Thursday, August 15, 2019

China policy: Hong Kong heroism and American uselessness

The right China policy for the West seems to be something like this: We'd like to maintain good trade relations, expand immigration, and sign treaties to reduce our militaries. But human rights abuses will be met with trade sanctions, and we'll promote a NATO-like regional security alliance with China's democratically governed Pacific Rim neighbors who don't want to be invaded.

The hope is to set the right incentives and keep things in China from getting worse. The threat of sanctions for human rights abuses will get economic interests to push against those abuses. Well-coordinated defense will prevent China from invading its neighbors and get it to sign the arms treaties. If all goes well, China moves towards liberal democracy through the gentle slow process of cultural engagement. It works -- it's a big part of how Communism fell in Eastern Europe.

America's China policy is not on that track right now. Donald Trump is starting trade wars not to punish repression, but because he likes trade wars. Relations between Japan and South Korea are falling apart, and where diplomats of any previous Administration would be mending things between top regional allies, we're not seeing that right now.

That brings us to Hong Kong. The Chinese-approved government supported legislation to make it easier to extradite people from Hong Kong to China, using a recent sensational murder as a pretext. Public outcry in Hong Kong was intense. The government says that the legislation is dead, but hasn’t formally withdrawn it. Protestors are calling for further reforms, including genuinely democratic elections. The protests have been amazing, with over a million people sometimes coming out. Recently they shut down the airport. This photo shows protestors surrounding police headquarters.

At a time when America is being useless, the protestors in Hong Kong are making an amazing display of nonviolent force. They aren't getting any cover from America's erratic trade policy, and they can't count on much in the way of outside support. They're just asserting their own control over Hong Kong for Beijing to see, and demanding democracy. I hope we can set them up to receive the support they deserve around about January of 2021.

Monday, August 5, 2019

Trump's trade war

This is a chart of the S&P 500 over the last five days. If you're not a stock market person, but you're curious about the weird effects of Donald Trump on the economy, I'd like to tell you about it.

At first we're on a plateau for a while, and then there's that quick jagged shock from which we recover. That's the Federal Reserve's decision to make a single interest rate cut, but not suggest more. The market seems to have more or less expected this. The economy has continued the upward trend that began in the early Obama administration, so the Fed didn't want to give more.

Trump has been feuding with Jerome Powell, the Fed chair. Trump wants more economy-boosting interest rate cuts as he goes up for re-election. He's unhappy that the Fed gave him only one.

In his statements afterwards, Powell said that he would cut rates again if things looked worse for the economy. He also said that trade wars were bad for the economy. Trump likes trade wars. And he likes pushing people around. So why not push Powell around with a trade war?

So then we fall off a cliff, and we don't get back up, and then slide down further. That's Trump tweeting surprise 10% tariffs on Chinese goods. (Into Christmas season! Think of the poor retailers!) The market understood interest rates, but so far, it's acting like it didn't understand Trump.

In the last part (today) we fall off another cliff. That's today's 3% decline, off the weekend's news that China devalued its currency. The Chinese are saying, "You want to make our goods more expensive? Well we can undo that by making them cheaper to you! Also forget about exporting to us, nobody can afford dollars here go away."

On a scale of zero to trade war, we're past the talking phase and into the action phase. It's just small actions now, but it's actions. Also Trump is having what has become a dominance fight with Powell on the side, and it pushes US-China towards further intimidation.

A moral of the story: Trump is less controlled by Wall Street than most Republicans. Instead, he's controlled by ego and racism. At least on the tariff issue, I think this is worse.

I think there can be good reasons for trade restrictions. Don't buy stuff made by slave labor, or stuff that destroys the environment. (In general, explore Pigouvian strategies).

But these aren't Trump's reasons. And in general, it's good for everyone to get the best deals in the world on stuff. If not, there's some interesting explanation of why not. What's going on inside Donald Trump doesn't correspond to any such interesting explanation.

Saturday, August 3, 2019

Elizabeth Warren's wealth tax is a great plan

As Vox has described, she'll tax wealth above $50 million at a 2% rate, and wealth above $1 billion at a 3% rate. Emmanuel Saez (Piketty's frequent collaborator) "estimates this tax would hit approximately 75,000 families and raise $2.75 trillion over a 10-year period."

The Vox article also notes that the tax would reduce private investment, since that's what it's taxing. This is fine. Private investment has bad returns these days. Look at what Apple did with its Trump tax cut: it bought back shares of its own stock. The greatest consumer technology innovator of recent decades couldn't find a new innovative business to assemble. So it just spent the money on raising its stock price and not building anything socially productive.

Low interest rates on bonds are a further sign that private capital can't find any productive place to invest itself. Aaa-rated corporate bonds returned 8% in the mid-90s, but only 3.29% today. In other words, there's so little good stuff for private capital to invest in that investors are accepting annual returns of only 3.29%. This is what a future of increasing income inequality will look like -- the increasingly vast wealth of the rich chasing a range of investment opportunities that doesn't grow as fast. Since 1980, inequality has widened as bond rates have fallen.

We're likely to get better social returns on investment in infrastructure, child care, science, and education. Many of these things don't work as private-sector investments because there's no way for private investors to reap the social good that they've sown. The benefits of making more scientists are distributed among the many beneficiaries of their discoveries in a way that won't come back as profit to a private investor.

Great utility is achieved if the government takes the money away from private investors and makes more scientists, which profit-driven private investment doesn't do very well. Excessive focus on private investment over recent decades has led us to neglect public investment. The wealth tax removes investment capital from the low-return private sector and puts it in the more promising public sector.

There are all sorts of implementation issues to be resolved, but they're worth resolving. For example, to stop the wealthy from hiding wealth overseas, we'll need to beef up the ability of the IRS to chase down vast investments, and set up international frameworks for tracking wealth. So let's do these things!

In general, I don't recommend donating to Presidential campaigns. Definitely not general-election campaigns, but probably not primaries either. Your money has much more impact on lower-level races. Jeff Merkley's Leadership PAC, which helps us retake the Senate and put it in the hands of its most skilled progressive legislator, is my #1 pick.

But I've given $100 to Elizabeth Warren's campaign. It's a token amount, but she'll have one more small donor to boast of. Perhaps it'll help in some small way to make her plans reality.

Wednesday, July 31, 2019

Warren and Sanders win the debate

In last night's debate, the moderators set John Delaney to attack Elizabeth Warren and Bernie Sanders. He did so by calling Sanders and Warren's plans "fairy tale economics." (Plans like theirs have been successful in Europe, which is a real place and not just a location from fairy tales. I actually went there recently and it was very nice.)

Warren's counterattack won the night: "I don't understand why anybody goes to the trouble of running for President of the United States, just to talk about what we can't do and shouldn't fight for." I don't understand why Delaney ran either, but I'm glad he did, as footage of Warren annihilating dim-bulb centrists was something the world needed.

There was also a nice moment when Tim Ryan interrupted Sanders to question whether Medicare for All would cover the things he claimed. Sanders' reply that it would -- "I wrote the damn bill!" -- had the audience applauding and Ryan silently seething on the split screen.

(In 2009, Tim Ryan initially voted to prevent Obamacare from covering abortion. Nancy Pelosi did something -- I don't know what -- to make him back down and support abortion coverage on final passage through the House. Then in 2015, he tried and failed to organize a centrist campaign against Pelosi as Democratic leader. As I'm probably the internet's biggest Pelosi fan, seeing Bernie give Ryan a good whacking was deeply gratifying for me.)

Both Sanders and Warren need to solidify their positions as second choices for each others' voters. Attacking boring moderates who are polling near zero is a good way to do it, as they have few fans for you to alienate. From what I can tell, Sanders and Warren genuinely like each other, as makes sense for ideological people who share an ideology. And it totally works as strategy.

After the debate lineups were announced, I remember Kathleen Geier wishing that Sanders and Warren would join forces against various annoying centrists. It sounded too good to hope for, so I tried not to hope for it. But it really does make sense, and it actually happened! What a wonderful night.

Tuesday, July 30, 2019

Brexit in Poundland

With Boris Johnson as Britain's new Prime Minister and no-deal Brexit a serious possibility, the British pound is collapsing. A dozen years ago, I visited Britain when the pound was worth $2. The Brexit vote knocked it to $1.35. It rose when people thought they saw ways out of the problem, but right now it's down to $1.22.

This could add to the ugliness of Brexit. Just at the moment when trade disruptions make imported goods hard to get, they become even harder to get because the currency you use to buy them has lost value.

There's a chain called "Poundland" that runs a British equivalent of American dollar stores. The name also seems to me like good slang for post-Brexit Britain. And if bad things happen to the pound, things could get bad in Poundland.

Wednesday, July 17, 2019

The House rebukes Trump

House Democrats unanimously voted to condemn Trump's racist attacks on four minority Congresswomen. The resolution passed, with four Republicans and newly independent Rep. Amash also voting yes. I'm glad to see this, for many different reasons that I'll tell you about.

 -The moderates did their part. There are 36 Democratic representatives from Republican-leaning districts. (Because of gerrymandering, Democrats need to hold at least 17 Republican districts to keep a House majority.) I wouldn't have been confident that freshman Democrats from South Carolina and Oklahoma districts 10 points more Republican than the national average would vote to rebuke Trump's racism. But they did. It speaks well of them and bodes well for future votes, including House passage of major legislation in 2021.

 -The House works. Democrats have been frustrated with the lack of action against Trump from the House. But in general, the problems aren't coming from inside the House. Impeachment accomplishes nothing while McConnell runs the Senate. Trump's new lawyers (Bill Barr, Emmet Flood) have deflected House subpoena attempts into court battles. Senate Democrats have let the House down when they need to work together, as on the border funding bill. But this is something House Democrats could do themselves, and they did it unanimously.

 -The Pelosi-AOC relationship is weird, but it's working. To pass anything in 2021, Pelosi has to cultivate relationships with Dems from Republican districts. These relationships are fraught, because the moderates are all afraid of attack ads tying them to Pelosi. Pelosi can reduce the burden on them by looking more moderate, which she now can do by making grouchy noises at AOC occasionally. But later when the focus is on Trump's racism and Pelosi won't mess up her position, she'll defend AOC against Trump. If all goes well, Pelosi uses AOC to keep the moderates happy and in office, and then squeezes votes out of them in 2021 like she did in 2009-2010 and 2005, this time to pass AOC's priorities. It's a good way for a parliamentary leader and a forward-thinking policy intellectual to play off each other.

 -This was important for America. In telling four minority Congresspeople, three of whom were born in the US, to go back to where they came from, Trump was trying to elevate racial divisions over our common bonds as fellow citizens. Any good future for America depends on us not doing this. Our worst crimes -- slavery and the genocide of Native Americans -- resulted from the dominance of the forces that Trump is trying to normalize again. Having the House formally push back against Trump's racism was an important defense of the only values under which America can flourish.

Saturday, June 29, 2019

Defeating Republican gerrymanders in 2020

Exactly one year after Anthony Kennedy submitted his letter of resignation from the Supreme Court, his replacement was part of a 5-4 majority decision to stop the Supreme Court from overturning partisan gerrymanders. Today we move further towards an America where most people support Democrats, but vote suppression, gerrymandering, the structure of the Senate, and the Electoral College together result in permanent Republican rule.

This probably would've happened whether Trump or some other Republican (Ted Cruz, say) was President. The force behind this decision came from Republicans as an institution. It keeps them in office and helps them achieve their ideological goals, so it's what they're going to do. When Mitch McConnell stole Merrick Garland's Supreme Court nomination, this is one of the things he was hoping for.

The best way forward now is simply to focus on winning in 2020 as much as possible. It's a redistricting election, so whoever controls state legislatures and governorships gets to decide how districts are drawn, without the Supreme Court getting involved. This Sam Wang tweetstorm has a bunch of good ideas.

State legislative races can be good entry-level offices to run for. Conventional wisdom is that you need $20,000 to be competitive as a candidate in Kansas, and $50,000 would be great. Obviously many people won't have that much money lying around, but it's within the means of people who have had some career success. This article has four profiles of first-time candidates, three of whom ran for state House.

Some states have public financing programs for state legislative campaigns. If you're not in a state with public financing, and you're interested in running, send me a message! I might have money for you.

If you're not cut out to be a candidate but you know someone who is, maybe talk to them about it. Encouraging your friend to run for state legislature might be the deed that prevents Republicans from strangling American democracy.

Monday, June 24, 2019

The illusion of Joe Biden's electability

The Vice President doesn't do much, so the office suited Joe Biden well. Our calm determined overachieving President needed a warm-hearted goofball sidekick, and Biden was a perfect fit for the role. Republicans didn't really care to attack him either -- much better to go after Obama. So his poll numbers rose, and pundits praised his electability.

Biden isn't nearly as good at being a Presidential candidate. He lost in 1988 despite having the most early money, and lost in 2008 when he was one of the more experienced Senators. Message discipline and generally avoiding sloppy campaign mistakes are not his strengths.

One aspect of electability is: how good is the candidate at running for President? It's one you can emphasize a little less in making decisions, because a candidate who's really bad at running will usually crash and burn before the voting even starts, and you won't have to think about them.

But it may help to explain why the two successful Democratic Presidential candidates I've seen were the young upstarts of their times. If Bill Clinton and Barack Obama weren't good at running, they wouldn't have made it through the primary. Al Gore, John Kerry, and Hillary Clinton got their nominations more through institutional support than on the campaign trail -- and they lost general elections.

(I also wonder if it helps to fake out the right-wing media. National Republicans had been smearing Hillary for 15 years before the 2008 election, and they were all locked and loaded to do it again, and then... that's not Hillary! That's... some black guy? When you nominate someone they didn't expect and haven't propagandized against, they might not be able to get their work done in the few months they have.)

But this is all to say -- the idea of Biden as especially electable is probably an illusion. His numbers were inflated by being in a role that turned his weaknesses into strengths, and now they're going back to being weaknesses. Better to have someone who does things right during the election and moves upwards than the person who came in at the top.

Sunday, June 23, 2019

Different parties

Under Hillary Clinton (or Bernie Sanders), we'd still have Obama's Iran deal. There's more disagreement here among Republicans. Under Ted Cruz, I'm pretty sure war would have begun. Donald Trump backed out of war at the last moment.

The old Republican establishment liked the far cruelty. Trump overthrew them, so now we get the near cruelty instead. One would blow people up far away, the other would tear children from their parents and throw them into dungeons here in America.

This is why it's easy for me to devote so much attention to partisan electoral politics. The consequences of Republican victory are that bad, and even if they're sometimes different across Republicans, they're always really bad. So it's worth discovering what you can about how to help Democrats beat them.

Thursday, June 20, 2019

Warren could work out well

Apparently Democratic centrists are seeing Elizabeth Warren as an acceptable candidate. If "Warren as compromise nominee" is defeat for Bernie the candidate, it's a victory for Bernie the movement. He moves the Overton Window for her; she moves the party to him.

She's just better, in lots of ways. As has been noticed, the best at plans. And better at procedural reform.

She wants to get rid of the filibuster. Bernie doesn't -- a common position among the more senior Senators. This is vexing because it'll block his agenda. You won't get 60 Senators for Green New Deal and Medicare for All. You need to pass them with 50. The filibuster doesn't do much to impede Republicans, because they can just rip out the funding from our programs with 50 in the budget (which is immune to filibusters).

Some of my friends on the left side of the Democratic Party may dream of crushing their rivals on its right side in a primary. Having them compromise behind Warren is probably better. Having your intraparty rivals reconciled and falling in behind you makes it easier to defeat Republicans and enact policy.