The Great American Con

It must be conceded that some Trump supporters are not only sincerely convinced Trump's beliefs and positions are based on true American values but believe these positions, if enacted, will improve their lot and their countrymen’s to “Make America Great Again.” Otherwise a Trump supporter is either a self-serving cynic or a willfully ill-informed disaffected protestatarian with anarchic tendencies. While these two latter characterizations do indeed define important groups of Trump supporters, these segments cannot to be reasoned with; and all of the three major groups, the American value based, the self-serving cynics and the anarchists, attract their share of morally reprehensible racists, xenophobes and nativists which are also beyond reasoning with.

Yet, it is within the first group, the one embracing their interpretation of American values, that we must seek to understand the appeal of the economic case Trump claims to have. This is a group of Americans that should be listened to, understood, and be afforded empathy, to start a conversation of reason. Not to do so is not only politically unwise, it seeds the possibility of a “better Trump” in the future: someone with the same divisive discourse but better disguised and better scripted. So, how does Trump then embody the emotional needs of these followers?

American Values

American values are set forth in several origin documents of the nation. The Declaration of Independence, establishing the right to representation and the foundation of inalienable rights; the Constitution establishing the separate powers of government, a united federation in pursuit of a common goal and the Bill of Rights; and the Gettysburg Address establishing American democracy as an experiment in progress. The Federalist Papers could be added, as they illuminate the thoughts and interpretation of our founding fathers on the first two documents and the role and promise of the union.

A common thread in these documents is faith and optimism in the future and role this grand experiment will have in the world. This has become a core value of America: a belief that the best is yet to come, that this is the land of opportunity, that there exists an inalienable right to the pursuit of happiness. This is at the root of what is commonly called American Exceptionalism. Trump makes a primal call to that core belief. He vociferously denounces America as a land that has lost its way and promises to rectify and restore that faith in America and its people. 

But Trump distorts the essence of American Exceptionalism and has deceived a large portion of the values group. He has done so by making up some facts unabashedly and distorting others, starting by his vague claim but catchy slogan “Make America Great Again.” By the numbers, this claim is spurious. Just a few gross indicators tells us that:

• From 1947 to 2016 GDP per Capita (constant) steadily climbed from $13,407.01 to $51,276.06.
• Infant mortality rates for full term births decreased from 15.2 per 1000 in 1960 to 2.6 in 2006.
• High school graduation rates increased from 74% in 1990 to 82% in 2013.
• The economy is currently in its longest streak of monthly job creation on record.

Civil rights have unquestionably expanded over the last 100 years and such expansion has accelerated at an increasing pace in the last 50. More Americans than ever can fully participate in the civil, social, political and economic life of their own country. Social nets have spread, nearly eliminating destitute elderly, protecting children and assisting low or no income Americans in their plight.

Those Jobs are Not Coming Back

Emotionally, however, the case to “Make America Great Again” rings true.  The flip side to the listed achievements attained is a sense of unfairness and abandonment from the technological and social displacement such progress has wrought. That is the raw nerve that Trump touches. Trump argues that American workers have lost their jobs to overseas cheaters, stoking xenophobia and false expectations simultaneously, promising (as do some Democratic politicians) to bring back “good manufacturing jobs” to America, typically meaning by that heavy industry and manufacturing jobs.

The reality is quite different, as technology is more to blame for such job losses. Silicon Valley technology thinkers are so aware of this issue that talk of “Universal Basic Income” is commonplace (along with speculation on the Singularity) among them. The UBI would be a way to ensure the welfare of everyone when all jobs are lost to automation and robots. But that is a whole other discussion and argument.

What is beyond argument is that technology disrupts the labor force, and that there is no turning back to a glorious past of a different (and “greater”) labor market structure. Productivity and output increases have been taking place in America and affecting the labor market structure. Suffice these examples:

Agro Industry:

• From 1900 to 2000 farm employment fell from 41% to 1.9% of the total workforce
• From 1948 to 1996 agricultural productivity increased 250%
• From 1955 to 2000 agricultural and farm exports increased approximately 800%

Automobile industry:

• 1980: 8,011,000 vehicles manufactured in the US by 725,000 workers – 11 veh/worker
• 2014: 11,661,000 vehicles manufactured in the US by 714,000 workers – 16.4 veh/worker
• The US accumulated Auto worker productivity increase from 1950 to 2013: 243%
• Estimated growth 2014-2018 - Employment: 2.1% / Productivity: 2.4%

Steel Industry:

• 1980: 101,455,000 Metric Tons shipped – employment: 398,829 – 254.38 MT per employee
• 2014: 95,400,000 Metric Tons shipped – employment: 149,800 – 636.85 MT per employee
• Overcapacity of the industry is estimated around 25 to 30% while steel imports estimated at 20 to 30% of the US market.

Electricity Generation:

• 2006 Generation: 4,060 TWh / By coal: 2,000 TWh (49.26%) / coal used: 1,030,556 K Tons
• 2014 Generation: 4,255 TWh / By coal: 1,600 TWh (37.60%) / coal used: 853,634 K Tons

Each of these industries has its own set of issues and problems, some of their own making, some related to unfair trade practices and some structural, but all indicate a substantial increase in output while reducing total employment or shifting resources. In fact, manufacturing jobs as a percentage of the total labor force has decreased from above 30% in 1960 to less than 8% in 2014 while manufacturing as a % of GDP has remained constant. No investor, businessman, entrepreneur or factory will give back the productivity gains attained to “Make America Great Again.”

Job Creation Blues

It is the reality and nature of a developing and growing economy that there will be labor force displacement, but no one expects or wants to return the economy to a country where 41% of the labor force worked in farms. The political promise of returning to an imagined better past is a pipe dream; in fact it is the original Marxist dream of Social Utopia. It also has striking visual imagery. The closed factories of old technologies create urban wastelands. Populists stand in a blighted area and decry such closings, making for a great image. It is not as striking to stand month after month in front of a hospital, a technology information park, or a construction site and say that in the last month more jobs were created than all existing jobs in the steel industry. If it bleeds it leads and that is red bleeding meat eaten up by voters of all persuasions.

According to labor economists it takes a little less than 150,000 jobs created monthly to keep the unemployment rate steady. Since 2010 this number has been exceeded repeatedly, decreasing unemployment from its peak of 10% in October 2009 to 4.9 % in August 2016. To compare, the highest unemployment rate since 1948 was 10.8% in Nov. 1982, and its lowest 2.5% in June 1953. Still, why does a steady stream of jobs created at a greater rate needed than by natural growth does not to quell the malaise that is touched upon by the slogan “Make America great Again”? When did this malaise begin?

Recessions strike employment as a lagging indicator, meaning unemployment peaks at the end of the recession once GDP starts growing again and impacts the labor market. The graph from the Federal Reserve clearly illustrates it well (shaded areas are recession periods). But this graph can also help us understand somewhat the underlying malaise tapped by Trump’s economic speech. The labor participation rate, i.e. the amount of people working and wanting to work, increased steadily at a rapid rate from around 1962, at 58% of the population, to 1990 at 67%. The participation growth curve slope starts to taper off in 1990 and peaks at 67.3 % in April 2000, climbing steadily down ever since to its July 2016 level of 62.8%.

Social changes have an impact, of course. The incorporation of women to the labor force likely explains part of the steep climb in labor participation rates between 1960 and 1990, while the growing peaks of recession-end unemployment rates in that period correlates to the desire of people to work during those years.  That growing participation curve can be interpreted as an optimistic outlook by the labor market. People expected the labor market to grow and have a good paying job waiting for them. Even in recessions, America was The Land of Opportunity. This may be, perhaps, the period to which Trump beckons when he says “Make America Great Again.”

The late 80’s and early 90’s changed the game. The biggest hoax perpetrated on the American people is the hoax of Supply Side economics. Begun with Reagan and synthesized in the phrases “trickle-down economics” and “a rising sea lifts all boats” but better described by Reagan’s own primary rival George H. Bush as "voodoo economics,” Supply Side economics transformed the economic landscape of the American worker.

The American labor market was under strain already. Technological disruptions (as described above) were driving down the manufacturing sector’s labor participation, and light industry, such as clothing and small goods, were feeling the beginning of globalization’s impact.  Starting in the mid 70’s the disconnect between productivity growth and wage growth became the norm. While many explanations for this disconnect have been put forward (including methodology problems measuring factors in the transit from a manufacturing to a service economy) undoubtedly the gap exists, resulting in owners of capital accumulating a greater share of the productivity gains than owners of labor.

The graph illustrating the disconnect between productivity and compensation (Lawrence Mishel, 2012) also indicates a sharp uptick in the slope of productivity gains in the advent of voodoo economics, while not as much in the hourly compensation curve, albeit it stopped declining.

In addition to these structural shift trends, income inequality has steadily increased in the US since 1969. Mercantilist policies, pushed by political “protectors” of business, created subsidies, tax loopholes and protective regulations resulting in increasingly non-competitive markets for goods and services benefitting the owners of capital. The GINI coefficient (indicator for income inequality) tells us that between 1969 and 2009 such inequality has increased an astounding 122%. This means that the increase in GDP per capita noted before has been distributed disproportionally at an increasing rate.

Increased income inequality has been directly correlated with increased divorce rates, increased personal bankruptcies and increased commute times, all associated with a lower quality of life. The increased income inequality pattern in America is a fundamental cause of the anger of the electorate with the political establishment as it fails to deliver the promised opportunity for a better life.

Hope and Greatness: Is There an Economic Case for Trump?

Reexamining the Unemployment/Participation chart from the Federal Reserve, 1990 onwards can now be understood as a period in which factors affecting the labor market structure and the remuneration of labor have come to a head. It is from that time that a trend of disillusionment begins for the American worker: a feeling that the American Dream is out of reach. It is no wonder that by 2008 the message of “Hope” resonated in the electorate enough to choose as president its purveyor, Barack Obama.  

Because the built-in structures (tax code) driving income inequality remain mostly unchanged, the faithful of voodoo economics hang on to the levers of economic policy and discourse, and the labor market structure is still buffeted by globalization and technology with no clear answer, it is no wonder that Hope gave way to Revolution in the 2016 election cycle. The “Rage Against the Machine” is understandable. And Trump preaches rage.

Yet, the answers Trump offers to quench this anti-establishment mood created by the disenfranchisement from the American Dream do not address the nature, origins or bases of this condition. His “recipe” includes more of the supply side economics that have been demonstrated time and time again to stifle growth and drive up inequality (supply-side faithful devotees are as blind to the failures of their economic ideology from the right as Marxist socialists are to theirs from the left). He promotes trade barriers potentially increasing by thousands of dollars per household prices for consumer goods from cars to TVs to toasters. Other agenda points in his recently announced master plan: weaken the social net and generally make the tax code more regressive for individuals and more generous for corporations, accelerating income inequality.

Trump’s answers are not the ones that will solve America’s woes. His answers do not even address the problems he highlights in his economic speech: job creation, fair trade and America’s “greatness.” It may be probable that by the way he posits the problems—with his knack for finding the raw nerve—and the way he parrots solutions from his supply side economic advisors, it may be just probable that he truly does not know how to link problems with solutions; and it is possible that at least some of those supporters that believed Trump could embody their aspiration of restoring America as the Great Land of Opportunity will soon see in Trump what Michael Bloomberg saw in him: A loud mouthed New York City conman.

Trump’s answers are not new, they have been tested before. Supply side economics has been tried throughout the world and failed—and brought us the Great Recession. His stance on trade has been tried before—and brought us the deepening of the Great Depression. And, beyond economics, his tribal stance of Country First has been done before—and brought us at its best ethnic cleansing and at its worst World War II. Trump is not the answer to America or is what America stands for. The grand experiment must go on, but different results should not be expected from trying the same solutions over and over again, no matter how loudly those solutions are pitched. His sales pitch is the Great American Con.

 Auto Industry in the 1980’s: A Decade in Transition; Christopher Singleton, Monthly Labor Review Feb 1992 (Accessed 8/7/2016)

Decline and Resurgence of the US Auto Industry (EPI) (Accessed 8/7/2016)

Economic Policy Institute, Surging Steel Imports Put Up To Half a Million U.S. Jobs at Risk, Briefing Paper #376 (Accessed 8/7/2016)

The US Steel Industry, Where we Have Been, Where we are Going, Keith Buse Feb 2005, Citing statistics from the American Institute of Iron and Steel (accessed 8/7/2016)

The 20th Century Transformation of U.S. Agriculture and Farm Policy, Carolyn Dimitri, Anne Effland, and Neilson Conklin, USDA Economic Research Service, June 2005 (Accessed 8/7/2016)

Coal Usage for Electricity Generation (Accessed 8/7/2016)

Manufacturing and the GDP (Accessed 8/7/2016)

Total Electricity Generation (Accessed 8/7/2016)

Manufacturing Labor Participation Federal Reserve Blog (Accessed 8/7/2016)

Labor participation rate/employment Federal Reserve Blog (Accessed 8/7/2016)

US GDP per Capita (Accessed 8/7/2016)

Infant mortality (Accessed 8/7/2016)

GINI in the US: Income Inequality and its Costs (Accessed 8/7/2016)

The wedges between productivity and median compensation growth, Lawrence Mishel,  April 26, 2012, EPI Issue Brief #330 (Accessed 8/7/2016)

The Voice of America

UPDATE: On November 8^th 2016 Donald J. Trump won the presidential election and will be the 45^th president of the U.S. Contrary to all predictions, pundits, and even his own expectations he became the president elect that evening. There are multiple reasons for such outcome and the election campaign and results will be fodder for writers for years to come. Points for further analysis include:

• Overreliance on negative campaigning by Secretary Clinton: she tried to convince people not to vote for Trump, instead of to vote for her.
• Low turnout in swing states. In some cases potentially by voter suppression, notably North Carolina, in others on account of the “Comey Letter,” the FBI Director’s untimely letter to Congress suggesting additional (and eventually unsubstantiated) wrongdoing charges against Secretary Clinton.
• Third Party votes.
• Influence of polling and the narrative of an inevitable “Clinton Coronation” on supporters who did not think their vote was needed for her to win.

A combination of these factors resulted in an election in which all expectations were trumped.

---------

Donald Trump is not going to be the 45^th president of the United States. That is what most polls and forecasters predict. Electoral Vote, FiveThirtyEight, RealClear Politics and many others would make us believe that is the case. Hillary Clinton only needs 270 electoral votes and the ElectoralMap does not look good for Republicans no matter who the candidates are. So Democrats, progressives, moderates, many Republicans and rational people of all stripes and colors can breathe easy: Trump will be defeated by the Blue Wall. Right?



Clinton: 347 / Trump: 191

Yet, disregarding the fact that complacency seeds defeat, while Trumpism may not elect Donald Trump its legacy may survive him.  Just as the Tea Party before it, Trumpism is a movement rooted in a mish mash of social grievances addressed by populist politicians. Its leading figure, Donald Trump, has galvanized a sector of society that is willing to give him wide latitude with the facts as long as he embodies the frustration they feel. And that wide latitude makes for a big bandwagon in which frustration mixes with dark emotions.

Trumpism is beholden to Trump, a figure that voices a grievance and vows he alone has the truth, the solution and the will to carry it out. His solution is to take: take back from usurpers; take away from enemies; take down those who would question him. Trumpism seeks to ensure that the strong will prevail and the weak annihilated. Trumpism seeks to lead the country to a future new paradise where life will be so much better, just like it was in the old paradise. The tenets of Trumpism are the same ones of totalitarian rule, which thrives on the anxious frustrated seeking someone who will protect them from usurpers, enemies and questioners—and lead them to a promised land.

Donald Trump urges his followers to:

• Regard truth and facts as malleable – the art of “truthfulhyperbole” he calls it.
• Regard as valid policydiscourse stereotypes, caricatures and stigmatizing .
• Regard democracy with contempt, calling it rigged and a wasteof time if he doesn’t win.
• Regard physicalviolence as a legitimate form of dialogue between adversaries.
• Regard international relationships and policy in transactionalbusiness terms.
• Regard zero-sum as the best way to do business (winners& losers)

With these tools and techniques he presents himself as the spokesman of truths up until now purposely hid by politicians and “the mass media.” He paints a picture to his audience of an America and the world centered on visions of fear and violence. An America where the only valid optimism is to believe and trust in him as a strong leader that will do an undetailed “whatever it takes” to fight against those dark forces he presents in hyperbolic rhetoric and lead the country back to a paradise lost.

That is the essence of Trumpism, a distortion of what America is. That is not America. America is the Promised Land, the land of opportunity. A place where the daughter of a teenage housemaid or the biracial son of a single mother can become president of the United States. A place where new industries are born, a place where new ideas are bred and tested, a place that prides itself in having the pursuit of happiness as an inalienable right for its people, thus believing that the best is yet to come.

Nonetheless, when Trump loses he will have left the legacy of Trumpism with all its tenets as described: a moral black hole. That is why Americans need to stand up for what our country is about and demonstrate to the world that such legacy is repudiated. In this election it is not only votes that count, it is the voice that must be heard. Trump must not only lose. His ideas on how to change America from a bright land of opportunity for all to a dark divisive territory of suspicion of each other must be rejected soundly.

In this election Red and Blue states don’t matter. Even if electoral college votes of any state remain in their historical trend, people in “red states” have to vote against Trumpism, as many as can do. People in “blue states” have to vote against Trumpism, as many as can do. New York and California must not only be in the blue electoral column, they must overwhelmingly reject Trumpism. Mississippi and Georgia can be in the red electoral column, but by the smallest margins ever. 

The voters of America, the popular vote has to say it loudly: Trumpism does not represent America.  Every vote counts as a voice against Trumpism. We owe it to the world to contain Trump and his ideas within a wall of their own.

 Wall Object created by LA street artist Plastic Jesus (AFP Photo/Mark Ralston)

All link content and images copyright their respective owners

Tear Down That Wall.

 

Drip, drip. Drip, drip. Eroding the stones. Drip, drip. Altering the mind. Little by little.

 

We keep getting signals, messages, dog-whistles from mainstream and fringestream media, from right wing echo chambers, from leftie universes, from Washington’s bubble… all speaking to, no, stoking the Aggrieved Mind. And then we wonder (not really) why Dallas happens, why Orlando happens, why Tucson happens, why Colorado Springs happens, even why San Bernardino happens. All them shooters with a grievance in search of a ready-made cause, a social excuse for their mayhem. Drip, drip, talking heads drip poison into the foundation, stain, ultimately rip the fabric of our nation, our world, separating the parts and building walls between all.

 

Build that wall is the rally cry. Unfriend, delete, ban, keep us all separate and (un)equal. A tribal and ghettoized state of mind that makes sure no common ground is allowed, because it compromises the purity of ideals, be they an interpretation of the constitution or of class or social or political identity. Purity is what matters. It is always the other one at fault, rarely a glance inwards allowing a broader view based on a crazy notion that everyone is created equal and endowed by their creator with unalienable rights.

 

I write these lines of apparent despair and hopelessness after a week of tragedies and head spinning events. Independence Day weekend was eventful in its own right. While the world was reeling from mass murders of Westerners in Dhaka, Shia in Baghdad and a (probable) response to that last one by multiple bombings in Sunni Saudi Arabia we all were tense, thinking of the unthinkable during America’s party.

 

Amidst the tension, Secretary Clinton was interviewed by the FBI on Saturday 7/2 to culminate their probe into those (damned) emails. On Tuesday 7/5, FBI Director James Comey said the FBI had not found sufficient evidence to prove a crime had been committed. He characterized Clinton’s actions as “extremely careless” but not “gross misconduct” which could have been indictable. To be so, her (110 out of nearly 40,000) emails would have to have been shared with people who had no security clearance, and she would have had to willfully and knowingly lie and obstruct the investigation (like, for instance, Gen. Petreus did). Unfortunately we have no true judicial comparables because the server maintained by the RNC in the White House --and from which twenty two million emails by Karl Rove, Scooter Libby and others were deleted when the inquiries into CIA agent Valerie Plame’s outing were being carried out -- was never subject to a public scrutiny such as the one on Clinton’s server.

 

Director Comey also mentioned that there was a possibility that the server installed by a former President in his fortified house and guarded by the Secret Service theoretically could have been hacked, but there was no indication or proof regarding such hacking (as there was for the White House, the State Department the FBI and the DoD – even the NSA). She also used her blackberry in foreign countries and that can be dangerous to National Security.

 

Director Comey got promptly hauled in by Republicans to testify before the House Oversight Committee of Congress, where this man, a career prosecutor involved in investigating Whitewater under Kenneth Starr, who as Acting Attorney General stood up to President Bush’s acolytes against illegal wiretapping under the Patriot Act (and had to eventually leave the Bush government because of it), and a well-known Republican, had his ethics, methods, thoroughness and motives questioned.

 

The same day as Director Comey read his statement asserting there was no criminal case to be made against Secretary Clinton was the last day in the life of Alton Sterling. This was a brutal killing of a black man while being held to the ground by two police officers and shot four or five times point blank. No congressional action, investigation or statement on this one.

 

The next day, Wednesday, the day Comey testified before congress and the Attorney General decided to follow his recommendation, another gruesome video was posted on social media: a young black man, Philando Castile, bleeds to death next to his fiancée, with his four year old step daughter-to-be strapped in the back seat, as a police officer points a gun at him. Again to Congress this life, and so, so many others not caught on tape, does not seem to matter.

 

With Clinton Derangement Syndrome (and here) fully in bloom both within the Republican right and the Democratic left, and with Trumpism firing up passions from all sides of the spectrum and everyone ignoring large portions of alienated America, the aggrieved mind finds itself ready to hit the destroy button. This time it was in Dallas.

 

“This is not just a black issue. This is not just a Hispanic issue. This is an American issue,” said President Obama referring to the factual gross disparities in incidents involving African-Americans and police stops with unpredictable consequences under the same circumstances as white people. “Would this have happened if those passengers would have been white? I don’t think it would have.” That was Governor Mark Dayton from Minnesota. “I’m going to be talking to white people. I think we’re the ones who have to start listening to the legitimate cries that are coming from our African-American fellow citizens.” That was Secretary Clinton (full speech), maybe referring to Congress? They have hearings all the time, but do not listen.

 

“Our nation has become too divided. Too many Americans feel like they’ve lost hope. Crime is harming too many citizens. Racial tensions have gotten worse, not better. This isn’t the American Dream we all want for our children.” That was Donald Trump, reaching out to our better instincts for a change, but not calling for any other action except “We must restore law and order. We must restore the confidence of our people to be safe and secure in their homes and on the street.” Another wall; this time, a Blue Wall.

 

We are in a ghettoized nation with factions demanding bigger walls to contain themselves in and keep the Others out, lashing out to those on the other side. The poison drip coming from all sides needs to stop; a stop to the endless water torture affecting minds, even artificially intelligent ones. Partisan politics does not seem to get it -- not even to hold a (probably pointless) hearing.

 

America’s original sin of slavery still has not been washed away. We are not living in a post racial America, despite unquestionable strides by African-Americans and other minorities in our society. There are still remnants, throwbacks, back steps in the process of building a nation for all its citizens. Our country and the world needs leadership with a vision that recognizes the tribal instincts, that recognizes the disruption of a world filled with Others and recognizes the need to reach out to that Aggrieved Mind behind the wall, beyond the bubble, in the other universe. A vision to lead towards building a future, not looking backwards. Not stoking petty divisiveness, not inciting hateful acrimony, not building bigger walls. Are we not better than that?

Trump's Trade Deals

We have seen a glimpse. Trump, the business man benefiting from Trump the politician. He relished in the thought of more vacationers in Turnberry, Scotland staying in the magnificent lighthouse suites of his Golf Resort, taking advantage of a devalued British Pound. But, if you look closely, other political issues that he so heartily embraces are very good for his pocket. His relentless attack on the Trans Pacific Partnership is not only a populist stance, it is good for the business of his branded products. 

China is the big loser if TPP goes through, as the rest of Asia would be aligned with the US in a commercial alliance, and Trump has repeatedly said in the past that he has made great deals and lots of money with China. Perhaps that is why polls in China are more favorable for Trump that in any other country. But even if he moves from China to licensing his brand to manufacturers in other countries such as Bangladesh, Malaysia, Chile or Peru, his vested business interest is for the Trans Pacific Partnership agreement to unravel. A frequent point Trump does not make or conveniently does not mention is that there is no special trade deal with China to “rip up” unless the US withdraws from GATT altogether.
 

If any portion of Trump’s income comes from Trump branded products he would be affected adversely when TPP countries manufacturing such products are forced to ensure and enforce the following (as Thomas Friedman has pointed out):

 

• Freedom for workers to form independent trade unions, elect their own labor leaders, collectively bargain and eliminate all child and forced labor practices.
• Adopt laws on minimum wages, hours of work and occupational safety and health.
• Halt human trafficking from countries such as Thailand, Myanmar and Bangladesh and require each signatory to improve access for human rights groups to assist victims of trafficking.

Those are real provisions included in the TPP that would impact Trump branded products by raising their manufacturing cost. Provisions with teeth, because if signatories fail to meet them, they would be slapped with tariffs.

Other TPP provisions include, lowering or eliminating 18,000 tariffs and restrictions placed on products manufactured in the US, such as cars, machinery and digital products, to improve US’ access to a billion person market; establish criminal penalties for stealing industrial secrets; recognizing and balancing unfair competition from state-owned and subsidized enterprises; and combat endangered animal part trafficking and penalize overfishing.

There are, however, provisions anathema to some legitimate critics. Pharmaceutical patent protections have been denounced by Sen. Bernie Sanders, for example, as too generous. These provisions restrict the production of unlicensed generics, potentially raising the cost of medicines to the region’s poor. But time limits originally sought by Big Pharma were substantially reduced and quality control increased by discouraging unlicensed and knock-off products.

Opponents also argue that multinational companies can sue governments in venues of their choosing to maximize legal advantages, and cite for example the case of Philip Morris vs Australia using ISDS (Investor-State Dispute Settlement) provisions. Philip Morris incorporated operations in Hong Kong to use tribunal arbiters from that country (China) and sue Australia for damaging the brand when it passed a law forcing plain warning packaging for cigarettes; the suit was eventually tossed out. TransCanada, the corporation behind the Keystone XL pipeline, has threatened to sue the US government, using ISDS provisions in NAFTA, for blocking its project on account of environmental concerns.

Clarification of ISDS rules is important but is not a deal breaker for TPP. Licensing, patents and intellectual property issues have been addressed and Big Pharma did not get all it wanted, just as generic manufacturers did not either. These are true concerns that a global economy needs to deal with. Ignoring the reality of global commerce is not going to diminish its transformational impact on labor markets all around the world. This reality is ignored by any country at its own peril. It is in establishing common rules and practices that global commerce can benefit a maximum of countries while regulating the negative externalities created by transactions carried out under different conditions and resources for each country involved. I addressed this issue before in my book Campaign Journal 2008. The term “Free Trade Deals” in itself is somewhat misleading, as these treaties in fact regulate the unfettered commerce practices creating those negative externalities as opposed to making such commerce more “Free.”

Steel Mfg. Processes as a Percentage of Total Produced

The economics of global trade are relentless, disruptive and heartless. But not more so than those of technological innovation. Old technology jobs give way to new ones and blame can be easily transferred by populists onto other factors, such as “free trade.” At least trade can be regulated, markets opened and facilitated. Technology not so much: as much or more steel is being produced and exported in the US now as ten years ago, but with technologies that need much less labor. More energy needs are being met by cleaner fuels and methods, not by coal. Food is being produced at astronomical rates with many less farmers. These are not jobs that are coming back from China, Mexico or any other place. Secretary Clinton, in an often misquoted statement, addressed the need to recognize this impact of technological disruption on the labor force in a Town Hall in West Virginia: 

“I'm the only candidate which has a policy about how to bring economic opportunity using clean renewable energy as the key into coal country. Because we're going to put a lot of coal miners and coal companies out of business, right, Tim? And we're going to make it clear that we don't want to forget those people. Those people labored in those mines for generations, losing their health, often losing their lives to turn on our lights and power our factories. Now we've got to move away from coal and all the other fossil fuels, but I don't want to move away from the people who did the best they could to produce the energy that we relied on.”

It is emblematic of populist cluelessness (or cynicism) that Donald Trump gave his anti-trade tirade in a scrap aluminum plant—a recycling plant. Recycling metal was one of the original disruptors, diminishing the need for mining and processing raw ore. It “killed” jobs, and as those workers that took over the jobs of other workers from a technological past cheered Trump on, you can be sure they have enjoyed the estimated thousands of dollars a year saved by each US consumer as a benefit of lowered trade barriers. The US International Trade Commission 2016 report on the Economic Impact of Trade estimates that U.S. consumers have saved as much as $13.4 billion in 2014 from tariff reductions associated with trade agreements. Furthermore it states that U.S. consumers who are either middle income (income between $40,000 and $69,000) or lower income (income less than $40,000) benefit disproportionately from the savings associated with the tariff reductions. Yes, they get cheaper TVs and toasters.
 

The benefits of trade are diluted and invisible, while job losses created by globalization and technological disruption are as visible as a shuttered factory down the street. Early in the Obama administration a lesson was learned. The president in 2009, and at the urging of workers’ unions imposed a tariff beginning at 35% and expiring after three years on tires from China. In his State of the Union Address of 2012 he said “over one thousand Americans are working today because we stopped a surge of Chinese tires.” However Americans, according to analysts from the Peterson Institute of Economics, paid $1.1 Billion more in tires over that period than otherwise would have been the case (about $800,000 per job “saved”), moneys that could have been used in other sectors of the economy producing jobs. China in turn, slapped retaliatory tariffs on US chicken parts, which cost American poultry exporters an estimated $1B in lost sales. Overall that line in the State of the Union address cost the US economy more than $2B. But a closed tire factory is visible and its unemployed workers are real. And they are voters. And they have unions. 
 

Global commerce will force changes and all stakeholders and grievances need to be recognized and addressed. Ignoring the problem and putting up a tariff wall will not solve the problem nor rescue lost labor. The best way to manage these relentless forces of change is by recognizing them and planning for them, just like you do for hurricanes. Social nets need to be secured, transitional paths designed and equal opportunity ensured to foster innovation and entrepreneurship in the new business environment. As Neil Irwin in the NYT pointed out recently, in Pittsburgh (home to the Pittsburgh Steelers) 5,100 steel mill jobs have been lost since 1990 but 66,000 new jobs in health care have come to the area. Yet, Irwin does not say... those iron workers, were they left twisting in the wind? Many if not most of them are unlikely to have transitioned to the health care sector. Until a satisfactory answer is given to those displaced workers, populist speech such as that of Trump will be music to their ears. To Trump’s own personal economic advantage.

Perhaps David Brooks is right when he says that the political issues of the day can be pictured as having shifted from arguments about size of government to arguments about size of walls. Walls for commerce and walls for immigration. The economic and identity anxieties of a globalized economy are being tapped into both by sincere and by cynical populist politicians appealing to the gut and the heart rather than the mind. Appeals that may be so misleading as to make a small but sufficient percentage of ill-informed voters vote for the word “Leave” in the belief that it means foreigners and other undesirables will be forced to leave and go back to where they came from, not that “Leave” will structurally change their own nation’s geopolitical standing. The term "swing voter" has decidedly now been irrevocably stained. As a wise man once said, you only have to fool some of the people all of the time in order to maintain political life and viability.
 

United States International Trade Commission: Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures, 2016 Report

The Economics of Inequality - A Healthy Economy is Healthy for Everyone.

The climbing stock market of the last few years as well as the anemic GDP growth are correlated to growing income inequality. Income inequality is a poorly understood economic issue that feeds speculative behavior and undermines economic growth. On the face of it, income inequality means there are people that earn a hell of a lot more than other people. It is about income not wealth, easily confused terms, although often one begets the other.

Growth is negatively impacted when financial assets and rents are accumulated by a small minority of higher level executives and majority owners who have a limited amount of capacity to spend it all. Said a different way: there is only so much stuff you can buy. So most of the money accumulated through inequality does not go into growth-generating consumer spending.

Typically that excess money ends up in financial markets of some sort: stock market and other financial games that do not contribute to economic growth, per se, when transformed into speculative bubbles. Of course, not all the climb of the market of financial instruments is speculative, as corporate assets, expected profitability and dividends are (or should be) the real drivers of the underlying value of a stock.

A major purpose of issuing stock is raising capital to invest in assets and company growth. If the human resources of a company are not considered assets but rather, easily tradable commodities, then maximization of profits (the fiduciary duty of business executives) logically dictates a policy of wage suppression. When wages can be maintained low, profitability increases and higher dividends are paid out. Increasing and steady dividends make for higher stock prices. And with a higher stock price, executive compensation climbs, and so on and so forth in a self perpetuating cycle. This falls under the classic category of market failure, i.e. a condition in which an imperfect structural allocation of resources creates inefficiencies and negative social outcomes—such as stagnant national economic growth. A structural situation like this typically requires third party intervention and direction, hence minimum wage laws.

But avoiding speculative financial market bubbles and decreased consumer spending are not the only reasons to intervene in the natural tendency for wage suppression by free enterprise. As Nick Hanauer has said, by maintaining the price of labor below the threshold of “living wages” many individuals and families, even when working much more than 40 hours a week, are forced to rely on public assistance for various basic needs, including housing, food and health. In other words, wage suppression shifts the true price of labor to the taxpayers. This is an egregious example of corporate welfare.

There is no substitute for money as a social program, as Daniel Patrick Moynihan famously argued. All instances of public assistance such as Medicaid, food stamps and public housing tend to erode the value of wages. In a counterintuitive and contradictory way, large businesses suppressing wages at a level under “livable income” are taking advantage of welfare and “socialist” programs, while groups and personalities pushing for a higher minimum wage are in fact advocating capitalist economics by defending the basic mechanism for distributing rents under such economic model: the salary.

The slowing pace of productivity has been blamed by many as the culprit of anemic GDP growth over the last few years. But income inequality is as culpable if not more, and the good news is that policy can change that, both materially and in expectations. This is not a case where the boss threatens the employee to fire him when said employee asks for a raise. This is leveling the floor and giving a raise to America, in order to give the economy a boost.

Metrics and indicators can be confusing and are open to interpretation. Mark Twain was famously eloquent about that: Lies, damned lies and statistics—the three ways to obfuscate the truth. Yet some probable consequences of raising the minimum wage can be inferred. Inflation will increase and stock market indices will be impacted adversely and naysayers will read these metrics as negative. Thinking it through, though, gives us a more mixed analysis. Negative interest rates and deflationary pressures are creating havoc in Europe and Japan. Experiments in cities around the country have not found that a rise in the minimum wage leads to sustained unemployment. Increased inflation will be more prevalent in the service sector, as manufacturing in the US is a relatively small portion of the economy. Interest rates on treasuries will increase, benefitting retirees and boosting the value of the dollar even more. This in turn will put downward pressure on the cost of imported goods, counterbalancing service sector inflation, but affecting exports. And finally, as disposable income in the less affluent sectors of society and the middle class increases, GDP growth will expand and pressure on social welfare programs will decrease. 

Depending on which noisy or quiet metric is focused upon at any given moment, the “economy” will be viewed, written about or politicized as prosperous or in the tank. But the growing level of income inequality is unequivocally unsustainable and certainly needs to be addressed. Not to do so most definitely will eventually bite the economy in its xxx even harder. America is not a household, and its budget accounts are different. America is not a business, and its operations work differently. America is a nation with a national economy; and America needs a raise.

My Correspondence on Iran with Congressman Ted Deutch

Honorable Congressman Deutch:

As your constituent and supporter I am disappointed. You have stated clearly your active opposition to the multinational accord hammered together by the JCPOA that in effect turns back the clock on Iran’s potential nuclear weapons capability. I believe your position is wrong.

The United States, you know well as member of the FA committee, is not alone in the world, and that works both ways. All other signatories of the accord, and most importantly, France, Russia and China, will lift all sanctions and restrictions in the short term whether there is an accord or not. This makes it imperative to have an accord that allows stringent verification and inspection of potential nuclear plans in Iran by the IAEC and other relevant multinational organizations. The aggregate opinions of former US Ambassadors to the UN, Secretaries of State from both parties, the leadership of the armed forces, and nuclear scientists and physics Nobel laureates clearly are an indicator that this is a good deal for America and the world. By taking sides against it you cater to some of your constituency no doubt and, definitely, to many of your campaign contributors. But this is not leadership on your side, it is a surrender of courage.

As a supporter of democracy, peace and common sense I urge you to reconsider the options. If the US Congress rejects the deal and overrides a presidential veto—which could happen—then the other members of the JCPOA will lose any and all reason to comply with any of the intentions of the accord and Iran (according to leading nuclear scientists) will have nuclear weapon capability within weeks. Negotiating with Iran if it has a nuclear arsenal will be extremely harder than negotiating with them without one.

You are personally and directly responsible for opening this window of opportunity that weakens America’s standing with its allies and endangers the world. The opposition to this accord is similar in tone and source as that of the Republican Party regarding the ACA: it is a bad law that needs to be repealed and replaced with an undefined “better” one. Demagoguery at its peak. Pandering to contributors at its worst.

Sincerely,

Carlos J. Rangel 

ON SEPTEMBER 1st CONGRESSMAN DEUTCH REPLIED:

September 1, 2015

Mr. Carlos J. Rangel
[ADDRESS DELETED]

Dear Mr. Rangel:

Thank you for contacting my office regarding the Joint Comprehensive Plan of Action (JCPOA), the recent agreement between the P5+1 (United States, United Kingdom, France, Germany, Russia, China) and Iran over its illicit nuclear program.  Your views on this issue are very important to me, and I welcome the opportunity to respond.

As a Florida State Senator and now as a Member of Congress, I try to apply the same process to every issue: study it, consult experts, speak with constituents, and then do what I believe is best for our country. That's why I have spent so much of my time in Congress fighting to expand Social Security, defeat trade deals that disadvantage American workers, and get big money out of our elections. I have also devoted myself to strengthening our national security, from speaking loudly and unapologetically on behalf of global human rights to working with our allies to take on common threats like terrorism, fundamentalism, and poverty.

For ten years now, I have been deeply engaged in issues related to Iran's illicit nuclear weapons program. During my time in the Florida Senate, American soldiers were being killed in Iraq, a war we should have never started, and often by Iranian proxy groups. Iran was evading weapons inspectors, using the Islamic Revolutionary Guard to launch attacks, and funneling missiles to Hamas and Hezbollah. That's why I passed the law that made Florida the first state in the country to prevent taxpayer funds from financing Iran's illicit quest for nuclear weapons - divesting $1.5 billion as a result.

Since arriving in Congress in 2010, I have helped pass federal laws exposing business dealings in Iran, cracking down on Iranian human rights abusers, and applying crippling sanctions to Iran's oil and gas industries. These were among some of the powerful sanctions responsible for driving Iran to the negotiating table.

Throughout the P5+1 talks with Iran, I remained in close contact with President Barack Obama's negotiating team, led by Secretary of State John Kerry, Secretary of Energy Ernie Moniz, and Secretary of the Treasury Jack Lew. During these many conversations, I laid out several issues that I felt had to be addressed for any potential agreement with Iran to move forward. On July 14, 2015, it was announced that the P5+1 and Iran had reached a final agreement over its illicit nuclear program. The language of the deal was delivered to Congress, along with classified and unclassified annexes to the deal. After a 60-day congressional review period, a vote will be held on this agreement this September.


Assessing this proposed nuclear deal with Iran is not a role that I take lightly, especially with four Americans, including my constituent Bob Levinson, currently held in Iran.

I also want you to know that I share the Obama Administration's commitment to a peaceful and diplomatic solution with Iran, and wholeheartedly reject the notion that the only alternative to this deal is war.

Too many of my colleagues in Congress are trying to turn this vote into a partisan fight. They should stop. I still believe that people of good faith can disagree honestly. For weeks, I have reviewed this agreement in classified intelligence briefings, met with European and Middle East ambassadors and other foreign officials, and held discussions with security and nuclear experts on this deal's terms.

These discussions have ultimately led me to conclude that several of the issues I have long raised as critical to any deal are not adequately addressed in this agreement. I cannot support it in its current form. While the deal restrains the Iranian nuclear program by restricting the amount of enriched uranium that Iran can keep in the country and limiting the number of advanced centrifuges capable of enrichment, it also includes several provisions that I believe undermine its enforceability.

Given Iran's history of cheating, evading, and delegitimizing international weapons inspectors, I am alarmed by the fact that this deal makes reinstating sanctions of today's intensity nearly impossible. Instead of front-loading sanctions relief to Iran, this deal should have required the incremental lifting of sanctions in return for Iran meeting strict benchmarks. The lack of anytime, anywhere access to known and unknown sites only invites Iran to cheat with the knowledge it can walk away from this agreement at any time and with billions of dollars in sanctions relief in tow.

Likewise, the unwarranted giveaways for Iran tucked inside this deal are also concerning. Lifting the arms embargo in five years lets Iran procure the sophisticated missile defense systems they need to guard the nuclear weapons they want. And suspending the ballistic weapons ban after eight years allows Iran to develop the technology to deliver a weapon anywhere in the world.

Finally, this deal may temporarily slow Iran's nuclear enrichment, but it speeds up the enrichment of the Islamic Revolutionary Guard Corps and the Iranian terror proxies that endanger security and stability in the Middle East. Opening Iran up to foreign investment, increasing its oil exports, and unfreezing over $100 billion in assets means more money to Hamas for building terror tunnels in Gaza, more weapons for Hezbollah in Lebanon, more slaughter at the hands of Bashar al Assad in Syria, and more violence worldwide.

As a believer in diplomacy and international cooperation, arriving at this decision was not an easy one. And while we may end up on different sides of this debate, I know that the times we agree will still far outnumber the times we don't.
Please feel free to contact me with any additional questions you may have or anytime I may be of assistance to you.  If you would like to be updated on these and other issues, please stop by my website (www.deutch.house.gov) and sign up for my electronic newsletter.  I hope you will find these tools to be valuable resources in keeping up with events in Washington and South Florida.

Sincerely,
^
Ted Deutch
Member of Congress


TD/cj


MY REPLY ON SEPTEMBER 2nd:

Honorable Congressman Deutch:

Thank you for your long and detailed response to my letter regarding the JCPOA agreement, otherwise known as “The Iran Deal.”  I understand your position yet still disagree with it. I sympathize and share with your feelings and misgivings, including the anger for our neighbor Bob Levinson’s captivity. But I do feel that, down the road, a spelled out and engaged relationship is a better path to achieve America’s security, peace and other goals.

Treaties, pacts, agreements and understandings are the closest thing to laws that exist in the international community. Opposing a law because it is believed that in the future it will be broken is a spurious argument. Laws require sanctions in order to be effective. From what has been publicly disclosed and internationally agreed by all parties and the UN, this agreement has an automatic, non-negotiable snap back sanction mechanism. The absence of law—or any true possibility of having a “better one”—is many times worse than a law that is difficult to enforce.

Of course there are factions within Iran that will try to use this deal to “enrich” their own terrorist objectives and infrastructure. But it is easier to detect, control, rein in and eventually make irrelevant those objectives if Iranian society is fully engaged internationally as opposed to existing in isolation as a rogue state.  As you say, people of good faith can have true disagreements. Countries can have these as well, yet coexist pacifically. That must be the long term objective: creating conditions and removing obstacles for such coexistence. We have to believe that with its intelligence capabilities, the savviness of its diplomacy and business community, as well as its “big stick,” America is strong enough to lead in this course of action.

Your description of your level of study and consultation invested in this matter seems to suggest that you know things that are not known to the general public with no access to such classified matters and high level conversations.  Your history in legislative actions targeting Iran also gives you credentials in the matter, no doubt. It is when such level of involvement exists that decision making tends to set root safely in past actions, alliances and precedent. This instead of “choosing to cut loose the shackles of the past,” as has been said by Mr. Obama. Indeed, it is sometimes hard to see the forest when focusing on the trees.

As always, with my continued support,

Carlos J. Rangel

  

President Lula and CJ2008

My dear friend Herica Christian, a journalist and political commentator for a major Brazilian radio network and part of the press corps at Planalto--the Brazilian president’s offices in Brasilia--was very kind and offered to take CJ2008 to President Lula. Here they are at a media event at the PT headquarters in Brasilia with the book. The event was chronicled in Folha de S. Paulo, one of the major mainstream newspapers in Brazil.