Tag: politics

Looking for win-win

The essence of trade is that both the seller and buyer benefit (win-win). Without that feature the trade would not take place. The expansion of trade locally and then globally increased the output and thus incomes of the average person dramatically.

In 1820, about 80% of the world’s population lived in extreme poverty (defined as living on less than $2.15 per day in today’s terms). By 2019, this figure had fallen to roughly 10%. This decline is especially notable given that the global population increased more than sevenfold during this period.


The pace of poverty reduction accelerated in recent decades. From 1990 to 2019, the global extreme poverty rate dropped from 43% to below 10%, with the fastest declines occurring since the 1990s. This progress was driven largely by rapid economic growth in Asia, particularly in China and India.

The increase in win-win gains in income from trade have been promoted by broad agreement on rules and norms for “fair trade” to maximize the increase in incomes that results. These have been developed over time through what is now called the World Trade Organization (WTO). Tragically, rather than further improving its rules, the U.S. has undermined the WTO by refusing to appoint new members to its dispute resolution body.

The benefits of such collaborative cooperation have been sought and gained in other areas as well. To take one, the climate benefits of nuclear energy also carries the risks of destruction from nuclear bombs. Agreements among the countries with such capacity to contain and minimize the associated risks are reflected in the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) of 1968 (extended in 1995). The Comprehensive Test Ban Treaty (CTBT, 1996), several bilateral agreements with the USSR/Russia and others have further reduced the risks.

The dramatic development of Artificial Intelligence (AI) programs promises incredible increases in our incomes but also carries risks. As with nuclear energy, all would benefit from agreements that limit these risks. Cooperating in developing such guard rails is in everyone interest. The US is making a big mistake in attempting to stifle  China’s AI development rather than a win-win cooperation with them to maximize its promise while minimizing its risk.

The case for such cooperation with China is powerfully made by Alvin Graylin in a recent presentation to the Committee for the Republic (on whose board I serve) the other day. https://www.youtube.com/watch?v=Jg6brPvFJGw.

DEI—a nuanced assessment

DEI — “diversity, equity and inclusion” programs or policies are efforts to promote fairness and full participation of people who have been historically underrepresented or subjected to discrimination. The normal standard of fairness when employing workers is that they are hired (or admitted to college) on the basis of merit—who best satisfied to the requirements for the job. This is what taxpayers who want the best results from their tax dollars, want as well.

Many universities set aside the admission of the best qualified students to reflect the fact that may blacks who might have greater potential than their past performance test score indicated because of racial discrimination should be given preferential treatment. But these “affirmative action” programs where struct down by the Supreme Courts 2023 ruling in Students for Fair Admissions v. Harvard and its companion case against the University of North Carolina, which effectively ended race-based affirmative action in college admissions.

To make room for more blacks, Harvard had raised the bar and thus discriminated against Asian applicants with higher scores. It is appropriate that the standards of equal treatment and merit should be observed for government jobs and public universities.

But private firms and colleges should be able to hire or admit whoever they want. Both firms and colleges may well want the social benefits from greater diversity. Not only can it make the workplace more interesting but the broadened understanding of different racial and religious groups generates greater social harmony as well.

I don’t know what DEI programs generally did or aimed for and am quite willing to believe that they wasted human resources. However, that is quite different from the desirability of properly educating our children about different races and cultures and the history of slavery and harms of racial discrimination. Along with civics, such instruction belongs in elementary school curriculums. Just as the enlightened treatment of gays, blacks, Muslims and other groups in movies and TV shows has led the way toward better understanding, exposure and education are important for building a better and more accepting society.

The government should not interfere in the choices of private firms and university about the composition of their work forces and student bodies.

Facebook

Our wise founding fathers established a government to protect the rights and property of a free people, who made their own decisions about how to live. They wisely did not create a government to tell us how to live—nor what to believe.

A society whose members don’t know what to believe, with people who spread lies for whatever nefarious reasons, has a serious problem. Living in communities as we all do requires a degree of trust in a common understanding of the facts. But who is to determine what is true and on what basis? In a free society the responsibility of evaluating what to believe rests with each of us individually.

“The American Founders told everyone who would listen (and some who wouldn’t) that the republic could not endure without a virtuous citizenry. They warned that the Constitution was necessary but not sufficient.”[1]  The quality of our lives and of the functioning of our communities depends on the choices and behavior of each of us. Our freedom to behave as we choose will only produce a successful community if its members behave virtuously. The maximization of each individual’s utility (happiness) as we economists might put it, depends, in part, on how well our individual preferences fit into the community’s norms and expectations. No man is an Island.

Our specific values might come from our religious and/or philosophical beliefs. These can differ but must include respect for the rights of our neighbors to live by their own lights. But decisions based on incorrect information will be suboptimal or worse. The government might require that firms transparently disclose relevant information about their products (such as content) but should not impose its own judgment about the truth—governments themselves lie too often to be the final orbiters of truth.

Meta CEO Mark “Zuckerberg announced earlier this week that his platforms would part ways with the third-party fact-checking organizations he had employed to police speech on Facebook and Instagram.

“‘The fact-checkers have just been too politically biased and have destroyed more trust than they’ve created, especially in the U.S.,’ he said.”  “An urgent meeting of the fact check legion-of-doom—Reason”  FaceBook posts will continue to allow comments by its users challenging alleged facts.  Zuckerberg, who met with President-elect Donald Trump at Mar-a-Lago on Friday, said his company is “going to get back to our roots and focus on reducing mistakes, simplifying our policies, and restoring free expression on our platforms.”

It is up to us to evaluate what to believe and what to pass on. This is not a trivial responsibility, but the market works hard to help. Just as we learn how to successfully do anything else (Reading, Writing, and Arithmetic), we need to learn how to evaluate information we are given and to carefully choose sources that we trust. There are private fact checking organizations we are free to consult or ignore. We are free to choose news sources that we believe adhere to the standards of objective journalism. But if we do not exorcise our judgement wisely, our society will be less “successful” than otherwise.[2] But it would violate the wisdom of our founders and the best interests of a free society to give that responsibility to the government.

[1] Jonathan Rauch, “Cross Purposes, Christianity’s Broken Bargain with Democracy” January 2025

[2] Jonathan Rauch. The Constitution of Knowledge: A Defense of Truth. Washington, D.C.: Brookings Institution Press, 2021. 280 pp.

Trump

President Reagan pointed to our beacon on the hill as the foundation of our relationship and leadership with the rest of the world. Soon to be President Trump’s approach is to threaten and bully the rest of the world.

“US President-elect Donald Trump’s trade policy challenges the post-war global trading system. By rejecting the World Trade Organization’s principles of non-discrimination and reciprocity, Trump proposes a power-based approach that would fundamentally alter international economic relations, risking the predictability and fairness that have underpinned global trade for seven decades.”  “How Trump threatens the world trading system”

But he hasn’t stopped there.  Though promising to end our “forever wars” and restraint in our international relations, Trump is coming on as the most aggressive President in memory:

“Many people have been understandably astonished by Donald Trump’s recently proclaimed desires to “take back” the Panama Canal “in full, quickly and without question” and to take over the self-governing Danish territory of Greenland.

“While Trump has written that “For purposes of National Security and Freedom around the world, the United States feels that the ownership and control of Greenland is an absolute necessity,” he would at least appear to be willing to pay Denmark for Greenland, as the U.S. paid Denmark for the Danish West Indies, renamed the U.S. Virgin Islands, in 1917.” “A thought on the Panama Canal and Greenland”

A bully, who forces rules on others that he disregards himself, will not serve America’s nor the worlds interests. We all want America to be safe, prosperous, and free. Thus, we must hope for and where possible promote a successful term for this and any other President. An important role can be, and hopefully will be played by the Republicans in Congress, starting with careful vetting of Trumps cabinet nominations. “Trump-bully-world-America-foreign-policy”

Tariffs

“Posting on his Truth Social platform, Trump said [Monday] that on the first day of his presidency he will charge Mexico and Canada a 25% tariff on all products coming into the U.S. He added in a separate social-media post that he would impose an additional 10% tariff on all products that come into the U.S. from China,… That would come on top of existing tariffs the U.S. has already imposed on Chinese goods.

“’This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!’ Trump wrote.” WSJ: Trump pledges tariffs on Mexico Canada and China”

A tariff is a tax on an import. They are permitted by the World Trade Organization when leveed on goods receiving state subsidies in order to create a level playing field for trade. Such global trade has made an enormous contribution to the standard of living around the world.  “Ernie Tedeschi, former chief economist for President Joe Biden’s Council of Economic Advisers, said the North American tariffs would cost the typical American household almost $1,000 per year.” WP: “Trump tariffs-China Mexico Canada”

The normal expectation is that the tariff will reduce U.S. demand for the taxed import and encourage its domestic production. But the US labor force is fully employed and can only increase domestic production of the targeted goods by shifting workers from the production of goods the US has a comparative advantage in thus reducing our overall income. Though employment of manufacturing workers has declined in the US, manufacturing output has not because worker productivity has increased. In fact, our imports have not shipped American jobs overseas as increasing productivity has resulted in reduced manufacturing employment most everywhere in the world, including China, surely a good thing. WC: “Trade protection and corruption”

Immediately after Trump’s tariff announcement, the exchange rate of the dollar strengthened. A stronger dollar reduces the cost of imports (but increases the cost to foreigners of our exports), thus undoing to some extent the demand reducing impact of the tariff. But it hurts our exports because of their higher price to foreign purchaser and reduces our overall standard of living.

China and others hit with this tax are likely to retaliate with their own tariffs. “Under the United States-Mexico-Canada Agreement (USMCA), which took effect in 2020, goods moving among the three North American nations cross borders on a duty-free basis. ‘Obviously, unilaterally imposing a 25 percent tariff on all trade blows up the agreement,’ said John Veroneau, a partner at Covington & Burling in Washington.”  WP: “Trump tariffs-China Mexico Canada”

Should Trump actually impose these tariff’s he would (again) be violating the law, which only allows the President to impose tariffs without Congressional approval for national security reasons: WC: “Tariff abuse”

Trump’s threatened tariffs are not even leveed on the goods he wants to restrict (drugs and illegal aliens). Thus, unlike traditional tariffs they would be leveed to pressure Mexico and Canada to take other actions Trump wants. They are bargaining ploys. So at the cost of raising prices and lowering incomes in the US, weakening the global trading rules from which we have benefited so much, and weakening the checks and balances limiting an over extended executive branch, Trump may be playing his bargaining game again. But in my opinion the cost to us and the world trading system is too high.

War

My many visits to Sarajevo, Mostar, and Banja Luka in 1996-7 exposed me to the devastation of war, as did my multiple visits to Pristina in 1999-2000, and my 23 visits to Kabul between 2002-13.  My two months in Bagdad as part of the Coalition Provisional Authority in 2004 and five, two week follow up visits added live fire to my “post” war experiences that left me jumpy for many months after returning home.  None of these came close to the front-line experiences of reporter Robert Fisk, whose accounts are reproduced in his thick book “The Great War for Civilization: The Conquest of the Middle East,” though he reported from the same countries I had worked in.

Fisk’s reports on his interviews with actual people and his viewing of their butchered bodies and mass graves in the dessert confronts his readers with the real victims of war. To characterize his accounts as heart wrenching doesn’t come close to the true tragedies he reports. The deceptions and lies of all sides, add to the immense tragedies of our post WW wars, which have accomplished nothing but death and destruction.

The current Middle East wars (Israel’s slaughter of men, women and child in Gaza, West Bank, and Lebanon), following decades of Israel’s abusive rule over Palestinian territories, is beyond belief and too many Americans remain silent.  But no side has been “pure.” Our illegal and lie filled invasion of Iraq in 2003 followed years of American and British bombing of Iraq following the Gulf War in 1991 (Desert Storm). Our sanctions of Iraq over that period staved to death 1.5 million Iraqi’s, mainly children (despite the Food for Oil program), and the U.S. military’s use of depleted uranium munitions in that war dramatically increased Iraqi cancer cases and birth defects in the years that followed. Fisk reports on these and US and UK efforts to keep it all quiet.

Some of Iraq’s health problems were also aggravated by Iraq’s use of chemical warfare agents such as mustard gas and sarin during the Iran-Iraq war of 1980-88. The United States, being on Iraq’s side at that time, ignored its use of these chemicals, which remain in the soil today.  American leadership, which is desired by much of the world, is undermined by such double standards. Our government lies to its own citizens about its illegal behavior as well. Edward Snowden is paying a very high price for exposing some of it. We owe him a lot.

American interference in other countries’ affairs (other than by being the beacon on the hill) has rarely served our national interest. While we have blindly assumed that we would be welcomed as liberators in Panama (1989-90), Iraq (1991, and 2003), Somalia (1993, 2007, and 2010), Haiti (1994), Bosnia (1994), Afghanistan (1998, and 2001), Serbia (1999), Libya (1986, and 2011) and Syria (2014)–(need I mention Vietnam?), we failed to understand that peoples of most every country hate invaders no mater who they are. Moreover, our ignorance and arrogance made us very inept occupiers.

In Ukraine and Israel our interference stops short of sending our solders (almost). But Russia’s invasion of Ukraine could have easily and sensibly been avoided if the U.S. had encouraged the negotiations Russia sought in December 2021 “Ukraine’s and  dead and  war”.  Following Russia’s invasion, we tragically threw cold water on the agreement almost reached between Ukraine and Russia in the March 2022 negotiations in Turkey. ‘Peace negotiations in the Russian invasion of Ukraine”  So onward to the last Ukrainian. The final outcome is very likely to be identical to the March 2022, Istanbul Communiqué but with 120,000 dead and 600,000 wounded Russians and 70,000 dead soldiers and 10,000 dead civilians and 140,000 wounded Ukrainians and 500 billions of dollars’ worth of property destruction. In other words, Russia and Ukraine paid a huge price (with our help) for nothing.

Fisk gives human faces to the real people who pay the price for our aggressions. This horrible cost in lives and property has contributed nothing to our national security. America has much to offer the world and has contributed much to the quality of life around the world. But it has done so with its example, trade, and diplomacy, not its army. The principles and institutions on which American was founded and has flourished have served us well when we have remained faithful to them.

President elect Trump has nominated Tulsi Gabbard to become his Director of National Intelligence. When she left the Democratic party two years ago and endorsed Trump for President this August she praised Trump for “having the courage to meet with adversaries, dictators, allies and partners alike in the pursuit of peace, seeing war as a last resort” and condemned the Biden administration for the U.S. “facing multiple wars on multiple fronts in regions around the world and closer to the brink of nuclear war than we ever have been before.”

“In 2022, she also faulted the Biden administration for failing to address Russian concerns as it invaded Ukraine.

“’This war and suffering could have easily been avoided if Biden Admin/NATO had simply acknowledged Russia’s legitimate security concerns regarding Ukraine’s becoming a member of NATO, which would mean US/NATO forces right on Russia’s border,’

Following a 2017 trip to visit Syrian leader Bashar al-Assad, Gabbard defended meeting with an American enemy by saying:

“I think we should be ready to meet with anyone if there’s a chance it can help bring about an end to this war, which is causing the Syrian people so much suffering,”  “The Hill–Tulsi Gabbard-Trump Nomination — 11/14/24”

 I hope that she still thinks this way.

Palestine

Starting in July 1995, I led IMF technical assistance teams to Israel and the West Bank and Gaza to help implement the provisions in the Oslo Accords to establish a monetary authority (Central Bank). These visits were at the invitation of the Israeli government and began and ended with briefing meetings with officials at the Bank of Israel in Jerusalem. I later led the IMF’s Financial Stability Assessment of Israel. The last of my eleven visits was in December 2013.

Following Israel’s occupation of the West Bank and Gaza Stripe (WBGS) in 1967, it allowed Palestinian skilled workers to fill labor needs in Israel. In the mid 1980s 40% of the Palestine workforces was employed in Israel. But prior to my first visit Israel closed that door and began importing workers from North Africa to fill the resulting shortage.

Looking back, in light of Israels on going attacks on Gaza, West Bank, Lebanon, Syria and Iran, (what a Financial Times article headlined as “Israel’s Spiraling Offensive” https://www.ft.com/content/cbe18019-752f-4770-be40-fe4b2dc5abd7?d )  I am surprised at what we close our eyes to officially and unofficially.

We knew that Jewish settlements in the West Bank (and earlier in Gaza) on land stolen from Palestinians were in violation of the Fourth Geneva Convention, which prohibits the transfer of an occupying power’s civilian population into occupied territory. But in our Financial Stability Assessment of Israel, we ignored the financial implications for Israeli bank loans to setters on the grounds that the Israeli government would bail them out for any loses incurred. Looking back, I don’t really know where this judgement came from, but we understood that we were to ignore the Settlements.

During one of my missions we saw a new Jewish settlement being born before our eyes. A few dozen Jewish families had parked their trailers on Palestinian land. When Palestinians protested the theft of their land, the Settlers call on the Israeli Army for protection. Subsequently they would build permanent houses on this property.

On most of my missions to the WBGS we stayed in the famous American Colony Hotel in East Jerusalem (Laurence of Arabia had stayed there as had Peter O’Toole while later filming the movie). From there we had to drive each day to Ramallah, the headquarters of the Palestine Authority and future home of the Palestine Monetary Authority we were helping create.  Two features of our daily drive confronted us with how Israel was treating the Palestinians in the territories it occupied.

Israel was building separate Jewish only highways through the West Bank and to Gaza. Most Palestinians working in Ramallah commuted each day on their own roads.  There were separate entry check points for Palestinians and for Jews (and the international community such as us). We sailed through the Jewish entry, where our UN passports were quickly reviewed, while it took an hour or two for most Palestinians lined up at their check point to enter every day. I was amazed that Palestinian anger at such treatment was so subdued and seldom expressed.

Our several trips to Gaza and my meeting with Yasser Arafat and near abandonment in the desert are a fascinating story in their own right that you can read in my book:  “Palestine-Oslo Accords – My Travels to Jerusalem” Hearing the explosion of a terrorist attack on a Jerusalem bus while eating breakfast in the American Colony Hotel and subsequently fleeing to Jordan across the tiny Allenby Bridge over the Jordan River are also discussed in the same book.

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

 

A Letter to the Republican Party

As a no doubt futile outlet for my frustration with the Republican Party, I have been enclosing the following letter in the return envelops they keep sending me with the request for financial support.

Dear Members of the Republican National Committee,

The Trump administration has had some positive achievements domestically (tax reform, regulatory reforms and court appointments). However, its continued increase in government spending (annual deficits of one trillion or more when the economy is at a cyclical peak) is wrong and unthinkable for Republicans. President Trump’s weakening of America’s support for and role in international organizations, abandonment of the Iran Deal and anti-nuclear proliferation treatises, and war on trade, are bad for America and the world we live in.  President Trump’s divisive language is unbecoming of the leader of a great nation, a nation of immigrants. The Republican Party has failed to stand up for these principles and to criticize the President for these offenses.

Even more concerning is your acquiescence to President Trump’s lying, immorality, and corruption. His clearly documented attempted bribery of the President of Ukraine for personal gain is damaging American security interests. His obstruction of Congress’s execution of its constitutional duties is very concerning. These and other acts cross the sadly low bar of acceptable behavior.

For the sake of our deeply divided country, the Senate owes us all an impeachment trial that any honest person will consider fair. President Trump must have every opportunity to explain and defend his behavior and those challenging it must have every opportunity to make their case. President Trump obstructed the House’s efforts to obtain firsthand evidence of the President’s attempt to use his executive authority for personal gain. It is essential that the Senate permit the testimony of those blocked in the House by the President (Bolton, Mulvaney, Mike Duffey).

With your silence you have abandoned me and my continued commitment to limited and sound government.  I cannot continue to support the party until you stand up and again defend our principles.

Sincerely,

Warren Coats

Buy American, Hire American

President Trump continues to repeat his populist slogan “Buy American, hire American,” reflecting the way he and Steve Bannon appear to understand what is needed to make America Great Again. Thus, with apologies, I endeavor again to explain why this catchphrase is fundamentally wrong and would actually make America weak. “Trade and Globalization” “Save trade”

If buying an American made product or service (100% American, 90%, 51%?) or hiring an American worker is my best option, I would not need to be compelled to do so by the government. If it is not my best option, being compelled to do so forces me to accept an inferior option. It would make me worse off. The Trump family understands this as their hotels import and purchase foreign made products (from China, Philippines and India, to name a few) and Ivanka sells clothing made in China.

It is obvious that being forced to buy and hire American would make many of us worse off (not to mention diminish our freedom of choice), but are there compensating benefits or gains for others in the American economy that would justify making us worse off? “Teeing up Trump tariffs”

Buy American

If I must buy an American made Corvette rather than a German Porsche, does the American economy benefit? To simplify, leave aside the fact that a substantial part of the components making up a Corvette are imported from various countries. The fact that I had to be forced to buy the American car rather than the German one, i.e. that it was an inferior deal, means that the American workers who make it were reallocated from the production of export products at which the United States had a comparative advantage. Trading less as a result of buying American mean allocating American workers to producing things (Corvette) that they are not as productive at making. They would be moved from producing Boeing aircraft to sell to Germany (to pay for our imports of Porsches) to producing Corvettes. So in addition to my being made worse off as a result of having to buy American, the American economy as a whole would be worse off as a result of a less productive work force and thus lower overall income (lower GDP). This is Econ 101.

In addition, as noted by the Financial Times, “Attempts to restrict procurement to domestic companies tend to backfire. They induce retaliation from trading partners, harming US businesses trying to sell abroad. They raise input costs, ensuring less infrastructure is built and fewer construction workers are hired for each dollar of public spending.” “The Pitfalls of having to buy and hire American”

Hire American

The meaning and impact of a requirement to hire Americans is a bit more complex. If the terms to American companies of employing the workers needed, whether they are citizens, permanent residents, or temporary or permanent immigrants from abroad, are not competitive with importing the product or service, American companies will in effect hire foreigners abroad (i.e. they will import the goods and services produced abroad). Thus it is a bit unclear what “hire American” means. “The long, rough ride ahead for ‘Made in America'”

Presumably, “hire American” refers to our immigration policies. Indeed our immigration laws need fixing. This includes providing a solution to the status of the 10 or 11 million people living here illegally, and adjusting immigration quotas to better match the needs of American firms for workers without undercutting the status of existing American workers. “Illegal-aliens”

The decline in American manufacturing jobs is largely the result of automation, not foreign trade. Manufacturing employment has fallen almost everywhere in the world as manufacturing output has increased. Automation enables the work force to produce more and thus enjoy a higher living standard. It need not cause unemployment.

The wonderful film “Hidden Figures” tells the true story of the large number of human “computers” employed by NASA (the National Air and Space Administration) who cranked out the numbers needed to put Americans in space and bring them home again. The stars of the film are three black women whose mathematical skills were indispensible to NASA. At the end of the day and in time for the first American to orbit the earth in 1961, new IBM’s mainframe computers proved essential to crunch the critical data fast enough. Overnight the human computers were no longer needed. But rather than becoming unemployed, most of them retrained to program and run the IBM computers with an unbelievable boost in productivity. While other things also affected NASA’s workload, the employment data are interesting. In 1960 NASA had 13,500 in house employees, which increased to 41,100 by 1965 and gradually drifted down to 18,618 in 2010. The numbers for contract workers on the same dates were 33,200 in 1960, 369,900 in 1965 and zero in 2010.

The President’s appeal to Buy American and Hire American, in addition to restricting our freedom of choice, flies in the face of what made America Great in the first place. As proclaimed by the Financial Times: “The principle should remain to keep the US economy as open as possible to the inflow of good products and good workers from abroad. Slamming down the drawbridge is only likely to impoverish the residents of the citadel.”