In his defense, Vivek Ramaswamy most likely didn’t write last week’s Wall Street Journal opinion piece. Still, if the advisers of his opponent for governor of Ohio (Amy Acton) grasp simple economics, they’ll make Ramaswamy own what denigrates enormous U.S. economic progress, and that ties investment success to government waste.

Ramaswamy writes that the “greatest driver of inequality over the past five years was exactly what the socialists now demand more of: large-scale government spending.” The latter won't age well. Think about it. 

Over the last five years artificial intelligence (AI) has reached the marketplace, and plainly caught investors by surprise as the rise of a former unknown like Nvidia attests, countless other hyper-unicorns given life by Nvidia’s genius (OpenAI, Anthropic perhaps?), not to mention rising investor excitement about growth potential off of planet earth. But to read Ramaswamy, these amazing leaps were rather quaint in an investment sense relative to government spending that apparently tricked the deepest markets in the world.

You see, in Ramaswamy’s version of reality, “When Washington floods the economy with borrowed and freshly printed dollars, the money flows first into assets owned by the wealthiest Americans.” Except that if asset rallies were this simple, every country would do as Ramaswamy imagines the U.S. has. Actually, Japan did it for decades amid falling stocks. Yes, investors disdain the central planning of resources (government spending) that Ramaswamy claims boosts markets.

Furthermore, and as Ramaswamy has long noted, the top 1% account for 40% of federal tax revenue. From the previous truth, we can extrapolate that government spending doesn’t enrich the rich not just because central planning is a market negative, but because the rich per Ramaswamy are routinely fleeced so that the federal government can spend.

Moving on, and returning to Ramaswamy’s overwhelmingly absurd assertion that “When Washington floods the economy with borrowed and freshly printed dollars, the money flows first into assets owned by the wealthiest Americans,” he seems to have forgotten a basic lesson of markets surely learned at Goldman Sachs, that for money to flow “into assets owned by the wealthiest Americans,” then equal amounts of money must be flowing out. It’s something about there being a seller for every buyer, and since the “top 1 percent” per Ramaswamy account for “roughly 30% of the nation’s net worth,” it seems the money flows he naively imagines are taking place due to government spending are pessimistic rich selling to optimistic rich.

Ramaswamy wisely disdains monetary debasement, but then claims that “borrowed and freshly printed dollars” yet again drive up the value of assets. Global stock markets continue to mock Ramaswamy’s certitude, so do U.S. returns in the 1970s and 2000s when the dollar was most substantially debased, after which logic must intrude: when investors invest, they’re buying future returns in dollars. Based on the previous truth, can Ramaswamy seriously believe debasement is the path to booming asset markets? If so, he imagines rampant market stupidity in addition to myriad other falsehoods.

From there, it’s notable that five years ago total federal debt was roughly $28 trillion versus $39 trillion today. While agreeing with Ramaswamy once again that dollar-price stability would trump any other policy today in terms of profound economic meaning, can he really believe investors would so readily buy income streams that are so rapidly being shrunken by the U.S. Treasury?

There’s so much more contradiction in a piece that Ramaswamy’s opponent should be most gleeful about, but the need for brevity intrudes. Ohio voters beware, but then as previously mentioned, solace can perhaps be found in the very real possibility that Ramaswamy didn’t write what is sadly associated with his talented name. 

Originally published on Real Clear Markets.

Spending cuts will not shrink the federal government. When politicians promise the opposite, they’re not telling the truth. 

“We must stop measuring compassion by the amount of money the government spends. We will cut spending, we will cut taxes, we will revolutionize welfare to put America on a better track.” Former Congressman Bill Archer, who died at 98 on July 4^th, said the latter in 1995. And the words soothe to this day. Just the same, it’s essential to point out that the federal budget was $1.5 trillion in 1995 and total federal debt was a shade under $5 trillion.

Archer promised what Republicans always promise, and never deliver. And that’s not a knock on Republicans. The view here is that they mean and have meant well.

The problem is that they’ve never grasped that spending cuts pursued to shrink government or government debt are an utter non sequitur. The last way any sentient being would aim to shrink government is through spending cuts. Which on its face sounds odd, but consider what’s true: that politicians exist to spend.

Since they do, what’s shrunken through spending cuts invariably doesn’t shrink government, rather it frees up money that will eventually be directed to other priorities, thus growing them. And as they grow, so grow their political constituencies.

That’s what Ronald Reagan found out when he got to the White House. No matter the program, there was always a Democrat and a Republican vested in its ongoing existence and growth.

Which means the spending cuts sought by Archer logically didn’t shrink government, nor do they today. They paradoxically grow government precisely because they free up dollars for new ideas. Paraphrasing Robert Moses, easily one of the most successful appropriators in government history, he merely needed a shovel in the ground to make what was small quite large.

Taking this further, what happens if programs are shrunk, or big programs like Social Security are reformed, and government debt is shrunken in small or large amounts? In asking the question, ask yourself what happens when you pay down credit card debt a little or a lot. The more you pay down the much greater your borrowing capacity becomes, particularly if your incomings (earnings) are expected to grow in the future. Please think about that, and apply it to the federal government.

Assuming major, major spending reforms that result in trillions of dollars worth of debt retirement, will this ultimately shrink the federal government or its debt? It’s a clown question. If trillions worth of debt is easily retired, that will only drive market confidence in federal debt upward, and for obvious reasons. Think personal credit cards again.

From there, contemplate U.S. borrowing capacity growth not just with reduced federal debt well in mind, but pair the latter with the unrivaled ability of the American people to create abundant wealth. What does the latter tell you about future federal tax revenues along with the federal government’s borrowing capacity?

At risk of stating the obvious, the obvious needs to be stated given broad acceptance among “conservatives,” “liberals,” "libertarians," and countless other ideologies in between that more federal revenue is required to shrink deficits and debt. What this signals is that the federal government is poised to soar in size alongside rising federal debt and falling federal borrowing costs. Bank on it. All because those who aim to shrink government aren't focused on what's enabled the growth not just of government, but indebted government.

We have a too much tax reveue problem, now and in the future. The size of government and its debts are symptoms of too much revenue now and in the future. 

Originally published on Real Clear Markets.

Conservatives rightly mock the left for its endless alarmism about “global warming.” Whether the latter is a threat or not, the very notion that we humans can mitigate the warming power of a sun that a million planet earths could fit inside seems more than a stretch.

Sadly, conservatives have their thumbsucking qualities too. Think their weird obsession with birth rates. Endlessly invested in notions of decline allegedly foretold by a failure of parents to have enough babies, they attach apocalyptic nonsense to individual choice.

Lyman Stone, director of the Pronatalism Initiative at the Institute for Family Studies, is the latest (but surely not the last) conservative pundit to promote the birth rate crisis narrative. Writing at the New York Times, Stone writes that doom awaits us thanks to an alleged failure of Americans to produce enough babies to exceed the so-called population “Replacement rate” of 2.1 children per woman. In Stone’s words, “If America’s population does decline, it will strain our entitlements system, damage the economy, reduce innovation and entrepreneurship, and cause serious labor shortages.”

Of course, missed by Stone is that there’s no such thing as “shortages” in a free, or even partially free economy. Instead, the people who constitute the market merely adjust to the situation around them. And they’re adjusting quite well.

Not only is the production of nearly every market good from the prosaic pencil to the wildly advanced iPhone an effect of literally billions of interconnected hands, machines and minds the world over (thus mitigating this odd focus on rates of birth within specific countries), it’s also worth noting that as Stone and his organization join a stadium-sized echo chamber of alarmists about falling birth rates globally, production of increasingly capable robots by Elon Musk’s Tesla (among others) is setting the stage for the entrance of literally billions of capable hands into global production.

For perspective, travel back in time to over 100 years ago when Henry Ford miraculously created cars for “the great multitude.” His monumental achievement was an effect of him dividing up work among thousands of workers on the path to herculean productive leaps that powerfully increased car production alongside routine declines in the cost of cars.

Factor in what you’ve just read not just as robots enter the workplace, but also technology that has made it possible for literally anyone with basic computer skills to produce code in a few hours that used to take large Silicon Valley teams months. It’s just a comment that the birth rates occupying the minds of always alarmed conservatives are no match for technological advances that will render the babies of today and tomorrow the productive equivalent of tens of thousands of babies from the past.

Applied to Stone and alarmism that will fill books and op-eds in the future as yet another cautionary tale about “predictions” from the expert class, future production alongside lower rates of birth will substantially dwarf what humans produced in the past such that the biggest problem for governments won’t be “strained entitlements,” but what to do with all the tax revenues flowing their way.

Which means the crisis isn’t the population decline that Stone laughably claims we’re not prepared for, rather it’s the looming growth of government. Precisely because those in the proverbial arena are much more than ready for lower birth rates, the biggest challenge will be a federal government profiting way too handsomely from all the future growth that Stone and others can’t see due to blindness born of a baseless birth rate obsession.

Originally published on Real Clear Markets.

The scholarly class must cease their pretense about the impossibility of “Fed independence.” They want no such thing...

Continue reading on Forbes.

In 1948 South Korea had per capita income of $48, a level of earnings that placed its economics below those of sub-Saharan African countries. At the time one U.S. official concluded that “Korea can never attain a high standard of living.” The reason, he observed, was that “there are virtually no Koreans with the technical training and experience required to take advantage of Korea’s resources and effect an improvement over its rice-economy status.”

The present is always a lousy predictor of the future.

Except there’s more. The rise of South Korea from a state of abject poverty is a reminder of the mindless modern embrace of “failed state” theories by conservatives.

One way in which they justify their support for economy-shrinking and excessively inhumane policies of deportation is by hiding behind the “failed state” fallacy. They claim that since this person or those people come from a nation that’s backwards both culturally and economically, it’s ok to expand armed government to make sure they don’t bring the culture and economics of the country exited with them. The rationale is silly, it’s sad, plus it wholly contradicts conservative thought.

Implicit in frequently risking one’s life to leave a failed country is a rejection of that country’s policies and cultures. South Korea instructs. The U.S. was the primary destination of South Koreans leaving its unrelenting poverty behind, particularly after 1965. With little to no education or knowledge of the American culture, they thrived stateside.

Which conservatives of old would have suspected. It’s not just that in coming to the U.S. to fix their poverty that some reject the policies and life of the countries departed, it’s that the freedom and free markets offered in the U.S. are a certain antidote to poverty. Think about it.

What have conservatives always said about failed states, particularly communist ones? The solution was always freedom and free markets. If countries would adopt the basics, they would thrive. And they did. As the 1990s to the present reveal beautifully, the conservative embrace of freedom and free markets was powerfully vindicated as failed, collectivist nations unshackled their people. South Korea once again instructs.

A nation that formerly exemplified poverty is now producing at herculean levels. Freedom works, and markets really work as China’s rise (remember John Lennon’s line “they’re starving back in China, so finish what you got”?) alongside that of South Korea from overwhelming poverty confirms. Normally conservatives would rejoice in this since it was policies they supported throatily that drove the brilliant change, but for this weird belief that present-day failure is a predictor of the future such that “illegals” must be arrested and deported by expanded, armed government. What an inhuman mistake, what an economy-shrinking (for the U.S.) error.

That’s because as with the past, not all country leadership is wise. Which means some people must continue to leave “failed states” of the present to fix their poverty. This is a beautiful thing, and once again an individual rejection of polices that don't correlate with prosperity. Translated, if they’re leaving ailing nations behind they’re signaling their American qualities.  

Paraphrasing the late Cato Institute co-founder Ed Crane, people who risk their lives to exit nations with policies inimical to human flourishing have established themselves as American by doing just that. Although Crane was a libertarian, conservatives used to agree with him. Now they don’t, which means they can’t take an obvious win.

Originally published on Real Clear Markets.

“Don’t count on it.” That’s what Joanne Lipman recently wrote at the New York Times, in a piece titled “The Elusive Promise of the Four-Day Workweek.”

Lipman’s pessimism about the four-day workweek becoming the norm is ironically informed by studies that reveal the four-day workweek as “superior.” They show productivity resembling the five-day workweek, albeit over four days. Lipman notes that "employee satisfaction [has] soared" where the four-day workweek has been implemented. 

Ok, so why the alleged elusiveness and Lipman's downcast countenance about the possibility of businesses broadly moving to a four-day schedule? She believes it’s very much about difficult CEOs who demand “face time.” In her words, “we consistently underestimate executives’ ferocious attachment to face time.” Lipman could perhaps be persuaded to be more optimistic.

That’s because a four-day workweek is already the norm. Lipman’s mistake was in taking the notion of a four-day week literally. 

What she missed is that workers rendered more productive and happier by the four-day workweek are also the kind of people for whom work is increasingly joy. In other words, the four-day workweek is proliferating alongside people working more than ever.

Lipman seemingly views work as something people must do, as opposed to what they can’t not do. That’s mistaken. See the productivity gains she cites.

Why are people more productive? It’s easy to shoot fish in a crowded barrel and say that machines, the internet, and AI make the work easier. No doubt they do, but the bigger story about more productive workers is that they’re that way due to the happy fact that they’re doing what increasingly elevates their unique skills and intelligence.

Which is the genius of technology. What does and thinks for us amounts to the entrance into every workplace of literally billions and eventually trillions of mechanized hands and thinkers that will enable relentless increases in specialized work. Is it any wonder that workers are happier?

Lipman’s focus is once again on how many days people are expected in the office, but she’s arguably not focused enough on what the four-day workers are doing when they’re not in the office. They’re much more likely to be working because they want to be, not necessarily because they must be.

Talking The End of Work whose more appropriate working title was The End of Laziness, it argued in 2018 that economists including Tyler Cowen got it backwards about rising economic growth correlating with less ambition and less work. Cowen was unwittingly channeling Lipman, or Lipman is unwittingly channeling Cowen now.

In truth, economic growth is just another way of describing rising productivity which, if anything, begets more work. Really, who wouldn’t be working all the time if “work” reflected individual passion?

So, while Lipman cites certain companies (JPMorgan, SpaceX) that most certainly benefit from the collaborative aspects of face-to-face time as evidence of a turn away from four-day weeks, she might ask around. It’s increasingly true that businesses operate on hybrid five-day workweeks in which some days an in-office presence isn't required. The ease of internet and AI from anywhere surely informs the latter, but the unsung and much bigger story is that face time and office politics are much less important when people are doing what they enjoy. Translated, productive workers don’t require policing

The four-day workweek is once again already here. And that's because even with explicit four-day workweeks, people would still be working on days five, six, and seven. What Joanne Lipman arguably isn’t seeing is that four-day jobs are seven-day jobs not by requirement, but due to employee choice.

Originally published on Real Clear Markets.

If education is so important to the development and future prosperity of young people, why doesn’t the latter reflect in compensation for teachers? It’s a question worth asking as conservatives continue to promote an education crisis narrative.

Better yet, if American education is so bad, why isn’t this reflected in the migration of financial, physical, and most of all, human capital, out of the U.S.?

Consider an otherwise optimistic editorial at the Wall Street Journal about the U.S. on its 250^th.  Amid the optimism, the members of the editorial board listed a few theoretical negatives, including “A K-12 school system that fails to educate half of its students to even minimal standards yet is controlled by unions that refuse to reform.”

It reads as awful at first glance, but are schools and teachers’ unions really the problem with public education? The guess here is that members of the Journal editorial board could off the top of their heads list numerous “good” or “great” public schools all over the U.S., and some perhaps attended the schools they could easily name. Also, roughly 87% of Americans attend public schools, which is a signal that many not only teach beyond the “minimal standards,” but do so effectively.

About the seeming disparity in public school quality, it’s not enough for conservatives to say there are rich and poor school districts simply because conservatives have long said money as a driver of educational outcomes (think Catholic schools in particular) is well overrated. The union excuse similarly isn’t wholly compelling considering the national reality that some of the “best” (whatever that means) K-12 schools are public.

What is compelling, however, can be found in an old Weekend Interview at the Journal with Thomas Sowell, in which he observed how different students historically brought different values into the classroom, and educational achievement was an effect of those values. Or as George Gilder put it in Wealth and Poverty, “Decent housing is an effect of middle class values, not a cause.” Extrapolate Sowell’s and Gilder’s insights to modern education, and it’s more difficult to blame schools, teachers, and teachers' unions.

More than conservatives might like to admit, learnedness is a choice. If true, then blame for poor educational outcomes would have to wisely be shifted from teachers and unions to students.

It raises another basic question: opposite conventional wisdom on the right about the importance of educational success and the “right major” to future achievement, does it really matter? Consider the lament that followed the one about K-12 education in the previously referenced editorial: “A progressive university elite that views America as corrupt and exploitative. A generation of the young have been taught to dislike their country, and to believe that socialism is superior to the free-market system that made their affluence possible.”

Ok, but conservatives can’t have it both ways. That’s because the richest U.S. corporations continue to do most of their hiring at those elite schools allegedly teaching U.S. hatred and socialism, not to mention the educational resumes of a conservative commentariat (old and young) the best and brightest of which were largely educated at elite schools.

All of which seemingly answers the question at the top. Teachers seemingly aren’t paid well because what they teach dims in career importance by the day, assuming it was ever valuable. But even where teachers pollute American minds with socialistic and anti-American principles, they’re not doing so successfully as corporate hiring practices indicate. 

Much ado about nothing? Capital flows, corporate hiring practices, and elite college diplomas held by top conservatives say yes. 

Originally published on Real Clear Markets.

In the coming weeks, the Consumer Financial Protection Bureau is expected to issue a new rule superseding a Biden-era interpretation of the Dodd-Frank Act that mandated banks provide data access to financial technology (or fintechs) at zero cost.

But rather than simply repeal the mandate, the agency is reportedly considering a hybrid price control/market regime in which some but not all transactions would have a zero price control. It would be much better for the Trump administration to simply stick to its free-market guns and leave this matter to negotiations between the banks and fintechs.

Section 1033 of the Dodd-Frank Act states banks must provide customer data to fintech firms at the request of mutual customers — including peer-to-peer lending platforms like Zelle and Venmo, or stock market brokers like Robinhood – often through data aggregators, or middlemen. What remained a point of contention up until the Biden administration was whether banks would be able to charge for ongoing, continuous access to that data beyond consumer requests.

In what amounted to a shortsighted giveaway to fintech firms, the Biden administration ruled banks could not charge for access to their customer data at all, ever — even while forcing banks to build and maintain the expensive secure APIs required to transmit it. This mandate was handed down all while preserving the fintech’s ability to monetize the same data.

While the intention was to keep costs low for customers accessing financial services, Milton Friedman informs us that there is no such thing as a free lunch. As the peer-to-peer lending economy has exploded — and services like Robinhood have grown immensely popular, particularly with younger users — banks now face sizable and rapidly growing costs associated with securely providing this data. Banks are forced to build, run, and ensure cybersecurity for enormously high-volume APIs while absorbing the entirety of the operational costs as well as the liability.

Pragmatically, this means that if the Consumer Financial Protection Bureau doesn’t change this ruling, banks will face heavy pressure to raise costs on consumers elsewhere to recoup the losses the government forces them to take on providing this service. While on its face one might think the Biden administration saved consumers money, in practice, it really just robbed Peter to pay Paul, as banks look toward other fee increases to comply.

The solution for all of this is frustratingly simple, though it’s unclear whether President Trump’s administration will be bold enough to rule as such. As it turns out, the private sector has already proven it doesn’t need any government handholding to negotiate agreements with the interests of customers in mind.

Recently, the fintech company Plaid, the largest aggregator of financial data, reached an agreement with JPMorgan Chase, the largest bank, to renew its data-access agreement. It included a non-zero pricing structure which, reportedly, would not impact Plaid’s current customer agreements and pricing models. This goes to show that fintechs are not little guys who need government help, but big players in their own right who are more than capable of negotiating commercial terms with the banks.

The fintechs surely understand the absurdity of their demands that banks continue to develop and maintain secure APIs and infrastructure to provide them with data free of charge. Where it gets very disingenuous is when fintechs push the argument that the automated pulling of customer data is indistinguishable from a genuine customer-initiated data request. It’s a real stretch, and as tech companies, no one understands the realities of data commoditization better than they do.

Fortunately for the fintechs, their business is booming. People love their products and services. Their advocacy should start reflecting that by competing fairly in the marketplace, rather than embarrassing themselves with rent-seeking behavior.

Let’s hope the Trump administration affirms its stance against price controls fully, not in an arbitrary halfway hybrid. For those who think these price controls lower costs for consumers, remember Milton Friedman.

Originally published on Cagle.

Data centers, and the $1 trillion+ that is being invested in their creation, are “causing” overall weakness in the U.S. economy. That’s according to former Biden White House economic official, Jennifer Harris.

Writing in the New York Times, Harris asserts that “the artificial intelligence buildout is expected to rival or surpass previous technological booms at their peaks — rail, electrification and the internet revolution.” This is bullish, right? Not according to Harris.

She laments that AI “is vacuuming up so much of our land, talent, semiconductor chips, building materials and, above all, so much of our money that it is beginning to crowd out the rest of the economy.” No, that’s not true. Harris misunderstands credit, and specifically what it is.

Credit is not money. Credit is resources (goods, services, and labor), which means it’s produced. The more production there is, the more savings and investment.

Please think about this with all the investment in AI. The latter isn’t about the consumption of resources, it’s about creating infrastructure that will set the stage for enormous increases in available resources.

For background, consider the cable industry and the then impressive sums invested in the 1970s to wire rural houses first, and then all houses for an expanded suite of television offerings. What happened in the early 1970s first set the stage for ESPN, Showtime, HBO, and C-SPAN, but the same cable infrastructure eventually set the stage for the rollout of the internet in the 1990s and beyond, along with the arrival of Facebook, Google, Amazon, Netflix, and countless other companies that exist today thanks to intrepid investment from long ago.

In contemplating what came before, it’s best to shift our gaze to data center potential. Their construction accounts for the majority of AI investment at the moment, and it among other things gives life to the genius of large language models (LLMs) made possible by Nvidia-created chips. Rich as Jensen Huang has become, it's well known inside Nividis that his fortune will ultimately pale in comparison to the value of the commercial ideas that emerge from Nvidia technology.

Harris would be wise to internalize the above truth. While she contends that AI investment is taking place at the expense of the overall economy, she ignores yet again that credit, investment, loans, and all other sources of finance are once again produced.

As the expected surges of wealth related to AI investment today signal, the $1 trillion worth of investment by Google, Amazon, Meta, and Microsoft that keeps Harris up at night will be a fraction of the wealth created as a consequence of their expenditures. Said another way, the effect of all this investment will set the stage for enormous increases in credit, and the rise of remarkable corporations that would not exist absent the initial, and sizable investment that so troubles Harris in the present.

In short, there’s no crowding out from AI investment, rather investment begets a great deal more of it. If AI and the data centers it has birthed can live up to even a fraction of their promise, the effect will be a much bigger surge of investment and economic growth made possible by the initial $1 trillion allocation.

Originally published on Real Clear Markets.

Elon Musk’s enormous wealth will soon enough appear small. For evidence, see a popular chart listing the looming federal tax bills for multi-billionaires in the U.S. Musk will apparently be assessed $26 billion next year, Jeff Bezos $23 billion, and so on.

The enormity of the numbers is troubling, but more troubling is how free market types are addressing the numbers. They’re making the rather simplistic point that if Musk and other multi-billionaires faced a 100% wealth tax, their wealth would still only pay off a tiny fraction of the national debt. As always, they’re focused on symptoms.

If it’s true that the wealth of the U.S.’s multi-billionaires wouldn’t come close to making a dent in the national debt, stop and think about what the underlying, screaming market signal is about the $39 trillion worth of debt: federal tax revenue is a pale imitation of what it will be.

In a very real sense, that’s a positive. It’s a market signal that the wealth of Musk, Bezos, Gates, Ellison, Zuckerberg, and Huang is small relative to those who will follow them. Those who will soon enough be standing on their shoulders will achieve on a level that will make the achievements of America’s richest of today seem somewhat small by comparison. Think how much better our lives will be as a result.

Still, the taxation the future rich will face rates serious thought. How many times did Elon Musk’s various companies nearly die due to a lack of capital. With Musk top of mind, how many brilliant concepts will never see the light of day due to excessive taxation of the rich, the very people who provide 99.99999% of the capital that innovators rely on to turn their seemingly odd visions (yes, Jeff Bezos and Amazon were formerly laughed at) into world-changing realities.

Consider the above question through the prism of $39 trillion worth of debt. If the previous number doesn’t in any way faze investors, and it doesn’t, stop and contemplate what future tax revenues for Treasury will be. What enables individual and business debt is what enables government debt: market expectations of future revenue.

Translated, future wealth creation will once again be much greater than the wealth creation of today, and that’s once again a good thing. What’s bad, and the real crisis, is that the federal government will be a huge, multi-trillion-dollar beneficiary of all this wealth creation due to an abjectly stupid tax debate over the proper tax rate that annually takes place between the statist and free market ideologies. Doesn’t the free-market side see that it’s being played?  

Even the scholars at the libertarian Cato Institute continue to point to nominally low tax rates as evidence that the U.S. is not as heavily taxed as European countries. Except that tax rates miss the point. The point should be about how much tax revenue Treasury collects, and will collect. As the $39 trillion worth of debt yet again signals for those who follow markets, Treasury’s capacity to collect more tax revenues is in a very real sense in its infancy. Which is why the discussion shouldn’t be about a “balanced budget” the size of which will soon enough dwarf existing budgets, but tax revenue caps meant to limit government along with its capacity to borrow.

For now, the various religions are focused on how to get Washington more tax revenue to pay off the debt, which is the debaters revealing a blithe countenance to all the borrowing that occurred amid soaring revenue since 1981. Oh well, Treasury yields are telling us tax revenues will continue to soar, and they will because the free-market crowd is having a tax-rate debate wholly on the terms of an opposing religion that is much more cheerful about growing government. The big government side is sadly winning big due to the right's near total misunderstanding of why there's so much government, so much debt, and why both will continue to grow. 

Originally published on Real Clear Markets.