Coyote Blog

The defenders of the Trump tariffs are starting to coalesce on a few different arguments, but what all these arguments seem to have in common is a core assumption that the current world trade system is "unfair." From Victor Davis Hanson via Powerline:

Our trading partners have taken advantage of us for decades after tariffs were no longer needed to help them rebuild their economies after WWII.

Or this:

I could write a book on this, and many people have, but what follows is my reaction to these tariffs and in particular to the notion that our trading partners are being "unfair."

Yes, many other countries have trade practices that are unfair -- unfair to their own citizens! I went to business school in the late 1980's and at the time it was all the rage a) to bash Japan for "cheating" the US and running a trade surplus and b) to wish to emulate Japan and their MITI-style economic management. I disagreed. I was fairly sure that MITI's control of capital flows was causing unseen distortions that would hurt the Japanese economy in the long-term (I had read my Hayek). At the same time, the Japanese were screwing their own consumers who had to pay far more than Americans for food and most manufactured goods, with far less choice and availability. It was not long after that Japan entered 20 years of stagnation as its trade subsidies and economic distortions just served to nuke their own economy.

Later, about 10-15 years ago, our Chinese exchange student and her friends came to the US for the first time. These kids, as it so happened, live only a few miles from one of the Apple assembly plants. They all brought huge empty suitcases to buy things in the US, including what seemed like a score of iPhones for their friends. The iPhones were far cheaper here in the US than in China where they are made and where many of the other things they bought were not available in China at all. So who is China's trade policy being unfair to? Me, or their own citizens?

I love foreign-subsidized trade. Nothing confuses me more than when people complain about foreign subsidies of exports to the US. Why? If the taxpayers and consumers of Germany wish to subsidize cheaper products in the US market, we should absolutely let them. I mean, I would be pissed off if I were a German citizen, paying higher prices and taxes so a few wealthy manufacturers can meet their quarterly profit goals, but why a US consumer should be unhappy is beyond me. (**see Panda Blog column in the postscript). And remember, we are not just talking about cars and vacuum cleaners, but raw materials and intermediate products bought by US manufacturers and support our domestic manufacturing.

Just as I was about to hit publish on this article, I saw this from Commerce Secretary Howard Lutnick defending tariffs:

He further urged, “these people have all been living in our house. They have been driving our car. They come by and visit, open our fridge and eat our food whenever they want.”

“They have taken advantage of us,” he emphasised [sic].

I am sure he will have all the hard-core MAGA types nodding sagely but what the hell does this really mean? In part this is the kind of confusion that results from aggregating what are in fact discrete transactions. Everything Americans buy we pay the asking price for, and everything the Chinese buy they pay our asking price for. How is someone getting cheated? How is there any fraud? Lutnick if pressed would obviously argue that fraud comes from the prices we are paying to the Chinese being artificially low. If that is the case, who is eating out of whose fridge? If I pay $20 less for shoes and $200 less for a phone and that difference is being subsidized by the Chinese people/government, then it is I that is getting over on them. Thanks for the free lunch, China. (update: Even Dave Chappelle agrees)

Hate me if you wish, but compared to consumers, manufacturers are a special interest. 13 million people or so are employed in US manufacturing firms, out of a total workforce of about 160 million, or something like 8%. And by no means are these all in jobs vulnerable to foreign competition -- in fact I would bet at least as many work for companies that are dependent on foreign raw materials for success as there are those working for companies that live at knife-edge vulnerability to competition.

Let me give you an example of a domestic industry entirely vulnerable to foreign competition that tariffs entirely support: Sugar. The US sugar industry would likely disappear if not for tariff's and import restrictions that raise the US sugar price to more than double the world price. We simply do not have the climate or land costs or labor costs to support competitive growing and manufacture of sugar in this country. As a result of tariffs, 300+ million Americans pay more than double for sugar, and perhaps worse, because of the high cost of sugar, food manufacturers in this country have largely abandoned sugar in favor of alternatives like HFCS that are far less healthy. And in exchange for this cost? We are protecting about 12,000 direct jobs. For nearly every tariff in every industry, you will find -- at its heart -- this sort of special interest math.

The history of sacrificing the mass of consumers to the profitability of a few elite producers goes all the way back to the horrible British corn laws. Economists refer to the problem as "concentrated benefits, dispersed costs." Costs are dispersed such that no one person bearing them really has the financial incentive to take on the costs of fighting them, while benefits are concentrated in a few hands that have the incentive and the means to fight to the death to protect their special privilege.

By the way, who is going to work in all these new on-shored manufacturing plants? Due to falling birth rates, the US labor force has been growing only very slowly:

This actually understates the problem, because there is a huge shortage of labor with the right skills for manufacturing. With the US near full employment (though with a relatively low workforce participation), its not clear how we will staff these theoretical new factories. Manufacturers are already screaming they can't get the people they need in the US:

“BlueForge Alliance calls me and they say, we need to hire some tradespeople, and we were wondering if you and your foundation could help.” “I said, I’ll try, as you probably learned, it’s pretty skinny out there … how many do you need?” “They said 100,000.” “100,000 tradespeople for one industry that most people don’t even think about.” “They said, we’ve looked everywhere … do you know where they are?” “I said, yeah I do, they’re in the eighth grade.” “That’s 100,000 building submarines. There’s 80,000 in the automotive industry alone for technicians. Right now … 80,000 openings.” “You start to go down the list and you begin to realize our workforce is wildly out of balance.”

Historically we have had two answers for this problem: 1) more immigration and 2) taking advantage of foreign labor through imports. This administration is trying to cut off both. (Long term there is an education opportunity, that will be addressed below).

If this foreign interventionist trade strategy is superior, why is the US doing so much better? The economies of most major trading nations are all on their back -- except the US. The US is doing very well and still is richer than most any other large nation. Countries like Germany and France that are supposedly so smart to be "cheating" in trade are clearly not doing a very good job of it, because every nation in the EU would be poorer on a GDP per capital basis than the poorest US state (Mississippi). Great Britain through most of the 20th century ran their economy into the ground through protectionism, leaving their industry bloated and inefficient. The US did the exact same thing in its auto and steel industries until tariffs were lifted in the 1970s. We have a smaller auto industry than we did then, but it is healthier and makes FAR better products.

The US is wealthier across the whole of the income spectrum than, say, countries in the EU. Our rich are richer than their rich and our middle class is richer than their middle class and our poor are better of than their poor, even considering the net of taxes and transfers. I have not updated this analysis for over a decade but I am pretty sure it is still directionally accurate.

In fact, there is a fairly direct correlation between low tariffs and citizen well-being:

I don't know where the average South Korean's or Thai's head is at on all of this, but I can say with some confidence that the average Western European citizen would be shocked at the notion that a) their country is somehow beating up on the United States and b) that they personally are getting rich at the expense of American citizens.

It should be noted that even when all else is equal, the fact that US citizens are substantially wealthier than their peers in other nations, it is almost mathematically guaranteed that we will buy more (ie import) than we sell in return in exports.

The Shifting of Jobs Out of Manufacturing Is A Normal Part of Economic Growth. Certainly a smaller percentage of Americans work in factories today than they did 30 or 40 years ago (ignore the Trump stat about 90,000 factories disappearing, though, it is totally fake). You know what other industry has lost jobs through US history? Agriculture. Today about 2% of the population works in farming vs well over 80% in the year 1800. I am pretty sure few today are pining away for a return to the life in a small farm -- I guarantee farmers and ranchers work way harder than most folks want to work today.

As the economy gets wealthier and technology advances, the nature of work keeps shifting. We are upgrading lower-skill, lower-productivity jobs for higher productivity jobs, just as we have since the start of the industrial and agricultural revolutions. We still need the things made in those lower skill, lower productivity jobs, so they shift to other countries (which in turn helps them get wealthier too). No one is demanding we shift workers back from manufacturing to agriculture, and no one should be arguing that we shift folks working on AI back to manufacturing.

Of course this process can have costs for individuals and communities. But we almost never wish to turn back the clock on past such transitions while still greatly wishing to block the current one.

These tariffs are not strategic. I have seen the most enthusiastic of Trump supporters try to argue that this is really about returning certain manufacturing to the US for strategic reasons. But this can't possibly be correct, or if it is, then its a really odd approach since these tariffs apply to every single country and every single product.

This may yet be another Trump negotiating ploy, but its a really expensive and high risk one. Trump supporters who have more than half a brain like Victor Davis Hanson are arguing this is just Trump putting a negotiating token out there. Perhaps. That is certainly Trump's style, to make an irrational demand and soften it only when he gets something back. Secretary Lutnick explicitly says this is the plan, and I will believe him. This is obviously expensive and high-risk, and to some extent still doesn't make a lot of sense since Trump slapped high tariffs on countries like Switzerland that have close to zero tariffs themselves and are largely productive partners.

It may well turn out that much of this ends up being performative. I need to remind everyone of Trump's much ballyhooed deal to get Foxconn to commit to a $10 billion plant in Wisconsin. I don't know if Foxconn ever intended to follow through, but in the end they never made most of this investment and the whole effort turned out to be performative. One interesting aspect of this article is that Foxconn backing out was not the only problem, there was a lot of local opposition as well for a variety of environmental, land use, and public policy reasons. It illustrates that the manufacturing labor shortage discussed above may not be the only reason manufacturing is shrinking in the US.

Trump supporters need to admit there is some vanity here. Trump likes to have people come to him hat in hand as a supplicant -- to kiss the ring, to thank him, to apologize, whatever. He blasted Zelenskyy for not doing just this on his White House visit (though I will confess I find Zelenskyy to be immature, irritating, and possibly corrupt). Trump supporters will say that what he really wants is for countries to show respect for America, and I suppose this is part of it, but I am convinced ego is a part of it as well.

There is more risk here than just price increases. Consumers are going to lose choices and many of those choices are going to be the low-cost options. Already Mercedes has hinted it may stop selling its entry level cars in the US. And yes, I know it is hard to cry for the Mercedes buyer, but the same math that causes the tariffs to hit hardest at their entry-level products (as they tend to have the lowest margins and the highest customer price sensitivity) is going to apply to about every other consumer product.

Ironically, one huge risk is to manufacturing investment. Trump's goal seems mainly to get more manufacturing investment in the US, but as long as the tariffs keep changing week to week -- and they will continue to if Trump is really using them as a bargaining chip -- no manufacturer in their right mind is going to make a major new investment. They are going to sit on their hands and wait. Many historians and economists of late have been coalescing around a theory that regime uncertainty in the 1930s -- ie the constant changing of regulatory rules and frameworks -- did much to cause the Great Depression to drag out longer.

And then there is the risk of cronyism. A system of high tariffs gives a huge new playing field for politicians to trade favors with favored companies, giving them special exemptions or hitting their competitors with extra costs. If you look at European politics around tariffs, it is a relatively ugly picture of favoritism to a few select elite. I guarantee you the special favors for Nike and Apple are already being discussed in the back rooms. Just look at the Foxconn deal discussed above, where Trump and WI governor Walker bought a trade-related election talking point for $4.5 billion in subsidies.

Update: And of course there is the threat to the rule of law. I left this out on the first draft because, frankly, I don't think the faithful of either party gives a sh*t about the rule of law if it is their agenda hat is being rammed through. Certainly Democrats didn't have any problem with Biden's lawless attempts to forgive a trillion dollars in student loans and I don't think Trump's supporters care about the legality of this tariff actions. The power to set tariff's is enshrined in the Constitution (that document Republicans used to care about) as a power of Congress. Weak-kneed and lazy Congresses have delegated some of this power to President's, but only very narrowly. The picture is complicated and illegal actions by the President can be hard to review in court. But looking at the 4-6 major delegations to the President of tariff authority, it is difficult to see that any of them apply simultaneously to every country on Earth and every single product manufactured anywhere. Certainly there is no precedent for them being enacted by the President on anything but a far far narrower basis (eg steel from China).

I also left out the issue of honorable dealings, which again I don't think political partisans of any flavor give a crap about. But Trump is violating any number of agreements, including not just lame President-only agreements like much of the climate stuff but real treaties that were legally passed by the Senate. He is also explicitly repudiating deals he personally made with Mexico, Canada, and the EU, among others. I suppose it is fine for him to behave this way in his personal negotiations for his personal businesses -- it is only his honor involved. But there is a real cost involved to the honor and reputation of the nation which makes it harder in the future for such agreements to be made.

So let me end by offering a few alternatives to tariffs to achieve some of Trump's stated goals.

Alternative 1: If you really want to reduce trade deficits, cut the government budget deficit. As I said above, the US is likely always going to run trade deficits as long as it is wealthier than the rest of the world. But probably the #1 thing that has caused these deficits to be higher than they would otherwise be is the huge Federal debt. Every year now we are issuing trillions of dollars of new US Federal debt. This pushes the interest rate for these bonds higher than the #1 risk-free world investment might otherwise be. This in turn attracts foreign capital, which buys dollars in order to buy of these bonds, which in turn increases the value of the dollar. This artificial inflation of the value of the dollar certainly helps consumers, by reducing the cost of imported goods, but hurts exporters by increasing the cost of their goods in local currencies of buying nations. The net effect is that government borrowing increases the trade deficit. Close the budget hole, and the trade deficit will come down over time.

Alternative 2: If you really want to increase US manufacturing, you need to increase the number of workers with trade skills. We talked above that US manufacturing is already limited by the lack of workers in skilled trades. In part this is due to government programs that pay people just enough that they play Call of Duty all day and still eat. But it is also due to the great fuck-up of our educational system. Public education has become complete crap. But even worse for manufacturing is the fact that we have for thirty years promoted a value system where it is high status to go to college and get a degree in the Lesbian poetry of Peru while it is low status to get a trade and go to work in manufacturing. The economic signals are pretty good -- the Lesbian poetry grad is probably unemployable while my friend with no college degree but welding skills makes 6 figures at SpaceX. But for some reason we have an entire hierarchy in education that says its wrong to encourage kids into trade schools -- they need to go to college. Starting to fix this is beyond the scope of this post but far more essential to US manufacturing than tariffs are.

**Postscript: I will conclude by recognizing that none of the above is recently adopted out of TDS, which I don't have. I would love certain parts of Trump's agenda to be succesful. But I have been making these same points for 20 years. Below is a post I wrote for my imaginary Chinese affiliate "Panda Blog" from an imagined Chinese citizen in 2006:

Our Chinese government continues to pursue a policy of export promotion, patting itself on the back for its trade surplus in manufactured goods with the United States.  The Chinese government does so through a number of avenues, including:

• Limiting yuan convertibility, and keeping the yuan's value artificially low
• Imposing strict capital controls that limit dollar reinvestment to low-yield securities like US government T-bills
• Selling exports below cost and well below domestic prices (what the Americans call "dumping") and subsidizing products for export

It is important to note that each and every one of these government interventions subsidizes US citizens and consumers at the expense of Chinese citizens and consumers.  A low yuan makes Chinese products cheap for Americans but makes imports relatively dear for Chinese.  So-called "dumping" represents an even clearer direct subsidy of American consumers over their Chinese counterparts.  And limiting foreign exchange re-investments to low-yield government bonds has acted as a direct subsidy of American taxpayers and the American government, saddling China with extraordinarily low yields on our nearly $1 trillion in foreign exchange.   Every single step China takes to promote exports is in effect a subsidy of American consumers by Chinese citizens.

This policy of raping the domestic market in pursuit of exports and trade surpluses was one that Japan followed in the seventies and eighties.  It sacrificed its own consumers, protecting local producers in the domestic market while subsidizing exports.  Japanese consumers had to live with some of the highest prices in the world, so that Americans could get some of the lowest prices on those same goods.  Japanese customers endured limited product choices and a horrendously outdated retail sector that were all protected by government regulation, all in the name of creating trade surpluses.  And surpluses they did create.  Japan achieved massive trade surpluses with the US, and built the largest accumulation of foreign exchange (mostly dollars) in the world.  And what did this get them?  Fifteen years of recession, from which the country is only now emerging, while the US economy happily continued to grow and create wealth in astonishing proportions, seemingly unaware that is was supposed to have been "defeated" by Japan.

We at Panda Blog believe it is insane for our Chinese government to continue to chase the chimera of ever-growing foreign exchange and trade surpluses.  These achieved nothing lasting for Japan and they will achieve nothing for China.  In fact, the only thing that amazes us more than China's subsidize-Americans strategy is that the Americans seem to complain about it so much.  They complain about their trade deficits, which are nothing more than a reflection of their incredible wealth.  They complain about the yuan exchange rate, which is set today to give discounts to Americans and price premiums to Chinese.  They complain about China buying their government bonds, which does nothing more than reduce the costs of their Congress's insane deficit spending.  They even complain about dumping, which is nothing more than a direct subsidy by China of lower prices for American consumers.

And, incredibly, the Americans complain that it is they that run a security risk with their current trade deficit with China!  This claim is so crazy, we at Panda Blog have come to the conclusion that it must be the result of a misdirection campaign by CIA-controlled American media.  After all, the fact that China exports more to the US than the US does to China means that by definition, more of China's economic production is dependent on the well-being of the American economy than vice-versa.  And, with nearly a trillion dollars in foreign exchange invested heavily in US government bonds, it is China that has the most riding on the continued stability of the American government, rather than the reverse.  American commentators invent scenarios where the Chinese could hurt the American economy, which we could, but only at the cost of hurting ourselves worse.  Mutual Assured Destruction is alive and well, but today it is not just a feature of nuclear strategy but a fact of the global economy.

1. Is this the most destructive Federal economic action in my 63-year lifetime? I am trying to think about the competition for this title. Certainly Nixon's wage and price controls would be up there in the top 5. The banking regulations that treated mortgages as preferred risk-free bank capital might be on the list. Perhaps we would include something like Biden's attempt to forgive a trillion dollars in student loans. There was some COVID craziness, including lockdowns and eviction moratoriums. But even looking at this collective Mt Rushmore of economic fail, I still think Trump's tariffs are at or near the top. This is as dumb as even the worst ideas of folks like AOC who the Republicans mock.
2. How is this possibly Constitutional? Article 1 Section 8 gives Congress sole "Power To lay and collect Taxes, Duties, Imposts and Excises" and "All Bills for raising Revenue shall originate in the House of Representatives." I understand the spineless Congresses have delegated all sorts of powers to the Executive Branch, but good God there has to be some sort of limit. Where is that nationwide injunction when you need it? This is as a good a case as any for the courts to test both Executive taxation power, limits to delegation of authority, and the general use of emergency powers.

The tariffs also bring to mind several ironies:

1. Trump called it "liberation day" but the actual day we celebrate liberation is the day the Declaration of Independence was signed. That document explains the King's injustices, including: "[the King] has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:...For cutting off our Trade with all parts of the world [and] For imposing Taxes on us without our Consent" Can't find any exceptions for emergencies in this document or in the Constitution.**
2. Republicans have spent 5 years (rightly) complaining about the exercise of emergency powers when the person who gets the power also gets to declare an emergency. And now they have topped anything Biden ever did with COVID emergency powers
3. In economics, independence is the road to poverty. The most economically independent people in the world are the isolated primitive tribes in the Amazon. This stuff is not hard, we have understood it since David Ricardo was writing over 200 years ago. We literally understood how trade created value before we had invented the telegraph or the railroad or knew that germs caused diseases. We understood it before Iodine was discovered. My post on aluminum tariffs helped show the value of trade.
4. This almost goes without saying, but after campaigning on inflation, Trump is directly adding to inflation. Back of the envelope, given that imports are about 16% of GDP, then a 25% average tariff on imports adds something like 4% to prices. Immediately inflation rates for this year go from 3% to 7%, and I am fairly certain this simplistic approach underestimates the problem. A family member works in the finance department of a well-known low-margin retailer and said that they were absolutely going to have to pass through tariffs and spent today working on the numbers. Sure, Trump is going to identify a few high-profile companies to name and shame for raising prices to pretend that companies should not be passing through these costs, but this is -- ironically again -- exactly as ignorant as Elizabeth Warren blaming grocer greed for food price increases, something that Republicans mocked by the way.***

I only have the time, and frankly the stomach, to put down these few quick thoughts on this one. More later.

Update: From Pat Toomey vis Powerline, this is as good of an explanation as I have seen for the theory in Trump's head that is driving tariff actions. This explains pretty well the calculathttps://www.powerlineblog.com/archives/2025/04/toomey-on-trumps-tariffs.phpion of the tariffs, which appear to be more correlated with individual trade deficits than current reciprocal tariffs

This, I’m afraid, is going to take us down a bad path, Dominic. I think that we’re going to experience more aggressive tariffs than a lot of people think, because the president really believes that — what he really wants to go after is the trade deficits. What he really objects to, and from all of my arguments with him, I’m convinced that he believes — and if you listen to his language — he believes that if you have a trade deficit with another country, that is the measure of the amount that country steals from you. And that of course disregards that we get something when we purchase products from other countries, but this is the way he views it. He thinks that the Canadians are ripping us off, because we buy some more goods from them than they buy from us (by the way, the difference is fully explained by oil imports that are quite useful and important to us). But this is where we are. We’re going to have relearn this lesson. I do think the markets are going to respond very poorly, if I’m right and on April 2 we discover we’re having a more aggressive round of tariffs than we expect.

We are really in trouble. This is really next-level ignorance.

** Postscript: Tariffs rather than immigration is the topic of the day, but I was reminded in perusing the Declaration of Independence for this post that it also says this: "He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither"

***Postscript #2: The reason this likely underestimates inflation is because it does not take into account domestic producers raising their prices to partially match the price increases of their foreign competitors

The admissions by the media and government insiders just keep on coming. We've had:

• We knew all the time that COVID likely was a Wuhan lab-leak
• We knew all the time that the vaccine did not stop transmission
• We knew all the time that Biden was increasingly frail and senile
• We knew all the time that the inflation-reduction act infrastructure spending was burdened by unwieldly bureaucratic rules

Each and every one of which was not only vociferously denied at the time but contemporaneous critics pointing out the obvious truths were labelled as conspiracy theorists and targeted for censorship. Now to these we can add:

• We knew all the time we were risking nuclear escalation with our actions in Ukraine
• We knew all the time we were really engaging in a proxy war with Russia as much as a defense of Ukraine

The linked article above -- Matt Taibbi reacting to reporting from the NY Times -- is just infuriating for those of us who -- while greatly disliking Russia and its aggression -- were skeptical about our role. A couple of examples since the article is paywalled (Taibbi in regular font, NY Times quoted in italics)

To many watching from afar, it seemed like simple common sense that using American weapons and American support personnel to attack Russians in Russia risked drawing this country into a shooting war with a nuclear enemy at any moment. Those of us who said these things were dismissed as alarmist, Putin-loving fellow-travelers. Now we have Entous describing American officials feeling the same after the opening of “ops box” attack....

In some ways, Ukraine was, on a wider canvas, a rematch in a long history of U.S.-Russia proxy wars — Vietnam in the 1960s, Afghanistan in the 1980s, Syria three decades later… It was also a grand experiment in war fighting, one that would not only help the Ukrainians but reward the Americans with lessons for any future war....

If you’re counting, that means we were lied to about the risk of World War, the chance of “victory,” the desire for negotiations, the success of last year’s counteroffensive, the solidity of our relationship with Ukraine, and the significance of U.S.-backed incursions into Russia. This was before Democrats lost the election last November, after which Biden crossed one more line:

Mr. Trump won, and the fear came rushing in… In his last, lame-duck weeks, Mr. Biden made a flurry of moves to stay the course, at least for the moment, and shore up his Ukraine project… He crossed his final red line — expanding the ops box to allow ATACMS and British Storm Shadow strikes into Russia — after North Korea sent thousands of troops to help the Russians dislodge the Ukrainians from Kursk… The administration also authorized Wiesbaden and the C.I.A. to support long-range missile and drone strikes into a section of southern Russia used as a staging area for the assault on Pokrovsk, and allowed the military advisers to leave Kyiv for command posts closer to the fighting....

There are a hundred details in this “Secret History” that serve as stark warnings to anyone who thinks protection from Armageddon is secure in the hands of career military and intelligence officials. Not only did we allow ourselves to be “blackmailed” into escalating a conflict with a nuclear power, the management of the “partnership” broke down because of a Heathers-style spat between the key brass twits, Ukrainian general Valery Zaluhniy and Mark Milley.

When Milley second-guessed Zaluhniy, the latter would respond with teen-like silence, or by avoiding Milley’s next call. Underscoring: the country to which we were giving hundreds of billions in aid didn’t feel a need to pick up the phone. Entous describes the general lack of communication via a moment of levity: “Biden administration officials would joke bitterly that they knew more about what the Russians were planning by spying on them than about what their Ukrainian partners were planning.”

Aggravating from first to last. The news briefly made a big deal about supposed releases of Epstein Clients and JFK Shooting Documents. But these have little interest to me when compared to what we are finding out about the secrets the government has kept these last 5 years. I will end with what I have written before on Ukraine:

The biggest question is -- what is the alternative? The implication is that there is somehow a hope to get the territory under Russian occupation back by military force. But I just don't see it. The Ukrainians have certainly been scrappy and creative and did a better job beating back the Russian thrusts at Kiev in the early days of the war than I would have guessed they would. They are now, though, fighting a static war of attrition with a county 4x its size. So what, at this point after 3 years, is the alternate plan that preserves territory? If that plan is to send a million American soldiers to Ukraine and risk escalation of the war, a nuclear exchange, and possibly a Chinese attack on Taiwan while our back is turned, then I am not going to agree.

Again, I would be happy to see Russia lose, but short of sending the American military into the line of fire, what is the plan? Perhaps Russia's will collapses before Ukraine's, but no one has presented me any evidence of that. That would be a sort of WWI outcome, where one side was eventually exhausted (though only after the intervention of US troops). As an aside, I wonder sometimes, would peace in 1915 perhaps with Germany retaining control of Alsace and Lorraine have been worse than all the deaths that followed, not to mention the platform the war built for the later rise of Hitler and the Nazi party?

As I said before, I am amazed that our ex-peace-protesting-hippies of the Left who would 100% retroactively say that the US should never have escalated in Vietnam after 1964 are in the lead of those who want us to fight in the Ukraine to the very end. Someone needs to tell me what's different, and I have not heard a good answer yet.

We frequently get bogus emails asking for payments of bogus services, but today we received probably the best-crafted SCAM we have yet seen. Look carefully and beware.

What made it more believable was the fake email chain they crafted with an email apparently from him to me asking for payment, and from me to him apparently telling him to email his invoice to my controller. Both my name and the controller's email were correct. The requirement that the payment be ACH only red flagged it for my controller or it might have been paid. ProjectNext Leadership and http://consulting.com both look like real things, though unlikely associated with this scam. But a quick check of their sites do look like they might plausibly be associated with the services in this email.

These scams are getting much better and you should make sure your payments people are well trained on this sort of thing,

Trump has proposed -- and depending on the time of day -- is actively planning to put large tariffs on aluminum imports (25% in the last version I saw). The implication is that there is some unfairness that has other countries producing a product we should be making domestically. Typically the argument is that the other governments are somehow subsidizing the product unfairly. Personally, I have never understood this argument -- as a US consumer I am perfectly happy to have taxpayers of another country subsidize my purchases. It turns out aluminum is a great example to look at because it is very clear why it is produced where it is.

First, let's look at where aluminum is produced, via wikipedia (perhaps taking Chinese reported production statistics with a grain of salt).

Some of this makes sense, but UAE? Bahrain?? Wtf? Let's explain:

Aluminum is produced pretty much the same way today as it was when the mass production process was first invented in the late 19th century -- using a LOT of electricity. Essentially, aluminum oxide from the raw bauxite ore is separated into pure aluminum and oxygen through an electrolysis process. I am not an expert, but estimates I have seen place electricity costs at 30-40% of the entire cost of aluminum. It takes something like 17,000 kWh of electricity to make one ton of aluminum. At some level you can think of a block of aluminum as a block of solid electricity**.

If you look at the top aluminum producers above, there is only a partial correlation with the top bauxite ore producers. That is because aluminum is generally not produced next to the bauxite mine but wherever the cheapest possible electricity can be found. The US historically produced a lot of aluminum, much of it in two places -- the Pacific Northwest and around Tennessee. You know why? Because these are the two largest areas of hydropower production, generally the cheapest source of electricity (its also why these were the two areas favored for early uranium separation). As US electricity costs have risen (and as we have actually reduced our total hydro power production under environmental pressure), aluminum production has moved to other countries.

Every one of the top six producers, excepting Canada, have electricity prices less than half those in the US. That is why Bahrain and UAE are on the list -- the are effectively converting their excess natural gas that might be wasted or flared to aluminum via electricity. Canada's electricity prices are also well under the US's though not as low as half, but Canada has a lot of very cheap hydropower in their eastern provinces and that keeps their aluminum industry viable.

It would be great to import 5-cent per kWh electricity from Bahrain, but there is no viable technological way to do that. So we do it the next best way -- we import cheap aluminum. This is a great example of why tariffs are absolute madness. Why would we possibly NOT want to take advantage of such fundamentally lower production costs in other countries for such a critical raw material?

The only possible political argument for doing so is that the government might wish to rebuild the US aluminum industry. But there is absolutely no way that is going to happen, for at least two reasons:

• Given the amount of electricity in the production costs of aluminum, to bring production to the US where electricity costs are more than 2x those of other producing countries would be to accept at least a 50% cost disadvantage, which is not going to be undone by a 25% tariff.
• But the more important point is this: No one in their right mind is going to invest based on the promise of tariffs that Trump himself changes almost daily and that will likely be politically undone long before any new plant is paid for, or even built. A new aluminum plant costs in the billions of dollars and it would be crazy to invest based on fleeting political promises. [OK, I freely admit that there do seem to be investors willing to make huge investments on the basis of what were likely fleeting political promises of government support -- solar, wind, EV's all come to mind. But "enticing investors to destroy capital" is not a very compelling reason to support subsidies and tariffs.]

If President Trump wants to rebuild the American aluminum industry, the best way would be to take actions that would free up regulations and mandates so that we could reduce the cost of electricity.

** Postscript: This is why aluminum is one of the very few items that it makes economic sense to recycle with current technology. Aluminum made from recycled scrap takes something like 1/20th the electricity of aluminum from the raw ore.

Kevin Roche, who has done a good job of separating fact from crazy through all of the COVID years, writes:

Lockdowns, school closures, forced masking, plastic barriers, etc. during the epidemic were euphemistically referred to as non-pharmaceutical interventions.  They might better have been referred to as non-effective interventions.  Five years later, the mainstream media is finally taking notice of this lack of effectiveness and stories like this one in the Boston Globe are appearing.  (“New Research Shows COVID Stay-at-Home Orders Did More Harm Than Good”)   Anyone who wasn’t inclined to panic knew this at the time of the epidemic.  I knew it, I published ads about the harms and the lack of benefits, wrote columns.  Anyone like me who took this position was pilloried as a grandma killing, heartless idiot.  Now five years later everyone is saying these steps were irrational, taken out of fear and panic, and all the negative impacts were not considered.

I am going to use this thought as an opportunity to further my previous discussions of organizational incentives and how they help explain government behavior. The following is built on my essay on the topic on August 3, 2021.

Incentives of Government Agencies

Most of the studies and planning among public health researchers and officials in the decades before 2020 came to the conclusion that public masking and lockdowns were both ineffective and largely counter-productive (the 6-foot social distancing rule was so weak it had not even really been studied -- it was a totally made up thing). The CDC's own website had (still has) an infographic that the general run of masks were ineffective and stopping disease inhalation. Meta studies generally concluded lockdowns were counterproductive.

But within weeks of the start of the pandemic in 2020, government agencies like the CDC threw out all this history and all their prior plans and decided to mandate masks and lockdowns.  Masks were mandated for people outdoors, even when we knew from the start that transmission risks outdoors were nil.   In late 2021, officials were still mandating masks for children, who have lower death rates from COVID than the flu and despite a lot of clear research about the importance of facial expressions in childhood development and socialization.  Millions of kids had to stay home from school, some for years, with disastrous affects on their learning (and probably socialization). So why?

One needs to remember that the officials of government agencies like the CDC are not active scientists, they are government bureaucrats.  They may have had a degree in science at one time and still receive some scientific journals, but so do I.  Dr. Fauci has seen about the same number of patients over the last 40 years as Dr. Biden.  These are government officials that think like government officials and have the incentives of government officials.

I will take the CDC as an example but the following could apply to any related agency.  Remember that the CDC has been around for decades, consuming billions of dollars of years of tax money.  And as far as the average American is concerned, the CDC has never done much (at least visibly) as we never have had any sort of public health emergency when the CDC had to roll into action.

If you think this unfair, consider that the CDC itself had previously recognized this problem.  For years they had been trying to expand their mandate to things like gun control and racism, trying to argue that these constitute public health emergencies and thus require the CDC's active participation.  The CDC had for years been actively looking for a publicly-visible role (as opposed to research coordination and planning and preparation and such) that would increase their recognition, prestige, and budget.

So that is the backdrop.  And boom - finally! - there is a public health emergency where they can roll into action.  They see this new and potentially scary respiratory virus, they check their plans on the shelf, and those plans basically say ... there is nothing much to be done, at least in the near term.  Ugh!  How are they going to justify their existence?  Tellingly, by the way, these agencies and folks like Fauci did follow a lot of the prior science in the opening weeks of the pandemic -- for example they discouraged mask wearing.  Later Fauci justified his flip flop by claiming he meant the statement as a way to protect mask supply for health care workers, but I actually think that was a lie.  His initial statements on masks were correct, but government agencies decided they did not like the signal of impotence this was sending.

There was actually plenty these agencies should have been doing, but none of those things looked like immediate things to make the public feel safer.  Agencies should have been:

1. Trying to catalog COVID behavior and characteristics
2. Developing tests
3. Identifying and testing treatment protocols
4. Slashing regulations vis a vis tests and other treatments and protective gear so they could be approved faster
5. Developing a vaccine

If we score these things, #1 was sort of done though with a lot of exaggerated and inaccurate messaging.  #2 the CDC and FDA totally screwed up.  #3 barely happened, with promising treatments politicized and ignored.  #4 totally did not happen, no one even tried.  #5 delivered a vaccine but with over-hyped results and foreshortened testing that has since had the devastating impact of reducing confidence in other, better vaccines.

Instead, the CDC and other agencies decided they had to do something that seemed like it was immediately affecting safety, so it reversed both years of research and several weeks of their own messaging and came down hard for masks and lockdowns.   And, given the nature of government incentives, they had to stick with it right up to today, because an admission today that these NPI aren't needed risks having all their activity in 2020 questioned.

Incentives for Government Officials

Pretty much all of the above also applies to the incentives of government officials.  Our elected officials of both parties, but particularly the Democrats, have been working for decades to have the average American think of them as super-dad.  Got a problem?  Don't spend too much time trying to solve it yourself because it's the government's job to do so.  Against this background, the option to do nothing, at least nothing with immediate and dramatic apparent potency, did not exist.  "They had to do "something."

It might have been possible for some officials to resist this temptation of action for action's sake, except for a second incentive.  Once one prominent official requires masks and lockdowns, the media began creating pressure on all other government officials.  New York has locked down, why haven't you?  Does New York care more than you?  We had a cascade, where each official who adopted these NPI added to the pressure on all the others to do so.  Further, as this NPI became the standard government intervention, the media began to blame deaths in states with fewer interventions on that state's leaders.  Florida had far fewer COVID deaths, particularly given their age demographics, than New York but in the media the NY leaders were angels and the Florida ones were butchers.  For a brief time terrible rushed "studies" were created to prove that these interventions were working, generally by the dishonest tactic of cherry-picking a state with NPI mandates that was not in its seasonal disease peak and comparing it to another state without NPI mandates that was in the heart of its seasonal peak. 

The other positive feedback loop was that at the same time, the public health leaders issuing these needless mandates were lionized as heroes. Fauci was smothered in positive press and numerous non-profits and universities lined up to hand him both scientific and ethics awards.

And then the whole thing got polarized around party affiliation and any last vestige of scientific thinking got thrown to the curb.   Take Chloroquine as a possible treatment protocol.  Personally, I never saw much evidence in its favor but early in 2020 we did not know yet one way or another and there were some reasons to think it might be promising.  And then Donald Trump mentioned it.  After that we had the spectacle of the Michigan Governor banning this treatment absolutely without evidence solely because Trump had touted it on pretty limited evidence.  What a freaking mess.  In addition to giving us all a really beautiful view of the hypocrisy of politicians, it also added another great lie to the standard list.  To "The check is in the mail" and "I will respect you in the morning" is now added "We are following the science."

Postscript: Incentives for the Public

I won't dwell on this too long, but one thing COVID has made clear to me is that a LOT of people are looking for the world to provide them with drama and meaning.  The degree to which many folks (mostly all well-off white professionals and their families) seem to have enthusiastically embraced COVID restrictions and been reluctant to give them up has just been an amazing eye-opener for me.

Just before inauguration day I wrote a post about the state of the world, saying in part:

To a large extent, US moral and intellection leadership post WWII on free speech and free trade has been critical to keeping these concepts alive around the world against the headwinds of authoritarianism.  Now, with a breakdown of support in the US for both, one wonders what future they have.

I held out some small hope that while it was depressing to consider that Trump was likely to further trash the notion of free trade (and he has certainly delivered on this bad promise), Republicans -- after years in the wilderness rightly complaining about government censorship and growing opposition on the Left to free speech -- might, just might, do something to make things a bit better. I thought JD Vance calling out Europe on its deteriorating free speech environment in his Munich speech was great. But its easy to call out other countries on this topic, much harder to remain disciplined in one's own country. It takes a lot of backbone to respect speech from people you really dislike and disagree with. And apparently this administration lacks such a backbone:

It’s been three days since the government arrested and detained Mahmoud Khalil for deportation. This afternoon, the administration finally stated the basis for its actions. Its explanation threatens the free speech of millions of people.

Yesterday, an administration official told The Free Press, “The allegation here is not that [Khalil] was breaking the law.” This was confirmed today by White House Press Secretary Karoline Leavitt, who announced Khalil is being targeted under a law that she characterized as allowing the secretary of state to personally deem individuals “adversarial to the foreign policy and national security interests of the United States of America.”

WTF? Is that really a law? Some holdover from the Alien and Sedition acts? I can't believe it would stand up to First Amendment scrutiny and as a minimum any court should demand a LOT more due process before a green card holder was kicked out of the country. Heck had the Biden Administration dug up this particular chestnut they likely would have slapped the label on Trump.

The administration is wielding this standard — deportation for people whose activities could cause “serious adverse foreign policy consequences for the United States” — to arrest and detain an individual graduate student. In explaining how he met this standard, the administration did not allege Khalil committed a crime. But it did explicitly cite the content of his speech,  characterizing it as “anti-American” and “pro-Hamas.” Protesting government policy is protected by the First Amendment, as is rhetorical support for a terrorist group (if not directly coordinated with it, which the government has not alleged here).

Disrupting college classes and harassing students is not protected expression, to be sure, and Leavitt stated that Khalil organized protests that may have done so. But the administration has not detailed Khalil’s specific actions with respect to those protests, so it remains unclear whether Khalil himself violated any campus rules against discriminatory harassment. Whether any such violation justifies detention and deportation is a separate question. In either adjudication, Khalil must be afforded due process. 

Congrats to the Trump Administration for taking a random asshole -- who few have heard of and many would disagree with and probably dislike -- and making him famous and likely far more effective in the future. Its like they never even heard of the Streisand Effect.

So my thin hopes that this Administration might have some positive effect on free speech are likely dashed. But that is no surprise. As I wrote in the article linked a the top:

I am not a Pollyanna -- I see threats and worrying trends in every direction, and will be writing about them.  For example, tomorrow we trade a President with an immense set of flaws for another with an immense set of entirely different flaws.  Perhaps I am not as disappointed as some by recent trends because I have always treated politicians and the media and academia with immense skepticism, so I am less surprised by their obvious failings.  I have always expected people in power -- government, corporations, wherever -- to abuse their power and believe the trick is to wire the system in a way that they cannot do too much damage.  In preparation for blogging again, and looking back over my old writing, one consistent theme I see is a disdain for solutions that boil down to "if only we replace their people with our people."  That's a hopeless approach.  We have flip-flopped the Coke and Pepsi parties in power more times in the last 50 years than we did in 100+ years before that, and its not making things better.  If anything its escalating a tit for tat power grab as each new administration pushes the precedent frontier forward more toward Presidential authoritarian power.  This is not a secret: Trump is bragging about it.

In late 1964, the United States faced a decision about Vietnam. The war had dragged on for 10 years, and the US had steadily poured more dollars and arms and "advisors" into supporting the South Vietnamese against North Vietnamese aggression. "Saving" the South Vietnamese and punishing the North Vietnamese, along with their Chinese and Soviet backers, for their aggression clearly was going to require a larger US commitment, both of arms and probably men. Was it time to ramp up, or find a formula for peace? Here are some of the elements, partially in hindsight, of this decision:

• Everyone wanted to see military aggression punished
• Most Americans at the time would would have been thrilled to hand the Soviets and Chinese communists an "L". There was an definite attraction to fighting the communists down to the last Vietnamese in a proxy war far from home
• Many were increasingly skeptical of the South Vietnamese -- the South Vietnamese government was a corrupt mess and not even really democratic after a military coup the US winked at. But we liked them better than the Russians and Chinese
• After 10 years, it was clear that the military stalemate could not be broken except for an extraordinary infusion of US arms and manpower.

I know there are folks who hold out that America and the South Vietnamese could have won if the war was fought smarter. But I think a majority of folks -- including most everyone on the Left -- would agree the post 1964 escalation was a mistake that cost over a million deaths on both sides and did not prevent -- and maybe even made worse -- a horrific aftermath of reeducation and genocide. All to try to prevent the emergence of the unified Vietnam of today, that appears to most American visitors as one of the most capitalistic countries they have visited.

I set this up all as an unsubtle analog to the Ukraine today:

• I think most people would like to see Russia's military aggression punished. I saw General Milley speak at Princeton and this was his main argument, that we have to establish a red line against military attempts to move borders.
• Many of us find the Putin regime in Russia to be distasteful and would be happy to hand it an "L". It is not much of an exaggeration to say that many Americans would like to see us fight Russia down to the last Ukrainian. I often wonder if the average X user with a Ukrainian flag icon is really knowledgeably pro-Ukrainian or just anti-Russian.
• Until the moment of invasion, the Ukraine was considered by the Left, Right, and media to be on of the most corrupt nations in the West. Their current strong censorship regime and suspension of elections smell bad, particularly given that we live in a county that managed to hold free elections during our Civil War (Lincoln until a few months before the 1964 election was sure he was going to lose and let elections go forward anyway -- god bless general Sherman).
• After 3 years, the war is in a stalemate and Ukraine finds itself in an extended war of attrition with a country four times its size. It strikes me that the only way to break the stalemate is to have some kind of order of magnitude larger external intervention, eg US and NATO troops on the ground

I got started on this post as the result of a pro-Ukraine meme I saw the other day. Unfortunately I cannot find it because X is a river that flows really fast and stuff from a day ago is a few miles downstream and hard to find. But basically it asked this question -- what part of your country would you willingly give up? If the answer is nowhere, don't ask Ukraine to give up Donbas and the Crimea for peace.

Totally reasonable question. And except maybe for parts of California and the District of Columbia, I would answer "nowhere." But there are problems. The first is that the Ukraine did indeed voluntarily give up the Crimea in exchange for peace in 2014. One thing I have never understood is that the same people in this country who are rabidly against any Ukrainian peace deal and want to fight on forever mostly had a collective YAWN over the 2014 Russian invasion of the Ukraine.

The biggest question is -- what is the alternative? The implication is that there is somehow a hope to get the territory under Russian occupation back by military force. But I just don't see it. The Ukrainians have certainly been scrappy and creative and did a better job beating back the Russian thrusts at Kiev in the early days of the war than I would have guessed they would. They are now, though, fighting a static war of attrition with a county 4x its size. So what, at this point after 3 years, is the alternate plan that preserves territory? If that plan is to send a million American soldiers to Ukraine and risk escalation of the war, a nuclear exchange, and possibly a Chinese attack on Taiwan while our back is turned, then I am not going to agree.

Again, I would be happy to see Russia lose, but short of sending the American military into the line of fire, what is the plan? Perhaps Russia's will collapses before Ukraine's, but no one has presented me any evidence of that. That would be a sort of WWI outcome, where one side was eventually exhausted (though only after the intervention of US troops). As an aside, I wonder sometimes, would peace in 1915 perhaps with Germany retaining control of Alsace and Lorraine have been worse than all the deaths that followed, not to mention the platform the war built for the later rise of Hitler and the Nazi party?

As I said before, I am amazed that our ex-peace-protesting-hippies of the Left who would 100% retroactively say that the US should never have escalated in Vietnam after 1964 are in the lead of those who want us to fight in the Ukraine to the very end. Someone needs to tell me what's different, and I have not heard a good answer yet. Comments are open and I would love to be convinced. I can't stand Putin and would be thrilled to see him disgraced but don't know how to do it at any acceptable cost.

Postscript #1: I have a tradition here of pissing off everyone to make sure my followers and readership never get very high. So I would apply much of the same logic above to the war in Gaza. I see conservatives saying stuff like "the Gazans need to know they are defeated" but I must say after over a year of war I sure don't see it. After the cease fire the Hamas army emerged from the rubble with clean uniforms and huge crowds of crazed civilians still braying for Jewish blood. I continue to support Israel and was frankly a supporter of their trying to kick ass in Gaza in retaliation for the October massacres. But I wonder, did the last year of killing and levelling seemingly all the buildings in Gaza do a bit of f*cking good? I don't know.

Postscript #2: Gato Malo, who I enjoy and respect greatly, is among those who make the case that a peace deal with no territorial loss was available early on, but was blocked by US and UK officials who wanted a proxy war with Russia and at the end of the day likely didn't give a sh*t about the people of Ukraine.

Postscript #3: Apropos of nothing in this post, this is pretty funny. I am still looking for the Ukrainian refugee with the lhasa apso.

Headlines on Conservative outlets bragged that Trump was already turning the economy around. Breitbart was typical with this headline:

US Manufacturing Expands For Second Month Under Trump, Driven by Stronger Demand and Policy Shifts

In the body of the story they write:

After years of stagnation, the U.S. manufacturing sector is showing renewed strength under President Trump’s leadership. The latest data signal a reversal from the prolonged contraction during Biden’s term. Businesses are responding to policy shifts aimed at strengthening domestic industry, securing supply chains, and encouraging investment. [ed: no evidence is supplied for this last sentence]

This is an example of a the totally irritating genre of media stories that take the form of "President blames his predecessor for bad economic numbers" and "President takes credit for good economic numbers." Politicians' ability to do this, even when the narrative they use reverses month to month, is just amazing. Biden to the end of his Presidency was blaming Trump for every bad economic story and now, barely 42 days into in term, Trump supporters are taking credit for good economic numbers, even those magically created by time-travelling Trump in the first 20 days of January.

This connection between Jan/Feb manufacturing numbers and Trump is dead wrong for two reasons

1. The economy does not work this fast. The economy is a massive river like the Mississippi where changes in flow in Minneapolis won't be seen for quite some time in New Orleans. In particular, manufacturers are producing to orders they received weeks or months ago for customers in turn who likely are responding to orders and demand they saw even further in the past. If they are sourcing from overseas or selling overseas the delay is even longer. And negative things flow through more slowly than positive. I suppose the President on January 20 could order the CEO's of the 3 largest companies in America put up against a wall and shot and we might see the panic in the economic numbers by March 3, but I am not even sure of that.
2. I can say with total confidence -- having been a strategic planner at the top levels of Emerson Electric, Honeywell, and AlliedSignal -- that there are very few manufacturing companies in the last 60 days who have been racing to expand their business. The chaos of Trump's changing tariff demands is making planning impossible. Again, nothing changes quickly and projects in progress have to be finished, but I guarantee no one is starting new capital investments in manufacturing that they can defer. Everyone is frozen. And anyone doing business with the government or who needs Federal approval of permits is totally frozen as well because none of that work is getting done. Even if we give Trump the benefit of the doubt to say his intention is to streamline permitting and approvals, right now it is total gridlock. In government offices right now, it is gridlock where everyone has walked away from their cars. I think it is a total lock that we are going to see a dip in manufacturing investment in the coming months.

Economists have given this chaos the name "regime uncertainty" and among many free market economists exactly this sort of shifting regulatory environment under FDR gets part of the blame for the length of the Great Depression. Alex Tabarrok has more here.

The current version of Coyote's Law is something like this:

Don't give the government a power that you would not like your worst political enemy to wield

The reason for this should be obvious -- unless you intend to be the last one in power, ie your goal is to initiate a totalitarian coup with yourself left in charge -- then in the normal course of the political cycle in democratic countries, your group will eventually be out of power and your hated political enemies ensconced in your place. From today's example below, it appears that this is NOT obvious to many politicians.

A decade ago I wrote this about hate speech restrictions:

So you think that "hate speech" or speech that makes someone uncomfortable or mocks someone or criticizes some particular group should not be protected under the First Amendment.  For those on the Left (who seem to disproportionately hold this opinion), I ask you to define anti-hate-speech laws in a way that you will be entirely comfortable if, say, President Lindsey Graham (God forbid) were to inherit the power to enforce them.

A President Graham might consider speech mocking Christianity or Jesus to be hate speech.  And if mocking Christianity is hate speech, wouldn't support for gay marriage or abortion be as well?  What about mocking the military, or police -- isn't that hate speech?

If you ban some speech but not other speech, someone has to be in charge of what is in the "ban" category.  When most people advocate for such a ban, they presume that "their guys" are going to be in charge of enforcing it, but outside of places like Detroit and Baltimore, sustained one-party rule in this country just does not happen.  That is why most calls for speech restriction are so short-sighted -- they assume that people of a like mind will always be in charge of wielding these restrictions, and that is a terribly historical assumption.

The recent chaotic transition to the Trump Administration would, in a rational world, give a lot of opposing politicians second thoughts about setting precedents and creating powers that were then ready for Trump to wield and expand. Heck el gato malo discussed this very topic in the context of a future Trump Presidency back in 2023.

Robby Soave of Reason brings us a great example today, Senator Amy Klobuchar's attempt in 2021 to give the Department of Health and Human Services the power to regulate speech that touched on health:

By the summer of 2021, the COVID-19 pandemic had entered a new phase.... [and] The frustration from the public health establishment was palpable, and top policymakers within the Biden administration blamed vaccine hesitant individuals for exacerbating the pandemic. In July, President Joe Biden said, "the only pandemic we have is among the unvaccinated." Among government health advisors, a consensus quickly formed that the main culprit was medical misinformation on social media.

Biden asserted that Facebook had blood on its hands and implied that regulation would follow if moderation did not improve...

The anti-misinformation efforts were not just talk: They had a legislative component as well. Sen. Amy Klobuchar (D–Minn.) was particularly animated on this issue. On July 22, 2021, she introduced the Health Misinformation Act, which would have granted broad new powers to the secretary of Health and Human Services (HHS). These powers would have included the ability of the secretary to reduce online platforms' protection from liability under Section 230, the federal law that immunizes websites from liability for users' speech. In effect, Klobuchar's bill would have established that the federal government could use a public health emergency as a pretext to erode vital free speech protections at the whims of HHS.

It is clear whose speech Klobuchar was interested in censoring: The press release accompanying her bill explicitly mentions the so-called disinformation dozen. Klobuchar and her fellow Democrats sought to empower the HHS secretary to censor COVID-19-related speech with which they disagreed.

Needless to say, the Health Misinformation Act never became law, which might be a relief to Klobuchar at present. That's because the secretary of HHS is now Robert F. Kennedy Jr., one of the very social media users accused of being a misinformation super-spreader. If her bill had been enacted, it would have eventually empowered Kennedy—someone who has been accused by Democrats and the mainstream media of encouraging vaccine hesitancy by promoting the idea that vaccines are dangerous—to make determinations about what counts as misinformation online.

It would be hilarious to ask Ms., Klobuchar if she intended to reintroduce her legislation in this session.

In the first part of this series, I wrote

Many readers will know that I have spent 25 years working with government agencies in a company that privately operates public recreation facilities.  Not infrequently I have had my managers, in frustration over something our agency partners have done or not done, complain that the folks they are working with in the government are “bad” people.  More generally this is a common refrain of government critics, that state agencies are full of “bad” people.  I always disagree with them.

The people that the government hires are no different on average than the people hired in private industry.  Sure, there is some self-selection as people may migrate to institutions they trust more than others or to work cultures they find more appealing, but this is true as well among private entities (e.g. choosing to work at a startup vs Exxon).  My strong belief, from theory and long experience, is that when government employees appear to act “badly” or irrationally, it is not because they are (or began as) bad people but because they are working in an organization with terrible incentives and a counter-productive performance management system.  This is not unique to government organizations – many or most of the great failures of once-proud private companies have come about due to issues with incentives.  The difference is that when private organizations go bad, there is a culling by customers and competitors that has no equivalent in the perfect monopoly of government agencies.

In this post, I want to go further into incentives and metrics helping to explain the behavior of government agencies. In particular, I want to look at two interrelated complaints often voiced about government agencies: "why are they so inefficient and/or slow?" and "why do they say 'no' to every new idea?" The answer to both comes down to performance metrics.

But in looking at the performance metrics of government agencies, we immediately run into a problem: many, perhaps most, government agencies don't have any written performance metrics or productivity standards for the majority of their employees. I have worked with public recreation agencies for decades (think NPS, USFS, BLM, state parks, etc) and I have never once seen anyone with a set of written performance metrics relevant to their job (some agencies will claim hey have metrics and then point to their 200-page strategic plan that was crafted a decade ago).

I understand that creating a good set of job-related performance metrics might be hard for some staff functions, but even for people, say, running a park I have never seen any goals for expense reduction, visitation increases, or visitor satisfaction (eg customer review scores) -- all metrics every one of our managers who privately operate public parks have. And even when they do have performance metrics, they are often for the wrong things (** see bonus story in the postscript).

So is Coyote full of sh*t? How can their behaviors be driven by performance metrics when they don't seem to have any?

Here is Coyote's first law of incentives: There are always incentives. If they are not embodied in written performance metrics, then there are unwritten ones that rule behaviors. And these unwritten incentives are generally a) very powerful and b) almost never aligned with the greater organization's goals.

If there is a very good manager, the incentive might be that manager's praise and recognition. Small teams can sometimes be energized by a shared mission they all believe in. To some extent the agencies I worked with were better than most because public lands agencies (eg NPS, state parks) attracted people with a sense of mission which could motivate people even when the organization did not.

But in general, government employees operate in a vacuum without any positive metrics -- they can't prove themselves by meeting or exceeding this or that goal because the goals have not been assigned and are not measured. So the default metric becomes this: to avoid screwing up.

Government employees operate in a web of hundreds, even thousands of procedural rules. The most obvious of these are very strict budgeting rules where (unlike in the private world) money is not fungible but is divided up into scores of buckets and has to be spent within both the dollar limit of its bucket and the narrow expense categories the bucket is assigned for. Everyone lives in fear of violating these spending and budget rules. I will give one example -- I know of $4 million from a private insurance settlement in favor of a public agency that has languished in a private bank account FOR FIVE YEARS because the government agency can't figure out how to receive the money and decide what account it should go in. Fearful of making a mistake, the money sits dormant.

But beyond money-related rules there are scores of others -- rules for environmental reviews and approvals and rules for archeological reviews of any digging. We had to replace a road culvert a year ago in California on public lands and among the 12 reviews that had to be completed was an historical review to make sure the culvert was not some sort of historical artifact. I remember we inherited a shack on the end of a dock that we wanted to replace (because it was falling apart) and the agency who owned the dock said "wait a minute, we think that is a historic building." I have to admit I laughed pretty hard when my COO lost it and said "then I will drop the f*cker on the Washington Mall in front of the Smithsonian for all the tourists to see but it is unsafe where it is and needs to be replaced."

And the list of rules keeps getting longer. When the organization has new top-down initiatives, they are layered on top of all the other initiatives and mandates to add more layers of review. In several California agencies, for example, simple contract changes have to be reviewed automatically by BIPOC and gender groups. There are climate and sustainability reviews of everything.

And all of the above does not even get to the subject of decision-making authority. In many organizations people are unclear who has the authority to make a decision, so "to be safe" they will kick it upstairs to their boss. Who might kick it upstairs to their boss. The hardest problem we often had in working with agencies was, even when we were pretty sure person X could approve our request, person X often felt safer kicking the decision to a higher level. Now the decision is on the desk of someone who isn't directly involved with the issue, and thus who is reluctant to do make a decision for something they don't really understand.

I want to remind folks that this is intended to be sympathetic -- the behaviors that can be so irritating are NOT the result of bad people being jerks. They are the rational responses of absolutely normal people operating without positive incentives and walking through a minefield of ways to screw up.

All of this leads logically to several behaviors:

• If you go to an agency for a decision, there is absolutely nothing positive they can gain from the situation. They don't get rewarded for satisfied citizens or number of requests approved. What looks like a simple decision to you is fraught for them. Every decision is a chance to screw up on any one of scores of rules without any possible upside for them.
• Even the simplest approvals and decisions take forever. Given that they are now saddled with your request, they are going to make sure they respond to the only incentive they have, which is to make sure they can't get criticized later. They are going to run an environmental review even if it is not necessarily required. They are going to insist a historian does an evaluation. They are going to check with their DEI folks to make sure you are being inclusive. They are going to kick the decision upstairs one or more levels higher than they actually need to. Meeting after meeting will be held with everyone who could possibly be involved, sometimes over a dozen people.
• They will not care about the time, because they are not rewarded for responding quickly. They have no upside and can only focus on making sure that they don't skip a step some later Monday morning quarterback thinks they should have followed. This could, by the way, be by an external group -- say the Audubon Society or a tribal group -- that sues the agency for its decision. The US Forest Service, which has to balance diverse activities on public land from mining and off-road vehicles to conservation, is sued over everything.
• The default answer is "no." Every "yes" is a risk, and government employees don't get any reward or recognition for a "yes." But they frequently get called on the carpet or trigger a lawsuit when they say "yes."

I will add that every agency has brave people who get positive things done for the public and their agency despite the incentives above. I met one such person a few weeks ago, Superintendent Trimble at Mammoth Cave National Park. He and his team are doing a fabulous job creating new ways for the public to enjoy the park. But folks like this are recognized and stand out as exceptions. It takes an unusual person to rise above this quagmire of bad incentives. Many folks that see these problems but don't have the nerve or energy or skill or will to persevere eventually leave government service for other things.

There is a lot more I want to get into on this, but before I do I want to step back and review another old business-economics chestnut, the agency problem. That will be the next post.

**Postscript -- Bonus Story. It used to be that California State Parks had a rule that only front-line employees badged as law enforcement could be promoted to higher ranks of the Agency. This was incredibly limiting and distorting and my favorite parks director Ruth Coleman got the rule changed 10-15 years ago (she later took the fall for a financial problem in the state, in part I think because the union was still angry about this change).

Anyway, before this change (and as a good illustration of why the change needed to be made) I was going to visit one of their parks and looked at the online reviews. They were terrible! Apparently the state park rangers handed out a zillion parking and related citations. When I visited their office, I saw on the wall a performance metric! Apparently there was a tracking sheet showing who had made their minimum citation goals and issued the most tickets. Apparently since this was the only metric they had, this is the one they focused on. And according to the reviews, they did a bang-up job finding any excuse to drop a citation on their visitors. But these were the folks responsible for the parks management -- it was like a McDonald's manager spending all their time citing customer cars in the parking lot. It was crazy.

Part of a Series:  Organizational Design, Behavior, and Change

To understand why organizations grow senescent, get fat, and fail – whether they be public or private – there is probably no topic more important than performance measures and incentives.  Many readers will know that I have spent 25 years working with government agencies in a company that privately operates public recreation facilities.  Not infrequently I have had my managers, in frustration over something our agency partners have done or not done, complain that the folks they are working with in the government are “bad” people.  More generally this is a common refrain of government critics, that state agencies are full of “bad” people.  I always disagree with them.

The people that the government hires are no different on average than the people hired in private industry.  Sure, there is some self-selection as people may migrate to institutions they trust more than others or to work cultures they find more appealing, but this is true as well among private entities (e.g. choosing to work at a startup vs Exxon).  My strong belief, from theory and long experience, is that when government employees appear to act “badly” or irrationally, it is not because they are (or began as) bad people but because they are working in an organization with terrible incentives and a counter-productive performance management system.  This is not unique to government organizations – many or most of the great failures of once-proud private companies have come about due to issues with incentives.  The difference is that when private organizations go bad, there is a culling by customers and competitors that has no equivalent in the perfect monopoly of government agencies.

I will return to the issue of government incentives in the next post, but I want to reinforce the importance of incentives to organizational failure by discussing one famous private example, a company everyone thinks of as failing due to fraud and malfeasance – ie bad people – but whose downfall was at its core due to bad incentives:  Enron.  In what follows I don’t want to take away from the criminality of various executives.  But I believe the failure at Enron started WAY before the criminality and was rooted in bad incentives.

The story starts with Jeff Skilling coming to Enron to implement the gas bank model he came up with at McKinsey.  Having personally been on this study for a brief time (as a very junior associate), I don’t think there was anything particularly wrong with the strategy.  The problem was perhaps in Jeff himself.   As has been reported many times, he was certainly brilliant, but my guess is that he was likely manic-depressive, and he certainly did not have a very good read on people.  I won’t say he was on the spectrum but had a sort of quasi-autistic inability to understand how people really tick.  He could fall in love with his own intellectual creations, which might be marvelous in theory, but fraught in actual implementation with real people.

Here is my theory – the downfall of Enron can be traced directly to Jeff Skilling’s implementation of what he called “mark-to-market accounting” for new Enron contracts, an academically intriguing idea that met with disaster in the face of real people.  To understand it, we first need to know what he meant by “mark-to-market accounting."

Since the dawn of capitalism, enterprises have struggled with how to provide the proper incentives to their sales force and dealmakers.  The simplest example to reward salespeople with a percentage-of-revenue commission.  It certainly seems logical to reward salespeople for making sales.  But even something so simple quickly becomes fraught when it encounters real human behavior.  The problem is that sales people will chase the easiest sales with the highest discounts, building a book of business that maximizes their commissions but may miss the most profitable sales. The same is true for deal makers, who (if allowed) will pursue the riskiest deals with the highest potential returns, leaving the company on the hook for future potential losses.

And this problem was an order of magnitude worse at Enron, where Skilling implemented a strategy in which traders are tasked with executing complicated long-term deals.  Traders were executing deals as long as 20 years in which natural gas might be bought here and then sold there and then converted to electricity which is sold somewhere else all tied to a capital investment at a certain plant and sale of tax credits to other companies.    Most, meaning pretty much all, companies would account for this by simply reporting the net profits from this deal in each year as they occur.  But what if most of the profit in the deal was 10+ years out?  Should the company, or the individual dealmaker, really have to wait 10 years to be rewarded?  Would the organization even bother pursuing these contracts if that were the case?

Skilling hated this traditional accounting.  Companies are often criticized for not thinking about the long term – how can one reward the organization for selling business 20 years out? He believed strongly that once the deal was signed these gains were all earned and locked in, such that the present value of the contract was essentially earned at signing and should be booked at signing.  Rather than waiting 20 years for the earnings to flow through, Skilling wanted to book the whole profit immediately, crediting both the company and the individual deal-maker with the entire value immediately.  This is what he called mark-to-market.  All the present value of profits from a multi-year contract would be booked when signing the contract.  And the deal maker would be rewarded for a percentage of those profits on signing.  Like much of Skilling’s thinking, this was a theoretically compelling approach.

Mark-to-market was a term well known at the time in the banking and securities world.  It refers to the process of adjusting the book value of investments to their market price.  All well and good – this was something the government was trying to get banks and financial institutions to adopt – so the government was open to approving Enron’s proposal for what was very unusual accounting in the energy world.

The problem for Enron was that they were, by their own admission, doing deals that were unique, that no one else was doing.  So how does one establish a market price?  Not everything was locked in by the contract – profits might depend on commodity prices or cost overruns or interest rates or even the bankruptcy of a counter-party.  Skilling may have called it mark-to-market, but that was effectively impossible. What Enron was really doing could more reasonably be called mark to forecast.  The forecasted revenue and profits for the contract would be recognized immediately on signing.

And now we arrive at the disaster.  Enron had the dealmakers themselves creating the pro formas or forecasts from their deals from which the present value determination was made.  So, what is this forecast going to look like?  The forecasts were going to be hugely optimistic -- the deal is going to make a freaking fortune with little risk, the forecast is going to be a hockey stick upwards.   This does not necessarily even require fraud – every sales person and deal maker who has ever existed is optimistic about their own deals.  And given that these are 20-year forecasts, the valuation of the deal might turn on the price of natural gas 20 years out.  Whose to say that $5 is more or less reasonable than $3?  The net effect is that all the mark-to-market valuations skewed high.

Skilling and Lay seemed mostly blind to this problem.  They did (nominally) create internal agencies that were meant to neutrally review deals and these mark to market valuations.  But these groups got little support from executives, particularly when deal makers seemed to be making so much money for the company (at least on this mark-to-market basis).  Deal makers had become the elite of the organization, virtually unchallengeable even by staff originally tasked with challenging them.  And remember that Lay & Skilling’s prestige and compensation – not to mention the compensation of every manager at Enron given their compensation system -- was largely stock-based, and the stock price was being driven up by the stacking up of these skewed mark-to-market valuations of projects, causing the company to effectively pull forward years of future (potential) earnings into the current year.  Anyone who started challenging project valuations was effectively attacking the entire organization’s compensation.

Enron eventually applied mark-to-market accounting to everything.  Change in tax law?  Take a one-time gain for expected net present value of decades of tax breaks.   Sign a video streaming deal with Blockbuster?  Immediately book profits for 20 years of hypothesized streaming revenue.  Of course, if the assumptions behind a deal were to change for the worse – say a reduction in natural gas prices from those forecast – then there should have been a mark-to-market loss taken on the contract, but that almost never happened. 

This was Skilling’s underlying ethical failure – mark-to-market was his conception, and he was responsible for making sure both halves of the process were implemented:  both taking credit for future gains when contracts were signed but also taking losses for impairments on those future results as they became obvious. I am not sure the mark-to-forecast approach could ever have worked in the real world, but its only chance was to have Skilling create a strong ethics and value structure in the company around rigorous and honest evaluation of current and past marks. And that sure as hell did not happen. If anything, Skilling behaved in the opposite manner, rewarding creativity in evading any loss and eking out new gains from re-marking past projects with rosier assumptions.

Enron’s reported results quickly began diverging from reality.  Reported results looked fabulous, as they were based on stacked project valuations that were in turn based on optimistic forecasts of dealmakers who had every incentive to be optimistic.  But at the same time many of the deals were crap – some just projects where core assumptions such as natural gas prices had not played out as expected but increasingly including dumb domestic merchant investments and even worse international projects.  Crap projects were being approved based on insanely optimistic forecasts that no one had an incentive to challenge. Eventually, in bankruptcy, outsiders would be staggered by how much of Enron’s investments were absolute money-losing garbage.  Enron’s strategy went awry almost from the beginning, but that fact was hidden by the bad measurement system and so Enron kept doubling down on worse and worse investments, with the inflated mark-to-forecast numbers convincing everyone, especially themselves, that they were brilliant.

At some point the divergence between mark-to-market project values and actual results could not be ignored, and with the refusal to mark project values down, some other alternative was needed.   The solution they found was via corporate weasel Andy Fastow, their CFO who created off-books entities to hide losses from bad merchant investments rather than mark the losses to market.  Because the bad deals created little cash, new borrowing was constantly required which again was dumped into off-books entities (which were made worse by Fastow’s gluttonous self-dealing). 

It is these deals that get most of the historic attention, but in my mind, the off-books fraud merely delayed (and magnified) the reckoning of an organization already set up for disaster by the incentives and measurement plan of mark-to-market accounting that Skilling put in place.

Today I am starting a new series on organizational design and behavior and the very difficult process of creating organizational change.  To some extent this is a return to my roots on this blog, and to some extent it is an admission that I have no desire to hover around my computer for enough hours in the day to keep up with the incredibly rapid news cycle the Trump Administration is driving.

But that does not mean I intend this to be irrelevant to current politics.  At the core of a lot of what is hitting the news – DOGE investigations, government headcount reductions, government employee accountability – are issues of organizational design and behavior and of how organizational change can be managed.  Most of the media discussion of current actions by the Trump Administration is not at all informed by any reasonable assumptions about how organizations work or how they can be improved. 

To some extent I started this series out of order, beginning with a post on downsizing before I ever thought of this as a series.  I realized after I wrote that post that I wanted to take a step back and cover more background first.  In my next post I shall embark on the series, starting first with incentives and performance measures.

I am on vacation and had not really intended to post but I wanted to quickly comment on one of the arguments used to push back on the DOGE effort. The Democrats, who historically have been real masters of managing the media, have had a pretty flat-footed response to DOGE and have floundered for any sort of messaging that offsets the near endless revelations of stupid spending that DOGE is finding. Most of their protests just look like hysterical defenses of the indefensible.

But the argument I have heard recently that is more likely to resonate with the Democrat's traditional (read: sane) base is something like "we are all for explorations of government efficiency but think it needs to be done in a much more measured and careful way." Unfortunately, for anyone with any experience in organizational cost cutting, a "measured pace" is another way of saying "let's move slow enough so the antibodies in the system have time to kill us." As a result, if anything, I think DOGE is moving too slow.

Way back when I was a newly minted MBA with a less cynical view of how organizations work, I was employed by consultant McKinsey & Co to do cost cutting studies. McKinsey had a pitch to clients where they said that simple-mindedly mandating across-the-board cuts was stupid and destructive. Instead they advocated for a process, I think it was called EVA but it was 30 damn years ago and I cannot remember, to carefully look at every process in the company, to redesign the process, and then cut headcount based on implementing the better process. They would say that the only way to cut staff was to first cut the work that employees had to do first.

As a over-educated and under-experienced consultant, this sounded great to me. It made logical sense as the most thoughtful way to go about cost and headcount reduction, and really it still does make sense in an academic vacuum. It just feels better doing a detailed analysis that leads to 10% less needed staff rather than simply at the outset demanding a 10% across-the-board staff reduction (it also demands orders of magnitude more consulting hours, but that only occurs to the current more cynical version of myself).

But in the real world, one often does not have this luxury. First, going into such an analysis can take many months, all through which the organization knows cuts are coming and productivity plummets. It is effectively pulling off the Band-Aid really slowly. Second, the only way to do this analysis is to have the cooperation of the staff that is about to be cut, a tall order in many real world situations where the staff is ready to fight you (and especially when the staff is organized into unions to fight you). Third, you really don't necessarily get much innovation through this process. By the way, all these problems are squared and cubed in a public vs private context with powerful unions and constant media spotlight.

When I was fresh our of mba-school, I thought just whacking 20% of the staff without analysis was the dumbest thing in the world. But having tried to change and manage organizations, I have changed my mind. Necessity is the mother of invention, and sometimes just getting rid of 20% of the staff and having to make do is the ultimate in necessity. In a reverse of the McKinsey formulation, you cut the work that has to be done by cutting the staff. This approach is fast, and there is no way for the anti-bodies to organize to fight the change when the change comes fast enough. Rip off the Band-Aid, get the required savings, fix problems where you went to far later.

The DOGE efforts are doomed at some level no matter what because so much of Federal spending is programmed by law. It is going to take legislative changes and a better budgeting approach out of Congress to make big changes. But I do think there is staffing efficiency to be had but DOGE is not going to get there alone either**. At some point Trump is going to have to just pick a number and say that in 30 days, every department has to cut their staff by that number. Nothing else is going to work. Nothing else usually works in the private world and it certainly is not going to work in the government where the antibody strength is the highest.

Which is not to say that what DOGE is doing is not valuable, because it is. The constant string of factoids and revelations are going to be the PR air cover that larger cuts via legislation and/or mass layoffs are going to need.

** Postscript: it is useful to keep a few numbers in mind to see the difficulties with the DOGE process getting their promised savings. Yes they can keep finding million dollar examples of stupid spending to be cut. But to get a trillion dollars in savings -- an almost unfathomably large number -- requires a million individual cuts of a million dollars each. The other thing to remember is just how large the federal workforce is. As I pointed out the other day, the 75,000 that took Trump's early retirement package seems like a lot, but it is well under just the normal annual 6% turnover in the federal workforce.

The Federal civilian workforce is something in the range of 1.8 million people. From this study, 6% seems to be a reasonable estimate of annual attrition among Federal employees, or about 108,000 a year. In that context, the 75,000 signed up for buyouts is nothing. It could easily be made up almost totally of people about to leave or retire anyway. I don't think we are accomplishing anything unless we take at least a 20-30% whack out of the government work force, or from 350,000 to 500,000 job reductions. Anything short of that is almost pointless.

Now, it certainly could be Trump is planning much larger layoffs and the buyout is his way of saying, "look, I gave you a chance to leave voluntarily and you didn't do it." In the book (not the movie) the Godfather, Vito initially offers the holders of Johnny Fontane's contract $10,000 to buy him out. When they refuse, he ends up offering them $1,000 and a date with Luca Brasi. Perhaps that is the next step here.

I still think my first reaction to the Left's pushback on DOGE's probe of the spending of USAID and later other government departments was on target:

Which led to this meme (it's an old standby but under @boriquagato
influence I am dipping my toe into meme creation:

As an aside, I am fully supportive of addressing real privacy abuses found in the DOGE process, though having these concerns come from the party and the media complex that spent the last four years trying to leak Donald Trump's and other rich people's tax returns and whose first response to these privacy concerns was to dox members of Musk's analytical crew makes me skeptical this is the real concern. For government workers, "privacy" means keeping secret bad or stupid decisions. Remember this one (which was again about covering up spending)?

Some of the questionable redactions, by contrast, are charming efforts at bureaucratic butt-covering. Lisa Page, for example, was discussing with Peter Strzok the challenge of having an intimate meeting in Andrew McCabe’s conference room, given the size of his grand new conference table. “No way to change the room,” Page texts in the version provided by Justice. “The table alone was [REDACTED]. (You can’t repeat that!)” Hmmm, what classified, top-secret, national-security information could possibly have been redacted? The blacked out bit, it seems, was a simple “70k.” The DoJ—and can you blame them, really?—didn’t want Congress to know they were in the habit of spending $70,000 on a conference table.

Update 2-17: DOGE is seeking access to IRS systems with taxpayer data. As loath as I am to slow this effort down, I think we need to hear about some strong controls before this proceeds.

But having thought about this longer, I think this is about more than just money. It is also about class. Just listen to how the cool kids in the media talk about Musk's group of young weirdly-nicknamed geeks. This is fairly typical:

He was speaking specifically about a Trump executive order that decrees that the Department for Government Efficiency can force federal agencies into firing four people for every new hire. “Who the hell voted for Mr. Musk?” Begala raged. “Who the hell voted for—excuse the phrase—a guy who calls himself Big Balls? A 19-year-old kid going in there and trying to fire cancer researchers and scientists and teachers and agricultural specialists. It’s, it’s appalling.”

This is moderately hilarious from a) a party who still has not told us which unelected people really were making decisions behind the curtain for a senile Joe Biden; and b) an individual (Begala) who wielded immense power and influence across all departments of the Clinton Administration. The department staffs in DC are 99.99% people who are both unelected and unconfirmed by Congress. The issue is not that they are unelected, the issue is that they are "the wrong sort." I am reminded of the British aristocracy in the 19th century that would tolerate almost any sort of governmental incompetence or malfeasance as long as the people were "the right sort" -- meaning of their class.

The mention of Victorian England reminds me of another way that class is likely involved here. In the English aristocracy the oldest son inherited the title and often all the land and income (which was entailed to the title). This left little for any additional sons, so an income had to be found somewhere for them in a profession that did not require them to sully themselves with "trade" (daughters were handled a different way, through the marriage market). Reading for the law was an acceptable profession for a son with brains, and the army or navy were outlets for many. But most families needed a way for their sons without too much brains or ability and not militarily inclined to make a living. A position in the Church was often the solution.

Modern American blue-blood parents are no different -- they need a way to secure a living for their kids who won't or can't land a job in the modern elite career choices (law, consulting, investment banking, or a sexy startup). Unlike in Victorian times, the military or the Church are no longer preferred elite options? So what to do with your 22-year-old gender studies major? The parents need her to get an income and they need her to do it in a context that they can proudly report to their friends -- Paul Begala does not want to tell his friends that his son's job is maintaining distributor pricing lists ** (anyone who does not believe the latter criteria should have been at my Princeton or Harvard Business School 25th reunions).

The solution? Get them a job at a non-profit, the modern American version of going to the Church. As Arnold Kling noted once, non-profits tend to have much higher status than do for-profits. And without competition they don't have to carry the same performance standards as for-profits. And they are incredibly susceptible to trading a position for your kid in exchange for a nice donation.

The employment rosters of non-profits and NGO's are stuffed with the children of privilege. So much so that there are many non-profits that seem to do nothing EXCEPT employ and pay the travel expenses of 20-something kids from rich and/or influential families. I have been writing about the non-profit scam for years. As I wrote then:

From my direct experience, I would go further.  There is a tranche (I don't know how large) of non-profits that are close to outright scams, providing most of their benefits to their managers and employees rather to anyone outside the organization.  These benefits include 1) a salary with few performance expectations; 2) expense-paid parties and travel; 3) myriad virtue-signalling opportunities; 4) opportunities to build personal networks.  This isn't just criticizing theoretical institutions -- people I know are in such jobs in these organizations.

The spending that DOGE is going after at USAID and other departments likely threatens the income of a number of under-qualified elite kids. So I will update my meme:

**Footnote: I will proudly tell the world that my son's first job out of college was indeed maintaining distributor pricing lists for Ballast Point beer. Trying to optimize profits across the matrix 100+ sku's and scores of distributors is a great real world skill building entry-level job that so many of the change-the-world-before-I-am-25 college kids currently eschew.

Postscript: If you want the blank template for the Astronaut meme updated for DOGE, I share it here.

This was originally posted on 2-1-25 but was lost in a  server update. 

Trump's first few weeks have been a mix of good and bad for this libertarian, all against a backdrop of horror at how Imperial the presidency has become.  But as of today, perhaps the most destructive and stupid initiative has begun:

Because we are all tired of those fentanyl-toting Canadians crossing the border illegally.   I mean, we all saw the Proposal and know how all those Canadians are trying to cheat US immigration law.

Seriously, this is beyond awful -- and not just because of the threat of retaliation, though that is real.  Even if all the affected countries roll over and accept these modified tariffs without response, this is still a terrible step for the US.  No matter how Trump and his very very small group of protectionist economist friends sell this, this is a tax on 300 million US consumers to benefit a small group of producers.   I don't have time right now to give an updated lesson on free trade -- that will have to wait for when I am not on vacation.  But I will offer a few ironies:

• After campaigning hard on inflation, Trump is slapping a 10-25% consumption tax on foreign goods.  That is a straight up consumer price increase for a variety of key products including much of the lumber we use to build homes, a lot of our oil and gas, a lot of our grain and beef, and many of our cars and appliances.
• Much of this inflation is going to disproportionately hurt Trump's base.  No one is going to care much if a Hollywood actor has the fair trade coffee they buy at Whole Foods go up in price, but Trump voters are going to see a direct effect of this on prices at Wal-Mart.
• Republicans have spent 4 years (rightly) condemning Federal and State governments for the economic disruptions of COVID lockdowns and restrictions.  While some of the inflation of the last 4 years was due to ridiculously high government deficits, another major cause was the COVID supply chain disruptions.  And now Trump is voluntarily recreating them.

The only small hope I have is that Trump is steeped from his business career in a certain style of brinksmanship bargaining that consists of taking an entirely destructive and irrational position in hopes that they folks on the other side of the table will back down and give him more than he should.  My son won poker tournaments like this because he would do so much crazy stuff that no one at the table wanted to challenge him.  I have always said that I don't think Trump is a particularly good business person -- he has run business after business that has failed.  But he is a good negotiator, and has exited numerous bankruptcies with his creditors giving him far more than one would think was necessary.

So I am sure his supporters would say that this is no different from the Columbia situation, when the Columbian president backed down quickly on not accepting repatriation of Columbian nationals under a storm of Trump threats.  Perhaps.  But even if this stuff is reversed, it is incredibly destructive because it is almost impossible for businesses to plan and make long-term investments when something so fundamental as tariff rates is changing so quickly and arbitrarily.

But there is yet another harm.  I know some folks are exhausted with the idea of American exceptionalism, in part because it has been a 75-year excuse to send our military bumbling around the world intervening in every conflict large and small, frequently overthrowing states only to have the replacement be even worse.

But there is one part of American exceptionalism that is important -- our example and our persuasion is a key support beam in upholding two great benefits for humanity -- free speech and free trade.  Every government official anywhere is a potential tyrant (if you think that is extreme, I would argue that this exact fear was one of the fundamental founding ideas behind our Constitution).  And tyrants want to have their opponents shut up and they want to shift economic activity to reward their supporters.  They love censorship and protectionism.

As such, in every country of the world, there is a tremendous headwind against free speech and free trade.  There is some natural gravity affecting government behavior that if there is not a constant, visible pressure to maintain free speech and free trade, they begin to be undermined.  And at least since 1945, the US has been the primary source of that pressure (one might add the UK to this, at least once upon a time, but looking at them now that is pretty much over).

Over the last 10 years, it has been incredibly depressing to see the US start to lose its commitment to free speech, particularly on the Left which has here-to-fore been the natural home of its defenders.  Trump and his supporters say things that seem like a positive step in returning to free speech, but I am a cynical man and I fear that we may only see censorship shifted to different topics rather than actually eliminated.  Time will tell, and I will have more on that later.

But in the case of trade, it is the Right in the US that has been the natural defender of free trade.  To see the Right not only abandon the defense of free trade, but actually start ramming torpedoes into its sinking carcass, is perhaps the most depressing part of Trump's order.

I lost a fair bit of money shorting Tesla ($TSLA) stock until I realized that its stock price was absolutely untethered to reality.  And we see this today as the stock is currently up 4% following yesterday's miserable earning report.  The "growth" stock with a P/E ratio of 111 reported its 9th straight quarter of flat revenues and 12th straight quarter of essentially flat to down profits (source CNBC).

There is a nice Cramer cameo in the movie Ironman where he screams "that's a weapons company that doesn't make weapons."  Tesla is the growth company that doesn't grow.  So of course, without growth, the Tesla stock fans are driving up that triple digit PE even higher

The only explanation seems to be statements from Elon at the earnings unboxing session yesterday:

Musk has been telling investors in recent quarters to focus less on the core business as it exists today and more on a future of autonomy and robotics.

In October, Tesla drummed up excitement among fans by showing off an early prototype version of a Cybercab at its “We, Robot” event. However, Tesla still does not produce robotaxis. Instead, the company sells a premium version of its partially automated driving system called FSD, short for Full Self-Driving (Supervised)....

While Tesla did not give specific guidance for this year, the company said, “we expect the vehicle business to return to growth in 2025.” It also reiterated plans to “unlock an unsupervised FSD option” eventually and said it expects to “begin launching” its driverless ride-hailing business “later this year in parts of the U.S.”

Wow, every CEO should try this after bad results.  "Focus less on the business as it is today and more on a vague, unspecified vision of how it might be better in the future."  This is the same sort of Musk handwaving we have seen for years.  The full-self-driving promise dates well back pre-COVID.   Honestly, having seen the state of FSD on Teslas, I fear for the residents of Austin where Musk claims there will be robotaxis in action later this year**.   I found this to be the most interesting piece of hopium:

The company’s stock price has rallied sharply since Trump’s victory in November as investors bet that Musk’s influence would lead to both favorable policies and less oversight of his companies.

Seriously?  In his first executive orders Trump has killed most of the mandates and subsidies on which the company has relied.

** Footnote:  You know where there are lots of robotaxis in action and have been for years?  Phoenix.  Waymo has become a fixture of the Phoenix and Scottsdale streets.   Everyone here loves them.  Yesterday I tried to get a picture but I was too late, but near my home there were three waymo's side by side going up the boulevard.  Go to any fancy club that attracts a lot of young people, like the bar on the roof of the new Global Ambassador Hotel, and you will see one Waymo after another dropping (mostly) young women off.   Women love these things because they feel safer without the driver.  I love them because they are about the only thing I see every day that looks like what I was promised about the future when I was a kid.   Musk has a long way to go to prove his camera-only sensing approach can match the LIDAR-rich Waymo strategy.

Postscript:  I know this will seem crazy, but it is possible to have mixed feelings about an individual:  people are not all Mother Theresa or all Hitler.  Musk's management of Tesla really irritates me and some things, like his fake Saudi tender offer or the SolarCity buyout, strike me as straight-up fraudulent (how many solar roofs were sold last quarter, Tesla?)  But I love everything that SpaceX is doing and I think Musk has done great work shining the light on certain issues from government waste to grooming gang coverup in the UK.

The new EU regulations on device charging standards are a really bad idea.  Via engadget:

The European Parliament has voted to make USB-C the common charging standard in the EU. All mobile devices with up to 100W power delivery (including phones, tablets and earbuds) sold in the region will have to come with a USB-C charging port by the end of 2024. Laptops will need to make the switch by spring 2026. Products that come to market before these deadlines won't be affected.

Most people I talk to seem to love this.   It is a relief for folks to know that all their devices will charge from the same cord, though it is already that way in my life because I have explicitly bought all my devices to use USB-C.  Yes, I have already standardized on USB-C myself so I have no problem at this moment in time with that charging technology.  The problem is the qualifier -- this moment in time.  Any government regulation that freezes technology in place is a really bad idea.  Sure, the EU says they are open to new technologies, but this makes adopting a new technology a matter of getting permission from one of the slowest and least efficient regulatory bodies on the planet.  When mobile phone technology cycles are 6-18 months long, who is going to bother with spending 3-5 years to get EU permission on a new approach.

When I go on rants like this with people I know, they tell me to calm down -- what, after all, would need to be changed with USB-C?  My answer is: "possibly everything".

Thank God we did not try to do this 15 years ago when mobile phone and charging technology was in flux.  Oh wait, we did!  Because we came inches away from similar charging standard regulation for phones about 2009.  Here is the article in Mother Jones lauding the United Nations-designed (!!) cell phone charger:

Good news: The [United Nationals Telecommunications] Union just approved a universal charger. If enough manufacturers adopt it, the industry could make half as many chargers—thus reducing greenhouse gases from manufacturing and transporting replacement chargers by as much as 15 to 24 million tons a year.

Bonus: The universal charger will likely use half as much energy on standby as conventional chargers, solving the “wall wart” problem.

The EU was trying to do the same thing in 2009, though fortunately it was voluntary.

The articles are helpfully illustrated with pictures of the handsets they were designing for:

Yes, had international regulators had their way 16 years ago, we would be stuck with something designed for these phones where one texted hello as 4433555555666.  It does not take hindsight to understand why this was a bad idea.  I wrote at the time:

There are at least two problems with this.  The first is that consumers are all different.   A lot of cell phones (and other devices like my kindle) are standardizing on a mini-USB connection.  Should I use the UN's solution, which is likely inferior?  Why?  Most of the time I don't even travel with a charger, I plug the mini-USB into my computer to charge.  That way I only have 1 charger on the road, for my computer.  You want me to carry 2, in the name of having fewer chargers?   You might say, "well, I hadn't thought of this situation," and I would say, "that's the point - you can't, there are 6 billion of us individuals out there."

The second problem is innovation.  Who says that innovation won't demand a different type of connection in 2 years?  Do you really want your technology gated to some working group at the UN?  Go back in time and imagine the government locking in a standard on something.  We still would have 801.11a wireless only, or cars would still all have crank starts (but they would all turn the same direction!) or cars would all have the same size wheels.  If the UN had invented something 3 years ago, it would have been power only and not data.  Today, most cell phones have power connections and connectors that double as data ports.

So many things would have been wrong with these.  They were power only and not data and power as we use today.  The cable was hard-wired to the wall-wart which would be incredibly annoying today.  It would have been either an old barrel connector, or if it was a form of USB it would likely have been one of the old hated non-symmetrical kind.  I don't think there was any data capability but if there were it would have been horribly slow.

Every single EU regulator would look at that old standard and say, yes it was misguided and would have been a mistake.  But THIS time it is smart?

Like many who do business in California, I often complain about the regulatory burden (free at last!)  People will ask, "So what one regulation would you get rid of?"  The problem is that this is a really hard question to answer because in most cases it is not any one regulation in particular, but the accumulation of regulation.  When a building collapses under a snow load, it is impossible to blame any single snowflake.

Have you noticed when you buy a product, you still get an insert that looks like the old instruction manuals we used to get, but that is in fact just page after page of legal and safety warnings with the actual useful stuff moved online?  Well companies have the same thing for employees, typically called an employee handbook.   Most of this is not really useful to employees but it is critical for compliance with a myriad of government regulations.  Our company always had an employee handbook, but starting around 2005 we were forced to have two -- one for California and one for everywhere else.   Each were reviewed and updated every few years.  Then in 2012 or so we were forced to switch to annual updates of the California handbook.   And then around 2018 we had to shift to twice a year updates of the California handbook, as the California legislature was creating so many new rules every session and California courts were creating so many new precedents and interpretation of existing rules that we had to constantly work to keep up with it.

Rules for meal breaks, arbitration agreements, non-compete agreements, cell phone use, background screening, privacy notices, and a million other things kept changing.  Just to pick one example at random, the California legislature keeps adding new forms of employee leave entitlements to this list:

• Sick Leave
• New Parent Leave
• Pregnancy Disability Leave
• Family and Medical Leave
• Bereavement Leave
• Voting Leave
• Jury Duty or Subpoena Leave
• Domestic Violence Victim Leave
• Crime Victims Leave
• Leave for School Activities
• Literacy Education Leave
• Drug/Alcohol Rehab Leave
• Kin Care
• Organ Donor/Bone Marrow Donor Leave
• Military Injury Leave
• Military Spouse Leave
• Reproductive Loss Leave

The last one I think really gives you a flavor of how the California Legislature spends its time.  Here is more detail:

Under Government Code 12945.6 (SB 848), employees at a company with at least five employees are allowed to take five days of leave within three months of a:

• failed adoption,
• failed surrogacy,
• miscarriage,
• stillbirth, or
• an unsuccessful assisted reproduction.

Seriously -- someone had to get worked up enough to create and sponsor a bill and push it through the entire process and get the governor to sign it to provide mandatory work leave for someone whose artificial insemination did not yield a child on the first try.  Good God my brother-in-law probably would have built up 6 months of leave as he had to try for years to finally be successfully, so long we started calling him the sperminator from all the times he had to fill a cup.

There is nothing too small to catch the California legislature's regulatory eye.   And almost every one of these laws might individually look OK or at least strike some empathy chord.  But in sum it is just overwhelming, particularly when it will not sit still.  There is always more and more piling on.

I will tell you a California labor regulation story.   California requires every employee to get a 30-minute unpaid meal break after working a certain number of hours.  The requirement is not to give the employee an opportunity to eat undisturbed, the employer has an affirmative obligation to make sure the employee gets and TAKES their meal break.   That seems like a nice thing to do -- what kind of Scrooge would deny their folks lunch?

Our first interaction with this law happened years ago where we had a gatehouse at a lake in California that required someone in it for 8 hours.  But by California meal break rules, we had to allow them an unpaid lunch for 30 minutes in the middle of that so they only got paid 7.5 hours per day.  Several employees who had this shift on various days approached us and begged to be able to work through lunch because they needed the extra money.  We let them.  And then come October (timed to get money for Christmas) and boom we get hit with a suit (turns out they were being advised the whole time and the entire situation was a trap they explicitly set for us).  We eventually had to settle -- though we had their request in writing, a California court decided that the employee could only waive their right to a work-free meal break with a signed letter EVERY DAY.  After this the rules got tighter and tighter.  Later we got sued when an employee who was wearing a company radio got a call on the radio during their break.  Boom, another suit for not giving them an uninterrupted 30 minutes without work.  So we started requiring everyone to check their radios and cell phones in a special locker before their break.  Eventually, to avoid lawsuits, we automatically paid the 1 hour missed meal penalty to any employee who started their lunch late -- we hired an extra person in the payroll department to audit time cards looking for meal break violations.  But then a few employees were intentionally starting their lunch late in order to collect the penalty.   Eventually we got to the insane work rule -- a rule that many companies in California have -- that it is a firing offense not to take one's meal break and to start it no later than 4:49 into their shift.

And this is just one example.  We have gone through similar hoops on everything from mediation agreements to background screening.

However, I will answer the question of what one or two regulations I would get rid of it I could waive a magic wand.  I would say

1.  the private attorney general act (PAGA) because it makes all the others worse.  PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of the State of California for Labor Code violations.
2.  The other change I would make is to eliminate the California Coastal Commission.  This is the single most destructive regulatory agency I have ever encountered, made worse by its incredible mission and scope creep and the fact that it has a history of giving special treatment to those with friends on the board or some kind of political pull.

Yes, it is "systemic" not "systematic".  Oops.  I will not re-edit the post because I am past feeling the need to cover up my dumber moments.

I pretty much hate the term "systematic racism," which is a clever rebranding by the DEI folks of the Christian concept of "original sin."  Try to tell the Church that you have behaved ethically?  Doesn't matter, you still need us to remove the stain of your original sin.  Try to tell the DEI trainer you don't have a racism problem?  Doesn't matter how you act, you are part of the systematic racism.

I want to go on a brief (but typical of this blog) digression.

Years ago, probably in 2017 after the Charlottesville / proud boys kerfuffle, I had a Jewish friend express his concern about rising Right-wing antisemitism.  He and I don't really talk politics much but my sense is that -- like many Jewish voters in the Northeast -- he is a reliable Democratic vote.  I remember telling him that I really did not think the sort of knuckleheads at Charlottesville presented much of a threat.  He asked me why.

I had to think about if for a minute -- I had a gut feel my statement was true but I had not really thought about it carefully enough to understand why.  After pondering it for part of dinner I finally said that I didn't think the antisemites (and overt racists) on the Right were a threat because most of them were low-status.  They did not have the power to do anything.  It's not like they were hiring for Bank of America or on the admissions committee at Harvard.  People with any sort of status or authority on the Right did not respect or follow these people (they might shill for their votes, but politicians of all stripes pander to the most absurd fringes of their part for votes).  [Almost without thinking about it I said that if I were he, I would be more worried about antisemitism from the Left, because the folks in the BDS movement (for example) on universities are just the opposite of antisemites on the Right -- they are among the elite.  I seldom am very prescient on cultural trends, but at the time I was very involved with the issue of discrimination against Asians at Princeton, and I thought I saw some parallels with Jews.  I think we have all seen the explosion of antisemitism that has come out of the mainly Leftish elite over the last year].

When I grew up in the South in the 1960s and 1970s, racism was overt.  Things began to improve remarkably in the by 1980, though I remember at that point my dad could not get the Exxon CFO into our country club because he was Jewish and there was pushback when George Forman tried to buy a house in tony River Oaks.  By 2000, a generation later, much of that crap was gone, or at least way better.  But they key change that should have made these changes sustainable was that racism was not only isolated to lower-status groups, but it became seen as a marker for being low-status.  Demonstrating racism became the reverse of virtue-signaling -- it marked one as a loser.

If there is such a thing as systematic racism, then it has to be perpetrated by people who are part of the system.  People like the proud boys are outsiders -- I guarantee they are not on any country club membership committees.  They are not determining Ivy League admissions.  They are not hiring at Goldman Sachs.

I do think the system goes wrong for blacks but it is not in any arena controlled by the proud boys.  And I  have a strong opinion on where that system failure lies:  K through 12 education, and probably even more specifically K-5 education.  We have affirmative action in the workplace for blacks.  Why?  Because there do not seem to be enough prepared candidates so we give less-prepared candidates a leg up.  Before that we have affirmative action in college for blacks.  Why?  Because there do not seem to be enough prepared candidates so we give less-prepared candidates a leg up.  We keep changing the SAT test.  Why?  Because blacks historically struggle to score as well as whites and other races on the test.  We keep changing (lowering) high school graduation requirements.  Why?  Because to many black children fail to graduate with the higher standards.

All of this stuff are after-the-fact attempted work-arounds that avoid fixing the real problem:  K-12 education is totally failing black kids.  Any root cause failure analysis would get to this conclusion.  You want to say that systematic racism exists?  Well here is the place where the system is totally failing one race.  If I were more of an expert, I could probably tell you which grade it is where things go off the rails but my guess is that it is an early grade where reading and basic math are not getting taught.

If I were the biggest racist in history and wanted to come up with a Dr Evil scheme to destroy blacks in America, I could not come up with a better plan than the K-12 education system, particularly in many large cities.  So here lies systematic racism, right?

Well, here lies the systematic failure to help African-Americans towards prosperity.  But it is hard to call it racism when in most of these cities the entire school board, the city council, and the mayor are all black or mostly black.  Here is the school board in E. St Louis -- not many proud boys there.  Here it is in Chicago.  Both of these districts are lavishly funded -- East St Louis spends over $25,000 per student and has a 12:1 teacher ratio  (the national average is about $18,000 per pupil and 14:1).  The student body is 96% black and US News report that in E. St Louis  "4% of high school students tested at or above the proficient level for reading, and 7% tested at or above that level for math."  Well no surprise that Blacks are struggling when freaking 96% of them graduate from public school systems like this without being able to read.  No affirmative action plan ever invented is going to magically create a future for adults who can't read or do math.

This is a f*cking crime, and it has nothing to do with racism or funding.  Trump can make headlines getting rid of DEI programs -- fine, they were a fix for this problem that was never going to work.  But until we seriously talk about public school education, we are not serious about fixing the systematic problems blacks face.  And the system is going to fight back hard.  Already folks in the system are telling us that the testing that shows blacks doing poorly should be eliminated.  Why?  Well they say it is to help blacks but that can't possibly be true.  Its like telling me that I am better off not getting a cancer test and finding out I have cancer.  The push to eliminate testing is a push to cover up this absolute tragedy by the insiders who are a part of it.

Anyone think there are some smart people out there with access to capital that could provide a better education privately for $25,000** a year in a school choice system?

** Postscript:  $25,000 is an average.  Typically in most school systems elementary school costs might be half the average and high school 150-200% of the average.

There is lots of regulation coming out of California of late attempting to prevent prices from rising in a temporary supply-demand mismatch (often called "Gouging").  I don't have time today to write something tailored to California but I will repost part of my economic lesson I use for a high school class that touches on price gouging.

We begin with the governor of Florida who has just signed an anti-price-gouging law.  We talk about how everyone hates price-gouging after a disaster.  What could be worse, right?

We then talk about a woman who spends most of her time at home, but rushes out to fill her gas tank right after the storm hits.  She has to wait in line for gas for 2 hours because everyone else has done the same as she, racing to the station, but she doesn't mind because she doesn't have anything else to do and feels better.  If asked if she would have topped off her tank if the price jumped to $6 from $3, she says no way.

Then we have an owner of a roofing company enter the fray.  His men are working 14 hours a day to put roofs on houses.  He is making a lot of money, and doing a lot of good as well.  Nothing is more important to people than fixing the roof before the next rain.  He may be the most important man in Florida at that moment.  But he can't keep up with demand, and worse, his guys are having to sit for 2 hours at a time to fill up their company trucks, when they should be repairing roofs.   He would gladly pay $10 a gallon if he could just keep his men on the job and not in gas stations.

So at this point we discuss "fairness".  It seems fair not to raise prices to "take advantage" of a disaster.  But is it fair to allocate gas away from the busiest and most productive whose time is most valuable to the people who are least productive and have the lowest value for their time?  We discuss how price caps shift rationing from price to queuing, and the people who get the product shift from those who most value it to those who assign the lowest value to their own time.

Finally, we discuss a guy in Georgia who has a tanker of gas he was going to send to a station in Atlanta.  They need the gas more in Florida, but they aren't paying more for it under the new price-gouging law, and so with his higher costs of driving all the way to Florida vs. Atlanta he is going to sell the gas in Atlanta.  If the price of gas in Florida were to rise to $6, he would send his truck of gas to Florida in a heartbeat.

This is the kind of discussion we have.   We will end up in a debate, with kids pointing out all kinds of things -- eg poor people who have a life or death need and might be shut out at $6.  We don't try to resolve things, but want them to understand there are unseen consequences to actions like price-gouging laws that must be considered along with the seen.  They may end up dismissing the unseen as less important than the seen, but it should not be ignored.

I know, with like 200 executive orders already in this administration, it is hard to imagine one was missing.  But if I were the victim of some sort of horrible karma and found myself as President, I was thinking about what EO I might sign (other than one repealing all the others).  This is what I came up with:

Subject:  Federal Transparency

I hereby order that all Federal agencies, from this day forward, follow the letter of the f*cking law in the Freedom of Information Act.  All requests will be processed in a timely manner as specified in the law and all redactions will be made solely based on the exceptions allowed in the law and those exceptions will be interpreted narrowly.  Redactions in any document released to the public solely to protect the reputation of an individual or agency shall be grounds for immediate termination of those involved [update:   here is a famous example]

Further, all public business will be handled through public channels and will be archived as required by law.  Anyone attempting to conduct public business through private channels that cannot be archived or FOIA'd will be subject to immediate termination.

Further, within 90 days the US military, the US state department, and all intelligence agencies are required to submit to me proposed updated guidelines and processes for marking documents as classified or secret with the goal of reducing documents with any sort of classification by 90%.  Anyone found to be over-classifying documents to protect an individual or agency's reputation will be subject to immediate termination.

If I knew more about Federal organization I would probably propose pulling FOIA officers out of their agencies and into some new group.  Maybe we pull out all the Inspector Generals as well and put them in that new group too.

Postscript

Who the heck remembers all the stuff like this to do day 1?  I can't remember that my wife told me to start the dishwasher at the next commercial.

When Trump took office in 2017, I thought there was a reasonable chance that he would pardon Hillary Clinton.  I thought this was just the sort of schoolyard trick Trump might play -- after all, what better way to tar someone as guilty when they have not even been indicted for anything**. Trump didn't do it.

But now Biden has.  And to his own family.  Wow.

In his last hours of office Biden issued pre-emptive pardons for numerous people who have not even been charged with any crime.  Sort of blanket get out of jail free cards for any federal offense they might be accused of.  The act feels unprecedented, though I remember that President Bush did something similar for Donald Rumsfeld.  But it is certainly unprecedented in its scope.  He pardoned

• General Milley (who called Trump "fascist to the core" and a "wannabe dictator")
• Much of his family, including all his siblings and their spouses.  Republican Congressional investigators believe that Biden family members funneled foreign bribe money to Biden when he was Vice-President.   Certainly their family has extraordinarily complex financial arrangements, sending money to each other through a variety of shell corporations
• The entire J6 committee, which is sort of weird as they already should have immunity through the speech and debate clause
• Anthony Fauci

The legal case most folks are looking at right now is Burdick vs United States  which says that 1) a pardon can be rejected and 2) acceptance of a pardon carries "an imputation of guilt and acceptance of a confession of it," though it is disputed whether this latter is a binding precedent.  Getting such an un-asked for blanket pardon certainly seems a mixed blessing.  Think about John Owens, his brother-in-law.  Did anyone have him on their radar before, because NOW they do.

I know some are p*ssed off that they cannot put Liz Cheney or Anthony Fauci in jail.  Personally I am relieved.  The Biden administration set some horrible precedents in prosecution of its enemies, perhaps some of the worst since Nixon.  We are at a tipping point between dialing back on this sort of banana-republic-style political retribution or going into full-on Sicilian vendetta wars.  I have had lots of people disagree with me on this, but I think we need to turn the other cheek here and find intermediate ways to enforce accountability.  Trump's revocation of the security clearances of the folks who made up a Russian conspiracy to discredit the evidence of Hunter Biden's laptop seems like a reasonable approach.

But there is a silver lining to all this that I posted on X the morning the pardons were announced -- without the looming threat of prosecution, there is no room to plead the 5th.  The most interesting person to get under oath to answer questions is going to be Fauci, of course.  I worry that we have not found the boundaries of gain-of-function research and that dangerous research is still going on and being funded by government organizations (most recently I have seen rumors that the Department of Agriculture has been funding gain of function on diseases that affect livestock).  There is so much this guy needs to be asked under oath -- Covid origins, suppression of opposing speech, the vaccine trials, coordination with the teachers unions on school recommendations, etc etc -- that the hearings could last weeks.

Biden's legacy, such that it is, could also be in some danger.  No one is going to prosecute the guy, for the same reason that Hur did not, but there are sure a lot of suspicious financial transactions running back and forth through his family and a myriad of shell companies.

**Postscript:  For those with a short memory, Clinton moved her email to a private server in an attempt avoid FOIA and in so doing probably allowed classified information to sit on a poorly secured computer in her house.  I would have said that neither of these sorts of errors or crimes would reasonably ever be prosecuted (at least at that seniority), that is until I saw FBI agents descend on Mar-a-Lago looking for poorly secured classified documents.  It should be noted that despite the fears of many folks on the Left, Trump did not prosecute Clinton.

As expected, Trump gave notice yesterday to the UN that the US is pulling out of the Paris climate accords.  This marks the second time he has done so, making participation in these accords one of the EO ping pong balls that get swatted back and forth every inauguration day.

The reason this is possible is that supporters of these accords have never submitted the agreement to the Senate for ratification, which would make the terms of the agreement more legally binding and much harder to casually reverse.  Per Article II, Section 2 of the Constitution:

[the President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur;

Woodrow Wilson spent a huge amount of time, most of his remaining prestige, and probably his remaining health negotiating the Versailles Treaty, but it was all for nothing in this country because the Senate did not approve the treat, which is why we were never in the League of Nations.**

My understanding is that something like the Paris Climate Accords there is actually a potentially less daunting way to adopt the accords as US law without getting a 2/3 vote in the Senate -- legislation could be crafted with rules mirroring the commitments in the Accords and then passed normally through the House and Senate.

Neither of these courses were pursued by President Obama or President Biden, even when they possessed Congressional majorities.  This is likely because -- whatever their public position is on climate change -- legislators know that adopting economically expensive mandates in an international agreement that are not matched by countries like China and India (see below) is wildly unpopular.  And so the basic approach has been to negotiate and "commit" the US to these agreements by unilateral executive action, and then attempt to use the regulatory tools available to the Administration to attempt to comply. [A more cynical view is that US Presidents have done what every other world leader has done in signing these pacts-- sign them as a virtue-signaling position with no idea of how to meet the commitments and perhaps no real intention of doing so].

Update:  This is really a stunning chart.  We have returned to the same carbon intensity we had before the Civil War.

** It is also why US wine producers, at least until a new treaty with the EU was approved in 2006, could legally use the word "champagne" to describe certain types of sparkling wine.  The history on this is complicated, and goes back further, but essentially the international agreement to not allow any wine outside of the Champagne region of France to use that name was embodied into the Treaty of Versailles, which the US did not ratify.  There is an organization called the CIVC which is essentially the Champagne union that defends the champagne IP, sometimes to ridiculous ends (reminiscent of the NFL and the word "Superbowl.")  I remember they sued Apple over calling a gold/bronze iphone color "champagne".