Today, Victor Davis Hanson gives readers five takeaways from Tuesday’s result in the midterm elections. Joshua D. Rauh appears on MTS (Monitoring the Situation) to question the pledged “one-time” nature of the proposed Billionaire Tax Act. And Robert Hodrick argues that a future US debt crisis could accelerate the existing global desire to move away from US dollar hegemony.
The Midterms
In The Free Press, Senior Fellow Victor Davis Hanson offers five takeaways from the Democrats’ decisive win in the midterms, which gave them control of the House of Representatives and the Senate. Besides pointing out that incumbent presidents often take a beating in midterm elections, he suggests what Tuesday might mean for the 2028 race, the fight against inflation, the war with Iran, and other issues. On the overall trajectory of Trump’s next two years, Hanson writes that the president will persist in conducting “Obama-like, pen and phone, executive-order domestic policies. Abroad, he will do largely as he has in the past, the way Clinton did in Serbia and in his Middle East negotiations, and Obama did with the Iran nuclear deal, the Paris Climate Accords, and the normalization of relations with Cuba.” Whether these policies are viewed as a success, he argues, rests entirely on the performance of the economy and the outcome of the Iran war. Read more here. [Subscription required.]
California Decides
Speaking to Theo Jaffee on MTS (Monitoring the Situation) Live on Tuesday, Senior Fellow Joshua D. Rauh raised his concern that the supposedly one-time 5% levy on California billionaires in the proposed Billionaire Tax Act, or Proposition 40, would become recurring if the measure passed. “There’s a famous quote in my field of economics that there’s nothing so permanent as a temporary government program,” he said. “I like to twist that around. There’s nothing so permanent as a temporary tax.” As of Wednesday afternoon, Proposition 40 is losing, but there are a significant number of ballots yet to be counted. Watch a clip from the conversation here.
Freedom Frequency
Countries, corporations, and financial markets are seeking to reduce their reliance on the US dollar as an international reserve currency, in foreign exchange markets, and as an investment vehicle, writes Visiting Fellow Robert J. Hodrick in a new Commons Dispatch essay for Freedom Frequency. The dollar’s dominance also empowers US financial sanctions. Although foreigners continue to accumulate US Treasuries, Americans have absorbed most of the large, continuing increase in US debt. At the same time, changes in the pricing of Treasuries are concerning because they result in billions more owed in interest every year. China and Europe have made limited progress replacing dollar transactions with the renminbi and the euro, but new payment systems are expanding. And the size of current and projected US debt—and complacency driven by low interest rates—poses a threat to dollar supremacy. An American fiscal crisis could lead to substantial dollar depreciation. Read more here.
In this week’s Grumpy Economist Weekly Rant, Senior Fellow John H. Cochrane questions whether the modern welfare state is economically sustainable. With government spending reaching 57% of GDP in France and approximately 45% in the United States, he argues that high taxes, extensive regulation, and social benefits that discourage work contribute to economic stagnation. Beyond rising debt and slow growth, Cochrane examines how declining birth rates threaten welfare systems that depend on future generations to finance today’s benefits. Instead of calling for expanded government programs, he makes the case for reforming the welfare state to focus assistance on those most in need while restoring incentives to work, save, invest, and raise families. Watch his rant here.
US Defense
For Strategika, contributor Hy Rothstein examines whether coercive bombing (using air power to force an adversary to change its behavior short of full-scale war) actually works. He traces air-power theory to Italian general Giulio Douhet, who in the interwar period argued that command of the air and bombing deep into enemy territory, including cities, would win wars almost on their own. World War II largely disproved his argument: Bomber losses were heavy, bombing cities strengthened rather than broke civilian morale, German production adapted, and air power proved most valuable in supporting ground and naval forces. Japan’s surrender hinged more on softened surrender terms than on bombing. Rothstein concludes that air power alone almost never coerces, signals weak commitment, and damages future credibility, so leaders should think carefully before relying on it. Read more here.
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