December 17, 2020

Goodbye NYC’s 21 Club… A Sign of the Times

By Trish Regan 

In 1922, two years after the onset of prohibition, a couple of 20-something cousins named Jack Kriendler and Charlie Berns started an illegal drinking club. Their speakeasy was located in the heart of Greenwich Village in New York and was known as the Red Head. It became a popular go-to spot to drink without fear of the Feds… that was until an infamous raid in 1930.

It was then that the founders learned their lesson. They enlisted architect Frank Buchanan to create a system of hidden doors, quick-release bar shelves, and a secret wine cellar to help dodge the Feds in the case of future raids at their newly designed location at 21 West 52nd Street.

The joint quickly became known as “Jack and Charlie’s 21” club and a legend was born… The 21 Club went on to host some of the biggest names in history at its famous bar – from Salvador Dali to Ernest Hemingway to Elizabeth Taylor to Marilyn Monroe – they’ve all had a drink (or two) at the 21 Club.

But this week, the famed establishment, like so many other restaurants and businesses in America, was forced to shut its doors and lay off 148 employees, some of whom had worked there for decades. Just days after New York’s Governor Andrew Cuomo declared his ban on indoor dining, the 21 Club announced it must close.

Not even an establishment that had made it nearly 100 years can survive these government-mandated widespread closures.

The 21 Club is just one of the hundreds of thousands of businesses paying the price for such draconian measures. 

In my weekly American Consequences podcast, I spoke with Chef Andrew Gruel, the founder and chef of Slapfish Seafood, which operates (or did operate) almost 30 locations throughout the country. (Yes, “Gruel” is his actual last name and he loves the irony of it.)

He spoke of a very grim reality, especially in his home state of California… 

The reality on the ground is that restaurants are shutting down by the minutes. Most restaurants right now are barely making payroll, if not having already let go of the majority of their staff. And they’re in that final stage of running it as owner-operator before they have to completely shut the doors. That’s not hyperbole. That is really what’s happening.

Money for Nothing and ‘Checks’ for Free

Congress is now preparing a new stimulus bill, and nearly $900 billion in fresh spending is expected. It’s unclear yet if small-business owners will receive any benefits from this new package… Instead, most of the aid is aimed at big bailouts for the airline and defense industries, and lawmakers are expected to offer up another round of stimulus checks.

Senate Majority Whip John Thune, the Republican from South Dakota, told reporters yesterday that he expected checks in the $600 to $700 range per individual. In addition, Thune promised that the package will include enhanced unemployment insurance of $300 a week.

And I’m sure Congress will come back to the bargaining table with yet another stimulus plan. (Why not? It’s not their money!) Former hedge-fund manager and chief investment officer Neil Grossman put it well when he wrote on Trish Intel this week that when it comes to government, there’s a tune they can’t stop playing… Think 1980s Dire Straits, “Money For Nothing and ‘Checks’ for Free.”

I’ve long argued against the unintended consequences of too much stimulus… It was a fatal error of the Obama-Biden years to think they could offer an $800 billion stimulus-to-nowhere, along with an increasing threat of regulations and higher taxes, as a “solution” for our then fragile economy that was trying to mend itself after the subprime crisis of 2008 (a crisis the Fed and our government were highly at fault for creating.) 

The Obama-Biden team left the health of the economy almost entirely up to the Federal Reserve… And lucky for investors, the market had a kind of Fairy Godmother in Janet Yellen.

Yellen’s perpetually low interest rates on the heels of Ben Bernanke’s multiple rounds of quantitative easing enabled the Fed to help keep markets afloat. 

But the Fed can’t do it alone… By not offering more economic clarity on policy (nor, frankly, much in the way of positivity) the Obama-Biden administration hindered our basic economy.

As such, the rich got richer (because they had the capital to invest in the markets) while the poor and middle-class felt the squeeze, as I explained in a recent American Consequences magazine issue.

And unfortunately, we’re running the risk of a similar pattern right now. Jerome Powell, though he did raise rates earlier in his tenure when the economy fared better, effectively toed the Fed party line… leaving rates remarkably low. So now, when we really need some help, what is the Fed to do?

Print more money, of course! And this time… it’ll have the help of Congress. 

We’ve already spent $3 trillion… We’re about to spend nearly $1 trillion more… And when Joe Biden takes office on January 20, I suspect there will be more spending on the way. 

We can’t afford this. So we’re effectively just kicking the can down the road, over and over again. You see, there’s little political incentive on either side to actually do what’s needed. It’s easier to offer giveaways than it is to tell Americans we need to cut programs. 

So here’s a novel idea…

Open Up, America! 

Instead of shutting down the economy entirely, as the Democrat lawmakers in California and New York are doing, why not open up with sensible measures in place to protect people against the virus? 

Shouldn’t it be up to me, as an individual, whether or not I’m willing to risk going inside to the 21 Club to taste their amazing chicken paillard? (They also had a terrific burger and fries in the bar section on the first floor.)

Of course I am capable of making that decision… I also believe businesses are capable of taking appropriate measures to protect their customers. After all, no proprietor wants to be responsible for causing a patron to get sick. It should be obvious to our government leaders, but apparently it’s not. So let me explain: No one wants to get coronavirus! (The way our lawmakers carry on – it’s as though they think people are deliberately trying to spread the virus.) 

But perhaps there’s something else going on… Perhaps some of our more vocal members of the Bluest states see this as an opportunity to get a bailout from the Federal government? If so, that is short-sighted and wrong… and as Grossman argues, a violation of our constitution… 

COVID exacerbated the fiscal problems so many states face, however, let’s be clear, many (aside from low tax states like Texas, New Hampshire, and Florida) were ALREADY fiscal disasters. COVID highlighted how poor fiscal management can handicap government’s ability to respond to crisis. Had our elected officials acted responsibly and done what they should have long ago, the national discussion would be very different. 

Many of the “old-line” states, unwilling to impose cuts on unaffordable services and pensions, have struggled to manage the impact of rising debt loads on their ability to meet basic needs. Fiscal mismanagement was viewed as something like the plague. Aside from the brief popularity of the Tea Party, there has never been ANY concept of how to develop an anti-deficit “vaccine” at the state and local level. There is no Moderna nor Pfizer equivalent for debt.

Isn’t this just a version of stealing? The irresponsible states intend to place their economic burden on the responsible states. Unlike New York, Florida has taken measures to allow its economy to open. So, why should Floridians be on the hook for New York’s problems? Perhaps instead, Governor Cuomo should be forced to take a page out of Governor Ron DeSantis’ book?

The pandemic came out of nowhere… But the economic crisis is one of our own making.

A Champagne Toast

As for the 21 Club, I’ll always have fond memories…

I loved going to frequent monthly dinners there to discuss the future of economic policy with so many brilliant economists and business leaders like Steve Moore, Steve Forbes, Larry Kudlow, and Dr. Art Laffer at the Committee to Unleash Prosperity. We’d brainstorm about economic policies that could better lead our country, and they were informative gatherings held in a place with so much history. 

I also remember taking my mother there for a glass of champagne one evening after my show three years ago. It was around this time of year and the restaurant was all decked out for Christmas. That feels like a lifetime ago… yet another sign of the times. 

Congrats to the 21 Club on an amazing 98 years. 

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Regards,

Trish Regan
Executive Editor, American Consequences
With P.J. O’Rourke
December 17, 2020