POLITICS
Much has
been said about President Barack Obama’s desire to fundamentally transform
America. For the most part his agenda
has been rooted in his ideology of social justice based on the historical
Marxist redistributionist model that aims to level the economic and social
playing field. And in the process he
hopes to diminish America to just another player on the world stage. But his actions betray another motivation that
capitalizes on his unique presidential power to get as much as possible for the
black underclass and to undermine the white majority. Having been elected and re-elected largely on
the basis of race, given so much support from guilt-ridden whites and a huge
black vote, he may feel he has license to pursue racial preferences in his
policies. While many would not begrudge
him for looking out for his own, this bias should not be at the expense of
American sovereignty, prosperity, culture and hegemony.
This paper examines Obama’s
racialized agenda on three fronts:
redistributing income to blacks; transforming American demographics
through immigration; and undermining national security in refusing to
appropriately prosecute radical Islamic terrorism. My purpose is to expose related truths of his
presidency, some of which are suppressed by the political correctness of
remaining silent.
The signs
Shortly
after the 2008 election I told a losing municipal candidate that Obama’s
upcoming administration will be about “getting whitey”. He quietly agreed. Given the historical significance of that
election, the 95% black vote for Obama, and mass media adulation, I meant the
new president was determined to “get ours” with a racial animus. Perhaps his return of the Churchill bust to
Great Britain immediately upon occupying the Whitehouse was a symbol of that
mindset. To be sure, the left has given
him a green light to get away with whatever he can. Indeed, his disregard throughout his
presidency for the law he is sworn to uphold has demonstrated that propensity to push the envelope.
Dinesh
D’Souza’s 2012 documentary film, “2016: Obama’s America”, portrays Obama as
inimical to American tradition and exceptionalism. He suggests this sentiment is influenced by
his father’s anti-colonialist, anti-West bent reflected in Obama’s book “Dreams
from My Father”, and his own experience raised in a Muslim environment in Indonesia. And no doubt his half-black parentage makes him sympathetic
to redressing past social injustices and the current plight of his people. The
problem is this mindset has undermined what’s best for America regarding
economic and social wellbeing, and has weakened our institutions of justice,
democracy and the rule of law.
President Obama through his imperious
agencies and executive orders has promoted affirmative action, an open southern
border, and wealth redistributionist policies, especially through the
Department of Justice, EEOC, Homeland Security/ICE, HHS, HUD, the CFPB and the
Defense Department. Accordingly, he
embraces the current income inequality mantra of the left that
disproportionately implicates blacks. His
agenda is particularly reflected by unwavering tax and spend proposals, selective
prosecutions, immigration policy, and regulatory injustices in health care, housing,
hiring and lending – all with race in mind.
Accordingly, during Obama’s tenure the government has compiled massive
databases classifying the population by race.
And what is one to make of the
notorious thug, Al Sharpton, getting so much access to the Whitehouse, and
prominently featured at the presidential table no less? Additionally, Obama’s allegiance to
environmental and labor groups has been aimed in part at garnering campaign
support for himself and Democrats to foster the implementation of his racial
agenda. In fact, paradoxically, he is so
beholden to the teacher unions he opposes charter schools despite their overwhelmingly
support in black communities.
Obama’s
virtual suspension of border enforcement and his promotion of amnesty for illegal
immigrants are aimed at ultimately entrenching the leftist agenda through new Democratic
voting. But he also wants to diminish
the white race through the browning of America.
In the traditional sense, President Obama seems downright anti-American.
And
consider his Muslim-sympathizing posture, starting with the bevy of Muslim advisors the president employs and receives at the Whitehouse.
Perhaps relatedly, he plans to resettle 10,000, and possibly in time up to
200,000, Syrian refugees to the U.S. in the wake of the latest ISIS attack in
Paris which involved at least one known Syrian assailant. This, despite opposition from more than 30
governors and over half the American people polled, and notwithstanding
the FBI and CIA Directors conceding the lack of resources to vet them. What’s more, surveys indicate that some 15%
of Syrian refugees sympathize with ISIS.
Fortunately, the House garnered a veto-proof majority in support of a
bill to defer any refugee admissions until a vetting process is
established. But Obama still dismisses
opponents to this proposal as racists. And
according to Governor Chris Christie on Fox News, Obama already has placed a
number of Syrians throughout the U.S. through non-governmental organizations
(NGOs), such as Catholic Charities, without even informing the governors. For Obama, accommodation to Muslims overrides
the safety of Americans. Would he feel
the same about, say, Scandinavian refugees infiltrated by white terrorists?
Obama refuses to acknowledge the
term radical Islamic terrorism, referring to the mass murder at Fort Hood by an
Islamic officer an act of workplace violence. He has imposed political correctness on the
military purging manuals and documents of all references to Islamic terrorism. And, he has hampered military operations in
Iraq and Afghanistan subjecting personnel to prosecution for perceived
violations of mandated restraint in the rules of engagement. Reportedly, the president has refrained from
attacking ISIS oil sites out of concern for damaging the environment, and has withheld
fire to promote the narrative that Al Quaeda is on the run. Some 80% of U.S. sorties return without releasing their ordnance because targets cannot be identified in the absence of necessary ground troop guidance which Obama does not authorize.
The president insists on treating Islamic detainees as
criminals for prosecution in the courts rather than as enemy combatants subject
to military law. Accordingly, he has
been hellbent on closing the detention center for Islamic captives in Guantanamo
Bay. Currently he plans to send the
captives to facilities in the U.S. in direct contravention of a Congressional
ban, flouting the law once again. And
his occasional utterances in Arabic are off-putting. President Barak Hussein Obama is a Muslim
sympathizer, if not a Muslim himself. It
is said he is loath to appear waging war on all Muslims. Indeed, he is reluctant to combat any Muslim.
All four
Governors of the Federal Reserve Bank are now Obama appointees. Notwithstanding the Fed’s supposed
independence, is it a coincidence that interest rates have been kept at
near-record lows for so long considering they accommodate government borrowing
that finances much of the spending in Obama’s racial agenda? Just sayin’.
Fiscal policy
Obama has
steadfastly refused to cut non-defense spending and has insisted on continually
shifting the tax burden to the rich while exempting almost half the population
from federal income tax. This is the
ultimate Robin Hood redistributionist scheme that largely benefits the black
underclass, which, by affecting many whites as well, buys broad political
support. To Obama and his ilk, bigger
government is the solution to the plight of the poor.
Taxpayer-funded health care
subsidies and Medicaid expansion under the Affordable Care Act, as well as
myriad social programs, weigh on federal and state budgets. The government has fraudulently siphoned
funds to ACORN and its successor organizations much of which finances leftist
political activity aimed at promoting wealth redistribution to blacks. Obama’s tripling of food stamp spending
during his tenure, his expansion of welfare eligibility and discontinuation of
work for welfare, as wellas his expansion and abuse of the free cell phone program
for the low income population, all accrue disproportionately to blacks. Indeed, given government accommodations, one
might say the race glass is half full in need of behavioral change and personal
responsibility to fill the void, rather than half empty requiring more
government help as the left always claims.
One might ask, “What’s wrong with
some life enhancements for this segment of humanity? The problem is that it is a slippery slope
that could turn into a runaway train that is difficult to rein in politically,
all the while encouraging permanent dependence. And many amenities to the poor are granted surreptitiously
where government is fooling productive Americans. As a consequence, America’s underclass with
its government largesse lives better than the general population of many
nations while the costs become imbedded in the budget baseline probably forever
given the difficulty achieving entitlement spending cuts. Why doesn’t Obama promote the qualities
needed to earn one’s way to a better life?
Rather, he fosters the tyranny of low expectations and the perpetuation
of the welfare state at the expense of the national interest. Income redistribution is so much easier for a
president. And Obama is cashing in for
his people, ultimately to their detriment.
Law enforcement
The Justice
Department under Attorney General Eric Holder, a black man who displays a
similar racial chip on his shoulder as the president, advanced the notion of
disparate impact as a basis for establishing discrimination in hiring, lending
and housing. There is no sign that this
zeal is abating under his successor, Loretta Lynch, a black woman. Disparate impact holds that a statistical
outcome which is at variance with overall black representation in an area
constitutes de facto discrimination regardless of any evidence of intent to
discriminate. Outrageously, in June 2015
the Supreme Court upheld the theory with regard to the Fair Housing Act of
1968. However, some other applications
have been struck down in lower courts. On
the basis of disparate impact determinations, the Obama administration is
scheming to force developers to build heavily subsidized housing in upscale neighborhoods for
blacks and other low income populations who are greatly underrepresented. In addition, the Consumer Finance Protection
Bureau (CFPB) created under the Dodd-Frank Act applies flimsy disparate impact evidence
to construe racial discrimination in auto lending.
The president undermines the
separation of powers through executive order, as well as highly expansive
interpretations of legislation in the executive rulemaking process enforced by his
agencies in implementing laws passed by Congress. Recognizing that Congressional political will
and the capacity of the courts to challenge the president are limited, Obama
takes a “sue me” approach to policy, audaciously pushing the envelope.
The
President and Eric Holder inserted themselves in high profile racial events
second-guessing local law enforcement, including incidents involving Trayvon
Martin in Sanford, Fl., Michael Brown in Ferguson, Mo., Freddie Martin in
Baltimore, Md. and a black Harvard professor in Cambridge, Ma., all helping to
spawn the dubious “Black Lives Matter” movement. The catalyst is always a white on black event
while nothing is said about the rampant black on black crime that devastates so
many black communities. The Justice
Department has forced changes in the Ferguson, Mo. police force, despite
ultimately acknowledging the innocence of police officer Darryl Wilson who had
to resign. In addition, federal monitors
have been placed in many cities.
Many believe this kind of intervention
and publicity are a prelude to the federal takeover of local police. Already a reluctance to use appropriate police
aggression undermines public safety and the quality of life. Ignored is the highly disproportionate crime
committed by blacks that inevitably results in incommensurate conflict with the
police. Indeed, the president through
his pronouncements has lent credence to the Black Lives Matter movement which disingenuously
claims such encounters are predicated on gratuitous police malice toward
blacks. Black grievance purported by the
group is now encroaching acquiescent academia amid support from many naïve
white students and cowardly college administrators.
The Justice
Department has diverted sizable portions of the post-financial crisis
multibillion-dollar settlements with major banks to the aforementioned corrupt successor
organizations of ACORN that serve black communities. According to The Wall Street Journal, Justice
directs settlement funds to such Obama political allies as The National Council
of La Raza, The National Urban League, The National Community Reinvestment
Coalition and NeighborWorks undermining constitutional Congressional
authority over spending. In 2009, the
Justice Department dropped prosecution started in the Bush administration of a New
Black Panther who terrorized voters outside a polling place in Philadelphia
during the 2008 election. And Obama’s
attorneys general steadfastly exempt sanctuary cities from immigration law
despite numerous horrific acts of violence by illegal aliens, and in the face
of national security implications amid heightened terrorist threats.
Obama’s apparent sympathy for Muslims
comes through in the failure of his compliant Justice Department to vigorously
prosecute alleged terrorists despite abundant evidence of wrongdoing. (Of course, properly treating them as war
combatants is off the table for Obama.) As mentioned, he refuses to link radical Islam
with terrorism, and restricts interrogation techniques. Rather, the president released five very high
ranking Muslim detainees for what now appears to have been a known deserter,
while celebrating the event on the front lawn of the Whitehouse featuring the
deserter’s white father speaking Arabic.
What an insult to the American people, not to mention those who fought
and died in Iraq and Afghanistan.
Earlier
this year, Christian Adams, a former federal attorney in Eric Holder’s Justice
Department, said on Fox News that Holder is “obsessed with race”. He also asserted much of the staff at the
agency now is grossly incompetent. Might
that be because of aggressive affirmative action hiring that substitutes race
for professional qualifications?
In a speech delivered on a
Hillsdale College cruise in July, Michael B. Mukasey, former U.S. Attorney
General under President George W. Bush, said support for left-leaning
activities has become a hiring criterion in the Department of Justice. And he said public display of that sentiment
in and out of the office in the form of posters has become common.
Affirmative action
We may never know how many
affirmative action hires fill the ranks of the Obama administration who, never
to be fired, will imbed Obama’s racial mindset in government for years to come.
And racial interference extends beyond
government to the corporate subjects of regulators who are compelled to
cooperate or suffer reprisals. A
president is entitled to appoint whom he wants.
But one wonders whether Obama is relying on gratuitous black
appointments at the expense of effectiveness and security just for the sake of raising
the black profile in government. And to
be sure, such a practice helps to advance the general black agenda as well. Consider Susan Rice as National Security
Advisor. She’s been seemingly invisible
as the nation’s security is threatened by terrorists like never before. Many more effective whites are probably available
for the job. But then again, Obama is
not really interested in fighting Muslims.
A personal anecdote illustrates the
tactics employed to promote affirmative action at General Motors when it was
controlled by the U.S. government following its bailout. The rescue was prompted by a fateful business
decline exacerbated by the deep economic recession following the 2008 financial
crisis. In the circumstance, GM became
something of a ward of the state subject to the machinations of government
bureaucrats.
In March,
2010 I interviewed for a financial executive position with GM at its New York
office. Initially, I, a white man, met
with a most unfriendly HR manager, a black woman. Without any introduction she asked to take a
copy of my driver’s license which she said was necessary because the position
was assigned a company car. This seemed
most bizarre before I even sat for a single interview. Nonetheless, after meeting with several
executives I felt pretty good about my prospects. Two weeks later I received a call from an HR
representative in Detroit to return for a second series of interviews in New
York. Upon arriving I waited about an
hour without any guidance as the New York HR woman I met previously was absent
that day and apparently told no one about my appointment. Finally, when the executives I was scheduled
to meet appeared they seemed quite flummoxed about my being there. One asked me who arranged the
appointment. He did not seem to recognize
the name of the HR person in Detroit who called me.
Nevertheless, the interviews proceeded.
In the end I was never more confident of an imminent offer, especially
since I was already told of a trip to review operations in Brazil upon coming
aboard. (One should not count chickens
before hatched but this case seemed a slam dunk never before experienced in countless job interviews throughout my near 40-year career.)
But the
absence of any further contact reinforced my suspicions about the strange series
of events – the steely demeanor of the HR manager, her preoccupation with my
driver’s license, and the lack of her coordination with the interviewing
executives. Here’s the theory I surmised
at the time. The federal government
through the EEOC was coercing affirmative action in GM hiring and was the HR
manager’s first allegiance. She could
not have cared less about the hiring executives because she was taking orders
from the EEOC. (Perhaps she was even an EEOC employee.) Her job was to systematically monitor the
race of applicants to assert discrimination and thus ensure a plentiful crop of
black hires. The drivers’ license with a
photo affixed was used to document the race of applicants and establish
patterns of racial bias. It would appear
the New York HR manager interfered with my candidacy sometime after the Detroit
HR manager scheduled my second series of interviews, thus accounting for the executives’
confusion when I arrived.
Lo and
behold, four years later my suspicions were affirmed in an editorial in The
Wall Street Journal, April 17, 2014. It
was entitled “Opinion of the Year” with a call out “You won’t believe how the
EEOC tried to prove racial bias.” The
article cited a federal court’s decision and outright rebuke against the EEOC
in its disparate impact case against a company for discriminatory credit and
criminal background checks based on a review of drivers’ licenses. According to The Wall Street Journal:
… the EEOC had… assembled a team of five
“race raters” to look at the drivers’ licenses of a sample
of applicants and then classify them by race. If four of the five agreed on the race of the individual, the applicant was
classified by that race.
Indeed, the
GM HR manager was only concerned with enforcing the EEOC’s racial agenda by
contriving evidence of discrimination. It
would seem having formally established my white race in the rating process, the
HR manager eliminated me from further consideration, perhaps by telling the
executives I withdrew my candidacy.
As mentioned, the Consumer Finance
Protection Bureau (CFPB) tried a similar tactic to demonstrate discrimination
in auto loan interest rates. The agency
claimed outrageously that any borrower with a black sounding name, such as
Johnson or Washington, who pays a higher than normal rate is a victim of
de facto discrimination. Happily the House voted
overwhelmingly against the CFPB’s attempt to prevent dealers from negotiating
interest rates so that minorities would not be disadvantaged by typically lower
credit scores. It is hoped the Senate
will follow through on this issue. Yes,
the Obama administration is obsessed with race.
Immigration
Especially
disgraceful has been President Obama’s abdication of his responsibility to enforce
immigration law. In the spirit of the fourteen-year
old Dream Act proposal, he bypassed Congress in 2014 to grant by executive
order temporary legal living status along with social security numbers for 5
million illegal immigrants. This adds
insult to injury sustained from another unilateral action the president took in
2013 that grants amnesty to illegals who arrived before the age of 16, subject
to certain conditions. Fortunately, the
2014 injustice has been overruled in the courts. The Justice Department has appealed and the case likely
will be heard by the Supreme Court. In
the meantime, criminal deportations have declined as Obama continues to order
border patrol agents to practically stand down, as well as allow sanctuary
cities to break the law with impunity.
Also reprehensible is the president’s
inaction since 2014 with respect to the tens of thousands of children crossing
the southern border from Central America at the risk of rape and murder. Rather, Obama quietly resettles them in
communities throughout the country at great distress to locals. Some believe Obama orchestrated this
migration knowing that legal recourse is impracticable given required court
hearings for all, most of whom fail to appear.
Separately, Obama’s position on admitting unvetted Syrian refugees into
the U.S. is just the latest indication of his obsession with diversity, even at
the expense of national security. Obama disdains
the racial status quo of America.
As
mentioned, the purpose of Obama’s immigration policy is to establish a legacy
that sets the stage for an eventual windfall of new Democratic voters
predisposed to big government and its largesse.
And the subsequent chain migration of relatives that follows reinforces
that prospect. He knows an ongoing
liberal agenda will sustain minorities as the traditional meritocracy never
will. But a corollary to this
demographic transformation through immigration is to facilitate rendering the
white population to minority status. Obama harbors a certain scorn for whites predicated
on bias experienced growing up, and possibly on his mixed race. This attitude is reflected even in a certain
hostility for his white racist (his term) grandmother who raised him. (However,
Obama also has expressed appreciation for her intervention.) Some resentment might be generally understandable
but is problematic for a President seeking payback. The opportunity to turn the tables as
President of the United States has grave implications.
Health care
The
principal impetus behind Obama’s Affordable Care Act was to provide health care
to the uninsured, a disproportionate percentage of which comprise the black
underclass. In typical redistributionist
fashion his program taxes the haves to
fund premium subsidies for the have nots.
In the process, taxpayers fund a massive expansion of Medicaid, $750
billion of which is transferred from Medicare, while the non-subsidized pay
much higher premiums and deductibles than before.
Taxpayers also finance bailouts of insurers to cover losses resulting
from expensive mandated coverages, too many unhealthy insureds, and too few
healthy policyholders. In fact,
government sponsored insurance cooperatives are falling like dominos, and the
largest insurer, UnitedHealthcare, is considering opting out of the Obamacare
exchanges. Many believe insurer failures
are by design in the grand plan for a single-payer system. After all, government control of health care,
some one-sixth of the economy, establishes a great opportunity to expand the
liberal agenda which accrues primarily to minorities. As such, premiums are means tested and the Affordable
Care Act is replete with affirmative action provisions that apply throughout
the health care system.
As insurers fail and enrollment
falters, premiums, deductibles and copayments are rising while doctor and
hospital networks narrow. As a
consequence, even the needy targeted by Obama are not really insured since
out-of-pocket expenditures are so high.
And catastrophic coverage for major illness may not exist because of
network restrictions. For example,
unless the hospital and all the attending physicians, including myriad specialists,
are members of a plan’s network, a patient can be exposed to a huge bill that
bypasses the out-of-pocket policy limit unbeknownst to policyholders. This was not the case before Obamacare. Because many reject coverage and pay a
penalty due to the costs and restrictions, the number of uninsured is still what
it was before the Affordable Care Act. Ironically,
many of those who opt out despite premium subsidies are the low income people for
whom Obamacare was established. But not
to worry. Obama gets credit for the
illusion that blacks are better off.
While
rising health care costs were a problem before Obamacare, conservatives have
proposed many alternative plans based on market competition that drive costs
down and provide desirable affordable coverage for everyone. Among their remedies are tax advantaged
health savings accounts, interstate policy sales, and the option to purchase
cheaper catastrophic insurance. But free
market consumer choice is antithetical to the government health care model,
which is another tool for restricting individual freedom and redistributing
income in order to empower Washington under the guise of helping the
downtrodden. Obama will not forsake
redistributionist policies, even for failed programs, because they ensure a
government role and are as a whole indispensable for sustaining the black
community. To concede the failure of one
government program undermines the entire egalitarian mission of the left.
Affordable housing
Federal
affordable housing policy was the seminal cause of the 2008 financial crisis
because government mandated banks, as well as Fannie Mae and Freddie Mac, to
relax mortgage underwriting standards to increase home ownership among minorities. Nevertheless, accommodations to low income
borrowers continue apace in Obama’s messianic zeal to transfer wealth to
minorities through credit subsidies.
This results in higher interest rates for other borrowers to cover the
greater credit risk, as well as potential taxpayer losses from Fannie and Freddie
loan guarantees.
In the aftermath of the crisis
President Obama and Congress considered diminishing or dissolving the two home
finance government sponsored entities in recognition that government’s role in
housing was excessive. Nevertheless, the
Federal Housing Finance Agency (FHFA), the conservator of Fannie and Freddie
since the crisis, continues to lower lending standards for the mortgages they
purchase from banks. Obama’s 2013
appointment of Melvin Watt to head the agency was telling considering he is a
black man with no mortgage experience. Not surprisingly, on his watch Fannie and
Freddie have relaxed underwriting criteria and down payment requirements for mortgages
they purchase. What’s more, the Federal
Housing Authority (FHA) has lowered the fee it charges lower income borrowers
to insure their mortgages. Recently, Obama
changed his inclination to unwind Fannie and Freddie to supporting continuation
of the agencies and their historical mission, which is largely aimed at
minorities.
As
mentioned, President Obama is trying to impose affordable housing in affluent
communities on the basis of bogus disparate impact criteria advanced by the
Justice Department. If past is prologue,
white flight would ensue in the wake of plummeting property values and quality
of life, leaving the lavish spoils to the new minority occupants. Yet another way of redistributing wealth, and
destroying neighborhoods he disdains.
Student loans
While the federal
student loan program benefits all races, the virtually unrestricted lending
criteria and Obama’s increasing repayment concessions disproportionately
benefit minorities who can least afford college. As such, he would like to go further and accommodate
the growing cry for blanket loan forgiveness and free college as a new
entitlement. In fact, the federal
takeover of college loans, codified in the Obamacare legislation, and the
growing impairment of the portfolio may be a prelude to that eventuality. Again, the resulting government augmentation
reinforces and perpetuates the redistributionist model that redounds largely to
blacks. It also compounds the intrusive national
debt. One wonders if the president will try to
saddle the taxpayer with forgiven student debt in a last gesture before leaving
office.
Voter fraud
A most
transparent campaign to entrench Democrats in government and thereby color
America to Obama’s delight, is the left’s acquiescence to illegal voting by
minorities with full support from Obama. This is apparent in the ardent opposition to
voter ID laws which liberals falsely claim are aimed at suppressing the
minority vote. In fact, the left refuses
to even acknowledge that significant voting violations by minorities occur. (Obama and the left should read John Fund’s
two books about existential voter fraud.)
The left even supports proactive herding of illegals to the polling
places by corrupt community organizing groups funded by federal monies. As mentioned, Eric Holder dropping the New
Black Panther voter intimidation case in Philadelphia is testament to the lawlessness
in voting.
In 2014 the
Supreme Court, in a case brought by the state of Alabama, ruled against a
provision of the 1965 Voting Rights Act requiring certain southern states with
a history of abuse to seek federal approval to make voting procedural changes. Obama and the left opposed this change even
though such voting abuses have been absent for many years. This is supported by the record numbers of
minorities elected to state and local office in the South, and by the fact that
a greater percentage of blacks in Alabama have been registered to vote than
whites according to The Wall Street Journal.
Anything to perpetuate the specter of racial discrimination.
Prison release
Another
racial accommodation is President Obama’s release of criminal illegal aliens
and so-called “non-violent” offenders from federal prisons, which, needless to
say, affect minorities disproportionately.
Obama purportedly released many violent illegals because of space
constraints, a good number of whom offended again. In addition, some 6,000 drug offenders, and
many more to come, were granted early release to align sentences with the
severity of the crimes committed. This
concession applies to many drug dealers who did not engage in violent acts,
such as murder or assault, or consort with gangs.
And Obama
has instructed his agencies to discontinue asking about a criminal record on
employment applications. The so-called
“ban the box” initiative prevents employers from initially asking applicants
about felonies in the interest of accommodating former inmates in their transition
to normal life.
To be fair, making punishment fit
the crime and allowing for possible personal redemption are compelling
considerations for preventing incarceration from destroying a life. But the historical propensity for criminal
activity among blacks is a major reason many non-blacks are wary of them. Suppressing a criminal record would eliminate
a means of distinguishing the good from the bad. As a consequence, this policy could result in more discrimination in
hiring and housing to avoid the chance of liability or peril from criminal acts.
Conclusion
Many black
public figures evidence racial animus – Eric Holder, Jesse Jackson, Al
Sharpton, etc. But as president, it’s a
problem. Because he represents all
America, he should not predicate his leadership on redressing the perceived
grievances of small minorities and diminishing the influence of the white
majority. But Obama’s policies promoting
wealth redistribution and illegal immigration while dismissing the threat of
radical Islamics do just that. Dr. Ben
Carson, Herman Cain and other black conservatives have shown no sign of that
preoccupation while acknowledging past injustices. Rather, they embrace universal American
interests recognizing racial relations have improved enormously such that
opportunities are relatively rife.
Fretting about the distant past is unproductive.
Obama and the liberals sympathize
with black grievances that flow from the legacy of slavery, lynching and
societal discrimination imbedded in the black psyche. As such, they dwell on ongoing government
recompense for that experience that brings adverse economic and social
consequences. Conservatives focus on the self-inflicted causes of the black
plight including family breakdown, crime, and the failure to appreciate the
value of education. They highlight 50
years of failed government remedies and excuses for continued hardship. The president joins the media and the left turning
a blind eye to the realpolitik of the black malaise while using the unique
powers of his office to compensate his people at the expense of the commonweal. He should use the bully pulpit
to inspire the black community to adopt the values that optimize success, as
reflected in some of his own achievements.
Rather than acknowledge the failings of the black community, the left
blames “white privilege” which supposedly bestows automatic societal advantage –
yeah, but a benefit that is earned
either directly or by dint of meritorious ancestry. Blacks should strive for the same.
But Obama doesn’t care about the real solution. He’s more interested in presiding over giveaways and payback while also bringing America down in the global context. His tactics for transforming America and establishing that legacy will only become more aggressive as the end of his term approaches. And much he puts in place is inextricable. God help us.
©2015 William J. Dodwell
Donald Trump: Change Agent or Buffoon?
By William J. Dodwell April 25, 2016
Donald Trump’s heretofore successful candidacy for president reveals new forces at play among the electorate disaffected by the Washington establishment and a feckless and diffident Republican Party. His supporters are understandably sick of political correctness and the duplicitousness of Republicans in Congress as they cave to the Democrats, despite past promises and healthy legislative majorities. Notwithstanding Trump’s many flaws, he has truly struck a nerve in American politics as a genuine outsider committed to breaking the mold.
This iconoclast has produced the “Trump phenomenon” that is the unique political dynamic that constitutes his persona vis a vis the voters, media, Republican establishment, nomination process, and his rival candidates in an unprecedented political ascendancy. Herewith, an analysis.
Trump’s appeal
More than anything else, Trump’s overt rejection of political correctness has put him on the political map. That is to be applauded. His straight talk about immigration, mass deportation and the building of a wall on the southern border has accorded with pent up frustration on both sides of the aisle. His focus on the atrocities of illegal aliens perpetrated against the citizenry, and on the burden they create for American workers they displace, has triggered a spark. Other issues striking a chord are his call for a return to American hegemony on the world stage, serious help for veterans, restrictions on Muslim entrants, a true commitment to destroying ISIS, and a return of jobs moved overseas. In addition, his proclaimed self-funding and the independence it buys from special interests is an important drawing card. (He has not ruled out fundraising in the general election.)
Despite Trump’s mega-wealth, he identifies with the working class. He grew up well off in Queens, New York City, not among the Manhattan elites, who to this day do not accept him entirely. He started working with his father building low and middle income housing in Brooklyn and Queens. But Trump’s ambition and courage brought him to the big time in Manhattan. As a consequence, he built a multibillion-dollar real estate portfolio that includes several properties that helped to revitalize sections of New York City, especially when it was in serious decay in the 1970s.
Trump’s populist appeal has roused many blue collar democrats, independents and lapsed voters, as evidenced by the huge crowds he attracts at his rallies and by the record turnouts at primaries and caucuses. Indeed, his supporters include legions of low information voters who ironically plagued the Republican campaign in 2012 from the left. His support rests on principles of sovereignty, a strong defense, fiscal soundness and economic prosperity devoid of philosophical trappings in a sometimes fanciful delivery of style over substance. Widespread public anger over President Obama’s lies and executive overreach, geopolitical weakness and political correctness gone amuck drives Trump’s popularity. And no doubt, his business success and fighting spirit inspire confidence in his ability to be president. At the same time, the propagandist left and its dupes portray Trump as a racist, xenophobe and fascist.
Trump’s outsider candidacy evokes another billionaire businessman renegade in Ross Perot who ran in 1992 as an independent against George H.W. Bush and Bill Clinton, often leading in the polls. His promise “to get under the hood” to fix America’s problems rang true to a country beset by immediate economic weakness. Like Trump, he warned about trade policy, but lost a televised debate with Al Gore about the North America Free Trade Agreement (NAFTA) on Larry King’s program. Although Perot garnered 19% of the popular vote in the general election, he scored no electoral votes. Nevertheless, he denied Bush a second term in the process. Would the electorate support the Trump aberration in the general, or deliver a reprise of Perot’s fate amid a wave of second thoughts? Voters can be fickle.
Media accommodation
Unlike any candidate in political history, Trump has attracted enormous free media coverage because of the political tsunami he has created. One reason for the largesse is the outsize ratings he generates for television and radio which supersede their aversion for Trump’s conservative and politically incorrect positions. If not for his massive popularity, Trump would not be covered as he has been, particularly for his views on immigration. Indeed, hosts are desperate to interview him for personal and network ratings.
That motivation engenders a certain media pandering to Trump. But other considerations preclude reproach as well. Some suppress their criticism out of fear of inciting his wrath in the form of public verbal trashing. Others fear lawsuits from the litigious candidate who unsuccessfully sued an author for defamation in response to a challenge to his billionaire status. And no doubt many curry favor with him in the hope of continued donations and business contracts, as well as cabinet posts and sinecures in a Trump administration. Other media commentators have longstanding friendships which no doubt temper their fire. Fox’s Jean Pirro, as she discloses, has been Trump’s friend for decades and received his donations during five runs for office. As such, she would never give him the third degree. His long relationships with Fox’s Sean Hannity and Greta Van Susteren also protect him from rebuke.
Peter Johnson, a Fox legal analyst (and Democrat), said on the air, “Trump is the smartest person I know.” Really? I sensed at the time he was pandering because he or his law firm does business with the Trump organization. Sure enough some time later he acknowledged that, not to be repeated again by my observation. Then amazingly, during an apparent lull in their relationship regarding interview access, Bill O’Reilly of Fox, who amicably has pressed Trump in his interviews, also said recently, “He is the smartest person I know.” Really? More than Charles Krauthammer or his other colleagues at Fox? What is the evidence of Trump’s superior intelligence? It certainly is not displayed in his policy explications. And he’s no strategic genius as his campaign has been criticized for a weak ground game. In fact, his failure to compete in Colorado out of an ignorance of the delegate game there earned Cruz 40 delegates while he was shut out. Perhaps his business savvy has earned him the intellectual praise.
Many on the right suspect the media promote Trump because he is Hillary Clinton’s easiest opponent in the general election. As such, liberal media would love to see Trump win the Republican nomination. If Clinton wins against a weak Trump, the media will have enjoyed both a political and economic victory.
Trump’s personal shortcomings
To be sure, Trump does not embody the typical presidential profile. He is vulgar, inarticulate and uninformed. Mentally and emotionally unstable, immature and thin-skinned, he lacks the conventional qualities of a president. He repeats the same mantras: Make America great again (his theme); Romney choked; China eats our lunch; we never win anymore; I built a great company. He can’t expound on any issue as he constantly repeats himself and digresses into subreferences and non sequiturs. Indeed, his bravado which attracts so many supporters also alienates others as evidenced by his more than 60% unfavorable rating, including some 78% among women.
Trump brags about his wealth which is an integral part of his brand. He cites his net worth as $10 billion but people in the know recognize that is grossly inflated. Forbes Magazine in its 2016 annual list of the world’s billionaires reports his wealth at $4.5 billion based on the work of a special analyst assigned this particular billionaire. Trump’s figure does not accord with generally accepted accounting principles (GAAP) that auditors attest to for public corporations as required by the SEC. Rather, he values properties at the present discounted value of future revenue streams that are exaggerated estimates and sheer guesses. However, his portfolio carries relatively little debt having discharged much of it through four bankruptcies some years ago.
And then there is his behavior. Testament to his immaturity are: his facetious comment about Carly Fiorina’s face (who ironically is an attractive woman); his outrageous dismissal of John McCain’s heroism because he was captured (subsequently retracted); his mockery of a disabled reporter; and his childish name calling directed at his rivals as in “little Marco” and “lyin’ Ted”. Trump says he will become presidential if elected. He also has suggested a reluctant “pivot” to normal demeanor in the general election.
Trump always judges people in terms of how “nice” they are (to him) rather than on the basis of substance, a sign of his fragile ego. For example, he seems naively flattered by Putin’s complimentary remarks about him, which, of course, are really aimed at buttering him up in case he is elected president. Actually, that mutual admiration society started with Trump’s expressed conciliatory posture toward Putin. In one of the debates Trump bragged about a friendly live exchange with Putin in the “green room” of “60 Minutes” in September 2015 before their segments aired. But the truth was exposed later that Putin appeared via satellite separately and continents apart. This fib compares with Hillary Clinton’s prevarication about taking gunfire on the tarmac in Bosnia in the 1990s. Too bad. Now Trump may lose some good ammunition he could use against her in the general election if he is nominated.
Trump is largely ignorant about the issues and has no desire to change. This is particularly odd as to economics which has been touted his strong suit given his Wharton background and successful business career. (He attended the Wharton School of Finance as an undergraduate, not the more prestigious graduate school which has the global reputation he boasts about.) In his comments about trade he seems to have confused the trade deficit with the budget deficit and national debt. He decries the growing $19 trillion debt but opposes any cut to entitlements which constitute more than 70% of government spending. Similarly, he supports former Republican Senator Connie Mack’s “Penny Plan” which calls for cutting 1% of spending across the board annually, but he would not touch entitlements.
Trump was rebuked for his apparent ignorance about the nuclear triad (the nuclear delivery capability from the ground, sea and air.) when questioned in the fifth debate. He also suggested China is a participant in the Trans Pacific Partnership (TPP) talks during a tirade against that country until Rand Paul corrected him.
Trump thinks he can substitute his negotiation skills developed from his many real estate deals for knowledge and judgment about complex issues. That and his general hoopla might sell in the primaries but he would have to face realpolitik in the general election and convince a much larger and more serious electorate. As odious as she is, Hillary Clinton would clobber him in the debates. But maybe this cycle audaciousness trumps substance.
Trump would not be where he is today but for a uniquely exasperated electorate that is willing to overlook his many foibles. One suspects he never expected to last this long, perhaps explaining why he has not assembled a conventional campaign apparatus. (That is currently changing.) He is reminiscent of former professional wrestler, Jesse Ventura, who ran for governor of Minnesota in 1998 on a lark. He wound up winning the race but declined to seek re-election. Some have questioned if Trump’s heart is really in the race or whether is he is just stoking his ego? At this stage he has to be committed.
Nonetheless, Trump looked very much in his element when he spoke at the New York State Republican Party dinner prior to the primary at the hotel he rebuilt from ashes in his late twenties. He related interesting anecdotes about his New York real estate projects that revealed a special talent. At that location he had come full circle from starting his Manhattan career to addressing the state’s Republican leaders as the subsequent winner of the primary in a blowout, and the almost continuous front runner in the Republican campaign.
Trump’s policy problems
Several of Trump’s policy positions have given him trouble in the media. To wit: Deportation of some 11 million illegal immigrants; building a wall on the southern border and making Mexico pay for it; delay in denouncing David Duke; neutrality about the Israel/Palestine conflict (later recanted); a moratorium on U.S. entry for all Muslims; punishment for women who have abortions (later recanted); a reevaluation of NATO; and making other nations pay more for our involvement in their defense. He even suggested they develop their own nuclear weapons. Some other utterances in his past have alienated the conservative base. But so far, Trump’s Teflon quality has endured.
Taxes
Trump’s tax plan proposes marginal rate cuts for individuals and businesses, and lower corporate and capital gains rates. In addition, he calls for a special low rate on the repatriation of overseas profits to unleash some $2 trillion of overseas profits onto the U.S. economy (if not invested in acquisitions and stock buybacks). Critics say this plan will blow up the deficit and debt. However, Larry Kudlow, conservative economist at CNBC, praises Trump’s plan as pro-growth.
Immigration
Trump’s position on illegal immigration launched his candidacy. He put the issue back in play just when the Republican Party was ready to make serious concessions in its platform to shore up the Hispanic vote for the election. Trump turned the argument completely around in blunt terms that no one had the courage to say. For that he won the support of millions of angry voters. Bravo! In particular, he cited the fact of many Mexican rapists and murderers among those crossing the border. Naturally, his critics misrepresent his statement demagogically claiming he referred to all Mexicans in an effort to brand him a racist. Of course, truth does not mean much to the left. And, unfortunately, many gullible Americans accept its lies and propaganda. The nation is under siege by immigrants and terrorists and many citizens do not report transgressions or suspect behavior by foreigners out of fear of invoking the demons of political incorrectness. The de facto prohibition on impolitic speech is indeed a scourge.
Trump wants to end sanctuary cities, those liberal bastions that refuse to enforce federal immigration law resulting in safe harbor for countless repetitive offenders, many who have murdered, raped, kidnapped and assaulted innocent Americans. His solution is to withhold federal funding from offending municipalities, and possibly prosecute law-breaking officials. He calls for building a secure wall that will virtually eliminate the inflow of illegals, and claims he will make Mexico pay for it in the form of a tariff on their exports to the U.S. Most controversially, he advocates deporting all 11 million or so illegals already living here while bringing back the good ones in accordance with the law. As desirable as mass deportation is to perhaps most Americans, the Congress and the courts will obviate such an accomplishment, especially as entire industries and their markets that depend on illegals complain en masse: hotels, restaurants, construction, landscapers, agriculture, etc. But by simply stating his deportation policy repeatedly in populist riffs grows support for Trump’s candidacy.
Trump’s immigration stance also will help to ensure that potential Muslim subversives are fully vetted, to include Syrian refugees among them. Accordingly, he proposes a moratorium on all Muslim entrants, and supports the inspection of mosques in the U.S. Again, Congress and the courts may prevent the moratorium but just airing the sentiment widely and often reinforces his backing.
Speaker Paul Ryan and others have denounced these measures saying, “It’s not who we are.” A President Trump would presumably reject that silly cliche and do what is right to protect the nation’s security and sovereignty. But protecting the quality of life diminished by culture clash is another consideration in immigration policy that no politician has the courage to invoke.
Trade
Trump is particularly strident about trade and U.S. companies outsourcing operations overseas. He says he will negotiate better trade deals and assign corporate takeover artist, Carl Icahn, and other proven business acquaintances to the task. He opposes the proposed Trans Pacific Partnership (TPP) deal with 12 Pacific Rim countries because of too many concessions that hurt American workers. He will tax imports from U.S. companies that move out of the U.S., such as Nabisco and Carrier, and will impose tariffs on currency manipulators, notably China.
Trump frequently cites the unfairness of currency devaluation but fails to offer a brief explanation of why that might be, as necessary for general audiences to understand and appreciate. A devalued currency makes exports cheaper and therefore more competitive in world markets. That translates into lower prices for American consumers as domestic producers mark down goods to compete with imports. That discounting can squeeze profits to the point that companies have to lay off employees or even go out of business.
Trump speaks only about the effects of devaluation on workers and never mentions the benefits to a much larger population of consumers in the form of lower prices, better selection and improved products forced by competition. His protectionist posture regarding imports invokes the specter of the Smoot-Hawley Tariff Act that sparked the Great Depression because it prompted retaliatory tariffs by trade partners.
Trump denounces companies for moving operations to other countries but never acknowledges the taxes, regulation and labor costs (especially of union employees) that compel the move to remain competitive. Moreover, small businesses have to shut down altogether under the burden. He decries the effect of devaluation on jobs but does not mention the benefit to consumers. Could Trump be in Big Labor’s pocket?
Big Labor
Trump never criticizes the excessive salaries, benefits, pensions and work rules unions impose on companies. That is because his business interests have relied heavily on organized labor and will in the future when his children take over (with the help of current executives). He does not want retaliation against his current projects. He cites the importance of education but never faults the teachers’ unions for the poor quality of public schools. In fact, an important reason companies hire so many foreign workers (besides lower wages) is because not enough Americans are sufficiently skilled and educated to produce effective and competitive product anymore. This not only applies to technology. Consider all the foreign bylines in the press, such as The Wall Street Journal. Apparently, there is a dearth of sufficiently literate Americans.
As president, Trump would support pro labor issues and appoint union advocates on the National Labor Relations Board (NLRB) who would establish costly precedents for business, as well as state and local governments. Very disturbing is a news clip in which he is seen walking with Richard Trumka, head of the AFLCIO. Trump’s cozy relationship with unions is never questioned, seemingly not even by conservatives.
Ted Cruz in an interview with CNN’s Anderson Cooper said he hears the Trump team is acting like “union thugs” threatening delegates to support him at the convention. Tactics include constant harassing telephone calls at home. Might Trumka be providing the henchmen?
Regulation
Sour on banks from his many unpleasant experiences with real estate financings and debt restructurings, Trump may not be enthusiastic about pursuing Dodd-Frank relief, although he has opposed the law on the stump. But he does support reigning in the predatory EPA. Moreover, he recognizes the climate change issue as a hoax involving a global wealth redistribution scheme executed through taxation, fines and litigation that enriches many of its principals. Good for him!
Foreign policy
Trump’s proposal to decentralize the defense of America’s allies is ill advised. Re-assigning overseas troops stateside would cost more both economically and strategically to deploy them when needed, thus diminishing their threat to the enemy. Encouraging the independent development of nuclear arsenals invites undue proliferation and risk. But certainly the paper tiger that is now NATO must be shored up, and all beneficiaries of U.S. military assistance should compensate their benefactor fairly and bear an appropriate share of the cost of their defense. To be sure, Trump would never negotiate such an outlandish agreement as the U.S. pact with Iran. A policy of firmness that instills fear in potential enemies is a benign and protective deterrent.
Health care
On health care Trump has to offer solutions beyond just medical savings accounts and inter-state competition for insurance policy sales he touts in interviews. His experience with health care for his employees, which he sometimes cites, makes him particularly credible. Selling insurance across state lines will help but, according to Avik Roy of the Manhattan Institute, studies show that reform would only reduce policy costs about 5%. Trump has to promote competition among health care providers. Tax deductible medical savings accounts would do this by giving the consumer a stake in the cost and an incentive to shop around rather than rely on the employer bearing the cost. But more is needed. Insurers should be free to offer tailored policies with a sliding scale of coverages, premiums and deductibles, including high deductible catastrophic coverage, instead of the expensive one-size-fits all that is the Obamacare redistributionist model.
Trump has to trumpet the failures of the Affordable Care Act (ACA) noting the rising premiums and deductibles and the narrowing networks of doctors and hospitals that worsen an already costly program for many. In this socialist program higher income insureds subsidize lower income insureds, and taxpayers subsidize insurance company losses. In addition, $700 billion was shifted from Medicare to prop up the fiasco. It seems Republicans are afraid to criticize the ACA now because the national hue and cry of a few years ago has abated as the public has experienced the program. But there is still great support for repeal and replace. It has to be rekindled.
Accordingly, Trump has to highlight the losses many insurers incur. This includes U.S. industry leader UnitedHealth Group which just announced withdrawal from the ACA exchanges, except in a few states. Americans who lose their policies because insurers drop out of the market, as they are doing, may be forced to accept very limited Medicaid coverage which many Obamacare enrollees have but are advertised to be generously covered. Trump should not be shy (imagine that!) about publicizing the notion that insurance company failures might have been expected from the beginning as a prelude to a single-payer system. Obama’s perfidy about health care is well established.
Republican politicians have been saying they want to repeal and replace Obamacare for years. But only now has Congress begun to develop a detailed replacement bill. Trump has to expose that inaction and pledge results.
Supreme Court nominations
Happily, Trump is unequivocal about appointing conservatives in the mold of Antonin Scalia to the Supreme Court. He even said recently he plans during the campaign to name a pool of about 10 candidates from which he would nominate to establish his conservative bona fides for the voters.
Expectations
As stated, many Trump proposals could never be implemented as they will face insuperable opposition in the Congress and the courts. And there is the question of his genuine conservatism given his past opinions and lack of specifics about his policies. What’s more, he has walked back many campaign statements. So what really is to be expected in a Trump presidency? Will he be too conciliatory? Can he be trusted?
Like President Obama, he could rely on executive order and aggressive administrative action through his agencies to get his way. But it is hoped he would be more respectful of the Constitution, as two wrongs do not make a right. In addition, a sustained Republican majority in the House and Senate would help him advance his conservative policies, as well as thwart any tilt to the left.
The opposition
The Trump phenomenon flies in the face of much more informed Republican rivals, some of whom are political outsiders too, and true conservatives. Most of Trump’s opponents declared him unfit for the presidency with Rick Perry, Bobby Jindal and Marco Rubio deriding him as a “carnival barker”. Only Ben Carson, Chris Christie and Mike Huckabee held their fire. Carson and Christi now endorse Trump, doubtless eyeing nice spots in his administration that might position them for another run at the presidency. And Huckabee’s daughter, Sarah Huckabee Sanders, is now a senior adviser on the Trump campaign.
Currently, his rivals Ted Cruz and John Kasich are collaborating to deny Trump the 1,237 delegate majority before the convention. By coordinating their campaign itineraries to concentrate on their respective strongholds, they hope to optimize the number of non-Trump delegates in the remaining primaries. They say a Clinton – Trump race in November would be disastrous for the party and the nation. But at the same time, an open convention gives them a chance for the prize.
As mentioned, many on the right question Trump’s conservatism. He says past statements expressing left of center views and his political contributions to liberals were necessary to function as a high profile businessman, especially in New York City. Now he claims as a politician he speaks his true mind which includes evolvement on some issues. Pure conservatives do not buy it. The National Review denounced him in a special issue featuring articles by 22 prominent conservatives stating the case for denying him the nomination because he lacks genuine conservative principles and appropriate decorum. Indeed, Trump does not speak the language of conservatism as all the other Republican candidates have. Rather than waxing philosophical, he embraces conservative principles in practical terms and expresses them in plain-spoken fashion.
The nomination process
Thus far, the primary and caucus voters opt for the renegade in the hope of breaking the mold of the Republican Party. And Trump believes the Republican National Committee (RNC) and the GOP establishment are scheming behind the scenes to defeat him to protect the traditional quid pro quo culture involving contracts, political contributions, jobs, etc. now threatened by this interloper. Some, including former candidate Dr. Ben Carson, even suggest the establishment, absent a white knight, might prefer defeat in the general election over submitting to the new order Trump would impose on them. How far would the Republican apparatchiks go to subvert the voice of the people? If the nomination comes down to the delegates rather than the voters in a contested convention, there could be a battle royal among the remaining candidates, the delegates and the party officials, coupled with a revolution by a disenfranchised electorate. Trump is already sounding the alarm.
To be fair, the delegate selection process and convention rules have been in place for many years. But because voting beyond the first ballot at the convention has occurred only infrequently (most recently in 1976 for Republicans and 1984 for Democrats), the public, and apparently Trump, have not been aware of the party practices. The nomination process is designed to select the most electable candidate in the general election. Thus far, that process through the New York primary has awarded Trump 47% of the delegates with only 38% of the vote, which is suppressed by the participation of up to 16 other candidates. Indeed, the U.S. is a representative democracy, i.e., a republic, promulgated by the Constitution. As such, Congress votes on behalf of the people on federal issues in lieu of impracticable referenda. Dissatisfaction with results can be redressed through elections. Likewise, the Electoral College, not the popular vote, determines presidential winners in order to level the playing field for small states which otherwise would not attract the interest of the candidates.
Is the will of the people subverted? In the Republican nomination process a candidate must win 1,237delegates, being a majority, including a voting majority in the primaries and caucuses of eight states, to avoid a contested convention. Perhaps problematically, convention rules may be changed in the week prior to the national confab that affect delegate eligibility and convention proceedings. In a few states, such as Colorado and Pennsylvania, state officials, rather than voters, assign delegates to candidates. If no candidate attains the 1,237 delegate threshold on the first ballot at the convention for which most delegates are pledged to the choice of the voters, the delegates are free to vote as they wish in subsequent ballots until a candidate garners the 1,237 delegate majority. Delegates released by candidates that have dropped out, principally Marco Rubio, are free to support who they want in the first ballot. Likewise for delegates never bound by primary voting results, such as those from Pennsylvania.
Generally, released delegates will take into account the candidate with the best chance of winning the general election. On that score polls consistently show also-ran John Kasich the leader. But delegate allegiance to local voters is also a factor. Throughout the process, even before the convention, candidates could wine and dine, horse trade, and even bribe and threaten delegates for their allegiance in the ballot voting, notwithstanding the illegality of coercion, certain spending, and quid pro quo agreements. And party insiders wield their influence behind the scenes as well, most likely to undermine Trump, their arch enemy. As such, there is the potential, legally and illegally, to deny the people’s choice.
The propriety of the so-called “super delegates on the Democratic side is truly questionable. These unbound representatives constitute some 30% of the delegate majority required for the nomination who are free to support any candidate irrespective of the voting in the primaries and caucuses. To date they support Hillary Clinton as a block seriously handicapping her opponent, Bernie Sanders. As it happens, after the New York primary Sanders lags too far in the voting anyway for a plausible shot at the nomination.
Speculation abounds about whether the Republican Party machinations will produce a nominee who fared poorly in the primaries and caucuses, or even someone who did not run at all. Trump believes the process is rigged to allow undue influence from donors, special interests and party insiders to deny him the nomination if he falls short of the 1,237 required delegates before the convention. But some unbound delegates may fear the voter backlash to even the appearance of corruption enough to support Trump after the first ballot.
Trump and others believe the winner of a plurality of the votes in the primaries and caucuses should be the nominee to reflect the will of the people. But the rules are the rules and they require a majority win. One can argue about the inequities of the nominating process, but changes have to be decided long before the election. As such, dissidents may work to amend the rules for the next cycle.
Conclusion
Donald Trump has galvanized a dormant sector of the electorate for which business as usual in Washington and a politically correct agenda are anathema. At the same time, his proposals seriously alienate the so-called GOP establishment which wants to protect the status quo for its benefit. It also bemoans his lack of policy substance, stability and decorum that could preclude his victory in the general election, as indicated by a significantly higher net unfavorable rating than Cruz, Clinton and Sanders. Can a yahoo president be good for America?
Trump’s chief rival, Ted Cruz, is also a maverick who as a freshman senator has proven a commitment to benign change with a passionate dedication to the U.S. Constitution. He also demonstrates qualities that make him more electable in the general. Because of his frequent stands on principle, he is despised by his colleagues in the senate and reviled by the Republican Party leadership. At a time when so many Americans have vented visceral discontent with the status quo, that vilification should be a badge of honor.
Of course, it all comes down to the electorate. Has a center right nation become center left, considering the popularity of self-described democratic socialist Bernie Sanders in the Democratic race? Republican candidates have to buck the tide of gullible and disaffected chronically unemployed and underemployed youth saddled with student loan debt. They also have to overcome deficits with blacks, Hispanics and women. A dumbed down culture long fostered by schools, colleges and media downplays and even denigrates scholarship. The body politic exploits racial tensions and promotes gross political correctness. As a consequence, naive and uninformed voters susceptible to the appeals for evermore government providence hold undue sway. This reality is antithetical to free markets and private enterprise, job creation, national security, and individual freedom essential to get the country back on track to strength and prosperity.
But Republicans may take solace in the fact that the last two presidential cycles were dominated by the historical significance of the first black president, the Great Recession, and the wars in Iraq and Afghanistan. Those factors have largely receded, perhaps giving way to new thinking, especially considering the public anger with the status quo. As such, considerable numbers of conservative Democrats, new voters and independents may combine with the Republican base to achieve victory in November. May Donald Trump break the mold and Ted Cruz preside over the reform. ©2016 William J. Dodwell
The Trump Tape: Feigned Indignation in All Quarters
By William J. Dodwell October 13, 2016
The media are all aglow over the release of an audio tape that features a private conversation containing lascivious comments of Donald Trump in 2005 caught on a hot mike. The left is salivating over the prospect of derailing his presidential bid while the spineless right joins in mass denunciation. The fury is reminiscent of the highly politicized reaction to Missouri Republican Congressman Todd Akin’s comment about “legitimate rape” that launched the Democratic “war on women” campaign in the 2012 election cycle. No doubt, many establishment Republicans are secretly cheering the bombshell.
While some are genuinely offended by Trump’s purported gender transgressions, especially among educated “liberated” women, most take a politically correct stance through requisite expressions of scorn. They include those who try to hurt the Trump campaign, and those who are too cowardly not to object to the tape because of how others might otherwise react. Others are intimidated into silence rather than challenge the gambit. Actually, most could not care less about the expose.
The Todd Akin analogy
In 2012 a preoccupation with Todd Akin’s fallacious but substantively harmless comment about “legitimate rape” cost Republicans an almost assured senate seat that resulted in retaining the odious liberal, Claire McCaskill. The media and the feminists trumped up artificial indignation in all quarters over his comment, including among Republicans and conservatives who considered support for Akin a political non-starter. The ostensible tactic of the left was to depict Akin as inimical to women for lacking sensitivity for rape victims. But the subtext was about the liberal obsession with the abortion issue.
Akin posited, wrongly, that women who are raped are not likely to get pregnant because the reproductive system shuts down under the trauma. The left tacitly feared that, in the event Roe v. Wade were overturned, Akin’s supposition, if it gained currency, would re-characterize rape so as to minimize it as a widely accepted exception to the right of an abortion among pro-life advocates. This means his notion would eliminate the opportunity to feign rape as a means of having the procedure legally. Akin would have won his race were it not for universal political posturing by media and all politicians that duped the voters about the significance of his casual utterance. Once again, the drums are beating to defeat Trump in the guise of defending women. What a sham!
Like the phony firestorm over Todd Akin’s politically incorrect comment, as well as the reaction to Romney’s “binders of women” remark during the 2012 race, the liberal media relish another opportunity to alienate women from the Republican presidential candidate. Just as the mass feigned indignation over the Akin and Romney brouhahas lacked substance, so too does the current tempest. The Trump tape is a red herring that must not distract from the dedication to defeat Hillary Clinton next month.
The case for Trump
That Trump is an emotional adolescent has been established throughout his campaign, but he still won the Republican nomination and a general endorsement from the party (until now). Therefore, why the surprise and how is his immaturity any more serious now? Some take issue with his comments in the context of his infidelity and that of some of his subjects. More problematically, others claim his behavior caught on tape constitutes assault that disqualifies him. But is that the case? His statements indicated that based on experience he believed his targets might be receptive to his advances because of his celebrity. In fact, most women probably would like to be wooed by a billionaire, even a lecherous one, who potentially would provide considerable benefits (gifts, prestige). Indeed, on the tape he said women “let” him take liberties.
As such, Trump was not really rapacious. He just immaturely indulged libidinous desires for his subjects encouraged by his experience with them. Surely he had to be aware of potential legal liability for crossing a certain line. (To be fair, that did not stop alleged rapist Bill Clinton.) Did his lewdness constitute physical violation by certain societal standards of today? At any rate, in the second debate Trump said in response to a moderator’s question that he did not act out any of his talk. If he is to be believed, his reply renders the assault allegation moot leaving only the significance of his thougts in question. At least that was the case until recent legal challenges by supposed victims. How much credence should be given to their claims of abuse?
As Trump said, his comments were private locker room banter common among men which he probably never seriously actualized. Certainly, he would not speak so salaciously in public as that would be reprehensible. Absent evidence, grabbing the crotches of casually known female acquaintances, as he mentioned on the tape, is not credible. What if someone secretly recorded football star Tom Brady making similar comments to team mates in the shower? (He probably has a private shower.) Would he be vilified as Trump is? Is private bawdry more significant when applied to a candidate for president of the United States?
Republican Senator John McCain, with his reelection in mind, said Trump demeans women and therefore he will not vote for him after previously endorsing him. But that interpretation is in the eye of the beholder. Many see Trump as a mere lecher. Should an overtly prurient interest disqualify him? Some claim Trump thinks of women as personal property. Well, he is a real estate man. (kidding)
Critics say Trump’s behavior reflects a character flaw that renders him unfit for the presidency. Should a Commander in Chief be allowed human shortcomings, even idiosyncrasies? Recall that President Jimmy Carter admitted to “lust in the heart” during an interview with Playboy Magazine during the 1976 campaign. In fact, boys will be boys with respect to sexual thoughts and words, even presidents. But translating them to action could be problematic. Bill Clinton acted on his proclivities while in public office to the point of reportedly exposing himself to his targets and even allegedly raping one. American history is fraught with other examples of bad behavior by presidents. For, example, John Tyler, the tenth president in the 1840s, held orgies in which he and his son participated. And President John Kennedy’s escapades in office are now well chronicled. So, Trump would hardly be the first horndog in the White House. Is such a person fit to be president?
If moral turpitude is an overriding issue, consider well-documented evidence concerning Hillary’s pay-to- play deals involving the Clinton Foundation, and the destruction of emails previously subpoenaed. Also ponder the curious body count associated with Hillary and her husband over the years, including the recent shooting of a reporter believed to leak Democratic campaign emails to WikiLeaks. Republican operative, Roger Stone, has presented compelling evidence of Clinton involvement in the Vince Foster death. In addition, researchers and former Clinton associates have reported on Hillary’s violent outbursts in books and television appearances. Is she fit to be president?
Trump’s apologies for private speech are not necessary as there was no intention to offend, and he had no control over publication. In any case, no one believes his contriteness other than for having been exposed. A leopard does not change his spots. In the second debate Trump tactfully capitalized on his apology to pivot to Bill Clinton’s sexual history in office, scoring a major point about the difference between talk and action. As long as Trump’s predilection is expressed in words and not action, few truly care, despite media portrayals. Nonetheless, the media obsession about the Trump tape could have a mass psychological effect against Trump at the polling place, like the Akin case.
Predictably, political opponents are recruiting alleged Trump victims to establish the assault assertion. To date, five women have filed charges for groping. Democrats invoke the standard line heard in rape cases, that the accosted did not come forward in the past because of humiliation, as if groping is equivalent to rape. One can imagine the loathsome Gloria Allred chomping at the bit for a potential piece of Trump’s wallet long after the election.
Donald Trump is a highly flawed candidate. (I supported Ted Cruz in the primaries.) But at least he would cut taxes and relax regulation to surely grow the economy. In addition, he would secure the border and ensure a ballast against liberal judicial activism on the Supreme Court. By contrast, Hillary Clinton would double down on Obama’s destructive leftist agenda. Keeping her out of the White House is paramount and supersedes the personal foibles of the only practical alternative.
Today’s woman
The premise underlying the outrage over Trump’s behavior suggests women are vulnerable and need to be shielded from overly aggressive males. The irony is inescapable as so many feminist-influenced women emulate male behavior. Today, women curse like the proverbial sailor. Some look like convicts as they deface entire limbs with tattoos. Prostitution has become an almost acceptable way to finance college. Stripping is a legitimate occupation. According to Nielson ratings, one-third of internet porn viewers are women, and once stigmatized female performers now are legitimized. And consider how women are portrayed in risqué movies and television programs. They love Howard Stern despite his extreme antics involving women over the years. They cheer certain female comedians who in their acts explicitly celebrate women acting like men sexually. Many women in business proactively prevail on male underlings for sexual favors. And women teachers pursuing underage male students is fairly commonplace. If that is the culture, society should not act like all women need a “safe place” like fragile reality-averse denizens of a college campus.
Historically, stark physical, emotional and psychological differences between men and women have rendered the latter in need of certain protections that are codified in the culture and the law. For example, a societal objection to rape establishes it as a criminal offense punishable by a long prison term. In addition, assault presumably has two standards: one applied to attacks on men, and a lesser one to physical contact with women because of the comparative physical frailty of females. But unlawful physical attack is distinguished from sexually induced groping or fondling. One might say today’s mores born of the sexual revolution and its evolution blur the line between legitimate and illegitimate contact. It’s the price of sexual freedom that evolved with the full cooperation of the distaff. And men are wired to respond accordingly.
Misogyny is the hatred for women, a term wrongfully ascribed to Trump for his tape comments. Rather, he displayed a libido accommodated by the attitudes of today’s liberated women and, as he says, fostered by his own celebrity. This is not a case of blaming the victim for arousing the attacker. But in the context of today’s male/female relationships certain standards have changed such that the Trump tape should not shock anybody. And, again, behind the politically correct posturing, most consider it innocuous. Even the evangelicals dismissed the Trump flap so not to undermine his chance to intervene in much more important issues, particularly for them the defense of religious freedom under the First Amendment. Some consider their position as selling out. But it is really a pragmatic concession for the greater good, both for their interest and that of the nation.
Squaring the conservative circle
How does the Trump tape defense reconcile with conservative principles? This requires viewing behavioral standards in relation to both fitness for the presidency and the realization of higher conservative considerations in a battle of competing interests. Consider the dynamics of general behavior and what defines conservatism within that construct. Personal conduct is governed by several guideposts including: law, morality, ethics, culture, ideology, faith, natural law, the forces of biology, and perhaps genetic predisposition. In life certain of these elements motivate, others restrain, and some of them may conflict, but they all inform behavior in varying degrees. Individuals choose which influences predominate (except genetic ones).
Law establishes clear limits on behavior and punitive consequences for breach. Mores and ethics provide additional constraints that may change over time. Faith, codifies behavior, especially that founded on scripture, and fosters inspiration. Culture dictates customs, tastes and practices in certain quarters and also changes over time. Ideology, such as conservatism, defines political and cultural parameters that, with respect to behavior, guides one’s activity relative to individual freedom, human rights, respect for tradition, aesthetics, personal fulfillment, and possibly a particular theistic belief.
Trump’s tape behavior seems to rest disproportionately on sexual instinct fostered by the permissive cultural environment of his generation, and reinforced by his puerile nature which has become so apparent. He is not especially constrained by religious faith and has demonstrated some ethical improprieties. However, he recognizes personal moral responsibility and the restraints of law. This profile may not comport with the standard conservative behavioral model. In fact, Trump does not embody the conservative political model either, yet, he won the Republican nomination. The subsequent tape revelations just accentuate the aberrations that were already discounted.
Should the tape be the straw that breaks the camel’s back? More important is the totality of his life taking into account his business and social relationships, entrepreneurial success, philanthropy, and the family he raised. Of course, there are limitations to mitigating factors. Relativism is not a conservative value. For example, a mafia chieftain with the same profile as Trump who commissions murder would not get any consideration. (Do the Clintons come to mind?) On balance, Trump is within the spectrum of behavioral propriety, with a forgiving nod for professed, if not entirely sincere, contrition for those offended.
But now Trump’s behavior is viewed in a political context, that is, in terms of his fitness for the presidency. As such, some conservatives, notably evangelicals as mentioned, subordinate traditional behavioral considerations to a larger benefit achieved through the ability to significantly affect government policy for the greater good as president. This compromise is particularly important to them in view of an existential threat to religious freedom. Similarly, other conservative interests, such as limited government, strong defense, and the practice of original intent exercised in the Supreme Court, would be severely undermined if Trump were to lose the election. Therefore, those values supersede traditional conservative behavioral standards in this case because individual freedoms are under siege by the left like never before and could be seriously dissipated for years to come in a secular march toward tyranny.
Mass hoopla
The faux outrage about the Trump tape is disturbing. Everyone recoils in lockstep. Like the Akin imbroglio, no one dares not to be offended. Intimidation abounds. Phony politicians on both sides of the aisle fear alienating voters. Lawyer contributors on television news programs fear offending female clients and colleagues. News hosts and reporters fear a threat to their ratings. Individuals fearing the disapproval of friends join the chorus, or at least remain silent. All fear being ostracized by the other, especially by the media, if they do not viscerally denounce Trump’s tape comments. In a disingenuous extrapolation, some say men should be offended because of their relationships to mothers, wives, sisters and daughters. As one with all those links to the other gender, this writer couldn’t care less about the Trump tape. And the wife agrees. Truth be told, most Americans probably consider the whole matter a yawn. But too many succumb to such media propaganda in the voting booth as they did in the Akin case.
“Tape shock” pretense among some Republicans calling for Trump to leave the race, including a number of conservatives, is predicated on protecting their reelection prospects. Others feign horror as a pretext for removing Trump’s unprecedented threat to the party establishment. In view of Trump’s strong performance in the second debate, he might have had regained momentum but for the Paul Ryan disavowal and other Republican defections. Those politicos should be held to account in the future. Much of America wants to break the party mold and rid it of types like “It’s not who we are” Boy Scout Speaker, Paul Ryan. Ditto for the vast majority of Republicans in Congress, including many fickle conservatives.
If the media are so interested in the treatment of women, where is the outrage about Bill Clinton’s predations and Hillary’s efforts to suppress them through threats to his victims? To this day mass media have been largely silent. And not a word from the feminist movement. What hypocrisy! What about the rape case in which Hillary as a public defender was recorded laughing about an exculpatory lie detector test that contributed to a not guilty verdict for a man she truly believed guilty? Was that woman morally served? How many are aware of reports of Democratic Senators Ted Kennedy and Chris Dowd forcing a waitress against a table in a drunken act of sexual aggression some years ago? And why does truly misogynous rap music get a pass?
Time was when journalistic standards fiercely upheld truth (with some exceptions, such as the peccadillos of President John Kennedy and the illness of President Roosevelt). But today, media are largely corrupt in their dedication to big government and the policies that protect, perpetuate and enlarge it. Ironically, the politicization of the Fourth Estate responsible for helping to defend the people from tyranny actually contributes to it.
The imperative
The voters MUST keep the corrupt Marxist scoundrel that is Hillary Clinton from occupying the White House. The Trump tape must not divert from that mission amid yet another invocation of identity politics. As said, as bad a candidate Trump is, the alternative is so much worse. At least Trump is convincingly committed to the primary essentials of lowering taxes, relaxing regulation, securing the border, and upholding the constitutional integrity of the Supreme Court. Hillary Clinton would do just the opposite and much more to the nation’s severe detriment for years to come. The politically correct obsession with the Trump tape cannot be allowed to deny a Trump victory or threaten down-ballot prospects. Voters must not be duped by another “war on women” ploy.
The mission: Challenge corrupt media. Stop Hillary. Elect Trump.
©2016 William J. Dodwell
GOOD RIDDANCE TO THE SCOUNDREL-IN-CHIEF
By William J. Dodwell November 23, 2016 In the spirit of the Thanksgiving holiday, let us be grateful for dodging a bullet in the recent election that will end the policies of that scoundrel who has occupied the Whitehouse for the last eight years. As such, it is fitting we reflect on the nefarious force he has been, and record the ignominious legacy he deserves in the hope of preventing such a person from achieving the presidency again. Barack HUSSEIN Obama heads for the exit in the wake of two terms of failure and venality buttressed by corrupt media, a gullible electorate and a diffident citizenry plagued by political correctness. Of particular note, is his concealed empathy for Muslims manifest in his restraint in prosecuting the war on terror, and even in accommodation to the radical Islamic enemy, at grave risk to Americans. Herewith just a sampling of his transgressions. The damage He was lawless, repeatedly flouting the Constitution he was sworn to uphold. He recurrently lied to the people, notably about Obamacare and Benghazi. His politically motivated premature withdrawal from Iraq directly gave rise to ISIS. He seemed to betray a certain sympathy for Muslims, starting with his refusal to utter the term “radical Islamic terrorism”. And he ordered falsified intelligence reports to fabricate the success of his Mideast policy. He squandered much of his economic stimulus meant for phantom “shovel-ready jobs” on transfers to the teachers unions in exchange for political donations to himself and other Democrats. He doubled the national debt borrowing more than all his predecessors combined. He secretly diverted billions to his homies in the hood from bank settlements and other monies as part of a grand scheme to redistribute income from the haves to the have nots in classic Marxist fashion. Obamacare is just such a program. Obama prevented normal economic growth throughout his administration through excessive regulation, and by refusing to cut taxes substantially across the board because rich people would benefit. This despite an assured boon to small businesses and the lower and middle classes. As a consequence, American workers suffered chronic real unemployment and underemployment which especially affected new entrants to the workforce. For his legacy, he desperately forged a heavily one-sided nuclear deal with a wholly untrustworthy Iran creating grave risk for the Mideast and the world. He opposed oil and gas development that would render the country energy independent. He acquiesced to the IRS efforts to undermine tax-exemption applications of conservative 501(c)(4) social welfare groups that engage in political campaigns. He harbored contempt for Congress as evidenced by his many imperious unconstitutional executive orders and regulatory schemes to bypass the will of the people. He embraced a global socialist order marked by open borders and diminished American stature on the world stage, and gutted the military in the process. And with all our problems, he thinks climate change is the first priority, while his DOJ considers criminalizing dissent on the issue. Obama sought to transform the demographics of the nation to create future Democratic voters and to dilute the white population. He was dedicated to Robin Hood tactics and pay-back against white America in some misguided notion of reparations for past injustices. Accordingly, he surreptitiously directed extra funds to the inner cities via successor groups of ACORN which Congress voted in 2009 to defund for rampant fraud. Currently pending in Congress is The Stop Settlement Slush Fund Act of 2016 (H.R. 5063) to redress this outrage. In the effort to reverse the white flight to the suburbs, he directs HUD to hugely subsidize low income residents to move into upscale neighborhoods, and coerces developers to accommodate the program. This will surely result in skyrocketing crime and plummeting property values, as well as kill race relations. He gave race hustler Al Sharpton and domestic terrorist group Black Lives Matter seats at the Whitehouse table and surrounds himself with Muslim advisors. In war, he hamstrings American soldiers through highly restrictive rules of engagement that have prolonged military operations costing untold lives, injuries and treasure. He also has prevented effective success against ISIS by prohibiting the destruction of enemy oil fields out of concern for the environment at the expense of thousands of lives and billions of dollars. Obama’s DOJ seriously undermines law enforcement by suggesting bogus racial motives to police action. This has emboldened wanton black violence against cops that has caused them to retreat in fear of their lives. Ignored is the historical highly disproportionate violent crime by blacks that has caused their frequent confrontation with police. Rather than capitalize on his position as the first black president to address that stark reality, he accommodates imagined black grievances. Ironically, race relations are the worst in decades. He ordered Homeland Security to tell border control agents to stop working, such that in some locations supervisors told them to stay home. This, despite countless horrific crimes by illegals that have terrorized communities. He released thousands of violent felons from prison. He furtively settled tens of thousands of migrants from Central America acrossthe country without informing local officials. He admitted 10,000 Syrian refugees despite the inability to identify terrorists among them, he and supports settling many more. He granted amnesty to millions of illegal aliens only to be stopped by the Supreme Court. To cover his tracks, he reports bogus deportation increases. In his final days as president Obama is no doubt working to solidify his mark through more executive orders, regulation and affirmative action placements with his “pen and phone”. Trump will be able to undo some of it but much of the taint will likely remain. Obama’s path to the presidency How did this character become president? Obsessed with the prospect of Obama becoming the first black commander-in-chief, the media put him in play as a potential candidate after an uplifting speech he delivered at the 2004 Democratic Convention. They have shamelessly protected, promoted, and cheated for him ever since. The left figured that, as president, Obama would become an exalted symbol of the underclass that liberals could further exploit for their own empowerment. Thus, the media refused to vet Obama during the 2008 election cycle or thereafter, despite serious questions about his background, including his birthplace. In the 2016 cycle the media anti-Trump lies, red herrings and propaganda were at a fever’s pitch. Challenges to his origin on the basis of compelling evidence were summarily vilified and dismissed, even by conservatives, as attempts to delegitimize the first black president. In fact, the inquiry was about his compliance with a constitutional requirement and everyone knew it. Of note, the same reservation was raised about Republican presidential candidates John McCain and Ted Cruz. Obama’s so-called long-form birth certificate which supposedly establishes his birth in a Hawaiian hospital, produced several years into the controversy, is said to settle the issue. Problem is, no record exists of his mother having been registered in the facility. Oops. Sadly, much of America indulged its racial guilt complex and sought absolution by electing the guy president. The electorate also fell for the leftist propaganda about big government, diversity and the environment fostered by the poisonous culture of political correctness. Ironically, Obama’s transgressions may make it harder to elect another black president. This would be a shame if the likes of such blacks as former presidential candidate Dr. Ben Carson, former Congressman Allen West, and Milwaukee Sheriff David Clarke were to run in the future. A new day But America finally awoke on November 8, 2016 in electing Donald J. Trump, as Obama had pushed the envelope too far. The nation has been providentially snatched from the abyss that would have been a Hillary Clinton administration dedicated to continuing the Obama disaster. Now the country can hope for large tax cuts and regulatory relief that will finally spur the economy to prosperity again. Also in prospect are secure borders and deportation of criminal illegals, the repeal and replacement of Obamacare, new oil and gas development, and a Supreme Court that will uphold the Constitution. As Trump might say, “This is H-U-G-E.” But he must resist the many pressures within and without his party to relent. As Winston Churchill said, “Democracy is the worst form of government, except for all the others.” The election worked out this time, but it could backfire in the future as the left further entrenches and the culture deteriorates. After all, Hillary won over half the votes despite her leftist agenda and abject corruption. And, Obama enjoys a high (personal) approval rating. Trump had better do well because some black degenerate named Kanye West says he is going to run for president in 2020. Will America fall for racial and other gambits again to allow another scoundrel to foul the office, whether it be that jerk rapper or some other leftist? On January 20, 2017 the Marxist and likely foreign-born secret Muslim will saunter out of the Whitehouse with a smirk that says, “S-U-C-K-E-R-S”. Good riddance, Obama. May the door hit you on the way out … really hard. ©2016 William J. Dodwell
Miscellaneous Thoughts Posted to Linked In Between October and December 2016
By William J. Dodwell January 14, 2017 ANTI-AMERICA OBAMA is currently bringing
in as many Syrian refugees as possible despite the inability to vet them
thoroughly. He's against establishing a safe zone for them in Syria or the
region because that wouldn't damage America. Add this to his release of thousands
of violent criminals from prisons into communities. Shame on America for
electing this globalist racialist Marxist. It could happen again unless
conservatives really galvanize. 12/31/16
WHERE'S ANN COULTER? Ubiquitous for years,
since August 2015 she has been virtually absent from media because of a
harmless impolitic tweet. Where are the conservative protests against this
outlandish censorship? I've posted this message several times in recent weeks
and no one has the courage to respond. 12/29/16
Financial institutions in particular
suffer from regulatory overkill in the aftermath of the 2008 financial crisis.
Liberals refuse to acknowledge that lax mortgage underwriting standards caused
the crisis, chiefly imposed by the government on the banks to increase home
ownership among low income earners. Overly stringent capital requirements are
not necessary if lending standards are upheld. Regulation and sustained
near-zero interest rates have stifled economic growth by restricting lending to
small businesses, fostering uncertainty that hampers capital investment. Instead,
capital flows to higher-return equities and other financial assets, and
corporations deploy cash for stock buybacks. Trump's deregulation and tax cuts
will re-launch the real economy.
12/28/16
Free markets, limited government and the
rule of law will foster the economic growth that improves everybody's
prospects. Over time, beneficiaries will change with structural transformation
in the economy. They must adjust or make do with what they have. Leave
government out of it, except to provide for the truly needy. 12/28/16
The left lionizes this guy (George
Michael), along with other recent decedents, Prince and David Bowie, to promote
the entertainment field it dominates and uses to advance its agenda. What is
their appeal? The musical model is Frank Sinatra, Nat Cole, Ella Fitzgerald,
Steve Lawrence and Eydie Gorme, et al. that unfortunately has been lost for
generations. Our decadent culture is a sad product of the left. 12/28/16
MERRY CHRISTMAS as we celebrate the
fortuitous election that produced a savior (Trump) that will redeem the sins of
his predecessor and crush the serpent that is the Left. Hark! He restores the
prospect of renewed prosperity, security and sovereignty in his promises to
diminish government, build a great wall, and uphold the Constitution. Joy to
the world that embraces the return of a benign hegemonic power respected by all
lovers of freedom. Deck the halls with visages of the new leader! (I can dream,
can’t I?) 12/25/16
A spending cap is great in theory but
enforcement is quite problematic. Consider the joke the debt ceiling has
become. When reached, it is inevitably raised, notwithstanding brinkmanship
about shutting down the government. To be sure, excessive spending is the basic
problem affecting growth. It’s the
factor that drives the other economic drags of debt, budget deficits, and taxes.
As such, inflated corrupt publicly financed infrastructure projects would
exacerbate the problem. Spending is the mother's milk of all politicians and
they will not allow it to be seriously limited, even with a balanced budget
requirement and a super majority override requirement. We need a sea change in
Washington culture. Will Trump drain the swamp?
Meantime, radical tax cuts and deregulation will help immensely.
12/24/16
(Response regarding a list of government
agencies proposed for elimination) Abolish the VA and let veterans secure
private medical services through vouchers. Alternatively, get rid of the labor
unions that seek to bloat the bureaucracy with as many employees in order to
maximize the VA budget and union power. Congress, including supposed VA
champion Senator John McCain, has been feeding this beast by just throwing
money at it for years. Surely the abuses were evident long ago but no one has
had the courage to challenge the unions. Why isn't the EPA on your cut list?
Political backlash? 12/21/16
FIGHTING BACK. Last night Fox News featured a segment on a “Professor Watchlist” compiled by Turning Point USA. The organization promotes and defends conservatism on college campuses. In particular, it outs professors who discriminate against conservatives. The intransigent enemy must be exposed and vilified. Where open debate is not permitted conservatives must wage war. 12/20/16 DUMP YELLIN. Trump must replace the Fed
Chair when her term expires Feb 2018, or fire her beforehand. Her remark that
the economy is operating at full capacity and therefore doesn't need any fiscal
stimulus, such as the tax cuts and deregulation Trump proposes is absurd. That
is exactly what is needed to escape the chronic sclerotic growth she
contributed to. She thinks nominal full employment based largely on lowing
paying and part-time jobs and a 40 year low labor participation is sufficient.
Steve Forbes or David Malpass would be great replacements. See my August 20,
2016 related paper in The Comprehensive Conservative entitled “Post-Crisis
Secular Shifts In the Capital Markets and the Global Economy Could Foster a New
Normal” 12/17/16
DRILL BABY DRILL! Pruitt at EPA and Perry at DOE will open
the spigot. Tillerson at State will help too but, as a major oil executive, he
has to continue to pretend to pay some homage to the climate-change HOAX.
Looking forward to more oil development on public and private lands, as well as
to more pipelines and refineries. And let's hope they bring back the coal
industry by repealing Obama's environmental regulations. In addition, they
should save money by de-funding the fraudulent alternative energy projects.
Nevertheless, political and legal obstacles are daunting. 12/16/16
Hollywood airheads trying to overturn the
Trump victory in the Electoral College vote on December 19th are nauseating.
Martin Sheen's appeal is particularly bad. Is he an actor? One wouldn't know it
watching his arms flail and his awkward look at the teleprompter. There's a guy
who's really lost his chops in his dotage. Hollywood is a particularly
nefarious force of the left. Ban the box office and ignore the Oscars. Name and
shame those leftist clowns – repeatedly.
12/16/16
Too bad Trump felt it necessary to meet
with that degenerate Kanye West. And, unlike the other visitors to Trump Tower,
he posed in the lobby with him. Of course, he was just pandering to the black
community, perhaps to compensate for only one black cabinet nomination. Nonetheless,
this act tends to legitimize the cultural blight this depraved creep
represents. But Trump never did display any class. In any event, delivering on
his promises of significant tax cuts, deregulation, the wall, deportation of
illegal aliens, and conservative Supreme Court picks, is much more important
12/14/16
(Response regarding the claim that Trump
attracted legions of racist voters.) Trump
won mainly because he represents a blow to massively reviled political
correctness. For many, his dedication to tax cuts, deregulation and border
security rang true. Others voted for him as the anti-Obama. Trump voters did
not ascribe racism and misogyny and, therefore, they were not determinative
factors. They voted on particular issues despite Trump's personal traits, which
do not include bigotry. The left created this straw man to discredit Trump's
victory and his coming conservative policies. There is no evidence his
decisions would reflect bigotry. His statements about illegal aliens regarding
crime, drugs and American worker displacement were based on specific realities
that resonated with voters. Trump did not blanketly condemn any group. The
Access Hollywood tape recorded a meaningless private conversation with no
implications for his policies. On that point, see my October 13, 2016 article
in The Comprehensive Conservative entitled, "The Trump Tape: Feigned Indignation
In All Quarters". Liberals will say
anything to prevail and often succeed. They have little regard for truth. In
2016 reality reached a tipping point and the left can't stand the hurt. 12/9/16
Trump's equivocations about some campaign
promises have been troubling. Likewise, his reported thirty hours of
conversations with Obama. Will Trump be persuaded to go soft on the president's
legacy by tempering his reforms? We know Trump is a sucker for compliments and
ego stroking, and frequently expresses opinions based on how "nice"
one is to him. Will he let personal chemistry supersede principle? Nonetheless,
his cabinet picks are solidly conservative, indicating his actions overshadow
his words. (Excepting the Labor nominee's immigration stance.) I'm confident
good changes are acomin'. 12/9/16
HOW ABOUT MORE CHICKS ON THE TRUMP TEAM?
Not because of diversity bunk, but for their proven conservative bona fides and
a certain karmic balance the distaff provides. Carly Fiorina, Monica Crowley
and Laura Ingraham would be great Trumpettes. And Sarah Palin would kick ass to
get it done. Katrina Pierson, Trump's national spokesperson, did a great job, especially
for a rookie. She's got chops. Kelly Ann Conway's great too, but she now stands
to forfeit too much money in a government job. She could be another Megan
Kelly, without the feminist hobbyhorse. Bring them on. 12/9/16
Bravo to Trump's pick for EPA Secretary. Scott Pruitt is a certified "climate-change skeptic" who will turn things around. Of course, the man-made climate change gambit is a HOAX aimed at redistributing global wealth from the rich to the poor through taxation, litigation, fees and penalties while enriching the principals, especially the thugs who rule the third-world. At the same time, the issue is a pretext for expanding and empowering government. Pruitt seems like a guy who will call a spade a spade. 12/8/16 As Obama approaches his exit I again try
to emblazon the national memory with the record of how bad this guy has been,
lest it be forgotten after he leaves. Elected because of the color of his skin,
he exploited the American guilt complex to get away with ignoring the Constitution
and the law to advance his racialist, globalist, socialist agenda. So, as
testament to his horrific legacy, abetted by utterly compliant and corrupt
media, I again post my November 23, 2016 article in The Comprehensive
Conservative entitled, "GOOD RIDDANCE TO THE SCOUNDREL-IN-CHIEF", to
help ensure: Never again! 12/8/16
(Response regarding a proposal to
eliminate certain government agencies.) Yes,
the Dept. of Energy and the others you cite should be abolished. But why isn't
the EPA ever mentioned in discussions about shrinking government? Like the
Energy Dept., it too is partially founded on a false premise, the HOAX that is
man-made climate change. The EPA is a tyrannical body. Let's hope nominee Scott
Pruit will change that by gutting the agency. 12/8/16
Cowardly Republicans decided at the
eleventh hour not to impeach IRS Commissioner Koskinen for his obstructions of
justice in the investigation of the agency's maltreatment of conservative
groups. WHAT AN OUTRAGE! Were they afraid of ruining his Christmas? This is a
terrible precedent that will surely encourage future government abuses. We need
a powerful force to combat the left, not these weaklings. The Republican Party
has to be completely overhauled, or replaced by an alternative. Trump will make
some changes but not nearly enough. 12/7/16
(Response) Government spending drives taxation - and
borrowing. That's why expenditures must be limited as a percentage of GDP. A
balanced budget requirement is just a prescription for tax increases and more
borrowing because self-serving politicians won't limit spending sufficiently.
"Starving the beast" helps to restrict taxation that can tyrannically
stifle a nation. Too bad Trump doesn't understand this. He carps about the $20
trillion debt but advocates a trillion more in wasteful infrastructure
projects. And he won't touch entitlements representing 70% of the budget. But
the issue is relative in the extreme. Dots (small nation-islands) in the ocean
(as cited) can't be entirely compared with developed nations because of
different economic, social, cultural and political dynamics that affect the
prospects for freedom and prosperity. However, a credo that says less taxation
= less spending = more economic freedom is a sound one. 12/7/16
Dr. Ben Carson's nomination for HUD Secretary
is encouraging. As a true blue conservative he can be expected to end Obama's
current program of highly subsidizing low income residents to move into upscale
neighborhoods, while coercing builders to accommodate. Carson can terminate
this outrage, aimed largely at a black constituency, without being called a
racist. Let's hope he'll help to dismantle Fannie and Freddie too, and curb the
increasingly expanding government affordable housing policy that caused the
2008 financial crisis. 12/5/16
Ivanka Trump is a problem. First she
persuades her father to adopt her socialist tax scheme for childcare and family
leave, now she gets him to meet with the contemptible Al Gore about the
environment. This registered Democrat and long-time personal friend of Chelsea
Clinton has to be neutralized. To be fair, Donald Trump only agreed to listen
to the climate change advocates to determine the EXTENT of man-made agents.
This is not necessarily a capitulation of his past hoax claim. He's just looking
for affirmation of what he believes is an infinitesimal influence on the
environment. Can he expect a truthful response?
12/6/16
IT'S WAR OUT THERE! The left's effort to
absurdly cast Trump supporters as neo-Nazis and white supremacists is an example
of why conservatives have to fight, not just talk. Good arguments are not
enough because the left doesn't care about truth. Liberal propagandists must be
exposed, vilified, marginalized, shamed, humiliated and silenced, just as they
try to do to conservatives. It's a daunting task because they're backed by
mainstream media, academia, Hollywood, Big Labor, as well as entrenched careerists
in government. Nonetheless, it's time to get down and dirty in a war on the
left. Let's rumble. 12/4/16
Trump's role in getting Indiana to concede
tax incentives tor Carrier to stay and save jobs is fine. It's done all the
time. But if Trump threatens retaliation for a Carrier move to Mexico in the
form of government contract cancellations or tariffs on Carrier imports to the
U.S., that's tyranny. Companies move out of the country because of high taxes,
uncompetitive union labor, and government regulation. That is what should be
targeted. Otherwise, consumers, who far outnumber workers, overpay or properly
opt for cheaper and maybe better quality imports. 12/2/16
CELEBRATING FOUR YEARS OF RIGHT-WING
ENLIGHTENMENT at The Comprehensive Conservative http://www.williamjdodwell.com/ covering politics, culture and the economy. Dedicated to upholding truth
and traditional values in defiance of political correctness, this website
promotes political and cultural conservatism with an attitude in the effort to
debunk liberal orthodoxy. It broaches what politicians dare not say and the PC-silenced
public would love to hear. 12/2/16
(Response regarding an Indian guest
complaining about an American hotel clerk joking that his name “has every
letter of the alphabet”.) It is perfectly reasonable that an English speaking American
desk clerk would react as she did to your name. Her jocular comment about the
alphabet was apt and funny. When you're in America you should understand this.
We don't need more sensitivity about offending people. That's how we got
political correctness. I support a campaign to defy political correctness.
Incidentally, it's amazing how many Americans butcher my simple perfectly
phonetic Anglo name. Don't take the clerk personally. Curb your paranoia. 12/1/16
(Response to comment) Language has
deteriorated in America for some time. No doubt it’s a result of standards
erosion in the schools. But it's also attributed to a culture in which serious
reading is obsolete. Reading, or the lack of it, transfers to speech and
writing. The proper use of past participles is constantly violated, even by
television and radio commentators. For example, "have went" instead
of "have gone" has almost become acceptable. Another pet peeve of
mine is "It's a good 'thing' or bad 'thing'." People are too lazy to
think of an appropriate predicate noun, or omit "thing" as redundant.
Again, even the pros are remiss. As Jacques Barzun says, as cited in your
article, we need "to re-sensitize the mind to words". Indeed, weak
language leads to weak thinking - at the risk of the republic. Don't expect the
schools to care. I believe the political left, to which they are beholden, is
determined to dumb America down to prevent critical thinking that challenges
government and liberal orthodoxy. Liberals know that brain-dead students lead
to Democratic voters. 11/30/16
The Left is now fretting about people
saying things they used to keep to themselves. It claims it's a manifestation
of hate speech encouraged by the Trump campaign and victory. Actually, it's a
sign there's a crack in the wall of political correctness prompted by Trump's
brave talk about illegal aliens and Islamic terrorists. Before people cowed in
silence about those issues. Now they're out in the open recognizing that
Trump's victory reflects a huge population of like-minded Americans. Widen the
crack in the PC wall. Defy the speech police! 11/29/16
Well, the election is over and I'm still
waiting for Ann Coulter's return from media imposed exile for a harmless tweet
she issued in August 2015. I notice that television news people now make third
person references to her, but still no live appearances. There's freedom of
speech in America under the law, but not in practice. 11/28/16
I thought John Bolton was a no-brainer for
Secretary of State but he's barely mentioned. What does Trump see in Romney
considering his outright denunciation of the New Yorker throughout the
campaign, as well as his own criticisms of the 2012 candidate? Could it be
their shared business experience? In any case, I suspect Trump told Conway to
publicly question Romney's candidacy (most unorthodox) to get Romney to
withdraw. Who's left? Giuliani has conflict of interest issues. Can Petreus get
a security clearance for the job given his conviction for classified
information violations? 11/28/16
WATCH YOUR WALLET! Beware of Obama in his
waning days as he funnels billions into fraudulent environmental projects and
ACORN-like inner city community groups, unbeknownst to Congress. In addition,
he'll probably release more illegal aliens. The media will not cover this.
Trump has to revoke all of Obama's executive orders, regulatory schemes and
fraudulent acts immediately upon taking office.
11/18/16
The earth replenishes itself naturally.
Consider the trauma of volcanic eruptions, earthquakes and other disasters over
billions of years. The earth is not fragile. We saw how quickly the sea
recovered from Saddam Hussein dumping hundreds of millions of gallons of oil in
the Persian Gulf when the U.S. invaded Iraq in the early 90s. We have not come
close to the limits of the earth's regeneration ability. Climate has changed
naturally from inception and will continue to do so. Man's input has nothing to
do with it. It is infinitesimal.
11/17/16
As always, evident environmental
degradation results from natural causes which cannot be controlled. Some
effects, such as beach erosion, can be fixed but only God controls the forces
that bring them about. Man has no control over temperatures, tides or natural
disasters. You say err on the side of caution. For a fallacy? And at what cost?
The cost is the left's agenda of redistributing wealth to the have nots through
global taxation, fines, penalties and legal verdicts and settlements while the
principals enrich themselves by skimming off the top. The U.S. is the prime
target. The climate change issue is a HOAX.
11/18/16
I'm a free trader but Trump's strident
cries about FAIR trade got me thinking. Does he know something few others do?
Might he be aware of hidden provisions in trade agreements that are stealth
wealth redistribution schemes to other nations? Conceivably, this could be
accomplished by allowing concessions to a trading partner, such as a tariff,
without a corresponding benefit to the U.S. Perhaps, there's good reason to
re-examine those deals. As Trump says, our trade negotiators are just political
hacks. They might be secretly pushing a leftist agenda. Carl Icahn would see
the ruse. 11/17/16
(Response regarding Einstein’s definition
of insanity as doing the same thing over and over expecting a different
result.) Yes, recalcitrant Republicans in Congress could continue to be a
problem. But let's see their impact given a Republican president who has the
power of veto and executive order, as well as the bully pulpit. This is a new
variable that Einstein would acknowledge. It could be different this time
around. I wouldn't expect Congress to
have acted differently at this point in naming its establishment leadership.
But it is hoped Trump's fierce determination will prevail and soften the
resistance of his party in time. Rome wasn't built in a day. 11/17/16
TAXPAYER ALERT: Federally funded infrastructure
spending must not diminish the degree of tax cuts. It's a sop to the
construction unions to which Trump has been beholden for years. Corruption is
inevitable. What really needs reconstruction? How much is really needed? How
much scrimping on cheap materials for profit? What about deliberate cost
overruns? Repeal the Davis Bacon Act that requires union labor rates on federal
projects. Tax cuts and regulatory relief will grow the economy for the long
term. Infrastructure won't. Remember, the teachers unions got most of Obama's
stimulus. How did that work out? What a waste!
11/16/16
I'm sick of the Bannon-bashing. We should
have three more of him in senior roles.
11/16/16
Climate change is a HOAX. The photograph of several third-world leaders
standing on a stage smiling in $3,000 suits after last year’s Paris summit
tells it all. They’re anticipating the
big checks that will flow directly to their pockets from the eventual $100 billion
Green Climate Fund established at the confab.
11/16/16
HAVE YOU OFFENDED A LIBERAL TODAY? C'mon, it doesn't take much. To fight political correctness offend a liberal daily. Don't cow to the left. That's how the problem arose in the first place. Say all the things the speech police say you shouldn't, and do it repeatedly. Turn the tables by insulting and intimidating them into silence. It's right out of their playbook. See my June 17, 2016 article in The Comprehensive Conservative, "Challenging the Culture of Political Correctness". 11/15/16 First Trump gets soft on Hillary who
butters him up in the hope as president he will drop investigations of her and
the Clinton Foundation. Then he gets seemingly star struck by Obama who extends
special transition assistance probably in the hope of Trump reciprocating by
going easy on his legacy. Will he stand up to Congress trying to water down his
campaign promises? Bannon should put Trump in a full nelson whenever he gets
wobbly until he comes to his senses. That's his job. 11/15/16
I see Dick Morris has emerged on Bill
O'Reilly's program after a four year media exile. This prompts the question of
whether Ann Coulter will be allowed back from her 15 month banishment now that
the election is over. Morris is a self-serving admitted liar. But Coulter is a
truth-teller. Her blacklisting by all media for "that tweet" is
appalling. It seems even Trump has ignored her despite her book promoting his
candidacy. Who says there's free speech in America? 11/14/16
I'm getting nervous about Trump's
equivocations. One can almost hear establishment Republicans whispering in his
ear. Regarding the wall, he's gone from brick and mortar to a virtual
electronic barrier, to a fence. What's next, a shower curtain? Anything less than
a real wall can be easily dismantled when he's gone. That's what the left and
moderates really have in mind. An impenetrable wall should be 100 feet up and
100 feet down to prevent the tunnels and to ensure its permanence. Let's get
real. 11/14/16
I'm pumped now that Trump's victory has
set in. I think we're at the threshold of a new day that will further repudiate
the Obama years. His legacy is toast. Although not the conservative I would
hope for, Trump supports tax cuts, regulatory relief, the wall, deportation,
healthcare reform, and conservative Supreme Court nominee criteria that can
turn things around dramatically. Until now, the focus has been on his anomalous
profile and demeanor. But as president that's not important so long as he's
committed to the right policy, especially considering a Republican House and
Senate. I think we're getting past his quirky persona. 11/12/16
Don't be fooled by Hillary's
"gracious" concession to Trump. She's buttering him up so he won't
prosecute her for the improprieties of the Clinton Foundation (notwithstanding
a potential Obama pardon). That might be why Bill Clinton also made the
congratulatory phone call to Trump. Unfortunately, Trump seems vulnerable to
falling for this gambit. I hope this possible weakness doesn't make him
susceptible to capitulation on policy. 11/12/16
Let's not get carried away by the post-election faux conciliation. It's always insincere on both sides of the aisle. There's no meeting of the minds with a Chuck Schumer or a Nancy Pelosi et al. We've been providentially snatched from the abyss as Marxism slowly engulfs America. Republicans must leverage their new power to the hilt. Give the Democrats a taste of their own medicine. Trump should issue legal executive orders as necessary and the Republican Senate should capitalize on the 51 vote filibuster rule. When in trouble, Trump should use the bully pulpit to appeal directly to the people, and not just by tweet. 11/11/16 It's a wonderful day in the neighborhood.
How about that record high stock market? It's anticipating the predictable
economic boom that will ensue from Trump's tax cuts and regulatory relief.
He'll bring home $2 trillion of overseas corporate profits. He'll gut
Dodd-Frank and free up bank lending to small business. He'll repeal Obamacare.
He'll open up energy development. Drill baby drill! He'll revoke all of Obama's
executive orders. Watch the airheads protesting in the streets change their
tune when they finally get jobs in the new Trump economy. Soon the Obama
nightmare will be over. 11/11/16
Let’s not forget the Trump victory is a
stark repudiation of Obama, a lawless leftist.
Mainstream media don’t mention this because, as always, they promote the
notion that any criticism of the first black president is racist. Trump must revoke Obama’s many income
redistribution schemes in housing and elsewhere, and resist the faux charges of
racism. Ditto for building the wall,
ending sanctuary cities, and executing deportation of criminal illegal
aliens. The recovery from the “obamanation”
of probably the worst president in our history will take courage. Trump must not cave. 11/10/16
Trump's dream team: John Bolton, Secretary
of State; Newt Gingrich, National Security Advisor; Rudy Giuliani, Attorney
General; Chris Christie, FBI Director; Larry Kudlow, Secretary of the Treasury;
General Michael Flynn, Secretary of Defense; Jeff Sessions, Homeland Security;
Steve Forbes, Federal Reserve Chairman. These guys would take our country back.
And Giuliani would put Hillary behind bars. If Trump can't abolish the fascist
EPA, he should leave the office vacant and furlough the employees. The first
order of business is to rescind all Obama's executive orders and repeal
Obamacare. 11/9/16
HOW SWEET IT IS!! Ding dong the bitch is
dead. No need for burial. Sweep the Marxist crook down a storm drain. The Trump
victory repudiates Hillary and Obama, and resoundingly humiliates the corrupt
media. May the great Ann Coulter gloat forever. Kudos to Fox News and most talk
radio for fighting the good fight, in particular Sean Hannity, Laura Ingraham,
Monica Crowley, Rush Limbaugh, Mark Levin, and Michael Savage. Of course, Trump
is not a conventional conservative but he saved us from the brink of national
destruction in Hillary Clinton. His rescue of the Supreme Court alone is
HUUUGE. 11/9/16
Hillary is vulnerable to blackmail by
foreign leaders and others who would reveal quid pro quo deals involving the
Clinton Foundation. We know they abound. As president she would likely
compromise herself against the national interest when confronted by donors
demanding concessions. In fact, as Secretary of State she ceded 20% of our
uranium supply to Russia in exchange for over $100 million paid to the Clinton
Foundation. In addition, her borderless, globalist mindset would exacerbate the
avalanche of drugs and crime cascading over the southern border destroying
communities. She must not get near the Whitehouse! 11/7/16
Sure Trump has negatives. But Hillary's
are soooo much worse. She's on the ropes. Put her away. Kick her to the curb.
Do it for Ann Coulter who's been banned by practically all media for over a
year for "that tweet". The Fourth Estate has become a bad joke. A
vote against Hillary is a vote against media bias and corruption. It is a vote
for free speech. How ironic that Hillary hired Jay Z to get out the low life
vote. His language on stage made the Trump tape sound like Sunday school. And
the Clinton Foundation paid for Chelsea's wedding, plus her living expenses for
the next decade. Corrupt to the core.
11/7/16
TRUMP: Economic growth through tax cuts
and regulatory relief; secure borders and American sovereignty; energy
development; Constitution-friendly appointments to the Supreme Court and lower
courts; the end of Obamacare; law and order; a strong defense and restored
American hegemony. HILLARY: The exact opposite enveloped in a Marxist,
globalist agenda that stifles individual freedom and prosperity, increases a
dangerously high national debt, and advances Obama's racist dream of
transforming the demographics of the nation.
11/5/16
Don't takes your eyes off Obama in this
lame duck period. He is determined to force the liberal agenda through
executive orders and the regulatory power of his agencies. And we will never
know how many non-firable affirmative action hires surreptitiously fill the federal
ranks to poison future policy with his leftist ideology. Right now HUD is
moving low-income people into upscale suburbs, including Westchester, NY,
through massive home subsidies. This inevitably means soaring crime and
plummeting property values. For context, see my December 4, 2015 article,
"Obama's Racialized Presidency" in The Comprehensive Conservative.
10/29/16
THE CROOK IN THE PANTS SUIT IS GOING DOWN.
Pile on! As Ann Coulter says, “Humiliate the media." on November 8th. 11/4/16
Finally, we’re hearing about the Clinton Foundation investigation which exposes the true impetus behind Hillary’s private email server. We now learn that the FBI has been exploring pay for play arrangements in five of its offices. But partisan bickering within the FBI, as well as efforts to suppress scrutiny by Attorney General Loretta Lynch (no doubt on orders from Obama) has kept revelations under wraps. Recent email leaks show abundant evidence to support prosecution. The utterly corrupt Marxist that is Hillary Clinton MUST be stopped at the ballot box. 11/3/16 MetLife does not pose a systemic risk to
the financial system any more than money funds and mutual funds do. AIG failed because of a huge portfolio of
unhedged credit default swaps covering impaired mortgage-backed securities of
clients. Its conventional insurance business
had nothing to do with the firm’s misfortune.
Insurance companies fund their investment portfolios with premium
collections. There’s no counterparty
exposure to speak of. Besides, the
inability to honor life insurance claims is hardly a systemic financial crisis. The effort to designate MetLife a systemically
important financial institution (SIFI) is a power grab by government to further
control the financial sector. Let’s hope
the Treasury’s appeal is summarily dismissed like its original case. 10/31/16
IS THE PUBLIC FINALLY GETTING WISE TO THE
CLIMATE CHANGE HOAX? Interestingly, the issue has not been mentioned much in
the 2016 election cycle, other than the Democratic primary. Is it because it is
no longer appealing to voters? If so, that's progress. Maybe they were sickened
by the photograph of several third-world leaders dressed in $3,000 suits
smiling on a stage following the Paris summit last year. They were no doubt
anticipating some nice checks that would flow directly to their pockets from
the eventual $100 billion UN Green Climate Fund. 10/29/16
See this video for proof positive of
liberal media bias during the 2016 campaign. The presenter looks like some kind
of derelict but the content is quite revealing. https://lnkd.in/dDeN4J6
10/29/16
Hillary is sick. Why isn’t anyone exposing her health
issues? Voters have a right to know
whether a candidate is likely to serve a term, and to assess the probability of
a running mate serving in his/her stead.
Hillary has been reportedly suffering from heart problems, Parkinson
disease, epilepsy, and blood clots and is currently taking medication for all
of those conditions. We have seen her
physical vulnerability during the campaign.
As Trump says, Hillary doesn’t have the stamina for the job. Her health should be independently evaluated
and reported. 10/28/16
BRING BACK ANN COULTER. Virtually all
media have banished her since that impetuous impolitic tweet in August 2015.
Such censorship is outrageous! She would have helped Trump's campaign
substantially if heard as widely as she was for years before her exile. Will
she be allowed back after the election? Or, will the powers that be destroy her
career like Arsenio Hall's at the top of his game over 20 years ago for booking
Louis Farrakan on his show? 10/26/16
What’s
the brouhaha about Trump’s refusal to commit now to the election outcome? He is simply deferring acceptance pending a
determination of election improprieties, particularly voter fraud. Why should he have faith in a legitimate
outcome in view of what he thinks is a rigged system in terms of media bias,
polling manipulation and voter fraud.
Many Democrats still don’t accept George W. Bush’s election despite
three recounts and a Supreme Court decision.
Besides, if he doesn’t accept the result, so what? What could he do, start a revolution? 10/25/16
Trump self-funding? I have a theory about Trump’s claim of self-funding his campaign. In fact, Trump has issued a loan to his campaign the proceeds of which fund operations. Donations are applied to retiring the debt which means they go directly to Trump, effectively reimbursing him. Donations in excess of expenditures will be retained by Trump (as permitted by campaign law) resulting in a nice profit for him. To assure full reimbursement and possible profit Trump has significantly limited ads and staff for a ground game. He has only about 25% the staff that Hillary has. 10/25/16 Glad to hear that Trump is going to sue his accusers. Their assault claims are phony as an $8 bill. Those women should be driven to penury. If just one complainant comes forward to publicly retract her charge and discloses compensation received for the claim and the person who recruited her, all other claimants would be called into question. This slander has to stop. A successful legal precedent will do it. And it would be so great to see that the repulsive legal rep, Gloria Allred, doesn’t make a dime from the ruse. Incidentally, Trump is criticized for disparaging one of the woman’s looks to discredit the credence of her charge. In the circumstance, his point is absolutely relevant. 10/23/16 How about Trump’s action plan delivered in his Gettysburg address! If 25% of this Contract With America is implemented, we’ll be much better off. He has to keep repeating those points in appropriate venues and media to prevail in the election. There would be tremendous support for his policies (not all) if non-base voters make the effort to understand them and their potential impact. 10/23/16 (Response to comment.) The U.S. Fed discontinued QE over a year ago to no consequence. In 2013 there was the “taper tantrum” when Ben Bernanke hinted at reducing QE bond purchases, but when it actually happened much later portfolios remained intact. The ECB QE policy has accomplished little, so why continue it? The real solution is to normalize interest rates to allow capital to migrate from inflated financial assets back to the real economy of goods and services to truly stimulate growth. See my March 1, 2016 article in The Comprehensive Conservative entitled, “The Fed’s Folly: Not Normalizing Rates Quickly After the Great Recession”. Of course, that would not be without pain. Bond portfolios would suffer, the euro would rise to hamper exports, and inflation would decline when Europe is already grappling with deflation. But bond investors can mitigate the effect by shortening durations when given the signal of an ECB rate hike. The point is, the general economy is much more important that short-term disruption of investment portfolios. Recall the courage of Fed Chairman Paul Volcker in the early 1980s when he raised interest rates dramatically and quickly (under different circumstances). The ensuing brief recession was worth the following 20 year period of almost uninterrupted growth. U.S. and European monetary policy that has created years of near-zero and negative interest rates has hampered economic growth. 10/22/16 Kudos to Trump for telling it like it is about Hillary, even at the Al Smith Dinner. No other candidate, except Ted Cruz, would have had the courage to repeatedly expose the gory details of her corruption. This is no time for protocol or even comity. We face political war where the country is at the precipice of losing its freedoms and the potential for prosperity as we’ve known it. Too bad Ann coulter is still exiled by the media, including conservatives, for her harmless tweet in August 2015. She would be a great on-air contributor in the fight to bring Hillary down. October 2016 Voter fraud is real! John fund wrote two books on it, most recently a couple of years ago. Why aren’t conservatives mentioning this in response to the left’s latest red herring to derail Trump? October 2016 Where’s the praise for Trump’s fine performance in the third debate? All media are writing him off in order to gloat later about their prescience, even conservatives. Prove them wrong on November 8th like the Brits did in the Brexit vote. This is an important chance to truly fight big government, corrupt media and political correctness. Don’t squander it. Hillary MUST be stopped! October 2016 The IG reported Hillary’s State Dept. cannot account for $6 billion of contracts because documentation identifying recipients is lost. Did it disappear because the money went to Clinton Foundation donors? Did it go to leftist community activist groups at Obama’s behest where much of the DOJ bank settlement money went? October 2016 ©2017 William J. Dodwell
Miscellaneous Thoughts Posted to Linked In Between January and March 2017 By William J. Dodwell April 3, 2017
©2017 William J. Dodwell
Miscellaneous Thoughts Posted to Linked In Between April and June 2017
By William J. Dodwell
- Follow
up. This issue concerns cultural
conservatism, the second pillar of the Comprehensive Conservative I espouse.
But at some point culture and politics intersect. If the slob factor has gone from, say, 10%
to, say, 50% and growing, that is of concern mainly because it may be politically
influenced. The necktie might be a bellweather for liberal encroachment. 6/14, 15
©2017 William J. Dodwell
Miscellaneous Thoughts Posted to Linked In Between July and September 2017
© 2017 William J. Dodwell
CULTURE
Religion: A Force for Good and Evil By William J. Dodwell December 19, 2015
Religious
tradition undergirds American society and civilizations throughout the world. In the United States the pilgrims and the
founding fathers embraced it, and the culture has continued it through organized
religions that provide a benign guide to living for most. But many God-fearing non-religious, as well
as atheists, reject denominational worship in favor of their own notions of
righteousness. History shows oscillating
patterns of religious and secular interest in a continuum between faith and
reason highlighted by the 18th century Enlightenment period in Europe. That movement shifted focus from religion to
rationality, liberty and tolerance as it emphasized empiricism and science. In the extreme, religion takes the form of
irrational zeal that justifies wars and mayhem in the name of theistic loyalty. Today, that model is particularly manifest in
the atrocities of radical Islamic jihad.
The religious
believer
Many find
solace in organized religion as a source of divine inspiration for overcoming
the difficulties of life and optimizing the joy of living. Some view it as a means of securing happiness
in the hereafter. Religious institutions
also provide a sense of belonging in a social setting of like-minded people
that promotes a kind of groupthink about God largely derived from sacred scriptures. Religious beliefs are usually founded on
faith that is informed by upbringing and a certain psychological and emotional
predisposition. They transcend rational
analysis, particularly when exercised through exotic rituals and symbols that
serve as vehicles for embracing the abstract. Some, such as born-again types, get religion
in reaction to harrowing experiences. Others
convert through powerful persuasion.
Most believers rely heavily on the Bible as a definitive source of righteousness. Accordingly, they establish it as a basis for many political positions on such issues as abortion, gay marriage, immigration and wealth redistribution. The bible belt, the presence of a Bible in every hotel room, and the book’s distinction as the most purchased publication of all time are testament to its power and the popularity of its message. Many other believers profess nominal obeisance to their organizational affiliation but only superficially apply its tenets to their lives, if at all. In fact, ongoing non-compliance of some members could rightfully render them hypocrites. Consider the barbarism of Mexican gangs who nevertheless identify with Catholicism because of its long tradition in their country. Ditto the Italian mafia. Pseudo-religionists see their faith as a one-way street where they appeal to God for help but ignore the canon. Or, religious affiliation is just pretense to enhance social acceptance. At the same time, religious
institutions strive for economic and political power through optimal membership
and church attendance that engenders tithing and reverance. That goal is particularly perverse in cable
television broadcasts featuring faith healers who exploit seemingly
feeble-minded audiences. Separately, Jimmy
Swaggart, until his fall from grace, was obsessed with multiplying his cable
outlets around the world to maximize followers and the dollars that follow. Of course, many upstanding evangelists have
enriched untold millions of lives including Billy Graham, Robert Schuller, Fulton
Sheen, Jerry Falwell and today, Joel Osteen.
Indeed, evangelical followers constitute an important voting bloc in
elections. Additionally, Islam functions
as a systemic political network of global governance sustained through
conversion and fearful adherence based on interpretations of the teachings of
Mohammed.
The Catholic Church’s peak power
rested on its massive following cultivated globally over centuries. Today that power is largely attenuated by the
priest scandals, as well as a secular sea change that has decimated vocations
and membership. Today the Church tries
to fill the empty pews by promoting the plight of migrants and launching a new
campaign for converts in Africa. In
addition, Pope Francis opines sympathetically about climate change and has liberalized
the interpretation of some church doctrine, perhaps out of political expediency
to garner membership and shore up the institution.
The
community church is particularly dominant in the black culture as something of
a palliative for economic and social ills.
It also is a social rallying point that incorporates the black instinct
for music. But one wonders how matters
of faith and morals supposedly proclaimed in the pulpit comport with the
pervasiveness of violent crime and other behavioral pathologies in black
precincts. It seems many church leaders
excuse aberrant conduct out of concern for alienating followers who do not want
to be held to account.
In a civil
society law supersedes religion.
Although American jurisprudence derives from Judeo-Christian precepts, a
legal defense cannot rest on biblical references. For example, opposition to abortion and gay
marriage may be legitimately argued in public discourse on biblical and
sociological grounds. But the current
law, like it or not, rests on constitutional principles such as human rights
and religious freedom, irrespective of contradictory scripture. Nevertheless, in societal relations religion
plays a large role in upholding traditional values minimized by the courts.
The non-religious
believer
Then there
are God-fearing people who do not affiliate with organized religion. To them the scriptures are inauthentic
screeds written by men sometimes hundreds of years after the fact. They lack credible divine origination and are
subject to many interpretations - literal, metaphorical and allegorical.
Rather, the non-denominational
believer gleans from the astonishing vastness, complexity, diversity and
orderliness of the universe a benign supreme being in control who can be honored,
as well as petitioned in the form of prayer.
Associated with this force is the notion of retributive justice
characterized by karma, an inexplicable but seemingly real phenomenon in which everyone’s
good behavior is rewarded and bad acts are punished. The relationship with God is intuitive, experiential,
as well as faith-based inasmuch as the believer recognizes the legitimacy of
something beyond reason. This person is
guided by natural law reflected in an inherent desire to do good and avoid evil
that is informed by a conscience, and by an understanding of the golden rule: Do
unto others as you would have them do unto you.
The non-religious believer’s relationship to God is personal and founded
on general spirituality rather than specific theology. His behavior additionally rests on a sense of
morality and ethics grounded in tradition, as well as on codified law. On that basis he cultivates a personal
responsibility for his conduct and a certain obligation to others. No club-like comradery is necessary.
The atheist, the
agnostic and the moral cretin
Atheists adopt a purely rational
assessment of the existence of God.
Faith and intuitive deduction do not suffice. Only empirical proof will do. This is understandable given man as a
rational being. It’s said that faith is
a gift. Should one be vilified for not
having it? Many brilliant people reject
God’s existence. But so do many geniuses
embrace the mystery of faith. Atheists
are not without scruples. They are
guided by a secular code of morality and ethics founded on natural law and even
common sense.
Agnostics
are not sure whether God exists or not and therefore may conduct their lives like
atheists. On the other hand, perhaps
they hedge their bets with a certain nod to the supernatural.
Another
category consists of those devoid of a natural moral compass, the so-called
“bad seed” born missing a certain chromosome. These incorrigibly unscrupulous
beings, often with an inborn propensity for violence, keep law enforcement
particularly busy.
The decline of
religion
The
secularization of society since the 1960s embodied in the mores of sex, drugs
and rock and roll promoted by licentious media has rendered religion almost an
anomaly as the culture steadily defines deviance down. Feminism, the sexual revolution, pornography,
abortion, out of wedlock births and other social changes and former moral proscriptions
have vitiated traditional values in favor of temporal indulgence,
notwithstanding some societal progress.
According to the Pew Research
Center, 23% of Americans do not identify with a religious denomination today,
and 11% do not believe in God, as a certain moral scrupulousness has abated. As such, once discouraged mixed marriages
across religious lines have become quite common. In addition, the prohibition of religious
displays in many public places and the suppression of the Merry Christmas
greeting, for example, show how far theistic sensibilities have waned. But they also reflect the intrusion of
poisonous political correctness. Amid
the changes, atheists have gained currency as an identity group.
Nevertheless,
God is still invoked in circumstances that call for such things as benediction
or a moment of silence. However,
although the latter acknowledges God, such a public mourning also may be an
expression of solidarity in grief that accommodates secular human relations. But God still is referenced on the U.S.
currency and in many public places. Is
it just a matter of time before those vestiges of traditional faith are
eradicated?
Godless
societies have not fared well. Consider
the paganism of the Roman Empire and the historical hardships of totalitarian
states.
Religious extremism
Throughout
history some primitive irrational religious practices, such as voodoo,
witchcraft, mythology and idolatry have achieved societal acceptance. But the common denominator among religious
and non-religious believers is a yearning for a benign, if sometimes
delusional, external force in the quest for inner peace. In the process, the extremists jettison
reason, just as one might embrace astrology or superstition.
The
deranged indulgence in religion has a history of brutality wholly antithetical
to the benevolent deity the followers worship.
Consider the Crusades waged by the Catholic Church against the Muslim
Turks in the 12th and 13th centuries, and the concurrent
global Inquisition aimed at combating heresy against the Church’s teachings. Other examples include the numerous lengthy
wars in Europe during the 16th and 17th centuries
involving the Protestant Reformation and the rejection of the Holy Roman Empire. And now there is radical Islam. It’s been said that religion has been the
primary cause of war. To be fair, this
is not true. Non-religious wars led by
Stalin, Hitler, Lenin, Mao and others were much more devastating, collectively resulting
in a loss of over one hundred million lives.
Today disparate religions coexist
in a more ecumenical spirit of tolerance in a very secular world. Perhaps that is because individual religions
have lost the social dominance that existed when their more numerous church
goers might have socialized more along denominational lines. Nonetheless, Muslims remain largely
segregated as they staunchly resist assimilation.
Many intelligent Muslims suspend
reason to subscribe to a perverse interpretation of the Koran and the mandates
of Shariah law. Accordingly, they
support barbaric jihad promoted by their leaders in the quest for a global
dominance in which Christians and Jews are either converted or eliminated while
non-compliant Muslims face death. Peaceful
Muslims, fearful for their lives, refuse to inform authorities about signs of
radical activity. Other non-combatants
secretly cheer the havoc their brethren wreak.
Today Islamic terror grips the world.
This is a classic example of religion as a force for evil.
Religious fanaticism is
psychopathic with potential pandemic consequences that can undermine
civilization. It must be suppressed
through the exercise of God-given reason and free will which distinguish man
from all other creatures. And that
resistance is not limited to the extreme zealots. Some regular religious practitioners might
relocate along the spectrum of faith and reason in recognition of the pragmatic. Much religion is not benign. It is often a shrouded exponent of the political
and economic ambitions of the powers that be.
While religion can be altruistic, people should retain their individualism
in the pursuit of self-realization and not relinquish their reason.
Conclusion
Rendering oneself
to God presupposes a certain faith, whether summoned through religion or not. Most temper it with reality but some forsake
reason to the point of renouncing their individual freedom to pursue happiness
and fulfillment. This extreme not only
applies to religious fanatics but also to those who exaggerate the significance
of the Bible and who embrace rituals, symbols and superstitions, possibly to
the detriment of their wellbeing. For
example, belief in the divinity of Christ and his resurrection is widespread
but contravenes reason. So does the
rejection of technology by the Amish, the prohibition of blood transfusions by
the Jehovah Witnesses, and Jews refraining from eating pork, all in deference
to an abstract being.
To the extent believers unduly
alter their behavior or thinking to comport with religious tradition, their
allegiance may override important temporal considerations. For example, one might agree with a
completely open border in the spirit of accommodating the downtrodden in an
extreme interpretation of biblically inspired altruism, but it is
self-destructive for a country. Likewise
for redistributing wealth through confiscatory taxation. At some point religion intersects with
politics and ideology where devotion to God may unnecessarily conflict with
dedication to secular principle.
Of course,
religious observance is a personal choice that gives one legitimate comfort and
a blueprint for morality. But one
decides on a point between faith and reason, between fantasy and reality. That decision has implications for his
freedom and possibly that of others. One’s
liberty derives from man’s unique intellect which is not just an instrument for
self-indulgence but a potential agent for magnanimity that promotes the greater
good. Sometimes a religious choice is
founded on an illusory notion of wellbeing and salvation that unnecessarily
denies one a better life. This is
particularly reprehensible when a religion is forced on practitioners.
Is reason supreme? It trumps blind religious faith that eclipses
one’s identity and may espouse harm to others.
Nevertheless, a believer’s reason needs guidance through a relationship
with its inexplicable but intuitive source - God. The appropriate blend of faith and reason can
transcend the power of intellect by introducing hope, another elixir of life. The atheist is left to his own devices. But it is said there are none in foxholes.
©2015 William J. Dodwell
Challenging the Culture of Political Correctness
By William J. Dodwell June17, 2016
Relentless media and institutional interference in public discourse through sanctions on speech have cowed most Americans into silence about many inconvenient truths. As a result, a culture of political correctness forsakes traditional values in favor of the grievances of myriad identity groups at the expense of the greater good. At the same time, the new paradigm tacitly elevates the overall liberal agenda. Suppressed dissent about such sacred cows as diversity, the environment, immigration, big government, and wealth redistribution contributes to ever-growing curtailment of individual freedom and a denial of reality itself. Indeed, restrictions on speech from unchecked political correctness can lead to state-sponsored censure, as First Amendment rights are redefined and diluted in a dangerous descent into tyranny. The same accretion of government control threatens the rest of the Bill of Rights as well.
Looming social, professional and legal consequences of impolitic opposition, or even inadvertent offense, create an atmosphere of fear and disgust throughout society. And too much accommodation to the aggrieved leads to behavioral and punitive excess, such as the possible criminalization of climate change dissent which the Department of Justice is currently considering. In turn, political correctness encroaches the right to criticize the deviant behavior, cultural extremes and government sanctions it encourages. Americans must reverse this malaise by vigorously challenging the speech police.
Sensitivity gone amuck
Political correctness deters critical speech against designated liberal constituencies through the fear of vilification or reprisal. Those groups, primarily based on race, gender, religion and sexuality, develop a power of their own by claiming perceived or feigned offenses, which mobilize their benefactors in media and the government to their defense. In the process, the left garners the allegiance of the protected classes while silencing their critics into effective acquiescence to liberal orthodoxy. The mass sensitivity that results inhibits dissent out of the fear of offending. This sets the stage for even more limitations on free speech and other liberties as the grievance industry expands. Consequently, Americans have to endure racial profiling bans, discipline problems in the inner city schools, absurd conduct codes on college campuses, and propaganda about the environment, just to name a little of the fallout. Here are some examples of how the touchy feely culture produced by political correctness has muzzled dissent and expression.
The Trump University kerfuffle
Presumptive GOP presidential nominee, Donald Trump, faces a firestorm for invoking ethnicity in his campaign. Specifically, he suggests recusal for Gonzalo Curiel, the federal judge assigned the civil case brought against him alleging fraud at his Trump University real estate school. Trump says the American judge’s Mexican ancestry may bias his opinion in light of Trump’s stated intent to deport 11 million illegal, mostly Mexican, immigrants, and to build a wall on the southern border to keep newcomers out.
The media, as well as many leading Republicans, denounce Trump’s referencing the judge’s ethnicity as racist while ignoring the remark in context with his campaign statements about Mexicans. Trump rightfully questions the judge’s independence based on his ethnicity in his capacity as a litigant in the case. In addition, his immigration policy expressed as a presidential candidate, and the judge’s membership in a Latino legal association, raise political implications for the judge’s independence that morally justify Trump’s call for recusal.
These circumstances are distinct from Trump questioning the judge’s independence on the basis of his Mexican heritage while a sitting president. That would be problematic. As such, Trump’s insistence on the judge’s extrication is wholly reasonable and therefore not racist, even though his call is not in accordance with legal recusal criteria. Besides, was it pure chance that a Hispanic judge was assigned the case given the likely Republican nominee’s controversial immigration policy? It would appear somebody in authority hoped to tilt the scales against Trump. The public has to reject this distortion of the race-obsessed media and those seeking political cover. Cowardly pundits and politicians, are deathly afraid media will render them and the GOP radioactive for not calling Trump out for this supposed indiscretion. Sadly, in media, entrenched political correctness trumps truth.
The truth is few really care about Trump’s ethnic invocation, except some Mexicans, pretenders, and brainwashed paranoid hypersensitives offended by the affront to political correctness. (Reportedly, some 60% of those polled said Trump was wrong but that is probably because they feared appearing to be racist to the pollster.) The public must recognize that liberals have made the term racist so gratuitous as to be almost meaningless. Massive sustained vocal opposition to media misrepresentation and charges of racism can vindicate Trump and neutralize the race card while showing the people are not dupes. A Trump victory in November would be media’s ultimate comeuppance, just as his immigration stance was in the primaries. But, unfortunately, informed, activist conservative populism of this sort is a long way from critical mass as the bigot label still rules, regardless of its lack of substance. This has to change.
The war on radical Islamic terror
The recent attack in Orlando, Florida in the name of ISIS that killed 49 people is the latest reminder of the insanity of political correctness as it cripples the fight against radical Islamic terror. The PC crowd, including President Obama himself, as well as presumptive Democratic presidential nominee, Hillary Clinton, fails to acknowledge a systemic threat in the Muslim community out of fear of offending innocent followers. Chillingly, one can reasonably suspect Obama is a Muslim sympathizer in view of his upbringing, policies and seeming refusal to take Islamic terror seriously. (Clinton goes along with Obama on everything to protect his legacy, so he in turn will order Attorney General, Loretta Lynch, not to indict her for improprieties concerning her e-mails and the Clinton Foundation.)
Indeed, Obama and many liberals will not even mention the word Islam in relation to countless terrorist acts committed in the name of Mohammed’s teachings. In the wake of Islamic acts of terror on U.S. soil, the media are quick to divert focus from radical Islam ideology to the gun control issue and warnings about unfair blanket indictment of Muslims. References to Islamic terror have been deleted from all U.S. government and military materials. Mosques cannot be inspected. Surveillance is subject to anti-profiling restrictions. Political correctness has intimidated the public from reporting suspect activities of Muslims out of fear of being called racist. Overt proselytizing of militant Islam in the military and the workplace cannot be pursued. In Europe, local governments designate Sharia law zones where law enforcement cannot engage.
The mass media refuse to call radical Islam for what it is. Rather, they protect it on the grounds of religious rights and to thwart discrimination. But another reason for their long acquiescence is cowardice – the fear of a bomb at the door a la Charlie Hebdo in Paris.
The left touts religious liberty for Muslims in America, many of whom conspire to destroy the country and may not even be citizens. But it denies the same for Christians who decline on religious grounds to accommodate gay weddings or comply with health care mandates regarding contraception. PC madness is a prescription for ongoing terrorist acts.
Alleged anti-Semitism
An article in the Sunday New York Times, May 29, 2016 by Rob Walker entitled “Left Speechless by Hateful Talk” illustrates how hypersensitivity founded on political correctness could undermine social harmony. In his weekly column about workplace grievances, Walker cites a Jewish reader’s complaint about what he perceives as the anti-Semitism of a department leader to whom he indirectly reports. Here are the specifics. While walking with the complainant to the parking lot after an offsite event, the boss, who probably did not know the employee is Jewish, referred to someone who would “Jew the price down”. Walker responded sympathetically to the reader’s question about what he should do about the man who the “shocked” and “flabbergasted” subordinate says “… is probably a Jew hater.” The columnist recommended responses including discussing the matter with the offender or another superior, to carrying on despite the frustration from not confronting offensive speech.
Of course, the incident could have been triggered by intemperate remarks about race, gender or sexuality as well. And, indeed, at some level such indiscretion can strain organizational comity and client relations, and on a large scale may create social discord. But the issue concerns the reason the article was written. Publicizing a petty private incident like this to promote political correctness fosters a walking-on-egg shells society. Of course, silencing dissent is a goal of the left for which the New York Times is a leading exponent. “Jewing the price down” is an age-old aphorism that invokes a history of Jewish involvement in business which necessarily involves energetic negotiation. As such, there is a rational basis for the saying, which, while not a term of endearment, is not necessarily an expression of hate as posited by Walker and his reader.
The aggrieved employee blithely extrapolates this well-worn phrase to a hatred of Jews. Like many hypersensitive about their ethnicity, he should curb his paranoia because false charges of anti-Semitism engender social alienation, which the New York Times invites by publicizing this incident. While rightful indignation based on a reasonable standard of general sensibilities warrants public attention, there should be a high threshold for local intervention and a higher one for publication. Otherwise, keep it private. A standard might be what it would take for the media to express the same revulsion to Catholic bashing. From the Jewish perspective, the incident may raise the specter of the Holocaust. But in the context of the general population 75 years later in what is now a somewhat philo-Semitic country, the employee’s grievance seems overblown and potentially disruptive. Jews might consider keeping their powder dry for the truly important offenses.
Most stereotypes derive from at least partial truth. For years people have talked about drunken Irishmen, gluttonous Italians, and lazy Blacks. While certain discretion is important in a civil society, especially in a public forum, it should not be the role of the media to hector and vilify when stereotypes are invoked. If positive stereotypes are valid, why not negative stereotypes in the interest of truth, especially if they help to remediate bad behavior? The problem is, it is not about truth. It is about political correctness with its undue emphasis on sentiment.
Let individuals bear the consequences of their words and temper themselves accordingly, or not. The employee offended by the Jewish slur has options that Walker cited. But if he takes action that gets the offender fired, he sows the seeds of real anti-Semitism. Better to let it go and move on.
Ann Coulter’s exile
It has been ten months since conservative pundit, Ann Coulter, was banished from the media for an unfortunate twitter outburst concerning the Republican presidential campaign. All over cable news channels for years, she is now apparently restricted to her weekly blog, missing the most exciting election cycle in decades. Her offense was to express her frustration about Republican candidates repeatedly pledging support for Israel, which Coulter apparently considered unproductive pandering in view of so many issues having much broader appeal to voters. “How many f…ing Jews do these people think there are in the United States?” was her tweet that may have ended her career.
The political correctness lies in what comedy slut Kathy Griffin said about picking targets for ridicule in her act, “Don’t mess with the Jews.” Why? Everyone else is game (Well, not Muslims). For many, the Jewish exemption breeds resentment that assures a backlash in some quarters. A response to Griffin might be what Harry Truman said, “If you can’t stand the heat, get out of the kitchen”. Since Jews are very much in the kitchen prominently involved in many areas of endeavor, to their credit, they are going to get heat on account of a seemingly disproportionate influence. It goes with the territory. No doubt their special consideration arises from the sensitivity about the atrocities of World War II, and that has to be respected. “Never again” is an understandable dedication, but three generations removed, linking a slur to another genocide can undermine support needed in the face of a real threat.
Coulter’s tone suggests a certain animosity, but so what? As she explained in the wake of the incident, she could have said the same about pandering to the evangelicals, and felt similarly about repeated Republican invocations of Reagan and abortion. Her emotional choice of words should not brand her an anti-Semite deserving of exile. (Of course, the banishment is enforced mostly by non-Jews in media who fear for their jobs and the reputations of themselves and their networks which a concerted Jewish effort might destroy for not leveling retribution against her). Having happened, her disappearance sends a strong message about “messing with the Jews”, but it comes at a public relations cost as her isolation, and that of many others, does not go unnoticed, despite the utter lack of news coverage about it. As mentioned, this kind of action can breed anti-Semitism. She has a right to say what she wants and the public has a right to hear it. Where is the outcry from the libertarians?
Coulter recently emerged on a couple of talk radio programs. Perhaps her sentence is nearing an end. That would be better than Arsenio Hall’s fate whose popular television show, and career, abruptly ended after Louis Farrakhan appeared as a guest some 25 years ago.
The Donald Sterling flap
One of the most outrageous examples of public timidity in the face of racial politics perpetrated by the media concerns the 2014 pillorying of billionaire Donald Sterling, former 30-year owner of the Los Angeles Clippers professional basketball team. His girlfriend, in an extortion attempt, publicized a recording of him in a private telephone conversation with her in which he spoke disparagingly about black people. For that he was forced to sell the team and was banned from the NBA for life. Astonishingly, the public seemed to acquiesce to the media firestorm that followed. No one had the courage to defend Donald Sterling. Only Mark Cuban, owner of the competing Dallas Mavericks basketball team, urged caution about the slippery slope that could ensue from prosecuting private personal communications.
Sterling did nothing wrong. Sure, his words were problematic for a white owner of an NBA team in a predominantly black league, but they were private. As a practical matter, it might seem Sterling would have to go, but not really. The mass media created an explosion of phony indignation fraught with political imperative. Absent the media cataclysm, the general public would not have cared much, even blacks. But the incident was too much of an opportunity for the PC police. Where is the mainstream media coverage of Al Sharpton’s private racist utterances caught on tape years ago? How many white citizens feign positive sentiments about blacks that belie their real opinions founded on the many social pathologies in the black community? The media outrage directed against Sterling for this inherently innocuous happening could by extension shut down any criticism of black people, the meal ticket of the left. (A liberal dream come true.) Mass capitulation to the media in its vilification of innocents and its suppression of truth has to stop.
Here’s an interesting coda to the Sterling debacle. Former Microsoft CEO, Steve Ballmer, paid an overpriced $2 billion for Sterling’s LA Clippers (in a forced sale no less) inflating team valuations throughout the NBA. Not long later Bruce Levenson, who owned a controlling interest in the Atlanta Hawks, announced he will sell his stake after surrendering to the league his e-mail in which he attributed low attendance to black fans who “scared away” whites from the arena and the surrounding bars. Did he capitalize on the newly inflated valuation of his team by indicting himself in the wake of the Sterling tsunami in order to expedite a quick lucrative sale that otherwise would not have occurred? Was his proffering of the e-mail a confession in the name of political correctness, or a ruse for financial gain? In any case, Levenson’s comment about a business reality does not justify the owner having to sell. Who could argue with the reasonableness of his statement, especially in a southern city? Maybe if the truth about attendance and its threat to the viability of the team were allowed to emerge, black fans might alter their behavior to save their team and keep it in Los Angeles. Or not.
More laissez-faire is needed in public discourse
Critics might argue that if it were not for political correctness imposed by the media the N-word, for instance, would still be popular. Certainly, television, radio and print may rightfully promote change by setting an example in their content. But propaganda, intimidation tactics, retaliation, and blacklisting, out of ulterior political motives, repel audiences, or should. Over time a civilization adjusts to genuine sensitivities and creates new norms. And if an individual chooses to shun another because of a slur on a group, that is his right. As such, most offenders will suffer consequences naturally and eventually fall in line with a reasonable consensus standard without badgering from the mass media.
The politically correct culture has become a battle between the offender and the aggrieved where the latter is ever more prominent as the left creates more protected classes amid an increasingly docile public. The coddled groups collectively operate in common cause with one another, which is to dispel discrimination, but also to stifle dissent in deference to the larger liberal canon. The politicians and the media freely, and usually inaccurately, brand the politically non-compliant as “haters” or “bigots” to establish official vilification that will deter emulation. Expressed dissent is even criminalized as “hate speech” in some precincts.
Public denunciation of a petty slur not only panders to identity groups. On a large scale it creates a mass docility that disarms opposition to important causes of the left, including sanctuary cities, climate change, and certain government social programs. People are afraid to object. Consider the utter nonsense in academia today with its trigger warnings and safe spaces. And mere allegations of rape on campus are taken as virtual fact with no rights for the accused as liberal administrators effectively abet the feminist mission to further empower women by marginalizing men. It seems the aggrieved are always right and the offender wrong amid much feigned indignation. The public has to support the rights of alleged offenders by challenging the aggrieved and insisting they make adjustments where appropriate. In other words, opposition has to tell the cry-babies to “get over it” as oftentimes the truth hurts. Political correctness must not eclipse truth and individual conviction. A massive backlash is in order.
The ever-expanding PC code promotes the agenda of the progressive left
Political correctness in the law vs. the culture
The war on political correctness rests largely on protecting individual freedoms of speech, religion and association. The First Amendment upholds those rights against government restrictions imposed by federal, state and local law and its administrative enforcement in its rulemaking process. But liberal politicians and the courts, averse to the original intent of the Constitution, continually infuse political correctness through expansive legal interpretations that undermine First Amendment rights, as well as other constitutional protections, including property rights and gun rights. The imperious overreach of the Environmental Protection Agency (EPA) is a prime example.
PC madness originates as an encroachment on liberties in cases of individuals versus private business or property, which are not protected by the First Amendment. Typically, liberals sensationalize an issue to create social pressure that ultimately leads to codifying it in local, state or federal law, at which point the grievance is legitimized and subject to a First Amendment defense. This may occur through a new law, or a Supreme Court decision that an issue is already covered by existing law.
In the absence of legislation, the political correctness campaign is a culture war waged by activists, lawyers, media, lobbyists and government seeking protective laws. In that conflict, conservatives have to build a concerted resistance against PC based laws that undermine individual freedoms, and fight for laws that uphold them. The battle includes opposition to legislation that imposes excess entitlements and wealth redistribution. The fight may call for new laws, but it also supports or challenges the constitutionality of existing laws, such as those concerning abortion, gun rights and discrimination, where conservatives and liberals disagree with respect to upholding, repealing or amending them. Some political correctness battles will remain cultural or philosophical, such as those concerning social mores, speech codes, public school curricula, and even public vulgarity, appearance and aesthetics. But that combat in daily life is as necessary as the battles in Congress and the courts.
The evolution and consequences of political correctness
Today extolling traditional values, including family, patriotism and meritocracy, while denouncing their opposite, violates the politically correct code. Those tenets fly in the face of the liberal agenda which promotes a growing entitlement-oriented society and an egalitarian environment in which everyone gets a trophy and the high school valedictorian is an offensive designation. Indeed, critics must defeat this mindset. According to the principles of the founding, everyone is equal under the law in respect of opportunity, but not outcome or entitlement. Conservatives believe material life beyond basic needs should be earned while the truly needy are accommodated. A government that guarantees a standard of living in excess of necessities does so to create an entitlement dependency that further empowers itself – like a drug pusher. As such, political correctness is a nefarious force that calls for vigorous opposition.
Many have been silenced, not because of any epiphany, but because of threats to their social and professional relationships for speaking their minds. For some PC zealots, mere criticism of an identity group constitutes bigotry. Among them are those who mindlessly accuse critics of President Obama of racism because he is black. This intimidation buttresses the politically correct canon allowing destructive leftist forces to infect daily life unchallenged amid de facto Marxist tyranny. Indulging the petty grievances of aggrieved groups feeds the PC beast. Every concession can erode the basic liberties on which America was founded and have allowed it to triumph.
The reason political correctness has gotten out of hand is because of not only aggressive liberal engagement, but also public diffidence. People are afraid of losing friends or even their jobs if they do not comply, or at least remain reticent. In the absence of adequate popular resistance, a cause becomes propagandized and in time institutionalized. It starts with the work of activists and gains currency when adopted by the media and prosecuted by lawyers who hope to establish new areas of lucrative litigation. Corporations fall in line to protect certain markets or to avoid bad publicity. Eventually, politicians feel compelled to support legislation, and the many liberal courts rationalize new rights, resulting in the codification of grievance remedies. In the meantime, a president can mandate a politically correct principle by executive order. Much political correctness is not legislated but heavily infused in television programming, advertising, movies and other entertainment that engender cultural change. And, as mentioned, the most absurd form of PC is evident on campus as ordered by college policies.
As a consequence, legal and cultural constraints stifle speech and thought with respect to differences based on race, gender, religion and sexual orientation, which the left tries to blur into one egalitarian amalgam. That silence dispels opposition to such inviolable liberal causes as amnesty, climate change, bigger government and the leftist agenda writ large. At the same time, political correctness often encourages aberrant behavior and fosters unfair and unproductive affirmative action. The liberal establishment champions the supposed aggrieved by obsessing about diversity, but the real goal is to balkanize society in order to facilitate government intervention and empowerment in classic divide and conquer fashion. Maximum government control through minimum dissent is the name of their game.
The transgender apologia – the latest creation of the left
The latest PC pandering focuses on the transgender community. It started with the elevation of LGBT issues and a new emphasis on the “T”, and gathered momentum with the Chaz Bono and Bruce Jenner gender conversions becoming a liberal cause celebre. And one wonders if Lady Gaga’s rumored transgender status might have made her a priority in the star making business. By executive order, President Obama recently mandated public rest room and locker room accommodations for this .3% segment of the population on the basis of one’s self-identified gender, rather than biological sex. Never mind the rights of states and the privacy concerns of the other 99.7%, or the fact the issue was never really a problem in the first place. This concession is not definitively covered in existing civil rights law based on sex. But, as mentioned, fully protective legislation is a goal of the PC left for all its constituencies.
Of course, this movement is about extending gay rights to establish yet another grievance group as a cudgel to further advance general liberalism. In fact, media references to gays now cite the LGBT rubric as that group encompasses far larger numbers and therefore wields greater political influence. While the restroom issue has sparked vigorous debate and protests, the public seems to have acquiesced to the celebration of Jenner’s sex change, probably because of new attitudes about gay rights. Media went into high gear and the public bought it. ABC featured him in a much hyped interview with Diane Sawyer. Glamour magazine named her “Woman of the Year” for “courage”. Even the Kardashian clan who previously scorned Jenner, one calling him a “loser”, suddenly embraced him to share the limelight and the associated dollars in the ultimate display of political correctness.
The public does not seem bothered by all the attention rendered this heretofore obscure anomaly of nature, an apparent indication of rightful opposition to transgender discrimination. But the vast majority, especially school officials, does reject the federal mandate to accommodate them in public restroom and locker room settings in pre-emption of local authority. And, some jurisdictions have imposed new pronoun designations and other speech directives in acknowledgement of transgender distinctiveness. At the same time, some on the left are becoming uncomfortable about reports that Jenner may want to restore his manhood, as possibly indicated by his continued reluctance to fully convert. Will the left lose a poster boy?
Turning the tables on the left
The mission
The task is to turn the tables without invoking genuine bigotry which, by definition, advocates deliberate harm against a group. It is nothing less than that. Effective push-back requires targets of gratuitous charges of bias and hate to summarily dismiss them by challenging the accuser and frequently repeating the offense. The PC resistance also applies to ersatz issues such as climate change, animal rights and diversity born of leftist ulterior motives aimed at redistributing wealth and weakening America. Other targets include excessive government spending that undermines the public fisc. One must recognize that many in the PC crowd are just indoctrinated dimwits. Personally banishing PC practitioners may be in order if conversion is hopeless. But lo, the courage to execute these confrontation and isolation tactics is sorely lacking.
Legitimate dissent is about upholding individual liberties promulgated in the U.S. Constitution without extending those freedoms to non-citizens, such as illegal immigrants, or to radical Muslims bent on destroying the U.S. Principles embodied in The Declaration of Independence also constitute a model for breaking away from the yoke of political correctness and the big government it espouses. And, of course, the war on political correctness is aimed at protecting the culture against the nihilism of the left by upholding certain traditions and standards. It is difficult to put the genie back in the bottle as generations have been brainwashed. At the very least, resistance has to prevent new PC mandates. Success requires concerted societal action to remold attitudes and restore past objections through demurring words, deeds and even facial expressions that effect a cultural transformation. In some cases, laws have to be repealed and court decisions overturned.
The tactics
Much political correctness is pretense. Emphasis should focus on activating the pretenders who may be particularly amenable to supporting the backlash. Consider the Donald Trump phenomenon. Notwithstanding his many foibles, he has certainly struck a chord in his war on political correctness. Where were all those ardent supporters of Trump’s immigration policy before he entered the political arena? They were scared into silence. Dr. Ben Carson also came out of nowhere to become a leading presidential candidate for a while largely on the appeal of his tirade against political correctness, starting with the famous prayer breakfast in the presence of President Obama. Many would support a vehicle for escaping the PC cult and ending their silence and pent up anger. Conservatives must capitalize on that opportunity.
Crusaders against political correctness also may express disapproval in ordinary social settings. Consider public vulgarity and vagabond appearance that have become largely acceptable because politically correct standards make such deviance exempt from criticism. While waiting on line, one might cast a widely visible sneer at the cultural renegade covered in tattoos that sends a message. It says to those around him, if not to him, “No, it is not acceptable to trash our civilization.” Openly objecting to seemingly minor offenses like this helps to de-grease the slippery slope.
More importantly, conservatives must challenge politically liberal comments in public discourse. In conversation they should criticize the unspeakable, such as the increasingly aggressive homeless population degrading the area, and vociferously denounce the enabling politicians and policies, such as those destroying New York and San Francisco. Doing this in specific liberal venues is especially effective. But conservatives have to muster the courage to resist the opprobrium. It comes more easily working in groups. Most of the time people are silent, and some walk away, but the message is registered in their minds. Liberals can be as timid as their counterparts. Overt agitation at work is not encouraged, but careful whispering can help.
An anti-political correctness movement also requires boycotting companies, their products and their advertising agencies associated with ads that continually push the envelope in promoting objectionable racial, gender and sexual relationships or portrayals. The same applies for television and movies that proselytize for the progressive left. Remember, not long ago some of today’s media content was verboten. While the off-putting depictions are not to be proscribed necessarily, they ought not be promoted. Conservative protesters may differ as to particular disapproval since they are not monolithic. But collectively, much progress is to be made from in-your-face expression. Of course, discretion is important. For example, one would behave differently amid the general public than in confrontation with activists. In any case, violence is not condoned.
The war on political correctness depends on individual and institutional forces to change public attitudes about defending individual liberties in the face of overweening media and government. This means mustering the courage to treat fire with fire against the left en mass politically and culturally. As the Trump phenomenon shows, much of the population is already convinced. The movement just needs a catalyst to turn back the tide. It can begin with grass roots defiance that displaces public cowardice, as well as with support for conservative organizations and events. And, of course, electing genuine conservatives to office at all levels helps to assure compatible legislation and judicial outcomes that thwart the legal assault on freedom. As the political and cultural landscapes change, even the media will come around as ultimately profits rule. Having vanquished the scourge of political correctness, the country will have delivered itself from what otherwise could become a fascist socialist state.
©2016 William J. Dodwell
Is the Liberal Education Establishment Deliberately Dumbing Down America?
By William J. Dodwell February 17, 2017
Education in America used to be sacrosanct as a key to professional, social and national success. Scholarship was respected and something to emulate. While this ethic still exists in certain elite quarters, it generally has deteriorated substantially in the last fifty years with serious implications for societal decline, employment, the culture, the body politic and America’s hegemony. How and why has this happened and what are the prospects for the future?
The long decline
Academia has long been a bastion of the political left. As such, it is a target for infusing its increasingly intrusive agenda. The origin of the malaise derives from the ideological and administrative politicization of public education. Liberal elected officials and like-minded school administrators embrace identity politics and other forms of political correctness that alter academic content and teaching modalities. At the college level, professors also promote the progressive agenda, which in turn, naïve brainwashed students help to propagate through protests. In the primary and secondary schools, teachers might not be as ideologically motivated but are controlled by their left-leaning administrative authorities, that is, superintendents and principals.
In addition, teachers are governed by their unions, chiefly the National Education Association and the American Federation of Teachers, which work in concert with state governments to optimize their salaries, benefits and work rules. Moreover, the unions curry favor with federal, state and local politicians and the Democratic Party through dues-financed campaign contributions and lobbying efforts aimed at extracting legislation and government spending favorable to the membership that sustains them. The unions also often hold sway over passive local school boards. Because union power secures generous total compensation and accommodations for teachers independent of performance or student achievement, and ensures they cannot be fired, the quality of education suffers.
Academic dilution
The radical departure from traditional curricula and academic standards linked to the institution of political correctness in the schools and colleges raises serious questions as to educational purpose. Has the left deliberately diluted education in its self-interest? Compounding the problem is a societal de-intellectualization engendered by technological distractions, such as email, smartphones and video games. Although a godsend in some ways, these innovations suppress in-depth thought. This creates a population unaccustomed to critical thinking and complex conceptualization which particularly undermines traditional education for the young. Further cultural deterioration is reflected in a long popular obsession with sports and in artistic decadence promoted by the media that have contributed to an atmosphere inimical to educational excellence.
Education authorities have curtailed or eliminated the teaching of civics and American history such that many children do not even know who George Washington was. Daniel Henninger writes in The Wall Street Journal, June 11, 2015, about the College Board’s revision of the Advance Placement examination for U.S. history. The changes recast the subject in a framework of “different contexts of U.S. history, with special attention given to the formation of gender, class, racial and ethnic identities “.
Indeed, in schools and colleges the works and achievements of so-called dead white males have become impolitic. The left suppresses and revises history to fit its agenda that emphasizes oppression, including the transgressions of the forefathers, particularly on American Indians and Africans. While concealing the atrocities and inequities of the early American settlers and the founders is dishonest, the teaching of history should be balanced to encompass the good and the bad. Likewise, the lesser significance of minority figures should not be exaggerated for their own sake. But liberal educators de-emphasize the nation’s founding and the freedoms and prosperity it spawned, while lionizing the global order. They virtually ignore the U.S. Constitution or even dismiss it as extremist. The education establishment embraces collectivism and downplays individual accomplishment lest it pose a challenge to its power. There is little room for dissent. Such homogeneous thinking invites tyranny, and educational manipulation sets the stage for that outcome.
Rigorous grammar study, including the diagramming of sentences and verb conjugation that foster clear communication, seem to have gone out with the typewriter. Consider the common disregard for proper past participles, even among the well- educated? Employers complain too many employees cannot write effectively. The extent of foreign names in media bylines suggests a paucity of qualified American educated journalists. A rote, checklist mentality in auditing substitutes for integrative analysis contributing to costly corporate failures. Information in instruction pamphlets is poorly organized. Note the declining literacy reflected in the many misspellings of basic words appearing in television news trailers and closed caption text (allowing for occasional typos while typing on the fly). Schools invoke exaggerated touchy feely notions of self-esteem and personal uniqueness at the expense of objective academic standards. And the American culture derides academic achievers as “nerds”.
Sports seem to trump scholarship in the schools, and even that is subverted by egalitarian zeal by which everyone gets a trophy, and keeping score on the ball field is prohibited. Political correctness further pervades the atmosphere with an obsession about race, multiculturalism and the environment. In fact, in Philadelphia there is a move to adopt Black Lives Matter as a curricular topic. In addition, California assemblyman, Marc Levine, introduced a bill requiring the State Board of Education to teach in its curriculum and textbooks about Russian interference in the 2016 presidential election, which the left claims invalidates President Trump’s victory.
Poor student performance
Street interviews that expose abysmal ignorance of history and current events, even among top school students, have become regular television entertainment. SAT scores have fallen for decades despite easier test content. And according to the 2015 global rankings of the Program for International Student Assessment (PISA) compiled by the Organization for Economic Co-operation and Development (OECD) , the U.S. scored a below average 41st in math, 24th in reading, and 25th in science. What’s more, only about one-third of 4th and 8th graders nationally in public and private schools performed at or above grade level proficiency in 2015, according to National Assessment of Educational Progress (NAEP).
This, despite average spending per student steadily rising above the inflation rate. Such results disprove the oft-mentioned link between spending and educational quality the progressives claim. As more educational control has shifted toward the federal government, spending has increased significantly without improved results. According to Investor’s Business Daily, September 7, 2015, “... the Department of Education runs over 100 grant programs, spending over $100 billion a year. And yet we’re not better off for it.”
In some cases bad teachers contribute to poor student performance. Teachers are virtually immune from termination because their unions protect them to prevent dreaded membership reduction. Instead, incompetent or misbehaving teachers are consigned to a so-called rubber room, often for years, where they do nothing while drawing full salary.
According to The Wall Street Journal, October 14, 2016, Families for Excellent Schools reports “Black and Hispanic students who attend charters in New York City scored nearly three quarters higher than their counterparts at district-run schools.” This contrast, common throughout the country, is proof positive of an incompetent or corrupt public school bureaucracy.
Explanation for the abdication
Apathetic parents
Why has educational deterioration gone unchecked? One reason is that recent generations of parents have fully acquiesced to the indoctrination of their children because they too endured it in school. What’s more, cultural changes abetted by mass media have democratized poor education such that reading is practically passé. Generations of academic standards erosion, cultural rot, and the aggression of teachers unions have produced docile parents. They do not question academic decline because they themselves do not know what constitutes a quality education. School boards populated by these parents and infiltrated by liberal political operatives offer little resistance. Hence, there is little demand for excellence in education. In fact, some boards are known to furtively ally themselves with the teachers unions and the teachers in a united front against parents and students as they rubber stamp union contracts and resist productive reform.
Political indoctrination
The left capitalizes on parental capitulation to indoctrinate students so they grow up less than truly educated, and therefore less intellectually capable of recognizing the harm of power hungry government and the liberal agenda. Liberal operatives in the U.S. Department of Education and their counterparts in the states control textbook content and teaching modalities through politically motivated mandates. School administrators as agents of the left implement its agenda, locally slanting and diluting curricula and conceding to weaker student performance standards in an egalitarian spirit. Since when have scholarship and excellence been policy objectives in the public schools? (To be sure, the better teachers decry this state of affairs.)
As mentioned, armed with billions of dollars of union dues, the teachers unions buy Democratic politicians with campaign donations in exchange for writing favorable legislation and directing budget appropriations their way. In addition, the unions fight Republican opponents through negative ads at election time. Fearing this power of the carrot and the stick, too many pols refrain from criticizing politicized curricula, poor student performance, and excessive concessions to teacher salaries, benefits and pensions. At the same time, progressive Democratic politicians advance the liberal agenda writ large with the help of union campaign contributions that keep them in office. Time was when teachers considered themselves professionals who scoffed at unionization as meant only for blue collar workers. That was before politics and monetary interests supplanted academic excellence. To be fair, the political left imposed unionization on the teachers in the 1960s. The unions have had a hammer lock on the profession and the body politic ever since.
The welfare of students is purely ancillary to the power of the unions and school administrations in their quest for political control over formative minds at the behest of liberal politicians in Washington and the state capitals. In fact, an industry joke has one union official saying, “We’ll care about the kids when they start paying dues.” As a consequence, political indoctrination and diluted education ensure students will not challenge liberal orthodoxy as adults, and even embrace it by voting Democratic. The huge achievement gap between public school students and their counterparts in charter schools and in other countries is testament to this fraud on children and, indeed, American civilization.
The Effects
A refuge from truth and reality
The hijacking of education by the left has had many adverse effects. On college campuses political correctness imposed by progressive operatives and abetted by the liberal group-think of the professoriate has infected impressionable students. It has resulted in absurd majors and paper topics predicated on a notion of ultimate egalitarianism and identity politics. The commandment not to offend, however unintentionally, has eradicated academic freedom, the hallmark of the traditional university. In addition, the mandate has engendered the hyper-parsing of language, such as avoiding gender specific pronouns, so not to invoke the remotest implication of differentiation, transgression, or microaggression. Naïve, brainwashed students banish or shout down conservative speakers and vilify like-minded fellow students. Witness the recent violent protests at the University of California, Berkley against a conservative speaker from Breitbart news in reaction to the activities of the new Trump administration. The following day the same outrage transpired at New York University.
Students and professors call for “trigger warnings” and “safe spaces” to protect them from the trauma of dissent. Cowardly public college authorities cave to their demands for fear of losing their jobs or funding from leftist government sources. Private schools also acquiesce to unruly denizens to avoid media opprobrium for political incorrectness. Curricula are fraught with sops to political identity groups while much traditional intellectual inquiry has disappeared resulting in too many shallow indoctrinated students. Even law schools have jettisoned much traditional legal instruction for leftist indoctrination, which is manifest in many court decisions.
Primary and secondary schools engage in social promotion, even graduating illiterates. They tolerate violent behavior, even assaults on teachers, citing disadvantaged upbringing and alternative cultures as excuses. Yet, faux violence is condemned. For example, a diner owner told me parents accompanied by children tell him not to show Fox News on the diner television because it exposes the young ones to violence. What? Might the teachers and administrators be behind this propaganda? Meanwhile, test scores and graduation rates stagnate at grossly unsatisfactory levels. In extreme cases of academic failure the state takes control of local schools. Of course, these problems largely derive from the pathological backgrounds of the student populations mainly in the inner cities. But academic and behavioral discipline could improve student performance as charter schools have demonstrated. Nonetheless, education authorities dismiss this remedy as impolitic.
Government interference
Mandates, funding and propaganda
A symbiosis between academia and government has produced a monolithic political force with far reaching social implications. The Department of Education in Washington DC has become increasingly intrusive on local schools as it dictates pedagogy and curricula. Notable examples are President Obama’s Common Core program and President George W. Bush’s No Child Left Behind initiative which have yielded an unorthodox teaching-to-the test mentality. In addition, federal and state authorities impose politically motivated mandates, including transgender restrooms.
Schools and colleges depend on federal grants. College students depend on federal loans and myriad repayment accommodation. Graduates carry their indoctrination into the work force and the families they create, and vote accordingly. Academia at large promotes the liberal agenda that celebrates government intervention, including many private colleges fraught with liberal professors. As a result, education is shrouded by government influenced indoctrination that permeates the social order to the extent that students transfer it to their adult lives. At the very least, the liberal group-think assures a lot of Democratic votes.
As a consequence, government grows bigger and more powerful on the backs of taxpayers and at the expense of individual freedoms. Schools and colleges are obsessed with promoting unassailable diversity, environmentalism and the rest of the “progressive” canon in concert with the liberal political establishment and the media. Education authorities even go along with the feminist left’s emasculation campaign that neutralizes gender in grammar schools and criminalizes college men for unsubstantiated sexual offenses arising from a faux rape epidemic. At the same time, the teachers unions push for pre-school programs to create more jobs for dues paying teachers.
Ironically, the education that used to safeguard against government tyranny now accommodates it by creating a widespread predisposition to the liberal agenda. Academic deterioration fostered by the body politic, media and the education establishment has harvested an apathetic citizenry and a gullible electorate that puts the nation’s liberty and prosperity at risk as America is dumbed down.
Employers have to hire more qualified foreign workers, especially for high-skilled technology jobs, as too many American graduates cannot read, write and compute adequately. Hence, the corporate demand for much higher H-1B visa caps established by the states. (Cheaper labor accounts for this too.) But to the satisfaction of the left, foreign hiring promotes diversity and holds back indigenous Americans making them more reliant on government largesse.
Is the American education deficit a deliberate tactic of the left to garner allegiance? Arguably, the less educated, marginalized by restricted employment opportunities and lower income, are more amenable to government assistance, and therefore more likely to support big government candidates at the ballot box. As such, government encroachment on the private sector is not as objectionable to them. Indeed, an academically limited student denied career aspiration more likely leads to a Democratic voter as an adult.
Escape routes
The charter school movement
Short of reforming the public education system, the solution is to bypass it through school choice programs encompassing a voucher system, charter schools, and home schooling that do not involve teachers unions. At the college level, conservative institutions, such as Hillsdale College and Liberty University which operate without any government funding, are excellent academic models. Alternative education restores traditional curricula and performance standards and embraces civics, history and the humanities as constituted in the Great Books that capture the essence of Western culture.
Developing disaffection with failing public schools, even among once acquiescent parents, has created increasing political pressure in support of free public charter schools and vouchers to attend private institutions. Inner city minority children as the primary victims of failed traditional public education are the greatest beneficiaries of alternative schooling. Indeed, their parents covet precious few available charter school seats limited by the political clout of teachers unions over elected officials who determine their number. Although regulation requires charter schools to admit students of all academic proficiencies and be accountable for performance, the absence of union influence gives them an advantage. The unions fight fiercely to protect their turf from decimation caused by student transfers to charter schools. Nonetheless, charter schools are growing. In New Orleans 92% of students are enrolled in them.
Political and union resistance to charter schools
But overall, the teachers unions still prevail even though charter schools usually produce eminently better results at a fraction of the cost, including dramatically higher SAT scores. David Leonhardt in The New York Times, November 6, 2016, cites Paray Pathak, an M.I.T. professor who studies Boston’s charter schools. He claims, “On average, Boston’s charters eliminate between one-third and one-half of the white-black test scores gap in a single year.” School boards sometimes retaliate against the charters by withholding student bus service, for example, out of a concealed allegiance to, or fear of, the teachers union.
Migration away from regular public schools results in lower enrollment and therefore fewer dues paying teachers. Theoretically, competition from charter schools should force public schools to improve and reverse the defections. Yet, critics insist student transfers undermine the viability of the public school system. But more importantly to them, they threaten the monopoly power of the teachers unions, a major source of campaign funding for liberal candidates running for public office. The left will not let go of this bastion.
The teachers unions are on the ropes, especially in urban areas where black parents demand the charter school alternative to woefully failing public schools. And some of the better teachers are leaving the profession in disgust. But Democrats in Congress, including black members, have long resisted this demonstrably successful path to better education. That is because they are beholden to the teachers unions for political donations which help to sustain their tenure, and in turn, the liberal agenda through legislation and funding.
Recently, the teachers unions called in all their chips to defeat President Trump’s Department of Education nominee, Betsy De Vos, a champion of charter schools. In this fight, even some charter school advocates publicly opposed her in the fatuous hope of some relief from union opposition to their own schools in the future. Notably, presidential aspirant Senator Cory Booker, who was a leading advocate for charter schools as Mayor of Newark, New Jersey, led the charge in the Senate to defeat Ms. De Vos. Ironically, Newark public schools are so bad they were taken over by the state. Fortunately, the Senate confirmed Ms. De Vos 51-50 including an unprecedented vote by vice president Pence to break the tie.
What is the standard for a good education?
What kind of education does one who escapes a bad public school hope for? What is a good education?
Liberal arts
The model school and college require diverse curricula and strong performance standards that develop integrative and critical thinking skills through rigorous reading, writing and computing as exemplified by the aforementioned Great Books of yore. As an enhancement, musical instruction for those inclined should be available. Teachers unions need not apply. Teaching certification should be available to exceptionally accomplished professionals in relevant fields without the requisite “education” credits.
Of course, at the college level the humanities raise the specter of the much maligned liberal arts program that employers have rejected in favor of commercial specialties having direct applications in business. This transition started in the early 1970s in response to a plethora of baby boomer graduates, including women beginning to enter the work force en masse. Employers sought to cull the herd by giving priority to business degrees which are putatively more amenable to a ready adaptation to commercial needs.
But the ability to think holistically, communicate, and critique effectively, the hallmark of the liberal arts education, facilitates the acquisition of specialized knowledge in business. These qualities also produce societal gentility and personal edification for a better civilization otherwise overpopulated by Philistines. Indeed, even in college, a preoccupation with prospective employment income and return on investment can be misguided. That said, given the cost of higher education and the desire for economic comfort, acquiring expertise based on commercial demand is an important practical consideration. The disparaged well-educated server at Starbucks has become a metaphor for the dissenter. Yet, perhaps most graduates have always worked in fields wholly unrelated to their college major. Moreover, nearly half of new graduates work in jobs that do not require a degree, according to a 2014 report of the Federal Reserve Bank of New York cited by Jeffrey J. Selingo in The Wall Street Journal, May 27, 2016.
The education/employment nexus
So, where is the education-occupation intersection? Students choose inappropriate degrees. Employers apply inappropriate hiring criteria. A paucity of qualified job candidates leave employers in the lurch. Better coordination between schools and employers as to needed skills and knowledge might help at the vocational level. In recent years, a concern for gainful employability consistent with employer needs sparked a new emphasis on science, technology, engineering and mathematics in the schools, so-called STEM subjects. Is the old liberal arts standard which says better thinkers are better on the job learners a better option after all? That would require convincing employers.
Parochial schools have been a good alternative to left-leaning, union dominated public schools for a long time. But declining enrollment from a secular disaffection with religious affiliation, the priest scandals, and the attendant drop in financial resources have diminished their influence. To some extent, charter schools cannibalize the religious schools and move into their buildings after they shut down.
Some support the federal Common Core program because it applies higher academic standards. But many students and their parents opt out of it as too revolutionary. For example, it teaches a more conceptualized approach to arithmetic in grammar school as an alternative to traditional times tables and long division. In Common Core, one might think of 15 times 11as 15 times 10 equals 150, plus one more 15 yields 165. Memorized times tables and rote carrying of units to an adjoining column are not necessary. The problem is, while a valid technique, one develops this numerical facility only later with experience. Better to teach the traditional method and expose the right students to the alternative as an optional supplement.
For the less intellectually inclined, vocational training prepares students for a variety of occupations in great demand that make for fine livelihoods. For-profit institutions fill this niche but they have a problematic history. Many of these vocational schools have misled students about employment prospects and capitalize on government loans available to applicants. (Trump University comes to mind.) In fact, the Obama administration was intent on shutting down the industry as predatory on the poor, including many returning veterans. These schools should issue a standard caveat, prominently displayed, that applicants far exceed available jobs and that securing one is a virtual lottery. Alternatively, for-profit schools should accept only referrals from employers who have expressed a need for the specialty provided. Nonetheless, vocational training can crystalize one’s interest and provide a general knowledge of a market and industry structure that can help a student decide on a career and navigate a job search.
In any case, there is no place for political indoctrination in any curriculum, including political correctness, unless advertised as such. For example, the aforementioned Hillsdale College and Liberty University are openly dedicated to conservative teaching. But a knowledge of the principles embodied in the U.S. Constitution and their application in history should be taught in every program. In fact, it is essential to defeat the left and preserve the nation. That is why the subject matter was dropped from so many public schools.
The Buffalo, New York Case
Carl Paladino is a member of the Buffalo Public Schools Board of Education, and was the Republican New York State gubernatorial nominee in 2010. He issued a telling report in January 2017 entitled, “How Union President Rumore Co-opted the Buffalo School Board and Rigged the Teacher’s Contract”. While the dysfunction described here may not be typical, it is certainly symptomatic of what plagues secondary public education administratively.
Administrative incompetence and corruption
Mr. Paladino discusses the collusion between the Board and the teachers union that pits them directly against the interests of parents and students. The union gets the upper hand because of a less than 5% electorate turnout at Board elections held in May while teachers vote in large numbers for pro-union candidates. The union finances friendly candidates for the Board and makes suspected payoffs for their cooperation in negotiations. Diversity preferences and nepotism supersede merit in Board hiring, assigning and promoting, and the race card is at the ready when school and Board officials are challenged. School principals fabricate grades and graduation rates. Student violence goes unpunished in deference to what is called “restorative justice”.
The teachers union refuses to render any fiscal concession in negotiations despite the precariousness of the system’s finances with deficit budgets every year in what Mr. Paladino cites as the third poorest city in the country. The union would not even agree to phase out over 30 years a lifetime private health care benefit for all administrators and teachers that is alternative to available Medicare. Buffalo spends $27,000 per student for severe student underperformance while other schools in the area spend generally $12,000 - $15,000 with much better results. What’s more, a Buffalo construction board official is under investigation by the FBI concerning a missing $450 million of a $1.5 billion school bond issue.
Progressive ideology is destroying education, but so is incompetent and corrupt administration.
Assessment
Is educational failure deliberate? Some of the deterioration is ideological imposed by the Democratic Party through its federal, state and local operatives. The Department of Education exercises control over funding to the states which may be contingent on certain political compliance. It also influences curricula. Political correctness and indoctrination combined with academic dilution are so pervasively extreme as to suggest a conspiratorial force in certain quarters. How can there be such a performance disparity between public schools and their charter school and international counterparts, not to mention a longitudinal comparison, despite massively more spending? It cannot all be teacher incompetence.
More likely, the failure is founded on a withholding of academic content and standards. To what end? Why would authorities rewrite and suppress American history, for example, other than to undermine the underpinnings of the republic in favor of the Marxist globalist view, especially in the colleges? As mentioned, the symbiosis between academia and the body politic, with a big assist from the media, diminishes the minds of America over generations as to defuse any challenge to what would be a new order.
The education problem also has an administrative component controlled by the teachers unions which vigorously resist needed reform, effectively abetting the liberal sabotage in the schools. The unions fund the Democratic Party and thereby promote its agenda. In turn, the politicians protect union interests through legislation and government expenditures, including many cowardly Republicans fearing union retaliation. In effect, the ideological and the administrative components come together.
Fighting back
As President Trump’s election showed, the power of the people still can win the day in this country. That is what is needed to transform the institutional ideological and administrative malaise in schools and colleges that has undermined education. Advanced technology and foreign competition in the marketplace and the workplace put a premium on quality education as a means of ensuring a good standard of living. And continued automation restricts even those employment opportunities. As such, these structural changes in the workplace probably will result in greater income inequality as the less educated are disadvantaged.
But by defusing the leftist propaganda machine that is the public education system, and by restoring academic standards, there is hope for a return to traditional education. That will help to ensure a body politic that will support a growing economy and attendant employment opportunities that would ameliorate the adverse effect of intractable structural change in the economy. This means ending the liberal indoctrination perpetrated by professors, administrators and politicians, and dismantling entrenched union opposition to necessary reform.
Where regular schools fail to reform, Americans must strive for optimal school choice and hold elected officials accountable at the ballot box to ensure quality education that is codified in legislation. And the locus of power must return to the states and local communities. Charter schools have made enormous progress and the climate is amenable for more. Academic freedom and rigorous curricula must be restored and executed in the schools. One example of resistance at the college level is Turning Point USA which compiles a “Professor Watchlist” that publicly exposes college professors who discriminate against conservatives. College alumni should withhold donations from schools that insist on propagating liberal orthodoxy and suppressing free speech. Education traditionalists must populate school boards. And ongoing public caterwauling is necessary to spur corrective action by the education establishment. Silence is not golden.
Ideal reform would result in de-politicized classrooms, textbooks and campuses and the demise of the teachers unions, as well as the Department of Education.
©2017 William J. Dodwell FINANCE & THE ECOMOMY
By William J. Dodwell August 27, 2015
Buried in the Patient Protection and Affordable Care Act (PPACA) of 2010 overshadowed by the public hoopla concerning government’s takeover of health care is a totally unrelated provision that further empowers government at great expense to the public fisc. This companion legislation, called the Health Care and Education Reconciliation Act, renders the U.S. Department of Education the direct lender for almost all prospective federal student loans, greatly reducing the role of banks. At present, the government loan portfolio stands at $1.3 trillion representing 43 million borrowers, including loans originated before the PPACA. Student loan debt now is second only to mortgages among household liabilities, exceeding credit cards and auto loans.
Under federal control, the student loan program is gradually metastasizing in a move from monthly payment forbearance to loan forgiveness, and ultimately to ongoing free taxpayer-funded college education for all. No doubt, many borrowers are delaying or stopping monthly payments in anticipation of eventual forgiveness. Jason Delisle of the New America Foundation writes in The Wall Street Journal that 20% of borrowers are in default. This is despite an average income-based loan forgiveness of $41,000 per borrower and $125 billion of total forbearance involving up to three years of deferred monthly payments.
Misleading financial reporting by the U.S. Department of Education
To date, the federal student loan program has been reportedly quite profitable overall as gains from loans to graduate students and parents more than offset the losses on the undergraduate and for-profit portfolios. In fact, profits derive almost entirely from loans to parents and graduate students, including medical and law school borrowers, who are better credit risks having good income prospects that ensure repayment. But is the student loan program really profitable? It may be on a net interest margin basis where the government receives more interest from borrowers than interest it pays on Treasury debt. Indeed, loan interest rates range from 2 to 4.5 percentage points above the loan comparable Treasury note, with graduate students and parents paying more than undergraduates.
But the Department of Education is notorious for obfuscating detailed information on loan delinquencies and defaults, as well as payment deferrals and forgiveness, a charge even levied by Douglas Elmendorf, the former Democratic CBO director. Susan Dynarski, professor of economics, education and public policy at the University of Michigan, and former advisor to the Obama administration, wrote about the Department of Education’s information brownout in the New York Times on March 22, 2015. She says the Federal Reserve Bank, the Treasury, the new Consumer Financial Protection Bureau, as well as private organizations seek demographic loan detail to detect student debt patterns threatening households and the economy. In addition, they want to quantify and foresee impending losses in order to intervene with borrower relief. But available data are highly limited, as is financial reporting on profitability. Unlike voluminous mortgage data now compiled by the government in the aftermath of the financial crisis, student loan demographics and true performance are largely aggregated and shrouded in secrecy by the Department of Education.
Historically, the government has been loath to publicize real student loan default rates, even under previous federal direct loan and guarantee programs. What’s more, it refuses to outsource detailed analytics to other agencies or private firms. As a consequence, the information dearth conceals the growing losses and economic impact of the student loan program. Could it be that the truth about loan defaults would prevent the program’s expansion and galvanize opposition against proposed loan forgiveness and free college education as a new entitlement? Fortunately, Congress is on to the charade. Representative Tom Price (R., Ga.) and Senator Mike Enzi (R., Wyo.) are trying to get the Congressional Budget Office (CBO) to adopt true “fair value accounting” for student loans where performance is accurately evaluated as it is by banks, particularly with respect to defaults. But big government politicos resist this initiative.
Federal accounting vs. bank accounting
Measuring student loan losses according to generally accepted accounting principles (GAAP) adopted by private banks transforms government reported profits to huge deficits. In so doing, the CBO’s projected $135 billion profit for the ten year period 2015-2024 converts to a $1.9 trillion loss according to the table below. Consider the 13% default rate (in dollars) of 2013 and 2014 reported by the Department of Education applied to a growing $1.3 trillion portfolio. After deducting defaulted balances that apparently are not removed from the loan book contrary to bank accounting, and deducting balances in forbearance (non-paying loans because of deferred payment allowances and pre-graduation), the default rate suggests a $122 billion default loss in 2015 alone. This loss increases commensurately over time with the size of the portfolio. Adding an estimated $28 billion for net interest income, the projected 2015 operating loss amounts to $94 billion on a GAAP basis.
The reason for the profitability discrepancy is that federal accounting adopts a net present value method of computing profit and loss rather than cost-based accounting employed by banks. Present value accounting involves forecasting all future net cash flows for the remaining duration of each loan, going out up to 20 years or more. That forecast aggregates loan outlays with scheduled principal repayments and interest received, and incorporates a deduction for actual defaults, as well as consideration for prepayment patterns and default recoveries. Then the government discounts those future cash flows to present value at a rate that is supposed to account for estimated default risk over the future life of the loans attributable to changing macroeconomic conditions. The resulting net present value is compared to that of the previous period to determine profit or loss. A higher present value denotes a profit for the current period, a lower one a loss.
3. Understated recognition of defaults on a present
discounted value basis
In addition, while a defaulted loan is removed from the future net cash flow computation, it is recognized in the current period only on a present value basis, a fraction of the full value a bank would recognize in earnings. The rest of the default amount is effectively amortized over the remaining life of the loan. For example, to isolate defaults, assume future net cash flows are fixed at $100,000. At a discount rate of 13% over ten years the present value would be $29,459. If $10,000 were removed from the cash flows because of default, the remaining $90,000 over 9 remaining years would be discounted to $29,960 vs. $33,288 if there were no default. This values the default at only $3,328 in the current budget, only some 33% of the whole loss. The rest of the default, $6,672, would be recognized at a 13% discount each year over the successively smaller remaining life, that is, over a waning number of periods. This amortization process also applies to the periodic default estimate implied in the discount rate. That would be a 13% discount on the original $100,000, and then a 13% discount on the remaining $90,000 after the actual default, and so on for each successive period until each loan expires. A bank would recognize the entire $10,000 actual default in current earnings, as well as full valued interim general default estimates.
The amortization of defaults in the CBO present value model is the most significant reason for the huge variance with GAAP default recognition and student loan profitability. Simply increasing the discount rate does not nearly correct the distortion concealing the real taxpayer losses imposed by the program. In fact, even a substantially overstated discount rate would still inflate annual profits because of default amortization inherent in the present value methodology.
Banks do adopt present value accounting to value illiquid securities and bank loans offered for sale in the absence of available market prices. In doing so, they assess a discount rate that incorporates interest-rate risk to account for the effect of higher interest rates on asset valuation, in addition to a rate for defaults. The resulting change in the net present value from the previous period represents the current profit or loss. But ordinarily, banks carry loans at cost, accrue interest, assess an estimate of defaults as a percentage of the loan balance and fully charge it against current earnings. In GAAP accounting, once an asset is depleted, as a defaulted loan is, it cannot be amortized because there is no value to recognize. Any remaining value is written off. By analogy, equipment is depreciated over its remaining useful life because value is realized through its continued use, and thereafter salvage value may be recognized. But if the equipment is destroyed, the remaining book value is entirely charged to earnings as the asset is disposed.
While the government removes a defaulted payment from the discounting process that determines profit and loss, it does not appear to remove defaulted balances from its portfolio. (The federal government does not compile a formal balance sheet.) Consequently, the reported loan balance that has been increasing 15% a year for more than a decade is inflated by bank standards. As such, in government accounting a defaulted loan in the portfolio balance is the same as a regular delinquent balance, except that it is more than 270 days overdue. Reyna Gobel reported in Forbes.com on 9/28/14:
It takes at least 9 months of non-payment for a default to take place
and show up on one’s student loan record
and credit report. The default rate has nothing to do with whether borrowers will default later
while on repayment
plans that can last up to 30 years.
The rationale for keeping a defaulted loan in the portfolio, and perhaps the reason for an understated discount rate, may be that the government is more optimistic about eventual recovery because of its special leverage to garnish wages, as well as withhold tax refunds and disability benefits. In addition, liberal repayment plans that may extend for decades create expectations of eventual collections. The percentage of recoveries on loans delinquent more than 270 days is not known. Banks sometimes adopt this “extend and pretend” posture to put off costly write-offs but it usually is ill advised.
In short, banks record an estimated provision for default losses each period based both on a percentage of the loan portfolio and on certain specific troubled loan information. That estimate is fully deducted from net interest margin to determine profitability. Separately, loans and accrued interest receivable recorded in the balance sheet are reduced by principal and interest payments, and as mentioned, by actual defaults. Notably, a defaulted loan balance is removed from the bank’s loan book and fully charged to earnings in the period in which it is declared, less any amount previously recognized in the cumulative provision for credit losses on the balance sheet (a “true up”). Banks to some degree recover amounts deemed in default but generally do not count on it, hence the immediate write-off. As such, the difference between federal government and private bank accounting regarding the recognition of loan defaults results in a huge variance in reported profitability. (See the table below.)
For a true accounting to taxpayers, the government should adopt current fair value bank accounting that recognizes immediate and full recognition of defaults in the period of occurrence. This yields more accurate profitability than a current valuation of future values that depends on somewhat subjective discount rates. If the present value method is retained, the government should at least mitigate distorted reporting by incorporating a discount rate commensurate with real default risk, and replace estimated defaults with actual defaults upon occurrence.
Banks don’t want risk-laden student loans
Unpalatable credit risk is largely why the government had to guarantee student loans to interest banks in participating in the market prior to the current direct loan program. Then how is it that student loans now are more profitable under government’s control when its lending criteria are practically unrestricted below a household income of $200,000? As explained, it is because defaults are substantially understated in budget results according to inappropriate prescribed present value methodology required by the FCRA.
Nevertheless, misinformed media tout the student loan program as profitable. On that basis, Jeffrey Dorfman wrote in Forbes.com in April 2014 about the CBO’s then projected $127 billion profit over the next 10 years. On the assumption that the profit is real, he argues that this business should go to the banks, which would covet such lucrative operations, rather than fund other government spending. Problem is, as noted, the banks would impose appropriate credit standards that would exclude a certain number of needy borrowers, while the government wants to lend to everyone who wants to go to college. Banks also would assess realistic credit losses against profits and recognize actual defaults entirely in the current period as required by corporate accounting rules. And Dorfman points out the banks would securitize their loans to reduce risk and facilitate more profitable lending, which government believes would lead to another financial crisis.
Since bank practices are anathema to government’s interest and its goal of establishing college education as another entitlement, government is not likely to surrender its newly acquired fiefdom. Nor would the banks want such an enterprise so unprofitable by their standards. At the same time, some propose presumed government profits be applied to lower interest rates for borrowers. Does the Department of Education resist this student accommodation because it knows it cannot afford to do so because the program is not really profitable?
Doing the math
The current student loan program
Consider current student loan costs as a function of Treasury financing, collection delinquencies, deferments, defaults, and forgiveness, as well as growing loan volume. According to the Dallas Federal Reserve Bank, the student loan portfolio grew 15% a year from 2003-2014. Projecting that rate over the ten year period 2015-2024, the current $1.3 trillion government loan portfolio would double about every six years and triple in nine years, as collections likely decline. (As noted, the loan balance appears inflated by defaulted balances that are not removed from the loan book, unlike banks.)
Applying the current 13% default rate to the loan balance, adjusted for loans that may not be due because of forbearance, and for default balances that have not been removed, annual defaults would amount to $122 billion in 2015 and compound annually at 13% as the total loan balance increases 15% a year. Coupled with an assumed 3% net interest margin profit, this amounts to taxpayer net losses of $635 billion in the next five years and $1.914 trillion in ten years. And this is in addition to existing federal grant programs for which $323 billion was spent in the 2004-2013 period according to the College Board, as well as guarantee claims on legacy private bank loans under the previous student loan program.
The table below reflects a pro forma
fair value GAAP presentation of projected annual student loan operating losses
for the period 2015-2024 as a bank would report it. The loan balance is assumed to grow 15%
annually from the current $1.3 trillion.
The assumed annual default rate is 13% of the loan balance reduced for
past defaults not removed and for forbearance which is assumed to be 16% of
loans annually. Both rates reflect
recent history according to the Department of Education.
Pro Forma GAAP-Based Profitability 2015-2024
($billions)
a. Federal Reserve
Bank of Dallas reported 15% annual outstanding loan balance growth from
2003-2014.
b. U.S. Department of
Education 2014 Q4. Forbearance refers to
non-paying loans because of deferred payment or loans that are not due because
of the pre-graduation status of the borrower.
c. U.S. Department of
Education 2014 default rate. Denominator
excludes loans in deferment status.
d. Net margin is
affected by delinquencies and income-based payments. Currently, new loan rates average about 5%
vs. about a 2% average 10-year Treasury borrowing rate. Loan rates change periodically according to
market interest rates.
Comparative profitability models appear below for the ten-year period 2015-2024.
Reconciling CBO profitability with GAAP reporting
Quantifying the vast difference between CBO’s $88 billion loss and the $1.9 trillion loss computed here, not to mention the official $135 billion profit, is less than precise because of somewhat opaque government accounting, especially regarding defaults. For example, a CBO document entitled “Fair Value Accounting for Federal Programs” states,
The models that (government) agencies use to project cash flows generally are not made public now, so the transparency of current FCRA estimates is limited.
But clearly the disparity lies in government discount rates that reflect understated default risk estimates, and in the fact that those estimates are not replaced by higher actual default amounts in the budget. Moreover, the CBO recognizes only the present value of those understated default estimates and actual defaults in the current period. By contrast, the conventional GAAP balance sheet accrual and revaluation approach presented here and adopted by banks recognizes a full 13% estimated general default rate in earnings based on recent experience, and records any actual default amounts entirely in the period in which they occur less previous estimates.
Specifically, the CBO model reflects putative defaults totaling $660 billion in the ten year period, implying only a 3.5% default rate as a percentage of the average portfolio balance (adjusted for forbearance and previous defaults), versus a 13% default rate in this analysis.
1,914 net loss (GAAP) vs. 88 net loss (CBO) = 1,826 difference
2,486 defaults (GAAP) – 1,826 = 660 CBO defaults (Assumes the entire net loss difference is attributed to defaults.)
660 CBO defaults = 66 average annual defaults 10 years
1,883 = average projected loan balance over ten years (adjusted for forbearance)
66 average annual defaults (CBO) = 3.5% default rate 1,883 average projected loan balance over ten years
2,486 GAAP defaults = 249 average annual defaults 10 years
249 average annual defaults (GAAP) = 13.2% default rate 1,883
Differences in the net interest margin profit attributable to spread assumptions may also contribute slightly to the variance with CBO. But the discrepancy centers primarily on default assumptions. Not included in the analysis are annual administrative costs which amount to about 1.7% of loan issuance according to Jason Delisle of the New America Foundation. That would amount to some $20 billion over a ten year period.
Absent default recovery data, the analysis assumes that the government collects no recoveries on loans delinquent more than 270 days, so the results could be exaggerated somewhat. But even if the $1.9 trillion projected operating loss were halved, which is beyond conservative, it still would be more than ten times the adjusted $88 billion loss reported by the CBO.
Comparing the growing student debt bubble with the subprime mortgage crisis
For perspective it is fitting to consider how the looming student loan bubble compares and contrasts with the subprime mortgage crisis of 2008.
Subprime mortgage crisis
The genesis of the subprime mortgage crisis was rooted in a widespread politically motivated lowering of lending standards that government imposed on originating banks, as well as on GSEs Fannie Mae and Freddie Mac which purchased their mortgages for securitization. The purpose was to advance government affordable housing policy aimed at increasing home ownership, especially among lower income borrowers. In time, that exposure magnified as banks accelerated subprime loan issuance beyond even the government mandates in order to profit from jettisoning borrower risk through selling the loans to the GSEs, or by shifting it to investors by means of their own private securitizations. At the same time home prices soared amid low mortgage rates sustained by accommodative monetary policy that fueled the demand for houses. Eventually, the sheer magnitude of subprime loans outstanding came to light, especially those held by Fannie and Freddie which had not been fully disclosed, no doubt to avoid alarming the financial markets.
This sudden realization of potential massive defaults devalued related mortgage-backed securities (MBS) held by banks, depleting their capital and precipitating a market liquidity crisis that engendered bank failures and government intervention. The adverse credit implications of the huge inventory of subprime mortgages also contributed to a dramatic drop in home prices. This resulted in up to 20% of underwater borrowers, many of whom stopped payments. Meanwhile, banks stopped new lending and foreclosed on homes. In the ensuing economic downturn, mortgages held by originating banks and those held by institutional investors in the form of private-label mortgage-backed securities suffered mammoth losses that threatened the stability of the financial system. A concomitant collapse in stock prices compounded the calamity.
Taxpayers bore the losses that Fannie Mae and Freddie Mac incurred from guaranteeing defaulted principal and interest payments to investors holding their MBS. Banks bore the losses from loans they retained and from private-label MBS held in their portfolios that largely diminished their capital base. At the same time, bank shareholders suffered hugely, as did individuals from impaired MBS held in pension funds, mutual funds and 401(k) accounts. The GSEs eventually recovered their losses mainly from profits earned while in conservatorship, but also through Department of Justice legal settlements with the banks that sold them mortgages. Non-agency MBS investors were left to their own devices through limited private lawsuits as they secured no relief from the Department of Justice settlements with the issuing banks. Some private MBS investors partially recovered some losses by holding their securities in portfolio, while stock investors who did not sell nearly tripled their investment from their lows. But the economy at large is still struggling for normalization seven years later because of feckless economic policies implemented in the aftermath of the crisis.
Student loan excesses
By comparison, low underwriting standards also apply to government student loans, invoking the specter of another wave of defaults, especially amid a slow economic recovery. Indeed, the government pursues an affordable college education policy for all Americans with little regard for the ability to repay, analogous to the affordable housing policy that triggered the financial crisis. Meantime, borrower expectations could generate increasing losses as they anticipate growing payment forbearance and eventual forgiveness in a move toward ultimate ongoing free taxpayer-funded college education.
As noted, banks are subject to fair value accounting rules where mortgages are recorded on the balance sheet and assessed a charge to earnings for anticipated credit losses in their public financial reporting. By contrast, federal student loans are subject to opaque government net present value accounting where default risk is improperly measured, scantly disclosed and probably concealed to avoid political backlash. As such, defaults are grossly understated in the budget along with discharged debt under new and proposed loan forgiveness programs, largely unbeknownst to the public.
This accounting stealth is akin to hidden exposure fostered by the quiescence of Fannie Mae and Freddie Mac regarding the true amount of subprime mortgages in their portfolio. Misleading student loan disclosure is also analogous to the false imprimatur rating agencies assigned to bank-issued subprime mortgage-backed securities that fooled investors. Sudden public awareness about the real losses taxpayers incur from the government student loan program could trigger a backlash in the financial markets against tax and borrowing increases needed to fund the added government spending. What’s more, while taxpayer-funded GSE and bank bailouts were largely repaid, there is little prospect of recovering ongoing defaults and, of course, forgiven student debt is forgone.
And, as in the aftermath of the mortgage crisis, predatory credit repair organizations exploit student loan borrowers charging fees for services offered free online by the Department of Education.
Subprime mortgages vs. student loans: the aftermath
Mark Adelson, former chief credit officer at Standard & Poor’s, estimates subprime mortgage losses at $750 billion to $2 trillion during the crisis in his paper, “The Deeper Causes of the Financial Crisis: Mortgages Alone Cannot Explain It”, published in the Spring 2013 issue of The Journal of Portfolio Management. According to the table above, the current 13% default rate on an adjusted $1.3 trillion loan portfolio growing at 15% per year suggests $825 billion of defaults in the next five years and $2.486 trillion in ten years. And under a loan forgiveness and free education policy, the losses could be multiples of that depending on when it is implemented. So, the potential damage from the student loan program over time compares with the immediate impact of the subprime loan crisis. However, Mr. Adelson estimates the broader impact of the subprime crisis, including the plunge in world stock prices and the prospective decline in U.S. global GDP, ranges from $5 - $15 trillion.
According to Winston W. Chang, Department of Economics SUNY Buffalo, NY, in his paper entitled, “Financial Crisis of 2007-2010”, $1.3 trillion of first-lien subprime mortgage loans were outstanding in March 2007, shortly before the financial crisis. Those loans were held by the GSEs, banks, non-banks and other institutions primarily in the form of mortgage-backed securities. Interestingly, this exposure corresponds exactly to the current federal student loan balance.
But unlike mortgage securities losses, federal student loan costs to the taxpayer are ongoing and unrecoverable, especially in view of the prospect of forgiveness and subsequent free education. Considering a manifold increase in government student loans and rising rates of default and forgiveness over time, losses could eventually exceed the precipitous costs incurred by investors and taxpayers (agency MBS) on mortgage investments during the financial crisis. But current government student loan accounting suppresses that reality.
The subprime mortgage losses triggered a diffuse shot gun-like collapse of MBS, stock and home prices that fostered a deep recession sustained by prolonged business uncertainty having global economic repercussions. It affected lenders, investors, borrowers, pensioners, homeowners, as well as taxpayers. By contrast, government student loan costs from defaults and forgiveness engender a rifle-like effect that discretely targets U.S. taxpayers over many years without the immediate and shorter-term systemic jolt of the failed subprime mortgage market. Nevertheless, blanket loan forgiveness and eventual free college education, given the sheer magnitude of the prospect, could have serious macroeconomic consequences. Meantime, current student loan excesses threaten a broad economic drag from higher taxes and government debt necessary to finance defaults and forgiveness, in contemplation of eventual widespread ongoing grants.
The movement toward student loan forgiveness and universally free college education
The incremental political move toward complete loan forgiveness and universally free college education is manifest in today’s growing income-based repayments, which applied to some 20% of the student loan portfolio balance in 2014 according to the U.S. Department of Education. In addition, about 15% of the portfolio was subject to forbearance that year. Moreover, increasing default and delinquency rates are creating political pressure for yet more student relief. Incidentally, the student loan burden compounds the new personal and taxpayer health care costs of the Affordable Care Act that spawned the current federal direct loan program.
The existing $1.3 trillion student loan portfolio constitutes the cumulation of loan disbursements, principal repayments, interest and fees received, defaults, and forgiveness to date. If this loan balance were entirely forgiven, it would result in an immediate loss to taxpayers for the entire amount, less estimated defaults recognized in prior periods. In addition, a free college scenario would produce ongoing prospective losses for the entirety of new loans issued each year, currently over $100 billion. Of course, then principal repayments, interest, fees and defaults become moot because loans become grants.
In the free college education model, the entire outstanding loan portfolio should be charged to the current budget. But given the history of unorthodox government student loan accounting, the loss probably would be amortized over many years so not to reveal the actual impact on the economy and taxpayer. Today’s loan portfolio balance of $1.3 trillion, increasing at the 15% average annual growth since 2003, would yield loan forgiveness of $2.6 trillion in 2020, and $4.6 trillion in 2024, less previously recognized estimated default provisions. New loan disbursements subsequent to forgiveness also would be immediately charged to the budget upon payment, or should be.
What’s more, government spending would likely increase at a greater rate. Those who could not afford even government subsidized loans would apply for free college education, perhaps on a whim, without necessarily intending to graduate. And tuition increases in response to greater demand would drive loan amounts higher.
President Obama’s policies
The Obama administration is quietly promoting federal student loan forbearance and forgiveness as a prelude to eventual free taxpayer-funded college education for all. Since 2007, loans of borrowers who work in the non-profit or public sectors are pegged to income and forgiven after ten years. Borrowers working in the private sector see debt forgiven in twenty years. Separately, under the income-based Pay As You Earn (PAYE) plan passed in 2012, borrowers who earn below 150% of the poverty rate pay nothing, while those earning more may pay from 1% to 15% of income. And, this plan may be combined with the aforementioned time-based forgiveness program. In the fall of 2015, by the executive power of the Department of Education, without the approval of Congress, the PAYE program will expand eligibility to a total of six million students.
In addition, the president has proposed a free community college plan, currently under review by Congress, for students with family income under $200,000. And, reacting to fraudulent claims about graduate job placements, President Obama announced that loans entered into in reliance on misrepresentation by colleges will be forgiven. Why not seek restitution from the colleges rather than burden the taxpayer? This policy could invite untold false claims as interpretation is problematic. Is the initiative just a ruse to grease the skid toward complete loan forgiveness?
The prospect of further forgiveness creates huge potential for borrower fraud at taxpayer expense. As mentioned, many current borrowers anticipate the largesse and slow or stop monthly payments. Will taxpayers also be on the hook for the many that never graduate? Indeed, complete loan forgiveness is gaining currency and free college education could be on the way. And once a government entitlement is born, it is difficult to rescind politically because both sides of the political aisle fear a populist backlash.
The Clinton Plan
Bending the college cost curve for students has become a priority. Indeed, in the political arena affordable college education has become as compelling as affordable health care. Democratic presidential candidate Hillary Clinton proposes a plan called “The New College Compact” that eliminates student borrowing for public college education through shared relief among the federal government, the states, the colleges, the borrowers, and of course, the taxpayers. The Department of Education would grant new money to the states funded by higher taxes on upper income earners. In exchange, states would spend more on higher education while colleges shift bloated administrative costs to student benefits such as instruction and athletic facilities.
To discipline the college admission process with respect to the academic and financial wherewithal of applicants, public colleges would continue to pay fees for high student default rates, low graduation rates, and exaggerated student employment prospects after graduation. College non-compliance even risks losing eligibility for federal monies. Families would contribute what they can afford without having to borrow while students work a required 10 hours a week. All students would be debt free throughout their education. In addition, the Clinton initiative would lower interest costs for existing student loan debt outstanding. Separately, the existing income-based PAYE program and free two- year community college would continue.
Clinton estimates the plan to cost $350 billion over 10 years, but that is apparently according to historically muddled government student loan accounting. The CBO projects new loans of $1.265 billion for the 10 year period 2014-2023. Assuming 70% of those loans finance public college enrollment, as reported by The College Board for the prior decade, $886 billion would approximate the borrowing that the Clinton plan would eliminate and replace by taxpayer funded grants, not $350 billion.
Where is the student savings coming from in converting from borrower to grantee? Sharing costs between the federal government and the states does not relieve the taxpayer’s burden. As noted, higher taxes on upper income earners will fund the incremental government cost. And shifting college spending from administration to faculty and student benefits does not lower overall costs. The student household pays what it can afford according to a means test in exchange for not carrying any debt. Federal and state taxpayers bear the cost of a grant for what the household cannot afford, or what would have been part of repayable student debt in the current program. As a result, the student pays some fraction of the college cost while enrolled as the taxpayer pays the balance. This contrasts with the current program where the student pays the entire cost in the form of loan principal and interest over many years after graduation. As greater demand for college education inevitably ensues under this more affordable plan, the cost to taxpayers will burgeon.
The root causes of student borrowing
Government
Political and cultural forces underlie the federal student loan development as the left advances its wealth redistributionist agenda by promoting a college education as a new inviolable government entitlement. The goal is another nationalized benefit like health care, and akin to increasingly liberalized home finance through the dominance of Fannie Mae and Freddie Mac in the mortgage market. Federal educational aid covers undergraduate and graduate students, and even illegal aliens in some states. And President Obama plans to restore Pell grants to prisoners discontinued in 1994 in a move to facilitate transition to private life and reduce recidivism. Indeed, the federal student loan program is an extension of increasing federal influence over primary and secondary education. At the same time, academia serves as a liberal indoctrination camp amid an environment of political correctness gone amuck in a cozy symbiosis with government.
In conjunction with the passage of Obamacare, the government took over the student loan market as an alternative to guaranteeing private bank loans. All the better to implement its redistributionist bent. Of course, the banks could not support the student loan market without guarantees, and certainly not in the wake of the financial crisis and the slow economic recovery. On account of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 passed in reaction to the subprime mortgage crisis, banks had to impose stricter underwriting standards and comply with more stringent capital requirements. This does not comport with lending to borrowers with little credit history and whose future income and ability to pay are difficult to assess. Now the government lends directly with virtually no regard for credit risk, while the banks concentrate on refinancing student loans for low risk borrowers such as doctors, lawyers and other professionals. Today, about 93% of outstanding student loan balances are held by the federal government, according to The Wall Street Journal.
However, the Student Loan Marketing Association (SLM), a publicly traded company known as Sallie Mae, continues to originate education loans funded by deposits and securitization of its portfolio. As a government sponsored enterprise (GSE) analogous to mortgage counterparts, Fannie and Freddie, defaults on its loans also are borne by taxpayers.
Graduate school loans constitute 40% of all student debt and 14% of borrowers reports Josh Mitchell in The Wall Street Journal 8/19/15. These loans are potentially more ominous for the taxpayer because they’re unrestricted, while undergraduate loans are limited to $57,500. Many go to graduate school just to postpone undergraduate loan payments. Though graduate loan profits currently defray undergraduate losses, the New York Federal Reserve reports that 1.8 million graduate borrowers owe over $100,000, while some medical and law students owe multiples of that. Because of the onerous debt, many graduate students specializing in less lucrative areas wind up in modest jobs rendering them unable to repay. As a result, they avail themselves of payment deferment programs and income-based plans while anticipating eventual forgiveness.
The increasing number of overextended borrowers engenders a bourgeoning call for taxpayer bailout, especially in view of the chronically discouraging employment outlook. Of course, the seeds for this eventuality partly lie in the absence of lending criteria, graduate school borrowing caps, and restrictions on course of study and institutions attended. But the federal lending policy is a great opportunity to expand the size and influence of government to the benefit of the political class.
Colleges
Tuition rises steadily as more government money becomes available thus creating the need for more student debt which now averages some $27,000 upon finishing a four-year college according to The College Board. Since the late 1970s tuition has increased more than four times the consumer price index, according to Frank Mussano and Robert V. Iosue, co-authors of “College Tuition: Four Decades of Financial Deception”. According to Peter Cappelli, professor of management at the Wharton School of the University of Pennsylvania, the 2015 graduate carries on average $35,000 of debt. The Wall Street Journal cites a 2006 study by Ohio economist Richard Vedder that claims every dollar of aid raised tuition 35 cents. Today, he says, every dollar increase in the subsidized-loan cap raises the cost 65 cents. To be fair, some of the increase is a result of fiscal pressures in the states since the financial crisis that have caused them to cut funding to their public colleges forcing them to raise tuition to cover the shortfall. Colleges will have to get used to cutbacks in state funding explains Bruce D. Benson, president of the University of Colorado in an op ed to The Wall Street Journal on 8/27/15. Seeing the handwriting on the wall amid progressive fiscal decline from a significant reduction of state support, he led a campaign for administrative efficiencies that netted the university over $100 million in the last few years from cost reduction, asset sales and additional revenues. Specifically, he terminated 148 administrators, took procurement and property management in house, adopted self-insurance, secured volume discounts for the prescription drugs program, and converted a faculty and staff newspaper to an online publication. This reduced overhead to 37% below that of national peers. He also sold unnecessary assets including a conference center and the former medical center. In addition, he consolidated a separate fundraising foundation increasing money raised by 20%, expanded online education, and doubled enrollment from abroad. Truly a model toward making college more affordable. Students
Extended graduation periods, commonly up to six years, diminish repayment prospects because the probability of graduation, and thus better paying employment, declines. Jennifer Barrett, Personal Finance Editor with CNBC.com, reports that only 37% of students at public four-year colleges graduate in five years while 57% at private colleges do. Peter Cappelli reports that only 40% of full-time students earn a degree in four years. Of course, that means many never graduate. Protracted college attendance and substantial dropout rates make federal student loan portfolios larger and riskier.
Employers
Meanwhile, employers require or prefer a college degree for many activities that once required only a high school diploma simply because graduates are available. This fosters the understandable notion that college is essential to achieve reasonable prosperity as non-graduates face limited options that offer significantly lower income. But because of failed government economic policy in the aftermath of the financial crisis, many graduates are unemployed or holding lower level jobs placing pressure on default rates at taxpayer expense.
Counterargument
Nevertheless, Lamar Alexander, chairman of the Senate’s education committee, asserts in a Wall Street Journal op ed on 7/7/15 that college is still quite affordable given Pell grants and other federal and state financial aid, as well as concessions by the colleges. With all the angst about student debt, he says on average it’s about the same as a new car loan which everyone takes for granted. Stories about six figure debt apply only to about 4% of all student loans, 90% of which are issued to doctors, lawyers and other post-graduates. He also touts the value of inexpensive community colleges. Mr. Alexander suggests reducing tuition by curtailing the costly federal compliance rules which add one-third to tuition at Vanderbilt University, for example. Finally, he warns that if too many forgo college because of perceived financial barriers the country faces serious worker shortages in a few years.
Colleges follow government money
Access to government education funds also attracts dubious for-profit schools. These predators target veterans and minorities while reportedly sporting a 10% graduate rate and a loan default rate 40% higher than average, and garnering little recognition in the job market amid bogus promises of ready employment. Even prestigious New York University promotes special programs via subway posters aimed at minorities, judging by the pictures.
To some extent, accredited institutions expand their curricula and lower academic standards to accommodate customers with government money in hand, especially when too many seats are empty. They even provide extensive remedial programs and re-tread high school courses in order to admit students less qualified by traditional standards. Many colleges seem to offer progressively less academically in exchange for continually rising tuition that bears little relation to direct educational costs, as they rely heavily on low paid adjunct professors and graduate students in the classroom. So anomalous is operating economics that colleges raise tuition just to mime the competition. It’s about brand. Of course, certain scholarships are offered to defray costs, but the discounted sticker price continues to rise as well. So many college students, yet the U.S. suffers a dearth of qualified candidates in technology that creates an overreliance on immigrants with H-1B visas. Heck, even American journalists seem to be in short supply. Witness all the bylines with foreign names.
Indeed, the average cost of attending a four-year private university has tripled since 1990 to about $42,500 per year according to Jennifer Barrett, CNBC.com. Note that this coincides with flat parental incomes for half that period. Partial scholarships are available but they often just discount already inflated tuition and may be marginal. Much of the tuition funds construction for extravagant facilities in the hope of attracting students attached to government loans. Other monies support certain frivolous college ranking criteria, as well as outsize administrative bureaucracy.
Higher learning may be an afterthought in academia today for both economic and political reasons. Questionable tuition increases drive up burdensome student debt that increasingly compels a populist move toward universally free college education. Do the benefits of a near universally educated society justify the cost to the taxpayer and the economy?
Endowments and philanthropy
Many believe throwing taxpayer money at social ills is automatically curative while it also assuages some personal guilt. Similarly, some naively think donating to colleges and universities necessarily advances education as a societal benefit. To be sure, not-for-profit institutions, and especially private colleges, depend on philanthropy to fund the huge costs of real estate and numerous capital projects. This is because tuition plus room and board charges barely cover just operating costs. In fact, most private colleges cannot meet the demand for financial aid. To compensate, some schools rent premises for weddings, sports camps, corporate retreats and adult education seminars to cover tuition shortfalls as enrollment and endowments decline and student financial aid needs grow. As such, educational giving is a noble exercise. This year, former New York mayor Michael Bloomberg donated $100 million to Cornell Tech. And hedge fund titan John Paulson pledged $400 million to Harvard. But what percentage of donations fund core educational activities rather than bloated administration, superfluous capital projects and endowment building?
Better that excessive capital spending be applied to lowering tuition. How often do colleges, large and small, spend on building prestigious sports franchises? Yes, the television and gate revenues and added alumni donations from a highly ranked team could be used to enhance the educational offering, but to what extent are they? Much of it goes to larger facilities and highly paid coaches. And this mindset extends to women’s athletics too. In addition, large universities with multi-billion dollar endowments just throwing off investment income could lower tuition to keep college education affordable and less dependent on government student financing. After all, they are “non-profit” institutions. But, again, the entrenched government/academia axis will not readily diminish itself.
Many donors think they are supporting better education, but, in fact, too often their money is used, unbeknownst to them, to promote politically motivated interests or just enrich the endowment. For example, annual alumni fund raisers are largely aimed at subsidizing minority students to further the diversity agenda. Even contributions specifically dedicated to a particular purpose by a donor over time can become misdirected. Consider the billionaire Yale alumnus who in 1991 stipulated his $20 million contribution be dedicated to expanding the Western civilization curricula. He had to withdraw his pledge four years later after the institution failed even to begin implementing the program.
The declining return on investment
At what point do rising college costs, falling income prospects, and burdensome debt justify alternatives to a four-year college education? According to Federal Reserve data cited by Peter Cappelli in his current book “Will College Pay Off?”, more than 40% of graduates work in jobs that did not require a college degree. To be sure, the graduate still has an advantage over the non-graduate but at some point diminishing returns set in. According to Jennifer Barrett of CNBC.com, the Federal Reserve Bank of New York reports a 56% differential in average earnings for the last 30 years and $1million over a lifetime.
But Peter Cappelli says, graduates earn more partly because they are displacing high school graduates in lower jobs leaving them even more in the lurch. For example, he points out that 60% of parking lot attendants have some college education. Public concern heightens as more question a college education as a value proposition. Chronic unemployment and underemployment among college graduates as a residual of the Great Recession and the financial crisis has engendered some new thinking about careers. Of course, growth-oriented economic policies that create jobs would help, but even in good times a certain critical mass seems to have been reached respecting the cost of college education.
Reversing the trend
The upshot could be a cultural sea change that restores general interest in community college and the trades. Working class jobs can provide nice livings for well skilled workers. For example, it seems the only licensed plumbers and electricians today are the business owners while the employees, many of them immigrants, have limited skills and rapport with customers. Smart would be college students could instead own or serve those businesses through legitimate trade school training and prosper handsomely. Similarly, restored shop classes in the high schools can teach non-academically inclined students marketable skills as an alternative to being lured into college under low admission standards only to fail and drown in debt.
In theory, college educated labor surpluses and superfluity will diminish as many workers gravitate back to the trades and other blue collar professions. And corporate employers facing resultant labor shortages will re-open many jobs to non-graduates like they used to. This will result in fewer college graduates, much lower college costs, significantly less need for federal financial aid at taxpayer expense, and perhaps a more productive economy. As a consequence, colleges will be left for the truly academically qualified and oriented at an affordable price. Nevertheless, one has to square this notion with the new economy that increasingly places a premium on the highly educated in certain sectors.
Certainly, a traditional college education is valuable in its own right, irrespective of vocational pursuit. It fosters critical thinking, greater awareness, better communication and literacy, and personal edification. This is why policemen and firemen, for example, are encouraged and sometimes required to earn college degrees even though education may not be functionally needed for the job. Indeed, a genteel citizenry is a societal benefit. Community colleges can serve that end to some degree as an alternative to a four-year college program. There’s even an argument for prisoner education programs considering the possibly better chances of rehabilitation and lower recidivism rates.
But the cost-benefit calculus of higher education has changed for students today. More blue collar career choices redolent of yesteryear’s paradigm can alleviate the imbalances manifest in chronic unemployment and underemployment, stagnant incomes, and inflated college costs. As to federal control over higher education, government will not relinquish its newly acquired power over massive student loan debt and the political allegiance it garners. As noted, the student loan takeover from banks is a prelude to blanket loan forgiveness and a free college taxpayer-funded entitlement to the benefit of the colleges and big government politics. To be sure, the left will demagogue any re-privatization proposals through class warfare tactics.
Conclusion
Continued double-digit annual growth in government student loans outstanding invites an increasingly tenuous asset bubble. The costly student defaults and loan forgiveness that ultimately result create pressure for higher taxes, as well as more federal borrowing that exacerbates the current $18 billion national debt, both at the expense of much needed economic growth. So do growing delinquencies and deferred payment allowances that hamper liquidity. What's more, too many overleveraged households are not healthy either.
Bogus reports of student loan profits contribute to greater general spending in Washington on the mistaken ground the loan program is affordable. Government should adopt an alternative fair value accounting methodology based on periodic balance sheet accrual and revaluation applied by private banks that would disclose real exposure to taxpayers. Public knowledge of the true cost of the student loan program and proposals for free college education would set the stage for appropriate restrictions by Congress and the voters.
But strong
wealth redistributionist political forces resist honest disclosure of student
loan losses that challenges the ongoing impetus for bigger government. The absence of healthy economic growth and
job creation essential to liquidate the student loan overhang fosters increasing
support for a government solution that could be irreversible.
©2015 William J. Dodwell
The Fed’s Folly: Not Normalizing Rates Quickly After the Great Recession
By William J. Dodwell March 1, 2016
For more than seven years the Federal Reserve Bank’s zero interest-rate policy (ZIRP) coupled with six years of quantitative easing (QE) has failed to generate normal economic recovery in the aftermath of the 2008 financial crisis and the Great Recession. The Fed’s policy of too little too long has yielded only 2% annual economic growth in that period, less than half the historical recovery rate after a recession. This GDP shortfall has been at the expense of millions of jobs that would have restored widespread prosperity. The Fed’s recent 25 basis point increase in the benchmark federal funds rate to the .25% - .5% range is hardly enough.
The solution is to reverse the ineffectual process that brought down interest rates so low as to force investors from traditional savings and investments into riskier financial assets for higher returns. This means quickly raising short-term rates. Ordinarily, rate hikes aim to withdraw liquidity from the economy to stem inflation. But in today's special circumstances of near-zero rates they must be raised enough to attract capital away from excess investment in stocks, junk bonds and emerging market securities inflated by the mass escape to better returns, and back to conventional bank deposits and money market funds that can fund loans in the real economy again. As such, normalized interest rates based on a true equilibrium in the credit markets would compensate savers with higher income, as well as incentivize banks through greater lending profitability. The resulting consumption and investment, particularly as they benefit small businesses that create most jobs, would create the economic growth expected 6 ½ years into the recovery. Even a mild recession in the transition might justify correcting the long-term shortfall in economic growth since the Great Recession. However, it is not likely raising rates from near-zero would pose that threat.
The waiting game did not work
The problem is Fed chairs Ben Bernanke and Janet Yellen have been too skittish about reactions to their policies in the financial markets to do what is necessary. Certainly, financial stability was the priority in the wake of the 2008 financial crisis. But long-term needs should not be undermined by undue fear of rocking the boat, or by almost knee-jerk responses to short-term market trading decisions that are largely speculative. Consider the courage of Fed Chairman Paul Volcker in 1980 when, in different circumstances, he began to rapidly raise interest rates to 21% triggering a short but painful recession in 1982-1983. That boldness subsequently ushered in almost 20 years of nearly uninterrupted economic expansion that created tens of millions of jobs.
Since the financial crisis the Fed’s criteria for raising short-term rates has centered on two principal targets: a 2% inflation rate and a 5% unemployment rate. As such, the Fed has relied too much on the discredited Phillips Curve which posits an inverse relationship between the rates of inflation and unemployment. Indeed, Yellin has indicated a particular preoccupation with labor markets in respect of interest-rate policy. Other factors the Fed considers include domestic and global GDP growth, bond yields, corporate profits, the dollar, and the prices of stocks and commodities. But waiting for harmony among these variables in stable financial markets does not correct the misallocation of credit and capital created by unconventional post-crisis monetary policy.
Inflation is still only 1.5% while nominal unemployment reached 4.9%. But the latter is distorted by too many part-time and low-paying jobs and the lowest labor participation rate in almost 40 years as some 95 million discouraged unemployed left the work force. As stated, GDP growth has averaged about 2% since the Great Recession ended in 2009 while Europe, Japan and China have been sluggish. After seven years of waiting to satisfy its criteria, the Fed decided to pull the trigger on a rate increase in December 2015 despite continued low inflation and slow growth, to the consternation of many traditionalists. Until then, the fear of recession and volatility in the financial markets kept postponing an initial rate hike, and now deters plans for further increases. Indeed, persistent low inflation stokes concerns of deflation from rate hikes. If only the Fed instead would act aggressively and independently like Paul Volcker. Structural monetary change involving normalized interest rates is needed to restore traditional balance essential for economic growth.
The effects of the Fed’s failed monetary policy
Since the end of the Great Recession in June 2009 the Fed has kept the overnight interbank federal funds rate near-zero by means of traditional open market operations of the Federal Open Market Committee (FOMC) in the hope of sparking recovery through more borrowing and spending. Accordingly, that Fed rate established a floor throughout the short-term credit markets suppressing the rates on bank loans and deposits, as well as money market instruments including bank C/D’s, repurchase agreements, and commercial paper.
The Fed also attempted to lower longer term rates through six years of quantitative easing (QE) to further boost the economy, with a particular eye toward stimulating the housing sector through lower mortgage rates. QE also was meant to drive up financial asset prices to foster a wealth effect that encourages consumer spending. This policy involved the Fed’s purchase of Treasury bonds and agency mortgage-backed securities issued by Fannie Mae and Freddie Mac, while simultaneously crediting excess bank reserves held at the Fed that injected liquidity in the financial system.
That new bank liquidity ultimately wended through the financial system as banks used it to fund the “risk-on” purchase of stocks and bonds by hedge funds, pension funds, mutual funds and other financial institutions seeking higher returns in a low interest-rate environment. In fact, some asset-management firms are looking to invest in low doc Alt-A mortgages, so notorious during the financial crisis, to capture outsize yields up to 8%. The banks, using the funds created by QE, typically finance the purchase of risky assets by financial institutions via repurchase agreements with them. Or, the banks purchased riskless Treasuries from those firms outright allowing them to replace them with higher return assets.
As a consequence of this this yield-chasing, capital has gravitated to investment portfolios in the financial economy at the expense of bank loans that finance investment in the real economy and the economic growth that would ensue. Many expected the enormous infusion of liquidity from QE to create inflation in the real economy. Instead, that inflation pervades the financial economy in the form of overvalued securities in the absence of high enough interest rates to motivate lending through the banking system that would engender new investment. In fact, M2, the money supply measure that includes savings deposits, money market funds and other time deposits that traditionally fund bank loans, has been almost stagnant since the financial crisis. The strong dollar with its safe haven status also has muted general inflation needed to stimulate flow in the economy.
As a result of QE, some $2.6 trillion is held by banks as excess reserves loaned to the Fed on which they accrue interest income at a rate higher than the federal funds rate they receive on overnight interbank loans. This incentive therefore restricts interbank lending needed to meet borrowing demand where it arises, thus limiting credit availability for individuals and businesses. Instead of bank loans, many borrowers rely on expensive unregulated non-bank online lenders.
Through both the FOMC and QE maneuvers to lower rates the Fed hoped to increase subpar inflation that would set the stage for 3% economic growth and 5% unemployment. Again, to date the Fed has achieved only 2% average annual growth in the weakest recovery on record. This combines with current 1.5% inflation and a reduction of nominal unemployment from 10.0% to a misleading 4.9%.
By lowering the Fed benchmark rate to near-zero the central bank lost the ability to further manage monetary policy through normal open market operations because a virtual floor had been reached. (European and Japanese central banks have resorted to negative rates to stimulate demand but to no avail.) Alternatively, the Fed manipulates the interest rate it pays banks on their excess reserves (IOER) to influence short-term rates across the board, including the fed funds rate. It also moves rates by entering into repurchase agreements whereby it borrows from the banks (which hold counterparty reverse repurchase agreements) to add or withdraw liquidity in the financial system as needed. The discount rate the Fed charges banks for short-term loans and the reserve requirement imposed on member banks are other levers for influencing short-term rates throughout the economy.
The Fed’s zero interest-rate policy and QE have created the following distortions:
Divining the right short-term interest rate
Indeed, protracted near-zero interest rates have limited the U.S. economy to far below its potential at the expense of livelihoods, careers, family formation and even mental and emotional health. What is an optimal short-term interest rate? Over time the Fed has alternated between discretionary and prescriptive approaches to rate setting.
Under the gold standard that prevailed in the U.S. in some form until 1971, the dollar was linked to gold at $35 an ounce. This kept the money supply, short-term interest rates and the dollar stable. In addition, bank interest rates were fixed under Regulation Q until phased out in the 1970s and 1980s as money market funds offering rising market rates competed with banks for deposits. Steve Forbes in his book, “Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It”, proposes a new version of the gold standard. He calls for a fixed dollar/gold ratio commensurate with the nature of today’s money markets to be maintained by the Fed through its open market operations. This would preclude inflation and interest-rate fluctuation, as well as ensure a stable dollar, as the central bank would be prohibited by law from having any monetary discretion, except in emergencies such as 9/11 circumstances. Forbes’ model probably would raise interest rates well above their anomalous lows to foster the economic change needed today. But the political left is averse to a policy that that would interfere with the freedom to accommodate ever-growing government spending through money creation.
In 1993 the acclaimed Stanford economist, John Taylor, created a model that became known as the “Taylor rule” that establishes an optimal nominal federal funds rate to be a function of inflation and GDP growth rates as defined. The resulting equilibrium interest rate consistent with full employment and price stability preempts central bank discretion to ensure changes in inflation and GDP growth are taken into account appropriately. Supposedly, the Taylor rule applied within the tolerances of financial stability reduces market uncertainty about future actions of the Fed. But QNB Financial Services reports that the Taylor rule currently calls for a fed funds rate of not more than 1%, far too low to motivate savers and investors back to bank deposits and money market instruments needed to fund the real economy. What's more, Ben Bernanke points out in a paper for Brookings 4/28/15 that the Taylor rule provides no guidance for negative real (inflation adjusted) fed fund rates which have prevailed almost without interruption since the crisis.
Fed Chair Yellen opposes such a rules-based approach to monetary policy as too restrictive. She believes the Fed needs flexibility tailored to circumstances to avoid overshooting the mark on the high side or low side. The Fed currently strives toward the equilibrium inflation-adjusted federal funds rate at which credit supply and demand intersect amid full employment and stable inflation, the so-called natural interest rate. That real interest rate has been negative throughout the post-crisis period to the detriment of the nation.
Martin Feldstein, former chairman of the Council of Economic Advisors under President Reagan, wrote in The Wall Street Journal 1/14/16 that the low rates in the aftermath of the financial crisis will generate inflation that will raise long-term rates. As such, he calls for higher rates to control inflation consistent with full employment. This is important because excess inflation undermines the dollar to reduce its purchasing power and devalue assets. As it happens, anomalous safe-haven investing in reaction to market turmoil, as well as weak business investment, counteract Feldstein’s theory by depressing interest rates, despite an easy money policy. Accordingly, the 10-year Treasury yields only 1.7% with nominal full employment, or about .2 % on an inflation-adjusted basis.
But the question is how to correct today’s aberration of inflated financial assets created by massive quantitative easing that has produced a $4.5 trillion portfolio at the Fed and has starved the real economy of adequate capital. Reversing this excess requires incentives in the form of high enough interest rates to redirect investment back to Main Street. While too much economic disruption is to be avoided, obsessing about a perfect confluence of inflation, unemployment and growth in today’s circumstances is not the solution for restoring normal economic performance.
A return to monetary normalcy
A quick normalization of rates would correct the abnormalities and promote capital investment and economic growth. Also needed are tax cuts and deregulation enacted by Congress and the president. The Fed has to return to conventional FOMC buying and selling of short-term Treasuries from and to banks to control short-term rates in the economy, a tool which collapsed with zero rates. Quantitative easing ended in October 2014 but the diminution of the resulting $4.5 trillion bond portfolio has to be managed effectively.
Currently the Fed reinvests portfolio securities as they mature because it needs the interest income to pay interest expense on its $2.6 trillion of excess bank reserves. Additionally, the Fed wants to avoid disrupting the bond markets by selling too many securities at once. The Fed is also averse to withdrawing as a ready buyer of refunded Treasury issues which could significantly increase interest costs to the Treasury. Since 2008 the Fed has returned over $500 billion of portfolio profits to the Treasury. Additional profits fund the Consumer Financial Protection Bureau created by Dodd-Frank, as well as federal infrastructure projects approved in the highway bill passed December 2015. Nonetheless, eventually the Fed is going to have to run off its portfolio as securities mature. Selling them as rates rise would create realized losses that the Fed’s capital might not be able to absorb, but the process can be managed to minimize that.
Concomitant with portfolio liquidation, the Fed would reduce excess reserves of member banks and the interest cost paid on them while relying more on cheaper repurchase agreements and Treasury deposits to finance the remaining portfolio. In addition, raising the IOER on remaining reserves would set a floor for other money market rates that supports a higher general interest-rate environment that attracts capital back into the banking system for lending. But as the portfolio wanes the Fed would rely more on interest owed on repurchase agreements with banks to influence interest rates than on IOER.
Sheila Blair, former head of the Federal Deposit Insurance Corporation (FDIC), objects to the Fed using repurchase agreements to set interest rates as explained in her 7/25/14 article in The Wall Street Journal. She fears that banks would tend to enter into riskless reverse repos with the Fed rather than with other banks, thus reducing liquidity in the financial system. This would be true particularly in times of market stress when counterparty risk renders the Fed a preferred borrower. Such a scenario also would hurt non-bank issuers of commercial paper as buyers become scarce.
Eventually, with the Fed’s portfolio and excess reserves reduced to normal levels, the central bank should go back to traditional FOMC operations to set short-term interest rates consistent with equilibrium in the credit markets. However, having experienced QE on such a large scale it remains to be seen whether the Fed would be tempted to resort to massive bond buying again as a tool to inflate the economy and accommodate the Treasury. With this precedent are the markets unduly conditioned to Fed intervention in times of turmoil in contravention to sustained interest-rate normalization?
The fed funds rate could be raised to the market equilibrium point in about 18 months. That would effectively redirect capital back to the banking system and improve margins to encourage general lending amid a more costly regulatory environment. This probably means a 4% nominal rate and a 2% real rate. The 4% nominal rate was last recorded in 2007 before the financial crisis. Clearly, small increments over several years are insufficient. The Fed needs an epiphany to reject the notion that rates cannot be raised because of a soft economy. That principle applies under normal monetary conditions. Chronic near-zero rates are hardly normal, and they have failed to spark a traditional recovery.
The drop in stocks, junk bonds, commodities, and emerging market debt in response to diminished demand in China and uncertainty about its foreign-exchange policy have prompted a countervailing move to safe-haven Treasuries that challenges the effort to raise rates. Appropriately high rates in the credit markets will garner capital to the money markets again. This will overcome safe-haven investing to produce a more productive economy that in time will support global markets.
Higher interest rates will deflate overvalued stocks and bonds to normal valuations and cause some disruption for investors and the economy. But price/earnings ratios for stocks had substantially exceeded historical averages, and some bond yields, particularly in Europe and Japan, are anomalously negative. Lower financial asset valuations resulting from higher interest rates will help to avoid transferring that inflation to the real economy when those assets move back to money market instruments. So, a significant correction is in order and largely anticipated inasmuch as financial asset appreciation has been a trade-off for real economic growth. A diminished wealth-effect from portfolio repricing will likely temper consumption, but higher savings income will help to offset it.
Zero rates helped to end the Great Recession and bring down unemployment. But having waited 6 1/2 years into the recovery to start raising them, the Fed risks having to reverse course as the business expansion nears an end. One has to wonder whether the Fed has been averse to normalizing rates so long in order to capture tremendous savings on borrowing costs for the government with its implications for increased entitlement spending. Some suspect the motivation might be to prop up the financial markets to protect the investor class.
Headwinds against normalization
Many believe the sharp decline in stock prices beginning in January 2016 is a sign that a mere ¼ point interest-rate hike the previous month was premature and deleterious amid low inflation and slow growth. This is not likely. Rather, turmoil in the financial markets reflects the ongoing economic slowdown in China, the collapse of oil and other commodity prices and the attendant bank loan defaults and sell-off in junk bonds, as well as the strong dollar. Besides, the market corrections just return financial assets to normal valuations inflated by aberrational capital allocation in reaction to ZIRP. In fact, the S&P 500 price/earnings ratio is still 35% above the historical average.
Lower returns from stocks, junk bonds and emerging market investments may set the stage for the re-allocation of capital back to the real economy, perhaps after a pit stop in safe haven Treasuries. And certain economic data support persistent rate increases that will make bank lending more attractive. They include: a tightening labor market, rising income, improving home prices, high household net worth, still relatively high stock valuations, and, according to Morgan Stanley, the prospect of good job growth, solidified corporate balance sheets, and lower consumer debt in the next four years.
But the Fed has been so sensitive to roiling the financial markets that its commitment to sufficiently sizable and frequent rate hikes is highly questionable. Indeed, some warning signs appear. For example, in January 2016 home sales dropped to a 12 month low. In addition, the February 2016 purchasing managers’ index for the dominant service sector declined to the lowest level since October 2013 reflecting continued slowing global growth. After the December rate increase the Fed said it expects to raise the benchmark rate to over 3% in three years. This is too cautious after a 6 ½ year wait. To be sure, overreaction (volatility) in the financial markets to aggressive monetary policy or other economic events traditionally undermines business confidence to throttle economic activity and scare the Fed into retreat. But if only the central bank would display the leadership that Paul Volcker did in 1980 and endure the disruption while adhering to a plan for higher rates. This mindset recognizes that unstable markets will eventually adjust when resulting new growth shifts capital away from inflated financial assets and back to the business and household sectors that drive economic expansion.
Paul Volcker’s 1980s solution
In 1980 the problem of combined slow growth and high inflation produced an imbalance between liquidity and production in the economy. The condition, dubbed “stagflation”, was described by what economists said was “too much money chasing too few goods” as inflation grew throughout most of the 1970s spurred by excessive monetary easing to accommodate military spending during the Viet Nam War. In fact, the so-called “misery index”, which combines the rates of inflation and unemployment, peaked at almost 22 during the Carter administration and defined that presidency.
In response, Fed Chairman Paul Volcker, appointed by President Carter in 1979, switched focus from the traditional fed funds rate itself to targeting monetary aggregates called M1, M2 and M3, that is, measures of checking accounts, time deposits and money market balances outstanding. This policy wrung inflation out of the economy once and for all through repeated monetary tightening. Accordingly, during Volcker’s tenure the bank prime rate moved from 11% in August 1979 to 21.5% in December 1980 and back down to 8.25% when his term ended in August 1987. As a consequence, a sharp recession ensued for 16 months in 1982-1983 as many small businesses failed because of sky-high financing costs. But Volcker’s derring-do gave way to nearly 20 years of nearly continuous economic expansion and prosperity.
Today the economy is beset by slow growth and low inflation, also caused by excessive monetary easing. But this time the Fed, in an effort to stimulate the economy from the effects of the 2008 financial crisis, lowered interest rates so much as to divert capital away from the production of goods and services and towards investment in financial assets. Because of soft demand in the economy in the wake of the financial crisis and the attendant uncertainty, the extra liquidity from low interest rates and quantitative easing designed to stimulate recovery in the real economy was not invested in production.
Rather, that liquidity gravitated to stocks, bonds and currencies to escape the near-zero returns on traditional low risk bank deposits and money market instruments, inflating valuations in the process. The task now is to raise rates to attract capital away from financial assets back to business investment in plant, equipment and inventory. The higher rates improve lending margins giving banks incentive to finance that expansion. At the same time, interest income to savers rises to ultimately stimulate some consumption.
The extreme scenario of the early 1980s may have posed a greater sense of urgency than the post-2008 crisis economy with its modicum of growth and low inflation, strong dollar, the wealth effect of inflated financial assets, and the smugness of having overcome the greatest economic jolt since the Great Depression. Hence today’s resistance to normalizing rates. But if the Fed had begun sufficiently raising interest rates in 2009 at the start of the recovery, the economy likely would have grown much better than the subsequent 2% average annual rate, even with an intermittent recession. Indeed, rate increases that would precipitate a 2% contraction followed by normal 4% or more annual growth over the last six years coming out of the recession would have produced much more prosperity than experienced. That’s pretty compelling. But the Fed is too timid to take such radical action.
A new normal?
Some believe 2% annual growth may be the new normal what with onerous financial regulation in the aftermath of the financial crisis and an ever-expanding government. Regulatory overkill from the Dodd-Frank Act has restricted liquidity and forced banks into riskless Treasuries or idle cash instead of loans. Many small banks have closed because of the costly compliance burden. New rules dictating the amount and type of capital set aside to absorb potential bank losses, limits on exposure to counterparty risk, and provisions to avoid depositor runs may very well limit credit availability needed for traditional growth. Yet, loan underwriting standards have slipped in some quarters, thus raising the specter of another financial crisis eventually. Meanwhile, the national debt has reached $19 trillion with no sign of future restraint. Indeed, prosperity depends on appropriate monetary and fiscal policy, as well as regulatory relief. Unfortunately, politics precludes real solutions.
By traditional standards, the current economic environment of persistent low inflation and slow growth, near historically low Treasury yields, a strong safe-haven dollar, declining profits, and geopolitical unrest created pressure on the Fed to relent on raising rates and even concede a new normal. Indeed, an aging population and lower productivity drag on the economy, contributing to merely 1.8% GDP growth in 2015, and only a .7% annual rate in the fourth quarter of the seventh year of the recovery. In addition, the strong dollar undercuts the Fed’s inflation target making imports cheaper. It also suppresses prices for commodity producers thus weighing on global growth. And, it makes dollar-denominated emerging market debt more onerous. At the same time, weaker foreign currencies make U.S. exports less competitive while slow growth in emerging markets invites competitive devaluations that make their imports more expensive. What’s more, divergent monetary policies in Europe and Japan counteract efforts by the Fed to normalize interest rates as other central banks accelerate quantitative easing, even to the point of negative interest rates.
Nonetheless, the U.S. is still in a better position than the rest of the world to start rate normalization that can lead the global economy out of the longstanding malaise. A reallocation of capital fostered by sufficiently higher short-term interest rates, as well as tax and regulatory relief, will yield the normal economic growth that has eluded the Fed for too long.
Unconventional monetary easing calls for unconventional unwinding process
In the aftermath of the subprime mortgage crisis the Fed took unprecedented action under dire economic conditions to save the financial system and stimulate the economy. The Fed lowered short-term interest rates to near-zero and suppressed longer term rates through the purchase of trillions of dollars of Treasury and agency mortgage-backed securities in its six-year quantitative easing program, adding massive liquidity to the banking system.
Initially, many analysts feared excessive inflation would result as the newly created credit pervades the real economy through bank lending. But in nearly seven years that has not happened because near historically low interest rates prevent banks from lending profitably, especially in view of new restrictive financial regulation. Low rates also discourage savers and investors from placing capital in traditional bank deposits and money market instruments that finance business investment. As a consequence, the rise in the supply and demand for goods and services never fully materialized from the post-crisis monetary stimulus resulting in protracted slow economic growth long after a deep two-year recession.
Investors sought an alternative to near-zero bank and money market rates through higher returns in riskier stocks and higher yielding securities and currencies. As mentioned, trillions of dollars of liquidity from quantitative easing flowed to those investments instead of production and consumption in the real economy. But some of those financial assets have faltered because of slow economic growth and attendant credit risk, particularly as a result of less demand in China, fallen commodity prices, and maybe the recent Fed rate increase. Those reversals have prompted the beginning of an important move away from inflated financial assets. However, that shift so far has gravitated largely to safe-haven sovereign debt and investment-grade corporate bonds rather than bank loans and deposits that finance the real economy. The effect of those bond investments is to suppress market interest rates counteracting the Fed’s attempt to raise them.
The Malpass nostrum
David Malpass, president of economics and research consulting firm Encima Global LLC, speaks of a “zero interest-rate policy trap” where below-market interest rates foster a cycle of low inflation and slow growth. This in turn discourages the Fed from raising rates for fear of triggering a recession. The inability to get off the dime suppresses lending to small businesses that finances the capital investment needed to create jobs, higher income and growth. Rather, the monetary status quo restricts credit to the most credit-worthy borrowers, says Malpass, such that it is disproportionately allocated to elite bond issuers, that is, government and large corporations.
Malpass claims rate cuts stimulate borrowing when rates are normal, but near-zero rates are just price controls on credit that stifle growth (because unprofitable margins limit lending). Malpass states in an op ed in The Wall Street Journal 10/7/15:
“The Fed’s theory that extremely low interest rates will someday cause solid growth has been disproved repeatedly. Growth would have been faster and more balanced if rates had been higher. In the current recovery interest rates are even lower, but the results have been worse, with real growth averaging only 2.2% - the slowest recovery on record.”
According to Malpass, the Fed has to pare its bond portfolio and finance it through less expensive repurchase agreements with banks instead of relying on bank excess reserves. In the process, the Fed reduces its bank debt with portfolio liquidation proceeds freeing up cash for banks to lend, especially community banks that finance small businesses. At the same time, banks earn lower rates on reverse repurchase agreements with the Fed compared to their excess reserves. As a result, banks engage in more interbank lending that directs capital where it is most needed in the form of loans to small businesses instead of to the Fed. In short, bank capital frozen with the Fed is unlocked to finance investment and consumption in the real economy. This is true stimulus.
Meantime, says Malpass, the Treasury has to cut back short-term issuances that crowd out loans on bank balance sheets. Less short-term borrowing by the Fed and the Treasury permits more borrowing in the private economy to finance economic growth.
If you find yourself in a hole, stop digging
The Fed has to break the mold that predicates rate hikes on traditional measures of rising inflation, falling unemployment and accelerating growth, because that formula has proved not to apply in the post-crisis circumstances of massive liquidity from QE and near-zero interest rates. Rather, the economy needs stimulus from normalized rates, even in the face of low inflation and growth. What’s more, in a normalized rate environment higher rates create room for stimulative rate cuts when the economy slows materially, unlike the floor established by zero rates.
A radical increase in short-term interest rates that unwinds zero interest-rate policy and quantitative easing to achieve monetary equilibrium will stimulate the capital migration from Wall Street to Main Street in a return to normalcy. Raising rates from zero does not throttle the economy the same as raising them from normalized rates in an inflationary environment that risks slowing the economy. Rather, normalizing rates in today’s circumstance encourages greater saving and more bank lending to rekindle aggregate demand. The effect is to reflate the economy as the Fed could not do in seven years through ZIRP and QE. It is not enough that banks simply lend more of their excess reserves to accommodate production in the economy. Higher rates improve bank margins that encourage more lending. They also reward savers and motivate consumption.
Just as economists hope for a “soft landing” after a period of turmoil, the economy now needs a strong launch fostered by the reversal of the Fed’s post-crisis policy. In professional sports, teams struggle with the dilemma of either tinkering with the roster in the hope of a championship in the near-term, or rebuilding to achieve sustained long-term success. After seven years adhering to the same old formula without desired results, the Fed’s policy has failed. It is time to stop digging. Unfortunately, the Fed does not appear to have the courage to resist formidable pressures from the financial markets to maintain below-market rates. Where’s a Paul Volcker when we need him?
As mentioned, today’s conditions do not prompt the same sense of urgency as in Volcker’s time given relatively stable inflation, unemployment and growth. Current economic data contrast with the double digit inflation and unemployment coupled with stagnant growth that plagued the economy in 1981. What’s more, the memory of the financial crisis still deters upheaval risk. Indeed, higher rates will deflate financial assets to the detriment of individual and institutional portfolios, including the Fed’s, but, again, they were overvalued anyway by normal standards.
Greater interest income on new bonds in a higher rate environment would defray portfolio losses. A stronger dollar resulting from rate hikes weighs on exports and overseas profits, but keeps imports cheaper. Low oil and gas prices hurt energy producers but free up funds for more industrial and household spending. Once economic growth gets traction from a wholesale redeployment of capital in the real economy through the banking system, portfolio values will recover according to normal fundamentals and robust job growth and prosperity will return.
But the Fed under Janet Yellin calls for more of the same in the face of challenges to her first rate hike. In fact, in recent Congressional testimony she said she would even consider a negative benchmark rate if economic conditions call for rate cuts, subject to a study of possible legal and operational restraints. Such a policy has failed in Europe and Japan. It would evaporate bank interest margins virtually assuring a shutdown in lending. As a de facto tax on savings, negative rates would encourage more investment in risky financial assets. Yet some think this is a way to stimulate the economy. She also said that any commitment to raising rates would be entirely consistent with inflation and unemployment targets and be very calibrated and gradual. This has not worked. It is a recipe for ongoing malaise. The Fed has to stop digging.
The market backlash
A sharp selloff in stocks after the 25 basis point rate hike in December 2015 prompted most market participants to rule out any further increases in 2016 as the economy softens. In fact, that investor reaction to global economic slowdown is spooking a diffident Fed into relenting on its original plan for four rate hikes in 2016. Volatility in stocks, bonds and currencies, as well as the prospect of recession, flag business and consumer confidence to deter consumption and investment in the real economy. Thus, turbulence in the financial markets might give the Fed serious pause that indefinitely suspends a commitment to rate normalization. This is especially likely in view of continued low inflation and slow growth in the U.S. that combine with escalated monetary easing by other major central banks. Having raised rates once, now the Fed succumbs to adverse market expectations, perhaps to retreat to a wait-and-see posture until traditional economic data support more rate increases.
The Fed likes to telegraph its rate posture in advance to avoid jolting the markets, especially since it has endured political heat in the past for a lack of transparency. In particular, the central bank learned a market lesson in mid-2013 when it unexpectedly indicated it would cut back QE bond purchases. This resulted in the “taper tantrum” that roiled the financial markets because investors anticipated continued monetary stimulus. Historically, the Fed has intervened to calm Wall Street in times of severe stress and the markets have come to expect it. Witness the 1987 stock market crash; the dot com bust in 2000; the post-9/11 period; and the 2008 financial crisis. Unfortunately, this implicit protectionist role and its intolerance for market disruption have inhibited the Fed from radical action in setting interest rates.
Damn the torpedoes
Rather than pursue economic normalcy through a new paradigm of credit allocation based on incentives for lenders and savers, the Fed cautiously waits for sustained signs of growth to emerge from a policy that has failed to produce it in seven years. What’s more, it bridles at volatility in the financial markets that might suggest untoward economic consequences. The Fed should start normalizing interest rates now in an atmosphere of relative stability and muster the determination to ride out the market reactions to that policy as Paul Volcker did over 30 years ago. Now that investors are conditioned to false alarms in the form of frequent triple digit declines in the Dow Jones Index that recover in short order, perhaps markets ultimately will be more amenable to rate hikes than commonly believed.
Glenn Hubbard, dean of Columbia Business School and former chairman of the Council of Economic Advisers under President George W. Bush, wrote in The Wall Street Journal 1/4/16 that conditions are ripe for higher interest rates. He claims rate hikes from near-zero levels will not hamper business as corporate balance sheets are repaired and ready for investment. Besides encouraging broader lending, higher rates will raise returns on interest-bearing assets to stimulate some spending. This, coupled with tax and spending cuts, as well as regulatory reform, will revive long dormant capital investment. However, countervailing QE bond purchases by the European Central Bank (ECB) and the Bank of Japan temper the stimulus of divergent monetary tightening by the Fed. But once higher rates restore normal growth in the U.S., the rest of the world likely will follow suit.
Mickey D. Levy, chief economist, Americas and Asia at Berenberg Capital Markets LLC, wrote in The Wall Street Journal on 11/30/15 about lessons learned since the early 1980s regarding unfounded fears of rising interest rates. He points out that the history of rate hike cycles in that period shows they were predicated on an improving economy, and that economic growth continued resulting in growing profits and higher stock prices. When the Fed raised its benchmark rate, long-term bond rates rose less than short-term rates because of lower inflationary expectations, and bank lending increased substantially. In addition, the concern about a stronger dollar from higher rates may be exaggerated because a currency is influenced by many factors besides interest rates. (To be sure, economic growth, trade flows, portfolio flows, geopolitical risk and safe-haven status also play roles.) What’s more, he says any burden from rate hikes in the last 35 years was mitigated by tax cuts, investment incentives, NAFTA, deficit reduction legislation, and market confidence. Throughout, the Fed focused on long-term objectives without worrying about short-term market reactions.
Today’s low inflation and slow growth are similar to conditions in much of the period Levy talks about. What is different are significantly below-market interest rates that distort economic incentives, and a short-term Fed view susceptible to market distractions. The solution is to restore equilibrium in the credit markets by steadily normalizing rates in a relatively short period. Higher rates will encourage broader lending because of higher net interest margins and will attract more deposits to fund it. As it is, chronic near-zero interest rates compound bad debt expense from bank loans to the depressed oil and gas sector that crimp profits making new regulatory capital requirements more difficult to satisfy. Rate normalization will re-circulate capital from inflated financial assets to the real economy to jump-start growth. Such a scenario might even create the engine that pulls the global economy out of the doldrums, now beset by retrenchment in China, depressed commodity prices and widespread disinflation, deflation, devaluation, overcapacity and flat growth.
The timing and pace of future rate increases is problematic today for those fearing impending recession. But the Fed’s original plan to raise rates four times by the end of 2016 to 1% - 1 ½%, still below inflation, is not nearly enough to redirect significant capital from Wall Street to Main Street in the form of a transfer back to bank loans, deposits and money market instruments. And the Fed is tentative even about that timetable in view of its fear of precipitating volatility in the financial markets. Current mixed economic fundamentals give analysts pause, but the Fed’s waiting game has failed. It is time to act aggressively.
The Fed should downplay traditional inflation, employment, growth and financial market considerations amid an aberrational monetary condition. Rather, it should adopt a new damn-the-torpedoes policy that assigns priority to restoring natural monetary equilibrium by raising rates accordingly. Despite areas of temporary weakness, considerable positive economic data today suggest the ability to withstand that change. The cure will be well worth the medicine.
©2016 William J. Dodwell
Post-Crisis Secular Shifts in the Capital Markets and the Global Economy Could Foster a New Normal
Financial asset prices rise and fall all the time, while economic fundamentals move in cycles. But some post-crisis changes suggest a new paradigm that will inhibit growth permanently. Indeed, the more than seven year effort to recover from the Great Recession in the aftermath of the 2008 financial crisis has failed to produce even a return to normalcy as slow growth, stagnant wages and weak business investment around the world persist. In fact, certain debilitative reforms in the U.S. impede recovery. They include: 1) The Dodd-Frank Act; 2) The new preeminence of the Federal Reserve Bank and near-zero interest rates; 3) The demise of private-label mortgage securitization and the nationalization of Fannie Mae and Freddie Mac; and 4) The possible reinstatement of the Glass-Steagall Act. In addition, the British exit from the European Union holds potentially transformative consequences in Europe.
Growth inhibitors
The Dodd-Frank Act
Excessive financial regulation under the Dodd-Frank Act has stifled lending, trading and liquidity, limiting credit availability and widening bid/ask spreads in security markets. Since 2009 bank lending margins and investment in Treasuries and mortgage-backed securities have been inadequately profitable. Newly restrictive capital, leverage liquidity and trading requirements for financial institutions prevent appropriate capital distribution needed for greater economic growth. Consequently, businesses do not expand and new enterprises cannot get started, even though capital and jobs lost during the financial crisis have been restored beyond pre-crisis levels. Massive consolidation in the banking industry has resulted in substantially more asset concentration and risk. The biggest four banks after the crisis previously comprised 11 banks, 2 major securities firms and one asset-management firm just before the bust.
To be sure, some new regulation is salutary. In view of the calamity of 2008, reasonably improved capital buffers are appropriate. And, it is hoped current rules will significantly limit such abusive practices as misapplying mortgage payments, cheating credit card customers, passing off bad loans to unwitting investors, and overly-aggressive collection practices. Most importantly, Dodd-Frank established strong mortgage underwriting standards. (Unfortunately, in time politics has a way of eroding them.) However, substantial restrictions on proprietary trading unduly curtail bank revenue and market liquidity. In addition, the newly created Consumer Finance Protection Bureau (CFPB) unnecessarily interferes with bank products and fees to the detriment of already paper thin profit margins.
Too much immobile capital and operational restraint on banks that exceed prudent risk assessment seriously weigh on profits, the economy, and ultimately the quality of life.
Ultra-low interest rates and the new preeminence of the Federal Reserve Bank
The Fed’s long insistence on not normalizing short-term interest rates has its adverse consequences. Normal rates that would attract capital back to bank deposits and money market instruments that traditionally fund consumption and business investment would truly stimulate the real economy of goods and services while rewarding savers. But that capital remains locked up in stocks and bonds as investors seek higher returns to escape the low interest-rate environment the Fed created. And the central bank quintupled its balance sheet to $4.5 trillion (currently $4.2 trillion) since the financial crisis through the purchase of treasury and agency securities that produced historically low interest rates and unprecedented control over the economy.
The fear of precipitating a recession, or even creating volatility in the financial markets, dominates monetary policy. After eight years, the Fed remains fixed on an elusive formula of concurrent growth, inflation and employment to justify any, much less substantial, rate increase. This mindset exists among the other major central banks as well, thus ensuring continued global stagnation. In Europe and Japan the obsession with monetary stimulus to combat deflation through lower interest rates has resulted in widespread negative interest rates, even for some long-term bonds, but to no avail.
Complicating the role of the Fed is the interconnectedness of global economies and their dependence on the actions of the Fed. Historically, oil and other commodity sales are transacted in dollars, and some countries have long pegged their currencies to the dollar. But since the financial crisis, dollar-denominated lending around the world in the form of loans and bonds, as well as general international transactions, has increased dramatically. As such, the Fed is more preeminent than ever and the dollar it controls is a major safe haven destination. This makes international borrowers and investors especially sensitive to movements in interest rates and the dollar resulting from U.S. monetary policy. As a consequence, the Fed has to worry about having a major influence on portfolio losses, credit availability and currency translation in foreign markets which in turn impact the American economy. These far reaching effects inhibit much needed interest-rate normalization.
A new book entitled “Who Needs the Fed?” by John Tamny theorizes a different approach to monetary policy akin to the gold standard. He suggests replacing reliance on money created by the Fed that distorts capital flows to the detriment of economic growth. Rather, he supports direct funding by lenders to borrowers from cash generated by profits realized from the lender’s production of goods and services. In other words, lending cash derived from tangible economic resources, rather than from whimsical fiat money, can ensure a properly valued dollar, productive allocation of capital, and a more healthy economy. This contrasts to today’s financial asset inflation born of years of extreme monetary easing that has resulted in chronically subpar growth.
Until savers, investors and lenders have the incentive to transfer capital from the financial economy to the real economy through normal interest rates on loans, deposits and money market instruments, growth will stagnate.
The demise of private-label mortgage securitization and the nationalization of Fannie Mae and Freddie Mac
During the financial crisis the government nationalized insolvent Fannie Mae and Freddie Mac by infusing it with some $190 billion of capital in exchange for 80% of the decimated common stock, as well as newly issued preferred stock. As the market for mortgage-backed securities issued by private banks dried up in the wake of the subprime mortgage debacle, the government became an even more formidable force in the housing sector. Today, some 60% of all mortgages valued at $5 trillion are owned or guaranteed by Fannie Mae or Freddie Mac at taxpayer expense.
The demise of private-label mortgage securitization ended what was a valuable source of financing for originating banks, as well as credit for borrowers and general liquidity in the economy as lenders could sell off their mortgages to make room for more loans (of all sorts) on the balance sheet. To date investors still have not restored their confidence in private mortgage-backed securities because of a lack of trust in the quality of the collateral born of fraud leading to the financial crisis, and an ongoing stagnant economy that invites defaults. (Unlike, agency MBS, private issues are not protected against default.) However, Dodd-Frank did institute important controls on mortgage underwriting and servicing, the absence of which underpinned the financial crisis. As such, better quality mortgages have made private banks more inclined to retain whole loan mortgages to the extent they lend.
Today it appears the two mortgage finance behemoths will continue under government conservatorship despite congressional debate about shrinking them, sharing risk with private banks, re-privatizing, or liquidation. Reinforcing the government’s strangle hold is its confiscation of all profits which now have exceeded the original bailout in a contentious legal battle with shareholders. But most disturbing is the political role these vehicles play, as before, in redistributing wealth through the federal affordable housing policy, again putting taxpayers at risk. And now, the two companies are not disciplined by the stock market.
Government control of Fannie and Freddie politicizes the housing sector putting taxpayers at risk of widespread mortgage defaults in an effort to advance government’s notion of social justice. The danger is a repeat of the 2008 financial crisis and its aftermath. Fannie and Freddie should wind down to share more mortgage risk with banks and private MBS investors. But revitalization of private-label securitization depends on a growing economy, and as mentioned, investor confidence.
The possible reinstatement of Glass-Steagall
Both the Democratic and Republican 2016 presidential campaign platforms call for reinstating in some form the Glass-Steagall Act of 1933 that was repealed in 1999 under President Clinton. This legislation separated commercial bank loan and deposit-taking operations from investment bank security underwriting, trading and advisory activities so not to put depositors at extra risk. Proposed re-regulation is predicated on the mistaken belief that repeal of this law contributed to the 2008 financial crisis.
But in fact, commercial banks, not investment banks, fostered the crisis through their lax mortgage lending in the origination of subprime mortgages. Investment banks, along with only a couple of large commercial banks, engaged in highly leveraged proprietary trading of mortgaged-backed securities consisting of those subprime credits. Smaller banks suffered from defaults of individual subprime mortgages they originated, not MBS exposure.
Plummeting MBS prices resulting from actual and anticipated defaults of subprime mortgages put bank capital in jeopardy creating a temporary liquidity crisis that caused buying and selling to come to a virtual standstill. This prevented some counterparties from rolling over their short-term obligations precipitating a fear of actual or potential pandemic interbank contagion. Exacerbating the debacle was insurer AIG’s undue concentration of unhedged credit default swaps which made the firm liable for covering huge unhedged MBS losses of counterparties. As such, the underwriting and trading of MBS per se by investment banks did not create the financial crisis. Rather, imprudent lending by commercial banks did.
Retail mortgage lenders, accommodated by the Fed’s longtime easy money policy, significantly relaxed underwriting standards largely at the behest of the federal government which was bent on expanding its affordable housing policy primarily aimed at low income borrowers. The government also coerced Fannie Mae and Freddie Mac to lower credit criteria they applied to mortgages they purchased from issuing banks, which they needed to issue their own federally guaranteed MBS. That exposure put taxpayers on the hook for the losses. Again, investment banks were not involved.
The issuance and trading of MBS transacted by the largest commercial banks, as well as investment banks, followed from the rampant creation of subprime mortgages by originating commercial banks which sold off the risk to MBS investors (including other banks). If sound underwriting had been maintained by the banks issuing mortgages, the MBS created from them would have held their value and not have caused the tsunami in the capital markets that ensued. The off-balance sheet special purpose entities (the trusts that housed the mortgages securing MBS) that concealed some mortgage impairment, and are commonly blamed for the crisis, would have been moot. In fact, securitization would have continued to provide beneficial liquidity to the economy by making credit more available and inherently less costly.
Rather than separate commercial and investment banking under a revived Glass-Steagall, banks must ensure sound loan underwriting standards and maintain adequate capital to safeguard against losses, and thus avoid FDIC depositor claims. In the unlikely event a bank still should fail, it could resort to an orderly bankruptcy, in conjunction with the FDIC, involving reorganization or liquidation without having to rely on a taxpayer bailout.
Why should commercial banks not be permitted to engage in low risk fee-based investment banking activities such as securities underwriting, securitization, M&A advisory and client asset management that diversify revenues? Restoring Glass-Steagall would eliminate that activity in commercial banks. As to proprietary trading, is it riskier than bank lending? It could be with too much leverage and opaque derivative overlays, but Dodd-Frank already safeguards against those excesses through the Volcker Rule, derivative exchanges, and stringent capital, leverage and liquidity requirements. Institutional and individual speculative trading and investment now occurs largely in stand-alone hedge funds and private-equity funds. Proprietary trading at traditional investment banks are restricted by Dodd-Frank. As such, restoring Glass-Steagall is moot from a risk standpoint. But denying commercial banks the added profitability of innocuous non-trading investment banking activities is unnecessary and imprudent. That said, one caveat is in order: the tendency of the commercial banking arm to relax loan underwriting standards for investment banking clients to assure ongoing fee-based business. Some kind of formal separation between the two sectors should be instituted like the traditional wall between securities underwriting and securities research.
The debate should concern the repeal of some of Dodd-Frank which immobilizes too much capital, imposes excessive compliance costs, and unduly restricts profits. The repeal of the Volcker Rule in particular would resume more lucrative proprietary trading in commercial banks for extra revenue and market liquidity at reasonable risk given appropriate capital requirements. But regulators and politicians overshoot the mark throwing out the baby with the bathwater in a call to separate all investment banking from commercial banks, only some of which even secondarily contributed to the financial crisis. This, to the detriment of the financial system and the economy.
The Brexit
Uncertainty abounds as many fret about whether the recent UK vote to leave the European Union will constitute an economic and political sea change, particularly affecting the financial center in London. Wonderment about trade, regulation, taxes and the relationship with the EU could discourage already weak domestic and foreign business investment in the UK forcing relocation out of Britain. In fact, several large M&A deals have been cancelled. These developments have grave implications for corporate profits, employment, GDP and the value of the pound.
In addition, the Bank of England’s effort to ease the impact will further postpone interest-rate normalization needed to fully restore the economy, compounding the harmful effects of chronic monetary easing. In fact, the central bank has already reduced the benchmark short-term interest rate to a historically low .25% in response to the Brexit. The BOE also plans to purchase corporate bonds along with government issues in its quantitative easing program for added breadth to the stimulus.
What’s more, the Brexit could de-stabilize the EU by encouraging other members to defect. Or, it might rekindle interest in Scotland to secede from the UK. A weaker EU also invites Russian aggression in Eastern Europe. But a renewed UK sovereignty may have its benefits. Time will tell as to the degree of secular transformation.
Economic malaise
The global economy has been plagued by sclerotic growth since the financial crisis despite massive monetary stimulus. In the U.S. dubious headline unemployment under 5% is misleading, as too many are underemployed or work part-time, and many who want to work go uncounted because they dropped out of the workforce in frustration. In addition, monthly jobs created and lost reported by the Bureau of Labor Statistics (BLS) are suspect. This agency conducts telephone interviews to determine the number of employed and unemployed. Purportedly, if one reports unemployment he is coaxed by a series of questions to prompt an employed categorization which includes working as little as one hour for a family member, for example. This way job creation figures can be seriously inflated by political motivation. Genuine employment statistics could be easily ascertained by referring to the Treasury’s objective payroll data reported by employers. What’s more, income levels have hardly budged in well over ten years.
Excessive underemployment and part-time employment, as well as overstated job creation figures and flat wages explain why the official unemployment rate is so out of sync with anecdotal evidence of widespread economic hurt.
Amid global uncertainty, foreign investors have gravitated to safe haven dollar-denominated assets, especially Treasuries. That has produced a chronically strong dollar that hampers U.S. exports and the overseas profits of multinational firms. Dollar appreciation also suppresses oil prices to the detriment of a highly leveraged dominant energy industry.
Central banks in the U.S., Europe and Japan unsuccessfully fight entrenched low inflation or deflation through extreme monetary easing. And economic reversals in China from too many bad loans issued in good times ended a major source of industrial demand for exporters around the world. That overexpansion currently threatens the banking system. Still looming are the effects of the U.S. subprime mortgage crisis because of the aforementioned regulatory overkill that goes far beyond redressing the relaxed underwriting standards that specifically caused it. Other global drags include overextended public and private indebtedness in the U.S. and Europe, and a twenty five year refusal to write off bad loans in Japan. Rock bottom and even negative interest rates coupled with chronically tepid economic growth and high unemployment throughout the world reflect dysfunctional financial and real economies that suggest a possible new paradigm.
A continued dearth of business investment in the U.S. precludes normal economic growth. Businesses, beset by chronically soft market demand, limited credit, and uncertainty about taxes and regulation, withhold the investment that drives the production and consumption of goods and services needed to create quality jobs and complete economic recovery. Instead, many companies buy back stock for a short-term fillip to earnings per share which may boost CEO compensation as well. The highest corporate tax rate in the developed world, years of low productivity, and inadequate lending to small business do not augur well for capital investment in premises, equipment and technology any time soon.
A lot depends on China restoring its former growth rate so it can significantly contribute to global demand again. As mentioned, its banking system is plagued by huge credit losses from an overleveraged economy which the government is trying to redress through a proposed $10 trillion bank bailout/bail-in and tighter regulation. In the meantime, China deals with capital flight and restricts foreign investment. China seeks to raise its profile in the capital markets by continuing to increase the convertibility of the yuan in commercial trade and financial transactions. Also, sovereign issuers and corporations inside and outside China increasingly float yuan-denominated bonds in international markets. The IMF’s recent acceptance of the yuan in its benchmark basket of world currencies helps toward attaining much desired safe haven status which will bolster demand for the currency. But a worsening of China’s economy came to light after the IMF’s decision raising a question about a change of heart. One wonders how long this state run economy will take to recover and become a major catalyst to global growth as it was not long ago.
The world economies have slowed as expansionary government diverts capital from productive deployment in the private sector through excessive taxes, spending and regulation. Protracted massive monetary easing to stimulate growth has failed. Political forces have precluded corrective monetary and fiscal measures in the form of interest-rate normalization, tax cuts and regulatory reform, seemingly content with just avoiding a recession. The question becomes whether the long dry spell reflects secular change, or an extended cyclical condition that will eventually revert to normal. The effects of aging work forces, minimal productivity and towering debt will prolong the status quo unless countries can overcome the political obstacles to real solutions.
Distorted and diverted capital flows
The function of the capital markets is to provide an efficient allocation of capital between lenders and borrowers consistent with productive investment and consumption for optimal economic growth. This system largely depends on the economic incentives of commercial and investment banks, as well as asset management firms, to readily serve as intermediaries in bringing lenders, borrowers and investors together. Certain forces disrupt efficient capital flows at the expense of the economy which may or may not change.
Monetary policy
Misguided monetary policy has created protracted historically low interest rates, even negative short-term and long-term rates, which distort capital flows because they materially suppress bank net interest margins to discourage lending. These rates also minimize income from money market instruments to force investors to seek greater returns through riskier investments from stocks to third world bonds and beyond. As a consequence, investors have inflated unproductive financial assets in the quest for higher returns to the detriment of the real economy, especially small businesses, which is starved of traditional capital from banks. Extremely low interest rates also prevent pension funds from meeting their investment targets, thus exacerbating under-funded liabilities. Low investment returns also restrict the ability of insurers to pay claims. At the same time, individual, institutional and government borrowers capitalize on cheap money to take on excessive debt. Yet when rates become negative as in Europe, some consumers see a sign of macroeconomic instability that prompts saving (in gold or the mattress), rather than the stimulative borrowing and spending intended by the central bank.
The quest for yield creates anomalous demand for higher return securities that artificially suppresses yield, thus undermining bond spreads and true credit risk. Yield chasing investment results in a less than optimal allocation of capital in the economy. Moreover, overly interventionist monetary policy creates volatility in foreign-exchange markets that complicates free trade by encouraging currency manipulation. And ongoing quantitative easing distorts the traditional relationship between interest rates and currency values. As such, the anticipated central bank purchase of bonds may cause the corresponding currency to appreciate even when interest rates are cut. In addition, the Federal Reserve Bank’s multitrillion-dollar Treasury portfolio amassed from several years of quantitative easing has created a shortage of collateral needed for interbank trading causing financing costs to rise. Chronically distorted capital movements in the financial economy have serious implications for the world economies it is meant to accommodate.
Regulation
New strictures on banks limit credit available for traditional capital formation and economic growth. Increased capital requirements meant to safeguard the too-big-to-fail banks disproportionately constrain the community banks that finance small businesses, the underpinning of the economy. Narrow lending margins and the added compliance costs of risk management, reporting and technology hit small banks harder as they, absent enough capital, are forced to curtail operations. In fact, some banks have to merge to realize economies of scale. The burden of low interest rates, added compliance costs, as well as major credit losses resulting from slow global growth, have seriously impacted banks around the world.
The biggest banks have to endure extra capital buffers, curb operations and pass stringent annual stress tests. In the U.S., this means the four largest banks, which consolidated from 37 financial firms since 1990 according to Barron’s, will have significantly less capital available for lending and investment. Further restricting bank capital and profitability are tougher loan loss provisions to be required by the Financial Accounting Standards Board (FASB) in 2020 in response to the financial crisis. That rule calls for recognizing losses faster through a forward looking estimate when loans are issued rather than recording them after the fact. The Comptroller of the Currency estimated loan loss reserves will increase 30%-50% industry-wide. All told, post-crisis regulatory restrictions on bank capital will seriously diminish market liquidity and hamper economic growth.
Restrictions on proprietary trading under the opaque Volcker Rule restrain client market-making and general liquidity in the secondary market at the expense of bid/ask spreads and added profits for banks. In reaction, banks shift emphasis to fee-based client asset-management. They also invest in private equity, hedge funds, and real estate, but those investments are now limited to 3% of tier 1 capital. Banks currently carrying such holdings above that threshold must sell them by July 2017 at the risk of incurring losses because of diminished liquidity. New derivatives exchanges and contract standardization, as well as short-term financing (repurchase agreements) limitations are aimed at reducing risk in the financial system.
The significant ebb in initial public offerings indicates disaffection with regulation and potential litigation. More companies seek the refuge of a private-equity firm with its management expertise and freedom from government tentacles.
But thank God for small favors. The FASB has proposed relaxing accounting rules governing derivatives associated with reasonable risk transactions. This will help especially non-financial companies that engage in non-speculative hedges of materials costs.
Major foreign banks are curtailing U.S. operations because of onerous regulation. Some critics call for breaking up the biggest U.S. banks to reduce systemic risk. At least that would justify relaxing some of the new regulation and freeing up capital for the economy. In the aftermath of the financial crisis the risk/reward calculus has been recalibrated to overly restrict economic activity – perhaps for a very long time.
Alternative lending
In response to changing bank practices the direct repo has emerged where money market funds, for example, lend directly to large investors, such as insurers, pension funds and endowments, in exchange for treasury securities collateral. Those lenders bypass traditional bank intermediaries which are less interested in repurchase agreements now because of the extremely low interest compensation. Rather, banks tend to hoard some riskless treasury securities previously used as collateral in repurchase agreement transactions because now they are needed to meet more stringent capital requirements, to the detriment of the repo market. Asset-management firms also now lend directly to wealthy individuals. And to some extent, private investor groups lend directly to companies in the place of banks that have cut back leverage loans that finance borrowers’ acquisitions because of high regulatory capital set-asides required of these assets.
Online non-banks bypass the regulatory impediments and fill a credit void for individual and small business borrowers. They evaluate and process loan applications and raise loan capital from investors, rather than depositors, who purchase and securitize the loans. Online lenders now issue FHA insured loans as many banks exit that area. But investor concern about data transparency and credit quality currently makes loans more difficult to sell forcing lenders to carry some of them on the balance sheet and assume the credit risk. In fact, the Department of Justice has filed what seems to be a petty lawsuit against Quicken Loans, a leading online lender, for misrepresenting the quality of loans to the FHA on what Quicken claims are minor technicalities. The government does not like those operating outside the regulatory ambit. (Regulators betray a similar animus against for-profit schools in a long effort to tighten control and even close them, although some of the schools deserve that fate.) Nonetheless, bank lending has loosened up of late as the Fed has begun to appreciate the plight of small banks. But economic sclerosis continues.
Securitization and other financing
Private-label mortgage-backed, as well as asset-backed, securitizations are still a small fraction of the levels attained before the financial crisis, although many legacy issues predating the crisis have recovered substantially in the secondary market. The demise is mainly attributed to a continued lack of investor confidence in loan quality, despite new mortgage regulation governing underwriting criteria and issuer retention. Once burned, twice shy can last a long time. Private securitization used to provide important liquidity to the economy by enabling lenders to sell loans to investors to make room for new ones.
For every action there is a reaction. As such, the quality of auto and credit card lending has declined as banks compete amid Dodd-Frank restrictions on trading, mortgages and other products. In addition, corporations issue more preferred stock in lieu of bonds to accommodate regulatory capital restrictions on institutional investors. Also more common for that reason are convertible contingent (coco) bonds which convert to equity when capital falls below a pre-specified level. Structural changes in capital structures raise the cost of capital and reduce liquidity as fewer investors are available. This further drags on the economy.
Investors still rely highly on the three major rating agencies for a determination of bond quality, despite their failure in rating mortgage-backed securities during the financial crisis. Now the SEC, in accordance with Dodd-Frank, requires them to disclose their rating methodologies. However, SEC reports indicate continued violations out of a failure to adhere to new rating procedures. What’s more, Micah Hauptman, financial services counsel to the Consumer Federation of America, says the deficiencies are “eerily familiar” and he questions the resolve of the SEC to pursue them. (NY Times 1/10/16, “Still Missing The Mark On Ratings” by Gretchen Morgenson) Could the loss of investor confidence in private-label MBS extend to other financial markets because of the continued market share considerations of the rating agencies? Economic growth depends on integrity in the capital markets.
Too much government interference
As government looms ever larger over the U.S. economy politics further intrudes policy, preventing real solutions. Businesses have to adjust or cease to exist. As mentioned, the government has issued myriad mandates over lending and trading while the Fed controls a $4.2 trillion balance sheet of securities that holds sway over the financial system. And imperious health care and environmental regulation take their toll. Yet, Washington DC seeks more power. This is not good as history shows that business downturns always have been abetted by government interference.
Fiscal policy and financial regulation
The excessive diversion of capital from the private economy to government through taxation, borrowing and spending reduces the incentive to produce, as the wealth of businesses and individuals is redistributed throughout the economy. What’s more, regulation is encouraging financial institutions to direct more capital to government securities rather than those issued by banks and corporations in a trend called “financial repression”. This is a result of government exempting Treasuries from today’s sky-high regulatory capital set-asides.
In addition, new regulation requires institutional non-government money market funds investing in bank C/Ds and corporate commercial paper to allow net asset valuations to float rather than remain fixed at $1. These funds are also subject to new liquidity rules that permit customer fees when a ready market is not available for certain securities. As a consequence, investors in money market funds require higher returns as compensation which in turn forces the funds to command higher rates on short-term borrowings of banks, corporations and municipalities. The regulatory bias for government financial assets, coupled with the Fed’s historically low interest rates that accommodate more government borrowing, creates a massive redirection of capital away from the private sector. And this pattern is evident worldwide.
The Financial Stability Oversight Council (FSOC), chaired by the Treasury Secretary, strives to further regulate the asset management industry and even large insurers on grounds of systemic risk from panic redemptions and massive claim defaults. MetLife successfully challenged its “systemically important financial institution” (SIFI) designation, which carries extra capital restrictions, as a court dismissed the government’s case as utterly baseless. But GE Capital sold $180 billion of financial assets rather than endure, or challenge, SIFI status.
The Department of Labor recently established fiduciary responsibility standards for all financial advisers but exempts state run retirement plans. This exception is a blatant attempt by government to control eventually trillions of dollars of retirement funds by marginalizing competing private brokerage firms. Similarly, President Obama’s My IRA is a federal vehicle for capturing retirement funds. Most investments in government funds will be directed to low return government bond funds that finance political agendas.
Consumer banking
The Consumer Finance Protection Board (CFPB) established by Dodd-Frank construes discrimination in home and auto lending through “disparate impact” arguments to make more credit available to low income borrowers. This principle declares de facto discrimination simply on the basis of statistical distributions of credit without any evidence of intent to discriminate. In the circumstance traditional credit criteria for assessing the ability of borrowers to repay is irrelevant. Government redistribution of wealth rears its ugly head again. The agency is entirely independent as it gets unlimited funding from the Federal Reserve and is not accountable to Congress. In response to an industry and congressional outcry, the constitutionality of the agency is under challenge in the courts.
Bank settlements
The Department of Justice extracted some $37 billion from banks in settlement of charges of mortgage improprieties during the financial crisis. Much of it was directed to left-leaning community groups, such as organizations formerly known as ACORN. This is another redistribution of wealth to low income populations by bypassing congressional budget authority. Defrauded private securitization investors received no compensation, having to rely on their own ineffective private lawsuits against banks. Incidentally, Trustees who were supposed to represent the aggrieved private MBS investors were beholden to the issuing banks that hired them for their failed securitizations in order to get future business. They therefore did not prosecute vigorously on behalf of their investors. No wonder private-label securitization is still dead in the water since the financial crisis.
As Rahm Emanuel, President Obama’s former Chief of Staff, said, “You never let a serious crisis go to waste.” The government milked the financial crisis for all it was worth, including bilking the large financial institutions, to advance the agenda of the left.
Global debt
Extremely low interest rates engendered by central banks have spawned some $51 trillion of corporate debt worldwide, far outpacing economic growth, according to S&P Global Ratings. Some state governments, such as Illinois, and the territory of Puerto Rico, face insurmountable debt requiring serious restructuring. The lack of political will to curb spending on the overgenerous social programs and pensions that created the debt portends negatively for long-term secular economic growth. In addition, excessive sovereign debt in the U.S., Europe and Japan continues to grow disproportionately to the economy as central banks accommodate borrowing with low and even negative rates. Indeed, nearly $12 trillion of government debt carries negative yields, according to S&P Global Ratings.
Excessive private debt in emerging markets throttles global growth. Protracted historically low interest rates created a chase for yield into these investments that financed massive production for export when commodity prices were high. Now debt has come home to roost, much of it denominated in appreciated U.S. dollars, as commodities plummeted. Similarly, liberal state controlled lending in China and an extensive shadow banking system created a boom and bust. That reversal weighs heavily on the world economy now that materials imported by China for development are no longer in demand.
The portfolio losses yield-seeking investors would incur on longer durations of these huge debt holdings from rising inflation and interest rates seriously deter rate normalization needed for full economic recovery. They also raise the specter of debt crises triggering massive defaults and a sudden withdrawal of credit with dire economic consequences.
To the extent below-market interest rates are baked into the financial and economic fabric, the incentive to borrow will continue, especially by federal governments. Corporations, individuals, and state and local jurisdictions eventually have to cut spending, restructure, or default to resolve their debt problems, absent sufficient revenue or income. But federal governments can create money through the central banks. Considering their addiction to fiat money for several years, they likely will continue the habit fostered by political predisposition at the expense of global growth.
The political landscape
The politics are not particularly encouraging for free market capitalism. Even Senator Dodd and Congressman Frank acknowledged necessary flexibility in Dodd-Frank as dictated by future experience when their bill passed in 2010. But while Trump supports repeal and replacement, a Clinton administration, would not abide it, succumbing to the suasion of the now influential Senator Bernie Sanders and financial reform crusader, Senator Elizabeth Warren. Both Clinton and Trump are committed to social programs, despite Trump’s wailing about the national debt. And both candidates pander to the increasing populist sentiment about trade and the jobs it costs.
As mentioned, the 2016 Republican platform calls for restoring the separation of commercial banking and securities activities under the Glass Steagall Act of 1933. Uncharacteristically, Hillary Clinton does not commit to entirely reinstating the law in the Democratic platform. (Might her Wall Street political donations be a factor?) Both Clinton and Trump advocate major infrastructure projects to stimulate growth a la President Roosevelt’s WPA. But that construction likely would only run up the debt and create short-term stimulus. In addition, it would enrich the labor unions to which Trump has been obligated for years to ensure peace at his building sites, and on whom he looks for major support in the November election. (So does Clinton.) Infrastructure projects are fraught with politics and corruption that undermine economic benefit by diverting capital from productive private investment.
Trump proposes lower taxes, including only a 10% rate on repatriated overseas profits that would return some $2 trillion to the U.S. economy. Some of the tax savings would induce employers to raise wages and break the chronic rut of flat inflation-adjusted incomes. Clinton is loath to accommodate business, and would continue the Treasury’s strong resistance to so-called corporate inversions by which American corporations move their headquarters overseas to take advantage of much lower tax rates. Trump’s tax cut would stimulate the economy but it is also aimed at curtailing corporate inversions. In 2015 U.S. companies experienced record foreign investment through acquisition, largely prompted by their opportunity to pay the lower taxes of acquiring company domiciles, especially Ireland.
Some campaign promises require congressional approval, but a presidency can act unilaterally through executive order, as well as the rulemaking powers of its agencies. Even the mere prospect of continued taxes, regulation and government intervention for another presidential term or more raises the specter of structural change that impinges on economic growth for the long-term. Just in recent years the federal government has taken over health care and student loans and continues to engage more in housing. And the administration still relaxes mortgage lending criteria to qualify for Fannie Mae, Freddie Mac and Federal Housing Authority (FHA) guarantees and insurance in the interest of its affordable housing policy aimed at lower income borrowers. Institutional memories are short.
Growing government interference and its redistribution of wealth adversely affect the cost and availability of capital in the private economy. What’s more, they suppress aggregate demand and production incentives essential for growth and prosperity. Critics argue that less risk in the financial system and alleviation of social ills are worth that price. True to a degree, of course. But without adequate growth the standard of living declines for all. Public sector predominance can reach a point where the economic pie grows steadily smaller. In view of the accretion of debt and regulation in the last eight years, that may be on the horizon.
Economic impact of structural changes in the world economy
Secular or cyclical change?
Do post-crisis aberrations in the financial markets and the economy, greater government intrusion, and an increasingly liberal body politic portend economic and social structural transformation and a new normal? Or, is the status quo just a sign of cyclical change bent on reverting to the mean as robust growth eventually resumes in response to traditional agents such as improved interest rates, employment, capital investment and elections? What is the tipping point that triggers a return to normalcy after more than seven years of economic lassitude following the Great Recession?
Ultimately, the solution comes down to monetary and fiscal policies, regulatory relief, and a competitive workforce which in turn bolster business and consumer confidence and growth. This means the turning point depends much on politics at a time when conservative policies lack strong support. In addition, new technologies take on an increasing role in the economy as businesses rely more on technological advances to improve production and productivity. Indeed, the top S&P 500 companies by market capitalization are technology leaders replacing the oil giants and materials producers of yore. So, while political forces suppress the economy, technology lifts it. On balance, what are the prospects?
Creative destruction
In the 1970s the U.S. experienced what economist Joseph Schumpeter called “creative destruction” as manufacturing gave way to the predominance of the service economy, creating a “rust belt” in its wake, amid a more educated workforce and technological advances. As global competition intensified, U.S. businesses outsourced production to cheaper overseas environments. In time, a marked rise in imports and foreign investment in the U.S. reduced domestic market share for many American companies.
Eventually, new technology and service industries were born creating new jobs that far outnumbered the ones lost. The internet and mobile devices have forged new industries once unimaginable. In recent years the security exchanges have seen massive global consolidation as a result of technological innovation that has added enormous capacity and speed to processing transactions. Consider the turnover of companies in the Fortune 500 and the S&P 500 that reflects astounding innovation. And prosperity was endemic. From the early 1980s relatively free markets produced nearly 20 years of almost continuous prosperity. But that was when government was friendly to private enterprise amid traditional monetary policy. Subsequently, the government got too much in the way with its taxation, spending, regulation and easy money.
The present malaise derives from much different change. It results from historically low interest rates, onerous taxes, runaway government spending and stifling regulation in the U.S. It combines with smothering debt and a struggling banking system in Europe, Japan and China (no excessive sovereign debt) to throttle global demand. Historically, interest rates, taxes and even regulation fluctuate with political cycles. But how long will it take to normalize interest rates, significantly cut taxes and reform regulation. It has not happened in over seven years. In the U.S. tepid growth largely reflects the liberal policies of a single administration. That can change with the right successor. But can a continued status quo reach the point of no return?
The national debt at $19 trillion has nearly doubled since 2009 to more than 100% of the economy under the most liberal president in U.S. history. (It’s much worse in Europe and Japan) There is little prospect that this trend will abate in the next administration as neither Clinton nor Trump is committed to spending cuts, despite Trump’s carping about the debt. And when does Congress ever cut spending, the 2011 sequestration notwithstanding? What’s more, the groundswell for student debt forgiveness along with free public college tuition, the move toward a single payer health care system, and other entitlements do not bode well. Government spending is particularly problematic considering even emergency expenditures, such as Obama’s stimulus, get permanently imbedded in the budget baseline in future years. Politicians do not want zero-based budgeting.
Creative destruction will occur on the technology front, probably with serious implications for income distribution. But entrenched liberal politics and increasing public sympathy for it will erode the traditional meritocratic model that assured steady growth for so long.
Central bank inertia
Continued low interest rates imposed by central banks afraid of the slightest short-term market reaction will prevent capital from migrating from the inflated financial economy to the real economy of goods and services, thus assuring continued sluggish growth. The Fed and other central banks seem to be satisfied with just avoiding a recession. That is not enough! What is the prospect of sufficient political will to normalize interest rates? Probably not much.
Besides the fear of roiling the financial markets, central banks are globalist and collectivist by nature, and are therefore perhaps overly amenable to global interdependence considerations. This raises the question as to how committed the Fed is to restoring growth in the U.S. economy. The unprecedented size of its balance sheet with its potential impact on the markets, plus the ability to accommodate government spending by keeping interest rates historically low, makes the Fed a formidable force. Raising rates by selling off assets would seem to diminish it. The phenomenon is akin to government’s resistance to lessening its power by cutting spending.
The Fed’s hubris derives from its expanded post-crisis role assigned by Congress despite its failure to act on reckless lending prior to the crisis. The central bank illegally nationalized AIG and sold the equity on behalf of the Treasury for a $23 billion profit. It provides unlimited funding to the Consumer Finance Protection Board. And, it conducts opaque stress tests on SIFIs to determine whether they may pay dividends or buy back stock.
One speculates whether the long-term benefits to the economy are secondary to preserving the Fed’s power in accordance with its collectivist sympathies. Given its control over chronic ultra-low interest rates and the historic size of the Fed’s portfolio, is the long feckless monetary policy that produced that anomaly an enabling instrument and a new normal? It’s no wonder many call for auditing the Fed’s surreptitious decision-making models.
Regulation
Excessive financial regulation that requires extra capital set-asides and restricts product reduces liquidity in the capital markets limiting credit availability, especially for small businesses. In addition, draconian non-financial regulation over health care, the environment and labor discourages business investment needed to create jobs. Have those forces produced secular change that limits future economic growth?
Employment and income equality
A poor education system forces businesses dependent on highly skilled employees to rely on H-1B immigrants resulting in social discord among the unqualified. In addition, inflated union wages and cheap foreign labor prompt employers to outsource production overseas so they can price their products competitively with imports in the U.S. As a consequence, less educated American-born workers and displaced overpriced employees are left in the lurch with serious implications for careers and economic growth. Government sanctions on the free flow of goods and on the movement of production outside the U.S. to protect American workers, as Trump proposes, will invite chaos. Trading partners will reciprocate protectionist practices. And citizens will revolt against higher prices and less consumer selection resulting from import restrictions, the trade deficit notwithstanding.
The failure to restore normal economic growth for so long has yielded greater income inequality and structural unemployment. Inadequate job creation is the culprit, founded on a widening skills and education gap, automation, and, of course, excessive taxes and regulation. A near 40-year low in the labor participation rate tells the story somewhat, even considering the legions of retiring baby boomers. It appears many younger people are opting for college over underemployment possibly because of the dearth of quality jobs available. For the same reason, a good number of discouraged job seekers dropped out of the work force. The prospect of a sustained strong growth of good jobs would seem weak, especially in view of little business investment.
A new paradigm emerges. Income inequality at the bottom is largely a result of structural change from the outsourcing of factory production to less costly overseas locations. Angus Deaton, winner of the 2015 economics Nobel Prize, worries that income inequality at the top undermines democracy as the wealthy acquire undue power. And a study by the Heritage Foundation finds that the government tries to compensate for income inequality through greater income redistribution from top earners to lower earners such that the latter are discouraged from working, thus exacerbating the inequality.
The real unemployment rate which takes into account the many underemployed and part-time workers, as well as those who have left the labor market out of despair, engenders income inequality and intensifies disparities between the haves and have nots. (Certain income inequality is inevitable in a meritocratic society given differences in education, work ethic and ability, especially as the economy places a greater premium on the smart and educated.) Structural unemployment and underemployment could assure ongoing slow growth that continues to suppress wages and reduce the standard of living.
Perhaps the further commoditization of more highly skilled work in today’s “gig economy”, as well as the new “sharing economy”, will compensate for adverse structural changes in the employment market in Schumpeterian fashion. But new technologies could aggravate the problem as capital replaces labor through automation. Some futurists theorize the eventual omnipotence of technology through robots will render labor unnecessary such that everyone can enjoy a life of leisure. But in the meantime radically skewed income distributions between the highly skilled and less skilled will be problematic.
The solution is to mitigate structural employment and income inequality by growing the economy through fiscal and regulatory reform in a normal interest-rate environment. This would create jobs for displaced workers, but structural mismatches between some jobs and available workers would remain as creative destruction ensues in a continually modernizing economy.
The body politic
Today, fiscal policy embraces egalitarian principles that promote inclusiveness over excellence while regulation discourages business investment. Meanwhile, fiat money generated by the Fed replaces production-based capital to finance widespread government assistance and intervention. All this monetary, fiscal and regulatory interference is the mark of a Marxist socialist state seen throughout Europe. Will the U.S. follow suit? Given the growing drift from meritocratic principles in American politics, in the face of an increasing predisposition to government assistance, the much maligned 2% economic growth of the last eight years may one day seem quixotic. Indeed, the economy slowed to only 1% growth in the first half of 2016.
Committed growth advocates among elected officials are too few and changing public attitudes about reliance on government do not augur well. An increasingly entrenched political left, substantially founded on a new disaffected generation that emerged in the aftermath of the financial crisis, does not value, or even understand, free market capitalism. As such, that population has no shame looking to the government for maximum assistance as it implements wealth redistributionist policies antithetical to real growth solutions. A cultural sea change at odds with free market economics is at hand. Indeed, meritocracy has yielded to egalitarianism in a society that celebrates wealth redistribution over production as more and more capital migrates from the private economy to government.
The universal solution lies in minimal public spending, taxation and regulation to foster economic growth in an unfettered private economy. Without question this can be achieved. But unless the current trend to the contrary reverses, a new normal will arrive with a greater disparity between the haves and the have nots. Nonetheless, a new paradigm may be inevitable regardless where the requisites of the new economy do not match available workers.
The question then becomes whether the displaced can adjust to the needs of the private economy by reinventing themselves through new skills and aspirations. If not, the state might have more of a role in accommodating them in the interest of social justice, especially as the political mindset of the populace drifts leftward. The eternal question of where to draw the line between self-reliance and government subsistence would be re-evaluated in an atmosphere of diminishing growth prospects. A new normal might have arrived already.
©2016 William J. Dodwell |