• This Man Could be Trump’s Best Cabinet Appointment of All  By Richard C. Young
• Survival Tip: Drive Like a Motorcyclist  By E.J. Smith
• Brightest Minds on Foreign Policy in America’s Interest  By Richard C. Young
• Fidel Castro and the Morally Obtuse  By Debbie Young
• Two Things Our Children and Grandchildren Won’t Understand  By Justin Logan
• Announcing New Rolling Stones Blues Album  By Richard C. Young
• Any Nation with Vast Power will be Tempted to Use It.  By Richard C. Young
• Trump to Plug American Infrastructure Deficit with Private Capital  By E.J. Smith
• Two Leaders–One Shot Pheasants, the Other Peasants  By Debbie Young

Two people familiar with Donald Trump’s cabinet appointee selection process have told Bloomberg that John Allison, former CEO of BB&T Corp., is under consideration for the position of Treasury Secretary. I’m a friend of John’s from his time as president and CEO of the Cato Institute.

Appointing John Allison to the position of Treasury Secretary would be the best decision Donald Trump has made yet, or could make. I’ll have a full write-up on Monday about John Allison and the potential Treasury position, if the position hasn’t been offered to someone else by then. Until then, consider purchasing John’s excellent book, The Financial Crisis and the Free Market Cure.

I received this from a client that spends a lot of time on the road. It’s an exhortation to awareness. The phrase “keep your head on a swivel,” has become synonymous with personal security. Awareness of your surroundings can mean the difference between having time to prepare or being caught totally off guard.  The November/December issue of Antique Automobile tells drivers to increase their awareness by driving their vehicle more like a motorcyclist would drive, always scanning the surroundings.

In his year-end catch up column, Steven Rossi writes:

Want to become a better car driver? Then ride a motorcycle! Serious motorcyclists are always scanning their surroundings so they’re continually aware of what’s going on ahead, beside and behind them, they operate with a heightened awareness and sensitivity toward road conditions and weather variations and they pay particular attention in planning ahead in the event of the unexpected. Going out and simply “enjoying the scenery” is somewhat of a misnomer when it comes to experienced motorcycle riders. You will notice that those extended skills will carry over into your everyday m.o. (modus operandi) while out on the road with four wheels.

On November 15, The American Conservative hosted leading scholars, journalists and policy makers to discuss the future of American policy with a focus on realism, nationalism, and president-elect Donald Trump. Among the speakers were former Senator Jim Webb, and Congressman Thomas Massie.

Former U.S. Senator and Secretary of the Navy Jim Webb delivered a keynote address at the conference, “Foreign Policy in America’s Interest: Realism, Nationalism, and the Next President”, held at George Washington University in downtown Washington, DC. Rep. Thomas Massie (R-KY), a Congressional critic of unauthorized military interventions, also made remarks, while other political analysts and foreign-policy experts discussed what type of mandate Donald Trump will have as he takes office and how the new administration should handle relations with Russia. A final discussion with prominent historians and scholars reflected on what 2016 means for the country’s longstanding commitment to intervention and globalism.

You can watch the videos of the conference below.

From President Barack Obama:

At this time of Fidel Castro’s passing, we extend a hand of friendship to the Cuban people. . . . .  History will record and judge the enormous impact of this singular figure on the people and world around him.

From the Manhattan Contrarian:

Pathetic.  Sorry, but it’s not OK to leave it up to “history” to judge the crimes of this monster.  Barack Obama won’t do it, because he is a man of the international Left, and ultimately a supporter of the program of Castro.

From President-elect Donald Trump:

Fidel Castro’s legacy is one of firing squads, theft, unimaginable suffering, poverty and the denial of fundamental human rights.

From the Manhattan Contrarian:

Wow!  Do we finally have a President who will stand up to the nonsense that afflicts the world?  So far I’m liking what I’m seeing from this guy.

To get a full understanding on just how bad conditions are in Cuba, read Francis Menton’s full article here before reading Scott Beyer’s report in National Review (October 2015).

Cuban exile community in Miami reacts to Fidel Castro death

The end of the year is a good time for reflection, and usually in column form, it means taking stock of what the past year has meant for politics, or society, or what have you. I’ll leave that to others this year. Instead, I’ll take a crack at predicting a few things our descendants won’t understand about how we lived. Good, bad, or ugly, below are a couple things I suspect will befuddle the coming generations.

Factory Farming

Developments in food production and agriculture during the 20th century had huge positive benefits, to include the fact that they helped prove Malthusian warnings about population growth wrong. Developments in animal husbandry and the production of meat went too far, however. Here, we went from making animal protein far more abundant, to expecting it at every meal, to expecting certain cuts at every meal. This required enormous environmental despoliation and sickening mistreatment of animals.

Instead of treating animals as containing any moral worth, they became another commodity to simply be produced with as much efficiency as possible, without any consideration of their indisputable pain and suffering.

Led in part by ethical arguments, in part by food fashion using snout-to-tail cooking, and in part by plain revulsion at the practices of factory farmers, I suspect the strides taken away from factory farming will speed up. Overall meat consumption will decrease, more people will eat bone marrow, offal, and other parts of the animal that seem exotic today, and consumers will place increasing emphasis on the treatment of the animals and their surrounding environment. Our children will look back at the videos surreptitiously taken of factory farms and wonder how we shuffled through our lives refusing to look at the barbaric charnel house that provided our calories.

Football

This one sounds counterintuitive, as the NFL is the most prominent and profitable professional league in the United States, and college football is wildly popular as well. But though the research on Chronic Traumatic Encephalopathy, or CTE, is in its infancy, I suspect the data will continue to pile up, showing that continual blows to the head over a period of decades has important negative health consequences.

I suspect our children and grandchildren will look back and wonder how it didn’t occur to us that a sport involving men who weigh 300 pounds and can run the 40-yard dash in 4.69 seconds chasing one another and wrestling each other to the ground with bad intentions might have lasting, negative health effects.

Paradoxically, as with mixed martial arts and boxing, I think the protective equipment that gave the illusion of safety will prove a culprit here. If, for example, players had not been able to wear helmets–or boxers had not worn 16-ounce gloves–the sports would have had to evolve in ways that prevented the repeated blows to the head that helped produce CTE. I would bet on long, drawn-out lawsuits, controversies from Pop Warner to the NFL, and a white-hot national debate about whether or why CTE is related to football.

There are many more things I think younger generations may puzzle over–the drug war, hour-long suburb-to-city commutes, telephones you talk into, the concept of privacy–but if I had to bet, put my money on Smithfield and the NFL.

On December 2, the Rolling Stones will revisit their roots with a new blues album pulling songs from the group’s early influences. Represented on the album will be Willie Dixon, Jimmy Reed, Howlin’ Wolf, Little Walter, Memphis Slim and more. The Wall Street Journal reports:

Though it informs the Stones’ music, traditional blues haven’t been a part of the band’s in-studio repertoire for a long while. Here, they slide back in and discharge the music with edgy, raspy efficiency. Cut live during the course of three days, the album has the feeling of a romp among friends who know the Chicago-style electric blues of the ’50s and ’60s by heart. Rather than strive for technical perfection, the Stones emphasize feel and loyalty to the originators in their playing. There are clever allusions by the band to bygone recording techniques. Mick Jagger’s harmonica, a predominant instrument on “Blue & Lonesome,” rattles the speakers as if he’s playing it through one of those old crystal microphones Little Walter preferred with a tube amp cranked to 10. Charlie Watts’s kick drum and toms boom and shake—where did the engineers place his microphones, inside the drums?—and his traditional grip on the sticks gives the rhythm its snap and swing. Guitars by Keith Richards and Ron Wood sting in homage to the work of Hubert Sumlin, who backed Howlin’ Wolf. They play the big riffs with fuzzy gusto.

Here’s a sample from that early blues album in which the Stones cover Willie Dixon’s “I Just Want to Make Love to You”:

At WarontheRocks.com, Cato Institute vice president for defense and foreign policy studies, Chris Preble writes that “Any nation with vast power will be tempted to use it.” But perhaps after years of foreign adventurism with little to show for it, Americans are becoming warier of new interventions in foreign conflicts. Unfortunately, as Chris reports, Washington insiders haven’t seemed to have had their enthusiasm for meddling in world affairs dampened.

Any nation with vast power will be tempted to use it. In this respect, the United States is exceptional because its power is so immense. Small, weak countries avoid fighting in distant disputes; the risk that troops, ships, or planes sent elsewhere will be unavailable for defense of the homeland generally keeps these nations focused on more proximate dangers. The U.S. government, by contrast, doesn’t have to worry that deploying U.S. forces abroad might leave America vulnerable to attack by powerful adversaries.

There is another factor that explains the United States’ propensity to go abroad in search of monsters to destroy: Americans are a generous people, and we like helping others. We have often responded favorably when others appeal to us for assistance. Many Americans look back proudly on the moments in the middle and latter half of the 20th century when the U.S. military provided the crucial margin of victory over Nazi Germany, Imperial Japan, and the Soviet Union.

But, in recent years, Americans have grown more reluctant to send U.S. troops hither and yon. There is a growing appreciation of the fact that Washington’s willingness to intervene abroad – from Somalia and the Balkans in the 1990s, to Iraq and Afghanistan in the 2000s, to Libya and Yemen in the present decades – has often undermined U.S. security. We have become embroiled in disputes that we don’t understand and rarely can control. Thus, public anxiety about becoming sucked into another Middle Eastern civil war effectively blocked overt U.S. intervention in Syria in 2013, notwithstanding President Obama’s ill-considered red line warning to Bashar al Assad.

But while the American people are unenthusiastic about armed intervention, especially when it might involve U.S. ground troops, most Washington-based policy elites retain their activist instincts. They believe that U.S. military intervention generally advances global security and that the absence of U.S. leadership invites chaos. The essays in this series, “Course Correction,” have documented the many reasons why these assumptions might not be true. The authors have urged policymakers to consider other ways for the United States to remain engaged globally – ways that do not obligate the American people to bear all the costs and that do not obligate U.S. troops to bear all the risks.

For more on how America’s vast might can cause problems for its citizens, read Chris’s book, The Power Problem: How American Military Dominance Makes Us Less Safe, Less Prosperous, and Less Free. For more about Chris and his work, read my series The Most Important Person You May Have Never Heard Of, parts I, II, III, and a bonus post here.

A LIBERTARIAN PERSPECTIVE ON FOREIGN POLICY | CHRIS PREBLE

During the presidential election campaign, Donald Trump’s probable pick for Commerce Secretary, Wilbur Ross, and economist Peter Navarro, wrote a comparison of Trump’s infrastructure plan to Hillary Clinton’s. In the report they wrote that America faces a huge infrastructure gap and attributed that gap to a lack of adequate financing options. President-elect Trump has said he will focus on rebuilding America’s infrastructure, and The Wall Street Journal reports that he will rely on private capital to reduce the cost of his plan.

The Trump plan will offer some discipline because it is designed to move private capital off the sidelines, and investors, unlike politicians, expect a decent return. In an October white paper, Trump economist Peter Navarro and investor Wilbur Ross detail what they call “a huge infrastructure gap,” which they attribute to a lack of “innovative financing options.” They think they can unleash about $1 trillion in the capital markets with a tax credit equal to 82% of private equity investment, much as states and cities encourage real-estate development.

Could Trump’s infrastructure plan create 1 million jobs?

That should help avoid the crushing debt normally associated with infrastructure stimulus programs. Ross and Navarro explain further Trump’s private sector financing plan here:

The Trump infrastructure plan features a major private sector, revenue neutral option to help finance a significant share of the nation’s infrastructure needs. For infrastructure construction to be financeable privately, it needs a revenue stream from which to pay operating costs, the interest and principal on the debt, and the dividends on the equity. The difficulty with forecasting that revenue stream arises from trying to determine what the pricing, utilization rates, and operating costs will be over the decades. Therefore, an equity cushion to absorb such risk is required by lenders.

The size of the required equity cushion will of course vary with the riskiness of the project. However, we are assuming that, on average, prudent leverage will be about five times equity. Therefore, financing a trillion dollars of infrastructure would necessitate an equity investment of $167 billion, obviously a daunting sum.

We also assume that the interest rate in today’s markets will be 4.5% to 5.0% with constant total monthly payments of principal and interest over a 20- to 30-year period. The equity will require a payment stream equivalent to as much as a 9% to 10% rate of return over the same time periods.

To encourage investors to commit such large amounts, and to reduce the cost of the financing, government would provide a tax credit equal to 82% of the equity amount. This would lower the cost of financing the project by 18% to 20% for two reasons.

First, the tax credit reduces the total amount of investor financing by 13.7%, that is, by 82% of 16.7%. The elegance of the tax credit is that the full amount of the equity investment remains as a cushion beneath the debt, but from the investor point of view, 82 percent of the commitment has been returned. This means that the investor will not require a rate of return on the tax credited capital.

Equity is the most expensive part of the financing; it requires twice as high a return as the debt portion, 9 to 10% as compared to 4.5 to 5.0%. Therefore, the 13 percent effective reduction in the amount of financing actually reduces the total cost of financing by 18 to 20 percent. By effectively reducing the equity component through the tax credit, this similarly reduces the revenues needed to service the financing and thereby improves the project’s feasibility.

These tax credits offered by the government would be repaid from the incremental tax revenues that result from project construction in a design that results in revenue neutrality. Two identifiable revenue streams for repayment are critical here: (1) the tax revenues from additional wage income, and (2) the tax revenues from additional contractor profits. 5

For example, labor’s compensation from the projects will be at least 44 percent. At a 28 percent tax rate, this would yield 12.32% of the project cost in new revenues. Second, assuming contractors earn a fairly typical 10 percent average profit margin, this would yield 1.5% more in new tax revenues based on the Trump business tax rate of 15 percent. Combining these two revenue streams does indeed make the Trump plan fully revenue neutral with 13.82 percent of project cost recovered via income taxes versus 13.7 percent in tax credits.

An Example

To look at this at a more granular level, conventional financing would require total payments of $1,625 per thousand dollars of project cost if the final maturity were twenty years at 4.5% and the equity got a 9% rate of return over the same period. However, with an 82% tax credit, the payments would be reduced to $1,330, an 18.1% reduction. If the respective rates instead were 5% and 10% and the final maturity 30 years, the respective payments would be $2,138 and $1,705, a savings of 20.2%.

Note that this tax credit reduces the risk of loss to the equity yet it still leaves investors with skin in the game. In effect, this tax credit approach means that major revenue shortfalls could occur without impinging on either the debt or the equity.

The tax arithmetic is likewise straightforward. 16.67% of project cost is the equity component, so the 82% tax credit equals 13.69% of project cost. The labor content of construction would be at least the 44% share the Congressional Budget Office attributes to the GDP. Taxing it at the 28% rate (21% plus 7% for the trust) yields 12.32% of tax revenues.

There also would be a 10% pretax profit margin for the contractor. Taxing that at the 15% business rate yields 1.5% of project cost. Adding that to the taxes on wages yields 13.82%, slightly above the 13.69% tax credit.

Note that the risk of a major shortfall is limited because contractors operate on a cost-plus basis. Alternatively, if they commit to a fixed price, they build in a large margin for error. Importantly for the government budget, there will not be much of a time gap between the granting of the credit and receipt of the tax payments under the Trump plan.

Except for Queen Elizabeth II, Fidel Castro “held on to power longer than any other living national leader,” noted the NYT. That is an intriguing comparison, writes Bret Stephens in the WSJ, “except that one of those leaders shot pheasants, while the other shot peasants.”

As the progressive left showers the dictator with praise as “a liberator for the ages,” Mr. Stephens interviewed Jose Daniel Ferrer for a different view of Castro’s Cuba. After spending eight years in Castro’s prisons, the 46-year-old Mr. Ferrer founded one of Cuba’s largest dissident organizations, the Cuban Patriotic Union.

When I first met Mr. Ferrer in person in May, he spent much of the time detailing Cuban prison conditions. Wardens in lower-security prisons use inmates as de facto slave laborers in agriculture or construction gangs. Inmates in maximum-security prisons are stuffed into tiny cells and allowed an hour of sunlight a day. Political prisoners “face constant terrors,” including threats to their families. Beatings and torture are routine. “A prisoner has a bad molar. He complains. He gets beaten up. No medical attention.”

As for the Cuban Guantanamo, I asked Mr. Ferrer how he thought it compared with its better-known counterpart at the nearby U.S. naval station. He dismissed the American Gitmo as un jardín de niños—a kindergarten—next to its Cuban sibling. …

It says something about the degraded state of Western politics that Mr. Castro’s life can still be celebrated by supposedly respectable political figures, while Mr. Ferrer remains a political unknown beyond a tiny group of Cuba watchers. It says something, too, that respectable opinion thinks of Gitmo as the ultimate symbol of moral barbarity, while it remains indifferent to the real hell next door. It’s that indifference that will have to change, if change is ever to come to Cuba.

Mary Anastasia O’Grady sums it up in the WSJ;

The international community could help. It pressured South Africa to end apartheid. Cuba is similarly divided by race, with dark-skinned Cubans shut out while a few whites rule—and it is far more repressive. But that’s unlikely to happen any time soon, as evidenced by the flow of sympathy notes to the dictatorship from world leaders.

FLASHBACK VIDEO: Cuban-American exiles launch war crimes case against Castro