(What’s Left of) Our Economy: New Wages Data Shed Light on Trump’s Rise

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January is becoming one of my favorite months, and for this winter-hater, it has absolutely nothing to do with the weather. Instead, it’s when we start getting at least preliminary economic data for the previous full-year, and the results can be eye-opening – as yesterday’s government figures on inflation-adjusted U.S. wages once again show. In fact, they do a great job of illustrating why the nation’s subpar economic performance contributed to Donald Trump’s rise to the presidency.

Not that they’re the only downbeat figures in this latest data set. But these are the numbers that in my view make the case most vividly:

>Accounting for inflation, wages for private sector workers in toto have gone exactly nowhere since March. (Government workers are left out of these statistics because their wages are determined overwhelmingly by politicians’ decisions, not economic fundamentals.)

>For production and non-supervisory workers, the story is even worse. After inflation, their wages have actually gone down since February – by 0.22 percent.

>Manufacturing workers as a whole have seen their inflation-adjusted wages drop since May – by 0.18 percent.

>Blue-collar manufacturing workers did a little better – their real wages have simply been flat since February.

Only a little less bleakly, the last two years have seen a major deceleration in price-adjusted wage growth. Here are the numbers for all private sector workers:

2014-15: +1.92 percent

2015-16: +0.85 percent

And the results for private sector production and non-supervisory workers:

2014-15: +2.24 percent

2015-16: +0.55 percent

The figures for all manufacturing workers”

2014-15: +1.90 percent

2015-16: +1.21 percent

And finally, for blue-collar manufacturing employees:

2014-15: +2.25 percent

2015-16: +0.81 percent

It’s true that even this dreary situation represents an improvement over the early years of the current recovery – when real wages generally were falling. But since economic growth resumed in America in mid-2009, real wages have barely budged. Here are the increases:

Overall private sector workers: +3.78 percent

Overall non-supervisory and production workers: +3.96 percent

Overall manufacturing workers: +1.21 percent

Overall manufacturing non-supervisory and production workers: +0.81 percent

Glass half-full types can say that at least workers to varying if small degrees have kept ahead of the cost of living. Glass half-empty types can point out that these gains have been stretched out over seven and a half years. No one should have great difficulty understanding why so many voters this year weren’t especially grateful.

Making News: Last Night’s Thom Hartmann Interview on China and Trade Now On-Line!

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I’m pleased to announce that the video of my interview last night on The Big Picture with Thom Hartmann is now on-line. Click on this link for a great discussion of China’s (outrageous) claims to serving as a champion of global trade, why so many American businesses and other establishment interests have been playing along with this charade, and why terms like “free trade” and “openness” are so routinely abused.

Making News: Back Tonight on Thom Hartmann’s Show – & More!

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I’m pleased to announce that I’m scheduled to return to RT America’s The Big Picture with Thom Hartmann tonight to talk about a truly bizarre development — mounting claims that hyper-protectionist China is becoming the world’s leading champion of free trade and economic openness in general.  Click on this link to watch live.

The segment is scheduled to lead off the program at 7 PM EST.  (But as RealityChek regulars know, this can sometimes change.)  As usual, I’ll be posting the link to the podcast as soon as one is available.

Also, it was great to be quoted in three news articles today.  The first, a USAToday piece on President-elect Trump’s job-creation gambits, can be accessed here.

The second, this NBC News post on the same subject, is available here.

The third, a Lifezette.com post on outgoing President Obama’s economic record, is at this link.

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

(What’s Left of) Our Economy: New Fed Data Show Manufacturing (Barely) Stays Out of Recession and Grew (Slightly) in 2016

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New Federal Reserve data showed that inflation-adjusted U.S. manufacturing production rose sequentially by 0.17 percent in December, an improvement that put industry back above its November, 2014 output level (by 0.09 percent) and therefore ended its latest technical recession. Downward revisions for October and November had pushed the factory sector back into a downturn.

Durable goods led the December showing, with after-inflation output increasing by 0.54 percent, the best showing since June’s 0.92 percent. And the durable goods increase in turn was paced by a 1.83 percent rise in real automotive production. Non-durable goods’ price-adjusted output, however, fell on-month by 0.29 percent, and this super-sector’s real production is still down on net since September, 2014 – meaning it remains in technical recession. October and November real manufacturing production revisions were negative.  Annual price-adjusted manufacturing production rose by 0.38 percent for full-year 2016 after shrinking by 0.17 percent the year before.  Inflation-adjusted factory output is still down by 4.11 percent since the onset of the Great Recession – nine years ago.

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

>Inflation-adjusted manufacturing rose by 0.17 percent in December month-on-month – enabling the sector to remain out of technical recession by a hair despite slightly negative revisions for October and November output.

>Real manufacturing output is now 0.09 percent higher than in November, 2014.

>The new Federal Reserve data now peg October monthly real manufacturing production as having risen by 0.07 percent, not 0.33 percent, and November’s 0.03 percent drop is now reported as a 0.14 percent decline.

>Manufacturing’s December improvement was led by a 0.54 percent monthly increase in durable goods production – the super-sector’s best such performance since June’s 0.92 percent.

>Spearheading this durable goods performance, in turn, was a 1.83 percent monthly after-inflation production gain in the automotive sector.

>In contrast, price-adjusted non-durable goods production fell sequentially by 0.29 percent in December – its first such decrease since August.

>As a result, this super-sector remains in technical recession, as its real production is down on net fractionally since December, 2014.

>On a year-on-year basis, real manufacturing output rose by 0.38 percent in December. Between the previous two Decembers, constant-dollar production dipped by 0.17 percent.

>Annual durable goods’ real output also rose in 2016 (by 1.14 percent) after dropping (by 0.76 percent) in 2015.

>Non-durables output, however, decreased in 2016 (by 0.56 percent) after rising (by 0.54 percent) in 2015.

>Despite the year-on-year improvement in total real manufacturing output in 2016, this production still remains 4.11 percent below its level when the Great Recession began – nine years ago.

Making News: Appearance in a New Globalization Documentary

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I’m pleased to announce the appearance on-line of a new documentary on Dutch public television that deals with trade and globalization issues, and features some extensive excerpts of an interview with me on these subjects.

Click on this link to access the show.  Even though it’s a Dutch production, much of the program is in English (with Dutch subtitles) – especially lengthy segments filmed in China that are absolutely fascinating examinations of Chinese factories and workers, and well worth your while.

Just FYI, my own appearances (in English, too) come at the following minute:second points in the 40-minute program:

7:30  11:30  13:30  14:20  34:50  35:50

But as suggested, I enthusiastically recommend the entire production, and hope you find it as informative to watch as I found it enjoyable to lend a hand.

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

(What’s Left of) Our Economy: White House Fakeonomics on Tariffs and the Poorest Americans

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We’ve heard a lot lately about fake news. But President Obama’s outgoing Council of Economic Advisers (CEA) has just reminded us that at least as great a problem is fake policy analysis. For its new report emphasizing that tariffs are “an arbitrary and regressive tax” that hits low-income Americans especially hard glosses over and ignores completely the biggest trade-related income questions that any intellectually honest researcher would ask.

CEA argues that “tariffs – taxes on imported goods – likely impose a heavier burden on lower-income households, as these households generally spend more on traded goods as a share of expenditure/income and because of the higher level of tariffs placed on some key consumer goods.”

But here’s the main point it glosses over: The vast majority of spending by poorer Americans goes to goods and service that are lightly traded, at best. Indeed, the White House economists provide the first clues themselves. As they show (in the figure below), even though the tariff burden on after-tax income does rise as such income falls, the absolute levels are very low – a little over 1.50 percent of such income for the poorest 10 percent of households.

Figure 2 Tariff burden relative to after-tax income

And as the next figure reveals, when totally untraded mortgage, rent, and utilities are removed, both the tariff burden gap between the richest and poorest Americans, and the absolute tariff burden, shrink dramatically. The latter falls all the way down to less than 0.60 percent of the total income of the lowest 10 percent.

Figure 3 Tariff burden relative to expenditures excluding mortgage, rent, and utilities

Looking at what lower-income households actually spend explains these rock-bottom numbers. According to the same Labor Department consumption data set used by the CEA economists, households in the lowest decile on the American income scale are spending fully 42 percent of their income on housing (which is not at all traded internationally) and another 17 percent on food (which is mainly produced domestically). Another six-plus percent of these households’ economic intake goes to health care, five percent to education, and a bit over four percent to entertainment (also all wholly or largely un-traded).

Interestingly, another 14 percent of the lowest-income group’s expenditures goes to transportation. U.S. oil imports are (lightly) tariffed. But assuming most of the poorest Americans don’t own, lease, or rent their own vehicles, the impact on their finances is surely minimal.

Add these numbers up, and clearly America’s lowest-income consumers spend hardly anything on imported goods that are subject to tariffs.

Moreover, here’s what the CEA economists completely ignore: The last few decades’ worth of trade policies they implicitly endorse here have wreaked havoc on the employment – and therefore incomes – of many of these same lower-income households.

Just look at what’s happened to domestic payrolls in two industries that used to provide jobs for many Americans who have no doubt fallen way down the income ladder: furniture and apparel. According to Labor Department data, since the North American Free Trade Agreement (NAFTA) went into effect in 1994 and ushered in the current era of U.S. trade policy, employment is down by more than a third in the former and by nearly 85 percent in the latter. Moreover, import- and offshoring-related job losses have been especially steep since China entered the World Trade Organization at the end of 2001 – as widely cited scholarship has emphasized.

As NAFTA also triggered a heated debate on trade policy in the United States, critics started printing up and handing out garments reading “My job went overseas and all I got was this lousy T-shirt.” Obviously, these are gifts that someone should have mailed the White House economists who suggest that tariffs have delivered the main trade-related hit to America’s poorest.

Our So-Called Foreign Policy: The Establishment’s Hypocritical China Cassandras

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Since Donald Trump’s cabinet choices appeared at their Senate confirmation hearings last week, critics have rightly observed that the president-elect and his picks to run his foreign and national security policies seem to disagree sharply on some major issues.

Less noticed is how the Trump nominees’ statements have revealed worse incoherence in the ranks of most critics – who sit overwhelmingly in the nation’s bipartisan foreign policy establishment. An unusually worrisome example has been the near-firestorm over Secretary of State-designate Rex Tillerson’s statement that “We’re going to have to send China a clear signal that, first, the island-building stops, and second, your access to those islands also is not going to be allowed.”

Tillerson’s remarks referred to an especially brazen aspect of Beijing’s expansionism in the South China Sea – centered on territorial claims that no one else in the region accepts. In an apparent effort to create irreversible realities “on the ground,” China has been capitalizing on the local topography literally to turn existing rocks and similar features into mini islands. Beijing has gone on to place various kinds of facilities – including some with military capabilities – on them, and to declare the immediately surrounding waters to be Chinese territory.

As widely noted, there’s at best considerable tension between Tillerson’s warning and several suggestions made by the president-elect during the campaign that he’s worried that America’s security relationships in the East Asia/Pacific region have become too dangerous militarily (since its adversaries are developing increasingly potent nuclear forces) and too one-sided economically (since the United States runs huge trade deficits with most regional countries).

Also completely weird, however, have been the alarm bells set off in establishment ranks to the effect that Tillerson had suddenly moved America dramatically closer to war with China over the South China Sea. For many of these voices have thoroughly upbraided Mr. Trump for failing to appreciate the crucial importance of U.S. alliances for safeguarding American and global security.

Establishment voice FOREIGN POLICY magazine ran a piece ominously asking, “Is Tillerson Ready to Go to War Over the South China Sea?” Only slightly less melodramatic was this Wall Street Journal sub-headline: “If carried out, Tillerson’s proposal to bar Beijing from some South China Sea islands would likely trigger military battle, experts say.”

A Christian Science Monitor headline sounded a similar alarm, and its article reported that “[T]he policy would dramatically reshape US thinking on Chinese expansionism, drawing a hard new territorial line in China’s backyard and, experts say, invite a military confrontation with Beijing.”

And even though they weren’t predicting imminent conflict, the experts interviewed by The Los Angeles Times still apparently fretted that Tillerson, “without diplomatic experience, had engaged in a flight of hyperbole in keeping with the tough rhetoric about China favored by Trump.”

These would all be defensible views except for one consideration: The American security strategy in the East Asia/Pacific region that all these experts have endorsed as a group for decades depends first and foremost on a credible threat to use military force to deter the kind of aggression in which China is engaged.

It is completely legitimate to question whether or not China’s island-building is the best casus belli, or circumstance for drawing a “red line.” But it is the height of hypocrisy to condemn – or even tut-tut over – a statement emphasizing that the United States has long considered maintaining freedom of the seas in East Asia to be a vital security interest (including by the Obama administration), and that China is on a course that will require U.S. military responses unless Beijing stops or changes direction sharply.

Or are all these American Asia experts confident that China will even slow its land and sea grab at some point down the road without firmer U.S. counter-moves than have been seen to date? If so, it’s time that they explained their reasons why – and how these rationales relate to their long-time insistence that major American military deployments in this region are essential to maintain peace and stability.

So the incoming administration looks to be a house divided on dealing with China’s strategic ambitions in Asia. That’s disturbing, but at least from the little known so far, the leading factions will be internally consistent (though the hawks still need to show that they understand the need to stop adding to China’s wealth and power through dangerously shortsighted trade and tech transfer policies, and Mr. Trump needs to understand more completely that even greater defense burden-sharing by the Asians could still leave America with unacceptable nuclear risks).

But the outside critics have just about disqualified themselves from any role in this debate – unless they can offer something more than hopelessly scattershot whining.

Im-Politic: No Learning Curve for America’s Left on Immigration

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I keep waiting for America’s self-styled progressives to start recognizing that they’re going absolutely nowhere in national politics until they abandon their devotion to Open Borders policies, and start responding to their fellow citizens’ legitimate economic and especially security concerns about mass immigration.

Sadly, nothing could be clearer from recent developments than that the wait will continue indefinitely. Even worse, the U.S. Left seems to be even more clueless on the subject than its counterparts in Europe.

Certainly President Obama remains unrepentant about his own record. In his Farewell Address, he touted his record in fighting Islamic terrorism overseas (not that he used the term), and warned against the dangers of domestic radicalization. But his boast that “no foreign terrorist organization has successfully planned and executed an attack on our homeland these past eight years” once again made painfully clear his neglect of the dangerous impact of already having admitting so many newcomers whose original religion or culture creates huge obstacles to successful assimilation into American society. Why else would he have glossed over the deadly attacks by Muslim immigrants in Boston, San Bernardino, and Orlando?

In fact, according to Mr. Obama, the only Americans who need to learn about current and emerging immigration realities are those in the native-born population – because their fear that some immigrants today could “destroy the fundamental character” of the country is not only obsolete, but bigoted.

Other progressives also seem to be doubling down on efforts to address valid immigration concerns with smears. Can anyone reasonably doubt, for example, that Alabama Republican Senator Jeff Sessions’ appointment as President-elect Trump’s Attorney General would be sailing through the Senate if had not so forthrightly championed immigration realism – and enforcing the nation’s existing laws?

Yes, many Senate Democrats have accused Sessions of harboring racist views and neglecting the rights of a wide variety of discrimination victims. At the same time, none of these alleged transgressions prevented New Jersey Democratic Senator Cory Booker – Sessions’ leading Congressional opponent – from feeling “blessed and honored” just last year “to have partnered with Sen. Sessions in being the Senate sponsors” of a Congressional Gold Medal for the voting rights activists of the 1960s. No one else in the Senate protested, either.

Maybe Booker’s Massachusetts Senate colleague, Elizabeth Warren, is moving in the opposite direction? Not if her declaration that she’s running for reelection is any indication. Warren marked the occasion by vowing to “fight back against attacks on Latinos, African-Americans, Muslims, immigrants, women, and LGBT Americans. Our diversity is what makes our country strong – and on this, there will be NO compromise.” As if all these groups can be lumped in the exact same victimization category.

In fact, the only sign of progress I can detect is that no progressives are urging Mr. Obama or Mr. Trump to quintuple the number of U.S. refugee admissions from war-wracked Middle Eastern countries – as failed Democratic presidential contender Hillary Clinton proposed.

The contrast with European progressive leaders is stunning. As reported in an insightful column on Marketwatch.com, the head of Germany’s Social Democratic Party – and the country’s vice chancellor in the current coalition government – is calling for “ncreased video surveillance…a ban on fundamentalist mosques as breeding grounds for terrorism, and…an end to freeloading on Germany’s generous child-support subsidies by other European Union citizens.”

Another German progressive leader has slammed Chancellor Angela Merkel for “uncontrolled border opening [and]a police force that has been downsized to the point of inefficiency, that neither has the personnel nor the technical resources that would enable it to cope with the current threat situation,”

Meanwhile, Jeremy Corbyn, who heads the United Kingdom’s struggling Labour Party, is unmistakably rethinking his former opposition to Britain’s decision to leave the European Union in large part because of the grouping’s lax immigration policies. Corbyn had previously opposed “Brexit,” which British voters passed in a referendum in June.

Germany, of course, has experienced Muslim terrorist attacks much bloodier than America’s. The Labour Party seems headed for its worst showing in Parliament since the 1930s. Will it take these kinds of security and political disasters to bring U.S. progressives to their senses on immigration?

(What’s Left of) Our Economy: What’s Really Wrong with Obama’s Aluminum Trade Case

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What’s most laughable about the Obama administration’s new World Trade Organization (WTO) challenge against China’s subsidies to aluminum producers isn’t the decision to file the complaint with just over a week left in office (although admittedly that’s pretty laughable). What’s most laughable is the continuing belief that the WTO is an effective instrument for fighting such predatory trade practices.

After all, as claimed by a U.S. industry leader in a statement cited by the U.S. Trade Representative’s (USTR) office itself, China’s subsidies have done enormous damage to the U.S. and global aluminum industries.” USTR’s press release, moreover, goes on to present data making clear that the PRC’s state-supported overcapacity building dates back to at least 2007, and that private sector American rivals that need profits have been forced to respond to the resulting global price crash by dramatically slashing both production and capacity.

It’s bad enough, as USTR admits, that President Obama’s main response until yesterday was completely ineffectual “engagement” with Beijing in various official bilateral talk shops. Mr. Obama allegedly even brought up the subject with Chinese president Xi Jinping last September. The results, according to USTR? “[W]hile China has expressed a willingness to continue talking about the excess aluminum capacity situation….China has not been willing to take concrete steps to address it.”

And now, with the number of aluminum smelter in the United States having fallen from 14 to five since 2011 – “with only one operating at full capacity” – the administration has decided to begin a WTO process that could take 15 months (counting appeals) to complete and, if Washington wins, authorize countervailing tariffs. Further, if Beijing loses and promises to end its aluminum transgressions, the United States will be faced with the probably insuperable challenge of monitoring compliance by China’s highly secretive bureaucracies.

This morning, Washington Post and CNN pundit Fareed Zakaria wrote that “Chinese elites” he’s recently met with are “remarkably sanguine about [President-elect] Trump” and his attacks on Beijing’s trade-related economic practices. If the incoming president relies heavily on the WTO to fight China’s predation, their complacency will be amply justified.

Im-Politic: How Trump Could Really Make the News Media Great Again

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The nation’s intertwined media and political elites are in an uproar over President-elect Trump’s performance at his press conference yesterday – the first he’s held since July. Their stated fear: Mr. Trump’s refusal to answer questions from a CNN reporter at the session add to evidence that he and his administration will be willing to “retaliate, bully, and ban journalists whose questions he doesn’t want to answer.”

As a result, the media won’t have “the access and information necessary to accurately and honestly cover the new administration” and the public will lose out “on the perspective those reporters bring, and we as an industry lose out in our efforts to hold power accountable.”

Sounds pretty serious. Except here’s what these supposed watchdogs of democracy either don’t get or won’t admit: More than ever before in recent memory, the Mainstream Media that Mr. Trump has so often attacked are hardly the totality of the U.S. media universe. They’re clearly not the totality of the competent or intellectually honest U.S media universe. And therefore, restricting some of their members’ access to American officials no longer means that the public’s right to know need be endangered.

The nation, and especially those increasingly overlapping political and media classes, have gotten so used to the structure of the journalistic universe as it’s evolved in recent decades that everyone’s forgotten that it has never, and shouldn’t be, set in stone. More specifically, although freedom of the press unmistakably is and should be protected vigorously by the Constitution, the role of today’s leading national news organizations, and in particular, the current White House press corps, has no legal or Constitutional basis. Nor should they enjoy such a privilege.

The White House Correspondents’ Association (WHCA), for example, exists and itself influences access to White House officials through its membership criteria, solely at the president’s behest. No government officials are required to deal with reporters on its roster, and as the organization itself acknowledges, presidents have treated it with dramatically varying measures of respect and disdain for more than a century.

In fact, the last word on who can interact in the role of journalists with government officials on any level legally belongs with government agencies themselves. In the words of this 2014 Harvard University study on such issues, the First Amendment

does not cover the full spectrum of newsgathering activity, and, as presently understood, does not confer a right to gather news in particular places or circumstances to which the public is not otherwise admitted. This includes access to private events, as well as access to nonpublic spaces owned by the government (such as government offices and prisons).”

Could American leaders exploit this situation in order to deny the public the information it needs to evaluate their performance, and weaken the vibrancy of truly representative government? Of course. But keep the following three considerations in mind:

First, according to the Harvard report, “Recognizing that effective newsgathering requires greater levels of access than what the First Amendment provides, legislators and regulators at various levels of government have adopted policies granting to a subset of the public identified as the ‘press’ certain privileges to do things that ordinary citizens may not.”

In addition, as this study documents, the courts have demonstrated a clear determination to ensure extensive access by journalists to public officials, and to define “journalist” in ways that have enabled aggressive reporting.

Regarding worries about the presidency in particular, the federal government also contains a legislative branch with plenty of members of opposition political parties. Even disgruntled members of a president’s own party have ample means to disclose information they consider important – either through their authority to compel testimony and reports from the executive, as well as their power of the purse; or by working with the media themselves.  

Second, how democratic would it be to empower the media themselves – which after all consist overwhelmingly of privately owned, profit-seeking businesses – to determine who can attend press conferences and belong to media pools covering traveling leaders? Indeed, how democratic would it be to entrust the establishment media specifically with this responsibility?

These businesses – again at the government’s sufferance – already play a decisive role in these matters. How many Americans – outside Beltway insider circles – are satisfied with the results? And what evidence is available that the White House Correspondents Association has adequately disciplined members who have been exposed as partisans? As little as has been seen from the journalistic employers of these hacks – who don’t seem to have fired any of them.

Third, the better establishment journalists perform at reporting accurately and impartially, the likelier they are to create, maintain or reestablish the kinds of informal relationships with the widest variety of officials that have always been central to the most valuable investigative reporting – as opposed to shouting questions in the White House press room. And don’t forget the importance of filing Freedom of Information Act suits, or even keeping up with information on the public record – which can be astonishingly revealing.  

In the meantime, the incoming administration has indicated that it’s thinking of introducing some badly needed accountability of its own into its dealings with the press – for example, Mr. Trump’s refusal to respond to the CNN reporter in the (not unreasonable) judgment that the organization has too often fallen short of best journalistic practices. Moreover, his press secretary-designate, Sean Spicer, has spoken of changing the authorized White House press pool in various ways in order to reflect better the makeup of contemporary journalism.

So America may be heading towards a world in which presidents (and other senior government officials) don’t feel any particular need to deal with, say, CNN. Or The New York Times. In the short term, the result might be a rocky period for the government, for the media, and possibly for the flow of high quality information a real democracy needs. Yet the status quo ante plainly was not sustainable – both because of new technologies that have been rapidly transforming the media landscape, and because traditional journalism’s recent performance in particular has been so deficient.

But American leaders will still have powerful interests in getting their stories and narratives out through news organizations with large audiences. That’s why I’m confident that, however scornfully they treat individual media companies, they’ll nonetheless wind up dealing with responsible and dedicated journalists. And who knows? Maybe heightened competition will help make the Mainstream Media great again.