Washington Post columnist Charles Lane compares and contrasts the “radical” views of Judy Shelton and Saule Omarova on money and banking. When President Trump nominated Shelton to the Federal Reserve Board of Governors, her “gold-standard advocacy marked her as too far out of the mainstream.” But now President Biden has nominated Omarova, whose views are “if anything, more radical,” to a key financial regulation post, comptroller of the currency. Some Republicans wouldn’t go along with Shelton’s nomination. Will some Senate Democrats find Omarova a bridge too far?

Judy Shelton, I note, has spoken at the Cato Monetary Conference several times, and during the debate over her nomination long-time conference director Jim Dorn wrote that whether or not we want a gold standard, it’s not a “nutty” idea.

Lane chides Shelton for saying that without fixed rules for the Fed “ ‘we might as well resurrect Gosplan,’ the Soviet Union’s planning agency.” Meanwhile,

Omarova considers the same Fed-bred profiteering [that Shelton criticized] — “collective action problems that create financial instability and hinder socially equitable economic growth,” as she puts it — but concludes that we might as well resurrect Gosplan.

Well, maybe not quite Gosplan, but she does propose that the Fed simply replace commercial banking.

Lane dryly points out that

Omarova graduated from Moscow State University in the late 1980s, before immigrating to the United States. This makes her confidence in the Fed’s ability to manage such a vast and complex portfolio efficiently, honestly and free of undue partisan influence doubly remarkable.

Also in the Washington Post Lawrence H. Summers, a prominent economist who served in top economic positions in the Clinton and Obama administrations, writes,

As a substantive matter, I respect Omarova’s legal scholarship on financial regulation. But I also appreciate that, past a certain point, regulatory vigilance can become regulatory truculence and polarizes in a way that is not good for business or consumers. One can appreciate industry concerns about a nominee to this vital regulatory position who has advocated for Federal Reserve reforms that would, in Omarova’s words, “effectively end banking as we know it.”

In her paper “The People’s Ledger,” which Lane quoted, she wrote that the Fed should become “the ultimate public platform for generating, modulating, and allocating financial resources in a modern economy.”

The question is, as Lane noted, are there centrist Democratic senators who believe that this is not the answer for a modern market economy?

Some day in January 2013, I got on a plane from Riyadh, the capital of Saudi Arabia, to Istanbul, the metropolis of Turkey. What made the otherwise unmemorable flight rather memorable was the dress code of some female passengers that changed dramatically from the departure to the destination.

In Riyadh, they all boarded on the plane all covered, from head-to-toe. When the plane approached Istanbul, however, I noticed some of these women walk back to the lavatory and emerge dressed in a very different fashion. Now, they were all wearing much more relaxed dresses—a few of which were quite revealing—along with heavy makeup. One woman, I can say, was wearing one of the shortest miniskirts I had ever seen. Apparently, she was ready to party in Istanbul’s famous nightclubs.

I tell this story in the beginning of my latest book, Why, As a Muslim, I Defend Liberty. The point I make out of it is a simple fact: Religious coercion does not lead to genuine piety. It only leads to hypocrisy. If people are forced to practice a religion, they don’t do it out of a sincere will to obey God. They do it out a disdained obligation to obey men.

This simple fact must be intuitively obvious to most people, but it isn’t to the mutawwa, or the “religion police” forces that Saudi Arabia has employed for decades, in order to discipline society in the name of God. The Islamic Republic of Iran is a similarly oppressive religious regime, as the “Islamic Emirate of Afghanistan” will now become, for the second time, under the harsh rule of the Taliban.

But the same simple fact — that coercion isn’t good for religion — wasn’t obvious also to many Christians, for many centuries. That is why they established theocratic kingdoms, persecuted “heretics,” and even tortured victims to “save their souls.” And that is why John Locke, the father of liberalism, had to write his 1689 classic, A Letter Concerning Toleration, in which he stressed:

“All the life and power of true religion consists in the inward and full persuasion of the mind; and faith is not faith without believing.… [So], it cannot be compelled … by outward force.”

In Why, As a Muslim, I Defend Liberty, I have several such quotes from John Locke, because I believe some of the problems he was addressing in the Christian doctrines of his day are quite similar to the problems we have in some Islamic doctrines of today. The parallel is also noted by Nader Hashemi, an American Muslim academic, who observed: “In much of the Muslim world today, as in Locke’s England in the seventeenth century… large segments of the population are under the sway of an authoritarian and illiberal religious doctrine.”

My book is largely a critique of this “authoritarian and illiberal religious doctrine.” But make no mistake: I am not challenging religion itself. I am only challenging its marriage with coercive power — with manifestations such religious policing, blasphemy laws, apostasy laws, supremacism over non-Muslims, or the doctrine of “obedience to the ruler,” a doctrine that Muslims tyrants love to use.

This critique requires a frank discussion of the Sharia — Islam’s legal tradition — which I offer in two subsequent chapters: 2 and 3. First, by showing some horrific results of the “implementation of the Sharia” in Pakistan — the persecution of rape victims as “adulteresses” — I call on fellow Muslims to “rethink” the Sharia. The key, I argue, is to look into the “intentions” behind religious rulings, instead of being blind literalists, as well as realizing that the Sharia is infused with medieval context and culture, which needs to be challenged, besides the universal tenets of Islam.

On the other hand, I argue in Chapter 3, there is also something to “learn” and even “revive” from the Sharia. Because, for centuries, in Islamic societies, the Sharia was the gatekeeper of a crucial value: rule of law. Because “God’s law” was above everyone, including the mightiest rulers, acting as a constraint on those rulers. When this traditional order was replaced with a bad form of secularization — inspired more by fascism than liberalism —authoritarian regimes dominated the Muslim world. So, liberalism is the right way forward, which, just like the Sharia of the past, will constrain rulers, and uphold the rights of all humans.

Then in Chapters 4 and 5, I use a thought experiment—an island-state established by shipwreck survivors—to reconsider the politics of Islam. Does Islam call for conquest and supremacy, as some Muslims believe? Or should Muslims cherish political systems based on contract and equality? (Or should they enjoy liberalism in the West as minorities, while championing supremacism where they make majorities, as an American Muslim leader recently suggested?) Meanwhile, does the Qur’an really oblige its believers to “obey” their rulers, leaders, or some other great men?

Chapter 6 addresses a common concern among Muslims: How can we allow all those irreverent atheists and offensive blasphemers to talk freely against our religion? Should we not silence them?

Chapter 7 goes into the economics of liberalism and see why that much-derided term, “capitalism,” is not alien to Islam but rather intrinsic to it, even in its conservative interpretations.

Finally, in Chapter 8, I get to a question that may haunt some Muslims the moment they hear the word “liberty,” let alone “liberalism”: Aren’t these the ideas of the colonizers that have invaded and plundered Muslim lands in the past 200 years? Why would we buy into their narratives? Is this some neocolonial conspiracy?

Surely, all these questions require much longer discussions than what I could summarize in the 150 pages of Why, As a Muslim, I Defend Liberty. Yet this little big book is meant to offer insights and challenge cliches, by elucidating complex ideas with personal anecdotes, historical episodes, and thought experiments that I am sharing for the first time.

So, you are welcome to read Why, As a Muslim, I Defend Liberty, by ordering online, or from the free PDF graciously offered by Lib​er​tar​i​an​ism​.org.

And you are welcome to view the live online book forum on Nov 21 I will have with Prof. Vali Nasr, who defined the book as “an important contribution to the debate over the future of the Muslim world” and “a must-read for Muslims and non-Muslims.”

Federal government debt is rising as politicians increase spending faster than tax revenues are coming in the door. With the economy growing, the government should be paying down debt, rather than increasing it at a rapid clip. Even without the infrastructure and entitlement bills currently being debated, the government will spend $3 trillion more this year than it will take in. House Speaker Nancy Pelosi says the new spending is “for the children,” but added debt will work against the children and drag down their standard of living.

Federal politicians have become increasingly irresponsible. They have not balanced the budget since 2001, and they have only balanced the budget 13 percent of the years since 1930. By contrast, politicians balanced the federal budget 68 percent of the years between 1791 and 1929. There was no legal requirement for them to do so, rather they did it because they correctly believed that limiting spending to revenues was the prudent and ethical way to budget.

Democrats and Republicans are currently battling over who will get blamed for raising the government’s statutory debt limit above $28 trillion. But both parties are to blame for the mountain of accumulated federal debt, which is roughly eight times larger than total state and local government debt of $3.2 trillion.

Since 2001, federal debt has risen 495 percent compared to just a 148 percent increase for state and local debt (page 7). Apparently, voters are sending politicians to Washington who are more irresponsible than the ones they send to state capitals. Or maybe there is something in the water in D.C. As governor of West Virginia, Joe Manchin received an “A” grade for sound fiscal management, but now in D.C. he is considering voting for a $1 trillion infrastructure bill and a $1.5 trillion entitlement bill, on top of trillions in other new spending passed since early 2020.

American politicians are more debt-addicted than politicians in most other high-income countries. Figure 1 shows the OECD estimate for combined federal, state, and local government gross debt in 2021. U.S debt at 141 percent of GDP is higher than the OECD average of 100 percent, and the 9th highest of 32 countries. Rather than squabbling over our useless statutory debt limit, our politicians should be implementing the apparently superior budgeting practices of countries such as Estonia, Luxembourg, Switzerland, Korea, and New Zealand.

U.S. debt has risen partly because of recessions and other crises in recent years, but other countries have also faced shocks. Figure 2 shows that debt has risen faster in the United States than in most OECD countries since before the Great Recession in 2007. U.S. debt has risen 76 percentage points of GDP since 2007 compared to the average OECD increase of 47 percentage points (U.S. debt rose from 64 to 141 percent, while average OECD debt rose from 53 to 100 percent).

Senator Manchin has “repeatedly raised the deficit as one of his major concerns,” and he says he’s “never been a liberal in any way, shape or form.” Just about every Republican would make the same claims. But somehow federal government debt has jumped $6 trillion over the past two years and keeps on rising.

More on government debt here, here, and here. The failures of federal spending are examined here, here, and here.

Data Notes. The OECD data from Table 36 is general government gross financial liabilities. OECD publishes the weighted average, but I calculated the simple average across countries.

Chicago Mayor Lori Lightfoot announced that all city employees would have to be vaccinated by October 15. Like a lot of people, the head of the Chicago police union objected to the order. But I was struck by the lack of self-awareness in his reaction:

“We’re in America, G‑ddamn it. We don’t want to be forced to do anything. Period. This ain’t Nazi f—ing Germany.”

Americans may not want to be forced to do anything. But we certainly are forced to do various things. And if we try to avoid doing what the government orders us to do, who enforces those laws and mandates? The police, of course. Chicago police have made hundreds of thousands of arrests for drug charges over the past 20 years, and tens of thousands for prostitution. Try not paying your taxes, and it may not be the Chicago police who come after you, but someone will. Not to mention, of course, all the laws that require you to keep your hands to yourself. 

The president of Chicago’s Fraternal Order of Police seems surprisingly unaware of what his job is.

Note: libertarians can disagree about general vaccine mandates in a pandemic. But the legal authority to require government employees in close contact with the public to be vaccinated doesn’t seem to be in much question. 

I do encourage the union chief and other police officers to ponder the point that Americans don’t like to be forced, and to lend their voices to efforts to reduce the use of force against private citizens. 

If there’s one thing we know about the looming debt limit crunch and the warnings about the dire consequences of default, it’s this: The government is not going to default.

The recurring brinksmanship over the debt limit and the partisan refusal to get Republican fingerprints on the increase don’t say much for our political class. But the U.S. Treasury isn’t full of stupid people, and they’ve been through this drill before. Back in July 2011, when the debt ceiling of $14.3 trillion was about to be reached, the Washington Post reported:

The Treasury has already decided to save enough cash to cover $29 billion in interest to bondholders, a bill that comes due Aug. 15, according to people familiar with the matter.

You can bet they’re making similar plans today. The difference is that 10 years later the debt ceiling is $28.4 trillion, just about doubled, and we’re about to bump into it again.

Back in that summer of discontent I talked to a journalist who was very concerned about the “dysfunction” in Washington. So am I. But I told her then what’s still true today: that the real problem is not the dysfunctional process that’s getting all the headlines, but the dysfunctional substance of governance. Congress and the president will work out the debt ceiling issue, probably just in the nick of time. The real dysfunction is a federal budget that doubled in 10 years, unprecedented deficits as far as the eye can see, and a national debt (more accurately, gross federal debt) yet again bursting through its statutory limit of $28.4 trillion and soaring past 120 percent of GDP, a level previously reached only during World War II.

We’ve become so used to these unfathomable levels of deficits and debt—and to the once-rare concept of trillions of dollars—that we forget how new all this debt is. In 1981, after 190 years of federal spending, the national debt was “only” $1 trillion. Now, just 40 years later, it’s more than $28 trillion. Traditionally, the national debt as a percentage of GDP rose during major wars and the Great Depression. But there’s been no major war or depression in the past 40 years; we’ve just run up another $27 trillion more in spending than the country was willing to pay for. That’s why our debt as a percentage of GDP is now higher even than during World War II. Here’s a graphic representation of the real dysfunction in Washington:

And the Congressional Budget Office tells us it’s going to get worse, much worse. See the following chart on page 2 of the CBO’s March 2021 Budget Outlook. The Obama-Trump spending pushed “debt held by the public” to levels not seen since World War II. Pandemic spending pushed the debt up to peak WWII levels. But it’s entitlement spending that will take the debt far beyond even today’s level. This is not a sustainable course. 

Where did all this debt come from? Obviously, it came from the rapid increase in federal spending over the past several administrations:

Presidents George W. Bush, Barack Obama, Donald Trump, and Joe Biden have all spent money like they had a bottomless pit of it. And the easiest way to spend government money is not to ask the taxpayers to pay for all of it. We may pay in the form of crowded-out investment and other private economic activity and thus in reduced economic growth, but no president has proposed to actually raise taxes to match his spending increases.

Republicans and Democrats alike should be able to find wasteful, extravagant, and unnecessary programs to cut back or eliminate. They can find plenty of ideas here.

The debt limit doesn’t seem to limit the debt. So what’s the point of it? Well, at least it gives the political class a periodic reminder that they are piling trillions of dollars of debt on their children. And it focuses Washington’s mind on the spending-and-debt problem for a moment. If the Republicans who helped Mr. Trump add $7.8 trillion to the national debt in just four years really want to reclaim their reputation for fiscal conservatism, they could make a practical offer: support for raising the debt limit in return for spending reform. Jeb Hensarling, who served for six years as chairman of the House Financial Services Committee, has some suggestions:

A modest effort today might include the bipartisan Trust Act, which would fast-track reforms to fiscally challenged programs like Social Security and Medicare, as well as the bipartisan Prevent Government Shutdowns Act, which would reduce brinkmanship without increasing spending.

I have another idea: tell Speaker Pelosi and Majority Leader Schumer that Republicans will vote for an increase in the debt ceiling in return for Democrats dropping the somewhere-between-$3.5 trillion-and-$5.5 trillion-dollar spending bill.

Seriously, we’ve got the highest national debt in history, at more than 120 percent of GDP. Federal spending has reached levels even fiscal doomsayers didn’t predict. The federal government has spent some $6 trillion responding to Covid. Whether or not that spending was necessary in an emergency, any budgeter knows that when you have large unanticipated expenses, you cut back somewhere else. You don’t say “if we can afford $6 trillion for Covid, of course we can afford another $6 trillion in new programs and transfer payments.”

If the brinksmanship that has once again sent the establishment into dire warnings finally results in some constraint on out‐​of‐​control spending, then it will have been well worth all the hand‐​wringing. But it’s important to be clear: the serious dysfunction in Washington is not the occasional debt ceiling kabuki, it’s a political process that produces ever more spending, deficits, and debt.

A CNN report says, “Making American cars greener is a key component of Biden’s economic and climate agendas… But the transition will be difficult; passenger vehicles contribute 29% of total US greenhouse gas emissions, and EVs and plug-in hybrids combined only account for around 2% of the US auto sales, according to a UAW analysis.”

Similar claims – that “passenger vehicles contribute 29% of total U.S. greenhouse gas emissions” – have been echoed repeatedly for a decade but are totally false. The entire transportation sector accounts for 29% of U.S. greenhouse gases, according to the Energy Information Agency. But Transportation includes airplanes, trains, buses, large trucks, and pipelines.

The attached page from Chapter 2 of the latest Transportation Energy Data Book shows that passenger cars and light trucks account for only 56.6% of the energy used in transportation. Since transportation-related greenhouse gases are almost entirely from energy use, and transportation contributes 29% of total U.S. greenhouse gas emissions, that means passenger vehicles account for roughly 16.4% of U.S. greenhouse gas emissions.

Confusing transportation with passenger cars is a familiar bait and switch trick long used to promote taxpayer subsidies for alternative fuels and vehicles. It was an old hoax back in 2012 when I labeled it “The Transportation Fallacy” in my chapter on “The Politics of Alternative Energy” in the Handbook of Oil Politics.

Remember that the U.S. accounts for only 15% of global greenhouse gas emissions (compared with 30% for China). That means U.S. passenger vehicles contribute only 16.4% to the country’s 15% share of global greenhouse gas emissions – less than 2.5%. But for the U.S. to achieve a 2.5% greenhouse gas reduction through this narrow channel would require abolishing and destroying all U.S. passenger vehicles.

No politician or green lobby is proposing to destroy all passenger vehicles and allow no future sales. Instead, the pricey yet symbolic gestures proposed by President Biden merely promise to gradually replace 276 million registered U.S. vehicles at a glacial pace: A mere 1.5 million of the nation’s 276 million vehicles were electric by 2019, and the average non-electric vehicle lasts 11.6 years. Trying to dictate that half of future vehicles produced by EVs and hybrids does not tell us how many will be sold, even with fat rebates. Besides, new cars are a tiny fraction of the stock of older cars and trucks. Also, the assumed energy saving from substituting EVs for gasoline vehicles ignores the massive energy involved in manufacturing electric vehicles, and eventually recycling their batteries.

The real reasons we are deluged with so much costly lobbying and propagandizing for subsidizing electric cars are that politicians love to take credit for handing out generous subsidies and those expecting to receive those subsidies will gladly express their gratitude by handing out generous campaign contributions.

Those who claim to believe the childish fantasy that gradually replacing new cars and light trucks in this country with electric models could make any change whatsoever in worldwide average temperatures are either fooling themselves or they are trying to fool taxpayers. To illustrate such deception or self-deception, The Washington Post notes that “Biden called for spending $174 billion ‘to win the EV market,’ including a nationwide network of 500,000 chargers… as well as $100 billion of consumer rebates for electric vehicles.” More recently, the article adds, “29 members of the House signed on to a letter calling on Schumer and House Speaker Nancy Pelosi (D‑Calif.) to ‘match or exceed’ Biden’s original $174 billion electric-vehicle proposal.” The previously mentioned CNN story also notes that “An amendment from Democratic Sen. Debbie Stabenow of Michigan would provide a base credit of $7,500 to help consumers purchase electric vehicles, an additional $2,500 credit for vehicles made in America and another $2,500 credit for vehicles made with union labor.”

These schemes for an enthusiastic EV spending spree have nothing to do with the international climate and everything to do with domestic special interest politics.

After midnight on July 31st, the federal government reached the $28.5 trillion debt limit, which is the amount of money Congress allows the Treasury Department to borrow to keep the government running. Since then, Treasury has relied on bookkeeping gimmicks—known in bureaucratese as “extraordinary measures”—to shuffle existing funds and thereby keep the government fiscally afloat. These extraordinary measures, however, are a stopgap. Treasury Secretary Janet Yellen yesterday estimated that incoming receipts will be insufficient to pay daily obligations sometime “during the month of October.”

In two ways, this news is scary.

First, the debt, per se, is disconcerting, as it amounts to almost $231,000 for every household in America. In prior posts, my colleague Chris Edwards has explained why we should all be concerned about the ballooning balance on our country’s credit card.

Second, the federal government would roil financial markets if it started defaulting on its obligations. Jamie Dimon, the CEO of JP Morgan, testified that this would engender a “cascading catastrophe of unbelievable proportions.” Moody’s warned of a “fiscal Armageddon.”

If the debt limit news is scary, then Congress’s response has been downright terrifying.

Ten days after exceeding the debt limit, the Senate passed the Infrastructure Improvement and Jobs Act, including $500 billion of new spending on roads, broadband, and the electric grid. Because this spending isn’t fully offset by new revenues, the bill would add a quarter trillion dollars to the deficit, according to the Congressional Budget Office. Nineteen Republicans joined all 50 Democratic Senators in supporting the legislation. Then they all went on their annual August recess.

Thus, the Senate reacted to the debt limit emergency by adding more to the national debt and then leaving for vacation. Isn’t that irresponsible? Mind you, we’re talking about the upper chamber of Congress, where common sense is much more likely to prevail than in the House of Representatives.

Behind the scenes, you’d think that Senate Majority Leader Charles Schumer is sweating the debt ceiling, right? After all, there’s a “fiscal Armageddon” looming next month. But raising the limit (or controlling spending) isn’t now the Senate’s priority–far from it. Instead, Schumer’s office is leading an all-hands-on-deck effort to move $3.5 trillion in new spending, including up to $1.75 trillion in deficit spending, on top of the $500 billion in new spending (and $250 billion in deficit spending) in the Infrastructure Investment and Jobs Act. Incredibly, the $3.5 trillion number reflects a compromise with progressive lawmakers, led by Sen. Bernie Sanders, who pushed for at least $6 trillion (and up to $10 trillion) in new spending.

For its part, the House of Representatives is along for the ride. Before departing on the chamber’s own August recess, Speaker Nancy Pelosi scheduled a late-September vote on the Infrastructure Investment and Jobs Act. At present, House staffers, like their counterparts in the Senate, have been working nonstop on legislation to spend another $3.5 trillion.

You might be thinking, “where does the debt limit factor into all this new spending?” As a political football, of course!

For progressives now ascendant in Congress, it’s an article of faith that deficits don’t matter and that the debt ceiling is a dangerous distraction. Nevertheless, congressional Democrats last month passed up opportunities to unilaterally raise the limit. Instead, House and Senate leadership wants to provide political cover for moderate Democrats by forcing a bipartisan vote. To this end, Speaker Pelosi and Senate Majority Leader Schumer are employing a brinksmanship strategy. They say they won’t act without Republican support.

But Republican leaders want nothing to do with such a vote, preferring for Democrats to “own” the deficit. And if GOP leadership were coming at this issue in earnest, with an eye to controlling federal spending, then they could be applauded. Alas, they’re not. As I observed above, 19 Republican Senators just voted for $250 billion of new deficit spending on infrastructure, after the federal government had exceeded the debt ceiling. More broadly, the GOP was fine with hiking the debt limit when Trump occupied the Oval Office—even before the pandemic.

The upshot is that both parties come to this game of chicken from a cynical and unserious place.

Where is this headed? I don’t think brinksmanship could work for Pelosi and Schumer. Given that Democrats hold majorities in the House and Senate, they can’t blame Republicans for inaction.

Reportedly, Pelosi and Schumer are mulling multiple other options. One pathway is for Democrats to attach the debt ceiling hike to a bill that Republicans would suffer politically for opposing, such as emergency funding for vitims of Hurricane/​Tropical Storm Ida.

Another approach involves a Rube Goldberg decision-making mechanism meant to obfuscate accountability, whereby responsibility for raising the debt ceiling would get watered down between the executive and legislative branches of government. Here’s how this scheme would work, according to Roll Call:

The procedure would give the White House the ability to waive the federal borrowing cap unilaterally, but give Congress a veto if lawmakers could muster the votes to block it. Even then the president would have the option of vetoing the resolution of disapproval, and it would take two-thirds of both chambers to override a veto.

This last measure seems most likely, if only because it best facilitates an escape from political accountability. Such is our contemporary Congress.