J. Bradford DeLong's Blog, page 344

Ten Years Ago on Grasping Reality: June 27-30, 2008

Robin Givhan may well have provided the worst Hillary coverage ever: Heathers...: Robin Givhan.... "Hillary Clinton spoke... smiling that talk-show smile���the one that never wavers. She was dressed all in cobalt blue.... The only people who dress from head to toe in bright blue are more than likely telling you to put your seat tray in the upright and locked position. What would possess a woman seeking the highest office to dress in a manner that only Veruca Salt could love?..."

True then; true now: Capital and Its Complements: The hope was that... net capital outflows from the industrial core would finance much late twentieth and twenty-first century industrialization. But we all know the outcome.... The core���especially the United States���offers a form of protection for capital against unanticipated political disturbances.... Net international capital flows are going the wrong way. [But] there are still substantial gross capital flows outward from the world economy���s core to its periphery. And we can hope that these capital flows will carry with them the institutions and managerial expertise that have made the core so wealthy. Nevertheless, a dispassionate observer might point out that for someone with limited resources and opportunities for policy reform to keep betting double-or-nothing on neo-liberalism is a strategy that has a well-deserved name: ���Gambler���s Ruin���.

Greg Ransom was the poster child for how training a knee-jerk right-winger in economics could produce someone whose only fit habitation was Beldlam: Attempted DeLong Smackdown Watch: Origins of Central Banking Edition: Greg's argument that attempts to avoid depression through government financial manipulation must necessarily fail was, to my knowledge, first made comprehensively by Karl Marx and Friedrich Engels...

Surprisingly few people seem to remember that Reagan had ideological majorities in both houses of congress always���there were back then a bunch of people who voted with the Democrats to organize their house because they remembered that the Republicans had freed the slaves, but that was all they would vote with the Democrats for: Paul Krugman Misreads the Political Situation, I Think: Reagan had ideological majorities in both houses of congress throughout his presidency--remember the "boll weevils"? Clinton did not even have ideological majorities in his first two years. Yet Reagan's conservative achievements were remarkably limited: (1) A tilting of the tax code to redistribute income to the rich. And it was more than offset, IMHO at least, by his major liberal achievements: (1) To end the Cold War by trusting Gorbachev's good faith--in spite of everything the Republican foreign-policy establishment and the wingnut ideologues could throw in his path to try to stop them. (2) To cement the government's entitlement-spending role as provider of a mind-bobbling amount of primarily middle-class social insurance: Social Security, Medicare, and Medicaid as we know them. And then there were Reagan's "achievements" that were simply stupidities...

The American media has always been very bad at its proper job: Why Oh Why Can't We Have Better Republican Presidential Candidates?: Ezra Klein: "Alex directs me to this Fortune interview where McCain unsheathes a SuperSoaker of crazy..." The in-the-tank journalist who breathlessly reports that McCain "starts by deftly turning the economy into a national security issue - and why not?" is David Whitford, editor-at-large of Fortune. Remember that name. He is one of the answers to the question "why oh why can't we have a better press corps?": we can't because people like David Whitford work for the press.

True then; true now: Straws in the Wind and Lines in the Sand: A chain is only as strong as its weakest link, and it seems pointless to work to strengthen the Democratic links of the chain of fiscal advice when the Republican links are not just weak but absent. Political advisers to future Democratic administrations may argue that the only way to tie the Republicans��� hands and keep them from launching another wealth-polarizing offensive is to widen the deficit enough that even they are scared of it. They might be right. The surplus-creating fiscal policies established by Robert Rubin and company in the Clinton administration would have been very good for America had the Clinton administration been followed by a normal successor. But what is the right fiscal policy for a future Democratic administration to follow when there is no guarantee that any Republican successors will ever be ���normal��� again? That���s a hard question, and I don���t know the answer...

The New York Times has never focused on competence in reporting: New York Times Death Spiral Watch (Liquidity Problem Edition): Andrew Ross Sorkin.... Here we have to stop the tape. It doesn't matter what your cash reserves are: if they are less than your callable short-term liabilities, you are vulnerable to developing a liquidity problem; and if your cash reserves at the start of a week are less than desired withdrawals during that week, then you have a liquidity problem. To say that "Bear Stearns did not have a liquidity problem" is simply wrong on so many levels...

Republicans lie. All the time. True then; true now: Impeach Antonin Scalia. Impeach Him Now: Hilzoy: "Silly me. Luckily, researchers at the Seton Hall Law Center for Policy and Research were paying closer attention. They tracked down the sources of Scalia's claim... a DoD press release.... [I]t says that 30 detainees have returned not to the battlefield, but to 'the fight'.... The Tipton Three were three British citizens.... After British intelligence cleared them... they were released. And after that, they participated in the movie The Road To Guantanamo. Apparently, this counts as "returning to the battlefield". And then there are the Uighurs.... Abu Bakker Qassim had published an op-ed in The New York Times. Adel Abdul Hakim had given an interview. These press statements were deemed hostile by the Department of Defense. Surely the Pentagon was joking? They weren't... giving hostile interviews constituted 'returning to the fight'...

Differences Between Obama and McCain...

Barry Eichengreen: Like the 1930s, in Reverse

True then; true now: Department of "Huh?" (Bear Stearns Edition): I do not know what is more unbelievable: (1) That somebody who takes over halfway through a quarter thinks that his "immediate priority" as CEO should be to make it so that the business shows a profit that very quarter. (2) That somebody who takes over halfway through a quarter thinks that he can make decisions as CEO that affect whether the business shows a profit that very quarter. (3) That somebody who takes over as CEO in the middle of a financial crisis thinks that it is constructive for him to send an immediate signal that driving a wedge between actual fundamentals and reported financial results is a good business to be in. (4) That any senior executive for any financial firm thinks that one-quarter financial results will materially impact market expectations of whether his organization is overleveraged--hence vulnerable to a liquidity problem. As of the start of 2008, it was common knowledge in the circles in which I travel that Bear Stearns was the weakest and would be the first to collapse if any Wall Street institutions were to collapse. But getting Bear Stearns into a position where it was less rather than more vulnerable than, say, Lehmann does not appear to have been something Schwartz thought was his job... Unbelievable.

We Are the Droids that We Have Been Waiting For!

Unemployment Benefit Extension Blogging; Why Does George W. Bush Hate John McCain?: A crass political post.... It seems to me likely that���whatever happens to the economy���George W. Bush has just produced four bad unemployment-rate headlines on the Saturdays August 2, September 6, and October 4.

A Remark on Friedman's "The Social Responsibility of Business is to Increase its Profits": If workers, customers, and investors expect that the executives of the corporations they deal with will pursue social-responsibility objectives, where's the foul?

Differences Between Obama and McCain...

General Motors and the S&P since 1971_

Energy Costs as a Share of Spending

Impeach George W. Bush. Impeach Him Now: Tim F. of Balloon Juice: "Message to all of those rightwing net warriors who demanded over the years that I accept that THERE WAS A PLAN and the Rumsfeld/neocon warhawks are not a bunch of criminal incompetents: you were completely f---ing wrong. Give up. Let���s hear from patchouli-soaked hippies at the Army War College: 'The transition to a new campaign was not well thought out, planned for, and prepared for before it began,��� write Wright and Reese, historians at the Army���s Combat Studies Institute at Fort Leavenworth, Kan. ���Additionally, the assumptions about the nature of post-Saddam Iraq on which the transition was planned proved to be largely incorrect.��� The results of those errors, they add, were that U.S. forces and their allies lacked an operational and strategic plan for success in Iraq, as well as the resources to carry out a plan.' The capsule summary is not entirely accurate in that Rumsfeld certainly did have a plan. He and the neocons planned to install a friendly strongman and leave. To guage just how stupid the war planners were, a useful question is who. Unless we had in mind a Saddam cousin or Muqtada Sadr, who wasn���t on our radar at the time, the only credible option would be a friendly exile. Aside from Ahmad Chalabi, how many of those can you name? It really was Chalabi or bust. We got bust.

Memory Errors...: This is bad. What I have thought for a long time--nigh on thirty years--was the theme from "The Magnificent Seven" is actually the theme from "The Good, the Bad, and the Ugly."

Contango...

William Greider's "The Education of David Stockman" Once Again: What is not readily available online... is Greider's introduction.... Most of the people defending Greider have not read Greider's introduction, which in my view at least provides interesting reading.

Taxing Income from Capital: Utilitarianism-Maoism-Waldmannism Edition: Waldmann presents a model in which (i) the holders of capital are all too rich with too high a level of consumption, hence (ii) you want to tilt their consumption profile so that their consumption declines as fast as possible, and (iii) the capital-output ratio is fixed--hence there are no productive inefficiencies. Thus the optimal government policy is to tax the capital income of the rich as much as possible until they become so poor that their consumption level hits the social optimum value, and use the resources raised to boost the consumption of the poor. It's a very nice intuition pump.

America the Loser: Project Syndicate

Project Syndicate: America the Loser: The American century ended on November 8, 2016. On that day, the United States ceased to be the world���s leading superpower���the flawed but ultimately well-meaning guarantor of peace, prosperity, and human rights around the world. America���s days of Kindlebergian hegemony are now behind it. The credibility that has been lost to the Trumpists���abetted by Russia and the US Electoral College���can never be regained... Read MOAR

Women's Roles in Agrarian-Age Civilization

Slides for a lecture built around a document...

Document: Abigail Smith Adams in Braintree, MA, to her husband John Adams in Philadelphia, PA: March 31-April 5, 1776

http://www.bradford-delong.com/2018/07/womens-roles-in-agrarian-age-civilization.html https://www.icloud.com/keynote/0VjXhN1LKyr4Nk8nbra6XASag

The American Century began around 1870, when the American...

The American Century began around 1870, when the American openness to immigration and societal experimentation on a continent-wide scale collided with the iron-hulled screw-propellered steamship, the industrial research laboratory, and the global submarine telegraph network. The American Century ended on November 8, 2016. On an... I won't call it "thinking"... elite... level, what we have today is the Republican Party of Henry Cabot Lodge and Robert Taft. On a knee-jerk pre-judged... or perhaps prejudiced... level, what we have is a large number of people who think that the present is not their friend and the future will be less than their friend and that people who look different plus rootless cosmopolites are their enemies. Save for the "normalcy" Republican Ascendancy between Woodrow Wilson's stroke and the defenestration of Herbert Hoover, these currents in the American psyche were under control. But no longer: On Martin Wolf: Donald Trump���s war on the liberal world order: "Striking features of Mr Trump���s behaviour are his fabrications, self-pity and bullying...

...others, including historic allies, are ���laughing at us��� over climate or ���cheating��� us over trade. The EU, he argues, ���was put there to take advantage of the United States, OK?...���Not any more���.���.���.���Those days are over.��� These are absurd claims. Armoured by ignorance and such attitudes, Mr Trump might do just about anything.... This, then, is an important historical moment. The foundations of the postwar economic and security order, not just of the ���holiday from history��� of the post-cold war era���, are now in doubt. The question is whether one should view this as a temporary, albeit perilous, departure from the normal state of affairs, or a far more permanent shift.

The argument for the former is that Mr Trump is an exceptional figure, who came from nowhere, in special circumstances. When he passes, so will this upheaval. This may be a delusion. Unless he blows up the world economy, Mr Trump has a good chance of re-election and so may last for six-and-a-half more years. He has identified a large and resentful part of the US body politic whose state is unlikely to get any better, while the gerrymandering of the US vote is likely to get even worse. Not least, a growing number of Americans agree that China is a cheat and a threat and Europeans are carping freeloaders. Mr Trump will pass. Trumpism might not. The US could become far worse than soberly Palmerstonian. The rest of the world should take that possibility seriously ��� and think and act accordingly.

#shouldread

MOAR Links: July 3, 2018

John Fortescue: The Governance of England: "Here He Shewith the Perellis That Mey Come to the Kyng by Ouer Myghtye Subgettes..."

Hans Sluga: Blog

David Strohmaier: The Way of Inquiry

David From et al.: What���s Left of the Right? : Democracy Journal

Karl Marx (1863): ETheories of Surplus-Value: "Ricardo���s Theory of Accumulation and a Critique of it: The Very Nature of Capital Leads to Crises..."

BoingBoing: Scientists accidentally engineer enzyme to eat plastic waste: "Researchers 'accidentally' engineered a natural enzyme found in a Japanese waste recycling plant to eat plastic waste.... the enzyme, Ideonella sakaiensis 201-F6, degrades polyethylene terephthalate (PET).... 'We hoped to determine (the enzyme's) structure to aid in protein engineering, but we ended up going a step further and accidentally engineered an enzyme with improved performance at breaking down these plastics...' [said] NREL's lead researcher Gregg Beckham..."

Valentina Pop: The Ultimate D��marche: France Wants to Oust English From the EU: "Prompted by Brexit, French President Emmanuel Macron wants to restore his language, the way it was before Britain joined..."

Cali Bamboo: Bamboo Flooring

Isaiah Berlin (1958): Two Concepts of Liberty

Day 14 Transcript: Holocaust Denial on Trial: Irving v. Penguin Books and Lipstadt

Francis Fukuyama (1989): The End of History?

Very wise words from close to where the rubber meets the ...

Very wise words from close to where the rubber meets the road about how the Rise of the Robots is likely to work out for the labor market over the next generation or so: Shane Greenstein: Adjusting to Autonomous Trucking: "Let���s come into contact with a grounded sense of the future.... Humans have invented tools for repetitive tasks, and some of those tools are becoming less expensive and more reliable...

...Were the investments pay off quickly, firms will make use of tools. Experiments are looking for such payoffs right now. However, even with such payoffs, adjustments tend to take time and will slow adoption and change. Autonomous trucking provides a good example.... What will happen to the 3.5 million truck drivers in the US who are focused on keeping their jobs?... Total employment is not at risk in the next decade, but it would not be surprising if a few job titles and assignments change....

There is plenty of motivation for automating long-haul trucking. Of all trucking jobs, long haul is the most difficult to fill and staff. The work can be uncomfortable. It also creates enormous value.... Trucking has already taken advantage of many advances in electronics. Most trucks contain on-board computers, GPS links, and numerous systems to monitor performance.... Judging from recent prototypes, humans are not disappearing anytime soon��� Take the use of autopilot in commercial airlines today; software-enhanced navigation merely changes what the pilots do and when they apply their expertise.... The hard work today focuses on other high-value propositions, such as reducing safety issues from things like inattentive driving. A little automation can go a long way for that purpose���it can stop vehicles sooner, issue warnings to drivers, and relay information to dispatchers for use by others in a fleet. The prototypes also continue trends that began with the introduction of electronics into trucking long ago. Partial automation can enable longer continuous vehicle operation, better fuel consumption, and reduced maintenance expenses.

So what limits progress? Like many applications in machine learning, there are too many ���edge cases��� that the software cannot yet satisfactorily handle���such as road construction, a vehicle stopped at the side of the road, unexpected detours, pedestrians unexpectedly on the side of the highway, a dead animal carcass in the road, and so on. AI researchers know this problem well. Routine work is not as routine as it seems. Humans are pretty good at handling millions of variants of the little unexpected aspects of road work, police stops, bad weather, poor drivers, and break-downs. The statistics of edge cases are quite demanding. Software can be trained to handle much of this, perhaps 99 percent of the issues in a typical drive. But 99 percent is not anywhere near good enough. If, say, 1 percent is still left for humans, that translates into more than half a minute every hour in which a human needs to intervene.... Partial or conditional automation is the most ambitious goal for the next several years. Full automation is a long way off....

We should expect that business processes will adjust and adopt new routines. The timing for fueling, maintenance, docking, and inspection will change. New procedures for monitoring daily, weekly, and monthly targets will be put in place. Will that eliminate work? No, but it will shift who does the work, what they do, and how they are trained to do it. The new timing will require new principles for organizing teams. The new teams will require new principles for responsibility.... Will that change work at the organizational level? Yes, sure, and even if we cannot precisely forecast how, it is clear where the type of work will change.... And here is the kicker. The reduction in cost might generate more demand for services, which might lead to more employment of truckers. It is hard to forecast the totality of all this change...

#shouldread

Ben Thompson: Intel and the Danger of Integration: "Intel...

Ben Thompson: Intel and the Danger of Integration: "Intel... has spent the last several years propping up its earnings by focusing more and more on the high-end, selling Xeon processors to cloud providers...

...That approach was certainly good for quarterly earnings, but it meant the company was only deepening the hole it was in with regards to basically everything else. And now, most distressingly of all, the company looks to be on the verge of losing its performance advantage even in high-end applications. This is all certainly on Krzanich, and his predecessor Paul Otellini. Then again, perhaps neither had a choice: what makes disruption so devastating is the fact that, absent a crisis, it is almost impossible to avoid. Managers are paid to leverage their advantages, not destroy them; to increase margins, not obliterate them. Culture more broadly is an organization���s greatest asset right up until it becomes a curse. To demand that Intel apologize for its integrated model is satisfying in 2018, but all too dismissive of the 35 years of success and profits that preceded it. So it goes...

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Carbon Blogging: Robert J. Samuelson Is Incompetent/The Washington Post Is a Bad Paper: Monday Smackdown/Hoisted

That the Washington Post still gives Robert J. Samuelson a platform is a shameful thing. That it ever gave Robert J. Samuelson a platform is a bad thing: Monday Smackdown/Hoisted: In That Case... Plant the Trees This Afternoon!: Mark Thoma does an evil deed by telling me that somebody should take note of Robert Samuelson. And he's right: somebody should. But why does it have to be me?

First, some history: The last time we tried to put a "Pigou tax" on carbon emissions--back in 1993 with the Gore BTU tax proposal--Robert Samuelson opposed it: "Congress," he said, "should... deliver a firm message: We won't pass this [energy] tax... [without] more spending cuts. This would give Congress more time to evaluate the energy tax and put more pressure on the White House to cut spending.... Congress... [should not] be stampeded."

Remember that: Robert Samuelson did not want Congress to be "stampeded" into including a carbon tax in the 1993 reconciliation bill.

Economists believe that things work well when the incentives individuals face--the good or ill that their actions cause for themselves--match up to the good or ill of the impact that their actions have on society as a whole. Thus our liking for energy taxes as the best way to start controlling global warming: individuals don't feel the harm that their greenhouse gas emissions do to other people via their effect on the climate, but a tax on carbon makes them feel that harm in their pocketbook and so matches up individual incentives with social outcomes. That's what the Gore BTU tax proposal was trying to do.

There are in general two ways that you can match private incentives with social outcomes. The first is to take individuals' preferences over material goods as given, and use taxes and subsidies to raise the prices of goods that have negative and lower the prices of goods that have positive "externalities," as economists call them. The second is to try to shift individuals' preferences: appeal to altruism, or to the moral sense, or to the mirror neurons to get people to feel good about doing deeds that have positive externalities, and rearrange social markers of status and approval to shift people's preferences over goods without changing their material characteristics or prices. Economists generally prefer to work on the tax-and-subsidy side rather than on the preferences side, out of a disciplinary commitment to the idea that cash-on-the-barrelhead is strong and pats-on-the-back are weak. But we do what we can: if we cannot pass a BTU tax, telling people who fund carbon offsets or drive fuel-efficient cars that they are good, responsible, moral people is a perfectly orthodox and constructive thing to do.

But somehow Robert Samuelson doesn't think so today. Attempts to work on the preferences side by saying "good for you!" to Prius drivers get him really, really angry:

Robert J. Samuelson: Prius Politics: My younger son calls the Toyota Prius a "hippie car."... [L]ike hippies, [Prius drivers] are making a loud lifestyle statement: We're saving the planet; what are you doing?... Prius politics is... showing off, not curbing greenhouse gas emissions. Politicians pander to "green" constituents who want to feel good....

California Gov. Arnold Schwarzenegger is the champ of Prius politics, having declared that his state will cut greenhouse emissions to 1990 levels by 2020.... However, the policies to reach these goals haven't yet been formulated; that task has been left to the California Air Resources Board. Many mandates wouldn't take effect until 2012, presumably after Schwarzenegger has left office. As for the 2050 goal, it's like his movies: make-believe. Barring big technological breakthroughs, the chances of reaching it are zero.

But it's respectable make-believe. Schwarzenegger made the covers of Time and Newsweek. The press laps this up; "green" is the new "yellow journalism."... Even if California achieved its 2020 goal (dubious) and the United States followed (more dubious), population and economic growth elsewhere would overwhelm any emission cuts. In 2050, global population is expected to hit 9.4 billion....

[H]ere's what Congress should do... gradually increase fuel economy standards for new vehicles... raise the gasoline tax over the same period by $1 to $2 a gallon... eliminate tax subsidies... for housing.... But practical politicians won't enact these policies, except perhaps for higher fuel economy standards. They'd be too unpopular.

Prius politics promises to conquer global warming without public displeasure.... Deep reductions in emissions... might someday occur if both plug-in hybrid vehicles and underground storage of carbon dioxide from coal-fired power plants become commercially viable.... Prius politics is a delusional exercise in public relations that... [is] not helping the environment [and] might hurt the economy.

In my view, Robert Samuelson is a bad person: when a carbon tax was on the agenda and we had a real window of opportunity, he fought it; now when the only things on the agenda are preference-shaping tools that I regard as very weak compared to a carbon tax, he's against them as well on the grounds that "hippie... Prius politics is... showing off" and that a carbon tax would be good.

A little intellectual three-card-monte here, doncha think?

Let me contrast Robert Samuelson's sneering at the "hippies" who want to take the weak "Prius politics" steps at fighting global warming we can take now with one of the favorite stories of somebody I once knew--somebody whose place on the ideological spectrum was the same as Robert Samuelson, but who I think was a good person--the late Lloyd Bentsen, who liked to tell this story and claimed he'd gotten it from John F. Kennedy when they were freshmen in the House of Representatives together:

If you travel through Lorraine, between Neufchateau, Toul, Epinal, and Nancy you find the Chateau de Thorey-Lyautey, retirement home of the French Marshal Louis Hubert Gonzalve Lyautey. Around 1930 the nearly eighty year-old Marshal had a conversation with his landscaper:

Lyautey asked his landscaper if he would on the next day start planting a row of oaks to line the road up to the chateau.

"But Mon Marechal," said the gardener, looking at the aged Lyautey. "The trees will take more than fifty years to grow."

"Oh," said the Marshal. "In that case, we have no time to lose. Plant them this afternoon!"

Notes: Here's the tape from 1993:

Robert Samuelson, Washington Post: March 25, 1993: The Clinton... BTU tax would increase the price of oil by $3.50 a barrel, or about 18 percent of today's price. A ton of coal would increase $5.60, a 26 percent jump. A thousand cubic feet of natural gas would rise about 13 percent.... Yes, it would depress oil imports - but not by much.... Likewise, the tax wouldn't reduce pollution or greenhouse gases because it doesn't cut overall energy use. Economic and population growth will raise energy consumption an estimated 15 percent in the 1990s; the tax might shave the total by 2 percent, says the administration.... The CBO has estimated how big a tax would be required to stabilize emissions of carbon dioxide, the main greenhouse gas and a byproduct of fossil fuels. Compared with the Clinton proposal, the overall tax would have to be twice as high and the tax on coal three times as high....

Clinton... is simply trying to stampede his program through Congress. He envisions a one-time spasm of deficit reduction. By fall, all the political dirty work would be done. This means... accepting a Clinton package that has too many taxes and too few spending cuts....

Congress should separate the energy tax from the Clinton package and deliver a firm message: We won't pass this tax - or its equivalent - until you propose more spending cuts. This would give Congress more time to evaluate the energy tax and put more pressure on the White House to cut spending. Unfortunately, Congress shows no interest in asserting itself. It prefers to be stampeded.

As Robert Samuelson knew back then--and as we all know now--there were no Republican votes for deficit reduction in 1993, no matter what program Clinton proposed. The Republican leadership had decided that they were going to make Clinton's presidency a failure, and would oppose the 1993 budget no matter how many spending cuts were included. Additional spending cuts would have lost left-wing Democratic votes for the reconciliation package. As it was, the reconciliation bill passed by a single vote in each of the houses. Thus a call for Congress to refuse to be "stampeded" was a call for no budget reconciliation bill at all, and thus a call for no increases in taxes--not even on carbon.

Seven-League Boots: For the Weekend

Stephen S. Roach: When Politics Trumps Economics: "Showin...

Stephen S. Roach: When Politics Trumps Economics: "Showing no appreciation of the time-honored linkage between trade deficits and macroeconomic saving-investment imbalances, the president continues to fixate on bilateral solutions to a multilateral problem...

...Similarly, his refusal to sign the recent G7 communiqu�� was couched in the claim that the US is like a ���piggy bank that everybody is robbing��� through unfair trading practices. But piggy banks are for saving, and in the first quarter of this year, America���s net domestic saving rate was just 1.5% of national income. Not much to rob there!... With the Congressional Budget Office projecting that federal budget deficits will average 4.2% of GDP from now until 2023, domestic saving will come under further pressure, fueling increased demand for surplus saving from abroad and even bigger trade deficits in order to fill the void. Yet Trump now ups the ante on tariffs���in effect, biting the very hand that feeds the US economy. So what Trump is doing is not about economics.... But why single out economics? The same complaint could be made about Trump���s views on climate change, immigration, foreign policy, or even gun control. It���s power politics over fact-based policymaking....

China���s real challenge to the United States is less about economics and more about the race for technological and military supremacy. Indeed, the pendulum of geopolitical leadership is now in motion.... China has ascended. Back in 1988, its per capita GDP was just 4% of the US level (in purchasing-power-parity terms). This year, that ratio is close to 30%���nearly an eightfold increase in just three decades. Can power politics offset the increasingly tenuous fundamentals of a saving-short US economy that continues to account for a disproportionate share of global military spending? Can power politics contain the rise of China and neutralize its commitment to pan-regional integration and globalization?...

Like Trump, Xi does not do capitulation. Unlike Trump, Xi understands the linkage between economic and geostrategic power. Trump claims that trade wars are easy to win. Not only is he at risk of underestimating his adversary, but he may be even more at risk of over-estimating America���s strength. The trade war may well be an early skirmish in a much tougher battle, during which economics will ultimately trump Trump...

#shouldread