Coup Odds and War with Iran

I have to address an article that's circulating right now that's driving me completely bonkers: this medium.com article entitled "Trial Balloon for a Coup?"  Please read it for yourself, if you have the time, before you read my take on it.

First of all, I am bothered by a writing flaw in this article, namely, that the author advances a thesis - that Donald Trump and company are testing the waters for a coup - and barely any of the subsequence paragraphs that follow support that thesis.  They're about unrelated matters, including whether or not Vladimir Putin offered Donald Trump a share of Rosneft.

Vladimir Putin might well have done that, but so what?  What does that have to do with a coup?  Maybe it's a business coup for the Trump business empire, but it doesn't support the planning of an armed seizure of power, an overthrow of democracy in the United States.

The article is full of stuff like that, objectionable items that nonetheless don't support the contention that a coup is being planned (for instance, so what if Trump is already planning his 2020 re-election campaign?  That may be tacky, it may be a waste of the President's time, but it has nothing to do with a coup).  There is one substantive supporting section, however.  Let me quote it in full:

As per my analysis yesterday, Trump is likely to want his own intelligence service disjoint from existing ones and reporting directly to him; given the current staffing and roles of his inner circle, Bannon is the natural choice for them to report through. (Having neither a large existing staff, nor any Congressional or Constitutional restrictions on his role as most other Cabinet-level appointees do) Keith Schiller would continue to run the personal security force, which would take over an increasing fraction of the Secret Service’s job.

Especially if combined with the DHS and the FBI, which appear to have remained loyal to the President throughout the recent transition, this creates the armature of a shadow government: intelligence and police services which are not accountable through any of the normal means, answerable only to the President.

(Note, incidentally, that the DHS already has police authority within 100 miles of any border of the US; since that includes coastlines, this area includes over 60% of Americans, and eleven entire states. They also have a standing force of over 45,000 officers, and just received authorization to hire 15,000 more on Wednesday.)

Ok! I could see a scenario in which the Department of Homeland Security and Federal Bureau of Investigation attempt a coup on behalf of The Donald.  But I'm going to politely suggest that to pull off a coup with only 60,000 dudes in a nation with an adult population of around 240 million people and a history of no coups ever is not an easy task, especially when a huge chunk of that population is already taking to the streets in very impressive protests that don't look like they're going to die down anytime soon.

The thing about a coup is: you need to have a good base of support to pull one off.  Remember how well the Turkish coup went last year?  Whoops.  A little fraction of the Turkish military tried to pull off a coup and totally botched it.  Instead of their coup succeeding, their opponent, President Recep Tayyip Erdogan, now has way more power than he had before the coup attempt.  D'OH!

You also have to be well-organized to pull off a coup.  Does the Trump administration appear to be well organized so far?  Sure, it could be a sophisticated front, to appear bungling and disorganized so as to make the coup all that much more unexpected!  But do you buy that?

 

My gut feeling - and this is just an informed guess - is that Steve Bannon and company might just be crazy enough to suggest a coup, or even try to go through with one!  But even assuming the DHS and FBI go along with a coup attempt, what about the CIA?  What about our armed forces generally? 

What we face now is not a spectacular, Nazi-style seizure of power but something far more banal, I hate to say.  From a short, well-written blog by Arun Gupta (emphasis added mine):

If you really want to know the impact of what Trump is doing, start following the commodities and equities markets closely. Trump probably pulled back so quickly on the green card ban because of the protests and the furor from Silicon Valley. Trump and his league of doom may hate the tech industry, but they can’t ignore the biggest companies in the world.

Today the markets are down and the volatility index is up because Trump is spooking businesses and investors. The markets will be a huge brake on his regime.

Indeed.  My basic contention is that Donald Trump doesn't have enough support to pull off a coup.  He is frightening the hell out of everyone around him!  That's how you play to your base, that's not how you pull off a coup.  That might be how you get a coup pulled off against you in certain countries, but thankfully, the one thing that is 100% awesome about our country's military history is that we have NEVER had a coup attempt in the United States.

Not saying we couldn't have one some day!  Just saying that it sure looks like Donald Trump and his little flock of allies (who do their best every day to alienate other powerful people who they could recruit as allies, but seem incapable of doing) lack the polish and planning capacity to pull off a coup.

You know what we could get, instead, however?  Another huge, American-power destroying, war in the Middle East.

Secretary of Defense James Mattis, an intelligent man in many ways, is a devoted enemy of Iran.  National Security Advisor Michael Flynn too has a hard-on for Iran.  Donald Trump has repeatedly condemned the Iran nuclear deal, and now Iran is testing missiles.  

You have a Republican administration which is not off to the races popularity-wise, which is staffed with folks who hate Iran in particular, and in Iran, a country prone to react to any perception of aggression with aggression of its own.  The "rally-around-the-flag effect" of a war declaration is going to be very tempting for an administration manned by a President who apparently worries that people don't love him.  Iran is, from the American perspective, a threatening-seeming, hostile country.  (They chant "Death to America!" there, after all!  Forget all the young people looking for peace and reform.)  In short, you have a recipe for war.

The last major, boots-on-the-ground war launched by the United States took place under a Republican President who was surrounded by advisors who believed that bringing democracy to other countries by force was not only A-OK, it was a great idea.  That administration lied to us, specifically over "Weapons of Mass Destruction," to get us into that war.  With Iran likely having the capacity to fire up a nuclear weapons program recently mothballed but certainly not decommissioned, I could see the same exact reasoning being used by Trump and his GOP supporters to start war with Iran.

Forget your coup fantasies.  There's a very real threat of war on the horizon.  I'm just a guy writing a blog, but if I was a gambling man, I'd put big money on war with Iran within the next two years.

Postscript: a reader asked if the appointment of Steve Bannon to the National Security Council is illegal.  As I understand it, the answer is: illegal? No.  Crazy?  Yes. A hair crazy.

If we decide to go to war with Iran, I'll have plenty to say about whether messing with Qassem Soleimani, pictured above, is a good idea or not.  For now, sleep tight!

Fairness and Federal Lands

So for a second weekend in a row, I took a day off of blogging due to birthing class and also because I had to just sit there and watch history unfold.

There is some talk going around right now that the "Muslim Ban" is all an elaborate sleight-of-hand; that the Trump administration has craftily cooked up a distraction to keep us from examining the substantial work being quietly done elsewhere.  It's an intriguing thesis, but I'm not sure I buy it, because there are ways to pull off this sleight-of-hand without attracting denunciations not only from the opposition party but from many within your own party as well.

I'm of the opinion that if it looks like incompetence, and it smells like incompetence, it might just be incompetence.  But it's totally possible that it's sleight-of-hand.  I don't know, and anyone who tells you they know for sure is lying.

I will say, if the alleged sleight-of-hand had been successful, then so many people wouldn't have noticed that the House just made moves to devalue federal land, in what looks likely to be a giveaway to private developers - a classic GOP move.  That will be the topic of today's post.

But first, I want to address the charge that I am not giving President Trump a fair chance, or that the opposition generally is not giving him a fair chance.

Prior to Mr. Trump's inauguration, all we had was speculation on what his Presidency would be like.  Any charge that he would be this or that, up to that point, was quite unfair.  However, he's now a week into his presidency.  He's moved aggressively, and I assume his supporters are mostly happy that he has.  We can now judge the first week of his Presidency.  He's pushed aggressively for a wall that will not keep immigrants out but will cost upwards of $14 billion (and that's a conservative estimate) and he's pushed aggressively for an immigration ban targeting majority Muslim nations but excluding those nations which have actually exported terrorists before, so in other words, an ineffective ban but one that nonetheless manages to insult and alienate much of the world.  He's mucked around with the official White House website in a way guaranteed to anger anyone who puts their faith in scientific consensus.

It would be quite unfair to judge his entire Presidency as a failure based on one week!  That is certainly true.  We still don't even know what his infrastructure plan will be, and that might well Make America Great Again, at least in regard to most people's bottom line.  (And let me reiterate: I hope the infrastructure plan is a huge success, because I want my fellow Americans and their families to prosper, and if they prosper, my family will likely prosper as well.)  But we can judge his first week in office, because the results are in, and the results suggest an administration with a real "damn the torpedoes" approach.  As a Jets fan I am reminded of Rex Ryan's "ground and pound" offensive philosophy.  Let me tell you, it was not a pleasure to watch.

Anyways, down to brass tacks.  Let's address this Guardian article about the effective revaluation of federally owned and managed land by the GOP-led House.  I urge you to read it, but assuming you don't have time to, here are the key two paragraphs (emphasis added mine):

Ignoring those figures, the new language for the House budget, authored by Utah Republican representative Rob Bishop, who has a history of fighting to transfer public land to the states, says that federal land is effectively worthless. Transferring public land to “state, local government or tribal entity shall not be considered as providing new budget authority, decreasing revenues, increasing mandatory spending or increasing outlays.” 

Essentially, the revised budget rules deny that federal land has any [monetary] value at all, allowing the new Congress to sidestep requirements that a bill giving away a piece of federal land does not decrease federal revenue or contribute to the federal debt.

I suspect where you're going to fall on this decision depends on how you see the following two maps.

In the map above, red - the color of communism, let me remind you - represents the percentage of land in a given state controlled by the federal government.  Seems like a whole lot of waste, right?

That is definitely the argument made by this Forbes article, which cites a 2015 study by Jason R. Mason of Wharton.  The numbers contained in this study are staggering.  Evidently, opening all these federal lands would generate 552,000 jobs annually for seven years and then 2.7 million new jobs annually for the following 30 years.  Holy cow!  By recent standards that is, frankly, an insane amount of jobs.  Taxing private activity on these open-for-business lands would generate $105.4 billion per year according to the Mason report - far from chump change!

If it sounds too good to be true, that might be in part because Mr. Mason has assumed, in his study, that oil will be selling for around $100 a barrel.  Oh.  While the price of a barrel of oil is inching back up above $50 currently, oil remains on shaky ground.  There remains too much oil in the world for a global economy still in the doldrums to consume it all (see this WSJ article or just Google search the topic).  This would suggest that the projected employment and income changes in Mr. Mason's study are highly dubious.

Still, for the sake of argument let's assume Mr. Mason's projections are correct.  According to the Guardian article, the current "closed" system of federal land management maintains 6.1 million jobs annually from recreation/tourism.  So, if the Mason report is correct and the Guardian article is also correct, opening federal lands to drilling, mining and the like would actually reduce employment by about 3.4 million jobs (2.7 million jobs in drilling, mining, etc. - 6.1 million jobs in tourism, etc. = a net loss of 3.4 million jobs).

This post is already getting too long, isn't it?  That's the problem with writing these dang things.  Let me just leave you with a different map and some closing thoughts, although I'm sure I'll be returning to this topic soon:

Ah, green.  The color of nature!  That's more like it.

The bottom line is that much of the West is not suitable for agriculture (READ THIS BOOK, please).  The Bureau of Land Management, which owns most of the land in the map above, allows ranchers to graze cattle on BLM lands.  Grazing cattle is one of the only economic activities that actually makes sense on arid Western lands.  The other two activities that make sense are mining/drilling, and tourism (largely "ecotourism" these days).

As a Northern Californian by birth who spent by boyhood summers in the Bitterroot Valley, Montana, I'm going to have to see much more convincing evidence than I've seen so far to convince me that mining and drilling will generate sufficient employment and economic growth to justify blowing the tops off the purple mountain's majesty.

Lest you think me an extremist, let me state for the record that there may well be many places for where after thorough and public review, federal lands should arguably be opened to private activity.  Still, sleight-of-hand attempts notwithstanding, after Donald Trump's first peculiar week in office, a LOT more people will be keeping their eyes on moves made with regard to our federal lands and will not tolerate a blind giveaway of federal lands.

The Bitterroot Valley, MT.  Wouldn't this look nicer if those mountains were being strip-mined?

The Muslim Ban

Let's talk the "Muslim Ban".

Fine work is being done by other writers decrying the morality of the Muslim Ban.  I'm going to assume for the sake of argument that we're all morally OK with the Muslim Ban.  I personally very strongly am not OK with it, but I'll put my objections aside for the sake of analysis.

Having accepted, then, that it's a good idea, a desirable idea, to keep Muslims from entering this country, let's take a look at the ban.

Not included in the ban is immigration from Saudi Arabia, Pakistan, Egypt, and a host of other majority-Muslim nations.  The specific nations targeted are Iraq, Syria, Iran, Sudan, Libya, Somalia and Yemen.

Of the 19 Sept. 11, 2001 hijackers, 15 were from Saudi Arabia.  The Muslim Ban therefore lets off the hook the country that exported the vast majority of the men who targeted us in the most audacious terrorist attack in American history.  Saudi Arabia is also the home of Wahhabism, the most "hard-core" branch of modern Islam and the one most ideologically responsible for the export of Islamic terrorism today.

Pakistan, is, of course, the power responsible for cultivating the Taliban and hiding Osama bin Laden from American and allied forces for many years.  They, too, are excluded from the ban.

With those two omissions, the ban does not seem that it will be all that effective in keeping out those Muslims from abroad who really, truly wish us Americans harm.

So who is included in the ban?

• Iraq, a nation the United States more or less destroyed in Operation Iraqi Freedom and never bothered to rebuild properly, resulting in a fractured nation unable to suppress the rise of ISIS;
• Syria, a nation infected by the ISIS virus from neighboring Iraq and treated as a bit of a ping-pong board between the United States, Russia, Turkey and the Gulf States, notably Saudi Arabia.  It, too, lies in ruins;
• Iran, a Shiite nation who stands in direct opposition to Sunni ISIS, and with whom we could ally in this battle, which would make total geopolitical sense but would go against the dreams of certain hard-liners;
• Libya, a nation that tore itself apart with American assistance;
• Sudan, a country ruled by a brutal dictator who nonetheless puts the hammer down on radical Islamist groups and therefore, you would think, is another natural ally from a geopolitical perspective;
• Yemen, a nation invaded by Saudi Arabia (again, the home of the bulk of the 9/11 hijackers); and
• Somalia, which just, Good lord, poor Somalia.

So the ban includes a bunch of nations with whom we could potentially ally and also a few which could make a good case are in the mess they're in in part because of the United States of America, but does not include those nations most likely to actually export "evildoers" who wish to come attack us.

Of course, a ban of any sort won't address the fact that all terrorist attacks in the USA since 9/11 have been home-grown affairs and have also killed far, far, far fewer people than drunk drivers have.

So: the ban has huge, gaping holes in it that render it pointless, just like the Wall.  This is beginning to become a theme in the early Trump Presidency!  The Muslim Ban will not keep terrorists out if they are determined to get in, but it does serve as a slap in the face to seven nations which have big problems and which might well turn to the USA for assistance.

Empires grow strong when they cultivate allies and extend a helping hand to those in need.  Empires suffer when they wall themselves off and tell their neighbors to go screw.  This is not rocket science.  This is geopolitics 101.

You don't need to believe in the moral goodness of welcoming refugees into our country to see that failing to welcome them squanders America's reputation abroad.  From a cold, clinical geopolitical perspective, it is intensely stupid to turn refugees from these seven nations aside.  It is essentially tossing a huge, valuable tool - the reputation of the United States to serve as a moral leader in the world - into the garbage.

Why not let the refugees in and monitor them?  I think most refugees would take that trade.  "OK, you can come in to our country and, with time, bcomee an American citizen, but just know that the FBI and NSA will be keeping tabs on you."  OK! DONE.  I think most refugees would take that deal in a hot second.  And the ones that really are terrorists?  Well, I have faith in our intelligence personnel to weed them out.  Donald Trump just gave a big speech in which he declared his love for the CIA, so surely he has faith in our intelligence personnel too, right?

In enacting this ban, Donald Trump also declared that it "almost impossible" during the Obama administration to get admitted to the United States if you were a Christian refugee, but not if you were a Muslim refugee.  This is not a fact-based claim. 

In fact, the United States accepts tens of thousands of Christian refugees. According to the Pew Research Center, almost as many Christian refugees (37,521) were admitted as Muslim refugees (38,901) in the 2016 fiscal year.

Given that Iraq and Syria both have populations more than 85% Muslim, a near 50/50 split of Christians/Muslims refugee admittance actually seems pretty heavily tilted in favor of Christians.

It's also worth remembering that the United States is a country where church and state are separate, and that therefore, establishing a religious test for admittance to the country is a violation of the First Amendment to our Constitution.  And if America is not our Constitution, then what is America?

Finally, let me close by saying that yesterday was Holocaust Remembrance Day.  An odd day for the Trump administration to roll out the Muslim Ban, truly.  In the official statement on Holocaust Remembrance Day, Donald Trump's statement did not mention the Jews.  Therefore, it seems unlikely to me that he remembers Voyage of the St. Louis.  Emphases added mine:

On May 13, 1939, the German transatlantic liner St. Louis sailed from Hamburg, Germany, for Havana, Cuba. On the voyage were 937 passengers. Almost all were Jews fleeing from the Third Reich. Most were German citizens, some were from eastern Europe, and a few were officially "stateless."

...

Quotas established in the US Immigration and Nationality Act of 1924 strictly limited the number of immigrants who could be admitted to the United States each year. In 1939, the annual combined German-Austrian immigration quota was 27,370 and was quickly filled. In fact, there was a waiting list of at least several years. US officials could only have granted visas to the St. Louis passengers by denying them to the thousands of German Jews placed further up on the waiting list. Public opinion in the United States, although ostensibly sympathetic to the plight of refugees and critical of Hitler's policies, continued to favor immigration restrictions. The Great Depression had left millions of people in the United States unemployed and fearful of competition for the scarce few jobs available. It also fueled antisemitism, xenophobia, nativism, and isolationism. A Fortune Magazine poll at the time indicated that 83 percent of Americans opposed relaxing restrictions on immigration. President Roosevelt could have issued an executive order to admit the St. Louis refugees, but this general hostility to immigrants, the gains of isolationist Republicans in the Congressional elections of 1938, and Roosevelt's consideration of running for an unprecedented third term as president were among the political considerations that militated against taking this extraordinary step in an unpopular cause.

...

Following the US government's refusal to permit the passengers to disembark, the St. Louis sailed back to Europe on June 6, 1939. The passengers did not return to Germany, however. Jewish organizations (particularly the Jewish Joint Distribution Committee) negotiated with four European governments to secure entry visas for the passengers: Great Britain took 288 passengers; the Netherlands admitted 181 passengers, Belgium took in 214 passengers; and 224 passengers found at least temporary refuge in France. Of the 288 passengers admitted by Great Britain, all survived World War II save one, who was killed during an air raid in 1940. Of the 620 passengers who returned to continent, 87 (14%) managed to emigrate before the German invasion of Western Europe in May 1940. 532 St. Louis passengers were trapped when Germany conquered Western Europe. Just over half, 278 survived the Holocaust. 254 died: 84 who had been in Belgium; 84 who had found refuge in Holland, and 86 who had been admitted to France.

Innocent people from Syria and Iraq in particular are going to die, and their deaths will be on our hands, and yet, for all that, we will no safer from the threat of actual terrorists that we were before the Muslim Ban.

The STOCK Act

A reader of the blog sent me his copy of the Enron: The Smartest Guys in the Room not too long back, which is (1) one of the nicer things that anyone's done for me in a while, and much appreciated and (2) a great read if you enjoy sheer, unbridled hubris.  And who doesn't?  Makes for great reading.

One point that the book drives home is that if the executives of a company hold a lot of stock that can potentially vest (i.e., cash in - here's a lengthier explanation) in a short period, those executives have a strong incentive to drive up their company's stock price in the short term and do not necessarily have a strong incentive to tend to the long-term profitability of their company.

This has led to all of kinds of problems for a good long while now here in the period of modern capitalism.  (The BIG NERDS at Harvard Business Review discuss at great length here.)

I bring this up because another reader was asking me to weigh in on the STOCK Act, and whether Donald Trump might be in violation of it.  I have to admit this is not my area of expertise, but let me take a stab at explaining answering the question.  The answer in brief is: hell yes, he is potentially 100% in violation of the STOCK Act.

The Stop Trading on Congressional Knowledge Act (STOCK Act) of 2012 was designed to prevent members of not just the Legislative but also the Executive and Judicial branches (despite having Congressional in the name) from passing /acting on legislation that might benefit their stock position.  In other words, it is an anti-insider trading act.  Wall Street is subject to anti-insider trading laws, so our elected and appointed representatives sure as hell should be as well!  

Donald Trump has yet to divest himself of any of his stock or real estate holdings.  He could place his assets in a blind trust, but he seems to think that having his family run his business empire while he takes a hands-off approach, at least publicly, is good enough.

Trumps's best defense is that Ethics in Government Act, of 1978, exempts the President from having to worry about conflicts of interest vis-a-vis his or her personal finances.  And that is true! But the President is not exempt from the STOCK Act, of 2012, which you'll note is much more recent year. There are any number of tariffs President Trump could angle for, arms deals he could or could not authorize, wars he could start for Pete's sake, which could directly benefit his stock portfolio and/or have an impact on his real estate holdings.  

So, in theory, the STOCK Act is a big problem for President Trump.  Quite frankly, if the rule of law is going to stand, he needs to divest.

But is the rule of law going to stand?  I have a hard time believing that any Executive branch nominee's will be rejected over STOCK Act violations and an even harder time believing that action will be taken against the President for a STOCK Act violation.  Call me a cynic I suppose.

After all, Republicans are proving themselves to be as spineless most of us expect them to be, so let's not count on them for any sort of anti-corruption crusade.  And Democrats appear to be wandering down the path of caving for which they are famous, so let's expect nothing from them either.

(While we're on the topic of spinelessness, I'm so tempted to talk about how the press is handling Trump and vice versa, but that's a topic for a different post, one that should probably be written after drinking heavily because that's what the topic will lead you to.)

Stock ownership by members of the Executive, Legislative and Judiciary in this country should be illegal.  Period!  What good reason is there to permit these individuals who allegedly want to serve their country with huge stock portfolios?  This article looks at Tom Price's confirmation hearings and draws the same conclusions.

Donald Trump won't even release his tax returns and so far he's gotten away with it, so what consequences will he suffer under the STOCK Act?  I'd love to be proven wrong on this score, and I will definitely revisit this issue as events unfold, but I am not holding my breath.

In the meantime, if you have the time please read this article on the economic headwinds facing Donald Trump as his Presidency begins, which may make the political task of selling a big infrastructure plan easier for him, but contain pitfalls, mostly the rising value of the dollar and the fact that the Fed is likely to raise interest rates several time this year - in general, trends that favor a decrease in economic growth.  More on all this later.

Everyone have a great weekend, and if you have any insider trading tips, pass them along to yours truly.  I promise fabulous profits in the year to come. 

Debt Hysteria

Today's blog is a simple reminder that no matter what any one tells you, our country is not going to go broke, even if it runs a big ol' deficit.

Debt hysteria is one of those few traits shared by the Right and Left.  The Right sees us drowning in a sea of entitlements, leading to some kind of central-planning dystopia from which the wealthy might be able to flee, but under which most of us will suffer.  The Left sees unsustainable tax cuts, and while the Left's objection to these tax cuts is marginally less insane than the Right's fear of tax cuts, it still is, essentially, hysteria.

Let's all say it together: the United States prints a fiat currency which is the reserve currency of most of the world.  Until such time as the Dollar is no longer accepted as good or valuable by most of the world, the US Treasury Department and Federal Reserve can put as many dollars into circulation as they need to / feel like.  ERGO, the federal government cannot "go broke".

Yes, you can't turn these fiat dollars in to your local bank and get [x] amount of gold, or silver, or [insert mineral here] in return.  And guess what?  You would have no reason to do so in the first place.  If society utterly collapses, sure, the dollar would be worthless.  But as long as we have a standing military, some form of order in society, and people doing business agree to circulate dollars as opposed to something else (and the contenders are jokes: the Euro? Bitcoin? The Renminbi? This is a topic for another post, but for now let's suffice it to say: let's get real - the contenders are runners-up at best), the US Dollar will stand, the most reliable and flexible - and therefore powerful - currency in mankind's history (or at least for our generation, our parents' generation, in most likely our childrens' generation as well).

Let's put all that aside for the sake of argument and assume the government can go broke, simply by being too far in debt - let's assume the government can't print any more dollars to pay off that debt, and that the government can't fight inflation using conventional means (i.e., have the Fed crank up the interest rate) for some crazy reason.

Even under these conditions, our debt is not out of control.  The Congressional Budget Office (CBO) projects that debt, under current conditions, will grow to 89% of the USA's GDP in the next 10 years.  Sounds scary, right?  Well, in the WWII years, the debt-to-GDP ratio ran at around 120%.  Debt was higher than GDP!  Heavens to Betsy!  Surely America went broke at this time, rather than going on to enjoy a half-century of unparalleled wealth and global dominance.

Remember when the huge deficits of the Reagan era destroyed the credibility of the dollar, leading to society's collapse?  Oh wait - I forgot for a second... the Reagan era was followed by the Clinton era of major employment gains and the "internet boom".

The point is: as long as your debt is denominated in your own currency, and your currency is widely accepted, you're not going to really face a debt crisis.  I want to put the following in bold to really drive it home: if someone tells you that entitlements such as Social Security or Medicaid are going to make us "go broke", they either DO NOT KNOW WHAT THEY ARE TALKING ABOUT or they are LYING TO YOU.  It's really that simple.

Now! One caveat.  Can driving up debt lead to an increase in interest rates, and can that pose an economic burden on our country?  Absolutely.  That can happen.  And it did happen, during the Reagan years notably:

Well, what happened in the Reagan years was “twin deficits”: the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what’s tradable.) This led to an accelerated decline in the industrial orientation of the U.S. economy:

There's more Econ 101 than I have the mental capacity to get into right now as to why higher interest rates lead to a stronger dollar which leads to an increase in the trade deficit which leads to a decline in the industrial orientation of the economy.  Suffice it to say: it can happen.

So, if Donald Trump makes to Make America Great Again, i.e., bring back manufacturing in a big way, he should arguably stay away from deficits!!! Not because America will "go broke" - it most certainly will not - but because the process described above.

(Please note:  I am not saying we should stay away from deficits.  Deficit spending can be extremely stimulative to the economy.  I am saying that deficit hysteria is a bunch of ridiculous hoo-hah.)

I beg you to please read this short Dean Baker article describing the economic burden imposed by austerity, i.e., balancing the budget at any costs, as opposed to a moderate tax.  A sample (emphasis added mine):

In any case, the austerity pushed by these people has imposed an enormous burden on the economy both in the present and likely long into the future. In fact, we can think of this burden as being similar to a tax. It is standard in Washington political circles to jump up and down and yell and scream over even the most minor tax burden, but fans of arithmetic everywhere know that people care about their after-tax income, not just their tax burden. Except for the arithmetically impaired or the insanely ideological, it would be much better to pay an additional 1.0 percentage point of income in taxes and have a 10 percent higher before tax income, then the leave your tax burden and income unchanged.

Let me close by looping back around to the New Yorker article describe the faddish survivalism trend circulating among the super-rich which I linked to in the second paragraph above.  The rich are hedging that society might collapse - that our fiat currency to be no good, and that something resembling Joseph McCarthy's The Road might unfold.  Hedge-fund manager Robert A. Johnson, who works on Park Avenue South (right down the street from where I work! I wonder if there's room in his bunker for my family when society collapses?) argues that buying fancy bunkers to protect yourself from a collapse of society, a collapse caused perhaps by cutting social services in the name of balancing the budget until everyone is simply starving, homeless and mad, is perhaps rather short-sighted:

Johnson said, “If we had a more equal distribution of income, and much more money and energy going into public school systems, parks and recreation, the arts, and health care, it could take an awful lot of sting out of society. We’ve largely dismantled those things.”

I know I'll have to return again and again to this topic, especially when the GOP and Trump start talking about what a terrible burden Medicaid as practiced currently is, for instance.  For now I'm off to chew glass.  Toodles!

The Wall and Other Issues

It's time to talk about the famous wall.  The big, pointless wall.  But first, a few little items I didn't want to overlook:

Yesterday I went out on a limb to suggest that Trump's protectionism might actually work out and be a good thing.  I'm not walking that back, but I will say: curb your enthusiasm.  Doug Henwood shared this Brad DeLong article essentially throwing cold water on the premise that "free trade" has been responsible for the decline of most manufacturing employment in the USA.  When Brad DeLong and especially Doug Henwood talk, I listen.  The article's quite long, but it's worth your time.  If I have time, I'll do a run-down of it in a future post.

Secondly, here's a fantastic rundown in cartoon form of Republican plans for healthcare under Trump.  It's not pretty.  There's a lot of verbal chicanery involved.  This is well worth your time.  I fully expect all the tired lies depicted in this cartoon to be trotted out at length in coming days.

Thirdly, here's some advice for liberals looking to oppose Donald Trump.  It's a great read.  I won't say I agree with every single point raised, but I very strongly agree with the final point made, if nothing else.  Not too long; do at least skim.

Ok!  Let's talk THE WALL.

There are some things Trump is bringing to the plate which may be worth everyone's time.  The wall is not one of those things.  Let's review the facts:

By most verifiable accounts, illegal immigration to the United States has notably declined in recent years.  More illegal immigrants left the United States than entered during most of the Obama Presidency.  (As a side note, let's not forget that Barack Obama has deported more immigrants than any other President in American history.  Over the course of his Presidency, Obama had 2.5 million illegal immigrants deported.  So if Donald Trump wants to outstrip him, he'll have to really step up the level of deportations.)

What is the good of building a wall when more illegal immigrants are leaving the country than entering it?  That's right: a grand five seconds of reasoning makes clear that there is no purpose to building a border fortification under these circumstances.  It is flatly a waste of money.

There's some indication, however, that there was a surge in illegal immigration in 2016 (in response to the improving economy).  

So let's assume illegal immigration is for sure a big problem and we want to nip it in the bud.  The question now becomes: what good does a wall really do?

Did Hadrian's Wall protect Roman Britain from invasions from the North?  Did the Great Wall of China save China from invasions by the Hsung-nu and Mongols?  The answer is a very decisive "No".  Given that Trump's wall is mostly going to be a fence, that's even less "protection" than one of these more famous walls.

If you're a smuggler of illegal immigrants, how do you deal with a wall?  You deal with a wall by building tunnels. America has experience with tunneling, and should know better.  Drug cartels in Mexico currently build tunnels with highly impressive engineering.  A wall or big fence is not going to stop anyone determined to enter this country illegally.

The wall is estimated to cost $6.5 million per mile for a single-layer fence, with an additional $4.2 per mile for roads to service the wall and extra fencing.  The US-Mexico border is 1,989 miles long.  So, assuming we're building a nice fence-with-extras here, the cost is: ($6.5 + $4.2 million) * 1,989 = $21.282 billion and change.  If you skip the niceties and just build a long fence, the cost is a simple $12 billion and change.

$12-21 billion is not, by federal budget standards, a lot of money.  However, it's a lot of money for a project that won't accomplish its intended goal.  The budget for the Environmental Protection Agency, an agency that actually performs meaningful work (like it or not), was only $8.1 billion in 2016.  President Trump plans cuts in arts funding that amounts to less than one billion total dollars.  These cultural programs actually employ people!  Oh well - the illegal immigrants who were clamoring for those arts jobs won't be able to get them even if they build a tunnel!  That'll show 'em!

If Donald Trump Makes America Great Again and the economy is on fire, illegal immigrants are going to come to this country to work, and no wall or fence is going to stop them. In the meantime, however, we will have pissed away $12-21 billion dollars trying to stop them.  Why?  Is that money not better spent elsewhere?  Forget the EPA and the arts - surely we could spend this money protecting our troops?  Or building some infrastructure?  Or something, anything really, worthwhile?

Here's a proposal: rather than building some stupid, money-wasting wall, why don't we just guarantee everyone who wants one a job?  That'll both cost money and put more money into circulation in the economy!  We can leave the lousiest jobs to illegal immigrants and save the more gratifying jobs for naturalized citizens.  They'd sign up for that deal.  After all, they don't expect their lives to be gravy.  They're coming to America for their families, in the hopes their children will be better off than they are - just as every immigrant wave to the United States ever has.  (Speaking as an Irish-American, when I see my fellow Irish-Americans, or Italian-Americans, or Polish-Americans, etc., trashing the illegal immigrant, I grow pretty hot under the collar.  No Irish Need Apply, after all.  And yeah yeah yeah, "but that was legal immigration!" Yes, and that's because we had a more rational immigration policy in the 19th century. Don't blame the immigrants of today for our current lousy immigration policies.)

I'll have more on guaranteed employment in a future post.  For now, let me simply say that if Donald Trump wants his presidency to be regarded with respect rather than ridicule, he will not build some big dumb fence.

Rejection of TPP and Border Adjustment Taxes

Yesterday was big, bad news.  Today I want to shift to some potentially good news!  Don't worry, there's still plenty of bad news to come.

President Trump has rejected the Trans-Pacific Partnership (TPP).  This will upset few except for those in assorted financial elites.  There was little to like in the pact in terms of protecting workers' rights and plenty to dislike in terms of protectionism for doctors, which has the net effect of adding around $700 to the average American families' annual health costs.

It is looking as though Donald Trump may actually be sincere when it comes to protectionism.  NAFTA will be coming under review.  I have to say I honestly find it hard to believe that a GOP President is sincere when it comes to reworking "free trade" policies, but it appears to be the case.  Trump is buttering up labor unions affiliated with the building trades, who appear to be quite warm to him.  This is an odd spectacle to witness and doesn't augur well for the Dems, the ostensible party of labor in this country.  (The Democrats are wisely rolling out a $1 trillion infrastructure plan of their own, and it will be very interesting to witness the sparring over infrastructure soon to come.)

With all this protectionism in the air, it's time to discuss the Border Adjustment Tax, which I'm going to abbreviate as "BAT".  This isn't in vogue but I don't know why.  People call a Value Added Tax a "VAT" - why not "BAT"?  BATman!  Sorry if I sound like Andy Rooney.  Let's move on.

A BAT is essentially a tax levied on imports, so it's more or less a tariff.  Currently, exports are taxed - not as exports per se, but as goods produced in the United States which are subject to US taxation, and then exported - whereas imports are not taxed.  This is a net burden on the exporter and a net benefit for the importer.

A BAT regime would flip that equation, with tax cuts across the board easing the de facto "export tax", while imposing a tax/tariff on goods entering the country.  In a way, this is a tariff and a subsidy for exporters.  Good for exporters, lousy for importers: really, in many ways, the crux of Making America Great Again.

In theory, then, the people paying the price under a BAT regime would be international corporations who currently produce goods abroad (at low or tax free rates) and import cheap goods back into the United States ("free trade", in other words), whereas those who do well would be manufactures looking to sell goods at home or abroad.

President Trump has called the BAT system, floated Paul Ryan and the House Republicans, "too complicated," but in all honesty, what does he propose as an alternative?  It sounds like a classical tariff by another name.  Tariffs built manufacturing in this country in large part, so if the goal is to overhaul America as a classic manufacturing power, it makes sense to have something resembling a tariff.  A BAT might work very well.

However, there is one big problem with the BAT, which is this: as imports will face a tax, those goods which currently flow into the United States and are cheap - our tennis shoes, cell phones, flat screen TVs and the like - will now have a tax tacked on them.  In other words, they might not be so cheap anymore.

Who pays the price of a BAT?  The consumer.  The flip side of the "hollowing out" of our economy, as manufacturing jobs have fled overseas, has been the proliferation of cheap goods for purchase.

Now - if a BAT regime results in significant job gains due to an increase in manufacturing, all else being equal, that will drive wages up.  If wages go up, it won't matter for consumers - who are also workers, let us never forget - that our consumer goods are costlier, because we'll have more money to spend on them.

Federal budget-wise, significant cash flow gains could result from a BAT regime.  A uniform BAT of 20 percent is estimated to yield $100 billion per year, or $1 trillion over 10 years.  Not too shoddy, really.  Now, of course, that money could be frittered away on pointless tax cuts, but what if it was used intelligently, say, to shore up Social Security, which is not in any way insolvent, but which otherwise intelligent people frequently insist it is?

President Trump has gone back and forth on this issue, as he is wont to do.  Reading the tea leaves, though, it appears to be very much on the table.

All this above is a radical oversimplification of imports, exports, modern protectionism, etc., but you gotta dumb it down at some point.  TL;DR VERSION: a BAT would likely be good for manufacturing in the United States, would hurt the international corporation, and might lead to some sticker shock for the consumer, but if consumers get a raise, who cares. 

I encourage you to read this article and also this article about BATs, from which I have derived most of this post.  I will certainly follow up on BATs in the future.

ACA Executive Order and Medicaid Block Grants

Let's discuss a terrifying and cruel development in the works.  This is far more substantive than any quibble over the size of an audience.  This is arguably the biggest news of any sort for domestic life in the United States in years.  Even if you hate Obamacare and think that the 20 million people who've gained insurance under the Affordable Care Act will be just fine without it, the implications for Medicaid, a bedrock of the modern American social contract, are terrifying.

The Affordable Care Act is getting eviscerated more quickly than many anticipated.  It may be possible to kill Obamacare without even repealing it proper:

[The executive order is] so broad it could allow many of the law's provisions, including many of taxes it imposes on insurers and the requirement that individuals buy insurance, to die from lack of enforcement.

There's no back-up plan announced as of yet, although block grants to the states will likely be involved.  

This move may mean the end of Medicaid as practiced.  That is a very scary prospect for those who depend on Medicaid.  It's much more radical than simply repealing Obamacare, a program that is still fairly young.  Medicaid has been with us for a long time now.  It covers 70 million people.  It's expensive, as far as cost goes, at around half a trillion dollars per year to maintain.  Nonetheless, a Republican Governor has already raised concerns regarding a transfer of Medicaid to the states:

“We are very concerned that a shift to block grants or per capita caps for Medicaid would remove flexibility from states as the result of reduced federal funding,” Gov. Charlie Baker of Massachusetts, a Republican, said this month in a letter to congressional leaders. “States would most likely make decisions based mainly on fiscal reasons rather than the health care needs of vulnerable populations.”

It appears likely to result in the end of coverage, or increased financial burdens, for many of our fellow Americans:

Gov. Robert Bentley of Alabama, a Republican, said that if a block grant reduced federal funds for the program, “states should be given the ability to reduce Medicaid benefits or enrollment, to impose premiums” or other cost-sharing requirements on beneficiaries, and to reduce Medicaid spending in other ways.

America is not going broke.  America cannot go broke as long as the dollar, a fiat currency which is the reserve currency of much of the world, continues to be accepted.  There is no credible challenger to the dollar, currency-wise.  Therefore there is no economic rationale to shifting the burden of Medicaid to the states.  The states do not print their own currency; they really do face a financial imposition from an entitlement program like Medicaid.  The federal government, by contrast, can permanently run deficits and turn out just fine. 

$500 billion sounds like a lot of money of course, but Pentagon expenditures on an annual basis are larger, and has America gone broke recently, or ever?  No.  America has not gone broke, recently, or ever.

It is worth noting that, as people are kicked off Medicaid, they will have to spend more of their discretionary income on medical expenses and therefore will not have that discretionary money to make additional purchases.  I put that in bold because I want to drive the point home.  These folks who might have bought a new television or pair of sneakers will not be making those purchases because they will be trying to fill the gaps left by their evaporated Medicaid coverage.  Therefore businesses who might have sold those TVs and sneakers and might have hired employees to facilitate that process will be unable to do so.  In other words, this is an economically contractionary measure.  This will off-set whatever economic gains might be made by Making America Great Again otherwise.

We haven't known what sort of President Donald Trump would be until now.  From the get-go, he has signed an executive order that is likely to slow down the economy at the expense of low-income households.  This is not bold, new thinking; this is standard Republican thinking.  

Donald Trump may play His Own Man on television; this action indicates that he, perhaps, is Just Another Republican.

UPDATE:  I neglected to mention that the ACA / Obamacare Medicaid expansion has been fairly good to the states financially.  Read the whole article linked-to there, or just read this if you don't have the time:

Medicaid expansion is a good deal for states financially, as the federal government pays the entire cost of covering the new Medicaid enrollees through this year [2016] and no less than 90 percent of the cost thereafter.  In expansion states there is now less demand for targeted Medicaid programs that serve low-income people with specific health conditions (such as certain women with breast and cervical cancers) but are funded at the state’s regular, lower matching rate, and for health programs that are entirely state-funded such as mental and behavioral health programs.  Expansion states also are collecting more revenue from their existing taxes on health plans and providers, such as the managed care plans that serve Medicaid beneficiaries in many states, which have experienced a surge in enrollment due to expansion.  The combination of these factors has produced savings for many state budgets.

(emphases added mine)

Trump's Speech to the CIA and First Press Conference

I missed blogging yesterday because I was very wrapped up in the post-inauguration happenings on the television.  There is much to say about Trump's first executive orders, the "skinny budget," his administration's statements on the benefits of his energy plan, and an intriguing if under-discussed idea called the "border adjustment tax".

But today I feel I have to address President Trump's speech to the CIA, which was jaw-dropping.

You would expect, when addressing the CIA for the first time, the President to give some sort of indication as to what his plans will be for the intelligence sector.  Surely there is something to be said about, for instance, tensions with Iran, or perhaps the CIA's staffing issues, or, you know, anything substantive at all.

Instead what we got was ... well, just watch for yourself.  He throws the CIA some vague love, but discusses nothing substantive.  He spends most of his speech talking about his rallies, his speeches, the media, who voted for him as opposed to who didn't, etc. 

It was an insane speech.  Who cares who voted for him or not?  He's the President now.  He's been sworn in.  The campaign is over.  I, for one, would love to hear what his plans for the intelligence sector might be.  I'm sure if I was a CIA employee I'd feel even more strongly about it.

There's been a lot of reason for concern for a Trump presidency, but the verdict's been out on Candidate Trump vs. President Trump.  The speech to the CIA is not reassuring in this regard.  This is not the speech of a man who is prepared to govern; it is the speech of someone who sounds like he just lost an election.

As marchers in cities throughout the United States and throughout the world set record numbers for protest, estimated by many to be the largest protests since the Vietnam era, Donald Trump doubled down on the spectacle of his CIA speech with his first ever press conference, led by charmer Sean Spicer.

The question-less press conference amounted to a bunch of whining about the how the media discussed the size of President Trump's inauguration.  And that was it.  Executive orders, the repeal of Obamacare, plans for the economy, you name it: nothing else was discussed in detail.

That's it.  That's President Trump's first press conference.  A man who looks very tired and stressed out essentially saying "SCREW YOU" to the media and then leaving.

The Trump Presidency is officially on.  Trump won, he was sworn in, and now he's the President.  And yet what we are hearing is still, in essence, his stump speech.  And not even the positive elements of his stump speech - not even plans to Make America Great Again.  This is just whining about media, whining about crowds, whining about losers, etc.

Don't take my word for it - watch the clips above.  And then find a loved one and tell them you love them, because holy cow.