Competing with China

China is now our main economic and political rival. Our proper and honorable response should be to strengthen our side—to be the best that we can be—in the way that one athletic team would fairly compete with another. Instead, we seem to be following the Michael Corleone—God Father—script of knee capping the enemy. Worse still, rather than pulling China into compliance with the international rules of commerce, we are moving toward their failing system of central guidance (industrial policy) of investment.

Deng Xiaoping, who served as the “paramount leader” of the People’s Republic of China (PRC) from December 1978 to November 1989, ended Mao’s repressive economic policies thus freeing up much of the economy under policies dubbed “socialism with Chinese characteristics.” Deng became known as the “Architect of Modern China.” “Since China began to open up and reform its economy in 1978, GDP growth has averaged almost 10 percent a year, and more than 800 million people have lifted themselves out of poverty.” When Xi Jinping took the throne in 2013, China’s annual GDP growth rate was 7.8%. As he increasingly reversed Deng’s economic liberalizations, China’s growth rate has steadily declined and is expected to average 2.8% in 2022. “World Bank – China”

The dramatic economic growth around the world since the start of the industrial revolution is founded in private property and trade. Trade enables individuals (and families) to specialize in what they have a comparative advantage in producing and trade it for what their neighbors are better at. Both are wealthier as a result. “Econ-101-Trade in very simple terms”    “Benefits of free trade”

Following President Richard Nixon’s page turning first visit to the Peoples Republic of China in 1972, when China’s total exports had drifted down from 4.3% of China’s GDP in 1960 ($2.6 billion) to 3.25% ($3.7 billion), until the U.S. formally established full diplomatic relations with the PRC under Deng in 1979, when its total exports were 5.16% of its GDP ($9.2 billion), exports remained a small part of China’s economic output. U.S. diplomatic recognition opened the door to increased trade with China.

At the time, a friend asked me what China could possibly produce that we would want to buy (I swear). While Chica’s exports changed little over those 19 years as a share of its GDP, it increased threefold in dollar value as a result of Chica’s overall economic growth.

Over the next 19 years (1979-1998) following Deng’s economic liberalization, China’s exports rose to 18.34% of its GDP and to $188.8 billion in absolute terms (over 20 times its exports in 1979). Income growth in developing countries normally reflect investment in capital, but in China’s case the larger share of its spectacular growth after its liberalization resulted from the improved efficiency of its resource allocations (increased labor and capital productivity). According to an IMF study “Analysis of the pre- and post-1978 periods indicates that the market-oriented reforms undertaken by China were critical in creating this productivity boom…. Prior to the 1978 reforms, nearly four in five Chinese worked in agriculture; by 1994, only one in two did. Reforms expanded property rights in the countryside and touched off a race to form small nonagricultural businesses in rural areas.” “Why Is China Growing So Fast”

But to maximize the win-win feature of trade, each person/firm must make its decisions about what to produce and trade without distorting outside interference (taxes, subsidies, buy American, etc.). Thus, communities develop rules and norms for “fair” trade. When trade extended beyond the community to the entire world, individuals and countries could maximize the mutual benefits of trade by extending such rules internationally. The U.S. had high protective tariffs on some Chinese goods under the Smoot–Hawley Tariff Act of 1930 (the Reciprocal Trade Agreements Act of 1934 allowed the US President to negotiate bilateral tariff reductions). China had many restrictions on foreign investments in China and a variety of government interventions in its export markets. These restrictive measures needed to be addressed as part of granting China membership in the World Trade Organization (WTO).

From joining the WTO at the end of 2001, China’s $272.1 billion in exports exploded to almost $3,550 billion over the next 19 years (2020), an increase of 13 times (essentially the same share of its GDP as the result of its extraordinary growth in total output). China’s imports followed a similar, but modestly lower, path, raising from 4.4% of GDP ($2.6 billion) to 17.42% of GDP ($3.090 billion) in 2020.  Prior to China’s admission into the WTO what had historically been generally balanced trade (imports and exports generally balanced) rose to a trade surplus of 4.45% in 1997. China sold more abroad than it bought from abroad and bought U.S. debt and property with the resulting surplus. It was hoped and expected that China’s pursuit of an export promotion policy based on an undervaluation of its exchange rate would be reined in by its adoption of WTO rules.

The Peoples Bank of China requested technical assistance from the IMF with complying with WTO requirements. In July 2002 the IMF sent me to discuss and organize the assistance for what was one of my most enjoyable missions (VIP tours of the Great Wall and the Forbidden City and some fabulous dinners). They wanted an American banking supervisor. One of my conditions was that he be given an office with an open door with the rest of the Chinese supervisors. The Deputy Governor approved our agreement, but the Governor vetoed it reflecting the existence of conflicting views on China’s way forward. The primary difference with the officials I talked to was how fast China should liberalize. They all agreed on the direction. The IMF report cited above stated that: “By welcoming foreign investment, China’s open-door policy has added power to the economic transformation. Cumulative foreign direct investment, negligible before 1978, reached nearly US$100 billion in 1994; annual inflows increased from less than 1 percent of total fixed investment in 1979 to 18 percent in 1994.” Direct foreign investment in 1994 was $34 billion and in 2020 it was $253 billion.

China’s gradual liberalization of its restrictions on capital outflows have resulted in larger outflows than inflows since early 2020. Between February and July of this year (2022), China suffered a record net outflow of US$81 billion via the Stock Connect and Bond Connect mechanisms, according to data from the Institute of International Finance (IIF). 

As developing countries catch up to the developed country leaders, their growth rates are expected to slow. But China’s continued heavy government direction of investment, while producing impressive high-speed trains and many thousands of high-rise apartments, and the resulting level of wasteful malinvestment is increasingly taking its toll. After speaking at a People’s Bank of China and Reinventing Bretton Woods conference in Hangzhou in 2014, I continued West to participate in the Astana Economic Forum, in Astana, Kazakhstan, stopping overnight in Urumqi, China, to celebrate my 72 birthday and change planes. Driving from the airport into a lovely Sheraton Hotel in downtown Urumqi, I passed row upon row of empty high-rise apartments (it was evening, and they were all dark) now the source of a major real estate crisis.

When Xi Jinping took over as China’s leader in 2013, the unfinished project of economic liberalization was stopped and put into reverse. The slowing of China’s growth rate accelerated. Clyde Prestowitz reported that: “The CCP [Chinese Communist Party] has long operated the economy on the basis of five year plans. In 2015, the new five year plan included the objective of: Made in China 2025. It listed a range of hi technology items with a target for making them in China by the year 2025. Semiconductors were high on the list, and as an advisor at the time to Intel, I can say that China exerted enormous pressure on that company and many others to move their production of semiconductor chips to China” “Tom Friedman has Biden and China Backward”

We are competing with China just as every firm competes with every other firm. It is mutually advantageous for both economies to grow. It is win win. But neither of us fully plays by the rules of fair trade. What should we do? While adopting policies to strengthen our own economy, we should encourage China to fulfil its WTO obligations. We are doing the opposite. We are taking the God Father mobster approach. As Edward Luce put it in the Financial Times: “Imagine that a superpower declared war on a great power and nobody noticed. Joe Biden this month launched a full-blown economic war on China — all but committing the US to stopping its rise — and for the most part, Americans did not react”  “Containing China is Biden’s Explicit Goal”

German Chancellor Olaf Scholz declared that “Globalisation has been a success story that enabled prosperity for many people. We must defend it…. Decoupling is the wrong answer…. 

We don’t have to decouple from some countries,… I say emphatically we must continue to do business with China.” “Decoupling China wrong answer says German leader”

“Mr. Xi and President Biden should focus their efforts on the future they seek, rather than the one they fear…. If a peaceful — if competitive — coexistence is the ultimate objective, Washington and Beijing do not need to knock each other out to win.” Jessica Chen Weiss in NY Times

We are restricting and reducing trade rather than encouraging its expansion. Not only has President Biden left former President Trump’s unjustified and damaging steel and aluminum tariffs in place (including on Canada) on national security grounds, but we have also directly knee-capped Chinese industries (Huawei, semiconductor chip supplies, etc.). “On 7 October, the Biden administration imposed a sweeping set of export controls that included measures to cut China off from certain semiconductor chips and chip-making equipment. Under these rules, US companies must cease supplying Chinese chipmakers with equipment that can produce relatively advanced chips unless they first obtain a licence.” “What do US curbs on selling microchips to China mean for the global economy”

Historically, such measures, as well as tariffs and bans on certain imports, have been motivated by protecting domestic firms or industries. “The Reign of Polite Protectionism”  The Jones Act of 1917, which forbids shipping goods between US ports in anything other than US built ships, is one of the most useless and embarrassing such laws (ask Puerto Rico). Banning the sale of some items to China can have a military justification but drawing the line between justifiable security concerns and the protection of uncompetitive domestic firms can be difficult. Trump’s 25% tariff on Canadian steel was (but cannot honestly be) justified on national security grounds. Whither justified or not, such restrictions make China and the U.S. (and the rest of the world) poorer. “Next salvo in Biden’s tech war on China expected to aim at quantum computing parts and artificial intelligence software.”  “US mulling bans to stunt China’s quantum computing”  Such restriction are examples of the knee-capping approach to competing with our rivals. “Trade protection and corruption”

But worse still we are now increasingly adopting China’s approach to economic management by the state—so called industrial policy. The recently adopted Inflation Reduction Act, for example, along with measures to reduce carbon omissions, subsidizes the domestic production of solar panels, wind turbines, batteries, and the processing of some critical minerals. A good economic case can be made for encouraging the use of low or non-carbon emitting sources of energy such as with the carbon taxes imposed in Europe. But there is no good case for incurring the higher cost of subsidizing the manufacture of low carbon emitting energy sources in the U.S. The same applies to subsidizing the domestic production of semiconductor chips as is established in this Act. The historical experience with government selection and support of particular products or technologies is not good to say the least. The Trump administration’s promise to buy successful Covid vaccines was a much better and very successful approach to encouraging the private sector.

“French President Emmanuel Macron slammed US trade and energy policies for creating “a double standard” with Europe…. He complained that ‘they allow state aid going to up to 80% on some sectors while it’s banned here — you get a double standard…. It comes down to the sincerity of transatlantic trade….’ The EU has been chafing over the US stimulus package known as the Inflation Reduction Act, which provides subsidies for electric cars made in North America.” “Macron accuses US of trade double standard amid energy crunch”

The financial incentive for corruption in obtaining government financial support is obvious. But even without it, government agents are at best just as good at determining and funding the best new and promising technologies for the future as are private entrepreneurs. The difference is that the private entrepreneurs are risking their own money and the government is risking yours and my money. The vast majority of such undertakings fail. When funded by the government, however, there is less financial pressure to fold and move on when outcompeted by better products. The government landscape is littered with white elephants.  “Questioning industrial policy”

Our China related policies have become damaging to the US and the West in almost every respect. “The China Initiative, launched in 2018 by the administration of former US president Donald Trump, aimed to fight suspected Chinese theft of technical secrets and intellectual property as competition between the two countries intensified…. At least 1,400 US-based ethnic Chinese scientists switched their affiliation last year from American to Chinese institutions,… The US had been ‘losing talent to China for a while and particularly after the China Initiative’,” “1400 US based ethnic Chinese scientists exited American institutions”  Not only do they return with Western technical knowledge but they also return with a fondness for Western values and freedom. Many Chinese retain that fondness and the desire to import more of it into China. We should not kill off those desires.

Doug Bandow offers sound advice: “There is still much for the West to do. The future is not set, and contra Xi’s boastful rhetoric, freedom still is the better bet for the world. Washington should start by addressing its own weaknesses. Free and allied states can constrain the PRC when necessary while cooperating with Beijing when possible, addressing Chinese abuses without adopting the PRC’s authoritarian and collectivist strategies. Americans should continue to engage the Chinese people, especially the young, showing respect for a great civilization while making the case for a free rather than totalitarian society. America can remember the crises she has overcome in the past, and confidently confront the China challenge today.” “Xi plays Mao without the madness”

The Ukraine War

Ukrainian President Zelensky says his country will file an expedited application to join NATO immediately. “’De facto, we have already proven interoperability with the Alliance’s standards, they are real for Ukraine — real on the battlefield and in all aspects of our interaction,’ Zelensky said. ‘Today, Ukraine is applying to make it de jure.”  “Zelensky says Ukraine filing expedited application to join NATO”  This reverses Zelensky’s statements he made in March of his willingness to stay out of NATO.

NATO members should just say no.  Hell no! After successfully serving to protect the West from the USSR, post-Soviet NATO has become a liability. After breaking our promise not to expand NATO further east in exchange for Russia’s agreement to the reunification of Germany, NATO has done nothing but cause problems.

In December 2021, Russia released an eight-point draft treaty to prevent its invasion of Ukraine. At the top of its list was no NATO membership for Ukraine. Soon after Russia’s invasion, President Zelensky offered to give up seeking NATO membership and agreed to much of what Russia demanded. The status of the largely Russian Donetsk and Lugansk was the largest sticking point. For reasons I totally fail to understand, the United States and its NATO allies refused to remove Ukraine’s NATO membership from the table while stating that membership was not a near term prospect. “Ukraine-Russia-NATO”

In March, following Russia’s stalled Feb 23 attack on Kyiv, representatives of Russia and Ukraine met at Belovezhskaya Pushcha, on the border of Poland and Belarus, for initial ceasefire talks.

Putin made six key demands:

  1. No NATO membership and a neutral position.
  2. Russian should be the second official language of Ukraine, with laws prohibiting it abolished.
  3. Recognize Crimea as Russian territory.
  4. Recognize the independence of Donetsk and Lugansk.
  5. Demilitarization of Ukraine and abandonment of weapons that could be a threat to the Kremlin.
  6. Banning of ultra-nationalist parties and organizations in Ukraine.

Of these, only #4 would be difficult for Ukraine to accept, but no agreement was reached, and the fighting continued with more and more Western support.  “Ukraine’s and Russia’s war”  The U.S. and NATO can bring Ukraine to the peace table anytime they want (by threatening to end their military and financial support).  No compromise agreement was reached in December, February, March or beyond. And NATO keeps expanding. Why? Why is the U.S. and NATO not pushing to make a peace agreement happen? If Russia still thinks it can come out ahead, China, India and others should convince it otherwise.

In a recent column in the Washington Post former chairman of the Joint Chiefs of Staff Mike Mullen, former U.S. senator Sam Nunn (D-Ga.) and former U.S. energy secretary Ernest J. Moniz, all of whom serve on the Nuclear Threat Initiative’s board of directors urged China to step forward:

“The most sensible policy choice for China is to wield its unique position of influence to encourage more “rational” decision-making by Putin. In particular, President Xi must make clear to Putin that nuclear use is a line he must not cross and that nuclear saber-rattling itself threatens the global nuclear order….  The United States and China can — and must — now work together with Europe and other nations to help end this war on the “just terms” called for by Biden in his speech to the United Nations.” “Xi Putin Ukraine nuclear arms”  

Every few months, I have urged us to stop this destructive war now. As winter approaches Europe with mounting energy shortages, I say it again. Stop it now.   “End the war in Ukraine”

A land of Immigrants

Ken Burns’ latest documentary (with his co-directors Lynn Novick and Sarah Botstein), “The U.S. and the Holocaust” is a well-timed reminder of Americans mixed views on immigration. As we all know, aside from the native Americans living here when Europeans began arriving, all of us, or our ancestors, are immigrants. But once here, many Americans decided that was enough and further immigration should be significantly curtailed.

The Burns’ documentary also reminds us of immigration seen from the perspective of those wanting to come.  Before the fall of the Berlin Wall, some of us will remember cheering as East Germans escaped from East Berlin in the German Democratic Republic (DDR). We were happy to see them escape their communist oppressors, but some were less happy to see them arrive in their own countries. But logically, if someone leaves one country, they must enter another. “Emigration and Immigration”

Immigrants fall into two broad categories: those fleeing persecution or mistreatment and those seeking better opportunities in new countries (America’s promised land). Some combine both motives. Not all asylum seekers desire to move to wealthier lands. Many Jews fleeing Germany hoped to return to their homeland after the era of Hitler. They chose to move temporarily to nearby countries such as the Netherlands, France, Poland, and Belgium. Otto Frank of the “Diary of Ann Frank” fame moved his family to Amsterdam.

“The U.S. foreign-born population reached a record 44.8 million in 2018.  Since 1965, when U.S. immigration laws replaced a national quota system, the number of immigrants living in the U.S. has more than quadrupled. Today those born abroad account for 13.7% of the U.S. population, nearly triple the share (4.8%) in 1970. However, today’s immigrant share remains below the record 14.8% share in 1890, when 9.2 million immigrants lived in the U.S…. More than 1 million immigrants now arrive in the U.S. each year….  New immigrant arrivals have fallen, mainly due to a decrease in the number of unauthorized immigrants coming to the U.S. The drop in the unauthorized immigrant population can primarily be attributed to more Mexican immigrants leaving the U.S. than coming in.” “Key findings about U.S. immigrants”

The American economy and the standard of living of the average household have benefited enormously from immigration. Those seeking better opportunities are disproportionately the best and the brightest from their home countries. The founders and heads of some of our best fintec companies were born abroad.  In fact, surprisingly, population growth in general in countries with free markets, property rights and rule of law has increased the standard of living enormously for almost everyone. From the emergence of humans individual living standards barely changed. The advent of agriculture 10,000 years ago created a small improvement. That changed with discovery of the “new world” and related expansion of trade 530 years ago and accelerated with the Enlightenment and the industrial revolution just 350 years ago. In the last 60 years per capita real incomes increased 2,414% in Ireland and 232% in Mexico (the least growth of those countries for which there was data). Over the last 40 years alone per capita real income in China doubled every 7.1 years. Between 1900 – 2018 the average real income of unskilled workers in the U.S. increased 1,473%. These and other amazing data can be found in “Superabundance” and extraordinary collection of very interesting income and resource data.

Accepting refugees has a different purpose and motivation. We accept immigrants for our benefit and we accept refugees for their benefit. Countries have an obligation to provide asylum to anyone who arrives at their territory with reason to fear persecution under the convention’s criteria. Ken Burns Holocaust documentary confronts us graphically with why this is necessary.   “Asylum in the United States”

Asylum seekers are a small fraction of total immigration each year. In FY 2019, the most recent pre-pandemic year with available data, 46,508 individuals were granted asylum.  Most immigrants entering the U.S. each year are joining family already here or looking for better opportunities (better lives).  As noted above they invariably contribute to raising incomes of those of us already here.  

There are many problems with our immigration rules and their administration. Congress has tried for decades to address them without success. But the recent political stunts by the governors of Texas and Florida reflect America at its ugliest.

“The group of 50 migrants flown to Martha’s Vineyard, Mass., by Florida Gov. Ron DeSantis (R) last week had nearly all recently arrived from Venezuela. Another group of 100 dropped outside the vice president’s Washington, D.C., residence this weekend also included those fleeing the country. And buses sent to Chicago by Texas Gov. Greg Abbott (R) largely included Venezuelans. 

“The U.S. in recent weeks has seen an even greater shift in migration from Venezuela, Cuba and Nicaragua.”  “GOP stunts with migrants sweep up those fleeing regimes they denounce”

Governor DeSantis and Abbott where not helping these refugees await their court hearings in greater comfort. They did not alert the authorities in Martha’s Vineyard, Chicago, or DC to prepare for their arrival. Their purpose was to share the burden with (and punish) “sanctuary cities”. Their purpose was to make a political statement using the refugees as innocent pawns.

A “suit was filed in federal court in Massachusetts. It takes aim at DeSantis, Florida Secretary of Transportation Jared Perdue and the state of Florida.

“The core of the case is the allegation that the migrants were coaxed onto the flights by false promises — “fraudulent inducement” in legal terms — and that this means DeSantis and his allies infringed those migrants’ rights and committed fraud.

“It asserts that migrants were approached outside a shelter in San Antonio by mysterious people who won their trust by supplying them with minimal benefits such as McDonald’s vouchers.”   “What you need to know about the complex legal challenges to DeSantis’s migrant flights”

Nunca from Texas provides important information on who these refugees are and understanding those facts is important: 

“I volunteer as a translator with asylees coming through the Texas border and I wanted to make a thread on who these migrants are, what help is actually needed and why what DeSantis and Abbott are doing is so needlessly cruel….

“The first and most important thing you should understand, these are LEGAL asylum seekers. They are not illegals. They are not undocumented.

“They have been given permission by our government to enter the US pending their official court date. The law ONLY requires that asylum seekers be present on US soil and that they present themselves to officials to request asylum.  That is it.

“Anyone who calls them illegal immigrants is really telling on themselves and deliberately trying to confuse the issue. 

“Once they present themselves to border officials, they are processed and then given a court date to officially plead their case.  This court date is almost always a year away and in a major city far from the border, like Boston, NY, Miami, Chicago, etc. 

“You can always spot the asylum seekers coming out of detention facilities because they don’t have shoelaces (story for another day) and they have court papers in one hand.

“Another thing I would note, the Biden admin is STILL immediately deporting the vast majority of asylees. The folks that make it through come from the most harrowing conditions you can imagine. I have met whole families who had to flee El Salvador on foot because gangs threatened to kill them if their son did not join.

“I met a man who was attacked by police for leading a protest. In almost every case, these are smart, hard working CHRISTIAN refugees. Their ability to assimilate into America and thrive is limitless. They love America. They just want a chance to live and thrive in peace. 

“WHAT HELP DO THEY NEED?

“Because these groups already have court dates and in almost every case, they have family they can stay with, they only really need two things: short term food and shelter and transportation. And I mean short term. Usually less than 12 hours. 

“In most cases, these asylees only need help getting to the bus station and maybe a bite to eat while they wait. Sometimes they need to stay overnight until the next bus leaves and sometimes they need help buying a ticket, though family usually buys the ticket for them. 

Border towns and local non profits have been dealing with this for 4 years. This did not start with Biden. It was actually worse under Trump.

“But these areas already know what to do with these transient asylees and they already have the resource networks in place to manage them. In most cases, an asylee will leave detention and organizations like Catholic Charities are right there to greet them and figure out if they can go straight to the bus station or if they need temporary shelter. Local municipalities & non profits here have gotten real good at it 

“WHY IS “BUSSING” ASYLEES AROUND THE COUNTRY SO BAD?

“Initially, I didn’t complain too much about Abbott’s decision to bus immigrants because it actually helped them. It gave them a free ticket to get closer to family. And they weren’t being forced to go.

“But…. The problem with Abbott’s approach is that they are often lying to the migrants about where they are going and what will be waiting for them. And even worse, when they get to NY or DC, Abbott is deliberately choosing to drop them off far away from the resources they need.  Abbott could easily notify DC that they are coming and then he could drop the migrants off right at the doorstep of the bus station or non-profit ready to greet them. It would cost him nothing.

“But he is choosing to dump them where it harms the City and migrants the most. 

By dumping them in front of the VPs house, like he did this week, now local officials have to figure out, without any notice, how to get 50 people in the heart of the City out to where the resources are ready to receive them. 

“And what DeSantis did yesterday takes it up another notch. He deliberately lied to immigrants in Texas who were already being managed by non-profits and shipped them into MV where no one was ready to help them. It was deliberately cruel and created to maximize pain. 

“Credit to the people of Martha’s Vineyard who stepped up in a huge way and responded. They did exactly what they were supposed to: they took care of their immediate needs and helped them get on their way. What folks here in Texas have been doing for years. 

“If Abbott and DeSantis actually cared about helping relieve the burden created by asylum seekers, they could just as easily and far more cost-effectively funnel the millions they are spending on their cynical stunt and give it to the non profits already doing the job. 

“Do asylees create a burden on border communities? Sure. But it is a burden we have already learned how to manage and the only thing we really need is more resources. It would be far more effective to just buy migrants a sandwich and a bus ticket than a private plane to MV. This is the kind of deliberate misinformation Conservatives are being fed.

“These migrants SHOULDN’T stay in MV because they have family and court dates in other places. They were TRICKED into being there.”

***********  

In an interview with the Washington Post about his new documentary, Ken Burns said:  I made a comment about the [Florida Gov. Ron] DeSantis play in Martha’s Vineyard as being a kind of an authoritarian response, just as it was when Disney says we don’t agree with you, he punishes them. When a state employee doesn’t do what he says, he fires them. That’s the authoritarian thing. It’s not the democratic way that you handle it. But the right-wing media has said that I’ve equated what DeSantis did with the Holocaust, which is obscene. I mean, literally obscene to do that. But it is also classic authoritarian playbook to sort of lie about what somebody just said in order to make it so outrageous that then you can deny the complexity of what’s being presented.”  “Ken Burns holocaust documentary”

What DeSantis and Abbott are guilty of is fraud. They lied to those sent to Martha’s Vineyard and Washington DC about where they were being sent and what they would receive when they got there. Fortunately, most of us still believe in the rule of law where fraud is punished.

“’The Republicans are so quick to bash the Venezuelan government and to say, ‘But we love the Venezuelans.’ And then the minute that vulnerable populations from Venezuela arrive in our country, they then use them as political pawns. It’s really beyond reprehensible. It’s a really repugnant motivation,’ Rep. Veronica Escobar (D-Texas) told The Hill.”   “GOP stunts with migrants sweep up those fleeing regimes they denounce”

“Lawyers for Civil Rights (LCR), a Boston-based legal advocacy group, filed the lawsuit on Tuesday challenging what it called the “fraudulent and discriminatory” scheme to charter private planes to transport almost 50 vulnerable people, including children as young as two, from San Antonio, Texas, via Florida, to Martha’s Vineyard last week without liaising to arrange shelter and other resources.

“The two charter flights cost about $615,000 – $12,300 per person – of taxpayers’ money, according to the legal filing….

“’This cowardly political stunt has placed our clients in peril. Numerous laws were brazenly violated to secure media headlines,’ said Oren Sellstrom, litigation director for LRC.” “Martha’s Vineyard immigration lawsuit”

Immigration is a very complicated and fluid issue and what I have pointed out above is just one part of many parts of the problem. Racial and religious discrimination is another avenue of contention in the immigration debate. One wonders whether deSantis (or anyone opposed to immigration in general) would behave differently if these asylum seekers where of a different color and from a different country. My Afghan friends unable to escape from Kabul look enviously at the Western welcome of Ukrainian refugees. But that’s a discussion for another article.

May justice be done.  “Immigrants from hell”

The Mar-a-Lago Raid

Former President Trump is under investigation for a number of possible crimes—e.g., tax evasion, attack on the Capital on Jan. 6, illegal removal or destruction of federal government records. This note, written together with Odell Huff, deals only with the possible crimes in relation to which the FBI raided Trump’s home at Mar-a-Lago. The FBI obtained the search warrant for Mar-a-Lago as part of an investigation into Trump’s handling of presidential documents. The search warrant listed three federal criminal statutes:

  • violations of the Espionage Act regarding unauthorized retention of national defense information;
  • destroying or concealing records “with the intent to impede obstruct or influence” federal government activity;
  • illegal removal or destruction of federal government records (without respect to cause).

See Wikipedia’s extensive report: “FBI search of Mar-a-Lago.”[1]

An immediate outcry from Donald Trump asked why such a raid was needed, claiming it was political, and called for a comparison of the mistreatment of government emails by then Secretary of State Hillary Clinton.

In Hillary Clinton’s case, which is reviewed in more detail in the second half of this note, her improper use of her personal computer for State Department messages, many of which she destroyed, was, in essence, forgiven. The FBI Director James Comey concluded (inappropriately, as it was properly a decision for the Justice Department to make) that: “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.”[2]

Donald Trump

Was the raid on a former President justified and should Donald Trump be charged for the crimes he committed?

Executive Summary of Trump’s Document Handling

All documents and communications of American Presidents must be preserved and are the property of the National Archives and Records Administration (NARA). “The Presidential Records Act (44 USC §22) establishes that presidential records belong to the United States and must be surrendered to the Archivist of the United States at the end of a president’s term of office (or second term of office, if consecutive). Unauthorized removal and retention of classified information of the United States government is a criminal offense under U.S. federal law; it has been a felony since the enactment of the FISA Amendments Reauthorization Act of 2017, which was signed into law by President Donald Trump in January 2018 and increased the maximum term of imprisonment for this offense from one year to five years.”[3]

In violation of the Presidential Records Act, “Trump regularly shredded ‘both sensitive and mundane’ papers while at the White House, at Mar-a-Lago, and on Air Force One.”[4] Moreover, upon leaving the White House at the end of his term, Trump sent two vans full of White House material to Mar-a-Lago in what White House aides described as a chaotic rush (as if he didn’t think he would really be leaving).

In May 2021 NARA realized that they had not received all the documents they were required to preserve and began discussions with Trump’s documents team to get them. “Trump reportedly went through the boxes at Mar-a-Lago at the end of 2021…. In January 2022, NARA retrieved 15 boxes of documents, gifts, and other government property from Mar-a-Lago…. From these 15 boxes, archivists and federal agents determined that 184 unique documents (totaling 700 pages) had classification markings, of which 25 documents were marked ‘top secret’, 92 ‘secret’ and 67 ‘confidential’….

Among the more than 11,000 government documents recovered since January 2022, over 100, and possibly over 320, were classified and some included nuclear-related material. The seized documents also included FBI, CIA, and NSA information about national security interests. Two-thirds of the recovered classified material was obtained in the first half of 2022, while the rest (103 documents) was seized in the August search of Mar-a-Lago.”[5]

In short, Trump’s promises to return all of the documents he had illegally taken where not honored and the raid on Mar-a-Lago was a last resort effort to obtain them. It proved to be the only way of obtaining them and was thus necessary and justified.[6]

Trump has clearly violated the Presidential Records Act. He is also guilty of the unauthorized removal and retention of classified information of the United States government. With regard to the second of these crimes—unauthorized removal and retention of classified information—Trump’s claim that he had declassified everything is without merit. “A sitting president has broad Constitutional powers to classify (and declassify) information. However, stemming from claims by former President Trump that documents at Mar-a-Lago were declassified, a Congressional Research Service policy paper on the Mar-a-Lago search warrant highlights that the declassification process is bound by regulations: per 32 CFR §2001.25, it requires markings that are ‘uniformly and conspicuously applied to leave no doubt about the declassified status of the information and who authorized the declassification.’”[7]

We do not yet know whether Trump’s possession of Top Secret and Secret documents has jeopardized our national security.

Should Trump be charged for these crimes?

Donald Trump should be held to the same standards as was Hillary Clinton, who was not charged for her crimes.Clinton’s use of her own computer clearly violated State Department rules and procedures and her resistance and delay in turning over what phone records she didn’t destroy does not reflect well on her to say the least. According to The Washington Post’s Fact Checker, Glenn Kessler, “Clinton, in her tweet, suggests none of her emails were marked classified. That’s technically correct…. Clinton has good reason for making a distinction with Trump.” [8] However, both Kessler and Clinton are technically incorrect because at least three emails were marked with, according to FBI Director Comey, “portion markings,” and another “110 messages contained information that was classified at the time it was sent.”[9]

Nevertheless, Trump’s violations of record keeping requirements were dramatically more numerous and serious. The government-owned documents Trump sent to his Mar-o-Lago residence contained hundreds of conspicuously marked Top Secret, Secret, and Confidential documents, some of which could jeopardize American security and the security of allies (at this writing the official assessment of such potential damage has not been completed). These violations of the law were of an entirely different magnitude than those of Hillary Clinton.

Surely Trump should be indicted for these crimes (separately from whether he should be indicted for his efforts to overturn the election of 2020, Trump University fraud, and/or tax fraud). Equal treatment under the law seems to demand it. Former Presidents should not be above the law. The Justice Department would have to present its case and evidence in a court of law in front of a jury where Trump could defend himself under oath (if he chose to). Especially given the political overtones of the case and the fact that the Attorney General was appointed by Trump’s successor, the case would need to be strong enough to convince the vast majority of American’s that Trump was being treated fairly. 

The pros and cons of charging Trump are explored in more detail in the attached articles.[10],[11]

So Garland has a dilemma: Indict or don’t indict. Risk losing or decline to prosecute and let Trump walk away. In concluding that “Donald Trump Is Not Above the Law” and should be indicted, The New York Times acknowledged last month, “Pursuing prosecution of Mr. Trump could further entrench support for him and play into the conspiracy theories he has sought to stoke. It could inflame the bitter partisan divide, even to the point of civil unrest. If viewed as illegitimate, a trial could also further undermine confidence in the rule of law, whatever the eventual outcome.”[12]

Such a trial runs the risk of provoking significant civil unrest (yes, we seem to have sunk so low). It is not impossible that one of the twelve jurors would refuse to convict Trump. Thus, an alternative suggestion is to hold a Grand Jury hearing in which all of the evidence is laid out for all to see, leaving it to voters to determine Trump’s ultimate fate. We would personally prefer to see this dangerous man behind bars.

Chronology

The following is excerpted from the CNN published timeline of the case.[13]

May 2021

An official from NARA contacts Trump’s team after realizing that several important documents weren’t handed over before Trump left the White House. The missing documents include some of Trump’s correspondence with North Korean leader Kim Jong Un, as well as the map of Hurricane Dorian that Trump infamously altered with a sharpie pen.

Fall 2021

NARA grows frustrated with the slow pace of document turnover after several months of conversations with the Trump team. NARA reaches out to another Trump attorney to intervene. The archivist asks about several boxes of records that were apparently taken to Mar-a-Lago during Trump’s relocation to Florida. NARA still doesn’t receive the White House documents they are searching for.

January 2022

After months of discussions with Trump’s team, NARA retrieves 15 boxes of Trump White House records from Mar-a-Lago. The boxes contained some materials that were part of “special access programs,” known as SAP, which is a classification that includes protocols to significantly limit who would have access to the information. NARA says in a statement that some of the records it received at the end of Trump’s administration were “torn up by former President Trump,” and that White House officials had to tape them back together. Not all the torn-up documents were reconstructed, NARA says.

February 9, 2022

News outlets, including CNN, report that NARA asked the Justice Department to investigate Trump’s handling of White House records and whether he violated the Presidential Records Act and other laws related to classified information. The Presidential Records Act requires all records created by a sitting president to be turned over to the National Archives at the end of their administration.

April and May 2022

On April 7, NARA publicly acknowledges for the first time that the Justice Department is involved, and news outlets report that prosecutors have launched a criminal probe into Trump’s mishandling of classified documents. Around this time, FBI agents quietly interview Trump aides at Mar-a-Lago about the handling of presidential records as part of their widening investigation.

April 11, 2022

The FBI asks NARA for access to the 15 boxes it retrieved from Mar-a-Lago in January. The request was formally transmitted to NARA by President Joe Biden’s White House Counsel’s office, because the incumbent president controls presidential documents in NARA custody.

April 29, 2022

The Justice Department sends a letter to Trump’s lawyers as part of its effort to access the 15 boxes, notifying them that more than 100 classified documents, totaling more than 700 pages, were found in the boxes. The letter says the FBI and US intelligence agencies need “immediate access” to these materials because of “important national security interests.” Also on this day, Trump lawyers ask NARA to delay its plans to give the FBI access to these materials. Trump’s lawyers say they want time to examine the materials to see if anything is privileged, and that they are making a “protective assertion of executive privilege” over all the documents.

May 10, 2022

Debra Steidel Wall, the acting Archivist of the United States, who runs NARA, informs Trump’s lawyers that she is rejecting their claims of “protective” executive privilege over all the materials taken from Mar-a-Lago, and will therefore turn over the materials to the FBI and US intelligence agencies. In a four-page letter, Wall says she reached this decision after consulting with top lawyers from the Justice Department and the White House Counsel’s office.

May 11-12, 2022

The Justice Department subpoenas Trump, seeking documents with classification markings that are still at Mar-a-Lago. Trump directs his staff to search for any remaining classified material, to comply with the subpoena, according to a lawsuit he later filed.

News outlets report that investigators subpoenaed NARA for access to the classified documents retrieved from Mar-a-Lago. The subpoena, which is part of the process to allow investigators to take possession of the documents from the NARA, is the first public indication of the Justice Department using a grand jury in its investigation.

June 2-3, 2022

According to a lawsuit the former President later filed, Trump invites FBI officials to come to Mar-a-Lago to retrieve the subpoenaed materials.

Four investigators, including a top Justice Department counterintelligence official, visit Mar-a-Lago seeking more information about classified material that had been taken to Florida. The four investigators meet with Trump’s attorneys and look around the basement room where the documents are being stored. Trump briefly stops by the meeting to say hello to the officials, but he does not answer any questions. During the meeting, the federal officials deal with the grand jury subpoena for some of the sensitive national security documents on the premises, and they take away the subpoenaed documents. At some point later in June, a Trump lawyer sends a letter to the Justice Department inaccurately asserting that there aren’t any more classified documents at Mar-a-Lago.

June 8, 2022

Trump’s attorneys receive a letter from federal investigators, asking them to further secure the room where documents are being stored. In response, Trump aides add a padlock to the room in the basement of Mar-a-Lago.

June 24, 2022

Federal investigators serve a subpoena to the Trump Organization, demanding surveillance video from Mar-a-Lago. Trump’s company complies with the subpoena and turns over the footage. CNN has reported that this was part of an effort to gather information about who had access to areas at the club where government documents were stored.

August 8, 2022

The FBI executes a search warrant at Mar-a-Lago—a major escalation of the classified documents investigation. The search focused on the area of the club where Trump’s offices and personal quarters are located. Federal agents remove boxes of material from the property. The search was the first time in American history that a former president’s home was searched as part of a criminal investigation.

August 11, 2022

Trump sends a message through one his lawyers to Attorney General Merrick Garland, saying he has “been hearing from people all over the country about the raid” who are “angry,” and that “whatever I can do to take the heat down, to bring the pressure down, just let us know,” according to a lawsuit he later filed. Hours later, after three days of silence, Garland makes a brief public statement about the investigation. He reveals that he personally approved the decision to seek a search warrant, and that the Justice Department will continue to apply the law “without fear or favor.” Garland also pushes back against what he called “unfounded attacks on the professionalism of the FBI and Justice Department.” Garland also announces that the Justice Department will ask a judge to unseal some of the search warrant documents, for the sake of transparency.

August 12, 2022

Federal Magistrate Judge Bruce Reinhart approves the unsealing of the Mar-a-Lago search warrant and its property receipt, at the Justice Department’s request and after Trump’s lawyers agree to the release. The warrant reveals the Justice Department is looking into possible violations of the Espionage Act, obstruction of justice and criminal handling of government records, as part of its investigation.

August 22, 2022

Trump files a federal lawsuit seeking the appointment of a third-party attorney known as a “special master” to independently review the materials that the FBI seized from Mar-a-Lago. In the lawsuit, Trump’s lawyers argue that the Justice Department can’t be trusted to do its own review for potentially privileged materials that should be siloed off from the criminal probe.

August 27, 2022

Federal District Judge Aileen Cannon, a Trump appointee who is presiding over Trump’s civil lawsuit, announces her “preliminary intent” to appoint a special master to examine the seized Mar-a-Lago materials.

September 1, 2022

Federal prosecutors clash with Trump’s lawyers at a high-stakes court hearing in Palm Beach, Florida, as part of Trump’s lawsuit seeking the special master appointment.

September 5, 2022

In a major ruling, Cannon grants Trump’s request for a special master to review the seized materials from Mar-a-Lago. She says the special master will have the power to look for documents covered under attorney-client privilege and executive privilege. The outcome is a major victory for Trump.

September 8, 2022

The Justice Department appeals Cannon’s decision in the special master case. Prosecutors also ask Cannon to temporarily block two key parts of her ruling while their appeal plays out: First, the part where she blocked the Justice Department from using any of the seized materials in their criminal probe while the materials were being reviewed by the special master, and second, the part of her ruling that required the Justice Department to hand over classified documents to the special master.

Hillary Clinton

Executive Summary of Hillary Clinton Email Controversy

During her tenure as United States Secretary of State (2009-2013) and later as the 2016 Democratic Presidential Candidate, Hillary Clinton drew controversy by using a private email server while Secretary of State for public communications rather than using official State Department email accounts maintained on federal servers. Clinton’s server was found to hold over 100 emails containing classified information, including 65 emails deemed “Secret” and 22 deemed “Top Secret.” An additional 2,093 emails not marked classified were retroactively designated confidential by the State Department.[14]

At the very beginning of her tenure as Secretary, the Bureau of Diplomatic Security had warned Clinton about the vulnerabilities of her use of a BlackBerry along with a private server, but Clinton ignored it and the Bureau took no action. While members of the Administration knew that Clinton used a private email address (clintonemail.com), no one outside of the State Department, certainly not President Obama, knew that she was using a private server maintained in her home by a private computer services firm. In October 2014, the State Department asked all previous Secretaries of State for all documents related to their time in office. Clinton responded in December 2014 by delivering 55,000 printed pages of emails that had been housed only on her server and its privately maintained backups (but with no copies of such correspondence in State Department records, as required by policy and by law). Omitted were over 30,000 emails she decided were personal. Federal rules required Clinton to preserve work emails before she left office, but she did not turn over her emails until 21 months after she left office. That Clinton used her private server exclusively for official work was not made public until March 2015 (more than two years after she left office), when The New York Times reported that the House Select Committee on Benghazi made the discovery.

The inspector general of the intelligence community reviewed the hardcopies delivered by Clinton and found “hundreds of potentially classified emails.” A “security referral” (but not criminal), to the Justice Department was made in late July 2015. Clinton and her private computer services companies finally relinquished the actual hardware servers and thumb drives to the FBI in August 2015. Clinton’s lawyer David E. Kendall said that emails, and all other data stored on the server, had earlier been erased prior to the device being turned over to the authorities.

Clinton repeatedly stated that her private server was “allowed by the State Department,” and that she never handled anything marked classified through her server. She repeatedly stated during her campaign that turning over 55,000 printed pages and then the hardware to the government “shows that I have been as transparent as I could.”

In May 2016, the Department’s Office of the Inspector General Steve A. Linick released an 83-page report about the State Department’s email practices. Aside from security risks, the report stated that “[Clinton] did not comply with the Department’s policies that were implemented in accordance with the Federal Records Act.” Each of these findings contradicted what Clinton and her aides had been saying up to that point. The FBI, through statements by Director Comey, later determined “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.”

My own conclusion is that while Secretary of State, Hillary Clinton deliberately and knowingly violated State Department policy by exclusively using a private server to conduct public as well as private business. While there is no evidence her intention was to specifically mishandle classified information, the clear intent was to retain control (delete forever) anything that could be harmful to her expected campaign for president, classified or not. By submitting 55,000 printed pages of official emails, after having deleted over 30,000 emails she alone decided were personal, and then not turning over the (totally erased) hard drives and thumb drives until almost a year later, she successfully circumvented both FOIA and the Presidential Records Act in order to advance and protect her campaign. The world will never know what she erased, only some of which was only partially recovered after forensic analysis of the scrubbed hardware.

Chronology

The following chronology focuses on requests for cooperation with the investigation of her email practices from Secretary and then Presidential Candidate Clinton and her responses. This review largely draws on the cited Wikipedia article and includes other sourced information.

2009 – 2013

At the outset of her tenure as Sec of State, setting up a secure desktop computer in her office was suggested, but Clinton was unfamiliar with their use and opted for the convenience of her BlackBerry, not the State Department and government protocol of a secured desktop computer. Efforts to find a secure solution were “abandoned by Clinton,” and she was warned by State Department security personnel about the vulnerability of an unsecured BlackBerry to hacking. She affirmed her knowledge of the danger, and was reportedly told that the Bureau of Diplomatic Security had obtained intelligence about her vulnerability while she was on a trip to Asia, but continued to use her BlackBerry outside her office. For the first two months of its use – January 2009 through March 29, 2009 – the web page [sign-in portal for users to access the server] was reportedly not secured with a TLS certificate, meaning that information transmitted using the service was unencrypted and may have been vulnerable to interception.

December 2012 – March 2013

Near the end of Clinton’s term, a nonprofit group called Citizens for Responsibility and Ethics in Washington (CREW), filed a FOIA request seeking records about her email. CREW received a response in May 2013: “no records responsive to your request were located.” Emails sent to Clinton’s private clintonemail.com address were first discovered in March 2013, when a hacker named “Guccifer” widely distributed emails sent to Clinton from former President Bill Clinton aide Sidney Blumenthal, which Guccifer obtained by illegally accessing Blumenthal’s email account. The emails dealt with the 2012 Benghazi attack and other issues in Libya and revealed the existence of her clintonemail.com address.

October – December 2014

In October 2014, the State Department sent letters to Clinton and all previous Secretaries of State back to Madeleine Albright requesting emails and documents related to their work while in office. On December 5, 2014, Clinton lawyers delivered 12 file boxes filled with printed paper containing more than 30,000 emails rather than their easier to analyze original electronic version. Clinton withheld almost 32,000 emails deemed to be of a personal nature. Datto, Inc., which provided data backup service for Clinton’s email, agreed to give the FBI the hardware that stored the backups.

March 2015

A March 2, 2015, New York Times article broke the story that the Benghazi panel had discovered that Clinton exclusively used her own private email server rather than a government-issued one throughout her time as Secretary of State, and that her aides took no action to preserve emails sent or received from her personal accounts as required by law.

After the existence of the server became publicly known on March 2, 2015, the Select Committee on Benghazi issued a subpoena for Benghazi-related emails two days later. Clinton chief of staff Cheryl Mills sent an email to PRN [Clinton’s computer services provider, Platte River Networks] on March 9 mentioning the committee’s retention request. The PRN technician then had what he described to the FBI as an “oh shit moment,” realizing he had not set the personal emails to be deleted as instructed months earlier. The technician then erased the emails using a free utility, BleachBit, sometime between March 25 and 31.

At a March 10, 2015 press conference, Clinton said all personal emails were deleted from her server, and she rejected the suggestion that she turn her server over to an “independent arbiter” to prove that she did not destroy any work-related emails and that “the server will remain private.”[15] The Clinton campaign said that she complied with NARA regulations because “more than 90% of those emails should have already been captured in the State Department’s email system before she provided them with paper copies.”

On March 27, 2015, Republican Congressman Trey Gowdy, Chairman of the Select Committee on Benghazi, asserted that sometime after October 2014, Clinton “unilaterally decided to wipe her server [which remained in her possession at that time] clean” and “summarily decided to delete all emails.” Clinton’s attorney, David E. Kendall, said that day that an examination showed that no copies of any of Clinton’s emails remained on the server. Kendall said the server was reconfigured to only retain emails for 60 days after Clinton lawyers had decided which emails needed to be turned over.

April 2015

Dan Metcalfe, a former head of the Justice Department’s Office of Information and Privacy, said this [exclusive use of a private server] gave her even tighter control over her emails by not involving a third party such as Google and helped prevent their disclosure by Congressional subpoena. He added: “She managed successfully to insulate her official emails, categorically, from the FOIA, both during her tenure at State and long after her departure from it—perhaps forever,” making it “a blatant circumvention of the FOIA by someone who unquestionably knows better.” (According to State Department spokesperson Marie Harf, use by government officials of personal email for government business is permissible under the Federal Records Act, so long as relevant official communications, including all work-related emails, are preserved by the agency.)

June – August 2015

On June 22, 2015, the Benghazi panel released emails between Clinton and Sidney Blumenthal, who had been recently deposed by the committee. Committee chairman Gowdy issued a press release criticizing Clinton for not providing the emails to the State Department. Clinton had said she provided all work-related emails to the State Department, and that only emails of a personal nature on her private server were destroyed. The State Department confirmed that 10 emails and parts of five others from Sidney Blumenthal regarding Benghazi, which the committee had made public on June 22, could not be located in the Department’s records, but that the 46 other, previously unreleased Libya-related Blumenthal emails published by the committee, were in the Department’s records. In response, Clinton campaign spokesman Nick Merrill, when asked about the discrepancy said: “She has turned over 55,000 pages of materials to the State Department, including all emails in her possession from Mr. Blumenthal.” Republican Committee members found emails that Clinton failed to produce. Clinton campaign staff accused Gowdy and Republicans of “clinging to their invented scandal.”

A June 29, 2015, memorandum from the Inspector General of the State Department, Steve A. Linick, said that a review of the 55,000-page email release found “hundreds of potentially classified emails.” A July 17, 2015, follow-up memo, sent jointly by Linick and the Intelligence Community (IC) inspector general, I. Charles McCullough III, to Under Secretary of State for Management Patrick F. Kennedy, stated that they had confirmed that several of the emails contained classified information that was not marked as classified, at least one of which was publicly released. On July 24, 2015, Linick and McCullough said they had discovered classified information on Clinton’s email account. Investigators from their office, searching a randomly chosen sample of 40 emails, found four that contained classified information that originated from U.S. intelligence agencies, including the Central Intelligence Agency (CIA) and the National Security Agency (NSA). Their statement said that the information they found was classified when sent, remained so as of their inspection, and “never should have been transmitted via an unclassified personal system.” Clinton’s presidential campaign and the State Department disputed the letter, and questioned whether the emails had been over-classified by an arbitrary process. According to an unnamed source, a secondary review by the CIA and the National Geospatial-Intelligence Agency endorsed the earlier inspectors general findings concluding that the emails (one of which concerned North Korea’s nuclear weapons program) were “Top Secret” when received by Clinton through her private server in 2009 and 2011, a conclusion also disputed by the Clinton campaign.

The inspector general of the intelligence community said her emails contained classified information and made a “security referral” to the Justice Department in late July 2015. Clinton directed her campaign in mid-August to turn over her computer server to the FBI. Clinton said her personal email account was “allowed by the State Department.” Federal rules required Clinton to preserve work emails before she left office, but she did not turn over her emails until 21 months after she left office. Clinton said “turning over my server” to the government shows “I have been as transparent as I could” about her emails.

Clinton’s IT contractors turned over her personal email server to the FBI on August 12, 2015, as well as thumb drives containing copies of her emails. In a letter describing the matter to Senator Ron Johnson, Chairman of the Senate Homeland Security Committee, Clinton’s lawyer David E. Kendall said that emails, and all other data stored on the server, had earlier been erased prior to the device being turned over to the authorities, and that both he and another lawyer had been given security clearances by the State Department to handle thumb drives containing about 30,000 emails that Clinton subsequently also turned over to authorities.

September 2015

Bloomberg News reported in September 2015 that the FBI had recovered some of the deleted emails. Since this episode, Clinton critics have accused her or her aides of deleting emails that were under subpoena, alleging the server had been “bleached” or “acid-washed” by a “very expensive” process in an effort to destroy evidence.

October 2015

On October 22, 2015, Clinton testified before the committee and answered the Select Committee on Benghazi members’ questions for eleven hours before the Committee in a public hearing. The New York Times reported that “the long day of often-testy exchanges between committee members and their prominent witness revealed little new information about an episode that has been the subject of seven previous investigations … Perhaps stung by recent admissions that the pursuit of Mrs. Clinton’s emails was politically motivated, Republican lawmakers on the panel for the most part avoided any mention of her use of a private email server.”

February 2016

Clinton maintained she did not send or receive any confidential emails from her personal server. In a Democratic debate with Bernie Sanders on February 4, 2016, Clinton said, “I never sent or received any classified material.” This statement was false, as had been clearly stated earlier by the inspector general of the security community in July 2015.

May 2016

In May 2016, the Department’s Office of the Inspector General Steve A. Linick released an 83-page report about the State Department’s email practices. Aside from security risks, the report stated that “she did not comply with the Department’s policies that were implemented in accordance with the Federal Records Act.” Each of these findings contradicted what Clinton and her aides had been saying up to that point. The report also stated that Clinton and her senior aides declined to speak with the investigators, while the previous four Secretaries of State did so.

June – July 2016

In various interviews, Clinton has said that “I did not send classified material, and I did not receive any material that was marked or designated classified.” However, in June and July 2016, a number of news outlets reported that Clinton’s emails did include messages with some paragraphs marked with a “(c)” for “Confidential.” The FBI investigation found that 110 messages contained information that was classified at the time it was sent. Sixty-five of those emails were found to contain information classified as “Secret;” more than 20 contained “Top-Secret” information. Three emails, out of 30,000, were found to be marked as classified, although they lacked classified headers and were only marked with a small “c” in parentheses, described as “portion markings” by FBI Director Comey. Comey added it was possible Clinton was not “technically sophisticated” enough to understand what the three classified markings meant which is consistent with Clinton’s claim that she wasn’t aware of the meaning of such markings.

In a Meet the Press interview on July 2, 2016, she stated: “Let me repeat what I have repeated for many months now, I never received nor sent any material that was marked classified.”

On July 5, 2016, FBI Director Comey announced in a statement he read to press and television reporters at FBI headquarters in Washington, DC, that the FBI had completed its investigation and was referring it to the Justice Department with the recommendation “that no charges are appropriate in this case.” He added, “Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case.” With regard to mishandling of classified information, Comey said, “there is evidence that they [Clinton and her team] were extremely careless in their handling of very sensitive, highly classified information.” The investigation found 110 emails that should have been regarded as classified at the time they were sent; another 2,000 emails were retroactively classified which means they were not classified at the time they were sent. Comey said that “any reasonable person in Secretary Clinton’s position, or in the position of those government employees with whom she was corresponding … should have known that an unclassified system was no place for that conversation.”

June 2017

On June 23, 2017, several members of the Senate Judiciary Committee opened a bipartisan inquiry into whether former Attorney General Lynch interfered in the FBI’s investigation into Hillary Clinton’s use of a private email server. The investigation found Clinton’s use of personal email server increased the risk of compromising State Department information, but “there was no persuasive evidence of systemic, deliberate mishandling of classified information.”

[1] Wikipedia contributors, “FBI search of Mar-a-Lago,” Wikipedia, The Free Encyclopedia, https://en.wikipedia.org/w/index.php?title=FBI_search_of_Mar-a-Lago&oldid=1109931185 (accessed September 10, 2022).

[2] Wikipedia contributors, “Hillary Clinton email controversy,” Wikipedia, The Free Encyclopedia, https://en.wikipedia.org/w/index.php?title=Hillary_Clinton_email_controversy&oldid=1104229653 (accessed August 10, 2022).

[3] Op. cit. Wikipedia, “FBI Search of Mar-a-Lago.”

[4] Ibid.

[5] Ibid.

[6] CNN, “Bill Barr ‘skeptical’ Trump declassified Mar-a-Lago papers,” YouTube video, 6:38, Sept. 3, 2022, https://www.youtube.com/watch?v=5zJUge5hdzo.

[7] Wikipedia, “FBI Search of Mar-a-Lago.”

[8] Kessler, Glen. “Hillary Clinton’s claim that ‘zero emails’ were marked classified,” Sept. 8, 2022, The Washington Post, https://www.washingtonpost.com/politics/2022/09/08/hillary-clintons-claim-that-zero-emails-were-marked-classified/.

[9] Wikipedia, “Hillary Clinton email controversy.”

[10] Linker, Damon, “The Case Against Prosecuting Donald Trump,” Persuasion, Sept. 2, 2022, https://www.persuasion.community/p/the-case-against-prosecuting-donald?utm_source=email.

[11] Shugerman, Jed, and Rozenshtein, Alan Z., “The Case for Prosecuting Donald Trump,” Persuasion, Aug. 31, 2022, https://www.persuasion.community/p/the-case-for-prosecuting-donald-trump?utm_source=email.

[12] Zurin, James D., “Indict Trump Over the Mar-a-Lago Documents? Don’t Indict? There’s a Third Option.” Washington Monthly, Sept. 7, 2022, https://washingtonmonthly.com/2022/09/07/indict-trump-over-the-mar-a-lago-documents-dont-indict-theres-a-third-option/.

[13] Cohen, Marshall et al, “Timeline: The Justice Department criminal inquiry into Trump taking classified documents to Mar-a-Lago,” CNN, Sept. 8, 2022, https://www.cnn.com/2022/08/09/politics/doj-investigation-trump-documents-timeline/index.html.

[14] Wikipedia, “Hillary Clinton email controversy.”

[15] Kiely, Eugene. “More Spin on Clinton Emails.” FactCheck.org, 8 September 2015. www.factcheck.org/2015/09/more-spin-on-clinton-emails/. Accessed 13 August 2022.

President Biden Attacks Internal Enemies

President Biden addressed the nation on September 1 from the site of America’s founding. In many respects it was a positive, uplifting speech reminiscent of Ronald Reagan’s wonderful speeches. Though I disagree with many of the details of his recent policy victories, it is normal for a president to promote them. But there was another part of his speech that has become very controversial.

“When President Biden stood before Independence Hall in Philadelphia on Thursday night, he warned that American democracy stands at the precipice… — one that, he said, comes from within the country’s borders. ‘Donald Trump and the MAGA Republicans represent an extremism that threatens the very foundations of our republic,’ Biden said.”  “Biden-danger within us”

The President of the United States is both the leader and head of state for the entire country and the head of his political party. Did President Biden cross the line between defending the country from serious attacks and partisanship when he made his speech? Biden was not criticizing Trump’s protectionist, isolationist policies as I have done (and I have praised Trump’s tax reform and reduction of excessive regulations). Those are partisan political issues. If we don’t like someone’s policies, we can vote against them. Biden was making a much more serious charge. He clarified that:

 “’I don’t consider any Trump supporter to be a threat to the country. I do think anyone who calls for the use of violence, fails to condemn violence when it’s used, refuses to acknowledge that an election has been won, insists on changing the way in which you count the votes — that is a threat to democracy.’ Yet Trump supporters generally do all of those things, backing the former president’s calls to overturn the 2020 election and elect candidates who vow to rewrite election rules, and supporting his promise to pardon those who attacked the U.S. Capitol on Jan. 6, 2021….

“Rep. Marjorie Taylor Greene (R-Ga.) [stated that], ‘Joe Biden just declared all of us enemies of the state.’”  “Biden-danger within US”

The critical question is who does Rep. Green mean by “all of us?” All Republicans or all who believe and promote what she does? And what does Rep. Green believe?

“Last month [Aug 2020] , The New York Times reported on Greene’s past statements referring to Q as a “patriot” and pushing the idea that Q was working to take down a supposed cabal of Satan-worshipping pedophiles.

“QAnon is a far-right conspiracy theory that falsely claims, among other things, that an individual known only as Q with supposed “Q-Level” government security clearance has been leaking high-level information. The theories allege a global network of child sex traffickers is orchestrating a plot against President Trump. QAnon followers believe Democrats are behind the plot.” Rep Green more recently said that she has changed her mind about QAnon. “Marjorie Taylor Greene has several ties to conspiracy hate groups”

Wikipedia’s summary includes that “Greene has promoted far-right, white-supremacist, and antisemitic conspiracy theories, including the white genocide conspiracy theory, QAnon, and Pizzagate, as well as other extremist conspiracy theories” “Marjorie Taylor Greene”

So, if President Biden means those like Marjorie Taylor Greene, then I fully agree with him that they don’t support American values. But are they dangerous? We don’t generally get too agitated by nut cakes who believe that the Earth is flat (there truly are such people out there on the loose) or that we are being visited by space travelers.

Several things make those like MTG very dangerous and justify President Biden’s warning. The primary danger is Donald Trump himself and the significant number of his True Believers. Trump tried in various ways to overturn the results of his losing Presidential race against Biden climaxing with the attack of the Capitol on Jan 6, 2021, in a final attempt to overturn the elections, which Trump continues to claim he won. He has not, does not, and presumably will not adhere to the rule of law. While we have already seen considerable evidence of his crimes, we must await the final judgement of the Justice Department whether to formally charge him.

“Trump told a right-wing radio host that, if he returns to power, he plans “full pardons with an apology to many” who attacked the Capitol. He also claimed he is ‘financially supporting’ some of those charged in the insurrection to defend them from ‘sick’ prosecutors and ‘nasty’ judges. Oath Keepers? Proud Boys? Unclear.”  “Kevin McCarthy – Joe Biden-semi-fascism – Trump”

Trump’s people have used violence before, as Trump quietly watched, and are threatening to use it again. Former Senator John McCain friend Sen Lindsey Graham, now a Trump worshiper, said on Fox News that “there will be riots in the streets” if the Justice Department indicts former president Donald Trump on charges related to his stashing classified documents in his Palm Beach, Fla., home.” If that doesn’t frighten you for the future of our country, read Jonathan Rauch’s account of what Trump’s reelection could look like: “Trump 2024 reelection-Viktor Orban Hungary”

The second reason for serious concern is that the Republican Party has either given in to Trump or gone silent. Given some of the Trump supported candidates the Republican Party is offering in the November general elections, it could be in serios trouble. More recently, Trump has turned his attack directly on Republicans who do not bow to him.

“Trump (who doesn’t do subtle or even not-so-subtle) blasted McConnell as a “broken down hack” who isn’t doing enough to help Republicans win.”  “Will Trump topple Mitch McConnell”

Trump further stated that: “The party is furious at [Mitch]. We have to put up with him for a period of time, but eventually, he’ll be gone. He’s bad news.”  “Trump rages about GOP” 

“In a statement posted to Truth Social on [August 27], Trump criticized McConnell for a statement he made that week about the crop of GOP Senate hopefuls, before making a dig at Chao, McConnell’s wife of 29 years, calling her ‘crazy.’

‘Chao served as Transportation secretary during the Trump administration for nearly four years, resigning one day after the Jan. 6, 2021, attack on the Capitol. In a letter to Transportation Department staff, she called the riot “entirely avoidable” and said she was ‘deeply troubled’ by the event.

“Chao previously served eight years as Labor Department secretary under former President George W. Bush.

I waited in vail for the Republican (real Republicans) backlash. “Senate Minority Leader Mitch McConnell (R-Ky.) on Tuesday said he does not have a reaction to former President Trump’s statement over the weekend that labeled his wife, former Trump administration Transportation Secretary Elaine Chao, ‘crazy.’

“Asked in Kentucky if he had any reaction to Trump’s statement, McConnell responded simply, ‘no.’”  “McConnell asked if he has reaction to Trump’s attack on wife Elaine Chao says no”

If the Republican Party does not stand up and defend its principles and those of our constitution and country, I will be worried. Very worried. As should everyone else who believes in America’s constitutional democracy. “Republican Rep Adam Kinzinger says we have no leadership”

Living Free together

We are a richly diverse society. Our fellow citizens have different religions, tastes, and political views. When expressed by mature, good-hearted people, this makes for very interesting dinner parties and cultural life. An important reason we have successfully lived together harmoniously in the past is that our laws and culture leave us free to make our own choices and live as we see fit. But this requires a general agreement and commitment to allow such diversity and broadly accepted rules or norms for our interactions with others. It requires treating others and their choices with respect and knowing where the social boundaries are. It also requires trust in and respect for the institutions that oversee and mediate our social interactions.

When the person we voted for losses, we must respect the result. All the more so the loser herself must respect the choice of the majority of voters. When a court passes judgement, we must respect it. When we disagree with proposals from the “other side”, we should clearly state the reasons for our disagreement rather than condemning them as enemies.

We seem close to losing these minimal requirements of a peaceful, free society. The present atmosphere has turned poisonous. Violence in response to outcomes we don’t like—threatened by some shameless politicians —would be a huge loss to to the orderly and peaceful life we have known.

One element of this poison—this atmosphere of hate—is the perpetration of lies (or of misinformation to use a more polite term). Social media has made it easier to spread lies. But it would be terribly wrong and contrary to the values that have helped our flourishing, to blame Facebook, Twitter, etc. for circulating lies. It’s fine to offer suggestions to them for improving the quality and usefulness of their platform, but we are the ones circulating the lies. “Social media and fake news” The hammer that drives a nail or smashes a head is not the perpetrator of either. The person holding the hammer determines its use.

Yesterday two respected friends tweeted the following:

“Last night, Dem Mary Peltola was elected to US House beating Sarah Palin — even though in the first round of ranked-choice-voting, Peltola finished 4th, with just 10% of the votes, compared to Palin’s first-place finish of 27%”

But this is a total lie. I don’t know who invented it (and it was surely not for honorable reasons) but my friends must accept the blame for their role in retweeting it. The truth, as reported in the Washington Post (and I confirmed it with the WSJ) is that:

“Peltola had nearly 40 percent of first-choice votes after preliminary counts, which put her about 16,000 votes ahead of Palin. [Only] Half of the Alaskans who made Begich their first choice ranked Palin second,”

If that all sounds a bit strange, it reflects the operation of the innovative and promising rank choice voting.

One of the structural weaknesses in our system that we need to fix is the establishment of congressional districts that are “safe” for one or the other party. This tends to favor primary candidates with more extreme views who then are pretty much guaranteed to win in the general election. Thus, rather than strengthening the center, which is more representative of the population at large, we are strengthening the two extremes.

Rank choice voting, which was used in Alaska, is a structural change in the election process that can help lower the temperature and restore political representative who are more broadly representative of their continuance. Such structural changes can be helpful and are needed, but at the end of the day we must each take personal responsibility for our own actions. Tweeter does not post or retweet anything.  We do and we need to take our personal responsibilities seriously.

It is helpful from time to time to remind ourselves of the enormous progress our societies have made in the last several centuries after tens of thousands of years with no progress. Marian Tupy and Gale Pooley have just provided us with a beautiful collection of such data in their just published book Superabundance: The Age of Plenty.  “Superabundance”  This is what we have to lose.

Econ 101: Price Caps

On June 6 this year, the average price of regular gasoline in Maryland was $4.85 per gallon. Two years earlier it was $1.94 per gallon. If we assume that the cost to the gasoline producers and sellers was the same in the two periods, gas suppliers were reaping a huge profit in June. As I write this article, Maryland’s price is $3.91. Should the government impose a price cap of, say, $2.00 to take away Shell and Chevron’s excess profits?

The economics of this situation are very simple. At the $2.00 price cap people will demand more gas than they did at the $4.85 price but the supply will be the same. Thus, not everyone who wants to buy gas will be able to. How will the excess demand (supply shortage) be resolved?

If prices are not allowed to ration supply among demanders such that everyone willing to pay $4.85 gets all they want, an alternative rationing mechanism must be imposed. Ration coupons might be issued randomly, or by lottery, or by the first letter of your last name, or to friends and relatives of the government civil servants handing out the ration coupons. Unlike any of these formulas, price rationing provides the available supply to those with the most pressing need for it. Less important trips will be canceled or postponed.

The supply side of the market is important as well. Increasing the supply of most things incurs increasing costs per unit (per gallon). Suppliers of anything will produce up to the point that the cost plus normal profit of additional output matches the market’s demand price. The supply response to price increases for gasoline can be very long. At a higher price oil companies will invest more in searching for new sources and in developing them (drilling new wells, pumping and delivering the crude oil to refineries, etc.). A limited, quick response can be achieved by increasing the rate of extraction from existing wells, but this may reduce their long run capacity. At $4.85 per gallon, oil companies have a strong incentive to increase supply as rapidly as possible. At $2.00 per gallon oil companies have virtually no financial incentive to increase supply thus the unsatisfied demand will persist over time.

Price caps are a dumb idea.

Nancy Pelosi in Taiwan

Nancy Pelosi, the Speaker of the U.S. House of Representatives, just arrived in Taiwan. Why is this a big deal? Shouldn’t anyone be able to visit any country that has opened their doors to them? It depends on the context and purpose.

The civil war for control of China was won by the Chinese Communists lead by Mao Zedong in 1949. The opposition, led by General Chiang Kai-shek, fled to Taiwan and reestablished the Republic of China (POC) there. The civil war was fought on and off between 1927 and 1949 when the victorious Mao established the Peoples Republic of China (PRC) and designated Taiwan as its 23rd province. Both the PRC and POC claimed to be the legitimate governments of all of China.

Following President Richard Nixon’s historic visit to China in 1972, “the United States moved to recognize the People’s Republic of China (PRC) and de-recognize the Republic of China (ROC) in 1979, [and] the United States stated that the government of the People’s Republic of China was ‘the sole legal Government of China.’ Sole, meaning the PRC was and is the only China, with no consideration of the ROC as a separate sovereign entity.

“The United States did not, however, give in to Chinese demands that it recognize Chinese sovereignty over Taiwan (which is the name preferred by the United States since it opted to de-recognize the ROC). Instead, Washington acknowledged the Chinese position that Taiwan was part of China. To this day, the U.S. ‘one China’ position stands: the United States recognizes the PRC as the sole legal government of China but only acknowledges the Chinese position that Taiwan is part of China.

“Congress passed the Taiwan Relations Act in 1979 to protect the significant U.S. security and commercial interest in Taiwan. The TRA provided a framework for continued relations in the absence of official diplomatic ties….  The TRA sets forth the American Institute in Taiwan as the corporate entity dealing with U.S. relations with the island; makes clear that the U.S. decision to establish diplomatic relations with the People’s Republic of China rests upon the expectation that the future of Taiwan will be determined by peaceful means;… mandates that the United States make available defensive arms to Taiwan; and requires that the United States maintain the capacity to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.”

“What is US one China policy and why does it matter?”

All American Presidents have affirmed this one China commitment while maintaining its “strategic ambiguity”. “U.S. Secretary of State Rex Tillerson said [that] the Trump administration is committed to the long-standing ‘One China’ policy as it reviews U.S. policy toward China, but also intends to keep all of its commitments to Taiwan.” June 13, 2017. “USA China-Tillerson committed to one China policy”

More recently: “Joe Biden made a potentially dangerous statement on Monday. In Tokyo, he gave a flat ‘yes’ to a reporter’s question of whether he was willing to ‘get involved militarily to defend Taiwan’. ‘That’s the commitment we made,’ the president claimed. In fact, the United States scrapped its formal commitment to defend Taiwan in 1979…. This is the third time in less than a year that Biden has publicly declared that the United States would use force to keep Beijing from seizing the island.  “Biden defend Taiwan-China invasion”

Pat Buchanan asks: “But if the U.S. went to war to defend Taiwan, what would it mean? We would be risking our own security and possible survival to prevent from being imposed on the island of Taiwan the same regime lately imposed on Hong Kong without any U.S. military resistance.”  “Is Taiwan’s independence worth war?”

What is Pelosi’s objective in going to Taiwan? What does she hope to accomplish with her poke in the Chinese eye? Our interest should be to promote the integration of Taiwan with the rest of China “by peaceful means.” Our diplomacy should be deployed to that end. President Biden’s repeated slips and Nancy Pelosi’s Taiwan visit do not provide the tone nor context for such diplomacy. I believe that her visit to Taiwan is a dangerous mistake. While we would be hard pressed from thousands of miles away to win a war with China, China would suffer enormously as well and probably has better sense than to start such a war. But what is the purpose of such a challenge?

Review of Thomas Sowell’s “Black Rednecks and White Liberals”

Thomas Sowell, a prolific and highly respected economist, wrote Black Rednecks and White Liberals in 2005, but I have only recently encountered and read it.  I wish I had read it earlier, but better late than never. The book is a collection of six essays on the role and dominance of culture over race in the experience of black Americans and other racial groups (Germans, Lebanese, Chinese, Jews, and other middlemen minorities). Like most good U of Chicago economists, he builds his arguments empirically. Digesting the book’s rich collection of data is worth the read.

Sowell documents that most slaves, who have existed from almost the beginning of humanity, have not been black, nor has being a slave, as unacceptable as it is in the modern world, necessarily impeded the futures of slaves once freed. Most interestingly, Sowell argues that the self-destructive behavior of America’s black ghetto culture is not genetic but rather the learned bad habits of the “Cracker culture” of the North Britons, Welsh, and Highland and Ulster Scots who immigrated to the American South and were its dominant slave owners. Sowell argues that the income and educational gaps between white and black Americans reflect the perpetuation by “ghetto” blacks of this culture and its remedy must come from blacks.

A review of the book by Neil Shenvi states that:

“Sowell’s first essay, which shares the book’s title, begins with this provocative quote:

‘These people are creating a terrible problem in our cities. They can’t or won’t hold a job, they flout the law constantly and neglect their children, they drink too much and their moral standards would shame an alley cat. For some reason or other, they absolutely refuse to accommodate themselves to any kind of decent, civilized life.

“Sowell continues: ‘This was said in 1956 in Indianapolis, not about blacks or other minorities, but about poor whites from the South… A 1951 survey in Detroit found that white Southerners living there were considered ‘undesirable’ by 21 percent of those surveyed, compared to 13 percent who ranked blacks the same way’.

“Sowell’s main thesis in this essay is that what we know today as ‘black culture’ is actually ‘white redneck culture’ or ‘cracker culture’ which ‘originated not in the South but in those parts of the British Isles from which white Southerners came. That culture long ago died out where it originated in Britain, while surviving in the American South. Then it largely died out among both white and black Southerners, while still surviving today in the poorest and worst of the urban black ghettos.’”

Shenvi’s review notes that: “[t]he 1970 census showed that black West Indian families in the New York metropolitan area had 28 percent higher incomes than the families of American blacks. The incomes of second-generation West Indian families living in the same area exceeded that of black families by 58 percent. Neither race or racism can explain such differences. Nor can slavery, since native-born blacks and West Indian blacks both had a history of slavery.”  “A review of Sowell’s Black Rednecks and White Liberals“

Sowell’s chapter on “Black Education: Achievements, Myths, and Tragedies” makes the exact same points and criticism of “modern” education made by my mother who was an elementary school teacher in the 1970s and 80s who believed in teaching basic skills and knowledge to a well-disciplined class. Any student who bullied a fellow student only had a chance to do it once while under the supervision of my mother’s strict disciplinary style. At her request she was assigned to classes with behavior problems and by the end of the year they loved her (as did I).

William Raspberry (1935-2012), one of my favorite Washington Post columnists, who like Sowell was black, wrote in a review of Black Rednecks… “[o]ne thing seems beyond dispute: Maybe we haven’t laid racism to rest, but we have reached the point where what we [i.e., blacks] do matters more than what is done to us. That’s great, good news.”

Econ 101:  Oil Price Cap

Among U.S. (and E.U. and some other primarily Northern countries) objectives in reacting to Russia’s invasion of Ukraine, is to diminish its capacity to continue this war, in part by reducing its export (largely oil and gas) income with minimum damage to the U.S. and other embargo supporters and to pressure it to the bargaining table sooner rather than later (we are trying to do that aren’t we??). As you can see from the previous sentence, this is not a particularly simple issue.

One measure being promoted by U.S. Treasury Secretary Janet Yellen is to cap the price at which we are willing to buy Russian oil.  If we just stop buying Russian oil all together (effectively a price of zero), global oil supply would presumably fall, and oil prices would rise. We know, of course that Russia will redirect its sales to countries not participating in the embargo, such as China and India, to the extent it can and the oil these countries would have purchased from Saudi Arabia and other suppliers would then be available to us and global oil supply would not fall as much as we might have expected nor would prices increase as much as otherwise. Much could be written about this (the limited potential of embargoes if not everyone participates), but I won’t.

The idea of Secretary Yellen’s cap is that rather than buying no Russia oil we (and all embargo participants) would continue to buy it but at an agreed price that is below normal market prices in normal time (the price cap). Thus, hopefully, Russia would still sell its oil to the West but would earn less foreign exchange from it and the West would have more oil than with a total blockage and thus avoid sharp market price increases.

“There are several outstanding issues to settle on the price-cap idea. Those include figuring out exactly how to enforce it, convincing other nations to subscribe to it and deciding the sales price at which Western countries would permit the purchase of Russian oil. Looming over the proposal is also the presumption that Russia would continue to sell oil at a price mandated by the U.S. and its allies.”  “WSJ: Janet Yellen begins Asia trip to win support for cap on Russian oil price”

“Some economists and oil industry experts are skeptical that the plan will work, either as a way to reduce revenues for the Kremlin or to push down prices at the pump. They warn the plan could mostly enrich oil refiners and could be ripe for evasion by Russia and its allies. Moscow could refuse to sell at the capped price…. 

“Mr. Biden… moved swiftly to ban imports of Russian oil to the United States and coordinate similar bans among allies. In some ways, the price-cap proposal is an acknowledgment that those penalties have not worked as intended: Russia has continued to sell oil at elevated prices — even accounting for the discounts it is giving to buyers like India and China, which did not join in the oil sanctions — while Western drivers pay a premium….

“The cap plan seeks to keep the Russian oil moving to market, but only if it is steeply discounted. Russia could still ship its oil with Western backing if that oil is sold for no more than a price set by the cap.”  “NYT Biden gas price cap Russia”

John Bolton, whose view I don’t generally share, said about Yellen’s oil price cap: “The proposal, academic and untried, faces multiple practical obstacles and uncertainties. Widespread sanctions violations by Russian maritime cargoes already exist, with no reason to think the oil-price cap is more enforceable.” “WP: Biden oil price cap-Russia Sanctions”

Such efforts to “hurt” Russia cannot avoid also hurting us. What other approaches might the Biden administration consider?

“The White House… has held off for months on backing a gas tax holiday, amid divisions within the Democratic Party and skepticism a roughly 18.4 cent-per-gallon discount would be passed on to consumers….  In private meetings with senior Energy Department officials to discuss ideas for boosting supply and lowering prices, some industry representatives have instead used the sessions to push for longer-term priorities like building pipelines and easing environmental restrictions.”  “Politico: White House-Biden-gas prices”

“Rep. Kim Schrier, D-Wash.,… called it “infuriating” that spikes in gas prices were “happening at the same time that gas and oil companies are making record profits and taking advantage of international crises to make a profit. This must stop.″ “PBS: House approves bill to combat gasoline price gouging”

When the supply of a product falls short of its demand, the gap can be closed in one of two ways. Both involve rationing a scarce commodity as is required for anything in limited supply which is virtually everything. The first approach—the market approach of price rationing—allocates the product to those who want it the most, i.e. those who are willing to pay the most for it. The second approach—the administrative allocation approach—allocates the product to those the government agency responsible for choosing who gets it, determine are most worthy or in most need of it based on the criteria the agency sets (which in practice invariably includes friends and relatives). History has clearly documented which of these methods of allocation works best.  Some of you will remember the long lines at gas stations when President Richard Nixon capped gasoline prices (another form of rationing).

That leaves measures that encourage increased supply from everywhere except Russia or that facilitate reducing demand. “Biden officials are openly pleading with Big Oil to pump more, not less. ‘We want them to get their rig counts up. We want them to increase production so that people are not hurting,’ [Energy Secretary Jennifer] Granholm said.”  “CNN: Gas prices-Biden-inflation” A higher price at the pump provides the market a strong incentive to increase supply, but that generally takes years to achieve much of an increase. In the interim profits of the suppliers will be higher than usual.

Some months back policy sought to reduce the consumption of carbon omitting products as part of our effort to slow global warming. For that objective an increase in gasoline prices would be a good thing, whether from a gas tax or restrictions on finding and pumping more oil out of the ground.

For the moment, encouraging more production by Saudi Arabia and other (non Russian) members of OPEC would be helpful. Finally rejoining the JCPOA (Iran deal), Trump’s withdrawal from which Max Boot called the “single worst diplomatic blunder in U.S. history” “WP: Trump-Biden Iran nuclear deal dead with no alternative”, would, among other important things, increase an important source of oil supply, as would dropping sanctions on Venezuela. If we can make deals with Saudi Arabia, given all it has done, deals with Iran and Venezuela should be no brainers.

Ending the war in Ukraine promptly is the most important measure for addressing the shortage of oil (and food more generally). “End the war in Ukraine”