trade war – Sheila Kennedy

Impeachment And The Economy

In a recent column, Paul Krugman opined that–among other benefits that some of us see (like potentially ridding ourselves of a severely mentally-ill President who has the launch codes)–the Impeachment inquiry launched by Democrats in the House will be good for the economy.

This seemed counterintuitive, since we have always heard that the markets respond negatively to uncertainty–and as we are seeing, Trump’s behavior when he is cornered is nothing if not unpredictable.

Krugman’s column anticipated Pelosi’s announcement, but applauded Impeachment’s probable effect on the economy.

If there’s one thing the tweeter in chief believes, it is that what’s good for Donald Trump is good for America. A little over a month ago (although it seems like much longer) he told a rally that “you have no choice but to vote for me,” because his electoral defeat would lead to a market crash.

But a funny thing has happened over the course of Trump’s latest terrible, horrible, very bad, no good two weeks. Suddenly, impeachment (though not removal from office) has gone from highly unlikely to highly likely. In fact, given the explosive nature of the now-revealed whistle-blower complaint, I don’t really understand how he can not be impeached.

And the financial markets have basically shrugged.

As Krugman notes, on the surface, this is strange. No matter what the outcome of the Impeachment proceedings, while they are going on, they are pretty much the only game in town: little or nothing else will happen. The administration’s legislative agenda will come to a screeching halt. Why doesn’t this worry investors?

The answer is, “What legislative agenda?”

Even when Trump’s party controlled both houses of Congress, he had only two major legislative initiatives. One was a big tax cut for corporations and the wealthy that will generate trillions in deficits but doesn’t seem to have done much for the economy. The other was an attempt to take away health insurance from around 30 million Americans, which didn’t pass.

It’s pretty obvious that, between watching Fox News and tweeting, Trump has had very little time for legislating, or for that matter, governing. (He has also given us ample reason to believe he has absolutely no idea how government works or how legislation is passed, which may explain his disinterest in both.)

To be fair, legislation isn’t the only way presidents can make policy, and the prospect of impeachment will probably exert a chilling effect on Trump’s ability to pursue policy through executive fiat. But here’s the thing: Since most of what Trump is trying to do is bad for America, whatever paralysis impeachment may induce is all to the good.

For Trump has, in effect, been waging a war on competence.

We’ve noticed.

In Trump’s vision of government, career diplomats who do actual diplomacy, experienced regulators who actually try to enforce regulations, researchers who produce objective data — up to and including weather forecasters whose predictions he doesn’t like — are all part of a deep state that’s out to get him. So Trump officials have been engaged in a systematic campaign to degrade America’s Civil Service, driving out people who know what they’re doing and replacing them with political hacks.

I’ve encountered a few members of Trump’s base, and their justifications for supporting him are consistent with Krugman’s description. Only “elitists” believe that people in government actually need to know something about governing, or have experience or expertise in the subject-matter with which they are engaged. Any businessperson–well, any white businessman— can run government.

Hell, you don’t need no fancy-shmancy degrees or experience. Just look at all those “best people” that Trump’s installed who are getting rid of all those silly rules and regulations that just get in the way of making a profit.

As Krugman says,

An impeachment inquiry will surely have a chilling effect on the Trumpian project of government degradation. It may not come to a dead halt, but Trump’s team of cronies will be distracted; they will be less brazen; they will be worrying about more potential whistle-blowers going public about what they’re doing.

In short, paralysis can be a very good thing. I’m rooting for it.

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Red Myths, Rural Realities

Paul Krugman recently looked at the effects of Trump’s policies on rural America, and found–to no sentient person’s surprise–that the effects have been disastrous.

Economists, reports Politico, are fleeing the Agriculture Department’s Economic Research Service. Six of them resigned on a single day last month. The reason? They are feeling persecuted for publishing reports that shed an unflattering light on Trump policies.

But these reports are just reflecting reality (which has a well-known anti-Trump bias). Rural America is a key part of Donald Trump’s base. In fact, rural areas are the only parts of the countryin which Trump has a net positive approval rating. But they’re also the biggest losers under his policies.

As Krugman points out, whatever Trump’s campaign rhetoric might have promised, his actual policies have been aligned with (okay, dictated by) Congressional Republican priorities–what Krugman calls “G.O.P. standard”: big tax cuts for corporations and rich people, accompanied by cuts to the social safety net.

The only real deviation from GOP orthodoxy has been the tariffs, and Trump’s evident belief that trade wars are “easy to win.” Even the farmers who have been a reliable part of Trump’s base are beginning to recognize that they will bear the brunt of the substantial injuries caused by those wars.

As for the tax and social safety net cuts…

The Trump tax cut largely passes farmers by, because they aren’t corporations and few of them are rich. One of the studies by Agriculture Department economists that raised Trumpian ire showed that to the extent that farmers saw tax reductions, most of the benefits went to the richest 10 percent, while poor farmers actually saw a slight tax increase.

At the same time, the assault on the safety net is especially harmful to rural America, which relies heavily on safety-net programs. Of the 100 counties with the highest percentage of their population receiving food stamps, 85 are rural, and most of the rest are in small metropolitan areas. The expansion of Medicaid under the Affordable Care Act, which Trump keeps trying to kill, had its biggest positive impact on rural areas.

It is fair to suggest that many rural Americans are unaware of the variety of ways in which Medicaid expansion and other social programs support farm country; some of those benefits are indirect (which doesn’t mean they aren’t critically important). The impact of the tariffs, however, is hard to miss.

What about protectionism? The U.S. farm sector is hugely dependent on access to world markets, much more so than the economy as a whole. American soybean growers export half of what they produce; wheat farmers export 46 percent of their crop. China, in particular, has become a key marketfor U.S. farm products. That’s why Trump’s recent rage-tweeting over trade, which raised the prospect of an expanded trade war, sent grain markets to a 42-year low.

If Trump succeeds in plunging us into a full-blown trade war, which certainly seems more likely than not, Krugman says American imports and exports will both shrink — and since farmers rely disproportionately on exporting, they will be the biggest losers.

The harm being done to rural America by Trump leads to that perennial question: why do so many of the people bearing the brunt of his ignorance continue to support him?

Krugman delicately suggests that it has to do with “cultural factors”–by which he means hostility to immigrants and resentment of coastal elites they believe look down on rural America. (What Krugman calls hostility to immigrants is, if the research is to be believed, part of a much larger and more ingrained hostility to non-whites and non-Christians.)

Krugman thinks that rural America’s support for Trump may start to crack as the negative effects of his policies become too obvious to miss. I’m less sanguine.

When we so-called “elitists” talk about “voting ones interests,” we are almost always referring to economic interests. When I listen to Trump supporters–when they post angry diatribes on Facebook or are interviewed for a new program–what I hear is a very different view of what constitutes their interests.

Economic reality be damned. Trump voters are defending their vision of America, and that vision is white, heterosexual, and fundamentalist Christian. So long as they believe Trump is hurting people who fall outside that narrow category, he’s their guy.

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Trashing The Economy

Schadenfreude would be appropriate if real people weren’t being hurt.

Recent business news included the planned overseas move by that icon of Americana, Harley-Davidson. Although a quote attributed to the CEO to the effect that Trump is a moron who knows nothing about either trade or economics turned out to be bogus, the decision to move production offshore sends a not-dissimilar message.

As Paul Krugman noted in a recent column, Harley-Davidson may be an icon, but it isn’t really a big economic player.

Nonetheless, I think the Harley story is one of those anecdotes that tells us a lot. It’s an early example of the incentives created by the looming Trumpian trade war, which will hurt many more American companies and workers than Trump or the people around him seem to realize. It’s an indication of the hysterical reactions we can expect from the Trump crew as the downsides of their policies start to become apparent — hysteria that other countries will surely see as evidence of Trump’s fundamental weakness.

No President can be an expert on all of the subjects on which a President must make consequential decisions. Most of those who have occupied the Oval Office have compensated for that reality by surrounding themselves with credentialed, expert advisers. But then, most of Trump’s predecessors were mentally stable enough to recognize that a need for advice about a highly technical area isn’t tantamount to an admission of inferiority.

There’s a reason the Trump Administration is filled with incompetents and sycophants–increasingly from Fox News–and even then, has seen unprecedented turnover.

And what Trump’s alleged experts have to say about the controversy offers fresh confirmation that nobody in the administration has the slightest idea what he or she is doing.

About that trade war: So far, we’re seeing only initial skirmishes in something that may well become much bigger. Nonetheless, what’s already happened isn’t trivial. The U.S. has imposed significant tariffs on steel and aluminum, causing their domestic prices to shoot up; our trading partners, especially the European Union, have announced plans to retaliate with tariffs on selected U.S. products.

And Harley is one of the companies feeling an immediate squeeze: It’s paying more for its raw materials even as it faces the prospect of tariffs on the cycles it exports. Given that squeeze, it’s perfectly natural for the company to move some of its production overseas, to locations where steel is still cheap and sales to Europe won’t face tariffs.

Opposition to tariffs used to be a hard-and-fast position of (what used to be) the Republican Party. It was a position I heartily endorsed, for reasons that Krugman alludes to and all Americans will soon begin to appreciate. That Harley and other companies would choose to move in reaction to those tariffs was entirely predictable.

But while it’s what you’d expect to see, and what I’d expect to see, it’s apparently not what Trump expected to see. His view seems to be that since he schmoozed with the company’s executives and gave its stockholders a big tax cut, Harley owes him personal fealty and shouldn’t respond to the incentives his policies have created….

So what do Trump’s economists have to say about all of this? One answer is, what economists? There are hardly any left in the administration. But for what it’s worth, Kevin Hassett, the chairman of the Council of Economic Advisers, isn’t echoing Trump’s nonsense: He’s uttering completely different nonsense. Instead of condemning Harley’s move, he declares that it’s irrelevant given the “massive amount of activity coming home” thanks to the corporate tax cut.

That would be nice if it were true. But we aren’t actually seeing lots of “activity coming home”; we’re seeing accounting maneuvers that transfer corporate equity from overseas subsidiaries back to the home corporation but in general produce “no real economic activity.”

As real economists and business reporters have documented, those tax reductions have once again failed to “trickle down” to the workers they were supposed to benefit. Most have been used in corporate stock buy-backs. Meanwhile, Congressional Republicans are voting to rob Social Security and Medicaid and make access to other social welfare programs more difficult–just as the Administrations uninformed trade war policy threatens to tank the economy. We are already seeing a weakening in consumer spending.

There is a (very unattractive) part of me that is watching this train wreck as vindication–this is what happens when you turn government over to people who ignore history and evidence and scorn the “effete elites” who actually know what they’re doing.

Schadenfreude.

But then I think of all the people who will suffer needlessly thanks to this clown and his circus…

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