Irma’s Devastation & Trump’s Art of the Deal

Perspective

The White House, the federal bureaucracy, the governors and the local leaders are in sync with a shared goal of helping all the people of our great nation hurt by Harvey and Irma.

And today, we commemorate the 16th anniversary of 9/11/2001, another time the people of our great nation came together.

In Brief

  1. Killer storm Irma ravaged Florida and continues its wrath moving into the southeastern states. Millions are without power and will be for days. All levels of government—local, state and federal– are mobilized to help. But lives will be shattered and we must all help.

  2. N Korea’s test of an H-bomb as well as ballistic missiles has created an international crisis. For 25 years this crisis has been brewing but a real solution was always kicked down the road with diplomatic nonsense. It is not likely to be allowed to fester much longer this time by either the US or China. Led by the US, the UN Security Council is likely to vote today on new sanctions.

  3. ISIS is on the verge of losing its geographic Caliphate but will remain a killer for years.

  4. President Trump turned to “the art of the deal” both with DACA and with a hurricane relief, budget and debt ceiling deal. To the joy of some and horror of others…he led.

  5. Hillary Clinton added to her list of people to blame for her defeat last year. In an interview on CBS Sunday Morning she blamed “white people”.

In-Depth

Forecasts

… I see no cause to modify my political forecasts this week.

Current POLITICAL Forecasts

  1. The chance the Rs will lose at least a few seats in the 2018 House elections is 80 to 90 percent.

  2. The chance the Rs will lose their 241-194 House majority in 2018 is 10 to 20 percent.

  3. The chance the Ds lose two or more of their 48 Senate seats in ’18 is 85 to 90 percent.

  4. The chance that Donald Trump will be the 202o R nominee is 90 to 95 percent.

  5. The chance that Trump will win a 2nd term is 80 to 85 percent.

Media

Don’t forget the Tuchfarber 30 Day test—when you get upset about something in the news ask if it is likely to be IMPORTANT IN 30 days or soOnly seldom will it be so and you can usually ignore it.

Global Politics

North Korea—failed US policy and failed Chinese policy.

Kim Jong-un’s N Korean regime appears to have detonated a hydrogen bomb a few days ago. An H-bomb is a nuclear device so powerful it takes an atomic bomb to set it off.

Ironically, Kim may have detonated and destroyed his family’s and regime’s decades old strategy in the process. For 25 years the US and UN have engaged in a strategy of “strategic patience” with N Korea. The policy of the Bill Clinton, George W Bush and Barack Obama presidencies has been an abject failure. Kim decided to press his luck and appears to have gone too far this time.

Even N Korea’s only effective ally and its protector, China, has vigorously condemned all of Kim’s recent nuclear and ballistic missile tests. Such tests force China into a corner…accept the risk of a major war on their border…accept a trade-war with the US… or severely rein in Kim, perhaps even forcing him from power. The last choice also contains great risks for China.

UN action on additional sanctions against N Korea will follow, with a vote as early as today. Watch if China or Russia veto them. N Korea has forced this crisis to a denouement and the Trump administration has jettisoned strategic patience as the failure it was.

Just as US policy toward N Korea has been a failure for decades, so too has China’s. They are in a make or break situation as is the US and its allies.

If China fails to rein in Kim comprehensively and effectively, they face either military action by the US or, more likely, a massive build-up of US and ally anti-missile capabilities in east Asia. That is a nightmare for China because it degrades the threat from their own strategic weapons.

What is far worse for China is that S Korea and Japan would be likely to obtain nukes to provide a mutually-assured-destruction [MAD] threat against N Korea. Japan has the plutonium and technical know-how to be a nuclear power within months. S Korea would likely be supplied by the US if N Korea is not reined in.

Even more ominous for China, a nuclear Japan would likely help Taiwan go nuclear, making it essentially impossible for China to invade Taiwan and ever gain control of what they believe to be a rogue province of China.

China’s past tolerance of a nuclear, ballistic missile armed N Korea is effectively ringing itself with future nuclear powers and missiles capable of shooting down China’s own missiles. That is a disaster for China.

Another thing to keep in mind as this crisis continues is that, as discussed more fully in the China section below, General Secretary XI is on the verge of consolidating control of almost all sources of power in his hands at the Party Congress next month. Assuming that happens, it is likely N Korea’s actions will get additional scrutiny and more aggressive Chinese reactions.

Russian war games—zapad 2017.

Every year Russia, like most major military powers, conducts war-games. The war-games rotate between far eastern Russia, the south, the southwest and the west [Zapad means west]. The exercise is scheduled for Sept 14-20, but the aftermath of the event may be its most threatening period if the Russia troops don’t return to their normal bases.

The 2014 war-games were used to prepare for the invasion and absorption of the Crimea into Russia as well as the establishment of a rogue state in the eastern region of Ukraine, the Donbass. This year’s games are scheduled in Russian territory and in the territory of its ally, Belarus, near Ukraine and the NATO countries of Estonia, Latvia, Lithuania and Poland.

Needless to say, there are strong fears in those countries and NATO that the Russians will again do something illegal and damaging to the west. Russia claims this is just a normal exercise, but have no doubt that the Russians are an enemy of the US and NATO and can never be trusted to tell the truth.

That does not mean that a catastrophe is at hand but the US and NATO need to be and are on-alert for whatever ploys Putin has up his sleeve.

I would note that our military and President Trump are fully aware of this and don’t trust Putin as far as they can throw him. This US administration will likely respond vigorously in the event of Russians misdeeds unlike the Obama administration in 2014 with Crimea and the invasion of the small country of Georgia in 2008 during the George W Bush administration.

ISIS loses its geographic caliphate.

ISIS sought to establish a world-wide Islamic Caliphate [empire] to rule using their perverted and extreme version of Islam.

As I noted in my January 2, 2017 predictions for the year… “20. ISIS will lose all or almost all of its geographic territory [Caliphate] in 2017 but will remain a terrorist threat for years to come.”

The ISIS capital in Iraq, Mosul, has fallen with only a few other pockets in the country still in ISIS control.

In Syria, the ISIS capital of Raqua is nearly under control of a US and Kurdish led coalition. Importantly, that coalition has Sunni Arab support. As in Iraq, it is just a matter of months before ISIS’s holdings in Syria almost all disappear.

ISIS is an off-shoot of Al Qaeda, a branch that made a fatal mistake of thinking they could take and hold geographic territory long before they were actually strong enough to do so.

They are still very dangerous in two major ways. First, ISIS fighters will continue to conduct guerilla type forays in a number of countries including Iraq, Syria and Libya. Secondly, ISIS inspired acolytes as well as ISIS fighters returning to their native countries will conduct attacks wherever in the world they can in the name of Islam and ISIS.

In the longer run, expect the remaining ISIS leaders and followers to be re-absorbed by Al Qaeda or by other Sunni Islamic extremist groups.

2018 Politics

Too astounding to even imagine.

Hillary Clinton was interviewed yesterday on CBS Sunday Morning by Jane Pauley.

Clinton said…” [Trump] was quite successful in refencing a nostalgia that would give hope, comfort, settle grievances, for millions of people who were upset about gains that were made by others because—”

“What you’re saying is millions of white people,” Pauley interrupted.

“Millions of white people, yeah,” Clinton replied. “Millions of white people.”

Perhaps she forgot she got over 35 million white votes.

When I read this today I was incredulous. The reporting had to be wrong. But, the video clip and transcript confirm it down to the last syllable. I’ll revisit this event next week after hearing the reactions for people in the media and both parties, but count me astounded.

Trump and the White House

Trump, DACA and Illegal Immigrants.

It amazes me how obvious things get so misanalysed by the media and politicians. A good example is the present situation with illegal residents of the US and the children they brought with them— “the Dreamers”—those covered by President Obama’s unconstitutional DACA program. The administration announced this week that the program is ending in 6 months, giving Congress time to act on the Dreamers situation and do comprehensive immigration reform if it so chooses.

President Trump’s policy preferences and action plan toward illegals has been obvious since before his inauguration. It boils down to 3 major points:

  1. Close the borders as much as possible to prevent more illegal immigration.

  2. Deport illegals who have committed major crimes or actions above and beyond just being in the country illegally.

  3. Do NOT deport law-abiding illegal residents as long as they stay law-abiding.

Note some crucial facts. Every person in the US has legal rights to due process even if they are an illegal resident. Our courts can handle [deport] only about 250,000 illegals per year because of those legal rights. There are about 11,000,000 illegals in the country including about 700,000 DACA program members. IT IS IMPOSSIBLE TO DEPORT MORE THAN A SMALL FRACTION OF ALL THE ILLEGALS. In addition, the economy would be badly damaged if we did.

In this blog’s January 2, 2017 twenty-five specific political-economic predictions for the year– numbers 3, 4 and 5 — paralleled the points above and have borne-out.

The President and his administration know it is neither possible nor advisable to deport the vast majority of the nation’s illegals.

Trump will get little or no credit for that common-sense position from immigrant advocacy groups, the press or the Democrats. He will take grief for members of his own party, but will lose little support from his base as they have higher priorities, including closing the border to more illegals, tax cuts and “draining the swamp”.

The administration’s ending of the DACA program in 6-months is little more than pressure on Congress to act on immigration reform and fund adequate border control. The Dreamers are not in serious jeopardy even if Congress doesn’t act as indicated by Trump’s tweets to that effect.
Stay tuned as this all plays out.

China’s Politics and Economy

China’s politics and economy are so important to the global economy and the general situation around the globe I am adding a regular section on it to the newsletter. The section will periodically include detailed articles on specific things but will also list each week evidence that suggest an economic soft landing for China—a controlled slowdown to “normal” economic growth levels—or a hard-landing—a more rapid, extended and dangerous bursting of China’s asset bubbles.

I WILL ADD AND DELETE ITEMS TO THIS SECTION AS RELEVANCE DICTATES. “NEW” ANALYSES WILL BE SO LABELLED AND REVISED SECTIONS WILL BE LABELLED “CHANGED”.

New or Major Evidence for Soft Landing

  1. The WSJ reports that Chinese regulators removed emergency measures they put on the Chinese stock exchanges in support of equities following crashes in 2015 and 2016. This is a sign of confidence and stability.

  2. The political leadership, including President Xi, and the financial regulators have promised to rein in excessive speculation and credit growth. [We’ve been promised that for many years and the debt has continued to sky.]

New or Major Evidence for Hard Landing

  1. NEW—China is preparing for the start of its every five-year 19th Party Congress in the middle of October. At the meetings, General Secretary Xi will be re-elected as General Secretary, the Party’s official leader, and most of the ruling members of the Politburo will retire as they have reached the official retirement age of 68. Xi has been maneuvering for years to pack the new Politburo with his allies and will probably succeed setting himself up to continue his rule after his new 5-year term ends in 2022. Most experts think that is his goal and that he will set the stage for it at this fall’s Party Congress. This will also set the stage for major economic and financial reforms likely to slash China’s high growth rate which has been “bought” with a massive accumulation of debt. Such reforms are almost sure to be accompanied by a long, slow economic hard-landing and much social and political unrest. Thus, Xi feels he must have total control for himself and the country to get through the coming crisis. Stay tuned…

  2. NEW—Today a B1 WSJ story reads— “…China has been reeling in some of its biggest deal makers on mounting concerns about capital leaving the country and debt loads posing a risk to its economy.”

  3. NEW—The WSJ’s Heard on the Street [Sept 8] wrote…” This doesn’t mean China’s bad loan problem has gone away, it just has been swept under a convenient nearby rug.”

  4. If the US imposes major trade sanctions on all nations still trading with N Korea it will create a global trade war and send China into an economic tail-spin. Three numbers tell the tale. China exports about $600B to the US—about 5% of its total GDP. The US exports less than 1% of its GDP to China. China exports less than $3B to N Korea—1/200th of China’s exports to the US. A global trade war would be devastating for all and probably send the global economy into recession or at least stagnation. But, keep in mind the balance-of-power and magnitude of the economic and financial damage here and that General Secretary/President XI is up for re-election to those two posts this fall and next spring. MUCH MORE ON THIS IN COMING WEEKS.

  5. WSJ article points out that the yield curve in China has flattened—the prices of 3-year bonds are essentially the same as 10-year bonds. Such flattening is often, but not always, indicative of an economic slowdown on the horizon. The article also mentions the mantra that I have been preaching…that the government of President Xi is manipulating the economic and financial system to assure no major problems before he is re-elected as party leader this fall and President next spring.

  6. China’s UN vote for strong new sanctions on N Korea is an indication of at least two major things: [1] China wants the N Korea nuclear crisis resolved very soon and, [2] China fears President Trump will launch major trade sanctions bursting its asset and debt bubbles.

  7. Several weeks ago, the IMF raised its projections for Chinese growth but sternly warned that rapidly increasing Chinese debt will hit 300% by 2022. Others like the Institute for International Finance [IIF} asserted in June that Chinese debt already totaled over 300% of GDP, a high percentage for a developing country.

  8. China is now officially and publicly instructing its companies that they must stop foreign investments in areas like insurance, hotels, other real-estate, gambling facilities, etc. Foreign investments are to be directed to two areas. The first is into strategic areas, as defined by the government, such as technologies where the intellectual property gained fits with government plans for China to become a major, worldwide competitor in various fields. [Sound like Japan in the 1970s and 80s?] The second area is into investments consistent with China’s One Belt-One Road strategy to tie it more completely with all of Asia as well as Europe and Africa.

These all indicate concern that economic, financial and political risks are rising.

Opinion and Commentary

Trump and the art of the deal

I’ll repeat a joke I borrowed from some unknown source and used several months ago here.

“Donald Trump was seen walking on water. The press reported he could not swim.”

According to the press, the Democrats, Never Trump Republicans and many extreme right-wingers– the man can do nothing right. His political base doesn’t agree as will be obvious in future days but for most outside that intensely loyal political base of about 40% of the voters Trump can do nothing correctly.

From my perspective Trump does many things well and other things badly. His leadership around hurricane relief has been nothing short of brilliant, as have many of his substantive policy positions. By contrast his tone and style often leave much to be desired.

Giving credit where credit is due, both his actions and tone around Harvey relief and before the Irma devastation have been excellent.

So too was the hurricane relief, federal budget and debt ceiling deal. I can hear the screams out there but the deal was a base clearing grand-slam homerun.

Working with both parties he negotiated a spur of the moment deal that got $16B in emergency relief funds, a federal budget extension for 3 months as well as a debt ceiling extension until early December. The voters chose him to lead…he did.

Before the deal a very crowded September schedule in Congress was likely to delay hurricane relief, threaten a government shut-down and the inability to pay our bills right in the middle of Harvey and Irma re-building efforts likely to cost several hundred billion.

Those are three of the four scores. The fourth is the biggest. Now tax cuts and reform can take center- stage. That is priority #1 for the US people and businesses.

Ask yourself a simple question…would you and the country be better off with a slightly different US budget and a slightly lower debt ceiling or with a substantial tax cut for yourself and for businesses?

Trump cut the Gordian Knot. Hurricane relief money is flowing and Congress now has 3 months to do its job.

Arch conservatives are complaining about the debt ceiling increase without budget cuts.
The Democrats and the media are crowing about Trump undercutting McConnell and Ryan and the fiscal conservatives.

Many Republicans now fear the Democrats will have the driver’s seat in December when the budget and debt ceiling deal ends. But, Trump is President, Ryan is Speaker with a 47-seat majority and McConnell is Majority Leader. And, do you think all the Democrats will stay together to shut down the government a few days before Christmas.

Imagine going back home if you are a Democrat or Republican congressperson for Christmas recess and telling your voters and supporters you voted to shut down the government and not pay the nation’s bills days before Christmas. Not going to happen…

All need to remember that Trump is a moderate conservative, not an ideological conservative or a Republican ideologue. He is a fiscal moderate, a social moderate and a national defense conservative.

So, let’s all watch what happens between now and early December. The Art of the Deal is in-play. The Negotiator in Chief is in the game.

His voters wanted him to get things done.

Think about it…


Until next week…
Al Tuchfarber
Professor Emeritus of Political Science, University of Cincinnati