Our So-Called Foreign Policy: Biden Keeps Widening That Dangerous Lippmann Gap

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alliances, Biden administration, China, defense budget, Defense Department, inflation, Lippmann Gap, military, nuclear weapons, Our So-Called Foreign Policy, Russia, Taiwan, Trump administration, Ukraine, Ukraine War, Walter Lippmann

As made clear by its latest proposed defense budget, the Biden administration is creating an ever more serious Lippmann Gap problem – and courting greater and greater threats to U.S. national security in the process.

As known by RealityChek regulars, this term refers to a danger warned of by twentieth century philosopher and journalist Walter Lippmann – who argued that a country whose foreign policy objectives were exceeding the means at its disposal to achieve those objectives is headed for big trouble.

And practically since it entered office, that’s the fix into which Mr. Biden’s expansive foreign policy goals on the one hand, and his Pentagon budget requests on the other, keep sinking America. Worse, this year, the predicament seems especially worrisome, since the President is conducting foreign and national security policies that inevitably are super-charging tensions with both a nuclear-armed Russia and a nuclear-armed China.

No matter whether you believe either or both of these policies are necessary or not (and I view the Biden Ukraine/Russia policies as unforgivably reckless, because no vital U.S. interests are at stake, and his China policies unavoidable, because Taiwan’s semiconductor manufacturing prowess has turned it into a vital interest), you have to agree that fire is being played with.

This past week, the administration revealed that it will be asking Congress to approve $842 billion worth of spending on the Pentagon and its operations proper. (As usual, the annual defense budget request additionally includes tens of billions of dollars worth of extra spending, practically all on Energy Department programs for maintaining the country’s nuclear arsenal.)

It’s a lot of money. But it’s only 3.15 percent larger than the funds finally approved for the Defense Department for this current (2023) fiscal year. And when you factor in the administration’s estimate of inflation for 2024 (2.40 percent), in real terms, it’s barely an increase at all. Worse, if you believe that inflation might stay considerably higher, then we’re looking at a prospective defense budget cut in real terms.

Either the President believes that (1) the U.S. military can already handle both the threat of a Chinese invasion of Taiwan and a Ukraine War that might at least spill over into the territory of treaty allies; or (2) that neither event will happen; or (3) that they’ll be spaced out neatly enough to enable existing U.S. forces to handle them one at a time; or (4) that a marginally bigger defense budget will at least put the Pentagon on the road toward building the capabilities it needs to handle these new potential threats before they actually materialize.

Do any of these strike you as safe enough bets?

Nor is this type of Biden administration defense budget request anything new. Last year at about this time, the fiscal 2023 Pentagon budget request was unveiled. `As you may recall, “last year at about this time” was roughly a month after Russia invaded Ukraine, and after President Biden resolved to help Kyiv turn back Moscow’s forces. He ruled out using American boots on the ground, but began providing major military assistance and significantly adding to the U.S. military presence in countries throughout Europe – including those right next to Ukraine that Washington had already promised to protect with nuclear weapons if necessary because (unlike Ukraine), they’re members of the North Atlantic Treaty Organization (NATO).

In addition, since the previous August, the President had stated several times that the U.S. military would come to Taiwan’s rescue if Beijing attacked. Even though the White House has sought to walk back these comments, their number plainly means that the United States has taken on another sizable defense commitment.

But that fiscal 2023 budget request – again, made in March, 2022 – sought only 4.2 percent more in defense spending than was finally approved for fiscal 2022. And after the administration’s expected inflation rate expected, the rise was only 1.5 percent.

Further, Mr. Biden’s first defense budget request (for fiscal 2022), made in April, 2021, sought Pentagon spending that was only 1.6 percent higher than that finally approved for the final Trump administration budget year.

It’s true that this modest Biden request was much bigger than the proposal made by his predecessor for fiscal 2022. But it seemed way too paltry given that at the heart of Mr. Biden’s approach to foreign policy was the promise that America would come charging “back” from four Trump years of alleged retreat from the world stage and in particular neglect of defense alliances.

Of course, defense budget requests are only the first step in the defense spending process, and Congress will surely push through some increases as it’s done in years past. Also crucial to remember: The amount of military spending doesn’t automatically translate into more or less fighting prowess, since spending priorities within the top-line outlay can be and often are shifted to generate more bang for the buck (or achieve other newly added objectives). Indeed, that’s what one aim that the President says he’s aiming to achieve.

Nonetheless, the overall initial budget request certainly limits the extent to which specific programs can absorb more funds without overly shortchanging other important programs. It also tends to exert a gravitational effect on Congress’ political ability to add (or subtract).

Two other big problems to worry about. First, the latest inflation estimates by the Pentagon have been way off. For the 2022-23 calendar year, the actual inflation rate has so far turned out to be nearly three times greater (nearly six percent as of February) than the estimate for that fiscal year (2.2 percent).

The estimate for 2023-24 of 2.4 percent roughly matches the latest forecasts of the Federal Reserve and the Congressional Budget Office. But as noted, even if correct, the extra outlays will be minimal in after-inflation terms, as I’ve argued previously, politicians’ great temptation to stimulate the economy with all sorts of giveaways as a new presidential election cycle gets underway could well keep price increases robust.

Second, decisions to spend even much more on, for example, new weapons or troop readiness can take years to result in more effective forces. So even much bigger Biden requests were never going to work instant miracles.

At the same time, the global threat environment is hardly moving at a snail’s pace. And recent reporting from The Wall Street Journal describes what a mammoth strategic transition the Defense Department needs to make – from a force focused on fighting a Middle East-centric global war on terror to one able to handle two great power threats.

The option that I’d prefer is for closing the Lippmann Gap by reducing some U.S. defense commitments (principally relating to Ukraine, along with further downplaying the Middle East) along with hiking military spending faster (to cope with the mounting Chinese threat to Taiwan). But at the rate the Biden administration is going, America’s worrisome mismatch between its foreign policy reach and its grasp seems sure to keep worsening.

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Im-Politic: A Viable Alternative to Affirmative Action?

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affirmative action, African Americans, college, college admissions, Defense Department, education, higher education, Im-Politic, integration, Latinos, math, minorities, NAEP, National Assessment of Educational Progress, reading, schools, segregation, Supreme Court

One of the most compelling arguments for ending racial preferences in college admissions – a demand that the Supreme Court will address in two high-profile cases – also seems to be one of the most depressing. As some opponents of such affirmative action programs contend (according to what I’ve heard on some cable talk shows), anyone truly interested in helping students from disadvantaged communities climb the education and therefore career success ladders would focus on improving the grade and high schools that are supposed to be preparing them for college, rather than on awarding higher education opportunities to those who don’t qualify according to race-blind criteria.

It’s depressing because for so long Americans have seemed unable to “fix the schools.” So ending or at least thoroughly weakening affirmative action in higher education, even if Constitutionally prohibited, looks like a recipe for perpetuating racial and ethnic achievement gaps.

Except that some impressive evidence has just emerged showing that primary and secondary schools have succeeded in bringing African American and Latino student test scores closer to white test scores. It comes from the latest edition of the U.S. Department of Education’s National Assessment of Educational Performance (NAEP – “the nation’s report card”).

The NAEP is incredibly data-rich, but one set of findings I regard as especially revealing were those presenting the shares of different racial and ethnic groups performing at or above the level viewed as “proficient” by NAEP. (Here’s a starting point for this section of the report card.) The results go back to 1990 for math and 1992 for reading, and through 2019 for both. Therefore, they show both trends over time and changes achieved in the roughly three decades before the pandemic and related school closings struck – and set back everyone. I chose proficiency as a standard versus “NAEP Basic” because it figures that the proficient students are those likeliest to attend or want to attend college.

It would have been great to describe not only the scores for fourth and eighth graders in reading and math, but for high school seniors. Unfortunately, those data only cover the short 2015-2019 period.

Here’s how the shares of white, African American, and Latino fourth graders who have been math-proficient has changed from 1990-2019:

White: 16 percent-52 percent

African American: 1 percent-20 percent

Latino: 5 percent-28 percent

 

Here are the same type of math figures for eighth graders:

White: 18 percent-44 percent

African American: 5 percent-14 percent

Latino: 7 percent-20 percent

 

And now the results for reading proficiency among fourth graders from 1992-2019:

White: 35 percent-45 percent

African American: 8 percent-18 percent

Latino: 12 percent-23 percent

 

And for eighth graders:

White: 35 percent-42 percent

African American: 9 percent-15 percent

Latino: 13 percent-22 percent

It’s clear that in every single case above, African American and Latino scores significantly lag white scores both at the beginning of the time periods examined and at the end. But it’s also clear that in evey single case above, the scores for both minority groups improved at a faster rate than those for white students.

Yes, there’s a baseline effect at work everywhere – that is, when the figure for a comparison year is very low, it’s going to be much easier to generate bigger percentage changes than for a comparison year that’s much higher. But in this instance, what seems most important to me is that bigger is indeed bigger, and undeniably encouraging.

The remaining racial and ethnic gaps remain disturbing, but two other recent findings indicate that faster progress is anything but a pipe dream. First, the U.S. Defense Department runs its own very big school system. In fact, the NAEP compares it to a U.S. state. And even though many of its students come from disadvantaged backgrounds, they’ve been outperforming their “civilian” counterparts for many years in reading and math at both the fourth grade and eighth grade levels. (Twelfth grade data aren’t available for this group.) So maybe the military has long known something about education that it could teach the rest of us?

Or maybe these schools function well because they place disadvantaged kids out of neighborhoods whose many and varied troubles create terrible learning environments? As it happens, there’s some strong evidence for that proposition, too. In other words, as a Washington Post education columnist has put it, the best way to help low-income (including of course minority) students isn’t to try making their local schools better, but to move them into better schools.

Of course, that kind of policy shift would open up a whole can of related “white flight”and “school busing” and housing-segregation worms that have sparked numerous racial conflicts in recent decades – even in liberal cities like New York and Boston. But that only reenforces a conclusion about American attitudes toward making sure that none of our country-men and women are left behind: Too often, failure or inadequate progress stems not from lack of resources or of knowledge, but of will.

Our So-Called Foreign Policy: For Banning All U.S. High Tech Sales to China

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Biden administration, China, Chips Act, Defense Department, export controls, national security, Our So-Called Foreign Policy, semiconductor manufacturing equipment, semiconductors, tech

Just as my good buddy Ace recently gave me a great idea for a post on U.S. Ukraine policy, my equally good buddy Swifty (a finance guy) yesterday gave me an equally great idea – about how to ensure that U.S. curbs on sales of high tech equipment to China really put the hammer on the semiconductor industry being built in the People’s Republic. And interestingly, it mirrors an idea that I proposed many years ago for America’s human rights policy – government compensation for American-owned firms that lose business due to such limits.

In recent months, Washington has made major – albeit incredibly belated – progress in cutting off such American aid to Chinese tech manufacturers, whose burgeoning capabilities of course will boost China’s military power and potential. Important restrictions on what U.S.- and foreign-owned businesses can supply to China’s microchip entities are contained both in the bill signed by President Biden to boost semiconductor manufacturing in the United States, and in a sweeping set of restrictions on what both U.S.- and foreign-owned firms can supply to China’s microchip entities.

But even if these new policies are adequately enforced – always a big question surrounding American efforts slow China’s tech progress – they suffer two related weaknesses stemming from their tight focus on the highest end semiconductors and the equipment needed to make them. First, the vast majority of chips in use today – including in military systems – are lower-tech, so-called “legacy” chips, and China’s growing presence in the global market for these devices can create dangerous vulnerabilities itself.

Second, any sales of the machinery and software needed to make these legacy chips is bound to wind up helping teach Chinese scientists and engineers how to make their more advanced counterparts.

And this is where Swifty’s idea comes in. As he noted, it needs to be America’s goal to cripple China’s ability to make any type of semiconductor, and to completely shut down its learning opportunities. The big obstacle to imposing the broader controls needed to achieve this goal? The fact that this step would drive U.S.-owned companies that make semiconductor manufacturing equipment out of one of their biggest markets.

Swifty’s recommendation? Compensate them for these losses – at least until they can recoup them by selling to friendly countries to which chip production that’s under pressure from U.S. restrictions moves from China. He adds that such payments would be eminently affordable.

After all, even though the China market is enormously important to these firms, the China revenues they say they’ll lose are drops in the bucket compared with the mammoth scale of overall U.S. government spending, and even of the U.S. defense budget. (For some company-specific figures, see, e.g., here and here.)

That last point is particularly critical. For knee-capping China’s tech prowess is vital to U.S. national security. So think of these payments as defense spending – since it’s at least as important to prevent China from deploying lots of high tech weapons on the battlefield in the first place as to develop ways to fight them on the battlefield.

This national security perspective also matters greatly for dealing with another possible outcome of this greatly escalated U.S. strategy of denial – sabotage by American allies whose tech companies try to take advantage of U.S.-owned firms’ exit from China. Although the Biden administration has given some of them temporary exemptions, so far, the rest seem to be abiding by the new Biden administration rules – even in one case in which a loophole may well exist. But if they balk at wider restrictions, they should be told that their actions could wind up enabling Chinese forces to kill Americans in combat, and that they can’t expect continued U.S. protection if they persist. 

Way back in the early 1980s, I wrote that if the United States was serious about human rights policy, compensation should be paid to American-owned companies that lose foreign business in dictator-ruled countries subjected to U.S. economic sanctions. If Swifty’s similar approach isn’t used for China tech policy, it’ll be difficult to claim that the nation is serious about its national security.        

Those Stubborn Facts: U.S. National Security Outsourced to China

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China, defense, Defense Department, national security, Pentagon, procurement, supply chain, Those Stubborn Facts

Number of Chinese entities in the U.S. Defense Department’s supply base, 2019: 655

Increase since 2012: “More than fivefold.”

 

(Source: “Pentagon Pushes Defense Companies to Limit Use of Chinese Supplies,” by Doug Cameron, The Wall Street Journal, September 18, 2022, Pentagon Pushes Defense Companies to Limit Use of Chinese Supplies – WSJ )

Im-Politic: So Far, Milley’s Sure Acting Like He’s Guilty of Treason

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25th Amendment, Bob Woodward, China, Constitution, Defense Department, Donald Trump, election 2020, Im-Politic, Jen Psaki, Joint Chiefs of Staff, Mark Milley, military, Pentagon, Peril, Robert Costa, treason, Washington Post

I’d bother to advise General Mark Milley to lawyer up – fast – except I can’t imagine that even Johnnie Cochrane (Google “O.J. trial”) – ultimately could get the Chairman of the Joint Chiefs of Staff off the hook for treason charges if claims made by an upcoming book on the Trump administration’s final months are true. Worse, the President of the United States seems just fine with such behavior from the person who’s both the top military advisor to the chief executive and to the Pentagon.

It should go without saying that Milley, as with every other American, deserves a presumption of innocence. But his behavior since the publication of excerpts from Peril, by Washington Post correspondents Bob Woodward (of Woodward and Bernstein Watergate fame) and Robert Costa decidedly resembles that of someone who’s guilty as sin.

As stated by another Post reporter, according to Woodward and Costa, Milley called his Chinese counterpart last October 30 and told him, “General Li, I want to assure you that the American government is stable and everything is going to be okay.”

Allegedly, Milley continued, “We are not going to attack or conduct any kinetic operations against you.” (With this phrasing, Milley for some reason might have been trying to exclude cyber-attacks from his promise.) 

And here’s the key passage: “If we’re going to attack, I’m going to call you ahead of time. It’s not going to be a surprise.”

Again, if true, any number of aspects of this phone call could be shocking and disgraceful for any number of reasons centering around the possibility that the General shattered the principles of civilian control over the military by taking an unauthorized initiative with major implications not only for U.S. national security but overall U.S. foreign policy as well.

And whether Milley was completely freelancing or not, the notion that former President Trump’s dangerously unstable state of mind excuses this behavior is utterly unacceptable. The Constitution’s 25^th Amendment lays out procedures for dealing with situations like this, and none of them were invoked before Milley picked up the phone.

Worse, keep in mind that Milley made the first of two phone calls to Beijing was made October 30, before Election Day and well before Trump set off alarm bells with his behavior in the voting’s aftermath. In addition, if Milley really believed that Trump would order an unprovoked attack on China, his own sanity needs to be questioned.

Even if you fear that a Trump victory last November would have freed him to make all manner of reckless decisions, there’s no reason to think that China would have been placed in any danger unless Beijing set the stage for war by, say, invading Taiwan. In fact, one of the most common (however bizarre, given the massive tariffs and damaging sanctions he’d imposed) criticisms of the former President’s China policy at the time was that in order to preserve his 2020 trade deal with the People’s Republic, he’d been treating China and especially its dictator Xi Jinping with kid gloves. The Biden camp itself was making this accusation as late as last September.

But none of Milley’s supposed offenses compare with the claim that he told China’s top military officer that if Trump decided to strike, he’d warn the Chinese. Talk about providing “aid and comfort” to an enemy – a centerpiece of American law’s definition of treason. And from a real world standpoint, what if Milley got wind of such plans a few days before the attack was scheduled? Would he have given the Chinese that much warning? Which would have given them a chance to launch their own preemptive strike? How do you think that would have worked out?

Further, what if Milley was simply worried that Trump might try this, with no concrete evidence, or less-than-conclusive evidence? Just because he thought Trump was crazy. Would he have warned China in this circumstance? Who can tell?

For these reasons, the Woodward-Costa claims are so jaw-dropping that you’d expect an innocent Milley to deny them specifically and indignantly – with wording on the order of “I never told General Li or any other Chinese official that I would warn them about an impending U.S. attack.” If I was him, I’d threaten a slander suit, too, if the authors didn’t recant (and probably even if they did).

Milley, however, hasn’t done anything close. The only statement issued (and not by him, but by his spokesman) ignored the charges. And almost as interesting, his allies in the government haven’t denied these charges expressly, either, when speaking (anonymously, of course) to other journalists. Most disturbing of all, White House Press Secretary Jen Psaki issued similar remarks yesterday – which must mean that Mr. Biden himself isn’t interested in getting to the bottom of this crucial matter.

The good news is that soon, neither the President nor the General may have a choice. On September 28, Milley’s scheduled to testify (under oath, natch) before the Senate Armed Services Committee on the Afghanistan debacle. You can be sure that the Woodward-Costa charges will come up, too. And if Milley deides to keep playing footsie, don’t be surprised if you see an attorney at his side – and even counseling him to take the Fifth.

Im-Politic: The U.S. Still Isn’t Even Running in the Global Semiconductor Supremacy Race

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appropriations, authorization, Chuck Schumer, Congress, Defense Department, House of Representatives, Im-Politic, innovation, Intel, microchips, semiconductors, Senate, subsidies, Taiwan Semiconductor Manufacturing Company, technology, TSMC

In a week, the United States will mark an anniversary that no American should want to celebrate: It was last June 10 and 11 that companion bills were introduced in both the House and Senate to increase greatly the U.S. government’s support for domestic semiconductor manufacturing. Since I’m a strong backer of such efforts, why am I so downbeat? Because despite the importance of strengthening the American footprint in this sector for both national security and future prosperity, and despite seemingly strong bipartisan support for this effort (at least in principle) nearly a year later, not a single penny has been been spent.

It would actually be reasonable to argue that the federal government took way too long to take even that preliminary step. After all, as I documented in this article last October, America’s global leadership in producing (as opposed to designing) the microchips increasingly crucial to so many defense-related and civilian products and services – and indeed, entire industries – had been waning for decades, and was finally lost in 2017. That’s the year when U.S.-owned Intel became unable to keep up with Taiwan’s Taiwan Semiconductor Manufacturing Company in turning out semiconductors featuring the world’s smallest circuit sizes – the main indicator of a chip’s capabilities.

So it’s not terribly impressive that American political leaders took two years to begin responding in a serious way. (And P.S. – the executive branch, under President Trump, clearly wasn’t johnny-on-the-spot, either, in using the bully pulpit to sound the alarm and generate support for action.)

Still, the bipartisan nature of the legislative effort – at a time of heated partisanship on virtually every other national issue – seemed cause for encouragement. Even better: Just a month later, the House and Senate passed their respective semiconductor bills.

Since then, however, progress has been sluggish. The Representatives and Senators didn’t manage to get their acts together before that session of Congress ended in order to draft and pass the consensus bill needed to go to the President’s desk for signing. Therefore, the measures died, and work needed to begin all over again this past January, when the new Congress convened.

Semiconductor work was proceeding along another track in late 2020, and resulted in key provisions of the expired bill being incorporated into legislation authorizing the Defense Department’s levels and kinds of spending for this fiscal year. That bill became law this New Year’s Day (over a Trump veto for unrelated reasons), but according to Congress’ procedures, authorizing bills can’t trigger any spending. That requires an appropriations bill – which also must be passed in identical form by both chambers before enactment.

Six months later, there’s still no money flowing. The story is excrutiatingly difficult to follow, but it appears that Senate Majority Leader Chuck Schumer of New York tried to speed up the process in May with an emergency funding measure. Passage seemed likely at month’s end, before the Senate’s scheduled Memorial Day recess, but was stymied at the last minute by a sadly typical array of political shenanigans from both the minority Republicans (whose support was needed because of the Senate’s filibuster provision requiring super-majorities to pass most legislation) and Democrats. (See here and here for good accounts.)

Passage of a similar measure by the House looks to be easier, because of the Democrats’ slightly bigger majority. But there the process is less advanced, since the House Democrats’ own technological competitiveness proposals were only introduced in committee May 25.

It’s not like the U.S. private sector has been standing still. Intel, most significantly, seems determined to reemphasize manufacturing again, and has committed to put lots of money where it’s mouth is. But without a major helping hand from Washington, this campaign is sure to be swamped by the massive amounts of foreign government subsidies for promoting advanced semiconductor manufacturing that have been announced lately. (Here’s a useful summary.)

I’m generally a fan of the cautious approach to policymaking fostered by the U.S. Constitution’s separation of powers and checks and balances principles. And I wouldn’t be so fast, like so many Democrats, to junk the Senate’s filibuster rule (which is not found in the Constitution). Yet time is not America’s friend when it comes to regaining lost ground in a fast-moving industry like semiconductors, and if Washington continues its business-as-usual approach on this issue, history will likely conclude that the American political system failed a big test.

Full disclosure:  I own a not-trivial number of shares of TSMC common stock.

(What’s Left of) Our Economy: Without Supply Chain Transparency, There’s No Supply Chain Security

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Bureau of Economic Analusis, Defense Department, Defense Innovation Unit, defense manufacturing, election 2020, FDI, foreign direct investment, GAO, Government Accountability Office, health security, Joe Biden, medical equipment, national security, offshoring, Pentagon, supply chains, Trump, {What's Left of) Our Economy

Earlier this month, I criticized Joe Biden’s new plan to strengthen U.S. domestic manufacturing with a special eye toward boosting the security of key supply chains for holding out as a model the Pentagon’s work on defense-related manufacturing. Just this week, I found even more evidence to support the view that if the presumptive Democratic presidential nominee is really serious about achieving this goal (and given his longstanding record on trade and globalization issues, ample doubt is warranted) he’ll need a dramatically new model.

By the way, these findings show that the Trump administration also remains too far from getting its own supply chain act together.  And the main reason is a dangerous – and wholly unnecessary – lack of supply chain transparency.

The evidence comes from a September, 2019 report from the U.S. Government Accountability Office (an investigative arm of Congress) that summarizes the views of a panel of specialists convened to discuss foreign threats to the U.S. defense manufacturing base, and presents findings on the subject from various U.S. government agency, private sector, and university studies. The threats include the offshoring of the production of key defense-related goods; takeovers by foreign entities of U.S.-based facilities that supply these products, along with important services, or foreign acquisitions of significant stakes in these facilities; and the loss of U.S. competitiveness in these areas for market- and competition-related reasons and the resulting turns to foreign suppliers.

And crucially, the panelists consulted (listed on p. 40 of the report) include no notable supposed globalization alarmists or China hawks. In fact, one panelist was a senior executive of the U.S.-China Business Council, which has been a major pillar of what I call the nation’s Offshoring Lobby.

The report correctly noted that the use of foreign-origin goods and services can benefit U.S. national security interests. Specifically, it can “lower costs and provide better access to foreign workers and markets [which can help the companies in question gain the benefits of economies of scale by winning more customers].” Moreover, “When companies that offshore contract with DOD [the Departent of Defense], they can pass those benefits along. Foreign investment can help U.S. companies grow.”

So as in all areas of public policy, the key is finding the best balance, and reasonable people can always legitimately disagree on where it’s found. But here’s what’s really alarming about the message sent by the GAO report – and collectively by all the specialists and materials consulted: Neither the Defense Department nor any other branch of the U.S. government has the ability needed to achieve this goal partly because they lack the information needed to identify vulnerabilities, and partly because much helpful information is kept confidential at the request of private industry.

Here are the main relevant observations and conclusions presented in the report making emphatically clear that the nation lacks the supply chain transparency vital to improving supply chain security:

>”[T]he absence of a common definition of offshoring makes it difficult to analyze the extent to which offshoring is occurring in general as well as its effect on the defense supplier base. As such, the extent of offshoring and its effects are largely unknown.”

>”[P]ublicly available data do not provide granularity to analyze foreign direct investments in industry subsectors that comprise the defense supplier base.”

>”Pentagon “industrial policy officials told us that BEA’s [the Commerce Department’s Bureau of Economic Analysis] publicly available data are not complete enough to assess foreign investments in U.S. defense industrial subsectors. We also found that BEA does not disclose certain data for industry subsectors if the data would disclose the identity of individual companies, as these data are considered confidential. For example, BEA data on new foreign direct investment from China in the U.S. industry subsector “electrical equipment, appliances and component manufacturing” are not publicly available for 3 of the 5 years we reviewed.”

>”[A]ccording to BEA, new foreign direct investment data do not capture foreign investment transactions that involve less than 10 percent voting ownership in a U.S. enterprise. This may include data on venture capital investments in U.S. start-ups. According to a report by the Defense Innovation Unit (DIU) within DOD, there are an increasing number of investments in U.S. venture-backed startups from China-based investors that are not tracked by the U.S. government. This limits full visibility into foreign investors and the technologies they are investing in, as well as any increase or decrease in investment flows.”

>The DIU “echoed concerns about the limitations of U.S. government data and stated that the U.S. government does not comprehensively track all available data on investments, including those from private sources to assemble a complete picture of the level of foreign investment in U.S. companies.”

One big takeaway from the above is that the Defense Department is far from the only culprit here. Much more important, though, nothing could be clearer from this list of information gaps than that the Pentagon that Biden would rely on hasn’t made much of an effort to close them. And although the Trump administration has rhetorically prioritized reshoring manufacturing back to the United States in part for national security-related reasons, and can boast noteworthy progress in changing the U.S. trade policies that have encouraged so much defense-related offshoring, it’s clearly made little progress in making sure that it has the most fundamental information it needs to make sound decisions.

Also critical to recognize: It’s not that this information doesn’t exist. As I’ve previously noted, the companies that produce these goods and provide these services know exactly they, and most of their own contractors and subcontractors, are doing. Fully understanding and optimizing their own operations, after all, is one of the main ways they make money.

And the best way to extract what the government needs is to require legally what I’ve described as “Truth in Globalization” – and require it fast. Otherwise, no matter who wins the Presidency in November, the U.S. government will needlessly keep flying blind on supply chain security.

Im-Politic: On Biden’s New Plan for Medical & Other Supply Chain Security

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alliances, Biden, CCP Virus, China, coronavirus, COVID 19, Defense Department, Defense Production Act, DPA, election 2020, health security, healthcare goods, Im-Politic, manufacturing, offshoring, Pentagon, pharmaceuticals, PPE, supply chains, tariffs, taxes, Trade, Wuhan virus

Joe Biden’s plan for rebuilding U.S. supply chains to ensure American access to critical products like healthcare goods came out yesterday, and any fair reading would have to conclude that these proposals are about as serious as the presumptive Democratic Presidential nominee’s proposals in related areas – like China policy. That is to say, they’re not terribly serious at present.

As with China policy, the first concern entails credibility. In 2011, when Biden was Barack Obama’s Vice President, the Commerce Department issued a report detailing all sorts of dangerous vulnerabilities in U.S. supplies of all manner of vital healthcare goods. The “Obama-Biden administration” did absolutely nothing in response – unless you count avidly pursuing offshoring-friendly trade deals, like the Trans-Pacific Partnership (TPP) that were bound to worsen these vulnerabilities. You could also throw in a record of continually coddling the trade and broader economic predation practiced by China, which surely fostered similar results.

As a result, it’s legit to ask whether any of these proposals will survive Day One of a Biden presidency.

In this vein, it’s more than a little disturbing that Biden proposes to use the Defense Department’s policies to minimize supply chain vulnerabilities as his model for addressing such problems for a wide variety of products –not just healthcare-related goods. These include “energy and grid resilience technologies, semiconductors, key electronics and related technologies, telecommunications infrastructure, and key raw materials.”

Unfortunately, the principal lessons taught by the Defense Department’s record on supply chains are how to duck the problem or define it out of existence, and the administration in which Biden served was no exception. Some of the biggest specific problems (as made clear in this Obama administration report):

>The Pentagon’s overall assessments prioritized financial metrics, not specific domestic production capabilities, as measures of the defense manufacturing base’s health.

>Its treatment of globalization’s challenges placed major emphasis on taking “advantage of emerging capabilities, regardless of where they originate,” not maximizing domestic production capabilities.

>Although specific vulnerabilities – and the related need to maintain or rebuild adequate domestic capabilities – were acknowledged, this vulnerabilities were consistently portrayed as isolated holes that could somehow be plugged without taking into account the dependence of these narrowly defined products on their own supply chains. Indeed, Biden’s new plan seems to reveal a similar flaw when it describes itself as “a set of targeted proposals to ensure the United States has the domestic manufacturing capacity necessary for critical supply chains.”

>Moreover, the Department has long supported objectives such as interoperability with allies’ armed forces and maintaining traditional – pre-Trump – global systems of what it defined as free trade, both of which often clashed with the goal of incentivizing domestic production. These goals were explicitly stated in this George W. Bush administration report, and here’s no evidence that the Obama-Biden Pentagon ever disagreed.

Indeed, the new Biden blueprint indicates that the former Vice President’s definition of supply chain security is pretty global, instead of national, as well:

“Instead of insulting our allies and undermining American global leadership, Biden will engage with our closest partners so that together we can build stronger, more resilient supply chains and economies in the face of 21st century risks. Just like the United States itself, no U.S. ally should be dependent on critical supplies from countries like China and Russia. That means developing new approaches on supply chain security — both individually and collectively — and updating trade rules to ensure we have strong understandings with our allies on how to best ensure supply chain security for all of us.”

If America’s allies were proven reliable suppliers of these products themselves, Biden’s perspective would make sense. But the list of countries that have recently hoarded medical goods for themselves as soon as the CCP Virus pandemic’s full dangers became apparent included most of these allies – meaning that the U.S. vulnerability problem far exceeds “China and Russia.”

Nor is it entirely evident how clearly Biden has thought though the tax policy provisions of his plan. Tax policy’s role is clearly viewed as crucial, as the plan emphasizes that

“Pharmaceutical offshoring has been heavily driven by tax code provisions that have encouraged companies to locate pharmaceutical production in low-tax countries even where those countries have labor and other costs comparable to the U.S.”

Consequently, Biden says he will “eliminate Trump Administration tax incentives for offshoring and pursue other tax code changes that will encourage pharmaceutical production in the U.S.”

At the same time, Biden favors raising the overall U.S. corporate tax rate from the 21 percent to which it has recently been lowered to 28 percent, along with a 15 percent “minimum tax” on large corporations. So good luck to drug companies – or any other companies making goods deemed critical by Biden – gleaning clear reshoring or domestic production ramping signals from this combination.

Perhaps any confusion will be cleared up by other alleged Biden measures to boost U.S.-based production – like “new targeted financial incentives, including tax credits, investments, matching funds for state and local incentives, R&D support, and other incentives to encourage the production of designated critical materials such as semiconductors in the United States”? At best, business will surely need to see many more details along these lines before committing the needed capital.

Unless maybe as President, Biden will simply mandate that the needed new facilities will be built when all else fails (as well as in tandem with those other policies)? That’s obviously the implication of his promise to use the Defense Production Act (DPA) “to its fullest extent to rebuild domestic manufacturing capacity in critical supply chains, using the lessons learned from the COVID-19 pandemic and applying them to our national needs.”

Or does Biden actually view the DPA as his primary tool for “generating the domestic mobilization we need”? That seems like a reasonable conclusion, especially given that it’s the first specific measure he mentions. Maybe instead he’s really talking about using the Act simply “to direct U.S. companies to ramp up production of critical products that will be needed over the near-term.”

Regardless of Biden’s real intentions, though, it’s anything but clear how Biden believes the DPA can be used to increase U.S. production in many of the industries he mentions as vital where such output has largely migrated overseas That’s especially true for the “semiconductors, key electronics and related technologies, [and] telecommunications infrastructure” he specifies. It’s sure going to be far more difficult than, say, ordering auto companies, to make ventilators.

It’s just as unclear how these Biden’s ideas can succeed without a much stronger trade policy dimension – and specifically, continued and even expanded tariffs. And it shouldn’t be limited to straightening out the muddled views mentioned above. 

Specifically, maintaining levies on chronically subsidized and dumped products like metals, along with sweeping tariffs on systemically protectionist China (and on other similar countries) would send the all the companies and sectors concerned an invaluable message. Bipartisan endorsement of these protections would demonstrates that they really can have confidence that new investments won’t be decimated by trade and broader economic predation. Just as important, an enduring commitment to tariffs would help convince overseas competitors (domestic and foreign owned) that if they want to sell the products in which they have big edges to Americans, they’ll need to make these products in America.

The good news is that at least some of these mysteries may be cleared up “soon,” when this Biden plan promises the former Vice President will release his “comprehensive strategy to create American jobs through modern American manufacturing.” The bad news is that if he what he’s said and written so far is any indication, he’ll have a lot of rewriting to do.

Our So-Called Foreign Policy: Why Mattis Isn’t the Last Word on “America First”

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alliances, allies, America First, China, Defense Department, globalism, Japan, Jim Mattis, Marines, Mattis, NATO, North Atlantic treaty Organization, North Korean, Our So-Called Foreign Policy, South Korea, The National Interest, Trump

By all accounts, General George S. Patton was one of America’s greatest battlefield leaders during World War II. And by nearly all of those same accounts, he had no qualifications to advise Presidents on the grand strategies that would serve the country best in world affairs.

I couldn’t help but think of Patton while reading about the contents of former Trump Defense Secretary Jim Mattis’ upcoming book about leadership lessons he’s learned during his own career in a Marine Corps uniform. For one of the main points made in Call Sign Chaos – that President Trump’s foreign policies are dangerously ignoring the vital importance of allies to U.S. security and prosperity – is not only far from obvious. This critique of America First-ism could itself be dangerously wrong.

Here’s the gist of Mattis’ case:

“Nations with allies thrive, and those without them wither. Alone, America cannot protect our people and our economy.

“At this time, we can see storm clouds gathering. A polemicist’s role is not sufficient for a leader. A leader must display strategic acumen that incorporates respect for those nations that have stood with us when trouble loomed.”

“…An oft-spoken admonition in the Marines is this: When you’re going to a gunfight, bring all your friends with guns,” he wrote. “Having fought many times in coalitions, I believe that we need every ally we can bring to the fight.”

And there can be no question that these beliefs form the core of Mattis’ policy worldview. His letter to Mr. Trump declaring his resignation as Pentagon chief shows that this decision was driven largely by his prioritizing of alliances. His stated position is worth quoting at length:

“One core belief I have always held is that our strength as a nation is inextricably linked to the strength of our unique and comprehensive system of alliances and partnerships. While the US remains the indispensable nation in the free world, we cannot protect our interests or serve that role effectively without maintaining strong alliances and showing respect to those allies.

“Like you, I have said from the beginning that the armed forces of the United States should not be the policeman of the world. Instead, we must use all tools of American power to provide for the common defense, including providing effective leadership to our alliances. NATO’s 29 democracies demonstrated that strength in their commitment to fighting alongside us following the 9-11 attack on America. The Defeat-ISIS coalition of 74 nations is further proof.

“Similarly, I believe we must be resolute and unambiguous in our approach to those countries whose strategic interests are increasingly in tension with ours. It is clear that China and Russia, for example, want to shape a world consistent with their authoritarian model — gaining veto authority over other nations’ economic, diplomatic, and security decisions — to promote their own interests at the expense of their neighbors, America and our allies. That is why we must use all the tools of American power to provide for the common defense.”

“My views on treating allies with respect and also being clear-eyed about both malign actors and strategic competitors are strongly held and informed by over four decades of immersion in these issues. We must do everything possible to advance an international order that is most conducive to our security, prosperity and values, and we are strengthened in this effort by the solidarity of our alliances.

“Because you have the right to have a Secretary of Defense whose views are better aligned with yours on these and other subjects, I believe it is right for me to step down from my position.”

In fact, the letter’s reference to advancing an international order most conducive to U.S. interests also makes clear that Mattis is a card-carrying globalist. For the defining feature of this school of thought is that because the United States lacks the ability to defend and promote its essential goals on its own, it has no choice but to nurture and support global systems that will do these jobs for it – even if such policies degrade some of its own power and wealth.

I’m not saying that because he’s a globalist, Mattis is wrong and good riddance to him from a policy-making position. Instead, I’m saying that, typically for adherents to this school of thought, Mattis evidently doesn’t know, or refuses to acknowledge, the possibility of an alternative approach, one that relies above all on America’s own considerable strengths and advantages, to security, prosperity, and freedom. I made the case for such an approach last year in this article for The National Interest (which also pointed out that the President’s actions – lamentably – haven’t been nearly as America First-y as his rhetoric).

Equally disturbing, the months since his resignation last December, Mattis seems to have overlooked the continuing emergence of evidence undermining continuing faith in globalism. Just three of the most obvious:

(a) the determination of the major allied economies of Europe and Asia to keep fence-sitting in America’s economic and strategic conflict with China – in large part because so many of them make so much money supplying the PRC’s export-focused factories;

(b) the ongoing failure of most of these allies to pay any reasonable share of the common defense;

(c) the bitter economic conflict that’s broken out between Japan and South Korea, which mocks the idea that the American military can rely on any effective help from them against aggression from North Korea or China; and

(d) the major progress made by North Korea and China in developing the kinds of nuclear forces that have created an unprecedented and needless risk of nuclear attack on the American homeland – needless because the wealthy countries anchoring the U.S. alliance system in East Asia refuse to build adequate defenses for themselves. In other words, tightly linking America’s fate to such deadbeats could wind up incinerating a major American city…or two…or three. 

So welcome to the foreign policy/grand strategy debate, General Mattis. Now how about addressing its most difficult questions seriously rather than simply repeating decades-old globalist mantras?

Following Up: Sign the Deal – then Seize the Border Security Initiative

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border security, border wall, Congress, crime, criminal aliens, Defense Department, Democrats, detention, Following Up, government shutdown, ICE, illegal aliens, Immigration, Immigration and Customs Enforcement, national emergency, shutdown, Trump

From what’s known of it, I’m as angry about the border security deal reached last night by Congressional negotiators to avert a new partial federal government shutdown as much as any immigration realist and/or supporter of President Trump. Even so, I would urge the President to sign it. (If he can win a few small improvements over the next day or two, as he’s just suggested he’ll seek, fine – but nothing achievable is worth sinking the agreement.) Then I’d recommend that he move to keep his promise that “we’ll be building the wall anyway” by using statutory authority to use Defense Department and other federal assets and resources to engage in barrier construction and secure the border in various other ways. In addition, the Trump administration should redouble efforts to keep his opponents on the defensive politically by shining the spotlight even more brightly on border security gaps left wide open by deal provisions they’ve insisted on.

I know that in yesterday’s post I argued that the Congressional Democrats, who have increasingly made clear their desire to gut meaningful border security completely, would both own a new shutdown morally (in terms of responsibility for government workers and contractors temporarily denied paychecks) and possibly pay a heavy price politically. The trouble is, that contention assumed that the Democrats’ latest cynical gambit, a new, goalpost-moving demand to shrivel (further) the federal government’s ability to detain apprehended illegal aliens – including surging numbers of border crossers – until their status hearings are held, would prevent the negotiators from reaching any agreement.

Consequently, any number of such aliens, including convicted criminals, would be released into American society, with little reason to believe many of them would risk a deportation decision (which would not be first for many). The result, as I wrote yesterday, would be a big victory for the Democrats’ principal goal of maximizing the number of migrants who can set foot on American soil to begin with, who consequently could avail themselves of the full range of legal due process protections to which everyone within U.S. territory is entitled, who would be released before their status hearings, and who would be scot-free to live and work in the United States until the Open Borders crowd could implement yet another amnesty.

Instead, the negotiators came to a conclusion that they, at least – if not necessarily many in their respective parties – could accept. There’s no denying that its threadbare reported barrier appropriation figure ($1.375 billion) would leave the current border security situation just about as unacceptable as it is today. So would the reported new quota on detention beds, which represent a big part of Washington’s ability to ensure that individuals arrested for immigration-law and related transgressions show up for hearings.

Final judgment should be withheld until the official text of the deal is released – especially on the beds issue. But some of the worst possible outcomes – from an immigration realist perspective – appear to have been avoided. In particular, although previous votes by Democrats so far haven’t been enough to prevent closet Open Borders supporters like House Speaker Nancy Pelosi from declaring walls to be “immoral,” the new agreement will make this childish position more difficult than ever to take. In addition, the current number of border detention beds is being cut, but not, it seems, by nearly as much as the Democrats recently sought, and the Immigration and Custom Enforcement (ICE) agency apparently will retain flexibility in their location.

Further, as its spokespeople have insisted, there’s a strong argument that President has ample legal authority to build and strengthen more in the way of barriers than the deal approves – even without taking the highly controversial step of declaring a national emergency. For example, as noted by one of my Twitter followers (“TruthHunterMan”), in a variety of circumstances, federal law states that “The Secretary of Defense may provide support for the counterdrug activities or activities to counter transnational organized crime of any other department or agency of the Federal Government or of any State, local, tribal, or foreign law enforcement agency.”

Moreover, this statute specifies that one of the purposes for which this assistance may be provided include “the transportation of supplies and equipment, for the purpose of facilitating counterdrug activities or activities to counter transnational organized crime within or outside the United States” and, more specifically, “Construction of roads and fences and installation of lighting to block drug smuggling corridors across international boundaries of the United States.”

In addition, as stated by White House Acting Chief of Staff Mick Mulvaney, “We will take as much money as you can give us and then we will go find money someplace else legally in order to secure that southern barrier.” So let the search intensify.

Finally, the Trump administration has done a fair job of publicizing the dangers to public safety posed by inadequate border security, but much more is possible. For instance, couldn’t the administration vividly illustrate how limits on detention are forcing the release of dangerous aliens by publishing on a regular basis the names of these individuals and the charges against them? And maybe some mass releases could be conducted regularly, too – with officials reading this information to broadcast news audiences as the migrants in question are set free? That would sure be Must-See TV. 

This strategy would have the added virtues of freeing federal workers – especially low-wage workers employed both directly and indirectly through contractors – of the threat of real economic hardship; of avoiding the forced labor situation that results from requiring essential workers to report to their jobs even if their departments aren’t funded; and of ensuring that the quality of vital services like air traffic control and Department of Homeland Security missions including Coast Guard patrols isn’t dangerously degraded.

Even passage of the latest full Trump proposal wouldn’t have strengthened border security much in the near future. So signing the Congressional compromise clearly wouldn’t produce a fatal setback. The main challenge now before the President is to flip as much of the script as he can, and capitalize on all the opportunities before him to secure as much of the border as America can ASAP.