Judge Gorsuch and the Dissolution of the Administrative State

The New York Sun ran an editorial today about a New York Times article by two children of left-wing judges.  They claim that the appointment of Judge Gorsuch will threaten the administrative state. The reason is that Judge Gorsuch opposes a decision called Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc  (467 U.S. 837, 1984), and Judge Gorsuch's appointment may lead to  its reversal.  The decision enunciated the Chevron principle, by which the Supreme Court held that when decisions are unclear the courts should defer to administrative agencies.

Repeal of such deference would be a great thing, and if we start a tabulation of costs versus benefits of the Trump administration, curtailing or ending the Chevron principle would add to the benefits side of the ledger.    

I go further.  The Chevron principle is a good argument for the inability of the courts to determine Constitutionality.  That claim was made in the early 19th century, but it was violated by Abraham Lincoln and denied by Andrew Jackson.  

The  Lincoln and Johnson administrations were unwilling to adjudicate the issue of secession. Rather than sue the first seven states that seceded, Lincoln chose to raise an army and illegally threaten them with military power.  The issue of secession was never adjudicated, which is why the North did not punish the leaders of the Confederate States of America for treason. If secession had been adjudicated early on, Chief Justice Taney's Supreme Court may have ruled on the side of the South.  The Civil War may have been averted.  At one point Lincoln issued an arrest warrant for Chief Justice Taney, but it was never carried out.  

The Chevron doctrine exhibits an authoritarian bias that reminds me of of Friedrich Hayek's warning, in The Road to Serfdom, that the bureaucratic state is inherently dictatorial.  By renouncing its own authority in favor of bureaucrats, the Supreme Court has ceded American governance to dictatorship by appointed agency.

The bungling incompetence of the appointed dictatorship that the Times has supported since the 1930s needs little clarification.  From 1830 to 1970 the average American saw wage gains of .5% to 2.0% per year.  Since the expansion of the administrative state under Johnson and Nixon, and especially the abolition of the gold standard in 1971 and the expansion of the powers of the Federal Reserve Bank, economic improvement for the average American has been nil. 

If wage gains had continued at 1.5% per years from 1971 to 2015, the average American would be earning roughly twice what he is earning now.  The administrative state is responsible for the halving of Americans' wages. 

I'm Betting on a Rising Stock Market

The belief that the stock market will go up forever is  a bubble psychology that goes back to the South Sea Bubble, which fooled even Sir Isaac Newton. Since 2009, and especially since President Obama's reelection in 2012, the stock market has been going at a tear. The tear will continue. The editorial page of the New York Times proves it.  The Times wrote this yesterday: 

On one side is a small yet vocal minority of Fed officials who want to head off inflation by raising rates sooner rather than later. On the other is a majority that thinks a near-term rate hike would stifle growth and, with it, any chance of restoring health to the labor market. That group includes Janet Yellen, the Fed’s chairwoman, and most members of the Fed’s policy committee…The economic evidence indisputably favors Ms. Yellen, who has indicated that rate increases should not begin until sometime next year, at the earliest. It will take until then to be able to say with confidence whether recent improvements in growth and hiring are sustainable.

The reason that the Times's editorial is important is that the nation's hierarchy of decision making with respect to interest rate policy is as follows:

Investment banker cronies--> Ochs Sulzberger family-->The New York Times--> public opinion among Democrats --> President Obama's opinon --> Janet Yellen's opinion --> Federal Open Market Committee decision

If a Republican were in office, the Wall Street Journal would play the equivalent role.

Rates will be lower, or will increase less, than stock market participants expect because the Democrats have a commitment to boosting the stock market. The Times goes on to make the curious claim that keeping interest rates low will improve real wages; that real wages have declined while interest rates have been kept at historically low levels for the past 43 years does not deter them.  Recall the old saying about insanity.  

 Seeking Alpha says that George Soros is currently hedging the S&P 500. I'm sure that there is a logical or statistical basis for his tactic  because all evidence says that the stock market is high now.  The support of the Fed will continue to keep the market at high levels into next year, though.  I'm not buying the S&P short ETF, SH, just yet. However, I have about 1% of my portfolio in the VIXX index and an interest rate short index, both of which have declined and are near all-time lows. The VIXX index measures market volatility, and it goes up when the stock market goes down.  It is at all-times low, which is an indicator that the stock market will go down.  

From a policy standpoint the New York Sun's Seth Lipsky continues to offer a still, small voice of financial sanity among the Sodom and Gomorrah of the American media.  Sadly, Paul Krugman will have to turn into a pillar of salt before any change in America's addiction to print-and-spend economics ends. 

For now, I'm buying a little more Chicago Bridge and Iron (CBI).  It's gone up a few percent since Buffett bought a second set of shares; according to Seeking Alpha several other hedge funds are piling in.  The sharp decline due to rumors about improper accounting and the firm's president's illness seems to have offered Buffett and other hedge funds a buying opportunity; including pension fund holdings, Berkshire may own 25%. 

New York's Best Newspaper May Close

Although I spend only two weekdays in Manhattan during the school year and fewer during breaks, I subscribe to the New York Sun. As well, I have bought a subscription for my mother who lives in the boroughs. The Sun is the very best newspaper I have ever seen, and the only one I have ever cared about. Sadly the paper may close at the end of this month. The courageous editor, Seth Lipsky, wrote about the paper's prospects today. If you live in New York, please consider subscribing. It's the best journalistic bang for the buck I have ever read. It would be wrenching to see the only high-quality conservative daily in the city to disappear. Mr. Lipsky wrote:

"This morning I write to you about the future of The New York Sun, which is in circumstances that may require us to cease publication at the end of September unless we succeed in our efforts to find additional financial backing. The managing editor, Ira Stoll, who is one of the founding partners in the paper, and I have shared this news with our colleagues, and we would like our readers as well to be aware of the situation.

"When we launched this business in October 2001 and began publishing the daily newspaper on April 16, 2002, it was with two goals. There was an editorial — an idealistic — goal of providing an alternative to the New York Times in coverage of New York City, politics, foreign policy, and culture. And there was a financial goal of making a profit. We have always been, and still are, of the view that the paper needs to achieve both goals to be a success.

"After more than six years of publication, the Sun is now at a crossroads. It has succeeded in establishing journalistic credibility and a reputation for quality and verve, and in becoming a part of the local, national, and international conversation. It is read daily by tens of thousands of New Yorkers, including the political, policy, and cultural leadership in the city. It is read in the nation's capital — in the White House, the Congress, and in the foreign chancelleries. Newspapers and Web sites in the city and around the world follow our scoops, quote our editorials, refer to our cultural criticism, and analyze our sports coverage.

"Even many who disagree with the views of our editorial page enjoy reading the Sun. "A fabulous read for culture," is the way it was described in the Nation. David Remnick of the New Yorker sent a note to say how much he admired what we are doing with the Sun, which he called "just plain good." He added: "OK, I agree with about ten percent of your editorials, but so what. ... I'm a lot happier, and richer, for having faced the Sun in the a.m."

Read the whole thing here. The Sun is a major force for a better New York and better America. Please subscribe.