As I’ve mentioned before from time to time, it always bugs me when national news media cover Chicago local stories. They invariably get the basics wrong.

Take this article from the Washington Post about Chicago Mayor Rahm Emanuel’s novel strategy of portraying political incompetence as a civil rights issue:

Say what you will about Rahm Emanuel, Chicago’s Democratic mayor, but he has been in the thick of just about every major policy and political battle in recent history. Few politicians bring more savvy to whatever the fight may be.

Emanuel’s latest provocative move is to recast the Chicago public schools’ pension-funding woes as a modern-day lawsuit equivalent to Brown v. Board of Education.

Though the problems behind the case were made in Illinois, its implications are national. Emanuel’s city isn’t the first U.S. jurisdiction to face brutal trade-offs between the contractual entitlements of unionized teachers and the educational needs of America’s public school kids — most of whom, as of 2014, are “minorities.” And it won’t be the last.

Here’s the part of the article that bugged me:

To be sure, Chicago’s lawsuit expressly disavows attacking the teachers, or their pensions; Emanuel, having endured a 2012 teacher strike, isn’t going there. The defendant is the state government, for allegedly sending a disproportionate share of its annual $10.6 billion in education aid to mostly white school systems outside of Chicago, whose students are 88 percent black, Hispanic or Asian. That’s “separate and unequal,” the lawsuit claims, in violation of state civil rights law.

Chicago’s chronically underfunded teacher pensions are the heart of the matter, however. A state-law requirement to pay into them from city resources accounts for Chicago’s financial desperation. The city owes 13 percent of the schools’ operating budget, or nearly $1,900 a year per student in 2017, for teacher pensions.

Without a quick injection of $215 million, Emanuel has said, Chicago public schools may face drastic service cuts, imperiling the fragile but real progress they have made during his administration.

Almost everything in that section is wrong. Autonomy of the Chicago Public Schools wasn’t forced on it, as the above implies. The CPS demanded it. The graph at the top of this post illustrates the source of the problem. Over a period of years the CPS failed to increase its contributions to its teachers’ pension fund. The fund isn’t chronically underfunded. It’s acutely underfunded and that underfunding was due to political incompetence, misfeasance, and nonfeasance. It’s like taking an ax to somebody and then characterizing it as a chronic health condition.

That’s what the Chicago Teachers Union has been complaining about. There wouldn’t be a problem if their pensions had been funded as they should have been in the first place. It’s too bad they didn’t complain during the six mayoral elections that have taken place over the period illustrated by the graph. Note that the Chicago Public Schools weren’t under City Hall’s control until 1995. Coincidentally, that’s when the Illinois General Assembly turned the keys over to Chicago’s mayor.

There seems to be a lot of Chicago Mayor Rahm Emanuel in today’s news. First, this article from the Chicago Tribune. Can somebody please explain to me how this isn’t racist on the basis of disparate impact:

Mayor Rahm Emanuel wants Chicago public high school students to show they have a plan for what’s next before they can get a diploma.

Emanuel’s proposal would add one more big item to the graduation checklist for high school seniors: proof they’ve been accepted into college or the military, or a trade or a “gap-year” program. The requirement would also be satisfied if the student has a job or a job offer.

The point, the mayor said, is to get Chicago Public Schools students in all parts of the city to stop seeing high school graduation as an ending and get them to consider what’s next.

“Just like you do with your children, college, post-high school, that is what’s expected,” Emanuel said at a Wednesday morning news conference. “If you change expectations, it’s not hard for kids to adapt.”

This is as fine an example of cargo cult thinking as I’ve ever seen.

Presently, I frequently have reason to spend time at a company in which nearly everybody in the organization below the age of 50 has a masters degree or above. 40 years ago there would have been two differences:

• Nearly all of those jobs would have been held by people with no more than a high school diploma.
• The country of origin of the people holding the jobs.

The jobs haven’t changed that much. The prerequisites have. If you think that strong-arming Chicago students to pursue higher education or some sort of certification will brighten their futures, think again. It won’t do them a bit of good.

At the Washington Post technology exec Robert D. Atkinson advises President Trump to stand firm with Chinese President Xi but to eschew threats of tariffs:

It would be one thing if China were just another middle-of-the-pack nation following international norms to reach ambitious industrial goals. But when the world’s second-largest economy makes by-hook-or-crook mercantilism the animating force of its economic and trade policies, that is a whole different kettle of fish. In addition to stealing intellectual property, forcing competitors to hand over their technologies and thumbing the scales on behalf of its state-owned enterprises, China’s unfair policies include a pattern of flatly denying some foreign firms access to its markets; weaponizing its antitrust laws to extort concessions; and underwriting acquisitions of foreign technology firms. These policies are especially damaging in the absence of a true rule of law or an independent judiciary to constrain Chinese officials.

The previous three U.S. administrations sought dialogue with Chinese leaders in the hope that they would have an epiphany and embrace the one true path of Western, market-based economics. But it should be clear by now that approach has failed miserably. Indeed, rather than reform, China has been doubling down.

Trump is right that China is flouting global trade rules to the detriment of the United States, but adopting a policy of economic nationalism — simply slapping tariffs on foreign goods, for example — will not solve the problem. In fact, it would simultaneously crimp U.S. prospects for growth, leave the global playing field wide open for China to dominate, and alienate allies who would have no choice but to cut flawed deals with the world’s new economic hegemon. But neither is it a viable option to blithely accept Chinese domination of advanced industries.

So what should the Trump administration do? One step would be to resurrect a new and improved version of the Trans-Pacific Partnership trade agreement. Much of the opposition to the TPP was based on a combination of ideology and misinformation, but it is true that the agreement could have been better. Trump should make it his own by adding new protections, such as strong curbs on currency manipulation, and then claim victory. Another step would be to more vigorously prosecute trade cases against China. But doing this would only chip away at the core problem. Neither approach represents a direct challenge to China’s systematic pattern of abuse.

To fundamentally change Chinese government behavior, Trump needs to assemble an alliance of nations that collectively raise the stakes. China won’t willingly abandon its mercantilist policies unless it is compelled to do so by outside pressure that goes beyond the narrow, legalistic limits of the World Trade Organization. This fight will be won or lost not in the tribunals of Geneva, but in the court of global opinion where countries are held accountable for delivering tangible results. That means the Trump administration needs to enlist the international community to pressure China to show by its actions that it can be a responsible player in the global trading system.

This is yet another of the 1,001 op-eds that make the same bad assumption: that it is possible for us by our actions to change the policies of China’s leaders. We can’t. China will continue the patterns of trade abuse I’ve documented here.

It’s long past time to recognize that admitting China to the WTO was an error as was granting the country MFN status. Mr. Atkinson is right. China is an exception. Sadly, there’s no use closing the barn door now.

We need to do what’s good for us and ignore what President Xi thinks of it. If it’s tariffs, it’s tariffs. If it’s embargo, it’s embargo. If it’s let ‘er ride, it’s let ‘er ride.

I do have one question for Mr. Atkinson. What does he think of U. S. technology companies colluding with the Chinese government to suppress the rights of the Chinese people?

A vote on the nomination of Neil Gorsuch to the Supreme Court of the United States is expected today in the United States Senate. Democrats are expected to oppose it and not enough votes in favor are anticipated to override a filibuster. Republicans are expected to “go nuclear” and change the rules so that he can be confirmed by a simple majority.

What should happen?

1. Neil Gorsuch is acceptable on his merits and should be confirmed. Democrats should return to the old standard which is that any competent candidate should be confirmed and vote to confirm.
2. Gorsuch is as good as any candidate Democrats are likely to see from this administration. Democrats should allow him to be confirmed, i.e. should not filibuster.
3. Republicans should not “go nuclear”. If they don’t have the votes to override they should let the nomination go down.
4. Republicans should “go nuclear”.
5. Democrats should oppose the Gorsuch nomination to teach Republicans a lesson. Republicans should not “go nuclear”. Democrats should then return to the old standard.
6. Judge Gorsuch should withdraw his nomination and a consensus candidate should be put up in his place. Democrats should vote to confirm this consensus candidate. Please name names. Who would be such a consensus candidate?
7. No consensus candidate is possible.
8. We should just continue with the present roster of Supreme Court justices until the end of Trump’s first or even second term.

At the New York Times and in commemoration of the centenary of the U. S. entrance into World War I, Michael Kazin muses over whether the U. S. should have entered the war at all:

How would the war have ended if America had not intervened? The carnage might have continued for another year or two until citizens in the warring nations, who were already protesting the endless sacrifices required, forced their leaders to reach a settlement. If the Allies, led by France and Britain, had not won a total victory, there would have been no punitive peace treaty like that completed at Versailles, no stab-in-the-back allegations by resentful Germans, and thus no rise, much less triumph, of Hitler and the Nazis. The next world war, with its 50 million deaths, would probably not have occurred.

I don’t think he dwells enough on the effects our entry into the war had on the United States or the reasons we entered the war.

The editors of Bloomberg clearly can’t get their heads around a transactional approach to foreign policy:

To have any chance of altering Chinese behavior, Trump needs a stronger and more coherent message. That means, first, identifying and prioritizing a set of clear, reasonable demands — and then pushing them consistently across a broad front.

Trump doesn’t have a plan. He won’t have a plan. Like it or not he just has a utility function.

I think we need a lot less Cold War nostalgia and a lot more attention to American wants and needs. The containment doctrine laid out in the Kennan letter worked. What we’ve been doing for the last 30 years hasn’t been working. It’s resulted in our spending trillions of dollars on foreign wars that have brought us little but dead people and the prospect of many, many more. It has resulted in stagnant real incomes for most Americans, a growing underclass, and a struggling middle class.

China, barely on the map 30 years ago, is now making noises like a geopolitical rival to the United States. It isn’t but it’s making noises like one but that’a subject for another post. Russia has its own nostalgia, it’s different than ours, and it too is making noises like a geopolitical rival.

But I’m game. I challenge the Bloomberg editors to articulate a “coherent message” that results in something other than increasing incomes for the top .1% of income earners and global American hegemony at the point of a gun.

Michael Pettis’s account of the story of global trade, recounted here at Bloomberg, is better than most. For example, his explanation of Germany’s behavior and its effect on other European countries:

After a decade of trade deficits and high unemployment, worried leaders in Berlin implemented labor reforms in 2003-05 whose main effect was to weaken wage growth. As unemployment dropped and business profits surged, the reforms also shrunk the share of national income allocated to ordinary households, driving down the consumption share as well.

German businesses, blessed with higher profits, responded unhelpfully. They paid down debt instead of investing the profits, increasing the share of national income devoted to savings. As the growing gap between German savings and investment soon became among the largest in history, so did the German trade surplus. German banks exported the excess savings into other European countries, no longer protected by the interest-rate and currency adjustments proscribed under the rules of the euro. By 2009, after insolvency prevented one European country after another from absorbing any more of the German tsunami of capital outflows, these shifted to countries outside Europe.

Germany’s behavior has not been benign. They’ve solved their own economic problems to the detriment of their trading partners.

However, I find this just puzzling:

As counterintuitive as it may seem, if Trump wants to address the U.S. trade deficit with China, he must focus on the capital account, not the trade account. Instead of imposing tariffs, he should either implement policies that absorb foreign savings more productively into the U.S., say by exploiting historically low interest rates and investing in much-needed infrastructure whose economic benefits are too diffuse to be captured by the private sector.

Why does he think that would happen? It sounds to me as though he’s just expressing a preference for one kind of consumption over another. How is building the 153rd bridge across the Mississippi “more productive”? Particularly on the federal level we don’t pick infrastructure projects based on return on investment but on how much they’re wanted by preferred constituencies, political allies, or donors. I think that if we were picking infrastructure projects based on ROI we’d be greenlighting power grid improvements, which certainly fit his rubric of “economic benefits are too diffuse to be captured by the private sector” over roads, bridges, and better Admiral’s Clubs in airports. But more resilient and secure power grids with enhanced ability to adapt to changing circumstances don’t have the constituencies that those other investments do.

Our problem with infrastructure is different than China’s. We’re a developed country. Our problem is not that we don’t have enough roads and bridges but that we have too many. Comments like that inevitably bring up the civil engineers’ report. Their report says nothing whatever about ROI. It just says we build roads and bridges but don’t maintain them. That’s our political problem and IMO is a direct consequence of state and local officials’ propensity for trying to extract more federal funds for their projects rather than turning to state and local taxes, increasingly dedicated to paying for the pensions of public employees and paying interest on debt rather than infrastructure spending. Relying more on Uncle Sugar won’t change that and IMO building more roads and bridges won’t change global capital flows.

But I think this is correct:

Or his administration should change the way savings imbalances are transmitted into the U.S., for example by taxing capital flows, which the U.S. was doing as recently as the 1960s.

But I’m quite certain that Dr. Pettis knows better than this:

What Trump shouldn’t do is get involved in a tit-for-tat tariff war with China that sidesteps the real sources of the imbalances. In a world in which capital flows overwhelm trade flows, trade imbalances are driven by imbalances in global savings, and the U.S. cannot resolve the former without addressing the latter.

because there’s very little that we can do to control the behavior of the Chinese authorities. They will do what they will do for domestic economic and political reasons without any regard for what we want, need, or do. Our ability to influence their behavior is quite limited.

What we should do is what they would do. Rather than being worried how the Chinese will react we should do what we need to do politically and economically. Being more worried about what Xi might think than we are about ourselves is perverse.

In just a few sentences in his article at Newsweek Jeremy Gelbart expresses my view of autonomous vehicles pretty succinctly:

Will there be a future where autonomous cars dominate the roads? Yes.

Will this future be in 3 years? No way.

It’s even possible that autonomous vehicles will never “dominate the roads”. It depends on all sorts of things, mostly non-technological.

I honestly don’t think that most people understand all of the hype we’re hearing about autonomous vehicles. In the California Gold Rush of 1849 great fortunes were made but mostly not by the miners. The greatest rewards were reaped by the people who sold tools and supplies to the miners.

I don’t believe that Google or Elon Musk want to be the General Motors of autonomous vehicles. I believe they want to sell the AI technology to the companies that will compete to manufacture autonomous vehicles. And, in Elon Musk’s case at any rate, to secure rents.

While I continue to demur with what I see as a facile interpretation of the report card on U. S. infrastructure produced annually by the American Society of Civil Engineers, I do think that Suneel Kamlani is onto something in his plan for improving U. S. infrastructure at Bloomberg View:

One promising solution is for states or regional economic zones to lead the way by creating their own infrastructure banks, modelled on successful development banks in other countries. The Northeast has taken the first step, with Massachusetts filing bills in January to establish a state infrastructure bank and examine a regional one. This model could be easily replicated across the U.S. to accelerate investment and economic activity.

How would it work? Taking the Northeast as an example, states from Massachusetts to Maryland could create a jointly owned entity capable of financing critical projects, including those that cross borders. Each state would contribute part of the initial equity, which could then be leveraged with private debt to invest in revenue-producing projects. The equity could be boosted through annual contributions from state transportation budgets — or from other sources — with every new dollar having a multiplier effect.

The federal government could even kick into those “banks”. As Mr. Kamlani notes, the plan has several benefits: projects could be funded on a portfolio basis, because of the greater diversity of their operations these “banks” might be attractive investment opportunities for pension funds, sovereign wealth funds, etc., and it’s a model that has been shown to work.

Best of all from my standpoint it would allow attention to be paid to projects that might not seem significant to an administrator sitting in Washington, DC but might be of obvious importance to somebody in Hanover, Delaware.