Archive for the ‘Economics’ Category

Inequality, wage stagnation, and free stuff

December 6, 2017

Recent years have seen much agitation about inequality, and the seeming fact that middle-income earnings have risen very little, if at all, in recent decades. Some see this as the rich “hogging” all the societal wealth gains.

Inequality is a real concern. Society is ever more bifurcated between the well educated and the less educated.

However, there are a number of reasons why that ostensible wage stagnation is not what it seems. First, wage comparisons over time must factor in inflation. But most economists know that government inflation indices are themselves inflated, overstating the true fall in the dollar’s value. Compounded over decades, this significantly understates the current worth of today’s pay.

Also, such wage numbers generally omit fringe benefits, which are increasingly important. The biggest one is health benefits which have risen greatly in both cost and value over decades. When that too is factored in, today’s workers are again seen to be earning more.

A further factor was highlighted by a recent piece in The Economist, which really made me sit up and take notice. It’s the value people get out of the internet. This adds to living standards and the quality of life one has with a given income level. And it’s more significant than you might guess.

The Economist reports how some researchers made estimates of the value of web goodies based on how much money people would demand, when asked, to give them up. These are necessarily crude estimates, yet they are eye-popping.

It’s $900 a year for YouTube and other video; $2800 for maps; $750 for Facebook; and a whopping $16,600 for search engines. (The Facebook estimate seems very low to me in comparison to the others; it may reflect that many people have a love-hate relationship with Facebook, considering it a sinkhole of time). Anyhow, this again gives at least some idea of the value of these services, to the average American.

We get these goodies essentially free. Of course, we do “pay” by giving web businesses data they use to target ads at us. But it’s a very one-sided deal. The Economist notes that, as against the $750 estimated value of Facebook to an average user, Facebook eked just $4.65 in ad revenue.

True, this has still made Mark Zuckerberg very rich. But it points up the fundamental fallacy of the rich getting their wealth at the expense of the rest. Zuckerberg provides users with value over a hundred times what he gets. That indeed is the essence of commerce: businesses profit by selling things for less than their value to buyers. That’s how the whole world gets richer.

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New depths of depravity

December 3, 2017

“Believe me,” he says, “believe me.”

A constant verbal tic. As if his subconscious knows he won’t be believed. You might think a man widely called a liar might try to avoid lies. But au contraire. He shoves his thumb in our eye.

“Believe me,” he said, regarding the tax bill, “This is going to cost me a fortune. This is not good for me. Believe me.” He said the “wealthy and well connected” aren’t benefiting and are actually mad at him because the bill is ending a lot of their loopholes. “I don’t care,” he said.

All huge lies. Does he think people are fools? Well, his supporters, yes.

Or does he delude himself that having concealed his tax returns he can now deny the nevertheless obvious fact that this legislation will benefit him personally, to the tune of hundreds of millions of dollars? What mental disorder is this?

But the big lie is claiming to help the middle class. In reality (yes, reality still does exist) middle class people will get crumbs at best, many will actually pay higher taxes, while the wealthiest, and corporations, make out like bandits. Moreover, while the latter give-aways are permanent, the benefits for the less wealthy expire in five years, so most of them will be paying more. This will happen, conveniently, in the next administration. Do they imagine the next president will get the blame?

It’s also a brazen political hit, targeted against wealthier states like New York, California and Massachusetts, which happen to have higher state and local taxes — and happened to vote against Trump.

And the idea that the tax cuts will trickle down to the less wealthy because businesses will hire more and pay more is another big lie. American businesses are already sitting atop piles of excess cash. And meantime, whatever stimulatory effect these tax cuts might have will be cancelled out by their blowing up deficits and national debt, which will ultimately wreck our economy.*

Then Trump re-tweeted stupid phony videos disseminated by an extreme right-wing British hate group to smear Muslims. Talk about fake news! A disgusting witless act by the President of the United States. Almost the entire British nation (including even Nigel Farage!) came together in shock to condemn it. (In response Trump tweeted an insult at Britain’s prime minister.)

The irony is that if he’d wanted to show Muslim atrocities, instead of this fake garbage he could have used pictures of children tortured by the Syrian regime; or James Foley’s head sawed off; or the Jordanian pilot burned alive; or, for that matter, 9/11; and the New Jersey Muslims celebrating it. (Oops, that was another Trump lie.)

Even more disturbing is that, despite everything, Trump’s approval rating still holds in the high thirties. In any other country, or in our own past, a leader behaving so egregiously would have forfeited all support. But today’s America is afflicted by extreme partisan tribalism.

Fools will say I should just shut up already, give it up, suck it up (and what about Hillary). Sorry, this is not normal politics. My beloved country is being defiled, and it breaks my heart.

* Only one Republican senator, Bob Corker, had the sense and integrity to vote no — literally the last man standing.

The Republican tax plan: “A big beautiful Christmas present” or coal in our stockings?

November 4, 2017

The real question: why?

Why this Republican tax proposal? Well, it’s billed as “reform,” and God knows our federal tax system is an ungodly mess crying out for reform. But this bill isn’t it. Fewer brackets means nothing. Admittedly, eliminating some deductions and, particularly, the Alternative Minimum Tax would be significant simplifications. Yet in other ways, new complications are actually added. Trump’s saying nine out of ten would be able to file on a postcard is a lie even biglier than usual for him.

It’s also a lie to call it the biggest tax cut in our history. It would be true if Trump had added the words for corporations.

And why cut taxes? Because they’re too high? When for decades government spending has exceeded taxes by hundreds of billions of dollars yearly? When the federal debt now tops twenty trillion?

Republicans — supposedly the party of fiscal conservatism — originally were supposedly aiming for a revenue-neutral reform — that is, making up the cuts by getting revenue elsewhere, like capping 401Ks. But of course taking any benefit away from anyone is political poison. So predictably, they jettisoned any notion of paying for the cuts. The budget they passed recently (with virtually no debate) permits them (due to arcane rules) to now enact a tax cut costing a whopping $1.5 trillion, over 10 years, with only 50 Senate votes, rather than an impossible 60.

But even with that giant window, making the math work is very hard. Especially with corporations getting most of the $1.5 trillion available. Additional fat cuts for fat cats necessitate compensatory tax increases for many middle and upper middle class folks. At best, some less affluent people will get peanuts, while caviar is served to the richest and, especially, corporations.

After decades of Democrats caricaturing Republicans as caring only for the rich, the GOP is now shamelessly proving it. When economic inequality has been a growing concern, to propose a tax bill that will significantly aggravate that inequality is disgraceful.

But they say the aim is to stimulate the economy, spur growth, and create jobs. Producing so much more income, and thus more tax revenue, that the cuts will pay for themselves. They’ve been making this argument for forty years. It has never proven true. A tax cut might be stimulative if it put money in the pockets of Joe Sixpack who’ll spend it. But not when most goes to the rich who’ll just save it. And corporate hiring simply has nothing to do with how much tax they pay on profits.

Meantime, the whole growth stimulation idea ignores the impact on deficits and debt. Which are set to explode in years ahead as ever more older people collect pensions and benefits while ever fewer work and pay taxes. We can finance the gap by borrowing, as long as interest rates remain at historic lows. But if ballooning debt spooks the financial markets, interest rates will spike up, and we won’t be able to afford much except interest payments. That makes cutting taxes suicidal economic insanity.

And snuck into the bill is this hidden stinker: repealing the Johnson Amendment, which bars churches from partisan politics. A terrible idea. (Read about it here.)

No wonder they want to ram this through quickly, without any pesky hearings or debate. Before anybody can really figure out what’s happening. Just like they tried to do with health care. Rushing such a hugely complex and consequential plan is also disgraceful and crazy.

But finally, for Republicans, the real reason behind all this is not economic policy. It’s more like religious belief. Tax cuts are a matter of faith, comparable to belief in God for Christians. Never mind economics, reality, or sanity.

Will it pass? Very doubtful. Likely it will get watered down into something insignificant — which Trump will nevertheless call a “big, big win.”

Huuuge!”

(Note, my family would benefit significantly from the GOP plan. And I was a Republican myself until recently. This tax plan epitomizes why I quit.)

 

The Jones Act — How protectionism sank our fleet

October 28, 2017

Remember Trump ordering a temporary waiver of the Jones Act, to get help to Puerto Rico? What was that all about?

The Jones Act, passed in 1920, limits shipping between U.S. ports to American built, owned, and crewed vessels. This was to shield the U.S. shipping industry from foreign competition. A textbook example of protectionism. Though usually protectionism isn’t so blatant, telling foreign business to get lost altogether.

Railroads also lobbied for the Jones Act, fearing that foreign ships would undercut them too in the business of transporting goods. And railroads did benefit, because ships built and crewed by Americans are so much costlier that all other forms of transport are cheaper in comparison. Thus, whereas 40% of Europe’s domestic freight goes by sea, just 2% does in America (despite our 12,383-mile coastline).

The Jones Act not only inflates the cost of U.S. sea transport, above what it would be with open competition; it inflates land transport costs too, by eliminating some of its competition. All those higher costs go into the prices for things we buy. Protectionism protects businesses — well, certain favored ones — at the cost of screwing consumers — and other businesses — here, ones that ship their products. Competition always benefits consumers, and the economy as a whole.

And protectionism doesn’t save jobs — because a business that isn’t competitive without it isn’t a good long term bet anyway. The Jones Act shows this. It could protect U.S. ships against foreign ones, but not against trains, trucks, and planes. In fact, the Act sank the U.S. shipping fleet. As recently as 1960 it was 17% of the world total; today just 0.4%.

That’s why the Jones Act had to be waived for Puerto Rico — there just weren’t enough U.S. ships for the job. Indeed, while the collapse of merchant shipping leaves most of the country with reasonable non-water alternatives, that of course is not true of places like Puerto Rico, Hawaii, or Alaska. (Hawaiian cattle ranchers regularly fly animals to the mainland!) In such places the impact on consumer prices and the cost of living is severe — yet one more reason why Puerto Rico’s economy was so dire even before the storm.

The Jones Act should surely be repealed — but lobbyists from the sailors’ unions and ship owners — the few that are left — are probably still politically powerful enough to prevent it.

A different idea about health care

September 22, 2017

As Republicans try one more time to pass a bill to strip millions of their health care, a huge policy crap-shoot without benefit of hearings, public debate, or input from experts, here’s another idea.

We keep hearing that middle class wages have flatlined over a long period. Actually, recent data shows a significant uptick. But anyway, such numbers are misleading because they normally reflect only salaries — and not fringe benefits — which comprise a growing part of total employee compensation. The big one is health insurance.

About 150 million Americans get health insurance through their employers, and its value (i.e., its cost) now averages about $18,000 annually. Combining this with salaries tells us that total earnings have not stagnated, but risen substantially.

This also means Americans effectively spend a growing part of their incomes on health care. It’s even more than that $18,000, what with rising deductibles, co-pays, etc. Of course, health care is something of value, improving quality of life, worth paying for. But paying for health insurance is not quite the same thing. Healthy people get little benefit. Indeed, the whole system is set up for them to subsidize the sick; and Obamacare expanded on that.

Overall, Americans spend a lot more on health care/insurance than other advanced countries, without being healthier. This is fundamentally because it’s not a competitive market. There’s really no shopping around for health services; the end-user isn’t usually the one who’s paying. Obamacare didn’t fix this.

Recently, during a medical appointment with one doctor, another stopped in to “consult,” for a few minutes. He neither examined nor treated me. He billed $405. Because he could. This is why health care costs are out of control.

A NY Times op-ed last November (by Professors Regina Herzlinger, Barak Richman, and Richard Boxer) proposed a simple reform that would have a big impact.

The main reason our system evolved the way it did is because employee health benefits aren’t taxed like regular wages are (which, by the way, makes them even more valuable to workers, enlarging the impact on the “wage stagnation” picture). But, as the Times writers point out, workers have little control over this enormous expenditure made on their behalf; they cannot try to economize or shop around for insurance. If they could, they’d opt for a wide variety of different plans.

So the writers propose that, without losing the nontaxableness, moneys earmarked for health insurance be given to employees, to purchase it themselves. If you spend the whole $18,000, fine; but if you spend less, you get to pocket the savings. (Even if you’re taxed on that part, it’s still a big benefit.) This would give insurance companies a strong incentive to develop a whole array of varied (and often cheaper) options, to compete for those consumer dollars — an incentive almost wholly lacking in the existing system.

It would also make the market for health care itself more like, well, a market. Competition among insurers would in turn exert pressure on providers to likewise innovate to offer more efficient, cost-conscious care. Meantime many more people would choose to use insurance as it was originally conceived, that is, to cover only big expenses, not routine ones. For the latter they would shop around, again mindful of costs. That would have a huge positive impact on the way health care is provided — and billed.

This reform seems like a no-brainer. And a huge vote winner too. Why has no politician latched onto this? Do the insurance companies (who wouldn’t like breaking open their comfy status quo) really have the whole system locked up?

The Economist: A love letter

August 31, 2017

On this blog I’ve frequently cited The Economist. It’s a news magazine (though Britishly calling itself a “newspaper”). I’ve subscribed for about thirty years. The Economist is my friend, almost a lover even, integral to my existence.

Maybe because I was a socially awkward youth, wordly clueless, I’ve always had an ache for understanding. To know what’s going on, and why. This The Economist provides. It keeps me informed about every corner of the globe (and in today’s interconnected globalized world, it all matters). And much of it is deeply fascinating, like a great global “Game of Thrones” with hundreds of characters and story lines. Take Venezuela’s for example, a dramatic tale (indeed, a morality tale), unfolding for a quarter century. The Economist provides a ring-side seat. Much of this stuff never makes it into newspapers or other sources.

The Economist doesn’t merely report events, it analyzes them. And furthermore it has a definite point of view, not only expressed in its editorials (called “leaders”) but also infusing its news coverage. It is the stance of classical liberalism, the philosophy of thinkers like John Stuart Mill, aiming to maximize human liberty and flourishing, through limited, democratic, accountable government, and openness to ideas, enterprise, commerce, and human variety. Indeed, it was specifically to oppose Britain’s “corn laws” (restricting free trade) that the publication was launched in 1843.

Did I fall in love with The Economist because its philosophy matched my own, or did the magazine shape my outlook? Probably some of both. Anyhow it’s rare for me to disagree with it. (There were some baffling past presidential election endorsements which seemed at odds with the magazine’s editorial stance.)

So far I may have made it sound dry. It is not. The writing is often a pleasure to read and is full of droll wit. I recall one report, quoting Cuba’s Raul Castro saying Honduras should be sanctioned because its president (arguably) wasn’t seated democratically. “Castro said this,” The Economist wrote, “with a straight face.”

So The Economist has no time for cant or hypocrisy. The magazine tells it like it is – often with delicious zingers.

And not just with words. Its covers too can be a hoot. One gem depicted the European nations, when confronted with a threatening Russia, collectively as a quivering jelly mold, with their cringing faces.

The magazine also covers business, finance, science, and the arts, including excellent book reviews. And the final page always provides a parting treat: an obituary. Yes, its obits too are flavorful reading, often about less famous personages, but always interesting ones. Or at least The Economist seems able to make them so.

Depicting France’s Macron; the feet sticking up are Theresa May’s

I’m pleased to have gotten into its pages a few times myself, with letters-to-the-editor. (The latest responded to an article about violence in Baltimore, pointing to the drug war as a major cause.)

I wish more people read it. Many of the world’s movers and shakers certainly do, but not enough of them. It’s dismaying when folks aspiring to (or exercising) leadership are so ignorant about the world. An Economist reader would never have said, “What’s Aleppo?”

Venezuela’s tragedy: be careful how you vote

August 8, 2017

Chavez & his mentor

It began in 1992 when paratrooper Hugo Chavez tried a military coup. He failed and was jailed, but vowed he wasn’t done. Released, in 1999 he won a democratic election as president.

Be careful how you vote.

Chavez strutted as an adversary of “U.S. imperialism” and avatar of “21st century socialism,” earning adoration from a Hollywood claque and the usual left-wing moral morons, bedazzled by the word “socialism” into excusing all manner of anti-democratic repression.

Chavez did enjoy much genuine support among poorer Venezuelans, whom he basically bought off by distributing the country’s oil wealth — while he crippled that very industry by nationalizing it and stuffing its ranks with political types, and wrecking the rest of Venezuela’s once-rich economy with an insane farrago of anti-market, statist policies.

Dwindling oil revenues could not sustain the game, the rich got poorer, and so, ultimately, did the poor too. Chavez died of cancer at 58 in 2013 before the mierda fully hit the fan. His chosen successor, former bus driver Nicolas Maduro, narrowly won a 2013 presidential election.

Maduro

Be careful how you vote. Though Maduro’s win was almost surely fraudulent, he couldn’t have pulled that off without votes from nearly half the electorate.

Then Venezuela really went off the rails, the economy collapsing in structural disarray, producing nothing, inflation exploding, people unable to get food or medicine. Instead of reversing the economic idiocies causing this, Maduro doubled down, and blamed the troubles on supposed U.S.-inspired sabotage. But few fell for this nonsense, his political support also collapsed, and the opposition won big in 2015 congressional elections. Only more fraud and manipulation denied them a decisive two-thirds majority. Maduro’s policy was now to intimidate, emasculate, and simply disregard the congress.

Meantime, the opposition also gathered more than enough signatures to force a presidential recall vote, pursuant to the Chavez-promulgated constitution. That too the regime quite simply disregarded, refusing to hold the vote.

All this plays out against a background of increasing repression (opponents jailed; forget a free press) and rising violence as protests by an increasingly desperate citizenry escalate, and the regime responds brutally. Its intransigence made negotiation efforts useless. President Maduro, who cannot win a fair vote, has now moved to seal Venezuela into a Cuban-style dictatorship by convening an all-powerful “constituent assembly” of handpicked stooges to supplant the congress and rewrite the constitution. That assembly’s “election” was — of course — another farcical fraud. (Even the company that ran it said so.)

Ortega

One of the assembly’s first acts was to fire Attorney General Luisa Ortega, a former regime stalwart, with at least a vestige of integrity that couldn’t stomach Maduro’s extreme illegal power grab, which she condemned.

And where, in all this, you might wonder, is the army? Why doesn’t it step in to protect the constitution, congress, and democracy? Because the army is part of the regime, long since packed with loyalists. Its guns are what really keep Maduro in power. It’s the army brass, not the people, he needs to keep happy. And this is not about ideology. The “socialist” and “anti-imperialist” rhetoric continues, but that’s just a fig-leaf cover for the reality. The regime, and its army, are a gang of thugs ruling Venezuela exactly as Al Capone ruled Chicago, and for the same purpose — their own criminal enrichment.

As ordinary Venezuelans sink into an abyss of deprivation, the regime and its army feed off their flesh and suck their blood. Having destroyed the normal economy, so that not even food can be purchased normally, the army has been tasked with bringing in and selling food — profiting hugely. It’s grubby fingers are in many other businesses too. Further, while the currency has become virtually worthless, they maintain an inflated official exchange rate, at around 1,000 times the Bolivar’s actual value. Why? Only insiders can exchange Bolivars for Dollars at that phony rate, plundering the state to enrich themselves. That’s why they won’t give up power. And because if they do, they’d expect punishment for their crimes.

Here is your “21st century socialism.”

What is the sad lesson of Venezuela? Be careful how you vote.

“The Fix” — What is real leadership?

July 9, 2017

Jonathan Tepperman’s book The Fix is prefaced with a quote: “Politics is the art of looking for trouble, finding it, misdiagnosing it, and then misapplying the wrong remedies.” It’s from Marx. (Not Karl but Groucho.)

My daughter gave me this book for Christmas. The Fix is great.

Its subtitle is How Nations Survive and Thrive in a World in Decline. Tepperman begins, like my own Rational Optimism book, with “The Litany” — the familiar catalog of everything wrong with the world. Admittedly that list has grown since I wrote in 2008. Yet I still don’t see, in the big picture, “a world in decline.”

Neither does Tepperman, really. He deploys exactly what I meant by rational optimism — not Pollyanna’s rose-colored glasses, but a belief that problems can be solved through reasoned effort. He discusses ten in particular (“the terrible ten”) and, for each, how one nation at least did solve it. Mostly how leaders solved them, because leadership is key.

Lula

The first issue is inequality; the country Brazil; the leader Lula. Of course Brazil hasn’t completely eradicated inequality, but it was previously one of the most unequal nations, and has made great strides. Lula came to the presidency in 2003 (on his fourth try) seen as a Marxist radical. But he defied expectations by acting instead as the most orthodox steward of the economy. That gave him the credibility to implement his Bolsa Familia program.

Government programs for the poor typically entail “doing things for them” — which is complicated, inefficient (much bureaucracy), costly, and prone to corruption. Bolsa Familia instead just hands out cash. But to get it, your kids must go to school and get immunizations and medical check-ups. This helps them escape the poverty trap, with better future prospects. Also smart is giving the money to the mothers, sidestepping feckless dads and empowering women. And its simplicity makes the program actually quite cheap, costing less than half a percent of GDP; moreover, by turning the poor into consumers, it boosted the economy, arguably more than paying for itself. All this helped sell the program to skeptics.

Next is immigration, and Canada — one of the world’s most welcoming nations. In fact, Canada seeks out people to come — most of them nonwhite. It uses a point system encompassing factors like education and skills (in contrast to America’s relationship-based system — “extremely irrational” says Tepperman).

Canada’s system developed to kill two birds with one stone. The vast nation was underpopulated. And it was experiencing ethnic tension between English and French speakers. The solution, spearheaded by Prime Minister Pierre Trudeau, was to subsume those differences into a broader ethos of multiculturalism.

The point system makes most Canadians see immigration as a plus, without the kind of xenophobic feelings so prevalent elsewhere. In fact, most actually consider multiculturalism important to their national identity.

On December 10, 2015, Prime Minister Justin Trudeau (Pierre’s son) stood in an airport arrivals hall handing out winter coats to the first of the 25,000 Syrian refugees Canada was welcoming. “You’re safe at home now,” he told them. While Trumpmerica currently bars all Syrian refugees.

But America is not the book’s villain. Indeed, one of its chapters is a good news story about the USA (imagine that). It concerns our recent energy revolution. (What, you didn’t notice?) It’s the fracking explosion (poor choice of words) to extract natural gas from shale, turning America into one of the world’s biggest energy producers.

No other country has tapped into shale gas to such an extent. Tepperman explains why. American property owners (unlike elsewhere) own everything under their land. That creates a huge incentive to exploit those resources; which has led to a proliferation of small energy companies; and competition among them has triggered a wave of technological innovation.

Remember how we pined for “energy independence?” Seemed hopeless — until the frackers got busy and started producing. Likewise all the Cassandra warnings about “peak oil.” Don’t hear that phrase much anymore either.

But I know what you’re thinking. At one time our local paper was filled with almost daily commentaries and reader letters expressing fear of fracking — a widespread movement which led some jurisdictions, including New York State and much of Europe, to ban it. But Tepperman dismisses all that fearmongering in barely a paragraph. The fact is that while fracking does (like every technology) entail risks, it has advanced sufficiently to deal with them quite well. So fracking has gone on for years now, producing bazillions of granfaloons of energy, and all the horror stories have proved to be basically chimaeras.

Peña Nieto

Another tale concerns Mexico, but has great relevance for the U.S. Mexico’s President Peña Nieto came to office upon a background of bitter partisan gridlock, among three main parties, no less. But he initiated a dialog among key leaders, that wound up committing all three parties to a big package of important reforms.

How was this remarkable breakthrough achieved? Tepperman: “quiet negotiations, painful compromise, political leaders willing to take risks and keep their word, and above all a recognition that zero-sum politics accomplishes nothing.” He also stresses the virtues of pragmatism as opposed to wearing ideological blinders. I was surprised Tepperman didn’t quote Deng Xiaoping: “It doesn’t matter whether a cat is black or white, so long as it catches mice.” Deng was defending policies that shredded Communist orthodoxy. Of course, ideologies are not arbitrary irrelevancies: we have reasons for what we believe, and those beliefs guide what one thinks is the right answer to a problem. But the trouble is that other people may think differently. Tepperman argues for satisficing — making the kinds of compromises among competing viewpoints and interests such that everyone gets something, though nobody achieves their maximum goals. As ever: don’t let the perfect be the enemy of the good.

Returning to Mexico’s reform pact, Tepperman sees no reason, in principle, why it couldn’t be repeated in America. I’m skeptical. While Mexico’s deal did encounter cries of “Treason!” such compromises here would meet a firestorm from enflamed partisans. And as Tepperman highlights, Mexico’s political parties were losing popularity because of the prior stalemate. America’s geographic political segregation and gerrymandering create a different set of incentives; despite abysmal approval ratings for Congress, its members almost all get re-elected.

Still, one of the book’s key points holds true: leadership matters. America has suffered from a notable lack of the kind of leadership Tepperman depicts. Obama certainly did not have it. He created the Simpson-Bowles commission to produce a big compromise plan like Mexico’s, then walked away from it. Unlike Peña Nieto, Obama was content to let the partisan dynamics just play themselves out, with predictable results. And as for our current president: oy.

My contribution to our China trade deficit

June 13, 2017

Our yearly trade deficit with China is around $340 billion and rising. That is, we import from China $340 billion worth of goods more than we export to China. Trump fulminates obsessively about this, saying China “rapes” us to the tune of that $340 billion.

Confession: I have personally added to our past China trade deficits, by importing many thousands of dollars worth of goods.

Typical Northern Song coin

They were old Chinese coins, bought mainly from one Shanghai dealer, Luo. I think he actually got rich in the process. But I made money too. For example, I’d get Northern Song Dynasty (960-1127 AD) coins, 10,000 at a time; cost around 13¢ apiece (shipping included). I’d sort through them, cleaning many, picking out better ones to sell for a buck or two, and the rest typically at $20 per hundred. Collectors loved such inexpensive thousand-year-old coins.

A middleman or trader like me has traditionally been seen as a kind of economic parasite. After all, I produce nothing myself. However, what I do is to get coins from people who value them less to ones who value them more. That creates what economists call a “consumer surplus,” making both my suppliers and my buyers better off. That’s economically beneficial.

I sell much to other dealers too. They retail the stuff to other collectors, creating still more customer value. And meantime, Luo got the coins from other Chinese sellers. They too profited and were made better off.

Also it’s not exactly the case that I produced nothing. My work of sorting, cleaning, and identifying coins added value to them.

Did any of this entail any job losses? On the contrary, my profits made me richer and hence able to buy more goods; and enabling my customers to buy coins cheaper than they would otherwise pay left them with more money to spend on other things. All this added buying power triggers creation of more jobs, to produce the additional goods and services now wanted. Similarly, Luo’s enrichment, and that of his Chinese suppliers, enabled them to spend more, contributing to Chinese job growth. And more jobs in China means Chinese can buy more goods made in America.

So is China “raping” us? What nonsense. Trade is win-win. That’s why people do trade. Being able to buy imported goods cheaper than they can be made here puts something like a trillion dollars annually in American consumer pockets; and spending that extra cash creates lots of jobs — surely more than the few trade might displace.*

Trump refuses to understand this. In his ignorant diseased mind, all deals have a winner and a loser. Sad.

My personal trade imbalance with China ultimately reversed. Chinese coins got much more expensive in China; Luo stopped selling those and switched to other stuff, which he’s been buying in recent years from me. Alas, my profit margin on those is much smaller.

* Another perspective on our China trade imbalance is that as Americans buy more Chinese goods than Chinese buy from us, money flows from the U.S. to China, which translates into China saving and investing at a higher rate than Americans do. Net annual saving by U.S. citizens has hovered around zero. And we finance our combination of consumer spending plus government spending by borrowing (much from China, lending us back the money we’ve spent for their goods). But that’s another issue.

Trump’s climate speech — full of covfefe

June 3, 2017

America first? Really? Who’d ever thought a U.S. president could make his Russian and Chinese counterparts appear better global citizens than us? But now even Putin and Xi Jinping are on the climate change high road, while America slithers down the other (accompanied only by the dictators of Syria and Nicaragua).

After Trump’s European trip, Germany’s leader Merkel judged that the era of U.S. leadership is over and Europe is on its own. Trump proved her point with his announcement of withdrawal from the Paris climate accord. A grown-up nation does not renege on its promises. Far from making America great again, he’s deformed it from an upstanding world leader into a child in a temper tantrum. America has never been this ungreat.

Trump says it’s to protect U.S. jobs. He just says things without regard to any reality; it’s just more covfefe.

It is true that even if carbon emissions went to zero, global temperatures would still rise, only a little less than otherwise. So if we were to curb emissions by reducing industrial output, to combat climate change, the economic harm would outweigh any benefit. But that’s not what Paris does.

Instead, it merely recognizes carbon’s effect on climate and the desirability of minimizing it to the extent we can. Simple common sense. Its targets are not binding commitments, with any penalties for noncompliance, but rather just earnestly expressed ambitions. Which virtually every other nation on Earth agreed are wise.

So no job losses. Zip, zero, zilch. Nor any transfer of wealth from America to other nations — more nonsensical Trump covfefe. His whole speech was a farrago of nonsense detached from reality, an embarrassment to the country. Transitioning sensibly from dirtier to cleaner energy sources can only have economic (as well as environmental) benefits. Trump’s coal fetish is simply insane. Coal blights the planet as well as miners’ health, and is a comparatively costly energy source. Even China, the world’s leading coal nation, is assiduously cutting back on it. And clean energy is creating around ten times as many jobs.

So why would Trump go out of his way to trash what he himself referred to as a “non-binding” agreement? To pander to his base of course — the rest of the world can go hang. Sensible heads in both government and business almost unanimously advised him against withdrawing from Paris. Polls show a majority even of Trump supporters opposed doing it. So this is aimed at the hard core of the hard core. Even politically it seems insane.

But it sticks a thumb in the eye of the world order, so Trump can play the disruptor. And it reflects yet again his bottomless ignorance about the world, the willful ignorance of a fool who thinks he knows it all. And perhaps also Trump, even in his literally diseased mind, could see that his record so far is not his lie of triumphant accomplishment but a train wreck. Trashing Paris was at least one thing he’d said he’d do that he could actually do. To him a no-brainer. Too bad it really is brainless.

In the Rose Garden he said the world was laughing at us for agreeing to Paris, and that will stop. Trump has an uncanny thing for turning reality exactly inside out. They weren’t laughing at us then, but now they are, while shaking their heads sadly.