Month: February 2018

Donald Trump was treated to a big extravaganza inside the Forbidden City while I was in China.  The flattery clearly worked.  He took it as an affirmation that the Chinese government thinks he’s as great as he does.

Both he and the MSM missed the point.  By holding this event in the Forbidden City, the Chinese government was sending the message that they were at the center of civilization and their guest was a barbarian, albeit an unusually important one.

Of course, they were right about the barbarian part.

As I’ve noted before, the “Chinese dream” and the “American dream” are fundamentally different.  The latter revolves around limited government and the legal and moral right of the individual to pursue happiness in any way that doesn’t negatively impact society;  the former is based on the wealth and power of the collective, which presumably trickles down in some manner to each individual.

The policy elements of the “Chinese dream” are as follows:

1.  Mercantilism:  The Chinese government imposes tariffs, controls the value of its currency, subsidizes industries it considers of national importance, and requires foreigners to turn over technology in exchange for access to its markets.

2.  Political stability:  In every dynamic economy, there are bound to be winners and losers.  The Chinese government uses every tool at its disposal to make sure that the losers don’t endanger the stability of the state.

3.  Increased military power:  This focuses on control of the area immediately outside of the country’s borders.  The militarization of the South China Sea is part of a plan to guarantee access to raw materials during wartime, while threatening to cut off those materials to South Korea and Japan.

4.  The war on corruption:  In the absence of a multi-party system, a free press, and an apolitical criminal justice system, the only hope of keeping corruption under control, and thereby maintaining support for the regime, is by applying continuous pressure from the top.

The American response to this, in a nutshell, can either be to beat ’em or join ’em. Traditionally, we have competed with Communist countries by emphasizing the great benefits that come from an open society with limited government and the rule of law.  Trump doesn’t appear to believe in any of that;  he seems to want to turn our country into a second-rate version of an authoritarian state which features tariffs, walls, and a strong military.  The rest of the world is not impressed.  As a result, Chinese power is on the rise.

Here’s how the factions would rate Trump to date:

CLs:  Positives:  Deregulation efforts; tax cuts; no major protectionist actions so far; eliminated the individual mandate.  Negatives: Signed off on a budget plan with lots of new spending.  Grade:  B.

Reactionaries:  Positives:  Gorsuch; work requirements for Medicaid; daily tweets triggering liberals; Muslim ban; no amnesty.  Negatives:  Filled his cabinet with Wall Street plutocrats; tax plan favored the wealthy; no real protectionist actions yet; showing some flexibility on immigration.  Grade:  B.

PBPs:  Positives:  Delivered on tax cuts and deregulation; no real protectionism to date.  Negatives:  Looks like a corrupt, incompetent bozo, which ultimately endangers our tax cuts; protectionism could be on the horizon.  Grade:  B.

CDs:  Positives: Some needed social spending in the budget; Gorsuch.  Negatives:  Tax plan favors plutocrats;  tweets are tearing the country apart; incompetent and corrupt.  Grade:  D minus.

What this shows you is that the CDs are gone, but the rest of the GOP will stand behind him, barring a disaster.

Here’s how the factions responded:

CLs:  Bleah!  Bleah!  The beast is gorging, not starving!

Reactionaries:  We didn’t grant amnesty for illegal immigrants, and there are no new programs for the undeserving poor, so OK.

PBPs:  Reagan proved deficits don’t matter.  Keeping the government open makes the GOP look responsible and thus helps us keep our tax cuts and deregulation.

CDs:  Providing money for social programs is a good way to help the poor.

And so, the CLs have been routed, but they have nowhere else to go, politically. Welcome to the era of “Funhouse Reagan.”

The opening was restrained, tasteful, and poignant.  The poignant part, alas, comes from the fact that there is a reasonable chance that South Korea, as we know it, won’t exist at this time next year.

That’s up to Donald Trump.  Koreans have good reason to be worried.

It would be fair to say that the Winter Olympics are the blue state games.  Red states are generally too hot and too flat for winter sports.

Nevertheless, people in red states have traditionally rooted hard for American athletes at the Winter Games.  Nationalism in sports is common to red and blue people alike.

Will that continue, or will Trump find a way to make the Olympics part of the culture wars, too?  We’ll see.

The GOP has shown once again that, as Dick Cheney once said, “Reagan proved that deficits don’t matter.”  As a result, we now know that my prediction for the economy was right; we will have “Funhouse Reagan,” not “Reverse Robin Hood.”

The remaining question is, will “Funhouse Reagan” evolve into “Trade Warrior?” Fortunately, Trump’s fixation with the stock market has prevented him from engaging in any real trade wars yet.  There’s no guarantee that will continue.

During the campaign, Donald Trump repeatedly assured us that the American economy was a shambles due to the predatory behavior of the Chinese.  Today, he tells us that the economy is in great shape.  The trade deficit with China in 2017 was the highest in history.

Is he an economic illiterate, or a liar?  You decide.

I composed this yesterday after reading one of the articles about Trump and the parade.  I barely had to change the original lyrics to make it work.

American Putin

American Putin

Stay away from me.

American Putin

Won’t you set me free.

Don’t want you hanging around my door.

Don’t want to see your shadow no more

I don’t need your war machines.

Don’t need American carnage scenes.

 

Now Putin

Get away.

American Putin

Listen to what I say.

 

Parody of “American Woman” by the Guess Who.

Trump’s fascination with military parades shows off many of his worst qualities: his bluster; his authoritarian impulses; his childishness; his egotism; his lack of understanding of our country’s values and political roots; and his mindless love of spectacle.  He’s approaching this as if he were a young boy playing with plastic tanks and army men in his sandbox.

There are two things about it that are really frightening.  First, he obviously has no objection to emulating Xi, Kim, and Putin; and second, he has no awareness of what war is all about.  For him, as I put it in a previous post, a war is a bomb, a parade, and a statue, not destruction, death, and misery.

There’s an interesting article on Vox.com today about what a war in Korea would really be like.  It focuses largely on the damage Kim could do with chemical weapons.  It’s sobering, and well worth your time.

To Trump, everything—relationships, war, politics, and foreign trade, to name a few–is a zero-sum game with a clear winner and a loser.  That’s why he loves sports so much.

You can expect him to take credit for all of the medals that Americans win in South Korea, and to criticize anyone who looks like a “loser.”  One hopes the athletes will keep a safe distance from him, but that won’t be easy for them, with conservative trolls lurking ominously on social media at home.

He’s just lucky that these are the Winter Olympics, because it would be easy to imagine a replay of what happened on the podium in 1968 in Mexico City if the athletes were largely minorities.

 

One of the most obnoxious things any human being can do is float some outrageous or insulting idea and then walk it back by calling it a “joke.”  Trump does it all the time. He did it again with his suggestion that anyone who didn’t applaud him at the SOTU is a traitor.

I’ve seen the film clip.  He certainly didn’t appear to be joking, and there is no reason to believe that his followers understood it that way.

This is a perfect example of how you can expect him to behave if there is a major war or terrorist attack, and next time, he won’t even pretend to be “joking.”

So the markets have finally reached the conclusion that cutting taxes in a boom will result in inflation and higher interest rates.  Well, duh.

The crash is coming on the heels of an upturn so large that only a prolonged rout can overturn it.  The fairly minor increases in wages, inflation, and interest rates arising from the tax bill to date don’t warrant that kind of a reaction.  In my opinion, however, these will be the enduring impacts of the legislation:

1.  Real estate, particularly in blue states, is going to take a significant hit as the result of higher long-term interest rates and new limitations on deductions.  Due in part to regulatory changes subsequent to the Great Recession, however, we won’t see declines similar to those in 2008.
2.  Wages in services that cannot be automated or offshored (e.g., construction, lawn maintenance, and health care) will increase as long as the labor market remains tight.
3.  Wages in manufacturing, however, mostly will remain flat.  There is no such thing as a tight labor market when you can move your factory to India.  It will take a long time to run out of Indians.
4.  Higher interest rates will make it harder for companies to expand, but they will have enough cash on hand that they can do it without the assistance of banks. The real question is, will they?  Everything I see indicates that the answer is no, due to ongoing weaknesses in aggregate demand driven by demographic changes and the decline of the American middle class, which was not addressed by the tax cut.

In short, in the long run, the tax bill will exacerbate inequality and damage the housing industry, but will do nothing to address the real issues in the American economy.

As I will explain in a subsequent post, the ongoing crash in world markets should, if properly managed, only be a blip.  However, confidence is everything in the markets, and our government’s response will fall to:  a gasbag huckster who ran a bunch of Atlantic City casinos into the ground; a plutocrat with no relevant experience in dealing with these situations; and a completely brand new Fed chairman.

If they succeed in screwing this up, they could turn a forgettable market correction into a big, beautiful bear market and a recession.  It’ll be amazing. Believe me.  Believe me.

You’re probably aware of the ongoing debate about Trump and his authoritarian impulses.  Some people find him a danger to the country; others think he’s too lazy and slipshod to really threaten our institutions.  To me, the two are not mutually exclusive; the real test will come when we face a genuine national crisis, such as a war or a massive terrorist attack.

What’s beyond debate is that he is destroying the public’s faith in institutions which should be, and always have been, nonpartisan.  The judicial system, the MSM, the CIA, the FBI, the DOJ–even the NFL–have come under fire, and Republicans no longer believe in them.  That’s purely on Trump:  he didn’t create the blue/red divide in our country, but he makes it worse every day, and no one ever dreamed of taking on the FBI until now.

The first job of the next president is going to be to restore morale within the government and trust outside it.