(What’s Left of) Our Economy: U.S. Inflation Just Rebounded on the Wholesale Level, Too

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Biden administration, consumer price index, core inflation, CPI, Federal Reserve, food stamps, inflation, interest rates, monetary policy, Obamacare, PPI, Producer Price Index, Social Security, student loans, veterans, wholesale inflation, {What's Left of) Our Economy

After today’s official report on producer price inflation in the United States, it’s hard to see how anyone could still genuinely believe that the worst of the recent, decades-high price increases afflicting Americans is past.

In the first place, both versions of the Producer Price Index (PPI) worsened sequentially in September) for the second straight month. And in the second place, these results are likely to generate acceleration in consumer prices (those September figures come out tomorrow) because these “final demand” producer price (also called wholesale price) numbers tell us what businesses charge for the goods and services they buy to create what they sell to consumers.

It’s true that, at some point, U.S. businesses will lose this pricing power because their customers simply can’t afford to keep buying as much. But continuing strong inflation at all levels by definition makes clear that this development isn’t imminent. (Otherwise, price increases would have cooled much faster.)

Moreover, the Federal Reserve’s tighter monetary policy, which makes credit more expensive, isn’t likely for at least several months to slow economic activity enough to moderate inflation. And the Biden administration keeps putting more money in people’s pockets (e.g., in the form of a – scaled back – student loan forgiveness program, a major expansion of food stamp eligibility and Obamacare benefits, and higher spending on veterans benefits). Further, tomorrow Washington could announce the biggest increase in Social Security payments (which are indexed to inflation) in decades.

Overall producer prices rose sequentially by 0.38 percent in September. The monthly increase was the first since June, but keep in mind that it followed a July drop of 0.41 percent and a smaller August decline of 0.18 percent (hence my claim above of two consecutive months of discouraging results).

As with the consumer price index (CPI), the government also releases “core” producer price figures that strip out food and energy prices supposedly because their volatility has nothing to with the economy’s fundamental vulnerability to inflation. And quickening inflation was apparent here, too, with September’s monthly increase of 0.36 percent following an August rise of 0.25 percent and a July bump up of 0.13 percent.

The headline year-on-year PPI increase looked a little better – but only if you forget the baseline effect, which can produce misleadingly high or low results if the preceding year’s readings (in this case) were abnormal in either direction.

The September annual rise of 8.55 percent represented the third straight month of deceleration, and the lowest such number since July, 2021’s 7.83 percent.

But it’s coming off an annual increase the previous September of 8.82 percent. By contrast, this year’s highest annual PPI increase (March’s 11.67 percent number) came off a yearly rise of only 4.06 percent the previous March. That’s less than half as high. Therefore, it’s entirely reasonable to see plenty of still worrisome producer price momentum in that most recent annual data.

As for core PPI, September actually saw an acceleration in the annual pace – from August’s 5.60 percent to 5.66 percent. And although the latest figure is still the year’s second lowest, it’s coming off a September, 2020-21 increase of 6.17 percent. The highest annual PPI result for this year (March’s 7.11 percent), that increase followed one between the previous March’s of a mere 3.15 percent – roughly only half as high.

Between these new wholesale price results and the rapid consumer prices increases revealed in last month’s official report on the consumer inflation measure preferred by the Fed, the case for peak inflation looks weaker than it has for months. And here’s one more reason for doubting that the cost of living crisis will abate much any time soon:  the unlikelihood, at least as I see it, that the Fed will keep tightening monetary policy much longer and risk being charged with throwing the economy into a recession with a presidential election coming up.

Of course, the central bank is supposed to be immune from political pressures (including public opinion). But of course, nothing in Washington is. I’ve actually been surprised that the Fed has persisted in its hawkish stance this long. But the real test of its convictions is still months away.       

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Im-Politic: VP Debate Questions That Should be Asked

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1619 Project, African Americans, Barack Obama, Biden, budget deficits, CCP Virus, censorship, China, Confederate monuments, Constitution, coronavirus, COVID 19, education, election 2020, Electoral College, filibuster, Founding Fathers, free speech, healthcare, history, history wars, Im-Politic, inequality, investment, Kamala Harris, Mike Pence, national security, Obamacare, police killings, propaganda, protests, racism, riots, semiconductors, slavery, spending, Supreme Court, systemic racism, Taiwan, tariffs, tax cuts, taxes, Trade, trade war, Trump, Vice Presidential debate, Wuhan virus

Since I don’t want to set a record for longest RealityChek post ever, I’ll do my best to limit this list of questions I’d like to see asked at tonight’s Vice Presidential debate to some subjects that I believe deserve the very highest priority, and/or that have been thoroughly neglected so far during this campaign.

>For Vice President Mike Pence: If for whatever reason, President Trump couldn’t keep the CCP Virus under control within his own White House, why should Americans have any faith that any of his policies will bring it under control in the nation as a whole?

>For Democratic candidate Senator Kamala Harris: What exactly should be the near-term goal of U.S. virus policy? Eliminate it almost completely (as was done with polio)? Stop its spread? Slow its spread? Reduce deaths? Reduce hospitalizations? And for goals short of complete elimination, define “slow” and “reduce” in terms of numerical targets.

>For Pence: Given that the administration’s tax cuts and spending levels were greatly ballooning the federal budget deficit even before the virus struck, isn’t it ridiculous for Congressional Republicans to insist that total spending in the stimulus package remain below certain levels?

For Harris: Last month, the bipartisan Congressional Problem Solvers Caucus unveiled a compromise stimulus framework. President Trump has spoken favorably about it, while stopping short of a full endorsement. Does Vice President Biden endorse it? If so, has he asked House Speaker Nancy Pelosi to sign on? If he doesn’t endorse it, why not?

For Pence: The nation is in the middle of a major pandemic. Whatever faults the administration sees in Obamacare, is this really the time to be asking the Supreme Court to rule it un-Constitutional, and throw the entire national health care system into mass confusion?

For Harris: Would a Biden administration offer free taxpayer-financed healthcare to illegal aliens? Wouldn’t this move strongly encourage unmanageable numbers of migrants to swamp U.S. borders?

For Pence: President Trump has imposed tariffs on hundreds of billions of dollars’ worth of Chinese exports headed to U.S. markets. But U.S. investors – including government workers’ pension funds – still keep sending equally large sums into Chinese government coffers. When is the Trump administration finally going to plug this enormous hole?

For Harris: Will a Biden administration lift or reduce any of the Trump China or metals tariffs. Will it do so unconditionally? If not, what will it be seeking in return?

For both: Taiwan now manufactures the world’s most advanced semiconductors, and seems sure to maintain the lead for the foreseeable future. Does the United States now need to promise to protect Taiwan militarily in order to keep this vital defense and economic knowhow out of China’s hands?

For Pence: Since the administration has complained so loudly about activist judges over-ruling elected legislators and making laws themselves, will Mr. Trump support checking this power by proposing term limits or mandatory retirement ages for Supreme Court Justices? If not, why not?

For Harris: Don’t voters deserve to know the Biden Supreme Court-packing position before Election Day? Ditto for his position on abolishing the filibuster in the Senate.

>For Pence: The Electoral College seems to violate the maxim that each votes should count equally. Does the Trump administration favor reform? If not, why not?

>For Harris: Many Democrats argue that the Electoral College gives lightly populated, conservative and Republican-leaning states outsized political power. But why, then, was Barack Obama able to win the White House not once but twice?

>For Pence: Charges that America’s police are killing unarmed African Americans at the drop of a hat are clearly wild exaggerations. But don’t you agree that police stop African-American pedestrians and drivers much more often than whites without probable cause – a problem that has victimized even South Carolina Republican Senator Tim Scott?

For Harris: Will Biden insist that mayors and governors in cities and states like Oregon and Washington, which have been victimized by chronic antifa violence, investigate, arrest and prosecute its members and leaders immediately? And if they don’t, will he either withhold federal law enforcement aid, or launch such investigations at the federal level?

For Pence: Why should any public places in America honor Confederate figures – who were traitors to the United States? Can’t we easily avoid the “erasing history” danger by putting these monuments in museums with appropriate background material?

For Harris: Would a Biden administration support even peacefully removing from public places statues and monuments to historic figures like George Washington and Thomas Jefferson because their backgrounds included slave-holding?

For both: Shouldn’t voters know much more about the Durham Justice Department investigation of official surveillance of the Trump campaign in 2015 and 2016 before Election Day?

For both: Should the Big Tech companies be broken up on antitrust grounds?

For both: Should internet and social media platforms be permitted to censor any form of Constitutionally permitted speech?

For Pence: Doesn’t the current system of using property taxes to fund most primary and secondary public education guarantee that low-income school children will lack adequate resources?

For Harris: Aren’t such low-income students often held back educationally by non-economic factors like generations of broken families and counter-productive student behavior, as well as by inadequate school funding – as leading figures like Jesse Jackson (at least for one period) and former President Obama have claimed?

For Pence: What’s the difference between the kind of “patriotic education” the President says he supports and official propaganda?

For Harris: Would a Biden administration oppose local school districts using propagandistic material like The New York Times‘ U.S. history-focused 1619 Project for their curricula? Should federal aid to districts that keep using such materials be cut off or reduced?

Now it’s your turn, RealityChek readers! What questions would you add? And which of mine would you deep six?

Im-Politic: More Evidence That Trump Should Really be Trump

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2018 elections, African Americans, Democrats, election 2020, establishment Republicans, Im-Politic, Immigration, impeachment, Jacob Blake, Joe Biden, Joseph Simonson, Kamala Harris, Kenosha, law enforcement, Mickey Kaus, Obamacare, Open Borders, police shooting, race relations, regulations, Republican National Committee, Republicans, riots, RNC, Rust Belt, tax cuts, trade policy, Trump, Washington Examiner, white working class

Since the early months of Donald Trump’s presidency, I and many of those who backed his election have been frustrated by his frequent support for and even prioritizing of issues and positions championed by orthodox Republicans and conseratives. After all, there was little reason to believe that he won the Republican nomination, much less the White House, because he was focused laser-like on cutting taxes and regulations or eliminating Obamacare. If that’s what either Republican or overall voters wanted, then you’d think that an orthodox Republican would have wound up running against Democratic nominee Hillary Clinton – and triumphing.

One reason I came up with to explain the early burst of conservative traditionalism from Mr Trump (highlighted by a failed effort at healthcare reform and a successful full court press waged to pass the Tax Cuts and Jobs Act of 2017) was his need to make sure that the establishment wing of his party stayed with him if he faced an impeachment.

His gambit worked, but even though the impeachment threat is gone, I still hear the President talking up the tax cuts and regulation thing way too much for my tastes. So it’s more than a little interesting to have just learned that, at least according to a report last week in the Washington [D.C.] Examiner, I haven’t been alone. (Or, more accurately, I and a handful of nationalist-populist analysts like Mickey Kaus haven’t been alone.) In this article, Examiner correspondent Joseph Simonson contends that some folks connected with the Republican National Committee (RNC) came to the same conclusion in the late summer and early fall of 2018. And just as important – their analysis came just before the GOP suffered major setbacks in that year’s Congressional elections after doubling down on conventional Republicanism.

Among the highlights of the report (whose existence the RNC denies):

>”Voter data from areas such as Kenosha County, Wisconsin, [we’ll return to this astonishing coincidence below] and other exurban communities, the individual said, showed a troubling trend. Although voters there very narrowly backed Trump in 2016, President Barack Obama’s margins were in the double digits in 2008 and 2012.”

>”Unlike members of Trump’s base, who can be trusted to vote for just about any Republican candidate, these voters feel no strong affinity toward the GOP. Moreover, the interests of those who live in communities such as Kenosha differ greatly from those who live in the Philadelphia suburbs in Pennsylvania.

“These Rust Belt voters favor stronger social safety nets and hawkishness on trade, rather than typical GOP orthodoxies such as lower tax rates and an easier regulatory environment for businesses. That is not to say these voters oppose those things, but the rhetorical obsession from GOP donors and members of the party do little to excite one-time Trump voters.”

>“Back in 2018 the general response to the report from others who worked at the RNC, said one individual, was, ‘well, we have socialism’ as an attack against Democrats and boasts about their new digital voter turnout apparatus.’”

>”Steve Bannon, the former aide to the president who was indicted last week on fraud charges, had viewed the same report a year ago and concluded that the upcoming election against Biden looked like a “blow out” in the former vice president’s favor.”

But let’s get back to the Kenosha point – which of course is unusually interesting and important given the race- and police-shooting-related violence that just convulsed the small city recently. It’s also interesting and important because the alleged report’s treatment of racial issues indicates that the authors weren’t completely prescient.

Specifically, they faulted the RNC for wasting time and resources on a  “coalition building” effort aimed at “enlisting the support from black, Hispanic, and Asian voters who make only a marginal difference in the Midwest and [that] can prove potentially damaging if more likely Republicans are neglected.”

Explained one person quoted by Simonson (and possibly one of the authors): “Lots of these people at the RNC are in a state of denial. The base of the GOP are white people, and that gives the party an advantage in national elections. You could not have a voter operation in California whatsoever, and it wouldn’t make any difference, but the RNC does because they don’t want to admit those states are lost forever.” .

Yet even before the eruption of violence in Kenosha (and too many other communities), this analysis overlooked a crucial reality: There was never any reason to assume that, in the Midwest Rust Belt states so crucial to the President’s 2016 victory and yet won so narrowly, that significant portions of the African American vote couldn’t be attracted without alienating the white working class. For both blacks and whites alike in industrial communities have been harmed by the same pre-Trump trade policies strongly supported by his chief November rival Joe Biden and many other Democrats. (For one example of the impact on African Americans, see this post.) Moreover, among the biggest losers from the Open Borders-friendly immigration policies now openly championed, instead of stealthily fostered, by the Democratic Party mainstream, have been African Americans.

It’s not that the President and Republicans had to convince massive numbers of African Americans with these arguments. A few dozen thousand could be more than enough to make a big difference this fall. And there’s some polling data indicating that the strategy was working even before the opening of a Republican convention that featured numerous African American speakers.

Now of course we’re post-the Jacob Blake shooting by Kenosha police and the subsequent rioting and vigilantism. We’re also post-the Biden choice of woman-of-color Kamala Harris as his running mate. Will those developments sink the Trump outreach effort to African Americans and validate the 2018 memo’s arguments?

Certainly the Harris choice doesn’t look like a game-changer. The California Senator, you’ll remember, was decisively rejected by African American voters during the Democratic primaries. I’m less certain about the Kenosha Effect. On the one hand, Mr. Trump has expressed precious little empathy for black victims of police shootings. On the other hand, he has villified the rioting and looting that are destroying the businesses – including African-American-owned – relied on by many urban black neighborhoods in cities that have long stagnated, at best, under Democratic Mayors. And this poll I highlighted a few weeks ago presents significant evidence that most African Americans have no interest in fewer police on the streets where they live.

It’s not hard to imagine a Trump campaign message developing over the next two months that strikes a much better balance. And an early test case looks set for tomorrow with the President’s planned visit to Kenosha. Somewhat harder to imagine is Mr. Trump significantly downplaying issues like tax and regulatory cuts, and ending Obamacare. As for his priorities if he wins reelection? At this point, the evidence is so mixed that I feel clueless. So stay tuned!

Im-Politic: Signs of Hopeless Division or Potential Unity?

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Affordable Care Act, Democrats, election 2020, Gallup, healthcare, Im-Politic, Immigration, independents, Obamacare, Republicans, Trump

Polls like today’s Gallup survey that try to assess what national issues and problems are foremost in American’s minds are terrifically valuable, especially as big elections like the 2020 presidential race approach. Trouble is, Democrats and Republicans and independents of all kinds will struggle to find clear trends marked out in this morning’s survey, much less derive strong comfort from it.

The difficulties start with Gallup’s overall findings about how high various major issues rank on the public’s priority scale. Competing fiercely for the top spot, and mentioned more than twice as often as the next concerns, are “The government/poor leadership” (cited by 23 percent of respondents – in this case, “US adults”) and “Immigration” (cited by 21 percent). And to be more specific, the government/leadership option offered by Gallup included “Congress” and “politicians,” not simply the President. “Immigration” wasn’t further elaborated on.

In principle, some more light might be shed on who could benefit most from this poor government finding by examining the trends over time. But as the chart below shows, although the importance of the overall government issue began rising notably right after the last presidential election (indicating that President Trump is causing most of the anxiety), the ranking became unusually volatile in the middle of last year, and has stayed that way – including through 2019. This year, of course, has seen an unpopular partial federal government shutdown most often blamed on Mr. Trump, rising levels of partisan rancor, and the climax (for now) of the Russia scandals investigation. On the whole, though, it seems reasonable to conclude that this issue is cutting somewhat against the President.

Some evidence to the contrary, however, comes from the current separate figures for Democrats, Republicans, and independents. Democrats express the most concern about the quality of government and leadership, with 32 percent pegging it as the country’s top problem. But although only 21 percent of Republicans chose this option, that result was much closer to that of independents (19 percent) than the Democrats figure. Both independents and especially Republicans are much likelier than the Democrats to blame government failings on the Democrats who now control the House of Representatives, and therefore wield much more power in Washington than during Mr. Trump’s first two years in office.

Using these criteria, the Gallup immigration findings look even more promising for Mr. Trump. It’s true that using that single noun to describe the issue masks the distinction between respondents who consider current U.S. policy too restrictive or not restrictive enough.

But assuming – not too controversially – that Republicans favor more immigration curbs, Democrats fewer, and independents as a group coming down somewhere in the middle, it seems apparent that immigration-motivated Americans are likelier to be Republican and Trump voters. Indeed, only five percent of Democrats view immigration as the country’s biggest problem today, versus 18 percent of independents and 41 percent of Republicans.

As for the rest of the issues mentioned in the Gallup survey, the responses seem to offer hope for both parties. Relatively little concern is expressed about matters such as the economy in general, unemployment and jobs, poverty, and inequality – which looks like good news for Republicans and for the President, since these results clearly signal satisfaction with the so-called pocketbook issues. Ditto for the measly three percent figure recorded for climate change and other environmental issues combined, and the failure of gun violence even to make it into the rankings.

At the same time, Democrats should feel pretty pleased that “Ethics/Moral/Religious/Family decline” alarmed only three percent of respondents, and “Crime/Violence” topped the list for only two percent.

The most puzzling message sent by the Gallup results concerns healthcare – which, it’s widely agreed, helped the Democrats greatly during last year’s midterm elections, and could be a winner for them again in 2020, especially if Mr. Trump continues his war on Obamacare.

The seven percent of the public naming healthcare as the country’s biggest problem resulted in the third highest such score (behind “The government/Poor leadership” and immigration). But especially given its enormous importance for so many families’ finances no matter how the Obamacare fight turns out – and potentially into the future if the White House and both houses of Congress are won by Democrats seeking to expand coverage dramatically – seven percent is hardly astronomical.

But how should this number be interpreted? If it signals overwhelming satisfaction with the status quo, however uncertain its durability is Republicans could benefit – but probably only if they make clear that they won’t go for major change, either. Since Obamacare (officially known as the Affordable Care Act) has shaped the status quo, Democrats in principle could take heart – particularly if their most ambitious ideas on this front fall by the wayside.

And here’s the partisan split (which I don’t think undermines the above analysis): Healthcare is seen as America’s leading problem by three percent of Republicans, seven percent of independents, and 14 percent of Democrats.

This Gallup poll’s findings that so many different and even clashing concerns are troubling Americans these days – and in so many possibly different ways – could understandably be seen as evidence that Americans are hopelessly far from agreeing on national priorities. I prefer a more optimistic take: There’s a new winning consensus and lasting political realignment in the making if only the nation’s political leaders could break out of their ideological straitjackets and build it.

Im-Politic: After Mueller/Barr, Can Trump Be Trump?

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America First, Attorney General, Betsy de, budgets, conservatism, conservatives, establishment Republicans, foreign policy, globalism, healthcare, Im-Politic, Immigration, impeachment, Kevin McCarthy, Obamacare, Populism, Republicans, Robert Mueller, Ross Douthat, seasonal workers, Special Counsel, Special Olympics, tax cuts, The New York Times, Trade, Trump, Trump-Russia, visas, William P. Barr

A week ago, I posted on the likely political impact of the end of Special Counsel Robert Mueller’s investigation of what have become known as the Trump-Russia scandals and of the release of Attorney General William P. Barr’s summary of its principal conclusions – which appear to put these charges and the threat of presidential impeachment they created behind Mr. Trump.

Now it’s time to think about a related and at least equally important subject: the policy effects. They could be profound enough to redefine the Trump presidency and the chief executive’s chances for reelection – even though the early indications seem to be saying exactly the opposite in ways that are sure to disappoint much of Mr. Trump’s political base. Here’s what I mean.

Ever since his administration’s opening months, I’ve believed that Mr. Trump’s policy choices have been strongly influenced by impeachment fears. Specifically, (and I have zero first-hand knowledge here) because President Trump feared that the Democrats and many mainstream Republicans were after his scalp, he concluded that he needed to appease his remaining allies in the latter’s ranks with policy initiatives they’ve long supported even though they broke with his own much less conventional and more populist campaign promises. 

In other words, it was the Russia and related scandal charges that were preventing “Trump from being Trump.”  

Moreover, this reasoning makes sense even if the President was certain that he faced no legal jeopardy. For impeachment ultimately is a political process, and although establishing criminal guilt is clearly helpful, it’s not essential.

The main evidence for my proposition has been the early Trump decision to prioritize Obamacare repeal over trade policy overhaul and infrastructure building; his almost libertarian-like initial budget proposal (at least when it comes to non-defense discretionary federal pending); his business-heavy tax cut; and numerous foreign policy moves that more closely resembled the globalist approaches he decried while running for the White House than the America First strategy his promised.

But although President Trump now seems certain to finish out his first term in office, he still seems to be currying favor with the Republican establishment. Just look at his latest budget proposal, and decision to go after Obamacare again – the healthcare move reportedly made despite the pleas of establishment Republicans like House GOP Leader Kevin McCarthy to move on from an issue now stamped as a major loser politically and threat to the party’s 2020 election prospects across the board.

It’s true that many of Mr. Trump’s trade and immigration policies still clash with the donor-driven agenda of the Republican establishment, and especially the party’s Congressional leaders. But even on these signature issues, the President arguably could be breaking even more sharply with the longstanding Republican and conservative traditions.

For example, Mr. Trump continues to keep suspended his threat of higher tariffs on many imports from China in apparent hopes of reaching a successful trade deal even though Beijing still seems determined to avoid significant concessions on “structural issues” (like intellectual property theft and technology extortion) and on enforcement.

On immigration, the President has just raised the 2019 cap on visas for unskilled largely seasonal foreign guest workers to levels never reached even during the Obama years. His administration also has permitted visas for farm workers to hit record levels and done little to stem the growth of work permits for foreign graduates of U.S. college and universities that critics charge suppress wages for high skill native-born workers.

One intriguing explanation for this continuing policy schizophrenia comes from New York Times columnist Ross Douthat. In a piece this past weekend, Douthat made the case that, although President Trump’s actual record has been largely heretical in mainstream conservative terms, when it comes to staffing (and especially key staff positions)

“there are effectively two Trump presidencies. One offers something like what the president promised on the campaign trail — a break with Paul Ryan’s green-eyeshade approach to entitlement reform, a more moderate tack on health care, an indifference to Obama-era conservative orthodoxies on fiscal and monetary policy.

“The other offers a continuation of the Tea Party’s insistence on spending cuts and Obamacare repeal, and appropriately its present leader is a former Tea Party congressman — Mick Mulvaney, the Zelig of the administration, whose zeal is apparently the main reason that the Obamacare lawsuit now has administration support.”

And the main reason for this confusing mix? The President has relied “on personnel who are associated with 2010-era G.O.P. orthodoxy, rather than elevating the kind of conservatives who have actively theorized for a more populist right.”

It’s so hard to argue with Douthat’s facts that I won’t. But they still leave the main puzzle unexplained – why so many of the President’s personnel picks have been so un-Trumpian. And much of the answer points to a problem that was clear to me ever since Mr. Trump’s presidential candidacy achieved critical mass and momentum, and that doesn’t seem solvable for the foreseeable future.

Specifically, as I’ve previously noted, conservative populists (I’m never been thrilled with this description of “Trumpism,” but for the time being it’s convenient) have never created the institutions and therefore cohorts of first-rate policy specialists remotely capable of staffing a conservative populist administration. Even if you want to identify immigration as an exception – where organizations like the Center for Immigration Studies put out top-flight studies – it’s clear that nothing of the kind has ever existed on the trade and foreign policy fronts.

And even worse, because of the long lead-times needed to achieve these goals, Mr. Trump appears doomed to dealing with shortages of competent true-believers as far as the eye can see. In fact, he’ll face a special challenge in the next few months, as the second halves of first presidential terms tend to see the departures of many early, often burned out appointees. And of course, the Trump presidency has already experienced much more than its share of turnover.

So I’m expecting an indefinite continuation of the eye-popping sequence of events of the previous week – in which Trump Education Secretary Betsy deVos announced an end to federal funding of the popular Special Olympics program, a public outcry ensued, and the President abruptly reversed her decision.

It’s hard to imagine that this kind of zigging and zagging can win President Trump reelection. But it’s also conceivable that the post-impeachment situation will “Let Trump be Trump” just enough – especially if the Democrats err in picking an overall strategy for opposing him.  After all, nothing has been more common in recent American political history than completely off-base predictions of Mr. Trump’s demise.

Im-Politic: Will Trump Let Trump be Trump on Issues?

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Congress, conservatism, conservatives, Democrats, deregulation, establishment, Im-Politic, infrastructure, John McCain, Marco Rubio, midterm elections, Nancy Pelosi, Obamacare, Populism, regulation, Republicans, tax cuts, Trade, Trump

Ever since Donald Trump made clear his staying power in presidential politics, his more populist supporters have tried to beat back efforts of more establishment-oriented backers to “normalize” him by insisting that they “Let Trump be Trump.” The results of Tuesday’s midterm elections tell me that the populists’ arguments on substance (as opposed to the President’s penchant for inflammatory and/or vulgar rhetoric) are stronger than ever, but that the obstacles that they’ve faced remain formidable.

The “Let Trump” argument contends that the President’s best hope to attract the most voters has always been his willingness to reject positions that for decades have been conservative and Republican hallmarks, but that have become increasingly unpopular outside the realms of most national GOP office-holders, other Washington, D.C.-based professional Republicans and conservatives, and the donors so largely responsible for their power, influence, and affluence. These maverick Trump positions have included not only trade and immigration; but the role of government and the related issues of entitlements, healthcare, and infrastructure spending; and Wall Street reform.

But since his election, as I’ve argued, Mr. Trump’s willingness to embrace the full maverick agenda has been blunted by his vulnerability on the scandals front. Specifically, he’s seemed so worried about impeachment threats from Democrats that he’s been forced to shore up his support with the conventional Republicans that dominate the party’s ranks in Congress. Why else, I’ve written, would his first two years in office have so prominently featured strong support for right-of-center standbys like major tax and federal discretionary spending cuts; curbs on regulation; repeal of Obamacare; and bigger military budgets, rather than, say a massive push to repair and retool America’s aging or simply outdated transportation, communications, energy, and other networks?

It’s true that Trump remained firmly in (bipartisan) populist mode on trade (notably, withdrawing from the Trans-Pacific Partnership agreement and slapping tariffs on metals imports and many Chinese-made products), and just as firmly in (conservative) populist mode with various administrative measures and proposals to limit and/or transform the makeup of legal immigration – though many of his most ardent backers accuse him of punting on his campaign promise to build a Border Wall.

Yet this Trump populism strongly reflected the views of the Republican base – a development now not lost on conventional conservatives when it comes to immigration, even though they’ve been slow to recognize the big shift among Republican voters against standard free trade policies. By contrast, the President has apparently feared that Congressional Republicans would draw the line on the rest of their traditional agenda – or at least that he could curry favor with them by pushing it.

The midterm results, however, might have brought these political calculations to a turning point. On the one hand, there’s no doubt that most House and Senate Republicans, along with the donors and most of the party’s D.C.-based establishment, are still all-in on their tax, spending, regulatory, and Obamacare positions.

On the other hand, according to the exit polls and other surveys, the tax cuts didn’t even greatly impress Republican voters (let alone independents). And most Americans aren’t willing to risk losing Obamacare benefits they already enjoy (especially coverage for pre-existing medical conditions) by supporting Republican replacement ideas that may be less generous.

The message being sent by all of the above trends and situations is that President Trump may have even more latitude than he’s recognized to cut deals with Democrats. At the same time, the Democrats’ capture of the House of Representatives on Tuesday and signs that they’ll ramp up the scandal investigations could keep preventing him from “being Trump” on such issues and possibly antagonize most Republican lawmakers.

Of course, my political neck isn’t on the line here. But I’d advise Mr. Trump to follow his more unconventional instincts. The Congressional Republicans still uncomfortable with him ideologically must be aware that his personal popularity with GOP supporters has grown significantly since mid-2017, and that this surge owes almost nothing to their own priorities. So if they don’t help staunchly resist any intensified Democratic probes, their political futures could look pretty dicey, too.

One big sign that ever more establishment Republicans are getting “woke” on the obsolescence of much establishment conservatism: the efforts by long-time mainstream conservative/Republican favorites like Senator Marco Rubio of Florida to develop a Trump-ian agenda that can survive Mr. Trump’s presidency. Further, resistance in Washington to their efforts is likely to continue weakening, since so many of the President’s ideological opponents on the Republican side are leaving the House and Senate. (And of course, their spiritual leader, veteran Arizona Senator and 2008 Republican presidential nominee John McCain recently passed away.)

To be sure, Mr. Trump yesterday (rhetorically, anyway) erected his own obstacle to deal-cutting – his declaration that he won’t be receptive if investigations persist and broaden. House Democratic leader (and still favorite to become Speaker again) Nancy Pelosi has pretty clearly, however, signaled that she herself is not impeachment-obsessed, even if those exit polls say most of the Democratic base is.

As a result, I can’t entirely blame the President for still feeling spooked by the Democrats – at least this week. But what an irony if the most important opponent “letting Trump be Trump-ism” – whose broad popularity could well combine with the advantages of incumbency to outflank the Democrats, win the President a second term, and pave the way for a truly earth-shaking, lasting realignment of American politics – turned out to be President Trump himself.

Im-Politic: Want to Really Fuel Big Government? Ditch Trump’s Trade Policies

Tags

Affordable Care Act, big government, budget cuts, Congress, conservatives, discretionary spending, entitlement spending, healthcare, Im-Politic, industrial policy, Mick Mulvaney, Obamacare, Republicans, Trade, Trump, USAToday

USA Today‘s editorial yesterday on U.S. trade policy did an excellent job of stating a major objection to tariffs and other measures that interfere with international commerce – and one that understandably resonates strongly in a nation that prizes free market values, and especially among its conservatives: These trade curbs fuel Big Government, thereby preventing the economy from achieving its full potential, and harming the nation’s society and culture as well as the economy by sapping the attractiveness of individual initiative.

The essay also understandably focused on a development that looks like a poster child for trade-fostered Big Government – the process set up by the Trump administration to decide which companies will receive exemptions from recent metals tariffs, based on claims that adequate domestic substitute steel and aluminum products aren’t available.

In the words of the editorial writers:

“[T]he administration has imposed a new tax on imported metals and then put itself in a position to decide who has to pay it and who does not.

“This is Big Government at its worst — arbitrary and capricious, if not outright political, as it picks winners and losers in business. And all this is being done without any new law being passed and while a Republican Congress, which used to stand for free enterprise and limited government, remains supine.”

One obvious rejoinder is the observation that, however cumbersome the exemptions process may or may not be, Washington actually has an impressive historical record of “picking winners and losers in business.” Examples include the information technology hardware and software industries, which were practically launched with public (largely Pentagon sponsored) research and development funds, and critically nurtured by government (again, largely defense-supplied) markets; the world-class farming sector fostered by U.S. Department of Agriculture research findings; the equally world-class pharmaceutical industry aided by the National Institutes of Health; and an aviation and aerospace industry supported by the Defense Department, by the National Aeronautics and Space Administration, and by a NASA predecessor aeronautic agency. (For an excellent summary of this historical record, see this study from the National Academies of Science.) 

But there’s another vital point missed by USAToday and by conservatives who remain devoted to preserving or renewing the expansion of the existing free trade realm: If they succeed, they’re likely to see the kind of Big Government metastasis America has never experienced before. The reason? So many renumerative Americans jobs will be lost, and so much income destroyed, that political pressures for a much more generous welfare state will positively skyrocket.

Another favorite cause of newspaper editorialists like the USAToday writers and many Big Government-phobic conservatives – the return of mass immigration – will bring the same type of outcome, for many of the same reasons.

And if you think that the nation’s leaders will unite to uphold the causes of self-reliance and much smaller government, you weren’t paying attention to the recent fight over abolishing “Obamacare.” For better or worse, the national healthcare system created at the initiative of the former President remains largely in place even though its Republican opponents control the entire federal government and a huge majority of state governments because lots of these Republican politicians recognized that eliminating this latest entitlement would be political suicide.

At the same time, standard-issue conservatives aren’t the only Americans who may need to learn these lessons. Donald Trump belongs on this list, too. Interestingly, he won the presidency after running a campaign that both promised an Americans-First overhaul of trade policy and to protect the nation’s immense middle class entitlement programs – both of which clashed strongly with conservative dogma.

But his biggest first-year push as President involved going after Obamacare – well before he had achieved any of his trade policy goals, and before he even began pursuing them energetically. And he’s so far permitted his budget director, former Tea Party stalwart Mick Mulvaney, to propose numerous deep cuts in discretionary spending and even some entitlement spending that aren’t exactly middle class-friendly, either.

This set of priorities may have been unavoidable politically, reflecting Mr. Trump’s perceived need to establish some conservative bona fides with Congressional Republicans – who mainly still strongly support the party’s old orthodoxy, but whose staunch backing he would need in any impeachment proceedings.

At the same time, a fair number of those donors-friendly, offshoring-happy Congressional Republicans are retiring – largely because they recognize that Trump-ian trade and other unorthodox policies have won over the base. And although Democratic hardliners may indeed push successfully for impeachment proceedings if the party wins the House, it’s likely that, in the absence of a major smoking gun, this campaign could alienate independent voters – who are hardly gung ho to give Mr. Trump the heave-ho. Chances are they’d be even less receptive to an impeachment spectacle dominating Washington if the President distanced himself from meat-axe public spending cuts.

If this scenario unfolds, the loudest voices complaining that Trump-ian trade policies lead to Big Government could be mainstream media editorialists and pundits. But these voices would be less important than ever.

Following Up: Healthcare’s Outsized Job Creation Reported in The New York Times

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Affordable Care Act, Chad Terhune, Employment, Following Up, healthcare, healthcare services, Jobs, Obamacare, private sector, productivity, subsidized private sector, The New York Times, Trump

Well this is pretty cool! A new New York Times op-ed piece has spotlighted a trend that RealityChek has long covered: how strongly the creation of healthcare services employment has dominated recent American job creation, and how this trend has been especially noteworthy since the financial crisis and Great Recession broke out nearly a decade ago.

At the same time, author Chad Terhune, who reports on the healthcare industry for Kaiser Health News and the California Health Care Foundation, explains a major dilemma being created by outsized healthcare job creation for the Trump administration: Because so many of the new jobs in the sector have been driven by the build-out of Obamacare, the president’ promise to abolish this vast new structure could endanger his broader promise to jump-start feeble U.S. economic growth and stagnating incomes.

Even worse, according to Terhune, any effort to make healthcare more affordable, or even keep it at its current affordability levels, will significantly weaken the healthcare job-creation engine.

As the author sees it, healthcare hiring got a major boost “as coverage expanded in 2014 under the [Affordable Care Act] and new federal dollars flowed in. The law gave hospitals, universities and companies even more reason to invest in new facilities and staff. Training programs sprang up to fill the growing job pool. Cities welcomed the development — and the revenue.”

Sharpening the healthcare jobs conundrum faced by the president: “rising health spending has been good for some economically distressed parts of the country, many of which voted for Mr. Trump last year.” And Terhune cites specific examples from West Virginia to Pennsylvania to Ohio and Missouri.

Just as important, the author convincingly shows that American healthcare’s success in creating employment – which clearly predates Obamacare’s passage – also largely explains its inefficiency. In Terhune’s words, because of the system’s

“redundancy, inefficiency and a growing number of jobs far removed from patient care….[l]abor accounts for more than half of the $3.4 trillion spent on American health care, and medical professionals like health aides and nurse practitioners are in high demand. But the sheer complexity of the system has also spawned jobs for legions of data-entry clerks, revenue-cycle analysts and medical billing coders who must decipher arcane rules to mine money from human ills.”

And although Terhune doesn’t make the point explicitly, this labor-intensivity means that the sector of the economy fueling so much of its output and hiring is pathetically unproductive. In other words, the more outsized growth and employment healthcare creates, the less able the entire economy will be to raise living standards on a sustainable basis.

Moreover, one big reason for this low productivity is a feature of the healthcare system – both under Obamacare and before it – not mentioned by Terhune, either, but that’s vital to recognize: As I’ve observed, although this gigantic industry is officially (and no doubt popularly) considered a part of the private sector, its scale owes largely to subsidies from the public sector, which is renowned for low productivity.

As always, RealityChek readers – and others – need to understand that placing healthcare (and similar industries, like the for-profit educational system and social assistance agencies) outside the “real private sector” is not the same as questioning its fundamental value. After all, no truly civilized society would ever reduce public policy to a quest for productivity to the exclusion of all other goals, whether economic or non-economic. Moreover, as some readers have alertly pointed out, the steady aging of the American population is bound to mean continued healthcare sector growth.

But Terhune’s article is a badly needed reminder that the economy’s heavy reliance on the current healthcare system’s employment power has major downsides. As its title indicates, it’s a “costly addiction,” and its price is bound to rise without a major overhaul of some kind.

Im-Politic: Did Trump (and Trump-ism) Really Lose Big in the Healthcare Fight?

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border adjustment tax, Congress, conservatives, Freedom Caucus, healthcare, Im-Politic, Immigration, infrastructure, Obama, Obamacare, Paul Ryan, Peggy Noonan, Republicans, RyanCare, tax reform, Tea Party, The Wall Street Journal, Trade, Trump

The list of realities, considerations, factors – call them what you will – that President Trump either forgot or overlooked as he pushed for House passage of the Republican healthcare bill is long, impressive, and pretty obvious according to the Washington, D.C. conventional political wisdom. On the off chance you haven’t heard it or read it, it includes the difference between cutting deals among real estate tycoons and negotiating with ideological politicians; his own voters’ tendency to rely heavily on the kind of government healthcare aid that the GOP legislation either eliminated or sharply curbed; the powerful vested stake developed after years or working with it in the current healthcare system – however troubled it might be – by major participants in the system; and the dangers to Mr. Trump’s own credibility and political power of choosing to tackle first a highly contentious subject (like healthcare) instead of a priority that’s reasonably uncontroversial (like infrastructure spending).

All those points seem valid to me, but I would add two more that seem at least equally important. Then I’ll present an interpretation of the healthcare story that hasn’t appeared anywhere else yet but that shouldn’t be overlooked – if only because it ties the otherwise puzzling story together in ways that are admittedly byzantine, but that make eminent sense in a Machiavellian (and therefore quintessentially political) way. In fact, this analysis dovetails exceptionally well with the president’s clear (to me, certainly) determination to remake American politics by rejecting the doctrinaire conservatism embodied by the Republican party for decades, and thereby increasing its appeal to independents and moderates.

The first such consideration that should be added to the overlooked list: how much more difficult it is both politically and substantively to take away government assistance used by economically stressed Americans (like those who backed Trump in droves) than it is to enable them to thrive without the assistance via other major planks of the Trump platform – chiefly immigration and trade policy overhaul.

One of the secrets of Trump’s success, after all, was his recognition that vast numbers of working and middle class Americans no longer buy the mainstream Republican argument that they could greatly increase their economic self-reliance through the wealth that would trickle down to them through shrinking taxes and government. He understood that this promise would always ring false as long as so many good jobs and so much income were being sent to foreigners through offshoring-friendly trade policies and mass immigration.

So it’s easy to understand why the Republican healthcare legislation registered so little support from even Republican voters – no doubt including many Trump backers. He seemed to be putting the cart before the horse not when it came to the kinds of government programs touted by liberals that Trump-ites viewed as bupkis, but with a program that had become central to their lives. (For a terrific analysis of Main Street views of healthcare at the usually ignored gut level, see this column by The Wall Street Journal‘s Peggy Noonan.)

The second neglected consideration flows directly from the first: President Trump’s election shows that the Republican party has moved significantly in his more populist and particularly less ideological direction, if not at the interlocking think tank/donors/Congressional level, at the far more important voter level. As a result, there was no apparent reason for Mr. Trump to defer to the more ideological Congressional Republicans on the healthcare front.

More specifically, even though the national party’s leadership did indeed treat Obamacare repeal and replacement as a defining principle and promise to its grassroots, and even though candidate Trump expressed strong opposition to his predecessors’ signature achievement, healthcare was never the defining principle of the maverick movement he led. That’s why he so frequently spoke of achieving healthcare goals that have been so widely rejected in Republican and conservative and leadership circles, like ensuring universal coverage.

So why did the president lead off his legislative agenda with orthodox Republican-style healthcare reform? Here’s where the story gets Machiavellian to me – but in ways that should be entirely plausible to anyone familiar with how successful political strategists think. Further, it’s a narrative that fully takes into account the hyper-partisan nature of Washington and legislative politics with which Mr. Trump needs to deal. And it goes like this.

The president recognizes that even though he’s remade much of the Republican base in his own image on the issues level, he also must realize that the Washington Republicans – which include the party’s mainstream conservative Congressional leaders and its more ideological Tea Party wing – remain hostile on the highest profile matters on his own agenda. I imagine he also recognizes that they might be powerful enough to undermine his initiatives on trade, immigration, and/or infrastructure – especially if Democratic leaders remain in their adamant “resistance” mode.

For even if Democrats are ultimately winnable on trade and infrastructure, they have no interest even in these areas in giving the president the kind of quick victory that would greatly strengthen the odds of turning his first term of office into a success that would boost the odds of his reelection. They have even less interest in helping Mr. Trump further strengthen his appeal to many of big Democratic constituencies.

So the Washington Republicans needed to be at least neutralized – and sooner rather than later. And appearing to fight the good fight for their healthcare reform proposal was an ideal way to demonstrate his loyalty to their objectives and strengthen his case for demanding concessions from them in return in areas he valued much more highly. This calculation looks especially shrewd since the Republican bill was so draconian that even had it squeezed through the House, the Senate was bound to prevent its reaching his desk in anything like its current form.

As a result, now that the “RyanCare” legislation is dead, Mr. Trump can say to both the House Republican leaders and even to the hard-line Freedom Caucus something to the effect, “We tried it your way, I carried lots of your water, and I paid a noticeable price. Now we drop the healthcare effort, pivot to my priorities, and I expect your votes, even if you won’t pull front-line duty. And when we do address healthcare as Obamacare’s failures multiply, you’re going to do right by your own constituents and drop the free market extremism. P.S. Anyone remaining obstructionist comes into my social media cross-hairs with your reelection bids coming up.”

I have no inside information here, and my reasoning could certainly be too clever by half. Moreover, one of the most important lessons I’ve learned in my professional life is that just because an analysis seems logical or commonsensical, doesn’t mean that it’s true. But even though it’s only about a day since the healthcare bill was pulled from a scheduled floor vote for the second and final time, I derive some satisfaction in seeing the president is making nice with both House Speaker Paul Ryan and the Freedom Caucus members, and making clear that it’s tax reform time (which could bring a tariff-like border adjustment tax). Which could mean that Donald Trump’s presidency is highly conventional in at least one respect – temptations to dismiss it as a failure should be strongly resisted.  

Im-Politic: Americans are Far from Bitterly Divided on Everything

Tags

Affordable Care Act, border wall, climate change, criminal illegal immigrants, Democrats, deportations, Gallup, illegal immigration, Im-Politic, infrastructure, Mexico, Obamacare, polls, regulations, Republicans, tariffs, taxes, TPP, Trade, Trans-Pacific Partnership, United Nations

America today is deeply divided on the new Trump presidency and many substantive issues. But the message sent by a new Gallup poll is that there’s considerable consensus when it comes to identifying the nation’s major challenges. And although polls have recently gotten a deserved black eye over their election performance, this fundamental finding tracks intriguingly with that reported (by a different organization) that I wrote about a little over a year ago.

Gallup sought Americans’ views on which of President Trump’s campaign promises they believe that it’s “very important” for him to keep. Here are the top four – which were also the only choices that topped 50 percent:

>”Enact a major spending program to strengthen infrastructure” 69 percent

>”Reduce income taxes for all Americans” 54 percent

>”Establish tariffs on foreign imports” 51 percent

>”Deport the more than 2 million illegal immigrants who have

    committed crimes” 51 percent

At least as interesting, three of these four stated Trump priorities enjoy strong bipartisan support:

>infrastructure: 68 percent of Democrats, 71 percent of Republicans

>tax cuts: 46 percent of Democrats, 62 percent of Republicans

>tariffs: 45 percent of Democrats, 62 percent of Republicans

The exception – interestingly – is

>deport criminal illegal immigrants: 33 percent of Democrats, 70 percent of         Republicans

Now here are the Trump priorities that Gallup found Americans regard as least important (note – which does mean that they oppose them):

>”Cancel billions in payments to UN climate change program” 30 percent

>”Withdraw from the Trans-Pacific Partnership” 26 percent

>”Build a wall along the border with Mexico” 26 percent

>”Require that for each new federal regulation, two must be

    eliminated” 23 percent

Just FYI, the administration has already announced officially that it’s pulling out of the Pacific trade deal.

And guess what? There’s a great deal of bipartisan consensus on the relative unimportance of these matters, too:

>UN climate change payments: 23 percent of Democrats, 38 percent of Republicans

>Trans-Pacific Partnership: 19 percent of Democrats, 32 percent of Republicans

>border wall: 12 percent of Democrats, 38 percent of Republicans

>regulations: 14 percent of Democrats, 31 percent of Republicans

Finally, I couldn’t help but notice that the most divisive Trump priorities, according to Gallup, are the aforementioned deportations of criminal illegal immigrants and…repealing Obamacare. A total of 46 percent of Americans told Gallup this move was “very important,” but although 68 percent of Republicans were on board with scrapping the Affordable Care Act quickly, only 26 percent of Democrats agreed.

I know that the president has his own pollsters – and of course his own opinions. But I wouldn’t be entirely surprised if their list of top White House priorities didn’t wasn’t very similar to those identified by Gallup as the public’s. Nor would I be surprised if achieving these goals – and softpedaling many of the others – made for a great first 100 days.