NDN Blog

Invite: Thur, May 16th - "Patriotism, Optimism"

Over the past year or so Simon has been making a big argument about the past and future of the center-left in America.  Called "Patriotism and Optimism," it makes the case that America is not in decline and is in fact doing as well as it has in any point in its history. It is meant to be an explicit rebuttal to the core argument Trump is making about America and its decline, an argument which is malevolently selling America and its people short every day. 

This primary way this argument has made itself into the world is through a 45 minute long Powerpoint deck, which has been seen in dozens of showings over the web and live in person to policy makers here in Washington and around the country. Our next showing of the deck will be Thursday, May 16th from 12:00pm to 1:15pm at our new offices at 800 Maine Avenue SW, Washington, DC. Lunch will be served. You can RSVP for the event and learn more here. For background before the showing, feel free to check out some related readings below.

Key Background Readings On "Patriotism and Optimism"

The Case for Optimism: Rejecting Trump's Poisonous Pessimism, Simon Rosenberg, Medium, 6/2/17. In an essay that originally was published on Medium, Simon argues that the great rationale of Trump's Presidency  –  that America is in decline – simply isn't true, and must be challenged more forcefully.  This is the piece that spurred the creation of the presentation. 

Chin Up, Democrats, Simon Rosenberg, US News and World Report, 1/20/17. In his column Simon argues that Democrats should have pride in their historic accomplishments and optimism about the future of their politics. This one is very relevant to the presentation itself. 

A Center-Left Agenda for the Trump Era - Simon Rosenberg, US News and World Report, 12/9/16.  In the early days after Trump's election Simon layed out a possible agenda for the Democrats centering on prosperity, security, shoring up the American led liberal order and ambitiious efforts to reform our political system. 

Additional Readings

Some Thoughts On the Caravan - By Simon Rosenberg, Medium, 10/24/18.  The Caravan, composed of 7,000 poor, unarmed, mostly Honduran Central Americans, poses no threat to the US, and illegal border crossings continue to be way down. Some thoughts on what Democrats should do to respond to Trump's farcical attacks and terrible policies.

Are We Better Off Under Trump? The Short Answer Is No - By Simon Rosenberg and Chris Taylor, NDN, 10/18/18.  Most measures of the US economy are worse today than when Trump took office. Worse still, the President’s policies have made it very challenging to manage the next recession or global economic downturn.

Challenging Trump's Tariffs - An Ongoing Series - By Chris Taylor, 10/17/18.  In a new series challenging Trump's tariffs, we argue that the President's trade policy is illegal, recklessly ignorant, damaging to the US economy, and historically unpopular. Congress must step up and rescind them in the coming months. 

Trump's Immigration Strategy Is Failing - By Simon Rosenberg, NBC News, 8/6/18.  Almost nothing the President has done on immigration and the border has worked; expect more extreme policies as the elections approach. 

Congress Must Debate The Weakening of Global Order - By Simon Rosenberg, NBC News, 5/10/18.  Few presidents have inherited a world or a nation in which more was going right. Trump seems determined to undo it all.

The Pernicious Politics of Oil - Simon Rosenberg, US News and World Report, 12/16/16.  Petro-powers are challenging the global order, and the next president seems uninterested in stopping them.

An Enduring Legacy: The Democratic Party and Free and Open Trade - Simon Rosenberg, Huffington Post, 1/24/14.  The global system created by Presidents FDR and Truman has done more to create opportunity, reduce poverty and advance democracy than perhaps any other policies in history. 

Trump Is More Like Maduro Than Any Democrat

This essay originally appeared on Medium.

In recent months, the Republican Party has toyed with a new electoral strategy heading into 2020: accuse Democrats of becoming radical leftists opposed to free markets and democratic institutions, and argue that they want to transform the country into something similar to the Maduro regime in Venezuela. In February, for example, Trump delivered a speech in Miami accusing his political opponents of wanting to impose Venezuelan-style socialism on the United States, while Press Secretary Sarah Sanders in March said that “Democrats are harassing the President to distract from their radical agenda of making America a socialist country.” The strange dynamic of this argument, however, is that the picture it paints of Democrats’ supposed economic unorthodoxy and disdain for the rule of law is far more reminiscent of Trump himself.  More so than any US President in the modern era, Trump has derided the American market-based economic system as robbing Americans and destroying US jobs, all the while trampling on the rule of law and seeking to intimidate his political opponents.

Let’s drill down a bit on the ways Trump is more like Maduro than any Democrat here in the US:

Anti-Market Economic Policies, Picking Winners and Losers - Trump has overseen what has become the most anti-market economic policy of any President in the postwar period. First, his unprecedented attacks on the global trading system have directly weakened the competitiveness of innovative American firms in an attempt to prop up his favored industries. The steel and aluminum tariffs have increased costs to automakers like Ford and GM by over $1 billion, and have led to aggregate job losses of over 400,000 net jobs. And have the tariffs led to the end of unfair trading practices against American steel and aluminum manufacturers? No, because the vast majority of those US imports come from Canada, the EU, and Mexico, all of whom haven’t engaged in dumping or subsidies to their domestic steel and aluminum producers. Trump’s tariff strategy is no different from if he enforced punitive taxes on American automakers and then gave government handouts to the steel and aluminum industries. Indeed, as a result of his tariffs, much of the agricultural industry is now reliant on government subsidies to stay afloat as their export markets have dried up.

Second, in his Miami speech Trump derided the Venezuelan government for its “power to decide who wins and who loses.” And yet Trump consistently interferes in the market and attempts to leverage government power to intimidate firms that he doesn’t like and help companies that he does like. Trump attacked GM’s decision to scale back US production as a result of elevated raw resource costs, and threatened to cut off GM’s access to completely unrelated electric car tax credits that are available to all US automakers. He threatened to unilaterally increase the shipping rates that the US Postal Service charges to Amazon, in an attempt to harm Amazon and Washington Post owner Jeff Bezos. Furthermore, Trump attempted to force electrical grids across the country to buy coal- and nuclear-generated electricity, even if the grids didn’t want to use those sources because they were more expensive. And just last month, he tried to pressure the Tennessee Valley Authority into buying more expensively priced coal-generated electricity from several firms that were owned by friends of the President. Time and again, Trump has refused to allow competitive markets to function, and instead has turned to the socialist strategy of using state power to advantage his allies and harm his enemies.

Third, Trump has overseen the most fiscally irresponsible budget in the modern era, at a time when the strong US economy requires the least fiscal stimulus. Orthodox economics says that debt-financed stimulus should be done during economic downturns and then deficits reduced during subsequent economic booms, so as to maximize the efficiency of borrowed money and reduce the debt burden on future generations. Trump has done the opposite of this. With unemployment under 5%, his tax cut and increased spending have sent deficits surging from 3.1% of GDP in 2016 to a projected 4.2% this year, negating much of the progress that Obama made in reducing it from 9.8% in 2009 to 3.1% in 2016. This level of budget deficit during good economic times is unprecedented in the United States. Indeed, since the end of the Second World War, the three largest budget deficits as a % of GDP while unemployment has been under 6% have been Trump’s deficits in 2017, 2018, and 2019 (projected). Similarly, disregarding fiscal sustainability has been a hallmark of the Maduro regime, which ran budget deficits of 20% of GDP and 15% of GDP in 2015 and 2014 that have played a major role in the country’s current hyperinflation.

Repudiation of Democratic Institutions – The area in which Trump might resemble Maduro the most is in his contempt for the rule of law and democratic checks and balances.  Maduro and his predecessor Hugo Chavez gained absolute power in Venezuela through state take-over of the free press, packing the independent judiciary with their own loyalists, transferring the power of the elected legislature to the executive, and imprisoning their political opponents. If those authoritarian actions sound familiar, it is because they are similar to the steps Trump has tried to take to consolidate his own power (albeit in a system with far greater checks to such abuses). Trump has attempted to delegitimize the free press as the “enemy of the people” in the eyes of Americans, applauded criminal assaults against journalists, threatened to disband specific courts that have made rulings he opposes, threatens almost weekly to lock up his political opponents, and used a blatantly made up national security emergency to bypass the elected Congress to build his border wall. In each of these ways, the actions of the Maduro regime to consolidate power are echoed by Trump in his attempted actions and rhetoric, while it is the Democratic Party that has taken the mantle of defending democratic institutions in the United States.

Furthermore, the President has attacked the independent governmental institutions that help manage the economy when they take actions that Trump doesn’t like. When the Federal Reserve was raising interest rates in a way that Trump thought would hurt his approval rating, he launched the most vocal attacks on the Fed of any President in decades. Meanwhile, Trump’s newest appointee to the Fed, Stephen Moore, is likely the most blatantly political figure appointed to the central bank in recent memory. In December 2018, Moore wrote an op-ed titled simply “Fire the Fed”, and he has consistently called for Fed Chair Jerome Powell to resign. Finally, Trump and his advisors have constantly attacked the Congressional Budget Office for supposedly making up economic data to hurt Trump, even though there is no evidence whatsoever of this activity. Major elements of Maduro’s economic policy in Venezuela have included a takeover of the central bank to dramatically increase monetary stimulus for political gain (leading to hyperinflation) and the packing of the independent statistical agencies with loyalists who doctored data to increase Maduro’s popularity. Here, Maduro seems much closer to Trump than to the Democratic Party.

As the 2020 election approaches, Republican attacks on the Democratic Party and its candidates as socialists and Venezuela-lite will undoubtedly escalate. But for all of their condemnation of anti-market and authoritarian impulses in Venezuela, their man in the White House is the greatest embodiment of such sentiments in modern American history. As is so common with Trump, this new line of attack is simply an attempt at misdirection from the real economic achievements of Democrats and Republicans over the past generation. Contrary to the arguments portraying Democrats as scary socialists, the Democratic economic approach has actually produced far better results than that of Republicans. Since 1989, four times as many jobs have been created annually while Democrats have been in the White House than when Republicans have been. Similarly, median income has on average fallen under Republican Presidents while it has risen under Democrats, and the budget deficit and uninsured rate have on average increased under Republicans while they have declined under Democrats. If Republicans want to find a party that has mismanaged the economy and adopted increasingly authoritarian ideas, they should look in the mirror.

Congress Should Warn The President Against Levying Tariffs On Europe

We are at the point now where Congress should send a clear message to President Trump that if he chooses to put tariffs on European automobiles and other goods in the coming weeks there will be consequences for his Presidency and his agenda in Congress.   Given the struggles Europe is having with Brexit, its upcoming May elections, and a slowing economy, launching tariffs at this particular moment would be rightly interpreted in Europe as an unnecessary and reckless hostile act and do grave and lasting damage to America’s relations with our closest historic allies.  Additionally, as we’ve written elsewhere, the President’s repeated evocation of emergency powers to levy tariffs without the approval of Congress is a dangerous abuse of Presidential power and should no longer be tolerated by leaders in either party. 

Events of the last few days have made this kind of aggressive action by Congress far more urgent.  First, the President’s son, Don Jr, penned an op-ed in a UK newspaper attacking Prime Minister Theresa May for her ineffective management of Brexit during perhaps the most consequential week of this sorry saga.  An extraordinary step, the op-ed demonstrated a willingness by the President’s family, and perhaps his government, to take dramatic action outside of all traditional diplomatic protocol to hasten the breakup of the European Union.  Second, the President has used remarkably hostile language about Europe in recent days, most notably in this exchange with the Irish Prime Minister at the White House last week.   With the Irish Prime Minister sitting next to him, the President said about Europe: “We are going to do something that’s pretty severe economically.  We are going to tariff a lot of their products coming in.” 

The formation of the European Union was one of America’s most successful and important post war projects.  In April, Europe and the United States will be marking NATO’s 70th Anniversary, and in May, Europe will be holding elections for representation in the European Parliament.  This should be a time to be celebrating our historic alliances and partnerships, not attacking them.  And at a broader level, Congress must now, as best it can, not just work to counter or mitigate the damage the President is doing to our nation and its interests, but to prevent it. 

While we believe anything the House and Senate do should be very aggressive, at the very least they should give serious consideration to two bills currently in Congress: the Bicameral Congressional Trade Authority Act of 2019, sponsored by Senators Toomey (R-PA) and Warner (D-VA) in the Senate, and Reps. Kind (D-WI), Panetta (D-CA), Gallagher (R-WI), and LaHood (R-IL) in the House, and the Automotive Jobs Act, sponsored by Reps. Sewell (D-AL) and Upton (R-MI). The Bicameral Congressional Trade Authority Act provides critical Congressional and Department of Defense oversight on the President's Section 232 ability to use national security as a justification to unilaterally impose tariffs, while the Automotive Jobs Act requires the federal government’s International Trade Commission to study the economic impact of auto tariffs before they can be implemented by the President.

With all of the warning bells ringing for the American and global economies, and our alliances with key trading partners, it is time now for Congress to engage and directly challenge the President on his irresponsible tariff policy.

Growing Recession Risks Could Make Trump Even Less Stable

In recent weeks, new challenges have emerged to the conventional wisdom that the US economy is largely doing fine. Growth is projected to significantly decelerate this year, with first quarter growth seen at only 0.4% by the Atlanta Fed and 0.9% by Goldman Sachs. Manufacturing output, a key leading indicator of economic activity, has fallen significantly over the past six months, and four major manufacturing indicators (ISM PMIMarkit PMIPhilly Fed, and Empire State Fed) now show US industrial activity at its lowest level since late 2016. Finally, the most widely trusted recession indicator in the financial markets - the yield curve - is now at its flattest level (indicating its highest recession probability) since 2008, and the NY Fed's recession model shows a 24% chance of recession in the next 12 months, an alarming reading considering that over the past 40 years there has always been a recession within 12 months when the model has reached 28%.

An economic downturn, accompanied by a loss in confidence in the economy among the public, could significantly harm Trump's chances in 2020. While the President continues to have the consistently lowest first term approval rating in the post-World War 2 period, it has been kept above disaster territory by relatively strong approval of his economic management. For example, March's Ipsos poll showed his net approval at -13, but his net economic approval at +6. If such a downturn were to happen, therefore, the bottom could easily fall out on his Presidency, and a serious primary challenge could be undertaken against the President. As a result, as the economy continues to weaken, we'll likely see a more unstable and increasingly erratic Trump, who will try ever harder to please his base with even more reckless policies in an attempt to hide the slowing economy.

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

With Growth Slowing, Trump Releases A Budget Devoid From Reality

This morning, the Trump administration released their budget request for 2020 and with it their economic projections for the next decade. Unfortunately, the document reads more like a Trump rally speech than a serious piece of economic literature, and contains projections at odds with virtually every independent analysis. The budget forecasts growth of 3.2% in 2019, even though the Fed, CBO, IMF, and every major bank (Goldman Sachs, JP Morgan, Morgan Stanley, and Bank of America for example) all project that 2019 growth will be 2.5% or less (the average 2019 projection for those seven organizations is just 2.2%). Even more implausible, Trump's budget forecasts that growth will stay at 3% and above through 2023. In reality, the IMF projects that US growth will be closer to 1.4% in 2023, while the CBO forecasts a growth rate of 1.7% in 2023. The administration's fiscal daydream doesn't stop here though. Much of the growth boost in 2018 came from sharply higher budget deficits that boosted aggregate demand (the deficit of 3.9% of GDP in 2018 was the largest deficit when unemployment was under 6% since 1950). Trump's budget, however, sees a budget deficit of 3.7% of GDP by 2023, compared to the CBO's current estimate of 4.6% in that year. What the administration is saying, then, is that they will have double the rate of growth in 2023 compared to CBO projections, while also having less fiscal stimulus than the CBO anticipates (stimulus that would presumably be necessary on an even larger level to achieve anywhere near 3% growth). 

Above all else, today's budget request is a desperate attempt to rewrite the economic narrative of the Trump presidency. Growth is slowing, not rising, and will likely hit its potential rate of 1.8% by 2020. This means that the President's promise that his tax cut would create sustainable long term growth above 3% was a lie. In addition, the budget deficit will continue to grow to unprecedented levels when outside of a recession (and indeed, the deficit for the first four months of FY 2019 is already 77% larger than the first four months of FY 2018). Trump's promise that his tax cut would pay for itself and that he'd balance the budget within his first term in office? Another lie. So far in Trump's presidency, growth has been strong because of a large fiscal stimulus that, while having little effect on long term growth and blowing up the deficit, increased short term growth. Now that the stimulus is wearing off, however, the reality of Trump's poor economic policies is becoming clear, something that could be politically disastrous for him in 2020. 

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Time For Congress To Directly Challenge Trump's Tariffs, Pass Bicameral Bill Reining In His Tariff Authority

Today's extremely poor job growth data reinforces the trend also echoed this week in Europe that we are heading for a sharp deceleration in economic activity and a potential recession.  The Atlanta Fed now sees only 0.5% growth in Q1, while Goldman Sachs projects a growth rate of just 0.9%. On top of that, manufacturing output, a key leading indicator of growth and a major priority for the President, has fallen sharply in recent months and is now at its lowest level since November 2016. 

Much of the blame for this significant deceleration lies at the feet of Trump's reckless trade policy, which has seen new tariffs imposed on over 20% of all US imports. This policy has led to a significant deceleration of global growth, including a near recession in the euro area, as well as a loss of key demand markets for US manufacturers and farmers. All told, the tariffs have led to thousands of US jobs being lost and have contributed to the recent declines in the stock market. 

As a result, removing Trump's tariffs is a key growth imperative for the US economy. This reinforces the need for Congress to more forcefully challenge Trump's trade policy, particularly the illegal national security authority Trump has used to unilaterally impose tariffs. One important way we recommend doing this is the Bicameral Congressional Trade Authority Act of 2019, sponsored by Senators Toomey (R-PA) and Warner (D-VA) in the Senate, and Reps. Kind (D-WI), Panetta (D-CA), Gallagher (R-WI), and LaHood (R-IL) in the House. The legislation provides critical Congressional and Department of Defense oversight on the President's Section 232 ability to use national security as a justification to unilaterally impose tariffs on our close trading partners.

Challenging the President on his trade policy is especially important in light of his new rent-seeking "plan" to charge our NATO and East Asian allies the full cost of US troops deployed in their countries plus an extra 50% premium. This idea is nothing short of extortion of our close allies, and if enacted would shake the transatlantic alliance to its core. If the President also unilaterally imposes auto tariffs on the European Union, a move likely to push the euro area into recession, the transatlantic alliance could witness a very rapid, and potentially fatal, unraveling. These moves can only be seen as intentionally trying to destroy the alliances that have created decades of peace and prosperity around the world. It is our belief, therefore, that directly challenging Trump's ability to impose these tariffs is a critical part of the fight against illiberal authoritarianism both at home and abroad.

With all of the warning bells ringing for the American and global economies, it is time now for Congress to engage and directly challenge the President on his reckless tariff policy.

Related Writings:

Trump's Trade Deal W/China Looks Toothless, 2019 Growth Stagnates - 3/6/19 - The potential trade deal with China looks likely to only increase some purchases of US goods, while doing little to reduce Chinese structural trade abuses. Meanwhile, the trade war has led to a large deceleration in US growth, while stimulus from the tax cut has weakened significantly.

Trump's European Tariffs Would Weaken The US Economy And The Transatlantic Alliance - 2/14/19 - Auto tariffs on the EU would destroy thousands of US manufacturing jobs, raise car prices across the country, and weaken our alliance with our European partners. Congress must act to challenge this looming trade war.

NDN Supports Bicameral Tariff Bill - 2/8/19 - NDN is pleased to endorse and support the Bicameral Congressional Trade Authority Act of 2019, legislation which provides critical Congressional oversight on the President’s ability to use national security as a justification to impose tariffs on our close trading partners.

Trump's Tariffs Are A Growing Threat To The American, And Global, Economies - 11/28/18 - US growth expectations have fallen, manufacturing and agricultural firms now face higher costs and weaker demand, and the trade deficit has surged. With a President unwilling or unable to grasp the risks of a broader trade conflict, it is up to Congress to challenge Trump far more directly on his reckless trade policies.

Iowa, Trump, and the Politics of Globalization/Tariffs - 10/12/18 - Trump’s trade policies are hurting the Iowa economy. His tariffs are unpopular there, and his party is performing badly in the fall elections. Some thoughts on what this means for the Democratic presidential race starting soon. 

Trump's Trade Deal W/China Looks Toothless, 2019 Growth Stagnates

In pursuing his trade war with China, Trump promised American workers and farmers that the tens of billions of dollars lost from reduced export access and higher costs would be made up by a comprehensive deal that dealt with the structural advantages China gave to its own industry. In recent weeks, however, it has become increasingly likely that a potential trade deal with China will not do that, and instead will only involve some increased purchases by the Chinese government. The New York TimesWall Street Journal, and CNBC all report that any language in the deal requiring changes to China's intellectual property or industrial subsidies will likely be too vague to have any real effect, and will have few mechanisms for enforcement. This represents a startling defeat for the President. If Trump only wanted an increase in US exports, he could have simply signed the TPP trade deal on his first day in office, which was projected to increase US exports by over $350 billion annually by 2030 (compared to at most an additional $200 billion in annual exports to China under this deal, although even that would be offset by fewer exports elsewhere due to the resulting appreciation of the US dollar). Instead, he has significantly weakened both the US and global economies for gains that could have been accomplished two years ago. 

Furthermore, while fourth quarter GDP came in above expectations at 2.6% (but still below the White House's "long term projection" of 3%, less than a year after the tax cut), early projections for 2019 growth show a significant reduction in growth. The Atlanta Fed sees only 0.5% growth in the first quarter of 2019, while the New York Fed and Goldman Sachs both project 0.9% growth. These growth downgrades come on the back of new data showing that in February manufacturing activity fell to its lowest level since November 2016. Trump's economic policies are largely responsible for this economic slowdown. His trade policies have led to a significant deceleration of global growth as well as a loss of key demand markets for US manufacturers and farmers, both of which have reduced US exports and production. In addition, his tax cut has now clearly failed to lift business investment as was promised by the administration. Non-defense capital spending today is at a lower level than it was in May 2018, and business investment has grown at an annualized average of 4.4% over the past two quarters, compared to a quarterly annualized average of 6.3% in 2017 before the tax cut was enacted. NDN has written a series challenging Trump's reckless trade policy for its harmful effects on the US and global economies, which you can find here. As well, you can read NDN's work detailing how the overall Trump economy has underperformed the strong Obama economy of 2015-16 here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Trump's Hold on DC, US Politics and the GOP Is Weakening

The central dynamic in US politics today, and perhaps even the politics of the world, is the growing awareness of how weakened a figure Donald Trump has become.  He was beaten badly in the 2018 elections, and saw both parties come together in Congress to reject his strident demands on his central domestic issue, the border.  In essence no one is scared of him anymore.  

The opposition to him is becoming more pronounced in official circles here and abroad.  On Venezuela, China and Russia came together to support a pro-Maduro coalition, directly challenging the President’s very aggressive policy there.  The open hostility towards him was on full display in both Warsaw and Munich last week.  And here at home, prominent Republicans have not only challenged him on the border, but also on NATO, tariffs, Russia, Syria, Yemen, Afghanistan and Saudi Arabia. 

The President’s unfortunate decision to declare a national emergency on the border when none exists may weaken him further.  As the Washington Post’s Greg Sargent reports this morning, early polling on the emergency declaration is very bad for the President, even among his supporters.  After weeks of improvement on 538’s polling aggregate, the President’s approval rating has turned sharply more negative in recent days.  The sense that our President is failing, adrift, a bit crazy and potentially in imminent, grave legal jeopardy is taking hold here and across the world.  Domestically it means more direct challenges to his power, and more anger, lashing out; globally however it may mean even more aggressive actions against US interests, as this New York Times article about escalating Chinese and Iranian cyberattacks against American businesses details.  As I wrote this weekend, the President has left America dangerously isolated and not focused on the most serious threats facing us today – Russia, cyber exploitation of our open society, climate change and the corrosive geopolitics of oil wealth – but his profound new weakness is an additional threat to our security now too. 

Finally, with this wierd period from early October to last week when the political focus was on the elections and then the shutdown coming to an end, the focus now will be now on more conventional governing challenges - the economy, foreign policy, health care, the deficit, etc.  Given that virtually every metric about the health of the nation has worsened under Trump, and our standing abroad has taken a huge hit, the return to reality we may be about to experience is going to be unpleasant for Trump.  I don't know how he is going to handle it all - his decline, the willingness to challenge, the growing gravity of the legal cases, the reality that he's been a crappy President - but one should expect more distractions from it all, and more dark and challenging days ahead. 

Trump’s European Tariffs Would Weaken US Economy, Transatlantic Alliance

This is the ninth article in a series produced by NDN challenging Trump’s tariffs.

On Friday, Nancy Pelosi will head to the Munich Security Conference with dozens of Congressional Democrats to reaffirm America’s security and economic commitments to our European allies. Since the end of the Second World War, the transatlantic alliance has played a critical role in defending liberal democratic values and ensuring widespread economic prosperity throughout the West, particularly in the United States. Today, over 7,000 European troops serve alongside American soldiers in Afghanistan, and exports to the EU support over 2 million jobs in the United States each year. While the Democrats reiterate America’s support for this critical alliance this weekend, however, Donald Trump will be preparing to drive a stake into its very foundations. On February 17th, the Department of Commerce will release their report on the national security implications of auto imports from the EU, which will almost certainly rubber stamp Trump’s claims that the EU is taking advantage of the US on trade. Following the report’s release, Trump will have 90 days to impose tariffs on EU auto imports as leverage to negotiate a trade deal, something that Sen. Grassley said Trump “is inclined to do” in an interview last month. Such a move would be devastating to the transatlantic system both economically and geopolitically, and Congress must decisively challenge such a decision.  

The imposition of auto tariffs of 25% on $65 billion worth of imports from the EU would be devastating to the US economy. First, the move would certainly lead to a trade war with the Europeans, and EU Trade Commissioner Cecilia Malmstrom already said last week that any tariffs on European auto exports would be met with reciprocal tariffs on tens of billions of dollars worth of American auto, agricultural, and industrial exports. As a result, auto production would fall significantly in the United States as exports fell, causing an estimated loss of over 700,000 jobs in the industry and a reduction in US GDP of $62 billion. This is on top of billions of dollars of lost earnings reported by Ford and GM as a result of Trump’s already imposed steel and aluminum tariffs, and would likely lead to negative earnings for the major American automakers in 2019. Second, the US tariffs act as a de facto tax on all American consumers. European-made cars would immediately skyrocket in price, but European-made auto parts are an integral part of American automakers’ supply chains, meaning that the price of US-made cars would also increase. The Center for Automotive Research estimates that the average price of a car would increase by $3,500 as a result of the tariffs. Not only would price increases reduce the disposable income of Americans, they would also reduce the number of overall cars sold per year in the US, causing significant job losses in the auto transport and dealership industries. Indeed, LMC Automotive estimates that the tariffs could cause US auto sales to fall by 2 million vehicles per year. The car sales industry employs over 1 million Americans, and a major slowdown in sales would lead to large employment losses there. What effect would a trade war over auto tariffs have on the US then? Tens of thousands of lost manufacturing jobs, and a big reduction in the disposable income of American workers.

Even worse, the auto tariffs could be the decisive blow that sends an already weak Eurozone economy into recession, something that could spark a global recession given already weakened global growth as a result of the US-China trade war. Over the past six months, growth in the euro area has weakened significantly as a result of global trade tensions, Brexit uncertainty, and fiscal issues in Italy. Last week, the European Commission slashed its growth projection for the Eurozone in 2019 from 1.9% to 1.3%, and Germany, the bloc’s largest economy, only narrowly avoided a technical recession in Q4 2018 while Italy, the bloc’s third largest economy, entered a recession last quarter. The imposition of auto tariffs by Europe’s most important trading partner would likely tip the weakened euro area into recession. Germany is by far the largest driver of growth in the bloc, and auto exports alone account for 5% of German GDP. Considering that German GDP growth was actually negative in the second half of 2018, a major shock to its most important industry would reverberate throughout its entire economy. Indeed, Barclays estimates that a 25% tariff on auto imports could lead to a 0.4 percentage point reduction in euro area growth in 2019. The result of a Eurozone recession would be very negative for the global economy, already in the midst of a slowdown from US-China trade tensions. The euro area is the 3rd largest source of global demand after the US and China, so a major slowdown there would lead to further weakness in global exports, and potentially a global recession.

Outside of the significant economic consequences of a trade war with the EU, such a move by Trump could tear the biggest hole in the transatlantic alliance since the end of the Second World War. America’s standing in the eyes of Europeans has already fallen enormously during the Trump administration, with “confidence in the US President to do the right thing regarding global affairs” falling by 75 percentage points in Germany, 70 in France, and 57 in the UK. Furthermore, Trump has consistently attacked the European Union as an entity (both in his support for Brexit and his support for far-right German parties opposed to Merkel) and has supported authoritarian, anti-Semitic regimes in Poland and Hungary even while the EU has attempted to sanction them. A unilateral American attack on the economy of the EU, however, would be a step beyond all of these actions, striking at the core quality of life of European citizens. The move would demonstrate that the United States under Trump fundamentally doesn’t care about Europe and the transatlantic alliance, and that Congress is either unable or unwilling to stop Trump from causing material harm to the EU. Further, the trade war is all the more harmful to EU-US relations because it is so clearly based upon fantasies created by Trump and his trade advisor Peter Navarro. Rather than taking advantage of the US on trade issues, the EU actually has a lower average tariff rate than the US according to the World Bank (2.35% in the EU vs. 3.36% in the US), and there have been no allegations of EU dumping or industrial subsidies regarding its auto exports as have been the case with China with furniture or solar panels for example. Trump is willing to significantly harm the EU’s economy to fix a make-believe trade problem that even his hawkish trade representative Robert Lighthizer says is a distraction from the real problem of China. With this in mind, the EU is likely to rethink their relationship with the US, and adopt a more “go-it-alone” strategy as has already started to become the case.

A new imposition of auto tariffs on the EU would likely devastate the US auto industry, cause a recession in the euro area and inflame the global growth slowdown, and significantly widen the growing schism in the transatlantic alliance. And what is Trump likely to get in return for such a move? Likely very little. Trump has justified the tariffs as needed leverage in future trade talks with the EU. However, the EU has clearly stated that they are not interested in a broad trade deal, and especially not one that includes agriculture. Furthermore, they have a strong incentive to not give in if Trump imposes auto tariffs, even if there is significant economic hardship: such a move would only encourage Trump to hold the EU’s economy hostage in the future for other negotiations, and being seen as subservient to Trump, the most unpopular US President in generations in Europe, would be politically disastrous for European leaders. Furthermore, as we saw in the Canada-EU trade negotiations that were almost derailed by half of the Belgian government over agricultural regulations and the failed TTIP negotiations, negotiating a trade deal with the EU involves harsh sacrifices by both sides that can fall apart at even the slightest hint of trouble, let alone a significant attack on the EU’s economy. And so the EU negotiations are likely to go about as well as the China negotiations – little progress made while the global and American economies suffer. But this time, the global economy starts from a much weaker position than it did in June 2018, and the Europeans are our critical allies, not our strategic rivals like China. In the face of these risks to global economic prosperity and the essential alliances that have created 70 years of peace and prosperity in the West, Congress must act to challenge this looming trade war and reaffirm our essential relationship with Europe. Doing so at Munich this weekend would be a great way to start.

NDN Hails Progress Towards 2020 Pact on Disinfo, Hacking

Feb 12th - In anticipation of the DNC meeting here in Washington later this week, NDN is calling on the DNC, the State Parties and the 2020 Presidential campaigns to forge a pact agreeing to forgo the use of illicit campaign tactics in the upcoming Democratic Presidential primary. 

In this new pact, it is our hope that all the Democratic campaigns will pledge to forgo the use of bots, trolls, troll farms, fake accounts, fake sites, deepfakes and faked images, hacking and use of hacked materials; for the campaigns to pledge to be vigilant about reporting illicit activity to the proper authorities, the social media platforms and the DNC; and to discourage the use of these tactics by their supporters and allied institutions. 

The use of these tactics has no place in modern democracies, and the Democratic Party should take a very clear stand against their use in the 2020 election.  Negotiating and adopting a pledge like this will send a very strong signal that Democrats want the American people to conduct a debate and choose their leaders without interference from foreign or inauthentic actors.

You can learn more about our idea for a party-wide pact here

Feb 22nd - Great to see chorus growing louder, much louder for new norms and committments for how we will manage our politics in the social media age.  A broad consortium of European parties signed on to a pledge; Joe Biden endorsed the pledge concept; and all the early Dem 2020s agreed to never use hacked materials this cycle. 

This story from Natasha Korecki of Politico dives into a new report showing early and aggressive disinformation tactics being used already against 2020 Democratic candidates.  It is a reminder that the 2020 election is not happening next year - it is happening now.  It has already begun.  And the big question still remains - are we ready? What are we doing to prevent 2016 from happening again? This is not a question for next year - it is a question for right now, today. 

Feb 26th - Politico is reporting that the 4 early state Democratic Party Chairs - IA, NH, SC and NV - have sent a letter asking other party leaders to work together with the 2020 candidates towards a party-wide pledge to combat disinfo and hacking.  Very promising development.

The Washington Post's Greg Sargent offers a very smart take on the importance of the four early state Dem chairs pushing the party into a debate about these issues.  

April 23rd - Three exciting developments today.  Sen. Gillibrand pledged to forgo use of stolen or hacked materials in her campaign and challenged other 2020s to do the same.  According to the CNN story "the campaign hopes this pledge will launch a conversation that will allow all the presidential candidates, the Democratic National Committee and state parties to come up with a common strategy, ideally before the debates begin this summer."

Additionally, in a letter to her House colleagues today about the Mueller Report, Speaker Pelosi wrote "The For The People Act addresses the sweeping election protection, ethics reforms, and voting rights protections that the public has demanded to ensure that each voter has an equal voice and that their votes are counted as cast. We continue to urge our Senate colleagues to take up these reforms. And in light of the President’s defenders arguing in defense of receiving and weaponizing stolen emails, we continue to press our Republican House counterparts to take up our pledge to refuse to use stolen, hacked, or falsified information in campaigns because the American people deserve honest debate." Great to see the idea of a "pledge" - the establishment of new norms in this age of disinformation - so prominently referenced in this historic letter. 

Finally, DNC Chair Tom Perez in an open letter to the RNC called for both parties to establish new norms in the current elections.  Was an important early step in this process by Perez. 

Related Writings/Media from NDN

Protecting The 2020 Dem Primary From Disinformation, Bots and Hacking - Simon Rosenberg, NDN, 1/29/19 - Democrats must come together now to prevent what happened in 2016 from happening again this time. NDN is calling for all 2020s to sign a pledge forgoing the use of illicit campaign tactics in the Democratic Presidential primary. 

Simon Discusses Protecting The Democratic Primary From Disinfo And Hacking On MSNBC's Joy Reid - Simon Rosenberg, MSNBC, 2/2/19 - Simon appeared on Joy Reid’s MSNBC show last Saturday to discuss his ideas for how Democrats should be working to protect the 2020 Presidential primary from bots, disinformation and hacking.

Trump Doesn't Take Russian Electoral Interference Seriously. This Is What Democrats Did To Oppose It In 2018 - Simon Rosenberg and Aaron Trujillo, NBC News, 12/18/18 - The U.S. and its politics are not powerless to stop the kind of foreign hacking and disinformation tactics we saw in 2016. In the 2018 midterms, the DCCC developed a series of tools and strategies for reducing the influence and impact of malicious actors. Far more can now be done to protect our democracy and our discourse — and doing so should be a very high priority for the new Congress in 2019.

A Primer on Social Media Bots and Their Malicious Use in US Politics - Tim Chambers, NDN, 9/13/17.  This new and compelling paper by long time NDN collaborator Tim Chambers explains what bots are, looks at their malicious use in US politics and offers some ideas on what to do about it in the days ahead.  

The RNC's Russia Problem - Simon Rosenberg, US News, 5/14/17.  The RNC was instrumental to the success of Russia's interference campaign in 2016.  It should take the lead to make sure nothing like this every happens again. 

Calling All Patriots - Simon Rosenberg, US News, 10/13/16.  In a new essay Simon calls on the RNC and other GOP leaders to stop aiding the ongoing Russian effort to disrupt and influence our election. 

Other Related Writings/Media

Every 2020 Candidate But Trump Promises: No Stolen Data - Sam Stein/others, Daily Beast, 2/21/19.  Every 2020 Presidential candidate agreed to not use hacked material in the 2020 elections except one - Donald Trump. 

Biden Calls on Candidates Not To 'Aid and Abet' Foreign Election Interference - Josh Rogin, Washington Post, 2/21/19.  Joe Biden joins the call for US Presidential candidates to forgo use of illicit campaign tactics in the 2020 election. 

2/16/19 Update - A new European initiative has adopted this "pledge" construct for the upcoming European wide elections.  Is an exciting development. 

Can American Political Candidates Help Stop the Flood of Disinformation with a Pledge? - Justin Hendrix, Just Security, 1/31/19.  A smart new piece which dives deeper into the idea of a pledge, or pact, among politicians and political parties as a way of countering hacking and disinfo.

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