(What’s Left of) Our Economy: The World Trade Organization Unmasked

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Chad Bown, China, Foreign Affairs, Keith Bradsher, multinational companies, Peterson Institute for International Economics, Ronald Reagan, Section 301, The New York Times, Trade, trade law, Trump, World Trade Organization, WTO, {What's Left of) Our Economy

It isn’t every day that Washington’s offshoring-happy economic policy establishment reveals one of its dirtiest secrets in public (unwittingly, of course!). So anyone – and especially U.S. political leaders – with any interest at all in trade, globalization, manufacturing, employment, and related issues (e.g., the economy, getting re-elected) urgently needs to read the final paragraphs of Tuesday’s New York Times article reporting that President Trump will soon greatly ramp up trade pressure on China.

But it’s vital to read the passage intelligently, because the point is made in in the kind of Washington-speak intended to conceal its real meaning.

As Times reporter Keith Bradsher wrote, a key feature of Mr. Trump’s alleged new China strategy will be the use of a provision of America’s national trade law system called “Section 301.” It’s a provision that grants a president broad authority to respond with punitive tariffs to foreign trade practices considered to be damaging the U.S. economy in “unfair” ways, and to respond pretty quickly. (It’s still not nearly quick enough for me, but that’s a separate issue.) And as he made clear, it’s a trade law provision with a noteworthy history. In Bradsher’s words:

“The United States used Section 301 energetically against other countries during the Reagan administration and the administration of President George Bush. Mr. Lighthizer [the current chief U.S. Trade negotiator] was a deputy United States trade representative in the Reagan administration and has been an advocate of shielding the American industrial base from government-assisted foreign competitors.

“But the cases then thoroughly antagonized America’s trading partners.

“‘It was really the aggressive uses of this in the late 1980s and early 1990s that prompted the rest of the world to set up the dispute resolution system’ of the World Trade Organization [WTO], said Chad P. Bown, a senior fellow at the Peterson Institute for International Economics here.”

Bown – whose Peterson Institute home is heavily funded by the offshoring lobby – no doubt meant his statement to reinforce the standard establishment description of and rationale for the WTO-centered world trade system that’s been in existence for the last quarter century. That is, the international economy had too long operated on a law of the jungle basis that bred continual and dangerous conflict, and that in an act of enlightened self-interest, the world’s economies recognized these perils and created a global trade court that would mete out justice according to objective legal standards and thereby serve every countries’ long-term interests.

In fact, Bown wound up confirming a very different description of the WTO and the motives behind its creation that I have advanced since it was first proposed: It’s an arrangement supported by America’s trade partners in order to prevent the United States from using its matchless market power to promote and defend its legitimate international economic interests. P.S. – because U.S.-based multinational companies supply the American market from so many overseas factories, undercutting Washington’s unilateral power to restrict imports mattered crucially to them, too.

For the Reagan-era uses of Section 301 cases that Bown (and Bradsher) mention were noteworthy not mainly because they were “energetic” or “aggressive”. (Unless you view most of America’s trade partners as snowflakes or strong champions of the rule of law.) These 301 uses were noteworthy because they worked. All the evidence is contained in this article I published in Foreign Affairs in 1994. And as Bown made clear, this success was completely unacceptable to “the rest of the world” – most of which, like China, relies heavily on selling to America in order to grow and develop satisfactorily. As a result, these economies, along with the multinationals, became convinced that handcuffing the United States was essential. And official Washington dutifully went along.

Although Section 301 is still on the books, it’s been U.S. policy under Democratic and Republican presidents alike to avoid it in favor of WTO procedures (just as most foreign governments, including allies, and the multinational companies want). And legally speaking (a term I use advisedly when it comes to the WTO and international law generally), that approach seems to dovetail with WTO rules.

But the Trump administration appears to be considering the contention that the United States retains the unfettered authority to use 301 at least in certain instances. The administration further seems confident that, whether it’s right or wrong on the law, the WTO membership collectively will shrink from a frontal challenge for fear of completely destroying a dispute-resolution system that still might serve its interests well going forward – at least much of the time. 

Nevertheless, the reports of a Trump course change on China trade – which could eventually be broadened – are still just reports. All that’s certain now is that, if they’re accurate, the president will wind up showing the his own compatriots and the rest of the world what a real America-First trade policy would look like.

 

Im-Politic: How I Scooped The Times on Trump and Nationalism 25 Years Ago

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America First, Democrats, elites, environmentalists, foreign policy, globalism, globalization, Im-Politic, Immigration, internationalism, interventionism, middle class, minoriites, nationalism, politics, Populism, Republicans, sovereignty, The National Interest, The New York Times, Thomas Edsall, Trade, Trump, working class

However conceited it sounds, it really is time – again – 🙂 to pat myself on the back. This morning’s New York Times featured a long analysis by contributor Thomas Edsall titled “The End of Left and Right as We Knew Them.” The main thesis (as per a quote from the director of the “International Institutions and Global Governance Program” at the Council on Foreign Relations):

“The most salient political division today is not between conservatives and liberals in the United States or social democrats in the United Kingdom and France, but between nationalists and globalists.”

Edsall himself elaborates:

“By now it has become quite clear that conservative parties in Europe and the United States have been gaining strength from white voters who have been mobilized around issues related to nationalism — resistance to open borders and to third-world immigration. … On the liberal side, the Democratic Party and the center-left European parties have been allied in favor of globalization, if we define globalization as receptivity to open borders, the expansion of local and nationalistic perspectives and support for a less rigid social order and for liberal cultural, immigration and trade policies.”

Moreover, at the heart of these new divisions are class distinctions: The nationalists on both sides of the Atlantic are likeliest to be relatively poor and relatively uneducated – although Edsall does present research findings showing – unconvincingly in my view – that classic “racial resentment, more than economic anxiety, influenced the [U.S.} presidential election.”

Yet the author also unmistakably believes that the left “In recent decades…both in Europe and in the United States [has] begun to include and reflect the views of large numbers of well-educated elites — relatively affluent knowledge or creative class workers….” Indeed, he coins a nice phrase: “The rise of the affluent left.”

So what does this have to do with yours truly? Plenty. Because nearly 25 years ago, I predicted the development of exactly the same trend. My forecast came in an article for the journal The National Interest that was called (wait for it) “Beyond Left and Right” – and it got a fair amount of media attention from both liberals and conservatives. (The National Interest itself is on the right end of the spectrum.) 

Unfortunately, I haven’t been able to find versions on-line that aren’t behind pay walls, but here are a few excerpts from a dog-eared xerox:

“…a new underlying fault line [replacing the old left-right divisions] is already emerging in American foreign policy, dividing what might best be called nationalists and internationalists. In terms of American diplomacy, this new alignment will pit a generic model of foreign policy-making that long predates the Cold War – one based at bottom…on the belief that international activism itself is the key to American security and prosperity – against a rival approach…whose supreme goal is consolidating American military and economic strength, and enhancing America’s freedom of action. In the realm of economic policy, those who argue that the nation-state, as an economic player, is obsolete or dangerous will vie with those convinced of its continuing relevance and legitimacy. In electoral politics, sharp differences in economic interests and cultural outlooks will produce a widening rift between business, professional,and government elites on the one hand, and wage-earners on the other. The issue of class, in other words, is re-emerging in American politics.”

I added that these divisions were arising from “the different impact of world economic trends on different classes” and were producing “a foreign policy debate [that] increasingly pits social and economic classes against each other, focusing on the questions of who pays the costs and who incurs most of the risks involved in competing economic and security policies.

“Polls repeatedly show that the best educated and wealthiest Americans are the staunchest internationalists on both security and economic issues. The surveys also show strong support for internationalist policies to be lacking nearly everywhere else on the social spectrum. “

And there’s more. I wrote that “At the mass public level,” the nationalist faction would be comprised of “blue collar union members, white collar middle managers and small businessmen from the Perotista ranks; family- and community-oriented immigrants; and grassroots environmental activists.”

As for their rivals, “The social base of internationalism would include many big multinational businesses and their upper level managers, financiers, professionals, and retailers. Journalists and the rest of the mass media, as well as academics, also tend to support an idealistic globalism. Other members of a new internationalist coalition might include minorities whose fear of cultural conservative nationalists outweighs their qualms about job-destroying internationalist free-trade economics, and affluent, mainstream environmentalists.”

And there was more on the role of the media: “Much of what they lack in numbers, the internationalists would make up for in money, influence, and the aura of respectability that their media allies will continue to provide.”

What would happen to liberal and conservative internationalists in the process? The former

“may wind up permanently alienating labor, minorities, and the white-collar middle class whether they intend to or not – and lose their identity as champions of the underdog and as agents of progressive change in the process. Internationalists of the Right will face similar problems. Without offering their voters something more than NAFTA, the continuing “creative destruction” of their jobs, endless foreign interventions, and Marilyn Quayle’s definition of family values, it is difficult to see them avoiding George [H.W.] Bush’s political fate.”

For good measure, I added that if they do crystallize, the resulting new coalitions are likely to be “less inclined to compromise than their predecessors….”

Clearly, I didn’t get everything right. But I’m kind of amazed at how many developments I absolutely nailed. Further, we’re only a few months into the Trump era. In other words, the American political realignment I anticipated still probably has a long ways to go.

(What’s Left of) Our Economy: Being Tom Friedman Means Never Having to Say You’re Sorry About China Trade

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China, Mainstream Media, protectionism, pundits, The New York Times, Thomas Friedman, Trade, World Trade Organization, WTO, {What's Left of) Our Economy

Uber-pundit Thomas Friedman’s New York Times column this week about China demonstrated both that “better late than never” may not always be true, and that there’s precious little accountability in the Mainstream Media. Too bad he performed both vital tasks completely unwittingly?

As he traveled through China recently, Friedman told us, his conviction grew that, as President Trump has been charging, “China is not playing fair on trade and has grown in some areas at the expense of U.S. and European workers….” Moreover, he adds, this China challenge “needs to be addressed — now.”

Continued Friedman: “The core problem, U.S. and European business leaders based in China explained, is that when the U.S. allowed China to join the World Trade Organization in 2001 and gain much less restricted access to our markets, we gave China the right to keep protecting parts of its market — because it was a ‘developing economy.’ The assumption was that as China reformed and become more of our equal, its trade barriers and government aid to Chinese companies would melt away.

“They did not.”

And Friedman did a pretty good job of summarizing what RealityChek regulars and so many others have known for years – that China’s mercantilism became considerably worse.

The author ended his piece with a (sort of) ringing call for action: “China needs to know that some people who disagree with everything else Trump stands for — and who value a strong U.S.-China relationship — might just support Trump’s idea for a border-adjustment tax on imports to level the playing field.”

But Friedman also included this kicker: According to someone he called “the smartest person I know inside China on trade (who will have to go nameless),” such actions “if anything… may be too late.”

As the author’s reaction – “Ouch!” – suggests, there’s a distinct possibility that his source is right about the consequences of waiting sixteen years to grapple seriously with China’s predatory practices.

But here’s what Friedman didn’t tell you: One of the folks who pushed vigorously for the boneheaded American WTO decision was none other than Thomas Friedman! As he wrote in 2000, opponents of China’s admission, like U.S. labor unions, were “head-in-the-sand” protectionists. Nor did Friedman seem to think much of fears that “China’s entry into the WTO will make it a more formidable geopolitical rival to the United States.”

Instead, he confidently wrote that “to say that [admission] will hurt the cause of democratization in China or that it won’t help create more islands from which Chinese democrats can operate and more tools by which they can communicate, is to speak utter nonsense.”

Interestingly, by 2011, Friedman seemed to be having important second thoughts about China’s reformist intentions. But he still doggedly opposed meaningful actions to neutralize Beijing’s currency manipulation, for example, with tariffs.

Since no one likes to admit mistakes – especially whoppers – I can certainly understand Friedman’s failure to report his enthusiasm for a China trade strategy he now recognizes as a titanic failure. Much less clear is why so much of the rest of the Mainstream Media – and especially news talk shows who view him as a globalization oracle – keep giving him a pass.

Im-Politic: Trump’s Accusers on Mishandling Intelligence Have Lots to Explain Themselves

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China, Im-Politic, intelligence, James Clapper, leaks, Russia, Stephen A. Hall, The New York Times, Trump, Washington Post

There was a funny article in today’s Washington Post Outlook section – not “ha ha” funny but funny in the sense that life serves up some coincidences that the adjective “embarrassing” doesn’t come close to covering.

The piece in question came from Stephen A. Hall, described as a 30-year veteran of the CIA’s Russia (and presumably Soviet) operations, and it went after President Trump for sharing intelligence information irresponsibly with Russia and thereby going far toward convincing valuable U.S. allies that his administration can’t be trusted with crucial strategic secrets.

Let’s leave aside the indisputable reality that the Soviet operations “run and managed” by Mr. Hall were completely blindsided by the fall of the Soviet Union – arguably the most important geopolitical development of the final half of the twentieth century. Let’s also leave aside that its Soviet operations were the scene of some of America’s most damaging intelligence failures when Hall was around. (Although I’m sure he wasn’t solely or even largely to blame.)

Let’s focus instead on an article that ran the very same day in The New York Times. It reported that “The Chinese government systematically dismantled C.I.A.spying operations in the country starting in 2010, killing or imprisoning more than a dozen sources over two years and crippling intelligence gathering there for years afterward.”

The reason? An “intelligence breach” that according to The Times was “one of the worst in decades.” Indeed, the article continues, “The number of American assets lost in China, officials said, rivaled those lost in the Soviet Union and Russia during the betrayals of both Aldrich Ames and Robert Hanssen, formerly of the C.I.A. and the F.B.I., who divulged intelligence operations to Moscow for years.”

And when did Beijing manage in effect to destroy the American spy network in China? Reported The Times, “From the final weeks of 2010 through the end of 2012, according to former American officials….” Further, the article adds, this “previously unreported episode shows how successful the Chinese were in disrupting American spying efforts and stealing secrets years before a well-publicized breach in 2015 gave Beijing access to thousands of government personnel records, including intelligence contractors.”

Anyone remember who was in charge of the U.S. government and its intelligence community during those years? Aside from Barack Obama, there was also one James R. Clapper, Jr., who was named Director of National Intelligence in August, 2010, and who of course has emerged as one of President Trump’s chief critics. For good measure, Clapper was promoted to that position from the top intelligence job in the Pentagon.

More important: During his tenure as head of the nation’s espionage establishment – and during Mr. Obama’s in the Oval Office – evidently zero progress was made in identifying the moles and plugging the breach. To add possible insult to injury, Clapper also could well be one of the apparent scores of former intelligence officials who have been leaking oceans of highly classified information intended to damage the Trump administration.

Like most reporting about intelligence matters, The Times account of the CIA’s China disaster may be completely or largely or partly wrong. As a result, it will be interesting to see if there’s any pushback over the next few days. But if and until there is, Americans will be entitled to ask whether anything that the president has shared with the Russians has or is likely to damage the nation’s security or its relations with other intelligence services as the disasters associated with many of his leading attackers.

Im-Politic: Initial Thoughts on the Trump Wars

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2016 election, Andrew McCabe, Director of National Intelligence, FBI, hacking, Hillary Clinton, Im-Politic, impeachment, intelligence community, James Clapper, James Comey, John McCain, Justice Department, Lindsey Graham, Loretta Lynch, Michael T. Flynn, Richard M. Nixon, Russia, Russiagate, Sally Yates, The New York Times, The Washington Post, Trump, Wategate

Since I’m not a Trump or intelligence community insider, I’ve refrained from posting any items on the last crisis that began surrounding the administration starting with the president’s firing of James Comey as FBI Director. (I have commented on some aspects briefly on Twitter.) But since I’m a strong supporter of many positions championed by Mr. Trump both during the campaign and – to a lesser extent – in the White House, I thought that RealityChek readers would be interested in some observations about aspects of the uproar that deserve more consideration.

First and most important: Both current and former officials in the federal bureaucracy and even the intelligence community clearly hope to end the Trump presidency, and have decided to leak to the equally anti-Trump Mainstream Media even the most highly classified material if it’s judged to be potentially harmful to the president. Yet no leaks have revealed any evidence supporting the central allegation against the president: the charge that he or close aides colluded in any way with Russian efforts to fix the presidential election in his favor.

Given that the president’s foes long viewed the prospect of his victory with alarm, and given that they have sought to de-legitimize this victory since it unfolded the evening of last November 8, the absence of such a smoking gun after so many months is absolutely startling. If this evidence exists, what are President Trump’s adversaries waiting for?

P.S. – this argument pertains to retired General Michael T. Flynn, who advised candidate Trump and briefly became his White House national security adviser. Flynn has certainly acted in several instances like he’s had something (or things) to hide. But he’s been tracked for months by intelligence officials who – again – have been anything but reluctant to make troubling findings public. And nothing has emerged pointing to working with Russia to undermine the campaign of Democratic nominee Hillary Clinton.

One possible explanation? Many anti-Trump-ers are waiting for the 2018 mid-term elections to get closer and closer, in order to boost the chances of a Democratic landslide before the administration had a chance to rebut the charges conclusively – and before Congressional Republicans have a chance to dissociate themselves from Mr. Trump. And maybe they’re being joined by some establishment Republicans, who hope to recapture their party from the Trump-ist forces. And maybe both factions are motivated mainly by the belief that Mr. Trump is such an unprecedented danger to the republic that any means are warranted to remove him from the Oval Office.

If so, however, some big legal issues pop up.  For instance:  Are individuals privy to information about crimes – and in fact major crimes – withholding them from law enforcement authorities? 

Second: Not only has no evidence of collusion been leaked. The former head of the entire intelligence community has just made clear that, during his own prolonged probe of Russia’s efforts to interfere with the election (a related but clearly separate issue, for which strong evidence exists), he saw none.

In March, James Clapper, who resigned as Director of National Intelligence soon after the election, had tantalizingly hinted at the existence of such material by telling a reporter that the intelligence community “did not include any evidence” in its January report on the Russian campaign “that had anything, that had any reflection of collusion between members of the Trump campaign and the Russians. There was no evidence of that included in our report.”

But when pressed by “Meet the Press” anchor Chuck Todd to confirm whether such evidence existed, Clapper responded, “Not to my knowledge.” And when asked under oath in Senate testimony on three months later whether that statement was still accurate, Clapper stated, “It is.” In other words, Clapper’s probe, which reflected the work of 16 intelligence agencies including his own Director’s office uncovered no collusion evidence.

The issue was briefly muddied during that same hearing by former Deputy Attorney General Sally Yates. Like Clapper, an Obama administration appointee to her latest position, Yates initially answered the question about collusion by demurring. She explained that her “answer to that question would require me to reveal classified information. And so, I — I can’t answer that.”

As noted by questioner Senator Lindsey Graham – no admirer of President Trump – the FBI that Yates helped supervise as the second-in-command at the Justice Department was part of Clapper’s Russia investigation. After Yates indicated that the FBI was conducting its own separate counter-intelligence inquiry into Russia’s activities, Graham asked Clapper if the evidence found by the Bureau at that time “was not mature enough” to justify including in the broader intelligence community report.

Responded Clapper: “[T]he evidence, if there was any, didn’t reach the evidentiary bar in terms of the level of confidence that we were striving for in that intelligence community assessment.”

So again, a protracted look into Russia’s Election 2016 hacking produced no evidence of collusion that the intelligence community as a whole believed was solid enough to justify even hinting at in its publicly stated conclusions.

Third: One highly damaging allegation that’s been made over the last week was the Washington Post‘s claim that Comey requested more resources from the Justice Department for his investigation just before he was fired. The clear implication: The president became convinced that Comey was ramping up his investigation – which began in July – and decided to fire him in order to deny him the funds needed to do the job adequately. Such an action, of course, would at least strongly resemble obstruction of justice.

This article, however, too, looks fishy. Post reporter Ashley Parker did include an on-the-record flat Justice Department denial, but needless to say, government spokespersons lie or dissemble all the time. Much more difficult to dismiss: Acting FBI Director Andrew McCabe – who had been Comey’s former top deputy – stated in his own sworn testimony to Congress that he was unaware of any such request.

Yes, it’s true that Comey might have made the request without telling McCabe. But how much sense does that make? Nor can anyone accuse McCabe of being a Trump toady. His wife, Jill, had run for office in 2015 as a Democrat and had accepted $500,000 in campaign contributions from the political organization of a long-time Clinton family ally, Virginia Governor Terry McAuliffe.

Finally (for now!), comes the subject, as reported in The New York Times, of Comey’s alleged memo claiming that President Trump asked him to drop his Russia investigation in a February meeting. The former FBI Director will surely have the chance to confirm, deny, or otherwise elaborate on this story and the conversation in his own testimony under oath to Congress.

As suggested by prominent Trump critic Republican Senator John McCain of Arizona, if this request was made, we’re talking about a genuinely Nixonian case of obstruction of justice. (The “smoking gun” tape that played such a decisive role in Richard Nixon’s impeachment and removal in 1974 centered precisely on a decision by the former President to order the FBI to stop its Watergate investigation.)

As Mr. Trump’s critics like to say, however, the Times article “raises questions” – indeed, big ones. First, it’s crucial to note that, as Nixon himself admitted, his actions were intended to cover up criminal activity. As noted above, there’s no evidence yet of a Russia-related crime committed by the Trump administration.

More immediately, Comey has not exactly been shy about loudly expressing, acting on, and widely sharing his concerns about obstacles to official inquests and other behavior he considered improper. In 2004, he threatened to resign as Deputy Attorney General over post-September 11 domestic surveillance programs he viewed as illegal. Last July, he famously held a press conference in which he took the extraordinary step of moving beyond his position’s investigative role to explain extensively his decision to recommend against indicting Hillary Clinton for using a personal email system as Secretary of State. And earlier this month, Comey said – again, under oath – that he took this step because he unilaterally decided that his superior, Attorney General Loretta Lynch had lost credibility as a Clinton investigator because of her meeting with the candidate’s husband, former President Bill Clinton, in June.

It’s certainly possible that Comey has decided to keep firsthand evidence of clear Trump criminality under wraps for going on three months now. But it sure looks out of character.

All of the above notwithstanding, there’s no question that the President’s undisciplined and often contradictory statements understandably have created major suspicions – which are by no means confined to his enemies’ ranks. The consequently confused efforts by his surrogates to clean up these messes have only compounded the problem. And even if the administration had its communications act together, one indisputable lesson of Washington and other scandals is that shoes keep dropping. Moreover, numerous continuing global business ties and burgeoning official responsibilities of the President’s children, his son-in-law Jared Kushner, and his family keep failing valid smell tests.

At the same time, the clearly organized Dump Trump effort by numerous persons with detailed knowledge of seemingly the full range of the federal government’s most sensitive activities suggests that “RussiaGate,” at least, could be different. Not in the sense that damaging claims won’t continue to be made, but in the sense that the anti-Trump-ers might have already leaked their worst.

The only certainty at this point appears to be that the various Trump Wars will rage on for months at a minimum – which means that the valid policy grievances of the president’s supporters and so many other Americans will continue to be neglected by their government.

Im-Politic: A New China Threat to U.S. Higher Education

Tags

China, Chinese Students and Scholars Associations, colleges, Confucius Institutes, foreign students, higher education, Im-Politic, Norman Matloff, The New York Review of Books, The New York Times, universities

A few weeks ago, a tweet of mine on the infiltration of China’s dictatorial regime on U.S. college campuses got a huge (for me) amount of feedback. I was responding to this New York Review of Books article titled “Should the Chinese Government Be in American Classrooms?” and I asked in turn, “This is even a question?”

After all, the piece dealt with the spread of so-called Confucius Institutes throughout American higher education (as well as, shockingly, into the nation’s primary and secondary schools). These organizations purport simply to be teaching Chinese language and culture. But as the article explains:

“[T]heir curriculum is largely shaped by Chinese [government] guidelines. Moreover, they have often been set up in secretive agreements with host institutions, which has caused Western scholars to question whether their universities are ceding undue control to a foreign government—in this instance, a foreign government well known for aggressively propagandizing its official views, censoring dissenting opinions, and imprisoning those who express them.”

So it sounds to me like an open-and-shut case for closing all of them down. But this past week, Norman Matloff, the University of California-Davis computer scientist who’s one of the leading U.S. authorities on America’s Chinese immigrant community, spotlighted another emerging threat from the People’s Republic to the nation’s colleges and universities: the mounting numbers of students they’ve been admitting from China.

The main ideas behind educating Chinese (and other foreigners) look great on paper and often work out well in practice. Americans clearly hope (and even expect) that exposure to these quintessentially free institutions will wind up injecting these newcomers with democratic values – which they hopefully will spread, either consciously or not, in their home countries upon their return. And of course U.S. educators rightly and reasonably hope that native-born students and teachers will benefit from the resulting new opportunities to learn firsthand about foreign countries.

But as made clear in a New York Times piece from last week mentioned in Matloff’s excellent blog, the Chinese government, again, is being imported along with these Chinese students. According to Times reporter Stephanie Saul, these students “often bring to campus…the watchful eyes and occasionally heavy hand of the Chinese government, manifested through its ties to many of the 150-odd chapters of the Chinese Students and Scholars Associations. The groups have worked in tandem with Beijing to promote a pro-Chinese agenda and tamp down anti-Chinese speech on Western campuses.”

It would be nice to think that American higher education, with its historic commitment to free inquiry, would have pushed back strongly against these practices – and even kicked off campuses any students found colluding with Beijing. But such optimism seems to be totally unjustified. Although the Associations’ pressures have by and large been resisted, according to Saul, their presence evidently continues to be tolerated. One likely reason: Chinese students tend to come from wealthy families, and to pay full-freight tuition and other costs – which financially strained public and private institutions value highly.

In other words, although U.S. higher education’s Chinese students policies aim in part to turn these youth into freer thinkers, the Chinese presence is turning these institutions more receptive to a major contemporary Chinese norm: Money talks.

(What’s Left of) Our Economy: Has Subsidized Private Sector Hiring Peaked (Relatively Speaking)?

Tags

CNN.com, Employment, healthcare services, Jobs, Labor Department, non-farm jobs, private sector, real private sector, recession, recovery, subsidized private sector, The New York Times, {What's Left of) Our Economy

The Snob’s Manual tells us (often correctly) that you know when the stock market’s peaked when the retail investor rushes in, and that you know when a fad is passe when the mainstream media report it. Could the same maxim be on target for economic trends, like the outsized role played by the U.S. subsidized private sector in job creation during the recovery? I’m not sure yet, but the last few sets of monthly American employment data (including last Friday’s April figures) are certainly food for thought.

As RealityChek regulars know, I’ve been spotlighting this trend since well before RealityChek was born. And it was great to see the theme picked up last month by a major reporter who covers the healthcare sector (the core of that part of the economy dubbed private sector but in fact heavily dependent on government spending). Since then, healthcare hiring’s unusual recent robustness has been covered by The New York Times and CNN.com.

Here’s the rub: So far this year, subsidized private sector job creation has become less important in the overall employment picture, not more. The March and April statistics are still preliminary, but since January, the pace of subsidized private sector hiring has ranged between 7.87 percent of total monthly job creation (in January) to 29.31 percent (in February). The April figure was right in the middle: 19.43 percent.

The subsidized private sector’s waning momentum – at least relatively speaking – comes through more clearly when the first four months of this year are compared with their last few counterparts. From January through April, 2017, subsidized private sector net new job creation (which also includes social assistance agencies and the for-profit education sector) represented 18.43 percent of the non-farm total (the Labor Department’s definition of the American employment universe.

That share is considerably higher than the figure for the first two months of 2013 and 2014 (14.56 percent and 12.53 percent, respectively). But it’s also considerably lower than the 27.68 percent for 2015 and the 23.87 percent for the same time span in 2016. In addition, these numbers show that the subsidized private sector’s importance has not fallen for two straight years.

That’s not to say that the subsidized private sector isn’t still punching above its weight. Its 19.43 percent of net new job creation was still greater than its share of total employment on a standstill basis (15.75 percent). It’s also still higher than the share at the mid-2009 onset of the current recovery (14.97 percent). And it’s much higher than the share at the start of the last recession at the end of 2007 (13.22 percent). But there’s no doubt that this year it’s not punching quite as hard.

The flip side of the equation tells a similar, but not identical, story. The “real private sector” – where job creation is determined largely by market forces, not government decisions – stood at 68.95 percent of total non-farm jobs last month. That’s actually a little higher than its share at the start of the recovery (67.80 percent). But it’s also still a little lower than its share at the start of the last recession – more than nine years ago (70.62 percent).

There’s still a long way to go in figuring out whether these early 2017 results will hold up even through the end of this year, much less whether they represent hiring that’s peaking (again, relatively speaking) in the subsidized private sector. And of course a huge question mark is hanging over this entire chunk of the economy in the form of the healthcare debate. But the real implications are unchanged. Although subsidized private sector jobs serve many valuable purposes, the more the economy leans on them to generate employment and incomes, the less dynamic and productive the nation is bound to be.

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

Tags

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: Trump’s Sure Not Draining the Mainstream Media Swamp

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Im-Politic, journalism, Maggie Haberman, Mainstream Media, media, Sean Spicer, The New York Times, Trump, Washington Post, White House Correspondents Association

At this early stage in the Trump administration, my biggest disappointment doesn’t concern the gaps of varying sizes between the president’s campaign rhetoric and policy moves. Sure, I’m concerned – though less (so far) about his decision to use cruise missile strikes to punish Syria’s dictator for alleged chemical weapons use in that country’s chaotic civil war than about his linkage of China trade ties with Beijing’s willingness to help rein in North Korea’s nuclear weapons program. Instead, my biggest disappointment concerns Mr. Trump’s dealings with the Mainstream Media.

For the president gave his supporters and the nation at large every reason to believe that he was going to take badly needed steps to reduce the bloated and increasingly harmful role played in American democracy lately by political reporters for America’s leading national news organizations and the failed bipartisan ruling class they tend to shill for. Yet three months into his administration, it looks like same-old-same-old — at least regarding the fundamentals — even though there’s no shortage of unusually sharp-edged exchanges between individual reporters and individual administration officials.

The president and his aides looked to be off to a strong start, as I reported in this post on the mold-breaking press conference he held just before his inauguration. Moreover, Press Secretary Sean Spicer has followed through on his stated intention to enable new news organizations and voices to take part in his daily White House press briefings, rather than defer to the arguably self-serving standards of the White House Correspondents Association (WHCA). Perhaps most stinging to the establishment press, in terms of discrete events, the entire administration decided to skip the WHCA’s increasingly narcissistic, celebrity-drenched, and off-putting annual dinner. On an ongoing basis, the president kept slighting the press several times per day with tweets that went over their heads and directly to his tens of millions of followers.

But at least to date, the administration has missed two opportunities genuinely to cut the Mainstream Media down to size and thereby introduce some desperately needed accountability into their cosseted world. The first has to do with the daily press briefings. Spicer clearly has been more combative at these events than his predecessors – for a time, the sessions were treated by networks as must-see TV.

As has become all too obvious, however, “combative” doesn’t necessarily mean “effective.” Indeed, Spicer’s numerous gaffes have made him an object of ridicule even among many outside national chattering class ranks. Yet what should be most upsetting about his performance – even for Americans who are not die-hard Trump-ers – is how plainly it shows the weakness of Spicer’s command of substantive issues and, at least as important, how slow he actually is on his rhetorical feet.

As a result, Spicer is conspicuously ill-equipped to carry out what should be one of the highest priority missions of Trump spokesman: using the press briefings to expose how politically partisan, childishly shallow, and downright ignorant so many Mainstream Media journalists and their breathlessly voiced questions tend to be.

The main purpose here wouldn’t be payback. The main purpose would be public education. Although the media’s poor trust and approval ratings indicate that few Americans still view them as reliable sources of information, the impact of daily broadcast humiliations can’t be overemphasized, especially given the matchless megaphone of social media. And because fostering the image of omniscience is obviously much more central to the Mainstream Media’s reputation (and profitability) than its by-now-shredded image of impartiality, a steady stream of comeuppances could well lead to the mass firings or demotions and infusion of new, untainted blood that the news business urgently needs.

The second media opportunity the Trump administration is missing has to do with access. Proximity to power is another key to the Mainstream Media’s disproportionate power (and pro-establishment bias). Love them or hate them, these journalists and the organizations they work for enjoy their still huge audiences largely because they can plausibly claim to be in the know. Because of the connections these correspondents and pundits have developed with America’s most important political leaders and other movers and shakers, they have nurtured the entirely credible impression that they’re privy to the real views of The Deciders and their advisers, and to the principal reasons (both genuine and those created for public consumption) behind their decisions. That is, following these news people was rightly seen as a good way to figure out both what American leaders were actually trying to do and why, and what these leaders wanted the public to think they were trying to do.

Unfortunately, as has been widely noted, the price for this access almost invariably has been independence that is all too easily compromised in far too many ways. Most obviously, a reporter who’s too difficult to manipulate, and/or too harshly critical, simply isn’t going to have the kind of contact with the figures that count the most as a reporter who eagerly plays this game.

More subtly, ongoing exposure to top leaders in government (and other spheres) tends to socialize journalists in innumerable ways that generate strong pro-establishment and status quo-oriented leanings. Understanding this process entails first and foremost understanding that journalists operate on the fringes of power. They lack the ability to shape events directly, but their choice of profession logically indicates a deeply felt interest in these events. Access to top leaders brings them tantalizingly close to this power – and to its biggest secrets (at least in theory).

Shrewd power-holders know how to capitalize on this journalistic weak spot by pretending to bring news people into their confidence, and on a regular basis actually doing so – usually in minor or superficial, but always self-serving, ways that at the same time can be dramatic and/or colorful enough to undergird an entire hard news story or feature. Sometimes, leaders also flatter journalists by asking for their counsel, and even acting as if it’s valued. After years of such treatment, it’s easy for a journalist to imagine that they and leading policymakers are ultimately on the same team.

Don’t forget that the aesthetics of Washington, D.C. (and other power centers) play a big role in this socialization process, too. It’s no accident that government office buildings, for example, are usually built at least in part from the same kind of marble favored by the Roman emperors and the classical Athenians. Nor is it an accident that individual offices at the uppermost levels of government are so beautifully and luxuriously appointed. Enter them and it’s difficult to imagine that anyone but the truly Best and the Brightest could occupy such regal quarters.

Access matters crucially to journalists in two other ways that disincline them to “afflict the comfortable.” First, by publishing leaks intended to advance certain policies or personalities, or block them or undermine them, media types can actually shape events themselves. In other words, they can actively engage in the arena, rather than simply observe it passively. Not surprisingly, many of these would-be movers and shakers regard these chances as prizes to be preserved at practically any and all cost.

Second, a reputation for enjoying big-time access to power-holders can translate into tremendous prestige both within the profession’s ranks and without. And the latter kind of prestige can easily turn into big bucks – in the form of lecture fees and book contracts. The bigger the bucks, moreover, the likelier a journalist is to gain entree to the power-holders’ social circles. As a result, the most successful mainstream journalists become even less inclined than ever to question in any fundamental way leaders who become neighbors, dinner-party companions, and even genuine friends. Moreover, although income levels are never sure-fire predictors of political and policy leanings, the rich rarely become populists, and considerable wealth and status surely don’t make journalists likelier to view promises to “drain the swamp” dispassionately.

So nothing would have dealt the Mainstream Media as damaging a blow as actions making clear that its access was going, going, and just about gone. As noted above, then-President-elect Trump and Press Secretary-designate Spicer were moving for a time in this direction. And few obstacles seemed to stand in their way. What, for example, could be easier than not returning phone calls from Trump-hating pundits like George Will or Charles Krauthammer, or comparably hostile beat reporters from The New York Times or Washington Post? Just as easy would have been to spread the word that these journalists actually are on the outs, and that their days of trafficking in inside information are over. Their remaining professional lives – at least at the national level – would have been measured in minutes. After all, it’s not as if their writing styles or expertise or analytical skills have ever been anything special.

Yet not only have at least some Trump loyalists and populists apparently been speaking with them on the sly. (What other explanation could there be for the sheer volume of reports about various personality and policy feuds inside the White House?) These figures have been speaking with them on the record – at length – not to mention showing up dutifully for those Sunday morning talk shows that have degenerated into little more than chortle-, sneer- and eyeroll-fests. Yet weirder, so has President Trump – even to New York Times correspondent Maggie Haberman, whose political reporting was considered so dependably biased toward Hillary Clinton that her Democratic party supporters labeled her a “surrogate.”

This CNN story purports to explain Mr. Trump’s views of Haberman and his willingness to keep talking with her. In fact, it explains nothing – unless you think that the president is unaware of the hacked Democratic National Committee emails outing her prejudice. If he did, would it be remotely plausible to think that “he knows that she matters, that she will not treat him with kid gloves but not be unfair either, that she commands the respect of the political communities in both Washington and New York”?

I’ve heard other explanations for Trump’s views of The Times – that he believes he can gain or keep the upper hand through the force of his personality, that he has an out-of-control wish to be loved by all, that it’s his hometown paper, that no native New Yorkers can resist the impulse to court it. Those last arguments appeared especially convincing when, not two weeks after his election, Mr. Trump visited The New York Times‘ offices for a long interview with many staffers – including columnists and editorial writers – who had pilloried his presidential run. Was he trying to rub the paper’s hostility in its collective nose? Maybe. But in that case, shouldn’t he have demanded that the Times staff traipse over to Trump Tower if it wanted some of his precious time? Was Mr. Trump trying to kill the publication with kindness? Perhaps. But why bother – and inevitably convey the impression that it’s still in the loop?

With the president apparently tacking to the center on policy, it may be inevitable that he’ll continue treating the Mainstream Media ever more conventionally. In which case, his supporters’ best hopes for a revival of authentic Trump-ism — and the country’s best hopes for encouraging the Mainstream Media to play a genuine watchdog role — could be the chief executive’s richly deserved reputation for about-faces.

(What’s Left of) Our Economy: All the Trade Fakeonomics That’s Fit to Print

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China, globalization, John Maynard Keynes, Mainstream Media, Paul Krugman, Peter S. Goodman, The New York Times, Trade, Trade Deficits, Trump, US-China summit, World Trade Organization, WTO, {What's Left of) Our Economy

Last week’s U.S.-China summit turned out to be as close to a nothing-burger as any meeting between the leaders of the world’s two most important countries could possibly be. But at least one useful purpose was served by the understandably suspenseful run-up to this eagerly anticipated first direct encounter between President Trump and the human face of the economic rival he blasted during his White House campaign: It reminded once again how relentlessly terrible Mainstream Media coverage of trade and globalization issues tends to be.

Any number of reports and columns dealing with the summit and the surrounding economic issues deserves targeting by buckets of rotten tomatoes. Worthy of special attention, however, was a “news analysis” on the economics of trade and U.S.-China trade by New York Times correspondent Peter S. Goodman. Indeed, his April 5 article, “Behind Trump’s Trade Deficit Obsession: Deficient Analysis” was so permeated with fakeonomics and outright howlers that even zeroing in on the following three will produce a pretty lengthy post. 

First, Goodman portrays as detached from “economic reality,” President Trump’s belief that “international trade is a zero-sum affair, as if every country were jockeying for a share of forever limited amounts of business.” Instead, according to Goodman, “Trade is not zero-sum. Expanded trade has historically tended to support economic growth, which generates more spoils to be divvied up for all.”

That may indeed be what the economics textbooks say. It may even be what many economists have told Goodman. But this claim misses a far more important reality. Whatever the import of trade balances in a strongly or even normally growing world, the world of recent years hasn’t fit that description. Why didn’t Goodman note that – or an equally important point that economists such as John Maynard Keynes and his own newspaper’s Paul Krugman have observed: In today’s slow growth world (to quote the latter) “mercantilism makes a fair bit of sense”? And of course the corollary is equally true: Countering that mercantilism is sensible, too.

Second, Goodman correctly reports that “Economists generally dismiss bilateral trade deficits as essentially meaningless, for reasons easily recognizable in the rest of everyday life. Most people surely run lopsided trade deficits with their dentists, handing these professionals their dollars without expecting them to purchase anything in return. One may assume that successful dentists will distribute their profits throughout the economy — on marketing, accounting, laundry and streaming music services. One way or another, these dollars generate jobs and income for other people. So it is with countries.”

But apparently, Goodman doesn’t believe that his “news analysis” mandate permits him to analyze this particular statement. If it did, he’d surely recognize that this analogy has nothing do with America’s current circumstances.

For starters, this comparison with everyday life is generally used by economists to illustrate the virtues of specialization – which unfettered trade enhances in theory and often in fact. That is, no one need worry about running a trade deficit with his or her dentist because attempting to take care of their own dental needs would be a foolish waste of their talents, resources, and time. Far better to leave that responsibility to someone with expertise and experience. And this strategy is viable because patients presumably can offer the dentist equally valuable services, or (in a more complex model), because the total amount of goods and or services that patients can offer to all of the merchants that they patronize roughly balance the amount of goods and services that the patients consume.

In other words, patients can run trade deficits with their dentists and remain financially solvent because they are earning the income to pay for these services by successfully “exporting” their own output.

Of course, this is far from the position in which the United States finds itself, since its global trade is in deep deficit, and has been so for many decades. Its economy has remained viable because it’s been able to finance those deficits by a combination of selling off assets and ever more borrowing. Its ability to borrow at affordable rates, in turn, largely reflects the reserve currency role of the dollar – which itself stems from the nation’s past record as a matchless creator of real wealth, its still world-class financial markets, and the lack of any suitable alternative. If Goodman thinks this situation is fine and dandy, he should at least say so. Then he should try remembering how similar circumstances led to the entire world economy’s near-meltdown less than ten years ago.

The financial crisis also should have taught Goodman how unrealistic it has become to expect that “one way or another,” America’s creditors will recycle their trade surplus earnings back into the U.S. economy that generate “jobs and income.” For as I’ve explained frequently, the very offshoring-happy trade policies of so little concern to Goodman (and the rest of the American establishment) greatly reduced the odds that capital inflows would be used productively (e.g., on new factories and labs) and greatly increased the odds that they would be used instead to finance consumption and crackpot finance. Responsible and productive use of recycled trade surpluses is also unlikely when they reach the mammoth scale seen during the bubble decade. For the very abundance of cheap credit greatly erodes the incentive to use it prudently. 

As for the bilateral deficits, it is indeed reasonable to downplay them – when the global deficit is fairly evenly distributed across a nation’s foreign trade partners. When nearly half of the total merchandise deficit is concentrated in U.S.-China trade, as is the case now, bilateral deficits clearly count for a great deal – unless the importance of trade deficits is discounted completely.

In fact, like Goodman, we can analogize to daily life: If an individual or family’s over-consumption is highly concentrated in a single product or service area, that’s a conspicuous target for belt-tightening.

Third, it was nothing less than jaw-dropping to see Goodman emphasize that “even if China were a paragon of fair trading practices, it would almost certainly run a surplus with the United States. Despite tremendous economic advances, China remains a relatively low-income country, home to hundreds of millions of people who cannot afford the more sophisticated fruits of the American economy.”

Just recall: This statement is being made a quarter century after the United States decided to prioritize the expansion of trade with China, and a decade-and-a-half after the landmark decision to admit China into the World Trade Organization – which was based on predictions that China would soon become a market whose growth would contribute to America’s prosperity.

If after all this time, China is still too poor to be able to support a reasonably balanced trade relationship with the United States, then its at least arguable to conclude that liberalizing trade with China so rapidly was a major mistake and was sold to the American public with completely erroneous arguments. It’s also crucial to remember that during the vigorous China trade debates that surrounded those decisions, numerous critics predicted that such imbalances would result – and in part precisely because China’s very low income levels made export bonanza forecasts so ludicrous.

But strangely, none of their views was included in Goodman’s article. Apparently being right isn’t news that’s fit to print.