Bull in the China Shop
By John Mauldin

Source: Gavekal


Job Jitters


Credit Intensity
Rushing the Process
John Mauldin
Chairman, Mauldin Economics |
Bull in the China Shop
By John Mauldin
John Mauldin
Chairman, Mauldin Economics |
The Clinton-Obama era ends as US Democrats seek a radical new voice
The party owes a debt of gratitude to Donald Trump as it sweeps away a cautious mindset
Edward Luce
Listen carefully and you can hear the retreat of the Democratic establishment. Incrementalism served its purpose: it made Democrats electable again and safe for Wall Street. But it has had its day. The generation of Democrats that downplayed concerns about inequality and embraced global markets is being replaced by a far bolder political voice. No matter who takes the Democratic nomination in 2020, they will speak for a radicalised party in quest of the new New Deal.
They owe a debt of gratitude to Donald Trump. However much resurgent liberals detest America’s 45th president, they can thank him for sweeping away the mindset of systematic caution that has mesmerised Democratic leaders for a generation.
It began with Bill Clinton’s New Democrats in the late 1980s. It ended in 2016 when Hillary Clinton lost to Mr Trump. In between it spanned Al Gore, the losing 2000 nominee, John Kerry, who lost in 2004, and Barack Obama, whose eight-year legacy is now being destroyed by Mr Trump.
Mr Trump has served both as a call to arms and as an example of how establishments can be defeated. On the first, Mr Trump has demolished whatever case remained for the idea that Democrats must forever ready themselves for a promised land of bipartisan amity. In practice, many thought that stance had already been discredited by Newt Gingrich, the take-no-prisoners Republican Speaker of the House during the Clinton years. Others thought the wrecking ball the Tea Party took to Mr Obama’s fiscal plans had finally settled the argument.
No matter how much Democrats tacked to the centre, the rewards for this virtue never came. Republicans simply moved further to the right. Democratic presidents, such as Mr Clinton, created budget surpluses. Republicans, such as George W Bush, duly spent them on tax cuts. Inequality is far worse today than in 1992, even though Democrats held the White House for more than half that time. Median incomes, meanwhile, have barely shifted. The initial anger over the 2008 financial crash was captured by the Tea Party. It is nevertheless hard to believe the self-proclaimed socialist Bernie Sanders would have nearly defeated Mrs Clinton had she not developed such close financial ties to Wall Street.
But it was Mr Trump who changed the weather. He showed that you could bamboozle a hostile establishment and still win an election. Then he switched horses and pursued an aggressive Republican agenda. From tax cuts and deregulation to gun rights and anti-abortion judges, Mr Trump now has Republican lawmakers eating out of his hand. Those who still believed it would be possible to work across the aisle — and who pined for the days of Rockefeller Republicans — were robbed of any remaining force. Mr Trump has done a service for the American left.
Reality has also lent it a helping hand. Regardless of your ideology, today’s numbers paint a stark picture. Ten years into the US recovery, median household incomes are, in real terms, still much what they were they were in 1999. The top one per cent of households own more wealth than the bottom 90 per cent. America’s average life expectancy has started to decline.
Mr Trump has made inequality worse. But he is not its author. The numbers were almost as bleak at the end of Mr Obama’s two terms. So tinkering no longer holds much appeal.
Much of the focus is on who should be the Democratic nominee to challenge Mr Trump. That obviously matters. But the significant point is that the party’s centre of gravity has shifted. Whoever the challenger turns out to be, whether Joe Biden, the former vice-president, Elizabeth Warren, the economic populist, Beto O’Rourke, the sunny optimist, or Mr Sanders, their platform will have to reflect that shift. Stances such as “Medicare for all”, a “Green New Deal”, and public election financing will have to be part of the package. So too will higher taxes.
Attention has also been lavished on Alexandria Ocasio-Cortez, the 29-year-old Democratic socialist and youngest member of Congress. More notable is the respect her ideas, including a top tax rate of 70 per cent, commands among establishment Democrats. “The congresswoman is right,” Lawrence Summers, Mr Clinton’s former Treasury Secretary, said last week. Mr Summers personified the Washington consensus of the 1990s. Like Keynes, however, he says he changes his mind when the facts do. They no longer fit the arc-of-history Democrats used to narrate. “The false doctrines of the neoliberal priesthood are losing their hold,” writes Nick Hanauer, the entrepreneur who made his fortune with Amazon.
America’s left is turning into a factory of new ideas. Some of them, such as a universal basic income, may be questionable. Others, such as breaking up monopolies, are more promising. Either way, for the first time in decades, America’s intellectual energy is now on the left. Some liken the ferment to the “bold persistent experimentation” of Franklin Roosevelt, author of the 1930s New Deal. Doubters compare it with the false dawn of George McGovern, who lost in a 1972 landslide to Richard Nixon. Whichever view proves correct, the Clinton-Obama era is drawing to a close. A new one is just beginning.
Trump’s New Shutdown World
In 2013, Obama tried to maximize the difficulty. OMB is taking another tack.
By Kimberley A. Strassel
A girl outside the shuttered National Museum of African American History and Culture in Washington, D.C., Jan. 2. Photo: andrew caballero-reynolds/Agence France-Presse/Getty Images
This weekend the federal shutdown becomes the longest in history—and yet, and yet, the sky has not fallen. Meet the team that has allowed the Trump White House to hold out for so long, and in the process forever altered future shutdown fights.
Across the street from the Oval Office, an only somewhat merry band of budget lawyers labor on one priority: making this event as painless as possible. That was the order from President Trump when the government closed, and the Office of Management and Budget was ready.
Acting White House Chief of Staff Mick Mulvaney had spent months as OMB director gearing up for a stoppage. Acting Director Russ Vought was all in. And OMB General Counsel Mark Paoletta and his small legal team (those not furloughed) has spent every day since putting out fires.
It’s the opposite of prior shutdown thinking. The Obama White House used a 16-day shutdown in 2013 to punish Republicans for withholding funds, and in the process penalized the nation. The administration immediately furloughed workers and cut pay for private contractors. It shuttered Head Start, suspended money for health care in the District of Columbia, and sealed national parks, including war memorials on the National Mall. Some agencies had carry-over funds that would have allowed them to continue operations; they refused to use it.
Some shutdown pain is unavoidable—and correctly so. Both the Constitution and the Antideficiency Act are clear that only Congress appropriates money, and no one should want the executive branch to flout clear legal requirements. Shutdowns are also wasteful and highlight Washington’s inability to function.
Yet since Mr. Trump “owns” this one, Republicans have an incentive to minimize the suffering. Congressional Republicans helped themselves by last year passing bills that kept most of the government open. As for the rest, it turns out the law provides some useful flexibility—when an administration cares to exercise it.
A series of OMB memos stretching back to 1981 had already established certain shutdown exceptions. Agencies can continue to function as necessary to protect safety and human life and property, as well as in aid of the president’s fulfilling constitutional duties. Those programs that operate under “indefinite” appropriations, including Social Security and Medicare, also continue. The current OMB team has employed some of these doctrines in ways past administrations haven’t but which nonetheless make obvious sense. The Food and Drug Administration, for instance, has on the grounds of safety continued to monitor adverse reactions to medical devices, conduct foreign drug-factory inspections, and watch for outbreaks of food contamination.
Lawyers have scoured other statutes for legal outs. It turns out that Congress’s latest spending bill, the continuing resolution that ended Dec. 21, contained a provision allowing the government to pay certain obligations that came due within 30 days. That’s allowed OMB to rush food-stamp payments for millions of Americans through February. It was the Interior Department’s own reading of prior statutes that allowed it to use entrance fees to keep national parks open.
Then there’s the past OMB legal finding that unfunded agencies can continue providing services that are “necessary” to funded ones or to mandatory services. An easy example: The Social Security Administration and Treasury Department, both technically shut down, must nonetheless process Social Security checks that operate under continuous appropriations.
That’s also why Americans will still get tax refunds. The OMB team dug through Treasury documents and found that long ago the Internal Revenue Service had determined refunds fall under permanent, indefinite appropriations. IRS workers are being recalled from furlough to process them.
Some critics claim these workarounds are “illegal,” but lawyers say the Trump team looks to be on sound footing—especially given these decisions have been approved by career OMB lawyers.
And also because the Trump team continues to nix proposals that fall too close to the legal line.
Yet there are no legal fixes for some truly painful effects—including Friday’s missed paycheck for 800,000 federal workers. And many patches were one-time wonders. There can be no additional payments for food stamps or for the Coast Guard. The pressure on Mr. Trump will only rise from here, and some Republicans are already nervous. Prepare for a lot more talk about national-emergency declarations.
But no matter the immediate outcome, the administration’s “painless as possible” approach has shifted the appropriations landscape. House Democrats will have to confront a new set of political calculations in budget negotiations during the Trump presidency. And future administrations will have a harder time justifying ugly shutdowns, in light of this example. Yet another way the Trump administration has changed Washington.
Apple and the Technology Cycle
The next society-changing innovation won’t be driven by the microchip.
By George Friedman
This Really Is the Next Revolution in TV Technology
MicroLED is better looking, more efficient and more versatile than any previous display tech. Now all Samsung, Sony, LG and others have to do is figure out how to manufacture it affordably
By David Pierce