Im-Politic: ‘Tis the Season – for Immigration Double Standards

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Associated Press, Chuck Schumer, CNN, illegal aliens, Im-Politic, Immigration, Mainstream Media. Nancy Pelosi, migrants, Open Borders, The New York Times, The Washington Post, Trump

All reasonable participants in the often angry national debate about American immigration policy surely agree that the deaths of migrant children in U.S. custody and the killing of a police officer at the hands of an illegal alien are comparably tragic. Why, then, have the Open Borders supporters treated them like night and day, focusing intently on the former and literally ignoring the latter? And why has President Trump so needlessly fed his own critics’ charges of cruelty, racism, and xenophobia on immigration policy with some double standards-setting of his own on these matters?

The discrepancy on the part of Open Borders advocates has been especially dramatic when it comes to Congress’ leading Democrats – who will assume control of the House of Representatives in January. House Speaker-designate Nancy Pelosi, Senate Democratic leader Chuck Schumer, and other major figures in the party (including its likely presidential candidates) have uniformly expressed outrage at the deaths this month of two Guatemalan children held by the U.S. immigration authorities after being brought to the border by parents on long, arduous trips from their home country.  (See, e.g., here and here.)

But the early morning December 26 killing of a Newman, California police officer (and an immigrant himself) by a suspect identified as an illegal alien by local law enforcement officials has elicited no response at all – even from Pelosi, who represents a California district.

The same pattern marks the coverage of these incidents by the Mainstream Media, which has made its Open Borders sympathies abundantly clear in recent years. For example, the Washington Post this morning was still highlighting on its front page the controversy over the children’s deaths. But the police officer’s death didn’t even make the print edition. The killing was mentioned on the paper’s website three times yesterday and today. But all three items were taken from the wire services, meaning that the Post hasn’t as of now assigned one of its own reporters to investigate.  (See, e.g., here.)

The New York Times did cover the policeman’s killing with one of its own correspondents – and ran the story on page 15 of the news section today. But an article on the children’s deaths, which are no longer breaking news, received front page coverage.

Visit the website of the Associated Press, the world’s largest bona fide news agency, and you’ll see an article on the most recent Guatemalan child’s death right near the top of the home page. But you need to scroll way down to find a piece on the police officer’s killing.

CNN also featured a follow up on the most recent child death prominently on its home page. But its coverage of the police killing doesn’t appear anywhere. You need to look for it with the search engine.

In my view, President Trump has dropped the ball here as well. It’s true that his administration has expressed regret over both migrant children’s deaths, is investigating these events, and seeking ways to handle the new flood of migrants more effectively. It’s also true that the administration has blamed the children’s parents in part for putting them in dangerous situations to begin with – and I agree. I also fully support the administration’s insistence that the U.S. government’s responsibilities to its own citizens are qualititatively different – meaning greater – than to citizens of other countries.

But although Mr. Trump has tweeted about the shooting (without condolences for his family or his colleagues) he’s made no comment at all about the children’s deaths. And just as the Open Borders folks exhibited a major blind spot in failing to acknowledge the special shame surrounding the death of a public official who risked his life every day on behalf of others by an individual who commonsense immigration policies likely would have kept out of this country, the President has exhibited a blind spot in failing to acknowledge the special sorrow surrounding the death of a minor who bore no responsibility for his circumstances. And he could so easily have done expressed such sentiments without conceding a single inch of ground in his campaign for the most stringent border security regime.

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(What’s Left of) Our Economy: Don’t Forget About the Quality of U.S. Growth

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business spending, Financial Crisis, GDP, Great Recession, gross domestic product, growth, housing, inflation-adjusted growth, Obama, personal consumption, real GDP, recovery, Trump, {What's Left of) Our Economy

One of the biggest economic questions facing Americans this holiday season – whether they’re heavily into the roller-coaster stock market or not – is whether the nation will slide into recession. I’m skeptical on that score, but I’m still wondering more about what I’ve long regarded as an even more important question: Will the quality of America’s growth start improving meaningfully?

As I’ve often explained, I prioritize this issue because, as significant as maintaining economic growth is, not all growth is created equal. In particular, unhealthy growth eventually tends to produce terrible results – the prime lesson Americans should have learned since the bubble-ized expansion of the previous decade collapsed into a terrifying financial crisis and the worst recession since the Great Depression.

So this looks like a good time once again to check into whether the U.S. growth recipe has changed since then, and if so, how much. As known by RealityChek regulars, the main indicator is how heavily increases in the inflation-adjusted gross domestic product (the growth measure most widely followed by knowledgeable students of the economy) depend on personal consumption and housing. For these are the parts of the economy whose bubble-decade bloat directly sparked the crisis. And the big takeaway as of last week’s release of the final (for now) figures on third quarter GDP? The situation is turning around, but at supertanker-like (i.e., painfully slow) speed.

Specifically, what I’ve called the toxic combination of personal consumption and housing (parts of the economy dominated by spending and borrowing, rather than saving and investing) came in at 72.66 percent of real GDP in the third quarter. This means that it’s decreased consistently since the first quarter of 2017 – the first quarter of the Trump administration’s stewardship of the economy – when it stood at 73.01 percent. For the record, as of the last quarter of the Obama economy (the fourth quarter of 2016), this figure stood at 72.93 percent

So that’s cause for encouragement. It’s also crucial, however, to recall that at the start of the last recession – at the end of 2007 – personal consumption plus housing as a share of real GDP was 71.49 percent. As a result, over that key time-span, the economy has evolved exactly the way we shouldn’t want. But at least by this measure the economy isn’t nearly as bubbly as at its peak during that bubble decade – when the toxic combination reached 73.74 percent of after-inflation GDP.

Another measure of America’s progress toward recreating an “economy built to last” (a wonderfully on-target phrase used by former President Obama) is the share of real GDP devoted business spending. Here, however, the trends show some troubling recent signs of backsliding.

At the start of the current economic recovery, in the middle of 2009, such spending represented 11.19 percent of price-adjusted GDP. The annual numbers since then, through 2017, are presented below:

2010: 11.42 percent

2011: 12.22 percent

2012: 13.08 percent

2013: 13.37 percent

2014: 13.95 percent

2015: 13.80 percent

2016: 13.65 percent

2017: 14.06 percent

Through 2014, in other words, business spending (or investment, if you prefer) as a share of the economy rose healthily. But this growth shifted into reverse in 2015 and 2016, before rebounding in 2017.

For the third quarter of 2018, business investment as a share of real GDP reached 14.61 percent – which represents further improvement. But the quarterly story isn’t as positive:

1Q 18 14.48 percent

2Q 18 14.64 percent

3Q 18 14.61 percent

That is, business investment as a share of inflation-adjusted GDP dipped between the second and third quarters. Is this dip a blip? Or the start of a longer-term decline? I’m not in the crystal ball business; that’s why I’ll be watching these numbers closely going forward – and why I believe you should, too.

Im-Politic: Has a Major U.S. Economist Secretly Been in China’s Pocket?

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China, donors, economists, globalization, Huawei, Im-Politic, Isaac Stone Fish, Jeffrey D. Sachs, national security, Project Syndicate, technology, telecommunications, think tanks, trade war, Trump, Trump Derangement Syndrome, Washington Post

I’ve always been skeptical of claims that money explains everything about where prominent folks stand on policy debates. Sure, money talks loudly, and that’s why, for example, I’ve so consistently reported on how leading U.S. think tanks are lavishly funded by corporate interests (e.g., here) and even by foreign governments (e,g, here) with huge stakes in matters on which they regularly comment, such as trade and globalization issues.

But I’ve believed that for the most part, their positions are also at least partly sincerely held – reflecting either an inability even to question what they’ve learned in school, or the power of group-think in their professional and social circles (inside the Washington, D.C. Beltway in particular these realms tend to overlap substantially), their honest convictions, and typically some combination of the above.

I still refuse automatically to write off analysts who disagree with me as simple donors’ mouthpieces, but a recent incident has reminded me that – in the words of a close long-time friend – when seeking to understand political behavior, the most cynical explanation is rarely wrong.

The story begins with an article on the Project Syndicate website – a sort of digital global op-ed page (which, to be sure, overwhelmingly publishes writers with globalist/establishment viewpoints) – by economist Jeffrey D. Sachs.

Sachs is a world-renowned figure in his field, but as with many of his colleagues, seems to assume that mastery of conventional economic concepts translates into expertise on all other subjects. (Google “Krugman, Paul” for perhaps the leading example of this phenomenon.) So I wasn’t entirely surprised to see him writing on the recent American arrest, on sanctions-busting charges, of a senior executive from the Chinese telecommunications entity Huawei – even though he has no special credentials on China, or technology, or national security.

I was very surprised by the nature of Sachs’ attack on the U.S. action, which ran on December 11. Most criticisms of the arrest focused on whether it would escalate the U.S.-China trade war – whether because it signaled a more aggressive turn in Washington’s approach, or because it would trigger Chinese retaliation – or whether the United States ultimately could curb China’s technological development, or whether the American tech industry could continue excelling after a cutoff of its access to Chinese markets or parts and components.

But according to Sachs, the Huawei arrest mattered most because it showed that “The Trump administration, not Huawei or China, is today’s greatest threat to the international rule of law, and therefore to global peace.” That’s pretty out there given that Huawei’s largest shareholder is a Chinese telecommunications company owned outright by the Chinese state, that its close relationship with Beijing has caused governments the world over to limit its presence in their markets for national security reasons, and that the Chinese regime itself has been challenging international law, and in turn peace and security, in the South China Sea region.

Still, I was inclined to write off Sachs’ diatribe as yet another example of Trump Derangement Syndrome, or the outgrowth of idolatry of the globalization status quo fanatical enough to fuel (sincere) outrage at any development threatening to change it – e.g., President Trump’s decision to confront China’s trade predation.

As a result, I was inclined to dismiss as off-base the reaction of one of my Twitter followers to Sachs’ article: “I guess we know who is signing Jeffrey Sachs’ paycheck these days.”

So imagine my surprise when, on December 12, Washington Post columnist Isaac Stone Fish reported that Sachs had written the forward to a big report put out by Huawei in November.

Nothing necessarily improper there. Academics engage in such activities all the time. And if Sachs genuinely believes that an entity that clearly is an arm of the repressive Chinese government deserved “kudos” for “producing… a timely and clear roadmap to help governments, businesses and civil society [emphasis added] to create digital nations on the path to sustainable development,” well that’s his business.

What is massively improper has been Sachs’ reactions to Fish’s questions about Sachs’ relationship with Huawei in light of his glowing praise of the entity both in the report and in his Project Syndicate piece: “Did Huawei pay you for that [the forward]? If so, don’t you think you should disclose that?”

Rather than respond to Fish, Sachs stonewalled – in fact, going so far as to delete his Twitter account.

In the process, he not only made it difficult to avoid the conclusion that he has something to hide when it comes to Huawei. He’s also unavoidably created shadows over two respected organizations with which he’s been closely affiliated: Columbia University’s Earth Institute (which he headed between 2002 and 2016), and that Institute’s Center for Sustainable Development (which he heads now).

I’ve been looking for evidence of Huawei or other Chinese funding for these organizations, and haven’t found any yet. But that doesn’t mean that there hasn’t been any (perhaps funneled through third parties?), and that it hasn’t colored their work. Because like I said, when seeking to understand political behavior, the most cynical explanation is rarely wrong.

Our So-Called Foreign Policy: Why Mattis Shouldn’t be Missed

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alliances, allies, America First, Defense Department, defense manufacturing base, deterrence, free-riding, globalists, James Mattis, nuclear war, Our So-Called Foreign Policy, steel tariffs, Trump

Boy! Go away for a few days around the holiday season and the whole world seems to turn upside down! (Especially during the Trump era?) For the purposes of this column, I’m thinking of the resignation of Defense Secretary James Mattis and his “Don’t forget to write” replacement by the President – although of course adding to the sense of tumult have been Mr. Trump’s angry tweets about the Federal Reserve and the stock market swoon that has partly resulted.

Not that the reactions of the nation’s chattering classes to the Mattis departure haven’t been entirely predictable. A prominent figure publicly chides the President, and he’s practically canonized by establishment politicians and their Mainstream Media spokespeople. The more so if he’s a former Trump official. (Google, e.g., “Tillerson, Rex.”) And major histrionics are always added when the dearly departed have been designated the “adults in the room” – i.e., familiar, experienced (and therefore automatically venerated) policy hands who supposedly are the last lines of defense against Trump-induced catastrophes.

But even at a time when Trump Derangement Syndrome has become epidemic, the Mattis-related lamentations stand out for numerous reasons. First, although Mattis’ performance as a battlefield commander has been outstanding – and deserves the respect and gratitude of all Americans – show me the evidence that he’s been a great or even OK leader of the Pentagon. Spoiler alert: There is none. In fact, in two important respects, Mattis has underwhelmed, at best.

He’s displayed absolutely no interest in strengthening the nation’s domestic defense manufacturing base – a vital challenge considering how dependent such production has become on parts, components, and material made in China, an all-too-likely adversary. In fact, Mattis badly failed the President during the early stages of developing the administration’s steel tariffs. In the Defense Department’s official memo commenting on the President’s decision (sought as part of an interagency review undertaken before the final announcement), Mattis never told his boss that Canada is officially considered part of the U.S defense manufacturing base. So levies on Canadian steel justified by national security considerations arguably made no sense.  (Unfortunately, the full Mattis memo is no longer on-line.)

Nor is there any evidence that the Defense Department under Mattis made any progress in reducing its levels of waste, fraud, and abuse. What we do know now based on an official report is what everyone knowledgeable about the subject has known for decades: the scope is massive. Mattis deserves credit for approving this report – the first audit the Pentagon has ever conducted of its own (even more massive) operations. But he served for nearly two years, and the department continued to be poorly run in too many respects.

Mattis’ performance was even less impressive as a strategist. For all his expertise in fighting wars and otherwise deploying forces once the relevant decisions have been made, he’s demonstrated no expertise in helping to figure out what conflicts and threats the nation should prepare for and what interests are essential to defend or promote. And that’s a big problem because, although the Secretary of Defense is far from the only presidential adviser responsible for providing input in the periodic process of developing the country’s official foreign policy strategy, he’s one of the principals.

Worse, everything we know about Mattis’ contributions – the essence of which was made unmistakable in his resignation letter – shows that he remained doggedly devoted to the globalist dogma that the key to America’s security and prosperity is maintaining and advancing the current international order, and especially the nation’s core military alliances. Viewed in a vacuum, these views are eminently defensible. Viewed the (essential context) of recent and present circumstances, they’re a formula for continuing to coddle chronic economic protectionists and defense free-riders, and for open-ended military involvement in hopeless tar-baby regions like the Middle East. At worst, they’re a recipe for exposing the United States to needless military risks precisely because allied free-riding (in the form of pitifully inadequate spending on their own conventional military forces) despite burgeoning aggressiveness from China and Russia has put a growing premium on America’s nuclear forces to maintain deterrence.

Which leads to the greatest irony surrounding the role of the globalist advisers President Trump originally hired and those he still retains: The globalist establishment keeps propagating the meme that they’ve been all that have been preventing a hair-brained chief executive from blowing the entire world to kingdom come. But the greatest dangers (indeed, the only dangers) that the country could be drawn into a nuclear conflict come from the globalist policy of seeking to protect allies or regions marginal to U.S. interests (South Korea, the new Baltic and East European members of NATO) from adversaries that can or will soon be able to hit the American homeland with nuclear weapons.

Only somewhat more defensible is the globalists’ determination to protect South China sea lanes from Chinese designs even though their favored trade policies have greatly enriched and strengthened China for decades – and even though most of the local beneficiary economies have victimized America’s with their mercantile trade policies.

In the process, Mattis and his fellow globalists have either utterly neglected or arrogantly savaged the kinds of America First alternatives that the President has rhetorically championed (though, as argued comprehensively in this article, not carried out consistently). In other words, he has portrayed as impractical or ignorant – along with reckless – a far superior strategy that views America’s strength, wealth, and favored geographic position as the best guarantors of its safety and well-being.

That’s the real reason for the doom- and gloom-saying sparked by Mattis’ departure. And why I wish he had never been appointed in the first place.

Im-Politic: Immigration Realists Should Love this Corporate Cheap Labor Lobby Immigration Study

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Business Roundtable, Cheap Labor Lobby, China, Im-Politic, Immigration, Jobs, national security, Open Borders, OPT, Optical Practical Training program, student visa, tech jobs

You have to hand it to the Business Roundtable (BRT) – an organization comprised of the CEOs of America’s largest companies. It’s not often that a lobby group puts out a study that undercuts its own message in no less than three ways. But that’s exactly what the Roundtable has accomplished with its new report warning about the consequences of Trump administration actions deemed likely to reduce the numbers of foreign students that come to study in the United States.

The focus of the BRT’s concern is the Optional Practical Training (OPT) program, which allows foreign students to work temporarily for employers for years after their graduation. The Roundtable and other supporters of issuing lots of these visas portray them as a valuable way for domestic U.S. businesses to improve their (and the nation’s) competitiveness by increasing their access to the best talent on the planet. As a result, they argue, programs like OPT boost these students’ incentives to study in the United States and thereby become eligible to enhance its well-being to begin with.

Opponents charge that OPT hands employers yet another means of hiring less expensive foreigners over equally capable but more expensive native-born workers, and thus suppressing wages for all workers in the technology-heavy industries in which these visa holders are highly concentrated. OPT and programs like it have also been criticized (including by the Trump administration) for enabling large numbers of students from China gain cutting-edge tech skills that Beijing can ultimately used to undermine American economic and national security interests, and for providing these students and the Chinese government with golden opportunities to spy on American industry.  

The BRT’s case for the biggest possible OPT program rests entirely on its supposed economic benefits. But these exclusively economic arguments are their own Achilles Heel.

First, the damage the BRT claims the U.S. economy will suffer from a hypothetical (but in my view, reasonably assumed) 35 percent reduction in OPT visas by 2020 and a consequent 60 percent decline in participation in OPT by 2020 is laughably small. Chiefly, by 2028, according to the BRT, the economy will be a cumulative $52 billion smaller in inflation-adjusted terms than otherwise, and the cumulative number of jobs lost by native-born Americans will hit 255,000.

These numbers may sound big, but keep in mind: They represent not annual losses but the estimated total damage over ten years from OPT cutbacks. And they’re laughably miniscule given that the United States currently produces goods and services (the activity that generates the “size of the economy,” or gross domestic product, figure) at an annual, rate of nearly $18.7 trillion in real terms, and that this economy is currently supporting nearly 150 million jobs.

Second, logically speaking, the reverse proposition is also true: If the economic losses resulting from cutting back on the OPT program are so infinitesimal, then so is the economic contribution made by the program at its current size. In fact, it’s reasonable to conclude from the BRT report that if OPT was eliminated completely, the U.S. economy (rightly) wouldn’t even notice.

Third, the BRT’s complete neglect of the national security dangers posed by the OPT program looks like an implicit confession that they’re considerable. Are the BRT’s CEOs telling us that they shouldn’t be considered at all? That reducing them is worth no cost at all? That enhancing national security isn’t even worth the itsy-bitsy price that the BRT itself reveals OPT curbs would entail? 

Of course, none of these conclusions reflects well on the Roundtable, or on the corporate Cheap Labor Lobby of which it’s a card-carrying member. That’s why I’m hoping that immigration and national security realists share it with as many recipients – including government decision-makers – as possible. If this is the best that the Open Borders movement’s Big Business branch can do to tout the OPT program, it’s fate will quickly be sealed.

Making News: Back on National Radio Tonight with a Trade Wars Update…& More!

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Breitbart News Tonight, Breitbart.com, China, economy, Gordon G. Chang, industrial production, John Cartney, Making News, manufacturing, tariffs, Thaddeus McCotter, The John Batchelor Show, Trade, trade war

I’m pleased to announce that I’m scheduled to return tonight to John Batchelor’s nationally syndicated radio show tonight.  During the segment, slated to start at 9:45 PM EST, I’ll be helping John, co-host Gordon G. Chang, and former Michigan Republican Congressman Thaddeus McCotter analyse the latest developments in the U.S. trade conflict with China.

Listen live on-line at this link. And as usual, I’ll be posting a link to the podcast as soon as one’s available.

Speaking of podcasts, last Thursday night, I appeared again on Breitbart News Tonight to talk about just about everything under the sun having to do with the state of the U.S. economy. To listen to the interview, click here and scroll down to the December 13 entries, where you’ll see my name.

Last Friday, moreover, John Carney of Breitbart.com spotlighted my post on what the new Federal Reserve industrial production numbers told us about the impact of President Trump’s tariffs on domestic manufacturing output.  Here’s the link.

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

 

Our So-Called Foreign Policy: Paul Volcker has Just Condemned Globalism

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alliances, Barron's, Federal Reserve, finance, globalism, manufacturing, Our So-Called Foreign Policy, Paul Volcker, Trade

For decades, anyone (like yours truly) who’s even intelligently argued for fundamentally new strategies for U.S. foreign policy and trade policy has been dismissed by defenders of the longstanding globalist approaches as an isolationist or a know-nothing or a protectionist (to name a few slurs). So imagine my surprise to see the other day my own critique of globalism (which decries both its national security and economic dimensions) being closely mirrored by no less than Paul Volcker. Even better, Volcker seems to agree that the mistakes made by both the main aspects of globalism are closely related.

To remind, Volcker is a former Chairman of the Federal Reserve who, as top official at the central bank, had the rare combination of economic smarts and political courage to understand that the only plausible way to end the raging inflation that began crippling the country in the late-1970s was to clamp down hard on credit. A deep recession resulted, but largely because of Volcker’s tight-fisted approach, the economy’s subsequent growth during the 1980s and 1990s was significantly healthier (though not perfectly healthy) than before Volcker hiked interest rates and curbed the money supply’s expansion.

Previously, he served in a senior Treasury Department role at a key juncture of post-World War II U.S. and world economic history (when the post-war global monetary order was falling apart, and a new jerrybuilt order was cobbled together), and as an economist at the Fed. Since leaving the central bank (in 1987), Volcker has been a highly successful advocate of Wall Street reforms and a respected voice for responsible economic policies.  (Here’s a short, handy bio.)

Also to remind, my own basic description of what’s been wrong with America’s globalist policies is that they’ve acted as if developing various types of international arrangements (including institutions like the UN and International Monetary Fund and military alliances), which have been aimed at grandiose global goals (the world’s pacification via the spread of democracy and global economic integration), were the best guarantors of achieving acceptable levels of U.S. security and well-being. (See this article for the most recent, comprehensive statement of these views.)

Consequently, globalists softpedaled efforts to create and sustain the national military and economic strength needed for the country to survive and prosper in the world as it was likely to remain for the foreseeable future: dog-eat-dog and tumultuous. In the process, they regularly sacrificed crucial chunks of the real economy (that is, its most productive sectors) – and the huge number of good jobs they supported – in quixotic efforts to bolster those institutions and to win and keep those allies. As a result, they lost sight of what should be the overriding objective of all foreign policymakers: promoting the interests of the great majority of their own citizens in the most realistic, responsible possible ways (and my definition of responsibility includes financial responsibility).

Actually, Volcker’s indictment is even harsher than mine, at least in tone. In this interview with Barron‘s last week, he suggested that the globalists’ priorities were driven by their desire that America “dominate politically and foreign policy-wise.”

But the substance of our perspectives are remarkably similar. As Volcker argued (and it’s worth quoting the relevant passages in full):

“We were willing to run these current account deficits [in order to pay the mounting costs of globalism without requiring Americans to pay for them with politically toxic higher taxes], and it was favorable for businesses—they could invest abroad, import more freely. But eventually it breaks down. During that process, you lost a lot of small American manufacturing. Now we’re getting the blowback from that. A lot of people feel left out, and they were! We took great pride in open markets, free competition, no tariffs. That pleases the scholars, it pleases big business, but it doesn’t please the people in the part of the country that lost out.

“[Interviewer] Is that an argument for protectionist…?

“Sounds awful, doesn’t it? That’s a bad word.

“Everyone wants to help the home team. We were more interested in dominating politically and foreign-policy-wise. And then we paid, sacrificing rural industry in the process.

“When I was back in the Treasury, the old Treasury bureaucrats would be like, oh God, somebody’s going to visit the president next week, what’s he going to give away? Because other country’s leaders were intent on encouraging the U.S. to buy from them, and the president would say OK, you’re part of NATO, you’re this, you’re that, all these individually small concessions.

“[Interviewer] Am I oversimplifying what you’re saying: The Nixon shock [Nixon administration policies that brought the post-war monetary system to an end] which bought us 40 more years of political dominance?

“I don’t want to overdo it, but yeah. It oiled the wheels of our foreign policy, building a whole network of allies and international institutions and so forth. That’s part of the process, it’s not the whole process. The top dog pays the price [laughing].”

Because I’ve closely followed Volcker’s career, I’m more surprised by the bluntness of this analysis, not its content. But there was one aspect I found genuinely unexpected – his description of Treasury Department career bureaucrats. For decades, in my experience, they’ve been among the truest believers in globalism, including in the desirability of neglecting the productive economy in favor of finance. It seems that in Volcker’s day, they were far more realistic.

As with any argument worth making, critiques of globalism shouldn’t need to rely on “appeals to authority” – the specious practice of insisting on the superiority of a certain viewpoint mainly because supposed experts agree with it. But who could reasonably fault any globalism critics who take pride in being in such splendid company?

(What’s Left of) Our Economy: Could Trump’s Business Tax Cuts Be Working (Kind of) as Advertised?

Tags

capex, capital spending, dividends, Factset.com, mergers and acquisitions, research and development, Standard & Poor's 500, stock buybacks, tax cuts, taxes, Trump, Washington Post, {What's Left of) Our Economy

One of the biggest stories in economics and politics over the past year has been the tax bill championed successfully by both the Trump administration and the Republican-controlled Congress. Economically it’s widely judged to have failed in its primary stated mission: encouraging more productive investment in the U.S. economy. And because it supposedly did little more than shower cash on already profit-rich corporations that overwhelmingly put it to supposedly unproductive uses like share buybacks and dividend payments (see, e.g., here and here), the American public rightly recognized it as a giveaway to tycoons and The Rich generally, and viewed it as one big reason to vote GOP candidates out of office in the recent midterm elections.

What a surprise, then, to come across evidence that the $1.5 trillion in business tax cuts so far have done a respectable job of working as advertised.

According to the Washington Post‘s Michael Heath, new research from Standard and Poor’s shows that since the tax package was passed, the firm’s well-known group of the 500 largest publicly traded U.S. companies have performed as follows:

>Through the first three quarters of this year, they’ve boosted share buybacks – which support the value of company stock and in the process enrich executives paid largely based on the increase (or decrease) in these stocks’ value – by 11.84 percent.

>During the same period, they’ve hiked capital spending (on new plant and equipment) by 19 percent.

>Over this span, they’ve boosted research and development spending by 34 percent.

>During the first eleven months of the year, their dividend payouts have been virtually unchanged.

When the entire American business universe is examined, the picture looks somewhat different – at least through the first half of this year. According to this summary of research from Goldman Sachs:

>buybacks rose 48 percent

>capital spending rose 19 percent

>research and development spending rose 14 percent.

What’s noteworthy about these figures, though, is that they indicate that the larger, indeed multinational U.S.-based companies spent their tax windfalls more productively than smaller, largely domestically focused firms. That’s noteworthy because one of the principal objectives of the tax cuts was to persuade the multinationals to stop stashing so much of their earnings abroad and bring these monies back home to stoke growth and jobs. So it appears that, to a significant extent, that’s what they’ve done.

Of course, the real results of the effects of the tax cuts (or any other policy initiative) can only be assessed accurately not simply by comparing year-on-year rates of change in various metrics, but examining how these rates of change have differed (if at all) from those of years before the initiative went into effect. I haven’t yet located the data for most of these indicators, but the chart below combined with the Washington Post figures for capital spending for the S&P 500 makes clear that it’s been growing much faster since the cuts were passed than before.

One area the Post didn’t look at, though, can’t be neglected: mergers and acquisitions. The numbers indicate that, measured by value, such activity increased much faster between 2017 and 2018 (for the first three quarters of the year) than between 2016 and 2017 – by 33.47 percent to 1.05 percent. (My sources are the 2016-18 data published by Factset.com.  Here’s its latest report.) The absolute numbers are sizable, too – the value of these transactions rose by more than $387.5 billion from January-through-September, 2017 to the same period this year. (Note: These figures are only authorized expenditures – but reportedly there’s evidence that 85 percent wind up getting made.)

But here (as elsewhere, for that matter) is where we run into a big complication that comes up whenever a policy initiative is judged: What changes are attributable to this move, and what changes to other factors? These other factors include other policies (like interest rate movements both announced and suggested by the Federal Reserve, or regulatory or trade policy changes), or existing or evolving business decisions on deploying capital (based on corporate judgments regarding likely customer demand that stem from the overall state of the economy or particular markets, and on how these situations are considered likely to change).

But all the same, a reasonable, defensible bottom line conclusion seems to be that productive business spending since the tax cuts’ passage is rising at a faster rate than before passage, and that the tax package has played a discernible role. Moreover, some of the other plausible reasons for this acceleration also are arguably attributable to Trump administration policies – at least in part.  Faster overall economic growth and regulatory reform are two examples. Trade policy might be a third.

Moreover, I’m making these points as someone who’s argued that President Trump’s prioritization of the tax cuts and Obamacare repeal was a major first-year mistakes, at least politically. Both should have taken a backseat to infrastructure building in particular. I’ve even expressed skepticism about the cuts’ likely economic impact.

But economically, the administration and its supporters seem to have had (and still have) a pretty good story to tell about the tax cuts – which could have bolstered their political appeal. Which means that a bigger mystery than the cuts’ actual effects could be why the administration told it so ineffectively.

(What’s Left of) Our Economy: New U.S. Manufacturing Production Data (Again) Mock Tariff Fear-Mongering

Tags

aluminum, China, durable goods, Federal Reserve, industrial production, inflation-adjusted output, manufacturing, metals, metals tariffs, metals-using industries, non-durable goods, steel, tariffs, Trade, {What's Left of) Our Economy

If you’re among the legions of tariff alarmists in America’s intertwined political, business, and media establishments, this morning’s industrial production report (for November) from the Federal Reserve turned out to be an especially cruel hoax. It’s overall results seem to reveal that President Trump’s levies on imports of steel, aluminum, and on products from China are (finally!) producing major economic data showing damage to domestic manufacturing in the form of inflation-adjusted output. But the critical details (once again) show absolutely noting of the kind.

Let’s start with the metals tariffs – which started to be imposed in late March – and the performance of industries that make heavy use of them. If the Trump tariffs are indeed going to bite, then you’d think that some evidence would be visible eight months later. But the new Fed data make clear that this evidence still hasn’t appeared. As with last month’s post on the industrial production statistics, I’m including small household appliances. I’m still increasingly convinced that they’re now so small and consequently use little in the way of steel and aluminum, they do incorporate lots of electronics – so in principle they reveal something about the China tariffs’ impact.

The data start with April (the first full month in which the metals tariffs were in place) and go through November. I’m presenting the previously reported and revised October results in order to provide a sense of the trends’ momentum. I’m also adding aircraft and parts, which I carelessly left out last month; therefore, the original October results aren’t available.

                                                    old thru Oct      new thru Oct         thru Nov

overall manufacturing:              +1.30 percent    +0.78 percent     +0.80 percent

durables manufacturing:           +1.93 percent    +1.55 percent     +1.73 percent

fabricated metals products:      +2.06 percent     +1.67 percent     +1.61 percent

machinery:                               +5.09 percent      +4.54 percent    +5.11 percent

automotive:                               -2.42 percent      -1.74 percent     -1.46 percent

small appliances:                      -6.62 percent       -8.10 percent   -10.86 percent

major appliances:                     -3.32 percent       -3.24 percent     -0.88 percent

aircraft & parts:                        not available       +3.54 percent    +3.27 percent

The good news for tariff alarmists is the overall real manufacturing growth slowdown apparent from this table, led by a significant downward revision for October. But look more closely and there’s no reason to blame the metals tariffs at all.

For if they were the main culprit, why would the slowdown be so much more modest in the durable goods sector – where so many of the biggest metals-using industries are found? Why would heavy metals-using machinery still be outperforming big-time? Why would another metals-reliant giant, automotive, be demonstrating such impressive catch-up? And how could the major appliances sector – which has also been hit with a product-specific tariff on large home laundry machines – be making up even more ground?

The details will also prove disappointing to China tariff alarmists. Starting in July, levies on $250 billion worth of imports from the People’s Republic. And so many U.S. domestically manufactured products contain parts and components and other inputs from China that it’s been easy to sell the contention that the higher prices for American industry resulting from the tariffs will backfire on the entire manufacturing sector.

Yet once more, the Fed industrial production data reveal these claims to be “truthy” (i.e, something that pushers want to believe is the case) rather than “true.” As noted last month, Chinese inputs are so widely used that I can’t perform a deep statistical dive for now. But the main manufacturing aggregates don’t bear out the “tariff-mageddon” story for the China levies, either.

As the numbers in the first table for smaller appliances indicate, there’s a case that they’ve been damaged by the China tariffs, since they surely use lots of Made in China electronic components. But the industrial production data writ large show nothing of the kind. The figures below show the changes in real output for manufacturing generally, and for its two main super-sectors, for the five months since the first China tariffs were imposed (during the first week of July) and for the five months to and including July.

                                                      March-July                       July-Nov

overall manufacturing:               +0.87 percent                 +0.52 percent

durable goods:                            +0.13 percent                 +2.01 percent

non-durable goods:                     +1.65 percent                  -0.99 percent

The obvious conclusion: Unless Chinese inputs are highly concentrated in the non-durable goods sector (and there’s no justification for this assumption), there’s a problem in non-durable goods stemming from something (or things) other than the China tariffs.  ‘

Luckily for the tariff alarmists, however, there’s no sign that they’ll be held accountable by the institution that’s supposed to be democracy’s watchdog:  the Mainstream Media.  So for the foreseeable future, in terms of what the public will be reading and hearing on trade policy, expect gloom to keep springing eternal. 

Im-Politic: The Mainstream Media’s Latest Immigration Fakery

Tags

criminal aliens, Im-Politic, immigrants, Immigration, Mainstream Media, The Atlantic, Trump, Vietnam, Vietnam War

Just when I thought that it had become impossible for the Mainstream Media’s pro-Open Borders bias and Trump Derangement Syndrome to make me genuinely angry, along came The Atlantic‘s article yesterday on Trump administration policy toward refugees from Vietnam – including those who arrived in the Vietnam War’s tragic aftermath.

The piece – loudly advertised as an “exclusive” – clearly sought to convey the impression that the Trump administration has decided to start deporting certain groups within this population simply because it’s determined to rid America of as many foreign-born residents as possible, along with preventing the entry of as many newcomers as possible. In the case of the Vietnamese, of course, this policy would be morally outrageous both because so many refugees aided the U.S. military effort and (along with their descendants) face grim fates if they return; and because the United States inflicted so much damage on the country during its decade-plus of massive armed involvement. (I’m not trumpeting a position on the war – which I opposed – here. Just stating a fact.) When I saw the headline, I was up in arms myself.

Imagine my surprise, then, to discover (in the fourth paragraph) what’s really changing:

“The administration last year began pursuing the deportation of many long-term immigrants from Vietnam, Cambodia, and other countries who the administration alleges are ‘violent criminal aliens.’”

Why is that a change? Because, in the authors’ view, this decision violates

“a unique 2008 agreement  [between Washington and Hanoi] that specifically bars the deportation of Vietnamese people who arrived in the United States before July 12, 1995—the date the two former foes reestablished diplomatic relations following the Vietnam War.”

But Trump administration officials have concluded, and told The Atlantic on the record, that the agreement “does not explicitly preclude the removal of pre-1995 cases.”

Which seems eminently reasonable when the article finally makes clear that the U.S. intent now is not indiscriminately to round up Vietnamese-Americans and kick them out of the country in order to advance (circle one or both) nativist or racist goals. Instead, the intent was to treat as exempt from the 2008 deal “people convicted of crimes.”

Indeed, these folks were not only convicted of crimes. According to the Department of Homeland Security’s Katie Waldman, “these are non-citizens who during previous administrations were arrested, convicted, and ultimately ordered removed by a federal immigration judge.”

But how did the Atlantic authors describe a U.S. government effort finally to get rid of convicted criminals who clearly have been using delaying tactics to put off removal orders by the American judicial system? As

>”the latest move in the president’s long record of prioritizing harsh immigration and asylum restrictions….”

>a ”new stance [that] mirrors White House efforts to clamp down on immigration writ large, a frequent complaint of the president’s on the campaign trail and one he links to a litany of ills in the United States.”

>a “shift” that “leaves the fate of a larger number of Vietnamese immigrants in doubt.”

>a betrayal of many “refugees from the Vietnam War. Some are the children of those who once allied with American and South Vietnamese forces, an attribute that renders them undesirable to the current regime in Hanoi, which imputes anti-regime beliefs to the children of those who opposed North Vietnam.”

In fact, if anything, the new Trump policy changes a 2017 administration decision that makes no sense at all for anyone who believes that criminal aliens have no business remaining in the United States one minute longer than necessary: exempting these criminals from deportation if they arrived in the country before 1995. What on earth was that about? And why does The Atlantic, by posting this “scoop” seem to object so strongly – especially since nowhere does this piece challenge the convictions?