Donald Trump has a Rough Night. Deservedly So.

There is some argument over whether Mark Twain is the author of the aphorism “It is better to be silent and thought a fool than to speak and remove all doubt.” Monday night’s Presidential debate should leave little doubt that it is advice that Donald J. Trump should have heeded. After all, Trump opened with a diatribe against free trade that convincingly demonstrated that he doesn’t have the slightest understanding of basic economics despite his alleged business savvy.


About Free Trade


The case for free trade is not new. The theory of comparative advantage, which is the underlying theory in support of free trade, was developed by David Ricardo in the early 19th century. The basic idea is that gains from trade accrue to individuals, firms or nations from differences in their relative abilities to produce tradable goods. Countries should specialize in producing goods in which they possess a comparative advantage, and then trade among themselves.


For example, suppose France has a comparative advantage in producing wine and England has a comparative advantage in producing beer. They will both be better off if France produces wine, England produces beer and France trades some wine for some English beer. They will produce more of each good at lower cost than would have been the case had each produced both wine and beer. The two countries are wealthier than they would have otherwise been.


While this is well understood by economists, it is widely misunderstood (or disbelieved) by the public. That is largely because politicians insist on arguing that trade deficits are “bad” and trade surpluses are “good”. To see just how ridiculous this is try a thought experiment. Imagine that after a few years U.S. companies were to sell $1 trillion worth of goods into the Chinese market. Then imagine that in return for the goods sold, the U.S. companies received pieces of paper denominated in Chinese Yuan nominally worth $1 trillion. And further suppose that the U.S. companies decided never to spend the Chinese Yuan they received for the goods they sold.


The U.S. now has a trade surplus of $1 trillion and a vault filled with lots of pieces of paper. On the other hand there are $1 trillion worth of actual goods in China that Chinese consumers have available to them. For free. How in the world does that make U.S. companies and consumers better off?


It doesn’t.


The U.S. will have given away $1 trillion for nothing in return except for useless pieces of paper. Because ultimately, all the Yuan in the vault are only useful when they are spent. And when they are spent, they are ultimately spent on Chinese goods. When that happens the U.S. trade surplus is reduced, as is the U.S. capital account deficit, (the flip side of the same coin) and the accounts move into balance.


It is unfortunately true that Hillary Clinton joined in the trade bashing and attempted to deny that she referred to the Trans Pacific Partnership deal as “the gold standard”. She can’t even tell the truth about being right. That is a pity because it is one of the very few sensible things she has ever backed.


And All the Other Stuff


When discussing trade Trump merely displayed yet again the stunning depths of his ignorance. Most of the rest of the time he was busy demonstrating his trademark boorishness and his adolescent lack of self-control. Moreover, it is hard to imagine that the vast majority of taxpayers agree with Trump that his failure to pay any federal taxes for some years is a sign that he is smart. Ditto from financially benefitting from his foundation. He might want to check how Leona Helmsley fared after she announced “Only the little people pay taxes.”


As soon as the debate ended the Trump team started complaining about the moderator, Lester Holt, who happens to be a registered Republican. As everyone knows, the team that complains about the referee after the game is the losing team. Like all loudmouths, Trump and Co. excel at whining.


It is too early for most polls to have picked up the fall out (if any) from the debate. A Reuters / Ipsos poll published Wednesday put Clinton ahead by 4 to 6 points. The most recent general election tracking poll by LA Times / USC conducted before the debate shows Trump expanding a lead over Clinton from 3 points to 4.


Note: There is a difference in methodology in the two polls. The Reuters/ Ipsos poll is based on a random sample of 1,705 Americans interviewed online. The LA Times / USC poll takes a random sample of about 400 Americans from a constant cohort of about 3,000 people. It also has about a 1-week lag.





Breaking News…Clinton Decides Terror Threat is Real

In the wake of the latest terrorist attack, this time in New York and New Jersey, Hillary Clinton announced that “This threat is real…”.

Thanks for that update, Mrs. Clinton, but the rest of the world pretty much had that figured that out on 9/11, over 15 years ago.


Mrs. Clinton also announced that she has a plan (she has a “plan” for everything) to defeat ISIS that includes an intelligence “surge”. To all but the most gullible, it is painfully obvious that that the term “intelligence surge” is devoid of any substantive meaning, but works well in focus groups.

Not to be deterred, Clinton also took the opportunity to remind us that she “sat at the table” when the “hard decisions” were made about terrorism. Be on the lookout when a politician speaks of “hard choices”. It’s a tell. Politicians love to speak of hard choices as they strive mightily to avoid making them. In this regard it is instructive to call to mind Clinton’s past behavior as described by former Secretary of Defense Bob Gates. In his book “Duty: Memoirs of a Secretary at War” he recounts how Hillary Clinton, when she was a Senator from New York, declined to support the Bush Administration’s ultimately successful military surge in Iraq for political reasons. As Gates tells it, “Hillary told the president [Obama] that her opposition to the [2007] surge in Iraq had been political because she was facing him in the Iowa primary. . . .”


Gates is hardly a partisan. His criticisms of Donald Trump are particularly withering. His comments include this one. “At least on national security, I believe Mr. Trump is beyond repair. He is stubbornly uninformed about the world and how to lead our country and government, and temperamentally unsuited to lead our men and women in uniform… He is unqualified and unfit to be commander in chief.”

Naturally enough, that led to a fairly typical schoolboy rant from Donald Trump. This, according to NBC News is what Trump had to say, “We had a clown today, an absolute clown, Robert Gates,” Trump told a crowd. “He’s supposed to be an expert. He’s been there forever … he goes out and he says negative things about me. I never met him. I never talked to him. Believe me, I am so much better at what he’s doing than he is.”


Gates aside, it should be noted that Hillary Clinton, as Secretary of State, did have a seat at the table when the hard choices were made. And she does have a good deal of experience when it comes to making truly awful decisions. For example, the ongoing fiasco in Libya is almost entirely her handiwork. She was instrumental in, and continues to support, the Iran nuclear deal, the obvious defects of which become more apparent daily, not to mention the Obama Administration’s dissembling about it. The Russian reset produced the annexation of Crimea, and Soviet troops in parts of Ukraine. And the Obama Administration’s combined mishandling of Syria’s Assad, Russia’s Putin and Iran’s Khamenei has further eroded the U.S. position in the Middle East while opening the door to Russia.

So once again the major party candidates have seized the opportunity to demonstrate just how stunningly ill-qualified they are to take the oath of office come January 2017.


Bridge Gate Trial Starts Today

This just in. One of Trump’s lead sycophants and fellow adolescent, NJ Governor Chris Christie, who appears to have succumbed to a Trump induced case of Stockholm Syndrome is in the news again. According to prosecutors, Christie knew his aides were involved in plan to shut down lanes to the George Washington bridge as the plan was unfolding. And, prosecutors say, Christie was aware that the point of the exercise was to punish the Mayor of Fort Lee who had the temerity to decide not to endorse Christie’s re-election bid.


George Washington Bridge


Hillary Clinton’s Not So Splendid Little War

In October of 2015, Atlantic Magazine published a description of Hillary Clinton by Conor Friedersdorf. He wrote: “Using contested intelligence, a powerful adviser urges a president to wage a war of choice against a dictator; makes a bellicose joke when he is killed; declares the operation a success; fails to plan for a power vacuum; and watches Islamists gain power. That describes Dick Cheney and the Iraq War—and Hillary Clinton and the war in Libya.”


(Please see the very short Video below of Clinton’s world class diplomatic skills.)

In 2016 the effects of Hillary Clinton’s bellicosity in Libya are still rippling through world politics. To see how, we need to go back to 2003.


In October of 2003, U.S. intelligence agencies raided a cargo ship bound for Libya carrying equipment used for making nuclear weapons. Many of the seized components were manufactured by a firm in Malaysia under the guidance of Dr. A.Q. Khan, a Pakistani nuclear scientist who was at the center of a vast black market in nuclear weapons technology. Having thus been exposed, and under intense pressure both from the U.S. invasion of Iraq and international sanctions, Libya made its peace with the West. In December of 2003, Muammar Gaddafi agreed to eliminate Libya’s weapons of mass destruction, including chemical weapons and a decades old nuclear weapons program.


Please note there is considerable disagreement over the extent to which it was the Iraq invasion, sanctions on Libya, either, or a combination of the two that persuaded Gaddafi to relent on his weapons programs. For this discussion, it doesn’t matter. But three things do matter: (1) that he gave them up, (2) the outcome, and (3) the message sent to similarly situated players. More about this later.


Now let’s fast forward to 2011 and the Arab Spring. What began as peaceful protest in late 2010 turned into full-scale revolt, eventually bringing about the collapse of the Tunisian Government on January 14, 2011. The Egyptian Government of Hosni Mubarak toppled about month later on February 11, 2011. Protests began in Libya on February 15, 2011, eventually leading to a civil war between armed opponents of Moammar Gaddafi’s regime and forces remaining loyal to him.


As the situation unfolded, Secretary of State Hillary Clinton decided that it was time for the U.S. to intervene, but not because Libya posed a threat to the U.S. The rationale for the intervention was a recently developed doctrine known as “Responsibility to Protect” (R2P).


Wikipedia describes, the principle of the Responsibility to Protect doctrine as “… based on the underlying premise that sovereignty entails a responsibility to protect all populations from mass atrocity crimes and human rights violations. The principle is based on a respect for the norms and principles of international law, especially the underlying principles of law relating to sovereignty, peace and security, human rights, and armed conflict.”


In the event the U.N. Security Council, at the urging of the U.S., adopted a resolution in which the Council authorized member states to take “all necessary measures” to protect civilians under threat of attack in Libya. The resolution, which passed in March of 2011, cited the “Responsibility to Protect”. Shortly thereafter U.S. led NATO forces began bombing forces loyal to Gaddafi.


Responsibility to Protect morphed rather quickly into a de facto policy of regime change. It didn’t take long for opposition forces to hunt down Gaddafi and then summarily execute him within hours of his capture. Judging by the video above, Hillary Clinton of Yale Law School thought this was just hilarious.


The Aftermath

It is important to put subsequent developments in the proper context. Moammar Gaddafi had already either turned over or destroyed his weapons of mass destruction consistent with the bargain he had negotiated with the U.S. At the time, diplomats suggested the Libyan situation as a model for turning authoritarian regimes with WMD ambitions into responsible players. But Hillary Clinton put an end to that. It was at her urging that the U.S. turned on Gaddafi and attacked forces loyal to him, thus sealing his fate.


In the immediate aftermath, Libya descended into chaos, during which time radical Islamists stepped into the power vacuum left by Gaddafi and seized a foothold in the country. By September 11, 2012 Islamic jihadist groups attacked the U.S. embassy in Benghazi, and deliberately killed Ambassador Chris Stevens and 3 other Americans. But it doesn’t stop there.


While Europe continues its struggles with migration from the Middle East, Libya has become the major migrant gateway to Europe from Africa. Hundreds of thousands have attempted to make the journey through the chaos of Libya into Europe to escape desperate poverty in Africa. And as the Guardian reports, “Islamic State is using Libya’s migrant flow as cover to bring in foreign recruits. Those volunteers blend with migrants going across the Sahara to Tripoli, then break off to head north-east to the Isis headquarters at Sirte, where the Pentagon says jihadi numbers have doubled to 6,000 in the past year.”


Meanwhile, North Korea was watching as these events unfolded. And what they saw was a dictator who gave up his weapons of mass destruction after negotiating a deal with the United States, only to have the U.S. turn on him, then attack forces loyal to him and effectively sign his death warrant.


It is one thing to attack a relatively powerless regime. It is quite another to attack one that has weapons of mass destruction. It reasonable to posit that it is highly unlikely that the U.S. would have attacked Gaddafi if he still had his stockpiles of WMD. That is not a lesson lost on North Korea’s Kim Jong-un, who, we may surmise, does not wish to share Gaddafi’s fate.


And not to put too fine a point on it, Gaddafi’s Libya was a vacation spot compared to life North Korea. Which inescapably leads to the conclusion that the Responsibility to Protect doctrine was a convenient excuse for Hillary Clinton to do some foreign policy grandstanding to burnish her credentials for her Presidential run.


When (as usual) things didn’t turn out so well, Hillary Clinton didn’t pay the price. Ambassador Chris Stevens, Information Officer Sean Smith, CIA operatives Glen Doherty and Tyrone Woods paid it along with the immigrants whose bodies’ wash up daily on the shores of the Mediterranean.


And yet, according to Foreign Policy Magazine, Hillary Clinton has “No regrets” about Libya. Her aides and advisors say she “…does not see the Libyan intervention as a failure, but as a work in progress.” She ought to check with the Libyans.


And potential Clinton supporters ought not delude themselves into believing Clinton’s behavior was somehow aberrant. It is of a piece. After all, she thinks the U.S. is also a work in progress that needs her help. The Libyans didn’t get to vote and didn’t have a choice; Americans have lots of choices.



The Obama Administration’s Foreign Policy

President Obama’s foreign policy achievements continue to roll in.


The Middle East

The New York Times reported (August 16, 2016) that Russia is launching bombers bound for Syria from an Iranian Air Force base. This is the first time foreign military forces have operated from Iran since WWII. Russia and Iran are supporting Syria’s Assad.



The Middle East Peace Process

Israeli and Palestinian leaders have agreed to meet and re-launch the Mid East peace process. The meeting is being hosted by Vladimir Putin and will take place in Moscow.



The Obama Administration has paid Iran $1.7 Billion, entirely in cash denominated in Euros, Swiss Francs and other non-dollar currencies. The Obama Administration continues to insist that its behavior is on the up and up. The money, they argue, was owed to Iran from an arms deal that was never completed in the 1970s. It has not explained why it was so important to supply the world’s leading sponsor of state terrorism with suitcases full of cash, denominated in non U.S. dollar currencies.


Iran returned the favor by escalating its harassment of U.S. Navy ships on the high seas. According to CNN, US Army Gen. Joseph Votel, Commander of US Central Command, last week called the Iranian conduct “concerning.”



China and the G-20 Conference

China went out of its way to snub President Obama when it “forgot” to bring stairs for Obama to exit Air Force One. They didn’t bring out a red carpet either.


North Korea

Meanwhile, North Korea claimed success in another nuclear test. The South Korean Defense Ministry estimated that the explosive yield was about 10 kilotons, compared to the less than 1-kiloton yield of its first test in 2006. North Korea has also launched a series of ballistic missiles, including one launched from a submarine last month.


South Korea has already agreed to deploy an anti-missile system known as the Terminal High Altitude Defense (THAD) system as protection against North Korea. China has reiterated its opposition to the move, suggesting that their North Korean friends may view it as a provocation.


Hillary Clinton, Obama’s first Secretary of State, promises more of the same.





Quick Hits, September 8, 2016

Speaking the Truth

When politicians start talking about speaking the truth, inevitably a whopper is just around the corner. Enter Mike Pence, Indiana Governor and Republican VP nominee.


In an address at the Reagan Library, Pence reportedly said: “Ronald Reagan spoke the truth to the American people, just like Donald Trump has.” In fairness, Pence may not have been lying; he may be as clueless as his boss is. Stay tuned.


No discussion about politicians speaking the truth would be complete without a mention of…Hillary Clinton. Remember the bit about carrying one Blackberry around for convenience purposes? It turns out that she had no less than 13 devices. And when it came to deleting the “yoga routines” supposedly on the devices, staff members took hammers to some of them.


A Big Libertarian Gaffe


Gary Johnson didn’t do himself any favors when he appeared on Morning Joe and it was clear that he didn’t know that Aleppo is the epicenter of the Syrian Civil War. At the very least it seems to confirm suspicions of many that Libertarians are not truly serious about foreign policy.

See the Clip from Morning Joe below.


Hillary Clinton Obstructs Justice. Again. 


On September 20, 2012, shortly after the terror attack on the U.S. embassy in Benghazi, the House Oversight Subcommittee on National Security sent then Secretary of State Clinton a request for any and all documents relevant to the attack. Additional document requests went out in August 2013 and May 2014.


On March 3, 2015, after the news broke that Clinton had a private server, the House Select Committee on Benghazi sent a request to Clinton and her lawyer, David Kendall, asking Kendall to “prevent the partial or full destruction, alteration, testing, deletion, shredding, incineration, wiping, relocation, migration, theft, or mutation of electronic records.” Then on March 4, 2015 the Committee sent a subpoena to Clinton for “all records in unredacted acted form” related to Benghazi for all of 2011 and 2012.


According to the FBI, on March 25, 2015, the firm responsible for managing her private server (Platte River Networks), had a conference call with Clinton’s staff, after which Platte River Networks deleted Clintons e-mail archives using a software program called BleachBit.


Destroying evidence that has been subpoenaed is obstruction of justice. Even James Comey should be able to figure that out.


More details can be found in a story by Deroy Murdoch. And this story about the time line by Andrew McCarthy should not be missed.







Hillary Clinton: Pharmacist-in-Chief

It is a rare day when Hillary Clinton has not provided convincing evidence that she is unsuited for the White House. Friday she did not disappoint. The occasion was Mrs. Clinton’s decision to weigh in on the faux crisis stirred up over the pricing of EpiPens. Apparently, Mrs. Clinton was so exercised that she courageously performed a ritual denunciation “[calling] out drug companies for outrageous and unjustified pricing practices”. See her website.


As usual, Mrs. Clinton has a “plan” to deal with the situation. This one, outlined on her web site, is a treasure trove of progressive ignorance in which more bureaucracy saves the day. The plan would establish a consumer oversight panel “charged with protecting consumers from outlier price increases.” It would determine these “unjustified, outlier price increase[s]” based on (1) the trajectory of the price increase, (2) the cost of production, and (3) the relative value to patients.


Needless to say, the all-knowing panel would be staffed and advised by agency “experts” and consumer groups.


After fact-finding we go on to the enforcement phase. Here below are three “enforcement tools” emphasized in the Clinton plan.


  • Making alternatives available and increasing competition
  • Emergency importation of safe treatments
  • Penalties for “unjustified price increases”


Let’s take them one at a time. And just for laughs, let’s pretend that the people who proved to be utterly incapable of launching the Obamacare website on time for a mere $600 million can figure out drug production costs at the drop of a hat in order to deal with some drug price “emergency”. And let’s not forget they are going to find “relative value to patients” presumably after they figure out what that is supposed to mean.

So here we go.

Enforcement Measure 1: Making alternatives available and increasing competition.


Anyone who has taken freshman economics (and passed) is well aware that vigorous competition and attendant substitution effects are among the default assumptions of market economies. But vigorous competition depends, in part, on easy entry and exit into the market. That can be problematic in the U.S. because there is a bottleneck otherwise known as the Food and Drug Administration (FDA).


The FDA presents a number of problems. First, it is notoriously slow when it comes to approving new drugs and generics, thus restricting competition and raising costs. Second, the FDA like all government agencies is subject to regulatory capture. Why should we assume that Hillary Clinton’s committee of “experts” would not be subject to the same phenomenon? It should be obvious that the FDA and similar agencies are not the solution—they are the problem.


Measure 2: Emergency Importation of Safe Treatments


Once again we have what should be a normal market process being treated as an “Emergency” measure. Why shouldn’t safe treatments be traded across borders as a matter of routine? Well for one, see regulatory capture in the preceding paragraph. The reason why drug importation is not routine is because government restricts it. And at the very least, pharmaceutical companies cheer the restrictions on because the effect is to reduce supply and increase prices.


For classical liberals, Free Trade across borders is a norm of free markets. Not so for restrictionists like Mrs. Clinton. They assert that trade is at best a zero-sum if not a minus-sum game, despite the mountains of evidence to the contrary. And so they restrict trade, tax consumers and protect favored constituencies. This holds true whether the product is autos or drugs. Mrs. Clinton’s way of thinking is the problem, not the solution.


Measure 3: Penalties for “unjustified” price increases.


This is Mrs. Clinton’s de facto price control board. Price controls of this type represent the most effective way to create product shortages and price spikes. In the process it discourages innovation and leads to thriving black markets. Anyone who doubts this should have a wonderful time living in Venezuela.


As Monty Python used to say: And now for something completely different. The enforcement measures discussed above are part of a much broader plan of breathtaking absurdity. Here I quote verbatim a sentence (actually a paragraph heading) from the plan that is in bold on the website. Because it is in bold I assume that the authors are quite proud of it and want to emphasize it. Ready? Here we go:


Require drug companies that benefit from taxpayers’ support to invest in research, not marketing or profits.


For its sheer lunacy, this one is truly for the record books. Hillary Clinton wants to prohibit drug companies from investing with the aim of making a profit. For the record let’s note the disclaimer that the prohibition applies only to drug companies that “benefit from taxpayer support”. Let’s also note that broadly speaking, the definition applies to 100% of drug companies.


Let’s consider for a moment why drug companies even exist. It is to make profits (technically to seek returns on invested capital). Let’s consider why drug companies engage in research. It is to develop drugs that they can sell and thereby earn profits (returns) from doing so.


Hillary Clinton, in the words of Barrack Obama, the most qualified person to seek the job, hasn’t quite figured this out yet.


So let’s sum up. Among the reasons why Hillary Clinton should be President is that she has a plan to “fix” the drug pricing “problem”. The solution is to restrict market entry, engage in free trade during emergencies only, institute a de facto price controls board, and put drug companies out of business.


Problem solved.