Im-Politic: Why It’s Time for Trump to Go

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anti-semitism, Capitol riot, censorship, conservative populist nationalism, conservatives, Constitution, culture wars, election 2016, election 2020, election 2022, election 2024, Glenn Youngkin, Hunter Biden laptop, Im-Politic, January 6, nationalism, Pat Buchanan, politics, Populism, Republicans, Ron DeSantis, Ross Perot, social media, Trump, Twitter Files

There are several reasons I haven’t posted yet on Donald Trump’s absolutely terrible last few weeks, some obvious, some not so much.

Among the former – clearly, as someone who proudly voted for him twice, and considers his Oval Office record on the issues impressive, I’ve been crestfallen by the number of serious and completely unnecessary “own goals” the former President has committed lately. The two worst: the lunch at his Florida estate with two outspoken ant-semites, and his social media claim that revelations of major social media collusion with Democrats during the 2020 presidential campaign “allows for the termination of all rules, regulations, and articles, even those found in the Constitution.”

It’s not that I’ve been forced to conclude that Trump is an anti-semite. Not when his daughter is married to a Jew, when for so long, so many of his closest business associates have been Jewish, and when he’s arguably been the most pro-Israel President in U.S. history.

Nor do I believe that he really wants to suspend the Constitution because he believes that the 2020 election was stolen from him, his activity during the run-up to January 6^th notwithstanding. Instead, I write it off as the kind of thoughtless outburst that’s come from him many times, and that stemmed from a frustration over the “Twitter Files” disclosures that’s not entirely incomprehensible. (Even this blatant Mainstream Media Biden apologist doesn’t rule out the possibility that because the election turned on such small vote totals in a handful of states, Trump might still be sitting in the White House had the Hunter Biden laptop story been widely suppressed during the general campaign.)

My main evidence? In two days, Trump denied suggesting what he actually suggested. Which sounds to me much more like crappy judgment than like conviction.

But to return to the main point of this post (which isn’t fighting these battles), my main less-obvious reason for keeping off the subject is one I’ve referred to before: an unwillingness to write about something unless I can think of something original to say. And so many valid points have been made by so many commentators about what Trump’s latest blunders say about his qualifications for a second term and/or his electability.that I’ve had difficulty adding to them.

Finally, however, I’ve come up with two, and they’re important enough to me to make clear that Trump’s usefulness in American politics and policy – which I view as considerable – has come and gone.

The first point has to do with Trump’s longtime habit of associating himself one way or another with figures with odious views – like the two anti-semites. Although as I said above, there’s no serious reason to think he subscribes to those views. But these repeated episodes aren’t coincidental, either, and clearly stem from his tendency to gravitate, at least temporarily, toward anyone who expresses anything remotely positive about him.

This pattern must stem from a degree of personal insecurity that seems to have been noteworthy enough even before a presidency marked by a long, almost nonstop series of false charges like the Russia collusion hoax. But however natural this reaction was, it also produced an equally long series of controversies (like this) that (a) did nothing to shore up his support with the faithful; and (b) greatly and understandably antagonized plenty of middle-of-the-road voters (including Republicans) who are generally with him on the issues.

His latest misadventures only indicate that this habit will continue – if only because the baseless attacks will. So with Trump as its standard bearer, the Republican Party, and the populist stances now strongly favored by its voters (if not by its thankfully vanishing D.C.-centric establishment wing) will struggle mightily at best to reach its full potential – a working class oriented majority coalition big and durable enough to generate thoroughgoing, lasting change.

Moreover, Trump’s uncritical attraction to any and all admirers surely explains much about his increasingly lousy record in distinguishing political winners from losers – which was displayed so prominently during last month’s midterm elections. And good luck creating a durable political movement without strong Congressional coattails.

The second original-as-I-see-it point has to do with a phenomenon that’s been commonly observed in business: The person who creates something turns out to be incapable of running it longer term. And it’s no mystery why. The two tasks require two different skill sets.

Trump unquestionably was indispensable to the triumph of modern conservative nationalist populism. After this embyronic movement (or, more accurately, related set of impulses, grievances, and leanings), experienced false starts led by former Nixon White House aide-turned-pundit Pat Buchanan, and by businessman Ross Perot, Trump achieved the breakthrough via a combination of stylistic convention-shattering and exciting new combinations of policy positions (notably, some standard conservative tax- and regulation-cutting along with economic nationalist trade and immigration stances and America First-focused foreign policies). Moreover, it’s unlikely that a politician with a more conventional personality could have left so many self-serving establishment shibboleths dead and buried, and channeled popular anger at the too-often bipartisan national power structure so effectively.

But that battle has been won hands down. The challenge for conservative nationalist populists is, as the consultants say, to expand the base. And that inevitably means appealing to voters who sympathize with the content of its platform, but who also insist on leaders who won’t force them to keep their noses held, and who seem determined to enflame rather than ease national passions. (A focus on fostering division while projecting images of sobriety, by the way, is a good desciption of many Democratic and progressive culture war shock troopers.)

Those gettable non-Republican conservatives and moderate are voters afflicted with what’s been called Trump Fatigue. And despite the major policy successes of his administration (e.g., a solidly growing, non-inflationary economy; a far more secure southern border; a halt to the enabling of China; an avoidance of pointless new foreign wars), who can blame them? Why would they look forward to four more years of national turbulence – especially since, as was not the case in 2016 and 2020, they may well have alternatives who can give them both a rousing and successful championing of populist economic and selected culture war causes on the one hand, and qualities like sound judgement and self-discipline and rhetorical precision on the other.

Of course, I’m talking about politicians like Republican Governors Glenn Youngkin of Virginia and Ron DeSantis of Florida. The former, as I documented here, both won in an increasingly Democratic state and outpolled Trump’s failed reelection campaign even in rural counties chock full of hard-core Trumpers. I haven’t examined the DeSantis win last month in detail, but he achieved even greater success in a state that’s at least as diverse (though trending Republican lately).

And in fact, polls are now showing (e.g., here) not only that the former President has lost big-time ground to his possible Sunshine State rival among Republican and Republican-leaning voters, but that by large majoities, these groups “now say they want Trump’s policies but a different standard-bearer to carry them.” The inclusion of the leaners in such surveys is especially important, as they comprise a critical share of those gettable independents that could put a GOP candidate over the top in 2024 and enable him or her to shape the nation’s politics and policies for decades to come.

Here’s a way to look at these matters that I wish wasn’t so completely religious in nature but that probably makes the point like none other (and precisely for that reason): Trump was the guy needed to bring conservative nationalist populism to the mountain top of victory in 2016. But he’s anyone but the guy to lead it to the promised land of lasting political and policy supremacy.

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Our So-Called Foreign Policy: Biden’s Dangerously Loose Lips on Nuclear Weapons Policy

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alliances, allies, Baltics, Biden, Biden administration, China, deterrence, globalism, no first use, North Korea, nuclear weapons, Obama, Our So-Called Foreign Policy, Russia, semiconductors, South Korea, Soviet Union, Taiwan, Trump, Ukraine

As usual, headline news is coming so fast and furiously from so many different direections that lots of major developments get neglected (including by me). One of the most important pretty stunningly shows once again that those American leaders who most loudly proclaim themselves to be champions of the globalist approach to foreign policy, and of the U.S. security alliances they view as one of its greatest achievements (both for the United States and the globe at large) have once more been flirting seriously with ideas certain to destroy those alliances.

Specifically, I’m referring to recent reports (e.g., here) that the President Biden is considering endorsing a “no first use” (NFU) policy for America’s nuclear weapons arsenal.

The shift hasn’t yet been approved. A rethink hasn’t even been officially announced. And some of the anonymous sources who leaked this news to reporters (no doubt from inside the Biden administration, and no doubt as a trial balloon) claim that what’s being contemplated is changing to something similar to NFU but not identical to it.

But of course, trial balloons are floated precisely to evoke reactions to something that someone awfully high up in government (or whatever organization is doing the floating) thinks is a swell idea, and who’s confident that his or her boss thinks or would think so, too. Moreover, the difference between NFU and the variant being considered seems pretty academic at best.

Most important about this possible new Biden approach to national security is that it reveals this administration to be every bit as cynical and therefore unserious about the globalism and alliances it pretends to prioritize – and about its indignant and sanctimonious portrayals of the more skeptical views of critics like former President Trump as proof of their dangerous ignorance – as the Obama administration.

For as I explained five years ago when Obama entertained NFU right after slamming Trump literally as a foreign policy and specifically nuclear weapons know-nothing, even mulling such a new nuclear doctrine could undermine the very alliances that globalists like him exalted.

And the reason is simple: First use of nuclear weapons is the policy that for decades has enabled the United States to deter attacks on the allies credibly in the first place – and that has held these arrangements together. For long ago, Washington dismissed as impractical trying to match adversaries like the old Soviet Union, China, and North Korea in conventional forces. The first two could draw on populations that would always exceed America’s, and even when it came to relatively small antagonists like the latter, fielding such forces was considered too expensive to be sustained financially and politically.

Nuclear weapons, however, were relatively cheap, and American leaders judged that declaring their intent to respond to purely conventional attacks on allies by these countries by launching the nukes if non-nuclear forces proved inadequate would put the fear of God even in a nuclear superpower like the Soviet Union. And first use would even more effectively deter countries with tiny or non-existen nuclear forces of their own, like China and North Korea for decades.

Even when Beijing and Pyongyang built nuclear forces big and capable enough to call this U.S. bluff successfully at least in theory (because they could now wreak impressive nuclear destruction on the American homeland, too), American leaders put their trust in NFU. And if indeed protecting allies was the overriding priority of U.S. foreign policy, this judgement was at least defensible.

A NFU policy, though, or even trial balloons, could bring disastrous consequences. Either would risk emboldening the enemies of the United States and its allies by signaling that Washington would at the least hesitate to play its most formidable military card. Just as important, it’s hard to imagine a worst recent time than the present for indulging in such speculation. After all, not only does the United States no longer enjoy overwhelming nuclear edges over China and North Korea. But China and Russia have displayed ever greater interest in establishing or reestablishing effective control over small neighbors like Ukraine and the Baltic states and of course Taiwan.

In addition, a NFU policy or talk thereof could frighten allies into bailing on the United States and cutting the best deals they could with Moscow or Pyongyang or Beijing while they still had the chance. Alternatively, because sizable American forces remain right at or near the front lines at all three of these flashpoints, the absence of a first use policy could result in them getting caught up in unwinnable battles even if a U.S. President wanted to stay on the sidelines.

Finally, when we’re talking about Taiwan, of course, we’re talking about the place that now makes the world’s most advanced semiconductors – products that are central to both future American prosperity and national security. So as is not the case with Russia’s neighbors or even South Korea (an impressive semiconductor manufacturer in its own right), adopting NFU could result in the loss of a genuinely vital U.S. interest.

I’ve long favored fundamental changes in U.S. alliance and overall foreign policy and national security strategy. But that’s not the point here. If you like alliances, it’s really pretty simple: At a minimum, you either keep first use, or you greatly beef up U.S. conventional forces, or you convince the allies to fill whatever non-nuclear military force gaps you face, or you do all three or some combination of them. If you adopt NFU and fail to take offsetting steps on the conventional force front, be ready to kiss these arrangements goodbye.

From all accounts (see, e.g., here) the allies themselves recognize this. So does China. What’s scary is that even if the supposed adults-in-the-room and master strategists in the Biden administration eventually realize the stakes involved (as their Obama predecessors eventually did), they may have greatly undermined the nation’s safety – along with boosting the risks of conflict the world over.

(What’s Left of) Our Economy: Now Oil’s Fueling the U.S. Trade Deficit’s Boom

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Advanced Technology Products, Biden, CCP Virus, China, climate change, COP26, coronavirus, COVID 19, exports, Glasgow, imports, lockdowns, manufacturing, non-oil goods deficit, oil, oil imports, oil trade, OPEC, supply chains, tariffs, Trade, trade deficit, Trump, UN Climate Change Conference, vaccine mandates, Wuhan virus, {What's Left of) Our Economy

So many records and multi-month or year highs and lows were revealed in this morning’s official report on U.S. trade flows (for September) that it’s tough to know where to begin. What caught my eye immediately, though, was a development that concerned a product that hasn’t generated much major trade news lately, but has produced quite a few headlines in the last few weeks alone: oil.

With the United Nations’ latest global climate change conference still underway in Glasgow, Scotland, and President Biden still asking members of the Organization of Petroleum Exporting Countries to boost their production to ease national and global energy shortages, it’s more than a little interesting that September saw America’s oil trade deficit balloon from $28 million (yes, with an “m”) in August to $3.38 billion (with a “b”).

That monthly total is the biggest since May 2019’s $3.98 billion and the $3.35 billion sequential worsening is the greatest such change for good or ill in absolute terms since the $3.52 billion improvement in this deficit in Dec., 2012 (when the monthly oil deficits were regularly some five or six times larger). It’s also the biggest increase in the oil trade shortfall since Jan., 2013 ($3.86 billion).

At least as interesting: On a year-to-date basis, the oil trade balance has shifted from a $13.98 billion surplus to a $6.84 billion deficit, mostly because oil imports are up 23.55 percent during this period.

The monthly spurt in the oil trade deficit weighed heavily on the overall September trade figures, accounting for 41.26 percent of the rise in the total deficit to a record $80.93 billion.

Moreover, not only was the September combined goods and services trade shortfall an all-time high. It beat the previous record (set in June) by a healthy (or sickly?) 10.52 percent, and the 11.52 percent monthly jump was the greatest such widening since the 19.87 percent recorded in July, 2020, when the U.S. economy was rebounding sharply from the short but deep downturn produced by the CCP Virus’ initial wave and the shutdowns and lockdowns mandated in response, along with major consumer caution.

September’s deficit resulted from both major trade flows moving in exactly the wrong way. Total imports set their third straight monthly record, increasing by 0.58 percent to $288.49 billion. And overall exports sank by 3.01 percent, to $207.56 billion. That total was the first monthly falloff since February and the biggest since the 19.96 percent plunge in April, 2020 – when the pandemic’s impact on the U.S. economy was peaking.

Still worse was the trade story in goods, where the $98.16 billion gap grew by 9.99 percent over the August total to a new record $98.16 billion. That figure broke the old mark (also set in June) by 5.25 percent, and the monthly increase was also the biggest since July, 2020 – when it rose by 12.20 percent.

Here, too, both exports and imports can be blamed. As with total exports, the former also decline for the first time since February, and the 4.71 percent sequential decrease to $142.71 billion was the steepest since the 25.10 percent crash dive suffered in pandemic-y April, 2020.

Goods imports, meanwhile, climbed by 0.78 percent to $240.86 billion – a new record , too.

Since manufacturing dominates U.S. goods trade, it’s not surprising that much of this September deterioration on the merchandise side came in industry. This sector saw its own longstanding and massive deficit hit a second straight monthly record, rising 1.60 percent to $118.75 billion.

Manufacturing exports dropped on month by 4.69 percent, from $97.13 billion to $92.58 billion. But the much greater amount of imports was down only 1.25 percent, from $214.041 billion to $211.33 billion.

These new records have pushed the 2021 manufacturing deficit so far to $968.25 billion – 22.52 percent bigger than last year’s January-through September number. So the full-year shortfall is sure to top $1 trillion for the fourth straight year – and by October.

Yet another all-time high was reported in an important manufacturing sub-sector – advanced technology products (ATP). The $50.50 billion worth of these goods imported by Americans in September set a monthy record, and one that broke the previous mark of $47.24 billion set in October, 2019, by 6.91 percent. Largely as a result, the ATP deficit surged sequentially by 22.82 percent in September, to $19.74 billion. The total was the biggest since last November’s $21.90 billion and the increase the fastest since May, 2020’s 22.98 percent – early during that US rebound following the CCP Virus’ first wave.

With many of these ATP goods coming from China, the import boom in this category understandably led to a big (15.01 percent) increase in the bilateral merchandise deficit. Indeed, the monthly rise, from $31.74 billion to $36.50 billion was the biggest since the shortfall’s near-doubling in April, 2020 – when the Chinese economy was bouncing back from its own broad virus-related shutdown – and the level was the highest since December, 2018’s $36.60 billion.

Goods imports from China hit $47.41 billion – their highest level since October, 2018’s $52.08 billion. And their 10.27 percent jump in September was the biggest such monthly change since the 18.23 percent increase of this past March, at the start of the U.S.’ last post-CCP Virus recovery.

The China goods deficit in September did worsen faster than its closest global proxy – the U.S. non-oil goods deficit (which widened by 6.47 percent). It’s still also growing more slowly on a year-to-date basis – 14.89 percent versus 18.60 percent, which indicates that the Trump tariffs continued by Mr. Biden are still restraining it. But the gap is narrowing.

What’s especially sobering about these and other recent trade figures is that the overall deficit rose by 7.50 percent between the second and third quarters of this year while the rate of economic growth fell by 40.31 percent.  That’s not supposed to happen. Clearly, virus- and lockdowns- and mandates- and supply chain-related disruptions are distorting normal economic patterns, but that’s a huge discrepancy nonetheless.  Worse (in this sense), the American economy’s expansion is so far expected to speed up again in the fourth quarter. Although trees aren’t supposed to grow to the sky, it seems a safe bet that the U.S. trade deficit going forward will do a pretty good imitation.     

(What’s Left of) Our Economy: Automotive’s Still in the U.S. Manufacturing Growth Driver’s Seat

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aircraft, aluminum, appliances, automotive, CCP Virus, China, coal, coronavirus wuhan virus, COVID 19, Delta variant, electrical equipment, facemasks, Federal Reserve, industrial production, inflation-adjusted growth, inflation-adjusted output, infrastructure, lockdowns, machinery, manufacturing, masks, medical devices, metals, petroleum refining, pharmaceuticals, PPE, real growth, recovery, reopening, steel, stimulus, tariffs, Trump, vaccines, {What's Left of) Our Economy

Talk about annoying! There I was last Thursday morning, all set to dig into the new detailed Federal Reserve U.S. manufacturing production numbers (for June) in order to write up my usual same-day report, and guess what? None of the new tables was on-line! Fast forward to this morning: They’re finally up. (And here‘s the summary release.) So here we go with our deep dive into the results, which measure changes in inflation-adjusted manufacturing output.

The big takeaway is that, as with last month’s report for May, the semiconductor shortage-plagued automotive sector was the predominant influence. But there was a big difference. In May, domestic vehicles and parts makers managed to turn out enough product to boost the overall manufacturing production increase greatly. In June, a big automotive nosedive helped turn an increase for U.S.-based industry into a decrease.

The specifics: In May, the sequential automotive output burst (which has been revised up from 6.69 percent in real terms to 7.34 percent) helped push total manufacturing production for the month to 0.92 percent after inflation (a figure that’s also been upgraded – from last month’s initially reported already strong 0.89 percent). Without automotive, manufacturing’s constant dollar growth would have been just 0.47 percent.

In June, vehicle and parts production sank by an inflation-adjusted 6.62 percent , and dragged industry’s total performance into the negative (though by just 0.05 percent). Without the automotive crash, real manufacturing output would have risen by 0.40 percent.

Counting slightly negative revisions, through June, constant dollar U.S. manufacturing production in toto was 0.60 percent less than in February, 2020 – the economy’s last full pre-pandemic month.

Domestic industry’s big production winners in June were primary metals (a category that includes heavily tariffed steel and aluminum), which soared by 4.02 percent after inflation; the broad aerospace and miscellaneous transportation sector, which of course contains troubled Boeing aircraft, (more on which later), and which turned in 3.75 percent growth, its best such performance since January’s 5.62 percent pop; petroleum and coal products (up 1.36 percent); and miscellaneous durable goods, which includes but is far from limited to CCP Virus-related medical supplies (up 1.21 percent).

The biggest losers other than automotive? Inflation-adjusted production of electrical equipment, appliances, and components, which dropped sequentially by 1.73 percent in real terms; the tiny, remaining apparel and leather goods industry (1.44 percent); and the non-metallic minerals sector (1.07 percent).

Especially disappointing was the 0.55 percent monthly dip in machinery production, since this sector’s products are used so widely throughout the rest of manufacturing and in major parts of the economy outside manufacturing like construction and agriculture.

But in one of the biggest surprises of the June Fed data (though entirely consistent with the aforementioned broad aerospace sector), real output of aircraft and parts shot up by 5.24 percent – its best such performance since January’s 6.79 percent. It’s true that the May production decrease was revised from 1.47 percent to 2.61 percent. But with Boeing’s related and manufacturing and safety-related woes continuing to multiply, who would have expected that outcome?

And partly as a result of this two-month net gain, after-inflation aircraft and parts output as of June is 7.83 percent higher in real terms than in pre-pandemicky February, 2020 – a much faster growth rate than for manufacturing as a whole.

The big pharmaceuticals and medicines sector (which includes vaccines) registered a similar pattern of results, although with much smaller swings. May’s originally reported 0.22 percent constant dollar output improvement was revised down to 0.15 percent. But June saw a 0.89 percent rise, which brought price-adjusted production in this group of industries to 9.33 percent greater than just before the pandemic.

Some good news was also generated by the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. Its monthly May growth was upgraded all the way up from the initially reported 0.19 percent to 1.18 percent. And that little spurt was followed by 0.99 percent growth in June.

Yet despite this acceleration, this sector is still a mere 2.27 percent bigger in real terms than in February, 2020, meaning that Americans had better hope that new pandemic isn’t right around the corner, that the Delta variant of the CCP Virus doesn’t result in a near-equivalent, or that foreign suppliers of such gear will be a lot more generous than in 2020.

As for manufacturing as a whole, the outlook seems as cloudy as ever to me. Vast amounts of stimulus are still being pumped into the U.S. economy, which continues to reopen and overwhelmingly stay open. That should translate into strong growth and robust demand for manufactured goods. The Trump tariffs are still pricing huge numbers of Chinese goods out of the U.S. market. And the shortage of automotive semiconductors may actually be easing.

But the spread of the Delta variant has spurred fears of a new wave of local and even wider American lockdowns. This CCP Virus mutation is already spurring sweeping economic curbs in many key U.S. export markets. Progress in Washington on an infrastructure bill seems stalled. And for what they’re worth (often hard to know), estimates of U.S. growth rates keep coming down, and were falling even before Delta emerged as a major potential problem. (See, e.g., here.)

I’m still most impressed, though, by the still lofty levels of optimism (see, e.g., here)  expressed by U.S. manufacturers themselves when they respond to surveys such as those sent out by the regional Federal Reserve banks (which give us the most recent looks). Since they’re playing with their own, rather than “other people’s money,” keep counting me as a domestic manufacturing bull.

(What’s Left of) Our Economy: As Trump’s Tariffs Stay in Place, U.S. Manufacturing Output Keeps Surging

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aerospace, aircraft, aircraft parts, Boeing, CCP Virus, China, coronavirus, COVID 19, Federal Reserve, gloves, imports, industrial production, inflation-adjusted output, manufacturing, masks, pharmaceuticals, PPE, real growth, recession, tariffs, Trump, Wuhan virus, {What's Left of) Our Economy

It’s tough to describe this morning’s manufacturing production figures from the Federal Reserve (for January) as anything but excellent, and anything but another strong endorsement of the stiff, sweeping tariffs former President Trump imposed on goods, especially from China. By shielding industry from a flood of imports from the People’s Republic, these trade curbs have undoubtedly contributed to a manufacturing recovery that entered its ninth straight month in January, and brought its production to within a whisker of pre-CCP Virus levels.

Moreover, as noted last month, the sector’s prospects seem bright, since not only has the entire economy kept recovering as CCP Virus vaccination proceeds and accelerates, but the aerospace industry revives both from its Boeing safety-related woes and the pandemic-related travel slump, and vaccine production surges.

Domestic manufacturers’ real output rose by 1.04 percent sequentially, increases were broad-based, and revisions were strongly positive. Although December’s previously reported 0.95 percent growth was downgraded to 0.94 percent, November’s was revised up for the second straight time (from 0.83 percent to 1.10 percent), and October’s for a third straight time (from 1.34 percent to 1.51 percent).

Due to these revisions, despite the severely recessionary impact of the CCP Virus both at home and abroad, domestic manufacturing’s inflation-adjusted 2020 production decline now comes in at just 2.01 percent, rather than the 2.63 percent reported last month. In addition, price-adjusted manufacturing output has advanced by 24.11 percent since its April nadir, and is now a mere 0.75 percent below its last pre-pandemic level last February.

As encouraging as the January figures and revisions were was their breadth. In fact, for the second straight month, the constant dollar output improvement came despite a small (0.72 percent) sequential dip in the automotive sector, whose major ups and downs have heavily influenced overall manufacturing production results for much of the pandemic period.

One cautionary note: January monthly after-inflation output growth for the big machinery category – which turns out production equipment for the rest of manufacturing, and devices crucial for other major industries like construction and agriculture – was only 0.52 percent, just half that for the entire manufacturing sector. And revisions were mixed.

More encouraging: Machinery’s growth has been strong enough that its real output is now back to within 1.12 percent of its February pre-pandemic levels.

January also saw accelerating growth in aircraft and parts production. Monthly output in expanded by 2.89 percent in January, December’s strong initially reported 2.78 percent increase is now judged to have been 3.03 percent, and November’s has been upgraded from 2.39 percent to 2.50 percent.

In fact, recovery in these aerospace sectors has been so vigorous that their output is now 6.77 percent greater than their February pre-pandemic levels.

Probably reflecting the vaccine effect, price-adjusted production of pharmaceuticals and medicines increased by 2.42 percent on month in January – the best showing since July’s 2.57 percent. But revisions were mixed, and this vital sector’s real output is only 4.11 higher than in February, just before the pandemic struck the U.S. economy in full force. On the brighter side, immense vaccine demand makes clear that the industry’s upside is enormous for the time being.

As for medical equipment and supplies – including virus-fighting items like face masks,face masks, protective gowns, and ventilators – their production performance keeps lagging badly. Inflation-adjusted output for this category (which encompasses many other products as well) actually fell in January for the second straight month – and by 0.54 percent. In fact, constant dollar output in this sector is 2.18 percent lower than during the last pre-pandemic month of February, 2020.

Making News: New Article on the GOP’s Future Now On-Line

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Capitol riots, conservatives, election 2020, GOP, impeachment, Making News, Republicans, The National Interest, Trump

I’m pleased to announce that my newest freelance article is on-line – an essay for The National Interest on the Republican party’s post-Trump and post-second-Trunp-impeachment future (and whether the former President is even likely to be left behind).

Here’s the piece, which I think you’ll find unusually interesting because of the poll results it describes about the demographic and ideological makeup of Trump voters last November. After all, they still comprise the vast bulk of Republicans. Please note: This is not a re-posting of a previous blog item. 

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

Our So-Called Foreign Policy: Biden’s Just Been Fooled Twice by Europe

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alliances, allies, America First, AstraZeneca, Belgium, Biden, CCP Virus, China, coronavirus, COVID 19, EU, European Union, Financial Times, globalism, health security, Northern Ireland, Our So-Called Foreign Policy, supply chains, The New York Times, Trump, United Kingdom, vaccines, Wuhan virus

It’s beginning to look like a pattern: President Biden keeps making clear that he’s determined to repair the vital U.S. alliance relationships he believes Donald Trump disastrously weakened, and the Europeans, anyway, keep flipping him the bird either explicitly or implicitly. And as the old saying goes, shame on anyone who’s been fooled more than once.

The explicit example came before Inauguration Day. The European Union (EU) – whose members were touted by candidate Biden as eager potential partners in a multilateral coalition against a common Chinese economic and national security threat – were on the verge of finalizing an investment treaty with Beijing. A top Biden aide publicly asked the EU to think twice and consult with the United States before proceeding. In response, the Europeans…proceeded. (See here for the details.) 

The implicit example came last week. During the campaign Mr. Biden, as noted here, made clear (except to every American journalist who covered the matter) that his plan to strengthen U.S. supply chains and make sure that the nation would never again be reliant on adversaries like China for crucial medical equipment and other vital products was by no means an “America Only” or even an “America First” proposal. Instead, one of its planks pledged to

“engage with our closest partners so that together we can build stronger, more resilient supply chains and economies in the face of 21st century risks. Just like the United States itself, no U.S. ally should be dependent on critical supplies from countries like China and Russia. That means developing new approaches on supply chain security — both individually and collectively — and updating trade rules to ensure we have strong understandings with our allies on how to best ensure supply chain security for all of us.” (Here’s the full document.)

In principle, this characteristically multilateral Biden approach made sense. Yet the blueprint came out scant months after (as reported here) many of these allies reacted to the outbreak of the CCP Virus by blocking exports of key medical equipment to ensure they could supply themselves.

You’d think that Mr. Biden, therefore, would have learned this lesson and recognized that the United States simply can’t afford to define “Made in America” as “Made in Lots of Other Countries, Too.” But you’d be wrong.

The day after his inauguration, the new President issued an executive order to create “a Sustainable Public Health Supply Chain.” And one of it directives charged various Cabinet and other agencies and senior advisers to study “America’s role in the international public health supply chain, and options for strengthening and better coordinating global supply chain systems in future pandemics….”

Again, therefore, Mr. Biden specified that this “sustainable public health supply chain” would stretch far beyond America’s shores, and that he believed various kinds of these “global supply chain systems” could ensure the nation’s health security in “future pandemics.”

How did the Europeans react? Little more than a week later, the European Union moved to restrict exports of the CCP Virus vaccine made by pharmaceutical giant AstraZeneca because its own supplies were so short. As a top EU official explained, “The protection and safety of our citizens is a priority and the challenges we now face have left us with no choice other than to act.”

The EU almost immediately reversed its decision – but only in part. It agreed to maintain shipments to the United Kingdom (which has recently left the union under a complicated agreement negotiated after the “Brexit” referendu vote of 2015) and to Northern Ireland (which is a part of the UK, but which remains part of the Union’s single market for goods). But the Europeans, according to The New York Times, still intend “to introduce export controls that could prevent any vaccines made in the European Union from being sent to non-E.U. countries, but without involving Northern Ireland….”

For good measure, great potential remains for a big vaccine-related dispute between the United Kingdom and the EU due to differences over which party is contractually entitled to the highest priority when it comes to vaccine shipments.

And the Financial Times reported that “Belgium, a key location for vaccine production in the EU, has notified the Commission of a draft health law that would give it new powers to curb medicines exports. The proposed legislation would allow Belgian authorities to restrict or ban the shipment of critical medicinal products and active ingredients, in case of shortages or potential shortages.”

Vaccines apparently are not included, but how could any responsible leader inside the EU or outside count on Belgium keeping its word during emergencies?  The same goes, incidentally, for the word of a United States led by an adult thinker, as opposed to a globalist determined to return to the pre-Trump days of Uncle Sucker.   

President Biden clearly needs to learn that lesson, too – and also needs to start asking himself whether the Europeans are holding his administration and his allies uber alles globalism up for ransom, and if the price for securing their cooperation on any number of issues is turning out to be dangerously unaffordable.

(What’s Left of) Our Economy: No Trade Highlights in the Year-End 2020 U.S. GDP Figures

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CCP Virus, coronavirus, COVID 19, exports, GDP, goods trade, gross domestic product, imports, inflation-adjusted growth, real GDP, real trade deficit, services trade, Trade, trade deficit, Trump, Wuhan virus, {What's Left of) Our Economy

With this morning’s release of the official figures on fourth quarter and 2020 U.S. gross domestic product (GDP), the process of closing the books on the Trump economy took a big step forward. For even though several more revisions of this advance result will be coming (starting next month), these data show preliminarily how the American economy shrank during the first CCP Virus year, and of course the final year of Trump’s presidency, and how the pandemic influenced the nation’s trade flows.

The headline figures will be widely reported, but are worth presenting anyway. The new numbers show that the economy shrank in 2020 in inflation-adjusted terms (the most widely followed gauge) of 3.50 percent. How bad is that? It’s not only the worst such performance since the Great Recession that followed the global financial crisis. (In 2009, real GDP sank by 2.53 percent.) It’s the worst such performance since 1946. The year after the end of World War II, when bloated levels of military output understandably nosedived, national output cratered by 11.60 percent.

Also discouraging – the sequential growth during the fourth quarter was only 3.95 percent at an annual rate. This pace both came in well below generally reliable forecasts like that put out by the Atlanta branch of the Federal Reserve, and means that little lasting momentum was created by the third quarter’s virus- and reopening-related record rebound of nearly 30 percent annualized after inflation.

The only positive takeaway possible this news is that this “miss” largely reflected government orders literally to shut down or keep shut down economic activity, as opposed to the kinds of market-related forces (and purely economic policy decisions) that normally determine growth and contraction rates. So once the pandemic is over, economic normality and some degree of growth should return. In fact on Tuesday, the International Monetary Fund projected that, by the end of 2022, the United States will be the country that’s back closest to its pre-CCP Virus growth path. (The Fund’s prediction, though, of course preceded these new subpar fourth quarter U.S. GDP figures.

The trade component of the GDP figures has been just as thoroughly distorted as the overall numbers. At $925.8 billion in price-adjusted terms, the 2020 trade gap set a new annual record, and represented an increase of 0.89 percent over 2019’s total. And this rise, however modest, was startling on its face since the shortfall almost always decreases when growth shifts into reverse. Should Donald Trump’s trade policies therefore be labeled a failure? We’ll find out more when the detailed year-end trade statistics as such come out (on February 5).

Interestingly, the new GDP figures indicate that most of the trade deficit’s year-on-year worsening ($8.2 billion in real absolute terms) came on the goods side, even though national and global services industries have taken the biggest economic hit by far during the pandemic. Yet the American inflation-adjusted services surplus dipped by only $24.7 million between 2019 and 2020.

For all of 2020, total U.S. real exports plummeted by 12.96 percent, from $2.5466 trillion to $2.2165 trillion. The latter is the lowest level since 2012, and the fall-off was the biggest percentage-wise since the 13.49 percent decline in 1958 – when trade flows were much smaller in absolute terms, and therefore big percentage moves in either direction much easier to generate.

Goods exports last year dropped by 9.46 percent in price-adjusted terms, from $1.7825 trillion to $1.6138 trillion. The latter was the lowest level since 2013, and the decrease the biggest in percentage terms since 2009’s 11.86 percent. (Goods and services trade figures began to be reported separately by the Commerce Department only since 2002).

As expected, the damage to services exports was considerably greater. They plunged by 19.20 percent between 2019 and 2020 – by far the biggest plunge ever – and last year’s $620.2 billion level was the lowest since 2010.

Overall U.S. imports worsened as well in 2020, sinking by 9.29 percent, from $3.4642 trillion to $3.1423 trillion. The year’s total was the lowest since 2015, and the drop the biggest in percentage terms since the 13.08 percent slump in 2009.

As with exports, the goods imports decrease was relatively modest. Yet their 6.05 percent decline (from $2.9234 trillion to $2.7644 trillion) was also the greatest relatively speaking since 2009’s 15.30 percent, and consequently they reached their lowest level since 2016.

Services imports, by contrast, contracted by 22.59 percent, from $543.1 billion to $420.4 billion. This decrease was by far the biggest ever by any measure, and dragged these purchases to their lowest level since 2009.

The fourth quarter’s combined inflation-adjusted goods and services trade deficit hit an all-time high for such three-month periods as well, with its $1.1211 trillion annualized total slightly surpassing the previous record (set in the third quarter) by ten percent.

Quarterly total real exports of $2.2770 trillion annualized were 5.10 percent higher than the third quarter total of $2.1665 trillion. But they remained well below the first quarter’s $2.4951 trillion – just before the virus’ first wave and full economic effects hit with full force.

The comparable goods exports total rose by 7.65 percent, to $1.7232 trillion annualized. But they, too are off their last pre-CCP Virus levels – by 2.89 percent.

After-inflation services exports improved sequentially, too – by 1.07 percent, from $581.3 at an annual rate to $587.5 billion. But in the first quarter, they stood at $730.1 billion – 19.53 percent higher.

Total real imports increased faster during the fourth quarter than total real exports, expanding by 6.67 percent, from $3.1855 trillion annualized to $3.3981 trillion. As a result, they’re now actually higher than their last quarterly pre-pandemic level – by 3.50 percent.

Constant dollar goods imports have risen robustly, too. They passed their first quarter level by the third quarter, and in the fourth quarter advanced by another 5.13 percent (from $2.8723 trillion annualized to $3.0238 trillion.

Real services imports improved significantly as well. Their $413.6 billion annualize fourth quarter total represents a 5.16 percent gain from the third quarter total. But they’re still 17.69 percent below their last pre-pandemic quarterly level of $502.5 billion.

Two other findings of note: First, although the increase in the annual constant dollar trade deficit reached an all-time high last year, its effect on economic performance was relatively slight. The trade gap’s widening accounted for 0.13 percentage points of that 3.50 percent annual real GDP drop. Proportionately, that’s less damage than was inflicted in 2019, when the higher trade deficit cut 0.18 percentage points from the 2.16 percent overall growth rate.

Second, on a quarterly basis, the trade bite was much deeper, as the deficit’s increase subtracted 1.52 percentage points off of the 3.95 percent sequential inflation-adjusted GDP increase. But not even this blow was the biggest ever relatively speaking – or even close. (The all-time worst such performance came in the second quarter of 1952, when 0.85 percent after-inflation annualized growth would have been a full 2.23 percentage points higher if not for the sequential increase in the trade deficit.)

(What’s Left of) Our Economy: More Evidence of U.S. Manufacturing’s Tariff-Bolstered Resilience

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CCP Virus, China, Commerce Department, coronavirus, COVID 19, imports, Jobs, Labor Department, manufacturing, recession, recovery, tariffs, The Wall Street Journal, Trade, Trump, value added, Wuhan virus, {What's Left of) Our Economy

I must confess that I’m more than a little confused. On the one hand, I read in The Wall Street Journal two days ago that the Trump administration “used tariffs to try to drive manufacturing back home, although growth in factory jobs stalled once the administration resorted to levies that drove up costs for many factories.”

On the other hand, I read in The Wall Street Journal yesterday that U.S.-based manufacturing is recovering “quicker than expected” from the CCP Virus- and lockdowns-induced American recession. Moreover, this stellar performance is taking place amid “higher costs for materials used in everything from kitchen cabinets to washing machines to automobiles.”

Stranger still: Unquestionably, among the cost drivers for these materials have been those Trump tariffs, especially on imports from China – which are not only wide-ranging (covering some $360 billion worth of Chinese-made products when they were imposed in phases), and steep (with most standing at 25 percent).

In fact, “stellar” really isn’t the best adjective for the manufacturing surge. Try “record-shattering.” For the Commerce Department’s “GDP by Industry” statistics show that between the second and third quarters of this year, manufacturing value-added (an output measure that tries to eliminate the double-counting that results from including in manufacturing production levels both final products and all the parts, components, and materials that go into those products) shot up by 13.34 percent at an annual rate. That’s not only never happened before. It’s never come close to happening before – at least since 2005, when the relevant data series began.

To be fair, this growth stemmed from the rubberband-like effect of partial virus-related reopenings of economic activity. Specifically, it followed a record 12.47 percent nosedive between the first and second quarters. But who can reasonably doubt that the immense scale of the Trump tariffs suppressed the amount of Chinese goods that could have satisfied this renewed demand, as they had done so typically in the recent past – especially since China’s export machine recovered exceptionally quickly from the People’s Republic’s own virus outbreak and massive shutdowns?

Moreover, who can reasonably doubt that the exclusion of these imports from the U.S. market more than offset whatever price increases the tariffs created? Because however much these levies are reducing companies’ earnings and profits, every sale lost to a China-based rival – whether at home or abroad – means much less in the way of earnings and profits. 

And this strong American manufacturing growth pickup has put an end to that short-lived manufacturing jobs slowdown. From April of last year (when the CCP Virus’ economic impact peaked on a monthly basis ) through December, Labor Department data show that U.S. industry’s payrolls are up by 820,000 – much faster growth than the 37,000 increase during the same period in 2019. Of course, the incredibly abnormal sudden stop-and-start of virus-era economies not just in the United States but the world over (and in largely unsynchronized ways) sharply limits the use of all such comparisons, because they have so relatively little to do with the economic fundamentals.

At the same time, though, it’s entirely reasonable to expect U.S. manufacturing production and employment to keep expanding as post-CCP Virus normality returns. And as long as the Trump tariffs remain largely in place, the prospect of a renewed Chinese import flood will be one major headwind that domestic industry won’t have to fear.

(What’s Left of) Our Economy: Why China Really is Like Nazi Germany

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Albert O. Hirschman, allies, Biden, China, dumping, Information Technology and Innovation Foundation, intellectual property theft, Japan, multilateralism, NATO, Nazi Germany, nuclear umbrella, Robert D. Atkinson, sanctions, South Korea, tariffs, tech industry, technology extortion, Trade, tripwire, Trump, {What's Left of) Our Economy

Because Nazi references can be so irresponsibly inflammatory, and therefore have been so often abused, I haven’t yet compared the threat posed by China to the rest of the world to that posed by Nazi Germany. (In my view, these comparisons have been used even more recklessly lately in U.S. domestic politics, chiefly to describe former President Trump and his views and policies.) So even though the People’s Republic, its ambitions, and its burgeoning capabilities do scare the living daylights out of me (and should scare you), I was nonetheless pretty surprised to see precisely this comparison just made by Robert D. Atkinson.

Atkinson is the head of a technology-focused Washington, D.C. think tank who I’ve known since the early 1990s. I’ve admired some of its work and haven’t been so crazy about other examples of its output, but I’ve never, ever considered him a boat-rocker, much less a rhetorical bomb thrower. In fact, my criticisms of the numerous studies and articles issued by his Information Technology and Innovation Foundation stem from my view that they’re way too cautious when it comes to countering China’s wide range of predatory economic practices (which include predatory technology policy practices like the theft and extortion of intellectual property).

And I’ve attributed much of this caution to the Foundation’s donor base – which is dominated by the U.S. and in some cases foreign tech and manufacturing companies that have worked so hard to send so much production and employment, and (voluntarily) so much technology to China for decades. It’s true that many of these firms are now crying foul as Beijing in recent years has aimed to strengthen its own entities’ positions at the foreigners’ expense. Yet their stubborn opposition to the unilateral Trump tariffs and some key sanctions on the Chinese tech outfits that have been major customers made clear their vain hope that they could somehow have their China cake and eat it, too.

Yet here comes Atkinson in the Fall issue of The International Economy (a publication that’s as – proudly – establishment oriented as they come) with a piece titled “A Remarkable Resemblance” likening China’s international economic policies to those of “Germany for the first forty-five years of the twentieth century” – which of course include the twelve Nazi years (1933-1945).

As the author argues, Germany during these decades was:

“a ‘power trader’ that used trade as a key tool to gain commercial and military advantage over its adversaries. Likewise, China’s trade policy is guided neither by free trade nor protectionism, but by power trade, with remarkably similar strategy and tactics to those of 1940s Germany. Understanding how Germany manipulated the global trading system to degrade its adversaries’ capabilities, entrap nations as reluctant allies, and build up its own industries for commercial and military advantage, just as China is doing, can shed light and point the way for solutions to the China challenge.”

Atkinson reports that this description of German policies came from a 1945 book by the important economist Albert O. Hirschman, which concluded that “[I]t’s is possible to turn foreign trade into an instrument of power, of pressure, and even of conquest. The Nazis have done nothing but exploit the fullest possibilities inherent in foreign trade within the traditional framework of international economic relations.”

The author rightly observes that

“Hirschman’s key insight was that some countries— in this case Germany under three very different government regimes from 1900 to 1945—focus not on maximizing free trade or even on protecting their industries, but on changing the relative power of nations through trade to achieve global power. Germany’s policies and programs were designed not only to advance its own economic and military power, but to also degrade its adversaries’ economies, even if that imposed costs on their own economy relative to a free trade regime.”

Germany also consistently sought, as the author points out “to make it more difficult for its trading partners to dispense entirely with trade with Germany, thus creating dependency.” And if that’s not enough to convince you about the comparison with China today, Atkinson himself notes that the German policy recipe also included massive industrial espionage, and Hirschman identified a major element as the equally massive dumping (selling at prices way below production costs) of goods into foreign markets to destroy overseas competition.

Atkinson’s diagnosis of the problem is so spot-on that it makes his recommended solution especially disappointing. Kind of like President Biden, he believes that the best internationally oriented option by far (on top of more effective support for U.S. industry, which I strongly support) is forming a “NATO for trade” that would be

“governed by a council of participating [free trading] countries…if any member is threatened or attacked unjustly with trade measures that inflict economic harm, DATO [the “Democratically Allied Trade Organization] would quickly convene and consider whether to take joint action to defend the member nation.”

I’ve already pointed out that the consensus on standing against China economically among America’s allies is way too weak to enable such multilateral approaches to succeed. But as long as we’re talking in terms of NATO – the military alliance between the United States and much of first Western and now Eastern Europe – and the Cold War, let’s not forget two other big problems. First, NATO (and this also goes for America’s security ties with South Korea and Japan) was never so much an alliance as a protector-protectorate relationship. The vast bulk of the heavy lifting was always done by the United States.

This allied security dependence in turn has produced the second major obstacle to a DATO’s effectiveness. Because the United States coddled allied defense free-ridingcand opened its markets one-sidedly for so long, the allies’ protectorate status was substantially cost-free economically, and even came with trade rewards no other country could remotely offer. (In addition, as I’ve also written, the creation of an American nuclear umbrella combined with the stationining of U.S. “tripwire” forces on the NATO frontlines in Germany also greatly minimized the military risks of siding with Washington.)

Today, however, economic power between the United States and the allies is more evenly distributed, and the allies’ profitable trade with and investment in China has, as noted in my aforementioned writings, greatly increased the economic price they would pay for lining up against China.

Still, by comparing the China threat to the Nazi threat, Atkinson’s article significantly bolsters the case for the United States escalating its response to the “all of society” level – or at least intensifying it qualitatively. Let’s just hope, as the author writes, that this time around the United States fully awakens a lot faster.