Friday, April 29, 2016

Political support disappearing for trade deals

Trade policy, often misunderstood or ignored, may be a major political issue this year.

Hillary Clinton, the likely Democratic presidential nominee, and Donald Trump, the likely GOP standard-bearer, take similar positions.

They say President Obama and previous presidents have gone too far in making international trade agreements.  It’s time to stop negotiating new ones or even unravel existing pacts.

Since John F. Kennedy was president, the U.S. has pushed for lowering trade barriers among countries.  Trade agreements, both worldwide and one-on-one, have been negotiated.  Trade has increased and national economies have become linked, supporting so-called globalization.

But trade accords have met increasing opposition, at least in this country.

Labor unions and others argue that foreign suppliers can compete successfully in the American market because they pay much less than U.S. employers.  Without doubt, jobs are outsourced to places like China and Bangladesh because their labor costs and working conditions are far below those here.

Trade deals are likely to throw some people out of work even while adding new jobs.  The federal government is supposed to provide “trade adjustment assistance” to displaced workers, but it has often done poorly.  Workers can feel they bear the burden of living with change.

Recently, after complaints about competing Canadian paper production, apparently government subsidized, Obama belittled the dispute, saying it would ultimately be compromised.  Since then, paper companies in Maine have been shutting down.  Jobs have been lost.

Even if new jobs are created by trade deals, it is difficult to calculate their net effect.  That makes it possible for opponents like Trump to charge that the U.S. comes out on the short end.

Beyond employment questions, environmental standards in Asia are far below those in the U.S., making production less costly there, but penalizing the quality of life.

Trump adds another point.  He sees an unfavorable American trade balance with another country as a defeat.  For him, trade is conflict, so that when its imports exceed exports, the U.S. loses.  He also links trade with immigration, playing on fears of anything foreign, especially Mexican.

The logical extension of Trumpism is complete American economic isolation or at least only entering into trade deals that are a sure bet the U.S. will come out ahead.

Clinton does not go that far, but somewhat amazingly for a former secretary of state, she chooses to ignore the political side of trade arrangements.  Most trade agreements are part of strategic relationships that are more than purely commercial.

Under pressure from Bernie Sanders, who is generally aligned with labor opposition to trade agreements, she has dropped her official support of the Trans Pacific Partnership and now opposes it. 
Clinton ignores the desire of Pacific Rim countries for a deal with the U.S.  These countries want to show an expansionist China they have a powerful ally.

Traditionally, congressional Republicans have supported new trade agreements.  In fact, the GOP more than the Democrats gave Obama a free hand to negotiate the TPP.  Now, reluctant to allow the president a political win, they are backing away from ratifying the agreement.

The combined resistance of Democrats and Republicans has finally led voters to focus on trade issues and increasingly to oppose new agreements, especially the TPP.  Unless the Senate ratifies the deal this year, it is likely to be dead.  China would have won this round.

A fact that is overlooked in this debate is that other countries are entering into trade agreements with one another.  New trade relationships, formed in the absence of U.S. participation, may displace American exports in world markets.  China can profit.

What does the American consumer want?  Does he or she want lower prices or to insist on better wages and environmental measures in other countries?

Even in the absence of trade agreements, some foreign goods are going cost less than their American versions, and people will buy them.  So the absence of trade deals does not mean the end of cheaper imports.

People have the right to be skeptical of promises to enforce better working conditions and higher pay in other countries.  When factories making goods for the American market collapse in Bangladesh, concerns about the value of trade pacts seem justified.

Trade deals would be more acceptable if they were accompanied by vigorous federal government action.  That’s made more difficult these days by political insistence on reducing its size and role. 

The TPP leaves real questions about U.S. enforcement of the agreement’s labor requirements.  And the government should do a better job to train and place American workers harmed by trade deals.

Wednesday, April 27, 2016

Political Thoughts – 10 Trump and Clinton head for the conventions

Yogi Berra was right that “it’s not over until it’s over,” but still Clinton seems to be there and either Trump will be there or we will see the most interesting political convention since the GOP in 1976.

Trump.  His momentum should get him enough convention delegates to avoid a convention war.  If not, he will have enough disgruntled supporters to devalue the nomination if it goes to somebody else.

He seems to sincerely believe that his style of campaigning is what will have brought him the nomination, so he will stick with it.  He can make this a campaign about women by continuing to attack Clinton because she is “weak.”  Not really a disguised code word and one that should get women and sympathetic men into action to support her.

Trump’s electoral problem is that he has attacked so many constituencies that it is difficult to see how those who remain unscathed can produce enough votes for him.

Clinton.  Her problem is her negative rating, though it’s not as bad as Trump’s.  That may seem small comfort, but, after all, an election is about comparisons between candidates.  Her negatives will be affected by the Justice Department decision on her use of the home computer, but otherwise, they will probably fade somewhat.

She threads a fine line.  She cannot go as far as Sanders to the left, probably because she is simply not that liberal.  That’s why the Republican business community, the backbone of the mainstream could grow to like her.  That explains the Koch consideration she gets.  It may not make her more popular with Democrats, but what’s a better alternative?

Sanders.  He is now running to influence the Democratic platform, and he will. Clinton would be wise to allow him his day.  If he doesn’t handle his opportunities carefully, he may have his activist organization after the campaign, but he will quickly fade.

As for his platform strategy, if you tested Democratic candidates for president and Congress on the content of the platform a month after it was adopted, most would fail.  Candidates have their own platforms, and party platforms (maybe like party organizations) mean little in practice.

The tone of the campaign.  Clinton is wise to appear “presidential” and willing to seek compromises. Leave the heated rhetoric to Trump.  Americans do expect a certain amount of decorum from their president.  So Clinton should remain calm. 

Also, she might not greet every audience with her mouth agape in feigned joy.  I know, she’s supposed to make you think she’s having a ball, just enjoying the dickens out of the campaign.  Recognizes friends in the crowd as if she’s surprised they are there.  Such artificial happiness only promotes the idea that she is not honest.  Nobody could enjoy campaigning that much.

Oh, BTW, it’s time for her to put together the proverbial truth squad.  Trump makes a fun target, far more vulnerable than she is.

Too early to talk about running mates, but not too early to think about it.

Friday, April 22, 2016

Religious issue tests Bill of Rights

People are supposed to be protected from an overly powerful government by the guarantees in the Bill of Rights.

While it was never intended to be a complete list of individual rights, it was written to curb the excesses colonial Americans experienced under the British king.

The Bill of Rights contains general statements of principle but almost no details.  Sometimes Congress and sometimes the Supreme Court fill in the details.

A current case illustrates how this works.  The First Amendment says the federal government cannot “prohibit the free exercise” of religion.  Under the Religious Freedom Restoration Act, it cannot force religious organizations, opposed to contraception, to provide health insurance coverage for it.

The Affordable Care Act requires such organizations to inform insured employees that they do not provide this coverage but that it is provided without charge by insurance companies.  Presumably, its costs are covered in the premiums charged to all employers.

Some say that even providing this notice forces them to support contraception and want the notice requirement lifted.

The Supreme Court has asked the organizations to consider simply negotiating insurance contacts without this coverage and notice requirement, leaving it to the insurance companies to inform their employees.  The government says it would agree if this arrangement ends all lawsuits.  

The Court has already found that, only when there is a “compelling” governmental interest, can the federal government override religious objections to a law.

For example, it ruled a Quaker must pay taxes, even if some of the proceeds support the military, because taxation is a “compelling” government function.  Jesus’ statement, "Render therefore unto Caesar the things which are Caesar's; and unto God the things that are God's" was about paying taxes.

Such cases show that religious freedom is not an absolute guarantee.  Yet some disagree and believe that these rights are absolute.  They say that government cannot take any action to limit them.

That is the essence of the current case.  Can government take any action that would limit what a religious group considers the “free exercise” of its beliefs?

If the answer is that it cannot, then the Bill of Rights recognizes the authority of people outside of government to determine for themselves whether the law applies to them.

Does individual freedom overrule the public interest?  The issue arises with respect to several parts of the Bill of Rights.

After decades of arguing about the meaning of the Second Amendment, the Supreme Court decided that it protects the right of individuals to own and use firearms.  Some see this right as absolute, preventing the government from placing any limits on their use.

They ignore the Court’s decision itself, which states that, to protect public safety, government may place reasonable limits on this right.  The opponents of this conditional decision, who seek to have government refrain from any limits, say that the presence guns themselves will be the best protection of public safety.

Perhaps most famously, the First Amendment says government can make no law “abridging the freedom of speech.”  This is perhaps the broadest of the rights and one distinguishing the United States from most other countries.

The Supreme Court has decided that making political campaign contributions is “speech” and that, in effect, no limit can be placed on the amount of such contributions.  Its decisions have given enormous power to a relative handful of extremely wealthy people.

In an earlier First Amendment case, the Court decided that a newspaper may report negatively on public officials provided it does so without knowingly misstating the facts.  This was a major support for freedom the press.

But there are limits on freedom of speech.  The government may pass laws to allow average people protection from outright lies, though public figures get somewhat less protection.  And you cannot unjustifiably yell “fire” in a crowded theater, though the common belief the Supreme Court said so is not accurate.

In the current political scene, it has become more common to hear claims that the Bill of Rights contains absolute freedoms that government cannot limit.  The so-called “originalist” view of the Constitution wants to apply the text literally and keep government out of picture.

That’s one reason why the next appointments to a delicately balanced Supreme Court are important.  Ultimately, the Court decides on whether limits can be placed on rights and what those limits can be.

The next president will undoubtedly have the opportunity to appoint new justices to the Court.  Much depends on the outcome of the presidential election for the determination of major constitutional questions that can affect everyone.

Wednesday, April 20, 2016

Political Thoughts 9 -- Are we there yet?

Post New York primary.  Did you notice how many more people voted in the Democratic primary than in the Republican?  Clinton remains the national vote-getting leader.  By the time of the conventions, she should have a pretty good start on winning the national popular vote in November.  That does not mean an automatic win.  Just ask Al Gore.

Complaints mount that the process is “rigged”.  The process predated most of the candidates, so how is it rigged against Trump or Sanders?  The process is based on political experience in terms of motivating the party faithful who work outside of the campaign season and, in the case of the 
Democrats, giving their office holders some guaranteed influence.  Closed primaries make sense if political parties still make sense.  Should dedicated party workers have to battle for a candidate selected by visiting voters who have no link with the party?

Trump.  It looks like he may be trying to appear more “presidential” (whatever that means) now that he is closer to winning the GOP nomination.  Will a more serious Trump continue to have his strong appeal for those who originally boosted him?  Maybe he now has “the big mo”, momentum toward the nomination.  Of course, his problem, though only in the general election, would be in trying to run away from some of the things he said earlier in the campaign.

Cruz. He has no realistic chance of getting enough delegates, so he wants to make sure Trump doesn’t.  As the saying goes, “he’s drinking his own bath water”.  That’s because he believes Trump’s delegates will desert him after the first ballot and swing to Cruz.  Who knows?  Maybe if Trump is really close to what’s needed, delegates would feel it a mistake to deny him the nomination, meaning that Cruz delegates would defect.  And Cruz might not be an appealing general election candidate.  Remember, he’s more conservative than Trump and he’s nasty and means it.

Kasich.  The New York Times thinks he should stay in the race though he trails Rubio who dropped out.  It says: “Mr. Kasich is not an exciting candidate, or even a political moderate.  But he is the most sane-sounding individual in the Republican field, and has been from the start.  Unlike his rivals, he’s shown a willingness to play by the rules.”  Thrilling endorsement.  The GOP nominee should pass a sanity test.  Kasich’s faint hope is that a deadlocked convention will turn to him.

Clinton.  She is the Democratic nominee.  With that in mind, she should calm down and look more “presidential”.  She lets Sanders make her so angry you could wonder how she would deal with America’s adversaries or even Republicans.  Too much emphasis is placed by the media on her unfavorable ratings.  The question will be if voters prefer her to the other candidates.  In fact, that is the way it has always been.  And she should more explicitly show concern about Sanders’ issues.

Sanders.  He has raised serious questions but the answers really do require the revolution he wants.  No revolution this year, though the Democrats have a real shot at the Senate.  The Times thinks he should stay in the race like Kasich, in this case to keep Clinton pulled toward his positions and to keep his supporters from wandering away.  OK, so long as he does not let his desperation become a way to damage Clinton.

A personal comment on Sanders.  In his Vatican talk, when he talked about his country, he was only critical of it.  A U.S. senator in an international forum ought to have something positive to say about a country in which “Democratic Socialist” Bernie Sanders can become a serious candidate for president.

Conventions and polls.  The media likes to say who would beat whom if the election were held today or what will happen at the GOP convention.  The media is wrong, though it is impossible to know what’s right.  People react as the process moves along and their perceptions change.  Maybe Trump will win the nomination on the first ballot and turn out to be a strong challenger to Clinton.  Maybe Clinton has it locked up and this is all a waste of time.  More people will make up their minds after October 1 than may provide the margin of victory.

Friday, April 15, 2016

States push for higher minimum wage, while Washington stalls

A national debate rages about the minimum wage.

One side argues the current federal minimum of $7.25 an hour yields a family income below the poverty line.  On the other side, businesses argue they cannot afford to raise wages without raising prices and losing sales.

Each side can find reputable economists to support its position.  However, it’s easy to conclude that many economists make up their minds on the issue first and then develop studies supporting their views.

All of this goes on in a charged political atmosphere.  Democrats generally support increasing the minimum wage, while Republicans usually oppose any increase.

The federal minimum was last set in 2009 and has not kept up with even the relatively modest inflation since then.  Traditionally, the federal rate has only been revised when it had lost some of its purchasing power as the result of inflation.

Attempts to raise the federal level have failed, because the GOP has the votes to block any increase from passing Congress.  President Obama has issued an executive order raising the minimum to $10.10 for some federal contract workers.  The Labor Department said the order could affect hundreds of thousands of workers.

Many states set a minimum wage above the federal $7.25.  Maine’s is $7.50, but, with a referendum pending, it is likely to be raised.  Impatient with Washington inaction, some states have decided to phase in higher rates and automatically link them to the rate to inflation.  California just set its rate for 2022 at $15, the highest in the country.

Most economists agree on at least some characteristics of the minimum wage.

The income produced by the federal minimum wage will likely keep families poor.  They will seek public assistance to help meet their basic needs.  Higher incomes would reduce their eligibility for such assistance.

Businesses required to pay a higher minimum wage may reduce profits, raise prices, lay off workers or adopt a combination of these measures.

People receiving an increased minimum wage are likely to spend the added income rather than save it.  That should boost business, though not necessarily the same businesses paying higher wages.  

Increases in the minimum wage come so seldom that it lags behind climbing living costs caused by inflation, constantly eroding the buying power of low-income people.

And we can identify those jobs that are most affected.  Many of them are in restaurants among cooks and wait staff.  Women and young people are more affected than men.

Even if these points may be generally accepted, problems arise when economists try to measure the impact of each of them. 

At what point do higher wages result in fewer people being hired?  That point would show the value of labor, but it varies by the type of business and even by area.

How much do prices have to increase so that a business will lose sales?  For example, if the price of a specialty hamburger goes up from, say, $2.75 to $2.85, will people buy fewer of these burgers?

In fact, the biggest debate when it comes to proposals to raise the minimum wage is about the effect of increased labor costs on sales.  It may seem logical to assume that any increase in costs will result in a decrease in sales.  But that linkage may not kick in immediately, and it varies by industry.

Whatever the resolution of these questions, one aspect of the minimum wage has become more obviously in need of repair.  Right now, employers are allowed to pay less than the federal minimum wage to workers receiving tips – at a wage level that has not be changed since 1991.

Investigative reporting has found that some tips added into credit card charges never make their way to the intended recipient.  And there’s no sure way of knowing if the tip income makes up for the loss in wages unless employees report all their cash tips to the boss.

To end a system in which there are plenty of reasons to cheat, employees receiving tips should also receive the minimum wage, as is required in California.  That would help retirees be assured of fair Social Security benefits because of correct employer and employee contributions.

Federal Reserve policy seeks a two percent annual inflation rate to provide a cushion to keep a slowdown from throwing the economy into reverse with a loss of jobs.  Shouldn’t the minimum wage keep pace with this planned inflation?

Given the unresolved economic debate, the minimum wage issue calls for a political agreement on the correct current rate and then a permanent inflation adjustment that could finally halt the endless debate.