Major economies rely on dangerous myths

China’s economy is tanking.  Refugees flood Europe.  Possible interest rate hike threatens U.S.

These three major stories are based on major myths.

China’s economy is in trouble.  Though under a Communist government, the country seems to allow its brand of free enterprise, including foreign investment.  It even has a stock market.

The government has tried to give the impression the benefits of capitalism can be achieved or even surpassed thanks to its ability to intervene and ensure efficient operation.  The stock and other markets boomed, and the economy boasted of remarkable growth.

But the government achieved these results artificially.  While China had something that looked like a free market, the results were actually the result of government manipulation.  Meanwhile, corruption and inflated markets grew.

The new leadership promised to reduce corruption without fully understanding how deep it went.  As it eliminated key people from leadership, China has become nervous about the future.

China’s market growth could not be sustained as prices rose too high.  The government reduced the value of the currency, creating a sense of near panic.  Instead of stabilizing the economy, its attempts to reduce imports, increase exports and support markets came too little and too late.

The result would be that, the market bubbles gone, China would have fewer resources to support its play for world power.  And the reduced Chinese need for imports would pose new threats for the economies of developed countries, though relatively little to the United States.

The myth of the state-run but partly free Chinese economy is fading.

After World War II, some European leaders decided that joining the countries of the Old World together as closely as possible would make it impossible for them to wage against each other once again.  They openly promoted a “United States of Europe.”

Their idea brought about remarkable progress.  National economies became increasingly integrated.  Some countries dropped their currencies in favor of the euro, a multi-nation currency.  The prospect of war in Europe virtually disappeared, not only because of unification efforts, but because the European economy became part of an interdependent world economy.

But some European countries chafed under centrally made rules.  By the time of the 2014 election of the latest president of the European Commission, the European Union’s independent managing body, the winning candidate said he opposed a “United States of Europe.”

The EU has no common refugee policy.  As they have streamed in recent months from the Middle East to Europe, refugees have found some countries, acting on their own, tried to shut the door on their entry.  Refugee access opened only after international attention became embarrassing.

And the common currency was not backed by a common tax policy that could raise the funds to support it in a crisis or by a method of forcing participants to avoid excessive debt.  The Greek crisis eased only when some countries increased bailout funding for their weakened partner.

The euro as a mature, world currency and Europe as a unified region were revealed as myths, though Europe could make them real.

In the U.S., after Congress blocked efforts to stimulate the economy by increased federal spending, the Federal Reserve was left to deal with high unemployment and the effects of the recession.  It lowered interest rates almost to zero to make loans supporting job creation as inexpensive as possible.

Investors, including the pensions funds on which many retirees depend, turned away from buying low-interest bonds in favor of stocks, which have a better chance of producing income.  But each time there has been any hint that the Fed would raise interest rates, stocks have lost value based on the belief that investors would soon return to bonds.

Interest rates have remained low, while, at the same time, stocks have fallen in value.  Not only does that send an inaccurate message about the state of the economy, where unemployment has dropped, but it undercuts retirement incomes.

The market reaction may discourage the Fed from increasing rates even after employment has recovered.  But the market reaction is based on myths.

The truth is the Fed is almost certainly only going to nudge up the rate and will not send it to such higher levels that bonds –lending money – will suddenly look better than stocks – investing money.   

And there is ample history that higher interest rates can co-exist with good stock prices.

In short, like China and Europe, the U.S. has its myths.    Having confidence in myths can be dangerous to economic health anywhere, so now may be the moment to abandon harmful and mistaken beliefs.

For one Republican, Iran presents challenge

In judging the proposed nuclear accord with Iran, it looks like wisdom is determined by political party. 

Almost all Republicans quickly opposed the deal.  The Democrats, true their more unruly traditions, are mostly supporting it, though some are vocal in opposition.

The GOP members of Congress are not only opposed to President Obama, hardly a change from their stance since he first took office, but also to the United Kingdom, France, Germany, Russia, China, the United Nations and the European Union. 

Their almost united opposition to the deal in the face of support from so many others could easily be read as matter of politics over policy.  Iran could take its place alongside the Affordable Care Act – Obamacare – as central elements of the Republicans’ 2016 campaign effort to take over the White House while keeping control of the House and Senate.

By arguing against the Iran deal strongly and repeatedly, the Republicans are conditioning public concern about it, laying the foundation for campaign attacks in the general election.  The Obama Administration has often been weak in defending its own policies, as the discussion of Obamacare has shown.

The current political calculation is that Obama will squeak by and avoid an outright congressional rejection of the deal, because he will hold onto enough Democrats to prevent a GOP override of his veto in the Senate.  The Democrats might even be able to prevent the matter from coming to a vote in the Senate.

There is only one Republican senator who has not announced opposition.  “Obama’s last hope for GOP support on Iran: Susan Collins,” headlines a Washington political newspaper.

Because she has not yet taken a position on the deal could mean that she is considering its provisions carefully and not merely adopting the party line.

Careful consideration, which includes reading the documents clearly skipped by many of her colleagues, makes sense.  This is an important matter worthy of careful review.  And like any human product, it is certainly not perfect, so it’s fair to balance its merits and defects.

But Collins must also take political factors into account.  Her GOP Senate leaders certainly would like her support and are more likely to reward her if she follows their policy of opposition.  And there are surely Republicans in Maine who will be angry or disappointed if she strays from the party position.

That could mean Collins would have to be willing to show the kind of political courage she has occasionally demonstrated in the past, which could place her in the Maine political pantheon with Margaret Chase Smith, Edmund Muskie, George Mitchell, Bill Cohen and perhaps Olympia Snowe.

Waiting to announce her decision until all the other votes fall into place could make political sense.

Let’s say the Democrats have enough votes to ensure that in the Senate the Iran deal cannot be overturned, as now seems likely.  She might find the politics easier to go along with the GOP knowing that her vote sticking with her party would not block the deal.

But, if the outlook for the deal in the Senate remains in doubt and Collins decides the deal is acceptable, her vote could be critical.  Even if her popularity with independents and Democrats in Maine could provide reassurance about her reelection, that vote could make her political life far more difficult.

To help both sides, she could vote against a Democratic move to cut off debate and, if they lack the necessary votes to block a vote, permit the rejection vote.  Then, she could choose to support the deal or to sustain Obama’s veto of the rejection bill.

In fairness, it is estimated that three GOP House members have not stated their positions and could support the deal.  But it is unlikely that whatever they do could have as decisive and visible an effect as what Collins might do.

It is worth recalling that the Affordable Care Act passed without a single Republican vote in either the House or Senate.  That would make outright opposition by the GOP, including Collins, not unusual.  In fact, if she were to support the Iran deal, it would be an historic sign of at least one senator’s effort to break down the partisan walls in Washington.

The Republicans seem to be readying themselves to lose in their opposition.  Some of them say the deal will not really advance until the world sees if the GOP takes control of the federal government in 2017.  

Given the deal’s almost immediate acceptance by much of the world community, this seems to be unrealistic.  So Susan Collins’s vote matters now.

Lacking detailed policy, Trump exploits style

GOP frontrunner Donald Trump may be teaching candidates of either party a valuable lesson.

Be yourself.

As pundits ponder the reason for his surprising success in polling about the Republican candidates and even in contests with Democrats, the explanation may be obvious.  Trump comes across as a person who expresses himself spontaneously, revealing his real self.

His style stands in contrast to most traditional candidates who carefully plan their words to gain support and to avoid offending any voters.  Often they end up speaking in generalities.  The public sees them as politicians doing what politicians do.

Trump makes a point of saying that he does not seek to be “politically correct.”  He appears to mean that he won’t say something that he doesn’t believe simply to ensure he remains in line with general opinion.

Not being “politically correct” or just plain “correct” may alienate parts of the voting public.  Do that often enough and you could have a tough time winning an election.

Trump’s approach could help him in a huge field of candidates during the primaries in which relatively few Republicans will participate in selecting the party’s nominee.  Still, it could make winning a general election impossible.

But Maine Gov. Paul LePage provides evidence to the contrary.  His 2014 reelection victory after he was outspoken about his political opponents shows that the spontaneous style also used by Trump may work.

This style has so far been a substitute for Trump providing details on his policy positions.  He shows a great deal of unexplained self-confidence and for some voters, that’s good enough.  His success in the polls has allowed him to set the terms of the GOP selection process.

Among the other GOP hopefuls, some have tried to imitate him, though he appears to be too far ahead of them for their moves to matter.  Except for Jeb Bush’s recent statements, they have hardly pushed back against his bold assertions and inaccuracies.

As he has struck a political nerve, the media has been covering him less as a political candidate than as a celebrity in world where celebrity news is journalistic gold.  It seems almost hypnotized by his skillful exploitation of his visibility.  If the media shifts its campaign coverage to the field, it will be worth watching to see if his attraction lessens.

As much as he has an effect on the Republican presidential race, there may also be an echo and an effect in the Democratic Party.

Vermont Sen. Bernie Sanders is the echo.  Though his positions are almost directly opposite to Trump’s, he, too, appears as a candidate who speaks his mind without fear of offending voters.  If he’s not as spontaneous as Trump, he certainly seems as genuine.

For example, he has no problem labeling himself a “democratic socialist.”  He does this with apparently growing support in a country where “socialism” is mostly used as a dirty word politically.  Sanders seems to have long understood the virtues of being plain spoken.

Vice President Joe Biden may be Trump’s effect on the Democrats.  In the past, his great problem has been unscripted remarks that may get him into trouble.  He has had to apologize more than once.  And he forced President Obama to take a public position on the issue, when he blurted out his support for same-sex marriage. 

Now, what has been his main problem could turn into his chief asset if he chooses to run for the Democratic nomination.  It’s difficult to doubt he is genuine and not programmed, and that has appeal these days.

Contrast Trump or Biden with Hillary Clinton.  Hers is the model of a strictly planned campaign.  No errors are to be admitted and all comments appear to be prepared.  In short, talking points are known well in advance, much as was the case with President George W. Bush.  She often looks like a parent talking down to her ignorant kids.

The Clinton approach may look even more obvious because of its contrast with Trump or Sanders and possibly Biden.  There’s still time for her to unbend a bit, admit errors and look somewhat more human.  Still, there’s no doubt that the seeming certainty of her getting the Democratic nomination has decreased.

Candidates for president promise much, but voters often choose based on their opinion of the person’s ability to govern and not on specific proposals.  Spontaneity may reveal character better than do canned speeches.

Trump may be contributing to this year’s process, though plain speaking cannot completely substitute for a responsible platform.

Does Obama share Trump, LePage attitude toward legislative branch?

In response to last week’s look at GOP candidate Donald Trump and Maine Gov. Paul LePage and their attitude toward legislative bodies, some readers argued that President Obama should have been included.

It was less a matter of saying Trump and LePage really did not seek to undermine Congress and the Legislature as much as saying, “the other guy is just as bad as our guy.”

Obama has been under steady attack for taking on authority that his critics maintain should really be left with Congress.

The President has responded by pointing out he has issued fewer vetoes and executive orders than any president in decades.  He has been countered by critics who point out his extensive use of executive memorandums, whose tally has traditionally not been kept.

And like GOP President George W. Bush, though on a smaller scale, he has issued signing statements when approving new laws, indicating that he would not enforce parts of them he considered unconstitutional.

Whether Obama has disrespected congressional powers is not likely to yield a satisfactory statistical result.  Either side can claim the data supports its position.

The issue is not statistics; it is substance.

When a president is faced by a Congress controlled by the opposition, he has often flexed his political muscle to the dismay of the other party.

Unlike some of his predecessors, Obama has been quite open about choosing to act because of congressional attempts to block his proposals.  “If Congress refuses to act, I’ve said that I’ll continue to do everything in my power to act without them,” he announced.

Instead of putting pressure on Congress, that statement amounted to a declaration of war.  Republicans could not accept his proposals without looking as if they were weak, so they left the field to him.

The alternative would have been for him to act assertively way without his defiant public statement.  Then, perhaps, the GOP leadership might have chosen to deal with him at least on some issues to forestall unilateral action his part.

Obama did leave the door open for months to an immigration reform deal, favored by many leading congressional Republicans.  But, with Obama having embarked on his go-it-alone policy, GOP leadership having become overly cautious about taking any action, and the approaching presidential election, the chances for cooperation died.

Instead, Obama pushed his executive power to the limit, perhaps even over it, in issuing an executive order that promised to prevent deportation of millions of immigrants.  Little attention was paid to his record of deporting far more than any predecessor.

His move to tell government prosecutors to avoid pushing many possible deportations infuriated Republicans, adding to their arguments against his supposed usurpation of lawmaking power.

In the end, the dispute over whether Obama stepped over the line of executive authority and assumed powers belonging to Congress may never be settled.  Courts have rejected the president’s use of recess appointments and may look at the immigration order, which has already been suspended.  But it’s highly unlikely that a court will broadly define the limits of presidential power.

Obama and the GOP-controlled Congress have become engaged in a high stakes tug of war.  In fact, that’s been characteristic of the relationship between the executive and legislative branches of the federal government from the beginning.

That struggle is quite different from the kind of confrontation between LePage and the Legislature.  The governor’s plan to veto all bills is less a struggle for power than a sign of petulance.  LePage has made it clear that he does not respect the Legislature or legislators.

LePage wants them to accept his reelection as a mandate to adopt his proposals.  He has offered non-negotiable proposals, and there’s virtually no room for compromise.

With Trump, it’s simply a question of whether his obvious lack of respect for anybody who disagrees with him will be carried over into his relationship with Congress.

Obama and Congress are engaged in a new chapter of the classic contest to define the power of federal government institutions.  Obama did initially seek cooperation, but as soon as the House of Representatives came under GOP control, it was the House that offered only take-it-or-leave-it options.  He reacted.

Obama and Congress have serious conflicts, but they differ from a mere assertion of the right to blank-check political power, sought by LePage and likely also by Trump.

Trump, LePage would endanger "balance of powers"

Gov. Paul LePage and GOP presidential hopeful Donald Trump have something in common.  Each wants to run government more or less at his will.  Neither gives great weight to the role of the legislative branch.

In fact, both readily disparage legislative opponents and their constituents, one or the other of them calling their critics “weak” or “corrupt.”  Writing off large parts of the population, they raise the question of their ability to lead a state or national government on behalf of all the people.

Both come from executive positions in the private sector where their word might have been law.  LePage is learning and Trump must yet learn that in government the constitutional balance of powers matters.

Discussing the recent decision of the Maine Supreme Judicial Court, I noted that it had ruled the state constitution gave the Legislature virtually “absolute” power on behalf of the people, while the powers of the executive and judicial branches are more limited.  The situation at the federal level is similar, though not identical.

The growing power of the executive risks giving both office holders and voters the wrong impression.  After a general election victory and aware of the extensive powers of office, an executive can come to appear to be the people’s primary representative.

One reader asked, “why have a governor if the Legislature is the primary representative of the people?”  Or a president, for that matter.

The revelation about the power of the legislative branch must have been a surprise, when we have become accustomed to executives claiming to speak for the state or country. 

The executive is primary in representing the state or country in relationships with others.  And as a single leader, the chief executive may inspire and encourage citizens. 

From there, it is easy to gain a sense that the executive is the dominant element of government, enjoying a general election mandate that ought to be observed by the legislative branch.  That’s LePage’s message, and there’s little doubt that Trump would see his office in the same way.

Still, there’s a good reason why the legislative branch comes before the executive branch in both the U.S. and state constitutions.  The legislative branch is supposed to represent the collective will of the people, the real sovereign.  It makes laws using authority delegated to it by a constitution approved by the people.

Precisely because its members are elected by district and not statewide or nationally, the legislative branch can reflect complex public sentiment more accurately than can the executive.

The executive’s lawmaking powers are supposed to be limited.  Vetoes of bills passed by a legislative body can be overridden, leaving the last word to the legislature.  Even appointments of top people in the executive branch must be confirmed legislatively.

A more complex world has imposed a transformation in the traditional balance between the two branches.  It has proven to be impossible for the legislative branch to enact laws that are sufficiently detailed to deal with the many specific situations arising when the executive tries to carry out the laws.

Inevitably, the executive must be left to adopt rules and procedures to apply the law.  Without unlimited funds, it sets priorities about which laws should be applied most actively.

In many cases, rules and executive orders have come to look a lot like laws.  The process of filling in the open questions in legislation leads to increased power for a president or governor.  If the executive branch goes too far, the legislative branch has to find a way to rein it in.

The executive is expected to have an agenda, proposed by the chief office holder and supported by executive branch personnel.  The problem of primacy arises when the top executive believes this agenda must be passed or that he or she is more powerful than the legislative branch.

President Teddy Roosevelt said the White House was a “bully pulpit,” meaning that the presidency gave him a strong position to advocate his agenda.  But, in another sense of the word, he did not “bully” Congress so much as find ways to convince its members to support him.

Courts increasingly find themselves asked to deal with the limits of executive power.  While the political system may allow for judicial determination whether executive actions are constitutional, it would be better for government to function based on positive relationships between executive and legislative and between government and voters.

Scorning and ignoring opponents, as LePage and Trump do, may provide a momentary sense of satisfaction, but it almost certainly undermines chances for constructive government.