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Tom Mullen is the author of It’s the Fed, Stupidand Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Trying to ‘create jobs’ is dumb

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It is the first week of the month, meaning we can expect a new ADP jobs report on Wednesday and the foolishly much-anticipated BLS jobs report on Friday. Based upon whether jobs created in March based on the report beats or misses expectations, President Biden will either gloat about the results or talk about something else.

Biden is certainly not unique in this respect. Every president since the report was created has tried to take credit for the jobs created during his administration. In most cases, pronouncements on this subject are carefully worded to read literally that “XXX jobs were created during my administration,” acknowledging that perhaps some other factors contributed to the supposed new jobs than the dear leader’s will and mighty actions alone.

So, at least we have that.

Nevertheless, the tweet we can expect from the president on Friday, BLS willing and the creek don’t rise, will imply heavily that it was his policies that are directly responsible for the hundreds of thousands of new jobs the report says were created the previous month.

There are several problems with this whole scenario, the most serious among them being that the Federal Reserve considers this report (or an alternative report based on the same methodology) in deciding how to conduct monetary policy going forward. Voters also take these reports seriously, to the extent they remember them on election day, and certainly the pronouncements of the incumbent president on the total number of jobs created during his previous term.

The first thing people should understand is the jobs report is largely fiction. It is not a literal tabulation of the total number of jobs created minus those lost. No one knows that information. Rather, the BLS conducts a phone survey, applies some formulas, and largely guesses how many jobs were created. It’s not as if there is nothing to it, but it is a very imprecise tool. That’s why it is common for the BLS to significantly adjust its findings for previous months while reporting the latest findings. And even the adjustments are based largely on voodoo.

Think climate change models. Or Covid mortality projections from March 2020. The BLS jobs report may or may not be quite that bad. But as the great Vincent Vega would say, “It’s the same ballpark.”

But while poking holes in the methodology of the jobs report is good fun for nonbelievers in the government religion, it misses the main point: trying to ‘create jobs’ in the first place is dumb. It is economically counterproductive. It’s the opposite of what any for-profit business should be trying to do.

Whether bringing a new product to market or simply trying to remain competitive in an existing market, businesses are constantly trying to produce more products at lower cost. The most significant costs for most businesses are labor costs. Therefore, businesses are constantly trying to produce more output with less employees.

Less jobs, not more.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

There is no such thing as ‘regulatory capture’

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I was in the hearing aid business a few decades ago. As a minority shareholder and chief operations officer, it was my job to build out a network of retail stores, manage our manufacturing operations, and manage the relationship with a foreign manufacturer that provided us products not previously available on the American market. We also had a plan to sell less expensive hearing devices in pharmacies.

Opening our first retail store was an exciting endeavor. We had a good location in a plaza with a solid anchor on a very busy intersection. We prepared our grand opening for months and were understandably excited for our first day of business. We ran ads in all the local newspapers and looked forward to our first patient walking through the door.

The advertisements did generate phone calls, but the first one was not from a potential customer. It was from the State Department of Health, informing us there had been a complaint about one of our newspaper ads. We were required to submit a response to the complaint after which the department would make a determination of its validity and any further action against or required of us.

Obviously, the complaint didn’t come from a customer; we had no customers yet. The complaint came from a local competitor who literally waited for our first hour in business to call the state. This is the way the world works.

The complaint was found to be without merit – our ad was not misleading or out of compliance with any regulations – but it certainly took the edge off an otherwise happy day. We lived and learned.

A few years later, after confirming there were regulatory barriers to selling “assistive listening devices” (not quite hearing aids, but helpful for mild hearing loss at about 1/10^th the price), we tried to lobby the state legislature ourselves. We successfully got our revision to the applicable statutes into a bill about other matters that was sure to pass and were told by the lobbyists we hired that it appeared we would be successful.

Then, on the very last day of the legislative session, the language was taken out after an all-out assault by a much better-funded set of lobbyists claiming our devices would be dangerous if not fitted by an audiologist.

Obviously, our device that peaked at 30 decibels (the average iPod at the time peaked at over one hundred decibels) posed no health risk to those who used it. But it did pose a revenue risk to those who hired the lobbyists – the audiologists. They also argued that hearing loss in some cases indicated other health issues that may not be discovered if the patient didn’t have an exam by a licensed professional before attempting to treat their hearing loss.

In 2022, the FDA approved the sale of full-blown hearing aids over-the-counter (OTC). Apparently, those other health conditions are no longer a concern. The big corporations have finally adapted their business models to include lower cost products and thus they can be allowed without small upstarts like our little firm disrupting their dominance. So, for almost twenty years, consumers were deprived of a significantly lower cost option for hearing loss for no valid reason whatsoever.

This is the way the world works.

One might ask, “How can you say there is no such thing as regulatory capture after having those experiences yourself?”

Simple. The term ‘regulatory capture’ implies there were once regulatory agencies that operated in an adversarial relationship with large corporations for the so-called “public good” that were later ‘captured’ by those corporations and made to serve the corporations’ interests. But that never happened.

‘Regulation’ itself is and has been from the very beginning a practice created by large corporations for the sole purpose of crippling or eliminating competitors.

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Tom Mullen is the author of It’s the Fed, Stupidand Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Progressivism, Trump or Biden-style, is one giant rip-off

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2024 is a presidential election year which means both major political parties will be telling their fairy tales about how they have in the past and will again in the future, if you will only elect their man, “save America.” It’s important to remember that both political parties are “progressive” parties, however one of them may object to that appellation. The Republicans merely embody the original progressive profile: fervently Christian, Republican, and corporatist.

The only difference in the Democratic Party is the Christian part. They are equally as religious but have replaced Jesus Christ with “Gaia” or more commonly “the environment.” But otherwise, they’re essentially the same.

We will hear much this year about the supposed gulf in ideology between the two parties. One claims to champion free markets, individual liberty, and limited government, while the other claims to look out for the little guy, protect the earth for and from future generations of humans, and pursue a more “equitable” distribution of wealth.

But once in power, either party will essentially do the same thing with only slight differences in emphasis. They will both govern as progressives have governed for the past one hundred plus years. And it is important to realize that, once the sales pitch about “progress” is set aside, progressivism boils down to one, giant rip-off. Military adventurism, business regulation, fighting climate change, and even “diversity, equity, and inclusion” are all part of it.

Certainly, there are people who genuinely believe in these things, just as there were during the early progressive movement. But they are the true “useful idiots.” The people who will actually make any of the latest progressive initiatives reality are all crony capitalists in bed with the government, just like a century ago.

Before the progressive era, the traditional way for governments to rip off their citizens was military spending. The highwater mark was war. A war that would cost $150 billion in today’s dollars was made to cost $500 billion instead, with the “profits” flowing to contractors, politicians, and other parasitical fauna. So, every government that thinks it can win is on the lookout to gin up a nice, juicy little war.

But even outside of war, military spending has been and remains a scam. The United States fought a 20-year war in Afghanistan, accompanied by several other military adventures in the Middle East including the large one in Iraq. When the last of these was supposedly ended in 2021 – and before the war in Ukraine began – military spending was still scheduled to increase in 2022.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Capitalists are terrible for capitalism

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U.S. President Donald Trump, flanked by Senior Advisor Jared Kushner (standing, L-R), Vice President Mike Pence and Staff Secretary Rob Porter welcomes reporters into the Oval Office for him to sign his first executive orders at the White House in Washington, U.S. January 20, 2017. REUTERS/Jonathan Ernst TPX IMAGES OF THE DAY

When Donald Trump first ran for president in 2016, the familiar notion that a successful businessman would “run the government like a business” reemerged. We’ve heard this whenever a successful entrepreneur, usually a Republican, has run for president. Of course, the government cannot be run like a business for reasons I provided in 2012 when Mitt Romney was the latest candidate who would purportedly do so.

In short, the private marketplace runs on voluntary exchanges while the government runs on force. Success in the former does not prepare one for success in the latter. It may even make one less prepared for the intrigues of politics, as Donald Trump, Jr. seemed to be saying in his recent interview of Matt Taibbi.

But free market proponents often make the further mistake of assuming that a successful business owner will at least be prone to pro-free market policies. After all, who knows better the blessings of capitalism than a capitalist himself or herself?

This is also mistaken. While running their businesses in the marketplace, successful entrepreneurs are a great boon to society. But when it comes to policy, capitalists are terrible for capitalism. Among history’s most successful capitalists this has virtually always been true.

For the entire history of commerce, business owners have sought the aid of government power to limit or eliminate competition. In 1807, long before the Progressive Era, the New York State legislature granted Robert Fulton, inventor of the steamboat, a 30-year monopoly on steamboat traffic in the state of New York. As Thomas DiLorenzo writes in How Capitalism Saved America, this allowed Fulton to charge exorbitantly high prices until Cornelius Vanderbilt defied the legal monopoly and undercut him.

The Progressive Era itself was a bonanza of crony capitalism. The popular myth about this period has so-called “robber barons” forming monopolies and exploiting customer and employee alike until progressives like Teddy Roosevelt came along to save the day with heavy government regulation.

As Murray Rothbard proved beyond any reasonable doubt, literally no element of this popular myth is true. In fact, it is the opposite of the truth. It is true that hugely successful business owners like John D. Rockefeller and J.P. Morgan attempted to form monopolies over various sectors of the economy. However, every attempt to do so without the government’s help ended in failure.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Why is the Fed Tightening Credit But Not Money?

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Federal Reserve Board Chairman Jay Powell surprised no one on Wednesday by announcing the Fed has raised its target for the federal funds rate another 50 basis points to the 4.25% – 4.50% range. What did surprise the stock markets, based upon the sharp selloff following his remarks, was his statement,

“Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done”

That’s basically what he has said during every public announcement since embarking on an historically steep round of interest rate hikes over the past six months. That this surprised investors indicates how deeply ingrained the “Fed put” has become in the psyche of the financial community. The stock markets continue to fluctuate below their all-time highs, therefore everyone assumes the Fed will announce a “pivot” at the next meeting, since it always in the past.

So, as each meeting approaches, the market begins to rally in anticipation of an announcement or even a hint of said pivot at Powell’s press conference. Then, Powell reads the same statement he has given after every previous meeting and the market sells off.

Needless to say, this is a terrible way for capital to be allocated, even given the existence of a central bank in lieu of a free market. But over a decade of zero interest rate policy (ZIRP) has trained investors to act even more irrationally and for equity prices to become even more separated from fundamentals than they have been in the past.

The Fed’s Balance Sheet

Ironically, Powell made another statement which is demonstrably false and is receiving no attention from investors or the financial media. He said, “In addition, we are continuing the process of significantly reducing the size of our balance sheet.”

The Fed has not significantly reduced its balance sheet. Let’s remember that in August 2019, the Fed’s balance sheet stood at approximately $3.7 trillion, down from its peak of $4.4 trillion 2014-17. The Fed reversed its modest tightening policy and began easing, increasing its balance sheet to $4.1 trillion by February 2020.

Once the Covid-19 lockdowns began, the Fed exploded its balance sheet to over $7 trillion in just three months, eventually taking the total to $8.9 trillion by March 2022.

One would think that “significantly reducing the balance sheet” would mean something more than Powell’s announced plan to reduce it by a mere $45 billion per month June-August 2022 and then by $90 billion per month every month thereafter. But the Fed hasn’t even managed to do that. As of this writing, the Fed’s assets still total almost $8.6 trillion.

In other words, while the Fed has raised the federal funds rate significantly this year, it has not attempted to reduce the supply of money. As a result, M2 has barely decreased since its peak of $21.8 trillion in March 2022. And without decreasing the money supply, the Fed cannot significantly reduce price inflation anytime soon.

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Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Who Killed Capitalism and the Internet?

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Back in the 1990s, there was this new phenomenon called “the internet.” It grew exponentially. Entrepreneurs saw the business potential for reaching more customers than they had ever dreamed they could reach through conventional methods. Consumers had more choices of every conceivable product – including information – than they ever had in history.

Like all technological advances, it produced big winners and big losers. Vast fortunes were made by those who built businesses that worked better on the internet. Vast fortunes were lost not only by those internet commerce replaced, but also by those who went long on businesses that didn’t work on the internet – Pets.com being the most infamous example.

The internet revolution was much like the industrial revolution in this respect. It advanced human flourishing in general exponentially but was decried by all those it damaged economically. Many brick and mortar retailers were put out of business, just as the automobile put blacksmiths out of business.

Legacy media faced annihilation. They were no longer the gatekeepers of information. The new generation of internet users had access to information from all over the world at the click of a mouse, including information previously filtered, spun, or suppressed by legacy media. There was a point at which those who had long decried its information gatekeeping and establishment propaganda gleefully counted down the days until the New York Times went bankrupt.

Governments didn’t like the internet much, either. Untaxable interstate commerce was replacing taxable brick and mortar commerce. Republican Congressmen lamented the internet was so new they didn’t know who to regulated it. And, of course, no government has ever liked the free flow of information. That’s why a First Amendment was necessary over two hundred years ago.

The current war on the free flow of information over the internet is led by the political left, but it didn’t start there. Long before conservatives were being deplatformed for opposing wokism, the political right was after internet publishers for criticizing the war on terror. Julian Assange is only the highest profile example. Online porn has also been targeted by the right since the internet’s earliest days.

As with laissez faire capitalism, it seemed like those who stood to lose had two choices: adapt or die. But there was a third choice: call in the government. And that’s just what all those who stood to lose did.

The decades-long destruction of America’s laissez faire free market was accomplished in much the same way.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Why are the United States the richest country in the world?

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“We’re a rich country, we can afford to…,” says your average liberal. Complete the sentence however you wish. “Guarantee every American healthcare.” “Guarantee every American a college education.” “Provide a home for an unlimited number of immigrants who require food, clothing, and shelter the moment they cross our borders.”

But how did the United States become so rich? No one ever asks politicians that one, simple question. Forcing them to answer it would be illuminating. The likely first answers would be vague references to “democracy,” but that doesn’t jibe with reality. If anything, America became rich in spite of democracy, not because of it. Most of the Constitution is devoted to checking democracy at every turn.

Eventually, politicians might get around to the “land of opportunity” narrative. And it is true that the United States offered native-born and immigrant Americans opportunity unavailable anywhere else.

Opportunity to do what?

It’s as if no one even wants to say it anymore. The opportunity offered was to pursue one’s individual self-interest, unmolested by and mostly free of the larceny of any king, commissar, or legislature. America became rich operating under Adam Smith’s principle of the invisible hand of the market, which says that people pursuing their narrow selfish interests in an environment where property rights are protected will do more good for society than people attempting to advance some “common good.”

It worked. It still works, to the extent it’s allowed. When people have the opportunity to keep the money they earn and dispose of it as they see fit, they produce more goods for others to consume. What they don’t spend on consumption becomes capital used to expand productive capacity and produce even more goods for others to consume.

This is what made America rich and built the modern, technological world we have the privilege of living in today. In 1888, at the peak of libertarian American society, the government collected about 3 percent of GDP in taxes and ran a 50 percent surplus. President Grover Cleveland fought a decade-long war during his nonconsecutive terms to reduce tariffs, saying government surpluses invited “mischief.”

Before the Progressive Era, Americans kept almost everything they earned and employed it in the pursuit of their own happiness, not some politician’s five-year plan. They invested in or entered new industries without licenses, unencumbered by regulatory agencies, free to innovate as they saw fit. Figuring out a way to provide more for your fellow Americans at a lower cost made you rich. Simply working hard and saving responsibly made you comfortable.

In a word, what made America the richest country in the world wasn’t free speech, freedom of religion, or the right to vote. It was capitalism, as laissez faire as it has ever existed anywhere, before, or since. The protection of property rights and relatively free markets resulted in an accumulation of capital we’re still benefiting from today. It didn’t fall from the sky. It was saved and invested by people pursuing their individual interests. That’s what works.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Don’t forget the culture war is economically motivated

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The culture war has been front and center for over a decade. Donald Trump’s election in 2016 was as much a reaction to it as it was about any of his policies. And the Biden administration’s war on MAGA is much more a war on its culture than against any credible threat posed by “white supremacists.”

Please.

There is no sense in fighting a war if one doesn’t know what one is fighting for and against. The right and left have different motivations and goals. At least the thought leaders on either side do. For much of the rank and file, it is purely a tribal conflict, with each side defending its banners and shibboleths.

It is important to understand that the left’s war on traditional culture is economically motivated. Breaking down cultural norms is a means, not an end. The entire school of critical theory was founded based on the realization there was not going to be a proletariat revolution due to economic conditions.

There was a very simple reason for this: the industrial revolution had made the proletariat much better off. Their real wages had risen and standard of living skyrocketed. It’s hard to generate the kind of anger necessary for a revolution among people who are doing better than they or any of their ancestors had ever done.

The founders of the Frankfurt School did not admit this to themselves. They were convinced socialism was a superior socio-economic philosophy and since empirical economic data contradicted this view, there needed to be a “more accurate” lens through which to view societal conditions.

Thus, critical theory was born as history’s most elaborate rationalization for denying reality. Objective reality was necessarily one of the prime targets of critical theory because it could tell only one story: capitalism was a vastly superior economic system not only to socialism but to any other economic system yet discovered. So, objective reality had to be challenged.

This eventually led the critical theorists to focus on minority victim groups and how capitalism was oppressing them, even if it was yielding vastly better economic results in the aggregate.

Of course, this was no truer than Marx’s economic theories about capitalism. What has vastly improved the lives of “people of color,” women, and other “marginalized groups” in poor countries over the past several decades has been less socialism and more capitalism.

China and India did not go from destitution to explosive economic growth because of diversity or democracy. Their transformation is due entirely to becoming more capitalist. Are they laissez faire? No, but they’re far more capitalist and far less socialist than they used to be. The same can be said for dozens of other countries.

A billion people were lifted out of extreme poverty over the past three decades and all the gains came in countries that became more capitalist and less socialist. There are zero outliers.

One can see why objective reality is such a problem for Marxists. This is why they fight on the cultural front, using all means possible to distort objective reality and persuade their target victim groups that capitalism is oppressing them. To achieve their ends, history must be erased, established customs declared racist, misogynist, or homophobic, and even the meaning of words changed to, in many cases, their antithesis.

But the end goal is economic. Every assault on societal norms must be viewed as a strategy to achieve socialism – because it is. No, the shrieking, purple-haired, nose-ringed, “trans man” may not realize this him/herself, but the people who created that unfortunate soul do.

Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?

Tariffs used to be considered corporate welfare that harmed workers

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Donald Trump was elected president in 2016 based on his “America First” platform. It’s three main planks were cracking down on illegal immigration, ceasing “endless wars” overseas, and economic nationalism. That last plank posited that “terrible trade deals” like NAFTA (1994) and allowing China into the WTO (2000) had hollowed out America’s manufacturing base, outsourcing the output and the high-paying manufacturing jobs to China and other lower-cost labor markets.

This assertion has no basis in reality, as the two charts below clearly show, but it was a big part of his appeal to Middle Americans. Trump promised to withdraw from the trade deals and use tariffs to bring manufacturing and manufacturing jobs back within American shores.

Industrial Production – 100 Year Historical Chart

The most curious aspect of this now-hoary populist canard was that it was sold as being pro-American worker. Tariffs weren’t going to simply make America as a whole more autarkic, or benefit business owners who otherwise could not compete with foreign manufacturers. They were going to benefit the so-called “working class” by bringing back higher paying jobs.

This is ironic because tariffs have historically been considered a transfer of wealth from the working class to big business. The original argument for an income tax was precisely to remove the burden of higher prices for consumer goods from the working class and shift some of the tax burden to big business. This was the case for the first peacetime federal income tax passed (and later found unconstitutional by the Supreme Court), the Wilson–Gorman Tariff Act.