Wednesday, September 18, 2019

Other Perfidious "Assaults on Democracy"

Critics and Democrats claim Republican leaders in the North Carolina General Assembly “assaulted democracy” when they called for two legislative veto override votes early last Wednesday morning when only 64 of the 120 House members were there to vote.
Fifty-five Republicans and nine Democrats were present on the floor. Sixty-one legislators had to be present to constitute a quorum. The Republicans won 55-9. They overrode two of Gov. Roy Cooper’s vetoes by a three-fifths majority: the budget and funds for the Medicaid transformation process now underway in the state.
The Senate has to consider both veto overrides before they can become law.
The only people who are not shocked or surprised by any news about legislative maneuvers that appear to be “underhanded” or “dishonest” are legislators or staff who have been on the receiving end of such “attempts to destroy democracy” in the past.
The main difference is that they usually happen in the dead of night, not in broad daylight for everyone to see.
Until 2011, those receiving the short end of the stick since Reconstruction were Republican legislators in the North Carolina General Assembly.
In 2005, there had been a long and contentious battle over the state lottery in North Carolina ostensibly to help provide more funds for public education in the state. The vote was close but kept falling short of the majority needed to pass the N.C. Senate which blocked passage since the House was in solid Democratic control at the time.
On Aug. 30, in the dead end of the summer, two Republican senators were on excused absences which created the opportunity for a 24-24 tie in the Senate. Democrat Senate leaders Tony Rand and Marc Basnight called senators back to Raleigh because they could count and a 24-24 tie would mean Democratic Lt. Gov. Bev Perdue could cast the deciding vote for the lottery and send it to the House and then to Democratic Gov. Mike Easley for his signature.
Was that “fair” or “foul” play back then? Or was that a shrewd use of parliamentary procedure that everyone knows about once they are sworn in?
The mother of all legislative shenanigans though took place in Congress on Oct. 30, 1987, one week after the largest percentage one-day stock market crash since the Great Depression.
Members of Congress were terrified that they had contributed to the crash by spending too much money, built up too much national debt and needed to at least try to balance the budget. The Democratic-dominated House was considering a $23 billion deficit-reduction package that included $12 billion in tax hikes that 48 Southern Democrats did not want in the bill.
The first attempt failed by a single vote, 205-206. Normally, a bill would have to “layover” for at least one legislative day before reconsideration, but Speaker Jim Wright of Texas was livid and didn’t want to wait until Oct. 31, so he started twisting arms on the floor right away.
Not only did he twist arms, but he also moved heaven, earth and Father Time forward. The Democratic leadership formally adjourned the House to end calendar day Oct. 30 “officially” around noon. They then passed a resolution declaring that a new day had begun so they could “start” the next legislative day that same afternoon, Oct. 30, at 3 p.m. complete with a new “morning” prayer.
It “magically” passed by one vote, 206-205. Fellow Texan and freshman Democrat Congressman Jim Chapman changed his vote from “Nay” to “Aye” to provide Speaker Wright his “assault on democracy” victory, as Republicans and many in the press saw it then.
We were in 401 Cannon House Office Building. The next day, we noticed a lot of painting and refurbishing going on across the hall in a spare storage room.
One week later, three of Jim Chapman’s staff moved into their new “ancillary office.”
Congressman Chapman got a new office space for his staff for changing his vote to raise $12 billion in taxes.
Were these assaults on democracy? You decide for yourself.

(first published in North State Journal 9/18/19)


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Wednesday, September 11, 2019

'The Resistance--- To What Exactly?"

Elderly leaders of “The Resistance” movement — think Bernie Sanders and Elizabeth Warren— grew up in the ’60s protesting the Vietnam War; talking about peace and love; burning bras to support women’s rights and demanding freedom from government oppression.
Back then, they wanted to “Resist the Establishment.” “Fight the Man.” “Question Authority.” Everywhere.
A funny thing though happened over time. These same “resisters” never seemed to want to “Fight the Man” in Washington when power was in the hands of liberal presidents they agreed with such as Bill Clinton and Barack Obama.
They wanted to give them more power, not less. Giving more power to centralized government officials as adult voters went against everything they said was wrong with America as student protesters.
We went to Ocracoke over Labor Day where I bought a T-shirt from the owner behind the counter who seemed to be about my age. She had a “RESIST” sign prominently displayed, so I had to ask if it meant the same thing to her now as during the protests of the ’60s.
“It means I resist President Trump!” she said very nicely.
“Do you resist him personally or specifically on certain policies?” I asked as politely as I could.
“He is just not a very good person,” she said.
“We have had plenty of presidents who were not ‘very good people.’ Neither Bill Clinton nor JFK was a sterling paragon of moral virtue, you know.”
“Trump is a fascist.”
“Many commentators called him Benito Mussolini when he was elected in 2016. There haven’t been any brownshirts in jackboots breaking windows and dragging people off to concentration camps on the news lately.”
“He treated children at the border terribly,” she offered as a rebuttal.
“It is tough to take care of children separately when their parents enter this country illegally. If we don’t have a nation of laws, people around the world would stop wanting to immigrate legally or illegally to America.”
“He wants to make abortion illegal,” she said.
“Abortions are still legal around the country,” I said. “There have been some restrictions on taxpayer funding for abortion, but large majorities of Americans have always opposed taxpayer-funded abortions.”
“Do you think President Trump is racist?” I asked. “Would he restore the Jim Crow laws from the Old South?”
“I think he would if he could,” the shop owner replied.
“President Trump signed a criminal justice bill in December 2018 that would free disproportionately larger numbers of black and Latino prisoners incarcerated for minor drug offenses. Why would a truly racist president ever do that?”
“Can I ask you one final question, ma’am, before I buy this nice T-shirt which I hope you sell at a profit to stay in business?”
“Sure. Go ahead.”
“How has your business been the last couple of years?”
“Despite Hurricanes Matthew and Florence, I have had the highest sales I can remember,” she blithely offered.
“If your business under Trump has been better than it ever was under Obama, why would you want to ‘resist’ that prosperity?”
“President Obama was a good president. He wanted to help people,” she argued.
“We help millions of people when we have a growing economy where everyone can find a job to support themselves and their families. Isn’t that better than having them all on government welfare?
“You are part of ‘The Resistance’ to President Trump which seems more personal in nature,” I said. “I agree with the idealism of our youth — I still don’t trust the concentration of massive amounts of power in the hands of a very few elected or appointed government officials in Washington to tell the rest of us what to do all the time.
“Wouldn’t it be nice if liberals, conservatives and independents could band together to ‘Resist the Establishment’ regardless of who is in power? Try to make our government smaller and quit spending so much money and building so much debt for our children to pay?”
She just smiled and said goodbye.
(first published in North State Journal 9/11/19)

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Wednesday, September 4, 2019

Inverted Yield Curves, Russian Collusion: What Next?

30-year bond yields at historic lows
Liberal cable news outlets that desperately want to get President Donald Trump removed from office any way possible have seized on the “inverted yield curve” as the next best political way to get him out of the White House.
Why use a financial term in electoral politics?
“Russian collusion” didn’t work. Impeachment is a moot point since the 2020 election is already underway. Why not jump on “inverted yield curves” to scare voters to vote against him even if hardly any know what it is?
Put very simply, an inverted yield curve happens in U.S. Treasury bond markets when long-term rates in 30-year bonds are lower than short-term rates of, say, 2-year bonds. When investors get spooked by something negative they see in economic indicators, they want to put their money in the safest possible financial instrument they can find.
When investors bid up the price of the 30-year bond for its safety, the effective stated yield on any issued bond is essentially pushed down. Such a flight to safety usually diminishes the demand for short-term bonds, which then drop in price by comparison and drives their effective interest rates up.
Short-term interest rates going up are not good for the economy either. Higher interest rates mean it costs more for businesses to borrow and invest, hurting their expansion plans or need to hire more workers — although one has to wonder how much of difference it really makes when we are in the lowest overall interest rate environment since the 1960s.
Many economists see inverted yield curves as harbingers of a recession occurring anywhere from 8 to 24 months after inversion.
In the hopeful eyes of MSNBC and CNN commentators, a bad recession will happen right when people go to the polls to vote for President Trump or Elizabeth Warren perhaps in November 2020.
Is it a “definite” indicator of a looming recession?
Ed Yardeni, a noted investment strategist, wrote in a recent newsletter that “an inverted yield curve has predicted 10 of the last 7 recessions.” He went on to say: “Inverted yield curves don’t predict recessions … They’ve tended to predict financial crises, which morphed into economy-wide credit crunches and recessions.”
There have been at least two occasions since 1960 when an inverted yield curve flashed an incorrect prediction for recession, in 1965 and 1998.
If this is a false reading of the inverted yield curve with no financial crisis in the offing, what else could be going on?
Apparently, the whole world is sending money for safekeeping in the U.S. Negative interest rates in Europe will do that to nervous investors as will unrest and tension in the Middle East, Hong Kong and China.
Inverted yield curves might not mean what they used to mean. In 1980, the yield on a 30-year bond was near 15%. In 1990, it was 9%. In times of higher interest rates, inverted yield curves meant more than they do in the flat 2% interest rate, essentially zero inflationary expectations of today.
A real estate investment executive said their investment projects were slowing down some, but not because he thinks a financial bubble-induced recession is imminent. Cost of materials is rising as are the costs of labor due to a shortage of skilled construction workers, but the main thing constricting their new investments is competition from foreign money looking for a safe harbor in America.
His investors typically have demanded 8% returns on their investments. He turned down a recent investment from a Lebanese investor who wanted only a 5% return, an amount that would undercut his longer-term partners which he was unwilling to do.
For now, America is looking like the only place where sophisticated investors the world over are paraphrasing a quote oft-attributed to Will Rogers: “I am more concerned with the return of my money than the return on my money”.
Relying on inverted yield curves as a political tool to get President Trump out of the White House might not work any better than “Russian collusion” did.

(first published in North State Journal 9/4/19)

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