1) The Art of Warsh

Phew!

Trump tapped Kevin Warsh to be the next Fed chairman. He’s a superb choice and one we’ve been pushing for more than a year. Congrats, Mr. President. You hit the bullseye.

Unlike the failed tenure of Jerome Powell, Warsh is not political; he is not an inflationist, and he rejects the economic mysticism that printing money causes growth.

Just as importantly, Warsh has told us many times that he also rejects the moronic Phillips Curve notion that growth causes inflation. Powell believed it and that led to the four years of Biden stagflation with stagnant real wages and high prices.

As Warsh wrote in the WSJ:

The Fed should re-examine its great mistakes that led to the great inflation. It should abandon the dogma that inflation is caused when the economy grows too much and workers get paid too much. Inflation is caused when government spends too much and prints too much.

Exactly.

We agree with our economic advisory board member, David Malpass, that the overriding goal of the Warsh Fed should be to keep the dollar strong and prices stable. Defend the dollar.

We’re worried about the dollar’s decline and we hope Warsh reverses that trend.

2) Stop the Presses: Congress Discovers the Laffer Curve

Our friend and economic compatriot, Dan Mitchell, called our attention to a new study by the revenue-estimators at the Joint Tax Committee, who after all these years now admit that, yes, Virginia, there is a Laffer Curve.

This is the agency of bean counters whose models have for decades consistently overstated taxes collected from tax rate increases, and taxes lost from tax rate cuts. They once concluded that a 100% income tax rate would boost revenues. But their new study acknowledges a Laffer Curve effect:

The Laffer curve peaks at the revenue-maximizing top tax rate, where revenue losses from behavioral responses offset revenue gains from a higher tax rate. Prior studies, however, largely overlook the Laffer curve's shape...

We show that modeling distinct tax bases more accurately and incorporating these interactions lowers the revenue-maximizing top tax rate and the associated revenue gains, yielding "flat" Laffer curves. Over this flat region, increasing the top tax rate raises relatively little revenue.

Quick, someone alert Bernie Sanders and AOC. Under most scenarios, a tax rate above 50% to 55% starts to lose revenues. And tax rates much lower than that reduce economic growth and incomes.

3) China Lies Again on “Green Energy”

One of the great myths that emerged from last week's Davos conference was that while the U.S. is using fossil fuels, China is all in on green energy. We’ve toppled that enduring myth many times on these pages.

But the Chinese are relentless liars, as evidenced by China's vice premier last week touting the need to "ensure the free flow of quality green products globally." He claimed that China generates 561 gigawatts of electricity from wind, some four times that of the U.S.

That's fine. The reality is that the Chinese economy is powered by coal.

The Statistical Review of World Energy reports that coal accounted for 58% of China's primary energy consumption in late 2024. Oil was at 20% and natural gas at 10%. If our math is right, that’s almost 90% of China’s energy coming from fossil fuels and everything  else - nuclear, hydroelectric, solar, wind, and other renewables - accounting for just 12%.

China burns 20 times the combined consumption of the 27 member states of the European Union. Since 2000, China has tripled its coal consumption. Every greenhouse gas reduction in the Western world has been more than offset several times by what the Chinese have produced.

Beijing officials are no doubt laughing behind the backs of gullible Westerners who believe that Beijing is committed to green energy - while they burn more coal than ever.

4) 27 Governors Have Opted Into Trump's School Choice Scholarships

Two more states joined yesterday: New Hampshire and Colorado. Every Republican governor except for Phil Scott of Vermont has opted in. Colorado Governor Jared Polis is the lone Democrat. Governor Glenn Youngkin brought Virginia in before he left office, but his successor, Democrat Abigail Spanberger may try to rescind his action.

Amazing that many of the same states and governors that lap up every penny in fraudulent welfare claims, turn their nose up on free federal money to better educate their kids.

This map shows opt-in states in red, states that have affirmatively opted OUT in blue, and undecided states in gray.

The tax credit will be available to all federal taxpayers starting in tax year 2027. Everyone will be able to donate up to $1700 for a single filer or $3400 for a married couple to a scholarship-granting organization and get it back dollar-for-dollar on their federal taxes.  But only kids in OPT-IN states can receive the scholarships.

Governors who say no, are effectively admitting they care more about the unions than they do about the poor kids in their own states. Pathetic.  

5) Race Reparations Are Back in San Francrazy

San Francisco has been an emblem of liberalism gone awry in recent years, with crime, homelessness, and rampant drug use spoiling the once-beautiful city. In November 2024, the city's voters wisely ousted the mayor, London Breed, and replaced her with Daniel Lurie, who promised to put forward measures to undo the damage of recent years.

He's received favorable press coverage since taking office a year ago, and has been an improvement for sure.

Lurie recently signed a bill that would create a reparations fund for the city's black residents, giving those who qualify up to $5 million each. For our readers who are black, move to San Francisco and get millions.

The bill is based on a 398-page report issued by something called the African American Reparations Advisory Committee. One of its other recommendations is to supplement the incomes of black residents to ensure they are at least equal to the city's median incomes. The committee endorsed paying these annual cash supplements  for - we are not making this up - "at least 250 years."

But the good news is that in the year 2276 we will be all square.

6) Trump Should Take This Deal

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