President Trump: “End all tariffs.”


I don’t understand everything President Trump says or does, but a lot of insight can be found in The Art of the Deal. He is not afraid to leverage strengths, call bluffs, and remain unpredictable. Many in the mainstream media see this as chaotic and a lack of preparation, but they continue to miss the point. While there are times when the President and some in his administration stray off message, there are other times when he hits the nail on the head. Consider his recent trade comments at the G7 summit.

Trump’s detractors have decried his calls for tariffs. They are correct in terms of long-term policy, but not necessarily from a positioning standpoint. When some of our Europeans railed against his calls for protectionism, the President turned the tables and took them at their word, calling for an end to all tariffs. If our trading partners really believe that tariffs are detrimental, then why don’t they join him and demand a summit to negotiate the expeditious removal of all trade barriers. They haven’t and probably won’t because the facts aren’t on their side. The Europeans spend a smaller percentage of their GDPs on NATO and have instituted their own tariffs on US goods and services. President Trump called their bluff.

Those who argue against the President’s proposed trade restrictions claim that he is igniting a trade war, but this argument ignores the reality of unfair trade restrictions in China, Europe and elsewhere. It also suggests that the US would be “starting a trade war” by instituting policies that resemble the ones already in existence in other nations. In essence, Trump is not really arguing that tariffs benefit anyone, but that they are necessary to prod our partners to level the playing field. Imposing tariffs gives him leverage at the negotiating table. While some of his statements seem to contradict this overall position, I believe it’s all about positioning for a better deal.

Agree or disagree with Trump on other trade issues, let’s get behind him on his call for a world without tariffs, barriers and subsidies. Free trade has spurned massive wealth across the world and will continue to be the engine of economic growth. Without a doubt, it’s the ideal.


Update on Venezuela


One Sunday, Nicolás Maduro was “reelected” president of Venezuela for a second six-year term. But most Venezuelans who oppose Maduro knew the process was rigged and refused to participate. Legitimate opposition parties were not allowed to field candidates and outside observers were not permitted in polling places. Although the nation has a population of about 32 million, Maduro was credited with only 5.8 million votes.

The current situation in Venezuela can be traced to Marxist Hugo Chávez’ ascendency to power in 1999. The corruption, redistribution, press control and industry nationalizations that followed have crippled the country. Inflation is currently estimated at 13,000% annually and 5000 migrants are fleeing the country daily, most to Columbia. There are hunger and healthcare crises as well. According to one study, the average Venezuelan actually lost 24 pounds in body weight last year. Even so, Maduro continues to blame evil capitalists and the US for the nation’s ills.

You might say that Venezuela’s demise is happening before our eyes, but for most Americans it’s not. CNN, CNBC, and other major media outlets have little or no interest in what’s going on there. Venezuela continues to be the most underreported economic story of the last two decades.

The truth is that Venezuela is an inconvenient truth for a mainstream media afraid to consider the cause. Before Chávez took power, Venezuela was a prosperous nation with the world’s largest proven oil reserves. The list of early Chávez admirers includes the likes of politicians Jesse Jackson and Jeremy Corbyn, Hollywood elites Michael Moore and Sean Penn, and even leftist economists like Joseph Stiglitz. The only rational explanation for the current tragedy is socialism but acknowledging this raises more questions. Bernie Sanders is a self-avowed socialist and Democrats from Obama to Clinton to Warren lean heavily in that direction. If socialism is responsible for the disaster in Venezuela, then why would it possibly work in the US?

As former British Prime Minister Margaret Thatcher warned, “The problem with socialism is that you eventually run out of other people’s money.” There is little left to confiscate in Venezuela and Maduro’s rigged reelection suggests that a peaceful end to the madness in the near future is unlikely. This is disturbing enough. But the lessons from Venezuela should serve as a wake-up call for all Americans. The economics of a welfare state, a “living” minimum wage, single-payer healthcare and free college for everyone don’t add up. If we venture down the same road, we will arrive at the same place.


Real Diversity on Campus


A recent study of faculty at 51 of the nation’s top 60 liberal arts colleges reveals that 39% of employ no Republicans as professors. While many colleges and universities in the US claim to be the foremost defenders of diversity, the concept is foreign in campus life.

The findings reported here are not unusual. To be fair, studies like this often assume political affiliation to reflect worldview or ideology, which is not always or completely accurate. Self-proclaimed political “independents” could be Republicans in hiding, Democrats claiming to be openminded, affiliates of another party (e.g., Libertarians, Socialists, etc.), or genuine middle-of-the-roaders; we don’t know for sure. In addition, ideological balance—or lack thereof—varies across institutions and disciplines. Private colleges and flagship state universities typically lean more sharply to the left, as do professors in the arts and humanities. Of course, a professor’s political ideology does not necessarily translate into the classroom. I know progressives who are inherently fair and balanced.

These caveats aside, this study points to a reality few academics seriously challenge: Most college campuses in the US are ideologically progressive. A lack of genuine intellectual diversity shapes campus discussions in ways that promote certain views and discredit others. Many academic conversations consider only left-leaning views of a given issue. There are many examples, but let’s consider two.

(1) The U.S. Constitution: Two general schools of thought are originalism (it means what it says) and non-originalism (it should be flexible). Most professors seem to accept the latter “living and breathing” position as intuitively obvious and dispute how the Constitution should be stretched or whether it is even useful at all. Originalists are presumed to be ill-informed by default.

(2) Markets and Liberty: The two general views here are capitalism (individuals make their own economic decisions) and socialism (the state determines what is best). Most self-proclaimed advocates of capitalism on campus concede its “obvious flaws” and propose some sort of middle ground between liberty and statism. Like the Constitution, the notion of free markets is simply outdated.

On these and other topics, colleges and universities should welcome internal discourse and external speakers who present and challenge all sides. Speech on campus should be free and students should be taught to respect the ideas of those with whom they disagree. Politically incorrect views should be encouraged, including skepticism about the role of government, the current state of the press, the pros and cons of free enterprise, health care, and much more. A college education can be life-changing if it promotes real diversity and critical thinking. Whatever your point of influence—educator, student, taxpayer, or someone who hires college grads—I encourage you to insist on nothing less. Our future depends on it.


Takeaways from the Zuckerberg Testimony


I decided to wait a few days after Zuckerberg’s testimony to Congress before posting my comments to see if it had any staying power. I don’t think it did. This is unfortunate because there are several important takeaways.

First, I was miffed at how little Zuckerberg professed to know about the underlying issues. His response to the hotel question was baffling ( He struggled to define hate speech and actually suggested that an algorithm should make the determination ( He was evasive, but most Senators gave him a pass.

Second, I was also astonished at how little those questioning Zuckerberg seemed to understand about Facebook’s business model. It’s really simple: Facebook gives you a platform, while advertisers pay the costs in exchange for the right to target you with their content. Effective targeting requires that marketers know who you are, which is why your personal data is so important. How can you engage Zuckerberg in a serious discussion if you don’t understand why Facebook’s success in the first place?

Finally, Zuckerberg seems okay with the inevitability of regulation. Of course, “government oversight” gives him cover and creates compliance costs that potential competitors would be less able to afford. His willingness to “work with Washington” has nothing to do with solving Facebook’s problems and everything to do about protecting Facebook’s control of the industry. He should be smart enough to do that on his own. There’s no reason why he can’t accept safeguard the data he captures or develop a customer agreement that a reasonable individual can understand.

Mark Zuckerberg is not my favorite person, but he’s a smart guy. I think he has little respect for privacy and I am concerned about the data breaches, but it’s time for consumers to accept some responsibility. If you are willing to post personal information on Facebook for hundreds of your “friends” to see, don’t be appalled when you discover that advertisers act on it as well. It should be obvious that public formats like Facebook will be full of fake news as well. While some industry oversight regarding the clarity of user agreements and data security is necessary, the federal government should largely stay on the sidelines. Government regulation usually makes things worse, this would not be an exception.


The problem with the trade war argument


I’ve heard many free-traders question the wisdom of President Trump’s tariffs against China. They argue that free trade benefits everyone and that tariffs elicit responses that can trigger a trade war. I don’t need to be convinced that their arguments are 100% correct as far as they go, but they make 3 questionable assumptions.

  1. They assume that US tariffs would be the “first salvo” in a trade war, but this is not the case. I don’t agree entirely with President Trump’s public assessment of the trade situation, but trade salvos have been launched at the US for some time. Currency manipulation, intellectual property rights, requirements that US firms must secure joint ventures with domestic firms to enter the market, and competition from state-owned enterprises are but 4 examples from China. In this respect, the tariffs announced today could be viewed as a much-delayed response to unfair practices instituted years ago.
  2. They assume that all nations share an equal commitment to free trade. In an ideal world, leaders in each country would be equally committed to open exchange, not just in talk, but also in practice. While we should work to reach this ideal, we must equally recognize that it’s not reality. Like it or not, governments don’t just get out of the way and let companies trade.
  3. They assume that a “somewhat free” trade arrangement is acceptable, and certainly better than tariffs and other government restrictions. But the US has overlooked real trade problems for years in the interest of short-term corporate gains. This assumption is not valid in the long run. It’s akin to appeasing a brutal dictator. You get might get “peace” for a while, but your long-term position is compromised.

All nations benefit from free trade, and it’s my hope that all nations will come to the table to discuss the removal of barriers that protect their firms and punish outsiders. But we need action. I expect my leaders to be open to compromise, but insistent on results. I’m willing to accept some international blowback from other nations if that’s what it takes to get real progress.


The Delta-NRA Debacle


Last week, Delta Airlines buckled to gun control pressure and began disassociating with the National Rifle Association. In response, the Georgia House and Senate just voted overwhelmingly to eliminate an amendment that would have renewed a $50 million jet fuel tax exemption for the Atlanta-based carrier. Lt. Gov. Casey Cagle summarized the sentiment this way: “Businesses have every legal right to make their own decisions, but the Republican majority in our state legislature also has every right to govern guided by our principles.” Many conservatives are cheering the response, but there are problems on both sides of the issue.

First, the NRA discount was available to members flying Delta to attend the NRA convention. These discounts are not uncommon and are simply offered to attract group business. They don’t reflect any kind of endorsement between airline and organization, but Delta cited “neutrality” in the gun debate when announcing its pullback. It’s obvious that Delta was caving to activist pressure. If Delta is taken at its word, then ALL discounts reflect a social position, and ALL are now subject to scrutiny. The company clearly doesn’t want to go there. Georgia politicians called out the company on this hypocrisy.

Moreover, Lt. Gov. Cagle is right. He is not challenging Delta’s legal right to pull the NRA discount. What the government gives, it can take away. But I’m uncomfortable with the entire process. Several questions are being overlooked.

Why was Georgia pondering the transfer of $50 million in tax dollars to Delta in the first place? Is it a proper role of government to subsidize certain companies because they “create jobs” or are savvy enough to lobby for the support? These are complicated questions, but the simple answer is no.

Why must Delta have a policy on social issues unrelated to its business activity? Should we expect airlines to negotiate group discounts only with organizations that meet the approval of political activists? This has gone too far. Delta should not have to pull group discounts in order to remain neutral on social issues.

Should we expect (or even want) politicians to reward or punish companies on either side of this debate? Absolutely not. Those cheering Georgia lawmakers at the moment have no basis to complain when left-wing politicians in California and New York harass companies in their states.

I don’t like what Delta did, but the response should be left to the market.


Trumponomics and the Stock Market


President Trump has lauded strength in the stock market as evidence for his economic policy. It’s not surprising that has hasn’t comment much during the recent correction and volatility. So how much influence does he have on the market anyway?

The answer is some, but the situation is complicated. In theory, stock values mirror expected returns over the long term, adjusted for risk. In practice, they are also influenced other factors, including:

  1. The Economy: There are exceptions, but most companies expect to do better when the economy grows, so economic expectations drive stock values.
  2. Regulations: In the long run, consumers pay for regulations through higher prices. But companies also suffer, as higher costs reduce demand for their products. Less production means less profit and drives stock prices lower.
  3. Interest rates: When interest rates are low, savers (especially retirees) who would rather invest in safer instruments are often pushed into stocks to achieve a reasonable return. The Fed has kept interest rates artificially low for years, priming the stock market with investors less able to manage the risk (the bubble this creates is another concern altogether). When rates rise, these investors are likely to move money from stocks to bonds, CDs, treasury notes, and other “safer” alternatives.
  4. Emotions: When investors feel good, they tend to buy more stocks, pushing prices higher. Keynes called this “animal spirits” and although he probably overstated their long-term influence, he made a valid point.

All of these factors have promoted record highs in the stock market. President Trump’s calls for tax reform and reductions in regulations raised economic expectations before he ever took office. Interest rates also remained low during his first year as president. After 8 years of Obama stagnation, investors were itching to take money off the sidelines and put it to work.

But the Fed controls interest rates and doesn’t like much inflation. It will likely raise rates in the coming months, making non-stock investments relatively more attractive. Add to this the reality that even quality stocks can become overpriced, and the market correction we’ve seen is no surprise. Of course, determining when this will occur is not easy, but market fluctuation is normal.

As for President Trump, he can rightfully take credit for much the market’s rise. Part of the Trump effect on the market is the simple fact that Hillary Clinton did not win the election. But there are other factors involved as well. Trumponomics is far from perfect, but it’s a far cry from Obama-Clinton.


The Corporate Response to Tax Reform


Firms are starting to respond to tax reform. A recent report in the Washington Examiner chronicles 164 companies that have announced employee bonuses in response to tax changes ( A number of companies have also announced increases in wages; Walmart is increasing the minimum wage for its employees from $10 to $11 per hour, although it’s being criticized—no surprise—for some store closures.

The takeaway point here is clear: Employers in a vibrant economy will raise wages without government mandates. Walmart must increase its own minimum wage or risk losing valuable employees. Companies don’t wait for politicians to act; they analyze the market and take action on their own. In fact, minimum wage laws only raise actual employee compensation when they forces an employer to pay more than the employee’s work is worth, and even then, for fewer employees (see earlier posts for a detailed discussion on this topic). Cut business owners and managers loose of burdensome regulations and excessive taxes, and most will look for opportunities to grow.

Progressives struggle to accept this reality. They typically claim that corporate tax cuts will end up in the pockets of rich shareholders. Rather than free businesses to grow the economy, they try to control them through taxes and regulations. Their approach leads to stagnation. Just look at the Obama years.

But while business response to corporate tax reform will be positive, many politicians and analysts—including Republicans and self-proclaimed economic conservatives—are falling into a trap. They claim to support tax and regulatory reform not because it’s inherently the right thing to do, but because businesses will respond in a way that benefits everyone else. They maintain that firms will do “the right thing” when taxes are cut, as if companies have an obligation to hire more employees. This line of reasoning reinforces the left’s argument that government has a lien on corporate profits, and tax rates and regulations should be manipulated to achieve the social and economic outcomes politicians desire.

To the extent that this can be measured, some firms will likely use the tax savings to raise dividends and/or buy back some of their own shares instead of hiring more employees and expanding their businesses. Opponents will cry foul when this happens because they did not do “the right thing.” These alternatives are good for the economy anyway, but that’s not the point. It’s their money. How individuals choose to spend it—as consumers, investors, or shareholders—is up to them, not Washington.

It’s exciting to see how these changes will spur the economy, but let’s remember…Capitalism, including minimal taxes and regulations, is the best economic system because it’s moral. The benefits it creates for society are welcome, but not the best argument for free enterprise.


4 Takeaways From Tax Reform


The tax reform package just passed is a mixed bag, but it’s a clear improvement over the current system. Amidst all of the details, there are 4 takeaways that will be good for the country.

First, the $10,000 limit for state and local taxes means that tax increases for upper (and some moderate) income earners at the state level will no longer be subsidized by the federal government. As a simple example, with unlimited SALT deductions, a $1000 tax increase at the state level would reduce the federal tax burden of an itemizer with a 35% marginal rate by $350. States will be under greater pressure to manage their own fiscal houses without indirect federal subsidies.

Second, the increased standard deduction means that many middle-income Americans will be able to reduce their taxable income without itemizing, thereby weakening the effect of political intervention through subsidies and deductions. This could make the transition to a flat tax—or something close—easier one day.

Third, reducing the corporate tax rate from 35% to 21% will level the business playing field for firms. Companies will invest a significant part of the savings, which will drive economic growth in the near term. The actual benefits of this change are hard to calculate, but it’s a definite plus for the economy and jobs.

Finally, the tax plan eliminates the individual mandate for health insurance. The left’s contention that Trump is “taking healthcare away from millions of Americans” is a lie. Eliminating the mandate only gives them a choice without a tax penalty. The ACA is built on the mandate, so this simple change will bring Obamacare back to the forefront. The ball is now in the Democrats’ court, because the program will struggle even more without increased subsidies.

The reform package didn’t go far enough, but compromise was inevitable.


What we learned from Alabama


We learned several things from yesterday’s Alabama Senate election. Roy Moore’s defeat was not an “upset” and it does not signal “a turn against Trump.” Although Moore was not an ideal candidate on the issues, sexual misconduct claims translated an easy win into a close loss. Had Moore prevailed, it would have been just as incorrect to suggest “a win for Trump” either, as he didn’t endorse Moore in the primary anyway.  But if you step back, there is a bigger issue that we must confront.

I’m not talking about sexual wrongdoings, but let me start by restating the obvious: If Judge Moore did everything he was alleged to have done, he should be held accountable. However, this analysis overlooks several facts:

Most importantly, we do not know what did or did not happen. Claims of behavior 40 years ago are almost impossible to unravel. Democrats and the mainstream media constantly referred to the charges as “credible.” Perhaps, but believable claims are not necessarily true. They referred to the number of allegations as evidence as well, but this, too, is flawed logic. The quantity of allegations does not constitute any evidence because different allegations represent different events. They claimed that this was not a partisan issue; the Democrats dispatched Al Franken, so they must be committed to reform in their own party. But this is not true either. Unlike Moore, Franken admitted wrongdoing, and because the Minnesota governor is a Democrat, his resignation paves the way for another liberal anyway, without a special election.

The most egregious intellectual mistake was made by Senator Shelby. “A lot of smoke, there’s got to be some fire there.” Wrong, Senator. The entire objective of this attack on Judge Moore was to create a lot of smoke. If this is your honest assessment, then we definitely need sharper minds in Washington. If not, then you owe the country an apology. Your opposition to Moore likely tipped the election to Jones.

Here’s what we know. These allegations emerged immediately following the Republican primary, when it was too late for voters to consider an alternative to Moore. Even if some of the allegations were true, the timing is no coincidence. We also know that some of details in the allegations just don’t add up. Does this mean none of the accusers were telling the truth? Not necessarily, but then again, we just don’t know.

Perhaps we will know the facts one day, but I doubt that the networks that pounded Moore for weeks will invest the time and resources necessary to sort out the truth in the coming months. Their goal was accomplished, so it’s time to move on to bigger fish now—President Trump.

I understand why voters could have concerns about Judge Moore. He’s not a gifted speaker and his denials didn’t have a convincing tone. But the same people who have been beating the Russia collusion drum for a year now just destroyed a man’s life and reputation with unsubstantiated 40-year-old allegations, and they don’t know what actually happened any more than the rest of us. What happened to the American value of innocent until proven guilty?

With Moore’s defeat, rest assured that the political lynch mob is here to stay. Just create “a lot of smoke,” and you can turn an election.

P.S. I received a couple of interesting emails asking if I supported Moore. He wasn’t the ideal candidate, but you ultimately choose between individuals on the ballot. I’ll trust Alabama on this one. My point was not about Moore per se, but about the willingness of many to jump on the anti-Moore bandwagon without seriously questioning the allegations. It’s not “anti-women” to insist on strong evidence for 40-year-old accusations. We should give respect and full consideration to women who come forward in situations like this, but without abandoning reasonable standards of evidence and judgment, especially regarding serious accusations like sexual assault. I welcome a reckoning for anyone guilty of workplace harassment or physical assault, but let’s avoid the lynch mob.

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