Daniel DePetris makes a decent case at the National Interest that Mike Pompeo is doing a pretty fair job of bolstering the State Department:

On making the State Department great again, Pompeo is well on his way. He promised to inject some excitement back into Foggy Bottom’s ranks, pledging to senators on the Foreign Relations Committee that he would freeze any further job cuts and begin recruiting the best and the brightest into the diplomatic service. Pompeo pledged to the State Department workforce that he would bring swagger back to the diplomatic community, all the while assuring his new employees that their contributions to U.S. security were highly valued. During his first speech on the ground floor, Pompeo lauded those around him as “ patriots and great Americans ” who will no longer be shut out or dismissed by the senior leadership.

Whereas Tillerson had a terrible relationship with Trump, at one point calling him a “moron” behind his back, Pompeo was able to gain the trust and confidence of the Commander-in-Chief during his previous stint at the CIA. Moreover, Pompeo’s personal ties with the president were a boon to the State Department’s institutional weight in the national security decision-making process; Foggy Bottom’s recommendations were no longer brushed aside as inconsequential.

Mr. DePetris is correct, however, that no amount of bolstering can make up for bad policies. G. K. Chesterton, always a good hand at turning a phrase, would have said that anything not worth doing is not worth doing well.

However, his closing observation does raise an important question. What administration has actually solved more national security problems than it created? I think you have to go all the way back to the Eisenhower Administration for that.

There are some glaring omissions in Peter Orszag’s analysis at Bloomberg of why seniors are retiring later now than they were 20 years ago. He thinks it’s due to the changes in the Social Security formula that were made 35 years ago but I think that’s just one factor and probably not the most important one.

What he neglects to mention is that over the last 20 years practically everything these seniors may have been relying on to fund their retirements has vanished or is not what they had expected it to be. Unless you’re a government employee define benefit pensions have all but evaporated and that process has only accelerated over the last couple of decades.

Very low interest rates over a very long period mean that ordinary savings are roughly the equivalent of burying it in a whole in the ground. Maybe even digging a bit up and burning it every so often. And climbing the risk ladder in search of greater earnings necessarily means that some will lose money.

What they might have been expecting from stocks or mutual funds in 1997 probably haven’t materialized. That’s something rarely mentioned when people talk about the booming stock market. With much of the growth concentrated in a very few stocks it necessarily means that the returns are being realized by a relatively small number of people.

In much of the country property values haven’t recovered since the housing bubble popped. In most Chicago zip codes, for example, prices have not recovered. That means that seniors can’t capture as much from the sale of their homes as they might have expected.

When you add all of this up it means that maybe the reason that seniors are retiring later is that they can’t afford to retire.

At RealClearPolitics political scientists David Brady and Brett Parker consider the likelihood that the 2018 midterms will be a “wave election” (defined as an election in which 30 or more House seats change hands to the minority party):

These numbers for Democrats are approximately equal to their 2006 figures, while the Republican numbers are below theirs in the 2010 and 1994 wave elections. Across every strength category, Democrats are signaling that they will vote Democratic for Congress at higher rates than Republicans. The Democratic advantage in numbers, and their September vote intention, are good portents for the party.

Time and events before November could change these indicators. However, the odds of the generic ballot and party identification shifting to the Republicans between now and Election Day are not good. One group that could affect these results is independents, who vote less than partisans and make up their minds later in the campaign. In the latest poll, independents lean 28 percent to 26 percent for Democrats, with 29 percent saying not sure; if these percentages carry over till November the Democrats’ numerical advantage will prevail.

Looking at 2018 less than two months before the election gives the Democrats the advantage in numbers, vote intention and a small lead among independents, all of which point to a Democratic takeover of the House of Representatives. The missing variable is, of course, turnout.

I don’t know what’s going to happen. Something depends on how much you can trust poll results. Another wildcard is how the Kavanaugh matter will affect turnout.

It could go either way. The events have energized both Republicans and Democrats. It may come down to who is more outraged.

This Wall Street Journal op-ed by Bobrick Washroom Equipment Inc. president Mark Louchheim provides some counterpoint to the whining of free trade advocates about Trump’s tariffs:

The conventional wisdom about manufacturing is wrong. It isn’t a lost cause, and the U.S. isn’t destined to become a pure “service economy.” In fact, new technologies including numerical controls, lasers and robotics have propelled a renaissance in American manufacturing. My Los Angeles-based bathroom-accessory and toilet-partition company has benefited from this, investing continually in our facilities, technology and best practices to remain globally competitive.

Nonetheless, our company is effectively shut out of China—a vast and growing market—due to its 25% tariffs on our exported products. In contrast, duties on competing goods from China to the U.S. range from 2.5% to zero. I love free trade, but fair trade is also important.

President Trump’s tariffs may harm major multinational manufacturing companies that have significant operations in China and companies that import products from China. But for many small and medium-size manufacturers such as ours, which create most of our products at home, the tariffs have minimal impact. There is no better time to level the playing field with China than now. The economy is growing quickly and it can absorb the short-term pain from reciprocal tariffs.

IMO Trump’s “trade war” has been remarkably mild, so mild, indeed, that I can’t help but think that they’re more a bargaining ploy than anything else. They only look harsh because he follows three successive presidents who’ve largely been supine with respect to China.

We should be lobbying for China’s ouster from the World Trade Organization on the grounds that it has never met the commitments it made to be granted membership. We should be demanding compensation for all of the intellectual property theft, explicitly against WTO rules, that China has engaged in, whether through compulsory technology sharing or industrial espionage. We should be demanding that China actually enforce its own environmental and workplace regulations rather than just issuing press releases about them.

In his column at the Wall Street Journal Holman Jenkins contributes his own explanations for GE’s decline:

Understandably, reporters emphasize the dramatic fall in GE’s market cap, from a company worth $600 billion 18 years ago to barely $100 billion today. But GE shrank partly through sales, having dumped its giant finance arm, its NBC network TV business, and much else.

The really stunning fall is the loss of $175 billion in value in its current set of businesses in 20 months. How did this debacle happen?

In a company that’s nowadays focused on making big machines for other companies, the GE Power business has become the new problem child. The world needs electricity—consumption is expected to grow 30% over the next 22 years. The power unit routinely produced 20% profit margins. But mistakes compound fast in a competitively and technologically demanding industry.

GE made an ill-timed purchase of France’s Alstom in 2015. When the expected upswing in turbine sales turned into a downswing, GE was slow to notice or react, perhaps partly due to promises made to the French government to expand employment.

Orders fell precipitously. Cost-cutting was required, and so were painful choices about whether to slow investment in new technology. All this could only be discouraging to customers making long-lasting, high-risk decisions about whose turbines to buy. By the count of UBS , GE’s share of new turbine sales fell to 11% this year from its historical share of nearly 50%.

Then more bad news arrived in recent weeks, about deteriorating fan blades in GE’s new HA line of power turbines, built and tested out the wazoo to withstand high pressures, temperatures and speeds while promising users lowered operating costs.

He then goes on to defend Jeff Immelt after a fashion:

A conglomerate’s virtue is supposedly the ability of unrelated or partly related businesses to help each other through tough times. The downside is that the stock price of a big and complex company is unlikely to register buried problems until they are far advanced. GE’s stock price long ago decided the conglomerate function wasn’t working. Under legendary CEO Jack Welch, some derided GE as a “faith stock” but his team earned the market’s confidence showing they were on top of problems and reacted quickly to poor performance.

Jeffrey Immelt led the company for 16 years. Despite sweeping changes he made to GE’s business model, Mr. Immelt never regained the market endorsement that Mr. Welch enjoyed. The quest ever since has been for a business mix to which the market will say “yes.”

I think he’s being far too kind. Nearly all of GE’s decline both in stock value and, more importantly, sales volume took place under Immelt’s tenure. Was he GE’s CEO or not? He received an awful lot of compensation for somebody who was simply being buffeted by the winds of fate.

But let’s return to my point of yesterday. It should not have been possible for GE’s management to make so many mistakes over so protracted a period. No major company has adopted the empirical, numbers-based approach to management than GE. Either managers are just pretending to use GE’s Six Sigma or there’s something fundamentally wrong with the methodology itself. I don’t see any other alternative.

Can GE dig itself out of itself on the basis of GE Power alone? I don’t see it. GE Power accounted for about 36% of GE’s revenues in 2017. By divesting itself of Capital, Medical, and Lighting GE is putting a lot of eggs in the Power basket. Power is coping with protectionist measures not only in China and India but in Russia, Brazil, Indonesia, and Kazakhstan by moving production out of the U. S. Will that be enough?

In his Wall Street Journal column Walter Russell Mead remarks on the incipient revisions to the North American Free Trade Agreement:

In addition to showing that Mr. Trump’s wild tactics can sometimes produce real results, the USMCA should defuse some fears about the supposed radicalism of his agenda. The new trade regime with Canada and Mexico is, like the old one, imperfect, but it is hardly a lurch toward autarky. Trade in North America will remain considerably more open than it was before Nafta went into force. In some ways, such as protection of intellectual property and the inclusion of digital commerce, the USMCA modernizes and extends Nafta rather than dismantling it. Canada managed to preserve Nafta’s Chapter 19 dispute-resolution panels that the Trump administration at first said infringed on U.S. sovereignty.

If the USMCA is a reasonable model of the kinds of changes Mr. Trump wants to make in the world trading system, his goals at the World Trade Organization and elsewhere could be less disruptive—and more achievable—than many fear. He has reset the terms of political debate while leaving the North American trade relationship largely intact. Free-trade proponents should think long and hard about the implications. Future presidents in both parties will likewise need to understand populist perceptions and craft trade agreements that address them.

It’s far too early to tell what impact the new agreement will have. Like the original NAFTA it is not free trade but an agreement for managing trade and not only do I not believe that we have the tools to determine its impact I don’t think we can even determine the directionality of its impact. There are just too many moving parts.

Will Trump be able to come to a new agreement with China using the same playbook? And what will it do? Stay tuned.

General Electric has fired another CEO. From the Wall Street Journal:

General Electric ousted CEO John Flannery on Monday after barely a year in the big chair. Anxious shareholders want a turnaround, and Mr. Flannery wasn’t delivering fast enough. He had moved to refocus the company on aviation and power generation, while selling other businesses. Yet on his watch the stock fell by half, and GE warned Monday it would miss more financial targets. Anyone who thinks corporate CEOs hold sinecures in today’s competitive world should contemplate Mr. Flannery’s fate.

His replacement, Larry Culp, is the first outsider in GE history to get the top job. That’s telling. Jack Welch, who led the company for 20 years, spent equally as long working his way up the corporate ladder. Successor Jeff Immelt did the same before beginning a 16-year run as CEO, which ended last year under similar pressure from investors.

GE used to be a $600 billion company. Now it’s barely a $100 billion one. What has gone wrong for GE?

• GE doesn’t know what business it’s in. It takes a manager of extraordinary skill and energy to manage a company with interests as diverse as GE’s had become. It hasn’t had one since Jack Welch and that was nearly 20 years ago.
• A string of bad acquisitions, mostly by Welch’s successor, Jeffrey Immelt.
• Process alone isn’t enough. Is GE’s Six Sigma, an empirical, quantitative approach to management, a sign of GE’s decline, its cause, or both? Or was it just insufficient to prevent GE’s decline?
• GE Capital never recovered from the financial crisis of 2008.
• You can’t maintain a great enterprise on the basis of outsourcing and creative accounting. Those are proven ways of goosing stock value and consequently executive compensation though.

I’ve posted several times over the last year or so on General Electric. Why? Because I think it’s an epitome of what’s happening to the United States.

And I think there’s a lesson for the Democratic Party in GE. Don’t cozy up to failing big company CEOs or CEOs who are doing reprehensible things, particularly reprehensible things abroad where they’re conveniently out of sight. Rich, successful, and admirable aren’t all the same thing. The last thing we needed was for Jeffrey Immelt to do to the United States what he did to GE but President Obama named Jeff Immelt to his Economic Recovery Advisory Board anyway.

I found the editors of Bloomberg’s editorial on the vital role of the United Nations alternatively delusional and confusing. First, the confusing. The published title of the editorial is “The U.S. and the World Need a UN That Works” but the original title that did not make the editor’s cut was apparently “United Nations General Assembly Faces Global, U. S. Challenges”. The General Assembly is barely mentioned at all. The editorial concentrates on the Security Council.

Let’s start with the General Assembly. Go ahead, I’m listening. Why do we need a General Assembly at all? Jeanne Kirkpatrick once called it a “Third World debating society” which IMO is sadly apt.

Let’s turn to the Security Council. What would a Security Council that “worked” look like? Is it one that would approve the U. S. invasion of Iraq or one in which the United States wouldn’t invade Iraq because the Security Council didn’t approve it? How, precisely, would either of those contingencies come about?

And this is just plain delusional:

In the end, though, the effectiveness of the UN will depend on the desire of its member governments, and especially that of the U.S., to make it succeed. The U.S. needs to show it again understands what it used to regard as obvious.

If Trump wanted to do that, it wouldn’t be hard. If he wanted to ease divisions, strengthen U.S. influence and bolster the UN at a single stroke, he’d reverse his stance on the Paris accord on climate change — an existential challenge that geopolitical rivals such as China have embraced as a basis for global cooperation. Of late, the U.S. government’s posture on this fateful question has been a failure on every level.

It made me want to take the bong away. What does the Paris Agreement have to do with the United Nations? Whatever you think of the Paris Agreement, China has never, ever supported any move that prevented its doing exactly what it wanted to do. While people hail the Chinese government’s announcement that they won’t be building 100 coal-fired power plants, Chinese companies maintain their plans to build 700 over the next decade. Said another way, the Chinese authorities write a heckuva press release.

At Bloomberg View Tyler Cowen makes six observations about the Kavanaugh confirmation hearings:

• Alcohol is an underrated factor.
• Americans don’t care enough about other problems.
• There is an asymmetry between male and female perceptions.
• Our criminal justice system isn’t very good.
• The Democrats are in a fog.
• This is how social change happens.

For explanations of what he is getting at without some of those, read the whole thing. I will only comment on the last. To believe that whatever “social change” results from the events of the last several weeks will be benign is to believe that all that matters is what 15% of the people say and what that same 15% do and what 30% of the people do and say are completely unimportant.