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What Goes Down Must Come Up

After Wednesday’s brutal day on America’s major stock markets President Donald can no longer brag about their record highs, but if he wants to attempt a complicated and counter-intuitive argument he can claim some credit for the rosy economic conditions that have caused the recent swoon.
The markets tanked because the Federal Reserve Board now intends to slightly raise the artificially low interest rates that fueled the markets’ record run, which is because by now they’ve successfully brought the economy to below full employment and a potential 4 percent growth rate in the gross domestic product, and for now it’s more worried about an inflation rate that’s slightly outpacing the long-awaited wage increases that have lately occurred. According to the perverse logic of the stock markets, good news is bad news, just as back when high unemployment and low GDP growth were bringing interest rates down and raising the indices up bad news was good news.
All of this damnably good news started shortly after the big financial meltdown of ’08, which was caused by the subprime mortgage social engineering of President Bill Clinton’s administration but came to fruition in the final days of President George W. Bush’s administration. Bush and most of the Democrats and Republicans in Congress — including both both of the party’s presidential nominees — responded with a big bailout of some major banks that annoyed people on both the left and the right, and the Fed started printing money at a rate that alarmed any conservative old enough to remember the hyper-inflation of the ’70s. In retrospect, though, the center-left and center-right compromise seems to have more or less worked.
The economy was already officially out of recession by the time President Barack Obama was elected by a scared-to-death electorate and passed a pork-laden “stimulus package” through the overwhelming Democratic majorities in Congress, and after that a historically slow recovery slogged along on the easy money the Fed was printing. We’re still convinced that Obama’s anti-business regulatory and tax policies slowed the recovery, and that only the Fed’s foolhardy money-printing sustained it, but after a scared-to-death electorate elected a Republican majority in the House of Representatives in the “tea party” wave of ’10 there were no more “stimulus packages” or other major interferences and thus things improved slightly. As much as we still disdain Obama-nomics and hate to give the guy credit for anything, we have to admit that during the last two years of Obama’s presidency the economy was on a clearly upward path.
By the time a scared-to-death-of-something-or-another electorate gave an electoral majority to Trump, the unemployment rate was a respectable 4.8 percent and the GDP was growing at a not-great-but-not-bad 3 percentage points or so. As much as we disdain Trump’s trade wars and attempts to restore the coal-driven and low-tech economy of the ’50s, and as much as we hate to give the guy credit for anything, we also have to admit that economy has been on pretty much the same upward trajectory ever since Trump’s inaugural speech promise that “The American carnage ends right here, right now.” Trump’s exceedingly business-friendly regulatory and tax policies have no doubt helped, and his stupid trade wars and economic nostalgia haven’t yet hurt much, and by now the economy is rolling along at a rate we can’t blame the Fed for applying some slight pressure to the brakes.
Trump is already grousing about it, though, as he’d much rather be bragging about record stock market highs and new land speed records in economic growth and how nobody has ever seen anything like it. As much as we hate to give the guy credit for anything, we have to admit it’s another brilliant political ploy. If your stocks are down it’s because of that damned fellow who’s Chairman of the almighty Fed, that quintessentially quasi-governmental institution that actually runs everything according to all the leading “deep state” conspiracies since the days of President Andrew Jackson, and has nothing to do with Trump, who is surely an innocent bystander and fellow victim.
Trump did in fact appoint Jerome Powell as the chairman of the Fed, and Powell was confirmed by a Republican Senate, but so was Attorney General Jeff Sessions appointed by Trump and confirmed by a Republican Senate, and for now both are suspected conspirators in a “deep state” plots to overthrow Trump. Those smarty-pants know-it-alls at the Fed have a darned convincing case for raising the prime interest rate to a few notches lower than historical norms, tough, and if it keeps the economy chugging along at a optimal if not the-greatest-anyone’s -seen rate without inflation we’re sure Trump will be glad to claim the credit, and boast about how great it could have been if only he had been in charge. At this point the labor market is tight enough that further economic growth will require an increase in immigration, and Trump should also be grateful if the Fed spares him that dilemma.
These days our only interest in the stock market is in the long run, and over that dreary amount of time it’s survived the Great Depression and Stagflation and the Dot.com and subprime bubbles, and it’s even survived Obama and we figure it will probably survive Trump. We give some of the credit to those smarty-pants know-it-alls at the Fed, but most of it to all those anonymous schmucks who get up every morning and go to some office or factory or shopping mall and make the decisions and do the work that keeps our still mostly-free economy slogging along through good times as well as bad times.

— Bud Norman

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Two Holidays in One

Yesterday was Easter Sunday, of course, but this year it coincided with the far more secular holiday of 4-20. For the sake of the squares among you we will explain that “4-20” is a sub-cultural slang term for marijuana. Some marijuana enthusiasts make a ritual of indulging each day at 4:20, although we’re not sure if it’s supposed to be A.M. or P.M, or perhaps both, if your sleep schedule is accommodating, and the 20th day of the fourth month of the year has become an unofficial national 24 hours of marijuana celebration. Easter didn’t prove a distraction for the large crowds that gathered in various cities across the country, and in The Mile High City of Denver 4-20 pushed the holiest day in Christendom right off the front page.
Tens of thousands gathered in a Denver park, according to the Associated Press, to smoke enough marijuana to make the nearby buildings look quite hazy in the news photographs. The state of Colorado has recently legalized the sale and possession of small amounts of marijuana, and although it remains in violation of federal laws and it is still illegal to smoke marijuana in public there seems to be a considerable degree of tolerance regarding the drug. Reports indicated that only 103 of those tends of thousands were cited, and only 92 of them marijuana violations. The rest were presumably handed a more expensive ticket for consuming tobacco in one of the nearby taverns. There seems to have been no violence or other problems associated with the party, and it can be assumed that the nearby fast-food outlets and convenience stores did a brisk business, so the event might become an annual tradition if anyone can remember the location. Most years it won’t fall on Easter, and a few more pious potheads might join in.
A bunch of grubby neo-hippies littering a park and giving a contact high to an entire neighborhood might not seem the most persuasive image that the pro-legalization movement might send to a wary non-pot-smoking public, which thus far retains a political majority in the country, and would probably be more sympathetic to the respectable Saab-driving suburban pothead who tries to hide it from the kids, but they do seem to be on a roll lately. Polling shows public sentiment moving toward legalization with the dizzying speed of same-sex marriage, legislation and referenda are being considered in several states, prominent politicians from both parties have offered their endorsements, and a certain sweet scent of inevitably is wafting across the land like the smoke from that rally in the park. It’s partly the Baby Boomer’s dominance of the Democratic party, and partly the increasing influence of libertarians and libertarianism in the Republic Party, but we suspect it’s mainly because everybody in government at every level is increasingly desperate for more and more revenues. Just as the Great Depression brought and end to the prohibition of alcohol, the current never-ending recession will prompt the government to cut itself in on the enormous trade in marijuana.
When it does happen, all those 4-20 types around the country won’t necessarily be celebrating. They’ve been smoking tax-free so far, and will be surprised to find how very expensive is the government’s fair share. Pot has previously been free of regulatory oversight, as well, and bureaucrats are notorious buzz-kills. In our newspaper days checking the fly-sheets at the local jail we noticed that the only people who ever got arrested for marijuana were selling large amounts in a careless way or had small amounts in their pockets while they were being arrested for something else, but we’re sure law enforcement will take a more active interest in the matter when state funds are stake. They’ll miss that slight outlaw frisson, too, and some will consider take up tobacco to regain that rebel stand.
State governments are all in the numbers racket already, with their lotteries and casinos ruthlessly protected monopolies, and government itself can be understood as sanctified protection racket. In Puerto Rico they’re considering getting in on the prostitution to trade to erase a debilitating debt, along with other ideas ranging from legalizing weed to reviving the country’s once-great coffee trade, and the more indebted states will be tempted to do the same after they’ve taxed all their rich people into other jurisdictions. State-sanctioned marijuana, which would be far more palatable to those aging Baby Boomer Democrats and their haranguing feminist wives as well those libertarian Republicans and their religious friends, will soon be an easy sell to a cash-strapped public.
A better way to fill the public coffers would be to expand the broader economy with tax and regulatory incentives to create more productive goods and services, but that’s a harder sell. There are good arguments against putting someone in prison at taxpayer cost for smoking marijuana, and good arguments for taking small cut on that marijuana to keep someone in prison for something more detrimental to the society, but parks full of grubby neo-hippies and agencies full of rapacious bureaucrats is not going to be a successful combination.

— Bud Norman

Five Long Years of Stimulation

Monday marked the fifth anniversary of the American Recovery and Reinvestment Act, better known as “the stimulus,” but we did not observe the occasion with a celebration. What with the economy the way it is, and having failed to apply for any available federal funding, we could ill-afford a fancy party or a bottle of fine champagne.
There was a warm rush of nostalgia, however, as we recalled the giddy optimism that attended President Barack Obama’s lavishly ceremonial signing of the law. We were told that the law would cost a mere $800 billion, already a insignificant sum by Washington standards, and yet keep the unemployment rate from topping 8 percent and bring it down to 5 percent by 2013 with “shovel-ready jobs” while lifting two million Americans out of poverty and saving the world from global warming by creating a new “green energy” industry. Since then the cost has grown to $2 trillion, the unemployment rate hit 10.1 percent and stayed above 8 percent for four years before enough people finally gave up looking for a job to push it down to the current 6.6 percent, the poverty rate has risen to a 50 year high, the president has joked that the shovel-ready jobs were “not as shovel-ready as we expected,” and the “green jobs” that survived the bankruptcies of the subsidized companies turned out to cost about $5 million apiece. This winter’s wicked weather suggests some success in combating global warming, but otherwise an objective observer might reasonably conclude that all the optimism seems have been unfounded.
Still giddy after all these years, the law’s indefatigable apologists offer two lines of defense.
One is that even if the stimulus did not live up to its promises it did at least prevent the country from sliding into another Great Depression and the earth from sliding out of its orbit and into the sun. The White House economists did overstate the stimulative effect of the stimulus, according to this popular theory, but only because they had generously underestimated the damage done by the stinginess and de-regulatory zeal of that free-market-crazed cowboy George W. Bush. This ignores that only months before signing the stimulus into law Obama had criticized Bush’s “irresponsible” and “un-patriotic” budget deficits, and fails to name a single regulation Bush eliminated that might have caused the financial downturn, and conveniently omits any mention of the Clinton-era “affordable housing” policies and their sub-prime shenanigans that did in fact cause the crash, but it has the emotionally satisfying appeal of blaming Bush.
The other argument is that the stimulus failed to achieve its stated goals only because it was far too small. One might expect that a $2 trillion infusion of freshly-printed cash would be sufficient to stimulate some economic activity, especially if you throw in a third trillion from the Trouble Assets Relief Program passed just a few months earlier, but apparently not. The theory that if what you’re doing only seems to be making things worse you should do far more of it is not new, having been around at least since it informed the Roosevelt administration policies that prolonged the actual Great Depression for nine years before the massive stimulus program that was World War II came along, and its temptation to those handing out the money has not diminished over the years.
Neither of these arguments can be definitively disproved, as economics does not allow for the sorts of controlled laboratory experiments that would settle such questions in the harder sciences, but there does seem ample reason for a healthy skepticism. The notion that handing out a couple trillion dollars of Monopoly money to reliably Democratic constituencies is the only logical way to revive an economy has an inherently suspicious ring to it, and much of the stimulus money was spent in ways that are remarkably unproductive even by government standards.
Those cheeky iconoclasts at The Washington Free Beacon chose ten especially outrageous expenditures that illustrate the point. One program spent $389,357 to find why young men drink malt liquor and smoke marijuana, when we could have told them for a far more economical sum that it’s to in order to get drunk and high, and another spent $8,408 to find out if mice can get drunk, which could have been learned for the price of a mouse and a beer. Another spent $1.2 million on a University of California-San Francisco study of erectile dysfunction in overweight men, while Yale University was given $384, 949 to study duck penises. (This genital pre-occupation reminds of us an old bureaucracy joke too blue to repeat here, by the way, but if you’re interested shoot us an e-mail with proof that you’re of age in your state and we’ll pass it along.) Yet another $100,000 went to fund anti-capitalist puppet shows, a particularly peculiar way of promoting economic growth, and still another $600,000 was spent to plant trees in the wealthiest neighborhoods of Denver, which presumably offset the benefits to the hated rich with commensurate benefits to beloved and impoverished Mother Nature. If such wacky use of public funds does not convince you of the wisdom of the stimulus, perhaps the $1.3 million spent on signs advertising the benefits of the stimulus did the trick. Judging by the amount of Obamacare’s budget spent on advertising its blessings, the government seems quite convinced that you’ll fall for it again.
Which is not to say the apologists aren’t quite right, of course. Perhaps such spending did save the country from breadlines and a return to the hit parade for “Brother, Can You Spare a Dime,” and perhaps it would have worked better yet if only we’d be willing to shell out a cool million for even more duck penis revelations, and there is no denying that the earth hasn’t slipped out of its orbit and into the sun. We can’t quite shake a nagging suspicion that Keynesian is bunk, and that like global warming it’s a scam to legitimize the government’s ravenous appetite for power, but if we could afford a fine bottle of champagne we’d drink it.

— Bud Norman