Disruption Involves Taking Chances


I am a fiscal conservative (I want to balance the budget) and a social moderate. I voted for Hillary Clinton for president because Donald Trump is a sleazy person and has such a volatile temperament.  But I’m also in favor of making big changes and Mr. Trump will certainly do this.

capture79As the Economist points out, “his voters took Mr. Trump seriously but not literally, even as his critics took him literally but not seriously.”  The Economist goes on to point out some of the risks involved in making the kinds of changes Mr. Trump is talking about:

    • If Obamacare is repealed, 20 million Americans will lose their health insurance. Yes, but it’s not going to happen this way. Obamacare will end up being modified and improved, not abolished.
  • His tax cuts would chiefly benefit the rich and would greatly increase our national debt. Yes, but the House of Representatives has a much better plan to do this and it is Congress, not Mr. Trump, which will develop a detailed plan.
  • Even if he does not actually deport illegal immigrants, he will foment the divisive politics of race. The illegal immigration problem needs to be solved and Mr. Trump is likely to get this done, with or without a wall.
  • Mr. Trump has demanded trade concessions from China and NAFTA. If he causes a trade war, the fragile world economy could tip into a recession. Blue collar workers, his strongest base of support, have had stagnant incomes for years and deserve some help. If he can increase our exports, blue collar workers will benefit.
  • He wants to reverse the Paris agreement on climate change which would harm the planet and undermine America as a negotiating partner. Global warming is real but the Paris accord does essentially nothing to slow it down. Increased coal use in China and India will more than negate what the U.S. and Western Europe are doing to cut back on fossil fuels.
  • Mr. Trump has demanded that other countries pay more towards their security or he will walk away. NATO members should be doing more on their own and if he can prod them to do this, then NATO will be stronger as a result.


Conclusion. Mr. Trump’s expressed views should be interpreted as initial bargaining positions. They are likely to have the effect of leading to progress on many serious problems which need to be addressed.  The risks involved in the negotiation process are worth taking

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Can the U.S. Economy Do Better?


In my last post I discussed the differing views of the U.S. economy held by Federal Reserve Chair Janet Yellen and her rival for the post, Larry Summers:

  • Janet Yellen thinks that the U.S. economy is steadily recovering from the Great Recession and that there is no hurry to raise interest rates back to normal levels.
  • Larry Summers thinks that the U.S. economy is suffering from secular stagnation and that there is a great need for more fiscal stimulus by the federal government.

There is another point-of-view, perhaps best expressed by the Hoover Institution’s John Cochrane in a recent Wall Street Journal Op Ed.  Let me try to summarize Mr. Cochrane’s argument:


  • From 1950 – 2000 the U.S. economy grew at an average rate of 3.5% per year. Since 2000 it has grown at only half this rate, 1.76% annually. By 2008 the average American was more than three times better off than in 1952. Real average GDP per person grew from $16,000 to $49,000 during this period.
  • The U.S. economy is now overrun by an out-of-control and increasingly politicized regulatory state. America is now middle-aged and overweight. The solution is to eat better and exercise.
  • Consider the above chart, the World Bank’s “Distance to Frontier” ease-of-doing-business measure for 2014. The U.S. is near the top but there is plenty of room for improvement.
  • Here is what a growth agenda would involve: deep tax reform, cleaning out the insane complexity and cronyism; a thorough overhaul of social programs, getting rid of all the perverse incentives; better schools that come from increased choice and competition; a dramatic legal and regulatory simplification, restoring a transparent rule of law.
  • Growth-oriented policies will be resisted. Growth comes from productivity which comes from new disruptive technologies and businesses.

Can our political system deliver the changes that are needed? The rise of Donald Trump and Bernie Sanders show that the people want big changes and are willing to disrupt the status quo to achieve them.  This means change is possible but it won’t come easily.

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