Sliding into 2025 

Happy New Year to constant listeners of the Far Middle. We have finally arrived at 2025, a new year and a new sports dedication to go along with it. Year ends and New Years are times for thinking of what was and what is. Thus, we're going to need a fitting dedication that compares and contrasts. I came across a breakdown of the economics of baseball from the mid-1950s and was just taken with how things were economically back then in baseball versus how they are today. It is a fascinating compare and contrast. So check it out. Back in 1955, the New York Giants (and it was the New York Giants back then) released financial data from their prior year, 1954, and that data was analyzed to break down revenues and outflows. Now, two-thirds of the team's revenues in 1954 consisted of gate admissions, ticket prices basically. Only 18 cents of every dollar of revenue came from radio and TV rights. 11 cents of every dollar came from concessions. So back then, it's pretty simple: if you didn't draw fans to get butts in those seats, the team wasn't going to survive as a financial going concern. The outflows, when you exclude profits, I think were even more interesting than the revenues. Only 30%, or 30 cents of every dollar, went to player salaries. 20 cents of each dollar was put into scout and farm systems, which was sort of the R&D of pro baseball. Another 20% flowed to maintaining ballparks and stadiums. 15 cents went out to front office staff salaries. 10 cents to travel costs during the season. And then the nickel that's left, the last five cents, went to marketing and public relations. Now again, those outflows exclude profit, if any. It wasn't a given that you were going to be profitable in Major League Baseball in the 1950s. And understand, baseball was not big business back in the 1950s. The Giants needed about $2.5 million of revenue to break even each year, and team payroll for the Giants was less than a million dollars. And that's a team that had Willie Mays, mind you. Now today, things have changed massively in magnitude and proportionality. The Giants today rake in over $140 million in TV revenue alone. Ticket sales are about $90 million. Total revenues are over $400 million. And the Giants' payroll is north of $200 million, which means it's about half of total team revenues. And much of that payroll, by the way, is guaranteed money under contract. Yeah, Major League Baseball today is big business with big stakes. 1954 and today, New York Giants to San Francisco Giants, small business to big business. A fitting contrast of what was and what is, as we closed out what was 2024 and what will be 2025 and beyond. Our year-end, start-of-year episode 189 dedication is to the starkly evolved economics of pro baseball. That sports dedication fits nicely into this week's theme: discussing a question many pundits are out there asking and assessing toward a year end and start of a new one: what or who were the biggest winners and losers of the past year, and what does it bode when one looks forward into the next year? Now certainly, 2024 didn't play out well for everyone and everything, and it wasn't a losing proposition for everyone either. There are fronts that look to be areas of increasing focus in 2025 and beyond for both societies and nations, and there is good news in that if you look close enough. So let's roll through some of those growing fronts of focus using our traditional Far Middle connections, from one topic dot to the next, in homage to Dr. James Burke and his docu-creation Connections. We'll make our first connection from how salaries of players in baseball went from a significant but manageable portion of team revenues back in the 1950s to the single biggest share of expenses today in the big business that is MLB, to how over a similar period of time, government program entitlements have run away with a lion's share of the taxpayer dollar. And as wild as player salaries have grown as a piece of the MLB pie, federal entitlements are wilder when it comes to the piece of the tax revenue pie that they consume today. There was an excellent article written by Christopher Deuth that summarized the situation and math of government entitlements. The article was 'How Entitlements Aid Our Future: From Balanced Budgets to Borrowed Benefits.' Now, rational fiscal policy and budgetary norms for government is pretty straightforward: you fund government operations with taxes, you borrow (take on debt) only for long-term vital investments or to manage short-term emergencies such as wars, and then you whittle down whatever debt balance you ran up during those exceptions and emergency times through modest budget surpluses and economic growth. Now it used to work. It always worked, frankly. It's how Thomas Jefferson was able to finance and make the Louisiana Purchase. It's how Ronald Reagan built up the military to defeat the Soviet Union. But Reagan was sort of a recent exception during his time, because decades before his rise to the presidency, things changed with deviating from those fiscal and budgetary norms that worked so well during our history. Much of it started with Franklin Roosevelt's presidency during the Depression and World War II. He set the norm for presidents and congresses to come, which was regularly outspending, running up federal government deficits. Then many presidents after FDR added to the habit of regular outspending and massive public investments, many of which those public investments have proved to be failures. All of this ran up debt to a pace and magnitude that our forefathers would have found unfathomable. But the bulk of the contribution to an unsustainable fiscal and monetary path that we had set upon and now find ourselves in can be attributed to out-of-control entitlement spending. It applied a philosophy of pretending that there were silver bullets and free lunches. The government spending did not reflect the need to make choices and trade-offs. The moral responsibility under this false premise went from a balanced budget in government to continuous deficit spending in government, a 180-degree shift in what was noble management of the national treasury. And now we see ourselves in dire fiscal straits: $34-plus trillion in debt, multi-trillion-dollar annual deficits, and now off-balance-sheet entitlement commitments and responsibilities that make the frightening math become outright terrifying. These realizations are starting to manifest, and they did so throughout 2024, including the presidential election, even though neither party or presidential candidate talked much about it. If anything, both Trump and Harris pretended the problem didn't exist. But that was election time. And now, as we enter 2025, it is governing time, at least for President Trump and Congress. And although I doubt we will see any changes or reductions in benefit to current recipients, I'm betting that you will see action on attempts to arrest spending to current levels and then to grow the economy so the entitlements become a smaller portion of the total budget pie. It's an absolute must if we want to avoid government default and economic calamity. So 2024, I believe, marked a bit of a subliminal end to pretending that infinite growth and entitlement spending can go on unabated. That belief was a loser looking back over the past year. And when facing the clinical math in a relatively short period, America's leaders will prove whether I was correct or not in that assumption. And boy, I hope I am right. I mentioned one of the ways to return to fiscal and budgetary normalcy with our federal government is to spur economic growth so that entitlement spending becomes a smaller piece of the overall economy and tax revenue base, which makes a nice connection to our next topical dot: something that suffered a significant setback in 2024 and may face tough times in 2025 and beyond, and that is overbearing and oppressive government regulation. Freedom of the private sector to create and keep value might be experiencing a new moment in America. I'll give you one example to illustrate how ridiculous things have become with respect to government regulation. It deals with the topic that will be front and center with the Trump administration's economic policy: tariffs. A key document regarding tariffs is the Harmonized Tariff Schedule of the United States. Now that name, the Harmonized Tariff Schedule, implies efficiency and simplification, but the reality is the opposite, because that Harmonized Schedule runs 4,392 pages long as of the summer of last year. War and Peace was only 1,200 pages, for goodness sake. The monster schedule is used by the International Trade Commission to apply classifications of imported goods into the United States as to what the tariff rate will be. And what the overall statistics show: this Harmonized Schedule, so to speak, has 22 sections and 99 chapters. But before even getting to the first section, the document has roughly 900 pages of notes and rules for interpretation. That's the introduction. These rules for interpretation exceed the ability of any general lawyer or business person to even begin to understand, let alone comply with. Now once you get past that puzzle, you get to the actual tariffs, and they are just as complex and just as difficult to understand and navigate. And then there are scores of exceptions to the already complicated rules of interpretation and tariff calculation. It's complexity stacked upon complexity stacked upon complexity. If the Trump administration looks to both create fair trade and simplify regulation, it may want to start with reimagining the Harmonized Tariff Schedule, because I'm betting that based on what I saw back in 2024, in the coming year, complex government regulation is about to suffer some serious setbacks, which would be to the benefit of doers and value creators all across America's private sector. Runaway entitlement spending and government regulatory overreach and complexity: those weren't the only losers in 2024. That pair can create a connection to another arena that came out on the losing end last year: those who look to undermine and erode the Constitution. Yes, anti-constitutionalists didn't have a good year in 2024, and it could get worse in the next few years. The Constitution is on the rise. It's always good to have a reminder of the genius of the Constitution and respecting its simple meaning. In 1926, President Calvin Coolidge summarized such benefits in a speech that he gave, and here's a key paragraph from that speech by Silent Cal, who actually wasn't all that silent. He said: 'It is often asserted that the world has made a great deal of progress since 1776, that we have had new thoughts and new experiences which have given us a great advance over the people of that day, and that we may therefore very well discard their conclusions for something more modern. But that reasoning cannot be applied to this great Charter. If all men are created equal, that is final. If they are endowed with inalienable rights, that is final. If governments derive their just powers from the consent of the governed, that is final. No advance, no progress can be made beyond these propositions.' Yeah, I've said it before and I'll say it again, constant listeners: Calvin Coolidge was one of America's most underrated presidents in history. His summation that I just read perfectly describes why we need to remain true to the simple and plain text of the Constitution. It was a winner last year. Let's make it a winner in 2025. Let's jump from the US Constitution and connect to how 2024 was not a good year for authoritarian regimes to attack individual rights of oppressed citizens. And we could pick from many choices here, but how about Venezuela and unfortunately the dictator there, Nicolás Maduro. Maduro enjoyed the United States bending over backward to appease him and his totalitarian regime throughout the Biden administration's tenure, primarily because with the adoption and imposition of climate policies across Europe and the United States, those economies still required fossil fuels. Once they shuttered their domestic sources of energy, they needed to rely on places like Venezuela to flow its oil. It's ironic, to say the least, and maddening. But things changed for the better when it came to Venezuela in 2024. It started with its presidential election in July. Before the election, Maduro suppressed the opposition and barred several candidates from running. Unfortunately, that sounds familiar to what certain areas of our government was attempting to do in the run-up to the 2024 US presidential election. Anyway, a former diplomat was successful in getting on the ballot to run for president of Venezuela, and he represented the opposition to Maduro that was unified when Maduro kept other opposition candidates off the ballot. The candidate's name was Edmundo González. Now, González beat Maduro by a wide margin, and all credible international election observers agree with that. But this being Venezuela and Maduro knowing that the United States would not hold him accountable, he simply refused to acknowledge the election. What he did was violently crack down on protest and dissent after the election. 2024 once again exposed the ugly reality of leaders like Maduro in places like Venezuela. Yet it presents a losing proposition for such totalitarian regimes, because the exposure for all to see, coupled with America's newfound leadership on the geopolitical stage, as well as its new logical return to energy independence and the rejection of imposition of draconian climate policies, all those things mean that 2025 is not going to be a year that bodes easy or well for people like Maduro. And the same can be said for Iran and other totalitarian regimes. Thus, if you are a fan of republican democracy and the rights of the individual, what happened in 2024 and what 2025 offers presents an opportunity to enjoy the application of our constitutional values across places and peoples that have hungered for such rights for a long, long time. Last year wasn't just a bad year for dictators in Venezuela. We can construct the connection to how it was also a high watermark for dictators stoking global conflict. The lack of American leadership on the global stage stoked the fires of war in places like Ukraine. Yet last year offered several setbacks for those wishing for a continuation of a war in Ukraine, and this year may present a legitimate window for achieving lasting peace, and one that reflects an unsalable reality for Russia, Ukraine, and Europe. I've intensely followed the Russia-Ukraine conflict through the past several years. It's been fascinating, a lot of innovation that was occurring militarily, but it's also, of course, incredibly impactful to the future of a wide portion of the world. And a crucial aspect of this conflict that most Americans don't realize is the historical background and context that it sits within. Russia views Europe historically as its sphere of influence, and it views Ukraine, or at least a very wide portion of it, as its own territory. And nothing's going to change that perspective and the desire of Russia, led by Putin, to see that through. Now that history, it's history. It predates Putin. In the 1990s, President Clinton was posed a question by Russian President Yeltsin, which was: 'Why don't we agree that Russia can have Europe while the United States gets the rest of the world?' I'm paraphrasing, but that's effectively what Yeltsin asked Clinton. And I think I do have the specific phrasing here. Yeltsin said: 'I ask you one thing, period. Just give Europe to Russia. The US is not in Europe. Europe should be the business of Europeans. Russia is half European and half Asian.' Then Gorbachev echoed Yeltsin's thoughts a few years later. He would reference 'our common European home' when speaking to Europeans in the West. And Yeltsin and Gorbachev were channeling Russian doctrine and views towards Europe going back to Stalin. It bears reminding, a lot of people forget this, that Stalin and Hitler struck a deal in the 1930s, what famously became known as the Nazi-Soviet Non-Aggression Pact. But what the pact agreed to was that Russia and Germany would invade Poland, divide it between them, and then the Soviet Union would take Finland and the Baltics. That's not a non-aggression pact; that's an aggression pact. Putin thinks the same way Stalin, Yeltsin, and Gorbachev did on this issue. And of course, Ukraine used to be part of Soviet Russia, making it even more strategic to Moscow. Putin and Russia are not going to walk away from Ukraine by ceding back territories that it bled to capture in the eastern part of Ukraine, including Crimea. That's not going to happen. Russia is suffering horrible losses against Ukraine, which by the way it vastly outnumbers and is out-equipped. It basically has better equipment and technology than the Ukrainians can deploy. So there's no way Russia will be able to defeat NATO under a conventional war. It's not going to happen. NATO would make short order of Russia on the conventional battlefield. But if the war in Ukraine continues, or if NATO directly confronts Russia in Ukraine, Russia, because of its tactical disadvantage to NATO and its need to absolutely save face in Ukraine, will have to resort to more severe and escalating options, like the use of nuclear weapons. Not good. Now many experts argue that this is the very reason that a total defeat of Russia in Ukraine is required. I think that's flawed logic. Russia is not going to use nuclear weapons and risk nuclear annihilation unless the very existence of Russia is on the line. And there are only two scenarios from Putin's perspective where that would exist. The first would be NATO engages in a nuclear attack. And then the second would be NATO and the US engage Russia with conventional tactical military confrontation in Ukraine to kick them completely out of the territories they currently occupy. Either, from Putin's perspective, would pose an existential threat for himself and, as far as he's concerned, for Russia as well. I think the incoming Trump administration understands all of this, which is why I believe you will see a push for peace and ceasefire in Ukraine, and that Ukraine will continue to exist as an independent nation, that its devastated infrastructure and economy will be rebuilt, but Ukraine might not become part of NATO, and Russia will certainly continue to hold those eastern parts of Ukraine and Crimea that led hundreds of thousands of troops to acquire. Hey, it's far from perfect and it is far from morally just, but it is without a doubt the only realistic option that does not lead to massively higher casualties, that stops the slaughter, and that prevents things from escalating into extremely dangerous levels beyond Ukraine to the wider map. This year should be for peace in Ukraine, because the prior year saw developments that presented setbacks for the senseless and never-ending war in Ukraine. Interestingly, the United Nations was supposedly designed to deal with and de-escalate situations like the war in Ukraine, but the UN unfortunately is morally bankrupt, and the world's better off without it than with it under its current configuration. And that leads into our next connection, discussing how last year was a losing year when it came to the credibility of the United Nations. I could pick from numerous examples of why that is so, but I'll focus on a single great illustration: Israel's conflict against Hamas. The UN has an agency under its umbrella known as the Relief and Works Agency for Palestine Refugees in the Near East, and its acronym is UNRWA. Well, the United Nations in the second half of last year revealed and confirmed that some of that agency's staff participated in the October 7th massacre of innocent Israelis and Jews by Hamas. Technically, the United Nations made the admission, but it should be pointed out the UN was forced to probe its agency only after Israel exposed what was going on. The report was conducted by the internal audit office of the UN, and it came with some troubling caveats. First, it investigated less than two dozen staffers that Israel identified as terror participants, far from exhaustive or wide-ranging. And out of the 19 staff investigated, the probe found nine were likely or highly likely to have joined in the Hamas attack. The UN said it was not able to find corroborating evidence against the remaining 10. Now compare that to what Israel alleged: that at least 1,200 UNRWA employees had ties to Hamas or other terror groups. Now that doesn't matter to the United Nations. It's closed its probe and it plans to move on without any further investigation. Who funds UNRWA, you might be thinking? You guessed right if you said the United States and European governments do. We shouldn't just stop funding UNRWA; we should stop funding the UN until it can demonstrate material reform consistent with its original charter. Last year proved to be a bad year for the United Nations. Let's hope it takes that as a warning to improve its reputation and standing this year. But I'm not holding my breath. That's why a stop in funding might be a much-needed additional push. Well, with a new 2025, it's one for the money, two for the show, three to get ready, now go, cat, go. We do have to go, but first I just recited the opening lines of the groundbreaking rock and roll song 'Blue Suede Shoes,' which was released around this time of year in 1956, but not by Elvis, as most rock fans think. The Elvis version was released later in 1956. The original version was by Carl Perkins, a guy who was a rock innovator and founding father and who most music fans today forgot. There are two different accounts about the origin of 'Blue Suede Shoes.' One version says that Johnny Cash might have played a role in its creation in 1955. Perkins, Cash, and Elvis were touring the South, and Cash told Perkins of an airman he served with in the military in Germany who had referred to his military regulation airman shoes as 'blue suede shoes' and insisted that no one step on them or scuff them. Cash suggested Perkins write a song about the shoes. Now in another version of how the song came to be, Perkins was playing a dance and noticed a couple dancing near the stage, and between songs he heard the boy scold his partner, 'Uh-uh, don't step on my suedes.' Looking down, he saw that the boy was wearing blue suede shoes and one had a scuff mark, and Perkins was amused to see that the boy cared more about his shoes than the girl, and he began working on a song about it that night. We don't know for sure which version is accurate, but we do know that 'Blue Suede Shoes,' a song most people today associate with Elvis, was the creation of fellow rock and roll founding father Carl Perkins. Have a great week to start a great year. Avoid stepping on other shoes, but do make sure you stay connected to that Far Middle.