Devin Nunes Weighs In

Devin Nunes, a Republican, a Trump supporter and Chairman of the House Intelligence Committee previously said (and continues to say) that he doesn’t see any evidence that Trump Tower was wiretapped by the Obama Administration. There appears to be unanimity on that point, taken very literally. But now, according to Nunes, new evidence has surfaced indicating that on numerous occasions, personal communications of U.S. citizens involved in the Trump transition were indeed intercepted by U.S. intelligence. Moreover, the information apparently had little or no foreign policy value, and was unrelated to the Russia investigation. Not only that, according to Nunes it seems that details about the individuals caught up in this net were widely distributed to players in the intelligence “community.”

 

Prior to the delivery of Nunes’s bombshell, James Comey had testified before the House Intelligence Committee the day before. In that testimony, Comey said that the FBI “was investigating the nature of the links between individuals associated with the Trump campaign and the Russian government, and whether there was any coordination between the campaign and Russia’s efforts”. A major focus of the hearing was on whether there was evidence that the prior Administration had “wiretapped” Trump during the campaign, a charge made several weeks ago by His Excellency. On Twitter of course. Under questioning Comey said “I have no information that supports those tweets, and we have looked carefully inside the FBI.”

 

Up until Nunes press conference, with the Comey testimony in hand, the story line peddled by the “Resistance” was (1) that there is no possibility that Trump and Co. were subjected to surveillance by “the intelligence community” and (2) the Trump campaign colluded with Vladimir Putin to swing the election.

 

Let’s unpack all this. It is perfectly obvious that Comey’s statement is about as meaningless as it gets. And that is being charitable. Comey says he has no information that supports Trump’s Tweets after looking carefully inside the FBI. Big Deal. Suppose the information is at the NSA or the CIA? Or suppose a rogue agent somewhere decided to conduct surveillance of Trump and Co. but decided not to write a memo about it and send it to the New York Times? And how did the “intelligence community” get the information that sunk Mike Flynn, anyway?

 

Leave all that aside for now. Comey testified that the FBI was conducting what amounts to a counter-intelligence investigation that included the Trump campaign. How is it even possible for the FBI to run a counter-intelligence investigation of the Trump campaign and not conduct surveillance of said campaign? It is simply beyond belief. And if this is how the FBI manages counter-intelligence activities, we might as well ask the KGB if they’d like to set up an office at the Pentagon.

 

In the meantime Rep. Adam Schiff (D-CA) has effectively charged Trump and his associates with treason in a way that would make Joe McCarthy proud. According to Politicus USA, Schiff “…laid out all of the important “coincidences” involved in the Trump campaign’s relationship with Russia. He asked, “Is it possible that all of these events and reports are completely unrelated and nothing more than an entirely unhappy coincidence? Yes. It is possible, but it is also possible, maybe more than possible, that they are not coincidental, not disconnected, and not unrelated, and the Russians used the same techniques to corrupt US persons that they employed in Europe and elsewhere. We simply don’t know, and we owe it to the country to find out.”

 

Some of Schiff’s performance can be seen below.

There was a time a long ago (pre 1992) when politicians at least pretended to be embarrassed when they got caught telling the inevitable whopper. They also at least hesitated before charging the other side with being a tool of a foreign power, sans evidence. Not anymore. That is exactly what Schiff and Co are doing with lots of innuendo and zero evidence.

When Politics is Everything

We now we have the politicization of just about everything. It is accompanied by a destructive tribalism that leaves no stone unturned. The personal is the political. So political opponents are not merely those with whom you disagree about some issues. They are the enemy and must be crushed at all costs, using any method.

 

So it becomes OK to lie. Because so many have adopted Nietzsche’s nihilism: there are no facts, only interpretations. Norms of decency and civility are taken as signs of weakness. The institutions of civil society are increasingly under attack by radicals and campus book burners who willingly use violence, and who fear no sanction for doing so.What matters is the will to power.

The irony is that Vladimir Putin didn’t need to meddle in our elections to try to weaken freedom and democracy. Our own pusillanimous politicians are doing that all by themselves.

 

JFB

The Mandibles–A Review

The Mandibles: A Family, 2029 – 2047

By Lionel Shriver

Harper Collins 2016

421 pages

 

In September of 2016, Lionel Shriver, a novelist, gave the keynote address at the Brisbane Writers Conference. She made instant headlines when, donning a sombrero, she denounced the idea of “cultural appropriation”. For those lucky enough to be unfamiliar with the term, cultural appropriation refers to the practice of writing, acting, speaking, dressing in a voice, clothing etc. outside of one’s own ethnic, gender, racial etc. identity. The idea appears to have already gained wide currency on elite campuses among the snowflake brigades.
Lionel Shriver
Shriver argued that fear of cultural appropriation could have a chilling effect on literature; that it could pigeonhole minorities who wish to be seen as individual people rather than members of a group, and that it enforces a narrowing of vision. She is, of course, correct. Not only that, she is refreshingly direct in her approach.

 

When asked by a reporter from Time if she found any validity in the criticism of her speech leveled by a woman who walked out, she replied “No”. When asked if she felt that she had neglected to have empathy for the other side when writing the speech she answered: “I have no empathy with that side”. Needless to say, all this has prompted the neo-Marxist race, class, and gender crowd to reach for the smelling salts.

 

Not bad for a day’s work.

 

Shriver, until that point, was most famous for the novel We Need to Talk about Kevin, which she published in 2003. In June of 2016 she penned a near-future dystopian novel titled The Mandibles—A Family, 2029—2047 in which she excoriates conventional progressivism. It is a wickedly entertaining book. And it is easy to see why progressives are a bit taken aback by it, and by her. The book is unmerciful in its mockery of the pseudo intellectuals who mouth the vacuous pieties of the faith. Worse yet, in the book it is a precoscious 14 year old who is forever pointing out errors in the reasoning of a narcisistic Georgetown economics professor.

 

The book grabs you by the lapels from the first page. It is bitingly ironic, with a keen eye for the inanities of academic fads and pop culture. Stylistically, Shriver combines the irony of Tom Wolfe with George Orwell’s admonitions about the use and abuse of language. She does this in a way that is immensely entertaining and with a clear-headed libertarian bent, but without a hint of Randian hyperbole.

 

The plot centers around “The Renunciation” which refers to the day in 2029 when the U.S. defaulted on its debt in response to foreign powers refusing to accept payment in dollars for U.S. debt service (or eventually anything for that matter). In response to the American government’s reliance on the printing press for money, primarily to finance entitlement spending, foreign powers, including erstwhile allies, form a new currency. The new currency is called “bancorps” and U.S. creditors demand to be paid in it. The U.S. refuses and simply defaults on its debt. Amusingly enough, the U.S. Fed Chairman printing all the U.S. dollars that are quickly becoming worthless is named Krugman.

 

The U.S. government along with the default forbids any of its citizens from holding bancorps. And it isn’t too long before the government begins to confiscate the citizenry’s  gold holdings including jewelry. Needless to say, inflation skyrockets, barter takes over and the U.S. is on the road travelled recently by Venezuela. Anarchy rules as mobs take over the streets.

 

The Mandibles is powerful, well written, funny in a black-comedy sort of way, and immensely entertaining. Most of all, it is not a book about economics as the word is commonly understood. It is about people, incentives, and systems.

 

Economics is commonly thought of as the study of money and business. But that is a narrow understanding of the field. Economics started off as Political Economy. The first economist, Adam Smith, was a Professor of Moral Philosophy at the University of Glasgow where he wrote his Theory of Moral Sentiments.

 

Economics is better understood as the study of the way we make choices. For this, economists have as Schumpeter put it, a set of theories (like the relationships of supply and demand to prices) and a toolbox (statistics). Most importantly, the underlying theory is that man is a rational self-seeking being capable of making his own choices in furtherance of what he subjectively believes to be his own self-interest. That self-interest extends beyond mere monetary gain.

Notably, free choices and free trade tend to maximize social utility. Conversely, systems relying on top down command and control fail to achieve citizen satisfaction, and in the end,  tend to fail disastrously.

Shriver has a good grasp of this and conveys it well in her story telling. As the economy, the culture and civil society break down after “The Renunciation” people still have to make choices, but now their choices face far more difficult constraints than before. So the questions explored are how do they cope, how does it affect their beliefs (if at all), how do they adapt, who is best suited to adapt and why, how do they define moral quandaries in their decision making? Lurking underneath it all, Shriver makes clear that rational self-interest prevails in decision making, no matter changing circumstances.

 

Shriver ties the economic collapse to a fundamental problem of collectivism, which is necessarily dependent on command and control. The Renunciation occurred because the country could not pay its debts. Those unsustainable debts are the inevitable result of the welfare state. Entitlement spending just went on and on until the collapse—and continued on with money from the printing press. The argument for enforced altruism over rational self-interest failed as manifest by the failure of the State, because it is contrary to human nature.

 

The result of an attempt to reconstruct a society contrary to human nature is a collapse of civil society, and a return of man to a Hobbesian state of nature. Sometimes it makes a pit stop with authoritarianism along the way, but inevitably human nature prevails over attempts to recreate a “new man” as various utopians have tried—all with such disastrous results. The Mandibles, in its amusingly smart-alecky way strongly hints at this. And it also suggests, sort of, a way to redemption and rebirth.

 

All in all, The Mandibles is an excellent read. It is highly amusing, witty and provocative, just as the author clearly meant it to be.

 

JFB

 

 

 

 

Preet Bharara: It’s About Time

Aloha

 

As the salutation suggests, this post is coming from Hawaii, where we have been living these last three weeks. Thanks to the wonders of Airbnb we rented a cottage in Maui near Makawao, a little cowboy town planted in what the locals refer to as the “up country”. The scenery is gorgeous; not only that, we are a short 20-minute drive to some spectacular beaches. For entertainment we take in the local sights, which among other things included going to a Luau, watching hula dancers and downing a Mai Tai or two.

Hula Dancers perfrom at a Luau on Maui

 

Best of all, we don’t have any television in the cottage. Which means that we are not constantly being bombarded by either the latest Trumpism or histrionics of “The Resistance”. Quite a relief since we are smack in the middle of Progressive territory. In a lot of ways, Makawao is like Greenwich Village in the 1970s, but with way more Tattoos. A couple of towns over in LaHaina there is a Tattoo parlor named Spikes that actually broadcasts radio ads with voice-overs by Dustin Hoffman and Gene Simmons (of Kiss). Still not tempting.

 

There are plenty of Village Voice style hand out newspapers that carry stories about the state of “The Resistance”, hushed conversations about the impending fascist state, and guys wearing ponytails that turned gray a long time ago. And if you want to give those old tie-dye jeans one more trip around the block, this is the place to do it.

 

Alas, even from afar, ripples from another clash between HRH Donald Trump and the Resistance managed to wash ashore onto beautiful Maui. This one came compliments of Preet Bharara, U.S. Attorney for the Southern District of New York. It appears that Mr. Bharara is under the impression that Barack Obama appointed him for life to his position as U.S. Attorney.

 

Preet Bahrara Press Conference / NYT

When, on Friday, Bharara’s superior in the DOJ asked for his resignation, he refused, demanding instead that he be fired by Trump. (A new and not entirely clever take on the you can’t fire me, I quit, gambit.) Anyway Trump promptly fired him. The only shame is that it took so long, because by his behavior Bharara conclusively demonstrated that he was, and remains, unfit to hold the office of U.S. Attorney, or any responsible office in law enforcement.

 

Let’s understand what is going on here. Preet Bharara’s refusal to resign was simply another round of the grandstanding that has characterized his tenure as U.S. Attorney. To be fair, grandstanding seems to be an occupational hazard that easily latches on to Attorney’s General and U.S. Attorneys in New York. The list of recent shrinking violets includes Rudy Giuliani, Elliot Spitzer and Eric Schneiderman. (Honorable mention goes to Chris Christie of New Jersey for his dishonorable conduct on this score.)

The Real Problem

There is nothing wrong about a prosecutor launching a political career. That is not the problem with Bharara’s behavior. It is that that Bharara appears to have subordinated the law and the Constitutional order to advance his political goals.

 

It is absolutely clear that the Trump Administration was acting lawfully when it asked for Bharara’s resignation. Article II, Section 2 of the U.S. Constitution gives the President the power to nominate officers of the government who will serve with the advice and consent of the Senate. And those officers serve at the pleasure of the President. The relevant statute 28 U.S. Code § 541 reads as follows:

 

(a) The President shall appoint, by and with the advice and consent of the Senate, a United States attorney for each judicial district.

(b) Each United States attorney shall be appointed for a term of four years. On the expiration of his term, a United States attorney shall continue to perform the duties of his office until his successor is appointed and qualifies.

(c) Each United States attorney is subject to removal by the President.

 

(Added Pub. L. 89–554, § 4(c), Sept. 6, 1966, 80 Stat. 617.)

 

Nothing in the statute says the President has to be polite. So the obvious question is: What doesn’t Preet Bharara, graduate of Harvard Law School, understand about the sentence Each United States attorney is subject to removal by the President?

 

If Bharara doesn’t understand what that sentence means he lacks the competence to preside over the prosecution of a parking citation. But of course, he understands it very well. Which means that while he was U.S. Attorney for the Southern District he deliberately refused a lawful order by the President. So he was insubordinate. And let’s not pretend that “asking” for a resignation is simply a request. When I was 14 my father would ask me if I wanted to mow the lawn and somehow or other I managed to figure out that he wasn’t asking a question.

 

So why would Preet Bharara refuse to obey a Presidential order that was unambiguously lawful, not to mention standard practice with any new Administration? Getting fired, as opposed to handing in a resignation, has zero substantive impact on the ultimate outcome. But stirring up this little drama further damages the administration of justice, which has already suffered some major hits. The wreckers include Hillary Clinton, James Comey, Loretta Lynch, Bill Clinton, Chris Christie and Barack Obama.

 

Well, it seems pretty obvious that Bharara decided to make himself into a (faux) hero by pretending to be a martyr for “The Resistance”. What better way to launch a political career as an elected or appointed official in the future if and when Progressives are once again ascendant.

Prosecutors and Politics

Prosecutors in the United States have tremendous power. Their job is supposed to be to serve justice. It is not to collect convictions. Nor is it to demonize or prosecute unpopular people or advance popular political causes, as did Christie, Giuliani, Spitzer, Schneiderman and Bahrara to name a few. The list is hardly exhausting.

 

The awesome power that prosecutors possess requires that they be held politically accountable. The justice system is not their personal playpen. Which is why U.S. attorneys serve at the pleasure of the President, who is accountable at the ballot box.

 

It is hard to avoid the conclusion that Preet Bharara subordinated the letter and spirit of the law he took an oath to uphold. It is also clear that Bharara’s behavior was a challenge to the Constitutional order. Moreover it has the potential to further damage our already damaged political-legal system. Anyone who doubts this should just ask the following question. If an incumbent lost an election and refused to give up his office in the aftermath, how would his behavior in any way be different than Bharara’s?

Mahalo.

JFB

 

 

 

 

Where’s that $100 Trillion?

That’s right. Trillion.

 

There is a reason, actually lots of them, why Washington is consumed with the latest Trumpian Tweet to the effect that Team Obama spied on Trump’s Presidential campaign. For one thing, if the charge is true, it would suggest that the Obama White House used the power of the White House to attempt to influence the election outcome in a way that is wholly improper, if not illegal. At the moment Trump & Co have produced exactly zero evidence that any of this is in fact true.

 

On the other hand, Andrew McCarthy, a former federal prosecutor argues there is a plausible case to be made that the Obama White House, and by implication Obama himself, did in fact orchestrate surveillance of the Trump campaign or Trump associates, if not Trump himself. McCarthy’s analyses are worth reading and are available here, here, here and here.

 

Now, back to the $100 trillion.

 

While Washington is busy (1) with its various conspiracy theories and (2) dreaming up new ways to waste your money, the present value of unfunded Social Security, Medicare and Medicaid obligations continues to grow unabated. Entitlements plus debt service now accounts for something in the area of 71% of all federal spending. The present value of unfunded entitlements plus accumulated federal debt amounts to about $100 trillion conservatively speaking, give or take a few trillion, as they say in Washington.

 

And it is slated to get worse as the population ages.

 

President Trump has grandly and repeatedly announced that he does not intend to act to curb the growth of entitlements. Bernie Sanders and Elizabeth Warren have gone him one better. They want to increase entitlement spending. They will of course “pay for” all of this by “taxing the rich.”

 

That will be difficult since U.S. GDP amounts to a mere $20 trillion or so. Clearing the books will require finding an extra $80 trillion, after all earnings have been confiscated. As it turns out the total dollar amount of wealth held by households and non-profit organizations is about $107 trillion, so government could just come along and confiscate all private wealth to balance the books on entitlements. And have a little left over. Probably to start a new entitlement program.

 

By now it should be obvious even to diehard Progressives that the nation’s finances are simply out of control and that there is no conceivable way that government can pay all its bills. Unless there is major reform the government is simply going to default.

 

More likely there will be a series of partial defaults, taken one step at a time. It will begin by pushing back the retirement age, which is the equivalent of rescheduling a loan because the funds are not available to pay off the principal. And where medical services are concerned government will begin by rationing, and will simply deny medical care to those not deemed worthy of it. There is no escaping this outcome without substantial reform.

 

The Administrative State resembles nothing so much as an elaborate Ponzi scheme; its survival depends on a suspension of disbelief. But because the Administrative State is a structural fraud, it is inherently incapable of taking the action needed for reform before the whole thing comes crashing down. Which is why the mandarins in Washington would rather talk about anything but entitlement reform. In this they bear a striking resemblance to Wylie Coyote who is just fine when he runs off a cliff—that is, until he looks down. Which may not be too far from where we are today.

There is a Choice

So that leaves a choice. We can dismantle the fraud that is the Administrative State and replace it with market liberalism and limited government. Or we can continue on and follow the path of Greece and Venezuela.

 

Unless there’s an extra $100 trillion lying around that nobody knows about except Wylie Coyote.

 

JFB

To Trade or Not to Trade…

Economic Nationalism and the Trump Trade Agenda

According to Steve Bannon, the second prong of the Trump Administration’s policy focus is “Economic Nationalism”. The obvious first question is: what, exactly, does Bannon have in mind when he refers to Economic Nationalism? An important subsidiary question is whether the Trump Administration considers Economic Nationalism to be a distinct area of policy focus, or does the Administration consider it to be an integral part of an integrated policy agenda.
Steve Bannon

The term Economic Nationalism is certain to provoke well-deserved eye rolling among the vast majority of professional economists. The term sounds like one of those focus group inventions that sounds good to the untutored, but is actually bereft of substantive economic meaning. Proof of the pudding is Obama’s use of similar rhetoric, as when he referred to “Economic Patriotism” and attacked what he called corporate “deserters”.

 

Barrack Obama

That said, this type of thing has to be taken seriously for a few reasons. First, terms like Economic Nationalism have a distinctly unpleasant historical odor, one might say stench, about them, as the terms are associated with the likes of Juan Peron and Hugo Chavez, not to mention Adolf Hitler. (Fans of this bunch need to read no further, they are all pretty much beyond saving). Secondly, leaving aside its linguistic associations, Economic Nationalism is often (correctly) seen as a form a mercantilism, which though noxious, doesn’t reach the depravity of fascism or totalitarianism. But mercantilism is no day at the beach either. It (incorrectly) sees trade as a zero-sum game and can easily lead to resource wars and empire building, as it did in the past.

 

Third, to the extent that Economic Nationalism represents some kind of resurgent mercantilism, protectionism or isolationism, it is bad economic policy whose imposition would almost certainly harm economic growth in the United States and abroad leading to economic misery. Ironically enough, the bulk of the economic harms would fall mostly on the people who seem to be most enthusiastic about it.

 

Finally, Trump seems to mean what he says, and he and strategist Bannon seem to be on the same page.
Donald Trump

No matter how you slice it, it is hard to see how Bannon / Trumpian Economic Nationalism is different from old-fashioned protectionism.

 

 

Trade and Protectionism

 

It is important to understand what free trade is and what free trade agreements like NAFTA actually do. In a nutshell, free trade refers to the free exchange of goods and services across national borders. Free trade agreements make this possible by removing trade barriers between people and companies residing in different countries. The trade barriers that are removed or reduced are typically tariffs and regulatory schemes designed to give the importing country’s home producers an advantage over foreign rivals. Consumers pay for all this through higher prices.

 

Discussions about free trade and trade agreements are often phrased in language that obscures more than it reveals. For example, when speaking of trade, it is typical to hear someone say something like this. “The U.S. bought $10 billion worth of goods from Mexico, but only sold Mexico $6 billion worth of goods in return. Therefore the U.S. has a trade deficit of $4 billion with Mexico. Moreover, that’s $4 billion worth of goods that American workers could have made. Therefore trading with Mexico cost Americans to lose jobs.”

 

Let’s take this one piece at a time. It is true but misleading to say that America bought $10 billion worth of Mexican goods, as if America is an undifferentiated whole. It is more accurate to say that millions of individual Americans in the aggregate bought $10 billion worth of stuff that came from Mexico and that millions of Mexicans bought $6 billion worth of stuff made in the U.S. The reason that Americans bought the $10 billion worth of stuff (and vice versa) is that they got a better deal buying the Mexican goods, whether in quality, price or both. In short, American consumers are better off because they can buy better quality and / or lower priced goods made in Mexico and shipped to the U.S.

 

It is not in any meaningful sense true that Mexico “stole” American jobs through trade. The first reason is that apart from a small number of political jobs that require U.S. citizenship, there is no such thing as an American job. There are jobs that Americans do, just as there are jobs that Frenchman do. But there is no particular reason to think of any job as American, or French or Mexican.

 

Second, it is without doubt the case that some jobs that were formerly performed in America are now performed in other countries resulting in the temporary displacement of some American workers. But American consumers are better off because more goods and services are available at lower cost and better quality than were available previously.

 

When it comes to Americans who lose jobs as a result of foreign competition, it really doesn’t matter that the competition comes from abroad or the next town over. It could come from anywhere. Eastman Kodak, for example, did not ultimately fail because of foreign competition. It failed because it resisted innovation and the advent of digital photography and was competed out of business. The lesson here is that to survive and thrive, workers and businesses need to remain dynamic and competitive.

 

By encouraging—or at least not impeding—the free flow of labor and capital across national boundaries, free trade facilitates the spread of knowledge, innovation and economic dynamism. It correctly treats trade as a plus sum game of shared gains. In so doing free trade allows resources to be matched to their highest and best uses, thereby promoting economic efficiency and wealth creation.

 

Opposition to free trade is often rhetorically disguised. One of the more popular dodges is to be for “fair trade” as opposed to free trade. Politicians routinely claim they are in favor of trade, but that it has to be “fair”. But what could be fairer than two counterparties exchanging goods and services for a freely negotiated price? And what could be less unfair than a transaction in which the police power of the State (in the form of tariffs and regulations) is used to tip the scales to favor one side?

 

We often hear that trade is unfair because a foreign producer’s government subsidizes them, or that their currency is being manipulated to lower prices below the market level. And in some cases this is undoubtedly correct.

 

So what?

 

If a government wants to subsidize a domestic producer directly or through currency manipulation, that government is taxing its own citizens to benefit the citizens of the importing country. Let them do it all day long. It is simply self-defeating. To see this, let’s do a thought experiment.

 

Suppose Korea, in an effort to guaranty large exports of Korean cars, decided to subsidize the manufacture of Hyundai and Kia cars such that the companies could sell their cars in the U.S. for a mere $1 dollar apiece. We would soon see lots of Hyundai and Kia cars on the road. And sales of other brands would dive. But American consumers would be richer and Korean taxpayers poorer because Korea would be effectively shipping products over to the U.S. and getting almost nothing in return.

 

Obviously, that wouldn’t last long because it would be so costly to Korean taxpayers that they would revolt. They would revolt because the favoritism (and corruption) of the arrangement is so transparent. But in principle there isn’t any real difference between the example given in this thought experiment and real world subsides and trade barriers. The only difference is that the thought experiment is clear and real world arrangements are opaque.

 

The Trump Trade Agenda

 

The Trump Trade agenda gives every indication of being old-fashioned protectionism implemented through tariffs and regulation, and gussied up as “Economic Nationalism”. The Trump argument is that it will increase employment and wages in America. Except that it won’t.

 

To the extent that people in protected industries keep jobs they do so at the price of higher costs and lower quality for consumers. It necessarily means that inefficiency is being subsidized, which in turn means that the dollars being shoveled into inefficient enterprises are being denied to innovative and efficient businesses that represent the growth of the future.

 

The path to increased economic growth and with it, higher wages, is one that recognizes the importance of achieving productivity gains through innovation and Schumpeterian creative destruction. It does not come through subsidizing failure; nor does it come by taxing consumers to privilege the industries with the best lobbying efforts.

 

Trumpian protectionism does not just fail to make the case in its own right; it is also undermines his stated intention to roll back the Regulatory, or Administrative State. Any serious effort to impose trade protectionism would entail massive increase in the power of the Administrative State. How are we to distinguish what is and is not an “American” product. How far back do we have to follow the supply chain to see whether a car manufactured in South Carolina counts as American or foreign. Are BMWs made in South Carolina foreign or American? How about Volvos? And who makes that determination and how?

 

Should we consider iPhones to be American products? There are about 750 or so parts suppliers, of which 69 are in the U.S. About 85% of the “rare earth” elements in the iPhone come from China. But the intellectual property of the iPhone has its home in Steve Jobs from California. And, by the way, Jobs’s biological father was a Syrian immigrant to the United States.

 

The Politics of Trade

 

Unfortunately, the current political environment does not favor trade. Trump has bought into the illiberal if not bizarre idea that Americans need to be protected from the freedom to trade. Bernie Sanders, Sherrod Brown and Elizabeth Warren have been there all along. Free traders dominate the Republican Congressional leadership, so perhaps they can limit the damage that Trump seems intent on inflicting in concert with Democratic Progressives. Trump has already moderated on some things; perhaps Paul Ryan will talk some sense into him and provide a fig leaf for a decorous retreat.

 

Paul Ryan
One can only hope.

 

JFB