Making the Grade

I have been asked to grade President Trump’s first 100 days as president. Most such assessments are the opposite of analysis. They take a gut feeling and back analysis out of it.

What criteria should I use in making my evaluation and how should I weight them? The criteria that occur to me immediately are foreign policy, domestic policy, managing the transition, unifying the country, more or less in order of weight.

What else should I take into account? And what should their relative weights be?


Looking for the Real Killer

There has been almost no end of complaints about how awful a president Donald Trump is. Unqualified. An oaf. Conflicts of interest. Nepotism. Russian influence. He didn’t release his tax returns. At Bloomberg View, in his catalogue of how bad the first 100 days of the Trump presidency has been, Jonathan Bernstein includes an insightful observation:

Republican party actors should have done whatever it took to defeat his nomination when they had the chance. Nominations matter, and none more so than the presidential nomination, and they are worth fighting — hard — over.

I would agree with it except for one thing. Is there actually anything that Republican party leaders could have done to prevent Trump’s securing the nomination?

I think they could have dissuaded any of the members of the very large field of candidates they cared to. That would have required them to unify behind one candidate early on. Who?

More than any president of my memory, Trump has been a self-made candidate. He was largely self-financing. There was no rallying ’round by Republican leaders, many of whom openly disdained him. They didn’t “fall in line” as Bill Clinton put it.

What steps on the part of the RNC could have prevented Donald Trump from securing the nominations? What could have prevented him from being elected president?


Mining the Dirt

Here’s an interesting story from Nature. Apparently, researchers are beginning to mine the dirt of ancient caves for human DNA:

Bones and teeth aren’t the only ways to learn about extinct human relatives. For the first time, researchers have recovered ancient-human DNA without having obvious remains — just dirt from the caves the hominins lived in. The technique opens up a new way to probe prehistory.

From sediments in European and Asian caves, a team led by geneticist Viviane Slon and molecular biologist Matthias Meyer, both at the Max Planck Institute for Evolutionary Anthropology in Leipzig, Germany, sequenced genomes of cell structures called mitochondria from Neanderthals and another hominin group, the Denisovans. Their work is published in Science.

That highlights a point I think I’ve made before about treasure-hunters. Schliemann wasn’t a scientist or a hero. He was a vandal.

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The Light of Day

In his column today in the Washington Post David Ignatius considers the case of Gen. Michael Flynn, presently being investigated for accepting payments from foreign companies closely tied with their governments and lying about it. Basically, my take on it conforms with his: spooks and generals don’t know how to behave when they come out in in the light of day.

Senior command is a world unto itself. The tribal culture that envelops all our military and intelligence personnel is especially tight for our most secret warriors. They sometimes miss the signals that life outside will be different.

Flynn certainly got a clear warning when he left the military after serving as head of the Defense Intelligence Agency. On Thursday, the Pentagon released a letter he received Oct. 8, 2014, about “the ethics restrictions that apply to you after your retirement.” The instructions listed eight areas of “post-employment restrictions,” including an obligation to get approval for any foreign compensation.

Flynn apparently cruised through that red light when he accepted $45,000 for speaking to the Russian government’s television-propaganda channel in 2015, and when he received more than $500,000 in 2016 from a firm with close ties to the Turkish government. Flynn retroactively registered as a foreign-government representative for work on behalf of Turkey that occurred on the eve of Donald Trump’s election and Flynn’s selection as national security adviser.

It’s unclear whether Flynn disclosed these foreign-government payments and other foreign contacts, as required, in renewing his security clearances at the White House, where he oversaw the nation’s most sensitive, compartmented programs. Failure to reveal such information can sometimes violate Section 1001 of the U.S. criminal code, known as the “false statements” provision.

As well as I can tell it’s being dealt with appropriately. It’s being investigated and the investigation may well lead to legal action.


What Net Neutrality Isn’t

The editors of the Wall Street Journal pervert the language to describe a laissez-faire approach to major carriers as “net neutrality”:

One of President Trump’s more ambitious appointees is Federal Communications Commission Chairman Ajit Pai, who on Wednesday unveiled an outline for rolling back Obama Administration rules that regulated the web like a 1890s railroad. Mr. Pai will be maligned by the left for undermining the “open internet,” but his plan would restore freedom and innovation that the federal government disrupted.

Mr. Pai in a speech at Washington’s Newseum sketched out a plan to untangle the 2015 “net neutrality” rules that classified the internet as a public utility under the Communications Act, a law carbon-dated to the 1930s. The rules give the FCC broad authority to dictate whether broadband practices are “reasonable.” Liberal pressure groups like Public Knowledge and Free Press said that nefarious cable companies might someday, somewhere block websites or slow browsing. Years later, no one can drum up an example.

That last sentence is untrue. Comcast is known to have throttled its customers’ access to certain sites. It was sued for it in Comcast Corp. v. FCC. Verizon has also done so but hasn’t been sued.

“Net neutrality” means that all traffic on the Internet is treated the same. There are several things that Internet service providers do to violate net neutrality: throttling and capping. “Throttling” mean a restriction on the speed of transfers including by site. “Capping” means setting limits on the amount of data that can be transferred also including on a by site basis.

Throttling or capping or the fear of them allows Internet service providers to sit athwart their Internet connections like the robber barons of old extracting tolls from content providers. When not prevented from doing so we can be confident they will because that’s what has happened in other countries. In Canada and many other countries around the world service providers both throttle and cap because they can.

I have no problem with either practice when they’re written into service contracts. I do when they aren’t. Internet service providers should provide the services they have contracted to provide.

Thirty years ago and more attempt after attempt at developing proprietary nationwide networks failed because they were proprietary. The Internet succeeded because it was open. Yes, that open quality helps big companies like Google, Facebook, or Netflix. Without an open Internet Google, Facebook, or Netflix would never have gotten big. The Internet service providers should not be allowed to determine what content you are able to access or what its cost should be.


A Surprising Outcome of Automation

Panera Bread has announced that it will be hiring an additional 10,000 delivery driver and in-store jobs as a consequence of something that some people might find surprising—automation:

ST. LOUIS, April 24, 2017 – Panera Bread (NASDAQ: PNRA) expects to add more than 10,000 new in-cafe and delivery driver jobs system-wide by the end of 2017 as it expands delivery service to 35-40 percent of its cafes by year end. Panera Delivery is the latest way Panera is meeting consumer demand for high quality food people can trust. Panera Delivery even further enhances the guest experience through industry-leading technology and Panera’s new delivery driver team.

“Panera is doing for delivery what we did for quick service – creating an elevated guest experience endto-end,” Ron Shaich, Panera founder, Chairman and CEO said. “In many places across the country, all that’s available for delivery is pizza or Chinese food. We’re closing the gap in delivery alternatives and creating a way for people to have more options for real food delivered to their homes and workplaces.”

That’s not exactly what I’ve had in mind when I’ve pointed out that automation has always resulted in an increase in jobs rather than a decrease but I’ll take it.


Another Finding for Gut Bacteria

At Live Science Rachael Rettner has an article presenting the evidence that chronic fatigue syndrome is caused by an imbalance in gut bacteria:

People with chronic fatigue syndrome may have imbalances in their gut bacteria, a new study suggests.

The study found that people with chronic fatigue syndrome had higher levels of certain gut bacteria and lower levels of others compared to healthy people who didn’t have the condition.

The researchers then checked to see if these imbalances also characterized the subset of patients in the study who had irritable bowel syndrome (IBS), an intestinal disorder that is common in people with chronic fatigue syndrome. Results showed that patients did indeed have different patterns of gut bacteria disturbances depending on whether they had only chronic fatigue syndrome or both chronic fatigue syndrome and IBS.

There’s a lengthy list of conditions including chronic fatigue, irritable bowel syndrome, and fibromyalgia in which the patients experience more than one and possibly all of the symptoms for all of the conditions, there are no clinical signs, and the diagnosis frequently depends on what the patient is complaining of. If the patient complains about fatigue, he is diagnosed with CFS. If the patient complains of abdominal distress, she is diagnosed with IBS. And if the patient complains of pain, he or she is diagnosed with fibromyalgia. Despite the patient actually experiencing fatigue, abdominal distress, and pain.

In the 1940s through the 1950s Baby Boomers were given enormous doses of antibiotics. Just about any time they were sick they were given antibiotics. Under the circumstances what would be surprising is if they hadn’t experienced an upset in the balance of their intestinal flora.

Lately I’m seeing everything from obesity to Parkinson’s Disease being blamed on gut bacteria. Although that’s an improvement over blaming disease on sin (malingering, overeating, eating the wrong thing, etc.), there’s a risk of gut bacteria becoming the explanation du jour. The balance is probably somewhere in the middle.


A Side by Side Comparison of the United States and China

At RealClearWorld Daniel Blumenthal presents a side-by-side comparison of the United States and China. Here’s his conclusion:

Therefore, those who believe in an inevitable Chinese takeover of Asia may not be wholly wrong. But that is not because China is overtaking the United States in wealth generation; far from it. Rather, it is because Beijing is taking advantage of an American political system unwilling to deal with its fiscal problems and provide for the common defense against the country’s most challenging threats.

I think he’s over-estimating China and under-estimating us. I’m less concerned about China than he but mostly because I think it’s failing to deal with its own internal contradictions.


One of These Things Is Not Like the Others

At the American Council on Science and Health Alex Berezow takes note of the differences between our health care system and those of other “rich countries”:

The first peculiarity is the amount of money the U.S. spends on healthcare. On a per capita basis, Americans spend 77% more on healthcare than other high-income countries. As a percentage of GDP, healthcare constitutes 1/6 of the U.S. economy, but it constitutes less than 1/8 of the economies of similar nations.

The second peculiarity is how healthcare costs are covered. In the average high-income country, 63% of healthcare spending is covered by the government, whereas less than 50% is covered by the American government. Additionally, prepaid private spending (e.g., insurance) plays a larger role in covering healthcare costs in the U.S. than in other high-income countries. And though out-of-pocket costs (as a percentage) are roughly the same between the U.S. and other similar nations, Americans pay more out-of-pocket due to the high relative cost of healthcare.

The comparison is highlighted in the table at the top of this post. As a word of caution, I think the table understates the percentage of health care paid for by the U. S. government slightly since it doesn’t include the employer-subsidized plans of government workers in its reckoning of “government-paid”.

I see several other differences worthy of note. The U. S. is by far the most diverse OECD country in terms of religion, race, ethnicity, and economy. The U. S. has a much higher percentage of very rich people as well as a much higher percentage of very poor people—people who are poor by world standards, something almost unheard of in other OECD countries.

Here in the U. S. we trust government less than they do in other OECD countries and our government is much less centralized than in other OECD countries. We are much larger both geographically and in terms of population. And the foundations of all the health care systems of all OECD that include single-payer or full on national health systems were laid when per capita health care spending was much, much lower than it is now.

After many years supporting a single-payer system for the U. S. I arrived at the conclusion that such a system would be ruinous here because we simply don’t have the will to contain spending.


If You Don’t Like It, What’s Your Plan?

The editors of the Wall Street Journal rise in defense of the president’s tax plan:

The White House rolled out its tax principles on Tuesday, investing new energy in the first serious reform debate in 30 years. While the details are sparse and will have to be filled in by Congress, President Trump’s outline resembles the supply-side principles he campaigned on and is an ambitious and necessary economic course correction that would help restore broad-based U.S. prosperity.

Many voters heard Mr. Trump’s make-America-great-again slogan as a promise to raise their incomes and improve economic opportunities after a long stagnation. Eight years of 2% growth since the recession ended in 2009 is the weakest recovery in the postwar era, and the result has been rising anxiety and diminished expectations for millions of Americans.

Faster growth of 3% a year or more is possible, but it will take better policies, and tax reform is an indispensable lever. Mr. Trump’s modernization would be a huge improvement on the current tax code that would give the economy a big lift, especially on the corporate side. The reform would sharply cut the business income rate to 15% from 35%, while simplifying the code for individuals and cutting some marginal rates.

Others, like the editors of the New York Times, castigate it as “cutting his own taxes”.

A few observations:

  • GDP = C + BI + G + (X – I)
  • The “BI” above is business investment and it’s been the weak link in GDP growth for nearly 20 years.
  • The effects of low investment aren’t felt immediately.
  • We will suffer the adverse effects of low business investment for decades into the future.
  • Our present business tax rates are out of step with the rest of the OECD.
  • They provide incentives for businesses’ moving their operations elsewhere and for keeping their offshore earnings offshore.
  • U. S. consumer spending is the highest in the OECD already.
  • So much of what we consume is made elsewhere that additional consumer spending doesn’t stimulate the economy as much as it used to.
  • Government spending, the “G” in the equation above, has risen in real terms faster than either consumer spending or business investment.
  • Government spending is a less efficient way of increasing growth because of deadweight loss.
  • Government spending rarely helps the poor. At best we end up paying the rich to help the poor.
  • Our economy is too large for us to base economic growth on exports.
  • Everything we do to increase our exports immediately provokes a threat of trade war.

That we need to reform our business tax rates should be obvious and non-controversial. Instead it’s highly politicized. Maybe that’s well-intentioned. Maybe not.


The editors of Bloomberg have mixed feelings:

The proposal aims to cut tax rates and greatly simplify the code — worthy goals. The U.S. corporate tax rate is one of the highest in the world and ought to be cut. And no American needs persuading that the personal-tax system is too complicated.

But a plan based on the president’s bullet points would involve a big increase in public borrowing, which would be unwise. In addition, starting from here, the political maneuvering needed to get it passed would cancel out much of the benefit.

What’s the solution? I can see several alternatives:

  • Cut spending. If we reduced our military commitments, there’s still room for cutting military spending. Administrative reform could cut a little more. I really can’t believe that in the $500 billion per year net spending in Medicare there isn’t room for any efficiencies.
  • Increase taxes. I don’t believe an additional bracket, a “millionaire’s tax”, should be out of the question. I’m skeptical that any cuts in personal income tax marginal rates will have much effect on economic growth.
  • Borrow the money. At a 1 or 2% cost of borrowing, a 5% return at the rate of return of private capital investment is a no brainer as Tyler Cowen points out.
  • Just extend the credit. Don’t borrow. Just “print” the money. As a percentage of the economy and even more relevant as a percentage of money it’s very small. The M2 money supply is around $13 trillion. Compared to that $240 billion is barely a rounding error. The downside risk is practically nonexistent.