Archive for March 2018

What A Way To Go

March 31, 2018

This past week, David Shulkin, Secretary of the Veterans Administration, was fired.  For President Trump, dismissing a White House staff member including cabinet secretaries, is  business as usual.  Classless and with ill-defined rationale.  But as more and more news makers are commenting, it was never about Shulkin or VA needs, but all about the President.

So what are Americans to make of this undignified use of executive authority?

  • Lets begin with the most obvious. Cabinet leaders serve at the pleasure of the President and no justification is necessary.
  • Most Americans, however, would expect some sort of explanations.  For example, Under Secretary Shulkin leadership, the service provided to our veterans declined unacceptably.  But that was not the case and the opposite is far more likely.
  • Politics, of course, is always not far from the appointment or retainment of cabinet Secretaries.  The President could have said that Secretary Shulkin had performed very well and as a hold over from the Obama Administration, had provided valuable continuity.  Now it was time to appoint a qualified Republican. Not mentioned by this President.

The President’s choice for the next VA leader is White House physician Ronny Jackson, someone with no experience running an organization and certainly not one as large and sprawling as the VA.  So we must look for some other reason.

Shulkin has said that White House political appointees had wanted Shulkin to push for “privatization of most of the VA services.  This would represent a fundamental redesign of the VA with little or no debate.  Shulkin opposed this pressure and is now back in the private sector.

Why would President Trump do that?

For the time being, IMO, one must speculate.  The two most obvious reasons would be (1) to distract Americans from all the other balls President Trump is juggling.  (2) A second reason runs along the lines of “what’s good for supporters of President Trump is good for the President too”.  Privatizing the VA would open oodles of business opportunities where oodles of money could be made from government contracts.  Hmmm.

(White House political appointees left a digital trail by suggesting the White House use a “free spending excuse” justifying Shulkins dismissal.  Unfortunately Secretary Shulkin’s alleged offenses were no more egregious than other cabinet secretaries, like HUD’s Carson and EPA’s Pruitt, and probably less.  Hmmm.)

David Shukin will make out quite well when he returns to work in the private sector.  There is no need for Americans to be concerned.  On the other hand, Veterans might be in for some unpleasant surprises and tax payers almost certainly will pay more for “privatized” services if these services deliver the same level of care as Veterans currently receive.

Jugglers who put too many balls in the air reach a point where there are too many.  The President had far more balls in the air before he fired National Security Advisor, HR McMaster and Secretary of State, Rex Tillerson and now David Shulkin.  A juggler’s risk is not dropping the extra ball, but rather seeing many, if not all, the other balls already in the air crashing down.

China And Trade

March 25, 2018

President Trump, in his best populist demeanor, announced massive import barriers on China. The President pointed to the $300+ billion annual trade deficit as justification. The President demanded China decrease the deficit by $100 billion as a first step. Sounds straight forward. Why are so many economists worried?

China is a huge country with over a billion citizens. Reports indicate that of that one billion, 400 million Chinese possess US middle class buying power. This should be a ready made market for American made products but the trade deficit shows otherwise. Why?

First, lets look at the top 10 US imports from China.

1. Electronic equipment: $150 billion (think Best Buy, Home Depot, portable drills, saws, vacuums, etc)
2. Machinery: $112.4 billion
3. Furniture, lighting, signs: $34.8 billion (think Pottery Barn etc)
4. Toys, games: $26.7 billion (think Amazon, most Department Stores)
5. Plastics: $17.6 billion
6. Vehicles: $15.6 billion
7. Knit or crochet clothing: ($14.9 billion (sweaters at Macy’s etc)
8. Footwear: $14.8 billion (Shoes and Running shoes)
9. Clothing (not knit or crochet): $13.5 billion (shirts, pants, hoodies at Walmart, etc)
10. Iron or steel products: $12.4 billion

What is it that makes this list of over $400 billion so attractive to American consumers?

Can you tell me the band name of one Chinese TV, vehicle, piece of furniture, toy or shoe, or piece of clothing? Almost certainly you cannot because the importers are American businesses which have outsourced the production of these items to China. Why? Because Chinese production costs less than “made in America”. And as a result US inflation rates are still very low.

This is an odd situation where Chinese business are not selling their brands in the export market. Chinese exports carry global brand names like Izod, Black & Decker, or Pottery Barn, and are exported to fill direct orders by US companies. So attempting to punish Chinese business for what US businesses have requested does not seem a wise and begs for unintended consequences.

But there is another face to Chinese trade. Is the Chinese domestic market open to US exports on the same basis that the US market is open to Chinese imports?

Unfortunately, the answer is no. The standard Chinese rationale has been that China is a developing market and needs to protect some parts of its economy so China can “catch up” to the developed countries. Tariffs have been the “go to” technique to provide local business owners time to develop competitive counter offerings. But with China (and also Korea), the understanding of intellectual property is quite different than the view in the West.

For example, US automobile companies face stiff tariffs on imported US made cars and trucks. Chinese officials insist that these automakers establish a presence in China in order to sell in China. (This is similar to what the US asked of Japanese car makers.) But there is a twist with the Chinese.

Automobile companies found that they could not get a license to manufacture unless they form a joint venture with an approved Chinese company. China also limited the amount of sub-components that could be imported for the assembly and sale of an American brand automobile in China. This provision was intended to require the auto maker to build, for example, stamping (the frame and skin of an automobile) plants, or buy from an existing Chinese stamping plant. Auto makers soon found Chinese made cars (under a Chinese makers name) running around China that look an awful lot like western cars. These Chinese auto parts companies just made more fenders and hoods than were ordered and sold the extras to a different Chinese assembly company who in turn assembled his own car. This, in Western terms, represents intellectual property theft.

So what are the consequences of getting tough with China?

China is still developing its economy and unfortunately is not going to leave unprotected certain industries. Automobiles, computers, solar panels, etc will present constant threats to intellectual property theft and protectionism regulations. Negotiations, especial through the WTO are in the long term the wisest path. Some day other countries will impose trade restriction on Chinese firms and China will feel economically the dangers its current policies have upon the US.

The US has instead chosen to levy tariffs which will increase the cost of products the US imports from China, thereby increasing the cost to US customers. China does not pay the duties, the importer does.

Ironically, the approach President Trump is following could have the consequence of raising wholesale prices on a broad section of goods and services without any increase in US sales to China. And should China elect a “tit for tat” response, American sales to China could decrease.

A bully knows only one approach. Threaten to punch the other person in the nose and expect the other person to bend to the bully’s demands also carries risks. China is unlikely to roll over to this approach and in a trade war, both sides normally lose.  Why would the President continue this high risk approach?

President Trump has his legal problems (with Stormy et all), the continuing Mueller investigation, weakening international relations (after killing the TPP, Paris Climate Agreement, and continuing to insist upon the “Wall”), and now he seems set to take on North Korea and Iran (with his new NSA and State Department Secretary. For someone who loves chaos, trade with China could distract Americans from Trump’s other unforced errors.

For sure, President Trump will have plenty to tweet about. I wonder whether he will notice the rest of the world’s friendship melting down around him?

Facebook’s Message

March 22, 2018

This past week’s news cycle has carried the story line on how Cambridge Analytica influenced the 2016 election. Allegedly, CA applied some sophisticate “data mining” techniques to Facebook users’ personal information. When Facebook became aware that CA had acquired so much personal information, Facebook contends it immediately told CA (a Facebook paying customer) to destroy the unauthorized content. Facebook accepted CA’s promise that the data was destroyed. Hmmm.

So, what message can Americans derive from this?

  • Russia was not alone in trying to influence the election outcome. Whether there was actual “collusion” between Russian sources and Trump campaign officials remains unclear and basically irrelevant. US Agencies (CIA) routinely attempt to influence elections in other countries around the world. What is not irrelevant is Trump organization potential collusion and the implication of trading Russian help during the campaign for future Trump Administration favoritism.
  • Opinion surveys are a lot easier conducted digitally than having to bang on so many doors and talking to real people. In the past, shoe leather, knocking on doors and telephone calls were the primary tools of opposition research firms. Can you imagine if it were discovered that internet providers had a means to scan someone’s computer in real time AND sell this information to whomever? CA did something similar with Facebook data.
  • Dog whistle phrases, like Crooked Hillary, Drain the Swamp, and Deep State have been well tested and are intended to provoke reptilian reactions. Everyone likes to hear what they already believe or suspect. There is nothing in the phrases Crooked Hillary, Drain the Swamp, or Deep State which provide insight into whether the term is applicable, and even more importantly, that these terms in any way differentiate Candidate Trump from Candidate Clinton. For example, does anyone really think that “Low Energy Jeb Bush” proves that Bush would have made a less effective President than Donald Trump?
  • Facebook has a dangerously flawed business model.

Facebook’s real customers are its advertisers not those who consider themselves members, and Facebook’s conscience are stockholders owners who seek investment returns without regard to how the earnings are obtained.

Facebook’s business model offers a “free lunch” to everyday citizens through cost-fee social communication.

  • Phase I. Facebook earns no income unless there are advertisements along side “member’s” posts. Up to this point, the “deal” is reasonably fair.
  • Phase II. But Facebook has not stopped there. There is far more money to be harvested if Facebook could post “targeted” ads, ads from advertisers who believe they can offer what the member wants if the member only knew about the advertiser. To facilitate this, Facebook needs to analyze a member’s posting and those of their friends postings.  Making this information available to advertisers (for more money) allowed Facebook to cross a line and begin its journey down a dark path.
  • Phase III.   Facebook’s next step added news and issues content intermixed with user postings.  And with the “like” button amplifying the initial news or issue post to the rest of someone’s friends, the Facebook business model took a profitable next step.
  • Phase IV. Facebook has recently added a feature where a member is allowed to sign into a totally different app, using their Facebook sign-in identity. Think this is a service? Not really because Facebook than gets to see all the user’s experience with this new app and can incorporate this information into Facebook’s knowledge of its member.
  • Big Brother is here.

So what can we say has been learned?

The free lunch associated with posting pictures and comments which can be viewed by unlimited friends, like all free lunches, was not free. Phase I advertisements are analogous to newspaper or magazines, or television. Phase II, III and IV are a slippery slope and harken the arrival of Big Brother.  These Facebook practices should be closely scrutinized.

It is not clear whether the genie can be put back in the bottle or even if the genie’s behavior can be limited.

Knowing when far is far enough, especially when mixed with a toxic cocktail of enormous profit generation, does not offer encouragement that Facebook will police itself.

The unanswered question is then, who can?

The Unheard Message

March 20, 2018

President Trump’s unexpected 2016 Presidential victory has all the markings of a message not heard. Candidate Trump promised all good things to everyone and did so in a showman’s style. That was heard. Intertwined, however, with Trump’s promises was a spiteful and narcissistic tone promising also to change long standing institutions.

Apparently the promise of so much good lulled many Americans to reserve judgement and let Trump be Trump.

Fourteen months into the Trump Presidency, incident after incident is accumulating that core traditions and institutions which underpin the operation of our Democracy are being mocked, attacked, and derided. It may be understandable that a struggling worker who hears of jobs returning may ask the President no further questions, but for political, intellectuals, and senior business leaders to not recognize the existential threat President Trump’s behavior is making on the proper functioning of the American Democracy, this is sad and should be a major concern.

The concerns are not about

  • Nominating Neil Gorsuch to the Supreme Court. The next Democrat President will nominate someone as liberal as Gorsuch is conservative.
  • Attempting to repeal the Affordable Care Act. The ACA while insuring some 20 million more Americans than before was still too costly compared to the rest of the modern world.  (ACA was no more costly than what preceded it.)
  • Unfunded tax cuts favoring the already wealthy. Natural consequences will show whether these tax cuts have been prudent or whether they have been simply a sop to wealthy Trump campaign supporters.

The concerns are about

  • The wholesale and unabashed mixing of Trump businesses and political nepotism without any regard for ethics. What an example for Americans.
  • The denigration of longstanding key government agencies like EPA, FDA, CIA, FBI, and Justice Department. It is one thing to disagree with existing agency policies, and to work to replace them. It is quite another to insinuate that the fundamental role of government is at fault.
  • The trashing of the State Department though allowing wholesale vacancies in Ambassadorships, key department officials, and funding. Again, one might disagree with policy direction but new policy direction needs a functioning State Department to develop the changes.  The “deal maker in chief” is not the answer.
  • The total lack of respect for civil discourse as exemplified by demeaning, degrading, and unproven statements personally addressed to other Americans. Name calling, serial denial of facts, and abusive, petty personal attacks have no place in arguably America’s most important office.

Congressional Republicans have pretty much decided to “go along and get along” with President Trump.  Apparently they have assumed this was a wise choice for them personally. Neville Chamberlain possessed similar thoughts in the late 1930’s too.

Business, academic, and civic leaders have also been muted in their criticism of President Trump. Never the less, these groups should have the capacity to see the logical extension of Trumpian rhetoric and find ways to speak out, before it is too late.

Successful democracies depend upon much more than just free speech and free elections.  With 340 million Americans, President cannot “make a deal” with each one.  There must be broad policies developed by skilled and experienced people.  And, there must be sound, ethical agencies charged with developing and implementing policy.

President Trump may simply be a politician who has not recognized he is the President and still sees every issue as a campaign opportunity.   Regardless, his actions and behavior have consequences, and can leave his successor with weakened institutions, shattered foreign relations, and many Americans with bankrupted confidence in the role of government.

Maybe Tom Steyer is right.



Conor Lamb and Consequences

March 14, 2018

Yesterday, in the Pennsylvania 18th District, Conor Lamb prevailed over Republican Rick Saccone in an election of dubious consequences. The 18th District has in recent years been a relatively safe Republican seat due largely to the disaffected large union population and generous gerrymandering.  President Trump carried this district by 20 points as an example.

So, what was so bad about Saccone or what was so good about Lamb?

Interviews with Trump voters in the 18th and several other districts across the country have revealed that many Trump voters are souring on the President as a person but overwhelmingly like the President because “Trump  gets things done”. Hmmm.

This comment suggests that these voters were disgusted with other politicians claiming they would change this or that, and in the end do nothing.

So, let’s look at some of President Trump’s successes. Lamb did not reject the President’s actions but asked 18th District voters what consequences might follow,.

For example,  Republicans gloated about tax cuts. Lamb asked, what government programs, important to the 18th District, might not happen or might need to be cut back when the Federal Government realizes it has too little money.  How about badly needed investment in roads, bridges, and ports?

Lamb did not say tax cuts are unfair or a bad idea because they grossly benefit the already wealthy (which they do). Rather Lamb framed the Trump action in terms where the consequences would be real to his district’s voters. Lower taxes would also put pressure upon Medicare, Medicaid, and social security Lamb said. Infrastructure projects would be slowed along with the new jobs that would be associated with development.

The key to Lamb’s approach was treating respectively potential voters, many of whom had voted for President Trump. He did not slam Trump as a person but kept the focus upon the President’s policies and what the consequences would likely be.

Even with healthcare, Lamb refrained from advocating universal healthcare but instead spoke of the right of all sick Americans to receive healthcare they could afford. Read more of Conor Lamb’s policies.  Hmmm.

Lamb’s intangibles came through as honesty and bias for action. Lamb appears clean-cut, honest, and hard working. In this contest, that was enough.

Don’t Cry For Me, Mr Tillerson

March 13, 2018

The breaking news this morning was the firing of Secretary of State Rex Tillerson and the naming of his replacement, CIA Director Mike Pompeo. Should anyone care?

The answer is either, yes – everyone should, or no, no one should. Hmmm.

Please unpack this statement.

The change has been long rumored and there have been multiple incidents where if Tillerson’s boss in the private sector had undercut him as President Trump has, Tillerson would have tendered his resignation and gone his own way. Given Tillerson’s preference for logic and a deliberate approach, Tillerson was bound to experience constant conflict with his boss. Trump’s strategic vision comprise plans for the moment and are subject to complete reversal if the President perceives a more desirable (for him) outcome which might be achieved with different tactics.

Our President is a win-lose deal maker. Trump wishes to win and doesn’t care what impact a loss has for the other person. In business, that may be fine, but in global relations, a deal where country Z may experience a loss,  the loss may multiple into political upheaval bringing on a new regime far more hostile to America’s interests.

Tillerson was at least one voice of reason and stability in Trump’s cabinet. Mike Pompeo is untested even with his short stay as the CIA Director. Pompeo may be too eager to please and with his rise in stature, susceptible to hubris in his new job. And with so many examples of an unmoored Trump (withdrawals from TPP and Paris Climate Agreement, entering North Korean negotiation without a plan, and driving a wedge between the US and its traditional allies by asserting tariffs and demanding renegotiations of existing treaties, one must reasonably conclude that losing Tillerson is a loss.

On the other hand, there is no evidence Mike Pompeo will bring anything new or different to the State Department. And there is even less evidence, Pompeo will put discipline into President Trump’s agenda. What you see is what you get. So it is arguable that no one should be worried because nothing substantive has changed.

So, don’t cry for me (and the American public), Mr Tillerson. Instead, recognize that you could have never succeeded at your post and for sure, never receive any credit. Mr. Tillerson, you should view your sacking as a result of the Stormy Davis effect. Standard Trump procedure is to change the subject and give the media something different to chase after, especially if the other subject was getting too close to home.

So, don’t cry for me, Mr Tillerson. You are now free to live a sensible life knowing you tried your best, in a no win situation, and did it with dignity and honor.