Today’s Rant outlines in detail where the Biden Administration seeks to take us – SOCIALISM!
I have a variety of sources of economic information available to me, plus I try to pay attention to public statements from the Biden economics team. What follows are the underlying theories and beliefs of the White House economic advisors that are driving much of the executive orders and policy positions you are hearing. What is below is not my interpretation, but is based on things the White House economics people or their primary consultants have actually said, and are quoted, and what other sources have confirmed as accurate.
The spending policies driving much of the economic policies is the belief that the primary goal is to get back to full employment as soon as possible-full employment in their view is 4.1% unemployment. They believe the way to accomplish this is an expansive fiscal policy driven by government spending and government investment. The private sector is downgraded as the source of economic growth and investment as the primary driver to the economy. Their real goal is clearly stated to be to “reallocate cash to workers from corporations.” That underlies everything. They acknowledge that corporate profits and dividend growth will be modest at best over the medium to longer term, and that higher corporate taxes will restrict dividend payments. These factors will combine to provide a very modest growth of stock prices in the future after a 2021 burst up.
Their models show debt to GDP will rise to 120% in 4 years, and continue to grow from there, but they believe that due to what they believe will be continued ultra-low interest rates, this makes no difference. They say they believe that it will be a few years before rates rise, and so it is OK to have massive deficits now. Apparently they do not consider a lower dollar to be an issue nor do they feel inflation will be an issue despite key commodities like corn, copper, and soy rising by 30%-50% recently, and oil now rising substantially. This is Modern Monetary Theory which I believe is very misguided. One day rates rise and the government debt service crushes all other needs, meaning taxes go up more, or services and defense go down. If progressives continue to hold sway, defense will go down just before China takes military action.
An underlying policy position is the belief, there are major benefits from the flood of social programs and that high income people and corporations need to pay higher taxes to pay for it because they believe wealthy people don’t really spend all they earn so they can reallocate that money to lower income people and have no impact on the economy, -the goal is transfer of wealth from the wealthy-(successful job creators) to the workers. They ignore the huge impact of charitable giving that builds a wide variety of institutions and pays for many educational and poverty programs. They believe that government spending is the source of reducing unemployment, and not private sector investment, so then you see how all of their spending plans fit this theory. You maybe now conclude this is socialism. The result of all of this will be lower stock prices which they acknowledge will happen in two or three years under these policies. They believe stocks will rise by 5.4% in 2022, but then be rising at an even lower rate for the rest of the decade. They see unemployment at 4.1% as full employment, and labor participation at around 63.7% and GDP growing at 1.8% by 2024. Interest rates will rise by 2024, but they think not by a lot. They have detailed models for all of this, but the models have a strong left leaning political bias built into them. Models require assumptions, and it is the assumptions that drive the result.
Another underlying position is the belief that higher stock prices mainly help the wealthy, and that the lower cost of capital derived from higher stock prices does not really do much to add to economic growth. They say that the Trump tax cuts did almost nothing to grow the economy and benefited the wealthy disproportionately. They really believe this. Likewise they believe all the deregulation was only helpful to oil and gas and banking, and had no real impact on economic growth. They strongly believe that increasing regulation on fossil fuels makes sense given climate change as an existential threat in their view. They seem to really believe they will create millions of new jobs through the government spending trillions on clean energy. Note the private sector creating jobs is nowhere in these policy statements. Therefore the attacks on fossil fuels will intensify. They also believe that raising the minimum wage to $15 will happen in steps so will have no negative impact on jobs or the economy and will help transfer cash from corporations to workers. This is despite several academic research projects and the CBO that have all proved the opposite will happen. Hundreds of thousands or more will lose jobs, and small companies will go out of business. It was proven in Seattle when they raise the minimum wage and several restaurants closed as a result, and others reduced staffing. All this approach does is to accelerate technological advances to replace human workers with robots and other technology like avatars answering customer service calls. They believe green jobs, solar panels, etc will pick up all of these displaced people. In my view that is naïve at best. Solyndra here we come.
A key construct of theirs is that economic growth depends on immigration growth and that is driving some of the immigration policies Biden is putting forth. Part of it is also to satisfy the left wing, and part is they believe these people will become counted in the census and give them more seats in Congress (that is why Trump tried to stop that in this year’s census), and then those people will be allowed to vote in local elections as they now are in some places on the left coast. Immigration is seen by them to be the main driver of economic growth, (that is a quote) and that is why they will push it hard. They believe that when Trump reduced immigration, it inhibited economic growth. Not clear to me what they think happened in the period up to March when economic growth was excellent, and unemployment was at record low.
They understand that cost of labor and production is key to where things get manufactured, and that the truth is Biden’s talk of bringing jobs back to the US is total BS because any special targeted tax breaks and other programs will not really work to bring jobs back.
One of the key players in the economic plans has told me they see the stock market booming right now, so they take that as confirmation that Wall St thinks their policies are wonderful. I have explained there is a major difference between short term trading which is why short term Wall St traders love the massive stimulus plans, and long term investors like me, and true investors all think this is very bad policy long term. He rejects that thesis even though he admits the longer term will see a stock market under performance and rising rates, but he says that is not for a while, and the short term goals are more important to Biden and Dems. That sort of sums up how they think now in this administration, and why we are headed for a very bad situation one day down the road as the deficit overwhelms important priorities, and economic policies for the long term. I believe they are trying to give a sugar high to the economy now so they can have a booming economy going into 2022 elections, when they will try to solidify their ultimate control of power through HR1. This bill is a massive attempt to take control of the government, and destroy any chance the Republicans have to regain any control. HR1 is the most dangerous threat to democracy ever put forward. It is Pelosi’s master effort to seize permanent real power for the Democrats before she retires. Pay real attention to HR1.
So, bottom line, there is no economic crisis in the US now, and the CBO says with no more stimulus we will be back at the levels before March by this June. See next paragraph. The White House economic policies are a policy program of what amounts to government takeover of the factors of the economy and production. The exact definition of socialism. The stock market will do poorly after 2021 or early 22, and if you earn a big income, or your company does, it will be taxes away to carry out these programs because tax cuts do nothing but help the wealthy and they want to transfer your hard earned money to the workers. If you follow all of the above you will have a clear picture of all of the rhetoric and the policy statements from the White House and Congress. If you combine all of this with the cancel culture and social media and the mainstream media online censoring, you see where this is all heading, and why the election of 2022 is so critical to the future of the country. Just consider if Joe does not last 4 years and Kamala takes over, it will be much worse unless the Republicans take back all of Congress.
Some data that counters the Biden economists: 16 million of the 22 lost jobs have been recovered despite the CA, NY and IL lockdowns and school closures by the unions. Government personal transfers were up $893 billion in the second and third quarters compared to wage comp down $215 billion. In Q2 real per capita disposable income rose 10.5% compared to Q1 and 25 times as fast as average quarterly growth in the prior two years. All driven by government stimulus of $2.6 trillion. That was more than all private sector wages in Q1 of 2020. For all 2020, per capita disposable income rose 5.5% the most since 1984. And none of this counts the last $900 billion stimulus. Quarterly savings rose by $800 billion giving a savings rate in Q@ of 26% compared to a normal 8%. Total savings in 2020 was $1.6 Trillion more than is 2019. There is your pent up spending coming later this year. If we get a $15 minimum wage it will impede hiring, and paying $400 a week will kill hiring like the $600 did as more than 50% of those people will make more not working plus they would get $2000 as a bonus for not working. Since the proposed spending would not really get out until August or September, (there is still $1 trillion unspent from the last two stimulus plans) there would be a added $311 billion a month of more stimulus hitting consumers bank accounts. Fed reserves are up 78% in one year.M2 is up 28.3%. Compare that to the seventies hyper-inflation period where that number was only 13.8% and everyone was freaking out over that. Housing is up 14% and business investment thru the end of 2020 was up 25%. The manufacturing index was at a 6 year high and ag prices are at a 8 year high. Jobs created in December other than in hospitality were 358,000. In 2020 the bottom 20% of income cohort received $45,000 from over 100 government programs and credits. Plus 22 million received food stamps. The entire press and Biden mantra of food insecurity is defined by an advocacy group Feeding America as survey respondents saying they were “worried “ about food security AT LEAST ONE DAY IN THE LAST YEAR. A Harvard research found that when food aid is increased the survey responses did not change. When they say millions worry about eviction or foreclosure, it is largely those who voluntarily choose not to pay anything because they know they cannot be thrown out under the current prohibitions. Now they worry they owe so much they cannot catch up. The end game for all of this is there will be higher rates and inflation at some point and then it will be too late to stop it without the sort of pain we had under Volker. The Dem stimulus bill just accelerates and exacerbates the problem. It is bad policy.
When they go to raise taxes and tell you we don’t pay our fair share: the top 1% pays 40% of all taxes but earns 20.9% of all income. The top 1% pays $615 billion the bottom 90% pays $440 billion. The bottom 50% pays 3% of taxes, but the top 1% pays an average of 25.4%.
The truth of the economic and the vaccine situation is both are doing well. Cases are down 41% since the peak in December. Likely because the holiday season is over. Shots per day are ramping up quickly, and are now around 1,300,000+-,per day, moving soon to 1.5 million per day average with some days as much as 2 million as the drug stores begin giving shots and J&J is being administered. Over 10% of total population has now had a shot. If we add 30+million had the disease that is 20% are immune or will soon be, and another 23% are children under 18. So +-43% of all people have had the shot, the virus, or are kids. So that is the real number to pay attention to. By March 1 it is likely that over 55% will be in this group. By April 1 we should be close to herd immunity levels of over 70% once J&J is fully deployed in late February. Perspective. Ignore the scare rhetoric out of the White House which has not yet had time to change much of anything about the distribution. The drug companies have figured out ways to get more shots per vial and J&J will be released this month which will materially add to that number. With the new cases dropping rapidly, we should be in good shape by June to have shots for anyone who wants one, and maybe at or near herd immunity. The issue will be to get everyone to get a shot. That is the real problem now. The economy is now doing very well and needs no more stimulus. Factories can’t keep up with demand. However, Biden will take full credit for the strong economic recovery that will happen in Q2, but the truth is it would have happened with no stimulus package. Keep eye on oil prices now already up to $54 from under $50. That is just the start as more oil production gets shut down by Biden. My estimate that oil prices will not get much over $65 looks like it could have been too optimistic. Energy prices impact inflation. While there are industries that have huge layoffs like travel and restaurants, the current programs of an added $300 a week plus $600, plus added PPP should do the job if the teachers union will stop their destructive actions to keep schools closed keeping people from going to work, and if CA and NY and IL will reopen as the rest of the country is.
Of the $67 billion allocated to K-12 schools in the last two bills they have only drawn $.45 billion half way through the school year. And now the Dems want to add $130 billion more to no end use. It is a pure payoff to teachers unions to zero benefit to taxpayers, the kids, or the economy. We do not need more stimulus, and Biden and his people are lying about an economic crisis. GDP is growing well now, and by Q2 as the shots are much more widespread, it will boom with all that pent up demand and huge excess savings. The $1.9 trillion is not really stimulus, it is a way to pay off teachers and other favored groups of Dem supporters. Despite all of this Biden has done very little to get schools to reopen because the teachers are huge donators to Dem elections. The kids be damned. They should fire any teacher not willing to work now. They are not working anyway so just fire them as Regan did with the air controllers. They will come back without the union since they need to work.
The false political narrative about Robinhood is doing as expected, and ramping up. As I have explained, brokers are required to keep capital in line with volume to make sure there are no fails due to the required two days it takes to settle trades. One solution would be real time settlement which I would think can be done in today’s high tech instant world. Based on what we know now they did noting wrong, but that does not matter to social media nor to the Dem chairs of House committees who have zero knowledge of how Wall St works. Ignore all the crap about the little guy getting screwed by Robinhood. The houses that clear for Robinhood required them to put on the limits to protect themselves and Robinhood and their customers from a meltdown. If Robinhood collapsed, the market would be at risk of others collapsing, and we would have possibly had a real problem. Instead the markets functioned as designed. Those investors who were playing with those stocks knew they were taking a real risk, and some won big and some lost. That is what markets are. They do not protect investors from losses if a stock declines, which seems to be the political victimization mantra we are hearing about the little guy getting screwed. It is all crap. Expect the hearings next week to be a total circus with the Dems screeching about how bad Wall St is and needs more regulation etc. There will be all sorts of attacks on hedge fund short sellers as some type of crooks. All that should be done to solve the short sale issues is to bring back the uptick rule that means you can only do a short sale when there is an uptick in the share price. This stops short runs on a declining stock. It is all political theater in Congress.
Everything now depends on Manchin and the Senate parliamentarian. He made some very encouraging statements on Tuesday evening. Between them, the $1.9 trillion package will not be able to be approved as is. $15 minimum wage cannot be part of the package under the Byrd rule. The $1400 will not go to nearly as many people, and the amount may be reduced. Two income families earning $75,000 might be the limit. It all makes no sense to hand $2000 to a family making $75,000 and employed now, which is like a giant bonus, when they don’t really need it to live on in most of the country. It is purely just a political bribe. A lot less than $350 billion will go to cities. Manchin holds all the cards now, and at 72 and reelected, he has little to lose no matter the pressure. This is his last roundup. If he holds to his positions, and resists pressure from Schumer and Biden, then the damage will materially reduced. The final deal is likely to be closer to $1 trillion. The next two weeks will be critical. Reality is we do not need any new stimulus as they have not even spent all of the money from the first $3 trillion package, and only a small portion of the $900 billion. The as yet unspent amount right now is estimated to be $1 trillion. As the economy opens there is no need for any new payments to individuals other than possibly those in the hospitality business. As this whole thing goes on, it is clear Joe has no idea what is going on, and hasn’t the smarts to understand the ramifications of what he is doing. He looks like an avatar sitting there signing all these exec orders.
Before the election I said I would get out of the market if Biden got elected since I was convinced he would do what he is now doing, issuing all sorts of terrible policies. Then the vaccines were announced, and that changed everything. I decided to hold on, and for now I remain invested. It is clear the economy will boom as the year goes on and the $1.5 trillion of excess savings of consumers hits the retailers as shutdowns are ended and schools reopen. That will spur factory production even more than it already is, which is full out. Now it appears 2021 could have a GDP growth of 6%-8%. The problem is Biden’s flood of executive orders reversing all of Trump’s deregulation, and Biden’s other executive orders are job killers. The new approach to kill fossil fuels will run up costs (oil is already at $55), added to labor regs that are coming, and other EPA rules to come, will be job killers. I believe there will not be a $15 minimum wage as Manchin is against it. It is likely that as the terrible Biden policies take hold, and taxes are raised, there will be material negative impacts on the economy, but they won’t show up until later this year, or in 2022. As a result I changed my investment strategy to stay in for now and ride the wave until things turn negative later this year.
My warnings about Taiwan being the test for Biden are playing out already. Air intrusions by Chinese bombers and fighters is now a daily occurrence and getting worse. Chinese warplanes staged a mock attack on a US carrier group a few days ago. They sanctioned Pompeo last week. Biden has only said we need to work with China on things like climate change. He should have loudly said these things cannot continue if China wants a good relationship with the US, and will not be tolerated. He will not say that. The Taiwan situation is now at a very dangerous point, and that could be the first major foreign policy crisis in the making, with Iran right alongside. The world is in an extremely dangerous place right now with Biden seemingly more interested in climate and open borders and $1.9 trillion waste of money that foreign policy. Standby for a major black swan.
Merkel has now made it official what I had warned the EU would do. At Davos last week she announced that the EU will not participate in any actions by the US against China or Russia, and that trading with China outweighs any geopolitical issues Biden thought he could get them to cooperate on. In simple terms, the unilateral approach Trump pursued was the only realistic approach to the China and Russia problems. That is essentially what she said in different words. The Europeans do not believe military power matters anymore, and they are not interested in expending much funding on it unless they are against the Russian border like Poland or Lithuania. They believe they can trade their way to peace, and are ignoring Hong Kong and the threats to Taiwan which they deem not of real interest to them compared to trade with China. The whole pitch of Biden to have alliances against Russia and China is dead on arrival in the real world. The recent investment treaty the EU signed with China is far more important to them than NATO or Taiwan, and they signed that just before the inauguration despite Biden asking them to wait until he weighed in. They told him no waiting, which was a clear message of where the EU stands, and how little they care about an alliance with the US against China. The current US liberal foreign policy basic ideas of old alliances is dead. It proves Trump was correct to go it alone, and to build up US military capacity as fast as we can. All of the press and foreign policy wonks in DC and on campus are living in a world that has left them behind with the rise of China as a major world economic and military power that is buying off the rest of the world. The only issue now is will Japan, S Korea and Australia stand with us if Taiwan is attacked. S Korea is doubtful and Japan is an unknown. Nobody else other than maybe Australia will be there. The EU is far more concerned about the far right winning the next elections given the bad economy, than they are about China or Russia. If the EU loses the Chinese market, their economy really goes into the toilet, so that now with Covid, China has a stranglehold on the EU. That is the reality the Biden foreign policy team does not seem to understand. Biden already blew it with Putin by signing the 5 year extension of the START treaty. Trump had been in negotiation to correct serious issues with the treaty, and to have a one year extension. Biden simply signed it for 5 years and got zero in return. Great start with Putin, and great message to Iran.
The teachers union continues to demonstrate that they are all about getting more money and power and not caring at all about kids who are being destroyed and in some cases committing suicide now. The Chicago and VA situations are beyond disgraceful and the Dem mayor and governor have no clue how to beat the union. The union is now even bragging that it is winning. The parents are screaming that the kids and parents are losing permanently. Study after study shows schools can be open safely and in fact are in FL and many other places. The damage the union is doing to an entire generation of kids, and especially minority kids is irretrievable now, and is worse than any terrorists could ever hope to do. Biden says nothing. Catholic and regular private schools have for the most part stayed open throughout. Nil cases. Proves the teaches unions are ignoring the reality of medical science and actual facts to the detriment of the kids. Teachers union should be fined millions and barred from new contracts for what they are doing to a whole generation of poor kids.
One thing I hear from virtually everyone now is the enormous concern for freedom of speech being shut down. It is a major crisis now, and we all need to speak up and stop what is happening on campus, the press, publishers, online social media, and now in corporations. It began with speech codes and “safe Places’ on campus, and has now become the norm in all sorts of places. Campus ideology is rapidly spreading and destroying what we all believe in, and some of us went to war for. We need to fight back.
Too bad we can’t shut off the US and reboot it
I regularly get emails from subscribers with attachment of things they get off the internet. Many of these, on checking, are bogus, and often some sort of conspiracy theory. If you are going to send me one of these, please verify the credibility and truth before you send it. I have far too many subscribers to be able to read or deal with so many fake news stories.
You may recall I said 2021 will be more chaotic than 2020. Welcome to 2021, and just look at all the chaos already in just 5 weeks. It is just beginning.
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