Power & Market

Forget the Human Rights Council, Why Not Leave the Entire UN?

06/20/2018Tho Bishop

The Trump Administration recently announced that the US will withdraw from the United Nations Human Rights Council. Their justification is that the council consists of human rights violators, such as Cuba, China, and Venezuela, and has demonstrated a bias against Israel.

UN Ambassador Nikki Haley took to the pages of the Wall Street Journal to further expand on the decision, writing:

After more than a year of unsuccessful efforts to fix these fundamental defects, the U.S. delegation announced Tuesday our withdrawal from the council. Our country will no longer be party to this deeply flawed institution, which harms the cause of human rights more than it helps it....

In the end, our allies’ case for the U.S. to stay on the council was actually the most compelling argument to leave. They said American participation was the last shred of credibility left in the organization. But a stamp of legitimacy on the current Human Rights Council is precisely what the U.S. should not provide.

Of course the exact same logic could be used to advocate the United States from pulling out of the UN entirely.

The UN’s website outlines the five core missions for the organization. These include:

  • Maintain International Peace and Security
  • Protect Human Rights
  • Deliver Humanitarian Aid
  • Promote Sustainable Development
  • Uphold International Law

Its failure to maintain international peace and security is obvious, though obviously the United States raising that objection would open America to deserved ridicule. The failure of the United Nations, however, to restrain fifteen years of US militarism points to the inherent weakness of the organization.

The disastrous human rights record of the UN also goes deeper than the criticism of the HRC. While, again, it’s not surprising for the US government being hesitant in raising particular objections, in recent years the UN has witnessed member countries resurrect widespread torture programs and help foster an active slave market in Libya.

As Lucy Wescott wrote in Newsweek, international human rights organizations have been vocal in questionining the usefulness of the UN:

The U.N. remains vulnerable after a number of governments have stopped it from preventing mass atrocities, including wars in Syria and Yemen. Syria is an example of “a systematic failure of the U.N. to fulfill its vital role in upholding rights and international law and ensuring accountability,” according to the report.

“[The U.N. is] certainly an organization that is creaking at the seams, that was designed for the 20th century,” Richard Bennett, head of Amnesty International’s U.N. office, tells Newsweek. “ There are questions about whether it’s fit for purpose in the 21st century.”

While the UN does manage to carry out some humanitarian aid missions, these too are plagued with expected problems of a vast international bureaucracy. The organization’s own estimates place the rate of fraud at 30%, but even those numbers understate the bleak reality that the biggest winners of the UN’s programs tend to be government officials who are the most to blame for international poverty.

William Easterly, co-director of New York University’s Development Research Institute, has written on how the United Nation's humanitarian model gets everything wrong:

[The UN swoops] into third-world countries and offer purely technical assistance to dictatorships like Uganda or Ethiopia on how to solve poverty.

Unfortunately, dictators’ sole motivation is to stay in power. So the development experts may get some roads built, but they are not maintained. Experts may sink boreholes for clean water, but the wells break down. Individuals do not have the political rights to protest disastrous public services, so they never improve. Meanwhile, dictators are left with cash and services to prop themselves up–while punishing their enemies.

This same top down approach underscores the failures of the UN’s “sustainable development” objective as well. Unsurprisingly, the inherent fallacies of economic central planners don’t vanish when executed by a vast international organization. Instead, we have bad economic policy, usually backed by Malthusian fearmongering, empowering globalist bureaucrats who aspire to one day be able to impose direct taxes on sovereign countries.

For those reasons and more, Trump should do what he does best and disrupt the status quo by pulling the US out of the UN and evict the organization from New York City. Then, if he wants to actually succeed where the UN has failed, he’d find a way to make his truly free trade zone happen. After all, nothing is better for peace, development or human rights as the wonders of international trade.

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Fed Raises Rates, Projects More Increases This Year

06/13/2018Mises Institute

Today Jerome Powell announced another .25% increase in the Federal funds rate, bringing it to a range between 1.75% and 2%. In a corresponding move, interest paid on excess reserves by on 20 basis points, rather than 25. This is a small but significant change to Fed policy, a reaction to the Federal funds rate moving steadily towards the Fed's upper target range in recent months. 

The FOMC also increased its inflation outlook from last May's meeting, now projecting 2.1% inflation in 2019 and 2020. Other measures of inflation are much higher still, with the consumer price index hitting a 6 year high at 2.8. 

In response to projected growth and inflation pressure, the FOMC also projected an additional interest rate hike in 2018. The underlying narrative of today's announcement is the US economy is strong and good times are here. We will see if that bears out the rest of the year. 

The Wall Street Journal notes the changes in the Fed's statement from its May release:

 

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Federal Reserve Nominee Wants To Take Your Cash And Track How You Spend

05/17/2018Connor Boyack

Central banks are shrouded in secrecy and few understand how they operate. These institutions handle economic matters that we’re told are far too complex for average people to understand.

The Federal Reserve’s secrecy originated from its inception, when created by a group of elite men using secret code names at a place named Jekyll Island a century ago. No doubt at least one mustache was twirled mischievously. Of course the day to day of monetary policy is far less thrilling, but that doesn’t mean the consequences of these bankers’ actions are any less dramatic.

A decade after the latest financial crisis — fueled by the cheap money policies of former Fed chairman Alan Greenspan — low interest rates and “quantitative easing” have continued to inflate what Donald Trump once rightly called a “big, fat, ugly bubble.”  The monetary policies that the Fed imposes bring significant harm to many Americans who are impacted by the whims of bureaucratic economists with unchecked egos.

For all the secrecy afforded to the Fed and other central banks, most of these decisions are made in plain view of the public, enjoying the protection that comes with dreadfully dull technical language of modern economics. For an example, look no further than the nomination battle going on right now over Marvin Goodfriend to the board of governors.

Read the full article at The Federalist
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Fed Keeps Rates Same, Changes Inflation Language

05/02/2018Tho Bishop

The FOMC announced that they will leave interest rates unchanged today, as was expected.

What was noteworthy about the Fed's announcement was a changes made to language about inflation. 

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The significance here is that it indicates the Fed is not concerned with short-term inflation rates above 2%, as we've seen in recent months. (The Fed's other inflation measure, "Underlying Inflation," has been over 3% - a 12 year high - since last month.) The Fed is hoping to continue with it's slow, steady, increase in interest rates to the rest of the year.

The question is how will the Powell Fed respond act if interest rates continue to creep upwards?

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Fed: "Underlying Inflation" near a 12-Year High

04/23/2018Ryan McMaken

According to the Federal Reserve's Underlying Inflation Gauge, the 12-month inflation growth in March was at 3.13 percent. That's the highest rate recorded in 140 months, or nearly 12 years. The last time the UIG measure was as high was in July 2006, when it was at 3.2 percent. 

The Fed began publicly reporting on new measure in December of last year, and takes into account a broader measure of inflation than the more-often used CPI measure.

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Not shockingly, the UIG has shown a higher rate of inflation than the CPI, most of the time in recent years. Moreover, this gap between UIG and CPI appears to be growing.1 

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In March, while the UIG was 3.13 percent, the CPI growth rate was 2.4 percent. This was a 13-month high for the CPI. 

The use of consumer prices only in the CPI has long been a problem, in that the cost of living and planning for the future does not involve only the basket of goods used in the CPI calculations. A wide variety of assets affect the American economy as well. 

As explained by the New York Fed's summary of the UIG measure:

We use data from the following two broad categories: (1) consumer, producer, and import prices for goods and services and (2) nonprice variables such as labor market measures, money aggregates, producer surveys, and financial variables (short- and long-term government interest rates, corporate and high-yield bonds, consumer credit volumes and real estate loans, stocks, and commodity prices).

But don't expect the Fed to abandon its fondness for the CPI and the arbitrary "2-percent inflation" goal any time soon. The fact that the broader measure of inflation is climbing to the highest level seen in more than a decade is apparently not a matter of concern. 

Today, the president of the Federal Reserve Bank of Chicago, Charles Evans, reiterated that the Fed is holding to its 2-percent inflation goal - and they're not talking about using the UIG measure. 

  • 1. The gap is simply calculated by substracting the CPI YOY growth rate from UIG YOY growth rate. A negative value means the CPI was higher than the UIG in that period. 
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First book in Austrian Economics book series

04/03/2018Mises Institute

The first volume of a new book series on Austrian economics edited by associated scholar Per Bylund and published by the British academic publisher Agenda Publishing is now available: associated scholar Mateusz Machaj's Capitalism, Socialism, and Private Property (2018).

In his book, Machaj extends Mises' and Hayek's arguments against socialism to prove once and for all that the "market socialism" solution to Mises' calculation problem, formulated by Fred Taylor, Oskar Lange, and Abba Lerner, fails to provide the solution they promised. Market socialism, Machaj argues, cannot provide the same solution as market prices, and therefore fails to meet Mises' challenge.

The book is available at Agenda Publishing's website. Faculty members and students are encouraged to order a copy for their university libraries.

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Federal Budgets are Meaningless

02/14/2018Jeff Deist

Reactions to presidential budget proposals generally run along predictable party lines: the party occupying the White House lauds it as a sober and responsible reflection of the nation's priorities, while the opposition party insists it will kill babies and bring about the general downfall of the nation. We might expect this political grandstanding to grow more intense in the Trump era, and so it has: the administration's new 2019 budget proposal has been met with howls of disapproval from many corners. 

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 We alternatively are told Trump's budget fights repeals Obamacare, mandates a border wall, swells defense spending, privatizes space travel, "reforms" student loans and food stamps, fights the opioid crisis, creates huge deficits, and somehow manages to expand federal expenditures 13% while simultaneously slashing critical programs. It's a starvation budget! It's a bloated pork-barrel giveaway! It even threatens Meals on Wheels! The average American, tribally inclined to believe one side's hype over the other, hears all of these things and wonders whether they're true.

But they are not true. Trump's budget, like all presidential budgets, is a meaningless document full of trial balloons that serve current political purposes rather than determining future spending priorities. Budgets have no bearing on future actions by Congress or the president, they don't change substantive law in any area, and they don't create deterministic deficits in the future. They are political documents, and should be understood as such.

A few points bear mentioning: 

  • Presidents have no constitutional role in the budget process, other than signing or vetoing a budget bill crafted by Congress alone.
    Unfortunately, the lawless and relentless rise of presidential power during the 20th century did not spare the budget process. But the Constitution plainly and unequivocally grants sole authority over the power of the purse to Congress in Article I, section 9, clause 7. Presidents are charged with executing the spending priorities of Congress, not setting them in the Oval Office.

    The more modern "tradition" whereby administrations propose an annual budget to Congress in early February is entirely extra-constitutional: the legally dubious Budget and Accounting Act of 1921 created the Office of Management and Budget under the auspices of the president, when it fact such an office should fall under congressional control (as the later-created Congressional Budget Office does). It is a mistake to further entrench the harmful idea that presidents have any say whatsoever over the federal budget.
     
  • Budgets have nothing to do with taxes and spending.
    Congress funds all of the federal departments, agencies, and programs through the annual appropriations process. Technically there are 12 annual appropriations bills, one for each Congressional subcommittee with jurisdiction over particular funding areas (e.g. defense, transportation, agriculture). House and Senate committees each pass their version, then in theory they hammer out an agreement known as a conference report that both bodies pass and send to the President. This process has broken down mightily in the last 15 years, because the poisoned political atmosphere makes agreement on 12 huge bills (all full of tucked-away language from swarming but friendly lobbyists) nearly impossible. So in recent years Congress has passed overarching "omnibus" bills that fund everything, or packaged "minibus" bills that combine two or more appropriations bills.

    But nobody gives a moment's thought to the already-passed fiscal year budget during the summer appropriations process. The budget is like an old newspaper, a story that is utterly irrelevant to the appropriations process. The only numbers that matters are last year's appropriations spending; those numbers form the "baseline" from which the committees begin-- not those suggested in the White House budget. The priorities and initiatives outlined in the administration's budget proposal are never considered for a moment. 

    Tax bills similarly make their way through committees in the House and Senate, though they must originate in the House. Unlike appropriations bill, tax legislation is not particular to a single fiscal year, and remains in effect unless later revoked, amended, or subject to sunset periods. Tax proposals and revenue projections contained in the budget again are irrelevant and never considered by Congress. 

    So how much Congress spends each year, and how much the Treasury collects in taxes, is wholly a function of the appropriations and tax bills passed by Congress (again, save for a presidential veto). 
     
  • Budgets have no binding effect on Congress or the president in future years.
    All of the spending and revenue projections contained in the administration's budget will be utterly forgotten in a month or two. Even if passed into law, the budget bill has no legally binding effect whatsoever on future years, future Congresses, or future presidents. Nor does it have any institutional effect. Nobody in Congress ever says. "Gee, remember that budget we passed back in 2010? We projected spending only $15 billion every year for NASA. I guess we'd better stick to it since we promised... Sorry NASA."

    Nobody knows, or can know what Congress will spend down the road-- just look at "emergency supplemental" bills passed during the Bush and Obama administrations to fund the wars in Iraq and Afghanistan. They were passed without regard to presidential budgets, and completely apart from the existing appropriations/omnibus/minibus bills already voted on. What exactly is the point of a budget, if Congress simply can pass additional spending bills whenever it chooses? So when the New York Times breathlessly announces Trump's budget creates huge deficits in the future or increases poverty, it displays a profound ignorance of the two points above. The administration has no budget, and it doesn't ultimately control spending and tax bills. 

We all would benefit from jettisoning the presidential budget charade. It only creates more meaningless political theater, and diverts our attention from what really matters: the total amount Congress spends and the total amount it takes from the private economy in taxes.

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Farewell, Steve Bannon

01/10/2018Ryan McMaken

It's been a bad few months for Steve Bannon. He was fired from his White House job in August. Then he supported Roy Moore and other political dead ends in an attempt to put himself forward as the leader of "Trumpism." Bannon then decided to provide a variety of juicy quotations denouncing Donald Trump in order to help Michael Wolff with his anti-Trump expose. Shortly thereafter, Bannon backtracked and apologized. After that, Bannon lost one of his most prominent sources of funding — the wealthy Mercer family. Finally, to cap it all off, Bannon was fired from his position as an adviser and radio host at Breitbart, where he had long enjoyed positions of leadership. 

This year-long run of total failure comes at the end of a remarkably short period of fame for Bannon, who, prior to Andrew Breitbart's untimely demise in 2012, was neither especially influential or well known. 

In his short period at Breitbart, Bannon did, however, manage to cozy up with Donald Trump and many within his movement, and turn this into an influential position at the White House. Bannon quickly faded as an influential figure in Washington.

In spite of Bannon's short and not-especially-notable tenure as a senior political adviser, Bannon continues to benefit from myths about his status as a kingmaker in Washington and around the nation. But, as Barbara Boland notes this week at The American Conservative, the myth was always just that — a myth. 

Bannon — always a relentless self-promoter — also managed to create the impression that he was the purveyor of some new kind of insightful and revolutionary political plan and vision. The idea was that he was going to create a Republican majority that would persist for generations. 

Upon closer inspection, however, there was never anything especially insightful, creative, or unique about this vision. It has always been nothing more than a re-tread of economic populism in which the Republicans would buy votes with lavish government spending on pensions and other social programs that are allegedly attractive to the "working classes." This would be coupled with economic nationalism opposed to free trade and devoted to aggressive foreign policy. 

David Stockman explains how Bannon's position was just the usual warfare-welfare state vision dressed up in nationalist and culture-warrior rhetoric: 

The last thing America needed was a conservative/populist/statist alternative to the Welfare State/Warfare State/Bailout State status quo. Yet what Bannonism boiled down to was essentially acquiescence to the latter — even as it drove politicization deeper into the sphere of culture, communications and commerce.

Stated differently, the heavy hand of the Imperial City in traditional domestic, foreign and financial matters was already bad enough: Bannonism just gave a thin veneer of ersatz nationalism to what was otherwise the Donald's own dogs' breakfast of protectionism, nativism, xenophobia, jingoism and strong-man bombast.

As Stockman correctly notes, Bannon never exhibited any real understanding of how central banking, Wall Street cronyism, and economic policy were driving the American cultural and economic trends that Bannon so often condemned. 

Instead, Bannon took to blaming people who do understand economics — i.e., Austrian-school economists and various free-market activist types — for various national ills, and for leading the Republican party astray. Says Bannon: 

 And then the Republicans, it’s all this theoretical Cato Institute, Austrian economics, limited government — which just doesn’t have any depth to it. They’re not living in the real world.

Later, Bannon returned to the theme, claiming that free-market ideas don't matter, and that "it is workers, not libertarian theorists, who are the backbone of the country.” (It's unclear if Bannon intends to imply that all libertarians are pie-in-the-sky "theorists" or if he is willing to admit that many libertarians do, in fact, work for a living.) This sort of right-wing Leninism-Maoism functions on the idea that "the working man" is all that matters, and that entrepreneurship, capital, and markets, are all somehow at odds with ordinary people being able to make a living. Not surprisingly, Bannon proposed to prop up the working classes with prohibitions on free trade, on migration, and by protecting federal social programs — thus expanding the debt burden and tax burden on everyone. 

The realities of economics matter little, though, when your political ideology relies primarily on sentimentalism. Bannon bases much of this position on his own nostalgia for the good ol' days in "an observant Catholic family" in a working class neighborhood. 

For Bannon, though, his devotion to this worldview never gets much beyond politics. Indeed, Bannon has an odd way of expressing his supposed devotion to the Catholic social milieu he praises. Divorced three times, Bannon apparently couldn't be bothered to personally do much toward creating the “typical fifties-sixties Americana neighborhood” that he says he wants to re-create. And this well illustrates the problem with turning to politics to cure every social ill. Erecting trade barriers and trashing immigrants isn't going to rehabilitate the American family, or convert people to a devout religious life. That sort of thing requires a lot of difficult non-political action. Were Bannon committed to getting government off the backs of people so they could pursue these goals voluntarily — via decentralization or other practical measures — that would be a good thing. But that has never been Bannon's goal. 

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