31 December 2018

Why The Government Shutdown Is Not About The Wall

As 2018 came to a close, President Trump and the Democrats in Congress remained locked in an impasse over whether to allocate $5 Billion in funding for Trump's border wall along the southern border with Mexico. With both sides dug in, multiple agencies are as of this writing effectively shut down because Donald Trump will veto any funding bill that does not also provide for the wall.

At least, that is what the popular narrative proclaims. I am unconvinced. In this battle the border wall is little more than a MacGuffin. It is merely a focal point for the animosity between the Democrats and the President--if the wall were not an issue there would be another of similarly existential significance. This shutdown has happened because the Democrats have categorically refused to work with Donald Trump on pretty much anything--and they certainly are not about to support a signature Trump campaign pledge.

This is where the Democrats have made a major tactical mistake. Their rhetoric is all about the wall--whether the wall will work, whether there are better uses for the public fisc, whether Trump has been efficient in the wall funding already granted. What they do not acknowledge is that a sizable portion of the American electorate wants the wall, period. By and large, Donald Trump's supporters are fully on board with shutting the government down in order to secure border wall funding; 63 million people--all those who voted for Donald Trump, want the wall that badly. Whether it works as they anticipate is, for now, not the issue. This is what they want, and this is what they elected Donald Trump to secure. The border wall was a signature campaign promise if not the campaign promise.

The irony of campaign promises is that no candidate--not for President and not for Congress--has the power in and of themselves to keep those promises. Campaign promises require both President and Congress to work together to pass legislation. Donald Trump was never going to secure the border wall funding on his own; he was always going to require the cooperation of Democrats in both houses of Congress. Yet when Democrats in Congress are so utterly opposed to Donald Trump they refuse to even concede that he is the President, cooperation has been the one thing they will not (dare not?) give him. For the Democrats, his campaign promises matter not at all.

In a representative democracy, such as the United States, however, they should matter.  When 46.1% of the electorate says they want something by voting for someone who has promised to obtain it above all else, the government is expected to take notice.  Trump voters might not have voted for Democratic congressmen in 2016 or 2018, but the Congress is still obliged to address their concerns, speak to their issues, redress their grievances. When the Preamble to the Constitution decrees one purpose of our foundational governing document is to "promote the general Welfare", it obligates the organs of government, including the Congress, to heed the expressed desires of the electorate.

46.1% of the electorate want a border wall built. 46.1% of the electorate want the government to build that wall. 46.1% of the electorate are being told by the Democrats that their desire is of no consequence, in flagrant disregard of what the Constitution demands of them.

The voters understand this all too well. There is a reason why Donald Trump's Favorable/Unfavorable poll numbers are significantly above Nancy Pelosi's and even more so above Chuck Shumer's. Whatever flaws Donald Trump may have as a President and as a politician, for the moment he has the high ground of actually striving to make good on a promise. For the moment, the voters are content to shut down a government that does not heed their expressed desire, to shut it down and leave it shut down.

Which is why Donald Trump is under no pressure to reopen the government. Which is also why Senate Majority Leader Mitch McConnell has been unusually disengaged during this shutdown. They are doing the will of the people, and the Democrats are not, and that means the pressure is on the Democrats to break this impasse, not the Republicans and not Donald Trump.  Whatever favorability hit Donald Trump takes over this shutdown, the Democrats have already taken larger hits and very likely will continue to do so.

Until the Democrats can speak credibly to the reality of what American voters expect from the federal government, they will continue to be on the defensive on this issue. Until the Democrats can acknowledge the real substance of this shutdown is not border wall funding, but the willingness of Congress to execute the will of the American voters, there will be little impetus to reopen the government.

As a consequence, barring a significant change in circumstances, the Democrats will have little choice but to give Donald Trump and the American voters funding for the border wall.

25 December 2018

No Politics, Only Prayers.

Today in the town of David a Savior has been born to you; he is the Messiah, the Lord.
Luke 2:11

Every December 25th, Christians everywhere celebrate the birth of Jesus Christ--the Son of God, through whom all of Mankind is offered eternal Salvation and life everlasting.

Every December 25th, people of all faiths unite in sharing this Christian holiday, joining the religious observance with interfaith wishes of peace on Earth and good will towards all men.

Every December 25th, we are called--regardless of faith--to reflect upon what truly matters in this world, and what truly does not matter. 

Some keep the holiday with lavish festivity and expensive gift giving. Some keep the holiday by going to church. Some keep the holiday as a time for family and friends. Some keep the holiday in solitude.

Some keep the holiday by railing against the injustices of this world, and how humanity still does not enjoy the peace promised in the Gospel. Some keep the holiday by arguing the holiday is a fiction, that neither God nor His Son exist, or ever existed. Some keep the holiday in anger. Some keep the holiday in tears.

However a man keeps the holiday, it surely is among the greatest testimonies of Jesus that, in some fashion, nearly all the nations of the world keep some observance of the holiday. Perhaps that is the true holiday spirit, the real holiday message--that this one moment can be shared by all. One does not need to be a Christian to wish for peace in the world. One need not be baptized to wish for blessings of health and prosperity among all men, and an end to poverty, disease, crime, and violence. Such desires are not "Christian", but rather "human". Regardless of what we believe, it may be fairly presumed we all want a better world.

Ultimately, that is the "Christmas spirit"--the hope that a better world can be achieved; that the lion can lay with the lamb; that people can be generous,  can be benevolent, can put aside violence, and anger, and hate. We can form a more perfect Union among men, we can establish Justice, we can insure Tranquility, promote the general Welfare, and secure the Blessings of Liberty for all men and all generations. No matter wide of the mark we yet are, no matter how many times we have tried and failed, we can do these things.

This is how I choose to keep the holiday: with a simple prayer for all Mankind, that all these things which we can do, we yet will do. I pray that our failures will not discourage us, that our sins will not defeat us, that our vices will not overmatch our virtues. I pray that we will make, not a perfect world, merely a better one.

Merry Christmas.

24 December 2018

The Federal Reserve's Christmas Gift: A Bear Market

Wall Street has little to celebrate this Christmas holiday, courtesy of a recklessly stubborn Federal Reserve. During the previous week, from 17 December to 21 December of 2018, the Dow Jones Industrial Average shed 6.8 percent of its total--the worst such performance since the 2008 "Great Recession." Such has been the turmoil among the major stock exchanges that Treasury Secretary Steve Mnuchin caught many observers by surprise when he called the major US banks on 23 December to address concerns of financial stability and the general availability of credit.

Yet is any of this really so surprising?

Consider a few basic facts:
A reasonable question to ask at this juncture is why would interest rate hikes precipitate stock market declines? The immediate answer is simply this: money.

The total supply of money in any economy varies inversely with interest rates. Lowering interest rates expands the money supply, and raising interest rates shrinks the money supply. The Federal Reserve's tweaking of interest rates is quite intentionally an effort to manage the total money supply in the United States. During 2018, Fed Chairman Powell opted four times to shrink the money supply.

When the money supply shrinks, prices are inevitably pushed downward, for when there are fewer dollars in circulation, each dollar has greater purchasing power, all else being equal. Stock markets, where prices fluctuate by the second, display this phenomenon faster than other portions of the economy, where prices are slower to change.

When the money supply shrinks, there are also fewer dollars available to lend--a reduction in the money supply is a reduction in the availability of credit.

Given that Powell's past two interest rate hikes have precipitated a deep and persistent stock market decline, and given that interest rate hikes are by definition a reduction in the availability of credit, is it really so outrageous that Secretary Mnuchin would be concerned about financial stability and credit availability? Is it not more outrageous that Jerome Powell is not concerned about these things? 

Certainly, Powell has a duty to be concerned, because the primary stated mission of the Federal Reserve is to conduct "...the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy." A price drop among stocks of 6.8 percent in a single week is not exactly what one would call price stability.

Yet Powell has been amazingly "tone deaf" to the consequences of Federal Reserve rate hikes. Within the mission of maintaining stable prices, the time to raise interest rates is during periods of significant inflation--something that has been conspicuously absent from the US economy. When there is no inflation, raising interest rates is an action calculated to destabilize prices--by causing them to drop.  Powell has even acknowledged this by his assertion that the economy is "strong enough" to absorb the rate hikes and corresponding money supply and credit reductions. The stock market decline was what he wanted--he unilaterally decided that stocks were "overvalued" and so elected, on his own initiative, to erase a few trillion of market capitalization.

No wonder President Trump would like to fire him--Trump has been clamoring against the rate hikes, correctly predicting that the money supply shrinkage would precipitate a stock market collapse. Market turmoil and declining share prices are not the way to "...promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy." By all appearances, Jerome Powell has been seriously derelict in his duty as Federal Reserve Chairman. If he were the Controller or CFO of any major US company, he would have been fired by now.

Sadly, this bit of financial Kabuki has been played out time and again throughout America's history--dereliction is rather the norm at the Federal Reserve.  Pushing interest rates too high too fast catalyzed bursting the 2006 housing bubble, and thus the subsequent 2008 financial crisis--the metastasis of which was itself the product of both government mistake and lax execution of established government regulatory responsibilities.  

Similar errors occurred in 1999 and 2000, when the Federal Reserve raised interest rates in the face of stock market declines, precipitating a recession beginning in March of 2001.

Even the calamitous stock market crash of 1929, widely viewed as the onset of the Great Depression, was triggered by an abrupt change in monetary policy by the New York Federal Reserve Bank, which raised interest rates to 6 percent.

That interest rate hikes catalyze stock market declines and crashes is absolutely established by the constant correlations between them.  One can view this correlation in one of two ways: The Federal Reserve erred by letting the money supply grow too much, causing the stock market to overinflate into a bubble, forcing a correction to be taken, or the Federal Reserve erred by deflating stock prices in the absence of any signs of price inflation in the broader economy.  One theme, however, is consistent--that the stock market declines and subsequent recessions are the consequence of Federal Reserve error.

Which begs the question of why we continue to empower the Federal Reserve to manipulate interest rates and the money supply in this fashion. Invariably, they get it wrong, and because they get it wrong there has there has not been a single decade of American history since the creation of the Federal Reserve in 1913 when there has not been major stock market and economic turmoil. Too much or too little, but never just enough is the basic pattern of Federal Reserve regard for interest rates.

One could even argue that the Federal Reserve's mission is impossible to complete.  Every interest rate adjustment by the Federal Reserve is an intrusion into the marketplace. Every interest rate adjustment is therefore a disequilibrium of the marketplace--and stable prices require equilibrium. The very thing the Federal Reserve does to carry out its assigned task is the very thing that causes it to fail at its assigned task. At the very least, expecting the Federal Reserve to ward off financial crisis by intruding into the markets is quintessentially insane behavior--repeatedly doing the same thing expecting different results.

Instead of constantly fiddling with interest rates and triggering economic upheavals, perhaps the Federal Reserve should adopt a novel approach to maximizing stability--do nothing.

Or is that expecting too much common sense from government bankers?

16 December 2018

With Flynn, Mueller Has Exchanged Prosecution For Persecution

Flynn has been persecuted,
not prosecuted
There is a steady drip-drip-drip of scandal emanating from Robert Mueller's Special Counsel investigation into all things Trump and Russia. Unfortunately, the scandal is about Robert Mueller, not Donald Trump. Nowhere is this more evident then in Mueller's pursuit of Michael Flynn, retired US Army Lieutenant General and briefly Donald Trump's National Security Advisor.

From its outset, investigations by the FBI and the Department of Justice into Flynn's activities during the transition period between Donald Trump's 2016 election victory and his January 2017 inauguration have been a study in controversy. 

After a scant 24 days as President Trump's National Security Advisor, Flynn resigned amid allegations that he lied to Vice President Pence about the nature of telephone conversations he had had with the Russian Ambassador, Sergey Kislyak. That scandal arose because un-named government officials leaked the contents of surveillance recordings of Kislyak's phone calls to the media, which dutifully began questioning why an incoming National Security Advisor would have conversations with the Russian Ambassador. At the time of Flynn's resignation, The Washington Post threw more fuel on the fire by speculating that Flynn's conversations were part of a larger scheme within the incoming Trump Administration to advantage Russia.

Lost in the hysteria was the inconvenient fact that the leaks driving the scandal were themselves a serious crime, under 18 USC §798, a crime that has never been either investigated or prosecuted.

When Robert Mueller was appointed Special Counsel by Deputy Attorney General Rod Rosenstein, he quickly revisited Flynn's phone conversations and presumed false statements surrounding them. On December 1 of 2017, Mueller persuaded (or coerced, depending on one's perspective) Flynn to plead guilty to one count of lying to the FBI when interviewed about those conversations in January of that year.

Lost in the furor surrounding that guilty plea was another inconvenient fact: The FBI agents who actually interviewed Flynn--one of whom was the now infamous Peter Strzok--did not think Flynn lied to them. Even former FBI Director James Comey, before his firing by Donald Trump, testified before Congress that the agents did not think Flynn lied

Mueller had Flynn pleading guilty to a crime that, according to the FBI, never happened.

Despite having pled guilty in December of 2017, Flynn has only recently come before a federal judge for sentencing, Mueller having postponed it multiple times, prompting Judge Emmett Sullivan to inquire as to why so many delays.

When Mueller finally presented filed his sentencing memorandum with the court, one supporting document was noticeable by its absence: Peter Strzok's original Form 302 interview summary of the January 2017 interview with Michael Flynn. The 302 summary that was filed was an exit interview summary of Peter Strzok, shortly before he was fired from Mueller's investigation team for having exchanged a considerable number of politically biased text messages with his then mistress Lisa Page. That interview summary was dated August 22, 2017, seven months after Strzok's interview of Flynn, and only makes reference to Strzok's original interview summary. That original 302 has yet to be produced.

To summarize: Robert Mueller pressured and finally persuaded Michael Flynn to plead guilty to a crime the FBI has said under oath before Congress did not happen, and, a year after obtaining that guilty plea, has failed to present the FBI's actual evidence on the matter.

Not only does Mueller not have evidence of the crime, but the main witness for Flynn's defense would be the FBI itself, the very agency to whom Flynn is accused of having lied.

In Judge Sullivan's courtroom, the cloud of suspicion hangs over not Michael Flynn but Robert Mueller. Mueller coerced the guilty plea from Flynn not with evidence but a threat that Flynn's son would be indicted for various non-crimes. Arguably, the criminal is not Flynn but Mueller, who would stand in violation of 18 USC §§241 and 242, both of which make it a crime for any government official to deprive someone of their constitutional rights, and especially the right of due process.

Can any investigation, by any government official in or out of law enforcement, prevail when its own credibility has been so thoroughly shredded in this fashion? Can any conclusion Mueller might reach--about President Trump, about Russia, about any electoral improprieties that may or may not have occurred in 2016--be taken seriously as the fruits of a serious investigation and not as the result of a political witch hunt, an extended (and taxpayer-funded) exercise in lies, corruption, and serial violations of basic civil liberties?

To call Mueller's pursuit of Flynn a prosecution is to make a mockery of the rule of law. It is turning a blind eye to Mueller's total contempt for the principle of due process, for the presumption of innocence, and for the rights of the accused. This has been no prosecution, but a persecution. Mueller targeted Michael Flynn, intentionally bankrupted him with the expense of defending himself against allegations of a crime that never happened, threatened his family, all for the sole purpose of gaining Flynn's cooperation in the Russia probe--a probe that, after two years, has utterly failed to establish even the existence of conspiracy or "collusion" between the Trump campaign and the Russian government in 2016.

Instead of sentencing Michael Flynn, Judge Emmett Sullivan should reject his guilty plea, toss the entirety of Mueller's "investigation" of Flynn out the window, and appoint new investigators to probe the length and breadth of Mueller's outrageous assault on the Constitutional order.  This is not Stalinist Russia; our tradition is the presumption of innocence, not the cavalier "show me the man and I'll find you the crime" arrogance of Lavrontiv Beria.  Mueller seems to be unaware of this, despite his legal and law enforcement bona fides.

There is indeed conspiracy and collusion afoot in Washington D.C., but it is against the Trump Administration, not by the Trump Administration. That is the one thing Mueller has proven beyond any and all doubt.