Wednesday, February 13, 2019

What is the condition of our economy?


The last quarter of 2018 saw a constant drumbeat of negative “news” that likely contributed to a psychologically induced drop in the stock market.   Headlines like, “Worst December for stocks since 1931 gets worse as rate hikes spook investors” were commonplace.   Social media regurgitated the narratives.    One would have thought the sky was falling despite an abundance of contrary economic performance measures that the economy is strong.
 
Something is wrong when armchair analysis by novice investors can detect the difference between economic reality and a false perception, but “journalists” cannot or will not.  The American public would do well to guard against watching biased and unreliable television “news” and informing itself (or rather not informing itself) through social media.  The resources are available to make better economic decisions.  The only requirements are time and focus.   The rewards can be significant.  

What is the evidence the economy is strong?

In the 1960s, economist Arthur Okun created the misery index economic indicator.  The misery index is largely the addition of the inflation rate and the unemployment rate.  The lower the number the better the economy.  The Carter Administration holds the title for the worst Misery Index at more than 20 (Inflation over 14% and Unemployment over 7%).  Dwight Eisenhower had the best at only 3.28.   The current misery index under the Trump Administration is 5.9 – the best since Eisenhower in 1952.

Recent release of end of year 2018 and January, 2019 economic data confirm a strong U.S. economy.

Lagging Economic Indicators (Table 1) illustrate how well the U.S. economy is performing.   LAGGING indicators are facts about what has happened in the recent past.  They can help in making some prediction about the immediate future, but straight-line projections of historical trends are dangerous and to be avoided.   In general, look at this table to assess where the economy is right now.



Saturday, December 22, 2018

Goodbye Syria and good riddance


President Donald Trump ordered the withdrawal of approximately 2,000 U.S. military personnel in Syria this week. An immediate withdrawal appears to have begun.  There also appears to be debate about whether U.S. air power might still be used within Syria to further U.S. limited objectives there.
 
When the Arab Spring erupted in Syria in 2010 the United States chose not to participate in the overthrow of Bashar al-Assad of Syria as he suppressed the uprising among his people.   President Obama did not want to become engaged in the web of Middle East tribal warfare.  He later erred in declaring red lines that he did not enforce, but he was right about not becoming engaged.

Later, in 2014, as ISIS grew and began to control territory in Iraq and Syria the U.S. position changed and President Obama advanced a military presence to confront the growth of ISIS under authority originally given President George Bush in 2001.  U.S. forces were deployed to Syria.  They also returned to Iraq for one purpose – to defeat ISIS.

A secondary effect of both the Syrian rebellion and the growth of ISIS was the creation of a refugee crisis as millions of Syrians fled to neighboring countries and Europe.  The instability created as far away as northern Europe by the Syrian fighting was further impetus for U.S. resolve in defeating ISIS.   Stabilize Syria and stop the flow.

President Trump campaigned on defeating ISIS and withdrawing forces from Syria, Iraq, and Afghanistan.  Almost immediately upon entering office he ordered a top to bottom review of the war with ISIS.   He then issued an Executive Order that is still classified secret but reportedly shifted decision-making to appropriate levels and stopped the whack-a-mole approach to chasing ISIS out of one location only to have them appear in another.  Instead, they would be destroyed where they were.
 
In short order, under the leadership of Secretary of Defense James Mattis, the changes began showing results and ISIS was essentially defeated in little more than a year.  The president withheld decisions regarding withdrawals based on the advice of his cabinet, but now appears intent on moving forward on those promises.

ISIS is defeated in Syria and Iraq having lost nearly all the territory it previously held.  Yes, expect that it will raise its head again somewhere.   But the explicit mission is complete.   There is no Congressional or UN mandate to expand that mission to remove Bashir al-Assad, to eject the Russians and Iranians, or to fight our NATO ally Turkey to protect our Kurdish partners in Syria in their pursuit of an independent state.

For two decades the United States has been over-committed in the Middle East and Asia – the operational tempo endured by our forces has worn very thin both the equipment and the human beings who must meet those commitments.  It is time to pull out of not only Syria, but Iraq and Afghanistan as well.  This was part of the President’s mandate when elected in 2016.  He withheld fulfilling those promises based on the counsel of others.  He no longer sees their arguments as anything more than illegitimate mission creep that is contrary to the national interest.

Trump said this week, “Does the USA want to be the Policeman of the Middle East, getting NOTHING but spending precious lives and trillions of dollars protecting others who, in almost all cases, do not appreciate what we are doing? Do we want to be there forever?”   He has said it all along and he has acted on it.  Many agree with him.

Secretary of Defense James Mattis, having served two years, submitted a letter of resignation this week effective in February.   The former Marine Corps general indicates in his letter of resignation that his views for the direction of the DoD are not consistent with President Donald Trump’s.  The differing views were well known, but the announcement seems to have been sparked by Trump’s decision to immediately withdraw from Syria.

Mattis places tremendous emphasis in his resignation letter on alliances and partnerships as part of the structure of American power.   In particular, he may perceive it as an abandoning of the Kurds.   No doubt Mattis (former Central Command Commander) has probably placed his own personal credibility on the line with the Kurds.   They have played a tremendous role in supporting U.S. objectives in Iraq (where we abandoned them after the first Persian Gulf War) and an even greater role in the Iraq War.

Senator Lindsey Graham has also criticized the President’s decision, expressing specifically his concerns about the Kurds as well.

The Kurds are always suspicious about U.S. reliability as a partner.  But they once again joined us and played a front row role in defeating ISIS in Syria and Iraq.  Make no doubt about that.  Also, have no doubt that the Kurds, and other partners such as Arab and Syriac Christian militias that have supported U.S. objectives in Syria, face tremendous threats from Syrian government forces, Russia, and Turkey after a U.S. withdrawal.

The Kurds have been sturdy partners to the U.S.   They should be recognized and aided in any manner that does not conflict with other major U.S. interests.   Our interests are not fully aligned.
Kurds are a persecuted ethnic group that seeks to establish self-government and even an independent state of its own for its people.   Nearly 30 million Kurds are spread across Iran, Iraq, Turkey, Armenia, and Syria. 
 
Turkey, a NATO ally of the United States, views some organized Kurdish groups as terrorists.  The U.S. and Turkey both classify the PKK as a terrorist organization.  Turkey also classifies the YPG as a terrorist group, but the U.S. does not and has partnered with the group in its fight against ISIS.

One must place all of this in historical context.   At the end of World War I the Ottoman Empire was dismantled.   There was talk of creating a Kurdistan for the Kurds that basically would have encompassed about half of modern-day Turkey.   The leader of the Turkish people, Ataturk, warned the Allies that a bitter fight would ensue if this was attempted.   The War of Turkish Independence developed, extending fighting for two years after WWI.  The British suffered a great loss at the Battle of Gallipoli.  Greek forces that led the charge were routed.

The objective of U.S. involvement in Syria was to destroy ISIS.  That goal was achieved.  Those who seek to retain a presence in Syria see remaining as a means by which to prevent an ISIS resurgence and to use the presence to thwart the expansion of Iranian and Russian influence in the region.

That is a mission creep that the President is not willing to support.   There is no U.S. policy to remove Assad by force.  There is no U.S. policy to establish a Kurdish enclave in Syria contrary to the interests of a U.S. ally – Turkey.   There is no U.S. policy to remove forcibly Russia and Iran from Syria.  There is no policy to destroy Hezbollah in Syria. 

The Middle-East is a tangled web of historic animosity, ancient grudges and fanaticism.   The U.S. has been dragged into this web in Afghanistan and Iraq and now peripherally in Syria and Yemen.   There is tremendous disagreement about the efficacy of such actions.

Place the historical animosities within the context of a blatant struggle between Turkey and Saudi Arabia over who will lead the Middle East’s Sunnis and a concomitant struggle between Shiite Iran and the Sunnis over who will dominate the Middle East more generally.

The President appears to have decided that the never-ending engagements in Syria and probably Iraq and Afghanistan are no longer worth continuing.  Only time will tell if he is right.  His Secretary of Defense disagrees with him strongly and has resigned.

The Secretary of Defense is resigning after serving two years in the position.  That is not unusual.  President Barrack Obama had four Secretaries of Defense, each serving about two years.   President Obama fired General Mattis when he was Central Command Commander without as much as an email or phone call heads up.  Obama’s team did not like the general questioning their approach toward Iran as they secretly worked on a nuclear deal.  Fine, it was President Obama’s prerogative to fire him.  It was not the end of the world. 

What is important is the fact that President Trump is forcing a debate on the direction of U.S. national security strategy.   For decades hawks have been able to justify almost anything based on 9/11.   That time is rightfully coming to an end.   There are much bigger fish to fry.    Asymmetric cyber warfare is the greatest existential threat to the United States.  U.S. National Security Strategy and resources should shift to that very real and dangerous threat.

Seeking Economic Balance


A healthy economy is balanced.   A pendulum that is close to its settled point is most stable.   Frequent record high this and record low that are not good in the long term.  There are competing interests.   Balance is good.

After a decade of the extreme pendulum swing from the economic collapse of 2008-2009 to the record setting 2017-2018 the U.S. economy is settling into a comfortable position.   It will not last forever as there are many forces that will keep each of these trends in constant and sometimes contrary directions.

For now, this is a good place.  Contrary to the panic many incite about stock market corrections or political turmoil the overall economy is in good shape right now.

Tuesday, October 23, 2018

Harvard case to end affirmative action?

An inflection point may be at hand.  For decades the U.S. Supreme Court has permitted the compromise of Constitutional equal protection rights to permit what can be broadly described as affirmative action.   The ongoing lawsuit by people of Asian ancestry against Harvard University’s admissions policies may well be the case that ends any consideration of race in education or employment.  If so, a broad social and political upheaval may occur as any form of race conscious government action is banned.

Students for Fair Admission (SFA) is pursuing a lawsuit against Harvard University contending that the admissions process discriminates against Americans of Asian descent contrary to the requirements of Title VI of the Civil Rights Act of 1964.  Title VI bans discrimination based on race, color, sex, religion or national origin. Title VI, and the associated Title VII that bans discrimination in employment, flow from equal protection rights contained within the U.S. Constitution.

Thursday, October 4, 2018

The Supreme Court’s Politicization – can we fix it?


The Republic is in a bind.  The nation is divided almost evenly from left to right.   The division over a generation has grown worse and infected the Supreme Court of the United States.  After the present confirmation process is completed there must be an effort to find a way to end this politicization of the Supreme Court and ensure that it remains the legitimate arbiter of the Constitution.

Article III of the U.S. Constitution states the “judicial power of the United States, shall be vested in one Supreme Court.”  Article II of the Constitution gives the President the power, “with the Advice and Consent of the Senate, … [to] appoint … Judges of the supreme Court.  The power imbued to the Supreme Court as the ultimate interpreter of the Constitution is uniquely American.
 
Before the Constitution was adopted there was great debate.  Alexander Hamilton wrote Federalist Paper No. 78 about the judicial power under the pen name Publius.  An opposing view was written in Brutus No. 15 by an unknown author.  Brutus’ overarching concern was that the Supreme Court, as ultimate authority of what the Constitution meant was unchecked due to its position and lifetime tenure of its members.  He said, “In short, they are independent of the people, of the legislature, and of every power under heaven. Men placed in this situation will generally soon feel themselves independent of heaven itself.”

Hamilton saw this state as a positive aspect of the Constitution.  He answered Brutus arguing that the independence and lifelong appointment would “secure a steady, upright, and impartial administration of the laws.”  He contended that the judiciary “will always be the least dangerous to the political rights of the Constitution” because it held no power of the purse (Legislative) or the sword (Executive).

Saturday, September 29, 2018

Obituaries - a favorite read

OK, Ok, you might be questioning this somewhat off the path title on my blog.  But I love to read obituaries in the weekend newspapers.   In a time when we are so distracted with technology I recommend reading them to get a better perspective.

One of my favorite obituaries that remains firm in my mind was that of Maureen O’Donnell.  She passed away in Annandale, Virginia on February 20, 1989 at the young age of 58 of cancer.  She had suffered greatly in life – losing 4 of her 6 children to cystic fibrosis.   But that did not stop her.  She only channeled her love to her students at W.T. Woodson High School where she taught Latin.  She was viewed as both a mother and teacher by her students.

She was remembered as a “small woman infused with boundless energy, [who] built one of the nation's strongest high school Latin programs from scratch, inspiring hundreds of students not only to study a "dead" language but to revere such traits as honor, compassion and understanding.”  She was awarded with an honorary doctorate by Yale and as Virginia Teacher of the Year in 1982 for the program she created.

Friday, August 3, 2018

The workforce is doing well


The Bureau of Labor Statistics (BLS) today released its “Employment Situation Report” for July, 2018.   It is a very positive report that continues to reflect an improved workforce environment.
  
Workforce health is related to the overall health of the economy: Gross Domestic Product (GDP) reportedly increased 4.1% in the second quarter of this year – a high growth rate;   measures of business and consumer confidence are high;  wages may finally be rising in a tight labor market;  inflation is holding at about 2%; the stock market remains at very high levels.