Calling for Blood

The opinion pages of the major news outlets today are filled with op-eds, the gist of which is that the only thing wrong with the illegal, immoral, and counter-productive attacks on Syria of late last week is that they weren’t nearly damaging enough and there should be many more of them. I won’t even both to link to them or name their authors. They are mostly from the same people who have been urging us to war for the last two decades. We have very little to show from taking their advice than dead or permanently wounded Americans and the vast number of dead in a dozen countries in the Middle East, North Africa, and West Asia. This is supposed to cultivate friends, increase our credibility, and make us more secure. It has done none of those things.

In any rational society the consistent wrongness of these opinion writers would make them objects of scorn and yet they continue to receive some of the most precious column inches in the world on a routine basis.


Why Trade With China Is Skewed

In an op-ed in the Wall Street Journal Peter Navarro explains why international trade with China cannot work as the notionally free traders think it should:

Why is the textbook model failing? The answer is that China’s faux comparative advantage is the result of its state-directed investments, nonmarket economy, and disregard for the rule of law.

The problem’s taproot is Chinese intellectual-property theft and the forced transfer of foreign technology as a condition of accessing China’s market. These illicit practices, including widespread cyberespionage, allow Chinese companies to move rapidly up the innovation curve at much lower cost than their foreign competitors, which must recoup the cost of research and development through higher prices.

Other forms of economic aggression contribute to China’s faux comparative advantage. To protect its market, China erects high tariff barriers—e.g., its auto tariff is 10 times that of the U.S. China has high nontariff barriers, too, including intrusive licensing requirements and foreign-ownership restrictions that keep the playing field tilted in favor of Chinese companies.

To gain global market share, China showers its state-owned and state-financed enterprises with subsidized land and capital, myriad export subsidies, and lucrative tax preferences. To prevent the adjustments predicted by the textbook model of trade, China has historically undervalued its currency.

Most broadly, China’s “going out” strategy involves leveraging sovereign-wealth funds to capture the industries of the future. Three of the world’s 10-largest SWFs are from China, and China Investment Corp. has close to $1 trillion. These funds regularly scour technology-rich communities like Silicon Valley, Boston and Austin, Texas, seeking to purchase the crown jewels of American innovation. Since its founding in 2009, for example, Sinovation has accumulated $1.2 billion in total capital and has invested in almost 300 startups.

Those are all arguments I made against granting China Most Favored Nation trading status, why I opposed its admission to the World Trade Organization, and why the U. S. runs such a large trade deficit with China. To them I would add China’s lack of a robust system of civil law which means that U. S. companies suing the Chinese partners that were foisted on them as the price of entry into the Chinese market do not do so on a level playing field. It is inevitably tilted towards those partners, many of them Chinese officials or their family members.

Millions of ordinary Americans have been injured by our feckless policy as jobs disappeared. A relative handful, like the Walton family and major shareholders in Apple, have become fabulously wealthy.

Americans aren’t the only ones who have been injured. Every individual living in a country with a developing economy has been injured as China’s mercantilism retarded the development of their countries.

The question now is how to remediate what those feckless policies have wrought. It won’t be easy or painless but the entire world will be better off for it.


Quote of the Day

The quote of the day comes from Janis Ian who wisecracked that the wages of sin may be death but once taxes are deducted it’s more like a tired feeling.


Oregon’s Public Pensions

You might find this New York Times article on Oregon’s public pensions interesting:

A public university president in Oregon gives new meaning to the idea of a pensioner.

Joseph Robertson, an eye surgeon who retired as head of the Oregon Health & Science University last fall, receives the state’s largest government pension.

It is $76,111.

Per month.

That is considerably more than the average Oregon family earns in a year.

Oregon — like many other states and cities, including New Jersey, Kentucky and Connecticut — is caught in a fiscal squeeze of its own making. Its economy is growing, but the cost of its state-run pension system is growing faster. More government workers are retiring, including more than 2,000, like Dr. Robertson, who get pensions exceeding $100,000 a year.

The state is not the most profligate pension payer in America, but its spiraling costs are notable in part because Oregon enjoys a reputation for fiscal discipline. Its experience shows how faulty financial decisions by states can eventually swamp local communities.

Oregon’s costs are inflated by the way in which it calculates pension benefits for public employees. Some of the pensions include income that employees earned on the side. Other retirees benefit from long-ago stock market rallies that inflated the current value of their payouts.

I don’t believe any Illinois public employee enjoys that high a pension paid from the state’s purse but there are some that are pretty outrageous. According to the Better Government Association’s Pension Database, the highest-paid state retirees in Illinois are receiving about a half million a year in pension payouts. There’s a clear argument that Illinois should abandon its present defined benefit retirement system in favor of a defined contribution. That would protect both retirees and taxpayers. It would not, however, give politicians the ability to siphon money that should be going to pension funds to other purposes so, of course, it won’t happen.

Illinois has the additional problem that it cannot constitutionally change the pension arrangements of present or past employees—only new ones.


Five Wars in One!

At Arc Digital Nicholas Grossman does a pretty fair deconstruction of the wars in Syria. There isn’t just one. There are five:

  1. Assad vs. the rebels
  2. U. S.-backed coalition vs. DAESH
  3. Turkey vs. the Kurds
  4. Israel vs. Iran
  5. Russia vs. the U. S.

Ironies abound. In the wars in Syria the U. S. is arming Al Qaeda and protecting DAESH. Our allies the Turks are fighting our allies the Kurds.

To me the entire situation is tragic. We have no friends in this conflict, many enemies, and practically nothing to gain whoever prevails.

Here’s how Mr. Grossman sees the endgame:

  • Assad (and Iran) restore Syrian sovereignty, but have to give up some control.
  • Russia gets a foothold in the Middle East, but does not dominate all of Syria.
  • The Kurds and Sunni Arabs get greater political control, but not independence.
  • Turkey has to live with more Kurdish control to its south, but retains its buffer in Syria’s northwest, and can rely on a sustained American commitment to discourage cross-border attacks.
  • ISIS gets nothing, and everyone else agrees to prevent its return.

I think he’s making some weak assumption as, for example, that the Turks won’t just decide to remain in their present holdings in Syria and that they won’t fight an ongoing war with Kurds, and that anybody could consider the U. S. a reliable ally at this point.


Is There a Fourth Way?

While I think that Third Way’s heart is in the right place in its “Social Contract for the Digital Age”:

To help people with the massive disruption happening today, we need a modern economic agenda that boldly redefines government’s role in expanding the opportunity to earn. The way to do that is through a new social contract for workers that would: 1) reimagine investment in good-paying jobs; 2) reinvent postsecondary education and skills; and 3) redesign the pay and benefits of work.

I have severe concerns about the position of its collective head. Consider this bullet point:

11. Universal Private retirement
Will guarantee that every worker has both Social Security and a private, employer-fed retirement account.

Today, nearly every worker in America has Social Security, and a lucky handful have either a traditional pension or private savings sufficient to live a comfortable retirement. But the traditional pension is fast becoming an artifact, and while many employers offer 401(k)s, many in the middle and working classes are at risk of saving too little for a comfortable retirement.

We have a minimum wage; we should have a minimum employer pension contribution for every job. Under this proposal, every job that doesn’t already have a retirement plan in which the employer contributes would now have a Universal Private (UP) retirement account. This would be completely separate from Social Security and would not affect the earned benefit program in any way. Resembling the federal Thrift Savings Plan, UP would be a simple, portable, individually owned account toward which employers would chip in at least 50 cents per hour worked. UP funds would be invested in a low-fee lifecycle fund with the option for enrollees to choose different investments. Workers would be encouraged to contribute their own money but could choose not to.

Upon retirement, the default payout would be in the form of a guaranteed monthly check for life to supplement a worker’s Social Security benefits. To offset the cost of the employer’s contribution in the early years, businesses would be eligible for a tax credit covering a portion of those contributions for up to 20 workers. This tax credit would be entirely financed by ending tax breaks on retirement contributions for individuals who have already accumulated $4 million in their tax-preferred accounts.10

With the modest, yet consistent, commitment to retirement savings fostered by UP, workers and employers would create nest eggs worth well over half a million dollars for retiring middle-class couples. That’s enough to fully match what such workers would earn from Social Security, which would remain 100% unchanged under this proposal.11

With UP, a lifetime of work would mean working- and middle-class people would have the same opportunity to earn a share of global profits as the professional class enjoys and, in turn, real wealth and retirement security they can count on. They would have wealth to pass on to children or a spouse. The wealth gap between the top and the rest of America would shrink appreciably. And a lifetime of work would guarantee a comfortable retirement.

The effect of mandatory employer contributions would be to raise the cost of employment and, consequently, to discourage it. In the presence of temps, H1-Bs, L-1s, and an alphabet soup of ways to bring workers in the country that would provide a competitive advantage to foreign workers over Americans already here. Is that what we really need?

Rather than going point by point through their proposals let me summarize what I think their net effects would be. They would:

  • Raise the cost of higher education without increasing the number of jobs that really require higher education.
  • Provide substantial disincentives to employment, particularly employee American workers.
  • Create an enormous bureaucracy dedicated to small business without actually helping small businesses.

There’s an old wisecrack about the First Rule of Holes: if you find yourself in a hole, stop digging. We need to stop subsidizing rich people, big companies, and stop importing workers.

Nearly three-quarters of the home mortgage deduction goes to benefit individuals in the top quintile of income earners. That is merely one of the thousands of forms of welfare for the rich. Most of those remain unchanged by the recent tax reform. Nearly every serious policy maker will tell you that the home mortgage deduction should be abolished. That’s political poison. As a good first step limit the maximum amount of interest to the price of the median home. That would be closer to $200,000 than the present $1,000,000 or the $750,000 that kicks in this year.

The list of benefits given to big companies is so vast I hardly know where to start. Not only do they have tremendous political clout, they receive more direct benefits, hardly a coincidence. Two-thirds of all grants and allocated tax credits go to just 582 firms and take it from me those aren’t mom and pop shops.

Small banks didn’t cause the financial crisis of 2007-2008. Big ones did. Big companies are not our friends. A company that is big enough to be dangerous is too big to be allowed to exist.

The problem with work in the United States is two-fold. First, the large number of foreign workers makes the job market too loose. That keeps wages from rising (not to mention enabling employers to maintain abusive work environments). Second, the very large number of unskilled and semi-skilled workers, many foreign and many entering the country illegally, changes what are viable business models. We’re maximizing the number of minimum wage workers when we should be aspiring to increasing the number of jobs that actually require college educations. The fastest growing job categories are in hospitality and the very low end of health care and both of those depend heavily on an imported workforce.


The UK’s Self-Justification

The United Kingdom explains its justification for bombing Syria on humanitarian grounds:

1.This is the Government’s position on the legality of UK military action to alleviate the extreme humanitarian suffering of the Syrian people by degrading the Syrian regime’s chemical weapons capability and deterring their further use, following the chemical weapons attack in Douma on 7 April 2018.

2.The Syrian regime has been killing its own people for seven years. Its use of chemical weapons, which has exacerbated the human suffering, is a serious crime of international concern, as a breach of the customary international law prohibition on the use of chemical weapons, and amounts to a war crime and a crime against humanity.

3.The UK is permitted under international law, on an exceptional basis, to take measures in order to alleviate overwhelming humanitarian suffering. The legal basis for the use of force is humanitarian intervention, which requires three conditions to be met:

(i) there is convincing evidence, generally accepted by the international community as a whole, of extreme humanitarian distress on a large scale, requiring immediate and urgent relief;

(ii) it must be objectively clear that there is no practicable alternative to the use of force if lives are to be saved; and

(iii) the proposed use of force must be necessary and proportionate to the aim of relief of humanitarian suffering and must be strictly limited in time and in scope to this aim (i.e. the minimum necessary to achieve that end and for no other purpose).

It’s a nice try but inadequate since it fails on grounds 3iii. Let me explain why. If a country is using its bombers to attack primarily civilian targets, destroying the bombers might be a justifiable use of force. Destroying command and control facilities would not.

The missile attacks did not end an imminent attack and I can’t believe that anyone thinks that of themselves they would end the use of chemical weapons or even deter them.

Ironically, the justification produced by the U. K. provides a sound argument for downing Saudi bombers presently attacking Yemen.

IMO the missile attacks were grossly premature. What should happen is that if the Russian don’t like the Security Council resolution sponsored by the U. S., France, and the U. K., they should sponsor one of their own so that an investigation of the alleged use of chemical weapons in Douma could proceed. To the best of my knowledge the preponderance of evidence to date has come from sources friendly to the anti-government forces. Past U. N. investigations have found that the Syrian government has used chlorine and anti-government forces have used mustard gas. If forces that oppose the Syrian government can provoke attacks against the Syrian government by the United States, France, or the United Kingdom any time they care to just by using chemical weapons against civilians, expect many more such attacks.

Meanwhile if humanitarian concerns are sufficient for the use of force, why wasn’t it justified in the case of the U. S. in Iraq and China in its own territories? The scale and duration of deaths was much greater in both cases. And what about Yemen?


The Times and Journal Respond

In reaction to the missile strikes on Syria by the United States, Britain, and France the editors of the New York Times point out:

Under the United Nations Charter, there are two justifications for using force against another country without its consent: in self-defense and with the United Nations Security Council’s permission. The former does not apply in this case, and the latter would be impossible, given Russia’s veto power in the Council.

Under the Constitution, war powers are divided between Congress and the president. In the view of most legal scholars, America’s founders wanted Congress to decide when to go war, except when the country is under attack. Since World War II, presidents from both parties have pushed the boundaries of executive authority and carried out many military operations without congressional authorizations, as Mr. Trump did last year when he ordered 59 cruise missiles fired against Syrian targets after a sarin gas attack on the rebel-held town of Khan Sheikhoun.

The War Powers Act in 1973 was supposed to allow Congress to reclaim some of its clout, but its record in circumscribing the president’s authority to use military forces in hostilities overseas is mixed. In recent years, executive branch lawyers have concluded that presidents may act unilaterally if they decide that a strike would be in the national interest and that it would fall short of an all-out war involving ground troops. Congress has largely acquiesced.

Two notable exceptions are the Authorizations for the Use of Military Force that were passed in 2001 and 2002 after the Sept. 11 attacks to cover American-led operations in Afghanistan and Iraq, respectively. The 2001 legislation was aimed at Al Qaeda and the Taliban; the 2002 legislation focused on the threat from the Iraqi leader Saddam Hussein.

Since then, President Barack Obama and now Mr. Trump have used those same authorizations at least 37 times to justify attacks on the Islamic State and other militant groups in 14 countries, including Yemen, the Philippines, Kenya, Eritrea and Niger, according to Dan Grazier of the Project on Government Oversight. This has allowed the Republican-led Congress to avoid public debate — and any responsibility for sending American men and women into battle.

This interpretation of the law gives a free hand to the volatile and thoughtless Mr. Trump, which could prove even more dangerous if he were to decide to attack North Korea or Iran.

After a relentless push by Senator Tim Kaine, a Virginia Democrat, Bob Corker, who is the chairman of the Senate Foreign Relations Committee and a Tennessee Republican, is soon expected to propose a new authorization to deal with military operations against nonstate actors like ISIS.

But legislation should also set limits on a president’s ability to wage war against states like Syria. Without that, Congress would be once again abdicating its responsibility and ceding broad powers to an impulsive president with dubious judgment.

while the editors of the Wall Street Journal caution

The military strike by the U.S., France and the United Kingdom Friday night was a necessary response to what President Trump appropriately called “barbarism” in describing the use of chemical weapons by the Bashar Assad regime in Syria. The question going forward is whether this is another one-time attempt to punish Assad or if it presages a larger strategy to counter the attempt by the Assad-Russia-Iran axis to dominate the Middle East.

“The purpose of our actions tonight is to establish a strong deterrent against the production, spread, and use of chemical weapons. Establishing this deterrent is a vital national security interest of the United States,” President Trump said in a speech to the nation. He’s right, but a one-time strike won’t have the deterrent effect he wants. Assad, and above all his Iranian and Russian patrons, have to know that they will pay a price for supporting Assad’s behavior.

The extent of the punitive action wasn’t clear as we went to press, though it appeared to be more extensive than the strike a year ago that attacked a single Syrian airfield. Mr. Trump said Friday night that the attack last year eliminated 20% of Syria’s air force, but the rest was quickly up and running again.

Mr. Trump made a point Friday of asking Iran and Russia: “What kind of a nation wants to be associated with the mass murder of innocent men, women, and children?“ A good question, but we hope the President doesn’t expect the Kremlin or Tehran to listen based on a one-time missile attack. They have too much invested in Assad to pull back unless they believe they will pay a larger price.

Administration briefers suggested the coalition is prepared for further strikes if need be, and if not Vladimir Putin can rest easy. The Assad axis is counting on the U.S. having limited staying power. The allies will have to be on guard for Mr. Putin and Iran to look for openings to strike back—from the Mediterranean to the Baltics. But it’s possible they will merely shout in protest and wait for the U.S. to lose interest. To truly deter barbarism and protect U.S. interests, Mr. Trump will need a larger strategy than one military strike.


Peaceful Settlement of Disputes

Chapter VI of the United Nations Charter says:

Article 33

  1. The parties to any dispute, the continuance of which is likely to endanger the maintenance of international peace and security, shall, first of all, seek a solution by negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peaceful means of their own choice.
  2. The Security Council shall, when it deems necessary, call upon the parties to settle their dispute by such means.


Article 37

  1. Should the parties to a dispute of the nature referred to in Article 33 fail to settle it by the means indicated in that Article, they shall refer it to the Security Council.
  2. If the Security Council deems that the continuance of the dispute is in fact likely to endanger the maintenance of international peace and security, it shall decide whether to take action under Article 36 or to recommend such terms of settlement as it may consider appropriate.

The United States is a signatory to the UN Charter. In essence Chapter VI commits the signatories to eschewing the use of force against other nations without the express authorization of the Security Council.

Being a party to international accords means you don’t get to do whatever you want whenever you want to do it. The Charter has the power of law. An attack against another country without the authorization of the Security Council is a violation of U. S. law.

Further Article I, Section 8 of the U. S. Constitution reads in part:

The Congress shall have Power…] To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

which means that the president does not have the authority to attack another country without the express direction of the Congress. Emergency circumstances allow the president to wage war without such authorization under his powers as commander-in-chief.

Russia has an enormous nuclear arsenal—enough to destroy the United States many times over and enough to lay waste to the entire world. Russia is Syria’s primary ally and Russian forces are aiding the Syrian government in putting down the war against it.

We don’t know for certain who used chemical weapons in Douma or even whether chemical weapons were used. For example, it is possible that bombing by the Syrian government released chemical weapons that were being made or stored in the area bombed. There hasn’t been a thorough investigation and we just don’t know.

Attacking Syria was lawless, reckless, and stupid.


The CBO Forecast

At RealClearPolicy James Capretta, no fan of big government, apparently concurs with the CBO’s assessment of the impact of the latest tax cut on the budget:

The Congressional Budget Office’s latest forecast makes a convincing case that fiscal complacency is now dangerous for the U.S. economy. CBO projects the federal government will borrow an additional $12.4 trillion over the next 10 years. At the end of 2028, the federal government will have outstanding debt of $28.7 trillion, or 96 percent of GDP. Ten years ago, federal debt was equal to 39 percent of GDP.

In fact, CBO’s official projection is an optimistic scenario. It assumes Congress will let many of the tax-cutting provisions enacted in the recently passed tax legislation expire after 2025. It also assumes, even more implausibly, that the caps on defense and nondefense appropriations for 2020 and 2021 contained in the Budget Control Act of 2011 will remain in place, thus forcing deep cuts in federal spending. However, Congress just enacted a bipartisan agreement to raise the caps in 2018 and 2019 by nearly $300 billion over that two-year period. If the tax cuts are made permanent, and if discretionary appropriations grow with the rate of inflation after 2019, then the budget deficit over the next decade would be $15 trillion instead of the $12.4 trillion contained in CBO’s baseline forecast. In 2028, the annual budget deficit would widen to 7.1 percent of GDP, while total federal debt would reach 105 percent of GDP.

and there is very good reason to believe that so high a debt overhang itself is a drag on economic growth.

Tax cuts are no longer a viable strategy for encouraging economic growth. Our expenses are too high and our debt is too large. Since cutting taxes is the only thing on which Republicans can agree, it sounds as though they’re out of gas.

And here’s the risk posed by our large debt overhang:

If interest rates were to rise sharply and suddenly, lawmakers could find themselves needing to raise taxes or cut spending drastically just to cover spiraling debt service payments.

Interest on the debt is, what, the third largest line item in the budget? That’s a significant risk.