Author: hamilton1788

The deal is done–well, sort of. While the basics are reasonably clear, many questions, as with the Japanese deal, remain. Here are my questions and comments:

1. The Europeans are going to buy lots of American weapons. Since there are a limited number of American defense contractors, and the buyers are governments, the impacts of this part of the deal are relatively easy to understand and enforce.
2. “Europe” is going to buy $750 billion worth of “American energy.” Since neither “Europe” nor “America” is an economic entity, what does that mean? Who in Europe will be responsible for these purchases? What “American” companies are going to be the sellers? Are large multi-national energy companies really “American?” What happens if the European consumers don’t need the “American energy?”
3. I haven’t seen anything which suggests that the Europeans gave ground on the digital services tax or the VAT. On the other hand, the German car companies didn’t get a special break; it remains to be seen how the French agricultural products will be treated.
4. My questions about “Europe’s” new investments in “America” are the same as for the Japanese. Who in Europe will be required to make the investments? What practical limits are put on Trump’s discretion? What happens if the companies don’t make the investments? And so on.
5. On balance, I would say that American defense companies and energy producers are the big winners here, and American consumers and European producers are the losers. In addition, the 15 percent tariff won’t be enough to spark an industrial renaissance in this country, if such a thing were even possible. The ultimate outcome from our perspective is that the revenue from the tariffs will be derived mostly from American consumers in the form of higher prices and will be used to finance the tax cuts in the BBB.

We didn’t plan to evacuate from Hurricane Irma, but increasingly dire storm surge forecasts gave us little choice. We left more or less at the very last moment. We had only one hour to pack the car with our most precious worldly goods. The results of the frenzied packing showed us what really mattered to us.

The EU is in a similar position as it negotiates with Trump. The Germans want to protect their auto exports; the French are mostly concerned about their upscale agricultural products; the Italians are fighting for their luxury consumer goods; and the EU as a whole wants to keep its digital services tax and its VAT. As Trump ratchets up the pressure, who will win carve-outs, and who will be left in the cold?

We may find out as soon as this afternoon.

As I’ve noted many times, Trump is an economic reactionary at heart. He wants to revive industries that employ lots of burly men because he associates them with an American economy that dominated the Free World in the 1950s and 1960s. There are two notable exceptions to his backward-looking views, however: crypto, which provides opportunities for people like himself to make millions without actually doing any work or helping the public; and AI, which he wants to deregulate to the maximum extent possible. Why is AI different?

I think Trump views AI in the same way that Americans saw nuclear weapons during the Cold War; it is a new form of arms race with the Chinese that we can’t afford to lose. Promoting AI development, regardless of its ultimate implications for his voters, is a way of creating leverage against the Chinese. As a result, AI fits into two sweet spots for Trump: his desire to impose terms on other countries; and his affection for decades when America, in his view, was truly great.

The polls indicate that Trump is underwater on immigration, his signature issue. What should we conclude from that?

Part of it is the inevitable disillusionment of largely disengaged voters who thought they were choosing the economy of 2019 and got tariffs and chaos instead. But the bigger part, as I predicted during the campaign, is that Americans wanted an immigration system that was orderly and humane. Biden didn’t deliver order until the end of his term and was punished for it; Trump has given us Alligator Alcatraz, guys in masks pulling helpless people off the streets, and prison in El Salvador. That is neither orderly nor humane.

For the Democrats, the important lesson here is not to overreact to the oppression as they did in 2020 and to start advocating for open borders. Opposing an inhumane process is absolutely necessary; letting everyone in is a mistake.

Some details are still elusive on the Japan agreement, but here is what I know:

1. The Japanese have a quota on imported rice. The agreement increases the American share of the quota but does not expand the quota itself. As a result, it will provide American farmers with a slightly expanded market, but it is hardly a blow for free trade.
2. The identity of the parties who will ultimately bear the cost of the tariffs will not be known until they have been fully implemented and we have the relevant data. Over time, expect the share born by the American consumer to increase, as it will no longer be possible to rely on stockpiled goods.
3. It appears that the agreement contemplates that investments will be made by both the Japanese government (in the form of loan guarantees) and the private sector, although the specific nature of the private sector obligations and the method by which they are enforced will have to be identified and put into law by the Japanese themselves. I also understand that the objects of investment are set out in the agreement and are generally appropriate for an evolving American economy. The issues now revolve around interpretation, enforcement, and the use of discretion. What happens if the Japanese companies refuse to make the ordered investments? What if Trump decides to go outside the list in the agreement and order investments in, say, private prisons for immigrants and fossil fuels? What if he uses his discretion purely to help his friends and punish his enemies? Who can stop him from doing that, given that the agreement is not subject to ratification by Congress? TBD.

Today is the tenth anniversary of this blog. A few observations are pertinent:

1. For better or for worse–ok, just for worse–this era has been dominated by Donald Trump, a man whose greatest accomplishment has been to win over the reactionary base with harsh rhetoric and to leverage that relationship into control first of the rest of the GOP and then the entire country. As a result, liberal democracy in America is being both rotted out from the inside (i.e., by perfectly legal means) and burned down from the outside. Things are going to get worse before they get better.
2. The central thesis of the blog from its beginning has been the existence of four different threads of opinion–what I call the four factions–within the Republican Party. That thesis has aged extremely well and explains why the GOP has so much trouble doing anything positive when it is in power. There has been an evolution within the party, however; the CDs have mostly left, and the Reactionaries run the place, subject to a lingering affection for tax cuts for rich people. Ten years ago, the Reactionary-PBP compact was dominated by the PBPs; today, it is the opposite.
3. The evidence that Trump is following the Orban playbook of stifling dissent by bullying and buying out his critics is becoming more obvious every day. All I can say is that it won’t happen here. This blog isn’t written with financial gain in mind, and it never will be.

The GOP was all over Obama when the federal investment in Solyndra went awry. It was yet another unsuccessful attempt at socialism, they said. Government shouldn’t pick winners and losers, because it simply didn’t have the necessary expertise. Decisions about investment must be left to the titans of the free market.

Even assuming, for purposes of argument, that the mandated Japanese investments are selected by Trump in good faith, the new agreement still represents a complete change in position by the GOP. Will anyone in Congress balk? Will we hear screams of anger from the Freedom Caucus?

Don’t bet on it. They will say this is different, because Trump is a wildly successful businessman, and Obama was not. Since Trump’s record of picking winners at the Trump Organization is ample and clear, I will leave it to you to decide whether they are right.

Yesterday was a busy day for dealmaking for Trump. Columbia agreed to pay $200 million and subject itself to oversight from an independent body over issues involving antisemitism. In exchange, it will get most of its grants back.

You can understand why Columbia views this as a reasonable business decision; after all, it gets more money than it loses, and there will be no direct federal oversight of its admissions or hiring practices. But what in the agreement stops Trump from doing it again? Is there something in the document that prevents Trump from turning the screws on Columbia in the future if the university does something to piss him off?

TBD.

As usual, details are vague regarding the deal, which leads to the following questions:

1. It seems reasonably clear that Trump has won better terms for American cars and agricultural products in Japan. That is a traditional goal in trade negotiations, and the result is welcome. But what, exactly, are the terms of that access, and will it be enough to matter? Will the Japanese actually buy American cars and rice if given the opportunity, or will they continue to prefer domestic products? We won’t know the answers to those questions, in all likelihood, for years to come.
2. Trump undoubtedly views the 15 percent tariff on Japanese goods as a victory because tariffs are, in his eyes, desirable in and of themselves. If your tariff is higher than someone else’s, you “won.” But the tariff will be a tax on American importers. Who will actually pay it? Will it result in higher prices, lower profits, or both? Thus far, the new tariffs have mostly been eaten by businesses, but that could change at any moment, and probably will.
3. We are told that “Japan” will be investing $550 billion in the American economy, at the discretion of Donald Trump. Who, exactly, in Japan will be writing these checks, and when? What limits are being put on Trump’s ability to direct the investments? What are the legal consequences if the investments are not made?

It is the last series of questions that create the most heartburn. At first glance, this looks like the creation of a huge sovereign wealth fund, to be spent totally at Trump’s discretion, with no oversight from Congress. The implications of that, given Trump’s character and motivations, are too obvious and frightening to merit further discussion at this time.

Ross Douthat argues that the Epstein mess proves that MAGA has an existence outside of Trump and puts limits on him. He’s right; reactionaries were present in the GOP long before Trump came on the scene, as Pat Buchanan could tell you. But where does MAGA go when Trump finally leaves?

As I see it, there are several possibilities:

1. MILITARIZED MAGA: Jack up the defense budget, eviscerate the welfare state to pay for it, and shoot anyone who complains. MOST LIKELY PROPONENT: Tom Cotton.
2. ECONOMIC POPULIST MAGA: Increase taxes on the wealthy, cut them for poor workers, and protect the welfare state. MOST LIKELY PROPONENT: Josh Hawley.
3. GODLY SOCIETY MAGA: Keep going with the tariffs and deportations, limit America’s obligations overseas, and take stronger steps to increase the native population. MOST LIKELY PROPONENT: J.D. Vance.
4. CULTURE WAR MAGA: The business of America is to fight wokeness wherever it can be found. MOST LIKELY PROPONENT: Ron DeSantis.
5. NEW CONFEDERACY MAGA: Reduce the power of the federal government and let the red states do whatever they want to oppress anyone who isn’t a straight white Christian. MOST LIKELY PROPONENT: Greg Abbott.

The battle for the soul of MAGA will probably take place starting in 2027, and will be fascinating in the same way as car crashes and natural disasters.

During the primaries, I argued that DeSantis would destroy liberal democracy from within with his methodical and single-minded pursuit of culture war victories, while Trump would burn it down with his capriciousness and desire for retribution. How did that turn out?

Trump has pursued the DeSantis agenda as energetically as his own. We have the worst of both worlds.

SCENARIO 1: Trump 2.0 is viewed as a success by a majority of the population. The economy is strong, and America is at peace. THE NOMINEE IS: A young, charismatic progressive with an ambitious agenda to remake America. The Democrats are going to lose the election in any event, so why not swing for the fences?

SCENARIO 2: Trump 2.0 is almost universally viewed as a failure. The economy is in the dumps. Any reasonably plausible nominee could win. THE NOMINEE IS: The same young, charismatic progressive. America is too far gone in this scenario for moderate remedial measures, and Trump has opened the gates to radical change with his contempt for liberal democratic norms.

SCENARIO 3: Trump is polling around 40 percent. The Democrats are likely to win, but who knows? THE NOMINEE IS: A moderate governor who promises to return us to normalcy with incremental and pragmatic change within the McConnell version of the Constitution. In other words, a younger and more energetic version of Biden in 2020.

The wild card here is whether the DOJ and the FBI will attempt to intervene in order to keep the GOP in power. The blue team needs to be prepared for that possibility.

Trump was struggling to find a response to the Epstein mess that would satisfy the base. Things looked a bit perilous. Then the WSJ ran a piece connecting his younger self to Epstein. This put Trump back on more comfortable ground; he called the article fake news, and the base rallied around him. Crisis averted.

Trump is suing Murdoch and the WSJ for a gazillion dollars. He should be calling Murdoch and thanking him for throwing him a lifeline.

Peak hurricane season will arrive next month. Our president is a climate change denier who is doing his best to wreck FEMA and the various federal agencies responsible for forecasting and tracking storms. The most likely landing spots for hurricanes are red states with governors who also deny climate change. What could go wrong?

Things will be very different this year in one respect. For the past four years, red state officials and voters could blame Biden for any shortcomings in the government’s response to extreme storms. Who will get the blame this year? Will it be Trump or the reactionary governors?

If you thought that the Trump racial agenda was simply to replace affirmative action with “merit,” his attempts to coerce NFL and MLB team owners to bring back racist team names should persuade you otherwise.

At least Hegseth tries to pretend that he isn’t using the names of loser Confederate generals again. No one actually believes him, but at least he’s making the effort.