Growth As In “America Great Again”

Posted December 9, 2016 by zukunftsaugen
Categories: Uncategorized, Politics, Barack Obama, Republican Party, Democratic Party, Healthcare, Conservatives, GOP, congress, medicare, medicaid, economy, economic growth, Donald Trump, federal debt

President-elect Donald Trump has told anyone who would listen he is a wildly successful business man and he will apply the principles which has propelled his wealth accumulation to problems and opportunities facing America. And, voila, America will be great again. Hmmm.

Trump the candidate often pointed to US “GDP” growth (around 2% per year) under President Obama as “pathetic”. Trump and his surrogates boasted that they would return growth to 4-6% range, if not higher. Is this a likely outcome one should reasonably expect?

Economic theory around growth gets complicated very quickly. One financial pundit recently boiled GDP growth down to two simple factors, population growth and productivity growth. This person predicted that the base case was likely to be 1% total GDP growth given a 1/2% population increase and a 1/2% productivity increase.

If this person was close to accurate, then for the US GDP growth to be higher, there would have to be a lot more workers added or some large stimulus to increase the output per existing worker, or both. At the present time no one is predicting new productivity tools similar to the impact computers and automation have had and no one is seeing the number of hours worked increase. So where would that 4-6% GDP growth come from?

The Trump economic brain trust claims that with less regulations and lower taxes, America businesses will invest more and as a result produce more goods and services. Hmmm.

And don’t forget the bi-partisan support for infrastructure repair and maintenance. This often characterized as a multi-trillion dollar, absolutely necessary, investment that only the government can finance. To be sure, infrastructure means more jobs and should be additive to GDP growth. But….

The combined lower taxes and the increased government infrastructure spending will drive federal deficits and increase the national debt dramatically. Sooner or later this increased debt will need to be paid back. And when paid back the reverse impact upon the economy (slowing productivity) should be expected.

Again the Trump team has the answer, the economy will be percolating so strongly with less regulations, lower taxes, and a stronger infrastructure that tax revenues will be sufficient to pay down the increased debt. Hmmm.

Looking around the world and judging the GDP growth of other countries puts President Obama’s 2% in a fairly good light. The Trump Administration’s 4-6% goal would put the US in a class by itself with a growth rate like China but growing without the predatory export segment. Hmmm.

Oh, and lastly, I wonder where the population growth rate comes out in Trump’s team’s mind? Making it harder for seasonal workers or undocumented workers living here now should run counter to GDP growth.

The most likely outcome will be a slight positive boost to GDP growth, say maybe to 2.5%.  Growth in excess of 3% will come with the prospect of a subsequent contraction back to 0.5% or so.  If GDP growth exceeds 4%, then a recession should be expected as the longer term reward.  (The silent hand won’t be so silent.)

With all this chatter about GDP growth, I wonder whether anyone will notice the “really big” tax reduction the wealthy received, the millions who will lose healthcare coverage, or that the new jobs “America Great Again” are mostly low pay and minimal or no benefits?

Once Again, Do Ends Justify Means?

Posted December 6, 2016 by zukunftsaugen
Categories: congress, Conservatives, Democratic Party, Donald Trump, George W Bush, GOP, Neoconservatives, Politics, Republican Party, Uncategorized

During the George W Bush years, especially with Karl Rove and Dick Cheney, the Administration mantra was “the ends justify the means”. There was no civil liberty or time honored practice that was not sacred enough to escape being trampled if it stood in the way of an Administration objective. Now, in the early days preceding the Trump years, there are many indications that the good old days of “do what is necessary” will rule the day.

President Obama ran a different type of Presidency. Obama’s critics point to him leading from behind and running rough shod over Article one of the Constitution, making law through regulatory action. A far more apt President Obama criticism might be his years were “the means justify the ends”.

President Obama used only executive prerogatives which prior Presidents had used, for example appointments during Senate recesses and only when the Republican controlled Congress failed to act. With President Obama there were no incidents of fabricated intelligence, invasion of sovereign lands, or out right violation of signed treaties like the Geneva Convention. But to many, the Obama years lacked decisive action, ISIS being the critic’s most popular example.

So, it is not a surprise that neoconservatives and other right wing types see the Trump Presidency as a time the sun will shine again. These are people who see government power as the most effective statecraft tool. Carry a bigger stick, use it enough that opponents worry you might use it again, and demand everything as a means of getting the most. (Sound like a New York real estate developers motto?)

This week President-elect Trump has exercised his bully pulpit against United Technology’s Carrier air conditioning unit. By extension he has fired a warning shot across other American companies ideas about outsourcing jobs.  Trump has threatened new tariffs if words won’t suffice.

If retaining jobs is successful, how could this be an undesirable “ends”?

In another case, President-elect Trump arranged a telephone call with Taiwan’s President, a no-no for the past 60 years in US-China relations. But if Trump’s goal was to gain more US exports to China, how could that not be a desirable “ends”?

Both of these incidents could also be simply “bluffs”. President-elect Trump may think these are cost-free tactics which if they produce the desired outcome are great and if they do not, they cost virtually nothing he may think. Hmmm, or did they?

The neoconservatives and far right wingers are truly dangerous people. They seek to achieve government objectives by force which means too often using the sons and daughters of other people in military action. While this sacrifice is necessary when the US must defend its boarders, venturing into the affairs of other sovereign nations almost always comes back to haunt us.

The President-elect must be careful that his “bluffing” gambits will be misconstrued by the hawks and understood as encouragement for these chicken hawks to do the same.

Another potential casualty of the “bluff” approach is that the bluffs may obscure other viable approaches. In the case of US companies shipping jobs overseas, a revisit to the tax code might reveal changes which make these outsourcing moves less valuable. The President-elect might, if truly serious about making America Great Again, instead de-emphasize “maximizing shareholder value” in favor of broader corporate governance which considers 4 stakeholders (customers, employees, communities, and owners/shareholders).

The Taiwan phone call is hard to figure. Sending a signal that the US under Trump might do the unexpected is grossly naive since in the period of nuclear deterrents, the last thing the US wants is to send unclear messages.  For US self interests, it is important to know what China’s (or Russia) intent are or that China or Russia know ours.

And what would the President-elect think when the Chinese President begins calling Raul Castro regularly?

Ends do not justify any means, and bluffs, especially those associated with bullying, are extremely short sighted tactics. Lets hope these incidents are just growing pains for the new Administration.

Medi-scare Or What

Posted December 2, 2016 by zukunftsaugen
Categories: congress, Democratic Party, Donald Trump, Healthcare, medicare, Politics, Republican Party, Uncategorized

House Speaker Paul Ryan has accused Democrats of conducting scare tactics around his proposed changes to Medicare. Ryan points to the projected exhaustion of the Medicare Trust Fund and its ultimate “bankruptcy” as reason to act. Ryan claims his plan is benign and will save healthcare for current and future Medicare subscribers. Hmmm.

Roughly speaking, Ryan has proposed adding to Medicare the option of “good” (?) private health care insurance. For Americans currently on Medicare, they could stay put with the current plan. Presumably some group of Americans, for example those under 50 would ultimately only have the “good” private insurance option. Medicare would die out as its subscribers died out.

Ryan’s plan carries some serious risks. The financial underpinnings of current Medicare can be fixed in a straight forward manner by raising or broadening the Medicare withholding tax, AND, putting in place sensible cost controls (US healthcare costs are twice the amount any other country spends).

The notion that the Medicare funding issue could be solved with “free market” principles is laughable when one looks around the world or considers the rising costs of healthcare insurance which most working Americans have .

All other major industrial countries utilize some form of a single payer healthcare system. At least two dozen of these countries have better health outcomes than the US. And, oh by the way, none of these countries spend as much per capita as does the US.

Medicare, however, is in a difficult spot. Each year, Medicare withholding tax revenues are less than what the efficient Medicare single payer system has to spend. The idea of giving each American the option of staying where they are or joining some new “good” private health insurance plan suggests first, that Medicare does not deliver “good” healthcare and second, that Americans are naive enough to believe there is another free lunch just waiting to be tasted.

There should be no doubt that Medicare subscribers could be shifted to other types of insurance and the balance between tax revenues and outflows could be made even. Less coverage or higher co-pays and deductibles from a “good” plan would shift the current deficit to Medicare users.

But there is no reason to believe the proposed “good” private healthcare insurance would provide the same coverage as currently available with Medicare somehow at a lower cost. (Ryan and company argue that “competition” will drive down the insurance costs. Hmmm.)

Medicare provides health insurance for the most vulnerable and ultimately the sickest Americans. Some of this cohort is wealthy and can afford to pay extra. Others are on a fixed income and are dependent upon what Medicare provides. Scare tactics are tempting but shear facts and comparisons with other nations should convince reasonable people that healthcare does not belong in the private sector.

Beware Of Hubris

Posted November 30, 2016 by zukunftsaugen
Categories: 2016 Presidential election, congress, Democratic Party, Donald Trump, GOP, human rights, income inequality, Politics, Republican Party, Supreme Court, Uncategorized

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Donald Trump won the 2016 Presidential election “fair and square” as much as we know today. While he did not win the popular vote, Trump won a significant majority in the electoral college. Do these outcomes represent a mandate?

If you couple the Trump victory with Republican control of both Houses of Congress, whether Trump’s victory counts as a mandate or not may seem to Republicans as immaterial. The next two years belong to the GOP and barring upsets in 2018, the Trump team should have its way for 4 years. This reflects American democracy in action.

When George W Bush won the 2000 Presidential election, only with activist help from the Supreme Court, one would have thought a President who lost the popular vote and squeaked by with the electoral college vote would have approached his office with a moderate perspective. Instead, the Bush team felt empowered and tried to impose the views of each of the GOP’s separate factions.

The neocons got an unjust war and one of the greatest foreign policy failures in history, the small government faction got the shameful “hurricane Katrina” response, the deficit hawks blinked over tax cuts and were rewarded with 6 years of unbalanced budgets, and the anti-regulatory advocates got a run away Wall Street which lead to a near global depression.

None of this needs to happen to President Trump. But all these events and more could happen.

The new Trump government’s enemy is as much “hubris” as it might be any particular policy. Team Trump may just think that since they won, anything and everything goes. President Trump needs to keep a short lease on Congress and direct his Cabinet to operate right of center but closer to the center than the Congress.

While Trump has walked back most of his campaign promises, danger lies ahead since nothing has changed about the Republican Party’s composition, ambitions, and dangerous policies.

The Republican Party still favors suppressing voter participation, discrimination under the guise of religious freedom, less regulations which act against the interest of gays, Hispanics, and women’s rights, and don’t forget the flat earth faction which continues to deny global warming.

Oh, and income inequality is not a concern of the Republican Party unless one is talking about how the rich can become richer.

So, President-elect Trump, beware of hubris.

Remember, your margin of victory was actually quite narrow and 2020 is not that far away. Steady economic progress will serve you well while steroid-like induced stimulus could easily put all the increased wealth generation into the already wealthy’s pockets and reward the average American with another deep recession.

The white working class voter liked you this time but they can turn on you just as easily. Run the economy so all boats rise and a second term is there if you want it.

Free Trade, Positive Or Negative?

Posted November 28, 2016 by zukunftsaugen
Categories: Democratic Party, Donald Trump, economic growth, Economics, GOP, Outsourcing, Politics, Republican Party, trans pacific partnership, Uncategorized

One of President-elect Trump’s campaign tenets was the renegotiation of NAFTA and the abandonment of the Trans Pacific Partnership. Trump promised that such a move would return jobs for Americans, especially those “rust belt States” workers who had lost their working spots when American manufactures either outsourced work to Mexico or set up factories in Mexico and now did the same work there which was previously done in America. While any trade deal should from time to time be reexamined, thinking the US can roll back globalization is (1) dreaming and (2) have far wider implications than just these displaced workers.

A little history. In the 80’s and 90’s, the US automotive industry was in deep trouble. Quality lagged foreign manufacturers and costs to produce a US auto was greater than an imported one. Get it, pay more for a US auto and get lower quality at the same time.

Union-management relations were mostly ineffective. Automotive companies’ management were lacking in vision and resolve. Union management were intrenched and acted as they were living in the 50’s or 60’s and competition did not exist.

The Automotive companies then hit upon the strategy of moving their captive parts manufacture to new, up to date plants in Mexico. These parts could cost less and be of equal or better quality than when they were manufactured in the US. The automotive companies asked other parts makers to match this quality and cost. Gradually automotive parts decreased in cost, improved in quality, and US produced cars became less costly to produce.  Unfortunately, US employment deceased markedly.

So, the anti-NAFTA argument suggests that had duties and tariffs remained in place as before NAFTA, then jobs would have remained in the US. If this were to be true, a less favorable outcome would have resulted.   Automotive assembly would have shrunk, if not disappeared all together.

Consumers were choosing “price” and “quality” over high price and low quality. In an ironic way, NAFTA saved the US automotive industry and a lot of jobs in the process.

So what about TPP? Is that one deal too many? Should it be rejected out of hand?

A little more history.

The norm in most countries around the world is to erect trade barriers as a means of protecting local industry. This protectionism inevitably leads to poorer quality and higher costs for the host country. In the process, however, local manufacturers or farmers are pleased but the country continues to slowly fall behind other nations in economic growth and prosperity.

More sophisticated countries erect clever regulations, such as safety and consumer protection rules instead of duties or tariffs. The imported products would be rejected unless they passed these rules (and conveniently meeting these rules adds cost to the imported goods).

The TPP is intended to enable a different group of nations to access each other’s markets with virtually no restrictions. This would include some other countries competing in the US marketplace, and if their goods or services were preferred, displace business that might be now served by US companies. It would also allow American companies to shift (outsource) jobs to these countries and import products which were previously manufactured in the US.

But, is TPP the problem or is there a lack of disincentives for American businesses, in the name of increased profits and outsource a greater and more relevant problem?

Open and “fiar” (not just “free”) trade has been fairly well established as the optimum position for a strong and growing economy. More restrictive trade is seductive and countries which succumb to domestic politics and revert to tariffs, embargoes, or duties might win in the very short term but inevitably lose in the longer term.

If the GOP or President-elect Donald Trump are seriously interested in workers who are currently or will soon be displaced by trade agreements, should the Trump Administration walk away form open and fair trade arrangements or instead look to worker protections and/or new taxes on outsourcing companies windfall profits.

What will Donald do?

Trump’s Thanks To The Rust Belt States

Posted November 19, 2016 by zukunftsaugen
Categories: Barack Obama, congress, Conservatives, Democratic Party, Donald Trump, GOP, Healthcare, Politics, Republican Party, Supreme Court, tax reform, Uncategorized

Donald Trump lost the popular vote by about 2 million, but was able to win the electoral college tally by flipping normally blue “rust belt” States to red.  His victory, in no small measure is thanks to a disheartened core of blue collar workers.  These voters were seeking someone who could offer them hope.

Now there is much speculation about how President-elect Donald Trump’s Administration will begin its first term. What will President Trump attempt to accomplish in the first 100 days? What legislation will signal America is going the “right” way again?  Will the “rust belt” supporters receive their just reward?

There is plenty of chatter about repealing Obamacare (and little talk about what will replace it). There is stealthy talk about who Trump will nominate for the Supreme Court. And lots of talk about Trump’s bold front attack on taxes and regulations. For the voters who pushed the electoral college total over the top for Trump (dislocated workers in rust belt States), they may not realize it but there is little to be optimistic about.

Obamacare addressed a shameful and hurtful aspect of the American healthcare delivery system, namely the notion that an insurer could reject (outright or through prohibitively high premiums) a customer based upon some pre-existing condition. Obamacare also made it much easier (read affordable) for many low earning Americans to gain coverage. Short of a universal healthcare (single payer) system, Obamacare marked a clear step towards human dignity and, for a country which considers itself “exceptional”, closer to where the rest of America’s peer countries already are with healthcare.

Obamacare insures more Americans in every State. Repealing Obamacare will hurt many of these rust belt State voters, not help them. Hmmm.

Trump’a Supreme Court nominee will represent the worst of American exceptionalism. The process of denying President Obama the time honored (and Constitutionally founded) practice of appointing someone to fill a vacancy has blackened the reputation of the Republican Party and will lessen the honor of Trump’s nomination. The actual nominee, himself (little chance of herself) will only tangentially be the issue.

Someone in the Scalia mold should be expected to rule conservatively and in a way unhelpful to rust belt State voters.

For the bread and butter task of “making America Great Again”, the Trump team is proposing “tax reform”and regulations roll back. Tax reform is said to feature lower tax rates coupled with elimination of tax loopholes and deductions. Most pundits say that, at a minimum, this will include sharp reductions in corporate tax rates and for individuals, lowering the top income tax rate reduction (39% to 33%). So, what’s in it for those rust belt State supporters?

The Trump team says those receiving tax cuts (corporations and high earners) will turn around and re-invest this new found money creating a sea of jobs. Regrettably there is no recent experience (like with the George W Bush tax cuts) to support this belief. Wealthy people spend or save any new found wealth and corporations tend to give the money back to share holder rather than actually invest. Sadly, the tax reform is unlikely to stimulate the economy and almost certainly is not going to benefit the rust belt State crowd.

The plan to roll back regulations must have more specifics. Which regulations and what does the roll back look like. This same type of Republican thinking, however, produced the “Katrina effect” and in 2008, a sleeping Republican Government woke up to find the precipice overlooking a world depression. Capitalism and free market policies may help but they can bring harm just as well.

To be sure, rolling back environmental standards and green house gas regulations could enable, for example, the coal industry to hire back some former workers. While this might seem to help in the short term the rest of the world including developing countries will be watching. For rust belt State supporters, global warming long term impact could work against their children.

One must grant that large tax cuts could have a stimulating effect on the economy as predicted by Republicans. While this might be a cause for cheer, these rust belt State voters would do well to recognize three things before they celebrate too loudly. (1) Any overall tax cut driven economic boom would not necessarily flow to them or their States. (2) Over stimulation is almost always followed by a period of contraction and recession (which will adversely impact the rust belt). And, (3) for auto and industrial workers longing for a return to the great paying and benefit rich jobs of the past, while prohibitively improbable, such an occurrence would jack up the cost of what ever was produced and decrease their companies’ competitiveness. These higher cost items in turn would make the companies less competitive and initiate another round of outsourcing or severe downward pressure on wages and benefits.

Tax cuts and slashing regulations is a no win situation.

All is not doom and gloom. Obamacare could benefit from a number of modifications, most healthcare experts agree. A moderate, right of center jurist does not necessarily need to be the end of the world. And, a combination of government stimulus (tax cuts and spending) coupled with a careful review of unnecessary regulation could provide a better situation for American businesses to flourish and grow, helping everyone.

Since the GOP’s heart does not lie in these rust belt States, IMO, disappointment and maybe even resentment lies ahead for these voters who made Trump’s victory possible.

Enough Already – For Now

Posted November 17, 2016 by zukunftsaugen
Categories: Barack Obama, Democratic Party, Donald Trump, GOP, Politics, Republican Party, Uncategorized

The reaction to President elect Donald Trump’s every move has been marked with breathless observations. Democrats, special interests, pundits, and discouraged voters are all weighing in on “what Trump might do”. Come on, he is the President elect and the incoming Administration is his show. Give him space or if one can’t do that, then give him enough rope and let’s see what happens.

Most of the concerned discourse is coming from Democrats or progressive leaning spokes persons.  GOP members have more resembled the Cheshire Cat just waiting for the time to pounce on some prey.  The 7/24 talk shows (and many major newspapers do not know what to say, given they can no longer picture Trump as a buffoon  and too embarrassed to confirm how wrong they predicted the election outcome.

To say Trump is a complex person is an understatement. To label him stupid might be more stupid.  Most GOP critics describe Trump as a Republican who stands near the Democrat border. Hmmm.

Trump is President elect thanks to some unbelievable circumstances. It is highly probable that Trump originally ran for President on a whim, a sop to his ego, and at the very worst, a marketing stroke for his brand. When unbelievably he got the Republican nomination, Trump probably thought he could not win the election but could in the process screw the Republican Party who had so poorly treated him… Now Donald Trump is the President elect and oh, how those GOP fair weather friends are now vying to kiss his hand.

If you are a centrist or anything left of center, the GOP represents the worst face of America. The GOP treatment of President Obama was disgraceful and history will be written that way in time. The GOP platform which boasts taking away healthcare for millions of Americans, giving huge tax breaks to the wealthy, rolling back under the guise of religious freedom as many advances the gay community has gained as possible, and taking the right of women to choose and if possible criminalizing it is a pretty bleak platform for anyone to stand upon, let alone Donald Trump. In other words, there is plenty of room for Donald Trump to fill out his Administration with people much closer to center on these issues.

Of course, this is not a time to merrily go off to sleep, secure in the belief that the Trump Administration will be in your corner. There are some scary individuals whose names are being floated like Rudy Giuliani, Sarah Palin, and John Bolton, who should have no roll in Government. What about Ted Cruz as Attorney General, does that sound rational?

Never the less, it is Donald Trump’s prerogative.

My reminder to anyone who will listen is remember two things. (1) The Republican Party, as currently constructed, is incapable of governing. They represents two many incompatible special interests. The idea of making America Great Again simply does not compute with the GOP’s stated policies. And, (2) it is wise to wait until it is clear who the Trump appointees will be.  At that time it will be easier to determine what impact these persons could and whether they will be additive to the GOP platform or set a somewhat different course.  It may turn out America will find that Trump is a moderating force on a party living in a world of 50 years ago.

After January 20th, all outcomes (good, bad, successful, unsuccessful) will fall to Donald Trump’s door step. Events will not be a result of President Obama or Democrats.  Events will have the Trump name on them.

Hopefully some of his advisors are telling him that.