Compromise In The Age of Trump: Centrists Are Handing Trump The 2020 Election | Blog#42
The 2020 Democratic primaries are starting to heat up and staying away from commenting on my blog has been painful in more ways than one.
The last few weeks have seen a flurry of news, including Trump’s disastrous trade blackmail tactics with friendly and competitor nations alike. It’s been just as hard to watch congressional Democrats tacitly agree to defray the victims of Trump’s blackmail: our farmers.
As a nation, we have a long history of supporting our farming communities; not so much the small family farm, but farming as a whole. That’s fine, I guess, except that now, protecting our farmers also means helping Trump hide the damage he is causing with the tactics he is employing in order to change the terms of our international trade.
It is perfectly understandable that, almost two years before an election, Democrats cannot possibly withhold passing spending bills. The thing, though, is that allowing Trump to bypass Congress entirely and hand out $16 billion to to farmers, with a bonus $1.5 billion thrown in for food pantries, without any vigorous opposition and without so much as a minimal effort to explain why to the public, will come back to bite – hard. Who will it bite, you may ask?
Today’s edition of The Pew Research Foundation website includes an article entitled, Food Banks Win in Trump Trade War.
“The shelves at your local food bank are likely stocked. Give credit to President Donald Trump’s trade war with China.
Food banks have been the beneficiaries of a U.S. Department of Agriculture program crafted last year and recently extended to support farmers affected by China’s retaliatory tariffs. Part of the farmer bailout includes a $1.4 billion program to buy surplus commodities affected by the trade tariffs and distribute them to food banks, schools and other outlets that serve low-income people. The purchases include beef, grapes, lentils, oranges, pistachios, pork, strawberries and tomatoes.
Leaders at food banks say the program has helped them provide their clients with healthy food, though maintaining and distributing perishable goods has come with unexpected costs. But critics say donating food to the needy is merely a beneficial side effect of the aid program and won’t put a substantial dent in food waste or hunger.
“That combination of trade war and additional food for food banks is not the policy mix I would have recommended,” said Parke Wilde, a food economist at the Friedman School of Nutrition Science and Policy at Tufts University in Boston. “It’s better to have a fairly well functioning trade policy and less need for mitigation for food banks.”
Still, food banks are happy to have the additional items, even if it means adding freezers and storage space to accommodate it.”
Food banks have had a terrible time keeping up with demand since the start of the Great Recession and through the so-called recovery. It is more the norm than not, still, to see year-round efforts by food banks, in partnership with grocery chains, in raising food donations. Have you noticed the big brown bags at your grocery checkout counter? When those first appeared around 2014, iIt used to be done only on holidays like Christmas and Thanksgiving. Now, the fundraisers are ongoing.
But now that Trump has broken agriculture’s main sources of export income, at least for the moment, our poor have become incidental beneficiaries. One might ask if that’s such a bad thing. Of course not. Ensuring that our nation’s food pantries are well-stocked could never be a bad thing, in and of itself. The bad part is how they came to be so well provisioned.
In an economy that is equal, there wouldn’t be such a call for free food. There wouldn’t be so many working poor who cannot afford to buy food for their families. In an economy that is working for the entire nation, wages wouldn’t be so disproportionate across the board. In an economy and a political system that are working adequately, there wouldn’t be an executive branch that is destroying itself and a legislative branch that is covering its tracks.
The Trump Agriculture Department began a federal aid program in July 2018, repurposing $12 billion of funds that didn’t require congressional approval. This was started before the November 2018 election, without any congressional approval or oversight.
Fast forward a year, and Trump is still waging a trade war. In fact, the war he started a year ago has yielded so little (does a negative net gain even qualify as “yielding?”) that, instead of using a different tack, Trump is doubling down. Without funds that can be appropriated through Congress, or rerouted to the Agriculture Department from the budgets of other departments (all of the funneling and rerouting is going to immigrant detention), Trump finagled himself more borrowing power to keep the farming industry stable last September, as Politico reported last month:
The aid programs in both years primarily involve sending direct payments to farmers and ranchers using funds from the Commodity Credit Corporation, a Depression-era financial institution under the USDA that has broad authority to stabilize the farm economy.
But it is unclear whether the CCC has enough borrowing authority to fund another tariff-relief program. It is only allowed to borrow $30 billion per fiscal year from the U.S. Treasury to fund its work, and last year’s bailout used a big chunk of that. The CCC also is used to fund traditional farm subsidies authorized every five years by Congress.
Lawmakers last September included language in a short-term spending bill that effectively gave the CCC more flexibility to keep money flowing.
Hoeven, who chairs the Senate Appropriations subpanel overseeing USDA, told reporters last week that Congress can easily reimburse the financial institution if needed.
Trump is using taxpayer money to help just one industry harmed by trade policy. Other industries reeling from the tariff battles, from car manufacturers to shoe retailers, are not expected to receive financial aid.
Why aren’t we hearing the Democrats’ screams? Why aren’t Democrats on the road talking to constituents and the public at large and preparing them for the fight they should be waging to keep Trump from covering his blunders? After all, by paying off farmers, Trump is making sure that a vocal part of his constituency remains loyal. By ensuring that farms, big and small, don’t fail, Trump also lays the foundation for the dishonest claim he will surely make about the resounding success of his trade policy. Oh, and you can be sure he’ll throw in a word or two about taking great care to ensure that food pantries have the stock they need, even though the real reason they’re getting all this bounty is that there is nowhere else to store it.
This is one part of the bait and switch that is currently unfolding, without so much as a peep from congressional Democrats.
The other part of this, quite a significant one, is monetary policy and Wall Street.
In a new op-ed in the Washington Post, former Obama adviser, Larry Summers, explains why we are now ripe for another recession:
While the headline number for first-quarter growth in gross domestic product (GDP) was a robust 3.1 percent, the details of the report suggest much weaker prospective growth. Jason Furman has highlighted that the gap between GDP as reported and the conceptually equivalent GDI, (gross domestic income) measure is now at its highest level since the onset of the Great Recession.
Moreover, the components of GDP that have predictive power for future growth are running at less than half the total GDP growth rate. Little wonder that most forecasters’ expectations for second-quarter growth are well below 2 percent. Other grounds for concern include weak reports from business on spending intentions, trade-war uncertainty and yield curve inversions —traditional predictors of recessions.
Then, Summers opines:
The best way to take out recession or slowdown insurance would be for the Fed to cut interest rates by 50 basis points over the summer and by more, if necessary, in the fall. A serious recession anytime in the next few years would encourage populism and polarization at home, and reduce American influence and strength in the world as well as damaging the global economy. It is clear in retrospect that the Fed was too slow in responding to gathering storms during 2008 as the Great Recession took hold and in 2000 when the Internet bubble collapsed.
Summers’ op-ed was written before today’s announcement by Fed Chair Jerome Powell, that he will be lowering interest rates. That announcement garnered an immediate response. The Dow instantly climbed 500 points on this news alone.
That Jerome Powell would finally bow to Trump’s intense bullying over the past year is no surprise. That Jerome Powell, a Republican, would want to save Trump from himself (and the economy in the process), is also no big surprise.
But Larry Summers worrying about protecting the markets from Trumpian instability? Delay a Trump recession? That tack is completely consistent with the monetary policy advice he gave President Obama at the start of the Great Recession. Save the markets. Save Wall Street. Save Trump.
Back in 2008, there was plenty of wiggle room for then Fed Chair Ben Bernanke to lower interest rates sharply and flood the market with Quantitative Easing money. Next time (this time?) those options are off the table. We are at 2.5%. That is how much the Fed can lower interest rates before it hits the zero lower bound. 2.5% is insufficient. So, what’s Summers’ solution? Lower rates now to soften the blow or delay it.
Again, who does this benefit, a year before a general election? To whose detriment would such maneuvers be? If not Wall Street. If not manufacturers and farmers. Who would these monetary maneuvers end up hurting – again – in a downturn? Not the banks, not Uber, not Lyft, not Apple, not Big Pharma, not Big Agriculture – not anyone except what’s left of the middle, working and growing gig economy classes. They’d be left holding the bag, again, except this time with a lot less generous stimulus package than was passed under Obama.
All this why? Because if we don’t do as Larry Summers says, we will be ripe for populism. Say what? What exactly is the rise of Trump, if not the rise of populism in the United States? What exactly did the choices in 2009, together with policies implemented after 2010, bring about, if not populism? What exactly did a general election campaign based on incrementalism and more of the same result in, if not the populist rise of Trump?
Contrast that kind of thinking and writing to Jared Bernstein on his blog. In “Trump and the Mexican tariffs: How far is this administration willing to go to achieve their protectionist, anti-humanitarian goals? Maybe farther than we thought.” Jared Bernstein writes:
But there’s also a plausible scenario where this Mexico tariff seriously dings our economy, through at least two, related channels: financial markets and investment. Equity and bond markets are initially reacting predictably negatively to the proposal, with auto shares taking a beating. I don’t worry about day-to-day market swings, but worse financial conditions, if they persist, clearly bleed through to growth, and thus to jobs, wages, and especially investment, where investors have increasingly been complaining about the “uncertainty engendered by the escalating trade war.
Relative to many economists, I’ve downplayed the “uncertainty” card; economies, like life itself, are always uncertain. But while I haven’t done the analysis (I will), I think there’s a signal building from trade uncertainty to the weak numbers we’ve been posting on business investment. This is especially the case given factors pushing the other way, such as low borrowing rates, strong consumer demand (albeit with recent hiccups), and high corporate profitability.
I’m not predicting recession, of course. Economists cannot reliably do so and the unemployment rate remains at a 50-year low. But the trade war was already a headwind and if this Mexican tariff goes through, that wind will gain velocity.
Q: Wait a minute. Trump may be crazy, but surely, he doesn’t want to undermine the economy, especially with a reelection campaign in the offing.
A: You’d think so—I certainly have—but this is yet another thing many of us have gotten wrong about him. The Trump recipe, according to observers including myself, has been create chaos, capture the media, propose a nothing-burger solution, claim victory. And do all this before the sh__ hits the fan, i.e., before there’s real economic damage. And, in fact, there’s some evidence that Trump largely plays with house money, meaning he creates economic chaos when the economy and markets are strong enough to shake it off.
But lately, he and his team seem more committed to sticking with their interventions, even when there are clear costs, as in the market and investment data. True, labor markets, job growth, real wages—those most fundamental indicators—remain solid. If that were to change, perhaps we’d see the same outcome as when the air-traffic controllers said, “it’s over,” re the government shutdown.
But those of us whose theory of the case is that when it comes to damaging the U.S. economy, Trump will only go so far, may need to update our priors. If this Mexican tariff goes into place and then escalates, we may be looking at an administration that is willing to sustain a lot more damage to achieve their wrongheaded, protectionist, anti-humanitarian goals.
Jared, of course, is right about Trump. What he doesn’t discuss here is the Democratic response. There’s been none, when there could have been. When on May 22nd, as Politico reported, even Senator Chuck Grassley was stating “”that the White House should have been more cautious about the timing of the announcement because farmers are still planting.
“[W]e want farmers to make decisions on how many acres of corn and soybeans to plant based on the market and not something the government’s doing,” he said.””
Where was Senator Jon Tester? He’s a Democrat (at least nominally) and… he’s also a farmer. Sherrod Brown of Ohio has a sizable rural constituency, as do Bob Casey of Pennsylvania, Feinstein and Harris of California, Leahy of Vermont, Warner of Virginia, and many others. Sanders of Vermont and Warren of Massachusetts both have offered plans for rural America in their platforms.
Tester was on Face The Nation on Memorial Day weekend.
He made some of the right noises in expressing his opposition to Trump’s trade wars and how farmers are affected. Though, in contrast, on CNN, this other farmer from Ohio was far more impressive in his mastery of facts, economic policy and agronomy.
Christopher Gibbs, quite clearly, gets it. He is quite clearly not only able to understand the political and economic dynamics, but is able to explain them in a cogent, erudite manner to a TV audience. How likely is it that he would be unreceptive to a counter message from Democrats? How unreceptive would he be to Trump being forced to back off of the cliff he’s dragging us all over?
But back to Jon Tester for a moment. He was asked if he saw Democratic candidates who fit the description he gave earlier in the week in a speech about Democrats gaining back the rural vote :
Why would Jon Tester harp on free college, guaranteed jobs and universal healthcare as disqualifiers for a candidate with good rural policies?
How hard would it be for a Democrat with a progressive rural plan to convince farmer Christopher Gibbs farmer to vote blue so he benefits from sane rural policy and his family from human rights such as guaranteed education, healthcare, and work? Do all farmers’ children stay on the farm? Do farmers’ children not need a higher education, say, as agronomists or botanists? Do farmers and their families have an easier time than the rest of America getting their healthcare needs met, financially?
To listen to Tester, one might be mislead into believing that rural Americans are fundamentally different from the rest of America when, in fact, they are no different from the Jon Tester who admitted he’ll take one of Trump’s ‘bandaid’ bailout checks but can’t find the honesty to utter Senator Bernie Sanders’ name and concede that Sanders’ Rural America Plan is appropriate and not a bandaid.
If there is Republican snakeoil in the “makers and takers” approach to public speaking, there is most certainly a Democratic snake oil approach in railing against “socialism and free stuff” that really are neither socialism or free. When you’ve spent decades in the Senate caping for greedy corporate sponsors while watching the middle class shrink to a nub, wages stagnate to the point where people can’t pay rent, eat, or actually use the health benefits they pay through the nose for, taxing corporations to pay for college or universal healthcare isn’t free anymore.
You, who works two or three jobs for low wages, crappy or no benefits, more than pay for the (in)dignity of not having a proper safety net: with your lives. You, who has managed to hang on to your good job and who is watching their own kids graduate from school with crushing debt and no decent-paying jobs. You, whose 29 year old kid still lives at home out of financial need. You more than pay for it with the sadness that comes from knowing your progeny won’t have it anywhere as good as you did for a part of your life.
Come on, America! Buck up! Get some self-love and self-respect and send these centrist relics packing!
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