Timidity of Smart Diplomacy

Motorboat Skipper and Guy Who Sits In the Secretary of State’s Chair John Kerry is demonstrating it.

This is what People’s Republic of China Foreign Minister Wang Yi said Saturday about the PRC’s occupation of the South China Sea and its construction on some of the islands of the Spratly Islands group:

The determination of the Chinese side to safeguard our own sovereignty and territorial integrity is as firm as a rock and it is unshakable. It is the demand of our people on our government as well as a legitimate right of ours.

This is Kerry’s response:

Special Snowflakes

…gotta be part of the blizzard. That’s the opening lament of a collection of graduate pupils in the University of California’s Master of Arts program in Art and Design. These Magnificent Seven, an entire class of the program and who have completed a year of it, wrote a letter explaining their decision to withdraw en masse from the program and posted it on the Art&Education Web site.

Some high points of their letter follow.

We are a group of seven artists who have been forced by the school’s dismantling of each of these elements to dissolve our MFA candidacies.

Help, or Watch?

Unfortunately, we already know which President Barack Obama will select, as he’s made clear in another venue.

The cause for concern this time is the economic strait in which Ukraine finds itself.

The contraction in Ukraine’s economy accelerated to 17.6% in the first quarter compared with a year earlier, the State Statistics Service said Friday, hammered by a conflict with Russia-backed separatists in its eastern industrial heartland that has slashed industrial output.

The Obama Guarantee

President Barack Obama made this guarantee in his statement at the end of his recent Meeting of the Deputies involving the Gulf Cooperation Council national leadership seconds.

The United States is prepared to work jointly with the GCC states to deter and confront an external threat to any GCC state’s territorial integrity that is inconsistent with the UN Charter. In the event of such aggression or the threat of such aggression, the United States stands ready to work with our GCC partners to determine urgently what action may be appropriate, using the means at our collective disposal, including the potential use of military force, for the defense of our GCC partners.

Banks, Government, and Risk

Fed governor Jerome Powell, in remarks prepared for a conference of community bankers in New York, said banks under a certain asset level, “perhaps $10 billion,” should be exempt from Dodd-Frank compensation restrictions. The restrictions, which are being developed by the Fed and other agencies, are designed to remove encouragements for bankers to take excessive risk.

Couple things about this. Why $10 billion? Why not $20 billion? Why not $5 billion? Based on what logic is this limit chosen? Based on what logic is any limit chosen? How is “system risk” from bank failure, the putative rationale for Dodd-Frank at all, a lesser risk than government’s intervention into the market place?

“We are severely concerned….”

Indeed, we are. PRC Deputy Director of Foreign Ministry Information Department Hua Chunying said

We are severely concerned about relevant remarks made by the American side. We believe the American side needs to make clarification on that[.]

That’s in response to SecDef Ash Carter’s remarks that he’d asked his folks to look into potential responses to the PRC’s seizure and occupation of the South and East China Seas. In particular, those responses might

include flying Navy surveillance aircraft over islands and sending US Navy ships within 12 nautical miles of reefs that have been built up in recent months around the Spratly Islands.

Overseas Cash Hordes

The [Financial Times] reports that just “five US companies are hoarding nearly half a trillion dollars as the country’s tax code and a tepid global economy deter businesses from spending their overseas cash piles. Apple, Microsoft, Google, Pfizer, and Cisco are sitting on $439bn of cash—accounting for more than a quarter of the total $1.73tn being held by US groups, according to Moody’s Investor Services.”

How to get this money back into the United States? Let’s see: lower the tax rate on foreign money being repatriated? Currently, we tax those funds at existing domestic tax rates; moving to a more territorial system where we tax only domestically earned income would lower the total rate some, giving some encouragement to repatriation of those overseas caches.

The Ex-Im Bank

The Export-Import Bank’s charter is up for renewal in our Congress this spring. The bank is alleged to help American companies by lending money to foreign buyers of and American company’s products so that buyer can afford the purchase, which in turns helps the US company, and its employees.

That’s a pretty good deal, right?

Maybe not so much. It’s American taxpayers who are on the hook—not just the one American company and its employees—if the foreign buyer defaults on the loan. But that’s not all. American companies trying to compete with that foreign buyer also are harmed, whether or not that foreign buyer defaults. See the graph below, from AEIdeas:ExImBank

A Foolish Plan

The European Union may accept up to 20,000 refugees a year and set up an automatic redistribution program for migrants overcrowding southern European states, under plans currently being developed in Brussels.

This doesn’t address the problem at all; it just encourages the current freshet to burgeon into a raging torrent.

True enough, as one anonymous EU official said,

We have to start somewhere. Agreeing on refugees outside the EU may be easier, because they are the most in need. Then, we may move on to relocation within the EU.

Indeed, the EU must start somewhere.

The Money Still Isn’t There

The Illinois Supreme Court struck down the state’s 2013 pension overhaul, unraveling an effort by lawmakers to rein in benefits for the consistently underfunded public-sector system.

The current pension shortfall is estimated at $111 billion, one of the largest nationally.

So now the citizens of Illinois must act. It is, after all, their Constitution, not the judges’. Assume that the judges of Illinois’ Supreme Court aren’t partisan hacks (they’re politician-lawyers who are elected to 10-year terms by the citizens of Illinois) and have correctly interpreted the state’s Constitution: they ruled correctly, ruling in accordance with the text of the state’s constitution.