Tariffs and Monetary Policy: Moral Hazard and Rent Seeking

President Trump's threat to impose tariffs on Mexico over immigration has pushed Federal Reserve Chair Jay Powell to say that if the tariffs lead to economic growth slowing, the Fed will cut interest rates.  While the bump may be about to end, this announcement was followed by a  solid global surge of stock markets on June 4 followed by smaller increases the next day.  This sets up a moral hazard situation for Trump where if he behaves irresponsibly on trade policy (with even GOP senators basically freaking out), the Fed might bail him out with interest rate cuts.

How is rent seeking entering into this?  I note a point just made by Dean Baker, that all these tariffs Trump is imposing on his own without any Congressional approval offer him the option of allowing specific exemptions from them.  So Trump can grant exemptions to specific sectors or even firms that favor him.  So Trump's trade wars are opening up a whole new vista for rent seeking.

Finally, and unsurprisingly, many of his trade policies look to fail to achieve their supposed goals.  This is pretty obvious for the case of the tariffs on Mexico, which by potentially weakening the Mexican economy weaken Mexico's ability to reduce Central Americans from to the US.  Another case involves the Chinese firm Huawei, supposedly both to enhance US national security and support the US high tech sector.  But according to a story in the Washington Post, 6/5/19 reports that 61 percent of experts say that Trump's ban on US firms supplying parts to Huawei will both weaken US national security by reducing US influence over Huawei and the whole 5G sector, with the relevant US firms being hurt.  I do not think even the Fed can bail the US economy out from this mess.

Barkley Rosser

A Bernie Sanders Narrative for Seniors

What follows is some unsolicited advice for the Sanders campaign.

Politico has an important piece on the downside of the extraordinary age bias in Sanders’ support.  Like a teeter totter, the large advantage Sanders enjoys among younger voters is counterbalanced by his dismal showing among the older crowd.  The article reviews voting breakdowns from the 2016 campaign and current poll results, and it shows that Sanders is not just behind among seniors, but way, way behind.  His political strengths guarantee he will survive the winnowing of the twenty-odd 2020 pretenders, but sheer arithmetic suggests he will need to make significant inroads among older voters, something he hasn’t done up to this point, to overtake Biden—assuming of course Biden doesn’t overtake himself.

So how can he do this?  The first thing to realize is that he doesn’t need absolute majorities among retirees and near-retires, just enough support so his advantage among the non-elderly isn’t erased.  The second is that direct material benefits alone are never enough.  People don’t simply vote in their immediate financial interest, although of course interests play an essential role.  Economic motives are like nuclei around which layers of narrative form, but it’s the narrative—the meaning—that orients people, and an economic condition can be explained in multiple ways.  Not all explanations are equally valid, of course, but in politics that’s largely irrelevant.  So yes, Sanders can and should talk up Social Security expansion and how universal health insurance would benefit  those on Medicare too.  But that’s not a sufficient political strategy; it lacks an encompassing narrative.  This narrative doesn’t have to be one all older people will gravitate to, but it has to speak to a significant portion of them.

And that’s where this post comes in.  Here’s a narrative I would recommend if I were on Bernie’s staff: As a democratic socialist, I have always believed in a future that we could approach step by step through political and social change.  That’s the America I once lived in, too.  It wasn’t perfect, not even close.  We had poverty, inequality, racism and sexism, military adventurism, and domination by the rich and monopolistic corporations.  Yet we also had steady progress against all these things, made possible by a relatively open political system—in other words, by democracy.  But for several decades that progress has stalled, and many of these problems have actually become worse again.  The system has shut down, and it will take radical means to open it up again so our country can resume moving forward.  For those of us in my generation who have seen all of this in our own lives, the era of reform and progress and then the era of blockage, this is our final opportunity to leave our legacy to the young.  It is an opportunity to recover the idealism that once, in the days of people like Martin Luther King and Bobby Kennedy, seemed almost mainstream but now demands a revolution.  We know what America was like before it became a plutocracy, and we can come together again to return to the path of democracy.  This is not about returning to the past, but returning to a possibility we knew when we were young that the future could be ours to win.  One way or another, we will leave a legacy to our children and their children’s children.  Let it be this legacy of democratic possibility.

Then talk about Social Security and health care, and the need for a politics that can actually put these issues on the table and make the needs of the majority the driving force for change.

A Very Erroneous Chart in the Economic Report of the President

Menzie Chinn has been reading the latest Economic Report of the President and finds a very erroneous and misleading chart, which is figure 1-6 from this this document (see page 45), which states:

Equipment investment, in particular, exhibited a pronounced spike in the fourth quarter of 2017, as both the House and Senate versions of the TCJA bill, which were respectively introduced on November 2 and November 9, stipulated that full expensing for new equipment investment would be retroactive to September 2017. This created a strong financial incentive for companies to shift their equipment investment to the fourth quarter of 2017, so as to deduct new equipment investment at the old 35 percent statutory corporate income tax rate. After the initial spike in the rate of growth in fixed investment, standard neoclassical growth models would predict a return of the rate of growth to its pre-TCJA trend, but from a higher, post-TCJA level, with the capital-to-output ratio thereby asymptotically approaching its new, higher steady-state level.

Earlier on page 43 we see:

Despite expected adjustment costs and investment lags in the transition to a higher-target capital stock, the first three quarters after the TCJA’s passage saw a notable acceleration in investment. Figure 1-6 reports growth in real private nonresidential fixed investment from the time of the TCJA’s passage until the third quarter of 2018, both for nonresidential investment overall and for the major subcomponents of structures, equipment, and intellectual property products, expressed as compound annual growth rates

Menzie looks at the equipment investment calculation:

My calculations indicate that (stochastic) trend annual growth rate over the pre-TCJA period indicated by the ERP is 7.8%, not -2.2% as indicated in ERP Figure 1-6. The TCJA period growth rate is 6.4%, rather than the 6.6% reported. Using the vintage the CEA probably used (December 2018 release) does not change these fundamental patterns.

I decided to look at FRED data on real private nonresidential fixed investment and suspect Hassett’s 1.5% growth rate for the pre-TCJA period really should read 5.1%. I suspect careful readers can find all sort of errors in this document, which begs the question how could the Council of Economic Advisers get the basic data on an important issue so very wrong. Or did Hassett outsource this chapter to Lawrence Kudlow?

A Tariff Laffer Curve?

Douglas Irwin is a very good economist. Let’s highlight his Historical Perspectives on U.S. Trade Policy:

The Civil War marked the beginning of a long period of high U.S. tariffs. These tariffs served the dual purpose of raising revenue for the federal government and keeping out foreign goods, ostensibly for the protection of U.S. labor and business. After the war, tariffs (which generated roughly half of government revenue) remained high to service the enormous debt burden that resulted from the war. Yet by the mid-1880s a curious problem had arisen: though much of the debt had been paid off, federal revenues were outstripping expenditures by as much as 50 percent. Republican and Democratic politicians agreed that the fiscal surplus should be reduced, but they proposed exactly the opposite policies for achieving this objective. Democrats advocated cutting tariff rates in an effort to reduce revenue. Arguing that this would simply encourage imports and raise even more revenue, Republicans proposed higher tariff rates to reduce fiscal revenue. This debate over the tariff "Laffer curve" essentially hinged on whether existing tariffs were above or below the revenue-maximizing rate, which in turn depended on the height of the tariff and the price elasticity of import demand.

Irwin examined this issue in his Higher Tariffs, Lower Revenues? Analyzing the Fiscal Aspects of the "Great Tariff Debate of 1888":

This paper examines this debate and attempts to determine the revenue effects of the proposed tariff changes. The results indicate that the tariff and the price elasticity of U.S. import demand during the 1880s below the maximum revenue rate, and therefore a tariff reduction would have reduced customs revenue.

Irwin also contrasts the other policy agendas of the two parties. Democrats wanted to lower tariffs to “ease the tax burden on consumers and farmers, and to eliminate inequities associated with special interest protection”. Republicans feared import competition as lower tariffs “would expose American industry and workers to foreign competition and thereby jeopardize the economic well-being of the country”. His paper notes that the typical tariff back then was even higher than the tariff rates being considered by the Trump White House. His estimates of the revenue-maximizing tariff rate, however, suggests that lower tariff rates would reduce tariff revenue. Of course, today we have other ways to raising Federal tax revenues as opposed to inefficient tariffs, which is why U.S. fiscal policy had relied on these other taxes and not tariffs before Trump.

Art Laffer is Not an Economist

Can The Hill be more wrong?

President Trump will award the Presidential Medal of Freedom, the nation's highest civilian honor, to economist Arthur Laffer, the White House announced Friday. The president will honor Laffer on June 19 for his contributions to economic policy. The White House described Laffer as "one of the most influential economists in American history" in announcing the award.

OK the Idiot-in-Chief did say that but repeat after me – Art Laffer is not an economist. Why did Trump debase the Presidential Medal of Freedom and the entire economics profession?

Laffer co-wrote a book published last year titled "Trumponomics: Inside the America First Plan to Revive Our Economy." His co-author was Stephen Moore, who earlier this year was nominated to serve on the Federal Reserve Board of Governors but withdrew amid bipartisan opposition from senators.

Well at least The Hill got this right. But this?

Laffer championed supply-side economics and gained prominence serving as a top adviser to then-President Reagan. He established what is known as the "Laffer Curve," which showed that increases in tax rates will eventually cause government revenue to decrease at a certain point. The model has been cited to argue for the benefits of tax cuts. Critics of supply-side economics argue that it has contributed to inequality and disproportionately benefits the wealthy.

The inequality critique is not the only issue with tax cuts that reduce national savings. Couldn’t The Hill note that the 1981 tax cut lowered investment via higher real interest rates as well as appreciated the dollar leading to large trade deficits? Enough with this weak account as Slate got this right!

Trump Gives World’s Worst Economist the Presidential Medal of Freedom

A better read and if you are going to dub Laffer as an economist please note he is a very poor economist. But at least he lavished Trump with praise.

North Korean Near-Famine Reportedly Leads To Dead Nuclear Negotiators

It has not been officially reported by the North Korean govt, but long running rumors are now being reported by various  serious media that Trump's big pal Kim Jong Un has recently killed the top 5 officials of his govt who set up his  failed summit with US President Trump.

According to sources I watch there has been a massive crop failure this year in the Democratic Peoples' Republic (DPRK). The big issue there is if the local, semi-allowed private markets in ag will save the population from outright starvation. At this time this is not  known.

So this difficult situation may be partly responsible for Kim Jong Un killing the top five negotiators with the US on nuclear weapons for the summit in Hanoi.  In addition, reportedly five more senior officials have been sent to rural labor, or something like that.

A report from South Korea's Chousn Ilbo nuwspaper is that whom Kim Jong Il killed was Kim Hyok Choi, along with four others, although this has not been confirmed by outside observers.  The newspaper also claimed that five other officials were sent to hard labor, but at least one of those has appeared in public, so this raises questions about this report, which some doubt (see comments below)

The unclear question is how much will the unofficial private markets in DPRK will save people from outright starvation/famine. The deepest  sources ai have followed say that it is unclear.  DPKR is not a "normal" country, and we have no way to know what is actually going on there now.

Given that his nation is facing food shortages, it is not surprising that he may be facing an internal challenge, and now we see that manifested by him overcoming any inside opposition by killing these five individuals. 

Note that this post has been revised in light of new information and comments below.

Barkley Rosser

Trump’s Latest Mexican Tariff Tirade Irks Senator Grassley

Senator Grassley rebukes the latest idiocy from the White House:

President Trump dropped a trade war bomb on Thursday when he announced his intent to put in place new and harsh tariffs on goods from Mexico until the “illegal Immigration problem is remedied.” And among the many worried, negative reactions was one from Senate Finance Committee Chair Chuck Grassley, in a strongly worded statement. “Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent,” the statement begins. “Following through on this threat would seriously jeopardize passage USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country.” Putting this in the context of harming Trump’s own signature USMCA (the replacement for NAFTA) is a smart frame, an effort to show that the tariffs are in conflict with the administration’s own trade goals.

First Tramp thinks NAFTA is the worst trade deal ever but NAFTA 1.1 is beautiful. But now Trump wants to start a new trade war with Mexico because he did not get his racist wall? OK! Of course Trump is not the only one with a twitter account and Paul Krugman has joined Senator Grassley with lines like:

Leave the economics on one side, and consider the supposed legal justification. U.S. trade law gives the president huge discretion to impose tariffs, as long as he is willing to make bizarre claims – i.e., Canadian steel threatens national security. But imposing tariffs without Congressional approval to serve goals that have nothing to do with trade policy – in this case, an immigration crisis that exists only in his mind – goes well beyond even the brazenness of his previous actions. So he's claiming justification under the International Economic Emergency Powers Act, which he claims basically lets him do anything he wants in response to anything he declares to be an emergency. I don't see any limits under this interpretation. Could he, for example, impose punitive tariffs on Swiss watches because Swiss newspapers run cartoons that make fun of him? Why not?

Krugman continues by noting some basic economics:

OK, the economics: What we import from Mexico are a lot of consumer items, especially food items, plus Mexico is a key part of the supply chain in various manufactures, especially autos. So this would hurt U.S. consumers and also hurt competitiveness of U.S. companies. So this would be stagflationary: higher inflation plus lost jobs. Industry would howl. Also very nasty for U.S. farmers if Mexico retaliates. Plus we are, of course, throwing away any remaining credibility as a negotiating partner.

Let’s also think about the Mexican economy which will be hurt by these tariffs. And if employment prospects decline in Mexico, this will likely increase the immigration flows from Mexico. So Trump’s latest insanity will only increase what he sees as a major problem. Yes – our President is a very stupid person.

Will China Play The Rare Earth Card In The Trade War?

The rumor that China might play its "rare earth card" was the rumor today that helped push down both stock and oil markets according to a variety of reports.  The trigger for this seems to have been a visit on May 26 by China's president, Xi  Jinping, to a rare earth facility, along with some rumbling statements associated with that visit.  They may not do it, but the possibility of blocking exports to the US of exports of rare earth metals shows that China has potential weapons if Trump follows through with more vigorous trade barriers.  How serious is this threat?

It is probably not as serious as it might  have been a decade ago.  In 1990 a solid majority of these critical elements were produced outside  of China, with the US being a major source, particularly California.  But production here and in some other nations such as Australia was reduced substantially as mining of many of these involves substantial environmental damage.  At the same time China entered the opening and expanded production, getting to be the source of about 90 percent of all production by 2010.  However, due to events then increased efforts to increase production of them elsewhere, especially Malaysia, Australia, and South Africa, has reduced this to 70 percent.

In 2010 China used the weapon against Japan.  A Chinese fisher was captured by Japanese forces when he  entered a zone controlled by the Japanese but claimed by China.  As the Chinese demanded release of the fisher, they halted exports of several of these metals used to produce electric cars. The Japanese gave up and returned the fisher.

There are 17 of these recognized rare earth elements, although it is often noted that they are not really all that rare.  Some of the more important ones are neodymium,  which is used in lasers and in magnets used in wind turbines and electric motors, yttrium used in superconductors, lanthanum used in cameras and telescope lenses, cerium used in catalytic converters, yttrium used in superconductors, gadolinium used in TV screens and MRIs, and praseodymium used in aircraft engines.

An irony of this situation is that these rare earths are used in technologies that are important to move us off dependence on fossil fuels towards more sustainable energy sources, such as wind and electric cars.  This may be a serious limit to long run growth. It is ironic that this may be getting caught up in a stupid trade war staged by our president against China.

Barkley Rosser

A Decision Theory Case to Chew On

Here’s something I posted over on Andrew Gelman’s wonderful blog:

I read Alive and thought it unknowingly made a very powerful point about decision theory, that you always have to balance the risks of action against the risks of inaction. The plane was stuck in snow on a slope that led down to a valley that was partially inhabited. Yes, the immediate survivors could not see this, and sending a party down the slope seemed very dangerous (which it was), so they delayed for months. Meanwhile, without thinking explicitly about it, they accepted the risks of staying put, which included the obvious one of an avalanche (how can you not know this about snowy mountain slopes?), which in fact transpired, killing a large fraction of those who had survived the initial crash. In retrospect, once it was obvious they would not be rescued by being spotted from the air, they should have sent a party down to the valley, and it is probable many lives would have been saved. The whole cannibalism thing is a distraction, IMO.

As for the munchy business, I once knew someone who, when giving his name at a restaurant, said “Donner” so he could hear them call out “Donner party of four!”

Conservative Economists Discover the Baumol Cost Disease

A little over a year ago Mark Perry wrote this nonsense:

The chart above (thanks to Olivier Ballou) is an update of a chart we produced last year about this time, and shows the percent changes since January 1997 in the prices of selected consumer goods and services, along with the increase in average hourly earnings in this version … Blue lines = prices subject to free market forces. Red lines = prices subject to regulatory capture by government. Food and drink is debatable either way. Conclusion: remind me why socialism is so great again.

To which I reminded him of the Baumol cost disease and followed up with this. It is good to see that Alex Tabarrok has been thinking about this issue as has John Cochrane. Read their posts as there is a lot of great discussion but permit me to cite just this:

I assumed that regulation, bloat and bureaucracy, monopoly power and the Baumol effect would each explain some of what is going on. After looking at this in depth, however, my conclusion is that it’s almost all Baumol effect.

Emoluments As Grounds For Impeachment

I have said this before, but am saying it again.  The clearest grounds for impeaching Donald Trump are not his obstruction of justice on which so much attention is being focused, but in my view his blatant and unequivocal acceptance of emoluments from foreign governments, with this most clearly evident at his hotel in Washington, with these emoluments the basis of lawsuits by the governments of Maryland and D.C. going forward slowly.  But somehow none  in Congress pushing impeachment have raised this issue as grounds for impeachment, even though this is something expressly forbidden in the Constitution of presidents.  What clearer grounds for impeaching a president could there be?

I think there are four interrelated reasons we have not seen much discussion of this matter.  One is that there has been so much focus on the Mueller Report, which focused on Russian interference in the 2016 election and the relation of the Trump campaign with that. While Mueller failed to find sufficient evidence of conspiracy, the door was left open for possible obstruction of justice, even though A.G. Barr has vigorously tried to slam it shut.  And then we have seen Trump apparently doing more of it as he tries to get his whole administration ignoring Congressional subpoenas.

Another reason for this focus is that charges on this were key in the move  to impeach President Nixon, with him being forced to resign as fellow Republicans made it clear they would support the move to impeach on these grounds.  Needless to say, today, with the  exception of Rep. Justin Amash of Michigan, no Republicans are supporting the move to impeach, a major  reason Speaker Pelosi continues to resist opening a formal impeachment inquiry, even as the pressure to do so rises.

 A third reason is that Mueller apparently accepted the demand by Trump to recognize a "red line" around his personal finances.  Those are now increasingly coming under investigation, and we are beginning to see some of his tax returns. But an impeachable focus out of what may come has not fully come into  view, although possible money laundering of Russian oligarch money through Deutsche Bank is widely thought to have occurred and may soon be exposed. But is that impeachable as it all happened before Trump became president?

Which brings us to the fourth reason, we have never had a president ever in the 232 years since George Washington took his oath of office who has even remotely been suggested to have violated this very clear rule stated in the Constitution, not a poor one (and we have had a few not rich, if not outright indigent) nor a rich one.  None of them, until at least now.  We have not been able to think about this.

But now it is here, if partially buried in all the carryings on about so many other matters, especially this matter of obstruction of justice.  But here we have a president for the first time ever clearly taking money from foreigners while in office, and in the case of the Saudis in particular, who have dumped piles of money into the Trump Hotel in Washington, acted in ways the Foreign emolumenter wants, arguably against the interests of the US.  Did we need to have "Bone Saw" MBS take power in a coup supported by Trump and Kushner?  Should we be rushing to war with Iran at their behest?  Should we be continuing to arm them for their brutal war in Yemen?

I would like to see at least one of the people either running for president or stomping about in the Congress demanding impeachment bring this up.  This is a far clearer violation of the Constituton than anything else Trump has done.  This is exactly why the Founding Fathers both put the emoluments clause into the Constitution and gave Congress the power to impeach presidents.  If there is a "high crime and misdemeanor" the Founding Fathers would have had in mind when they did all this, is not violating the emoluments clause at the very top of the list?  Out with the crooked bum!

Barkley Rosser

Khamenei Denounces Rouhani For Negotiating Nuclear Deal

This has been reported by Juan Cole.  Apparently Supreme Jurisprudent, Ali Khamenei of Iran in a speech to a large number of university students has seriously denounced President Hassan Rouhani for having negotiated the JCPOA nuclear agreement with the United States and other powers.  During the negotiations Khamenei played a mixed role, raising doubts about the negotiations, but allowing them to continue and for the agreement to be adopted and implemented.  As all know, Iran has until now kept its part of the agreement, whereas President Trump withdrew the US from it and has imposed even more serious economic sanctions on Iran than were there before the agreement, with other powers unable to substantially offset the US actions, even as their governments have continued to nominally support the agreement.  Thus, Khamenei has now fully and openly declared that his doubts were correct and that Rouhani was foolish to make the agreement.

This follows the announcement that Iran will begin nominally breaching the agreement by expanding its enrichment of uranium.  The violation remains relatively minor at this point, but it is a significant step in any case. With the US raising military pressure, even as Trump says he does not want a war, it seems that this situation is just getting worse with almost nobody making any effort to halt this slide into rising conflict.  As it is, Khamenei seems to be preparing his nation for the worst.

Barkley Rosser

Shorter working weeks needed to tackle climate crisis

The U.K. think tank Autonomy has issued a report calling for much shorter working weeks, "The Ecological Limits of Work: on carbon emissions, carbon budgets and working time," which is featured in a Guardian article published today, "Much shorter working weeks needed to tackle climate crisis – study." 

People across Europe will need to work drastically fewer hours to avoid disastrous climate heating unless there is a radical decarbonising of the economy, according to a study. 

The research, from thinktank Autonomy, shows workers in the UK would need to move to nine-hour weeks to keep the country on track to avoid more than 2C of heating at current carbon intensity levels. Similar reductions were found to be necessary in Sweden and Germany. 

The findings are based on OECD and UN data on greenhouse gas emissions per industry in the three countries. It found that at current carbon levels, all three would require a drastic reduction in working hours as well as urgent measures to decarbonise the economy to prevent climate breakdown. 

Will Stronge, the director of Autonomy, said the research highlighted the need to include reductions in working hours as part of the efforts to address the climate emergency.

Sandwichman previously addressed this issue last October in a pair of EconoSpeak posts and reached very similar conclusions:

The IPCC 1.5° C Report and the Ten-Hour Week

Some Questions about the Ten-Hour Week

Trump Claims Obstruction of Justice is an Official Duty of the White House

Tierney Sneed reports on Trump’s latest obstruction of justice:

The Justice Department on Monday issued a legal opinion claiming that Congress could not compel former White House Counsel Don McGahn to testify about special counsel Robert Mueller’s report. The opinion was released not long after reports that the White House was planning to instruct McGahn to not comply with a House subpoena that he testify at a Judiciary Committee hearing Tuesday.

The legal opinion can be found here and states in part:

Congress may not constitutionally compel the President’s senior advisors to testify about their official duties … This testimonial immunity is rooted in the constitutional separation of powers and derives from the President’s independence from Congress.

What an incredibly arrogant canard! McGahn is being asked to testify to Congress about what is clearly obstruction of justice – a crime. How is that an official duty of the White House? Oh wait – the Trump White House is nothing but a den of organized crime so maybe he sees committing crimes as one of his official duties!

Sanctions On Iran Are Hitting Hezbollah

That is the top headline, upper right corner front page, of today's Washington Post, a quite long article by Liz Sly and Suzan Haidamous.  WaPo has been much criticized by Trump and his supporters for alleged "fake news" critical of his leaving the Iran nuclear deal while Iran was compliant and not only reimposing the sanctions put on by Obama to get Iran to the negotiating table for that deal, but adding more and yet more leading to a military escalation that may have peaked.  So, now maybe WaPo is rewarding Trump for saying he does not want a war with Iran (I approve of that) by headlining this story that has long been pushed by his fans as a justification for all this sanctions imposing on Iran.  Maybe Iran has been well behaved on the nuclear deal (while wickedly testing ballistic missiles, not part of the deal), but, ah ha! the sanctions will hurt its evil terrorist proxies like Hezbollah, and, wow, now we learn they are, whoopee!

It does look that indeed the heightened economic sanctions on Iran have reduced its financial support for Hezbollah, and I am not a big fan of that group.   One source quoted in the WaPo story put Iran as providing about 70 percent of Hezbollah's funding, with it unclear by how much that has been reduced.  Hezbollah has publicly reported that it has had its funding reduced and has initiated lots of fundraisers to help offset that.  It claims not to have reduced its support of social services or paying "families of martyrs."  It is unclear if it has had to pull back much from its involvement in the war in Syria, where the final round is probably now in place in Idlib province in the Northwest.

Some longer perspective is needed here.  I have log argued that why Israel opposed the Iran nuclear pact was that it did not want the economic sanctions Obama imposed to get Iran to the table ended, and that their prime motive for this was precisely that they did not want funding support for Hezbollah increased.  I argued in many posts here from way back that in fact Iran was not involved in a nuclear weapons program after about 2003, with Supreme Jurisprudent Khamenei having issued fatwas against nuclear weapons.  Israeli military intel realized Iran was not really much of a nuclear threat, certainly not in the short run, as did US military intel.  The nuclear deal was really to put the Iranian potential for such a program into a deeper box and assure those afraid of it, but it was not accepted in some places, especially in the US where Republicans just dismissed it, partly under Israeli encouragement.  But for the Israelis the problem was the ending of sanctions and their fear of Hezbollah, which seemed much more salient than the effectively inactive Iranian nuclear weapons program.  They knew all along the hysteria over that was just that, overblown hysteria.

So why has  Israel been so afraid of Hezbollah?  According to most sources it is because they were unable to defeat Hezbollah easily when they invaded Lebanon in 2006.  They also know that Hezbollah has something on the order of 25,000 missiles, these more serious than the scrubs that Hamas and Islamic Jihad periodically fire out of Gaza.  However it already has those so placing sanctions on Iran will not get rid of those.  But in any case they do not want Hezbollah getting even more or otherwise building up their military strength, which their experience in Syria fighting al-Qaeda related groups has only bolstered.

As it is, the US has since the 1980s designated Hezbollah a terrorist organization and placed sanctions on both it and Iran for its activities, those sanctions remaining on after 2015 when the sanctions to get it to the negotiating table were ended with the nuclear agreement.  And in the 1980s indeed it engaged in many terrorist activities, including against US forces, such as the attack on the US marines barrack in Beirut in 1983 that killed hundreds.  But then in 1992 Hezbollah entered politics and began to have members holding cabinet positions, with its role in the government steadily increasing over time to where today it is the strongest political group in Lebanon, with its Shia population base the largest ethnic group now in Lebanon, if not a majority out of its great diversity.

This fundamentally changed Hezbollah policy, all but ending its role as a terrorist group, if not ending its role as scaring the Israelis because they cannot defeat it when they invade Lebanon.  There was a major attack in Buenos Aires by a Hezbollah group in 1992 on the Israeli embassy and then another deadly attack there in 1994 on a Jewish aid society building.  But since then there have been no terror attacks unequivocally identified with the group.  Some have claimed they were tied to the suicide attack in 2005 that killed Prime Minister Hariri, but most identify that as a Syrian operation, with any Hezbollah involvement peripheral.  There was also a suicide attack on an Israeli tourist bus in Burgas, Bulgaria in 2012 that killed 5, with some claiming that was a Hezbollah or perhaps Iranian operation, but that remains unsolved and Hezbollah and Iran have both denied any involvement.

Looking at a Wikipedia entry on "Hezbollah attacks on Israel," this reports 16 rocket attacks between January 2007 and December 20, 2015 coming out of Lebanon into Israel.  While there has been some property damage and four injuries from these, nobody has been killed.  Furthermore, Hezbollah has denied being involved in any of these with most identified as coming from either al Qaeda related groups or various radical Palestinian groups, all of these Sunni.  The only ones nobody has claimed are the final 5, four in 2014 and the last one in 2015, none of these causing any property damage or injuries and all denied by Hezbollah.

Offhand this leaves me as pretty unimpressed with how wonderful this report is.  Does this justify the US withdrawing from the JCPOA and then imposing sanctions on Iran much stricter than were on before the nuclear negotiations.  I do not think so.

Barkley Rosser