Qatar Update

How could I overlook this?

In today's post I touched briefly on Qatar and it's history vis-a-vis Saudi Arabia (via the NY Times).  I had previously summed up another NYT article on Qatar here.  To wit: Qatar and Saudi Arabia have beef; Qatar has long tried to walk a fine line between being Saudi Arabia's pal and the pal of Saudi Arabia's sworn enemy, Iran; the US has 11,000 troops stationed in Qatar and thus has prudently respected this balance; the Saudis recently tried to completely isolate Qatar and end this balancing act entirely; and Donald Trump has astoundingly done his best to blow up the balancing act by using Twitter to put Qatar on blast (you read that correctly! not a fever dream on your part!) for supporting "terrorism," while simultaneously dealing $110 billion worth of arms to Saudi Arabia, which is completely hilarious in its sheer hypocrisy (Cato Institute).

But you might think, "Well, at least the Trump administration has decided what side they're on and is acting accordingly."  Well, NOPE.

Trump sells Qatar $12 billion of U.S. weapons days after accusing it of funding terrorism. (CBS News)

Seen on its own, you might think the Trump administration is engaged in some brilliant, seeing-many-steps-ahead geostrategy.  But given the other moves made by the Trump administration, both domestically and foreign-policy wise, I feel pretty confident in asserting that the Trump administration just doesn't understand what the ---- it's doing.  Emphasis added mine:

In the face of the escalating tensions Qataris came to D.C. with a large entourage -- expecting to break ground on the escalating regional standoff. But there is no sign of progress. The State Department has yet to extend an official request for a joint meeting between representatives that are in the nation's capitol from Qatar, the UAE and Saudi Arabia. Qatar says have still not received the list of demands that the countries have for them. The U.S. has not played a role in passing along request, either.  (CBS News)

Hahahahhahah come ON, people.

Maybe this will all work out Great for America Again, somehow, but I'll tell you, if I was Qatar right now, I'd be getting on the horn with Iran and saying, "Hello, Ayatollahs? It's me, Qatar"*.

America has demonstrated, through its vacillating, to a country in which its troops are based, that it cannot be relied upon.  Whether or not you're in favor of projecting strength overseas, I have to ask: how does this help us?

* this stupid pun cleared by several of my closest associates - blame them.

Lovely Qatar

Potpourri (TL;DR edition)

Are things Too Long for you?  So long you Don't Read them?  Don't worry, I'm on the case!

Today I provide a variety of links to valuable/interesting reading, along with brief summaries for those of you movers and shakers on the go who don't have the time to read them yourselves.  Graphically, I have provided no-usage-rights-required pictures of lovely flowers.  Soothing!

The "Skills Gap" is a Bunch of Malarkey (NY Times)

You'll often hear assorted Important People assert that high unemployment is due to a "skills gap"; workers formerly employed in manufacturing, for instance, lack the skills to move swiftly into new work, even though businesses are eager to hire.  The problem is there's very little evidence for this assertion at all.  Lost manufacturing jobs, which once provided a middle-class way of life, are being replaced by low-end, undesirable work -- working as a cashier, for instance -- or high-end work, requiring collegiate education and beyond.  I guess you could say that's evidence of a "skills gap," but it's a gap that can't be breached with simple job retraining, and besides, there's only so many of those high-end jobs to go around.  Apprenticeship programs can help mitigate "skills gap" problems somewhat, but the bottom line is: middle class jobs are disappearing, period, and "skills" don't have a lot to do with that.  (Low aggregate demand and "labor arbitrage" have more to do with it - see below).

"Public-Private Partnerships" Don't Work as Well as Plain Ol' Having the Government Do It  (NY Times)

I talked a week ago about infrastructure and how public-private partnerships are a bit of a scam.  Here's more writing to that effect.  China: doing it right, at least until recently.  India and much of the rest of the world: not so much.  Trump's infrastructure plan relies heavily on public-private partnerships.  Make America Stricken with Delays and Cost Overruns Again.

Oil Glut Ain't Going Nowhere (NY Times)

OPEC has no answer to North American shale producers and everyone involved has a short-term incentive to produce more, even if in the long-term that is bad for business.  As such oil is going to stay very cheap for a long time, which is good in the short term for consumers, and bad in the long term in terms of replacing oil with an environmentally less destructive energy source.

Class Conflict and the "Core Area" vs. "Gloalization" (American Affairs)

A fascinating but lengthy and verbose article, which I strongly encourage you to read if you have the patience for it, that looks at the history (from roughly the industrial era forward) of class development, immigration, "free trade" and the rise of "populism" in response thereto. 

In a nutshell: nation-states developed via mercantilism, capital and labor clashed constantly, eventually capital more or less pacified labor by improving their position in the social contract, and a new "class" emerged - the "managerial class," which is basically a less nasty, more soothing capitalist class.  As a side note, the higher labor standard under this regime essentially requiring limiting immigration, as the resources of the nation-state or "core area" are not limitless and, given that low-wage immigration or outsourcing can be used to diminish the earnings of labor, it is requisite that both be curtailed to keep the good times rollin'.

However, with the advent of the super-national, global corporation, the capitalist class has every incentive to dismantle mercantilism (an obstacle to the global logistics chain) and reduce labor to relative poverty again by pitting "native" workers against immigratns and workers overseas who earn far less and have far fewer rights ("labor arbitrage").  Labor, in response, has every reason to turn to populists - some of whom are legit, others of whom are con artists - to restore the old mercantilist order.

(It goes without saying that if labor could somehow achieve global solidarity, there would be no need to return to the mercantilist order, but then again, the Jets could win the Superbowl this year.  Most likely not gonna happen.)

If you have the time, read the article.  Long, but worth it.

Economic Populism Doesn't Need to Mean "More Government" (Dean Baker)

In a nutshell: Democrats worry that "populist" voters hate "big government".  Well, there's two conceptually easy (but politically difficult) ways to win over these voters without increasing the size of government: (1) negotiate the value of the dollar downstairs relative to our trading partners, notably China, thus driving exports and subsequently raising manufacturing employment; and (2) replace members of the Fed who are fixated on crushing inflation -- inflation which barely exists -- by raising interest rates, which slow down the economy and make hiring and salary increases less likely.  It seems to me that virtually everyone except Neel Kashkari of the Minnesota Fed should be on the potential chopping block.

Incidentally, here's a 5-paragraph piece on Neel Kashkari.  (Bloomberg)  He's a smart guy.  Read it!

A Nice Little Rundown of the Saudi Arabia-Qatar Rivalry (NY Times)

And let's wrap up with this nice, short and informative piece.  TL;DR version: Crown Prince Sheikh Hamad bin Khalifa al-Thani of Qatar grew up with a chip on his shoulder regarding his powerful neighbor, Saudi Arabia, and spent decades on end messing with the Saudis all over the globe.  Saudi Arabia is trying to put an end to that nonsense right now with a heavy hand, but the heavy hand can seriously backfire!  Not smooth, Saudis!  This approach might work out for Saudi Arabia, or we might be looking at a Qatar more closely allied with Iran (and Turkey, to an extent) than ever.  We'll see how it turns out!

Have a great weekend, everyone.

Not pictured: private contractors scamming taxpayers on overly-bloated P3 infrastructure projects.

Infrastructure Update

Did you know this week was "Infrastructure Week"?  It was overshadowed a hair by the James Comey testimony and the upset British election.  But it was "Infrastructure Week," touted by the Trump administration as the time when its big infrastructure plan would be rolled out.

The plan was not in fact rolled out, at least with any specificity, but we can at least discuss what we know.

First of all,Trump's proposed budget actually cuts transportation program funding by 13% for the coming year, and cuts billions more in grant money for infrastructure.

As for the touted infrastructure plan -- previously promised in the amount of $1 trillion over 10 years -- his aides are now indicating that $200 billion of that will come from the federal government, and the additional $800 billion will come from private investors.

If that sounds potentially like a $800 billion handout to private investors, that's because, in a nutshell, it is.  But who cares if it works well, right?  Well...

Bernie Sanders' office did a nice job reporting on so-called "public-private partnership" schemes (also known as P3s -- I previously covered them here) and their many notable failures.  I encourage you to read it yourself, but the salient points follow:

First of all, the American Society of Civil Engineers (commies?) say we need $2 trillion, not $1 trillion, in infrastructure spending on top of what we're spending currently just to get our highways, bridges and the like back to a sound state.  So Trump's $145 in budget cuts are a bad place to start.

Secondly, private equity financing is often far, far more expensive / less efficient than government spending (emphases added mine throughout):

Trump’s plan to rebuild America relies heavily on the use of public-private partnerships to finance infrastructure projects with private equity capital. Such financing, whether through private equity or traditional tax-exempt municipal bonds, is repaid by ordinary citizens through a combination of taxes and user fees. Private equity financing is markedly more expensive than traditional government financing, however – by as much as three to six times. Considering the scale of infrastructure development under consideration, that difference could be enormous. For example: the charge for a $100 million-dollar investment using traditional government bond financing (at 3 percent, over 30 years) is about $90 million. For private equity capital, at a 15 percent return, the total skyrockets to $450 million.  (Sen. Bernie Sanders)

I have previously looked at whether the private sector was more efficient than the public sector, generally, in this blog post.  Needless to say, private contractors employed by the government do not fare well in the "spending taxpayer money responsibly" department.

The Sanders report takes a lot at a lot of specific, galling instances of public-private partnerships gone wrong; it's a brisk weekend read so print it out and give a once-over if you can.

It appears that under the euphemism of "asset recycling," the Trump administration will be looking to take many facilities built with public funds and hand them over to people we as taxpayers/citizens do not vote into office and ergo cannot control:

In addition to the obvious siphoning of public resources that Trump’s tax breaks and private equity financing entail, his administration has been pushing “asset recycling,” i.e. selling off existing assets – like airports, bridges and highway rest stops – to private investors and using the revenue (“recycling” it) to fund new facilities.

It is important to note, moreover, that weak investment in America’s infrastructure is not due to lack of access to financing, but because of constraints associated with insufficient state and local government revenue. Trump’s public-private partnership model does not address this problem and, in fact, exacerbates it by increasing overall costs to taxpayers. And because smaller-scale projects, like those in rural areas, may not be profitable enough to attract private equity investors, his model risks leaving many parts of the country behind.  (Sen. Bernie Sanders)

That bolded point is critical.  The federal government does not lack for funds to invest in big infrastructure projects.  States and municipalities, however, do.

The critical issue with infrastructure is -  it needs to get funded, somehow.  We as citizens can either pay taxes for it, or, if we turn our infrastructure over to some private operator, we will pay tolls and fees instead.  Either way, we pay - but based on the track record of public-private partnerships, we pay a lot less if we just fund the damn projects ourselves and leave the private companies looking to cash in out of the picture.

The US spends less on infrastructure these days than it has in 20 years.  This is no surprise, because beginning in the Reagan era and continuing in the Clinton era, we took a turn as a country to the belief that only tax cuts work and that government spending never does.  It was a grand experiment but the results are in: our infrastructure is not up to snuff.

A veteran of the NYC Office of Management and Budget ("OMB") spoke to Hamilton Nolan about NYC's specific infrastructure decline, but most of his points apply to many localities, and our nation writ large.  It's an excellent, entertaining read, but I'll try to sum it up for you.

Back in the 90s, during boom times, everyone assumed that growth at exorbitant rates would continue forever.  Therefore unrealistic spending plans were submitted - plans that included both maintenance and brand new expansion.  When economic hard times hit, NYC and other municipalities couldn't sell the bonds for these plans.  Who would buy them?

So the reduced funds from insufficient bond sales had to be spread out over both maintenance and new projects, with the result that maintenance has suffered and new projects are long-delayed or unfinished.

Maintenance shortcomings and project delays often get blamed on government corruption / inefficiency.  The OMB official makes clear that the popular, flashy stories about "graft" overlook a more serious problem:

Journalists love to find the stories of the government employee who misused a company car, but they couldn’t care less about a general funding shortfall (I don’t blame them, it’s not interesting, or easy to get anyone to understand why it matters.) (Hamilton Nolan / Fusion)

That's right.  We don't like taxes in this country, so we don't have money to spend on infrastructure.  It's not complicated.

The OMB official states that there were major "builds" in the 1930s and 1960s, and not since then. Infrastructure lasts a long time, but it doesn't last forever; it's time for another build (which will take years to be completed, it should go without saying, although it often goes unsaid).

(By the time of the Bloomberg era in NYC, people in charge were more interested in real estate than in infrastructure.  No big surprise there -- but a discussion of real estate's disproportionate political power is a subject for another blog post.)

He goes on, in a nutshell, to blame tax cuts for the problem -- since, after all, local governments need money to invest in infrastructure.  (The federal government can more freely use deficit spending, but for political reasons, it, too, needs tax income, and it looks like Donald Trump isn't proposing raising any taxes at all).  There is plenty of blame to go around, the OMB official says:

We can blame the GOP and tea partiers all we want, but there’s not a single Democratic politician proposing anywhere near the infrastructure funding we need, even if there were, there’s not a single voter out there who would vote for the kinds of tax hikes we’d need to address it, we’re just not close. ... Let’s say we shorted ourselves on taxes just 1% per year (though probably much more), but did that for 40 years, how we would ever get that lost savings back? This is the kind of stuff that’s easy to ignore because no one would look twice at a line graph with 1% cuts. But now we all own a giant house that we can’t afford the upkeep on since we spent all our money on iphones and hookers instead of investing in the house. So all you schlubs out there are just reaping the harvest that was sowed a generation ago by schlubs like me. Too late now.  (Hamilton Nolan / Fusion)

Oh well.

 

Donald Trump is also proposing "asset recycling" the national air traffic control program.  I think this editorial cartoon by Chan Lowe / Tribute Content Agency (full disclosure: used here without permission!) puts it best:

I encourage you all to read Naomi Klein's The Shock Doctrine whenever you can, which discusses privatization in many different forms and locales over the years.  It does not paint a pretty picture.

Middle East Strategy Update

Anyone who's played any multi-player strategy game -- Risk, Diplomacy, you name it -- once or twice understands a very basic principle of geostrategy: isolate and defeat one enemy at a time.  Do not take on multiple enemies at once.  You will lose.

The Middle East is a complex place, but if you want to simplify the situation, you can see there's more or less four sides: Israel, Turkey, the Sunni bloc led by Saudi Arabia, and the Shia bloc led by Iran.  (I previously blogged about this balance of power here.)

The Saudi / Sunni bloc and the Iran / Shia bloc are bitterly opposed.  They have proxy battlegrounds all over the place: Iraq, Syria, and Yemen are the big ones.  Israel is frequently allied with the Sunni bloc; Turkey tries to play both sides.  (There's also the Kurds, largely on their own and despised by all).

ISIS, the current world leaders of Islamist Terrorism, are Sunni.  Ergo, they are de facto allied with Saudi Arabia and the Sunni bloc, even though officially they're persona non grata.

Just in case you're unclear on this point: ISIS just attacked Iran, in the Iranian capital, Tehran.  It was considered a signature "victory" for ISIS.  So in case you were under the impression that all Muslims are "in this together", disabuse yourself of that notion.

The Trump administration has come down hard on the side of the Saudi / Sunni bloc.  James Mattis, the Secretary of Defense, is hell bent on getting after Iran.  The Trump admin just sold $110 billion worth of arms to Saudi Arabia.  So it would appear that the Trump administration is solidly on the side of the Sunni bloc.

At the same time, the Trump administration is trying to defeat ISIS -- backed by Saudi Arabia, and the enemy of Iran.

Now, let's discuss Qatar.  First take a look at this handy map:

See little Qatar down there?

OK.  Qatar, like many a small state in history, attempts to deal with its large, powerful neighbors by playing both sides.  It facilitates the export of Sunni terrorism, to buddy up to the Saudis, but it also stays on good terms with Iran, just across the Persian Gulf (incidentally, in case you didn't know, Iran was historically known as Persia).

Critically from the American point of view: the United States maintains a sizable military base in Qatar.  You will notice that the US is not located on the map above.  If America wants to project military power in the region, it must do so from bases located in willing countries in this region.  Countries like Qatar.

Saudi Arabia and other Sunni bloc nations, determined that Qatar is too Iran-friendly, has very recently moved to completely isolate the country.  Astoundingly, Donald Trump has gone full-bore in on this isolation.  In fact, he's taking credit for it.  

“During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology,” [Trump] wrote in a midmorning post. “Leaders pointed to Qatar — look!” (New York Times)

Just a reminder: the US relies on its base in Qatar for military operations in the area.

As with many other things, it would appear that Donald Trump does not know what the ---- he's doing:

“The Saudis played Donald Trump like a fiddle,” said Bruce O. Riedel, a former intelligence analyst who advised Mr. Obama and now works at the Brookings Institution. “He unwittingly encouraged their worst instincts toward their neighbors.” (New York Times)

Emphasis added mine.

Pass this off as preening Democrat sour grapes arrogance if you like, but from the outside perspective it sure does seem that Donald Trump is doing the Saudi / ISIS / Sunni bloc's bidding.  This stance should get two thumbs up from ISIS. 

Will Qatar fold, and cut off relations with Iran?  It's quite possible.  However, it's also possible Qatar will badly resent this move, and be driven deeper into the embrace of Iran.  It's also possible a coup will break out against the current government.  It's possible the US base in Qatar could be endangered -- if not immediately, in time.

It seems that Donald Trump and James Mattis would love to get their war on against Iran, and they may indeed.  If they do, Iran will shift to defending itself, and will be forced to take the pressure off ISIS.  ISIS will flourish.  It's that simple.  

The global terrorist attacks since September 11, 2001 have been committed by Sunni extremists, not Shiite extremists.  A war with Iran will be a huge boon to this group of people, and is likely to prove an even costlier debacle for the United States than our war against Iraq was, especially given that the Iranians have proven themselves in combat when defending their homeland.  A war against Iran is a war only Iran can win.

In my opinion, we should bury the hatchet with Iran and destroy ISIS, even if it pisses off the Saudis.  Or, I suppose, we can bury the hatchet with ISIS and attack Iran, a position I would find sickening morally given ISIS's brutality, but nevermind.  Either way, let's pick a goddamn side.

Donald Trump in Qatar recently.  Why did he even bother visiting?