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Posts published in “McKee”

Cheney to Bush revisited

mckee

Many of us heaved a semi-sigh of relief when Trump announced John Bolton for national security advisor. “Whew,” we thought, “at least he did not try to put Bolton up for Secretary of State.” It was going to be difficult enough having this cold-eyed firebrand at the elbow of our terrifyingly unpredictable president, but at least it was in the NSA’s role of an advisor not a doer. Filling the NSA job had proved to be a disaster for Trump. This appointment would be the fourth individual to fill the post in less than 15 months, and Trump desperately needed to get it right. Bolton missed out on the first round of Trump’s appointments but had obviously been pacing the halls waiting for a call. So, one hoped, Bolton might be safe. He’s a loudmouth war hawk, but he cannot get us in much trouble from an advisor’s seat, we thought, as long as we have responsible grown-ups out in front, running Defense and State.

But the 70-year-old Bolton has been involved in insider politics close to 40 years. A graduate of Yale (’71) and Yale law (‘74), he practiced law for a few years and then, with Reagan’s arrival, he moved into the revolving doors of the capitol political arena. He began moving back and forth, from a variety of positions in Justice and State when the Republicans were in, then to conservative think tanks, connected law firms and Fox News when they were out, steadily climbing the ladders of power with each move. His top post previous to Trump’s election was Ambassador to the United Nations under a recess appointment by George W. Bush. He did not serve long, for he was forced to resign when it appeared that he would not be confirmed by the Senate.

According to a white paper presented to Trump’s transition team, the National Security Advisor position was supposed to be “as an honest broker of policy options for the President in the field of national security, rather than as an advocate for his or her own policy agenda.” He was to be the eyes and ears of the administration, identifying the hot spots around the world and winnowing out the essential details to keep the president fully informed. He was not expected to be out in front shooting his mouth off, nor was he expected to be seen traveling around looking like he had any authority over anything. That there is a huge difference between an “advisor” and an” advocate,” is apparent when one considers that the advocate roles all require Senate confirmation while the advisor role does not.

But there is no sign that either Bolton or Trump ever read the NSA job description. Bolton was never content to stay behind the curtain and speak only to the ear of the president. Within weeks he could be found searching out microphones, cameras and podiums everywhere to air his views on a variety of topics. An off-hand remark to the Federalist Society leapfrogged Bolton over Pompeo into the middle of a sticky issue with Pakistan. Bolton met with Israel’s Netanyahu at the prime minister’s home in Israel that had the trappings of a state dinner. At one time or another, Bolton has declared himself opposed to the Iran nuclear treaty, in favor of a pre-emptive strike against North Korea, in favor of assisting regime change in Syria, in favor of toughening the U.S. stand against China, to include military options, and declaring that the International Court at the Hague was officially dead to the U.S.

Recently, Bolton, not Pompeo, declared that Russia should get out of the Ukraine, return Crimea, stop using assassination tactics, and quit interfering with U.S. elections. It was Bolton who stepped forward to walk Trump’s words back when he got ahead of himself on troop withdrawal from Syria, and Bolton and Pompeo together went on the fence mending tour through the Middle East. It has not become unusual to see Bolton and Pompeo issue joint statements of policy on U.S. matters.

The recent departure of Mattis marks the last of those considered by many to be the adults in the room, at least with regard to foreign policy. With the exception of Bolton, the men at these essential posts are now second-string deputies or inexperienced sycophants leaving no one to step up with the gravitas to speak truth to power. Bolton has become it, the man, the trusted counselor with open access to a willing ear. This, to the extent that several of the cognoscenti compare it all to be in the same category and in the same manner as a prior trusted relationship.

The word is that Bolton-to-Trump has become the same as Cheney-to-Bush -- times two.Happy New Year.

With eyes tightly shut

mckee

Most objective historians consider the Iran nuclear deal to be a signature achievement of the Obama Administration. It was not a perfect deal, but it satisfied most of the concerns of most of the nations upon most of the terms that most of the participants considered to be important and which all could then embrace. It was accomplished at a historic table that had never been assembled before. And all of the nations agreed that it was a brilliant diplomatic feat that clearly belonged to the United States, attributable in substantial part to the skill of Secretary of State John Kerry and the international leadership of President Barack Obama.

So, with his eyes tightly shut and his fingers plugging both ears, Trump stepped right up to kill the deal.

After refusing to admit that Iran was in full compliance with all terms of the agreement, and against all advice from the moderate voices from everywhere, Trump abruptly announced in May of 2018 that he was pulling the United States out of the deal. Trump followed this in early November with the re-imposition of stringent economic sanctions against Iran. The thinking, as announced by Trump, is that this will force the Iranian leaders to come back to the table and agree to a stronger agreement.

Never mind that strict sanctions have been tried before and seldom work. Never mind that so far, there has been no indication of any interest by Iran in cooperating with any of Trump’s unilateral demands. Never mind that so long as the present Ayatollah remains as supreme leader, there is little likelihood of any change, no matter what the more moderate voices might want.

The tragic consequence is that Trump paid no attention to what Hassan Rouhani, the moderately inclined, Scottish trained lawyer who is the current president of Iran, had managed to accomplish on his end in bringing about the adoption of the deal by Iran. Trump seems to ignore or be oblivious to the progress that has been made within Iran and to the consequences to that progress that will probably result from his actions.

Rouhani had been the lead negotiator for Iran during the negotiations of 2003-2005, when a temporary suspension of the nuclear program was arranged. He resigned from the effort in 2005 when the ultra-conservative hard-liner Mahmoud Ahmadinejad was elected president of Iran. In 2013, Rouhani beat the conservative successor designated by Ahmadinejad to become the seventh president of Iran. He then convinced the supreme leader to stay out of the way to the renewed negotiations for a nuclear compromise. He installed the more moderate Mohammad Javad Zarif as Iran’s foreign minister, to head the negotiations for Iran. The sudden moderation in the leadership of Iran, away from the hawkish doctrinaire of Ahmadinejad, and with the tacit agreement of the supreme leader to keep silent, the way was paved for the negotiations to be restarted.

Although Rouhani had faced stiff resistance from within Iran throughout the years of negotiations, with the announcement of a successful agreement and the anticipated cessation of economic sanctions, Rouhani’s popularity in Iran shot up. He was re-elected president over the more conservative candidate backed by the Ayatollah in 2017. For the first time in over 35 years, ever since relations with Iran were cut off in 1980, a pathway appeared for the possibility of reopening discussions with the west.

It was only an expectancy, for the supreme leader, the Ayatollah Ali Khamenei, is a hard line, hawkish cleric who, under the complicated political structure that no one in the west seems to understand, can exercise controlling influence over the presidency and parliamentary operation of the country at any time. Rouhani had persuaded the Ayatollah to step aside during the negotiations, but the ultra-conservative factions continues to be strongly critical of any deal made with the international powers. But at least the formal agreement was a step in the right direction.

Trump’s action ends any chance of this progress. Although Rouhani continues in his efforts to work with Russia, China, and the European powers to salvage any part of the deal that he can, and he has announced that Iran would continue to adhere to the requirements of the deal, Rouhani’s domestic opponents are clamoring for his resignation. One conservative news outlet likened him to the disgraced former British prime minister Neville Chamberlain. Despite the steps by the E.U. and other nations to uphold the deal, Iran’s economy is in severe stress. Iran’s currency has plunged in value against the dollar, bringing huge price increases in everything from cell phones to medical supplies. Many European companies are abandoning Iran rather than risk being curtailed by the United States. Given the rift between the Rouhani faction and the conservative followers of the Ayatollah, it is unlikely that any meaningful capitulation to Trump’s demands will occur.

The huge problem is the lack of a realistic, attainable declaration of policy by the United States towards the middle East. This whole thing was a hipshot from Trump without listening to any advice and without any evaluation of consequences. His foreign policy for the Middle East is so muddled with exceptions and inconsistencies as to be unintelligible. Trump’s declaration to Iran is an unrealistic statement of demands – it is not an invitation to negotiate, it is a demand for capitulation, and one that most observers predict is destined to fail.

So much remains uncertain. What is our policy towards Europe going to be as events unfold in Iran? What will we do if the European allies do not back the U.S. but continue to work against us to maintain open trading channels with Iran? Will the U.S. actually apply sanctions against its own allies if this happens? What of the waivers that the U.S. is granting (to South Korea, Japan, India, China, Taiwan, and Turkey, among others) – what is the basis for these exemptions and how long will these last? What will the reaction be of those not receiving waivers? With the sanctions and exceptions, and the workarounds coming out of Europe, it is obvious that there is going to be a ton of money to be made – some legitimately and barrels full under the tables. Is anybody watching the money?

Unless Trump is persuaded to change direction and moderate his demands, it appears the inevitable result will be an unstable Iran in the midst of an unstable middle East, with the same problems we face in North Korea, only worse. The economic impact of the continuation of sanctions by the United States, without participation by the rest of the Western powers, will serve only to impoverish Iran, drive an impenetrable wedge into relations with the United States, and cement relations with Russia and probably China.

The upshot of it all? It is a mess, and unlikely to improve anytime in the foreseeable future.
 

A billion-dollar non-solution

mckee

So, Trump is sending federal troops to the border in California and Arizona to defend us from the murderous thieves and marauding thugs that make up the approaching caravan of Guatemalan migrants. Never mind that the approaching migrants mostly consist of families and largely include women and children; that there is no indication of any element of organized crime or criminal gangs, and that all of Trump’s declared fears in this area are totally groundless – and worse, he knows it.

And never mind that the so-called caravan, which started out over 7,000 strong, has dwindled to around 3,500 and continues to shrink. It is in central Mexico now, about 800 miles from the border, and moving about 20 miles a day. Its size continues to dwindle as it moves north, with people and families dropping out either to return to Guatemala or remain in Mexico. It will be at least another month before any of them reach the U.S. border.

And never mind that this is not the first such caravan of immigrants to approach the southern border. There have been at least three earlier crowds, all of which were processed without difficulty. No one knows how many there will actually be this time, but at the present rate of attrition, the actual number will probably be well within what any of the major border crossing facilities are equipped to handle on any given day without assistance. The general consensus is that there will be no actual need for additional support at the border or in any of the other immigration control resources when this caravan actually shows up.

While we may not be sure when the approaching caravan is going to arrive, or how many there will be, Trump has announced that the troops will be at the border in time for the mid-term elections! He started out promising around 800, then upped it to 5,200, then announced Wednesday last, off the cuff and catching the Pentagon by surprise, that it might be as many as 15,000 strong. What a wonderful idea. What could possibly go wrong?

15,000 is about the size of a modern, mechanized infantry division. A division can be operational at around 10,000 and is fully staffed at 20,000. Suffice to say the modern division normally goes to field armed to the teeth with automatic and semi-automatic weapons, artillery resources, close-in air support and armor. If not actually deployed to a combat situation like Afghanistan or the middle east, the soldier in the modern division will spend his or her day at the home base in constant training to hone and keep sharp the battle skills necessary to bring this massive armament to bear if and when needed. Deployment to the border will provide very little in the way of usable training experiences – meaning the equivalent of a full infantry division is being pulled off line for a totally non-military exercise for one to two months.

In addition, everybody needs to be housed and fed and provided with transportation. The modern army no longer moves on its feet, meaning they will need all manner of ground vehicles plus airplanes and helicopters – lots of them – for everybody to get around in. This does not come cheap, with estimates of the border deployment of a month and a half or so running to $1 billion with the number at 5,200 troops, translating to costs of upwards of $3 billion if the number reaches 15,000.

Here is the clinker. The U.S. military is prohibited by law from becoming directly involved in the enforcement of domestic laws – including immigration – without specific authorization from Congress, which Trump does not have. The posse comitatus law of 1878 forbids the use of the military for domestic law enforcement. All the federal troops can do is provide logistical support to the border guards. They cannot become involved in any way with the arrest and detention of the immigrants. This is without a doubt the most expensive means Trump could have selected to provide nothing but back-up to a situation that may never develop into an actual problem.

All of the responsible voices around the old fool have told him that this is an absurd use of U.S. active duty combat soldiers. General Mattis said so in public, but the president overruled him. It has been fully exposed in reality to be 100% a political stunt aimed at the right-wing base just prior to the mid-term elections.

There is no way anything productive can come out of this. Anybody remember Kent State?
 

On presuming innocence

mckee

Trump thunders that the Democrats want to do away with the presumption of innocence and will be responsible when mothers and wives see their sons and husbands trashed by false accusations. Senator Collins claimed that Judge Kavanaugh was entitled to the presumption of innocence in the face of what she admitted was credible testimony from his accuser. Senator Durbin has been taken to task for his remarks that the presumption of innocence does not apply to this case.

The arguments abound that it is all a plot by the Democrats to take away a time-honored tradition of our American heritage, and that without it, one’s reputation could be trashed anytime a baseless accusation was made.

The Republicans have made a complete mish-mash of the argument, and they should all know better. Recent discussions indicate that there is considerable confusion over exactly what the presumption is and how it operates. Let us take a look at this subject under some bright lights.

Most of us understand the concept of evidence, and the concept that if one claims something is so, they must produce evidence of the claim in order to have it established and accepted as true. But what happens if there is no evidence? Under what circumstances can we get to a conclusion where we have to accept the existence of a set of facts without proof. How do we handle this?

The answer is with assumptions. In our every day lives, we assume all sorts of things just to get through the day. We assume the clock is accurate, we assume the bus will arrive on time, we assume the phones will work, we assume it is not going to snow in June. Our lives would fall apart if we had to have proof of all these propositions before taking any action.

A presumption is nothing but a formal assumption. In the law, we formalize this reality into certain rules of evidence and recognize presumptions all over the place. The presumption that property acquired during marriage is community property, the presumption of heirship of a birth during coverture, the presumption of due care, and so forth. These presumptions are not evidence. They stand in as substitutes for evidence when it is necessary to get to a conclusion that turns on some point where there is not actual evidence. Presumptions serve to enable us to accept as true the fact in question despite having no actual knowledge of it, and despite there being no actual evidence on point, in order to complete a legal process or reach a legal conclusion.

In the law, any presumption evaporates in the presence of actual evidence. The presumption becomes unnecessary and unwarranted, for if there is actual evidence on point, the truth of the proposition is to be determined by the actual evidence. In court, this is measured by the burden of proof. In a civil case, the burden of proof is either by a preponderance of the evidence – which means more probably true than not true – or by clear and convincing evidence, which is a higher standard. In court, the law does not accept mere possibilities as sufficient for proof; we say the proof must at least reach the standard of being more probable than not.

On the criminal side, in the absence of evidence, the law says an individual is presumed innocent. This presumption is not evidence and is not itself a fact, for we do not know whether the individual might be guilty of something or not. The presumption exists only in the absence of evidence and operates to prevent the government from obtaining a conviction, or even from filing charges, unless there is some evidence of guilt.

Just as in other instances, if there is any evidence available, the presumption of innocence disappears. Once there is evidence, the presumption is replaced by the burden of proof we impose upon the government in a criminal case. We say the government cannot convict the individual without proof beyond a reasonable doubt. This is a much higher standard than the civil standard.

The presumption of innocence does not mean the individual is actually innocent. The presumption is merely a rule that guides the court in processing criminal cases in absence of sufficient evidence.

If there is no evidence, the presumption prevents any charges from being filed. If there is some evidence, the presumption disappears, and the issue is determined on the evidence measured by the burden of proof. If the evidence is insufficient to meet the required standard of proof, the law treats it as though there was no evidence on point. If the defendant is found not guilty, it does not mean he is innocent; it merely means the government did not produce sufficient evidence to convince the jury beyond a reasonable doubt. There are many instances where a jury may actually conclude that a defendant is possibly guilty, or even probably guilty, but will not convict because they are not satisfied that proof is beyond a reasonable doubt.

What of the situation here, where Judge Kavanaugh was faced with the compelling but somewhat vague accusations of Dr. Blasey-Ford? The government is not charging him with a crime, so testing the sufficiency of the witness’s story against the specific elements required for the criminal charge is not involved. There is evidence. The testimony of the gentle professor is evidence. The law is clear that the testimony of a single witness is sufficient for the proof of any fact, so there is no presumption to apply. The question, then, does not turn on the presumption of innocence but rather on the burden of proof.

What is the burden of proof to apply? In a criminal case, the burden of proof would be beyond a reasonable doubt, but this is not a criminal case. In a civil lawsuit, the burden would be by a preponderance of the evidence; mere possibilities are not enough. But this is not a lawsuit.

The issue under examination is the constitutional duty of the Senate to advise and consent. The constitution does not say what the burden of proof should be in such proceeding, and to my knowledge and research, there is not a rule in the Senate Manual that would apply here. As such, the standard to be applied becomes a matter within the inherent discretion of each senator. Proof to some degree of probability is reasonable, but so too are mere possibilities, or intuition, or even hunches if the senator determines such to be sufficient.

The point here is that the presumption of innocence plays no part in this process. It is the burden of proof that matters, and that is up to the individual senator. It is up to the senator how the testimony of the gentle professor is to be evaluated against the evidence produced by the judge.

How high is the senator going to set the bar, and how much weight is to be given to the evidence that is on the table? These are all matters of discretion for the individual senator to apply in acting upon the constitutional duty imposed to advise and consent. The decision under senate rules should be a matter of individual discretion, left up to each the individual senator.

Instead, and from all appearances, the majority party has treated this case as a matter of partisan expediency and has dictated the result to its members. Senator Durbin knew exactly what he was talking about.

The NDA’s gotta go

mckee

Most of the kerfuffle Paulette Jordan’s campaign for Idaho’s governorship is in will evaporate in another news cycle or so, with little actual damage to the candidate or her campaign.

In the ordinary scheme of things, rearranging a political campaign just before the run-up to the final event is not that unusual. Here, it is perhaps a power struggle between the candidate, the home town crowd, and some pros from afar – apparently, a political consultant and his staff brought in from Minnesota.

The hoopla over their leaving is a campaign detail that has nothing to do with the candidate’s persona, her policies, or her abilities for the office she is seeking. The problems relate only to her ability to manage a statewide election campaign, and she gets at least a half a pass here because she is new at it on the statewide level. It’s the pros from afar who should have known better. At least, to my mind, there were a whole handful of better ways they could have used to manage the transition roll out.

No matter how pissed-off the political consultant was at getting dumped, as a professional he was obligated to do no harm to the candidate or her campaign as he went out the door. The blithe statements that confidentiality agreements precluded him and his staff from giving any explanations were atrocious. His final responsibility, whether he got fired or quit in a huff, was to design an exit strategy that got him and his people out with no mud, minimal harm, and no messes to clean up after.

Jordan does need to move quickly to restore organization to her campaign, and bland press releases with no details are not the best answer here. And she does need to eliminate the one truly unexplainable and intolerable detail that might remain.

The mere existence of non-disclosure agreements is a red flag that marks clear trouble ahead. Any candidate for high office has to know and accept that every scrap of that person’s life is open to examination; one must be prepared to explain any rough or unsavory spots that might exist and under no circumstances may one be suspected of hiding anything. A non-disclosure agreement is just that - an indication that there is something to hide.

Jordan should immediately get rid of any remaining NDA’s and assure everyone that she has done so.
 

The gap cannot be ignored

mckee

Personal income as a percentage of GDP is continuing to shrink, despite the general growth in the economy and employment.

What makes this decline particularly distressing is that during the same period, corporate profits have been burgeoning and executive compensation – particularly CEO compensation – has been skyrocketing. It does not take a CPA or math whiz to figure out who is getting squeezed.

As the graph in the margin demonstrates, only those within the top 20% have enjoyed any real increases in incomes in the years since 1979. The bottom four lines represent the four quintiles of the rest of the population. The actual average incomes within each of the four quintiles of this bottom 80%, when measured in actual buying power after consideration of inflation, are declining.

In the post WWII years from 1945 to 1980, incomes at all levels grew rapidly and at roughly the same rate up and down the income ladder. The recession of 1973-1975 marked the end of the post-war growth, and with the recovery from this recession, the disparity between the top 20% and the entire rest of the country began to widen.

With the advent of the Reagan era in 1980, government policies towards the economy changed. The government shifted from its reliance on Keynesian economic theories and turned to the so-called supply-side goals of maximizing production and profits. The theory was that if the owners and shareholders were recognizing maximum profits on maximum production, the gains realized would “trickle down” to the wages and salaries of the workers.

Unfortunately, it did not work that way. Where maximum profit is the goal, every cost becomes target, and with no disincentives to protect the labor class, their wages and salaries are on the block. Total incomes of the upper 20% of the workforce began to explode in the middle 1980’s and continues to skyrocket today. The bottom quintiles flat-lined and have enjoyed essentially no part of the economic growth sustained in the last 30 years. The only real beneficiaries of the tremendous growth in the U.S. economy have been essentially the professionals and highly talented, the owners and their top executives, and the shareholders. Everybody else is falling behind. Everybody.

The middle class, which at one time was the thriving bulwark of our society, is vanishing. We have reached the point now where fully half the population lives in a low-income status, many at or below the poverty line. And this trend is continuing to worsen. Since 1980, incomes within the middle and lower ranges slowed sharply or receded. The U.S. was ranked 6th from the bottom of the 173 countries in the free industrialized world in terms of income and wealth inequality.

The wealthiest 1% now own about 40% of the total wealth – a share higher than at any point since 1962. There is more wealth in this 1% than in the bottom 90% combined. And it is continuing to widen.

The owners, shareholders and consumers are well protected and taken care of, both by market forces and government regulation. Only the labor end of the economy is totally out in the cold economically. Market incentives are really available only for the well-educated, the highly skilled and the exceptionally talented. The ordinary worker has, in essence, been abandoned.

The Republicans have buried their heads in the sand to sing the praises of unfettered free-market capitalism. They view with disdain any efforts at government intervention, labeling such as “liberal” causes, which they equate to socialism, and insist that all such should be eradicated. Socialism is considered to be a form of totalitarianism, a failed experiment, unworkable in any society that values individual incentive and innovation. Any concept of rebalancing the wealth of the country is considered the pinnacle of liberalism and socialistic thought, meaning that any aspect of this concept is a complete anathema to the coveted ideal of free market capitalism. Compromise has become unthinkable.

Too many Democrats have also buried their heads in the sand to avoid any attempt to confront these issues head on. They have allowed the Republicans to define the term ‘liberal” and to then equate it to the equivalent of a nasty, four-letter word. The Democrats then run away from any attempt see such a label attached to their efforts or campaign beliefs.

Despite the fact that every other industrialized nation in the free world embraces some modified version of socialism, or at least utilizes socialistic devices to the benefit of their populations in some areas, too many Democrats seem to agree with the Republicans, and continue to act as if “socialism” at any level or in any form is a poisonous concept, not even to be discussed as an appropriate solution for any problem facing our world today.

This means that the concept of income or wealth redistribution cannot be mentioned in polite society today by anybody. The Republicans refuse to discuss it at all, and the Democrats are afraid of the liberal label that might be attached to any meaningful efforts if they bring it up. The result is an empty void over what may be the most crucial social and economic issue of our day.

What should be becoming painfully obvious is that some level of government intervention is going to be needed to reverse the trend of an economy that is rapidly transferring all wealth to the very rich. It is the essence of what is essential. The hands-off approach is only making it worse.

There are a variety of remedies to the issue of inequality of wealth, and plenty of room for debate on most of them. They run from steps to reinvigorate labor unions to increasing the availability of higher education and post-high school training to reactivating a national minimum wage to imposing maximum ratios on compensation to enacting various tax incentives to encourage diversity. There are undoubtedly more ideas that could be explored.

What must happen is recognition by both parties that (1) something must be done and (2) the solution is a legitimate area for government intervention or assistance. This should not be a partisan issue. This is the survival of the way of life as we have grown accustomed for everyone. Both sides must commit to a diligent search for acceptable and effective remedies if we are to reverse the distressing trends that are becoming increasingly obvious.
 

Wrecking balls in motion

mckee

About a week ago, and in the dead of night according to the New York Times, Trump started his trade war. With all the other hoopla going on, not much has been done to call attention to this event.

International trade makes up around 25% of our GDP, which is a number that is not to be sneezed at. However, international trade is not the most interesting subject to examine and even simple explanations can take the reader off into the weeds by the end of the lead. There is just no way to inject any real excitement into basic accounting, trade ratios and market shares.

That said, the event noted may have more lasting and direct consequences upon more of our everyday lives than all of the other matters that the old fool is playing around with will have, even combined. It was exactly midnight that a third round of tariffs imposed by Trump on billions of dollars’ worth of foreign trade from China was to take effect. China immediately announced that it was matching the U.S. action with additional tariffs on of its own. Similar dialogues are rippling throughout Europe, Canada and Mexico as these countries prepare retaliations in response to U.S. tariffs imposed upon their exports. Trump has announced the intention of following suit if retaliatory tariffs are imposed against the United States. The result appears to be the beginning of an inevitably escalating series of retaliatory tariffs that could escalate until trade maximums are engulfed.

So, history seems on the brink of heading down a path last followed almost 90 years ago, when the isolationists convinced then President Hoover to go along with a stiff tariff program intended to protect American jobs. The Smoot-Hawley tariffs were enacted in 1930. Economists and historians estimate that these tariffs were the direct cause of U.S. exports falling by over 40% by 1932, crippling international trade. All economists generally agree that the trade war caused by the Smoot Hawley tariffs exacerbated the Great Depression.

Trump has not announced what specifically he intends to accomplish by the imposition of his tariffs. He has no clear policy to promote. He says only that the U.S. is being treated unfairly, and that we have to reign in the current levels of trade deficits. He doesn’t say why the trade is unfair. Surely, there are specific imbalances that need attention, and there are some trade practices that are unfair. Specific tariffs can be a tool in certain cases. But the task here is to find a tool to apply as a Band-Aid to a specific problem, not to attack every situation with sledge hammer or wrecking ball. Too often tariffs become sledge hammers, leaving too much unintended wreckage. Even when carefully applied, the impact of tariffs will eventually hit the consumer.

Trump’s fascination with trade deficits, and his insistence that they need to be brought into balance, is just plain wrong. Trade deficits are not inherently evil. In a healthy economy with markets that are otherwise booming, trade deficits are a perfectly normal if not even a desirable result. In the U.S. for example, with an economy that is burgeoning ahead, the huge beneficiaries of our trade deficits with most of our trading partners are domestic consumers. Eliminating deficits by definition requires either an increase in production or a decrease in consumption. Where artificial measures are applied, in the usual case it is the consumer who will suffer in the end.

Consider what happened in 2009, when the unions and tire manufacturers complained to the Obama administration that China was flooding the market with radial tires. Domestic jobs were being lost because domestic producers could not compete. So, the Obama administration imposed a punitive 35% tariff on specific types of radial tires exported from China. Because of the specifics involved, economists were able to study the market exactly, and measure the results with a degree of precision.

It might have looked like the special tariffs helped in the short run. Domestic tire producers were able to hold their prices and maintain production, and an estimated 1,200 jobs in the tire industry were preserved. But according to a study released by the Peterson Institute of International Economics, when the consumers’ side of the deals were examined, the additional cost of what had been cheaper Chinese exports cost domestic consumers an estimated $1.1 billion in higher prices. Further, when the tariffs hit, the decline in sales of the imported tires cost an estimated 3,731 domestic jobs lost on the retail side. One academic study on this specific tariff concluded that three retail jobs were lost on the consumer side for every manufacturing job saved on the production side.

In the longer run, the special tariffs did not return all radial tire production to the U.S. Instead, production migrated from China to other cheaper countries. Domestic tire production was initially boosted by the tariffs but soon sagged again as competition from foreign sources spread. One manufacturer, for example, held his employment level from 2009 through 2012, with the addition of the tariffs, but by 2017 – five years later – the employment level at this firm was down by over 25%. A study released in July of 2017 concluded that the special tariffs made no difference to production problems in the tire industry long term yet cost the U.S. consumers billions of dollars in higher prices.

The problems are even more complicated when the commerce being hit are products made up of component parts or subassemblies. According to a 2017 analysis presented by CNN, for example, every car manufactured in the United States could actually be considered an import when considering the origination of all the parts and subassemblies that go into the manufacture. To show the incongruities, by this measure the most “American made” vehicle currently on the market is a Honda pickup – a commercial vehicle partially manufactured in Japan with more than 75% of components manufactured in either the U.S. or Canada.

If tariffs are imposed on parts that are exported to the U.S., this can put the domestic parts manufacturer at a significant disadvantage. The domestic producer’s costs are driven up by the tariffs, often resulting in it conceding market shares to foreign competition which acquires the same parts and subassemblies but without tariffs. If the domestic producer can absorb the additional costs of the tariffs without raising prices, it still must reduce margins which might otherwise be available for increases to wages or reinvestment in plant resources.

All major U.S. automakers also have assembly plants in Mexico. Components are manufactured in the U.S. and elsewhere, shipped to Mexico for assembly, with the completed vehicle then returned the U.S. for sale. In a full-scale trade war, we may find tariffs imposed by the U.S. on parts and subassemblies; tariffs imposed by Mexico on the components sent to plants in Mexico for final assembly and tariffs on the finished vehicle as it is returned from Mexico for sale. Multi-levels of tariffs would hit U.S. consumers purchasing U.S. made cars from U.S. manufacturers on vehicle models intended for sale in the U.S.

One investment analysist said long range planning under Trump was difficult because no one could figure out what his policy was, is, or might become, commenting that “Watching all these trade actions is like watching a pinball machine.” Further, what Trump is doing is probably illegal. Imposition of tariffs are supposed to require Congressional action; the President is only authorized to act without Congressional authorization when declared necessary for national security. Most analysists agree that there is no true national security involvement in any of the tariffs Trump has imposed so far, or in any tariffs that he has announced he intends to impose.

What is clear is that the ultimate target of almost all of these tariffs is, or will be, the American consumer. Despite what it looks like, tariffs are not a tax or penalty imposed upon the foreign exporter. While sometimes the cost of a tariff can be absorbed by exporter; much more common in the short run, and always in the long run, is that the additional cost of the tariff will be passed along into the price to be paid by the ultimate consumer. A tariff in reality is nothing but a sales tax imposed upon the poor end consumer.

Anybody want to guess who that is going to be?
 

Now, they must organize

mckee

Trump and the Republicans keep dredging Hillary’s name up, again and again. And every time they do, some bunch of Democrats rush to her defense, playing straight into the Republican strategy of keeping Hillary’s name up in the main lights. The whole intent of this is plainly obvious: to make Hillary the face of the Democratic party, and then plant the suggestion or even hint among the most stalwart independents that where there is smoke there might be fire. And the Democrats are letting them get away with it.

At the same time, Obama’s name is starting to vanish. In the main, this is also because of Republican antics. Trump acts like Obama never even existed. He never mentions Obama by name as he steadily removes every vestige of his administration. When faced with some feature of the Obama years that cannot be ignored, Trump blithely rewrites it, revising history and inserting alternative facts more to his liking. Then he casts himself into the lead role and claims full credit for anything positive. To see this strategy in operation, all one has to do is watch Fox News. And the Democrats are letting him get away with it.

The Democrats are in disarray. If they do not recognize it, and do something about it right now, they risk losing the midterms this fall and even the Presidential in 2020. Right now the party must stop allowing the Republicans to define what the Democratic party stands for. They need to start by getting Hillary off stage once and for all. She is the totally wrong icon to leave out as the standard bearer of the party. She is the anathema of a candidate who paid no attention to the clamor for hard issues erupting all around, and whose only campaign strategy was to avoid taking a hard position on anything even remotely controversial, keeping tight instead to the platform of “It’s My Turn,” and “I’m Not Trump.”

The party, ideally, needs somebody of their choosing up on stage and under the lights who can stand as a true face of the Democratic Party. The obvious pick here would be Obama, but others might serve just as well. A charismatic chairman of the DNC, for example, or perhaps Joe Biden, unless he is determined to run himself in 2020. The objective has to be to stop allowing the Republicans to define what the Democratic party looks like, and to get a positive example out there who can do some good.

More, or at least equally important, the party must advance a core set of positive programs to frame the difference between the parties and provide a reason for support that is keyed to something other than the negative. In plain words, the “Anybody but Trump” issue is not going to be enough to win any election, and if that turns out to be the central issue this fall, it is an omen of disaster for the Democrats.

The recent primary upset of New York Congressman Joseph Crowley, the ten-term representative from the Queens who was number four in the Democratic caucus and looked on by many as Pelosi’s successor, should be a clamoring alarm to every Democrat running for anything anywhere. Alexandria Ocasio-Cortez, the 28-year-old waitress and community organizer from nowhere who pulled it off, spent one-tenth the money and was totally ignored by the DNC, the DCCC and the entire Democratic establishment of New York. But she concentrated on hard Democratic issues without flinching or softening or sugar coating anything – her platform was a list of Democratic Socialism straight out of Bernie’s playbook. Crowley tried to telephone in a plain vanilla centrist campaign that would not ruffle any feathers. Ocasio-Cortez set up a grassroots organization right out of Obama’s playbook that ran into every corner of her district, and then personally hustled around shaking every hand, kissing all the babies, and talking the arm off everyone who would listen. Crowley stayed in Washington, relying on what money would buy and sending stand-ins to show up when a personal appearance was demanded. The result should have been predicted: Ocasio-Cortez clobbered the insouciant congressman by a landslide 15 points - 57% to 42%.

The lessons should be obvious. There has to be something more to the Democratic promise than “Anybody but Trump.” There have to be positive programs being advanced that will define the party and attract the essential votes from the undecided independents. The Democrats have to quit running away from legitimate Democratic principles just because Republicans threaten to call them “socialistic.” Bernie Sanders should have taught all that they did not have to cover up mainstream Democratic philosophy in order to motivate the vital core of independent or undecided voters.

Ocasio-Cortez’s list isn’t that bad: Medicare for all; free community college; increase the minimum wage; and a guaranteed jobs program for all who want work, to name a few from her basic set. In other words, a refocus and underscore of core Democratic issues promoting the social and economic empowerment for the average person. The key here is for the Democrats to step up and claim ownership of Democratic issues in Democratic terms, and not allow the Republicans to define them in Republican terms.

If the Democrats do not get busy and start to reverse these Republican stratagems right now, the midterms may turn into a disaster and the result in 2020 may very well be 2016 all over again.
 

Eye on the ball

mckrr

There is no end to the awfulness emanating from the Whitehouse. Even when Trump is right, he manages to make it wrong just by the clumsy, crass manner decisions are being implemented. Consider:

Trump pulled the U.S. out of the Iranian nuclear deal for no good reason, announcing that he intended to reimpose economic sanctions. The international political problems of this move are monumental. But the economics of Trump’s actions are going to present some fascinating opportunities that no one is paying attention to, yet.

By definition, economic sanctions are two-way streets, meaning there are significant economic costs to both the imposing nation and the nation being punished that are functionally equal. It is one thing to impose economic sanctions on a targeted nation as part of a multinational plan where all the allies agree to join in; the cost of the policing action is shared among all the participating nations. But what of unilateral sanctions that are attempted by the United States alone, when the allies do not join in? Trump has announced that he will impose unilateral sanctions upon any company from any friendly country caught dealing with the Iranians.

Exactly how does Trump expect this move to go over with our allies? Or at home? All of our allies in Europe seem determined to keep the Iran deal alive. They have announced a nine-point economic plan to rescue the pact. Although no details are available yet, stripped of the diplomatic trappings the clear intent here has to be for Europe to provide Iran with a means of working around any U.S. sanctions. As this plot begins to thicken, the possibilities multiply. For anyone with inside knowledge and a willingness to bend the rules or take advantage of circumstances, there is money to be made on both ends of any sanction situation.

Take a look at what is happening in the other half of the world. The U.S. Department of Commerce announced a series of economic sanctions against a giant computer electronics manufacturer in China commonly known as ZTE. This outfit has been selling computer equipment to all the countries on the forbidden lists – Iran, North Korea, Syria, Sudan, etc. – for years, and had already paid huge penalties imposed by the world court Then it was revealed that ZTE puts out cell phones with secret devices to capture data that is transmitted to intelligence gathering facilities in China – raising the specter of national security. As a current sanction imposed just by the U.S., ZTE was forbidden to do business with any U.S. resource for a period of seven years.

ZTE immediately began cutting back its operations, which involved cancelling billions of dollars of orders from parts manufacturers in the United States, causing panic and predicted huge losses here. According to the N.Y. Times, it is estimated that 4/5ths of ZTE’s high-tech parts come from U.S. sources. Imposition of the sanctions would result in staggering losses to some U.S. suppliers

So, Trump reversed course and announced that he will step in to help out with ZTE – presumably to lighten the sanctions and thereby save the Chinese company’s bacon. The move was announced as a measure to bring relief to the U.S. suppliers notwithstanding the national security concerns.

Then it was revealed that Trump’s U-turn on ZTE came right on the heels of the announcement of a $500 million investment by China into one of Trump’s golf course and hotel operations in Indonesia. Obviously, the Whitehouse promptly gushed, just a serendipitous coincidence.

Yeah, right. Isn’t it more likely that this fiasco means that unilateral imposition of sanctions on friendly companies in other instances will come with caveats and exceptions and back-doors so that, in the long run, all these deals can turn into one-offs that depend upon pragmatic measurement of the economic turmoil brought upon the related countries, including the U.S?

Since it looks like there might be huge bucks to be made here, why not? U.S. unilateral sanctions can easily be turned into a political morass, with corruption, influence pedaling, pay for play and every other ill that might befall. All anyone has to look at to understand the fortunes that might be at play here are the millions of dollars that Michael Cohen amassed from a handful of gullible companies for absolutely nothing. What are the odds that a substantial part of this money did not find its way into one of Trump’s pockets? Is there anyone about who actually believes that Trump and his minions will resist the opportunities that are going to spring up in the Iran business, once the spinning begins in earnest?

Let us just try to keep our eye on the ball here.