(What’s Left of) Our Economy: A Trump-y New U.S. Trade Report – in a Good Way

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Biden, CCP Virus, China, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, Phase One, services trade, Trade, trade deficit, trade war, Wuhan virus, {What's Left of) Our Economy

Although it covered a presidential transition month, there wasn’t much transitional about the official U.S. international trade figures for January that came out Friday. Trump-y policy fingerprints were all over them – and mostly in a good way – mainly in the form of continuing declines in the monthly deficits for China and the manufacturing sector, two main targets of the former President’s efforts to reduce the overall shortfall.

At the same time, also visible were the distorting affects of the CCP Virus, and the stop-and-start nature of so much economic activity in the United States and throughout the world, which seem certain to impact all economic data for several more months.

Overall, the combined goods and services trade deficit rose 1.86 percent sequentially in January, and the $68.21 billion total was the second highest on record – after November’s $69.04 billion. The goods deficit also hit its second largest total in history, with its $85.45 billion level representing a 1.58 percent increase over December’s total, and trailing the $86.89 billion all-time high also set last November. The services surplus, meanwhile, inched up on month in January by 0.47 percent, to $17.24 billion. This monthly improvement was the first since June for this virus-battered segment of the U.S. and world economies.

Total exports rose by a mere 0.53 percent, to $191.14 billion, and goods exports grew by 1.56 percent, to $135.66 billion. These were the best monthly performances in both categories since last February. Services exports, however, dipped for the first time since July, with the 0.47 percent monthly January decrease bringing the level to $56.28 billion.

A new record was set on the import side – January goods purchases from abroad reached $221.11 billion, surpassing October, 2018’s 218.91 billion, and exceeding December’s total by 1.57 percent. Total imports grew by 1.19 percent on month, to $260.16 billion, but services imports fell sequentially in January by 0.88 percent, to $39.05 billion – the first monthly decrease since May.

In an apparent setback for Trump’s tariffs and other elements of his trade policy, January also saw the second highest monthly deficit in U.S. non-oil goods trade. RealityChek regulars know these trade shortfalls as the “Made in Washington trade deficit”, since they strip out the results for petroleum and services – sectors that are rarely dealt with in trade deals or similar policies, and in which liberalization efforts remain minor.

But the $85.52 billion January level has been topped only by November’s $86.40 billion.

Nonetheless, the U.S. manufacturing deficit in January sank by 6.32 percent, from $106.52 billion to $99.79 billion. The decrease was the third straight, and the monthly gap was the smallest since last June’s. Manufacturing exports declined by 3.47 percent sequentially, to $81.66 billion, while imports dropped by a greater 5.05 percent, to $181.46 billion.

One big reason for this encouraging manufacturing performance was the January narrowing of the manufacturing-heavy U.S. goods deficit with China. January’s $26.50 billion total was 3.60 percent lower than December’s $27.23 billion, and the best such figure since May’s $26.96 billion.

U.S. goods exports to the People’s Republic plunged sequentially by 12.19 percent, to $12.86 billion, and this fall-off was especially discouraging given Beijing’s commitments under the year-old Phase One trade deal to boost imports. Moreover, the monthly decrease (to the lowest level since October) was the biggest percentage-wise since the January, 2020 crash dive of 18.96 percent, when much of China’s economy was shut down by the virus.

Yet China’s much greater goods exports to the United States fell by 6.60 percent, from $41.86 billion to $39.11 billion. This monthly total was the lowest since July’s $40.66 billion, and the sequential decrease also was the third straight. This slump, coming on top of the 3.59 percent decrease in U.S. goods imports from China in 2020, was no doubt due in part to the Trump tariffs on some $360 billion worth of Chinese goods that were as central to the former President’s China trade policies as the trade deal, and that President Biden has decided to keep so far.

Even more important, it can’t be a complete coincidence that U.S. manufacturing output has held up well during the pandemic period as these levies stayed in place. They must have played a significant role in preventing Chinese products from outcompeting their domestic counterparts for the American demand for manufactures that the virus left over.

As a result, the clearly related China and manufacturing performances could be teaching a valuable lesson to the Biden administration: Although virus-related distortions to U.S. trade flows will end sooner or later for reasons only partly related to official policy decisions, the fate of Trump’s China tariffs is entirely up to the President. That makes his eventual decision whether to continue or lift them the most important trade-related wildcard of all still facing the U.S. economy.

(What’s Left of) Our Economy: U.S. Manufacturing Hiring Climbs Back on Track

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aerospace, automotive, Biden, Boeing, CCP Virus, China, coronavirus, COVID 19, Donald Trump, gloves, healthcare goods, Jobs, macinery, manufacturing, masks, non-farm jobs, pharmaceuticals, PPE, private sector, semiconductor shortage, semiconductors, tariffs, transportation equipment, vaccines, Wuhan virus, {What's Left of) Our Economy

As this morning’s February official U.S. jobs report was dominated by a reopening-fueled surge in leiure and hospitality payrolls (which accounted for 355,000 of the month’s total 379,000 sequential improvement), American domestic manufacturing’s employment performance resumed chugging along.

U.S.-based industry gained 21,000 jobs on net last month, recovering from its drop off in January (which was revised down from a decline of 10,000 to one of 14,000). December’s initially reported advance, though, was upgraded from 31,000 to 34,000.

The February results mean that manufacturing has now regained 60.45 percent (824,000) of the 1.363 million jobs lost during the peak CCP Virus lockdowns period of last March and April. Consequently, they show that industry’s reemployment pace has continued to reverse its previous performance as the economy’s pandemic recovery leader.

That status now belongs to the overall private sector, which since last April has regenerated 62.61 percent (13.267 million) of the 21.191 million jobs it shed last spring.

Nonetheless, since public sector net hiring remains very weak, manufacturing’s job-creation performance remains well ahead of that of the economy as a whole – which is viewed by the Labor Department, which compiles and releases these statistics, as the “non-farm sector.” Since April, employment in this combined public and private sector is back up by 12.887 million – representing just 57.63 percent of the 22.362 million jobs they lost together in March and April.

Manufacturing’s biggest February jobs winner by far was transportation equipment (up 9,700 – more than 46 percent of industry’s total employment advance). Since payrolls in the very big automotive sector inched up by just 1,000, it’s likely that much of the rest of the increase came in an aerospace sector whose employment troubles are being healed by Boeing’s comeback from safety woes. But because the aerospace (and other non-automotive transportation) jobs figures are reported one month late, we’ll need to wait until the March report to know for sure.

Other major February manufacturing jobs gainers were miscellaneous non-durable goods (up 4,100), machinery (3,800), plastics and rubber products (3,000) and miscellaneous durable goods (2,800). The increases in miscellaneous non-durables and machinery were especially encouraging, as the former category (as detailed below) includes many of the medical goods vital to the anti-virus fight, and the latter’s products are used throughout not only the manufacturing sector, but other big parts of the economy like construction and agriculture.

The biggest February manufacturing jobs losers were food manufacturing (where payrolls fell by a net 3,100), non-metallic mineral products (2,400), and printing and related support activities (1,700).

Given the continuing struggle against the pandemic, the continuing shortages of many vital products like protective gear, and the surge in vaccine production, the jobs performance of healthcare goods once again underwhelmed – though keep in mind that, as with the non-automotive transportation goods categories, the data here are one month behind, too.

In the broad pharmaceuticals sector, employment actually fell by 700 in January. December’s initially reported 2,200 jobs rise has now been upgraded to 2,300, but this big industry’s payrolls are up just 1.89 percent since last Febuary – the last full pre-pandemic data month.

Hiring was stronger in the pharmaceuticals subsector containing vaccines. January employment rose by just 100 sequentially, but the initially reported December 1,100 payrolls increase was revised up to 1,600. As a result, the subsector’s workforce is now 4.55 percent bigger than last February.

The manufacturing category containing personal healthcare-related protection devices (PPE) like facemasks, gloves, and medical gowns has grown employment most impressively of all these healthcare sectors. But it lost 800 net new jobs in February, a drop that failed to offset the upward revisions of 600 for December. These shifts left employment in this sector 7.98 percent higher than the final pre-pandemic monthly figure.

Notwithstanding January’s workmanlike result, all the pieces still seem to be in place for an accelerating manufacturing jobs rebound: the return of normal economic conditions generally (however choppily), Boeing’s brightening prospects, the continuing need for much more in the way of vaccines and other medical goods, the Biden administration’s stated determination to boost domestic output of CCP Virus-related products, and last – but surely not least – the sweeping tariffs placed by the Trump administration on imports from China that for the near future President Biden apparently will keep.

No one should forget, though, that one strong new headwind has appeared – a global shortage of semiconductors that is already depressing production across manufacturing. Yet even this disruptive event at bottom seems largely due to the unexpected speed of the U.S. economic bounceback, especially in sectors shut down almost entirely, like automotive manufacturing. So whatever the short-term difficulties it causes, the microchip shortage looks like it stems from the kinds of problems, to borrow from an old sports adage, that manufacturing and its workers ultimately would like to have.        

Following Up: Two Hopeful Signs from Trump’s CPAC Speech

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Capitol riots, Conservative Political Action Conference, Conservative Populism, CPAC, Donald Trump, election 2020, election integrity, Following Up, Jeff Sessions, Kevin McCarthy, Populism, voter ID

He came, he spoke, and he left the audience happy. Not that I view Donald Trump as a Caesar-esque figure, but a paraphrase of that Caesar-esque remark seems to describe well the former President’s speech and its reception yesterday at the Conservative Political Action Conference (CPAC).

Two aspects of the speech – the former President’s longest public utterance since his pre-Capitol riot rally speech – made yours truly especially happy. First, he spent a fair amount of time defining what he (and many others, including me) called “Trumpism.” And second, his inevitable treatment of the election 2020 integrity issue was nearly as forward looking, and therefore constructively focused on how last fall’s unmistakable voting and vote-counting irregularities can be minimized from now on, as it was backward looking, and therefore divisively focused on claims of an outright political steal (which, as I’ve previously said, haven’t struck me as results-altering).

Trump’s attention to a Trumpist perspective counts mainly because at least in principle it conveys the idea that he’s interested in consolidating and strengthening his legacy by promoting a set of programs and policies, and not simply by mounting a comeback of his own and emphasizing personal loyalty. In other words, possibly along with not explicitly declaring even an interest in running for reelection in 2024, the former President has opened the door to the possibility of Trumpism without Trump – that is, the party’s nomination of a presidential candidate who’s with him on the issues but lacks his troubling personality traits.

Of course, talking this talk doesn’t mean that Trump will walk this walk. In this respect, I can’t help but recall the way he excommunicated from Trumpworld his first Attorney General and the former Senator from Alabama Jeff Sessions, who was a Trumpy (and in my view admirably serious) conservative populist way before Trumpy was cool, and in fact became the first sitting Senator to endorse his 2016 White House bid.

It’s true that Sessions was villified – and essentially denied a return to the Senate last year when Trump endorsed his much less ideologically Trumpian opponent in the state’s Republican primary – because he recused himself from overseeing the Justice Department’s investigation of the Trump campaign’s alleged collusion with Russia.

But it’s also possible that the so-called “Russia-Gate” drama was (understandably, given its disgracefully partisan roots and its damage to his early presidency) a one-off event in Trump’s mind. In this vein, perhaps Trump’s continued cordial relations with House Republican leader Kevin McCarthy of California, who blamed him in part for the Capitol Riot, points to a more tolerant Trump going forward.

As for election integrity, don’t overlook the fact that Trump led off by demanding voter identification requirements. First, polls show it’s incredibly popular among the public, enjoying, for example, 76 percent approval in this 2018 Pew Research Center survey. In addition, however, there’s reason to think that Democrats might find it in their interests, too.

How come? Because of evidence that stronger ID requirements have actually spurred Democratic and non-white voter turnout – two paramount and related objectives of the party. Apparently, these rules so incense Democrats that they react both by voting in greater numbers, and by doubling down on efforts to register non-whites.

But regardless of motives, the outcomes should be applauded across the political spectrum. For they mean not simply that more votes are cast, and that voting becomes easier. After all, those shouldn’t goals for democracies that want to remain or become healthy. Instead, the combination of voter ID requirements and more registered voters would mean that voting by those who are eligible is maximized. Who could legitimately object?

So in theory, the election integrity portion of the Trump CPAC speech could help inspire at least a first needed election reform step that even the most extreme partisans would favor. For in states that tighten ID requirements, these new standards would logically set off a heated voter registration competition that would both increase turnout and greatly boost the odds of all ballots cast being valid ballots. That sounds like a win both for election integrity and for a more inclusive political system. And the faster the progress made by this reform campaign in state legislators, the likelier that America’s next presidential election will help bring the nation together rather than drive it further apart.

Im-Politic: More Evidence that Trump-ism Has Captured the GOP More than Trump

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Conservative Political Action Conference, Conservative Populism, CPAC, Donald Trump, election 2024, GOP, Im-Politic, Immigration, MAGA, Populism, Republicans, Suffolk University, Trade, USAToday

As known by anyone who closely follows the American politics news, tomorrow is “Trump at CPAC Day.” For everyone else, that means that the former President will be giving his first full-fledged speech as a former President, and his most comprehensive public utterance since he controversially addressed that pre-Capitol Riot rally on January 6.

The conventional wisdom seems to hold that tomorrow’s event will be just the lastest sign that the Republican Party remains Trump’s to command. All the polls appear to support this claim, and it looks almost certain that he’ll receive a rousing welcome at the Conservative Political Action Conference, a major annual right-of-center conclave. Moreover, even Senate Republican leader Mitch McConnell of Kentucky, who’s angrily blamed Trump in large measure for the riot, has since stated that he would support a Trump reelection drive if the former President won the Republican nomination in 2024.

I agree that Trump is today’s most popular Republican. But my reading of two new polls adds to my previously stated conviction that the new Trump-ian GOP is less the cult of personality that’s widely supposed, and more a political faction converted to Trump’s nationalist populism. As a result, although the former President himself clearly remains overwhelmingly popular in Republican ranks, there’s potential for other politicians who agree with the “MAGA agenda,” but lack his erratic and often troubling personality, to challenge him successfully in the 2024 primaries.

The most recent of these surveys was conducted by Suffolk (Mass.) University and USA TODAY, and on the surface, it looks like evidence of continuing Republican enthusiasm for Trump. Fully 59 percent wanted him to run for the GOP nomination in 2024 with 29 percent opposed. If he ran, 76 percent would back him in the primaries and 85 percent would vote for him in the general election. Moreover, a strong 80 percent said they’d punish pro-impeachment Republican office-seekers at the polls.

Moreover, by a 46 percent to 27 percent margin respondents said they would leave the GOP and join a Trump-led third party if the former President decided to take this road. And by a roughly similar 54 percent to 34 percent, they voiced more loyalty to Trump than to the party.

But to me, the most revealing result concerns Republican voters’ 2024 nomination preferences. That 59 percent support for a Trump 2024 campaign doesn’t look so overwhelming, and certainly doesn’t scream “personality cult.” Nor does the finding that even fewer – 54 percent – consider themselves Trumpers before Republicans. And don’t forget – fewer than half would follow Trump out of the GOP. Of course, that outcome would gut the current Republican party. But it would also leave Trump with a political rump.

The bigger majorities saying they’d actually vote for Trump in the Republican nomination race and the November election, meanwhile, indicate first and foremost that, in a Trump versus a Democrat race, Republicans would overwhelmingly view the former President as the better choice. That sounds a lot like a “lesser of two evils” or “Anyone But a Democrat” conclusion, not a full-throated endorsement of a political idol, on the part of many Republicans.

Supporting this interpretation is the impressive hostility respondents did display for Democrats in the Suffolk University/USA Today poll. For example, 73 percent don’t regard Joe Biden as the legitimate President, and by a 62 percent to 26 percent margin, they want Congressional Republicans to “do their best to stand up to Biden on major policies, even if it means little gets passed” rather than “do their best to work with Biden on major policies, even if it means making compromises.”

One big shortcoming of the Suffolk University/USA TODAY survey is the absence of questions on specific issues, including MAGA-type issues. That subject, however, is taken care of pretty suggestively by a poll conducted by Echelon Insights. And its overall conclusion was that “’Fight’ and Trump’s Agenda (Not Personality) Key to GOP Voters.”

Echelon’s main evidence? The firm asked Republican voters “When deciding whom to support in future Republican primary elections, how would you feel about a candidate having the following characteristics.”

Of the twelve choices presented, the two most popular by far were “Won’t back down in a fight with the Democrats” (winning 65 percent approval, with 49 percent calling it “Absolutely Necessary for My Support”) and “Supports the Trump/America First agenda (immigration/trade)” (winning 60 percent approval, with 45 percent calling it “Absolutely Necessary”).

And the second least popular choice? “Has a personality that reminds me of Donald Trump.” Here, only 21 percent of respondents clearly viewed this trait favorably in terms of their upcoming votes, and only 13 percent viewed it as a deal-breaker. In fact, even among Republicans describing themselves as “Trump Firsters” and not “GOP Firsters (oddly, the overall percentages weren’t presented), only 19 percent viewed a Trump-ian personality as being “absolutely necessary” for their support.

The main difficulty facing Republicans and especially ideological Trumpers remains the same: Finding a “MAGA”-backing alternative to the former President who shows enough pugnaciousness to excite the Trump base to turn out strongly, but not so much as to turn off the party’s moderates and independent voters.

The CPAC convention is an important first major post-election, post-Capitol Riot, post-second impeachment chance to start establishing this kind of brand. As a result, post-CPAC polls will be important indicators of who, if anyone, has made progress in meeting this challenge.

(What’s Left of) Our Economy: No Shortage of Steel Trade Fakeonomics

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Biden, Donald Trump, free markets, free trade, IHS Markit, National Bureau of Economic Research, productivity, Rajesh Kumar Singh, Reuters, steel, steel prices, steel tariffs, steel-using industries, subsidies, tariffs, Trade, {What's Left of) Our Economy

Here’s one likely byproduct of President Biden’s unexpected decision so far to maintain most of Donald Trump’s tariff-centric trade policies – including undermining the workings of the deeply anti-American World Trade Organization (WTO): shoddy or just plain incoherent attacks on these economic nationalist measures seem certain to be just as numerous as they were during the Trump years. Indeed, two have just been released.

In the shoddy category is a Reuters article from yesterday reporting that American manufacturers are suddenly very short of steel, that prices are therefore soaring to extortionate and profit-killng levels, and that the Trump steel tariffs – among the previous administration’s measure that Mr. Biden has so far decided to keep – are largely to blame. Even worse, the piece tells us (and entirely predictable according to standard economic theory), the protected U.S. steel industry is taking full advantage by keeping its own production low, and therefore maximizing upward pricing pressures and therefore its own profits.

Yet the statistical basis for these claims falls apart on close analysis. Author Rajesh Kumar Singh starts off by writing that

“Domestic steel mills that idled furnaces last year amid fears of a prolonged pandemic-induced economic downturn have been slow in ramping up production, despite a recovery in demand for cars and trucks, appliances, and other steel products. Capacity utilization rates at steel mills – a measure of how fully production capacity is being used – has moved up to 75% after falling to 56% in the second quarter of 2020 but is still way below 82% in last February.”

That’s not, however, what’s said by the Federal Reserve, the offical source of U.S. capacity utilization data. Its tables show that for iron and steel products, capacity utilization rates stood at 76.03 percent last February, and at 77.84 percent last month. Where I learned ‘rithmetic, that’s an increase. Moreover, since bottoming last May, just after the worst of the CCP Virus and shutdowns’ first wave, it’s up 56 percent.

Indeed, steel’s capacity utilization performance is especially impressive – and especially destructive to Singh’s article – given that from last February to this past January, capacity utilization in domestic manufacturing overall is down slightly (by 0.60 percent).

And what Singh somehow left out is that during that same period, different Fed tables show, while overall manufacturing production adjusted for inflation dipped by 0.75 percent, iron and steel products output was off by just 0.71 percent.

His reporting is no more responsible on U.S. steel prices. Yes, they’ve risen strongly lately. But that’s largely because they fell so steeply almost immediately after the tariffs went on, in February, 2018. As made clear by the (chartreuse?) line from the chart below, from the respected consulting firm IHS Markit, they’re still much lower than they were three years ago. Nor, contrary to another claim of his, do they look much different from Chinese and European prices.

In the incoherent category is a study released by the National Bureau of Economic Research (NBER), widely seen as one of the gold standard for American economics, whose main theme is that, contrary to the Trump administration’s claims, American consumers and businesses, not the Chinese or any other foreign countries, paid all the costs of the Trump tariffs.

I’ve repeatedly pointed out the lack of evidence for this contention. (See, e.g., here).  Today, however, I’m more interested in a finding made along the way by the three blue-chip economist authors: When it comes to steel, “The data show that U.S. tariffs have caused foreign exporters…to substantially lower their prices into the U.S. market.”

What they didn’t do is ask themselves why and, even more important, how this could be. That’s especially puzzling because the answer obviously is that foreign steel industries are subsidized by foreign governments. Consequently, they don’t face the same earnings pressures as their U.S.-owned counterparts, and can stay in business – and even ramp up production – despite major price cuts.

So the idea that there’s now or for decades has been free trade in steel has no basis in fact, and anyone who keeps ignoring this global landscape can’t possibly place any value on America retaining a steel industry worthy of the name – or on any definition of free trade that’s remotely reciprocal and therefore sustainable, not to mention one that serves U.S. economic interests realistically defined.

At least as important, as I’ve noted before, anyone blasé about huge quantities of artificially cheap foreign steel flooding into the United States can’t be serious about ensuring that the American economy is predominantly influenced by free market forces of any kind, or about understanding the central importance of productivity gains in spurring technological progress and even durable prosperity.

For the record shows that the recent wide availability of subsidized, cut-rate steel has provided the steel-using industries generally with a crutch that’s relieved them of the need to anchor satisfactory profits in ever-improving efficiency – and kneecapped their productivity performance. And since steel is hardly the only imported product subsidized by foreign governments, there’s no reason to believe that this kind of economic damage is limited to steel-users.

All the same, a continuing flood of trade and tariff fakeonomics may produce a silver lining.  As long as the Biden administration hews to the Trump line, at least the American people will still have an Executive Branch with an interest in pushing back strongly.     

(What’s Left of) Our Economy: A Feeble Case Against U.S. Populism

Tags

bubble decade, CCP Virus, coronavirus, COVID 19, Donald Trump, France, GDP, Germany, global financial crisis, gross domestic product, per capita GDP, Populism, real GDP, Wuhan virus, {What's Left of) Our Economy

Since I’m still glad that Americans elected a President with strong populist leanings in 2016 (however flawed he was in all the temperament and character ways on full display after his reelection loss), I was especially interested in a new academic study on how well populist leaders have run their nation’s economies when they’ve had the chance.

And since I’m particularly keen on properly assessing former President Trump’s record in this regard (it’s the selfish American in me), I was especially disappointed that this research on “The cost of populism” said nothing useful at all about the subject because it lumped the experiences of populist leaders in widely divergeant economies and across many equally divergeant periods of time into one category. Therefore, I thought I’d provide some perspective.

The authors, a trio of German economists, are pretty emphatic in their conclusion:

“When populists come to power, they can do lasting economic and political damage. Countries governed by populists witness a substantial decline in real GDP per capita, on average. Protectionist trade policies, unsustainable debt dynamics, and the erosion of democratic institutions stand out as commonalities of populists in power.”

And they highlight their finding that, after taking into account the circumstances faced by populist leaders once they’ve gained power or office (which presumably were pretty bad – otherwise, as the authors recognize, why would the populists have succeeded in the first place?), right after a populist victory, such economies as a group fared increasingly worse in terms of their growth rates compared with economies headed by more establishmentarian leaders. To their credit, the authors also try to adjust for whether the countries examined faced financial crises just before their populist political experiments began.

The question remains, though, whether a study encompassing and deriving averages or medians from a group of countries containing many chronically impoverished lands, as well as the high-income United States, can tell us about the latter, whose single populist leader during the period studied served for just a single brief term. Interpreting this American experience is further complicated by three important, concrete factors the authors apparently haven’t considered.

First, the pre-Trump growth rates of the United States were artificially inflated by interlocking bubbles in housing and consumer spending. And because the growth stemmed largely from these massive bubbles, by definition it should never have reached the levels achieved. So viewing that bubble-period growth as an achievement of establishment leaders isn’t exactly kosher methodology. Even more important: The financial crisis that (inevitably) followed these establishment-created bubbles nearly crashed the entire world economy. So maybe this debacle deserves at least a little extra weighting?

Second, U.S. growth during the populist Trump years compared well with that of the second term of the establishment-y Obama administration, especially before the CCP Virus struck and much economic activity was either voluntarily depressed or actually outlawed. For example, during the first three years of Donald Trump’s presidency, gross domestic product (GDP) after inflation (the most widely followed measure), increased by 7.68 percent. During the first three years of the second Obama term, it rose by 7.63 percent. And don’t forget: American economic expansions usually don’t speed up the longer they last.

Even if you include the results of pandemic-stricken 2020, real GDP improved by 3.90 percent under Trump – a rate much lower than the four-year Obama total of 9.47 percent, but hardly disastrous. Moreover, since this growth has already begun accelerating once again, the claim that Trump’s policies did lasting damage looks doubtful.

The price-adjusted GDP per capita statistics (i.e., how much growth the economy generates per individual American), tell a similar story. During the full second Obama term, this number improved by 6.25 percent as opposed to the four-year Trump advance of just 2.46 percent.

But the pre-CCP Virus comparison shows a 5.58 percent climb under Trump versus 4.81 percent during the first three years of Obama’s second term. And here again, the levels have snapped back quickly so far after plummeting during the worst pandemic and lockdown months. Therefore, the populist Trump administration likely left the pre-Trump trends intact at the very worst.

Third, if you want to go international, the Trump economic record holds up well compared to those of establishment leaders in Germany and France. During the CCP Virus year 2020, France’s economy shrank in real terms by 5.01 percent, and Germany’s by 3.88 percent. The U.S. contraction? Just 2.46 percent.

No reasonable person would conclude that these comparisons prove once and for all that American populism has been vastly superior in economic policy terms. And it’s entirely possible that the U.S. record has no or few lessons to teach other countries. But for Americans, nothing in this paper indicates that they’ve paid any “cost of populism,” and a deeper dive uncovers evidence that they’ve actually benefited.

Our So-Called Foreign Policy: It’s Official. Uncle Sucker is Back

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alliances, allies NATO, America First, Biden, deterrence, Donald Trump, Japan, North Atlantic treaty Organization, Our So-Called Foreign Policy, South Korea

If you think this title is too harsh, and especially if you agree with his view that maintaining U.S. alliances must be central to American foreign policy-making, you need to ask yourself this: How can some of the major points President Biden made in his speech Friday to an audience containing heads of major allied governments accomplish anything but keep the United States needlessly paying outsized costs for these arrangements and even worse, running major risks that include nuclear attack, for no good reason whatever?

As known by RealityChek regulars, downsides of American security alliances both in Europe and Asia that arguably were acceptable during much of the Cold War period have become terrifying and – because stemming from stubbornly hidebound thinking and consequent policy inertia – downright inexcusable more recently. That’s because physically devastated allies literally helpless against aggression in the earliest post-World War II decades, but nonetheless retaining vital economic and therefore military potential, had fully recovered by the mid-1970s, and because their continued defense free-riding led Washington to station sizable military units (and their dependents) directly in harm’s way.

The idea was that this U.S. presence’s very vulnerability to superior conventional forces from the Soviet Union and North Korea would deter aggression to begin with. Forit would all but force a U.S. President to approve saving these American lives with nuclear weapons – whose use could trigger an all-out mutually devastating conflict.

This gamble could be defended when the United States enjoyed clearcut nuclear superiority over the Soviets, a nuclear monopoly and near-monopoly over the North Koreans and Chinese, respectively – and when allies and their potentially crucial assets were still down and out. But for many years, the nuclear gap has  closed in Europe and the the monopoly and near-monopoly in Asia vanished, and all allies in question have been amply wealthy enough to defend themselves. So Washington’s refusal to adjust means that the nation could well see nuclear warheads land on its soil because the Europeans, Japanese, and South Koreans have been permitted to be military deadbeats. Could any policy be more recklessly perverse, or determined to reward irresponsibility and cynicism?

Despite loudly griping about allied defense free-riding, raising the temperature in periodic defense burden-sharing negotiations, and rearranging some troop deployments in Europe, Donald Trump never frontally and comprehensively challenged the status quo, at least while President. Would a second term have been different? Who knows?

What is clear, especially from this latest speech by Mr. Biden, is that the United States will now be doubling down on this entire literal Americans Last strategy.

For not only did the President repeated the pre-Trump standard Washington endorsement of the core principle of the North Atlantic Treaty Organization (NATO) that “An attack on one is an attack on all. That is our unshakable vow” – which inevitably tells the allies that they can continue free-riding militarily to their heart’s content and count on American protection no matter how potentially disastrous the consequences for the American people.

He actually praised “Europe’s growing investment in the military capabilities that enable our shared defense” even though these expenditure will be definition be utterly inadequate as long as their level leaves a military gap that American conventional and nuclear forces still need to fill.

Further, in declaring that he would not view U.S. alliances as “transactional” he assured America’s so-called partners that their relationships with Washington need involve no give and take whatever, thereby guaranteeing that these opportunistic governments would raise their chronic free-riding to much loftier levels, and that Americans would bear more of the costs and risks of these arrangements than ever.

And most foolishly of all, Mr. Biden explicitly told the Europeans (and consequently the Asians) that, after the stormy Trump years, it was up to the United States “to earn back our position of trusted leadership.” That is, the kinds (long overdue) burden- and therefore risk-sharing criticisms made by the former President were completely illegitimate, and that whatever ailed the alliances resulted from Trump’s America First words and (much more modest) deeds, not from decades of allied risk- and burden-shirking.

Of course, Mr. Biden’s words were actual U.S. policy for decades before the Trump years. That’s why these arrangements became so dysfunctional from any sensible American standpoint in the first place. But by making this approach explicit, and giving the Europeans and Asians official license for their longstanding “heads we win, tails America loses” priorities, the President has not only gravely weakened his own country’s safety and prosperity. He’s destroyed whatever legitimate hopes ever existed that multilateralism and collective security could ever adequately serve any reasonable definition of American interests.

Our So-Called Foreign Policy: Mr. President, U.S. Dealings with China are No Game

Tags

alliances, allies, Antony Blinken, Asia-Pacific, Biden, China, Cold War, democracy, Donald Trump, Indo-Pacific, Jake Sullivan, Kurt M. Campbell, national interests, Our So-Called Foreign Policy, Soviet Union

For literally decades, American foreign policy makers, and especially the pre-Trump globalists, fell into the dangerous habit of obsessing about second-order questions (like whether the old Soviet Union was a fundamentally aggressive or defensively-oriented power, whether military force or diplomacy was the nation’s most effective foreign policy tool, whether unilateral or multilateral actions were most likely to succeed, and whether a more or less involvement in world affairs was preferable).

As a result, they typically neglected the paramount first-order questions: Principally, what overseas goals does the United States need to achieve to secure adequate levels of safety and well-being? In other words, which foreign objectives matter decisively for the United States in and of themselves, and which don’t? And those are first-order question because assessing others’ intentions is much more guesswork than science, and because no one can sensibly choose tools for a job without knowing what job they want to do.

(See this 1985 FOREIGN POLICY essay and this 1991 Atlantic Monthly article on the general failure of not only American leaders but of presumed foreign policy experts to think rigorously about national interests. See this 1991 New York Times piece about the hazards of divining intentions as opposed to capabilities. Apologies if the first two are no longer available for free on-line.)

Therefore, it’s awfully depressing to see the Biden administration staging its own version of backwards strategizing. It’s evidently determined to base its China policy on figuring out what kind of relationship it wants with the People’s Republic, and paying much less attention to identifying specific actions the United States wants China to take, stop, and refrain from in the first place.

The Biden approach is completely mistaken for two main reasons. First, whenever relationships are pursued regardless of their impact on particular, concrete interests, these national needs and wants inevitably become subordinated to atmospherics and abstractions and processes – a decidedly unpromising recipe for national success.

Second, the particular relationship on which President Biden and his top aides are focusing – one marked by competition – is so intrinsically ambivalent (especially in the realm of world affairs) that its much likelier to confuse than to provide useful policy guidance. In addition, competition is a concept that evokes the playing field, where both victory and defeat have ultimately trivial consequences, rather than the fundamentally anarchic and much more dangerous international landscape. Consequently, its use tends to downplay even stakes otherwise defined more threateningly.

These obstacles to clear foreign policy thinking and numerous others all rear their heads in statements the new President and his leading advisers have made during the campaign and transition, and since Inauguration Day.

For instance, Jake Sullivan and Kurt M. Campbell, who have become, respectively, Mr. Biden’s White House national security adviser and National Security Council “czar” for the Asia-Pacific region, perceptively noted in a prominent 2019 article that terms used by the Trump administration like “strategic competition,” unless elaborated on, can’t help but connote “uncertainty about what that competition is over and what it means to win.”

They did write of the need to decide what “kinds of interests the United States wants to secure.” And they do dance around some specific objectives, like maintaining unimpeded navigation in Asia-Pacific (or, to use a term more expanive and popular lately because it includes India – “Indo-Pacific”) waters, and preventing China from taking over Taiwan, and safeguarding America’s global technology leadership. 

But the authors also drone on and on about achieving a state of coexistence that “would involve elements of competition and cooperation, with the United States’ competitive efforts geared toward securing those favorable terms” (but never absolutely committed to securing them); and about “accepting competition as a condition to be managed rather than a problem to be solved”; and about how the Chinese competitive challenge differs from its Cold War-era Soviet counterpart; and about how China has become an “essential partner” as well as a formidable competitor with the United States because of the appearance of shared global dangers like climate change and pandemics; and about an “emerging” global contest of social and economic models; and about how to “get the balance between competition and cooperation right.” Indeed, the piece is titled “Competition Without Catastrophe.”

In addition, last year, new Secretary of State Antony Blinken took pains in a lengthy interview to emphasize that although “we are in competition with China,” there’s “nothing wrong with competition if it’s fair” That point is entirely valid in the context of a sporting event, a spelling bee, or other forms of competition with relatively trivial consequences.

At best, however, it’s deeply puzzling when dealing with decisions that can bring either great benefit or harm to an entire nation, and that can create major risks and require massive expenditures of national blood and treasure. In cases where winning and losing matter considerably and even vitally, it should be obvious, that prevailing or figuring out how to cope with defeat are worth the candle. Yet if and when it’s the fairness of the outcome that matters most rather than the outcome itself, why bother competing at all? Worse, these efforts can produce inexcusable wastes of resources that will surely be invaluable in the more important situations sure to come somewhere down the line.

In one instance reminiscent of the Cold War thinking they generally criticize in the China context, Campbell and Sullivan write that winning that competition of social and economic models with Beijing counts significantly because the United States (in unspecified ways to be sure) will be much better off in a world mainly made up of free market democracies than in one dominated by countries that try to emulate China’s totalitarianism.

Their point is fortified by the leading role advanced surveillance systems play in China, which additionally means that the United States must stay ahead in these fields both in order to ensure military superiority when push comes to shove, and to defend itself against Chinese cyber-aggression. Moreover, intuition and common decency lead all Americans to root for the widest possible global triumph of political and economic freedom (realizing of course that the latter can be defined in many different ways).

Even here, though, the framing U.S. strategy as a competition with China can complicate as many choices as it clarifies. For example, a defining principle of Biden foreign policy is that, in the President’s words, “America’s alliances are our greatest asset” in world affairs. Yet if so, then the new administration, as with its Cold War predecessors, will need to recognize that many of its current and desired partners won’t be either political or economic democracies or even close (in Asia, Communist-ruled Vietnam and the quasi-at-best democracies of Thailand and the Philippines come to mind), and that today’s genuine democracies often feel free – as during the Cold War – to ignore or actually undermine U.S. interests (like Germany nowadays regarding both China and Russia).

Finally, it’s all too easy to conclude that the Biden-ites’ focus on second-order questions first and foremost represents a series of word games aimed at masking their inability or unwillingness to identify first-order issues. Take the President’s insistence that he’ll carry out an “extreme competition” with China. Even leaving aside that he immediately proceeded to trivialize the term by declaring that his approach will differ from Donald Trump’s by focusing on “international rules of the road” (another second-order priority), what exactly will be “extreme”? And how does his definition of extreme competition compare with the other varieties of competition detailed by Sullivan and Campbell?

Similarly, Blinken has just ventured that the U.S. relationship with China entails “adversarial,” “competitive,” and “cooperative” aspects. The last category is no mystery. But what’s the difference between the first and the second? Does the first refer to American interests that must be advanced or defended at all costs and risks, or at least major costs and risks? Does the second refer to those situations and interactions where fairness is overriding? 

Sullivan and Blinken in particular admit that they used to belong to the dangerously naive China engagement mainstream of the U.S. foreign and economic policy communities.  But until they, their colleagues, and the President stop talking about the China challenge as if it was a game, ample doubt will be justified as to whether they’ve yet become China realists.           

Making News: Podcast Now On-Line of New National Radio Interview on Biden & China

Tags

Biden, China, Donald Trump, Gordon G. Chang, Making News, Phase One, tariffs, The John Batchelor Show, Trade

I’m pleased to announce that the podcast is now on-line of my interview last night on John Batchelor’s nationally syndicated radio show on U.S. China trade policy. Click here for a timely discussion with John and co-host Gordon G. Chang on the outlook for America’s approach to the People’s Republic as the Biden administration settles into office.

One especially interesting point: Although John seemed to focus on how China fell well short of meeting its commitments under Donald Trump’s Phase One trade deal to boost its purchases of American-origin goods and services, I pointed to some data indicating that the agreement produced some important achievements on this front.

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

Im-Politic: For Biden, It’s Americans Last on Migrants and the Virus

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asylum seekers, Biden, CBP, CCP Virus, coronavirus, COVID 19, detention, Donald Trump, El Salvador, Guatemala, Honduras, ICE, Im-Politic, immigrants, Immigration, Immigration and Customs Enforcement, Journal of the American Medical Association, lockdowns, Mexico, migrants, Remain in Mexico, stay-at-home, testing, U.S. Customs and Border Patrol, Worldometers.info, Wuhan virus

Some of you might have heard and been concerned about reports that President Biden’s new policies will result in migrants caught by U.S. border authorities being released into the United States without being tested for the CCP Virus. If you knew how much potential for superspread these policies hold, you’d be even more concerned.

Under President Trump, the problem appeared under control because Washington ended the policy of processing migrants who crossed the southern border illegally and then releasing them into the United States to await future hearings on their requests for permanent residency. Instead, apprehended migrants claiming to be asylum seekers, were returned to Mexico (whatever their nationality) until their cases could be brought up. And last March, these policies were extended to all would-be border crossers due to pandemic concerns.

Yet due at least partly to the Biden administration’s immigration-welcoming statements and actions (including during the campaign), migrant flows northward have surged, and current U.S. detention centers have been filling to overflowing despite American court orders preventing them from holding detainees for more than 72 hours in certain facilities in Texas. Worsening the situation has been Mexico’s new refusal in some instances to accept migrants expelled from U.S. territory. (See here for details.) And the new U.S. President seems determined to facilitate immigration inflows generally.

Therefore, the U.S. Customs and Border Enforcement (CBP) agency publicly acknowledged last week that “some migrants will be processed for removal, provided a Notice to Appear, and released into the U.S. to await a future immigration hearing.” Crucially, this practice is proceeding even though CBP doesn’t test arrivals for the CCP Virus unless symptoms are visible. (See the previously linked article for the statement.) 

Which is where the public health threat comes in. Because data from the virus has seemed to be unusually prevalent among these migrants. To begin with, although figures only go through August, a paper published by the Journal of the American Medical Association (JAMA) found that the monthly rate of cases in detention centers was more than 13 times that for the U.S. population as a whole.

Although the JAMA authors wrote that increased testing at the centers only partly explains these high numbers, it also points out that they may also stem from “challenges faced implementing the Pandemic Response Requirements” – like overcrowding. At the same time, they confirm that because asymptomatic detainee testing has been “limited,” even these case numbers could be underestimates. And since migrants tend to be relatively young, asymptomatic cases are surely more common than among legal U.S. residents generally.

The total number of virus cases found among migrants in the detention centers since February has been small – just over 9,300. But the real measure of the danger comes from the incidence of the CCP Virus in the migrants’ main native countries – which look to be sources of large and ever greater greater supply going forward.

Yes, their overall case rates are much lower than their U.S. counterparts, as these data from the Worldometers.info website show:

cases per million

U.S.:                  83,687

Mexico:            14,920

Guatemala:         9,052

Honduras:         15,573

El Salvador:        8,708

One big reason, however, is that they’ve done so little testing, as these numbers from the same source make clear:

tests per million

U.S.:               984,900

Mexico:            37,781

Guatemala:      45,624

Honduras:        39,569

El Salvador:   110,338

Given the immense virus-related uncertainties revealed by these statistics, any measures that increase the numbers of untested migrants in the United States are simply incomprehensible for any government taking seriously the obligation to protect its own population. And given the tight controls already restricting individual, group, and business activities in the United States, these Biden decisions seem even less defensible.

It’s one thing for the new President to reject an America First framework for public policy. It’s quite another to adopt positions that merit the bizarre and perverse label “Americans Last.”