Coyote Blog

I have not blogged for a while but recently I have allowed all the election advertising to get under my skin.  The solution sets being discussed -- to the extent any solutions are discussed rather than just promoting fear of the other team --are so divorced from any sensible analysis of cause and effect that it is almost intolerable to even listen.

For this article, I have taken real things people have expressed concern about in this election cycle and I have proposed six meta issues that are closer to the true causes of people's concerns.  Of course, none of this is being discussed by anyone on either side in this election.  So, not to imply there are not other meta problems, here are my six:

1. The US Federal budget deficit, source of inflation, high mortgage rates, and even the trade deficit
2. Federal Reserve Policy, which has created the recent K-shaped binodal prosperity profile
3. K-5 public education, which has hurt everyone but particularly people of color
4. Conflation of race with culture, which hinders discourse on everything from immigration to education
5. Complete misunderstanding about how political power works
6. Special Bonus Meta Issue: Wars of choice.

All of these are amenable to government action, they are not just things like "eliminate the evil that lurks in men's souls."

1. US Federal Budget Deficit

Affordability has been a big issue in this election, and many of the solutions proposed are just outrageous.  Mamdani in NYC proposes to create government grocery stores, because I guess nationalizing the part of the food delivery chain that has sub-5% margins makes total sense.   Many jurisdictions want to ban new data center construction to keep a lid on electricity prices, though none to my knowledge are also proposing to ban or stop using the cloud-based services these data centers support.  Both parties have proposed banning 3^rd party real estate companies from buying single family homes, in yet another Federal effort to preference buying homes over renting.  Many have pointed to Trump’s tariffs as a source of costs to consumers – OK, I have to give them that one, that is likely true though inflation and affordability issues pre-dated his tariffs (ditto Trump’s war in Iran).  And Donald Trump himself frequently proposes to deal with affordability issues by sending checks to taxpayers (at first as a share of the tariff “windfall” and more recently as a bribe to vote Republican in the coming election) – because Biden sending similar checks out during COVID had nothing to do with the 9% inflation that followed.

There can be many causes of any particular price going up in some moment of time but anyone who is running for Congress and makes an issue of affordability without discussing the Federal deficit is totally unserious.  Our now $2 trillion Federal deficit is high on a historic scale and we have never sustained deficits of this size for so long as we have over the last 15 years, growing our total debt to 120% of GDP, leading to interest charges of $1 trillion a year.  A decade ago deficits could have been mostly cured by simply slowing spending and letting growth increase the revenue side, but unfortunately we are beyond such easy solutions.   These outsized Federal budget deficit has at least three negative effects:

• It is inflationary. We can argue about a lot of things in economics, but nothing has been proven so thoroughly as the inflationary effect of governments borrowing to spend more money than they have.
• It raises borrowing costs including mortgage rates. Don’t like mortgage rates over 7%?  People like to point to the Federal Reserve but that’s like blaming the guy who changes to price stickers at Walmart for higher prices.   In the US this year, there will be about $600-$800 million of net new mortgages, but the US Treasury will have to issue $2 Trillion of net new debt.  This competition for available funds drives up the cost of borrowing for everyone.
• It makes the trade deficit worse. The trade deficit is not something I care a lot about – I think it is a pretty meaningless number that ignores all kinds of economic activity.  But for those folks who do care, including Donald Trump, the Federal budget deficit has far more to do with the trade deficit than tariff levels (note that after two years, the trade deficit today is not much different than when Trump began his random number tariff campaign).  When the government issues $2 trillion of new debt, a lot of that debt is bought by non-Americans.  To buy the debt, they have to convert their local currency to dollars, which in turn raises the value of the dollar, which in turn makes imports cheaper and exports more expensive. Another way to think of this is that dollars don’t just pile up somewhere unused and uninvested – if foreigners buy a lot of our debt, that money has to return somehow and one way is in the form of our buying their exports.

It probably goes without saying, but Trump and the Republicans have shown zero interest in controlling spending or cutting the deficit and it is unlikely the Democrats and extremely unlikely the DSA will focus on this at all.  So anything any of these folks say about affordability can largely be ignored as bullsh*t.

2. Federal Reserve Policy

Starting around 2010,  the Federal Reserve began expanding its balance sheet in a program called quantitative easing (QE), using essentially printed money to buy and hold government debt.  This put cash back in the economy, specifically onto the balance sheets of then-struggling banks.  At that time interest rates were close to zero but since then as rates have risen it also helped ameliorate some of the interest rate effects of government borrowing – adding such a large buyer of debt to the system would inevitably lower or at least put a cap on interest rates.

Back in 2018, in answer to a question about why -- with low interest rates, QE money printing, and a large budget deficit – we didn't see more inflation at the time  I wrote:

Is it possible that inflation exists but it shows up mainly in financial assets (stocks, bonds, perhaps real estate) that don't really factor into standard inflation metrics?  Every step the Fed has taken, as well as other western central banks, appears to me to be crafted to pump money into securities markets rather than into main street.  Certainly we have seen a huge inflation in the value of financial assets and real estate over the past several years.

In this election there is a lot of concern, really anger, from some Americans that the economy looks K-shaped to them.  Meaning that the wealthy are doing very well while others are at best treading water.   I tend to find people's dissatisfaction with their level of prosperity odd on a world or historical scale -- even low income Americans are so much better off than their peers around the world or particularly as compared to past centuries.   But folks don't see what life is like for similarly situated people in Africa or in the 18th century -- and don't care.  What they see is a lot of other folks getting rich with apparently little effort while they remain in place.  The fact that many of the newly rich techbros and Wall Street guys act like douchebags when they strike it rich does not help.

While normally I push back on this kind of narrative – for example the “hollowing out of the middle class” meme was largely unsupported by the data  – I do think this concern is at least partially true.  People who owned tangible and financial assets over the last 15 years, particularly with leverage, have made fortunes and I believe that the Fed’s QE and balance sheet expansion programs have been largely responsible for much of the excesses.  Go to any regional bank or private equity company over the last 10 years and they would lament that their biggest problem was “deal flow” – which is merely euphemism for their having a ton of hot money the wanted to spend somewhere and couldn’t find enough places to pump it into.  Much of this hot money started at the Fed and if you were in a position to benefit from the hot money, you could get rich.

3. K-5 public education

If there is a true example of systemic racism in this country it is the crime against black children perpetrated by the public k-12 education system, and probably in K-5 (once kids get to 6^th grade without reading or math they are likely never going to recover).  There has been no worse crime committed against African Americans in this country since Jim Crow.   And the craziest part is that some of the worst examples are in cities with all-black mayors, city council, and school board members.

Take the example of East St Louis.  Here is the school board in E. St Louis -- not many proud boys there.   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).    Teachers earn beetween $70,000 and $80,000 a year before benefits for about 9 months a year of work.  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.  This is a f*cking crime, and it has nothing to do with white leadership or funding.

This has to be fixed, but in large part the various governments in this country have focused on working hard to NOT fix it.  That is because every time there is a standardized test that points out this failure to educate black children well, it is first dumbed- down, and then made optional, and then eliminated.  Which is insane – its like deciding that the solution to too many cancer diagnoses in some particular area is to stop testing for cancer.

Politicians are often susceptible to cargo-cult thinking and nowhere is this more obvious than in education.  At some point years ago politicians looked at successful people and noticed that successful people typically had college degrees.  Most of us would have said, “Sure, that is because a college degree means they have gained some knowledge, demonstrated critical thinking, can write and do math at some minimum level, can be focused and complete tasks responsibly, and have dedicated themselves to achieving difficult goals over long periods of time.

But politicians don’t think this way – they are not very good at parsing cause and effect.  So if successful people have college degrees, they figured that if we handed out lots more college degrees then there will be more successful people.  But since the K-12 education system could not produce enough qualified people to get into college, then standards had to be lowered, testing requirements eliminated, and high school grades inflated.  To help unprepared folks graduate, new majors with absurdly low standards were invented, grades were inflated and use of AI was winked at.  Not surprisingly, none of this has helped black well-being very much.  All the college DEI and affirmative action in the world is not going to help most black kids because it is 10 years too late -- they were failed by the system way back in K-5.

To complete the sad irony, the very traits that contribute to prosperity and for which college degrees were a proxy – hard work, focus on long term goals, critical thinking, discipline, deferring gratification – have now been labeled by supposed “supporters” of the Black cause as representing whiteness and to be avoided as racist.  Had the KKK come up with a plan to screw the black race in this country, I don’t think they could have done a better job.

Unfortunately, change is difficult since the teacher's unions have an iron grip on public education and many blue state politicians who owe their elections to union cash and get-out-the-vote manpower.  All the extra money we have poured into public education over the last 20-30 years, and there has been billions of it, has mostly been captured by public school employees, both teachers and especially the growing cadre of administrators.  The only possible way is to break the monopoly -- a monopoly far more destructive than companies like Comcast Cable ever were -- is with school choice.  Parents have got to be empowered to move their kids out of the failing monopoly schools.  As a bonus, school choice would quiet the culture war in that parents who want their kids taught there are 53 genders or just 2 can find appropriate schools for their children.

4. Conflating Race with Culture.

Comedian John Cleese said it as succinctly on Twitter:

I'm not a racist. I'm a culturalist I believe some cultures are superior to others.   For example, I prefer cultures that do not encourage wife beating, paedophilia, clitorectomies, stoning and constant inflation of the male ego

Mr. Cleese by the way is potentially in trouble with the British government for pointing to ugly things in Islamic culture and religion (as practiced today in many places).  This is ironic since the folks most upset about his comments on Islam were silent, even mostly supportive, when he nuked Christianity from orbit in several different movies and spoke out directly against the head of the English state church.

I should be clear that by “culture” I don’t mean the traditional foods a group eats or the clothes they wear or how they braid their hair.  All of this adds richness to a society, at least until the “cultural appropriation” morons start howling.  But criticism of a culture is fine, even warranted, when their “cultural practices” include mistreatment of women, sexual minorities, or anyone outside the clan group.  Many of the world’s people live in low-trust societies that are highly clannish or tribal.  These cultures show very little respect for the people, property, and laws outside their clan.  Rightful criticism of these cultures have nothing to do with race – Sicilians around 1900 would have fitted this description and their culture clash with 20^th century America fills the pages of books and movies.

I can't think of anything that has screwed up discourse more in this country than the attempt to respond to cultural (or even individual) criticisms as racist.  It is absolutely toxic, and undermines the whole concept of racism.  Folks on the Left talk about the unbroken progress on social issues since the 1950's but on race I have seen nothing but retrograde deterioration since about they year 2000.  In 1995 things were not fixed but hopeful, so much better than when I grew up in the 60's and 70's.  It was understood by the core of civilized society that judging individuals solely by their race was wrong and to be avoided.   But over the last 25 years, our schools and universities have flushed this all down the drain and have taught exactly the opposite.

5. Compete misunderstanding of how political power works.

Long-time readers of this site will be familiar with Coyote’s Law:

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 but apparently isn't -- 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.

Let’s focus on speech restrictions – by no means the only example but a good one to see how this works.  Everyone who wants to restrict speech (and those numbers seem to be approaching a majority even in the US) implicitly imagines that they will be the ones defining what can and cannot be said.  But how do you have that confidence in a democracy?

A great example is from the pandemic when then-Democratic Senator Amy Klobuchar proposed the Health Misinformation Act.  The legislation, never passed fortunately, would have given the director of the HHS immense new powers to regulate health-related speech.  Her justification was to end “misinformation” about vaccine hesitancy, COVID treatments, and even COVID origins.  Forget for a minute that some of the speech she wanted banned turned out to be correct.  Forget about the totalitarian impulse here to muzzle those who disagree with you.  The point I want to focus on is that today the head of the HHS who would have been given all this power to regulate health-related speech is RFK, Jr., a person whose beliefs in the health realm likely horrify Ms. Klobuchar.   Per Coyote’s Law, her proposed new powers DID end up in the hands of her worst political enemy.

But what if one is assuming that we are coming to a sort of political end of time, where one political party remains in power permanently?  This is where people really do not understand history.  Everyone assumes that if their movement takes over, the well-intentioned people like themselves who are the intellectual vanguard of the movement will be in charge.  But that never happens.   Once one creates a one-party rule backed by increasing power, the nice people do not remain in charge, they end up against a wall.  The ruthless people like Stalin and Mao and Pol Pot grab power.  There is no outcome where nice, well-intentioned people end up at the top of a country with one-party rule.

6. Bonus Selection: Wars of Choice

It is a delusion, perhaps a hubris, that has infected all Presidents in my lifetime.  It goes like this:  with by FAR the strongest military in the world, wouldn’t it be great to use it to topple bad regime  ___ [fill in the blank].  I will confess the US seems to have some success at decapitating regimes if we put our mind to it -- the Diem coup (and execution) in South Vietnam, the lukewarm (at best) support for the Shah of Iran that contributed to his ouster, Saddam Hussein in Iraq, the Afghanistan invasion, Gaddafi in Libya, Maduro in Venezuela, Noriega in Panama, and now much of the previous leadership of Iran.  The problem is that we don’t have a very good history of putting something better in place following  that leader.  The Gaddafi killing and its aftermath is a great example – he was a bad guy that did bad things but the country is in undeniably worse shape after the chaos that followed his death.

There are several reasons we are seldom successful

1. We almost never really understand a country, how its power structures work, and how strong the opposition parties might be. In Iran the US vastly overestimated the strength of the opposition and underestimated the tight grip the Republican Guards have on the government
2. While US military strength may be much greater than that of the target country (though drone warfare may be evening the odds), we tend to have asymmetric pain tolerance. We can impose painful embargos and bomb the cr*p out of their facilities, but what accountability do Iranian leaders face for all this?  Why would they suddenly give up?  In fact the bombing is probably building loyalty among parts of the citizenry.  On the other side, US leaders have only limited pain tolerance.  Nobody from the US is dying and no one is getting bombed but some tankers get botted up in the Straights of Hormuz and diesel prices go up by a buck or two a gallon and the Republicans are in a panic about their midterm chances.  Iran’s driving up diesel costs, a trivial outcome compared to what we have done to them, has even caused us to think about changing sides in an entirely different war (Russia and Ukraine).

The current war, entirely a war of choice (perhaps of whim) is already tremendously expensive and the costs will be born for years as we either have to pay for restocking expensive munitions inventory or else we lose the next battle because the cupboard is bare.