Jeff Flake's Speech and the GOP vs. the CFPB

Senator Jeff Flake, R-Arizona, in announcing his retirement, gave a stirring speech that is being lauded by political pundits in the New York Times and elsewhere as boldly principled, even heroic.

It is great that Sen. Flake decided to stand up against Donald Trump, a man who thinks it is a good idea to pick fights with widows of slain American soldiers.

It's just a shame that Sen. Flake showed a decisive lack of boldness and heroism in willingly serving as one of 48 lackeys who combined with the bootlicker-in-chief to kill a sensible rule to protect the American consumer, worker and taxpayer from Wells Fargo and other financial entities.

Flake joined with forty-seven other Republican Senators, and zero Democrats, to overturn a rule being considered by the Consumer Financial Protection Bureau (CFPB) - the single greatest advent of the Obama era - to put the screws to arbitration.  These forty-eight shills of the finance industry were joined by Vice President Mike Pence, who provided the tie-breaking vote.

The New York Times, which often engages in sensationalist reporting, nonetheless does do much excellent reporting, and its coverage of arbitration is a must-read.  The long and the short of it is that arbitration clauses, inserted into contracts between employer and employee, between credit card user and credit card issuer, and elsewhere, essentially circumvent the US court system.  Yes, your acceptance of any of these contracts is "voluntary", but good luck getting by in this day and age without, for instance, a phone.

The CFPB has been considering, for five years, a rule that would have essentially undone arbitration as it is currently practiced, and allowed broader use of class-action lawsuits to fight financial fraud.  Emphases added mine:

For decades, credit card companies and banks have inserted arbitration clauses into the fine print of financial contracts to circumvent the courts and bar people from pooling their resources in class-action lawsuits. By forcing people into private arbitration, the clauses effectively take away one of the few tools that individuals have to fight predatory and deceptive business practices. Arbitration clauses have derailed claims of financial gouging, discrimination in car sales and unfair fees.

The new rule written by the consumer bureau, which was set to take effect in 2019, would have restored the right of individuals to sue in court. It was part of a spate of actions by the bureau, which has cracked down on debt collectors, the student loan industry and payday lenders.  

...

Looking to head off a repeal, Democrats and consumer advocates branded the effort as a gift to financial institutions like Wells Fargo and Equifax. Both companies, in the face of corporate scandals, used arbitration clauses to try to quash legal challenges from customers. (NY Times)

Listen, let's call a spade a spade here.  This is not an especially nuanced issue.  Ending this CFPB rule is a direct middle finger to any American who's been screwed over by (or stands to be screwed over by) a financial institution.  No company is being badly hobbled by the threat of class-action lawsuits.  Republicans estimate class-action lawsuits could cost financial firms $500 million in legal fees.  Accordingly to Fidelity, the U.S. finance sector has a capitalization of $7.59 trillion dollars.  Even if legal fees ballooned to 100 times the size of what Republicans estimate, they'd still be a drop in the bucket for the finance sector.

Who's being helped here?  Wells Fargo? Equifax? Come on, EQUIFAX?  The student loan industry?  The debt collection industry?  I'm going to politely suggest these companies and industries should be sued, over and over again, until they either no longer exist or are run under completely different conditions, by completely different people.

As for our elected representatives, they are sell-outs.  Donald "Drain the Swamp" Trump is a sell-out, and Jeff Flake is also a sell-out, even if he gives a fine speech.

Fake News on the GOP Tax Plan

Apparently the Trump administration and its boosters are claiming the GOP tax plan in the works will raise worker's pay by anywhere from $4,000 to $9,000 a year, an absolutely preposterous lie that's so bold that it might just work.

The Wall Street Journal has a great takedown of this embryonic tax plan.  You know your big GOP tax plan is a bunch of hot garbage if the WSJ, of all publications, rips it to shreds.

You might not be able to access the WSJ article due to a paywall, so I'm going to pull the key quotes for you here.  All quotes below are from the WSJ article, and emphases added are mine throughout.  Let's begin!

The White House Council of Economic Advisers claimed in a report released last week that the cuts to the corporate tax rate contained in the Republican tax-reform proposal would raise average annual household incomes by more than $4,000. They called this a “very conservative” estimate.

...

On the individual side, the Republican plan offers almost no direct benefit to the middle class. Many details are still missing, but from what we know so far it would largely be a wash for most households. A larger standard deduction and child tax credit would roughly offset the elimination of personal exemptions and the increase in the lowest bracket from 10% to 12%. 

This is the WSJ's take, not mine.  Onwards:

The bigger debate is about who benefits from a reduction in the corporate rate from 35% to 20%, which would reduce federal annual revenue by about $200 billion. An important economic lesson about taxes is that the one who writes the check is not necessarily the one who bears the cost. The Treasury Department and the Joint Committee on Taxation operate under the assumption, informed by decades of research, that about 25% of the corporate tax bill is ultimately paid for by workers in the form of lower wages. Recent peer-reviewed research has found labor’s share of the corporate tax burden ranging from lower than 25% to as high as 50%.

OK.  So here's the WSJ, owned by Rupert Murdoch and not exactly a liberal publication, stating decisively that a corporate tax rate cut of 15% will result in lower wages for workers, and probably little to no direct tax benefit.

Onwards:

The White House claims that the average household would see between $4,000 and $9,000 more in its paychecks every year. But if all 125 million households got a raise like that, it would amount to an annual increase in total wages of between $550 billion and $1.1 trillion. That’s between 275% and 550% of the total cost of the $200 billion corporate tax cut—implying a supply-side effect that’s more than a little far-fetched. ... Although the White House makes much of the importance of peer-reviewed research, their estimates of the wage effects from a cut to the corporate tax rate are based on parameters from a few papers written a decade ago, none of which were peer-reviewed, and most of which were never published.

GOP "math" has long been a joke, and it seems the Trump administration marches forth in the same sad tradition.

Let's wrap up here for now:

Moreover, the parameters used by CEA are based on estimates for U.S. states or much smaller and lower-income countries. North Carolina and Estonia might get much more inbound investment with a lower rate, but the trick would not work nearly as well for an economy as big as America’s. Many companies need to be in the U.S. for reasons quite apart from taxes. The United Kingdom, an advanced and relatively large economy, is a more relevant example. Its experience of a 0.3% annual real wage decline since 2007, following its cutting its corporate rate from 30% to 19%, does not inspire much confidence in claims about large wage effects.

OK! So there you have it.  You're sure to be hearing a lot from Republicans and their allies about how much better off we'll be as a result of the corporate rate cut.  Don't believe it.  If even the Wall Street Journal thinks it's a bad idea for the average American: it's a bad deal for the average American.

Likely the Trump administration will claim the WSJ is "fake news," but you have to wonder how long he get away with that particular canard, given that the WSJ is owned by the fellow who owns Fox News.  We'll find out!

Credit Card Debt, Fed Chair Nominees and Congress' Tax Plans

Just some assorted reading for today, with some light commentary added.

Overall credit card debt is increasing as banks increasingly turn to credit cards as a source of profits.  It's easy to get worked up over "usurious" banks, or alternately, "reckless" consumers, but the truth is banks exist to make a profit, so they're going to lend money and charge high interest rates to the extent they can, and consumers are going to borrow if they have no alternative.  Here's the money quotes for you TL;DR types.  Emphases added mine:

That business model is increasingly lucrative. Many consumers, their wages stagnant and their costs rising, are growing reliant on credit cards for essential goods and services, including medical and dental care. Across the industry, profits rose in the latest quarter.

In the years since the financial crisis, the largest United States financial institutions churned out profits largely thanks to a booming business in trading and structuring bonds and other securities. Advising corporations and other institutions on their finances and strategies was another lucrative revenue stream.

Now, though, those businesses are flagging, in part because financial markets have been eerily calm.

So banks are turning more to lending to consumers — especially through credit cards — to pick up some of the slack.

Many Americans have seen their savings winnowed by a combination of the recession and stagnant wages. Almost half of adults said they could not pay for a $400 expense without selling something or borrowing money, the Federal Reserve has found. Some 44 percent of people with credit cards are currently carrying a balance, according to the American Bankers Association’s latest quarterly analysis, up 1.7 percentage points from the same period two years ago.  (NY Times)

 Roughly the same amount of aggregate credit card debt as on the eve of the last major financial crisis.  Not that that should keep you up at night, but certainly worth monitoring... (Source: Business Insider)

You can hardly blame banks, which exist to make a profit, for extending credit to people who can't pay their bills otherwise, and then charging them interest for it.  The outrage, if there is to be outrage, should lie at the feet of the forces responsible for stagnant wages.

The good news is: wages are actually rising! Dean Baker has the details.  But wage growth can be stopped dead in its tracks if Donald Trump appoints a "fiscal hawk" to Chair the Fed.  Here's a look at five candidates who Trump might consider.

The killer would be Kevin Warsh.  According to Politico, the current favorite is Jerome Powell, which would be a decent appointment, compared to Warsh, who is a hardliner, and would likely look to raise rates, which would slow economic growth.  Powell, by contrast, has voted consistently with current chair Janet Yellen and the very moderate moves she's made.

If wages continue to grow, then folks won't get swallowed by credit card debt.  If they don't, credit card debt could balloon into a real issue, and threaten to undermine not only low-earning worker/consumers but worker/consumers across the board.

Of course, even if the Fed did raise interest rates, if there was some sort of plan to generate sizable economic growth (and with it, inflation), it might not matter!  Unfortunately, the GOP-led congress is gearing up for a $1.5 trillion tax cut, possibly.  Such a tax cut is almost certain to disappoint in terms of economic growth, as this chart makes clear:

Look at the red line: as it dips downwards, do you see the radical increase in GDP growth (the blue bars) that follows?  Neither do I.

Maybe instead of a big-ass tax cut, we should do what the American Society of Civil Engineers suggests and invest $2 trillion in our dilapidated infrastructure.  A big infrastructure plan was one of the main selling points of Donald Trump's election, and so far he and has party have not only failed to deliver, they're basically stopped talking about it.  Sad!

The Fall of Raqqa and Kirkuk

It would be easy to miss two major events in the Middle East this week due to the flap over Donald Trump's continuing insult parade, this time with regard to calls to grieving family members of fallen US military personnel.

One of the two major events was the fall of Raqqa, Syria, which had been the "capital" of the ISIS "caliphate".  This capture may put an end to the "caliphate" for now, but it most certainly does not put an end to ISIS.  This article linked-to here gives some detail, but the crux of it is: ISIS is going to shift into international terrorism mode for a while, lay low in Syria and Iraq for the time being, and, when chaos once again engulfs Syria and Iraq - which is almost certain, given the competing powers at play - possibly come rolling on back.

I sincerely hope this does not happen, as ISIS is as evil as it gets, but you can't rationally blame ISIS for taking a page from the Taliban's playbook, i.e., retreat for a bit and wait for an opening to come back in big way.  Lookee here, the Taliban ain't doing so bad these days:

(Source: Al Jazeera)

(Incidentally, here's a great New Yorker piece on Ashraf Ghani, the President of Afghanistan, a smart man who I am a big fan of, but who also may be too stubborn and too unwilling to engage in power politics to actually run the country effectively.)

Anyways, back to Iraq/Syria... so, Raqqa has fallen.  ISIS, for now, has been driven away.  Which brings us to our new, immediate problem - or rather, or newest iteration of a very old problem:

The fall of Raqqa threatens to inflame relations between Kurds and Arabs, who have been fighting the Islamic State in an uneasy alliance with the United States-led coalition — but against an enemy that is rapidly melting away. Most immediately, they may be at odds over the future governing of Raqqa.  (New York Times)

You bet your touchas they'll be at odds, especially given the other major news from this neck of the woods, which was much more shocking than the expected fall of Raqqa: the much more surprising fall of Kirkuk.

Kirkuk, in Northern Iraq, had been under the control of the Kurds since mid-2014.  This map, from June 2014, courtesy of the Guardian, shows you both Raqqa and Kirkuk as well as the extent of the Kurdistan regional government at the time:

As you can see, that's a big chunk of green up there, and none of Kurdistan's neighbors is too happy about that.  Certainly Iraq has no reason to be happy with a sizable de facto nation occupying much of Northern Iraq itself.  But there are lots and lots of Kurds in Turkey, Syria and Iran as well, and an independent Kurdistan in Iraq would certainly prompt hope for Kurdish territorial gains at the expense of Turkey, Syria and Iran.

The Kurds are not politically monolithic.  In understanding the Kurds, you should know these four groups in particular:

• The Kurdistan Democratic Party (KDP) - led by the Barzani family, in particular President Massoud Barzani, who is often accused (correctly) of corruption and authoritarianism.  It is fair to point out that corruption and authoritarianism are pretty common features of the chaotic Middle East these days, so let's not single ol' Massoud out.
• The Patriotic Union of Kurdistan (PUK) - presided over by the Talabani family.  Former Iraqi President Jalal Talabani died just recently, on October 3, 2017.  Just like the KDP, these folks are not saints, nor are they really worse than any of their enemies.
• The Peshmerga, the Kurds' fighting force, which is divided between KDP and PUK loyalists basically.  A highly effective infantry force for years.
• The Women's Protection Units (YPJ) - female defenders of Rojava (in Northwest Syria) and enemies of ISIS, about whom the War Nerd has written with his typical blend of cold-hearted realism and warm-blooded passion.

What has happened here in a nutshell is that the PUK sold out the KDP (with the YPJ an afterthought, but also getting screwed).  The Peshmerga stood down and did not defend Kirkuk as the Iraqi army - nothing to write home about, honestly - retook the city without firing more than a shotor two.

It's a stunning upset because the Peshmerga has been so effective for so long, and Kurdistan such a reality on the ground, that Massoud Barzani felt free to call a referendum on Kurdish independence just recently.  The referendum was a big "success" but it was a bridge too far for the Iraqi government, and more importantly, for Qassem Soleimani in Iran.

Soleimani - a man with whom you should not fuck (pardon my language), as yet another fantastic New Yorker profile makes clear - cut some kind of deal with the PUK (what, exactly, the deal was is the main mystery here) and the PUK stood down.  The Peshmerga, which had fought so well for so many years running, just totally folded.  To me, this comes as almost as big a surprise as Trump's victory over Clinton last year.

(Source: energy-pedia news)

Now the Kurds no longer control Kirkuk, and even worse for them, they no longer control Kirkuk's oil fields.  That's a huge financial blow for Kurdistan.  It appears to be good news for British Petroleum, however.

As for Donald Trump, it is not great news.  Emphases added below mine.  From NBC:

A few days after the Trump administration announced a new, get-tough approach to Iran, one of that country's top military commanders [Qassem Soleimani] and the armed Shiite militias he supports played a key role in the seizure of an important Iraqi city from the U.S.-backed Kurds, according to Iraqi, Kurdish and American officials.  (NBC News)

From the New York Times:

American officials, including President Trump, insisted that the United States was not taking sides in the dispute, but some analysts say that the United States approved the Iraqi plan to enter Kurdish-held areas and that Iran helped broker the agreement with a Kurdish faction to withdraw its fighters from Kirkuk, allowing the Iraqi forces to take over largely unopposed.  (NY Times)

And here's the money quote on the so-called "Trump doctrine":

"This is the first real tangible challenge to the Trump Iran doctrine, and we have our answer: it seems like there is nothing behind it," Michael Barbero, a retired U.S. Army lieutenant general who served in Iraq and has close ties to the Kurds, told NBC News.  (NBC News)

Ouch.

Well, our President is too busy picking fights with widows to stand by our long-time allies in the Middle East anyways.

For me, it's a truly sad moment for the Kurds, to whom I am deeply sympathetic, corruption or no corruption.  They have had to put up with a lot over the years, notably genocide.  There was some hope that a new Kurdish nation would rise, as Israel once did.  For now, such hopes look to be dead.

YPJ fighter.

Libertarian Critiques of the Gender Gap

In response to yesterday's post, a reader put to me that the gender pay gap "is for the most part a myth and has been debunked by many economists," citing an article by Steven Horwitz.  I try to keep an open mind, so let's take a look at Horwitz's article.

First, in analyzing the oft-discussed ballpark figure that women earn 80% of what men do to perform the same work, Horwitz has this to say (emphasis added mine):

First, if the critics are claiming that the 80% number means that when men and women with the exact same skills and experience and preferences do the exact same work that women get paid 80 cents for every dollar men do, they are wrong. That is not what the 80% figure shows. 

 

Rather, that number is the ratio of female to male wages among full-time workers, across all kinds of jobs and regardless of the skills and preferences of the workers. That 80% is an aggregate – it is not an apples-to-apples comparison of men and women doing the same work. Thus, the claim that women get paid 80% of what men do for the same work is a myth.  (Foundation for Economic Education)

As our reader also says, "You can’t compare janitors to maids and management positions in different industries as if they were the same."  And that's true.  It would be wrong to compare the earnings of a Chief Executive Officer and a Chief Operating Officer, or a heart surgeon and an ophthalmologist, for instance.  So Horwitz is likely right in that the 80% aggregate misses the mark somewhat.

But what about janitors and maids?  According to the Bureau of Labor Statistics, in 2016 (source here), janitors earned about 22% more than maids on the average, and janitors are were likely to be men than women (and vice versa for maids).  Is their work substantially different, or are they market substitutes? 

This New York Times article cites numerous studies which found that as women entered certain occupations, average pay decreased, whereas when men entered certain occupations, the opposite occurred - "even after controlling for education, work experience, skills, race and geography."  This seems to have occurred even when an "apples-to-apples" comparison is done, in this case with regard to the specific occupation of ticket agent (emphasis added mine):

A striking example is to be found in the field of recreation — working in parks or leading camps — which went from predominantly male to female from 1950 to 2000. Median hourly wages in this field declined 57 percentage points, accounting for the change in the value of the dollar, according to a complex formula used by Professor Levanon. The job of ticket agent also went from mainly male to female during this period, and wages dropped 43 percentage points.

The same thing happened when women in large numbers became designers (wages fell 34 percentage points), housekeepers (wages fell 21 percentage points) and biologists (wages fell 18 percentage points). The reverse was true when a job attracted more men. Computer programming, for instance, used to be a relatively menial role done by women. But when male programmers began to outnumber female ones, the job began paying more and gained prestige.  

... even when women join men in the same fields, the pay gap remains. Men and women are paid differently not just when they do different jobs but also when they do the same work. Research by Claudia Goldin, a Harvard economist, has found that a pay gap persists within occupations. Female physicians, for instance, earn 71 percent of what male physicians earn, and lawyers earn 82 percent. (New York Times)

Now, maybe those lawyers are engaged in different types of law work - some are real estate attorneys, some are litigators, etc.  But ticket agent... how many different types of ticket agent are there, really?

To be fair to Horwitz, he doesn't dispute that discrimination effects the gender pay gap - just that it doesn't account for most of it:

The consensus of the economic studies is that there is still about 3 to 5 percentage points of the 20 percent, or roughly 15 to 25% of the gap, that cannot be accounted for by economic differences and that might well be due to discrimination. (Foundation for Economic Education)

(By contrast, one study cited in the NYT piece comes to the conclusion that "pure discrimination may account for 38 percent of the gender pay gap.")

It's worth noting that Horwitz cites "economic studies" but doesn't actually provide links to, or even the names of, any actual economic studies.  I'm not denying he is referring to actual studies, but it would have been nice to know what they were.

Horwitz notes several times that is a fan of markets, and states in his conclusion that insufficiently "free" markets might be causing distortions that allow discrimination to flourish.  "The less rivalrous the market, the more you find forms of power, including that stemming from bias, can express themselves."  Maybe.  It's also possible that markets are often not rational, no matter how badly the Austrian school / libertarians generally might wish otherwise.  

That said, it's also possible that the studies cited in the New York Times article above are also tarnished by bias - that those studies were constructed with the belief that discrimination does in fact explain most of the pay gap.  That gender discrimination is persistent and looms large in peoples decision-making seems like a less crazy premise to me than that markets are efficient and rational.

Horwitz and Claire Cain Miller, the author of the NYT article discussed above, agree on much.  Both seem to concur that socialization may be largely responsible for the gender pay gap, in that women are often deterred from childhood for pursuing higher-paying work that is typically performed by men, and that the prospect of raising a child puts many women off from undertaking careers which obligate long hours - stereotypically "men's work", which tends to pay much more.

Horwitz clearly has, in the end, good intentions, and his piece is well worth reading in its entirety.  His lack on specificity on the studies he cites, and the fact that other studies directly contradict his "apples-to-apples" claims calls into question who has the better studies.  But mostly, I must say I disagree with Howitz here (emphases added mine):

Working through voluntary processes and the institutions of civil society to reduce sexism seems a far more congenial option than using policy. I also think that the long-standing liberal concern with the dignity and growth of all individuals should make us want to address the sexism that remains in our culture. This is a set of issues on which we can agree with progressive feminists – working together to change the culture is a better solution than trying to regulate labor markets in ways that are not necessary. (Foundation for Economic Education)

Au contraire - I suggest that if, as just a beginning, paid parental leave was not also offered, in equal amounts, to men and women, but that both men and women were obligated to take that leave, and furthermore, if working longer hours was actually deterred or even disallowed by law, you might see regulated labor markets come to change culture, rather than vice versa.  I also suggest that congeniality should be at the least of our concerns where labor rights are concerned, and that attempts to "change culture" absent law are often doomed to failure - the perennial back and forth of the modern day culture war.

But whether culture is the determinant of, or the byproduct of, the social economy is a vast topic for another day.  For now, I simply suggest you read Horwitz's piece and Miller's piece as well.

The Gender Pay Gap, the EEOC, and Parental Leave

In light of the uproar over Harvey Weinstein, and the subsequent #MeToo campaign, I thought it would be appropriate to look again at the gender wage gap and what, if anything, the Trump administration is doing to narrow that gap, as well as the treatment of sexual harassment under the Trump administration.

The Equal Employment Opportunity Commission (EEOC) received 90,000 complaints in 2015, of which 30% dealt with sexual harassment, and it was estimated that 75% of sexual harassment incidents in the workplace went unreported.  This informative Vox article breaks down a 2016 EEOC study that makes clear that the little Powerpoints we're all subjected to once a year (if that) do next-to-nothing to deter harassment.

(The Vox article also makes an important point that in unionized industries, the pay gap is significantly reduced.)

That a Republican President would seek to undermine the EEOC with appointees and rules designed to make employment less equal is not really a surprise, and Donald Trump has sadly not proven an exception to the rule in this regard.  His most recent EEOC nominee, Donald Gade, is "an outspoken critic of disability pay for wounded veterans" (source: Inside Counsel) which strikes me as totally flipping insane, politically, but in this day and age positions once considered insane are increasingly entering the political norm, aren't they?

As you can guess, if the President is going to nominate a man who thinks that even those who fought for their country in the armed forces and sustained injuries shouldn't get "handouts," he's certainly not going to do anything to fight the chronic gender pay gap.  And in fact, Trump's EEOC has moved to stop reporting from large companies - reporting that would have assisted efforts to close this gap:

The Trump administration has halted a rule that would have required large companies to report to the government what they pay employees by race and gender — an Obama-era policy that aimed to close what economists call the wage gap. ... Starting next year, companies with more than 100 employees and federal contractors with at least 50 would have had to report more detailed salary data to the EEOC on a form they already annually submit to the agency. ... If, for example, the numbers revealed that a business paid male sales employees far more than their female counterparts, the EEOC could choose to look into the matter and perhaps launch a discrimination lawsuit.  (Washington Post)

Gotta keep those pesky lawyers at bay!

Business Insider, a publication I find increasing indispensable, has a wonderful, graph-filled breakdown of the pay discrepancy between men and women.  It will come as no surprise that women of color fare even worse than white women (oddly, Asian women suffer slightly less than white women).

It is also a cruel irony that new mothers suffer salary-wise when their children are born, but then men tend to enjoy a salary increase.  

Of course, some of that discrepancy might be obviated by a national paternal leave policy, which is a concept that enjoys bipartisan support and had been loudly trumpeted by Ivanka Trump.  A great, concise look at paid family leave can be found here.  Certainly, the polling on the issue is good:

A Pew Research Center survey of 2,029 adults released in March found that 82 percent support paid maternity leave, 69 percent support paid paternity leave, 67 percent support paid family leave, and 85 percent support paid-leave to deal with one’s own serious health condition. (HealthAffairs.org)

Still, counting on Ivanka Trump to spearhead a national parental leave policy might not be the best idea.  If you read the Washington Post article above, you'll see she stood by her father's decision to halt the reporting from larger companies.  Still, who knows, maybe she really will step up to the plate, somehow.

Barring that, logic would suggest the pay gap for women, and low levels of reporting on sexual harassment, are here to stay, at least if Donald Trump's EEOC has anything to say about it.

On a side note, and unrelated to the issues discussed above, I don't want any of you to miss this horrifying expose of elder law abuse.  Why this isn't a hot button issue politically is beyond me.  Read it and weep, and, sadly, maybe don't trust your parents' doctors.

NAFTA Update

Donald Trump continues to be alarmingly right on the issue of "free trade" agreements, as you can tell by the character of his enemies.

I personally wish this were not so, given that he is a race-baiter, a man fundamentally without dignity, and by all accounts, an illiterate.

Still, it appears that Trump might in fact be sincere about withdrawing from NAFTA, and if so, he'd be on the right side of history and economics.

A potential withdrawal is lauded by the AFL-CIO and denounced by the U.S. Chamber of Commerce.  The U.S. Chamber of Commerce is not exactly a small-town affair, despite the fact that most of the municipalities we grew up in have their own local, and fairly benign, Chambers of Commerce.  The U.S. Chamber of Commerce is much more akin to today's NRA; a fairly extremist ur-organization standing for Big Business, all other considerations be damned.  If the U.S. Chamber of Commerce is against it, and the AFL-CIO is for it, odds are it might actually be good for the average American worker.  Just consider this:

Last fall, Nike, Apple, and three major utilities quit the Chamber or its board of directors over what one company called its “extreme rhetoric and obstructionist tactics.” Companies such as Dow and General Electric distanced themselves from the group as environmental and labor groups piled on with criticism of the Chamber’s cozy relationship with special interests.  (Mother Jones)

That is from a 2010 article, but times haven't changed under U.S. Chamber of Commerce head Thomas Donohue.

As Orwellian as it gets: the U.S. Chamber of Commerce building touting "jobs"

The NY Times, in its alarmist article about possible NAFTA repeal, appears to be taking the side of agribusiness, in a fairly manipulative way:

If the deal does fall apart, the United States, Canada and Mexico would revert to average tariffs that are relatively low — just a few percent in most cases. But several agricultural products would face much higher duties. American farmers would see a 25 percent tariff on shipments of beef, 45 percent on turkey and some dairy products, and 75 percent on chicken, potatoes and high fructose corn syrup sent to Mexico.  (NY Times)

I hate the use of "American farmers" here.  It conjures the image of the little man and woman workin' hard on their small-to-mid-sized farm.  The truth is, modern agribusiness is dominated by a tiny number of producers with gigantic proportions.  Should we, the average American consumer, worker, and taxpayer, be all that worried about these firms having to pay a few tariffs when they sell goods in Mexico?  I suggest no.

Astoundingly, given how much the Trump administration to date has doubled down on being friends of the wealthy, and enemies, rhetoric aside, of the little guy, the Trump administration appears to be serious about overturning the most egregious part of the NAFTA: the clauses that obviate national sovereignty (emphases added mine):

Business groups say they are firmly opposed to an American push to curtail a provision called investor-state dispute settlement, which allows companies to sue Canada, Mexico and the United States for unfair treatment under Nafta. Meanwhile, Canada has said that it will not consider dispensing with another provision, Nafta’s Chapter 19, which allows countries to challenge each other’s anti-dumping and countervailing duty decisions before an independent panel.  (NY Times)

This fellow is not enthralled with recent news.

Let's be very clear about this paragraph.  "Business groups" (the U.S. Chamber of Commerce and others) are opposed to the overturning of treaty elements that allow companies to sue the nations in which they do business and overturn the laws of those nations.  Last time I checked, Mexico, the United States, and Canada were all ostensible democracies, whereas companies were beholden only to a tiny number of people: their shareholders.  Why should "investor-state dispute settlement provisions" even exist?  That puts the concerns of companies ahead of all other concerns.  I suppose that's fine if you're a hardcore libertarian, but if you're not, I assume you're on Team Nation-State.  I know I am.

If you'd like to see Dean Baker put the NY Times on blast for their NAFTA-death alarmism, here's the link.  And of course, here he points out how "free trade" isn't actually free trade at all.

Now: would a transition out of NAFTA be smooth?  Most likely not.  Just look at poor Britain - having undergone Brexit, they're now considering... drum roll please.. joining NAFTA!

So it's a tricky issue.  But there's no denying that, in this one instance, Donald Trump might actually be standing up for the American worker, whether he realizes it or not.  This is an issue that Democrats should do their best not to be on the wrong side of, unless they want to continue to see their clocks cleaned:

Mainstream centrist Democrats have a highly specific reason to evade criticism of our trade deals: a guilty conscience. After all, it was the 1993 fight over the North American Free Trade Agreement that saw the Clinton wing of the Democratic Party stick the knife deep into the back of its longtime ally, organized labor. Among labor types, the NAFTA betrayal, plus the many Democratic trade deals that followed, has rankled for years; whenever I talk to union members, bitterness over trade almost always comes welling to the surface.  (Politico.com)

If you'd like a lengthy read, here's a reminder of why NAFTA is garbage.  There are many, many, many, many, many, many good reasons to be opposed to Donald Trump, but perhaps "free trade" is not one of them.