Opponents of government welfare have their various reasons.  Libertarians generally oppose government welfare on the grounds that it is immoral to take one person’s property (money) and give it to someone else.

Still, there is also a utilitarian argument against welfare.  Libertarians can join conservatives in criticizing government welfare because it gives the wrong incentives.  When someone receives welfare because they don’t have a job or don’t make much money, it encourages that person to continue the same behavior.

Someone who receives money for not having a job is more likely to not get a job in the near future.

Unfortunately, government welfare can also create a sense of entitlement.  Even more, it can create resentment.  Look at what happened to Elon Musk when he attempted to cut government spending.  He was attacked ruthlessly, particularly by people who had a financial stake.

When was the last time you heard a welfare recipient declare publicly that they are so thankful for the support they receive?

Disincentives for Companies

Just as welfare creates disincentives for individuals to produce wealth, it does the same for companies.

While tariffs are a form of taxation, they act as a form of welfare for certain companies.  And as with welfare, they create a sense of entitlement and resentment.  Tariffs can also prop up an otherwise bad company.

Let’s say you have an American company that makes and sells baby dolls.  Without any import tariffs, the company can barely exist because of competition from other companies that have their baby dolls made in China.

When there is a steep enough import tariff, all of a sudden, the American toy company can produce and sell baby dolls and make a good profit doing so.  Since the costs for the competing companies is so much higher with the tariffs, they are unable to sell baby dolls at the previous price.  This is a big advantage for the American producer that doesn’t have the added tariff cost.

The problem is that the American producer couldn’t compete without the tariff.  Maybe some of that had to do with taxes and regulations within the United States, but then these should be reduced.  You don’t make it a level playing field by making it more difficult for other companies.

Without the tariffs, the American toy producer would have been forced to be more cost efficient in order to compete.  If it didn’t do so, it would probably go out of business.

With the tariffs, there is no longer the incentive to improve operations.  The company can be far less efficient than some foreign companies, yet still outsell and outcompete them.

Bad Economics

The key to our living standards is wealth production.  Resources should be allocated in accordance with consumer demand.  Part of resource allocation is having producers be efficient.  By enacting tariffs and propping up just the domestic companies, it is a misallocation of resources.

Profits and losses are a signal in the marketplace.  Profits are a signal to do more of something.  Losses are a signal to do less of something.  You wouldn’t invest your money in a company that is losing money unless you expected the company to turn things around rather quickly.

Tariffs are a disruption to the profit and loss signal.  An American company that was not profitable without the tariffs might be made profitable with the tariffs.  This means that more investment would flow to this company, and the company would keep doing what would be deemed inefficient in a free market.

So, not only do tariffs increase prices, but they can also drive investment towards less efficient producers.

Like welfare, tariffs redistribute wealth and misallocate resources.  They disincentivize companies to be more cost efficient.  Overall, tariffs make us poorer than we otherwise would have been.

It is generally a bad idea to make important decision under duress, unless it really is urgent.  Sometimes people get a sense of urgency for something that should be well thought out.

For example, think about when there is a housing mania.  The prices are going up at a much faster pace than price inflation.  A house that is listed for sale might get multiple offers that are actually above the listing price.

Now think about someone who doesn’t own a house but wants to own a house.  They might get a sense of panic.  If the prices keep going up 10% or 20% per year, they will never be able to get into a house.  I have heard people say that they need to buy now before it is too late.

You should never feel rushed into a making a decision like this.  It will end up being a bad decision.  At the same time, you also don’t want paralysis where you avoid ever making an important decision.  Of course, not making a decision is making a decision.  If you never actually make an offer on a house, that is making a decision.

The point is that you should give yourself time to make important decisions.  This is why it is generally a bad idea to rush into a marriage.

Decisions in Advance

There are some people who think America is facing financial disaster.  They are probably correct.  It just depends on how much of a disaster it is.

If you think we are headed for financial disaster, or even if you think there is just a decent chance of it happening, then you should prepare accordingly.

It doesn’t make much sense to throw up your hands and close your eyes and hope for the best.  You don’t want to say, “I’ll deal with it when the time comes.”

Sure, you will have to deal with it when the time comes, but it will be far easier to deal with it if you somewhat prepare in advance.

This certainly includes your investments and personal money matters.  If you think the stock market is going to crash by 80%, then you obviously want to diversify out of stocks.

But I believe that being mentally prepared is incredibly important and often overlooked.  I have talked (written) about this regarding recessions.  Just knowing and mentally preparing for a coming recession will put you ahead of most people.  It becomes a lot less painful when it hits.

If you are living the good life and ignore any threats of a recession, it will be far more painful when it does hit.  You may be forced to adjust your lifestyle in a dramatic way.

It is like anything in life.  If you keep your expectations in check, then there is less disappointment.  This doesn’t mean being an eternal pessimist.  It just means living in reality.

Life Goes On

One problem I see for people who are trying to prepare for financial disaster is that they get too wrapped up in the hype, and they make bad decisions that go too far.

For example, think about someone who actually predicted the 2008 financial crisis in advance.  Let’s say that someone had a crystal ball and could see the general trends in the economy ahead.  They knew the banks would be in big trouble.  They knew that some financial institutions would be going under.  They knew that the stock market would crash.

If they didn’t know any more details than that, they might have pulled all of their money out of the banks.  But in retrospect, this wasn’t necessary.  Anybody with an FDIC-insured bank account didn’t lose their money.  The government isn’t good at keeping promises, but it has definitely been good at keeping this promise in order to keep the banking system functioning.

(I fully understand that the government causes much of the disfunction in the banking industry in the first place.)

Also, someone with a crystal ball might have seen the stock market crash in 2008.  But let’s hope they had a crystal ball that could see in the future past March 2009 when stocks hit their bottom.  If you had bought U.S. stocks in March 2009, you would have done very well up to this point 16 years later.

The point is that life goes on.  Most things keep functioning and humming along.  The stock market still functions.  Even when it crashes, most stocks typically come back.  If you are buying a diverse group of stocks (an index fund), you won’t get hurt by a few really bad stocks.  As long as the overall market recovers, then so will your fund.

Don’t Overdo It

I say all this because some people take extreme actions as if civilization is coming to an end.  The problem is that it costs them a lot of time and money.

It’s always possible that we could have a zombie apocalypse.  There could be a major nuclear war.  There could be a major breakdown in the division of labor.  If we get to that point, then it will not be much a world to live in.  Even if you have food stored and a getaway shelter in the woods, you still might not last long.

It is better to prepare for a less dramatic situation that is still tough.  If you think we are going to have 20% price inflation and some supply shortages, that seems to be a more realistic outcome.  If you buy some extra necessities in bulk ahead of time to ease the burden, then what’s the worst (best) that will happen?  We only get 2% inflation and you use up the extra paper towel and toilet paper that you bought before.  You still might have saved money.

It is a bad idea to make life-changing decisions for things that are highly improbable.  I am talking about someone who takes all of the money out of their bank account to buy gold, bullets, and food.  By the way, the gold won’t do you much good if there is truly a breakdown in the division of labor.

I have read about people making some crazy decisions.  They get it in their head that some event is going to happen, and they go completely overboard in preparing for it.  This tends to go especially poorly for a man who is married.  Guess what?  Your wife doesn’t want to live off the grid in the woods.

I know the U.S. government is soon headed for $40 trillion in debt (not counting the unfunded liabilities).  I know price inflation is still alive and well.  I know we had an inverted yield curve in 2023 and 2024.  I know we have an Everything Bubble that could pop at any time.

Still, life goes on.  We will most likely continue to have electricity and the internet.  We will still have a somewhat functioning banking system.  The stock market isn’t going away, even if it crashes by 80%.  People will still buy and sell houses, even if interest rates are at 15% and there are a lot of foreclosures.  People will adjust.

Prepare smartly.  You can buy into the hype of financial disaster to a point, but life will most likely go on.

“We won.  What the f**k did we win?  Every day I look at the mailbox for my O.J. prize.  Nothing!” ~Chris Rock on the reaction of black people to the O.J. Simpson verdict

This is conservatives and libertarians who originally cheered on the wrecking ball that was DOGE in late January and early February of 2025.

Every day I look at the mailbox for my DOGE check.  Nothing!

Do you remember the DOGE checks that Trump and Musk briefly talked about?  Some of those great savings were going to be rebated back to the American people in form of $5,000 checks.

There is just a slight problem.  There are no “savings”.  Any so-called savings have been more than offset by additional increases in government spending elsewhere.

Elon Musk originally said that we could cut the federal budget by $2 trillion per year.  Then he said it was probably more realistic to expect $1 trillion per year to start out.  Then he went down to something like $150 billion.

$150 billion?  That is around a one-month deficit for the U.S. government these days.  So, you might be able to balance the budget for one month?  What about the $150 billion per month deficit for the other 11 months of the year?

The crazy thing is that we won’t actually see a cut of $150 billion per year.  The budget will continue to increase in size.

What Was All This For?

DOGE was a good idea.  Even if it accomplishes nothing in terms of budget cuts right now, at least it pointed out some of the egregious stuff that comes out of Washington DC.

It wasn’t just that there is wasteful spending.  In those short few weeks of DOGE mania, it exposed that our tax money is actively used against us.  It is used to propagandize us, to destroy our culture, and to run the world empire.

Just for the exposure of USAID, we should all be thankful to Elon Musk for this.  I don’t believe Musk went in there with bad intentions.  From a personal standpoint, he would have been far better off not getting involved in politics.  It has actually cost him a lot of money and given him a lot of grief.

You have to wonder what Elon Musk thinks about all of this now?  It’s like Edward Snowden spending his life in exile in Russia.  Was it all worth it?  You expose all of this wrongdoing and you get bad consequences. Meanwhile, much of the American populace just shrug their shoulders if they even pay attention at all.

“Oh well, the NSA has been spying on me.  I hope they enjoyed reading my email to Aunt Betty today.”

“Oh well, the U.S. government is funding transgender comic books overseas and funding foreign media companies.  I hope those media companies start covering some more things of interest to me.”

Elon Musk has to realize that DOGE is a total flop at this point.  When Trump attacked Thomas Massie for questioning a bloated budget and not issuing rescissions for the things DOGE found, Musk had to have known that the honeymoon was over.  That’s why he is stepping away and trying to fix his businesses that have suffered.

Chaos With No Benefit

Everything seemed to start out so well at the beginning of the second Trump term for people who care about liberty.  It seemed that maybe we would actually get something different this time.

DOGE did many things where even a fiscal conservative could disagree.  Forcing government employees back into the office might actually cost more money because you need to provide office space for people who previously worked at home.

Still, the overall spirit of DOGE was that maybe we could apply an ounce of common sense and stop the free ride for so many people living off of Uncle Sam.  DOGE was a major disruptor of the status quo.

Most people working at government jobs are not like the elite who rule over us.  Sure, some of them have a power complex, but most of them are just going to work and making an income.

Their lives have been majorly disrupted.  Maybe you say, “good”.

But what’s it all for?  I would rather a major disruption of the military-industrial complex.  Instead, Trump is bragging about the first $1 trillion “defense” budget.

Attacking millions of government workers and contractors was not the low hanging fruit.  And again, it hasn’t actually produced any cuts.  The money has basically just been reallocated.

Trump and members of Congress could demand rescissions of the things exposed by DOGE.  But with the exception of a few people in Congress, that isn’t happening.  All of that work and political capital was spent to expose this stuff, and we get nothing out of it.

It has created a ton of chaos with no actual cuts.

We aren’t getting DOGE checks.  We aren’t getting a reduction in the deficit.  We aren’t getting a reduction in overall spending.  We got all of the chaos with no immediate benefit.

There was an interesting moment recently when Donald Trump stated that kids in the U.S might have two baby dolls instead of 30.  This was in reference to his tariffs on China, which is seemingly an admission that his tariffs will cause higher prices.

China does export a lot of toys to the United States, which would include baby dolls.  Apparently, Trump thinks that your child can have just 2 dolls instead of 30 so that he can make America great again.

This is Trump’s moment of “Let them eat cake.”

It takes especial gall from someone like Trump to make this comment about how many baby dolls your children should have.  Trump owns multiple luxurious properties.  The faucets in his places are probably gold-plated.

Is Trump really going to play the role of complaining about excess materialism?  Trump is the face of excess materialism.  It is like when some rich politician tells you to ride your bike to work while he flies on his private jet to a climate change conference.

Maybe Trump can become the new leader of the World Economic Forum.  The slogan can be: “Let them eat bugs and only have 2 baby dolls.”

What Else Should be Limited?

If Trump is going to complain about Americans having too much wealth, what else will he suggest?

Maybe we should only have 27-inch televisions instead of 55-inch televisions.  Maybe you don’t really need that king-sized bed.  It is really more of a luxury than a need.

Here is another issue that Trump didn’t address.  What about a family that is just barely getting by before the new tariffs?  What if they are barely able to pay the electric bill and the grocery bill each month?  They were able to get together just enough money to buy a baby doll for their daughter for Christmas.

Should that family not pay their electric bill next year, or should they not give a single Christmas present to their daughter because the price of toys has gone up?  Most kids don’t have 30 dolls.  Maybe some have more toys than they play with, but it is probably a variety of toys.

And what about things that aren’t toys?  If the price of furniture goes up, is he going to say that a family should only have one bedroom dresser for the whole family?

Excess Materialism vs. Big Government

If Trump or anyone else suggested that there is too much emphasis put on materialism in the United States, that might be appropriate if it wasn’t trying to justify higher taxes.

In other words, it isn’t necessarily unreasonable to say that people who don’t put an emphasis on materialism tend to be happier and more grateful for the things they do have.  This is probably true after reaching a certain point of wealth.

But here’s the problem.  Most people don’t want the government controlling the amount of wealth or material goods we are allowed to accumulate.

If I listen to a self-help podcast and make the decision that I don’t want to have so many material goods in my house, then I can make that decision.  It shouldn’t be the government’s decision to make for me.  It certainly doesn’t justify raising taxes on the goods and services we buy in the name of reducing materialism.

Conclusion

Donald Trump’s political career has been largely successful because he speaks out against the ruling elite. This statement from Trump makes him sound like one of the out-of-touch elitists that he so often criticizes.

If Trump’s presidency and his attitude continue down this path, he will be a deeply unpopular president.  He is already hated by about half of America.

Even some Trump supporters will start to lose their patience with him if Trump thinks he can dictate how many baby dolls your kids should be allowed to own.

The FOMC released its latest monetary policy statement.  As was expected, the federal funds rate did not change and will stay in a range of 4.25% and 4.5%.

The sentence that is getting the most attention in the statement is the one that implies we are headed for stagflation – higher prices and reduced economic growth.

The sentence reads: “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

It wasn’t that long ago that Jerome Powell said that the Fed didn’t foresee stagflation as a problem, and he said that they didn’t really have a plan to deal with it.

Meanwhile, the Implementation Note states that the Fed will continue to reduce its balance sheet by $40 billion per month – $5 billion in Treasury securities and $35 billion in mortgage-backed securities.

It is still a complicated situation with a trend of lowering rates (temporarily on pause) and slight monetary deflation.

Powell vs. Trump

The fact that Powell and company aren’t lowering rates this time around and are continuing to reduce the balance sheet will only exacerbate the war of words between Powell and Trump.  Of course, Powell will be far more polite with his words.

Trump will blame a bad economy on Powell for not being ahead of the curve and lowering rates fast enough. Powell will blame Trump for imposing higher tariffs and making price inflation more persistent.

In a sense, they are both right, and they are both wrong.

Trump is right that rate cuts would boost the economy in the short run.  But it would just make the long-term pain that much worse.  It would be another kicking of the can down the road.

Powell is right that Trump’s tariffs will make some prices higher.  At the same time, it is the Fed that causes prices to go up virtually all the time.  Price inflation was a massive problem in 2022, and that didn’t have much, if anything, to do with tariffs.

We are in this bad position because of big spending politicians like Trump and central bankers like Powell who accommodate the deficit spending by creating money out of thin air.

They are both to blame, along with a lot of other people.  Trump is more to blame from his first term at this point (remember 2020?), but it’s not like he is getting spending under control now either.

1970s Stagflation Again?

It is impossible to predict the future, but I don’t think we are going to return to a version of the 1970s in the near term.

The Fed’s monetary policy at this point is much tighter than it was in the 1970s in general.  That’s not to say that the Fed can’t and won’t start ramping up the digital printing press again.

We are coming off of an inverted yield curve for almost two years (2023 and much of 2024).  The Fed is still deflating its balance sheet in the face of this.  This has recession written all over it.

But I don’t see the high price inflation like what happened in the 1970s.  It has come down since reaching a high of just over 9% in 2022.  I know there are arguments that it is understated, but I still don’t think it is anywhere near what it was in the 1970s when it was in the double digits.

With a recession, price inflation is likely to come down more.  Of course, this relief for the American consumer might be negated by the tariffs.  Still, when times get bad, expect demand for a lot of consumer products to go down.  Even with necessities like food, people will find cheaper alternatives.

If the Fed doesn’t go crazy with its money creation – and I know that is a big if – then expect price inflation to go down.  It doesn’t mean that prices will go down, but they should stop going higher as fast.

A recession is looking highly likely.  Powell is blaming Trump’s tariffs.  He will say that he wanted to lower rates sooner, but he just couldn’t do it because of the price pressures from the tariffs.

The next question is how the Fed will react once the recession hits.  It may depend on the severity and whether any major financial institutions are on the brink of failure.

Expect major economic trouble ahead, but not necessarily stagflation.  Maybe that will be later down the line.

There are some terms that I simply dislike because they conflate different things.  Globalism is one such term.

There are certainly others.  I have never liked to use the term austerity unless I give my own meaning behind it.  In economics, austerity is often used as a term to describe balanced budgets or at least less deficit spending.

The problem is that some people refer to austerity when they are talking about government spending cuts. Others refer to austerity when they are talking about the government raising more revenue (i.e., higher rates of taxation).

From a libertarian standpoint, these two things could not be more different.  Libertarians want lower taxes and lower spending.  If someone uses the term austerity and you don’t know if they mean spending cuts or tax increases, then they probably shouldn’t be using the term.

Free Trade or One-World Government?

I see people use the term globalism, and it isn’t always clear what they mean by it.  It is usually said in a negative context, but the definition can vary quite a bit depending on how it’s being used.

I have heard people criticize globalism coming out of Klaus Schwab and the World Economic Forum (WEF). The WEF wants to impose some kind of a one-world government on the people of the planet.  At the very least, they see themselves as the elite who should control what the masses do.  Libertarians would obviously oppose this type of globalism.

Now, with tariffs in the news, some people refer to globalism and simply mean free trade.  They think we have to defeat globalism by restricting trade between countries, and tariffs are one way to do that.  They see it as harmful that people are engaging in so much buying and selling with people from other countries.

For most libertarians, they see nothing wrong with global trade if it is done on a voluntary basis.  This makes us wealthier by increasing the division of labor.

So, when someone speaks against globalism, we have to ask: Which kind?  One-world government or free trade?  I am firmly against one and firmly in favor of the other.  Please don’t conflate the two.

If somebody writes or speaks about globalism, they better make it crystal clear what they are talking about.  Otherwise, I will doubt their communication skills, and I am not going to give credence to what is being said.

For me, it is generally better to avoid the term.

When Trump announced massive tariff increases on his so-called Liberation Day, there was instant feedback in the form of a big downturn in stocks.  It was likely this feedback from investors that gave us some relief after that.

The good news about the tariffs is that most Americans are already feeling the pinch (to put it mildly) of higher prices.  When you enact a policy that instantly causes 401k plans to drop by 10% or more, it tends to make those people against that policy.

If we get significantly higher prices down the road after enacting this policy (if that’s what you want to call it), then the average American who isn’t a diehard Trump supporter is probably going to blame the tariff policy.

Even though Trump tends to thrive on conflict, he is also somewhat of a populist.  If the majority of Americans are blaming his tariffs for their worsening economic situation, it is likely that Trump will have to reverse course.  He will probably do it in Trumpian fashion where he somehow declares victory even though it was just a stupid and unnecessary move.

When there were vaccine mandates in 2021 and 2022, it wasn’t clear if the people not willing to take the vaccines could win that battle because it was a minority of people.  There was a lot more concern there.

If you are against the higher tariffs and worry that they will worsen your standard of living, you have good reason.  But the good news is that you will have a majority of people on your side because most Americans are tired of paying continually higher prices.  Plus, those who have investments don’t like to see their net worth go down along with the higher cost of living.

The Chinese Call

While Trump put a pause on the much higher tariffs for most countries, the Chinese officials decided to call Trump’s bluff.  Sure, the Chinese are also temporarily hurting their own people by enacting their own import taxes, but they have likely just had enough of the bullying by the American government.

Whenever there is a problem in America, it has become fashionable to blame either Russia or China.

It’s interesting that Trump (and the Biden blob before him) insist on sanctioning Russia for the war in Ukraine.  This means that they won’t allow products to be sold to Russia.  In other words, it is like Russia putting a massive tariff on American goods.  Yet, Trump and company see this as a punishment for Russia.

If it is a punishment for Russia, why does Trump see it as a good thing to impose sanctions on his own country?

With the extraordinarily high tariffs on China, it is essentially like have sanctions at this point by both countries, with certain exceptions.

What About Shortages?

While there has been much focus on the stock market and what will happen with the tariffs, there hasn’t been a lot of discussion about the possibility of shortages, at least in the corporate media.

China is a major trading partner of the United States, or at least it was.  Trump keeps talking about making a deal now, but Chinese officials are playing hardball.  They are basically saying that Trump has to lower the tariffs before they will come to the table and talk.

In the meantime, this is an absolute nightmare for businesses, but especially businesses that rely on imports from China.  Trade has essentially been halted with over a billion people.

There is a decent chance that we could see major supply shortages.

Think about being a business that sells a product made in China.  Let’s say you sell book shelves that are made in China.  With the massive tariffs, you would have to more than double your price to consumers just to stay profitable.  It doesn’t make sense to import book shelves from China with these massive taxes.

Ok, you may say, but an American company can step in and make book shelves.  Well, first of all, it takes time to make this decision and actually implement the process.

But why would a company even start producing book shelves if they couldn’t compete before?  For all they know, Trump might make a deal with China next week and bring tariffs back to where they were three months ago.  Then the Chinese would ramp up production again and start shipping out book shelves.  All of a sudden, the American company that decided to start making book shelves is no longer profitable again with this product.

Think about this same example with thousands of products including toys, furniture, clothing, home décor, cleaning products, and healthcare equipment.  It is hard to imagine that there won’t be major disruptions at the very least.

Remember Toilet Paper

Remember 2020 when panic struck (because of the fearmongers in government and the establishment media).  Just as the lockdowns came, we also started to get shortages.  There were some shortages with meats and vegetables.  Of course, the big one that most people remember is toilet paper.

There was a run on toilet paper, and it still isn’t really clear why.  Once word got out that there was a shortage of toilet paper, it caused a vicious cycle of higher demand.  It was common to go to the store and see empty shelves where the toilet paper is sold.  If a new shipment came in, it was usually gone within hours, especially with word getting out on social media.

If we have major shortages in the near future, it is hard to say what it will be.  It would seem probable that it is something that previously came from China, but even with that we aren’t certain.  Some of the products listed above are common things imported from China, but we really don’t know where it will hit hardest.  The best you can do is prepare with extra things that you know you will need.

The Amazing Government Interference and the Amazing Marketplace

I have long said that it is amazing how much poorer we are because of government interference.  But it is also amazing how well the marketplace responds and is still able to thrive in spite of the interference.  We still somehow get advancing technology even with all of the taxes and regulations.

That is the good news and bad news here.

The tariffs are going to make us a lot poorer than we otherwise would have been.  And I say that with the opinion that we were already facing a recession with or without tariffs.  The higher prices are a real thing that make our lives harder.  If we have significant supply shortages, it will make life even harder.

The good news is that entrepreneurs are very resilient with all of the difficulties thrown at them.  If these tariffs last a while and we see supply shortages, the market will eventually respond.  At some price, businesses will provide what is in high demand, or at least provide possible substitutes.

Americans will mostly survive these higher tariffs, but it will make life more difficult that it needed to be.  In the meantime, it might not be a bad idea to take an extra trip to the store and stock up on some essential goods.

And if you were planning to buy something in the somewhat near future, you might want to consider getting it now before prices go higher.