Trump Brags About Record Defense Spending

Niv Elis covers the latest in the Trump fiscal fiasco:

President Trump on Friday signed two spending packages totaling $1.4 trillion, averting a government shutdown at midnight. The bills included all 12 annual appropriations bills for the 2020 fiscal year that started Oct. 1. They also included a slew of tax cuts, extending expiring and expired tax breaks and eliminating other taxes that amount to an additional $426 billion in lost revenue, bringing the total cost of the bill to more than $1.8 trillion.

Reagan used to complain about “tax&tax and spend&spend” so he replaced it with spend&spend and borrow&borrow. Trump is doing the same but there’s more:

Trump’s signature brings to a close a fraught year for spending. At the same time last year, his refusal to sign a stopgap measure over funding his proposed border wall led to a 35-day shutdown, the longest in the nation’s history. The Democratic majority in the House, which was seated in the midst of the shutdown, left Trump with little to show for the shutdown by way of wall funding. After finally striking a deal to reopen the government in February, Trump proceeded to declare a state of emergency along the Southern border to allow him to reprogram other funds. Not long after, Trump released his annual budget proposal that would have hyper-charged military spending while dramatically cutting domestic spending, slashing more than 20 percent of funds from the EPA, State Department, and Transportation Department, and abolishing funding for popular programs such as the National Endowment for the Arts, the Corporation for Public Broadcasting and the Special Olympics. Congress summarily dismissed the request and ultimately agreed to a deal that would increase spending on both defense and non-defense significantly for both 2020 and 2021. Congressional leaders would need two stopgap measures spanning nearly three months to work out spending allocations, find compromises on controversial issues such as the wall and agree on additional legislation to include in the package.

Trump tried to follow the rightwing playbook by paying for the tax cuts for the rich and increases in defense spending by screwing the rest of the Federal budget. Thankfully this failed. But of course that did not keep Trump off the twitter:

I will be signing our 738 Billion Dollar Defense Spending Bill today. It will include 12 weeks Paid Parental Leave, gives our troops a raise, importantly creates the SPACE FORCE, SOUTHERN BORDER WALL FUNDING, repeals “Cadillac Tax” on Health Plans, raises smoking age to 21! BIG!

Trump went onto to say that the U.S. has never spent more on defense but of course he is talking about nominal dollars and not inflation adjusted figures. Thankfully we have the BEA and Table 1.1.6. Real Gross Domestic Product, Chained Dollars. In 2012$, defense spending was $861.3 billion in 2010. By 2016 it had fallen to $708.3 billion. Now it had risen to $737.5 billion by 2018 and will likely be over $770 billion this year. But we will nowhere close to $862 billion in 2020 – nor should we be. Of course that did not stop Trump from lying to the troops!

Does Menzie Chinn Or Tyler Cowen Replace Mark Thoma?

The retirement of Mark Thoma, whose Economists View has been praised on his retirement with having transformed the econoblogosphere back in the mid- noughties by linking regularly, daily in his heyday, to other blogs, including this one. Thanks to him when the big crash happened, there was a wide open debate across levels and schools of thought in economics about what was going down. 

But for some time now, Mark has been reducing his activity on his blog, with it stopping being the reliable every day link to other blogs some time ago.  I fear that this combined with his retirement may be a signal of the decline, if not the outright death yet, of the econoblogosphere, at least as an important intellectual and policy force.

The obvious new competitor has been Twitter, which I confess I still resist.  It is ubiquitous, but also seriously shaallow for serious issues.  I recognize its usefulness for covering immediate events such as disasters or revolutoins or strikes, etc.  But it is vacuous for any serious discussions.  But its appeal and attraction have simply grown, with the rise of use by Trump, with his 68 million followers and doinog over 100 per day has substantially led to this shift.  We here are in a declining market.

At a personal level it seemed to me the peak may have been even before  Mark Thoma showed up. I was involved with the predecessor to this blog, Maxspeak. Back then I regularly would get up to 70 cmmentss on posts I mase, and in my view, without draggging through details, the most influential in real terms posts I have ever put up in the econoblogsphere date to that time.  We had some major issues we were important on against established views in both parties, with Social Security an espeially important one, something tha carried over when Econospeak started with its closely affiliate Angry Bear blog.

Anyway, as regular readers probably notice, the only times we get the kinds of comment numbers I used to get regularly on Maxspeak ar when somebody like our semi-regular visitor, Egmont, shows up. But even he recently seems to appear less frequently.  Our audience seems to be shrinking, and as near as I can tell is largely of an older age: ok boomer!

Which brings me to the matter of Mark Thoma's retirement.  So, there is no question that I have huge respect him and the role he has played. I fear that this is not a matter of him now devoting more time to his blog in retirement, but a sign that he will be withdrawing more generally from public activity for whatever reason, various speculations floating around on that, which I shall not comment on in any detail.  But if he is having problems due to health or whatever, I definitely wish him the best.

In any case, I fear he is disappearing from the econoblogosphere. This raises the question of who is his successor, however reduced.  I propose that it is Menzie  Chinn ar Econbrowser, now mostly silently backed up by his senior co-blogger, Jim Hamilton.  That blog now seems to host some of the more intelligent debates between people of different views.

Its most serious rival may well be Marginal Revolution, run by the polymathic Tyler Cowen, who posts on matters beyond  economics.  He and Menzie clearly have different ideologies, with Mennzie, who briefl served on the CEA staff of George W.. Bush, more of an establishment center left type, with his co-blogger somewhat more to the right, although long eschewing any ideological or political stance except  occasionally very vaguely.

OToH, Tyler identifies himself as a libertarian, but is so often complicating his views that many of his commenters regularly complain about his supposed statist deviations.  But there also people of different ideologies and methodologies appear and acstually debate to some degree.

It is kind of a close call. MR gets more attention, and Tyler covers a wider array of topics, while getting more and more into interviewing major public intlllectuals.  But while some of them have disappeared, he has perhaps more trollish extremists spouting racist and xenophobic and wild conspiracy yveiws. Unlike Menzie (or  Jim) he rarely enters into the discussions he sets off, with an occasional exception.

OTOH, Menzie's  posts are narrower, often reflecting his specialty of  time-series analysis of international economic relations, which holds off some of the worst trollish crazies. But theee regular commentators who defend t=Trump and his policies, which Menzie  is often criticizing.  Menzie is more likely to comment on the ongoing debatres, although usually on fairly technical matters regarding econometric methodology or data. But he (and Jim) tolerate broader debates, and the quality of those debates cross the current divide may be more serious than what goes on at MR, with its large number of loonny bin conspiracy theorists.

These seem to me now to be the most serious successors to Economists View in the wake of Mark Thoma's rerirement. Neither provides the broad linking he did, but they are both open to broad debate across party and ideological lines, which goes on in each of them.  I wish both all the brst.

Barkley Rosser

The Afghanistan War

The Washington Post has over the last 7 days published a detailed account based on many secret documents they have spent years obtaining to provide an accurate account of what has happened during what is now the longest war the US has been engaged in.  It is an impressive account, which I have tried to follow, although with finishing a semester I did not read every word ot it. But it is a serious and important serious series, just reaching its conclusion today, along with lots of commentary in the WaPo Sunda Outlook section.

One extremely serious bottom line on both of them was lying by US officials, just rampant and all over the place for both wars.  WaPo Outlook had an especially useful column by Lauren Kay Johnson who was US military PR person in late 2009-early 2010, soon after Obama came in.  Lies, lies, lies.

The obvious comparison is with the Vietnam War, and  much does carry over such as corruption and bad excuses for continuing with unlikely improvement outcomes. Vietnam was bigger and deadlier, well over 2000 dead per year in Vietnam compared to about 100 Americans dying in Afghanistan per year.  Easy to pay no attention to them.

So aside from a lot lower US deaths, maybe the other big difference from the Vietnam War is the shift to drones, perhaps not unconnected to the  first.  While this almost certainly reduced the US deaths, it also led to less knowledge on the  ground  that was there in Vietnam (see "They Marched into Sunlight" by David Maraniss, old friend of mine).

Obviously a big difference between the two wars is that Vietnam beyond some point engendered a massive anti-war protest movement, while the longer Afghan war has not even to now triggered anything like the protests the Vietnam predecessor brought.  Certainly both the far lower death rate and lower costs lie behind this.

But the similarities are clear and must be recognized.  This has been a corrupt, ultimately hopeless war that people at many levels of the US govt have  just routinely lied about.  A big difference between the teo wars is the big role of opium in Afghanistan, with the money in that just hugely important,while a much more minor matter in the earlier war.

A big question coming out of these reports, especially important for Dems, is the tole of Obama.  Unfortunately he looks somewhat like LBJ in the Vietnam War, although not identical. The similarity is that both inherited their war from a predecessor and then were subjected to accusations that they needed to show that they were tough and not Communists or Muslim radicals, and so each attempted to make intermediate deals that kept the war going while not going all the way the superhawks wanted, allowing both those who wanted more war and less to whine.

For Obama the ultimate of this came with Libya, where he was pressured by many outsiders, including the old colonial powers UK and France, with Hillary Clinton transmitting these outside demands, Obama took a middle route, the much-mocked "leading from behind" where the air forces of UK and France were leading the way in with massive outside support, including from the Arab League complicated, not going to get into details of that, but Arab Spring was going on).

On the politics I note that Newt Gingrich (or some other high GOP of the time) in a single sentence criticized hiin for being a wimp and only "leading from behind" rather than going in all out, while also, in the same sentence criticizing him for going in at all, implicitly the later Trump critique.

So, yes, Libya became aa mess, still one to this day, which made Obama loath to go all in in Syria, although he did set up the deal with the Syrian Kurds  i NE Syria that after Trump got in led to the defeat of Daesh/ISIL.  But, hey, he got 8 Benghazi hearings that eventually led nowhere.

But then we have him imitating LBJ at a later stage and rather than pulling out as JOe Biden of all people was basically advising him to do, he played to the hawks as people like Trump were claiming he was not even a US citizen, and had his "surge," not all that big, but enough to stick him into the war for the rest of his presidency.  This was one of the biggest mistakes Obama made.

Which Brings us t o Donald Trump. He campaigned on opposing this war and got support from some leftsts due to this and similar promises elsewhere.  The botton line is that despite a lot of so-far failed negotiations with the Taliban, he has not gotten anywhere, and there are now more US troops in Afghanistan than when be became president.  This is also true  in other parts of the wold.

What almost nobody commenting on this, and while I did not read every single word of the generally excellent WaPo series on this, is that there was a compltely justified reason for the beginning of this war.  Al Qaeada attacked the US on 9/11/01, killing nearly 3000 Americans, with them being protected and housed by the Taliban regime then there.  Many have forgotten that when G,W. Bush invaded Afghanistan to bring regime change thee, he had the support of well over 90 percent of the US population, including me. And the invasion was successful: the government was overthrown.

Which gets us to the critical point: we should have declared the real victory we had achieved and withdrawn soon after, arguably, possibly, with some more to pursue bin Laden, but not necessarily as he had built the mountain caves he initially retreated to, and Sausi intel was  not giving us the info on them at that time.

But, G.W. Bush got distracted with the completely idiotic  invasion of Iraq, and once that got going, Afghanistan was forgottn, an embarrassing, which it has remained ever since, so unfortunately.

The harder question I see here is the massive momentum of the US mil/intel complex.  Once it gets going anywhere, it is just so hard to overcome and stop;  There was from a thoughtful perspective an argument to get out soon after the Taliban were overthrown in 2001.  But instead we got this massive momentum: we needed to get the right successor regime, fix things up, etc etc etc, and given that the Bush adminhad become refocused on the totally idiotic invasion of Iraq, simple did not happen.

So, we did not leave when we could have with honor as a success, and given how these things go, even with newly elected presidents o both parties calling for us to leave, well, we remain there with more troops than ever.

In any case, as a bottom line, I thank the Washington Post for having provided this highely detailed account of what has happened with the now-long US war in Afghanistan.

Barkley Rosser

PS: note that at certain points this was written as of being 12/15, but it did not get finished and gou out until 12/16.

At This Point Richard Nixon Resigned

Richard Nixon resigned as president after the House Judiciary Committee recommended he  be impeached, the vote that just happened yesterday for President Trump.  In the case of Nixon that vote was followed by a famous visit from three poerful GOP senators, including Barry Goldwater, who informed Nixon that he had lost the support of the GOP in the Senate.  Of course now we have the GOP Senate Majority Leader McConnell going on Sean Hannity to promise that Trump will not be convicted and that he will "coordinate" with Trump's lawyers to make sure there is no conviction.

Curiously, public polling support for impeaching Nixon only got ahead of opposition to it after the SCOTUS ruling that led to the public  release of the so-called "smoking gun" tape about a month before Nixon resigned.  In contrast, support for impeaching Trump has exceeded opposition to it since soon after it was announced the impeachment hearings would happen and appears to be holding steady, even as the Trumpists run all over the place declaring how he is  going to gain or is gaining from the impeachment proceedings.  It may be that his base is all riled, but so are those who do  not like Trump.

I find it also a bit weird that Trump and his supporters are running around threatening that the next time they control the House under a Dem prez, well, they will just go and impeach him.  They seem to forget that we have already seen this show with the Clinton impeachment, also a thoroughly partisan affair, which never had support from more than about 30 percent of the population.  That one went to trial with all the GOPs voting for conviction, with one Dem also voting for it, Mr. Clean Russell Feingold of Wisconsin.  Of course the current GOPS say Clinton committed a crime, perjury, while they claim Trump has not, although last time I checked, bribery is a felony.

Now they did not try to impeach Obama, for which I suppose we should be grateful, although he was largely squeaky clean.  But they certainly did endlessly harass him over nonsense, 8 separate hearings on the nothing that was Benghazi, lots of time and millions of dollars, not to mention endless aggrieved ranting by Sean Hannity, although somehow we never hear a whisper about that now.

Ass a final comment on the changed attitude of the GOP, I can look at my congressional representative.  In 1974, that was GOP M. Caldwell Butler of  Roanoke, a member of the House Judiciary committee, who voted in support of recommending to impeach Nixon.  As successor (after a six year spell with Dem Jim Olin) was a former staffer of Butler's, Richard Goodlatte, who also was on the Judiciary committee, eventually becoming its Chair in recent years. He just stepped down and was replaced in the  2018 election by one of his staffers, the mostly mild-mannered Ben Cline. However, not only did Cline not vote for impeaching Trump, he even joined the gang led by Matt Gaetz that raided the House Intelligence committee during one of its hearings.

Needless to say, Ben Cline is no M. Caldwell Butler, even though he sits in Butler's old seat.

Barkley Rosser

Is The Trump Trade War Over?

Probably not, but maybe.

The basic problem is that Trump has long wanted t beat up on other nations in a trade war, but now he is getting impeached and he needs positive news, and the stock markets like word that he is making trade deals. So now we get trade deals, but it is all sort of a mess.

So there are two matters here. One involves China, discussed in a new post here by pgl, which I shall comment on later. But my quick take on it is that he has made essentially similar proclamations in May, April, and even Dec. 2018. Sure, China will buy lots of US ag products and will respect intellectual property rights.  The number of times the la tter has been promised, I havelost count of.  As for the former, well, Trump is still trying to pay off his farmer losers with US taxpayer money.

So, the iiem not mentioned by pgl, although I konw he is konwledgeable on this, is the USMCA, or NAFTA++ whatever number.  The situation with this has become completely absurd. So on the day the House Judiciary comm called for impeachment of Trump, House Pseaker Pelosi came out for a modified version of Trump's USMCA.  Seveeral changes were made, incuding putting a limit on pharma price protections and a demand for Mexicans to allow union organizing. There were siine other minor changes frm the earlier versions. Anyway, it was enough for Pelosi o get the AFL-CIO to support it. She supported it.

So now McConnell and GOPs in the Senate do not support it. They do not like something because the AFL-CIO supports it?  Given that Trump wants this, I am really quite mystified.  I do not know what is going on here on this weird Senate oppo to this deal.

Just to review, this deal is mostly just the old NAFTA.  Some of it is an improvement; it needed an updating  Most of the changes in it were simply TPP items that both Canada and Mexico had previously agreed to.  This included most of the environmental and labor changes in the deal, but not a problem for Can and Mex.  Curiously one of the recently revised view by House Dems undoes part of the TPP deal, wich involved major protection for US pharma, with this being undone by the Pelosi/Hose Dems revision.  I am not clear id this  is the item that has McConnell upset or the matter of demanding that Mexico allow more union organizing.

As for the China matter, well, the new statement does not look all that much different from the May, April, and Dec. 18 stateements. Wow. We shall have China respecting US intellectual property rights and will buy lots  of US ag products.  Some tariffs will be reduced, but not many.  The big thing with the tariffs is not that some are being reduced, but that those that were supposed to come on Dec. 15 will not happen. Not much here, and the stock market yesterday barely moved.  Trump's ability to goose up the market with these nearly vacuous pronouncements seems to be coming to an end.

Barkley Rosser

Exaggerated Benefits for U.S. Farmers from the China Trade News

How gullible is Reuters?

China will likely hit $50 billion in purchases of U.S. agricultural products, U.S. President Donald Trump said on Friday after earlier announcing that he would roll back scheduled tariffs on Chinese imports as Washington and Beijing finalized an initial trade deal.

That was their opening paragraph. Fortune had a different take:

The Markets Have Spoken: Phase One Trade Deal Between the U.S. and China Is “No Victory” - From Shanghai to London, stocks rallied on Friday morning as a “Phase One trade deal” was reached between China and the Trump Administration—that is, until the details were announced. By noon in New York, the major indices still trading were swooning, with the S&P 500 and Dow Jones Industrial Average in negative territory, ceding big early gains. What happened? ... Later in the day, the markets' exuberance was largely dashed by what's not in the deal. "I think we're pretty much where we were in May," says Usha Haley, W. Frank Barton distinguished chair in international business and professor of management at Wichita State University.

From 2012 to 2014, we exported less than $20 billion of agricultural goods according to this reliable source. In 2017, this figure had declined to less than $17 billion while it dropped to less than $7 billion by 2018 thanks to Trump’s stupid trade war. All this deal accomplished was to temporarily avoid even more trade war stupidity. The stock market does not believe there will be any real improvement in the trading between the U.S. and China. Even if there was a complete reversal of the damage done to our agricultural sector from Trump’s idiotic trade policy – the best we could hope for would be $20 billion in agricultural exports to China and not some absurd $50 billion from our Liar-in-Chief. Of course, Lawrence Kudlow is supposed speak today so maybe he can mansplain to us how Trump’s stupid trade policy will lead to some massive agricultural boom. Update: On occasion one gets a comment that is too good to pass up:

"From 2012 to 2014, we exported less than $20 billion of agricultural goods according to this reliable source." That is yearly, if I understand. What period of time does the agreement cover, so that $50 billion could make sense? Surely not in a year.

Brilliant and here was my reply:

I was referring to exports per year with that near $20 billion. But Trump's babbling? Huh! So maybe Trump has one of those Leninist 5-year plans where we declare success if annual exports are only $10 billion per year. Yes Trump does follow Putin's lead!

Stealing The 2016 Election?

I have been watching the later stages of the still-ongoing House  Judiciary Comm hearing on impeaching Trump.  I have seen Republicans repeatedly ranting on about how this is an effort to undo the "popular election" of Trump, the will of the "63 million" who voted for Trump.

Really, how dumb are these people? Hillary had three million more than Trump, 66 million.  He was not the popular winner.  What a joke.

Of course impeachment is explicitly an undoing of an election result.  The person elected, even ones who actually won the popular vote such as Nixon and Clinton, is charged with having engaged in conduct meaning they should be removed.  Quite aside from the hypocritical idiocy of ranting over Trump's "popular" election, this claim about elections and impeachment is simply ridiculous.

Barkley Rosser

Smoking At The Fed

This is about the now late Paul Volcker, but I shall come in from an odd and particular persprctive. Upfront, I did meet the late Paul Volcker several times, although never in an official situation.  Much of "inside" stuff I shall say comes from others.

I do not know the details of the Fed prior to the 1970s, but at least as of the Chairmanship of Milton Friedman's major prof, Arthur Burns, who capitulated to the  demands of Nixon for his 1972 reelection,  But it was clear that Burns was carrying on a long established tradition in the Board of Govs of the Fed: they smoked their behinds off in their supersecret meetings in the old days (not the "openness" of now).

What really went on in the earlier days is myth, but then in the 1970s Fed Chairs came to be required to testify on a regular basis to various Congressional committees.  Burns was the Chair then and the first of them who had to do this, and he set the precedent: obfuscating smoking in public.  Burns smoked a pipe, and he became notorious s the Congressional reps pressed in with their generally populist questions pushing for lower interest rates, he smoked his pipe at length before answering inquiries, to the point of actually shrouding himself in actual smoke, something no longer allowed.

From my old inside info, this matter of smoking was a big deal in the late 1970s when Jimmy Carter appointe G. William Miller to be Fed Chair, a corporate CEO with zero experience with either banking or the Fed.  His was one of the worst and most disastrous Fed chairmanships ever, maybe the absolutely worst ever.  To really nail this down, I have been told by insiders of the day that Miller not only did not smoke, but he imposed a no-smoking ruole on Bd of Govs meetings (not sure about FOMC ones, but probably them too).  I have been told that this reallyt seriously ticked off various decades-long Bd members who had long been used to smoking during Board meetings.  As it was, inflation soared shortly after Miller arrived, who was viewed as not only incompetent, but a jerk.

It is frequently forgotten that Jimmy Carter put Volcker in 1979 as inflation accelerated and accepted that Volcker might engage in polices that would end his presidency.  There were other factors in Reagan's victory over Carter, but the bad economy, not totally due to Volcker, and beyod the economy, that did Carter in.

So, to further the smoking story, which is very much about closedness vs openness at the Fed, a matter  of ongoing dispute, when Carter removed the blazingly incompetent Miller, the Board was most pleased when the then NY Fed prez Volcker came in, the biggest in all meaning smoker of them all ever. At 6'7 tall he was indeed a most imposing and formidable individual. He  also smoked the biggest cigars I have ever seen, reportedly from odd local sources (he lived in simple circumstances most of his professional time in DC, longtime base in NYC).  So his elevstion from NY Fed Prez was most welcomed by all reports I have reported.

The pubic smoking tradition continued with Volcker and beyond hin to his successor, Alan Greenspan, who was in for the next two decades, only with Bernanke coming in mid-noughties, after when the current PC no-smoking rule came in not only for pubiiic presentations but also in Board meetings. But the old system was in place for the Volcker regime, preceded ty Burns's obscurantis  pipres, followed by t he massively pahllic cigsrs of Volcker, and then the long reign of  Greensapna with his cigarettes.  All of them used their smoking in Congresinoial appearances to help confuse all with their caefullyd-do-not-disturb-the-markets public testimony, which was simply supported by their caeefully obfuscatory remarks, with =an entire industry arising that  still exists, somewhat resembling the old "Kremnilolgy"of the old days. In the old days ,especially with Burns and Volcker, they literally would envelepe themselves in smoke while testifying to Cpngrsss, and Greenspan in bad moments did a passable imitation of what they could do more effectively with pipes and vthe large cigars of Volcker.

The big question on this meme is transparency at the Fed.  The smoking by Fed Chairs  in the old days symbolized the old secrecy of Fed discussions.  Now we have transparency, more or less coming in with Bernanke in the mid-noughtties, just ii time fot the big crash and the Great Recession.  I do not know if Fed secrecy is better than the current everry-Fed-official-shoots-off-his/her mouth or not. But that is where we are now: the Fed is  open, no more smoke-filled rooms.

As for Volcker himself, he had a long life and career..  Apparently he was the key person bringing the final end of the remnants of the gold standards under Nixon.  There was much more.

Clearly this is much debate over his inflation-crushing policy, 79-82, which helped end Carter's presidency and brought the sharp and deep recessinon of 1982, when the uneployment rate got higher than in the latest Great Recession, both over 10 percent. Phillips Curve  was positive in much of the 70s with stagflation, and the ratex crowd said P'c vertical, although that was for expectations being fulfilled and that was a period of great upheaval.

A final more private report from old friends/Fed staffers is that when a staff person made a presentation to the Board in the Volcker era he usually said nothing, while sitting there with all his size and smoking huge cigars.  Fine. But if staff person messed up, he would arise and the speaker was in deep trouble with Volcker destroying the presenter as if he had burned his cigar into them.

But, the bottom line is that for his many flaws this man who lived for 92 years and had hug influence over the history of global monetary and economic developments, I ultimately have deep respect for him, despite his various flaws, although in the end this might get down to how incredibly impressive he was in person, so tall and bald and smoking a humongous cigar, all with a calm smile.

Barkley Rosser

How Long Will US Foreign Net Income Dark Matter Continue?

The United States became a net foreign debtor in 1985.  With current account deficits every year since that net foreign indebtedness has steadily increased since, reaching a reported total of -$10.56 trillioin as of Sept. 30 this year, a substantial total.

However, while many have long predicted that this mounting net foreign indebtedness would eventually lead to the US having also having a net negative capital income flow, it has not happened.  In 1985 when the US initially into net indebtedness, the US had a net surplus on capital income of about $30 billion.  Rather than shrinking, that surplus has increased somewhat apparently in the subsequent 34 years.  As of the  second quarter of this year it appears that the annual surplus of capital income was running in the neighborhood of $100 billion. 

While there are serious sources of uncertainty and noise in much of this data, it certainly seems that US-owned assets abroad are earning far higher rates of return than what foreigners are earning from their assets in the US.  This has for quite a long time been labeled the "dark matter" phenomenon.

The question arises: how long can this odd situation continue?

Barkley Rosser

Liz Cheney Loves Traitors

Dick Cheney lied a lot so I guess his daughter feels compelled to do the same:

So I would just ask people to remember that they have failed despite the fact that they had a process that basically put everything tilted in their direction. The Democrats were able to act as judge and prosecutor. The Democrats were able to select every single witness. The Democrats were able to prevent, and did prevent, witnesses from answering Republican questions. The Democrats decided what the American people would see and when. The Democrats decided the timing on the release of important pieces of transcripts, they still have not released the transcript of the IC Inspector General, and so the Democrats essentially stacked the deck in their favor and despite the fact that they did this, and even with every unfair advantage and unprecedented advantage they gave themselves, including preventing the President from having any access to the proceedings, preventing his counsel from having any participation in the proceedings, they now have come out of this and fundamentally failed to prove their case.

My Lord – more whining about the process? And yes the case was proven overwhelmingly. There is a lot more BS in her little rant but who gives a damn what she said. Why is she defending a traitor? Oh wait PlameGate:

Four and a half years ago, after reading the Robert Novak column that outed Valerie Plame Wilson as a CIA operative specializing in counter-proliferation work, I wrote an article in this space noting that this particular leak from Bush administration officials might have been a violation of a federal law prohibiting government officials from disclosing information about clandestine intelligence officers and (perhaps worse) might have harmed national security by exposing anti-WMD operations. That piece was the first to identify the leak as a possible White House crime and the first to characterize the leak as evidence that within the Bush administration political expedience trumped national security.

Of course this leak was from the Office of the Vice President. Who was the Vice President back then? Oh yea – Liz Cheney’s daddy. Yes Dick Cheney committed treason and he got away with it. So now Liz Cheney wants the traitor Donald Trump to get away with it too!

The End Of The Harris Candidacy

I should probably not waste time on this, but I was a fan of Kamala Harris, and her ending her candidacy while still in fifth  place in the polls, if in a long slide, has me disappointed.  As it is, given her declining polls, lack of money, and reportedly internally divided campaign staff, there, her chances of actually getting the nomination had falle n to effectively zero.   It is actually an act of class on her part to get of the overly crowded Dem field.

In light of  the recent sharp decline of Warren as well who is now running #4 among Dems, we now have three white males on top.  As it is I confess that I favored both Warren and Harris over all three oof those and the rest as well.  How is it these problematic three whilte males are on top (I reocgnize that especially supporters of Sanders and Buttiegieg will dispute this and may well show up here to properly correct me and tell us of their virtues, and they as well as Biden do have virtues).

I am going to put it out there: I think both Warren and Harris, especially the latter, have been held to a higher standard as women and Harris as a minority woman, than the white males. They are not allowed to make any errors or even appear to make an error.  The white males can bungle and have serious issues, but hey, not a problem, or at least not a fatal problem.  They can go on for the next day.

Soomething that played a role in the decline of both Warren and Harris (and Warren may yet make a comeback) has been their effort to overcome the split among Dems over what to do about health care.  Both of them initially, or at least at some point, signed on to the "Medicare-for-all" label for a single payer government run health insurance system that would eliminate all private insurance, following Bernie's lead from 2016 and maintained now, all of this being part of a fight over who was the "most progresive" candidate.  Of course, neither Warren nor Harris could beat Bernie for that title, and Bernie's true believers have stuck with him, even if his support has not expanded.

As it is, "Medicare-for-all" is a label that is not great if one looks at it closely.  That is because, frankly, Mwdicare by itself sucks.  It is crappy coverage.  Pretty much everybody actually on Medicare also has supplemental private insurance od some sort as well. So in fact this was a misleasing label for what really should probably be called "Canadian-style single payer."  But this is a minor point.

The more important point was all the pollls showing that while a majority says they support "Medicare-for-all" when asked that, if one adds "with all private insurance ended," the support has always plunged.  Most people have private insurance and most of them like their  insurance  or are afraid of losing it.  So both Harris first and then Warren tried to deal with this, tried to deal with this, only to fall on both of their faces.

So first it was Harris, saying while she was for Medicare-for-all, she would not immediately abolish private insurance.  It was a bomb.  Both sides dissed her.  Big surprise, same thing happened when Warren not unreasonably also sought a middle way, go slowly on Medicare-for-all.  Ironic  As ir is, I think both of them took reasonable positions, but they have been political disasters.  As it is, I think this internal Dem arguing over this issue is just stupid.

On the matter of Harris, I am now too late going to mount a defense of her on the the other matter that she got hurt badly on.  Well, a further matter was what put her briefly on top: that her attack on Biden on the race issue in the first debate was overdone and problematic as people came to think about it, and her  attack failed to move African Americans away from supporting Biden.  But the matter that really hurt her was the attack by Tulsi Gabbard near the end of the second debate of her record as a DA and AG, and she never really recovered from that.

Here is where I wish to mount the defense I now feel guilty of not making publicly earlier, especially as I was aware of the response.  I think the reason Harris did not respond clearly in the debate is that Gabbard's attack was filled with so many fale or misleading atatements that Harris could not on the spot in the time given respond to all of them.  As it is, the very next day that Gabbard was shown to be full of it, but that report involved subtlrlirs and complications and was simply not picked up widely.  It became unknown, with the publicity being that Gabbard had successfully exposed terrible problems with Harris's record.  She was not perfect, so, bring on the white males!

I have reason to believe I shall not get this link right, but it can be tracked down on Politifact from Aug. 1, 2019.  It is at politifact.com/california/article/2019/aug/01/were-tulsi-gabbard-attacks-kamala-harris-record-c .  Since that  will probably not work, let me lay out the points made in it.

So Gabbard made a string of accusations.  The one that actually sticks to some extent is that Harris was in a hypocritical position given thaat she admitted  to having smoked pot but was putting pot smokers in jail, while later supporting legalization.  Well, of course she was enforcing the law, but apparently there  was a dramatic decline in the arrest rate on this during her time as AG, from 817 in the first year  down to 137 in the final year. She was accused of not allowing new evidence to be applied for Kevin Cooper.  That did happen, but it happened before she was in and done by people she had not control over.  She was accused of supporting tightening punishment of famillies, but that was lower level officisls and she made them stop.  Another issue involved raising cash bails.  This was put in place while she was DA in SF by certain judges for violent crimes.  She was not responsible for this and in the Senate supported reducing bail.  The bottom line is that almost all of what Gabbard accused her of was either exaggerated or just plain false.  But, hey, a black woman cannot make any mistakes.

One positive here is that I think this may raise the chance Harris might become VP nominee.  If Warren gets the nomination, it wll not happen: two women ia too much.  Biden might not pick her, both because he may still be angry over what she did in the first debate and also does not need her to increase his support among African Americans, but he also may need more to pick Warren to unify with the left wing of the party.  But for Both Sanders and Buttigieg, especially the latter, she looks like the obvious VP pick. We shall see.

BTW, one reason I have been for her is that I know her dad, retired Post Keynesian Stanford economist, Donald J. Harris of Jamaica originally, whom I had in grad school and greatly respect.  ironicallly he and his daughter fell out during her campaiign over the pot issue, when she jokingly replied to an interviewer, "Of course I am for pot legalization; I am a Jamaican," which her old man did not appreciate at all.

Barkley Rosser

Bicycles and Wine Tariffs

Jeffrey Frankel has a must read blog over at Econbrowser:

The “bicycle theory” used to be a metaphor for international trade policy. Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests. I don’t know if the theory was ever right. (And, to be honest, I don’t entirely understand why forward movement keeps a bicycle from falling over.) But if we had stood still on trade policy over the last three years we would be a lot better off than where we are now.

It may be cold in New York City but after all that Thanksgiving wine, maybe a bicycle ride is in order. Just after that infamous phone call with the President of Ukraine, Trump opined on trade policy regarding wine:

Mr Trump, who is teetotal, said: "I've always liked American wines better than French wines. Even though I don't drink wine. I just like the way they look." The US is the world's largest consumer of wine and the largest import market, with France consistently among the top origin countries for imported wine.

He was angry over something called the digital sales tax but here is a more related reason for this weird tweet:

High tariff rates constitute the single most restrictive barrier to U.S. wine exports. According to the World Bank, the average simple-applied import tariff including all products worldwide in 2015 is 6.8%; without including the preferential rates the average is 30.4%. Virtually all U.S. wine exports to the major markets, other than Canada, face tariffs that are double or triple those rates. For example, the EU import tariff per 750 bottle can range from $0.11 to 0.29, depending on the type alcoholic content of the wine. Japan’s tariff is 15% by value of the product. U.S. exports to India are hindered by a 150% tariff set on the value of the wine. By comparison, the U.S. import tariff on a 750 ml bottle is $0.05 for still wine and $0.14 for sparkling wine. Over the last 30 years of multilateral wine negotiations through the General Agreement on Tariffs and Trade (now the WTO), the U.S. import tariff for wine shrank from 31.5 cents to 6.3 cents per liter. Unfortunately, other countries’ wine tariffs only slightly decreased, if at all. For several emerging markets those rates are still high with China at 14%, Russia at 12.5%, Brazil at 20%, Vietnam at 50% and India at 150%. Wine Institute takes the position that trading partners must first reduce their tariff rates for all wine products (e.g., HTS Codes 2204, 2205 and 2206) to the current U.S. tariff levels before the U.S. further reduces its rates. This policy is based on decades of international trade negotiations that have materially aided the wine industries of other countries and harmed the U.S. industry. The U.S., which has some of the lowest wine tariffs of any major wine producing country, lowered its wine tariffs to a very low rate in the Uruguay Round while other countries maintained much higher tariff rates. This disparity in tariffs has directly resulted in a significant loss of U.S. market share and a negative balance of trade for U.S. wineries that continues to increase.

The Wine Institute discussion continues by noting EU subsidies for European wine. One might presume this would be an excuse for Trump’s proposal of wine tariffs but fortunately the Wine Institute would rather get back on that bicycle.

The Current State of the U.S. Dairy Industry

I had to endure a discussion of the plight of American dairy farmers where Trump’s trade policies were somehow to blame. Stephanie Mercier confirmed some of the facts:

According to data reported by the National Farmers Union (NFU), the average dairy farm has shown a positive net income only once in the last decade, in 2014. In 2018, the average value of production exceeded the total cost of producing each hundredweight of milk in only one state, California, and nationwide, dairy farmers lost an average of $3.21 per hundredweight of milk produced. For 2019, total dairy production is expected to increase modestly over 2018, by less than 0.3 percent, and the average all-milk price is expected to increase as well, from $16.26/cwt in 2018 to $18.40/cwt. While the projected 13 percent increase in price for this year is welcome news for U.S. dairy farmers, that level still falls below the average total cost of production for farmers in most of the country.

But she had a very different take on the international issues involved:

This situation is largely a result of a persistent mismatch between the supply of dairy products and the demand for them, and is not isolated to the U.S. domestic market. Within the European Union, low dairy prices prompted some Italian, German, and Belgian producers to dump their product in protest during the summer of 2019. The combination of low prices and a severe drought in 2018 has pushed many Australian dairy operations to the brink of collapse. The farmer-owned Fonterra dairy cooperative, serving both Australia and New Zealand farmers, has seen its share values decline by about 50 percent since the beginning of 2018.

Look – we can criticize Trump’s stupid trade war for a lot of things but low milk prices are being driven by other factors:

In many ways, the current supply/demand conditions in the global dairy market, at least in developed countries, seem to represent an example of the “treadmill theory of technology adoption” in agriculture, posited by Dr. Willard Cochran (University of Minnesota) in the 1950s. Farmers adopt new technologies to reduce their costs, but if most farmers do the same thing, it often leads to over-production of that commodity. Prices drop, so they end up generating less revenue.

So what has been the U.S. policy response?

In the 2018 farm bill, enacted late in the year, Congress tried to respond to the dairy crisis by making significant changes to the dairy safety net system. Under the new legislation, Dairy producers will be able to cover their production with both the Dairy Margin Coverage (DMC) program (the replacement for the Margin Protection Program) and Livestock Gross Margin insurance for dairy offered under the crop insurance program. Dairy producers will be eligible to claim a refund of some of the premiums they paid under the Margin Protection Program, a benefit estimated to cost $58 million for all producers. Dairy farmers who commit to maintaining the same DMC coverage level over the lifetime of the farm bill will receive a 25 percent discount on their premiums. Congress set the stage for bolstering these programs with provisions in the Bipartisan Budget Act of 2018 (passed in February of 2018), with policy changes that were projected to cost $1.1 billion over and above baseline spending levels for the period of 2018 through 2028. Under the DMC program, 37,468 dairy operations were enrolled for 2019, accounting for 85 percent of all operations. Payouts under the program for 2019 have totaled $306 million to date. Enrollment is now open for 2020 participation in the program, and the enrollment period ends on December 13, 2019. There were also 1,237 livestock gross margin insurance policies sold for dairy cattle operations in 2019, covering $128 million worth of liability.

As consumers, we are enjoying low milk prices but then we are paying a bit more in taxes. This link has more on this Dairy Margin Coverage program. Update: Free trade with China could help the dairy products surplus problem according to this report:

With the development of China’s economy and the rise in Chinese people’s living standards, the per capita consumption of dairy products in China keeps rising. Despite the increasing demand for dairy products, the domestic production of dairy products sees a rather anemic growth. In 2017, the apparent consumption of dairy products in China reached about 31.79 million tons, representing a CAGR of about 2.7% from 2013 to 2017, according to the researcher. However, the production volume of dairy products in China grew at a CAGR of only 2.1% during the same period. The main reasons for the sluggish growth include: (1) The costs of domestic dairy production in China are higher than the global average as affected by the costs of feed, labor and land, and the low profitability inhibits the production growth; and (2) Chinese people lack confidence in domestic dairy products as safety incidents occurred frequently in China's dairy product industry in the recent decade. The above factors drive the growth of dairy product imports in China. According to China Customs, in 2018, the import volume of dairy products in China reached 2.74 million tons, up by 7.80% YOY; the import value reached USD 10.65 billion, up by 14.80% YOY, the researcher concludes.

Of course, Team Trump and their stupid trade war philosophy might screw this up for American farmers.

Why Did Oil Prices Plunge This Black Friday?

Nothing to do with the American super big shopping day after Thanksgiving, but several items, some of which may reverse themselves.  As it is, it was a pretty big drop, nearly 5 percent for the day for both West Texas and Brent crude, with the latter now just above $60 per barrel.

The big headline is the resignation of Iraqi prime minister Adil Abdul Mahdi. The immediate trigger of that was that it was demanded by Iraq's most influential cleri, Ali Sistani.  This came after weeks of mounting protests in Iraq against the government, both in Baghdad, but also among Shia in the South, with Sistani a Shia cleric. He is based in Najaf, the Shia holy city where Imam Ali is buried, the son-in-law of the Prrophet Muhammed.  Protestors had just torched an Iranian consulate there. The supposed reason this might justify a fal in oil prices is that it is thought that the protests have reduced exports from Iraq, which is currently the second largest oil exporter in OPEC. I do  not know if that will result, but if indeed this leads to Iraqi oil exports rising, then indeed a price drop is justified.

While lless headline-generating but arguably more important are rumors regarding a major OPEC meeting in Vienna next week.  Supposedly the Saudis have gotten tired of cutting oil production to offset increases by other OPEC members. This may not help out the ARAMCO IPO going on, with falling oil prices resulting.  But that would certainly portend a reasonable basis for them to fall.

On top of that there are also reports that non-OPEC member Russia is now withdrawing from agreements over the last three years, largely with the Saudis, to restrain their production, especially of condensates.  This too would reasonably push oil prices down.

There are also reports of snags in US-China trade talks, a less important item that might reveese tomorrow, but one that makes all the markets nervous, and indeed stock markets were down today also.

So, while "Black Friday" in the US means businesses supposedly coming out of negative red territory on their profit accounts, in the the oil patch it looks more like something unwanted, black indeed.

Barkley Rosser

Putin Beating Up People At Russia's Top University

That would be Moscow State University, the "Harvard" of Russia.

Not in the MSM at all, but I have mu sources, and apparently sometime last week the FSB, the successor to the domestic  arm of the old  KGB, raised Moscow State (whose main building is one of those "Stalin Gothic" skyscrapers) to capture a student who had been posting leaflets on walls protesting recent government actions.  He was reortedly taken into the library and severely beaten to the point of torture.

Oh yes, VV Putin is such a lover of knowledge and science, just like his flunky, Donald J. Trump.

Happy Thanksgiving, you all.

Addendum: Apparently the student was accused of "terrorism."

Barkley Rosser