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(What’s Left of) Our Economy: Where are the Wages?

15 Wednesday Nov 2017

Posted by Alan Tonelson in (What's Left of) Our Economy

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Barack Obama, inflation-adjusted wages, Jobs, John Boehner, manufacturing, private sector, recovery, wages, {What's Left of) Our Economy

Today’s new Labor Department data make clear that inflation-adjusted American wages are now performing so badly that just remaining flat month-to-month could justify a passing grade. For in October, real hourly pay in both the private sector overall and in manufacturing floundered below recovery era peaks they’d reached in July (resulting from painfully slow progress over those eight years). In industry, moreover, after-inflation wages fell on a year-on-year basis for the first time since September, 2014.

The 0.09 sequential drop in constant dollar private sector wages was the third straight monthly decline in a row. Since July, after-inflation wages are down a total of 0.46 percent. And year-on-year, October’s increase was a mere 0.37 percent. Between the previous Octobers, these wages rose by 0.75 percent.

As a result, since the recovery technically began, in mid-2009, inflation-adjusted private sector wages are up 4.36 percent.

In manufacturing, price-adjusted pay flat-lined sequentially for the second straight month. Since July, they’re off by 0.82 percent. And since last October, real manufacturing wages have fallen by 0.46 percent – much worse than their 1.87 percent improvement between October, 2015 and October, 2016.

So during the current economic recovery so far, constant dollar manufacturing wages have advanced by only 1.21 percent.

Just as the recovery was starting, then House Republican leader John Boehner, caustically asked Democratic President Barack Obama – and the nation – “Where are the jobs?” They eventually came. But with unemployment driven way down to near-multi-decade lows, pay was supposed to follow. Until they do, claims that the economy is (finally) normalizing will continue having a hollow – and politically tin-eared – ring. And expect to hear more and more Americans ask, “Where are the wages?”

(What’s Left of) Our Economy: First Thoughts on the Fast Track Defeat

13 Saturday Jun 2015

Posted by Alan Tonelson in (What's Left of) Our Economy

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2016 elections, David Schweikert, fast track, free trade agreements, Gerry Connolly, House of Representatives, infrastructure, John Boehner, Nancy Pelosi, TAA, TPA, Trade, Trade Adjustment Assistance, Trade Promotion Authority, Washington Post, {What's Left of) Our Economy

Make no mistake about it: Even though supporters of the president’s trade agenda can still muster immense amounts of money and political power to reverse the results of yesterday’s House vote on fast track trade negotiating authority, the measure’s effective (and potentially final) rejection is a big milestone in American political and economic history.

The crucial vote yesterday – on a secondary issue regarding government aid for workers who lose their jobs via trade – was so lopsided (302-126) that literally dozens of Democratic and Republican Members of Congress would have to change their minds in the next few days to win it for the offshoring lobby. That’s not impossible, but defeat for these powerful forces, which include Big Business, Big Finance, and Big Media, isn’t unprecedented, either. President Bill Clinton was denied fast track authority twice, in 1997 and 1998 – and when nearly everyone (mistakenly, in my view) thought the economy was strong. In addition, Congress refused to renew fast track, which prevents it from amending proposed trade agreements, for President George W. Bush in 2007.

Nonetheless, if yesterday’s House action stands, U.S. trade policy, and a lot of American politics, will be brought to a cross-roads, since it will mark an end to Congress’ more recent record of approving trade deals reached by presidents (like the 2011 agreements with Colombia, Korea, and Panama), and supporting related trade policies (like enabling currency manipulation by China). So here are some preliminary reactions and thoughts on what just happened, What It All Means, and what it could portend.

>In politics, time is almost always on the side of forces trying to prevent something, and that’s much of what you need to know about why the fast track advocates want and need to hold a re-vote ASAP on the crucial Trade Adjustment Assistance (TAA) issue. Much of the rest has to do with the ongoing intensification of the 2016 presidential and Congressional cycle. Even trade supporters widely acknowledge that their positions are risky politically, and that therefore it’s best to approve trade deals or take similar actions as long before upcoming elections as possible. Both sides of the fast track debate know that the closer to November, 2016 a vote gets, the less likely it is to pass – or even come up. So if the bipartisan fast track champions can’t win next week, the proposal’s goose really does look cooked.

>Also interesting on timing: In 2011, when the economy was weaker, and job-creation much less impressive, those three aforementioned trade agreements passed by respectable margins. Yesterday, after four years of improvement (however slow), legislation to boost the chance of future deals failed. That upcoming election cycle might account for much of the explanation in two respects. First, there’s that overall political unpopularity of current trade policies. But the second concerns the dramatically differing positions of the president and Congressional Democrats. After all, he’s not running for re-election; most of them are. So not only are the latter freed of the pressure to support their White House incumbent as his reelection campaign approaches. His political future is no longer at risk at all.

>My happiness over the TAA vote was almost matched by my discouragement during the preceding floor debate. The economic case against new TPP-style trade agreements is overwhelming, as I’ve written in this previous post, and in articles like this and this. But fast track supporters just trotted out the same talking points debunked here. Not that I’m saying that it’s about me or my work. Instead, I’m worried that if current trade policies aren’t rejected for the strongest possible substantive reasons, the most valuable lessons might not be learned, and shifting political winds could blow policy right back on the wrong course.

>Indeed, House Democratic leader Nancy Pelosi nicely illustrated that point after her game-changing declaration of opposition to TAA renewal under these circumstances. Addressing her Republican colleagues in particular, Pelosi pointedly stated that fast track’s prospects would “greatly increase” if they helped her pass a highway bill. Not that America doesn’t urgently need major infrastructure repair and upgrades. But are they worth passage of the current fast track bill? Even if stronger Buy American requirements are added to it, not in my opinion – because fast track’s passage threatens further erosion of the nation’s industrial and technology base. If those capabilities keep getting hammered by offshoring-friendly trade policies, it will matter a lot less how efficiently Americans can move goods and services and data, communicate with each other, and utilize the internet.

>Speaking of the debate, let’s thank Republican House Speaker John Boehner of Ohio and his GOP colleague David Schweikert of Arizona for its two lowest points. Clearly playing to the strong, growing partisanship of his caucus, Boehner repeated a major talking point aimed at those Republicans reluctant to empower Mr. Obama to do much of anything. The fast track bill, he claimed was needed “to make darn sure that there’s less authority for the president…..”  Really?  Is that why this president asked for the measure? Because he relishes losing power to act independent of Congress’ wishes?

>But at least Boehner didn’t get into the political gutter like Schweikert. As he put it in his floor remarks, fast track opponents have been spreading so much blatant misinformation that Hitler’s chief propagandist, Joseph Goebbels, “would be proud of them.” Anyone agreeing with me that invoking Nazism in this or any other domestic political context is contemptible, please call Schweikert’s office Monday and demand that he apologize or resign.

>President Obama didn’t cover himself with glory, either. The president made the most personal possible plea for support from House Democrats yesterday morning, asking that they not reject “my trade agenda.” In other words, Mr. Obama ultimately believed that the fast track dispute was all about him. He also reportedly impugned the opponents’ motives, slamming their switch on TAA as a cynical legislative ploy. And this attitude on top of his arrogant, repeated dismissals of trade policy critics as know-nothings. Not surprisingly, many Democrats have shot back that the president himself needed to explain why he finally dropped his longtime reluctance to engage lawmakers directly in order to rescue a policy favored most ardently by many of his fiercest political opponents.

>Also unimpressive – the Washington Post’s editorial reaction to the fast track defeat. On top of being childishly petulant in their tone, dogmatically pro-offshoring Post editorial writers boneheadedly quoted Virginia Congressman Gerry Connolly, one of fast track’s few House Democratic supporters, to make their point that opponents were shrinking from “shaping America’s future.” As I’ve pointed out, Connolly represents Virginia suburbs of Washington, D.C. whose economies are dominated by direct and indirect (through contracting) federal spending. In other words, he’s as much of a paragon of capitalism and competition and free markets as the Kardashians are of discretion.

>We’ll have to wait till the work week begins to start getting foreign reactions to the fast track vote, and the other countries so far included in the TPP talks may hold off until its final fate is clear. But if fast track is indeed dead, we’re likely to see just how ludicrous one of the measure’s supporters’ main talking points has been. Fast track backers have always insisted that without passage, other countries wouldn’t negotiate seriously with Washington, since whatever they agreed to could be rejected by Congress. This is nonsense, I’ve argued, because the U.S. market is far and away the biggest prize of any trade negotiations America is involved in. Especially for export-led economies like those in Asia, walking away from the TPP for lack of fast track would amount to cutting off much more than their noses to spite their faces.

Tomorrow, let’s look at two more purely political implications of the fast track vote.

(What’s Left of) Our Economy: Another Con Job by Schumer on Trade and Currency?

13 Wednesday May 2015

Posted by Alan Tonelson in (What's Left of) Our Economy

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Chuck Schumer, currency manipulation, fast track, George W. Bush, House of Representatives, John Boehner, Lindsey Graham, Mitch McConnell, Obama, Senate, TPP, Trade, Trans-Pacific Partnership, veto, {What's Left of) Our Economy

I would hate to think that New York Democratic Senator Chuck Schumer has been conning the nation yet again on the currency manipulation issue, but the new trade compromise announced by Republican leader Mitch McConnell of Kentucky and his Democratic counterpart Harry Reid of Nevada has me scratching my head. In fact, I know that the analysis in this post may be a little difficult follow. But a bit of extra effort to understand this byzantine legislative tale will be well worth your while.    

The deal figures to break the Senate deadlock over President Obama’s request for fast track trade negotiating authority, which was created by yesterday’s defeat of a motion to begin floor debate officially. A major sticking point was McConnell’s refusal to combine the fast track request with a vote on several other trade bills. And one of these included a Schumer measure that would crack down meaningfully on foreign governments that undervalued their currencies in order to undersell competing U.S.-origin goods and services for reasons totally unrelated to free market forces.

The idea reportedly was that Congress’ Republican leaders would summarily reject the connected package as a trap that would doom any chances for new trade deals. For they and other fast track backers have continually claimed that foreign governments are dead set on preserving full freedom to engage in such exchange rate manipulation, and would react by simply refusing to negotiate seriously with Washington.

For reasons that frankly escape me, the Republicans took the bait. As a result, many Senate Democrats who ordinarily vote for such job-killing trade agreements mounted their high horses, joined forces with the trade policy critics in their party, and mustered enough votes to stall the fast track bill. These reasons escape me because a freestanding bill with even the best currency manipulation provisions has almost no chance of becoming law and therefore influencing U.S. trade policy.

After all, Republican Speaker John Boehner of Ohio has fought hard and successfully to keep a strong House currency bill off the floor, and so far his rank and file has been unwilling to openly challenge him and overturn his decision. Even if the legislation passed both House and Senate, unless the majorities were veto-proof (which looks far-fetched), the president could easily turn it aside. And if new trade deals don’t genuinely outlaw currency manipulation, other signatory countries could deter any unilateral American anti-manipulation actions with the threat of their own retaliatory sanctions.

The real way to ensure that American trade policy responds effectively to currency manipulation is by including in the president’s fast track negotiating instructions a flat requirement that he ensure the inclusion in new trade deals – like Mr. Obama’s proposed Trans-Pacific Partnership (TPP) – of enforceable disciplines against this currency protectionism. The manipulators could still frustrate U.S. aims by dismissing even the best documented American complaints. But the link to fast track would matter most by serving as a poison pill, since supporters of the expedited trade procedures insist that strong currency measures would be a fast track deal killer, and their inclusion would likely sink fast track for the time being.

Schumer has loudly championed the idea of cracking down on currency manipulators for many years. But his agreement to separate currency issues from the fast track vote dovetails with a disturbing pattern of failing to follow through with actions at crucial junctures. In particular, in early 2005, he and South Carolina Republican Lindsey Graham introduced a promising anti-currency manipulation bill in the Senate, and spoke passionately about the need to match Washington’s years of words on the issue with deeds. Yet that June, both lawmakers consented to postponed a vote in exchange for a series of flimsy Bush administration promises, and were content later that year to drop their initiative altogether following another series of comparably weak commitments.

In principle, Schumer could argue that a separate currency bill would still be useful to counter Chinese manipulation, since Beijing is not (yet) part of the Pacific Rim trade deal. But again, standalone bills have repeatedly failed on Capitol Hill, and there is no reason to suppose that their chances are any better today.

The fast track bill still faces major, and possibly insuperable, hurdles in the House. And as I wrote yesterday, the previous Senate vote still marks a Congressional milestone – however cynical the motives of many lawmakers might have been. Nonetheless, the maneuvering by Schumer (and, to be sure, like-minded Democratic colleagues) made what’s often called “The World’s Greatest Deliberative Body” a good deal less great. And given the strong odds of Schumer succeeding Reid as Democratic leader, a meaningfully brighter future is looking awfully hard to predict.

Our So-Called Foreign Policy: It’s High Time for America to Take the Hint(s) in the Middle East

01 Wednesday Apr 2015

Posted by Alan Tonelson in Our So-Called Foreign Policy, Uncategorized

≈ 3 Comments

Tags

border security, foreign policy, Iran, Iraq, ISIS, John Boehner, Jordan, Middle East, nuclear weapons, Our So-Called Foreign Policy, Palestinians, Shiites, Sunnis, terrorism, Yemen

Sometimes, when countries are lucky, reality knocks them over the head with a two-by-four before they make fatal mistakes. The United States, over whom God is said to watch (along with fools and drunks) has just gotten two of them in connection with the Middle East in the last week. Yet no one should bet the ranch that these broadest of hints will be taken.

The first came in a Saturday Washington Post news article on the regional situation just before a Saudi-led coalition started intervening in Yemen’s civil war. As Post reporter Liz Sly explained it:

“The United States is aligned alongside Iranian-backed militias in Iraq and against them in Yemen. Egypt and the United Arab Emirates, who have joined in the Saudi offensive in Yemen, are bombing factions in Libya backed by Turkey and Qatar, who also support the Saudi offensive in Yemen. The Syrian conflict has been fueled by competition among all regional powers to outmaneuver one another on battlefields far from home.”

The clear message: This is a madhouse that even Bismarck couldn’t deal with, much less Susan Rice.

The second sign that current Middle East policy is flying the United States into a mountain came from, of all people, House Speaker John Boehner. Now traveling through the region, the Ohio Republican declared, “America’s ability to lead in the world depends on Jordan’s ability to remain a stabilizing force in the Middle East, and we could not ask for a more solid partner.”

This is the same Jordan whose Sunni king from an Arabian peninsula tribe rules over a population that’s long been more than half comprised of always restive Palestinians, but whose demographic profile is now being reshaped by enormous refugee waves from disintegrating neighboring countries. Among the newcomers – hundreds of thousands of Shiites who comprise that sect’s first significant presence in the country. In other words, Boehner believes that the future of America’s global leadership depends on the national equivalent of a time bomb whose ticking he can’t, or won’t, hear.

As I’ve written before, it’s time for the United States to go. But not in the belief that various surrogates – like Arab coalitions – can effectively replace or even supplement American power. Or that the domestic energy revolution is already advanced enough to make the region marginal to U.S. economic interests.  Or that ISIS is so brutal that it will ultimately tear itself apart or provoke a powerful backlash.  Or that one of these days, Iran and Saudi Arabia may be ruled by moderates and genuine modernizers. Or that (similarly), Islam in all its forms might undergo a Reformation and help lead all the Middle East’s peoples out of dysfunction.

Instead, the United States urgently needs to begin actively and explicitly preparing its exit by using domestic policies to minimize Middle East dependencies and threats. This means ensuring that the economy develops energy sources large and diverse (geographically as well as in terms of fuel types) to turn Middle East oil producers into permanent global energy market followers, not leaders. It means securing U.S. borders well enough to keep out terrorists from within the region (and their supporters from without). And until marginalization policies are firmly in place, it means (a) harrassing ISIS with air strikes and special forces to keep it off balance, and (b) either preventing Iran from building a nuclear weapon, or crippling its economy through sanctions if current negotiations fail, until marginalization policies are in place.

Above all, it means that American leaders must realize that foreign policy-making isn’t first and foremost about acting out their fantasies – whether imperial or humanitarian. (Yes, I know – the two often overlap.) Instead, foreign policy-making is first and foremost about promoting and defending the nation’s security and welfare. Before the energy revolution in particular, the United States had no viable alternative to active, often dangerous, involvement in the Middle East’s deadly affairs. Now the vastly superior disengagement option, which emphasizes (domestic) conditions that Washington can reasonably hope to control, is within our grasp. I’d hate to be the one to have to explain to future generations why this opportunity wasn’t aggressively seized.

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Those Stubborn Facts

  • (What's Left of) Our Economy
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  • Housekeeping
  • Im-Politic
  • In the News
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  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

The Snide World of Sports

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Guest Posts

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

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Current Thoughts on Trade

Terence P. Stewart

Protecting U.S. Workers

Marc to Market

So Much Nonsense Out There, So Little Time....

Alastair Winter

Chief Economist at Daniel Stewart & Co - Trying to make sense of Global Markets, Macroeconomics & Politics

Smaulgld

Real Estate + Economics + Gold + Silver

Reclaim the American Dream

So Much Nonsense Out There, So Little Time....

Mickey Kaus

Kausfiles

David Stockman's Contra Corner

Washington Decoded

So Much Nonsense Out There, So Little Time....

Upon Closer inspection

Keep America At Work

Sober Look

So Much Nonsense Out There, So Little Time....

Credit Writedowns

Finance, Economics and Markets

GubbmintCheese

So Much Nonsense Out There, So Little Time....

VoxEU.org: Recent Articles

So Much Nonsense Out There, So Little Time....

Michael Pettis' CHINA FINANCIAL MARKETS

New Economic Populist

So Much Nonsense Out There, So Little Time....

George Magnus

So Much Nonsense Out There, So Little Time....

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