The Capital Letter

Adventures in ESG — JPMorgan’s Own Goal and Other Stories

J.P. Morgan Chase CEO Jamie Dimon at a conference in Washington, D.C., April 9, 2019 (Jeenah Moon/Reuters)
The week of April 19: ESG, proposed capital-gains-tax increases, and much, much more.

JPMorgan Chase’s Chairman and CEO, Jamie Dimon, has spent the last year or so positioning the bank at the center of the increasingly ascendant notion of stakeholder capitalism (the essentially corporatist idea that a company should be run for the benefit of “stakeholders,” of which its shareholders are only one group).

In 2019, he was the chairman of the Business Roundtable when (rather grandly, or some might say, presumptuously) it decided to “redefine” the purpose of a corporation:

Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders. With today’s announcement, the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility.


In fact, it is pre-modern (this is, fundamentally, an idea that dates back to the Middle Ages), but that’s a discussion for another time.

Turn to the statement itself to read how consideration of stakeholders includes “supporting the communities in which we work.”

Dimon has also become a prominent advocate of ESG, both as a way for investors to measure a company and, for that matter, for managers to run one. ESG has become, perhaps, the dominant form of “socially responsible” investing (SRI). What it means is that companies are measured against a series of currently somewhat subjective environmental (the “E”), social (the “S”) and governance (the “G”) yardsticks. Please keep that “S” in mind for now.

In his 2020 letter to shareholders (at 66 pages, it might be seen as the literary equivalent of one of Fidel Castro’s notoriously long speeches, although, to be fair, it is of considerable more value or, when even it is of no value, interest), Dimon wrote how “we have long championed the essential role of banking in a community — its potential for bringing people together.”

This, however, was not immediately apparent to fans of a selected number of leading European soccer (“football” in British English) teams. Under a plan announced this week they were going to form the Super League, a championship (also informally referred to as the European Super League, or “ESL”) that would run alongside domestic competition. The details don’t particularly matter, but let’s just say that this idea did not play well with either existing soccer authorities (not least for competitive reasons), many of which warned that players participating in the ESL could be barred, the BBC reported, “from all other competitions at domestic, European or world level and could be prevented from representing their national teams.”

If soccer’s authorities didn’t like the idea, fans were, if anything, even angrier, both for the way that the ESL was structured (it was regarded as both elitist and — its core would consist of 15 permanent members — noncompetitive) and, of course, for the possible consequences to soccer’s existing setup. It was also seen as a blow to the — what was that word again—“communities” in which these teams had for so long played a part.

And what, if anything, does this have to do with JPMorgan Chase?


JPMorgan Chase & Co. is bankrolling the biggest upheaval of European soccer since the 1950s in a 4 billion-euro ($4.8 billion) bet that has already drawn heavy criticism from fans, domestic leagues and politicians.

The U.S. investment bank agreed to underwrite an initial 3.5-billion-euro investment to help a group of the world’s richest soccer clubs set up a top-tier Super League, a figure that will total 4 billion euros after additional payments and expenses, according to a person familiar with the matter. The investment, currently financed by JPMorgan, may be offered to investors at a later date . . .

Now, it is easy enough to make a case that the owners of these clubs should be free to deploy them in any league they choose, but it is no less easy to argue that financing this venture was not exactly the most community-minded thing that JPMorgan could have done.

Writing in The Guardian, Nils Pratley:

It is only a fortnight since the chief executive, Jamie Dimon, was warbling at length about his bank’s sense of purpose. “When JP Morgan Chase enters a community, we take great pride in being a responsible citizen at the local level – just like the local bakery,” he claimed in his annual letter to shareholders. It is hard to spot any sense of localism or community in the backing of an exercise in short-term greed that is grubby even by modern football’s standards.

Nor can one see how Dimon squares his support for a closed shop cartel with his claimed belief that society is better “when everyone has a fair shot at participating – and sharing – in the rewards of growth” . . .

Of course, nobody should be remotely surprised by the gulf between Dimon’s cuddly words and JP Morgan’s on-the-ground version of serving the community. The clients pay the bills and the share prices of the quoted-company clubs – Juventus and Manchester United – rose strongly on Monday. But, please, spare us Dimon’s homilies in future.

Indeed. Dimon is a bank manager, not an (elected) politician, something he can sometimes forget. While I can certainly forgive some hypocrisy in the pursuit of the bottom line, something that a company’s management should be pursuing (the bottom line, that is), I don’t think that such a significant proponent of ESG would have been delighted by this:

The Daily Telegraph:

One sustainability rating agency has downgraded JP Morgan over the breakaway plan. Standard Ethics changed its rating for the bank from “adequate” to “non-compliant” and said it had behaved “contrary to sustainability best practices”.

It would take a heart of stone not to laugh. And what a flexible word “sustainability” turns out to be.

Eventually (via The Daily Telegraph):

JP Morgan has apologised to furious football fans for helping to mastermind the botched bid to form the European Super League.

The Wall Street bank admitted it had failed to anticipate the strength of opposition to the plans, in which 12 breakaway clubs would have been permanently protected from relegation in an effort to put their finances on more secure footing. The proposals were scrapped just two days after being made public amid an international backlash.

A spokesman for JP Morgan said: “We clearly misjudged how this deal would be viewed by the wider football community and how it might impact them in the future. We will learn from this.”

Sources at the bank insisted that while chief executive and chairman Jamie Dimon may have been aware of the controversial deal, he was not involved in signing off on the plans before they were announced on Sunday.

This may have been a very specific case, but, more generally, it is obvious that those company managements, who have, one way or another, committed “their” companies to the ethos of stakeholder capitalism and/or ESG are increasingly going to be held to account by activists (whether or not they are shareholders), governments, and many others with no direct ownership interest in the business. Given the choice between disappointing those constituencies or disappointing their shareholders, it is not hard to guess what managements will choose.

Via Bloomberg (April 15):

JPMorgan Chase & Co. set a goal to finance $2.5 trillion in initiatives that combat climate change and advance sustainable development over the next 10 years, while Citigroup Inc. said it would back $1 trillion of similar efforts by 2030.

Combined with previous announcements by Bank of America Corp., the three largest U.S. lenders have all committed to backing more projects that advance a low-carbon economy amid calls by the White House for businesses to do more to curb pollution.

JPMorgan’s commitment includes $1 trillion for projects that bolster cleaner energy sources, it said Thursday in a statement. The bank will also support developing countries as well as initiatives that advance economic inclusion. Citigroup said half its pledge will go toward environmental projects, including renewable energy, water conservation and sustainable agriculture. Much of the rest is aimed at education, affordable housing, gender equality and racial and ethnic diversity.

And here, more recently, is John Kerry in the Financial Times (my emphasis added):

Six leading banks have made commitments worth some $4.15tn [for climate solutions]. It’s a first step. And as disclosure of climate-related financial risks increases, banks and other financial institutions are going to be held very much publicly accountable for how they manage those risks. This is serious business.

Politically pushed lending, what could go wrong?

As for the argument about “risk,” that has, as I have mentioned on previous occasions, repeatedly been taken apart by John Cochrane, most lately with an open letter on his blog, The Grumpy Economist, to Janet Yellen. The context is some recent remarks made by the treasury secretary to the Financial Stability Oversight Council, the highest-level body responsible for overseeing financial regulation in the U.S.

As I noted, Cochrane quoted Yellen as follows:

We must also look ahead, at emerging risks. [To the financial system, the FSOC’s purview.] Climate change is obviously the big one.

It is an existential threat to our environment, and it poses a tremendous risk to our country’s financial stability. We know that storms will hit us with more frequency, and more intensity. We know warming temperatures might disrupt food and water supplies, leading to unrest around the world. Our financial system must be prepared for the market and credit risks of these climate-related events. But it must also be prepared for the best-possible case scenario: that we begin a rapid transition to a net-zero carbon economy, which also creates potential challenges for financial institutions and markets. On all these fronts, the Council has an important role to play, helping to coordinate regulators’ collective efforts to improve the measurement and management of climate-related risks in the financial system.

To Cochrane, who regards climate as an important cause, this is “nonsense”:

“Climate change is obviously the big one.” The biggest risk? To the financial system? More than sovereign debt crisis, another run, another pandemic, war, revolution, pestilence, crop failure, another Great Depression, civil unrest, cyberattack . . . I could go on. You have a much better imagination than that. So does your staff.

Climate change “is an existential threat . . . poses a tremendous risk to our country’s financial stability.” You don’t really believe this oft-repeated trope do you?

We do not, in fact “know” that storms will hit more frequently and more intensely. But even if they do, when was the last time a storm had more than a tiny effect on GDP, and threatened financial stability, a contagious run on the nation’s debt-laden financial institutions? Weather has never, in all history, caused a financial panic.

We do not, in fact “know” that slowly warming temperatures will “disrupt” food and water supplies. But even if they do, it is utterly absurd to imagine that you or your bank regulators can measure or control a causal chain from bank regulation to carbon emissions to warming temperature to food and water disruption to unrest around the world to financial stability (whew) which, let us remember, is the FSOC’s only task. Do you really think that the most important way to prevent, say, a war in Syria in 2075 is for California to build a high speed train? This is beyond absurd. And even then, what does “unrest” abroad over food have to do with a coordinated US bank failure? Famines have come and gone, and Goldman Sachs remains unscathed . . .

You did not have to do it. You could have said, “The FSOC should study implementation of the Administration’s executive orders on climate.” You could even have said “The FSOC will continue to research the possibility of climate related risks to the financial system,” knowing full well what any honest quantitative research will find. You did not have to assert things that are so blatantly preposterous.

For Yellen to assert things that are “blatantly preposterous” is, perhaps, surprising. For John Kerry, let’s just say, not quite so much.

And what if markets are capable of pricing in such risks without the assistance of Kerry, Yellen, and other such central planners, or, even, ESG-influenced investing (which is often claimed to be less risky):

From Institutional Investor:

In recent research, which includes a review of outside academic studies, Dimensional Fund Advisors sought to address the question of whether and how well climate risks are priced into different markets. Dimensional looked at how the markets priced both physical risks and transitional risk, which arises as economies move away from fossil fuels and to a low carbon economy. The new research grew out of Dimensional’s study of the economics of climate change published in October.

“Many of the effects are hard to predict, hard to quantify, hard to bring to the present in terms of value or cost,” Savina Rizova, the firm’s global head of research, told Institutional Investor. “First, financial markets do pay attention to these risks, despite the complexity and even the longer run effects of climate change. Second, companies have incentives provided by competitive financial markets to better manage their exposure to climate risks if they want to have a lower cost of capital.”

Rizova said one of the academic studies she reviewed focused on municipalities. “You can’t avoid the physical effects of climate as a physical entity,” she said. The study found that municipal bond yields are higher for places with higher exposure to the risk of rising sea levels. “But the majority of effects is found in long maturity bonds, which speaks to the fact that markets do reflect the considerations about the longer run risks of climate change,” she added . . .

Rizova said she also found that markets are very much in line with objective scientific evidence. One study of climate futures traded on the Chicago Mercantile Exchange between 2002 and 2018 found that warming trends predicted by scientific climate models, warming trends inferred in the price of climate futures, and actual rises of temperature over the period all coincided. “That tells you that first the climate futures market reflects expectations in line with scientific models, and second, in general the participants in climate futures don’t systematically overestimate or underestimate future warming trends,” she said.

Investors interested in owning securities that don’t contribute to climate risk may not need to own funds with an ESG label . . .


The Capital Record
We released the latest of a series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and NRI trustee David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.

In the 14th episode David Bahnsen talked to Timothy Busch, founder and CEO of the Pacific Hospitality Group, one of the premier hotel developers and operators in the country. Tim is also the founder of the Busch Firm, an elite tax and estate-planning law firm. They discussed hotels in an era of woke capitalism.

And the Capital Matters week that was . . .
The week began early for Capital Matters, with Kevin Williamson commenting on Sunday on a debate between Professor Richard Wolff of UMass–Amherst and Arthur Brooks, formerly the president of the American Enterprise Institute and now a professor at Harvard, on the resolution: “Socialism is preferable to capitalism as an economic system that promotes freedom, equality, and prosperity.”

It is disappointing that this debate in still going on after so many years of socialist failure, but certain categories of belief are remarkably persistent.

It is hard to pick an extract, but here goes:

Wolff insists that capitalist economies are “unstable” because they go through occasional periods of recession, as though there were not examples of cyclical phenomena to be found across the spectrum of human social activities. I’m especially perplexed by his insistence that “this crazy downturn we’re living through now” illustrates the brittleness of capitalism: We had a worldwide epidemic that forced genuinely unprecedented restrictions on the U.S. economy, and, as a result, we experienced — this is amazing — only two quarters of contraction before resuming growth. The overwhelming majority of Americans right now say their financial situation now is either unchanged from or an improvement over their financial situation before the epidemic, during which vast enterprises reorganized themselves in a remarkably short period of time while pharmaceutical companies brought three vaccines to market with impressive speed. It would be difficult to think of a better example of the innovation and flexibility of capitalist economies.

Jerry Bowyer warned Big Tech that it might be running out of friends:

In the pages of USA Today, Senator Rubio sided with Amazon workers attempting to unionize in Bessemer, Ala. “When the conflict is between working Americans,” wrote the senator from Florida, “and a company whose leadership has decided to wage culture war against working-class values, the choice is easy — I support the workers.” It may seem a small thing for a single senator to take a moral stand (that makes no promises of action) concerning a relatively minor dispute, but Rubio’s op-ed is deceptively revealing. It is just the latest example of a fundamental shift in the Republican Party’s attitude toward “big business,” away from the laissez-faire attitude conservatives have usually held and toward open hostility for woke capital’s most notorious propagators. And Big Tech businesses, Amazon being one of the worst offenders as of late, have no one to blame but themselves . . .

Robert VerBruggen examined some of the numbers being flung around in the current corporate-tax debate:

Basically, each country has a different mix of business types. The U.S. has a relatively small corporate sector and a relatively large non-corporate “pass-through” sector. (Pass-throughs are taxed on their owners’ individual returns, rather than through the corporate tax.) Pass-throughs are about 90 percent of U.S. businesses and account for half our net business income.

Pomerleau and Schneider adjust the data to account for this problem and two other, more technical ones (differences across countries in the labor share of corporate output, which isn’t subject to corporate tax, and depreciation). The upshot: “Once each of these issues is adjusted for, the U.S.’ tax burden on C corporations prior to the TCJA was higher than the OECD average, and the TCJA brought the burden to around the OECD average.”

Later in the week, Robert looked at just how high these new corporate-tax rates might be:

The capital-gains tax has always interacted poorly with the corporate tax, which Biden also wants to hike, from 21 percent to 28 percent. Combined, the two proposals lead to downright insane tax rates.

Basically, corporate profits are taxed before they can be paid as dividends* or reinvested to grow the company, so capital-gains taxes are a second layer of taxation. If profits are taxed at 28 percent at the corporate level, and then rich investors lose 43 percent of what they earn, that works out to a 59 percent “integrated” rate. That’s one high rate, even if it applies only to rich people who invest in corporations.

See this Tax Foundation piece for some similar math, including state taxes, on Biden’s campaign plan . . .

Tom Spencer took aim at the administration’s plan for a global minimum tax:

Sovereign nations are free to flex how they set their own fiscal policies based on their own needs. As the pandemic has shown, that’s a good thing: Evidence from the World Bank suggests that the developing world’s recovery from the pandemic will be more sluggish than much of the developed world. In response Ghana has opted to provide a 30 percent rebate for companies in sectors especially impacted by the pandemic. What good reason is there to prevent a poor country such as Ghana from providing tax relief to help kick-start its economy during a devastating recession? Indeed, what reason is there to prevent a richer country such as Ireland from adopting tax cuts that allow it to become an economic powerhouse?

These issues aside, there’s the plain truth that corporate taxes are a very bad way of taxing corporate income. Studies show 51 percent of corporate-tax costs are passed directly on to workers. Given that the marginal excess burden of the corporate tax is roughly 30 percent of the revenue raised, this would mean that for every single dollar generated for the government 65 cents would be lost from workers’ pockets.

Rather regressive, don’t you think?

Jeffrey Singer was unhappy about the FDA’s actions over the Johnson & Johnson COVID vaccine:

Last week, the Food and Drug Administration reported that six women of childbearing age who received the one-dose Johnson & Johnson COVID vaccine contracted a rare form of blood clotting in the venous drainage of the brain — one associated with a low platelet count. Sadly, one of the six died and another is in critical condition at the time of this writing. The FDA recommended “pausing” the use of the J&J vaccine until more information can be gathered. But even though this was less than a one-in-a-million event — more than 6 million Americans have received the J&J vaccine — and the risk of blood clots in women taking oral contraceptives is higher, the advisory panel established by the FDA to study the problem punted. It decided to not decide — waiting instead to see if any more cases get reported. We may never know how many people will die from COVID who would have gladly taken their chances with the vaccine . . .

The FDA won’t allow Americans to act on their own assessments of the risk of dying from COVID versus the risk of a complication from these two vaccines. Instead, it has forced the public to accept the risk-benefit assessment of the majority of its advisory-committee members. And this is nothing new: For more than 80 years, the FDA has infringed on the right of people to make their own lifesaving decisions . . .

Robert VerBruggen looked at the administration’s child-allowance plans:

The Washington Post has some preliminary details, with the final plan due next week. It’s $1.5 trillion in spending and tax credits, paid for by hiking taxes on high earners. It includes an extension of the $3,000-to-$3,600 “child allowance” the Democrats enacted in their stimulus bill, plus money for paid leave, child care, pre-K, and free tuition at community colleges.

The overall level of taxing and spending is a problem. We’re coming off a very expensive year, we’re still going bankrupt, and any tax hikes we pass to fund new programs now are tax hikes we can’t pass to shore up the existing deficit later.

On the specifics, the child allowance is controversial here on the right, as I’ve documented previously. It’s paid to parents whether they work or not, and thus risks re-creating the welfare system before the 1996 reform. But it also supports families raising children, which many conservatives are open to. I suggested a more gradual and careful way of creating a child allowance in this piece . . .

Climate “risk” is, as referred to above, a concept that is open to abuse, but the SEC presses on, as Benjamin Zycher discussed here:

Firms already must disclose how they are evaluating and mitigating the risks of future climate regulations and impacts to physical assets. This is a bottom-up (that is, decentralized) approach under which disclosures can be tailored to the innumerable differences among companies and sectors, thus allowing a broad range of disclosure frameworks for investors to evaluate in the context of their portfolios. Because companies are long-lived concerns, or at least are expected to be, they have powerful incentives to provide unbiased information so to maintain their credibility, notwithstanding [the SEC’s] Lee’s unthinking assertion that “not all companies do or will disclose without a mandatory framework.”

Lee’s argument for consistency, comparability, and standardization would replace that existing framework with a top-down mandate, justified on the grounds that such standardization would yield a straightforward view of a climate “risk” issue, despite the reality that it remains massively complex. In other words, she is arguing that the existing disclosure system fails to provide “material” information because the disclosures are not comparable. That assertion is incorrect precisely because companies and sectors are different. Top-down “comparability” is an illusion: Investors would have to interpret the “standardized” information in the context of their specific investments. Moreover, as John Cochrane of Stanford University has pointed out, “material” risks are short term — say, over a ten-year horizon — while climate risks are very far in the future, and thus are afflicted with enormous uncertainty: “‘Risk’ means unforeseen events. We know exactly where the climate is going over the horizon that financial regulation can contemplate.”

A requirement for “comparable” disclosure of the business “risks” created by anthropogenic climate change would be deeply speculative, and the level of detail and scientific sophistication that would be needed to insulate firms from shareholder lawsuits are staggering. Such self-protective “disclosures” would run thousands of pages, with references to thousands more, and the idea that such “disclosures” would facilitate improved decision-making by investors is laughable.

Douglas Carr described Bidenomics as Keynesianism’s ultimate test:

The most recent precedent for Biden’s Keynesian stimulus is Obama’s, which fell well short of economists’ Keynesian-influenced projections. In February 2009, a Philadelphia Fed survey of 43 professional forecasters found that real GDP was expected to grow 2.56 percent per year over the following ten years, which was 0.4 percent above the rate actually achieved during Obama’s last six years. In an edition published in February 2021, the same survey projected real GDP growth of 2.25 percent. A similar shortfall would produce 1.85 percent growth, which, from an American perspective, looks like secular stagnation.

Many Keynesian economists believe that Obama’s stimulus was too small to be effective. No one claims that about what is now under way. Bidenomics should be the ultimate, no excuses, Keynesian test. As noted, it is difficult to distinguish the policy influence on this unique recovery. The U.S. economy’s 17.8 percent annualized recovery to date should have plenty more to go, but, over the long-term, in the collision between unprecedented spending and private investment, historical data indicate that stagnation will prevail.

Rich Lowry on Biden’s climate “summit”:

Kerry got verbiage from the Chinese about tackling climate change “with the seriousness and urgency that it demands.”

This is a great coup, just not how Kerry imagines. Every time we pump up China as a partner on the climate, we feed the ridiculous pretense, which President Xi is desperate to create, that China is a good global citizen overwhelmingly concerned with the planet’s welfare.

It’s highly doubtful China is going to reach peak emissions in 2030, or zero by 2060, its latest promise. Beijing is bringing a massive amount of coal-fired power plants online. Regardless, who’s going to hold China accountable for its climate pledges, and how, precisely?

If the Chinese fall short of their pledge in 2030, by which time we may have fought and lost a hot war with China over Taiwan, what are we going to do to punish or correct them? If we can’t get them to stop committing genocide in Xinjiang province today, are we really going to bring them to heel over excess emissions nearly a decade from now?

Philip Cross reviewed Mark Carney’s Value(s). It wasn’t a rave:

The toxic combination of an extraordinary ability to communicate and a lack of attention to detail has long plagued Carney’s pronouncements. Thus, in 2012, he introduced “dead money” into the lexicon of the Left by accusing firms of building cash reserves and not investing and spending more in the aftermath of the Great Financial Crisis. Unfortunately, the whole notion was based on erroneous data, compounded by a failure to understand why firms concentrated on repairing balance sheets after the worst financial crisis since the 1930s. Carney quickly made a half-hearted attempt to recant his musings by claiming dead money had later been “resurrected.” However, the idea that hoarding cash inside firms helps explain slow economic growth after 2008 became a bedrock of the left-wing critique of the evils of capitalism in the decade after the financial crisis. Coming from the central-bank head of a G7 country, Carney’s statement lent precious gravitas to an idea whose flaws were fully exposed during a pandemic that favored firms that had carefully built robust balance sheets. Carney does not devote even one of the 600 pages of Value(s) to addressing the dead-money fiasco, presumably because the narrative it spawned serves his purpose of undermining faith and trust in capitalism.

Carney likes to cite the story of removing Montagu Norman’s portrait from the Bank of England (Norman was the governor who convinced Churchill to restore the gold standard at prewar parity, plunging Britain into a prolonged recession). Carney soon received a call from George Osborne, then chancellor of the exchequer, asking if Osborne could borrow the picture to hang in his dining room. Asked why he wanted to do so, Osborne said the painting would remind him “never to listen to the advice of the governor of the Bank of England.” Readers would do well to heed Osborne’s advice when pondering Carney’s critiques of markets and values.

Timothy Fitzgerald pondered carbon tariffs “border carbon adjustments”:

The border carbon adjustment appears to make the most sense when one country has a carbon price, but its trading partner does not. In such cases, every product that is imported is subject to a tariff that is intended to pay the domestic carbon price for the embodied emissions.

Past negotiations were just a bunch of negotiators around the table, but now all of the parties have a blunderbuss pointed at their own foot. Even if they think that blunderbuss is pointed at their neighbor’s foot instead of their own. And they are all claiming, “You had better do something about the climate, because I’m just crazy enough to shoot!”

That may seem to be a counterproductive negotiation strategy. Yet tariff advocates tend to get a lot of mileage out of the idea that someone else will pay the tariff. Indeed, the leading candidate is often the “dirty” foreign producer. Or maybe they can sell the tariff as a major revenue source to help pay for, say, infrastructure. The truth is a bit less appealing: Higher prices are, in practice, passed through to consumers, who also end up with less choice.

Climate advocates are also embracing this strategy, suggesting that adding tariffs to the mix could cause countries to speed up after decades of hesitancy and adopt a more aggressive approach.

The border carbon adjustment is more of a blackboard idea than a ready-to-go solution. Assessing embodied emissions is no easy task, let alone verifying them. Today tariffs are assessed based on monetary value, which can be verified with an invoice. Good luck finding information on the invoice about emissions.

A system of tariffs will be implemented unevenly around the world, inevitably creating winners and losers and surely leading to retaliation. Imposing carbon tariffs might make the contentious arena of agricultural tariffs look tame by comparison. Oh, and yes, there will be carbon adjustments on your vegetables, too . . .

Sally Pipes questioned the existence of a health-care affordability crisis:

Despite the pandemic, between February 2020 and February 2021, U.S. household income rose 13 percent, according to the Commerce Department. Again, that extra income did not go to health care. In fact, consumer spending on health care remained down year-on-year as recently as January.

Where’s all that money going? The personal-savings rate leapt 80 percent last year. The food-delivery business is booming. Pet supplies are flying off the shelves. Harvard’s Joint Center for Housing Studies projects that spending on remodeling will increase on an annualized basis through early next year.

Digging deeper into Gallup’s data gives a better idea of what’s really going on. Twenty-one percent of people earning $180,000 or more told the pollster that they reduced spending on “recreational and leisure activities” over the last year “in order to afford care.”

Logic tells us that many of these people cut their leisure spending because of pandemic-induced restrictions. But even taking them at their word, self-reported spending choices are not evidence of a crisis. Everyone would rather spend money on “wants” such as recreation rather than “needs” such as health care. Those who make three times the median household income are well-positioned to make that trade-off.

Of course, many Americans do lack access to affordable health coverage. Most people Gallup interviewed thought the solution was more government spending and regulation.

But that would be counterproductive. Federal subsidies and price controls only make health care harder to access. The bans on low-cost short-term health plans in many states leave some consumers without affordable options. Price caps on drugs lead to fewer medicines coming to market. And excess red tape makes it harder for health-care providers to compete based on price.

As a group, Americans consistently spend more on eating out and entertainment than health care, according to the Bureau of Labor Statistics. That’s a perfectly reasonable choice, but one that suggests we can adjust our priorities when we need to.

Finally, we produced the Capital Note, our “daily” (well, Tuesday–Friday, anyway, although next week this may be reduced owing to travel). Topics covered included: the U.K. announces a national-security review of Arms Holdings acquisition, Taiwan’s exports balloon thanks to semiconductor shortage, a hedge-fund behemoth warns of a SPAC bubble, Biden’s $50 billion semiconductor subsidy, tax, Big Tech and influencing the debate, Playboy’s NFT play, Dogecoin and the deli, the chip crunch, Veblen goods, Apple rolls out expanded ads business, jobless claims hit new low, quant funds stage a comeback, Google’s new privacy policythe coming (maybe) capital-gains-tax disaster, a GameStop winner, (Boris) Johnson’s green dream, Biden’s green dream, and “sleepminting.”


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