News From Greenwich Village

Undoubtedly, you have been hoping for some news from the crazy left-wing commune of Greenwich Village in New York City.  Fortunately, I have collected a few good items.

Unless you live here, you have very likely never heard of our state assemblymember, Deborah Glick.  Although she's been in the Assembly for some 25 years, she has mainly been known as a lackey of recently-convicted Speaker Sheldon Silver.  Certainly, nobody can name any bill in the 25 years on which she has voted contrary to the official leadership position.  And you would think that her seat is about the safest in the universe.  But recently a guy named Arthur Schwartz has announced that he will challenge her in the Democratic primary in September.  (Schwartz is known for serving a term as General Counsel of ACORN shortly before its demise, and currently for acting as counsel to the Bernie Sanders campaign in New York.)  Suddenly, Glick sees a need to show her face in the community, and thus a few days ago around came one of those taxpayer-funded newsletters touting her accomplishments.

There's a lot of humorous stuff here to give you a good laugh, but let me just pick my favorite:  Ms. Glick has been made a member of the legislature's "Anti-Poverty Working Group":

Almost 1.4 million people in New York are living in extreme poverty.  This includes a disproportionally high numbers [sic] of children, women, elderly and minorities.  The newly created work group will undertake an evaluation of the drastic increase of New Yorkers living in poverty and identify solutions to combat it.  It is our belief that a comprehensive approach is the only way to assist people to move out of poverty.  I look forward to formally working with my colleagues toward eradicating poverty throughout New York.    

Somehow Ms. Glick omits it, but let's start with this: a good rough estimate of what is currently spent annually in New York State by governments at all levels on anti-poverty efforts is $100 billion.  Now, you will never find an exact comprehensive number for that anywhere.  But here is a number for annual state and local "welfare" spending of $21.3 billion; here is a number for Medicaid of $54 billion; if we only get our pro rata share of the national pie, our annual food stamp and other federal nutrition spending will be about $8 billion; housing could easily be another $5 - 10 billion; and there's plenty more.  And yet, according to Ms. Glick, there has been a "drastic increase of New Yorkers living in poverty," and there are "almost 1.4 million people in New York . . . living in extreme poverty."  

Hey, Deborah!  You've been in the legislature for 25 years!  How can it possibly be that you guys spend $100 billion a year (that would be $2.5 trillion over 25 years) on anti-poverty efforts created and designed by you, only to see poverty "drastically increas[ing]"?  

According to the Census Bureau here, the official "poverty rate" for New York State is 15.9%.  Multiply that by a population just under 20 million, and you get about 3.2 million people in the state "in poverty."  At $100 billion of annual anti-poverty spending, that's over $30,000 per year per person in poverty, over $120,000 for a family of four.  The official "federal poverty level" for a family of four is $24,300.  We spend five times that amount on our "anti-poverty" efforts  for a comparable family in "poverty," only to see poverty "drastically increasing."  But then Glick, of course, represents not an average New York district, but rather one of the very wealthiest districts in the state.  And you know what that means:  it means that our "poverty" rate is much higher than the state average (the New York County (Manhattan) poverty rate is several points above the state average at 18.3%)(what???!!!) and we also spend far more than the state average on "anti-poverty" efforts (hey, a spot in a Housing Authority project in Chelsea is worth $50,000 to $60,000 per year in rent subsidies, just for starters), only to see none of the people ever leave poverty.

So, according to Glick, what we need now is a "comprehensive approach," which, if only we try it, will move us "toward eradicating poverty."  You mean it's that easy, and yet no one ever thought of it for the whole last 25 years you've been in the legislature wasting the $2.5 trillion?  Well, of course, we know that the answer to the question is that Glick is part of the disgusting state bureaucratic blob whose principal mission is to make absolutely sure that poverty will never go down so that funding can be maintained and enhanced and bureaucratic sinecures protected.  Is there any doubt that the recommendations of Glick's new anti-poverty "working group" will be more money for more anti-poverty efforts, none of which will ever remove anyone from poverty?

Something you may have seen yesterday was the open letter from 40 self-described New York "millionaires," asking and begging to have their taxes (and of course, those of all the other millionaires) increased in order to raise more money to fix the problem of poverty in our state.  Here is a copy of the letter from the Guardian, along with the names of all the signers.  The problem as they describe it:

It is a shameful fact that child poverty in New York State is at a record level, exceeding 50% in some of our urban centers. New York State has a record number of homeless families – more than 80,000 people – struggling to survive across the state. And far too many adults in our state do not have the work skills needed for the 21st century economy.  Now is the time to invest in the long-term economic viability of New York. We need to invest in pathways out of poverty and up the economic ladder for all of our fellow citizens, including strong public education from pre-K to college. . . .  

The proposal is for an increase in marginal tax rates on income above $665,000 (the cutoff for the top 1%) of up to an additional 3.15% on the highest incomes, which the authors claim will raise some $2.2 billion per year.  The authors see this as their "fair share" in a spirit of "shared sacrifice."

Really, how could anybody be so easy to dupe as these dopes?  Their incremental $2.2 billion is barely 2% of current annual "anti-poverty" spending in New York.  (And my calculation of "anti-poverty" spending didn't include public education.  Add that in, and the $2.2 billion is more like 1.5%.)  Can't a single one of them have the critical thinking capacity to ask how it could be that the $100 billion per year that we are already spending still leaves us with that 50% child poverty rate in some areas, yet supposedly another $2.2 billion will fix something?  Believe me, it won't take our "anti-poverty" bureaucrats until breakfast to figure out how to make an additional 2% in their budgets disappear without getting a single person out of poverty.  Does anybody really believe that they can make $100 billion a year disappear, but if it's $102 billion suddenly they will be motivated to cure poverty and wind down their no-longer-needed agencies?

And of course, if these 40 people, or some of them, are seriously rich (and clearly some of them are), then they don't make their money through taxable income.  For example, one of them is Steven C. Rockefeller, a great-grandson of John D.  Is there any chance that a meaningful part of the increase of his net worth in a given year comes through taxable income, versus (non-taxable) increase in the value of pre-existing assets?  Go ahead and increase the marginal tax rate to 100%.  You won't touch him!  He'll only notice to the extent that the new rates keep a few of the tacky nouveaux riches out of his clubs.  Meanwhile, he'll get a good laugh that the rubes fell for his sleight-of-hand.     

In other local news, our community newspaper called The Villager carries an article in its current edition reporting on a presentation by a guy named Jeffrey Trask focusing on the history of our local subsidized "artists" housing project known as Westbeth.  Westbeth is a collection of big formerly industrial buildings on the Greenwich Village waterfront (it was the home of Bell Labs, until they moved out in the 60s).  In the late 60s the buildings were converted to residences for artists.  The idea was to give a start to struggling young artists, who would then move on and make room for others:

[T]he project was intended as an arts incubator; artists were supposed to live and work there for five years, then move on, making room for a new group of artists.   

Really, the naivety is touching.  With deeply subsidized rents, the project struggled financially from day one, and of course, literally no one ever moved out.  Why in heavens name would anyone move out of a deeply subsidized apartment in the best neighborhood in the City?  From a different article in The Villager in 2009:

Almost 38 years later, Westbeth is still home to original tenants like Maile and Duberstein, as well as other longtime residents. Neil reported that about 60 percent of the tenants are over age 60 and half of those are older than 70; therefore, out of about 750 residential occupants, 30 percent are more than 70 years old.    

Add seven more years to that, and you can see that virtually everyone in this project collected on a lifetime rent subsidy.  The 2009 article gives the turnover rate as 3 to 4 apartments per year -- less than 1%.  Basically, the original tenants are all staying until they die.  Trask's take:

Although treasured by its residents and widely admired as a “noble experiment,” Westbeth never fulfilled its original promise, Trask said. By the time the project was complete, rent for loft space in the city had risen beyond the means of most artists, so residents did not move out of Westbeth after five years as originally planned. Trask concluded that Westbeth was a social success but did not succeed financially.    

Yes, the socialist model of subsidized public housing that is a financial disaster and transfers huge public resources to middle class people who don't need or deserve the subsidy, is nevertheless a "noble experiment," to be "treasured."  Who could have known?  Who could have suspected that people given a multi-tens-of-thousands of dollars per year rent subsidy available in only the one location will never move out?  (How big is the rent subsidy?  A new development along the waterfront about a mile south -- one of the few that is a rental rather than a condo -- has rents averaging about $10,000 per month.  This article gives the Westbeth average rent as $750 per month.  That would make the average rent subsidy to the Westbeth tenants over $100,000 per year.  And these people never had any claim to be poor!  How can this possibly be a good idea?)

Don't worry: no politician in New York will ever suggest that the Westbeth tenants should have to give up their subsidy, or any part of it.  After all, this is a "noble experiment" to be "treasured."  Like, say, the perfect fairness and justice that have been achieved in Cuba, or North Korea.

UPDATE, March 27: 

In cheerier news, the spring flowers have arrived in the tree gardens along Bleecker Street.

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Here's a closer view of one of the gardens.

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If you haven't been by recently to see our beautiful corner of the City, there's no time like the Spring!

Just Think How Neat And Orderly Everything Will Be Once Government Functionaries Can Monitor Everything

Really, it's disgusting how people keep messing up, when left to their own devices and without minute-by-minute guidance and monitoring by perfect and all-knowing government functionaries.  But don't worry, the technology for government to monitor everybody and everything all the time marches forward at an ever-accelerating pace.  Can it be long before the curse of human imperfection has been eliminated?

For example, consider cash.  Can you believe that the government to this day still allows people to conduct economic transactions using this untraceable and unreportable medium?  And the next thing you know, people use it buy and sell illegal substances like drugs, to gamble, to pay employees "off the books," to avoid taxes, and God knows what!  Get rid of it, and immediately everything will be neat, orderly, and in accordance with government-prescribed perfection.  Or at least that is the universal view of the government functionary.  Serious proposals are circulating right now to get rid of high denomination bills (like the $100 in the U.S.) as a step toward perfecting society.  And after the $100, why not just get rid of cash entirely?  Megan McArdle covers this subject in a column at Bloomberg View (that also ran in the New York Post):

The Bank of Korea is planning for a cashless society by 2020. Swedes are making the shift. I am intrigued but also troubled.  There’s a lot to like about the idea of a cashless society, starting with its effect on crime. The payoff to mugging people or snatching their bags has already declined dramatically, simply because fewer and fewer people are carrying cash around. I myself almost never have any of the stuff on hand. . . .  A cashless society would also see a decline in the next level of robberies: stickups of retail outlets. . . .   One step beyond that, there’s the effect on criminal enterprises, for whom cash is key. Making it impossible to transact business while keeping large amounts of money away from the watchful eye of the government will make it much harder to run an illegal operation.

What could possibly go wrong?  Well, for starters, could the perfect all-knowing government ever make a "mistake"?  McArdle:

When I was just starting out as a journalist, the State of New York swooped down and seized all the money out of one of my bank accounts. It turned out -- much later, after a series of telephone calls -- that they had lost my tax return for the year that I had resided in both Illinois and New York, discovered income on my federal tax return that had not appeared on my New York State tax return, sent some letters to that effect to an old address I hadn’t lived at for some time, and neatly lifted all the money out of my bank. . . .  Unmonitored resources like cash create opportunities for criminals. But they also create a sort of cushion between ordinary people and a government with extraordinary powers. Removing that cushion leaves people who aren’t criminals vulnerable to intrusion into every remote corner of their lives.

I would say that that kind of "mistake" is the least of our worries about the government.  What if the government itself is a pervasive criminal enterprise?

Anyway, don't get the idea that monetary transactions are the only thing that the government is planning to monitor.  On Tuesday (the Ides of March) the New York Times reported on a new New York State program, taking effect March 27, under which all prescriptions for pharmaceuticals are now required to go through a state-monitored computer system.  No more paper allowed!

Starting on March 27, the way prescriptions are written in New York State will change. Gone will be doctors’ prescription pads and famously bad handwriting. In their place: pointing and clicking, as prescriptions are created electronically and zapped straight to pharmacies in all but the most exceptional circumstances.  New York is the first state to require that all prescriptions be created electronically and to back up that mandate with penalties, including fines and imprisonment, for physicians who fail to comply.

The stated reason for this is to try to crack down on abuse of prescription opioid painkillers, which have caused increasing numbers of deaths in recent years.  But if that's the reason, why don't they just monitor those prescriptions, and stay away from the millions of prescriptions for medications against things ranging from diabetes to high blood pressure to cholesterol? And the answer is, they take the opportunity to monitor everybody for everything because they can.  Who's going to stop them?  And anyway, the only people with access to the information are going to be the perfect, all-knowing, a-political, expert state functionaries.  So what's to worry about?  (For now, there appears to be an exception to New York's new law for prescriptions that are to be filled out of state.  I guess I'll take advantage of that one.)

In other news, this time from Denver, Colorado, it seems that after several complaints were received, an independent monitor conducted a review of use of the supposedly confidential National Crime Information Center and Colorado Crime Information Center databases by the Denver Police Department, and promptly uncovered several dozens of instances of improper use.  David Kravets at Ars Technica has the story here.  Example: a policeman, on behalf of a friend who suspected his wife of having an affair, provided information to enable the friend to find and stalk the wife's suspected lover.  Or how about this:

[A] female hospital employee spoke with a DPD officer who was at the hospital to investigate a reported sexual assault. The female employee was not involved in the investigation, but the officer made ‘‘small talk’’ with her after his interview of the sexual assault victim. At the end of her shift, the female employee returned home and found a voicemail message from the officer on her personal phone. She had not given the officer her phone number, and was upset that he had obtained it. . . .  During an investigation into the incident, records revealed that the officer had, in fact, used the NCIC/CCIC database (and other DPD databases) to obtain her phone number. . . .

If you're wondering why you don't read about this kind of thing very often, Kravets points out that this review was only conducted in response to a series of specific complaints, and that there is no ongoing routine monitoring of police use of the databases.  Oh, and no police officer who committed misconduct was fired or received any cut in pay or any other meaningful punishment; the worst was a "reprimand."  Hey, the cops are the good guys!  Why should we worry about them doing anything wrong?  I mean, it's not like some government bureaucracy (like say, the IRS) might ever use this accumulating government information to disadvantage political opponents of those in power.  Right?

UPDATE, March 19:  Jeb Kinnison has a post that reminds us of what has to be the largest government corruption of all time, namely the fake prosecutions of banks for alleged wrongdoing in connection with the recent financial crisis -- raising in excess of $100 billion outside of the congressional appropriation process -- and the use of much of those proceeds to give to organizations supportive of the government's side of the political divide.  La Raza, National Urban League, National Community Reinvestment Coalition, Neighbor Works America, etc., etc., etc.  He doesn't have a precise figure for how much of the $100+ biillion went to such organizations, but even if it's a relatively small fraction, it could easily equal or exceed all actual bribery that has occurred since our Republic was founded.  All administered by the Department of "Justice," of course -- the very people who get to decide who gets prosecuted for what in this country.  Don't worry, they won't be.  

Progressivism: Riches For The Top Guys, Disaster For Those At The Bottom

I love listening to people of the Left -- people like Bernie Sanders, Hillary Clinton, Bill de Blasio, and their international counterparts like Chavez and Maduro of Venezuela, Rousseff and da Silva of Brazil, the Castros of Cuba, or many others -- as they talk about the terrible income inequality under capitalism and the perfect justice and fairness soon to be achieved through government-enforced redistribution programs (run by them, of course).  Many of these people march under the banner of "socialism," while others use different labels ranging from Communism for the Castros, to Chavismo for the Venezuelans, to the Democratic Party for Clinton.  I'll use the catch-all term of "progressivism" for the overall concept of government-enforced redistribution as the appropriate route to justice and fairness among people. 

A few days ago, in a post titled "Progressive Policies Increase Income Inequality," I noted what is to me the obvious fact that implementation of progressive policies, on whatever scale, increases rather than decreases income inequality as it is measured by the commonly-used statistics.  Today, I thought I'd take a closer look at how those policies affect the people at the very top and at the very bottom of the societies in question.

First, let's consider a few of the international examples.  Venezuela is the country where Hugo Chavez and his successor Nicolas Maduro have used a combination of attacks on the rich and redistributionist programs to keep themselves in power for going on two decades.  Many companies have been nationalized; products like gasoline, food, and common household products are steeply subsidized; and for several years the government has pursued a blowout program of construction of subsidized public housing.  Then, late last summer, it emerged that Chavez's daughter Maria had some $4.2 billion in bank accounts in the United States and Andorra.  How did she happen to come into that kind of money?  In a considerable amount of looking, I haven't been able to find any clue.  Nor have I seen any suggestion of any kind of government investigation of possible wrongdoing.  Hey, maybe she just found it in the back yard!  And anyway, Maria hadn't amassed anywhere near the fortune of Chavez's former treasury secretary Alejandro Andrade:

Alejandro Andrade, who served as Venezuela’s treasury minister from 2007 to 2010 and was reportedly a close associate of Chavez, was discovered to have $11.2billion in his name sitting in HSBC accounts in Switzerland. . . .  

But at least the lives of those at the bottom have been improved, right?  It certainly doesn't appear that way from any evidence that I can find.  Of course, all of the deeply subsidized products have disappeared from store shelves.  GDP is shrinking at a rapid rate.  The Economist calls the situation a "mounting economic crisis."  Oh, and did I mention that the government has said that it will turn off the electricity for all of next week and shut the whole country down.  They blame a drought, and a resulting lack of water for the hydroelectric system.  But don't they have the world's largest oil reserves?  Hey, this is socialism!  Anyway, do you think that despite the crisis Mr. Maduro might somehow have operating electricity in his palace next week?

Cuba?  Don't know if you caught the 2014 memoir by former Castro security guard Juan Reinaldo Sanchez titled "The Hidden Life of Fidel Castro."  In case you missed it, here's a summary from Britain's Daily Mail.  Palaces, yachts, servants by the dozens.  Lots of details in the article, but the long headline says all you need to know:

Castro the commie hypocrite who lives like a billionaire: He's posed as a man of the people. But a new book reveals Cuba's leader has led a life of pampered hedonism and a fortune as big as the Queen's

And the ordinary people?  Of course the Cubans don't publish any usable statistics.  But maybe you can get an idea of how they live from the ration system.  From the Guardian (no enemies of the Castros) in April 2015:

Every Cuban family registers with a local supply store, where they can use a libreta or ration book. This typically provides about 10kg (22lb) of rice, 6kg of white sugar, 2kg of brown sugar, 250 millilitres (1 cup) of cooking oil, five eggs and a packet of coffee per person per month, along with 2kg of meat (usually chicken) every 10 days, a bun every day and a bag of salt every three months. Milk is provided for pregnant women and children under seven years of age.  The basic libreta products are guaranteed, but they are not enough – so people often have to travel to several places on several different days to make up the shortfall.

Well, if you like milk, I certainly hope you are pregnant!

In Brazil the leftist Workers Party came to power in 2002, and has been much more moderate in its redistributionist ambitions than its counterparts in Venezuela and Cuba.  But somehow, once taking property from some and passing it around to others is legitimized, it's just not possible for the humans at the top of the redistributionist game to resist taking a big cut for themselves.  And thus it seems that for many years the top pols in Brazil have been conspiring with the top execs at the state-owned oil company Petrobras to overpay for major contracts and have the excess passed back as kickbacks and divided up among the favored.  From Time magazine yesterday:

Prosecutors believe businesses paid almost $3 billion in bribes to state officials for rigged, overpriced construction contracts; those officials then funneled much of the cash to political parties, including the PT, to fund election campaigns.

Impeachment proceedings have recently begun against current President Dilma Rousseff.  Some million or more people took part in protest demonstrations on Tuesday.  And just in the past couple of weeks the investigation has turned to former President and Rousseff mentor "Lula" da Silva.  Da Silva claims he didn't take any "cash bribes"; but then there's that three-story beach house, and the millions to finance the political campaigns.

Fortunately, here in the U.S. we are not nearly so coarse and crude as those Latin American caudillos.  Here we have the Yale Law School to teach budding redistributionist pols how to cash in on their government positions and get personally rich in a much more sophisticated and high-minded way.  And don't forget, tax deductible!  I'm referring, of course, to the Clinton Foundation.  CNN here calculates Bill and Hill's "speaking fees" since 2001 at $153 million.  Now, on how much of that do you think they paid ordinary income taxes?  CNN doesn't tell us, but then why have a Clinton Foundation if it's not going to take a good chunk of the fees as tax deductible "contributions" and then fund the lifestyle of private jets and top hotels as part of the "charitable works"?

Bill de Blasio?  Remember that he was Hillary's campaign manager when she first ran for the Senate in 2000 -- he learned at the feet of the mistress!  He literally hadn't been mayor for a week before he set up his own not-for-profit called Campaign for One New York and started raising slush fund money from nice guys like the teachers unions in multi-hundred-thousand dollar chunks.  $5 million later, today's news says that he is shutting down the "charity."  He doesn't want the "ethical distractions" in connection with his upcoming campaign for re-election.  Really!  No word though on whether he's giving any of the money back.

Well, at least our U.S. progressives take care of those at the bottom.  Actually, it depends on what you mean by "take care."  They can "take care" to double or triple your price of electricity and gasoline through the war on fossil fuels (in which all of Clinton, Sanders, and de Blasio are participants).  Or they can "take care" to "put a lot of coal miners and coal companies out of business," as Hillary put it a couple of days ago.   Or they can "take care" to make the very least-skilled workers unemployable through a big hike in the minimum wage.

Well, you say, at least Bernie Sanders has not used his government offices to personally enrich himself.  My answer is that he hasn't held executive office yet.  I don't believe anyone is immune to the temptation to redistribute to himself once he gets control of the redistribution game.  Maybe Bernie would be the exception.  Fortunately, we'll probably never get a chance to find out.

No Subject Generates More Ignorance Than The Trade Deficit

A few months ago I had a post titled "No Subject Generates More Ignorance Than Poverty."  And I must say I had a good point, since almost everybody gets duped by the intentionally deceptive statistics on poverty put out by the government.  Look around at what people who ought to know what they are talking about say about poverty (you can start by reading that linked post), and you will find an endless series of self-important know-it-alls making fools of themselves.

But I'm sad to report that I have found another subject that makes self-important know-it-alls look even stupider, and that is the so-called "trade deficit."  I started getting into this subject back in September in a post titled "Donald Trump And The Trade Deficit Fallacy", after first watching a clip of Donald Trump talking about it.  In the clip (found at the link), Trump equated a trade deficit to "losing" to the counterparty country that runs the corresponding surplus.  Here is a quote:

What is the United States trade deficit with Mexico, Japan and China?  Let's start with China.  Almost $400 billion per year.  If you have a company when you're losing $400 billion you've got to do something very fast.  We don't.  We've been losing hundreds of billions of dollars per year, frankly for decades.  It's not going to happen any more.   

Somehow I naively thought that if Trump kept saying things this uninformed he would quickly be laughed out of the race, or alternatively maybe he would take ten minutes to learn about the subject and stop talking nonsense.  But then there he was last night, celebrating after a new string of primary victories, and basically saying the exact same thing over and over again.  It's not just that he has fallen for the "trade deficit" fallacy; he has decided to make it a, if not the, central theme of his campaign.  We're "losing" to China and Mexico, and if I become President I'm going to turn that around.

Well, fortunately, I was watching this on the Fox Business channel, where surely they would have some savvy business types to call Trump on this and point out why what he was saying doesn't make any sense.  The hosts were Lou Dobbs, Charles Gasparino and Kennedy.  And, after listening to Trump's speech, Dobbs promptly launched into a monologue about how absolutely right Trump was!  Our trade deficit is "enormous," it's been going on for decades, these kinds of "imbalances" just can't last, we're racking up huge "debts" to other countries that can't be repaid, it's "unsustainable," etc., etc., etc.  Gasparino and Kennedy?  Who are they to disagree with the great Lou Dobbs?  Basically, they didn't say anything. 

I can't even figure out where the idea that a trade deficit is so terrible comes from.  Essentially, a trade deficit is the result of summing up millions of private transactions, reflecting the preferences of millions of private actors, and it's unclear to me why anyone should even care that after a year of all of that the Chinese or Mexicans ended up holding more dollars or dollar-denominated bonds and we ended up with more consumption goods.  The right way to look at that is that we provide some combination of a reserve currency that they think they can trust (at least more than the other terrible currencies) and a perceived relatively-safe place to invest, and in return they are willing to pay for that by allowing us to consume more than we produce of current goods and services.

Particularly wrong-headed is Dobbs's contention that a trade deficit represents racking up unsustainable debts.  Consider the (large) piece of the trade deficit that is simply accounted for by foreigners accumulating dollars.  Yes, in a sense, that represents a "debt" of the United States.  But it's a debt that is not a claim against the taxpayers, and can only be collected on by spending the dollars to buy something in the United States.  Suppose the foreigners try to "collect" on the debt.  They spend the dollars in the U.S.  If they actually spend more dollars in a year than they accumulate by selling stuff to us, then they have collected on part of the debt.  How does that appear in the books?  As a trade surplus.  By the logic of Trump, Dobbs, et al., isn't that a good thing?  So then, why is this "debt" a problem, and why is it supposedly "unsustainable"?

Another part of the trade deficit gets invested in the U.S. by buying U.S. corporate bonds and other securities.  Again, can anyone explain why that is a problem, particularly a problem that the U.S. government needs to worry about?  This is not debt that the taxpayers are on the hook for.  Apple, for example, is a big corporate borrower.  It is very profitable, and has more than sufficient profits to sustain its debts.  If it wants to, it can maintain and even increase its level of debt indefinitely.  Why should it be a matter of public concern whether this debt ever gets repaid?  And if the profits go away and the debt can't be sustained, then the (foreign) lenders will lose some or all of their investment.  Again, who cares?

OK, some of the trade deficit money gets invested into U.S. government bonds.  These bonds are a claim on the taxpayers, and they are a problem.  But they are a problem because the U.S. government is overspending and putting too much burden on future taxpayers.  That burden has nothing to do with whether there is a trade deficit, and would be just as much a problem if we had nothing but trade surpluses and all the bonds had to be sold domestically.   

Anyway, for today's final entertainment, I point you to the op-ed in today's Wall Street Journal by Anne Stevenson-Yang and Kevin Dougherty titled "China's Looming Currency Crisis."   If you had been listening to Trump and Dobbs you could be forgiven for having thought that China was "winning" and it was the U.S. that was in crisis because of the huge trade deficit.   But then what exactly is this "crisis" for China, as described by Stevenson-Yang and Dougherty?  You guessed it:  It's that the darned Chinese, instead of using their savings (accumulated in dollars via the U.S. trade deficit) to buy yuan (and thence to buy goods or make investments in China), are either holding the dollars or making investments in the U.S. and Europe.  

[I]n China getting money out of the country is now the major preoccupation of both families and corporations. Risk-averse individuals are trading out of the wealth-management products they used to buy for 10% yields and moving their money to safety in the U.S., Australia, Canada and Europe.   

To put it another way, their supposed "crisis" is no more than the other side of the accounting entry of our trade deficit.  And Stevenson-Yang and Dougherty certainly discuss this as if it is a crisis for China.  Hey, the yuan might depreciate!  Stuff might cost more in China!  Well, I guess then we both have a crisis.  If so, the only solution would be to make the trade accounts of every country with every other country balance to exactly zero every year.  Good luck with that!  Maybe we can do it by hiring another few million bureaucrats for the U.N.  

For myself, I agree that China has maybe not a crisis, but a problem.  The problem is loss of faith in competent stewardship of the economy by the government, leading to capital outflow and likely a recession, which may be a long one.  The people react to the climate of fear at home by accumulating a more trusted currency (dollars) and putting their investments in the U.S. and other Western countries.  On our books, this shows up as a "trade deficit."  How could anyone not regard this as advantage U.S.?

Trump Voters And The Magical Belief In Government Action

After violent protests forced the cancelation of a Trump rally in Chicago on Friday night, I listened for about half an hour to Trump being interviewed on the subject by Sean Hannity.  Much of the discussion was about the illiberality of the "liberal" left, but some considerable percentage of the time was also devoted, after a fashion, to issues of economic policy.  I say "after a fashion" because, as usual with Trump, there were no specifics.  Instead, given the opportunity, with all the time in the world, to lay out anything he wanted about economic policy, what Trump did was repeat, over and over, the same line:  "We're going to bring the jobs home."  By my count, he uttered that line at least half a dozen times in the half hour, and that was the beginning and the end of what he had to say about economic policy.

Well, what does that even mean?  What is the thing that supposedly Trump is going to do that will "bring the jobs home"?  Certainly, he did not mention anything in this interview.  In previous interviews, I have heard him go as far as to say that we are "losing" in international trade to countries including China and Mexico, and that he can fix that by doing better "deals" than our current incumbents.  But the better "deal" consists of what, exactly?  

Unfortunately, I think that many or most Trump voters actually believe that we are somehow "losing" in the arena of international trade, and that there is something a President can do to change that.  On a similar note, the Obama voters believed that their man could "stop the rise of the oceans" and "heal the planet."  Is there really much difference?

How would you measure whether we are "losing" to another country in international trade?  Me, I would start with per capita GDP.  That statistic would basically tell you which country's workers have the higher-value jobs, and by how much.  So how does the U.S. stack up against China and Mexico in per capita GDP?  Here is a chart compiled by Wikipedia that includes per capita GDP numbers for all the countries of the world from three sources -- the IMF, the World Bank, and the UN.  All three are pretty close for these purposes, so I'll use the IMF numbers (which come from 2015; the others are for 2014).  And the answer is:  US per capita GDP for 2015 is $55,904; Mexico is $9,592; and China is $8,280.  Whoa!  That's saying that people in the U.S., on average, are close to six times as productive as Mexicans, and almost seven times as productive as Chinese.  I would submit that any rational person would conclude that we are killing them in the international economic competition.  Indeed, it's not remotely close.  (And by the way, did you know that even after the tremendous economic growth in China in the last two decades, Mexico is still the wealthier country by a considerable margin?  It pays to look at the statistics.)

Are these jobs that are one-sixth or one-seventh as productive as our jobs the ones that Trump plans to "bring home"?  Another way of looking at that is that Mexican and Chinese jobs are not productive enough to support a wage as high as the U.S. minimum wage for any but a tiny percentage of their workers.  How could it possibly be a good thing to bring those jobs here?

When he has been asked to specify the jobs that he thinks should be done in the U.S., Trump has sometimes referred to automobile assembly line jobs that have gone to Mexico, or computer assembly that is now done largely in China.  These of course are about the lowest-value jobs in the automobile and technology sectors today.  Think about what goes into a car or a computer today, and you immediately realize that there are zillions of much higher value jobs that the rational country would greatly prefer to have.  Which is a better job, designing the new sensors that will keep cars from crashing into each other, or snapping the same two pieces together on an assembly line two hundred times a day every day of the year?  Creating a new computer chip to maximize gas mileage, or screwing on door handles all day long?  I say, good luck to the Mexicans and Chinese with those rote assembly jobs.  Within our lifetimes, they will mostly be done by robots. 

I have a fundamentally different diagnosis from Trump as to the basic economic problem of the U.S.  The problem is not that good jobs are moving abroad as we "lose" to other countries.  The problem is that our own job-creation machine is not working at the pace that it should.  And that, in turn, has little to nothing to do with international trade policy, and everything to do with what I have called the "war against the economy" being waged by our government domestically.  In that article in August 2015 I listed a few of the intentional efforts of our government to suppress economic activity:

[M]assive wasteful spending and debt accumulation; artificially suppressing cheap and reliable energy in favor of subsidizing expensive and unreliable energy; overregulation and endless phony prosecutions directed against anyone who dares to make too much money in a financial business; forcing people to overpay for wasteful health insurance (Obamacare); big tax increases; and more.

What could actually help our economy take off?  How about stopping the suppression of cheap energy?  How about recognizing our financial sector as the crown jewel of our economy and ending the demonization of it?  In a simple summary, how about basic encouragement of productive economic activity instead of intentional demonization and suppression?  But instead we have Trump proposing better "trade deals" with China and Mexico.  Meaning what?  Tariffs?  Quotas?  How are things like that going to help?  

Lack Of Understanding Or Respect For The First Amendment

Lots of people pay lip service to the First Amendment, and its importance to our democracy.  But how many people actually understand it, let alone have any respect for it?  And lack of understanding and respect for the First Amendment are particularly prevalent among those in positions of power and authority.  Hey, what fun is power and authority if you can't shut up your critics?

One of my favorite Stalinist corners of the federal bureaucracy has long been the FDA, where they somehow think they have the absolute right to determine what can and cannot be said in this country about any substance that might ever cross human lips.  First Amendment?  What's that?  The FDA first won my award for "Top federal effort to suppress free speech" back in 1999, for its long-running efforts to ban so-called off-label marketing of pharmaceuticals.  Sixteen years and several tens of billions of phony fines collected from pharmaceutical companies for constitutionally-protected conduct later, the FDA was continuing to march forward undeterred in its campaign to ban off-label marketing, when suddenly last August it found itself enjoined from enforcing those restrictions against a company called Amarin.  Amarin had sued in federal court seeking the injunction by asserting that the FDA could not point to anything false or misleading in its proposed marketing campaign; and a judge in the Southern District of New York (Engelmayer) agreed and issued the injunction.

At the time the FDA vowed to appeal, but yesterday comes news that they have backed down and settled with Amarin.  Do you think that was decent of them?  My take is the opposite:  They were facing near certain crushing defeat in the Second Circuit; and by settling now they will continue to take the (outrageous and preposterous) position that their off-label marketing restrictions are still viable, and to attempt to continue to enforce those restrictions against others.  From the Times article linked above:

The agency on Tuesday downplayed the implications of the deal. In a statement, it said that the settlement applied only to the Amarin case and that its position on whether companies have a constitutional right to provide truthful information about off-label uses had not changed.

Well, that's how much respect and understanding the FDA has for the First Amendment.  How about some others quoted in the Times article?  For example, there is Dr. Joshua M. Sharfstein:

Leaving such decisions to a judge, not the F.D.A., concerned Dr. Joshua M. Sharfstein, a former principal deputy commissioner at the F.D.A. who is now an associate dean at the Johns Hopkins Bloomberg School of Public Health.  “The courts are at the precipice of taking over a fundamental F.D.A. function of calling balls and strikes in the drug market about what’s truthful and not misleading,” Dr. Sharfstein said.

Got that?  According to ex-FDA "principal deputy commissioner" Sharfstein, it's a "fundamental function" of an executive agency of the government (here the FDA) to decide what you can and cannot say.  And the courts just have no business meddling!  Really, did this guy (or anybody else who now or ever has worked for the FDA) even go to high school?

Meanwhile, in the same category, there's another important case on off-label marketing that I haven't yet mentioned here.  Justice has been prosecuting a guy named Howard Root, CEO of a company called Vascular Solutions, Inc., for supposed off-label marketing of a device called Vari-Lase for the treatment of varicose veins.  Root took his case to trial, with the full support of his company and his board, and in February a federal jury in San Antonio, Texas acquitted him of all charges.  A lawyer named Kevin Riach notes the significant aspect of the trial:

Notably, the trial court instructed the jury at the opening and close of trial that truthful off-label promotion is not a crime because such speech is protected by the First Amendment. This instruction marks the first time that the First Amendment protection for truthful off-label speech has been adopted by a court outside the Second Circuit, and it is a significant blow to the government’s ability to prosecute companies for off-label promotion. The court’s instructions are likely to be cited by other companies facing False Claims Act and criminal liability for off-label promotion in future cases.

And there's nothing like an acquittal to finally give a wrongly-accused defendant the ability to open up and unload against the outrageous and oppressive government.  From a statement by Root after the verdict:

"The company and I are vindicated by today's verdict, but outraged by the obscene legal process we were forced to endure," Root said in a statement. "There is simply no excuse for abusive and dishonest conduct in any U.S. governmental agency, much less in the Department of Justice and our law enforcement agencies."

All I can say is, he was still a lot nicer than I would have been.

Anyway, the FDA is not giving up on this, but gradually the fissures are opening.