Making News: New Article on Why I Voted for Trump

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Big Tech, Black Lives Matter, censorship, China, Conservative Populism, conservatives, Democrats, economic nationalism, election 2020, entertainment, environment, freedom of expression, freedom of speech, George Floyd, Hollywood, Hunter Biden, Immigration, industrial policy, Joe Biden, Josh Hawley, journalism, Mainstream Media, Making News, Marco Rubio, police killings, regulation, Republicans, Robert Reich, Russia-Gate, sanctions, Silicon Valley, social media, supply chains, tariffs, taxes, technology, The National Interest, Trade, trade war, Trump, Truth and Reconciliation Commission, Ukraine, Wall Street, wokeness

I’m pleased to announce that The National Interest journal has just published a modified version of my recent RealityChek post explaining my support for President Trump’s reelection. Here’s the link.

The main differences? The new item is somewhat shorter, it abandons the first-person voice and, perhaps most important, adds some points to the conclusion.

Of course, keep checking in with RealityChek for news of upcoming media appearances and other developments.

Im-Politic: Why I Voted for Trump

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Big Tech, Black Lives Matter, censorship, China, Conservative Populism, conservatives, Democrats, economic nationalism, election 2020, entertainment, environment, free expression, freedom of speech, George Floyd, Hollywood, Hunter Biden, Immigration, impeachment, industrial policy, Joe Biden, Josh Hawley, journalism, Mainstream Media, Marco Rubio, police killings, Populism, progressives, regulations, Republicans, Robert Reich, Russia-Gate, sanctions, Silicon Valley, social media, supply chains, tariffs, taxes, technology, Trade, trade war, Trump, Truth and Reconciliation Commission, Ukraine Scandal, Wall Street, wokeness

Given what 2020 has been like for most of the world (although I personally have little cause for complaint), and especially Washington Post coverage of endless early voting lines throughout the Maryland surburbs of the District of Columbia, I was expecting to wait for hours in bad weather to cast my ballot for President Trump. Still, I was certain that Election Day circumstances would be a complete mess, so hitting the polling place this week seemed the least bad option.

Hence my amazement that the worst case didn’t pan out – and that in fact, I was able to kill two birds with one stone. My plan was to check out the situation, including parking, at the University of Maryland site closest to my home on my way to the supermarket. But the scene was so quiet that I seized the day, masked up, and was able to feed my paper ballot into the recording machine within about ten minutes.

My Trump vote won’t be surprising to any RealityChek regulars or others who have been in touch with on or off social media in recent years. Still, it seems appropriate to explain why, especially since I haven’t yet spelled out some of the most important reasons.

Of course, the President’s positions on trade (including a China challenge that extends to technology and national security) and immigration have loomed large in my thinking, as has Mr. Trump’s America First-oriented (however unevenly) approach to foreign policy. (For newbies, see all the posts here under “[What’s Left of] Our Economy,” and “Our So-Called Foreign Policy,” and various freelance articles that are easily found on-line.). The Biden nomination has only strengthened my convictions on all these fronts, and not solely or mainly because of charges that the former Vice President has been on Beijing’s payroll, via his family, for years.

As I’ve reported, for decades he’s been a strong supporter of bipartisan policies that have greatly enriched and therefore strengthened this increasingly aggressive thug-ocracy. It’s true that he’s proposed to bring back stateside supply chains for critical products, like healthcare and defense-related goods, and has danced around the issue of lifting the Trump tariffs. But the Silicon Valley and Wall Street tycoons who have opened their wallets so wide for him are staunchly opposed to anything remotely resembling a decoupling of the U.S. and Chinese economies and especially technology bases

Therefore, I can easily imagine Biden soon starting to ease up on sanctions against Chinese tech companies – largely in response to tech industry executives who are happy to clamor for subsidies to bolster national competitiveness, but who fear losing markets and the huge sunk costs of their investments in China. I can just as easily imagine a Biden administration freeing up bilateral trade again for numerous reasons: in exchange for an empty promise by Beijing to get serious about fighting climate change; for a deal that would help keep progressive Democrats in line; or for an equally empty pledge to dial back its aggression in East Asia; or as an incentive to China to launch a new round of comprehensive negotiations aimed at reductions or elimination of Chinese trade barriers that can’t possibly be adequately verified. And a major reversion to dangerous pre-Trump China-coddling can by no means be ruled out.

Today, however, I’d like to focus on three subjects I haven’t dealt with as much that have reinforced my political choice.

First, and related to my views on trade and immigration, it’s occurred to me for several years now that between the Trump measures in these fields, and his tax and regulatory cuts, that the President has hit upon a combination of policies that could both ensure improved national economic and technological competitiveness, and build the bipartisan political support needed to achieve these goals.

No one has been more surprised than me about this possibility – which may be why I’ve-hesitated to write about it. For years before the Trump Era, I viewed more realistic trade policies in particular as the key to ensuring that U.S.-based businesses – and manufacturers in particular – could contribute the needed growth and jobs to the economy overall even under stringent (but necessary) regulatory regimes for the environment, workplace safety, and the like by removing the need for these companies to compete with imports from countries that ignored all these concerns (including imports coming from U.S.-owned factories in cheap labor pollution havens like China and Mexico).

I still think that this approach would work. Moreover, it contains lots for folks on the Left to like. But the Trump administration has chosen a different economic policy mix – high tariffs, tax and regulatory relief for business, and immigration restrictions that have tightened the labor market. And the strength of the pre-CCP Virus economy – including low unemployment and wage growth for lower-income workers and minorities – attests to its success.

A Trump victory, as I see it, would result in a continuation of this approach. Even better, the President’s renewed political strength, buoyed by support from more economically forward-looking Republicans and conservatives like Senators Marco Rubio of Florida and Josh Hawley of Missouri, could bring needed additions to this approach – notably, more family-friendly tax and regulatory policies (including childcare expense breaks and more generous mandatory family leave), and more ambitious industrial policies that would work in tandem with tariffs and sanctions to beat back the China technology and national security threat.

Moreover, a big obstacle to this type of right-of-center (or centrist) conservative populism and economic nationalism would be removed – the President’s need throughout the last four years to support the stances of the conventional conservatives that are still numerous in Congress in order to ensure their support against impeachment efforts.

My second generally undisclosed (here) reason for voting Trump has to do with Democrats and other Trump opponents (although I’ve made this point repeatedly on Facebook to Never Trumper friends and others). Since Mr. Trump first announced his candidacy for the White House back in 2015, I’ve argued that Americans seeking to defeat him for whatever reason needed to come up with viable responses to the economic and social grievances that gave him a platform and a huge political base. Once he won the presidency, it became even more important for his adversaries to learn the right lessons.

Nothing could be clearer, however, than their refusal to get with a fundamentally new substantive program with nationally unifying appeal. As just indicated, conventional Republicans and conservatives capitalized on their role in impeachment politics to push their longstanding but ever more obsolete (given the President’s overwhelming popularity among Republican voters) quasi-libertarian agenda, at least on domestic policy.

As for Democrats and liberals, in conjunction with the outgoing Obama administration, the countless haters in the intelligence community and elsewhere in the permanent bureaucracy, and the establishment conservatives Mr. Trump needed to staff much of his administration, they concentrated on ousting an elected President they considered illegitimate, and wasted more than three precious years of the nation’s time. And when they weren’t pushing a series of charges that deserve the titles “Russia Hoax” and “Ukraine Hoax,” the Democrats and liberals were embracing ever more extreme Left stances as scornful of working class priorities as their defeated 2016 candidate’s description of many Trump voters as “deplorables.”

I see no reason to expect any of these factions to change if they defeat the President this time around. And this forecast leads me to my third and perhaps most important reason for voting Trump. As has been painfully obvious especially since George Floyd’s unacceptable death at the hands of Minneapolis police officers, the type of arrogance, sanctimony and – more crucially – intolerance that has come to permeate Democratic, liberal, and progressive ranks has now spread widely into Wall Street and the Big Business Sector.

To all Americans genuinely devoted to representative and accountable government, and to the individual liberties and vigorous competition of ideas and that’s their fundamental foundation, the results have been (or should be) nothing less than terrifying. Along with higher education, the Mainstream Media, Big Tech, and the entertainment and sports industries, the nation’s corporate establishment now lines up squarely behind the idea that pushing particular political, economic, social, and cultural ideas and suppressing others has become so paramount that schooling should turn into propaganda, that news reporting should abandon even the goal of objectivity, that companies should enforce party lines in the workplace and agitate for them in advertising and sponsorship practices, and that free expression itself needed a major rethink.

And oh yes: Bring on a government-run “Truth and Reconciliation Commission” to investigate – and maybe prosecute – crimes and other instances of “wrongdoing” by the President, by (any?) officials in his administration. For good measure, add every “politician, executive, and media mogul whose greed and cowardice enabled” the Trump “catastrophe,” as former Clinton administration Labor Secretary Robert Reich has demanded. Along with a Scarlet Letter, or worse, for everyone who’s expressed any contrary opinion in the conventional or new media? Or in conversation with vigilant friends or family?

That Truth Commission idea is still pretty fringe-y. So far. But not too long ago, many of the developments described above were, too. And my chief worry is that if Mr. Trump loses, there will be no major national institution with any inclination or power to resist this authoritarian tide.

It’s reasonable to suppose that more traditional beliefs about free expression are so deeply ingrained in the national character that eventually they’ll reassert themselves. Pure self-interest will probably help, too. In this vein, it was interesting to note that Walmart, which has not only proclaimed its belief that “Black Lives Matter,” but promised to spend $100 million on a “center for racial equality” just saw one of its Philadelphia stores ransacked by looters during the unrest that has followed a controversial police shooting.

But at best, tremendous damage can be done between now and “eventually.” At worst, the active backing of or acquiescence in this Woke agenda by America’s wealthiest, most influential forces for any significant timespan could produce lasting harm to the nation’s life.

As I’ve often said, if you asked me in 2015, “Of all the 300-plus million Americans, who would you like to become President?” my first answer wouldn’t have been “Donald J. Trump.” But no other national politician at that point displayed the gut-level awareness that nothing less than policy disruption was needed on many fronts, combined with the willingness to enter the arena and the ability to inspire mass support.

Nowadays, and possibly more important, he’s the only national leader willing and able to generate the kind of countervailing force needed not only to push back against Woke-ism, but to provide some semblance of the political pluralism – indeed, diversity – required by representative, accountable government. And so although much about the President’s personality led me to mentally held my nose at the polling place, I darkened the little circle next to his name on the ballot with no hesitation. And the case for Mr. Trump I just made of course means that I hope many of you either have done or will do the same.

Im-Politic: Why China’s U.S. Election Interference is a Very Big Deal

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battleground states, Center for Strategic and International Studies, China, Chinese Americans, collusion, Democrats, election 2020, elections, entertainment, Freedom House, Hollywood, Hoover Institution, Im-Politic, Mike Pence, multinational companies, Nancy Pelosi, National Basketball Association, NBA, Robert Draper, Robert O'Brien, social media, The New York Times Magazine, think tanks, Trump, Trump-Russia, Wall Street

It’s baaaaaaack! The Russia collusion thing, I mean. Only this time, with an important difference.

On top of charges that Moscow is monkeying around with November’s U.S. elections to ensure a Trump victory, and that the President and his aides are doing nothing to fend of this threat to the integrity of the nation’s politics, Democrats and their supporters are now dismissing claims administration about Chinese meddling as alarmism at best and diversionary at worst.

In the words of House Speaker Nancy Pelosi, commenting on recent testimony from U.S. intelligence officials spotlighting both countries’ efforts, to “give some equivalence” of China and Russia on interference efforts “doesn’t really tell the story. 

She continued, “The Chinese, they said, prefer [presumptive Democratic nominee Joe] Biden — we don’t know that, but that’s what they’re saying, but they’re not really getting involved in the presidential election.” ,

The Mainstream Media, as is so often the case, echoed this Democratic talking point. According to The New York Times‘ Robert Draper (author most recently of a long piece in the paper’s magazine section on Mr. Trump’s supposed refusal to approve anti-Russia interference measures or take seriously such findings by the intelligence community ), China “is really not able to affect the integrity of our electoral system the way Russia can….”

And I use the term “Democratic talking point” for two main reasons. First, the Chinese unquestionably have recently gotten into the explicit election meddling game – though with some distinctive Chinese characteristics. Second, and much more important, China for decades has been massively influencing American politics more broadly in ways Russia can’t even dream about – mainly because so many major national American institutions have become so beholden to the Chinese government for so long thanks to the decades-long pre-Trump policy of promoting closer bilateral ties.

As for the narrower, more direct kind of election corrupting, you don’t need to take the word of President Trump’s national security adviser, Robert O’Brien that “China, like Russia and Iran, have engaged in cyberattacks and fishing and that sort of thing with respect to our election infrastructure and with respect to websites.”

Nor do you have to take the word of Vice President Mike Pence, who in 2018 cited a national intelligence assessment that found that China “ is targeting U.S. state and local governments and officials to exploit any divisions between federal and local levels on policy. It’s using wedge issues, like trade tariffs, to advance Beijing’s political influence.”

You can ignore Pence’s contention that that same year, a document circulated by Beijing stated that China must [quoting directly] “strike accurately and carefully, splitting apart different domestic groups” in the United States.

You can even write off China’s decision at the height of that fall’s Congressional election campaigns to take out a “four-page supplement in the Sunday Des Moines [Iowa] Register” that clearly was “intended to undermine farm-country support for President Donald Trump’s escalating trade war….”

Much harder to ignore, though: the claim made last year by a major Hoover Institution study that

“In American federal and state politics, China seeks to identify and cultivate rising politicians. Like many other countries, Chinese entities employ prominent lobbying and public relations firms and cooperate with influential civil society groups. These activities complement China’s long-standing support of visits to China by members of Congress and their staffs. In some rare instances Beijing has used private citizens and companies to exploit loopholes in US regulations that prohibit direct foreign contributions to elections.”

Don’t forget, moreover, findings that Chinese trolls are increasingly active on major social media platforms. According to a report from the research institute Freedom House:

“[C]hinese state-affiliated trolls are…apparently operating on [Twitter] in large numbers. In the hours and days after Houston Rockets general manager Daryl Morey tweeted in support of Hong Kong protesters in October 2019, the Wall Street Journal reported, nearly 170,000 tweets were directed at Morey by users who seemed to be based in China as part of a coordinated intimidation campaign. Meanwhile, there have been multiple suspected efforts by pro-Beijing trolls to manipulate the ranking of content on popular sources of information outside China, including Google’s search engine Reddit,and YouTube.”

The Hoover report also came up with especially disturbing findings about Beijing’s efforts to influence the views (and therefore the votes) of Chinese Americans, including exploiting the potential hostage status of their relatives in China. According to the Hoover researchers:

“Among the Chinese American community, China has long sought to influence—even silence—voices critical of the PRC or supportive of Taiwan by dispatching personnel to the United States to pressure these individuals and while also pressuring their relatives in China. Beijing also views Chinese Americans as members of a worldwide Chinese diaspora that presumes them to retain not only an interest in the welfare of China but also a loosely defined cultural, and even political, allegiance to the so-called Motherland.

In addition:

“In the American media, China has all but eliminated the plethora of independent Chinese-language media outlets that once served Chinese American communities. It has co-opted existing Chineselanguage outlets and established its own new outlets.”

Operations aimed at Chinese Americans are anything but trivial politically. As of 2018, they represented nearly 2.6 million eligible U.S. voters, and they belonged to an Asian-American super-category thats been the fastest growing racial and ethnic population of eligible voters in the country.

Most live in heavily Democratic states, like California, New York, and Massachusetts, but significant concentrations are also found in the battleground states where the many of the 2016 presidential election margins were razor thin, of which look up for grabs this year, like Florida, Georgia, North Carolina, Texas, Michigan, and Pennsylvania.

As for the second, broader and indirect, Chinese meddling in American politics, recall these developments, many of which have been documented on RealityChek:

>U.S.-owned multinational companies, which have long profited at the expense of the domestic economy by offshoring production and jobs to China, have just as long carried Beijing’s water in American politics through their massive contributions to U.S. political campaigns. The same goes for Wall Street, which hasn’t sent many U.S. operations overseas, but which has long hungered for permission to do more business in the Chinese market.

>These same big businesses continually and surreptitiously inject their views into American political debates by heavily financing leading think tanks – which garb their special interest agendas in the raiment of objective scholarship. By the way, at least one of these think tanks, the Center for Strategic and International Studies, has taken Chinese government money, too.

>Hollywood and the rest of the U.S. entertainment industry has become so determined to brown nose China in search of profits that it’s made nearly routine rewriting and censoring material deemed offensive to China. And in case you haven’t noticed, show biz figures haven’t exactly been reluctant to weigh in on U.S. political issues lately. And yes, that includes the stars of the National Basketball Association, who have taken a leading role in what’s become known as the Black Lives Matter movement, but who have remained conspicuously silent about the lives of inhabitants of the vast China market that’s one of their biggest and most promising cash cows.

However indirect this Chinese involvement in American politics is, its effects clearly dwarf total Russian efforts – and by orders of magnitude. Nor is there any reason to believe that Moscow is closing the gap. In fact, China’s advantage here is so great that it makes a case for a useful rule-of-thumb:  Whenever you find out about someone complaining about Russia’s election interference but brushing off China’s, you can be sure that they’re not really angry about interference as such. They’re just angry about interference they don’t like.`      

Our So-Called Foreign Policy: Globalists Keep Abusing the Lessons of History

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America First, globalism, John Maynard Keynes, Jonathan Kirshner, Our So-Called Foreign Policy, The New York Times, Trump, Versailles treaty, Wall Street, Woodrow Wilson, World War I

Although I’m a long ways past high school, I wouldn’t be at all surprised to learn that students are still being taught that the main lesson Americans should draw from their country’s foreign policy during the early decades of the twentieth century is that standing aloof from world affairs is a catastrophic mistake.

The most familiar feature of this claim holds that by preventing the United States from joining the League of Nations after World War I, America’s so-called isolationists guaranteed that no effective counter to fascist aggression could be mounted, and thereby guaranteed the outbreak of a far more destructive global conflict. But an economic indictment has been leveled against U.S. policy during those years as well.

As made clear between the lines of a December 7 New York Times op-ed piece, supporters of the foreign policy globalism opposed by President Trump and most of his backers have long ardently believed that international financial policies after the First World War also took a disastrous, “America First”-type turn. One big problem, though – history actually shows that the fundamental mistake Washington made was not too little international economic engagement after the war, but too much during it.

In the article – which usefully commemorates the hundredth anniversary of a seminal book by iconic twentieth century British economist John Maynard Keynes – Boston University political scientist Jonathan Kirshner rightly lauds Keynes’ eloquent case against the economic punishments levied against Germany by the 1919 Versailles peace treaty. He’s also right in criticizing the United States’ “stubborn” and “shortsighted” insistence that its allies fully repay the enormous war debts they’d racked up to America.

As Keynes himself insisted, those obligations were “a menace to financial stability everywhere,” imposing a “crushing burden,” that would be “a constant source of international friction.” An international financial order that was little more than a tangle of debts and reparations, he warned, could hardly “last a day.”

Kirshner, though, looks like he has a hidden – globalist – agenda. Echoing today’s criticisms of Mr. Trump’s trade and foreign policies (which, I need to note, have been far from models of consistent America First-ism), he condemned American leaders of the 1920s for ending a “brief flirtation” with internationalism (a pre-Trump term for globalism) under President Woodrow Wilson and returning to “nationalism and nativism.” “Domestic demands,” he continued, were placed above “global concerns.”

Even more pointedly, he repeated Keynes’ contention that it “will be a disaster for the world if America isolates herself.”

Nonetheless, you don’t need to buy into America First-ism or even simply criticize globalism to recognize that Kirshner (and Keynes himself, for that matter), have completely ignored the financial run-up to Versailles. During these years, private American banks lent massively to the belligerents before the U.S. entry into the war in April, 1917 (overwhelmingly to the allies, but including minor credits extended to Germany), and after America joined the conflict, Washington took over.  (Here’s a handy brief history.)

In other words, the eventually ruinous war debts amassed by the European victors were possible largely because Wall Street massively intervened in the conflict financially in its early years, and because the U.S. government continued underwriting the fighting in its latter stages.

Also – and comparably – crucial: Just as America’s very entry into the war both guaranteed its prolongation and ensured that its ending would become a exercise in self-righteous, destabilizing, and ultimately disastrous vengeance rather than the kind of cold-blooded but hard-headed diplomacy that had contained the damage from previous conflicts, its loans to the belligerents worsened the destructiveness of the fighting and the consequent challenges of reconstruction. Indeed, Wilson himself was worried that Wall Street’s largesse was helping the allies in particular to wage war far longer than they otherwise could have afforded, and helped ward off the sheer exhaustion that would force a negotiated peace.

Thus the real lesson of America’s early 20th century financial diplomacy isn’t that international engagement is always bad, or that international non-involvement is always good.  It isn’t even that the United States should never seek to have its cake and eat it, too – which was clearly the expectation of Wilson’s successors.  It’s that in this particular instance, America’s combination of actions backfired. 

And let’s not forget a broader lesson for students of foreign policy and its record that’s reinforced by Kirshner’s article:  Beware of scholars cherry-picking history.   

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tags

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

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

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

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

(What’s Left of) Our Economy: Latest Trade Deficit Scuffles Still Missing Lessons of 2008

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bubbles, finance, Financial Crisis, free trade agreements, G20, Germany, Global Imbalances, investment, Japan, manufacturing, offshoring, tax reform, Trade, Trade Deficits, trade policy, trade surpluses, Trump, Wall Street, {What's Left of) Our Economy

Roughly ten years after it broke out, it’s still incredibly rare to see economists or pundits link U.S. and resulting global trade imbalances with the financial crisis. So I’m always thrilled – as I tweeted this past week – to see it ever happen. All the same, even this insightful column by Reuters’ Edward Hadas simply dances around the crucial link between these imbalances and American trade policies, and in particular, their offshoring-friendly nature.

In a March 15 essay, Hadas commented on the German (and other countries’) trade surpluses that have attracted such attention this past week for two main reasons: German Chancellor Angela Merkel’s first-ever meeting with President Trump, and a conclave taking place at the same time of the finance chiefs of the world’s 20 leading economies (the so-called G20). The author’s main contention is indisputable as far as it goes. According to Hadas, the real problem with these imbalances is financial:

“The euros, pounds and dollars which Germany, Korea et al accumulate inevitably land in the global financial system. There would be no problem – only gains all round – if these monies funded valuable infrastructure, productive factories and other assets which can generate a reasonable economic return.

“Too often, though, though, the extra currency winds up supporting counterproductive finance. It backs ultimately ruinous property speculation, lends support to chronically weak governments, encourages unsustainable consumer spending and destabilises developing economies, not to mention enriching banks and bankers and stimulating corruption. A typical example: the recycled dollars from the U.S. trade deficit helped fund the American housing bubble whose pop created the 2008 crisis.”

But what Hadas – and so many others – fail to do is explain adequately why deficit countries (like the United States) make such dangerously shortsighted choices with their windfalls. Three main (and not mutually exclusive) reasons have been served up. First, financial systems in the deficit countries (especially the United States, which runs the biggest deficits) have over-rewarded uses of capital that produce the fastest possible payoffs, and under-reward longer-term projects. The result is too much investment that encourages speculation, financial monkey business, and simple consumption, and too little investment that builds factories and laboratories and funds other activities that create wealth more slowly, but on a more sustainable basis.

Second, such irresponsible uses of capital have become practically inevitable if only because the deficits have been so enormous, and so much money has become available. When anything is in such abundance, and therefore costs so little, most economists would agree that there’s little reason to use it carefully. After all, it looks like a sure bet that more of that thing at very attractive prices will be readily available.

A somewhat different version of this argument has to do with what economists call “moral hazard.” It argues that the American financial system used over-abundant money so recklessly at least partly because investors felt certain that they’d get bailed out of most or all of their mistakes by government. So why not take maximum advantage of what seems to be a “heads, we win; tails, we lose” proposition?

The third explanation for the irresponsible use of resources focuses on the consumption-heavy nature of the economies of the deficit countries. (This argument also tends to note that the surplus countries frequently try to limit and even depress consumption.) The more capital they take in, in other words, the more such spending (as opposed to productive investment) is likeliest to result either because such behavior is encouraged by government, because a “live for today” has been produced by that country’s culture, or because of some combination of the two.

Whenever something as a big as a global financial crisis strikes, many culprits are responsible. And all of the above explanations should be taken very seriously (along with others, like lax financial regulation). But what Hadas and all the rest continue to miss is how the world trade system, national trade policies, and the trade flows they have fostered have actively fostered in deficit countries like the United States a neglect of productive activities like manufacturing (which is so heavily traded).

Specifically, as Washington in the 1990s and 2000s signed more and more trade agreements structured to encourage multinational companies from all over the world to supply U.S. consumers from locations in super low-cost and virtually unregulated developing countries like China and Mexico, American leaders and other elites (e.g., in the media) naturally sought to rationalize their decisions by spreading the message that sectors of the economy like manufacturing (and the income loss produced by the accelerated offshoring that rippled throughout so much of the Main Street economy) could be neglected with impunity. And the administration of George W. Bush (along with Congress of course) and the Federal Reserve chaired by Alan Greenspan underwrote America’s spendthrift ways with big budget deficits and ultra-low interest rates, respectively.

Even worse, these destructive trends fed on themselves. The more offshoring seemed to pay off, and the more domestic manufacturing operations looked like losing — or at least anachronistic — propositions, the less interested financiers became in investing in them. So the amount of productive activity on which to use incoming capital to start with began shriveling. And the less productive activity available to sustain Main Street living standards responsibly (i.e., mainly through earnings), the greater the political establishment needed to prop up those living standards by providing more easy money — at least if it wanted to stay in power while maintaining the offshoring status quo.

Ironically, even though Hadas emphasizes regulation as the answer to global imbalances, his particular focus has big trade implications:

“Regulation can do more than strengthen bank capital ratios. It can reform the system, so trade surplus funds are not directed to economically counterproductive uses. That will be tough, both politically and practically. But it should be easier – and will be far more helpful – to solidify finance than to try to change the national characters of Germany or Korea.”

I’m all in favor of channeling the use of trade surplus funds by deficit countries into productive activity. In fact, I strongly support requiring such uses by U.S. multinational companies if much-discussed tax reform finally succeeds in persuading them to bring home the vast amounts of earnings they’re currently stashing abroad to avoid paying higher U.S. corporate rates. 

But this requirement needs to be accompanied by (at the very least) strong measures to keep out foreign-made goods that benefit from predatory trade practices like dumping, subsidization, and intellectual property theft. Otherwise, foreign competitors will be able to keep undercutting their domestic American competition in the U.S. market, and these new productive investments will fail. It’s also entirely likely, however, that more sweeping trade curbs will be needed – to offset the scale economy disadvantages created by U.S.-based firms’ inability to sell into so many important markets and their rivals’ ability to sell freely in their home countries and the United States.

And this is in fact where recognition is needed that the trade problem created by American policy concerns not simply inducements to offshore, but the coddling of protectionism in high income countries like Japan and Germany.

The bottom line: As indicated in a post last week, the United States may have to accept that even reasonably balanced foreign trade is not achievable with competitors holding radically different economic priorities (as I argued last week was precisely the case with Germany), and that reducing trade flows is a more than acceptable price to pay for preventing financial crises caused by imbalanced trade. When you add in America’s great capacity for much more self-sufficiency in a wide range of manufactured good, that seems like a more than acceptable trade-off to me. More important, it’s where the Trump administration, admittedly in fits and starts, could be leading us.

Im-Politic: Comey’s Real Motivation?

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2016 election, Charles Krauthammer, classified material, Eric Holder, FBI, Financial Crisis, Hillary Clinton, Im-Politic, indictment, James Comey, prosecutors, rule of law, Wall Street

Possibly the only certainty surrounding the FBI’s decision not to indict Hillary Clinton for mishandling sensitive government documents is that we’ll be buried in analysis and commentary for the foreseeable future. That’s why it’s so remarkable that the most important point we’ll hear about the controversy may have already been made – by nationally syndicated conservative columnist Charles Krauthammer.

Addressing FBI Director James Comey’s unwillingness to recommend criminal charges against the presumptive Democratic presidential candidate, Krauthammer provided an explanation that’s far more convincing than the claims that Comey’s conclusion was legally justified (unless the “gross negligence” set as a bar for criminality is indeed substantially different than the “extreme carelessness” the FBI did find).

The Krauthammer take is also more convincing than the charges filling the air that the Republican Comey was responding to political pressure from a Democratic administration, or that he absolved Clinton in exchange for an implicit or explicit promise of an official job if she won the White House. Not that this kind of sleaze is unknown in American politics. But these accusations and insinuations apparently clash with everything said over the years by Democrats and Republicans, including hyper-partisans, about Comey’s integrity.

Krauthammer’s alternative hypothesis was more comforting – but only somewhat so. In his view, Comey wound up opposing criminal prosecution for fear of decisively influencing the presidential election – the nation’s most important political contest – with a legal decision. In Krauthammer’s words, Comey:

“knows if he had indicted her, that’s the end of her campaign. That will be the event of the 2016 campaign history. He will be the — it will be the decision that sways everything the most. I think he didn’t want to be that. And I think it’s because she is running. Not so much she is a Clinton, not so much because of her reputation and all that and her power, but I think Comey did not want to be the person that history remembers as changing the course of this presidential election.”

From a purely human and political standpoint, such reluctance to shape political outcomes through even entirely legitimate exercises of legal authority would be entirely understandable. In many ways, the nation still hasn’t recovered from the Supreme Court’s involvement in the 2000 presidential election’s Florida recount. Another legal decision that further poisons the atmosphere and further polarizes the electorate is the last thing America needs.

Nonetheless, if this was indeed Comey’s rationale, then he greatly overstepped his job description. However defensible this judgment on the merits, precisely because law enforcement and politics should be kept as separate as possible, Comey would have had no business deciding a criminal case based on his (or anyone’s) sense of how even the most important election would be affected. The scope for abuse is so vast that this simply can’t be the justice system’s call.

In fact, such reasoning would be disturbingly reminiscent of former Attorney General Eric Holder’s refusal to prosecute Wall Street kingpins for their role in fostering the financial crisis because he was

“concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

Prosecutors are supposed to prosecute – nothing more, nothing less. If they don’t feel free to pursue lawbreakers with a “chips fall where they may” attitude, they inevitably undermine the foundational American belief that no person or institution is above the law. Comey may have had the best of intentions, but even if a sincere and reasonable belief that the public interest required legal restraint motivated him, he would stand guilty of betraying the public trust.

(What’s Left of) Our Economy: New Data Showing the Fed Really has Worsened Inequality

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asset prices, Bank of America, Ben Bernanke, bubbles, Federal Reserve, finance, housing, inequality, interest rates, Janet Yellen, QE, quantitative easing, recovery, stocks, Wall Street, zero interest rate policy, ZIRP, {What's Left of) Our Economy

Here’s a shock! A study claiming that the Federal Reserve’s historically unprecedented easy money policies have supercharged Wall Street (and the rich) and left Main Street (and the rest) in the dust! And it comes from Wall Street!

The debate over how the central bank’s zero interest rate policy (ZIRP) and quantitative easing bond-buying program (QE) has impacted inequality in America has been just as heated as the debate over how these decisions have impacted economic growth and the prospects for recreating real national prosperity.

The critics charge that easy money has greatly widened the rich-poor gap, largely by boosting incentives to buy and own stocks, and thereby fueling a long, powerful bull market that has overwhelmingly benefited the wealthy because they dominate stock ownership.

The mainstream Fed position was stated by Chair Janet Yellen at the September press conference following the decision to keep interest rates on hold:

“It is true that interest rates affect asset prices, but they have a complex effect through balance sheets, through liabilities and assets. To me, the main thing that an accommodative monetary policy does is put people back to work. And since income inequality is surely exacerbated by a high—having high unemployment and a weak job market that has the most profound negative effects on the most vulnerable individuals, to me, putting people back to work and seeing a strengthening of the labor market that has a disproportionately favorable effect on vulnerable portions of our population, that’s not something that increases income inequality.”

Her predecessor, Ben Bernanke, has made similar points, albeit with more reservations.

A new study from Bank of America, however, contains some data strongly indicating that the Fed’s critics deserve to win this clash hands down. For example, the B of A researchers examined the fate of various possible uses of $100 since the Fed began massively supporting the U.S. economy after the collapse of Lehman Brothers in the fall of 2008. The main findings? A $100 dollar investment in a standard stock and bond portfolio during this time would have more than doubled in value. But a $100 dollar wage would be worth only 14 percent more.

The same methodology also reveals that the financial system is channeling much more credit to the wealthy than to the rest. Thus for every $100 they raised at the start of 2010, venture capital and private equity funds are now raising $275. But for every $100 of mortgage credit extended in America since then, just $61 is being loaned and accepted today. And prime real estate in the nation has appreciated in value more than ten times as much as all U.S. residential real estate.

These results (and others in the study) hardly end the debate over the Fed and inequality. Bernanke and Yellen still make powerful “counterfactual”-based arguments – i.e., claiming that as bad as the situation is now, it would be even worse had the central bank not acted so decisively. And B of A’s possible motives need to be noted. Generally speaking, the financial sector has been campaigning strongly for a Fed rate hike because rock bottom interest rates have greatly reduced the profitability of lending.  (In that respect, this report may not be such a shock.)

But the B of A study should greatly increase the burden on the Fed to demonstrate that its monetary policies haven’t been little more than a boondoggle for the nation’s upper classes – not to mention a flop in and possibly an obstacle to restoring genuine economic health.

Im-Politic: Why CNBC’s Bias isn’t Simply Partisan

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bailouts, Ben Carson, Bernie Sanders, Black Lives Matter, boardroom liberalism, capitalism, Clinton Democrats, CNBC, crony capitalism, Democrats, Donald Trump, free markets, globalization, Im-Politic, Immigration, Larry Kudlow, media, media bias, Noam Scheiber, Obama, Occupy Wall Street, Tea Party, Trade, Wall Street

Many of those nice enough to comment on my post yesterday on CNBC’s awful presidential debate performance have attributed the often abusive questions posed by the moderators as evidence of liberal/Democratic media bias. And that’s what some of the Republican candidates charged as well. My response? I wish the fundamental problem was that obvious – and therefore that correctable, at least in theory.

Instead, what the network’s evident mindset represents is the much more insidious development of a national political class homogeneous enough to share fundamental values, assumptions, and positions (with all too superficial variations) and powerful enough to ignore and, when necessary, keep out of the governing system against-the-grain views.

Part of this analysis reflects my own experience as a frequent CNBC viewer – and not only as background noise during the workday. I think the network’s coverage of finance, business, and economic headline developments is acceptable, and it at least mentions major breaking news in other spheres. Yes, I could watch Bloomberg, or Fox Business. But as my father used to say, we’re all creatures of habit, and my sampling of the newer competition has not yet persuaded me to change the channel permanently. Nor have I yet found any other continuous sources of reasonably serious hard news.

And when I hear or see the letters, “CNBC,” my first reaction isn’t “Democrats.” Quite the opposite. Even with the blatantly partisan Larry Kudlow gone from daily programming, the network clearly is tailoring its material towards the investment community and the steadily shrinking pool of American retail investors – groups not known for progressive leanings. In fact, with the latter ever more skewed toward the upper income strata, it hasn’t been surprising to see CNBC broadcast more and more segments that openly celebrate the “lifestyles of the rich and famous.” That’s of course on top of the broader tendency of the business press to create and glorify the “Superstar CEO” – a practice that (amazingly? or not?) has survived the financial crisis and ensuing recession.

When it comes to policy – overwhelmingly economic policy, of course – CNBC is firmly in the free market camp. Minimal taxation and regulation are constantly touted, as are free trade agreements, un- or barely fettered immigration policies, and the supposedly iron, unchangeable, undeniable realities that make them necessities – the historically inevitable and beneficent globalization of business; the equally inexorable triumph of capitalism worldwide; and the resulting supreme imperative of participating in and growing foreign market opportunities. And when the focus is domestic, CNBC therefore places on a pedestal “business-friendly” states, which unlike their more neanderthal (usually Democratic governed) counterparts are supposedly wise enough to spare companies of nearly all the costs of public goods and services – and to discourage unions.

It’s true that much else that’s central to CNBC’s worldview isn’t very consistent with free markets. But institutions like activist central banking are accepted not so much as regulatory exceptions to a more liberal rule, but as fixtures without which the economic landscape would be unrecognizable, and therefore literally inconceivable. Similarly, although the bailouts of non-financial companies were positively scorned, the bailout of Wall Street was (a little sheepishly) accepted because, well, it beat global destruction.

These exceptions to free market norms have convinced many that CNBC is extolling not genuine market capitalism, but crony capitalism, in which the biggest, most politically connected businesses manipulate government to serve their own selfish purposes and especially to marginalize newer, less influential competitors or even prevent them from forming. I agree that the network isn’t inclined to assail this form of corruption. (Of course the pugnacious Rick Santelli is a prominent exception.) But another implicit assumption needs to be added here to flesh out the full CNBC worldview, and it concerns the ostensible virtues of what I’ve referred to as “boardroom liberalism.”

This is a school of thought identified by New York Times reporter Noam Scheiber, and he put it better than I ever could:

“It’s a worldview that’s steeped in social progressivism, in the values of tolerance and diversity. It takes as a given that government has a role to play in building infrastructure, regulating business, training workers, smoothing out the boom-bust cycles of the economy, providing for the poor and disadvantaged. But it is a view from on high—one that presumes a dominant role for large institutions like corporations and a wisdom on the part of elites. It believes that the world works best when these elites use their power magnanimously, not when they’re forced to share it. The picture of the boardroom liberal is a corporate CEO handing a refrigerator-sized check to the head of a charity at a celebrity golf tournament. All the better if they’re surrounded by minority children and struggling moms.”

Scheiber used the term to describe the outlook of President Obama, and obviously it holds for Clinton-style Democrats, too. Just as important, because the most powerful ideologies and worldviews can accommodate a fair amount of diversity, it’s easy to imagine a conservative version of “boardroom liberalism,” and in fact, between the two of them, they dominate the perspectives of the establishment politicians, senior bureaucrats, media figures, and so-called policy intellectuals that in turn dominate American politics and discussion thereof.

In my view, this is the perspective that reigns at CNBC, and throughout the establishment media. And although it’s surely closer to the Democratic Party mainstream than to the Republican rank and file, and reserves special contempt for the Tea Party faction (as well as religious conservatives), it doesn’t hold much affection for Bernie Sanders and the Occupy Wall Street crowd, either.  (History-induced guilt typically inspires more indulgence for Black Lives Matter.)

I’m sure it’s clear why an ideologically uniform press corps is as big a threat to a democracy worthy of the name as an ideologically uniform party system. But an even greater danger is posed when the same precepts unite those media and political worlds – along with their colleagues in think tank ranks and academia. Conventional wisdoms become completely ossified and the decision-making apparatus becomes almost impervious to fundamentally new ideas – even in times of crisis.

When powerful challengers from utterly alien universes do loom on the horizon (e.g., a Donald Trump or a Ben Carson, Tea Party-ers uninterested in politically convenient compromises), all the major occupational groups and ideological sects comprising this polyglot establishment rush to join forces against the invaders. And they employ all the (predominantly verbal) weapons they can muster, ranging from slanderous invective to loudly professed indifference to chortling condescension to outright ridicule. This counterattack, moreover, is conducted with unusual vehemence when the outsiders make perfectly clear that they have no use, much less respect, for the conventional wisdom-mongers.

On the one hand, it’s comforting that a lively alternative media-verse has emerged in recent years – precisely in response to the power, intolerance, and resulting arrogance of the establishment. On the other hand, the establishment still seems firmly ensconced – in journalism and in both parties. Since it’s still early in the 2016 presidential cycle, this year finally being different can hardly be ruled out. But as Yogi Berra once said, “It gets late early out here.”