft – in the United States. Even research from immigration skeptic organizations, like the Center for Immigration Studies, confirmed my findings.

Immigrants, because they trend younger, should account for higher rates of criminal infractions, as young people are likely to commit violent crimes by many multiples more than the elderly (think about it intuitively: how may gas stations get robbed by geezers with oxygen tanks in tow, cruising with walkers wheeled by tennis balls?) So, it shouldn’t be a surprise that some more recent research from groups like CIS have indicated that immigrants may be responsible for slightly higher rates of criminality when compared to the more elderly native-born Americans. But overall crime rates in the United States, in particular violent crime, has been on a downward spiral (decreasing 36%) since the 1980s, even as the immigrant population has increased by more than 100% (largely because of the aging of the US native population). Moreover, many of the cities with the highest proportion of immigrants have proven to be lower in violent crime rates than those with low immigrant populations

I never really abandoned my theory that our porous southern border could contribute to crime, or that immigration brings both the ambitiously good and bad. The dullards, the average people, the unambitious, the “C” students, tend not to emigrate from their native country, absent some earth-shattering catastrophe. There’s really not a libertarian argument for 100% open borders; nobody thinks a murderer should be able to run from his crimes by crossing a national border and starting over. Even in an anarcho-capitalist society, no an-cap believes a person should be able to escape the consequences of a murder or rape by stepping over an arbitrary national border. The influx of about one million legal immigrants – all of whom are screened for a violent criminal background – likely decreased the average, I suspect. But none of my suppositions change the statistical reality that immigration has not increased the crime rate in the United States. 

On the law-and-order front, I had just entered the classroom as a high school history teacher when I was approached to write the above-mentioned series of “hard-hitting” articles on immigration. Among the topics I covered in my classes were the Alien and Sedition Acts, and the Virginia and Kentucky Resolutions (written by James Madison and Thomas Jefferson) in response to them. Moreover, the great Dr. Tom Woods had shortly thereafter come out with his book Nullification: How to Resist Federal Tyranny in the 21st Century in 2010. Woods’ book brilliantly explained in great detail how nullification was used throughout American history, and I used my copy as a loaner for my students to write research papers on nullification. (I assigned students to blend two or more uses of nullification throughout American history in a persuasive research paper.)

Nullification, it turned out, was first used against the Alien and Sedition Acts of 1798, the Alien Acts being the first uses of pretended federal authority over immigration. As immigration was not an enumerated federal power under the Constitution, Jefferson (and Madison, separately) argued, quoting the 10th amendment, that “alien friends are under the jurisdiction and protection of the laws of the State wherein they are: that no power over them has been delegated to the United States, nor prohibited to the individual States, distinct from their power over citizens. And it being true as a general principle, and one of the amendments to the Constitution having also declared, that ‘the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people,’ the act of the Congress of the United States, passed on the — day of July, 1798, entitled ‘An Act concerning aliens,’ which assumes powers over alien friends, not delegated by the Constitution, is not law, but is altogether void, and of no force.” As a classroom history teacher, I not only found the conservative argument that sanctuary cities were exercises in lawlessness was false, but that sanctuary cities were the closest modern analogues to Jeffersonian nullification and Madisonian interposition.  

In the end, I refused the paid contract to write the pieces skeptical of immigration, and instead eventually wrote unpaid pieces for my blog explaining the conclusions of my research for a mostly open immigration system. I instead argued that the Constitution would be more scrupulously followed (and crime lowered, by making the immigration process easier and more open) by letting states vet immigrants for criminal records, as was done under the “Castle Garden system” before Ellis Island opened up in 1892 (which ushered in federal control over the immigration process).  

Crime in Sweden and Germany

More recently, there’s been an explosion of coverage of immigrant crime in the right-wing press with regard to immigrants from the Middle East and northern Africa to Europe. Many of these stories about immigrant criminality in Europe began long before the current wave of immigrants (which itself began about 2013, in the wake of the Arab Spring revolutions) from the Middle East and northern Africa, sometimes updating nothing about the data from the original Stormfront and other white nationalist blog posts as far back as 2005

Of particular focus among immigrant-skeptic groups in recent years has been Germany, which now has about 15 percent of its population as immigrants (about the same as the US) and Sweden, which has 18 percent of its population as immigrants. Both countries were facing a demographic implosion by exceptionally low native birth rates before the most recent immigrant wave. And although the majority of immigrants to both Germany and Sweden have been from other EU countries or Eastern Europe (and have lower overall proportions of immigrants than Switzerland, Australia, New Zealand and other countries), these two countries have substantial minorities of immigrants from Muslim countries. 

And the immigration of dusky-skinned Muslims is what has particularly inflamed the political right. While many bordertarians are under the impression that placid Germany has become a violent nation ruled by immigrant Muslim gangs, Germany is in fact experiencing its lowest violent crime rates since unification in 1991, and has one-fifth of the intentional homicide rate of the United States

Sweden also has one-fifth the intentional homicide rate of the United States, despite higher immigration levels. As both countries’ populations have aged over the decades, crime has decreased. But Sweden has become a special case because it has reported rape rates that have skyrocketed since 2005, the same year the national parliament adopted a law making some forms of consensual sex legal “rape.” While rape cases have more than tripled – including the famous double rape case involving Wikileaks’ Julian Assange, which involved two cases of consensual sex – reported “incidents” of rape increased more than 15 times because of new reporting mechanisms. 

Selling the statistical changes resulting from this 2005 Swedish rape law as an Islamic “rape-wave” was something Islamophobic/pro-war organizations such as the Gatestone Institute turned into a virtual cottage industry. And their lies have been widely repeated by the political right’s stenographers who pretend to be journalists, from Breitbart to The New American to Infowars. I’ve exposed the Gatestone Institute’s lies about Muslims and Sweden elsewhere, so there’s no point in recounting their anti-Muslim war propaganda and how their leaders stand to profit from more war here. But there is one more point to make: if Muslims were indeed an criminal underclass inherently prone to raping Swedish women, they’d be prone to raping women in locations other than only Sweden. And that hasn’t been the case in Germany, where rape is at historic lows, despite massive Muslim immigration. 

Nor are Muslim-heavy areas of America – like Michigan – inherently more dangerous for women. 

Promotion of fear of violent immigrants based upon anecdotes and propaganda is nothing new, and it was one of the primary reasons America’s traditional open border with Europe was slammed shut in 1921. The great classical liberal Congressman William “Bourke” Cockran (D-NY) argued that the door to immigration shouldn’t be closed to Eastern European immigrants through the Emergency Quota Act of 1921 because of the “Red Scare” bombings anomaly a few years earlier: “Surely the gentleman from Washington [Mr. Johnson] will not say for a moment that of the 10,000 that debark from vessels at our ports every week there is any considerable number who would want to blow up our Constitution, even if they could find out where it is located. [Laughter.] They do not come here to destroy the government that they are eager to join. Do you not see what a contradiction there is between the actions of these men and the motives you impute to them? They have to ‘go broke’ to come here, to use a familiar colloquialism.” Cockran lost, and America’s era of mostly open borders ended as the Ku Klux Klan had a huge revival in the 1920s based upon stoking fear of immigrants under the slogan “America for Americans.” 

It’s important to stress that not every person who wrongly seeks massive restrictions on immigration is a racist. Nor does every immigration skeptic organization try to paint immigrants as an inherent criminal underclass. Some immigration restrictionist groups like NumbersUSA take pains to stop immigrant bashing. But immigrant-bashing remains the lifeblood of the political viability for America’s foreign wars (which, ironically, drive waves of immigration). 

Viewing the foreign-born – especially Muslims in the 21st century – as an inherent criminal class makes bombing their countries of origin politically palatable enough for our foreign policy brutality to continue. All one needs to do is to contrast what the political impact would be if an errant US drone strike outside of Montreal killed 30 in a maple syrup factory versus the reality of the political silence of the media and public about the September 2019 strike that killed 30 pine nut farmers in Afghanistan.  A strike that accidentally kills dozens of innocent Canadians would create outrage, because they are friendly people Americans sympathize with, while a strike against Muslims we have been propagandized to fear for a generation generated political crickets. 

Are Immigrants a Financial Drain?

One of the main arguments employed against higher immigration levels, or at minimum “legalizing” the undocumented population of immigrants, is that immigrants are a net-drain on government tax dollars. For libertarians, that’s a strange argument. In libertarian circles, it’s a general rule that paying more taxes than you receive back in “benefits” makes you a tax victim and not more virtuous or valuable to society. But if one studies only “illegal immigrants,” many of whom work in the underground economy and pay little taxes, they do in fact pay less on average than an American-born worker of the same income (but also take only a fraction of the government resources consumed by the native-born). Of course, if the main goal were to extract more taxes from “illegal” immigrants, it would be a simple matter of legalizing the undocumented population and bringing them to the above-board economy where most would pay the full income and payroll tax rates paid by natives. 

 

Some libertarians and many conservatives worry about the social cost – or even collapse of the state – from the costs of immigration. This is the argument made by famed economist Milton Friedman that “It is one thing to have free immigration for jobs, it is another thing to have free immigration to welfare. And you cannot have both.”

The great libertarian writer William Norman Grigg once told me (I’m paraphrasing here): nothing gets a conservative to defend the sustainability of the welfare state faster than an open border with dark-skinned people. 

In conservative circles, it’s fashionable to deploy the phrase “Cloward-Piven Strategy” as a conspiracy by the left to use a wave of dependent immigrants to collapse the federal government financially and usher in an era of socialism. (Incidentally, social scientists Richard Cloward and Frances Fox Piven’s original strategy in the 1960s was about registering welfare recipients to vote and had nothing to do with immigration.) I jokingly proposed to Will Grigg that we should champion the “Eddlem-Grigg Strategy” to let the Democrats collapse the welfare state this way, since we both actually wanted the welfare state to fail and the people to turn against it.

But the economics of immigration demonstrate that neither the Cloward-Piven immigration strategy nor the Eddlem-Grigg Strategy are practical. Immigrants, as it turns out, are a net economic crutch for both government and society as a whole. Immigrants typically come to the United States poor, often with only the clothes on their backs, but on average, they earn a bit more income than native-born Americans.  They are twice as likely to start a business, meaning that they are not net-job-takers. 40% of Fortune 500 companies were founded by immigrants or the children of immigrants (i.e., those conservatives label as “anchor babies”). 

Conservative Republicans and bordertarians often cite one particular study – The Fiscal Burden of Illegal Immigrants on United States Taxpayers (2017) – by the Federation for American Immigration Reform (FAIR), which purports to show that “illegal” immigrants are net-tax takers to the tune of nearly $116 billion per year. This study was perhaps the source of President Trump’s inaccurate Tweet in December 2018 that “Illegal immigration costs the United States more than 200 Billion Dollars a year.”

Analyzing that study by the Federation for American Immigration Reform (FAIR) – and why it employs misleading (but not factually false) data – is key to understanding how the immigration restrictionist movement manipulates data. Alex Nowrasteh of the Cato Institute has criticized the FAIR report for a number of reasons, but the most important is this point: “FAIR counts the benefits consumed by the US born American citizen children of illegal immigrants.  This means that FAIR also doesn’t count the taxes paid by these US born citizens when they start working. Counting the benefits consumed but ignoring the tax revenue they pay (or will do so in the future) is one way FAIR gets such a negative result for this report.” Indeed, the FAIR study acknowledged that: “The overall population that we analyze, for the purposes of determining the costs of illegal immigration, also includes about 4.2 million American-born minor children of illegal aliens.” 

In other words, US-born children of immigrants are more likely to be poorer and qualify for higher benefits, since they’re US citizens by birthright (i.e., they’re “anchor babies”). The FAIR study counts these children as 100 percent immigrant until the day they leave their parents’ home and go out into the world to work, and at the instant these “anchor babies” begin to earn an income FAIR counts them in the column of 100 percent American, native-born citizens. 

The only criticism one might make of the Cato summary of the FAIR report is that Cato says it “is one way FAIR gets such a negative result for this report.” Actually, it’s one of two primary ways. While FAIR slightly inflated the number of American-born children of immigrants beyond the numbers used by other academic studies (such as the Pew Institute or Urban Institute), and it also charged immigrants with the bulk of the cost of border enforcement (and a few other smaller-ticket items), the primary mechanism to which they arrive at this astronomical cost of “illegal” immigration is by counting first-generation American citizens as “immigrants” only while they are children and counting them as native-born when they get jobs. 

FAIR’s study essentially argues we should keep out immigrants (and enforce immigration laws vigorously) because American kids get subsidized school lunches and SNAP benefits.

Immigrants themselves – unlike their American-born children – are exceptionally low users of government services. They generally don’t qualify for welfare (exception: refugees, who are heavy users of welfare) and use far less health care, according academic studies on the topic: “After multivariate adjustment, per capita total health care expenditures of immigrants were 55% lower than those of US-born persons ($1139 vs $2546),” the National Institutes of Health reported in a 2005 study. This makes intuitive sense, since the majority of health care costs are incurred by the elderly; immigrants coming to the United States to work tend to be young and healthy.  With a constant influx of young adults, immigrants are a demographic that perpetually skews younger. Also, they generally do not use government K-12 schools for themselves (they do occasionally bring in children immigrants, but the majority of their children are US-born citizens). 

The other main way to skew the data against immigrants by is by counting government services and ignoring a native-born comparison, a strategy also employed by the FAIR study. In a nation running a $900+ billion annual deficit, as the US federal government is today, each of the 300+ million people in the country are – on average – a net drag on services by approximately $3,000 per person. FAIR doesn’t measure immigrants’ children use of services against the native-born use of services, but a straight taxes paid versus benefits received standard. By this standard, native-born citizens are even larger wards of the state, both on a total cost basis and a per capita basis. But FAIR only reports the smaller immigrant numbers. 

The National Academy of Sciences, Engineering and Medicine concluded in a 2017 study that adjusted for the deficit and found that “at any given age, adult members of the second generation typically have had a more positive net fiscal impact for all government levels combined than either first or third-plus generation adults.” So the anchor babies draw more heavily from government services than the second-plus generation American kids, but contribute more in taxes as adults than do second-plus generation Americans. In short, looked at independently as their own generation, the “anchor babies” are not the drain on government services the FAIR study portrays them to be. They’re actually a slight crutch so that a higher level of services can be consumed by the older generations of native-born.

In the end, immigration was never a welfare state issue; the welfare state is its own issue, and immigration has almost no effect on it. Milton Friedman was wrong in his assumptions, largely because he never took the trouble to look at the actual economic data. Bordertarians today have no such excuse, since the data is readily available from the NASEM, Cato, the Urban Institute, Pew and other studies. 

 But even if we assume the counter-factual, that immigration is a financial drag on government, what is the practical argument for proceeding? The practicality argument is fraught with impractical hurdles. The only practical way to crack down on “illegal” immigration would be to end visas for tourists, students and H-1B tech workers.  Most “illegal” immigrants come by overstaying their legal visas, not by crossing the Mexican border. But ending visas would seriously hurt tourism in Florida’s Disney World, colleges in Boston, Massachusetts and high-tech sectors of California’s Silicon Valley. The benefits of these immigrants is tangible in dollars, knowledge and entrepreneurship. 

Popular support for national immigration controls is a thin reed: polls continuously show that people appropriately view immigrants as an asset by wide margins, so the popularity battle is already lost for bordertarians. Welfare, however, remains controversial

One might argue that it’s not practical to abolish the welfare state, but – really – what’s more practical: Abolishing the welfare state when nobody’s really tried to do it? Or trying to end “illegal” immigration along the 2,000-mile border with Mexico, after spending tens of billions annually for decades while failing to move the needle in the slightest on the 11-12 million unauthorized immigrants working in the United States? The former would the unified support of libertarians, while the latter would divide libertarians at best.

 

IQ and Immigration

 

The narrative for restricting immigration based upon average national IQ can be summarized as something like this: 

Immigrants from developing countries would have an IQ too low to sustain freedom here. They’d immigrate in droves to the United States and stupidly vote to bring to our federal government the socialism and tyranny of their home countries they left behind. A more open immigration system with massive numbers of new, low-IQ immigrants would eventually overwhelm the high-IQ American public. Only by admitting limited numbers of smart (presumably European, but possibly also East Asian) people can the United States avoid the disaster of being overwhelmed by a mass of stupid new dependents who will vote themselves into the same socialist kleptocracies that made them emigrate from their native lands. 

Among the chief proponents of this worldview is Stephan Molyneux, a YouTuber and blogger with some influence in libertarian circles. “Racial IQ differences is the one topic that allows us to push back against Third World immigration without succumbing to racism,” Molyneux has tweeted. The Irish-born Canadian’s YouTube and podcasts total more than 600 million views/downloads, and his works have been progressively banned by establishment social media, with PayPal most recently suspending Molyneux’s account in early November. 

Typical of Molyneux’s argument are the following Tweets: 

“Average IQ in Syria is 83.

Turkey is 90.

They will never ever be like the West.

If they fight, they fight.

Protect ourselves, let the world be the world.”

Twitter, October 7, 2019

 

“India has an average IQ of 82,” Molyneux tweeted February 24, 2019. “82. But yeah, it is long-ago colonialism that keeps India backward.”

Twitter, February 24, 2019 

 

“High IQ is better…. People with higher IQs tend to be more law-abiding, tend to tell the truth more tend to be more economically productive, tend to stay out of trouble more, tend to be better neighbors. As a whole, higher IQ for a society is preferable, if you have a choice.”  

FreedomDomain Radio, 2015

 

None of this, of course, amounts to an economic argument. A free market economy can put people of virtually any intellectual ability to positive use. The mutual beneficence of trade does not rely upon the intellect of the trading partners in any school of economic thought. The poor and working classes definitely make specialization and higher-order organization skills of those with higher intelligence and skills more effective, not less effective, by freeing the latter up from farming and creating food, building their own shelter, and the like.  

Molyneux’s political argument is that immigration from low IQ-average nations tend to eventually lower the intelligence of the recipient nation, presumably leading to more votes for socialism and/or bloated, inefficient government. “My big concern with respect to immigration is – I’m certainly willing to accept that people who come from, in general, lower IQ demographics are above the mean – smarter, smarter people. All right, great, fantastic. But the part of your [Dr. Jason Richwine, whom he is interviewing about Latin American immigration to the US] research that troubled me is the degree to which that does not tend to sustain itself over generations.” 

The primary argument left to Molyneux is that – even assuming Richwine’s narrow research on Hispanics is a universal biological inevitability, something nowhere in the historical record – is that low IQ immigrants will hurt natives through their votes, presumably by voting for socialism and authoritarian government. The main problem with Molyneux’s political argument is that a high IQ is not generally associated with opposition to big government. In fact, in some cases there’s a clear statistical negative correlation between the two, as well as an intuitive partial negative correlation. 

For the intuitive part, one does not associate low intellect with socialist theoreticians and revolutionaries like Karl Marx, Vladimir Lenin or Leon Trotsky. They may have been absurdly wrong, as well as evil, but it’s nonsense to claim they had below-average intelligence. History is bereft of examples of dimwits who successfully lead socialist revolutions. Dimwits like Venezuela’s Nicolas Maduro may eventually take over a socialist economy, but the ones who lead revolutions tend to have above average IQs, even if they are mislead and occasionally openly evil.

On the empirical front, there are several data points which show a strong correlation between high intellect and support of socialism instead of a correlation between low IQ and support of big government. College graduates tend to have a higher IQ, with the pattern being the higher level of degree, the higher the IQ. Generally speaking, college graduates are far more likely to vote Democratic, and this trend was particularly divergent among white people (a 35-point difference). If college graduates had decided on the presidential race in 2016, Hillary Clinton would have won in a landslide. 

Jews have the highest overall intelligence among any ethnic group but are also among the most loyal Democratic Party constituencies. And while it’s a dubious point to claim that a group leans toward big government simply by virtue of its backing of one or the other of the political duopoly (empirically, government grows faster with a Republican in the White House), this is the primary argument made by right-leaning bordertarians.

Even in a broader sense, the more intelligent occasionally are more likely to back bigger government. High intellect college professors are far more likely to back socialist policy than are laborers (which tend to have lower IQs), the latter being the backbone of Trump supporters and the Republican Party. College professors do not fit into the assumed pattern of high intellects supporting smaller government and lower intellect supporting socialism. 

Finally, the politicians seeking ever-higher burdens of government inevitably are drawn directly from the higher intelligence group of people with advanced college degrees. Say what you will about how wrong Elizabeth Warren is on public policy (and she’s probably the worst), it’s silly to say she has below average intelligence. 

All this is not to say there’s a uniform pattern of smart people supporting socialism and the uneducated supporting the free market. There are contrary patterns as well. College-educated minorities were more likely to vote for Trump than minorities without a college education. While minorities – blacks and Latinos – tend to vote overwhelmingly Democratic at any educational level, that trend is minimized by a college education.

Once we acknowledge the data that higher education tends to increase IQ scores, circling back to Molyneux’s Tweets earlier in this essay, it’s not appropriate to compare the highly educated US electorate (44 percent college degrees) against the less educated Turkish electorate (17 percent college degrees ) and Syrian population. 

Part of the problem with taking a raw statistic like average IQ for a particular country and measuring it against the highly-educated and well-nourished United States population is that it fails to account for differences such as education levels, poor nutrition, having a two-parent household, “family chaos,” total family size, exposure to lead paint, and other factors. And there are plenty of nuances even within that statistic of higher education among college graduates: Science and technology majors tend to have higher IQs than do those who major in the humanities. And it’s almost impossible to tell how much selection bias there is among these choices (Do intelligent people choose physics, does studying physics increase intelligence, or a combination of both? – There’s no real data on that.)

Molyneux noted in one of his Tweets cited above that the average Indian has an IQ of 82. But Indian-Americans have an average IQ of 112 (higher than Ashkenazi Jews, the ethnic group with the highest average intelligence), and are among the most successful American minorities earning more than 50% higher than the average white American. Might better nutrition and higher education have something to do with that disparity?

Likewise, Black immigrants earn 30% more than US-born blacks, which is likely due in part to higher education among immigrants, but also likely based in part upon absentee fatherhood, which is less prevalent among African immigrants than among native-born African-Americans.  

There are several kinds of selection bias among immigrants which also should be accounted, meaning that the average IQ person from any particular state may not immigrate to the US. It could be said that “C” students generally don’t emigrate from their native countries. Generally, only the ambitious – whether the good or those on the run from their crimes – tend to emigrate. 

This has also been backed up by history, with the term “brain drain” being invented by British social scientists in the 1950s by the migration of doctors and scientists to the United States in the early Cold War era, a factor that the OECD says is still happening on behalf of the United States today. And the exodus of Venezuelan doctors in recent years from the Maduro regime has resulted in a health care boom across Latin America as Venezuelan doctors have expatriated from their native land. 

In the case of Venezuela’s absolute economic devastation from the corrupt socialist dictatorship, a second round of emigration resulted in unskilled labor leaving the country as well. But this too should not be a concern for libertarians, as economists have long viewed more laborers – even unskilled ones – as an unqualified net benefit for a society.

In sum, the argument that IQ should be a factor in limiting immigration is no argument at all, unless it is an argument about immigrants or immigrants outvoting natives into a socialist hellscape.

Immigrants, Culture and Voting 

While the above demonstrates there’s no economic excuse for limiting immigration by national quota based upon a nation’s average IQ, what of the cultural argument that admitting millions of immigrants from third-world countries to the United States would usher in an era of big government as a result of their votes? 

On a fundamental human level, there appears to be something inherently wrong about deciding whether to admit a man into this country who just wants to earn a living for his family (or flee execution by a tyrant) on the basis of whether they are more or less likely to back Hillary Clinton over Donald Trump, whose domestic and foreign policies are only a percent or two different on almost all of the major issues. And it’s particularly problematic when one of the parties, the GOP, has made it more than clear that immigrants aren’t welcome in their party through many public pronouncements (such as here, here and here, among many others). That immigrants have been driven away from the GOP, turning immigrants into a bogeyman among the GOP rank-and-file, is hardly evidence of a pro-socialist immigrant worldview. People tend to avoid supporting a party that is openly bigoted against them, as they tend to take a personal attack personally. So it’s not practical to say that the tendency of immigrants to vote Democratic is an indication they are motivated by a desire to vote for bigger government.  

In fact, some immigrant groups had a strong historical affinity for the GOP until they were pushed away in the 21st century. Muslim-Americans were once a reliable conservative and wealthy GOP voting bloc (though since 9/11, they have switched to Democratic because of fear-mongering in the GOP), as were Cuban-Americans.

It’s instructive to look at this historical impact upon immigration if one wants to analyze whether immigrants tend to vote for bigger government. Bordertarian Stephan Molyneux’s fear that the unwashed masses of immigrants will vote for big government (mentioned above) has never panned out in US history. America had relatively open borders from its founding until 1921, and immigrants tended to side with the party of smaller government (at the time it was the Democratic Party) throughout all of that period. The era of big government under the New Deal and Great Society only emerged after the immigration door had been slammed shut in the 1920s. One could credibly make the statistical claim that immigration prevented big government, based upon the empirical data in American immigration history, but the claim that immigrants bring socialism to a country has never been borne out historically by actual data. 

On the free government front, the average immigrant today, most of whom come from Latin America, has a far greater experience with elected governments than did the immigrants coming from Czarist Russia, Bismarck’s Germany or Victor Emmanuel’s Italy 140 years ago. The days of the banana republic in Latin America are almost gone. Nearly all immigrants from Latin America today left some government after having voted in local and national elections and having a national government with some rudimentary form of separation of powers. By way of contrast, the average immigrant in 1900 had never had the opportunity to cast a meaningful ballot and left a government with a king, czar or other hereditary monarch. Even the Irish Catholic immigrants of the mid-1800s had been disenfranchised by penal laws Britain enacted after conquering the Emerald Isle. 

So using history as a comparison, immigrants have not tended to bring about bigger government in the United States even when they came from the worst authoritarian regimes of the 19th century. Yet government globally has tended to allow citizens to become freer in the last 30 years when compared to the recent past, as evidenced by the results of almost every freedom-in-the-world analysis, from Freedom House to the Heritage Foundation. The cultural argument of immigrants needing more experience in free government before being allowed to immigrate has zero merit when measured against history.

Moreover, “Western European culture” isn’t all it’s cracked up to be in an economic sense. Most people who come from third world countries come from nations whose governments actually control a smaller proportion of the economy than does the US government. This proportionally lower tax and spending burden is admittedly out of necessity, as poor nations’ governments can only extract so much from their poor populace, while rich countries can afford to extract greater sums from their prosperous middle class. Ironically, most right-wing immigration restrictionists afraid that immigrants would bring their home governments’ spending policies to the US through their votes are generally very happy to bring in more immigrants from Germany and the Netherlands, nations whose governments extract more than twice the GDP ratio of that extracted by the Venezuelan government, and even higher proportions if the raw per capita tax bill is considered. Germany in particular is not only the birth-place of Karl Marx and Frederick Engels, it’s also led experiments in National Socialism, Soviet Socialism and democratic socialism within living memory.

Public opinion polling

Thus, the entire case made by bordertarians for strict immigration laws is based upon certain public opinion polling numbers, and the assumption that this public opinion polling data will bear out contrary to the way it has worked historically. 

Among the most cited poll questions has been the Pew Charitable Trust, which in 2011 asked Americans “Would you rather have a smaller government providing fewer services or a larger government providing larger services?” The general population of the United States answered 48 percent for smaller government and 41 percent for larger government. But Hispanics responded by only 19 percent seeking smaller government and 75 percent seeking larger government. It’s a huge disparity, and one if borne out consistently over generations could have an impact upon the future of the United States. 

But that’s one giant “if,” measured against the economically certain and historically realized benefit of immigrants. One problem with poll numbers – especially when you are interviewing people only half of whom speak English proficiently – is that how the question is asked can dramatically change the response provided. 

Perhaps more importantly, there’s a huge difference in age between the average age of the native-born non-Hispanic American and Hispanic people living in the United States. Pew Charitable Trust noted in July 2019 that the most common age of white Americans is 58, while the most common age of Hispanics is 11 (that’s not a typo). The median age for both is 44 versus 30, respectively. Just as immigrants skewed slightly Democratic in voting going back to the pre-9/11 era because they’ve always skewed younger, younger voters have always skewed toward higher support for socialism than older (and wiser) people. This disparity is at least partially a function of age, not culture. 

And it may be the answer to the entire disparity in response to the Pew question, a different question, adjusted for age, yields a completely different response. When asked in 2019 about their views of socialism and capitalism by the same Pew Charitable Trust, the numbers were much closer to the national average, about the same difference one would expect once adjusting for the age difference between Hispanic and the population of white Americans. While 52 percent of Hispanics had a strong or somewhat positive view of socialism (versus 35 percent for whites), 61 percent had a strong or somewhat positive view of capitalism (versus 66 percent of whites). 

And the likelihood of the original Pew Trust question bearing itself out over generations seems slim, as the 2012 poll notes that each generation of Hispanic in America is less likely to support bigger government as they remain here into the second and third generations. Moreover, the largest number of new immigrants in recent years has not been Hispanics, but Asians. So this polling data doesn’t even apply to most immigrants any more. 

  Bordertarians essentially think that American culture has become so weak that it cannot bear the same 13-15 percent of its population of immigrants it has historically borne (current levels are about the 1850-1920 historical average), even as other countries such as Australia (33 percent immigrant), New Zealand (25 percent immigrant) and Switzerland (29 percent immigrant) easily bear much higher proportions of immigrants among their populations. Is the American culture of freedom so uniquely fragile it cannot bear the absorption of a sizable minority of immigrants?

The argument against immigration based upon culture – if we assume culture means more than ethnic or religious affiliation – withers at the slightest historical or empirical inspection. So it’s instructive to ask why such a view attained such widespread popularity: If immigrants are not culturally inferior to native-born Americans with respect to supporting a free society, how did so many people come to believe this myth. And the answer is that the American people have been programmed to do so by the Military Industrial Surveillance Complex in order to keep our Middle Eastern “terrorism” wars and Latin American “drug” wars active, using tens of millions of foundation dollars annually to keep up the fear. 

More immigration itself may be the cure to this very high and tangible cost to America in terms of weapons dollars and soldiers’ lives. As more Latinos and Muslims immigrate to America, more people will become personally familiar with them, less fearful of them, view them more like fellow human beings, and become less supportive of our costly and unnecessary aggressive foreign wars. 

Thomas R. Eddlem is a freelance journalist. His articles have been published in more than 20 publications, and he is the author of A Rogue’s Sedition: Essays Against Omnipotent Government. He also authored the foreword to the late William Norman Grigg’s book No Quarter, and is working on completing Grigg’s unfinished manuscript The Stolen Life of Christopher Tapp. His blog can be found at teddlem.blogspot.com.

The New Threat to Free Political Speech

The New Threat to Free Political Speech

It’s said that tough cases make bad law. If so, Maryland’s prosecution of Dennis Fusaro and Stephen Waters for campaign finance law violations threatens to make some really bad law. The prosecutors themselves believe the case will “justify burdening speech and associational rights” under the First Amendment to the U.S. Constitution and article 10 of the Maryland State Constitution’s Declaration of Rights. The latter promises “That freedom of speech and debate, or proceedings in the Legislature, ought not to be impeached in any Court of Judicature.”

The case stems from a county council race in Anne Arundel County, Maryland in 2014 between 2004 Constitution Party candidate for president Michael Peroutka and Democrat Patrick Michael Armstrong. Peroutka won the race after the following anonymous robocall was sent to approximately 5,000 Anne Arundel County voters:

“Hello, what a great opportunity for the LGBT community. We have a true believer for our cause in Patrick Armstrong who’s running for County Council in Anne Arundel County, Maryland. Call Patrick today and thank him for his bravery in coming out of the closet. Coming out of the closet and supporting the fairness to all Marylander’s Act, the Maryland State Senate Bill 212, and supporting the rights for all transgenders. Transgenders can now openly and freely go into any bathroom of their choice based on their confused gender identity. Tell Patrick to continue to stand loud and proud in support for transgenders’ equal rights. While our opponent argued that children could be at risk by sexual predators with this new law, we celebrate the rights of transgenders and what this does for equality for transgenders in Maryland. Call him today at 410-***-**** and thank him for supporting the bathroom bill. Paid for and authorized by Marylander’s for Transgenders.”

The satirically written phone message – “Marylanders for Transgenders” doesn’t exist – accurately related Armstrong’s position with regard to the “bathroom bill” then before the county (and his already very public sexual preference), but failed to disclose who had paid for the robocall. Authorities eventually arrested Peroutka’s campaign advisor Dennis Fusaro, as well as Stephen Waters, both political professionals, and charged them with violating Maryland’s campaign finance laws. The robocall cost less than $200 to set up. Fusaro, the judge concluded, had purchased the phone used for the robocall and Waters set up the robocall after Peroutka had rejected the idea of the call for his campaign. (Peroutka testified at trial for the prosecution and testified he didn’t know about the call until after the election.) Both Fusaro and Waters were convicted in a bench trial February 22, given a $1,000 fine, 60 days in prison and three years probation. The case is currently under appeal.

Wither the right to anonymous political speech?
The case is important for defending anonymous political speech, and America has a long tradition of anonymous political speech going back to Samuel Adams writing against the British as “Vindex” in Boston newspapers, the Federalist Papers, Anti-Federalist Papers, and the Jefferson/Hamilton correspondence over Washington’s Neutrality Proclamation as Americanus, Pacificus and Americanus. But District Judge John P. McKenna, Jr. would criminalize anyone who engages in the modernized version of pampleteering like the Federalist Papers. “The voters of Anne Arundel County had a right to judge the content of that robocall for themselves and make up their own mind as to whether or not it bears any weight,” McKenna said during sentencing. “But they (also) had the right to know who was behind the call.”

One of several interesting details about the case is that none of the actions, spending or speech took place inside the State of Maryland. Prosecutors claim that Fusaro bought the phone used for the call at a Virginia Wal-Mart and had Waters set up the robocall from Virginia with a Canadian company. In short, Maryland is claiming that it can regulate political speech initiated in other states. The prosecution statement against dismissing the case actually claimed regulating out-of-state political speech was a feature, rather than a bug, of their case, stating: “This is not a case of ‘an individual leafleteer who, within her local community, spoke her mind, but sometimes not her name.'” Indeed, the Federalist Papers analogy goes one step further; none of the Federalist Papers (or, for that matter, the Anti-Federalist Papers) were written in Maryland by Marylanders, and yet were reprinted widely in local papers and printed on broadside pamphlets. One might quibble that the quality level of the content in the robocall was of a different level from the Federalist Papers, but the regulatory regime set up to prohibit anonymous political speech is identical and equally applicable to all forms of anonymous political speech regardless of perceived quality.

Overly broad laws and selective prosecution
Judge McKenna acknowledged in his February 22 decision of Maryland’s election disclosure law encompasses just about every kind of political speech: “There is no question that the definition contained in §1-101(k), at first blush, seems broad.” He added that “While Citizens United upheld limited disclosure requirements, it did so because Congress specifically drafted the Bipartisan Campaign Reform Act (“BCRA”) to apply to limited forms of communications that were easily identifiable and only when high-dollar thresholds had been met.”

But in the Fusaro/Waters case, there’s no high-dollar threshold, unless a couple of hundred dollars counts as “high-dollar.” McKenna, Jr.’s February 22 decision documented only the purchase of a cell phone in a Federicksburg, Virginia Wal-Mart for less than $100, and noted that the total cost of the robocall – including the cost of the phone and use of the Canadian robocall firm Impact Strategies to make the calls – was less than $200. Maryland’s election law calls for disclosure of any expenditures of more than $100, though Maryland’s Capital Gazette newspaper’s endorsement of Peroutka’s opponent contained no formal disclosure statement. But while multi-billion dollar corporate media empires (the Capital Gazette is owned by the giant Tribune Media conglomerate) and pay to deliver their endorsement to tens of thousands of voters, politicians are cracking down on small-time operators. And the reason is clear: Little people are having a bigger impact than the giant established media empires that back big government incumbents, which explains why the IRS went after fledgling Tea Party groups in the wake of the 2010 Tea Party revolution.

Waters and Fusaro’s lawyers have argued that the communication was targeted outside of existing law, noting that the law had limited to disclosure to official campaigns and expressed advocacy where the political message was to vote for or against a specific candidate. The Fusaro-Waters robocall above did not make an expressed advocacy. The defense argued that “This narrowing construction (or, more accurately, redefinition) borders on parody. The State does not explain how this excludes political posts on social media, e-mails, or dozens of other forms of speech that each occur thousands of times a day in Maryland and cannot be required to include disclaimers.” Of course, those disclaimers may be on the docket in the future if this case goes forward.

The defense attorneys argued in their consolidated reply for dismissal that “Because the Election Law Article’s disclaimer requirements are so broad, it is not a campaign finance regulation, but a political speech regime. Because it is not tied to money spent on election campaigns and forces political actors to speak, it is a content-based restriction that must be subjected to strict scrutiny.”

Soviet dictator V.I. Lenin has been paraphrased as saying that politics is about “who does what to whom for whose benefit?” and not abstract principles of justice. And there’s a bit of that in practice among prosecutors of this case. Fusaro’s attorney Benjamin Barr, of the Pillar of Law Institute, told the Libertarian Institute that another issue the court failed to consider was the selective prosecution issue. Barr noted that he had brought before the court a large number of robocall cases – including Americans for Job Security and others on both the political left and right – none of which were prosecuted. Why are only Fusaro and Waters being prosecuted by state Prosecutor Emmet Davitt? They were likely prosecuted for the presumably unpopular and politically incorrect content of their call, and not for crossing some bright line campaign finance law.

A history of intimidation and harassment
The U.S. Supreme Court observed of disclosure laws directed against civilians in the 1976 Buckley v. Valeo case that “we have repeatedly found that compelled disclosure, in itself, can seriously infringe on privacy of association and belief guaranteed by the First Amendment.” Transparency laws have generally been a ruse for intimidation. This goes back to the 1958 case of the National Association for the Advancement of Colored People v. Patterson, when the State of Alabama demanded the membership and donor rosters of the local NAACP during the height of the civil rights movement. The court ruled in that case disclosure would effectively publish a hit-list for the then-very active local Ku Klux Klan terrorist cells: “A requirement that adherents of particular religious faiths or political parties wear identifying armbands, for example, is obviously of this nature. Compelled disclosure of membership in an organization engaged in advocacy of particular beliefs is of the same order. Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs….Petitioner has made an uncontroverted showing that, on past occasions, revelation of the identity of its rank-and-file members has exposed these members to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility.”

While some may scoff at the comparison between NAACP donor disclosure in the midst of Ku Klux Klan-inspired violence during the height of civil rights movement furor and a robocall involving a county council race today, gender issues have a recent history of violence and intimidation in the United States. This was especially true with California’s Proposition 8, a move to define marriage as between one man and one woman in 2008. Brendan Eich, co-founder of Mozilla, donated $1,000 to the campaign for Prop. 8, and was forced to step down from his job because people objected to the donation once it was exposed publicly. Police were called to a Los Angeles restaurant and donned riot gear after a local restaurateur had been revealed on-line to have donated to Prop. 8. Supreme Court Justice Clarence Thomas noted this wave of violence in the wake of Prop. 8 disclosure in his concurrence in the Citizens United case:

“Some opponents of Proposition 8 compiled this information and created Web sites with maps showing the locations of homes or businesses of Proposition 8 supporters. Many supporters (or their customers) suffered property damage, or threats of physical violence or death, as a result. They cited these incidents in a complaint they filed after the 2008 election, seeking to invalidate California’s mandatory disclosure laws. Supporters recounted being told: “Consider yourself lucky. If I had a gun I would have gunned you down along with each and every other supporter,” or, “we have plans for you and your friends.””

The Fusaro/Waters case also has several side issues, which is to say, distractions. Patrick Armstrong stressed in a Facebook post the facts of the robocall were accurate and that the robocall had improperly brought his parents into the race:

“Point of clarification: I don’t want this story to be taken the wrong way.
My problem with the robocall is not the linking of me to a law that protects the transgender community, not at all!
My many problems with the call are as follows:
1) It smeared the transgender community, citing a “confused gender identity” and suggested that they are child sex predators.
2) It mocked me, my sexuality, and the transgender community.
3) It provided my parent’s home phone number and asked people to call it.
4)It broke the law, failing to identify who authorized and paid for it.
I stand with the transgender community because no one deserves to be bullied and I stand up to bullies. No one deserves to be mocked or made fun of for being who they are. If someone doesn’t understand sexuality or sexual identity, or if it scares them as it scares many conservatives, they do not then have the right to bully. Not understanding, or misunderstanding, is not a free pass to attack anyone. I am proud to represent the G in LGBT, and I am proud to defend those who are in the T of LGBT. Live and let live, mind your business, and never, ever bully anyone. Point clarified.”

Armstrong’s complaint about the phone number on the robocall being his parent’s home number is technically accurate: Armstrong lived at home with his parents, and listed his home address as a contact address on his official registration with the State of Maryland’s State Board of Elections. Armstrong did, however, supply a different contact phone number on his official state election form, so Waters could have used that number as a contact number on the robocall if he had gone to Armstrong’s filing with the state. But it’s a bit of a stretch to claim that his parents were targeted by the robocall, as Armstrong has charged, since a simple web search for Patrick Michael Armstrong comes up with his home number (which doubles as his parents’ number).

Making the claim that Fusaro and Waters dragged Armstrong’s family into the race doesn’t directly change the court proceedings, but it does prejudice most people against the defendants for engaging in unpopular speech – the only kind of speech that traditionally needs legal protection.

The other wrinkle in the case is that the person who initiated the speech was Fusaro, who had been a paid advisor to a political campaign. Peroutka had explicitly rejected the robocall during a campaign meeting, Judge McKenna noted, and there was no claim that this was a “wink, wink” off-the-books campaign operation by Peroutka. But Fusaro did receive a $2,000 bonus for winning the campaign, and the judge believed the robocall was an attempt by Fusaro to win the bonus by winning the campaign. But does a person give up his freedom of speech upon contracting to work on a political campaign? Maryland’s prosecutors evidently think so. “These laws that require disclosure are very important to ensure the integrity of the election process,” Prosecutor Emmet Davitt, a longtime donor to Democratic Party political causes, claimed. “We want the message out that it’s not just a matter of a rule or a dirty trick – that it’s against the law. And we hope it sends a message that, if you can’t obey the laws, kindly stay the hell out of Maryland.” But of course, Fusaro is being prosecuted for what he did when he wasn’t in Maryland at all.

“You have a chance to make an impact and send a message,” Davitt said in an interview for the Washington Post before the trial got underway. “We have a fantastic democracy, but people have to play by the rules.” But the real message being sent is by this case is that if you engage in the right kind of anonymous political speech, you’re safe from prosecution, but if you engage in spreading the “wrong” political opinions, you might find yourself in legal jeopardy.

Full disclosure: Though I have never met Dennis Fusaro face-to-face, I have corresponded with him by phone off and on since the 1990s when he was state and local affairs coordinator for Gun Owners of America and I was the director of research for The New American magazine.

No Place to Hide: The Church Committee Hearings Revisited

No Place to Hide: The Church Committee Hearings Revisited

The 21st century attack on privacy by the NSA, FBI and CIA casts the hearings by Senator Frank Church (D-Idaho) and Otis Pike (D-N.Y.) during the early 1970s in a new light as a path to needed reforms.

Hero whistleblower Edward Snowden told interviewers after he revealed widespread NSA warrantless searches that “I don’t want to live in a world where everything that I say, everything I do, everyone I talk to, every expression of creativity, or love, or friendship is recorded. And that’s not something I’m willing to support. It’s not something I’m willing to build. And it’s not something I’m willing to live under.”

Snowden doesn’t stand alone in history. Senator Frank Church (D-Idaho) investigated intelligence agency excesses and said essentially the same thing 40 years earlier on NBC’s “Meet the Press”: “In the need to develop a capacity to know what potential enemies are doing, the United States government has perfected a technological capability that enables us to monitor the messages that go through the air…. Now, that is necessary and important to the United States as we look abroad at enemies or potential enemies. We must know, at the same time, that capability at any time could be turned around on the American people, and no American would have any privacy left – such is the capability to monitor everything: telephone conversations, telegrams, it doesn’t matter. There would be no place to hide.”

The Experience of the Church and Pike Committees

The Church and Pike Committees were companion intelligence committees in the U.S. Senate and House of Representatives, respectively, that investigated U.S. intelligence agencies in the mid-1970s, including the CIA, FBI and NSA. They also investigated misuse of the IRS auditing function by officials of the Nixon administration. The committees revealed to the American people that U.S. intelligence agencies had engaged in warrantless surveillance of Americans through wiretapping, mail-opening and the planting of listening devices, despite clear requirements by the Fourth Amendment that all searches are “unreasonable” and illegal unless they are under a court warrant with “probable cause” and contain a specific description of what is being searched and what will likely be found by the search.

The hearings also revealed that the FBI’s Counter-Intelligence Program, COINTELPRO, had engaged in clandestine operations of deceit and intimidation against critics of both American foreign policy and racial policies in the South. Moreover, the CIA had engaged in policies of assassination, gun-running, and military coups d’etat in foreign countries – generally without even informing the President. In short, they revealed America had a secret government that had operated outside of constitutional boundaries and without either the consent or knowledge of elected officials in both the legislative and the executive branches of government.

The Pike Committee found that even though the Constitution requires that all federal spending be approved by Congress, “GAO accountants on loan to the Committee had concluded that the foreign intelligence budget is three to four times more costly than Congress has been told.” In other words, the intelligence agencies were spending three to four times more than they were constitutionally authorized. The Pike report provided anecdotal evidence of vast waste, noting that budgeting in the CIA and other spy agencies “to range somewhere between cursory and non-existent.”

Perhaps most importantly, the Church and Pike hearings revealed the tactics of how intelligence agencies court legislative friends and blunt criticism, and provide an example of how legislatures can curb intelligence agency powers substantially.

At the height of the constitutional violations, in 1970, President Nixon authorized the Huston Plan, a scheme to violate the Bill of Rights with impunity in the name of national security and “internal security.” Nixon withdrew authorization for the Huston Plan days after authorizing it, and Tom Charles Huston (the plan’s author) also played the contrite role in Church Committee hearings. Huston told Senator Gary Hart (D-Colo.) that the executive branch had been essentially operating under the Huston plan for decades on an ad hoc basis, with each department violating the constitutional restrictions of the Fourth Amendment independently without Presidential approval or knowledge:

The COINTEL Program – apparently even the Justice Department did not know about that. If they had told me, it was obvious that the word would have been out. So it seems to me that many of these agencies just kind of operated in their own world, and had their own programs going. They did not want anyone else to know it. And the thing that intrigues me is that I always was under the illusion that the purpose of intelligence was to provide policymakers with information upon which to make policies. But if the policymaker does not even know that there are sources of information available, I do not know what in the world good it does anybody except the people who are operating it for their own gratification.”

In short, Huston wanted to centralize constitutional violations in the President’s office, where these violations had been committed independently and without presidential authorization up until that point. The Church Committee concluded of the Huston Plan that: “Some provisions of the plan were clearly unconstitutional; others violated Federal statutes…. Five days after the President approved the plan, he revoked it at the insistence of the FBI Director and the Attorney General – to the dismay of those CIA, NSA, and FBI representatives who had helped Huston develop it.” And the Church Committee stressed that “the Huston plan itself was only an episode in the lawlessness which preceded and followed its brief existence.” Nobody else came forward to document the lawless attack on the Constitution publicly. And the committee also found with regard to the Huston Plan that “even though the President revoked his approval of the Huston plan, the intelligence agencies paid no heed to the revocation. Instead, they continued the very practices for which they had sought presidential authority, expanding some of them and reinstating others which had been abolished years before.” This was part of what Church labeled a “continuous effort by the intelligence agencies to secure the sanction of higher authority for expanded surveillance at home and abroad.”

After the September 11, 2001 attacks, Congress unwittingly gave the legislative seal of approval on the 21st century version of the Huston Plan. The Huston Plan also anticipated the formation of the National Director of Intelligence, calling for “A permanent committee consisting of the FBI, CIA, NSA, DIA and the military counterintelligence agencies should be appointed to proved evaluations of domestic intelligence, prepare periodic domestic intelligence estimates, and carry out the other objectives specified in this report.”

But the Huston Plan, along with the ad hoc attacks on the Constitution, went awry in the wake of the Church/Pike hearings. Representative Otis Pike (D-N.Y.) ran his committee with an antagonistic approach toward the intelligence agencies, and ran up against overwhelming bureaucratic “Deep State” resistance. He was never able to get a report of his investigations declassified to the public because he could never get consent from the executive branch to declassify the information (a key flaw in the law that unreasonably favored – and continues today to favor – executive branch Deep State secrecy). Eventually a committee staffer leaked one of the Pike Committee reports to New York City’s Village Voice newspaper.

Senator Church took a more cooperative approach to his hearings and was able to get several reports published in declassified form, and conducted several open hearings for public scrutiny. Consequently, historians generally conclude that the Church Committee was more successful because of its public results. But the reality is probably more complicated; Pike played the “bad cop” in the legislative good cop/bad cop investigative team. It’s likely that the legislative pressure generated from the contentious House Intelligence Committee hearings forced intelligence officials to cooperate with more friendly Senate Intelligence Committee negotiators in order to avoid what would have likely been more severe legislative restrictions that would have been the inevitable result had they further stonewalled congressional investigators from both chambers.

The legacy of the Church and Pike Committees was enactment of clear restrictions on intelligence agencies that remained largely in force for more than a generation until passage of the USA Patriot Act, in the wake of the September 11, 2001 terrorist attacks. For example, Congress enacted the Foreign Intelligence Surveillance Act in 1978, which required a warrant for any surveillance that could involve incidental spying on Americans when foreigners are targeted for surveillance. And President Ford signed Executive Order 11905 banning the use of assassination as a foreign policy tool in 1976.

Stonewalling legislative oversight

A key tactic of intelligence Deep State bureaucrats to maintain their power is to declare everything a “state secret” and engage in obstructionism whenever any information is requested by legislative branch investigators who are charged with oversight of the national security state apparatus. Leashing the bureaucratic Deep State begins with genuine transparency and meaningful legislative oversight.

Both the Church and Pike committees noted the tendency of intelligence agencies to declare everything a state secret. After a lower-level State Department employee in the Ford administration’s Cyprus office was silenced before the committee under the excuse of “executive privilege,” Pike sarcastically wrote that “The authority invoked by the Secretary of State was neither ‘classification’ nor ‘executive privilege,’ but a new doctrine that can best be characterized as ‘secretarial privilege.’” The leaked Pike Committee report cited Pike concluding that:

“Those who argue for secrecy do not mention the Constitution. They do not mention taxpayers. Instead, they talk of rather obscure understandings the Russians might derive about some specific operation, even if all the Russians knew was a single dollar total which would be in the billions of dollars and would cover dozens of diverse agencies. How the Russians would do this is not clear. The Committee asked, but there was no real answer. What is clear is that the Russians probably already have a detailed account of our intelligence spending, far more than just the budget total. In all likelihood, the only people who care to know and do not know these costs today are American taxpayers.”

Indeed, the phrase “executive privilege” appears nowhere in the U.S. Constitution, though the Congress is given plenary power to require information from the executive branch. In fact, the Constitution requires the President to volunteer that information up to the legislature under Article II, Section 3: “He shall from time to time give to the Congress Information of the State of the Union.” Instead, intelligence agencies have specialized in foot-dragging even under threat of lawsuits. “When legal proceedings were not in the offing, the access experience was frequently one of foot-dragging, stonewalling, and careful deception,” Otis Pike complained in the Pike Committee Report, as published in the Village Voice on Feb. 23, 1976. “If this Committee’s recent experience is any test, intelligence agencies that are to be controlled by Congressional lawmaking are, today, beyond the lawmaker’s scrutiny.” What Pike warned about in the 1970s is a reality today, at least in part, as evidenced by then-Senate Select Committee on Intelligence Chair Dianne Feinstein’s complaints on March 11, 2014 that:

“In May of 2010, the committee staff noticed that [certain] documents that had been provided for the committee’s review were no longer accessible. Staff approached the CIA personnel at the offsite location, who initially denied that documents had been removed. CIA personnel then blamed information technology personnel, who were almost all contractors, for removing the documents themselves without direction or authority. And then the CIA stated that the removal of the documents was ordered by the White House. When the committee approached the White House, the White House denied giving the CIA any such order.

“After a series of meetings, I learned that on two occasions, CIA personnel electronically removed committee access to CIA documents after providing them to the committee. This included roughly 870 documents or pages of documents that were removed in February 2010, and secondly roughly another 50 were removed in mid-May 2010.”

CIA officials – all the way up to Director John O. Brennan – initially denied CIA officers had maliciously hacked into the Senate’s computers, and later acknowledged the hacking and deletion of files took place. No one was ever disciplined for this serious separation-of-powers offense, or for the very public lies denying the offense took place. This is because they were doing what the Deep State leaders wanted.

But America had been down that road long before Feinstein, if not quite as blatantly. Pike complained in his leaked report that “On September 12, 1975, the President, or someone using his name, cut off the Committee from all classified information. As if that were not enough, his action was accompanied by a demand that we immediately turn over all classified materials from our own internal files.” Assistant Attorney-General, Civil Division Rex E. Lee, the author of the memorandum, testified to the committee that “the President’s responsibilities for the national security and foreign relations of the United States leave him no alternative but to request the immediate return of all classified materials heretofore provided by any department or agency of the executive branch and direct all departments to decline to provide the Select Committee with classified materials, including testimony and interviews which disclose such materials, until the Committee satisfactorily alters its position.” Lee later admitted he hadn’t even troubled himself to read the committee’s position before penning the letter.

Pike explained that “If this Committee could not have received testimony from CIA officers or FBI agents about advice or options they presented to senior officials, it would have had no choice but to shut down. Oversight would be dead.” But, of course, that was the intent behind intelligence bureaucratic foot-dragging from the beginning.

Pike complained that “the words [of the CIA and other intelligence agencies] were always words of cooperation; the reality was delay, refusal, missing information, asserted privileges, and on and on.” So it is today, as CIA Director John O. Brennan told the Council on Foreign Relations (an interventionist New York City think-tank from whose tiny 3,000-fold membership has been drawn virtually every CIA Director since its 1947 founding) on March 11, 2014 that the “CIA has tried to work as collaboratively as possible with the Committee on its report. We will continue to do so, and I have talked extensively to Chairman Feinstein and Vice Chairman Chambliss about the report and the way forward.” Brennan said this, even as his lie denying CIA hacking into Senate computers was ongoing.

Another means of obstruction used by intelligence committees has been to formulate internal jargon as an excuse to avoid presenting information demanded by congressional subpoenas. Pike explained that:

“Perhaps the most difficult question in developing information about intelligence activities is knowing the right question to ask. As an illustration, Committee staff obtained the names of CIA proprietaries, after lengthy negotiations. Some time later, staff members noticed that certain names were not on the list. The explanation was that those were ‘fronts,’ and we had not asked for fronts; Nor was this sort of semantic contest confined to staff inquiries. In one public hearing, Congressman Stanton and the FBI’s Raymond Wannall consumed more than five minutes drawing distinctions among ‘surreptitious entry,’ ‘burglary,’ and ‘illegal break-in.’…

“Astonishingly, while the Committee was in the midst of objecting to this past project, CIA was obtaining approval for re-instituting the same type of project in the same country. The CIA never told the Committee about this renewal. When newspapers revealed the new project, Committee staff asked the CIA why it had not been told. The response was ‘You didn’t ask the right question.’”

This, of course, is the same tactic used today. Congressman Justin Amash (R-Mich.), an heroic critic of NSA warrantless surveillance, has complained of NSA briefings:

“What you hear from the intelligence committees, from the chairmen of the intelligence committees, is that members can come to classified briefings and they can ask whatever questions they want. But if you’ve actually been to one of these classified briefings – which none of you have, but I have – what you discover is that it’s just a game of 20 questions.

“You ask a question and if you don’t ask it exactly the right way you don’t get the right answer. So if you use the wrong pronoun, or if you talk about one agency but actually another agency is doing it, they won’t tell you. They’ll just tell you, no that’s not happening. They don’t correct you and say here’s what is happening.

“So you actually have to go from meeting to meeting, to hearing to hearing, asking questions — sometimes ridiculous questions — just to get an answer. So this idea that you can just ask, just come into a classified briefing and ask questions and get answers is ridiculous.

“If the government – in an extreme hypothetical, let’s say they had a base on the moon. If I don’t know that there’s a base on the moon, I’m not going to go into the briefing and say you have a moonbase. Right? [Audience laughs.] If they have a talking bear or something, I’m not going to say, ‘You guys, you didn’t engineer the talking bear.’

“You’re not going to ask questions about things you don’t know about.”

Obstructionism of congressional investigators in the 1970s went to extreme lengths. State Department personnel were told on the personal orders of Henry Kissinger not to discuss either classified information or the decision-making process with committee members – not even in executive session – and Kissinger personally defied subpoenas issued by the committee, and nearly faced a contempt of Congress indictment on that basis.

Intelligence infiltration of media and Congress

Kissinger and his friends in the intelligence community then engaged in a public smear campaign against the Pike Committee, accusing it of “McCarthyism,” and a compliant mainstream press – liberally strewn with “former” CIA and intelligence officials – jumped in to help. The Pike Committee report noted that “Facts seemed to make no difference. Within days of the innuendo being raised by Dr. Kissinger and his reply, newspaper columns and editorials were reporting their charges of McCarthyism.”

Intelligence agencies had melded with mass media in an attempt to maximize agency influence even in the 1970s. The Pike Committee report noted that “Full-time correspondents for major U.S. publications have worked concurrently for CIA, passing along information received in the normal course of their regular jobs and even, on occasion, traveling to otherwise non-newsworthy areas to acquire data.” The CIA issued guidelines to its employees in the wake of the Church/Pike hearings that they should not pose as members of the media, but it’s unclear this restriction is still in place.

And networking with members of Congress on how to defeat legislative oversight was also on the agenda. The Pike Committee report actually contained an internal CIA memorandum where Senator Henry “Scoop” Jackson (D-Wash.) was advising the CIA on how to escape scrutiny from the Church Committee. Of course, CIA corruption of members of Congress is a serious breach of separation-of-powers. If Americans think that the far-larger intelligence agencies of today aren’t doing the exact same thing, but on a much more massive and subtle scale, they’re kidding themselves. The “intelligence community” has learned from its mistakes of the Church/Pike era, and has actively courted members of Congress with their sweet lies in order to head-off the same kind of restrictive legislation.

How to get out of the mess that we are in

The difference between the Church and Pike committee era and the congressional oversight committees today is that today’s committees are staffed by congressmen who are far more compliant with the Deep State, as Pike mentioned in this part of his hearings:

“Chairman Pike: If it is your position that we may never disclose information, how can we carry out our responsibilities?

“Mr. Lee: The same way, Mr. Chairman, that for decades other committees of Congress….

“Chairman Pike: That is exactly what is wrong, Mr. Lee. For decades other committees of Congress have not done their job, and you have loved it in the executive branch. You tell us that Congress has been advised of this. What does that mean? It means the executive branch comes up and whispers in one friendly congressman’s ear, and that is exactly what you want to continue, and that is exactly what I think has led us into the mess we are in.”

After the Church/Pike hearings, which were regarded as disastrous to the Deep State functionaries, more compliant members of the House and Senate Intelligence Committees were courted. Thus, it’s no surprise that House Select Intelligence Committee Chairman Mike Rogers (R-Mich.) led floor debate against ending the unconstitutional warrantless metadata program in the House of Representatives in 2013. As supervision – if it can be called that – has loosened, intelligence officials have become emboldened, as evidenced by the Feinstein/Senate computer hacking debacle that nevertheless involved no repercussions against intelligence agencies or officials.

Moreover, the Church and Pike Committees give additional insights into how lawlessness at the federal level trickles down to lawlessness at the state and local level. Former Houston Police Department narcotics officer Anthony Zavala “recounted that wiretapping had become ‘second nature to us all,’ and ‘that it was all discussed freely, and that everyone knew it was going on.’” And state and local police across the nation today use “stingray” aircraft to surveil citizens, also without warrants or probable cause. As the federal government ignores constitutional restraints, other branches and levels of government are also empowered to violate the privacy of Americans.

America’s Felix Dzerzhinsky, former NSA and CIA Director Michael Hayden, began his long defense of the American gulag archipelago of secret CIA prisons and unlimited NSA/CIA surveillance in 2013 by claiming of Edward Snowden’s revelations represented “undeniable operational effect of informing adversaries of American intelligence’s tactics, techniques and procedures.” In short, he claims that revealing intelligence publicly empowers America’s enemies.

But, of course, if information empowers the enemies, information also empowers citizens. This was something that the father of the U.S. Constitution, James Madison, noted: “A popular government, without popular information, or the means of acquiring it, is but a prologue to a farce or a tragedy; or, perhaps both. Knowledge will forever govern ignorance: And a people who mean to be their own governors, must arm themselves with the power which knowledge gives.”

Other early Americans also pointed out the truism that knowledge will forever govern ignorance, and that government officials often seek to shield themselves from supervision by the public, to the disaster of the public. Edward Livingston wrote in his 1823 report on the Louisiana criminal code that: “No nation ever yet found any inconvenience from too close an inspection into the conduct of its officers, but many have been brought to ruin and reduced to slavery by suffering gradual impositions and abuses which were imperceptible, only because the means to publicity had not been secured.”

The question is: Shall the government empower citizens and enemies alike, or trust government officials alone with such information? All people familiar with world history know that the greatest threats to large and powerful nations like the United States come from their own government, insulated from public control, and not from external threats.

That means restraints upon intelligence agencies is essential to Americans enjoying continued freedoms in the future (full abolition of the intelligence apparatus is not politically practical), and it will only happen through a coordinated coalition effort by liberty advocates with the political left, along with several specific reforms. The basic rules of winning reform include:

1. Don’t follow traditional party politics. As a rule, Republicans are not going to be the friends of reform of intelligence agencies and general left-right and Republican-Democrat political distinctions don’t matter. In the 1970s, the biggest obstacles to reform were “conservative” Senators Barry Goldwater of Arizona and John Tower of Texas. But liberal Republican Jacob Javits was on the right side of the issue. In the 21st century, the lines will be even more blurred, with many libertarian-leaning and some Tea Party Republicans being advocates of reform. Essentially, the core leaders of the reform movement will be the Liberty and Progressive caucuses of both houses, with some exceptions in each.

2. Control over the congressional intelligence committees is key.

Any reform of the surveillance state necessarily involves replacing the members of the House and Senate Intelligence Committees who have proven to be loyal sycophants of the Deep State intelligence bureaucracy. This involves targeting those congressmen in their districts at election times, and marginalizing them – to the extent possible – in party caucuses.

3. The “Deep State” will disclose nothing voluntarily.

Everything is a “vital” secret to the surveillance state, even if the people labeling intelligence documents as “vital” don’t know the definition of the word “vital.” Thus, documents need to be more readily declassified, and not just by courageous whistleblowers and leakers outside of the formal legal process.

Here’s how:

4. Congressional committees need to have the legal power to declassify executive branch documents.

The executive branch monopoly on the classification of information is a key source of its power, and it needs to end. Knowledge is power, and the legislative branch will never again be the equal of the executive branch if it does not also have the power to declassify documents. At a minimum, a law should be enacted to give the Intelligence Committees of both houses of Congress the power to declassify executive branch documents by majority vote. Additionally, each chamber should have the power to declassify documents by majority floor vote, independent of each other chamber.

In this quest to get public information, the progressive left will occasionally be the friend of liberty. During the Church Committee hearings Sen. Walter Mondale (later the Democratic nominee for President) noted in testimony on declassifying Operation SHAMROCK that “I just wanted to comment briefly on what I thought I heard to be the argument, that somehow the classification and determination of the executive department should govern how this committee decides to release or not to release information to the public. I do not think we can accept that definition for a moment. If we do, I think we are no longer a coequal branch of Government.” And “conservative” Republican John Tower of Texas responded: “Yes, there is a right of the people to know, but that must be balanced against the fact that when these matters are made public, they are available also to our enemies.” Tower, a sell-out to the surveillance state, explained: “Public inquiry on NSA, I believe, serves no legitimate legislative purpose, while exposing this vital element of our intelligence capability to unnecessary risk, a risk acknowledged in the chairman’s own opening statement.”

5. The “Deep State” will fight back, and use dirty tactics.

Henry Kissinger’s character assassination tactics against the Democrats who then controlled congressional intelligence committees stand as a warning that the Deep State will stop at nothing to maintain its power. But it’s also important to keep in mind that Kissinger’s attempts, although abetted by legislators like Sen. Henry “Scoop” Jackson, did not succeed in the 1970s. If these techniques could be overcome and exposed in the 1970s, the same could happen in the 21st century.

6. Restore the FISA Rule and end the ex parte nature of warrant requests.

For libertarians and classical liberals, this is a weak standard. The FISA law [Foreign Intelligence Surveillance Act of 1978] allowed for warrants after the fact (up to 60 days after the surveillance took place), and in practice very few surveillance requests were refused by compliant judges who had been appointed by the executive branch. But it’s an important, albeit minimalist, first step. The FISA standard violated the letter of the Fourth amendment, but it was a quasi-sincere effort to maintain a minimum protection of American citizens from Deep State overreach.

In addition, FISA court applications have been exclusively ex parte proceedings, which explains the reason more than 99 percent of requests have been approved by FISA judges. Congress should pass a law requiring appointment of an attorney to argue against each request on constitutional and practical grounds.

7. Don’t count on those charged with enforcing the law to actually apply the plain meaning of the U.S. Constitution to limit the Deep State.

There will be no silver bullet in this war to de-fang the surveillance state, such as a magical unicorn in the form of a Supreme Court who would actually rule on the plain text of the Fourth Amendment. The amendment defines a “reasonable” search as one which contains (1) a warrant by a judge, (2) signed under oath, (3) with “probable cause” evidence and (4) particularity, describing what you’re looking for and where you expect to find it. The federal court system, including the Supreme Court, will not enforce the plain text of the amendment.

Even the proponents of quasi-reform such as Ford Administration Attorney-General Edward Levi, claimed in testimony before the Church Committee “Having attempted to provide something of a factual base for our discussion, I turn now to the Fourth Amendment. Let me say at once, however, that while the Fourth Amendment can be a most important guide to values and procedures, it does not mandate automatic solutions.” To this, one might have replied: “Yes, Mr. Attorney-General, it does. Let me read the text of the amendment back to you.” Yet even Levi issued guidelines prohibited surveillance of persons or groups not under investigation for crimes, a sensible set of guidelines roundly condemned by the neo-cons of the 1970s.

Levi’s counter-factual claim about the infinite flexibility of the Fourth Amendment (it was actually written to be inflexible) was carried out in a far more malignant form when Alberto Gonzales took over as Attorney General during the Bush administration.

Senator Church warned that:

“If this government ever became a tyrant, if a dictator ever took charge in this country, the technological capacity that the intelligence community has given the government could enable it to impose total tyranny, and there would be no way to fight back because the most careful effort to combine together in resistance to the government, no matter how privately it was done, is within the reach of the government to know. Such is the capability of this technology.

I don’t want to see this country ever go across the bridge. I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision so that we never cross over that abyss. That is the abyss from which there is no return.”

America has already begun descending into that abyss Senator Church described. But there is still some time to return from that abyss, if the liberty movement partners with the progressive movement to check the Deep State by taking control over the legislative branch again, as it did in the 1970s.

Thomas R. Eddlem is a freelance writer who has been published in more than 20 periodicals. He is the author of Primary Source American History, and wrote the introduction to the forthcoming book by William Norman Grigg No Quarter: The Ravings of William Norman Grigg.

MOAB is the new greatest show on earth

MOAB is the new greatest show on earth

MOAB is the new greatest show on earth. Donald Trump is the first President to have seamlessly merged reality television with war. Like the director of an old Arnold Schwarzenegger movie, he’s constantly looking for ever-bigger explosions to wow the audience to distract from the aging actor.

The Copper-Toned Coprolite traded in Neilsen for Rasmussen and Gallup two years ago, but MOAB is the new way to the top of the ratings. Immediately after authorizing the bombing, and fresh from make-up (presumably thrashing his head amongst the rubble of the bottom of a nearly empty Cheetos bag), Trump assured Americans he was proud of the military in a sit-down photo-op with generals in uniform who had lots of medals. This sit-down is the new Red Carpet walk for the septuagenarian star.

Back to MOAB: “This is the right munition to reduce these obstacles and maintain the momentum of our offensive against ISIS-K,” General John W. Nicholson assured Americans in a press release, explaining they wanted to take out an ISIS “tunnel complex.” It’s certainly the right munition for the McAlester Army Ammunition Plant, which manufactures the MOAB at $16 million per unit.

But the MOAB is not designed for penetration into tunnels. A bunker-buster bomb, which is made for penetrating into the kind of tunnels the military claimed they were going after, costs a measly $145,600 per bomb. It doesn’t look or sound nearly as cool, though. There’s no “wow” effect. Thus, the MOAB. Cynics would claim it was about more funding for the Military-Industrial Complex, but they’re wrong. This was about the show, not about money. That it’s a show with the biggest budget ever is not important; that it’s the biggest show ever is all-important. The greater cost of the bombs was not the Oscar, but only the gift bag at the Oscars.

The recent bombings in Syria, Iraq and Afghanistan – it’s clear to anyone paying attention – have been for show. Consider the April 6 bombings by the U.S. against the Syrian Air Force base that had allegedly used chemical weapons in Khan Shaykhun. The Syrian Air Force was flying sorties to bomb the same neighborhood later that same day from the same air base. Reuters news service said (citing a British humanitarian group the Observatory), “had ‘done the impossible’ in order to continue using it for sorties.”

Actually, it’s quite possible if you warn the enemy when and where you’re coming and then don’t bomb the runway. And that’s just what the U.S. did. Russia – who is working with Assad’s government on the ground – was told which airport was going to be hit in advance. As for not bombing the runway, Trump tweeted the next day that “The reason you don’t generally hit runways is that they are easy and inexpensive to quickly fix (fill in and top)!”

Some cynics might complain that Trump has been inconsistent with his campaign promises. For example, in 2014 he tweeted that “I would not go into Syria, but if I did it would be by surprise and not blurted all over the media like fools.” In his defense, he technically didn’t blurt it out to the media, only to the target of the bombings. All right, that’s not really a defense. Trump also tweeted that same year that “The President must get Congressional approval before attacking Syria-big mistake if he does not!” And Trump didn’t go to Congress before bombing Assad, presumably because art reviewed by a committee never has the same artistic quality.

Trump has been consistent with regard to his campaign promises, however. In cases where the Vermilion Vulgarian pledged to “bomb the $#!%” out of ISIS and other warmongering postures, he’s kept his promises. And where Trump has pledged to leave nations alone, he’s broken all of those promises. As Lenin said, “promises, like pie crusts, are made to be broken.” But there’s a consistency in his position.

Just because Trump lied doesn’t mean he’s inconsistent. As Secretary of Defense James Forrestal once told Senator Joe McCarthy, “consistency has never been a mark of stupidity. If they were merely stupid, they would occasionally make a mistake in our favor.”

There’s more than enough evidence to prove President Circus Peanut is consistent, not stupid. His consistency is in putting on the greatest show on earth, greater than any gladiator circus orchestrated by Roman emperors. And the crowds today cheer in the modern-day Colosseum of Facebook and Twitter, expressing gratitude that the Marmalade Molester is not, in their words, a “pussy.”

I know. It’s kind of an awkward phrase for the Trumpkins to use, considering their Dear Leader’s personal history. But they’re not talking about that kind of pussy. Usually, not being a “pussy” means bombing the snot out of a country that never harmed any Americans, and then later acting all “shocked, shocked!” by the blowback from the widows and orphans whom we subsequently label “savages.” Christ’s “Golden Rule” of treating your neighbor as yourself is so out-of-fashion. Ron Paul didn’t get booed at a Republican presidential debate in 2012 for nothing.

This isn’t about right and wrong, It isn’t about defeating an enemy to America. And it isn’t even about funding the Military-Industrial Complex. It’s about show-business. Before he left the small screen for the world’s biggest stage, Pumpkin-Head tweeted that “If Obama attacks Syria and innocent civilians are hurt and killed, he and the U.S. will look very bad!” For Trump, that was 300 innocent civilians ago. Civilians matter no more than budgets.

Neither does an end-game for Syria matter, where the U.S. Air Force is striking both ISIS and the Syrian government at the same time. It doesn’t matter who in Syria benefits, even if this makes the U.S. government the unofficial air force of al Qaeda. Al Qaeda’s affiliate Tahrir al-Sham is the sole remaining significant power on the ground in Syria that the U.S. Air Force and Navy is not bombing. In effect, Trump has turned our pilots into al Qaeda’s air force.

It’s only been 16 years since 9/11. Have we Americans forgotten so soon who attacked us that day?

The answer for those who haven’t been paying attention is: Yes, many have forgotten. Perhaps they should be reminded. But that would risk ending the greatest show on earth.

MOAB is the new greatest show on earth

On the Life of William Norman Grigg

One of the greatest joys of my life was being able to work right next to William Norman Grigg at The New American magazine from 1994-2001 in Appleton, Wisconsin. I had been one of the staffers who had moved out from Belmont, Massachusetts to Appleton in 1989, and he was quickly added to the magazine’s staff after some brilliantly-written columns in 1993.

“Thesaurus Rex,” as he was sometimes called in Appleton, wrote for the internal newsletter of the company we called “The Insider Report” with a wit and vocabulary that made everyone in the office belly laugh. Hardly any of his satiric wit made it into the print magazine, because the style of the magazine at the time was to limit satire. But it was a joy to read, and I’m richer for having access to it. Much of my own writing style is a pale shadow of Will Grigg’s thundering style of prose.

One example of his wit was his description of the apprehension of the Unabomber, Ted Kaczynski in “The Insider Report.” He had written that the environmental terrorist Kaczynski — who had been apprehended unbathed — had experienced in “personal biodiversity while living in a yurt made of his own offal.” I read it and laughed, even though at the time I didn’t know what a “yurt” or “offal” was (though I had a pretty good idea from the context). So I looked them up in a dictionary … and laughed again, even louder.

Of course, there were two senior editors and three researchers who wrote for “The Insider Report,” but Will Grigg wrote the majority of the content. And he wrote the best content. He was a voracious reader, and his reading inevitably made it into his articles. Will was for a decade the magazine’s most prolific writer, and the writer most readers looked forward to reading most.

I left The New American‘s staff before he did, and for different reasons than his departure. His split with The New American and its parent organization, the John Birch Society, in 2005 was acrimonious. I won’t go into that other than to observe that both sides could have toned it down. I tried to smooth things over to prevent Will’s departure, but was not successful. There are plenty of people who would want to beat up on The New American magazine for firing him as his wife Korrin got sick, leaving Will as the only caretaker of his five children (they have six now). There are a few who deserve some blame for that. But the result of the firing was that the magazine was greatly diminished. Ironically, the years immediately following Will’s firing was my most prolific time as a freelancer for The New American. I tried to fill the gap, but no one could replace Will Grigg.

But Will also faced a loss. Leaving The New American diminished Will’s writing production, as he took more time to make ends meet and deal with domestic issues. Will was thunderous after 2005 right up until he got sick last month, but never even close to being as prolific as during his time with The New American.

I was enriched by his friendship, even though it was a long distance one beginning in 2001. Will was unbelievably friendly, omni-curious, and wholly devoted to his wife and children. Mostly I will remember him for his great personal wit and vocabulary, whether it was in print or in a face-to-face conversation. I will greatly miss that.

His family needs help more now than ever, as his children grow up without a father.

Republished with permission from Thomas R. Eddlem’s blog.

 

MOAB is the new greatest show on earth

Economic Stimulus? Try More Savings and Lower Debt

President-elect Donald Trump’s proposed $1 trillion infrastructure spending program promises “accelerated economic growth.” But an analysis of data from the IMF’s World Economic Outlook database revealed that more government spending is not the path to economic growth.

[See part one of this series: Will Trump’s Infrastructure Stimulus Spending Work?]

So if government spending doesn’t drive economic growth, what does drive it? The IMF data demonstrates that there are two major factors in a country’s economic growth: Savings and low government debt. Of the two, savings is by far the more powerful factor. [see Figure 3]

The IMF database measures the National Savings Rates against economic growth, as measured by the annual average growth rate for the world’s 39 Advanced Economies. The data indicates stronger growth for nations with higher than the average 24.5 percent National Savings Rate and weaker than average growth for nations with lower than average savings.

The United States has been among the nations with below average savings since the 1980s, and has had below average growth since that time. With a current savings rate of 17 percent, the United States loses almost a full percentage point of per capita economic growth every year because of insufficient savings compared to gains with nations which have average savings. Compounded over time, this amounts to a substantial economic disadvantage.

Much of the variance in the data-points on savings rates is accounted for in government debt levels. This can be observed in a 3-D chart [Figure 5] which measures both National Savings Rates and Government Debt as a proportion of GDP against GDP growth. Government debt has a negative role in economic growth, though a smaller role than savings rates.

Why a low savings rate?

There are plenty of reasons why the United States has a low savings rate compared with other Advanced Economies. Lowered interest rates are one major disincentive for savings. So the U.S. Federal Reserve Bank, which has kept interest rates near zero for almost a decade, is partly to blame. There’s really no point in putting your money in the bank when it pays less than the rate of inflation. And low interest rates also contribute to inflation, which acts as a tax on poor people’s money held in cash and labor. The wealthy are far less impacted by inflation because unlike the poor most of their assets are held in stocks, bonds, real estate and other hard assets which are largely immune to currency inflation. Inflation acts as a double-incentive for the working class to spend before the value of the dollar is eaten up. But low interest rates are not the only reason the United States has lower than average savings rates. Some European nations with high savings rates – such as the Swiss and the Swedes – currently have negative interest rates from their central banks.

There are many other factors in national savings. Some countries force workers to save. Australia has a retirement savings plan called “Superannuation,” which forces Australians to save 9.5 percent of their income. Singapore has an even more militant forced savings plan – more than 35 percent of worker wages – with its Central Provident Fund. But the United States has a pay-as-you-go system for its Social Security and Medicare programs, resulting in no individual account balance, no real savings and no investment.

One of the key claims of Keynesians is that government spending or “stimulus” during the Second World War set off the post-war boom in the United States. But the reality of the modern data reveals that it was the years of war-era rationing – and resultant forced savings – that financed the post-war growth. Indeed, the federal government underwent a massive reduction in size and scope at the end of the war, and experienced only a brief recession.

By way of contrast, Austrian School and other free market economists have long stipulated that only savings and investment can create economic growth. The data confirms the Austrian thesis, and refutes the Keynsian/Behavioral School idea that government spending can create economic growth.

Standard “mainstream” Keynesian or Behavioral School economics also holds the view that deficit spending and taking on debt has little-to-no impact on economic growth, or at the very least an impact smaller than the supposed positive impact of massive government “stimulus” spending. Professor Krugman claimed in an 2015 Guardian article that “By late 2008 it was already clear in every major economy that conventional monetary policy, which involves pushing down the interest rate on short-term government debt, was going to be insufficient to fight the financial downdraft. Now what? The textbook answer was and is fiscal expansion: increase government spending both to create jobs directly and to put money in consumers’ pockets; cut taxes to put more money in those pockets. But won’t this lead to budget deficits? Yes, and that’s actually a good thing.”

Dr. Krugman’s claim is belied by the data. The level of government spending has no measurable impact on economic growth. [See Figure 1] So the “benefits” of increased government spending is zero. But what is the impact of government accumulating debt through deficit spending? Krugman and other establishment economists assert that as long as interest rates are low and borrowing is nominally cheap, then the economic cost of accumulating debt is virtually non-existent.  On the economic impact of government debt, there’s a wealth of data. Government debt is a secondary factor in economic growth – less than national savings – but still significant. [See Figure 4]

IMF data demonstrates that nations with a high government debt have measurably lower economic growth rates.  This chart shows the impact of national debt rates upon average GDP growth rates.

This difference was also confirmed by the University of Massachusetts study in 2013 by Thomas Herndon, Michael Ash and Robert Pollin. The study was conducted to debunk the claim by Harvard University economists Reinhart and Rogof that there was a threshold of government debt at 90 percent of GDP at which economic growth fell off a cliff, and the Herndon-Ash-Pollin study did its job well. The Herndon-Ash-Pollin study exposed errors in Reinhart and Rogof’s spreadsheet and debunked the “debt cliff” myth. But they also confirmed that there is a heavy price to pay for carrying a large national debt.

If the Trump administration is interested in sparking more vigorous economic growth, the path to it will not be more government spending, but paying off debt with spending cuts and ending inflationary monetary policies that curb savings rates.

MOAB is the new greatest show on earth

Will Trump’s Infrastructure Stimulus Spending Work?

Well, government spending never has increased economic growth.

(Part one of two)

President-elect Donald Trump proposed a new $1 trillion infrastructure spending and tax cut package which his campaign promised is “a golden opportunity for accelerated economic growth and more rapid productivity gains.”

But is more government spending a golden opportunity for economic growth? The answer to that question would surprise most establishment economists.

Former Princeton University Professor Paul Krugman wrote for The Guardian of London last year that more government spending stimulates an economy and less government spending hurts an economy: “Since the global turn to austerity in 2010, every country that introduced significant austerity has seen its economy suffer, with the depth of the suffering closely related to the harshness of the austerity.”  Krugman also claimed that “Standard macroeconomics said that cutting spending in a depressed economy, with no room to offset these cuts by reducing interest rates that were already near zero, would indeed deepen the slump.”

But Krugman’s statement is mythology, propped up by subjective analysis of data that results in a confirmation bias. An objective look at the largest available set of macroeconomic data, at the experience of all the world’s Advanced Economies using the International Monetary Fund’s World Economic Outlook Database, reveals a different reality. The WEO contains economic growth, spending and other data on countries since 1980.  The WEO data on the world’s 39 Advanced Economies reveals that more government spending – or even less government spending, in the form of austerity cuts – has had zero measurable impact upon official economic growth as measured in real per-capita Gross Domestic Product, either during the year spending increased [See Figure 1] or the following year [Figure 2].

The record of the IMF data is clear: Every dollar of Obama’s fiscal “stimulus” during the Great Recession did absolutely nothing to promote economic growth. Actually, Obama’s American Recovery and Reinvestment Act did a couple of things not related to economic growth: It won re-election numerous politicians who were perceived as “doing something” about the 2008-09 economic crisis, and it furthered the economics career of Paul Krugman and other big government Keynesians.

More significantly, however, it created a massive government money-hose to all the wealthy interests who were politically connected, which cannot but act as a catalyst for increasing income inequality. How could it be otherwise? The federal government taxes the tips of waitresses and Uber drivers, and then gives those tax dollars in the form of bailouts to huge banks like Goldman Sachs and Bank of America or to politically connected corporations like General Motors, Tesla, the teachers unions, and green energy companies that were friends of – and political donors to – the Obama administration.

Yet, many of the same economists and politicians who cheerleaded that massive transfer of wealth from the working poor to the crony capitalists on Wall Street are typically the ones who preach loudest against income inequality.

Krugman and other Keynesians typically analyze a much smaller dataset, and look primarily at countries in the midst of economic distress (such as Greece) whose irresponsible governments have already been forced into austerity measures by market conditions. Or, they admix both spending cuts and tax increases into a general category of “austerity” and erroneously conclude that spending cuts hurt economic growth. Interestingly, the IMF itself authored a 2010 study “Will It Hurt? Macroeconomic Effects of Fiscal Consolidation” on a subset of its own database that acknowledged government spending cuts had little-to-no impact upon GDP (within the margin of error) while finding that tax increases as a form of what it termed “fiscal contraction” had a sharply negative impact upon economic growth. Yet establishment economists like Krugman continue to link to the IMF study as evidence that spending cuts hurt economic growth and spending increases stimulate economic growth. The IMF study did conclude that more spending paid for by higher taxes becomes a net economic drag on the economy that year, as most free market economists would expect. The IMF data also demonstrates [Figure 4] that more government spending financed by deficit borrowing is a perpetual drag on economic growth when it increases national government debt levels.

Even if one concludes from the data [Figure 1] that more government spending creates a small increase in GDP, and is not a result of cuts from nations already in economic distress (or freer spending by governments already growing), spending increases have a one-and-done economic impact with the economy. They produce zero benefit after the year in which the money is spent [Figure 2]. But taking on debt is a permanent, ad infinitum, drag on economic growth … until the debt is paid off with spending cuts or tax increases.

Not surprisingly, Obama’s stimulus pushed the national debt level over the 100 percent of GDP mark – double the debt proportions of the Reagan era – and has coincided with the weakest economic growth (about two percent per year) of any recovery during the modern era. This can be contrasted with the four percent or greater average GDP growth during the Reagan era recovery.

Trump’s $1 trillion infrastructure spending plan would almost certainly yield precisely the same economic results as the smaller Obama infrastructure program, as it is based upon the “more-government-spending-means-more-economic-growth” mythology. In other words, should Congress pass the Trump infrastructure program, it will be paid for with lower economic growth rates immediately as a result of tax increases or in perpetuity in the form of the economic drag associated with carrying a larger national debt.

(Part Two Tomorrow: Economic Stimulus? Try More Savings and Lower Debt)

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