Im-Politic: A Billionaire Candidate’s Massive Climate Change Blind Spot

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China, climate change, Democratic debate, Democrats, election 2020, Im-Politic, tariffs, Tom Steyer, Trump

It’s now been five days since I first heard it, but I still can hardly believe my ears because this utterance might have been the single dumbest and/or most ignorant combination of positions I’ve ever heard a leading political figure make. It came from Tom Steyer during the Democratic presidential debate last Tuesday night, and even though the California billionaire’s campaign seems to be going nowhere fast as the 2020 campaign nears its primary phase, it deserves to be spotlighted.

The first of the two statements in question? Steyer’s declaration that “On the first day [of his presidency], I would undo Mr. Trump’s [China] tariffs.” The second? “…I would declare a state of emergency on day one on climate.”

Why is this so mind-boggingly idiotic? Because as should be known by anyone who thinks he or she is qualified to be President, not only has China become by far the world’s largest emitter of the greenhouse gases held to be responsible for climate change, but as shown in the left-hand chart below, it started becoming an emitter in a class by itself at the turn of the century – i.e., right about the time when it was admitted into the World Trade Organization (WTO). And the most important effect of WTO admission was greatly complicating the challenge faced by all the world’s economies – including America’s – in using tariffs to curb the growth of China’s subsidy-fueled carbon-belching export-heavy industries. 

We don’t yet have data for 2019, but the chart also shows that the growth of China’s emissions began to slow (though they’re still growing faster than anyone else’s except India’s) as China’s economic growth (which has always been export-heavy) began slowing. Moreover, over the last year, as literally hundreds of billions of dollars worth of Chinese goods intended for U.S. markets have been hit by President Trump with stiff tariffs, China’s growth hit a 29-year low. Think that’s a coincidence? Think again, as between 2018 and 2019, China’s annual export growth crash dove from 9.9 percent to 0.5 percent in U.S. dollar terms. (The right-hand chart, which measures emissions on a per capital basis, displays similar trends.) 

There’s nothing of course intrinsically wrong with Steyer’s passionate belief in the need to combat climate change. But his utter failure to recognize China’s immense contribution to the danger he sees makes embarrassingly clear – to put the kindest interpretation on the matter – that his knowledge base lags far behind his emotions. To the extent that other high profile climate activists repeatedly let China off the hook as well, they deserve the same criticism. And if this massive blind spot (or delusion) casts big-time doubt on Steyer’s qualifications to be President (which it should), it should have the same effect on all the other climate change resisters who display this shortcoming, too.

(What’s Left of) Our Economy: U.S. After-Inflation Wages Could Still Use More Inflation

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Barack Obama, election 2020, inflation-adjusted wages, manufacturing, private sector, real wages, recovery, Trump, wages, {What's Left of) Our Economy

This morning’s real wages figures from the Labor Department (for December) contained an unusually diverse grab bag of results, and with a presidential election year now officially underway, perhaps the most newsworthy are those that could well affect the race for the White House – and which on balance seem unfavorable to President Trump.

In addition, though, some other results undermine a major belief about how after-inflation paychecks have fared during the current (record length) economic recovery versus its two immediate predecessors.

Not that the news was all bad for the President and his supporters (and anyone else rooting for a stronger American economy). Yes, overall, inflation-adjusted wages in the private sector dipped sequentially for the second time in three months – by 0.09 percent. (The Labor Department doesn’t track real public sector wages because their trends say more about politicians’ decisions than about economic fundamentals).

But if these preliminary figures hold tightly enough, the 2019 year-on-year improvement of 0.64 percent will be higher than 2018’s 0.56 percent increase.

At the same time, wage growth decelerated throughout 2019 – from 0.37 percent between January and June to 0.27 percent between June and December.

Real manufacturing wages fared better, continuing a year-long trend. Month-to-month in December they climbed by 0.18 percent, and their year-on-year increase and improvement were stronger than that of the private sector, too. The latest annual rise was 0.74 percent – up from the previous year’s flatline. And throughout 2019, they increased at the same 0.37 percent rates during both halves of the year.

But the results were less encouraging for non-supervisory workers in both the private sector overall and in manufacturing. By certain measures, paychecks for the lowest paid U.S. workers have been improving faster than those for the workforce overall. And using the Labor Department’s methodology of distinguishing supervisory from non-supervisory workers provides some support for that finding.

For example, on an annual basis, in 2019 and 2018, inflation-adjusted wages increased faster for both non-supervisory manufacturing and blue-collar workers than those wages for all workers, as shown here:

                                     Total private     N/S private     Total mfg      N/S mfg

Year-on-year, 2019:         +0.64%           +0.75%          +0.74%        +0.45%

Year-on-year, 2018:        +0.56%           +1.63%                0%          +1.14%

Yet the table also shows 2018-19 deceleration for both groups.

Moreover, on month in December, real wages for these blue-collar workers performed worse in absolute terms than for all private sector and manufacturing workers – actually falling by 0.21 percent for the former (the biggest decline since October, 2018’s 0.22 percent drop) and increasing by just 0.11 percent for the latter.

And deceleration continued through the year. Between the first and second halves of 2019, constant dollar wages increases for the private sector fell from 0.53 percent to 0.21 percent, and from 0.23 percent to 0.22 percent for manufacturing.

The impact of Boeing’s safety-related woes on aircraft manufacturing per se and on the company’s huge domestic supply chain could explain some of these disappointing figures for industry. But so could the uncertainties created either by Mr. Trump’s tariff-centric trade policies, or by their ragged implementation, or both. Further, as the numbers indicate, real wage weakness isn’t simply a manufacturing problem.

Perhaps most important for Mr. Trump, real wages’ performance during the first 34 months of his term in office (starting with February, 2017, his first full month), have lagged their increases during the most comparable period in Barack Obama’s presidency – his last 34 months in office (ending in January, 2017). Here are the results:

                                       Total private      N/S private      Total mfg        N/S mfg

1^st 34 Trump months:         +2.53%           +2.72%           +0.65%          +2.77%

last 34 Obama months:      +3.50%           +3.97%          +3.05%           +2.97%

Finally, the new real wages data show that when it comes to this gauge, the current economic recovery stacks up unexpectedly well with the two previous expansions where a reasonable amount of statistics exist – for non-supervisory workers. The comparison is especially striking between the current expansion and the 1990s expansion – which is widely viewed as an excellent one for both the economy and America’s employees.

                                                               Private    N/S private    mfg     N/S mfg

1990s expansion (2Q 91-1Q 01):             n/a           +6.37%       n/a      +2.18%

bubble expansion (4Q 01-4Q 07):           n/a            +0.35%       n/a      -2.77%

current expansion (2Q 09 – present):  +6.30%        +6.79%   +1.59%   +3.01%

Unfortunately for President Trump and Trump-ers, though, this longer-term picture isn’t likely to impress voters as much as more recent developments. And when it comes to workers’ after-inflation wages, he clearly has more work to do.

Im-Politic: Still Clueless – About Trump – After All These Years

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conservatives, election 2020, GOP, Im-Politic, Jeff Stein, Jonathan Martin, Maggie Haberman, Mainstream Media, Populism, Republicans, The New York Times, The Washington Post, Trump

Since a U.S. Presidential election year is now underway and since the Mainstream Media, for all its credibility problems, still supply the news coverage that so many voters rely on in whole or in part, it seems important to present some evidence that, nearly four years after Donald Trump’s victorious presidential run, at least two newspapers arguably at the top of the journalistic heap still have no clue as to what or why it happened.

Both examples deal with President Trump’s capture of the Republican Party, and the most disturbing of the two examples comes from The New York Times. The title of its December 21 piece – “Fear and Loathing: How Donald Trump Took Over the Republican Party” – tells you pretty much all you need to know about its perspective. Authors Jonathan Martin and Maggie Haberman do refer in passing to “Mr. Trump’s deviations from longstanding party orthodoxy on issues like foreign policy and tariffs,” but they apparently believe that they’ve had nothing whatever to do with the GOP’s transformation.

Instead, they portray the post-2016 party as nothing but a cult of personality, comprised of voters and a majority of office-holders so blindly devoted to and terrified of Mr. Trump, respectively, that they’re determined to overlook supposedly dispositive proof of the President’s unfitness for the White House as his Ukraine policies.

In fact, Martin and Haberman are so incapable of attributing the President’s success to the policy disasters spearheaded by the political establishment’s right wing (Google “financial crisis” and “Great Recession”) that one of their sources for this claim is no less than the head of the Club for Growth – a leading anti-Trump orthodox conservative organization.

And when they encounter a more convincing explanation – an observation by a North Carolina Republican Congressman that Mr. Trump “has a complete connection with the average Republican voter and that’s given him political power here” – they simply leave it hanging.

Somewhat better – but more bewildering – is Jeff Stein’s December 27 Washington Post report on “Trump’s quest to shatter GOP economics reached its culmination in 2019.” Let’s give Stein his due for focusing on the substance (even though he seems to forget that major Trump departures from Republican dogma began on his first day in office – when the President pulled the United States out of the Trans-Pacific Partnership trade agreement).

But his two paragraphs could not be weirder – even from a standard political standpoint:

“Whether [the Trump era shift] will permanently remake the Republican Party, on the other hand, remains an open question.

“‘Republican lawmakers privately still believe the deficit is a problem and support free trade — but they’re not going to say that publicly, because it’s not where their voters are,” said Brian Riedl, a budget analyst at the libertarian-leaning Manhattan Institute. ‘I’m not sure Trump has changed the minds of Republican lawmakers as much as he has won over the base and lawmakers understand crossing the president is political suicide.’”

There’s no question that the long-term future of conservative, Trump-ian populism is still up in the air – if only because its triumph has been so sudden, and because largely as a result, its ability to create the institutional underpinnings needed for durability can’t be taken for granted.

But does Riedl really believe that Republican lawmakers matter to the party more than the base? That may be convenient for someone in a weakening establishment struggling to avoid the ash heap of history. But does Stein buy it? Or does his use of Riedl’s statement indicate that, like so many Mainstream Media reporters, he identifies with that weakening establishment, too?

Im-Politic: Trends that are Trump’s Reelection Friends?

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Adam Schiff, Barack Obama, Bernie Sanders, economy, election 2020, Elizabeth Warren, Gallup, Im-Politic, independents, Jobs, Joe Biden, Kamala Harris, Nancy Pelosi, Trump, Tulsi Gabbard

Don’t look now, but Gallup has just given President Trump two major end-of-the-year gifts in two separate sets of poll results it’s just published. Gift Number One: Mr. Trump this year moved into a tie with his White House predecessor, Barack Obama, as the man most admired by Americans. Gift Number Two: The state of the U.S. Economy, widely viewed as one of the most important determinants of Americans’ votes for President, has faded notably in their minds as a top national concern.

Impeachment, and the nonstop political coverage of Mr. Trump’s alleged wrongdoing, surely have been America’s leading political stories this year. But all the same, the President and Obama jointly headed the list of the country’s most admired man. Better yet for Trump-ers:  The survey was conducted in early December, so respondents had lots of time to digest the impeachment drama. And the possible icing on the cake – the tie was produced by a one percentage point reduction in the Obama score from 2018 (when he won this contest – and for the twelfth time!) and a five percentage point rise in the Trump score.

Further, although trend data isn’t available, Mr. Trump was named most admired by 10 percent of independents. That figure trailed the Obama total (12 percent), but not by much. And the former President won’t be on any ballots this year. 

The results for some of the President’s other major opponents and critics are bound to cheer him, too. House Intelligence Committee Chair Adam Schiff, the California Democrat who’s helped spearhead the impeachment drive, increased his score from 2018 – but only by less than one percent to one percent. House Speaker Nancy Pelosi also rose in the poll – but only from one percent to two percent.

As for the group of Democratic contenders for Mr. Trump’s job, the best performers in this survey were Vermont Independent Senator Bernie Sanders, Massachusetts Senator Elizabeth Warren, Hawaii House Member Tulsi Gabbard, and California Senator Kamala Harris (who recently dropped out). Yet they all garnered only one percent of Americans’ votes. Nonetheless, all did better than former Vice President Joe Biden, whose backers for this title declined from one percent in 2018 to less than one percent this year.

As for the economy, since the global financial crisis produced the Great Recession starting at the end of 2007, it’s been rated as “the most important problem in the U.S.” in Gallup surveys seven times (the last coming in 2016). In addition, “jobs” was mentioned among the top four most important problems nine times. (I find it odd that the two are presented separately by Gallup as well.)

But since the Trump inaugural, the economy has vanished from the ranks of the top four national problems, and the only appearance made by jobs was in 2017 (when it came in fourth).

Even if polling was more of a science than an art, none of these results would guarantee President Trump’s reelection. One potential trouble spot: During each of his years in office so far, “government” has topped Americans’ lists of the country’s most important problems. The Gallup results indicate that respondents assign about equal blame for Washington dysfunction to Mr. Trump and the Republicans in Congress on the one hand, and to the Democrats in Congress on the other. But during the Trump administration, the percentages prioritizing this concern have risen overall from previous levels – and markedly.

The big takeaway for me is that if the President turns and keeps his focus to at least a reasonable extent on substantive issues like the economy, and shoots off fewer dumbbell and wholly unnecessary tweets and remarks (here’s a prime recent example), and if no new misconduct-related bombshells emerge, he’ll calm the nerves of the independents he needs to win back from their 2018 defection to the Democrats, in particular relieve their Trump Exhaustion Syndrome, and win reelection pretty handily. The big fly in this ointment, of course, is that the above prescription so far has never been followed by Mr. Trump.

Making News: Two Podcasts of National Radio Trade War & Economy Interviews…& an Eye-Opening Look at Amazon.com!

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Amazon.com, Breitbart News Tonight, economy, election 2020, Gordon G. Chang, Henry George School of Social Science, Hong Kong protests, Jobs, jobs report, Making News, manufacturing, publishing, Rebecca Mansour, Rick Manning, Robin Gaster, Smart Talk, The John Batchelor Show, Trade, trade war, Trump

I’m pleased to announce that just out on-line are two podcasts of national radio interviews on the Trump trade wars and a video on an especially startling aspect of Amazon.com’s stunning rise to business titan status.

The latest interview now available was conducted last night on “Breitbart News Tonight” and can be found at this link.  Once you’re there, scroll down a fair ways till you see my name on a December 6 segment – a discussion with hosts Rebecca Mansour and Rick Manning that ranged from the last (excellent) U.S. jobs report to the Hong Kong protests to the intensifying presidential election campaign.

The previous interview was broadcast Wednesday night on “The John Batchelor Show.”  Click here to listen to a conversation with John and co-host Gordon G. Chang on how well the U.S. manufacturing sector is faring as President Trump keeps trying to revamp U.S. trade policy.

The video shows me reversing roles and interviewing economist Robin Gaster on the implications of Amazon.com’s efforts to disrupt yet another major U.S. industry, and one playing an especially important role in American culture – the book publishing industry.  Click here to watch, and keep in mind that the interview is posted in two parts.

Incidentally, this interview is the latest in the “Smart Talk” series sponsored by the Henry George School of Social Science – a New York City-based economic research and education institute on whose Board I’ve served as a Trustee for several years.  “Smart Talk” has featured some of the world’s leading economic thinkers, and if you search around its section on the website, I’m sure you’ll find some fascinating and important material.

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

(What’s Left of) Our Economy: Trade War(s) Update

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Argentina, Bloomberg.com, Brazil, business investment, China, CNBC, consumption, currency manipulation, debt, Democrats, digital services tax, election 2020, EU, European Union, export controls, Financial Crisis, France, Huawei, internet, investors, manufacturing, production, steel, steel tariffs, tariffs, Trade, Trade Deficits, trade enforcement, trade war, Trump, Wall Street, Wilbur Ross, Xi JInPing, {What's Left of) Our Economy

The most important takeaway from this post about the current status of U.S. trade policy, especially toward China, is that it may have already been overtaken by events since I began putting these thoughts together yesterday.

What follows is a lightly edited version of talking points I put together for staffers at CNBC in preparation for their interview with me yesterday. I thought this exercise would be useful because these appearances are always so brief (even though this one, unusually, featured me solo), and because sometimes they take unexpected detours from the main subject. .

Before presenting them, however, let’s keep in mind this new Bloomberg piece, which came on the heels of remarks yesterday by President Trump signaling that a trade deal with China may need to await next year’s U.S. Presidential election, and plunged the world’s investors into deep gloom. This morning, however, the news agency reported that considerable progress has been made despite “harsh” rhetoric lately from both countries. It seems pretty thinly sourced to me, and the supposed course of the trade talks seems to change almost daily, but stock indices are up considerably all the same.

Moreover, even leaving that proviso aside, what I wrote to the CNBC folks yesterday seems likely to hold up pretty well. And here it is:

1. The President’s latest comments on the China trade deal – which he says might take till after the presidential election to complete – seriously undermines the claim that he considers a deal crucial to his reelection chances because it’s likely to appease Wall Street and thereby prop up the economy. Of course, given Mr. Trump’s mercurial nature, and negotiating style, this latest statement could also simply amount to him playing “bad cop” for the moment.

2. His relative pessimism about a quick “Phase One” deal also seems to reinforce a suggestion implicitly made yesterday by Commerce Secretary Wilbur Ross when he listed verification and enforcement concerns as among the obstacles to signing the so-called Phase One deal. I have always argued that such concerns are likely to prevent the conclusion of any kind of trade deal acceptable to US interests. That’s both because of China’s poor record of keeping its commitments, and because the Chinese government is too secretive and too big to monitor effectively even the most promising Chinese pledges to change policies on intellectual property theft, illegal subsidies, discriminatory government procurement, and other so-called structural issues.

3. Recent reports of the United States considering tightening (or expanding) restrictions on tech exports to Chinese entities like Huawei also support my longstanding point that the US and Chinese economies will continue to decouple whatever the fate of the current or other trade talks.

4. In my opinion, the President is absolutely right to play hard-to-get on China trade, because Chinese dictator Xi Jinping is under so much pressure due to his own weakening economy, and because of the still-explosive Hong Kong situation.

5. I’ll be especially interested to learn of the Democratic presidential candidates’ reactions to Mr. Trump’s latest China statement, as well as the announcement of the reimposed steel tariffs on Argentina and Brazil, and the threatened tariffs on French “digital services” [internet] taxes. With the exception of Massachusetts Senator Elizabeth Warren and Vermont Senator Bernie Sanders, the candidates’ China policies seem to boil down to “Yes, we need to get tough with China, but tariffs are the worst possible response.” None of them has adequately described an alternative approach. The reactions of Democratic Congress leaders Nancy Pelosi in the House and Charles Schumer will be worth noting, too. The latter has been strongly supportive of the Trump approach in general.

6. The new steel tariffs, as widely noted, are especially interesting because they were justified for currency devaluation reasons, with no mention made of the alleged national security threats originally cited as the rationale. Nonetheless, I don’t believe that they represent a significant change in the Trump approach to metals trade, because the administration has always emphasized the need for the duties to be global in scope – to prevent China from transshipping its overcapacity to the US through third countries, and to prevent third countries to relieve the pressures felt by their steel sectors from Chinese product by ramping up their own exports to the US. Obviously, all else equal, countries with weakening currencies (for whatever reason) will realize big advantages in steel trade, as the prices of their output will fall way below those of competitors’ steel industries.

7. Regarding the tariffs threatened in retaliation for France’s digital services tax, they’re consistent with Trump’s longstanding contention that the US-European Union (EU) trade relationship has been lopsidedly in favor of the Europeans for too long, and that tariff pressure is needed to restore some sustainable balance. In this vein, I don’t take seriously the French claim that the tax isn’t targeting U.S. companies specifically. After all, those firms are the dominant players in the field. Second, senior EU officials have started talking openly about strengthening Europe’s “technological sovereignty” – making sure that the continent eliminates its dependence on non-European entities in the sector (including China’s as well as America’s). The digital tax would certainly further the aim of building up European champions – and if need be, at the expense of US-owned companies.

By the way, this position of mine in no way reflects a view that more taxation and more regulation of these companies isn’t warranted. But it’s my belief that these issues should be handled by the American political system.

Also of note: Trump’s suggestion this morning that the French tax isn’t a big deal, and that negotiations look like a promising way to resolve the disagreement.

Finally, here are two more points I wound up making. First, I expressed agreement that the President’s tariff-centric trade policies have created significant uncertainties in the economy’s trade-heavy manufacturing sector in particular – stalling some of the planned business investment that’s essential for healthy growth. But I also noted that much of this uncertainty surely stems from the on-again-off-again nature of the tariffs’ actual and threatened imposition.

As a result, I argued, uncertainty could be significantly reduced if Mr. Trump made much clearer that, whatever the trade talks’ fate, the days of Washington trying to maximize unfettered bilateral trade and investment are over, and a new era marked by much more caution and many more restrictions (including tighter export controls and investment restrictions, as well as tariffs), is at hand.

Second, at the very end, I contended that President Trump deserves great credit for focusing public attention on the country’s massive trade deficits in general. For notwithstanding the standard economists’ view that they don’t matter, reducing them is essential if Americans want their economy’s growth to become healthy, and more sustainable. For as the last financial crisis should have taught the nation, when consumption exceeds production by too great a margin, debts and consequent economic bubbles get inflated – and tend to burst disastrously.

(What’s Left of) Our Economy: Now What in the U.S.-China Trade War?

Tags

agriculture, allies, China, decoupling, Democrats, election 2020, forced technology transfer, Hong Kong, Huawei, impeachment, intellectual property theft, National Basketball Association, Phase One, Steven Mnuchin, subsidies, supply chains, Taiwan, tariffs, Trade, trade talks, Uighurs, verification, {What's Left of) Our Economy

This is the second working day since the United States and China reached what the Trump administration is calling a “Phase One” trade deal with Beijing last Friday, and the questions surrounding the agreement still far outweigh what’s known. That alone should tell you that towering obstacles continue blocking any confident assessment of where the President’s so-called trade war stands, much less where the conflict is likely to go. Even so, here are some observations I hope are useful.  (Teaser:  One major point concerns tonight’s Democratic presidential candidates debate.)

First, the absence of any written statements or documents from the U.S. side describing or even summarizing what’s actually in the agreement justifies big doubts that anything deserving the term “deal” has been reached at all. Further reinforcing legitimate skepticism is China’s long record of broken promises on trade.

Second, especially strong skepticism is warranted about U.S. claims that any meaningful progress has been made on the so-called structural issues focused on from the very beginning by the Trump administration. For it as I’ve long argued, China’s government is so vast and secretive, and leaves such scanty written records of key decisions, that it will simply be impossible for the United States to monitor and enforce even the most promising Chinese commitments on intellectual property theft, technology extortion, discriminatory Chinese government procurement, and Beijing subsidies that shaft U.S.-owned and other foreign businesses vis-a-vis their Chinese rivals.

Third, even if China currently means to keep its alleged promises to binge buy American agricultural products, any number of external events could upset the apple cart. They include the Hong Kong picture becoming uglier (its becoming prettier can’t be totally ruled out, but seems highly unlikely); new Chinese crackdowns on other protests that may emerge (especially among the Uighur Muslim population) or revelations of new Chinese atrocities against the Uighurs or other minorities or other protesters; more attempted Chinese bullying of high-profile U.S. businesses like the National Basketball Association; a major flare-up of tensions over Taiwan or China’s aggressive moves in the South China Sea; a step forward in the Huawei case that increases the chances that the CFO daughter of the founder of this Chinese telecommunications giant will be extradited to the United States from Canada for sanctions-busting; and Chinese moves that persuade Washington that Beijing has no intention of keeping its perceived agriculture or other promises.

Moreover, the longer China takes to ramp up its buys from American farmers, the greater the potential for these kinds of shocks to bring this “Phase One” agreement crashing down.

Fourth, the less impressive the “mini-deal” keeps looking, the more convincing my view that its apparent modesty reflects President Trump’s belief that his domestic political position has weakened significantly – both because of the new impeachment threat and signs of an economic slowdown.

It’s true that Treasury Secretary Steven Mnuchin has suggested that if the deal hasn’t been finalized by December 15, the Trump administration will go ahead with a previously vowed 15 percent increase on $156 billion worth of levies on Chinese imports. But that’s anything but a concrete threat. In addition, it’s important to note this report suggesting (the specifics are really sloppily described) that China wants the sequencing to work in the opposite way:  First, tariffs get rolled back (or frozen in place?), then the agriculture buys begin. 

Moreover, no one in the administration has said anything about reversing its Phase One-related decision to suspend a big tariff increase (to up to a formidable 30 percent on some products) previously announced to begin on October 15. So even though U.S. duties on some $360 billion worth of Chinese goods would still remain in place if China blows Mr. Trump off, there’s a real chance that Beijing won’t incur any further punishment – doubtless because the President believes that tariffs above and beyond current levels and coverage could panic investors again and further soften economic growth.

Some kind of blow-up in Hong Kong or elsewhere could yet change Mr. Trump’s calculations. But the more important point so far is that events, not the President, are now in charge of the trade talks track of his China policy.

Fifth, at the same time, none of the above means that the United States is devoid of leverage versus China and in particular the kind of clout that can keep advancing its economic as well as closely related technology and national security interests, and this is where a second, arguably more important, track of the Trump China policies needs to be remembered. As I’ve written, the President has sought not only to end the threat of China’s economic predation by forcing Chinese policy changes through tariff pressure. Although he rarely speaks of it, he’s also been trying to repel Chinese threats to U.S. security and prosperity through a series of unilateral measures aimed at decoupling the United States from China economically.

By crimping trade, investment, and technology flows, these decoupling steps are reducing America’s vulnerability to China by significantly reducing the access to the U.S. market so crucial to the success of China’s advanced industries; by shrinking the footprint of China’s state-controlled economy in America’s largely free market system; and by cutting off a Chinese tech sector that could be become highly dangerous from critical supplies of U.S. components.

Decoupling has also been advanced by those tariffs so far imposed on $360 billion worth of Chinese products (amounting to nearly 86 percent of all goods imports from China last year). They haven’t done much to achieve their stated aim of improving China’s behavior, but they have decreased China’s importance to the U.S. economy by prompting an exodus of global manufacturing supply chains out of the People’s Republic.

Further, the Trump decoupling campaign has also helped awaken many foreign governments to the China tech and broader economic threat – though because so many other countries (including major American treaty allies), were profiting so handsomely from the pre-Trump globalization status quo, progress on this front has been uneven and disappointing. (See here for why Germany, for example is so conflicted.) 

Sixth and finally, one major set of actors in this drama, though, hasn’t been very woke on China issues:  most of the Democratic presidential candidates. Sure, many have supported a policy of “doing something” on China (though rarely involving tariffs – or any other concrete measures). But so far, none seems to view China’s multi-dimensional challenge to America as a major concern – and all the top-tier contenders and most others now support impeaching the President. 

Consequently, they could greatly strengthen not only Mr. Trump’s position, but the American position, with firm declarations in tonight’s debate that China will stay squarely in Washington’s cross-hairs if they win the White House, and that therefore there’s no point in stonewalling in hopes of easier post-2020 U.S. policies. Not that any confidence looks well founded that any of them will.        

(What’s Left of) Our Economy: What the Mini-Deal Says About Trump’s China Policy

Tags

agriculture, business investment, censorship, China, decoupling, democracy, Democrats, election 2020, Elizabeth Warren, Hong Kong, Hong Kong protests, human rights, impeachment, Populism, Republicans, tariffs, Trade, trade talks, trade war, Trump, Uighurs, Ukraine, Ukraine Scandal, {What's Left of) Our Economy

The “Phase One” min-deal reached by the United States and China tamping down bilateral trade tensions for the moment, speaks volumes about the three major forces that are now driving President Trump’s China policy, and that will keep shaping it through the next U.S. election – though not always in consistent ways. They are:

>the President’s evident belief that his reelection hopes are being threatened mainly by revived impeachment threats but also by an economic slowdown that has unmistakably been influenced by the so-called trade war with China;

>his consequently increased need for political support from the establishment Republicans so numerous in Congress who have never boarded the Trump Tariff Train and who are worried about their own reelection chances next year; and

>Mr. Trump’s consistent (though generally unstated) belief that no matter how the formal trade talks proceed, America’s national security as well as economic interests require the U.S. economy to continue steadily decoupling from China’s.

The strength of the impeachment drive faced by the president is now indisputable. Some polls are even showing growing Republican support for not only impeachment by the House but removal by the Senate. Moreover, this political challenge comes at a time when the President’s strongest suit by far (at least according to polls) – his economic policy record – is looking somewhat weaker.

Few signs point to a recession breaking out by Election Day, much less during the preceding weeks or months. But growth has been slowing to levels that Mr. Trump himself has deemed unacceptable – in no small measure because they were the rates that prevailed for most of the Obama administration.

The tariff-heavy Trump trade policies hardly deserve all the blame. (See, e.g., this recent post.) But the failure of business investment to stay elevated following passage of major tax cuts for business is especially telling. It buttresses claims that both the President’s various sets of tariffs and the inconsistency with which they’ve been both threatened and applied have inhibited companies from approving big new expenditures on new factories and other facilities.

As a result, nothing that can reasonably be expected from Washington (in other words, ruling out a big infrastructure spending bill) is likelier to boost the economy more than a nerve-calming trade truce with China mainly featuring some Chinese market opening or re-opening (especially for agricultural products) in return for some U.S. tariff cuts, promises to refrain from new levies, or some some combination of such moves. At the least, such an agreement would in theory help growth maintain the momentum it has remaining.

A mini-deal along these lines would also please the Senate Republicans who might ultimately judge the President’s fate, and who generally have lagged far behind the GOP base in turning against pre-Trump China and broader trade policies. Moreover, as I’ve written, impeachment politics have greatly magnified their sway over Mr. Trump before. Despite his sky-high popularity with Republican voters, the President was heavily dependent on their political backing until this spring in order to neutralize any impeachment chances while his Russia ties were being investigated. That’s surely why his early policy initiatives were dominated by traditional Republican priorities, like tax cuts and repeal of former President Barack Obama’s healthcare overhaul, rather than by populist priorities like an infrastructure bill and the prompt imposition to tariffs.

Once the Special Counsel and other investigations flopped for various reasons, Mr. Trump had a much freer hand. But because of the emergence of “UkraineGate,” for now, those days are over. Probes growing out of those events are certain to last for months. Therefore, continued, much less higher, tariffs on China that could further drag on the economy and further frustrate the rural constituencies so crucial to the President and many other Republicans seem out of the question.

The President is so hamstrung that he’s been unable to marshal greater public support for staying the tariff course even though China is antagonizing American public opinion with its harsh suppression of the Hong Kong protests and the Muslim Uighur minority, and with its heavy handed efforts to extend its censorship practices to the National Basketball Association and other U.S. businesses. And don’t forget: These developments have placed China in a much weaker position, too.  

One reason that the President hasn’t been able to capitalize could well be his reluctance to declare publicly the functional equivalent of economic war, or his intent to decouple – presumably because any such statements would prompt the Chinese to crack down even further on American companies even doing business in the PRC that have nothing to do with job and production offshoring aimed at serving the U.S. market from super-cheap and highly subsidized Chinese facilities, as opposed to serving Chinese customers. And that reasoning has been entirely understandable.

Much less understandable – the President’s insistence that a trade war with China would be easy to win and inflict no economic harm on Americans, rather than choosing to challenge his compatriots to endure some sacrifices in order to beat back a mortal threat to their national security as well as prosperity. No wonder public support for so-called hard-line policies remotely strong enough to offset the opposition and reservations of the Congressional Republicans and most Democratic politicians is nowhere to be seen.

And don’t doubt that the Chinese fully understand. Whatever problems they initially experienced in figuring Mr. Trump out, they surely have concluded that they’re best advised to play the waiting game on the broader and deeper so-called structural issues dividing the two countries (e.g., intellectual property theft, technology extortion, massive subsidies) until the President is replaced by a Democrat who’s much easier to deal with.

Indeed, the evidence for this conclusion is abundant. China issues have played a small role in the Democratic primary campaign so far – even when it comes to long-time critics of pre-Trump trade policies like Democratic Socialist Vermont Senator Bernie Sanders, and Massachusetts Senator Elizabeth Warren. One likely explanation: In recent years, Democratic voters and leaners have markedly flipped on those pre-Trump approaches, from deep dislike to general approval. This shift in public opinion (matched in part by a trade flip in the other direction among Republicans and leaners) may also warrant some Chinese confidence that even a President Warren might prove a more acceptable interlocutor than Mr. Trump.

Nonetheless, the formal talks are not the only track on which the Trump administration’s China trade policies are running. And the other track – featuring unilateral U.S. moves to restrict Chinese involvement in the American economy, and thereby foster decoupling – is much less controversial than the trade talks and especially the tariffs and tariff threats clearly required to spur any meaningful progress.

Highly revealing on this score (in terms of the importance attached in Washington to decoupling): Even as a high level Chinese delegation was jetting to Washington, the President approved actions against Chinese tech companies and Chinese officials that were justified by human rights concerns, but that in the first case clearly advanced decoupling. Just as revealing (in terms of possible Chinese acceptance of a more skeptical new bipartisan U.S. consensus on China policy): Despite the provocative timing, the Chinese didn’t turn around and head back home once they heard the announcement.

Reinforcing the new American consensus on decoupling has unmistakably been the growing realization by the U.S. corporate sector that its heavy bets on China have dangerously increased its vulnerability not only to the whims of American politics, but to a Chinese regime that’s turned out to be much less hospitable than expected. As a result, “Phase One” is not only a suspiciously convenient-looking term being used by the President to describe his new deal. It also looks suitable for describing where his administration’s overall China policy stands right now.     

Im-Politic: Why Trump’s Ukraine China Ask Was So (Needlessly) Stupid

Tags

China, collusion, conflict of interest, Democrats, election 2020, Hunter Biden, Im-Politic, impeachment, Ivanka Trump, Joe Biden, Obama, Pelosi, Swamp, Trump, Trump-Russia, Ukraine

It’s lucky for President Trump that being stupid per se isn’t (yet?) grounds for impeachment, because if it was, his recent call for Beijing’s aid to investigate the Biden family’s possibly corrupt activities in China would surely qualify. In fact, it’s hard to think of a presidential action in recent memory that fails on so many substantive and political grounds. And no, I don’t agree with Florida Republican Senator Marco Rubio that the President was simply trying to troll the press.

Even so, it’s still possible that this episode could have a silver lining for Trump-World.

First, let me repeat my previous position that there’s absolutely nothing wrong with Mr. Trump probing Hunter Biden’s business dealings in China, Ukraine, or anywhere else, and whether they’ve improperly or illegally influenced U.S. policy toward those countries while his father was Barack Obama’s Vice President. In fact, since the current challenges and opportunities facing Americans nowadays from both countries have been strongly affected by policy decisions made during the Obama years, every American caring about the nation’s interests should want to know more about the Bidens’ goings on.

Nor should Joe Biden’s presidential bid this year shield him from scrutiny. In fact, as the President has pointed out in remarks on the Bidens and China, the former Vice President’s White House bid makes full disclosure absolutely essential. After all, as Mr. Trump has asked, “How would you like to have, as an example, Joe Biden negotiating the China deal if he took it over from me after the election? He would give them everything. He would give them everything. How would you like to have that?”

Can Americans be certain that a President Biden would sell his country down the river in China trade talks or on other fronts? Of course not. Can they be certain that Biden let China off the hook on various important interests, or urged doing so, since Hunter (successfully) began soliciting Chinese business in 2010? No on that score, too. But the uncertainties created and the undoubted, ongoing possibility of various payoffs are precisely why conflict of interest laws are on the books to begin with.

Moreover, conflicts of interest are especially important to investigate when it comes to countries like China and Ukraine. For there, governments and/or the oligarchs to which they’re closely connected call all the major economic and business shots.

Of course, claims abound that Mr. Trump is vulnerable to comparable (or even worse) charges. But regarding the Russia allegations, they’ve been big news since his 2016 Republican primary campaign began gathering real steam. In addition, after his inauguration, they were thoroughly examined by a Special Counsel probe that lasted nearly two years. And so far he’s still innocent until proven guilty in a legal sense. In addition, and revealingly, the current impeachment probe isn’t attempting to revive any of these charges.

Policy-wise, the Trump Russia record has been mixed, including support for measures (like strengthening the U.S. military presence in Eastern Europe right up against Russia’s borders, and strongly backing the American fossil fuels production revolution), that plainly aren’t pleasing Moscow.

It’s true that Trump daughter Ivanka operated a business that made shoes and apparel in China and imported these wares into the United States. I’d joined the ranks of those who believed those ties should have been severed at least once Mr. Trump became the Republican nominee. But Ivanka Trump has now shut down her China business. And can anyone seriously believe that in return for whatever copyrights she received from Beijing while her father was in office, that the President has taken it easy with China? After tariffs on literally hundreds of billions of dollars worth of Chinese products that have deeply wounded China’s economy? And a Taiwan policy that has poked Beijing in the eye on an issue of deep importance to China’s leaders and many of its people?

By contrast, it’s entirely legitimate – and important – to point out that the Obama-Biden record on both China trade and security issues was an eight-year exercise in coddling Beijing.

And both leaders’ records get to much of the reason why the President’s ask to Beijing was so boneheaded. Whether the Bidens are playing dirty or not, how can it help but legitimately expose Mr. Trump to the same kinds of conflict-of-interest charges he’s leveling against Biden? Indeed, House Speaker Nancy Pelosi is now making them. Moreover, it’s not as if China has anything like an impartial, rule-of-law-dominated criminal justice system. And let’s not forget the so-called political optics of his gambit at precisely the time when Beijing is violently repressing democratic protests in Hong Kong. “Appalling” isn’t too strong an adjective.

Just as bad, the President’s ask undercuts one of his most effective campaign themes – that for decades, his predecessors and their cronies had conspired with foreign governments like China’s to shaft everyday Americans on trade issues in particular. Just think back to his Inaugural Address. So now the same Chinese regime that’s conspired with Swamp-ers from both parties is supposed to help a President damage someone he’s labeled (with good reason) as a prime member of that corrupt complex?

The only justification I can think of for the China ask – at least politically – is the following (and don’t think I’ve got a lot of faith in this speculation): Now that Beijing has brushed off the President, he could turn around and contend that the Chinese are helping the Bidens cover up. Substantively – and whether this objective is being sought intentionally or not – the China ask could result in Mr. Trump taking a harder line on the trade talks.

More credibly, and encouraging in my eyes given my doubt that any verifiable China trade deal is possible: Even had Beijing complied, the President could come under enough Pelosi-like pressure to make impossible the kind of cosmetic deal that in principle could have solved some big potential China-related political problems heading into the election (i.e., with farmers angered at losing a big export market, or consumers outraged at tariff-induced higher prices).

The problem is that constructing these kinds of tortuous scenarios should be completely unnecessary, because, as I’ve stated,

>the Bidens’ conduct has been so questionable;

>the China-related case against them looks so compelling:

>Mr. Trump surely can get enough damning foreign government information about their doings from less substantively and politically controversial sources like Australia and, yes, Ukraine (to which the Democrats seem strongly devoted); and

>consumer and farmer complaints aside, the Democrats will have a devil of a time this coming election year making political hay by accusing the President of being too tough on China.

So the China ask looks an awful lot like another damaging and completely unforced Trump error. Nonetheless, the next time such a blunder seals his political fate will be the first. And even though my above scenario is pretty far-fetched, who can still confidently say that the President’s string of good luck has finally run out?

Making News: Video of Presidential Campaign Economics Interview Now On-Line!

Tags

Democrats, economy, election 2020, Elizabeth Warren, Liquid Lunch, Making News, NewsmaxTV.com, Wall Street

This past week has been so crazy news-wise that I’d completely forgotten to post a link to a video of an interview I did for NewsmaxTV.com two Fridays ago. The subject: some recent economy-related developments in the current and intensifying presidential campaign!

So click here for a great (and still timely!) discussion on the “Liquid Lunch” program focusing in particular on Massachusetts Senator Elizabeth Warren’s rise to just-about-front-runner status among the Democratic contenders – and on an apparently strong reaction from Wall Street.

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