Trump the Terrible

To say that Trump’s future presidency promises to be a mixed bag, while true, seems increasingly too kind. On the positive side there seems to be a very good chance of a truly monumental tax reform. House Ways and Means Committee Chairman Kevin Brady recently released the outline of a major tax reform plan as part of Speaker Paul Ryan’s “A Better Way” agenda that would, if enacted, introduce a dramatic, growth enhancing reform of U.S. personal and business income taxation. While there are a few differences with the President Elect’s tax reform proposals, it should not be that difficult to resolve them. Prospects for adoption are the best they have been for decades.

On the growing negative side Trump is adding to the nasty character traits he seemed unable to control during his campaign—a level of blatant corruption that would even embarrass the Clintons. After having his daughter, who is also his business partner, at his side during his private meeting with the Japanese Prime Minister Shinzo Abe, a few days later he put Ivanka on the phone with Argentina’s President (Trump is seeking approval to build a real-estate project in Buenos Aires).

For me these examples of Trumps many conflicts of interests pale in comparison to the deal he claims credit for to keep 1000 Carrier jobs in Indiana where Mike Pence is still the governor. The Chicago Tribune reported today that “Carrier would receive a $7 million package of incentives to keep its factory here from moving to Mexico, the company said Thursday, under a deal negotiated with the state after an unusual intervention by President-elect Donald Trump that could reshape the relationship between the White House and private enterprise.” http://www.chicagotribune.com/business/ct-trump-carrier-jobs-subsidies-20161201-story.html

This goes beyond the corruption of personal enrichment and vote buying from the public purse to measures that undermine the very basis of our national wealth. And Trump proudly stated to the press that he would give any other company that wanted to move production abroad a VERY hard time. He is gloating over his “skillful” use of his great power as president.

The standard of living of the average middle class family in the U.S. could not even have been imagined half a century ago. Among the many things that make our wealth possible is the ability of companies and each of us to allocate our resources where we think they will be most productively used. Trump is now inserting the power of the Presidency—of the government—to over ride those economic decisions in order to save some jobs at some (favored) companies at the expense of other jobs and overall economic efficiency. This is blatant corruption of a high order and if allowed to persist will erode our economic productivity and standard of living over time. Read any of my blogs on trade and free enterprise (or what most of us call the liberal economic order).

Not only is Trump’s corruption shocking, but also his failure to behave presidentially is beyond embarrassing. It is dangerous. Someone should take Trump’s phone away until he figures out that his campaign style of ad libbing is simply wrong for the POTUS. When he said he would jail and take away the citizenship of flag burners, was he ignorant of the law (confirmed by a Supreme Court ruling) or contemptuous of it??? In his recent phone conversation with Pakistani Prime Minister Muhammad Nawaz Sharif, was he looking ahead to what he might say to the Indian PM when he committed himself (and implicitly the United States) to the following: “I am ready and willing to play any role that you want me to play to address and find solutions to the outstanding problems.” You can read the entire terrific, wonderful, exceptional conversation here: http://www.pid.gov.pk/?p=30445 What in the hell is he thinking? Unfortunately the list of problems is growing. And he’s not even the President yet.

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Globalization and Nationalism: Good and/or Bad?

Globalization is under attack and nationalism is on the rise. The evidence includes the election of Donald Trump. But what is this globalization these people are so opposed to?

After 1945—after the Great Depression and two world wars—Western nations established an international system of rules that honored national sovereignty, facilitated the flourishing of global commerce, and encouraged respect for human rights and liberties. This liberal international order resulted in the longest period of peace among the world’s major powers the world had ever seen, broad-based economic growth that created large middle classes in the West, the revival of Europe, growth in poor countries that lifted hundreds of millions of people out of poverty, and the spread of freedom across the globe. Fareed Zakaria, Washington Post/2016/11/17/. This is the liberal international order that I largely support.

What exactly is under attack and what is on the rise? In a very insightful article in the National Review, Michael Lind characterizes the globalist view as follows: “In the 1970s and 1980s, libertarians made all of the major arguments heard from globalists since the 1990s: Favoring citizens over foreign nationals is the equivalent of racism; national borders impeding the free flow of labor and goods are both immoral and inefficient; the goal of trade and immigration policy should not be the relative security or relative wealth of particular countries, but the absolute economic well-being of all human beings.” Michael Lind, National Review, Sept 15, 2016

What about the rise of nationalism in relation to globalism? I believe strongly in the economic benefits of the freest possible global trade, but it would be a mistake to overlook or ignore the concerns of those who oppose it. In this note I attempt to restate the case for freer trade in terms that should appeal to economic nationalists who wish American trade (and other) policies to reflect the interests of Americans first (before taking into account the benefits to the rest of the world). I also reflect on the international rules of trade from the perspective of the sovereignty concerns of nationalists, or what economist Larry Summers calls “responsible nationalism.” Voters deserve responsible nationalism not reflex globalism

I was forced to think more carefully about the case for freer trade by the opposition to globalization expressed by many of Trump’s supporters. But I quickly discovered that my friend Michael Lind has been there before (see above) as has the brilliant social psychologist Jonathan Haidt who noted that: “those who dismiss anti-immigrant sentiment as mere racism have missed several important aspects of moral psychology related to the general human need to live in a stable and coherent moral order.” Jonathan Haidt: “When and why Nationalism Beats Globalism”, The American Interest, July 2016

Haidt’s closing words succinctly summarize our challenge: “The great question for Western nations after 2016 may be this: How do we reap the gains of global cooperation in trade, culture, education, human rights, and environmental protection while respecting—rather than diluting or crushing—the world’s many local, national, and other “parochial” identities, each with its own traditions and moral order? In what kind of world can globalists and nationalists live together in peace?”

Immigration and trade are intimately linked – if Mexicans can make it in Mexico and export it to the U.S. they will be less interested in moving to the U.S. in order to build it there (in fact, net Mexican migration to the U.S. has been negative for the last few years)—and thus I will look at both.

The most promising starting point in my view is with the sovereignty of each American citizen. Unlike the Magna Carta, which wrested more autonomy for the people from the King, the free men and women of revolutionary America gave up a limited amount of their autonomy to a new state in order to better protect their property and individual rights. The direction of delegation was the exact opposite of what the world had ever seen before. It is not without profound significance that our Constitution begins with “We the people.”

Thus it is quite appropriate to judge governmental authority and policies by the standard of how well they serve our individual sovereign interests. In evaluating those interests, it is appropriate to do so from the perspective of John Rawls’ veil of ignorance, i.e. principals of fairness—rules of the game—that we accept as fair without knowing which positions in society we will occupy. This is the perspective of free market, competitive capitalists and is opposite to the perspective of crony capitalists who exploit the power of government for their personal benefit.

We have surrendered limited (enumerated) powers to our governments (local, state, federal, etc.) in order to enjoy greater security and protection of our property but also to support and protect our freedom to trade and to enjoy its benefits. No one really needs to be convinced that being able to specialize in what we make best and trade it for other things we need has enormously increased our wealth over being self-sufficient (no trade). No one needs to be convinced that by investing in tools and better technologies we have been able to produce more for trade and thus become wealthier. But investing and trading require common understandings with those with whom we trade—the rules of trade. We have long ago understood that we all benefit from giving up some of our sovereignty to our government to negotiate and enforce the agreed rules of trade, protect our property, and mediate disputes over whether the rules were followed.

The simple act of entering into a contract with someone involves giving up the freedom to act as we want each moment in exchange for a similar commitment by our counterparty for the mutual benefit of both of us. Where the mutual benefits of such rules are greater than the cost of the forgone freedom of action, the agreement is a positive sum arrangement—win-win. Conforming to international product standards, e.g. adhering to standards of weights, measures, voltage, labeling, etc., facilitates trade. The key policy issues in this area are the nature and details of the rules of trade that best serve our personal interests (in the Rawlsian sense) and thus our community and national interests, and the extent of the market in which we are able to trade (village, province, nation, world). “Free Markets Uber Alles,” Dec 2014

The more widely we can trade, the greater is our opportunity to specialize in what we produce and to develop and apply more productive technologies.

“Trade and Globalization,” Aug 3, 2016. Our founding fathers were rightly concerned about the power of the new American government to limit the right of its citizens to trade. In fact, the U.S. Constitution prohibited the States from interfering with trade across State borders (interstate commerce). Article I, Section 8, Clause of the Constitution states that the United States Congress shall have the power “To regulate commerce with foreign nations, and among the several States, and with the Indian Tribes.” While Congress has occasionally used this power to impose restrictions on trade across national borders, the majority of Americans still believe that cross border (international) trade has been mostly good for the U.S. (65% in 2015). The wrong-headed effort to save American jobs during the Great Depression with high tariffs imposed by the Smoot Hawley Tariff Act of 1930, precipitated retaliatory tariffs around the world and a disastrous collapse of global trade and employment. U.S. imports and exports fell by more than half and the whole world was made poorer by it.

As noted above, the resulting increase in the world’s wealth from technical progress and trade has been enormous. But the incentive created by trade in a large market to innovate new products and more efficient ways to produce them has also meant that some of the existing products and/or technologies lose out and must give way to the improved ones. Those producing the old products and services are forced to find new ones and if necessary new productive skills.

The United States has generally grown economically faster than most other countries, in part, because its citizens have not been willing to allow those who lose out in such competition to block progress by the “winners” by protecting their products and jobs. The ultimate willingness of Americans to accept and protect the dynamic economics of competitive national and global markets rests, I think, on the three pillars: maximum wealth creation, maximum opportunity for everyone (the chance to win at a fair game), and help for those who lose out.

Americans should only be willing to give up some of their personal sovereignty to their government when they gain more in exchange in the Rawlsian sense of a positive sum, fair game. We should impose the same conditions on the extension of the rules of trade beyond national boundaries. This is the standard by which bilateral, regional and global trade agreements should be judged. They have the largest potential for win-win expansions of mutual trade and the greater income and wealth that expanded trade can produce. The Bretton Woods institutions created after World War II (the IMF, World Bank and World Trade Organization) established the institutional arrangements for such international cooperation. It is important to insure that such agreements do not increase the protection of “privileged” industries or sectors of the economy. In fact, they should diminish such protections where they already exist, which is why many European industries and interests oppose the Transatlantic Trade and Investment Partnership (TTIP). Much of the Trans Pacific Partnership (TPP) has this positive character. American leadership in creating the international institutions through which we interact with others abroad, i.e., through which the rule of law is established and enforced internationally, has ensured that the international order has remained true to the values on which America was founded.

The evolution of man established the family as the unit of first and primary concern. The well being of one’s family stands above the interests of all others. However, the process of civilization has been one in which mechanisms of trust and mutual assistance have convinced individuals to yield some of their sovereignty to larger units (village, state, etc.) under conditions that strengthened the security and well being of family units. Globalization is the logical conclusion of such a process. It is the development of laws of cooperation and the mechanisms of their enforcement (i.e. the rule of law) that potentially raise the welfare of everyone. But the details of the expanding circles of cooperation are important and must not violate genuine national and family interests.

In listening to the views of many Trump supporters I concluded that their anger and demand for big change derives from feelings that their government—especially the federal government—is not serving their legitimate interests and in fact is interfering with their lives without commensurate benefits. “The reason Mr. Trump won, [Mr. Bannon] says, ‘is not all that complicated. The data was overwhelming: This is a change election. People weren’t happy with the direction of the country. So all you had to do was to give people permission to vote for Donald Trump as an agent of change, and make sure he articulated that message.’” steve-bannon-on-politics-as-war-WSJ

So what are the Trump supporters mad about? What do they want to change? To the extent that they are concerned about the same things I am, it is that too much of our individual sovereignty has been taken by an overweening government, which has become a big brother who attempts to make our decisions for us for our own welfare. Our personal choices have increasingly been taken away from us and with them our opportunities. The “elites” have arranged the rules for there own benefit. It is no longer a fair game.

The weaknesses of current arrangements at the national level that seem to anger Trump supporters largely concern: a) regulatory capture of an over extended regulatory state, b) inadequate provision of a level playing field and c) an inefficient and poorly designed safety net for the losers in the competitive game. Very briefly:

  1. a) The crony capitalism reflected in President Eisenhower’s famous concerns with the risks of a military industrial complex, have metastasized into a much broader capture by legacy industries of a much more extensive government intrusion into the economy. Wherever government regulates (and some are actually helpful), the most affected, established firms are best placed to insure that such regulations benefit rather than hurt them, usually by protecting themselves from the competition of new comers. Wall Street comes to mind. Changing direction on bank regulation, Cayman Financial Review April 2015
  1. b) A level playing field. Good quality education (especially K-12) is one of the most important ways for the poor and initially disadvantaged to get into the productive economy and to rise as far as their talents and energy will take them. But the education provided to this group is often of poor quality. The iron grip of teachers’ unions has often served the interests of teachers at the expense of their students. School choice (tuition vouchers) would introduce badly needed competition in the provision of education to all – the poor as well as the rich (who all ready enjoy considerable choice).
  1. c) An efficient safety net. When jobs disappear to technological advancements (e.g., increased automation) the affected workers and capital need to be reallocated to more productive uses. But this is economist speak. The workers involved often lose their human capital (i.e. their existing skills lose value in the market place) and need to retrain for new tasks. Older works might never rebuild new skills sufficient to restore their previous incomes. Government policy should give more attention to vocational training (and retraining). But the ultimate safety net should be strengthened and redesigned by replacing existing welfare programs and social security with a guaranteed minimum income for each and every citizen (in the spirit of Milton Friedman’s negative income tax). US federal tax policy, Cayman Financial Review July 2009

Responsible Nationalism and Globablization

As Michael Lind observed earlier, America has been dividing into liberal internationalists like myself who live in the big urban centers and civic nationalists, who live in the rest of the country. The civic, economic, responsible and just plain old nationalists seem to be reacting against their sense of a loss of control over their own lives. Big brother seems to be regulating more and more what we can do, say, produce, or buy. Their opportunities are being thwarted by an unfair game—crony capitalism for the well-placed elites. This sense of a loss of control is compounded by concerns over the lack of control of our borders against undesirable immigrants and potential terrorists. While the assimilation of different cultures into the framework of basic American values of personal freedom and responsibility can be touchy and challenging at times, the finger pointing and pressure from the American left for full cultural integration feeds the fears of many of a loss of cultural, ethnic, and religious identity.

When some groups receive preferential treatment some other groups are necessarily discriminated against. While I have tried hard to accept the logic of “Black Lives Matter,” it always rubbed my sense of fair play the wrong way. All lives matter. Thus while I am saddened that it seems necessary to some white males (I am guessing they are males because that is what the press always says) to carry signs saying “White Lives Matter,” I can understand. If we need to say the one, we need to say the other if we still have any sense of fairness.

So there are plenty of things for Trump supporters to be angry about and to want to change. But now that we have him, what changes should we push for? I am particularly interested in changes that will reassure Trump’s angry voters to support American participation in the liberal global order. In evaluating what is in our national interest, we need to consider the long term rather than immediate benefits of a rule based, freely competitive world order.

We should push for a thorough reform of our tax system (see my article above), strengthen our safety net for those displaced by technology (by far the major source of job losses in the U.S.) and trade, and shift more of the regulation of commerce to the market (to consumers and owners) thus significantly reducing government regulation. We must also fashion an immigration policy that meets the needs of our economy without overwhelming the capacity of our society to absorb new members. Existing long term, undocumented residence need to be offered a realistic path to legal status. But most of all, in fashioning these and other changes we need to listen carefully and constructively to each other’s concerns and take them into account.

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What do Trump supporters want?

Dear Jeff (Giesea),

Thank you for reaching out to non-Trump supporters in the search for dialog and better understanding. I fully agree with you that we need civil discussion, which requires assuming the good intentions of those across the table.

As a Trump opponent, I voted for Gary Johnson, the starting point for me is to understand what you and other Trump supporter hope the Trump administration will do. Why did you and so many others support him? I don’t buy the liberal press’ (sorry for using short hand and thus inaccurate, but convenient labels) contention that most of his supporters are racists, bigots, etc. who actually liked and supported Trump’s rudeness, potty mouth, etc. Most of his supporters probably overlooked these character flaws (just as Hillary supporters overlooked rather than embraced her decades of dishonesty). But what did you and the others support? Trump’s protectionist, anti-immigrant, anti- Muslim rhetoric seems to reject long standing Republican Party and conservative positions. His threat to challenge the freedom of the press to criticize him hardly squares with conservative respect for the constitution.

You kindly responded to my question of why you supported Trump with six points only one of which referred to Trump (that you thought he would provide “big, bold thinking and executive-style leadership.” The other five referred to problems with current leadership and directions. In short you want change. Now we need to discuss what those changes should be.

It is now time to turn to a discussion of policy issues, something almost totally lacking in the most ugly, ad hominem campaign I have ever seen. In fact, as President elect Trump begins to spell out his positions he is already walking back many of his earlier more extreme positions, or at least what we thought were his positions. The way forward with the dialog you are helping to promote is to seriously undertake an examination of specific policy issues to see what we can agree on and where we disagree and why.

I think everyone agrees that our immigration policy is broken and needs to be fixed. So let’s explore what we each think needs to be fixed and the best way to do. Our rapidly aging population (more and more retired people relying on a shrinking working age population to grow our food etc) will require more immigration to survive. The important issues are who those immigrates should be, how to most effectively control the process, and what to do about existing illegals. Let’s have that discussion.

If we have learned anything about Obama Care it is that slipping through legislation that enacts significant changes on the basis of a narrow majority is a serious mistake. Significant changes should require broad support and that will certainly be true in the Trump administration as well.

What is behind Trump’s protectionist rhetoric? He is not likely to actually violate very beneficial international trade law and slap large tariffs on China for currency manipulation (something they are demonstrably not doing any more). When in the campaign he said that he would demand that Boeing stop sourcing its aircraft parts abroad in order to bring those jobs home, he seems not to have considered that the resulting higher cost of Boeing’s planes would reduce global demand for them thus costing American jobs (not to mention his general attack on free market efficiency). I expect to see such demands vanish, but what are the improvements in our trade agreements that Trump (and you) thinks are desirable? Lets have that discussion.

The separation of church and state and the freedom of religion enshrined in our constitution are fundamental to our values as a nation. There is no blood test to determine if you are a Muslim or a catholic or a Jew. Religion isn’t and can’t be a test of who is allowed to visit America. But striking a proper balance between our freedom and our security is a serious challenge. The Patriot Act, passed in the wake of 9/11, was a serious intrusion on our freedom in the false name of security in my view, but lets discuss with the new Trump administration how best to balance the powers of government to protect us, against the risks of big brother overly controlling us.

Many of us have rebelled against the excesses of “political correctness” on university campuses and else where (I have written several blogs on the subject). The traditional goal of the university is the unrestrained pursuit of truth. But in its place good manners (civility as you rightly put it.) are essential if we are to live peaceably together and flourish. I would love to see Trump and Hillary together call upon their supporters to respect, though not necessarily agree with, the views (and property) of their opponents—of everyone.

Thank you again for promoting this dialog.

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And So here we are…

And now the Republican’s own it. What ever happens, whether their doing or not, the Republicans own what ever happens on their watch. It is filled with opportunity to turn our country away from an ever growing government rule over our personal lives back to greater personal freedom with a limited government safety net rather than an ever more extensive rulebook of what we can and cannot do. Donald Trump has demonstrated over his life that he ruthlessly pursues what benefits him with little to no regard for those he tramples on and little hesitation to use the powers of government for his personal gain. This history is set out in the attached article that I wrote thinking we were saying good-bye to Trump.

Hopefully some of Trump’s promises (deporting 11 million illegal aliens, blocking entry to Muslim’s, high tariffs on China—all of which would be devastating to our economy as well as illegal) will simply be forgotten. Some other promises (respectable Supreme Court appointments, reducing corporate income tax rate and other badly needed tax reforms, a more restrained foreign policy) would be very beneficial and should be adopted. Many promises were contradictory. David Ignatius reported in today’s Washington Post that: “A Trump foreign policy, based on his statements, will bring an intense “realist” focus on U.S. national interests and a rejection of costly U.S. engagements abroad…. Trump also promised repeatedly that he would step up the U.S. military campaign against the Islamic State and replace U.S. generals who were insufficiently combative. But he has been vague about what he plans to do in Iraq and Syria.” Let’s hope that we get the first Trump rather than the second one.

My hope (I am always inclined by nature to be hopeful) is that Congress—a Republican controlled Congress—will reassert its proper constitutional role and roll back the extensions of executive power we have suffered under George W and Obama. Trump’s “strong man, leave it to me” impulses risk abuses of executive authority every bit as much as Obama has or Hillary might have. My other hope is that Trump’s transition team, with sound thinking people like Ed Feulner, will staff Trump’s administrative departments with good people with good ideas. Trump is smart but ignorant of most conservative thinking about economic policy issues. Hopefully he rejects his earlier claim that he is his own advisor and listens to his government as well as David Ignatius’s admonition that: “Undoing globalization isn’t possible. But undermining America’s leadership in that system would be all too easy.”

Hillary Clinton’s beautiful concession speech could have been given by Ronald Reagan. http://www.usatoday.com/story/news/politics/elections/2016/2016/11/09/watch-live-hillary-clinton-addresses-supporters-after-defeat/93532872/. She said nothing that President Trump should disagree with and I wish him and his future administration the very best.

The Ugly Face of Capitalism

Capitalism is an economic system in which people, individually or in groups, can keep the fruits of their labor and in so doing can invest and deploy what they save from it to increase their output and thus income. In short, capitalists create value– things other people want– in order to improve their own incomes. The absolutely amazing accomplishment of capitalism can be glimpsed from the following, which I wrote two years ago: “World per capita income didn’t change much from the time of Christ to the founding of the United States ($444 to $650 in 1990 dollars), a period of 1,790 years. But in the following 320 years it jumped to $8,080. And about half of that jump came over the last 50 years.” https://wcoats.wordpress.com/2014/12/18/free-markets-uber-alles/

Capitalism involves relationships between people that we might call win-win. You make money when you produce something others want and will pay you for. Donald Trump presents another face of capitalism. Rather than a value creator, Trump prides himself on being a great bargainer. He was often playing a zero sum game. Rather than increasing the pie, he focused on increasing his share of the pie, thus reducing someone else’s share. As Andrew Sullivan put it: “[Trump] has no concept of a non-zero-sum engagement, in which a deal can be beneficial for both sides. A win-win scenario is intolerable to him, because mastery of others is the only moment when he is psychically at peace. (This is one reason why he cannot understand the entire idea of free trade or, indeed, NATO, or the separation of powers.)” http://nymag.com/daily/intelligencer/2016/11/andrew-sullivan-trump-america-and-the-abyss.html

But Trump has not just bargained for better deals for himself, he has also often stolen them. It is not unusual, nor even necessarily a black mark, to fail in business and then to pick up and try again. Trump has many failures under his belt: Trump Shuttle, Trump: The Game, Trump Magazine, GoTrump.com, Trump Mortgages, Trump Steaks, Trump Super Premium Vodka, Trump University (over which he is being sued for fraud) and several Trump Casinos. Four Trump owned casinos in Atlantic City filed for bankruptcy: Trump Taj Mahal, 1991; Trump Castle Associates, 1992; Trump Hotel & Casino Resorts, 2004; and Trump Entertainment Resorts, 2009. But Trump was clever enough to generally lose other people’s investments rather than his own. He even claimed to make charitable contributions that were actually other people’s money and spent other people’s charitable contributions on himself. He probably has not paid federal income taxes for many years, but we cannot know for sure because he has not released his federal income tax returns.

More disturbing to the property rights foundation of capitalism is Trump’s use of the government’s right to seize property for “public” use under its eminent domain powers. When he was unable to convince private owners of property to sell it to him, he did not hesitate to turn to government to force them to: See the excellent article by Cato’s David Boaz: https://www.theguardian.com/commentisfree/2015/aug/19/donald-trumps-eminent-domain-nearly-cost-widow-house as well as the article by John R. Lott, Jr. in the National Review: http://www.nationalreview.com/article/431005/trump-eminent-domain.

According to USA Today: “Donald Trump often portrays himself as a savior of the working class who will ‘protect your job.’ But a USA TODAY NETWORK analysis found he has been involved in more than 3,500 lawsuits over the past three decades — and a large number of those involve ordinary Americans.

“At least 60 lawsuits, along with hundreds of liens, judgments, and other government filings reviewed by the USA TODAY NETWORK, document people who have accused Trump and his businesses of failing to pay them for their work. Among them: a dishwasher in Florida. A glass company in New Jersey.  A carpet company. A plumber. Painters. Forty-eight waiters. Dozens of bartenders and other hourly workers at his resorts and clubs, coast to coast. Real estate brokers who sold his properties. And, ironically, several law firms that once represented him in these suits and others.

“Trump’s companies have also been cited for 24 violations of the Fair Labor Standards Act since 2005 for failing to pay overtime or minimum wage, according to U.S. Department of Labor data. That includes 21 citations against the defunct Trump Plaza in Atlantic City and three against the also out-of-business Trump Mortgage LLC in New York.  Both cases were resolved by the companies agreeing to pay back wages.

“In addition to the lawsuits, the review found more than 200 mechanic’s liens — filed by contractors and employees against Trump, his companies or his properties claiming they were owed money for their work — since the 1980s.  The liens range from a $75,000 claim by a Plainview, N.Y., air conditioning and heating company to a $1 million claim from the president of a New York City real estate banking firm. On just one project, Trump’s Taj Mahal casino in Atlantic City, records released by the New Jersey Casino Control Commission in 1990 show that at least 253 subcontractors weren’t paid in full or on time, including workers who installed walls, chandeliers and plumbing….

Trump’s comment on his unpaid bills was that: “If a company or worker he hires isn’t paid fully it’s because The Trump Organization was unhappy with the work.”[1]

That Donald Trump received the Republic nomination for President and a large number of American votes despite his immoral behavior, rude comments about women, Hispanic, Muslims, threats of torture, and bombing the families of terrorists, etc., has damaged the United State’s image abroad. But he has damaged the image of capitalism as well. Trump’s business activities have been bullyish and exploitive and have not added value to the world as the counterpart to his wealth in the normal and laudable tradition of capitalism. The damage from Trump’s campaign is wide indeed.

[1] Steve Reilly, USA Today, 06/09/2016 http://www.usatoday.com/story/news/politics/elections/2016/06/09/donald-trump-unpaid-bills-republican-president-laswuits/85297274/

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Terrorism: Security vs. Privacy

We all care about our personal and national security and about our individual freedom, of which our privacy is an important element. Measures that serve both are win win and thus uncontroversial, but often measures that enhance one diminish the other. How and when to use such measures (tools) involve agreement on the balance of risks between security and privacy. Striking the best balance requires public review and debate and constant monitoring as I have discussed before. https://wcoats.wordpress.com/2016/03/24/fighting-terrorists-part-ii/

Tools that enable our government to collect information on and track individuals can enhance our security by detecting and hopefully interrupting plans to carry out terrorist attacks. The existence of such capabilities, e.g., to monitor phone calls, emails, payments, and physical movements, also create the capability of collecting such information on people for other purposes, e.g. for commercial or political espionage. Governments through out the world have used such tools to monitor and suppress the “undesirable” activities of their foreign enemies and sometimes of their own citizens. Limits and safeguards on the use of such tools can mitigate the risk that they can be misused to get private information on individuals for other unwarranted purposes.

Finding the best balance between security and privacy is difficult but important for our freedom. We know or assume that we know how Russia, for example, uses surveillance tools on its own citizens. We generally believe that our own government only uses such tools to enhance our security. But the risks of and the growing actual misuse of government powers for political ends (e.g., targeted IRS audits on political enemies, illegal surveillance of a government employee’s girl friend or wife, etc.) are challenging our, perhaps, naïve faith in the honestly of our government. Hillary Clinton’s mishandling of classified email and Russian theft of U.S. government personnel records are nothing compared to the temptation to steal historical data on the activities of Donald Trump and Mrs. Clinton.

The credible rule of law is one of the critical foundations of our personal freedom. It both protects and limits the extent and domain of our privacy. The principle of “Innocent until proven guilty” is an essential element of the rule of law. It evaluates whether an act has violated the law. In a free society people are not punished for acts contemplated but not committed. Acting against people the state believes might be likely to or inclined to violate the law, for example, that it thinks are likely to commit a terrorist act, would violate this fundamental principle of a free society. An exception to this general rule would be the arrest of a person having the instruments and ingredients for making a bomb and supported by evidence that he plans to make and use the bomb.

Following the terrorist attacks in New York and Washington DC on 9/11, public sentiment shifted its balance between security and freedom in favor of security. The so-called PATRIOT act signed into law by President George W. Bush on October 26, 2001, reflected that shift by infringing on our privacy and traditional rights in ways that would not have been accepted earlier. Moreover, measures that were initially considered temporary and emergency in nature have become increasingly accepted as normal. Even after a slight curtailment of the provisions of the PATRIOT act when it was renewed in 2015 most of these measures were left in place. No one seems shocked today that the government maintains a “No Fly” list based on suspicions that certain people who have committed no crimes might be potential terrorists. Such profiling unsurprisingly results in Middle Eastern Muslims dominating the list, a racial and religious discrimination that violates existing anti discrimination laws and would not have been tolerated before 9/11.

It is not unusual today to hear people who claim to appreciate the importance of the First Amendment to the US Constitution (freedom of speech) suggest that radical Islamist websites that attempt to recruit ISIS Jihadists should be blocked. Most of my friends are too young to remember the anti-communist witch hunts of Senator Joseph McCarthy of the 1950s from which we coined the term McCarthyism. It was a time when a frightened public saw communists under every bed. Soviet spies, a legitimate target for arrest and punishment, were often confused with Marxists (communists), who espoused an economic system now rightly discredited. Those of us who still support freedom of speech believe that bad and pernicious ideas are best defeated with reasoned counter arguments. We believe that it is potentially dangerous to our freedom to allow our government to determine what we can read, hear, or see.

Edward Snowden did our country a great service by forcing a public discussion of what safeguards are needed to strike the balance desired by the public between their security and their privacy. I have written about Snowden before:  https://wcoats.wordpress.com/2013/12/24/the-year-of-edward-snowden/    I recently viewed the movie “Snowden” and the documentary about the same events called “Citizenfour” and highly recommend both. The Heritage Foundation has contributed to this discussion in the following half-day seminar. http://www.heritage.org/events/2016/10/cybersecurity I particularly recommend the opening session with Michael Hayden, who makes a number of interesting and thoughtful observations.

The level of discussion, which is to say the lack of serious discussion of these issues, in the American Presidential campaign is distressing. I am reassured that some very bright and thoughtful people are discussing them. In addition to the Heritage seminar cited above, the New American Foundation recently held an all day seminar on these issues that started off with an excellent presentation by Andrew J. Bacevich (starting at about 24 minutes into the video)

https://www.newamerica.org/international-security/events/next-presidents-fight-against-terror/

We can not remind ourselves often enough that “the price of liberty is eternal vigilance.” And, we should add, courage.

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Making sense of Trump

With the latest scandals and polls dropping, Trump’s defeat becomes ever more certain. But rather than broadening his appeal to the undecided Trump has instead doubled down with his hard-core base and declared the election “rigged.” What is he thinking? What is his strategy? The generous interpretation was given by veteran GOP strategist Mike Murphy: “’I think Trump is right: The shackles have been released, but they were the shackles of reality. Trump has now shifted to a mode of complete egomaniacal self-indulgence.’” http://wapo.st/2ef3vmQ This interpretation states that Trump is only making excuses for his defeat to save his damaged ego.

Maybe. But few observers claim that Trump is dumb. This implies that he knows what he is doing. His repeated claims that the establishment (press, elites, corporate America) has rigged the elections is so treasonous that Republic House leader Paul Ryan spoke out against them Saturday: “’Our democracy relies on confidence in election results, and the speaker is fully confident the states will carry out this election with integrity,’ Ryan’s press secretary, AshLee Strong, said in a statement sent to several media outlets.” http://www.theblaze.com/stories/2016/10/15/paul-ryan-pushes-back-against-trumps-claims-that-the-election-is-rigged/

“The people who speak for Donald Trump’s presidential campaign on Sunday tried to walk back his incendiary comments about a ‘rigged’ election, with vice presidential candidate Mike Pence saying that Trump was only referring to media bias and vowing that ‘we will absolutely accept the result of the election.’… And literally hours after those media appearances, Trump was back on Twitter ― making clear that, yes, he thought voter fraud was a real threat to the election’s legitimacy.” http://www.huffingtonpost.com/entry/trump-rigged-election_us_5803876de4b0162c043c7d1f

Poor Mike Pence who seemed a generally decent guy. He is in an even worse position than Paul Ryan being dragged along through Trump’s seditious muck. What does Trump want or expect his hard-core supporters to do when he losses in a rigged election? He doesn’t seem to be pumping them up to just hang their heads and go home. Trump seems not to care who or what he destroys as befits his disgusting model of zero sum capitalism in which he profits (wins) by gaining better terms in deals with counterparties and/or stiffing business partners with his bankruptcies. No win win for Trump.

The real concern, as expressed strongly by Fareed Zzkaria Friday, is that along with destroying the Republican Party, Trump will destroy America as well. http://wapo.st/2dWNmQe

Trump has gone from evil to seriously dangerous, not because he has changed any—he hasn’t—but because there are so many people who have been willing to support his ugly, incoherent, ranting candidacy. I understand their anger at an ever larger, more intrusive government that has in the nature of things been captured for the benefit of crony (rather than real, competitive) capitalists. But Trump only promises to expand government further and to manipulate it more skillfully, for the benefit of….??? I will vote for Gary Johnson and William Weld.

 

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Emigration and Immigration

During the height of the Cold War, the Berlin Wall was built to keep the citizens of East Germany from leaving. We cheered as it and similar barriers to emigration from the Soviet to the Free World fell in 1989. But the right to leave awkwardly confronts the right of countries to choose who may or may not enter. The right to leave has little meaning if you have no place to go.

Immigration, especially in the U.S. and Europe, has become a very divisive and difficult public policy issue. Individual freedom and economic efficiency call for the free movement of people. The common market of Europe (the European Economic Community) requires the free movement of labor, capital, goods, and services among its members. This is a desirable and worthy goal, but in typically “take no prisoners” fashion, the European Union has applied this requirement without serious attention to the needs and sensitivities of recipient countries with regard to who enters and works in their country.

During the cold war, when our sympathies were with those behind the Iron Curtain wanting to get out, the East-West participants in the CONFERENCE ON SECURITY AND CO-OPERATION IN EUROPE in Helsinki in 1975 agreed to:

“Make it their aim to facilitate freer movement and contacts, individually and collectively, whether privately or officially, among persons, institutions and organizations of the participating States, and to contribute to the solution of the humanitarian problems that arise in that connection,

Declare their readiness to these ends to take measures which they consider appropriate and to conclude agreements or arrangements among themselves, as may be needed,…”[1]

The emphasis at that time was on “cultural exchange” and cross border employment. The right to emigrate, however, was a step too far.

Aside from the political dimension of a “right to migrate,” there are clear economic efficiency benefits from the free movement of labor, supplementing those of the free movement of goods and capital.[2] Leaving aside the special case of war refugees, people generally move, whether within their own country or to a new one, in order to take better jobs. One exception is the Brits who vacation or retire to sunnier parts of Southern Europe. They obviously bring their pension incomes with them. The Polish plumbers in England and the Filipina nurses throughout the world increase their own incomes but fill worker needs in their host countries as well. In short, immigration is generally a win win scenario.

Within the overall annual limits the U.S. has placed on immigration, the number of H-B1 work visas (those requiring high skills or education) has been squeezed by preferences to extended family members of existing green card holders, thus depriving American industries of the skilled workers they need. If foreign workers are not allowed to immigrate here, capital will tend to move abroad in order to produce what is needed overseas and import it. Opposition to immigrants by workers who fear that they will lose their own jobs are generally misinformed or motivated by other concerns.

Immigration can also ease the economic problems associated with an aging and shrinking population. Japan’s population is now smaller than it was in 2000 but more problematic is that it is also older. The percentage of those over 65 in Japan’s total population has increased from 17% in 2000 to 24% now. Its working age population has declined 9%. As a result, a growing share of income from those working is required to support those who have retired. This problem has been partially addressed by an increase in the number of Japanese women entering the labor force, but it has not been enough. Relaxing Japan’s very restrictive immigration laws would also help. As a general rule most Japanese are quite insular and not comfortable living and working with foreigners. According to The Economist: “The country has remained relatively closed to foreigners, who make up only 2% of the population of 127m, compared with an average of 12% in the OECD.”[3] But Japan’s demographic crisis is leading to a gradual liberalization of immigration requirements.

Workers who worry about immigrants taking their jobs are generally confusing the impact of technology on some existing jobs and job skills, and to a lesser extent the impact of increases in cross border trade. The disruptive, but income enhancing, impact of ever changing technologies does impose costs on those who must learn new skills, but it is the relative openness of Americans to such innovation and growth that has made America the wealthy country that it is.

However, there are limits to the pace of change (and the pace of immigration) that societies can comfortably absorb. The backlash of public concern with immigration, which played an important role in Britain’s recent vote to leave the EU, seems to reflect the upsurge in the pace of immigration in recent years. It also seems to have reflected misinformation about the extent of British control over that pace. While EU membership carried an obligation to accept the free flow of labor into the UK from other EU member countries, only half of the UK’s immigration was from that source. The UK government fully controlled the other half.

Donald Trump has linked his anti-immigration rhetoric to public concern with terrorism. His campaign website states that: “Trump is calling for a total and complete shutdown of Muslims entering the United States until our country’s representatives can figure out what is going on.”[4] This statement, dated December 7, 2015, has been followed by increasingly nuanced (if that word can be used for Trump) formulations of Trump’s anti-terrorist immigration “policy” proposals. On April 16, 2016, “Donald Trump’s speech on foreign policy Monday focused in large part on his proposal to suspend immigration from dangerous parts of the world and impose a new system of ‘extreme vetting’ that would subject applicants to questions about their personal ideology.

“We should only admit into this country those who share our values and respect our people,” said Trump, proposing what he called an “ideological screening test.”[5]

Typical of Trump’s campaign, he is either ignorant of existing visa requirements or deliberately misleading his audience. At least since 9/11, visa applications from all but a few countries, whether work or tourist, require an extensive background check.[6] All green card recipients swear to uphold the American Constitution and its laws. These are reasonable and appropriate requirements and they have been in place for a long time.

And then there are concerns about the preservation of a country’s culture, a legitimate goal. And then there is plain old racism and protectionism (the protection of monopoly returns to jobs from entry restrictions via closed shop unions or licensing requirements and to firms from import tariffs).

So what should a country’s immigration policy be? Aside from war refugees, whom the U.S. and most countries have taken a moral/humanitarian obligation to accept,[7] a country’s immigration policies should serve the economic needs of the country and respect the cultural traditions and security concerns of its citizen’s. The United States has benefited enormously and famously by accepting all people seeking a better life who are committed to our laws and values. However, pragmatism calls for regulating the rate of immigration to numbers that can be readily assimilated and limiting it to people of good character committed to abiding by our laws and values.[8]

U.S. immigration laws suffer from a number of defects. The overall number of immigrants permitted per year has not kept pace with the growth in our population and economy. But more important, as noted earlier, the number of actual workers, and especially high skilled workers, has been seriously crowded out by a preference for extended family members of existing residents (not core family, but extended family).

The U.S. has a special problem because of a relatively large number of illegal immigrants who have become an important part of our labor force for some time. It is important for our laws to effectively limit immigration to legal channels while enlarging those channels. It is also essential to resolve and normalize the status of those who came here illegally in the past. Several years ago a bipartisan group of U.S. Senators, the so-called Gang of Eight, fashioned immigration reform legislation that addressed these issues. Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 No one was happy with every provision of the draft law but it enjoyed broad support as a compromise and was passed by the Senate. It was never brought up in our dysfunctional House of Representatives.

The Senate immigration bill is a good basis upon which to renew the discussion of immigration reform in the U.S. Hopefully, following the November elections in the United States its Congress can return to the important business of fashioning laws that promote economic growth, well being, and fairness. This should include adopting a comprehensive immigration reform law.

[1] CONFERENCE ON SECURITY AND CO-OPERATION IN EUROPE FINAL ACT concluded in Helsinki, Finland, August 1, 1975, Page 38.

[2] https://wcoats.wordpress.com/2016/08/03/trade-and-globalization/

[3] The Economist, August 20, 2016, page 31.

[4] https://www.donaldjtrump.com/press-releases/donald-j.-trump-statement-on-preventing-muslim-immigration

[5] The Washington Post: https://www.washingtonpost.com/national/trumps-immigration-plan-raises-many-unanswered-questions/2016/08/16/754fba76-6382-11e6-b4d8-33e931b5a26d_story.html

[6] Some countries, such as England and German and other parts of Europe do not require a US visa to enter the US, though they should have criminal checks when applying for a Passport in their own country.

[7] Of the 4,812,993 Syrian refugees registered outside of Syria (several million displaced Syrians remain inside Syria) as of March 2016, only 7,123 have settled in the U.S as of July 2016. Germany has accepted 600,000 and about 4.5 million have been registered in Turkey, Lebanon, and Jordan. It is estimated that there are an additional 2 million Syrian refugees that are unregistered. https://en.wikipedia.org/wiki/Refugees_of_the_Syrian_Civil_War

[8] Six years ago I wrote these proud words about our immigrants. Please note the last sentence: https://wcoats.wordpress.com/2010/06/10/a-nation-of-immigrants/ My comments on Syrian refugees almost a year ago are also worth rereading (in my humble opinion): https://wcoats.wordpress.com/2015/11/19/what-to-do-about-syrian-refugees/ as are my comments on immigrants and terrorists two months ago: https://wcoats.wordpress.com/2016/06/11/the-challenges-of-change-globalization-immigration-and-technology/

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