Events

How the CARES Act Will Delay Economic Recovery

The economic fallout of the government’s shutdown in response to the coronavirus pandemic has been unprecedented.

Nearly ten million people have filed for unemployment benefits in just two weeks. The 6.6 million claims from the last week of March doubled the previous week, and both weeks smashed the previous one-week record of 700,000 claims in 1982.

To mitigate the damage of this mass level of unemployment, the federal “stimulus” bill, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), includes two key provisions that will serve to prolong the negative economic impact of the shutdown: bailouts to big businesses and the $600 a week in unemployment benefits in addition to state level benefits for eligible recipients.

The bailout payments to big businesses, like the airlines, not only rewards risky behavior but will just delay the inevitable restructuring that will need to take place.

For instance, American Airlines and Boeing, rather than building up cash reserves during the past ten years of flush economic times, instead leveraged low-interest rates (courtesy of mad Fed money printing) to engage in billions of dollars worth of stock buybacks to benefit from the stock market bubble. Now, rather than selling their stocks to raise liquidity as the prices tumble, they will rely again on a taxpayer-funded bailout.  

Furthermore, the bailouts will largely just enable big businesses to stay afloat during the remainder of the shutdown, delaying layoffs that will likely be necessary as the travel industry will be slow to recover due to a public remaining uncertain about the health risks of travel. 

So at a time when the economy is attempting to “re-open,” the businesses that had been propped up during the shutdown will need to engage in another round of layoffs, prolonging any recovery efforts. 

Also damaging to the labor market as the economy attempts to re-start will be the enhanced unemployment benefits. 

 “The $600 weekly unemployment compensation boost included in the CARES Act will provide valuable support to American workers and their families during this challenging time,” said Secretary of Labor Eugene Scalia.

Indeed, the financial support will be critical for those laid off through no fault of their own.

Such benefits, however, will significantly hamper any effort to “re-open” the economy once the pandemic fears erode, and may prove to be very difficult to eliminate.

A cursory look at the data shows that many of those out of work will be getting paid more not to work than they did to work.

Examining Bureau of Labor Statistics data, this article in The Street found “the median income for a full-time wage or salary worker on a weekly basis was $936. For a 40-hour work week, this translates to a yearly income of approximately $48,672.”

Comparatively, a 2019 USA Today article evaluating 2018 state unemployment benefits data reported the average national weekly unemployment payout of $347 a week. Add to this the $600 a week from the CARES act, and that comes to $947 per week, or $49,244 on an annualized basis.

In other words, the average unemployed person receiving benefits due to the coronavirus shutdown would be receiving more income than the national median income from working. Granted, these figures are broad aggregates, but still illustrate the point that many will be receiving more income being unemployed than they would if they chose to return to work.

The federal supplements are currently scheduled to last four months – roughly to the end of July.

Now imagine, using an optimistic scenario, most of the nation begins to wind down their economic shutdowns by mid-May or early June, meaning many workers would still have four to six weeks of eligibility to receive the generous unemployment benefits.

Of those businesses seeking to re-hire workers to help ramp up production and services to customers, many will find it difficult to do so. Unemployed workers who can receive more income staying at home instead of returning to work will choose to stay at home as long as the unemployment checks continue to roll in. Most states have waived the requirement to be seeking work to receive unemployment benefits, so there would be no pressure to do so. 

Returning to work for many would make them financially worse off. Some employers would also offer benefits like health insurance, but many jobs in the hospitality industry – where the majority of jobs have been lost – do not. While many would be eager to return to work to regain a sense of purpose, many others would make the economically-rational choice to continue receiving the higher level of income while avoiding the disutility of work. 

And this effect would reach beyond more than just those that could receive more income staying at home. For some, even the opportunity to earn more money working rather than remaining unemployed would not be deemed to be worth it, once we take the marginal benefits and costs into consideration.

Say someone receiving $947 per week in unemployment benefits has an opportunity to return to a job paying $1,000 a week. Obvious choice, right?

Maybe not.

The choice isn’t simply between receiving $947 a week versus $1,000 a week, but also working 40 hours a week versus zero hours. On the margin, this person would be receiving $53 more a week, but having to work 40 hours to earn that marginal benefit. On the margin, returning to work would yield this person about $1.33 per hour. Many would find this unappealing.

The federal government’s paying out of these additional benefits will surely provide a much-needed financial lifeline to millions forced out of work. But it’s also important to acknowledge how they will make it far more difficult to get the economy going again. Many businesses will find it difficult to once again staff their operations while the benefits continue. 

The notion of generous unemployment benefits discouraging work is not some right-wing, or free market ideological talking point. Even the New York Times resident left-wing economist Paul Krugman acknowledges that extended unemployment benefits will likewise extend higher levels of unemployment. In his 2010 economics textbook, Krugman stated “Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect.” He explains that granting more generous benefits “reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of ‘Eurosclerosis,’ the persistent high unemployment that affects a number of European countries.”

Moreover, these benefits will likely prove to be very politically difficult to end. Indeed, before the first checks have even been cut, Nancy Pelosi has been promoting the idea of extending the benefits through September. 

Imagine if unemployment remains high, perhaps in or near double digits, and Congress finds itself debating whether or not to cut millions of out of work American off from these federal benefits just two months before a national election.

Any guesses how that turns out?

The government has shut down the economy, forcing millions out of work. It’s understandable for them to also take measures to cushion the financial blow dealt to those made unemployed because of their decision.

What’s also important is to understand that these actions will most likely prolong any desired “re-start” of the economy, and these supposedly temporary unemployment benefits will prove to be very difficult to eliminate in an election year. 

Crisis Exposes Devastating Consequences of Fed Policy: Americans Have No Savings

Two weeks ago, during a March 17 address to the nation in response to the COVID-19 outbreak, President Donald Trump asked that Americans work from home, postpone unnecessary travel, and limit social gatherings to no more than 10 people.

And last week, on March 27, Trump signed a stimulus package of over $2 trillion dollars to provide relief to an economy on the precipice of collapse.

The aid package includes handouts and loans to individuals, small businesses, and other distressed industries.

Despite Trump’s “having created the greatest Economy in the history of our Country,” when the markets tanked, massive and immediate government intervention was the only thing left to forestall a total collapse.

So why can’t greatest economy in the world can’t handle a temporary shock without needing trillions of dollars injected to stay afloat?

The Federal Reserve and its vicious and ongoing war on savers are to blame.

Using the Federal Reserve Note – commonly (but incorrectly) referred to as the dollar – introduces a dilemma. Because of inflationary monetary policy, Americans have long been forced to select among three undesirable options:

  1. A) Save. Hold Federal Reserve Notes and be guaranteed to lose at least 2% in purchasing power every single year.
  2. B) Consume. Spend Federal Reserve Notes on immediate goods and services to get the most out of current purchasing power.
  3. C) Speculate. Try to beat the Fed’s deliberate inflation, seeking a higher return by investing in complicated and unstable asset markets.

With businesses and Americans defaulting on their rent and other obligations only days into the collapse, the problem is clear: Few have any savings… and why should they when saving their money at negative real rates of return has been a sucker’s game?

Lack of sound money, or money that doesn’t maintain its purchasing power over time, has discouraged savings while encouraging debt-financed consumption.

American businesses and individuals are so over-leveraged that once their income goes away, even briefly, they are too often left with nothing.

Fiat money is especially pernicious in the way it harms its users. To some, small 2% losses can go easily unnoticed, year to year. Over 100 years, the loss has been well over 97%.

And who can save for emergencies when you’re being forced to work and spend more – simply to maintain the same quality of life?

Over 100 years, the Federal Reserve has destroyed more than 97% of our currency’s purchasing power.

With the Fed slashing short-term rates to zero, the US Federal Reserve Note has been further destroyed as a method of preserving savings. (And negative nominal interest rates could be coming next.)

Inflationary economic policy, absent the guardrails of sound money, has created a situation with an obvious and deadly conclusion: that many Americans lack savings to protect themselves against downturns.

This situation isn’t necessarily the fault of the people, but rather the fault of a system in which discouraging and punishing savers is a crucial tenet of the entire framework.

The Federal Reserve, the U.S. Treasury, and the White House are trying to reassure the public that everything is “under control,” that “the U.S. economy’s fundamentals are still strong,” and that the economy will skyrocket once COVID-19 is taken care of. What if they’re wrong?

Maybe the greatest monetary experiment in history is coming to an end. Maybe sound money can still save the day, but we must not waste any more time in restoring it.

Airline Bailouts Destabilize the Economy and Inflate Asset Prices

In the end, after all of the political posturing and all of the speeches and exhortations for Congress to “do something,” a $2 trillion “coronavirus stimulus” bill landed on the president’s desk for The Donald to sign. And sign he did, uttering all of the platitudes and everything else that comes with “historic” spending legislation that never should have seen the light of day. Although COVID-19 has helped expose vast weaknesses in public health systems in the USA, it also has shown that with much of corporate America, the emperor has no clothes.

Although tracking where the money goes is not an easy thing, we do know that the airlines will receive about $50 billion in cash and loans, while Boeing will receive a share of $17 billion earmarked for industries favored by Congress. Another $500 billion will go to cruise lines, hotels, and other firms that have lost business because of travel restrictions and the economic shutdowns.

Politicians of both parties heaped praise upon themselves for their “bipartisan” efforts, which in real life only can mean that Congress cleaned out what was left of the IOUs in the till. Rep. Thomas Massie, a Republican from Kentucky, drew attacks from all sides as he tried to force a roll call vote (as opposed to the voice vote that the members wanted) and announced his opposition to the bailout. President Trump called for his expulsion from the Republican Party while Democrats declared him to be an unsavory ideologue.

There is not much to do but to wait for the results, and they will unfold over time. However, much of this bill’s harm is invisible, the way that termites quietly but surely destroy a house when homeowners fail to detect them. The politicians and the pundits, along with corporate executives, are hailing this infusion of public funds to business as a lifeline to the economic system itself, when, in reality, it will weaken these firms in the long run.

This commentary deals mostly with the airlines, but what we say here applies to any firm receiving rescue funds and loan guarantees. While some of these essentially bankrupt firms gain some relief as taxpayers and consumers pony up to pay the companies’ bills, the temporary cash infusion allows them to kick the financial can down the road and not deal with the underlying problems that they are facing, at least for now.

In a recent New York Times op-ed piece, Tim Wu of Columbia University asks the following: “Are taxpayers rewarding a decade of bad behavior?” If he is asking specifically about US airline firms, the answer is a resounding yes. Wu notes that in recent years the airlines have been very profitable but that instead of building defenses against possible downturns that are not easily predicted (such as the coronavirus crisis), they have used much of their profitability to buy back their own stock.

Obviously, stock buybacks are controversial, and as long as stock prices rise, company officials look like financial geniuses. However, if the markets crash or if bears loom on the horizon, all of that value vanishes very quickly and the companies are left in worse shape than when they began. As a financial strategy, stock buybacks are inherently risky and tie up cash that could go toward capital development or even the “rainy day” fund for the inevitable market downturn. Writes Wu:

During the past decade, flush with cash, most of the companies in line to get taxpayer money did not prepare for a downturn. Instead, they spent enormous sums on stock buybacks, which reward shareholders and increase executive pay. For example, the airline industry, which is prone to booms and busts, collectively spent more than $45 billion on stock buybacks over the past eight years. As recently as March 3 of this year, with the crisis already beginning, the Hilton hotel chain put $2 billion into a stock buyback.

Such behavior is especially galling given that the airlines received a major bailout in the immediate wake of the 2001 September 11 attacks that severely damaged that industry. Likewise, Congress spread out the rescue money in 2008 and 2009 to deal with the infamous housing bubble that the government and the Federal Reserve System created. Yet here are the Usual Suspects once again gathering around Washington, collective hats in hand.

Airlines this time are promising (or at least say they are promising) not to use the newest amount of rescue money to engage in stock buybacks, but that hardly is reassuring. There is a larger problem, and it is not limited just to overvaluing their stock or their inability to learn any lessons from past disasters.

The greater problem of which we speak the Federal Reserve’s ongoing policy of pumping up the system the way that nineteenth-century cattle ranchers would “water” their herds shortly before sales by feeding them salt. The overly thirsty cattle would drink more water than usual, and when they would be weighed during a sale, would seem heavier—and fatter—than they really were.

While Fed pumping (and simultaneous suppression of interest rates) inflates the value of stock—providing a façade of an economy performing better than it really is—it also inflates the capital assets of companies, and airlines are no exception. Because of past bailouts, glorified money printing by the Fed, and corporate practices such as stock buybacks, the nominal values of these firms are substantially higher than they would be in a more free market.

It is not difficult to see the vast network of market misrepresentations that has come with these policies. Wu notes:

The past decade was also an “easy money” decade, thanks to federal monetary policy that favored liquidity and low interest rates. Many of the firms now asking for bailouts took advantage of low interest rates to borrow heavily. For their part, many creditors lent money at rates that did not fully reflect the risks to these industries. The debt loads have created their own fragilities during the economic downturn.

In other words, one set of policies to get around natural market constraints has led to one distortion after another. We now are at the point where airlines—and the banks that have been underwriting them—are hooked on cheap money, inflated stock prices, and overvalued capital assets. If Congress, Trump, and the Fed actually were to step back and let market forces work, the short-term results would be devastating—to current airline management. Yes, the airlines would be bankrupt, but in real terms, they have been bankrupt for a long time and the COVID-19 crisis now has exposed this industry for the financial fraud that it has been.

Given that the various players previously mentioned have decided to keep the fraudulence afloat, what does that mean for the future of the airline industry? One cannot necessarily predict future events and when they will happen, but one can say with utmost certainty that the airlines soon enough will bring a new generation of management to Washington bearing the same tin cups that their forebears carried.

There is no doubt that airlines, along with Boeing and almost certainly Airbus, will find themselves in a future crisis that keeps them at least partially grounded. It could be another pandemic, a terrorist attack, or just awful political leadership, but one can be sure that something will occur to significantly reduce airline ridership. Reduced ridership means reduced funds, and a similar scenario to what we see currently playing out is sure to follow. At some point, however, the financial damage will be so great that not even the Fed will be able to “water” airline stock anymore and the cold water of massive bankruptcies will follow, imperiling the entire financial system.

These bailouts don’t just reward irresponsible business behavior, but they also impose restrictions that will create future problems. Airline firms receiving federal funding are not permitted to cut worker pay or lay off workers until at least September 30, which means that the aid is a glorified welfare check to labor unions representing airline workers. (The bailout rules also forbid stock buybacks and freeze executive pay at 2019 levels.) Bloated union contracts also are part of the problem with airline financial policies, so, in the end, Congress and Trump have managed to reward most, if not all, of the bad actors in this sorry saga.

What is done is done, but at least we can take a look at what would have happened had Congress just said no to the airlines this time. Unlike the current situation, in which we will see the “good” effects first and the “bad” effects down the road, a “solve your own problems” approach to the airlines would result in immediate layoffs, bankruptcies, and at least some airlines would completely go out of business.

Although most politicians and airline executives want us to believe that airlines are an “essential” industry that is the equivalent of the “thin blue line” between prosperity and a depressed economy, the markets see things differently. First, and most important, with the current situation there is no way that airlines can meet their loan payments, issue stock dividends, or even pay all of their employees at current rates (including their executives). Faced with that situation, the healthier companies would most likely come to terms with their creditors and restructure their finances.

The unlucky firms, however, would go into Chapter 7 bankruptcy, with all assets sold to pay off their creditors. That means massive layoffs, fewer flights—and realistic valuation of their assets. If the economic need for airlines really were as great as airline executives and political pundits claim, then whoever has purchased those assets at bargain prices would be able to put them to use in no time. The industry will have had its necessary cold-water bath, and asset values, along with prices of airline tickets, would settle at true market values, not the bloated numbers that pollute current airline balance sheets.

Because the “bad effects” of allowing airlines to go under would result at first in massive layoffs, bankruptcies, and fewer passengers in the air, the media and political classes would be condemning those who voted down the federal largess. “Bad effects,” not surprisingly, are quite visible and the plight of the newly unemployed and of stranded travelers plays well on the news.

The “good effects,” however, are less visible. By the time airline assets were sold at bankruptcy auctions and new companies hit the airport runways with market-priced capital and market-paid employees, the media would be on another crusade and the resurrection of airlines would not receive the coverage it deserved.

By shoveling out cash to the airlines and more promises to the banks whose unsteady solvency always lurks in the background, Congress and Trump have perpetrated a financial fraud greater than much of the mess we saw on Wall Street more than a decade ago. Yes, they will receive praise in the media and votes from those grateful to have taxpayers pay their wages and salaries, but they have solved no problems and have created a generation of new ones. Almost surely we will be covering the next crisis on these pages.

Reprinted from The Mises Institute.

Judicial Engagement & National Emergencies

A Curious Quote & A Historical Lesson

“We repeat what was stated in Block v. Hirsh, as to the respect due to a declaration of this kind [an emergency] by the Legislature so far as it relates to present facts. But even as to them a Court is not at liberty to shut its eyes to an obvious mistake, when the validity of the law depends upon the truth of what is declared.”

Can you guess which judge made this statement against blind judicial deference to a Congressional determination of an emergency? You are probably thinking Justice Peckham or one of the Four Horsemen, right? Nope! It was none other than the infamous, and in some corners famous, Oliver Wendell Holmes.

This quote comes from a 1924 case in which the Court rejected a rent control law originally passed in 1919. This was the second time in three years the Court addressed a version of this law. The first time, in 1921, Justice Holmes, writing for a 5-4 Court, upheld the rent control law because it was a temporary measure intended to address the housing shortage in Washington D.C. after World War I.

In that 1921 case, Holmes reasoned that the Constitution’s restrictions were loosened during an emergency situation. But in the 1924 case he explained that once the emergency ended, the restrictions snapped back into place. Thus, a law that otherwise violates the Due Process Clause and the Takings Clause of the Fifth Amendment can be upheld during a temporary emergency but not once the emergency ends. Moreover, and surprisingly coming from Justice Holmes, the Court held that there was a role for the judiciary in determining whether an emergency still existed. That is, legislative assertions that go against the facts will not be granted broad, irrefutable deference.

The dissenters in the 1921 case, including Justices Van Devanter and McReynolds, argued that the Constitution’s limitations and restrictions always apply. Even during wars or national emergencies. In other words, the Constitution is absolute.

This dissent is correct both as an originalist matter and a theoretical matter. But as a practical matter, judges rarely argue that the restrictions in the Constitution are absolute. History shows that judges are willing to read a little bend into the Constitution during a true national emergency. However, it is also the case that they are willing to call the government on extending the “emergency” once it is obviously over.

Coronavirus and the Judiciary

An emergency is currently imperiling both the country and the entire world. The pandemic caused by the novel coronavirus has effectively brought most of the world to a stand-still. Sports organizations have cancelled their own seasons, even the 2020 Summer Olympics were postponed, and entire countries have been put on lockdown. Such drastic action by both private actors and government entities is unparalleled in recent memory.

But some people in the United States are clamoring for the federal government, and the President, to adopt even more drastic measure. People are not only demanding action to help stop the spread of the virus, but also that the federal government remedy the societal harms caused by the pandemic.

The main economic harm caused by COVID-19 is rampant and unprecedented unemployment. This level of unemployment means that many individuals, and many corporations for that matter, will be unable to pay their bills, including rent. This has led to pleas for pauses on evictions, and some cities and states have enacted such policies.

Both federal and state governments have enacted many other measures to limit the economic harms. This includes the passage of a 2.2 trillion-dollar stimulus package with direct payments to Americans. The longer this emergency has persisted the more restrictive the actions state governments take. Many have issued stay at home orders and required the shuttering of non-essential business—which has led to debates over whether gun stores or places of worship are “essential.”

There is also a large vocal crowd of people calling on the federal government to issue a national stay at home order. Most constitutional scholars believe such an order is beyond the powers of the federal government. But that has not stopped the calls for such a move. Further, even if the government did issue such an order, would there be courts that stand against it? Looking at history, I doubt it.

The Switch in Time

Now you may be wondering whether courts look at emergency situations differently. That is, whether courts generally hold that constitutional restrictions loosen when the government confronts an emergency—as Justice Holmes did.

Maybe implicitly. But the Supreme Court in A.L.A. Schechter Poultry Company rejected that idea. The Court argued that the 10th Amendment decisively counters the assertion that the federal government has greater authority during a time of emergency. Moreover, the fact that the Constitution specifically allows for the restriction of some rights (like habeas corpus) proves that there is no implied “emergency constitution.” That is, a constitution with lessened restrictions during an emergency.

The Constitution creates a government of enumerated powers against a backdrop of rights and powers reserved by the people and the states. The drafters of the Constitution had recently won a war and the country under the Articles of Confederation was enduring many hardships. But they did not write a release valve into the Constitution that allows the federal government to expand its power in an emergency.

And even if such inherent power is in the Constitution, such a grant would belong to Congress, not to the Executive Branch. But currently, in emergency situations it is the Executive Branch which takes the most drastic actions.

So, while the Court’s opinion in A.L.A. in 1935 was likely correct, it opened the door for much greater deference as a whole due to the later “switch in time that saved nine.” When the Court shifted and began upholding F.D.R’s New Deal programs it did so not based on a doctrine of emergency powers or the theory that the Constitution’s restrictions loosened during an emergency. Instead it simply held that the Constitution allowed for a more powerful federal government in general.

Thus, there was a theory that the Constitution’s restrictions on the federal government waned in times of emergency. The Court rightly rejected that theory, and then the Court changed course and held that the Constitution was not as restrictive as thought.

Whatever its merits, as a practical matter it is interesting to note that we might be better off if the Court had stayed with its smaller incorrect decision that the Constitution’s restrictions loosened during an emergency because some New Deal programs could have approved under that doctrine rather than being approved through a reworked understanding of federal power.

Going Forward:

As IJ’s President and General Counsel Scott Bullock recently stated in response to the DOJ’s request for Congress to suspend the right of habeas corpus: “History demonstrates again and again that governments use a crisis to expand power and violate vital constitutional principles. And when the supposed emergency is over, the expanded powers often become permanent.”

Because of this, the judiciary should be extra vigilant after the emergency ends. The courts have often engaged in blind deference to the “political” branches in many categories of cases since the New Deal Era, especially when it comes to economic and property rights. But the tide is beginning to turn, especially in state courts. This is important because many of the restrictions currently being contemplated deal with economic liberty and property rights. But courts should see this as a special circumstance requiring extra attention because government tends not to act like George Washington (or Cincinnatus) and voluntarily lay down power heaped upon them in an emergency.

Because governments rarely follow the path laid down by these two legendary men, courts should be extra vigilant and ensure that constitutionally dubious actions taken because of a national emergency are not carried forward once the emergency has ended. Moreover, and shocking as it may be for an IJ attorney to say, judges should take a cue from Justice Holmes and see a role for the judiciary in determining whether an emergency is still ongoing—though they shouldn’t look to Holmes for much else.

Reprinted from The Institute for Justice

How Z-pak Could Slay COVID-19

Z-Pak, also known as azithromycin or Zithromax, could be a critical tool in preventing and treating COVID-19 coronavirus, according to Professor Michael P. Lisanti, MD-PhD and Chair of Translational Medicine at Salford University in the UK. I recently spoke with Professor Lisanti to unpack his hypothesis and call for immediate clinical trials of Z-pak and other extremely inexpensive, generic antibiotics for COVID-19 patients. 

Watch my detailed interview with Dr. Michael Lisanti on antibiotics for COVID-19 and cancer here:

Individuals may have heard of Professor Lisanti’s work as it relates to groundbreaking experiments targeting cancer stem cells and senescent cells—chronic disease-related cells created by aging. With over 90,000 citations and over 563 published papers, Professor Lisanti is one of the world’s most cited researchers—dead or alive—according to Google Scholar.

New drugs cost a billion dollars and 10-15 years to make it through the FDA approval process. This regulatory hurdle precludes natural substances that cannot be patented from being properly researched and tested for illnesses because companies cannot afford the cost to prove the efficacy of something that any organization would be able to sell afterwards. This top-down monopoly approach to medicine can leave the world on its heels—not enough clinical trials on natural substances and patent-dependent, new FDA-d drugs and vaccines years away—during a pandemic like the one we are in now.

Professor Lisanti has specialized in identifying FDA-approved generic antibiotics like Z-pak and doxycycline that are extremely effective in killing senescent cells at the heart of aging-related diseases. 

As the world is painfully aware, COVID-19 coronavirus is particularly dangerous for the elderly or those with aging-related senescent illnesses like diabetes, cancer, heart disease, and lung disease. As Professor Lisanti said in a statement on his new paper in the journal Aging, “If you look at the host receptors of COVID-19, they are related to senescence. Two proteins have been proposed to be the cellular receptors of COVID-19: one is CD26 – a marker of senescence, and the other, ACE-2, is also associated with senescence. So, older people would be predicted to be more susceptible to COVID-19, exactly as is observed clinically in patients. This could increase their probability of infection, and would explain the increased fatality of COVID-19 infection in older patients. All of this could be related to advanced chronological age and senescent cells.”

Lisanti’s laboratory has previously demonstrated that Z-pak selectively removes 97% of senescent cells. Without those cells acting as host receptors, it may be harder for COVID-19 to take root in the body and cause serious damage. 

Lisanti’s lab goes on, “Clinically, it appears what is leading to fatalities in older [COVID-19] patients is the very strong inflammatory reaction and the resulting fibrosis. Azithromycin inhibits inflammation-induced fibrosis, by targeting and removing senescent cells. The cost would be minimal, as the drug is off-patent, widely available and considered safe.”

Z-pak has made headlines after doctors around the world such as the widely publicized French clinic trials and New York and New Jersey physicians have found promising results on the front-lines of coronavirus using it in combination with another generic drug hydroxychloroquine. President Trump publicly championed the combination as a potential “game-changer” which has created a knee-jerk politically-charged push-back from media outlets. Some have dismissed the notion that an antibiotic like azithromycin could be effective against a virus. Antibiotics treat bacteria not viruses, the common refrain goes. 

But Lisanti’s understanding of the medical literature is compelling. “Azithromycin is known to stop the production of cytokines, a torrent of inflammatory mediators that trigger life-threatening lung inflammation in coronavirus patients. Azithromycin has also been shown to block the production of other viruses, such as the Zika and Ebola viruses.” 

Other FDA-approved generic antibiotics such as doxycycline (which costs around 10 cents per dose) that target senescent cells could also be fruitful to study in clinical trials. Indeed, some doctors are already implementing doxycycline into their protocol. Doxycycline has demonstrated the ability to prevent protein synthesis and IL-6 levels associated with viruses.

America’s greatest moments happen when individuals have the courage to step up and challenge groupthink-confined consensus to solve problems. We need medical groups, philanthropists, and entrepreneurs to support and develop clinical trials using Z-pak and doxycycline to investigate treatment and prevention of COVID-19. If Z-pak or doxycycline alone or in combination can be clinically shown to fight coronavirus, it may be an easier protocol to scale since these antibiotics are extremely inexpensive and are some of the most widely prescribed drugs in the world today. 

For our historic fight with COVID-19, we must take action in pursuing clinical trials for these potentially revolutionary antibiotic therapies right under our noses. 

Less Driving Amid Outbreak is Hurting Red Light Camera Revenue — Which is Great

Since states began locking down in mid-March, unemployment has skyrocketed, businesses have shuttered their doors, and these uncertain times have grown more worrisome by the day. There is one industry that is hurting, however, that shouldn’t bother many of us and that is the Red Light Camera industry.

Anyone whose been self-quarantining over the last few weeks likely knows that their trips to the gas station have been minimal simply because they are driving less. When people drive less, predatory and unconstitutional Red Light Camera companies like Redflex — who stalk unwitting drivers on the roads — make less money. This is a good thing.

As Business Insider points out, fewer drivers on the road is good for everyone: air pollution is falling, crashes are down, and there’s no blood-pressure inducing congestion.

But one industry in particular is feeling the pain in their bottom line. According to the report:

Redflex, an Australian company that operates “traffic safety programs” in roughly 100 US and Canadian cities, warned that less traffic and suspended construction amid the pandemic will be a stress on its balance sheet.

“Approximately 15% of group revenue is dependent on volume-based contracts,” the company said in a regulatory filing Monday first spotted by The Wall Street Journal, hinting at its business line that includes enforcement cameras. “We anticipate our revenue from these contracts will be impacted broadly in line with the reduction in traffic volumes as well as the duration of the disruption.”

Can I get a “Woooohoooo!!!”?

Shares of the unconstitutional predatory company’s stock have been in free fall since the beginning of the year, toppling near 50%. The company’s CEO, Mark Talbot told investors that travel restrictions are hurting plans for future installations and therefore impact the ability of the company to profit off due process-removing red light camera tickets.

“So far, there have been no terminations to contracts,” he said, according to a transcript compiled by Sentieo. “We are, of course, undertaking cost initiatives where possible to mitigate the impact of reductions or risk of delay. In addition, the Board and executive team will be taking a reduction in compensation effective April 1 for the duration of the disruption.”

For those who don’t recall, Talbot’s predecessor, Karen Finley was sent to prison in 2016 after being found guilty of bribing politicians to implement her due process-removing red light cameras.

After her sentencing, Finley described the company perfectly when attempting to deflect blame for her bribery scandal. “Redflex was a toxic and soul-sucking place to work. I worked over ten hours a day, almost every weekend and never saw my family,” she said — completely ignoring the fact that her job as the CEO was probably the largest contributing factor to the ‘soul-sucking place.’

However, the problem goes much deeper than Redflex, it is industry wide.

Take away the political corruption, bribery scandals, increased accidents, and police state issues with Red Light Cameras and we are still left with a system that is rooted in the removal of due process. The good news is that after the corporatist red light camera industry spread through the nation like a cancer for more than a decade, people are finally beginning to realize their inherently despotic nature.

As a result, people have been fighting back.

As the Newspaper reported, a group of three lawyers had filed suit in 2013, arguing that New Miami, Ohio’s automated ticketing ordinance gave vehicle owners no realistic opportunity to defend themselves against the demand for a payment of up to $180 that arrived in the mail. Optotraffic, a private vendor, sent the tickets to motorists passing through the less-than-one-square-mile town on US 127, a major highway that links Cincinnati with points north.

During that period of Optotraffic extortion, the city robbed drivers of $3,066,523.00. After Butler County Court of Common Pleas Judge Michael A. Oster Jr.’s ruling, the city was forced to pay back all of it in 2017.

On top of the unconstitutional nature of Red Light Cameras is the safety factor. These companies and the corrupt and greedy politicians who accept them know that they are about revenue generation — not safety — as these cameras increase the likelihood of an accident or death.

In February, TFTP talked to Stephen Ruth, aka, Red Light Robin Hood, who risked his very freedom to expose this madness..

Ruth was arrested and was facing years in prison for exposing the deaths of several people, including children who were killed as a result of these shortened yellow lights, through disabling the cameras.

In May 2015, sixteen-year-old John Luke was killed crossing the street when an SUV hit him. Less than a year later, a 64-year-old legally blind man named Warren Karstendick was killed in a hit-and-run when an SUV struck him. After visiting the scenes of their deaths and several others, Ruth concluded that these innocent pedestrians were losing their lives due to cars speeding up to avoid red light tickets.

Although the New York City’s Department of Transportation claims that all of its traffic signals provide a minimum of three seconds per yellow light, the AAA of New York released a 2012 report that found every tested traffic camera had a yellow light shorter than three seconds. Despite the fact that governments claim red light cameras are solely used to prevent accidents while modifying driver behavior, the revenue generated from traffic cameras can grow exponentially if yellow lights are shortened. As a result of the government’s greed for red light revenue, the safety of the driver took second priority.

While the Free Thought Project would never celebrate the decline of a legitimate business, the corporatism-rife red light camera industry is anything but legitimate. During at time when Americans are having to choose between paying rent and eating, the fact that a corrupt and unconstitutional company like Redflex is unable to financially prey on them is comforting.

Warren Harding and the Forgotten Depression of 1920

It is a cliché that if we do not study the past we are condemned to repeat it. Almost equally certain, however, is that if there are lessons to be learned from an historical episode, the political class will draw all the wrong ones — and often deliberately so.

Far from viewing the past as a potential source of wisdom and insight, political regimes have a habit of employing history as an ideological weapon, to be distorted and manipulated in the service of present-day ambitions. That’s what Winston Churchill meant when he described the history of the Soviet Union as “unpredictable.”

For this reason, we should not be surprised that our political leaders have made such transparently ideological use of the past in the wake of the financial crisis that hit the United States in late 2007. According to the endlessly repeated conventional wisdom, the Great Depression of the 1930s was the result of capitalism run riot, and only the wise interventions of progressive politicians restored prosperity.

Many of those who concede that the New Deal programs alone did not succeed in lifting the country out of depression nevertheless go on to suggest that the massive government spending during World War II is what did it.1 (Even some nominal free marketeers make the latter claim, which hands the entire theoretical argument to supporters of fiscal stimulus.)

The connection between this version of history and the events of today is obvious enough: once again, it is claimed, wildcat capitalism has created a terrific mess, and once again, only a combination of fiscal and monetary stimulus can save us.

In order to make sure that this version of events sticks, little, if any, public mention is ever made of the depression of 1920–1921. And no wonder — that historical experience deflates the ambitions of those who promise us political solutions to the real imbalances at the heart of economic busts.

The conventional wisdom holds that in the absence of government countercyclical policy, whether fiscal or monetary (or both), we cannot expect economic recovery — at least, not without an intolerably long delay. Yet the very opposite policies were followed during the depression of 1920–1921, and recovery was in fact not long in coming.

The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent. No wonder, then, that Secretary of Commerce Herbert Hoover — falsely characterized as a supporter of laissez-faire economics — urged President Harding to consider an array of interventions to turn the economy around. Hoover was ignored.

Instead of “fiscal stimulus,” Harding cut the government’s budget nearly in half between 1920 and 1922. The rest of Harding’s approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.

The Federal Reserve’s activity, moreover, was hardly noticeable. As one economic historian puts it, “Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction.”2 By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923.

It is instructive to compare the American response in this period to that of Japan. In 1920, the Japanese government introduced the fundamentals of a planned economy, with the aim of keeping prices artificially high. According to economist Benjamin Anderson,

The great banks, the concentrated industries, and the government got together, destroyed the freedom of the markets, arrested the decline in commodity prices, and held the Japanese price level high above the receding world level for seven years. During these years Japan endured chronic industrial stagnation and at the end, in 1927, she had a banking crisis of such severity that many great branch bank systems went down, as well as many industries. It was a stupid policy. In the effort to avert losses on inventory representing one year’s production, Japan lost seven years.3

The United States, by contrast, allowed its economy to readjust. “In 1920–21,” writes Anderson,

we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again.… The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.

The federal government did not do what Keynesian economists ever since have urged it to do: run unbalanced budgets and prime the pump through increased expenditures. Rather, there prevailed the old-fashioned view that government should keep taxation and spending low and reduce the public debt.4

Those were the economic themes of Warren Harding’s presidency. Few presidents have been subjected to the degree of outright ridicule that Warren Harding endured during his lifetime and continues to receive long after his death. But the conventional wisdom about Harding is wrong to the point of absurdity: even the alleged “corruption” of his administration was laughably minor compared to the presidential transgressions we have since come to take for granted.

In his 1920 speech accepting the Republican presidential nomination, Harding declared,

We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens but because it will be an example to stimulate thrift and economy in private life.

Let us call to all the people for thrift and economy, for denial and sacrifice if need be, for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic. There hasn’t been a recovery from the waste and abnormalities of war since the story of mankind was first written, except through work and saving, through industry and denial, while needless spending and heedless extravagance have marked every decay in the history of nations.

It is hardly necessary to point out that Harding’s counsel — delivered in the context of a speech to a political convention, no less — is the opposite of what the alleged experts urge upon us today. Inflation, increased government spending, and assaults on private savings combined with calls for consumer profligacy: such is the program for “recovery” in the 21st century.

Not surprisingly, many modern economists who have studied the depression of 1920–1921 have been unable to explain how the recovery could have been so swift and sweeping even though the federal government and the Federal Reserve refrained from employing any of the macroeconomic tools — public works spending, government deficits, and inflationary monetary policy — that conventional wisdom now recommends as the solution to economic slowdowns. The Keynesian economist Robert A. Gordon admitted that “government policy to moderate the depression and speed recovery was minimal. The Federal Reserve authorities were largely passive.… Despite the absence of a stimulative government policy, however, recovery was not long delayed.”5

Another economic historian briskly conceded that “the economy rebounded quickly from the 1920–1921 depression and entered a period of quite vigorous growth” but chose not to comment further on this development.6 “This was 1921,” writes the condescending Kenneth Weiher, “long before the concept of countercyclical policy was accepted or even understood.”7 They may not have “understood” countercyclical policy, but recovery came anyway — and quickly.

One of the most perverse treatments of the subject comes at the hands of two historians of the Harding presidency, who urge that without government confiscation of much of the income of the wealthiest Americans, the American economy will never be stable:

The tax cuts, along with the emphasis on repayment of the national debt and reduced federal expenditures, combined to favor the rich. Many economists came to agree that one of the chief causes of the Great Depression of 1929 was the unequal distribution of wealth, which appeared to accelerate during the 1920s, and which was a result of the return to normalcy. Five percent of the population had more than 33 percent of the nation’s wealth by 1929. This group failed to use its wealth responsibly.… Instead, they fueled unhealthy speculation on the stock market as well as uneven economic growth.8

If this absurd attempt at a theory were correct, the world would be in a constant state of depression. There was nothing at all unusual about the pattern of American wealth in the 1920s. Far greater disparities have existed in countless times and places without any resulting disruption.

In fact, the Great Depression actually came in the midst of a dramatic upward trend in the share of national income devoted to wages and salaries in the United States — and a downward trend in the share going to interest, dividends, and entrepreneurial income.9 We do not in fact need the violent expropriation of any American in order to achieve prosperity, thank goodness.

It is not enough, however, to demonstrate that prosperity happened to follow upon the absence of fiscal or monetary stimulus. We need to understand why this outcome is to be expected — in other words, why the restoration of prosperity in the absence of the remedies urged upon us in more recent times was not an inconsequential curiosity or the result of mere happenstance.

“The central bank is in a war against reality.”

First, we need to consider why the market economy is afflicted by the boom–bust cycle in the first place. The British economist Lionel Robbins asked in his 1934 book The Great Depression why there should be a sudden “cluster of error” among entrepreneurs.

Given that the market, via the profit-and-loss system, weeds out the least competent entrepreneurs, why should the relatively more skilled ones that the market has rewarded with profits and control over additional resources suddenly commit grave errors — and all in the same direction? Could something outside the market economy, rather than anything that inheres in it, account for this phenomenon?

Ludwig von Mises and F.A. Hayek both pointed to artificial credit expansion, normally at the hands of a government-established central bank, as the nonmarket culprit. (Hayek won the Nobel Prize in 1974 for his work on what is known as Austrian business-cycle theory.) When the central bank expands the money supply — for instance, when it buys government securities — it creates the money to do so out of thin air.

This money either goes directly to commercial banks or, if the securities were purchased from an investment bank, very quickly makes its way to the commercial banks when the investment banks deposit the Fed’s checks. In the same way that the price of any good tends to decline with an increase in supply, the influx of new money leads to lower interest rates, since the banks have experienced an increase in loanable funds.

The lower interest rates stimulate investment in long-term projects, which are more interest-rate sensitive than shorter-term ones. (Compare the monthly interest paid on a thirty-year mortgage with the interest paid on a two-year mortgage — a tiny drop in interest rates will have a substantial impact on the former but a negligible impact on the latter.) Additional investment in, say, research and development (R&D), which can take many years to bear fruit, will suddenly seem profitable, whereas it would not have been profitable without the lower financing costs brought about by the lower interest rates.

We describe R&D as belonging to a “higher-order” stage of production than a retail establishment selling hats, for example, since the hats are immediately available to consumers while the commercial results of R&D will not be available for a relatively long time. The closer a stage of production is to the finished consumer good to which it contributes, the lower a stage we describe it as occupying.

On the free market, interest rates coordinate production across time. They ensure that the production structure is configured in a way that conforms to consumer preferences. If consumers want more of existing goods right now, the lower-order stages of production expand. If, on the other hand, they are willing to postpone consumption in the present, interest rates encourage entrepreneurs to use this opportunity to devote factors of production to projects not geared toward satisfying immediate consumer wants, but which, once they come to fruition, will yield a greater supply of consumer goods in the future.

“Popular rhetoric notwithstanding, government cannot be run like a business.”

Had the lower interest rates in our example been the result of voluntary saving by the public instead of central-bank intervention, the relative decrease in consumption spending that is a correlate of such saving would have released resources for use in the higher-order stages of production. In other words, in the case of genuine saving, demand for consumer goods undergoes a relative decline; people are saving more and spending less than they used to.

Consumer-goods industries, in turn, undergo a relative contraction in response to the decrease in demand for consumer goods. Factors of production that these industries once used — trucking services, for instance — are now released for use in more remote stages of the structure of production. Likewise for labor, steel, and other nonspecific inputs.

When the market’s freely established structure of interest rates is tampered with, this coordinating function is disrupted. Increased investment in higher-order stages of production is undertaken at a time when demand for consumer goods has not slackened. The time structure of production is distorted such that it no longer corresponds to the time pattern of consumer demand. Consumers are demanding goods in the present at a time when investment in future production is being disproportionately undertaken.

Thus, when lower interest rates are the result of central bank policy rather than genuine saving, no letup in consumer demand has taken place. (If anything, the lower rates make people even more likely to spend than before.) In this case, resources have not been released for use in the higher-order stages. The economy instead finds itself in a tug-of-war over resources between the higher- and lower-order stages of production.

With resources unexpectedly scarce, the resulting rise in costs threatens the profitability of the higher-order projects. The central bank can artificially expand credit still further in order to bolster the higher-order stages’ position in the tug of war, but it merely postpones the inevitable.

If the public’s freely expressed pattern of saving and consumption will not support the diversion of resources to the higher-order stages, but, in fact, pulls those resources back to those firms dealing directly in finished consumer goods, then the central bank is in a war against reality. It will eventually have to decide whether, in order to validate all the higher-order expansion, it is prepared to expand credit at a galloping rate and risk destroying the currency altogether, or whether instead it must slow or abandon its expansion and let the economy adjust itself to real conditions.

It is important to notice that the problem is not a deficiency of consumption spending, as the popular view would have it. If anything, the trouble comes from too much consumption spending, and as a result too little channeling of funds to other kinds of spending — namely, the expansion of higher-order stages of production that cannot be profitably completed because the necessary resources are being pulled away precisely by the relatively (and unexpectedly) stronger demand for consumer goods. Stimulating consumption spending can only make things worse, by intensifying the strain on the already collapsing profitability of investment in higher-order stages.

“Mises compared an economy under the influence of artificial credit expansion to a master builder commissioned to construct a house that (unbeknownst to him) he lacks sufficient bricks to complete.”

Note also that the precipitating factor of the business cycle is not some phenomenon inherent in the free market. It is intervention into the market that brings about the cycle of unsustainable boom and inevitable bust.10 As business-cycle theorist Roger Garrison succinctly puts it, “Savings gets us genuine growth; credit expansion gets us boom and bust.”11

This phenomenon has preceded all of the major booms and busts in American history, including the 2007 bust and the contraction in 1920–1921. The years preceding 1920 were characterized by a massive increase in the supply of money via the banking system, with reserve requirements having been halved by the Federal Reserve Act of 1913 and then with considerable credit expansion by the banks themselves.

Total bank deposits more than doubled between January 1914, when the Fed opened its doors, and January 1920. Such artificial credit creation sets the boom–bust cycle in motion. The Fed also kept its discount rate (the rate at which it lends directly to banks) low throughout the First World War (1914–1918) and for a brief period thereafter. The Fed began to tighten its stance in late 1919.

Economist Gene Smiley, author of The American Economy in the Twentieth Century, observes that “the most common view is that the Fed’s monetary policy was the main determinant of the end of the expansion and inflation and the beginning of the subsequent contraction and severe deflation.”12 Once credit began to tighten, market actors suddenly began to realize that the structure of production had to be rearranged and that lines of production dependent on easy credit had been erroneously begun and needed to be liquidated.

We are now in a position to evaluate such perennially fashionable proposals as “fiscal stimulus” and its various cousins. Think about the condition of the economy following an artificial boom. It is saddled with imbalances. Too many resources have been employed in higher order stages of production and too few in lower-order stages.

These imbalances must be corrected by entrepreneurs who, enticed by higher rates of profit in the lower-order stages, bid resources away from stages that have expanded too much and allocate them toward lower-order stages where they are more in demand. The absolute freedom of prices and wages to fluctuate is essential to the accomplishment of this task, since wages and prices are indispensable ingredients of entrepreneurial appraisal.

In light of this description of the postboom economy, we can see how unhelpful, even irrelevant, are efforts at fiscal stimulus. The government’s mere act of spending money on arbitrarily chosen projects does nothing to rectify the imbalances that led to the crisis.

It is not a decline in “spending” per se that has caused the problem. It is the mismatch between the kind of production the capital structure has been misled into undertaking on the one hand, and the pattern of consumer demand, which cannot sustain the structure of production as it is, on the other.

And it is not unfair to refer to the recipients of fiscal stimulus as arbitrary projects. Since government lacks a profit-and-loss mechanism and can acquire additional resources through outright expropriation of the public, it has no way of knowing whether it is actually satisfying consumer demand (if it is concerned about this at all) or whether its use of resources is grotesquely wasteful. Popular rhetoric notwithstanding, government cannot be run like a business.13

Monetary stimulus is no help either. To the contrary, it only intensifies the problem. In Human Action, Mises compared an economy under the influence of artificial credit expansion to a master builder commissioned to construct a house that (unbeknownst to him) he lacks sufficient bricks to complete. The sooner he discovers his error the better. The longer he persists in this unsustainable project, the more resources and labor time he will irretrievably squander.

Monetary stimulus merely encourages entrepreneurs to continue along their unsustainable production trajectories; it is as if, instead of alerting the master builder to his error, we merely intoxicated him in order to delay his discovery of the truth. But such measures make the eventual bust no less inevitable — merely more painful.

If the Austrian view is correct — and I believe the theoretical and empirical evidence strongly indicates that it is — then the best approach to recovery would be close to the opposite of these Keynesian strategies. The government budget should be cut, not increased, thereby releasing resources that private actors can use to realign the capital structure.

The money supply should not be increased. Bailouts merely freeze entrepreneurial error in place, instead of allowing the redistribution of resources into the hands of parties better able to provide for consumer demands in light of entrepreneurs’ new understanding of real conditions. Emergency lending to troubled firms perpetuates the misallocation of resources and extends favoritism to firms engaged in unsustainable activities at the expense of sound firms prepared to put those resources to more appropriate uses.

This recipe of government austerity is precisely what Harding called for in his 1921 inaugural address:

We must face the grim necessity, with full knowledge that the task is to be solved, and we must proceed with a full realization that no statute enacted by man can repeal the inexorable laws of nature. Our most dangerous tendency is to expect too much of government, and at the same time do for it too little. We contemplate the immediate task of putting our public household in order. We need a rigid and yet sane economy, combined with fiscal justice, and it must be attended by individual prudence and thrift, which are so essential to this trying hour and reassuring for the future.…

The economic mechanism is intricate and its parts interdependent, and has suffered the shocks and jars incident to abnormal demands, credit inflations, and price upheavals. The normal balances have been impaired, the channels of distribution have been clogged, the relations of labor and management have been strained. We must seek the readjustment with care and courage.… All the penalties will not be light, nor evenly distributed. There is no way of making them so. There is no instant step from disorder to order. We must face a condition of grim reality, charge off our losses and start afresh. It is the oldest lesson of civilization. I would like government to do all it can to mitigate; then, in understanding, in mutuality of interest, in concern for the common good, our tasks will be solved. No altered system will work a miracle. Any wild experiment will only add to the confusion. Our best assurance lies in efficient administration of our proven system.

“We must proceed with a full realization that no statute enacted by man can repeal the inexorable laws of nature.”

– Warren G. Harding

Harding’s inchoate understanding of what was happening to the economy and why grandiose interventionist plans would only delay recovery is an extreme rarity among 20th-century American presidents. That he has been the subject of ceaseless ridicule at the hands of historians, to the point that anyone speaking a word in his favor would be dismissed out of hand, speaks volumes about our historians’ capabilities outside of their own discipline.

The experience of 1920–1921 reinforces the contention of genuine free-market economists that government intervention is a hindrance to economic recovery. It is not in spite of the absence of fiscal and monetary stimulus that the economy recovered from the 1920–1921 depression. It is because those things were avoided that recovery came. The next time we are solemnly warned to recall the lessons of history lest our economy deteriorate still further, we ought to refer to this episode — and observe how hastily our interrogators try to change the subject.

Reprinted from The Mises Institute

Why Demographics is not Destiny

“Demographics is destiny” is a phrase uttered in some rightwing circles and quietly believed in some leftwing ones. In political terms, the phrase suggests either cultural or genetic determinism, or both—namely, that people of a particular culture, ethnicity, or race will (statistically) vote in a particular way. Although the highly politically incorrect words won’t leave Leftist lips, some of their common narratives can only be true if they also believe that that three-worded devil is, too. For example, in 2019, Sabrina Tavernise of the New York Times wrote that “Once the heart of the confederacy, Virginia is now the land of Indian grocery stores, Korean churches and Diwali festivals…It is also significantly less white.” Beyond Virginia, Tavernise goes on to credit this browning of America for other Democrat victories when she writes, “Democrats took control of the House and elevated Nancy Pelosi to speaker in 2018 because of victories in these fast-changing parts of of America, and both parties are preparing for battle over these voters in 2020.”

Meanwhile, there was recently a civil war in American conservatism, largely surrounding the intersection between demographics, culture, immigration, and voting patterns. Mainstream conservative voices argued that race is irrelevant, illegal immigration should be curbed, and that culture transcends race. The more dissident wing questioned whether or not a freedom-minded American Republic could survive mass legal immigration from third-world countries, since their cultures and genetics lend themselves to voting for larger and larger government.

I sometimes roll my eyes at “both sides are wrong” assertions, especially when their champions are driven by a desire to appear fair-minded and above the fray, rather than by a desire to pursue the truth. Alas, feel free to accuse me of the same, but in this case, it’s true: both the Left and the Right are wrong that demographics is fundamental to the political future of America (or of any other society). Demographics is not destiny.

As I’d said, demographic determinism comes in two forms: biological and cultural. Although the latter is more important, the former is in some ways a more egregious error. Biological determinism—the notion that people’s behavior, actions, or physical characteristics, is determined by their genes—is false. This can seem counterintuitive, since genetic determinism is true for other living creatures. But the defining characteristic of people is that they are capable of creating explanations of the world around them, of creating knowledge that hitherto had not existed. In the words of physicist David Deutsch, who expounded on this concept in his 2011 book, The Beginning of Infinity, people are “universal explainers”. This capacity to explain and understand the world is intimately connected with our corresponding ability to control it. 

And that power is why people are not genetically determined: given adequate wealth and technology, any genetic condition may be compensated for by technological innovation. For example, a child born with no limbs may be equipped with prosthetic ones so indistinguishable that the mutation which caused the condition in the first place is moot. Poor vision is already compensated for by glasses, contacts, and surgery. Even something as seemingly determined as height may in principle be modified, and some individuals have undergone so-called leg-lengthening surgery in recent years. The same logic applies to inborn diseases, susceptibilities, disabilities, and any other problem that Nature may not have solved for us.

One really has an obligation to let the imagination fly here—in general, if a solution to a problem of the human condition is possible in principle, then people can procure it, given only that we create the knowledge of how to do so. 

So physiology poses no fundamental limitations on what people are capable of achieving in the long run. This is a blow against some strands of genetic arguments surrounding immigration, especially with respect to the supposed importance of race. To emphasize: any perceived shortcoming owing to genetics can be compensated by the requisite technology. Even if such an innovation has not yet occurred, it is always discoverable by knowledge-creating people.

“Fair enough,” the determinist says, “but culture still matters, and immigrants who come to America still vote Left.” But culture is merely a set of ideas put into practice, and those are also not set in stone. History alone makes this clear, as the practices of your own ancestors from merely a few generations ago, with whom you share most of your genes, would likely horrify you today. The fact that cultures can improve at all proves that they are not some unstoppable, unchanging force. And, perhaps ironically, while genes propagate in only one direction—from parent to offspring—culture travels every which way imaginable, thus allowing for a plasticity and adaptability of which genes are utterly incapable. 

The fact that people are universal explainers rules out cultural determinism as it did biological determinism—because people are capable of creating ever-more accurate explanations of reality, of resolving errors in their worldview, no culture is ever deterministically linked to any group of people. Just as the unbounded creativity of people renders our own genetics merely a background canvas on which we may paint whatever manmade environment we desire, so too does our creativity lend itself to modifying and, hopefully, improving any cultural milieu in which we find ourselves. 

A salient example of deterministic thinking on questions of immigration is that of Muslim migration into Western nation-states. As Adrian Michaels of The Telegraph wrote in 2009, “Europe’s low white birth rate, coupled with faster multiplying migrants, will change fundamentally what we take to mean by European culture and society…Muslims represent a particular set of issues.” More recently, in 2017, the Pew Research Center published projections of Muslim percentages of European populations over time, under various possible scenarios. The scenarios differ by birthrate and migration levels, implicitly assuming that the number of Muslims in Europe is determined by these variables. 

But ideas don’t travel through the birth canal, nor are they shielded from their environment—Muslims who migrate to Europe are exposed to new ideas, new cultures, new criticisms of their most cherished beliefs, and their European-born children even more so. Muslim immigrants and their children may adopt the new culture in which they find themselves, or they may radicalize, or they may do anything in between—the future patterns of people and their ideas cannot be prophesied.

Having said that, we should not idly sit by and merely hope for cultures to improve themselves from the inside, as it were. Some ideas are better than others, and some cultures lend themselves to progress and error-correction more so than others. Since the memes occupying one’s wetware are not immovably fixed by either gene nor by the culture into which one was born, we have a moral obligation to try to improve them—both our own and others’. And we do so by criticizing them, by explaining their deficiencies, by offering modifications. 

So no, demographics is not destiny. Neither immigrants not those of particular genetics are predetermined to vote in some predictable manner. All people are universal explainers, and as such, are capable of unbounded improvement in thought and action. While it might be comforting to learn that race and other background are not determinative, the other side of the ledger is that since people can improve by acquiring new knowledge, we should not treat anyone with kid gloves. If demographics is not destiny, then the bigotry of low expectations is similarly unacceptable. This is exhilarating, for it means that people are not fundamentally divided by genetics, nor must our cultures be permanently incompatible. Civilizational progress of all kinds will always be, to quote David Deutsch, at the “beginning of infinity”.

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An Economic Reckoning ft. Clint Russell Ep. 217

https://youtu.be/B4rBZcugFw0 Clint Russell joins me in this week’s episode of Liberty Weekly. Clint is the host of Liberty Lockdown, a podcast that took the liberty scene by storm during the COVID-19 lockdowns. Before Clint launched Liberty Lockdown, he was a private...

On the Brink of Nuclear War ft. Connor Freeman Ep. 216

https://youtu.be/CJ62Lw1PJsg In this episode of the podcast, I speak with Connor Freeman about the dismal state of U.S./Russian relations. We discuss the spiraling escalation in Ukraine and U.S. policy decisions which signal that the unthinkable may be inevitable....

Addiction and COVID-19 ft. The Clean Libertarian Ep. 215

https://youtu.be/38r3URgicX4 Much has been said about the excess rate of substance abuse during COVID-19. To try to understand some of these causes, I brought on my friend Drew Cook of the Clean Libertarian. Drew is a recovering addict who is now working to help other...

Press Censorship in Wartime Ep. 214

https://youtu.be/s5Jhj1smhFI With the risk of kinetic war between the US and Russia becoming more and more likely each day, the United States is already marshalling its forces to silence domestic and international dissent to the conflict. In this episode, I examine...

Year Zero

A Conversation with Patrick MacFarlane

Patrick joined me again. In this episode we discuss Ukraine Russia, China, culture, democrats, republicans, and traditional family. Liberty Weekly Discord Libertarian Institute 19 Skills Pdf Autonomy Course Critical Thinking Course Donate Patreon...

The Network w/John Robb

John Robb joined me to talk about the network, its operations, where it fails, and why he thinks conspiracy theorists are wrong. Global Guerillas Substack Discord Libertarian Institute 19 Skills Pdf Autonomy Course Critical Thinking Course Donate Patreon...

America’s Response to the War in Ukraine w/Dave DeCamp

Dave DeCamp joined me to discuss the American reaction to the war in Ukraine. We discuss how the sanctions and information war seem to be targeting Americans rather than the Russian politicians. Is the Biden Administration utilizing propaganda to manufacture consent...

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