(What’s Left of) Our Economy: Senate Fast Track Vote Reveals Widespread Trade Policy Cluelessness

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With the Senate approving fast track negotiating authority for the president in the wee hours today, it’s an ideal time to take stock of where Mr. Obama’s trade agenda stands.

First, the fast track debate now heads to the House of Representatives, which has always been more resistant to the trade strategies pursued by America for at least two decades. Campaign finance dynamics largely explains why: Since Senate seats are state-wide offices, they’re much more expensive to win that House seats, and therefore big money is especially important. And America’s big money loves job- and growth-killing trade deals.

Second, largely as a result, just in terms of political score-keeping, the Senate’s endorsement is no big deal. In fact, the only real suspense came on a vote on a measure that would have required any trade deals submitted to Congress to contain enforceable disciplines on currency manipulation. It was defeated, but only by a 51-48 vote. At the same time, the details of this issue speak volumes about how un-seriously even well-intentioned American leaders handle trade issues.

As I’ve explained before, even the measure offered by Republican Senator Rob Portman of Ohio and his Democrat Debbie Stabenow of Michigan would have done nothing to solve this problem. Why not? There’s no global anti-currency manipulation consensus (and indeed, many countries are determined to either use it or retain the option). Moreover, future U.S. trade deals, such as the proposed Trans-Pacific Partnership (TPP) are likely to include majoritarian dispute-resolution systems just like their predecessors. Therefore, any American complaints filed under the new regimes can be expected to go exactly nowhere.

But let’s give supporters of the amendment the benefit of the doubt and just assume that they hadn’t had time to think this far ahead. This shortcoming could be entirely forgivable given how vehemently and for how long the opposition, led by President Obama and Congress’ Republican leaders, has rejected effective responses to currency manipulation. It would still be anything but clear why so many Portman-Stabenow backers wound up favoring the fast track bill once the currency provision went down – including Portman himself, who had warned colleagues that without his measure, “In one week, through currency exchanges, you can undo years of benefits in terms of reducing tariffs and non-tariff barriers in a trade agreement.”

Another example of how fundamentally inane the fast track debate has become concerns the economically tangential, but of course morally abhorrent, issue of human trafficking. The subject was injected into trade policy and politics by Democratic Senator Robert Menendez of New Jersey, who offered an amendment that would bar Congress from using fast track procedures for any trade deals with countries officially accused by Washington of egregious human trafficking records. TPP first-round member Malaysia falls into this category.

Even though the Obama administration regarded it as a TPP-killer, the Menendez measure passed the fast track- and offshoring-friendly Senate Finance Committee by a strong bipartisan 16-10 vote. Fast track supporters evidently were counting on weakening it enough to make it acceptable to the White House and to the Malays, but somehow the full-strength Menendez amendment survived and was included in the final trade legislation. It’s easy to see how fixing what fast track backers insist is a major problem could push the bill’s journey through Congress further into the intensifying 2016 presidential campaign cycle, and thus threaten its chances.

But the Malaysia trafficking fight is noteworthy in at least three other respects, too. First, it’s as vulnerable to nullification by TPP members as the Portman-Stabenow currency measure. Second, it’s also vulnerable to nullification by President Obama, who could in principle appease the Malaysians and others simply by certifying that their trafficking record has improved. But even if these two propositions were not true, the Malaysia ruckus reveals a third fast track and TPP-related complication that looks especially damaging to their supporters. For it belies sweeping claims by the president and his trade policy supporters that the TPP is creating high, enforceable standards in areas like labor rights and environmental protection.

If the president is right (and I’ve explained why, for separate reasons, he isn’t), then TPP will serve as “the most progressive trade deal in history” because its social and human rights and ecological and other requirements will be strong enough to require violators to change their ways – presumably by threatening them with the loss of trade preferences created by the agreement. But according to fast track backers, including the president, Malaysia is not only not preparing to clean up its human trafficking act. It’s threatening to torpedo the whole TPP if the measure survives. And judging by these expressed fears, it’s succeeding. If according to Mr. Obama, Malaysia feels free to resist a TPP rule on a practice that is in effect the toleration of slavery, why won’t other developing countries feel equally free to resist TPP rules in much more (legitimately) controversial areas, like appropriate levels of worker rights and environmental protection in developing countries?

The continuing irony surrounding the fate of fast track and TPP is that the Obama trade agenda is so misbegotten that it could well fail in the House without critics raising any of the above contradictions. But beyond the immediate future, they’re important because they make clear that even if many fast track opponents succeed in reshaping American trade policy to reflect their stated priorities, the resulting new agreements would damage the U.S. and world economies as much as their predecessors. Much more radical surgery on this policy front is needed. If fast track’s defeat doesn’t spotlight that need, American leaders will have missed an all-too-rare opportunity to help foster genuine, because sustainable, growth nationally and globally.

(What’s Left of) Our Economy: This Isn’t a Low-Wage Recovery – If You Use a Low Bar

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Given all the economic subjects syndicated columnist Robert Samuelson could be outraged about, the claim that the current U.S. recovery is creating mainly low-wage jobs seems a strange choice. In his May 20 column,  he writes emphatically, “It turns out that this is wildly misleading and that the economy’s employment profile — the split between high- and low-paying jobs — hasn’t changed much since the recession or, indeed, the turn of the century.”

Even if you look at the numbers more closely than the recent research cited by Samuelson, you find that he’s correct – but only in the most technical sort of way. Much more important, though, a detailed examination of wage data shows that low-wage jobs represent a share of total U.S. employment with which no one should be happy, and that this percentage has been growing steadily over time. Moreover, this increase is especially disturbing considering some other labor force developments that have hardly been secrets.

Samuelson reports that he asked Elise Gould of the progressive Economic Policy Institute to “examine whether the recession has shifted the economy’s job distribution.” Her main finding: Hardly at all. According to Gould, in 2000, low-wage jobs (those that paid less than today’s average wage of $25 per hour, made up 24.4 percent of American workers. In 2007, the year the recession officially began (at the very end), this figure had risen to only 25 percent. And this year’s latest numbers show it only increasing to 25.7 percent. So the trend is going the wrong way, but as Samuelson emphasizes, “It’s striking how little has changed.” Moreover, he rightly observes that the recession can’t be the only cause.

To his credit, Samuelson mentions another economist who comes up with considerably larger absolute numbers for the low-wage share of total jobs (about 40 percent) but who contends that their increase has been “somewhat greater.”

I was pretty confident that Gould’s figures for absolute levels of low-wage employment were too low mainly because the categories she examined were too broad. As I’ve pointed out, even super-categories like “professional and business services,” which overall pays better than average, contains a large share of low-paid workers (in its case, 43 percent as of the latest – April – Labor Department monthly jobs report). I also suspected that much the same held for health-care services, which Gould and Samuelson regard as middle-wage.

When I ran my own numbers, breaking out some of the obvious low-wage sectors of health-care services (like home health-care aides), I did get higher absolute numbers of low-wage jobs than Gould – 36.55 percent of private sector workers as of April. But I was surprised to find that this share hadn’t risen much over the last few economic cycles.

In December, 2001, when the previous decade’s economic expansion began, low-wage workers comprised 34.38 percent of all private sector workers. By November, 2007, when that (bubble-y) expansion officially ended, percentage had actually dipped to 34.33 percent. When this recovery began, it stood at 35.50 percent. And by this April, low-wage workers represented 36.55 percent of the private sector workforce.

My numbers, therefore, also indicate that the current recovery has indeed seen outsized employment growth in low-wage industries, but that this problem has not gotten significantly worse.

So what’s the problem? I can think of two big ones, neither of which should have escaped Samuelson’s notice . First, since the Great Recession struck, American workers have been dropping out of the workforce like flies. As widely noted, the Labor Force Participation Rate – the share of Americans either employed or actively looking for work – fell sharply during the downturn and through the recovery, and now stands at near-four-decade lows.

Although that’s just as widely – and correctly – seen as economically damaging, one logical byproduct should be a greater share of Americans holding better jobs. Unless we really think that most of those who have exited the labor force are enjoying cushy retirements? As a result, even the modest rise that’s been witnessed in the low-wage share of total private sector jobs should be alarming given how few Americans relatively speaking are still working.

Second, a large, growing (even modestly) share of U.S. workers in low-paying jobs would make sense in an economy with strongly growing productivity. In principle, the better-paying sectors, which tend to be the most productive, would see their job gains at least restrained by dint of being able to generate ever more output with ever smaller payrolls. But America’s labor productivity (the type of productivity for which we have the timeliest data) has been growing weakly throughout the current recovery, and has actually fallen for the two straight quarters

Moreover, even the traditionally high productivity manufacturing sector has been faring poorly lately in this critical respect – meaning that if its output keeps expanding (which has been the case), its employment increases should be especially robust. Yet job-creation in the low-wage sectors – which tend to be low-productivity, too – continues to outperform.

So let’s give a cheer-and-a half to Samuelson for dispelling the belief that America has lost the ability to create meaningful numbers of jobs that don’t involve asking “May I take your order?” or something similar. But as a result, we’re entitled to ask why he – and others – aren’t investigating why these jobs remain so prevalent, especially when so many other economic indicators tell us that the labor market should be looking much healthier.

(What’s Left of) Our Economy: Where’s the Wage Inflation? (Cont’d)

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I don’t know why the U.S. wage figures that adjust for inflation get so much less attention from politicians, economists, and investors than those that don’t take into account rising living costs. Maybe mainly because the pre-inflation numbers come out along with each month’s anxiously awaited jobs report, while the real wage figures are issued about three weeks later?

Whatever the reason, the inflation-adjusted numbers deserve much more attention. For they’re far and away the best measure of whether workers are keeping their economic heads above water or falling further behind, and whether their bargaining power is or isn’t threatening to fuel strong price increases throughout the economy. And today’s new Labor Department real wage data (which is still preliminary, along with the March numbers) show undeniably that the answer is a resounding “No” on both counts.

Wage “inflation” for the private sector on month in April was exactly zero – for the second straight month. This means inter alia that real wages are actually down since January, from $10.55 per hour to $10.54.

If you try really hard, you can make a modest case for some signs of wage life over longer periods. At 2.33 percent, the April year-on-year rise was certainly stronger than 2013-14’s flat-line and 2012-13’s 0.88 percent increase. But it’s still in line with all the previous 2015 annual increases. Moreover, nearly six years after the current recovery officially began, real private sector wages are still only up 2.13 percent.

Don’t bother looking for any wage inflation in the manufacturing sector – an historic American wage leader that’s turned into a major laggard during this recovery. Inflation-adjusted wages in industry failed to move at all in April for the third straight month. Year-on-year, these manufacturing wages were up just 1.82 percent in April. That’s marginally better than its January-March counterparts, but mainly because inflation-adjusted manufacturing wages fared so poorly in early 2014.

And although this past April-April has been much better for manufacturing workers than the last two – when real wages in industry grew by a measly penny in toto – real manufacturing wages are still down 0.75 percent during the recovery.

The April real wage data did contain ray of hope for the nation’s automotive workforce. Real wages in this sector – which has been leading manufacturing’s recovery bounce-back – jumped 1.24 percent over March levels. If it holds, that will represent the best monthly advance since November, 2013. But this latest improvement followed a (still preliminary) 1.13 percent decline in March. This decrease in turn was the biggest since…last April.

As a result, we’re left with mixed results for automotive wages, for this tendency toward monthly volatility contrasts with 2015 annual growth figures that are by far the industry’s best since pre-recession days. Nonetheless, real auto wages suffered so greatly during the recession and the early recovery years that they’re still down 3.38 percent during the current six-year expansion.

Indeed, the sector’s real wages have been so depressed recently that they are now struggling to stay ahead of the private sector’s overall. That’s important because of the historic role played by American automakers in building the nation’s middle class in the post-World War II period. Indeed, at technical the start of the last recession, in December, 2007, real automotive wages were 12.45 percent higher than private sector wages in general. As of April, the gap had shrunk to 0.47 percent – and those private sector wages adjusted for inflation are up just under five percent total during that seven-plus year stretch.

If anyone can tell me how this adds up to a picture of American manufacturing roaring back in any way but taking a low road, RealityChek’s comments section is open for business!

Those Stubborn Facts: China’s “Weakening” Export Growth in Perspective

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China’s “Weakening” Export Growth Dwarfs America’s

“Foreign buyers’ appetite for made-in-China products has also weakened. China’s exports were up 6.1% in 2014, slowing from a growth of 7.9% in 2013.”

The Wall Street Journal, May 19, 2015

U.S. global goods exports 2014: + 2.66%

U.S. global goods exports, 2013: +1.95%

(Sources: “China Unveils Blueprint to Upgrade Manufacturing Sector,” The Wall Street Journal, May 19, 2015, http://www.wsj.com/articles/china-unveils-blueprint-to-upgrade-manufacturing-sector-1432009189 and calculated from “U.S. International Trade in Goods and Services, 1992-Present,” Foreign Trade Division, U.S. Census Bureau, http://www.census.gov/foreign-trade/statistics/historical/exhibit_history.pdf)

 

Making News: New Hill Article on Obama’s Other Trade Cover-Up

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I’m pleased to announce that The Hill newspaper, which specializes in covering Congress, has just posted a new article of mine presenting the evidence that keeping the text of the Trans-Pacific Partnership (TPP) agreement tightly guarded isn’t the only trade-related cover-up being conducted by the President Obama.  The administration has also buried deep within the Commerce Department website state-level data on imports – even as it publishes and publicizes studies that only report state-level data on exports.  And even as such cherry-picked figures have become mainstays of its own campaign in favor of new trade deals and trade negotiating authority, and the lobbying of offshoring multinational business interests.

As made clear in the article, the import data shows that most individual states have been running high and rising trade deficits during the current recovery – which means that trade flows have been undercutting their growth and job creation, not strengthening it.  In addition, the article IDs many of the leading Senators and House Members whose support for current trade strategies means that they’re voting against their state’s economic interests.

(What’s Left of) Our Economy: More Trade Double-talk from Obama

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President Obama has repeatedly tried to justify to critics his progressive trade policy bona fides by acknowledging how far so many previous trade deals have fallen short of their promises – and then insisting that his proposed Trans-Pacific Partnership (TPP) and a companion European deal are incorporating the right lessons.

The trouble is, the rest of his administration doesn’t seem to have gotten this message, conveying the impression of a government speaking literally out of both sides of its mouth – and therefore undeserving of sweeping new fast track trade negotiating authority.

Speaking at the headquarters of offshoring-happy Nike earlier this month, the president acknowledged that “past trade agreements, it’s true, didn’t always reflect our values or didn’t always do enough to protect American workers.  But that’s why,” he insisted, “we’re designing a different kind of trade deal.”

Addressing progressive activists in Washington a few weeks earlier, Mr. Obama was even more emphatic:

“[P]ast trade deals didn’t always live up to the hype.  A lot of trade deals didn’t include the kinds of protections that we’re fighting for today.  And I saw it in Chicago and in towns across Illinois where manufacturing collapsed, plants closed down, jobs dried up.  When I ran for office, I’d talk about a man I met who had to pack up his own plant before he was laid off.  And that made a mockery of the value of community and the dignity of work.  So for a lot of Americans, they attribute those changes to what happened in the aftermath of trade agreements.  And I understand that.  But we’ve got to make sure we learn the right lessons from that.”

No one, however, seems to have told the U.S. Trade Representative’s (USTR) office, the Commerce Department, or even the White House staff.

Thus according to USTR, “The process of opening world markets and expanding trade, initiated in the United States in 1934 and consistently pursued since the end of the Second World War, has played an important role in the development of American prosperity. According to the Peterson Institute for International Economics, American real incomes are 9% higher than they would otherwise have been as a result of trade liberalizing efforts since the Second World War. In terms of the U.S. economy in 2013, that 9% represents $1.5 trillion in additional American income.

Such gains arise in a number of ways. Expanding the production of America’s most competitive industries and products, through exports, raises U.S. incomes. Shifting production to the most competitive areas of our economy helps raise the productivity of the average American worker and through that the income they earn. With the ability to serve a global market, investment is encouraged in our expanding export sectors and the rising scale of output helps lower average production costs. Such effects help strengthen America’s economic growth rate. Moreover, imports increase consumer choice, and help keep prices low raising the purchasing power for consumers. Imports also provide high quality inputs for American businesses helping companies and their U.S. employees become or remain highly competitive in both domestic and foreign markets.”

What’s not to like?

Then there’s Commerce: “Free Trade Agreements (FTAs) have proved to be one of the best ways to open up foreign markets to U.S. exporters. Trade Agreements reduce barriers to U.S. exports, and protect U.S. interests and enhance the rule of law in the FTA partner country. The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for U.S. companies to export their products and services to trading partner markets. In 2014, 47 percent of U.S. goods exports went to FTA partner countries. U.S. merchandise exports to the 20 FTA partners with agreements in force totaled $765 billion, up 4 percent from 2013. The United States also enjoyed a trade surplus in manufactured goods with our FTA partners totaling $55 billion in 2014.”

In other words, and contrary to the president, past free trade deals have indeed promoted American values as well as American economic interests.

Finally, the White House itself: “The Administration has made progress in expanding global trade opportunities for U.S. exporters by signing into law three trade agreements, enforcing U.S. companies’ rights under existing trade agreements, and strengthening trade relationships in major emerging markets.” So it seems like the president learned the right trade policy lessons even before launching into the TPP talks?

It’s perfectly reasonable (if factually challenged) for U.S. officials to argue that past trade deals have been big successes, and that therefore America needs more of them. It’s also perfectly reasonable for Mr. Obama to claim that past trade deals have often failed, but that he’s discovered a real recipe for success. But it’s anything but reasonable for a single administration to be taking both positions. If anything, it’s a tell-tale sign of a time-honored political trick: Throw enough mud at a wall and expecting some of it to stick.

(What’s Left of) Our Economy: The TPP’s Main Achilles Heel is Still Economic

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President Obama’s proposed Trans-Pacific Partnership (TPP) trade deal has attracted so much non-economic praise and criticism that it’s been understandably hard for many to remember that the strongest arguments against it concern its likely impact on both America’s growth and hiring, and on global recovery and financial stability.

It’s true that the TPP would affect realms of policy and life beyond the sale of goods and services across borders per se. In particular, it seeks better harmonization of regulations impacting health, safety, and other social priorities across the twelve member countries – and in ways that surely would curb national sovereignty. It will also inevitably bear on U.S. relations with East Asian countries at a time when China is displaying determination to replace America as kingpin in the Western Pacific. And let’s not forget the secrecy charges!

Nonetheless, economics deserves pride of place in the TPP and broader trade debate for two main reasons.  First, achieving most of America’s non-economic goals – including national security – ultimately depends on it ability to grow satisfactorily and in healthy ways. TPP and the endorsement of current trade strategies signaled by its passage would make that sustainable pie expansion all but impossible.  Second, the previous bubble decade should have taught Americans a bitter lesson about ill-considered trade expansion.  TPP’s passage would repeat the blunders that helped nearly blow up the entire world economy just over a half a decade ago.

The strongest evidence for TPP as an American recovery killer comes from examining what’s happened to that portion of U.S. trade flows most heavily influenced by trade agreements and related policies (like years of apathy re foreign currency manipulation). Adjusted for inflation, the rise in the non-oil goods deficit since the current expansion’s technical beginning in mid-2009 has slowed this sluggish recovery’s pace by nearly 20 percent in real terms, as of the first (still preliminary) first quarter 2015 figures. Nearly all this damage, moreover, has come in the private sector, which remains the economy’s only serious bet for genuine, long-term prosperity.

In other words, if the non-oil goods deficit, which was already $65.50 billion in the second quarter of 2009, had simply not gotten any worse through the first quarter of 2015, inflation-adjusted gross domestic product (GDP) would have grown by $95.40 billion more than its actual $487.30 billion increase. And although the relationship between economic growth and employment is ever more controversial, who can reasonably doubt that this faster expansion would have boosted hiring and therefore increased upward pressure on stagnant wages?

Many TPP supporters point to America’s already wide open markets and wonder why TPP would indeed worsen trade deficits. They need to look at America’s experience with the Korea-U.S. Free Trade Agreement (KORUS), which the Obama administration has touted as the high-standards model for TPP. In one sense, it’s clear why the president portrayed KORUS as the TPP blueprint: Korea’s economy is defined by the same kinds of non-tariff trade barriers found in many of the TPP countries, and America’s trade negotiators targeted them in their talks with Seoul before training their sites on the TPP group as a whole.

But since KORUS went into effect in March, 2012, U.S. goods exports to Korea have actually fallen on a monthly basis by 21.44 percent. U.S. merchandise imports from Korea are up by 33.58 percent. The most valid global comparison is with the nation’s worldwide non-oil goods balance, and it’s devastating. During this period, U.S. goods exports in this category increased by 2.32 percent, while merchandise imports were up 17.20 percent – just over half as fast as they surged from Korea.

Apologists for this dismal performance concentrate on exports and point to America’s service trade performance. But these flows so far have only been lightly affected by trade liberalization. Moreover, according to the latest (2012) official U.S. data, two-way U.S. Korea services trade ($27 billion annually) was dwarfed by goods trade ($101.18 billion). And signs are appearing that the U.S. services surplus with Korea could well go the way of the goods balance, as the high tech Korean economy keeps making steady progress in narrowing its global intellectual property trade deficit in particular.

TPP supporters also blame Korea’s sluggish recent growth for disappointing U.S. export and therefore overall trade performance under KORUS. But since 2012, Korea’s economy has expanded considerably faster in real terms (by 2.29 percent, 2.97 percent, and 3.32 percent, respectively) than America’s (2.32 percent, 2.22 percent, and 2.39 percent). A much more plausible explanation for export lag is KORUS’ entirely predictable failure to reduce significantly those Korean non-tariff barriers – which is bound to be repeated with the TPP zone for reasons that have bedeviled U.S. trade diplomats (and American producers) for decades: These measures, put into effect and maintained by highly secretive bureaucracies, are excruciatingly difficult even to identify, much less document in trade courts.

Meanwhile, the post-KORUS U.S. import surge from Korea also has a policy-related explanation with ominous implications for a post-TPP America. Seoul – and all the companies it still tightly controls – correctly interpreted the deal as a green light to ramp up shipments to the United States, in full confidence that Washington would ignore the various forms of subsidization largely behind their price competitiveness. Since major TPP countries like Japan, Malaysia, Singapore, Vietnam, and Mexico are comparably export-dependent, expect TPP to have the same disastrous effect on their trade flows with America. And if TPP does indeed have a docking provision, which means that new members can be added to the deal without Congressional approval once it’s finalized, the deal could wind up giving the same signals to a host of other export-led Asian economies, including China’s.  

Finally, the results of soaring U.S. trade deficits would damage not only the American economy but the global economy. As I’ve written repeatedly, many leading economists now acknowledge that the unprecedented global economic imbalances that built up in the last decade, and that were centered around the rapid expansion of U.S. trade with China and other developing countries, were instrumental in inflating the interlocking American spending and housing bubbles that burst so disastrously in 2007-08.

In particular, the offshoring spurred by these policies transferred enough production power to the third world to undermine U.S. consumers’ livelihoods and incomes, but couldn’t transfer enough consumption power to these populations to turn them into world-class spenders. The problem was exacerbated by the decisions of many developing countries to grow by amassing trade surpluses, not by consuming, and to protect themselves against financial turmoil by amassing large amounts of dollar and other foreign currency reserves – which also requires exporting much more than importing. When Washington decided to compensate for consequent losses in earned income by propping up American consumption with enormous budget deficits and then-record low interest rates, catastrophe became inevitable, and economies around the world were victimized.

The steady rebound of America’s trade deficits even during an historically feeble recovery and the president’s determination to conclude trade deals practically structured to supercharge them has put the United Stated and the rest of the world right on course for Financial Crisis 2.0. The sooner the TPP critics start going back to these economic basics, the more optimistic I’ll feel about defeating the president and creating a trade policy that makes this disaster less, not more likely.

Im-Politic: A Flawed Guide to Modern Populism

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This morning’s Washington Post article on the new-found popularity in American politics of the label “populism” makes a crucial point:  The term is becoming so widespread among so many different kinds of politicians that it’s threatening to become meaningless. After all, if everyone is a populist, can anyone really be?

At the same time, it’s pretty stunning how many more legitimate reasons for populism’s proliferation have been missed by author David Greenberg, a Rutgers University historian.

Chiefly, the author expresses thinly veiled contempt for Republican leaders who have adopted the populist mantle. “Its promiscuous application [nowadays],” he writes, “has usually meant forgetting and forsaking key parts of the original Populists’ agenda. This year’s Republican candidates — an assortment of senators, governors, a surgeon, a CEO — may rail against Washington and claim to fight for the little guy, but in most cases, their view of government’s role in economic life couldn’t be more starkly opposed to the Populists’ ideals.

Yet Greenberg overlooks the fact that since the late-19th century heyday of the original Populists, an impressive level of prosperity has become so widespread that a leading national economic challenge today is preserving a middle class worthy of the name, not creating one in the first place. One main reason is that “government’s role in economic life” has ballooned so dramatically. As a result, however, the defining characteristic of populism can no longer simply be support for yet more government spending.

Just as important, government’s immense scale – and consequent intrusiveness – combined with growing affluence, partly explains why conservatives who rail against this role do have some valid claim to populism. It also explains why this message resonates so powerfully among so many Americans who have not amassed fortunes of any size, and who believe that their lives – and their hopes for their children – have become more economically and financially fragile.

In addition, populism today is arguably broader than the big government-smaller government debate because two major sources of middle and working class economic anxiety – job-killing trade deals and immigration policies – are at best tangential to Greenberg’s framework.

To be sure, the author takes some Democrats and liberals to task as well for faux populism. But here his critique emphasizes style, not substance. Writing of Hillary Clinton, for example, he argues that because “symbolism matters in politics,” although she “can fairly claim to have voiced the concerns of those lower on the economic ladder, her years in establishment circles have made it hard for her to denounce a rigged system with the fire-and-brimstone zeal that the populist label suggests.”   

So Greenberg’s bottom line appears to be that a true populist today must not only stand for big government, but mainly champion society’s poorest. On the substance, this position is certainly defensible. But it’s an odd form of populism that doesn’t speak to the leading – and entirely valid – concerns expressed by a large demographic majority. Indeed, many prominent Democrats ,who worry about their party’s recent difficulties in winning middle and working class votes, will probably find populism a la Greenberg pretty deficient too.  

Moreover, the author’s priorities indicate that he’s mistaking populism for what is actually a phenomenon that New York Times reporter Noam Scheiber has brilliantly identified as “Boardroom Liberalism.”

As Scheiber wrote in a New Republic article last year, this political outlook is “a worldview that’s steeped in social progressivism, in the values of tolerance and diversity. It takes as a given that government has a role to play in building infrastructure, regulating business, training workers, smoothing out the boom-bust cycles of the economy, providing for the poor and disadvantaged. But it is a view from on high—one that presumes a dominant role for large institutions like corporations and a wisdom on the part of elites. It believes that the world works best when these elites use their power magnanimously, not when they’re forced to share it. The picture of the boardroom liberal is a corporate CEO handing a refrigerator-sized check to the head of a charity at a celebrity golf tournament. All the better if they’re surrounded by minority children and struggling moms.”

I explained here why this approach of throwing a continuing and even growing stream of crumbs to the poor is as looney on the merits as it looks politically cynical. Too bad Greenberg doesn’t seem to have read Scheiber before submitting his draft to the Post. Going forward, I’d suggest that he, and others, use these tests of populism instead: Who’s really getting the one percent’s goat? Who’s viewed as a genuine danger to its power and privilege? Because you can bet that the powers-that-be – which of course includes the Washington Post and the rest of America’s media elite – are too smart to waste their time trashing, ridiculing, and otherwise trying to marginalize phony populists.

(What’s Left of) Our Economy: April Growth So Feeble That Most of Domestic Manufacturing Now in Technical Recession

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Business travel prevented me from filing my usual same-day report, but yesterday morning, the Federal Reserve reported that inflation-adjusted American manufacturing production in April barely posted its second straight monthly increase.  The sluggish pace of growth and mixed revisions, however, left industry’s real output levels still below those of last November, and its 2015 growth rate paltry. Arguably just as important, the durable goods sub-sector – which represents more than half of domestic manufacturing – entered a technical recession (six months or more of cumulative real output decline), and several industries within durable goods extended their slumps.

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

>According to the Fed, constant dollar manufacturing production in April topped March’s level by just 0.01 percent. March’s real manufacturing output growth was revised up from 0.13 percent to 0.29 percent, but February’s initially revised 0.22 decrease was revised down to a 0.24 percent drop.

>As a result, after-inflation manufacturing output is 0.54 percent smaller than last November. Moreover, since January, this production has advanced by only 0.05 percent.

>The April Fed figures also show that durable goods manufacturing entered a technical recession (with real production down cumulatively by 0.32 percent since October), and such downturns grew longer in several critical durable goods sub-sectors.  In particular, 

>although inflation-adjusted automotive output rose by a healthy 1.30 percent on month in April, its production is still 4.22 percent lower than in July, 2014;

>thanks to a 0.85 percent monthly decrease in real output in April, machinery production is now down 0.52 percent since last August;

>a statistically insignificant monthly rise in April fabricated metals production after inflation left its real output 0.06 percent lower than its July, 2014 level; and

>real primary metals production rose by 0.54 percent in April following three straight monthly declines, but its inflation-adjusted output is down 1.42 percent since September, 2011. Indeed, since hitting its recovery peak last July, primary metals output has fallen 10.73 percent in inflation-adjusted terms – due in large measure to a flood dumped foreign steel.

>April’s poor monthly manufacturing performance also resulted in the sector’s worst year-on-year gain of 2015 in real terms. Since recording 5.14 percent annual growth in January, manufacturing’s annual real production increase has declined each month, and stood at 2.56 percent in April.

>The April year-on-year inflation-adjusted manufacturing production rise was also lower than that for April, 2013 to April, 2014 (3.68 percent), though it was higher than 2012-2013’s 2.44 percent.

>Durable goods production inched up by 0.11 percent on month in April, but year-on-year growth in this enormous group of industries has slowed dramatically, too – from 6.06 percent in January to 2.58 percent in April. Indeed, this latest annual rise was manufacturing’s worst April-April performance of the six-plus year-old economic recovery.

>Non-durable goods output shrank on month in April in real terms by 0.09 percent. Its year-on-year real output increases have slowed steadily this year as well – from 4.09 percent in January to 2.51 percent last month. But this April’s annual increase did beat 2013-14’s 2.38 percent.

>April’s figures leave real manufacturing production 2.34 percent higher than at the start of the last recession, in December, 2007.

>Durable goods output after inflation is 8.73 percent higher during this seven-plus year period, while non-durable goods production in constant dollars is 5.19 percent lower.

Our So-Called Foreign Policy: Why Power Remains Paramount

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It’s tempting to conclude that nothing could be less important than a Brookings Institution conference on International Peace and Cooperation in an Age of Global Competition” even if invitees did include “senior foreign policy officials, scholars, and experts from G-20 member states and other pivotal countries.” After all, why would representatives of foreign governments disclose to an audience comprised of representatives of other foreign governments anything of consequence that was previously unknown?

At the same time, what’s learned about such gabfests can usefully remind the rest of us plebeians how completely out to lunch these supposed luminaries tend to be – especially regarding the main questions and choices they think they face. So FOREIGN POLICY magazine contributor James Traub deserves a big shout out for reporting the gist of this off this record session. For his account (unwittingly, to be sure) strongly indicated that those assembled (presumably including some American leaders) have totally forgotten the key enduring truth about international affairs.

It’s a maxim that prevails even in these turbulent times, and indeed especially in these turbulent times: As long as the world contains multiple, independent forces or parties of any kind, their hopes for success (however defined) will depend overwhelmingly on their relative power.

According to Traub, the attendees were all but consumed with the question of whether world affairs are still dominated by the kinds of nation-states that emerged centuries ago, or by the bewildering array of non-state actors and forces that seem to be popping up everywhere nowadays, ranging from terrorists to religious movements to civil society groups to the simple “demand of ordinary people for a better life than their government now affords them.”

The author quite rightly notes the dramatically different sets of policy implications that flow, at least logically, from either answer: the former militating for continuing to seek advantage over rival states, and win and keep allies; the latter pointing to a new, more cooperative agenda of solving or at least ameliorating a series of common problems underlying growing turmoil and transcending national borders (e.g., poverty, autocracy, and climate change).

Of course, anyone with a lick of intelligence (including the conferees) will recognize that life never divides so neatly. Indeed, as I’ve written, the internationalist ideology that’s governed U.S. foreign policy-making since Pearl Harbor has always sought to eliminate the social and economic conditions considered key to the appeal of its communist adversaries. Similarly, Traub reports that many of the conferees arrived at answers essentially amounting to “all of the above.” That is to say, a revival of traditional power politics, epitomized by Russia’s muscle-flexing in its immediate neighborhood, was being accompanied by the rise of transnational threats that are best handled cooperatively. And all the while, nation-states as a whole “are much weaker than they were,” with the United States either unable or unwilling “to reassure allies or scare off adversaries as it once could.”

But what apparently went unrecognized is that national power will remain decisive whether cooperative or conflictive impulses and dynamics wind up on top. The importance of power in a completely rough-and-tumble world should be obvious. Its importance in a world where more positive-sum logic is more widespread is admittedly more difficult to identify, but no less paramount.

The reason is that even within communities that have developed commonly recognized authorities for organizing action, cooperation will always have a structure, and that structure will tend to have significantly different effects on different parts of that community. To the extent that these differences matter (which is often the case), various community members will usually have different preferences for moving ahead. The winners and losers are often determined by the amounts of resources (economic power) they can mobilize on behalf of their causes, by the the bounds of existing law and policy, and by their relative persuasive gifts. Often outcomes result from some combination of all of these.

When no commonly recognized authority exists, as with international politics today, persuasion can sometimes work also. Existing policies rarely count for much, law for even less, but relative power typically plays the biggest role. Consequently, as long as it matters to Americans that their priorities (or something close) prevail in international cooperative ventures or negotiations, their leaders will need to bring as much power as possible, in all of its forms, to bear on the relevant planning or bargaining sessions at the relevant international organizations or other venues  – whether to pressure, to induce, or to threaten credibly or exercise the option of walking away if their course isn’t satisfactory.

A final argument for focusing on cultivating power should be especially compelling for those Brookings invitees – and others – who have had actual policy-making experience. They should know better than anyone else how suddenly unpredictably international challenges and opportunities can arise. Power is no guarantee of coping successfully. But who can doubt that the strong and the wealthy will fare much better, mainly because they enjoy more relatively good options, than the weak and poor?

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