In a normal time, the announcement that the Republican speaker of the House is retiring to spend more time with his family — after just a few years on the job — at a moment when Republicans control the federal government and have more officeholders nationwide than at any time in almost a century and the economy is roaring would be almost unimaginable.
Most politicians are actually pretty boring
Many are conniving and needy
Very few of them are intellectually interesting
.. I’ve long argued, friendship can be far more corrupting than money
.. if you personally hate Paul Ryan, that’s an indicator to me that you’re an unreasonable person.
.. But if you buy the claptrap from the Krugmanite Left or the Bannonite Right about Ryan, if you think he’s evil or a fraud, I’m going to assume you’re part of the problem in our politics.
.. boils down to simply two things: The idea that character matters and the idea that ideas matter.
.. The fact that Paul Ryan was a man out of place in his own party says far more about the state of the GOP than it does about the man.
Consider this week alone:
- A president who cheated on his first wife with his second and “allegedly” cheated on his third with a porn star is tweeting that Jim Comey is a “slimeball.”
- The president’s personal PR team over at Hannity HQ is calling Robert Mueller the head of a crime family.
- The CBO just announced that we’re in store for trillion-dollar deficits for as far as the eye can see.
- The president is tweeting taunts about how his missiles are shinier toys than Putin’s.
- The president’s nominee for secretary of state, Mike Pompeo, a once passionate and thoughtful defender of Congress’s sole right to authorize war, is now invoking law-review articles as justification for a president’s right to wage war on a whim.
- The president’s lawyer’s office was raided by the FBI (not Bob Mueller’s team, by the way) after getting a warrant from a judge and following all of the onerous protocols of the Justice Department, and the former speaker of the House — and avowed historian — is insisting that the Cohen and Manafort raids are morally equivalent to the tactics of Stalin and Hitler. I’m pretty sure the Gestapo didn’t have “clean teams” to protect attorney-client privilege (particularly of dudes named “Cohen”), and last I checked the KGB wasn’t big on warrants.
- On Monday evening, the president convened a televised war council and spent the first ten minutes sputtering about how outraged he was by an inquiry into a pay-off of his porn-star paramour.
Trade Wars, Stranded Assets, and the Stock Market (Wonkish)
Yet you go to trade war with the capital you have, not the capital you’re eventually going to want – and stocks are claims on the capital we have now, not the capital we’ll need if America goes all in on Trumponomics.
Or to put it another way, a trade war would produce a lot of stranded assets.
.. The costs of protectionism, according to conventional economic theory, are not that tariffs caused the Great Depression, or anything like that. They come, instead, from moving your economy away from things you’re relatively good at to things you aren’t.
American workers could sew clothes together, instead of importing apparel from Bangladesh; in fact, we’d surely produce more pajamas per person-hour than the Bangladeshis do. But our productivity advantage is much bigger in other things, so there’s an efficiency gain – for both economies – in having us concentrate on the things we do best.
.. So, what would a trade war do? Suppose the US were to impose a 30 percent tariff across the board, with other countries retaliating in kind so that there’s no improvement in the U.S. terms of trade (more technical stuff I don’t want to get into.) How much would this reduce trade? It depends on the elasticity of import demand; a reasonable number seems to be around 4. This would mean a fall in imports from 15 percent of GDP to around 5 percent – a 10-point reduction. And that in turn means a reduction in US real income of around 1.5 percent.
.. even a trade war that drastically rolled back globalization wouldn’t impose costs on the economy comparable to the kinds of movement we’ve seen in stock prices.
But the costs to the economy as a whole might not be a good indicator of the costs to existing corporate assets.
.. Meanwhile, the factories that do exist were built to serve globalized production – and many of them would be marginalized, maybe even made worthless, by tariffs that broke up those global value chains. That is, they would become stranded assets. Call it the anti-China shock.
.. Of course, it wouldn’t just be factories left stranded by a trade war. A lot of people would be stranded too. The point of the famous “China shock” paper by Autor et al wasn’t that rapid trade growth made America as a whole poorer, it was that rapid changes in the location of production displaced a significant number of workers, creating personal hardship and hurting their communities. The irony is that an anti-China shock would do exactly the same thing. And I, at least, care more about the impact on workers than the impact on capital.
Is It Policy, or Just Reality TV?
It also announced that President Trump was nominating the White House physician to head the Department of Veterans Affairs. What do these announcements have in common?
The answer is that both are indicators of how Trump views his job. He doesn’t seem to see actual policymaking as important; instead, he treats it all as an exercise in reality TV.
.. The point, instead, is that running veterans’ health is a management, not medical, job — and Jackson has no managerial experience.
.. Once you start looking at the Trump administration as an exercise in publicity, not policy, you see signs of it everywhere.
.. Larry Kudlow to replace Gary Cohn in that role, Kudlow’s remarkable track record on the economy — he’s been wrong about everything
.. nothing in Kudlow’s role as a shouting head on cable TV has prepared him for the job he’s supposed to do.
.. So Trump is acting as if his job were to run up ratings for his TV show, not to make actual policies.
.. Wall Street had a big relief rally when investors tentatively concluded that Trump wants to only play at trade war, and can be bought off with symbolic wins that change nothing real.
.. Trump hasn’t managed to repeal Obamacare, but his officials have undermined the program’s efficiency, driving up premiums and reducing coverage.
.. if and when America needs real leadership, there will be nobody home.
.. So far, the Trump era has been almost free from crises Trump didn’t generate himself. One of the few such events demanding an effective response was Hurricane Maria — and the response was disastrously inadequate.
.. So what happens if there’s a foreign policy crisis, a financial crisis, a health crisis
.. we’ll need actual policies. And who’s going to devise those policies? Lincoln had a team of rivals; Trump has assembled a team of poseurs.
.. And even if Trump should come to realize he needs better people, he probably couldn’t get them.
.. Trump can’t even hire good lawyers!
.. one of these days, the reality TV administration is going to bump up against actual reality. And it’s not going to end well.
Paul Krugman Explains Trade and Tariffs
There’s no way to bring back all those steel plants and steel jobs, even if we stopped all imports. Partly that’s because a modern economy doesn’t use that much steel, partly because we can produce steel using many fewer workers, partly because old-fashioned open-hearth plants have been replaced by mini-mills that use scrap metal and aren’t in the same places. So this is all a fantasy.
.. You may remember Bernie Sanders using Denmark as an example. It’s a good one: much better wages, a much stronger social safety net, a mostly unionized work force. But Denmark is as open to world trade as we are. It’s domestic policies — from taxing and spending decisions to pro-labor policies in the service sector — that make the difference. Universal health care and the right to organize matter a lot more for workers than trade policy.
.. Why does the president of the United States have the authority to make decisions (such as imposing tariffs) that have significant impacts on the economy, trade, relationships with allies, etc. — with impunity, and with no input from Congress? What path should Congress be taking to restrict his powers.— Ricky, Saint Paul, Minn.
PK: Actually, Congress voluntarily limited its own role, to protect itself from special-interest politics: it votes big trade deals up or down on a single vote, then stays out of it.
.. However, these powers aren’t supposed to be used arbitrarily: there’s supposed to be an independent study of the issue, and the president acts on the basis of that study. What’s happening with Trump is an abuse of the process: the Commerce Department came up with an obviously bogus national security rationale for tariffs Trump wanted to impose for other reasons.
So we have a process that gives presidents some discretion, for pretty good reasons — but one that assumes that said presidents will act honestly and responsibly. It falls apart when you’re dealing with someone like Trump.
.. PK: President Oprah Winfrey, or whoever, can undo these tariffs with a stroke of the pen. However, we might get into a full-scale trade war before that happens, and in any case the U.S. has already lost its reputation as a reliable negotiating partner.
.. PK: Basically, we have persistent trade deficits because we have low savings and remain an attractive place for foreigners to invest. And as a result, the U.S., which was a creditor country before we began running persistent deficits since 1980, is now a net debtor.
But you want to keep some perspective. Our “net international investment position” — overseas assets less liabilities — is about -45 percent of G.D.P., which isn’t that big a number, all things considered. For example, it’s less than 10 percent of our national wealth.
And the idea that this gives foreigners a lot of power over America has it backward. On the contrary, in a way it makes them our hostages: China has a lot of money tied up in America. Suppose they tried to pull it out: the worst that could happen would be a fall in the dollar, which would be good for U.S. manufacturing and inflict a capital loss on our creditors.
Lot of things worry me; our foreign debt, not so much.