2018 myth of the year

Politifact selects a lie of the year.    They don’t have a similar award for myths.  They should.

A political myth is perpetrated usually with great concoction of bits of truths mixed in with a lot of lies or exaggerations.  John Kennedy got it right in 1962 when he said:

“The greatest enemy of truth is very often not the lie – deliberate, contrived and dishonest, but the myth – persistent, persuasive and unrealistic.  Too often we hold fast to the cliches of our forebears.  We subject all facts to a prefabricated set of interpretations.  We enjoy the comfort of opinion without the discomfort of thought.”

I am concerned with the mix of news and opinions presented primarily on cable news.  Fox News is a clear example of this.

“You’re entitled to your own opinions. You’re not entitled to your own facts.”

Let’s consider a few examples:   Trump sent the military to halt the impending invasion of a caravan of immigrants, filled with would be criminals.

Basically,  this was just a mid-term election stunt.   Unfortunately, a very unnecessary one.  But it was done to because immigration was a hot button issue, and Trump wanted to stand out, as the toughest guy on halting illegal immigration.

But the myth of the year, I believe is Trump’s  simple statement:

“Trade wars are good, and easy to win”

Trade wars makes every economist who understands the mechanisms of capitalism cringe.   Tariffs imposed on China result almost immediately in China imposing tariffs on the US.   No one is ahead in negotiations.  The government gains because they receive the tariff income, but industries which import from China must pay higher costs.   Higher steel prices strongly impacts the oil industry and their capital investments.  I believe Trump has  killed any chance of the  Keystone XL pipeline, Phase 4 of every being constructed given the sharp drop in oil prices and the increase in steel prices.   Trump bragged at his ability to talk down oil prices, by getting Saudi Arabia to increase production.   The Saudi’s increase production as Trump pushed through new sanctions against Iran, and importers of Iranian oil.   Of course, Trump then reversed course and granted waivers to many countries, so Iranian oil could keep flowing to the world market, creating a temporary oil glut.

The Department of Energy will let oil companies drill almost anywhere they want, but the economics of many projects are gone.  This includes the decades of controversy of drilling in northern Alaska and extensive oil shale developments.

Mr. Tariff man, you’ve made a mess of things!

Stay tuned

Dave

 

 

 

 

 

Trump: Populism, Nationalism with overriding Pro-business focus

Populism and nationalism are not policies, but ideologies, which when rigidly applied or taken to extremes, have terrible consequences.   Populism concentrates on the problem, rather than the solution.   Nothing is every built on existing solutions.   It is more of a tear down and rebuild philosophy,  Underlying populism is a focus not on problems of society, but on government itself.   An excellent example was Trump’s campaign slogan, “Let’s drain the swamp.”   The message was that policies in the Obama administration were only what lobbyists wanted, and he was truly independent of their efforts.   The more Hillary Clinton spoke of her background in government, the more she became part of the “elite” class who were causing all the problems.

Populists exaggerate the problem and are vague on the solutions.  Trump frequently goes from an exaggeration to an outright lie.   Populists  are constantly at war with opponents who they claim will only make matters worse by continuing government policies.   Case in point was Scott Pruitt, Administrator of the EPA, taking an axe to hundreds of environmental rules, on the basis of deregulation.   He had no interest in protecting the environment.  He allowed  and in fact appointed “elitists” or fossil fuel lobbyists guide federal policies.  I guess Pruitt would defend his policies as doing what is best for the nation in helping companies explore for oil, ultimately lowering the cost of gasoline.

Nationalism says that a country does only what is in its best interest.   With Trump, it seems anytime we are part of an international organization, we have this tremendous clout to determine outcomes.   Case in point, is Trump’s verbal attack of Germany at the NATO summit.

Trump renewed the long-standing U.S. criticism of the project on Wednesday, and doubled down by tying it to the future of NATO. “Germany, as far as I’m concerned, is captive to Russia because it’s getting so much of its energy from Russia,” Trump told NATO Secretary General Jens Stoltenberg, speaking on camera. “We have to talk about the billions and billions of dollars that’s being paid to the country we’re supposed to be protecting you against.”

Trump was referring to the Nord Stream 2.  It will take another blog to Here is the irony of nationalism – other countries can’t tell us what to do, but we can tell them how to run their countries. I will explain the Nord Stream 2 pipeline in a later blog.

The third element is a pro-business agenda.  The tax cut is a very much part of this.  It seems not much of the tax cut is being put to use to expand manufacturing.  It likely will drive up our deficits.   With trade tariffs, this will in the short term help some businesses, particularly steel and aluminium manufacturers.  It is likely to hurt US car makers, and drive up the price of cars.  In Florida,  the orange and grapefruit growers are worried about being priced out of Asian markets due to reciprocal tariffs.

So, if populism focuses only on the problem, and nationalism guides policy decisions, the end result as in the coming trade war, likely will hurt Trump’s pro-business agenda.  International cooperation will be dwindling under Trump, as he pushes America first, and above everything else.

The travel ban is an excellent example of populism and nationalism, accomplishing very little.   Certainly,  the Muslim world thinks very little of our president.

Getting tough on immigration, was rooted in populism and nationalism.   It was founded on exaggeration and frequent lies. The resulting family separation and horrific outcomes were predictable.  It was a bet that executive authority would triumph over judicial restraint.  It didn’t.

Stay tuned,

Dave

 

 

 

Trade Wars – What doesn’t work

“Trade wars are good, and easy to win”  Donald Trump March 2, 2018 tweet

Trump would like to pressure China into respecting intellectual property.  A lot of folks who understand free trade say this is fair and right.   Trade wars using tariffs don’t work.  In fact, the outcomes are so absolutely predictable, the other country will retaliate.  We have a 34 billion dollar tariff against China, so they impose equal tariffs against us.   Their and our exporters get hurt.  Does any country gain leverage on trade disputes by first imposing tariffs?   What tariffs have done is to end trade discussions between countries.   Policy changes can’t proceed while trade wars are in progress.   So, the idea of waging war and peace doesn’t work.  And leverage would work if one country is feeling real pain and the other is not.  But, this isn’t the case, and our pain is very apparent to voters.  China doesn’t have voters, so their tolerance is as high as the leaders want to go.

Really dumb.

Stay tuned,

Dave

PS.  I’m working on another blog called Presidential lies and myths.    Trump’s tweet on trade wars is a myth and it’s a whopper.   Lies usually have some false statistic associated with them, most notably with immigration and the economy.

 

 

 

 

Trump’s economic advisors

“It is a horrible deal, really horrible, but we’re going to fix that”

This is any particular quote from Trump but applicable to many accords – from NAFTA, the Trans-Pacific Partnership and to many bilateral accords, most recently his attack on he  South Korean Trade Agreement.   The same quote can be said of the Iran Nuclear deal and the Paris Accords on Climate Change Mitigation.   Everything is blamed on prior administrations, but most of the blame still goes to President Obama.

A minor case in point –  on January 12, 2018,  Trump cancelled a trip to the US embassy in London, citing Obama poor decision in moving the Embassy at a cost of 1.2 billion dollars.   It was decided upon by President Bush and not Obama.   Trump rarely lets facts get in his way.

Gary Cohen,  was the head of the National Economic Council,  and chief economic advisor to Trump.   He is generally accredited for Trump’s tax cut and jobs program, signed into law on December 22, 2017.   On March 6, 2018,  Gary Cohen resigned in March, just before the imposition of tariffs on aluminum and steel.  It was widely reported that he was against the tariffs.  Larry Kudlow has been appointed to this position.   Kudlow is a strong believer in  supply-side economics, which means that a cut in federal taxes, will stimulate the economy sufficiently to make up for the loss in tax revenue.  He been dead wrong a number of times, beginning with the opinion that tax increases would dampen the economy during the Clinton administration.  Just the reverse happened, and the economy boomed after this.

Kudlow was a strong advocate of George W. Bush’s substantial tax cuts, and argued that the tax cuts would lead to an economic boom of equal magnitude. After the implementation of the Bush tax cuts, Kudlow insisted year after year that the economy was in the middle of a “Bush boom”, and chastised other commentators for failing to realize it. Kudlow firmly denied that the United States would enter a recession in 2007, or that it was in the midst of a recession in early to mid-2008. In December 2007, he wrote: “The recession debate is over. It’s not gonna happen. Time to move on. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come”. In a May 2008 column entitled “‘R’ is for ‘Right,'” Kudlow wrote: “President George W. Bush may turn out to be the top economic forecaster in the country”. By July 2008, Kudlow continued to deny that the economy was looking poor, insisting that “We are in a mental recession, not an actual recession.” Lehman Brothers collapsed in September 2008, creating a full-blown international banking crisis.

Larry Kudlow is well educated, articulate and  very straight forward.  He has been a regular commentator on MSNBC.  His comments is generally appreciated, as he is well informed.  However,  he has been frequently wrong on the basic moves of the economy, I believe because of his philosophical perspective of less government intervention.   This has been chronicled in a book entitled Superforecasting (2015).   The book explains how experts in various fields, do no better than amateurs.

Two key advisers right now, are Peter Navarro, Director of the National Trade Council  and Wilbur Ross,  Secretary of the Commerce Department.   In many administrations, these organizations and individuals might not receive much attention, as they engage in behind the scenes negotiations on trade and commerce.   However,  as fears of a trade war with China,  intensify and concerns of the impact on our economy is debated,  these two individuals are increasingly in the media, particularly in the business news reporting.

Peter Navarro is a very controversial figure at present.  Wikipedia labels him as a heterodox economist, with opinions  outside of the mainstream economistss.   He is also considered a protectionist and isolationist by Wikipedia.   According to the Guardian:

Navarro was a key architect of Trump’s “America First” policy of economic nationalism and a tireless critic of China’s economic policies – one of his books is decorated with a map of America being stabbed in the heart with a knife marked Made in China. Although he has agitated for aggressively protectionist trade policy since joining the Trump campaign in 2016, the tariffs are his first key victory. During the campaign, Navarro, the only economics PhD in the Trump team, described his role as merely a facilitator. “The president – he’s the man who leads,” he told the Wall Street Journal. “He says, ‘I want to do this. How do we do it?’ The way I help is figuring out how you might do it.”

Protectionism, or economic nationalism?  Perhaps the choice of words doesn’t matter; it is the outcomes in the long run that are important.   I’ve included links on Peter Navarro at the end of this blog.

Finally,  a key adviser to Donald Trump is  Wilbur Ross.   His view on trade, as per Wikipedia:

On the subject of foreign trade, Ross has said: “I am not anti-trade. I am pro-trade, but I’m pro-sensible trade. [Being anti-trade] is a disadvantage of the American worker and the American manufacturing community.” Ross has also said that the government “should provide access to our markets to those countries who play fair, play by the rules and give everybody a fair chance to compete. Those who do not should not get away with it – they should be punished.” Initially in favor of the Trans-Pacific Partnership, Ross has said that after examining the agreement, he found it was “not consistent with what was advertised.”[34]

In 2004, The Economist described Ross’s views as protectionist. Germany’s chancellor Angela Merkel has also voiced concerns during 2018 World Economic Forum in Davos over Ross and the Trump administration views as “not the proper answer”.  Ross, at the 2018 World Economic Forum, responded to concerns by noting that “There have always been trade wars. The difference now is U.S. troops are now coming to the ramparts.”

Wilbur Ross has appeared on a number of business news stations, including MSNBC, and I happen to like his straight forward answers to questions.  He always seems to be well prepared, informed and polite.   He chooses his words well.    However, he seems to underplay the affect of the proposed tariffs  might have on the stock market.

How the Trump trade wars will finally be resolved, is difficult to say.   Republican biased news stations say that in the end,   the hard position taken  by Trump will result in China yielding, particularly on intellectual property rights.  Other commentators see only an escalation of tariffs, as China would rather fight than be seen as having given in to the US.   Economic nationalism works on both continents, sometimes escalation is easier than compromise.  Certainly, the sell off in the stock market is based on the potential for a protracted battle.

As I publish this blog, the Dow is poised to drop around 500 points.

I have included a number of links on Cohen, Kudlow, Navarro and Ross.   All individuals  have extensive biographies available on the Internet.

Stay tuned,

Dave

Links:

Wikipedia:Wilbur Ross

Wikipedia:  Peter Navarro 

Peter Navarro, the economist shaping Trump’s economic thinking

Wikipedia:  Larry Kudlow

New York Times:  Larry Kudlow is the new favorite to replace Gary Cohen

Wikipedia:  Gary Cohen