Sunday, March 4, 2018

About those Tariffs

The President, through his adviser Peter Navarro, has offered a powerful argument for tariffs on steel and aluminum: national security.  National security, no pun intended, is the ace of trumps in the policymaker's deck.  But it is so powerful an argument that only one counterargument is available: national security.  Everything else is just whinging about the tax that must be paid to cover the cost of the national security interest advanced by the tariff.   Orrin Hatch says that the steel and aluminum tariffs will be a "tax" on the American people.  Yes, Senator, they will be.  We pay overt taxes to fund battleships, so why not pay indirect taxes to protect strategically vital industries?  Hatch's claim is true; it just isn't relevant.

But, tariffs being a political football, all sorts of irrelevancies must be dealt with.  The mainstream media are fixated on jobs, not wonkery.  They don't really care about the national security argument.  They don't even understand it.  The President is implying, correctly in my view, that for our national security, we need to roll our own steel, just as we must grow our own staple foods and supply our own energy.  We must not depend on the kindness of strangers for our survival.  

Mr. Navarro has been making that case on the Sunday morning news shows, but the hosts won't engage him on that level.  They tell us instead that more people have jobs using steel than making it.  So what?  We don't need those jobs for our national security.  GM may sell fewer cars, and we may drink less beer.  We will need to adjust for those losses somehow.  But we must roll our own steel, says Mr. Navarro, so what else matters?  At least, that's what he could say.  Instead, Navarro denies that the downstream effects will be significant.  No point relying on the trumpiness of your card if you can rely on its just having a  higher face value than the other guy's.  And why admit you're imposing a tax if you don't have to admit it?  

To make matter worse, Mr. Navarro cannot resist offering an irrelevant argument of his own, viz., that the US is for free trade if it's fair.  That argument neuters his trump card.  Would Mr. Navarro be for fair trade if it meant importing steel rather than producing it?  What if China responded to our steel tariffs by offering, in exchange for their removal, to lower the tariffs on US goods and to enforce US intellectual property claims?  That would certainly make the tariffs look like a stroke of genius (for a while, but see below).  But it would give the lie to the principal argument advanced by the White House for the tariffs in the first place.  

Both Trump and Navarro are China bashers from way back.  Their concern was not that China was preventing us from making our own strategic goods.  Their concern was jobs.  As Navarro says, we are exporting our wealth and jobs under current trade rules.  Well, what do we care about more?  Would we give up the strategic goods argument if we could get our jobs and wealth back?  I don't understand the WTO's rules, and maybe the organization is just where the rest of the world unites to fight the US.  But, for some reason, WTO rules allow nations to impose tariffs for national security reasons.  Is Trump's national security claim just eyewash for the WTO?  Could the best argument for the tariffs be a lie?  Would Trump lie?  

It would be nice if the MSM could ask Mr. Navarro about the conflict between his national security argument and his free trade argument, but they don't understand the implications of the national security argument, so they don't.  Rather, they address the national security argument by pointing out that the tariffs will piss off our allies, which is bad for national defense in a different dimension.  That is the DOD's position, but, even if we take it at face value, is it reason enough for us not to make our own steel and aluminum?  

The problem, as with all things Trump, is execution.  Was there no way through diplomacy and negotiation to reach an agreement with our allies whereby we could make our own steel and aluminum?  Did this surgery have to be done with a cleaver?  Granted, our aluminum industry, in particular, is on its last legs.  But Trump's been in office for over a year.  What evidence is there that he has worked the steel and aluminum issue from a national security perspective with our trading partners?  

Sadly, the best argument for these tariffs is the least attractive politically.  That's why we will hear about what it is going to cost us in economic terms instead of what it is going to gain us in national security terms.  How do you measure the value of not having to rely on Chinese steel?  (China accounts for 2% of US steel imports, but it's not clear how much steel from other places is transshipped from China.)  What is the value of not having to rely on Canadian steel?  Brazilian steel?  It's very difficult to understand and evaluate the benefits of resource independence in the abstract.  And yet, that's the best reason for the tariffs, if they will, in fact, make us safer.

Meanwhile, what about Trump's real trade agenda, getting rid of the trade deficit that he says arises from unfair trade.  I doubt our feckless leader has ever heard of Robert Triffin.  Mr. Navarro should have heard of him, as Triffin's Dilemma lies at the heart of Mr. Navarro's misguided trade policy.  The "unfair" trade that creates our trade deficit is how we put dollars in the world so that it can be the world's reserve currency.  We translate the benefits of being the issuer of the world's reserve currency into benefits to US consumers via lower prices and interest rates (as our trading partners lend us back the dollars we pay them for things they send us).  "Fair trade" means no more exorbitant privilege.  Is that a good thing or a bad thing?  I don't expect these issues to be aired publicly.  But I do expect them to be aired privately within a White House with working brains at all levels.  I wonder if they were....

[Update a day later: Trump tweets that tariffs will be lifted if NAFTA is renegotiated.  In other words, act first, then negotiate to undo the damage.  Sounds like "Take the guns, then give them due process."  This is not a bad way to deal with a weak enemy.  It was how the Russians used the Cuban missile crisis to get rid of American missiles in Turkey.  The tariffs are a demand for ransom.  Mostly from our friends!  What happened to national security?  Oh, well.]  

Friday, February 9, 2018

USA Announces Phase 1 Clinical Trial of Modern Monetary Theory

I remember the Reagan tax cuts in 1981.  The Bill was called ERTA - the Economic Recovery Tax Act.  It was a Keynesian stimulus bill, with the stimulus largely coming from tax cuts, allowing people to keep more of their money to spend.  Trouble is, it created a significant deficit quite quickly, and it favored the rich.  So, a year later, Congress dealt with these problems by passing a Tax Equity and Fiscal Responsibility Act.  Who could complain about that - we like tax equity and fiscal responsibility, right?   But it wasn't enough.  In 1984, the deficit was still rising, and it became necessary to take the gloves and the sugar-coated names off.  We passed the Deficit Reduction Act, raising taxes again, or at least closing some "loopholes," i.e., revenue losers that some people don't like.  (Sorry, no link.)

Now, we get to do it all over again, maybe.  The recent tax law and today's budget agreement are budget-busters.  They will cause the deficit to grow.  Self-styled fiscal conservatives are aghast.  And yet, this time there is a new player in the game, a theory of money that says deficits and (monetized) national debt aren't inherently bad.  Fiscal conservatives' hearts may be in the right place, but their minds may be in the wrong century.

The thing is called Modern Monetary Theory (MMT). (Knock yourselves out.)  Here's the short version of it.  If there were no taxes, and the government just printed all the money it spent, the currency would go splooey, because no one would know that money was rare enough to use as a medium of exchange.  But nothing else bad would happen.  The country wouldn't go "bankrupt," because it could just keep printing money to pay its debts.  So, if the trouble with not taxing is that the money would become worthless, we must conclude that the reason to raise taxes is not to "pay for" things, but to protect the currency from the effect of paying for things with printed money.

This is a big deal, says MMT, because the amount of taxes necessary to protect the currency does not necessarily equal the amount of money printed by the government to pay its bills.  What if taxes fell a dollar short each year?  What would be the harm?  Surely, our economy can absorb on extra dollar every year without a loss of faith in our money.  Well more than that is counterfeited every year, and life goes on.  While it's easy to say that zero taxation would result in hyperinflation, it is much more difficult to say how much money could be printed without damaging the currency.  In other words, why is it necessary or wise to run a balanced budget when some things could be paid for simply by printing money?

MMT is not about borrowing money; it's about printing it.  Our laws don't allow the government to print money per se, but a cooperative Treasury and central bank can, together, effectively do so.  Thus, one "solution" to the increased interest cost of the new debt arising from the new deficits would be for the Fed to buy the bonds.  The Fed sends the interest it collects right back to the Treasury, effectively neutralizing the interest costs associated with those bonds. That's "printing money" for all intents and purposes.

The transmission mechanisms whereby printing too much money leads to inflation are beyond the scope of this memo (because they are beyond the scope of my knowledge), but the general drift is this: if the Fed buys up bonds, interest rates will fall too low, too much credit will be created, and too many dollars will soon be chasing too few goods.  Inflation isn't driven by the government spending; it is driven by the private credit created when government spending does not compete for the same private dollars.

But that's the thing: the problem always comes down to inflation, and inflation always requires a "shortage" of goods or services, including labor.  I put "shortage" in scare quotes because I mean only a scarcity relative to demand.  There may be no unusual bottleneck in production; hyperdemand can create a "shortage" even when the production facilities are operating perfectly well.

The heart of the MMT argument, then, is this: We live in an era of rapidly rising global supply of everything we need, including labor.  The growth in output is reminiscent of the deflationary days of the late nineteenth century in the US, when the money supply could not keep up with the output of goods.  MMT says that there cannot be inflation without shortage, and shortage will not happen even the face of a surge in demand, because global capacity is growing, and the time necessary to bring even more capacity on-line is shrinking.  Indeed, "supply" might even be reckoned to include the supply that could show up in six months if the need were known.  Mickey's broomsticks are running wild, and we need a mop to clean up the water they are bringing from the well; that mop is printed money, or, at least, so says MMT.

If the MMTers are right, the deficits created by the recent legislation will be "handled" by an economy that can easily absorb the resulting spending.  The issue is interest rates.  Will the Fed raise rates to cool the economy, causing an unnecessary recession, or will it accommodate the new budget by monetizing some of the debt and watching to see if the extra money in the economy actually causes inflation.  1937 suggests the former.  In that year, skittish conservatives looked up, saw their shadows, and pulled the fiscal plug on the New Deal.  A theretofore recovering economy saw five more years of winter until the exigency of war overcame our aversion to debt. 1982 and 1984 say the same thing. What if we had let the Reagan deficits run?  What did the supply curve look like back then?

But this is 2018.  All Congress has to do to test whether the new laws are unduly inflationary is nothing.  The Fed will be the key.  Will it monetize the debt and see if inflation happens, or will it assume that undue inflation will happen and end the trial of MMT that Congress is now conducting?  Time will tell.  For now, however, I would urge fiscal "conservatives" to inform themselves about MMT and ask themselves not whether they "like it" - they won't - but whether there is anything about it they actually disagree with.  In my experience, no one disagrees with the principles of MMT, but most people disagree with its conclusions.  What a piece of work is man...

Friday, January 12, 2018


The President wondered aloud, to people to whom it is never smart to wonder aloud, why America is letting in so many people from "shithole" countries.  Of course, the heads on the left exploded at the denigration (check your etymological privilege) of these places, but I believe their attacks on the President's attitude completely miss the point.  Immigration is supposed to come from shithole countries.  America is all about the tired and poor, the huddled masses yearning to breathe free.

Escaping shitholes is what made America great.  It's how my ancestors got here.  It's how everybody's ancestors got here, including the persecuted pilgrims and even the so-called "native Americans," who themselves migrated here from somewhere worth the trouble to migrate from when migrating was even harder than arriving two hours early for a flight.

Herr Drumpf says we should bring in more people from a place like Norway.  But, for some reason, people are not trying to sneak into America from Norway.  Maybe that's because, with all due respect to Disneyland, Norway is by all accounts the happiest place on Earth.  No, people are trying to get into America by any means necessary from places where people do not want to stay.  That's where immigrants come from.

Which brings me to the visa lottery.  I'm not sure why Trump is opposed to this program, but as an alleged branding expert, he should know better.  What better way is there for a country to demonstrate its wonderfulness than to run a raffle where the prize is a green card?  Does Russia have such a program?  I know a wonderful woman from Ukraine who got her green card through the lottery and became a citizen as soon as she could.  Ukraine is a shithole.  It's people aren't brown, but it's a shithole.

So, yes, Trump's comments were racist, but there's nothing new there.  We already knew that he favored racist policies that appeal to his racist base.  And I guess we already knew that he was stupid.  But still, if we have to pick one thing about shitholegate to go apeshit over, I nominate the man's utter ignorance of what immigration is about, what (not where) we came from, and what our generosity of spirit means to our national image and, therefore, at the end of the day, to our national self-esteem.  Having elected this fool is embarrassing enough.  But to have our noses rubbed in it daily by our leader's noise and our leaders' silence is really a bit much.


Monday, October 9, 2017

It's a Wonderful Party

I get it now. Frank Capra is directing our politics. It's 2008 and, having let a skinny black kid with a funny name ascend to the highest office in the land, the GOP is considering political suicide.  The party intends to destroy itself in two ways. First, it will gerrymander Congressional districts so that Republican idiots can win seats by appealing only to other Republican idiots. Second, it will steadfastly refuse to act as the loyal opposition to the aforementioned SBKWTFN. As a result, the party will become politically dysfunctional and ideologically irrelevant.

But the GOP's guardian angel has come to show McConnell, Ryan, et al. how the world would be without it. Eight years of ineffective government, Harry Reid using the Nuclear Option to get lower court judges confirmed, an infrastructure that continues to crumble, and, then the coup de grace - the occupation of the party's empty husk by a snake-oil salesman who has seen the potential of appealing to idiots.

About Trump replacing Obama, wags have been saying that orange is the new black,  But more important, anger is the new savvy.  If you can get the torch and pitchfork crowd to vote for you, you don't need soccer moms.  And you can get the mob to follow you if, in fact, one party has gone off in search of every last vestige of unfairness anywhere in the land, and the other has inexplicably shot itself in every vital organ it could find.

Donald Trump is every sane American's nightmare.  Not just because he is so bad, but because his election was not a fluke.  We don't deserve better.  We applaud the gerrymandering that seems so good for our parties, whichever one is doing it in our name, never thinking that anti-democratic behavior might be, well, bad for democracy.  We believe it's better to bequeath crumbling roads to our kids rather than the obligation to pay for good ones.  We have sequestered the money our military needs. We elected bozos, and now we have a bozo-in-chief.  It's not only he who is uniquely unqualified.  So are we.

Sadly, the GOP does not yet appear to be losing its resolve to do itself in.  Paul Ryan still grits his teeth and says nice things about the usurper.  John McCain still points to the few things Trump's national security team has done right.  (That part of the screenplay needs a rewrite: in addition to the President going off half-cocked on twitter, Mike Flynn should have remained in charge of defense until he could sell us out in a more noticeable way to make the point.) 

Yes, there are straws in the wind - Sen. Corker, for example.  But is the lesson being learned? I suspect not.  In the final reel, Democrats will realize that their apathy and pique made Trump possible.  They will come out to vote and teach the Republicans the lesson that they seem unable to draw from Trump's awfulness.  Whether there are any better angels left in the GOP by then remains to be seen.

On Nativism

I am not sure what to make of Alt-Right.  I'm a third-generation American Jew.  To blacks I'm white and to "Whites" I'm not.  I was born here to people born here.  I am an unhyphenated American.  My ethnicity has nothing to do with it.

"Nativism" has been getting some bad press recently.  But I'm a nativist.  I believe that American culture - a common language, certain common values, a commitment to self-government and individual liberty - is essential to the society to which I belong.  The staunchest opponents of American nativism today seem to me, ironically, to be the Americans least comfortable with how Native Americans were treated in the past.  Can we say that those Native Americans who militantly opposed the European colonists were wrong to do so?  Do we have any doubt that they had a reason to be worried or the right to defend their culture from invasion?  Was Sitting Bull a racist?  What, exactly, distinguishes the noble Native American who fought Custer from the hated racist who would fight multiculturalism today?

European America is a multi-ethnic society, but it is not a multi-cultural one.  (I find the idea of a multi-cultural "society" oxymoronic.)   The USA is a melting pot.  Why should we Americans share our societal bounty with people who do not wish to become culturally American?  ESL, sí, bilingualism, no. Yes, we have subcultures, and that's fine.  If black people want to jump the broom at weddings, that's their business; I recall stomping a flashbulb.  Just so we agree that monogamy is right and wife-beating is wrong.  (The polyamorists among us are outliers.  There's always room for outliers.  That's part of our culture.)

It's easy to see how colonists - real, alien colonists - can pose a threat.  But what are we to make of cultural invasion?  We are already ethnically and spiritually diverse; everyone coming here already "looks like" some large group of assimilated Americans.  And yet, some people coming here are different from us natives.  Shall we not defend our culture from these invaders?

People who come here with no intention of learning English should not be welcome here.  Language has semiotic significance way beyond the simplicity of communication.  Our shared language is how we share our culture.  By choosing not to speak and understand it, you announce that you do not care to be one of us.  Yet you expect us to provide the blessings of liberty to you as if you were the posterity of our founders.  But our founders' posterity speaks English.

Why would we admit anyone who believes America should be subject to Sharia law?  Is the arrival of such a person not an invasion?  This is the problem posed by the horrid Donald Trump.  He has latched onto a form of nativism that subsumes all of what I would call appropriate cultural nativism, and then altered it to appeal to those who don't really understand that ethnicity and nominal religious affiliation are beside the point.

Race and religion become screening proxies for bad ideas because people can lie about their ideas but not their ethnicity.  If we can keep out all the "mud" people and all the Muslims, then we will keep out every non-White person who would not assimilate, i.e., most of those who would not assimilate, which is enough.  We'd keep out a lot of good people, too, but those denied admission are not marked for extermination, just sadly excluded because we have no better screening tool.

But it is in the nature of our species not to believe in proxies.  We are not capable, in large numbers, of understanding that we might choose to ban all Muslims simply as an engineering solution to the problem of excluding bad Muslims.  To resolve this cognitive dissonance, we simply assume that all Muslims are, in fact, bad people.  It's easier that way for a large number of human beings to implement an exclusionary policy that may be necessary to cultural survival.

The flip side of this argument is the claim that multi-culturalism does not threaten native culture but seeks rather to enhance it.  But we come back to human nature.  The concept is fine, but the reality is balkanization and, eventually, a battle for cultural primacy.  People want to be "normal," and that requires norms.  Multi-culturalism eschews norms.

This, then, is the dilemma of philosophical nativism: if it isn't racism, it doesn't happen.  And if it is racism, well, then it's racism.

Monday, September 25, 2017

President Doughtard Does the Dozens

[It's my blog, and I'll be un-PC no matter how many thousands of followers it costs me.]

Kim Jung Un's Korean language insult to our Feckless Leader has been translated as "dotard," an old fool, someone in his dotage.  But I prefer the homophone "doughtard," which does not exist, but would exist if it were not politically incorrect to attach "tard" to things, and, if it did exist, would mean someone with more money than brains.

I googled "doughtard" before writing this and discovered that it already has its own hashtag; so obviously apt a pun was hardly going to go unpublished.  I don't use the twitter, but I hereby virtually retweet any tweets that call our Head Twit a "doughtard."

Watching Trump play the dozens with Kim is more than dispiriting.  This is not a school-yard where young males sort out their pecking order by creative public name-calling.  I suspect that Trump senses the advantages that accrue to the best blusterer in less august settings, and, having no sense of place or occasion at all, he acts as if those same advantages apply on the world playground.  He is wrong.  And he is dangerous.  He has more money than brains - no matter how much (or little) money he actually has.

While I bemoan the President's name-calling, I admit that the urge to label him is overwhelming.  There must be a way to capture the essence of this guy with a trope we have all seen. The common expression "What's it like to ...?"   is literally deep.  We know what we know, and we have experienced what we have experienced.  We want to know which of the things in our personal database we should consult to grasp this unknowable thing.  Name-calling is one way of doing that, and, because our need to understand the President is so great, the need to put a "what he's like" label on him is powerful indeed.

Good communicators are experience brokers.  They look for a name that matches the man and matches something in their own experience that matches something in their audience's experience, too.  I am blessed to have a small enough audience that I don't really have to go for a common denominator.  I can find my label and apply it because it works for me, and let readers take it or leave it.

So, I keep coming back to "Rough Beast," as in:
The Second Coming  By William Butler Yeats
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold; Mere anarchy is loosed upon the world, The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst   Are full of passionate intensity. 
Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,   Slouches towards Bethlehem to be born?   
[Because poets do tricky things with orthography, I note that the color was added by me for emphasis.]
Or in terms our literarily challenged President might understand, Yo' mama, Doughtard.

Saturday, September 9, 2017

President Chemo

I must applaud President Trump for his deal with the Democrats on Harvey aid and the three-month delay of the fiscal cliffs before us.  The most interesting thing about the deal is that Republicans fell in line behind it.  Why didn't McConnell and Ryan say "Sorry, Don, but we're not going to bring that bill to the floor"?  My guess - they don't want to say that.  My guess - they do want to return to regular order.  My guess - they don't want an approval rating of 19% or whatever it is.  All they needed was political cover, and the President, nominally of their own party, has given it to them  This is how the fever breaks in American politics.  If it breaks.

The Republican party has destroyed itself, and race remains at the heart of the problem.  When Lyndon Johnson and the Democrats signed the Civil Rights Act in 1964, the GOP became the party of the unreconstructed South.  The votes were there, and, having no scruples, Richard Nixon and his pals went for them.  A voting (but not philosophical) coalition arose among white voters, even those who hated what the Yankee business interests in the party actually stood for.  From Nixon onward, the GOP has been on the wrong side of domestic history, bailed out in the 1980's by being on the right side of world history.   Now, the party is on the wrong side of everything, all because it has put "winning" over deserving to win.

No doubt, the Democrats lowered the bar, and they get no praise for becoming the party of the disenfranchised and no one else.  The Democrats abandoned Big Labor and its members in favor of victims of "oppression."  Oppression is a bad thing, but a party devoted to its remediation is a makeweight, a group whose support one seeks - like the Greens, or the Libertarians - not one of two "major" parties.  Yet here we were, with one party representing racists and plutocrats and the other representing victims and moralists, and nobody representing Joe Sixpack, except to the extent he was also a racist or a moralist.

Without big strategies, the parties descended into color war - winning and losing as institutions and not as ideologies.  The Red side - our right wing, ironically - won via Operation Red Map.  Now, our local and Congressional elections can be won by the biggest wack job on the right, because the winner of the Republican Primary doesn't need swing voters. That sends Tea Party morons to Congress and makes Congress dysfunctional.  Which gives the very same voters who elected the Tea Party morons the idea that "Congress" is broken, but not because their bozos are breaking it.

And so the stage is set.  Everyone hates Congress, but no one blames his or her representative.  Someone has to come along and tell the idiots who elected the Tea Party that they have elected morons without telling them that they are idiots for doing so.  Trump pitched his candidacy perfectly for that purpose - racist enough to get the white vote but also anti-establishment enough to peel off the unorganized mass of opponents, several of whom are more competent and deserving of high office, but none of whom would have had the balls to do what Trump didn't need any balls to do last week.

Trump is chemotherapy for the cancer of intransigence that afflicted the Congress.  He is going to make Congress work by freeing non-Tea-Party Republicans to compromise without being primaried.  The toxic side effects include denigration of just about everything that makes America great - free speech, checks and balances, the truth - but that's how sick we have become.  Trouble is, the side effects won't be felt for years, so we may get eight years of what we only needed for one week: someone who says it's ok to compromise.  Because, make no mistake, by going along with the Trump/Schumer plan, the GOP is compromising, and the voters are going to like the result.  Especially if the next step is elimination of the GOP's annual hostage-taking when it comes time to raise the debt ceiling.  (Sad to see Ben Sasse lament the loss of his party's ability to threaten to kill our credit rating in order to get its way.  And he calls himself a patriot.  Yikes.)

So, score one for President Chemo.  Perhaps Congress will figure out that he will sign anything he can take credit for, and praise everyone who participates in getting it for him, including "compromising" Republicans.  That shifts the game away from satsifying the GOP base to satisfying the electorate.  At least, it would, if Operation Red Map had not been so successful.  It remains to be seen whether the GOP majorities in gerrymandered districts are ok with compromise once "their" President has blessed it.  One hopes so, but only time will tell.