Economy up, stocks volatile – who gets credit, blame?

 

The American economy remains in one of its longest recoveries in history. Does President Trump deserve the credit?

The memory of the 2007 financial meltdown fades. Unemployment is down. Incomes are beginning to increase. Consumer spending, the driver of the economy, is picking up. The recovery, begun years ago, remained strong during Trump’s first year in office.

A close look reveals a far more complicated explanation for the recovery in which Trump plays only a surprisingly small part.

Government is a player in the economy, but does not drive it. Businesses and individuals decide on its direction. Their actions don’t all head the same way at the same time. In a free enterprise society, the big decisions are not made by government, though it provides incentives and controls.

Government economic action is composed of two elements, fiscal policy and monetary policy. The president and Congress manage fiscal policy – taxes and spending, while the Federal Reserve, independent of the president, runs monetary policy – interest rates and the supply of money.

From the moment he took office in 2009, President Obama tried to boost government spending to stimulate the economy. At first, he was successful, and Congress agreed to a $787 billion stimulus. Republicans opposed any added government efforts, arguing they would increase the national debt.

Fiscal policy would go no further, leaving recovery to the Federal Reserve. Under recently departed Fed chair Janet Yellin and her predecessor, interest rates were cut close to zero and the money supply expanded. The Fed made it easier for people to borrow and then spend to boost the economy.

Yellin’s team managed to promote growth without high inflation. While personal income did not grow much, neither did prices.

Most presidents reappoint a Fed chair to a second term even if he or she is a member of another party. But Trump wanted to put his own stamp on the office. He picked a person remarkably similar to Yellin, but who might give Trump some room to claim credit for the appointment and for monetary policy.

Trump’s contribution to recovery was limited to his signature on a tax cut bill entirely developed by others, the congressional GOP. The bill created expectations that money saved on taxes will grow the economy, thus producing more tax revenues. Meanwhile, it increases the national debt far more than Obama’s proposal would have.

Trump has taken credit for economic gains, including some under Obama. The same positive statistics he scorned as a candidate, because they made Obama look good, he now claims have become accurate under his regime.

Putting presidential politics aside, Yellin deserves more credit for the recovery than either president.

Government spending sets the priorities for only a portion of the economy. Obama’s effort promoted basic developments like roads and hospitals. Tax cuts allow companies and people to set their own priorities, which do not usually include public works. That’s why more money will be needed for those purposes.

Consumer spending may increase, but what people buy may be more expensive. Trade policy is beginning to have the effect of raising the price of imports, which are a large part of our shopping carts.

One other problem with the recovery is that its benefits are uneven. Most economic gains have gone to the top 10 percent, while incomes for others have been relatively flat. Even if the 90 percent is beginning to see some progress, they have a long way to go to close the gap.

The same kind of gap also exists between urban and rural areas. Gains have been going to areas classified as urban and not to rural America. According to the census, Maine has fewer people living in urban areas than any other state. So many Mainers still await the chance to catch up.

Beyond taking credit for the economy, Trump has boasted of the big increases in stock prices, the “Trump Bump.” However, despite impressive gains, the stock market’s future is unclear. It is quite different from the economy. Speculation, normal in investing, is unlike decisions about what goes in the shopping cart.

The stock market can swing rapidly. Investors are now worried about higher interest rates and wage growth that will boost prices, causing inflation, and harming some corporations.

A president’s risk in claiming credit for the economy or stock market that he or she doesn’t really control puts the president in line for the blame when either declines, which is inevitable.

Modesty, now in short supply, would be a good idea.

Politicians use jargon to disguise the truth

 

“If you can’t convince them, confuse them.” President Truman supposedly said that.

It still seems to apply to the way the federal government communicates with us voters. To clarify a bit, here are some things politicians say and what they mean.

Congress adopts a “continuing resolution” when it cannot agree on a budget. A continuing resolution extends the previous year’s spending temporarily for a few weeks or months. The current budget year began last October, but we are still “temporarily” living hand-to-mouth with a previous budget.

“Regular order” means Congress acts normally by holding hearings and debates and then working out compromises between the House and Senate. Sen. McCain famously asked for it, and Sens. Collins and King want it. But congressional leaders push bills through using speeded up procedures.

“Democratic republic” is what we supposedly have, which should allow any member of Congress – they’re all equal, right – to bring up a bill. Only two people can allow a bill to get to a vote, the Speaker of the House and the Senate Majority Leader.

The “Freedom Caucus” is the strongly conservative group in the House that opposes government spending. It has enough votes to deny the House the freedom to vote on many proposals, because of Speaker Ryan’s practice, explained next.

The “Hastert Rule” isn’t a rule but a Republican practice begun by an earlier speaker, saying that no bill will reach the House floor unless “a majority of the majority” GOP supports it. Speaker Ryan adds to it by requiring that no bill may reach the floor unless it can pass with only GOP votes.

“Cloture” means getting the 60 votes it takes to allow a bill to face the final simple majority vote in the Senate. That can give the minority, now the Democrats, some influence in it. President Trump wants the “nuclear option” that would end the 60-vote requirement, but the GOP worries about when it will be the minority.

“The [Obamacare] individual mandate is now gone” said President Trump. The mandate was not repealed. The penalty for violating it was cut to zero. Some will obey it anyhow, thanks to government subsidies for insurance premiums. By the way, we obey the flag code and there’s no penalty for violating it.

“The bill is a thousand pages long” implies that Congress lets matters get too complicated for average people. Any time even one word of a section of law is amended, the whole section must be printed. Small changes can take many pages.

“An obscure law” means a law that the writer never heard of. Most laws are, by nature, obscure. One is the Logan Act, banning private citizens from carrying on foreign relations for the government on their own. Nobody has been prosecuted in 200 plus years. That makes it “obscure,” when perhaps it has simply been obeyed.

“The American people want” is a phrase based on polling. But, because of the way the GOP has designed congressional districts in many states, the Democrats have to be well ahead in the polls to hope to gain control of the House. Polling meets political game playing.

“Russian attempts to influence the election” are illegal, because foreigners cannot participate in or contribute to campaigns. This is mixed up with “collusion,” working with foreigners. It’s possible that, even without working together, merely knowing about foreign activity and accepting it should be rejected.

“Bipartisanship” is what candidates promise but don’t produce. They claim they are ready “to work across the aisle,” doing the public’s business through compromise with members of the other party. The Freedom Caucus is exempt from this promise. Candidates say this, because that’s what voters want, but it doesn’t happen.

“Compromise” is thought to mean that each side makes concessions to the other to achieve a result. For many in the GOP majority, it means they are willing to accept Democratic support for their positions, but won’t make any concessions. The Dems reciprocate and “compromise” remains as rare as the dodo.

‘Switzerland” is what some call Sen. Susan Collins’ office. That makes it neutral territory for Republicans and Democrats who like to consider themselves moderates to try to reach agreement on immigration and force the Senate Majority Leader to allow a vote on their deal.

What Collins is doing is positive. The would-be moderates need first to agree and then stick together to insist they carry as much weight as the Freedom Caucus. Then, we voters might get some of the bipartisanship we were promised.

Congress fails, allows presidential rule

Suppose you ran a business and, when checking your employees’ job performance, found they only got an average 20 percent score.

You might decide that, with more employee effort or some new workers, your business would run more successfully. You would probably consider firing at least some of them.

Well, you are the boss, and the people you have hired to run your business only receive that low score. You are an American voter, and the Congress you have elected only receives a favorable rating from about one-fifth of voters. Democrats do better than the GOP, but both parties score badly.

While each party plays the blame game with the other about the federal government shutdown, voters say they focus more on the inability of Congress to produce any result. Partisan warfare has blocked compromise. The majority GOP believes the Democrats should admit defeat, while the Democrats try to use the little power they have.

The Constitution places Congress first among the three branches of government. Instead of playing its prime legislative role and forcing presidents to decide to accept or reject bills it has passed, legislators have turned over most of their power to the president.

Just two days before the last government shutdown, GOP Senate Majority Leader Mitch McConnell told the media, “As soon as we figure out what he [Trump] is for, I would be convinced that we were not just spinning our wheels.” In short, the GOP Senate majority leader won’t lead, unless the president approves the plan in advance.

This attitude makes the president both executive and legislature, leaving Congress to try to come up with bills that please the White House.

In this year’s version of that process, President Trump has made the role of White House as legislator even more difficult by sending highly conflicting messages about what he wants.

Arizona GOP Sen. Jeff Flake, no friend of the president, concluded, “We can’t wait for the White House anymore.”

Congress should do its constitutional job and present the president with bills produced in the normal legislative process, almost certainly with some bipartisan support. Then, as a separate branch of government, it would be in a stronger position to press the president not to veto a bill, rather than assuming his veto in advance.

The failure of Congress to function by producing legislation to send to the White House is one reason why voters give it low grades. That failure results from its virtually total focus on politics rather than policy.

Members of Congress believe they can win re-election if they push policies that pander to their core constituents or can be sold to them by simply being labeled authentically conservative or liberal.

What they miss is what the polls always show. Most voters care more about having a functioning government than about specific policies. That view is especially true for independents, who can provide the margin of victory in presidential or Senate elections.

These swing voters may be ignored because many congressional districts are designed to produce guaranteed winners. Through this “gerrymandering” process, state legislatures create districts to be won mostly by big GOP majorities. Members of Congress cater to these pre-set majorities.

Instead of functioning like the lead branch of government, as the Constitution intends, Congress cares more about party positioning for the next election than about passing urgently needed legislation.

Party unity leads Republicans to try to please their president, though Trump is turning out to be hard to please. But the GOP, despite its earlier more constructive positions on immigration, now seems to be falling in behind him on the issue. Still, they have trouble following his daily moves on Twitter, and they don’t have enough votes to win.

At times, the Maine Legislature provides a better model. Because state law requires both passing a budget and, usually, a bipartisan two-thirds vote to adopt it, the Legislature can play its constitutional role. Such bipartisanship will be under challenge this election year.

Right now, Republicans control the U.S. Senate and House as well as the presidency. While not all Republicans agree, they may be capable of reaching a broad consensus among a large majority of them. If they then gave just a little ground to the Democrats, Congress could function.

Having control of both the presidency and Congress, the GOP risks being held accountable for failing to produce results. With an erratic president, who turned out not to be a dealmaker after all, Congress is missing the chance to reassert its equality with the president.

Appearances matter: Trump’s barroom talk no substitute for leadership

Most people know the 2018 Winter Olympics will soon begin. Few will know the difference between the two men’s 1500-meter speed skating gold medals.

Who cares? What’s important is what country wins medals and who wins the most. That’s one number many people will know.

They care about the medal count. If the U.S. does well, it will be a source of pride. And it may send a message about America’s leading role in the world. That’s why countries like Russia and, in the past, East Germany have cheated in the Olympics. They hope the results will enhance their prestige.

Appearances matter. How well a country does in speed skating says nothing about its place in the world, but some people believe medal count does. Russia, banned from this year’s Olympics, thought it could steal its way back to major power status.

Even more importantly, the prestige and respect for a country depends on the conduct of its leaders. When the president of the United States prefers barroom jibes to statesmanship, he costs the country the respect of both its own citizens and people across the world.

President Trump’s appeal for his so-called “core constituency” is supposedly based on his saying publicly what they think and may express only in bars or locker rooms. They may be entitled to feel that one of their own is now in power.

Add to that, congressional Republicans who support his denial of having used racist language, despite Trump’s poor record of truth telling.

They see him as a GOP president who is their conduit for passing their conservative program. He fails to lead and lacks a program of his own. The unsuccessful repeal of the ACA and the tax overhaul bill both came from congressional Republicans, not the White House.

Trump was glad to take personal credit for both legislative moves. So long as they control Congress and have an accommodating president, some right wing Republicans will forgive or ignore any tweets or White House outbursts.

We like to believe that the U.S. president, even after a highly partisan campaign, represents all Americans. But Trump remains faithful to his core and disdains the rest of the country, even though the majority did not support him.

Some congressional Republicans feel so strongly about their views that they are uncompromising. They spurn any cooperation with Democrats. They know this year’s elections could weaken their grip on government, so they will play hardball now and count on Trump to back them.

As part of his plan to pick up needed Democratic support in the Senate, Trump wants to resort to tactics consistent with his deal making in New York City real estate. For example, he wants to bring back “earmarks.”

Earmarks were tacked onto other legislation and provided tax-supported local projects designed for specific members of Congress. They ran into billions of dollars and were mostly eliminated by an embarrassed Congress.

But Trump seems to think he can buy Democratic votes by offering them earmarks. They would be financed by taxpayers, running up the deficit. The price we would pay is worth it, if Trump could pick up a rare legislative victory.

He demands Democratic support for his border wall (wasn’t Mexico supposed to pay for it?) by insisting on it as a condition for helping for DACA immigrants brought here as young kids decades ago. Obviously, he badly wants to notch a political victory on his border wall promise.

Trump’s anti-immigrant tactics appeal to his core, but the constituencies that voted for him are shrinking. His GOP allies support him for the party’s 2020 nomination, because they will stick with their incumbent president.

If the polls are even faintly right, he has no chance of reelection, provided the Democrats put up a decent candidate. He will probably be challenged for the GOP nomination, ripping the party apart. If a Romney or a Rubio tries again, the challenger could get the nomination. The GOP better get all they can from Trump now.

The worst part of Trump’s loose language about immigrants from countries whose inhabitants are not predominantly white is that he has made more Americans fearful of their government. If you are member of a group Trump doesn’t like, you may worry about actions by him and his compliant supporters.

South Carolina GOP Sen. Lindsay Graham was at the meeting where Trump unloaded on immigration from Haiti and Africa. He objected, answering that this country is defined by its ideals, which do not support discrimination based on national origin.

Trump probably did not understand.

Government switches: from 'flip flops' to 'nullification'

When government reverses an established policy, the move can range from a “flip-flop” to outright “nullification.” A “flip-flop” is a switch in policy. Nullification is a move to ignore the law.

President Trump and his administration have been busy reversing measures adopted by his predecessor, President Obama. Executive orders go back to George Washington. Obama used them as a form of legislative action when a GOP Congress blocked his proposals.

The GOP criticized Obama for his excessive use of executive orders, though Congress could never overrule him. No effective legal action was attempted to halt his use of such orders. But some state attorneys-general were able to get courts to suspend his immigration rules.

Now the situation is reversed. Even with a Republican Congress, Senate Democrats have the votes to block repeal legislation. So Trump has done just what Obama did, issuing his own executive orders to revoke Obama’s actions.

Lacking many bills bearing his imprint, Trump has made a big show of ceremonies in which he issues executive orders. He tries to elevate these orders to the level of signing an act of Congress.

Then, executive agency actions are designed to reverse policies of the previous administration. That is normal, but these course changes seem to be more prevalent under Trump. At the U.S. Supreme Court, the Justice Department has abandoned many Obama-era positions in the middle of cases.

The most obvious policy switch came recently on marijuana, which is a controlled substance under federal law. The Obama Justice Department dropped almost all enforcement of that law in states that permit the medical or recreational use of marijuana. Its action opened the way for several states to legalize marijuana.

Attorney-General Jeff Sessions has revoked the Obama policy and directed U.S. attorneys around the country to enforce the law without regard to state laws. While his action brought out strong opposition, it is difficult to fault him for enforcing the law.

The Wall Street Journal pointed out evidence that legalization has encouraged illegal activity rather than halting it. It also noted that a majority of Americans favor legalization.

If marijuana production and possession are to be made legal, it is up to Congress to do the job. It passed the existing law, but it looks like members want to avoid responsibility for legalization. Yet, that’s exactly their job, far more than Sessions’.

In 2017, Congress focused on the Affordable Care Act and taxation. The Republicans saw these as issues on which it had made promises and it could claim credit. Almost all other issues of real consequence were untouched. Voting on issues may be controversial, so Congress prefers to leave many decisions to the president or other officials.

With no fingerprints on such decisions, members of Congress are free to criticize. They leave the impression of runaway government, when they don’t take responsibility. Flip-flops instead of established policy are acceptable. In short, the reason flip-flops are the norm is the failure of Congress to act.

At the state level, policy switches may be even more serious. In Washington State and Florida, the legislatures are moving toward taking authority to nullify state court decisions on the constitutionality of the laws they have passed. Legislators claim judges have become, well, legislators.

They may be correct, but they should influence court action by better defining court jurisdiction and exercising greater care in confirming judges, avoiding picking them solely for their political views. Otherwise, nullification can overcome the essential separation of powers.

Nullification has a long history in the U.S., associated with southern states fighting against federal action on slavery. It is a direct attempt to deny decisions made according to the approved constitutional process.

These days, the best example of nullification is found in Maine. Under the state constitution, the people, rather than their representatives, may vote to adopt legislation. When they exercise their democratic right, they make law.

Last November, Maine voters passed a law to adopt the Medicaid expansion made available under the ACA. While the Legislature had previously passed such a law, Gov. LePage had vetoed it.

But, under the state constitution, there is no veto of laws passed by the people. The governor may be unhappy with the vote of the Maine majority, but he does not have the right to block the law enacted by the people, just what he and some GOP supporters now want to do. The people are sovereign, not the governor.

Congressional failures, tampering with the separation of powers and outright nullification are all threats to core values of our political system.

'Go it alone' – Brexit, ExitUS, Statoil – a dangerous policy

“Go it alone” is becoming the political policy of our times. It can be dangerous and costly.

The best known case is the decision of the United Kingdom to quit the EU, a move known as Brexit. A majority of UK referendum voters decided that their country could achieve to its former glory as a world power while ridding itself of immigrants the EU deal forced it to accept.

The Brits were promised they would get almost all of the EU benefits without the cost of membership or the immigrants. In fact, the EU savings would cover needed improvements to the national health program. And the UK was such a valuable trading partner, it would be able to dominate the exit negotiations with the EU.

While the UK government opposed Brexit and knew those promises couldn't be kept, it campaigned poorly, and Brexit carried the day.

Things are not quite working out as promised. Britain will have to pay tens of billions to leave. The EU won't give it nearly as good a trade deal as the EU insiders. There are big problems with Ireland, which remains in the EU and currently, as part of the Irish peace deal, has no trade border with Britain.

The UK's principal port is actually Rotterdam in the Netherlands. Workers are leaving the UK and now there's a nurse shortage there. Major international banks are moving out. “Go it alone” looks less rosy, but nobody yet has stepped up to try to reverse Brexit.

Brexit looks like a bad mistake for the Brits. The U.S. would never adopt “go it alone” like that.

Except that President Trump has done it many times over. You might call the policy “ExitUS,” which sounds like “exodus.”

Because of his misguided and partial understanding of the Paris environment agreement, he has made the US the only country in the world to quit it and remain outside. If there's an international agreement that every country can accept, it probably isn't all that tough. But the US is out.

What about the NAFTA agreement with Canada and Mexico? The US has received a bad deal, Trump says, and that settles the matter. He refuses to acknowledge that the US runs a positive trade balance with Canada and insists there's a deficit. When Canadian Prime Minister Trudeau corrected him, he implied Trudeau shaded the truth.

At the NATO summit meeting, Trump had difficulty convincing others that the US would keep its mutual defense commitments. He topped that off by rudely pushing aside, without the slightest acknowledgment, the Prime Minister of Montenegro.

International relations are complicated and interconnected. Harm me now, a country can say, but don't expect my help later.

The US was desperate for support at the UN opposing a resolution against the decision to move the American embassy in Israel to Jerusalem. Out of almost 200 votes, it received 9, from small, dependent countries. The US did not get the votes of Canada and Montenegro.

Under Gov. Paul LePage, who some see as Maine's mini-Trump, “go it alone” has also been a central policy with negative results.

Statoil, a Norwegian energy company, sought to build a major wind farm off the coast of Maine. According to the Forbes survey, Statoil annually ranks high among the largest 500 corporations in the world. It received the necessary approvals and, according to knowledgeable people, was in line to get major federal support.

LePage, engaging in a bit of legislative blackmail, got the Legislature to reopen the process so the state could switch from Statoil to backing a University of Maine project. This is pure “go it alone” with the usual adder of patriotic boosterism.

It didn't work. UMO did not get the big federal grant. Statoil decamped for the UK, where it built a large fleet of floating wind generators, the first such major commercial generation. That could have been Maine.

What is most important is that “open for business” Maine pulled the rug on one of the largest corporations in the world. How many other such outfits are likely to consider Maine in the future? The LePage switch probably will cost for decades.

It would be fair to ask candidates for governor this year how they voted or would have voted on the Statoil switch.

“Go it alone” may make people feel better, but it can produce dangerous and long-term results. Acting in isolation may have been possible in simpler times, but it is not a workable solution in today's more complex and interconnected world.

Year ends with more questions than answers

As the year turns, there are some things I haven’t been able to understand. I figure I'm like most people.

Why doesn’t President Trump get it? His popularity is in the steepest free-fall of any president, yet he keeps promising policies most people don’t want and whose implications for America's role in the world and the economy at home many don’t like.

Does he understand that running for president and being president are two quite different things? His presidency seems to be more about salesmanship than leadership.

Why did President Obama screw up so badly in Syria, allowing Russia to dominate matters there? He made a great speech in Cairo early in his administration, but never followed up with leadership on Middle East policy.

Obama left us with Democratic congressional leaders who repeat old slogans rather than offering positive, even bold, alternatives. Are there any young, national Democratic leaders outside of Washington? Like Obama was.

Why is Gov. LePage unable to understand how government works? He lets partisan petulance get in the way of leadership. He might have achieved more of his goals by compromise than he will by confrontation. He seems to think it’s all about him, when it’s really all about us.

Why do the Democrats desert their key constituencies? They are the party of working people and minorities. That was the magic of the presidency of Franklin Delano Roosevelt. But they focus their attention on less important issues and their preoccupation with the GOP's shortcomings.

Why don’t they focus on bread-and-butter issues like how to create jobs for the future, boost pay and protect retirement? Why does most of the talk either amount to complaints about the wealthy (which most working people would like to be) and social issues, which obscure more basic concerns?

Can we adjust to the speed of change? Our lives are changing at an ever-increasing rate. It is amazing to see how quickly same sex marriage gained acceptance and Supreme Court approval.

Now we are seeing long overdue but nonetheless warp-speed changes in dealing with sexual harassment and worse. Attitudes need to be fixed immediately, but society should also make sure this is permanent change, and not a frenzy that will soon pass, and that it is fair.

Why can’t we accept that the climate is changing with some unfortunate and dangerous results? It matters little if human beings are the cause, but it matters a lot if human beings, eager for short-term gain, refuse to do anything about it or make it worse.

Why can't we deal quickly and effectively with wildfires in California or major power losses in Maine, when we know both are sure to come?

Why are we still fighting a war in Afghanistan? This has never really been a country. Every outsider – the British, the Russiand now Americans – has failed to create a stable and unified country. It is tragic to waste American and Afghan lives in the longest American war, which cannot end in victory.

Why don’t we squash fake news? Trump labels anything he doesn’t like as “fake news” and he is a major producer of it. Enough people have come to believe fake news that they think all news they like is accurate and all news they dislike is fake. Fake news is taking down the real thing.

Before something is labeled as news, it should have passed before an editor or fact checker. All media – print and electronic -- ought to do what the Washington Post does and have fact checkers who report daily. The evening news would do its job better with fewer feel-good reports and a daily fact check.

Why has baseball so demeaned the job of manager that they are selected based on how well they can coddle their big stars? When a manager gets $2 million and a pitcher gets $25 million, that could be why. The result is that the manager gets no respect, and the game is more of a business and less of a sport.

I find all these questions bewildering. Of course, there may be an answer. A Persian fable told of a king who sought an all-purpose bit of wisdom. He was advised that wisdom could be summed up by the words, “This, too, shall pass.”

Abraham Lincoln reportedly once talked about that message. He said, “How much it expresses! How chastening it is in the hour of pride! How consoling in the depths of affliction!”

Amen. Happy New Year.