Covid news not bad; political and economic news not good

This far into the epidemic it’s interesting what we know and extraordinary what we don’t. Which is more significant: the knowledge or the ignorance?

So what is happening:

  • Daily cases in many European countries are rising sharply but recorded death and excess mortality rates are not – so far.
  • In the US, the daily case and death rates have been falling for two months, from a late summer bump.
  • And in Australia and New Zealand, we are seeing just how hard it is to eliminate the disease.

The data has lots of possible interpretations, which certainly helps if you’ve got a particular case to support.  But one piece of good news is that the fear factor is coming in at the lower end of expectations.

Continue reading “Covid news not bad; political and economic news not good”

Breach-of-international-law row unlikely to deflect Boris Johnson’s trade negotiating strategy

Opponents of Brexit are finding it hard to pick winnable fights.  

The latest stoush: the UK’s withdrawal treaty gives the EU powers over the Northern Ireland market; the EU has suggested (should an FTA not be agreed) that these might be used to hinder the flow of goods to the province from the rest of the UK; so the British government intends to  take powers in its internal market bill to stop this.

Cue outrage at the possible breach of the withdrawal treaty and thus international law.

Continue reading “Breach-of-international-law row unlikely to deflect Boris Johnson’s trade negotiating strategy”

What sort of coalition do America’s voters want?

The future of America’s Republican party looks more interesting and probably also more healthy, if one can judge by the interchange between Ben Sasse, the scholarly Senator for Nebraska, and his more demotic President, Donald Trump.

“No president — whether named Obama or Trump or Biden or AOC — has unilateral power to rewrite immigration law or to cut taxes or to raise taxes. This is because America doesn’t have kings”, 

wrote Sasse before adding a quick civics jab: 

“Under our constitution we’re supposed to have public servants.”

It’s a reminder that political parties are coalitions – often uneasy ones.  

Continue reading “What sort of coalition do America’s voters want?”

A clear UK position puts Brussels under pressure in the EU / UK trade negotiations

Early September, after the holidays, is when Brussels resumes business. Early on the agenda is whether the EU’s leadership abandons their negotiating strategy for a post-Brexit trade deal, as British PM Boris Johnson ups the pressure.

So far the EU’s negotiators have insisted that the UK must submit to unequal treatment in the relationship (for example, in regulatory policy, state support of industry and dispute resolution) if the UK is to retain some level of trade privilege above World Trade Organisation (WTO) minima.   

Continue reading “A clear UK position puts Brussels under pressure in the EU / UK trade negotiations”

Scotland forever – but in or out of the UK?

It may rank as one of the most surprising and/or least effective public health measures adopted during the pandemic.  But Scotland’s devolved government has outlawed background music in hotels and restaurants because it might encourage people to raise their voices.

Indeed, the Scottish administration has sometimes ostentatiously gone out of its way to take a different path to that trodden by Boris Johnson’s national government. Meanwhile, opinion polling support for Scottish independence is rising.

Using the pandemic to beat the drum for Scottish independence must irritate those who prefer science-based consistency.  But they probably need to get used to it. Continue reading “Scotland forever – but in or out of the UK?”

A moment of truth for the EU in the post-Brexit trade talks

Covid, summer holidays and the usual foreign policy rows have overshadowed the EU/UK post-Brexit trade talks.  A pity because this looks like a – perhaps the – key moment, as the ever astute Wolfgang Munchau points out in the Financial Times.

The issue is the EU’s insistence that the UK conform with the EU’s state aid and competition policy – in broad terms, the regime whereby the authorities arbitrate and ensure consistency between the member states’ freedom of action in industry regulation, promotion and subsidy. Continue reading “A moment of truth for the EU in the post-Brexit trade talks”

Trump’s (pre-Covid) economy gives clues for election strategy

One of the interesting things about the (pre-Covid) US economy was that, on the surface at least, it didn’t change all that much between Trump and Obama. Or so argues economist Pierre Lemieux in The Trump Economy: Three Years of Volatile Continuity for the Cato Institute.

His assessment on economic growth:

“Under Obama, the average annual growth [in real GDP per capita] starting in 2010 was 1.4%. Under Trump, it averaged 2.0%, though the upward trend slowed in 2019, falling to 1.8%, which is roughly the same level as 2017. These data are consistent with the continuation of a slow recovery from the Great Recession.”

And on labour markets:

“Overall, the poverty and unemployment picture improved slowly from 2009 to 2019, with no radical break when the occupant of the White House changed. The Obama economy and the Trump economy seem to be the same economy. This observation applies to many other measures of American prosperity”

OK.  An important general point – that presidents’ short-term influence on the economy is usually overrated and the influence of longer-term market and policy settings is underrated – is usefully made.  But you still ought to look at the changes in those settings to draw some conclusion about possible longer-term economic and political impacts.

Lemieux’s analysis identifies three substantial policy divergences between the two administrations.

Comprehensive tax reform in 2017 is the first.  This pushed down the cost of capital and increased investment. Lemieux cites evidence that it spurred economic growth in the following year by 0.8 percentage points.

But the tax cuts were not backed by reduced government spending.  So rising government debt, further boosted by Covid payouts, will require a response at some point.  The choice on how this is done – either spending restraint or higher taxes – remains a key dividing line between America’s political tribes.

The second divergence is on regulatory policy. Trump’s administration actually managed to stop (rather than just slow) the growth in the stock of regulation.

“… the Trump administration has roughly capped the total volume of federal regulations at, or slightly over, the 185,000 pages [in the Code of Federal Regulations] they comprised at the end of the Obama presidency”

The process was probably more shuffle than standstill but, even so, it represents a decisive change of intent from the sweeping regulatory surges in areas like resource use, financial services, healthcare and energy policy launched by enthusiastic politicians of all stripes and predating the financial crisis.  And it almost certainly needed a clear lead from the top (plus some excellent regulatory economists on the ground).

The third area is Trump’s break with the orthodox consensus on world trade.  

Managed stability has been replaced by an attempt to batter concessions out of China, win votes from the losers of globalisation, and challenge China’s bid for geopolitical hegemony.  The best you can say about the economics is that so far he seems to have got away with it (despite increased trade barriers reducing US GDP by an estimated 0.4%).

If you are a market liberal, you ought on balance to prefer the Trump mix – although you would be entirely justified in having some conniptions with regard to opportunism and lack of consistency.

And you might also want to use this analysis to evaluate how a Biden or Trump presidency might approach things after the November election.

First up, the case for more continuity.  Despite the rhetoric, both parties will at bottom be relying on workers and businesses in the private sector to generate post-Covid recovery by adapting to changed economic conditions.  Both are likely to spend freely to support those economically hurt by the pandemic (although it’s also reasonable to expect the winner to direct more pork towards ‘his people’).  Both are likely to favour strategic competition with China over market integration. No one wants to tackle the national debt before the market makes them do it.

And now the differences.  

Biden Democrats see a much bigger role for government in the recovery and are already talking about higher taxes on the usual suspects (business and the rich) to pay for extra spending on green subsidies, childcare and unionised jobs.  One can also safely predict a resumption of normal service from the regulatory bureaucracy. Trump and his allies seem less likely to take this path.

So in some ways, Covid might be clarifying the economic choices facing Americans  in November.  Which will surely be helpful after all that continuity.

John Bolton’s White House memoir requires conservatives to do some thinking

John Bolton’s book on his time as Donald Trump’s National Security Adviser – The Room Where it Happened –  is worth reading.  His forensic training means he sets out clearly his own actions and their motivations.  His recording of the responses of others appears scrupulous, albeit disputed. Failings of omission or judgement in the record seem more probable than failings of accuracy. Continue reading “John Bolton’s White House memoir requires conservatives to do some thinking”

Special pleading should not  obscure the direction of the UK’s post-Brexit negotiations

The UK car industry has run a good race in the post-Brexit lobbying stakes.  But Britain’s chemical industry looks to be making a late run, if recent coverage in the Financial Times is accurate.

The issue for the industry is the post-Brexit regulatory regime and how this is to be disengaged from the current European model.  The government plans to set up a UK agency to record the safety registrations for industrial chemicals. Continue reading “Special pleading should not  obscure the direction of the UK’s post-Brexit negotiations”

Britain’s Battle of Brexit has an internal dimension

One of the chores of the Brexit process is the repatriation of powers from Brussels to Westminster.  Simple as making a list you might say.  But one aspect – bringing home the state’s economic regulatory powers – is causing a spat.

When the UK joined the European Economic Community (as it then was) in 1973, these powers were held at the national level.  But since then, in addition to ceding further powers to Europe, the central government has devolved substantial retained powers to regional administrations in Edinburgh, Cardiff and Belfast.  And the local politicians – seeking to advance their localist and autonomist agenda – are clamouring for a share of the handback.

So Westminster’s mandarins and politicians have come up with a plan, with a refreshingly deep foundation in history, economics and – yes – politics. Continue reading “Britain’s Battle of Brexit has an internal dimension”