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I often refer to the “dollar store economy” in my posts. What does that mean?

A dollar store economy is characterized by: low wages, inflation, and interest rates; high profits, asset prices, levels of foreign trade, and inequality; and sluggish growth. The low wages are the product of regulations favoring capital over labor and the availability of an enormous workforce overseas. The low inflation and interest rates result from the low wages and an aging population. The high profits and asset prices are caused by the low wages, low taxes on capital, greater access to foreign markets, and the lack of investment opportunities at home due to a shortfall in demand. The high levels of foreign trade are a driver of inequality and sluggish growth, because they reduce wages (and, therefore, demand) at home and provide additional markets abroad.

The poorly-paid workers can only afford to buy goods at dollar stores; as a result, the wealthy invest in them, but not businesses catering to the middle class.. Hence, my name for the economy.

Over the next week, I will be looking at this phenomenon from a variety of different angles, and exploring the plausibility of alternatives.

There is plenty of consternation about pandemic-related inflation. Should the Fed respond by increasing interest rates?

No. Inflation is caused by an excess of demand relative to supply. Raising interest rates will do nothing to increase the supply of anything; in fact, it could deter investment that would improve productivity and eliminate bottlenecks. As to demand, it is less driven by borrowed funds than by savings generated during the height of the pandemic and a diversion of spending from services to goods. How will increasing interest rates address those factors?

The bottom line is that we are dealing with a large number of temporary issues that will go away in time. It would be a mistake to overreact in the short run.

If you are a reactionary, your view of American history probably runs something like this: America was settled by white Christians; by their own grit and godliness, and without government assistance, they made America great; they therefore are the only true Americans, and are empowered by God to run the country; their predominance is threatened by haughty, over educated liberals, minorities begging for handouts, and uppity women; so real Americans have the right to do anything in their power to remain in charge.

Left wing Twitter activists tell a different story. To them, America is, was, and will always be an irredeemably racist and sexist country. The story of America is one of oppression. Liberals, on the other hand, see the central narrative of America as the struggle for the perfect union. This is an ongoing effort, and one with plenty of failures, but the end is a liberal democratic system in which the rights of everyone are respected, and even embraced. It is a happy ending.

All of these narratives encourage their adherents to disregard or distort inconvenient facts, but not to the same degree. The liberal narrative contains more humility (it acknowledges that backward steps are always possible), and it actually fits the facts better than its competitors. Life for women and minorities may not be perfect in today’s America, but do you really think nothing has changed since 1619, or even 1950? On the other side, do you really believe the band of religious skeptics who wrote the Declaration and the Constitution intended to give right-wing Christians a perpetual monopoly on power? Only in their fevered dreams.

At some point, the extremely left-leaning Kyrsten Sinema had an epiphany. Politics were less about ideology and more about finding common ground and getting things done. In addition, she had John McCain as a role model. She would be an independent voice working with both parties to make America a better place.

The vision sounds plausible, but it comes with three problems. First, McCain, in spite of a few notable deviations, mostly adhered to the GOP party line. Second, if your intention is to work with both parties, you need to explain what you want, and why. Sinema doesn’t do that; displaying independence seems to be the objective, not a means to an end. Finally, Sinema seems to delight in tweaking the left. How does that help her make deals with them?

Manchin, I get. He tells the world what he wants, and he is willing to make deals. He really should be viewed as a Republican with an economic populist streak that doesn’t fit in the current GOP. With Sinema, who knows?

The narrow Republican victory in the two special elections gave the GOP control of the Senate. This had two important results: first, the progressive wing of the Democratic Party lost any illusions about its ability to enact its agenda; and second, the GOP was forced into a partnership of sorts with Biden. Nihilism doesn’t work when you’re in charge, at least in part.

Confirming judges became a more contentious process. On the other hand, there were no issues with the debt ceiling or government shutdowns, and the bipartisan infrastructure bill passed without a whimper from the progressives. There was no talk about major changes to the welfare state, except, of course, on Twitter. The dollar store economy remained unchallenged.

The bottom line here is that we tend to forget that the voters didn’t give progressives any kind of a mandate for dramatic change in 2020; it was the surprise outcome of the Georgia elections that changed left-wing expectations. In a way, Manchin is right; if you want huge reforms, you need to elect more liberals.

Polls consistently show that the majority of Americans want abortion to be legal, but subject to significant restrictions—a common sense position that is at odds with the extremists in both parties. That being the case, is it not therefore likely that we will see most of the red states take moderate positions when the Supremes finally thrust the last dagger into the back of Roe?

Dream on! It could have happened prior to 2016; at that point, the PBPs still controlled the GOP, and they were worried about a backlash from women. Today, the Reactionaries dominate the party, and their solution to any electoral problem is to double down, gerrymander, and suppress votes. As a result, the only debates that will take place—and they will be muted—will revolve around rape and incest.

Ross Douthat thinks the left should be celebrating. After all, neoconservatism is dead, the culture wars have been won, and we are on the precipice of a massive expansion of the welfare state. Is he right?

Not really. The demise of neoconservatism was as welcome to the reactionary right as to the left, so you can hardly count it a liberal victory. On the culture war front, red states have started to use their political power to shut up the left, and the Supreme Court is poised to eliminate left-wing rights and further enshrine those appreciated by the right. The welfare state expansion may very well not pass. Finally, the likelihood of a soft coup by Trump and his acolytes is greater now than at any time in his presidency, because it will have the support of the mainstream of the GOP.

I don’t see any reasons for celebration here. There is no realistic prospect of getting out of the woods until the 2024 election.

The debt ceiling is a relic from the days when it was assumed that balanced budgets were the norm, and the sale of government securities to finance debt would be a rarity. Today, its only purpose is to give Mitch McConnell the ability to blackmail the Democrats. Period.

There is a decent, if not necessarily compelling, argument that the filibuster promotes moderation and a valuable degree of continuity in the Senate. Is that a reason to keep it in place for the debt ceiling? No, because, unlike any other issue that comes before the Senate, there is no case for a public default. Even McConnell acknowledges that; he only values it for tactical purposes.

Since the debt ceiling is just an idiotic blight on our political landscape, removing it from the filibuster should be a simple task; it doesn’t create a precedent for anything. Surely Manchin and Sinema can see that. Right?

Don’t say I didn’t warn you. I predicted this would happen even before Biden took office.

Some left-leaning commentators argue that Biden should mint a trillion dollar coin, or rely on the Fourteenth Amendment, or follow the rule of the least unconstitutional act if Congress doesn’t raise the debt ceiling in a timely manner. And indeed, he will have to do one of those things if everything goes wrong. All of the approaches have legal merit, and should be sustained by the judiciary. The problem is that the markets know there are reactionary, chaos-loving potential plaintiffs out there, and that they can find a reactionary, chaos-loving Trumpist judge who will take their claims seriously. As a result, every payment of any kind by the federal government will carry a tinge of illegality, interest rates will rise, and serious damage will be done to the economy even if Biden ultimately wins the case.

In other words, just get rid of the filibuster on this ridiculous issue and be done with it.

Chuck Schumer’s plan, it seems, is to either compel GOP senators to vote for the debt ceiling increase or to expose them as hypocritical nihilists. This approach has been a disastrous failure, because they won’t vote for the increase, and everyone already knows that they are hypocritical nihilists. The GOP base actually gives them kudos for that.

On its face, Mitch McConnell’s plan is to force the Democrats to raise the debt ceiling on their own, and then to attack them as big spenders and socialists. That won’t work, either, because the voters don’t care much about the deficit, and because raising the debt ceiling only covers past spending decisions—including those made on a bipartisan basis while Trump was in office.

In reality, McConnell is hoping that the Democrats screw up, the debt ceiling is not raised, chaos ensues, and the Democrats get the blame. It is completely fair to describe this as vandalism at the highest level, but it might work.

Pressuring the GOP on this issue is hopeless. The best solution would be to eliminate debt ceiling filibusters, and vote on party lines for the increase. In the meantime, wake me up when it is over.

I’ve got those dirty, lowdown Covid-19 blues.

You have to be aware of it; it’s all over the news.

The right’s so irresponsible; for that, there’s no excuse.

We can go forward or back; the nation has to choose.

——

We just did what we were told; we took one for the team.

We drove over a hundred miles to get the damn vaccine.

For people to do otherwise, I think is just obscene.

It’s ok if they lose their jobs; you know just what I mean.

——

I’ve got the blues.

The pandemic blues.

Mandates are required here;

There’s no right to refuse.

They claim it’s about freedom

But they ignore the costs.

Their freedom’s just another word

For thousands of lives lost.

If Biden is looking for a good way to improve his economic record and lower the inflation rate, here’s an idea: get rid of the counterproductive tariffs, including the ones imposed on China. Yes, the GOP will howl that he is going soft on the Chinese, but the tariffs are a tax on Americans, not China, and do not provide us with any meaningful leverage. They serve no purpose other than to play to the right-wing peanut gallery. That wasn’t deemed to be a good enough reason to stay in Afghanistan; why should this be any different, particularly after showing toughness by making the submarine deal?

The combination of pandemic-driven wage pressures, supply chain issues, and occasional local government disapprovals has made life more difficult for dollar store owners. Should we celebrate?

Not really; dollar stores are a symptom, not the cause, of what I call the dollar store economy. The cause is the hollowing out of the middle class as the result of globalization, technological change, and tax and regulatory policies favoring capital over labor. If we succeed in rebuilding a prosperous middle class through the expansion of the welfare state, there will no longer be as much demand for dollar stores, and they will expire from natural causes. Until then, dollar stores thrive because they meet the needs of struggling American workers. They are, unfortunately, an essential safety valve in today’s economy.

Ross Douthat notes that the typically libertarian left supports vaccine and mask mandates, while the normally authoritarian right opposes them. He thinks this role reversal is deeply weird. Can it be explained?

Yes. The left supports mandates only because every less restrictive alternative has been tried, and has failed. Mandates are the only plausible remedy at this time, and they are working, as I had predicted. The right opposes mandates because they are, as I have noted many times, faux libertarians. They object to restraints imposed on them by what they perceive is a liberal establishment; abortion regulations, of course, are a different story. Freedom for me, but not for thee.

A quick glance at a map tells the story; if China gains control of Taiwan, it will have a foot on the throat of the Japanese. The Japanese presumably prefer not to become a Chinese vassal state, but any efforts to beef up their defensive capabilities will run afoul of both public opinion and their constitution. What, then can the Japanese government do?

Provide America with enhanced intelligence and cyberwarfare assets. They are relatively cheap, consistent with traditional Japanese areas of expertise, and easy to conceal from both the Chinese and the voting public. They would also be very helpful in the event of an attack on Taiwan.