California’s Green ‘Bantustans’ Are Coming to America

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If the “smart growth” urban planners that dictate land use policies in Democratic states and cities have their way, the single family dwelling is an endangered species.

In Oregon, proposed legislation would “require cities larger than 10,000 people to allow up to four homes to be built on land currently zoned exclusively for single-family housing.” In Minneapolis, recent actions by the city council mean that “duplexes and triplexes would be allowed in neighborhoods that only previously allowed single-family housing.”

The war on the detached, single family home, and—more to the point—the war on residential neighborhoods comprised exclusively of single family homes, is on. And it’s gone national.

In California, ground zero for this movement, state legislation now requires cities and counties to fast track permitting for “accessory dwelling units.” This scheme will allow developers and ambitious homeowners to construct detached rental homes in their backyards, but since they’re called “accessory dwelling units,” instead of “homes,” they would not run afoul of local zoning ordinances that, at one time, were designed to protect neighborhoods from exactly this sort of thing.

“Smart growth,” however, began long before the home itself came under attack.

First there was the war on the back yard. Large lots became crimes against the planet—and if you doubt the success of this war, just get a window seat the next time you fly into any major American city. In the suburbs you will see a beautiful expanse of green, spacious, shady neighborhoods with lots designed to accommodate children playing, maybe a pool or vegetable garden, big enough for the dog.

But you will also see, plain and obvious, those suburbs that were built after the smart growth crowd came along. Tight, treeless, and grey, with homes packed against each other, these are the Green Bantustans, and there’s nothing green about them.

The image below shows homes packed roughly 15 per acre—including the streets—on private lots that are 40-feet wide by 80-feet deep. As of January, these homes were selling for $350,000. Such a deal! Smart growth!

Why call neighborhoods with mandated ultra-high density “Green Bantustans”? Because the Bantustan was where a racist elite used to herd the African masses during South Africa’s apartheid era. The commonality between the Green Bantustan and the Racist Bantustan becomes clear when you step back and ponder what is happening. In both cases, a privileged elite condemn the vast majority of individuals to live in a concentrated area designed to minimize their impact on the land.

But in America, the “smart growth” advocates aren’t racists, they’re misanthropic environmentalists.

The image below is fascinating, because at the same scale, it shows a neighborhood in the township of Soweto, once touted as a poster child for one of the most chilling warehouses for human beings in history. But notice the size of the lots—40 feet by 80 feet—are identical in size to that Green Bantustan in California. Also, please note, it’s probably much easier to get a building permit in Soweto.

In the name of “smart growth,” urban planners have succeeded in creating policy that has drawn lines around American cities, “urban service boundaries,” which make it nearly impossible to start new home construction outside these lines. While the purpose of these boundaries ostensibly is to protect open space, farmland, and wilderness habitat, not only are those goals only marginally fulfilled, but other negative unintended consequences abound. Consider the following:

Urbanization just takes a different form. Creating these greenbelts of protected open space mean instead of leapfrog development, you have super-leapfrog development. People who want to get out of the city now build and purchase homes on the other side of the greenbelt. Instead of suburbs on the perimeter of cities, you have exurbs, whole new cities, constructed just beyond the protected areas.

Quality of life is ruined in older suburbs. Homes within these cities are concentrated onto tiny lots in order to get as many people into each new development as possible. Often these new developments are imposed in the middle of semi-rural suburbs where the way of life for the people already living there is destroyed.

Traffic congestion gets worse. These dense new neighborhoods are designed to be “pedestrian friendly,” but what they really are is car unfriendly. There is no room to park, inadequate roads, and expensive light rail that most people can’t make practical use of.

Housing becomes unaffordable. The winners in “smart growth” are never people who need affordable homes, because prices always go up when you reduce the supply of developable land. The winners are those landowners lucky enough to have property within the arbitrary boundaries where growth is permitted, and the public sector bureaucrats who keep development within their jurisdictions, in order to collect property taxes and fees on artificially inflated home values.

Basic Facts Contradict the Arguments for “Smart Growth” 
If the proportion of land consumed by people, even in low density suburbs, is compared to the amount of land available for development, the case for high-density “smart growth” weakens. For example, even with nearly 40 million residents, California is a sprawling, relatively unpopulated state where harsh restrictions on land development are unnecessary.

Encompassing 164,000 square miles, California is only 5 percent urbanized. According to the American Farmland Trust, California has 25,000 square miles of grazing land (15 percent), 28,000 square miles of non-irrigated cropland (17 percent), and 14,000 square miles of irrigated cropland (9 percent). The rest, 54 percent, is forest, oak woodland, desert, and other open space.

The above chart depicts three urban growth scenarios, all of them assuming California experiences a net population increase of 10 million, and that all new residents on average live three people to a household (the current average in California is 2.96 occupants per household). For each scenario, the additional square miles of urban land are calculated.

As the chart shows, adding 10 million new residents under the “low” density scenario would only use up 3.2 percent of California’s land. If all the growth were concentrated onto grazing land—much which is being taken out of production anyway, it would only consume 21 percent of it. If all the growth were to fall onto non-irrigated cropland, which is not prime agricultural land, it would only use up 19 percent of that. Much growth, of course, could be in the 58 percent of California not used either for farming or ranching.

Two key points about these data bear emphasis. First, there is plenty of room for low-density development for millions of new residents, not only in California, but elsewhere in the United States. As shown in this example, moving 10 million people into homes on half acre lots, with no infill within existing urban areas, would only consume a small fraction California’s land area.

Second, even the dense scenario depicted on the first column the chart, cramming ten homes onto each developed acre, is not acceptable to the smart growth crowd. The policy goal in California, and elsewhere as noted, is to channel as much new development as possible into the confines of existing cities, and overwhelmingly favor multi-family dwellings over single-family detached homes.

“Smart Growth” is Not Smart, It’s Just Cruel

None of this is necessary. The idea that American policymakers should enforce urban containment is a cruel, entirely unfounded, self-serving lie.

The lie remains intact no matter the context. If there is an energy shortage, then develop California’s shale reserves. If fracking shale is unacceptable, then use safe land-based slant drilling rigs to tap natural gas in the Santa Barbara channel. If all fossil fuel is unacceptable, then build nuclear power stations in the geologically stable areas in California’s interior. If there is a water shortage, then build high dams. If high dams are forbidden, then develop aquifer storage to collect runoff. Or desalinate seawater along the Southern California coast. Or recycle sewage. Or let rice farmers sell their allotments to urban customers. There are answers to every question.

Environmentalists generate an avalanche of studies, however, that in effect demonize all development, everywhere. The values of environmentalism are important, but if it weren’t for the trillions to be made by trial lawyers, academic careerists, government bureaucrats and their government-union overlords, crony green capitalist oligarchs, and government pension-fund managers and their partners in the hedge funds whose portfolio asset appreciation depends on artificially elevated prices, environmentalist values would be balanced against human values.

The Californians who are hurt by urban containment are not the wealthy people who find it comforting to believe and lucrative to propagate the enabling big lie. The victims are the underprivileged, the immigrants, the minority communities, retirees who collect Social Security, low wage earners, and the ever-shrinking middle class.

In America, it used to be that refugees from California who aspired to improve their circumstances could move to somewhere like Houston and buy a home with relative ease. Watch out. That is changing. The masses are being herded into Green Bantustans, as America turns into a petri dish for the privileged upper class, backed up by a fanatical Earth First movement.

This article originally appeared on the website American Greatness.

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Twilight of the Malthusians

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Thomas Malthus was an English cleric and scholar living in the early 19th century who developed the theory that global population increases exponentially, while global production increases arithmetically. His theory—and the eventual collapse of civilization that it implies—enjoys influence to this day. In California, it found early expression in a 1976 speech by Governor Jerry Brown, who announced that we had entered an “era of limits.” For more than 40 years now, influential politicians such as Brown, supported by like-minded environmentalists, have embraced the Malthusian vision. But an alternative exists.

First, global population growth was only increasing “exponentially” for a few decades in the middle of the 20th century. As the chart below indicates, using data from the United Nations, the annual rate of global population growth peaked in 1980 at just over 2 percent. Since then, it has already dropped to half that rate, estimated at around 1 percent per year in 2020. By the end of this century, global population is projected to be growing at a decidedly “arithmetic” rate of under 0.2 percent per year.

At the same time that the rate of global population growth is slowing significantly, global productivity continues to increase. Virtually all recent estimates—World Bank, International Monetary Fund, United Nations—forecast global GDP growth to exceed 3 percent per year into the foreseeable future. This rate of growth is low by historical standards and, notwithstanding temporary disruptions caused by future recessions, is likely to be much higher over the next several decades. Put another way, the rate of global wealth creation currently exceeds the rate of human population increase by at least 50 percent, and that ratio is likely to improve over the long-term.

Enough Resources to Sustain Global Economic Growth?

By now, most Malthusians have to acknowledge that global population is leveling off, but they will nonetheless assert that too many people are already here, and there simply aren’t enough resources left on Planet Earth to fuel long-term economic growth. But the prevailing challenge facing humanity when confronted with resource constraints is not that we are running out of resources, but how we will adapt and create new and better solutions to meet the needs that currently are being met by what are arguably scarce or finite resources. If one accepts this premise, that we are not threatened by diminishing resources, but rather by the possibility that we won’t successfully adapt and innovate to create new resources, a completely different perspective on resource scarcity and resource management may emerge.

Across every fundamental area of human needs, history demonstrates that as technology and freedom are advanced, new solutions evolve to meet them. Despite tragic setbacks of war or famine that provide examples to contradict this optimistic claim, overall the lifestyle of the average human being has inexorably improved across the centuries. While it is easy to examine specific consumption patterns today and suggest we now face a tipping point wherein shortages of key resources will overwhelm us, if one examines key resources one at a time, there is a strong argument that such a catastrophe, if it does occur, will be the result of war, corruption, or misguided adherence to counterproductive ideologies, and not because there were not solutions readily available through human creativity and advancing technology.

Energy, water, and land are, broadly speaking, the three resources one certainly might argue are finite and scrupulously must be managed. But in each case, a careful examination provides ample evidence to contradict this claim.

Abundant Energy: According to the most recent BP Statistical Review of World Energy, proven reserves of fossil fuel could provide enough energy to serve 100 percent of worldwide energy requirements at a total annual rate of consumption twice what is currently consumed for at least another 367 years. That is based on adding together the known reserves of the three primary fossil fuels. Using natural gas exclusively, 27 years; oil, 90 years; coal, 250 years. Moreover, additional reserves of fossil fuel are being discovered faster than fossil fuel is being depleted. And this abundance of available fossil fuel is estimated without accounting for vast deposits of so-called unconventional reserves such as methane hydrates.

In addition to fossil fuel, there are proven sources of energy such as nuclear and hydroelectric power, and new sources of energy including wind, solar, geothermal, and biomass, that have the potential to scale up to provide comparable levels of power production. And then there is the eventual promise of limitless, clean fusion power, and perhaps other sources of energy we can’t yet imagine. With these many energy alternatives, combined with relentless improvements in energy efficiency, it is difficult to imagine human civilization ever running out of energy.

Abundant Water: In many regions of the world, the challenge of meeting projected water needs appears more daunting than the challenge of producing adequate energy. But fresh water is not a finite resource. There are countless areas throughout the world where desalination technology can provide water in large quantities—in 2017 over 24 billion cubic meters of the world’s fresh water was obtained through desalination, an amount equivalent to 5 percent of all urban water use worldwide in that year. For large urban users, desalination is affordable and requires surprisingly little energy input.

Another way to provide abundant water is to redirect large quantities of river water via inter-basin transfers from water-rich areas to water poor areas. Finally, water is never truly used up, it is continuously recycled, and by treating and reusing water, particularly in urban areas, there should never be water scarcity.

With water, as with energy, innovation is providing solutions heretofore unimaginable. Densely populated urban areas around the world are turning to high-rise agriculture, where food is grown indoors using water that is perpetually recycled, fertilizer from waste streams, with zero need for pesticides.

Abundant Land: The question of finding adequate land for humans is clearly different from that of finding energy or water, since unlike energy or water, land is truly finite. But even here, key trends indicate land is now becoming more abundant, not less abundant. This is because for decades, all over the world, people have been migrating into densely populated cities. Using World Bank data, as summarized on the bar chart, the global rural population (red) has slowly increased from 2 billion in 1960 to an estimated 3.4 billion in 2020. By 2050, the rural population worldwide is actually expected to decrease, back down to 3.1 billion.

Meanwhile, the global urban population has accommodated nearly all population growth over the past sixty years. These urban populations are concentrated in megacities that, while vast, consume a small fraction of land area on earth. In 1960, humanity’s 1 billion urban dwellers constituted only 34 percent of the global population. By 2050, an estimated 6.6 billion people will live in cities, comprising 68 percent of all humanity. Moreover, this transition has been voluntary. Most people apparently prefer the amenities and opportunities of urban life.

This massive voluntary migration to cities from rural areas, combined with new agricultural innovations, is depopulating landscapes faster than what remains of human population growth will fill them. This seismic shift in the distribution of humans on earth, combined with new high yield crops, aquaculture, and urban high-rise agriculture, promises a decisive and very positive shift from land scarcity to land abundance in the next 25-50 years.

The Ideology of Abundance vs. the Ideology of Scarcity

If one accepts the possibility that humanity is not on a collision course with resource scarcity, entirely new ways of looking at policy options are revealed. Rather than attempting to manage demand, based on the premise that supplies are finite, we might also manage supply by increasing production. While, for example, utility pricing might still be somewhat progressive, if we assume resources will not run out, it doesn’t have to be punitive. If someone wishes to use more energy or water than their neighbor, if their pricing isn’t so punitive as to effectively ration their consumption, but instead is only moderately progressive, then overconsumption leads to higher profit margins at the utility, which in-turn finances more investment in supplies.

Another consequence of rejecting the Malthusian conventional wisdom is a new understanding of what may truly motivate many powerful backers of the doomsday lobby. By limiting consumption through claiming resources are perilously scarce and by extracting them we may destroy the earth, the vested interests who control the means of production will tighten their grip on those means.

Instead of pluralistically investing in this last great leap forward to build megacities and infrastructure for the future—in the process extracting raw materials that either can be recycled or are renewable—the public entities and powerful corporations who benefit from scarcity will raise prices and defer investment. It is the interests of the emergent classes, whether they are entrepreneurs in prosperous, advanced economies, or the aspiring masses in developing nations, which are harmed the most by the Malthusian notion of inevitable scarcity.

Abundance is a choice, and it is a choice the privileged elite must make—in order for humanity to achieve abundance, elites must accept the competition of disruptive technologies, the competition of emerging nations, and a vision of environmentalism that embraces resource development and rejects self-serving anti-growth alarmist extremism. The irony of our time is that the policies of socialism and extreme environmentalism do more harm than good both to ordinary people and the environment, while enabling wealthy elites to perpetuate their position of privilege at the same time as they embrace the comforting but false ideology of scarcity.

This article originally appeared on the website American Greatness.

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The Future’s So Bright, Gavin Newsom’s Got to Wear Shades

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Jerry Brown was governor of California for 16 years. His four terms, two that ran from 1975 through 1982, then two more that ran for the past eight years, bookended California’s transition from a sprawling and remote, sun-splashed coastal paradise, defined by Hollywood, the counterculture, and a rising technology industry, to an economic leviathan, the global epicenter of technological innovation, and cultural evolution.

So much has changed. California now boasts the fifth-largest economy on earth. California’s high-tech companies—Apple, Facebook, Google, and countless others—are defining how we will live in the coming decades. In nearly every significant area of politics, culture, and technology, Californians are global leaders.

California’s politics are also unique, insofar as no other state in the union is so absolutely under the control of Democrats. Every major state officeholder is a Democrat. Both houses of California’s state legislature are controlled by Democratic supermajorities. California’s congressional delegation, which at 53 is by far the largest in the U.S. House of Representatives, consists of 46 Democrats and only seven Republicans. California’s senators, the venerable Dianne Feinstein, and the ascendant Kamala Harris, are both staunch Democrats. And all of these Democrats proudly consider California to be ground zero for the anti-Trump “#Resistance.”

And so, on January 7, the Brown era came to an end, and a new governor took office: Gavin Newsom. Elected easily, the former lieutenant governor (and before that, mayor of San Francisco) ran on the slogan “courage for change.” Newsom’s inauguration speech didn’t disappoint. Change was indeed the message, consistent with the policy agenda he’d campaigned on—universal preschool, a guarantee of free community college, and universal, single-payer health care (including for noncitizens).

And to pay for all this? No problem. California is an economic juggernaut. California’s current budget surplus could be as high as $15 billion. California’s future’s so bright, you’ve gotta wear shades.

Except that it is not all that bright. California faces dangerous economic challenges likely to converge into a perfect storm, with devastating consequences. Here are a few things that Gavin Newsom in particular, and California’s Democrats in general, may wish to consider before they take their great leaps forward.

California’s State Government Revenue Is Vulnerable
The chart below, created using data from California’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2017, shows state government revenue by source for two select years, 2010 and 2017. The revenue stream of 2010 provides a sobering contrast to what happened in 2017 and likely in 2018, because 2010 represented the economic low point preceding recovery from the great recession. In 2010, California’s general state revenue was $94 billion, and personal income tax collections constituted 46 percent of the total. By 2017, revenue had grown by 56 percent to $148 billion, and personal income tax collections constituted 58 percent of the total.

This comparison between 2010 and 2017 should serve as a cautionary example to anyone considering expanding California’s state spending. Because nearly the entire increase in California’s revenue between the economic trough of 2010 and the current economic peak was the result of wealthy people paying enormous taxes on one-percenter levels of income and capital gains.

The Super Rich Pay Most of the Taxes Collected in California
If that fact isn’t yet obvious, here’s another chart derived from California’s June 2017 CAFR, showing how much income tax was paid according to the tax bracket of the taxpayer. This uses data for the fiscal year ended June 30, 2015, which was the best available data at the time. It’s a fair bet the disparities depicted on the chart have widened even more, since investment appreciation in the two years through June 2017 were extraordinary.

As shown, of the $71 billion in personal income tax collected in the fiscal year ended June 30, 2015, $28 billion, or 40 percent, was paid by only 70,437 individual filers. The vast majority of Californians, those declaring under $100,000 in income, contributed only $7.5 billion, just over 10 percent of total collections, even though they represented 81 percent of California’s taxpayers.

The cold fact California’s new governor must confront is that extremely rich people, paying the highest rates of state income tax in the United States, are the only reason the state has any surplus at all.

Personal income tax collections in California nearly doubled between 2010 and 2017. The reason for that wasn’t because people making under $100,000 were earning less and paying less in income taxes—they were, but those residents only contribute 10 percent of California’s income tax revenue, even though they are more than 80 percent of all taxpayers.

So what happens when rich people start paying less in taxes, because investment returns stop being extraordinary?

The Enabling, Overinflated Bubble in Tech Stocks and Real Estate
Between the fiscal year ended June 30, 2010, when California’s state government collected $43 billion in personal income taxes, and the year ended June 30, 2017, when the state took in $86 billion, the value of technology companies literally exploded. During that six-year period, the tech-heavy NASDAQ index tripled in value, from 2,092 to 6,153. In that same period, Silicon Valley’s big three tech stocks all quadrupled. Adjusting for splits, Apple shares went from $35.28 to $144.02, Facebook opened in May 2012 at $38.23, and went up to $150.93, Google moved from $216.86 to $908.73.

While California’s tech industry was booming over the past decade, California real estate boomed in parallel. In June 2010, the median home price in California was $335,000; by June 2017 it had jumped to $502,000. Along the California coast, median home prices are much higher. Santa Clara County, home to Silicon Valley, now has a median home price of $1.3 million, double what it was less than a decade ago.

As people sell their overpriced homes to move inland or out-of-state, and as tech workers cash out their burgeoning stock options, hundreds of billions of capital gains generate tens of billions in state tax revenue. But can homes continue to double in value every six or seven years? Can tech stocks continue to quadruple in value every six or seven years?

Apparently, Gavin Newsom thinks they can.

Clouds Darkening the Golden State’s Future
California’s optimists may wish to take off their sunglasses, at least for a while, because economic storm clouds are on the horizon. More evidence that the tech stock and housing bubbles are deflating comes from Joel Kotkin, who in a recent column enumerated the factors driving values back down; slowing foreign investment that for years has helped propel California’s real estate values upwards, state GDP growth, tech sector expansion, and job creation falling behind other states, sky-high rents driving workers out, and “declining infrastructure, absurd housing prices, massive poverty, and the embarrassing budget-busting high-speed choo-choo.”

California’s state tax revenues are inordinately dependent on wealthy filers making a lot of money, which makes those revenues inordinately vulnerable to another economic downturn. But when the asset bubble pops, not only will revenues go down. Expenses will go up. Way up.

Because California’s state and local government workers collect some of the most generous, financially unsustainable pensions in the world. A recent study by the California Policy Center estimated California’s state and local government worker pension funds to carry an unfunded liability of $846 billion. Using the methodology offered by the prestigious Stanford Institute for Economic Policy Research, California’s unfunded pension debt is even higher, at $1.26 trillion.

California’s Profound Weaknesses Demand Caution
If the overall value of tech stocks and real estate plateau, much less decline, California’s state tax revenue immediately would drop by at least $10 billion per year, and the contributions they are required to make to their government worker pension systems would go up by at least $10 billion per year. This would wipe out any possible budget surpluses. And yet these programs, universal preschool, a guarantee of free community college, universal health care (including for noncitizens) and single-payer healthcare, come with staggering annual costs. To implement all of them likely would cost several hundred billion dollars per year. Where on earth will California get that money?

Barry Ritholtz, writing for Bloomberg in October, touted the accomplishments of California’s economy in comparison to the economy in Kansas—which he derisively held up as President Trump’s ideal policy environment. He decried Trump’s allegedly dystopian policies, claiming they would lead to the “Kansasification” of America.

But Ritholtz ignores California’s dependence on unsustainable asset appreciation to sustain its government budgets and its pension funds. He ignores the Golden State’s wealth inequality, the high rate of poverty, the even higher cost of living, the punitive regulations. He ignores the arrogance of the climate fundamentalists and open-borders fanatics, who are apparently unaware that when you can’t build anything at a reasonable cost (thanks to regulations inspired by the need for “climate change mitigation”), you might not want to invite the entire world’s huddled masses in for a permanent visit.

Gavin Newsom, egged on by leftist oligarchs, public sector unions, extreme environmentalists, opportunistic trial lawyers, the high tech, media, and entertainment communities, and the identity politics industry, is galloping exuberantly toward their common utopian vision: the Californiafication of America. With any luck, Newsom will take off his sunglasses, notwithstanding the lovely, lingering bright California sun, and looking to the horizon, avoid the abyss obscured by clouds.

This article originally appeared on the website American Greatness.

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Economic Headwinds Came Long Before Trump’s Presidency

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After the unexpected election of President Donald Trump, something else unexpected happened. The stock market soared.

In the final week before the 2016 election, the Dow Jones Industrial Average closed at 17,888, an unimpressive level, since it had reached that same point nearly two years earlier in December 2014. But following Trump’s victory, the Dow went wild. By the time he took office in January 2017, it had already jumped over 12 percent, to 20,094. By January 2018, it peaked at 26,616, then edged upwards to 26,828 on October 3, 2018. In less than two years, the Dow Jones Index grew by an astounding 50 percent.

Since then, however, the Dow, along with the other major U.S. indexes, have been tumbling. By Christmas Eve, the Dow was 19 percent off its high, down to 21,792. What had been called the “Trump Bump” is now being called the “Trump Slump.”

While President Trump has been criticized for taking credit for the stock market rise, Barack Obama also got into that action, claiming in October 2018 that “the booming started on his watch.” But today’s economy, and especially the stock market, are reacting to longer-term trends for which neither president deserves full credit or blame.

Depicted on the chart below is the performance of the Dow from 1995, when the markets began first showing signs of “irrational exuberance,” to the extremely exuberant present day. On clear display are the past two bubbles, the internet bubble of 2000, the housing bubble of 2007, and what we may call the “super bubble” or “everything bubble” of 2018.

It doesn’t take an economist to notice a pattern. The Dow, which tracks closely with all publicly traded equities in the United States, more than doubled in the four year heady runup to its January 2000 peak, then went into decline for nearly four years, before doubling again between 2004 and 2007. Then, when the housing bubble popped, the Dow went off a cliff, dropping to half its 2007 peak in a little over a year. In past 10 years, the Dow has exploded again, tripling to a high of 26,828 in October. What now? Visually, at least, another correction appears logical.

There are all kinds of economic reasons why what is visually indicated on the above graph should happen. At best, we may hope for stocks to correct but not crash, which is sort of what happened after the internet bubble popped. But what’s different this time?

One key difference this time around is that dramatically lowering interest rates is not an option. In January 2000, the Federal Funds Rate was 5.5 percent. By June 2003, it had dropped to 1 percent. When interest rates drop, stocks become relatively better investments than fixed-rate investments. Lower interest rates also induce more people to borrow, creating liquidity, stimulating consumer spending, which helps corporate earnings which drives up stock prices. The cause and effect is reflected in the stock market history—by 2003, after lowering interest rates by 4.5 percent, the stock market finally began to recover.

In October 2006, the rate had risen to 5.25 percent. In September 2007, as home sales were starting to drop, it was lowered to 4.75 percent. When the housing bubble popped, and the stock market crashed, the Federal Reserve responded by steadily lowering the Federal Funds Rate. By December 2016, it had dropped to 0.25 percent, the lowest rate possible.

What should be of concern, is that the rate today, 2.5 percent, is only half as high as it was during the past peaks. During the previous two bull markets, the Federal Reserve was able to bounce the rate up to around 5 percent before the bears came calling. This time, assuming we’ve hit the peak, only half that increase, to 2.5 percent, was achievable.

Debt Accumulation Is Not a Sustainable Way to Stimulate Economic Growth
A consequence of low interest rates is more borrowing, which can be a good thing if that borrowing stimulates economic growth that translates into investments in productivity. But today, borrowing has not been used to stimulate productive investments. Instead, much of the corporate borrowing over the past decade has been used to finance stock buy-backs. This is a dangerous strategy, causing short-term growth in earnings per share, but loading debt onto corporate balance sheets that will have to be refinanced at increasingly high interest rates, at the same time as investment in research and modernizing plants and equipment has been neglected.

In recent years, federal, state, and local governments have also over-borrowed. Federal borrowing accelerated in mid-2008, and hasn’t slowed since—climbing to more than $21 trillion by the third quarter of 2018. As interest rates rise, servicing this debt will become far more difficult. Meanwhile, all U.S. credit market debt—government, corporate, and consumer—has continued to increase. After dipping slightly to $54 trillion in the wake of the burst housing bubble, it was up to a new high of $68 trillion by the end of 2017.

When interest rates fall, not only is the stock market stimulated. Bonds make payments at fixed rates, so when the market rate drops, the price of these bonds increases, since they can be sold for whatever price will give the buyer the same return as the current market rate. Interest rate reductions also cause housing prices to rise, since when interest rates are low, people can afford bigger mortgages as they make lower monthly payments. The opposite is also true, which is unfortunate for investors. All else held equal, rising interest rates means lower prices for bonds and housing.

If the super bubble pops and crashes this time, all assets—equities, bonds, and real estate—will drop in value. Even if extraordinary measures are taken to stop the decline—such as the fed purchasing corporate bonds—there will be nowhere to run.

Focusing on Helping America, Not Wall Street
Unwinding the debt accumulated during a credit binge lasting decades will impact all sectors of the economy. In the short run, federal budget deficits are structurally impossible to eliminate. But what can be changed is how the money is being spent. Here, the policies of President Trump reflect a canny awareness of costs and benefits. For example:

  • Investing $20 billion in border security may significantly reduce the cost of illegal immigration which has been estimated well over $100 billion per year.
  • Pressuring wealthy nations to pay more for their own security will allow the Pentagon to redirect military spending towards research and development and modern weapons that will maintain deterrence.
  • Renegotiating trade agreements will reduce trade deficits, which in-turn will create jobs and slow foreign acquisition of American assets.
  • Bringing jobs back to the United States will create millions of new jobs, with the boost in consumer spending power more than offsetting the increased prices for goods.
  • Enforcing tariffs on strategic commodities such as aluminum and steel help keep and expand these vital production capacities onshore.
  • Holding nations such as China accountable for theft of intellectual property helps preserve America’s competitive advantage in the technologies of the future.
  • Rolling back regulations across all business sectors has already greatly improved America’s business climate, stimulating investment and creating jobs.
  • Pushing for new public/private investment in infrastructure, neglected for decades, can create jobs, improve safety and resiliency, and enhance quality of life.

The United States has significant economic advantages that Trump, unlike his predecessors, is using to benefit ordinary Americans, and it’s about time. America can engage in the tactics just described because the American currency remains unchallenged as both the global reserve currency and the global transaction currency. As long as America’s economy is healthier (or less afflicted) than other major national economies, America’s currency will remain strong even as the U.S. Treasury continues to issue hundreds of billions in new T-Bills to cover deficits.

The only currencies that might challenge the U.S. dollar are those of China or the European Union, but these economies face debt overhangs as severe as America’s. And unlike the United States, China and the EU confront an array of challenges, including an aging population, less diverse economies, fewer domestic supplies of energy, less agricultural capacity, less internal stability, and less military power. Until there is a serious competitor to the U.S. dollar, Americans have time to get their federal budget deficits under control.

When Trump called attention to the soaring stock market, and raved about increasing economic growth, he was doing what a president should do—be America’s greatest cheerleader. But the reality is that Trump has inherited an economy that survived the subprime mortgage crisis of 2007 by even more borrowing. It is an economy in which stock values rose because corporations took advantage of low interest rates to borrow cash to buy-back their own stock; an economy where consumers resumed borrowing to buy cheap imported goods and pay punitively overpriced tuition to send their children to college; an economy where infrastructure spending and strategic military investments were deferred in order to fund more domestic entitlements and fight endless police actions overseas.

A correction to the stock market is inevitable. The relentlessly hostile political and media establishment will blame the correction on Trump. But Trump’s economic policies are appropriate for the times in which we live. They are designed to restore America’s strength and security, and to minimize the degree to which the problems on Wall Street spread to Main Street.

This article originally appeared on the website American Greatness.

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New Cable Series “Mars” Lays Leftist Fearmongering Onto a Whole New World

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If you haven’t watched, you would think the National Geographic Channel’s cable series “Mars,” would be a straightforward dramatization of human colonization of the Red Planet in the near future. You would be half right.

The show is indeed a well-imagined portrayal of the first colonies on Mars, but rather than being a straightforward dramatization of this exciting next chapter in human civilization, the “Mars” series is saturated with leftist propaganda.

By the end of the second mini-season, which concluded December 17, the messages were clear: humans have brought planet Earth to the brink of apocalyptic ruin—capitalist, climate-denier humans in particular—and they’re going to do the same thing to Mars. They will, that is, unless an underfunded, heroic and beleaguered, transnational band of multicultural warriors with seductive accents manages to stop them.

The contrast down on the Martian surface couldn’t be more obvious. On one side the aforementioned “good” colony of scientists and environmental justice zealots. On the other, the “bad” colony, lavishly funded by the “Lukrum Corporation,” populated by remorseless shills, bent on destroying the fragile ecosystems of Mars for fun and profit.

Just in case this cartoon caricature of ideological struggle extending itself into the solar system isn’t obvious enough, the Martian drama is frequently interrupted with documentary interludes. These segments alternate between sober commentary by climate scientists, warning us of imminent disaster, and the usual images—mountain-sized formations of ice calving into a warming ocean, raging wildfire infernos, and, of course, oil-soaked waterfowl in their final death spasms.

If the rhetoric seems over the top, both in the dramatic dialogue, and in the documentary commentary, that’s because it is. Here are some actual quotes: “Whenever the wealth of the corporations is greater than the wealth of governments, the corporations win.” “People have to join together to rein in the companies.” “Oil is a war against life.” “Big corporations will view Mars as an ‘unfettered’ regulatory environment.” “Science faces skepticism from the public and opposition from the people in power.” “Our mission was to explore this planet, not watch it be exploited by corporate thugs.”

And on, and on, and on, and on, and on. To make their points, National Geographic trots out everyone from Bernie Sanders to Bill Nye the Science Guy, and they touch on everything from climate change to Citizens United. Parents, watch your teenagers; nothing they get in the public schools will contradict this one-sided onslaught.

And what’s the point, if you take this literally? That colonies on Mars, a moonlike, cratered rock with barely a trace atmosphere and no archeological remnants (notwithstanding speculation from ancient astronaut theorists), require environmental impact statements? That Mars might experience catastrophic climate change? That its “ecosystems” must not be disrupted? Really? No. This is television docudrama intended as a convincing metaphor. After all, if we have to be this cautious on Mars, imagine how much more cautious we’re going to need to be here on Earth.

While National Geographic makes transparent use of the eventual settlement of Mars as a metaphor for the ideological conflict currently raging on Earth, this cable television production itself might serve as an apt metaphor as well. Because this TV show is affiliated with—and partially owned by—a ridiculously well-endowed foundation, the National Geographic Society, yet presents its case as if it is arguing against the all-powerful establishment.

This is one of the biggest lies in the entire debate over how to manage resources on Earth: the lie that says the people concerned about “climate change” are the underfunded underdogs, who bravely face the corporate behemoths and their paid-off puppets. Nothing could be further from the truth. The following table shows, for the most recent year for which there is data available, the annual revenue of just a few of the environmentalist nonprofits operating in America.

The National Geographic Society is the largest on this list, but the tail is long. Beyond this sampling, there are thousands of activist nonprofits dedicated to fighting “climate change,” or “smart growth,” or “getting people out of their cars” and promoting mass transit, or “environmental justice,” and so on. To paraphrase Carl Sagan, the man who once said, “terraforming Mars is an idea whose time has gone,” “billions and billions” of dollars are spent each year by environmentalist nonprofits in the United States, and “billions and billions” more around the world.

Environmentalist Nonprofits and Foundations (partial list)

To be fair, much of the work being done by environmentalist nonprofits is valuable and should be supported. Back in the good old days, Greenpeace had one mission: save the whales. And they succeeded. The Sierra Club had its origins in saving what remained of old-growth Sequoiadendron giganteum redwood trees; the club even advocated restrictions on immigration based on the impeccable logic that if millions of people continued to pour into the United States, that would put additional pressure onto ecosystems. But that idea went away as the alliance between the hard Left and the environmentalist movement solidified.

Now, instead of prioritizing efforts to end what are the urgent and genuine environmentalist challenges of today—tropical deforestation to grow “carbon neutral” biofuel, strip-mining the oceans to feed Asia, slaughtering the last herds of Rhinos because supposedly consuming powder from their ground-up horns works better than Viagra, slaughtering apex ocean predators that are essential to marine ecosystems because serving soup containing Shark fin confers status in China, rampant rates of population increases among the most backward, misogynistic societies on Earth—instead these well-heeled environmentalist nonprofits are turning all their firepower towards ending “climate change.”

The irony here is off the chart. Enlisting the financial power and moral credibility of American and international environmentalist organizations in the fight against “climate change” is a corporatist wet dream. Except, oops, it’s not a dream. It’s reality. You see, when it comes to fighting “climate change,” the environmentalists have a lot of help. And why wouldn’t they?

Fighting climate change, as it is interpreted in contemporary society, means you can’t build any more homes on open land. Instead, you have to densify, in order to reduce the “carbon footprint.” This makes established landowners and land developers filthy rich, since only they have the preexisting assets and financial heft to build more homes. It enriches the public sector, as higher property taxes are collected from real estate that has artificially inflated value, and as the real estate portfolios of pension funds soar commensurately.

Fighting climate change means consumers have to buy new cars and new durable appliances, since the old ones waste energy and water, and aren’t “smart.” And speaking of “smart,” fighting climate change means we’ll have to build “smart cities” and the “internet of things,” whereby not only will every aspect of our resource consumption be micro-managed—with “incentives” to reduce usage at algorithmically optimized moments (never mind if you wanted to wash your shirt now, and not when the grid is ready to accommodate you), but you’ll also be micro-surveilled.

Fighting climate change means that international corporations will get a few more profitable quarters, as they sell new automobiles, light rail cars, busses, washers, dryers, ovens, cooktops, water heaters, solar panels, streetlights, grid upgrades, etc., that people will be required by law to buy. And everything from your coffee maker to your toilet will be “wired.” You will not only be mandated to buy these products, but you’ll have to “subscribe” to them in order to facilitate software upgrades. You’ll never really own them. But who wants a dumb washer, after all?

Fighting climate change will mean that public entities will no longer have to build new infrastructure, and will use that money instead to hire more bureaucrats to watch over us, and to pay themselves more. Fighting climate change will mean that all rights to extract and utilize “carbon” will be traded—amidst stupefying corruption and fraud—on an exchange, with the number of extraction credits slowly ratcheted down, allowing the market to set the price per unit. How wonderful.

And while the transnational corporations are getting richer, and political bureaucracies are expanding their reach, and environmentalist organizations continue to swell with virtue, what will happen to the environment—along with possible minor warming, possibly partially contributed to by humans? A lot will happen, that’s what.

Population growth will rage unchecked in the most vulnerable regions of the planet because nobody wanted to be called racist, ocean fisheries will collapse because nobody wanted to stand up to China, forests will be replaced with carbon-neutral corporate plantations because that was the “science-based” policy of choice, and charismatic megafauna will go extinct, because, well, you know why.

While this happens, what will the National Geographic Society be up to? They’ll produce more “climate change” propaganda, purportedly to warn us about corporations and all that.

Yes, “Mars” is a metaphor. But perhaps not the metaphor its producers intended.

This article originally appeared on the website American Greatness.

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