In his popular 1971 book Rules for Radicals, Saul D. Alinsky identified ridicule as the most potent of all political weapons. 

“There is no defense. It is almost impossible to counterattack ridicule,” said Alinsky, a Chicago-based community organizer and activist.  

Ridicule is the recipe for Matt Walsh’s new documentary Am I a Racist?, a film that pulled in $4.7 million in its opening weekend, the third most for a documentary in the last decade, according to The Hollywood Reporter. 

I attended Am I a Racist? on Saturday with a friend, and with the possible exception of Deadpool & Wolverine, no movie in years had me laughing so hard.

Walsh does a wonderful job of exposing the DEI industry and the bankrupt philosophy of the New Racists, who much like the Old Racists, refuse to see people as individuals. 

“You cannot separate yourself from the bad white people,” author Saira Rao tells a group of women (including Walsh in costume and wig) who ponied up thousands of dollars to learn how to shed their white identity. 

Rao, Robin DiAngelo and the other “antiracists” depicted in Walsh’s film fall into the racist trap of seeing others only as their group identity. And Walsh goes to great lengths to expose the radical intellectual foundation of the ideology of the New Racists, but that work has been well done before. What makes Am I a Racist? so delicious — and a true work of art — is Walsh’s brilliant use of narrative and humor to reveal that his targets are not just third-rate scholars but outright charlatans.

The movie begins with Walsh attending an antiracist struggle session under false pretenses. He introduces himself as Stephen and behaves obnoxiously, interrupting others constantly and yammering on about himself. Eventually he retreats to the crying room (a real thing), and upon returning he has been outed as Matt Walsh, conservative commentator for the despised Daily Wire. People feel unsafe and Walsh is ordered to leave. The police are called. 

All of this is according to plan, of course. And it gives Walsh his “Inciting Incident” — a filmmaking term for a disruptive event that sets a protagonist’s story into motion. Walsh decides to “disguise” himself and sets out on a quest of racial discovery. He dons a jacket and man-bun, and files the paperwork (and pays the necessary fees) to become a certified DEI expert.

Equipped with his DEI card, which he flashes everywhere he goes, Walsh can begin his quest of coming to grips with his whiteness, paying lavish fees to sit down and talk with the best minds in the DEI business.

Using droll humor, pregnant pauses, and the power of the question, Walsh allows his subjects to do the work on his behalf, telling the audience everything about DEI and the ideology of the New Racists. Kate Slater, an “anti-racist scholar-practitioner,” tells Walsh we should be talking to six-month old babies about racism. (She’s angry her own daughter still likes white princesses.) 

Some antiracists appear to be misguided true believers, duped to believe that the the answer to racism is a different kind of racism, but the majority of Walsh’s subjects appear like grasping grifters turning a buck by exploiting the racial shame white Americans still feel over slavery and Jim Crow.

The climax of the movie comes when Robin DiAngelo, author of the best-selling book White Fragility, shells out $30 to Walsh’s assistant Benyam Capel, one of his “seventeen black friends,” as reparations. DiAngelo seems to doubt individual action can atone for the collective sin of slavery, yet after a little prompting, which includes Walsh’s own reparations payment to Capel, she retrieves the money from her purse.

“That’s all the cash I have,” DiAngelo tells Capel.

Unlike Rao, DiAngelo doesn’t seem mean. She doesn’t seem bitter. But she does seem very much like a fool — albeit a fool who has written a book that has sold five million copies and who was paid $15,000 for a brief interview with Matt Walsh. 

All of this is designed to drive home the point of Walsh’s mockumentary. 

“There’s a group of people that get paid money — and derive power and influence — in creating racial division,” Walsh tells The Free Press. “They profit off of guilt and resentment and suspicion.”

Saying this is one thing. Showing it is something else, and that’s exactly what Walsh does on his Borat-like journey of racial discovery.

I made the Borat comparison when leaving the theater, and  was a bit disappointed to see that numerous other writers had already drawn the connection. But there’s an important difference between Walsh’s comedy and that of Sacha Baron Cohen, whose mockumentary Borat in 2006 became an international smash by (hilariously) deceiving and mocking Americans. 

Whereas Cohen’s comedy punched down, Walsh’s humor punches up. His targets are primarily university faculty and best-selling authors who are making astonishing amounts of money by creating racial disharmony and exploiting racial shame. Secondary targets (we might call them friendly fire) are the rich white women who pay Rao unseemly sums to be told how awful their whiteness is, and the suckers who pay card-carrying DEI instructors to provide them tools to flagellate themselves over their racist sins.

The religious parallels here are not lost on Walsh, who at one point has attendees of his DEI session select the tool with which they’ll flagellate themselves. Though some of the attendees walked out of the room when the whips and paddles were presented, many reached into the box and took one. 

In the end, Am I a Racist? shows that the two things Marxists claim to hate most — profit and religion — are deeply entwined with the DEI commercial apparatus. 

Importantly, however, Walsh’s movie doesn’t just lambaste antiracists. He shows us good examples, too. Along his journey, we meet other people — black and white. Young and Old. Immigrant and native — who see people as they should: as individuals. 

The decision to incorporate these voices and experiences into the film was artistically important; the comedic scenes during this part of Walsh’s journey are warmer and less stressful than when Walsh is, say, serving antiracists food at a dinner party behind a mask and dropping a stack of dishes, or filling a glass with water until it spills over. Even more importantly, these trips and experiences show us there is an alternative to the racism that is infecting our institutions and human souls.

It’s unclear what the legacy of Walsh’s movie will be. While I don’t expect to see Walsh at the Academy Awards in March, I suspect his film will hasten the withdrawal of DEI programs in America, which were already in retreat.

Whether Am I a Racist? can drive a stake through DEI’s heart is unclear, but Walsh has already achieved something no white paper or logical argument has done to DEI evangelists: he embarrassed them. 

And as Saul Alinsky would say, nothing is more effective politically than that.  

Over the past couple of decades, calls to do something about economic inequality have grown louder. The narrative holds that income and wealth inequality are skyrocketing, and the government must use higher tax rates on the wealthy to bring them down. In particular, the Biden-Harris proposal to tax unrealized capital gains seems motivated in part by the desire to reduce the wealth of the wealthy.

Is US wealth inequality really growing? I’ve seen this chart from the Federal Reserve shared around.

It shows that the shares of wealth owned by the top 0.1 percent and by the top 1 percent have grown over time, while the share of wealth owned by the top 10 percent has remained fairly steady, and the share of wealth owned by the bottom 90 percent has fallen slightly since 1989.

So wealth inequality does seem to be growing. But let’s also note that wealth is growing for the bottom 50 percent too, not just the top.

I took the Fed’s wealth data and adjusted them for inflation. You can see here that all wealth groups have more than doubled their wealth in real terms since 1989. The pie is growing — a lot — and so it’s not clear we should even care that inequality is going up, so long as everyone is benefiting.

But even though economic inequality is not a bad thing in and of itself, I wouldn’t blame someone for looking at the first chart and thinking it might be a symptom of something that has gone wrong in the American political economy. So what’s behind this rise in wealth inequality, and is it real in the first place?

I dove into the literature on wealth inequality, and what I found was that this remains an emerging area of research, in part because the data have some problems. How you value illiquid forms of wealth like ownership of private businesses ends up being an important problem. And it’s an important problem because ownership of private businesses and corporations is concentrated in the top 10 percent, and that source of wealth has driven the entire trend in inequality.

These numbers aren’t adjusted for inflation, but they show just how important ownership of businesses and corporate equities is to the wealth of the top 10 percent compared to everyone else. The bottom 90 percent get their wealth mostly from real estate, pension plans, and consumer durable goods. Publicly traded corporate equities are easy to value, but how do you value private businesses that have never been sold? At best you can “guesstimate” what they are worth, and even these numbers are likely to be wrong. After all, the success of many private businesses depends crucially on the unique expertise and talent of their owners. If they were sold, they wouldn’t be as valuable, because that expertise would be gone.

The other point to notice about this source of wealth is how risky it is, compared to real estate in a primary home and pension plans. Having your wealth in a private business or even a publicly traded business is the opposite of diversification. And this is what researchers have found. This widely cited paper finds that “business income is much riskier than labor income.” Another finds that high-income households are “far more exposed to aggregate fluctuations” than low-income households. Yet another investigation finds that “[i]diosyncratic rates of return are crucial to explain social mobility, in particular by speeding up downward mobility.” In other words, rich people often don’t stay rich, because the type of capital they own often suffers negative returns.

That’s the theme of last year’s book The Missing Billionaires, which finds that “if the wealthiest families had spent a reasonable fraction of their wealth, paid taxes, invested in the stock market, and passed their wealth down to the next generation, there would be tens of thousands of billionaire heirs…today.” The middle class in America enjoys the ability to earn labor income, save some of it, and invest it in low-fee, diversified index funds that earn relatively low-risk passive returns. But billionaires often can’t do that, or haven’t. Their wealth overwhelmingly depends on their active management of a single enterprise — they put all their eggs in one basket. That’s why billionaire wealth rarely passes down for more than three generations.

Thinking about the problem of volatile returns further, we should realize that people who suffer a volatile rate of return — entrepreneurs — are going to demand a higher average rate of return to compensate for that risk. To put the point a different way, if we forced entrepreneurs to have the same average income as workers, no one would become an entrepreneur — it wouldn’t be worth the risk. If volatility goes up, so must capital incomes.

This review essay finds that the wealth-income correlation has declined over time. In other words, people with higher (lifetime) incomes are now less likely to have higher wealth than they once did. Perhaps the volatility of entrepreneurial returns has gone up, which means that entrepreneurs would enjoy higher incomes even as they are less likely to be able to build long-term wealth.

Another reason for rising wealth inequality is the aging of America. Older people are wealthier than younger people, and there are more older people now. This chart shows wealth held by different age groups over time.

These figures are not inflation-adjusted, but they show just how much wealth skews toward the old, and how the proportion of wealth held by the old has increased as the ranks of the old have grown and the ranks of the young have shrunk. One way to think about these figures is that many people who have little wealth now will eventually have a lot of wealth. If we want to talk about wealth (or income) inequality, we need to adjust wealth and income figures for the life cycle. Economist Jeremy Horpedahl has been following generational wealth trends, and he finds that millennials and Gen Z have more wealth at their age now than previous generations did at the same age.

A final cause of wealth inequality is differential access to financial information and investment opportunities. One study finds that “30-40 percent of retirement wealth inequality is accounted for by financial knowledge.” Wealthy investors are also allowed to invest in private equity, which earns higher (but more volatile) returns than the broader stock market. The Securities and Exchange Commission bans non-wealthy people from investing in private equity on the assumption that they are not financially sophisticated.

In short, wealth inequality is largely a result of general prosperity. Wealth has risen across the generations and across the economic spectrum, but it has risen most for those at the top, possibly in part because wealthier people have better financial knowledge and, because of regulations, better access to investment opportunities. The aging of Americans has also increased income and wealth inequality. Finally, wealth inequality might be overstated to begin with because the type of wealth owned by the wealthy is specialized and therefore more volatile. Let’s by all means grow the financial knowledge of all Americans and increase their opportunities to access high-return investment opportunities. But there’s little evidence the American economic system is fundamentally “rigged” against those without wealth.

Only four percent  “of US adults say the political system is working extremely or very well.” Sixty-five percent say we “always or often feel exhausted when thinking about politics.” Yet, we keep doubling down, thinking that more attention on politics will somehow fix what ails society. 

In 2020, candidates spent over $14 billion seeking the presidency. This was double the amount spent in 2016. The 2024 presidential campaign is far from over. How much will candidates spend this time to fix our attention on politics? 

If you are one of those who find politics dispiriting, C. S. Lewis would understand. In his essay “Membership,” contained in his collection The Weight of Glory, C. S. Lewis wrote, “A sick society must think much about politics, as a sick man must think much about his digestion: to ignore the subject may be fatal cowardice for the one as for the other.” Politics, Lewis explained, is not “the natural food of the mind” but a “necessary evil.” However, too much emphasis on politics has become “a new and deadly disease.” 

Lewis compared fresh fruit to canned fruit. The latter can be necessary for storage, but Lewis observed he had met people who learned to prefer the tinned fruit to the fresh. 

Similarly, among us are those who prefer to weigh the promises of candidates as a pathway to societal advancement rather than shore up the foundations of a free society. 

If candidates still fix your mind on their empty promises, Ralph Waldo Emerson has an instant mindset cure. In his essay “Experience,” he wrote, “A political orator wittily compared our party promises to western roads, which opened stately enough, with planted trees on either side, to tempt the traveler, but soon became narrow and narrower, and ended in a squirrel-track, and ran up a tree.”

Running ourselves up trees has consequences. Milton Friedman, in Capitalism and Freedom warned, “The use of political channels, while inevitable, tends to strain the social cohesion essential for a stable society.”

Friedman continued, “Every extension of the range of issues for which explicit agreement is sought strains further the delicate threads that hold society together.”

And then, as if Friedman could see ahead to 2024, he added, “Fundamental differences in basic values can seldom if ever be resolved at the ballot box; ultimately they can only be decided, though not resolved, by conflict. The religious and civil wars of history are a bloody testament to this judgment.”

Friedman clearly articulates the antidote to politics:  

The widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary with respect to any activities it encompasses. The wider the range of activities covered by the market, the fewer are the issues on which explicitly political decisions are required and hence on which it is necessary to achieve agreement. In turn, the fewer the issues on which agreement is necessary, the greater is the likelihood of getting agreement while maintaining a free society.

When someone says I have unyielding loyalty to Tide detergent or Coca-Cola, their decision only affects them and their family; the rest of us go about our business.

Yet, there are many who say with great conviction: I am a lifelong, loyal Democrat or I am a lifelong, loyal Republican.

In the wake of fraudulent elections in Venezuela, some are saying they are unconditionally loyal to the corrupt President Maduro.

In Stalin’s Soviet Union, some falsely accused of political crimes went willingly to their death as their last service to the Party.

Such loyalties are best reserved for totalitarian societies.  

This is not the loyalty that built America.

What built and sustains America is loyalty to principles. 

There are few more precise statements of loyalty to principles than Thomas Jefferson’s First Inaugural Address of 1801. At the start of his address, Jefferson reflected on the duty before him. Instead of boorishly setting out his vision, Jefferson spoke of the greatness in the country’s founding principles. Great principles, not great individuals, were required. 

Jefferson said, “I approach [my duty] with those anxious and awful presentiments which the greatness of the charge and the weakness of my powers so justly inspire.” An “awful presentiment” is a foreboding of disaster. Jefferson humbly recognized the limits of his personal power and did not bemoan the constitutional limits on the power of government.

Jefferson was clear that only his reliance on principles overcame his despair over the daunting responsibilities of the presidency. In the Constitution, he would “find resources of wisdom, of virtue, and of zeal on which to rely under all difficulties.” 

Among the American principles, he stated, were “equal and exact justice to all men, of whatever state or persuasion, religious or political; peace, commerce, and honest friendship with all nations, entangling alliances with none; the support of the State governments in all their rights.” Then Jefferson added,

Principles form the bright constellation which has gone before us and guided our steps through an age of revolution and reformation. The wisdom of our sages and blood of our heroes have been devoted to their attainment. They should be the creed of our political faith, the text of civic instruction, the touchstone by which we try the services of those we trust; and should we wander from them in moments of error or of alarm, let us hasten to retrace our steps and to regain the road which alone leads to peace, liberty, and safety.

A claimed mandate at the ballot box must not be used to justify coercing others. On the contrary, Jefferson asked his audience to” bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will to be rightful must be reasonable; that the minority possess their equal rights, which equal law must protect, and to violate would be oppression.”

Jefferson understood that those who cannot even control themselves should hardly seek to control others: “Sometimes it is said that man can not be trusted with the government of himself. Can he, then, be trusted with the government of others?”

If people must not control others, what should a “good government” do? Jefferson delivered a clear answer: “A wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.” 

Jefferson advocated shared values to help maintain a good government, including “honesty, truth, temperance, gratitude, and the love of man.” 

Some people believe the government is the source of a caring society, Jefferson found the roots of a caring society in each of our everyday encounters: “Let us restore to social intercourse that harmony and affection without which liberty and even life itself are but dreary things.”

In his most famous essay, “Self-Reliance,” Emerson issued a caution for his generation and ours: “A political victory… or some other favorable event, raises your spirits, and you think good days are preparing for you. Do not believe it.”

Keeping in the spirit of Jefferson, Emerson ended “Self-Reliance” with his immortal line: “Nothing can bring you peace but yourself. Nothing can bring you peace but the triumph of principles.”

In July 2024, all three of the AIER Business Conditions indicators maintained their levels from the previous month. The Leading Indicator inched up from 54 to a mildly expansionary level of 58, while the Roughly Coincident Indicator declined from 83 in June to 58 in July. The Lagging Indicator fell from a contractionary 42 to a slightly more contractionary level of 33. 

Leading Indicator (58)

Among the twelve Leading Indicator components, from June to July 2024 seven rose and five declined. 

Among those rising were United States Heavy Truck Sales (15.71 percent), US Initial Jobless Claims (4.60 percent), the Conference Board US Leading Index of Stock Prices (2.27 percent), Adjusted Retail and Food Service Sales (0.97 percent), FINRA Customer Debit Balances in Margin Accounts (0.19 percent), the Conference Board US Manufacturers New Orders Nondefense Capital Good Ex Aircraft (0.12 percent) and US Leading Index Manufacturing, New Orders, Consumer Goods and Materials (0.11 percent).

Falling from June to July 2024 were the 1-to-10 year US Treasury spread (-0.61 percent), Inventory/Sales Ratio: Total Business (-0.73 percent), US Average Weekly Hours All Employees Manufacturing (-0.75 percent), University of Michigan Consumer Expectations Index (-1.15 percent), and US New Privately Owned Housing Units Started by Structure (-6.85 percent).

Roughly Coincident (58) and Lagging Indicators (33)

In the Roughly Coincident Indicator, four components rose and two declined. The Coincident Personal Income Less Transfer Payments (0.24 percent), Coincident Manufacturing and Trade Sales (0.19 percent), and US Labor Force Participation Rate (0.16 percent) gained. Industrial Production and the Conference Board Consumer Confidence Present Situation Index fell by 0.64 and 1.63 percent, respectively. Nonfarm payrolls were unchanged. 

Among the six Lagging Indicators, four declined and two rose. The declining components were core CPI year-over-year (-3.03 percent), the Census Bureau’s Private Construction Spending (Nonresidential) index ( -0.41 percent), US Lagging Commercial and Industrial Loans -0.19 percent, and US Commercial Paper Placed Top 30 Day Yields -0.02 percent. The Conference Board US Lagging Average Duration of Unemployment (-0.48 percent) and US Manufacturing and Trade Inventories rose.

Over the past twelve months, the Leading Indicator exhibited significant fluctuations, moving between expansionary and contractionary phases. In July 2023, the index was strongly expansionary at 79, but dropped to 46, dipping into contractionary territory. It briefly recovered to 54 in September, before plunging to 29 in October, indicating strong contraction. After that, the index rebounded, peaking again at 75 in February 2024. The trend then showed moderate fluctuations, with values ranging between 54 and 71 from March through July 2024. Over the last six months, the index has shown an increasingly tepid mild expansion, shifting toward a weaker performance.

Over that same time period the Roughly Coincident index remained strongly expansionary for most of the year, with values consistently above 75 from July 2023 through June 2024. In July 2024, however, the index shifted toward a more neutral level, dropping to 58 in a notable moderation from its previously strong expansion. The Lagging Index, meanwhile, has experienced a steady decline over the past six months, with no values exceeding the neutral level of 50 since November 2023. This gradual weakening, highlighted by a drop from 50 in April 2024 to 33 by July, indicates a persistent contractionary trend.

The overarching narrative from the three Business Conditions Monthly indices points is, for the first time in some months, one of relative consistency. The Leading Index shows signs of a mild but weakening expansion, while the Roughly Coincident Index, after strong expansionary performance throughout most of the year, has now moderated toward a neutral level. The Lagging Index has meanwhile steadily declined into contractionary territory. In the aggregate, the three indices suggest growing economic headwinds and a slowing of the broader economy.

Discussion

On September 18, 2024, the Federal Reserve initiated its rate-cutting cycle with a 50-basis-point reduction, a move that Chair Jerome Powell emphasized was aimed at managing downside risks to the economy, rather than signaling a weakened economic outlook. While stronger-than-expected data from industrial production and retail sales suggest underlying economic resilience, a closer look reveals mixed signals. While the rate cut increases the possibility of a soft landing, it remains to be seen whether the timing and degree of those cuts are sufficient to (whatever the economy). The Federal Open Market Committee (FOMC) has indicated further rate cuts ahead, projecting that the unemployment rate will stabilize at 4.4 percent. However, we anticipate a more prolonged effect, with unemployment likely rising to 4.5 percent by year-end and 5 percent next year. The possibility that the Federal Reserve’s rate reductions are aimed not only at mitigating unemployment but also at alleviating annual debt service costs, set to exceed $1.1 trillion this fiscal year, warrants consideration.

The FOMC concluded one of its most closely watched meetings cautioning that such large cuts won’t become routine and described the move as preemptive, directly addressing suspicions that the large cut signals a downturn in economic growth, which is still projected at 2 percent for the year. The 50-bp cut lowered the target range for the federal funds rate to 4.75 to 5.0 percent, with the Fed signaling two more 25-bp cuts this year. While the median FOMC forecast expects the unemployment rate to stabilize, some participants foresee a slightly higher peak. Core inflation projections were revised downward for 2024 and beyond, indicating the Fed’s growing confidence in hitting its 2 percent inflation target. Fed Chair Jerome Powell emphasized that the move was a recalibration of policy, rather than a response to alarming data, though signs of weakening in the labor market and the Beige Book report contributed to the decision. The committee remains open to further large cuts if the labor market deteriorates unexpectedly.

Despite the confidence expressed, and bearing in mind that the Consumer Price Index is not the Fed’s preferred inflation metric, US core inflation unexpectedly rose in August, driven by higher housing and travel costs. The core consumer price index (CPI), which excludes food and energy, increased by 0.3 percent from July and 3.2 percent year-over-year, marking the highest monthly rise in four months. This uptick raises the annualized three-month inflation rate to 2.1 percent (up from 1.6 percent in July). Headline CPI, which includes food and energy, climbed 0.2 percent due to falling gasoline prices. Shelter costs are continuing to rise in addition to airfares, daycare, and insurance. The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, is due later this month and remains closer to the central bank’s 2 percent target; it will play a more critical role than the CPI in shaping future rate decisions.

The broader economy is showing signs of cooling, particularly as consumers dip into savings. With the labor market softening, consumption is likely to be marked by caution in the months ahead. Although personal income grew in the late summer period, slightly outpacing expectations, this rise was offset by weaker wage growth and a decline in average hours worked. The savings rate drop and consumer reliance on wealth effects from a strong stock market have bolstered spending, but these factors are unsustainable if unemployment continues to rise or the stock market–which rebounded suddenly after the early August near-correction, experiences additional volatility. A cooling labor market and the potential for a stock market correction could quickly temper consumer spending, dampening growth in the last quarter of the year.

Recent jobless claims data suggest that layoffs remain low as companies are reluctant to reduce their workforce, but job cut announcements — a leading indicator — are rising sharply. Economic conditions are cooling, and weaker demand is likely to trigger more widespread layoffs in the coming months. Job cut announcements surged 193 percent in August, the highest since 2009 (excluding the lockdown period in 2020), with the most significant cuts coming in the technology and education sectors. Additionally, the most recent Federal Reserve Beige Book report denoted flat or declining activity across multiple regions, with consumer spending and manufacturing both weakening, signaling that further layoffs could be on the horizon. As a result, the unemployment rate may rise to 4.5 percent by the start of 2025. 

The University of Michigan’s September sentiment survey, interestingly, reflects both sides of the Fed’s dual mandate: consumers acknowledge that inflation has eased, but they also perceive a weakening labor market. The overall sentiment index rose to 69.0, the highest since May, which surpassed expectations. But views on inflation were mixed: short-term inflation expectations fell to 2.7 percent while longer-term expectations nudged up to 3.1 percent. Despite this, improved buying conditions for durable goods and a rise in future economic expectations suggest that some consumers anticipate rate cuts in the near term.

To the extent that the survey also reveals growing concerns about the labor market, with more respondents expecting higher unemployment and declining income expectations, inflationary pressures may be giving way to fears about job security, which could weigh on consumer confidence in the coming months. The survey also noted a slight increase in partisan sentiment gaps, indicating that consumer expectations may shift as the presidential campaign gains traction.

Late summer industrial production data offered some encouraging data points, particularly with headline production jumping 0.8 percent. That exceeded both expectations and the consensus forecast of an 0.2 percent gain. Manufacturing production also increased by 0.9 percent, largely driven by a 9.8 percent surge in output from autos and parts, which contributed significantly to overall growth. Consumer goods production rose by 0.7 percent, indicating some resilience, with consumer durables up 5.8 percent.

In what has become a common refrain, though, beneath the surface are more complex circumstances. The majority of the gains can be attributed to a recovery in automobile manufacturing, as other key areas, like consumer nondurables, actually experienced an 0.6 percent decline. Additionally, the manufacturing figures are at odds with PMIs, which indicate a contraction in production activity. The disconnect raises questions about the broader sustainability of the recovery. Moreover, revisions to the July data make August’s numbers look better than they are. July’s industrial production decline was revised down to -0.9 percent, providing a lower base for comparison which diminishes the significance of the August rebound. In other words, the numbers may be less robust than they appear.

Amid this extremely mixed array of economic data, gold has continued its noteworthy ascent, reaching new all-time highs. After the Federal Reserve initiated its monetary easing cycle with a 50-basis-point rate cut, gold surged as much as 1.5 percent, hitting $2,625.77 an ounce. The Fed’s official shift to accommodation weakened the dollar and boosted gold prices. Though the rate cut was widely expected, the beginning of a cutting cycle is traditionally bullish for gold. When a central bank adopts an accommodative monetary stance, such as by lowering policy rates, it tends to result in currency debasement. As the value of the currency declines, gold, a non-yielding asset with intrinsic value, becomes more attractive as a store of wealth and a hedge against inflation, driving its price higher. (Lower interest rates also reduce the opportunity cost of holding the metal, which doesn’t pay interest unless loaned.)

Commodity trading interests have positioned themselves accordingly, with net bullish positions in Comex gold hovering near their highest levels in four years. Historically, gold has increased by an average of 6 percent in the first six months after the start of a Fed rate-cut cycle. Central bank buying, increased safe haven demand due to geopolitical tensions, and strong retail investor interest have further fueled gold’s momentum. In the face of concerns about a broader economic slowdown signaled by warnings from companies like FedEx and Skechers, gold’s role as a safe haven asset continues to attract investors, propelling its gains amid ongoing market uncertainties.

The latest economic data presents a more subdued outlook, with several regions experiencing flat or declining activity as consumer spending weakens and manufacturing contracts. Despite recent upward revisions to GDP, the durability of July’s strong spending is now in question. Employment levels have generally remained steady, but firms are increasingly selective in hiring, with some reducing hours or using attrition to lower workforce numbers. Looking forward, businesses anticipate price and cost pressures to stabilize, though economic activity is expected to remain flat or decline slightly in several regions.

The key issue moving forward is whether the Federal Reserve’s shift toward an expansionary monetary policy will be sufficient to counteract the emerging signs of economic contraction. It remains to be seen if this early phase of monetary easing can stabilize the economy, or if, as seen in past cycles like 1984 and 1994, so-called soft landings can be engineered to avoid a deeper downturn. Although uncertainty regarding the start of rate cuts has now been removed, the course of subsequent rate cuts, a currently too-close-to-call Presidential election in November (with significant tax and regulatory implications), a 40.3 percent rise in business bankruptcies from June 2023 to June 2024, and consumer exhaustion have skewed risks to the downside. 

LEADING INDICATORS

ROUGHLY COINCIDENT INDICATORS

LAGGING INDICATORS

CAPITAL MARKET PERFORMANCE

It’s the end of an era. Volkswagen has just announced that it is planning the closure of two of its German auto manufacturing plants for the first time in its corporate history. In the face of rising competitive pressures from China, its leadership made the seemingly prudent decision to shutter unprofitable operations and concentrate resources elsewhere. The forces of global competition have done what even Allied bombing campaigns could not: close Germany’s more venerable manufacturing plants.

The looming closures, however, are not what spells the end of an era. Rather, it is the response to the planned closures that bodes ill, and not just for Volkswagen but Germany, and free-market economies more broadly. A bloc of interventionists, from labor unions to government ministers, has leapt into the breach, proclaiming their intent to “prohibit” Volkswagen’s intended course. They wish, in short, to force the private company to sustain the unsustainable — intending, by using the power of advocacy, to prevent the kind of creative destruction that makes modern economies flourish. 

Daniela Cavallo, a leading representative of Volkswagen’s General Works Council, for instance, says that Volkswagen’s management decision “is not just a disgrace. It’s a declaration of bankruptcy… Closing factories? Terminations for operational reasons? Cutting wages? Such ideas would only be admissible in one scenario! And that is if the entire business model is dead.” Trade union activists like her are insistent that Volkswagen be prohibited from doing what must be done.

She is, of course, exactly wrong. Closing plants and cutting wages cannot remotely be interpreted as signs that an “entire business model is dead.” In fact, such adjustments are absolutely necessary components in maintaining a vigorous and functioning business model which can freely reallocate resources in the face of a constantly shifting landscape. While the comfortably insulated inhabitants of Wolfsburg may not wish to hear it, the world has shifted in substantial ways and there is no inherent right to business-as-usual.

Not surprisingly, politicians have weighed in as well. Lower Saxony Governor Stephan Weil has said the company “needs to address its costs but should avoid plant closings.” While that’s easy for him to say, it’s not clear how VW is going to solve the fundamental mismatch between high operating costs and lowered consumer demand. 

And the problem is deeper than merely the market’s softening for German cars. VW has, among other political intrigues, been asked to help meet government mandates by producing more electric cars to meet state emissions targets. Unfortunately for VW, fewer and fewer buyers seem to be open to the electric revolution, especially with the abrupt end in taxpayer-funded electric car subsidies. State tinkering, in other words, is having its predictable effect: laws to artificially boost demand cannot also artificially boost supply in the long term. Something had to give, and now there is hell to pay.

VW’s problems with government go beyond mere market tampering. Since state government holds 20% of the voting rights at the firm, and employee representatives hold half, VW finds itself in something of a pickle. One might say Wolfburg has VW by the ears — the company can neither continue as it has, nor let its political masters go.

And this may the rub: since VW has so heavily relied on state subsidies, much of the talk about factory closures may in fact be industrial-political theater. With threats to close assembly lines causing such raucous dissent (and international headlines), there is some cynical justification for believing this all may be a ploy to scare politicians into re-introducing EV subsidies, thereby juicing VW’s bottom line. It’s an old gambit, to be sure — keep the gravy flowing or we will have to make some uncomfortable scenes…

Whether or not threats to shutter factories are a sham, the overt market manipulations on display represent a serious blow to the efficient allocation of resources. Left unchecked, Germany’s days as an economic engine will be numbered: as its motor sputters and slows under the increasing drag of bureaucratic strictures, it will inevitably backslide into Soviet-style industrialism in which political clout matters more than efficient production. While German labor activists jostle to “save jobs,” and politicians jockey to coddle a titan of industry, they are unwittingly knocking the supports from under a system that led to Germany’s famous prosperity in the first place. Advocates of “protection” cannot defy the basic laws of economics regardless of how loudly they object. The jobs they wish to save will instead be cruelly wiped away in a global floodtide, its comfortably insulated beneficiaries immiserated under the onslaught of the inevitable.

Dismal as this all sounds, it is not a certain death-knell. Bureaucratic sclerosis, after all, displays its own cycles of creative destruction. Sensible people (and Germany has more than a few) may yet call a halt to these kinds of clumsy and counterproductive market interventions. It is entirely conceivable that freed from the fetters of state and union mandates, VW can find a creative way off of its destructive path. But if it does not, it may well mark the end of a free-market era in Germany, with enormous implications for Europe’s largest economy.

Today in America there are about 93,000 people awaiting kidneys for transplant. If you’re one of these individuals you’ll likely wait about four years before getting a kidney, enduring dialysis in the meantime — unless, of course, you’re among the one in twenty people who die each year for want of a kidney.

Thomas Sowell famously says about economic reality that “there are no solutions, only trade-offs.” He’s correct, mostly. Every now and then we encounter a problem that does have a solution. The kidney shortage is one of these problems. And the solution is to allow kidney donors to be paid for their donations.

The case for freeing the market in transplantable kidneys is strong, both economically and ethically. Thousands of lives would be saved every year and thousands more delivered from the misery and indignity of dialysis. The downside is almost nonexistent.

Nevertheless, most people steadfastly refuse even to consider supporting a policy of allowing any living individual to be paid a market price in exchange for one of his or her kidneys. Many of the arguments against a free market in kidneys spring exclusively from people’s aesthetic revulsion at the thought of commerce in kidneys. This revulsion is curious, given that it’s surely more revolting to allow people to die unnecessarily simply in order to protect other people’s aesthetic sensibilities.

While I would immediately lift the prohibition on kidney sales, there are several intermediate measures that would yield much benefit if a complete lifting of this prohibition is off the table. One of the most promising was proposed by the late George Mason University law professor Lloyd Cohen.

Cohen recommended that all of our body organs be considered to be parts of our estates in the same way that our homes and jewelry are parts of our estates. When someone dies, his or her heirs would own the deceased person’s body organs just as they own that person’s other properties. These heirs could then sell, give away, or ignore these organs.

The advantages of Cohen’s proposal over the current blanket prohibition on sales are clear. Each year, tens of thousands of healthy transplantable body organs are buried or cremated, needlessly destroyed despite their ability to extend and improve the lives of thousands of people. By treating all transplantable organs as property of each deceased person’s estate, this wholesale destruction of lifesaving body parts would be significantly reduced.

It’s easy to bury a loved one with his or her healthy kidneys or heart if agreeing to have those organs harvested for transplant brings nothing more than a sense of satisfaction from helping a stranger live longer or better. But if the sale of the loved one’s organs will bring thousands of additional dollars to the estate, I’ll bet my pension that the number of kidneys — as well as hearts, lungs, and other body organs — harvested for transplant from newly deceased persons will skyrocket. As a result, thousands of living people will enjoy longer, healthier, and more productive lives.

Of course, as with all properties destined to become part of a person’s estate, that person would, while still alive, have great leeway to determine the disposition of his organs. If someone objects religiously to his organs being harvested, that person must merely specify in his will that no such harvesting is to take place. That man’s family and the courts will be bound to honor this demand.

Or if someone specifies in her will that she wants only her daughter Ann or her nephew Bob to receive her kidney (or heart, or lungs, or liver, or …) for transplant, that provision, too, would be honored.

Cohen’s proposal avoids a major objection to a free market in kidney sales — namely, that too many living persons will impair their health by selling their kidneys to make a quick buck. Cohen’s proposal can be adopted without permitting living persons to sell their organs.

Still, objections are raised, most notably, that potential heirs will skimp on the quality of a sick loved one’s medical care.

No one knows what the prices of transplantable cadaveric organs would be if these were salable on the market. But it’s implausible that adding the value of these organs to our estates will endanger our lives given that our homes, automobiles, and many other assets are already part of our estates. It makes no sense to dismiss Cohen’s proposal on such flimsy speculations.

Another intermediate measure, proposed several years ago by Adam Pritchard and me, is even more modest than the one proposed by Cohen. Pritchard and I propose allowing living people to sell rights to harvest their organs upon their deaths. That is, while I’m still prohibited from selling my kidney when I’m alive, I would be permitted to sell to you — or to a hospital, to a medical insurer, to anyone — the right to harvest my kidneys (and other organs) upon my death.

Today we are all encouraged to become organ donors. But moral encouragement is all we get. How many more of us would sign up to become donors if we received some payment for our agreement while still alive?

Because no one knows what condition my body organs will be in when I die — and because I likely will not die until around 2040 — the prices that I would be able to fetch in 2024 for the rights to harvest my organs upon my death would be modest. My guess is that the right to harvest my kidneys and other organs in the future would fetch a total price today of no more than $250. Still, for $250 I’m more likely to take the necessary steps to agree to become an organ donor than I am when the price I earn from taking such steps is $0.

Is there any good reason to exclude the market value of deceased person’s body organs from being reckoned as part of the deceased’s estate? Is there any good reason for preventing still-living people from selling the rights to harvest their organs in the future, after they die? I can think of no such reason that begins to stand up to the enormous good that such measures would unquestionably produce in the form of more live-improving and life-saving transplant surgeries.

The July US Bureau of Labor Statistics’ employment report reinforces the conclusion that the economy is slowing, as the number of new jobs slowed sharply and the unemployment rate rose to 4.3 percent, up from 4.1 percent in June, and from 3.8 as recently as March. Assessing the Administration’s exaggerated claims for success is essential before what success there has been fades from attention. 

To give the Biden Administration’s credit for any success in increasing jobs requires proponents to blatantly misrepresent facts. Most notably, they claim to have added nearly 16 million jobs to the economy, more than any earlier president in one term. It’s true, but it takes credit for the return of about 9.4 million jobs for people who lost their jobs due to COVID-19 precautions and had not yet returned to work at the time Biden took office. Taking credit for the recovery of a large part of the COVID-related, record loss of 21.9 million jobs, far overstates Biden’s contribution and the effectiveness of his policy efforts. In fact, since the COVID recovery ended in June 2022, the Biden Administration witnessed the creation of 6.3 million new jobs, only about 40 percent of the Administration’s claim. In contrast, the previous administration oversaw growth of 6.7 million jobs before COVID hit. 

The Biden Administration can proudly point to a long period of relatively low unemployment. The unemployment rate for the civilian labor force was 4 percent or less for the 29 months from January 2022 to May 2024. But the Trump Administration also had a relatively long period of such success. The unemployment rate was 4 percent or lower for 26 months from January 2018 to February 2020, up until forced business closures at the onset of COVID. Both episodes are significant accomplishments, with Biden’s slightly better result assisted by an early return to low pre-COVID unemployment levels a year into his administration, despite the lingering lag in the number of jobs.    

A more significant exaggerated claim came in May 2024: “Under President Biden’s Investing in America agenda, nearly 800,000 manufacturing jobs have been created . . .” This claim is more significant because it is tied to the Administration’s new industrial policy to subsidize and protect strategically important domestic industries, most clearly reflected in the CHIPS and Science Act and the Inflation Reduction Act that both took effect in August 2022. Manufacturing jobs fell from about 12.8 million at the beginning of COVID to 11.4 million jobs in April 2020. The recovery of manufacturing jobs, when jobs reached 12.8 million again, came in May 2022. The number of jobs added from then until July 2024 is only 166,000, about 21 percent of Biden-Harris’s claimed achievements. 

Most of the Biden manufacturing job gains occurred earlier, from May 2022 to October 2022, ending within 2 months of the effective date of the two Acts. Subsequently, manufacturing jobs flatlined at about 12.9 million for the next 22 months, right up to the present. Biden’s new industrial policy has produced essentially no new jobs over the nearly two years since passage. 

No review of labor market performance would be complete without addressing real wage developments. The Biden claims discussed so far ignore real wages, and for good reason. In the nonfarm business sector, real hourly compensation rose in the pre-COVID Trump period at a 1.5 percent annual rate. Under Biden, real wages fell at a 1.4 percent annual rate from the first quarter of 2021 to the second quarter of 2024. 

Damage to real wages began with Biden’s “Day One” energy and regulatory Executive Orders, which reduced productivity and real GDP. This loss in productivity reduced real wages for six quarters and, despite a modest recovery since, kept real earnings and the standard of living lower than when Biden’s term began. It also accounted for much of the early inflation surge.  Viewed from this perspective, the current Administration’s performance has been no better than under the Trump Administration, and the latter outperformed in terms of the speed and extent of the COVID recovery and gains in real wages. For most of the Biden-Harris term, real wages have been below their level when the term began.  Relatively high levels of employment have been achieved, as under Trump, pre-COVID, but the new industrial policy appears to have failed, at least for manufacturing jobs. This should not surprise students of history. The US never made rapid advances in economic growth by massive subsidies and trade protection for selected industries.

Angry headlines have recently proclaimed “Kroger Executive Admits Company Gouged Prices Above Inflation,” and “Corporate greed exposed: Kroger admits to price gouging on milk and eggs amid antitrust trial.”

There are several problems with this account. The first is that recent price increases are caused by “corporate greed.” But there is never any explanation for why greed has somehow increased, and then decreased when price increases have subsided. Sharp increases in greed, shared across all corporate sectors at the same time — which is what “greedflation” would require — seem  implausible.

Second, “price-gouging” is defined as excessive price increases during a declared state of emergency, not price increases in normal times. There are problems with even the standard definition of price-gouging, of course, but charging an extra dime for eggs in ordinary business doesn’t come close to fitting the definition in the law.

The most fundamental problem, though, is the naïve equating of price changes with cost changes. The logic seems to be that the only legitimate change in prices must come from and be proportional to, changes in cost.

There is no economic basis for such a rule. Cost and price may move together over longer periods of time, but in any period of a few months the price is mostly determined by consumers. This conclusion is not ideological, it’s not controversial, and it dates to one of the giants of economic theory:  Alfred Marshall.

In his landmark monograph, Principles of Economics (first published in 1890), Marshall defined, and limited, the role of costs in determining final price (Book V, Chapter 3, Section 7): 

[I am] chiefly occupied with interpreting and limiting this doctrine that the value of a thing tends in the long run to correspond to its cost of production…

We might as reasonably dispute whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by utility or cost of production…[W]hen a thing already made has to be sold, the price which people will be willing to pay for it will be governed by their desire to have it, together with the amount they can afford to spend on it. Their desire to have it depends partly on the chance that, if they do not buy it, they will be able to get another thing like it at as low a price.

The “scissors” analogy is quite clear, since the classic “supply and demand” graph in introductory economics even looks like two scissors blades. If you know only “supply” (the schedule of amounts offered for sale at different prices) or only “demand” (the quantities purchased by consumers at different prices), you have no way of predicting the price at any point in time. Marshall’s insight is timeless: in the short run, consumers are generally buying from other consumers, not from producers.

A New York Times story on the accusations against Kroger quotes Joshua Hendrickson, an economist at the University of Mississippi:

If prices are rising on average over time and profit margins expand, that might look like price gouging, but it’s actually indicative of a broad increase in demand…Such broad increases tend to be the result of expansionary monetary or fiscal policy — or both.

The disconnect between cost and price may be clearest when you are buying, or selling, a house. The amount paid for a house has almost nothing to do with the price it commands now; instead, if you want to buy a house you have to make a better offer than the other buyers interested in the house. In many cases, the final price is more, possibly much more, than the price the owner paid. But it can be less, and in some cases much less. The price of a house that sells depends on what buyers want, not on what sellers want.

Buyers also often dictate a price well below the cost the seller paid, in the case of perishable items such as flowers or food products. The seller is forced to mark the produce down to the highest price that buyers are willing to pay, even if that price is half, or less, than the purchase price. The alternative is that the seller will get nothing, and be forced to dispose of the produce as trash.

Yet no one accuses consumers of “price-gouging,” even though they are paying a price far below the seller’s cost. If that is the definition of price-gouging, then I am an avid price gouger myself. I was recently traveling to give a talk in Nashville, at AIER’s Bastiat Society chapter there, and needed a hotel. Having waited until the last minute to secure a hotel reservation, I went onto one of the web sites that find low prices. There was quite a nice hotel near the venue, for a price of $78, so I reserved it.

The room came with a nice “free breakfast” in the morning, and of course my room had to be cleaned. I’m confident that the cost to the hotel just of paying the costs of giving me a key were $50 or more; their long-run “break even” price had to be $150 or more. Yet I was able to get a room for $78; how come?

The answer is that that is how Marshall showed that pricing works. There is simply no necessary relationship between cost and price. By renting out the room at a price below their cost, the hotel was able to get some revenue. Like wilting flowers and food close to its “sell by” date, hotel rooms are either rented out or wasted; the price is determined by demand.

Grocery stores are brokers; they find the lowest cost sources for produce, meat, dairy, and other things consumers want. Then, the grocery offers those things for sale. It is a highly competitive business, one that often has extremely thin profit margins. Many of the things that groceries do, even those that seem exploitative, have reasonable explanations as sound business practice. All the examples of attempts to regulate pricing practices of groceries have resulted in higher prices, or empty shelves. Anyone who wants to understand how the grocery business actually works should pick up Alfred Marshall’s “scissors,” and run with them. 

In August, Ford announced it was spiking its plan to roll out an all-electric three-row SUV, citing low consumer demand and a crowded market. 

“We’re seeing a tremendous amount of competition,” John Lawler, Ford vice chair and CFO, told journalists in a conference call. “In fact, S&P Global … said that there’s about 143 EVs in the pipeline right now for North America — and most of those are two-row and three-row SUVs.”

The news that Ford was scrapping its SUV EV came just a month after the company announced a manufacturing pivot at its plant in Oakville, Ontario. The plant, which had been earmarked for EV production, was shifting production to Ford’s F-series pickups, its flagship gas-powered trucks.

“The move,” the New York Times reported, “is the latest example of how automakers are pulling back on aggressive investment plans in response to the slowing growth of electric vehicle sales.”

The Cost Problem

Ford’s latest pullback from EVs is no surprise to people who’ve been paying attention to the EV market. 

More than a year ago I pointed out that news outlets were reporting of EVs “piling up” at dealership lots because of low consumer demand, which ultimately prompted Ford to halve production of its popular F-150 Lightning, reducing output to about 1,600 vehicles per week. 

The reality is both lawmakers and Washington and auto companies severely misjudged consumer demand for EVs, which has proven far lower than estimates had projected. There are many reasons for the low demand, but the primary reasons are concerns consumers have with EVs. 

Price is one factor. Research in recent years has indicated that despite government subsidies, EVs typically cost on average between $5,000 and $10,000 more than a similar gas-powered vehicle. That EVs are more expensive than gas-powered cars may surprise few readers, but what’s less known is that the price gap is widening.  

“EV prices aren’t just going up; they are rising faster than inflation…faster than [internal combustion engine] vehicle prices” Ashley Nunes, a senior research associate at Harvard Law School, testified before Congress in 2023, noting that the inflation-adjusted average price of a new EV had risen to over $66,000 in 2022, compared to $44,000 in 2011.

The Charging Problem

Cost, however, isn’t the only concern of consumers. 

An overwhelming percentage of Americans—77 percent, according to a 2023 survey led by the Associated Press-NORC Center for Public Affairs Research and the Energy Policy Institute at the University of Chicago—have concerns about how they would charge an EV if they bought one. 

These concerns are not baseless. In February, the New York Times profiled a man Michael Puglia who had recently bought a Ford F-150 Lightning and said it was the “coolest” vehicle he’d ever owned. 

“It’s unbelievably fast and responsive,” the Ann Arbor, Mich., anesthesiologist told reporter Neal E. Boudette. “The technology is amazing.”

The problem was the vehicle’s range. When the weather grew colder, Puglia found that the distance his vehicle could travel fell dramatically. His faith in the $79,000 truck dampened, and he found himself wondering if he should sell it. 

“People say ‘range anxiety’ — it’s like it’s the driver’s fault,” Puglia told the Times. “But it’s not our fault. It’s actually they’re not telling us what the real range is. The truck says it’s 300 miles. I don’t think I’ve ever gotten that.”

The range problem of electric vehicles is exacerbated by another challenge facing EVs: a lack of charging stations. Nationwide, there was 68,475 private and public charging stations at the beginning of the year, according to the Department of Energy. That’s more than twice the number in 2020, but it’s still just a third of the number of gas stations and far below projections.

One reason charging infrastructure has lagged is due to the federal government’s incompetence. Nearly three years ago, the U.S. Departments of Transportation and Energy announced a $5 billion spending effort to build fleets of charging stations to lead “an electric vehicle revolution.” As of the summer of 2024, just seven charging stations had been built.

“That is pathetic,” said US Sen. Jeff Merkley, a Democrat from Oregon. “We’re now three years into this … That is a vast administrative failure.”

Of Profits, and Losses

The decision of automakers to bet big on EV adoption was in some ways rational, in that they were responding to powers in Washington that were pressuring them and incentivizing them to expand electrical vehicle production. But the costs of listening to industry experts and politicians in Washington instead of consumers — and profits — have been severe.

In August 2023, NPR reported that Ford CEO Jim Farley was charging ahead with its ambitious EV expansion even though the company was “losing money on each EV it sells” and consumer demand for EVs was plummeting. Farley’s reasoning was that Ford was attracting new customers, but it was a costly endeavor. Ford reported a loss of $4.7 billion on EV sales in 2023, roughly $40,525 per vehicle sold. 

“If the great mass of consumers dislike purple cars with green polka dots, then a society based on private property will not waste resources in the production of such odd cars,” wrote economist Robert Murphy. “Any eccentric producer who flouted the wishes of his customers and churned out vehicles to suit his idiosyncratic tastes, would soon go out of business.”

Murphy wrote these words more than twenty years ago, but in a sense they describe Ford’s business strategy. By producing mass amounts of pricey EVs that consumers didn’t want and selling them at a loss, Ford was in a sense cranking out green polka dotted cars. It was a losing strategy and path to going out of business. 

Ford’s massive pullback from EVs is part of a broader return to economic reality. Companies flourish in a free market economy not by serving bureaucrats but consumers, the true “bosses.”

“They, by their buying and by their abstention from buying, decide who should own the capital and run the plants,” Mises wrote. “They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser.”

Automakers bear responsibility for their decision, and paid the price in the form of losses. But this misallocation of resources likely could have been avoided if not for the federal government’s hamfisted attempts to coerce Americans into EVs, which included not just taxpayer-funded subsidies, but overt pressure from Washington and federal regulations designed to phase-out gas-powered cars.

Fortunately, the centrally planned EV revolution now appears dead in the water, or at least in full retreat. A spokesman for Kamala Harris recently told Axios the presidential candidate “does not support an electric vehicle mandate.”

Forcing Americans into EVs was always a bad idea economically, but it now appears to be a bad idea politically, too.

That’s good news for Ford and American consumers.

Up until the DNC anointed Kamala Harris as their standard bearer, they were pushing their devotion to saving democracy. Then Democrats became all about joy at their convention, in large part by ignoring the massive costs of what they so joyously promised. Afterward, the Harris campaign first posted Biden policy positions as their own. But then those were deleted, so Harris could pretend to be a “change” candidate despite being Biden’s VP for almost four years. Harris then said almost nothing informative about her new policies, but proxies offered often anonymous claims to different beliefs than she had previously espoused, whose details were far too skimpy for credibility, much less evaluation, even though that undermines effective democracy they so recently claimed to be ardent defenders of. And Matt Vespa has reported, the source code for Harris’ “new” just-in-time for the debate policy section showed it was “a copy-and-paste job from the Biden 2024 website.”

Such slippery vagueness makes an informed electorate, able to evaluate specific policy positions, beyond reach. And voting dominated by uninformed participants adds nothing to our wisdom, yet can dramatically change the outcome, because absent detailed information, no one can adequately judge how a proposal would fare or falter in the real world.  

Why is there such a gap between private market behavior and such political competition? After all, like private sector salespeople, politicians strive to present their wares as attractively as possible. But unlike private sector salespeople, much of a politician’s product line consists of self-proclaimed responsibility or “co-traveler” status for everything good, but sufficient distance or innocence in everything bad, and claimed consequences of proposals not yet enacted. And seldom are the benefits “all they are cracked up to be” but the supposed costs a low-ball fantasy. Further, politicians are unconstrained by truth-in-advertising laws, which would require that claims be more than misleading half-truths; they have fewer competitors (and journalists, judging from the recent debate) keeping them honest; and they face “customers” far more ignorant about the merchandise involved than those spending their own money.

These differences from the private sector explain why politicians’ “sales pitches” for their proposals are so much vaguer. The downside is that if vague or vaporous proposals are the best politicians can put forward, their wares are certain to be logically or empirically inadequate. 

If campaign rhetoric is unmatched by specific program details, where the devil lurks, there is no reason to believe such proposals will be effective, much less efficient, uses of funds, because no reliable way exists to determine whether a policy will actually accomplish what is promised so easily on the campaign trail. The details will determine the incentives facing decision-makers, and goals, however laudable, that are inconsistent with the incentives created will go unmet.  

Sometimes, politicians know too little of their “solutions” to provide specifics of a workable plan. That is, the vagueness is in their minds.  If so, they know too little to deliver on fine-sounding campaign commitments. Achieving intended goals then primarily depends on trust that some future bureaucrats or legislators will somehow both know precisely what to do and do it right — a prospect that inspires few beyond the “public servants” in question.

Politicians may in other cases know the details of intended programs, but fail to provide them. That is, the vagueness is in what they tell the public. Unfortunately, if it is necessary to conceal the details of a proposal to put the best possible public face on a proposal, those details must be adverse. When those details make a more-persuasive sales pitch, politicians would not withhold them. Concealing rather than revealing pays off politically only when better informed voters would be more inclined to reject a proposal.   

Examples of government policies that fall far short due to vaguely articulated or poorly designed campaign promises are not hard to find. Those who seriously study government can provide many such. Here are just a couple of my “favorite” failures.

As Mark J.  Perry described in 1991, a 10-percent luxury yacht tax leading democrats “crowed publicly about how the rich would finally be paying their fair share and privately about convincing President George H.W. Bush to renounce his ‘no new taxes’ pledge.” But “they’d badly missed their mark.” It never even raised enough money to cover the cost of running the program, but managed to kill 25,000 boating industry jobs for far-from-rich workers and wipe out millions of dollars of tax revenue in the process. But at least the government learned a lesson and killed that program. But we keep creating more such promises that will be unkept. More recently, President Biden’s infrastructure plan (mainly throwing money at ill-conceived projects) was going to produce half a million new EV charging stations by 2030, but only managed to build seven stations in the first two years. 

Sometimes the vagueness has enabled massive frauds, including over $1 trillion in the Obamacare program. Jonathan Gruber, its architect, admitted that “The bill was written in a tortured way to make sure the CBO did not score the mandate as taxes” (even though it was found constitutional only because Chief Justice Roberts held that the insurance mandate was a penalty rather than a tax). That made those costs disappear from the scoring. In addition, since the CBO only projected 10 years into the future, they slow-rolled implementation the first four years, to make it look far cheaper than it would actually be ($848 billion) when it was evaluated. But when the CBO later looked at the costs of 10 full years of the program, it found the tab to actually be over $2 trillion.

Claiming adherence to more elevated principles, but stalling in presenting detailed proposals also has strategic advantages. It defuses critics by allowing criticism to be parried by saying “that was not in my proposal” or “I have no plans to do that” or “I said something different since then” (but don’t expect a clear, defensible reason for why, or ask whether I can be trusted to not go back to my earlier positions),” or other rhetorical dodges. It forces opponents to “go first” with specific proposals, which puts the political heat on opponents and provides their camp something to criticize, without allowing similar return fire. It also allows a candidate to incorporate alternatives proposed by others as part of their “evolving” reforms, while claiming to maintain their same principles.

Regardless of the strategic political advantages of such vagueness in misleading or misdirecting voters, adequate analyses of public policies cannot be built upon such proposals and pronouncements. That requires the nuts-and-bolts policy details that have been so glaringly absent in 2024. And when a candidate combines so much “guess what I will actually do because I have given you no real idea” with desires to increase by trillions of dollars what they will transfer from citizens’ hands to their own, that is a valid reason for not being a cheerleader on their behalf.  

In the private sector, few Americans would spend their own money based on such vague promises of an unseen product. They would be foolhardy to act any differently when a political salesperson is marketing their wares, because such vagueness virtually ensures bad policies, if advancing Americans’ well-being —rather than party power — is the criterion.