Right in San Francisco

North Korea: Continued Optimism

    President Trump is playing two simultaneous chess games - one to denuclearize North Korea; the other to make a quantum change in our trade deficit with China. Since Chinese cooperation is critical in controlling North Korea, the two are intertwined. Understanding the likelihood of success in either negotiation is difficult, both because the terrain is complicated, because much of the mainstream media paints everything Trump does as a failure, and because much of the financial media is opposed to any changes to current business arrangements. The Korea negotiation is the harder of the two, because the objective must be completely obtained; "success" in the trade negotiations can be more flexibly defined. This optimist believes that The Donald has a plan which can accomplish both objectives. 

    On the plus side, Trump offers a clear statement of the intended outcome: verifiable total de-nuclearization of North Korea; halving the  trade deficit with China. In a world where many American interests are part of the negotiation, he is unafraid of offending his knee-jerk opponents, and even his allies. A first priority was to establish a personal relationship with the key decision makers - he directly with Xi Jinping in China, and Secretary of State Pompeo with Kim Jong-Un.  Symbolism is important - Kim understands that he is below Jinping and Trump, and how and when he gets to meet with Trump is part of the negotiation. It is fair to assume that Kim's two meetings with Jinping included some direction from Beijing, and some discussion of personal safety guarantees. Trump is a good negotiator - he is keeping all of his powder dry, rather than making concessions just to get negotiations going. 

    On the minus side, Trump hires some terrible advisors. The clear path of the recent backtracking in the Korea negotiations could be summarized as: a period of positive statements and symbolic good will gestures (releasing prisoners; demolishing North Korea's nuclear test site); John Bolton musing that we needed to follow the Libya model (in which Muammar Gadaffi gave up his nuclear program, was deposed, and was assassinated); a series of understandable belligerent comments by Kim; a re-siezing of control by Trump in which he cancelled the planned June 12 meeting; and a new set of positive comments and planning activities with Kim, Trump, China, and the South Koreans. The totally unnecessary problem was precipitated by Bolton acting in his prior commentator / provocateur capacity rather than someone who actually is a central part of the administration. He was hired to project a tough stance during the negotiations, but was not smart enough to know how to play the role. He has apparently been taken to the woodshed, not to be heard again unless Trump needs some bluster at a future sticking point. 

    On the "To Be Demonstrated" level, it is an advantage that Trump can control all of the elements of the American game. He can accept a "strategic direction" of decreasing our current annual trade deficit of $375 billion by $200 billion - the type of thing that heads of state can agree on privately, without giving their domestic opponents a specific number as a rallying point. (Agricultural and oil/natural gas sales to China will be substantially increased to the detriment of Australia and Brazil. Expansion of US sales of technologically sensitive items will be a longer term negotiation.) Trump can agree to "solve" the ZTE problem - in which the Chinese telephone company is near bankruptcy as a result of American sanctions following prohibited activity with Iran. (Congress complains; the media complains; the Democrats complain, but Trump agrees that will be enough for ZTE to fire some key employees and change a few members of the Board of Directors.) It will be enough to have strong momentum on trade through the time that firm comitments are made on North Korea's nukes. 

    This is also multi-player chess. The South Koreans know that they are on the front line of disaster if negotiations fail - and are willing to pay a good piece of the North Korean redevelopment cost. The Russians want a place at the table - and could be a problem if they stop enforcing sanctions. Countries bordering the South China Sea will get nervous if  Trump trades acceptance of Chinese militarization of their newly built islands in exchange for North Korea or trade concessions - actually a recognition of the new reality might be acceptable if it seals a big deal.   

    The "off again-on again" meeting planning should be viewed as a good thing - both because Trump's immediate response showed a full understanding of the need to guarantee (with China's help) Kim's longevity in power, and because Kim's willingness to put Bolton's gaffe aside indicated the extent to which he needs to substantially improve the economic circumstances in North Korea. This is a deal that the two of them need, and can make. The key is for Trump and Pompeo to be able to retain focus for the year it will take to agree on actions, timelines, and guarantees. And to remember the stakes.

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   This week's video chronicles the current high-level discussions between North Korean Vice Chair Kim Yong Chol, Secetary of State Pompeo, and others in preparation for the Trump-Kim meeting in Singapore. While "it ain't over til its over", all of the right steps seem to again be in alignment.  

bill bowen - 6/1/18

Deep State 2016: Chasing Shadows

 

    One should be disappointed if the leaders of the CIA and the FBI were not skilled enough in their craft to make investigation of their engagement in the 2016 presidential election look like something from Alice in Wonderland. An illusion here; a feint there; a bureaucratic impasse; a legal conundrum; loud braying from allies on the Democratic side of the aisle; knee-jerk responses from conservative commentators.  And all of this takes place as a counter-story to the Democratic media's obsession of alleged collusion between the Trump campaign and the Russians. Lewis Carroll at his peak could not have done better. 

    What do we know (largely due to the courageous persistence of House Intelligence Committee chair Devin Nunes, and over the shrieks of committee minority leader Adam Schiff)?

        Prior to this week:

            - The Trump campaign was full of dodgy characters. Paul Manafort; Steve Bannon; Michael Flynn; Anthony Scaramucci - each had their own agenda and client list. High on the compendium of Trump's management deficiencies is the vetting of senior managers.   

            - The Obama administration politicized government agencies to attack opponents. The lowlight was the use of Lois Lerner's IRS to target conservative tax-exempt organizations as part of a broader pattern of executive overreach. 

            -  Senior Obama administration officials (UN ambassador Stephanie Powers; CIA Director John Brennan; and National Security Advisor Susan Rice), oversaw a program to bypass American privacy laws by wiretapping hundreds of foreign officials, identifying (unmasking) Americans with whom they were talking, and leaking the contents of the discussions to the New York Times, the Washington Post, and other friendly outlets. 

            -  The FBI used the "Steele dossier", paid for by the Democratic National Committee and the Hillary Clinton campaign, as a justification for a FISA Court warrant to wiretap Trump aide, Carter Paige. 

            - FBI leadership, particularly James Comey,  factored politics into investigatory decison making - the decision to not prosecute Hillary Clinton for her "extreme carelessness" which fell short of "intentional or gross negligence"; the  "last minute" resurection of the Clinton investigation, which might actually have cost her the election. Attorney General Loretta Lynch was totally compromised by her tarmac meeting with Bill Clinton, so Comey filled the gap, rather than deferring to the Deputy Attorney General.  

            - A number of Comey's subordinates - Andy McCabe, Peter Strzock, Lisa Page - were ardent anti-Trumpers, loose in their communications, and (in the case of McCabe) prone to false testimony under oath. 

            - Trump's responses have often been right on the substance, but wrong on the facts, giving the Left ample room for distractions. The FBI did not wiretap Trump Tower, but it did wiretap calls of foreign persons with campaign aides, then unmasked the campaign aides. 

        And the new news - Stefan Halper:

            - Halper, a former American professor at Cambridge University in the UK, has a long history of working between the intelligence community and academia to provide information to political parties about the likely policies and activities of their adversaries. In 1980, he worked for the Reagan/HW Bush campaign to gather information on President Jimmy Carter's foreign policy direction. (HW had been director of the CIA.)  The activity was unearthed in 1983, and after a brief kerfullfe, was forgotten. 

            - He was paid some $1,000,000 through a shadowy Department of Defense account between 2012 and 2017. 

            - In mid-2016, he reached out as part of an FBI investigation to befriend three Trump campaign aides - Papadopolous (who he paid $3000, and introduced to a Turkish woman associate - and who has subsequently been indicted by Mueller's team for lying under oath); Carter Page (who was the subject of the FISA warrant controversy), and campaign co-chair Sam Clovis. 

            - Halper has been mis-characterized as a plant in the Trump campaign. He was actually employed by the FBI to investigate selected campaign members who might have Russian connections. It is not clear that he found anything, but the FBI has refused to disclose to the administration or to the House Intelligence Committee either the circumstances surrounding his hiring, or any results of his investigations. 

            - The next week will dampen emotions, as Trump has appointed Chief of Staff Kelly to oversee a sharing of documents between the FBI, the CIA, and the House Intelligence Committee. The burden of proof lies with the FBI to show that their surveillance of the Trump campaign was not for political purposes, a test which they can most likely pass. In any case,m this should be central to the oversight role of the House Intelligence Committee - making sure that the spooks are not interfering in our elections.  

    The two investigations - Mueller's and that of FBI Inspector General Michael Horowitz - should be viewed as a pair: Mueller investigating whether candidate Trump colluded with the Russians to influence the outocome of the election (excluding Stormy Daniels and other tangents); and Horowitz investigating whether the Obama administration used the FBI and the CIA to tilt the election in the favor of Hillary and undermine the incoming Trump administration.  Niether will ever be proven to the satisfaction of both Republicans and Democrats. In the short run, we will be consumed by the Mueller report, but in a 100 year perspective, abuse of the FBI and the CIA by a sitting administration for partisan political purposes is far more important to the health of the Republic. 

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    This week's video is an introduction to John Cox, the candidate for California governor who won the support of 55% of the delegates at the recent GOP state convention, and who has been endorsed by President Trump and House Majority Leader Kevin McCarthy. The immediate priority is to come in among the "top two" in the June 5, primary. 

bill bowen - 5/25/18

 

    

"Blue Wave" Meets "Economy, Stupid"

       Prognostications about the November House elections fall into three categories: Nancy Pelosi and the liberal media who are measuring the drapes based on the inevitable "blue wave" that will result from everybody hating the usurper, Donald Trump; professional forecasters such as Charlie Cook and Kyle Kondrick who analyze the details and - chastened by their mammoth failures in 2016 - give the probability of Democrats taking over the House  a 50-50; and those of us who are influenced by James Carville's admonition to the 1992 campaign of the first President Clinton, "It's the economy, stupid".  

    Let's deconstruct the "economy" argument. What is there in the economy that might intrude into the back of the voter's minds when they pull the curtain on the voting booth, or complete their tamper-proof mail-in ballots as we do out here on the Left Coast. And let's give the low information voters credit for making some association between the economy and the party in power.   

    First, "Results" measures - Am I better off? How are things going in the areas that directly impact my family? (Confession, this is the Republican phrasing; the Democratic phrasing would include a lot of gender and ethnic oppression stuff.)  

    1. At 3.9%, "official" unemployment is below the theoretical "full employment" level. After a decade of decline, the Work Force Participation Rate (the portion of working age residents working or actively looking for work) has stabilized at around 63% - meaning that the unemployment rate is no longer being  artifically made to look better by having people give up.  Long term unemployment claims are the lowest that they have been in 45 years. The boom is evident across all demographic categories.  

    2. Wages and salaries have been increasing at 2 to 3%, faster than in the Obama years when employers were absorbing more healthcare costs, but still below what "full employment" might call for. Inflation remains slightly lower, but gasoline prices are rising. For most workers, significantly improved income comes from longer hours rather than higher rates. 

    3. The stock market was up 23% in Trump's first year, about half of what it achieved in Obama's eight years. This year it is flat, with increased volatility. Past performance is no guarantee of future returns (or some such language), but personal account balances are up, IRAs are healthy, pension plan funding is less daunting, bank account balances are starting to show some return, and the 2008 recession is firmly in the rear view mirror. 

    4. Interest rates remain historically low, with 30 year mortgages under 5%. In the predictable future, refinancing will be severely curtailed, and housing will become relatively more expensive with higher finance costs, but that is a different election cycle. For now, people are comfortable borrowing for houses, cars, college costs, and credit card purchases. 

    5. Courtesy of our grandchildren, Congress and the president have given the average American family a tax cut in excess of $1000. The amount varies based on many factors, including whether you live in a high tax (e.g. Blue) or low tax (e.g. Red) state, but for most, withholding payments have been reduced and April 15, 2019 will be a "feel good" day for American voters. 

    6. The Conference Board's Index of Leading Economic Indicators (factory orders, interest rate spreads, jobless claims, building permits,and such) projects continued solid expansion well beyond November. 

    And some "Causal" discussion - who deserves credit? Is this all that there is? 

    1. True, economic expansion began under President Obama, but the pace was anemic by historical standards, averaging about 2%, before accelerating to 2.5% in Trump's first year. Through the Obama years the Federal Reserve held interest rates near zero, and maintained "quantitative easing" (purchase of government debt to lubricate markets.)  Rates are now up to 1.7%, and on a projected path to get to a "new normal" of about 3% within a year. Bankers are paid to divine the future economics, but there is consensus that we are enjoying  a healthy, growing economy, capable of withstanding higher interest rates.  

    2. It will take a year for the tax cuts enacted in December to fully make their way into the economy, but many voters are seeing reduced withholding from their paychecks, international corporations are repatriating money previously held overseas, and many have given a portion of their lower tax rates to employees or shareholders. Democrats (none of whom voted for the tax bill in  either house of Congress) can scream about "crumbs going to the workers", but most voters think of $1000 as more than crumbs.  

    3. Trump, Commerce Secretary Ross,  and Foreign Trade Negotiator Lighthizer are making a multidimensional high stakes effort to correct the structural $700 billion imbalance between imports and exports of goods. Half of the deficit is China, but Mexico and Germany are also problems that must be dealt with. Relative to the mid-term elections, voters understand the problem, and that action is being taken. 

    4. From January 2017, Trump has been a zealot in reducing regulations, whether from the Environmental Protection Agencvy, the Department of Labor, bank regulators, or other federal agencies, while operating under Reagan's premise that " government is not the solution to our problem; government is the problem."  In the long run this may present negative consequences, but in November 2018, the voters know that Trump (and Republicians in Congress) are all in for economic growth. 

    Democrats are starting to realize that they need to stand for something beyond opposition to President Trump, but they face a dilemna.  The energy in the party comes from the progressive left wing who want universal healthcare, free childcare, and guaranteed government jobs, while the state of the economy makes it hard for moderates to gain much traction as an alternative to Republican financial management. A tough spot, in James Carville's terms. 

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    This week's video is a brief Richter Scales ditty about being a Republican in San Francisco.   

bill bowen -  

    

    

Minimalist Hope: The California Republican Party Convention

    California Republican leadership spent the past weekend in San Diego schmoozing, endorsing positions on ballot initiatives, and debating the merits of candidates for statewide office. For the many who ask "So what?", there is an answer that offers at least a bit of hope.  

    A Brief Background

        - While Hillary won California by a 62 to 33% margin (a 3,446,000 margin; more than her national margin), there are still pockets in the Central Valley, Orange County, suburbs east of Los Angeles, and San Diego where Republicans win elections. Republicans hold 14 0f the 53 US House seats, with Democrats targeting 10 in their effort to gain control of the House with a capture of more than 23 seats nationally. 

        - Under a "top two" primary system, the June 5 primaries will propel two candidates to the November 6 election, regardless of party. Absentee voting has already begun. Two of the Republican seats will be vacant with the retirement of Darrell Issa and Ed Royce who were honored by the party.   

        - Democrats hold slim supermajorities (over two-thirds) in the state Assembly and Senate, allowing them to raise taxes without any opposition, or to bring down any number of plagues upon the state which already has the highest tax and poverty rates.  

         - In this election cycle Republicans have several issues which energize the base, particularly in the enclaves where there are House seats to be saved. 

            - In April 2017, Democrats increased the gasoline tax and vehicle registration fees by $5.2 billion annually - an average of $779 per family, which has the greatest impact on the working poor. Nearly 1,000,000 signatures were submitted to put repeal on the ballot for November. Past diversion of highway and "Cap and Trade" funds to other purposes has resulted in California roads being in poor repair; the $5.2 billion buys no new capacity. Folks are angry. 

            - California's declaration as a "Sanctuary State" has met resistance in numerous City Councils in Southern California who have passed resolutions requiring support for cooperation between their law enforcement officials and federal authorities.  

        - With the importance of the House races, the Republican National Committee has - after a many year gap - begun spending money in California to establish campaign headquarters and directly support candidates. 

    The good

        - There is a sense of optimism about the House seats. The liberal Cook Report shows two seats as Lean Democrat, and three as "Republican Toss Up".  In most of these districts so many Democrats are running that two Republicans may qualify for the November election. 

            - The two most at risk districts are east of LA where Ed Royce is retiring from a district where he got 58 % of the 2016 vote, and south of LA where Darrell Issa is retiring from a district where he got 51 % of the 2016 vote. 

            - Cook's "toss up" elections for Republican incumbents include Jeff Denham (Tulare; 52-48 in 2016), Steve Knight (Fullerton; 54-46 in 2016); and Dana Rohrabacker (Coastal Orange County; 58-42 in 2016). All are experienced campaigners and well funded. 

        - The convention, for the first time, endorsed candidates for state wide office in order to unify behind a single Republican in the top two system. This succeeded with Judge Steven Bailey beating a party opponent for the attorney general endorsement. (This could draw national attention as Brown-appointee Xavier Becerra has several lawsuits against the federal government, and George Soros is spending several million dollars to elect local district attorneys who support his objective of reducing prison sentences.)  Endorsements without intraparty opposition were also approved for Mark Meuser as secretary of state and Cole Harris as lieutenant governor.  

    The Bad

        - The big prize got away. John Cox got 55% of the delegate vote for governor against Travis Allen's 40%, 5% short of what he needed. Polls currently show Cox in second place to Gavin Newsom, and he has the support of House Majority Leader Kevin McCarthy and several other leading Republicans, but it will take a united and supportive party to survive the June 5 primary which includes former LA Mayor Antonio Villaraigosa and mount a real challenge in November, and many of the Allen supporters seem more interested in a good fight than a win.  

        - After a century the California GOP rules were changed to eliminate the practice of rotating the chairmanship between the north and the south. With decidedly more population, the more conservative south will undoubtedly dominate the more moderate north in future party governance - not that the 9 million-person Bay Area deserves a loud voice with only one Republican among the 80 Assembly members and none among the 40 Senate members. 

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    This week's bonus video is a quick 1985 precursor to John Kerry's current rogue negotiation with Iran.

bill bowen - 5/11/18 

 

Impeach? Let's Get Serious

    The Democrats have two prominent approaches to impeachment: the Tom Steyer approach of spending tens of millions of dollars to make impeachment the central issue of the 2018 midterm elections, and the Nancy Pelosi approach of refusing to entertain the subject. The Republican approach is generally to ignore the Democratic base's rants, relying on  on the premise that there is no impeachable offense. For Republicans, it is generally not a good idea to accept that Pelosi's goals and logic align with the GOP's. 

    Premise: what Pelosi is really saying to her base is that they should wait until Mueller has given them the club that they need - a finding of collusion, obstruction of justice, or at least lying under oath. There is no way that there will be no charges after a year's wide-ranging investigation by an aggressive group of seasoned prosecutors, and any conclusion will be enough to serve as a centerpiece for the 2018 Congressional elections. After a year of false New York Times headlines claiming that the smoking gun has finally been found, Republicans have largely become inured to the reality that Mueller will eventually do something, anything, giving the Democrats a peg to hang their impeachment promise on. The prospect of President Pence gives some pause, but he is not the politician that Trump is, without a following allowing him to continue the Trump agenda.    

    The Republicans can use a refresher. 

    The House brings charges by a simple majority; the Senate convicts by a two-thirds majority. Article II, Section 4 of the Constitution:  The President, Vice President and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors. The latter phrase is not defined, and opinions vary with the politics of the observer, but most would agree that it includes "obstruction of justice", which in the federal code is defined as "Whoever corruptly, or by threats or force, or by any threatening letter or communication influences, obstructs, or impedes or endeavors to influence, obstruct, or impede the due and proper administration of the law under which any pending proceeding is being had before any department or agency of the United States, or the due and proper exercise of the power of inquiry under which any inquiry or investigation is being had by either House, or any committee of either House or any joint committee of the Congress". The Democrats would claim that Trump's expression to James Comey that he hoped Michael Flynn would not be prosecuted opens the door. Likewise, Trump's firing of Comey. Tweets don't help. In any case, there is enough rationale for what is essentially a political process.  

    There are three precedents. 

        - President Andrew Johnson was impeached by the House in 1868, but survived a vote in the Senate by one vote. In the immediate aftermath of the Civil War, the issue was who was to oversee Reconstruction in the old Confederacy. Johnson, a native of Tennessee and president by dint of Abraham Lincoln's assasination, wanted the military to report to him through a sympathetic Secretary of War. The northern Republicans wanted a more assertive military governance reporting to Congress. Congress passed a law saying that he could not fire the Secretary; he did anyway. Whatever one's sensibilities, it was a clear case of the president disobeying a direct Congressional law, and surviving the aftermath (until the end of his term in 1869.)  

        - Fast forward 106 years to 1974, when President Nixon resigned after a bipartisan vote in the House Judiciary Committee to bring charges of Obstruction of Justice, Abuse of Power, and Contempt of Congress as the details of the Watergate break-in became known. Public support had collapsed, and there were clear grounds for the charges. 

        - President Bill Clinton was impeached by the House in December of 1998  for perjury to a grand jury and obstruction of justice in the case of Paula Jones who had sued for sexual harassment when Clinton was governor of Arkansas. A few Democrats voted against Clinton; a few Republicans voted for him. In the Democratic Senate one charge received 50 of the 67 votes needed; the other received 45. With a booming economy and his popularity at 70%, Clinton served until 2001.   

    Republicans take faith in that the House brings charges, but the Senate then tries the case, with a two-thirds majority necessary for removal. Under any scenario, Republicans will have about half of the Senate votes, and there are not enough elected NeverTrump Republicans to side with the Democrats. But that is not the game outside of the delusional left wing.  The objective - like the endless Mueller investigation, and the slow-walking of voting on nominees for executive and judicial nominees - is to make it impossible for Trump to govern. At some point things grind down; Trump runs out of energy; reelection in 2020 becomes impossible; there is a revolt within the Republican party. What is required is maximum pressure, through every means, all of the time. 

    With a strong economy and potential international success, Pelosi's ultimate goal is a Nixon scenario. In the apparent absence of prosecutable evidence, the greatest Republican risk lies in a "forced error" by the President. 

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This week's video is a brief, mind-numbing presentation on immigration.

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