Trump’s economic delusions: Why the current boom won’t last

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A few days ago, Trump gave a press conference regarding the state of America’s economy. He announced that American GDP had expanded by an annualised rate of 4.1%. This, along with a range of figures including a low unemployment rate and decent wage growth, seemed impressive. Trump predictably credited the economic buoyancy to his policies like environmental deregulation and tax cuts. Democrats, equally predictably, retorted that Trump was benefiting from Obama’s sound management. The fundamentals have changed little since Trump took office.

The reality is that the current boom won’t last. Partly because such high growth will incline the Fed to raise interest rates, putting a dampener on growth. Quantitive easing and federal bond-buying will be phased out. The global economy is slowing, which will affect the US sooner or later, even if its performance is high by developed world standards.

More importantly, Trump’s policies won’t do anything to boost growth in the long term, and in some cases will reduce it. For manufacturers, the effects of Trump’s tariffs and a potential trade war with China could more than offset any gains made by corporate tax reductions. Even for the rest of the economy, the tax cuts were a one-time affair. We are experiencing a bounce in growth as a result of them, but it will die down soon. On the other hand, the deficit-increasing nature of the tax cuts will harm America’s long term prospects, as debt interest payments increase and the markets lose their confidence. Running a high deficit during a boom will lessen the country’s ability to stimulate the economy when the next crisis hits. Additionally, America already has amongst the lowest tax burden of any developed country, even lower than Switzerland as a proportion of GDP. So its unlikely the tax cuts will significantly increase America’s competitiveness, particularly if infrastructure projects are cut to prevent the deficit from spiralling out of control.

Perhaps what’s most important is the impact of the Trump economy on the ordinary person. If you’re a company with a lot of offshore money, the tax cuts have been pretty good. But there’s very little evidence to suggest that this has resulted in higher wages for most Americans. Instead, income inequality, which is already the highest of any major developed country, is projected to increase further as a result of Trump’s reforms. While Wall Street celebrates the current boom, most people’s lives simply carry on as normal. And while I don’t believe the success of big business and finance is inherently bad, it isn’t a good barometer for how the country as a whole is doing. Conservatives love to talk of the importance of social cohesion, and rightfully so. Yet as far as their economic policies are concerned, they will create an America less cohesive than at any point since the Gilded Age. Just remember that the next time you hear of how well Trump’s America is doing.

Air pollution is a killer. Tax the polluters.

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A recent opinion poll suggests that 70 per cent of people in the UK are worried about air pollution and half want the state to do more. The British government does nothing.

The main problem are highly polluting diesel vehicles. Air pollution will gradually fall as the oldest, most polluting vehicles are replaced. Yet the courts have ruled that the government must act now, regardless of cost. Air pollution campaigners say ministers have instead taken the cynical decision that it is cheaper to continue breaking the law.

There is no doubt that air pollution is bad for us. The damage can start before a child is born, restricting growth and brain development in the uterus, with lifelong effects. Children exposed to high levels of air pollution have lower lung function and have far more respiratory infections.

In adults, the result is more likely to be cancer, cardiovascular disease, diabetes or obesity. A US study that followed half a million people for 15 years found that those exposed to greater amounts of air pollution were more likely to die early, although it is difficult to establish what role air pollution plays in individual cases.

I long ago gave up my British driving lucence. The traffic is so dense and the driving so bad that if we can’t reach our destination by public transport we don’t go at all. But that doesn’t bear upon pollution except in so far as there are just too many vehicles on the road, pouring forth huge volumes of particulates.

Even if you don’t drive you can get seriouly ill living on a busy street or daily walking along it. Electric cars are a help (although the electricity still has to be generated), and a higher gas tax is badly needed, especially in America. The government debt is humungous, so why not at last tax people more for polluting and thus lower the debt a bit. Call it a pollution tax. This is suggested tongue in cheek. It’s the political version of suicide. People prefer to die, one assumes, than pay more tax.

A former spy-chief says social media emboldens the far Right.

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I am reproducing a book review by Stephen Collins in this month’s edition of Prospect Magazine, because it needs to be emphasised and tepeated. The book is called “Principled Spying” by David Omand, a former head of GCHQ. (Georgetown University Press):

“Twitter and Facebook have a darker side. I have seen them encourage the growth of radical voices, most worryingly on the far right, where alt-right and other extremist tendencies have in recent years gained ground. These forces are becoming so powerful that they now threaten the foundations of western democracy.

“The internet’s pioneers thought the online world would lead to a mass engagement with global challenges such as conflict, the environment and poverty. But social media use is creating a contrary trend that taps into the deep roots of our tribal instincts. The likeminded gather together. And when this happens, misfortunes tend to be blamed on the “other.” The result is an increasing fragmentation of politics into “us versus them” group.
Anonymity lends the online world an especially nasty flavour. It encourages a vulgarity and crudeness that would not be tolerated face to face. A sense of online disinhibition feeds attacks on those who espouse contrary views and the effect can be powerful.

Access to diverse opinions are an essential part of how voters make up their minds. Increasingly, however, the design of social media encourages users to spend more time in a bubble of advertising and political messaging. When social media spreads information that’s intentionally misleading or false, it undermines the choices that underpin any open society. In the long-run, that flight from rationality in political debate further weakens confidence in public bodies, expertise and leadership which makes us ever-more vulnerable to manipulation.

“These are the characteristics that have left us vulnerable to demagogues and extremists and which bring us to the most worrying point of all: social media enhances the subversive agendas of states like Russia. It is striking that the tactics used to interfere in the US election aimed to polarise US politics, already a feature of the Trump campaign. Russian attempts to interfere in the French election were intended to promote Marine Le Pen’s chances, in the hope that her hard-right agenda – especially on immigration – would destabilise politics in France.

“Different kinds of extremism can feed off one another online. Violent IS propaganda has stoked its counterpart on the extreme right. The interaction of the two has further polarised opinion over immigration, housing and jobs, and put sections of the community at each other’s throats.

For liberal democracies to survive and thrive in the digital age, we have to understand the vulnerability of the modern political process to covert manipulation of public opinion. It can come from without or within the nation. If we fail to see it, we risk becoming agents of our own destruction.”

In a conversation about the state of the world my nearly-17 year old grandson said,”Don’t worry, everything will be alright”. I still don’t know how to process that hope-filled remark, and of course did not argue the point and come across as an old Jonah. But for his sake and for the sake of hopeful young people everywhere, I pray he turns out to be correct.
Free speech and democracy, however imperfect, won through by the skin of their teeth. They are not givens.

Brexit and British agriculture (a bit long but a window into the Brexit muddle)

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The EU’s Common Agricultural Policy provides a total of £3bn per year – more than half of all farm income – which on average supplies 50-80% of a British farmer’s income. The EU also protects its farmers with tariffs on agricultural imports from outside the bloc of 12.2%, rising to as much as 51% on lamb and 74% on milk. Were Britain’s food market opened up to cheap imports from, say,the US, many farmers would struggle to survive.

British agriculture employs 466,000, only 1.5% of the UK workforce, but provides 61% of Britain’s food. It also supplies Britain’s food and drink industry, the UK’s largest manufacturing sector, employing more than three million people. Furthermore, 70% of Britain’s land is farmed; farmers are the main stewards of the beautiful countryside.

The EU is the largest export market for British farming: it receives more than 60% of agri-food exports – and 90% of British beef exports. EU countries are also the source of 70% of the UK’s food imports. If Britain and the EU were to fail to conclude a free-trade deal, and British farmers were suddenly faced with high tariffs for their products, it would have a devastating effect. A free-trade deal, with zero tariffs on agricultural goods, may be agreed. However, if Britain leaves EU customs union, new inspections are likely to be introduced, which would pose a lot of difficulties for perishable products.

At the moment Common Agricultural Policy subsidies are calculated partly on hectares farmed, and partly tied to environmental improvements. But the system is controversial since the largest payments are paid out to the biggest landowners, including the Queen and large agri-businesses. The system also drives up the price of land, making it hard for new farmers to enter the market and encouraging farmers to farm every acre they possibly can.

So although the total level of subsidy is guaranteed until 2022, after Brexit in 2019 the largest single payments will be capped, and subsidies will be used instead to “incentivise methods of farming that create new habitats for wildlife, increase biodiversity, reduce flood risk, better mitigate climate change and improve air quality by reducing agricultural emissions”. Public money will be paid to upland sheep farmers for “protecting drystone walls and other iconic aspects of our heritage”, and used to improve public access to farmland.

This sounds very environmental, but farmers are panicking, desperate for subsidies to remain in place. Profit margins in farming are thin: one report last year suggested that 90% of farms would be bankrupted if single farm payments were removed. The government is accused of muddled thinking: it wants to turn Britain into a paradise for wildlife and improve productivity in British farming; and nonetheless wants to use new world trade deals to get lower food prices for consumers, while simultaneously maintaining Britain’s high food and animal welfare standards. How can this be done without decimating the industry?

Meanwhile, an estimated 80,000 seasonal workers are needed every year to pick Britain’s fruit, vegetable and flower crops; 75% of these workers come from Romania and Bulgaria, the rest from other eastern EU nations. Every Christmas season the poultry industry needs 13,000 workers to process turkeys and 58% of these are foreign. Of the vets in Britain’s abattoirs, 85% are EU nationals. In total, about one in ten agricultural workers are foreign migrants.

The Tory government is in its usual muddle (what’s new? Ed).In principle it recognises the need for a new seasonal agricultural workers scheme, similar to the one that existed before mass EU migration began. But if it agreed this it would go against the wishes of Brexit voters who want to rid the country of pesky foreigners. Meanwhile, farmers, have to plan ahead and fulfil contracts with their suppliers. By 2017, the number of seasonal workers had already dropped heavily – EU migrants were discouraged by the Brexit vote and the fall of sterling against the euro. As a result, large amounts of fruit and vegetables rotted in the fields and orchards. (An ediited version of an article in The Week, 17 March 2018)

This illustrates the pathetic inability of the Brexit blowhards to think through what they were pushing through. Nobody bothered to get into the weeds and work out answers to the swirl of problems Brexit would bring. “Stupid” and “irresponsible”? To be sure. But it illustrates what can happen when prejudice and emotion guides affairs of State. It isn’t even true that the EU is the origin of all the much-criticised regulations; many are home- grown interpretations of overall EU policy, arranged by British bureaucrats. Pluck out the mote in your own eye before setting about the motes of others!

Why is the above on Epicurus.Today? Because Brexit offends the Epicurean principles of peace of mind and moderation, not to mention equality and fairness to the greatest number. It is unwise to jump into the unknown without a parachute.

More on extreme religion

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It appears that the governor of Jubaland, Somalia, has banned the use of single-use plastic bags on the grounds that “they pose a serious threat to the well-being of humans and animals alike”. It has also forbidden the logging of rare trees. The governor, Mohammed Abu Abdullah, is head of a terrorist group allied with al-Qa’eda.

Ah, you think, maybe groups like this are edging into a more civilised mode and are at least protecting the environment. And then you find out that Mohammed Abu Abdullah is alledgedly funding his government by selling banned ivory to the Chinese and by continuing to kill innocent civilians. It was recently responsible for murdering at least ten people in Mogadishu with car bombs and by storming a government building.

This feeds into the perception of Islam as a violent, inhumane religion. Sensible readers know well that a huge majority of people of the Islamic faith are peaceable decent folk, who deplore everything al-Qa’eda stands for. But governor Mohammed Abu Abdullah and his thugs play straight into the hands of right-wing racists and religious nuts in the West.

A pox on all of them! Except for the fact that they have far too much influence on our own immigration policies and attitudes. Case in point is the US ban on moslem visitors from certain moslem countries, a ban that enjoys huge support from a certain (christian?) segment of the population. We need to defend our borders, yes. But blanket bans are un-Epicurean.