Tag Archives: political economy

Something is Missing

Posted on by
Reply

James Mackintosh had a piece in Saturday’s Wall Street Journal concerning President Donald Trump’s moves to reduce our nation’s trade deficit, particularly our deficit in the goods trade. In his piece, he delineated what he believes must happen in order for the deficit to come down the way Trump wants it to.

Trump’s obsession is the goods deficit—and there are two ways it can come down.
The first is that the overall goods-and-services deficit remains unchanged, but services—about which Trump doesn’t seem to care and in which the US runs a surplus—are sacrificed for manufacturing. … This, though, would need shifts in domestic tax and regulation.
The second way for the goods deficit to shrink is to reduce the overall trade deficit. That will mean less foreign money coming in (remember, the balance has to balance). Combine that with more investment in manufacturing—because imported goods are made less competitive by tariffs—and it will mean America has to provide more of the savings to finance new assembly plants, clean rooms, and sweatshops.

Stipulate Mackintosh is correct. That’s from a purely fiscal perspective, though. Regarding his first way, Trump and the Republicans in Congress are working in that direction, albeit for broader reasons than just changing the trade emphasis on services.

It’s the second way that matters here, and related to that is this: Mackintosh claims to not understand—that no one can understand—Trump’s policy. I claim that there’s more to our national weal than just the fiscal.

It’s a Critical Item that we revive our manufacturing base, including sourcing its critical inputs from ore to components for finished goods to finished goods—not just build more assembly plants. That manufacturing base, too, must include making large goods like automobiles and weapons systems, it must include small-to-tiny goods like medicines, and it must include cheap energy sources to power all the factories we need in our new economy and to fuel those automobiles and weapons systems. Those autos can be powered, sort of, with batteries, but the weapons systems and factories—and the electricity needed to recharge those batteries—need cheap, reliable oil for the weapons systems, and cheap, reliable, always on oil, natural gas, nuclear power, and coal for the power generating systems.

See pre-WWII Japan and WWII Germany for the outcome of depending on other nations, enemy or not, for those Critical Items. That’s what’s missing in Mackintosh’s lack of understanding.

Paying higher prices for restarting and maintaining at least a core manufacturing base that can surge production and expansion in a crisis generated by an enemy nation, which we likely will, is simply part of the price of maintaining a defense establishment capable of answering that crisis on terms favorable to us. It’s the other side of the coin used to pay directly for the development and acquisition of those weapons systems.

It’s just barely possible that this is Trump’s policy goal.

A Start

Posted on by
Reply

Thomas Duesterberg, a Hudson Institute Senior Fellow, proposed five steps for our Federal government to take to address the People’s Republic of China’s economy and growing technological prowess. They form the foundation for a good start in countering that nation’s rise against us.

• tighten export controls on technology and expertise related to AI or national defense. …also coordinate export controls with allies on semiconductor production and equipment

This should be expanded to include sourcing the raw materials, intermediate processed components, and finished products of any type from sources outside the PRC.

• work with Congress to limit Chinese access to US financing, with stronger outward investment controls and limited access to listing on American stock exchanges

This should include enforcing existing requirements that any company, foreign or domestic, must meet to be listed on an American exchange. Chief among these are that those listed must subject themselves to stringent American accounting practices and audits. The current requirements vis-à-vis PRC-domiciled companies listed or seeking listing are under discussion with the PRC; however, there is nothing to discuss here: either those companies satisfy, or they must be delisted or cannot be listed in the first place.

• impose sanctions on Chinese banks. Washington has largely not pursued them, though reporting indicates Chinese banks have facilitated and financed illicit commerce such as technology transfer to Russia, drug trafficking, and money-laundering, as well as the purchase of sanctioned Iranian and Russian oil

• show Chinese tech companies reciprocity. China effectively bars most American firms from its markets by either forbidding them or making entry contingent on ridiculous requirements, such as revealing source code. Washington should bar firms tit-for-tat, especially in response to intellectual property transfers demands from China

Not tit-for-tat, as that would work in both directions: were the PRC to reduce or drop those restrictions, we would then need reciprocate. The mistakes here are two: one is that the PRC cannot be trusted to stop its parallel…sub rosa…thefts of our companies’ source code, intellectual property, technologies. The second mistake is that we should be doing no economic business with the PRC in the first place.

• enlist allies in the fight. The administration has competing foreign-policy priorities, but limiting China’s ability to compensate for losing the US market would measurably enhance success

President Donald Trump’s (R) protectionist tariffs against friends and allies and others work at cross purposes with his foreign policy tariffs against the PRC (and against Russia, Iran, and northern Korea, albeit for these three the moves primarily are sanctions). Leaving aside the broader counterproductive nature of protectionism, such tariffs are counterproductive by reducing or eliminating the targeted nations’ incentive to work with us against the PRC, even with the PRC’s inimical practical and operational moves toward those friends and allies, and others.

In fine, more is needed for Duesterberg’s proposals. The PRC is an avowed—by it—enemy nation, committed to overcoming us economically, militarily, and so politically. The sort of steps proposed by Duesterberg need to be broadened in reach to address the entirety of the PRC economy, which would directly limit that nation’s military growth and improvement as well as its technology growth and improvement, which would indirectly limit its military. That, in turn, would limit its ability to overcome us politically.

There is, though, only so much our government can do by itself. Our private enterprises, small, medium, large, and international, need also to recognize the enmity the PRC has toward us and to recognize how much their own interactions with the PRC and with PRC-domiciled companies facilitate the PRC’s effort to dominate us. They need to move apace in withdrawing from those interactions and find non-PRC related sources for their production, from ores to processed ores to components for assembly to finished products. They need also to stop aiding and abetting the PRC through helping it develop its own technology base.

Yet Another Thought

Posted on by
2

President Donald Trump’s (R) moves against regulations regarding our showerheads, dishwashers, stoves and ranges, and other household appliances has triggered a thought in me regarding regulation and Congressional delegation.

As we all know, Congress has delegated rule-making to the Executive Branch agencies and Departments, and many of us think Congress has over-delegated. Congressmen have shown themselves loath to wholesale claw back that delegation and write their own regulations to give concrete effect to Congress’ statutes. Here’s an easier move Congress could make regarding that delegation and rule-making.

Let the agencies and Departments conduct their rule-making in the current way, with the requirement for a comment period, the regulators required to take seriously the public’s comments during that period, and the writing of the “final” rule. The added steps are these, and they are few:

1. The agency/Department is barred from implementing the rule at any time in draft form, including via “guidance” letter, before it takes formal, legal effect
2. When the agency/Department has finalized its rule, it must submit the rule to Congress for approval
3. Each house of Congress must approve the rule via floor debate and majority vote—this is the step that gives the rule legal effect, not agency/Department finalization
4. Each house of Congress must approve the rule within 10 calendar days of its submittal to Congress
5. If both houses do not approve the rule within 10 calendar days, the rule is deemed disapproved, and it cannot take effect
6. If the rule is disapproved, whether by overt disapproval or by failure to approve within 10 days, the rule and no rule similar to it can be brought up again for six years

That last rule is especially important: it allows for the possibility of a complete turnover of the House of Representatives three times, it allows for the possibility of a complete turnover of the Senate, and it allows for the possibility of a complete turnover of the White House and, by extension, of the leadership of those agencies and Departments.

NB: I posted the gist of this to DOGE’s Regulations.gov, which is DOGE’s call for, and Web site for receiving, suggestions for rule changes and rescission by us ordinary Americans.

Because when I got to the head of the line, they were all out of humility, so I made up for it with an extra helping of hubris.

Some Welfare Reform Ideas

Posted on by
Reply

Convert our welfare programs virtually entirely to hand up programs instead of the handout programs that they are currently. There are a relative few folks who truly cannot make their own way and need the support of handouts, but these would be more easily taken care of were the present waste in the form of payments to those who don’t need the help eliminated. That’s even before the fraud and abuse—two virtually synonymous terms in this context—gets dealt with.

Those who don’t really need the help can be dealt with in the following ways. First is to recognize the everyone is capable of falling on hard times, whether through things beyond their control or through their own negligence or mistakes. Give them access to hand up programs, but those programs must come with expiration deadlines after which payments to individuals cease. Extensions should be possible, but they should be difficult to obtain, with the onus on the recipient to prove he still needs them and still is doing his best to meet the criteria for a hand up.

Additionally, hand up programs must come with means testing. Means should be based on the Federal Poverty Guidelines, which in the main, they are. However, currently, “means” generally has thresholds running from 200% to 400%, of the FPG. That has to stop. If a family’s earned income is above the Poverty Guideline, they are tautologically not poverty-stricken. They do not need Federal welfare, even if living just above the Guideline is uncomfortable.

There must be a work requirement attached to all hand up programs. Able-bodied individuals must be working, looking for work actively (not just tossing a resume over the transom once a week or sitting around a union hall), or in training or schooling for work (financial support for the training/schooling, if needed, must come from the State or local jurisdictions).

Finally, Federal welfare must be a last resort after local community, church, and charity capacities are exhausted, then city, county/parish government jurisdiction and larger charity capacities are exhausted, then State and regional charity capacities are exhausted. Particularly regarding the governmental jurisdiction from the city/county/parish level on up to the State, capacity must be limited to existing revenues, with no increases in American taxpayer fund transfers into the State or local jurisdictions.

These are not new ideas, but it’s long past time to implement them. Doing so not only would benefit welfare recipients and those who do not really need welfare payments, it would strongly benefit our nation writ large by reducing drastically Federal spending, with the resulting impact on our yearly budget deficits and our national debt, and by increasing our GDP through all those folks going back to work, improving national productivity.

A Path

Posted on by
Reply

House Republicans are appropriately dismayed with the Senate’s reconciliation budget framework bill—the Republican Senators shied away from the deep spending cuts that are needed, passing only a lick and a promise threshold of $4 billion against the earlier House-passed bill with its serious threshold of $1.5 trillion on the risible fiction that the $4 billion is a floor, and that more cuts will occur in subsequent legislation.

I’ve suggested one path to passing a budget framework: debate the Senate’s bill, rather than killing it outright, and amend the Senate’s version to include serious spending cuts. Then hold out for those cuts in the House-Senate Conference that would result.

In conjunction with that, Speaker Mike Johnson (R, LA) could commit to not bringing any of the dozen appropriations bills that would be the actual spending bills to the floor for debate unless and until all dozen are passed out of committee and those committee’s spending cuts aggregate, across all of the bills, to the required total spending cuts of the House-passed $1.5 trillion, or a skosh less if that’s what fell out of the Conference Committee agreement and passage.

Along those lines, Johnson could require all of the committees, particularly the chairmen, to work with each other to achieve the total spending cuts and defense and border spending increases that are necessary.

That last also would push the committees—including the Chaos Caucus members and the timid-on-spending-cuts Republican members—to honor the Congressional sessions-old commitment to pass all of the appropriations bills on time, with no need for any Continuing Resolution foolishness.

Come to that, Johnson should make that appropriations bills commitment regardless of any framework bill conference committee outcome.

Update: After I wrote this and scheduled it for publishing, the House Republicans went ahead and passed the Senate’s bill 216-214, and they did it without any floor debate or amendment to make the bill meet their requirements.

Silliness, indeed.