Archive for November 2016

Beware Of Hubris

November 30, 2016

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.

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Free Trade, Positive Or Negative?

November 28, 2016

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

November 19, 2016

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

November 17, 2016

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.

Repeal And Replace

November 15, 2016

“Obamacare is a disaster, a jobs killer, and should be repealed at the first opportunity”, we have been told by Republicans. The Affordable Care Act is in the GOP cross hairs and all that is slowing action is January 20th and Donald Trump’s inauguration. Oh, if it were that easy.

There are various estimate for how many Americans owe their healthcare insurance coverage to Obamacare. Most reports come in around 20 million (out of about 300 million insured Americans) and a good piece of that 20 million lies in Medicaid expansions. And amongst these 20 million are those with pre-existing conditions, children under 26 still living at home, and those unable to afford insurance. So, why the great need to throw out the Affordable Care Act?

Consider the following first:

US per capita health care spending is in excess of $9,400 and in first place globally. In comparison, Germany spends about $5,400, France about $4,900, Canada about $5,300, and high cost Japan about $3,700!  Does that make you wonder why healthcare is so expensive in the US compared to the rest of the world?

Could it be with this high cost healthcare that Americans must be the healthiest in the world.   Do they live longer than residents in other countries?

Hmmm, the numbers don’t say that… Germany (81.0 years), France (82.4), Canada (82.2), high cost Japan (83.7) and the winner is US (79.3), in other words, the US spends almost twice as much per person on healthcare and ranks 31 out of 168 countries and well below other modern industrial countries.

And by the way, these comparison countries cover all residents and therefore do not need a separate Obamacare to increase coverage.

The Affordable Care Act is just part of an overall US healthcare delivery system, which includes open enrollment health insurance (individually purchased or provided through an employer), Medicare, Medicaid, Veterans Administration Health System and the Affordable Care Act.  ACA was added with the intent of closing the gap of uninsured Americans and if possible begin reversing the year over year price increases.

The underlying assumptions with ACA are two, cost will decrease and health outcomes will improve with a preventive based healthcare delivery system which would be available and affordable to all Americans, not just who can afford to pay what the market will bear. ACA, unfortunately, is still built upon a free market, for profit model. Accordingly there was no incentive for insurance carriers, hospitals, or drug companies to work at cost control or to insure all Americans. Case in point, of course, is the completely out of control greed associated with increasing drug prices.

So, once again, what is the big deal about Obamacare?

Conservatives and a wide range of special interests believe ACA represents a step along the path to “socialize medicine”. Conservatives would prefer “under” and even “uninsured” Americans in preference to seeing full coverage in a single payer, universal healthcare system as found in Germany, France, Canada, and Japan.

The collateral damage for this ideological strategy is a grossly uneven distribution of healthcare services. Those without health insurance receive the best that emergency rooms can provide and have no protection from potentially massive hospital bills.

Of course there are many questions and concerns with single payer systems. Healthcare is not free and must be paid for in some way. And abuse of any government service is always possible, if not predictable. Never the less, why would it be the case that the US should be proud to be the only modern, developed nation at ease knowing that children of some Americans will grow up without sufficient preventive healthcare when compared to sons and daughters of Wall Street executives?

Healthcare cost is probably one of the most misunderstood realities of American life. Most Americans receive their healthcare coverage through their employer. Even with co-pays, deductibles, and employee sharing of premium costs, these Americans still are hugely insulted from the true healthcare costs. Supporting the repeal of Obamacare is wholesale hypocrisy since the main benefits accrue to those most in need.

A less obvious reason to more seriously study US “cost of healthcare” is income inequality and scarcity of good paying jobs. Healthcare spending which was more in line with Germany and France would reduce insurance premiums for both individuals and businesses thereby freeing up disposable income for individuals and retained earnings for businesses. Accordingly individuals would have more left from the pay check to spend as they please and businesses would have more to invest and grow their businesses.

It appears there will be no such discussion or even interest in a single payer system.  Rather, Republicans will thrash around trying to find ways to keep the ACA benefits and make believe the extra costs do not exist.

Letter To A Friend

November 11, 2016

The following is an email I sent to a German friend who had sent me a worried email on Wednesday following Donald Trump’s upset victory. Germany and many other parliamentary system countries have great trouble in understanding how someone with ruthless, mean spirited, and fact-free claims could suddenly be selected. In these countries, the heads of State come from the majority party and are not unknown, inexperienced new comers. Germany as well as many other European and Asian countries also worry about their security should the US under Trump tilt to a more isolationist foreign policy. Bluntly, would a President Trump cut deals with Russia and China ceding chunks of Eastern Europe, Africa, and Southeast Asia to the influence of Russia and China?

Here is my reply to his question on my assessment

Dear Friend,

Beginning late Tuesday night as the election results began to show up on TV, the realization that the “unthinkable” was about to happen became clear.  Philadelphia residents are mostly “center to center left” and therefore strong supporters of Hillary Clinton.  Clinton’s defeat left many (including me) feeling somewhat like one does when a close friend dies.

As for the question about what I see for the future… it is complicated.  There is little known about Trump except as related to his business dealings.  His real estate developments were all constructed around contracts where Trump got a large commission upfront.  This payment insulated Trump from whether the project succeeded or failed.  Reports also indicate that Trump would attempt to renegotiate sub-contracts trying to get his suppliers to accept 70 cents instead of the one dollar agreed to.

Most political observers think that Trump said anything he thought, without regard to whether his words were truthful, informed, or not, if he thought it would help his candidacy.  He was trying to gain “free” television time, and cleverly trying to find which issues appealed to enough voters to win the election.

Complications (of my answer) continue when one considers that he will be a Republican President with a Congress controlled by the Republican Party.  The Republican Party, however, is not of one mind, and unlike the parliamentary system, are free to vote against Trump’s proposals if they want to.  Many of Trump’s campaign proposals will increase government spending which much of the elected Republican Congress are against.  Trump’s stated views on trade run against long stranding Republican Party views.  Trump’s statements about Putin, NATO, and Japan/Korean nuclear policy are strongly opposed by Congress.  How these differences will translate into policy is unclear.

•   Most commentators are predicting Trump will move quickly on repealing our healthcare law (called the Affordable Care Act, or Obamacare).  His and Congress’ problem is what to replace it with.  Will Trump agree to a different type of national program or push the problem by to individual States?
•   Environmental regulations is another area where Trump could use “executive orders” to change existing Obama orders.  Clean energy and in particular emissions from coal fired power plants could take steps back.
•   On business matters, Trump’s policies are just as unclear.  He has talked about cutting corporate taxes but if he does so, how does he replace this tax revenue?
•   One of my greatest concerns is who (advisors) will he surround himself with.  Many of the faces that were seen with him during his campaign are seen as narrowly focused and of questionable national stature.

For me personally, most of his proposals for domestic policy would not affect me directly.  Lower taxes would of course be advantageous, healthcare changes would adversely impact the poor not me, changes like abortions or contraceptives are not relevant, and in my lifetime, burning more coal does not directly affect me.  I am against all these changes (including lower taxes), however, on the basis that they are unfair and have dangerous long term consequences.

Lastly, there are many reports that the US is deeply divided, red versus blue, Republican versus Democrat, Conservative versus Progressive.  I think this is an incorrect conclusion.  Rather, there are many special interest groups who seek certain objectives. (Each special interest group feels zealously about their issue but are not exercised about another special interest’s hot issue.

Those who cry out for smaller government are in fact in favor of more power at the State level so that they can gain some advantage in farming, manufacturing, or real estate. (These small government advocates are really about seeking advantages on their playing field.)  Other groups want lower taxes but still want the big government services.  Some groups claim they want more religious freedom but in fact wish really to impose their religious views on others or selectively discriminate against others (like blacks or gays/lesbians).  While these views might predominate the Republican Party, not all Republicans share these views and most Republicans who share one or two, don’t share them all.

The same can be said for Democrats.  Some democrats favor more welfare or healthcare type programs but don’t want to see higher taxes (tax the rich is ok for them).  Most Democrats favor less discrimination (more opportunity for minorities) but don’t want it to impact their job.  Similarly, many progressives support tougher environmental regulations but resist higher prices or loss of employment.  And union workers who have traditionally been Democrats, simply want good paying jobs and don’t want to hear they may have to retrain because those jobs no longer exist in the US.

My point in this is that Donald Trump cleverly built an alliance of voters by saying what each subgroup wanted to hear or believe.  If he delivers on his economic promises, all will be forgiven and he should easily enjoy his two terms (8 years).  If forces beyond his control or forces resulting from his misjudgments on policy push the US economy into recession (or even do not improve our current 1.5% GDP growth) he could be a 1 term President since his current supporters are united on bread and butter, not philosophic reasons.

Enough for now.  As Trump begins to select his advisors more clues will emerge.  There is still a good chance of major conflicts with his own Party in Congress.  Some are saying this will not happen because Trump will want his legacy to be not just positive, but almost heroic.  We shall see.

Keep safe and healthy.

I have not heard back from my friend. When I do I will report more.

President Elect Donald J Trump

November 9, 2016

For many (but not enough), the unthinkable has happened. Donald Trump has won the 2016 Presidential election with a narrow but clear cut electoral college victory. Americans have spoken and their choice of Trump over Hillary Clinton was wide and broad based.

Along with President-elect Trump, the GOP kept control of both the Senate and the House of Representatives. The keys to the White House and the governance of Congress (and soon the Supreme Court) have passed to the Republican Party.

Pundits will spin this outcome for days, weeks and maybe months pinning the Democrat loss on this reason or that one. For many the dislike of Hillary Clinton was enough to vote for Trump. For others, the election was about the economy, it was simply not good enough for these voters, anything would be better. Another group saw Trump as anti-establishment and a change agent from the current status quo. Political pundits will fault the basic campaign strategy and criticize the decisions to under estimate the importance of Wisconsin, Michigan, and Pennsylvania. And so on.

For centrists, especial those on both coast, their worst fears has been realized. The GOP which has specialized in gridlock and just saying “no” now possesses the reigns of government. The George W Bush years set a poor standard where a narrow victory lead him and his Administration to unbounded hubris, ultimately into a unnecessary failed Iraq War, and concluding with a near death of the world economy. President elect Trump deserves a chance to lead the country in more measured steps. Whether he does, remains to be seen.

President elect Trump’s victory has left an indelible mark in the ground. He has promised to make America Great Again. For the rust belt States that provided Trump the margin of victory, nothing short of a resurgence of good paying jobs will be enough. Were Trump and the GOP to somehow deliver on this promise, the Country and most citizens will be better for it. If, however, global realities on trade and foreign policies actually show that the past 7 years have been actually as good as global realities allow, then President elect Trump could be a one term President.

We must also not forget that a Clinton victory would not have been a bed of roses. Most all her pledges would have elicited strong opposition from the Republican controlled Congress. And, no one should be delusional and think Clinton would suddenly become open and transparent in her communications. Personally I was willing to accept these tradeoffs in exchange for a centrist to moderately left of center Supreme Court Justice.

Life sometimes seems unfair and President elect Trumps victory could be seem in that light. But Americans voted freely and the results elected Donald Trump. The future will take care of itself.