Friday, March 17, 2017

Trump Continues To Alienate Important Allies - The End Of The American Century?

I'm not sure Jared Kushner is getting the job done as the de-facto manager of foreign relations for the Trump administration. And it is increasingly looking like he and his father-in-law will preside over the period that will be defined as the "end of the American Century".

In Asia, Trump's weak response to China's aggression, his complete back-down on challenging the "one-China" policy, and his weak and muddled response to the North Korean missile launches have created real concern amongst our allies, none more so than Australia. From his disastrous initial phone call with Turnbull to the rejection of TPP to the campaign rhetoric about letting Japan and South Korea become nuclear powers, all have made Australians question American leadership.

Those questions only got deeper when Stephen FitzGerald, Australia’s first ambassador to China and respected foreign policy hand, openly stated that Australia needed to realign itself with China and added a scathing indictment of the Trump administration. Said Fitzgerald, "Trump has not only debauched the American system and practice of government, compromised America's security, and destabilized international politics. For Australia...Trump's ascension has laid bare the danger of our dependence, our unquestioning involvement with America's foreign contests and wars, and our delusion that our interests and America's are the same, or that the US cares about ours. And if you didn't already question aspects of the indiscriminate claims of shared values with the US - for example, America's gun culture, religion in politics, or plutocratic government - the values that Trump brings to the presidency, including his assault on the values we do share, and the ideas of truth, fact and integrity in public life, are an affront to our and should be called out for what they are."

But the main thesis of FitzGerald's talk was simply "We are living in a Chinese world. But we don’t have a relationship to match it." FitzGerald is under no illusions about the nature of the Chinese government and realizes its desires to expand its influence in Asia. But he argues that now is the time for Australia to recognize Chinese leadership in Asia and begin a constructive and deep engagement with China.  There are other in Australian foreign policy circles who will disagree with Fitzgerald and believe that the US remains an important counterweight to Chinese influence. But FitzGerald is highly respected in Australia and his words show just how much Trump has rattled important allies. Who would have believed we would hear an Australian say the words "we are living in a Chinese world."

Secretary of State Tillerson's visit to Asia also did nothing to soothe the Australians. I would assume they would consider the fact that he neglected to even make a quick stop-over in Canberra as another slap in the face from Trump. And his saber-rattling and refusal to even consider negotiations with the North Koreans will further trouble the Aussies, driving them ever closer to the Chinese.

Meanwhile, Trump is also antagonizing our other long-standing ally, Britain. In yesterday's press conference, Sean Spicer cited Fox News contributor Andrew Napolitano stating that Obama had asked the UK's intelligence service to spy on Donald Trump. This was apparently "proof" that supported Trump's claim that Obama had "wiretapped" Trump Tower, a claim that has been thoroughly debunked by every intelligence source and investigation. Needless to say, the UK did not like getting dragged into Trump's domestic political disputes, especially when the claim is false. The UK intelligence agency, in a rare move, immediately put out a strong statement denying Trump's claim and UK politicians immediately demanded an apology from the Trump administration. The administration's initial response was to assure the UK that this would not happen again and was merely a repetition of a news report and not an endorsement of the report, despite it being read by the President's press secretary. That is hardly an apology and will probably continue to infuriate the Brits.

Worse, Trump himself refused to apologize for the UK story in his frosty press conference with Angela Merkel, saying the administration did nothing wrong by regurgitating with a White House imprimatur an unsourced and undocumented comment from a Fox News pundit and further annoying the Brits. In addition, he tried to bring Germany into his conspiracy theory by saying that he and Merkel had something in common, having both been bugged by the Obama administration. Merkel was not amused. Trump once again accused European countries of not "paying their fair share" to the US to defend Europe. While it is true that under 1/4th of NATO countries fulfill their commitment to spend 2% on their military, in no way is any money owed to the US. Trump just enhances his reputation for ignorance and unreliability with our allies when he continually repeats this claim. It's no wonder that Germans' trust in America has fallen from 60% just prior to the November election to just 22% today and now stands virtually equal to Germans' trust of the Russians at 21%.

Unnecessary tempests like this will only make our allies in the UK and in Europe continue to question the leadership of the United States, just as they are currently doing in Australia. And the more questioning that goes on, the more likely those allies are to begin to look elsewhere for leadership. And once those bonds are broken, they may never be put back together. In Europe and in Asia, in just two months, Trump is managing to fray the alliances that were the backbone of the "American century" of American foreign policy dominance and leadership of the free world. Whether you think the US needs to continue to be the world's policeman or not, backing away from that role and leaving a leadership vacuum will only make the world a more dangerous place not only for our allies around the world but for the US itself.

Trumpcare And Budget Are Ready Made Ads For Democrats; Use Them Now

The Trump budget is an horrific proposal and there are plenty of experts who have spent the last day documenting the atrocities in it. As Stan Collender says, "This is not a budget. It's a Trump campaign press release masquerading as a government document". I'm sure we will be hearing that line about Trump proposals many times during his presidency. But, more than anything, this should become a campaign document for Democrats. This budget is never going to become law, although I'm sure some of its horrible ideas will eventually become part of whatever budget Republicans in Congress can come up with. But Democrats should pin every horrible proposal in this budget on Republicans starting now. Between Trumpcare and the Trump budget, Democrats can start building a narrative now that will pay off in the 2018 elections.

The real reason this budget is dead on arrival is the sequestration deal that both parties agreed to in 2010 as part of a debt ceiling deal that would force a budget deal that would reduce the deficit. Sequestration involved deep cuts to both defense and non-defense spending equally. Both sides hated sequestration - Republicans hated the cuts to defense and Democrats hated the cuts to non-defense spending. But that was the point. The idea was that both sides would come to a better agreement on a budget before sequestration kicked in. They didn't, primarily because Republicans were happy to see federal spending cut even if meant a decrease in defense spending. In addition, the cuts in non-defense spending hurt Obama and slowed down the economic recovery from the Great Depression. So we are left with sequestration, which is the law of the land until 2021. And part of sequestration is that it creates budget caps and does not allow movement between defense and non-defense spending. In addition, any change to the caps or movement between defense and non-defense spending must be approved with 60 votes in the Senate. The Trump budget essentially keeps the total sequestration budget cap in place but moves funding from non-defense to defense, a violation of the sequestration law. The only way to get around that is with 60 votes in the Senate and there is no way any Democrat is going to sign on to a bill that guts as many domestic programs as this one. So this budget will never become law.

But that doesn't mean that Democrats should not be exploiting this budget's viciousness and heartlessness. Combined with Trumpcare, this budget reflects the Republican vision of our government. The ads simply write themselves. Republicans want to deny 24 million Americans health insurance and openly admit that "insurance really isn't the goal" of Trumpcare. Republicans don't believe that Meals on Wheels or Head Start or school lunch programs "are effective" and simply eliminate those programs. Tell coal miners in Kentucky and Pennsylvania that Republicans want to rip away their new-found healthcare, make it easier for mining companies to kill them, and defund the Appalachian Regional Commission. Tell those rural voters in Michigan and Wisconsin that Republicans want to rip away their new-found healthcare and defund the Great Lakes Restoration Project. It doesn't matter if none of these things actually become law. It does matter that these are the opening moves by Republicans as soon as they have total power. It does matter to create the narrative about the Republican party working against the interests of the people who put them in power. Even Trump himself, who never admits to anything, agrees that Trumpcare will hurt his voters.

Now is the time to start the narrative for the 2018 elections. Democrats and associated PACs should start running advertisements now in competitive House districts using the Republicans own words against them. Framing the narrative now will put even more pressure on vulnerable House Republicans, creating more fissures in the GOP majority. And it will also set up the follow-up narrative describing Republicans and Trump as weak and ineffective for not getting anything done. Get to work, Tom Perez.

Thursday, March 16, 2017

Trump May Have Already Lost Republicans In Congress

We are less than two months into the Trump presidency and it looks like he may have already lost the Republican Congress. The buildup of the Russian connections, the evidence-free accusation that Obama wiretapped him, the collapse of Trumpcare under the weight of the horrendous CBO score, and now a budget that is full of attack ad fodder for Democrats may have finally stiffened the back of Republicans in Congress.

This was supposed to be the wonderful honeymoon period for Republicans where they would pass all those things they'd been promising forever and ride the wave of Trump's popularity. Instead, the actual process of governing, especially with an ignorant, erratic, and unengaged President, is only creating more and more bad press for the GOP and threatens to unravel their majority.

Yesterday, Chuck Grassley, the chairman of the Senate Judiciary Committee, said that he will refuse to move ahead on any more confirmation votes until committee gets full briefed by the administration on the Russian investigation. It is clear that the FBI is stonewalling the committee as Grassley complained, "He [FBI Director Comey] was supposed to get back to us and we still haven't heard anything". On Tuesday, Judiciary Committee member Lindsey Graham threated to subpoena Comey if he did not appear willingly. The obvious assumption should be that Comey's silence is based on instructions from the DOJ, led by Jeff Sessions, who was rather unclear about where his recusal from the Russian investigation began and ended.

Whether this is an indication that Republicans have a basis for believing there is no "smoking gun" out there that implicates the Trump campaign in colluding with the Russians or simply a desire to get everything out in the open and try to move on, whatever that may bring, is also unclear. But it is a sign that the GOP is no longer interested in taking the heat for this investigation that is really Trump's own doing.

At the same time, the GOP is also not interested in defending Trump's accusation that Obama wiretapped him. Yesterday, House Intelligence Committee Chairman David Nunes said he doesn't believe "there was an actual tap of Trump Tower" and later suggested that Trump's tweets should not be taken literally. However, Nunes said that other kinds of surveillance of Trump or Trump Tower may have occurred and should be investigated. Nunes was one of the first to announce that Trump's claim should be investigated, so this is a significant back down. Meanwhile, Trump continues to push forward with that claim, taking Nunes' approach that he meant surveillance more broadly when he said "wiretap". And, just a moment ago, a bipartisan statement from the Senate Intelligence Committee says definitively there was no wiretap or surveillance on Trump Tower.

To my mind, Trump's continual pursuit of this accusation without producing evidence, which, as President, he could easily do, indicates that there is some intelligence out there that does show collusion between the Trump administration and Russia. But that intelligence probably came from targeting a Russian and conversations by a US citizen captured in that monitoring are not allowed to be presented as "evidence" without obtaining a warrant. In any case, it is another example of GOP members becoming less willing to be Trump's defenders.

Trumpcare, supposedly being shepherded through the House by Paul Ryan, has turned into a disaster with the revelation of the CBO score. Ryan's plan to rush this bill through the House before the CBO score has backfired badly. Now, in order to get this through the House, Ryan will have to appease the Freedom Caucus which is looking for something far closer to outright repeal. Moving the bill in that direction will alienate House moderates and make it impossible to get it through the Senate. As it comes more and more clear that the bill will never pass the Senate, it becomes less and less likely that House GOP members will vote for a bill that even Trump concedes will largely hurt the GOP base, especially when they know it will never become law.

Trump did the GOP no favors by holding two campaign rallies yesterday where he barely mentioned Trumpcare. Later, in a Fox interview, Trump said "I'm not signing anything" if the bill doesn't meet his standards and admitted that the bill in its present form will actually hurt many of the people who voted for him. That's not going to reassure GOP House members who will be required to take the first vote on this plan. It is becoming quite likely, if not probable, that this bill may never make it out of the House and will certainly never make it through the Senate in anything like its present form.

Today, the Trump administration released its budget proposal, again without any consultation with Congress and apparently based mostly on Trump's campaign promises and tweets. This budget is dead on arrival and has even managed to anger Republicans in Congress. It is a wet dream for Mick Mulvaney and Steve Bannon but it is just that, a dream. No member of Congress is going to vote to eliminate Meals on Wheels for the elderly. McCain and Graham will never vote for 30% cut in the State Department, even with the increased military budget. Trump is not going to get Joe Manchin to vote for a budget that eliminates the Appalachian Regional Commission. Who is going to vote for cutting the National Institutes of Health, which is responsible for cancer research and basic research for new pharmaceuticals? The budget even includes funding for the border wall that apparently we are going to pay for and Mexico is not. It cuts funding for Amtrak service and airline flights for rural areas. That should go down well in counties that rely on these services and voted for Trump. And there are probably a hundred more items I could point to that would create problems for the GOP in this budget.

As Kevin Drum notes, this is not a serious budget proposal but simply another campaign document meant to appeal to Trump's base. The problem is that is also full of campaign materials for Democrats. But an additional problem created by it not being a serious document is that it now puts all the responsibility on Republicans in Congress for coming up with a budget apparently on their own. That has proved difficult to do. Remember, last year, despite also having control of both the House and the Senate, Republicans were unable to even produce a budget. Paul Ryan could not even get one out of the House and over to the Senate. If the Trumpcare bill collapses, it is going to be even more difficult to bring the warring factions with the GOP together to come up with a budget.

Lastly, Trump's Muslim ban 2.0 was also struck down by a federal court yesterday. Again, this may make great PR that appeals to Trump's base, but it just weakens Trump even more.

Trump's erratic behavior, policy ignorance, and unwillingness to get his hands dirty in the details of governing have Republicans in Congress incredibly wary. They have no interest in taking the hard votes when they have no assurance that Trump himself will not only not give them cover but also might actually totally flip-flop on the issue if that seems the more popular position. With the divisions inside the Republican caucus already quite deep, an unengaged and erratic President will not make moving difficult legislation forward any easier.


GOP Talks About Lowering Health Care Costs, But Doesn't Really Mean It

The Republicans continually rant and rave about bringing down the cost health care. Of course, their answer is, as always, "more competition", as they do everything in the power to gut Medicaid and cut Medicare.

Kevin Drum has a nice little graph that shows the rate of health care spending among the three major health delivery systems:


If the GOP were really concerned about reducing the cost of healthcare in the United States, they would be pushing people into Medicaid and Medicare. Instead they are much more interested in taking care of their business cronies and give massive tax cuts to the rich.

Studies Find Lower Inflation Rate For High Incomes, With Implications For Public Policy

There is a fascinating story over on EquitableGrowth about two new studies that show another negative side-effect of massive income inequality. The reports show that the basket of goods that high income earners purchase is substantially different from those of low income earners. But the really shocking finding is that the inflation rate on those high income goods is 0.65% lower than the goods that lower income earners purchase. A difference in inflation that great is astounding and has broad implications for public policy.

Two studies, one by the National Bureau of Economic Research and the other from Stanford University, support this finding. In essence, the driver of these two inflation rates is that higher income people buy higher quality goods from large brand name firms. Because of their economies of scale, these large brand name firms can innovate their products more cheaply than the smaller firms whose products are more generally bought by lower income earners. This results in lower comparative prices. In addition, global trade again favors the large firms and again allows them to offer these high end products more cheaply.

If these studies are true, then income inequality is in a (un)virtuous circle. The higher inflation rate for lower earners exacerbates income inequality which then makes large firms focus on even more innovative, cheaper products for higher earners feeding a further lower inflation rate for high earners and on and on. This process is exacerbated by the expansion in global trade, which again favors the larger firms over smaller ones. In addition, if the higher inflation rate for lower earners actually exceeds the inflation benchmark Consumer Price Index, then lower income earners are falling even farther behind as are the beneficiaries of social programs keyed to that benchmark.

It is yet another example of how the economic policies of the last 30 years have essentially created a two-tier economy. And the gap between those tiers is getting wider and wider. And it will only get worse under the Trump administration.

Conservatives In US And UK Risk All By Making Policy Without Knowing Impacts

I hope we can all admit that conservatism, despite its lip service to the contrary, now has absolutely no interest in dealing with facts or analysis about the programs they wish to introduce. In the US, the point of conservatives these days is to simply grant major tax cuts to the wealthy by whatever means possible. In the UK, Theresa May insists on moving ahead with a hard Brexit despite the apparent dangers to the UK economy and the existing union. And one thing they both have in common is a lack of interest in analyzing the effects of those positions.

Paul Ryan rammed Trumpcare through two committees in the House before he had a CBO score on the bill. This was absolutely intentional, done in the hope of creating enough momentum that the CBO score could be ignored. That proved to be a potentially fatal tactic when the devastating CBO numbers came out. Now, in an act of ultimate hypocrisy, Ryan is claiming that the bill can now be tweaked in response to the CBO report.

In the UK, Theresa May has now gotten the parliamentary authority to invoke Article 50 and she intends to do so by the end of this month. But David Davis, the secretary for Brexit, admitted to the parliamentary committee overseeing the withdrawal from the EU that the government had performed no additional studies on the potential impact to the UK economy by withdrawing from the EU other than the ones performed before the Brexit vote was taken. Said Davis, "They made an estimate during the referendum campaign, but I think one of the issues that’s arisen is that those forecasts don’t appear to have exactly been very robust since then...Much of this is about mitigation. Any forecast that you make depends on the mitigation. As a result, it is rather otiose to do the forecast before you have concluded what mitigation is possible."

Admittedly, there are so many potential impacts to the UK economy from tariffs to border controls to agriculture that putting together an accurate forecast for an unknown final deal is impossible at this time. But it is possible to put together forecasts that look at the various contingencies of the individual pieces. Instead, according to Davis, "The simple truth is that you’ve got to do this in sequence. All of these things are being done piece by piece. When we have finished making the Lego blocks, we will build the house. And then we will have the forecast you are talking about." This is ridiculous because, in the end, Davis and May may very well end up in the same place as Paul Ryan, having negotiated a deal only to find out that the numbers will devastating.

In addition, Davis and other members of May's cabinet like Boris Johnson and Liam Fox are floating the idea that the UK could leave the EU without a Brexit deal at all. That is a plan that could be forecast right now but I'm sure the government will never do it because everyone suspects the numbers will be horrendous.

It's hard to know whether it is ideology or hubris that drives thinking like this. But putting forward policy without having a pretty good idea of how it will effect jobs, insurance, government finance, or the economy as a whole is a recipe for disaster. Incredibly, both the conservatives in the US and the UK seem to be willing to jump into the abyss without knowing what's down there.


Wednesday, March 15, 2017

Stopping Trumpcare Will Derail GOP Legislative Plans, Even Ryan Admits

Josh Marshall at TPM makes the important point that the next few weeks will be critical in deciding whether Republicans will be able to pass Trumpcare and now is the most important time for intense and relentless resistance to pressure your legislators. Despite the horrific CBO score, there is still enormous pressure on Republicans to still get Trumpcare passed and make good on their promise for the last seven years.

As Marshall notes, "Here's the key. No one wants to be the last one holding on for an unpopular or dead bill. The more electeds pull their support, the more perilous the situation gets for those holding on." It is like a wave that builds and as more and more GOP members of the House and Senate pull away from the bill, that wave gets bigger and the rest of Congress will not want to stand in the way. That's why now is the time for a full court press.

As I've written before, stopping Trumpcare will actual derail the rest of the GOP agenda. Paul Ryan said as much last week in his interview with Hugh Hewitt. According to Ryan, "Think of legislation as one train track with a bunch of trains on the track. If you don’t get these trains through the system, it slows everything else down. So if we didn’t get this done in time, according to our schedule — and we’re planning five weeks over this, this is a five week process of passing this bill, which is fairly lengthy. It slows absolutely everything down, pushes tax reform off past the summer."

More importantly than pushing tax reform back on the calendar, not being able to pass Trumpcare throws a spanner into the whole process of tax reform. That's because the current GOP plan for tax reform relies on already having been able to implement cut of $1.2 billion from federal revenues. That $1.2 billion reduction in revenue comes from Trumpcare, repealing the taxes that fund the ACA and defunding Medicaid by over $800 million. Now the new baseline revenue number for tax reform is $1.2 billion lower than it would have been, with the added bonus that the top 1% also already received a $600 million tax break. From there, Republicans plan to use tax reform to cut taxes by another $1.8 billion. But, under Senate rules, any new tax cuts cannot add to the deficit in 10 years. Republicans could possibly close enough tax loopholes and use dynamic scoring to actually make that $1.8 billion cut work. It's true that nothing would stop the GOP from pursuing the $1.8 billion cut on its own without the lower baseline or simply use the same tactics as the Bush tax cuts by letting them sunset after 10 years. And, with the real divisions in the Republican party, that may be all they can do with tax reform. But, currently, the entire GOP plan relies on that lower baseline revenue number achieved by passing Trumpcare.

In addition, not being able to pass Trumpcare will weaken two GOP leaders. Paul Ryan will be under sever pressure if he can not pass this bill even through the House and the knives will be out for his Speakership. Trump will also be severely weakened and that will make it more likely that Republicans in Congress will finally stand up to him on Russia and corruption.

Now is the time for intense and relentless resistance. Stopping Trumpcare will derail the GOP legislative plans for this year and weaken two of the three most important Republican leaders.


Emails Indicate Monsanto Wrote The "Independent" Academic Research On Roundup

The New York Times has a story today on one of my most despised products, Roundup, made by Monsanto. Roundup is the most widely used weed killer in the world and Monsanto has spent a great deal of effort genetically modifying crops to be resistant to the weed killer. It was a win-win for Monsanto as farmers bought Monsanto seeds in order to use Monsanto weed killer.

Roundup, which goes by the chemical name of glyphosate, has always been surrounded by a suspicion that it is a carcinogen. I remember, years ago, my doctor railed against Roundup, describing its chemical composition as being almost exactly like formaldehyde which is a known and recognized carcinogen. The idea of spraying the food that we eat with this stuff was insanity and it is.

Finally, in 2015, the International Agency for Research on Cancer (IARC), part of the World Health Organization, determined that Roundup was indeed a carcinogen linked to non-Hodgkin's lymphoma. That finding prompted lawsuits from people who had developed that disease and the court case ins currently ongoing.

Monsanto was tipped off to the fact that the IARC was going to determine Roundup a carcinogen by a friendly partner in the EPA. With that advance knowledge, the company brought the full force of its PR machine against that finding. Internal emails produced during discovery prompted by the litigation showed that Monsanto's man in the EPA, Jess Rowland, was also working to ensure the EPA would no reach a similar conclusion as the IARC as well as to kill another investigation by the Department of Health and Human Services. Rowland was a senior member of the EPA's Office of Pesticide Programs, whose work was deemed as lacking robustness and criticizing its assessments on human health by another department in the agency. Those internal emails also hint that Rowland's motivation to work with Monsanto was to get hired by Monsanto after he retired.

Another revelation from the discovery phase of the litigation was more email traffic suggesting that Monsanto wrote research reports on Roundup that were then given to scientist to publish as academic research. One Monsanto executive wrote, "We would be keeping the cost down by us doing the writing and they would just edit & sign their names so to speak". He indicated that this had been done before at Monsanto.

Meanwhile, the damage that Roundup continues to inflict continues. Roundup Ready, in other words resistant, crops first appeared in 1996. But barely 20 years later, Roundup resistant weeds have already started to appear. Right now, that is actually a benefit for Monsanto because these weeds can be killed by applying even higher doses of the herbicide. The Department of Agriculture has determined that the appearance of the resistant weeds has resulted in an additional 383 million pounds of Roundup being sold. But that strategy of increasing doses can only last so long. In the meantime, we continue to bombard the food we eat with a known carcinogen. And Monsanto and its paid cronies continue to deny, deny, deny.

Snow Days









Tuesday, March 14, 2017

More Misogyny In The Boardroom

While we are on the subject of gender discrimination in business, let's listen to the John Allan, chairman of that British supermarket chain, Tesco. According to Allan, "For a thousand years men have got most of these jobs. The pendulum has swung very significantly the other way and will do for the foreseeable future. If you are a white male, tough. You are an endangered species and you are going to have to work twice as hard. If you are female and from an ethnic background and preferably both, then you are in an extremely propitious period."

Allan has tried to back away from the comments, saying, "It was intended to be humorous, a bit hyperbolic. The context was that I was talking to a bunch of aspiring non-executive directors, many of whom were women, and I wanted to give them some encouragement and, therefore, I used that rather colourful turn of speech. And the audience, I think, was quite amused and quite enjoyed it." I'm sure they did.

Tesco's 12 member board is all white and, although it has three women, none are full-time female executives.


Gender Bias In The Financial Industry Comes From The Top

Kevin Drum highlights a research paper from the National Bureau of Economic Research which clearly shows how women are discriminated against in the financial industry. Whether they engage in misconduct or not, women are much more likely than men to be fired and find it harder to find a job afterward.

According to the report, "While male advisers are more than two times as likely to engage in misconduct, female advisers are 20% more likely to be fired for engaging in misconduct. Female advisers are also 30% less likely to find new employment and face longer unemployment spells as a result of misconduct". Not only are men twice as likely to commit misconduct, they are also twice as likely to be repeat offenders and their misconduct is usually far costlier than women.

But even women who engage in no misconduct have a shorter life span at an individual firm than men. Drum kindly provides us with this graph to illustrate.


Interestingly, women are far more likely to be accused of misconduct by their own firm. Again, according to the report, "For male advisers, 55% of misconduct complaints are initiated by customers, and 28% by their employers. For female advisers, employer-initiated instances of misconduct are almost as frequent as those initiated by consumers, 41% versus 44%. These results suggest that employers may be the primary source of gender discrimination, and are consistent with the recent survey evidence which suggests that a large majority of women believe there is gender discrimination within firms".

The report concludes that this gender bias comes from the top in these financial firms. According to the NBER, "Female advisers at firms with no female representation at the executive/ownership level are 42% more likely to experience job separation than male advisers at the same branch following an incidence of misconduct. On the other hand, firms with equal representation of male and female executives/owners discipline male and female advisers at similar rates. We find similar differences between these firms when it comes to hiring advisers with misconduct records."

I would also venture to guess, although the NBER does not confirm, that when men engage in misconduct it is viewed by management as being in the pursuit of higher productivity or more assets under management for the firm. For the company, male misconduct is almost indicative of an aggressive, productive employee, which is why it is tolerated. Since women are just as likely to be charged with misconduct by the firm as opposed to a client, it is probably a sign that the firm is trying to "get rid" of them as they are not "productive". In other words, women are too ethical for the financial industry.

And one final note. Looking at this report, can you doubt that misogyny was a real factor in last year's election?

Xenophobic Nationalist Wilders Slumps In Last Poll Before Netherlands Election

The next big test of the strength of far right nationalism seemingly sweeping the world will be in Netherlands tomorrow. There Geert Wilders, a racist and the leader of the far right nationalist Freedom Party, has been ahead in the polls in the lead-up to the election tomorrow.

But the last polls just came out and Wilders has relinquished his lead to the current Prime Minister Mark Rutte. Wilders and Rutte faced off in a debate on Monday night amid a diplomatic firestorm over a dispute with Turkey. That dispute revolved around the refusal of the Dutch government to let Turkish ministers into the Netherlands in order to campaign to give Turkish President Erdogan more power. Turks living in the Netherlands are eligible to vote in that Turkish referendum. Rutte's government refused the ministers' entry due to security concerns, as a large rally of Turks inside Netherlands would play into the hands of Wilders and the Freedom party.

But Rutte seems to have won the debate handily with snap polls showing that even 59% of Freedom Prty members conceding he outperformed Wilders. The poll shows that the Freedom Party will now win only 16 seats in the 150 member parliament, down from a projected high of 33 seats in December. Rutte's Liberal party is now expected to win 30 seats. Obviously, any government formed will have to be a coalition government but the party with the most seats will have the first opportunity to form that governing coalition.

This is just one poll but it is the last one before the election and it confirms that Rutte has been gaining strength as election day nears. A defeat of Wilders would potentially be a firewall holding back the rage of xenophobic nationalism that has swept Europe and the globe. Combined with Le Pen's poor polling in a potential French runoff and the failure of AfD to gain much traction in Germany, it could signal a return to sanity.

I'm purely speculating here but I do believe that Donald Trump's shocking win here in the US and his willingness and even eagerness to abandon the Western alliance, including NATO and EU, along with his general incompetence has made some Europeans realize that these votes for far right nationalists are more serious than just a protest vote against the establishment and that there is more to governing than slogans that blame immigrants and foreigners for the current economic woes. Trump has, in effect, woken Europe up.

Let's hope I am right - we will find out tomorrow.

The CBO Score Of Trumpcare By The (Grim) Numbers

The CBO report on Trumpcare came out late yesterday and the numbers are even worse than most imagined. Early estimates would be that between 10 and 20 million of current holders would lose their insurance but the CBO numbers are almost double those estimates. In addition, the savings to the federal budget come to just 0.2% of GDP, not even making a dent in the federal deficit and merely shifting most of the costs of those savings and more onto the states. Here are the numbers:
  • 24 million more people will be uninsured by 2026
  • 21 million more uninsured by 2020
  • 14 million people would lose their insurance NEXT YEAR, in 2018!
  • In 2026, 52 million will be uninsured compared with 28 million under the ACA
  • The 24 million newly uninsured in 2026 breaks down like this: 14 million currently on Medicaid, 3 million in the individual markets, and 7 million IN EMPLOYER BASED INSURANCE!
  • Premiums will rise 15% to 20% higher than under ACA until 2020. After 2020, as more and more older and sicker individuals are forced to leave the markets, premiums will rise at a lower pace than under the ACA resulting in premiums 10% lower than current law 2026.
  • In general, if you are younger and healthier your costs may drop slightly compared to the ACA; if you are older and sicker, your costs will skyrocket. A 64 year old man making $26,500 per year will see his purchase costs to buy a plan increase to $14,600, over half of his income and nearly $13,000 more than under the ACA, and that does not include any deductibles and copays.
  • Deductibles and co-pays will rise as compared to the ACA
  • Cost savings to the federal budget will be a paltry $337 billion over 10 years, or just $34 billion per year. As a frame of reference, the annual deficit for 2016 was $587 billion and projected GDP in 2026 will be nearly $28 trillion.
  • There will be $337 billion in savings to the federal budget and it breaks down like this: $935 billion in cost savings, $880 billion of which comes from cuts in Medicaid. But almost $600 billion of that savings goes toward tax cuts primarily skewed toward the wealthy.
  • The $880 billion in Medicaid savings are for the federal budget only. That difference will have to be made up by the individual states who will have to decide whether to pick up those costs or simply reduce coverage or  reduce the number of people covered.
Here is a chart from Kieran Healy that compares the net premiums for different age groups and income levels under the ACA and Trumpcare:


The chart makes clear that if you are younger and/or richer, Trumpcare will actually be better for you. If not, you will be far worse off. And it is important to remember that Trumpcare will provide policies with fewer benefits, so an older person will be paying far more for less coverage. In addition, the Wall Street Journal provides this chart which shows that rural areas will also be hit much harder by Trumpcare.

Older, rural voters will bear the brunt of this plan which is highly ironic since those areas are the hardcore base of Trump's support.

Another item hidden in the CBO report also puts lie to the Republican claim that Obamacare is imploding. According to the CBO, "In CBO and JCT’s assessment, however, the nongroup market would probably be stable in most areas under either current law or the legislation." In other words, the individual market will be stable under the ACA and also even under Trumpcare.

One caveat to that claim is that Trumpcare increases the premium ratio of older to younger enrollees from 3:1 under the ACA to 5:1. That increase to the 5:1 ratio is what partly drives the enormously higher premium costs for older people. But a former parliamentarian in the Senate says the he doubts that raising the ratio will not be considered eligible for budget reconciliation. Now, the GOP has installed its own parliamentarian so it is not inconceivable that the former parliamentarian is wrong. But, if not, having to revert back to the 3:1 ration may threaten the stability of the individual market as insurance companies will not be collecting those higher premiums from older enrollees while the government support they received from the ACA will have been repealed.

The initial reaction from Republicans is to essentially deny reality. HHS Secretary Tom Price says that the CBO report is "just not believable" and insists that Trumpcare will actually increase the number of people covered. That statement is truly not believable. In fact, Politico reported last night that the executive branch's own estimate from the Office of Management and Budget showed that 26 million would lose insurance by 2026, 2 million more than the CBO.

Mark Mulvaney, the OMB chief, quite simply admits that insurance isn't really the point of Trumpcare, saying, "Insurance is not really the end goal here". He was unintentionally being honest as the real purpose is to defund Medicaid and pass the massive savings on to the rich in the form of tax cuts.

Paul Ryan has basically taken the same stance as Mulvaney, that insurance really isn't even the purpose of the Trumpcare bill. The fact that there will be millions of people who will become uninsured and tens of thousands who will needlessly die is secondary to his overriding goal of actually defunding a federal entitlement program, in this case Medicaid, and passing these savings on to his rich overlords in the form of a massive tax cut. Tweeted Ryan, "CBO report confirms it → American Health Care Act will lower premiums & improve access to quality, affordable care." and he later said that the CBO report was "encouraging". As described above, the reason premiums actual decline compared to the ACA is because his plan essentially throws older and sicker people off insurance making the remaining pool healthier and cheaper. Ryan was more explicit and excited about defunding Medicaid when he said "This is why I'm so excited..We are defederalizing an entitlement, block granting it back to the states, and capping its growth rate. That's never been done before." He earlier virtually admitted that coverage wasn't the issue saying, "We always know, you’re never going to win a coverage beauty contest when it’s free market versus government mandates." There is a real irony in Ryan's pride in capping the growth rate in Medicaid after years of complaining that "government run health care means healthcare will be rationed". By definition, capping Medicaid's growth rate will mean rationing.

Medicaid is designed to protect the health of children, the disabled, and the elderly who can either not afford health care or are indigent and need long-term care. For Ryan and the GOP, killing tens of thousands of these less politically powerful people is the price that must be paid in order to take the money from Medicaid and pass it on to the richest 1%. And it will all go to the 1%. Individuals in the top 0.1% would receive a tax cut of $200,000 per year and those in the top 1% would "only" receive $195,000 per year.

This CBO report would be a crippling blow for any other bill in any other time. And it may yet be the death knell for Trumpcare. But the GOP is currently so ideological and so protected in its electoral position, they may simply continue to try and ram it through. The days ahead will be provide some interesting moments for some Republicans in the House and the Senate.


Monday, March 13, 2017

CBO Score Demolishes Trumpcare

The CBO estimate for Trumpcare has just come out and the numbers are devastating. By 2026, over 24 million people will have lost health insurance. In 2018, before many of the provisions have already kicked in under Trumpcare, 14 million will have lost health insurance. Premiums will rise by 15% to 20%. In addition, the total savings to the federal budget from this plan are a paltry $337 billion over 10 years. That is peanuts when you think that last year's deficit alone was $587 billion. This plan would save a measly $30 billion per year while throwing 24 million of the insurance rolls. It is hard to see how Republicans can weather the storm that these numbers will create. The number of uninsured in 2018 is especially striking because every GOP House member who votes for this plan is, of course, up for re-election next year. That number alone makes the chances of Ryan being able to ram this bill through the House even more difficult. And if he can't even get that job done, his days as Speaker may well be numbered. Ryan has doubled down, tweeting this statement which is a blatant lie about what the CBO report says, "CBO report confirms it → American Health Care Act will lower premiums & improve access to quality, affordable care". It does no such thing. More on this tomorrow....

The Continuing Myth About The ACA And The Heritage Plan

It takes courage, humility, and honor to admit when you've made a mistake. That's why you've never seen me do it on this blog. But I have to admit, I have been absolutely wrong about the Affordable Care Act. For years, I have believed that the Democrats essentially took a Heritage Foundation proposal that Republicans put forward back in the 1990s to stop Bill and Hillary Clinton's health care plan but had no interest in actually implementing and turned that very plan into the ACA. In some ways that it is true but in more ways it is false. Scott Lemieux over at Lawyers, Guns, and Money shows me the error of my ways.

The Republican plan, known as the Heritage plan because it originated at the conservative Heritage Foundation, has long been assumed as the template for Romneycare in Massachusetts and the Affordable Care Act. But the Heritage plan was actually nothing like those plans and was not really involved in stopping Clinton's health care initiative. Instead, it was a bill that was introduced by Republican John Chaffee and had some moderate GOP support during Clinton's effort that has the greatest resemblance to the ACA. The Chaffee plan had an individual mandate, standardized benefits, vouchers for poorer people to purchase insurance, and the ban on denying coverage for pre-existing conditions. That is remarkably similar to the principles of Obamacare.

But the Chaffee plan was not the Heritage plan and was nothing like it. The Heritage plan basically took form in the late 1980s and its purpose was not to really provide health care but to dismantle Medicare and Medicaid and to replace all insurance coverage, include employer based, with skimpy, and probably expensive, catastrophic plans. The only principle the Heritage plan has in common with the ACA is, ironically, the individual mandate that everyone carry health insurance. Even that conservative principle has fallen victim to Paul Ryan's vision of "freedom".

The differences between the two plans are stark. Lemieux has provided a nice visual to highlight those variances.


As you can see, the Heritage plan originally was designed to turn Medicare, not Medicaid, into a voucher system that would probably restrict coverage and not keep up with the rate of medical inflation. It gutted Medicaid, eliminated regulation of insurers, and provided minimal actual insurance protection. Even worse, the plan originally intended to roll back the tax incentives for employer provided insurance, essentially forcing everyone to buy their own insurance. It's main purpose was to gut the two big entitlements of Medicare and Medicaid and relieve employers of the responsibility of picking up health insurance for their employees. None of this resembles the ACA in any way and much of it was even too extreme to become part of Trumpcare.

It is understandable that Democrats wanted to feed the myth that the ACA was actually based on a Republican plan that the GOP only offered as an alternative but had no real interest in implementing. It made for a good sound bite and good politics. And it is actually partly true. But the Republican plan the Democrats were really implementing was based on the Chaffee plan and had nothing to do with the plan put forward by the Heritage Foundation. So I stand corrected.

Sturgeon Puts May On Hot Seat With Demand For New Scottish Referendum

Nicola Sturgeon, the First Minister of Scotland, has thrown another spanner in the works as Theresa May tries to ram through a "hard" Brexit from the European Union. Essentially Sturgeon is demanding another Scottish referendum on independence once the terms of May's Brexit deal become known but before they are finalized into law.

In a statement today, Sturgeon said, "If Scotland is to have a real choice - when the terms of Brexit are known but before it is too late to choose our own course - then that choice must be offered between the autumn of next year, 2018, and the spring of 2019." Scotland voted to remain in the EU in the Brexit vote and May's hardline stance threatening the UK's access to Europe's single market could be devastating for the Scottish economy. According to Sturgeon, "If the UK leaves the EU without Scotland indicating beforehand - or at least within a short time after it - that we want a different relationship with Europe, we could face a lengthy period not just outside the EU but also the single market."

The decision whether to hold another independence referendum actually depends entirely on the UK Parliament in London, which is dominated by the Conservative government. Allowing the vote to go forward will create even more chaos and confusion to the whole Brexit negotiation and execution. As May observes, "Another referendum would be divisive and cause huge economic uncertainty at the worst possible time." Indeed it would. But not allowing another independence referendum could create a constitutional crisis that might spill over to Northern Ireland as well and May can not afford that either as she negotiates with Europe.

May is essentially left with only bad options - allow the vote and live with the chaos, ignore Sturgeon's call for the referendum and risk a constitutional crisis, or somehow bring Sturgeon into the Brexit negotiations and hope there will be some compromise position they can agree on. The first two are unpalatable and May has seemingly ruled out the third in pursuit of a hard exit.

The Conservatives political opportunism is finally catching up to them. Cameron's promise of the first Scottish independence referendum basically destroyed the Labor party in their base of Scotland as the party sided with Scotland remaining in the UK and helped create the Scottish Nationalist Party (SNP). That move essentially destroyed the Labor party as an effective opposition in the UK Parliament. And Cameron's promise of the Brexit referendum was intended to protect Conservatives from the threat of UKIP and silence the Tory economic nationalists and racists in Parliament. That gamble went horribly wrong and Theresa May is living with the consequences. The result down the road may very well end up with the Tories and the UKIP nationalists fighting over control of a shrinking country comprised of just England and Wales.

Trump, Kushner Selling Out US Interests In Asia To China For Personal Gain

In the wake of this Bloomberg story about how the Kushners will make a $400 million payday by selling their stake in the troubled 666 5th Avenue office building to a government-connected Chinese group, it is worth asking the question of whether the Trump administration is essentially ceding all influence in Asia to the Chinese for a vast personal bribe.

The transaction will be between the Kushner Companies and the Chinese firm Anbang whose ties to the Chinese government made President Obama stop using the Waldorf Astoria as the hotel of choice when visiting New York, primarily out of fear of espionage. The deal would value the office building at over $4 billion, the highest valuation ever for a New York City office building. In addition, to the $400 million payment from the Chinese, the Kushner Cos. would also receive another $100 million from other investors. Anbang will convert the upper floors of the office tower into luxury condominiums while the Kushners have agreed to invest $750 million into retail space in the building in return for a 20% stake in the venture. That 20% stake could be worth close to $1.5 billion. It's a pretty nice deal to get paid $500 million, then asked to put up another $250 million, and get a stake in a venture worth $1.5 billion.

But it gets even better than that. In what appears to be an additional sweetheart deal, the Kushners will also be able to have $250 million debt retired for just $50 million. The entire project relies on $850 million in funding made possible by another government program, EB-5, that has been thoroughly abused by big moneyed interests over the years without any oversight or restrictions. According to Bloomberg, the EB-5 program "grants two year visas and a path to permanent residency to foreigners who invest over $500,000 in economically distressed areas". Nothing says a distressed area like 5th Avenue in New York City.

Donald Trump spent his entire campaign railing against China, charging currency manipulation and threatening massive tariffs against Chinese imported goods. Soon after he was inaugurated, he even challenged the "one China" policy that tacitly assumes that Taiwan is part of China and proclaimed he would stand up the Chinese military buildup in the South China Sea.

But all that bluster has given way to virtually no action. Trump withdrew from TPP handing economic power in Asia over to the Chinese. He accepted the "one China" policy. He alienated our Australian allies. His response to the North Korean missile tests has been enormously weak, even considering the limited options available to the US. The labeling of China as a currency manipulator has not occurred and there has been no progress on the promised tariffs, as the administration itself is engaged in a civil war between the economic nationalists and the Wall Street crowd on that issue. And Jared Kushner, while having no formal role that requires Congressional approval or the requirement to divest himself of his economic interests, has essentially become the de-facto Secretary of State.

In return, the Trump Organization received a host of lucrative trademarks from the Chinese government last week that will allow the company to develop a variety of branded product opportunities in that country. An intellectual property consultant based in Hong Kong has never seen anything like it, saying, "For all these marks to sail through so quickly and cleanly, with no similar marks, no identical marks, no issues with specifications – boy, it’s weird." And now the Kushners receive a sweetheart deal on a troubled property in New York from Chinese interests, a deal one NYC real estate observer called "a home run of a transaction for Kushner and his group". Next month, Trump will again be profiting from the Chinese government when he hosts President Xi Jinping at Mar-a-Lago. I wonder what other bribes the Chinese have to offer then.

During the campaign, there were rumors, perhaps supported by statements from those connected to Trump, that the focus on Trump's ties to Russia were actually helpful because they distracted the press away from his deep financial ties to China. Well those ties are clearly exposed now.

In light of all these transactions, it seems pretty reasonable to believe that Trump and Kushner are selling out US interests in Asia to the Chinese for personal profit. Is anyone in the Republican party going to stand up to him?


Cotton's "Warning" To House Re ACA Sounds More Like A Plea

Tom Cotton's warning to his Republican counterparts in the House regarding repealing Obamacare sounds to me less like a warning and more like a plea not to make swing Senate Republicans responsible for the failure of the bill to pass.

In an interview on Sunday, Cotton said, "I’m afraid that if they vote for this bill, they’re going to put the House majority at risk next year. So, I would say to my friends in the House of Representatives with whom I serve, do not walk the plank and vote for a bill that cannot pass the Senate and then have to face the consequences of that vote." Of course, Republicans have cast dozens of votes to repeal Obamacare ever since it went into effect and they have hardly had to "face the consequences". The people who would face consequences from their base on the hard right are Senators like Cotton if they do not go along with repeal. Of course, some of those Senators are smart enough to know that they will also face serious consequences if they vote for the devastating cuts in health insurance that this bill will create.

Paul Ryan has instigated a game of chicken with his own compatriots in the GOP. He stated that pretty clearly when he essentially dared Republicans to abandon their years of promises to repeal the ACA by voting against this bill. Ryan is essentially betting his job on this game of chicken because his days as Speaker may be numbered if he can't push this bill through the House. On the other hand, he could stave off a challenge to that position by ramming this bill through and letting it die in the Senate. He would have fulfilled his part of the bargain and the blame would fall squarely on the GOP Senate, especially those handful of Republican Senators who would vote against the bill. The real danger for all Americans, and to the Republican majority in the House is that every Republican will cave in to the game of chicken and this horrendous bill actually becomes law.




Sunday, March 12, 2017

Reasons Why Economic Conditions May Hurt Trump

There has been some concern that the Trump administration will benefit from the improved and improving economic conditions put in place under the Obama administration and finally bearing fruit these days. I wrote about this yesterday, especially commenting on the fact that in 2016 income growth in the bottom 30% was higher than the top 20% for the first time this century.

However, there is a strong counter-argument that the economy may well be a negative for Trump. We officially came out of the recession caused by the financial crisis in late 2009. Admittedly, recoveries from financial crises have historically taken far longer than recoveries from normal recession. But this recovery has now been running for over six years and the chances for a renewed slowdown are increasing by the day. In fact, the rising wages are an indication that we are getting close to full employment and faster Fed interest rate hikes will slow that wage growth and the economy down. The fact that we are near full employment alone suggests that job growth will begin to level off or decline.  In fact, this graph from Kevin Drum shows that the rate of job growth peaked in the middle of 2014 and has been declining since.


In addition, the US has a larger problem in that the working age population in this country has also peaked. Axios provided this graph showing the projected working age population including and excluding immigration.

As you can see, the working age population without immigration will actually decline by about 10 million without continued immigration. A declining working age population will result in lower GDP growth and lower business investment. If you want to see what a declining population will do to an economy, take a look at Japan. For the last two decades, Japan has been beset by anemic GDP growth and suffered through six recessions during that time. Most of that is explained by this one graph.

The working age population in Japan peaked in 1998 and has been declining ever since. That virtually corresponds to the two decades of stagnation that the Japanese economy has suffered.

This is why Trump's anti-immigrant stance and xenophobia is so counter-productive. Without immigration, the US economy will continue to shrink as GDP and business investment contracts. And Trump himself may well be the victim of that trend. Unfortunately, so will the rest of us.

GOP Plan For Trumpcare Is To Try To Ignore CBO Score

It looks the plan that Paul Ryan, in conjunction with the White House, is going to run with his plan to completely ignore the CBO score of Trumpcare/Ryancare that is expected to be released tomorrow. The Trump administration sent out its economic team to flood the Sunday talk shows and either trash the CBO or claim that its numbers are usually meaningless.

Mike Mulvany, the OMB director, came out and said that "estimating the impact of a bill of this size probably isn’t the best use of their [the CBO's] time." It is an interesting position to take considering that estimating the impact of Congressional proposals is pretty much the purpose of the CBO. At the same time, the statement itself is nonsensical. What Mulvaney is suggesting is that bills that might have a huge impact on the economy and the budget are not worth scoring. But, of course, it is far more important to score huge bills like this BECAUSE they can have such a huge impact on the economy and the budget.

Gary Cohn also said today that "In the past, the CBO score has been meaningless." Again, a remarkable position to take in light of what Republicans have demanded while Obama was President. And, as Krugman points out, the CBO's predictions about the impact of Obamacare have been pretty accurate, considering all the variables involved. CBO accurately predicted the decline in the uninsured and the premiums being charged in 2017 are in line with their projections as well, after overestimating those costs for the past two years. It has, on the other hand, overstated the costs of Obamacare by one-third, primarily because the ACA has reduced the rate of medical inflation more than predicted.

It is also quite possible that the Trump administration has a heads up about how bad the CBO score will be and this is a pre-emptive effort to limit that damage. A horrendous CBO score will certainly give those Republicans who want to retain Obamacare but need to fool their own constituents that they are on-board with repeal even more ammunition to scuttle the bill.

Considering the GOP demanded CBO scoring for not only the ACA but anything budget related that Obama wanted to do, it is a remarkable change in position. But it is yet more proof that GOP concerns about the deficit and the debt are just political posturing and nothing more. Democrats should remember that the next time they are in power.

Natural Weekends - Orchids

Thanks to the green thumb of my lovely wife, we have had orchids in full bloom for the last couple of months, a nice antidote to winter.






And even the geranium has bloomed too.