The West and China: A Rabbit That Has Been Hypnotized by a Snake

Twain famously observed how history doesn’t repeat, but that it tends to rhyme.  America and the West learned a hard lesson during the Cold War when the preeminent communist power of the day attempted to sedate the free world into a geopolitical slumber using an ingenious approach.

Today, we are making an uncannily similar mistake, this time with the modern-day communist power of China. If we don’t heed the historical rhyming and lessons that come with it, troubled times are certain.

The 1950s and the Geopolitical Sedative of ‘Peaceful Coexistence’

In early 1956 Soviet ruler Nikita Khrushchev delivered a secret speech to the Twentieth Party Congress.  In it he unveiled the new official state policy of ‘peaceful coexistence,’ which the Soviet Union would apply when dealing with its rival, the West.

Peaceful coexistence was packaged to be appealing to western Europe and the United States.  The concept advertised a future where communist nations in the Soviet sphere could live alongside western democracies, without fear of constant strife and with an eye toward reducing tensions.

Of course, the Soviet Union’s and Khrushchev’s true intentions with the application of peaceful coexistence were quite different than what was promoted to the West.  Behind the rhetoric of détente sat the long-term twin objectives of lulling the West into a false sense of security and of laying the groundwork to decisively vanquish democracy.  Peaceful coexistence was in many ways a marketing campaign to produce the opposite result of its name.

The Soviet propaganda machine got fully behind the promotion of peaceful coexistence.

Countless influential individuals in the West, including the powerful in European and American governments, took the bait hook, line, and sinker.   Peaceful coexistence was quickly embraced by the elite and expert classes.

The few who early on saw peaceful coexistence as a sham were initially labeled as narrow-minded and backward thinking.  Until the Soviets brutally invaded Hungary later in 1956.  Russian tanks in the streets of Budapest immediately clarified that peaceful coexistence was nothing but a ruse to buy time, gain advantage, and outmaneuver the West.

Peaceful Coexistence Redux: Modern China and the West

China has been promoting its own brand of peaceful coexistence for decades.  It is masterfully good at it; China today is much more persuasive, effective, and patient than the Soviets ever were in the 1950s.

China’s version of peaceful coexistence has successfully permeated just about every institutional pillar of modern western society.

Academia, having a seemingly incurable ideological soft spot for communism and its cousin socialism, needed little coaxing to jump on the peaceful coexistence bandwagon.  Colleges have been eagerly pocketing Chinese money to fund a broad spectrum of research and programs.  Universities compete to take on as many full-tuition-paying Chinese nationals as possible in undergraduate, graduate, and postdoctoral slots.  Individual professors, departments, and universities across higher education are hopelessly conflicted and financially indentured to China.

The capital markets have behaved badly under the influence of peaceful coexistence.  The largest investment houses, banks, and private equity firms assessed the growth prospects of China, and happily poured trillions of dollars into the communist economy.  Much of that economy is designed to pilfer technology from the West, further militarize the communist nation to better prepare for conflict with the West, and to build strategic industries that aim to destroy competition in the West. Ironically, the biggest capitalists in the free world have willingly funded a regime that exists to destroy capitalism.

Big business, specifically global corporations, saw over a billion potential new Chinese customers for products. They quickly became transfixed with peaceful coexistence, to where companies began acting illogically.

Major US airlines refuse to acknowledge the nation of Taiwan on their global maps resting in the seat pockets of their planes, for fear of upsetting China.

Tech firms grant Chinese state security access to user personal data that they would never dream of providing to US authorities.

Peaceful coexistence coupled with over a billion potential viewers have hypnotized western media and entertainment.  The Chinese Communist Party acts as director, editor, and producer of most major Hollywood films these days.  And marquee athletes and professional sports franchises are much more comfortable deriding their home nations and ticket-buying customers than they are speaking truth to the power that is China.

The western environmental movement fully embraced peaceful coexistence and commits the most egregious acts of aiding and abetting China.  Much of this knowing collusion falls under the flaw and folly of ‘tackling climate change.’

Environmentalism used anti-science ideology and nonsensical concepts of zero-carbon and renewable energy to drive policy mandates, subsidies, and protections for products with supply chains controlled by China.

Environmentalism is proving to be a geopolitical trump card for China:  eradicating American energy independence brought on by the shale revolution and replacing it with a certain energy dependence on China.

Politicians, not always the sturdiest of moral fortitude and discipline, were often easy marks for China’s brand of peaceful coexistence.  Outwitted and outmaneuvered presidents, popes, and climate czars engage China with visions of world peace/détente, new members of the religious flock, and climate accords.  These western leaders bring back nothing of substantive value from the negotiating table, yet they readily cede value on the most vital of issues.

The biggest error politicians and state bureaucrats make when dealing with China is assuming discrete issues can be segregated from China’s grand strategy residing under its umbrella of peaceful coexistence.  Our self-anointed climate czar pretends we can put fundamental differences aside in a winner-take-all competition, so that we can agree on setting targets for future atmospheric concentrations of carbon dioxide.  China sees that miscalculation and happily utilizes it to secure more advantage and advance its strategic objectives.  That gives Code Red a new meaning.

A Wake Up Call from Sun Tzu

Communism remains the gravest threat to individual rights and human quality of life.  It desires to destroy the free world, bring what is left into its orbit, and grow its power.  The approach attempting to achieve these aims is insidious and steadfast.  It follows the ancient strategic teachings of Sun Tzu and the principles of Choho No Jutsu.

There is no art higher than that of destroying the enemy’s resistance without a fight on the battlefield.

Subvert anything of value in the enemy’s country.  Implicate the emissaries of the major powers in criminal undertakings; undermine their position and destroy their reputation in other ways as well, and expose them to the public ridicule of their fellow citizens. 

Do not shun the aid of even the lowest and most despicable people. Disrupt the work of their government with every means you can.

Spread disunity and dispute among the citizens of the enemy’s country.  Turn the young against the old.  Use every means to destroy their arms, their supplies, and the discipline of the enemy’s forces. 

Debase the old traditions and accepted gods.  Be generous with promises and rewards to purchase intelligence and accomplices.  Send out your secret agents in all directions. Do not skimp with money or with promises, for they yield a high return.

Act with Moral Superiority to draw the trust of the enemy’s people, in this way you gain the enemy’s own people as an ally against him.

Does reading that send a chill down your spine?

Global leaders of the communist ideology do not intend compromise, reform, or peaceful coexistence.  That was the reality during the Cold War with the Soviets, and it remains the reality today with China.

China understands that the elite in the free world desperately want to believe communism desires compromise and reform.  That desperate want is our biggest weakness.

The phrase ‘a rabbit that has been hypnotized by a snake’ is taken from the memoirs of German World War II and Cold War legendary spy chief Reinhard Gehlen, The Service.

America Needs a Third Party

I’m a big believer in America; where it came from, what it stands for, and its future potential. The United States is far from perfect, in both its history and its present. Yet it still represents the best social, political, and economic system to respect and nurture the individual.

But most sense something is very wrong with where the nation is heading. Look around at our national political leaders from both parties of late, is the best we can do? America needs a course correction.

Drastic change is not needed. The nation should not radically tear itself down and then rebuild itself into something perceived to be better abstractly but likely will be much worse. Keep the Electoral College, don’t stack the Supreme Court, defend the Bill of Rights, and preserve the free market.

But our political system is in dire need of new blood. Two parties have enjoyed a stranglehold on governance for too long. Where they were once different shades of similar ideals, today the two parties have split orbits to where they represent extremes that cater to the minority fringes and leave little for the large middle.

The Primary Problem

Primaries are mostly to blame for the current polarization of the two-party power cartel. A moderate Democrat has no chance when running against a proud leftist in a primary. A traditional Republican today may be dead-on-arrival when going up against a hard-right opponent.

Although moderates typically represent the strongest candidates to win the general election, today’s leadership in the Democrat and Republican parties, coupled with the primary election process, tends to kill off moderates before the general election.

The opposing party funds this dynamic, making it worse. How many times in the past decade have we seen one party funding commercials for the other party’s most extreme candidate in the primary election? The hope, of course, is that the extremist wins the primary, which will make it easier for the opposing party’s extremist to win the general. Experience has shown the logic works.

The dynamic also creates a talent drain in candidates. Many moderates with distinguished careers in politics have decided to step down rather than face a primary drubbing. Too many high-potential candidates never start political careers because of the radicalization of the primary party process.

People used to say to run for office you have to be nuts. Today, to successfully run for office you must be nuts, and extreme in ideology.

The General Conundrum

When candidates representing the extremes of each party prevail in the primaries, the choices in the general election leave much to be desired for moderate voters. If a moderate wants their vote to count and voice heard, they must choose the lesser of two perceived evils.

That gives an advantage to the leftist Democrat candidate in the general election. The leftist promises the world to voters and lavishes special interests with handouts, from universal income to college loan forgiveness. It’s hard to run against candidates who act as a political Santa Claus, where every day is Christmas, and the credit card bill never comes due.

To vanquish such an opponent, one needs sound ideas and a sensible platform that appeal to run-of-the-mill Americans. That hasn’t exactly been the descriptor of many Republican candidates these days, who obsess on their own form of cultural control, just from a different direction than their leftist opponents.

Between primary and general elections, moderate voters are bombarded with shrill messages from each extreme side. Messages get amplified beyond the campaigns, because each end of the spectrum enjoys its own major media outlets who are more than happy to stoke the partisan flames.

The moderate voter sees two options as election day approaches: someone whose extreme leftist views disturb but who offers the voter free stuff, and someone else whose extreme hard-right views frighten and who offers no free stuff. The exhausted moderate often ends up voting for the former, or perhaps simply staying at home and not voting at all.

The Remedy

The fix to our current political conundrum is surprisingly simple. What we need today is a third national political party. One where the Constitution is respected, individual rights reign supreme, government is minimal but covers its necessary responsibilities, the free market is unshackled, and fiscal discipline is exercised.

That description fits neither the Democrat nor Republican platforms of today. And these two parties have enjoyed a stranglehold on the presidency since 1852. Perhaps it is time to shake things up and fill the great middle void space that many Americans associate with.

Choice is good. Three options at the ballot box are better than only two. Particularly when the current two have radically evolved to the extremes.
The best fit for a third choice is libertarian. There are two classic strains of libertarianism.

The first is the purer and more extreme, the Ayn Rand view. Where all government intervention is a form of coercion, coercion of the individual is immoral, and thus government tends to be immoral. Government is not to be minimalized as much as it is to be eradicated. Government should not prevent or subdue individual choice, even if such choice might infringe on the rights of others.

The second strain of libertarianism is more practical, the Milton Friedman view.[1] Where government should still be minimized to maximize freedom of the individual to choose, but where government protects the ability of others to do the same. Individual choice remains paramount, but it must not infringe on the rights of others to follow their own values.

This second strain of libertarianism, when properly framed, would be attractive to many moderate voters today. Government out of our bedrooms and classrooms, the state spending only what it takes in, the shrinking of the Orwellian administrative state, releasing the Darwinian free market, and protecting individual rights and the Constitution.

A smaller, more nimble government focuses on the bare necessities of national defense, protecting rule of law and property rights, and preventing the infringement of individual rights. Taxpayers realize an honest-to-goodness rate of return on their investment.

Reversing the Slide

A third political party embracing a practical libertarian ideology would be an instant success in America. It’s not a break from western republican democracy, it’s a restatement of it. Many Americans would listen to the platform and rightly think, “well, yeah, isn’t that the way it’s supposed to be?”

Perhaps the biggest benefit to this third, new political party would be the inevitable moderation of the Democratic and Republican parties. The middle, a voiceless space today, would become relevant once again and demand that the extremes evolve toward the moderate middle or face the consequence of losing power.

A third party occupying the middle and embracing practical libertarianism would reform the primary election process without tearing it down. The leftist would struggle to make it through a Democratic primary. The hard-right nationalist is placed on the eccentric fringe of the Republican party.

Reasonable and compelling candidates organically sprout up from Republican and Democratic primaries. Coupled with the libertarian choice, citizens and taxpayers are in a better place no matter who prevails in the general election.

Cartels and Their Vacuums

Imagine if consumers had only two cola drinks to choose from, call them P and C. Over time, each option evolved to an opposite extreme. Brand P became laced with cocaine and extremely unhealthy, and brand C removed all sugar and caffeine to where it became nothing but tasteless, colored water.

If those two choices held cartel power and were protected from competition, no other product options would manifest. Many consumers would stop drinking cola beverages. If a new option was introduced with the features of what coal drinks used to offer, it would become an immediate commercial success.

Nature abhors a vacuum. But American politics have created an impressive vacuum and preserved it for too long. That’s to be expected with concentrated cartels, in business and politics. Time to break the cartel and create more choice.

President Biden recently bragged, “Milton Friedman isn’t running the show anymore.” So true, no matter if Democrats or Republicans hold power. And so sad, because if Milton Friedman’s libertarian views were running the show today, America would be in much better shape.

Few of us desire to practice politics. But all of us want to choose from the very best of options when it comes to selecting our political leaders. That’s what the Founding Fathers envisioned and that’s what we deserve.

Let’s get what we deserve.

1. Watch the video TAKE IT TO THE LIMITS: Milton Friedman on Libertarianism on YouTube to hear an explanation of ‘consequentialist’ libertarianism from Milton Friedman.

Mis“LEED”ing: Fact Versus Fiction for Green Buildings

How many times have we heard those worn-out taglines of ‘sustainability,’ ‘green is good,’ ‘triple bottom line,’ and ‘doing well by doing good?’  Study after study, report after report, and headline after headline.  All used to help justify products like electric vehicles and solar panels, as well as to defend related policy mandates, market protection, and subsidies.

Many of today’s largest markets and industries rely entirely on the ability of the expert class to continue to hoodwink consumers, taxpayers, and investors on the false need and an altered reality of certain products and standards.

Consider the case of green building design, specifically LEED-certified buildings.

For those unfamiliar with LEED, it stands for ‘leadership in energy and environmental design.’  It’s become all the rage in real estate these days, particularly for commercial and office space.  LEED-certified buildings enjoy an unchallenged reputation for better performance, accretive economics, and societal benefit.

That’s due in large part to an ocean of studies that posit LEED-certified buildings as superior to non-LEED-certified buildings in every imaginable way.

Creating the Need for LEED

A recent example is the October 2022 research report from real estate firm CBRE titled Green Is Good: The Enduring Rent Premium of LEED-Certified U.S. Office Buildings.

The title is an eco-marketing thing of beauty; a rich, concentrated trove of all the gimmicky tricks.  Employ an obligatory worn-out tagline (‘green is good’)?  Check.  Inject an aura of economic legitimacy (‘rent premium’)?  Check.  Infer a longevity that exceeds the half-life of CO2 in the atmosphere (‘enduring’)?  Check.

The executive summary doesn’t disappoint. It begins by boldly stating that an analysis of 20,000 office buildings in America found that the average rent of those with LEED certification was 31% higher than those of non-LEED-certified buildings.

The impressive finding indicates that renovating existing or building new spaces that have high energy efficiencies and meet LEED certification standards are well worth the effort and investment.

Except, when digging a little deeper into the study’s details and data, that’s not exactly the case. In fact, that’s not at all the case.

The Devil in the Data

As with many studies, reports, and news articles surrounding the vaunted energy transition, reading beyond the title and executive summary is vital.  Doing so for this study of the economics of LEED-certified buildings betrays a very different set of conclusions than the popular consensus and the report’s title.

The golden rules of real estate, including the ultimate of location-location-location being the three most important factors determining value, apparently still matter today, even with Code Red for humanity and approaching climate doom.

When the study’s data are adjusted under regression analysis for building location, building age, and renovation history, the premium that LEED-certified buildings enjoy shrinks from the advertised 31% down to just under 4% before COVID and only 3% after COVID. 

That’s a massive drop to a paltry, low single-digit premium that may be within the statistical noise and uncertainty of the study.  Meaning when an apples-to-apples comparison is performed, LEED certification doesn’t amount to much of any appreciable rent premium.

Building age is far more impactful than LEED certification.  The regression analysis found that office assets built after 2012 commanded a 14% rent premium over those that were built between 2002 and 2011. Each additional decade in age decreased rent by approximately 5%.

Data prove age affects rent much more than LEED certification.

What’s intriguing is that the complete report disclosed these findings and how they evaporated the trumpeted rent premium for LEED certification.  It’s all in the body of the report, which very few people take the time to read.

By the way, LEED-certified office buildings tend to be larger and higher quality assets concentrated in downtowns of expensive cities, compared to non-LEED-certified buildings. Which means LEED-certified spaces should enjoy higher rent premiums than buildings that are smaller, lower quality, and not located in the most exclusive of zip codes.

The report cites that a third of Manhattan’s office inventory is LEED-certified while only a tenth of Louisville’s office inventory is LEED-certified.  And Manhattan office space is pricier than Louisville’s.  Yet rent premiums of Manhattan offices versus Louisville offices have very little to do with whether the buildings are LEED-certified.  It’s because it’s Manhattan and Louisville!

Voodoo Economics

What you don’t find discussed in the study, which harms its credibility, is recognition that constructing a LEED-certified building is a more expensive proposition in up-front capital investment than constructing or renovating a non-LEED certified building.  If there is only a miniscule, or nonexistent, rent premium for the LEED-certified office, the rate of return will indicate a losing investment proposition, not a winning one. That is the opposite conclusion that the study’s title warrants.

The study also argues green buildings offer lower mortgage default risk for investors.  That may not be the case looking forward into the coming years, when considering LEED-certified buildings are disproportionately concentrated in at-risk real estate bubble markets of Manhattan, San Francisco, and so on.

Further, LEED certified buildings are a favorite of the tech industry. And the tech industry right now is on the verge of a major correction, with job losses piling up and with office buildings, many LEED-certified, being vacant and leases being abandoned.  LEED-certified buildings may post higher default rates than traditional offices as we experience the grips of a recession or slowdown, or certainly if another tech bubble bursts.

Unaddressed in the study and regression analysis is what impact government leasing of LEED-certified buildings has on rent spreads.  One of the largest tenants of metropolitan office space is often government.  If bureaucrats favor LEED-certified space and aren’t afraid to pay up with taxpayer dollars to rent it, rent spreads for LEED-certified buildings are likely to skew.  Without government subsidy, there may be no rent premium for LEED certification.  Perhaps, there might even be a ‘green discount’.

Communal Paradise Lost?

There are other flaws in the study.

It wrongly assumes de facto ‘increased productivity’ associated with LEED-certified buildings.  That’s not obvious or necessarily true for the workers who inhabit them.  Ledger entries of debits and credits by accountants working in a LEED-certified building don’t magically happen quicker or more accurately than they would when the accountant is working in a non-LEED-certified building.

There’s another false premise about LEED-certified buildings, particularly in the era of pandemic: the health and wellness benefits associated with LEED-certified buildings.  Today, there are health risks found in LEED design features.

For example, are low-flow water faucets in restrooms of LEED-certified buildings a health risk when it comes to hygiene and germ spread?  A similar question pertains to HVAC systems in LEED-certified buildings that try to balance energy efficiency targets with fresh air-to-recirculation air ratios.

These days, most office occupants do not relish the thought of breathing air all day that has longer average indoor residence time.  Or using faucets that trickle to wash hands.  The safer office building environment would employ higher water flows in restroom faucets to minimize germ transfer and HVAC systems using as much fresh air feed as practical.

And those celebrated common areas for collaboration, meeting, and eating utilized in LEED-certified buildings? Just another venue for potential disease transmission.

Pandemic necessitated a re-think of all facets of life and business.  Yet LEED-certified design has largely escaped such a re-think.  Why?  Aspects common in, or mandated by, LEED certification need an objective reassessment as to whether they are beneficial in the era of Covid.

Too Much of a Green Thing

A key conclusion buried in the study escaped mention in the executive summary and title.  The regression analysis found no statistically significant rent premium associated with higher levels of LEED certification.

Attaining a higher level of LEED certification requires more investment to achieve the target level of points. If there is not a statistically significant rent premium associated with higher LEED certification, then being greener is not better.  Being greener is a poor investment decision; investors lose money when spending to attain a higher level of LEED certification.

The Echo Chamber at Work

How one stumbles upon this report is emblematic of how the echo chamber works in media, the expert class, and environmentalism today.

A headline on a major business website mentioned the study title, specifically the ‘green is good’ hook.  The website article exclusively highlighted the report’s title and the opening statement of the executive summary that advertised the massive 31% rent premium for LEED-certified buildings. Only until tracking down the study and reading the body of the report will the regression analysis come to light.

That’s how the environmental racket operates these days. The green formula:

  • Perform a study to skew in the desired direction by applying favorable assumptions.
  • Push the desired findings in the executive summary.
  • Come up with a creative and eye-catching title (use those eco-taglines we called out in the beginning), then post or publish the report.
  • Collaborate with major media to rebroadcast and further amplify the desired sound bite or headline.

It’s not greenwashing. It’s worse. Most would consider it misleading and unethical.

Nick Introduces CNX Resources’ “Appalachia First” Vision

Watch below as Nick walks through CNX Resources “Appalachia First” vision, released today. The vision is rooted in Appalachia serving as the launchpad to a more efficient and sustainable future catalyzed by lower carbon intensity natural gas. A pro-growth and pro-market blueprint, the vision is best summarized by its mantra, “Produce it here. Use it here – first.”

Learn more about CNX Resources’ “Appalachia First” vision and the company’s tangible, impactful, and local progress on making it a reality at https://www.positiveenergyhub.com.

Nick Addresses the Economic Roundtable of the Ohio Valley

On Wednesday, November 30, Nick Deiuliis addressed the Economic Roundtable of the Ohio Valley. Nick presented the following talk, entitled, “Milton Friedman isn’t running the show anymore. And therein lies the problem.”

I gave a quick refresh and reread to the invitation letter sent to me back in September for this event. Two things stood out that I wanted to share.

First, the descriptor of the Economic Roundtable of the Ohio Valley includes those words ‘nonpartisan’ and ‘nonpolitical.’ How awesome is that, especially in this day and age?

The second thing that stood out was the letter summarizing the Roundtable’s history of having distinguished individuals and speakers.  Sad to report I’m not going to live up to that legacy and will probably dilute it quite a bit.  That’s the bad news, but the good news is that I’m here to speak today about the teachings and the thoughts of a very distinguished and noted individual in the field of economics. One who appeared at this very forum in the past.  And that is the great economist Dr. Milton Friedman.

I admit I have a few irons in the fire.  Professionally I run a publicly traded energy company in Appalachia, CNX Resources. Great company doing very noble things in an industry that matters greatly these days. Never a dull moment there, I assure you.

I’m active on the policy advocacy front. I maintain a website where I’m constantly posting various thoughts and materials and commentaries; you can give that a look at nickdeiuliis.com. I’ve begrudgingly become active on social media, particularly on Twitter as well as on LinkedIn. I will say it’s been striking how different those platforms are.

I wrote a book, Precipice: The Left’s Campaign to Destroy America. I’ll hit on some of the themes in the book during this talk. By the way, all the proceeds from its sale go back to another one of my endeavors, which is helping to fund the CNX Foundation’s Mentorship Academy – check that out on my website or on the CNX Foundation website.

And I publish a weekly podcast, “The Far Middle,” as in not the far right and not the far left. And, oh yes, how could I forget the most exciting effort of all?  My wife and I raising five children, now all young adults.

I ended up with all these irons in the fire by evolving my leadership style from one of political quietism into one of advocacy.  Particularly in the areas that affect my company, industry, region, and neighbors.

But I’ll tell you, the other big motivator for pursuing and participating in these efforts, even though at times it creates a very chaotic and time-challenged environment, is, in a word, love. I love Appalachia. I love the people who live in it. I love the energy industry. And I love the opportunity to engage with institutions like this one when it comes to the major themes and policies and issues that drive our collective future.

So, with the risk of that sounding like Ringo Starr with ‘peace and love, peace and love,’ let’s get right into it. I dedicated episode 23 of the Far Middle, back in October of 2021, to proposing six commonsense recommendations to broadly improve American society and our economy.

Much has happened since I issued that just over a year ago, to say the least. If you look across these six recommendations we will cover, you’ll see that the one thing they all share, besides all being commonsensical, positive things to improve our society and economy, is that none of them were followed by our leaders.

In fact, most of the six recommendations I will list saw policies and decisions from our leaders that moved in the exact opposite direction of my proposals.  I will let you decide whether that is an indication that I don’t know what I am talking about or if instead I am a visionary genius.

And when I’m done running through the six recommendations, I want to wrap up by tying them to the great Milton Friedman and seeing how much consistency there is with what I was recommending and what Friedman would argue should be done.

Sound like fun? Let’s get rolling.

Recommendation #1: Balance the Federal Budget

The first recommendation is, in many ways, the most basic: requiring that our federal government adopt a balanced budget each and every year. And when I say balanced budget, I mean a legitimate balanced budget, where all the actual inflows and outflows are counted.  Not the voodoo accounting you see with government budgeting scoring.

Suffice to say years of not following this recommendation has produced quite the financial quagmire. National debt sitting at over $30 trillion. That’s over 120% of GDP, a level not seen since World War Two. Worse yet, this nation continues to run massive deficits each fiscal year, making the debt load worse.

And those figures that I just stated do not include debt-like commitments in the form of entitlements such as Social Security, Medicare, and Medicaid. Those entitlements are growing just as quickly as the debt.

Compounding the problem further yet is that interest rates are continuing to rise, a topic we will cover shortly, and that is increasing the debt service cost, making budget deficits worse and national debt even higher.

Mandating a balanced budget necessarily requires government, and particularly Congress, to do its job. As in setting spending priorities in line with tax generating priorities.  All I’m asking for here, by the way, is for the most powerful government in the world to exert the same financial discipline you and I do when managing our household finances and our personal balance sheets.

Recommendation #2: Shrink the Fed’s Mission

The second recommendation ties to the first, as I alluded to. And that is to have the Federal Reserve rein in its mission creep, which has expanded exponentially the past few decades, and to focus exclusively on setting a monetary policy that stabilizes prices and sets interest rates at a real, positive level.

The Fed has been quite distracted over recent years.  It went from a simple, single mandate of stable prices via moderate interest rates, to then the dual mandate of maximizing employment and stable prices, to today a multifaceted mandate of maximizing employment, stabilizing prices, addressing economic inequality, fixing climate change, and embracing the tenants of modern monetary theory, or MMT.

The Fed doesn’t only move the capital markets these days, the Fed is the market, ala the ‘Fed Put.’ The Fed has created an economic and societal drug known as free money, meaning the Fed’s benchmark rates are far below inflation, resulting in real interest rates that we experience across our economy that are grossly negative.

When you have negative real rates for prolonged periods, all kinds of distortions occur in the capital markets. Asset bubbles pop up everywhere: in stock prices, in bond prices, real estate prices, in rare wine, art, coins, commodities, and everything else imaginable. We collectively become addicted to the asset bubbles caused by the drug of negative real interest rates, pushed by the dealer, the Fed.

This Fed manipulation of capital flows and the markets must end. It’s a certainty to end. It ends one of two ways.

The first way is that the Fed returns to its original mandate and job by raising benchmark rates to not just tame inflation but to create positive real interest rates. The second way is that the market comes to realize what the Fed has done and revolts, where the Fed loses all credibility.

Both paths will present some level of pain, as is always the case when going cold turkey and trying to deflate asset bubbles. The former path has a gain at the end of the pain while the latter results in nothing but calamity and economic destruction.

By the way, I believe that we are experiencing deeper negative real interest rates today than ever, despite the Fed raising benchmark rates. That’s because inflation has increased much more than the Fed has raised rates.  So, not only is the Fed far from achieving the desired goal, but it’s also further away from that goal now than it was before inflation took root. Sobering for sure.

Recommendation #3: Reverse Climate Policies

The third recommendation that I offer is a big one.  And that is eliminating, suspending, or reversing all regulations, accords, and treaties looking to, and I’m going to use the air quotes here, ‘tackle climate change.’

Please do not misunderstand.  I don’t debate that CO2 levels are rising within the atmosphere or that the contributor to that rise is largely from human activity. My issues with climate change go back to simple math, physics, chemistry, and engineering. These policies are flawed when it comes to those items. How so?

Well, most fundamentally climate policies universally assume wind, solar, and electric vehicles are zero-emission or zero-carbon forms of energy or transport. That is simply not true. Never was and never will be.  All activities, all forms of energy have a life cycle carbon footprint. And those carbon footprints for wind and solar and electric vehicles are quite large, I suspect larger than say natural gas power generation. For these policies to warrant and pretend that renewables or EVs offer zero-carbon footprints is misleading and a form of ‘fraud by policy.’

The second problem with these climate policy prescriptions is that geologically there is nowhere near sufficient global supply of metals, materials, and rare earths to manufacture the number of wind turbines, solar panels, and electric vehicles that would be required to meet mandates and targets.

The third problem is these policies inevitably benefit our adversaries, namely China and Russia, because these policies trade our domestic energy security enjoyed today for a reliance and an outsourcing of our energy dependence on the places where the stuff is mined and manufactured to provide us the wind turbines, solar panels, and electric vehicle batteries tomorrow. You can’t mine, process, and manufacture those things onshore to anything close to the scale that will be required under climate policy mandates.

The fourth problem with climate policies is that they are prohibitively expensive and are one of the most regressive forms of taxation to the middle class and working poor that you will ever find.  All the subsidy, tax credits, and rebates that a government can create will never shield us from the regressive taxation nature of what climate policies do to energy cost and energy access.

And the final problem is that government is never the answer to issues like these and, in the words of Milton Friedman, government is the problem. The shale revolution in Appalachia did more to reduce global CO2 emissions than any government policy, mandate, or prescription. The free market, innovation, and disruptive technology: those are the answers to addressing, or, again using the air quotes, ‘tackling climate change.’

Recommendation #4: University Endowments Cover Student Debt Forgiveness, Not Taxpayers

I could talk all day on climate change policies, but we don’t have all day, so let’s go to our fourth recommendation.  Which is any form of student debt forgiveness should be borne first by university endowments before a dime of taxpayer money is touched.

Look, I get it: too many colleges and universities have been ripping off students with degrees that have excessive tuition costs up front, offer little value in career wage later, and that produce a grossly negative rate of return. It’s been the biggest false advertising scheme in American history, and it continues. So, there is a wrong.

But the answer, or making it right, is not to have taxpayers pick up the cost for defrauded students and families. If you want to follow classic tort law, have the aggrieved party receive restitution from the one doing wrong, which in this case would be the university or college.

Doing so would also have the added benefit of catalyzing legitimate reform from the higher education system, because now there would be a cost to not fixing and improving the business model. Today, not only is there no consequence or cost to not reforming, but universities are also grotesquely rewarded for continuing to run the racket.

Common sense and tort law fundamentals inform us the path to reform and accountability is to tap the school endowments first.  Students, parents, and taxpayers will all benefit. The system will reform.

Recommendation #5: Reform Public Unions and the Iron Triangle

Recommendation number five is something that both Franklin Roosevelt and Ronald Reagan both agreed with. How many things can you say that that would be true of? Well, what they agreed on was that public unions, and here I’m talking about entities like teachers’ unions in public schools, present an inherent civic conflict of interest.

That conflict arises across three corners of a triangle: in one corner you have the public union which collects dues from its workers and then uses those dues to fund political campaigns and lobbying efforts; in the second corner of the triangle you have elected politicians and judges, the beneficiaries of the public union funding and lobbying, and they are the ones who appoint the third corner of the triangle.  Which are the administrators and bureaucrats, who set the rules and negotiate the contracts with the public unions.

The Iron Triangle, as it is referred to, works to the benefit of all three corners and to the detriment of those left out of the triangle: the student, taxpayer, and or the parent.  The harmed parties are the ones who the public union worker, elected official, and appointed bureaucrat are sworn to serve but end up doing anything but.

The answer or solution to this conundrum of the Iron Triangle is to either stop the practice of public sector unions or to require very specific performance metrics within negotiated labor contracts.  I am not anti-union; I am the product of a private sector union family and I work very closely with the unions across the awesome building trades. Public unions, however, are a different animal altogether and do not reflect an arm’s length negotiated balance, but instead are terminally conflicted without reform.

Recommendation #6: Have Social Media Pick a Side

The last recommendation, number six, is one that is more of a modern-day phenomenon and is affecting every one of us in bigger and bigger ways.  And that deals with big tech and social media. For too long these entities have had it both ways.

On one hand, they enjoy the benefits of being a platform, meaning they are not responsible for content posted. On the other hand, they enjoy the benefits of being a publisher, thus being able to receive free speech protection and control content placed on their sites, much like a journalist or news organization would.   Well, you can see why they would want to have it both, or maybe better said, all, ways.  But you can also see how it can’t be over the long haul.

My recommendation would be to allow each social media platform to choose for itself whether it wants the protections and responsibilities of being a platform or instead prefers the same for being a publisher. But pretending that these sites can take the advantages of both and avoid the responsibilities of both is wanting to have it both ways. That’s not how it works in life and that’s not how it works in business; thus, it shouldn’t work that way when it comes to social media and big tech.

What Would Milton Friedman Think?

There you have them: my six big ideas, my big recommendations, to miraculously cure all that ails Appalachia, southeastern Ohio, and the United States of America.  Let me conclude by tying all this back to the great Milton Friedman.

Our president in 2020 stated the following: “Milton Friedman isn’t running the show anymore.” Correct, Mr. President. And therein lies the problem.

I proposed the six recommendations, as I said, in October of 2021. Consider what has happened with respect to government action since that time.

  • The federal government debt? It’s grown, continues to grow, and it’s worse than it’s ever been.
  • When it comes to the Federal Reserve, its mission is as wide as ever and negative real interest rates are as large as ever, with no signs of inflation abating.
  • With climate change policies, we just saw over 35,000 bureaucrats from over 200 nations convene in Egypt to accomplish nothing other to emit much CO2.
  • Student debt we are most familiar with because the president unilaterally decided, without Congressional consent as required by our Constitution, to forgive $400 billion or so of debt, making reform by higher education even less likely.
  • Public sector unions continue to grow unabated, as evidenced by the recent Inflation Reduction Act and its $80 billion gift to the Internal Revenue Service, so that the service can go out and hire tens of thousands of new public sector employees, all of which will pay dues to the union which then will return the favor to government by contributing even more to the campaigns of like-minded public officials. The Iron Triangle is alive and well.
  • And our friends in big tech that run social media platforms continue to enjoy having their cake and eating it too; having their benefits of publishers and platforms protected while avoiding all the accountability that comes with either.

Yeah, unfortunately Milton Friedman isn’t running the show anymore.  But if you wanted to get a feel for what he would advise if he were, give a read to his 1991 lecture titled Why Government is the Problem.  I am proud to think that Dr. Friedman would’ve supported all six of my recommendations.  His lecture goes much wider than my six recommendations, and he is much more entertaining in print than I am, despite me having the advantage of being here live with you.  So, give it a read.  And check out the Free to Choose Network, which continues to carry torch of Dr. Freidman.

And one last mention for my book Precipice as well; I wish as a citizen that many of the themes I wrote about three years ago did not turn out to be as relevant as they are today.

All this makes me think of borrowing a few lines from Simon and Garfunkel.  Where have you gone, Milton Friedman? Our nation turns its lonely eyes to you.

Thank you.