governance

OPEC+ decision to cut oil production will impact gas prices

Posted on by j.giglio

Earlier this month, the 23-member oil-cartel known as OPEC+ (Organization of the Petroleum Exporting Countries), of which Russia is a member and led by Saudi Arabia, announced it would slash production by 2 million barrels per day.  The production cut is equal to 2% of the world’s daily oil production.  The cut was seen as a slap in the face to President Biden.  The move by OPEC+ drew angry criticism from Washington and the White House accused the Kingdom of taking sides with Russia.

In response the Biden Administration said it plans to re-evaluate the U.S.’s eight-decade old alliance with Saudi Arabia. It is hard to forget that during the Presidential campaign in 2020, the president’s money quote was he promised to make Saudi Arabia a “pariah” state.  He said there is “very little social redeeming value in the present government in Saudi Arabia.” He has criticized the Crown Prince for his role in the killing of Washington Post journalist and political opponent Jamal Khashoggi.  All this while courting Iran, an arch enemy of Saudi Arabia, in the hopes of striking a nuclear deal that would give Tehran billions of dollars to threaten the security of Gulf States.

Still for months the leader of the free world lobbied Saudi Arabia to help ease energy prices by pumping more oil into the market.  These pleas fell on deaf ears. The Administration urged the Saudis to wait for the next meeting of OPEC+ on Dec. 4 before making a decision on production cuts.  The Administration wants to hold down gas prices to advance the Democrats’ chances in the midterm congressional elections. Now the administration has announced it will sell 15 million more barrels of petroleum from the nation’s strategic reserve, aiming to ease gas prices.  The White House said it was prepared for more sales of the $400 million barrels in the strategic petroleum reserve if there are further disruptions in the world markets.

Not only that but the White House is starting to relax some of the sanctions on the authoritarian government in Venezuela which sits atop some of the world’s largest oil reserves to allow Chevron to resume pumping oil and exporting oil to the U.S.  There is an ominous sound of barrel scraping here.

Congressmen from both parties called for retribution against the cartel as well.  Some called for taking direct action against Saudi Arabia such as denying it access to military hardware and passing legislation allowing OPEC+ members to be sued under antitrust laws.

The Saudi’s rejected the accusation that it was getting in bed with Russia. They stated that the decision to cut output was driven purely by economic considerations and in response to future uncertainty about demand for oil.   OPEC+ was doing what it usually does.  They want to regulate the flow of crude oil to world markets in an effort to control prices. That is what the cartel is all about, full stop.. They are seeking to protect their national economic interests as has always been the case. The Saudi’s need money to provide for a decarbonized future and to fund its on-off war in Yemen.

The irony here is that according to the U.S. Energy Information Administration in September 2019, the U.S.  became a net exporter of crude oil and petroleum products for the first time since 1973.  In 2022, the U.S. will again be a net oil importer.  The Administration’s policy has been to ween the American economy off fossil fuels in favor of clean energy.  Quite apart from bans on fracking, bans on drilling, the President’s first act in 2021 was to scrap the cross-border permit for Canada’s XL pipeline which was projected to carry 900,000 barrels of crude oil a day into the U.S.

Events like the coronavirus and the tragic war in Ukraine should have revealed the dangers of being dependent on unreliable regimes and geopolitical adversaries.  These choices have left the U.S. in  an untenable, vulnerable place.

Insider Trading in Congress

Posted on by j.giglio

A New York Times analysis found that between 2019 and 2021, 97 senators and representatives or their family members bought or sold stocks or other financial assets in industries that could be affected by their legislative committee work, violating a law designed to prevent insider trading and stop conflicts of interest.

Over the three -year period, more than 3,700 trades posed potential conflicts between lawmakers’ public responsibilities and private finances.

For example, 15 lawmakers tasked with shaping US defense policy actively invested in military contractors.  Still further, Senators, House members, and top Capitol Hill staffers who will help decide whether the government regulates cryptocurrency are themselves invested in bitcoins and altcoins.

All this while ordinary Americans are losing their shirts, if not their entire wardrobes, dealing with the pandemic and the rising cost of living while lawmakers ae making hay.  Sure, consumers may be getting some relief at the gas pump, but they are having to dig even deeper to pay for groceries.

The price of eggs is up about 40 percent since this time last year.  They are paying 20 percent more for milk, bread, and a staple in many Americans’ diet—chicken. Many of these working-class individuals risked their lives on the frontline of the COVID-19 crisis to stock grocery shelves, work in hospitals, or deliver food to homes, among other things.

To prevent members of Congress from taking advantage of their positions for personal gain, the U.S. passed the Stop Trading on Congressional Knowledge Act, known as the STOCK Act, signed into law in April 2012, an election year.  At a highly visible signing ceremony, it was said that the legislation would address the “deficit of trust” that divides Washington and the rest of America.

The STOCK Act prohibits members of Congress and senior executive and legislative branch officials from trading based on knowledge obtained as a result of their jobs. It increased transparency by beefing up financial disclosure requirements on stock trades and posting the annual financial disclosure forms federal officials file on a publicly available online database.  A key provision of the law mandates that lawmakers publicly and quickly disclose any stock trades made by themselves, a spouse, or a dependent child.

But transparency only works if people abide by the rules.  Congress and top senior Capitol Hill staff have violated the STOCK Act hundreds of times, but they face minimal penalties that are inconsistently applied and not recorded publicly.  If they file their disclosure more than 30 days after it’s due, they have to pay a fee this being the U.S. Congress of no more than $200.  And Congress has the discretion to waive the fines stipulated in the law.

Is it any wonder that the average American does not understand why elected officials do not play by the same rules as everyone else?  The hard truth is that the American people simply do not trust the federal government.  Only two-in-ten Americans trust leaders in Washington to do what is right, according to the Pew Research Center.

There are a variety of rare bipartisan proposals floating around the House and the Senate to tighten the rules on stock trading, and key details still need to be ironed out.  The only way lawmakers can earn back trust is to hold themselves to a higher standard, starting with an outright ban on the trading of stocks and other financial assets such as cryptocurrencies by members of Congress, their immediate family members and senior congressional staff.

Members of Congress should spend their time working for the American people. But persuading them to start putting the public ahead of their personal financial interests is like asking them to perform surgery on themselves.  And you can take that to the bank.

The Consequences of Interest Costs on U.S. Debt

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Over the next 30 years, the fastest growing category of government spending is projected to be interest on the national debt.  That means the government will be shelling out hundreds of billions of additional dollars each year for interest payments.

The growth in interest costs presents a huge threat to the economy and to Americans’ economic future.  The long-term societal effects will be massive; it will be a painful reckoning when the bill comes due.

According to the Congressional Budget Office’s (CBO’s) 2022 Long-Term Budget Outlook, the cost of interest on the national debt will surpass defense spending in 2029; Medicaid, Medicare and Child Health Insurance in 2046; and Social Security in 2048.

The CBO projected that annual interest costs paid to holders of Treasury securities would total $399 billion in 2022 and nearly triple over the coming decade to $1.2 trillion, growing from 1.6 percent of gross domestic product (GDP) to 3.3 percent in 2032, which would be the highest level ever.

If the Federal Reserve raises interest rates by larger amounts than the CBO has projected, costs may rise even faster than anticipated.  Still further, interest costs are on track to become the federal government’s single largest expenditure in 2054.  By then, interest costs will account for almost 40 percent of tax revenue and become the largest federal expenditure.

Rising interest payments are the result of escalating interest rates and debt levels that have risen like the blade of a hockey stick.  Treasury yields have surged with inflation running hot and the Federal Reserve in an aggressive tightening mode, while the national debt has grown by some $6 trillion since the pandemic began.  Pandemic-driven fiscal and monetary policies changed the debt situation considerably and for the worse.

The latest data show inflation at an 8.5 percent annual rate.  It is reasonable to expect the Fed to keep tightening over a sustained period, trying to reduce aggregate demand, relieve pressure on consumer prices and produce a hoped-for soft landing.  In 2017, the national debt was $20 trillion; now it is approaching $30 trillion.  Ten-year Treasury yields have climbed close to 3 percent, double what they were last December.

Increasing debt and high interest rates can crowd out important federal budget priorities and lead to a vicious cycle of even more debt, deficits, and interest payments.  This means the government will be paying hundreds of billions dollars more each year on interest payments on top of other fixed costs that are also growing, such as health and retirement provisions for an aging population.  This enhances the risk of a fiscal crisis.

As for those who hold on to the hope that folks in Washington will develop a long-term strategy to deal with the debt pile and deficits, it is likely time to label that as wishful thinking.

Congresses and presidents of both parties have long avoided making hard choices about the federal budget and failed to put it on a sustainable path.

In line with time-honored tradition, they prefer to just pop into the national arboretum of magical money trees and grab what they want.  The phrase “often wrong, but never in doubt” is only a slight exaggeration when it comes to their behavior.  The present commands their attention.  The few lawmakers raising issues about the debt, deficits, and rising interest costs are an endangered species.

Of course, crises can provide the necessary cover to make tough, hard decisions. As Stanford Professor Paul Romer said in 2004, a crisis is a terrible thing to waste – a sentiment later echoed by former White House Chief of Staff Rahm Emanuel.  Let’s hope the U.S. doesn’t waste this one.

Sausage making and the President’s Build Back Better legislation

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The legislative process is rarely pretty in the best of times, never mind in times like these.  Many people console themselves with this reality by quoting Otto von Bismarck, the pragmatic Prussian politician who, among other things, was the first chancellor of the German Empire from 1871 to 1890.

He is often erroneously quoted as saying “Laws are like sausages.  It is best not to see them being made.”  There has been a lot of sausage making going on in full view at the White House and in Congress over the last several months on the President’s Build Back Better legislation.

When a big bill makes its way through Congress, it highlights political divisions and can seem disconnected from the average American’s life. The Biden administration’s quest for a legislatively viable version of its Build Back Better agenda is an example.

Several of the administration’s promises have been abandoned in the new package, such as free community college and instituting a clean electricity standard with penalties for utilities that don’t comply.  Senator Joe Manchin, D-West Virginia, kneecapped the provision to retire coal and natural gas plants.

Other programs that were initially going to be permanent will instead be set to expire in a year or two or five, like the expanded child tax credit and expanding Medicaid in the 12 states that have not already done so.  It merits noting that once entitlement programs are established, they are famously difficult to repeal.

Still, the $1.75 trillion package contains a wide-ranging set of programs such as universal preschool for all 3- and 4-year olds, subsidized child care that caps what parents pay at 7% of their income, expanded Medicare to cover the cost of hearing benefits, and expanded tax credits for 10 years for utility and residential clean energy to reduce pollution, including electric vehicles.  Also notable is that although an overwhelming majority of Americans favor government action like Medicare negotiating with drug companies to reduce drug prices, that policy in not in the proposed legislation.

While the White House claims the legislation would not add to the deficit because of tax increases on corporations and the affluent, finding the taxes to pay for this package is proving difficult.  For example, Sen. Kyrsten Sinema, D-Arizona, is opposed to increasing the corporate tax to 25% or 26% and raising personal income tax rates. The progressive wing of the Democratic Party is now proposing annual taxes on billionaires for unrealized capital gains on stocks that have not even been sold and received as income.

According to an analysis from the University of Pennsylvania’s Wharton School of Business, the proposed new taxes and tax increases to pay for the $1.75 trillion bill would raise nearly $470 billion less than the White House claims.

With the President out of the country, Democrats are arguing among themselves over the details of the legislation.  House progressives are adamant about requiring the bill to be a done deal before they will vote for the $1.2 trillion bipartisan infrastructure bill that has been passed by the Senate because they don’t trust moderate Democrats to keep their word.

As the late, great New York Yankee catcher Yogi Berra said: “It ain’t over till it’s over.” So, the public sausage making, also known as lawmaking, will continue on Capitol Hill over the President’s Build Back Better legislation. As always, the devil is in the details.

The fight over the federal debt ceiling is Kabuki theater. What is Kabuki theater, you ask?

Posted on by j.giglio

The United States is once again flirting with a default crisis. The clock is ticking on a deal to raise the federal borrowing limit, or debt ceiling, and prevent a default on the national debt. After months of wrangling, Congress struck a short-term deal to temporarily avoid a first-ever default, but it sets up another showdown in a matter of weeks.

The recent legislation raised the nation’s borrowing limit by $480 billion, the amount the Treasury Department said it needed to meet the country’s cash needs until Dec. 3, setting up yet another deadline for Congress to resolve the issue.

The debt ceiling, also known as the debt limit, is the maximum amount of money the feds can borrow cumulatively by issuing debt in the form of bonds to meet its obligations.

The fight over the federal debt ceiling is Kabuki theater in the city of sound and fury. Tracing its origins to the 17th century, Kabuki is the stylized Japanese drama in which performers wear elaborate make-up and costumes. Actions aren’t literal but metaphorical, conveyed through singing, dancing, and mime.

In Washington, D.C. the Kabuki theater of America’s debt ceiling is a debate with overheated rhetoric and extravagant gestures, as politicians of both parties engage in the silly debt ceiling dance until the 11th hour, when each gives ground to save face, resolves the standoff and avoids a default just in the nick of time.

A default would be a catastrophic blow to the economic recovery from the COVID-19 pandemic. Global financial markets would be disrupted, and Americans would pay for this default for generations, as global investors would come to believe that the federal government’s finances have been politicized and they are not going to get paid what they are owed. Going forward they would demand higher interest rates on the Treasury bonds they purchase.

Congress enacted the debt ceiling in 1917 to placate anti-war lawmakers who were uncomfortable about letting the Treasury Department borrow too much money to finance World War I. Since then, the limit has been raised or modified 98 times according to the Congressional Research Service. Yawn.

It’s a mechanism that allows the U.S. Treasury to borrow money for any approved spending up to a certain limit without first getting approval from Congress. Lifting the debt limit does not initiate any new spending. Rather, it simply allows the U.S. to finance obligations already authorized by Congress, including interest on the debt and payments to Social Security, Medicare, and Medicaid.

There have been regular congressional battles over the debt ceiling. Despite partisan disagreements, Congress and the President have never allowed the country to default on its debt. During the Obama administration in 2011, when Republicans refused to raise it without significant spending cuts, a deal was finally struck to resolve the debt ceiling issue.  But coming within days of the Treasury being unable to pay out certain benefits did lead to Standard & Poor’s to strip the U.S. of its triple-A credit rating for the first time in history.

There were also government shutdowns in 2013 and 2018, when the government closed non-essential services, such as national parks, and sent federal employees on forced leave.  President Trump’s demand for $5.7 billion to build a wall on the Southern border led to a 35-day shutdown in 2018.

If the debt ceiling is not raised and the government can’t borrow to pay the bills, it would have to suspend certain pension payments, withhold military and federal workers’ pay, and delay interest payments on outstanding debt, potentially roiling financial markets and raising borrowing costs.

But not to worry, Americans have seen this movie before. The debt ceiling will be raised, and the government will not default. After all the Sturm and Drang, all will be fine after Democrats and Republicans have used it to embarrass one another and seize some electoral advantage.

What will the Taliban do with U.S. Military weapons left behind?

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With the war in Afghanistan having officially ended on Aug. 31, the world’s thoughts have turned to how the Taliban will govern the country and what equipment left behind by coalition forces they now have at their disposal.

The calamity in Afghanistan raises questions not just about what the American mission was but about how much of the U.S. military budget seems to provide little in the way of benefits. The U.S. dumped over $2 trillion into nation building in Afghanistan over a 20-year period, including $85 billion in technically advanced equipment and training for Afghan security forces.

Say what you will about the decision to withdraw, it should be obvious by now that the boneheaded, hasty, and chaotic U.S. exit from Afghanistan cost the lives of 13 brave servicemen and women, and left behind hundreds of Americans and thousands of Afghan allies the U.S. repeatedly promised to get out.

If that sounds like one of the less significant charges one might level against the American government, consider how, after a war that lasted 20 years, the U.S. has nothing to show for it but a fully equipped Taliban parading around in U.S. Army fatigues, cradling American M16 rifles and other weapons. The Taliban staged victory parades showing off the U.S. military hardware they have seized, replacing sandals with American military boots they could never have imagined.

A rough estimate of the total amount of equipment sent to Afghanistan during the 20-year occupation includes up to 22,000 Humvee vehicles, nearly 1,000 armored vehicles, 64,000 machine guns, and 42,000 pick-up trucks and SUVs. Other weapons included up to 358,000 assault rifles, 126,000 pistols, and 200 artillery units.

Oh, and the Taliban will likely inherit state-of-the-art military helicopters, warplanes, late-model drones and other air aircraft from the U.S. as well. Thanks to the largesse of the American taxpayer, the Taliban now has more Black Hawk helicopters than 85 percent of the countries in the world, according to Congressman Jim Banks, who is also a veteran.

While it is always frustrating to read about the many ways the federal government wastes taxpayer money, it pales in comparison to the appalling reality that the U.S. left an estimated $85 billion in taxpayer purchased military equipment in the hands of the Taliban. This was just part of the American taxpayer money that evaporated as the Taliban marched toward Kabul. There was also the opportunity cost of what these funds could have done to improve the quality of life in the U.S.

Even if the equipment is not used by the Taliban, it may end up going to the highest bidder, or to hostile states that can reverse engineer the technology.

But there are other dangers as well. For example, the Taliban has seized biometric devices from the U.S. military that might allow them to identify and capture Afghans who worked with the U.S. and the NATO allies that were part of the Afghan enterprise. These devices have the fingerprints, eye scans, and biological information of all the Afghans who were with the coalition forces over the last 20 years.

There is no sugar coating the American defeat in Afghanistan. But trying to get the straight skinny from the Pentagon and the White House on why all the U.S. weaponry was abandoned is like trying to put out a bush fire.

Having closed the chapter on Afghanistan, Americans who pride themselves on having notoriously short memories will move on to other issues, such as the still-raging COVID-19 pandemic and things that affect them and their families more directly. Politicians have made careers betting on the public’s historical amnesia and short memory.

And unlike the 1979 kidnapping of 53 Americans at the U.S. Embassy in Teheran, the media will not report on the fiasco in Afghanistan for 444 days and nights, as they did throughout the Iranian hostage crisis.

Demystifying the rule of law

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America’s constitutional order is under great stress and foundational principles such as free speech and the rule of law are under attack. The breakdown in respect for American institutions has helped instigate a season of violence and unrest.

The rule of law (ROL) is an expression most Americans are familiar with. It is a popular but vague term often used in political and economic contexts. Americans routinely hear politicians, judges, legislators and prosecutors mention the ROL right up there with freedom and democracy.

Few have paused to say what they actually mean by it. The concept is defined in many ways. For starters the ROL is an ideal, something to look at as a standard, a criterion. It is another way of saying that laws as written are applied equally to everyone. The ROL in its most basic form is captured in the popular quote “no one is above the law.”

It also means that laws should govern a nation and its citizens, as opposed to power resting with a few individuals. In theory, the law of the land is owned by all, made and enforced by representatives of the people.

The notion of the ROL comes with a host of concepts, like the law should be clear, known, and enforced; people are presumed innocent until proven otherwise; the police cannot arbitrarily arrest or detain people without good reason. Laws are interpreted by an independent judiciary which provides for the peaceful settlement of disputes.

The ROL requires that the law be enforced equally.  The most marginalized people in our society are entitled to be treated exactly the same way as anyone else.  It also requires that laws should not discriminate against people for no good reason, such as the color of their skin, their nationality or gender.

The concept of the ROL dates back thousands of years.  For example, the ancient Greeks started democratic law courts back in the 4th and 5th century BC with juries that had hundreds of members.  At Runnymede in 1215, English leaders signed the Magna Carta (Latin for Great Charter).

One might argue that the exalted Magna Carta was the beginning point of English-speaking peoples’ understanding of the ROL.  It was a document in which, for the first time, monarchs and government leaders agreed to subject themselves to the law, recognized that people were entitled to equality before the law and had a right to a jury trial.  The immediate practical consequence of Magna Carta was the establishment of an elected assembly to hold the monarchy to its side of the bargain.  These were momentous new concepts.

In the U.S., the most visible symbol of the ROL is the constitution, which was drafted by a special convention in Philadelphia in 1787.  It is the framework for effective and limited government and the supreme law of the land.  A congressman once delivered one of the truest statements of American political theory: “There is a straight road which runs from Runnymede to Philadelphia”.

The American effort to make good on the promise of the ROL has been difficult and sometimes bloody.  There is no getting around it – America has struggled to create a legal system that is fair to all its people.

The most glaring example is that the U.S. Constitution did not address the problem of slavery, despite the words in the Declaration of Independence that “all men are created equal”. This was the great flaw in American constitutional history.

America and other countries subscribing to the notion of the rule of law have considerable hard work to do to negotiate the distance between the ideal and the reality on the ground.

Strategy and the COVID-19 pandemic

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Residents and workers at U.S. nursing homes and long-term care facilities have accounted for a staggering proportion of COVID-19 deaths. The prognosis is particularly poor for elderly individuals who contract the virus. Around 80 percent of U.S. COVID-19 deaths have been among people 65 and older, according to the Centers for Disease Control and Prevention. These numbers highlight the failure of government officials to think strategically.

The disease is particularly lethal to older adults with underlying health conditions and can spread easily through facilities where many people live in a confined environment and workers move from room to room. Because of residents’ close proximity, these places are alike petri dishes for the coronavirus. At least 50,000 residents and workers have died from the virus at U.S. nursing homes and other long-term care facilities for older adults.

This figure may be understated because states differ in how they report deaths of residents in long-term facilities. For example, some do not include incidents of a resident dying in a hospital.

The lack of a national strategy to ramp up COVID-19 testing in congregate care facilities and to provide protective equipment to staff made it easier for the virus to spread in these densely populated settings. State decisions to transfer recently recovered COVID-19 patients back into long-term care facilities also increased the risk to this population. New York State, for example, mandated that nursing home facilities admit actively ill COVID-19 patients.

Despite early warnings based on fatality rates in China and Italy that people over 65 were the most vulnerable to the novel coronavirus, the national and various state strategies for dealing with the pandemic had major shortcomings.

Successful business people understand that strategy is about making choices, such as who is the target customer they wish to serve. Additionally, they understand that a firm’s resources represent the critical building blocks of a successful strategy. They determine not what an enterprise wants to do but what it can do.

Equally important, they recognize that resources are finite. Resources don’t spring full-blown out of Zeus’ forehead. Put simply, a key responsibility of leadership is to identify, build, and deploy resources in pursuit of business goals to provide value to the target customer and adjust as market conditions change.

Brand-obsessed leaders at every level of government have to be honest about clearly defining at-risk populations and allocating scarce resources to protect those people. In the case of COVID-19, that means the elderly and those with underlying conditions. For example, knowing that nursing home and long-term care residents and workers are most at risk, a targeted strategy would have allocated finite resources such as testing, protective equipment and other medical supplies to this vulnerable population.

Strategy is about making hard choices with imperfect information. Anyone running a successful enterprise understands that trade-offs matter. Leaders have to make choices about what they will do and what they will not do based on facts and the reality of limited resources. This requires them to choose carefully among available resources and sensibly allocate them to the problem at hand.

Another challenge when it comes to developing a successful strategy in a competitive environment is not to confuse means with ends. You can’t have everything at once, so your goals should be realistic and feasible, not pipe dreams. Words to live by.

You would be right to conclude that U.S. political leaders could have done a better job of protecting the seniors who are most vulnerable to the coronavirus. They were left exposed by the failure to develop an intelligent strategy. Americans can only hope those leaders have developed a realistic strategy to protect seniors if a second wave of the virus comes in the fall. It’s better to go too far than not far enough when it comes to protecting the most vulnerable in society.

The Battle of Anacostia Flats

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History is a foreign country to many students and to far too many Americans as well. The call for using the military to quell protests in Washington, D.C. is not without historical parallel. The story of the bonus march on Washington has been ignored or forgotten by contemporary pundits.

In 1924, Congress rewarded veterans of the First World War with bonuses of a bit more than $1,000 per soldier, but they were not scheduled for full payment until 1945.

Unemployed veterans petitioned for immediate payment to alleviate the economic hardships of former servicemen who had lost their jobs in the early days of the Great Depression. In 1930, over President Hoover’s veto, the Democratic Congress voted to pay the veterans a little more than half of the amount promised. More than 20,000 veterans of the World War Expeditionary Force with their wives and children from all over the country descended on Washington in the spring and summer of 1932 and promised to stay until Congress approved legislation to pay the balance of the bonuses.

By June the veterans who styled themselves as the Bonus Expeditionary Force were camping in shacks and tents across the river from the capital and occupying vacant buildings in the city. In mid-June, the House of Representatives passed a bill that authorized the immediate payout of the bonus, but the Senate rejected the bill. President Hoover, concerned about balancing the budget, continued to oppose the veterans request. Most of the veterans returned home but an estimated 2,000 to 10,000 had nowhere to go and remained with their families to engage in protests.

Many in the Hoover administration saw the bonus marchers as a threat to national security. In mid-July, President Hoover ordered the police to clear the bonus marchers out of several abandoned federal buildings that they were occupying.

When the evictions began, several marchers threw rocks at the police, who then opened fire. Two veterans were killed and an ugly riot followed. The local authorities appealed to President Hoover for help. The violence provided him with the excuse he had been seeking to use force, and he ordered the United States Army to help police clear out the buildings.

Late in the afternoon of July 28, General Douglas MacArthur, the Army chief of staff, undertook the assignment with the assistance of his aide Dwight D. Eisenhower. He led the Third Cavalry under the command of George S. Patton, along with two infantry regiments with fixed bayonets, a machine-gun detachment, and six tanks that, for the first time in American history, drove down Pennsylvania Avenue in pursuit of the marchers. The troops used tear gas to drive the veterans out of the buildings and then through the crowded streets of the capital.

As the marchers retreated, General MacArthur exceeded his orders, just as he would do in Korea two decades later, to secure the building and contain the marchers at their camp. He pursued them to their Shantytown across the Anacostia River and ordered his troops to burn the tent city where the former servicemen and their families camped. Reportedly, 55 veterans were injured and 135 arrested.

When General MacArthur met with the press later he said: “That mob down there was a bad-looking mob. It was animated by the essence of revolution”. He sought to justify his actions by arguing that the bonus marchers were attempting to overthrow the government.

The Battle of Anacostia Flats outraged many Americans and marked the low point of President’s Hoover’s tenure. The bonus march contributed to his defeat to Franklin Roosevelt three months later and was a catalyst for social change.

In 1936, Congress finally passed, over President Roosevelt’s veto, a bill to disburse about $2 billion in bonuses. The march laid the foundation for the G. I. Bill of Rights in 1944, which provided Second World War veterans with funds for college, housing and other benefits.

Humility and effective leadership

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It has been a busy year for death in the United States. The coronavirus killed more Americans in the last two months than died in the Vietnam War. The world has been disrupted and the collateral damage is omnipresent. Catastrophic events such as COVID-19 are hard to predict. They expose weaknesses in society and reveal the consequences of earlier bad decisions such as failing to diversify supply chains.

The pandemic has placed extraordinary demands on business and government leaders. Its scale and attendant uncertainty, unpredictability, and ambiguity make it challenging to navigate the crisis.

Crises also demonstrate that recovery is most likely under effective leaders who lead with humility, make tough decisions, tell the truth, and are able to identify and deploy resources with dispatch. Leadership matters and character is foundational to good leadership. Character refers to the distinctive qualities of an individual and, as Aristotle said character is revealed through action.

There are scores of books, articles, and studies about leadership. They often include a checklist of the characteristics that cumulatively constitute effective leadership, including vision, accountability, courage, drive, collaboration, integrity and more, many more.

One trait that receives insufficient attention is humility. If leadership has a secret sauce that may well be it, and humility seems to be in short supply today. Humility has nothing to do with being weak or indecisive. Put simply, a humble leader understands the things he or she doesn’t know, so they listen. It improves their hearing as well as helping them get smart on issues.

Successful leaders rely on the opinions and decisions of other people in times of crisis, especially when the cause of the crisis is outside their area of expertise. Effective leaders project self -confidence and authenticity when they check their egos at the door and acknowledge their failures and weaknesses. They understand the world is just too complicated for them to have all the answers.

Humility and ambition are not always at odds. Consider, for example, the case of Abraham Lincoln, who never let ego get in the way of his ambition to create an enduring union.

In contrast, consider leaders who don’t want people who say no. They are suspicious of any plan that doesn’t originate with them. You can argue with them but you must be careful how and when. You are better to give way on every possible point until the vital point, to position yourself as in need of guidance rather than appearing to believe that you know better than they do. Remember, these types of leaders want more than to be advised of their power, they want to be told they are always right. Other people commit errors or deceive them with false information. They are insecure in their insecurities.

These self-absorbed leaders who tell the truth less than half the time can’t be trusted to keep their promises, often pass off blame to others, and are especially bad at understanding and caring for people, they lack empathy. Leaders who do not have the humility to recognize their own errors and omissions will not make necessary course corrections to ensure success. Such leaders don’t catch the joke that if you think you are the smartest person in the room, you are in the wrong room and the only one who is incapable of learning.

Humility is a mindset for leaders who want to do big things in a world filled with uncertainty and ambiguity. These leaders motivate and empower those around them and listen well. As C.S. Lewis said: “Humility is not thinking less of yourself, it’s thinking of yourself less.”