Saturday, August 5, 2017

Schumer Unveils Democratic Trade Policy Geared For 2018 Election

Chuck Schumer has laid out the Democratic approach to trade in the latest addition to the "Better Deal" plan being put together for the 2018 election. While the media reports describe the approach as being very similar to Trump's, I don't think that is entirely accurate. Although there is clearly an emphasis on protecting American workers, the trade plan outlined by Schumer does not involve tariffs or trade wars that Trump favors. Instead the plan focuses on targeted protection of American workers from overseas buyers, ensuring standards are raised for foreign workers in trade agreements, and preventing offshoring of jobs through changes in the tax code.

One of the major planks of the plan is to create an agency that would have the ability to block foreign purchases of US companies if it was determined that purchase would threaten American jobs. The new agency may, in fact, be redundant as there is already an agency, the CFIUS, tasked with determining whether a purchase of a US company may provide a foreign company with the ability to get an upper hand in certain technologies. In fact, Schumer is proposing a bill that would allow the CFIUS to do exactly what the proposed new agency would do. In addition, Schumer's bill would ask the CFIUS to block Chinese purchases until they do more to help defuse the North Korean nuclear threat.

Another part of the plan is the creation of an "independent trade prosecutor" who would be responsible for investigating unfair trade practices by other countries and challenging those practices in a venue outside the World Trade Organization (WTO). I have to admit that this part of the plan is a bit disturbing because going outside the WTO will only end up with similar retaliatory actions by other governments and potentially cause chaos down the road in international trade.

More importantly, Democrats want future trade agreements and a renegotiated NAFTA to include specific outcomes to raise standards for foreign workers so that American workers will be less disadvantaged. As one analyst says, "There is no legalese about ‘striving’ to meet nonbinding ‘declarations.’ It's outcome-focused: full stop." This is critically important and a way to protect American workers while making sure the living and working standards of foreign workers actually improves.

In addition, the plan includes taxing American companies for outsourcing jobs overseas and, admittedly mimicking Trump's "Buy American", encourages the use of American made products in new infrastructure.

While, as I've noted above, I'm not crazy about resolving disputes outside the WTO or think that the "Buy American" plan will be particularly effective, it is without doubt good politics as far as the Democrats are concerned, especially for those Democratic Senators who are defending seats in states that Trump won. In addition, Schumer has a chance to create a split between the President and the free traders in the Republican party over the next year, not only on trade but also perhaps on infrastructure.

Economists are screaming that the Democratic plan is protectionist. But virtually every country has some kind of protective policies. In Europe, much of it is geared to protecting the agricultural sector. And here in the US that is also true to some extent, with wasteful and useless subsidies for things like ethanol or the sugar industry. Instead, in this day and age, we should protecting important nascent technological industries for a limited period. The chip and solar panel industries are two cases where technology largely developed and perfected here in the US were essentially handed over to the Asian tigers to destroy our manufacturing base, primarily because those Asian countries subsidized those industries. Even now, in 2016, China is planning to spend $170 billion over the next few years to develop a domestic chip industry.

Despite what economists may say, governments are continually engaged in protectionist activities. Dean Baker has been railing for years about how white collar professionals in the medical and pharmaceutical industries here in the US have been effectively insulated from foreign competition. The real answer is to make sure those protectionist policies are actually benefiting important industries and workers, rather than those with the most powerful lobbies. That, of course, is admittedly easier said than done.

As with so many policies, Trump ran on a slogan that was admittedly popular but had no detailed thinking behind it other than slapping countries he thought were dumping illegally here in the US with across-the-board tariffs. Democrats, on the other hand, seem to be taking a much more nuanced and targeted approach to "protecting" the actual workers and industries that are being harmed by unfair foreign competition. But I'm guessing you could make that statement about the difference in approach of the two parties on so many policies.

Natural Weekends - Storm Clouds

Friday, August 4, 2017

Primacy Of Shareholders Is Actually Holding Back Economic Growth

One of the mythical mantras of Republicans is that oppressive regulation and increased capital requirement are keeping banks from lending money, stifling potential economic growth. This, of course, is total fiction and the vice chairman of the FDIC recently explained the fallacy of that position.

Thomas Hoenig testified in front of the Senate Banking Committee that a study of the 10 largest bank holding companies distribute over 100% of the current year's earnings to investors. Those earnings could have supported $500 billion in new loans. In addition, $83 billion in stock repurchases to simply inflate banks' stock prices could have funded another nearly $750 billion in new loans. Said Hoenig, "While distributing all of today’s income to shareholders may be received well in the short run, it can undermine their future returns and weaken the growth outlook for the larger economy."

As I've written many times before, the concept of the primacy of shareholder value is actually eroding capitalism and exacerbating inequality. Banks, and Wall Street in particular, have strayed so far from their intended purpose which was the efficient distribution and use of capital. Today they barely fulfill that function at all. And now, according to Hoenig, the efforts to reward shareholders are actually impinging on economic growth.

Trump Goes On Vacation And Is Freer To Tweet As Mueller Impanels Grand Jury

Here in the Northeast, August is usually the hottest and most humid month. It will be again this year for Donald Trump as he heads for his extended "working" (i.e. golf) vacation in Northern New Jersey. With the revelation that Mueller has impaneled a grand jury in Washington, DC as well as reports that subpoenas have been issued regarding Don Jr.'s meeting with the Russians, the pressure on Trump is increasing. In addition, there are also reports that top FBI officials have been notified they may be called to testify regarding Trump's obstruction of justice. Meanwhile, Trump himself will be on vacation for the next three weeks, away from the consistent discipline provided by Kelly, and probably free to tweet at will. As I said, it's going to be a hot few weeks.

Thursday, August 3, 2017

As Trump's Approval Sinks And Agenda Fails, Republicans Distance Themselves From President

The conventional wisdom in the mainstream media continues to be that Trump's base is sticking with him and that his support among Republicans continues to be nearly universal. Back in mid-June, I challenged that assumption, pointing out the not only had his support among Republicans dropped by over 10% but that the level of strong support for Trump among that group had fallen to near the 50% level. And, as Nate Silver pointed out, that support among Republicans may actually be artificially higher than it appears as more and more Republicans refuse to self-identify that way simply because of Trump.

The latest Quinnipiac poll seems to indicate that all those trends are increasing. Trump's approval rating is down to an abysmal 33% and his support among Republicans has fallen to just 76%, dropping from around 90% when he began his term. Of that GOP cohort, again, only 53% strongly support Trump. His support among his assumed base, white workers without a college degree, has actually fallen into negative territory with 50% disapproving and only 43% approving. Around 60% of voters do not believe that he is honest and that he considers himself above the law, especially alarming numbers if we ever get to impeachment proceedings. In addition, the question about whether American are optimistic about the next four years with Trump as President has flipped entirely since his inauguration, going from 53%-43% optimistic to 53%-43% pessimistic. As the assistant director of the survey said, "It's hard to pick what is the most alarming number in the troubling trail of new lows for President Donald Trump."

Now this is just one poll so it needs be taken with that grain of salt. In addition, it comes after the disaster of Trumpcare and continuing revelations about Russian collusion. So I expect this might be a temporary low, especially as the White House renews its white nationalist agenda. On the other hand, Silver's point about the reduction of self-identified Republicans still holds as a possible inflator of his support among Republicans. But the fact of the matter is that Trump's support is still falling and it is falling fairly quickly among Republicans and even among his core base.

I don't think it's any coincidence that, now that dream agenda of gutting Medicaid to pass massive tax cuts has essentially failed, vulnerable Cngressional Republicans are starting to distance themselves from Trump. Poll numbers like this will only exacerbate that trend. So don't believe it when you hear Republicans are still sticking with Trump. Republicans in Congress don't seem to believe it.

Trump's White Nationalist Agenda Will Only Make US Weaker And Poorer

A couple of weeks ago, I wrote that Bannon was taking back control of the Trump agenda as he became virtually the last man standing among Trump's inner circle who has remained untouched by the Russia investigation. With Bannon now in the driver's seat again, we would expect to see the revival of the white nationalist agenda with the added benefit of shoring up the Trump base. And that is exactly what's happened.

Some of the actions to shore up the base will substantive and others will not. The transgender ban, for instance, was so typical of many Trump policies, an announcement followed by no concrete action at all. And, based on the negative reaction across the Washington political spectrum, from the military to Congress as a whole, I wouldn't expect any concrete proposals to actually appear.

It is still too early to know whether anything concrete will arise from the attempts to reduce the number of legal immigrants and restrict affirmative action in universities or, again, whether they are merely morsels of red meat thrown to the base. In both cases, there will probably be ancillary negative effects even if there ends up being no change in either policy.

Take the case of immigration. The Muslim ban and Trump's campaign rhetoric changed the view of the whole world about coming to America. I wrote back in February that Trump's immigration policies would be a drag on US economic growth going forward. According to a Goldman Sachs' study, "Reduced immigration would result in slower labor force growth and therefore slower growth in potential GDP—the economy’s 'speed limit'. In addition, academic studies suggest there could be negative knock-on effects on productivity growth. As a result, we see immigration restrictions as an important source of downside risk to our 1.75% estimate of potential growth."

As we have seen with tourism and border crossings, rhetoric can have an impact even without any actual implementation behind it. And a NY Times article yesterday showed just how that rhetoric is already creating a negative impact. The tech hubs in Mexico, Canada, and China are all starting to attract foreign technology and entrepreneurial talent that would normally come the US under the H1-B program that Trump has specifically targeted. Yes, there are problems with the abuse of the H1-B program, but that is not what Trump is attacking, as his hotels are exactly the kind of abusers we should be cracking down on.

In Jalisco, Mexico, the state's minister of innovation, science, and technology called Trump, "our best marketing." As the talent moves offshore, so will companies. The article provides examples of two firms that abandoned the US for Mexico and Canada. And it won't be long before Silicon Valley begins offshoring work to those entrepreneurial centers. And one last absurdity of the legal immigration reduction is that it says it will favor applicants based on skills, education and language ability, But, as Vox points out, current legal immigrants are already actually better educated than native born workers.

This one chart alone shows what a farce the latest immigration bill really is. And the chances of it actually becoming law are also pretty slim as the majority of both the Republicans and Democrats in Congress will oppose it under enormous pressure from the business community. But, as the increased interest of foreign workers to go to Mexico and Canada instead of America shows, the impact of this proposal will still be negative for the US economy even if the bill does not pass.

Once again, Trump's stated policies will actually hurt his base in the real world that we live in, while providing the pretense that he is protecting them. In the end, however, we will all suffer as economic growth stagnates even further.

Wednesday, August 2, 2017

Trump, Republicans, And The Future Of Our Democracy

Yesterday Yascha Mounk had an op-ed in the New York Times entitled "The Past Week Proves That Trump Is Destroying Our Democracy". Mounk is also the co-author of an article in the Journal of Democracy entitled "The Danger of Deconsolidation" which describes the increasing dissatisfaction with democracy in developed countries around the world.

It is clear that Donald Trump has created a unique threat to American democracy, with his blatant disregard for political and governing norms, his lack of understanding and assault on the separation of powers, and brazen violations of law, essentially daring the other branches of government to try and rein him in. As Mounk says in the very first sentence of his op-ed, "America is on its way to a full-blown constitutional crisis".

Mounk documents the attacks on the intelligence community, Robert Mueller, and Jeff Sessions and the trial balloon of the President pardoning himself. He cites the use of the Boy Scout Jamboree as a political rally, the encouragement of police to abuse those they arrest, despite the constitutional presumption of innocence, and the threats to indict Hillary Clinton. All of these occurred last week and all are direct attacks on our democracy.

Says Mounk, "This is worrying. The Constitution cannot defend itself. If Congress does not stand up to Mr. Trump because Republicans are afraid of their own base, the president may be able to obstruct the course of justice with impunity. Worse, he may then conclude that he can get away with violating even more basic limits on his power...And since nobody can say for sure that the Constitution will become toothless if congressional Republicans let yet another infraction pass, their instinct will be to defer their patriotic duty to some more opportune moment in the future. But that moment may never come. There may never be a time when we know for sure that this decision, today, will determine whether the American republic lives or dies."

It is right and proper to take Republicans to task in the way they have handled Trump with kid gloves. And their unwillingness to vigorously and vociferously oppose Trump is, as Mounk says, clearly threatening our democracy. But it would have been more helpful if Mounk had also documented the over two-decade effort by the Republican party to attack the institutions and norms of our democracy. Starting with Reagan's "government is the problem", to Newt Gingrich's assault on congressional norms, to the with hunt and bogus impeachment of Clinton, to stealing the 2000 election, to illegal gerrymandering and voting restirctions, to lying about the Iraq War, to Katrina, to the delegitimization of Obama, to Merrick Garland, the Republican party has transformed itself into a reactionary white nationalist party and has been a primary factor in creating what Mounk describes as "democracy deconsolidation" here in the US.

According to Mounk's this trend of increasing loss of faith in democracy is not unique to the US.  "Citizens in a number of supposedly consolidated democracies in North America and Western Europe have not only grown more critical of their political leaders. Rather, they have also become more cynical about the value of democracy as a political system, less hopeful that anything they do might influence public policy, and more willing to express support for authoritarian alternatives. The crisis of democratic legitimacy extends across a much wider set of indicators than previously appreciated."

I have already written about Mounk's findings that younger citizens across a wide range of countries are far less enamored with democracy and increasingly support other forms of government including authoritarian rule. Equally disturbing is the trend to not believe that many of the cores values of a democracy, such as civil rights or even fair elections, are even necessary. This is not just the ignorance of youth, as the study confirms the steady increase in these trends over time.

One might think that these trends might be a reflection of the disruption that globalization and automation has created in advanced Western economies. Younger people are seeing that their futures are far less secure and prosperous than the previous generations and are reacting accordingly. It might also include the prototypical white working class Trump voter as well. But one of the surprising results of Mounk's study is that the trend is actually highest among the rich.

The people who have benefited the most from democratic expansion, globalization, and automation are increasingly less likely to support democracy. What they fear most of all is having their riches taken from them and given to those "undeserving", in other words, the redistributive powers of democracy. As Mounk says, "with the exception of a brief period in the late twentieth century, democracy has usually been associated with redistributive demands by the poor and therefore regarded with skepticism by elites. The newfound aversion to democratic institutions among rich citizens in the West may be no more than a return to the historical norm."

This finding, of course, tracks the transformation of the Republican party, and, to some extent, the Democratic party as well. As both parties came to rely on the rich, the wealthy, and corporations in order to fund elections campaigns while at the same time the power of unions were decreasing, the acceptability of anti-democratic actions became more and more acceptable in order to protect the parties' benefactors.

Our democracy, as Trump has clearly illustrated, is far more fragile than we think. And with not only younger people but also the powerful wealthy increasingly unconcerned about the deconstruction of our democracy, the future of our democracy looks as grim as any period in my lifetime.

How We Ended Up Not Even Bothering To Prosecute Corporate Crime

As I've made clear in many prior posts, it is my firm belief that corporations will continue to brazenly break the law and pay the resulting fines as simply the cost of doing business until the government finally puts some senior executives in jail for a prolonged sentence. In fact, it is a wonder how we ended up in the situation where this never happens to begin with.

An article in the New Yorker outlines the history of corporate prosecutions since the 1970s. It all started in 1975 when the chairman of United Brands inexplicably committed suicide by jumping out the window of his NYC office. That suicide sparked the interest of an SEC investigator, Stanley Sporkin, who then uncovered the fact that United Brands was paying a $2.5 million bribe to the President of Honduras. With the chairman who authorized the bribe already dead, Sporkin felt that somehow United Brands should be held accountable for the bribery scheme. With the help of a prosecutor, Jed Rakoff, Sporkin developed a unique theory to try and bring the entire company to justice. In a sense, they were successful as United brands ended up paying a $15,000 fine (you read that right) and pleading guilty to conspiracy and wire fraud.

But Sporkin's idea, which was really based on the fact that the guilty executive was already dead and unable to face justice, created a sea change in the way corporate crime was prosecuted. After that case, charging the corporation become the method for prosecuting white collar crime instead of charging executives and individuals. The obvious problem with this strategy, from the viewpoint of justice, is that corporations can not be jailed. The only punishment available is to fine the corporation which, in publicly traded corporations, means that shareholders bear that cost even if individuals in the company have benefited from the crime.

While getting an admission of guilt and extracting a fine became the preferred method to prosecute corporate crime, there were occasional cases where individuals actually were tried, mostly for insider trading on Wall Street. But they were the exception to the rule.

The real turning point came with the massive fraud at Enron. Enron's accounting firm, Arthur Andersen, was complicit in Enron's fraud and the company engaged in a massive obstruction of justice by destroying evidence. When it was convicted of those crimes, the firm lost its accounting license and essentially folded, costing thousands of regular, law-abiding workers at the company their jobs.

The Andersen case made prosecutors totally gun-shy about seeking criminal guilty verdicts from companies simply because they did not want to be responsible for driving another company, and the associated jobs, out of business. So, rather than go back to the old way of prosecuting the individuals involved, prosecutors concocted another entirely new method to hold the corporation accountable, the deferred prosecution agreement.

A deferred prosecution agreement requires the corporation to not admit guilt but agree to cease whatever probable criminal behavior they were engaged in and, if the corporation repeated the behavior within some agreed upon time frame, it could be subject to prosecution. This solution was the worst of both worlds. No individuals were prosecuted and the company never admitted guilt. In addition, corporations were found to be repeatedly violating these deferred prosecution agreements and, rather than risking a real prosecution, the government and the corporation just agreed to pay another fine and engage in another deferred prosecution agreement. Basically, corporations learned that they will only be fined for their illegal behavior, never prosecuted, and they soon considered those fines as simply the cost of doing business.

Between the fall of Arthur Andersen and last year, the Department of Justice has amazingly agreed to over 400 deferred prosecution agreements. The fear of holding a corporation criminally liable and the reluctance to prosecute individuals within those firms is the reason that no company and no senior executive has been criminally charged in the wake of the massive financial fraud that accompanied the crisis of 2008.

As the New Yorker article points out, senior executives have also become increasing sophisticated about avoiding direct responsibility for illegal activities and the law requiring prosecutors show direct criminal intent makes convicting individuals even more difficult. Even blatant violations of the Sarbanes-Oxley law, passed in the wake of the Enron scandal, that required senior executives to sign off on the accuracy of financial reports have not triggered an attempted prosecution.

Jed Rakoff, now a judge and the man who unwittingly started us down the path to where we are today, is now advocating going after individual executives. He believes that even billion dollar fines are treated as the "cost of doing business" and that the deferred prosecution agreements provide no real deterrent. Instead, he suggests that "sending a few guilty executives to prison for orchestrating corporate crimes might have a far greater effect." I couldn't agree more. Hopefully, this approach will show up somewhere in the Democrats' "Better Deal".

Of course, prosecuting crime is not the only problem we have with corporations. The concept of the corporation was originally created to encourage economic activity by providing some liability protection to those managing the company. Since then, the Supreme Court has imbued the corporation with powers entirely unnecessary to enhance its original intent, such as the power of free speech and now the freedom of religion. But that is a whole other discussion best left to another day and another post.

Tuesday, August 1, 2017

It Doesn't Get Easier For The GOP After Healthcare

With senior Senate Republicans even saying that it is time to move past healthcare, you might think that things might get easier for Republicans in the next few months but that doesn't look like it will be the case. Trump may be demanding that the Senate keep on trying to pass healthcare but more and more Republicans in both houses of Congress want to move on to "tax reform" where they believe they will be able to find far more common ground within their caucus.

Martin Longman points out, however, that Republicans are now apparently split about the actual tactics to use in order to pass tax reform. Republicans in the House seem to want to move on tax reform as part of passing a budget and they would like the Senate to use the budget reconciliation process which would only require 51 votes to pass it. Some others in the Senate and even in the White House want to try to pass a bipartisan tax reform bill outside of reconciliation which would require at least eight Democratic votes. Obviously, the fact that Democratic votes will be required means that whatever "tax reform" that passes will be far less generous than what the reactionary right, especially in the House, will want or demand.

An additional incentive for Senate Republicans to not use the budget reconciliation process to pass tax reform is that it allows them to still use the budget reconciliation process to make another pass at healthcare. That opportunity would disappear if they actually passed a budget that included tax reform, meaning that Republicans would have to wait until next year's budget in order to pass healthcare under reconciliation. That might not be the most opportune time, just months before an election, to revive a bill that polls in the teens. And, Longman points out, the long-awaited indictment of New Jersey Senator Robert Menendez will probably be coming soon, especially with Trump and Sessions controlling the DOJ. If he is forced to resign, Chris Christie will be able to appoint a Republican as Senator, adding another, decisive GOP vote for healthcare.

In addition, it is not like Republicans are anywhere close to passing or even agreeing on a budget. They were unable to do so last year and it seems quite possible they will be unable to again this year. Whatever might pass the House will probably be unacceptable to even 50 GOP Senators. If tax reform gets tied to the budget and even that fails, then Republicans would have failed at every one of their top three priorities. The base will be furious.

Longman, however, fails to also mention the potential impact of the debt ceiling vote on the budget, tax reform, and perhaps even healthcare. According to Treasury Secretary Mnuchin, the debt ceiling must be raised by the end of September which does not leave the Republicans a lot of time to get it done. Since getting that done will require Democratic votes, you would hope that Schumer has extracted at least some concessions from McConnell on at least tax cuts or the budget or both. Hopefully that would include a promise to have revenue neutral tax cuts and to block the deep spending cuts that the reactionary right in the House will demand.

All of this will make an interesting time for Republicans after the August recess. And if they road ahead isn't difficult enough, they will also have Trump to deal with as he sees the agenda failing and continues to lash out at Congressional Republicans.

The Obstruction Of Justice Case Against Trump Just Keeps Growing

While the bombshell story from the Washington Post that Trump himself crafted Don Jr.'s initial, false statement on his meeting with Russians to get dirt on Hillary, further implicating Trump in obstruction of justice, a smaller and equally telling item was hidden way down in the story, indicating that Trump's legal team, and possible Trump himself, planned to blame the Don Jr. meeting on a Democratic plot to entrap the Trump campaign in colluding with the Russians. This contemplation of an additional obstruction of justice corresponds with the revelation by NPR that the White House was aware of the false Fox News report that tried to debunk the Russian investigation by claiming that Seth Rich had actually leaked the DNC emails to the Russians and that the President himself possible signed off on that story.

Back in March, I wrote that there was already an extraordinary amount of evidence that the Trump campaign colluded with the Russians. Since that time, we have learned about Kushner's attempt to create a back channel to the Russians and Don Jr's meeting with Russian representatives who were peddling dirt on Hillary Clinton, just to name the most explosive revelations. Meanwhile, everything that Trump does with regard to Russia screams guilt. He has already laid the groundwork for two of his last defenses, first that nothing he did was illegal and, lastly, who cares.

Meanwhile, the obstruction of justice case against Trump also keeps growing. The Post report describes how the President overrode his advisers and apparently crafted every word of Don Jr.'s initial response to the news of the Russia meeting as an introductory meeting that only discussed Russian adoptions. Within days, that statement had been proved a fiction as the Russians had actually offered up dirt on Hillary, Don Jr. said he loved it, and then invited Kushner and Manafort to the meeting where it is unclear whether any documents were actually delivered by the Russians to the campaign.

But the Post story also says, "The president’s legal team planned to cast the June 2016 meeting as a potential setup by Democratic operatives hoping to entrap Trump Jr. and, by extension, the presumptive Republican nominee, according to people familiar with discussions." This meshes with other attempts by the Trump team and their media mouthpieces to somehow claim the Democrats were actually responsible for the DNC email leaks, somehow "proving" the collusion story is a hoax.

The NPR report shows how a wealthy Texas GOP donor and Trump supporter, Ed Butowsky, tried to determine if Seth Rich had actually leaked the DNC emails to WikiLeaks, that the FBI was covering that up, and that Hillary and the Democrats may have actually had a hand in Rich's death. Fox News eventually ran with this story, claiming that a source had seen the FBI file on the Rich case and confirming Rich's contacts with WikiLeaks, but had to retract it within days. An investigator hired by  Butowsky has now sued Fox News, claiming the news outfit attributed quotes to him which he never made.

As part of that suit, it appears that Butowsky actually had a meeting with Sean Spicer in the White House where he outlined the details of the false Fox News story. Spicer has now confirmed that meeting, saying it was done as a favor to the wealthy donor. Furthermore, the suit claims that Butowsky told the investigator that Trump had read the Fox story and personally signed off on it. Butowsky admits he did make that statement but said he just made that up in order to encourage the investigator to stay "on script", even though the investigator knew elements of the Fox story were false. I imagine that Mueller might want to get Spicer and Butowsky to describe under oath what, if any, interactions they had with the President on this matter, some time in the future.

Finally, Jared Kushner, who clearly has more skilled lawyers than anyone else in the White House, also manages to keep talking about the Russian investigation, probably to those lawyers chagrin. Kushner, who is Trump's point man on virtually everything important to Trump except Russia and immigration, is constantly trying to depict himself as one of the most forgetful and disorganized successful businessman on the planet. First he forgot his meeting with Flynn and the Russians where he tried to set up a secret back-channel. He forgot the meeting with the Russians and Don Jr.. He forgot the hundreds of meetings with foreign leaders. He claims he didn't read the entire email chain that Don. Jr sent him despite the subject line being "Re: Russia - Clinton - private and confidential". And he claims he showed up to that meeting without really knowing why.

Now Kushner is reported to have told interns he addressed yesterday, "They thought we colluded, but we couldn’t even collude with our local offices." Of course, that's because the Trump campaign eschewed local offices and instead focused on a data-driven media onslaught run by Kushner and the Mercers. And just because they couldn't coordinate with local offices, doesn't mean they couldn't coordinate with the Russians. As I've noted above, there is enormous evidence to believe that happened, despite Kushner's self-serving statements about his own incompetence.

While lying to the press and the American people is no crime, the false statement crafted by Trump and the potential Presidential involvement in the false Fox News story are indications of "consciousness of guilt" which is admissible as evidence in an obstruction of justice charge. And you can be sure Mueller will be cataloguing every one of these as he builds his case against Trump.

Monday, July 31, 2017

With Kelly As CoS, It Is Worth Noting How Much Power We Have Given Military Men

I know we kind of crossed this bridge back in the confirmation process last winter, but I think it is worth at least pointing out that, with Kelly moving to Chief of Staff, current and former military commanders have more political power within the civilian government than at any time in recent memory. And with Trump basically abdicating his authority in the foreign policy arena except in the case of Russia and possibly Iran, we are as close as we have been in a long time to actually seeing the loss of civilian control of the military. This is all happening willingly and with little discussion.

During the confirmation process, there was concern that military personnel would hold cabinet positions at the NSA, Defense, and, with slightly less concern, DHS. With Rex Tillerson either sidelined or totally ineffective, (it is hard to know exactly which), Mattis and McMaster now become the most powerful foreign policy voices in the cabinet, outside of perhaps Bannon and Jared. More disturbingly, Kelly is now taking over probably the most powerful position inside the White House, outside of the President himself.  Don't get me wrong, I am in no way impugning the integrity of Kelly, McMaster, and Mattis or in any questioning their dedication to civilian control and the Constitution. And, in fact, I think we all appreciate the fact that, while we may not agree with them on policy, they are at least competent people trying to do a good job. And, hopefully, they will at least provide some level of sanity and reason that will be able to counter some of Trump's worst ideas.

But we should at least recognize that this is setting a potentially dangerous precedent. While those military men may be competent, they certainly view the world and their jobs from one particular point of view which may not be helpful in certain situations. I'm not suggesting that this precedent will inevitably lead to a military takeover but it certainly takes us at least a baby-step closer to that remote possibility. And that should be something we all recognize and perhaps even discuss.

The Mooch Gets The Boot

We all knew that Anthony Scaramucci would not last long but no one thought it would be less than a week. MSNBC reports that he is out at the White House. Whether this is any indication that Kelly is actually taking control is anyone’s guess, but I would think not.

Update: Here is the NYT story and it appears that Kelly asked Trump to remove the Mooch from the job of Communications Director. 

Conservatives In Disarray While UK Sleepwalks To Brexit Nightmare

While we were all focused, and rightly so, on making sure that millions of Americans would not lose their health insurance and hundreds of thousands would not needlessly die, Britain continued to sleepwalk towards the abyss of Brexit, apparently without any plan or strategy at all. And the long-expected downturn of the UK economy in the wake of the Brexit vote finally appears to be occurring.

While 2016 GDP growth in the UK was merely modest after the Brexit vote, it certainly exceeded the expectations of an immediate downturn. Thus, the anemic first quarter number was considered perhaps an anomaly. But second quarter growth was hardly any better, meaning that the UK has had virtually no growth so far in 2017. It also appears that what little growth there was primarily was driven by increased borrowing, which is sustainable for only so long, as we have seen. There are potentially two primary drivers for the decline in growth, austerity and Brexit.

Simon Wren Lewis writes that, while austerity slowed the UK economy in 2015 and 2016, the current slowdown is primarily driven by Brexit. The immediate depreciation of the pound after Brexit has not been offset by a corresponding increase in exports, simply because British companies have no idea what markets may disappear when the government finally figures out how leave the EU. Of course, an easier fiscal policy would also help juice the economy but that would be a total repudiation of everything the Conservative government has preached since David Cameron became Prime Minister.

As the economy begins to sink and jobs, especially in the financial industry, start moving to the Continent, the cries to either put a hold on Brexit or actually reverse it grow louder. Those calls are exacerbated by the total ineptitude of the Conservatives to even put forth a coherent strategy and plan for leaving the EU. Virtually everyone knew that it would be virtually impossible to negotiate all the complex issues that Brexit creates in the two year window that is required. Yet Theresa May and the Tories pushed ahead to invoke Article 50 and began the process. Now, in the wake of their repudiation at the polls, even the Conservatives are realizing that some sort of transitional agreement is needed in order to avoid total chaos in 2019.

Unfortunately, as with Republicans in the US, the Tories are caught between the hard-Brexit faction that wants a clean break from the EU and those that finally realize a transitional agreement will be needed. There is no agreement within the party on the critical issues of free movement and access to the EU customs union. In addition, the hard Brexit faction looks at any transitional agreement as just a way around implementing Brexit, having no faith that the "transition" will ever end.

As the Conservatives bicker with themselves, there is no guarantee that the Europeans will be interested in a transitional agreement in any case. The EU has been under enormous strain ever since the financial crisis nearly a decade ago and there have been enormous efforts to ensure that leaving the EU, possibly beginning an avalanche of demands from other members and resulting in possible dissolution, will be as painful as possible. There is no reason to think that the Europeans are interested in making Brexit easier and less painful for the UK through something like a transitional agreement.

It has become abundantly clear that the UK and the US scored two of the biggest own goals in political history with the votes for Brexit and Donald Trump. Yes, the votes indicate how poorly both governments dealt with the losers of globalization and automation, giving all the gains to the holders of capital, those mythical "job creators", and leaving those displaced workers to largely fend for themselves. But, in both countries, those disenchanted voters decided to essentially blow the entire system up by the slimmest of margins and for largely different reasons. Now both countries are going to spend years trying to clean up the carnage created by those votes.

Sunday, July 30, 2017

Is Moving Kelly To Chief Of Staff Part Of Larger Plan To Fire Mueller?

I just heard an interesting theory on MSNBC this morning concerning the fate of Jeff Sessions. The idea is that, by moving Kelly into the White House, it opens up the slot at Homeland Security. This would then allow Sessions to move over to DHS and continue to torment immigrants, which has always been one of Sessions' priorities. And that would open up the AG slot for Trump to appoint someone who will fire Mueller.

This solves at least two problems for Trump. First, he doesn't have to fire Sessions and, secondly, it gets around the problem of a recess appointment for AG, since the GOP has promised there will be no recess. But it doesn't solve the problem of Chuck Grassley's vow to not even consider a new nomination for Attorney General anytime soon, meaning that Rod Rosenstein, who has also vowed not to fire Mueller, will become acting AG until the nomination is confirmed.

But even that may not deter Trump who has begun to hold more rallies lately in the hopes of firing up his base again and focusing their anger on recalcitrant Congressional Republicans. The obvious immediate targets are Collins, Murkowski, and McCain. I imagine that McConnell will also become a target as well, especially if he does not destroy the legislative filibuster as Trump demands. And if Trump goes ahead with the plan detailed above, then Grassley will also become a target for blocking Trump from getting the cabinet he wants.

With tax reform severely constricted by the failure of healthcare and its resulting lower budget baseline, the need to pass the debt ceiling with Democratic votes, and the need to pass a budget, again perhaps with Democratic votes, it is going to be an interesting few months for Congressional Republicans after they return from the August recess. I expect that Trump will only make their life more difficult.

Natural Weekends - Squirrels' Crabapple Feast

The crabapples are just starting to ripen up and the squirrels have been up in the tree, choosing the right ones, and feasting on them.