Biden's Industrial Policy Failure Hurts the U.S. Economy
Most examples of Mitchell’s Law involve government passing a bad law (increase in minimum wage) that leads to a bad consequence (fewer jobs), which then becomes the excuse for a new bad law (job training programs).
Sometimes, though, politicians don’t even wait for bad results before coming up with new excuses for bigger government.
Last year, a handful of clueless Republicans in the Senate sided with Democrats to enact Joe Biden’s scheme for industrial policy (the so-called CHIPS Act).
There were all sorts of reasons to oppose the proposal, including a miserable track record of failure for industrial policy in nations such as post-war Japan and modern-day China.
But it also should have been opposed because it opened the door for additional forms of government intervention.
Here’s a tweet from Adam Ozimek that summarizes some of the ways that the Biden Administration is using subsidies as a lure to impose a dirigiste agenda.
Here’s what has happened. Politicians have driven a lot of manufacturing away from the United States because of red tape, mandates, and taxes.
So then politicians figured they could bring production back to American with a big package of subsidies for high-tech companies.
Yet those same politicians are now attaching lots of strings to those subsidies. Companies can only get the handouts if they accept red tape, mandates, and taxes.
Here’s some of the Wall Street Journal‘s editorial on the topic.
Government subsidies are never free, and now we are learning the price U.S. semiconductor firms and others will pay for signing on to President Biden’s industrial policy. They will become the indentured servants of progressive social policy. …the Administration is using the semiconductor subsidies to impose much of the social policy that was in the failed Build Back Better bill. …Start with child care, which chip makers applying for more than $150 million in federal aid will be required to provide to their employees and construction workers. …Chip makers will also have to pay construction workers prevailing wages set by unions and will be “strongly encouraged”—i.e., required—to use project labor agreements (PLAs), which let unions dictate pay, benefits and work rules for all workers. …chip makers will have to describe their “wraparound services to support individuals from underserved and economically disadvantaged communities,” such “as adult care, transportation assistance, or housing assistance.” The Administration is imposing a cradle-to-grave welfare system via corporate subsidies.
The editorial concludes with some very sensible observations about the willful stupidity of the self-styled national conservatives who were cheerleaders for this expansion of government power.
The irony is rich because chip makers have shifted manufacturing to Asia to reduce costs. Producing chips in the U.S. is 40% more expensive than overseas. One reason is the U.S. permitting thicket. But chip makers that receive federal largesse will still have to comply with more regulation under the National Environmental Policy Act. …What a wonderful life if you’re a politician. First, pile on regulation that increase business costs. Then dangle subsidies to drive your social policy… We took a lot of grief from the big-government right for opposing the Chips Act, but these conservatives look like chumps for voting for an industrial policy that is now an engine for progressive policy. And one subsidy is never enough. …Welcome to French industrial policy.
The bottom line is that Biden got a victory, but the American economy suffered a defeat.
Politicians and bureaucrats now have a new tool that they can use to make government a bigger burden on the economy’s productive sector.
At the risk of understatement, that’s not a recipe for economic vitality and competitiveness.
American lawmakers should not by copying the policies of nations with much weaker economies.
Especially when we already know the right way to get more prosperity.
Courtesy of International Liberty. (Originally titled " Industrial Policy and Mitchell’s Law")
Americans Struggling to Save for Retirement Amid Economic Malaise
Older Americans are struggling to save for retirement in the Biden economy, pushing them to stay in the workforce longer.
While the average savings for a comfortable retirement for one person is around $967,000, according to the Federal Reserve, the typical account balance for retirement savings is just $144,000.
A staggering 40 percent of retirees say they live solely on income from Social Security, which pays out an average of $20,000 per year, CBS News reported. A Bankrate survey found that 55 percent of Americans are behind on the general recommended retirement savings rate.
The negative outlook for retirement comes as many Americans struggle with inflation and surging interest rates.
A recent poll found that half of Americans say they are worse off than they were a year ago, the largest total since the Great Recession. Bank of America on Wednesday warned customers that the Federal Reserve will raise interest rates "to the point of pain" as inflation shows no signs of easing.
The poor economic outlook is forcing seniors to push back their retirement, CBS News reported:
Senior planning executive Daniel Fitzpatrick's original goal was to retire at 60. He's now 64 and still working. Fitzpatrick currently has an income in the low six-figures.
"The benchmarks move as I get older," Fitzpatrick said. Now, his goal is to retire at 70 and then "look for something part-time afterward."
Georgia residents, like Fitzpatrick, need about $850,000 to retire, according to GoBankingRates. He has about that much in savings, but regrets starting to save so late.
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US Supreme Court poised to
overturn Biden administration’s limited student debt relief plan
On Tuesday, the US Supreme Court heard two different challenges to President Joe Biden’s student loan forgiveness plan, announced last year but blocked almost immediately by Republican judges. Biden’s plan would grant up to $20,000 in loan relief per federal borrower.
One of the cases seeking to overturn the plan, Biden v. Nebraska, was brought forward by six Republican-led states. The Republican challenge claims that the measure is illegal because in granting the relief Biden was using the pandemic as a pretext to fulfill a campaign promise, and that the pandemic itself did not fit the definition of an emergency as outlined in the original legislation cited by the administration to justify the loan forgiveness.
In fact, Biden was following in Trump’s footsteps when he used the “emergency” provision in the 2003 Heroes Act to delay federal student loan payments. Trump used the same measure to delay student loan payments three times in 2020.
In seeking to overturn limited debt relief, the Republican brief also cites the “major questions” doctrine and that the decision to cancel a limited share of overall student loan debt is “undoubtedly a matter of economic and political significance.”
In over three hours of opening arguments on Tuesday, the right-wing court, led by Chief Justice John Roberts, and supporters of former President Donald Trump’s failed coup, such as Justices Samuel Alito and Clarence Thomas, questioned the legality of Biden’s order, citing the “major questions doctrine.”
The dubious legal doctrine posits that the courts can strike down any federal policy that presents a “major question” Congress might not have considered when enacting legislation. The major questions doctrine has been used by the right-wing court in the recent period to strike down the Centers for Disease Control and Prevention’s (CDC) eviction moratorium, Obama-era Environmental Protection Agency (EPA) rules concerning power plants, and a requirement from the Occupational Safety and Health Administration (OSHA) that large corporations institute either COVID-19 vaccine mandates or a testing program at workplaces.
Laying the groundwork for citing the major questions doctrine as a justification for blocking Biden’s order, Justice Roberts questioned Solicitor General Elizabeth Prelogar if she recognized that canceling a fraction of student debt in this case “presents extraordinarily serious, important issues.”
Following the use of the “major questions doctrine” to overturn the EPA regulations last year, John Yoo, author of the torture memorandums used under the George W. Bush administration, told The Hill that the doctrine would be a “permanent feature and restriction on regulation” and a way “the courts are going to patrol the administrative state.”
The other case challenging the debt relief proposal, US Department of Education v. Brown, is actually a Trojan horse for right-wing business interests. It was initially brought forward by two Texas residents, Myra Brown and Alexander Taylor, who were not eligible to receive the debt relief because they had privately-held loans. Their lawsuit is backed by the Job Creators Network, which was co-founded by Home Depot co-founder and billionaire Bernie Marcus in 2010, with support from Koch Enterprises and the billionaire Mercer family.
The Job Creators Network also receives funding from the Retail Industry Lenders Association and the National Restaurant Association, the two major lobbies for low-wage employers such as Walmart, Dollar General, Olive Garden and Starbucks.
While Republicans openly campaign against any social relief for the working class, in a cynical attempt to gin up support for the Democrats before the midterm elections, after months of refusing to announce any action, Biden announced last August his plan to eliminate up to $10,000 in federal debt for borrowers earning up to $125,000 annually or $250,000 for married couples. Borrowers who received Pell Grants, financial aid aimed for lower-income students could be eligible for an additional $10,000 in relief.
Currently, some 43 million borrowers in the United States owe over $1.7 trillion in student federal loan debt representing a massive and looming financial burden for a significant section of the working class.
While Biden campaigned for president on eliminating $10,000 of student debt—less than a third of the average $37,574 per federal borrower—during the first two years of his presidency, when the Democrats controlled both the House and Senate, neither Biden nor congressional leaders seriously attempted to get legislation passed to ensure debt forgiveness.
Instead, Biden, following in Trump’s footsteps, used a provision in the 2003 Heroes Act to delay federal loan debt repayments six times. In his last year in office, Trump used the law to pause repayment three times. Upon Biden’s announcement of his plan to cancel up to $20,000 in debt, several lawsuits were filed and the plan was blocked by Republican judges last fall, before eventually making its way to the Supreme Court.
Since the plan was announced last year, the Education Department has confirmed that over 26 million Americans applied for federal student debt relief, with over 16 million being approved. Even if every eligible borrower were to apply and be approved, the plan would provide roughly $400 billion in loan forgiveness spread over 30 years, representing a yearly figure of roughly $13.3 billion. The estimated yearly figure in debt relief is just over a tenth of the more than $113 billion the Democrats and Republicans allocated to the Ukrainian government last year to wage war against Russia.
In front of the Supreme Court on Tuesday, several Democratic politicians briefly rallied with a few hundred students in support of the measure. In a less than useless gesture, Vermont Senator Bernie Sanders called on the reactionary court to “listen to the needs of the people” and “do the right thing.”
Self-styled “progressive” Massachusetts representative Ayanna Pressley, joined Massachusetts Senator Elizabeth Warren and Sanders outside the Supreme Court and demanded the court uphold Biden’s debt relief, which Pressley mis-characterized as “transformational.”
Seeking to portray Biden as a friend of “black Americans,” Pressley said Biden “heeded the calls of this movement” and “mobilized on behalf of the needs of the people.”
An analysis of the student loan application data by Politico last month found that the program would not just benefit “black” Americans, but all working class Americans. Nearly 90 percent of the loan applicants came from zip codes where the median income was less than $59,999, with over 60 percent of applicants hailing from zip codes where the median income is between $20,000 and $39,999.
Ben, a young Chicago worker and 2020 graduate, told the World Socialist Web Site, “my student debt has been a source of anxiety and it sort of undermines one’s confidence. Thinking about the future, this loan payment is always looming over everything.”
Reflecting on the increasingly insurmountable cost of a college education in the United States, Ben said,“I think over the past few decades we’ve seen the price of a college education soar way beyond its value.”
Craig, a graduate student teaching assistant in the Chemistry Department at University of California-Riverside, told the WSWS that while he did not currently have any debt, “Graduate school is very much trying to make me go back into debt! And right now I’m considering taking out a fairly substantial loan to cover some of my living expenses. I’m just talking about my day-to-day living expenses, like rent, my car, etc.”
“Renting an apartment in Riverside,” Craig said, “is too expensive. So I live out in Pomona so my rent is a little bit more manageable. ... it’s quite a drive…”
Maya, a freshman in California, told the WSWS that while the Biden campaign “aggressively advertised among students about his promise of loan forgiveness for those most in need, it was also obvious that that promise was what young voters most wanted to hear.”
“I don’t think the Democrats have fought hard for this plan both because of their ties to the universities,” Maya added. “By even bringing the plan to the Supreme Court they can show that a plan was made and proposed, but the rejection falls out of their hands.”
Commenting on the urgent need for relief for millions of working class students, Maya said that at her high school “many students couldn’t accept dream college admissions because of the lack of financial aid. Student debt relief would mean a lot to everyone in my community,” however, “$10,000 is a drop in the bucket to the amount of housing, supplies and tuition expenses of college.”
Landon, a high school student, told the WSWS his“biggest concern” is “that I love learning and take pride in my education yet it’s likely that I’ll have to go $60,000-$100,000-plus in debt just to be able to study science and/or history.”
Reflecting on the ongoing danger of World War III, Landon added, “Not to mention the fact that we now face the threat of nuclear war with the massive escalations in Ukraine such as the shipment of tanks and now talks of sending F-16 fighter jets.”
GOP Hawks Say the Only Thing Cut From the Pentagon Will Be 'Wokeness'
'I can't think of a worse time to cut defense spending than now,' Rep. Mike Gallagher says
Congressional defense hawks say the only cuts to the defense budget that will be considered will be to "woke" programs, saying cuts to the Pentagon would be disastrous as the United States faces down a Russian war in Ukraine and Chinese threats to invade Taiwan.
"As Russia wages war on Ukraine and China eyes a similar move on Taiwan, I can't think of a worse time to cut defense spending than now," Rep. Mike Gallagher (R., Wis.), a member of the House Armed Services Committee, which oversees America's $400 billion defense budget, told the Washington Free Beacon. Gallagher and other Armed Services Committee leaders, including chairman Mike Rogers (R., Ala.), told the Washington Free Beacon there is zero appetite among the majority of House Republicans to roll back the Pentagon's budget.
As part of concessions to a small group of Republican holdouts during the House speakership fight, Speaker Kevin McCarthy (R., Calif.) reportedly agreed to some $130 billion in spending cuts that are expected to impact even traditionally insulated agencies like the Defense Department. The agreement has given rise to concerns the Pentagon's budget could be frozen in place, preventing it from expanding war-fighting priorities amid rising demands due to the war in Ukraine.
McCarthy has said he would only cut the Defense Department's spending on "wokeism" and other projects not impacting war-fighting capabilities. Others, such as Rep. Jim Jordan (R., Ohio), said "everything has to be on the table" as the 2023 budget is made. But those with the most power over the Pentagon's budget said they will prevent any cuts that negatively impact an already strained fighting force.
The Biden administration's push to foster a more sensitive environment across the U.S. military has been under Republican scrutiny since the president took office. Hawks have pilloried the introduction of critical race theory books in the Navy as well as mandated gender identity trainings implemented by the Army and Navy.
Republican defense leaders who spoke to the Free Beacon said they see a pathway to compromise with far-right budget hawks. As McCarthy recently proposed, military programs seen as promoting a "woke" agenda, such as diversity and inclusion training, could provide a pathway to satiate members advocating defense cuts as well as those trying to keep the military well equipped to face down Russia, China, and Iran.
"On the House Armed Services Committee—we are laser-focused on the threats we face and the capabilities we need to defeat them," Rogers told the Free Beacon. "We are examining programs to determine if they actually provide the capabilities we need to defeat the threats we face. If they don't, they'll be cut. However, maintaining overmatch with China requires modernizing our military, and we cannot shy away from that investment."
Rep. Jim Banks (R., Ind.), also an Armed Services Committee member, offered a similar analysis. Banks, like other GOP hawks, said wide-ranging defense cuts will embolden China and other U.S. enemies.
Chinese leader Xi Jinping "is now planning a visit to Moscow," Banks said, pointing to increased ties between China and Russia. U.S. president Joe Biden "has fomented chaos around the globe," Banks said, "and House Republicans need to be laser-focused on investing in our military and disentangling our defense industrial base from our greatest adversary."
Banks said he "will never vote to cut defense spending, and a large majority of Republicans are in the same boat." But the congressman also said there "are plenty of budget cuts I support that would strengthen our military, like defunding Office of Diversity, Equity, and Inclusion at the [Defense Department]."
"Wokeness is weakness, and defunding these far-left ideologies will boost cohesion, retention, and morale and make our military stronger," Banks said.
There are concerns that with a slim Republican majority in the House, Republican defectors could team up with dovish Democrats to force defense cuts. "There are places I may actually agree with Republicans on defense cuts," Rep. Ro Khanna (D., Calif.) said last month. "If they're going to look at that and make certain cuts, then let's have that conversation."
"What we saw in the speaker fight was that a relatively small number of Republicans are willing to hold the process hostage out of the desire to make dramatic cuts in the budget," Rep. Adam Smith (D., Wash.), the Armed Services Committee's former chairman, told the Hill last month. "So regardless of what McCarthy did or did not promise, that same group of people can do the same thing on the budget, on the appropriations bills, on the defense bill."
It is unlikely that any Democrat would sign on to cuts that target liberal initiatives such as the DEI office Banks has in his sights, and Republicans think they have a better chance to bring the party together on redirecting funds toward war-fighting rather than making any cuts.
Rep. Mike Waltz (R., Fla.), a combat veteran who serves on the Armed Services Committee, said all flanks of the Republican Party could unite to redirect Pentagon funding to critical war-fighting programs that increase America’s ability to confront China and other threats, such as those posed by Iran in the Middle East.
"I'm in favor of identifying wasteful programs within the [Defense Department] and redirecting those funds to urgent priorities, but we cannot propose broad spending cuts on the backs of our troops," Waltz told the Free Beacon. "We need to ensure our military has the capability to counter China's massive military buildup, Iran's growing nuclear capabilities, the emerging terrorist threat in Afghanistan, and much more."
There are also concerns that potential defense cuts could interfere with efforts to modernize America's military, which has lagged behind similar efforts undertaken by China and other nations in recent years. Military production lines in the United States also have been strained by the ongoing war in Ukraine, where America is supplying a great amount of hardware. Potential cuts to the defense budget could exacerbate these supply-line issues.
"A strong budget ensures that our military forces are always capable of safeguarding the homeland, protecting our national interests, strengthening foreign alliances and partnerships, rapidly modernizing our forces to counter emerging threats, and supporting service-member families and veterans," Rep. Joe Wilson (R., S.C.), another Armed Services Committee member, told the Free Beacon.
Rebeccah Heinrichs, a national security analyst with the Hudson Institute think tank, said the American military needs hardware now more than ever, particularly if it is to engage in a showdown with China in the Pacific region.
"In an idyllic world at peace," Heinrichs said, "we could do the hard acquisition reform and gut all of the butter out of a budget that's supposed to be strictly guns, so to speak. But we are not in that world."