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Maybe Politics Matters After All

Looking strictly at the numbers it’s hard to work up much interest in whether Republicans or Democrats are in charge after 2020. Either way, trillion-dollar deficits and extremely easy money are guaranteed, which means the US – along with most of the rest of the world – will fall off a financial cliff shortly. After that, the only non-financial issue that will matter is war – and both parties seem about equally bloodthirsty these days.

However, after the November congressional elections — in which Democrats with, ahem, assertive ideas and attitudes did extremely well — proposing big, potentially transformative change now looks like the best way to cut through the media clutter and gain a following.

So the Democrat base has lost its fear of the “S” word and is now embracing a list of policies that are designed to lock in their dominance for a generation, but which carry myriad unintended consequences. If the Dems were in charge today, there’s a good chance that they would:

Make Washington D.C. a state
This is a no-brainer for Democrats. Since DC voters skew liberal (no surprise for people who by and large work for the government), making it a state adds two guaranteed votes in the Senate and several solid votes in the House. That alone might be enough to tip the balance on many votes.

Lower the voting age to 16
This is another no-brainer for Democrats. Younger people tend to be more idealistic and less experienced, which means they, like D.C. residents, tend to skew liberal. Adding a bunch of young voters to the rolls means adding a disproportionate share of those votes to Democrat candidates.

Pack the Supreme Court
Republican presidents have been able to add more judges to the Court in the past couple of decades than have Democrats. The result is a solid conservative majority that might become even more so if President Trump gets to add another Justice in the next two years. Let Trump win a second term and the Court will be untouchably conservative for a generation.

This is intolerable for Democrats, a growing number of whom are proposing to simply increase the size of the Court and add a bunch of liberal justices for balance.

FDR tried this in the 1930s and failed, but his successors are looking at various ways to get away with it.

Eliminate the Electoral College
According to Wikipedia, “The United States Electoral College is a body of electors established by the United States Constitution, constituted every four years for the sole purpose of electing the president and vice president of the United States. The Electoral College consists of 538 electors, and an absolute majority of 270 electoral votes is required to win an election. Each state’s number of electors is equal to the combined total of the state’s membership in the Senate and House of Representatives; currently there are 100 senators and 435 representatives.”

The math of elector apportionment gives more per-capita clout to small states as a way of protecting them from the whims of the large. Without this advantage, according to fans of the Electoral College, candidates would ignore Wyoming and Rhode Island and spend all their time in population centers like Los Angeles and Dallas. Subsequent governments would favor big states over small; good luck to Nevada if it has a water dispute with California.

In short, without the Electoral College, flyover country is toast. But with the Electoral College it’s possible to win the most votes and still lose the election, as has happened a couple of times recently to the Dems. As the following chart shows, a majority of Democrats would abolish the College while Republicans would keep it.

electoral college maybe politics matters

Several 2020 Democratic presidential hopefuls have recently gotten behind proposals to eliminate the Electoral College, including Elizabeth Warren and Beto O’Rourke.

Impose a wealth tax
Keynesian economics, which dominates the thinking of today’s political class, really doesn’t get savings. For Keynesians, the only good wealth is circulating wealth that buys stuff, preferably with leverage. So 1000 shares of Amazon stock do no one any good while they’re just sitting on some rich guy’s balance sheet. Only when he cashes out and buys something is he contributing to society. Same thing with buildings, paintings, farmland, etc.

Hence the concept of a wealth tax, which takes part of the value of such assets each year and puts it back in circulation. Historically this has been viewed by those with common sense as both dangerous – because it makes investing in productive assets less attractive – and even more dangerous because it sends capital fleeing to more hospitable climes.

But as the public sector descends into bankruptcy it’s becoming desperate for some of that “idle” capital. And given control of both the executive and legislative branches, the Democrats might try to take it. From today’s Wall Street Journal:

Plan from Sen. Ron Wyden would treat increased value of long-term investments like income

The top Democrat on the Senate’s tax-writing committee wants to tax long-term investments like other types of income, raising rates and requiring the wealthiest people to pay taxes on their unrealized gains each year.

The plan from Sen. Ron Wyden of Oregon is the latest proposal from Democrats in Congress and on the presidential-campaign trail to boost taxes on the wealthy in a bid to address what they view as the problems of economic inequality and provide a funding stream to pay for new programs. While the specific proposal has little chance to become law anytime soon, such ideas could carry over into policy if the party makes gains in 2020 elections.

Unlike plans from Sens. Elizabeth Warren and Bernie Sanders, Mr. Wyden’s tax would go after investment income rather than total accumulated wealth or estates that are passed on from wealthy individuals to their heirs.

Mr. Wyden’s plan would tax the gains on long-term investments annually, rather than when someone decides to sell the asset, as is the case currently. It would also raise the current taxes on capital gains to match the rates on other types of income, such as salaries.

Okay maybe it does matter who ends up running the government in 2020. They’ll preside over an epic crash in any event, but avoiding the above might make the eventual recovery marginally easier.

 

Emigrate While You Still Can

16 thoughts on "Maybe Politics Matters After All"

  1. What the dems are pushing for should scare the shit out of anyone who believes in the rule of law, the Constitution, and what this country was founded on, and what it is supposed to stand for. At 69, I have many more years behind me than I do to look forward to. I always thought we would return to those ideals, and that if we didn’t, the SHTF event that would start a much more bloody and damaging civil war than the last, would ensue long after I ceased to exist. I’m not so sure now. I think we are in grave danger of that after the 2020 election no matter who the victor is.

  2. If capital gains aren’t indexed for inflation, it’s just flat-out theft by the government.
    You buy a house and rent it out for ten years.
    You pay taxes on the income from that house all of that time.
    You decide to sell the house.
    How much is is worth? It’s worth exactly one house, regardless of how much inflation has driven up its price in a decade.
    You sell it for $100K more than you paid and pay $34K on the “gains.”
    Now you want to buy an identical house, but you can’t afford it.
    The inflated price of that house made the government rich, but you’re poorer, because you had a house, and now you can’t afford to buy the same thing back.

  3. AND
    – prosecute you for not referring to someone by their “preferred” pronoun
    – extreme prejudice against Christians and Jews (every other religion is wondrous though)
    – elimination of the 1st and 2nd amendments
    – the criminalization of every conservative policy or thought.

  4. First of all, it’s not just “the numbers” that seem to indicate that neither party will make any difference, at least monetarily, there is also the fact that for the most part Republicans and Democrats represent the two sides of the same coin (no pun intended.) Most Republicans and virtually all Democrats want larger government and their only real differences are over how to allocate the spoils from taxation, regulations, tariffs, etc. and deficit spending from the issuance of Treasury bonds. So, yes, I agree that maybe politics does make a difference – or could – if enough “right-minded” people can get into office. Unfortunately, there is no doubt in my mind that if the Democrats continue to hold the House – let alone gain the Presidency – then this country is toast. However, if enough incumbent “RINO” Republicans are replaced with “constitutionalists” and the House is won back to them, and if Trump can win re-election then I also agree that a second American Republic would have a chance of arising out of the ashes.

    As I’ve said before, to me one of the main “problems” with history is it takes place over such long periods of time that most people can’t grasp the dynamics to learn from it. Sure, one can argue that the looney ideas and desired institutional changes from the Dems are because they can’t win “at the ballot box”, but I would argue that many of those ideas only able to be floated because contrary conventional wisdom so far seems to be wrong, or at least questionable, and mainly because the long-term consequences that have been admonished are taking too long to manifest.

    When I was a kid of about ten I remember talking to an elder relative about taxation and government entitlements and she said that the reason so many people were for entitlements is because they believed the government just printed the money, instead of getting it from taxes. It seemed so stupid and obvious to me even then, and yet here we are – some 50 years later – and guess what?, today the government practically does just print money and the financial markets couldn’t be happier. That’s why MMT has been revived. ‘Governments don’t need to tax at all since they can just print all the money it needs.’ It’s hard to argue against that given record high stock prices and record low interest rates. Weren’t interest rates supposed to be the governor of fiscal profligacy? For how much longer can this go on for?, or is conventional wisdom wrong again, and AOC types are the true geniuses of today.

    After all, if one of the the most succinct ways of explaining the ultimate failure of socialism is the phrase “socialism is great until it runs out of other peoples’ money”, then is not the “solution” to just print the money and not take it from any one? Wouldn’t it last forever then?

    Shouldn’t the current system has imploded by now? I also remember as a kid hearing that the Vietnam War was costing “over a hundred billion dollars!!!!”, like that was a lot of money, and the national debt was like 350 billion. “Interest rates are going to the moon soon,” I heard my dad’s friend – a bond trader – say. “We” were so stupid then, or at least not very creative, because no one could imagine the creative financing that was soon after implemented. And even if we had, the conventional wisdom was that it wouldn’t work. Even without a gold standard those nasty interest rates would quickly limit such irresponsibility. “Quickly?” Hardly, and still waiting. One down for “conventional wisdom”, one up for “pragmatism and idealism.”

    So no wonder the dogs are being let out. What other time-tested wisdoms are probably wrong?

    At the time the Constitution was written only “land owners” were allowed to vote – in other words only those with “skin in the game.” Then blacks were granted that right, even though they didn’t have as much “skin” on average individually, and then women who had even less. One could argue that things have only gotten more bat-shit crazy ever since politically, but then again I think it’s hard to argue that that those those days were better than now by almost any measure, more or less. So is that how long it takes for a republic to crumble by allowing the less-than-wealthy vote? Almost 250 years (and still counting)? No wonder some (a lot?) of people think allowing teenagers to vote is okay, or maybe even a really good – and “democratic” – idea.

    And why should only nine judges determine if something is Constitutional. Why not allow every judge in the country vote and tally up the opinions? Why just “elites?” Myopic judges are people too.

    When I say to others, ‘If people are so stupid to vote for such-and-such, they deserve what they get.’ And almost without exception they respond, ‘Yeah, but that affects me too.’ So, we have the majority of the country’s population located on the two coasts and a few big cities, and we’re all supposed to be subject to the opinions of the minority living in “bumble-f – – -” wherever? “That’s not democratic. Hello, we’re not an agricultural nation any more. Therefore the Electoral College should be abolished.” Why not a compromise? How about abolishing Daylight Savings Time for all of us 24/7-tech city folk but still let farmers have a say? Frankly, considering the innumerable videos of college kids who can’t point to even the US on an atlas (never mind, say, Africa), I doubt 1 in 10 citizens understand the Electoral College system, and – more importantly – have the decency of true liberty and diversity.

    Lastly, I’m not as concerned about a “wealth tax” because at the rate things are going taxes will no longer be needed. We’ll just print the money.

  5. Germany lost WW1, hyperinflated, suffered through Hitler and the National Socialists, was blown to bits in WW2 and then partioned into 2 countries and occupied for 50 years. And yet today the Germans have the strongest economy in Europe and are running the EU.

    The lesson is obvious. Failure isn’t terminal as long as you work hard and make the right decisions on the other side.

    America’s problem isn’t its impending bankruptcy and the collapse of the dollar. Germany has proven that even a long series of catastrophic failures can be overcome. The big risk to America is the reform we chose after the collapse. If we chose industrial capitalism we’ll be fine in 20 years. If we chose UBI and the Bernie Bros we’ll rapidly devolve into Venezuela.

    1. Interesting observation which is a lesson but not a principle (not that you claimed it was). Working hard and making the right decisions isn’t a principle for any government. After having worked for a period of time in government, I actually laughed when I read your statement as I remembered my time in government service. The reason working hard and making the right decisions is a joke for government is due to the inefficiencies inherent in all bureaucracies and the pit of snakes that all successful deceivers are that run for office or climb the civil service ladder.

      However, working hard and smart by making the right decisions are foundational principles for individuals who wish to succeed. Use your brawn and you will have a flat nose from putting your nose to the grindstone. Use your head and you can work hard and smart to become an owner of your own mill.

      You had a good example. I’ll take a different approach and view of conquest and war.

      Example: China. After Mao, no amount of hard work or even being able to make any individual decision beyond the trivial resulted after the communist takeover and Mao’s “reeducation”. Nothing will change there for 100 years unless there is a civil war. Their country is not successful because they work hard, though millions do, but because they steal technology to advance their society. Crony Communism will eventually, like all other collectivist ideologies, run out of other peoples money.

      Example Armenia: Or take any country conquered by Islam. Their inhabitants were killed or driven to flee for their lives and their lands confiscated. No amount of hard work or decision making will allow a return for it has now been 100 years since the Armenian genocide.

      Its not hard work or making the right decisions that allows one to work out of previous mistakes and poor choices and their inevitable disastrous results as to governments but individual freedom and liberty which allows one to do so for one’s country. Germany was blessed in having chosen individual freedom and liberty after each of its mistakes and disasters. This is the reason they were able to bounce back. And of governments in Europe, Germany is a Republic which is only now losing their individual freedom and liberty due to socialism and the encroachment of Islam upon German society. Germany will start to crumble economically and socially under the social strain of Islam within a decade until war results.

      The requirement of individual freedom and liberty are the keys to succeed as a highly successful nation. This is also a reason there will never be a successful Islamic country which isn’t obtaining its wealth by selling off its natural resources. I’ll not even comment on Islamic work ethic.

      As to America, Socialism will not come peacefully to rule over citizens in America because we are the most armed nation on earth by population and cherish our individual freedom and liberty. Socialism, like any collectivist ideology, obtains its power by robbing its citizens of individual freedoms and liberties in the name of doing “good on behalf of the collective”.

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  6. you left out 1) Universal Basic Income (which strangely enough Milton Freedom supported), 2) Single Payer Healthcare, 3) legalized infanticide, and 4) the intentional destruction of the domestic petroleum industry.

    1. Start looking now for any African ancestry in your geneology. As soon as these jacka$$e$ pass ‘reparations’ against unapproved pigmentation, SIGN-UP!

      $$$$$!

  7. Good article, thanks – BUT trying to tax the wealth/asset base is a non-starter because the wealthy have their assets stored at inaccessible locations: Cayman Islands etc The only way governments can attack this is to go after the corporate structures and trusts that cover the assets with a global tax avoidance blanket.

    I have written a book about all this and much more. A free pdf of my manuscript to available by emailing: peter@underco.co.uk OR

    Have a look at my website for current updates: https://www.gofundme.com/fnahvp-free-bo

    1. Well, another way to implement a wealth tax is to increase inflation …. which Trump has in essence done by pushing the Fed to lower interest rates by 50 basis points. So, this one is a wash to me between the two parties.

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