Making News: New Marketwatch Column on the Trump Solar Tariffs — & More!

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I’m pleased to announce the publication of my latest op-ed piece – a column for Marketwatch.com explaining why President Trump was right in slapping tariffs on imported solar energy panels.  Here’s the link.

In addition, Joe Guzzardi of Progressives for Immigration Reform, recently wrote a column based on some of my findings on wage stagnation in the United States.  Through the Cagle Syndicate, it ran in several smaller newspapers around the country – e.g., here and here.

In the January-February issue of The American Conservative, Ted Galen Carpenter of the Cato Institute quoted my views on defense burden-sharing in America’s security alliances in a piece he did on the threats created by these arrangements.  The article, alas, is behind a pay wall.

Finally, in a January 19 post, Brendan Kirby of Lifezette.com featured my views on Apple’s announcement of new investments in U.S. domestic manufacturing.  Here’s the link.

And be sure to keep checking in with RealityChek for news of upcoming media appearances and other developments.

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(What’s Left of) Our Economy: Behind Manufacturing’s Real Wage Stagnation

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Nowhere has the U.S. economy’s persistent wage stagnation been more persistent or dramatic than in its manufacturing sector – even though industry has regained nearly half the jobs it lost during the last recession, even though its payrolls more recently have actually been increasing at a slightly faster pace than those for the overall economy, and even though manufacturers keep telling Washington that they have hundreds of thousands of job openings.

A close examination of the data reveals one apparent piece of the answer: Since the economy’s last employment bottom, in March, 2010, an outsized share of manufacturing hiring has taken place in sectors that either pay relatively poorly, or in one key instance, whose inflation-adjusted wages have sunk significantly.

According to the Bureau of Labor Statistics, since those gloomy 2010 days, manufacturing employment is up by 9.48 percent (or 1.086 million jobs). Real wages, however, have risen by only 0.80 percent during that period. This poor performance becomes a lot less mysterious given the makeup of manufacturing job creation since early in the current economic recovery.

Over that near-seven-year time-span, nearly 82 percent of all manufacturing hiring has been concentrated in five industries, and three of them – comprising just over half that total – both paid wages below the manufacturing-wide figure of $10.66 per hour in March, 2010: fabricated metal products, food products, and plastic and rubber products.

Since then, their after-inflation wages are down by 0.24 percent in the first, up by 4.82 percent in the second, and down by 0.22 percent in the third.

One big sector of the five biggest recovery-era manufacturing job creators – machinery – paid 4.13 percent higher than the average manufacturing wage in March, 2010, and real pay has risen by a healthy 7.70 percent since then.

But this out-performance has been more than outweighed by the price-adjusted wage drop in manufacturing’s post-March, 2010 hiring champ – the automotive sector. Motor vehicle and parts production represented 5.77 percent of the nation’s manufacturing jobs at the employment bottom. Since then, however, it’s represented fully 25.85 percent of the sector’s new hires – punching above its weight by a factor of nearly five.

And here’s the rub. Since March, 2010, inflation-adjusted automotive pay has decreased by 3.91 percent. And during this period, this industry has added more than twice as many workers as have machinery companies.

In addition, the reverse has also been true in manufacturing: Way too little of the employment increase since the March, 2010 bottom has taken place in its best-paying sectors. And their wage increases also have been unimpressive at best in real terms for the last nearly seven years.

For example, the nation’s computer and related electronics industries paid wages that topped the manufacturing average by just over 39 percent in March, 2010. Yet its payrolls have fallen since by 3.79 percent, and wages have declined by 2.50 percent after inflation.

Aerospace workers (including parts) made just short of 61 percent of the average manufacturing worker in March, 2010. Since then, constant dollar wages have risen by 4.85 percent, but payrolls have increased by a bare 0.25 percent.

In the petroleum and coal products sectors, the average was topped that for manufacturing overall by just over 45 percent at that manufacturing employment bottom. But employment is off by 2.40 percent.

It’s tempting to chalk up the employment changes (but surely not the pay trends) to gains in productivity – which are presumably displacing workers. But the BLS’ latest data on labor productivity by manufacturing sector reveal no clear general pattern. Many industries that have been boosting both their after-inflation output and their labor productivity (rather than boosting efficiency simply by doing less with even less) fall into the low-wage category. And many sectors with both falling productivity and real output are often labeled “high tech” and “industries of the future.”

What is clear is that, just as low-wage jobs show signs of increasing prominence in the overall American employment scene, the same trend looks like it’s taking hold in manufacturing.

Our So-Called Foreign Policy: The Establishment Goes Farther Off the Deep End on North Korea

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James Jeffrey’s new post in The Atlantic on the North Korea nuclear crisis has so much to commend it. (Yes, there’s a “but” coming, and it’s enormous, but let’s give him his due.)

The former U.S. Ambassador to Turkey and Iraq valuably reminds readers of the dangers of assuming – as per the latest conventional wisdom – that North Korea’s motives for developing nuclear forces potent enough to threaten the American homeland are purely defensive. This confidence, he notes, may be convenient for justifying a call for the United States to clear the way for a negotiated solution to the crisis by backing off its longstanding insistence on Pyongyang’s denuclearization. But no one aside from Kim Jong-un himself can have any confidence in assessing what’s inside his head.

As a result, Jeffrey also recognizes that the nuclear deterrence strategy that helped prevent Soviet and Chinese aggression during the Cold War (and so far seems to be helping curb Russian and Chinese expansionism nowadays) is far from guaranteed to work against a leader with a history of erratic and even violent behavior, and who is heir to a regime with a similar history – including absorbing enormous sacrifices to “reunify” the Korean peninsula under its rule. (At the same time, Jeffrey seems to undercut these arguments at the end by calling the denuclearization goal unreasonable, and signaling his support for a compromise that would leave the North with “some nuclear capability” in exchange for “a ‘temporary’ diplomatic solution that stops North Korean development of systems that can strike the U.S.”

In addition, Jeffrey forthrightly explains that both the Cold War deterrence strategies and their latter-day Korean counterpart depended on a gamble that involved putting the U.S. homeland at risk of nuclear attack, and denying an American president any real choice but to push the nuclear button that would surely bring this about.

Finally, the author understands that U.S. security interests could be powerfully served – and deterrence on the Korean peninsula strengthened – by encouraging South Korea and Japan to develop their own nuclear weapons (although he never addresses the objection that neither country would likely go to these lengths as long as they can free-ride on the American defense guarantee).

So Jeffrey deserves great credit for going beyond conventional foreign policy thinking in many important respects. But in the most important respect by far, he’s solidly inside the consensus – which astonishingly, and let’s face it – derangedly – believes that there is any objective that the United States could achieve that’s worth any significant risk of nuclear attack on one or more major American cities.

Specifically, the author believes that North Korea may indeed have aggressive aims, and that the nuclear forces it will soon possess will be powerful enough to keep the United States on the sidelines if he attacks the South for fear that he will strike at the American territory. As a result, he believes that “the possibility of military action against North Korea could be understood not as a ‘good thing,’ but as the ‘least bad.’”

And although he does not call on the Trump administration to launch a “preventive war” to take out the North Korean nukes, he insists that steps that could result in such an attack on the United States, namely “a preemptive strike (or generating a credible threat of one to frighten China to act against Pyongyang), however awful, could be the least risky” way to a avoid several even worse alternatives.

And what are these alternatives? On top of the conquest of the South, and abandoning 80 years of global collective security,” or watching “China intervene to ‘check’ Pyongyang, thereby pulling South Korea (and Japan) into China’s security orbit and ending the security regime the U.S. has maintained in the Pacific since 1945.”

I agree that these would be important setbacks for American interests. But would they be worse than watching several major U.S. metropolitan areas become burning, glowing wastelands? This is where I get off the boat – and I believe anyone with a lick of sanity should follow.

Do you and the rest of the American people agree? I strongly suspect the answer to both questions is “Yes,” but re the latter, here’s what’s most outrageous, and indeed unacceptable: We have no way of knowing, because all wings of the nation’s foreign policy establishment have pursued a strategy of hiding these risks from the public.

That’s why I keep contending that, given North Korea’s impending ability to hit the United States with nuclear weapons, the only policy capable of eliminating this threat (to the extent possible) is pulling the American forces out, thereby removing any reason for North Korea to launch a nuclear strike on American territory, and allowing the powerful, wealthy countries of the region handle Kim anyway they wish. Alternatively, let’s at least put this question – literally one of life and death – directly to the Americans who have been hoodwinked for so long and who would pay the price of hewing to the status quo, and see what they think.

(What’s Left of) Our Economy: Trade Policy Critics Need a Steeper Trump Learning Curve

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In at least one major respect, it should be clear by now that the more things have changed in U.S. trade policy under President Trump, the more they’ve remained the same. Unfortunately, an otherwise fine op-ed in yesterday’s New York Times just revealed that this message hasn’t been received by some prominent supporters of trade policy overhaul.

The article, by Scott N. Paul of the Alliance for American Manufacturing, made all the standard (and in my view, very compelling) economic and domestic political arguments on behalf of imposing tariffs or quotas or both on U.S. imports of steel. (Full disclosure: I’ve worked informally with Paul’s organization for many years, though we’ve differed on tactics from time to time.)

And if Mr. Trump was focused like the proverbial laser beam on aiding important American industries besieged by predatory foreign trade practices, this piece surely would serve an important purpose – influencing fence-sitting Members of Congress and in the chattering classes, and even some opponents.

But Paul’s need to write this article in the first place, and especially to point out (correctly) that Trump trade curbs that were widely expected have now been delayed for months, shows that the main obstacles to these steel moves aren’t on Capitol Hill or in the think tanks and news media. They’re in the Trump administration itself. And the principal reason seems to be one that has shaped the trade policy debate for decades, and that has typically knee-capped reform efforts: national security.

It’s true that as both a candidate and as President, Mr. Trump has promised that the days of “globalist” decisions to prize foreign policy interests and especially smooth relations with America’s allies over domestic needs would end. His Inaugural Address memorably scored “a small group in our nation’s capital” for having

enriched foreign industry at the expense of American industry; Subsidized the armies of other countries while allowing for the very sad depletion of our military…. defended other nation’s borders while refusing to defend our own; And spent trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay. We’ve made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon.”

Nonetheless, according to all reports, top Trump administration national security aides, especially Defense Secretary James Mattis, have erected major roadblocks to turning this rhetoric into reality. The reason? Although China’s government-subsidized steel glut has attracted most of the attention, the proposed tariffs would hit steel shipments from many leading American allies. Their protests appear to bear out the U.S. steel industry’s contention that the Chinese steel that’s been flooding world markets has pressured other steel-producing countries to maximize their own imports – especially to the United States, whose market has remained generally open – and that in some cases, Chinese steel products are being re-exported to the United States as other types of products.

Nor is this the only instance of a Trump trade-foreign policy trade-off. The President has stated he’s postponed imposing other sanctions on China in order to persuade Beijing to crack down harder on North Korea for maintaining a nuclear weapons program.         

Unless American trade policy critics start addressing these considerations, they’re likely to extend a long string of policy defeats. Two counter-arguments are especially promising.

The first is that the general practice of buying and keeping allies’ (or other countries’) good will by turning the other cheek on trade policy is unnecessary. In all of these cases, the country in question faces far greater security threats than does the United States. Therefore, there’s no need to offer any inducements to accept American military protection, or to produce cooperation toward shared goals. And if these countries now believe they’re in the clear, security-wise, and can resist or ignore trade pressure from Washington with no damaging consequences, they’re not going to be very reliable allies or partners going forward.

The second, and overlapping, argument is that the by far best guarantors of America’s security and prosperity are the country’s own domestic capabilities, not alliances or any kinds of relationships with foreign countries. And as suggested above, this goes double for relationships with countries who seem to value their own tariffs and subsidies over military protection from the United States or objectives like eliminating North Korean nuclear weapons.

In other words, President Trump’s commitment to America First trade policies has been far from absolute. If trade policy critics want him to govern more along the lines of Candidate Trump, they’ll need to raise – and broaden – their game.

(What’s Left of) Our Economy: The Big Messages Being Sent by a Jetsons-Like Invention

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Along with the rest of the world, I just got another reminder that the future is arriving a lot faster than most of us expect. And that’s got especially big implications for related points I’ve long been making about U.S. immigration policy and efforts to boost the country’s minimum wage.

For many years, when I’ve spoken about immigration policy, I’ve used the following argument to explain the relationship between the mass immigration America has fostered for so long (including winking at illegal immigration) and the productivity gains and technological progress needed to ensure that living standards can improve in a sustainable (not bubbly) way:

Does anyone remember Rosey, the robot maid on the 1960s TV cartoon show, ‘The Jetsons’? Did you ever wonder why, decades later, there’s still no Rosey – or anything better than a Roomba? A major reason has to be that, with so many legally and illegally present housekeepers and housekeeper candidates available, and willing to work so cheaply, there’s been little incentive to automate domestic work.”

It was my way of using pop culture to illustrate why a big spur to technological progress (and the higher productivity it tends to bring) for the United States in particular has been the scarce labor situation that’s existed for most of American history. With workers in chronically short supply, and therefore increasingly expensive to hire, U.S. businesses were constantly looking for labor saving devices that could cut their costs. And American inventors were terrific at seizing the opportunity and providing them.

In other words, the U.S. economy was behaving exactly the way the textbooks said it should. When labor became too costly, business stepped up its search for ways to substitute capital (which often meant) technology, for those overly dear workers. More recently, as labor has become more abundant (and therefore, all else equal, cheaper), this dynamic has often shifted into reverse.

Incidentally, mass immigration policies aren’t solely to blame. Offshoring-friendly international trade deals like the North American Free Trade Agreement (NAFTA), and similar trade policies (like coddling China’s trade predation) have also greatly expanded the amount of workers realistically available to American employers, especially in sectors like manufacturing. And it’s surely no coincidence that business spending on equipment and machines and the like (called capital spending) has been a notable weakness lately in the U.S. economy. (In fact, although many factories in China are automating rapidly – because of wage increases – this report makes clear that labor surpluses are still slowing its pace in some important Chinese manufacturing industries.)

What has this to do with Rosey? Simple. As this Washington Post piece from last week shows, she’s here – or just about here. For at the latest annual Consumer Electronics Show (one of the tech industry’s major events), a company called Aeolus Robotics unveiled a device that looks awfully similar. According to the Post reporter, this “child-sized” machine

performed domestic duties such as mopping, picking up stuffed animals off the floor and moving furniture, and, perhaps most impressively, retrieving drinks from the fridge using an intricate-looking grabbing arm — all without human assistance.”

The robot – billed as “the first multi-functional robot that can act like a human being” – still doesn’t crack wise in a New York accent, like the cartoon Rosey. But how far off can that be?

Technology and labor costs hardly move in lockstep, and of course innovation results from many causes. But economic theory, anyway, is saying that my view on the cost and supply of domestic workers is becoming outdated. Common sense also suggests that if something like Rosey is just about here, then domestic workers aren’t as cheap and/or as abundant as I believed. So their wages may well have been rising strongly enough lately to create demand for an automated counterpart.

At the same time, the advent of “Rosey” (and how many other devices like “her” just over the horizon?) amounts to a frantically waving red flag about the wisdom of any immigration policy moves likely to increase the supply of poorly-skilled workers in the American economy – which is to say, any proposals supported by the national Democratic Party and the rest of the country’s Open Borders enthusiasts. Just what kind of work can they be expected to find? Indeed, the automation progress represented by “Rosey” signals that much of the existing workforce in the nation is going to be increasingly hard-pressed to secure or hang onto decent-paying jobs.

Similarly, although I believe there’s still a strong economic (and moral) case for a national minimum wage that tracks inflation, the seemingly impending dawn of the Age of Rosey raises big questions about the wisdom of the kinds of minimum wage jumps sought by the “Fight for 15” campaign and other activists.

Rosey’s” appearance at the Consumer Electronics Show doesn’t mean that I’ve come down one way or the other in the vital debate taking place today over whether all this recent technological progress ultimately will be a net job killer or creator. But it seems clear as a bell that this tech wave is being completely ignored by the Open Borders and the Fight for 15 backers, and that Americans closest to the low end of the wage and income scale are likely to be among the biggest victims.

Making News: Podcast of Last Night’s Batchelor Show Interview on Trump and China Trade

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I’m pleased to announce that the podcast is on-line of my interview last night on John Batchelor’s nationally syndicated radio show.  Click on this link to hear a great discussion involving John, co-host Gordon G. Chang, and me on what to expect from the Trump administration going forward on China trade policy challenges.

And keep checking in at RealityChek for news of upcoming media appearances and other developments.

 

Making News: Back on National Radio Tonight Talking China Trade

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I’m pleased to announce that I’m scheduled to return to John Batchelor’s nationally syndicated radio show tonight.  The segment is slated to start at 9 PM EST and the subject will be the state of U.S.-China trade relations.

As you may have noticed, China trade policy has been prominent in the news lately because of President Trump’s phone call Monday with China’s leader, Xi Jinping, and because important deadlines are rapidly approaching for Mr. Trump to impose tariffs on some categories of imports from the People’s Republic.

You can listen live on-line at this link to what’s sure to be a lively discussion involving John, co-host Gordon Chang, and me. As usual, I’ll post a link to the podcast as soon as one’s available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

 

(What’s Left of) Our Economy: New Figures Report a Strong 2017 that Ended Weakly for U.S. Manufacturing

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The Federal Reserve’s new industrial production figures for December revealed that inflation-adjusted U.S. manufacturing output growth has slowed substantially. Its fractional (0.08 percent) monthly increase represented its worst sequential performance since August’s 0.14 percent dip. December’s near-standstill, moreover, followed a November upwardly revised 0.31 percent improvement that was much slower than October’s upwardly revised hurricane bounceback growth (1.50 percent). In addition, the December weakness was widespread, with real sequential growth in the durable goods supersector decelerating from November levels and such output decreasing in non-durables.

Nonetheless, domestic manufacturing’s full-year 2017 price-adjusted growth of 2.64 percent was its best annual increase since the 2.71 percent registered in 2011. For non-durable goods, its 2.64 percent annual real production advance was its best since 2005’s 3.95 percent. Inflation-adjusted production in the automotive sector rose on-month by 2.03 percent – its best rate since August’s 3.47 percent. Yet combined motor vehicles and parts output after inflation remained in a technical recession, standing 0.16 percent lower in December than in April. The December figures show that, adjusted for inflation, American manufacturing remains 2.25 percent smaller than when the last recession began, a decade ago..

Here are the manufacturing highlights of the Federal Reserve’s release on December industrial production:

>New Federal Reserve industrial production figures showed that a U.S. manufacturing production growth slowdown – which began in November following October’s hurricane bounceback – extended into a second month in December.

>After-inflation manufacturing output rose on month by a bare 0.08 in December, the worst such performance since August’s 0.14 percent sequential dip.

>Real monthly production for November was revised up from 0.22 percent to 0.31 percent, but that figure still represented a major decrease from the 1.50 percent constant dollar sequential growth in October – when industry mounted a comeback from early autumn’s hurricanes. The October figure was also revised up (for the second time) from 1.45 percent.

>The softness in the December manufacturing output figures was widespread. In the durable goods supersector, real production increased sequentially by a respectable 0.27 percent. But that performance was down from November’s 0.43 percent and October’s 0.54 percent.

>Constant dollar output in non-durable goods – the supersector most heavily affected by the hurricanse – fell sequentially in December by 0.12 percent. Its monthly price-adjusted growth in October and November was 2.57 percent and 0.17 percent, respectively.

>Viewed from a year-on-year perspective, manufacturing’s performance was much better. It’s full-year 2017 inflation-adjusted production increase of 2.64 percent was the best since 2011’s 2.71 percent – which was achieved much earlier in the current economic recovery.

>Durable goods’ growth of 2.65 percent in real terms in 2017 was its fastest rate since 2012’s 4.26 percent.

>For non-durable goods, its identical 2.64 percent real year production rise was its best such performance since 2005’s 3.95 percent.

>December was the best month for automotive output – which increased after inflation sequentially by 2.03 percent – since August’s 3.47 percent.

>But this crucial sector remained in technical recession, as its December inflation-adjusted production down by 0.16 percent since April.

>As of the December figures, after adjusting for price changes, American domestic manufacturing still remained 2.25 percent smaller than when the last recession broke out – ten years ago.

Im-Politic: Some Major Surprises in Trump Poll Numbers

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Even if you’re skeptical that pollsters are great at divining public opinion, you’ll probably agree that the results of a recent survey about President Trump’s popularity are absolutely stunning. In particular, the findings, reported last week in The Atlantic, show Mr. Trump has made notable strides in winning over African-American men and women, and Hispanic men – groups that overwhelmingly voted against him in the 2016 presidential election.

At the same time, the news wasn’t all rosy for Mr. Trump. The same poll showed that he’s lost ground with key constituencies that supported his run for the White House – namely among white voters.

The results reported by The Atlantic come from an on-line poll, so there are some reasons for skepticism. But the sample size was unusually large – more than 605,000 Americans were interviewed in this manner.

According to the exit polls, the President won only eight percent of the black vote in 2016. But the new findings, from SurveyMonkey, shows that his popularity with African-Americans has grown over the last year. The firm says that 23 percent of black men and 11 percent of black women currently currently approve of his performance.

The exit polls surprised most observers by pegging Mr. Trump’s share of the Hispanic vote at 29 percent. The Atlantic piece doesn’t give an Hispanic total for the newest findings, but the author of the article, Ronald Brownstein, writes that, “Trump’s 2017 approval rating slightly exceeded his 2016 vote share among Hispanic men, and was slightly below it among Hispanic women. ” Indeed, among Hispanic men, Mr. Trump’s support hit 40 percent.

More good – though not great – news for the President: SurveyMonkey reports his overall approval rating at 42 percent. That’s low historically, but it’s a bit higher than reported by the smaller, though more frequent, soundings from the major polling companies.

But that’s where the good news for the President stops. Principally, Mr. Trump carried 66 percent of the overall white vote in 2016. The SurveyMonkey report shows that his approval rating among whites is now just 56 percent. Among college-educated whites, his favorability numbers are down from 48 percent to 40 percent, and among whites without a four-year degree, his support has slipped since Election Day from 66 percent to 56 percent. And his position weakened considerably among white women however this population is sliced and diced.

If you’re a glass half-full Trump backer, you could be heartened upon realizing that most of the negative trends could easily be reversed with just a little more discipline and reasonably good judgment from the Oval Office. If you’re a glass half-empty type, you’ll emphasize that both qualities remain in distinctly short supply.

Those Stubborn Facts: What Trump Voters Say They Want

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Non-College-Educated Whites’ Stated Top 2016 Presidential Election Issue Priorities*:

Building a Border Wall: 31%

Imposing Tariffs on Predatory U.S. Trade Partners: 65%

Improving Infrastructure: 65%

*From a January, 2017 survey

(Source: “With Fireworks, Washington Returns to the Core Trump Agenda,” by Gerald F. Seib, The Wall Street Journal, January 15, 2018, https://www.wsj.com/articles/with-fireworks-washington-returns-to-the-core-trump-agenda-1516035795?mod=e2tw(