Making News: Back on National Radio Talking Trump and China Trade…& More!


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I’m pleased to announce that I’ll be returning to John Batchelor’s nationally syndicated radio show tonight. The segment, slated to start at 10:15 PM EST, will deal with the Trump administration’s planned tariffs on Chinese imports and the possibility of retaliation by Beijing.

Here’s the link at which you can listen live on-line to what’s sure to be a provocative discussion among John, me, and co-host Gordon G. Chang. And as usual, if you can’t listen live, I’ll post a link to the podcast as soon as one’s available.

In addition, it was great to see my recent post on think tanks that take foreign government money cited in this Sunday piece by Douglas Turner of the Buffalo (N.Y.) News.

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




(What’s Left of) Our Economy: U.S. Productivity Growth Remains Far from Great Again


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The U.S. government’s latest figures on the broadest measure of the economy’s productivity growth came out this morning, creating the perfect opportunity to report on these key data along with a narrower set of productivity growth numbers released two weeks ago. The latter generally are timelier (though not this time), and the latest edition revises these numbers going all the way back to 1990!

The big takeaway: Despite some very modest upgrades for the most recent results, the economy remains in the midst of a major productivity slowdown. This matters greatly, because even though many economists doubt how accurately the government statistics measure productivity growth, nearly all economists agree that strong performances in this field are crucial to boosting Americans’ living standards in a sustainable way.

First, the broader measure – known as multi-factor productivity because it measures the nation’s prowess at using a wide range of inputs to generate a unit of output of a certain good or service. For non-farm businesses (the headline figure used by the productivity-tracking Bureau of Labor Statistics to capture the economy as a whole), the BLS calculates that multi-factor productivity improved by 0.9 percent between 2016 and 2017. That’s reasonably good news, since it’s the best such rate of growth since 2013-14’s one percent.

Revisions for 2014-15 and 2015-15, moreover, were only slightly negative in toto.

Yet in historical perspective, this performance remains pretty miserable. Comparing multi-factor productivity growth during the last three economic recoveries (to obtain the best apples-to-apples data), shows the following:

Non-farm business multi-factor productivity grew by 9.75 percent during the 1990s expansion (which lasted roughly nine years). It grew by 7.29 percent during the early 2000s bubble recovery (so called because its dependence on borrowing and spending wound up triggering the national and global financial crises). Since that expansion lasted about six years, it’s annual multi-factor productivity growth was actually a little better.

But the current economic recovery began in the middle of 2009. Yet through the end of 2017, multi-factor productivity for non-farm businesses increased by only 6.84 percent. So the pace of growth has slowed considerably.

The labor productivity figures tell us about economic efficiency stemming from the use of just one input – an hour’s worth of work by a single worker. But they’re usually more up to date since they come out on a quarterly, not annual, basis. And these more frequent reports also contain more detailed breakdowns, which is especially interesting for me because they make possible gauging manufacturing’s performance.

For that non-farm business sector, BLS now tells us that last year’s fourth quarter labor productivity stayed unchanged sequentially on an annual basis – hardly good, to be sure, but better than the 0.1 percent dip previously reported. That upgrade, plus a third quarter growth rate that’s now 2.7 percent rather than the previous 2.6 percent number, helped bring the full-year 2017 advance to 1.1 percent. That’s the best annual performance since 2013-14’s 1.5 percent.

Unfortunately, as indicated above, these results incorporate long-term revisions, and these actually worsen the non-farm labor productivity story. Again, examining the trend over the last three economic recoveries, we find that cumulative labor productivity growth remained the same for the 1990s and bubble-decade expansions – 23.25 percent and 16.03 percent, respectively. But the figure for the longish current recovery was cut from 9.34 percent growth to 9.32 percent.

Manufacturing’s labor productivity growth patterns look quite similar. The fourth quarter sequential advance was revised up from an excellent 5.7 percent annualized to six percent. And the third quarter’s dismal 4.9 percent annualized drop was upgraded to a 4.7 percent decrease.

Longer term, moreover, the slowdown story here remained intact, too. As with non-farm business labor productivity, manufacturing labor productivity’s cumulative growth during the 1990s recovery and the bubble decade recovery were unrevised by the BLS. So they’re still 45.91 percent and 30.08 percent (much higher in absolute terms, you’ll note, than the growth for non-farm businesses overall). But the 10.91 percent manufacturing labor productivity growth increase for the current recovery was revised down to 10.90 percent. And yes, its performance between the last two economic recoveries deteriorated at a much faster rate than that of non-farm business labor productivity.

It’s still true, as indicated above, that lots of uncertainty still surrounds all these productivity data. But it’s also still true that most of the economists who argue about their accuracy agree that the current recovery’s overall growth has been historically feeble. Significantly slowing productivity growth is entirely consistent with this weakness.

(What’s Left of) Our Economy: RealClearAmateurism on Steel Tariffs


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One of my favorite sayings holds that “A little knowledge is a dangerous thing,” and a recent column on the website on steel tariffs does a splendid job of showing why.

According to author Michael Cannivet, who heads an investment company “serving high net worth private clients,” President Trump’s decision to impose tariffs on steel imports from a wide (but still to be determined precisely) group of U.S. trade partners are “not a real long-term solution” for “cities reliant on American steel and aluminum production” because they’re certain to harm U.S. companies in the sector that are “working hard to reinvent themselves by innovating.” And he chooses as a prime example a steel firm close to his heart – AK Steel, which has a plant in his wife’s hometown of Middletown, Ohio that has employed “generations of her family.”

But in Cannivet’s eyes, AK’s experiences are also important because (quoting another author):

AK Steel is the result of a 1989 merger between Armco Steel and Kawasaki. The Kawasaki merger represented an inconvenient truth: Manufacturing in America as a tough business since the post-globalization world. If companies like Armco were going to survive, they would have to retool. Kawasaki gave Armco a chance, and Middletown’s flagship company probably would not have survived it.”

This analysis is absolutely right – except it omits one crucial point. Kawasaki – a Japanese steel company – didn’t merge with Armco out of the goodness of its heart, or simply because it viewed the Armco operations in question as unusually promising assets. It also merged with – and transferred state-of-the-art production technologies – to Armco in large measure because Reagan-era trade restrictions severely limited its opportunities to supply the lucrative American market via exporting from Japan. Here’s some evidence from none other than the Japan government-run Japan Economic Institute of America (an often useful source of information and analysis that unfortunately closed its doors in the very early 2000s):

“By the mid-1980s NKK and Japan’s other major steelmakers were beginning to eye onshore U.S. operations. Such a presence would give them a way around the trade restrictions that by then had become a fixture so that they could service the automotive and other Japanese manufacturers that were setting up plants in this country.”

And P.S. – why were so many other Japanese manufacturers (like automotive firms) setting up plants in America? Again, in large measure due to those same Reagan-era trade curbs, as explained by this recent column in The Japan Times:

The Reagan administration forced the Japanese auto industry into accepting a voluntary restraint on their exports to the U.S., under which the annual shipments from Japan was limited to 1,680,000 vehicles. The Japanese automakers responded by launching production in the U.S. one after another to evade the trade restrictions — Honda was the first by building its long-planned auto plant in Ohio, and was followed by Nissan and Toyota.”

None of this should be surprising to anyone with more than a little knowledge of trade or the globalization in manufacturing in particular. My book, The Race to the Bottom, cited an immense number of examples of national economies much smaller than the United States using tariffs or other trade barriers to lure foreign manufacturing to their shores. As a result, there’s every reason to believe that a U.S. resort to these measures would work spectacularly – and instances of precisely such successes keep emerging

And that’s of course the point of this post: Cannivet clearly doesn’t know more than a little about trade or the globalization of manufacturing. What he knows for sure is that he doesn’t like tariffs – possibly because he learned not to like them in a college freshman economics course. But apparently that was all that RealClearMarkets needed to justify showcasing his views. Maybe the site should change its name to RealClearAmateurism.

(What’s Left of) Our Economy: America’s Growth and Savings Dilemma in a Nutshell


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An intriguing op-ed in USAToday provides a great opportunity to return to an important subject RealityChek has neglected a bit in recent weeks – the quality of America’s economic growth.

The article, by Maurie Backman of the Motley Fool investing website, does a fine job of scolding Americans for not saving enough – and of debunking many of the excuses heard for their lack of thrift. One of his especially interesting arguments: No matter how little one earns, it’s always possible to save something.

This is literally true, although economists widely agree on the seemingly commonsense proposition that (all else equal, of course!) the less you earn, the harder you’ll find saving, and in fact the less you’ll save. But what I immediately began thinking about is a major implication of this pattern. Namely, if Americans started saving even a little more, wouldn’t future economic growth be even slower than it’s been? At least unless the country found some other engine of growth – like investment or trade?

The light shed by the latest data on America’s growth shows just what an enormous transition this will entail. These numbers come from the government’s second read on the gross domestic product for the fourth quarter of last year and how its changed. (We’ll get one more fourth quarter figure next week and that will be the final result for that period – until a more comprehensive set of revisions is released a little further down the road.)

What they reveal is that the economy nowadays has never been more consumption-heavy. In fact, it’s even more consumption-heavy than at its peak during the mutually reinforcing credit and housing bubbles of the previous decade – which eventually collapsed into the worst financial crisis to hit the United States and the world since the 1930s.

During the fourth quarter, personal consumption as a share of the inflation-adjusted gross domestic product (GDP) hit 69.64 percent. That slightly eclipsed the former record of 69.60 percent – which dates only from the second quarter of last year.

So is it time to hit the economic panic button? Not (quite?) yet. Because housing – the second part of the toxic combination that helped trigger the crisis – still remains depressed compared with the previous decade’s levels. Housing’s share of real GDP peaked in the second quarter of 2005 at 6.17 percent. During the fourth quarter of last year, it was a relatively subdued 3.52 percent.

As a result, the toxic combination’s total share of the economy after adjusting for prices stood at 73.16 percent. That’s a bit lower than the old combined record of 73.27 percent (during the third quarter of 2005). But it’s only a bit lower.

And therein lies the biggest dilemma facing American policymakers – whether in the White House or the Congress or the Federal Reserve: Spending-based growth is unhealthy and unsustainable – and the story usually ends very badly. But reorienting the country’s national business model and turning it into “an economy built to last” looks to be disruptive enough to exact major short-term costs.

(What’s Left of) Our Economy: The Real Messages of that Business Letter Opposing Tariffs on China


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Forty-five American business groups have just sent a letter to top Trump administration officials urging them not to impose “sweeping tariffs” on China in response to its longstanding and widespread theft of U.S. “trade secrets and other intellectual property.” That’s not especially newsy, since large elements of the American business community have long opposed any measures that would rock what they consider to be a highly profitable boat – the business they do with the People’s Republic.

Here’s what’s much more newsworthy: The list of signers is missing some of the leading lights of the U.S. trade association world, including the Business Roundtable, the National Association of Manufacturers, and two leading China-specific groups – the US-China Business Council, and the American Chamber of Commerce in China (which is distinct from the U.S. Chamber of Commerce, an organization that did sign).

Since the membership of the U.S. Chamber in particular is so all-inclusive, it’s possible that its name on the letter was thought to suffice for many companies belonging to those other groups that are absent. But these companies have never been shy about practicing double- and even triple-counting. So it’s also possible that the above absences indicate that the American business community – and especially the multinational companies that have so powerfully influenced U.S. Trade policy with China for decades – is seriously divided on the tariff issue.

What’s also noteworthy is the letter’s statement that “Tariffs would not only affect Chinese shippers but also harm U.S. companies that sell component pieces of final products exported from China.” In other words, the letter is implicitly acknowledging that many of its signers have been among those companies that have long spearheaded the offshoring of American jobs and entire supply chains to China.

Their offshoring focus of course explains much of their staunch opposition to vigorous Washington responses to such cut-and-dry protectionist Chinese practices as currency manipulation: Although this trade predation has damaged America’s domestic production base, these businesses’ China-based operations have been major beneficiaries.

Similarly, the strong interest of so many of these companies in continuing to coddle China’s mercantilism at the domestic economy’s expense explains the seeming paradox of their main policy message to President Trump: On the one hand, they “continue to have serious concerns regarding China’s trade policies and practices” and admit that their persistence endangers “U.S. global competitiveness, innovation, productivity, and cybersecurity.”

And on the other, they insist that American countermeasures be limited to steps – like “measured, commercially meaningful actions consistent with international obligations” and working “with like-minded partners to address common concerns with China’s trade and investment policies” – that have been tried for years, and that so far have produced nothing but failure.

Making News: John Batchelor Podcast On-Line…& More!


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I’m pleased to announce that the podcast is on-line of my Thursday night interview on John Batchelor’s nationally syndicated radio show. In case you missed it live, click here to listen to a fascinating discussion among John, co-host Gordon G. Chang, and me, about the Trump administration’s recent decision to prevent semiconductor manufacturer Broadcom from taking over fellow chip-maker Qualcomm.

Also that day, I was quoted in this post on the President’s controversial claim that the United States currently runs a trade deficit with Canada.

In addition, on March 12, I was interviewed at length on the Voice of America (VOA) about President Trump’s China trade policy. Since the segment was broadcast on one of VOA’s Chinese-language TV channels, you’ll be hearing a simultaneous translation of my remarks with my own English version only somewhat audible in the background. But although it’s nearly impossible for a non-Chinese speaker to know what’s going on, here, for the record, is the link. My segment begins just before the 23-minute mark.

Finally, on March 6, re-ran my recent RealityChek post on naive (or disingenuous?) claims that there’s lots of free trade in the world steel market. Here’s the link.

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


(What’s Left of) Our Economy: A Strong February for U.S. Manufacturing Production – but Big Revisions May be Coming


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Thanks to an unexpectedly crowded Friday, I wasn’t able to put out a report on yesterday’s Federal Reserve real manufacturing output figures – for February. Which is really a shame, because they signaled a noteworthy reversal to the recent slowdown in manufacturing output. In addition, the American automotive sector – which had led domestic manufacturing’s strong early recovery from its deep recessionary slide – emerged from its latest technical recession.

Two important caveats, though: First, revisions weren’t great, to say the least, so part of February’s strong performance reflected a January that was even weaker than previously reported. Second, next week, the Fed will be putting out its latest annual revisions, which will give us entirely new numbers dating back to 2016. And sometimes these updated figures change the picture significantly.

But now to the manufacturing highlights of yesterday’s intriguing good news/less good news Federal Reserve industrial production report:

>According to the Federal Reserve, after-inflation U.S. manufacturing output jumped by 1.27 perceet month-to-month in February – its best such performance since October’s 1.29 percent, which was boosted by a bounceback effect from last fall’s hurricanes. Taking October out of the picture, the February monthly rise was the biggest since last April’s 1.37 percent.

>At the same time, January’s meager 0.08 percent sequential uptick was downgraded to a 0.18 percent dip, and although December’s downwardly revised monthly dip is now judged to have been a 0.04 percent advance, November and October growth figures were lowered as well.

>Year-on-year, manufacturing grew in February by 2.57 percent – the fastest annual pace since July, 2014’s 2.82 percent. By contrast, between the previous Februarys, manufacturing’s price-adjusted output increased by only 1.13 percent.

>Due to the monthly revisions, full-year 2017’s real manufacturing output growth fell to 2.33 percent. But that still resulted in industry’s best year by this measure since 2012’s 2.58 percent.

>Moreover, February’s monthly growth was torrid enough to bring domestic industry to within 1.49 percent of its last constant dollar production peak – hit at the end of 2007, on the eve of the Great Recession.

>Manufacturing’s February performance was led by the durable goods super-sector, whose after-inflation production advanced by 1.78 percent on month. This growth was the fastest since February, 2014’s 1.80 percent, which was helped by a harsh winter rebound effect.

>Yet January’s sequential production change number for durable goods received a significant downgrade, too – from a 0.15 percent increase to a 0.38 percent decrease. The cumulative December and November revisions were slightly negative as well.

>Due largely to the downward January revisions, the month’s reported annual durable goods manufacturing increase was reduced from 2.47 percent to 1.74 percent – the lowest such figure since last August’s 0.95 percent.

>But February’s annual durable goods real production increase of 3.46 percent was the best monthly performance since January, 2015’s 3.50 percent – which also stemmed partly from a winter weather bounceback.

>The downward December revisions, moreover, reduced durable goods’ full-year, 2017 inflation-adjusted growth to 2.41 percent – a figure that is still a post-2014 (2.72 percent) high.

>For the smaller non-durable goods super-sector, constant dollar production rose by 0.71 percent on month in February– its best such growth since the 2.34 percent burst in hurricane-affected October.

>Omitting the October performance still shows that February’s after-inflation non-durable goods growth was its strongest since last April’s 0.96 percent.

>Further, in the non-durables sector, revisions were slightly positive.

>On a year-on-year basis, real non-durable goods output improved by 2.18 percent in February. And for full-year, 2017, the positive monthly revisions pushed after-inflation output production up to 2.25 percent – the best such result since 2004’s 3.95 percent.

>The star February performer in manufacturing, was the automotive sector – whose sequential real output shot up by 3.88 percent, to an all-time high.

>That monthly performance was automotive’s best since last April’s 4.16 percent growth jump, and pulled the sector out of a real output technical recession that dates from that month.

>Interestingly, though, automotive’s initially reported 0.58 percent January sequential real output advance was revised down to a 0.22 percent drop, and December’s initially reported 1.13 percent inflation-adjusted production improvement was reduced to a 0.88 percent increase.

Im-Politic: The Foreign Governments Funding Think Tank Experts on Trump Tariffs


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With the announcement of the Trump tariffs on steel and aluminum – and the prospect of more trade curbs to come – the news organizations on which Americans rely for accurate and impartial information have understandably turned to private sector specialists for facts and analysis.

What’s much less understandable is that many of these specialists work at Washington, D.C.-headquartered think tanks that receive significant funding from foreign governments – many of whose economies will be profoundly affected by any major changes in U.S. trade policy. Even worse, the press coverage of the Trump tariffs has consistently failed even to mention these conflicts of interest – even though some news outlets have reported on the subject in considerable detail.

To give you an idea of how widespread these conflicts are, here’s a list of the foreign government donors for three major think tanks, drawn directly from their websites, and some figures indicating the often major sums these governments (including groups they fund) have contributed to these organizations’ budgets for the most recent data year available:


The Brookings Institution, 2016-17:

$1 million – $1.999999 million

Government of Norway:


Australian Government, Department of Foreign Affairs & Trade

United Arab Emirates


The Japan Foundation Center for Global Partnership

Japan International Cooperation Agency

Taipei Economic and Cultural Representative Office in the United States


Australian Government, Department of Industry, Innovation, & Science


Government of Denmark

European Recovery Program, German Federal Ministry of Economic Affairs and Energy

European Union

Government of Finland

Korea International Trade Association

CAF-Development Bank of Latin America

Department for International Development, United Kingdom

Embassy of France

Japan Bank for International Cooperation

Temasek Holdings

The Korea Foundation

Korea Institute for Defense Analysis

Embassy of the Kingdom of the Netherlands


Peterson Institute for International Economics, 2016


Korea Institute for International Economic Policy

Swiss National Bank

Up to $24,999

Central Bank of China, Taipei

European Parliament

Japan Bank for International Cooperation

Korea Development Institute

Korea International Trade Association

Embassy of Liechtenstein

Monetary Authority of Singapore


Center for Strategic and International Studies 2016-17

$500,000 and up




Academy of Korean Studies

Korea Foundation




South Korea







The Netherlands

United Kingdom

Japan Foundation Center for Global Partnership

European Development Finance Institutions

Norwegian Institute of Defence Studies

Norwegian Institute of International Affairs

Shanghai Institutes for International Studies

Taiwan Foundation for Democracy


As I’ve written before, even analysts whose paychecks are wholly or partly written by foreign governments (or other special interests, like offshoring-happy multinational companies) can provide valuable insights.  They also have every right to weigh in on any policy debate they choose.  But unless you believe we don’t live in a world in which money talks, and that this goes double in a national capital, it’s clear that news consumers have an equally important right to know the source of the money behind the views they’re reading about – and that the media is letting its readers, viewers, and listeners down when this information is kept concealed.   


Making News: A New Op-Ed, National Radio Tonight…& More!


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I’m pleased to announce that a new op-ed of mine was published yesterday – a post on the website of the foreign policy journal The National Interest on some of the more fundamental issues raised by the Trump administration’s tariffs on steel and aluminum imports. Click here to read my argument that the uproar over the levies reveals a major disagreement tension between the ideal of free trade and the ideal of free markets.

In addition, I’m scheduled to reappear on John Batchelor’s nationally syndicated radio show tonight on the Trump administration’s decision to block a foreign takeover of the U.S. semiconductor company Qualcomm. The segment is slated to begin at 10:15 PM EST, and you can listen live at this link. As usual, I’ll post a link to the podcast as soon as one’s available.

And I just found out that on March 8, Ted Evanoff of the Memphis (Tennessee) Commercial Appeal quoted me in a piece on the economic impact of the Trump tariffs. Ted is one of the country’s best manufacturing reporters, and his 2010 book At the Crossroads is a superb history of the modern American automobile industry and why its fortunes sank so sharply through the outbreak of the financial crisis. So I’m always flattered to know that he’s keeping up with my work.

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

(What’s Left of) Our Economy: Wage Inflation Warnings Just Got a Lot Funnier – Unless You’re a Worker


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Today’s U.S. real wage data from the Bureau of Labor Statistics kept mocking the claims that the United States is teetering on the edge of a dangerous round of wage inflation. In fact, the statistics show that in February, real wage recessions (periods of two quarters of more when after-inflation hourly pay has dropped on net) actually continued.

The month-to-month January-February flat-line in inflation-adjusted private sector wages means that this form of compensation is down cumulatively by 0.28 percent since last May. Worse, January’s 0.19 percent sequential decrease was revised down to a 0.28 percent drop.

In manufacturing, after-inflation wages as of February were 0.19 percent lower than they were in January, 2016. Month-on-month in February, they dipped by 0.09 percent. At least January’s sequential decline of 0.46 percent was revised up – to a 0.37 percent decrease.

Since the onset of the current economic recovery, more than eight years ago, real private sector wages have improved by only 3.98 percent. But that performance is more than ten times better than that of manufacturing, where this pay has grown by only 0.28 percent during that period.