The editors of the Wall Street Journal are grimly amused by the dialogue between Chinese State Councillor and Foreign Minister Wang Yi and Special Presidential Envoy for Climate John Kerry:

Foreign Minister Wang Yi made this leverage explicit in a Wednesday lecture to U.S. climate envoy John Kerry, who is back in China pleading with its leaders to reduce the country’s carbon consumption. “The U.S. side wants the climate change cooperation to be an ‘oasis’ of China-U.S. relations,” Mr. Yi said, according to a Foreign Ministry readout of the meeting. But he insisted that “China-U.S. cooperation on climate change cannot be divorced from the overall situation of China-U.S. relations.”

In other words, Beijing wants to extract concessions from Washington before it further indulges Mr. Kerry’s climate show. Mr. Yi told Mr. Kerry, according to the document, that “the United States has made a major strategic miscalculation about China.” America should “attach importance to and actively respond to the ‘two lists’ and ‘three bottom lines’ put forward by China,” he instructed.

The “List of U.S. Wrongdoings that Must Stop” includes sanctions on Communist Party figures (the State Department has restricted travel to the U.S. by some officials, including those connected to China’s violation of its treaty obligations on Hong Kong). The list also complains of American efforts to shut down potential Chinese espionage operations in the U.S.

The most significant of the “three bottom lines,” meanwhile, is that the U.S. back off its defense of Taiwan—the island democracy that Beijing wants to absorb, potentially by force. If the U.S. backs away from its Pacific alliances, the pitch seems to go, perhaps China will sign up for more putative cuts to CO2 emissions in the future.

For the Communist Party, climate change is secondary to China’s immediate strategic interests. Yet it hopes the U.S. is woolly-headed enough to trade away its security priorities for unenforceable climate promises.

That mirrors the way China has been treating American businesses for 40 years, holding out promises of access to the enormous Chinese market and getting them to, very nearly literally, trade the store. My contention has long been that their leaders are smarter and tougher than ours and that our political leadership has practically no notion of how to negotiate with the Chinese leadership. Their assumptions, based in a career in American politics, are invariably wrong.

It’s always nice to be recognized and in his latest Washington Post column Henry Olsen identifies the Illinois legislative leadership as the heavyweight champions of gerrymandering:

The new map is so brazen that progressive elections analyst Drew Savicki found it would create up to 85 districts expected to be Democratic in the 118-seat state House, even though only 69 Democrats would be elected in a map that fairly reflected the proportional strength of each party. So while Democrats would naturally win a majority because they dominate the state, the Democratic plan would net them nearly 80 percent of the seats from less than 60 percent of the votes.

It’s true that Republicans also pass egregious gerrymanders that use all the same techniques. I focus on the Illinois Democratic plan because it is the first plan to be finished after data from the 2020 Census was fully released in August, and because it demonstrates that no party has a lock on political virtue.

I’m still searching for a definition of “democracy” that would encompass this sort of sleight-of-hand while distinguishing democracy from oligarchy.

There is one thing missing from Mr. Olsen’s account. Gerrymandering is a strategy by which those who have the power to do so help themselves and their allies and injure their political opponents regardless of to which party or race those opponents belong.

Or maybe the Humpty-Dumpty Congress. I’m thinking of Humpty-Dumpty’s apothegm in Through the Looking Glass:

When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.

West Virginia Sen. Joe Manchin’s op-ed in the Wall Street Journal is spurring a considerable amount of comment. In it he says in no uncertain terms:

I, for one, won’t support a $3.5 trillion bill, or anywhere near that level of additional spending, without greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on existing government programs. This is even more important now as the Social Security and Medicare Trustees have sounded the alarm that these life-saving programs will be insolvent and benefits could start to be reduced as soon as 2026 for Medicare and 2033, a year earlier than previously projected, for Social Security.

Establishing an artificial $3.5 trillion spending number and then reverse-engineering the partisan social priorities that should be funded isn’t how you make good policy. Undoubtedly some will argue that bold social-policy action must be taken now. While I share the belief that we should help those who need it the most, we must also be honest about the present economic reality.

which must be giving the Congressional leadership some heartburn. Kevin Drum responds:

The spending bill amounts to only $350 billion per year and is mostly paid for, which means that its effect on inflation will be negligible.

Part of the problem here is that everyone, including me, keeps referring to this legislation as a “$3.5 trillion bill,” as if its size were the main thing that defines it. But it’s not meant as a stimulus bill or a recovery bill or anything like that. It’s just a bill that funds a bunch of progressive programs. This means the questions we should be asking about it are less about its raw size and more about which of these programs you support.

The CBO says the bill is only “mostly paid for” if you accept certain rather unlikely assumptions which are even now failing.

He continues by throwing down the gauntlet and challenging people to declare their relative support or opposition to seven spending components in the House’s “infrastructure” bill. I’m pretty sure my answers would not make Mr. Drum happy. I think that

1. The federal government should be chary of subsidizing consumption except, possibly, at the outset of a recession when there is a steep shortfall in consumer spending.
2. Even then any plan of the sort should be strictly means-tested.
3. Paying for two years of community college for all comers is an utter waste of money whose main effect will be to increase the cost of higher education.
4. Our problem is a shortfall in aggregate product which will not be addressed by anything in the proposed spending bill at least not in the near term and probably not at all.

When I remarked on the Social Security Trustees’ report, I didn’t mention what they had to say about the Medicare Trust Fund which if anything is in worse shape than that of the Social Security Trust Fund as the editors of the Wall Street Journal do not hesitate to report:

Don’t shoot the messenger, but the Trustees project that the Medicare hospital trust fund will run dry in 2026.

Five years is not a lot of time but, fortunately, it’s not in a presidential election year which suggests the Congress will wait until the wolf is actually at the door before doing anything about it. The editors also don’t hesitate to point out the irony of the Congressional Democrats striving to broaden Medicare even as it faces insolvency:

Democrats won’t mention any of this as they try to add vision, dental and hearing benefits to Medicare and lower the qualifying age to 60 from 65.

I think I disagree with this observation:

The Medicare Trustees note that their forecast doesn’t take “into account the potential effects of sustained slower payment increases on provider participation, beneficiary access to care, quality of services, and other factors.” Translation: Many doctors won’t take Medicare patients because stingy government payment rates don’t cover their costs. The feds may soon have to pay providers more to ensure Medicare patients can get care.

As of today more than 90% of physicians take Medicare and most of those who don’t are either shrinks or plastic surgeons. I don’t believe the numbers add up to support their claim. Medicare, Medicaid, and a variety of other government programs account for something between 40% and 60% of all healthcare revenue, depending on how you calculate and whom you ask. I find the notion that physicians will cut off their noses to spite their faces unlikely. What I think is more likely is that physicians will mobilize to persuade the Congress to rescue Medicare.

Sean Trende summarizes his analysis in RealClearPolitics of the effects of a declining presidential approval rating in his concluding paragraph:

Regardless, the decline in Biden’s job approval is consequential. Right now, he is probably sitting just below the “Mendoza line” that would represent a “normal” midterm, with perhaps no Senate losses and low double-digit House losses. If the president rebounds, Democrats will have a successful 2022, even if they narrowly lose the House. If he declines much further, however, it could turn into an ugly rout.

There are lots of facts, figures, and charts to back up his observations.

15 months is an eternity in politics and a lot can happen between now and November 2022. The only districts in which good intentions or trying very, very hard are likely to help them very much are those they’re going to carry regardless. If inflation continues to transit over the next 15 months the unewelcomely slow economic growth projected by the Atlanta Federal Reserve, as pointed out by a frequent commenter, will probably affect President Biden’s popularity his handling of the withdrawal of troops from Afghanistan or any foreign policy news.

Historically, as Mr. Trended documents, the parties of sitting presidents have tended to lose a dozen or more seats in the election after the start of his first term. With such a narrow House margin that could be significant.

In Thomas B. Edsall’s column in the New York Times he asks the question “How Strong Is America’s Multiracial Democracy?”. I’ve now read the column twice and for the life of me I have no idea what the answer is. I have no idea what his answer is.

When black intellectuals are saying things like:

The only remedy to past discrimination is present discrimination. The only remedy to present discrimination is future discrimination.

I can only conclude that it is weakening. I agree with Mr. Edsall that conditions for blacks in the U. S. have improved enormously over the last 50 years but I’m concerned that an increasing number of people, both black and white, don’t recognize that. Said another way, facts have nothing to do with the present mood.

Pop quiz. According to the 2020 U. S. census has the percentage of blacks in the country increased, decreased, or remained the same? Answer: it has decreased very slightly. Unless you’ve read the published reports very closely, I don’t think you’d come to that conclusion.

The Social Security Trustees have released their annual report, only five months later than they are required by statute to provide it (a record), reports Kate Davidson at the Wall Street Journal. The report contains good news and bad news. The bad news first:

• The fund disbursed more than it took in last year.
• The trust fund will be depleted by 2034, one year earlier than forecast just one year ago.

Now the good news:

Senior administration officials also said they expect higher inflation this year will significantly boost benefits next year, estimating Social Security beneficiaries could see close to a 6% cost-of-living increase. That would be the highest annual benefit increase since 2008, when rising gas prices pushed up the cost-of-living adjustment to 5.8%, officials said.

By comparison, beneficiaries saw a 1.3% cost-of-living adjustment in 2021, and a 1.6% adjustment in 2020.

There’s a worm hidden in that apple. The higher the disbursements, the faster the fund will be depleted.

Now the big question: will Congress take action to prevent the fund from cutting benefits in 2034 as they will be required to do? I honestly don’t think it’s a done deal. Social Security recipients are not just older than other Americans—they tend to be richer and whiter, too. Social Security has been called “the third rail of American politics” but that was then and this is now.

At Project Syndicate Nouriel Roubini warns that stagflation shouldn’t be discounted:

NEW YORK – I have been warning for several months that the current mix of persistently loose monetary, credit, and fiscal policies will excessively stimulate aggregate demand and lead to inflationary overheating. Compounding the problem, medium-term negative supply shocks will reduce potential growth and increase production costs. Combined, these demand and supply dynamics could lead to 1970s-style stagflation (rising inflation amid a recession) and eventually even to a severe debt crisis.

Until recently, I focused more on medium-term risks. But now one can make a case that “mild” stagflation is already underway. Inflation is rising in the United States and many advanced economies, and growth is slowing sharply, despite massive monetary, credit, and fiscal stimulus.

There is now a consensus that the growth slowdown in the US, China, Europe, and other major economies is the result of supply bottlenecks in labor and goods markets. The optimistic spin from Wall Street analysts and policymakers is that this mild stagflation will be temporary, lasting only as long as the supply bottlenecks do.

True to form Dr. Roubini is less optimistic:

But what if this optimistic view is incorrect, and the stagflationary pressure persists beyond this year? It is worth noting that various measures of inflation are not just well above target but also increasingly persistent. For example, in the US, core inflation, which strips out volatile food and energy prices, is likely still to be near 4% by year’s end. Macro policies, too, are likely to remain loose, judging by the Biden administration’s stimulus plans and the likelihood that weak eurozone economies will run large fiscal deficits even in 2022. And the European Central Bank and many other advanced-economy central banks remain fully committed to continuing unconventional policies for much longer.

He concludes by pointing to the likelihood of “persistent negative supply shocks”. I would add that the best evidence we have is that public debt overhang is a drag on economic growth. We already have a lot of public debt overhang and the likelihood is we will have more.

Update

Also at Project Syndicate Kenneth RogofF waxes nostalgic about the similarities between the present and the 1970s: the messy and unsuccessful conclusion of a disastrous war, a Republican president challenging institutional norms, slowing economic innovation, flagging growth in productivity, and big increases in government spending unmatched by tax increases. Ah, those were the days.

I found the editors’ of the Wall Street Journal’s take on the various spending plans that the Congressional Democrats have teed up amusing:

If Mr. Sanders were to confiscate every asset of every American billionaire— Jeff Bezos’s rockets; Elon Musk’s bitcoin; Larry Ellison’s boats; Oprah Winfrey’s houses; Ted Turner’s ranches; Jay-Z’s car collection; even the starched shirt off the back of poor Larry Fink, who tied for last place on the Forbes list, at $1 billion—it still wouldn’t cover the cost of Democrats’ next two legislative plans.

That’s to say nothing of funding the government’s regular operations, a baseline budget that’s expected to be roughly $4 trillion a year. And we haven’t allocated a dime yet to Mr. Sanders’s larger ambitions, including Medicare for All. The point is that he talks abstractly about the “billionaire class,” but at the scale of the U.S. government, Jeff Bezos is a minnow.

Bernie’s shtick is always “us versus them.” The reality is that there aren’t enough of “them,” which is why the tax man will be coming back sooner rather than later for the rest of “us.”

It will also be amusing to see Gallup’s update to their annual poll on American trust in the federal government. Last year trust in the legislative branch was at an all-time low.

There is a little truism I wish more people understood: today’s savings is tomorrow’s consumption. There’s a corollary: today’s borrowing borrows against tomorrow’s consumption. Federal borrowing makes the most sense when it will contribute fairly directly to increases in future GDP.