(What’s Left of) Our Economy: Is Trump Finally Getting It on NAFTA?

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automotive, Bill Clinton, Canada, Inside U.S. Trade, Mexico, NAFTA, North American Free Trade Agreement, Politico, Ronald Reagan, rules of origin, tariffs, Trade, Trump, World Trade Organization, WTO, {What's Left of) Our Economy

It’s still unconfirmed, but if true, a development reported in the (usually reliable) newsletter Inside U.S. Trade would reveal that the Trump administration is finally recognizing a major weakness in its approach to revising the North American Free Trade Agreement (NAFTA). And special bonus – the proposal in question would also go far toward solving the trade problems with China and most of the rest of the world that have been rightly identified by the administration.

Here’s a good summary of the scoop provided Tuesday by Politico:

“Three sources close to the [NAFTA] talks said the U.S. has demanded that Mexico, and possibly Canada, accept a higher tariff rate for autos that don’t meet the pact’s new content rules. That would essentially force companies that build cars in Mexico to agree to have exports to the U.S. that don’t conform to the rule be subject to a tariff beyond the 2.5 percent rate Washington bound itself to at the World Trade Organization. USTR [the Office of the U.S. Trade Representative] also declined to confirm this development….”

The key here is the point about higher tariffs. The three NAFTA signatories have now come to agree that the treaty’s regional content rules need to be made more strict. So far, in order to qualify for tariff-free treatment anywhere inside North America, autos and light trucks (which comprise an outsized share of intra-North American trade, and have attracted the most attention in the talks) need to be made of 62.5 percent North American parts and components. The aim, at least ostensibly, has been to encourage producers outside North America to relocate production and jobs inside the free trade zone.

The Trump administration has been pressing to raise the content levels needed for such tariff-free treatment to at least 70 percent for passenger vehicles, and reportedly Mexico is now on board in principle (though the exact number has yet to be agreed on). But so far, the administration has not demonstrated much, if any, awareness that higher mandated local content levels alone won’t bring many new factories or jobs to the signatory countries – and have under-performed on this front so far – for a very simple reason. As I’ve noted repeatedly, the penalty that non-North American producers need to pay for non-compliance is only 2.5 percent – an extra cost they can easily absorb.

The Inside U.S. Trade item suggests that this point has been taken, which would be great news for all three NAFTA countries if the eternal tariff is raised high enough to foster North American production and discourage imports. Even better, this proposal – which would essentially turn North America into a genuine trade bloc if extended to all traded goods and services – would by definition limit American imports from all the countries long regarded in Washington as troublesome trade partners (like China, Germany, and Japan). For they would all find it much more difficult to supply the United States – along with Canada and Mexico – with exports, and would face great pressure to serve North American customers instead with products overwhelmingly made in the free trade zone by North American workers.

It’s true that an increase in the external NAFTA tariff would violate WTO rules and would therefore expose all three North American economies to retaliation from outside the continent. But all three countries have run chronic trade deficits with the rest of the world, so they stand to come out ahead if a full-fledged trade conflict actually resulted. And as former President Ronald Reagan emphasized when he originally broached the subject (back in 1979), North America is self-sufficient, or could easily become so, in every significant product or service used by a prosperous economy.

Indeed, Reagan subsequently and explicitly contended that NAFTA was needed as a trade bloc to fend off the challenges posed by regional consolidation in Europe and East Asia. (The Wall Street Journal article in which this argument was made is now behind a pay wall, but the quote is found in my Marketwatch.com op-ed linked above.)  So did former President Bill Clinton. Both were known – and rightly so – as free trade supporters. Donald Trump, a decided free trade skeptic, should settle for no less.

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(What’s Left of) Our Economy: The China Trade Cheerleaders Make their Failures Painfully Clear

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Bill Clinton, Bob Davis, Charlene Barshefsky, China, Financial Crisis, Global Imbalances, Great Recession, The Wall Street Journal, Trade, Trump, World Trade Organization, WTO, {What's Left of) Our Economy

This is how abysmal America’s pre-Trump China policies were: Wall Street Journal reporter Bob Davis recently gave supporters of China’s 2001 accession to the World Trade Organization (WTO) ample opportunity to defend their positions on this landmark decision. And what were the most convincing rejoinders they could muster to claims that the benefits of WTO membership (chiefly, legally sheltering China from unilateral U.S. responses to its wide array of predatory trade practices) enabled China’s rise as a dangerous economic and military power – and that American trade policy needs to respond vigorously? Observations that the biggest gains have indeed flowed to China.

According to Davis, WTO admission advocates “can point to real gains from integrating China into the global economy. According to the World Bank, some 400 million Chinese have been lifted from extreme poverty—that is, from living on less than $1.90 a day—since 1999.”

In addition, “After the deal, foreign investment in Beijing mushroomed from $47 billion in 2001 to $124 billion a decade later. The lower investment and import restrictions required of China as part of its WTO entry also encouraged multinationals to rush in, as did the prospect of serving the vast Chinese market. China became the world’s manufacturing floor, and Chinese imports [sic] to the U.S. soared.”

Evidently, the WTO admission supporters tried to identify benefits for the United States, too. For example, “Today, technology companies tap the Chinese market to boost profits and defray research costs.” And “The low inflation associated with cheap imports, together with Chinese purchases of U.S. government bonds, has also helped to hold down interest rates, making it cheaper for Americans to buy not only clothes and electronics but also homes and cars.”

But apparently none could point to evidence of U.S. companies’ China earnings trickling down to the American domestic economy and its workers. Indeed, the reference to “defraying research costs” looks like a euphemistic way of describing how these businesses often moved white collar and professional as well as blue-collar manufacturing jobs to China.

Similarly, the low inflation and interest rate points amount to gushing that China’s WTO membership helped enable Americans to live way beyond their means. On that score, the only sane U.S. response should be “thanks but no thanks” – since the result was a decade of bubbles whose inevitable bursting triggered the terrifying global financial crisis and ensuing Great Recession.

The unprecedented bubble decade global trade imbalances fostered by the WTO’s enabling of China’s mercantilism, and their nearly cataclysmic results, also provide vital context to claims (chiefly by former U.S. Trade Representative Charlene Barshefsky) that China “became the world’s second-largest importer, giving a boost to rich and poor nations alike.” For these imports and their growth were clearly dwarfed by China’s export surge. And although China’s post-2009 spending spree did help “the global economy from tumbling even more deeply into recession,” it’s unquestionable that the “kitchen sink” stimulus from the Federal Reserve and other major central banks played a far more important role.

But perhaps the most compelling evidence offered in Davis’ article for the abject failure of the China WTO decision came from former President Bill Clinton – who led the campaign to support Chinese membership by promising both an economic boom for U.S. exporters and irresistible pressure for a democratization of China that would bring more global peace and freedom. As Davis reports, the normally loquacious Clinton “declined to comment for this article.”

(What’s Left of) Our Economy: The Republican Tax Plans’ Biggest Flaw

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Alan Greenspan, Barack Obama, Bill Clinton, budget deficits, business spending, capital gains, corporate taxes, dividends, Federal Reserve, fiscal policy, George W. Bush, House, income taxes, monetary policy, multinationals, non-residential fixed investment, Paul Volcker, repatriation, Republican tax bills, Ronald Reagan, Senate, tax cuts, taxes, {What's Left of) Our Economy

The tax bills passed by the Republican-controlled House and Senate and strongly supported by President Trump (despite some important differences between them) can be fairly criticized for any number of big reasons: the mess of a drafting process in the Senate, the impact on already bloated federal budget deficits and the national debt, the cavalier treatment of healthcare reform, the seemingly cruel hits to graduate students and to teachers who buy some of their students’ school supplies.

My main concern is different, though. I could see an argument for the main thrust of the bills – even taking into account most of the above flaws – if they boasted the potential to achieve its most important stated aim. In Mr. Trump’s words, “We’re going to lower our tax rate to the very competitive number of 20 percent, as I said. And we’re going to create jobs and factories will be pouring into this country….” Put less Trump-ishly and more precisely, the idea is that by slashing tax rates for corporations and so-called pass-though entities, along with full-expensing of various types of capital investment, American businesses will build more factories, labs, and other productive facilities; buy more equipment, materials and software; hire more workers and increase their pay (since the demand for labor will soar).

Actually, since automation will surely keep steadily reducing the direct hiring generated by all this promised productive investment, let’s focus less on the jobs promise (keeping in mind that manufacturing in particular generates lots of indirect jobs per each direct hire), and more on the business spending that will boost output – since faster growth is the ultimate key to robust employment and wage levels going forward.

Unfortunately, after spending the last few days crunching some relevant numbers, I can’t see the GOP tax plans living up to their billing – which makes their flaws all the more damning.

What I’ve done, essentially, is look at inflation-adjusted business spending during American economic recoveries (to ensure apples-to-apples data by comparing similar stages of the business cycle) going back to the Reagan years of the 1980s, and examine whether or not individual and especially business tax cuts have set off a factory etc building spree. And I didn’t see anything of the kind, except possibly over the very short term. Moreover, even these increases may have had less to do with the tax cuts than with other influences on such investments – like the overall state of the economy and the monetary policies carried out by the Federal Reserve (which help determine the cost of credit).

Let’s start with the expansion that dominated former President Ronald Reagan’s two terms in office – lasting officially from the fourth quarter of 1982 through the second quarter of 1990 (by which time he had been succeeded by George H.W. Bush). The signature Reagan tax cuts, which focused on individuals, went into effect in August, 1981 – when a deep recession was still underway.

Interestingly, business investment kept falling dramatically through the middle of 1983 – when an even stronger rebound kicked in through the end of 1984. Indeed, that year, corporate spending (known officially as private non-residential fixed investment surged by 16.66 percent. But this growth rate then began slowing dramatically – and through 1987 actually dropped in absolute terms.

A major tax reform act was signed into law by the president in October, 1986, and individuals were its focus as well. Two provisions did affect business, but appeared to be at least somewhat offsetting in their effects, in line with the law’s overall aim of eliminating incentives and disincentives for specific kinds of economic activity. They were a reduction in the corporate rate and a repeal of the investment tax credit – whose objective was precisely to foster capital spending. Other provisions had major effects on business but principally by encouraging more companies to change over to so-called pass-through entities, not (at least directly) on investment levels. Business spending recovered, but its peak for the rest of the decade (5.67 percent of real GDP in 1989) never approached the earlier highs.

Arguably, fiscal and monetary policy were much more influential determinants of business spending, along with the recovery’s dynamics. The depth of the early 1980s recession practically ensured that the rebound would be strong, as did the massive swelling of federal budget deficits, which strengthened the economy’s overall demand levels, and their subsequent reduction.

Perhaps most important of all, the Federal Reserve under Chairman Paul Volcker cut interest rates dramatically from the stratospheric levels to which he drove them in order to tame double-digit inflation. And yet for most of 1984, when business spending soared, the federal funds rate (FFR) was rising steeply. Capex also strengthened between 1987 and mid-1989, which also witnessed a scary stock market crash (in October, 1987).

The story of the long 1990s expansion, which mainly unfolded during Bill Clinton’s presidency, was simultaneously simpler and more mysterious from the standpoint of business taxes – and macroeconomic policy. Following a shallow recession, Clinton raised both personal and corporate tax rates while government spending was so restrained that the big budget deficits he inherited actually turned into surpluses by the late-1990s. For good measure, the FFR began rising in late 1993, from 2.86 percent, and between early 1995 and mid-2000, stayed between just under six percent and just under 6.5 percent.

And what happened to capital spending? In late 1993, right after the tax-hiking, spending- cutting, deficit-shrinking Omnibus Budget Reconciliation Act was passed, and the Fed was tightening, businesses went on a capex spending spree began that saw such investment reach annual double-digit growth rates in 1997 and stay in that elevated neighborhood for the next three years.

It’s true that Clinton and the Republican-controlled Congress passed tax cut legislation in August, 1997, that among other measures lowered the capital gains rate. But the acceleration of business spending began years before that. And although we now know that much of this capital spending went to internet-centered technology hardware for which hardly any demand existed then at all, from a tax policy perspective, the key point is that this category of spending rose strongly – not whether the funds were spent wisely or not.

The expansion of the previous decade casts major doubt on whether any policy moves can significantly juice business spending. Just look at all the stimulative measures put into effect, tax-related and otherwise. The recovery lasted from the end of 2001 to the end of 2007, and during this period, on the tax front, former President George W. Bush in June, 2001 signed a bill featuring big cuts for individuals, and in May, 2003 legislation that sped up the phase-in of those personal cuts and added reductions in capital gains and dividends levies. For good measure, in October, 2004, the “Homeland Investment Act” became law. It aimed to use a tax “holiday” (i.e., a one-time dramatically slashed corporate rate) to bring back (i.e., “repatriate“) to the U.S. economy for productive investment hundreds of billions of dollars in profits earned by American companies from their overseas operations.

In addition, under Bush, the federal budget balance experienced its biggest peacetime deterioration on record, and starting in the fall of 2000, the Federal Reserve under Alan Greenspan cut the FFR to multi-decade peacetime lows, and didn’t begin raising until mid-2004.

The business investment results underwhelmed, to put it mildly. Such expenditures fell significantly throughout 2001 and 2002, and grew in real terms by only 1.88 percent the following year. Thereafter, their growth rate did quicken – to 5.20 percent rate in 2004, 6.98 percent in 2005, and 7.12 percent in 2006. But they never achieved the increases of the 1990s and by 2007, that expansion’s final year, business investment growth had slowed to 5.91 percent.

There’s no doubt that something needs to be done to boost business spending nowadays, which has lagged for most of the current recovery and turned negative last year – even though the federal funds rate remained near zero for most of that time and the Federal Reserve’s resort to unconventional stimulus measures like quantitative easing as well, despite unprecedented budget deficits (though they began shrinking dramatically in 2013), and despite the continuation of all the Bush tax cuts (except the repatriation holiday, and the imposition of a small surcharge on all investment income to help pay for Obamacare). Business investment’s record during the current recovery has been even less impressive considering a Great Recession collapse that was the worst in U.S. history going back to the early 1940s, and that should have generated a robust bounceback.

But if history seems to teach that tax cuts and even other macroeconomic stimulus policies haven’t been the answer, what is? Two possibilities seem well worth exploring. First, place productive investment conditions on any tax cuts and repatriation (the 2004 tax holiday act did contain them) and then actually monitor and enforce them (an imperative the Bush administration neglected). And second, put into effect some measures that can boost incomes in some sustainable way – and thus convince business that new, financially healthy customers will emerge for the new output from their new facilities. To me, that means focusing less on ideas like raising the national minimum wage to $15 per hour (though the rate should, at long last, be linked to inflation), and more on ideas like trade policies that require business to make their products in the United States if they want to sell to Americans, and immigration policies that tighten labor markets and force companies to start competing more vigorously for available workers by offering higher pay.

In that latter vein, the 20 percent excise tax on multinational supply chains contained until recently in the House Republican tax plan could have made a big, positive difference. Sadly, it looks like it’s been watered down to the point of uselessness, and the original has little support in the Senate. The House Republican tax plan also had included a border adjustment tax that would have amounted to an across-the-board tariff on U.S. imports (and a comparable subsidy for American exports), but the provision was removed from the legislation partly due to (puzzling) Trump administration opposition.

Mr. Trump clearly has acted more forcefully to relieve immigration-related wage pressures on the U.S. workforce, but it’s unclear how quickly they’ll translate into faster growing pay.  If such results don’t appear soon, and barring Trump trade breakthroughs, expect opponents of the Republican tax plan to keep insisting that it’s simply a budget-busting giveaway to the rich, and expect these attacks to keep resonating as the off-year 2018 elections approach.   

 

(What’s Left of) Our Economy: The Alternative Facts Behind America’s China Trade Policy

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alternative facts, Bill Clinton, Charlene Barshefsky, China, exports, imports, Long Yongtu, manufacturing, offshoring, services, The Wall Street Journal, Trade, trade law, U.S. Trade Representative, USTR, World Trade Organization, WTO, {What's Left of) Our Economy

After reading her interview with The Wall Street Journal, it’s hard to tell whether Clinton-era chief U.S. negotiator Charlene Barshefsky is mainly clueless or mainly arrogant. In other words, is Barshefsky oblivious to how badly she (and colleagues) botched the challenge of admitting China into the World Trade Organization (WTO)? Or is she confident that the bipartisan American economic policy establishment remains so strongly wed to this epic failure that her reputation and current cushy job as a leading trade lawyer won’t suffer in the slightest even when it’s scope is made unmistakable?

Most disturbing, nothing could be clearer from the interview – in which she was joined by one of her former top Chinese counterparts – that her views on the WTO deal and those of Beijing are as close, as the Chinese like to say, “as lips and teeth.” The only significant difference: then Chinese vice commerce minister Long Yongtu denies that his country’s economic reform efforts have gone off the rails in recent years. Barshefsky insists that China “has stopped the process of economic reform and opening and that, instead, has put in place a spate of measures that are zero sum. They’re highly mercantilist and discriminate against U.S. and foreign companies.”

That’s nice to hear. But this claim also underscores how completely blindsided Barshefsky, the rest of the Clinton administration, and the rest of the powers-that-be in American government, business, and academe were by an about-face in a country with a recent history of political instability and course changes, and no record of viewing trade as a positive-sum game or economic openness as a crucial objective in and of itself.

Barshefsky also demonstrates her belief that the phony promises that fueled the Clinton administration’s successful drive to secure China’s WTO entry still hold water – at least with the high and mighty. For example, according to Barshefksy, “The U.S. didn’t alter its trade regime, nor did any other country alter its trade regime. As in any WTO negotiation, it is the acceding country that needs to reform its economy.” But as she surely knows, WTO membership won for China substantial immunity from the national trade law system the United States historically had used to safeguard its legitimate trade interests unilaterally. Once China entered the WTO, Washington’s internationally recognized responses to China’s predatory trade practices largely depended on the assent of the WTO membership – which has been numerically dominated by economies that were major users of Chinese style protectionism.

Barshefsky continues to claim that the safeguards she negotiated with China were adequate to protect domestic industries – at least temporarily – from surges of Chinese imports. The only problem, she contends, is that these mechanisms were “”almost never used.” What Barshefksy omitted, however, was that the big U.S.-based multinational manufacturers that lobbied so lavishly and successfully on behalf of China’s entry were also offshoring production and jobs like crazy to China largely to supply the America market much more cheaply. Limiting America’s imports from China, especially from factories with which they were linked, was the last thing they wanted.

According to Barshefsky, the post-WTO ballooning of the U.S. goods trade deficit with China can be brushed aside because “we have a substantial services surplus with China.” It’s too bad she didn’t provide any numbers, but not at all surprising – since that surplus last year was only about a tenth as big ($37.4 billion) as the merchandise shortfall ($347 billion). Moreover, the manufacturing-heavy nature of this merchandise deficit – which is increasingly comprised of advanced manufactures – should concern all Americans.

And finally, Barshefsky repeated the widely expressed canard that “the trade deficit is a function of macroeconomic factors. Principally, the difference between what Americans save, which is nada, and investment, which is plentiful.” But the relationship between national trade balances and savings rates is simply a mathematical identity – which by definition says “nada” about causation. Indeed, there are plenty of reasons to suppose that, the more the trade deficit grows, the lower the savings rate is bound to become.

Yet interviewing Barshefsky has at least performed one public service. It reminds Americans that alternative facts began shaping the nation’s politics and policy long before the last presidential election.

(What’s Left of) Our Economy: The Real U.S. Private Sector’s Employment Role Keeps Shrinking and Shrinking

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Bill Clinton, Employment, George W. Bush, healthcare services, Jobs, Labor Department, non-farm jobs, Obama, private sector, recoveries, subsidized private sector, {What's Left of) Our Economy

Because the latest monthly U.S. jobs figures that were released last Friday incorporated revisions going back to last March, our picture is clearer than ever of how dependent former President Obama’s job-creation record was on employment gains in what I call the economy’s subsidized private sector. Those are industries, notably healthcare service, where levels of demand (and therefore employment) are heavily reliant on government subsidies (and therefore politicians’ decisions) instead of on market forces.*

And unless you believe that government or parts of the economy it largely underwrites should be America’s job-creation leaders – which you shouldn’t – you’ll recognize that the more prominent that subsidized private sector is in the nation’s employment picture, the weaker the job market’s dynamics, and the U.S. economy’s genuine strength.

The verdict? These subsidized industries played a large, growing role in U.S. employment gains achieved during the economic expansion that began in June of Mr. Obama’s first year in office. At the same time, although the economy under Mr. Obama performed much better in this crucial respect than under his predecessor, George W. Bush, it fell short of the job-creation pattern under Mr. Bush’s predecessor, Bill Clinton.

The easiest way to show these trends is to focus on the share of total non-farm employment (the American jobs universe according to the U.S. Department of Labor, which officially tallies these numbers) accounted for by the subsidized private sector on a stand-still basis and the share of total job gains it represents. That methodology also yields the data on how employment in what might be called the “real private sector” is faring. And here are the numbers for the last administration:

 
Non-farm job change: +14.534m Percentage change: +11.09

Private sector job change: +14.833m Percentage change: +13.68

Subsidized private sector job change: +3.276m Percentage change: +16.70

Real private sector job change +11.557m Percentage change: +13.01

 

The following numbers show how strongly the subsidized private sector has influenced overall job creation under Mr. Obama:

 
Share of total non-farm job gains: 22.54 percent

Share of conventionally defined private sector job gains: 22.09 percent

 
As a result, the real private sector accounted for 80.51 percent of total non-farm job gains – a high but much smaller share than that resulting from failing to strip out the subsidized jobs (102.06 percent – the discrepancy comes from the absolute reduction in government jobs under President Obama).

Moreover, the subsidized private sector’s importance grew impressively during the Obama years. Between 2015 and 2016, it produced 24.44 percent of all non-farm jobs generated and 26.68 percent of all the employment improvement in the private sector as conventionally defined.

Nevertheless, if the subsidized private sector’s employment role grew robustly under President Obama, it positively skyrocketed during the Bush recovery of the 2000s compared with the rest of the economy. Let’s start by examining the job increases in the relevant major sectors of the economy from the end of 2001 to the end of 2007 – an expansion much shorter than that which began under President Obama:

 
Non-farm job change: +7.139m Percentage change +5.45

Private sector job change: +6.388m Percentage change +5.83

Subsidized private sector job change: +2.827m Percentage change +17.56

Real private sector job change +4.191m Percentage change +4.48

 
The contrast with the Obama years is even more striking when you specify the percent of jobs created for which the subsidized private sector was responsible. In the most important measures, both numbers are roughly twice as high:
Share of total non-farm job gains: 39.60 percent

Share of conventionally defined private sector job gains: 44.25 percent
As a result, the real private sector accounted for just 58.71 percent of total non-farm job gains under former President Bush – way smaller than the share than that resulting from failing to strip out the subsidized jobs (89.48 percent).

But the data leave little doubt that the best recent job-creation performance of recent presidents was turned in by Bill Clinton – with one caveat. Here are the figures for the economic expansion that began in April, 1991 (several months before his first inauguration) and February, 2001 (a month after he left office).

 

Non-farm job change: +24.412m Percentage change +22.53

Private sector job change: +21.991m Percentage change +24.47

Subsidized private sector job change: +4.109m Percentage change +35.84

Real private sector job change +17.882m Percentage change +22.80

 

In terms of the employment-generation role played by the subsidized private sector, here’s what these numbers show for the Clinton expansion:

 
Share of total non-farm job gains: 16.83 percent

Share of conventionally defined private sector job gains: 18.68 percent

 

The one blemish in the Clinton record is the very strong relative growth shown by the subsidized private sector both in absolute and percentage terms. Yet these developments didn’t move the overall job change numbers nearly as much as under Presidents Bush and Obama because they started from a considerably smaller base.

 
Finally, let’s examine how the subsidized and real private sectors’ share of total employment on a static basis has changed since the Clinton expansion began, with the beginning and end of that recovery and subsequent recoveries as our benchmarks:

 
Subsidized private sector as share of non-farm employment, start of Clinton recovery: 10.58 percent

Real private sector share: 72.36 percent

 

Subsidized private sector as share of non-farm employment, end of Clinton recovery: 11.73 percent

Real private sector share: 72.53 percent

 

Subsidized private sector as share of non-farm employment, start of Bush recovery: 12.29%

Real private sector share: 71.41 percent

 

Subsidized private sector as share of non-farm employment, end of Bush recovery: 13.67%

Real private sector share: 70.16 percent

 

Subsidized private sector as share of non-farm employment, start of Obama recovery: 14.97 percent

Real private sector share: 67.80 percent

 

Subsidized private sector as share of non-farm employment, latest Obama data: 15.73

Real private sector share: 68.97 percent

 
The best way to sum up these trends?  In my view, it’s realizing that, since the Clinton recovery began three and one half decades ago, the American economy has generated 37.188 million net new jobs. At that time, the subsidized private sector represented 10.58 percent of total employment.  Since then, it’s been responsible for 30.72 percent of the net new jobs created in the nation — punching way above its weight

The real private sector in April, 1991 accounted for 72.36 percent of the country’s total employment.  Since then, it’s produced 59.08 percent of net new jobs — punching well below its weight.  And finally, fully 52 percent of all the added employment created since April, 1991 that is officially classified as private sector has actually come in the subsidized private sector.

In other words, Presidents come and presidents go, and the economy expands and contracts. But for the last 35 or so years, the subsidized private sector has continued to grow in relative importance. Donald Trump is already considered to be the greatest disruptor in the presidency’s recent history. Is this trend, though, too powerful even for him to resist?

*As always, my definition of the subsidized private sector is not meant to be inclusive.  It simply includes three parts of the economy – healthcare services, the for-profit education sector, and social assistance agencies – that are broken out in the Labor Department data, and that therefore are easy to identify.  It should also encompass workers in sectors like defense-related manufacturing, but many of these are much more difficult to quantify.  

 

Following Up: No Reasonable Doubt Left that Trump is Right as Rain on NAFTA and Offshoring

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Bill Clinton, exports, Fiat Chrysler, Following Up, globalization, Manufacturers Alliance for Productivity and Innovation, manufacturing, Mexico, NAFTA, North American Free Trade Agreement, offshoring, Robert Samuelson Stephen Gold, Sergio Marchionne, tariffs, Trump

Could America’s globalization cheerleaders finally admit that the debate over U.S. manufacturing trade with and investment in developing countries like Mexico is now over and done – including whether President-elect Trump has a handle on it? And that supporters of current American globalization policies like the North American Free Trade Agreement (NAFTA), including many Trump critics, have been completely wrong?

The cheerleaders’ position has long been summarized by the phrase “emerging markets” – claiming that third world giants like Mexico have been valued by American businesses overwhelmingly as exciting new consumers for their products. More recently, in the wake of Mr. Trump’s attacks on massive auto investment in Mexico, NAFTA and globalization defenders have claimed that these new factories have been built not mainly to “export back to the United States, as the President-elect argues. Instead, according to Stephen Gold of the Manufacturers Alliance for Productivity and Innovation – quoted uncritically by Washington Post columnist Robert Samuelson in a piece about the President-elect’s NAFTA statements and actions – “Our members locate abroad, because that’s where the growing markets are. Companies need to be close to their customers.”

These claims were first debunked by no less than former President Bill Clinton, who admitted back in 1997 that NAFTA had been “about factories moving there to sell back to here.” But granted, that was back in 1997. Maybe something has changed?

According to no less than Sergio Marchionne, chief executive of Fiat Chrysler, not even close.  As he just stated, if Mr. Trump imposes high enough tariffs on the vehicles it makes in Mexico for export to the United States, “it will make production of anything in Mexico uneconomical and we would have to withdraw.”

Marchionne continued, “The reality is the Mexican auto industry has been tooled up to try and deal with the US market,” Mr Marchionne said. “If the US market were not to be there, then the reasons for its existence are on the line.”

Moreover, the data – which have finally started to appear prominently in public – reinforce Marchionne’s claim. Every vehicle producer operating in Mexico exports the overwhelming share of its output – for Fiat Chrysler, it was 94 percent in 2014. And last year, some 77 percent of the cars exported by these companies from Mexico were sold in the United States.

These statistics also thoroughly debunk another explanation made – more recently – for corporate auto investment in Mexico. That it’s lured south of the border because Mexico has so many trade agreements with countries aside from the United States. In fact, these deals have been described as achievements that make Mexico a more attractive vehicle export platform than the United States itself. But apparently, the companies themselves haven’t gotten the word.

Finally, it’s crucial to point out that the automotive industry in Mexico isn’t just any old industry, or any old export industry. It comprises fully six percent of the country’s gross domestic product and 18 percent of its manufacturing production – making it the country’s second largest economic sector (after food processing). And P.S. – it’s the country’s biggest generator of foreign reserves, topping even oil. 

Of course, many legitimate questions surround the issues of Mr. Trump’s trade policy plans and his ambition to reshore big chunks of manufacturing. But there can be no legitimate questions left regarding his contention that U.S. tariffs would devastate the paramount incentive businesses have been receiving since NAFTA went into effect to set up operations in Mexico. Anyone doubting that nearly all have been targeted at the U.S. market must either be unable to read – or unwilling.

(What’s Left of) Our Economy: Offshorers’ Protests (Unwittingly) Reveal Why Trump’s Tariffs Can Work

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Al Gore, Bill Clinton, imports, Mexico, NAFTA, North American Free Trade Agreement, offshoring, offshoring lobby, Ross Perot, tariffs, Trade, Trump, {What's Left of) Our Economy

A funny thing has happened on the way to this early stage in the development of Donald Trump’s policies on using trade measures to foster manufacturing employment: The nation’s powerful corporate Offshoring Lobby has just revealed that the critics have been right in charging that America’s trade agreements have fueled massive net job and production flight.

The evidence? Its panicky reaction to the president-elect’s declared intention to slap stiff tariffs on the exports its foreign factories try to send to the United States.

Think about it. Ever since the debate over the North American Free Trade Agreement (NAFTA) turned trade into a front-page issue, supporters of new deals insisted that their main aim was fostering exports from the United States. And since these new foreign sales would be added to the exporting firms’ existing sales, American growth and job-creation would increase. The quintessential boast along these lines? Then-Vice President Al Gore’s promise during his 1993 debate with former independent presidential candidate Ross Perot that NAFTA would further open an already huge, fast-growing Mexican consumer market to U.S. producers:

“Did you see the Wal-Mart that opened in Mexico City on the news?…Largest one in the world, if I understand it. They have 72 cash registers ringing constantly with people in that- in Mexico taking American products out of that store….They prefer American products. If we lower those trade barriers and get rid of them altogether, we will have an export surge into Mexico.”

Moreover, during that debate, Gore explicitly refuted Perot’s claim that the vast majority of American exports to Mexico eventually come back to the United States because they’re parts and components of finished goods that Mexicans have been too poor to consume. That is, Gore insisted that when American business looked at Mexico, it overwhelmingly saw those net new customers for their U.S. facilities and employees that would boost their American production and employment. And he dismissed as not even a half-truth the notion that the multinationals valued Mexico largely as a source of low-wage workers in a regulation-light country that could replace American workers in their U.S.-focused supply chains.

Years later, a different export-oriented justification for free trade agreements and offshored production emerged – especially in the policy community: American multinational companies were mainly building factories overseas because they were the most effective way to reach foreign customers, but that these new plants were engaged in the relatively simple activity of assembling finished goods from large numbers of more advanced parts and components. And since domestic U.S. factories and workers excelled in the latter, offshored production would serve as an immensely powerful magnet for those more sophisticated products.

Interestingly, by 1997, these contentions were all debunked by an unusually authoritative source – Gore’s boss, President Bill Clinton. In a speech aimed at convincing American labor unions to endorse his quest for new trade agreements, Clinton insisted that the deals he had in mind weren’t “about NAFTA or factories moving there to sell back to here.” Not that anyone noticed at the time – and I didn’t even find this quote till researching my book The Race to the Bottom in 1999.

Fast forward to today. There’s no doubt that purchasing power in many low-income countries (especially China) has increased substantially. But there’s also no doubt that it hasn’t improved nearly enough to enable them to rely on their own domestic consumption to spearhead their growth and modernization. Therefore, “moving there” by American businesses is still heavily motivated by “selling back to here.”

And even stronger evidence comes from the howls of corporate protests against Trump’s tariff plans. After all, if serving those foreign markets was the top priority for production offshoring – and especially if Gore was right and that “80 to 90 percent” of American sales to Mexico even more than 20 years ago stayed in Mexico (and similar countries) – why would tariffs reducing their access to the United States matter so much? In particular, if corporate offshoring has had so little to do with supplying U.S. customers, why would Corporate America not in effect throw a bone to a new president and win more than a little White House good will – not to mention great PR with so many Main Street Americans?

The answer, of course, is that the Gore view of offshoring remains as bogus today as it was the night he debated Perot, and that Trump is absolutely right: Without easy access to the U.S. market, offshored production loses a decisive share of its value. Therefore, denying or at least interfering with this access via trade curbs should create powerful incentives to bring these factories (and related facilities, like labs) stateside again. Clearly these firms know it. Mr. Trump’s election indicates that much of the public knows it. The only remaining question is whether, and how quickly, Congress and the chattering classes will catch on.

Im-Politic: The Biggest Media Clinton Cover-Up?

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2016 election, Bill Clinton, chattering class, democracy, Donald Trump, Establishment Media, Gennifer Flowers, George Stephanopoulos, Hillary Clinton, Im-Politic, journalism, Juanita Broaddrick, Kathleen Willey, Mainstream Media, Monica Lewinsky, Paula Jones, sexual assault, videotape, women

What does George Stephanopoulos know and why isn’t he talking? Those to me are two of the most important and clearly the most inexcusably neglected, questions that have been raised in the last 36 hours of the Donald Trump video firestorm. I say inexcusable because the answers could produce major evidence that the establishment media are becoming ever less capable of playing their historic and indispensable role of American democracy’s watchdog.

As must be obvious to anyone following this latest twist of the 2016 American election cycle, one of the leading issues being raised is whether the Republican presidential nominee is being held to a standard fundamentally different from that applied to his Democratic rival’s husband, Bill Clinton, both throughout his presidential years and, reportedly, for decades before.

“Reportedly” is of course the key here. The most disturbing parts of the Trump video clearly are those passages in which he suggests he committed sexual assault. If true, that would of course eliminate the “locker room banter” defense put up by his surrogates and other backers. Indeed, it’s entirely conceivable and understandable that a critical mass of American voters will view even that possibility as a disqualification for any public office. 

I wrote yesterday, there’s no shortage of hypocrisy over the Trump-Clinton comparison on either side. But so far, the Clinton supporters would seem to have the advantage because, as I understand their position, the only Bill Clinton offense that’s been proven has been the former president’s affair during his administration with then White House intern Monica Lewinsky – and that this affair was consensual.

That’s true enough. But for many years, serious charges of far worse behavior by Bill Clinton have been circulating. In connection with one of those instances, a sexual harassment lawsuit filed by former Arkansas state employee Paula Jones was settled, with Clinton paying her $850,000. (He admitted no wrongdoing.) At least one other woman, Juanita Broaddrick, has accused the former president of raping her. At least one other woman, Kathleen Willey, has charged him with sexual assault. Neither woman took her claims to legal authorities at the time – which is a common feature of such episodes.

My purpose here isn’t to litigate or even debate the merits of these real and alleged scandals. Instead, it’s to point out that one of America’s most prominent journalists is and has been throughout the campaign in a position to shed considerable light both on Bill Clinton’s behavior and on Hillary Clinton’s treatment of the women claiming to be his victims. That’s George Stephanopoulos. He was a top adviser to the former president’s first election campaign, and then served as his White House press secretary for Clinton’s entire first term.

As a result, it’s inconceivable that Stephanopoulos didn’t participate in high-level meetings with both Bill and Hillary Clinton on handling these controversies both during the campaign and during the first term. (Jones filed her complaint in 1994, and an imbroglio involving an alleged Clinton affair with Gennifer Flowers roiled the 1992 White House race.) That is, he surely has first-hand knowledge that bears directly on the most sensational issue before the nation today – about the veracity of the various sexual misconduct-related charges against both Clintons.

But on Stephanopoulos’ own Sunday morning talk show, on the very day of a potentially monumental presidential debate in which these questions are sure to come up, the host said nothing even hinting at his former employment by the Clintons. None of the other journalists or political figures on the show’s panel of commentators did either. Nor can I find any instance of an establishment journalist asking Stephanopoulos about his nearly unmatched access to the Clintons in those years.

Could the reason be that Stephanopoulos is thinking about passing through an increasingly busy revolving door yet again and returning to government from his media perch? Or is he still simply a Clinton partisan? And what of the rest of the Mainstream Media and political chattering class members that owe so much of their public profile, and therefore incomes, to shows like Stephanopoulos’? Are some of them having the same thoughts, or holding the same views? Are they worried about getting blackballed from “This Week” – and possibly from the rest of the broadcast and cable networks if they put one the industry’s leading lights on the hot seat? Or are they above all concerned that they’ll be informally ostracized from one of America’s most glamorous social sets for displaying bad form?

Until these questions start getting asked, Americans will have more and more reason to suspect that their country’s news industry can’t be trusted to hold their public figures accountable not simply because of political bias, but because the industry keeps steadily merging with those it’s supposed to be covering. How a democracy can retain its fundamental health under those circumstances isn’t easy to see at all.

Im-Politic: The Near and Longer-Term Outlook for Trump-ism

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2016 election, Bill Clinton, campaign finance, Cold War, Donald Trump, establishment, Hillary Clinton, Im-Politic, Mikhail Gorbachev, Populism, Republicans, Ross Perot, Soviet Union

As of this afternoon, it’s hard to tell which current storm has been bigger – Hurricane Matthew, or the tempest whipped up by the release of a video showing Donald Trump making genuinely disgusting comments about women, and specifically about hitting on them as a big shot.

It’s possible that this disclosure will finally doom the Republican presidential nominee’s already dimming chance of victory in November. But it’s not inevitable, Trump, after all, has been written off before, including following similar revelations, and as of yesterday’s pre-video tape polls, remained highly competitive (though behind) both nationally and in swing states. And even this late in the fall campaign, any number of outside shocks could tip the balance in his favor – including a foreign setback for the United States, a major act of terrorism abroad or even at home, and new information about Hillary Clinton’s own heavy personal and policy baggage.

At the same time, each new Trump outrage makes his chances of defeating his Democratic rival more and more reliant on events he can’t control. That’s a position no one, office-seeker or not, should ever want to be in.

It’s impossible to imagine influencing the main substantive debate that’s broken out over the Trump video – whether what has been learned (anew?) about him is worse morally than what is known about womanizing by former President Bill Clinton and some of his predecessors, along with Hillary Clinton’s own treatment of her husband’s victims. But I can’t resist one relevant observation: Nothing could be more revealing about the deeply divided state of American politics than noting how many Clinton backers who are up in arms about the Trump news dismissed Bill Clinton’s late-1990s critics as (among other descriptions) hopelessly backward prudes, and how many Trump backers were then all over the former president as a reprehensible pervert unfit to hold office.

Largely because they’re still so uncertain, to me the purely political ramifications and questions – especially longer term – are much more interesting and important.

First of course comes tomorrow night’s presidential debate, and how both candidates will handle the Trump revelations. Even before the new video was made public, the first such contest and the vice presidential debate made clear that the Democrats were still counting heavily on spotlighting Trump’s closely related character and qualifications issues. The newest Trump outrages would seem to make this strategy more appealing than ever.

But after a while (which could range from 15 minutes into the debate to the entire period preceding election day) will this look like piling on to significant numbers of voters? Or will repetition make many eyes simply glaze over?

And crucially, how will Trump respond? The smart approach would be to apologize again, at somewhat greater length, and then call for focusing the rest of the evening – and the campaign – on issues. If Clinton persisted, Trump could sadly accuse her of wallowing and resume discussing jobs and the economy, national security, or immigration etc. Trump might also consider shifting the discussion to the potentially damaging release of transcripts of Clinton’s Wall Street speeches and what they signal about her views of America’s top financiers, the desirability of open borders, and the like. Yet too quick a pivot could too easily be read as simple tactical desperation on his part, not as a valid effort to introduce a genuinely worthy subject.

The next time Trump displays such political intelligence, however, will be the first. Indeed, he had exactly this opportunity at the end of the first debate, and hit back with a reference to Bill Clinton’s misbehavior and then a sustained attack on a former Miss Universe.

Second, it looks to me like the mainstream, establishment Republicans who Trump routed in the primaries are looking at his latest crisis as gift from the gods that will boost their chances of recapturing the party in time to prepare for the 2020 elections. Their thinking could not be more obvious. A Trump presidency could consign the establishment to irrelevance for several electoral cycles – which would hurt not only politically, but financially, since as a class their incomes depend on their ability to peddle influence. And this observation applies both to establishmentarians who currently make a living lobbying or consulting for political candidates or media outlets, and to office-holders eagerly eyeing such jobs at some point.

Even a narrow Trump loss could threaten their positions and livelihoods. But a landslide defeat for Trump would enable them convincingly to tell a critical mass of conservatives and Republican-leaning independents, “I told you so,” and push populist impulses and figures to the political margins – at least until the next economic downturn or national security-related disaster.

So every time you read a report about such an establishment Republican denouncing Trump’s transgressions, or calling for his withdrawal from the ticket, keep thinking about all the reasons why their denunciations aren’t necessarily high minded.

The final (for now) political question also concerns the future. And one way to think about it in this respect to remember Mikhail Gorbachev. No need to Google him (right now, anyway). He was the 1980s era Soviet leader whose efforts at domestic and foreign policy reforms were followed by the USSR’s collapse and the end of the Cold War.

It’s still an open question as to whether Gorbachev had a theoretically viable plan but simply ran out of time because the Soviet Union was so brittle economically and socially as well as politically that any serious talk of change at the top was bound to shake its foundations. There’s a powerful argument that Gorbachev actually was not nearly bold enough domestically, and foolishly tried to graft some free market practices onto an economy that he intended to remain fundamentally state-directed. Still others insist that the moment Gorbachev decided to allow Soviet bloc members to open their borders to the West, communism’s dominion over Russia and the rest of the USSR proper was finished. (Here’s a handy summary of many of the major pro and con arguments.)  

But what’s important here for the future of American politics was the question that dominated American foreign policy circles from the moment Gorbachev’s apparent ambitions became…apparent: Was Gorbachev “sincere”? Or more accurately, it was a question that flowed from this query: Could someone like Gorbachev, who rose up through the Soviet system, truly stand for ideas that could in theory of transform that system?

Trump’s obvious personal shortcomings raise the same kind of questions for me. Principally, is it reasonable to hope for politicians to come up through the current political system, and therefore learn how to avoid needlessly alienating or scaring much of the electorate, but who will champion thoroughgoing populist-type reforms a la Trump? Or does succeeding within the system require such heavy reliance on establishment funding (on both sides of the aisle) as to frustrate any truly populist inclinations – and leave that space open to outsider alpha types who have learned to place supreme, overweening trust in their own judgment and capabilities, with all the resulting eccentricities, or worse?

That is to say, can Trump-ism without Trump become a viable movement? Can it attract the necessary resources and talent from outside the establishment? Evidence for a “No” answer is the fact that neither Trump nor his immediate ideological forebear, Ross Perot, have so far been able to pass crucial confidence and reassurance tests with the U.S. electorate. It’s of course rarely a good idea to say “Never.” But this admittedly small historical sample suggests that for a new, improved version of populism to emerge, the aftermath of these 2016 elections will need to be as rule-breaking as the campaign itself.

Our So-Called Foreign Policy: Why Robert Gates is a Flawed National Security Guru

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2016 election, Bill Clinton, border security, China, Crimea, debt, Donald Trump, export controls, George W. Bush, Hillary Clinton, Iran-Contra, Middle East, NATO, NATO expansion, Obama, Our So-Called Foreign Policy, Putin, Robert M. Gates, Ronald Reagan, Russia, terrorism, The Wall Street Journal, TPP, Trans-Pacific Partnership, Ukraine

The Wall Street Journal op-ed staff’s decision to publish Robert M. Gates’ article last Friday on how he sizes up the two major presidential candidates’ qualifications for the Oval Office makes sense only by the degraded and often mindless standards of the American political, policy, and media establishments.

Sure, as the tag line ostentatiously noted, “Mr. Gates served eight presidents over 50 years, most recently as secretary of defense under Presidents George W. Bush and Barack Obama.” As a result, I’m certainly interested to know his views – and especially that, although Democratic nominee Hillary Clinton has a deeply flawed record, Republican Donald Trump is “beyond repair.” You should be, too. But should anyone regard Gates as the last word? I’m not convinced – nor should you be.

For starters, one of the presidents Gates served was Ronald Reagan – as a big player in that administration’s reckless and downright looney scheme (the so-called Iran-Contra affair) to evade Congress’ ban on supplying anti-communist Nicaraguan rebels with profits made secretly by selling arms to Iran’s terrorism-sponsoring, hostage-taking ayatollahs. Gates also seems to regard George W. Bush’s disastrous foreign policy presidency as standing within the bounds of acceptability. Hello?

At least as unimpressive, though, is Gates’ judgment regarding current foreign policy issues. Here are three examples. First, the former Bush and Obama Secretary of Defense warned that:

“Every aspect of our relationship with China is becoming more challenging. In addition to Chinese cyberspying and theft of intellectual property, many American businesses in China are encountering an increasingly hostile environment. China’s nationalist determination unilaterally to assert sovereignty over disputed waters and islands in the East and South China Seas is steadily increasing the risk of military confrontation.

“Most worrying, given their historic bad blood, escalation of a confrontation between China and Japan could be very dangerous. As a treaty partner of Japan, we would be obligated to help Tokyo. China intends to challenge the U.S. for regional dominance in East Asia over the long term, but the new president could quickly face a Chinese military challenge over disputed islands and freedom of navigation.”

True indeed. But then he upbraids both Trump and Clinton for opposing President Obama’s Pacific rim trade agreement, a position that he argues (despite presenting no evidence) “would hand China an easy political and economic win.” Indeed, Gates dredges up the know-nothing specter of China responding to Trump-ian tariffs with a trade war against America that it could well win because of all the U.S. debt it holds and because it’s “the largest market for many U.S. companies.”

Apparently he’s unaware that China’s debt holdings are a small fraction of the outstanding U.S. total, that the PRC remains much more important to American multinational firms as an offshore production platform than a final customer (which explains why the United States runs a huge trade deficit with Beijing), and that without adequate access to the American market, China’s export-focused economy and political stability would face mortal danger.

Worse, as chief of Mr. Obama’s Pentagon, Gates pioneered a relaxation of American export controls that greatly expanded China’s access to America’s best commercially produced defense-related knowhow. Talk about feeding the beast!

Gates’ critique of the Clinton, and especially Trump, Russia stances should inspire no more confidence. According to this supposed national security guru, “neither Mrs. Clinton nor Mr. Trump has expressed any views on how they would deal with Mr. Putin (although Mr. Trump’s expressions of admiration for the man and his authoritarian regime are naive and irresponsible).”

As Gates notes, under Putin, “Russia [is] now routinely challenging the U.S. and its allies. How to count the ways. There was the armed seizure of Ukraine’s Crimea; Moscow’s military support of the separatist movement in eastern Ukraine; overt and covert intimidation of the Baltic states; the dispatch of fighter and bomber aircraft to avert the defeat of Syria’s Assad; sales of sophisticated weaponry to Iran.

“There is Russia’s luring the U.S. secretary of state into believing that a cease-fire in Syria is just around the corner—if only the U.S. would do more, or less, depending on the issue; the cyberattacks on the U.S., including possible attempts to influence the U.S. presidential election; and covert efforts to aggravate division and weakness with the European Union and inside European countries. And there is the dangerously close buzzing of U.S. Navy ships in the Baltic Sea and close encounters with U.S. military aircraft in international airspace.”

But actually it’s Gates who’s leaving the biggest questions unanswered. Does he now view the targets of Putin’s aggression as vital U.S. interests that merit a defense guarantee that could expose the United States itself to nuclear attack? When exactly did Crimea and Ukraine, which are so close to Russia that they cannot possibly be defended by Western conventional forces, attain this status? Why were American presidents going back to 1945 wrong to take exactly this position (including all of those he served)?

Indeed, what’s changed since Gates himself recognized this reality, and warned former President George W. Bush that the NATO expansion pushed by him and his predecessor, Bill Clinton, would needlessly provoke the kind of Russian push-back now underway? And if Gates hasn’t reversed himself on Russia, why is he so scornful of Trump’s evident interest in cutting a deal with Putin?

Gates is non-partisan, but no better, when it comes to the Middle East. He accuses the two candidates or failing to define “what the broader U.S. strategy should be toward a Middle East in flames….” But his critique of Trump is especially off base. According to Gates, the Republican candidate has “suggested we should walk away from the region and hope for the best. This is a dangerous approach oblivious to the reality that what happens in the Middle East doesn’t stay in the Middle East.”

But he misses the essence of Trump’s position, which is defending America from threats emanating from the region at America’s borders – which are relatively controllable – versus in that terminally dysfunctional, faraway region – which is completely uncontrollable. Gates can legitimately disagree with this approach (which I have repeatedly endorsed), but he can’t legitimately claim that it doesn’t exist.

Gates’ critique extends to several other current flashpoints, but what’s especially revealing to me is how this supposed diplomatic sage completely mis-identifies the biggest foreign policy question facing America’s leaders and the public. It’s not, per his formulation “how [the next president] thinks about the military, the use of military force, the criteria they would apply before sending that force into battle, or broader questions of peace and war.”

As I’ve been writing since the mid-1980s, that kind of thinking puts the cart before the horse. (Here’s a good summary of my first lengthy article on the subject, which unfortunately is not available in full on-line.) America’s main foreign policy challenge is figuring out its principal overseas interests, and basing its decisions on using force on the importance of those goals. Otherwise, debates on going to war and other uses of military power will be conducted in a strategic vacuum – which already too often has been the case.

Given Gates’ wealth of experience, it’s fine for The Wall Street Journal – or any other news organization – to grant him a prominent forum from time to time. How much better it would be, however, for editors and reporters and pundits to ask him, and themselves, if he’s ever displayed any learning curve.