Monday, September 02, 2024
Elon Musk Leads Parade of Tech Titans Boosting Trump as the True ‘Freedom Candidate’
A shocking partisan switch is underway in the stratosphere of the tech titans: The industry known for its wokeness is betting big bucks on a Republican.
Last month former President Donald Trump gave a thumbs up to the notion of teaming up with billionaire innovator Elon Musk if he wins in November. Hours later, Musk posted a message on X: “I am willing to serve.”
Elon Musk for commerce secretary? Or perhaps for the newly created position of free speech czar?
Whether or not Musk actually joins a Trump administration—Trump himself said Sunday that the mogul is likely too busy to do so but could “consult”—his bold steps to back the Republican signal a turnaround.
Musk voted for Hillary Clinton in 2016 and Joe Biden in 2020. Yet last month he launched a pro-Trump super PAC, which he and several other tech moguls are funding—even though Trump would likely remove federal subsidies for electric vehicles, a major Musk industry, if he wins a second term.
Investor and “Shark Tank” star Mark Cuban called the phenomenon of tech bosses boosting Trump “insane.”
Not really: While Democrats strove mightily last week to push “freedom” as the theme of their convention, tech leaders are betting that freedom of speech, freedom to innovate and freedom from crushing government regulations and confiscatory taxes are more likely in a Trump reign than in a Kamala Harris administration.
Among those Silicon Valley heavyweights is Nicole Shanahan, who was Robert F. Kennedy Jr.’s running mate.
“I would say that I trust the future of this country more under the leadership of Trump … than I do of the Harrises,” Shanahan said last week as Kennedy weighed his decision to back Trump in the race.
Harris’ economic plans, Shanahan warned—”particularly her flawed ideas about price caps on food”—echo “the very policies that caused the famine my family suffered through in Mao’s Communist China.”
The Republican National Committee’s platform, dictated largely by Trump himself, pledges lower taxes and deregulation, and describes innovators as national treasures.
In contrast, the Democrats’ 2024 platform vilifies businesses as greedy profiteers who don’t pay “their fair share” and proposes hiking corporate taxes to 28% and raising taxes on capital gains.
Andreessen Horowitz, a Silicon Valley venture capital firm, said in December that it would decide which presidential ticket to support based on one issue: “If a candidate supports an optimistic technology-enabled future, we are for them. If they want to choke off important technologies, we are against them.” The firm called “bad government policies” the No. 1 threat to their industry.
Trump has expressed his enthusiasm for new technologies, even promising to “make America first in AI.”
By July, Marc Andreessen and Ben Horowitz, the investment firm’s principals, had changed sides and endorsed Trump, saying the Republican will reduce regulation and lower taxes.
When Trump chose running mate J.D. Vance, a venture capitalist with Silicon Valley experience, tech entrepreneurs applauded.
PayPal founder David Sacks is throwing his support to Trump and even spoke at the Republican National Convention. Palantir Technologies cofounder Joe Lonsdale and cryptocurrency kings Cameron and Tyler Winklevoss are donating to Musk’s America PAC to back Trump.
Of course, tech is an industry like any other, concerned with what government can do to damage the business environment.
Expect more tech leaders to change sides if Harris and running mate Tim Walz roll out policy proposals as misguided as those we’ve seen so far, like price controls.
Big tech reacts to bad economic policies at every level, not just federal.
The same political metamorphosis bringing tech figures to Trump is also causing thousands of firms to flee California’s high taxes and overbearing regulations, and relocate to Texas. They’re trading woke for business-friendly.
Austin, the state capital, has become a tech hub dubbed Silicon Hills. Musk recently moved his company SpaceX to Texas and announced that X’s headquarters will soon follow.
Yet Musk is more than a Silicon Valley titan—he is also a crusader for free speech.
Last month he stared down a European Union bureaucrat who objected that Musk’s uncensored two-hour conversation with Trump on X could result in “disinformation.”
“Take a big step back,” Musk responded via a cheeky meme, after blasting the bureaucrat for his “alarming disregard for freedom of expression,” as a letter from several free speech groups put it.
Musk recently closed X in Brazil rather than comply with government censors there. X is suspended in Venezuela for refusing to take down posts challenging dictator Nicolas Maduro’s phony victory claims.
Ending government censorship is a top Republican priority. The Biden-Harris administration has used agencies from the FBI to the Department of Health and Human Services to pressure social media to do the administration’s bidding. The RNC platform pledges that federal interference will stop.
Musk wants “to promote the principles that made America great in the first place,” naming meritocracy and free speech among the core ideas his America PAC is pushing.
They’re not on Harris’ agenda—more reasons tech money is moving to Trump.
You don’t need AI to figure that out.
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Food Profit Margins Shrink, But Harris Blames Them for Rising Grocery Bills
Rising grocery costs continue to put the squeeze on families. Overall, the cost of a trip to fill the pantry rose nearly 22 percent since the beginning of 2021. Many specific staples rose far more—eggs are up 110 percent, flour up 29 percent, orange juice up 82 percent. A family of four spending $1000 per month just three and a half years is spending an additional $2,640 annually for this same shopping list.
Unfortunately, Vice President Harris misdiagnosed the source of the problem as “bad actors” seeing their “highest profits in two decades.” She blames the initial surge in food prices on supply chain issues during the pandemic—certainly a major contribution to the shortages and price increases on many items early in the pandemic.
However, Harris mixes this truth with falsehood by claiming businesses are now pocketing the savings after these supply-chain issues have subsided. Her proposed solution—“the first-ever federal ban on price gouging on food”—will compound the misery.
First, the faulty diagnosis. A look at the data easily counters this.
An insightful way of analyzing whether price increases are due to “gouging” is to focus on the variable production costs of the goods sold plus the selling, general, and administrative expenses. Tyson Foods—the world’s largest chicken, beef, and pork processor—saw its margin drop from 8.4 percent in 2020 to just 1.1 percent last year. Kraft Heinz and General Mills—food processors with combined revenue nearly equal to Tyson Foods, suffered similar results. Kraft Heinz’s margin declined from 21.4 percent to 20.2 percent. General Mills’s shrank from 17.8 percent to 16.8 percent. Far from “gouging,” these industry leaders are failing to fully pass along the entirety of their own cost surges to consumers. Expenses relative to sales increased during the past three and a half years of elevated inflation.
After accounting for all expenses—including extraordinary items, taxes, and interest—margins are even tighter. Notably, Tyson Foods experienced a net profit margin last year of NEGATIVE 1.23 percent. Kraft Heinz realized a 10.72 percent net profit margin last year, and General Mills a 12.91 percent margin.
What about industry-wide? Profit margins are shrinking as food manufacturing costs rose 28.4 percent since January 2020, exceeding the 26.3 percent retail price hikes on food items. Grocery store profit margins sank to 1.6 percent in 2023, the third consecutive year of decline after peaking at 3.0 percent in 2020.
In other words, grocer profit on $100 of sales is just $1.60. Profit margins contracted as overall food inflation totaled 20.6 percent in those three years. The biggest grocers have experienced this margin crunch. The Kroger Co.—the nation’s largest traditional supermarket—eked out an operating margin of 1.93 percent this past year, a margin lower now than it was pre-pandemic. These trends are the opposite of gouging.
History provides endless proof that prices set by governments under the market price results in shortages. Demand expands as supply shrinks. What good is a lower price if the shelves become empty?
Venezuela, Cuba, and the Soviet Union provide ample examples of the dangers of price controls. But the United States embarked on its own failed experiment just five decades ago. In August 1971, President Nixon ordered an initial 90-day freeze on prices and labor, with future price increases to be subject to federal approval. The proposal initially proved wildly popular, with 75 percent public support and a landslide re-election the following year. President Nixon even ordered an IRS audit on companies breaching the ceiling.
Ultimately, the program ended in disaster. As explained by Daniel Yergin and Joseph Stanislaw, “Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets.” In April 1974, the administration dismantled most of the program.
Importantly, the inflation of the early 1970s resulted largely from easy money. From the beginning of 1970 through the demise of the price-fixing program in April 1974, the M2 money supply expanded by 48 percent. In less than four years, prices rose by nearly 27 percent. In other words, prices jumped in fewer than five years by an amount equivalent to that of the entire prior decade!
Does this sound familiar? It should. The inflationary surge of the post-COVID era is largely a direct result of the explosion of government spending beginning in 2020. The Federal Reserve financed much of this spending by ginning up its digital printing presses to purchase government bonds alongside a myriad of other assets—from mortgage-backed securities to corporate debt.
The flood of new money coursed through the economy. The M2 money supply swelled by 40 percent in just two years. More dollars chasing goods and services ultimately resulted in dramatic price hikes.
Harris appears to have forgotten the important lessons from this episode. Based on her insistence that price gouging is responsible for high grocery prices—when it clearly is not—the Vice President’s proposal would more likely function as a price freeze or command pricing. As such, the existence of state laws currently prohibiting dramatic price increases during emergencies should not assuage concerns about Harris’s proposal. Of course, even these state laws may result in the unintended consequence of shortages—but these temporary interventions in the market are rarely activated.
With deficits looming even larger in the years ahead, the threat that the central bank will finance this spending with another bond purchasing spree only increases. The food production industry is not immune from the ravages of this reckless monetary policy: the spiral of rising labor costs, insurance, and equipment. In addition, the sector is particularly sensitive to the assault on affordable fuel vital to the cultivation and transportation of food.
It’s time political leaders admit their own culpability in the shrinking purchasing power of the dollar at the grocery store. Blaming painful price increases on the very entities responsible for the most bountiful, readily accessible supply of sustenance in human history is woefully misleading. Imposing price controls is a demagogic solution harmful to farmers, processors, grocers, and families.
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Also see my other blogs. Main ones below:
http://jonjayray.com/covidwatch.html (COVID WATCH)
http://edwatch.blogspot.com (EDUCATION WATCH)
http://antigreen.blogspot.com (GREENIE WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://snorphty.blogspot.com (TONGUE-TIED)
https://immigwatch.blogspot.com (IMMIGRATION WATCH)
https://australian-politics.blogspot.com (AUSTRALIAN POLITICS)
https://john-ray.blogspot.com/ (FOOD & HEALTH SKEPTIC -- revived)
http://jonjayray.com/select.html (SELECT POSTS)
http://jonjayray.com/short/short.html (Subject index to my blog posts)
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