Macro Roundup

Matthew Klein, "President Trump Leaves Office Next Week. Here’s What He Meant for the Economy,"Barrons, January 15, 2021, https://www.barrons.com/articles/a-review-of-trump-tax-cuts-trade-wars-and-a-spending-boom-51610724602

His comment on equity market performance, “…From the day Trump was elected until the day he lost to Joe Biden, the S&P 500 rose just over 12% annually. Only Bill Clinton and Calvin Coolidge presided over bigger market gains—and both of them left office near the tops of two of the most notorious equity bubbles ever. Making this even more impressive is that stock market valuations were already high before Trump won. Stocks were about three times as expensive relative to earnings in October 2016 as in July 1923, just before Coolidge took office. Stocks were similarly cheap when Ronald Reagan was elected in 1980. Stocks were 40% cheaper when Barack Obama was elected compared with when Trump won, and 20% cheaper when Clinton won. Only Herbert Hoover and George W. Bush were elected when stocks were trading at higher valuations….”

Great chart by Matt Klein showing the impact of Trump’s surprise win and GOP control of government’s impact on unleashing animal spirits, “…Perhaps the most important impact of Trump’s surprise victory was psychological.The prospect of a unified Republican federal government reset expectations of corporate executives, small-business owners, and many ordinary Americans. That showed up in asset prices—cyclically adjusted earnings multiples rose more than 25% in the year after Trump won—and in surveys. No one captured the shift in mood better than Ray Dalio, founder of hedge-fund firm Bridgewater Associates. On the eve of the election, Bridgewater’s research department warned that a Trump victory would cause markets to plunge because of the implications for trade policy and the rule of law. But one month later,Dalio was comparing Trump’s election to the transition from Mao Zedong to Deng Xiaoping in China, concluding that it “could have a much bigger impact on the U.S. economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits.”…”

Gerald Seib, "Where Trump Came From—and Where Trumpism Is Going,"Wall Street Journal, January 15, 2021, https://www.wsj.com/articles/where-trump-came-fromand-where-trumpism-is-going-11610726416

Woodson argues that the civil rights movement has departed from MLF tradition, “…John C. Calhoun famously asserted: “There is no instance of any civilized colored race of any shade being found equal to the establishment and maintenance of free government.” Black efforts at self-liberation in the 19th and 20th centuries were based on the opposite assumption. Today many black leaders defer to angry white progressives who make the same arguments about blacks’ lack of moral agency, reject the country’s founding principles, and seek to undermine its institutions. For months, the radical left has been exploiting the country’s genuine concern for fairness to keep blacks in a constant state of agitation, anger and grievance, urging them toward behavior that lives down to the slanderous stereotypes of white supremacists. The leaders of these movements insist that every inequity suffered by blacks is caused by institutional and structural racism, that they have no power to liberate themselves, and that they will remain oppressed until white people change. Even to raise the issue of what role self-determination plays for blacks earns you the label of “racist.”Civil-rights organizations and their leadership, as well as the Congressional Black Caucus, need to wake up before it’s too late. A faction of black leaders has been silent about, or complicit in, the takeover of the civil-rights movement by the radical left. The effect of this is not to glorify black achievement but to crucify low-income blacks, who are represented in national media outlets by their worst-behaved members, and bear the brunt of the attacks by the woke radical left on the cities where they live….We must turn away from the present course, which preaches despair rather than hope. Black achievement must be glorified…”

How the Left Hijacked Civil Rights

The civil-rights movement, led by the Rev. Martin Luther King Jr., helped deliver America from the historic sins of slavery and Jim Crow by forcing the nation to confront the full humanity of its black citizens. King’s words and actions glorified America by transfiguring its racial wound and revealing its redemptive promise. Yet today many black leaders have lost sight of King altogether and are aiding and abetting the crucifixion of their own people. Rather than hope, they see despair; rather than the Easter Sunday of true liberation, they offer the bleak Good Friday of never-ending misery.

The history of black American responses to slavery and Jim Crow generally followed three paths. They were hotly debated, but all emphasized human agency, sought liberation, and rejected despair.

First, there were the recolonization or “back to Africa” movements championed by the likes of Marcus Garvey. These movements sought an exit from America.

Second, there were the insurrectionists of the 19th century, who believed that black Americans should engage in armed rebellion or vocal opposition so that they might find a home in this country. Here lie Nat Turner and, later, W.E.B. Du Bois. They wanted to have their resistant voice heard in America.

Third, there were accommodationist movements of the sort undertaken by Booker T. Washington, who thought that loyalty to America was the best course.

Exit, voice, loyalty—however different these strategies were, each supposed that human agency mattered, that oppression wasn’t destiny. That is why, even amid great struggle, black Americans responded by building their own institutions and businesses. Great universities, medical schools, hotels, restaurants, movie companies and even a flight school sprung up. All of this was self-financed—and made possible by two-parent families, churches and other cultural institutions that provided shelter against the outside storm of racism.

In the 20th century, that same creative conflict between these three schools of thought reappeared. Debaters included the Student Non-Violent Coordinating Committee, the Southern Christian Leadership Conference, the Black Panther Party and the Republic of New Africa, which sought to establish a separate black state within our borders as an exit strategy.

King offered an inspiring combination of the strategies of loyalty and voice. In 1960, when students in Greensboro, N.C., became frustrated with the slow pace of legal action favored by Thurgood Marshall, King was sent to discourage them from engaging in civil disobedience. The students told King to lead, follow or get out of the way. They were determined to liberate themselves. They understood the difficulties and were undeterred by the obstacles. Like King, they were willing to persevere toward justice even when it was inconvenient, and to suffer the consequences of their actions. Hope, not hopelessness, animated all that they did.

King paid a heavy personal price for his hope that America was redeemable. Twice his home was bombed; once, his wife and daughter were nearly killed. Surrounded by hundreds of angry, armed black men after that bombing, he discouraged retaliatory violence. He was assaulted several times, and jailed as well, but he remained steadfast in his commitment to nonviolence. He united black Americans behind the proposition that racism is evil in itself, not simply because white people visited it upon blacks, and that all must unite to combat evil. He warned us about the self-destructive path of violence, not only for blacks but for the whole nation.

One of the original arguments to justify slavery was that blacks were morally inferior and thus incapable of self-government. John C. Calhoun famously asserted: “There is no instance of any civilized colored race of any shade being found equal to the establishment and maintenance of free government.” Black efforts at self-liberation in the 19th and 20th centuries were based on the opposite assumption.

Today many black leaders defer to angry white progressives who make the same arguments about blacks’ lack of moral agency, reject the country’s founding principles, and seek to undermine its institutions. For months, the radical left has been exploiting the country’s genuine concern for fairness to keep blacks in a constant state of agitation, anger and grievance, urging them toward behavior that lives down to the slanderous stereotypes of white supremacists. The leaders of these movements insist that every inequity suffered by blacks is caused by institutional and structural racism, that they have no power to liberate themselves, and that they will remain oppressed until white people change. Even to raise the issue of what role self-determination plays for blacks earns you the label of “racist.”

Civil-rights organizations and their leadership, as well as the Congressional Black Caucus, need to wake up before it’s too late. A faction of black leaders has been silent about, or complicit in, the takeover of the civil-rights movement by the radical left. The effect of this is not to glorify black achievement but to crucify low-income blacks, who are represented in national media outlets by their worst-behaved members, and bear the brunt of the attacks by the woke radical left on the cities where they live.

“Justice” for black America cannot be achieved by framing it solely through the distorted lens of the deaths of George Floyd, Breonna Taylor and others in fatal police encounters. For every unarmed black American killed by the police, hundreds are killed in neighborhood homicides.

Those who call for the defunding of police departments, such as leaders of the official Black Lives Matter organization, are silent about this inconvenient truth. They have a narrative and cannot let the facts get in the way. Their story is that the whole of American history is stained and the whole of America must be overthrown. When citizens declare that they support Black Lives Matter, do they share its opposition to the nuclear family, its objective of abolishing the police, and its view that the Christian cross is a symbol of white supremacy? These positions of the organization—language that has largely been scrubbed from its website—in no way improve the lives of black Americans. They give up on black America and encourage its needless suffering.

Like all Americans, blacks have triumphed over their circumstances only when they have adopted bourgeois virtues such as hard work, respect for learning, self-discipline, faith and personal responsibility. In the 19th century, Frederick Douglass found reading to be the key to his own personal liberation amid slavery, and he understood that whites deliberately withheld literacy from blacks precisely because it was so valuable. Bourgeois values drove blacks to build the powerful religious, fraternal, and other voluntary associations that helped them thrive in the worst days of Jim Crow and cultivated the essential virtues in the next generation.

There would have been no civil-rights movement without this. But radical progressives now insist that such virtues are the legacy of white supremacy, colonialist values that reflect the continuing bondage of blacks to oppressive Western culture. The only “authentic” expression of blackness in America, they claim, is the opposite of bourgeois self-restraint and discipline—indulging in the passions of the moment, whether anarchic rioting, insulting teachers or other unsalutary forms of expression. The radical left—disdaining exhortations toward work, family and faith as “respectability politics”—argues that blacks should feel free to indulge their “true” nature, echoing the age-old white-supremacist notion that said nature is violent, lascivious and incapable of self-restraint.

The slave masters’ trick of old was to dissuade blacks from adopting bourgeois values precisely so they could be kept in servitude. Marriage was forbidden and families were split apart. Douglass observed that slaves were encouraged to indulge in drink and debauchery during the holidays so they would be “led to think that there was little to choose between liberty and slavery. We felt, and very properly too, that we had almost as well be slaves to man as to rum. So, when the holidays ended, we staggered up from the filth of our wallowing, took a long breath, and marched to the field—feeling, upon the whole, rather glad to go, from what our master had deceived us into a belief was freedom, back to the arms of slavery.”

But there were always those who saw through the trick and used the holidays to hunt, make items for sale, visit distant family members, and hire out their own labor. Some of these were even able—eventually—to purchase their freedom.

Tellingly, leftist elites teach their own children the values of working and studying hard even as they encourage behavior among blacks that will make sure they remain uncompetitive but “authentic.” By the time young blacks today discover, as did the slaves of Douglass’s time, that freedom understood as “do whatever you feel like” is no way to build a worthwhile life, it will be too late. The fruits of the civil-rights movement’s hard labor—teaching the young to be so self-disciplined that they were able to resist responding in kind to hatred and abuse from whites—will have been lost.

We must turn away from the present course, which preaches despair rather than hope. Black achievement must be glorified. The crucifixion of black America by the radical left must halt. There is a grander, more fruitful future for us all.

Mr. Woodson, a veteran of the civil-rights movement, is founder and president of the Woodson Center and author, most recently, of “Lessons From the Least of These: The Woodson Principles.” Mr. Mitchell is a Washington Fellow at the Claremont Center for the American Way of Life and author of “American Awakening: Identity Politics and Other Afflictions of Our Time.”

Robert L. Woodson Sr. and Joshua Mitchell, "How the Left Hijacked Civil Rights,"Wall Street Journal, January 15, 2021, https://www.wsj.com/articles/how-the-left-hijacked-civil-rights-11610748711

Richard Epstein highlights potential competition policy issues around social media firms limiting access to their platforms, but still thinks a market based solution is best policy, “…But the nondiscrimination side of the formula is still with us,” Mr. Epstein says, “and it is that duty that’s at issue today with Trump and Twitter. And if the monopoly constraint applies, then it is not a defense to say that these companies are privately owned.”Mr. Epstein admits the tech companies aren’t “pure monopolies in the way in which you might’ve thought in the 17th century, because Twitter’s got some competition from Facebook.” But there is still pushback, he says, when “these companies decide that they’re going to exercise their sovereign power as if they were ordinary private companies, because people believe that there are strong monopoly elements associated with their operation.” This view is shared by both left and right: “As these companies become more imperious, there’s a greater insistence that they be treated as monopolies.”The argument becomes stronger, Mr. Epstein says, “when those who are policing the entry into the networks” make their political preferences clear: “You cannot be both a platform operator and a partisan. Jack Dorsey is not, shall we say, a neutral party.” Mr. Epstein thinks Mr. Zuckerberg is also partisan, but “in a cagey way. He is certainly no Republican, but he is smart enough to mute his hostility relative to, say, Dorsey.”Mr. Epstein has two recommendations for Twitter and Facebook, which he’s sure they won’t follow: “First, they should take the control of access to their networks and give it to somebody who doesn’t care about the outcome. And then, to have a relatively narrow, consistently applied, definition of what counts as violence and threats of force.” In regard to the latter point, Mr. Epstein points to how Ayatollah Ali Khamenei, who has more than 880,000 Twitter followers, “gets to promise the death of America on his account 20 times a day. All sorts of other zealots get to do that. You can’t select the violence you don’t like from the violence that you do like, or choose to ignore.”…Yet such a market solution may be the best we can hope for. “The safest control against a monopoly—in every market that you’d care to invent—is new entry,” Mr. Epstein says. In any case, who would the enforcers be for a potential nondiscrimination rule against social-media monopolies? The answer underscores the unlikelihood of such action: “It’s going to be essentially the Biden administration telling the Twitter company that they can’t discriminate against Trump.”..”

The ‘Common Carrier’ Solution to Social-Media Censorship

The punitive banishment of Donald Trump from Facebook and Twitter has met with almost uniform approval from the president’s critics. So has the decision by Apple and Google to remove Parler, a Twitter alternative favored by Mr. Trump’s supporters, from their app stores. Many Democrats see these actions as a righteous and justified silencing, especially in light of Mr. Trump’s encouraging words for the mob that violently invaded the Capitol on Jan. 6. Even many of Mr. Trump’s supporters concede that Twitter and Facebook owe him no platform—that only the government has a legal obligation to respect the First Amendment.

Richard Epstein takes a different view. The gagging of the president by America’s digital behemoths provokes in him a mix of indignation and distress. A professor at the New York University Law School, he is the foremost libertarian legal scholar in the common-law world. (Mr. Epstein, 77, directs NYU’s Classical Liberal Institute, where I am a fellow.) We converse by Zoom, and he says that he’d tell Jack Dorsey and Mark Zuckerberg of Twitter and Facebook, respectively, to “give Trump his account back.”

The punitive banishment of Donald Trump from Facebook and Twitter has met with almost uniform approval from the president’s critics. So has the decision by Apple and Google to remove Parler, a Twitter alternative favored by Mr. Trump’s supporters, from their app stores. Many Democrats see these actions as a righteous and justified silencing, especially in light of Mr. Trump’s encouraging words for the mob that violently invaded the Capitol on Jan. 6. Even many of Mr. Trump’s supporters concede that Twitter and Facebook owe him no platform—that only the government has a legal obligation to respect the First Amendment.

Richard Epstein takes a different view. The gagging of the president by America’s digital behemoths provokes in him a mix of indignation and distress. A professor at the New York University Law School, he is the foremost libertarian legal scholar in the common-law world. (Mr. Epstein, 77, directs NYU’s Classical Liberal Institute, where I am a fellow.) We converse by Zoom, and he says that he’d tell Jack Dorsey and Mark Zuckerberg of Twitter and Facebook, respectively, to “give Trump his account back.”

Mr. Epstein emphasizes that he’s been frequently critical of Mr. Trump and called on the president to resign as early as February 2017: “I thought his style was so confrontational that you couldn’t keep peace in the land.” Yet he’s been struck by the “one-sided” nature of the debate over Mr. Trump’s ban from social media, focusing almost solely on the First Amendment and how it “applies only to Congress and to the states and doesn’t apply to private parties.” Largely absent from the debate, he says, has been the word “monopoly.”

“Look,” he says, “there are private companies and there are private companies.” The conventional argument about the First Amendment is right when it comes to a company like Simon & Schuster, which pulled the plug on a book by Sen. Josh Hawley of Missouri in disapproval of his challenge to the presidential election results. Mr. Hawley can take the book somewhere else. “There are lots of alternatives, lots of publishers of one kind or another,” Mr. Epstein says. If it turns out that publishers all collude so that none will take him, Mr. Epstein says, “that gets you into an antitrust violation. So there’s a remedy.”

The situation with Mr. Trump and the social-media giants is different. If they are monopolies—not “an easy question,” Mr. Epstein acknowledges—the common-law rule is that “no private monopoly has the right to turn away customers.” It must take them all on “fair, reasonable and nondiscriminatory” terms. This principle, which sometimes goes by the acronym Frand, dates back to the writings of Sir Matthew Hale (1609-76), an English jurist.

“The question of media control,” Mr. Epstein says, “can only be understood by going back to the historical regulation of common carriers and public utilities.” Hale didn’t use the word “monopoly,” but instead wrote of a party “affected with the public interest,” such as a harbor with only one landing space. Its owners, he argued, had a duty to serve on terms that were fair, reasonable and nondiscriminatory. “They couldn’t just charge what the market could bear, but had to face that constraint.” This notion of “rate regulation,” Mr. Epstein says, was incorporated into American law in 1876, when the Supreme Court decided in Munn v. Illinois that the state had the authority to regulate a grain warehouse’s prices.

Munn began the development of a body of law concerning “common carriers,” such as railroads, which offer services to the general public for which there is no alternative. In Mr. Epstein’s view, the near-monopoly position of Twitter and Facebook may generate common-carrier obligations. “These are common-law rules,” he says. “It’s not as though you can post a little notice on top of your website that says, ‘Not subject to common-carrier rules.’”

Unlike harbors, warehouses and railroads, social-media monopolies don’t raise an issue of rates. Their content is free. “But the nondiscrimination side of the formula is still with us,” Mr. Epstein says, “and it is that duty that’s at issue today with Trump and Twitter. And if the monopoly constraint applies, then it is not a defense to say that these companies are privately owned.”

Mr. Epstein admits the tech companies aren’t “pure monopolies in the way in which you might’ve thought in the 17th century, because Twitter’s got some competition from Facebook.” But there is still pushback, he says, when “these companies decide that they’re going to exercise their sovereign power as if they were ordinary private companies, because people believe that there are strong monopoly elements associated with their operation.” This view is shared by both left and right: “As these companies become more imperious, there’s a greater insistence that they be treated as monopolies.”

The argument becomes stronger, Mr. Epstein says, “when those who are policing the entry into the networks” make their political preferences clear: “You cannot be both a platform operator and a partisan. Jack Dorsey is not, shall we say, a neutral party.” Mr. Epstein thinks Mr. Zuckerberg is also partisan, but “in a cagey way. He is certainly no Republican, but he is smart enough to mute his hostility relative to, say, Dorsey.”

Mr. Epstein has two recommendations for Twitter and Facebook, which he’s sure they won’t follow: “First, they should take the control of access to their networks and give it to somebody who doesn’t care about the outcome. And then, to have a relatively narrow, consistently applied, definition of what counts as violence and threats of force.” In regard to the latter point, Mr. Epstein points to how Ayatollah Ali Khamenei, who has more than 880,000 Twitter followers, “gets to promise the death of America on his account 20 times a day. All sorts of other zealots get to do that. You can’t select the violence you don’t like from the violence that you do like, or choose to ignore.”

Ultimately, Mr. Epstein says, those berating Twitter and Facebook for their abuse of “monopoly power” will lead the market to rebel, as happened when entrepreneurs responded to railroad monopolies by developing spur lines and other alternatives. “And that’s Parler,” he says, “and Gab,” another upstart that is kicking at Mr. Dorsey’s shins.

Yet Parler is in a bind. Apple’s refusal to carry its app means that it can’t get onto an iPhone. “The iPhone is 40% of the market,” Mr. Epstein says. “So unless people with iPhones have two phones—which is a huge inconvenience—they’re going to be denied the service altogether.” Gab has “decided to build a fully integrated network, their own servers—to become completely self-sufficient.”

This gives rise to a paradox. “You assert there’s a monopoly,” Mr. Epstein says, “and then you act to do something about it, and then you have an industry that’s competitive, at least in part. But it’s imperfect competition, because these guys don’t have the reach.”

Mr. Trump had 89 million Twitter followers. “They are not going to go away, whether Twitter likes them or not,” Mr. Epstein says. “So he’s literally going to start to integrate with another network.” Mr. Epstein sees this as “a funny chicken-and-egg situation”: “Twitter is, we’re saying, a serious monopoly we have to regulate. But now that it’s abusive, it’s no longer a monopoly because we have these other guys coming in, and they’re going to try to do Twitter in.”

Mr. Epstein warns of ugly political consequences: “What you’re seeing now is an unwillingness of companies like Twitter and Facebook to tolerate conservative talk on their networks. What you’ll now get is conservative networks and liberal networks, and they won’t overlap.” This will heighten political polarization, as “each group starts to listen to its own, and they get madder and madder about what’s going on.”

Yet such a market solution may be the best we can hope for. “The safest control against a monopoly—in every market that you’d care to invent—is new entry,” Mr. Epstein says. In any case, who would the enforcers be for a potential nondiscrimination rule against social-media monopolies? The answer underscores the unlikelihood of such action: “It’s going to be essentially the Biden administration telling the Twitter company that they can’t discriminate against Trump.”

Tunku Varadarajan, "The ‘Common Carrier’ Solution to Social-Media Censorship,"Wall Street Journal, January 15, 2021, https://www.wsj.com/articles/the-common-carrier-solution-to-social-media-censorship-11610732343

"... Total NY state spending is $177 billion a year—almost twice the budget of Florida, which has a population that is 10% larger than New York’s. New York City alone spends as much as Florida’s state government does. In the past 18 years, New York City’s population has grown less than 4%, while its public payroll is up 20%. For the six years ending 2019, according to a Manhattan Institute report by Eric Kober, the city’s average public-employee wages rose 48%, almost three times the national average....""

Effective tax burden, “…The past is not prologue. In a middle finger salute to their hometown, Mr. Trump and Treasury Secretary Steve Mnuchin persuaded Congress to cap the state and local government tax deduction, which formerly made those levies about 40% less onerous for New York taxpayers. President-elect Joe Biden has proposed eliminating lower tax rates on long-term capital gains and subjecting high-income earners to the Social Security tax. Together, those changes would raise the top marginal federal income tax rate to 53%. Add in the current New York state and city tax rates of almost 13% and the marginal tax rate for the Big Apple’s high earners becomes 66%. Make that 68% if Albany raises its tax another two percentage points, as has been proposed. Even if I were indifferent to working the first eight months of the year for the government, what about my employees and the many talented and ambitious young people who are the future of New York? How will they feel about the difficulty in building a business and a life in a city and state that are driving away their tax base and will face declining public services?...”
Mark Kingdon, "New York, I Love You, but We Can’t Go On Like This," Wall Street Journal, January 15, 2021, https://www.wsj.com/articles/new-york-i-love-you-but-we-cant-go-on-like-this-11610732183

New York, I Love You, but We Can’t Go On Like This

I happen to love New York.

Born in Brooklyn, I grew up on Long Island. My first summer job was as an office boy at a Midtown Manhattan brokerage during the 1965 bull market. I went to Columbia University. I met my wife, who is Chinese, at a Japanese investment conference in Manhattan. After working for AT&T and a private investment firm (both in New York), I started a hedge fund 37 years ago and have run it from four successive locations in the city. Following a rough patch for New York in the 1970s, I was able to enjoy the renaissance under Mayors Rudy Giuliani and Michael Bloomberg.

Besides the obvious pleasures of living in New York—Broadway, the opera, art, dance, great restaurants, Central Park—I’ve been fortunate to be involved with organizations that make a difference in people’s lives, including Harlem Children’s Zone, United Jewish Appeal, the New York City Police Foundation, City Center and my alma mater. Many diverse friendships have grown out of work and community service. I always thought the high cost of living, erratic public services and high tax rates were a necessary and reasonable price to pay for the city’s many virtues.

Until now.

New York once had two competing political parties, which provided checks on extreme populist ideas. Not anymore. Reducing the use of cash bail to avoid discriminating against the poor was understandable, and the New York City Police Department’s decision to reduce the use of stop and frisk was a good one. But sharply limiting judges’ discretion to keep dangerous criminals in jail was not. NYPD Commissioner Dermot Shea and his predecessor, James O’Neill, both warned that this measure, and releasing more than 2,000 “hardened criminals” from Rikers Island, would significantly degrade the quality of life in the city, particularly in poor neighborhoods. They were right. Crime rates have reversed a long decline. The number of shootings in the city rose by 97% in 2020.

In the 1990s and 2000s New York became the safest American big city, sharply reducing its correctional population, thanks to the NYPD’s success at preventing and solving serious crimes through neighborhood-based proactive policing. New and proposed legislation at the state and city level, however, threatens future public safety. In June, the City Council voted 44-6 in favor of the Public Oversight of Surveillance Technology Act, which requires the NYPD to disclose publicly the surveillance technology it uses. Mr. Shea points out that terrorists and dangerous criminals will happily turn such information to their advantage.

This is a mayoral election year, and the announced candidates are engaged in a destructive competition to find the best way to hamstring the police. Bills in the hopper would limit police use of artificial intelligence, facial recognition and license-plate surveillance. State Attorney General Letitia James sued Mr. Shea and Mayor Bill de Blasio this week over their handling of the summer’s Black Lives Matter demonstrations. She is asking for a host of police reforms and a federal monitor to ensure compliance. The NYPD is already under the supervision of a federal monitor appointed in 2013 to oversee court-ordered changes to the department’s stop-and-frisk practices.

The growth of the homeless population in New York and other cities is directly related to the decision to empty the jails. Many homeless are mentally ill. They are often arrested and released several times before committing violent felonies. Mr. Shea says he’d like to see the city provide supervised facilities for the mentally ill, rather than leave the job to the police, corrections officers and the street.

Another measure that suggests New York’s legislators have learned nothing from the 1970s was their decision to enact a virtual rent freeze, eliminating vacancy decontrol and the ability of owners to pass the costs of inflation and building upgrades through to tenants. Look for the return of abandoned buildings, which will hit poor neighborhoods hardest and reduce the city’s tax rolls. Don’t expect public housing to come to the rescue. For three years in a row Public Advocate Jumaane Williams has included the city’s housing authority on his Worst Landlords Watchlist, with nearly half a million open work orders that would cost $45 billion to complete.

New York’s biggest existential issue is the dire financial condition of city and state government. Total state spending is $177 billion a year—almost twice the budget of Florida, which has a population that is 10% larger than New York’s. New York City alone spends as much as Florida’s state government does. In the past 18 years, New York City’s population has grown less than 4%, while its public payroll is up 20%. For the six years ending 2019, according to a Manhattan Institute report by Eric Kober, the city’s average public-employee wages rose 48%, almost three times the national average. These trends are worth keeping in mind during the discussion of how to fill Covid-related budget holes.

Well-known solutions to these problems include privatization of services, productivity measures for government employees, and changes to overgenerous pension benefits. Such measures are verboten in New York. Still, they may be the only viable options. In 2016, before the recent stock market boom, 1% of New York taxpayers contributed 37% of all state personal income taxes, according to a study by the Citizens Budget Commission. Those revenue generators are steadily leaving the state for less-taxing environments.

New York’s political class naively believes that residents will accept ever more draconian tax increases. But the city is like a restaurant that is losing customers because its service and food are going downhill. The appropriate response isn’t to raise prices and expect them to come flooding back but to reverse the decline in quality.

The past is not prologue. In a middle finger salute to their hometown, Mr. Trump and Treasury Secretary Steve Mnuchin persuaded Congress to cap the state and local government tax deduction, which formerly made those levies about 40% less onerous for New York taxpayers. President-elect Joe Biden has proposed eliminating lower tax rates on long-term capital gains and subjecting high-income earners to the Social Security tax. Together, those changes would raise the top marginal federal income tax rate to 53%. Add in the current New York state and city tax rates of almost 13% and the marginal tax rate for the Big Apple’s high earners becomes 66%. Make that 68% if Albany raises its tax another two percentage points, as has been proposed.

Even if I were indifferent to working the first eight months of the year for the government, what about my employees and the many talented and ambitious young people who are the future of New York? How will they feel about the difficulty in building a business and a life in a city and state that are driving away their tax base and will face declining public services?

There’s more. Progressive Sens. Bernie Sanders and Ron Wyden have called for taxes on wealth and unrealized capital gains, reversing a century of tax policy designed to encourage long-term investment. France and others tried wealth taxes and rescinded them when they discovered that implementation was a nightmare and the revenue generated was far less than expected. A wealth-tax bill that includes future appreciation on donated assets was introduced last year in Albany. If New York adopts such a tax on its own, it would raise a lot of revenue—for Florida.

Another proposal guaranteed to reduce employment and tax revenue is a local tax on security transactions. Perhaps those proposing a securities tax think that stock trading still needs to happen on Wall Street, so that runners can shuttle stock certificates back and forth between firms. Physical trading of paper certificates ended in the 1980s. Now Zoom has made working from home easier than anyone imagined. Investment bankers and money managers can operate effectively with minimal travel, reduced office space and a decentralized workforce. In March 2020, Ken Griffin moved 12 Citadel Securities employees to a beachfront hotel in Palm Beach, Fla., where they traded more securities than any brokerage firm in the country.

The best way to help the poor, besides supporting well-run charter schools and community programs like Harlem Children’s Zone, is to have a healthy, growing economy that provides job opportunities for all city residents. Badly designed criminal-justice, housing and tax policies will ultimately hurt the people they are supposed to help. Let’s hope we get the government and policies that New York deserves before it’s too late.

Mr. Kingdon is CEO of Kingdon Capital Management.

Baker makes case that we should focus on Trump voters, not their chosen horse, "....The best argument for Donald Trump’s presidency was never about the man himself. It was about the people who voted for him.... In short, President Trump’s greatest achievement will have been the elevation of the legitimate concerns of perhaps half the U.S. population, an improbable, physics-defying reversal of the political tides that had eroded much American self-confidence in the preceding generation...."

Gerard Baker, "There’s as Much to Learn From Trump’s Success as His Disgrace,"Wall Street Journal, January 17, 2021, https://www.wsj.com/articles/theres-as-much-to-learn-from-trumps-success-as-his-disgrace-11610919460

Initial reaction to Biden relief bill from a few analysis“….Dan Clifton of Strategas Research notes: Our back-of-the-envelope calculation suggests thatmore than half of the spending proposals put forward last night do not meet the budget reconciliation requirements...Andy Laperriere and Don Schneider of Cornerstone Macro... note that the initial Biden spending binge could be even larger than advertised: The Biden team estimates that the plan could cost $1.9 trillion but it is possible for it to be even more expensivegiven that estimates for some provisions (paid leave, health insurance, and child care tax credits) aren’t available...They also... think that the bill will end up costing far less than the $1.9 trillion proposed by Biden... due to deficit concerns from moderate Democrats and nearly all Republicans….”

James Freeman, "The Biden Blowout,"Wall Street Journal, January 15, 2021, https://www.wsj.com/articles/the-biden-blowout-11610739641