Should we subsidize college educations?
“According to a national report by the State Higher Education Executive Officers Association (sheeo.org), high school graduates earn an average of almost $30,000 per year. Bachelor’s graduates earn an average of just over $50,000 a year. And those with a higher level degree (master’s, doctorate or professional) average nearly $70,000 per year. This translates to a significant earnings gap over the course of one’s life.” https://www.educationcorner.com/benefit-of-earning-a-college-degree.html “According to the SSA, the average wage in 2017 was $48,251.57.” https://wallethacks.com/average-median-income-in-america/ Moreover, college graduates generally have more interesting and secure jobs.
Who should pay for those advantages? The students themselves, or their families, have often borrowed the money to cover their educational expenses. Currently they owe $1.6 trillion “Here’s-what-trillion-student-loan-debt-is-doing-US-economy”. Democratic party presidential candidate Bernie Sanders proposes to cancel all of it. He would also make all public colleges and community colleges tuition free.
Is that a good idea? Is it fair and does it encourage or enable a better use of our human resources? A proper evaluation requires indicating who would pay for it if not the students themselves. From the above data we see that college graduates make a lot more than everyone else on average—almost double the income of high school graduates.
If the $1.6 trillion in education debt is cancelled, the burden of repaying it (most of it was lent by banks, often guaranteed by the government) will be shifted from the better off (students who will receive higher incomes in the future because of their college educations) to tax payers. Total tax collections by the federal government in 2018 were $3.3 trillion, half of which was income tax, 35% was payroll tax (social security) and only 6% was corporate income tax. https://www.pgpf.org/budget-basics/who-pays-taxes
Senator Sanders says he will cancel all student debt within six months. Does he plan to cut spending on other programs by $1.6 trillion, a 36% cut, or to increase taxes by $1.6 trillion (the deficit for FY 2019 is already forecast to be $0.9 trillion), or some mix of these? According to Charles Lane: “Sanders and other left-leaning Democrats promise to pay for tuition-free college and Medicare-for-all with higher taxes on the top 1 percent of earners. Most Nordic countries, by contrast, have zero estate tax. They fund generous programs with the help of value-added taxes that heavily affect middle-class consumers…. The Nordic countries tried direct wealth taxes such as the one that figures prominently in the plans of Sen. Elizabeth Warren (D-Mass.); all but Norway abandoned them because of widespread implementation problems.” “Democrats-use-Nordic-nations-as-models-of-socialism”
The Tax Policy Center “estimates that 69 percent of taxes collected for 2019 will come from those in the top quintile, or those earning an income above $157,900 annually. Within this group, the top one percent of income earners — those earning more than $783,300 in income per year — will contribute over a quarter of all federal revenues collected.” Can we and should we try to squeeze even more out of them?
The effective federal tax rate for the top 1% income earners in 2018 was 29.6%, compared to 12.1% for the middle quartile of income earners and 2.9% for the bottom quartile (almost none of which was income tax). It is not obvious where the burden of this gift to the prospectively better off college grads will fall. But it seems to involve a lot of income transfers, which seem to sound nice to our new “socialists.”
Who pays for Uncle Sam’s deficits?
The Vietnam War – the movie
Whether you lived through it or are viewing it as ancient history, Ken Burns and Lynn Novick’s The Vietnam War is shattering. I alternately wept and retched. It was a serious mistake that took over twenty years to back (or crawl) out of. The loss of life was staggering. Estimates of war related deaths between 1954 and 1975 vary from 1.5 to 3.6 million people. Of these 58,220 were U.S. military personnel. Less reliable estimates of South Vietnam military (ARVIN) deaths range from 100,000 to 250,000 and of North Vietnam military and their South Vietnamese collaborators (the Viet Cong) around one million. Estimates of civilian deaths range from 225,000 to 500,000 of which 195,000 to 430,000 where in the South.
But these deaths only scratch the surface of the costs of this war in blood and treasure. Those injured numbered 1,170,000 people. The sight of returned American solders without legs (which seemed more common than missing arms) became relatively common in the 1970s. Greater still was the emotional damage to those who participated in and witnessed up close the human waste of this war, the emotional anguish of those with the courage to refuse to fight what they (and history) considered an immoral war, which included Mohammad Ali, and the scars to our nation, which most of us witnessed from afar, and all can now see again in the Burns/Novick film.
The film balances the horrible visual images of the wasted and mutilated bodies of old men, women and children sprawled or piled along the roads with the personal human stories of individual participants. The terror in the faces of women and children running through the streets is excruciatingly hard to watch. But the contemporary interviews of solders and reporters who had participated in the war and the Americans back home who demonstrated against it gave a very human touch to the pointless horror they looked back on.
As the war dragged on from the 1960s into the 70s solders increasingly questioned the wisdom of torching the homes of impoverished South Vietnamese with no way of knowing whether they were the “good guys” or the “bad guys.” These men, and in some cases women, served faithfully and bravely in what was increasingly, obviously a pointless slaughter. And our Presidents—Kennedy, Johnson, and Nixon—lied to us about what was going on—not the easily provable and obvious lies Trump tweets throughout the day, day after day, but serious lies most of us believed until near the end. The Burns/Novick film presents it all—all sides, including fascinating interviews with a number South and North Vietnamese—in as humanized a way as possible for such an unbelievably inhuman undertaking.
What have we (or should we have) learned as we wage war in Afghanistan, Syria, Somalia, Libya, Iraq and Yemen to name the most conspicuous cases and not to mention the threats of war in Iran and North Korea?
- Fighting other people’s wars on other peoples’ land that we know little about is foolish. In fact “foolish” is far too mild a characterization. It is reckless in the extreme. It is insane.
- Wars are between real people, many if not most of who may have nothing to do with the struggle. The costs to them in lives and limbs should be taken into account when evaluating whether America’s interests are really served by foreign military engagement.
- The intense patriotism and sense of adventure of American solders is similar to the motivation of ISIS fighters. I admire them and their courage because they were my guys who believed they were fighting for my safety. I see them through my eyes, but I was struck by how similar their motivations for fighting a perceived enemy were to what seems to be the motivations of ISIS fighters. That should give us pause.
- Foreign adventures—a few trainers, or solders to lend a hand—almost always sound better at the beginning than by the end (when there is an end).
- Real people, especially our youth who tend to do the fighting, cannot easily escape the emotional damage of the horrible acts they are required to undertake. This cost should receive its due weight in evaluating whether our interests are really served by participating in foreign wars.
- Madeleine Albright’s famous comment that “what is the good of having the world’s most powerful military if you can’t use it?” should have landed her in jail.
We must defend and protect the homeland without question. It should be very hard to justify sending American troops anywhere abroad to fight for whatever reason. We should have very clear answers to the following questions: Why should we be there and who are our enemies? Who are we fighting and to what end? We almost never do.
Do we really need Free Speech?
James Damore was fired by Google for a memo he posted at work giving his views on why there are so few women at his workplace. Basically, he argued, fewer women are interested in math and science than men and thus Google’s hiring policies designed to attract and hire more women are misguided. In this note I make two points: First, we lose a great deal of first order importance if we counter erroneous or offensive speech by repressing it—FREE SPEECH is protected by the First Amendment for good reason. Second, it is more effective to counter false ideas with correct or better ideas than to repress them.
Damore went further than Larry Summers did twelve years ago. Summers, who was President of Harvard University at the time, noted the fact that there were so few women at Harvard in the hard sciences and asked why that might be so. He explored several possible explanations without endorsing any of them. He was, in fact, raising a serious question for serious discussion. Many of his colleagues found his question so offensive that he was forced to resign his Harvard presidency. This is what I wrote about it at the time: “Science-discrimination-and-Larry-Summers”
One of the possible factors in the underrepresentation of women in the sciences not raised by Summer is the fact that the approach to teaching math and science has been designed by man and best suits the ways men generally learn. Considerable research indicates that men and women tend to learn differently. A pedagogy best suited to men might discourage otherwise potentially interested women from perusing science.
Damore went further by concluding that Google’s hiring practices were discriminatory to men and thus illegal. In a Wall Street Journal oped Damore stated that: “I committed heresy against the Google creed by stating that not all disparities between men and women that we see in the world are the result of discriminatory treatment…. I suggested that at least some of the male-female disparity in tech could be attributed to biological differences (and, yes, I said that bias against women was a factor too).” “Why-I-was-fired-by-Google” None of us needs to be convinced that there are biological differences between men and women (hopefully), so why not with regard to tastes in employment?
I have not read Damore’s ten page memo and don’t intend to take sides on the points he makes, over than to agree with his statement that Google will have a better Human Resources policy if it is based on fact rather than ideological presumptions of the facts. Open discussion of the issue—of Damore’s biological claims—is one of the best ways to sort out what is scientifically supportable from what is ideological fiction.
Opening public discourse to the views and comments of anyone wishing to say something, i.e., “free speech,” potentially exposes us to some pretty nasty stuff. There is a fundamental and critical difference between addressing rudeness—bad manners—via inculcating cultural values of mutual respect (good manners) and via government suppression. Today’s millennials seem to have been raised to expect protection from anything unpleasant (shame on you helicopter moms). Rather than take responsibility for their own good behavior and the encouragement of the same in others, they seek and demand protection imposed by the “authorities” with “safe zones” and the like. In my view this is on the “Road to Serfdom.” I have shared my views on the emergence of state imposed political correctness on several earlier occasions: “What-is-wrong-with-PC”
To my second point, suppression of speech is also an inefficient way of countering falsehoods or doubtful or “bad” principles. If such views cannot be aired openly and publically, they are very likely to live on and survive within social or ideological bubbles where they are not challenged. The Internet facilitates living within a bubble or reaching beyond it and we need to encourage everyone, and especially each new generation to reach beyond their echo chamber in order to confront their beliefs with other views.
In an interview with Bloomberg on August 10, Damore stated that: “There are simply fewer women that want to get into these fields,” he said. “If you’re a girl and you’re interested in technology, that’s great…. If anyone is interested in technology they should just pursue it,” he added. “It’s a great field.” “Fired-google-engineer-says-company-execs-shamed-and-smeared-him.” This doesn’t sound much like a bigot to me.
How People Become Terrorists
Yesterday I attended a fascinating lecture by Marc Sageman on his latest book: Misunderstanding Terrorism. You can watch it here: How-people-become-terrorists
Though greatly oversimplified, the essence of his findings, which included direct interviews of over 30 captured terrorists, is that members attracted to a close net group with a shared concern and thus shared identity and common cause can for various reasons rise to terrorism when they think their issue is not receiving a fair hearing. He does not consider the ultra conservative interpretation of Islam espoused by ISIS to be a very important factor in attracting its “soldiers.” Perhaps this is why National Security Advisor H. R. McMaster urged Trump not to use the label “radical Islamic terrorism” in his speech to congress saying that it was not helpful. McMaster-trump-terrorism-speech
America’s best defense against ISIS and other terrorist producing groups is to adhere to the values that have made American so respected and admired around the world. These include the evenhanded application of the rule of law.
While listening to Dr. Sageman’s presentation I was reminded of the University of California’s handling of the Free Speech Movement in 1964-5. The FSM was formed in the fall of 1964 after the University banned the traditional sidewalk tables on the edge of the Berkeley campus from which student organizations recruited members and/or passed out their literature. I was a member of the FSM council, as were the presidents of virtually all recognized campus organizations, in my capacity as President of the University Conservatives. The council’s purpose was to get the Berkeley administration to lift its ban and restore free speech on campus (a different time indeed).
As the daily meetings of the FSM council droned on, the group began to informally split between those pushing for more and more forceful demonstrations (which led eventually to the student take over and sit in of Sproul Hall, the administration building) and those of us favoring discussions with the Administration. As the FSM council became increasingly more radical, more moderate groups began to drop out and five of us (the Presidents of Young Republics, Young Democrats, University Conservatives, Young Peoples Socialist League, and Democratic Socialists) began meeting separately in the middle of the night to agree on a strategy for approaching the Administration. We met in the office of Professor Seymour Martin Lipset because the YPSL President was his research assistant and had the key. In this we succeeded but not until Bettina Aptheker and the Marxist group led students into Sproul Hall where they “sat in” for the next few days until they were carted off by the police. Sadly, Joan Baez, who had performed on the steps of Sproul Hall (from which Mario Savio and I and others addressed the daily crowds) every Friday, and whose music I love, led the students into the building singing “We shall overcome” (though she stopped outside the door herself). It was an unforgettable experience with protest movements and crowd dynamics.
President Trump has taken the opposite approach to our terrorist threat. Rather than honestly debating whether Muslims or any other identifiable group are unfairly treated in America (of course some are occasionally, but not as the result of an official discriminatory policy), and/or our purpose and conduct in occupying Iraq, Trump has pretended that the threat comes from abroad and has tried to make it even harder for foreigners to visit. In the process he has given an ugly tone to our discussions of real issues and concerns. Trumps-foreign-policy-and-Mexico
Trump’s poorly conceived, poorly drafted, and poorly executed Executive Order temporarily banning entry of people from seven Muslim majority countries fits Dr. Sageman’s description of how to promote terrorism. Tears-and-detention-for-us-visitors-as-trump-travel-ban-hits. In the past few weeks, our charming and welcoming airport immigration officials have detained some unusual travelers.
American born citizen Sidd Bikkannavar, a scientist at the Jet Propulsion Lab with Global Entry, was detained in Houston on his return from Chile and pressured to give over the pin access number to his phone, which had been issued by his employer and contained sensitive material. Indian-origin-nasa-scientist-detained-at-us-border-phone-confiscated
French historian Henry Rousso, a pre-eminent scholar on the Holocaust, was also held at the Houston airport. “When the immigration officer discovered he would be receiving a fee for his keynote address at Texas A&M University, he ordered him to be deported, claiming he should have a working visa rather than a tourist visa.” French-historian-Henry-Rousso-detained 10-hours.
The celebrated Australian children’s writer, Mem Fox, was detained at LAX and wrote that “In that moment I loathed America.” In-that-moment-I-loathed-America-I-loathed-the-entire-country.
The detention for several hours of Mohammad Ali’s son on his way home from a speech in Jamaica because he is a Muslim is one of the more outrageous examples of what is happening. Muhammad-Ali-son-detained-Fort-Lauderdale-airport
These short sighted and ugly measures are not making us safer, quite the opposite:
Former-CIA-chief-says trumps-travel-ban-hurts-American security
In response to stricter requirements for European travel to the U.S., the European Commission is considering whether to suspend visa free travel to Europe for Americans. Did we really think we could do it to them without them wanting to do it to us? Where are the adults?
Keystone Pipeline, Jobs, and Confusion
Perhaps “haste makes waste” explains the jumble of contradictory statements coming from President Trump with regard to the Keystone XL and Dakota Access Pipeline projects. Or maybe not?? Trump gives green light to Dakota Access Keystone XL oil pipelines. Trump’s trade and jobs rhetoric continues to alarm free market conservatives as well as our trading partners abroad (see the comments coming from a bewildered Germany wondering how to best protect their interests as Trump pursues what he—mistakenly—considered America’s interests).
The pipelines will save jobs (yes save jobs), improve safety, and reduce environmental risks compared with the existing alternatives of rail and trucking. Obama’s State Department reviews, which cleared the Keystone XL project multiple times, concluded in its final review that the Canadian oil in question was coming out of the ground with or without the Keystone XL pipeline and thus there would be no significant impact on greenhouse gas emissions from the pipeline. https://keystonepipeline-xl.state.gov/documents/organization/221135.pdf
The same is true for the Dakota Access pipeline, the final 1,100 feet of which (of the 1,171 mile project) have been stopped because of objections by the Standing Rock Sioux tribe that it would “disturb sacred burial and archaeological sites.” WaPo.
On Tuesday, Trump said: “From now on, we’re going to be making pipeline in the United States. We build the pipelines, we want to build the pipe. We’re going to put a lot of workers, a lot of skilled workers, back to work. We will build our own pipeline, we will build our own pipes, like we used to in the old days.” WaPo
I am increasingly inclined to think that Trump’s blatant misrepresentations of the impact of his “Buy American, hire American” mantra is sinister demagoguery. TransCanada, the Canadian project owner had already planned to buy 65% of the steel pipe from U.S. manufacturers as a purely business decision. Replacing the remaining 35% with American made pipes would increase the cost of the project. It would also redeploy American workers from their current, presumable more productive, employment to make these pipes. It is hard to see what Trump doesn’t get about efficiency and productivity as a source of our wealth. If he insists on doing it “like we used to in the old days,” he will make us poorer as “in the old days.”
“Opponents of the pipeline dismissed the job numbers and economic impacts, arguing that pipelines will create only “a handful” of permanent jobs.
“But the fact that pipelines only have a handful of permanent workers simply conveys how remarkably efficient pipelines are. The high output of labor generates value and wealth and frees up Americans to be more productive elsewhere in the economy.” http://dailysignal.com/2017/01/24/trumps-pipeline-approvals-are-a-win-for-the-economy-and-environment/?utm_source=TDS_Email&utm_medium=email&utm_campaign=MorningBell&mkt_tok=eyJpIjoiT0RJeFlqaGpNamt3TkdOayIsInQiOiJTSnpZZExnVUdLOThQdW5ESnNPNDlIUHByWXFXNSs3bEFDa0VFOHVCbnhTOUtnbTBMWnd6MEkxTkdhRHpCVjU5a0JhQ2EraVZWTVVOcXlJVzVpMkVQVm9OWkJcL29VOEpkdG93RllJeldNNVBpem9KbHlPTWlOOFRJSkVEM3FyR1QifQ%3D%3D
President Trump and manufacturing jobs
President Trump intends to bring back manufacturing jobs. How might he do that and what would it mean for our economy and our workers?
Keeping in mind that our manufacturing output has steadily increased over the years and is now at an all time high, though the number of manufacturing jobs has steadily declined. Bringing back manufacturing jobs means rolling back and undoing the technical advances that made manufacturing workings more productive. But if we increase the number of workers in manufacturing by making each worker less productive (shelving some of the productivity enhancing technical advances), where will these workers come from? Presumably not from Mexico. They will have to give up what they were producing before in order to take the new manufacturing jobs.
Looking more carefully at such a policy reveals that it would make us poorer. Without Trump’s arm twisting (carrots and sticks—tax breaks, i.e., bribes, and/or tax or other penalties), the workers in question would be employed doing things that were more profitable (i.e. more productive and contributed more to our income) than in manufacturing. Trump would have those workers move from where they are more productive to where they would be less productive. I assume that such a policy reflects ignorance rather than malice, but what ever his motivation, the result of Trump’s protectionist threats would be to lower our standard of living.
If President Trump intends to return power from the government to the people, as he claimed in his inauguration speech, he will have to stop threatening companies to produce things in the U.S. when they would otherwise find it more profitable (cheaper) to produce them abroad and import them. Anything and everything that adds to our economy’s productivity (specializing in what we are best at and exporting it to pay for imports that other countries are better at making) increases our incomes. Trump should stop interfering with our private economic decisions and get on with the other aspects of his promises (tax and regulatory reform) that will increase our well-being.
Econ 101 – Jobs and Income Growth
At long last the economy has more or less reached full employment. The December 2016 unemployment rate was 4.7 percent while the Federal Reserve’s assessment of normal full employment (NAIRU—non-accelerating inflation rate of unemployment) is 4.8 percent. More over, wage growth has picked up, increasing 2.9 percent over a year earlier. The producer price index increased 0.3 percent in December (4.3% annualized). The economy is heating up. The Federal Reserve raised its overnight interbank interest rate target (Fed Funds rate) from 0.5 to 0.75 percent in December.
What does this mean for PEOTUS Trump’s goal to create jobs and increase the economy’s growth rate? At his press conference January 11, 2017 he claimed to be: “The greatest jobs producer God ever created.”
A new job is created when a company demands an additional worker for some reason or other and the desired worker is supplied. More jobs (by which I mean more new ones than the loss of old ones, i.e., a net increase in jobs) can come from any of three sources: a) an increase in the labor participation rate (more people looking for work from those of working age who are physically able to work); b) more young people entering the labor force than retiring old people leaving it; and c) a net immigration of working age foreigners. An increase in the demand for workers that cannot be filled will put upward pressure on wages and ultimately on prices.
In December the labor participation rate rose to 62.7 percent from its low in November of 62.6. It had been around 66 percent in the years just before the great recession of 2008. While we don’t really understand why so many people have dropped out of the labor force, there is scope to increase employment if some of them return. Some of the new jobs are filled by immigrants, especially those jobs requiring information technology skills, which creates additional jobs to feed, cloth, and entertain the new residents. http://wapo.st/2irYDYW. While 7.4 million people were looking for work in November 2016 (latest available), there were 5.5 million unfilled vacancies. If you like data: 5.1 million were hired in October while 4.9 million left their jobs for a net increase in employment of 0.225 million. Of those leaving their jobs 0.372 retired or died.
In short, the economy does not lack jobs and the number of jobs is growing at about the rate of growth of the working age population. If the government increases employment for infrastructure projects, those workers must be attracted away from their existing jobs, which will require higher wages. Increasing employment at much faster rates would be inflationary. Higher inflation would undermine the real value of excessive nominal wage increases.
The problem—issue or challenge—is that the new jobs offered often require skills that do not match those of the workers looking for work. Most layoffs and discharges result from automation and other productivity improvements (not from trade), which increases the wages offered for the new jobs needed as a result. This process—increased worker productivity—is the source of per capita income growth, i.e. of our increasing standard of living. However, the benefits of increased productivity will only be broadly shared if workers are trained (or retrained) in the new jobs needed. In addition, the increased income inequality in the U.S. since the 1970s is largely the result of increased rent seeking from government as government regulations have expanded to protect the established companies from outside competition.
Faster income growth, therefore, will depend on improving productivity and its rate of growth over time (not creating more jobs). Improved and simplified regulations will free up some of the large armies of compliance officers to work in jobs that actually produce things we want. It will also increase market competition by reducing regulatory capture and related rent seeking. The same is true for any reforms in the provision of medical services that lower their cost (e.g. from greater transparency of costs of treatment options and patient responsibility for and interest in those costs). This is a different issue than who pays for medical care (insurance) but the nature and structure of medical insurance profoundly influences the incentives patients and doctors have to choose cost effective medical services. Tax reforms that lower the cost of investing in the U.S. will also increase productivity and income growth.
Investments in plant and equipment and new technology increase labor productivity and income in the future but require workers and materials to build them in the present. In an already more or less fully employed economy the resources used for investments must come from giving up other uses, primarily from producing consumption goods and services. To finance investment people will need to consume less and save more.
If none of the resources and their financing come from the government (and Trump plans the opposite), interest rates will need to rise in order to encourage more savings and to moderate the increase in investment. The Federal Reserve will have to raise its interest rate targets just to stay neutral (i.e. to keep inflation rates near their 2% per year target) as the tightening labor market puts upward pressure on wages and equilibrium interest rates. Thus interest rates will need to increase even more to encourage the additional savings needed to finance additional investment.
The new government has yet to propose its budget for the coming year, but Trump cannot simultaneously increase military spending and infrastructure spending and leave entitlement commitments unchanged (which imply significant increases in actual social security and medical outlays because of an ageing population and increased retirements relative to new entrants into the labor force) even if his tax reforms are revenue neutral (which current proposals are not). We don’t know yet which of his plans will have to give and to what extent. None of this takes into account the large impact not so far down the road of unfunded fiscal liabilities (unfunded social security, Medicare, and Medicaid obligations). https://wcoats.wordpress.com/2013/03/16/the-sequester/ https://wcoats.wordpress.com/2011/04/23/thinking-about-the-public-debt/ http://tinyurl.com/yjos2ed. Thus it is difficult to forecast how much interest rates will need to rise in order to keep inflation in check while crowding out private investment to finance the growing public debt.
Higher interest rates will also tend to strengthen (appreciate) the dollars’ exchange rate, which will increase our trade deficit unless Trump totally destroys our trade flows in a misguided effort to balance our trade account (balance imports and exports). A larger trade deficit would result in some of the increased investment being financed by foreign saving (capital inflow) and to that extent would reduce the upward pressure on interest rates. So far I have not taken account of possible changes in the economic conditions of the rest of the world. However, an appreciated dollar would improve the exports and thus economic activity of other trading partners but would increase their local currency cost of any borrowing their firms and citizens have done in dollars.
The bottom line is that any increase in economic growth in our fully employed economy will come from increases in productivity not increases in employment. Tax and regulatory reform should improve the allocation of our labor and capital resources to more productive uses. They should also lead to increased investment, which will enhance future productivity. Jawboning or pressuring the allocation of these resources into less productive uses (e.g. domestic production of goods that could be more cheaply imported) will reduce economic growth. Increased investment will require higher interest rates in order to generate the savings needed (reduction in consumption) to finance the additional investment. However, continued fiscal deficits will divert that amount of savings away from investment. Without significant cuts in future entitlement commitments (and/or defense spending) these deficits will grow larger at the expense of economic growth. New trade tariffs threatened by Trump or other new impediments to trade will also reduce our productivity and growth. While the Trump administration could increase our economic growth rate in the coming years, this outcome depends on it resolving existing internal contradictions in its proposed policies.
The Liberal International Order
A monopolist enjoys a bigger profit than would a competitive supplier of the same items by restricting the supply in order to charge a higher price. This assumes that he can increase the price by more than the reduction in his sales, but I will skip these economic details in order to get to my point.
Monopoly is good for the producer and bad for the consumer. Monopoly is generally impossible without help from government to restrict competition. The United States has flourished economically, in part, because we have chosen the competitive model—the level playing field of commerce—as the social and economic model we aim for domestically and promote internationally. Many other nations have also embraced this model and our leadership in promoting it. We extend and promote the rule of law on which a level playing field is built through the Bretton Woods Institutions created after World War II (the IMF, World Bank and World Trade Organization) and other international bodies and agreements. Our leadership in promoting these values is now in jeopardy for a variety of reasons that include our aggressive use (and misuse) of our military power and our unilateralism.
Chas Freedman is the most articulate champion I know of, of the wise use of American diplomacy to promote the above and other values that have characterized our country’s governance. Chas was Nixon’s interpreter during the President’s first trip to China in 1972. His three decades as a U.S. diplomat included Ambassadorship to Saudi Arabia during Operations Desert Shield and Desert Storm and a term as Assistant Secretary of Defense for International Security Affairs. The following challenge to the United States is taken from his latest book American’s Continuing Misadventures in the Middle East and was contained in his August 29, 2012 address to the American Foreign Service Association’s Adair Memorial Lecture at the American University School of International Service, Washington D. C. He enumerates the conditions for our continued (or restored) leadership of the liberal international order that has served us and the world so well. Chas concentrates more wisdom into fewer words than anyone I know:
“Americans believe that societies that respect the rule of law and rely upon democratic debate to make decisions are more prosperous, successful, and stable than those that do not. Recent efforts to impose our freedoms on others by force have reminded us that they can be spread only by our setting an example that others see as worthy of emulation. Freedom cannot be sustained if we ourselves violate its principles. This means that we must respect the right of others to make their own choices as long as these do not harm us. It also presupposes a contest of ideas. Our ideas will not prosper unless we maintain solidarity with others who value and also practice them.
“That is why a first priority of American diplomacy must now be to re-forge the unity of the Atlantic community behind the concept of the rule of law. This cannot be done unless we confront and correct our own lapses from the great traditions of our republic. To re-empower our diplomacy by inspiring others to look to our leadership, we much restore our respect for our Bill of Rights as well as our deference to the dignity of the individual both at home and abroad. Let me be specific.
“We must revive the Fourth Amendment’s ban of search and seizures of persons, houses, papers, and other personal effects without probable cause. No more ‘extraordinary rendition.’ No more universal electronic eavesdropping, warrantless seizure of paper and electronic records at the border, and intrusive inspection of anything and everything in the possession of passengers using public transportation.
“We must reinstate the Fifth Amendment’s protections against deprivation ‘of life, liberty, or property, without due process of law.’ No more suspension of habeas corpus or executive branch assertions of a right to detain or even kill people, including American citizens, without charge or trail.
“We must return to respect for the Sixth Amendment’s guarantee of the right of anyone accused of a crime to be informed of the charges and confronted with the witnesses against him and to be represented by a lawyer. No more ‘secret evidence.’
“We must reinstate the Eighth Amendment’s prohibition of ‘cruel and unusual punishments,’ including torture, and we must reaffirm our adherence to the several Geneva Conventions. We Americans can have no credibility as advocates for human rights if we do not practice what we preach.
“In short, the path to renewed effectiveness in American diplomacy lies not just in wise and dexterous statecraft and the professionalization of those who implement it abroad. It rests on the rebuilding of credibility through the rediscovery of the values that made our country great.”