Wednesday, May 11, 2016

How America Picks Its Next Move in the South China Sea

Washington is choosing its FONOPs carefully.

By Zack Cooper and Bonnie S. Glaser
The National Interest
May 11, 2016

On May 10, 2016, the USS William P. Lawrence conducted the United States’ third recent South China Sea freedom of navigation operation (FONOP). Many in Washington had been expecting a FONOP for several weeks, because the last FONOP was over three months ago and a defense official previously committed to conduct two such operations per quarter. Reports suggested that a FONOP was rescheduled last month for unknown reasons, so an operation appeared overdue.

Nevertheless, the FONOP surprised many observers by targeting Fiery Cross Reef. Both of the previous FONOPs were conducted as innocent passages because they were directed against features that are entitled to territorial seas under the United Nations Convention on the Law of the Sea (UNCLOS). The first FONOP was conducted near Subi Reef, which is below water at high tide, but is within twelve nautical miles of a feature that by its proximity provides Subi Reef with a territorial sea. The second FONOP was carried out near Triton Island, which is above water at high-tide and therefore merits its own territorial sea. As a result, U.S. Navy vessels had to transit “innocently” through these features’ territorial seas without maneuvering or conducting military operations.

The recent Fiery Cross Reef FONOP was similar to these two previous operations, in that the William P. Lawrence transited under innocent passage within twelve nautical miles of the reef. Fiery Cross Reef is claimed by China, Taiwan, Vietnam and the Philippines, and this operation challenged attempts by China, Taiwan and Vietnam to require prior permission or notification of transits through territorial seas. In response, China reportedly dispatched two J-11 fighter jets and a Y-8 warning aircraft, as well as a destroyer and two frigates.

Some experts looking for a stronger signal of U.S. resolve in the South China Sea had hoped that after the first two FONOPs, Washington would target Mischief Reef to show that the United States will not treat low-tide elevations as rocks or islands simply because China has created land on top of them. Mischief Reef is believed to be a low-tide elevation, meaning that it merits only a five-hundred-meter safety zone, rather than a twelve-nautical-mile territorial sea. Although China has created over five million square meters of land to house an airfield and port on Mischief Reef, UNCLOS clearly states that islands and rocks must be “naturally formed.” Thus, the United States is legally entitled to conduct normal military operations within twelve nautical miles of Mischief Reef, which would signal that the United States will not alter its operations in response to Chinese land reclamation.

This leads to an important question for experts trying to understand U.S. decisionmaking: why did officials in Washington choose Fiery Cross Reef rather than Mischief Reef? There are two primary hypotheses, both of which could explain why the administration has once again eschewed such an operation.

First, some experts have argued that the White House is simply risk-averse, and determined to avoid any potential crisis with China in President Obama’s last year in office. These critics suggest that the White House sees innocent passages as less escalatory and has therefore avoided Mischief Reef, which would require the U.S. ship to conduct military operations during its transit near the reef. Since the administration had already challenged Subi Reef, which houses one of the three new airfields in the Spratly Islands, operating near Fiery Cross Reef (home to another airfield) was the logical next option if Mischief Reef (site of the third airfield) was ruled out.

Alternatively, the White House may be waiting to operate within twelve nautical miles of Mischief Reef until the Arbitral Tribunal issues its decision in the case the Philippines has brought against China. The tribunal may rule that Mischief Reef is a low-tide elevation, rather than an island or a rock. This would make it more difficult for China to claim that a U.S. FONOP that includes the conduct of a military activity near Mischief Reef is provocative. Therefore, some U.S. leaders may believe that delaying a Mischief Reef FONOP until the legal case is resolved ensures that Washington is on the right side of international law, and gives the United States an opportunity to reinforce the tribunal’s decision.

It would make logical sense for the administration to wait until after the ruling to conduct a Mischief Reef FONOP, as long as the White House can avoid the perception that it is unwilling to accept risk to uphold the prevailing order. It is critical that the United States continue to follow through on its promise to conduct routine FONOPs so that the individual operations do not become political footballs. Just like surveillance operations in international waters and airspace, the United States would be better off if these operations were seen not as major political decisions but minor operational details. Regular U.S. patrols are also vital because if Washington doesn’t challenge China’s illegal claims, it is hard to imagine smaller states doing so.

China will criticize the United States regardless of the details of the operation. After the May 10 operation, for example, China’s Foreign Ministry spokesperson said that the FONOP “threatened China’s sovereignty and security interests, endangered the staff and facilities on the reef, and damaged regional peace and stability.” The Ministry of National Defense called it “gravely provocative” and accused the United States of “sabotaging peace and stability.” This type of response is to be expected, but it is a small cost to pay for upholding the rules and norms that undergird the international order.

Article Link to the National Interest:

Wednesday, May 11, Night Wall Street Roundup: Wall St. Slumps As Disney And Macy's Slam Consumer Shares

By Noel Randewich
May 11, 2016

U.S. stocks dropped on Wednesday and the Dow Jones industrial average suffered its worst day since February as feeble quarterly reports from Walt Disney, Macy's and Fossil undermined confidence across the consumer sector.

The consumer discretionary index .SPLRCD fell 1.98 percent, notching its worst day in three months, with all but three of its 88 components losing ground.

The biggest drag on the Dow, Disney (DIS.N) dropped 4.04 percent after it posted a rare earnings miss.

Department store Macy's (M.N) tumbled 15.17 percent to its lowest since 2011, while watch maker Fossil (FOSL.O) sank as much as 34 percent to a 2009 low after the two companies slashed their full-year forecasts.

Adding to gloom in retail stocks, Office Depot (ODP.O) slumped 40.39 percent and Staples (SPLS.O) dropped 18.34 percent. The two terminated plans to merge after a U.S. federal judge ordered the deal temporarily halted because of concerns it would reduce competition.

All of the 10 major S&P sectors fell except for utilities .SPLRCU, which gained 0.24 percent.

The S&P 500's decline undid gains from a rally the day before driven by (AMZN.O), the online seller that has caused so much trouble for Macy's and other traditional stores in recent years.

"There is no pricing strength, there is no income growth and you have Amazon staring you in the face soaking up a lot of orders," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville. "They are getting battered everywhere they look."

The S&P consumer discretionary index recently traded at about 18 times expected earnings, expensive compared to the S&P 500's PE of 16, according to Thomson Reuters data.

The past two sessions' gyrations may be indicative of what is in store for the next several days as the quarterly earnings season winds down and traders focus on macroeconomic data, said Eric Wiegand, senior portfolio manager at U.S. Bank's Private Client Reserve.

"We could see decent moves in either direction but not necessarily confirming a long-term trend."

The Dow .DJI slumped 1.21 percent to 17,711.12 points, its biggest one-day drop since February 11. The S&P 500 .SPX lost 0.96 percent to 2,064.46.

The Nasdaq Composite .IXIC dropped 1.02 percent to 4,760.69.

About 7.0 billion shares changed hands on U.S. exchanges, just below the 7.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

First-quarter earnings for S&P 500 companies have mostly beaten analysts' expectations, but are estimated to have fallen 5.4 percent from a year ago, according to Thomson Reuters data.

Other retailers slammed on Wednesday included Kohl's (KSS.N), Nordstrom (JWN.N) and Dillard's (DDS.N), all down more than 6 percent.

Declining issues outnumbered advancing ones on the NYSE by 1,895 to 1,092. On the Nasdaq, 1,994 issues fell and 821 advanced.

The S&P 500 index showed 38 new 52-week highs and seven new lows, while the Nasdaq recorded 51 new highs and 57 new lows.

Article Link to Reuters:

Trump Surge Could Signal Close Fight With Clinton

By Chris Kahn
May 11, 2016

Donald Trump's support has surged and he is now running nearly even with Democrat Hillary Clinton among likely U.S. voters, a dramatic turnaround since he became the Republican party's presumptive presidential nominee, according to a Reuters/Ipsos poll released on Wednesday.

The results could signal a close fight between the two likely White House rivals as Americans make up their minds ahead of the Nov. 8 election to succeed Democratic President Barack Obama. As recently as last week, Clinton led Trump by around 13 points in the poll.

In the most recent survey, 41 percent of likely voters supported Clinton, the Democratic front-runner, and 40 percent backed Trump, with 19 percent not decided on either yet, according to the online poll of 1,289 people conducted from Friday to Tuesday. The poll had a credibility interval of about 3 percentage points.

The results reflect a big increase in support for Trump since he knocked out U.S. Senator Ted Cruz of Texas and Ohio Governor John Kasich last week to become the last Republican in the White House race.

There was no immediate comment from the Clinton or Trump campaigns.

Clinton, who has all but clinched the Democratic nomination over rival Bernie Sanders, has mostly led Trump in the head-to-head poll this year. Trump briefly matched her support a few times in 2016, most recently in mid-March, after U.S. Senator Marco Rubio of Florida, a favorite of the Republican establishment, dropped out.

Presidential elections are not decided by the national popular vote but by the Electoral College, which is based on state-by-state results.

Opinions are likely to change over the next six months as American voters become inundated with hundreds of millions of dollars in campaign advertising, highly publicized debates and a pair of party conventions.

Trump and Clinton both have much to prove to the American electorate. The Reuters/Ipsos poll found earlier this month that a majority of voters did not trust either candidate with key presidential responsibilities such as managing the U.S. economy, handling the role of U.S. commander in chief, and conducting themselves according to a “high moral standard.”

The candidates' choice of running mates could also be important. Voters surveyed in the poll said they would be more likely to support Clinton if her choice for vice president was a liberal, while Trump would help his chances if he picked someone experienced in politics and someone who is “consistently” conservative.

Trump’s rise in the polls coincides with his attempt to take over the reins of the Republican Party from leaders who clashed with him during a bruising and blustery primary fight.

U.S. House of Representatives Speaker Paul Ryan, the country's top elected Republican, said he would not immediately endorse Trump, and party elders including former Presidents George H.W. Bush and George W. Bush and the last two presidential nominees, Mitt Romney and John McCain, said they would not attend the Republican convention in Cleveland in July.

Article Link to Reuters:

Paul Ryan’s Awful Dilemma

By Jonathan S. Tobin
May 11, 2016

Those who claim that House Speaker Paul Ryan did something cynical or self-interested by refusing to endorse Donald Trump last week were wrong. Ryan is caught in a terrible trap in which he is trying to reconcile two conflicting obligations. As one of the two highest-ranking Republican officeholders in the country, he feels he cannot stand aloof from the presidential election against a Democrat that threatens to give us another four years of the Obama administration even if his party’s nominee appalls him. I think he means it when he says he’d like to unify Republicans as much as it is possible. But he also knows that he cannot lend his name and reputation to a candidate whose protectionist and isolationist stands are antithetical to everything that Ryan believes in and whose behavior disgraces the GOP. That leaves the political world wondering how he can possibly reconcile these two things when he meets with Trump tomorrow.

The short answer to that question is that he can’t.

Ryan may be hoping he can emerge from tomorrow’s conclave with Trump with concessions or promises that will enable him to at least make a nominal endorsement that won’t sacrifice his conscience. But no matter what is said at that meeting and no matter how much of his trademark earnestness he brings with him, the speaker is asking for the impossible. Trump is Trump. He won’t change his style, and he won’t commit to supporting conservative principles and policies that he never liked in the first place. Like every other member of his party, sooner or later Ryan is going to have to choose between partisan obligations and those of his conscience. There is no third path.

By not simply bending the knee to Trump but demanding that he accommodate conservatives, Ryan is behaving sensibly. In theory, Ryan was right last week when he said that it is the responsibility of the nominee to act to unify the party. Trump ought to have spent the few weeks since his victory became all but certain working to conciliate those who opposed him. That doesn’t mean just starting to act like a president rather than reality television performer or a billionaire mogul who is accountable to no one. It means trying to find common ground with conservatives and mainstream Republicans whose presidential choices were swept aside as Trump stormed through the primaries on a populist tide.

Ryan may hope that Trump will rethink his refusal to change or that in the course of tomorrow’s get together or subsequent meetings he will be able to somehow persuade him to make some concessions to conservatives that will allow them to retain at least a shred of personal honor in exchange for their endorsements.

But while Trump may be willing to come to Washington to meet with Ryan, there is little chance that he will give Ryan what he needs. Trump may be malleable about policy questions. Indeed, his positions are always subject to change. With the exception of his absurd promises to build a wall and to make Mexico pay for it and his call for a ban on Muslim travel to the United States, there are few if any positions he’s taken that haven’t been subject to change. He’s flip-flopped almost continuously in front of our eyes these last few months and often taken contradictory stands within the same speeches (a with his wildly inconsistent foreign policy address) or the same conversation as was the case most recently with his backtracking on his tax plan and calls for tax increases.

But Ryan is kidding himself if he thinks he can get anything of value out of Trump.

Unlike most presidential nominees who have worked their way up in politics to one extent or another, Trump is not someone who understands or cares about the dynamics of bringing together a vast, unruly coalition as Ryan must do in the House. Though in terms of the way he has played the system as a crony capitalist — he is the ultimate corrupt insider — Trump plays an outsider as far as Republican politics and conservatism is concerned. It is on the basis of that pose as the man who will sweep aside the political establishment that he has won the GOP nomination and sees no reason to change now. Indeed, there is every reason to think that he believes the votes he won in the past few months have given him a mandate to reject everything for which Ryan has stood.

Trump will be making a mistake by spurning Ryan’s entreaties. He may be riding high now, but significant defections from Republicans who believe that he is simply beyond the pale will doom any hope he might have to beat Hillary Clinton. He needs the mainstream Republicans and conservatives who are talking about staying home or even voting for Clinton to rally to his cause. He ought to fear such defections far more than Ryan should be worried about the puny threats of a Sarah Palin. Yet with so many Republican officeholders choosing to discard their principles and pay homage to him recently, Trump may think Ryan and other holdouts are bluffing.

More to the point, Trump simply is incapable of changing into the kind of candidate that Paul Ryan could support even while holding his nose. We already know that he thinks he doesn’t need to act in a presidential manner since his millions of fans love his political incorrectness and vulgarity. He may also think that he has beaten conservatism along with his 16 rivals for the nomination. He may believe this is the moment to kill it and complete the transformation of the GOP into something very different from the party that has championed conservative ideas since Ronald Reagan rather than letting his opponents up off the floor.

A Trump Republican Party will be a protectionist foe of free trade and a Know-Nothing faction that places itself at odds not only with illegal immigrants but all Hispanics and other minorities. Trumpism is in no small measure a personality cult built around a vulgar thug who renders conservative talk about values meaningless. Trump may believe in nothing but himself, but he has also tapped into an ugly populist streak in American politics that he won’t abandon because it is an expression of his repulsive personality. Trumpism is, as Brett Stephens noted in the Wall Street Journal, “a regression to the conservatism of blood and soil, of ethnic polarization and bullying nationalism.” There is no compromise possible between such a creed and the optimistic and pluralistic conservative vision championed by the late Jack Kemp that Ryan has spent his adult life supporting. To be suckered into a deal with a man with no principles will harm those principles even if the alliance only lasts until a November defeat and it will ensure the complete collapse of conservatism if somehow Trump wins.

As House Speaker, I know Ryan has obligations to other House members and the party he belongs to which others who are free to abstain from the Hobson’s Choice between Trump and Clinton don’t have. He may also want to be president someday. Ryan understands that his chances in 2020 or some other year will be undermined if his refusal to endorse the nominee can be used to blame him for what is likely to be a catastrophic defeat for which Trump alone will be truly responsible.

This means that Ryan, a good man who exemplifies all of the best qualities of our political culture, can either sacrifice his principles in the name of a dubious GOP unity or stand aside and keep his honor while knowing that doing so will undermine his standing as a party leader in the short term while also doing long-term damage to his presidential hopes. I don’t envy him this dilemma but whether he does it tomorrow or at some point before, during or after the Cleveland convention, choose Ryan must.

Article Link to Commentary:

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Donald Trump Is Right: Deficits Don’t Matter

By David Dayen
The New Republic
May 11, 2016

“Reagan proved that deficits don’t matter,” Vice President Dick Cheney said when the Bush administration sought a second round of tax cuts in 2003. This fits with a rich tradition of conservative tax-cutters abandoning deficit hawkery when they want to hand money to favored groups. But some economists on the left agree with Cheney that deficits don’t matter—at least not as much as more jobs and prosperity for all—and their views are getting newfound attention because of an offhand comment by presumptive Republican presidential nominee Donald Trump.

Trump found himself well outside of mainstream thinking about deficits and debt last week when he suggested that the United States could borrow money to shore up the economy and simply ask for discounts on the debt later. Doing so would sap confidence in U.S. Treasury bonds, considered the safest financial investment in the world. The resulting interest rate rise would defeat the purpose of getting a discount on the debt, not to mention potentially triggering financial catastrophe.

Trump later explained that he was merely referring to buying back existing debt at a discount if interest rates went higher, lowering the nominal value. This is something the U.S. does routinely. But Trump went further when he told CNN on Monday, “This is the United States government… you never have to default because you print the money.”

Trump’s statement sounds a lot like Modern Monetary Theory (MMT), a tenet of economists who believe in de-emphasizing the need for deficit reduction because the U.S. controls its own currency. Balanced budgets, to MMTers, take money out of the hands of ordinary Americans who can put it to more productive use through job creation and consumer spending. The deficit only matters once you reach full employment, when overheated consumer demand can lead to inflation. But we’re nowhere near that point right now, meaning there’s plenty of room for deficits, without any possibility of default.

One MMT advocate, Stephanie Kelton of the University of Missouri-Kansas City, worked for Bernie Sanders in the Senate and now advises his campaign. But even Sanders emphasizes deficit reduction, by promoting higher taxes on the wealthy and Wall Street transactions. Kelton’s worldview, and in this instance Trump’s, goes far beyond even Sanders’s comfort level on the issue.

I’m almost certain that Donald Trump had no intention of stumbling into this philosophical debate, traditionally fought between the left and the far left. But his freewheeling style of political rhetoric often drops him into uncharted territory. In this case, Trump exposed an unsaid but prevalent conservative hypocrisy about deficits.

As Cheney’s quote about Reagan shows, Republicans habitually ignore deficits when they obtain power. It’s a matter of convenience, a tempting way out of the fiscal responsibility trap that makes it difficult for politicians to keep their campaign promises. But every time a Bill Clinton or a Barack Obama gets the keys to the Oval Office, Republicans flip the script, generating a sudden fear of mountains of debt. Congressman Paul Ryan has been claiming the U.S. is about to turn into Greece for eight years. A deficit hawk industry in Washington comes alive to tell the nation that we’re broke. This creates practical constraints on liberal spending programs to help the poor and the elderly.

Trump’s comment that America can’t default on its debt, and can money-print its way out of trouble, shreds that Republican playbook. Deficit fear-mongering loses its punch if the GOP’s new leader dismisses an animating principle of how conservatives defend against social spending.

There’s a mirror for this on the left, too, where establishment economists criticize MMT for downplaying the deficit. Paul Krugman argued a few years ago that if you printed too much money, interest rates on government debt would spiral higher, leading to hyper-inflation. MMTers counter that Krugman is creating political constraints where none actually exist. The intricacies of this argument can make you woozy, but suffice to say that the divide between Krugman and Bernie Sanders supporters on display in the presidential primary are also evident here, only in far more technical form.

Wall Street, and Democratic frontrunner Hillary Clinton, have taken the Krugman side of the argument, but in a peculiar way. Financial executives who went nuts at the Trump comments acknowledged that the U.S. re-negotiates debt and prints money, but that someone running for president should never say this. “For a president to say these kinds of things publicly would have the opposite effect you would want in that they would put the economy into recession,” said Jim Paulsen, chief investment officer at Wells Capital, to Politico.

It’s true that confidence plays a role in capital markets, and if a national leader is openly devising schemes to lower our obligation to creditors, those creditors can get nervous. And questioning the full faith and credit of the United States isn’t just a bad look; it’s unconstitutional. But what’s really going on is that Trump is threatening an established order.

Liberals have used the constraint of deficits while in power even more strongly than Republicans. The Obama White House has boasted that, since 2009, the deficit has fallen at the fastest rate since the end of World War II. In 2009, under Nancy Pelosi and Harry Reid, Congress instituted a “paygo” rule that forced all spending to be paid for, made progressive priorities in social programs more difficult to achieve, and allowed Republicans to demonize Democrats as the party of higher taxes.

If the deficit really doesn’t matter, Democrats would have to live up to their image as the party of the people, and work to provide better opportunities for them. And they would have to spend federal money to do it. Behind the mockery of Trump’s monetary positions is the truth that mainstream Democrats aren’t prepared for the implications of an MMT world. They would rather hold off the left by claiming that their hands are tied because of the deficit.

Such moderation makes the wealthy funders of Democratic campaigns far more comfortable, and it leads many in the media to laud Democrats as the more responsible, serious party. But such cuts don’t lead to more jobs, higher wages, and a better life; spending on infrastructure or health care or education does. Democrats should listen again to Trump’s stray remark for the grain of truth in it: Deficits don’t matter. The sooner the party realizes that, the better off its constituents will be.

Article Link to the New Republic:

Today's Stock In Play Is C&J Energy Services (Symbol CJES)

Justice Department's Reputation Hangs In Balance Of Clinton Probe

By Julian Hattem
The Hill
May 11, 2016

No matter what decision federal prosecutors and FBI investigators make in the Hillary Clinton email probe, there is sure to be a public backlash from the left or the right.

If Clinton doesn’t face charges, Attorney General Loretta Lynch and the Justice Department will certainly come under criticism from conservatives who will suspect President Obama’s administration of covering up for a former Cabinet member.

Yet if charges are brought, Democrats are just as sure to question the motives of FBI Director James Comey, a Republican who worked for the Bush administration.

The stakes are huge given Clinton’s status as the likely Democratic presidential nominee, underscoring the pressure on the Justice Department. Charges against her or her aides could wound her presidential bid, while silence would ease her path to the White House.

“In this scenario, federal prosecutors are damned if they do bring a case and damned if they don’t,” said Justin Shur, the former deputy chief of the Justice Department’s public integrity section, who is now at the law firm MoloLamken.

“Regardless of whether the charging decision is supported by the facts and the law, there’s always someone who will suggest there was a political agenda behind it.”

The federal investigation connected to Clinton’s use of a private email server throughout her tenure as secretary of State has loomed over her presidential campaign. Central to the investigation is whether she sent classified information over her server, though more than 2,000 of the emails now considered classified were not marked as such at the time they were sent.

The investigation has gone on longer than some anticipated, though it may now be nearing a conclusion.

FBI investigators and federal prosecutors have reportedly interviewed multiple Clinton aides in recent weeks, and a session with Clinton herself is expected in the coming days.

Multiple former prosecutors are seeing those interviews as a sign that the investigation is in its final stages.

Some former officials with the Justice Department are watching the unfolding case with concern and warn a decision in the Clinton case could affect Justice’s image for years to come.

“I’m greatly concerned about the reputation of the Justice Department, which is why I have stated that I think the proper and best course would have been to have this go to an independent prosecutor a good year ago,” said Ronald Sievert, a former Justice Department official who teaches law at Texas A&M University and the University of Texas Law School.

“It was pretty obvious that to put these decisions in the hands of … high-ranking political appointees creates a perception — valid or not — of, at the very least, unconscious political influence,” he added.

Sen. John Cornyn (Texas), the No. 2 Senate Republican, has taken to the Senate floor to call for Lynch to appoint a special prosecutor to handle the case. So far, however, Justice has declined to do so.

In the absence of a special counsel, others have pushed for the Obama administration to release as much information as possible about the case if it decides not to press forward with an indictment.

“All I can go by is what the president has said and what the attorney general has said: that there’s not going to be any politics played,” Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) said on Tuesday.

“If it doesn’t work out that way and they don’t prosecute, then they’ll have to be very transparent and tell us what there is in the FBI report that will tell us why it shouldn’t be prosecuted.”

That’s easier said than done.

Prosecutors are largely prohibited from releasing details about investigations that don’t lead to criminal charges. And while there are some instances of prosecutors releasing information about a case they declined to pursue, such as in cases of police shootings, the Clinton case lacks many of the quirks that made those disclosures possible.

“It’s very, very rare for that to be done, and it wouldn’t happen in this case because they can’t go into the details of Hillary Clinton’s email in a public report,” Amy Jeffress, a former Justice Department official who is now a partner at Arnold and Porter, told The Hill. “It would be too politically sensitive, as well as potentially damaging to national security and foreign relations, to release anything more than the decision.”

According to reports, federal prosecutors and FBI investigators have yet to dig up evidence that could lead to a criminal indictment, though the process is not yet completed. There has been no evidence that a grand jury has been convened in the case, which would be necessary before criminal charges could be filed.

If the Justice Department does decide to press charges, either against Clinton or one of her allies, the evidence will become public, making the decision easier to justify.

Still, Comey is a Republican who gave money to Mitt Romney, the 2012 GOP presidential nominee, in his race against Obama. He has a reputation more as a maverick than a political lackey, but Clinton’s allies might try to change that if the Justice Department proceeds with an indictment.

The department has repeatedly refused to discuss details of the investigation.

“That investigation is, as you know, an ongoing matter,” Lynch said this week. “It’s being handled by the career lawyers and agents of the department, and they will review all the facts and evidence and make a recommendation at the appropriate time.”

Comey is fond of saying the FBI doesn’t “give a rip about politics,” and multiple former officials insisted that political considerations would not enter into their minds.

“There’s no bigger quote-unquote ‘target’ when you talk about a presidential nominee, especially Secretary Clinton,” said Glen Kopp, a former prosecutor now in the white-collar section at Bracewell, a law firm.

But there are plenty of other “heads on the wall” of politicians from both parties who have faced federal charges, he said. Despite the unique nature of the Clinton case, the mechanics aren’t too different from other high-profile investigations.

“People are wary of those political influences and, from my experience, do their best to block out the noise,” he said.

“In this context, yes, there will be perhaps some … louder screams of dissatisfaction with the process. But I think it’s the integrity of the process that is paramount.”

Article Link to The Hill:

Hillary Clinton's Primary Quagmire

She's on a course to win the Democratic nomination, but still piling up losses.

By Gabriel Debenedetti
May 11, 2016

Hours before the West Virginia polls closed Tuesday, Hillary Clinton’s top fundraisers got a memo from campaign manager Robby Mook. The message: Even if Bernie runs the table in the remaining states, he still can’t win.

It’s a well-known point by now, but it’s still one Mook needed to make as Clinton sputters toward the finish line, loaded down with the baggage of recent losses in Indiana and West Virginia and the prospect of a few more losses still to come.

This wasn’t the way the Democratic primary was supposed to end. Clinton may have turned her focus to presumptive GOP nominee Donald Trump, but at the same time her campaign is forced to continue fighting a rear-guard action against Bernie Sanders, who shows no sign of surrender.

After going dark on television for several weeks, the former secretary of state is suddenly investing in television advertisements in Kentucky — a state that should have been in her wheelhouse. Deep into the primary schedule, Clinton is forced to reckon with almost weekly results highlighting her relative weaknesses with white men and young voters, and she’s only gradually been able to increase her swing state travel. All the while, Trump sharpens his day-to-day critiques of her.

Some Democrats are now growing uneasy over a rocky finish that has Clinton spending resources and political capital so late in the process.

“The defeat in Indiana I was just horrified at, frankly,” said former Democratic National Committee chairman Don Fowler, a Clinton backer, echoing others who say that for the moment it’s more of an annoyance than a deep concern about the candidate. “The longer Bernie stays in, and the longer he is not mathematically out of the process, the weaker we’re going to seem to be."

Clinton is still on track to pass the threshold to clinch the nomination at some point in June using a combination of pledged delegates and superdelegates, and her lead among pledged delegates remains above 275. That makes it extremely difficult for Sanders to catch up to her unless he can win over a large number of the party elites who vote regardless of their state’s decision. Yet the Clinton campaign, cognizant of the need to show respect to Sanders’ legion of devoted supporters, is unable to initiate the call to unite behind her candidacy.

Even as she increases the frequency of her attacks and directly confronts Trump on the trail and in campaign communications, Republicans are all too eager to remind voters of how uncommon it is for a front-runner to be dropping contests with such frequency so late in the process, and to borrow lines from the Democratic challenger she can’t quite shake.

“Bernie Sanders has a message that’s interesting. I’m going to be taking a lot of the things Bernie said and using them,” Trump told MSNBC’s "Morning Joe" late in April, turning to a criticism of Clinton’s decision-making that Sanders frequently uses on the campaign trail. “He said some things about her that are actually surprising. That essentially she has no right to even be running. She’s got bad judgment. When he said ‘bad judgment,’ I said, ‘sound bite!’"

Trump returned to Sanders’ argument Tuesday, tweeting, “Hillary has bad judgment!,” and linking to an Instagram video hitting her over the 2012 attacks in Benghazi, Libya.

Sanders aides regularly brush aside questions about whether the Vermont senator’s decision to remain in the race through the convention is harming Clinton, referring to the notion that drawn-out primaries harm the nominee as a “myth.” Anyway, they insist, Sanders will ultimately do whatever he can to defeat Trump in November.

As long as Sanders continues to roll up wins, there’s little incentive for him to leave the race, making it likely she’ll have to weather three more weeks of nicks and bruises that could hand Trump lines of attack.

After West Virginia, there’s no respite: Oregon, which votes next Tuesday, is among the most liberal states in the country. Sanders has held massive rallies there and can point to the support of Jeff Merkley, his only endorser in the Senate.

The same day, Kentucky also votes. While it’s long been thought of as a likely Clinton win — in part because it is a closed primary where only Democrats can compete, not independents — her grip on the state seems increasingly tenuous.

Sanders has been the leading candidate for campaign donations coming from Kentucky for three straight months, according to an analysis performed by the Kentucky Center for Investigative Reporting. And Clinton’s March comment about putting “a lot of coal miners and coal companies out of business” has resonated. Though delivered within the context of investing in green jobs, it damaged her chances in the state’s coal-producing regions.

After appearing to stop spending money on primary state advertising following her sweeping wins in the Northeast in late April, Clinton resumed her television investment with a roughly $180,000 buy for the final week there on Monday night.

Sensing an opportunity, the Sanders campaign reserved additional Kentucky ad time of its own on Tuesday, according to media buyers. And it sent around a fundraising email carrying the news of Clinton’s ad buy.

"If you’re looking for a sign that the Clinton campaign knows this primary is far from finished," it proclaimed, "here it is."

Article Link to Politico:

Trump is No Reason to Back Garland

May 11, 2016

When President Obama nominated Merrick Garland to replace Justice Antonin Scalia on the U.S. Supreme Court, Democrats thought they were in a strong position to muscle the Republican majority in the Senate into approving him. They thought Garland’s supposedly centrist position (more on that later) would brand any opponents to his nomination as extremists. But most of all they counted on the ability of the White House and Garland to keep his cause at the top of the news for so long that the GOP refusal to even consider hearings, let alone a vote on him, would create a massive backlash with serious implications for the Republicans in the fall. But nobody in Washington in either party thought the best argument for Garland would wind up being named Donald Trump.

While polls do show a majority of Americans don’t think the seat should remain vacant for a year, months of maneuvering from Garland and his handlers have accomplished absolutely nothing. The battle (if one can dignify what is essentially a one-sided dead-end argument with such a dramatic word) over the nomination has gotten little attention even inside the beltway as the nation has been transfixed by the presidential campaign.Stunts like Garland’s sending a questionnaire to senators have landed like a lead balloon. Though some Republicans have granted him the courtesy of a meeting, there is no sign that most Republicans are even thinking of changing their minds about approving him. More importantly, as long as the feet of Senate Majority Leader Mitch McConnell and Judiciary Committee Chair Chuck Grassley are set in stone on the matter, there will be no hearings and no vote. Whatever leverage Democrats acquired by complaining about the Senate not doing its job was undermined by the discovery of speeches by Vice President Biden and Senator Chuck Schumer, in which they proclaimed that Democrats would do the same thing as the Republicans are now doing if the situation was reversed.

All of which is to say the entire effort has proven to be a grandiose public relations gesture with few signs that it will make much of a difference in a presidential year in which the only real issues will be what voters think of Donald Trump and Hillary Clinton.

But Trump is a factor in the Garland debate. Democrats and even some wobbly Republicans are now thinking that with the Republican presidential race decided, members of the Senate need to think about whether it’s time to throw in the towel on the Garland nomination. The thinking is that Trump ensures not only a Clinton victory but also may take down the Republican Senate majority with him. Since Clinton and a Democratic Senate may replace Scalia with someone far more liberal than Garland, the argument is that Republicans will be doing what is best for conservatism if they swallow hard and confirm a moderate like the nominee rather than having to stand by and watch helplessly as an even bigger liberal is confirmed next year.

Of course, this is the same argument put forward in March and was rejected by Republicans. As I wrote at the time, the GOP couldn’t acquiesce to Garland for two reasons.

One was that it was foolish and unthinkable for Republicans to concede the November election months in advance. So long as there is even a theoretical hope that a Republican in the White House next year and a GOP Senate to work with him, they are right to hold their ground.

The other reason was that despite the White House spin about Garland that has been endlessly repeated by much of the mainstream media, he is no centrist. As a New York Times analysis of his appellate court decisions illustrated, he is actually to the left of Justices Stephen Breyer and Elena Kagan, while not just so liberal as Ruth Bader Ginsburg or Sonia Sotomayor. Any ideological difference between Garland and the person Clinton might pick next year is marginal. He will be a solid member of what will be a new liberal majority.

But now that Trump is the presumptive nominee there are those who think it is no longer reasonable for the GOP to keep stalling. With most polls showing Trump a certain loser to Clinton by margins that would likely impact Congressional races as well, a doomsday scenario for the Republicans is not unlikely. Faced with certain defeat, some might reason that confirming Garland would, even if they know he is a hard core liberal, put in place a justice who is not that young a man. Confirming a 63-year-old liberal like Garland would be better than if Clinton appointed someone younger that would then have a better chance to impact American law for the worse for an even longer period.

But even if we take it for granted that a Trump apocalypse is a certainty —and it is still possible as some swing state polls show that he could somehow find a way to win against a Democratic candidate that is almost as unpopular as the billionaire reality star — Senate Republicans still have no reason to budge.

Even if many Senate Republicans are still hedging on whether they will vote for Trump themselves, the one thing they can’t and won’t do will be to concede defeat to the Democrats months in advance. Doing so in so public a manner would harm the already diminished chances for the reelection of endangered Republican incumbents who hope to survive in spite of Trump’s likely downward pull on the GOP ticket.

Nor is Garland’s age any more of an argument to confirm him than the myth about his centrism. In this day and age, 63 is not old. The relative advantage of having someone who might be on the court for only 25 years as opposed to 35 years is lost on senators who will be long gone from Washington by then.

That means Garland must face up to the fact that the great honor of being tabbed for the Supreme Court by a lame duck president who needs the approval of the opposing party to get his pick confirmed is highly overrated. Garland has fallen on his sword for his party and may well waste the next few months being pushed to do other foolish things by a White House that is still trying to turn a non-story into a cause célèbre. If he really wants to sit on the Supreme Court someday, he’d be well advised to stop annoying Senate Republicans who don’t want to be rude but will still never vote for him and start lobbying Hillary Clinton. She, and not some surge of public opinion that will never happen, is the only way his ambition will ever be realized.

Article Link to Commentary:

Wednesday, May 11, Morning Global Market Roundup: Dollar Dips From Two-Week High, Stocks In The Red

By Jamie McGeever
May 11, 2016

The dollar fell on Wednesday, succumbing to a bout of profit-taking after hitting a two-week high the previous day, while European stocks also put a positive start to the week behind them to trade in the red.

Weak corporate earnings weighed on stocks, as Germany's DAX .GDAXI snapped a four-day winning streak and the broader FTSEuroFirst 300 index of leading European shares.FTEU3 erased much of Tuesday's rise, which was the biggest in three weeks.

U.S. futures pointed to a fall of around a third of one percent on Wall Street ESc1 SPc1.

"The growth outlook remains tepid at best and visibility is poor. Sentiment is now very fragile with the instinctive reflexive 'buy on dips' that has served investors well is now being supplanted by ‘sell the rally’," said Mike Ingram, market strategist at BGC Partners in London.

"And that is precisely what we are seeing today."

Financials were among the biggest losers in Europe, their 1.5 percent fall .SX7P led by a 10 percent plunge in Austrian bank Raiffeisen Bank International (RBIV.VI) after it said it will look into a possible merger with RZB.

Shares in outdoor advertising firm JC Decaux (JCDX.PA) slumped nearly 10 percent after it issued a weak second-quarter outlook, causing several investment banks to cut their ratings and price targets on the stock.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.2 percent, resuming the recent downtrend. The index has risen only one day in the last three weeks and on Tuesday it hit an eight-week low.

Japanese shares ended flat, with the Nikkei .N225 relinquishing earlier gains as the rally in the yen gathered steam.

MSCI's broad gauge of global stocks .MIWD00000PUS slipped back. On Tuesday it climbed nearly 1.1 percent, its best session in about a month, in large part driven by the S&P 500's .SPX best day in two months, a 1.3 percent rise.

Marathon, Not A Sprint

In currency markets, the dollar's pullback was led by losses against the yen. The Japanese currency had risen to a two-week high earlier this week after a key economic adviser to Prime Minister Shinzo Abe on Tuesday told Reuters that Japan would intervene if the yen firmed to between 90-95 per dollar.

But dealers locked in profits on Wednesday, pushing the dollar down 0.7 percent to 108.50 yen JPY=. Last week the Japanese currency hit an 18-month high of 105.55 per dollar.

"The recent rise in dollar/yen might be seen as a victory for the Bank of Japan but, perhaps unfortunately, this looks more like a marathon than a sprint," said Steve Barrow, head of G10 strategy at Standard Bank.

The euro EUR= rose 0.2 percent on the day to $1.1390. Last week it traded at $1.16, its highest this year.

The dollar's index against a basket of six major currencies .DXY was down a quarter of one percent at 94.070, easing back from Tuesday's two-week high of 94.150.

Bonds remained well supported, indicating investors were wary about the prospects for riskier assets in the near term in an environment of sluggish global growth.

An auction of three-year U.S. notes on Tuesday was received well. Yields on 10-year debt US10YT=RR were at 1.75 percent, not far away from a 2016 low of 1.53 percent.

German government bonds also reflected the cautious undertone in global markets, with the 10-year yield EU10YT=RR down a basis point at just 0.11 percent.

Longer-dated yields on peripheral Spanish and Italian bonds, however, climbed to multi-month highs on Wednesday as Spain started the sale of a 50-year bond and investors anticipated Italy may soon do the same.

Spain's benchmark 30-year bond yields rose 11 basis points to a two-month high of 2.86 percent ES30YT=TWEB and Italy's rose 9 basis points to a three-month high of 2.78 percent IT30YT=TWEB.

In commodities, oil prices fell around 1 percent as traders cashed in on Tuesday's rally of around 4 percent. Brent crude futures LCOc1 were down at $45.10 per barrel and U.S. crude futures CLc1 were at $44.20 per barrel.

Article Link to Reuters:

Stuck With Dangerous Dollar Dominance

By Mike Dolan
May 11, 2016

The world is getting an object lesson on the problems of having one dominant global currency and even the supposed prime beneficiary, the United States, can see the downside.

Alarming bouts of volatility in world financial markets over the past 12 months have been rooted in a fear of what happens when a world with its highest-ever peacetime debt pile faces even a hint of higher interest rates.

Despite a constant narrative about U.S. households and banks paying down debts ever since the global credit crash eight years ago, any 'deleveraging' that did happen was more than offset by higher government, corporate and personal debt around the globe in Europe, China and across emerging markets.

In fact, aggregate world debt is now far higher than it was before the 2007-08 crash.

"The saga of debt is far from over," says a report from Morgan Stanley. It goes on to explain why Morgan Stanley expects demographic-led shifts in savings and investment to soon push interest rates higher and transform that debt mountain into additional deadweight on world growth over next five years.

But the role of the U.S. dollar as the world's main reserve currency denominating large chunks of that debt pile is showing up as complicating factor that's added to risk of instability.

The first U.S. interest rate increase in almost a decade in December - just a quarter of a percentage point - was enough to trigger a convulsion in world markets that led to the worst start to a year for global stocks since World War Two.

Underlining 'cause and effect', the subsequent recovery only came about once the Federal Reserve hastily made clear it was pressing the pause button precisely because of seismic events in world finance.

Few doubt a growing U.S. economy that's near full employment can absorb some normalization of interest rates from near zero, and a higher dollar goes hand in hand with that.

But the rest of the world clearly can't.

The Bank for International Settlements estimates that while U.S. dollar dominance means it accounts for almost 90 percent of all foreign exchange transactions and some 60 percent of hard currency reserves. But crucially it also accounts for about 60 percent of all debts and assets outside the United States.

And if the rest of the world goes into shock because of the higher cost of servicing and paying back those dollar debts, the boomerang effect on U.S. exporters, commodity firms and the wider economy just ends up tying the Fed's hands in ways made crystal clear this year already.


No surprise, then, the U.S. central bank has no deep love for the dollar's prime reserve currency status - even though it's been described by Europeans and others over the years as an "exorbitant privilege" that ensures the world lends to the U.S. Treasury in its own currency at low interest rates regardless of dollar strength.

Speaking at an event in Zurich on Tuesday on the dollar's global status, New York Fed chief Bill Dudley said Americans should not be perturbed if other currencies such as the euro or China's yuan eventually eat into the dollar's share of reserves.

"If other countries' currencies emerge to gain stature as reserve currencies, it is not obvious to me that the United States loses," he said, as long as it "is being driven by their progress, rather than by the U.S. doing a poorer job."

While that's far from wishing away dollar hegemony, it speaks to the greater ambivalence among central bankers toward reserve status than their national treasury chiefs - given how widespread use of the currency can compromise domestic policy.

It's that tension that risks sowing instability everywhere.

If the Fed can't adjust monetary policy because of fears of transmitting a self-defeating shockwave around the world via the dollar, then there's understandable concern that artificially low Fed policy just stores up even more debt and international accounting imbalances and undermines the very currency that's supposed to play anchor.

At the same event in Zurich, Claudio Borio, head of the monetary and economic Department of the BIS, said the dollar's role could potentially exacerbate instability by allowing the United States to run larger and more persistent fiscal and current account deficits - and to run looser monetary policy for longer.

What's more, a resulting Fed easing bias spreads to developed and emerging economies as governments resist a weaker dollar for competitiveness or financial stability reasons, Borio added.

"Easing begets easing," he said.

For Morgan Stanley, this is just leads to ever-higher debt, and there are no painless ways out of a problem that will start to hurt significantly over the coming years - only a series of "less painful" options including the option of consolidating debts and making them permanent or perpetual.

In the meantime, the U.S. bank said, the dollar itself will most likely push higher again, if only because the U.S. economy is probably the only one that can absorb a rising exchange rate in this environment.

For Borio, a more 'pluralistic' system with many world currencies sharing the reserve role doesn't by itself solve any problem, either. There would then be no credible single anchor.

Hard-headed cooperation and joint decision making may be the only answer.

"This means not just putting one's house in order, but also putting our global village in order."

Article Link to Reuters:

Oil Dips On Record U.S. Inventories; Canada Output To Improve Soon

By Henning Gloystein
May 11, 2016

Oil prices dipped on Wednesday as Canadian oil sands production was expected to gradually ramp up following forced closures due to wildfires, and as record crude inventories especially in the United States put pressure on markets.

An ongoing fight by Middle East producers for market share in Asia also weighed on prices, countering production declines and disruptions around the world.

International Brent crude oil futures LCOc1 were trading at $45.44 per barrel at 0702 GMT, down 8 cents from their last settlement, while U.S. West Texas Intermediate (WTI) crude futures were down 16 cents at $44.51 a barrel.

ANZ bank said that recent "gains in prices were capped as concerns over further disruptions in Canada eased as producers looked to return to their operations."

Oil sands companies around the Canadian energy hub of Fort McMurray began to restart operations on Tuesday after an out-of-control wildfire forced a week-long shutdown.

Provincial and industry officials said production in much of the region should ramp up soon. Facilities north of Fort McMurray that had been shuttered largely because of heavy smoke rather than fire were seen as likely to come back online in a matter of days in many cases.

The fires in Canada's oil sands field region have knocked out around 1.5 million barrels of daily crude production, leading to a significant tightening of global markets, supported by more production declines and disruptions in the United States, Latin America, Asia, and Africa.

With Canadian oil sands production gradually coming back and U.S. crude inventories hitting record highs, some analysts say that a price rally away from decade-low prices hit early this year may fizzle out.

Industry group American Petroleum Institute (API) said on Tuesday that U.S. crude inventories rose by 3.45 million barrels to a 543.1 million barrels during the week ended May 6.

That's enough to meet global crude demand for almost a week.

"A similar report today by the DOE (U.S. Department of Energy) will break the all-time high of 545.2 million barrels from October 1929," the U.S.-based Schork Report said in a note to clients on Wednesday.

In a sign of an ongoing aggressive fight for market share, Iran has set its June official selling prices (OSPs) for heavier crude grades it sells to Asia at the biggest discounts to Saudi and Iraqi oil since 2007-2008.

Iran on Tuesday set the June OSP for Iranian Heavy crude at $1.60 a barrel below the Oman/Dubai average in the latest sign that producers especially in the Middle East are willing to accept low prices in return for market share.

Clinton Loses To Sanders In Coal State Of West Virginia

By Amanda Becker and Jonathan Allen
May 11, 2016

U.S. Democratic presidential candidate Bernie Sanders defeated Hillary Clinton on Tuesday in West Virginia's primary, winning over voters deeply skeptical about the economy and signaling the difficulty Clinton may have in industrial states in the general election.

The loss slows Clinton's march to the nomination, but she is still heavily favored to become the Democratic candidate in the Nov. 8 election.

In a November match-up with Donald Trump, Clinton will need to win over working-class voters in the U.S. Rust Belt, which includes key states such as Ohio and Pennsylvania.

Trump, 69, won contests in West Virginia and Nebraska handily on Tuesday. The presumptive Republican nominee is set to meet with party leaders in the U.S. Congress on Thursday, including U.S. House of Representatives Speaker Paul Ryan.

After Ryan said last week that he was not yet ready to endorse Trump, Trump said on Sunday that he would have to decide whether he still wanted Ryan to preside over the party's July convention.

Trump said in a Fox interview on Tuesday night that he would like Ryan to chair the convention as planned. "He's a very good man, he wants what's good for the party," the New York billionaire said.

Trump has zeroed in on Clinton's protracted battle with Sanders, a 74-year-old U.S. senator from Vermont. He has taunted Clinton in recent days by saying she "can't close the deal" by beating Sanders, her only rival for the Democratic Party's nomination since Feb. 1.

Clinton, 68, has said she will ignore Trump's personal insults, including his repeated use of his new nickname for her, "Crooked Hillary," and instead will criticize his policy pronouncements.

Top Concerns: Economy and Jobs

Deep concerns about the economy underscored West Virginia's Democratic primary. Roughly six in 10 voters said they were very worried about the direction of the U.S. economy in the next few years. The same proportion cited the economy and jobs was their most important voting issue, according to a preliminary ABC News exit poll.

A remark Clinton made at an Ohio town hall in March that the country would "put a lot of coal miners and coal companies out of business" at an Ohio town hall in a comment may have hurt her with voters in coal-mining states such as West Virginia.

During Clinton's visit to West Virginia and Ohio last week she repeatedly apologized to displaced coal and steel workers for her comment, which she said had been taken out of context, and discussed her plan to help retrain coal workers for clean energy jobs.

To secure the Democratic nomination, a candidate needs 2,383 delegates. Going into West Virginia, Clinton, a former U.S. secretary of state, had 2,228 delegates, including 523 so-called superdelegates, elite party members who are free to support any candidate. Sanders had 1,454 delegates, including 39 superdelegates. Another 29 delegates will be apportioned based on West Virginia's results.

Clinton and Sanders will compete in another primary contest on May 17. Both candidates are also looking ahead to the June 7 contests, the last in the long nominating season, in which nearly 700 delegates are at stake, including 475 in California, where Sanders is now focusing his efforts.

Sanders has vowed to take his campaign all the way to the Democrats' July 25-28 convention in Philadelphia, and wants a say in shaping the party's platform.

Sanders has repeatedly told supporters at packed rallies that most opinion polls indicate he would beat Trump in a general election match-up by a larger margin than polls show Clinton defeating Trump.

Trump, shifting into general election mode, has already begun to consider running mates. He told Fox on Tuesday night that he has narrowed his list to five people.

He did not rule out picking New Jersey Governor Chris Christie, a former rival who ended his presidential bid in February. Christie, who endorsed Trump and then campaigned for him, on Monday was named to head Trump's White House transition team.

Article Link to Reuters:

Trump Supporters Have Crossed A Moral Boundary

By Michael Gerson
The Washington Post
May 10, 2016

WASHINGTON -- The great Republican crackup has begun.

There is a growing group of Donald Trump partisans, including former House Speaker Newt Gingrich, Rush Limbaugh and New Jersey Gov. Chris Christie. Then there are Republican officials who publicly support Trump and privately hope he will lose in November -- a group that could only be counted via lie detector, but I would test Senate Majority Leader Mitch McConnell first. And there are Trump opponents and skeptics, including the 41st president, the 43rd president, Jeb Bush, Mitt Romney, Sen. Ben Sasse of Nebraska and House Speaker Paul Ryan. Ryan, in particular, is providing air cover for the unconvinced.

What common views or traits unite the most visible Trump partisans? A group including Limbaugh and Christie is not primarily defined by ideology. Rather, the Trumpians share a disdain for "country-club" Republicans (though former House Speaker John Boehner apparently likes Trump because they were golfing buddies).They tend to be white and middle-aged. They are filled with resentment.

Above all, they detest weakness in themselves and others. The country, in their view, has grown soft and feeble. Their opponents are losers, lacking in energy. Rather than despising bullying -- as Ryan, Romney and all the Bushes do -- they elevate it. The strong must take power, defy political correctness, humiliate and defeat their opponents and reverse the nation's slide toward mediocrity.

There have always been politicians who despise weakness and the weak. Richard Nixon and Lyndon Johnson are examples. They were not always bad at governing, but they were bad human beings who came to a bad end.

This type of leadership can motivate, usually through resentment and anger. What it cannot do is inspire. Inspiring leaders are often those who identify with the weak. They may develop this trait by rising from poverty themselves, like Abraham Lincoln did. Or they may have had their capacity for empathy expanded by suffering, such as Franklin Roosevelt's struggle with polio. In American history, inspiring leadership has often been informed by religion, which (at its best) universalizes our empathy.

This is the main reason that some of us cannot simply lump it and reluctantly lend our support to Trump. The Republican Party is not engaged in a policy argument; it is debating the purpose of politics. For some Trump opponents, the justice of a political system is determined by its treatment of the vulnerable and weak. In the Catholic tradition, this is called "solidarity." Whatever you call it, this commitment is inconsistent with a type of politics that beats up on the vulnerable and weak -- say, undocumented workers, or Muslims -- for political gain.

Those who accuse Trump opponents of elitism are engaged in a particularly mendacious slur. Trump is attempting to place nativism at the center of American politics. Those who resist are not enforcing the rules of a private club. Many -- including religious people in poor and working-class communities -- are defending a vision of politics in which empathy is honored and the weak are placed first. They are opposing a candidate who mocks the disabled, demeans women, engages in ethnic stereotyping and encourages religious bigotry.

Those who regard this tawdry mix of vulgarity and cruelty as typical of any social class are engaged in a particularly offensive form of condescension. Hating losers and the weak is fundamentally inconsistent with Christian ethics, and other sources of moral judgment, in every income quintile.

Make no mistake. Those who support Trump, no matter how reluctantly, have crossed a moral boundary. They are standing with a leader who encourages prejudice and despises the weak. They are aiding the transformation of a party formed by Lincoln's blazing vision of equality into a party of white resentment. Those who find this one of the normal, everyday compromises of politics have truly lost their way.

This is not even to mention Trump's pledge to limit press freedom, or his malicious birtherism, or his dangerous vaccine skepticism, or his economic plans that would bring global recession, or his lack of relevant qualifications, or his temperament of brooding and bragging, egotism and self-pity, or his promise to emancipate the world from American leadership, or his accusation that Ted Cruz's father was somehow involved with Lee Harvey Freaking Oswald.

Some are trying their best to act as though all this were normal. But we are seeing, in the words of G.K. Chesterton, "lunacy dancing in high places." None of this requires a vote for Hillary Clinton. But it forbids a vote for Donald Trump. 

Article Link to the Washington Post:

Conservatives' Third Party Is Going Nowhere

By Francis Wilkinson
The Bloomberg View
May 11, 2016

Some conservatives are so upset by Donald Trump's triumph that they're seeking a third-party candidate from the right. William Kristol, the ubiquitous conservative operative/editor of the Weekly Standard, met privately with 2012 Republican presidential nominee Mitt Romney last week to "discuss the possibility of launching an independent bid, potentially with Romney as its standard-bearer," the Washington Post reported. Kristol had previously tried to woo retired Marine Gen. James N. Mattis, who apparently demurred.

There is something nutty about this, and not simply because third-party candidates face a difficult road in American politics. Kristol and like-minded conservatives are seeking a vehicle for a conservative candidate for only one reason: The nation's conservative party just rejected more than a dozen opportunities to nominate someone acceptable to them.

In other words, having started the primary season with more than a dozen champions, then having failed to win the competition within the conservative party, these conservatives are now eager to compete in the even less receptive arena outside the conservative party. You can't say they lack gumption.

One potential independent candidate, mentioned by Kristol and others, is Nebraska Senator Ben Sasse, who is a stalwart of the #neverTrump camp. Sasse published an open letter on his Facebook page laying out the need for an independent run.

Melissa and I got the kids launched on homework, so I’ve been sitting out by the river, reflecting on the great gap between what folks in my town are talking about, and what folks in the DC bubble are talking about.

Sasse treats us to the wisdom of his local townfolk, who are tired of all the goings-on in Washington, don't cotton to Trump or his likely Democratic opponent, Hillary Clinton, and are, as the caricature demands, bursting with small-town virtue and plain common sense.

Perhaps when you have a Ph.D in philosophy from Yale, and represent a rural state, as Sasse does, these are the conventions you resort to. But much of Sasse's Facebook post reads like a road map of conservative self-delusion.

"With Clinton and Trump," he wrote, "the fix is in. Heads, they win; tails, you lose. Why are we confined to these two terrible options? This is America. If both choices stink, we reject them and go bigger. That’s what we do."

Republican voters in every region of the country, over the course of many months, chose Trump over 16 conservative opponents. That is the fix. In effect, options have been acted upon. Choices have been made. Sasse just happens to be about a year late to the decision desk.

Sasse proceeded to outline four "big national problems" that a common-sense independent candidate should focus on:

♦ National security "for the age of cyber and jihad;"

♦ "Honest budgeting/entitlement reform so that we stop stealing from future generations;"

♦ "Empowering states and local governments to improve K-12 education" while Washington updates lifetime learning programs;

♦ "Retiring career politicians by ending all the incumbency protections, special rules, and revolving door opportunities for folks who should be public 'servants,' not masters."

"This really shouldn’t be that hard," Sasse concluded.

Debate over what to do about each problem he cited divides his own party, let alone the nation at large. Remarkably, Sasse failed to include the conservatives' great unifying theme, Obamacare, on his list. When he launched his Senate campaign in 2013, he certainly recognized its dramatic appeal. “If it lives," Sasse said of the Affordable Care Act, "America as we know it will die.”

Good grief.

This, of course, is precisely the sort of overwrought, Palinesque gibberish that has brought conservatism into disrepute.

Consensus on Sasse's four issues isn't impossible. For example, according to Gallup data, to protect Social Security, voters consistently prefer raising taxes to cutting benefits. Congressional Republicans, however, want the opposite. Are Sasse and his GOP colleagues ready to join the American consensus? (It's not that hard.)

Sasse and Kristol have every reason and right to turn their backs on Trump. But the notion that the nation needs a political party pure enough for their conservatism seems to get the problem exactly wrong. We already have such a party. If their brand of conservatism failed there, it failed, period.

Article Link to the Bloomberg View:

How to Tell Facts About the Debt From Political Hype

By Mohamed A. El-Erian
The Bloomberg View
May 11, 2016

Recent remarks by Donald Trump, the presumptive Republican presidential nominee, have turned the spotlight back to the U.S.'s $18 trillion federal government debt. The attention follows a period of substantial decline in the budget deficit that countered claims the country was heading rapidly toward debt Armageddon.

Here are key facts to remember as you assess what is likely to be a loud and contentious political conversation on debt:

There are five major ways to reduce the burden of debt

1. By growing faster, thus generating incremental resources for debt servicing while maintaining and enhancing living standards; by raising more tax revenue and earmarking it for debt repayment; by cutting government spending and diverting the funds to higher debt servicing, including prepayments; by defaulting on contractual debt terms; and through financial engineering that captures interest-rate arbitrage opportunities, buys back debt cheaply, improves the mix of issued securities and delivers greater financial efficiency.

2. There are practical limitations to the ability of these approaches to deliver big results in the short run. As a result, there is no realistic, orderly manner to eliminate the stock of national debt within just a few years. Default is extremely costly, disrupting both public and private capital flows while sharply increasing borrowing costs. There is a limit to what financial engineering -- a strategy that is gradual and opportunistic -- can achieve. Significant fiscal adjustment, be it via sharply higher tax rates for almost everyone or draconian expenditure cuts, risks devastating growth and rendering the overall debt burden even harder to sustain. And it is not easy to generate an immediate growth spurt, especially when the world economy is fighting structural headwinds.

3. Given the other ailments of the post-recession economy, it isn't easy to argue that a sharp reduction in the national debt should be an immediate, standalone priority, and it does not belong among the three top urgent economic goals for the next administration. Although the longer-term trajectory of debt should be kept under close scrutiny and contained, there is no evidence that the U.S.'s existing stock of federal debt is a major problem. Borrowing costs are extremely low. The U.S. has access to abundant financing. And unlike many developing countries, it has historically issued almost no debt that is denominated in a foreign currency.

4. The focus on debt should not divert attention from the need for greater infrastructure spending, both through public projects and public-private partnerships. The potential gains far exceed the incremental cost of debt servicing, especially with such low interest rates. Infrastructure shortfalls are already holding back productivity, cutting into actual and potential growth and, in some cases, causing social difficulties.

5. The best way to deal with the country’s debt is by unleashing the higher and more inclusive growth that the U.S. is capable of, and by bolstering its future potential. This involves addressing structural impediments to growth, not just by plugging infrastructure gaps but also through pro-growth tax reform and better labor market retooling. It also requires countering the excessive worsening of inequality, which aggravates the problem of deficient aggregate demand by channeling the incremental income to the rich who have a lower marginal propensity to consume. In addition, steps should be taken expand the options for alleviating the crushing burden of student debt and to lead a more effective global policy coordination effort.

Rather than a narrow focus on federal debt, the presidential candidates need to lead a national economic debate on the comprehensive growth strategy that Congress should be implementing. Otherwise, political polarization on Capitol Hill will further undermine the country’s growth performance, erode future potential, and turn debt from mere fodder for political sound bites to a hard-to-solve problem for future generations.

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Why Trump Will Gamble on Assad

The tough-guy Republican candidate admires tough-guy leaders. And all those people the Syrian dictator’s slaughtered? Don’t be PC.

By James B.T. Dickey
The Daily Beast
May 11, 2016

Donald Trump doesn’t talk a lot about Syria, except to say it’s screwed up. He likes to keep things simple, after all, and his great talent lies in confirming prejudices, not confusing them. But as the Trumpian shadow looms over the November elections, the Syrian question ain’t going away, and if we see a re-christened “Trump White House” in January, some real decisions are going to have to be made.

The memo below was originally written as a kind of joke, a Swiftian “modest proposal,” but its logic does fit in with the politics of a man who admires leaders with tough-guy credentials like Russian President Vladimir Putin. And how does Putin play the Syrian game?

So, let’s imagine:

Date: 2 February 2017

To: Donald Trump, POTUS

From: Omarosa Manigault, National Security Advisor

Subject: Syria, All In.

The Players and Stakes: The Syrian Civil War has global implications. What began in 2011 as a local protest against the Assad regime’s casual brutality has grown into an existential threat to America’s post-Cold War dominance. The conflict is in its fifth year, has killed upwards of 200,000 people and displaced millions more. Multiple factions—sectarian, secular, and mercenary—vie for control of the populace, and, where control is impossible, settle for extermination.

Fleeing the terror, refugees have sought shelter in Turkey, Lebanon and Jordan, or moved on to Europe where their unwelcome presence is contributing to tensions among EU member states. Iran, Saudi Arabia, and Turkey each back their proxies in a bid to mold Syria in their image.

Meanwhile, Russia has chosen to emerge from its post-Soviet doldrums by flexing its military muscle in support of a longtime client, the Assad regime.

In the midst of this chaos, the Obama administration decided to follow a carefully measured strategy of muddling through which, while utterly failing to end the conflict, also managed to fritter away America’s political capital like an old lady playing nickel slots.

While the U.S. could choose to walk away, doing so would leave America’s reputation on the table, with nothing to show but blood, tears and IOU’s.

Instead, the U.S. should change the game, place a bet, and play to win. Picking a side is guaranteed to lose us some “friends,” but America’s interests would be best served by a definitive end to the conflict soon, rather than the endless hemorrhaging which is the primary attribute of an “equitable” solution later. All moves are calculated risks, so let’s look at them in the language of a casino, which the American people know you’ve mastered:

Salafi Blackjack: Backing the rebels with military and economic aid, while actively targeting the Assad regime would keep America aligned with traditional allies, the Gulf monarchies and Turkey, and has the greatest continuity with the existing policy of building a viable alternative to the Assad Regime.

However, this option will require the largest post-conflict investment to ensure there is not another outbreak of hostilities. The “deck” is made up of disparate rebel factions, many of dubious value, and others, such as the Nusra Front and the Islamic State (ISIS), are self-declared enemies of America. Due to the chaotic environment and the shifting loyalties of the rebels, there is no guarantee that aid to one faction will not find its way into the hands of our enemies, as has happened repeatedly to date.

Further, at this point our hand has been split so many times that even should we pick a “winner” from among the factions, the “losers” are likely to make building a sustainable peace expensive at best, impossible at worst. This option also carries the risk of a direct confrontation with Russia.

Lastly, backing the Sunni proxies of Saudi Arabia and Turkey would likely require the U.S. to abandon the Syrian Kurds as a precondition for Turkey’s cooperation. This would be unfortunate because, to date, the Kurds have proven themselves the most capable opposition to the Islamic State in the region.

Alawite Hold’em:
Siding with the regime is the fastest way to end the conflict and thereby bring an end to both the mass killings and to stem the flow of refugees into Europe. However, it also would be guaranteed to completely alienate the Gulf States and Turkey.

As of mid-2016 military momentum had swung in favor of the regime, largely due to the direct intervention of Russian military forces. While the Assad Alawite minority regime is no friend to the United States, it is also an enemy of the Sunni extremists, such as ISIS. Should the United Sates side with the regime, many of the non-Sunni minorities, such as the Kurds and the Christians, would likely rally around the government due to their distrust of the Salafists.

The degree to which they would do so would be contingent on a guarantee by the U.S. to prevent reprisals and encourage sectarian autonomy in a reformed Syria. A victory by the regime also has the advantage of not requiring a large foreign occupation to assist with stability and governance.

The regime already has the mechanisms of governance, however imperfect, under its control, and so there would not be the same level of chaos following the war as there was in Iraq.

The primary risk with this scenario is to America’s reputation as an enduring partner of the Gulf monarchies and Turkey. In the most extreme case, Turkey might even withdraw from NATO.

However, based upon Turkey’s recent turn towards authoritarianism under President Recep Tayyip Erdogan, NATO might be better for the loss. (A crisis might also encourage the remaining members to pay their membership fees.)

Many critics will also claim that this policy would strengthen Iranian and Russian power in the region. However, while both these nations would like to see the Assad regime remain in power, the increased U.S. influence over Syria would not be viewed with favor by either Putin or the Ayatollahs. In the long run, the U.S. has more to offer Syria than they do.

The last major downside of this policy would be the ethical dilemma of backing a regime which has killed hundreds of thousands of its own citizens. This risk can be mitigated in two ways, first by making America’s support contingent on the (eventual) removal of President Assad, and second by a concerted information campaign highlighting the atrocities of the Salafist rebels.

Walk Away: The only way to guarantee that the United States does not waste any more lives or resources in Syria is to walk away. However, to walk away from Syria would be tantamount to walking away from the Middle East. While many Americans would be happy with such an outcome, the chaos unleashed would be worse, even, than we saw under Presidents George W. Bush and Obama.

What little stability exists in the Middle East is to a large degree contingent upon U.S. security guarantees. While the U.S. does not have a historical relationship towards Syria in the way that is does towards Israel or Saudi Arabia, America’s “abandonment” of the region would likely result in both increased competition between regional states, and the possibility of severe internal state conflict as well. For example, there is some question whether the Al Sauds would be able to maintain their grip on Saudi Arabia in an environment of low oil prices without the U.S. security umbrella. While the Al Sauds are hardly the ideal regional partner, they are unquestionably better than the alternative of an Arabian Peninsula ruled by Salafist extremists.

Recommendation: For the past five years, the United States has been playing a bad hand. It is time to end the conflict fast, and the best way to do that, while also reinforcing the perception of America as the dominant Middle East power, is to back the existing government of Syria. The worst downsides of such an outcome would be diplomatic, but while Turkey and Saudi Arabia might resent such an outcome, the Syrian people and the rest of the world would appreciate an end to the war.

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