What he wants - the DACA débâcle.

There has been much discussion this week of what exactly it Trump wants. The question was bought into sharp relief by the DACA débâcle. Perhaps his clearest statement was at the Tuesday publicity stunt meeting in which he loudly declared he'd sign whatever the bipartisan group of senators brought to him.  Before they could present him their plan, John Kelly rather sneakily bought Tom Cotton to see him - something he didn't need to have done but which suggests that Kelly sees the opportunity to advance his own political agenda.  Suddenly Trump had stipulations as to what he would and wouldn't sign.

Now the Democrats are fuming that he reneged on his Tuesday commitment, and McConnell is reluctant to move forward without a clear indication from Trump as to what he actually wants.  That's a forlorn hope. Trumps has no fixed policy goals; what he wants is to look as though he's accomplishing something - anything - it doesn't matter the content as long as he gets the credit and praise to placate his insecurity. Trump is fundamentally weak and unprincipled, making him a prime target for manipulation by sycophantic toadies.  His behavior suggest he feels deeply undeserving and out of his depth. What he want's isn't any particular policy; it's to be admired, worshiped and adored. In the immortal words of Mr. T. "Pity the fool".       

OPEC's Fall

Forty years ago, OPEC's control over oil supply and hence prices was an important consideration in economic and international political calculus.  OPEC countries could use their leverage over oil prices for political ends. Two things have changed. First the world's demand for oil hasn't grown as quickly as was once forecast. Since oil fields take decades to develop and exploit, tat has led to some over capacity. That would not be so bad were OPEC still able to coordinate supply; but on the supply side, the shale revolution has put paid to that.

First, the small shale drillers provide flexible supply that comes online whenever prices rise. That serves to bring supply up to meet demand and keeps in prices from spiking were OPEC to turn down the taps. The Saudi's role as the world's marginal producer has been usurped.

The second effect is to put a spanner in the works of the OPEC "bargain", a bargain that is the only way it was able to persuade its members to abide by agreements to restrict output. When only OPEC countries were producing, the fall in revenue from reduced output was offset by the rise in prices. Whether this was "revenue neutral" I don't know but it clearly would have mattered. Now, when OPEC cuts production prices may not rise nearly as much since the shale driller will come on stream to help fill the gap between demand and supply. So OPEC members will see a fall in revenue from lower output that is no longer balanced by a rise in price. That makes it almost reaching a collusive equilibrium in this repeated PD game almost impossible.

"All the worlds's a stage"

Donald Trump's 55 minutes of live TV, in which he was seen chairing a meeting of senior Republicans and Democrats, was this week's moment of shock and awe, designed by the White House to show that the Commander in Chief wasn't as senile as Michael Wolff's book suggested.

Although there was some short term ohh-ing and ahh-ing, the PR benefit was quickly negated by three  things.  First there were the comments the following day that reinforced the idea that he can't really distinguish between his performance as an executive on "The Apprentice" and what he may believe is a performance as President. Welcoming people back to "the stage", and frequent references to critics and ratings suggest he sees himself playing role, one that I suspect he knows he is really not up to. 

Second was Trump's affirmative response to Senator Dianne Feinstein's suggestion that they proceed with a "clean DACA bill". That was a huge negotiating give-away, a disaster for the Republicans, and he was quickly corrected. But listen, we all make mistakes under pressure, right? Sure, but he's a self-proclaimed "stable genius", the best negotiator on the plant, so that rookie mistake is a big deal.

But most important of all was his promise to 'sign whatever they bring him', a commitment on which he reneged within 24 hours when he tweeted that he'd not accept any proposal that didn't include "the border wall". It must now be clear to anyone who may have been harbouring doubts, that he cannot be trusted to negotiate in good faith. Whether he doesn't remember what he has said or simply doesn't care is immaterial; a man is only as good as his word, and Trumps' word is not worth anything. That's not only something that Congress must be concerned about; every world leader, including Iran's and North Korea's, must now be wondering if there is any point negotiating with our president if his word can't be relied on. That weakens the US' standing in the world and its ability to shape the international order.   

"Shit-hole countries"

There's not been a lot of clarity in the analysis this week. The "shocked choirboy" mixed with the outraged liberal has all but obscured any discussion of the "effectively pragmatic world leader".  So let's break it down.

First, while it's jarring to hear the President referring to countries as "shit-holes", he'd not be the first to use vulgar language. And I'd put money on the fact that many of those who are expressing shock at the language have, at some point in their lives, used language as bad or worse. So let's put the vulgarity per-se to one side.

Next is the question of race. Here it is the juxtaposition of non-white countries collective labelled "shit-hole" countries and Norway which is widely perceived to be one of the least racially diverse countries in the world, that is the cause of the appropriately righteous indignation. That certainly does smack of racism, but let's be honest; that's not really headline news for Donald Trump, the man who single-handedly perpetuated the scurrilous "birther" myth, whose very first campaign speech branded Mexicans as rapists and drug-dealers, and who reputedly has a history of discriminating against racial groups of color in his property tycoon days.

As repugnant is his racist views are, as grating as his words, particularly to anyone who loves language adroitly used, are, the real story is the damage done to the United States' relationships with other countries; not only with those he has disparaged, but with every leader and diplomat involved in international diplomacy. In international relations (as in marriage) it's often best not to blurt out the first thing that comes into your head. We use the phrase "being diplomatic" for that exact reason. Yet this, which is far more consequential and will have a much a longer lasting impact, has been largely obscured by furore over race and propriety.

The media needs to stop being outraged by his personal characteristics; his narcissism, his insecurities, his bottomless capacity for bold-faced lies, and report on what his actions really mean for the country, and for the rest of the world. They need to take a collective deep breath, calm down, and do their effing job. 

Populism abandonded

An argument could be made that Washington had been captured by lobbyists and wealthy donors and  was not longer sufficiently responsive to voters. That sentiment fuelled the surge in populist rhetoric in the last election; it is what connected Trump voted to Bernie's supporters. "Drain the swamp" they chanted.

But as Fareed Zakaria points out, very little of Trump's populist promises have been fulfilled, nor are they likely to be. The wall won't be built as promised, and certainly won't be paid for by Mexico. A big infrastructure initiative looks very different from advertised. Jobs aren't coming back to coal, and outsourcing continues apace (even at Carrier, the HVAC company).      

Trump has spent much of his campaign and presidency undermining the institutions of civil society - and in reneging on his populist agenda he will have demolished a possible avenue by which government might have been reformed to answer to voters rather than moneyed interest groups. Populism as an idea has now been discredited as just another ploy to grab the levers of power, and then abandoned as quickly as it was embraced.

Globalization over promised and, over 30 years, has come to be viewed as having benefited the elites while betraying the aspirations of the majority. Education, particularly higher ed. is suffering a similar fate. And a populist-driven reconstruction of the institutions of democratic government has gone the same way, to be consigned to the dustbin of historical inevitability.     

The Economy, Stupid.

Much of the rise in the stock market can be attributed to the anticipated gains to corporate net income of the lower tax rate. Were corporations in the DJIA previously paying tax at 35% then the cut to 21% would have increased their net income by 66%, which translates to a rise in the DJIA index from 18,000 last year to 30,000; the markets are over half way there. In addition, some gains are likely to come from the rescinding of regulations put in place during Obama's administration.

Higher net income, if passed on to employees, will have a positive effect on GDP which may go some way (but not all the way) to pay for the tax cuts; estimates suggest that this will cost the Treasury about $150b a year, about 5% of the budget. If it is spent on automation, some gains may come from increased sales, and from the making of the equipment, though any related reduction in employment would dampen the effect. And if returned to shareholders, some might go back into the economy though increased spending, though at a lower multiplier than through increased wages.    

There are additional costs to which the relaxing of regulations will give rise; increase pollution will lead to sickness, lost work productivity, and increased demands on Medicaid, not to mention the clean-up costs that are less likely than before to be borne by the polluter and more likely now to be borne by tax payers. So while the fundamentals were in place before Trump took office, it would be fair to say that the Republican agenda over which he is now presiding is having a positive effect in the short term. Whether this will be outweighed in the long run by the unintended costs remains to be seen.   

The lost art of diplomacy

Whether making derogatory or provocative public statements works in the world of real estate, I don't know.  But I'm pretty sure it's not a good idea in international diplomacy. Take Pakistan, for example: the US may be unhappy with Pakistan's efforts to root out Taliban fighters in the Tribal regions, but a public shaming constrains Pakistan's choices in ways that are unhelpful to US interests.  Threatening to cut off aid in private could be effective leverage. Doing it publicly provokes a domestic backlash and will likely lead to a response for the Pakistani government that is not at all what the US would have wanted or might have achieved had this been negotiated diplomatically (in both senses of the word).

No Russia Collusion

Here's my guess. Mueller hasn't and won't find any clear evidence of collusion with Russia during the election. And indeed there may not have been. But I suspect what Trump is really worried about is an investigation of his finances. I'm speculating that he has entered into some deals with some relatively unsavoury individuals who may have involved him, wittingly or otherwise, in some financial arrangements that may have crossed the line into illegality. He may not have known exactly what his exposure was at the time, but probably now suspects that with the more diligent scrutiny to which his dealings are being subjected, they may represent a significant risk that he will be subject to legal proceedings once out of office.  

Trump: Bannon Banned

The rift between Donald Trump and Steve Bannon will end badly not only for "Sloppy Steve", but for the Democrats hoping to take back the House next November.  As noted earlier, Bannon is replaceable; Trump, the reality-TV star and on-air talent, is not, at least as far as his base is concerned. Bannon's agenda was truly populist and that was a threat to the GOP establishment. They are delighted to see him gone. No more will he be orchestrating far right challenges to its more main-stream candidates in the primaries. And that's where the Dems will lose out. By fielding less disreputable, less unelectable candidate, like Roy Moore, the GOP will have an easier time defending the seats they need to hold on to in the mid-terms. Perhaps the Dems best play in the fall, absent a coherent policy platform -- which looks as far away as ever -- is to secretly fund Bannon and his slate of primary challengers. 

Predictions for 2018

1. The Democrats will make gains in the House in the mid-terms but will not win a majority. They will not pick up any more seats in the Senate.
2. The US will tacitly and reluctantly accept North Korea as a nuclear power.
3. Muller will conclude his investigation without finding any concrete evidence of collusion between the Trump campaign and the Russian government and its proxies.
4. Social Security, Medicade and Midicare reform will be put in hold until after the mid-terms
5. DACA will expire without a resolution; ICE will begin deportation.
6. the GOP will pass an infrastructure bill that relies on private financing, with risk backstopped by the Government; it will receive no Democratic support. 
7. China will continue to gain influence and assert it's role in international affairs. 
8. Trump will not recertify the Iran Nuclear deal but all other parties will continue to abide by its terms, and the deal will de-facto remain in place. 
9. Brexit talks will lead to the development of a transitional period to allow the UK more time to disentangle itself from the EU.
10. South and North Korea will reconcile some of their differences and trade and labour flows will resume.     
11. No progress will be made in negotiations between Israel and Palestine. 
12. The rule of law in Afghanistan will continue to deteriorate.
13. US-Pakistan relations will reach a nadir in the summer but begin to improve towards the end of the year . 
14. Putin will win re-election.

Bannon Trump Split

An analogy might be informative: Trump is clueless pop star who fans idolize; Bannon is the producer and song writer who people have heard of but don't really care much about. Bannon will have a hard time finding another idol as popular is his first creation, but Trump will have plenty of producers and writer willing to hang their hats on his coat tails.