The Week the Wheels Started Falling Off the Trump Train

 Last week the wheels started falling off the Trump train. We learned from Atlantic editor Jeffrey Goldberg, who some how was patched into a national security call on the messaging Ap Signal where he listened into a haphazard discussion on the imminent attack on Houthi bases in Yemen. To have such a discussion on Signal was a clear breach of national security by the principals involved who included National Security Advisor Michael Waltz, Vice President J.D. Vance, and Secretary of Defense Pete Hegseth. To add insult to injury, the principals lied about their conversation, only to be shown up by Goldberg, who published a transcript of the call. 

Also on the call was Trump’s envoy to Ukraine and the Middle East, Steve Witkoff. Real estate lawyer Witkoff committed the cardinal sin by listening in on the call from Moscow, where every normal diplomat knows everything is bugged by the FSB. Witkoff is a complete amateur in diplomacy, and he is so far in over his head. Further, Putin and is Minister of Foreign Affairs Sergey Lavrov have been run rings around experienced American diplomats over the past two decades. Simply put, Witkoff is being taken to the cleaners. 

This affair, now called Signalgate, will have a lasting effect on the Trump Administration. If any the American people don’t forgive, it is incompetence. Joe Biden learned this the hard way with his chaotic withdrawal from Afghanistan.

Later in the week Trump announced 25% tariffs on imported automobiles and trucks with its obvious inflationary consequences. In my largely Latino gym, the leading topic of conversation were the auto tariffs, and their imposition is obviously feeding into inflationary psychology.

The week closed out with new data on the deflator for personal consumption expenditures, which for core goods and services in February came in at a higher than expected 0.4%. Inflation has not gone away, and my guess is that market hopes for rate cuts later this year will be quashed. Not surprisingly, consumer confidence in March plummeted to a three year low. 

Further unnerving the public’s mood was Trump’s attacks on Big Law. Two big law firms (Paul Weiss and Skadden Arps) caved into his threats of pulling security clearances and access to Federal buildings. Apparently, they were guilty of supporting anti-Trump efforts. Fortunately, three firms (Perkins Coie, WilmerHale and Jenner Block) successfully filed suit to halt his efforts at intimidation. I am sure that this did not go unnoticed by Chief Justice John Roberts, a veteran of Big Law firm Hogan and Hartson. This will not augur well for the administration when their appeals hit the Supreme Court.

The already weak stock market took notice of these events and declined 1.5% on week and it is now down 5% on the year. Remember Tariff Day is set for next week on Wednesday April 2nd. To close I would note that the day before Herbert Hoover signed the Smoot-Hawley Tariff Act of 1930, the Dow Jones Industrial Average declined by 8%.

My Review of Alexander Karp's and Nicholas Zamiska's " The Technological Republic: Hard Power......"

Technology in Service of the Republic

Alexander Karp, the CEO of the artificial intelligence data analytics firm Palantir and his head of corporate affairs, Nicholas Zamiska have written a scathing attack on the consumerism of Silicon Valley and a plea to use American technology to defend our country. They view the current ethos of Silicon Valley as hostile to government and society, especially to using technology in national defense. This is the complete opposite of the World War II ethos of science adviser Vannevar Bush and Robert Oppenheimer of Manhattan Project fame. At that time and into the 1950’s and early 1960’s technology was harnessed in defense of the nation. In contrast the valley’s current avatars are more interested in shopping apps. They forget that Silicon Valley got jump started by the need for integrated circuits to support the ICBM programs.

Karp and his colleagues, on the other hand, are more interested in protecting our troops from IED’s and for detecting terror threats in advance. To them if a marine needs a better rifle, the Pentagon should order it. Similarly if the a marine needs better software, the Pentagon should order it. 

Karp blames the cultural relativism of the 1970’s on for the valley’s distaste for America. By that the authors mean the valley leadership believe that our culture is not inherently superior to other cultures. Hence, it is not worth fighting for, yet they live under a defense umbrella that enables them to create great wealth. As a result, you can read Karp and Zamiska as a call to arms for Silicon Valley to utilize its unique talents to defend our Republic.

At times the book gets very pedantic. It seems that Karp has read every German philosopher in the original German. That slows down the read, but it should not deter anyone from getting the fundamental message of this very important book.

 

Powell Gives Trump Tariffs the Benefit of the Doubt

 The stock market initially interpreted the Fed's actions this week as dovish in that despite the prospect of tariffs on April 2, the Open Market Committee maintained its guidance for two rate cuts later this year. Although Fed Chair Powell couldn't say it, what is going on is that he is giving the Trump's tariff policy the benefit of the doubt by calling the inflationary impact "transitory." 

What we witnessed is Powell at his political best. In effect he is saying the Fed will wait and see how the tariffs play out. If instead, he were more hostile to the tariffs, Trump would have come down hard on the Fed triggering a political fight Powell does not want. This way the Fed will wait to see how inflationary the tariffs will be and if they turn out to be malign the Fed will have the political ability to react to them.

Thus, in my opinion, the stock market's enthusiasm for the Fed's move is misplaced.

My Review of Hampton Sides' "On Desperate Ground"

 The Chosin Few

Hampton Sides published his Korea War opus “On Desperate Ground” nearly seven years ago. It was highly acclaimed at that time, so don’t have much to add. All I can say his book portrays the heroism of the men of the 1st Marine Division in extraordinary personal detail. They were true heroes surrounded by Chinese and North Korean forces in the Chosin Reservoir who engaged in a spectacular breakout in the freezing cold. Through his words you can feel the snow and the winter cold at 4,000 feet in the North Korea of November 1950. 

To me the marine grunts are the true heroes of the book. However they benefitted from the great generalship of Oliver Prince Smith, who should be in the pantheon of great American generals. They also benefited from the engineering genius of Col. John Partridge who, under fire, constructed the landing field that would supply the surrounded marines and built a pontoon bridge that enabled the mass evacuation of the division. 

General Douglas Macarthur comes under withering criticism. After his very successful Inchon landing, MacArthur became blinded by his own ego. He ignored warnings of an imminent Chinese intervention and when it came, he was oblivious to its impact. It was the human wave attacks of the Chinese that made the defense of the Chosin Reservoir so perilous. Had the marines not benefitted from American air superiority, they would have been massacred. 

Although the Korean War took place 75 years ago, it still resonates today by asking the questions: Do we have soldiers of courage that would display the heroism of that time, and do we have the generalship to guide them? It goes without saying that Donald Trump couldn’t shine Harry Truman’s shoes. 

The Recession of 2025

This coming December the Business Cycle Dating Committee of the National Bureau of Economic Research will find that a recession began in the second quarter. Although there are clear signs that the economy is weakening, most observers believe that we are in a temporary growth slowdown. Moreover, you can’t see a recession in the most recent economic data. Therein lies the point I am trying to make. When a recession is in the data, it is too late to make a credible forecast, because the whole world would already know it. The task of a forecaster is to make a call when the data is ambiguous, not when it is clear. Of course, I along with many who called for a recession 2022 and 2023 were dead wrong.* Obviously, the forecasting community is gun shy.

My argument for a recession is based on the recent 10% decline in stock prices that will dampen consumer spending, the friction caused by the Trump tariffs that will raise prices, stall capital spending, and disrupt supply chains and government spending will decline making it pro-cyclical. It looks like we are about to relearn the very hard lessons of the 1930 Smoot-Hawley Tariff Act.  

At the start of the year the value of an expensive U.S. stock market was more that two times nominal GDP. As Keynes noted, “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

Moreover, I would suggest that the stock market decline is far from over. On March 5th I posted on LinkedIn that the high for the stock market was in. Steve Blitz of Lombard came back to me with the comment, “More critical is where is the low.” My sense is that the stock market and the recession will feed off each other that will send the S&P 500 down to the 4900-5000 level, making for a bear market-like 20% decline. We closed to today at 5600. 

Although it is hard to prove statistically my guess is that with 50% of consumption accounted for by the top 10% of income earners, the decline in stock prices will have a negative effect on consumer spending via the wealth effect. Consumption spending as a share labor income is very stable, not so for wealth.  Early signs of weakening consumption was highlighted by several airline executives mentioning a slowdown in air travel.

As far as supply chains go just think about the amount of steel and aluminum, now subject to a 25% tariff, which is used by the Ford F-150 truck and the Boeing 737 airplane. There may be domestic substitutes for steel, but not aluminum. The electric grid is troubled enough that it would be hard pressed to supply electricity to a new aluminum smelter.

Net Net. President Trump’s speculation that the transition to his “golden age” could be marked by a recession.

* I operate under the slogan "Often wrong, never in doubt."

 

My Review of I.S. Berry's "The Peacock and the Sparrow"

 Betrayal in the Desert

Former CIA Officer I.S. Berry has written a terrific first novel set in Bahrein at the time of the Arab Spring. It is a classic espionage novel. Her protagonist is Shawn Collins, an aging CIA officer with an alcohol problem. He finds Rashid, a questionable source within the Iran-backed Shia underground that is attempting to overthrow the ruling Sunni monarchy.

Collins’ new station chief is a young and arrogant Ivy leaguer who thinks he knows it all. The two don’t get along from the start. Collins is attracted to a stunning local artist named Almaisa of European/Arab parentage. She has studied in the west and his interest in her is more personal than professional.

With Almaisa and Rashid we get a sense of the real Bahrein. We get a real smell of the streets and get an understanding of violence associated with uprising. I visited Bahrein on business many years ago and only saw its office towers and a large collection of Mercedes automobiles. I didn’t see the back streets or the outskirts of Manama, the capital.  

Along the way we get a sense of the politics of the CIA and the habits of the elite westerners who reside there. They live in a different world. If I had one criticism it would be the lack of maps, for the country as a whole and Manama. It would have made it much easier to follow the plot.

SHAME

I never felt so ashamed for my country than I did yesterday when I watched President Trump bully Ukrainian President Volodymyr Zelensky in the oval office in front of a worldwide television audience. In Trump’s mind Zelensky was guilty of not kissing his ass so Trump stood foursquare for Putin’s aggression in Ukraine and in the process seemed to abandon the Western Alliance. I really should not have been surprised because his administration threw Ukraine under the bus at the Munich Security Conference two weeks ago. (See: https://shulmaven.blogspot.com/2025/02/trump-and-new-hitler-stalin-pact.html) 

As I noted then what Trump is doing is not appeasement, but rather he has made the U.S. a co-aggressor with Putin’s Russia. This will end badly with China being the only real winner. If there is a small silver lining here it will be to rouse Europe from its slumber by forcing a massive increase in its hitherto inadequate military expenditures.

In the aftermath of Trump’s bullying, I was nauseated to watch his sycophants cheer him on. Secretary of State Marco Rubio, Secretary of the Treasury Scott Bessent and Senator Lindsay Graham all belong in the hall of shame. Trump wanted a cabinet of suck-ups; he certainly has one.

 

"People of Color" Ideology Headed for the Dustbin of History

 Politico in the form of of a column by UC Berkely Professor Jerel Ezzel has come around to the Shumaven view that the term "people of color" belongs in the dustbin of history. (See Below)

"The moment, predictably, triggered a backlash from conservative commentators, who accused King, who is Black and a journalist, of being preoccupied with race. But it was also a reminder of the awkward, clunky and frequently backward attempts by the left (or those perceived to be on the left) to, literally and figuratively, read the room. For years Democrats’ understanding of race has not only not evolved, it has arguably been in full-blown retrograde. Nowhere has this been more evident than in the party’s canned usage of the term “people of color.”" https://www.politico.com/news/magazine/2025/02/21/people-of-color-race-dei-democrats-00201548?nname=playbook&nid=0000014f-1646-d88f-a1cf-5f46b7bd0000&nrid=0000014e-f0ed-dd93-ad7f-f8edae200000

We discussed this issue in 2022 in writing about the Latino/Black schism in the Los Angeles City Council. ( See: https://shulmaven.blogspot.com/2022/10/peope-of-color-false-political-construct.html ) If anything the election results of 2024 highlighted the fact that "people of color" do not not vote in a bloc and many of them voted for Donald Trump. Indeed blind support of DEI is an election loser.

United to Restart Service to Israel

 United to restart service to Tel Aviv, Israel

(February 4, 2025)

In early February United Airlines announced it would restart service to Israel in mid-March with one flight a day out of Newark which would be upped to two flights a day by the end of the month thereby beating Delta by two weeks. In January we called on the major U.S. air carriers to end their de facto boycott of Israel. (See: https://shulmaven.blogspot.com/2025/01/us-air-carriers-stop-boycotting-israel.html) Delta announced their resumption of flights to Israel starting in April later that month.(See: https://shulmaven.blogspot.com/2025/01/delta-to-resume-flights-to-israel.html)

For United, this should only be the beginning because it has historically had the most flights to Israel of all the U.S. airlines. For example United had flights, in addition to Newark, out of Washington, D.C., Chicago. Los Angeles and San Francisco. Now all we need is American Airlines to follow suit.

Trump and the New Hitler-Stalin Pact

In the early morning hours of August 24th,1939 Soviet Foreign Minister Vyacheslav Molotov and German Foreign Minister Joachim von Ribbentrop entered into a pact that would ratify the division of Poland and the ceding of Lithuania, Latvia, Estonia, and Bessarabia to the Soviets. The press would soon call it the Hitler-Stalin Pact that enabled Germany to invade Poland on September 1st and Soviet Russia to invade three weeks later. 

Today President Trump, echoing Russian propaganda, called Ukraine President Volodymyr Zelensky a "dictator" and accused him of starting the war in Ukraine, a complete lie. Put bluntly, Trump has thrown Ukraine under the bus. My guess is that Putin called in all his cronies and broke out the vodka in celebration of a new Hitler-Stalin Pact. And to put icing on the cake for Putin, Defense Secretary Hegseth announced substantial budget cuts for the Pentagon.  Instead of dividing Poland, Trump and Putin are setting the predicate for the division of Ukraine. The result in 1939 was a World War. I fear a Trump-Putin condominium will lead to a similar result. 

For previous posts on Ukraine, see for example: https://shulmaven.blogspot.com/2014/03/the-ukraine-what-is-to-be-done.html and https://shulmaven.blogspot.com/2022/03/mr-zelinskyy-goes-to-washington-via-zoom.html.

Donald Trump, Four Weeks in: The Good, the Bad, and the Ugly

Donald Trump’s second inauguration certainly did not take its cues from Lincoln’s second where he said, “with malice towards none and charity for all.”  It is turning out like a vengeance tour where he is flooding the zone with a host of initiatives, some of questionable legality. However, he is keeping his campaign promises and is acting in sharp contrast to the somnolescent Biden Administration.  Below is my take on the good, bad, and ugly so far. To be sure it is arbitrary, and it is no way a full list with the bad and ugly massively outweighing the good.

The Good

• A few good cabinet appointments: Marco Rubio at State, Scott Bessent at Treasury, Doug Burgum at Interior and Elise Stefanik, at the U.N.

• Doing away with DEI in the federal government and its contractors.

• Joining social-democratic Europe with restrictions on gender reassignment care for minors.

• Banning biological males from participating in women/girls’ sports.

• Although it can turn ugly fast, passing the Laiken Riley Act and a crackdown on unlawful undocumented immigrants. Tough actions on border security are long overdue. 

• Cracking down on campus antisemitism.

• Unambiguous support for Israel.

The Bad 

• DOGE, Elon Musk’s Department of Government Efficiency. Although the New York City power broker Robert Moses taught us you can’t make an omelet without breaking some eggs, Musk is going way too far in his noble attempt to cut government waste. He is using a butcher knife instead of a scalpel. As a result, many hard-working government employees are living under what they rightly perceive as a reign of terror. Simply put, it is very hard to improve the efficiency of government with a demoralized work force.

The Ugly  

• Pardoning the January 6th rioters.

• Decapitating the FBI, Justice Department and the CIA, leaving us vulnerable to acts of terrorism.

• Horrendous cabinet appointments featuring incompetent and vile people. Namely, Pete Hegseth at Defense, RFK, Jr. at HHS, Tulsi Gabbard at National Intelligence, and Kash Patel at the FBI. Yet again the Republicans in the Senate have proved themselves to be moral eunuchs in approving these appointments, with Patel pending. (See: https://shulmaven.blogspot.com/2021/02/the-party-of-moral-eunuchs.html) With Hegseth, Gabbard and Patel, our security is at risk.

• Starting a trade war with our allies Canada, Mexico, E.U. and Japan. This is a sure-fire way to increase inflation and to lower growth. (See: https://shulmaven.blogspot.com/2025/02/the-tariffman-strikes.html)

• Practically surrendering Ukraine on a platter to Putin at the Munich Security Conference. 

• Dropping the bribery prosecution of NYC Mayor Eric Adams.

My Review of Williamson Murray's "The Dark Path: War and the Rise of the West"

 War Through the Ages

The late Williamson Murray, a military historian at Ohio State, has written a tour de force history of war from the 1500’s to the present. He argues convincingly that the intense competition for the mastery of Europe led to advances in military technology and the infrastructure of war making were responsible for European success in mastering the globe.  His other thesis is that wars are not won by decisive battles, but rather by brute numbers, organization, economics, finance, and logistics. 

For example, Napoleon’s victory at Jena, which so impressed Hegel and Ludendorff’s victory at Tannenberg did not determine the outcome of the Napoleonic Wars and World War I, respectively. Napoleon lost because the coalition against him was far better organized and financed and had numbers on their side. Similarly, Germany and its allies lost world War I because with America’s entry into the war they were outnumbered and out financed. However, “time and chance happen to all” or in Clausewitz’s word “friction” and at times friction can overcome a lack of resources. For example, Ukraine is still in the fight, but it appears that heroic country was just sold-out by Trump.

Williamson discusses at length the various revolutions in military affairs. He starts with gun powder rendering castle walls obsolete and he goes on to discuss innovations in sailing that happened 100 years later that enhanced naval power. The most important revolution was the merger of the French Revolution with its levee en masse with the industrial revolution which made war total by making the civilian population enmeshed in warfighting. The flowering of that would occur in the American Civil War where the North was far better organized with far better logistics to overcome the South. The war lasted as long as it did because of poor generalship on the part of the North and better generalship on the part of the South.

If there is a hero in the book, it is Otto von Bismarck, whose strategic vision unified Germany with three wars. He had strategic focus and fully understood Clausewitz’s dictum, “that war is the extension of politics by more violent means.” Thus, the lack of strategic vision is road to ruin in wartime. For example, Bismarck understood that after victory against Austria he chose not seize any territory and that ultimately made Austria an ally.

For recent history Murray relies on the work of Andrew Marshall, the longtime head of the Pentagon’s Office of Net Assessment. ( A biography on Marshall was reviewed here: https://shulmaven.blogspot.com/2015/04/my-amazon-review-of-andrew-krepinevichs.html ) In that biography I noted, “As the Cold War was winding down in the mid-1980s he focused his attention on the rise of China and was quick to point out how the revolution in military affairs (precision weapons, computerized command and control and information warfare) in the 1990s would significantly change the nature of future battlefields.” Indeed, this is how Murray viewed Marshall’s work. Further Murray noted that Marshall was among the first to see the Soviets lacked the economic strength and the scientific bench to keep up with the U.S. in 1980’s, which highlighted the fact that war involves far more than kinetic battlefields.

Although “The Dark Path” is a long book, it offers a kaleidoscopic view of the history of war over the past 500 years. It is not for the casual reader, but for those interested in understanding how our world came into being, it is well worth the effort.

Trump's Gaza Plan: More than Meets the Eye

 At his joint news conference with Israel's Prime Minister Netanyahu, President Trump stunned the world by calling for the resettlement of Gaza's population to pave the way for a massive development project under U.S. auspices in Gaza. According to Trump it would be a new "Riviera." Aside from the Israel far right, the idea was uniformly panned in the middle east, Europe and among Trump's MAGA base. Simply put, it is not going to happen.

However, Trump's forced the region to wake up to the fact that we can't go back to the world as it stood pre-October 7th. It will force the Palestinians to come to terms with the new realities of the region.

What has not been said is that while the U.S. will not rebuild Gaza, Trump's idea has whetted the appetite of every property developer from Egypt to Turkey to Saudi Arabia to the Gulf. While Gazans won't accept the U.S. to take the lead, they might be more amenable to an Arab consortium in a project that, of necessity, would involve the temporary exile of portions of the current population. I have to believe that discussions are already underway across the capitals of the middle east.  

The Tariffman Strikes

Donald “the Tariffman” Trump will announce today a 25% tariff on all goods coming from Mexico and Canada and a 10% additional tariff on all goods coming from China. And this is only the beginning with additional tariffs on E.U. products and some specific duties coming. The tariffs on Canadian and Mexican products are an obvious violation of the United States-Mexico-Canada Treaty that Trump signed when he was president the first time. 

To put the tariff question in context, the U.S. imported $3.3 trillion of goods last year, about 11% of our GDP. On a purely arithmetic basis, a 10% tariff on all imports would raise the price level by approximately one percent and a 20% tariff would raise the price level by 2%. However, a potentially stronger dollar and foreign producers absorbing part of the cost would partially reduce the inflationary impact.

Although many economists poo-poo the long-term inflationary impact of the tariffs as a one-time increase, I am skeptical. Why? First, the tariffs will cause a costly rejiggering of supply chains in the longer run, and second in the short run there will be chaos at the Mexican and Canadian border points of entry where all goods shipment will be held up until the tariff is paid. Further it is not clear to me how consumers will respond to the price increases. Instead of thinking like an economist, many consumers might believe that a new inflationary spiral has started. Recall, all the talk about the transitory nature of inflation in 2022.

Importantly, we have to remember that tariffs are an excise tax on imports. As such they raise prices and reduce output with stagflation being the result. Throwing sand into the gears of the economy can hardly promote growth. To the contrary it will stifle growth and add to inflation.

Delta to Resume Flights to Israel

 Delta Airlines announced it will resume flights to Israel. (See below) Less than a week ago we called for the three major U.S. air carriers to end their boycott of Israel. (See: https://shulmaven.blogspot.com/2025/01/us-air-carriers-stop-boycotting-israel.html) Delta has followed though and we applaud Delta CEO Ed Bastian for his decision. Now it is time for United, who had the most flights to Israel, and American to follow through.

Delta to resume Tel Aviv service from New York-JFK on April 1

Delta will restart daily nonstop service to Tel Aviv (TLV) from New York-JFK on April 1, utilizing its Airbus A330-900neo to provide customers with nearly 2,000 weekly seats. 

Staff Writer 

Jan 24, 2025 9:00am

https://news.delta.com/delta-resume-tel-aviv-service-new-york-jfk-april-1

My Review of Andrew Leigh's ""How Economics Explains the World: A Short History......"

History Through the Lens of Economics

Andrew Leigh over-promises and under-delivers in his history of the world through the lens of economics. To be sure economics is particularly important but as Ecclesiastes says, ‘time and chance happens to all.” Economics gives us tools to help understand the world, such as incentives, diminishing marginal utility and sometimes, as behavioral economics has taught us, people aren’t as rational as the classical theory would predict.

He, of course, mentions many of the great economists from Smith to Keynes and Freidman, and Kahneman. There works clearly help explain the world. He also mentions the work of Jared Diamond on the importance of an economy residing along and east-west axis as opposed to a north-south axis. This helps to explain why the northern hemisphere has done so much better than the southern hemisphere, but what does that have to do with economics?

He fails to discuss how human beings can really screw up what apparently looks like a strong endowment. Witness the weakness of Russia and Argentina and the converse of South Korea and Japan.

My bottom line is if you want a very short overview of the role of economics in history, this book might be for you, but it leaves out much.

U.S. Air Carriers: Stop Boycotting Israel

An Open Letter to:

Robert Isom

CEO, American Airlines

Ed Bastian

CEO, Delta Airlines

Scott Kirby

CEO United Airlines

As a frequent flyer to all three airlines, I have one question for you: Why are you boycotting Israel? All three of you had regularly scheduled flights from the United States (JFK, EWR, ORD, DFW, ATL, LAX, SFO, and IAD).  I recently flew on El Al  from LAX to TLV. I would have preferred an American carrier, but because of your boycott I had no choice, but to fly on El Al.

I understand that Israel has not been the safest of countries. Nevertheless, El Al has been operating safely since the Gaza war began and now with a limited cease fire in place, I don’t think you have any excuse for not flying into Tel Aviv. If your current policy of not flying into Israel persists, there can be only one explanation: you are boycotting Israel. 

I therefore urge you to resume flight operations to Tel Aviv as soon as possible. Otherwise you would be doing a great disservice to the flying publics of the United States and Israel. You also would objectively be taking the side of Hamas in the Gaza War. If that is your policy, say so!

My Review of Stuart Banner's " The Most Powerful Court in the World:...."

 A History of the Supremes (Not the Motown Group)

UCLA law professor and former Supreme Court clerk Stuart Banner has written an encyclopedic history of the Supreme Court of the United States. He not only covers the case law, but he also covers the personalities, the politics inside and outside the court, from its earliest beginnings in the 1790’s to the present. In the interest of full disclosure, I had a very small adventure with the Supreme Court as a plaintiff in Yahr v. Resor (4th Circuit 1970) and having cert. denied in 1971.

What Banner rightly argues, the Supreme Court always was and always is a political body. When the Senate was controlled by a party not in the White House, appointments were often delayed until the next election. Merrick Garland’s nomination in 2016 was not an exception to history. As the old wag goes, “the Supreme Court follows the election returns.”

What I found interesting was Banner’s discussion of the 1925 judicial reforms, authored by Chief Justice Howard Taft and adopted by Congress. Those reforms enabled the Supreme Court to reject cases coming before it and it enabled the court to leave a rather dingy office space in the Senate office building to the Greco-Roman shrine it occupies today. According to Banner the ability of the court to choose its cases enabled it to take cases, many concerning civil rights, that it wouldn’t have previously taken because of a very crowded docket. Further he notes that the Republican Administrations in the 1920’s appointed several moderate justices, Harlan Fiske Stone, Charles Evans Hughes, and Owen Roberts. Those three justices played a meaningful role in ratifying the New Deal legislation of the late 1930’s.

While Banner applauds and criticizes many Supreme Court cases, he is silent on why the Supreme Court, from Marberry v. Madison in 1801 to Dred Scott in 1857, the Supreme Court did not overturn a single act of Congress. While after the Civil War and to this day many congressional acts were overturned. So, why was the court, so deferential to the congress in the early 1800’s. Banner rightly mentions Gibbons v. Ogden ((1824) which established federal supremacy over interstate commerce, but he fails to mention its huge economic impact in opening the Midwest and establishing New York City as the nation’s leading port.

He also doesn’t criticize Euclid v. Ambler Realty (1926) which ratified local zoning and, in my opinion, a regulatory taking; Berman v. Parker (1954) and Kelo v. New London (2005) which enabled government to seize private property and turn it over to another private party, not for direct use by the government for a public purpose.  He does note the extreme extension of the commerce power in Wickard v. Filburn (1942) which prevented a farmer from growing crops for his own use, hardly interstate commerce. My guess is that the case would be decided differently today. 

Lastly, he speaks favorably of Chevron v. NRDC (1984) which gave huge discretion to administrative agencies to go beyond the clear intent of Congress. Fortunately, that was overturned this year in Loper Bright Enterprises v. Raimundo. I do note that his book went to press ahead of that case.

These criticisms aside, Banner clearly explains how and why the Supreme Court overturned much of Reconstruction and how and why much of the rights we enjoy today were creatures of Supreme Court actions from the 1920’s on. However, although he discusses how the Supreme Court functioned as a super-legislature in overturning laws protecting workers and individuals, he is less critical of the court creating rights without any direct constitutional underpinning. The controversy over Roe v. Wade and its repeal is an exemplar of this. This is a book for supreme court nerds, and if you are one, it is well worth the long read.

We are in the Early Stages of a Bond Bear Market

Bond market cycles last a long time. For example there was a bond bull market from 1920-1946 when long term U.S. Treasury yields declined from 6% to 2.3%. Thereafter a 35 year bear market ensued to September 1981 which took the yield on 10-Year U.S. Treasury Bonds to 15.84%. This was followed by a 39 year bull market that ended in August 2020 with the 10-Year U.S. Treasury yield trading at a meager 0.56%. It seems clear to me that with the 10-Year bond closing this week at 4.76%, we have been in a bond bear market for over four years. 

Thus if history is any guide, we are only the the early stages of a bear market that could last another two decades. Of course, as in any bear market, there will be rallies along the way, the the path for yields will be decidedly upward.

The fundamentals underpinning the bear market include monumental budget deficits throughout most of the world's largest economies, unfunded pension plans, a still smoldering inflation, and, at least in the near term, the global electorate's preference for populist politics that is working to deglobalize the world economy.  Further, if you add to the mix the need for enormous expenditures to harden infrastructure for weather events and the costs associated with energy transition, all the forces are in place for higher inflation and higher yields.

As far as the stock market goes, stocks can and have risen in the early stages of a bond bear market. That certainly has happened over the last four years. However, as high interest rates begin to bite, the stock market will no longer have a bond bull market at its back to support a near record price-earnings ratio for the broad market.  

The views outlined here are consistent with an earlier blog in 2022 outlining the prevalence of 13-year cycles. (See: https://shulmaven.blogspot.com/2022/05/the-useconomy-is-entering-new-thirteen.html) Also see my recent short term outlook       (https://shulmaven.blogspot.com/2024/12/2025-revenge-of-bond-vigilantes.html)

Memo to the Republicans: Don't Over-Reach

You missed a bullet by electing Mike Johnson speaker on the first ballot. By the way I think Johnson has been under-rated by the media, and it is my guess that he has the potential to turn out to be a speaker of consequence. My primary suggestion is that you don't make the same mistakes the early Biden Administration did. They over-reached, and while it looked good early on, the Democrats reaped the whirlwind in 2024. Don't let that happen to you. Remember we are still a 50/50 country; Biden forgot that.

Thus you should focus on a few narrow, but important priorities. Namely extending the 2017 tax cuts with few amendments, immigration control, energy deregulation, increased defense spending and targeted tariffs. Don't mess around with the tax subsidies for alternative energy embedded in the misnamed Inflation Reduction Act. For example wind energy supplies a huge portion of the electricity needs of all of the states going north from Texas to North Dakota. I need not remind you that the folks in those states are your prime constituency. 

I am not smart enough to know that all of this can be done in one or two reconciliation bills. That tactical decision is way above my pay grade. But remember, success breeds success and if you can get this done early, the rest of your wish list could very well come within range.

One more thing, on the foreign policy front, do not abandon Ukraine. If you do, it will be your Afghanistan.