Trump seeks to end independent Fed

Gordon L. Weil

Remember the Great Recession of 2008? 

Thanks to prosperity since then, memory may have faded.  The steady growth in the American economy is largely the result of two-fisted government action by the president and the Federal Reserve.  They each used different tools.

Increased spending on public projects can help turn the economy around.  It pumps money into directly creating jobs, which produce even more jobs as the new income ripples through the country.

Soon after taking office, President Obama succeeded in getting Congress to adopt an economic stimulus that reached $831 billion.  Tax cuts were a big part of the package, along with building roads and other public facilities.  Some went to social benefit programs.  New federal debt paid the bill.

A GOP Congress denied Obama any more stimulus spending, but later it was willing to add to the public debt by adopting more tax cuts.  President Trump signed off on them, and the recovery continued.

The stimulus alone would not have brought the strong recovery.  Much of the sustained work was handled by the Federal Reserve.  On its own, it lowered interest rates, making borrowing easier for new homes and business expansion.

The Fed also stepped up lending to banks, so they could more easily offer mortgages and money for economic development.  By lowering interest rates and making more debt available, it used its powers to aid the economy.

Created in 1913, the Fed has mandates to fight inflation, when prices and interest rates rise too quickly, and to promote job creation.  Its moves affect all other banks and it serves as the federal government's bank, making it the central bank.  Other countries also have central banks.

The U.S. central bank is meant to operate outside of political control.  Its board members are appointed for 14 year terms.  The long terms are intended to insulate the Board, which receives no taxpayer funding, keeping it independent of the politics of the day.

The president and Congress may want the Fed to promote easy money, allowing them to take credit when running for reelection.  They are likely to be less concerned about long-term effects, whatever the Fed's responsibility.

When he was running for reelection in 1972, President Nixon induced the Fed chair to lower interest rates.  That produced a short-term push to the economy but led to huge inflation that hit under President Carter.

Now having slashed interest rates and bought enormous amounts of debt to beat the Great Recession, the Fed has few tools left to combat another downturn.  You cannot cut rates to stimulate the economy when they are already low. 

So the Fed has begun trying to rearm itself by gradually raising rates and reducing the amount of bank debt it holds.  By returning to normal levels, it will later be able to make cuts to help recovery in case of another downturn.  It has been going slowly, because there is little inflation.

Trump has promised great economic growth.  While he can take some of the credit for the sustained recovery, he wants levels of growth that would be unusually high.  This year, he is not achieving his goals, which probably would have eluded any president or policy.

He blames the failure to reach high growth rates on the Fed, including Jerome Powell, his own appointee as chair.  Trump believes that raising rates, even slowly and slightly, hampers the achievement of his forecast growth.  It's obvious he dislikes the Fed's independent monetary policy.

He scorns Powell, admitting he is "stuck" with the Fed chief, but keeps up his pressure.  Powell resists resigning.  But he has led the Fed to back off plans for more small rate boosts.

Trump has picked candidates for two open slots on the Board.  Stephen Moore is a political commentator with no academic or business background to help him with the complexities of monetary policy.  Herman Cain is a businessman who shows no understanding of the Fed.  Both have made misstatements about the Fed.

Trump's economics are misguided, designed only to win him an election, and his appointees, both Trump loyalists, would vote to decrease rates.  Nobody would worry about post-election inflation. 

The Fed committee that makes policy has 12 members.  So these appointees could not themselves change interest rates.  But they could politicize the Fed.

Congress created the Fed as an independent body.  It was meant to keep the economy on a steady course, not subject to political swings.

Will the Republican Senate refuse to confirm political appointees or appease Trump in hopes he will lead the GOP to electoral victory?

GOP deploys political "bluff" on Green New Deal

Gordon L. Weil

The country has been treated to a classic case of political theater, and few even knew about it.

People missed the cynical drama staged by Senate Republican Majority Leader Mitch McConnell mainly because much of the media spread what amounted to "fake" news.

The story began in January when some newly elected House Democrats launched a proposal dubbed "the Green New Deal."  The "New Deal" was meant to echo the broad social legislation enacted to combat the Great Depression in the 1930s.  The new version would bring sweeping economic and environmental action.

The proposals were ambitious and idealistic, reflecting deep concern about the deterioration of the environment and the income gap.  Opponents immediately ridiculed them, claiming they would outlaw everything from airplanes to cows' farts.

While it was obvious the proposals were a set of lofty objectives, backed by Senate Democrats running for president, they lacked detail.  They proposed no funding and aimed for success in ten years, which was clearly impossible.  Critics would claim they were impractical or would harm the economy.

No member of Congress expected that the Green New Deal could be adopted before the 2020 elections.  Some Democrats hoped to see if it could get the party on record in support of its goals.  Many others were wary of endorsing extreme and controversial proposals. 

Republicans relished the prospect of a split among Democrats and the possibility of being able to box the Democrats into a politically vulnerable endorsement of the proposal.  To them, the Green New Deal was not a challenge, but an opportunity.

McConnell himself proposed the Green New Deal bill in the Senate.  Republicans staged a symbolic floor debate to exaggerate and lampoon it.  The GOP leader had made sure that there would be no committee hearings on the bill and no possibility for other senators to amend it.

He then scheduled his bill for what has been called a "bluff vote."  Though the Republicans had proposed the bill, they really opposed it and would seek to kill it.  That was their bluff.  They apparently hoped that some Democrats, to please the party's most liberal wing, would err and vote for the proposal, causing an internal party split.

A couple of weeks ago, the bill was brought before the Senate.  Under today's practices, the Senate would first have to vote to end debate before the bill itself would be considered.  If the GOP blocked ending debate, the bill would theoretically remain alive.  In fact, it would be buried. 

The GOP could use this stealthy move to vote against their own bill without going on record in opposition to its lofty goals. 

The Democrats countered by deciding simply to vote "present" when their names were called.  In that way, they could avoid falling for the bluff.  With no favorable votes and not enough votes to end debate, the bill would effectively be permanently shelved.

Everybody knew the script.  The vote on cutting off debate followed predictable lines.  All Republicans voted against ending debate and Democrats, except for four, voted "present."

Three of the four were Democrats elected in normally Republican states.  Their votes, throw-aways because they did not affect the outcome, might help them burnish their credentials with GOP voters back home.

The fourth senator was Maine's Angus King.  He is an independent member of the Senate but is aligned with the Democrats.  He objected to the Green New Deal as being impractical, as did the Republicans and some Democrats, but he also objected to McConnell's bluff strategy.  Still, as an independent, he could vote this time with the GOP.

Then, the media coverage hid the whole unseemly ploy.  Virtually all news reports said the Senate had voted down the Green New Deal.  It surely would have done so if there had been a real vote, but the media downplayed or ignored that, above all, this was a "bluff vote" designed to split the Democrats.

No news reports noted the lack of the normal legislative consideration that would happen if the bill was taken seriously.  The media allowed the GOP to get away with its bit of theater.  It made no effort to explain what was in the bill or the reasoning behind it. 

In school, students may be taught how laws are made in the federal government.  The formal system described in the schoolroom is gone, replaced by the kind of tactics used on the Green New Deal.  Can you find that fact in the evening news?

When government doesn't work, people may be angry.  But they often don't know why.

Mueller findings, voter worries could produce Trump win

Gordon L. Weil

Whatever the polls say, Donald Trump could be re-elected. 

Both he and the Democrats have focused great attention on the Mueller report.  By finding that the Trump campaign did not collude with Russian meddlers, it may end up absolving Trump of many other charges or complaints.  Some voters are sure to see it that way.

His chances for victory may rate better than his personal popularity, because he appeals to millions of Americans who worry about their meager savings and dislike changes taking place in the country.  Despite low unemployment, these people have not shared in the nation's prosperity.

Nobel Prize winning economist Joseph Stiglitz has reached sobering conclusions, finding "the U.S. has the highest level of economic inequality among developed countries.  It has the world's greatest per capita health expenditures yet the lowest life expectancy among comparable countries."

Even worse, the gap between average people and the most wealthy is huge.  Stiglitz notes that three Americans have as much wealth as the bottom 50 percent.  To be clear, that's three people, not three percent.  And the percentage of children earning more than their parents, a sign of economic progress, is tumbling.

American productivity is climbing.  But the benefits do not show up in the wages of production and nonsupervisory workers.  Investors and owners are picking up the gains.

Under the Republican tax cut, the breaks have mostly gone to the wealthy.  Middle-income taxpayers saw their withholding tax lowered before the 2018 elections, but their expected tax refunds shrink after those elections.

Still, some voters do not hold Trump responsible.  They believe their taxes can be reduced by cutting government spending.  Reduced regulation, which Trump is providing, costs less.  A tough trade policy slows imports, creating more jobs at home, though it may also cut exports.

The dominant political mantra remains "jobs, jobs, jobs."  It seems to matter little if the price of today's low unemployment is less environmental protection and lower quality health care. 

Trump promises recovery of the declining manufacturing economy.  He appeals to people who regret the growing influence of women and minorities.  He wants to build trade and immigration walls to protect the country.  "America First" means an increasingly isolated country, seeking to regain its past.

Even though demographic change is inevitable, some see it as having been sped up by allowing an "invasion" of immigrants, legal and illegal.  Trump's Wall is a powerful symbol of resistance to change.  The key word in "Make America Great Again" has been "Again."  Some people like what that implies.

Whether Trump utters untruths almost daily or focuses excessively on himself or treats others with disrespect matters far less to some voters than his policies of lower taxes, fewer imports, reduced immigration and less regulation.  His policies may be enough to get him re-elected, even by voters who don't like him.

Many Democrats believe that his faults, now widely recognized, will be enough to bring his defeat.  His popularity remains relatively low.  In short, they think Trump will defeat himself.  That's why there are so many candidates.  Win the primaries, they think, and you win the presidency.

Their view gets some support from the 2018 congressional elections.  Republicans lost control of the House and gained less than expected in the Senate, because of voters' negative view of Trump.  Will the Mueller report change opinions about him?

Some Democratic candidates believe voters are ready for a sharp, almost revolutionary, reversal.  They argue for an increased role for government to deal with climate change, public health care and education.  The necessary funds would come from an increase in taxes on the most wealthy.

These Democrats see the reaction to Trump giving them the opportunity to focus on increased government action, not leaving the country entirely to the private sector and competition.  They may remind voters of the sad story of leaving regulation of the crash-prone 737 Max 8 to Boeing, its manufacturer. 

The Democrats divide between moderates and self-styled democratic socialists.  They split between middle-of-the-road policies and an extreme shift away from Trump.  Will the Democrats remain divided, benefiting Trump, or will the primaries yield a unifying view of how much change their voters want?

Meanwhile, Trump and his loyal Republicans seem ready to stick with catering to public longing for the disappearing past.  The worries of middle class families could work to Trump's political advantage.

The 2020 election is as likely to be about the temper of the American people as about Trump's character.  It will really be about us and what we want. 

U.S. votes, Brexit reveal problems from overuse of referendums

Gordon L. Weil

The 2016 presidential vote and Brexit have something in common. In both cases, many voters found the result was much different than their expectations.

In recent months, the British Parliament has been grappling with putting into effect the closely decided referendum vote to leave the European Union. It proved easier to say "Leave" than finding a way to do it.

The main problem is Northern Ireland, a part of the United Kingdom. Leaving the E.U. means either it will have a new border with the country of Ireland or one with the rest of the U.K. It has neither now. Nobody has come up with a solution to avoid one or the other.

This issue has disastrously complicated the "Leave" decision. Faced with uncertainty, major parts of the U.K. economy are departing for the E.U. They cannot accept the situation and assume the worst. Confusion reigns.

Resolving the issues created by the "Leave" vote has been left to Parliament, which cannot agree on any course of action except delay. The result is political chaos.

The Brexit crisis is the result of using a popular referendum in a country having little experience with direct democracy – decision-making by the people rather than by their legislative representatives. Perhaps the most national voting experience many people had was the Eurovision Song Contest.

In the U.S., Donald Trump's election was the American version of a national referendum, and he got four years at the helm. Not only did he win the presidency without a majority of the popular vote, but he has stirred deep concerns about his leadership on matters ranging from race to trade.

The safety valve on this national vote has always been the election of the House of Representatives. The people get to express their political opinion midway through a presidential term. If they dislike the results of the presidential election, they may elect an opposition House.

That's why the entire House is elected every two years while senators, members of a body designed to slow change, are elected for six-year terms. The House can become the short-term monitor of the president. The Democrats, newly in control, are trying to slow Trump down.

There are two solutions for dealing with the complicated consequences of a referendum.

One is used in Switzerland where voters participate in national referendums as often as four times a year. The issues are usually narrow and specific, and their votes make laws that can be immediately applied.

The other approach is to allow the legislative body to complete or even modify referendum results. There are 23 states, including Maine, that authorize referendums initiated by voters, while 49 allow legislatures to put questions before the voters.

State legislatures can deal with trying the fulfill voters' decisions that cannot go directly into law. In Maine, when a vote authorizes action without providing necessary funding, the Legislature regains control. The 2004 vote on school funding has not gone into effect, because it might force an increase in state taxes.

A possible reform proposed for referendums would be to require a super-majority for passage. If, say, 60 percent of voters were needed, legislatures would be more likely to find ways of fulfilling the will of the people. Another suggestion is that the number of signatures to initiate a referendum could be increased.

The problem in the U.K. undoubtedly arose out of the lack of familiarity with direct democracy. The error was using a referendum. After the vote, the British Government mistakenly tried to keep Parliament out of the "Leave" process. It did not succeed.

In the U.S., Trump won in one of the four presidential elections since 1824 in which another candidate got more votes. Despite having won only a minority popular victory, he has sought to make huge changes in American policy. The House can block some of his moves, but Congress has given presidents great, unchecked powers.

Some House members propose impeachment, implying that it can be used for policy reasons, as in the past. Both of the earlier times it was tried amounted to a pure politics, and it failed.

Direct democracy works on a small scale, as in Switzerland. The New England town meeting system succeeds, though with low participation. But referendums are beginning to show defects, especially in mass democracies like the U.S. and the U.K.

Elected legislators need to exercise their powers. The British Parliament could have dealt better with E.U. issues by itself without first holding a referendum. Congress should cease delegating its powers to presidents and recover its constitutional authority.

Moderates count little in partisan world; voters harbor unrealistic hopes

Many voters consider themselves to be political moderates, not partisans on the right or left. To appeal for their votes, candidates claim they can "work across the aisle."

But do voters really favor political leaders who will sometimes vote in line with their wishes and sometimes against them? Is it possible to be a moderate politician, if the "aisle" turns out to be a canyon?

Moderate politics may be one of the grand myths of American politics and more wishful thinking by voters than reality.

A moderate might propose solutions to political issues that yield some satisfaction to each side, but also some dissatisfaction. Compromise might be acceptable, because everybody wins something, just not everything, they sought.

That kind of moderation is only possible if both sides are willing to give some ground. If one side insists on full acceptance of its demands, a moderate politician will fail. In Congress, the extremes of both parties show little willingness to accept anything less than complete victory.

The ideological wings of both parties now have enough seats to block compromise. Though still occasionally possible, it is unusual.

More often, what voters mean by "moderate" is the politician who generally supports their party but may sometimes split with it on key votes. Such a moderate may act independently when responding to their constituents or adhering to a personal principle when they resist party discipline. They may do so, especially if they don't tip the balance.

Some voters believe that on issues mattering a lot to them, the office holder can be counted on to split with their party. When that does not happen, the moderate can quickly be scorned as a mere partisan.

Take the case of Sen. Susan Collins. She provided one of the key votes that saved the Affordable Care Act and opposed some major Trump appointments. She has been considered to be a rare GOP moderate and most likely that is how she sees herself.

Then she voted with her party to confirm Brett Kavanaugh to the Supreme Court. Everything changed. In the eyes of Kavanaugh's opponents, Collins became a loyal Trump supporter, though she had not supported him for president and had routinely backed presidential Supreme Court nominees.

Collins' situation is complicated by Sen. Mitch McConnell, her Republican leader in the Senate. As a member of his party, she inevitably votes to retain him as her Senate leader. But McConnell does not see some major issues as she does.

She is then exposed to his obvious willingness to back Trump and his strict discipline in the Senate, blocking many votes that might embarrass GOP senators. He usually bars compromises, insisting on his way or nothing. Collins may have to go along with him so she can get good Senate committee assignments, which he doles out.

McConnell initially expressed concern about President Trump's declaration of a national emergency to fund the Wall. But when Trump insisted, he changed position without hesitation. Collins had been among Republican senators opposed to the declaration. McConnell simply ignored them. She stuck to her opposition.

Does that make her a moderate? Now set against her, some voters disappointed by her Kavanaugh vote said her latest position was a sham, because she could count on Trump successfully vetoing the resolution disapproving his declaration. Had she supported Trump, she would also have been condemned.

Perhaps this case showed there's no room for moderates in American politics. They cannot create compromises, and independent-minded moderates cannot satisfy some voters unless they act like they belong to the other party. Then, of course, they would not be moderates.

It may also show that voters who say they want moderate politics are either chasing a political ghost or badly missing the excessively partisan nature of today's politics.

Suppose a majority of Maine voters had opposed Kavanaugh and believed his appointment would be the single most important issue before the Senate. By voting for Collins, they had given McConnell great power to steer the Kavanaugh vote.

Of course, that kind of foresight by voters is impossible. We cannot predict what votes or nominees are coming and if a senator will break party discipline on a critical issue – even if the senator is a moderate.

Politicians, even moderates, do not often split from their party. If voters want politicians who will reliably vote in favor of their positions, they may have a better chance if they choose between the parties.

In this age of extreme partisanship, more certainty may only come from voting as a partisan, not as a moderate.

Direct election of president expected, despite bitter opposition

The country has found a politician who is honest, speaking the truth as he sees it, no matter the consequences. Paul LePage, the former Republican governor of Maine, has spoken out against the proposal for popular election of the president of the United States.

"It saddens me that we're willing to take everything we stand for and throw it away," LePage said. "It's only going to be the minorities who would elect." He continued, "White people will not have anything to say."

Two of the last three presidents, including Trump, won the electoral vote while losing the popular vote. That has given a big push to the proposal of having presidents elected by a majority of American voters.

LePage has said, "I was Donald Trump before Donald Trump became popular." We are "one of the same cloth," he said, inviting his listeners to accept him as an authentic supporter of the president's views.

Unfortunately, the issue has become partisan. Five times, the U.S. has elected a president supported by only a minority of voters. All of the losers were Democrats. Not surprisingly, the GOP opposes the national popular vote proposal.

Many Republicans seek to suppress the influence of "minority" voters, allowing white voters to continue to dominate the political process. Electoral voting goes along with gerrymandering and measures making it more difficult to register or vote.

These policies amount to a rearguard action to slow the inevitability that the "minority" – mainly African Americans, Hispanics, Asians and American Indians – will soon constitute the majority of the population.

The proposal before Maine and the country is that states will instruct their presidential electors to vote for the candidate who has won the popular vote nationally. When states with 270 electoral votes, a majority, support this approach, it can come into effect. Right now, less than 100 more electoral votes are needed.

One complaint about the proposal is that Maine, a small state, will lose influence. The electoral vote gives Maine 74/100 of one percent of national voting power. The national popular vote, based on the 2016 election, would give Maine 56/100 of one percent. Maine's above-average voter turnout would allow it to retain its modest influence.

We expect every voter to have equal weight in the democratic process – one person, one vote. Without the national popular vote, a Wyoming voter has almost four times the influence of a California voter and counts somewhat more than a Maine voter.

In both the 2000 and 2016 elections, Maine voted with the popular majority only to see the loser in the state gain the presidency. The same was true for California, New York and other states, which could not have seemed fair to their majorities. In Maine, despite LePage's worries, the majority was obviously mostly white people.

In 1787, when the Constitution was drafted, the Framers showed mistrust of democracy, which they limited to the House of Representatives. States retained much power. Each one, no matter its size, got three automatic seats in Congress – two in the Senate and one in the House. The size of a state's congressional delegation determines its electoral vote.

Since then, popular democracy has risen. The Senate is elected by popular vote, not by state legislatures as it was originally. Women, African Americans and younger people have been added to the original corps of white men. National media and a national economy have grown, engaging citizens across the country.

Under the Constitution, each presidential election is actually 51 separate elections – the 50 states and D.C. Maine, with its split electoral vote system, shows that states can act independently in deciding how their electoral votes will be determined. That is what is now happening.

Jurisdictions with a majority of electoral votes can decide that the state will allocate its votes to a national winner. There are now enough states that have seen their majorities overruled by a popular minority to provide the necessary 270 votes to make the change. There's no need to amend the Constitution.

Whatever Maine does, the national popular vote is inevitable. Presidential campaigns are national, ignoring state lines. Healthcare, federal taxes, immigration, individual rights, and the economy are addressed nationally not state-by-state by presidential candidates.

The Republican Party needs to extend its appeal to a broader constituency rather then trying to suppress the vote of non-white ethnic groups. It must see that its policies to discourage voting by new participants in the political process are not good for the party or for the country.

Healthcare needs reform, not reckless cuts or impossible extremes

In the 2020 election campaign, healthcare looms as a major issue. 

Many Republicans want to repeal the Affordable Care Act and slash Medicare.  Eliminating Obama's signature policy and reducing Medicare are centerpieces of their effort to end Democratic "big government."  They like the traditional system based mainly on insurance provided by employers. 

Many conservatives believe healthcare should be left to private sector insurance and emergency care.  The U.N. World Health Organization rates U.S. medical services as only average, except for its top-flight emergency rooms.  The country also ranks first world-wide with the highest healthcare costs.

Medicare gives most older Americans, who lack coverage under employer plans, regular access to hospital and doctor care.  Drug costs are subsidized.  If they cannot afford the program's premiums or co-pays, Medicaid can help.

Under Medicare, people can choose their doctors.  In addition to Medicare payments, they either come up with cash or use supplementary coverage, provided by private insurers. 

Medicare Advantage, a popular form of the program, tempts insurers to cheat the government by claiming they paid doctors for more care than they actually did.  Last week, the massive extent of this cheating was revealed, with more bad news expected.  Many major insurers appear to be involved.

Congress has blocked Medicare from selecting drugs based on their price.  Suppliers have an incentive to charge as much as the market will bear, far above actual cost.  Their prices are not regulated.  They may expect that co-pays would be raised.  

Because Medicare covers so many people who might otherwise have no protection, some Democrats propose universal health insurance – "Medicare for all."  Most likely, they would propose to fix it first, piling one unlikely promise on top of another.  But it sounds politically appealing.

This proposal is a form of so-called "single payer" insurance.  A government agency pays all bills with some co-pays to screen out those not truly ill.  "Single payer" raises taxes but eliminates insurance premiums, and is thus expected to lower net outlays by individuals.

But the cost of hospitals and doctors remains uncontrolled.  The single payer may still face higher prices.  One obvious solution is that the single payer also employs the doctors and owns the hospitals.

Such a system exists in the U.S. – the Veterans Administration.  Because any system is only as good as the people who run it, it works better in some places than others.  In Maine, it works well.  Full disclosure: I'm a participant.

Because some managers elsewhere falsified their records and delayed service, the VA system has come under pressure.  The Trump Administration's solution is to make it easier for veterans to use outside doctors at government expense.  This outsourcing is part of the GOP effort to reduce government programs.

The ACA is a hybrid between the traditional insurance system and a government payer.  It is supposed to control prices through the operation of an open market in which people can choose their coverage.  Insurers are required to cover more people.

After a recent change, made when the GOP Congress went after the ACA mandate, individuals no longer must buy insurance or pay a penalty.

If not covered by employer plans, individuals may exercise their choice through state exchanges in which insurers compete.  Originally, a non-profit public option was proposed in each exchange, but it was blocked by a single senator representing insurance interests.  The obvious fear was that people would turn the lower-cost public option into a single payer.

The ACA has its problems.  It has survived because of a handful of GOP senators, including Susan Collins, and Chief Justice John Roberts' swing vote on the U.S. Supreme Court.  The lack of cost control and the loss of required participation make it an imperfect solution.

Recently, a Columbia University expert has suggested that, instead of the ACA or copying single-payer Canada, the U.S. should consider the German model, the world's oldest health insurance plan.  Less costly than the American system, it uses a combination of employer, employee and government financing.

Private insurers in Germany are subject to strong regulation, and they compete on price and quality.  An individual's co-pays are capped at a fixed percent of annual income, less than co-pays in the U.S. 

Americans prefer choice and competition, and the German system provides it.  Government regulates prices but does not replace insurers. Along with adding drug price regulation, this plan merits more attention.

Healthcare is an immediate and costly problem.  Candidates need to skip anti-government cost-cutting bravado on the right or unrealistically generous promises on the left and look for real solutions.