TRADING PLACES

Free trade is not based on utility, but on justice. ~ Edmund Burke

This weekend China’s President Xi Jinping is meeting with our president at his Mar-a-Lago resort. A key discussion topic will be trade between the 2 nations. This face-to-face meeting represents a substantial test for  Mr. Trump for several reasons. First, the US and China are the world’s 2 largest economies. Second, each man has very different perspectives on how to conduct international trade with each other, let alone the broader features of their economic and political firmaments and mutual interests. These challenges lead The Economist to cleverly christen this inaugural meeting Spar-a-Lago.

Our golfer-in-chief unfortunately will not be carting with Mr. Xi along his fairways, clubs at the ready. Officially, the Chinese government takes a sub-par view of golf, considering it a game for rich capitalists. Perhaps the 2 men can relax and create personal connection during a game of bocce ball instead?

They have plenty of trade issues to discuss. In 2016 the US exported $169.8 billion (B) of goods and services to China. We imported almost 3 times as much; $497.6B of imported goods and services from China. The US trade deficit with China isn’t recent. It has been negative for 31 years ever since Reagan was president, as shown in the figure below.

US-China Balance of Trade, 1985-2016 (10⁹ $)

Source: Economist.com, DOC/BEA

Overall, the current US balance of trade (BoT; exports minus imports) deficit with China is $309.8B. Mitigating the US-China trade deficit would be useful for us, depending on how it’s done. The president and Congress have power to change policies that can influence some but not all aspects of our BoT. During the past 3 years the appreciation of the US dollar relative to other key currencies like the Yuan and Euro – that neither the president nor Congress can effect – has not helped US exports.

Beyond the US and the Middle Kingdom, international trade anxieties are affecting other trading nations. The largest concern is that trade growth has slowed; the high-output growth engine of globalization-related trade has braked. As we already know, the political winds are shifting, causing international trade’s sails to luff in the doldrums of no supportive breezes. The World Trade Organization (WTO) expects that trade will remain “sluggish” and grew just 2.8% in 2016, like it did in 2015. Over the last decade, world trade growth has lagged world GDP growth. The world’s real GDP grew 3.0% in 2016. Average annual world real GDP growth between 2000 and 2016 was 3.0%; between 2000 and 2010 it was higher, 3.9%.

The post-WWII orthodoxy of increasing trade to improve nations’ growth and development is crumbling. Talk of tariffs and other protectionist policies is cresting these days, as individual nation’s economic growth has faltered and domestic-centered populism rises.

In addition to the general reduction in GDP growth mentioned above,  there are more specific reasons for this decrease in trade. First, growth of the BRICS (Brazil, Russia, India, China and South Africa) has slowed. These nations are the world’s largest emerging markets. Their collective economic growth has slowed from 9% in 2010 to about 4% in 2015. By 2015, 3 of the BRICS (China, Russia, and South Africa) had slower growth for at least 3 consecutive years and Brazil remains in a significant recession. Brazil’s GDP dropped 3.2% in 2016, it contracted 3.8% in 2015. Long-term growth expectations in these 5 key economies have been repeatedly downgraded since 2010. This lack of growth affects both our exports and imports. Second, imports into developing nations stagnated, growing only 0.2% in 2016, according to the WTO.

Mr. Trump has spewed several ill-considered actions for dealing with the threatening, hostile world he sees beyond our boundaries, including abolishing “unfair” trade agreements like the North American Free Trade Agreement (NAFTA), placing punitive tariffs on imports and restricting our borders.  

The pre-election Trumpian “action plan” included withdrawing from NAFTA that the candidate called “The worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.” After becoming president, his extreme language has become less bellicose. Now he’s apparently willing to renegotiate, but hasn’t specified what that means; imagine our surprise. Time may tell.

In numerous public pronouncements the president has said he’s considering large tariffs on imports from countries like China and Mexico. Sometimes he’s mentioned a 45% tariff, other times a 10% tariff. Like all too many of his impulse-driven communications, they’re literally spread all over the map without substance. These specious ideas characterize his disjointed, no-dots-connected approach to creating policies that will hardly enhance our nation’s greatness. They’ll probably have the opposite effect. He seems oblivious to the likelihood that if he imposes tariffs on Chinese, Mexican and other nation’s imports these countries will retaliate with their own tariffs on our exports. In his fantasy world, US tariffs will only bring back low- and medium-skilled manufacturing employment; not higher prices on imported consumer goods and services, not curtailed exports from the ensuing trade war.

American companies that have used China and Mexico as a production base would struggle to revamp their supply chains. If US firms brought production back home to escape the tariffs, prices would increase dramatically and take considerable time to set up. As a consequence of much higher tariffs, Goldman Sachs estimates that the cost of producing clothing domestically would increase by over 40% and smartphones by over 35%. None of these consequences seems to concern Mr. Trump.

His muddled, myopic mind doesn’t see any connection between exports and imports. They are completely separate from each other, not mutually bound by trade agreements and economic reality.

The president seems equally unaware that the ultimate objective of bilateral and multilateral trade agreements is to benefit every signatory and that the negotiations to reach agreement will always involve trade-offs that need to be recognized and made. Trade agreements are founded on the world being a positive-sum game, where each party can gain. Should trade agreements be reviewed and modified over time? Surely, but Mr. Trump’s world view is at best zero-sum.

That zero-sum concept is not supported by historical facts. For example, under NAFTA US farmers – who most likely voted for Trump in large numbers – have exported significant amounts of corn and other ag commodities. In 2016 these farmers sold 13.8 million metric tons of corn to Mexico. Corn exports to Mexico have increased 5.5% every year since NAFTA was implemented in 1994. Mexico has said if the US walks away from NAFTA or imposes tariffs on Mexican goods, it will buy corn from other exporters including Argentina, not the US. How are you going to explain that in Dubuque or Omaha Mr. President?

Then there’s Trump’s Wall. Building the Wall along the US-Mexican border was a prominent specter in Trump’s candidacy. When mentioned in his campaign speeches, it wasn’t a question of if, but how tall and how long it would be – and, of course, that Mexico would pay for it. The Wall was only one piece of Mr. Trump’s actions to close our borders.

Other pieces include his disastrous 2-part orders to stop people from 8 (then 7) principally Muslim nations as well as other visa-holders from entering the US. To date, federal courts have fortunately taught Mr. Trump that his actions are subject to court interpretation; despite his protests (which themselves were cause for public astonishment and distain).

But back to The Wall. The total length of the US-Mexico border is 1,989 miles. It’s been difficult for anyone outside the White House to get specific information about Mr. Trump’s plan for the Wall. Until Jan. 20, Mr. Trump's border wall existed only as campaign rhetoric not supported by a real plan for building or paying for it. Its length and height depended on to whom and where he was talking. Now that he’s president, a plan appears to be arising. In mid-March the Department of Homeland Security (DHS) issued a request that stipulated the wall must be 30ft high, look good from the US side and be hard to climb or cut through. It must take at least 1 hour to cut through. The request apparently didn’t state how long the wall should be. Irony abounds beyond walls because some of the firms that may submit bids are minority-owned, Hispanic companies.  

Others have speculated that the Wall could be up to one-half of the border’s length, with natural barriers such as the Rio Grande River taking up the rest of the length. Guestimated costs range from $12 to $21 billion. The President’s draft budget, which was sent to Congress last month and generated scathing reviews, indicates only about $2.9 billion is now earmarked for the Wall — most of which will come from sizeable cuts to key agencies within the DHS, like the Coast Guard. Oh, will the bill eventually be sent to Mexican President Enrique Peña Nieto, as Mr. Trump proclaimed dozens of times? Nope, he was just kidding in trolling for votes. US taxpayers appear to be on the hook, which is no laughing matter at all.

The president’s international trade policies are quixotic at best; they are misdirected and inconsistent. It’s hard to see such policies as the product of reasoned, competent, coordinated analysis. This goes beyond just trade. Such concern was reflected in a recent column by David Brooks where he stated, “Trump’s greatest achievements are in the field of ignorance. … It’s not so much that he isn’t well informed; it’s that he is prodigiously learned in the sort of knowledge that doesn’t accord with the facts of our current dimension.” Trading places with Mr. Trump would involve more than relocating to 1600 Pennsylvania Avenue. Fasten your seat belts and resist.

DEVELOPMENTAL BLUES

Development is an endurance exercise with incremental improvements. ~ Sri M. Indrawati  

The self-inflicted tumult created by the 45th president has whelmed our policy-making and politics during the 74 days since he was inaugurated is completely evident to all but Micro-Man himself. His and his acolytes’ myopia limits their vituperative policy considerations only to domestic affairs and not the 195 nations beyond the US. After all, it’s “make [only] America great again” isn’t it? An exception to this domestic bias includes the impending social and economic disaster connected with the Mexican border wall.

His limited view of our world is reflected by his proposed 32% reduction in funding for the State Department and other development programs. The media’s reaction to the president’s punishing budget reductions didn’t adequately acknowledge the fiscal fact that it is not the president but Congress that ultimately determines appropriations and expenditures for the federal government. The president proposes; the Congress acts. Given how badly he mishandled his push for the contaminated replacement to Obamacare, I have no doubt his proposed budget will drastically change. As one prominent Republican Senator concluded about the president’s proposed budget reductions, “They’re dead on arrival.” We’ll see about his conclusion during the coming months of budget negotiations.

The president’s overly inward focus has given me a case of the developmental blues. The rest of the world continues to exist, remains vital to our interests, and should not be summarily dismissed as it has been by Micro-Man.

Like other interesting economics topics, opinions about the efficiency and effectiveness of economic development vary considerably. Economic development is multi-dimensional and refers to improving the welfare and status of a nation’s people, including their health, well-being, education and livelihood.

Some analysts despair about the state of development of many countries, especially because so much economic, political and personal effort has been expended in attempting to improve the lives of people in "lesser-developed countries" (LDCs). Other analysts are more optimistic, saying that some developing nations have realized important gains in crucial facets of their social and human advancement.

At the risk of considerably simplifying alternative strategies for economic development, a more liberal prescriptive approach can be characterized as “interventionist,” another more conservative approach focusses on “market-led” policies. Liberal discussions about how to aid LDCs often express a preference for collectively-focused policy approaches that enhance public sector intervention in markets in order to encourage growth and development. More conservative approaches emphasize strengthening market forces in a nation’s economy, including adopting low-tax rate policies, trade liberalization, deregulation and privatization of state enterprises.

Interventionist policy adherents frequently mention that free-market strategies can often harm the poor and do nothing to mitigate the potentially damaging influences of having multi-national (or transnational) corporations assume too large a role in development, via market-led strategies perhaps based on the disdained Washington Consensus.

Unfortunately, neither centrally-dispatched, interventionist policies, nor market-based strategies are wearing developmental white hats. That's why you could also color me developmentally blue from a prescriptive policy perspective. Left unsaid is the unsettling notion that despite more than 65 years of effort, economists and policy-makers still sadly lack a definitive idea about how to answer the central question, "What works in development?" These herculean efforts include the formation of international organizations devoted to promoting and facilitating economic development and growth like the World Bank (WB), the International Monetary Fund (IMF), and the United Nations Development Programme (UNDP) and spending billions and billions of dollars in this quest.

In 2000 the UN created 8 Millennial Development Goals (MDGs) – such as decreasing extreme poverty, reducing child mortality and achieving universal primary education – to be achieved by 2015 via 21 targets. The MDGs guided the UNDP and many nations’ development efforts. Not every MDG objective was achieved, but many were fruitful. The efforts of the Chinese and Indian governments to reduce extreme poverty (people living on less than $1.25/day) in their nations were singularly successful. 

After 2015 the UN moved on and now has another, much more numerous and more ambitious series of goals, entitled Sustainable Development Goals (SDGs), which are built on the MDG foundation.

The 8 MDGs have been superseded by 17 much more expansive SDGs. The SDGs are described here.

It should be no surprise that the UN more than doubled its list of development goals – that’s the nature of setting public objectives over time and the nature of bureaucracy. Regrettably, more than doubling the number of goals will involve some degree of diminishing returns, given that the UN’s and WB’s development budgets haven’t doubled, nor have the sources of aid grown to support the SDGs’ achievement beyond these international agencies. Talk about scarce resources being spread ever more thinly.

Given their larger number, it’s hard to imagine the world’s efforts –especially LDCs and donor nations –can possibly be focused and intense enough to succeed in achieving each and every SDG. These SDGs have a total of 169 targets, 8 times as many as the MDGs. Take for example, the first SDG, “End poverty in all its forms everywhere” [Emphasis added.] that has 6 individual targets. The corresponding MDG was, “Eradicate extreme poverty and hunger.” The new poverty goal is essentially unconditional; to eradicate every form of poverty everywhere on Earth by 2030. It’s a worthy, but realistically unattainable objective.

Unfortunately, and despite our huge collective efforts to date, the answer to the fundamental question “What works for development” largely remains; we don't really know what works. In this sense, the development glass is half-empty.

David Brooks summarized development economics' lack of insight in a New York Times column dealing with the development enigma surrounding Haiti, "The Underlying Tragedy." We don't really know how developing nations can create sustainable development – and be aided by already-developed nations in this mission to enhance the lives of all their citizens. This is true for both macro- and micro-aid strategies, as well as indigenous and external plans. We don't yet unmistakably know how to target, structure and spend financial aid so that it will reduce poverty and create longer-term economic and social improvement for all citizens.

Needless to say, this is a regrettable situation because it implies we don't really understand with any specificity how well-meaning decision-makers can provide broadly-applicable ways for needful nations to augment their development status. Brooks' article mentions that perhaps a nation's culture is a more telling indicator for why some countries are more successful than others in their quest for development. Yet changing cultural norms in the name of economic development is a much more disputed prospect, and fraught with far more unease and uncertainty than merely improving ineffective or inefficient institutions, infrastructure and even markets (that in and of themselves embody huge challenges). Unsurprisingly, few publicly-funded projects directly mention changing cultural norms as a mechanism for achieving economic development goals, even though such indigenous norms may not outwardly be consistent with enhanced development. So, if the development glass is indeed half-empty, how should we proceed; what's the alternative?

We, the already-developed world of G-7 or G-20 nations, must continue promoting (and funding) effective economic development, but unambiguously consistent solutions for development still await discovery. Hopefully, we will gain more insight about what works for economic development as a new generation of clever economists as well as political and social scientists tackles these abundant challenges.

A more positive rejoinder to the above "half-empty" argument can be made using a different perspective. This alternative is discussed in David Leonhardt's column in the New York Times, "For the Poor, A Message of Hope." Leonhardt talks some about Liberia and its significant economic development struggles. Liberia's per capita income has decreased by an astonishing 80% to as little as $210 [that’s $0.58/day] since 1980, one of the world's very lowest. However, development economist Charles Kenny argues that contrary to the popularly-held general belief, nations in Africa like Liberia have actually attained some success and improvement in recent decades, even if their economic growth hasn't distinguished itself. Kenny argues in his book, Getting Better, "the biggest success of development has not been making people richer but, rather, has been making the things that really matter – things like health and education – cheaper and more widely available." Furthermore, the UN's 1st Millennium Development Goal (to halve the portion of world population living in dire poverty by 2015) was impressively achieved 5 years early largely through efforts in India and China. It can be done.

So instead of focusing on the dismal state of Liberia's (and other nations') per capita income, we should change our perspective and acknowledge that other, non-economic factors have progressed from development aid. For example, average life expectancy has improved significantly in many developing nations. In 1990 Ethiopia’s life expectancy at birth was 47.9 years; by 2008 it increased substantially to 64 years. Also, Ethiopia’s infant mortality, although still elevated, has been reduced by 50% to 67 deaths/1000 births in 2009. Ethiopia increased its primary school enrollment ratio from 21.7 in 1990 to 89.3 in 2007. These improvements are significant and impressive.

In concentrating on economic numbers (like per-capita income) we've ended up overlooking crucial gains by developing countries' human development, particularly in health and education. Sure, these gains are all relative to a very low historic base, but they represent noteworthy, meaningful improvements in many people's lives. The gains in life expectancy since 1980 have been highest in the Middle East and North Africa (12.2 years), South Asia had the second largest gain (9.6 years) and Latin America is third (8.1 years). Still, 12 nations have life expectancy less than 55 years; and Sub-Saharan Africa's gain since 1980 is a disappointing 4.0 yrs. [As a point of reference, Leonhardt mentions that estimated life expectancy during the Stone Age (approximately 200,000 years ago) was 34 years.[1]] These advances are also in spite of the modern-day scourges in Africa and other locales of HIV/AIDS and Ebola that many people, including Mr. Kenny, believe are akin to the 14th century Plague that killed 30-60% of Europe's population.

Thus, we should look more closely at which development programs actually do work, rather than asking whether any work or not. Fortunately, some do work. It appears that development of the "basics" – health, education, communications and transport (HECT) – have provided a growing number of counties with demonstrable improvement. Indeed, programs that concentrate on HECT broadening and deepening can also eventually even impart economic progress; since healthier, more educated, more connected people will be more productive and economically vital.

Needless to say, there is still too much room for improvement in how development can be successfully created to be complacent, but we should remember that the development glass is indeed half-full. We should focus on human, HECT-based development through our efforts, rather than more narrowly-focused economic development. And most important for myopic, disjointed folks like Mr. Trump, our history is replete with evidence that when we help improve the economic status and welfare of other nations’ peoples, American citizens – including corn farmers in Iowa – benefit as well.

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[1] It's a mystery to me how archaeologists can determine Stone Age life expectancy, but then they probably wonder how we economists calculate cross-price elasticity of demand and purchasing power parity.  

ATTAINING GREEN ENLIGHTENMENT. WITHER THE DUCK

If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands. ~ Douglas Adams 

The road towards a cleaner environment by producing greener electric power has been a steadfast policy of Democrats and Republicans for quite a while, but will likely take a detour with the browner vision of Micro-Man, President Donald Trump. Sadly, clear blue sky and water are not a priority for the 45th president. This is just one part of the tragedy connected with his political ascendency. Other key parts include 14 million people losing their health coverage, according to the Congressional Budget Office, in just the first year after his new American Health Care Act takes effect.

Here I’m examining the rise of green power – meaning electricity generated from renewable resources, such as solar, wind and biomass. During the past ten years renewable electricity production – including hydroelectric facilities – has increased from 8.8% of total electricity produced in the US to 13.4%. Much of this increase has been due to both public subsidies and individual states setting Renewable Portfolio Standards (RPS) – mandates for renewable electricity to reach a set percentage of total electricity sold in the state by a specified date.

The federal and State subsidies provided to solar, wind and other renewable energy sources have been instrumental in increasing renewable energy’s production. Rooftop solar installations continue to grow, with 12 states more than doubling their deployment in 2016. These subsidies – mainly tax credits – aren’t insubstantial; $13.2B in FY13 for electricity-related renewable energy. Non-renewable energy producers – principally fossil-fuel producers like oil and natural gas companies – typically protest subsidies that promote renewables but rarely mention they have received much larger subsidies like depletion allowances for much longer (since the 1920s). As one observer of the energy industry stated, “There is no such thing as an unsubsidized unit of energy” in the US, whatever its source.

Currently, 29 states, Washington, DC, and 3 territories have adopted an RPS; 8 states and one territory have set renewable energy goals. Each state defines its RPS differently. As environmentally-beneficial as green power is, achieving these standards and goals is not without challenges and consequences.

What’s a key RPS strategy for politically blue (and green) states like California, Colorado and Oregon can be much different for red states like Alabama, Nebraska and North Dakota. California’s RPS is among the nation’s highest: 33% of all electricity sold by 2020, 50% by 2030. Colorado’s goal is 30% by 2020. Oregon’s goals are 25% by 2025, 50% by 2040. In contrast, North Dakota’s goal was 10% by 2015 and seems to have met this modest mandate.

The path towards producing more green power cost-effectively is becoming a fraught one. Challenges for achieving these ever-larger goals include the Duck and political opportunism.

First, the Duck. No, it’s not a reference to the biological family anatidae that includes ducks, geese and swans. The renewable-energy Duck is the icon for the effect that electricity generated by residential renewables is having on demand for grid (state-wide) electricity, and consequently on utilities’ revenues. The increased reliance on solar and wind has significantly changed California’s state-wide pattern of electricity demand.

The California Duck

The California Duck, shown in this chart from The Economist, illustrates the typical spring day’s net electricity load requirements. These requirements have dropped between 2012 and 2015 from 07:00 to 15:00 (7am to 3pm), and are projected to continue dropping through 2020. This substantial reduction is chiefly due to increased solar PV and wind generation because of California’s aggressive RPS. Conversely, system net demand after 15:00 (3pm) has risen rapidly (as solar and wind energy subside) and reaches a peak between 19:00 and 20:00 (7 and 8pm). Due to these changes the hourly net load profile looks like a duck’s profile; hence the name. These fluctuations, induced by increased renewable electricity generation, are causing significant issues, including lost revenues for the California utilities and the state transmission grid operator (California ISO).

As the chart’s subtitle suggests, an issue connected with assertive RPS’s are the increased costs associated with meeting the standard, in California’s case 33% of electricity sales within the next 3 years. California’s electricity is, on average, 37.2% more expensive than the average national price. In 2016, 27% of California retail electricity sales came from RPS eligible renewable sources (including only “small” hydropower, dams less than 30MW). Part of this cost is due to California utilities having to pay a credit to residential customers who’ve installed solar PV panels (like we did in 2008) when the panels generate kWh to the grid. The level of the renewable energy credit is contentious because utilities have argued their solar PV customers don’t pay their fair share for grid costs and upkeep and because of what the utilities think are too high renewable credit payments. 
The California Public Utilities Commission (CPUC) didn’t buy that argument and preserved the credit for existing net energy metering (NEM) customers for 20 years after their interconnection. Other states, like Nevada, have accepted the utilities’ position about NEM credits. In Dec 2015 the Nevada PUC lowered the state’s renewable NEM credits for all solar PV customers. After this decision, installers like SolarCity quickly closed up shop and left Nevada holding the bag, not even a pair of deuces. Nevada’s rooftop solar installations dropped precipitously.
Others have argued that California actually has too much solar and wind power because the California ISO is actually curtailing (solar and wind facilities are told by the ISO to not operate) increasing amounts of renewable energy because no one can use it at the time it's being produced. Last year over 305,000 megawatt hours of solar and wind electricity were curtailed. 

Another part of this cost comes from complying with the RPS. California must retire perfectly fine natural gas power plants before their operating lifetime is completed and not sell available, low-cost hydropower. There is now a lot of hydropower available in California and the Pacific Northwest.

The unexpectedly large amount of rain that California, Oregon and Washington State received this season has made hydroelectric power abundantly obtainable. But because hydropower generated from large dams is not sanctioned in California’s RPS, its sale to customers won’t qualify towards meeting the RPS requirement. Thus, it’s likely the reservoirs’ water will head towards the dams’ spillways rather than through its turbines.

Technological resolutions for dealing with the Duck’s shape include adding electricity storage capacity and smart grid capabilities, both of which have and will increase system costs, perhaps dramatically.

In blue-green states like California there’s little dispute about the value of improving our environmental quality. Nevertheless, increases in states’ renewable energy mandates unsurprisingly coincide with significant changes in who is buying and selling electricity (and when during each day). In this milieu it’s become clear that people, stakeholders and interest groups affected often disagree about how to allocate the costs associated with RPS. One possible remedy could be that over time the markets that now offer commoditized kWh could evolve into ones where customers are paying for varying levels of secured energy services.

Finally, the issue of political opportunism surrounds California’s RPS. There’s little real resistance when politicians set ever-more stringent objectives – like RPS – as long as they are sufficiently far into the unknown future. Perhaps so they won’t be in office on the due date? For example, last month a leading California legislator introduced legislation – SB-584 – that would require California to get all (100%) of its electricity from solar, wind and other renewable sources by 2045. [As of May 1, the SB# for this bill is now SB-100.] If state senator Kevin de León was hoping to receive a greener-than-anyone award with SB-584 he failed. Hawaii’s existing RPS is the highest, 100% by 2045. This year in the future seems like a long way off – and for most considerations it is. But for energy infrastructure, energy usage and energy technology, 28 years in the future is a lot closer than any term-limited politician can fathom.

Perhaps he’s playing the “me-too” game and simply copying the Aloha State’s idealistic RPS. Taking nothing away from beautiful Hawaii, but California’s economy is 30 times larger than Hawaii’s and has 27 times more residents. Getting to a perfect 100% of any collective activity is that much more of a supreme challenge when the system – California – is large and complex. And realizing 100% achievement requires not just now unavailable technological advances, but wholesale behavioral modifications by every energy user and producer in California. Changing ingrained habits is always a big-time challenge.

Here for example is another praiseworthy public goal that has taken far, far longer to not completely attain, eliminating tobacco smoking. It's been over 50 years since the first US Surgeon General's report on smoking was published. This widely-discussed report directly linked smoking to disease and shorter life spans. Substantial taxes have since been imposed on tobacco products as well as performing widespread, multi-media anti-smoking advertising and-public service campaigns. But a recent CDC report states that despite ever-higher taxes and other broad, long-term efforts 36.5M American adults still smoke tobacco, representing 15.1% of our adult population. That’s 36.5M people away from 100% elimination of tobacco smoking during 53 years of effort. 

I’m not saying that renewable energy goals are comparable to eliminating tobacco smoking. I am asserting that achieving an unconditional 100% of any worthy public objective is a fiction that may offer some momentary political appeal, but no real expectation of attainment even with significant public effort and expense.

Senator de León your heart is likely in the right place, but your head isn’t. So by all means you should consider raising California’s RPS and lengthening the target date, but don’t use 100%. I suggest 65% by 2055. It may not provide as big a headline (or solar spotlight) senator, but it makes far more sense and eventually can make a real difference. I hope that’s good enough for you; it will be for California.

PROGRESSIVES HIT A BIG BUMP

Freedom is just a word for nothing left to lose. ~ Janis Joplin

At this point, the quadrennial task surrounding development of practicable political strategies to win presidential and Congressional elections in America is unmistakably facing the Democrats. Big time. Given the Trump administration’s astonishingly frenzied, disordered, tumultuous record so far, you might think it could be an easy task. I doubt it.

How bad is it now for Democrats? Let me count the ways. Republicans hold a 241-194 majority in the House of Representatives and a 52-48 majority in the Senate. The Democrats’ Congressional representation is very concentrated. More than 50% of the House Democratic caucus members come from just six (12%) of our states. One of every four House Democrats is from either California or New York. At the state level, Republican governors now exercise power in 33 states. Republicans now control 66 of the 98 legislative chambers in the country. Republicans control 32 state legislatures, including 17 with veto-proof majorities. Those 32 states account for 61% of the U.S. population. Republicans now have total political control over 25 states outright and another 2 where they can override a Democratic governor’s vetoes. The nation hasn’t seen this level of Republican dominance in our political process since Herbert Hoover was president.

Despite this unassailable Republican domination, during the past weeks much of the liberal media has been running stories about how Rex Tillerson, Betsy DeVos, Jeff Sessions and Steven Mnunchin could be denied the cabinet positions He Who Shall Be Named Micro-Man nominated them for. Hope springs eternal and all that, but the laws of Senatorial mathematics unsurprisingly crushed those less than faint Democratic hopes. As of Feb 14, each of these questionable, unfitting nominees has become a Senate-approved cabinet member, as expected. Oops, I wrote too soon. On Feb 15 Andrew Puzder, the president’s nominee for Labor Secretary, resigned after numerous Republican Senators expressed dissatisfaction with him. Micro-Man remains a laggard. So far he has barely filled his roster of senior administrative jobs; he has nominated just 35 people to fill the roughly 700 positions that require Senate confirmation. Are these the results of "a fine-tuned machine"? I think not. 

During the past year well-founded, “identity”-based issues raised by progressives were thrust into the nation’s social, legal and political limelight. These issues included “visibilzing” the 0.6% of the population who identify as transgender. [Yes, visibilizing doesn’t appear in the dictionary; the term is used by used by the LGBTQIA community.[1]]  This limelight engendered a diverse set of personal and political reactions across the nation, including support and outrage. What happened from these reactions? Among other things, the Nov 8, 2016 federal election happened with calamitous results for the Democrats’ social liberals, among others.

There are many ideas floating in the political ether about what contributed to this election’s surprising outcome, now that the Democrats are WOPPed – wholly out of political power – in Washington DC and many states. I think 3 of the reasons Democratic social liberals/progressives fared badly are: a lack of motivating, emotional connection of enough voters with Democratic candidates’ goals and priorities; geographically-concentrated, heavily urbanized backing; and fractionalizing minorities central to the Democrats’ base.

The Democratic coalition that twice elected Barack Obama nosedived this time around. During the campaign there was much talk about the increased prominence of minority voters and their amplified importance for Sec. Clinton’s success. Demographically, that was true for her campaign, but not the nation. According to Census projections, no one racial group will be a majority of the country by the year 2044, which is 27 years in the future. But right now, non-Hispanic whites represent 70% of eligible voters and they vote more reliably than any ethnic or racial group. The Democratic campaign tactics seemingly forgot this; the election’s actual vote count reflects this gross oversight. Micro-Man won 58% of the total white vote and 63% of the white male votes.

Despite being unwaveringly tooted by Democrats, Hillary Clinton failed to win a majority of white women voters. Also, Millennial, Hispanic and African-American voters failed to vote for Sec. Clinton in sufficient numbers in enough states to ensure her victory. Critics mention that Sec. Clinton’s campaign emphasized far more why voters should not cast their ballots for Micro-Man, and not a strong or alluring enough message to voters about why she deserved their votes. There was too much pessimista and not enough optimista in her campaign. It seemed like her campaign forgot, in a stunning error, about the primacy of our outdated Electoral College mechanism. An example of this misguided bungle was her spending campaign effort in Arizona and Texas (among the reddest of all states), rather than Michigan and Wisconsin. OMG.

Here’s a personal example attesting to why Democrats now inhabit such a dark political space. Recently my wife and I had dinner with some friends and inevitably talked about the despairing situation we and our nation are facing because of He Who Shall Be Named Micro-Man is president. Recalling former times when progressives were actively headlining the news, one of us asked “What was the name of that group who was protesting Wall Street.” It took us a while to remember the answer: Occupy Wall Street.

The Occupy movement was formed in late 2011 to demonstrate against inequality and the deluge of financial disruption for millions of Americans during the Great Recession. It popularized the phrase “we are the 99%,” reflecting the continuing struggles inequality poses on people who are neither wealthy nor rich (the 1%). In 2011 at the height of its influence, the Occupy movement had palpable difficulty stating its principal objectives because of its commitment to “participatory democracy.” Perhaps as a consequence, its legacy does not include demonstrable electoral political success.

In contrast, it takes much less time to remember the Tea Party, and its movement’s widespread (and all too successful) influence on American politics since 2009. In 2010 the Tea Party Caucus (that has since morphed into the Freedom Caucus) in the House of Representatives was formed after conservative candidates it directly supported had won 48 seats in the House. In a real sense the Tea Party’s legacy includes the populist ground-roots political activism that helped elect the current president as well as very conservative members of the House and Senate.

The Democrats have had no counter to the well-organized political movement that has provided total control of Congress and the Presidency to the Republicans. In a sense, now that the Democrats have virtually nothing left to lose, they have the freedom to create a fresh, new strategy and tactics for future success.

The average age of the 4 Democrats’ Congressional minority leaders is 73 years. The Democrats are now electing much-needed, new leadership of the Democratic National Committee (DNC). The DNC, like Democrats in the majority of states, has no unified political power base. Creating such unification will be imperative.

Notable exceptions to the Democrats lack of power include their 5 state trifectas (states where one political party controls both legislative houses and the governorship): California, Oregon, Hawaii, Connecticut and Maryland. Nevertheless, as mentioned above, Republicans enjoy having 25 state trifectas, as well as the all-important federal trifecta. As one journalist put it, Democrats and the DNC are “leading from behind.”

In effect, the DNC is now searching for relevance as well as a plan for 2018 and beyond. They would do well to learn from the successful efforts of the Tea Party and other political crusades. In the short time available for next year’s House elections, this plan needs to entice majorities of voters to elect Democratic candidates in local, state and Congressional elections. Creating such a plan will require discipline and focus – something Democrats have found difficult in the past to master. The DNC will need to finally acknowledge the obvious; that the world beyond the Washington DC beltway is a much different place than they thought it was.

The Democrat’s plan for success also should include direct financial and political support for the growing number of grass-root organizations that already have empowered thousands of people’s “resistance” to Micro-Man’s chaotic, painful changes. The DNC and Democrats will need to build upon the initial successes connected with the Women’s March, the airport demonstrations and town-hall meetings to form a viable, enduring movement founded on a new, expanded, easily-repeatable message that emphasizes inclusion, human rights, safety and opportunity.

In fact after being WOPPed 4 months ago, messaging is the only leverage Democrats now have at the federal level. If successful, such communication – from strong, distinctive and broadly empathetic candidates – coupled with resistance and other action, can induce more people to actually vote for Democrats. Only then may there be a sparkle of light at the end of the dark tunnel Democrats now find themselves in. What do we now have left to lose?  

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[1] The better-known abbreviation for the Lesbian, Gay, Bisexual, and Transgender (LGBT) community has been amended to LGBTQIA as a term used to refer to the now more multi-faceted community by explicitly adding the Queer, Intersex and Asexual communities. 

GROWING, GROWING, GONE?

He looked at us, Dean and me, with an expression that seemed to say, “Hey now, what's this thing we're all doing in this sad, brown world.” ~ Jack Kerouac, On the Road

We’ve barely begun to travel on the president’s road to alleged greatness and it has already turned into quicksand.

Mostly because of the president’s flurry of ukases – aka, executive orders (EOs) – that have closed our borders in the guise of “national security” and begun to dismantle the Obama accomplishments. These executive orders are not like those of the past. They appear to be uncoordinated, skeletal, rushed tweet-like summary statements rather than well-considered, substantive pronouncements, as past presidents’ ones have been. No real core, no measured assessment, no pre-coordination with affected agencies; nothing but a glorified headline press release that employees of executive agencies have to guess what they mean and what they’re supposed to do as a consequence. Pundits have told us that DJT “thrives on chaos;” now we’re all suffering from it; wondering how to make “You’re fired” mean something.

At this point, the prime example is he-who-must-be-named Micro-Man’s Jan 27 EO on immigration that indefinitely barred Syrian refugees from entering the United States, suspended all refugee admissions for 120 days and blocked citizens of 7 Muslim-majority countries, refugees or otherwise, from entering the United States for 90 days.

This decree has unleashed confusion and turmoil throughout the immigration system, including airports in the US and overseas. It prompted protests and legal action. Emigrating Christians appear to be spared these administrative shackles that seem only applicable to Muslims, despite frantic counter-statements by the president’s embattled cohorts. Ah, chaos.

But let’s travel on the road beyond SFO, LAX, OGG and JFK and head to making America great again through Micro-Man’s promised, magnified economic growth.

A large part of post WWII American greatness is tied to our impressive macroeconomic growth. In real (inflation-adjusted) terms, our 2016 GDP is almost 4 times larger than it was 50 years ago, quite an accomplishment, which averages to yearly growth of 1.4% through the ups and downs of our last half-century of business cycling. The chart below shows annual real GDP growth for each president since Reagan in 1981. The growth rates for the two most recent presidents, Barack Obama and George W. Bush, are noticeably lower than that of either Bill Clinton or Ronald Reagan. Where has all our growth gone?

Source: Bureau of Economic Analysis

Micro-Man has stated that as president he will oversee “tremendous” economic growth. In September 2015 he said, “We're looking at a 3%, but we think it could be 5%, it could even be 6%.” Twelve months later his campaign estimated that the economy would expand at an annual rate of between 3.5% and 4%, following his proposed overhaul of the tax code. Then one month later, during his Las Vegas debate with Hillary Clinton, he tenaciously doubled down on producing increased annual GDP growth, “I actually think we can go higher than 4%. I think you can go to 5% or 6%.” After his election victory, Steven Mnuchin, who DJT has nominated to lead the Treasury Department, and be responsible for implementing the president’s economic agenda, backtracked on his boss’s Olympian growth goals, and stated in an interview, “I think we can absolutely get to sustained 3% to 4% GDP [growth], and that is absolutely critical for the country.”

Because so much depends on it, I hope our economic growth will increase, but seriously doubt it can happen at the fantasy-levels of 5% or 6% per year, given the policy ideas DJT and real Republicans have already declared. For some perspective, even 4% annual nominal GDP growth means the US would need to add $754 billion – slightly larger than Turkey’s GDP (ranked 18th largest in the world, with a population of 80.3 million) to our GDP. That yearly increase would be a very heavy lift and require policies that will not be considered even in a tweet by Micro-Man.

Economists generally agree (I know, I know, it’s almost oxymoronic to state that economists agree on anything, but…) that sustained macroeconomic growth requires increases in the number of employed workers, increases in capital stock (e.g., factories, machinery and equipment), increases in labor and capital productivity (aka, total factor productivity) and technological advancement.

By examining each of these key drivers of growth during the recent past, we reach a somber conclusion: US macroeconomic growth will not soon increase from the most recent 1.5% to 2% annual rate to even 4%. If Republicans reduce government support services as expected, this will mean serious economic challenges for millions of Americans that have nothing to do with growth. 

Increases in the number of employed workers will fall due to policy and demographics. Donald Trump and his Republican supplicants are all too busy denying visas, closing borders and building walls that will prohibit immigrant labor – be they unskilled, semi-skilled or those with H1B visas – from entering the US. The rising retirement of Baby Boomers means the number of US laborers will be barely growing, despite Millennials’ additions. The labor force is anticipated to grow at an average annual growth rate of just 0.5%, from 2014 to 2024, the lowest in several decades. The US total fertility rate now is at its lowest in a long time – 1.87 children per woman. So much for expecting the number of employed workers to increase. More positively, the US capital stock has steadily increased for decades. The St. Louis Federal Reserve Bank estimates in 2014 that the US capital stock was $51.2 trillion. But capital stock increases alone cannot pull growth rates up.

Total factor productivity (TFP), which combines productivity changes in labor with that of capital, has been growing at a smaller rate than previously. Over the past four quarters ending in the third quarter of 2016 the Federal Reserve Bank of San Francisco calculated that TFP grew at a diminutive annual rate of just 0.32%. Because TFP encompasses the benefits derived from technological improvements, economists believe it is a central source of growth within an economy. So the decades-old reduction in productivity growth is a significant and puzzling concern for economists and policy-makers, excluding today’s president.

One likely drag on productivity growth is the enduring reduction in government-funded non-defense R&D spending. The Obama administration’s proposed FY2016 budget called for a modest increase in R&D funding over last fiscal year. This proposed budget now is no longer relevant and a new, summary one may be produced by the new president. Outlays for all R&D would have represented 3.5% of all federal spending in FY2016, continuing a long decline.

Professor Robert J. Gordon has made a compelling case that the days of 3% to 4% annual growth for the US are behind us. Historic growth rates are gone. His captivating book, The Rise and Fall of American Growth, comprehensively documents the reasons for his dour prognosis. Prof. Gordon’s calculation of total factor productivity shows that for the decade ending in 2014 the annual change in TFP was a small 0.7%, the second smallest since the decade ending in 1930. There are 4 general reasons, which Prof. Gordon labels “headwinds,” that are now flying in the face of growth. They include rising inequality, poor-quality education, our aging population and rising government debt that can reduce productivity gains relative to increases in people’s standard of living. He forecasts that average growth in real income per person over the next quarter-century will be a minute 0.7% per year—almost one-half the already-small 1.3% per year rate realized in the 2000–2015 period.

Thus, looking at the near future, it’s unlikely that US economic growth can rise to historic levels, say even 3% per year. It’s gone unless public policies are enacted to reduce inequality, improve public education, increase labor-force size and participation and reduce government debt including the oncoming onslaught of baby boomers’ Medicare/Social Security transfer payments. If enacted, such policies could increase productivity and standards of living. But they won’t be by Micro-Man. His flighty day-by-day policy agenda offers no hope of that happening. It’s likely we’ll revert to Kerouac’s sad, brown world with unknown, unintended consequences.

ROBOTS, BLACKSMITHS, AND THE FUTURE

For whom the bell tolls: human employees?

No man is an island, entire of itself; every man is a piece of the continent. ~ John Donne

I’ve been fascinated with robots and technological change for over five decades. My high school drama club produced Karel Capek‘s play, R.U.R. (Rossum’s Universal Robots), that creatively introduced the word “robot” into the English language and forever after augmented science fiction’s realm. [Spoiler alert: the robots won.] In graduate school I examined the process and impact of technological advance in several industries, including energy utilities.

Industrial robots haven’t been science fiction for decades. They’ve been used in many industries to increase productivity and reduce labor requirements. Recently, much more attention has been cast on robots and more generally, automation advances and artificial-machine intelligence (AI), as “job stealing” forces that may soon reap havoc with all sorts of workers’ employment prospects. In his “farewell address” last week President Obama warned about “the relentless pace of automation that makes a lot of good, middle-class jobs obsolete.” This week’s Davos meeting of the world’s political/business/techno-elite has identified technological disruption (i.e., human workers’ jobs becoming obsolete) as one of the 4 “biggest risks” of 2017.

Such decades-old technological forces already have seriously jeopardized the president-elect’s stated (and impracticable) objective of significantly increasing US domestic manufacturing employment. Turning manufacturing’s automated digital clock way back into a labor-intensive, analog pocket-watch will be impossible, despite Micro Donald’s tweets.

We’ve come way beyond mere robocops. Alarmist pro-roboticists like Jerry Kaplan, author of Humans Need Not Apply, believe that with continuing advances in AI, virtually every human job will ultimately be replaced by automatons. In his book Kaplan says robots will choose to “farm us [humans] or keep us on a preserve, making life there so pleasant and convenient that there’s little motivation to venture beyond its boundaries.” Sounds like big fun, doesn’t it? Martin Ford’s book, The Rise of Robots, offers another dystopian view of future human employment, as epitomized by the book’s sub-title, “Technology and the Threat of a Jobless Future.“ The machines are coming for the high-wage, high-skill jobs as well, Ford says, and not just for manufacturing jobs, burger-flippers, or hospitality workers.

According to these authors, signs of the robotic transformation are hiding in plain sight. Over the last 15 years, 50,000 financial workers on Wall Street have lost their jobs as high-frequency trading programs complete over 100,000 transactions in one-tenth of a second, while at the same time attempting to mislead their competitors. A McKinsey study states that 43% of workers’ time in the financial sector could be automated using expected improvements in AI. Legal firms no longer are interested in paying staff to sift through hundreds of documents when a computer can absorb a thousand times as many in just a few seconds. Automated software can now turn facts into functional journalism. The list goes on…

Martin Ford says “nearly any white-collar job that involves sitting in front of a computer manipulating information” is exposed. Enhanced, AI-based capabilities are behind an Oxford University study’s examination of over 700 occupations that concluded 47% of US jobs are at risk from automation. Currently, that’s almost 75 million jobs that could be threatened, what Ford characterizes as a “jobless future.” Such provocative, ominous conclusions have increased concerns about future availability and sustainability of human employment, and may have precipitated one member of Congress to say (absurdly) he wished “technological change would just slow down.”

Nevertheless, individuals and analysts have bifurcated feelings about these disquieting pronouncements. A recent New York Times readers’ poll about future technologies indicated that “robot servants” elicited the highest number of “somewhat excited” responses (32%) and the most “not too excited” plus “not at all excited” responses (52%).

Is indeed the bell tolling for human employees? No, not any more than it generally already has, despite the media hype to the contrary. The idea that tomorrow’s future will be jobless plays directly into people’s fears of huge displacement by characterizing the historical trend of employing new machines-technology to advance productivity as totally job-killing. It hasn’t ever been. This is not a new trend, and it’s never ultimately created significant, widespread unemployment.

In the US much of this advancement began in the mid-18th century in agriculture, when over 90% of American workers were toiling on farms, with the invention and adoption of machines like the cotton gin, steel plow and reaper. These innovations generated massive improvements in labor productivity. Building on this dramatic agricultural productivity advancement, the Industrial Revolution also appeared in 18th century Great Britain and beyond. For the first time in human history, mechanization assumed a keystone position in industrial and agricultural production.

Certain laborers have been and continue to be adversely affected by adoption of new technologies. There are now far, far fewer blacksmiths than there were in the late 19th century – the pre-automotive age of horse-and buggy power. In 1900 there were about 20 million horses in the US. I estimate that in the very late 19th century there were between 9,000 and 12,000 blacksmiths just in rural America, where 60.4% of Americans lived. In addition, there were sizeable numbers of blacksmiths in fast-growing cities. In 1900 New York City had around 100,000 horses that provided virtually all types of transportation for humans and commercial establishments. In the Big Apple alone there were more than 900 businesses that served this equine population – firms with blacksmiths, wheelwrights and farriers. At the turn of the 20th century there were probably 3.5 million horses in American cities. Then things changed, big time.

By the 1920s, after the horseless carriage (aka, automobile) had utterly reined in horses’ general transportation duties, blacksmiths and their brethren were no longer as much needed. Many of them eventually probably found jobs at Ford, General Motors, Studebaker, or other car manufacturers.

According to Maynard Studios there are now only 500 professional blacksmiths in the US. Should we shed a tear for the thousands of long-displaced blacksmiths? No.

Robotophiles’ (or is it robotophobes?) visions of a jobless future remind me of prognosticators who in the early days of personal computers confidently predicted that we’d soon be living in the age of the “paperless office.” So, is your place of work now paperless? Nope; paper is still plainly present in our offices and homes. The paper industry produced revenues of $132 billion last year.

The paperless-future folks forgot both about people’s needs for tangible documentation, and that technological, structural changes take a long time to become prominent. Likewise, the menacing prophecies of writers like Martin Ford and Jerry Kaplan that millions of human workers will soon be displaced by robots are misguided.

Scott Andes at the Brookings Institution has found that there need not be any correlation between adoption of robots and manufacturing job losses. Countries like Germany, that utilize more manufacturing robots than we do, have lost fewer manufacturing jobs. Automation technology creates jobs, doesn’t just supplant them. Contrary to popular belief, the use of ATMs in the 1990s resulted in an increase in the number of bank tellers because the cost of opening up new branches was reduced because of the ATMs.

Nevertheless, as automation technology advances it will continue to especially imperil workers whose time is mostly spent on routine, repeatable tasks. As has been true during the past several decades, humans with more computer skills will continue to replace human workers with inadequate or no computer skills, in the way that graphic designers and word processors replaced typists. This substitution is never immediate, despite Ford’s claims; it can require significant investment and planning. In fact, in his final chapter Ford succumbs to reality by stating anticlimactically that “there is no question that the economy will remain heavily dependent on human labor for the foreseeable future.” Yet however beneficial for the overall economy digital advances can be by improving labor productivity, those at the bottom of the labor distribution without sufficient digital or computational skills are the most vulnerable and will be most hurt. This is why robotophiles should be clamoring for improved, focused education techniques and programs that will train digitally-displaced workers no matter how young or old they are, rather than preaching for universal basic income.

Will robots soon become the specter of the end of human employment? No, the much-feared jobless future of the day after tomorrow is pure hype. But continued robotization (aka, advanced, digital mechanization) of commercial practices will certainly cost jobs, as it has since the late 18th century, and create them. And yes it’s one of numerous concerns facing labor; but those shouting about humans losing all prospects of employment are getting ahead of themselves and reality.

With our in-coming president centered solely on individual companies’ employment practices (see Carrier Corp’s 800 jobs) rather than a needed, broader, macro labor strategy, every job lost in Monticello (Iowa), Grand Rapids (Michigan) or other towns is his only (slender and momentary) measure of his tweet-based policy’s effectiveness. That’s why he’s my woeful Micro Man. If, as expected, he doesn’t extensively increase manufacturing employment, he’ll no doubt blame innocent Democrats. The fate of our laborers and the economy will depend on what happens as Micro-Man’s myopia meets a myriad of macroeconomic challenges, including those surrounding technological displacement. 

A January Postscript. As you can imagine, it’s not just blacksmiths who have been technologically displaced. Nope, Botts Dots are now headed for history’s dust-bin. The Dots have apparently reached the end of their road because of new technology – driverless cars.

According to the Sacramento Bee, “After more than a half century of service, the safety device created by Elbert Botts in a Sacramento lab and once described by a state official as a loyal old dog, is expected to be relieved of duty sometime this year. The classic white ceramic dot, a notable innovation in its day, appears to be a bad fit as a lane marker in the emerging new world of driverless cars that rely on cameras, radar and computers to ‘read’ and understand lane lines.” Botts Dots have been done in by driverless cars; who would have guessed. It’s especially startling since you only need several people's hands to count the number of validated, non-experimental, fully-driverless cars and trucks now cruising on California fabled freeways.   

A MICRO MAN WILL SOON BE AT OUR NATION’S HELM

An expert is a person who has made all the mistakes that can be made in a narrow field. ~ Neils Bohr

Donald Trump will become the 45th President of the United States (US) in exactly 30 days, following his unexpected election victory. The Electoral College voted yesterday to make him president and Congress will certify the Electoral College’s vote on Jan. 6. Coming into the presidency, Mr. Trump’s experience is narrowly founded on commercial real estate and reality TV. Unlike Neils Bohr, he would never admit to making any mistakes. His grandiosity-seeking persona has focused on specific, narrow, micro-oriented concerns, usually announced via 140-character Twitter posts.

Political commentators have been spewing too many speculations about how Donald Trump surprisingly won the presidency. Nate Cohn of The New York Times and others have concluded that his victory came from a fortuitous, slight “red-shift” in a few battleground states – Florida, Wisconsin, Michigan and Pennsylvania.

He narrowly won each of these states by one point or less of the popular vote. But these slender victories gave him a decisive Electoral College edge. Only with effective, focused and steady effort over the next several years on the part of Democrats will this red-shift be prevented from being a long-term political prospect. This is by no means a sure thing; currently the Democrats are leaderless and far from united. For example, when was the last time you heard that the Sanders-Warren progressive movement was succeeding in the political ground work to place strong candidates on 2018 ballots that can actually win elections?

Interestingly, the red-shift phenomenon has been examined for over 150 years, but not by politicians. Astrophysicists first discussed it in the 19th century. It was a basis for Edwin Hubble’s early 20th century Law that posited other galaxies are receding from Earth, causing a red-shift (Doppler) effect. The Hubble Law supports the dynamic Big Bang model of the universe.

Even though the headline-obsessed Donald Trump likely will cause a number of “bangs” as president, with any luck they won’t compare in the slightest to the Big Bang that Hubble described. Fingers remain completely crossed on this. But let’s now depart from cosmology and take off to the here and now.

Even before he’s president, The Donald (TD) pulled off one momentary bang on Dec. 1 in getting Carrier Corp. to "save" 800 jobs at its Indianapolis air conditioner plant. Nice work. However, despite all the media hoopla that TD created in Indianapolis, the next week United Technologies Corp.’s chief executive (UTC owns Carrier) stated that some of those “saved” jobs would be ultimately lost to automation. In other words, Carrier still plans to cut its workforce, so those 800 saved jobs are a chimera. And what about the other 400 Carrier workers that TD seems to have completely forgotten about who will be soon laid off? Oh well, sorry guys.

Is The Donald ducking his responsibilities to take a comprehensive view of his job as president? So far, as president-elect, it seems so. He is all about tactical, individual, bottom-up “deals,” (micro transactions), rather than a broader, strategic (macro) vision that might unify and preserve America’s greatness. [As I’ve already shown, we are now great, and have been, despite his incessant proclamations to the contrary.] And yes, in recent times certain groups of Americans have not seen much if any economic benefit, as other groups have. This vital issue of economic inequality, that TD’s announced economic policies will not remedy at all, does need to be rectified; but it does not detract from our overall distinction as a nation. There is no nation that can claim seamless distributional equity.

The Donald’s Carrier deal required now-governor Mike Pence to offer a lush $7 million taxpayer-funded bonus to the company. What happens after January 20 when workers beyond Indiana demand TD’s help? Maybe President Trump can create a rotating vice presidency of Republican governors who can bestow multi state crony capitalism outside the Hoosier State on an as-needed basis.

Irony abounds. The US unemployment rate declined to 4.6% in November, the lowest it’s been in over 9 years. This reduction represents a significant success for hundreds of thousands of US workers that the Obama administration has helped in bestowing. In fact, during President Obama’s time in office the economy gained 15 million jobs, which works out to 36,000 jobs per week. Yet TD’s public statements clearly emphasize his disparagement of this advantageous macro situation.

He campaigned with a micro focus on preserving manufacturing jobs, which have steadily declined during the last 63 years, on fending off the purported “war on coal” that has affected the nation’s 80,000 coal-miners and stopping imports. 
Mr. Trump’s allegations about why coal miners now represent only 0.05% of our labor force are, to be generous, misplaced. Sure, environmental policies established by Republicans and Democrats have played a part (and offered important, essential health and longevity benefits to all of us), but the most important factor reducing coal mining jobs has been competitive market forces, specifically the reduction of domestic natural gas prices due to significant improvements in extracting natural gas from the ground (e.g., fracking).

Coal’s share of its key market as a fuel for electric power generation has been cut by 15% during just the past 8 years. Natural gas and non-fossil-fuel technologies (solar, wind, biomass) have gained what coal has lost. No bully-pulpit phone calls or mouth-to-mouth meetings by TD will restore coal’s former markets. Why should they? He continuously accentuates his acumen as a businessman who understands markets and technology, and applauds market forces that he has taken advantage of in commercial real estate. Market forces are present in the energy sector as well.

The improvement in the nation’s overall (macro) employment – now 124 million full-time workers – isn’t his concern; he’s purely focused on micro transactions – industry-specific situations – like Appalachian coal miners or air conditioner builders. Micro matters to him. Perhaps he believes macro is for losers.

If we didn’t know it before, most of us now know that working class wages have stagnated for more than a decade. This upward wage inertia has turned John M. Keynes' famous downward "sticky wages" insight on its head. The wages of less-educated, primarily non-urban workers, among others have been stuck from rising. White working-class people strongly voted for TD and gave him a crushing 39% margin over Clinton. With TD’s beauty-contest cabinet appointments and his suggested economic policies (e.g., not raising the $7.25/hr federal minimum wage) how can wages for working-class laborers be improved? They can’t.

Under the Trump presidency, I expect average real (inflation-adjusted) wage rates will continue to decline or at best stay steady. Inflation is likely to increase if he convinces his congressional buddies to fund his ideas for improving the nation’s infrastructure (an eminently worthwhile, if overdue measure of expansionary fiscal policy), and increase the defense department’s budget (an utterly mistaken, uncalled for scheme). Among other reasons, such sizeable spending, along with Republicans’ incessant desire to cut federal income and remove estate taxes for the richest Americans, will require large amounts of deficit spending. Increased deficit spending will raise interest rates on government bonds. Ten-year Treasury notes’ interest rates have risen 55.7% since Nov. 1.

Right after the Federal Reserve increased the Federal Funds interest rate last week by 0.25%, the US dollar appreciated as expected. The new president’s suggested increases in deficit spending will further strengthen the dollar. With the stronger dollar, US exporters will have a more difficult time selling their goods overseas and imports will become less expensive, something that can threaten a larger trade deficit and lower macroeconomic growth, neither of which is likely to please the new president. Watch for Congressional Republicans to fortify their discussions about reducing the Fed’s much-needed independence.

In his 44 days as president-elect, I’m convinced that TD thinks solely in micro terms, he’s a distinctive deal guy. He is likely to be a pervasive transactional president, unmoored by any unifying vision of meaningful macro objectives. Perhaps learning from the Kardashians (although he’d never give Kim even a milligram of credit), he banks on the broadening power of social media – especially Twitter – to provide pseudo-breadth to his micro moves.

Can micro TD convince us and the world that his narrow, transactional perspective is sufficient to lead our nation? Is this the change that his acolytes voted for? We'll be finding out on a day-by-day basis beginning in 30 days.