“The Making Of An Ignoramus”: Making America Great Again Means Running The Country Like A Failing Casino
Truly, Donald Trump knows nothing. He is more ignorant about policy than you can possibly imagine, even when you take into account the fact that he is more ignorant than you can possibly imagine. But his ignorance isn’t as unique as it may seem: In many ways, he’s just doing a clumsy job of channeling nonsense widely popular in his party, and to some extent in the chattering classes more generally.
Last week the presumptive Republican presidential nominee — hard to believe, but there it is — finally revealed his plan to make America great again. Basically, it involves running the country like a failing casino: he could, he asserted, “make a deal” with creditors that would reduce the debt burden if his outlandish promises of economic growth don’t work out.
The reaction from everyone who knows anything about finance or economics was a mix of amazed horror and horrified amazement. One does not casually suggest throwing away America’s carefully cultivated reputation as the world’s most scrupulous debtor — a reputation that dates all the way back to Alexander Hamilton.
The Trump solution would, among other things, deprive the world economy of its most crucial safe asset, U.S. debt, at a time when safe assets are already in short supply.
Of course, we can be sure that Mr. Trump knows none of this, and nobody in his entourage is likely to tell him. But before we simply ridicule him — or, actually, at the same time that we’re ridiculing him — let’s ask where his bad ideas really come from.
First of all, Mr. Trump obviously believes that America could easily find itself facing a debt crisis. But why? After all, investors, who are willing to lend to America at incredibly low interest rates, are evidently not worried by our debt. And there’s good reason for their calmness: federal interest payments are only 1.3 percent of G.D.P., or 6 percent of total outlays.
These numbers mean both that the burden of the debt is fairly small and that even complete repudiation of that debt would have only a minor impact on the government’s cash flow.
So why is Mr. Trump even talking about this subject? Well, one possible answer is that lots of supposedly serious people have been hyping the alleged threat posed by federal debt for years. For example, Paul Ryan, the speaker of the House, has warned repeatedly about a “looming debt crisis.” Indeed, until not long ago the whole Beltway elite seemed to be in the grip of BowlesSimpsonism, with its assertion that debt was the greatest threat facing the nation.
A lot of this debt hysteria was really about trying to bully us into cutting Social Security and Medicare, which is why so many self-proclaimed fiscal hawks were also eager to cut taxes on the rich. But Mr. Trump apparently wasn’t in on that particular con, and takes the phony debt scare seriously. Sad!
Still, even if he misunderstands the fiscal situation, how can he imagine that it would be O.K. for America to default? One answer is that he’s extrapolating from his own business career, in which he has done very well by running up debts, then walking away from them.
But it’s also true that much of the Republican Party shares his insouciance about default. Remember, the party’s congressional wing deliberately set about extracting concessions from President Obama, using the threat of gratuitous default via a refusal to raise the debt ceiling.
And quite a few Republican lawmakers defended that strategy of extortion by arguing that default wouldn’t be that bad, that even with its access to funds cut off the U.S. government could “prioritize” payments, and that the financial disruption would be no big deal.
Given that history, it’s not too hard to understand why candidate Trump thinks not paying debts in full makes sense.
The important thing to realize, then, is that when Mr. Trump talks nonsense, he’s usually just offering a bombastic version of a position that’s widespread in his party. In fact, it’s remarkable how many ridiculous Trumpisms were previously espoused by Mitt Romney in 2012, from his claim that the true unemployment rate vastly exceeds official figures to his claim that he can bring prosperity by starting a trade war with China.
None of this should be taken as an excuse for Mr. Trump. He really is frighteningly uninformed; worse, he doesn’t appear to know what he doesn’t know. The point, instead, is that his blithe lack of knowledge largely follows from the know-nothing attitudes of the party he now leads.
Oh, and just for the record: No, it’s not the same on the other side of the aisle. You may dislike Hillary Clinton, you may disagree sharply with her policies, but she and the people around her do know their facts. Nobody has a monopoly on wisdom, but in this election, one party has largely cornered the market in raw ignorance.
By: Paul Krugman, Op-Ed Columnist, The New York Times, May 9, 2016
“Trade, Labor, And Politics”: Whatever They May Say, Politicians Who Espouse Rigid Free-Market Ideology Are Not On Your Side
There are a lot of things about the 2016 election that nobody saw coming, and one of them is that international trade policy is likely to be a major issue in the presidential campaign. What’s more, the positions of the parties will be the reverse of what you might have expected: Republicans, who claim to stand for free markets, are likely to nominate a crude protectionist, leaving Democrats, with their skepticism about untrammeled markets, as the de facto defenders of relatively open trade.
But this isn’t as peculiar a development as it seems. Rhetorical claims aside, Republicans have long tended in practice to be more protectionist than Democrats. And there’s a reason for that difference. It’s true that globalization puts downward pressure on the wages of many workers — but progressives can offer a variety of responses to that pressure, whereas on the right, protectionism is all they’ve got.
When I say that Republicans have been more protectionist than Democrats, I’m not talking about the distant past, about the high-tariff policies of the Gilded Age; I’m talking about modern Republican presidents, like Ronald Reagan and George W. Bush. Reagan, after all, imposed an import quota on automobiles that ended up costing consumers billions of dollars. And Mr. Bush imposed tariffs on steel that were in clear violation of international agreements, only to back down after the European Union threatened to impose retaliatory sanctions.
Actually, the latter episode should be an object lesson for anyone talking tough about trade. The Bush administration suffered from a bad case of superpower delusion, a belief that America could dictate events throughout the world. The falseness of that belief was most spectacularly demonstrated by the debacle in Iraq. But the reckoning came even sooner on trade, an area where other players, Europe in particular, have just as much power as we do.
Nor is the threat of retaliation the only factor that should deter any hard protectionist turn. There’s also the collateral damage such a turn would inflict on poor countries. It’s probably bad politics to talk right now about what a trade war would do to, say, Bangladesh. But any responsible future president would have to think hard about such matters.
Then again, we might be talking about President Trump.
But back to the broader issue of how to help workers pressured by the global economy.
Serious economic analysis has never supported the Panglossian view of trade as win-win for everyone that is popular in elite circles: growing trade can indeed hurt many people, and for the past few decades globalization has probably been, on net, a depressing force for the majority of U.S. workers.
But protectionism isn’t the only way to fight that downward pressure. In fact, many of the bad things we associate with globalization in America were political choices, not necessary consequences — and they didn’t happen in other advanced countries, even though those countries faced the same global forces we did.
Consider, for example, the case of Denmark, which Bernie Sanders famously held up as a role model. As a member of the European Union, Denmark is subject to the same global trade agreements as we are — and while it doesn’t have a free-trade agreement with Mexico, there are plenty of low-wage workers in eastern and southern Europe. Yet Denmark has much lower inequality than we do. Why?
Part of the answer is that workers in Denmark, two-thirds of whom are unionized, still have a lot of bargaining power. If U.S. corporations were able to use the threat of imports to smash unions, it was only because our political environment supported union-busting. Even Canada, right next door, has seen nothing like the union collapse that took place here.
And the rest of the answer is that Denmark (and, to a lesser extent, Canada) has a much stronger social safety net than we do. In America, we’re constantly told that global competition means that we can’t even afford even the safety net we have; strange to say, other rich countries don’t seem to have that problem.
What all this means, as I said, is that the Democratic nominee won’t have to engage in saber-rattling over trade. She (yes, it’s still overwhelmingly likely to be Hillary Clinton) will, rightly, express skepticism about future trade deals, but she will be able to address the problems of working families without engaging in irresponsible trash talk about the world trade system. The Republican nominee won’t.
And there’s a lesson here that goes beyond this election. If you’re generally a supporter of open world markets — which you should be, mainly because market access is so important to poor countries — you need to know that whatever they may say, politicians who espouse rigid free-market ideology are not on your side.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 28, 2016
“Default Prevention Act, Really?”: House GOP Plays With Matches; Will The Economy Burn?
The Republican-led Congress has just 12 days before the nation’s debt ceiling has to be raised. If lawmakers fail to meet their responsibilities, the country won’t be able to pay its bills, we’ll default on our debts, the full faith and credit of the United States will be in jeopardy, and the economic consequences will be severe.
At this point, congressional Republicans appear to be divided into two groups. The first, which includes the GOP leadership, knows it must raise the debt ceiling, but this faction has no idea how to complete the simple task. The second, which includes far-right members in both chambers, wants to hold the debt ceiling hostage, threatening to crash the economy on purpose unless Democrats meets their demands, but this faction hasn’t bothered to fill out the ransom note.
So far, markets aren’t panicking, because everyone is working from the assumption that Republicans won’t deliberately create a recession for no reason – though anything’s possible.
What’s striking, though, is how little work is getting done. We’re 12 days away from a dangerous deadline – Congress is only in session for 7 of those 12 days – and Congress isn’t even trying to move towards a resolution yet. Instead, the GOP-led House spent time yesterday on something called the “Default Prevention Act.”
With the potential for an unprecedented federal default two weeks away, House Republicans on Wednesday plan to pass legislation not to avert disaster, but rather to manage it, channeling daily tax collections to the nation’s creditors and Social Security recipients if the government’s borrowing limit is not lifted.
Let’s put this in everyday terms. Imagine a gang told you they plan to burn down your town unless their demands are met. You’re skeptical and tell the gang to go away. But the gang members stick around and say, “Before we burn down your town, let’s start making plans to prioritize which parts of the town you might want to rescue before we turn violent.”
That, in a nutshell, is what the “Default Prevention Act” is all about – the gang members passed a bill yesterday to prioritize which bills they’ll allow the United States to pay, and which bills will get burned by their fire.
The problem, of course, is that all of this is completely insane.
What we’re talking about is a plan in which Republicans try to manage the fire from their own arson, “channeling daily tax collections to the nation’s creditors and Social Security recipients” after they refuse, on purpose, to raise the debt ceiling.
And why would GOP lawmakers prioritize the nation’s creditors and Social Security recipients? On the former, because so much of the global economy rests on U.S. Treasury bonds, a deliberate default risks crashing financial systems across the planet. That would be … catastrophically bad.
On the latter, congressional Republicans don’t want to be responsible for cutting off Social Security checks for millions of American seniors, right in time for the holidays.
The “Default Prevention Act” is, by this measure, misnamed. It would prevent the nation from defaulting on some debts, while encouraging the nation to default on others.
Making matters just a little worse, Slate’s Jordan Weissmann explained that the GOP plan appears to be illegal and literally impossible to implement.
[E]ven if the government could borrow to pay bondholders and seniors, crossing the debt limit would still be plenty apocalyptic. Treasury’s computers still might not be capable of prioritizing its obligations, in which case we’d still end up failing to pay some bondholders despite Congress’s intentions.
The mere threat of such an accidental default could cause markets to seize. If the Treasury did successfully keep money flowing to its lenders, meanwhile, the government still wouldn’t be able to cover all of its other costs, and thus would be forced to implement massive, immediate spending cuts to other programs, likely dragging the U.S. and probably the rest of the world into a recession.
He’s referring, of course, to a recession that could easily be avoided by simply raising the debt ceiling – a simple, procedural vote that costs nothing.
Tick, tock.
By: Steve Benen, The Maddow Blog, October 22, 2015
“Buckle Your Seatbelt”: Obama Reminds Congress About Looming Showdowns
Much of the political world’s attention has focused on the presidential campaign trail of late, and for good reason. Congress takes August off; President Obama has been on vacation; and his would-be successors have put on quite a show.
But as August nears its end, the White House remains quite cognizant of the challenges facing federal policymakers. Just yesterday, the president published a message on Twitter, explaining, “Amidst global volatility, Congress should protect the momentum of our growing economy (not kill it).” Obama added that the United States “must avoid” a government shutdown and austerity measures.
The message didn’t come out of the blue. Current funding for the federal government expires at the end of September, and though Republican leaders intended to make progress with talks over their summer break, there’s no indication that officials are any closer to a solution than they were in July. On the contrary, as was the case in 2013, some far-right members seem eager for a fight that would result in a shutdown.
And then, of course, there’s the debt ceiling. On the one hand, we received some good news on this front from the Congressional Budget Office this week. The Washington Post reported:
Congressional leaders may have more time to work out a deal this fall to increase the federal borrowing limit, after new projections from Congress’ scorekeeper showed tax revenues have been greater than expected this year. […]
In July, the Treasury Department estimated the government would hit its $18.1 trillion borrowing limit at the end of October. CBO, however, now projects the debt ceiling will not need to be increased until mid-November or early December, while noting there is a level of uncertainty when determining the exact date.
On the other hand, the delayed deadline won’t necessarily help. The Huffington Post reported:
[The debt-ceiling] deadline is nearing. And the mixture of an ongoing presidential campaign – which encourages lawmakers to play to their base – and the itching for more spending cuts from conservative groups suggests it won’t pass without drama. […]
Asked if he expected debt-ceiling fireworks, longtime GOP consultant Craig Shirley replied: “Without a doubt.”
In fairness, it’s important to note that GOP leaders want no part of this – House Speaker John Boehner and Senate Majority Leader Mitch McConnell haven’t expressed any interest whatsoever in a replay of the 2011 hostage fight in which Republicans threatened to crash the economy on purpose unless President Obama met the GOP’s demands.
But as we’ve seen many times, party leaders often feel as if they have no choice but to follow. And in this case, amid economic uncertainty and market volatility, far-right Republicans see conditions that give them a twisted sense of leverage.
The broader timing doesn’t help, either. The race for the GOP presidential nomination will be pretty intense by the time December rolls around, and it’s likely we’ll see most, if not all, of the Republican field pushing the party to be as radical as possible – each candidate will try to prove to right-wing activists that they’re “tougher” than their rivals.
Buckle your seatbelt.
By: Steve Benen, The Madow Blog, August 28, 2015
“Tutorials Really Aren’t Going Well”: Walker’s ‘Unbearably Silly’ Approach To China
More than one presidential candidate has struggled with foreign policy this year, but few have had as much trouble as Wisconsin Gov. Scott Walker (R). In March, the far-right governor, recognizing his troubles, arranged for a “crash course” in international affairs.
If yesterday was any indication, the tutorials really aren’t going well. The Washington Post reported:
Angry anti-China rhetoric from U.S. politicians escalated Monday as Wisconsin Gov. Scott Walker (R) called on President Obama to cancel Chinese President Xi Jinping’s state visit to the White House next month. […]
“Why would we be giving one of our highest things a president can do – and that is a state dinner for Xi Jinping, the head of China – at a time when all of these problems are pending out there?” Scott Walker told reporters following a visit to the Carolina Pregnancy Center in Spartanburg, S.C., on Monday afternoon.
As the governor sees it, China would “actually respect” us more if President Obama snubbed the Chinese leader. Let that thought roll around in your head for a moment.
In a written statement, Walker also said there are a series of major Chinese issues of great concern to the United States – the economy, currency manipulation, cyber-security, militarization of the South China Sea, human rights, etc. – and the Wisconsin Republican seems to think the best way to address these issues is for the White House to withdraw its invitation to the Chinese leader.
“We need to see some backbone from President Obama on U.S.-China relations,” Walker added.
Maybe the governor who’s afraid of his own positions on immigration should steer clear of backbone” rhetoric.
Dan Drezner, a center-right foreign-policy scholar and Washington Post contributor, called Walker’s argument “unbearably silly,” which is both fair and the kind of label presidential candidates should try to avoid.
In Slate, Joshua Keating said, “Cutting off dialogue with China at a time of rising tension seems disastrously short-sighted,” adding, “[I]t’s hard to avoid the impression that Walker simply saw that China was in the news today and decided to make some tough sounding noises about it.”
In April, after some unrelated nonsense from Walker on foreign policy, President Obama called the governor out by name. “Mr. Walker,” the president said, apparently needs to take “some time to bone up on foreign policy.”
That’s as true now as it was four months ago.
By: Steve Benen, The Maddow Blog, August 25, 2015
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