Archive for November 2018

Real Life Catches Up

November 28, 2018

President Trump and the Republican controlled Congress trumpeted the windfall that was about to befall the US economy if the Congress passed the GOP tax cut.  The principle tax cut pieces were a dramatic reduction in the corporate tax rate and a one time waiving of the foreign profits tax (repatriation of money earned outside the US at zero or a very low tax rate).  “Jobs, bonuses, and investment”, said the President and GOP leaders.  Hmmm.

At the time, most economists and anyone with an average memory could remember George W Bush lowered the same two taxes with no broad impact upon the economy. Economists knew that businesses congenitally are wired to give any windfall to investors, if not also to top management.  And guess what…

So, once again a well intended tax cut has gone to rewarding investors and top management with only a few crumbs falling in the laps of workers.  The only one who should be surprised is “Charlie” who still believes “Lucy” would hold the football still.

This past weekend General Motors announced 5 plant closings and the reduction of some 14,000 workers.  For the economist or Wall Street investor there was much to cheer and much to be concerned about.  GM’s stated reasons were (1) sedan models were precipitously declining in consumer demand, and (2) GM wished to invest in new technology and needed cash.  Who could dispute these two business goals.

President Trump who may set long standing records for being a “head to tail” thinking reacted strongly telling GM that they should replace production at the three assembly plants with some other cars.  There seemed to be no recognition that the Trump Administration may have contributed to these job losses.  Hmmm.  

The President scolded GM calling them ungrateful in view of the Government bailout begun in 2008 and the more recent subsidies in support of GM’s electric car development.  Do you believe the President?

Most analysts see GM’s announcement as a recognition that sedans are no longer consumers’ choice when compared to SUVs, crossovers, and trucks.  The targeted plants represents over capacity and until new vehicles are ready, these plants will have no assignment.

And, by the way, GM of course, was  rewarded by Wall Street.  GM was acting in a timely manner the Street thought.  Hmmm.

President Trump has plenty to think about. 

  • Why shower tax breaks upon businesses when publicly traded companies will just return the savings to share holders? 
  • What role does the President think the additional $1 billion in cost (due to steel and aluminum tariffs) played in hastening GM’s decision? 
  • And what Wharten School economic theory is the President relying upon that says automotive sales can year after year increase and never see a contraction?

Our “economist-in-chief” would do well to get ready for similar bad behavior from other recipients of government tax breaks.  There are many signs that the economy, with or without the harmful effects of tariffs, is on the verge of contracting. As that happens, everyone will see the President has no clothes to hide the foolishness of the tax reductions and the initiation of the trade wars.

Other than hollow words, what does the President have to stimulate growth now? 

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The Season For Being Thankful

November 26, 2018

Once Thanksgiving arrives and the New Year is in sight, most people begin thinking about what they are thankful for.  To be sure “New Year” does mean different dates to different faiths but the notion of self reflection and focusing on what goals lie ahead seems somewhat universal.  For 2018, as in 2017, Donald Trump remains the “elephant in the room”.

President Trump, IMO, history will record as having been the worst US President rivaling Buchanan, Grant, and Harding if not the worst ever.  So what is it about President Trump to be thankful about?

Here are three observations to think about.

1. In today’s New York Times “Sunday Review” section, Maureen Dowd writes a featured opinion piece capturing the schism in her otherwise very conservative family.  The schism was exposed when she wrote about George W Bush and most recently about Bret Kavanaugh.  In her piece one can feel the pain Maureen feels when she, as a journalist, calls out the short comings of various Republican targets.  

In this piece, Ms Dowd speaks of the “deal with the devil” (quotes are mine) her brother Kevin made with his 2016 vote for Trump.  She references his rationale for “over looking” some of Trump’s behaviors because of the “greater good” (my quotes) Kevin sees flowing from Trump (and would not have flowed from Hillary Clinton).  Kevin cites Gorsuch and Kavanaugh as two examples.

2. In the grocery store on Saturday, I was awaiting my turn to check out.  I noticed a man pacing nearby seemingly unsure which line to enter.  Since he had only two items, it seemed to me the “self check out” should be his choice.  Just as it became my turn to put my groceries on the belt, the man returned and stood there silently but looking as if I was expected to let him go before me.  Hmmm.  He had only two items so I said, “please you only have two items, please go ahead of me.”

The man nodded and put his items on the belt, and then said, “what do you think about those politicians?”  I had no idea what he was talking about and asked him to explain.  The man replied, “you know, not dealing with those caravan people marching up and trying to cross our border.”  Hmmm.  (This was two days after Thanksgiving and two minutes after he had been offered a kindness of getting into line out of order. 

“That’s a big problem”, he said.  I replied, “how can that be, there are already 11 million undocumented immigrants already living in the US.  The caravan is a drop in the bucket”.  The man went on with other irrelevant information like an immigrant who killed some family and that would not have happened if the immigrant was not here.  The man apparently did not hear me say that real data shows less crime from these new immigrants than long term US residents.  Hmmm.

We concluded our conversation just before his two items were rung up on the cash register with a reference to the likelihood that he was an immigrant or the son of one.  And, yes he was.  His parents were from Lithuania and they had had problems early in the assimilation process.  But now  was a different time.

3. Moving on, I received a Facebook post in which a “friend” shared someone else’s post that 12,500 central Americans were matching, not the 2,000 previously reported.  And these 12,500 were filled with some very bad hombres.

The “friend” was someone in her early 80’s, and who herself was a two time immigrant from the Ukraine!  This woman whose family had immigrated to Canada and then she immigrated to the US with her Ukrainian-Canadian husband.  Apparently it was ok for her, but not for those from south of the border.

Hmmm.

In a strange and bazaar way the election of President Trump is shining a bright light on hypocrisies we all have.  For Irish catholic Kavanaugh supporters, seeing their church teachings against abortion gain two anti-abortion Supreme Court votes was enough to look the other way on a President who routinely flaunts the Constitution, disparages women, and see no value in telling the truth, a good trade off they think.  

For the stranger in the check out line who just got an invitation to move up felt the appropriate “thank you” was to gratuitously disparage another generation of immigrants.  

And to my “friend” who also is a devote Trump supporter, passing on inflated information without any hint of a positive resolution colors the picture of fellow Americans who do not see the world as I do.

This year I am thankful that I am now seeing there may be a broken logic behind Trump supporters.  There is a rationale to be sure, but a fact based logic should not be expected.  It will take something very personal for these Trump supporters to recognize reality and find him unnecessary.  IMO, events demonstrating President Trump’s qualifications to be considered one of the worst US President, are about to arrive.  

Unfortunately, when these events arrive, those hurt most by them will be some of Trump’s most fervent supporters.  Hmmm.   

The Wrong End Of The Hammer

November 21, 2018

The Trump Administration is twisting and turning trying to make America Great Again.  Tariffs and new Trade Agreements seem to be the tools of choice aimed at making things happen.  I wonder why neither tariffs or one sided, imposed trade agreements have not worked yet and why they should not be expected to work in the near future?

Trade Agreements openly negotiated combined with judicious use of tariffs where the situation demands have been key tools of international trade for over 100 years.  What makes these tools inappropriate today?

Nothing, except tariffs and trade agreements are injudiciously applied.

Managing international trade, somewhat like using a hammer, can have beneficial results if the hammer is used purposefully, and unsatisfactory, if not disastrous consequences if used incorrectly.  The Trump Administration “thinkers”, in keeping with the President’s “bully” preferred approach, decided to levy massive tariffs unilaterally on steel and aluminum imports.  The President claimed “national security” (that these materials were essential to the US national defense and as such the US needed healthy steel and aluminum industries).  

The “national defense”assertion was incorrect and laughingly irrelevant, but it serves little purpose to re-litigate this position. The Administration’s strategy was (and is) to claim something, impose a tariff, and then negotiate an agreement more friendly to America.  

International trade, in the ideal circumstance, involves anyone any where in the world buying or selling products or services from anyone or any place in the world.  The purchase price should reflect the seller’s selling price plus applicable taxes and shipping costs.  

Life, however, is not that simple.  Most countries might wish to protect certain products or industries and provide “subsidies” to those chosen products or industries.  These subsidies make these products and services less expensive than those same products or services produced by other countries.  So “country A” might impose a tariff on imports originating in “country B” claiming “country B” was in effect taking unfair advantage of “country A”.

The quarrel with China is different.  American companies discovered that China could produce goods at significantly lower costs and at the same or superior quality than the exact same product made in the US.  This simple discovery morphed into “outsourcing”, and in a few years lead to a huge trade deficit (China bought less from the US than the US bought from China).   

Today one goes to Pottery Barn, or Crate and Barrel or Macy’s and buys chairs, tables, underwear and guess what, the chances are near certain that these goods were made in China to Pottery Barn or Crate and Barrel or Macy’s specifications. In essence, US companies are driving imports from China.

On the flip side, China buys Boeing Aircraft or Grgich Hills Cabernet Sauvignon but those products are made to Boeing or Grgich Hills design and specification.  Chinese consumers buy these American products because they are superior to similar products available in China.  

In the classic international trade dispute, China might want to develop its own aircraft industry or wine industry and seek to depress the availability of US products.  Tariffs, which make the price of imported goods more expensive, are the tool of choice.

The Trump’s Administrations policy is to make Chinese (and later European) goods more expensive when bought by US consumers.  Hmmm.  If US manufacturers knew how to make chairs, tables, dresses, and underwear less expensively, wouldn’t US companies already have done that?  An even greater irony is that most every thing the US now imports from China could be imported from other low labor cost countries such as Viet Nam, Cambodia, Jordan, or Egypt.

So, what do you think Wall Street thinks about this?  Do investors see Americans, after more rounds of tariffs, as having more money in their pockets and able to buy even more US products and services?  I think not.

It is time to put the hammer away.

Like The Baldwin Locomotive Company?

November 15, 2018

The Roman Catholic Church finds itself in the clutches of a series of potentially fatal management crisis.  Across Europe church attendance continues to decline and Catholic churches in the US are seeing a similar trend.  One could question why but strictly from a business perspective, declining attendance means less and less money for the church and its support of Rome.

If the Roman Catholic Church were a public business, investors would want to see, right now, the “turn around” plan.  Rome’s actions this past week, however, dispels any notions that Rome understands the magnitude of its problems or how to deal with them in the 21st century.

This evidence came out when the US Catholic Church’s Bishops met in Baltimore for the purpose of agreeing upon a common response to allegations of sexual harassment and abuse perpetrated by members of the clergy.  After years of cover ups and misdirection statements, US catholic Bishops were set to issue some new rules.  But wait, Rome step in and ordered the Bishops to issue no statements and make no agreements pending a meeting next February in Rome where a global representation of Bishops could meet.  Hmmm, do you detect a sense of urgency?

The US Bishops were debating new guidelines about how to involve civil authorities, how to act transparently about accusations being made, and how to stop “recycling” clergy who were accused of abusing others, especially children.  What should be so hard about that?

Some senior members of the Catholic Church blame the child abuse cases upon the sizable percent of gay priests.  For these conservative church leaders, “get rid of the gays” and the problems of pedophilia disappears too.  If life were that simple.

The Catholic Church has several problems, to be sure.  Declining attendance suggests the church is not meeting the needs of modern society at a minimum.  Along with declining attendance, there is an even larger decline in those who want to become priests.  In times of shortages, who is going to ask about sexual orientation? 

Relevance, that is the role the church undertakes with its followers, is the missing subject, and that is not going to be found by next February, if it is not known now. 

The wide spread disgrace of clergy grooming and then seducing young boys and girls, and subsequently the hierarchy covering up church members’ complaints teaches the parishioners in clear and unambiguous words, this man’s catholic church is not about administering to its followers, it is about the followers looking the other way while still sending money to Rome.

The church is quick to drag out all the old superstitions.  You know, like being prepared for life in the next world rather than cleaning up the act in this world.

The Baldwin Locomotive Company was famous for making great and powerful steam locomotives.  In the late 1940’s, Baldwin rolled out their largest and greatest steam locomotive yet.  Within a few years Baldwin was finished as a company.  The reason, Baldwin was in the steam locomotive business while the rest of the world was looking for efficient and speedy transportation.  First came diesel locomotives, then jet airplanes, and new, limited access roads where automobiles shined.

What business does the Catholic Church leaders think they are in?

Midterms Assessment

November 13, 2018

The midterm election results should send a wake up call to both Republicans and Democrats. When either party answers the call, they will hear a disturbing message.  Many voters are confused over whether they more pro or anti President Trump or are their votes tied to party platforms (and results). 

Many voters have conflated the concept of being a Republican with being Pro-Trump and many other voters have conflated being a Democrat with being anti-Trump.  

Here’s why this is worrisome.

Republicans,  after having voted to repeal Obamacare over 90 times and having offered no suitable “replace” legislation, that is legislation containing “pre-existing condition” coverage, never the less, told voters that they were for “pre-existing conditions” coverage just the same.  Too many dependable Republican voters seemed to believe these politicians. Should voters believe that Republicans really do favor healthcare for all Americans?

And, how about tax cuts.  Republicans beamed about passing the “largest” tax cut in history (???) even though the tax cut gave bundles to corporations and the wealthiest Americans and crumbs to the average middle class worker.  Republicans then told voters that Democrats would raise taxes.  

Where is common sense?  The Republican tax cuts were unfunded and the cost associated with these corporate and super rich benefits are going directly to the Federal Debt.  Fiscal responsibility?

And speaking of deficits, Republicans have spoken with great energy (all throughout former President Obama’s years) about the Democrat’s reckless monetary management.  When asked about the tax cut driven increases in deficits, Mitch McConnell, with a straight face, said Republicans would fix the deficit with cuts to Medicare and Social Security.  What has Trump got to do with that?   Hmmm.

So the learning is – voters must separate Republican platforms (and track records) from President Trump.  There are plenty of reasons for people of good faith to be anti-Trump.  Pick one that is important to you, for example, Trump’s disregard for the environment, his war on immigrants, his foolish trade wars, or his despicable attitude towards women.  There are plenty more.  But look at what elected Republicans have done.

There may even be rational reasons why people may be pro-Trump (like “he keeps his promises”, he’s a man of action”, “he tells it like it is”, or “he cares about jobs”).  President Trump, however, does not tell the truth, is mean spirited against many who cannot defend themselves, and has clearly enriched his family businesses and those of his wealthy supporters.  Regardless, those who still like Donald Trump will do themselves a disservice if they do not also look beyond the Donald Trump personage and ask the simple question, “what has he and elected Republican Congress members done for me”?

Democrats did well in the 2018 midterms because enough people asked that question.  Across the country in districts where the President did well in 2016, Democrats won.  Why?  

The most likely reason is that Democrats spoke to issues important to voters and the Republican record on these same issues were not what voters thought best.

As the country looks towards 2020, Democrats need to further distill the key issues and put forward a clear and concise picture.  Healthcare, infrastructure (read jobs) investment, and campaign reforms (read transparency in campaign financing) are three areas to start with.  Let the Mueller investigation lead to its own conclusions and do not, I repeat, do not say the word “impeachment” before it is on most Americans’ tongues.

 

Does My Vote Count?

November 5, 2018

There has been much said why voter turn out, especially in mid-term elections, is so low.  Often mentioned is the prospective voter saying, “why should I bother to vote, nothing seems to change whether I vote or not”.  Hmmm.

Depending upon where the voter lives, like a red voter in a very blue district, one can understand this surface reaction.  Another example is the voter who lives in a swing district and regardless of whether the voter votes red this year and blue the next time, and their choices win, nothing seems to change on issues important to that voter.  And not to be overlooked, of course, there is the “let the other person do it”, the lazy or not involved voter simply doesn’t want to expend the energy to register and vote.  The “free rider” simply blows off elections and makes up excuses if someone asks why no vote.

Consider also the voter who sees massive amounts of “out of State” money buying TV time just prior to each election.  “How can my candidate overcome that type of spending”, one might say.  These massive spending campaigns disclose a problem with our election laws but IMO, this spending does not cause gridlock or the perception of no Congressional action.  

Instead the real culprit contributing to “my vote doesn’t count” is the rampant lobbying which takes place each day in Congress.  Large corporations and special interest groups poor money into each elected officials office regardless of whether the office is red or blue.  Our elected officials have become so accustomed to having a rich uncle pour in thousands if not millions to both red and blue parties that principled decisions have become the casualty.  Regrettably this flood of money teaches the elected officials that change is not good.  Status quo allows too many elected officials to milk the system enhancing their own financial position.  

Too much lobbyist money ?  Seem a wild and crazy idea?  How does one explain the lack of serious gun controls, healthcare costs twice as high as the rest of the world, and the lack of serious comprehensive immigration reform when history clearly records the immigrants’ contribution over our country’s history?

So, again, why should I vote?

Voting is the only way Americans can select new and different officials.  Voting is the only way Americans can hope to change the current situation.  For example, electing women, or ethnic and racially diverse people, or someone other than a red or a blue person can not be accomplished unless people vote. 

But even more basic, voting empowers each American to justly criticize those who have been elected. Anyone can complain but without having voted, where is the justification to complain? 

In a representative democratic government, voters elect others who we entrust to make national and State choices for us.  Tomorrow is the mid-term election, so the current candidates are all we have to choose from.  Vote, earn the right to be constructively critical, and next time, if your choice does not fair well,  get involved in the primaries.

So Refreshing, A Few Facts

November 4, 2018

The Trump Administration, as well as the Trumper-in-Chief, President Trump has set a high bar for future Presidencies to proclaim “best ever”, “tremendous success”, or “all time best”.  It seems every aspect of life in the US has become super special through the magic touch of the President.  Hmmm.

This past Friday, the Labor Department released its monthly estimate of new jobs added to the economy.  The number of 250,000 was higher than estimates and signaled good news for the Trump Administration.  Just another sign of President Trump’s Midas touch?

Monthly New Jobs 11:2018

(Published in the Philadelphia Inquirer on November 2, 2018 citing Bureau of Labor statistics.)

In fact even a casual look at the recent history of monthly jobs shows that 250,000, while a good number is just one of many similar numbers since 2014 and part of a positive trend since 2010 when Barack Obama was President.

The 250,000 jobs number is good news to be sure.  A wise person, however, would wonder why after the huge tax cuts handed out to corporations and the wealthy, the number of new jobs (predicted by the President and Republicans) was not much higher?

For the time being, let’s use this example as one indicator why data and facts are so important when dealing with a President untethered to the truth.

Vote Tuesday and choose “facts”.