Three vignettes on Trump

Meme Less

Trump is a pretty scummy guy, all things considered. Insults, misogyny. He feels much more like a contestant on Big Brother (what a scummy show) than a presidential candidate. Gordon Ramsay is comparatively a paragon of civility and rational discussion. It can be fun to meme about the guy. But faking support, wearing Trump hats on flights to be “cool” or “edgy”(as happened to me on my SAN->OAK flight). It gives credit to Trump in a real election with real consequences. No point in doing that. Meme less, talk to your neighbors about voting for not Trump more. We’ve had eight months of memeing and look where we are.

Better than Expected

Trump has done way better than I anticipated. While talking with a friend in July 2015 I argued Trump would stick around. I thought what seemed to be his message at the time(keep welfare strong, maybe universal healthcare, while being strong abroad) might begin to hurt political parties. It might bring about a seismic shift in politics without him winning. But he’s escalated beyond an outlet for discontent and he is now potentially the nominee. I was wrong.

As time has gone on and I’ve read more David Frum, I think that the Republican establishment is somewhat rotting out. In a similar way to Nietzsche saying that God is dead.Quoting Wikipedia “To Nietzsche, the concept of God only exists in the minds of his followers; therefore, the believers would ultimately be accountable for his life and death.” As the tea party and other disaffected no longer believed in the Republican institutions, the institutions somewhat ceased to exist. The party in The Party Decides ceases to exist. The question is, what, if anything, will Republican voters believe in as a whole after this election. In essence, “Will there be Republican voters?” 

Sanders Voters shouldn’t Vote Trump

I know you’re mad. You think the system has failed us. You push for European style democratic socialism. Clinton is a shill. I understand your frustration. But Trump won’t bring the change you’re looking for. Whether we draw comparisons between Trump and outsiders running for office in South America (and either failing or seizing control of countries with weak checks and balances) or Trump and the far right in Europe, things don’t end well by electing Trump. Heck, if your criticism of Clinton is that she’s corporate, Trump is the definition of a profiteering scumbag (see: Trump University).

Clothespin vote Clinton. Worst case you get an uninspired center left career politician. If you vote for Trump, the best you get is a man with no policy positions who thinks little of women and, as I said earlier, makes Gordon Ramsay look like a decorous gentleman.

As Harrison Ford said on the Trump run “Oh… not so much… no, I don’t think so”

 

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Protectionism is back in vogue

Its costs are easy to see, and its benefits aren’t. Policymakers should explain the benefits, and craft policies to mitigate the costs.

I was reading about the repeal of the corn laws and the effect the repeal had, and it brought me back to the current election. (Also of interest, this 2013 Economist article, explaining their pedigree of free-trade support, stemming from the movement to repeal the corn laws.) While protectionism has always been somewhat popular, it’s seen a resurgence lately. With Trump advocating punitive tariffs, and Sanders stating he is not comfortable with “a single trade agreement this country’s negotiated,” popularist protectionism is back in vogue.

The instinct of several students in the first lecture I had on the economy of Mexico was to blame NAFTA for the difficulty Mexico has had allocating resources into research and providing adequate liquidity. The professor (who has done significant research in the field), noted that NAFTA saw a marked increase in both on a percentage basis, but relatively little on an absolute basis. NAFTA has certainly tied Mexico and the United States closer together. This hurts Mexico when the US is doing poorly, vise verse. But it’s certainly not an altogether bad thing, as the intuition of some (economics students!) would suggest.

It seems that even among some economics majors there is pretty widespread and wholesale skepticism of free trade. I know that the vast majority of economists support free trade, so I looked to see what others attributed the gap between the public and economists to. William Poole, the former head of the St. Louis fed, posited that it’s largely due to a lack of understanding by the public of what free trade actually does. Furthermore, he claims, those who oppose free trade are in a general sense doing it altruistically. This makes sense. Free trade does hurt those whose jobs are outsourced, but though over 50% of Americans are skeptical of fair trade, nowhere near that many have lost jobs to trade. The typical example for an outsourced job hurt by free trade is manufacturing. But a pretty substantial body of evidence would suggest that those jobs are pretty much gone, even if manufacturing output has increased. The US has comparative advantage in high-tech, low labor manufacturing, and jobs are increasingly moving into the service industry. This post-industrial economy  where almost everyone is employed in service poses a whole new set of questions which I hope to write on, but these are questions like “what can we do to improve low-moderate skilled service industry jobs?” or “how can we improve the quality of our labor force?” not “how can we take jobs back from China?” NAFTA has cost us manufacturing jobs, but has made goods cheaper. It has benefited those with higher levels of skill and education. Now it’s a question of how to reallocate said lower skill lost jobs, and retrain those adversely affected. Policies such as improved education and healthcare, or even more radical proposals such as taking corporate gains from outsourcing and funneling those into programs to help those affected by free trade have something to be said for them.    This is the 3 million dollar question, one which economists have struggled to agree on. How can we get the efficient allocation of free trade whilst supporting those adversely affected? However, clinging to quotas and tariffs is not risk-free for US workers, though it is effective rhetorically.

The costs of free trade are pretty obvious. Joe builds toy cars. Joe’s job goes to China, and Joe’s job in the toy-car industry is lost. He no longer has a relevant skill (toy car building) and he’s in a bad place. The benefits, as are pointed out in the above William Poole article, are much more nuanced. Toy car prices are lower, which helps everyone on aggregate. Other gains, such as increased foreign demand for US goods or services are much more hidden and small, and must be taken in aggregate. Essentially, Joe bears an individually high cost for small gains applied over a large number of people. And the government, perhaps, should be in the business of looking how to rectify that. Sanders (who has unfortunately pushed Clinton on this issue) is very anti-trade, largely viewing it as only a mechanism through which jobs are lost, and ignoring entirely gains from trade. This is pretty darn effective rhetorically, as has been seen both in his Michigan win among those who dislike free trade, and in those students in my econ courses who support Sanders and jump to free trade as an evil at the earliest possible opportunity. Ted Cruz opposes TPP, but says he’s generally free trade. The Republican argument on this just doesn’t sell. On one hand, they’ll say, free trade is good, for nebulous reasons. But it’s not very rhetorically effective to preach about the gains from trade and the cost of tariffs. They are preaching smaller government which includes not helping those impacted, and I agree with David Frum that the Republicans are short of good ideas these days. They won’t support those adversely affected by free-trade policies, helping them form part of a new, stronger american workforce. Saying “well it’s good for the country but you’ll get hurt by it, but we won’t do anything about that because small government.” doesn’t sell, and shouldn’t sell. This does let Trump blame bad trade outcomes on incompetence though. “If only the government was good at trade, it’d be better. I would negotiate better.” This is entirely hot air, but it does promise to solve issues free trade has caused for those whose jobs have been lost. I’d prefer a candidate who was willing to acknowledge the costs of free trade, and help workers adversely affected retrain, increase their human capital, and work in more competitive and efficient fields. As such, I in some ways agree with the Progressive Policy Institute’s newest policy advisory for trade.

I cede that wellbeing GDP does not make, but there is a very strong correlation between the two, and taking a short-term hit to a small segment of the workforcemay be worthwhile. Admittedly, some economic studies have indicated tariffs in the short run may have positive effect under certain circumstances. But this is far from the Sanders claim that he supports no US free trade deals.

In terms of trade advantages, just look here.

But ultimately, none of us are shaping trade policy. What does this mean for us? Those who are feeling the Bern should see there is actually relatively little difference. Sanders views trade in terms of winners (multinationals) and losers (employees.) Trump sees it in terms of winners (foreign nations) and losers (the USA). Sanders has pushed Clinton to the left, but the one thing which bothers me the most about these policy shifts is the shift away from free trade, to protectionism. While it’s unlikely Sanders would go as far as Trump, he’s opposed the same trade deals (NAFTA, South Korean Trade Agreement, upcoming TPP) that Trump has. While Trump’s ridiculous tariffs would be more harmful than simply repealing these agreement, at this point the repeal of any of these makes us less competitive on a global market, increases the cost of our goods, and causes inefficient allocation into things like high labor manufacturing which we already have high-tech growth in! Trade agreements sure aren’t panacea, but they do lead to lower prices and more efficient allocation. They hurt individuals, but taking gains from trade and parlaying them into helping those affected via training, etc is the way to go. The “we lose in free trade” argument is demonstrably false. Even moreso, it’s somewhat pessimistic. “We can’t compete with foreign markets” is essentially those calling for the end of these trade agreements are saying.

NATO Free Riders?

Are Western European members free-riding, or just optimizing?

Recently, there’s been a lot of debate on NATO, its function, its role, and how it may be ‘free-riding’ off of US military power. If we use the 2% spending threshold as a benchmark, it’s clear to me that yes, there are free-riders. Even more striking examples include countries such as Austria, which spend under 1% of their GDP on military spending, and are members of the Partnership for Peace. They have no such obligation for military spending but are clearly almost entirely dependent on NATO’s military assets should action need to be taken abroad (or, although this is an almost absurd proposition, in case of a Russian encroachment/invasion.)

There needs to be a serious conversation about what this 2% threshold means. It’s chronically violated by a majority of NATO nations, and the fact it’s chronically being broken does raise questions about if there are free-riders. The alliance has clear requirements, and those nations which break them don’t suffer as a result. Countries like Germany utilize militaries largely comprised of conscripted youth, that more resemble youth training than an effective fighting force.

The Simond De Galbert piece in the Atlantic points out some very important mitigating factors. NATO allies are increasing spending significantly more than they were recently (to be fair, it’s because they are scared of security threats, not because they feel obligated to repay the US). Yet he brushes over the fact these 2% targets were missed over many years. In times of peace, the US picks up the tab regardless, while NATO and Western Europe cut budgets.

But I do see the gist of the argument. The US defense budget is around 4% of GDP. The USA, compared to Europe, has been much more muscular in using its military in the last forty years or so, intervening when Europe has been afraid to. The NATO mutual defense clause has never been invoked by a European nation, and the US is increasingly making a “pivot to Asia.”  The US is aiming to advance its foreign policy in part with this military spending. The 4% of GDP military spending is not just for allies: it also helps the USA, and allows it to act unilaterally in a way most of Western Europe simply cannot. Any large-scale operation would need American support. The UK spends 2%, and gets comparatively little. While it meets the NATO threshold (which we all can appreciate, and helps in joint operations), it still isn’t in a place where it can operate unilaterally. It doesn’t help the UK that much in a purely self-interested manner. Jeremy Corbyn has called for the dismantling of Trident (and hence almost explicitly endorses free-riding on the US nuclear arsenal.) The question is, what can and what should happen to those that shirk duty. The UK, as I alluded to, gets little out of its defense spending. Many other nations don’t spend the 2%, and there is no negative. So why should the UK, when even at 2% its unilateral power is limited?

If the US wants to spend 4%, and this means other states don’t need to spend 2% due to positive externalities, do we really need to enforce the 2% threshold?

Intuitively, everyone is acting in their own self-interests. The US would love to have more military power from allies, but knows it needs to spend the 4% to maintain its agenda on two fronts, so will do so regardless of EU spending. The EU knows the US can use these assets to assist them, so prioritizes spending on measures that help their own citizens directly such as welfare, or a youth conscripted military. Countries such as the UK value their special relationship so meet the threshold, and France may want to have the ability to act on their own against ISIS. Eastern European nations want to deter Russian encroachment ala Ukraine. Austria doesn’t feel threatened (yet) and has chosen to keep its spending low. To be fair, I’m not sure how its lack of NATO membership truly weighs into its decision making.

Everyone is acting in what they see to be their own best interest. The US may want increased German spending, but this does somewhat change the dynamic of NATO. Hastings Ismay said the purpose of NATO was to “keep the Russians out, the Americans in, and the Germans down.” A powerful Germany in NATO would change things significantly, although it might be a good thing in the post Cold War era.

I’m not sure whether now was a good time to bring the lack of European NATO spending up. US-European cooperation is in a pretty good place. Trump may advocate for the fundamental restructuring and dismantling of NATO (a fairly clearly bad idea), but there is a point to be made. As things are structured at present, Europe has little incentive to meet its threshold (although this may be changing). The US has no incentive to abandon them if they dont meet these thresholds, and  the longer these 2% thresholds are broken the weaker they become. Undoubtedly, should wider scale conflict break out, the US will want strong European allies. Yet I don’t anticipate a drop in US military spending even if its allies hit the 2% mark: the US probably wants to spend 4% independent of NATO requirements. There needs to be discussion about the 2% rule and how, if at all, it will be enforced. As it stands though, the 2% rule is just a number and not an incentive: who can blame Germany for breaking it? Until it incentivizes, it will only be an easy way to invoke the free-rider argument. But it will do nothing to change the supposed “free-rider” dynamic.