Month: January 2017

The best case scenario assumes that Trump ultimately winds up governing more or less as a generic Republican with–shall we say–some major stylistic differences.  This results in the following:

1. The inevitable big regressive tax cut is not accompanied by major entitlement cuts, and the trade war quickly fizzles due to fierce opposition both at home and abroad.  The country consequently experiences what I have labeled the “Funhouse Reagan” economic scenario:  a skyrocketing deficit; higher interest rates; and a recession. It isn’t as bad as the “Trade Warrior” scenario, however.
2. Resistance from Republicans in Congress and members of his own cabinet causes Trump to give up on the Unholy Alliance with Russia.  The Trump foreign policy is conventional, albeit hawkish.
3.  The North Korea war follows the script I posted a few days ago.  Kim does not launch suicide attacks against South Korea and Japan.
4. Trump backs away from his confrontation with China in exchange for some cosmetic changes on trade.
5.  Most of Obama’s climate change measures prove to be irreversible.
6.  Trump violates some constitutional norms, but his efforts to stifle public opponents are limited to Twitter attacks and the odd libel suit.  Our freedoms remain intact.
7.  Dodd-Frank is not repealed, and there is no major banking crisis.
8.  Obamacare is watered down somewhat, but is not truly repealed.

This scenario will only occur if the GOP establishment gains control of the administration due to Trump’s short attention span and lack of interest in policy. Don’t bet the ranch on that.

If I recall correctly, the principal GOP presidential candidates in 2008, even including John McCain, supported some sort of stimulus in the face of the deepening recession.  This was in keeping with past practice, including the period after the bursting of the tech bubble during the Bush Administration. When the Obama Administration proposed a stimulus, however, the GOP completely changed course and complained bitterly about waste and pork.

The stimulus essentially had five parts:  additional safety net payments; aid to state and local governments; temporary tax cuts; a public works program; and investments in clean energy.  The safety net payments effectively reduced misery and propped up aggregate demand. The aid to state and local governments similarly worked to maintain governmental service levels, while boosting demand.  The tax cuts, which were largely an unsuccessful attempt to bring Republicans into the fold, were a mixed bag;  large portions of the proceeds were predictably used for savings or to pay down debt, which didn’t help with the short-term problem.   The public works program was conceived as an updated version of New Deal programs, but the approval process for infrastructure projects is far more convoluted than it was in the 1930’s, and infrastructure is no longer built by armies of strong men with shovels, so this part of the stimulus was a bit of a disappointment.  Unlike the rest of the package, the energy investments were not really viewed as a short-term mechanism to create jobs and boost demand, so their effectiveness needs to be viewed on a longer-term basis.

Taken as a whole, the stimulus was a moderate success;  with the exception of a few GOP ideologues, there is a consensus among economists that it saved millions of jobs.  Left-wing critics, such as Paul Krugman, who complained that the stimulus was too small ignored both political realities and the weaknesses in its public works component.  The real question now is whether the GOP, by its vocal opposition to the Obama program, has precluded its own stimulus in the likely event of a Trump slump.  If it has, things could be even worse than I have predicted, which is saying something.

Imagine that you are a Republican senator from a red state.  Your margin of victory was larger than Trump’s.  You have serious doubts about his qualifications, his personality, and his free-flowing ideology, so you said as little as possible about him during the campaign.  On the other hand, your base includes a large number of his followers, you fear being singled out by him on Twitter, and you are genuinely fired up about his plans for deregulation and tax cuts for the wealthy.  What are you to do?

Continue to treat him as you did during the campaign:  not as a real Republican, but as a third party candidate, or perhaps a force majeure, for whom you have no ultimate responsibility.   Keep your distance and use him to get what you want, but don’t tie your fortunes to him too tightly, because you don’t want to be in the cart when it rolls into the ditch.

Your UK vacation gets cheaper by the day, but the vampire squid will have to find a new place to live.

Obama campaigned in 2008 as the man who could bridge the red/blue divide, and he meant it;  he continued to reach out to the GOP years after it became clear that he could only make deals with them by using leverage.  His administration was remarkably clean.  His family life was beyond criticism, even from the religious right.  The economy improved dramatically, and the deficit fell, during his tenure.   For all that, red America hated him with a passion, and the divide was worse, not better, when he left office.  Why?

The easy, but incomplete, answer to that is that he was African-American.  I think there are three better responses:

1.  Everything about Obama screams “cosmopolitan” and “urban.”  His race is part of that, but only part;  his education, interests, and demeanor are part of it, too. He didn’t show much interest or sympathy for rural voters and culture, and he occasionally demeaned them on open microphones.
2. His support for Black Lives Matter, gay marriage, and criminal justice reform made it appear that he was taking the blue side in the culture war.
3. There were plenty of prominent GOP politicians and media figures who thought  that they could benefit by throwing gas on the fire.  They were right; it worked.  The GOP is now in complete control of our government.

Calling out business owners in public.  Doing his best to muzzle the media. Starting wars and swaggering to maintain his popularity.  Encouraging rivalries among his advisers, distancing himself from day-to-day decisions, and firing unpopular subordinates with great fanfare.  Using corruption as a mechanism to maintain discipline.  Trying to remain unpredictable.

Is it Putin or Trump?  You decide.

 

Trump, like many of his countrymen, was looking forward to a showdown with the ayatollahs in order to avenge the humiliation of the hostage crisis in 1979.  He was persuaded by his advisers that tearing up the nuclear agreement was a mistake, however, and he was preoccupied with other issues, so an uneasy peace prevailed in 2017.  Things would be much different, however, in the following year.

Trump seized his chance after a minor confrontation between Iranian and US vessels in the Persian Gulf in early 2018;  he demanded an apology and the payment of reparations.  When the Iranians refused, he ordered airstrikes on military and political targets in Tehran.  The Iranians looked to Putin for assistance, but, not wishing to relinquish the fruits of his alliance with Trump in eastern Europe, he declined.

Lacking any other way of retaliating, the Iranians mined the Persian Gulf and announced they were restarting their nuclear program.  Worldwide oil prices skyrocketed, much to Putin’s delight.  Facing a severe recession, Trump ordered an all out missile and air assault on Iran.  This included the use of some low level nuclear weapons.

The Islamic Republic was destroyed.  Monuments were built to Trump in Saudi Arabia and Jerusalem.  Debate began on funding one in Washington.

There was, to be sure, a reasonable case for immediately confronting North Korea:  all of the peaceful efforts by previous administrations had failed to change the regime’s behavior; the regime’s efforts to build an ICBM were dangerously close to success; and no one could be sure that Kim Jong Un could be effectively deterred once he had a weapon in hand.  Nonetheless, in keeping with his essential character, Trump saw the war primarily as a cheap way to gain popularity and stifle criticism in light of his domestic failures and low poll numbers.

In March, Trump sent a message to the Chinese and North Koreans.  The essence of it was that North Korea must agree to dismantle its nuclear program within a month or face annihilation.  That could be done in any number of ways, including turning it over to the Chinese, but the demand was not negotiable.  The North Koreans, of course, refused the ultimatum and swore to turn South Korea and Japan into lakes of fire.  The Chinese also protested vigorously, but Trump ignored them, predicting that Beijing would not risk a military confrontation on behalf of such an unreliable ally.  The South Koreans and Japanese just held their breath and prayed.

On the appointed day, Trump launched air strikes against the regime’s nuclear facilities.  They were completely successful.  He concurrently sent a message to the North Koreans and Chinese promising not to broaden the war or engage in regime change, but assuring them that all of North Korea would be turned into a cinder if the government tried to retaliate against Japan and South Korea. Lacking any concrete promises of massive military assistance from the Chinese, Kim was faced with a dilemma:  lose face and deal with a potential coup; or face the destruction of his entire country.  It was a close and nervewracking call, but in the end, he opted for more threats, but no action.

The war was thus contained, and was a big public relations victory for Trump, who had shown himself to be a “winner.”  His poll numbers skyrocketed.  The Chinese government was humiliated, and decided to retaliate by stepping up its provocative activities in the South China Sea.  Trump, emboldened by his success, looked forward to a high stakes confrontation with Beijing over trade and navigational issues.  A much more dangerous crisis between the superpowers loomed ahead.

In a lot of ways, the auto bailout was the most remarkable accomplishment of Obama’s presidency.  It was an issue that didn’t play any part in the campaign, but he had to deal with it almost immediately after taking office.  There was no established playbook for dealing with the situation, and the risks were very high.

By any reasonable standard, the bailout was a huge success.  It is not at all clear that the auto industry as we know it would still exist in the Rust Belt states without it.  It was not the fiscal disaster the right predicted, and the price imposed for it was adequate to address the moral hazard question in the future.

The auto workers then showed their gratitude by voting for Trump.

As we know, Donald Trump has no government experience, few policy ideas, and the attention span of a gnat.  As a result, he will have to rely heavily on his team in order to run the country.

The team does not exactly inspire confidence.  Here is how it breaks down:

1.  Where’s the key to the washroom?  Team members with no experience running  an agency or a large private sector entity:  DeVos; Carson; Trump himself.

2.  Fox in the henhouse:  Team members who clearly don’t believe in the mission of the agency they will be leading include:  Carson; Pruitt;  what’s his name–I just can’t remember–Rick Perry!

3.  Shining brass:  And you thought Patton was dead!  Two out of three are sane, which is a high percentage for this crowd.  Team members:  Flynn; Mattis; Kelly.

4.  Alt-right on!  Out of the ideological mainstream guys:  Bannon; Flynn.

5.  Tribunes of the plutocrats:  Faux populists include Ross, DeVos, and Mnuchin.

6.  Who’s in charge here?  The team as a whole is rife with ideological conflicts. These include:  Mattis vs. Flynn on Russia and Islamic terrorists; Kelly vs. Trump on immigration control; Tillerson vs. Pruitt and Trump on climate change; Sessions and Mattis vs. Trump on torture; and Price vs. Trump on entitlement “reform.”

The most important potential conflict is between Mattis and Flynn.  Mattis is a hawk, but he’s not a nut, while Flynn, by all plausible accounts, is an autocratic crazoid.  If Flynn wins this battle, God help us all.

Brooks has a column in today’s NYT in which he discusses the issue of market failures in the health care system.  He notes the arguments against markets and admits they have some validity, but ultimately rejects them because they are largely based on an analysis that is more than fifty years old.  He then goes on to say that things are different now, because lots of information is available on line.

The internet will solve our health care problems!  Whoo-hoo!  I would respond as follows:

1. Dismissing a study because it is old is an odd position for someone who claims to be a conservative.  I guess we can throw out Plato, Aristotle, and the Bible, too.
2. The conclusions that he rejects in the cited study are based on common sense observations that are still accurate today, not on obsolete data.
3. If you’ve ever gone on line looking for medical advice for a particular symptom, what you will inevitably find is a host of possible causes and direction to get advice from a doctor, which solves nothing.
4. The market does work in some instances.  If you have a medical problem that isn’t serious or complicated, you can probably figure it out for yourself and buy over-the-counter medicine to deal with it.  There is plenty of information available under those circumstances, there are lots of competing providers, you aren’t in a position where you have to make a decision under very adverse circumstances, and you won’t die if you misdiagnose the problem.  For more serious and complex issues, however, you don’t really have any choice but to rely on a doctor or a hospital, and that is where all the market failures–monopolies, inequality of knowledge, the need to rely on someone trustworthy, etc.–come into play.  That’s where the money is in our system.  The internet isn’t going to make the problem go away.

Just as the French Revolution still influences French politics today, the ghost of Franco still haunts Spain.  While the Spanish right clearly accepts democratic norms, you can occasionally see evidence of centralizing, authoritarian DNA, particularly in issues involving separatism.

The current rightist minority government is in a difficult position.  Is it sufficiently flexible to deal with the upcoming Catalonian crisis, or will it revert to type, even without a majority?  I make no predictions on that point, but it will certainly be interesting to watch.

             Welcome to the Roller Coaster

Welcome to the roller coaster.

Strap in for the ride.

Up and down and round and round.

There’ll be no place to hide.

 

We’ll cozy up to Russia, now.

We’ll fight with the Chinese.

Where’s North Korea on the list?

No one can feel at ease.

 

We won’t have any allies, now.

Cold interest will prevail.

Nobody there to pick us up

If we should fall and fail.

 

America is going rogue.

It’s not been tried before.

It’s likely a disaster but

It sure won’t be a bore.

The CIA guy known as Mike.

He thinks Putin should take a hike.

He broke with his boss.

Our gain is Trump’s loss.

There wasn’t much there not to like.

The Italians and Germans have a complicated history, going back to the days of the Roman Empire.  During the last two centuries, their respective experiences have been more similar than different:  a belated unification in the latter part of the 19th Century; war; fascism; defeat in World War II; and EU membership. That notwithstanding, the condition of the two countries today is very different; the German economy is roaring forward, while Italy suffers from slow growth and chronic deficits.  The question for the day, then, is why?

The easy and simple answer to the question is that one country is populated by Germans, and the other by Italians.  That, however, is just a way of rephrasing the question:  why are these nations the way they are?

I think there are two related reasons, both connected to national complacency.  If you’re an Italian, you’re blessed with good weather, good food, a beautiful countryside, great art, and a glorious history; it’s consequently easy to enjoy the dolce vita and leave the grim pursuit of material goods to others.  The Germans either don’t have those advantages or have them at a much lower plane, and their country suffered far more damage during World War II, so they have more incentive to throw their energy into building wealth.