Trump's Potential Legacy: 50 Million+ Enemies of the State

Bloomberg reports that Treasury Secretary Janet Yellen’s pick for a dream date lunch would be none other than John Maynard Keynes, who Bloomie reporter Christopher Condon describes as “the founding father of modern macroeconomics.” I thought John Law held that title. 

This pronouncement happened during a speed round of questions in Detroit while chatting with Michigan Governor Gretchen Whitmer. “I would choose John Maynard Keynes,” said Yellen. Keynes “changed the way all of us understand business cycles, public policy and financial markets.”

Murray Rothbard referred to Keynes in his History of Economic Thought class class as simply “Maynard.” In his Forward to Henry Hazlitt’s The Failure Of The ‘New Economics’, What Yellen reveres so much, Rothbard called a “Keynesian holocaust” in his Forward to Henry Hazlitt’s The Failure Of The ‘New Economics’. Yes, there's been bubbles, busts and inflation ever since. About Keynes, the man, Yellen’s dream date, Rothbard wrote, 

John Maynard Keynes, the man — his character, his writings, and his actions throughout life — was composed of three guiding and interacting elements. The first was his overweening egotism, which assured him that he could handle all intellectual problems quickly and accurately and led him to scorn any general principles that might curb his unbridled ego. The second was his strong sense that he was born into, and destined to be a leader of, Great Britain’s ruling elite. Both of these traits led Keynes to deal with people as well as nations from a self-perceived position of power and dominance. The third element was his deep hatred and contempt for the values and virtues of the bourgeoisie, for conventional morality, for savings and thrift , and for the basic institutions of family life.

There “is really a bipartisan understanding that he really hit deep insights into how economies work,” the Treasury chief said. Macroeconomics “as a distinct discipline began with Keynes’s masterpiece, The General Theory of Employment, Interest and Money, in 1936,” according to an International Monetary Fund note.

Rothbard in his Forward to Hazlitt’s critique of Keynesianism, wrote that Hazlitt “in this vitally important and desperately needed book throws down the challenge in a detailed, thoroughgoing refutation of the General Theory.” 

The General Theory was anything but a masterpiece. As Hazlitt explained,

Now though I have analyzed Keynes’s General Theory in the following pages theorem by theorem, chapter by chapter, and sometimes even sentence by sentence, to what to some readers may appear a tedious length, I have been unable to find in it a single important doctrine that is both true and original. What is original in the book is not true; and what is true is not original. In fact, as we shall find, even much that is fallacious in the book is not original, but can be found in a score of previous writers.

During her gushing the Treasury Secretary noted that President Richard Nixon famously said in the 1970s “we’re all Keynesians now.”

Not all of us.

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For at least twenty years, the term "illegal alien" (or similar variations like "illegal immigrant") has been the subject of a contentious debate between pro-immigation and anti-immigration activists. Over the past decade, the Left has increasingly managed to limit the use of the term "illegal" to refer to any migrant. For example, until fairly recently, the Associated Press was still using the term "illegal immigrant," but as Foreign Policy magazine notes, under "pressure from immigration advocates, the Associated Press update[d] its stylebook" to change the term in 2013. Other media organizations have followed suit. Nonetheless, some government organizations occasionally continued to use the term "illegal alien" until 2021 when the Biden administration instructed the US executive branch to abandon the term "alien" altogether. "Illegal alien" is on its last leg.

The disagreement between Left and Right is largely over how to portray the immigrants themselves. The Left seeks to banish the term "illegal" so as to normalize undocumented migration and increase it in general. The Right, on the other hand, seeks to portray undocumented immigration as nefarious in order to further restrict overall immigration. 

For the sake of argument, however, let's say that we are agnostic on the matter of whether immigration should be increased or decreased. 

So let's ask: is the term "illegal immigrant" useful? The answer is: "it depends." Moreover, the designations of legal and illegal do little to tell us about the productivity of a migrant, or the demands he or she makes of the welfare state. In practice, legal immigrants have greater access to public funds than illegal immigrants, and it shows. 

How Bureaucrats Arbitrarily Decide What is Legal

The core of the problem lies in the fact that the designations of legal and illegal are not rooted in market transactions or voluntary exchange. Rather, the designations rely primarily on arbitrary bureaucratic criteria. For example: Congress has declared that if immigrant X has filled out the appropriate approved paperwork and has been given the green light by some federal agent, he is thus legal. Congress has also declared that if immigrant Y's paperwork does not receive the necessary rubber stamp from some bureaucrat, he is not legal. In this latter case, private employers are not legally permitted to hire the worker regardless of the worker's skills or the employers needs. Even for those specific "illegal" immigrants who have been offered jobs and lodging in the private sector—and can pay their own bills—the lack of proper government paperwork precludes these potential workers from peaceful exchanges with employers and others.  

We can see the arbitrariness of this sort of thing in a number of other examples. 

One example is the minimum wage: the government has declared that an employer cannot enter into a contract with employees at a wage level under the minimum wage. Thus, employment at or above the minimum wage is "legal." Employment below that level is "illegal." The contract remains illegal even if both parties are willing. Thus, the line between legal and illegal in this case is totally arbitrary and based on mothing more than the central-planning impulses of federal lawmakers. 

We see a similar phenomenon in relation to drugs. At the federal level, Viagra is legal because Congress says so, and marijuana is illegal because Congress has decreed it. There’s certainly no objective standard determining why the federal government grants private citizens the freedom to choose one but not the other. There’s no clear difference between the two in terms of long-term health risks. In fact, Viagra is likely a bigger risk than marijuana. 

A final example can be found in the idea in the lockdowns that governments imposed on businesses and households during the covid panics of 2020. At that time, the government arbitrarily defined some businesses as essential while other businesses were deemed non-essential. In some jurisdictions, those workers deemed non-essential were even told to not leave their homes or risk prosecution. Thus, there were "legal" businesses and "illegal" businesses. This distinction was purely arbitrary, of course, and reflected nothing more than the biases of politicians and health officials. 

In all four examples, the only real difference at work here is that a legislator or bureaucrat has decided that one drug/immigrant/employee/business fits a government-defined standard while another drug/immigrant/employee/business does not. 

Nonetheless, the distinction between legal and illegal is relevant in the context of law and public policy. Obviously, when an employee and an employer agree the employer will pay the employee less than the government's minimum wage, that can bring serious penalties. The same is true of using illegal drugs or hiring illegal immigrants. In all cases, the state has the de facto power to prosecute and sanction those who run afoul of the regime's arbitrary decrees. The regime violates property rights when it prosecutes people for these peaceful activities, of course, but states have never much troubled themselves about violating property rights. 

The use of the terms "legal" and "illegal" in these contexts also serve a rhetorical purpose. They tell us that government policymakers like the legal thing, and don't like the illegal thing. Skeptics of the state's "wisdom," however, have long understood that governments have never been reliable arbiters on what is good, moral, proper, or healthy. The legal status of an activity or person or product has never been a definitive criterion on which to base an opinion about much of anything. 

Using Legal Status to Expand the Welfare State

The arbitrariness of the legal/illegal distinction in immigration cuts both ways.

It's true that the designation of "illegal" can be used to reduce immigration by cutting off access to the legal marketplace for immigrants without the proper government approval.  On the other hand, the designation of "legal" can be used to expand taxpayer-funded subsidies. Contrary to the widely-held belief that legal immigrants are productive and illegal immigrants are unproductive, the reality is that legal immigration tends to be a larger overall drain on taxpayer resources that illegal immigrants. This is partly because there are more legal immigrants than illegal. But it's also true because most legal immigrants have more access to the American welfare state than do illegal immigrants. Moreover, many legal immigrants avail themselves of the many generous American safety-net programs.  

Indeed, a label of "legal" can often be applied to unproductive immigrants who take advantage of welfare programs and who may not even work for a living. Measures of legal immigrant use of welfare programs show robust levels of participation in these programs. The best that can be said of legal immigrants (on average) in this regard is that (according to some conservative measures) they collect welfare at slightly lower rates than the native population.  But this should not be surprising. After all, after a mere five years of residence in the United States, most immigrants with legal permanent resident status have access to the full array of welfare programs including food stamps, Medicaid, CHIP, cash assistance, and more. Some US states (California, for example) offer taxpayer-funded benefits to immigrants without the five-year bar, including Medicaid and food stamps. 

Consequently, the extension of the status of "legal" immigrant is really just an indication that the immigration is more likely to collect taxpayer-funded benefits of one type or another. Yes, illegal immigrants are eligible for some social benefits such as emergency medical care and taxpayer funded childcare.  Legal immigrants, however, are eligible for far more in the way of social benefits. A permanent resident—once declared "legal"—cannot be deported for being willfully unemployed or collecting social benefits.  In other words, an immigrant can obtain and maintain legal status even if he or she is unemployed, on welfare, and a net drain on taxpayers. Note that such a person can be "legal" while self-reliant immigrants with jobs and private economic support can still be arbitrarily labeled "illegal." 

Moreover, there are additional loopholes that allow the regime to declare many immigrants—many of them initially labeled "illegal"—as eligible for greater and more immediate access to taxpayer funded benefits. For example, "[r]efugees, people granted asylum or withholding of deportation/removal, Cuban/Haitian entrants, certain Amerasian immigrants" and other specific groups are exempted from the waiting period.  By definition, everyone in these groups is a legal immigrant, and we see is not at all necessarily the case that legal immigration results in fewer demands on the taxpayers than legal immigrants. 

So, is the term "illegal alien" useful? It's not very useful beyond simply determining the state of that migrant's paperwork and the migrant's relationship with government authorities. When it comes to the private sector and the net economic contribution that person makes, the terminology doesn't tell us much about any specific case. 

A more fruitful question may be to ask how much taxpayers ought to be called upon to fund foreign nationals, legal or otherwise.1 By limiting access to the welfare state for all foreign nationals—not just the "illegal" ones, but also legal permanent residents—immigration policy would move toward a less arbitrary standard that is not quite so easily manipulated by government policymakers. 

• 1. There are many definitions of "foreign national" in use, and many organizations claim that legal permanent residents are not foreign nationals. Common defintions of "foreign national," include "a person or organization who is not a citizen of the United States, and who is a citizen of a foreign country" or "A non-naturalized citizen of a country." The US Department of Homeland Security defines legal permanent residents as "foreign nationals who have been granted the right to reside permanently in the United States." According to the State Department, a "national" is "a person owing permanent allegiance to a state." WIt is reasonable, therefore, to conclude that a colloquial understanding of the term "foreign national" strongly suggests all non-citizens are best classified as foreign nationals.There are presently approximately 23 million foreign nationals living in the United States. 

The 1920s in America, as well as much of the West, were characterized by a feeling that anything was possible. In the Roaring ‘20s Americans no longer worried about war, and they had seen the post-war depression of 1920-1921 vanish quickly, thanks to a paucity of government meddling. The Federal Reserve was managing the money supply in what eventually became a fatal disaster but was heralded at the time, and inventions flowed forth from a great release of creative energy that had been pent-up during the war.

With low unemployment Americans were prosperous and mobile as mass-production made cars affordable for the middle class. Women had won the right to vote and were asserting their independence in culture and work, and alcoholic beverages were prohibited giving rise to massive defiance in the form of organized crime and speakeasies. In dance, the fast-kicking Charleston became wildly popular. 

The 1920s was also the Jazz Age. Originating from African American musicians in New Orleans, “jazz” had no agreed-upon definition, though improvisation became one of its defining elements.

As one writer described it,

Jazz represented the Roaring Twenties’ spirit: energetic, modern, and slightly rebellious. Musicians like Louis Armstrong, Duke Ellington, and Bessie Smith became national icons, pushing musical boundaries with improvisation and new rhythms. Jazz clubs, especially in cities like New York and Chicago, became cultural hubs, drawing diverse audiences and facilitating the mingling of different racial and social groups.

The popularity of jazz rendered it an American signature, but the reigning classical orthodoxy considered it low brow. Americans, therefore, were low brow.

This bothered some jazz musicians, and one of them decided to shake-up that prejudice.

Paul Whiteman’s concert

On Friday, January 4, 1924 Ira Gershwin sat reading the morning’s New York Tribune while his younger brother George and a friend were nearby playing a game of pool. Ira noticed an item in the music section headlined “Committee Will Decide ‘What is American Music?’.” As he read on he learned that jazz bandleader Paul Whiteman was planning a concert for Lincoln’s Birthday, February 12 — five weeks away. 

Whiteman’s “An Experiment in Modern Music,” he read, would be judged by four iconic musicians of the day: Sergei Rachmaninoff, Jascha Heifetz, Efrem Zimbalist, and Elma Gluck. How they would know if the “experiment” could be called American music was likely a mystery even to them.

It was the brief article’s last paragraph that made Ira straighten up and take notice:

George Gershwin is at work on a jazz concerto, Irving Berlin is writing a syncopated tone poem and Victor Herbert is working on an American suite.

His brother is at work on a jazz concerto?! In the upcoming days George would be occupied with a musical comedy he had written which was about to open on Broadway, Sweet Little Devil. Where did Whiteman get the idea Gershwin was writing a concerto?

It turned out George had forgotten about his promise to Whiteman during talks back in December. He called the band leader early the next morning to tell him it would be impossible to write a concerto in the time remaining. But Whiteman somehow talked him into it, though Gershwin promised not a concerto but a freer piece such as a rhapsody. Whiteman assured him he only needed to write the piano score; his trusted in-house arranger Ferde Grofé would do the orchestration.

After he had sold his first song in 1916 at age 17 for 50 cents, Gershwin worked as a song plugger and producer of piano rolls for a while. His first commercial success as a composer was the ragtime Rialto Ripples in 1917 followed by a bigger hit Swanee in 1919. With songwriter William Daly he began collaborating on Broadway musicals beginning in 1920. 

Gershwin had been in the habit of jotting down song ideas in what he called his Tune Books. Now, at age 25, he had collected an abundance of musical phrases, and he turned to these to get him started on what would eventually become a sure bet to pack concert halls here and abroad for the next 100 years — Rhapsody in Blue.

Manuscript evidence suggests he only worked on Rhapsody a total of 10 days from January 7, 1924, to the end of rehearsals in February.

Last minute anxiety

Carnegie Hall had been booked for February 12, 1924, and surrounding dates, so Whiteman settled for the less-capacious Aeolian Hall. 

Whiteman was taking a risk for the concert he had planned. On the day of the event, scheduled to begin at 2:45 p.m., he slipped out of the hall to check on the box office, and in his own words:

There I gazed upon a picture that should have imparted new vigor to my wilting confidence. It was snowing, but men and women were fighting to get into the door. . .

Such was the state of my mind by this time that I wondered if I had come to the right entrance. And then I saw Victor Herbert going in. It was the right entrance. . . The next day the ticket office people said they could have sold out the house ten times over.

All very encouraging but by late afternoon Whiteman’s experiment was fading. Applause had been polite for the performances up to that point. Slowly, people began to head for the exits.

Then Gershwin, “a lank and dark young man,” stepped quietly on stage. Settled at the piano he nodded to Whiteman, who gestured to Ross Gorman whose clarinet wail electrified the audience. The hall’s deserters rushed back in.

Later, critics said Rhapsody was flawed, it was too heavy on the piano part and its form was not classically proportioned. But when the final ffz (very loud) chord was struck by Gershwin and orchestra, the audience exploded with applause. According to Whiteman he and the young composer took five curtain calls.

The question “What is American music?” never got answered. 

Today, a who’s who of concert pianists have recorded the Rhapsody, many available on YouTube. 

In late January of this year pianist-composer Ethan Iverson wrote a piece for the NY Times, saying

Thanks to the centennial, you’re likely to come across a lot of “Rhapsody” performances this year — not that the anniversary makes much difference, because that’s always the case.

As conductor Michael Tilson Thomas once said, Gershwin’s music has that elusive quality of making people fall in love with it.

Happy centennial, Rhapsody in Blue!

The amount of commercial real estate loans coming due in 2024 has jumped to $929 billion according to the Mortgage Bankers Association. Previously the amount had been estimated to be $659 billion, with the 40% increase “attributed to loan extensions and other delays rather than new transactions,” according to Bloomberg’s John Gittelesohn.

Of the nearly $1 trillion in commercial-property debt maturing this year, banks hold $441 billion of it, the mortgage bankers group reported. 

With commercial-property prices down 21% from the early 2022 peak and office prices falling 35%, an estimated $85.8 billion of commercial property debt was considered distressed at the end of 2023, according to MSCI Real Assets, who believes there is an additional $234.6 billion of potential distress.

Reuters reports “investors are combing through portfolios of regional banks, as small banks account for nearly 70% of all commercial real estate (CRE) loans outstanding, according to research from Apollo.”“As long as interest rates stay high, it's hard for the banks to avoid problems with CRE loans," said short-seller William C. Martin of Raging Capital Ventures told Reuters, who decided to place a bet against NYCB after the bank's disastrous Jan. 30 earnings release which detailed real estate pain and led him to believe that shares could sink further on more real estate losses.

"The regional banks ... (are) doubly more exposed to rates," said Dan Zwirn, co-founder and CEO of distressed debt investment firm Arena Investors, who is avoiding real estate for the next year or two, citing in part higher risk of default.

Nearly 1,900 banks with assets less than $100 billion had CRE loans outstanding greater than 300% of equity, according to Fitch.

Credit rating company Fitch, in a detailed report in December, said if commercial real estate “prices decline by approximately 40% on average, losses in CRE portfolios could result in the failure of a moderate number of predominantly smaller banks,” Reuters reported. (emphasis added)

NYCB said on Wednesday options could include loan sales and that the bank "will be razor-focused on reducing our CRE concentration."

But loan sales are unlikely with properties now valued 50%-75% below their valuations at the time loans were made. No one will buy loans at par where the underlying collateral has fallen by 25%-50%. Selling loans at a loss will generate capital-eroding losses these banks can’t afford. For the same reason, borrowers seeking an extension for their undercollateralized loan will be asked to pay down the principal balance with cash they likely don’t have. "Loans that were done over the last five to seven years, a lot of those are challenged now," said Ran Eliasaf, founder and managing partner of real estate investment firm Northwind Group, who is investing in the New York multifamily market.

Real Estate investor Ken McElroy told Jeff Snider that if this real estate downturn is a baseball game it is in the 2nd or 3rd inning.

Watch this space. 

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