Archive for the ‘Economy’ Category

Tinkerbell Effect

Monday, October 15th, 2018

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This is a term which describes things that are thought to exist only because people believe in them. One of the areas where is it used fairly widely is with money. Money has no intrinsic value. It only works because everyone using it believes that it will continue to work for the foreseeable future.

Populism at its core is built on the Tinkerbell Effect. Populists believe that “crowds” are self-validating. Whatever the crowd believes must be fact because everyone in the crowd shares the same belief.

Science, while it studies the “wisdom of crowds”, has never accepted the claim that belief should replace proof regardless of how popular any particular belief might be.

The modern era began with the introduction of the scientific method in the 17th century. That method requires all assumptions to pass a series of rigorous tests in order to gain credibility. The scientific method created the concept of objective truth. It freed reality from being narrowly defined by popes or potentates. Instead it handed the responsibility of understanding the world to a select group of highly decentralized critical thinkers around the world – experts in their particular fields. These groups are self-selecting based on their areas of interest. Anyone can join, regardless of race, color, creed, or nationality. They simply have to prove through their publications that they have sufficient understanding of the subject matter to be taken seriously by their peers.

When Galileo improved the Lippershey telescope to provide ultimately 30x magnification, he was able to confirm the Copernican helio-centric theory of the solar system. This was a direct challenge to the Biblical claim supported by the Catholic Church that the universe revolved around the earth.

Galileo championed the idea that all of the laws of nature are mathematical. That meant that natural outcomes should not only be predictable, but also repeatable by anyone with a comparable understanding of the underlying mathematics. In other words, you didn’t have to be Galileo to see the moons of Jupiter transit across the face of the planet. You only had to have the same telescope that Galileo had and understand what those dots moving across the image of Jupiter actually represented.

This ushered in a new age where scientists could reliably explain all natural phenomena. Reality was no longer dependent on opinion or dogma. Instead there was (and is) an unbiased group of experts who could not only separate fact from fiction, but were eager to test new ideas even if they questioned accepted theories. This group almost by definition is constantly pushing the boundaries of understanding while simultaneously strengthening those theories that survive rigorous testing.

This group earns the right to test all theories about reality through the professional credentials they acquire, the reputation they have with their peers, and their own success in producing original work that can be duplicated by other experts in the field.

By definition, these experts also know more about their subject than any random crowd regardless of its size.

Therein lies the rub.

Populist movements, including the one in this country, strive to take back the right to determine what is fact and what is fiction. They reject any and all outside groups who suggest that any but their own trusted group can dictate their beliefs.

Here’s why all of this is important.

Trump’s lying is not a character flaw or pathology. It is not a “salesman” characteristic. It IS a deliberate strategy to weaken our collective ability to distinguish truth from falsehood. Steve Bannon summarized this strategy when he said, “The way to deal with [the media] is to flood the zone with s**t.”

Trump’s singular success as a politician has been his ability to create an alternate reality in which he and his supporters live. He has been successful because he is exploiting a weakness in our democracy. That weakness is the power that we invest in the chief executive. An untrustworthy chief executive in our system can acquire a lot of power very quickly. The only checks to that power are congress, the courts, and voters. A free and independent press is supposed to inform the voters so that their choices are fact based.

Trump’s strategy is to delegitimize the press, create an alternate reality where he is the only arbiter of truth, and demonize all those who oppose him. Because he is the President, he has the power to accomplish that. Facts are no longer relevant in this discussion because Trump’s supporters reject experts as biased elites and the press as “the enemy of the people”. Democrats are “traitors” and “evil people”. All those who oppose Trump, in the minds of his supporters, should be “locked up”. The Republican Party has long since abdicated any role in checking the President’s power. Those who might provide leadership have either died or been drummed out of the party. The courts are slowly being bent to Trump’s will too as his appointments flood positions that a Republican Senate majority had kept open during the Obama administration.

The only reliable check that remains is voters. That fact isn’t lost on Trump and Republican either. Trump has already built the narrative that any vote that doesn’t go his way must be the result of a rigged system or voter fraud. Republicans have stepped up their efforts at every level of government to suppress the vote from those who generally vote for Democrats.

This brings us to the current crossroad.

Our country appears to be split.

We have conservatives who vote based on a set of ideological beliefs that they share regarding government, taxes, the free market, and personal responsibility. Whether smaller government actually increases human freedom is never questioned. If tax cuts and deregulation don’t result in faster economic growth, at least they are giving individuals more control over their own property – which seems to be good enough. Conservatives believe that people choose to be poor and that any attempt to mitigate the circumstances surrounding poverty discourages people from putting in the work that would improve their condition. There is no data to support this view either, but put that hasn’t stopped Trump from blaming the poor, immigrants, and people of color for the country’s problems.

Republicans were concerned about debt and deficits when a Democrat was in the White House. Now that Republicans control all branches of government, they are running up deficits and increasing the debt at an historic rate.

Liberals on the other hand are focused these days on achieving a pragmatic balance between the market and the state. They view government as tool to constrain corporate excess. Decisions on each specific issue of government involvement are the result of extensive evidence-based study and a good faith attempt to produce outcomes which benefit the most people. If liberals have a religion it is the belief that science will always produce the best answer. One of the potential outcome of this philosophy is a technocracy where all power as well decision-making is concentrated in a small group of supposed experts. China claims that this is their form of government, but it looks a lot more like an oligopoly because the Chinese “experts” who have the power are also personally benefiting from their decisions. While that isn’t the case in this country, there is a deep suspicion among conservatives that those who are making decisions based on their academic credentials MUST somehow also be benefiting personally from the positions that they are taking. There is no proof to support that claim, but conservatives still insist that “experts” can’t be trusted. This leaves conservatives free to insist that their beliefs are more credible because they are based in “common sense”.

From an ideological perspective, however, modern liberalism in this country may not be well equipped to deal with the anti-state anti-intellectual radicalism that has become the Republican Party. The pragmatic Clintonian Democrats come off as passionless technocrats rather than true believers. This more than anything else explains the rise of the Bernie Socialists. Democratic Socialism is on the rise because it brings a new vision of the expanded role of the state that can match the populist fervor that swept Trump into office. Both the Democratic Socialists and the populists share a deep distrust of what they view as the establishment. They both want to tear it down and build something new.

The populist challenge is they have failed to dislodge the Republican establishment. Instead the Republican establishment has figured out how to ride this populist wave. The result is that the power of establishment has increased. The only difference is that this establishment is speaking in populist terms rather than traditional conservatism. The policies, however, are the same as they have always been.

All indications are that the Democrats will regain control of the House and make significant gains at the state level.

What will that mean for the next two years?

If past is prologue, the path forward is pretty obvious.

Regardless of the election outcome, Trump will double down on his authoritarian tactics. He will try to end the Mueller investigation. He will increase attempts to suppress the 2020 vote. He will refuse to comply with court orders limiting his power. He will refuse to cooperate with congressional investigations. The resulting constitutional crisis will have to be resolved in a Supreme Court where Kavanaugh could be the deciding vote. Whatever the Supreme Court decides will only increase divisions between those who believe in their own views and those who seek the objective reality.

He will crack down on protests and try to further weaken the influence of the press. He may cause an international crisis in an effort to boost his status as a “war” president. He will almost certainly continue his misguided trade war.

Finally, the recession that we have all been waiting for will arrive. Trump will fumble the response and deepen the crisis rather than resolve it. Trump will use the crisis to impose even more draconian immigration enforcement in an effort to blame the failure on Muslims, Hispanics, and the poor. Violence against all of those groups will increase.

Next up a different take on this whole picture.

Socialism

Monday, July 30th, 2018

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The recent nomination of a democratic socialist in a NY congressional district has awakened the great red scare among some conservatives.

The standard conservative line regarding socialism is that there isn’t one successful socialist country and it is a stepping stone to communism.

But that begs the question.

There isn’t one successful libertarian country either, but that doesn’t stop many of those same conservatives from suggesting that an unfettered free market is the solution to all that ails us.

So let’s start with a simple definition of what socialism is and the fairly successful history of socialism in this country.

Here’s the definition of socialism from dictionary.com

A political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Just for the purposes of comparison, here the definition of democracy.

A system of government by the whole population or all the eligible members of a state, typically through elected representatives.

Notice the difference? Democracy is a system of government. Socialism is a political and economic theory.

A democracy can operate on socialist principles. There are many successful examples around the world. They generally provide a high level of services supported by a high level of individual and corporate taxes. In addition to taxation, industries are also highly regulated, workers generally have a place at the table when decisions are made, and public resources like air and water are protected. Fundamentally, the government is run by representatives, just like this country, who are elected by citizens who have decided that this is the way that they would like their government to operate, just like this country.

A dictatorship can also claim to operate on socialist principles, though that dictator would have to be benign. But just saying you are a socialist country, doesn’t make you one any more than just saying that you are a democracy, as Russia does, means that all elections are fair, opposition parties are free to campaign, and voters really have a choice.

Milwaukee was dominated by a Social-Democratic party for the first 60 years or so of the 20th century. The focus there was worker’s rights. They successfully eliminated child labor and ushered in the 40 hour work week. All this was accomplished in addition to all of the day to day operational needs of big city.

By definition, police and fire departments, our military, public schools, public libraries, and public infrastructure are all examples of communities getting together to provide a service that is owned collectively and regulated either locally or nationally.

Suggesting that socialism is bad for free markets also misunderstands both free markets and socialism.

We have seen over and over that free markets operate best in well-regulated environments. Those regulations and laws also provide a means of enforcement and a method where those who have been injured can seek redress. If you don’t pay your bills, someone can take you to court in order to get paid. If you fix prices or inhibit competition in order to illegally inflate your profit, the government can levy a penalty that could include repayment to those who were harmed. Google was fined $5B by the EU for that very reason. If you want to sell a drug, you have to prove to the FDA that the drug is effective and that all of the potential side effects are well known. If you want to start a bank, there are all kinds of rules to insure that your bank is going to be able to manage your deposits in a responsible way.

All of this regulation fits the definition of socialism. The community (voters) are agreeing to regulate the means of production/distribution/exchange for the benefit of the community.

So the REAL discussion should be HOW MUCH socialism is appropriate.

This is the same discussion that we should be having about libertarianism – HOW MUCH government is appropriate.

Serious questions have been raised that the United States is not really a democracy, at least if you look at the outcomes of legislation. A ground breaking study suggests that we are really an oligarchy where the rich and powerful, though a small minority of the total population, are the ones who benefit from virtually all of the legislation and rule-making done by our elected representatives. That study has since been questioned by a closer examination of the alignment between middle class and upper class interests. But clearly the poor are not well served in this democracy even though they represent 15% of the population.

There are good reasons to have a discussion about how healthcare is delivered in this country. The facts are that we continue to spend more money per person on healthcare than any other country in the world, but our outcomes are far worse than even the average among our industrialized peers.

There are good reasons to have a discussion about income inequality and economic mobility. The number one factor in this country that influences future success is your father. In other words, if you are the child of a poor father, the barriers to you becoming wealthy are significantly higher than if your father was wealthy, even if everything else in terms of talents, ambition, and determination are the same. The reasons are that poor kids simply don’t have access to the same levels of nutrition, healthcare, education, and investment that are available to wealthy kids. That’s not the case in the rest of the industrialized world. All children have access to healthcare. All children have access to high quality education. All children have access to good nutrition. The best and brightest have a much easier time rising to the top in other countries than they do here. That said, those who have received their education elsewhere are attracted to our country because of the advantages available for the well-off.

There are good reasons to talk about the influence that money has in our politics. Corporations and wealthy individuals have tilted the playing field to their advantage. The result is that taxpayers and small investors end up subsidizing CEO pay, for example, because of tax and trading rules that are in place. Other countries (e.g. Austrialia) have taken successful steps to rein-in corporate pay without damaging their economy.

There are good reasons to talk about the cost of higher education. Our current system is warping the future of kids with huge student loan debt when they graduate. Rather than start their own companies, they are forced to work for big companies that pay well for a decade or more so that they can pay off that debt. Other industrialized countries subsidize the cost of higher education which frees up those graduates to take more risk early in their careers than their peers in this country.

There are good reasons to talk about our spending priorities in this country. We spend way more money on defense and far less money on infrastructure, education, and social services than our industrialized peers.

Trump’s message to Make America Great Again was in part a promise to get government working again for those who felt government has ignored them.

The conversations that I’ve suggested that we need to have are motivated by the same interest. We need to get the government working better for those who aren’t getting healthcare benefits from their employers. We need to get the government working better to help working people who are not getting their fair share of the benefits of economic growth. We need to figure out how government can be made less responsive to the wealthy and more responsive to the majority of voters. We need to figure out what role government can play in making higher education more accessible to those who can’t currently afford it without going into debt.

None of these topics are specifically socialistic, but all of them can be organized under the larger banner of making government work better for the majority rather than the minority.

No one is suggesting that we dismantle our current representative democracy.

What is being suggested is that voters have a serious discussion about the way our government currently operates.

What is being suggested by some candidates who call themselves Democratic Socialists is that if they are elected, they will advocate for changes to the way government operates in some of the areas that I’ve listed. The ONLY way that these changes will occur is if a majority of voters agree that these changes make sense.

How different are these changes than the changes that outlawed child labor, the 40 hour work week, public schools, or public libraries?

IMHO, there is no difference.

So let’s try to have these needed conversations without the hysteria that the country is being overtaken by some evil force. It’s not, unless that evil force is the people who resist change and are willing to demonize even a discussion about change as a slippery slope into communism.

Waffle House Economy

Tuesday, March 6th, 2018

The difference between fantasy and reality is that in the real world real stuff actually happens to real people.  If you live in a fantasy world, you have lost touch with reality.  You have not, however, escaped reality.  Reality will, sooner or later, assert itself.  At that point, you will suffer a rude awakening.

Our country is poised to experience several rude awakenings as we discover that our President and those supporting him have lost touch with reality.

Russians
We now know that the Russians have been and are continuing an effort to disrupt our democracy.  We know the who, the why, and even the where.  Some of those who worked on disrupting the 2016 election, have since come forward to provide detailed accounts of what they did and how they did it.  Facebook and twitter have identified the accounts that they used.  Mueller has the evidence and indicted some of the perpetrators.  Our intelligence community has documented the hacking that occurred to voter records and electronic voting machines.  Our intelligence community continues to sound the alarm that these attacks are expanding and becoming more sophisticated.

Our President and the party that supports him live in the fantasy world that the whole Russian effort is a partisan witch hunt intended to discredit Trump’s election.  They attempt to deflect blame to Clinton, the Democrats, or the media.  The REALITY is that concerted efforts by the President and his supporters to discredit the media left us vulnerable to Russian spreading REAL fake news.  Conservatives were eager to spread whatever stories they read that confirmed their fantasies about Clinton and the Democrats even though they were fantasies.

The reality is that we have been attacked in no less a real way than we were attacked on 9/11.  Why hasn’t our President and our government responded?

According to Tom Friedman, there can only be two answers.  Either Trump is simply delusional or the Russians DO have something on him that he does not want others to know.  Neither choice bodes well for the country.

Tax Cuts and Government Spending and Economic Growth
We have never provided this large a stimulus to an economy that was this robust.  We are in completely new territory as far as what is going to happen.  The tax cut and the associated budget bill killed off the “Trump” stock market rally because of concerns about the Fed raising interest rates to combat inflation.  More concerning is this massive reduction in government revenues is happening at the same time as costs for Social Security, Medicare, and Medicaid are rising because of the baby boomer retirement.  The fantasy is that the tax cuts will pay for themselves, but even the Trump budget shows they don’t believe it.  The claim is that we will see 3% growth as far as the eye can see.  The reality is that there aren’t enough workers to support that sort of growth.  The worker situation grows worse each day that we actively discourage immigrants from coming here to work.  The second fantasy is that corporations will invest the tax cut in higher wages.  Wages are going up, but it’s because unemployment is so low.  Corporations have spent $6B in bonuses and wage increases.  They have spent $170B in stock buy backs.  That’s reality.

Tariffs
This is a terrible idea.  It based in Trump’s fantasy that trade is some sort of mano-a-mano wrestling match.  It’s not.  Even if other countries don’t retaliate, which the very likely will.  It will be a net looser for the economy.  Just like the tax cuts, nobody has tried to impose tariffs at time of very low unemployment.  That’s because the whole design of the tariff is to use price to replace imported products and services with domestic products and services.  The problem is that we do not have the employees to ramp up domestic production of much of anything.  How are steel producers and aluminum producers going to expand, if they can’t find skilled workers?  The result instead will be more pressure on wages AND more pressure on prices.  What’s that spell? INFLATION.  What happens when inflation goes up?  The dollar goes up.  What happens when the dollar goes up? Exports go down.  That’s why tariffs went out with the cold war.  The news suggests that Trump’s about face on tariffs was driven more by his frustration with his administration than a careful analysis of the subject.

So where does this leave us?

SNL said it best.  We hired a businessman to run the economy, and he’s running it like a Waffle House at 2AM.

The State of the Union is Fantastical

Wednesday, January 31st, 2018

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President Trump’s first state of the union speech was just as remarkable as his first year in office.

David Graham from the Atlantic had a good summary.

The reality is somewhat less rosy: By a wide margin, Americans believe that the nation is on the wrong track, and the president’s approval rating is historically low. Trump has struggled to push his agenda through Congress, just squeaking a big tax cut in at the end of last year. That presents three challenges for the president, and his speechwriters: How do you boast about victories you haven’t had? How do you present new proposals when many of the old ones are still on the table? And how do you handle the Russia story that seems to consume most of politics each week?

The answer from Trump was simply to conjure his own reality, outlining a set of some accomplishments, delivering the standard list of policy proposals, and ignoring the Russia probe altogether.

This president is not often good at hiding his emotions, but he did so Tuesday. As a result, not only was the picture he painted of America removed from reality, but Trump himself was also practically unrecognizable. The speech somehow managed to render Trump the one thing he almost never is: boring.

One has to go no further than his claims of economic success to reveal the gulf between reality and fantasy that exists in the White House.

Since the election, we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone.

Only 1.8M new jobs were created since he took office according to the Bureau of Labor Statistics. Instead of citing the real figure, he chose to cite a figure that included three months where jobs could only be attributed to Obama.  It’s also because during his first full year in office, the 1.8M new jobs was the slowest job growth since 2010. The reason is that employers are having a hard time finding workers, which is what he also could have said.  Instead he left the impression that this was an extraordinary accomplishment.

Of those jobs created during his time in office, 184,000 were in manufacturing which would also been a good number compared to the 16,000 jobs lost in 2016. But that doesn’t mean that manufacturing is in good shape. Total manufacturing employment is still down by more than 1M workers compared to 2007.

After years of wage stagnation, we are finally seeing rising wages.

Wages did grow from 2014 through the third quarter of 2017, but the rate of growth has slowed and in Q4 wage growth actually declined (from $353/wk to $345/wk)  So why didn’t he mention that?

African American unemployment stands at the lowest rate ever recorded, and Hispanic American unemployment has also reached the lowest levels in history.

During Trump’s campaign, he claimed that more than half of African American youth were unemployed. The real number was 19.2%. African American unemployment fell from a high of 16.8% in 2010 to 7.7% last January. Since then it has fallen to 6.8%.  Why didn’t he just say that?  It is still really good news, and given his past campaign exaggerations, would have indicted a new respect for the facts.

Unemployment claims have hit a 45-year low.

That statement was true on January 13th. Last week the number went up. That’s still a good number, but it is only a six week low, not a 45-year one.  Why not simply say that they hit an 45-year low two weeks ago.

The stock market has smashed one record after another, gaining $8 trillion in value. That is great news for Americans’ 401(k), retirement, pension and college savings accounts.

Only about 50 percent of Americans own stocks directly or through retirement funds, according to a Gallup survey. And most of the value in stocks is held by the top 10 percent. And the bull market in the US is actually weaker than market gains in the rest of the world. So the truth is that the US markets are just part of a larger global trend, and if anything Trump has discouraged investment in US markets rather than encouraged it.

BTW, the markets fell more than 1% on Monday as money moved from stocks to bonds. This is generally an indication that at least some traders think that this market may be near its peak. Almost $360B is stock market wealth (using Trumps calculus) disappeared as a result.

Just as I promised the American people from this podium 11 months ago, we enacted the biggest tax cuts and reform in American history.

This claim is just wrong and has been widely debunked. Depending on how you count, it ranks 8th in terms of size. Both of Obama’s tax cuts were larger.

Our massive tax cuts provide tremendous relief for the middle class and small businesses

More wrong. This tax plan benefits large corporations and wealthy people. According to Moody’s, three-quarters of the $1.1T in individual cuts go to people earning more than $200K/year in taxable income. Those represent only 5% of all taxpayers. The same report warns that this plan will have negative consequences on federal and local government finances.

We slashed the business tax rate from 35 percent all the way down to 21 percent, so American companies can compete and win against anyone in the world. These changes alone are estimated to increase average family income by more than $4,000.

More voodoo math. As FactCheck.org points out, if every household averaged a $4,000 increase in income, that would add up to $500B/year. Corporate taxes collected last year only totaled $300B. Even if all corporate taxes were eliminated and all of that money flowed directly into individual income, it still couldn’t add up to the increase Trump claimed.

The real numbers, according to the Tax Policy Center, are closer to $1,610. That’s $135/mo. Most people are smart enough to realize that they are not the ones getting a big break.

Since we passed tax cuts, roughly 3 million workers have already gotten tax cut bonuses — many of them thousands of dollars per worker.

Less than 2.5% of the work force have received one-time bonuses.  That’s why the remaining 97.5% know that this wasn’t a good deal for them.

Since we passed tax cuts … Apple has just announced it plans to invest a total of $350 billion in America, and hire another 20,000 workers.

Apple DID give workers bonuses because of the tax plan. They do plan to repatriate $38B in overseas profit as a result of the plan. They did not say that their $350B five-year investment plan was the result of the tax plan. The capital part of that plan seems in line with past levels of annual investment.

The foundation of REAL economic growth is productivity. Productivity requires a large percentage of the population to be employed in doing things that make money. It is very difficult to increase productivity when you have a large growing retirement population. The only way to do that is to add as many new workers through immigration as you have retiring. You can’t simultaneously support lowering immigration, increasing retirement, and have a high growth economy. Japan already proved that it can’t be done.

The other end of productivity is businesses investing in new plants, new technologies, etc. That’s how you increase productivity without adding new workers. That investment is also NOT currently happening because businesses are able to make money without making those investments.

Another gauge of a healthy economy is the saving rate. Savings rates go up when people have more disposable income. The rate of savings is going down, which suggests that households are strapped for cash or they are drunk on spending. Neither is good. The first suggests that the cost of living is rising more rapidly than wages. The second suggests that any boost that the economy may be getting from consumer spending is short lived.

Finally, the government has a role in economic development too. That’s to stimulate the growth of new emerging industries. Trump is failing there too. That’s because of the stake in the ground that Trump planted regarding coal. First he has failed to keep the promise that he made to coal workers. Second his wrongheaded tariffs on solar panels is costing jobs in a rapidly growing sector of the industry while failing to make any difference in the coal industry which is in decline.

The problem with short term incentives like tax breaks and repatriation is that they are candy rather than substance. Bringing $38B of profits back to this country from Apple will make it appear as if something got made in this country. Unless Apple invests that money in making more stuff in the United States than it may have otherwise made, it will not be reflected in any increase in either jobs or productivity. If Apple just uses the money to buy back their stock and increase their dividends, any economic boost will be short lived and perhaps make the next stock market correction that much more severe.

When the President bases policy on false beliefs, the country will pay the price.

Adding $1.5T in additional debt now is a REALLY bad idea according to the IMF.

The I.M.F. warned against assuming that the current economic cycle would go on indefinitely, however, particularly given the towering debt of the United States and other countries. By borrowing so much, the government can crowd out other investors and drive up interest rates. At the same time, giant deficits crank up pressure to cut government spending on health care and housing, policing and schools. With less money to go around, spending dries up and consumer demand — the economy’s primary engine — slows.

This was the SAME warning that Republicans used during the Recession. It turned out not to be true, because that’s when the government SHOULD be spending money to get the economy going again. That deficit spending worked. The economy recovered. And NOW is the time to increase taxes in order to make investments in the future industries that will support the next generation of businesses and employment. That’s because a growing economy can support a higher tax rate.

Cranking down on immigration at a time of low unemployment and baby boomer retirement is another REALLY bad idea.

A single immigrant can bring in unlimited numbers of distant relatives

This was Trump’s big lie from his speech.  Politifact labeled is Mostly False.

We should be welcoming immigrants AND their families. New family formation is the bedrock of the consumer economy. Immigrants who bring in family members provide their own support system for those immigrants.  That means they will have places to live, jobs, churches, mosques, and people like them who will help them make the peaceful transition to becoming citizens. This family process that includes a path to citizenship is why we don’t have the same problems with domestic terrorism that we’ve seen in England, Germany, and France.  There is no good reason to scrape the family immigration system.

Trading citizenship for 1.8M Dreamers for cutting LEGAL immigration in half (from $2.1M to $1M) is a bad deal for the economy.  Dreamers are already here and already have jobs.  Reducing the ability for immigrants to bring in their family members will just reduce the number of legal immigrants.  I have no problem making our immigration system more merit-based, but the number of legal immigrants should be set by the number of unfilled jobs in the economy.  Right now that number is 6M.  What is wrong with expanding the H1B program which is merit and employer based until the number of unfilled jobs is reduced?

The only reason we can’t do that is because Trump has told the country that immigrants are dangerous.  He did that again last night.  Canada on the other hand has built their economy on merit-based immigration and has already told the world that if the US doesn’t want you, you are welcome to come to Canada where their political culture realizes the economic value of skilled immigrant workers.

The REAL problem we are dealing with in this country is the disconnect between reality and fantasy.

Until we have a government willing to tell the truth, we are going to struggle for any sort of reliable and unified plan for growth and stability.

Pants On Fire

Wednesday, January 10th, 2018

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Trump is liar.

It isn’t that he is just a liar. He is a liar of historic proportions.  The NYT has a complete list and a couple of charts comparing Trump’s lies (repeats excluded) and Obama’s lies.

 

In our political system, public officials normally pay a price for lying.  That’s because a candidate makes promises to voters in order to secure their votes.  While most voters are sophisticated enough to realize that even a President can’t do everything that they promise, our system does include an expectation that whomever holds the office will in fact respect the office and the power voters have put in his/her trust.  Breaking that trust may be just another example of Trump “shaking up Washington”, but according to the polls, most voters don’t like it.

This post is about an upcoming scenario where Trump may finally pay that price.

Obstruction of justice is a very difficult charge to prove because it relies on intent.

There is plenty of smoke to suggest that Trump had intent to obstruct the FBI investigation into Russian interference in the 2016 election.

That smoke does not need to include any evidence that the 2016 election results were altered by Russian activity. The charge isn’t that Trump made the Russian efforts more or less effective. The charge is that he interfered with the investigation into Russian efforts.

The smoke also doesn’t need to include any evidence of collusion with the Russians. Whether or not there was collusion is a separate charge. The obstruction charge is that he interfered with the investigation into whether or not there WAS any collusion. Trump could be cleared of the collusion charge and still be liable for the obstruction of justice charge.

Finally that smoke doesn’t need to include any evidence that Mueller somehow overstepped his authority. He was given broad authority by Dept. AG Rosenstein to follow whatever threads he found that would lead to evidence of criminal activity. When he finally presents his case, Trump supporters are going have a hard time convincing the public that Trump’s crimes were outside the scope of what Mueller was originally supposed to investigate.

Here’s the short list of the things that support a potential obstruction of justice charge.

  1. Trump and his staff put a lot of pressure on Sessions NOT to recuse himself from the Justice Department investigation BECAUSE Trump expected Sessions to protect him from that investigation. This speaks to a state of mind that suggests that Trump felt that he needed protection.
  2. Trump drafted a letter to Comey suggesting that Russian investigations were “fabricated and politically motivated”. Comey was later fired because he refused to stop the investigations even though Trump’s initial public statements were that he was fired because of the FBI’s handling of the Clinton email inquiry. This also speaks to state of mind regarding a cover-up.
  3. The Wolff book claims that Trump and his lawyers concocted a misleading statement on Air Force One regarding DTjr’s Trump Tower meeting with Russians. They did that in “an explicit attempt to throw sand into the investigation’s gears”. Wolff also claims that a staffer (Mark Corallo) quit over the incident because of the obvious obstruction of justice implications. This alone would meet the standard for prosecution.  It should not be too hard for Mueller to find out from Mark Corallo whether or not Wolff quoted him accurately.
  4. NYT reports that Mueller has substantially corroborated Comey’s notes regarding his dealings with Trump. That corroboration includes notes kept by other WH staffers that Mueller has obtained.

If these Wolff claims are true, that means that other staffers on the flight DID knowingly participate in obstructing justice. Mueller will have the opportunity to interview them under oath for their version of events.

Trump’s defenders continue to suggest that Trump can’t be prosecuted for taking actions that are within his legal authority. That misses the question of intent. The courts have clearly ruled that legal authority does not immunize a government official from abusing that authority with corrupt intent.

But that ultimately isn’t going to be the issue.

The issue will be that at some point in the not too distant future, a sitting President will again be summoned to testify in front of a grand jury. This is a man who doesn’t read, doesn’t have the patience to sit through policy briefings that last more than a few minutes, admittedly didn’t prepare for campaign debates, lies regularly to inflate his own accomplishments, has an overinflated view of his own capabilities, and seems to have only a tenuous grasp on facts. How is this man going to perform when confronted with a detailed discussion of his actions as described by the sworn testimony of others?

This will be a situation where his usual strategy of bending the truth will not work. This is also situation where inexperience, “negotiation”, or even delusion are unacceptable excuses for failing to tell the truth. He won’t be able to deny that he said things because government lawyers and the grand jury will have the transcripts. He won’t be able to deny that he was present at a meeting when the sworn testimony of others who were there confirmed his presence. His experience as a performer will not help him. He won’t be able threaten. He won’t be able to settle. He won’t be able to leave after ten minutes. He will just have to answer the questions to the best of his ability. The recent NYT interview is a perfect example of the sort of disaster that this President is facing.

This is a minefield of Trump’s own making. It is hard to believe that he will be able to navigate it without stepping on at least a few of them. When he does, Mueller won’t need to prove intent to get an obstruction of justice claim to stick. He will have Trump on tape lying to a Grand Jury.

It is also ironic that a deeply flawed book that contains a lot of misinformation may end up being the publication that takes down a president who has a similar disregard for the truth.

Postscript:

At the time of this posting, two more Republican members of the house have announced their retirement (Issa and Royce). That brings the number retiring to 32 (compared to 15 Democrats). 20% of the 23 House Republicans running in districts won by Clinton in 2016 are not seeking re-election to those seats. Since 1962, an average of 40 house seats have been lost in midterm elections by the president’s party when the president’s approval rating fell below 50%. Trump says that polls don’t matter, but a lot of Republicans appear to be acting as if they do. Democrats only need 24 seats to regain a majority in the House.

When the Levee Breaks

Saturday, December 30th, 2017

With appropriate attribution to Led Zepplin, we find ourselves less than a year from the 2018 elections in a moment when it appears that there is a Democratic wave election building.

First let’s look at the evidence.

Then let’s speculate on why.

Harry Enten of the FiveThirtyEight blog printed an excellent analysis of where the two parties are today and how that compares to past off year elections.

A new CNN survey released this week showed Democrats leading Republicans by an astounding 56 percent to 38 percent on the generic congressional ballot. That’s an 18 percentage point lead among registered voters — a record-breaking result. No other survey taken in November or December in the year before a midterm has found the majority party in the House down by that much since at least the 1938 cycle (as far back as I have data).

These results are reflected in the larger aggregated poll that FiveThirtyEight produces.

What does that mean?

At this same point in time in 2006, Republicans were in the majority in Congress and Bush II was in his second Presidential term mired down in the Iraq war. Republicans trailed Democrats in the generic ballot poll by 10%. The Democrats gained control of the House and the Senate. That year they won 31 net seats. In 2018, they only need to win 24 seats to regain a majority.

We’re still nearly a year away from the midterm elections, however. And voter preferences at this point can change dramatically by election day; the average difference between the congressional ballot at this point and the final result is about 9 percentage points. But most large shifts on the generic ballot from this point onward have occurred against the party that holds the White House. Once you take into account who holds the White House, the generic ballot at this point is usually predictive of the midterm House result.

Here’s some of the why.

63% of voters think that the economy is good or excellent. Less than 40% of voters give Trump credit for that.

73% think the world will become more dangerous in 2018 because of Trump.

A majority of voters blame Trump for a deterioration in race relations. Only 13% blamed Obama for a deterioration in race relations at this point in his presidency.

52% of voters say they will probably or definitely vote for the Democratic nominee for President in 2020.

For the first time in history a past president was selected as the most admired man in the country versus the sitting first term president.

In Alabama, African-American voters over performed. They cast 29% of the vote while representing only 27% of the electorate. They also voted 96% for the Democrat. Given the history of voter suppression in Alabama, these numbers could be even better in the rest of the country.

According to a NYT opinion piece, here’s what that means for the rest of the country.

By emphasizing turnout in 2018 — especially of voters of color — Democrats can take control of the Senate, the House of Representatives and at least five statehouses. Republicans’ margin in the Senate has now slipped to just a two-seat advantage, and the Senate contests in Arizona, Nevada and Texas are all winnable if there is a robust turnout of voters of color. Texas may be considered as conservative as Alabama, but its actual demographics are much more favorable: Only 53 percent of Texas eligible voters are white (and a quarter of the whites are strong Democrats). Mr. Trump won Texas by 800,000 votes, but there were four million eligible, nonvoting people of color in 2016, three million Latinos alone.

Finally there is the enthusiasm gap. Voters opposed to Trump in particular and Republicans in general are just a lot angrier about it. As a result, they are more determined to vote.

Here’s a quote from a CNN article about the Virginia election.

In Virginia’s 2017 election, Democrats comprised 41% of the overall electorate as compared to just 30% for Republicans, according to exit polling. Almost half of the electorate (47%) said they strongly disapproved of Trump, and Democratic nominee Ralph Northam won 95% of those voters.

It is certainly possible that Trump could pivot in a different direction, but that seems unlikely.

Instead all signs point to yet another wave election where the incumbent party loses their majority. There are much more significant implications to this loss of majority for Trump because of the ongoing investigations into the actions of his administration.

Cryin’ won’t help you, prayin’ won’t do you no good,
Now, cryin’ won’t help you, prayin’ won’t do you no good,
When the levee breaks, mama, you got to move.

 

Above The Law

Tuesday, December 5th, 2017

On May 1, 1977 David Frost had the interview of his career. This was three years after Nixon resigned. Nixon was working on his memoirs and his publicist believed that these interviews would boost his popularity. Frost was able to get Nixon to admit that he DID cover up the Watergate burglary but that it wasn’t obstruction of justice because, in Nixon’s opinion, the President can’t do anything illegal.

Trump’s lawyer just floated the same defense for Trump.

This argument was first proposed by Alan Dershowitz this summer after the Comey firing. That argument has been dismissed by many legal scholars since including the Brookings Institute. In their document entitled “Presidential Obstruction of Justice: The Case of Donald J. Trump” they make the case that even if Trump had this authority (which is highly suspect) he cannot exercise it for corrupt purposes. Stopping an investigation into crimes committed by those in the White House is corrupt.

The problem is that Trump’s claim isn’t just for past actions. His attorney was asserting his ability to intervene in “any case” that may come up in the future. If the Mueller investigation is able to turn up credible evidence linking Trump to the crimes of others, Trump is asserting his right to “express his view” by firing everyone associated with the investigation.

Dowd is basically arguing that as the chief law enforcement officer, Trump has the authority to block investigations into himself, his allies and into his friends, and nothing he does can be construed as obstruction of justice,” Matthew Miller, a former Justice Department spokesman, told me this morning. “The logical extension of all this is that Trump can try to remove Mueller and it would be entirely legitimate.

But this ultimately won’t be a legal issue. It is a political one. That’s why the authors of the constitution gave Congress broad authority to hold the executive and judicial branches accountable for actions that were damaging to the country, even if they weren’t illegal.

Which brings us to the current problem.

Trump feels as though he can largely act with impunity because no matter what he does Republican Party leaders stand with him.

Here’s a brief list of his actions over the past couple of weeks.

  • Disputed the validity of the Hollywood Access tapes – No Republican response
  • Distributed inflammatory European anti-Muslim videos – British respond. Mild Republican response
  • Calls Sen. Warren Pocahontas at a meeting with American Indians – no Republican response
  • Piled on the sexual assault claims of celebrities and Democrats while ignoring accusations against himself and other Republicans – no Republican response
  • Wrongly claimed that the tax plan doesn’t benefit him – no Republican response
  • Endorses Roy Moore – Republican leaders (including McConnell) back off of their previous condemnations

He may be right when he says, “Hey look, I’m President. I don’t care. I don’t care anymore.”

He understands that he has the Republican Party right where he wants them. They need the passage of a tax bill (any tax bill) to support their campaign in 2018. They are not going to abandon Trump and risk fracturing the party when they are on the cusp of winning. He’s how EJ Dionne characterized it.

Don’t count on Republican politicians abandoning Trump quickly now that their tax victory is in sight. They and the president have a lot more in common than either side wants to admit. The primary loyalty they share is not to God or country or republican virtue. It is to the private accumulation of money, and this is a bond not easily broken.

The reality is that sexual assault and pedophilia are now acceptable as long as you are a Republican.

You need no more evidence than the tax plan to understand that the Republican Party does not care about the white working class voters that put them in office. When questioned about the faulty math in that bill Chuck Grassley said, we’re not talking about math here, we’re talking about philosophy. That philosophy is that what is good for business and good for the wealthy is good for the country.

What is happening instead is that Trump is remaking the Republican Party in his own image. By their silence, they are allowing Trump to define what the party stands for.

The Moore election in Alabama is a perfect example. Trump’s argument is that voters should ignore the claims of pedophilia because it is more important to have a key Republican vote in the Senate. Moore’s own defense is that his pro-life position should be all voters care about. Senate Republicans have now said they will accept whatever choice Alabama voters make.

If this is true, is there anything that Trump (or Moore) could do to cause the Republican Party to turn against him?

At this point I doubt that even video supporting the Steele Dossier Russian orgy claims would damage Trump’s core support.

Would invading North Korea and putting US territory at risk of a nuclear attack be a problem?

How about bombing Iran in an effort to destroy their nuclear facilities?

Trump is obsessed with testing the limits of his support. That has been true in his personal life. Now it is being demonstrated in his political life. The difference is that it is now our constitution and the fabric of our democracy that he is testing rather than the fidelity of his spouse or the loyalty of his employees. The only thing we can be sure of, is that as long as he is in office, this will continue. He will systematically break every taboo and challenge every social and political norm in order to prove that he is the most powerful man in the world. History tells us that these people always fail eventually. He is in the process of taking the Republican Party down with him. It will be interesting to see what the final straw will be for the rest of the country.

Same Poison Different Bottle

Saturday, September 23rd, 2017

via GIPHY

 

Every time Republicans regroup in an attempt to repeal and replace the Affordable Care Act, the proposed legislation gets worse.  That in itself should tell you something about the nature of the politics at play here.

The proposed Cassidy-Graham bill is the same poison in a different bottle.  It shifts health care costs including Medicaid to the states.  At the same time, it perversely cuts funding to support Medicaid and subsidize insurance premiums.  Worse yet, all federal funding disappears in 10 years.

It hard to fathom how Republicans could come up with a plan that would be worse than repealing Obamacare without a replacement, but they succeeded.

What is even harder to understand is that even though the bill is widely opposed by healthcare experts, industry groups, AND 85% of the population, it almost became law.  At this point it appears that the bill will fall a few votes short of passing in the Senate.  It would almost certainly have passed in the House, and President Trump would have signed it.

We can no longer afford to trust the Republican Party with healthcare.  It’s too important to be the subject of this sort of politics.  Healthcare accounts for 20% of our economy.  12.5% of Americans work in the healthcare industry.  More than 32M people would lose coverage under Cassidy-Graham.

Republicans were willing to vote on this without a CBO score, committee hearings, or testimony from experts and those affected.  They were willing to vote without any input from Democratic Senators even though Senate Democrats represent a majority of voters.

Instead they were willing to pass this bill, as bad as it was, because they thought they could.  They were more concerned about their base, their ideology, and the next election; than what was best for the rest of the country.

Please hold Republicans accountable in the upcoming elections for this cowardly act.

 

 

Should I Stay or Should I Go?

Monday, June 5th, 2017

Why is Trump so unpopular?

His supporters claim that a biased media and the “sore loser” Democratic Party are to blame.  While Trump supporters may draw some comfort from those excuses, the real cause is much more obvious.

Trump has lost a third of his support since taking office based on his actions.

  1.  He passed a bill that broke his promise to replace the ACA with something which provides better coverage to more people for less money.  His bill covers 23M fewer people, raises costs for the sick and elderly, removes pre-existing conditions protections, gives a huge tax break to the wealthy, and saves no more money than the ACA.  73% of voters oppose it.
  2. His admitted Muslim travel ban was poorly implemented and struck down by the courts.  Most polls show that the public supports the courts and opposes the ban.
  3. 78% of Americans support an independent investigation of the claims of Russian involvement in the election and Trump’s potential obstruction of justice.
  4. 62% of voters want to stay in the Paris Accords.  Trump announced the US was leaving based on an economic argument that was widely criticized by the fact checkers.
  5.  A majority of Americans (53%) want Trump to release his tax returns.
  6. Finally a majority (54%) of Americans believe President Trump is abusing his powers.

Trump’s historically low approval ratings are his own fault.  Neither the media nor the Democrats forced him to take these actions.  Hopefully his current supporters will also eventually hold him accountable.

For those Trump supporters who aren’t there yet, allow me to share the thoughts of Ray Dalio.  He is a billionaire hedge-fund manager who has been a vocal Trump supporter until recently.

His concern is that he hasn’t seen the pivot that he was expecting from Trump.  That was a pivot from seeking confrontation to implementing policy.  Trump won.  He has an historically unique moment for the conservative movement – Congressional and Judicial majorities.

Instead Trump has spent his time in office seeking out conflict.  Instead of making the fundamental changes in the way that government operates that he promised, Trump continues to drive the world to the brink of disaster environmentally, militarily, and financially.

Here’s how Dalio is evaluating his choice.

It seems to me people who are trying to figure out whether or not to support him are faced with three big questions: 1) what exactly is the part he’s trying to optimize for (e.g., American manufacturing workers) and at the expense of whom, 2) am I more aligned with that part he is trying to protect (e.g., American manufacturing workers) or more aligned with those who will lose out (e.g., immigrants, those who will lose benefits from his budget changes), and 3) will his path of conflict rather than cooperation be effective or harmful?

The rest of us are looking forward to 2018 when we plan to use the ballot box to vote out those who supported his plans.

The Perils of Trump

Monday, February 13th, 2017

Trump nation-tracker-overall-1

Trump has become one of the most unpopular President’s in history in the shortest time on record.

Because he lost the popular vote by such a wide margin, he didn’t enter office with much support outside his party. That support is now gone.

Whether Trump’s approval rating will drop further depends largely on independents and Republicans — he has almost no support to lose among Democrats. If those voters do sour on him, that could pose a threat to Republicans in the midterm election in 2018. The incumbent president’s approval rating historically serves as a good predictor of how many seats his party will lose at midterm.

Based on recent studies, we can make some predictions of where future erosion could occur.

His core support represents about 22% of the population. These folks are going to support Trump no matter what.

The next group are going to support him based on what he delivers. These represent another 22% of the population. These first two groups, the “believers” and the “conditionals” make up the 44% of the population (more or less) that approve of Trump’s performance so far.

The “conditionals” are interested in an improved economy, cleaning up Washington corruption, defeating ISIS, and building the wall in that order. If he fails to do any of those things, he will lose their support.

Let’s look at the challenges that Trump has with this group of “conditionals”.

Trump’s economic plan has a big problem. There aren’t enough workers to support the growth that he has promised. Worse than that, Trump is also expected by this group to put a tough immigration plan in place. Immigration is the easiest place to find the workers that Trump’s economic plan REQUIRES.

Here’s the math. We currently employ 152M people. Trump wants to add 25M more jobs. He needs that job growth in order to deliver the 4% a year GDP growth that he has promised. He’ll get 8M from population growth. If we are able to return to historical highs in workforce participation, he’ll get another 8M. That still leaves him 9M short.

There are only two places he can find those extra jobs. Either immigrants are going to fill them or he’s going to have to figure out how to convince baby boomers to come out of retirement.

The problem is that he can’t fill them with immigrants because one of the other things that the conditionals are going to hold him accountable for is keeping immigrants out and deporting those who are here illegally. That leave seniors. 19% of those 65 and over, work today. In order to hit his numbers, that percentage has to increase to 32%. Even that won’t get the job done, because 7M jobs are filled today by undocumented workers. If you deport all of those workers in addition to keeping new workers out, Trump’s plan adds only 9M new jobs. That’s not nearly enough to hit his GDP numbers. It barely keeps up with the jobs that population growth will require.

Trump is left between a rock and a hard place. Investments to grow the economy without increases in both productivity and workforce are going to spike inflation as demand exceeds supply. That’s going to lose him the support of the conditionals who will have a harder time buying a house, paying their adjustable mortgage, buying a car, and paying their bills. If he reneges on his immigration plan, he will lose the support of the conditionals even if it does help him keep his economic promise.

Trump has already lost the last two groups (curious and resister). He won’t get them back because their views are diametrically opposed to his base and the conditionals. They don’t want a wall.  They want to keep Obamacare. etc.

The only logical result is a continued erosion of the “conditionals” as Trump fails to deliver on his promises.

Most presidents lose ground during their first two years. The average decline since World War II is just short of eight points, according to a compilation by Marquette University political scientist Charles Franklin. If Trump follows that pattern, he could end up with an approval rating in the high 30s — perilous territory for congressional candidates running in swing districts.

If he survives all of the other challenges that currently seem to surround his administration, the historic patterns leave him in very dangerous territory. Bush II lost control of both the house and the Senate in 2006 because the country was tired of the Iraq War. His approval ratings were in the 30’s.

House members are already dealing with tea-party-like disruptions at their local town halls. Republicans are already backing away rapidly from any immediate action on Obamacare replacement because of fears of the impact that might have on the 2018 elections. Trump hasn’t even started to try to get his agenda through Congress, and the news cycles are dominated by stories of disarray, conflict, and foreign intrigue.  By way of comparison, by the third week of the Obama administration stimulus legislation was already being debated.

The closer that we get to the 2018 elections, the less likely it will be that at least House Republicans are going to be willing to take controversial votes. If healthcare reform remains undone, some voters are going to hold him accountable for NOT making the healthcare changes he promised. Other voters are going to vote for Democrats to PREVENT him from making the changes that he promised.

There is no clear path for Trump to improve his situation.

There are only many opportunities for it to get worse.