Goodbye 2019 (and good riddance)

As 2019 and the decade of the 20 teens comes to a close, the impeachment of Donald Trump, only the third President impeached in the history of the United States, dominates the headlines.  My hope (I am a crazy optimist) and wish for my country’s sake is for Trump’s trial in the US Senate to adopt rules that most everyone will see as fair. That means giving Trump every opportunity to state and defend his case and the opposition every opportunity to state theirs. Some Republicans have denied the evidence presented in the House investigation that Trump offered favors (White House visit and military aid) to Ukraine President Zelensky if he would investigate the activities of Trump’s political opponent’s son in Ukraine. Other Republicans, such as Congressman Will Hurd, accepted the evidence but argued that the offence was not sufficiently serious to justify impeachment. Congressman Hurd’s judgement reflects the fact, I suppose, that political standards have sunk so low that we now accept that every President lies to us and abuses his authority (see the Washington Post’s Afghanistan Papers https://www.washingtonpost.com/graphics/2019/investigations/afghanistan-papers/documents-database/).  I think it would be a mistake to accept and normalize such behavior.

Here are some of the key issues of this year (at least those I wrote about) and a few of my blogs/articles about them:

Health care insurance

Given medical costs must be paid by someone (the recipient of the care, the tax payers, insurance premiums, etc.). Insurance shares the cost (the lucky who are well help pay for the unlucky who are sick). But how services are paid for (what and how much is covered by insurance, etc.) will also influence the services provided and their cost.

https://wcoats.blog/2019/08/01/health-care-in-america-2/

Trade war and protectionism

President Trump has torn up the rule book for negotiating freer and freer trade. The result so far has left us worse off.  Fed economists Aaron Flaaen and Justin Pierce found “that tariff increases enacted in 2018 are associated with relative reductions in manufacturing employment and relative increases in producer prices.” https://www.federalreserve.gov/econres/feds/files/2019086pap.pdf

Trump pulled out of the progressive Trans Pacific Partnership (TPP), negotiated a “new” North American Free Trade Agreement (whatever he calls it) that is worse than the existing NAFTA except for the new parts taken from the TPP, worsened trade with China (so far–see Federal Reserve report above), alienated potential partners who would have happily joined us in negotiating with China, and angered the EU with whom he wants a new trade agreement. His potentially illegal uses of tariffs have introduced government protection of favored industries increasing crony capitalism. He continues to weaken the World Trade Organization (WTO), which has provided the bases of increasingly free rule-based trade since WWII. The growth in trade over the last 70 years has helped lift most peoples of the world out of dire poverty.  The number of people living in extreme poverty fell from 2.2 million in 1970 to 0.7 million in 2015.

https://wcoats.blog/2019/11/18/protecting-jobs/

https://wcoats.blog/2019/08/05/econ-101-currency-manipulation/

https://wcoats.blog/2019/06/07/the-sources-of-prosperity/

Foreign wars and policy

President Trump rightly condemned our forever wars and promised retrenchment. I agree with his assessment of our excessive military aggressions and deployments abroad, but for one reason or another he has failed to deliver. The New York Times reports that: “Under President Trump, there are now more troops in the Middle East than when he took office.” https://www.nytimes.com/2019/10/21/world/middleeast/us-troops-deployments.html

Trump seems to act on impulse without serious consultation with his National Security Council, State Department or Pentagon, decimating our diplomacy. His periodic insults to our foreign allies haven’t helped either.  Nor have his love affairs with Putin, Kim Jon-un, and Xi Jinping (do you see a pattern here?).  Diplomacy is the alternative to military adventures for serving our national interests abroad. Trump has failed to fill important State Department positions and seems to pay little attention to his NSC and State Department briefings. Having removed two ambassadors to Ukraine in one year (this year) because his personal lawyer, Rudy Giuliani, thought they were insufficiently loyal to Trump, the U.S. currently has no ambassador in Ukraine.  Trump’s stewardship of our international relations has been a disaster.

Then there was Trump’s intervention in Military justice: From the Military Times: “President Donald Trump’s decision to grant clemency in the cases of three military members tangled in war crimes cases raises questions about whether troops are being given a green light to disobey the rules of law…

Army 1st Lt. Clint Lorance, convicted of second degree murder in the death of three Afghans, was given a full pardon from president for the crimes. Army Maj. Mathew Golsteyn, who faced murder charges next year for a similar crime, was also given a full pardon for those alleged offenses.  Special Warfare Operator Chief Edward Gallagher, who earlier this fall was acquitted of a string of alleged war crimes while being convicted of posing with a dead Taliban member, had his rank restored to Chief Petty Officer by the president.”  “We-shouldnt-forget-what-whistleblower-seals-told-us-about-eddie-gallagher”  What is Trump thinking? What does he have in mind?

https://wcoats.blog/2019/12/14/nation-building-in-afghanistan/

https://wcoats.blog/2019/05/03/oslo-the-play/

https://wcoats.blog/2019/03/11/is-rep-ilhan-omar-anti-semitic/

Monetary policy and the international monetary system

While monetary policy has been relatively good for a floating exchange rate system, asset price bubbles and international currency flow imbalances persist and, in my view, are unavoidable. We need to adopt a hard anchor for the value of the dollar.  The shockingly large fiscal deficits (over one trillion dollars per annum in 2019) with a fully employed economy, when we should be running a budget surplus to provide room for deficits during the next downturn, are building serious risks for the not so distant future. Trump’s attacks on the Federal Reserve’s monetary policy will make managing those risks more difficult.

https://wcoats.blog/2019/01/25/central-banking-aware/

https://wcoats.blog/2019/03/24/central-banking-award/

https://wcoats.blog/2018/05/01/free-banking-in-the-digital-age/

https://wcoats.blog/2019/07/24/whither-libra/

https://wcoats.blog/2019/04/16/returning-to-currencies-with-hard-anchors/

Information and the Internet

The Internet has had a profound impact on how we live and do business. It is hard to imagine a day without our mobile phones. But like all new tools and technology it opens the door to new ways of doing harm as well. This is currently most conspicuous with the spreading of fake news and learning anew what news sources to trust and not trust.

https://wcoats.blog/2019/12/01/new-tools-require-new-rules/

Domestic politics and Trump

In my discussions of the Trump administration I have tried to focus on policies, some of which I like and some I don’t, rather than on Donald Trump himself, about whom I like nothing. The following focuses on Trump.

https://wcoats.blog/2019/12/27/a-letter-to-the-republican-party/

https://wcoats.blog/2019/11/20/to-whom-or-what-am-i-loyal/

My friend Jonathan Rauch explains the limitations of my efforts to focus on policies in an article well worth reading. “Believing is belonging,” https://www.nationalaffairs.com/publications/detail/rethinking-polarization

Modern Society and its challenges

If we move away from personalities and dig deeper into our human motivations that inform policy design and choices, we can’t escape the role of incentives at the center of much of the analysis of my profession–economics. I have and will continue to explore my thoughts on human nature and the role of incentives, institutions, and customs in our search for how best to live free with others seeking their own goals in our society.

https://wcoats.blog/2019/08/10/where-does-the-desire-to-explore-come-from/

https://wcoats.blog/2016/11/22/globalization-and-nationalism-good-andor-bad/

https://wcoats.blog/2016/12/31/my-political-platform-for-the-nation-2017/

Happy New Year

 

Romney on Culture

Mitt Romney is clearly an intelligent guy with an impressive business track record. This makes it all the more disturbing that while visiting Israel Romney felt called upon to blame the difference in living standards between Israel and the occupied West Bank and Gaza (WBG) on cultural differences. I will unpack the ignorance of this claim further on, but first, why did he do it?

We know that Romney is weak on foreign policy issues and regrettably influenced in this area by neocon advisors who tend to favor the one Israeli state solution to the Israeli/Palestinian problem favored by the Israeli right wing over American interests and policies. Since George W Bush American policy has explicitly supported a two state solution. Those unfamiliar with the history of these issues are urged to read my earlier blogs on the topic: “The View from the West Bank – a history of the conflict”, “Jerusalem in august 2006″, “Leaving Israel August 11 2006″. “The Invented Palestinians”.

The United States has a strong commitment to the military defense of Israel and it was appropriate for Romney to restate that commitment while visiting Israel. But it is neither in our national interest nor Israel’s to support or endorse every measure the current Israeli government might think up or take in relation to its neighbors. Israel’s well being depends on making a just peace with its neighbors and returning the West Bank and Gaza to the Palestinians that live there. This is well known and accepted by most Israeli’s but not, apparently, by Romney’s neocon advisors. Given Romney’s lack of understanding in these issue, wisdom would have called for him to remain silent on the issue. So why did he say it, then deny it and than say it again?

First, what did he actually say? According to the Associated Press (“Romney outrages Palestinians by saying Jewish culture helps make Israel more successful”) on July 30 Romney told a breakfast meeting with wealthy donors at the King David Hotel in Jerusalem:  “As you come here and you see the GDP per capita, for instance, in Israel which is about $21,000 dollars, and compare that with the GDP per capita just across the areas managed by the Palestinian Authority, which is more like $10,000 per capita, you notice such a dramatically stark difference in economic vitality…. And as I come here and I look out over this city and consider the accomplishments of the people of this nation, I recognize the power of at least culture and a few other things.”

Saeb Erekat, a top Palestinian official told the AP: “What is this man doing here? Yesterday, he destroyed negotiations by saying Jerusalem is the capital of Israel, and today he is saying Israeli culture is more advanced than Palestinian culture. Isn’t this racism?”

The next day in an interview with Fox News’ Carl Cameran in Poland, Romney denied that he has spoken of the role of culture in the differences in income between Israel and Palestine. (Cameron interview of Romney) It did not take long for Romney to correct this misstatement in a National Review article under his name, “Culture does matter-Mitt Romney”: “During my recent trip to Israel, I had suggested that the choices a society makes about its culture play a role in creating prosperity, and that the significant disparity between Israeli and Palestinian living standards was powerfully influenced by it. In some quarters, that comment became the subject of controversy.”

So why did he say it?  Sadly Tom Friedman probably has it right in his July 31 column in the New York Times: “Why not in Vegas”  “Since the whole trip was not about learning anything but about how to satisfy the political whims of the right-wing, super pro-Bibi Netanyahu, American Jewish casino magnate Sheldon Adelson, why didn’t they just do the whole thing in Las Vegas? I mean, it was all about money anyway — how much Romney would abase himself by saying whatever the Israeli right wanted to hear and how big a jackpot of donations Adelson would shower on the Romney campaign in return.”

So statesmanship, diplomacy, American national interest had nothing to do with it. So maybe Romney actually understood how stupid his comments were. But let me walk us through the facts.

First, Palestinians and non Arab Israelis are first cousins racially. So this can’t be what Romney had in mind. Religiously, Judaism, Christianity, and Islam, the three great monotheistic religions, with Islam the most recent in that evolutionary chain, all share cultures of individual responsibility and work ethic. So it is hard to see Romney’s point in this area. My point is not that culture is unimportant, though calling in “everything” is clearly wrong. My point is that anyone who knows anything about Israel and the WBG, knows that it does not apply there. A very informative and well worth reading criticism of Romney’s statement is in Fareed Zakaria’s Aug 2, Washington Post op-ed, “Capitalism not culture drives economies”.

If Romney had driven the short, but time consuming, distance from Jerusalem to the temporary Palestinian capital in Ramallah, he would have seen some of the physical evidence of how Israel is choking the economies of the occupied, land locked West Bank and the blockaded Gaza Strip (high concrete walls cutting through Palestinian farms, check points blocking the movement of people and commerce, illegal Israeli settlement on Palestinian lands, etc.). I would have thought that a man of Romney’s intelligence would chose to remain silent on these deeply explosive issues until he could consult a more balanced group of foreign policy experts. Sadly he seems to have put politics above national interest.

A Nation of Riches

America is a rich nation, despite its many problems and challenges, many, such as war adventurism, the product of hubris born of our success. Many elements contribute to our riches, but overwhelmingly toping the list are the people who have come here to live in freedom and with the opportunity to achieve their ambitions with hard work and a bit of luck.  “Eternal vigilantes” is the price we must pay to preserve the institutions and attitudes that help defend our way of life from those who want to run them for us.

We are rich in many ways. We are rich in our neighborliness toward our fellow man (we are the largest charity givers in the world), born in part by our gratitude for the respect for our persons and property shown to us by our neighbors. We are rich in the diversity with which we are able to live and conduct our lives, within the domain of mutual self-respect.

Our fellow citizens have come from all over the world. They are self-selected by their desire to be free and to work hard. And they bring with them those elements of their cultures that have enriched their lives in their home countries.

I shared in and enjoyed some of that richness last night at a concert by the Washington Balalaika Society featuring Olga Orlovskaya (soprano) at a local Presbyterian Church. The WBS (www.balalaika.org) is dedicated to performing traditional Russian music with Russian folk instruments (Balalaika, dombra, bayan). Olga Orlovskaya is a great granddaughter of Fyodor Chaliapin, the greatest Russian opera singer of the 20th century. Of the dozens and dozens of concerts and plays to choice from in the Washington area last night (or most any night) my Russian friend Andrei Makarov convinced me to attend this one and what a treat it was. America is indeed a rich country.