The Vietnamization of America's Middle Eastern Wars

More and more, America's wars in the Middle East and Africa bear a disturbing resemblance to the Vietnam War.   The Afghanistan war papers revealed that the government hasn't been truthful about the U.S. military efforts in Afghanistan, and that there is no path to victory.  https://news.yahoo.com/afghanistan-war-american-people-lied-to-washington-post-papers-201042599.html.  We earlier learned that the government's claim that Iraq had weapons of mass destruction--the justification used by the George W. Bush administration for invading Iraq in 2003--was also a lie.  https://www.salon.com/2015/05/20/george_w_bushs_cia_briefer_admits_iraq_wmd_intelligence_was_a_lie/.  These stories are reminiscent of the Pentagon Papers, which in 1969 revealed the Pentagon had lied to the American people about the Vietnam War, greatly inflating the prospects for victory while thousands of troops died for its lies.  But the Pentagon Papers didn't say much that surprised the troops who had fought in Vietnam.  They already knew the war was unwinnable.  Morale among U.S. troops in Vietnam was so bad that drug and alcohol use were rampant in the ranks, desertion was disturbingly frequent, and alleged fratricide in the form of killing officers an occasional measure supposedly taken to avoid seemingly pointless casualties and death. 

Now we are hearing that many members of the military oppose America's wars in the Middle East.  https://www.salon.com/2020/01/12/many-soldiers-want-to-stop-fighting-lets-build-a-movement-that-welcomes-them_partner/ and https://www.newsweek.com/combat-veteran-gold-star-husband-support-trump-ending-wars-1471550. Perhaps some 50,000 or more troops have resisted service in these wars.  https://nymag.com/intelligencer/2015/03/what-happens-to-most-awol-soldiers.html.
This military opposition to the war ominously changes the dynamics of the U.S. Middle Eastern wars.  When the troops themselves lose their sense of mission, the possibility for success evaporates.  Who wants to die to further Donald Trump's impulsive, strategy-light decisions? 

America's leadership can offer endless rationales for having some 80,000 U.S. troops in the Middle East and Africa.  But experience has taught that these rationales and $2 will buy a newspaper.  The government has no strategy for victory and our troops know it.  Refusing to acknowledge or deal with this reality didn't result in success in Vietnam, and it won't result in success now.  Even though America wisely stopped drafting men to into the military after the debacle of the Vietnam era, we can't expect that an all-volunteer military will blindly obey orders and die pointlessly.  Retreat and withdrawal are never easy.  But America's withdrawal from Vietnam, although deeply painful, also marked the beginning of a process of reconciliation, healing and growth.  America remained the world's most powerful nation and has enjoyed growth and prosperity since then. While there are many problems here that must be resolved, problems that may seem intractable at times, fighting unwinnable wars will only make things worse.  The wars in the Middle East and Africa have morphed into latter day Vietnam Wars.  Let's get out now.

Trumpty Dumbty Built a New Wall

 

Trumpty Dumbty built a new wall,

Trumpty thought he had done it all

Despite his malarkey, a few brave men

Made Trumpty look dumbty all over again.

Viral video shows border wall being scaled at Mexicali. Border Patrol says system 'worked exactly as designed'

A Future For the Trump International Hotel

News services report that the Trump International Hotel in Washington, D.C. is up for sale.  Given this property's notoriety, as the venue for alleged Constitutionally-violative emoluments paid to President Trump, its future as a hotel could be in doubt.  Who would pay full market price for a hotel with a clouded reputation?  Anyone who did might come under investigation for giving President Trump an alleged Constitutionally violate emolument--or worse.  The penalties for bribery of a federal official are stiff.  So the Trump International isn't likely to command a high price.

But not all is lost.  Many commercial buildings are being converted to multiple use.  What once were malls, office buildings and other single use buildings find new lives as real estate jacks-of-all-trades.  Multiple use doesn't solve the emoluments/bribery problem--there could still be issues if the buyer really meant to buy political capital and not just a building.  But the identity of the buyer might resolve these concerns.  Consider the following.

Organize a crowd funded investment trust, with members of the progressive movement as trustees, that would be funded by rage donations. The trust would buy the hotel and convert it to multiple use.  The building could have a fitness studio--called Colin K's--where members would practice kneeling to the national anthem.  It could have a restaurant that served steak with anything except ketchup.  It could have a film studio, where actors appearing to be coarse, lecherous older men with orange hair would be filmed in videos with much younger women called "Naked and Afraid in the Business World."  It could have an immigrant orientation center, where classes in English as a second language would be offered, a family re-unification center called Encontremos Los Desapareciditos ("Find the Disappeared Little Ones") would operate, and immigrants would be given clear, clean spring water to drink.  It could have a travel agency that would arrange travel to Cuba and to countries that President Trump had in mind when he referred to "shithole countries."  It could have a Kurdish Liaison Office (the functional equivalent of an informal Kurdish embassy).  And last, but certainly not least, it could have an Amazon physical store, which would be a success because it would no doubt be a Trump-free zone.

President Trump's Failure to Cooperate in the Impeachment Inquiry Can Be Used Against Him

President Trump has taken a broad, unprecedented position against the House of Representatives' impeachment inquiry of his attempts to secure Ukrainian assistance in undermining the Democrats in the 2020 election and other matters.  He is refusing to cooperate in any way whatsoever, and is ordering at least some witnesses not to cooperate.  By stonewalling the House, he appears to hope to stall and delay the inquiry until it loses steam and, perhaps, popular support.

However, his choice not to cooperate can be used against him.  The U.S. Supreme Court has ruled that when a person asserts their Fifth Amendment right against self-incrimination, a court can draw an adverse inference from the assertion of the right.  See Baxter v. Palmigiano, 425 U.S. 308, 320 (1976).  This can only be done in civil proceedings, not in a criminal prosecution.  But an impeachment proceeding isn't a criminal proceeding.  It is a civil proceeding, where the worst case consequence is removal from office.  There is no prison time, no fine, no probation, and no public service.  The President's silence can be viewed by the House during impeachment proceedings, and by the Senate during the trial on the articles of impeachment, as evidence that the President engaged in high crimes and/or misdemeanors.  The adverse inference, if taken, would be added to the other evidence that the House accumulates and the entirety of the evidence (including the adverse inference) could constitute the evidentiary basis for impeachment and conviction.
 

The Impact of Trump's EU Tariffs

As part of his trade war on the rest of the world, President Trump proposes to impose 100% tariffs on a variety of European goods, such as cheese, meats, olive oil, wine, pasta and olives.  Here's the impact of those tariffs.

          OUT                                   IN

          Brie                                      Velveeta

          Prosciutto                            Spam

          Italian virgin olive oil        Pure vegetable oil

          Anything with an                Any grape-flavored
          appellation d'origine          beverage with a kick in      
          controlee                               a bottle with a twist-off cap

          Imported Italian pasta      SpaghettiO's

          Olives                                    pickle slices

Bon appetit.

Why Donald Trump Can't Stop a Recession

A recession may be on the horizon.  The Federal Reserve doesn't think so.  Some others do.  Only time will tell who is right.  But if there is a recession, President Trump can't stop it before the 2020 election. 

The principal tool for the President to fight a recession would be to partner with Congress and put together a package of spending bills that would increase federal expenditures.  This sort of program, called fiscal policy, sometimes includes tax cuts, but not always.  The greatest fiscal stimulus in U.S. history, military spending for World War II, included a massive tax increase and an even greater increase in deficit spending.  The result was both victory in the war and an economic revival at home. 

Today, however, there is an almost complete absence of agreement between the President and the Democrats in the House as to how to deploy fiscal policy.  Although both sides speak of infrastructure spending, agreement on the fine points and details has remained elusive since the President was inaugurated and won't be achieved before November 2020.  For more than the past 20 years, the federal budgetary process has been largely dysfunctional, and it has grown more so as political divisiveness has increased.  With only one full budget cycle remaining before the election, it's simply too late to implement fiscal measures in time.

To make things worse, the President would likely seek a tax cut as part of the stimulus package.  But, having alienated the Democrats by ramrodding through the 2017 tax cuts with nary a shred of consideration for Democratic views, the President has essentially no good will left with the House majority when it comes to tax policy.  The Democrats will agree to tax changes only if there is a substantial rollback of the 2017 cornucopia of tax cuts for the wealthy, and the President won't agree to that.  So no deal on tax legislation is possible.

Of course, central banks can endeavor to combat recessions.  But the President does not control central bank policy.  Monetary policy and other economic management measures such as quantitative easing and the setting of bank reserves lie within the purview of the Federal Reserve.  The President attempts to influence the Fed with shrill demands on Twitter for much more aggressive interest rate cuts than the Fed seems inclined to make.  But the Fed strives to maintain its independence, and the President would be wise to back off.  If the financial markets lose confidence in the independence and integrity of the Federal Reserve, stocks will crater and the economy will get a tummy ache.   Moreover, Fed interest rate adjustments often take 18 months or longer to affect the economy.  Although they may almost instantaneously be reflected in asset prices in the financial markets, they take a long time to wend their way through the processes of the economy.  There isn't enough time before November 2020 for interest rate cuts to have a big impact. 

The prospects for a recession remain uncertain.  Unemployment is at a 50-year low, a remarkable development that no doubt informs the Fed view of the economy.  The stock market is dancing near its all-time highs.  Transportation and manufacturing are slowing, and the business community is pulling back on new investment because of confusion and caution arising from President Trump's trade wars.  It's difficult to tell how things will go.  But if a recession is coming, it's coming.

President Trump: the Fed's Biggest Moral Hazard

Perhaps the Federal Reserve's biggest problem today is that it has a moral hazard problem with President Trump.  A moral hazard is a situation in which a person can take risks without having to bear the full consequences of those risks.  For example, when stock market investors think the Federal Reserve will cut interest rates to prop up the economy and the stock market should things go downward, they are more willing to buy stocks because they expect a bailout from the Fed.  This can lead to over-investment in stocks and greater potential for an asset bubble that can later burst painfully.

President Trump's trade war with China has created uncertainty.  The economy is slowing and the stock market has been trending downward for several weeks.  Trump has been haranguing the Fed to cut interest rates, evidently in the belief that such cuts can offset the negative impact of his trade war.  There is considerable debate among economists and others whether the Fed can actually prop up the economy and stocks while the President exchanges volleys of tariffs and other trade restrictions with China.  Perhaps the Fed can soften the impact, but it seems doubtful the Fed can do more than slow down the negative impacts of the trade war.  When the Fed lowers rates in what is already a low-rate environment, that signals things are going to be bad.  Businesses pull back, slowing hiring and investment.  Consumers spend less..  The rate cuts could produce a self-fulfilling prophecy.

However, as long as President Trump believes the Fed can offset the damage his trade war does, he has no incentive to act prudently.  He may instead proceed recklessly and then turn to the Fed to put out the fires he starts.  This is an extremely concerning instance of moral hazard, and one for which there is no easy solution (because the President doesn't seem to understand economic reality).  The President could trigger an economic downturn and a bear market with no certainty that he could secure a good trade deal.  And we'd all pay the price.

How to Stimulate the Economy

With current economic indicators mostly signaling a slowdown in the economy--and perhaps a recession--a lot of attention is focused on stimulating the economy. The dialogue revolves around central bank accommodation (via lowering interest rates and bond purchases in the form of quantitative easing) and fiscal policy (i.e., deficit spending).  Fiscal measures are essentially impossible because of political gridlock.  And central banks, having devoted the past decade to accommodation, have only limited ammo left.  So what can stave off recession and renew economic growth?

There's no simple answer.  But one important factor is the availability of inexpensive energy.  Modern life is dependent on vast amounts of cheap energy.  The Industrial Revolution that created our high tech lives was the result of the development of inexpensive ways to harness and utilize large amounts of energy.

Let's begin in A.D. 1700.  Living standards in A.D. 1700 worldwide were about the same as they were in A.D. 700 and 300 B.C.  In other words, things had hardly improved over thousands of years.  But within the 150 years following 1700, people had developed the steam engine and learned how to harness electricity for commercial use.  These developments were followed by new ways to extract large amounts of fossil fuels that could be sold inexpensively.  Then, after 200 years (i.e., by 1900), people had developed the internal combustion engine.  The internal combustion engine could be used widely in transportation, manufacturing and many other ways.  Large scale generation and distribution of electricity became feasible, and the widespread availability of electric motors greatly enhanced living standards.  Economic growth and improvement of living standards accelerated at an exponential pace.  In essence, access to inexpensive energy sources (carbon based fuels and electricity) triggered a monumental amount of economic growth and a phenomenal rise in living standards in a historically short amount of time.  Of course, we now have pollution and other byproducts of the Industrial Revolution to contend with.  But the simple truth is the astounding economic growth of the past 300 years resulted to a large degree from ever increasing access to cheap energy.  Cheap energy and the technology developed to exploit it made modern life possible.   

Why is energy so important to economic growth?  Because energy is a key input into all economic activity.  From manufacturing to transportation to farming to fast food to government offices to hair salons to slimy corporate lawyers peddling excuses for their greedy clients to sordid lobbyists plotting to kill health insurance coverage for all to the performances of rock stars in large arenas, energy is an input into essentially all economic activity.  If the cost of energy is lowered, all economic activity gets a boost and economic growth in all sectors of the economy is facilitated.  

It's no accident that America's economy grew briskly in recent years concurrently with a drop in the price of natural gas, solar and wind energy, and to some degree, oil.  The proliferation of fracking not only has capped the price of oil, but also created demand for a lot of drilling equipment, trucks of various kinds, and so on.  So it boosted the manufacturing and transportation sectors. 

We use enormous amounts of energy stored in the past to make our current lives more comfortable and enjoyable.  We now understand we can't keep relying so much on energy from fossil fuels.  We have to develop more sustainable lifestyles.  However, in order to maintain and improve our lives, we need to continue our access to cheap energy in better ways.  After decades of frustration, solar and wind energy have actually become cheaper than fossil fuels.  That is a very positive development.  More technological advance is needed. 

The policies needed continue the availability of cheap energy would be varied and sometimes controversial.  Increased federal funding of basic research is an obvious one, although the GOP has done much to cut this from the federal budget.  Republicans seem fear science.  But ignorance will not spur economic growth.

Building more gas pipelines is obviously controversial to the NIMBY crowd.  But we do need better distribution systems for gas--and electricity as well.  All the windmills and solar farms in the Plains states won't do much good without power lines to transport the electricity to the big cities that need the power.  These power lines entail a huge NIMBY problem.  But this will have to be dealt with somehow, because distribution systems have to be enhanced if there is to be growth.  We need not bow to big, bullying energy and power companies and give them everything they want.  But we should acknowledge the need for better distribution systems.

Fostering greater fuel efficiency also helps to lower energy costs.  It may not lower the stated price per unit, but it reduces the number of units people have to buy.  So it would help to pursue efficiency as well as reduce unit costs.  One hidden cost of efficiency, though, is people consume more energy when it effectively becomes cheaper--many ordinary cars and SUVs today have engines that are as powerful as those in the muscle cars of the 1960's, since engine technology has improved so much, and people drive more miles per year.  So greater efficiency isn't an improvement if it doesn't reduce the use of fossil fuels.

There are many other factors besides energy that affect economic growth.  But a lot aren't controllable by any branch of the government.  Energy policy, though, can be implemented through government.

In the 1940's, 50's and 60's, the U.S. had ultra-high marginal tax rates, not that much deficit spending (the government focused on reducing the deficit, not increasing it), a rather inactive Fed, relatively high wages that provided for a comparatively equitable distribution of wealth and income--and an era of brisk economic growth and low unemployment.  This is an era still remembered as a golden age in America.  Why?  Because oil was damn cheap.  What happened after the first OPEC oil embargo in 1973?  A decade of economic stagnation followed by decades of economic uncertainty.  When we had cheap energy, we had lots of prosperity.  When energy rose sharply in price, prosperity as we had enjoyed it went away and still hasn't returned.  We don't need to sell our souls to the fossil fuels companies.  But we need to recognize that our standard of living and future improvements to our standard of living are dependent on access to cheap energy.  And we need to find responsible and sustainable ways to keep that gravy train rolling.

Donald Trump's Fourth of July

 

Once upon a time, a dark lord, with the furtive connivance of a despot on a distant land, tricked the good people of an exceptional nation, a nation of manifest destiny, into choosing him as their elected leader.  The dark lord cast wicked spells over many of the citizens and deluded them into thinking he would bring them succor from their struggles and sorrows.  Not all of the people of the land were fooled, and many stoutly resisted the dark lord.  The dark lord stumbled and flailed in his sordid attempts to oppress and persecute the people, and gnashed his teeth over his repeated failures.  To glorify and aggrandize himself, and deceive the people into believing in his witchcraft, the dark lord misappropriated unto himself a national holiday, and strove with pretense and chicanery to make it into a celebration of himself.  But the heavens were not fooled.  When the appointed day for the holiday arrived, dense clouds appeared in the skies and showered the land with tears--tears for the los pobres and los ninos kept in the dank dungeons of the dark lord; tears for los desaparecidos, the children separated from their parents, never to be re-united.  And thunder, the angry rumblings of the skies, signaled celestial disapproval of the necromancer. The dark lord, heedless of the portents, pressed on with his depraved revelry.  But what will be the price of his recklessness?

Confusion, evacuations as weather threatens Trump's July 4th bash

To Increase Inflation, Increase Incomes

The Federal Reserve Board is desperate to increase inflation to 2% per year.  It believes that a 2% level of inflation will promote economic growth by giving businesses greater pricing power and the ability to repay debt with less valuable dollars.  Right now, inflation as measured in the way the Fed prefers, runs about 1.6% per year, and remains stubbornly below 2%.

There's no economic research that definitively shows anything magical about 2% inflation being the key to the Goldilocks economy (i.e., not too hot and not too cold).  The figure is just a guess.  But if we were to accept that 2% has miraculous powers, then why has inflation persisted in staying lower?  With unemployment levels running at historic lows of about 3.6%, one would expect inflation to be moving up briskly.

Economists believe consumer expectations have a large role in determining the rate of inflation.  If people expect inflation, then there will be inflation.  If people don't expect inflation, they will resist price increases and inflation will be hard to come by.  Right now, inflation expectation are low.

Why would people today have such low expectations for price increases?  Perhaps the most obvious reason would be because they don't have the money to pay increased prices.  Wages, adjusted for the mild inflation we've had, have stagnated for decades.  The middle class, who are key consumers in the national economy, just aren't bringing in any more.  So they not surprisingly feel that they can't pay more and would resist price increases.  If the Fed wants to pump up inflation, it should hope that people get paid more.

With unemployment reaching an astonishingly low 3.6% level, one might think employers would pay more to get new hires and keep existing employees.  But that's not happening much.  Here and there, pay is jumping up.  But on the whole, incomes are mostly in a rut.  There pretty much is nothing the Fed can do to increase worker pay.  But it shouldn't hold its breath waiting for inflation to boost the economy.