On TAP: Kuttner + Meyerson

March 15, 2018

Now that Rand Paul has announced he won’t vote to confirm Mike Pompeo as secretary of state or Gina Haspel as CIA director, and given John McCain’s prolonged absence from the Senate due to his illness (and his skepticism about Haspel’s nomination due to his longstanding opposition to torture), President Trump’s nominees will need at least some Democratic support to win confirmation. In the case of Pompeo, that shouldn’t be a problem. Haspel, due to her supervision of a secret CIA facility that engaged in waterboarding and possibly other forms of torture as well, will have a tougher time getting confirmed.

Leading Democrats, including Oregon Senator Ron Wyden, who serves on the Intelligence Committee, and Representative Jerry Nadler of New York, who’s the ranking Democrat on the House Judiciary Committee, have already said that Haspel’s oversight of torture operations should disqualify her from heading the CIA.

Which brings us to the continually curious case of California’s Dianne Feinstein, who, according to a Washington Post story on Wednesday, “appeared to defend” Haspel. “She has been a good deputy director,” Feinstein told the Post, going on to note that the torture that took place on Haspel’s watch was not yet specifically illegal. (Subsequent legislation by McCain, backed by Feinstein, did outlaw torture.)

Hmmm. Talk about your soft bigotry of low expectations! You might think that precisely because torture wasn’t yet illegal, Haspel had the option of exercising her judgment in deciding whether to allow such procedures to go forward. You might think her decision would be a reasonable basis for senators’ confirmation votes.

Apparently, that’s not how Feinstein operates. In the time-honored tradition of the Senate, she likes to reward public figures who, if only for a moment, exhibit a rudimentary reasonableness or confirm her expectations for how the Washington establishment should operate. That the Washington establishment has long been full of dangerous loons, and is fuller now than ever before, is a fact she seems unable to grasp. Having expressed the hope that Trump would grow into his job, she effused at Trump’s momentary support for more gun control, which, of course, he rescinded a couple days later. Haspel appears to pass muster with her for functioning efficiently as the CIA’s deputy director.

As she’s done before, in her votes to authorize the Iraq War and support George W. Bush’s tax cuts on the wealthy, Feinstein appears to be positioning herself to cast a vote likely to appall most of her fellow Democrats.

This time around, however, she has a Democratic challenger—California Senate President Kevin De Leon—who on this and other issues not only parts company with Feinstein, but is closer to the moral sense of most Californians. De Leon has an uphill battle, but Feinstein’s apparently irrepressible instinct to affirm the establishment, no matter how deranged it may be, gives him a fighting chance.

March 14, 2018

Tom Friedman and the Reality Club. It was only a matter of time before reality hit Tom Friedman over the head. Or did it? After a long, long delay—decades actually—Friedman’s Wednesday column in the Times concedes that he might have been wrong about China moving to join the ranks of market democracies.

His title is, “Some Things Are Right Even If Trump Believes Them.” Friedman writes:

For those of us who believe in free trade—and that China and America can both thrive at the same time—but who are convinced that China hasn’t been playing fair and don’t trust Trump to fix it, this is a critical problem to think through.

Well, yes it is, and welcome to the club. Friedman concedes that China is responsible for the loss of large numbers of U.S. manufacturing jobs, and that China doesn’t play fair. He interviews the usual suspects: “We assumed that China would ‘reform and open’ after it joined the WTO, said James McGregor, a longtime China trade expert. Instead, China ‘reformed and closed.’”

Imagine that. Better late than never, I suppose. But what should we do, Tom?

“So what would a smart American president do? First, he’d sign the Trans-Pacific Partnership trade accord.”


March 13, 2018

The business press is agog over President Trump’s decision to stop the proposed purchase of computer chip manufacturer Qualcomm by Singapore-based Broadcom in the name of national security. Critics have termed the decision radical, and highlighted two ways in which it departs from the precedents set by the government’s Committee on Foreign Investment in the United States (CFIUS). First, the president, basing his action on CFIUS’s letter of last week, stopped the deal before the tender offer was actually made. Second, the nationality of the purchaser—Singapore (though Broadcom had announced it would soon reconstitute itself as a U.S. company)—is not a foreign rival that can threaten national security. “If it’s a Chinese investor, the bar is going to be high,” one former member of the National Security Council told The Washington Post. “A Singaporean investor you would not normally have considered a high risk.”

The coverage, however, misses the genuine radicalism underpinning CFIUS’s fears about the merger. As I wrote last week, what tipped the scales against Broadcom was that it underinvests in its properties, preferring instead to mine its companies for profits at the expense of investment. The agency’s fear was that reducing Qualcomm’s investments in security-related technology like 5G communications capabilities would enable a Chinese high-tech company, Huawei, whose close ties to the Chinese military CFIUS has long documented, to steal a march on the U.S.

And CFIUS didn’t stop there. The problem with Broadcom, it proclaimed, was that it followed the model of private equity firms, hollowing out their companies to extract profit. As the agency’s letter said, “Broadcom’s statements indicate that it is looking to take a ‘private-equity’-style direction if it acquires Qualcomm, which means reducing long-term investment, such as R&D, and focusing on short-term profitability.”

In short, CFIUS just indicted a common Wall Street practice and numerous Wall Street practitioners for weakening the American economy. The radicalism of CFIUS’s warning on the proposed purchase is precisely its economic empiricism: This is what private equity generally does, CFIUS has declared. There’s no reason to believe for so much as a nanosecond that Trump understands this basis for CFIUS’s warning, but that’s no reason why the business press should overlook it, too.

March 12, 2018

Spinning the Pennsylvania House Race. The special election to fill a vacant House seat is Tuesday, and polls show the race in a dead heat. A loss, or even a near-miss would be devastating to Republicans, since Trump carried the longtime GOP seat by about 20 points.

A Democratic pickup would portend major Democratic gains November. The district, in greater Pittsburgh, is exactly the kind of territory where blue-collar voters deserted Democrats in droves—and are now coming back.

Democrat Conor Lamb is a social conservative—he defends gun rights and opposes abortion. He makes the generational argument that Democrats need a new face as House minority leader. But on pocketbook issues he’s a progressive.

Lamb supports Trump’s tariff orders on steel and aluminum—and was calling for defense of American industry long before Trump was. Lamb has astutely directed his fire against House Speaker Paul Ryan, no friend of labor, since this election is not about Trump, but about which party will control the House.

This has partly bulletproofed him against right-wing attacks, but has not prevented his lackluster Republican opponent from trying to paint Lamb as a Pelosi clone in ads. Right-wing columnists, taking the opposite tack, are already spinning an anticipated loss by Republican state Representative Rick Saccone as the result of Lamb not being a true Democrat. 

This is of course nonsense. He’s had resounding support from the labor movement, and is a longtime friend of unions, unlike his Republican opponent, who supports union-busting. The lackluster Saccone is another element of Republican spin.

If Lamb wins, or even comes close, this is a calamity for Republicans—and a sign that the blue wave is still building. In some regions of the country, Democrats will need to make their peace with social conservatives. Progressives will still dominate a new Democratic House. 

March 9, 2018

Spare Us the Ghosts of Smoot and Hawley! One of the enduring myths of American economic history is that the Smoot-Hawley tariff of 1930 deepened the Great Depression. Here’s James B. Stewart in Friday’s New York Times.

After Smoot-Hawley was passed, Stewart solemnly warns, other nations retaliated and exports “plunged 61 percent from 1929 to 1933. … [T]he ensuing trade war exacerbated and prolonged the hardships of the Great Depression.”

The only problem with this received wisdom is that it has been thoroughly debunked by the respected dean of trade historians, Alfred E. Eckes Jr. Professor Eckes did a deep dive into what Smoot-Hawley actually did, and found that it exempted more products than it covered. And the trade in duty-free products declined just as much as the ones subject to the tariff. Eckes wrote, “Except under the Underwood schedules during World War I, no tariff before or after Smoot-Hawley permitted such a large percentage of U.S. imports, by value, to enter duty-free.”

Why did trade decline generally, independent of what was covered by tariffs? Because the world was falling into a Great Depression, and commerce always collapses in a depression. The tariff was a very minor, bit player in this story.

FDR persuaded Congress to give him authority to negotiate reciprocal cuts in tariffs in 1934, but the Great Depression still had six more years to run—because purchasing power had collapsed. And in a salutary retreat from the globalism of that era, FDR took America off the gold standard, the better to mount a domestic recovery program.

That doesn’t mean that higher tariffs are always good. As I’ve written, Trump’s strategic trade policy should have been targeted against the real predator of the story, China.

But it’s well past time to retire the myth that Smoot-Hawley was a major factor in the Great Depression. 

March 8, 2018

The stunning success of the West Virginia teachers’ strike—winning a 5 percent raise not only for themselves but for all the state’s public employees—suggests that in labor relations, as in everything else, the nation is moving, with accelerating speed, in opposite directions. As the five Republican justices on the Supreme Court are poised to weaken public-sector unions with their forthcoming decision in the Janus case, a state full of public schoolteachers with no legal right to collective bargaining have just won an amazing victory.

This requires some explanation. I’ll try.

To begin: While unions may be smaller and weaker than at any time since the pre-New Deal days, public support for unions is high and growing: In the latest Pew and Gallup polls, unions have approval ratings of 60 and 61 percent, respectively. Among millennials, a generation whose experience of the American economy has been preponderantly dismal, the approval rating for unions exceeds 70 percent. This does not mean millennials have had positive experiences with unions. With union membership at 11 percent, and only 6.5 percent in the private sector, most millennials have had no experience with unions at all. However, as their grandparents and great-grandparents realized in the 1930s, they have figured out that unless workers gain more power, the inequality and unfairness baked into the economy will only grow worse—a belief that many of their elders share. West Virginia may have gone heavily for Trump, but popular support for the teachers there was such that the Republican governor and legislature felt compelled to grant them their raise.

Also working in the teachers’ favor were the digital channels of communication and mobilization that the unions and their supporters were able to create on Facebook pages and the like. A similar process is unfolding in Oklahoma, where unions are scarcely to be found, but where a Facebook page that teachers have used to organize themselves for a possible strike now has 40,000 followers. As the sociologist Zeynep Tufekci has pointed out, digital communications make mobilization—a task that unions were once needed to perform among workers—much easier. Tufekci, who joined the occupiers in Zuccotti Park and in the great squares of Cairo and Istanbul, also noted that none of those occupations had sufficient structure to reach decisions or negotiate with the authorities. The West Virginia teachers had enough structure, however—their unions, even without de jure bargaining rights—so that they were able to reach a deal with the state, and the Oklahoma teachers may be in that sweet spot as well.

While unions as institutions are weak, public action on behalf of workers appears strong enough to win victories for those workers in the legislative process, as the Fight for 15 has demonstrated. Actual organizing of private-sector workers, however, remains all but impossible under the constraints of labor law, so until that public pro-union sentiment becomes so strong that it forces a wholesale rewriting of labor law, the institutional strength of labor isn’t likely to grow.

Meanwhile, back at the Court, the Republican justices look to be following the general pattern of Republican elected officials. In decades past, the “right-to-work” laws designed to cripple unions were confined to the anti-union South and Southwest, but in the past decade, Midwestern Republicans have moved to adopt “right-to-work” laws, too, in such former union strongholds as Wisconsin, Indiana, and Michigan. This transformation, I’d argue, is of a piece with the Republican campaigns to suppress voting, stop immigration, and enact increasingly extreme legislation. At the root of all these actions is the GOP leaders’ awareness that the nation’s growing racial diversity and millennials’ left-leaning politics give them just a few short years to enact legislation or deliver court rulings that can delay or derail their political eclipse—like weakening the very unions that do the best job of helping bring minorities and millennials to the polls.

All of which is why 2018 looks to be shaping up as a year of both dejection and elation, or, more precisely, of fear (chiefly among Republicans) and rage (chiefly among everyone else).

March 7, 2018

How We All Pay For Trump’s Tax Cuts. Sure as night follows day, Republicans rediscover the temporarily suppressed horror of deficits once the ink is dry on tax giveaways to rich. And the cure, of course, is cutting what remains of social outlays.

The Republican tax bill increased the ten-year deficit by well over a trillion dollars. Now comes Martin Feldstein, Harvard eminence and former chair of Reagan’s Council of Economic Advisers, writing in The Wall Street Journal to sound the alarm.

But in a splendid display of selective myopia, Feldstein places primary blame neither on the tax giveaway (the corporate rate cuts, he writes, “will spur productivity and raise real wages. They are not the main driver of the debt problem.”) nor on Trump’s increased military spending (“which will contribute relatively little to the increased debt”). Actually, only if you think $800 billion over ten years is “relatively little.”

So what’s driving the debt, according to Feldstein? That would be Social Security and Medicare, of course. The good professor helpfully suggests reforms, namely cuts.

A cynic might observe that Republicans have been playing these games since Reagan: 1) increase deficits with tax cuts and military build-ups; 2) blame social spending; 3) execute cuts.

If Democrats can’t explain this to the voters come November and turn it into political pay dirt, shame on them.

March 6, 2018

Our tax dollars at work:

Four months ago, a mother and her seven-year-old daughter crossed the U.S.-Mexico border at San Ysidro, just south of San Diego. They had come from the Democratic Republic of Congo, where they had taken refuge in a Catholic church in response to threats to their safety. Somehow, they made it all the way to San Ysidro, where they immediately went to immigration authorities and asked for asylum.

Four days later, the mother was interred in a Southern California detention center, while her seven-year-old girl was sent, without explanation, to a children’s center in Chicago, where she knows nobody and repeatedly asks for her mother. The government has filed no charges against them, nor alleged that they pose any kind of danger to anyone, nor contended that the mother was in any way unfit to take care of her little girl. They have been permitted to talk on the phone several times since, though the girl is reported to have sobbed throughout each of the calls.

Our tax dollars at work.

According to the Department of Homeland Savagery—that is, Security—it is the government’s policy to discourage people who arrive unannounced at the border and ask for asylum, and one way it are endeavoring to discourage them is to separate children from their parents. There have been reports, which the government has declined either to confirm or deny, that the separation of children from their parents is now a common practice. The ACLU has filed suit to reunite the mother and daughter, to compel the government to reunite all such separated parents and children, and to enjoin it from continuing the practice.

Elsewhere on our website today, we’ve run one of my columns, in which I note the disquieting parallels between today’s ICE raids and the kidnapping journeys that slaveholders made to the Northern states between 1850 and 1861 to re-enslave African Americans who’d freed themselves by escaping. Such re-enslavements were not only legal, but under the terms of the 1850 Fugitive Slave Act, Northern states and cities—and even Northern citizen-bystanders—were legally obligated to help the kidnappers re-enslave the escapees. In essence, the hatreds of the white South were imposed on the North, and many Northern states and cities—prefiguring today’s sanctuary city and state laws—reacted by passing statutes forbidding their officials from cooperating in these kidnappings, while demonstrators and activists sought to hide the freed men and women and thwart the slavers.

Now, in forcibly separating children from the parents, federal officials have dusted off yet another slavers’ practice and put it back into use.

Why ICE offices aren’t surrounded by obstructive vigils of Americans who don’t want their tax dollars to work this way is a mystery to me.

March 5, 2018

Here Comes Big Right-Wing Money. In the months after September 1, 1939, after war was declared but before Germany mounted its blitzkrieg offensive, observers were puzzled that Hitler was temporizing. They called it a Sitzkrieg, a sit-down war. Then, in the spring of 1940, the Nazis smashed through much of Europe in a matter of weeks.

Excuse the analogy, but political observers, waiting for the full ferocity of Koch brothers money, have been puzzled that the Republicans have allowed Democrats to take back some 39 Republican-held state legislature and city council seats, and not flooded the zone with cash. Has the right-wing money machine been overrated?

We will soon find out. More likely, the high rollers were sitting out the minor races, but the Sitzkrieg is over.

Now comes a higher-stakes contest—the special election on March 13 for Pennsylvania’s 18th Congressional District in greater Pittsburgh. The seat is vacant because the incumbent, a fiercely anti-abortion Republican named Tim Murphy, pressured his mistress to abort what turned out to be a false-alarm pregnancy, and resigned in disgrace. But I digress.

The Democrat, Conor Lamb, a Marine Corps captain and one-time federal prosecutor, was actually ahead of the lackluster Republican candidate, Rick Saccone, in the money derby, about $3.8 million raised to just $1 million for Saccone, according to last week’s filings.

But then the Republican money machine went into high gear. As of this week, according to a tabulation by The Wall Street Journal,

GOP-affiliated groups—including the National Republican Congressional Committee, the House GOP’s campaign arm; the Congressional Leadership Fund, a super PAC aligned with House Speaker Paul Ryan; the Republican National Committee; and two pro-Trump PACs, 45Committee and America First Action—have poured about $9.1 million into the Pittsburgh-area race.

Saccone, now flush with cash, is flooding the airwaves with negative ads, branding Lamb a tool of House Democratic leader Nancy Pelosi and of course of Hillary Clinton. Will it work?

This is steel country. Trump is coming to campaign for Saccone, and you have to wonder about the timing of his steel tariff announcement.

Trump carried the district by 19 points, but recent polls have shown Democrat Lamb narrowly ahead. The district has a slight Democratic registration, even though the disgraced Murphy regularly carried it by double digits.

If big money makes a big difference in this race, it is a warning to Democrats counting on a blue wave in November. And if the Republican loses or even notches a narrow win, it will be a sign that even Koch money can’t buy you love. 

March 2, 2018

Man of Steel. Donald Trump is imposing 25 percent tariffs on imported steel and 10 percent on aluminum. The unions, the bipartisan steel caucus in Congress, domestic steelmakers, and Trump’s nationalistic base were delighted. The usual suspects were appalled. And the stock market promptly plunged.

The Wall Street Journal, working itself into a full lather, warned that this was perverse economics, since 6.5 million Americans work in steel-using industries while only 140,000 work in steel-making.

So, how should we understand this? Are these tariffs a case of Trump doing something right for a change, or protectionist folly?

Here are two important things to understand. First, the major offender here is China. The Chinese subsidize steel, sell it below cost in world markets to grab market share and drive out other producers.

This is a flagrant violation of trade norms as well as a national security threat. According to an authoritative study by the Association for American Manufacturing, China now dwarfs every other producer, making 803 million metric tons (mmt) of steel, compared to just 78 mmt for the U.S.

Second, steel really is a vital industry. But if things continue on their present course, the American steel industry will be gone.

Here’s the problem. Raising tariffs in isolation is not a policy; it’s a stopgap. We need a much broader grand strategy to challenge China’s state-led capitalism as a strategic threat and to revise the entire structure of world trade law, which seems powerless to deal with Chinese predation. This seems well beyond Trump’s comprehension.

Today, he tweeted:

Say what?

In addition, raising tariffs is no substitute for an industrial policy. To revive American steelmaking and other manufacturing, we need targeted sectoral policies as well as a serious public infrastructure program with “buy America” provisions. That way there are made-in-America customers for made-in-America steel, and we begin rebuilding U.S. manufacturing generally.

So can we defend these tariffs? Yes, but only as a stopgap and only as part of a much larger set of policies that Trump is not capable of delivering. As the saying goes, even a stopped clock is right twice a day.