Public Policy and Governance – Page 176

The Trouble With Tariffs

I try to read a variety of information sources, but I will be the first to admit that–if it weren’t for my architect husband–Engineering News Record would not be among them. It is a print publication that considers itself “the construction resource,” and focuses on matters like the reason for that Italian bridge collapse and the technology of road paving. These are subjects that fascinate my husband, but usually aren’t among my preoccupations.

However, there is a real virtue to reading such publications for a policy person, because they report on the practical implications of what might otherwise be abstract and ideological policy debates. That is exactly what the most recent issue did in its discussion of Trump’s misbegotten tariffs, in an article titled “Equipment Readies for Tariff Fight.”

As the article reported, “the reality of new surcharges on all sorts of imported materials and finished goods has begun to reverberate through the global supply chain for construction equipment.” And that global supply chain is complicated–something a ham-handed and ill-considered policy can disrupt in unexpected ways and with unanticipated consequences.

The (sobering) points made by the article can be summarized by a quote from a vice-president of the Association of Equipment Manufacturers: “Everyone loses in a global trade war. Tariffs are taxes on American consumers and businesses.”

Major manufacturers have already raised their prices in anticipation of the higher up-front costs of steel and other materials. According to Senator Chuck Grassley, tariffs the administration aimed at imports of automobile components have also hit heavy-duty trucks, buses, construction equipment, agricultural equipment and industrial engines. As those prices increase, they’ll be passed along, so prices paid by consumers will rise. (There has already been a 32% rise in the cost of hot-rolled, coiled steel.)

Some 30% of of the construction equipment manufactured in the U.S. is designated for export, and the imposition of tariffs has “upended” the industry, which had been anticipating a period of strong sales. As a consequence, according to industry spokespersons, manufacturers are likely to shift production to “places like China or Brazil.”

These tariffs and retaliatory tariffs will put U.S. manufacturing at a disadvantage, because dozens of OEM’s have facilities around the world. It will tip the balance and they’ll just move out of the U.S. to make the equipment somewhere else.

The decision whether to shift the locus of manufacturing is only one of the consequences that has yet to be felt; as the article quoted one construction industry representative,

The point about tariffs is the effect doesn’t come the day after, it comes the year after. The economic impact, the loss of jobs, the loss of business in the community–that is a very long-term effect.

There is a reason that opposition to tariffs bridges ideological divides. Both conservatives and liberals recognize the negative effects of these sorts of interventions into complex and interrelated markets. Unfortunately, we have a President whose policies (if they can be dignified by the term) do not rest on any theoretical or philosophical framework. Instead, he acts out of bile and petulance, complicated by utter ignorance of the matters he is disrupting.

The Engineering News Record says these tariffs pose a significant threat to the construction equipment industry’s prosperity. But the damage isn’t limited to the construction equipment industry. Tariffs pose a significant threat to job creation, consumption and general American prosperity–a threat that could have been avoided had we elected someone competent, or even someone who had–and heeded– competent advisors.

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“I Quit”

Principled people who can do so are fleeing the Trump Administration. Those who cannot afford to take the moral high ground–the government workers with mortgages to pay and children to educate–are valiantly trying to hold their agencies accountable to the rule of law.

Talking Points Memo, among others, has reported on the departure of one who just left: the top watchdog overseeing student loans.

The Consumer Financial Protection Bureau’s “Student Loan Ombudsman,” responsible for guarding student borrowers against predatory lenders and scammers, has resigned in a scathing letter aimed at acting CFPB director Mick Mulvaney.

“Unfortunately, under your leadership, the Bureau has abandoned the very consumers it is tasked by Congress with protecting,” Seth Frotman’s resignation letter, obtained by NPR, read. “Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.”

Not exactly surprising, in an administration where up is down, failure is success, accurate reporting is “fake news,” and corrupt practices are touted as “good business.”

Frotman’s job was to monitor and review of thousands of complaints from student borrowers. The Obama administration had introduced a number of regulations intended to protect those student borrowers against fraudulent practices; according to Frotman, Mulvaney and Betsy DeVos have worked “diligently” to eliminate those protections.

Frotman’s letter pointed to specific wrongdoing by Mulvaney, NPR reported, including the alleged suppression of a report from his office revealing that big banks were “saddling [students] with legally dubious account fees.”

In May, NPR noted, Mulvaney called for Frotman’s office to be incorporated into the Office of Financial Education, effectively proposing to remove Frotman’s office from direct enforcement actions and shifting it to an educational role.

Regarding another change — the Department of Education’s announcement last year that it would no longer share federal student loan oversight data with the CFPB — Frotman wrote: “The Bureau’s current leadership folded to political pressure… and failed borrowers who depend on independent oversight to halt bad practices.”

NPR has posted a copy of Frotman’s letter here.

My husband often reminds me that–while Americans are distracted by our demented President’s tweets, rages and sundry other embarrassing and destructive behaviors–his administration is busily dismantling the structures of accountable and legitimate governance–stacking the federal courts with right-wing ideologues, eliminating regulations protecting air and water quality, bleeding public schools of the resources needed to educate the country’s children, empowering theocrats, and weakening the rules that restrain the rich and powerful.

Even if November brings the hoped-for “blue wave,” and installs a Congress that takes its oversight responsibilities seriously, it will take years to restore both the rule of law and the American people’s ability to trust that their government is operating on their behalf.

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File Under “We Told You So”

The Guardian,among other publications, recently reported that Verizon “throttled” the presumably unlimited data of California firefighters while they were battling the blazes that were–and still are–engulfing communities in that state.

California firefighters’ ability to battle a huge wildfire was impeded by Verizon Wireless throttling their internet connection, in a moment advocates say demonstrates the high stakes of the battle over net neutrality.

Santa Clara county fire department had paid for what Verizon described as an “unlimited” data plan for various internet-connected devices, but the data flow was throttled to about 1/200th of the typical speed – unusably slow for any meaningful data transfer.

This restriction created problems for a command and control communications vehicle called OES 5262 as firefighters battled the Mendocino Complex fire, the largest wildfire in California’s history, in late July. The vehicle – essentially a fire engine that is fitted with computers and communications equipment – gets internet access via a device that uses a Verizon sim card. It is used as a hub to “track, organize and prioritize routing of resources around the state and country to the sites where they are needed the most”, according to the Santa Clara county fire chief, Anthony Bowden, in a lawsuit over net neutrality protections, first reported by Ars Technica.

Net Neutrality rules put in place under the Obama Administration would have protected the firefighters (or at least provided them with recourse), but those rules were repealed by Ajit Pai, Trump’s appointee to the FCC. Pai was a former executive at Verizon, and Verizon has been one of the “big telecom” companies lobbying for the repeal. Pai argued that the net neutrality rules would stifle innovation, and that they had been established on “hypothetical harms and hysterical prophecies of doom”.

With Pai at the helm, the FCC simply ignored massive numbers of emails arguing against repeal, and ignored as well a number of surveys that found more than 80% of Americans supporting Net Neutrality.

The July incident wasn’t the first time Verizon had throttled the firefighters’ data connection.

They had previously contacted Verizon in June when they were dealing with the Pawnee fire and December 2017 when they were battling a grass fire near Prado regional park.

According to emails included in court filings, in June 2018, the fire captain Justin Stockman contacted Verizon requesting that the data connection for a critical piece of communications equipment was unthrottled. A Verizon account manager responded by trying to upsell the fire department from a $37.99 plan to a $39.99 plan.

The Santa Clara fire department is part of a larger lawsuit against the Federal Communications Commission; the lawsuit seeks to overturn the repeal of net neutrality rules that prevent internet service providers from blocking, throttling and prioritizing customers on the basis of pay. The suit represents plaintiffs in twelve separate lawsuits that were consolidated into a single suit. Those lawsuits were filed by more than three dozen entities, including state attorneys general, consumer advocacy groups, and tech companies.

Probably the best explanation of Net Neutrality–and the consequences of its repeal–can be found by watching comedian John Oliver who has devoted two of his shows to the topic.

I guess it takes a comedian to explain why the loss of Net Neutrality is no laughing matter.

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Banking On The Postal Service

The Roosevelt Institute–named for FDR–has a project it calls “the next New Deal.” One of its recommendations takes a hard look at a proposal that has been floating around for a while–allowing the Post Office to offer banking services.

Banks today are increasingly consolidating branch locations, while also moving away from low-cost financial services to high-profit activities, leaving marginalized Americans underserved and left behind in today’s economy. Without access to basic banking services, such as checking and savings accounts or small loans, consumers are vulnerable to a host of financial abuses. To foster a more inclusive and accessible economy and society for all communities in the U.S., the public provision of banking goods and services by the government is an important— and bold—option to consider. In a new report co-published with the Samuel DuBois Cook Center on Social Equity at Duke University, Thomas Herndon and Mark Paul argue for the public provision of household financial services.

Among the referenced “host of abuses” are payday lenders and other predatory operations, offering money to people who are desperate for cash to meet a pressing and/or unexpected need at obscene rates of interest.

Allowing the Post Office to offer banking services would make those services available in locations that bank branches no longer serve, and would allow people with very limited means to access basic financial tools that most of us take for granted: checking and savings accounts, check cashing services, and the ability to have direct deposit for Social Security and payroll checks. The Post Office would also lend money–at reasonable rates–via small loans, auto loans, and mortgages.

As I noted, adding banking to the services the Post Office currently provides has been proposed before. I always thought it was a good idea (although for some reason, the banks disagreed….)The Roosevelt proposal, however, adds an interesting argument to the case for Postal banking, one I had not previously encountered.

Roosevelt’s proposal for banking through the Postal Service argues that in addition to serving a growing public need, having a public bank would allow the federal government to monitor and manage the country’s online financial services marketplace.

This second component would serve as a powerful regulatory tool by allowing the government to condition sellers’ access to the marketplace based on certain consumer safety standards. Consumers could also rate and review sellers, fostering easier detection  of consumer abuses. A public banking option structured with these two components would create the financial infrastructure required for universal service, while also preventing consumer financial protection abuses through public-private competition.

If we had an administration and Congress that was operating in the public interest, this proposal would at the very least get serious consideration. But of course, we don’t have a functioning government right now, let alone people in public office to whom we might affix the label “statesmen.”

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This Won’t Pass–But It Should

In addition to her Corporate Accountability measure, discussed yesterday, Senator Elizabeth Warren has introduced an “anti-corruption” bill, based on the highly dubious theory that We the People are capable of learning from our mistakes.

Nothing about Warren’s Anti-Corruption and Public Integrity Act should trigger Congressional outrage, but I predict that the blowback will be fierce; the Act’s assault on money in politics is pretty much guaranteed to enrage the plutocrats who are used to buying Congressional votes for their policy preferences.

As Vox describes it,

Sen. Elizabeth Warren (D-MA) envisions a United States government in which presidential and vice presidential candidates must — by law — disclose eight years’ worth of tax returns and place any assets that could present a conflict of interest into a blind trust to be sold off (neither of which President Donald Trump has done).

Those two provisions are just the beginning.

Her proposed fix envisions a Washington where the president, vice president, Cabinet members, and congressional lawmakers have a lifetime ban on becoming lobbyists, and other federal workers have restrictions — albeit less severe — on entering lobbying firms. The act would also bar federal judges from owning individual stocks or accepting gifts or payments that could potentially influence the outcome of their rulings.

And in Warren’s plan — laid out in a new bill called the Anti-Corruption and Public Integrity Act— this would all be overseen by a new US Office of Public Integrity, which would go after violators and usher in a new era of ethics law enforcement.

The idea is to “isolate and quarantine the ability of big money to infect the decisions made every day by every branch of our government,” she said in a speech on Tuesday. That means all three branches: executive, legislative, and judicial.

The bill is designed to completely overhaul a system that has benefited politicians in both political parties. No more revolving door between Capitol Hill and K Street, no more hiding tax returns, no more benefitting from inside information affecting stock ownership… Here are some of the key provisions:

lifetime ban on lobbying for presidents, vice presidents, members of Congress, federal judges, and Cabinet secretaries.
Multi-year lobbying bans for federal employees (both Congressional staffers and employees of federal agencies). The span of time would be at least two years, and six years for corporate lobbyists.
Requiring the president and vice president to place assets that could present a conflict of interest —including real estate—in a blind trust and sell them off.
Requiring the IRS to release eight years’ worth of tax returns for all presidential and vice presidential candidates, as well as requiring them to release tax returns during each year in office. The IRS would also have to release two years’ worth of tax returns for members of Congress, and require them to release tax returns for each lawmaker’s year in office.
Banning members of Congress, Cabinet secretaries, federal judges, White House staff, senior congressional staff, and other officials from owning individual stocks while in office.
Changing the rulemaking process of federal agencies to severely restrict the ability of corporations or industry to delay or influence rulemaking.
Creating a new independent US Office of Public Integrity, which would enforce the nation’s ethics laws, and investigate any potential violations. The office would also try to strengthen open records laws, making records more easily accessible to the public and the press.

The Anti-Corruption and Public Integrity Act can be viewed as a companion, of sorts, to Warren’s Accountable Capitalism Act, described in more detail in yesterday’s post.

Elizabeth Warren is often labeled “left-wing,” a description that says more about how tribal our politics has become than it does about her policy proposals. (Efforts to protect consumers from predatory business practices and the American public from corruption are neither Left or Right–unless you categorize upholding the rule of law as “Left.”)

Each of these measures goes to the heart of the problem being addressed; neither “nibbles” around the edges of systems that have outlived whatever utility they may once have had. Their virtue is that they “blow up” and replace systems that have become corrupted.

That virtue, of course, is also their fatal flaw, and why neither is likely to pass.

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