On TAP: Kuttner + Meyerson

Kuttner
March 28, 2018

When Trump Does Something Right. The trade deal with South Korea is a model for future trade agreements. What a pity that it fell to a lunatic like Donald Trump to bring it about. Credit mainly goes to Trump’s trade advisers, especially Peter Navarro and Robert Lighthizer.

The deal exempts South Korea from the steel tariffs, in exchange for an agreement by the Koreans to cut steel exports to the U.S. by about 30 percent. Past investigations have found that Korean steel is heavily subsidized.

The deal also commits South Korea to dismantle some of its many obstacles to U.S. exports of products such as cars and pharmaceuticals. And a separate agreement commits both countries not to use currency manipulation for trade advantage. What’s not to like?

Yet many commentators found it hard to get their minds around the idea that dismantling other nations’ protectionism wasn’t itself protectionist. Check out this NPR interview with Navarro.

Granted, the deal was unusual because the U.S. has more leverage with South Korea than with most nations. We are its geopolitical protector, and South Korea also needs America’s blessing or at least tacit consent as Seoul commences its own parallel diplomacy with the North. The U.S. is also one of South Korea’s most important markets.

Yet because of our huge and largely open domestic market, and a half-trillion trade deficit with the rest of the world, we also have substantial leverage with other nations to demand that they play fair, too. Other presidents have been reluctant to use that leverage.

If Trump can get this deal, just imagine what a sane, progressive president might get.

Meyerson
March 27, 2018

The Commerce Departments’ dead-of-night announcement yesterday that the 2020 Census would ask people if they were American citizens is perhaps the most purely partisan ploy we’ve yet seen in this age of Republican hyper-partisanship. The sole purpose of the question is to intimidate immigrants, the foreign-born, and the undocumented from participating in the census at all—thereby undercounting those chiefly urban neighborhoods that are heavily Latino or Asian, which in turn would lead to a decennial redistricting with fewer Democratic districts.

(The Commerce Department insists that the change was prompted by the Justice Department’s desire for better data to enforce the Voting Rights Act. If you believe that that was the motivation of Jeff Sessions’s department, you’re a good candidate to buy not just the Brooklyn Bridge but Brooklyn itself.)

Within a couple of hours after Commerce’s announcement, California’s redoubtable attorney general, Xavier Becerra, announced he was filing a lawsuit seeking to block the use of the question. The Constitution, Becerra argues, requires the government to perform an “actual enumeration” of the population every ten years, and by deliberately undercounting a portion of the population by asking the citizenship question, the Census Bureau would be violating its constitutional mandate.

I’m no one’s legal eagle, but I suspect the Federal Circuit with jurisdiction over California—the Ninth Circuit—will likely side with Becerra. Once that case proceeds to the Supreme Court—which currently also has a major case on the constitutionality of gerrymandering before it—we’ll see just how Republican the five Republican justices on the court are feeling. The Janus case, which would decimate the public employee unions that are a key part of Democratic electoral efforts, was argued in the Court last month. A pro-Janus ruling, which the five GOPniks are expected to deliver, would constitute a veritable Son of Bush v. Gore ruling—that is, a purely partisan expression of Republicanism. A decision that the citizenship question is constitutional would be Son of Bush v. Gore on steroids. It remains to be seen just how Republican the Chief Justice—John Roberts, who has shown some concern for the Court’s reputation—is willing to be.

Kuttner
March 26, 2018

Saturday Night Massacre—or Saturday Night Live? Let’s review the bidding. The pundits keep warning that Special Counsel Robert Mueller’s firing is imminent. Trump obviously seethes and keeps fantasizing about telling Mueller he’s fired. What next?

If Trump does move to fire Mueller, he has to fire Deputy Attorney General Rod Rosenstein first. More precisely, he’d have to order Rosenstein to fire Mueller, give Rosenstein time to respond, then replace him, and go down the chain until he can find someone willing to fire the special counsel.

This would surely take a day or two—plenty of time for Rosenstein to tip off Mueller, and plenty of time for Mueller to deliver his draft report and his files to Congress, the Justice Department, and state attorneys general.

Mueller has surely prepared for this contingency, and he already has plenty of material to justify impeachment. His firing would make a formal impeachment process inevitable. Just enough Republicans have warned Trump about this scenario that he has held off, so far.

A rational person (ha!) would appreciate all of this, and not fire Mueller. On the other hand, Trump is neither a rational person nor is he capable of complex thought.

Rather, he often holds contradictory views at the same time and proceeds on impulse. (What other germophobe has unprotected sex with a porn actress?)

So Trump is fully capable of firing Mueller, despite the self-destruction that such a course portends. Will he order Mueller's firing, or will his minders stay his hand?

Those adult minders are getting more and more scarce. The hiring of Larry Kudlow and John Bolton suggests that he is determined to populate his senior advisers with people as reckless and flaky as himself—people he likes from watching them on Fox.

When this history is written, one of the great disgraces of this era will be the failure of more than a handful of Republicans in Congress to restrain Trump. They continue to put ideological goals, such as tax cuts, deregulation, and control of the federal courts, ahead of protecting their country from a crackpot.

Assuming democracy holds for another seven months, all signs suggest Republicans will pay dearly in November—and Trump may well pay dearly even before that.

Kuttner
March 23, 2018

How the Globalists Brought Us Trump. The headlines today are filled with alarmist language about how Trump’s retaliatory tariffs against China risk setting off a trade war. He’s imposing up to $60 billion worth of tariffs against an array of goods to compensate for a range of Chinese predatory tactics, including theft of intellectual property, subsidy of production below cost, and coercive “partnerships” with U.S.-based companies seeking to do business in China.

Here’s the pity of it all. The financial and political elite had this coming, by denying for decades the reality of China’s mercantilism. I write about this in the current issue of the Prospect. But Trump is pursuing a long overdue correction in a foolhardy way.

The right way to go after China’s predatory state capitalism would have been to keep China out of the WTO until we agreed on some set of symmetrical rules of the road. Clinton and Bob Rubin blew that one.

The elites deceived themselves into thinking that if we let China into the club first, China would evolve into a liberal, free-trade democracy. That sure produced some chuckles in Beijing.

The right way now would be to get together with the EU and mount a common diplomatic offense against China’s mercantilism. Instead, Trump went after the EU as well with his steel and aluminum, and is now facing retaliatory tariffs from Europe against the U.S. 

Trump has blown open a door to a long overdue drastic revision of policy—but in the crudest possible way, one that could backfire. His trade advisers, unlike Trump, are serious people. Trade chief Robert Lighthizer, a veteran of trade negotiations, knows how to do this diplomacy right. But this is really complex stuff, and it’s unlikely that Trump will listen to Lighthizer, except on the headlines. (His own lawyer defending him in the Mueller investigation, John Dowd, just quit because Trump refused to take his advice.)

By doing this ass-backwards, Trump almost guarantees that the mainstream press will keep prattling the usual platitudes about free trade good, protection bad, though today a few commentators were beginning to come around. A worthwhile piece is by Peter Goodman of the Times, who emphasizes the need for collective action against China, thus acknowledging that China is a real problem.

Winston Churchill is said to have quipped, “You can always count on the United States to do the right thing, after they’ve tried everything else.” By dithering on the realities of China (and profiting handsomely for it), financial and political elites have left it to Trump to belatedly do the right thing, but in the wrong way.

By the time serious people get back into power in Washington, China may well have convinced key global economic players that the predator is the U.S., and even more damage will have been done. This does not exactly serve to Make America Great Again.

But the blame is not solely with Trump. It is equally to be shared with a generation of globalists who were either naïve or in Beijing’s pocket. 

Sow the wind, reap the whirlwind. Or in this case, the windbag. But tragically, a windbag with real power.

Meyerson
March 22, 2018

Today, Wisconsin Democratic Senator Tammy Baldwin is introducing a bill that, if enacted, would make the American economy a damn sight better, fairer, and more productive. The Reward Work Act would curtail stock buybacks and require corporations to have their employees elect one-third of their boards of directors.

This year (and it’s only March!), Baldwin notes, corporations have spent $225 billion on buying back their own shares—an amount that vastly exceeds what they’ve spent on R&D or other investments, much less using their tax cuts to raise their workers’ wages or give them bonuses. As University of Massachusetts economist William Lazonick has been documenting for a number of years, the corporations on the Fortune 500 routinely allot the lion’s share of their profits to buybacks and dividends, often taking on debt to do so.

The practice of buying back shares—which, by decreasing their number, boosts their value—took off after Ronald Reagan’s Security and Exchange Commission passed a rule (10b-18) that enabled CEOs to engineer buybacks without fear of being penalized for manipulating share prices for personal gain. The rise of buybacks and greater dividend payments fit neatly into the Milton Friedman-promulgated doctrine that the purpose of corporations was to “maximize shareholder value,” though Friedman probably didn’t suspect that this would come to mean “at the expense of long-term productive investment and employees’ earnings.”

Baldwin’s measure repeals rule 10b-18. In calling for worker representation on corporate boards, it takes a leaf from German laws requiring “co-determination.” In Germany, corporations must divide their boards equally between shareholder and employee representatives, giving workers a share of power over corporations’ practices. It is one of several reasons why the German middle class has not eroded in recent decades to the degree that the middle class has shrunk in other advanced economies.

In introducing this bill, Baldwin is betting that this form of progressive populism will stand her in good stead in her re-election campaign this year in Wisconsin. Like Ohio’s Sherrod Brown, who’s also up for re-election in an industrial Midwestern state that Donald Trump carried in 2016, she’s wagering that a pro-worker, anti-Wall Street agenda will resonate with many of the working-class white voters who swung to Trump. Baldwin and Brown could well be charting the future of Democratic politics. Let’s hope they’re right.

Kuttner
March 21, 2018

Pete Peterson Meets St. Peter

Name, Please?

Peter G. Peterson.

And what makes you think you deserve admission to the Pearly Gates?

I’ve led a virtuous life, made billions, and gave most of it to charity.

What sort of charity?

Well, I gave over $1 billion to create the Peter G. Peterson Foundation, to warn Americans about the dangers of deficits and debts, and the excesses of Social Security and Medicare.

Yes? And where’s the charity part?

Too much spending will bankrupt America, especially the dreams of the young.

I’m just a saint, not an economist. But are you saying that it’s Social Security and Medicare that are destroying the life chances of the young, rather than—oh, I don’t know—college debt, insecure jobs, unaffordable housing, the very rich taking more than their share?

My one regret on Earth was that the young people just wouldn’t listen to what I was telling them.

And where did you say you made your money?

That would be private equity.

We have a saying around here: It’s easier for a camel to go through the eye of a needle than—

I know … than for a rich man to enter the Kingdom of Heaven.

You’ve heard that one.

Yes, and I thought that if I just warned people against the perils of Social Security and Medicare, the Almighty would appreciate my virtue.

It’s kind of a stretch, Pete.

Well, do you mind if I ask you a few questions?

Sure, fire away.

It looks pretty fine up here. Who pays for all of this?

The Almighty forgives us our debts, as we forgive our debtors.

Don’t you think that’s kind of profligate?

Well, we do have other, more austere quarters that might suit you a lot better.

Meyerson
March 20, 2018

They’re gunning for Nancy Pelosi again. Democratic candidates in swing districts—even a few in solidly blue districts—are suggesting they might prefer a new and different leader in the House.

Since the early 2000s, Republicans have been running against Pelosi, in classic Republican style, by alleging she’s the personification of coastal elitism. The charges have been leveled so many times, much as similar charges were leveled at Hillary Clinton, that millions of Americans believe them, though they’d be hard-pressed to say what, exactly, Pelosi has done that can substantiate them.

Here, then, is a charge that sticks, that’s empirically verifiable: Nancy Pelosi has been the most effective legislative leader of either house of Congress since—well, way back. It was Pelosi who was responsible for the passage of the Affordable Care Act, when Rahm Emanuel and others were telling President Obama to give it up. It’s been Pelosi who has kept the House Democrats united in opposition to such Republican legislation as the tax bill. It was Pelosi who mobilized the House Democrats’ opposition to the Iraq War, which enabled them to capture the House in the 2006 election.

Indeed, Pelosi came to power in the House Democratic delegation not just because she had the backing of the liberals, but also because such old bulls as John Murtha and David Obey knew she was “operational”—able to craft and pass bills that needed to pass and block bills that shouldn’t. Her record compares favorably to such other legislative legends as Sam Rayburn and, as Senate majority leader, Lyndon Johnson.

I agree with the argument that Peter Beinart made last week in The Atlantic: that the right has gone after Pelosi because she’s a woman, and, like Clinton, a woman of manifest skills and accomplishments. (Why is there no pressure for Democratic senators running in red states to say they’ll vote against Chuck Schumer as their Senate leader? As a liberal with Wall Street ties, Schumer might look to be a classic GOP target—but the American Right’s deepest rages and phobias are directed at women and minorities.) Pelosi is also saddled with the cultural baggage, if baggage it be, that comes with representing San Francisco. (The phrase “San Francisco Democrat” was first used as a term of derogation by Jeane Kirkpatrick, Ronald Reagan’s neo-con UN ambassador, who coined it in a speech to the 1984 Republican Convention, which followed hard upon the Democrats’ ’84 convention, which had been held in San Francisco. She clearly intended it to be an allusion to San Francisco’s gay community and the city’s tolerance for them. Classy dame, that Kirkpatrick.)

Through such displays of bigotry, San Francisco became a punching bag for the GOP, and Pelosi became heir to that hatred when she was elected to Congress three years later.

The Democratic candidates now distancing themselves from Pelosi likely don’t know this history, or have even an inkling of where Pelosi ranks in the annals of legislative leadership. As Conor Lamb’s victory in last week’s special election in Trumpland, Pennsylvania, indicates, the Democrats may do very well this year in historically Republican districts. If so, they’ll face a choice right after November’s election: Do they want their leader and agenda to reflect the politics of those districts, or the politics of the Democratic base? Pelosi gets unity when unity is required on tough votes, but she also lets Democrats vote their districts when they need to. If the party is going to be housed under a bigger tent post-November, she has no trouble with that; indeed, no one has worked harder across the years to elect Democrats everywhere. But I’ll be damned if Democrats can find a better ringmaster.

Kuttner
March 19, 2018

Odd Couple. The pattern of Russian lying, in this case to deny any involvement in the murder of a former Russian double agent in Britain, sounds faintly familiar. The British government has identified the weapon as a military-grade nerve agent called Novichok, a compound made only in Russia. On Sunday, Putin called the claim “total rubbish, drivel, and nonsense.” (They don’t edit him for redundancy.) Putin went on to insist that Russia had destroyed all of its chemical weapons, as required by international treaty, more than two decades ago.

Piling on, Russia’s ambassador to the EU, Vladimir Chizhov, told the BBC that if Britain had indeed identified Novichok, then the Brits must have stockpiled chemical weapons themselves, and one could have gotten loose. Another Russian diplomat, Alexander Shulgin, ambassador to the Netherlands, went further, denying that such a compound even existed: “There has never been any program under the group name Novichok in the Russian Federation,” he said.

And Russia’s ambassador to Britain took that denial even further. Alexander Yakovenko suggested that maybe the whole story was British fabrication to distract attention from Brexit. “Nobody even saw the pictures of these people in the hospital,” he said.

Meanwhile, back in Missouri, Donald Trump boasted, at a fundraiser, that he had simply made up his claims of a Canadian trade surplus that he used to berate Canadian Prime Minister Justin Trudeau. “I said ‘Justin, you do.’ I didn’t even know. … I had no idea. I just said, ‘You’re wrong.’”

In terms of brazen lying, it’s hard to say who wins the fabrication derby—Putin or Trump. It’s one more form of affinity between the dictator and the would-be dictator.

For now, Trump can only envy Putin. Trump doesn’t get to use toxins to assassinate enemies, though his impact on American democracy has been toxic.

Putin, who just won “re-election” in a landslide, destroyed his opposition first. Poor Trump still has to contend with elections, and maybe with impeachment.

Kuttner
March 16, 2018

Odd Couple. The pattern of Russian lying, in this case to deny any involvement in the murder of a former Russian double agent in Britain, sounds faintly familiar. The British government has identified the weapon as a military-grade nerve agent called Novichok, a compound made only in Russia. On Sunday, Putin called the claim “total rubbish, drivel, and nonsense.” (They don’t edit him for redundancy.) Putin went on to insist that Russia had destroyed all of its chemical weapons, as required by international treaty, more than two decades ago.

Piling on, Russia’s ambassador to the EU, Vladimir Chizhov, told the BBC that if Britain had indeed identified Novichok, then the Brits must have stockpiled chemical weapons themselves, and one could have gotten loose. Another Russian diplomat, Alexander Shulgin, ambassador to the Netherlands, went further, denying that such a compound even existed: “There has never been any program under the group name Novichok in the Russian Federation,” he said.

And Russia’s ambassador to Britain took that denial even further. Alexander Yakovenko suggested that maybe the whole story was British fabrication to distract attention from Brexit. “Nobody even saw the pictures of these people in the hospital,” he said.

Meanwhile, back in Missouri, Donald Trump boasted, at a fundraiser, that he had simply made up his claims of a Canadian trade surplus that he used to berate Canadian Prime Minister Justin Trudeau. “I said ‘Justin, you do.’ I didn’t even know. … I had no idea. I just said, ‘You’re wrong.’”

In terms of brazen lying, it’s hard to say who wins the fabrication derby—Putin or Trump. It’s one more form of affinity between the dictator and the would-be dictator.

For now, Trump can only envy Putin. Trump doesn’t get to use toxins to assassinate enemies, though his impact on American democracy has been toxic.

Putin, who just won “re-election” in a landslide, destroyed his opposition first. Poor Trump still has to contend with elections, and maybe with impeachment.

Kuttner
March 16, 2018

How the Press Drinks the Kool-Aid—and Passes It On to You. It’s maddening how the mainstream press absorbs and replays ruling ideology as fact. You have to be paying attention, or you don’t see it.

Exhibit A is a seemingly neutral New York Times reporting piece on challenges facing Angela Merkel in her new term. The title is a little suspicious: “As Merkel Begins New Term, Compromises Could Pose Threat.”

What fatal compromises? The writer, Jack Ewing, goes on to warn—remember, this is a news piece, not an op-ed—“She had to bend to demands from her party’s junior coalition partner, and agree to roll back deregulation that, since 2005, has unleashed the country’s economy.”

That junior partner would be the Social Democrats. What dangerous policies are they demanding that reporter Ewing finds so alarming? Policies that would “make it easier for workers at small firms to organize, greater increases in pensions, and put limits on companies’ use of temporary workers.” Oh, the horror of it!

Ewing states as fact that these policies would depress growth and raise unemployment. But of course that is one side of a highly charged ideological argument, not fact. The evidence suggests that Germany’s rare slump early in this century was the result of the costs of absorbing the integration of the former East Germany and the Bundesbank’s perverse response of hiking interest rates, not the result of excessive wages or worker protections.

Ewing’s piece reads as if it were spoon-fed by Germany’s now mercifully departed ultra-austerity finance minister, Wolfgang Schäuble. But this nonsense is published as straight news.

Does the Times still have editors? Or do they drink the same Kool-Aid?

Want another one? The Wall Street Journal reports, in a straight news story, that Toys R Us plans to close all of its U.S. stores. The story gives the usual explanations—competition from Amazon and from Walmart, and so on.

You have to read down to the 23rd paragraph, the last one in the piece, to learn the real prime reason for the collapse. Private equity company owners of the toy chain, Bain Capital and KKR, joined by Vornado Realty Trust, loaded up the chain with $6.6 billion in debt.

The piece doesn’t point out that private equity’s strategy is to use that borrowed money to extract windfall returns, stick the company with payments on the debt, and then let it collapse.

Commercial: These media lapses are why we need the Prospect

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