NOTE TO THE ANTI-TRUMP HERD: THE PRESIDENT UNDERSTANDS ECONOMICS…AND HE’S WAY AHEAD OF YOU

1/30/17

In the wake of President Trump’s indications that Mexico will “pay for the (border) wall” with some sort of 20% export tax, observers are pointing out that it is we, the American consumers, who will ultimately pay for the wall if the financing mechanism is indeed some kind of export tax.

As the kids would say, “Well, duh!”   Those who raise this argument do so as if they have suddenly realized some economic truth that is beyond the grasp of Mr. Trump, whom they consider an idiot on all counts.   This low estimation by his opponents of Mr. Trump’s mental capacity is ceaseless despite the Trump campaign’s making idiots of those very same opponents who guffawed at the very notion that Mr. Trump could win the 2016 presidential election, but I digress.   The point is that those who assume that Mr. Trump fails to understand that consumers ultimately pay tariffs and the like also assume that Mr. Trump has the economic literacy of, say, his opponent in the 2016 election or any other lifelong politician.  Of course Mr. Trump understands that some portion of a tariff is paid by consumers.

Let me make two technical digressions here.  First, note that in the last sentence of the last paragraph, yours truly said that Mr. Trump understands that “some portion of a tariff is paid by consumers.”   I didn’t say, as do most commentators on this point, that consumers will pay the entire tariff or that, as is often said, sellers will “pass along” the cost of a tariff, or any cost increase, for that matter.   Indeed, sellers don’t “pass along” an entire tariff.  The cost of a tariff is shared by both the producer and the consumer.   The proportion paid by each is determined by their relative elasticities of demand and supply.   The party with the lowest elasticity (of supply in the case of the producer and of demand in the case of the consumer) will pay a higher proportion of the tariff.  In common English, the seller, in this case Mexico, will pass along what it can and eat what it can’t.  This is rather basic microeconomics.   Whether Mr. Trump and his people understand this fine point I don’t know, but I am reasonably confident, based on their own statements, that his opponents don’t grasp this nuance.

Second, we are not talking a straight-out tariff here, or at least one would think we are not talking about a straight-out tariff here.   Like most of Mr. Trump’s proposals, this one, too, is vague and probably will remain so until about five minutes before it’s put into effect.   Currently, however, the talk is that the tax will be structured as an adjustment to the corporate income tax in which imports will not be deductible and exports will not be taxed, or something like that.  Or it might be something else, and no one is sure where the 20% number came from.   But so it goes with Mr. Trump; he keeps both his fans and his opponents, and the great majority of Americans, who are neither, in suspense.   For those of you who share yours truly’s affection for great old movies “You know how the Premier likes surprises.”

So Mr. Trump knows, despite the seemingly brilliant economic observations of his opponents, that any kind of export tax from Mexico will be paid for, in some proportion, by consumers.   Given that knowledge, why does he still contend that “Mexico will pay” for the wall?    It seems quite obvious:   The export tax is nothing more than a negotiating stance, a stick to prod Mexico to come up with at least some of the cost of the wall.   Mexico, when faced with the choice of either paying for the wall or seeing their exports to the U.S. taxed, one way or the other, at 20%, will be a lot more amenable to, shall we say, contributing to the cost of the wall, than they would be without the incentives provided by this Damaclesian tax.       

As things stand right now, Mexico has no incentive to contribute anything to the construction of a border wall.   The prospect of a tax on its exports to the U.S. will provide a measure of an incentive.   If it doesn’t, don’t be surprised if Mr. Trump comes up with something else to incentivize Mexico to see enough wisdom in building the wall to have it make sense for Mexico to come up with some of the cost.   And don’t be surprised if Mr. Trump once again makes idiots out those who doubtless will continue to question Mr. Trump’s intellect long after he has made them look silly.

“GENTLEMEN, DON’T REPORT WHAT (THE PRESIDENT) SAID; REPORT WHAT (YOU HAVE DETERMINED) HE MEANT”

1/26/17

The entire Chicago political/social/religious establishment (They tend to meld in this town.) is up in arms, hopping mad about what they assume to be President Trump’s plans to send in the National Guard to combat the contumacious criminal carnage that is killing the world’s greatest city.

Mayor Rahm Emanuel, who has been in charge during the recent skyrocketing in crime in Chicago, says of the idea of sending in the National Guard “I’m against it straight up…We’re going through a process of re-invigorating community policing….It’s antithetical to the spirit of what community policing is.”

Governor Bruce Rauner says “We continue to believe it’s not the right thing for us to send in the National Guard.   That would be a mistake.”

Alderman Toni Foulkes, who presides over Englewood, one of the focal points of the Chicago crime wave, says “For my communities, it would be an actual bloodbath.”    The irony of her 16^th ward’s already qualifying as at least something of a bloodbath seems to escape Alderman Foulkes.   But I digress.

Ray Lopez, alderman of the once upon a time relatively quiescent 15^th Ward, says “The National Guard is using a hammer to kill a fly.  We don’t need tanks rolling down Ashland Avenue.  I don’t need tanks rolling down Archer Avenue.”

Even newly minted Cardinal Blasé Cupich, now very much part of the city’s ruling establishment, decries “The problem is surely much more complex than that kind of a solution…We have to make sure we don’t over-simplify this issue by just saying that it’s a matter of control by military or police forces.”   To his credit, the Cardinal did say that Chicago has “really wonderful police.”   Messrs. Rauner, Emanuel, and Lopez, and Ms. Foulkes, said nothing of the kind.   But, again, I digress.

Regardless of what one feels about the advisability of “sending in the Guard,” there is something seriously wrong with all of the above comments, to wit…

President Trump said nothing about “sending in the National Guard.”

The President did say that he would “send in the Feds,” but that could mean a lot of things…the DEA, the FBI, the IRS (Remember what put Al Capone away.), and the ATF, are all likely vehicles for further federal involvement in Chicago’s crime problems, and I’m sure that list is not exhaustive.   But Mr. Trump did not specify what he meant by “send(ing) in the Feds,” and one suspects even he didn’t know what he meant.   However, that didn’t stop Mr. Trump’s opponents in the press, and in politics, from immediately assuming, for purposes that might seem obvious, that Mr. Trump meant that he would send in the Guard…and thus a convenient strawman was assembled.

This is par for the course in the media’s and the political establishment’s treatment of Mr. Trump.    They read what is convenient for their agenda, and, by extension, least flattering to Mr. Trump, into each of the President’s comments or actions.   For example, we have been told since the inception of his campaign that Mr. Trump is “anti-immigrant,” even though he is married to an immigrant and his businesses depend on immigrants as employees, customers, and investors, because he wants to re-establish a meaningful border and confirm the nation’s right to decide who will come here and who won’t.  

One of the late, great Richard J. Daley’s press spokesmen (I think it was Frank Sullivan, but could have b been Earl Bush.) once advised the media “Don’t report what the Mayor said; report what he meant.”   Apparently, over forty years later, the press, and the Chicago establishment, is taking that advice regarding their coverage of Mr. Trump.    However, only they apparently get to decide what Mr. Trump meant.

IS A SINGLE PAYER HEALTH CARE SYSTEM IN YOUR FUTURE?

1/23/17

While yours truly doesn’t like to make predictions that don’t have solid numbers behind them, predictions are what makes blogs like these interesting.   So here’s something to anticipate in a Trump presidency:   the introduction of a single payer national health system, or something like it.   There are a number of reasons yours truly thinks such a system will be proposed, but please note that I am not as confident single payer will be implemented as I am that it will be proposed by President Trump.

Mr. Trump has already made noises that have been interpreted in some quarters, and with horror and shock in conservative quarters, as an indication that he is open to single payer.   Those noises so far have been limited to his disapproval of the profits the drug companies are making and his consequent eagerness to negotiate with the drug companies.    While interpreting such comments to mean that Mr. Trump is open to a single payer system remains something of a stretch, there are more reasons to suspect that single payer may be in our future.

First, our health insurance system, perhaps even our entire health care delivery system, was a big issue in the campaign and remains a big issue.   Indeed, yours truly thinks the mess that Obamacare has made of the health system was a much bigger factor in Mr. Trump’s moving into the White House than most people thought.   Why?   We got a letter informing us that our 2017 health care premia would be going up 76%  (That’s not a misprint---76%) from 2016.   We received that letter one week before the election and we weren’t alone.    What is more motivational to undecided voters?    News, days before an election, of a gigantic increase in one of their largest expenses as a result of a program wholeheartedly supported by one of the candidates or a 30 second commercial designed by those who obsess over focus groups?  

Second, Mr. Trump was not elected because of an abundance of affection for the man.    As I’ve said before, the chief reason that he was elected was because he was running against the nearly perfect personification of the political establishment that has managed to gain the ire and contempt of the populace over at least the last 20 years.   But another good reason that Mr. Trump got elected was because people perceived him, and rightly so, as an effective negotiator.   It would seem logical that, since health care costs are a major problem and we have a terrific negotiator in the White House, we apply those bargaining skills to a problem the President was elected, at least in part, to solve.  A single payer system is the system that gives Mr. Trump the most leverage, and the greatest opportunity, to apply those formidable negotiating skills to the problem of health care costs.

Third, it is nearly silly to argue that Mr. Trump, or his supporters, would object to single payer on ideological grounds.   First, Mr. Trump has no ideology; he is interested in getting things done, not in advancing a political philosophy.   Second, his supporters are not the types who pore over yawn inducing tracts from the likes of the Heritage Foundation or the Cato Institute; luminaries of such institutions were among the most vociferous of the anti-Trumpers.   Trump supporters are, by and large, not interested in the finer points of the government’s role in our financial and personal lives, in the government’s long abuse of the Inter-State Commerce Clause to emasculate state and local government, or even in the seemingly ever growing government share of the GDP…at least not in so many words.   Trump supporters are simply angry that their way of life has been vilified, scoffed at, and derided by a condescending, snide, “so smart but not so smart” intelligentsia that has taken control of the nation’s media and government.   People are tired of being treated either like children who must be shown the proper way to live or like lab rats whose bewildering, clearly misguided behavior must be analyzed by political “experts” working to get the next whiz kid with all the answers into the halls of power.   Be assured that if Mr. Trump can use a single payer system to get health care costs down while maintaining a reasonable level of “quality” (whatever that nebulous word means) in the health care system, his supporters, and many of those who didn’t support him, will be ready to coronate the guy.   All the protests of the egg-heads at the conservative and libertarian think tanks will matter not a whit.

Congress may be problem here.   However, note that, while I am confident that something like a single payer system will be proposed, I am not as confident that it will be implemented.   Still, I doubt that Congress will be as big an obstacle in this matter as one might think.   First, if the Democrats can get over their reflexive “nothing Trump proposes…ever” attitude (which, by the way, is a mirror image of the GOP’s “nothing Obama proposes…ever” attitude), Mr. Trump should be able to get plenty of Democratic support for what has been, after all, a Democratic dream since at least the administration of Harry S. Truman.  And the GOPers will go along simply because they are politicians and thus can’t imagine life off the public payroll.   If a Trump designed single payer system is garnering popular support, and hence Mr. Trump’s popularity and influence is increasing, these guys will get on board.   They may pretend to be ideologically motivated, but the GOPers, like their Democratic counterparts, are not profiles in courage; they are politicians, terrified at the notion of having to work at a job that involves more than having one’s hindquarters smooched by obsequious sycophants seeking access to the public purse.   If supporting single payer will help enough GOPers stay in office, even the “conservative” organs in think tankdom will come up with some marginally plausible story that single payer is now “conservative.”   After all, people who work at think tanks don’t want to take regular jobs, either.

Still, the money being spread around by the insurance lobby, the pharmaceutical lobby, the health care delivery lobby, etc., will speak very loudly to those pols who have to weigh a potentially popular program against huge campaign checks, lavish “fact finding” trips, and the possibility of future employment in the “lobbying” field.   Further, it is hard to argue that single payer does not have plenty of inherent flaws.   So passing and implementing single payer should be difficult.   But proposing single payer, especially for a non-ideological president who is supremely confident in the negotiating skills that in large part got him elected, seems a logical component of the Trump approach.   And, again, passage is a real possibility despite its difficulties.

NEWS ON CABLE NEWS NETWORK OR FOX NEWS? DON’T COUNT ON IT.

1/19/17

My wife and I just returned from a trip to the Florida Gulf Coast.   It was terrific in every way and inspired us to begin what promises to be an extended search for property in that part of the world.   But rather than engage in a travelogue in which there is neither room nor reason for my usual cynicism and “glass ¾ empty” approach to travel, I will confine my comments to a matter only ancillarily related to the trip.

What the world really needs is a genuine cable news station.   In Chicago, we have WBBM Newsradio 78.   In New York, they have WCBS and 1010 WINS.  Other cities have similar stations, though I suspect their number is shrinking.   What is frequently called “news radio” in other markets is in reality what we would call “talk radio” in larger markets.   The beauty of a WBBM, a WCBS, or a 1010 WINS is that its listeners are never more than a half hour away from a concise summary of the genuine news of the day.   For those of us who suffer from the heartbreak of news junkiness, these stations are a lifeline to sanity in a world overcome by silliness. 

The problem arises when one travels away from Chicago or New York.   One is not normally familiar with the characteristics of the local AM radio stations and must search for a news station in the car.  Usually, one is disappointed to find either no news stations or talk stations or sports talk stations that falsely label themselves news stations.    Even if one were to find a genuine news station, AM reception is poor in hotel rooms.   This leaves us who, even during a relaxed and wonderful vacation are compelled to keep up with the news, limited to what is available on the television…and there is the problem.

We did not have CNBC in our hotel, which was fine because I wanted to get away from the markets for a while.   In order to keep up with the news, though, that left us with CNN and Fox News.   So what is the problem, you might ask?   Can’t one get news on the Cable NEWS Network or Fox NEWS?   The answer, ironically, is no.   

There is little if any news on either of the big cable news station, or at least there is no news at reasonably predictable times.   Instead, what we get on CNN and Fox are panels of “experts,” with varying, but generally abysmally low, degrees of expertise arguing about esoteric points that matter not a whit to anyone who does not reside within 20 miles of the Washington Beltway.    Who really cares about the confirmation prospects of Mr. Trump’s pick for the post of Second Assistant Deputy Undersecretary of Undershirts?   Apparently, only the estimables who populate CNN and Fox News; one has rarely seen such passion, and such volume, expended on matters with such indiscernible consequences for the average person…or even for the typical news junky like yours truly.

Furthermore, is there any “news” on either Fox or CNN that is not “breaking”?   What is this with all the “breaking news” that is notable only for its lack of import, consequence, or timeliness?   “Breaking news:   interviews at Trump Tower continue.”  “Breaking news:   Weather is Cold and Snowy in the Midwest in January.”  Really?

Once upon a time, there was a station called CNN Headline News, which delivered summaries of the news in half hour intervals.   Its beauty, like that of the aforementioned genuine news radio stations, was that one could get to the news of the day within a half hour regardless of the time of day or one’s location.   The channel still exists as CNNHN, but apparently has been taken over editorially by the people who lost their jobs when the Weekly World News ceased to exist; CNNHN’s fare consists entirely of far too deep a dive into the latest ghastly and pervertedly titillating crime stories.  

The obvious conclusion is that the relatively straight news programming once provided by CNN Headline News does not sell and that is why the format of the station was radically reconstituted into a sort of National Enquirer of the Air.   What apparently does sell, judging from what one sees when one is forced to watch CNN and Fox News, is a lot of yelling, screaming and ad hominem attacks by marginally informed commentators on issues about which rational, sober people who work for a living care little.