A BRIDGE TOO FAR

 People are not prisoners of fate, but only prisoners of their own minds. ~ Franklin D. Roosevelt 

There’s no doubt that the 44 days we have endured Donald Trump’s presidency have been fraught, excessive and soon-to-be expensive. That’s especially true because the majority Repubs in both houses of Congress have behaved as supine sycophants. As a consequence, the president has trampled over numerous established conduct standards. This includes his all too notable efforts to certify himself as a modern-day Caligula, one of Rome’s most treacherous emperors. Caligula’s reign as emperor was cut short when officers of the Praetorian Guard, senators and courtiers assassinated him. During his almost four-year reign from 36 - 41 AD, the decadent Caligula tirelessly worked to strengthen the already-unrestrained power of the Roman emperor. Sound familiar? 

Caligula Caesar (12 – 41 AD)

Meanwhile, the leaderless Dems remain in a myopic muddle. They are still attempting to figure out why they lost 120 days ago. Despite their uninspired efforts, I yearn they’ll be ready to challenge successfully their opponents way before the next-year’s federal elections on Nov. 3. Given the Dems’ pace so far I’m not sure they’ll be ready. Nevertheless, hopes spring eternal, despite recent polling that shows the Dems’ approval ratings are the lowest recorded in nearly the last 2 decades. 

My principal consolation is that the Repubs have buoyantly reached a way too early peak, electorally speaking. The multiple, adverse consequences associated with the president’s becoming a misguided tariff warrior, among other things, that will heighten inflation. Substantial price increases will soon occur for veges and fruits imported from Mexico, as well as electronics, shoes (99% of shoes sold in the US are imported, mostly from China) and other traded items from around the world. Your wallets will soon need to be thicker. 

And don’t forget cars. One automotive expert stated there’s probably not a vehicle on the market today that wouldn’t be affected in some fashion by the new US tariffs. And these price increases could begin increasing within several weeks of the tariffs going into effect. The cost of producing cars throughout North America may soon rise between $3,500 and $12,000, according to particulars. Imported cars’ prices will be directly affected by the tariffs. 

Importantly, the hydra-headed (Elon Musk and Donald Trump) Musketeerian cohort’s efforts include stripping the federal government of vital strategic capabilities, including the significant human capital held by experienced public sector professionals. Their hard-earned knowledge cannot be replaced by Musk’s cocksure DOGErs using fiscal chainsaws. The Musketeers’ efforts will ultimately yield sobering political and economic tempests for the Repubs once they start affecting regular folks beyond the DC beltway, like you and me. 

A major goal of the imprudent Musketeers’ staff cuts in federal agencies is to provide some fiscal breathing room for Mr. Trump again to lower federal taxes. When he did it in 2018 the already-rich benefited disproportionately. Within several years the top 5% of households had received 40% of Trump’s individual tax cut benefits. According to Census data, the average annual earned income in the top 5% of US households is about $500k. Do such income levels need tax reductions? Clearly not.  

The president’s dreadful milieu of profligate changes produced an unexpected thought for me involving the game of bridge. I learned how to play contract bridge when I was in high school. Any skills I might have once had with this interesting card game dissipated long ago. My parents regularly played bridge with a group of friends, one of whom took it upon herself to teach me how to play. At that time – the 1960’s – bridge enjoyed considerable popularity. To excel at playing bridge, it’s important to apply mental insight, logic and deliberate tactics to make your bid. These skills, rather elusive for me way back when, are particularly important when no suit has been designated as trump so the highest card of the suit that’s initially played in a hand wins. 

Continuing my bridge analogy, all of us will benefit now from publicly bidding No Trump. The president’s actions represent a bridge too far to take beyond November 2026. 

My hazy memories of playing bridge are distinct from my vivid recollections of driving over several of the nation’s marvelous bridges. First place goes the Bixby Bridge, shown below. 

The Bixby bridge. 

This iconic 93 year-old bridge was completed for $200,000. When you’re driving south on CA Rt. 1, the Bixby bridge serves as the gateway to Big Sur. I’ve driven on this bridge several times, each one a delight. 

I hope the Dems will be searching for a Bixby bridge to the future. The Musketeers’ efforts represent a bridge to a future that’s utterly ominous. 

The Ugly Tragedy of Tariffs

No nation was ever ruined by free trade. ~ Benjamin Franklin 

The US-China trade war is continuing and will get much worse on Tuesday. First initiated during President Trump’s initial term, US tariffs on specific imported Chinese products ranged from 10% to 50%. As of February 4, tariffs on all Chinese imports will be 10% above any existing tariffs. The president didn’t forget the other 2 nations that we trade most with. He also increased US tariffs on Canadian and Mexican imports to a stunning 25%. Kaja Kallas, the European Union’s chief diplomat, correctly labeled them saying, “There are no winners in trade wars.” 

The president’s Order contains a clause that will increase US tariffs if Canada, China, or Mexico retaliate. All three governments already have promised to answer Mr. Trump’s higher levies with their own retaliatory tariffs on US exports including Florida orange juice, Tennessee whiskey, Kentucky peanut butter as well as other goods. 

On October 15, 2024 Donald Trump stated that of the 470,000 entries in Webster’s English Dictionary, “Tariff is the most beautiful word in the dictionary.” Now as president again, he’s attempting to beautify America. His new tariffs will not be beautiful; they will be ugly, especially for consumers. 

Tariffs have a long history of creating revenue for public potentates. The world’s first tariffs of record were established by English King Henry VII in 1489. 

Henry VII (1457-1509)   Wikipedia

Three (3) centuries later, the US Tariff Act of 1789 was promptly enacted by the newly-created US Congress. This law allowed only the US government to levy uniform tariffs, no state can create tariffs. Tariffs remained the primary source (up to 90%) of US federal revenue for well over a century. Tariff revenues now provide about 2% of federal revenues. Before the president’s January 31 tariff proclamation, the average US tariff across all products was 2.77%. 

Today the US has increased tariffs on all imported Chinese goods. Such an escalation will raise prices for companies and consumers likely accelerating domestic inflation. Higher US tariffs have incited additional retaliation from Canada, China and Mexico, further ratcheting up a trade war that has already exacted economic harm for each country. 

Hundreds of products’ prices were subsequently increased by President Trump’s first Chinese tariffs started in May 2018. They were imposed on $200 billion (B) of Chinese imported goods that represents 40% of Chinese imports to the US. The list of tariffed Chinese items included everything from “frozen retail cuts of meat of swine” all the way to “furniture of plastics.” China predictably retaliated with new tariffs on roughly $60B US exports into China, that represented 46% of 2017 US exports to China. Although China has certainly stretched WTO rules to its advantage, it’s doubtful that the president’s current hardball tactics of raising tariffs will be worth the pain and cost that will harm US exporters and consumers. 

A prominent paradox of the president’s tariff increases is his nascent administration’s justification for the new tariffs’ anticipated loftier tax revenues. Higher tariff revenues will serve as a means of justifying the president’s extension of sizeable tax cuts for the wealthiest Americans. 

The US imports more goods from China than any other nation in the world. In 2022, China accounted for 16.5% of all US imported goods. This fact is reflected in the sizeable, continuing trade deficits the US has with China, $279.4B in 2023. China’s dramatic economic growth over the past decades has been principally export driven. It is the leading exporter of goods in the world, ahead of the US. China’s exports of goods represent a hefty 18.6% of its GDP. In 2023, total US goods’ and services’ exports represented 11% of our GDP. 

In this assessment of our trade conflict with China, I focus specifically on US farmers who have endured heavy and direct economic cross-fire from the president’s trade war. More than 20% of US agricultural exports face reciprocal tariffs from China and other countries. 

I examine an incongruous pair of agricultural products, soybeans and lobsters that have been subject to Chinese tariffs. Before the president initiated his new tariffs, the US exported to China $21.6B of soybeans and $128.5 million worth of live lobsters. I will soon dive into marine crustaceans, but let’s first consider the humble soybean. 

Soybeans.  Soybean plants are widely grown for their edible bean. US farmland is awash with soybeans. They are now planted on 86 million acres of American farmland, more than any other crop. Thus, soybeans are very BIG agriculture in the US. They are our nation’s single largest agricultural export; almost double that of corn. This is one reason why China imposed a retaliatory 25% tariff on US soybean exports. Another reason is based on where soybeans are grown – in bright red, Trumpian mid-western states. In addition to being the source of all things in the tofu universe, soybeans are widely used in animal (especially pig) feedstocks, and as an ingredient for biodiesel fuel and astoundingly even crayons. Fermented soy foods include soy sauce. 

About 60% of US soybeans are exported. The Chinese market dominates US soybean exports. However, the Chinese tariffs on US soybeans have transformed that situation. China retaliated in 2018-19, with tariffs on US soybeans entering China which caused US exports to plunge by 98% into the country. 

The Chinese imported only $15.1B of US soybeans in 2023. They’ve been buying more Brazilian and Argentinian soybeans instead. Also distressing for US soybean growers is that 2024 year-end prices per bushel have collapsed to August 2020 soybean prices. The USDA/ERS expects 2024 net farm income (a measure of farm profits) to drop by 1.1%. “It’s a big concern,” said David Williams, a Michigan soybean farmer. The trade conflict, which President Trump initiated with steel and aluminum tariffs in 2018, has spread far afield. 

US soybean farmers have taken it in the beans with respect to their livelihoods due to Trump’s tariffs. These reliably Republican farmers notably complained to the Trump administration about the first Chinese punitive tariffs. The US government responded to these grievances by providing $3.6B in unplanned, taxpayer-paid fiscal assistance to soybean farmers to offset their financial distress caused by price and income drops. 

Lobsters.  Lobsters are large marine crustaceans. North Atlantic lobsters are found off the ocean coasts of New England and Canada. The largest lobster ever caught weighed 44 lb. They are sold and shipped as living animals. The biggest producer and exporter of American lobsters is the state of Maine. Lobster is an acquired taste for some, but they’re eaten by increasing numbers of consumers. It is a staple in North American seafood markets and is featured on many restaurants’ menus. 

For New England and especially Maine, lobsters have long been a fragile business. In 2023, Maine’s 4,800 lobster fishermen (there are very few women who commercially catch lobsters) “landed” 93.1 million (M) pounds of live lobster; that’s just 58% of 2016’s catch and the lowest since 2009. The lobster industry has often experienced significant ups and downs. In 2019, US lobster exports to China dropped more than 40% due to China’s retaliatory tariffs and stringent inspections. But in 2023, the US exported $182M worth of live lobsters to China, after the Chinese eliminated both their tough Covid-related inspections for imported food and some of the punitive, retaliatory tariffs that eliminated virtually all US lobster exports to China during several prior years. 

    Mark Barlow is the owner of Island Seafood, a large business that ships live Maine lobsters around the world. Barlow mentioned that as soon as China slapped its 25% tariff on US lobster exports, he told his sales team, “China’s dead.” His Chinese customers confirmed his expectation. “I don’t think there is [a] way to import US lobster,” one Chinese buyer stated. Barlow confirmed the Chinese tariff was a significant blow for Maine. As he put it, “The orangutan in Washington woke up from a nap and decided to put tariffs on China, and then Chinese stopped buying [Maine lobster] immediately. We’re getting absolutely slaughtered.” Maine’s drop in lobster sales became Canada’s bounty. Instead of buying Maine lobsters, the Chinese purchased Canadian ones. Trumpian tariffs threw US lobstermen overboard. 

Although it's unlikely, introducing stronger US tariffs on hundreds of imported goods might eventually benefit some US manufacturers who are not subject to the tariffs. But Maine lobstermen and Minnesota soybean farmers will suffer again from their lobster losses and soybean sorrows. Their travails will coincide with millions of US consumers who will be paying extra for imported goods like vegetables, petroleum, automobiles and medical drugs. Mexican avocados will become pricier, and Trump’s happier, go figure. 

One estimate of the increased costs we will face because of these tariffs is at least $1,170 per household. The president’s provocative tariff policy – mimicking President William ("I am a tariff man.") McKinley’s failed policy preferences – does not appear to be a winning economic strategy, even if he blames it on DEI programs. 

GALACTIC MERGERS & ACQUISITIONS

 How many times must a person look up / Before they can see the sky? ~ Bob Dylan 

For some time now - beginning very early Wednesday morning on November 6th - the sun has been setting on the Biden administration.  

Since then, the Dems have been conducting extended post-mortem finger-pointings on why and how the Repubs and president-elect Donald Trump (the Lyin’ King) successfully captured the federal government trifecta. Triple ouch! Unlike the Dems, the Repubs are understandably licking their chops. 

Nevertheless, the federal government continues operating despite challenges by MAGA radicals. During the remaining 13 days before Donald Trump assumes the presidency, Joe Biden and his cohorts appear to be doing what they can to get some satisfying stuff done, especially if it will complicate Mr. Trump’s presidency. One example is Biden’s prohibiting future oil and gas leasing across 625 million acres of US waters in parts of the Atlantic Ocean, the Pacific Ocean, the eastern Gulf of Mexico and even the Northern Bering Sea. Take that Donald! 

But why didn’t President Biden and Congress pass a law giving citizenship to Dreamers, as they were promised long ago? A fine question. Should we be pleased that most of the prior federal government trifectas have only lasted 2 years? Maybe. 

So we can lament that congressional Dems haven’t managed to appoint even more liberal-ish judges to our federal courts; something they should have been doing way before now but didn’t find time for. And bemoan that the president hasn’t somehow reduced the almost stratospheric price of arabica coffee beans – a 30% wholesale price increase in just the last several months – that has us coffee drinkers in a tizzy. We’re again remined (thankfully) that presidents have next to no power to reduce individual goods’ prices, despite their sometime claims. 

The Federal Trade Commission (FTC) has principal federal responsibility for sustaining market competition by prohibiting anticompetitive mergers and acquisitions (M&A) and other business practices that could lead to higher prices, fewer alternatives and/or less invention. Ms. Lina Kahn was appointed by President Biden as Chair of the FTC on June 15, 2021. Although she’s been running the FTC a relatively short time, Ms. Kahn has aggressively pushed to reduce market concentration held by giant US businesses. However, Chair Khan’s remaining tenancy as FTC Chair is now expected to be quite short, assuming the 47th president wants to bother with the FTC. 

Under her leadership the FTC has strengthened its pro-consumer emphasis, with particular focus on M&A deals. Unfortunately, the FTC’s efforts to limit large M&A activities, have been decidedly mixed with more legal losses than wins. 

One recent success was the FTC’s opposition to the merger of two large grocery store chains – Kroger’s efforts to purchase Albertsons. Last month a US judge in Oregon blocked the merger in a ruling agreeing with the FTC that this merger would end up harming consumers and lead to higher prices. Kroger is the second largest grocery store chain in the US, behind the behemoth Walmart; Albertsons is the fourth largest. Will egg prices – the recently-discovered talisman of consumer well-being – dramatically decrease as a result? Unlikely, but it’s the thoughts that count. 

At this point, it's too late for Dems to do any more about promoting reductions in US market concentration. Soon-to-be President Trump’s heart and soul believes that concentration of corporate power should be promoted, not stymied. 

Ms. Kahn should focus her attention on something far more consequential – very large-scale M&A. I’m talking about President Biden appointing her to lead a new agency perhaps akin to the recently created and wholly unformal, Trumpian Department of Government Efficiency (DOGE). It’s headed by the conceitedly-focused duo of Elan Musk and Vivek Ramaswamy (M&R). Let them begin their promised, Sisyphean attempt to reduce the federal government’s budget by $2 trillion (29.6% of total FY2024 federal spending). A little trimming would probably be useful. But don’t hold your breath. Reducing the federal budget by almost 30% ain’t gonna happen. Why? Because M&R will fiscally need to step on too many influential political toes to cut even 10% of discretionary federal spending over a multi-year period. 

Instead, Ms. Kahn should evoke Bob Dylan’s stalwart Blowin’ in the Wind lyrics (see above), swiftly resign as Chair of the FTC and look skyward to observe the vast amount of M&A happening in the heavens. President Biden will promptly create the Transgalactic Trade Commission (TTC) and have Ms. Kahn serve as its initial Grand Leader. It will be an opportunity of a lifetime for her, given her interest in combating M&A. This time on a galactic scale. 

Sure, there’ll be a starship’s worth of challenges in crafting the TTC, but potentially it will be worth far more than the efforts that has been invested in its creation. If the Biden administration can commit to providing $8 billion in last-minute aid to Israel’s defense, offering a tiny fraction of additional funding to create the TTC should work. Assuming no unexpected challenges (who’s kidding whom, but …), I hope in several years the TCC will be able to tender 25% of the FTC’s current average number of legal case submissions in federal courts. 

Is there heavenly M&A? For sure. The image below from the Hubble Space Telescope shows 2 galaxies in the process of merging to eventually form another, even larger galaxy. 

NGC 6040 & LEDA 59642 merging to create ARP 122

This image shows the tilted, warped spiral galaxy on the left (NGC 6040) merging with the round, face-on spiral galaxy on the right (LEDA 59642) to form the combined ARP 122 super-galaxy. This cosmic merger is taking place 570 million light-years away from Earth’s spot in in the Milky Way galaxy. Referencing the galactic scheme of things, 570M light-years is considered a significant distance even by astronomers. For comparison, the closest major galaxy to us, Andromeda, is a mere 2.5M light-years from Earth. But reducing M&A activity on a galactic scale no matter where it’s located can be a worthy effort. 

The Milky Way, our neighborhood in the universe, is a small-ish barred spiral galaxy spanning more than 100,000 light-years. Its disk contains 100-400 billion stars and at least that number of planets. The Earth and our solar system is perched about halfway from our galactic center, along one of its spiral arms. 

According to recent cosmological calculations based on observations from the Hubble and others of the more than 40 space-based telescopes now circling the earth, there are at least 200 billion galaxies in the observable universe. From this appraisal, astrophysicists think that between 5% and 25% of these galaxies are merging with or being acquired by other galaxies. 

Because there’s an incomprehensively vast number of galaxies twinkling in our skies, even a relatively small number of those actively merging with one another (say, 5%) translates into a gigantic number of galaxies merging or being acquired. OMG! This grandiose, heavenly M&A activity that may produce even more dark matter desperately needs to be managed by none other than Ms. Kahn. Rather than drift in the amorphous realm of what I might do for my next job, is Lina Kahn willing to up her game and become the initial Grand Leader at the TTC, and rise above the challenges to reign in transgalactic M&A? I hope so. 

COMPARING THE US AND CHINESE GDPs

 A PRIMER ON INTERNATIONAL MACROECONOMICS

Mere parsimony is not economy. Great expense may be an essential part of true economy. ~ Edmund Burke 

The United States (US) and the People’s Republic of China earnestly began dancing around each other on the world’s economic stage as long ago as the early 1980s, when Deng Xiaoping was China’s paramount leader. This dance continues… 

 The US gross domestic product (GDP) became the world’s largest around 1890, besting the British, according to paleo-economists. By then, the US economy was more than twice as productive as Britain’s. The Chinese GDP became the 2nd largest in 2010. Both nations’ GDPs remain in the top 2 since these dates. 

I travelled to Beijing during February 1980 on a UN project to teach Chinese planners about empirically-based macroeconomic forecasting models (no abacuses allowed). It was a memorable experience in many ways, including my learning that the sole Beijing hotel that westerners could stay in provided no heat in the dead of winter to its guests like me. None = BIG Brrrr. The hotel’s archaic Russian-built system did not work. Average Beijing high/low temperatures during February are 39°F/19°F; it felt a lot colder especially during the all too plentiful, freezingly-harsh winds blowing through Beijing from the Gobi desert. I attempted to keep warm by frequently drinking copious amounts of very hot tea when I was awake. This partial solution was definitely second-best. I needed functioning, hot radiators in my hotel room. 

Fortunately my stash of Aggregate Supply and Demand curves and least-squares estimators needed for my lectures survived the cold. Aside from a frigid hotel room, it was an extraordinary trip. Ah, foreign travel. 

Both the US and China have come a long way since then. In 2024, the US and China once again have the 2 largest GDPs on Earth. A nation’s GDP represents a key indicator measuring a country’s general macroeconomic health. The concept of GDP was created in the US in 1934, during the Great Depression. By the end of WWII, many nations used GDP to measure their economic status. The real (price-adjusted) 2024 US GDP is 24x as large as our 1934 GDP. 

This analysis offers my interpretation of the 2024 US GDP relative to China’s. Several highlights of this comparison include: 

• The US nominal GDP – the world’s largest – currently is nearly 60% greater than China’s,

• Our GDP per capita is over 3 ½ times greater than China’s,

• Despite having 2 very dissimilar economic systems, the shares of GDP expenditures financed by the US's and China’s governments differ by less than 1% of each other. 

My macroeconomic assessment of the US and Chinese economies is based on information shown in the table below. In addition to nominal GDP, this table considers 7 different factors that influence both macroeconomies. 

As mentioned above, the US  $29.17 trillion GDP, is the largest of any nation and has been since the mid-1890s. Historically, the US became the world's largest maker of manufactured goods and steel by the latter 1880s when it surpassed imperial England’s production. 

Our 2024 annual inflation rate, now 2.6%, has declined steadily since 2021 principally due to the Federal Reserve Bank’s tighter monetary policy efforts. The Fed’s “target” inflation rate is 2%. The Fed began raising its Federal Funds Rate (FFR) in March 2022 to quell inflation. At long last, in September the Fed decided that inflation was close enough to its target, so it began lowering the FFR, its principal interest rate. At its November meeting the Fed again reduced its rate – to 4.58% - hopefully ensuring our macroeconomy will not slip into a partial recession. 

In 2021, at the peak of the Covid pandemic’s economic disruption, our inflation rate was an excessive 7.0%. Although the 2.6% rate is less than half what it was just 3 years ago, current lower macro price increases have not engendered praise by consumers, much to the dismay of Democrats. This is especially true for grocery store items like eggs, whose price notably increased almost 30%, mostly due to avian flu not Joe Biden. Housing prices are up nearly 25% since 2020. Surveys indicate a strong majority of people want no price increases at all. Fat chance of that happening, especially with taller tariffs on the horizon. 

China’s annual inflation rate is a diminutive 0.3%, a level that often typifies an impending macroeconomic slump. China’s low inflation exemplifies the significant economic challenges the nation currently faces. Such challenges include a very distraught property/real-estate market, fragile consumer confidence and increased belligerence from China’s major international trading partners, which directly involves the US especially after January 20. 

Chinese authorities have recently expanded monetary policies to speed up their economy. These efforts include reducing the main interest rate, reducing the Chinese Central Bank’s required reserves, cutting citizens’ minimum down payment for 2nd homes and providing financial support for the principal stock market. 

China’s 2024 GDP growth rate is far stronger at 4.8%, over 70% higher than the 2.8% US growth rate. Nevertheless, the Chinese government is concerned about GDP growth because it has shrunk from 8.4% in 2021. 

Having 1.416 trillion people, China is the world’s second most-populated nation, after India. China’s population is problematically the most rapidly aging on the planet. The US population is the third largest, accounting for only 24% of China’s. This striking difference accounts in part for the impressive disparity in GDP per capita; at $82,715 the US is almost 4x as large as China’s. The US is 9th highest; tiny Luxembourg has the world’s highest GDP/capita, a stratospheric $151,150. 

GDP by Sector.  The table also shows significant differences between how our and China’s GDP is split by our economies’ 3 major sectors; Agriculture, Industry and Services. The US macroeconomy is dominated by the labor-intensive services sector that accounts for over 80% of total expenditures. In contrast, China’s services sector characterizes a meager majority - 54.6% - of its economic activity. China’s Industry and Agriculture sectors each represent far more endeavor than in the US economy. 

GDP by Component.  Finally, compare China’s and the US economy’s GDPs with respect to their 4 major expenditure components, the most common way of measuring GDP: Consumption (C: blue), Investment (I: grey), Government (G: orange) and Net Exports (X-M: yellow). The pie charts below illustrate several distinct differences in each nation’s GDP composition. 

 

Start with the biggest component, personal consumption expenditures. In the US, consumption represents over two-thirds of our 2024 GDP, 67.9%. This dominance exemplifies that our economy is driven by consumers including you and me. Although China’s consumption expenditures have risen, they now represent just 39.2% of their economy, less than 60% of the much larger US consumption share. Next, investment expenditures for the US are17.5% of our GDP; China’s are much larger, 41.4%. For at least 3 decades the Chinese government has prioritized economic growth via investment, not through personal consumption as in the US. This markedly different, notable prioritization is illustrated in the charts. 

The 3rd component, government expenditures, are unexpectedly quite comparable between the 2 countries. US G expenditures are 17.3% of total GDP; China’s G is 16.5%, less than 1% different. For me this is unanticipated because the US is a democratically-founded, diverse private market-based economy. In marked contrast, China’s economy is communist-founded and run by the Chinese Communist Party. It’s evolved and dramatically grown into a mixed socialist economy with strong central state production and control. 

What can explain this surprising similarity of G expenditures between such different economic systems? Possibly that China’s impressive Investment expenditures include a significant amount of unspecified, government-funded investments by its large, state-owned enterprises. In essence, China’s I payments probably include hefty volumes of government investment that’s not included in G expenditures. 

Furthermore, China’s public expenditures for their elderly/retired citizens are much lower than many Western nations’ standards. China’s deeply inequitable pension system provides rural elderly Chinese a publicly-financed pension of $30 per month on average. In sharp distinction, the mean retirement benefit for all US Social Security recipients is $1,784 per month. The US government’s Social Security and Medicare/Medicaid expenditures totaled roughly $3 trillion in 2024, more than 10% of our GDP. 

Net exports (X-M), the 4th and last component of GDP, is the smallest piece. Both nations’ net exports are less than 3% of their GDP in absolute numerical value. But unlike China’s net exports (+2.9%), the US net exports is a negative number (-2.7%), meaning that the dollar value of our imports exceed the dollar value of our exports. 

The yearly US trade deficit (M>X) is not a new thing; it has occurred since the 1970s. Our negative net exports are due to people’s and business’s higher demand for foreign goods and services. This demand leads to greater imports that our domestic industries may not be competitive enough to counter in international markets. 

Last year, the highest-value imports into the US from around the world include crude petroleum, machinery, vehicles and pharmaceuticals. Unlike the US, China is often characterized as an export-driven nation. After it joined the World Trade Organization in 2001, China has consistently recorded trade surpluses with the US and most other nations it trades with. China’s most valuable exports to the US include mechanical devices, electrical and electronic equipment (like iPhones) and textile products. Interestingly, soybeans are the highest-valued export from the US into China by a considerable margin. 

Overall, the US and Chinese GDPs reflect key aspects of the 2 nations’ distinct, differing economic and administrative systems. These systems ultimately are driven by the ever-shifting behavior of US and Chinese people, businesses and government. 

WILL YOUNG VOTES BE A KEY TO KAMALA’S SUCCESS?

 Not voting is not a protest. It’s a surrender. ~ Keith Ellison   

With 36 days until the presidential election, the media is having a field day talking about what it considers will be important groups of potential voters that can surely swing local and national election results. Here are several of the media’s “pivotal groups” for the election I have come across.

First, Omaha Nebraska may find itself at the “the center of the election,” at least momentarily. How could this be? Omaha is the nation’s 42^nd largest city in a steadfastly Republican red state. Because like Maine, the Cornhusker State allocates its Electoral College votes in part by Congressional District, and not the winner-take-all method used by each of the other 48 states.

 

 According to one account, Nebraska’s single electoral vote from its 2^nd Congressional District (CD)[1] (encompassing Omaha) that President Biden won in 2020, could prove vital for VP Harris this November. Because the media has been offering a steady panoply of presidential election possibilities during the ever-shrinking pre-election period, Omaha has captured a fleeting political focal point. Nevertheless, the potential presidential electoral importance of Nebraska’s presidential electoral vote from its 2^nd CD of will depend on complex, faintly possible multi-state voting outcomes, starting with VP Harris actually winning this 2^nd CD delegate election, to really happen.

Next, a recent news story carried this headline, “Young voters play potentially decisive role in 2024 election.” The crucial phrase in this headline is “potentially decisive.” Another story also attempts to tell a convincing tale that young, college-age people may have a pivotal role in the next election. Ah, youth.

Younger voters have played a role in every US election since 1972, just like other voters. This has been true ever since the government reduced the required minimum voting age from 21 years to 18 years via the 26^th Constitutional Amendment that was ratified in 1971. Those were the days.

Regarding our up-coming election, a new poll showed Harris leading Trump by a margin of 32% among likely young voters. That’s a startling and impressive margin. Yet another recent poll of younger voters for CNN found that Harris is preferred over Trump by just 12% of this sample, which if sustained on election day could be a problem for VP Harris. These 2 polls’ quite divergent margins reconfirms my view that whatever result you believe in, you can find at least one of the myriad of available polls that supports it.

Another hopeful story about youthful voters stated that young voters could have a monumental impact on the presidential contest. Nationwide, nearly 42 million 18-to-27-year-olds, the group known as Generation Z, will now be eligible to vote. Some observers say colleges have become more important than in past elections, with campuses hosting more voter-registration drives, debate watch parties and panel discussions designed to urge students to vote. Encouraging anyone, including young people, to vote is always a worthy cause.

For additional perspective, there are nearly 58 million adults age 65 and older in the US, virtually all of whom are eligible to vote. In terms of actual election results, every segment of the voting population can be potentially decisive. Despite the media’s recent zeal, youth voters have never been judged decisive in a presidential election’s outcome. There’s one reason: youth voters habitually have the highest rate of non-voting. Thus, despite the current media attention, I doubt young voters will play a decisive role in the 2024 election. They simply have routinely not voted in sufficient numbers, compared to other age groups, especially “seniors.”

The youngest-aged people only vote one-third as much as older people (10% vs. 34%, in 2022 according to Pew). Despite substantial efforts to get them to vote, young voters do not vote twice as often as older folks (13% vs. 27% in 2022).

Will youth voters have a monumental impact on November 5’s election, as some suggest? That’s highly unlikely. The above-mentioned slender numbers from Pew regarding people aged 18-26 years who voted are not encouraging. In 2022, they represented the lowest age-share of any voter group and the second highest age-share of nonvoters.

Like other age groups, youth did vote much more in our 2020 presidential election (rather than during the 2022 mid-term election). In the last presidential election 51.4% of youth (18-24 years) voted, according to the Census. But even this one-out-of-two youth’s voting represented the lowest voter participation rate across all ages. This analysis confirms that young people have been consistently least likely to vote in every national election since 1980.

Perhaps on November 5 youth-oriented pro-voting efforts can prove successful. College campuses are hosting more voter-registration drives and other activities. I certainly hope such efforts are fruitful, given that young folks’ proclivity to vote has heretofore been frail. But based on history, I lament that these sizeable efforts (including Taylor Swift’s recent endorsement of Kamala) will unfortunately be for naught in encouraging young folks to vote. 

The Pew research shows that the fraction of 18-29 year-olds who voted declined to 10% in our most-recent 2022 elections. That’s the smallest proportion of any voter age group, despite substantial get out the vote efforts by both parties. This November I expect voting throughout the US will be accomplished with diminutive numbers of young voters and far larger numbers of older folks, which honestly I am more comfortable with. Youth is great; and a broader set of life experiences is better as a foundation for voting. Once again, youth voters will likely have neither a monumental or decisive effect on this election’s outcome.

My desire is that plenty of youthful voters, along with your, my and everyone else’s electoral support, will help ensure the vice president’s hopeful victory.

Onward in Democracy for Omaha and beyond.

---

[1] Nebraska’s 2^nd Congressional District seat is now occupied by Representative Don Bacon, a Republican, who will be competing with Democrat Tony Vargas in November’s election. 

MANUFACTURING HIGHER TARIFFS, OMG!

Rumors of the demise of the US manufacturing industry are greatly exaggerated. ~ Elon Musk  

Recently President Biden decided he can help American manufacturers by momentously raising US tariffs on certain imported Chinese goods. I lament this action. Yet the importance of our economy’s manufacturing sector has been perennially bellowed by many.

Manufacturing is the process of fabricating goods by manual labor and/or machinery. Humans have been manufacturing objects for thousands of years. Predecessors of Homo sapiens created stone tools 200,000 years ago. About 3,000 years ago during the Bronze Age dagger blades were manufactured using an alloy of copper and tin (aka, bronze), shown below. In this era, technology every so gradually evolved over multiple centuries. Needless to say, since those not really good ol’ days technological advance has speeded up big time.

Bronze Age dagger blade. Wikipedia.

 When President Biden boasted in December 2023 that “We’ve created close to 800,000 manufacturing jobs since I’ve taken office” his statement passed several verifications.[1] But he was not talking about workers creating more modern dagger blades. He was hailing his extensive, multi-billion dollar government-funded industrial policies. His programs are focused on loans and subsidies to manufacturers who are building domestic semiconductor fabrication plants, EV subsidies to help domestic auto-makers, increased green energy production to stymie climate change and good ol’ infrastructure enhancements to shorten our daily commutes.

Most recently, the president has promoted substantial increases in American tariffs on Chinese EVs and batteries (to 100%) and solar panels (to 50%) to protect and assist domestic manufacturers. It’s another political nail sealing the doorway to free trade that a decade ago was a popular and proven prescription for gaining national benefits. Most economists recognize that when tariffs are imposed on imported goods they represent an additional, indirect tax in the form of higher prices ultimately paid by consumers, not manufacturers.

This isn’t the first time elected officials have imposed sizeable tariffs on the US public. The lamentable Smoot-Hawley tariffs were put in place by President Herbert Hoover in June 1930. These big-time tariffs covered over 20,000 imported goods and exacerbated the effects of the Great Depression.

President Biden’s new-found preference for substantial trade protectionism – he voiced disapproval when then-President Trump previously created similar tariffs – will hopefully assist domestic manufacturers. Even if successful, which is by no means certain, such policies will take quite a while to have beneficial effects. These tariffs will certainly produce unintended consequences. Expected consequences include the imposition of retaliatory tariffs by China. Yet the president is quite eager that voters will somehow fondly remember these measures on November 5, even if they’ll eventually pay higher prices as a result. Attempting to recreate the past is never easy.

 The president’s plan to vastly strengthen US tariffs on a broad variety of “strategic” goods imported from China is more targeted to improve his near-term political prospects than attain any specific economic goals. President Biden is using Section 301 of the Trade Act of 1974 that states if the he believes nation’s national security is threatened, he can unilaterally impose or change tariffs. The president believes that in spades; saying his new tariffs will protect American workers and businesses from China's unfair trade practices.

These tariffs will likely result in somewhat higher prices that consumers will face for a broad array of imported items, including solar panels, lithium-ion batteries, semiconductors, steel, aluminum, syringes, needles, personal protective equipment (PPE) and surgical gloves. I didn’t realize surgical gloves and syringes were strategic goods.

If you’re a died in the wool traditionalist like President Biden, manufacturing employment is the only true measure of honest labor. Manufacturing employment peaked in 1979 when 19.6M people worked at making goods. It’s been a long time since manufacturing has been the actual core of our economy. Service industries now account for 80.3% of total employment. Hoping to reinvent yesterday won’t happen even if you’re the president.

When considering the state of US manufacturing, it’s important to distinguish between manufacturing output and manufacturing employment. In April 2024, only 8.2% of US workers were employed in manufacturing. Manufacturing employment has steadily declined during the 7 decades since 1953, when it hit its peak 32% share of total non-farm employment. The Bureau of Labor Statistics forecasts US manufacturing employment will continue declining to merely 7.5% of all workers by 2032.

Manufacturing output however has defied economic gravity and held steady principally due to impressive increases in automation with consequent improvements in the sector’s productivity, relative to the overall economy. Domestic manufacturing output has kept a roughly 10% share of our real (price-adjusted) GDP. This increased use of automation/robotics in manufacturing means a substantial majority of manufacturing workers now are highly-skilled and well-trained.

I’d like to believe the president’s much-elevated tariffs will not result in weighty economic harm. I also wish these misguided actions might serve to strengthen his election prospects, but doubt they will. Even though the media does its best to make it seem like November 5 is the day after tomorrow, it remains 156 days away at this point.

Tariff policy per se never captures more than an ever so slender sliver of voters’ attention. Higher consumer prices due to these tariffs however will gain attention of far more people. Finally, misdirected actions like the president’s higher tariffs pale in comparison to what’s ahead if a now-convicted felon succeeds him after election day. So it goes…

 

---

[1] I won’t quibble with the president, although it’s more accurate to say 589K manufacturing jobs were recovered from the thankfully-brief Covid recession, and 175K new jobs were created. However you slice it, a great many manufacturing jobs have been gained during the president’s time in office. 

PROTESTS IN 2024 & 1968

In such ugly times, the only true protest is beauty. ~ Phil Ochs  

Do 56 years make a difference? Perhaps. Despite the magnifying effects of social media, I do not believe the current 2024 pro-Palestinian protests at dozens of US college campuses will be nearly as consequential as the anti-Vietnam war protests that happened in 1968.

One recent count states that 90 colleges among the 5,999 in the nation have had protests with about 2,300 total arrests. Curiously, unlike prior ones the protests at UC/Berkeley have yet to draw many headlines. One recent example protest in the news involved some of the 663 full-time students at the Art Institute of Chicago.

Granted, the current protests are not finished and there is much talk about them continuing for another 100 days until the Democratic National Convention (DNC) in Chicago that begins on Aug. 19. Talk is far easier than undertaking the significant efforts needed to make that actually happen. It is more likely they will peter out in the next several weeks, and then attempt to re-assemble for the DNC in mid-August.

I wonder how these college-based protests can be sustained after commencement season that is now in full bloom and will end within a month. The challenges facing demonstration organizers include how they can keep students focused on a protest without schools in full session. Naturally, any time local gendarmes over-react at a protest, the activists become revitalized. Indeed police have at times over-reacted, including stationing combat-ready sharpshooters on the roofs of nearby campus buildings at one of my alma-maters.

Nevertheless, the media’s attention has already begun skidding behind the actual conflict in Gaza. Whatever they may be worth, recent polls indicate only one-quarter of American people support these protests. At this point these antiwar protests now seem to be slight compared to the big bang of anti-Vietnam protests that I played a very minor part in that befell our nation and the DNC in Chicago 56 years ago. The media’s attenuated comparisons between the far larger anti-Vietnam protests and the Gaza protests reflect slender similarities.  

The Gaza protests are focusing on tragic events in the Middle-East that were initiated by Hamas’ dastardly attacks in Israel on Oct. 7 and killed more than 1,200 Israelis and foreign nationals, including at least 35 US citizens. Hamas and other compatriot groups seized 253 hostages. A total of 112 hostages taken prisoner during the attacks now have been freed. The fates of the remaining 141 hostages remain a mystery because Hamas refuses access to them for anyone. The Israelis have forcefully retaliated causing significant destruction and loss of life, as shown below.  

Gaza destruction from Israeli shelling.

The Gaza protestors, like those at Columbia University, are demanding that their colleges divest from companies that “publicly or privately fund or invest in the perpetuation of Israeli apartheid and war crimes.” US firms that the protestors have cited for colleges to divest from include Amazon, Google, Hewlett-Packard, Starbucks and McDonalds.

What results do protestors desire from disinvesting specific equity holdings like Hewlett-Packard or McDonalds from a college endowment because it sells computers or Big Macs to Israel’s government and the Israeli Defense Force (IDF)? Is this act supposed to change the Israeli government’s actions against Gazans and Hamas? American college endowments cumulatively are sizeable, but represent just a shard of international financial assets. If a college were to sell its endowment’s positions in these stocks, how much influence would it then have to possibly persuade these firms to change their global strategy with respect to Israel? None.

What would be the next set of endowment holdings that other protestors would want removed? Perhaps US Treasury bonds because our government has provided significant financial aid to Israel. In fact, since the end of WWII Israel has received more US foreign aid than any other nation on Earth, $312 billion. Shouldn’t the protesters want such aid to stop, given that it has provided Israel with significant improvements for the IDF, among other things. Disinvestment has the theoretical appeal of capitalist debasement, but not for gaining influence with respect to some protesters’ fuzzy goals.

The cause for the State of Palestine has been made numerous times over an historically extensive time period. Most recently on May 10, when the UN General Assembly (UNGA) offered a vote to upgrade Palestine’s membership in the UN. The vote was 143-9 approving the upgrade for Palestine from “non-member/observer status” to “member status,” with 25 abstentions. There are currently 193 UN member states, thus apparently 16 member states did not formally vote or abstain on this motion.

This was the second time the UN considered including Palestine as a full member state. In 2011 Palestinian President Mahmoud Abbas first delivered the Palestinian Authority's application for UN membership. It failed. The Palestinians did not receive the required minimum support from the UN Security Council (UNSC). Instead, Palestine received observer status in 2012. Palestine is one of two states that have observer (non-voting) status at the UN, the other is the Holy See/Vatican City.

The UNGA May 10 vote was entirely symbolic – something the UN habitually specializes in doing – because the inclusion of any national state into the UN requires prior approval for membership by the 15-member UNSC. A minimum of 9 of the 15 UNSC members must approve the request for full membership. As one of the 5 permanent members of the UNSC[1], the US retains veto rights on any measure put before the Council for a vote. The US vetoed the vote for Palestinian inclusion as a full UN member state.

Deputy US Ambassador to the UN, Robert Wood, told the General Assembly after the vote that unilateral measures at the UN and on the ground will not advance the US-preferred two-state solution. He stated, “Our vote does not reflect opposition to Palestinian statehood; we have been very clear that we support it and seek to advance it meaningfully. Instead, it is an acknowledgment that statehood will only come from a process that involves direct negotiations between the parties." Furthermore, the current Palestinian reality is there are 2 deeply rivalrous, ununified fragments to Palestine; the East Bank Palestine that is headed by Mahmoud Abbas’s Palestinian Authority and the Gaza authority that is headed by Hamas’s staunchly seclusive Yahya Sinwar.

The continuing diplomatic journey to establish a State of Palestine has navigated many twists and turns. In retrospect, mistakes have been made by every participant. The journey to Palestinian statehood was altered when the State of Israel was created in 1948, becoming a UN member in 1949. Since its beginning, the US has been a key ally of Israel. Both nations have benefited from this relationship. Nevertheless, this may be changing a bit under the strong right-wing control of Prime Minister Benjamin Netanyahu. President Biden recently threatened to halt some shipments of US offensive weapons if the Israelis move ahead with their invasion of Rafah.

Unlike the current Gaza protests the anti-Vietnam War protests throughout the US involved hundreds of thousands of Americans. There are several inter-related reasons why the Vietnam protests were so much broader than the Gaza protests. First, in the late 1960s all young American men between 19-25 years old were required register with the Selective Service System (aka, the draft) for military service. Second, President Lyndon Johnson made the tragically flawed decision to send large numbers of US combat personnel to aid South Vietnam’s fight against the invading North Vietnamese. President Johnson’s decision supported President John F. Kennedy’s previous 1961 decision that authorized smaller numbers of US military advisors to assist the South Vietnam government in developing strategy and tactics to combat North Vietnam’s raiding guerrilla troops.

The US Vietnam draft began in 1964. The US military conscripted 2.2 million American men during this period, which brought the Vietnam tragedy directly into families’ lives throughout the 50 states. The Vietnam War was never far from any American’s thoughts.

My Selective Service (draft status) card categorized me as 4-F, meaning I was legally registered but not qualified for military service. No, not because I had heel spurs like Donald Trump alleges. I was, and remain, a type 1 diabetic. Ironically, my having diabetes likely saved my life after my college deferment ended as a 21 year old B.A. degree holder.

About 2.7 million US troops fought in Vietnam for a decade, ending in 1973. An estimated 10,000 women also served in Vietnam, principally as nurses/medical staff as well as in administrative roles, military intelligence or air traffic control. More than 58,000 Americans died and more than 150,000 were wounded in Vietnam.

The estimated fiscal costs of the Vietnam conflict, that unequivocally pale in comparison to the human toll, exceeded $176 billion during 3 US presidencies: Kennedy, Johnson and Nixon. Retrospectively, the US’s entry into Vietnam’s civil war has been properly viewed as a giant military, political and cultural blunder of the first-order.

The Gazan conflict is significantly distinctive. Unlike Vietnam, there are no US armed forces fighting in Gaza. The scale of conflict is much slimmer. Perhaps more importantly and thankfully, there is no longer a draft requirement for young Americans to fight in the Middle East or anywhere else.

Comparisons between the protests in 1968 and 2024 have been made, but in a real sense the current protests about Gaza are incomparable to those that happened during the Vietnam War. The times are different, the politics are different and the public is different. The Gaza protests reflect these differences; many thousands of antiwar activists will not be marching in Washington DC towards the capitol with strong public support.

Although thoroughly despicable, Hamas’ strategy of hiding deeply underground within Gaza’s daily urban milieu is as outrageous as it is wretchedly shrewd. This strategy, together with Prime Minister Netanyahu’s scorched-earth tactics to improbably eradicate Hamas and its fighters, has resulted in immense damages to innocent Gazans’ lives. So far the Israeli Defense Force (IDF) has killed or injured more than 110,000 people living in Gaza, whose communities have been destroyed. Water, food, fuel and healthcare remain in desperately short supply in Gaza.

 Given these circumstances, what can the pro-Palestinian protests hope to achieve, other than expressing understandable exasperation and rage? Other than symbolism, somehow convincing college trustees to sell their endowments already-slender holdings of Israeli equities will have next to no actual remedial effect on Israel’s conduct in Gaza. Maybe symbolism is sufficient, although I doubt it. Trustees may be reluctant to do even this because it opens up future possibilities of having to unload other equities that upset another set of activists. More substantively, none of the Gaza protestors’ demands are aimed at getting Hamas to stop its staggeringly appalling tactics that precipitated Israel’s invasion. This is probably a purposeful oversight, but that bias limits the protestors’ broader support.

Although unlikely, the protestors should take as a victory President Biden’s latest public decision about the Prime Minister’s war tactics. The Gaza protests have encouraged the President to stop delivery of giant bombs and other over-the-top weaponry that the DOD calls “high-payload munitions.” Finally, I urge Gaza protesters to reconsider showing up in Chicago at the DNC. If they somehow disrupt the DNC’s proceedings – that the media will unfortunately happily support and emphasize no matter how inconsequential – they will only increase the odds that #45 will become our 47th President. That fate would be disastrous for far more people than the 2 million Gazans.

 

---

[1] The 5 permanent members of the UNSC are: China, France, Russian Federation, United Kingdom of Great Britain and Northern Ireland and the USA. The 10 non-permanent members - 5 of which are elected each year by the General Assembly for a 2-year term - currently are: Algeria, Ecuador, Guyana, Japan, Malta, Mozambique, Sierra Leone, Slovenia, South Korea and Switzerland.