Elizabeth Warren is favored in Iowa

Elizabeth Warren is leading in the favorability averages of the historically best Iowa pollsters, compiled by Nate Silver. Biden still leads the national polls. But I think these Iowa numbers are underrated in contemporary internet speculation. If you're worried that Biden might coast to the nomination, let me render Optimism Guy services in my new Elizabeth Warren Fan Club uniform.

First, some history about Iowa and why it's historically such a big deal. It's the first actual election in the primary, so it's a huge focus of media coverage, and plays a major role in winnowing the field. That's the point at which the primaries become more a mass-media story rather than an inside story for activist types. And with the national primary coming on, lots of people are starting to seriously decide how to vote. It's the moment when you want the media to treat you as the popular candidate on an upswing. You do this... by winning Iowa! It's the place where Obama became the front-runner in 2008. There are changes of various sorts that probably dampen this effect a little relative to history, but I think it's still significant.

Now for our polls. Among Iowa Democrats, Warren's favorable-unfavorables lead the pack at 80-11, followed by Harris at 73-10 and Mayor Pete at 72-7. Bernie is at 68-24, and only then do we see Biden at 67-24.

We're in the stage where candidates start to drop out. Because these polls register information about how you might vote if your first choice drops out, they're better for predicting the direction of consolidation than polls that just ask you about your first choice. And that direction of consolidation favors Warren.

Nicely, it also favors Harris, Pete, and Bernie (MoE tho) over Biden. They each have a decent electability case -- Harris with minority turnout, Bernie with good general-election poll numbers, and Pete with skillful navigation of the media environment. I think they'd all make much better presidents than Biden, who really has the full versions of bad traits that people attack the other three for in overheated primary debates.

In summary: Warren is on top in a highly consequential polling average. If she falters, some alternative superior to Biden gets a serious shot. If you're a Warren fan or an anybody-but-Biden type (I'm both), Iowa favors you.

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.

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.

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.