Though I generally believe Paul Krugman is an also ran, in this case he seems to have gotten it right.

AE

Opinion | The New York Times

By Paul Krugman

Do you remember Donald Trump’s trade war? You can be forgiven for having forgotten all about it, given everything that has happened since; it sounds trivial compared with his effort to stay in power by overturning a fair election. Even in terms of policy while in office, it was far less important than his pandemic denial, and probably less important than his tax cuts or his sabotage of health care.

But the trade war was uniquely Trumpian. His other policy actions were standard-issue Republicanism, but the rest of his party didn’t share his obsession with trade deficits; indeed, he probably wouldn’t have been able to do much on that front except for the fact that U.S. law gives presidents enormous discretion when setting tariffs. Only Trump really considered trade deficits an important issue; and he, er, trumpeted what he called a “historic trade deal” under which China agreed to buy an additional $200 billion in U.S. goods and services by the end of 2021.

Now, Chad Bown of the Peterson Institute for International Economics, who has been the go-to source on the trade war from the beginning, has a final assessment of that deal. And it turns out to have been a complete flop: “China bought none of the additional $200 billion of exports Trump’s deal had promised.”

So Trump was a chump; the Chinese took him to the cleaners. But if you want to do a post-mortem on the trade war, Trump’s haplessness in dealing with foreign leaders is actually a minor part of the story. Far more important is the fact that the shocks we’ve been experiencing since the pandemic began make the Trumpian view of trade look even more economically foolish than it did when he took office.

In the world according to Trump and Peter Navarro, the man he chose as his trade czar, international trade is a zero-sum game. If other countries buy stuff from America, we win; if we buy stuff made abroad, we lose. Navarro and Wilbur Ross, Trump’s commerce secretary (he really knew how to pick them), made this explicit in a policy paper they put out during the 2016 campaign, which asserted that the trade deficit subtracts one-for-one from U.S. growth: Every dollar we spend on imports reduces our G.D.P. by a dollar.

Economists scoffed at this crude mercantilism, which completely ignored the point that imports can make us richer, because the whole reason we buy some goods from abroad is that they are cheaper and/or better than domestically produced alternatives. This is especially true in the modern world economy, where many products that enter international trade are “intermediate goods,” like parts that are used in production. As it turned out, Trump’s tariffs disproportionately affected intermediate goods. So the tariffs raised U.S. production costs and, according to almost all estimates, reduced the number of manufacturing jobs.

Still, mercantilism isn’t always unadulterated nonsense. (Sometimes it’s adulterated nonsense?) Under certain conditions — namely, when the economy is depressed because overall demand is inadequate — trade deficits can reduce output and jobs, and actions to reduce those deficits can act as a form of economic stimulus. That’s why, back in 2010, when lack of demand was the overriding constraint on the U.S. economy, I called for strong pressure on China to end the undervaluation of its currency.

And it’s possible that one of these years we will once again find ourselves facing persistent problems of inadequate demand. But that’s not where we are now.

We are, instead, currently living in a world of constrained supply — a world, in particular, in which domestic factories are struggling to produce what consumers want. Those supply constraints are why inflation has surged.

As we have entered this world, the United States has plunged deeper into trade deficit:

How should we think about this plunge? Would we be richer and better off if we didn’t allow as many imports?

The answer should be an obvious “no.” As many economists have pointed out, the pandemic has caused consumers, still nervous about face-to-face interaction, to switch from buying services to buying goods:

Imports have surged because many of the goods consumers want are produced abroad, and America doesn’t have the capacity to produce them here — at least not on short notice. Furthermore, even when we can satisfy demand with domestic production, that production, the tariff debacle tells us, often requires imported intermediate goods.

So if we had tried to block the pandemic-related import surge, we wouldn’t have had more jobs; we would just have had more shortages and even higher inflation. In fact, some economists have urged President Biden to help the fight against inflation by lifting the Trump tariffs — something he could do without congressional approval.

Unfortunately, it’s easy to see the political and strategic problems with doing this, no matter how much sense it would make. Trump may have been China’s chump, but Republicans would pounce on any action that could be construed as a gift to China, even if continuing Trump’s tariffs hurts us more than it hurts the Chinese government.

I’ve called today’s newsletter a post-mortem on Trump’s trade war, but, in fact, that trade war isn’t over. Trump’s trade policies were foolish and costly — they failed by any measure you choose — but it may be a long time before any president is in a position to undo the damage.

Read More on The New York Times

Dear Friends,

Here we are – Stagflation (when the inflation rate is greater than the growth rate) is back. Last seen in the late 1970’s and early 1980’s. Ultimately free market interest rates reached the high teens by 1982. The inflation broke – along with Nelson Bunker Hunt and his silver manipulation. We are on route worldwide to a repeat with the Fed on the wrong track and Congress at risk of sealing the tomb. We are far enough along so that no short-term fix is likely or even possible. If the Fed stays on its course and Congress does not act on the human infrastructure bill what will happen quickly is evident. Stagflation will continue with the inflation rates spiraling while the growth rate shrinks.

The divergence in wealth and income between the top 50% and the bottom 50% of the populace will increase substantially. (Wage rates never keep pace with a rampant inflation.) The poor will become poorer; the rich will hold their own as the rich own assets which will somewhat offset the wealth destruction inherent in inflationary times. To battle the inflation the Fed must veer towards caution. Endowing the banks with billions through asset purchases and a building Fed balance sheet only exacerbates the inflationary trend and subsidizes the banking community which seems to do just fine without continuous injections of taxpayer funds. Maintaining interest rates at deeply artificially low levels, though an acceleration of asset values and markets, has no beneficial effect on the growth of the economy. In fact, the results of these artificially loco rates are to depress growth and accelerate inflation. The increases in asset values and markets do not generally augment consumer buying power – in fact they reduce the consumer ability to buy overpriced goods – the average consumer does not benefit from escalating asset values as the average consumer’s only valuable asset is generally his or her home. Home value does not increase consumer buying power.

Approximately 25% of our population is at or past retirement age, dependent on pensions, return on savings, social security et al. This group of more than 80 million people are partially interest payment dependent for the income to purchase consumer goods. These older folks are able to contribute less and less to our consumer fueled economy further inhibiting growth. The case for low rates inhibiting growth while increasing asset values is a long one but enough said as to how. It is time the upper 20% of the population benefit from the low rates and the banking giveaways. Those benefits are unlikely to be spent in any way that accelerates consumer spending.

Why do I emphasize consumer spending? First because in the United states it is the primary motor of the economy. Without strong growing consumer spending, there can be no sustained inflation adjusted growth. It is without precedent in our economic history that with an impoverished middle and lesser class, the country has grown from anything but depression levels. The reason is simple. It centers around VELOCITY OF MONEY. (Lower income folks spend 100 – 110% of all income sources on consumer products. The highest earners spend less than 10% on consumer purchases.) Example: $1,000,000 income to lower income levels means $1,000,000 to $1,100,000 goes to consumer purchases while $1,000,000 of revenues to the highest earners are likely to produce only $100,000 in purchases. The larger the wealthy class and the greater the divergence the greatest resistance to inflation adjusted growth. This is a spiral; its net effect is a depression. The $1,000,000 is spent again and again in lesser amounts by the recipients. The $100,000 the same course.

So, what is the solution – no absolute solution but the right direction be achieved:

The Fed must stop the banking endowment and reduce its balance sheet in an adept fashion. This can be done without disruption as the Fed ownership of debt is, in the majority, government debt. In fact, the same entity is the borrower and the lender. Simple solutions abound if the banking profit machine is abandoned. Rates need to float to where they reflect real supply and demand to ultimately quash the inflation. Second the $3 trillion stimulus, now reduced to $2 trillion will have to happen, and promptly. Remember the recipients of this package spend all they receive. – “Growth”

Long term we must institute wage rates, through regulation if necessary, that allow all workers to earn a decent living wage. We must institute medical coverage and price controls for all medical and pharmaceutical charges. The United States, the richest country in the world, has the highest cost per capita of any nation and yet rates 39^th in terms of the quality and success of treatment. That doesn’t make for a successful work force. The case for short term survival and longer term success is clear. Do we have the collective strength to achieve both? I think so but the proof of the pudding will be in the eating.

Asher Edelman

By Nicholas Kristof

Opinion Columnist, The New York Times

We no longer have a White House aide desperately searching for a fire alarm to interrupt a president as he humiliates our country at an international news conference, as happened in 2018. And a Pew Research Center survey found that 75 percent of those polled in a dozen countries expressed “confidence in the U.S. president to do the right thing,” compared with 17 percent a year ago.

Yet in a larger sense, America is not back. In terms of our well-being at home and competitiveness abroad, the blunt truth is that America is lagging. In some respects, we are sliding toward mediocrity.

Greeks have higher high school graduation rates. Chileans live longer. Fifteen-year-olds in Russia, Poland, Latvia and many other countries are better at math than their American counterparts — perhaps a metric for where nations will stand in a generation or two.

As for reading, one-fifth of American 15-year-olds can’t read at the level expected of a 10-year-old. How are those millions of Americans going to compete in a globalized economy? As I see it, the greatest threat to America’s future is less a surging China or a rogue Russia than it is our underperformance at home.

We Americans repeat the mantra that “we’re No. 1” even though the latest Social Progress Index, a measure of health, safety and well-being around the world, ranked the United States No. 28. Even worse, the United States was one of only three countries, out of 163, that went backward in well-being over the last decade.

Another assessment this month, the I.M.D. World Competitiveness Ranking 2021, put the United States No. 10 out of 64 economies. A similar forward-looking study from the World Bank ranks the United States No. 35 out of 174 countries.

So it’s great that we again have a president respected by the world. But we are not “back,” and we must face the reality that our greatest vulnerability is not what other countries do to us but what we have done to ourselves. The United States cannot achieve its potential when so many Americans are falling short of theirs.

“America’s chronic failure to turn its economic strength into social progress is a huge drag on American influence,” said Michael Green, chief executive of the group that publishes the Social Progress Index. “Europeans may envy America’s corporate dynamism but can comfort themselves that they are doing a much better job on a host of social outcomes, from education to health to the environment.

“Rivals like China may see the fraying of America’s social fabric as a sign of strategic weakness,” he added. “Emerging economies, whose citizens are starting to enjoy quality of life ever closer to that of Americans, may be less willing to take lectures from the U.S. government.”

Biden’s proposals for a refundable child credit, for national pre-K, for affordable child care and for greater internet access would help address America’s strategic weaknesses. They would do more to strengthen our country than the $1.2 trillion plan pursued by American officials to modernize our nuclear arsenal. Our greatest threats today are ones we can’t nuke.

America still has enormous strengths. Its military budget is biggerthan the military budgets of the next 10 countries put together. American universities are superb, and the dynamism of United States corporations is reflected in the way people worldwide use their iPhones to post on their Facebook pages about Taylor Swift songs.

But they also comment, aghast, about the Capitol insurrection and attempts by Republicans to impede voting. American democracy was never quite as shimmering a model for the world as we liked to think, but it is certainly tarnished now.

Likewise, the “American dream” of upward mobility (which drew my refugee father to these shores in 1952) is increasingly chimerical. “The American dream is evidently more likely to be found on the other side of the Atlantic, indeed most notably in Denmark,” a Stanford study concluded.

“These things hold us back as an economy and as a country,” Jerome Powell, the chair of the Federal Reserve, said Tuesday.

More broadly, the United States has lost its lead in education overall and in investments in children. The World Bank Human Capital Project estimates that today’s American children will achieve only 70 percent of their potential productivity. That hurts them; it also hurts our nation.

We can’t control whether China builds more aircraft carriers. We can’t deter every Russian hacker.

But to truly bring America back, we should worry less about what others do and more about what we do to ourselves.

Dear Friends,

I am releasing a short version of a video done with Robert Reich, a friend and great liberal thinker.

We are unable to release the full video on social media as there is quite some censorship prior to the election. We hope to release the whole after Joe Biden’s win.

Click the video below and share widely. Thank you!

Asher Edelman

Dear All,

The economy over the next couple of years and its problems are resolvable as long as we resolve the pandemic. The key is going to be who’s advice Joe Biden takes. If it turns out to be the old line Clinton people like Robert Ruben and Larry Summers we will continue the economic disaster and the banks will continue to profit. I think Biden is a better man than that and the economic problems are totally resolvable providing we focus on the lower 70% of the asset holders and earners. I’m pleased that the Republicans in the Senate realize that Trump has lost his game – I think they may have lost their game as well. On that note I beseech you to vote and get all of your like-minded friends to vote and our nation and our economy and our people will have a chance.

Asher 

Opinion by Greg Sargent

Columnist | Washington Post

As you’ve heard, Wolf Blitzer and Nancy Pelosi (D-Calif.) had a very contentious exchange on Tuesday, in which the CNN anchor demanded to know why the House Speaker was not prepared to support the White House’s offer of a $1.8 trillion stimulus package.

“Don’t let the perfect be the enemy of the good,” Blitzer told Pelosi, thus seeming to suggest that the real holdup to any deal is Democratic opposition.

But new reporting from Bloomberg News strongly suggests another angle worth investigating, if the goal is to truly get to the bottom of what might end up holding up an agreement.

And this angle points to an even bigger story: how Republicans may already be laying the groundwork to try to destroy a Joe Biden presidency, should he win the election.

The short version: A Senate GOP strategist privately confided to Bloomberg that a key Republican goal right now is to lay the groundwork to revert hard to austerity, should Biden prevail, crippling the possibility of any serious stimulus efforts next year, even amid continued economic misery.

As of now, Senate Republicans are hostile to supporting a deal even if the White House and House Democrats can reach one. The White House’s $1.8 trillion offer includes some things Democrats want, such as $1,200 checks to individuals, but Pelosi wants more money for aid to states and a national strategy against the novel coronavirus, among other things.

Senate Republicans may not even accept spending levels that the White House is proposing. Senate Majority Leader Mitch McConnell (R-Ky.) is planning a vote on a far smaller package — $500 billion for extended assistance for the unemployed and small businesses, among other things.

The Senate bill appears designed to do the minimum while giving vulnerable GOP senators a way to say they’re doing something at a moment of deep economic peril, in hopes of salvaging McConnell’s majority.

But Trump undermined that strategy by tweeting: “Go big or go home!” Now Senate Republicans risk getting split between the conservative impulse to spend as little as possible (at least on aid to distressed Americans) and Trump’s demand (for now, anyway) for more spending.

But, given that spending more now would likely boost Trump’s reelection chances, why aren’t Senate Republicans on board?

The Bloomberg report offers this remarkable clue:

“A GOP strategist who has been consulting with Senate campaigns said Republicans have been carefully laying the groundwork to restrain a Biden administration on federal spending and the budget deficit by talking up concerns about the price tag for another round of virus relief. The thinking, the strategist said, is that it would be very hard politically to agree on spending trillions more now and then in January suddenly embrace fiscal restraint.”

This is an anonymous source. But it accords with what all our intuitions and our understanding of recent U.S. political history tell us. Republicans almost certainly suspect Trump will lose even with a big stimulus and already hope to put an incoming President Joe Biden in a fiscal straitjacket, saddling him with the terrible politics of a grueling recovery.

A big package now under a GOP president would make that harder to get away with. That’s bad enough, but the evolving strategy here may be worse than this suggests. The calculation is probably not just about avoiding the hypocrisy of spending big now and embracing austerity under a Democratic president.

It’s also likely that a big package now would put the economy in a somewhat better position early next year, when Biden (should he win) would take over. This, too, is probably what Republicans want to avoid.

Indeed, as Eric Levitz points out, if Republicans can scuttle a robust package now, that would hand Biden a “deepening recession.” If Republicans hold the Senate and can block big stimulus measures at that point, Levitz continues, “Biden’s presidency would be over before it starts.”

And so, when McConnell chortled with glee at this week’s debate in Kentucky about the failure to pass more aid at a desperate national moment, it telegraphed what’s coming. And we’ve already lived through what happened when Republicans, led by McConnell, tried to cripple the recovery from a previous economic calamity that a Democratic president inherited from a Republican one.

Back then, McConnell calculated that if Republicans adopted a strategy of openly tailoring everything around the overarching goal of denying Barack Obama bipartisan support, Obama would take the blame for it. It’s likely McConnell is already thinking the same.

Obviously Republicans might theoretically oppose more spending to address a recession during a Biden presidency out of adherence to principle, however egregiously misguided. But notably, the GOP strategist above also telegraphs a strategy of constraining Biden by suddenly claiming to care deeply about deficits.

That’s particularly galling, given that Trump and the GOP passed a massive corporate tax giveaway that lavished enormous benefits on top earners while helping to explode the deficit. Now concern over that deficit will be used to try to cripple a Biden presidency through austerity.

Which leads to a final point. As I’ve noted, Trump campaigned in 2016 on a (fraudulent) promise to break with orthodox conservative economics, including opposition to big expenditures in the public interest, vowing to preserve safety nets and invest in job-creating infrastructure.

In many ways Trump tossed that vow aside and embraced GOP plutocracy. But now he’s suddenly desperate to secure another huge spending infusion, because he needs one to salvage his reelection hopes. So it would constitute a perverse form of poetic justice if a GOP refusal to go along — one rooted in a strategy of hamstringing a Democratic president from addressing deep national challenges — ends up contributing in some small way to Trump’s political demise.