Saturday, July 26, 2025

Ration Rationing!

 For the last couple of weeks, most of the email generated by this blog has concerned those government-run grocery stores proposed by the New York Democratic mayoral candidate, Zohran Mamdani.  If I eliminate the usual hate mail—which I have graded and returned—the rest is about split between those who are positive that it wont work and those who are eager to see the experiment implemented, as long as it is done far from their homes. 

A very small number of people pointed out that, while there were several examples of small government-run grocery stores in food deserts, there werent any examples of large-scale government-operated food stores.  Thats true:  I cant find a single good example—but I found something fairly close:  an example of the government’s intending to do good, but ending up distorting a very large market.

At the start of World War II, Great Britain found itself in a dangerous position:  The island nation had to import two-thirds of its food under normal circumstances and German submarines threatened to cut off the food supply, so the British government implemented a strict rationing system for hard-to-obtain foods.  Ration books were issued, a point system for meat, tea, sugar, and fats was established, and propaganda cartoons featuring Doctor Carrot and Potato Pete urged civilian compliance.

The rationing system insured that the army received sufficient food to continue to fight, guaranteed that no one starved, and (most importantly) insured that everyone in the country believed that, regardless of an individuals wealth or position, no one got more than their fair share of the available food.  The English class system made that last point particularly important.

Surprising many, British food rationing did not stop immediately after the wars end due to a combination of economic hardship and global instability.  The country was deeply in debt, with its economy drained by six years of war.  Imports had to be paid for in scarce U.S. dollars, which limited access to foreign food.  At the same time, British domestic agriculture, though improved during the war, could not yet fully meet demand.  The Labour government that was elected in 1945, prioritized fairness and full employment over market liberalization and viewed rationing as a way to ensure equitable distribution during recovery.  Bureaucratic inertia and fear of inflation also delayed reform.  Rationing, while unpopular, was seen as a stabilizing measure for when and if the economy and supply chains could recover.  Thus, not only did the rationing not stop after the war, but bread was added to the list of controlled items.

In short, keeping rationing in place seemed both safer and fairer to the Labour government that did not fully trust or believe in a free market, so it continued to control both production and distribution of food.  Producers, guaranteed a stable price for their goods, saw little reason to risk investment in either innovation or expansion.

The rationing system was a form of price and supply controls and while such draconian measures were a necessary evil during the war, they were a huge mistake after the war.  Wage and price controls inevitably lead to market inefficiencies such as shortages and a drop in the quality of goods delivered.  As the government increasingly manages coupons instead of increasing productive activity, labor and capital are misallocated.  The end result of such economic policies is always a shortage of goods and the development of a black market that sells goods at a high price.

As Milton Friedman said, "The government solution to a problem is usually as bad as the problem.”

By maintaining wartime controls during peacetime, Britain dramatically slowed its own economic recovery.  Rather than letting the market rebuild supply chains and incentivize production, the government suppressed price signals, reducing incentives for farmers and importers to innovate or try to increase efficiency in both agriculture and distribution.  At the same time, the government wasted money and manpower maintaining a large bureaucracy to enforce the rationing.

Though rationing was meant to ensure fairness, an economist like Milton Friedman would argue that forced equality through rationing reduced overall welfare.  He would say it's better to allow prosperity to rise, even if unequally at first, than to hold everyone down to the same artificially low level of consumption.

By the late 1940s, the British public was weary of prolonged austerity. Rationing, initially accepted as a wartime necessity, became increasingly unpopular as peace returned. Restrictions on staples like meat (8 oz weekly), butter (2 oz), and sugar (8 oz) felt oppressive, especially with limited variety and long queues.  Housewives, in particular, were vocal about the burden, with some forming groups like the British HousewivesLeague to protest rationing and price controls.

Ironically, though the British and the Allies had won the war, English food rationing lasted years longer than in any other European nation—including in Germany, who had lost the war.  France ended food rationing in 1949, and Poland, Belgium, and Germany, in 1950.  In 1951, Winston Churchill and the Conservative Party were returned to power with a promise to end economic controls, including rationing.  England finally ended all food rationing in 1954.

Though rationing lasted almost three times as long as the war, food consumption in Great Britain returned to prewar levels within a few years after rationing ended.

Saturday, July 19, 2025

Why Not Government Grocery Stores

 By now, most Americans know that the Democratic Party candidate for Mayor of New York has included a proposal for opening five municipally-owned stores—one in each borough—as part of his 2025 mayoral campaign.  Not surprisingly, the proposal meets with the approval of several of the more liberal Democrats, prompting Senator Elizabeth Warren to proclaim on CNBC, Its a new and fresh plan for New York City, but its been tried in other cities around the country and has had some real successes.”

That news surprised me, so I decided to look a little closer at the history of government-run grocery stores.  Spoiler Alert:  Senator Warren speaks with a forked tongue.

Though I searched, I cannot find any large American metropolitan area that has tried a government-run grocery store.  Government-run grocery stores in the United States have been attempted in various forms, primarily in small towns and rural areas, with mixed results. 

  • Erie Market, (Erie, Kansas).  When the town’s only grocery store threatened to close in 2020, due to Covid restrictions, the town stepped in and purchased the store.  After four years of operating at a loss, the town leased the store to a private company.
  • Baldwin Market, (Baldwin, Florida).  A city-owned grocery store operated for five years but closed in 2024.  Even though the store operated at a loss, the store faced declining patronage as customers found cheaper prices at private stores.
  • Rise Community Market, (Cairo, Illinois).  As one of six stores the state opened up in food deserts (defined as a rural community of at least 500 residents, located more that 10 miles from a retail store), Rise is still open, though local residents complain of high prices and empty shelves.  Despite millions of dollars in subsidy, four of the state-run stores have closed. 
  • St. Paul Supermarket, (St. Paul, Kansas).  The store, owned by the municipality, is considered a success due to strong community buy-in, motivated by the need to retain residents and attract new ones.  The store generates a profit slightly above the average for rural grocery stores, which has been attributed to local support and effective management.  Community engagement, local management, and the store’s role as a retention and recruitment strategy for the town are the keys to the store’s success.  However, its small scale (serving a population of ~600) limits its applicability to larger urban settings.

The only other grocery stores that I could find that might be considered state-run were tribal stores on Native Reservations and military commissaries on military bases.  Unless I missed something, thats it.  Note that all of these stores were attempted in rural areas—none were located in urban settings.

In 2023, Chicago Mayor Brandon Johnson announced a plan for municipally-owned and operated grocery stores to fight urban food deserts (with “food desert” defined as an urban area more than a mile from a grocery store).  After completion of a feasibility study, the plan was abandoned.

Besides noting that no large urban city has successfully run a state-owned and operated grocery store, there are good economic reasons why such a store would be doomed to failure.  Government-run stores disrupt the natural price signals and competition that drive the greatest efficiency in private markets.  Unlike private grocers, who optimize supply chains and quickly respond to changing consumer demand, government entities often lack both the expertise and the incentives to operate efficiently, leading to higher costs and wasted resources. 

Let me put that another way:  Economists, like Milton Friedman or Friedrich Hayek, would argue that markets allocate resources better than centralized planning.   Government stores risk misallocating resources by prioritizing political goals over economic viability.  Misallocated resources lead to inefficiency, which leads to higher costs.

Government-owned stores also crowd out private investment.  The best way to eliminate a food desert is to provide incentives for private investment.  Subsidized stores can undercut prices, discouraging private investment in grocery retail, especially in underserved areas, in a business in which profit margins are already thin (1-3% in the industry).  A government-owned store, though poorly run and losing money, may still attract sufficient customers to deter a private store from opening.

Government-run stores inevitably limit consumer choice by offering fewer products or by stocking lower quality goods due to bureaucratic constraints or budget limitations.   (Remember back in 2012, when New York City wanted to ban soft drinks larger than 16 ounces?)  Private grocers, driven by profit motives, are incentivized to cater to diverse consumer preferences or to innovate new services.


While we lack US examples of urban government grocery stores, there are ample international examples:  Vietnam, Iran, Venezuela, and Cuba have all experimented with government grocery stores.  All promised lower prices by eliminating profits.  The bottom line, however, is that all either failed outright (Venezuela and Cuba) or depended on steadily increasing government financial support.

One last point about government-run grocery stores:  For years, big box discount stores like Sam’s have tried to open stores in all of the five boroughs of NYC.  Each time, the City has blocked such moves with prohibitive zoning or land use regulations.  In each case, the reason for blocking the new stores was to protect existing small businesses,  such as bodegas and neighborhood stores.  So, if Walmart tries to compete with them, it’s “predatory capitalism”, but if a government agency does it with taxpayer money, it’s “enlightened socialism”?

There are currently over a thousand retail grocers in New York City, each of them competing for customers by offering different levels of services and prices.  The idea that the city, with limited purchasing power, with no experience in the market, and with  no profit incentive could really compete with lower prices sounds exactly like the kind of pie-in-the-sky idea a thirty-year-old candidate with no real work experience might propose.

Saturday, July 12, 2025

Trains of Thought

This is a topic I wish I could discuss with Fred Dabney.  Fred was a Renaissance Man— somebody who knew just about everything about anything.  Freds been gone a while now, but I still miss going to the radio station where he worked the graveyard shift, playing jazz all night long.  Wed drink coffee while discussing the news coming off the teletype.  

If there was one topic that Fred was really an expert on, it was trains.  I like trains and probably know as much about them as the next historian, but I cant tell you the difference between a 4-2-0 and a 4-6-0 steam locomotive.  Fred could talk about that for days.  (Im lying—I do know the difference but could only talk about it for a couple of minutes.)  I wonder what Fred would say about Edward Hoppers fascination with trains.

Yes—Edward Hopper, the American artist, whose paintings primarily explore themes of isolation, solitude, and the alienation of modern life.  His work often depicts stark urban and rural scenes—empty diners, gas stations, theaters, or lone figures in rooms—with everything bathed in dramatic light and shadow.  These settings evoke a sense of loneliness, quiet contemplation, or disconnection, that reflect the emotional undercurrents of early-to-mid-20th-century America.  The most famous of his works is Nighthawks (1942).

If youve ever stared at a Hopper painting and felt an odd sense of loneliness, introspection, or the creeping suspicion that the guy at the diner counter is thinking deeply about the futility of it all… congratulations.  Youve been Hoppered.  But amidst his sunlit isolation and moody diners lies another, often overlooked motif: the train.

Thats right—Edward Hoppers trains are more than just steel and steam and they are not merely background scenery or a means to get from here to there.  Instead, they are symbolic workhorses, quietly chugging away with emotional freight.  Whether nestled on a track behind a country house or slicing through a gloomy overcast landscape, Hoppers trains whisper stories about time, distance, longing, and that deeply American itch to move—even if we're not sure where to.

Lets begin with the basics.  Trains are literal vehicles, but in Hoppers world, they are also emotional vehicles—rolling metaphors for departure, arrival, waiting, and wondering.  For a man obsessed with stillness, Hopper had a surprisingly kinetic undercurrent running through his work.  Trains, in this context, act as symbols of transition, offering movement in otherwise frozen moments.

Take Railroad Sunset (1929), in which a lone signal tower basks in a garish sunset, and the track extends out of sight to both sides of the painting. Paradoxically, the train, itself, is absent—conspicuously so—but the train is missing in many of Hoppers “train” paintings.  The glowing sky suggests that the train is either coming or has just gone.  Its a portrait of in-betweenness, of anticipation hanging in the air like steam from an engine that’s just passed.  Here, the tracks (and the train we can only imagine) become a symbol of a dividing line—between day and night, solitude and contact, home and elsewhere.

Its impossible to talk about Hoppers trains without addressing the American mythology of the railroad.  Trains helped tame the West, connected small towns, and served as backdrops for tearful goodbyes and hopeful hellos.  In the collective American psyche, they are almost spiritual. They represent progress—and its discontents.

In Chair Car (1965), Hopper paints the inside of a railway car with passengers scattered like chess pieces.  No one speaks.  Everyone stares out the window or into space, even though nothing can be seen out the windows.  The seats are plush, the lighting is warm, and yet—theres a heaviness.   The passengers are traveling together, but they are also clearly traveling alone. Are these people going somewhere? Or are they merely enduring the ride?  Is the train even moving?

Hoppers trains arent the heroic beasts of industrial triumph ushering in a new age. Theyre more introspective.  They reflect a deeply personal American contradiction: the desire to roam versus the longing to belong.  The train offers escape, yes—but it also implies disconnection.  It moves, but it never promises arrival.

In Hoppers universe, even train stations throb with symbolism.  Consider Approaching a City (1946).  The canvas shows the view from a train approaching an almost featureless tunnel beneath looming urban buildings.  The city feels impersonal and closed off, without a single person visible.  The viewer doesnt get to see the other isolated people inside the train; we only see the train’s passage—the mechanical act of entry into something unknown.

The station—normally a place of hustle, ticket stubs, welcoming kisses and final embraces—is stripped of both motion and emotion.  Hopper often preferred to paint the moments before or after the train arrives. Waiting is a recurring mood.   It becomes a metaphor for human existence: were always waiting for something—love, clarity, purpose, or perhaps the next train out of town.

Even The Camels Hump (1931), which features no train at all, but merely a glimpse of rail line in a rural setting, carries the ghost of movement. Hopper once said he was interested in the sad desolation of a railroad track.”  That track, curving off into nowhere, becomes the physical embodiment of uncertainty.  The setting for this painting is in Massachusetts, near Hoppers studio.  Did the abandoned tracks symbolize isolation to the artist?

A recurring theme in Hoppers paintings is the view from the window—and nowhere is this more poignant than when one is seated on a train.  The window becomes a moving frame, slicing the world into a series of digestible vignettes.  The train window is both a portal and a barrier: it allows the viewer to see out, but not to engage.  This is peak Hopper—engaged detachment.

In Compartment C, Car 293 (1938), a young woman sits reading, oblivious to her surroundings.  She is the embodiment of the solitary traveler.  Outside the window, the world slips past unacknowledged.  Its a quiet meditation on interior life amid exterior motion.  That the compartment is labeled and numbered—"Car 293"—hints at the industrial impersonality of modern travel.  And yet, inside, its deeply human, even if isolated.

Lets not ignore the fact that many of Hoppers train-centric works feature solitary women—reading, gazing, traveling.  In a time when women's mobility was becoming more socially acceptable, trains offered independence.  These female figures often look lost in thought, but they also exude a kind of quiet autonomy.  Hopper doesnt portray them as helpless waifs or glamorous adventuresses, instead, theyre ordinary women in extraordinary states of self-possession.  The train offers a space for personal freedom, though it carries a heave dose of isolation.

In many Hopper paintings, time stands still.   But the presence of trains—whether visible or just implied—serves as a reminder that time is always passing.  The train tracks lead somewhere.  The people are en route to some place.  The signal tower is lit for something expected.

Theres a gentle irony to this: Hopper, the painter of frozen moments, uses the symbol of the train—a machine of relentless motion—to underscore stillness.  The train is always coming or going, even if we never see it.  Its the heartbeat beneath the surface of his quiet worlds.

Ultimately, Hoppers trains arent about transportation—theyre about transformation.  They represent the soul in transit, the mind on a journey, the heart caught between departure and destination.  Theyre symbols of possibility and loss, of progress and estrangement, of the uniquely human condition of being neither here nor there, but somewhere in between.

And lets face it: theres a bit of wistful romance to the whole thing.  Who hasnt watched a train slip past and thought, Where is it going?  Should I be on it?  Would that solve anything—or just change the view from the window?”

Edward Hoppers trains are subtle but powerful. They carry with them more than people—they carry questions.  Are we moving toward something, or away from it?  Are we passengers in our own lives?  Will the conductor ever explain the delay?

So, the next time you see a train in a Hopper painting, dont just admire the brushwork.  Lean in.  Listen for the low clickety-clacking rumble of thought.  It may be whispering something youve felt but never put into words.

And if all this seems like a huge load of symbolism to load onto just a few tracks and a quiet car, remember—Hoppers real subject was never actually the train.  It was always us.

Saturday, July 5, 2025

Why the CBO is Frequently Wrong

 During the hectic, unreal days of Watergate, Congress decided it needed a trusty sidekick to wrangle the federal budget.  Thus, the Congressional Budget Office (CBO) was born on July 12, via the Congressional Budget and Impoundment Control Act.  Why? Well, President Nixon was playing fast and loose with funds, "impounding" money Congress had earmarked, causing a Capitol Hill kerfuffle…Congress wanted its wallet back!

The “how” was simple: lawmakers crafted a nonpartisan agency to give them the straight dope on budgets and economic forecasts, that was to be free from executive spin.  Modeled after Californias budget wizards, the CBO became Congresss go-to for number-crunching. 

The CBOs mission?  To arm Congress with clear, unbiased data for smarter spending decisions, without whispering policy advice. Its like a financial crystal ball, helping lawmakers navigate the fiscal fog with confidence.  And so, the CBO was supposed to be a nonpartisan Capitol Hill hero, quietly crunching numbers to keep the budget battles light and bright while giving the voters the truth about pending legislation—without political spin.

Unfortunately, it hasnt always worked out that way.

The CBO tries very hard to be nonpartisan, and there is no better proof that it generally is than the fact that each political party in turn has complained long and loudly about bias whenever its ox is gored but staunchly defends the office when the CBO’s projections ding the opposing party.  Even if we assume the CBO operates without appreciable bias—as I believe it does —that still doesnt mean that its estimates are to be believed.

The problem is this:  from its inception, the CBO has created financial models based on static forecasting (sometimes called, “static scoring”).  So, what is “static forecasting”?  Let me give you a real-world example:

Back in 1990, Congress passed a luxury tax on high-dollar items that typically were only bought by the wealthy:  large yachts costing over $100,000, private jets, and very expensive cars.  Congress wanted to raise tax revenue without increasing taxes on either the middle class or the poor.  The bill, the Excise Tax on Luxury Goods was part of the Omnibus Revenue Reconciliation Act of 1990.  The CBO estimated that the tax on yachts alone would bring additional tax revenue of over $120 million.

At the time, American shipyards sold thousands of yachts annually, so the CBO just estimated that 10% of the existing revenue would be paid to the government annually.  Of course, nothing like that happened.

The global yacht business was competitive and when American-made yachts suddenly went up in price, customers immediately changed their buying behavior.  Since they were just rich and not stupid, consumers bought used yachts (which were not subject to the new tax) or they went overseas—particularly to Europe—to purchase their luxury boats.   New yacht sales in the United States dropped by more than 70%, causing many small and medium boat builders—especially in Florida, Maine, and the Pacific Northwest—to close or drastically downsize.  An estimated 7,600 to 9,000 jobs were lost in the yacht-building industry alone, with ancillary industries (marinas, suppliers, etc.) losing many thousands more.

Well, at least the government brought in more revenue, right?

Nope!  The total amount collected on the sale of yachts in the first year was $12.7 million—a figure less than the government spent enforcing and collecting the new tax.  The Government Accounting Office (GAO) said this was primarily because the IRS had to track complex sales of high-end goods and pursue evasions, such as shell companies buying boats offshore.

It wont surprise you that these dismal results were duplicated on all the luxury goods that were mentioned in the new law.  Whether it was jewelry, expensive furs, private jets, or the latest Ferrari, the rich altered their purchase patterns in ways not predicted by static modeling.  A Congressman summed up the failure, We intended to tax the millionaires, but we actually ended up punishing the middle-class boat builders.” 

Congress eventually repealed the law, but not before the disruption had long-lasting effects.  Some economists argue that the yacht industry still has not completely recovered, thirty-five years later!

Since static forecasting does not take into account the behavioral response of the taxpayers to new taxation, what is really needed is dynamic forecasting.

Static models are simpler: raise taxes, get more money.  But dynamic models say: Wait—people might work less, invest differently, or shift money offshore!”

Dynamic modeling tries to account for how people, businesses, and markets adapt—sometimes in weird, unexpected ways.  Its like trying to predict not just how the pool table balls move after the break, but also how the table might warp mid-game, or your pet cat might jump up on the table and attack the ball.

Why doesnt the CBO just always use dynamic models?  Because theyre wildly complex.  To do it right, you need to make hundreds of assumptions—about interest rates, about labor markets, about consumer psychology, about unicorn migration patterns (okay, maybe not about that last one, but you get the picture).  And if Congress doesnt like the answer?  Suddenly your assumptions are under fire and your budget is cut. 

So, the CBO sticks mostly to static scoring—not because they think its perfect, but because its safer, more transparent, and less politically explosive.  After all, nobody in the CBO wants to explain to a Senate committee on live television that the entire economic forecast turned into crap because millions of Americans suddenly went out and bought pet rocks.

We could—but we wont—change the way the CBO makes economic forecasts.

Imagine the Congressional Budget Office (CBO) as a weather forecaster for the federal budget.  If Congress passes a tax cut, for example, the CBO could use dynamic scoring to say, Heres what might happen—if everything goes great, if things go as usual, or if the economy trips on a rake.”

Instead of a static forecast of the tax cut, they give three dynamic forecast scenarios:

·      High projection: Everyone starts businesses, hires like crazy, and the GDP soars.  Tax revenues fall at first, but the booming economy makes up for it.  Unicorns dance, it rains in Death Valley, and the Seattle Mariners win the World Series.  It’s the “rosy scenario.”

·      Medium projection: The tax cut boosts spending and work a bit, but not dramatically.  The economy grows, but mostly as expected.  This is the Goldilocks forecast—not too hot, not too cold.  Both proponents and opponents of the tax cut claim to be correct.

·      Low projection: People pocket the extra cash, but don’t do much with it.  The economy doesn’t pick up, and tax revenues drop more than hoped.  Cue the budget shortfall and awkward committee hearings while the talking heads with perfect hair speak confidently on television about the failure of “trickle-down economics.”

Dynamic scoring would let the CBO show how real people might react to policy changes—rather than just assuming that everyone keeps behaving the same as always.  Unfortunately, predicting human behavior is a tricky business, which is one reason the CBO avoids dynamic scoring.  The other reason—and the main reason—is that Congress doesnt want to be in the position of explaining economics to voters who want simpler answers.  Lawmakers prefer a clean, single score”—even if its less nuanced.

Or to put that more succinctly, Congress wants answers that can fit on a bumper sticker.  Even if they are wrong.

Saturday, June 28, 2025

The Dangers of Economic Populism

 Last week I wrote about Zohran Mamdani, an…. unorthodox… primary candidate in the New York mayoral race.  Since then, Mamdani has won.  Whether or not this win was due to New Yorks ranked choice voting system is open to debate.  I read two statistical analyses of the effect of RCV on the primary, and each claimed the system unfairly threw the election, but since neither report agreed on who benefitted nor did either show me its math, I have no idea it either is correct.

And its beside the point.  Whats really important is that economic populism looks like it is here to stay.

Which, of course, triggers the question, “What is economic populism?”  Economic populism is a political and economic approach that emphasizes the needs and interests of the "common people" over those of elites, of large corporations, or of financial institutions.  It often includes policies aimed at reducing inequality, at protecting domestic jobs, and at expanding government support for working- and middle-class citizens. 

Water, salt, oxygen, caffeine, vitamin A, and acetaminophen are all more or less good for you… And all of them in large doses will kill you.  Economic populism is exactly like that.

America has had several brushes with economic populism—FDRs New Deal, any policy proposed by Elizabeth Warren or Bernie Sanders, and several of the economic proposals of President Trump are good examples.  In and of themselves, these policies are not bad things:  remember, too, that economic populism isnt strictly left or right-wing, but is a style of economic politics that can appear across the spectrum.  Left-wing politicians focus on wealth redistribution, unions, healthcare, and taxation while right-wing politicians focus on tariffs, nationalism, and national job protection.

Economically, these measures lead to inflation, loss of jobs, and a shortage of the goods subject to the price controls.  The real danger lies in the political costs.  Economic populism starts off like a potluck dinner with a promising host.  Come one, come all!” cries the candidate.  Free healthcare!  Low rent!  Jobs that pay actual money!  And pie for dessert!” Its music to the ears of anyone whos been burned by recession or inflation, or who just got screwed over by the local cable company.

And honestly?  Its hard not to cheer.  Economic populism is often a genuine human response to real pain.  If wages are stagnant, factories are shuttered, and billionaires are launching themselves into orbit, while youre still trying to afford putting braces on your kids teeth, when a leader steps up and says, Lets take care of the people, not the elites,” its tempting to shout Hallelujah!” and hand them the keys to the car.

But heres the thing: sometimes the person you gave the keys to not only drives you home... they change the locks, reset the GPS, and push your saintly old grandma out the window.

First, a champion emerges, who begins with economic populism with an agenda focused on helping ordinary folks over the wealthy or well-connected.  (Think stimulus checks, rent control, union support, anti-monopoly crackdowns, or nationalizing things like utilities, grocery stores, or Wi-Fi.  (Because Wi-Fi should be a human right, obviously.)

This leader gets elected on the promise that theyll take on the system.” And, at first?  They do, as they slash bureaucratic red tape, defund the police, pass spending bills, and make Wall Street sweat a little.  People cheer.  Approval ratings soar.  The pigeons get off the park statues long enough to salute.

But soon, the populist leader realizes something uncomfortable: governing is harder than campaigning, and the realities of economics soon show you that numbers are too sharp to juggle.

When inflation creeps up or foreign investors get nervous, economic populists often find a convenient answer—just blame the “usual suspects”.  These include the media (fake news!”), the judiciary (corrupt judges!”), or the Federal Reserve (saboteurs with calculators!”).  Instead of saying, We need to fine-tune our policies,” the populist says, We wouldve been perfect if it werent for those meddling institutions!” 

This is where the slide begins, because, now, the leader isnt just fighting inequality—theyre fighting accountability.

Next comes the DIY phase—attempts to fix the system. But these measures are not designed to make it better, but to make it easier to control.  The courts?  Far too slow or biased.”  Better pack them with friends.  Election laws?  Too biased.”  Better replace them.  Independent media? Unpatriotic.”  Better buy them out or shut them down.  Civil service? Uncooperative.”  Better fire the lot and hire cousin Jimmy.

All of it is justified under the banner of protecting the peoples will.”  The populist starts governing not for all citizens, but for real” citizens (i.e., their base).  And dissent inevitably becomes treason.  This, of course, is much easier if you have state-owned and controlled media. 

By this point, the original economic populist dream—to create a more just economy—is buried under red flags and loyalty oaths.  Inflation is inevitably climbing.  Business investment has fled.  The budget may be bloated from all the free pie served by insolent civil servants.  But instead of changing course, the populist doubles down: more controls, more slogans, more enemies, and more free programs to be paid for by taxing what remains of the wealthy.

What has happened?  The inevitable.  All too easily, economic populism turns to authoritarian populism—where power is centralized, dissent is punished, and freedom is optional.

By now, citizens realize theyve traded bread and butter policies for bread and circus politics.  There might still be subsidies and slogans, but transparency is gone.  The economy wobbles.  Institutions weaken.  And the charismatic leader who once promised fairness now rules by decree.

While some try to resist, others say, Well, at least theyre not the other guys.” But deep down, everyone knows: the systems not the same.

Well, since Ive given you the sermon, I might as well reveal the moral of the story.

Economic populism doesnt necessarily go authoritarian, but it usually does.  There are populist policies that uplift the working class without burning down the courthouse.  But if the leader you elect blames the courts, or says all economic woe is the fault of the rich, or promises services that are magically free—you may not be on the road to fairness.  You might be on the shortcut to autocracy, instead.

So enjoy the pie and cheer for the underdog—but keep an eye on the locks.  And if your grandma mysteriously vanishes from the passenger seat… its time to grab the wheel.

One last note, Dear Reader:  I was not talking about the other political party, I was talking about yours.

Friday, June 20, 2025

Bread, Circuses, Mamdani

New York City is pretending to have a primary election for mayor.  I say “pretending” because the metropolis switched to a “ranked choice” voting system four years ago.  Ranked choice voting is fine in competitive races, but anywhere a single party holds a large lead over a minority party, computer modeling shows that it almost always results in a majority party victory by minimizing the effects of a third party splitting the ballot.  Which is usually the reason the majority party imposed the new system of voting.

With ranked choice firmly in place and Democrats outnumbering Republicans 7 to 1in NYC, I can reliably predict that a Democrat will win, but which one?  If you believe the polls, the race is a toss-up between former Governor Andrew Cuomo and State Assembly member Zohran Mamdani.  Cuomo’s candidacy proves there is political life after public death and the Mamdani’s is a perfect example of why watching politics is better than viewing any television show.  Currently, Mamdani has strong backing among younger voters and progressive constituencies, while Cuomo maintains support from older and more moderate demographics.  The primary is set for June 24, so we will learn the winner shortly.

Thirty-three year-old Zohran Mamdani was born in Uganda and moved to the US at the age of seven.  After earning a bachelors degree in Africana Studies, he became a US citizen in 2018.  Two years later, he was elected to the New York State Assembly.  Apparently, Mamdani has never held a management job in the private sector.  Now, just five years after that, he is running to become the mayor of the largest city in the nation, on a platform that is…well…unique.

Mamdani, a Democratic Socialist running as a Democrat, wants to enact some sweeping economic reforms that would change New York City forever.  Here are some of his more striking proposals:

Rent Freeze: He proposes an immediate freeze on rents for all rent-stabilized apartments in NYC, impacting over 2 million tenants.  He plans to appoint members who support this initiative to the Rent Guidelines Board.

City-Run Grocery Stores: He advocates for establishing one municipally-owned grocery store in each borough that would offer affordable food options, especially in underserved areas.  These stores would operate without profit motive, aiming to reduce overhead costs and pass savings to consumers.

Free Public Transit: He aims to make all city buses fare-free and improve service by expanding bus lanes and reducing delays.

Universal Childcare: He plans to provide no-cost childcare and to increase wages for childcare workers to match those of public-school teachers.

Tax Reforms: He proposes raising corporate taxes from 7.25% to 11.5% and implementing an additional 2% flat income tax on millionaires to fund his programs, aiming to generate approximately $9.4 billion annually.

Lets tackle each of these points individually.

Rent controls, like all price controls, simply do not work, and we have more than 2000 years of economic data to prove it.  If property owners cannot raise rents to align with rising costs, they either turn the apartments into salable condominiums or take the property off the market, creating a housing shortage that inevitably leads to rising prices. 

I could give you the well-established arguments and facts on rent control, but perhaps, it would be better to just relate what happened when the Argentine President Javier Milei repealed rent control in Buenos Aires in December 2023.  The effects have been both dramatic and aligned with free-market predictions.  Landlords who had exited the market promptly reentered it, increasing the number of available units by more than 170%.  More supply meant landlords competed on price—especially after allowing dollar-denominated contracts—resulting in a drop in rents by approximately 40%, adjusting for inflation.  Both of these conditions led to a rental-market-boom” which gave prospective tenants more choice and bargaining power.

City-run grocery stores might sound nice—like a public library with bananas—but economically, theyre a recipe for wilted lettuce and financial indigestion. 

First, the government isnt exactly known for its retail instincts.  If youve ever been to the DMV, imagine that vibe—but in the frozen food aisle.  Want a cart?  Fill out Form 27-B and return it to Window 3.  Prefer bagels over bureaucracy?  Too bad—the state has decided rice cakes are better for you.  My local store carries two dozen types of olives—the city-owned store will offer one type.  Thankfully, Ill never have to shop at the only store left in a New York borough, since I like olives stuffed with anchovies.

Second, these stores would be funded by taxpayers, meaning everyone from grandma in Queens to a kid in the Bronx is helping subsidize Chads organic turmeric habit.  And if the store loses money (which, if they pride themselves on being non-profit, they absolutely will), the city just raises taxes or cuts funding to pothole repair.  Either way, the avocado hits the fan.

Private grocery stores already compete fiercely to bring you arugula at midnight and 87 flavors of hummus.  Government grocers would have no incentive to improve—because when profit doesnt matter, neither do customers.  They wont improve service or selection for you, but the competition will close some of the private stores, meaning you will have fewer choices, while the city is still open but receives less in taxes.

And lets not forget politics.  One council member demands more kale, another wants a beef boycott, and someone inevitably proposes a tax on Pop-Tarts and Coca-Cola.

So, while the idea of city-run groceries might sound noble, the reality is more freezer-burn than fresh produce.  When it comes to stocking shelves, it's best to let the people who know a cantaloupe from a meatball do the shopping.  If that pothole has been sitting in the street in front of your house for the last three years, why would you want them to pick your pot roast.

Free and expanded public transit services and universal childcare sound good, but the New York Pension Service is already $177 billion in debt.  Dramatically increasing the number of people receiving those benefits will only make the problem worse, even if those services are run well.  How will the city pay for these new services?  It sure as hell wont be with the profits from those grocery stores.

Which brings us to higher business taxes and a special tax on the rich.  In the last 20 years, 160 major financial firms headquartered in New York collectively managing $1 trillion in assets has left New York City, primarily because of existing taxes.  Lets put that another way:  New York City has already lost the business equivalent of the entire economy of Switzerland. 

Many businesses have already left New York for New Jersey where the business taxes are already roughly 6% less.  If Mamdani can implement his tax proposal, New Jersey business taxes will be more than 10% less than New York City.   Currently, 22% of Manhattan commercial property is empty, the equivalent of 90 million square feet of property.  If Mamdani gets his way, a hell of a lot more buildings are going to become empty.

As for that additional tax on high earners, Mamdani believes this will result in a tax revenue increase of $9 billion, a figure he needs to fund all the progressive measures he has proposed.  Multiple cities and numerous countries have tried to pass punitive taxes on the rich only to discover that capital flight is always the result.  The rich simply move their riches where they will be left alone.  The cost of enforcing those draconian taxes frequently cost more than the new revenue produced. 

Well, in only four days from now, we will see who the voters of New York City select to be their new mayor.  Well, then technically, he will only be the winner of the Democratic Primary, but as I have already explained, thats a minor detail.