NYT (“Trump Expected to Name Marco Rubio as Secretary of State“):
President-elect Donald J. Trump is expected to name Senator Marco Rubio of Florida as his secretary of state, three people familiar with his thinking said on Monday, as Mr. Trump moves rapidly to fill out his foreign policy and national security team.
Mr. Trump could still change his mind at the last minute, the people said, but appeared to have settled on Mr. Rubio, whom he also considered when choosing his running mate this year.
Mr. Rubio was elected to the Senate in 2010, and has staked out a position as a foreign policy hawk, taking hard lines on China, Iran, Venezuela and Cuba in particular.
He initially found himself at odds with those Republicans who were more skeptical about interventions abroad, but he has also echoed Mr. Trump more recently on issues like Russia’s war against Ukraine, saying that the conflict has reached a stalemate and “needs to be brought to a conclusion.”
Despite speaking in hard-line terms about Russia in the past, Mr. Rubio would likely go along with Mr. Trump’s expected plans to press Ukraine to find a way to come to a settlement with Russia and remain outside of NATO. It is unclear whether the leaders of Ukraine or Russia would be prepared to enter into talks at Mr. Trump’s urging.
Mr. Rubio has been among the most outspoken senators on the need for the United States to be more aggressive on China. He has adopted positions that later became more mainstream in both parties. For example, while serving in Congress during the first Trump administration, he began advocating industrial policy meant to help the United States better compete with China’s state-directed economy.
Mr. Rubio also served as a co-chairman of the bipartisan Congressional-Executive Commission on China, which has aimed to craft aggressive policy on China, especially in trying to address human rights abuses there. In 2020, Mr. Rubio sponsored a bill that tried to prevent the import of Chinese goods made with the use of forced labor by China’s ethnic Uyghur minority. President Biden signed it into law the next year.
While I certainly didn’t have “Little Marco” Rubio, who was long at odds with Trump before becoming a leading sycophant, on my radar screen for the post, he’s well qualified—certainly more so than Rex Tillerson or Mike Pompeo, who served in the post in the first administration. He’s been in the Senate for fourteen years and serves on both the Foreign Relations and Intelligence Committees; he’s the ranking Republican on the latter.
Multiple reputable sources are reporting that Rubio is the selection. He’ll easily be confirmed by his colleagues.
The notion that the Secretary of State sets his own policy agenda is rather silly. Of course President Trump will be the ultimate decider. But Rubio’s instincts are perfectly reasonable and, indeed, align with the Biden administration’s policy with regard to key adversaries. The degree to which Trump will actually listen to him remains to be seen.
In terms of domestic politics, Rubio was just re-elected in 2022. Florida Governor Ron DeSantis would appoint a replacement, who would presumably have a leg up in a 2026 special election to serve the final two years of the term. There is plenty of speculation as to who DeSantis might appoint. Regardless, the seat will remain in Republican hands at least through he midterms.
Michael Schuman, The Atlantic (“China Has Gotten the Trade War It Deserves“):
A global trade war is starting, and China is at the center of it. A reckoning for Beijing’s economic model, which is designed to promote Chinese industry at the expense of the rest of the world, has long been coming. China’s trading partners have had enough. The result will be a wave of protectionism, with potentially dire consequences for both China and the global economy.
The most obvious and dramatic evidence for this was unveiled [Tuesday] by President Joe Biden, who announced that his administration would quadruple the existing tariffs on imported Chinese electric vehicles, to 100 percent. He will also hike tariffs on steel, aluminum, medical equipment, semiconductors, solar cells, and lithium batteries. The Chinese government instantly protested and threatened action of its own. “The United States should immediately correct its wrong practices,” the Chinese Ministry of Commerce said in a statement. “China will take resolute measures to defend its own rights and interests.”
et China’s leaders have no one to blame but themselves. They joined a global trading system and then gamed that system. Biden’s tariffs are the natural response, though not an entirely positive one. Protectionism raises costs, hurts consumers, shields unworthy companies from competition, and punishes worthier ones. Disputes over trade will only intensify the rivalry between the world’s two great powers.
This souring of trade relations wasn’t always foreordained—but it had become virtually unavoidable. Chinese leader Xi Jinping has failed to reform his economy in ways that would have made this trade war less likely. Facing this confrontation with the United States, he is even less likely to make reforms today. The result is trade conflict and heightened political tensions that benefit no one.
[…]
All governments place their thumb on the scale to promote their national industries to some degree. China’s thumb simply weighs more heavily. A 2022 study by the Center for Strategic and International Studies in Washington conservatively estimated that China spent $248 billion supporting its industries in 2019. That’s twice as much as the United States did.
“It’s the whole financial system, the whole economic system that is leveraged for industrial policy, which is very different than what’s been happening in market economies,” Camille Boullenois, an analyst of Chinese industry at the research firm Rhodium Group, told me. Where electric vehicles are concerned, “it’s very hard to imagine the industry growing as fast without government support.”
[…]
Xi Jinping seems set on making matters worse. His principal economic goal of achieving “self-sufficiency” aims to reduce what China purchases from other countries and substitute goods made by foreign companies with Chinese alternatives—especially in industries, such as green energy, that other governments find strategic. In doing so, Xi is practically inviting more intense trade disputes.
In Xi’s thinking, economic growth “is going to come from churning out a lot of this stuff and exporting it to the world,” Leland Miller, a co-founder of the research firm China Beige Book, told me. “Why they think they can get away with that when they are already running giant, politically charged trade surpluses with most of the world, including the United States, and they’re going to supercharge those surpluses and think that’s going to be successful … it doesn’t make much sense.”
The big point is that China is not just exporting too much stuff; it’s also exporting its economic problems. Xi intends to maintain Chinese jobs and factories at the expense of other countries’ workers and companies, to avoid necessary but potentially disruptive reform at home. That means Xi is actually undermining the great hope of China’s rise. A wealthier China was supposed to be an engine of global prosperity. Xi’s version is promoting protectionism and confrontation that threaten that prosperity.
Facing political pressure at home, politicians around the world are forced to defend their economies from Xi’s strategy, even if that leads to trade wars that sour relations with Beijing. This is not a good outcome for the global economy or for geopolitical stability. But Xi’s policies have made it inevitable.
The Economist (“Xi Jinping is subtler than Vladimir Putin—yet equally disruptive“):
Mr Xi’s challenge to the world is more subtle than that posed by the warmongering Mr Putin. Yet it is still a problem. He craves a might-makes-right order, letting China do as it pleases. Its support for pariah states is meant to defy and divide the West, while avoiding a direct clash. Its “grey-zone coercion” in the South China Sea falls short of war, but is intended to weaken foes. China thinks these tactics can be sustained without tipping into conflict. The question for any country that supports global rules is how far to let Mr Xi go.
When it comes to Russia, China’s leader has already gone quite far. Mr Xi ignores Western pleas that he tone down his support for Mr Putin, viewing Russia as an indispensable partner in his campaign to dismantle the American-led order. The two countries have been deepening their military and trade ties. America, in turn, has been tightening sanctions, and imposing tariffs on China in other areas. Of most concern are Chinese components and machinery flowing to Russian arms manufacturers. Antony Blinken, America’s top diplomat, has said that Russia would struggle to carry on in Ukraine without China’s support. China is not a participant in the crisis, nor a party to it, bristles Mr Xi. But a long war that tests Western unity is to his advantage.
On the other side of the world, it is the risk of a conflict caused by China that worries America and its allies. The South China Sea is larger than the Mediterranean, but increasingly difficult to cross without encountering Chinese coastguard vessels doing dangerous things. Near two disputed shoals, Chinese guardsmen routinely blast Philippine vessels with water-cannons powerful enough to bend metal. Farther south, Chinese vessels harass Malaysian ships looking for oil and gas in Malaysia’s exclusive economic zone, waters that China calls its own.
The Philippines’ defence treaty with America turns Chinese bullying into a superpower stand-off. The stakes are as high over Taiwan, which is preparing to swear in Lai Ching-te as its new president on May 20th. China increasingly acts as if the island’s air and maritime boundaries do not exist. America and its allies have been preparing for the worst-case scenario: a Chinese invasion of Taiwan. But for now the bigger danger lies in the grey zone, where Chinese actions risk causing a spiral of escalation.
By design, China’s actions in Europe, Asia and elsewhere often lie between war and peace. A forceful response risks seeming like an over-reaction. Doing nothing, though, means ceding incremental gains to China. So the first task is for Western countries to expose China’s actions for what they are: a glimpse of the world order that Chinese leaders seek, in which no country cares, or dares, to challenge their power. Shining daylight on China helps avoid complacency. (Before the invasion of Ukraine, European states took too long to believe American warnings about Russia’s malign intentions.) And information can shift public opinion. Polls in some countries that are a target of China’s bullying suggest growing distrust.
That all makes a second task easier. America must stand by its allies, not as an act of charity, but because they are a superpower asset that China lacks. Relentless Chinese and Russian attempts to divide alliances, from nato to America’s defence network in Asia, are a backhanded compliment. Autocrats respect strength, and there is strength in numbers.
There are powerful incentives in the national security space to exaggerate threats, and China is no exception. This is not Cold War II. While China is, like the USSR before it, an autocratic state with a large nuclear stockpile, there is no talk among rational players about “mutually assured destruction.” Indeed, the notion that conflict between the two great powers could escalate to a thermonuclear exchange is scarcely mentioned. Our countries’ economies are, despite gradually escalating tensions and talk of trade wars, considerably more intertwined than the US and Soviet economies were even at the height of detente.
But make no mistake—China is not a mere peer competitor seeking to enhance its position at our expense within the established norms of the international system. Its activities in both the economic and military spheres are well outside the boundaries of international law yet calculated to remain below the threshold that will lead to a dramatic response.
The Trump and Biden administrations, in different ways, have finally given up on the old elite consensus that treating China as a normal actor would encourage it to become one. We’re rightly ratcheting up pressure but yet stopping well short of a Cold War-style containment strategy. Left to their own devices, though, they would soon establish regional suzerainty over American allies, including Taiwan, Japan, and the Philippines.
AP economics reporter David McHugh: “Germany went from envy of the world to the worst-performing major developed economy. What happened?“
For most of this century, Germany racked up one economic success after another, dominating global markets for high-end products like luxury cars and industrial machinery, selling so much to the rest of the world that half the economy ran on exports.
Jobs were plentiful, the government’s financial coffers grew as other European countries drowned in debt, and books were written about what other countries could learn from Germany.
No longer. Now, Germany is the world’s worst-performing major developed economy, with both the International Monetary Fund and European Union expecting it to shrink this year.
The link, alas, is to a July report, also by McHugh, noting that “the International Monetary Fund forecast this week that Germany would be the globe’s only major economy to shrink this year, even with weak economic growth around the world amid rising interest rates and the threat of growing inflation.” This chart, on the front page of the OECD website, provides the context I was looking for:
Germany has been outperformed by every major country save Argentina this year and is projected to be near the very bottom again next year. Quite the turn of events, indeed.
It follows Russia’s invasion of Ukraine and the loss of Moscow’s cheap natural gas — an unprecedented shock to Germany’s energy-intensive industries, long the manufacturing powerhouse of Europe.
Germany decided to abandon its decades-long nuclear energy program in the wake of the Fukushima disaster in 2011, with the last of the plants shuttered earlier this year. This left them reliant on Russian gas and, ironically, their own coal—which they’ve naturally also been trying to wean themselves from to combat climate change.
The sudden underperformance by Europe’s largest economy has set off a wave of criticism, handwringing and debate about the way forward.
Germany risks “deindustrialization” as high energy costs and government inaction on other chronic problems threaten to send new factories and high-paying jobs elsewhere, said Christian Kullmann, CEO of major German chemical company Evonik Industries AG.
From his 21st-floor office in the west German town of Essen, Kullmann points out the symbols of earlier success across the historic Ruhr Valley industrial region: smokestacks from metal plants, giant heaps of waste from now-shuttered coal mines, a massive BP oil refinery and Evonik’s sprawling chemical production facility.
These days, the former mining region, where coal dust once blackened hanging laundry, is a symbol of the energy transition, dotted with wind turbines and green space.
The loss of cheap Russian natural gas needed to power factories “painfully damaged the business model of the German economy,” Kullmann told The Associated Press. “We’re in a situation where we’re being strongly affected — damaged — by external factors.”
After Russia cut off most of its gas to the European Union, spurring an energy crisis in the 27-nation bloc that had sourced 40% of the fuel from Moscow, the German government asked Evonik to keep its 1960s coal-fired power plant running a few months longer.
The company is shifting away from the plant — whose 40-story smokestack fuels production of plastics and other goods — to two gas-fired generators that can later run on hydrogen amid plans to become carbon neutral by 2030.
One hotly debated solution: a government-funded cap on industrial electricity prices to get the economy through the renewable energy transition.
The proposal from Vice Chancellor Robert Habeck of the Greens Party has faced resistance from Chancellor Olaf Scholz, a Social Democrat, and pro-business coalition partner the Free Democrats. Environmentalists say it would only prolong reliance on fossil fuels.
Kullmann is for it: “It was mistaken political decisions that primarily developed and influenced these high energy costs. And it can’t now be that German industry, German workers should be stuck with the bill.”
Unlike the United States, with only two political parties (one of which has little interest in governing) the Germans have a form of proportional representation and tend to have coalition government. They also have a long history of government, business, and labor working together to balance their competing interests. Still, this is a wicked problem and one largely of their own making.
The price of gas is roughly double what it was in 2021, hurting companies that need it to keep glass or metal red-hot and molten 24 hours a day to make glass, paper and metal coatings used in buildings and cars.
A second blow came as key trade partner China experiences a slowdown after several decades of strong economic growth.
These outside shocks have exposed cracks in Germany’s foundation that were ignored during years of success, including lagging use of digital technology in government and business and a lengthy process to get badly needed renewable energy projects approved.
Other dawning realizations: The money that the government readily had on hand came in part because of delays in investing in roads, the rail network and high-speed internet in rural areas. A 2011 decision to shut down Germany’s remaining nuclear power plants has been questioned amid worries about electricity prices and shortages. Companies face a severe shortage of skilled labor, with job openings hitting a record of just under 2 million.
And relying on Russia to reliably supply gas through the Nord Stream pipelines under the Baltic Sea — built under former Chancellor Angela Merkel and since shut off and damaged amid the war — was belatedly conceded by the government to have been a mistake.
Now, clean energy projects are slowed by extensive bureaucracy and not-in-my-backyard resistance. Spacing limits from homes keep annual construction of wind turbines in single digits in the southern Bavarian region.
A 10 billion-euro ($10.68 billion) electrical line bringing wind power from the breezier north to industry in the south has faced costly delays from political resistance to unsightly above-ground towers. Burying the line means completion in 2028 instead of 2022.
That’s a hell of a delay, but an understandable one. Modern societies concern themselves with aesthetics.
“We’re seeing a worldwide competition by national governments for the most attractive future technologies — attractive meaning the most profitable, the ones that strengthen growth,” Kullmann said.
He cited Evonik’s decision to build a $220 million production facility for lipids — key ingredients in COVID-19 vaccines — in Lafayette, Indiana. Rapid approvals and up to $150 million in U.S. subsidies made a difference after German officials evinced little interest, he said.
“I’d like to see a little more of that pragmatism … in Brussels and Berlin,” Kullmann said.
This is a strange reversal. The United States has long been adverse to industrial policy while most OECD countries have not.
Scholz has called for the energy transition to take on the “Germany tempo,” the same urgency used to set up four floating natural gas terminals in months to replace lost Russian gas. The liquefied natural gas that comes to the terminals by ship from the U.S., Qatar and elsewhere is much more expensive than Russian pipeline supplies, but the effort showed what Germany can do when it has to.
However, squabbling among the coalition government over the energy price cap and a law barring new gas furnaces has exasperated business leaders.
Evonik’s Kullmann dismissed a recent package of government proposals, including tax breaks for investment and a law aimed at reducing bureaucracy, as “a Band-Aid.”
Germany grew complacent during a “golden decade” of economic growth in 2010-2020 based on reforms under Chancellor Gerhard Schroeder in 2003-2005 that lowered labor costs and increased competitiveness, says Holger Schmieding, chief economist at Berenberg bank.
“The perception of Germany’s underlying strength may also have contributed to the misguided decisions to exit nuclear energy, ban fracking for natural gas and bet on ample natural gas supplies from Russia,” he said. “Germany is paying the price for its energy policies.”
The closure of the nuclear plants was a massive own-goal. Presumably, though, it was a politically popular one. Whether there’s an appetite to rethink the policy—and whether it’s even reversible in the near term—I haven’t the foggiest.
Schmieding, who once dubbed Germany “the sick man of Europe” in an influential 1998 analysis, thinks that label would be overdone today, considering its low unemployment and strong government finances. That gives Germany room to act — but also lowers the pressure to make changes.
The most important immediate step, Schmieding said, would be to end uncertainty over energy prices, through a price cap to help not just large companies, but smaller ones as well.
Whatever policies are chosen, “it would already be a great help if the government could agree on them fast so that companies know what they are up to and can plan accordingly instead of delaying investment decisions,” he said.
These are big, fraught decisions. Fast likely isn’t in the cards.
AP (“President touts ‘Bidenomics’ though new poll shows just 34% approve his handling of the economy“):
President Joe Biden made his pitch Wednesday to a skeptical public that the U.S. economy is thriving under what he now touts as “Bidenomics” — even as a new poll showed that could be a hard sell as the foundation for his 2024 reelection campaign.
In a major economic speech in Chicago, Biden said his administration’s efforts were sparking recovery after Republican policies had crushed America’s middle class. But the poll said only one in three U.S. adults approve of his economic leadership.
That 34% figure is even lower than his overall approval rating of 41%, according to the survey from The Associated Press-NORC Center for Public Affairs Research.
Biden’s approval figures have barely moved for the past year and a half, a source of concern for a president pursuing a second term on his ability to govern and focus on workers. He wants voters to connect local roads and bridge projects, factory construction and the rise of electric vehicles and renewable energy to the millions of dollars in initiatives he signed into law during the first two years of his administration.
“Bidenomics is about the future,” he declared in his Wednesday speech to cheering supporters. “Bidenomics is just another way of saying: Restore the American dream.”
At the same time, he sought to paint previous Republican tax cuts as deeply flawed, saying they helped the rich but failed the middle class for decades as the promised “trickle down” benefits never seemed to come to the less wealthy.
“The trickle down approach failed the middle class,” he said. “It failed America. It blew up the deficit. It increased inequity. And it weakened our infrastructure. It stripped the dignity, pride and hope out of communities, one after another.”
[…]
The new poll identifies a weakness within Biden’s own base. Many of the Democrats he needs to marshal in 2024 are comparatively unenthusiastic about his economic record. Seventy-two percent within his party say they approve of his handling of his job overall, but just 60% say they approve of his handling of the economy.
By comparison, during the depths of the pandemic as unemployment spiked, Republicans approved by overwhelming numbers of then-President Donald Trump’s economic leadership. Only about 1 in 10 Republicans now approve of Biden overall or on the economy, a testament to the polarization that defines modern U.S. politics.
[…]
Overall, 30% of U.S. adults say they think the national economy is good, up slightly from the 25% who said that last month, when the president and congressional Republicans were in the midst of negotiations over raising the nation’s debt limit and a historic government default was a risk. No more than about a third have called the economy good since 2021.
The administration is making a data-driven argument in addition to Biden’s speech. The Treasury Department released an analysis showing that spending on factory-related construction has doubled since 2021 after adjusting for inflation. White House economists issued a report that shows inflation is lower in the U.S. than the rest of industrialized nations in the Group of Seven.
White House aides believe that Biden’s speech on Wednesday can generate greater awareness of his policies and increase Democratic voters’ appreciation of the economy. While the president’s allies acknowledge that many Americans still hold dim views of the economy, they note that the actual economic data was far worse last November, when Democrats mounted a stronger-than-expected showing in the midterm elections.
Biden aides say they are encouraged by data showing Americans’ views can be changed by a consistent message reinforced on multiple fronts, which is what the president and his Cabinet are setting out to do by touring the U.S. over the next three weeks. Their hope is that repetition of Biden’s accomplishments, coupled with a contrast to GOP proposals to undo those initiatives, will stick with voters for 2024.
POLITICO (“Biden puts all his chips on the table with a push on ‘Bidenomics’“):
President Joe Biden is tying his political fate to the U.S. economy — recessionary risks be damned.
The White House this week is going all in on a campaign to claim credit for the nation’s post-pandemic resurgence, touting an economic vision that aides see as so central to Biden’s presidential legacy they’ve gone as far as giving it a name: “Bidenomics.”
It’s a fresh messaging push that marks the most aggressive attempt yet by Biden world to convince the public that the economy is, in fact, good. It’s also a major bet that the bottom won’t fall out, at least through November 2024.
“They’re going to wrap their arms fully around the economic strategy and economic results,” said Seth Harris, the former deputy director of Biden’s National Economic Council. “And I think their expectation is that there will not be a recession.”
The question of how strongly to tout the economy has vexed virtually every president running during a time of recovery. Boast too hard and voters may perceive you as out of touch. Stay too quiet and risk the perception of taking hold that times are bleak and getting bleaker.
Biden has pledged to avoid the missteps of his former boss, Barack Obama. He was reluctant in real time to play up good economic news after voters recoiled at his first attempt to do so though an infamous 2010 tour dubbed “Recovery Summer.” The current effort is an implicit recognition that Biden has more work to do.
Key to the sales pitch, which will include a speech Wednesday by the president formally outlining his economic case, is defining what exactly Bidenomics is. Ahead of the address, White House aides described the term as a broad collection of policies aimed at using government muscle to revive and reshape the economy to help the middle class. They pointed to a range of efforts, including bolstering manufacturing investments, expanding high speed internet access and cracking down on industries that charge so-called junk fees.
If the definition is a bit all-encompassing, the implication is clear. Biden’s political fortunes, his top aides believe, will hinge on how effectively they can hammer home the idea that voters are better off than just a few years ago — and have the Biden administration to thank for it.
“There’s going to be billions of dollars spent laying out what Joe Biden has done,” said one Democratic national political consultant familiar with the campaign strategy. “All these things are incredibly popular. But people don’t really know about them.”
[…]
Biden advisers privately acknowledge the hazards of centering an economy that’s likely closer to a peak than a valley, especially more than a year out from Election Day. Branding whatever happens over these next 17 months as the result of Bidenomics reflects an even bigger gamble, opening Biden up to a raft of attacks from his Republican opponents if the U.S. hits a downturn.
The administration’s attempt to label Biden’s economic legacy just more than halfway through his first term has struck even some Democrats as premature, and a potential unforced error.
“Bidenomics sounds like bad math,” said a Democratic strategist who was granted anonymity to speak frankly. “Bidenomics sounds like when my parents tell me something costs $2 and it’s $20.”
Shockingly, the WSJ Editorial Board (“Bidenomics in One Lesson“) is not impressed:
As it gears up for the 2024 re-election campaign, the White House is undertaking a political salvage operation over the economy. President Biden is now embracing what we have long called Bidenomics as a badge of honor, and he’s telling tales about how spthelendid everything is and why he deserves credit for it
The White House is going on this PR campaign because it can read the polls. Mr. Biden’s approval rating on the economy is 38.3% in the latest Real Clear Politics average. People don’t think the economy is all that great. So in Chicago on Wednesday Mr. Biden touted all the new construction going on from the spending that Democrats passed in the last Congress. And there’s no denying that when you spend literally hundreds of billions of dollars to subsidize certain industries, you can get new plants.
But then why are voters so unhappy? The answer can be found in one lesson by looking at the nearby chart. It tracks average real hourly earnings for all workers in the private economy across the Biden Presidency, and it tells an ugly story about the impact of the worst inflation in 40 years and the standard of living. This is the inflation that Mr. Biden did so much to ignite with all of his spending.
Here’s the chart (the version at the link is interactive):
It is, to say the least, odd. First, the y axis is in 10-cent increments, making the difference between the peak of $11.40 and the trough of $10.95 look enormous. Second, why the hell would you put a comparison of 2021, 2022, and 2023 in 1982-1984 dollars?
In 1982-84 dollars, which takes account of inflation, average hourly earnings were $11.39 when Mr. Biden took office but started to decline immediately and didn’t stop falling until inflation peaked in June 2022. They have bounced up a little but were still back only to $11.03 in May. That’s a 3.16% decline in real earnings for the average worker across the 29 months of the Biden Presidency.
It’s perfectly reasonable to adjust earnings for inflation. Indeed, while I’m a Federal employee and get annual cost of living adjustments, they have been decidedly lower than inflation, which has been the highest by far in my working life. But using 1982-84 dollars makes no sense here, in that it changes the baseline for no apparent reason.
I’ve tried to look up the numbers myself but can’t easily find them on the BLS site. But the fact that WSJ bizarrely changed them to 1982, 1983, and 1984 dollars is a pretty good indication that their argument is less interesting using the logical 2021, 2022, and 2023 dollars. It’s not like BLS doesn’t have a handy dandy inflation calculator to make that comparison easy.
These are official Labor Department statistics. Mr. Biden can’t deny them, so he had someone fudge the point by writing in his Chicago remarks that, “Look, pay for low-wage workers has grown at the fastest pace in over two decades.” We’d like to see how his economists cherry-picked the data to justify that one.
All of which reminds us of the old Marx Brothers joke: Who are you going to believe, me or your own eyes? Regarding Bidenomics, Americans should believe their own eyes.
These guys literally just fudged the numbers!
WaPo’s E.J. Dionne (“If ‘Bidenomics’ works, it will be a very big deal“) is, not surprisingly, more receptive.
President Biden might not seem like a revolutionary, but he is presiding over a fundamental change in the nation’s approach to economics. Not only is he proposing a major break from the “trickle-down” policies of Ronald Reagan, as Biden highlighted in a speech in Chicago on Wednesday. He is also departing from many orthodoxies that shaped the presidencies of Democrats Bill Clinton and Barack Obama.
Government is no longer shying away from pushing investment toward specific goals and industries. Spending on public works is back in fashion. New free-trade treaties are no longer at the heart of the nation’s international strategy. Challenging monopolies and providing support for unionization efforts are higher priorities.
You can trace the break in part to new circumstances and challenges, as national security adviser Jake Sullivan argued in an important speech of his own in April.
Heightened competition with China and the urgency of dealing with climate change are part of the story. So is the long rise of wealth and income inequality accompanied by the collapse of many of the country’s industrial communities. The breakdown of supply chains during the pandemic put an accent on resiliency and an emphasis on bringing home manufacturing, for semiconductors especially but for other products, too.
The shift also has to do with who Biden is, his long-standing alarm over the Democratic Party’s alienation from working- and middle-class voters and an unease with the Reagan-era economic consensus that hovered over Democratic administrations.
“When I worked for him as vice president,” Sullivan told me earlier this month, “he would frequently talk to me about his underlying discomfort with some of the prevailing economic assumptions, both with respect to trade and domestic investment.”
[…]
Bidenomics has also gone global. One indicator is the exceptional and ongoing debate Sullivan’s speech provoked in proposing a “new consensus” to replace “a set of ideas that championed tax cutting and deregulation, privatization over public action and trade liberalization as an end in itself.” The old formulas, Sullivan argued, not only failed to address new problems; they didn’t work on their own terms.
“In the name of oversimplified market efficiency,” he said, “entire supply chains of strategic goods, along with the industries and jobs that made them, moved overseas.” The idea that freer trade “would help America export goods, not jobs and capacity, was a promise made but not kept.” He stressed the need for “a modern American industrial strategy” and the benefits of “moving beyond traditional trade deals to innovative new international economic partnerships.”
Sullivan advised Hillary Clinton’s 2016 campaign against Donald Trump, and the election’s outcome provoked a long period of reflection on the anger he encountered throughout the country. “As I traveled across the United States on behalf of the campaign,” Sullivan wrote in Democracy Journal in 2018, “I was reminded again and again how the broken aspects of the American economy were not the inevitable product of disembodied forces like ‘globalization’; they were very much the product of policy choices shaped by decades of conditioning.”
The Biden-Sullivan project amounts to a program of deconditioning. Sullivan told me his speech “is really a description not just of my own journey on these issues” but also the journey of his generation responding to “the shortcomings of the previous approach.”
I’m deeply skeptical of industrial policy but agree with many parts of the Biden approach—which, ironically, echoes what his predecessor touted but largely failed to do. While I was very much part of the elite Western consensus on the virtues of globalization, the way that we did it created a race to the bottom that was good for us as consumers but bad for much of the working class, who had to compete against the unfair labor practices and shoddy standards of China and much of the global south. While Trump’s “America First” policies were mostly wrongheaded, it really makes sense to end our economic dependence on China. Further, while “Infrastructure Week” became a running joke under Trump, it absolutely makes sense to invest in green energy, transportation infrastructure, expanding broadband access, clean drinking water, and the like. The market simply won’t provide those organically, certainly not as fast as we need them.
As to the politics, it seems reasonable to take credit for popular policies that were only passed because had managed to cajole his own party caucus in Congress. The idea that, by labeling it “Bidenomics,” he’ll be blamed if the economy goes south is laughable. He’s going to be blamed for it, anyway! It has been thus for as long as I’ve been following presidential politics.
UPDATE: Commenter @Andy points out that it’s actually BLS, not the WSJ, who normalizes these figures into 1982-1984 dollars. Their rationale:
Since we first published the data in the mid-1970s, the headline ECI numbers always focused on nominal change in employer costs—that is, without any adjustment for inflation. Over time, these nominal changes have shown some wild swings, with annual changes in private sector wages above 9 percent in the early 1980s, and typically in the 1–3 percent range throughout the 2010s.
We also have had inflation-adjusted data available, although we didn’t previously highlight the numbers in the quarterly news release. The constant-dollar ECI, or real wage change, could move from negative to positive, based on changes in the CPI. For example, those 9+ percent annual changes in the nominal ECI in the early 1980s, when adjusted for inflation, resulted in a nearly 5-percent annual decline in real wages. More often, the constant-dollar ECI reported annual changes in the range of plus or minus 2 percent.
With recent increases in the CPI nearing 40-year highs, there’s more interest in whether wage growth is keeping up with inflation. Thus, we have expanded the availability of constant-dollar ECI data. The ECI uses the Consumer Price Index for all Urban Consumers (CPI-U), U.S. city average, to adjust for inflation. The process involves rebasing the CPI to match the ECI base period of December 2005. (The published CPI is currently based in the 36-month period from 1982 to 1984.)
One would think that, in the age of big data, it would be easy to update all of their figures to current dollars automatically. But this makes some sense.
My apologies for erroneously concluding that the WSJ editors were pulling a fast one.
Defense analyst Loren Thompson devotes a recent Forbes column (“Ukraine, Taiwan Challenges Spur Efforts To Strengthen Munitions Industrial Base“) to America’s dwindling stockpiles:
The dual stresses of conflict in Ukraine and potential conflict in Taiwan have forced a wholesale reevaluation of how the U.S. government purchases munitions and other materiel, with an eye to accelerating every facet of the process.
The urgency of military needs has merged with the Biden administration’s efforts to craft a national industrial policy, and the bureaucratic result is akin to when frozen regions begin to thaw with the coming of spring.
At this point the U. S. isn’t able to supply arms to Ukraine at the pace at which the country needs them. Will we able to supply both Taiwan and Ukraine at the same time?
One presumes that’s rhetorical, since we’re barely keeping up with the demands in Ukraine. And, in a follow-up column (“Urgent Military Need For ‘Affordable Mass’ Can’t Wait For A New Generation Of Smart Munitions“), Thompson declares, “Some experts believe that the current stock of long-range, precision-guided munitions would run low within weeks after a war with China commenced.” So, we’re currently not able to do either at a sufficient pace, let alone both simultaneously.
After showing that the United States is devoting more aid to Ukraine than all of our European allies and partners combined, Dave concludes,
Here’s a question the significance of which shouldn’t be lost on any of the interested parties: given a choice between Ukraine and Taiwan, which is our higher priority? I think it’s Taiwan.
I agree but think it’s a false choice, at least at present.
Our National Defense Strategy, the unclassified summary of which was released last October, declared that we are “prioritizing the PRC challenge in the Indo-Pacific, then the Russia challenge in Europe,” followed by an array of “persistent threats” (Iran, North Korea, violent extremist organizations, global climate change, etc.). This is in line with the previous administration’s strategy and builds on the “Asia pivot” by the Obama administration a dozen years ago.
At the same time, while we see “the People’s Republic of China (PRC) as our most consequential strategic competitor and the pacing challenge for the Department,” we also recognize that “Russia poses acute threats, as illustrated by its brutal and unprovoked invasion of Ukraine.”
So, given that Russia has already invaded Ukraine while China has yet to give any indication that a Taiwan invasion is imminent, it stands to reason that the acute threat will get the temporal priority over the pacing challenge. All of our planning and acquisitions efforts for the future fight are based on China because they’re vastly wealthier and more capable than Russia. But there’s a fight right now in Ukraine and the Biden administration has, rightly in my view, judged that it’s in our moral and strategic interests to arm Ukraine and render Russia a less acute threat.
Now, of course, Dave’s implication that China could exploit the situation by pushing up the timeline of a Taiwan invasion is surely right. Presumably, the intelligence community has judged that risk low enough to justify our Ukraine policy but, hey, they’ve been wrong before.
Where Dave and I are very much in agreement, though, is that, if we’re going to be a global superpower prepared to project power around the world, we need to upgrade our industrial base and vastly increase our stockpiles. As the two Thompson columns linked above suggest, that’s one area in which there’s actually significant bipartisan consensus and momentum for action.
In “What America Needs Is a Liberalism That Builds,” Ezra Klein argues that the progressive project is often impeded by Democratic processes as much as by Republican obstructionism. And he uses arguments from a libertarian think tank to build his case. His core complaint:
In a seriesofcolumnsover the last year, I’ve argued that we need a liberalism that builds. Scratch the failures of modern Democratic governance, particularly in blue states, and you’ll typically find that the market didn’t provide what we needed, and government either didn’t step in, or made the problem worse through neglect or overregulation.
We need to build more homes, trains, clean energy, research centers, disease surveillance. And we need to do it faster and cheaper. At the national level, much can be blamed on Republican obstruction and the filibuster. But that’s not always true in New York or California or Oregon. It is too slow and too costly to build even where Republicans are weak — perhaps especially where they are weak.
This is where the liberal vision too often averts its gaze. If anything, the critiques made of public action a generation ago have more force today. Do we have a government capable of building? The answer, too often, is no. What we have is a government that is extremely good at making building difficult.
The thing is, we were world-leading good at this sort of thing once upon a time. We managed to build transcontinental railroads and telegraph networks in record time a century and a half ago and this continued well into the 20th century.
[T]he Empire State Building was constructed in just over a year. We are richer than we were then, and our technology far outpaces what was available in 1930. And yet — does anyone seriously believe such a project would take a year today?
“We need to unpack the many constraints that cause America to lag other major countries — including those with strong labor, environmental and historical protections — in delivering infrastructure on budget and on time,” [Brian] Deese [the director of Biden’s National Economic Council] continued.
Nor is it that we don’t spend a lot of money on infrastructure projects.
[T]he United States is notable for how much we spend and how little we get. It costs about $538 million to build a kilometer of rail here. Germany builds a kilometer of rail for $287 million. Canada gets it done for $254 million. Japan clocks in at $170 million. Spain is the cheapest country in the database, at $80 million. All those countries build more tunnels than we do, perhaps because they retain the confidence to regularly try. The better you are at building infrastructure, the more ambitious you can be when imagining infrastructure to build.
The problem isn’t government. It’s our government. Nor is the problem unions — another favored bugaboo of the right. Union density is higher in all those countries than it is in the United States. So what has gone wrong here?
I’m not sure he gets the answer right but it’s one to which I’m sympathetic:
One answer worth wrestling with was offered by Brink Lindsey, director of the Open Society Project at the Niskanen Center, in a 2021 paper titled “State Capacity: What Is It, How We Lost It, and How to Get It Back.” Lindsey’s definition is admirably terse. “State capacity is the ability to design and execute policy effectively,” he told me. When a government can’t collect the taxes it’s owed or build the sign-up portal to its new health insurance plan or construct the high-speed rail it’s already spent billions of dollars on, that’s a failure of state capacity.
But a weak government is often an end, not an accident. Lindsey’s argument is that to fix state capacity in America, we need to see that the hobbled state we have is a choice, and there are reasons it was chosen. Government isn’t intrinsically inefficient. It has been made inefficient.
And not just by the right:
What is needed most is a change in ideas: namely, a reversal of those intellectual trends of the past 50 years or so that have brought us to the current pass. On the right, this means abandoning the knee-jerk anti-statism of recent decades, embracing the legitimacy of a large, complex welfare and regulatory state, and recognizing the vital role played by the nation’s public servants (not just the police and military). On the left, it means reconsidering the decentralized, legalistic model of governance that has guided progressive-led state expansion since the 1960s, reducing the veto power that activist groups exercise in the courts, and shifting the focus of policy design from ensuring that power is subject to progressive checks to ensuring that power can actually be exercised effectively.
Klein expands on this by quoting one of Lindsey’s colleagues:
A place to start is offered in another Niskanen paper, this one by Nicholas Bagley, a law professor at the University of Michigan. In “The Procedure Fetish,” Bagley argues that liberal governance has developed a puzzling preference for legitimating government action through processes rather than outcomes. He suggests, provocatively, that that’s because American politics in general, and the Democratic Party in particular, is dominated by lawyers. Joe Biden and Kamala Harris hold law degrees, as did Barack Obama and John Kerry and Bill and Hillary Clinton before them. And this filters down through the party. “Lawyers, not managers, have assumed primary responsibility for shaping administrative law in the United States,” Bagley writes. “And if all you’ve got is a lawyer, everything looks like a procedural problem.”
This is a way that America differs from peer countries: Robert Kagan, a law professor at the University of California, Berkeley, has called this “adversarial legalism,” and shown that it’s a distinctively American way of checking state power. Bagley builds on this argument. “Inflexible procedural rules are a hallmark of the American state,” he writes. “The ubiquity of court challenges, the artificial rigors of notice-and-comment rule-making, zealous environmental review, pre-enforcement review of agency rules, picayune legal rules governing hiring and procurement, nationwide court injunctions — the list goes on and on.”
The justification for these policies is that they make state action more legitimate by ensuring that dissenting voices are heard. But they also, over time, render government ineffective, and that cost is rarely weighed. This gets to Bagley’s ultimate, and in my view, wisest, point. “Legitimacy is not solely — not even primarily — a product of the procedures that agencies follow,” he says. “Legitimacy arises more generally from the perception that government is capable, informed, prompt, responsive, and fair.” That is what we’ve lost — in fact, not just in perception.
Comparing the modern United States to the frontier of the 1860s or even the early 1930s is in many ways unfair. There are real obstacles to building that simply didn’t exist then. But it’s perfectly reasonable to compare ourselves to other OECD democracies. And we’ve tied our own hands with well-intentioned regulations that practically invite long and costly litigation.
Rebuilding that kind of government isn’t a question of regulatory tweaks and interagency coordination. It’s difficult, coalition-splitting work. It pits Democratic leaders against their own allies, against organizations and institutions they’ve admired or joined, against processes whose justifications they’ve long ago accepted and laws they consider jewels of their past.
The environmental movement cheers when Biden says he wants to decarbonize and fast. But if he said that in order to achieve that goal, he wanted to reform or waive large sections of the National Environmental Policy Act to speed the construction of clean energy infrastructure, he’d find himself at war. What if he decided to argue that government workers shouldn’t just be paid more, but they should be easier to both hire and fire?
The problem here is that Klein and I are wonks, interested in solving problems efficiently, first and ideologues second. And, on the domestic policy side at least, Klein is wonkier than me.
I’ve spent most of my adult life trawling think tank reports to better understand how to solve problems. When I go looking for ideas on how to build state capacity on the left, I don’t find much. There’s nothing like the depth of research, thought and energy that goes into imagining health and climate and education policy. But those health, climate and education plans depend, crucially, on a state capable of designing and executing policy effectively. This is true at the federal level, and it is even truer, and harder, at the state and local level.
So this is what I have become certain of: Democrats spend too much time and energy imagining the policies that a capable government could execute and not nearly enough time imagining how to make a government capable of executing them. It is not only markets that have failed.
I find it interesting that Klein couches all of this in terms of “industrial policy,” which Third Way Democrats rejected in the early 1990s in favor of more market-based approaches. But little of this is about the state picking winners and losers (a concept he eschews earlier in the essay) but rather about the nature of the regulatory state. The Empire State Building was privately-owned and financed; the regulatory system simply allowed it to be built quickly.
While I’m still fundamentally conservative in preferring government to be involved only where necessary, I’ve long understood that certain infrastructure projects—roads, rail, airports, mass transit come readily to mind—are only possible with government footing the bill or at least securing land rights. It may well be that various “clean energy” projects will need public subsidy. But I’ve never really thought of infrastructure-building as “industrial policy,” which I’ve always seen as being about making the country’s manufacturing sector more robust and globally competitive.
Similarly, while I prefer regulation to be as modest and unintrusive as possible, it’s been decades since I thought the market would take care of workplace safety, environmental impacts, and the like. But we do seem to have created a regulatory structure that’s more burdensome of that of Western Europe, Canada, and Japan—all of which I tend to think of as more highly-regulated than the United States. Clearly, we’re doing something wrong.
In my absence Friday, an interesting sidebar discussion took place in the comment thread to my post “The Christian Love That Dare Not Speak Its Name” about the evolving tone of the comments section here at OTB as well as my own positions over the years.
Longtime commenter Boyd, who’s been with us since probably the earliest days of the blog, notes that my “shift to less conservative positions” and other factors have driven off most of the conservative commenters from “back in the day” and that this has created a vicious cycle in which “very often, the valid, incisive non-liberal point is just ignored, so the conservatives often don’t get engaged in any actual discussion of the matter at hand.” MattB and Stormy Dragon, in particular, rebut the second part of that.
In terms of the evolution of the commentariat, it’s clearly the case that most of the better contributors are to the left of me. There are a handful of very thoughtful conservative voices left–and I count Boyd among them–but they do seem fewer in number than was once the case. Then again, I’ve noted the same trend in the blogosphere as a whole. Several right-of-center bloggers that were daily reads once upon a time now just make me shake my head. For that matter, the same thing has happened with conservative politicians.
There are three, not mutually exclusive, explanations for this. First, as I’ve argued elsewhere, we’ve simply changed the definition of conservative at a rapid clip. Second, conservatives are putting emphasis on parts of their agenda that were once peripheral. Third, I’ve become less conservative even by the terms of the debate operational in 2003.
In the grand scheme of things, my views are pretty much what they were when I launched the site a little over nine years ago. I was, after all, already approaching middle age, had been rabidly interested in politics for a quarter of a century, had a PhD in political science, and spent several years teaching the subject by that point; I was not exactly a tabula rasa. But in 2003, we pretty much divided up sides on the blogs based on where you stood on the Iraq War. Even guys like Charles Johnson, who was and remains very liberal on the social issues, was on Our Team. So, for that matter, were John Cole, Andrew Sullivan, and others. There was almost no heresy that could get one ousted from good standing so long as one supported a vigorous military posture against America’s enemies.
From literally the first days of the blog, I was castigating the likes of Ann Coulter, pushing back against the notion that those who opposed a war that I supported were therefore unpatriotic, took a libertarianish posture on the social issues, and was openly hostile to organized religion. I could certainly have written ”The Christian Love That Dare Not Speak Its Name” back then although, having just left the Deep South after having spent much of my teenage and adult life there, it would have been somewhat less snarky and more temperate towards the heartfelt beliefs of the sort of people in whose company I used to spend a lot more time.
On the other hand, my views on some social issues have changed. Most notably, my view of homosexuality in general and gay marriage in particular have surely evolved leftward. My 2003 views on gays were moderate for a 37-year-old Southern conservative but I still considered the “gay lifestyle” bizarre, was skeptical of gays serving openly in the military, and thought society had every right to deny its blessing to marriages it found perverse. Having spent most of my life in a culture where homosexuality was reviled, my only exposure to the phenomenon were the weirdos on TV wearing leather chaps that showed off their bare asses at gay pride rallies and various repressed weirdos who didn’t mind being flamboyant in a culture that despised them. Living in a much more gay-friendly metropolitan era, I simply know more “normal” gay people who are different from other “normal” people I know only in their private sexual conduct.
Additionally, as Steven Taylor and I have both written, our views have evolved in fairly similar ways over the years mostly through the act of blogging. We’re a pretty good controlled experiment, albeit one with some serious methodological flaws. But we started with very similar viewpoints and information consumption habits when we started teaching together at Troy way back in 1998. He remained there when I moved up here in 2002 and we started blogs within a few days of one another in early 2003. So, while my geographic relocation is no doubt one influence, the blogs would seem to be the common factor.
The nature of blogging, at least in the way that we do it, is that one’s arguments, analyses, and worldview are constantly being challenged. Most obviously, commenters and other bloggers take our statements to task and we’re forced to defend them. Less obviously, simply finding interesting materials to blog about requires an inordinate amount of reading–mostly of people who don’t have identical views to your own because, unless one is simply curating content, there’s not much fodder in “What he said.”
I’ve written tens of thousands of posts over the years, several thousand of them substantive analyses of public policy issues. Being intellectually honest–a career liability in the punditry business, frankly, but an occupational hazard of the scholar–simply requires changing one’s views over time when presented with compelling evidence and argument.
Aside from some modest drift on social issues, I’m less economically libertarian than I was nine years ago. It’s not so much that I trust Big Government solutions than I once did but that I ‘m less confident in the Invisible Hand and the power of individual self-determination.
While I still strongly oppose central economic planning, even at the benign level of Industrial Policy, I no longer think that the free market always yields winners based on the wisdom of the crowds. More crucially from a public policy standpoint, while I still think a person’s earnings rightly belong to him and not the society as a whole–and thus I find the notion of a top marginal rate of 70 percent, as it was when Ronald Reagan took office, or 90 percent, as it was for much of the postwar period, confiscatory and wrong–I don’t view low taxes as a secular religion. The Laffer Curve curves, after all, and we actually do need to raise money to pay for the government programs that we agree upon.
In addition to the changes in the conservative movement and in my own philosophy, another phenomenon is taking place–a change in emphasis in Republican politics. Going back to the earliest days of my political memory, which began roughly with the Iran Hostage Crisis and the 1980 presidential election, the GOP has spent a lot of time talking about the social issues on the campaign trail. Notably, though, they didn’t make them a governing priority, aside from tertiary things like denying public funding for abortion services and the like. While Ronald Reagan talked a good game on the values issues, his governing emphasis was on defeating the Soviets by building up our military. As recently as the last Republican presidency, that of George W. Bush, the practical governing emphasis was on the War on Terrorism and its offshoots in Afghanistan and Iraq. While I came to oppose the execution and even the strategy of both efforts, I nonetheless bought the underlying premise that defeating those forces hostile to American security was vital.
While I think Mitt Romney will pivot this campaign back to more familiar ground, the internecine Republican debate that’s been ongoing since the election of Barack Obama has been on what strike me as fringe issues. While I reject the argument that it’s mostly about race–there were plenty of nutty conspiracy theories about Bill Clinton, too–the debate has been almost completely unhinged from reality. Ridiculous numbers of Republicans believe ridiculous things about the president. ObamaCare, which is at its heart corporate welfare for the health insurance industry, is widely decried as “socialist” and all manner of irrational invective has been hurled at the Heritage Foundation-devised individual mandate. And the combination of religious zealot Rick Santorum’s emergence as the Last Not-Romney Standing and the takeover of some state legislatures by people a lot like him has us debating such nonsense as to whether birth control pills are moral and whether it would be a good idea to force women to get vaginal ultrasounds as a precondition for obtaining legal surgery.
What’s happened along the way, unfortunately, as that those of us who call out these actions as outlandish and unhelpful to the conservative and/or Republican cause are dismissed as heretics. A handful have gone full John Cole and become bitterly anti-Republican. Most, though, are simply dismissed as RINOs and squishy moderates who don’t believe in anything and don’t feel like they have a place in the dialog.
This is reinforced by a phenomenon that I’ve written a lot about over the years, of American politics taking on a team sports mentality where all that matters is the color of the jersey. If Barack Obama is in favor of something, Republicans must therefore denounce it. If Barack Obama does something that we all support–say, giving a Go order to the raid that killed Osama bin Laden–we are expected to find some way to minimize or criticize it.
This mentality has been present in the blogosphere for a number of years now but seems to have taken hold even among the political grown-ups. Even the World’s Greatest Deliberative Body is acting along these lines, with Republican leaders not even bothering to pretend that they’re interested in advancing conservative goals by forcing the president to give more than he gets. No, the chief goal is to ensure Obama doesn’t get re-elected and an 80 percent win on the issue is considered instead a 100 percent loss.
It’s a maddening environment in which to try to have an intelligent conversation.
Charles Duhigg and Keith Bradshear have an excellent article in today’s New York Timesanswering a question that President Obama once asked Steve Jobs. Contrary to what you might think, it isn’t just cheap labor and lack environmental regulations that explain it:
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
Why can’t that work come home? Mr. Obama asked.
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
(…)
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
The article goes on to explain how the advantage that Apple found in China wasn’t just cheap semi-skilled labor, but the economies of scale and speed with which requests could be complied with that really sealed the deal. The story about the iPhone’s screen tells the tale most effectively:
For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.
Then a bid for the work arrived from a Chinese factory.
When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.
The Chinese plant got the job.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
(…)
Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
In China, it took 15 days.
Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.
[Y]es, money is part of why all of our gadgets are built in China. But what started a couple of decades ago as a reach for efficiency has now resulted in the entire electronics-manufacturing ecosystem being lifted up and transferred to China.
Apple doesn’t build iPhones in the United States, in other words, because there is no longer an ecosystem here to support that manufacturing. There’s no supply chain, there aren’t enough super-low-cost workers, and there are not enough mid-level engineers. And many Americans looking for work are still hoping for a return to jobs, salaries, and lifestyles that have simply disappeared.
This is a complex problem, and there’s no easy solution. But it’s a problem this country is going to have to fix. Or the massive middle class that once drove America’s prosperity will just cease to exist.
Of course, the problem with American politics is that easy solutions are all we ever hear from politicians because that’s all that voters want to hear. Any politician who dares to present ideas that cannot be summarized into nice easy sound bites usually ends up getting ignored, and all that putting out a detailed plan of any kind tends to accomplish is that it leaves the candidate in question open to more and more criticism. More importantly, though, the American people don’t want to hear things like Blodget says from their political leaders. Just ask John McCain when he bluntly stated during the Michigan Primary in 2008 that many of the manufacturing jobs that went overseas weren’t going to come back. He was right, but he was roundly denounced not only be Democrats by members of his own party. Pessimism, or to put it better honesty, doesn’t play well in politics. Americans want to hear that things are going to get better, quickly, that we will always be the leader of the world, and that we are the greatest nation ever to exist in the history of the world. Admitting that we’ve got a serious problem and that there’s pain to come in the future? Yea, try to make that sell in a race for the White House
Yves Smith doesn’t share in the praise for the article and notes that the authors missed a very important fact in their story about those iPhone glass screens:
So basically, the Chinese funded a completely non-economical glass R&D facility IN ANTICIPATION of getting the Apple order. There is no way anyone would build a factory like that unless the money was close to free. It already had glass samples in stock! The “some subsidies trickled down” sounds way too innocent. It sounds more like someone recognized the importance of Apple as a marquee customer, and whether the push came from the officialdom or businessmen with the right connections in high places, it doesn’t really matter. This project smells of having serious government backing. How can private businesses anywhere compete with that?
They can’t, of course, but I also don’t think that anyone is seriously suggesting that the United States can or should adopt anything resembling Chinese industrial policy. For one thing, it goes against the entire ethos of our economic and legal systems not to mention our culture. For another, it doesn’t strike me as an efficient use of resources. China has been pumping billions into projects like this, and many of them have laid dormant. That’s seems to me like the classic signs of a bubble, when and how it pops is another question. Smith also points out that Apple may not be the best example of how and why an American manufacturer prefers to rely on overseas labor. Changing the screen design mere weeks before product roll out, be points out, is as much an example of Jobs’s erratic genius as anything else and isn’t necessarily a sign of good project management. The only reason it worked out well for Apple, it seems, is because the Chinese firm was able to push its workers to work longer hours than any American ever would. In other words, Chinese near-slave labor saved Steve Jobs’s ass.
Notwithstanding these valid criticisms, the article raises compelling points that should deeply concern all of us. As Blodget notes, it’s principally the lack of the infrastructure needed for the kind of manufacturing that Apple, or any cellphone or electronics manufacturer for that matter, would need that makes it unlikely that those kinds of jobs will return any time soon. Moreover, thanks to offshoring, advances in technology, and increases in worker productivity, there are entire classes of employment that either no longer exist anymore or don’t require nearly as many bodies as they used to. Many of these are the semi-skilled positions that were once a ticket to a middle class lifestyle. The same thing goes for the positions that used to be waiting for college graduates, and are now harder to come by. Where, exactly, are these jobs going to come from?
There is one factor the article cites that we could do something about. We don’t graduate nearly enough engineers in this country, partly because American college students seem inclined to pick “easy” majors rather than one of the STEM subject areas. We also don’t do much to encourage foreign students who come to the United States to study in these areas to stay here after they graduate. On that last point, many have suggested that we should offer H1-B visa’s to any foreign college student who agrees to stay and work in the United States after graduating. It’s a reasonable idea, as is any the encourages immigration by high-skilled workers and professionals, but right now immigration policy is ham-strung by a Republican Party unwilling to compromise at all until some ridiculous ideal of “border security” is achieved, even if its a policy that helps the economy. It’s a dumb position to take on many levels, and it’s hurting the economy.
Apple is now the leading corporation in America by any number of measures. However, even accounting for its overseas factories, it employees barely 1/10th of the number of employees that General Motors employed in the 1950s, and just a fraction of the number of employees that General Electric employed in the 1980s. Quite simply, they don’t need that many workers anymore. And yet, the population of potential employees is far higher now than it was in the 50s or the 80s. Unless everyone is going to be a software designer, we’re going to have to find somewhere to employ all those people that provides more than just a minimal wage. During his campaign for the Presidency, Jon Huntsman talked about a manufacturing renaissance that he believed was on the verge of occurring in America. One hopes he’s right about that because, otherwise, we’re going to have some big problems to deal with.
Update: Don Boudreaux shares a Letter To The Editor he sent to the Times in response to the article linked above:
As your reporters admit, Apple uses lots of overseas workers precisely because those workers are willing to work in worst conditions and for lower pay than are American workers – strong evidence that the options open to even low-skilled Americans are far superior to those of most workers in developing countries. Our prosperity enables even the poorest of us to avoid such toil.
Of course, some people (apparently including, according to your report, Pres. Obama) wonder why Apple doesn’t simply hire American workers at American wages to do more of those jobs. Alas, the unavoidable result of that policy would be a substantial rise in the price of Apple products and a fall – likely total – in the number of such products produced and sold.
Put differently, your report, like Mr. Obama, insinuates that low-wage jobs overseas (and jobs currently performed by machines) would, if transferred to America, somehow become the same – but higher paying – jobs for workers here. This insinuation is wrong. If Apple followed Mr. Obama’s suggestion, there would soon be no Apple and, hence, no “iPhone work” that the U.S. could possibly “lose out on.”
This is a fair point, although I would quibble with the assertion that there are so many options open to Americans right now. As anyone who’s been unemployed for more than a month or so can tell you, that’s not necessarily the case, and for large segments of the American workforce it does seem like the path to a middle class life that used to exist is disappearing. That’s not to say that Chinese wages and working conditions should be brought to the United States. That would be absurd, and I doubt most Americans would accept it. However, it still leaves unanswered the question of where the jobs are going to come from in the future.
This morning, Joe Scarborough tweeted, “National Review, George Will and Red State all rightly find Newt Gingrich to be an unacceptable choice for conservatism.”
It is an interesting phenomenon. Gingrich, who most of us presumed was a novelty candidate running solely to feed his ego and sell more books, is now the Republican frontrunner, holding the widest lead anyone has had thus far in the horserace. But, not only does the Establishment not like Gingrich, even major bastions of the Tea Party brand of anti-Establishment Republicanism are leery.
The Washington Examiner, for example, has endorsed Mitt Romney and explicitly cautions against nominating Gingrich.
Several weeks ago on this page, we urged conservatives to “think twice” before deciding to back Gingrich, saying that he “has been seen as an ultimate Washington insider, as exemplified in that $1.6 million he was paid to represent Fannie and Freddie, and his work with Nancy Pelosi on behalf of cap-and-trade.”
The fact is, Gingrich is part of the problem, not part of the solution. He has tried mightily to shift attention away from his Washington insider status, saying, “I have never done lobbying of any kind.” But that claim simply does not square with the facts, especially concerning Gingrich’s lobbying Republicans in Congress for a new Medicare entitlement in 2003
[…]
Try as he might, Gingrich cannot change the fact that, as rival Ron Paul has pointed out in a TV spot, his reported net worth went from $10,000 when he entered Congress in 1978 to $7.5 million when he left Congress in 1998. And remember, it was only then that he began making millions by selling access to his vast networks of influential Washington contacts to clients like PhRMA and Freddie Mac. Combined with his rhetorical unpredictability and short-fuse temperament — he is like an exploding cigar, waiting to be lit — Gingrich’s insider status makes him a symbol of congressional back-scratching and an easy target for Obama’s political hit squads.
It is not unusual in politics for voters to project their hopes and dreams onto a fresh candidate. But Gingrich is hardly a blank slate. It should be remembered that he is the only Speaker ever to be reprimanded by the House of Representatives, and was ordered to pay $300,000 in penalties because of his ethical transgressions. It also needs to be remembered that he was engaging in an adulterous affair with a twentysomething aide (now his wife) even as he was preparing the impeachment of President Clinton for having an adulterous affair with a twentysomething intern. Republican voters seem to be engaging in willful amnesia about what is euphemistically called Gingrich’s “baggage.” They shouldn’t: It would be used against him in ugly ways in a general election campaign.
Even Ann Coulter–hardly a bastion of pragmatism–piles on:
If all you want is to lob rhetorical bombs at Obama and then lose, Newt Gingrich — like recent favorite Donald Trump — is your candidate. But if you want to save the country, Newt’s not your guy.
Gingrich makes plenty of bombastic statements, but these never seem to translate into actual policy changes.
After becoming the first Republican speaker of the House in nearly half a century, for example, Newt promptly proposed orphanages and janitorial jobs for children on welfare.
It was true that welfare had destroyed generations of families shorn of the work ethic and led to soaring illegitimacy rates, child abuse and neglect. Maybe orphanages and child labor would have been better.
But we didn’t get any orphanages. We didn’t get jobs for children in families where no one works.
What we got was the cartoonish image of Republicans as hard-hearted brutes who hated poor kids.
[…]
With Gingrich we get the worse of all worlds. He talks abrasively — offending moderates and galvanizing liberals — but then carries a teeny, tiny stick.
We want someone who will talk softly and unthreateningly while implementing vital policy changes. Even when Gingrich doesn’t completely back off conservative positions, his nutty rhetoric undermines the ability of Republicans to get anything done.
By the time of the 1996 Republican National Convention, Gingrich was so widely reviled that the Democrats’ main campaign strategy against all Republican candidates for office was to link them with Gingrich.
When Ann Coulter is condemning your “nutty rhetoric,” you may have crossed a line.
The National Review editorial Scarborough mentions praises Gingrich before burying him:
We say that mindful of his opponents’ imperfections — and of his own virtues, which have been on display during his amazing comeback. Very few people with a personal history like his — two divorces, two marriages to former mistresses — have ever tried running for president. Gingrich himself has never run for a statewide office, let alone a national one, and has not run for anything since 1998. That year he was kicked out by his colleagues, the most conservative ones especially, who had lost confidence in him. During his time as Speaker, he was one of the most unpopular figures in public life. Just a few months ago his campaign seemed dead after a series of gaffes and resignations. That Gingrich now tops the polls is a tribute to his perseverance, and to Republicans’ admiration for his intellectual fecundity.
Both qualities served conservatives well in the late 1980s and early 1990s, when Gingrich, nearly alone, saw the potential for a Republican takeover of Congress and worked tirelessly to bring it about. Even before the takeover, Gingrich helped to solidify the party’s opposition to tax increases and helped to defeat the Clinton health-care plan. The victory of 1994 enabled the passage of welfare reform, the most successful social policy of recent decades.
Gingrich’s colleagues were, however, right to bring his tenure to an end. His character flaws — his impulsiveness, his grandiosity, his weakness for half-baked (and not especially conservative) ideas — made him a poor Speaker of the House. Again and again he combined incendiary rhetoric with irresolute action, bringing Republicans all the political costs of a hardline position without actually taking one. Again and again he put his own interests above those of the causes he championed in public.
He says, and his defenders say, that time, reflection, and religious conversion have conquered his dark side. If he is the nominee, a campaign that should be about whether the country will continue on the path to social democracy would inevitably become to a large extent a referendum on Gingrich instead. And there is reason to doubt that he has changed. Each week we see the same traits that weakened Republicans from 1995 through 1998: I’d vote for Paul Ryan’s Medicare reform; Paul Ryan’s Medicare reform is radical right-wing social engineering; I apologize for saying that, and no one should quote what I said because I was wrong; actually, what I said was right all along but nobody understood me. I helped defeat Communism; anyone who made money in the ’80s and ’90s owes me; I’m like Reagan and Thatcher. Local community boards should decide what to do with illegal immigrants. Freddie Mac paid me all that money to tell them how stupid they were. Enough. Gingrich has always said he wants to transform the country. He appears unable to transform, or even govern, himself. He should be an adviser to the Republican party, but not again its head.
“Gingrich’s is an amazingly efficient candidacy in that it embodies everything that is disagreeable about modern Washington. He’s the classic rental politician,” George Will said on “This Week” today.
“People think that his problem is his colorful personal life. He’ll hope that people concentrate on that rather than, for example, ethanol. Al Gore has recanted ethanol. Not Newt Gingrich. Industrial policy of the sort that got us Solyndra, he’s all for it. Freddie Mac, he says, hired him as a historian. He’s not a historian.”
The bottom line is that people who have been paying rapt attention to American politics since at least 1994 simply don’t like Newt Gingrich very much. The average voter–even the average primary voter–has only fuzzy recollections of Gingrich as Speaker. To them, his carny act seems original. And, in contrast to previous frontrunners Rick Perry and Herman Cain, his ability to speak in paragraphs makes him seem positively brilliant.
This act will wear thin this go-round just as it did in the 1990s. The only question is whether it’ll happen in time to derail his train to the nomination or we’ll have to wait until November.
George Will’s disdain for Mitt Romney pales in comparison of his disgust at Newt Gingrich. From yesterday’s “This Week”:
Gingrich’s is an amazingly efficient candidacy, in that it embodies almost everything disagreeable about modern Washington. He’s the classic rental politician. People think his problem is his colorful personal life. He’s gonna hope people concentrate on that, rather than on, for example, ethanol. Al Gore has recanted ethanol. Not Newt Gingrich, who has served the ethanol lobby. Industrial policy of the sort that got us Solyndra – he’s all for it. Freddie Mac, he says, hired him as a “historian.” He’s not a historian. Hire Sean Wilentz, hire Gordon Wood if you want a historian.
Now, as a technical matter, Gingrich, who has a PhD in history from Tulane, is a historian. But Will’s right: Freddie didn’t hire him for his decades-lapsed scholarly credentials but for his ability to lobby Congress and his credibility in some conservative circles.
Will’s undisguised scorn is a good illustration of why Gingrich, even as he makes a bid for the affections of rank-and-file anti-Romney voters, is unlikely to win over much of anti-Romney conservative upper crust. As much as there’s still a demand for an impressive, thoughtful conservative in the race who can lead the party to Romney’s right, most of the political elites who know Gingrich best were convinced a long time ago that he isn’t that guy.
Ordinarily a Chapter 11 filing by yet another solar energy firm would not be news, bankruptcies in the industry are rather common it seems. However, the bankruptcy filing by a Silicon Valley firm yesterday is raising questions about the Obama Administrations “Green Jobs” program, and leads one to wonder why the Federal Government is providing loan guarantees to companies in an industry with a history of insolvency:
WASHINGTON — A Silicon Valley maker of solar power arrays that was started with high hopes and $527 million in loans from the federal government said on Wednesday that it would cease operations. The failure of the company — and the loss to taxpayers — is likely to renew the debate in Washington about the wisdom of clean energy subsidies and loan guarantees.
President Obama praised the company, Solyndra, for its advanced technology during a visit last year. But in a statement on Wednesday, Solyndra said its business had run into trouble because of difficult global business conditions, including slowing demand for solar panels, and stiff competition.
The Energy Department, which approved the funding, said China’s subsidies to its solar industry were threatening the ability of Solyndra and other American manufacturers to compete. The price of a solar array, measured by cost per watt of capacity, has fallen 42 percent since December 2010, the agency said.
Two other American solar companies, Evergreen Solar and SpectraWatt, also sought bankruptcy protection in August, and both said competition from Chinese companies had contributed to their financial problems.
In the case of Solyndra, some experts said that regardless of the competition, the company’s unique designs, which were expensive to manufacture, were to blame for its failure.
Solyndra was promised loans of up to $535 million under a guarantee program authorized by Congress as part of the 2009 stimulus package. The Energy Department has made more than 40 promises of guarantees, of which Solyndra was the first. It has committed $18 billion in guarantees and expects to allocate several billion dollars more by the time the program finishes at the end of September.
The government calculates premiums for the guarantees, essentially a loan fee based on the risk of default, but it picks up the cost of the premiums for the companies in the subsidy program. By that yardstick, it has spent $2.4 billion in credit subsidies for the program.
This was not a typical government guaranteed loan. Rather than being provided by a commercial bank and guaranteed by the government, the loan was provided by the government itself through an entity known as the Federal Financing Bank, a division of the Treasury Department. In essence, then, the program was loaning taxpayer dollars to these companies with one hand, while guaranteeing the repaying of these loans to the FFB, also with taxpayer dollars, with the other. Neither Solyndra nor any of the other companies that benefited from these “loans” (it’s really more appropriate to call them gifts) assumed any risk. All the risk was assumed by the American taxpayer, which makes the appallingly bad judgment that was apparently used here even more egregious.
In the case of Solyndra, one has to wonder how the company ever qualified for loan guarantees to begin with. The company has never recorded a profit in its entire history and earlier this year cancelled an expansion that was supposedly going to be financed in part by the loans received through the Obama Administration program. Just a year ago, PriceWaterhouseCoopers issued a scathingly negative report on the company two months before President Obama went there to tout the company as an example of his investment in “Green Jobs.” It leads one to question both the criteria that were used to determine who gets the loan guarantees to begin with, and the political judgment of the White House in choosing this particular firm to showcase the President’s economically dubious idea that subsidizing so-called “Green Jobs” will somehow create demand for “Green” products where it doesn’t currently exist.
At least one Member of Congress is raising questions about how Solyndra was able to qualify for this Federal gift despite having no record of actually making money, and plenty of reasons to doubt it could succeed:
“In an apparent rush to push stimulus dollars out the door, the Obama administration wasted $535 million in taxpayer funds in guaranteeing a loan to a firm that has proven to be unviable in the global market,” said Representative Cliff Stearns, the Florida Republican who is chairman of an investigative subcommittee of the House Energy and Commerce Committee.
He said the Energy Department might have authorized the guarantee because an Oklahoma oil man who was a donor to the Obama campaign, George Kaiser, was an investor in the project. In a joint statement, Mr. Stearns and Representative Fred Upton of Michigan, the chairman of the committee, said, “We smelled a rat from the onset.”
But the Energy Department dismissed that assertion, saying that Solyndra applied for federal help during the Bush administration and that Obama-era officials merely finished the process the Republicans had begun.n
That last bit, of course, doesn’t really answer the question of whether or not political connections inside the Obama Administration helped Solyndra gain approval for participation in the program, which apparently didn’t come until well after George W. Bush had left office.
As Bruce McQuain points out, this case is a microcosm of what happens when government tries to do something it isn’t designed or intended to do. Traditionally, start up companies like Solyndra start out by getting their initial working capital from a combination of the assets of the owners, private investors, and venture capitalists. Given that Solyndra is located in the center of the venture capital world, where tech companies that won’t show a profit for years are given money by VCs who believe that they’ll one day be something big. The number of tech companies that are household names today that started out this way is quite large. But venture capitalists are risking their own money, or the money of people who have entrusted them with the decision making authority to choose investments, and they’ve typically got experience in the industries in which they’re investing. More importantly, most large VC investments come with strings attached that include bringing in professional management, and otherwise guaranteeing that what started out as a project between friends is run professionally by people who make sound business decisions.
None of that is true when the decisions are being made by the government. For one thing, the people who make the decisions aren’t playing with their own money and they don’t owe any fiduciary or contractual obligations to the people whose money they are investing. If a VC makes a bad judgment on an investment, he either loses his own money or likely loses investors. If a government bureaucrat makes a bad judgment on a program like this, they’re unlikely to lose their job, they haven’t lost their own money, and all they need to do when the loan guarantee has to be paid is send the bill to Congress. They don’t have the incentive to make the right decisions, and they likely don’t have the experience either. And they’re playing with your money and mine.
One final point is worth noting. If Solyndra was not able to obtain venture capital funding in Silicon Valley of all places, that fact alone should have raised eyebrows. As it turns out there were significant problems with the company’s business model and its product design that were pointed out long before the loans were approved by Treasury. These concerns were either not known to the decision makers, or they were ignored in the name of helping a “Green” company. Neither choice is good.
NBC’s Bay Area affiliate calls the bankruptcy a political catastrophe for the President. While I’m not sure I would go that far, it is certainly Exhibit A in the case against the kind of “smart people” Industrial Policy that Democrats have longed to engage in for years, and which President Obama foolishly went forward with in the name of “Green Jobs.”
If you were a visitor from Mars, watching tonight’s State of the Union address and Paul Ryan’s Republican response, you would have no reason to think that the looming insolvency of our entitlement system lies at the heart of the economic challenges facing the United States over the next two decades. From President Obama, we heard a reasonably eloquent case for center-left technocracy and industrial policy, punctuated by a few bipartisan flourishes, in which the entitlement issue felt like an afterthought
(…)
[Ryan’s] remarks, while rhetorically effective, were even more vague about the details of that reckoning than the president’s address. Ryan owes his prominence, in part, to his willingness to propose a very specific blueprint for addressing the entitlement system’s fiscal woes. But in his first big moment on the national stage, the words “Medicare” and “Social Security” did not pass the Wisconsin congressman’s lips.
Of course, Ryan wasn’t speaking for himself so much as he was speaking for the GOP as a whole, and the harsh reality is that his Roadmap, which is the only serious GOP proposal that addresses the long term debt problem, has not been endorsed by many Republicans and the leadership has noticeably not made it part of the overall Republican plan. The President, meanwhile, made it clear just yesterday that he would not entertain serious entitlement reform. This isn’t really surprising. If you look at the polls, it’s clear that Americans don’t have much of a stomach for entitlement reform, even though they seem to realize that we can’t continue on the way we’re going. It’s much easier for politicians to pander to voters than to lead on an issue like this, because the instant reaction of partisans on either side to any proposal related to Medicare or Social Security is to preach doom-and-gloom to the elderly and those nearing retirement age.
If we lived in a country with adult political parties, the release of the Commission’s report would serve as the beginning of a long overdue national conversation about how to get our fiscal house in order. Liberals would recognize that social spending would have to be cut, and conservatives would recognize that defense spending cuts and tax increases would have to be on the table. Instead, what we’re likely to see is more of the same political gamesmanship — liberals accusing the GOP of wanting to starve Grandma, conservatives accusing liberals of just wanting to raise taxes so they can spend more. And the debt will continue to rise.
At some point we’re going to be forced to deal with these problems, but it’s not going to happen until we start feeling the pain that we could ward off if we’d just grow up already
The Debt Commission’s report provided an opportunity for the start of a national conversation on what is going to be the most important issue of the next decade. Instead of acting like adults, though, the report has largely gone ignored. President Obama could have used its ideas as a jumping off point for his address last night, but instead he didn’t mention it at all and repeated the same tired bromides about protecting Social Security and Medicare that we’ve heard from every President since the programs came into existence. Paul Ryan could have been more honest with the public but, because the leadership that he spoke for doesn’t want to touch entitlements, he glossed over the real cause of budget deficits and the National Debt. Last night was, in short, a profoundly missed opportunity. Something tells me that, in a few years, we’re going to look back and wish that they’d been more honest with us last night.
Megan McArdle calls for an extension of Godwin’s Law that would put an end to “using the word fascist to apply to the current, or indeed previous, administration.”
How is this helpful? Has clarifying the distinction between fascism and socialism really added to most peoples’ understanding of what the Obama administration is doing? All this does is drag the specter of Hitler into the conversation. And the problem with Hitler was not his industrial policy–I mean, okay, fine, Hitler’s industrial policy bad, right, but I could forgive him for that, you know? The thing that really bothers me about Hitler was the genocide. And I’m about as sure as I can be that Obama has no plans to round up millions of people, put them in camps, and find various creative ways to torture them to death.
I agree with her conclusion but not her argument.
Last things first: The Final Solution was possible because Nazi Germany was a fascist state and therefore no one dared question Hitler’s orders. Genocide is, however, not a necessary outgrowth of fascist ideology nor have most genocides been carried out by fascist governments. Benito Mussolini, the Founding Fascist (if you will), wasn’t a mass murderer and Pol Pot, Idi Amin, and Omar al-Bashir aren’t fascists. The genocide was what made Hitler evil, not what made him a fascist.
With that out of the way, I completely agree that dubbing American presidents and their policies fascist is not a helpful way to advance the debate. See, for example, my previous discussions of Jonah Goldberg’s Liberal Fascism and the Obama cult of personality. While there may be aspects of the Bush or Obama policies that have something akin to Communism or Nazism or Fascism or whathaveyou, those terms have so much extraneous baggage that the discussion invariably strays from the actual thing being criticized. [As Dave Schuler points out in the comments, there’s a name for this: “poisoning the well.”]
We should be careful here to differentiate name-calling from the actual substantive argument. It’s a very different thing to argue that bringing up the idea of nationalizing health care makes you a Marxist/Socialist/Communist than to argue that enacting a given policy will naturally lead down a road to ever-more-powerful government. So, Friedrick Hayek’s Road to Serfdom is different than Ann Coulter’s Treason: Liberal Treachery from the Cold War to the War on Terrorism or even Al Franken’s Lies (And the Lying Liars Who Tell Them): A Fair and Balanced Look at the Right.
George Will has a column in today’s WaPo, “Making Congress Moot,” making a point that I’ve been making about the Bush administration’s dubious use of TARP funds to bail out the auto companies.
Congress’s marginalization was brutally underscored when, after lawmakers did not authorize $14 billion for General Motors and Chrysler, the executive branch said, in effect: Congress’s opinions are mildly interesting, so we will listen very nicely — then go out and do precisely what we want.
On Friday the president gave the two automakers access to money Congress explicitly did not authorize. More money — up to $17.4 billion — than had been debated, thereby calling to mind Winston Churchill on naval appropriations: “The Admiralty had demanded six ships: the economists offered four: and we finally compromised on eight.”
The president is dispensing money from the $700 billion Congress provided for the Troubled Asset Relief Program. The unfounded assertion of a right to do this is notably brazen, given the indisputable fact that if Congress had known that TARP — supposedly a measure for scouring “toxic” assets from financial institutions — was to become an instrument for unconstrained industrial policy, it would not have been passed.
This isn’t even slightly hyperbolic. The thing is, though, as Dave Schuler noted on Wednesday’s OTB Radio, Congress has the ability to stop this — and virtually every other bit of executive overreach that many of us constantly complain about — at any time it musters up the will to do so. That it hasn’t means, essentially, that it doesn’t want to.
It looked for a while as if the United States was firmly entrenched as the world’s leader in Internet innovation. President Bill Clinton and Al Gore, his vice president, did much to encourage development of the country’s technology infrastructure, writes Thomas Bleha in an article accessible on the Foreign Affairs magazine Web site (www.foreignaffairs.org).
From the 1960’s until the day President Bush took office, he writes, “The United States led the world in Internet development.” No longer. The Bush administration’s policies, or lack thereof, have since allowed Asia – Japan in particular – to not only catch up in the development and expansion of broadband and mobile phone technology, but to roundly pound us into the dirt. “The lag,” he diplomatically asserts, “is arguably the result of the Bush administration’s failure to make a priority of developing these networks.”
Japan instituted what used to be called an industrial policy, which provided incentives for expanding broadband and wireless technology to the masses. The United States, meanwhile, has done essentially nothing. Japan is now well ahead of us in the percentage of homes with broadband. And their broadband on average is about half the price and 16 times the speed of ours. Japan is even further ahead in mobile telephony. “U.S. mobile phone service remains awful by European, let alone Japanese, standards,” writes Mr. Bleha, who served as a Foreign Service officer in Japan for eight years and has a forthcoming book on the subject.
Meanwhile, Japan, South Korea and other Asian countries are poised to leap ahead of the United States in any number of areas: teleconferencing, telecommuting, remote medical services, distance education, multimedia entertainment.
The economy as a whole is at risk because of broadband shortcomings, says Charles H. Ferguson of the Brookings Institution (brookings.edu). Last year, he asserted in a book, “The Broadband Problem,” that the United States might lose up to $1 trillion because of constraints on broadband deployment.
Please, spare me the cries for “industrial policy.” We heard this throughout the 1980s and well into the 1990s, when Japan’s economy went into a decade-long tailspin. The advantage of having government make technological decisions and then subsidize them is that everyone can get on a standard system and be able to invest in it without fear of backing the wrong horse. The disadvantage, though, is that that system might be inferior to the one that finally emerges in a competitive market.
While I haven’t seen Ferguson’s book, he had a working paper on this topic three years ago (h/t Steve M.). Ironically, it points out that most of the problems the U.S. has had in this area stem, not from a lack of central regulation but, on the contrary, too much:
First, the pace of deployment and technological progress in broadband services remains seriously inadequate. Second, the principal source of this problem is the monopolistic structure, entrenched management, and political power of the incumbent local exchange carrier (ILEC) and cable television (CATV) sectors, worsened by major deficiencies in the policy and regulatory systems covering these industries. Third, this is a truly important issue. Failure to improve broadband performance could reduce U.S productivity growth by 1% per year or more, as well as reducing public safety, military preparedness, and energy security. And finally, structural reforms in industry, policy, and the U.S. regulatory system are required. Appropriate policy measures include structural separation of switching, enhanced services, and data transport in the telephone industry; divestiture of content from< transmission in the CATV sector; mandatory open interfaces for interconnection; increased financial transparency and disclosure; and reforms in regulatory systems to increase their efficiency, high technology expertise and political independence.
Some of those problems have been addressed–although by no means solved–with legislation that has come out since. During the evil Bush Administration, no less.
Further, even though it’s incredibly obvious, analysts who compare the United States to Japan or to countries in Western Europe seem to always miss the fact that the United States absolutely dwarfs those places in geography. Getting broadband and cellular access to rural South Dakota is a hell of a lot harder than getting it to the rural areas of Denmark or Japan.
(The Foreign Affairs site is down as I write this. I’ll check the article later and may add more if warranted.)
