About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Thursday, December 21, 2023

Christmas & New Year's Message For Argentina


Between 1860 & 1930 Argentina experienced strong economic growth & by 1913 was one of the ten wealthiest countries in the world ranking higher than Canada & Australia.  Its per capita GDP was 80% of that of the United States.

Starting in 1946 with the government of President Juan Peron & his wife Evita, the economic experience of Argentina has been up & down but mostly down.  Peron, a former Army lieutenant general, took power after engineering a coup d'etat in 1943 & his socialist policies gradually shifted leftward leading to state control of the economy.  Unstable Peronism replaced the stable civilian constitutional government that had been in place for the seven decades prior to the Great Depression in the United States.

Under Peron, policies designed to redistribute wealth included increasing state-owned property, controlling prices & rents, & increasing government spending to finance populist programs.  Naturally this led to ruinous inflation.  

Peronism has persisted, to one degree or another, for the majority of the last 80 years resulting in political instability & economic decline in living standards.   

The deterioration of the currency over the past 20 years shown in the above graphic predominantly coincides with the rule of Cristina Kirchner (first as the wife of President Nestor Kirchner from 2003 to 2007, then as president herself from 2007 to 2015, & then as vice president to Alberto Fernandez from 2019 to 2023).  In the 21st century alone Argentina has defaulted on its international sovereign debt three times – in 2001, 2014, & 2020. 

The above graphic tells the story of the unsustainable Argentine government spending the past 20 years & its accompanying inflationary misery & deterioration of any standard of living where 40% of the population now lives in poverty.  The black-market value of the peso is well over 1,000 pesos per U.S. dollar, far exceeding the official rate of 370 pesos per dollar.  The Argentine peso has lost 99.206% of its value against the U.S. dollar from December 5, 2003 to December 10, 2023, going from a value of more than a third of a dollar to 27% of a penny.  See graphic below that shows the growth of the money supply the past five years.

Inflation was 143% the past year - see graphic below.

The above three graphs illustrate Steve Forbes' concise definition of inflation - the distortion of prices that occurs when money loses value.  The fundamental cause of Argentina's inflation is the decline of the value of the peso.  Money, first & foremost, is a measure of worth.  Source: Inflation - Forbes, Lewis, & Ames, pages xiii & 9.

With the above backdrop it is no wonder that the Argentine electorate felt they had nothing to lose & on November 19, in a runoff presidential election, elected libertarian economist & Congressman Javier Milei President in a vote of 56% to 44% over the sitting Peronist economic minister Sergio Massa.  The turnout was 74% - you have to go back to 1900 to equal that turnout in the United States for a presidential election.

Since both candidates are steeped in different economic training the voters had a real choice - there were no subtle differences or small distinctions.  

Massa's record & beliefs were on display for most of the last 20 years - he held positions in a Peronist government before working for both Nestor & Cristina Kirchner's administrations as well as Fernandez's.  Massa's lifelong work was centered on making people dependent on government  - one of his campaign strategies was to show commuters two ticket prices for trains & buses: one low priced ticket, with government subsidies, he supported & the other much higher priced under Melei's plan without the government subsidies.  The budget deficit under Massa is 15% of GDP or about three times that of the United States in 2022.

Melei has been a university level professor of economics specializing in economic growth.  He studied the work of Professor Friedman & Dr. Murray Rothbard (& thereby extension to Bastiat) & knows the importance of people producing value in an economy.  Melei follows the laissez faire Austrian school of economics.  Melei opposes identity politics, sex education, abortion, euthanasia, & the notion that humans cause climate change.  He is an advocate for individual rights, has zero tolerance for crime, supports families' choice of education, gun owners' rights, same sex marriage, gender identity, universal healthcare, & legalization of drugs & prostitution.  Melei's foreign policy preferences for Argentina include closer relationships with the United States, supporting Ukraine's stand against Putin's invasion, & less close ties with China. 

The election was virtually over when Massa won Buenos Aires, where a third of the Argentine population lives, by only 1.4% & Melei won Cordoba 74% to 26% by over 1 million votes.  Massa's wins were small to moderate, & sparsely distributed throughout the country while Melei won by substantial margins across the entire country.  Unlike the presidential elections of the United States where Democrats win the west coast, northeast, & a few other states but lose the rest of the country, Melei had no weak spots. 

The actual results of the runoff election were Melei 14,476,462 votes (55.69%) to Massa 11,516,142 votes (44.31%).  Massa conceded defeat before the first official results were announced.

Melei took office on December 10 & his immediate plans include public spending reductions by reducing transfer payments to provinces, cancelling public works, & cutting subsidies to energy & transportation agencies like the train & bus commuter subsidies that Massa supported.  Melei has reduced the official peso exchange rate against the dollar by 55% to bring it into line with the black-market rate which is the true market rate widely used domestically that has benefited importers (whose goods are bought using the low official exchange rate) @ the expense of exporters - now we have to see if the peso stabilizes there.

Due to the instability of hyperinflation & the loss of usefulness of the peso as a medium of exchange Melei plans to dollarize - i.e., use the U.S. dollar in addition to or instead of the peso, close the central bank that has been completely controlled by the treasury, eliminate & cut taxes, & privatize deficit making public companies.  

Melei's plans touch all of the principles of supply side economics: 1) the reduction of the size of government and its claims on earned income, 2)  lower taxes for the highest income earners who are the job creators, & 3) sound-money policies using the U.S. dollar the way Ecuador, El Salvador, Saudi Arabia, Qatar, Oman, Kuwait, Bahrain, & Hong Kong have - either dollarizing or pegging their currencies to the U.S. dollar.

Now turning around Argentina's economy will not happen quickly.  The misery of the entrenched stagflation (both high unemployment & high inflation) will endure a while longer as Melei's various programs come into play.  Melei's party holds only six of 72 seats in the Senate & 38 of 257 in the House so the politicians of all the parties will have to cooperate & recognize the electoral mandate & work with the new president @ least for a while - like Democrats did with President Reagan in 1981.

But the stakes could not be higher for all of Argentina because it is not just the 40% of the population that lives below the official poverty level, it is really all of the people, except for the few elites like Cristina Kirchner, who suffer from the poverty of opportunity where there has been no hope of improvement to the standard of living for most of the past 80 years. 

Javier Melei, & more pointedly the people of Argentina who dared greatly to elect Javier Melei in a landslide to the office of President, gives them a chance.  Now they have to make the most of it.

So it is to Argentina, & specifically the libertarian people who voted to throw off the burden of socialism that I dedicate this Christmas & New Year's message - namely, it is the future that they bring when tomorrow comes.

Tuesday, December 5, 2023

WSJ Publishes My Solution To The Social Security Solvency Problem

America was founded on the principles of limited government, personal responsibility, & free enterprise so it was an indication of how far we have moved away from these principles in learning that young adults & women think the American dream is out of reach in a recent WSJ/NORC survey: 46% of men & only 28% of women said the ideal for advancement for hard work still holds true.  Only 28% of Americans under 50 have a positive outlook on getting ahead.  People say they need a 50% pay raise to be happy.

Brought on by their incomes losing ground to inflation & the rapidity of an 18% increase in the general price level since Biden took office, Americans are feeling the effects of the mixed economy that is really more than 50% socialist. The federal government's limitless deficit spending is really not fulfilling but just lets people muddle through life on government dependence never knowing the "triumph of high achievement" in the words of TR's Man In The Arena.

Complicating the socialist economic problem for these young people is that many of the former grade A companies they work for have stymied their upward mobility by adopting Woke cultures centered around antibusiness non-financial aspects of the ESG movement, equality of outcome policies of DEI, a super alertness to perceived racial prejudice & discrimination - even when none exists - to the point of absurdity following the hateful teachings of Critical Race Theory, & a broader awareness of social inequalities such as racial justice, sexism, & homosexual, bisexual, & transgender rights.  It would be hard for a new Ivy League MBA with $100,000 of student loan debt to want to work for an employer adopting these types of policies - these MBAs are looking for meritocracy & advancement.

But what they are finding is trouble "in terms of their perceived ability to marry, raise children, own a home, & plot an autonomous course to have control of their own financial destinies - the fundamentals of traditional middle class citizenship." - The Dying Citizen, page 40, Victor Davis Hanson.

A case in point - The Walt Disney Company recently filed an SEC statement admitting  "We face risks relating to misalignment with public and consumer tastes and preferences for entertainment, travel, and consumer products, which impact demand for our entertainment offerings and products and the profitability of any of our businesses."  Specifically, Disney has infamously dabbled in politics by attempting to place homosexual & queer content in children's school programs - fighting the state of Florida & the preferences of parents who are their paying customers.  See Parental Rights In Education law.

Since much of this wokeness has spread to Police Departments & the U.S. military is there any wonder that 2,500 NYC policemen have quit in 2023 & the military faces recruitment shortfalls?

To address the significant portion of the country that is not concerned about meritocracy & advancement of career but rather prefers time to contemplate the correct work-life balance - especially while their parents are helping out - the country obviously needs a change of mindset from a "you deserve, you're entitled to" mindset to one of even limited personal responsibility for a start.  Just listen to TV & radio commercials to see how much stuff advertisers tell people they deserve for free, & of course this mindset delivers anything but freedom.

The federal government runs 126 separate & often overlapping anti-poverty welfare programs identified by the Cato Institute, like the 33 housing programs run by four cabinet departments or the 21 different programs providing food or food-purchasing assistance.  But make no mistake, federal government spending is powered by Social Security & Medicare & unless the new president is willing to tackle these gargantuan entitlements our financial miseries as indicated above will only get worse due to increased longevity of older American beneficiaries & the smaller payroll contributions of people unconcerned about working.  And both Biden & Trump offer no help saying they have no intention to address Social Security & Medicare entitlement funding @ all.

Now I have offered four solutions for America's financial problems: 1) replace the Medicare plan with one of premium support to buy private insurance using a nominal dollar demogrant, unadjusted for inflation, for people younger than 55, 2) change the basis for the initial Social Security benefit to the CPI instead of the national average wage index to ensure that benefits do not grow faster than the cost of living, 3) cut, cap & balance federal spending @ 18% of GDP, & 4) replace the federal income tax & IRS with the FairTax Plan.  Go to the search bar on the upper left side of RTE to find any of the numerous posts I have written explaining in detail all of these solutions - all of which get some play in the financial media from time to time.

So with the above as background, I was delighted when the WSJ published my letter below on November 16 regarding the Social Security solution.

Dear Editor,

John F. Cogan and Daniel L Heil's excellent op-ed (Older Americans Are Better Off Than Ever - November 10) points out that "the typical senior household today enjoys Social Security benefits that have twice the purchasing power of benefits received by the average household in 1982."

A beneficiary's initial benefit is based on the national average wage index, not the inflation rate.  Because real wage growth has been greater than inflation, purchasing power has doubled since 1982.  Indexing the initial Social Security benefit formula to inflation instead of this wage index would solve the Social Security solvency problem.  By using the index, the government is guaranteeing a real positive return for the average person, a guarantee no other investor has.