Wednesday, September 21, 2016

It’s Still Clinton’s Race To Lose

Only 38% of likely voters think Donald Trump is ‘qualified’ for the presidency.

By William A. Galston
The Wall Street Journal
September 21, 2016

Despite a distressingly low signal-to-noise ratio in this year’s presidential contest, Americans have taken the measure of both candidates. Now, thanks to a fine-grain poll by Quinnipiac University, we can see what they think.

Only 32% of likely voters believe that Mrs. Clinton is honest, compared with a larger but still dismal 40% for Mr. Trump. Fifty percent think he is “honest enough” to be president, while only 43% think she is. Just 37% say she is more transparent than Mr. Trump; 54% say the opposite.

Asked to explain why they do not regard Mrs. Clinton as honest enough to be president, roughly equal shares of the naysayers cite her private email server, the Benghazi attack, and their impression of her as evasive and calculating. (Only 39% believe that she bases her policies on a set of core values.) And 34% of the electorate, including 38% of independents, say that her use of a private email server changed their opinion of her honesty.

Clearly Mrs. Clinton’s burning desire to preserve what she once called a “zone of privacy” has cost her dearly, and not just because it has made her appear less than honest and transparent. Asked whether she believes that she has to play by the same rules as everyone else, only 42% of the electorate responds affirmatively; 56% think she does not believe that the rules apply to her. It is unlikely that she will be able to reverse these impressions by Election Day.

If the news is bad for Mrs. Clinton, it is much worse for Mr. Trump. Seventy-five percent of likely voters think he should publicly release his tax returns, and 59% do not believe that his stated reason for not doing so—the continuing IRS tax audit—is the real reason. A healthy majority, 61%, believe that “the way Donald Trump talks appeals to bigotry.” This judgment extends well beyond minority voters to include 61% of whites with college degrees and 56% of whites overall.

Nor does Mr. Trump lead Mrs. Clinton in those personal characteristics where he might be expected to hold the edge. The candidates are statistically tied on possessing “good leadership skills”—55% for Mrs. Clinton, 54% for Mr. Trump—while an identical 76% regard each as being a “strong person.”

Among the other attributes most directly linked to the presidency, Mrs. Clinton leads decisively. Among likely voters, 68% say that she has the right kind of experience to serve as president, compared with only half as many—34%—for Mr. Trump. Sixty-three percent say that she is “level headed,” compared with only 27% for Mr. Trump. Despite his fervent appeals to working-class voters, only a 44% minority thinks that he cares about average Americans, compared with a 53% majority for his rival.

The survey asked respondents for their summary judgments, and the results were decisive. A full 62% of likely voters think Hillary Clinton is qualified to serve as president, including not only 77% of minority voters but also 57% of whites and 65% of whites with college degrees.

In contrast, only 38% think Donald Trump is qualified to be president, including just 33% of women, 41% of white women, and 46% of whites with college degrees. Among whites without college degrees, only 51% think he is qualified, not statistically different from the 49% who think Mrs. Clinton is.

When voters who think Mr. Trump is unqualified are asked the main reason why, only 10% cite his offensive comments, and 12% the fact that he has never held elected office. Most focus on deeper flaws—that he has the wrong temperament (35%) or lacks knowledge (30%).

If Mr. Trump is to receive a majority or even a plurality in the general election, millions of Americans who have concluded that he is not qualified to be president and that Mrs. Clinton is qualified will have to cast their ballots for him anyway.

Under normal circumstances, such an outcome would be inconceivable. But this year has been anything but normal, and a return to normality during the next seven weeks seems unlikely.

Mr. Trump has recently tried to win over black voters by asking them, “What do you have to lose?” Quite a bit, it turns out—his support among African-Americans still hovers just above zero.

But many white Americans have a different view, some of it reflecting cultural and demographic changes they find alarming, much of it rooted in their gloomy economic outlook. “I love Trump,” a Kentucky FedEx driver recently told the New York Times. “He shoots from the hip.” Asked whether that might be dangerous, she replied “I don’t care. After all we’ve been through, I just don’t care.”

There is only one way Hillary Clinton can lose this election—if enough Americans believe their circumstances are so dire that they are prepared to gamble on a man who poses risks to the country’s future that prior generations would have found unacceptable.

Article Link To The Wall Street Journal:

Pleasant Surprises In President Obama’s UN Speech

By Post Editorial Board
The New York Post
September 21, 2016

President Obama surprised us with his farewell speech Tuesday at the United Nations, with some passages we could almost pass off as Post editorials.

He preached the benefits of the free market and liberal democracy: “The principles of open markets and accountable governance, of democracy and human rights and international law...remain the firmest foundation for human progress in this century.”

The president touted “political order” built through elections and representative government, respect for human rights and the rule of law. And he even held up America as a model for such government, “a force for good” that thinks “beyond narrow self-interest.”

“We have worked to roll back poverty and hunger and disease beyond our borders,” he noted — and we admit our mistakes.

Yes, he was still Barack Obama. As we’d predicted, he patted himself on the back for “accomplishments” from the Iran deal to returning “the global economy to growth.” He made his usual plugs for fighting climate change and inequality, and added veiled barbs at Donald Trump. And he couldn’t resist again equating Israel’s “faults” with those of the Palestinians.

But he also broke new ground by waxing downright passionate about the need to reject religious “fundamentalism” and sectarian conflict — chiding “many parts of the Middle East” on this score. While diplomatically not mentioning Saudi Arabia outright, he even blasted leaders for “narrowing the public space to the mosque, where...perversions of a great faith” are tolerated.

Maybe Obama feels free to speak more honestly now that he’s on his way out. Too bad it took so long.

Article Link To The New York Post:

Why Europe Secretly Roots For Donald Trump

They won’t admit it in public, but some European politicians wouldn’t be too upset if The Donald wins.

Politico EU
September 21, 2016

Careful observers of European politics might be forgiven for asking if — behind the exclamation of shock and horror over the prospect of a Donald Trump presidency — they don’t detect the occasional wry smile or hint of giddiness when the conversation turns to the U.S. Republican presidential candidate.

To be sure, hardly a day goes by without some senior European official voicing grave concerns over the possibility that Trump might win the elections. European Parliament President Martin Schulz warned recently that Trump “would be a problem not just for the EU but for the whole world.”

French President François Hollande, who faces his own challenges with right-wing populism, recently said Trump “makes you want to retch.” German Foreign Minister Frank-Walter Steinmeier, abandoning his usual rhetorical temperance last month,called Trump a “hate preacher.”

And yet, in some quarters at least, the Trump cloud carries with it at least a sliver of silver lining. No European politician will say so publicly, but to some on the Continent, Trump presents a once-in-a-generation opportunity for emancipation from American influence.

To varying degrees, America-bashing has been a mainstay on both the Right and Left of European politics for decades. From GMOs to Guantanamo, from the drone war to the death penalty, European politicians have rarely had difficulty finding reasons to rail against the U.S.

In fact, the evils of U.S. influence is one of the few things that European politicians from nearly every slice of the political spectrum can agree upon. In Germany, for example, one is just as likely to see an “Ami Go Home” (Ami is German slang for American) poster at a rally for the Left party as at a gathering of the far-right Alternative for Germany.

Just as the EU served as a convenient whipping post for British politicians of all stripes in recent decades, culminating in the Brexit vote, the U.S. serves a similar purpose for many European politicians. Even those who profess a deep commitment to the transatlantic relationship often can’t resist using the U.S. as a rhetorical foil to deflect attention from their own vulnerabilities.

"As long as moderate politicians occupy the White House, anti-American politicians will find it difficult to turn their rhetoric into reality. A Trump presidency would force a rethink."

Just last week, Jean-Claude Juncker, hailing the Commission’s crackdown on Apple’s Irish tax penalty in his State of the Union speech, declared: “Europe is not the Wild West.” Anyone listening knew that “Wild West” means America. “We are not the United States of Europe,” Juncker added, to applause from the assembled MEPs. “We are much more diverse in Europe and stronger.”

Most Europeans at the center of Europe’s political spectrum genuinely fear the consequences of a Trump victory and a weakening of the Transatlantic relationship. But others smell an opportunity too good to be allowed to pass.

As long as moderate politicians like President Barack Obama or U.S. Democratic candidate Hillary Clinton occupy the White House, anti-American politicians will find it difficult to turn their rhetoric into reality. A Trump presidency would force a rethink.

Here are five reasons some European politicians are secretly rooting for Trump:

The end of free trade: From the outset, European trade negotiators warned that anti-Americanism posed the biggest threat to a sweeping transatlantic trade deal. The Transatlantic Trade and Investment Partnership (TTIP), the free-trade pact being negotiated by the U.S. and Europe, has been on life support for months. A Trump victory wouldn’t just douse any remaining hope for success, it would put a stake through the heart of the negotiations.

Opponents of the deal see it as the Trojan Horse of trade, designed to give U.S. companies even more influence in Europe. Trump has argued the opposite, that free-trade deals hurt American workers. The bottom line: a Trump victory would put a free-trade pact between the U.S. and Europe of any kind firmly off the table.

The birth of an EU army:
The U.S. has guaranteed Europe’s security for decades through NATO, effectively placing a giant security umbrella over most of the Continent. That reliance doesn’t sit well with everyone.

Though Europe doesn’t have anywhere near the military resources of the U.S. (American military spending accounts for about 75 percent of the NATO total), politicians in France and Germany are eager to get to work on a European defense force. The idea isn’t new and faces myriad hurdles, mainly the question of how to finance it on Europe’s shoestring budget.

Nevertheless, a Trump victory would give the initiative a major boost. As with the trade deal, Trump would likely be happy to let the Europeans fend for themselves. He has made no secret of his distaste for Europe’s reliance on the U.S. military. Conversely, few Europeans would welcome Trump as commander-in-chief. If he wins, proponents of a European army would finally have the compelling argument they’ve been looking for.

Breaking up big brother surveillance:
Europe’s most emotional gripe about American influence in recent years has revolved around mass surveillance. Edward Snowden’s revelations have convinced Europe that nobody — be it Angela Merkel or the man on the street — is safe from the NSA’s digital dragnet.

Though the reality is somewhat less dramatic, that narrative has carried the day and many Europeans are convinced the U.S. is listening to their phone calls. Snowden, a man Trump argues should be executed, has become a modern-day Che Guevara for Europe’s youth. For all the transatlantic tensions around mass surveillance, Europe still cooperates with the U.S., mainly to get access to intelligence on Islamic terrorists. A Trump victory would be welcome news to those opposed to such cooperation.

Cracking down on Wall Street:
The influence of Wall Street banks in Europe has long been a bee in the bonnet of Europe’s anti-American elites and populists alike. No conspiracy theory about the eurozone debt crisis, for example, is complete without dark hints about suspected machinations in New York’s financial district.

The recent brouhaha about former Commission president José Manuel Barroso joining Goldman Sachs illustrates the depth of the distrust. “Goldman Sachs was one of the organizations that contributed to the financial crisis in 2007-2009, so we wonder about this particular bank,” Juncker last week, explaining why he called for an investigation into Barroso’s move. Never mind that the EU has no specific ban on officials working for Goldman or that plenty of European banks, such as Deutsche Bank, also had a hand in the turmoil.

Justified or not, the bottom line is that Wall Street is considered a toxic force in Europe. Politicians on the Left have had Wall Street banks in their sights for some time. A Trump win would present a good opportunity for a crackdown.

The most powerful force driving Europe’s secret hopes for a Trump victory is simple schadenfreude. Most Europeans never bought the U.S.’s “city on a hill” claims of exceptionalism. And yet for decades, they’ve been subjected to American claims of moral superiority.

Not only did the U.S. liberate Europe from fascism, it also freed the Continent from the clutches of communism, goes a common refrain. To more than a few Europeans, President Trump would prove that the U.S. is really no different than the Continent: just as dysfunctional, just as vulnerable to its basest instincts and just as susceptible to the false promises of a demagogue.

Article Link To Politico EU:

Ukrainians Fear President Trump Will End Their Freedom

The ominous shadow of Putin-praising Donald Trump looms large over the country Putin is trying hard to tear apart.

The Daily Beast
September 21, 2016

Perhaps you remember Ukraine. Perhaps you remember this war. But if you’re in the United States in the blur of the American presidential campaign, it must seem faint and far away.

For the people here, however, what they read and see coming out of Republican candidate Donald Trump sounds very loud, and clear, and tantamount to a death sentence for their country.

Adding despair to pessimism, they realize their own leaders aren’t really prepared if Trump wins.

It seems to them almost inconceivable that an American president would praise and be praised by Russia’s Vladimir Putin, who illegally annexed Ukraine’s strategic Crimea Peninsula in 2014 then started a shadow war waged by proxy forces and unidentified Russian soldiers to carve off eastern Ukraine (Donbas) like a butcher cutting a roast.

Of course, the factions that have set up “republics” in the east think Trump is great, just as many Russians in the Motherland do after a steady diet of Moscow-generated praise for The Donald.

But that’s certainly no consolation here in Ukraine’s capital.

At the recent Yalta European Strategy (YES) conference, held here in the capital instead of the resort town of Yalta, which is in Russian-annexed Crimea, a group of young Ukrainian professionals were discussing the way the world sees them, and might help them, or not.

Statements by European politicians who came to the forum struck many as “banal” and “indifferent” given the existential crisis that looms before them.

Olena Vynogradova, a 27-year-old lawyer supporting Ukrainians displaced by the war in Donbas, joined the forum to hear more about concrete, strategic plans for her country from Western experts. But those were not forthcoming, and the shadow of Trump loomed large without being addressed directly.

“If Trump wins, there will be no Ukraine,” Vynogradova told me. “Listening to Trump talking about the Crimea annexation [which he says he accepts] and Putin’s presidency [which Trump says shows superior leadership]. It made me realize that Trump would not be our friend and that our politicians do not really have a strategy for our life with Trump.”

Communications manager Alexandra Azarkhina, 25, also worried about her country’s future. She looked back on the tumult and hopes of the revolution centered in Kiev’s Maidan Square in late 2013 and early 2014. It overthrew a Putin crony in hopes of closer ties with a more liberal, wealthier, stronger, less intimidating European Union which, only two and a half years ago, seemed united behind the push for democracy and freedom.

“When we were on the Maidan Square, we fought for a war against corruption; we were full of idealism about the West. And now? I look at Brexit, at the U.S. elections, and my head goes round,” Azarkhina said. “It is scary,”

The founder and sponsor of the YES event, Ukrainian billionaire Victor Pinchuk, also sounded concerned. He said he wanted to shake things up by reminding the Western community that the war in Donbas is not just Ukraine’s problem.

“Some people in the West want to … delete Ukraine from the short list of global crises,” Pinchuk complained to the audience on the first day of the forum. “That is wrong. Ukraine is not a local but a global conflict.”

There are, however, so many of those competing for attention.

Alexander Kwasniewski, the former president of Poland, told me that the biggest challenge the EU countries are facing today is the immigration crisis. Even though Poland is on Ukraine’s western border, and war still rages in Ukraine’s east, Kwasniewski suggested the failed diplomatic peace formulas of the past could yet be the solutions for the future.

“Only by fulfilling the main principals of the Minsk agreement in the Normandy format,” could stability be assured, Kwasniewski insisted, as if the fighters on the ground knew, remembered, or cared what that meant.

Ukrainian politicians anxious for strong statements of support were, to say the least, disappointed.

MP Mustafa Nayem wrote in a post on Facebook that he was disappointed by French Foreign Minister Jean-Marc Ayrault’s de facto acceptance of Russian terms, including changes in Ukraine’s constitution, amnesty for the separatists, and special status for the breakaway republics. “It’s as if witnesses to a rape suggest to the victim to stop fighting and listen to the rapist’s demands,” said Nayem.

How could the West help Ukraine survive these crises?

Local authorities believe one way is to help Kiev reform Ukraine’s corrupt and unprofessional institutions, including the military.

“By mid October we’ll receive advisors coming from at least seven NATO countries to advise us on cyber security, and to strengthen democratic civilian control of our military,” Ukrainian presidential advisor Archil Tsintsadze told me. “I would suggest Russia not interfere in another country’s business.”

Tsintsadze is originally from the nation of Georgia, and remembers all too well what happened there. Despite a great deal of Pentagon support, Georgia’s security was still badly compromised in its war with Russia in the spring and summer of 2008. Russian tanks crossed into the country and rolled all the way to the outskirts of the capital Tbilisi—and that was when a supposedly hard-line George W. Bush was in the White House.

What if Trump is president of the United States and Putin decides to show what Trump calls admirable leadership by seizing all the territories he wants in the near abroad of Russia?

Nobody here has any confidence Trump would stand in Putin’s way.

Tsintsadze didn’t want to go deeper into the subject: “I envy Trump,” he said suddenly and out of context. “He is rich and he has a young wife; but my wife is much more beautiful.”

And this just in: Foreign Policy reports that Trump was invited to meet with Ukrainian President Petro Poroshenko on the sidelines of the United Nations General Assembly in New York this week. Trump’s campaign didn’t even bother to send Kiev an RSVP.

Article Link To The Daily Beast:

Preparing For North Korea's Inevitable Collapse

By Eli Lake
The Bloomberg View
September 21, 2016

Let's be honest. The world would be a better place if a revolutionary tribunal in the near future sent North Korea's Kim Jong-un and his henchmen to the gallows. Kim's subjects are so malnourished that North Koreans are notably shorter than their South Korean cousins. The state's gulags are so large, you can see them from space. Survivors of those camps have testified that fellow prisoners withered away from starvation.

The U.N. high commissioner for human rights has acknowledged the horror. A 2014 report from that office says that inside of North Korea "crimes against humanity" have been committed as a result of the state's policy. These include "extermination, murder, enslavement, torture, imprisonment, rape, forced abortions and other sexual violence, persecution on political, religious, racial and gender grounds, the forcible transfer of populations, the enforced disappearance of persons and the inhumane act of knowingly causing prolonged starvation."

Crimes against humanity generally cost a regime its legitimacy, if not its sovereignty. And yet most national security professionals would regard the collapse of the North Korean slave state as a calamity. The reason for this is simple: all the nuclear weapons and material. A 2015 study from the U.S.-Korea Institute at Johns Hopkins University's School of Advanced International Studies estimated North Korea possessed 10 to 16 nuclear weapons, and will possess 20 to 100 such weapons by 2020. This says nothing of the highly enriched nuclear fuel the state has produced or the mobile rockets and longer-range missiles to launch the warheads.

Trying to secure all this after a chaotic collapse or overthrow of the Kim regime would be a nightmare. General Raymond Thomas, who heads U.S. Special Operations Command, called a regime collapse in North Korea a "worst case scenario," at a conference hosted last week by the Institute for the Study of War. "In the event of the implosion of the region, we'd have the loose nuke dilemma on an industrial scale," the general said, describing it as a "vertical track meet between the Chinese and the South Koreans in terms of securing the nukes."

In this sense, North Korea's nukes are the Kim family's insurance policy. Since the Clinton administration, the U.S. and the international community have been willing to extend the life of the regime in exchange for (ultimately broken) promises about its reactors and enrichment facilities. And while the U.S. has also placed sanctions on North Korea at times, in the end the goal of U.S. policy has been regime preservation.

Secretary of State John Kerry summed up this approach earlier this month. "We have made overture after overture to the dictator of North Korea," he said, after the regime's fifth nuclear test. "We have made it very clear to him that we’re prepared to talk about peace, about peace on the peninsula, about food assistance, about normal relationship with the world, about a nonaggression pact -- I mean a host of different ingredients -- if he will simply acknowledge he is prepared to come to the table and talk about denuclearization and his responsibilities to the world -- not to us, to the whole world."

The problem with this approach is that it's a sucker's bet. If Kim "will simply acknowledge" he's ready to talk, the international community will lavish him with material support and unearned recognition.

A far better use of American diplomacy is to quietly push China and South Korea to begin planning with the U.S. for the day the North Korean regime falls. It's a long shot. General Thomas acknowledged last week that there are no channels between the U.S. and China on special operations. And the U.S. has good reasons to mistrust China, an aggressive cyber adversary that is unilaterally claiming territory through militarized artificial islands. What's more, China and North Korea share an ideological attachment as two of the five remaining communist states on the planet.

That said, North Korea is a time bomb for China as well as for the U.S. Beijing is worried about refugees coming over its border, and loose nukes would be as much a danger to China as to America's East Asian allies. This year Beijing supported U.N. sanctions against North Korea at the U.N. Security Council.

None of this is to say the U.S. or North Korea's neighbors can or should topple the Kim regime. Popular uprisings are impossible to predict, and the hard work of persuading people to stop obeying their oppressors is best left to outside groups and not governments.

But North Korea's rickety tyranny won't last forever. Even the most imposing dictatorships prove in the end to be hollow. Today, many North Koreans are gaining access to the outside world, including through smuggled USB sticks with South Korean soap operas and other illegal bits of outside culture.

The liberation of these people should not have to open a nuclear Pandora's box. Today the U.S. helps to prop up an open-air prison to protect the world from an apocalyptic arsenal built by its wardens. It's past time for the U.S. to begin planning for the day when it's no longer obliged to honor this foul bargain.

Article Link To The Bloomberg View:

The Reasons Behind The Obama Non-Recovery

It wasn’t the severity of the Great Recession that caused the weak recovery, but government policies.

By Robert J. Barro 
The Wall Street Journal
September 21, 2016

The Obama administration and some economists argue that the recovery since the Great Recession ended in 2009 has been unusually weak because of the recession’s severity and the fact that it was accompanied by a major financial crisis. Yet in a recent study of economic downturns in the U.S. and elsewhere since 1870, economist Tao Jin and I found that historically the opposite has been true. Empirically, the growth rate during a recovery relates positively to the magnitude of decline during the downturn.

In our paper, “Rare Events and Long-Run Risks,” we examined macroeconomic disasters in 42 countries, featuring 185 contractions in GDP per capita of 10% or more. These contractions are dominated by wartime devastation such as World War I (1914-18) and World War II (1939-45) and financial crises such as the Great Depression of the 1930s. Many are global events, some are for individual or a few countries.

On average, during a recovery, an economy recoups about half the GDP lost during the downturn. The recovery is typically quick, with an average duration around two years. For example, a 4% decline in per capita GDP during a contraction predicts subsequent recovery of 2%, implying 1% per year higher growth than normal during the recovery. Hence, the growth rate of U.S. per capita GDP from 2009 to 2011 should have been around 3% per year, rather than the 1.5% that materialized.

Arguing that the recovery has been weak because the downturn was severe or coincided with a major financial crisis conflicts with the evidence, which shows that a larger decline predicts a stronger recovery. Moreover, many of the biggest downturns featured financial crises. For example, the U.S. per capita GDP growth rate from 1933-40 was 6.5% per year, the highest of any peacetime interval of several years, despite the 1937 recession. This strong recovery followed the cumulative decline in the level of per capita GDP by around 29% from 1929-33 during the Great Depression.

Given the lack of recovery in GDP, a surprising aspect of the post-2009 period is the strong employment growth. The growth rate of total nonfarm payrolls averaged 1.7% a year from February 2010 to July 2016, despite the drop in the labor-force participation rate. The post-2009 period is not a jobless recovery; it is a job-filled non-recovery. Similarly, the drop in the unemployment rate—from 10% in October 2009 to 4.9% in July 2016—has been impressive, though overstated because of the decrease in labor-force participation.

What accounts for the strong recovery in the labor market combined with the non-recovery in GDP? Mainly weak growth of labor productivity. The growth rate of GDP per worker from 2010-15 was 0.5% per year, compared with 1.5% from 1949 to 2009. The recent productivity slowdown is clear since 2011 but may have started as early as 2004.

What could have promoted a faster recovery by enhancing productivity growth? Variables that encourage economic growth include strong rule of law and property rights, free trade, rolling back inefficient regulations and other constraints on market activity, public infrastructure such as highways and airports, strong institutions for education and health, fiscal discipline (including a moderate ratio of public debt to GDP), efficient taxation, and sound monetary policy as reflected in low and stable inflation.

The main U.S. policy used to counter the Great Recession was increased government transfer payments. Federal social benefits to persons as a ratio to GDP went from 8.7% in 2007 to 11.7% in 2010, then fell to 10.9% in 2015. The main increases applied to Medicaid, Medicare, Social Security (including disability) and food stamps, whereas unemployment insurance first rose then fell. Unfortunately, increased transfer payments do not promote productivity growth.

The 2007-08 financial crisis was also followed by vast monetary expansion involving increases in the balance sheets of the Federal Reserve and other central banks. The Fed’s expansion featured a dramatic rise in excess reserves, used to fund increased holdings of Treasury bonds and mortgage-backed securities. Remarkably, the strong monetary growth came without inflation.

The absence of inflation is surprising but may have occurred because weak opportunities for private investment motivated banks and other institutions to hold the Fed’s added obligations despite the negative real interest rates paid. In this scenario, the key factor is the flight to quality stimulated by the heightened perceived risk in private investment.

Given the need for productivity-enhancing policies, it is sad that recent policy suggestions from Donald Trump and Hillary Clinton have emphasized restrictions on trade and immigration and higher minimum wages. The former policies are equivalent to constraining technological progress. Expanded trade in goods and people is like better technology—both raise the total real value of goods and services that can be produced for given inputs. Mandating a higher minimum wage amounts to inefficient regulation of the labor market by pricing young and less-productive workers out of the job market.

At this point, it is hard to imagine U.S. policy makers participating in serious policy discussions aimed at promoting economic growth. But maybe I am too pessimistic—after all, the report on the U.S. fiscal situation in 2010 by the Simpson-Bowles Commission was very good. Too bad the Obama administration ignored it.

Article Link To The Wall Street Journal:

Wells Fargo’s Incentives Go Awry

Employees, not the bank, benefited from creating fake customer accounts.

By Holman W. Jenkins, Jr.
The Wall Street Journal
September 21, 2016

“To meet quotas, employees have opened unneeded accounts for customers, ordered credit cards without customers’ permission and forged client signatures on paperwork. Some employees begged family members to open ghost accounts.”

So reported the Los Angeles Times three years ago, opening a window on a snafu at Wells Fargo that, by now, has led to the dismissal of over 5,000 employees, $185 million in fines and Tuesday’s abject appearance of CEO John Stumpf before the Senate Banking Committee.

You get what you pay for. In the language of incentives Wells Fargo certainly did. It rewarded employees for signing customers to new accounts, so some employees—in pursuit of bonuses or job security—created fake accounts or signed up customers for credit cards they didn’t authorize.

The funny thing is, Wells Fargo itself gained nothing from this. In most cases, when a fee appeared on their statement for a service they never authorized, customers rejected it. Wells Fargo bore the personnel and paperwork cost of opening the account and then the personnel and paperwork cost of closing it. The employee got a paycheck, possibly a bonus. Wells Fargo got nothing but additional costs.

How different from the strategies of misdirection and exploitation of our cognitive biases that we normally see companies using to maximize revenue from customers. By making it easy to sign up and hard to cancel, cable operators generate monthly payments from customers who would otherwise cancel. Supermarkets arrange their layouts to maximize our propensity to buy and manipulate our perceptions of value. Or take the typical corporate phone tree: Is it not an instrument devilishly designed to facilitate transactions that yield revenue (i.e., sales) while frustrating those that produce costs (complaints, returns, warranty claims)?

All these things pay off or companies wouldn’t do them. Yet Wells Fargo, with its clumsily designed system for rewarding cross-selling, essentially afflicted itself with its own internal cognitive bias that employees could exploit to get paid for creating fake accounts that generated little or no revenue or profit for Wells Fargo. As the Washington Post last week explained, “In some cases, the employee would create a phony email address— was often used, according to regulators—in order to get credit for setting up an online account the customer didn’t request.”

Does this depress you? Perhaps it shouldn’t.

Even as big data gives companies more power, in the least attractive instances, to exploit their customers, learning and technology also operate on the other side. Whole businesses, with names like BillFixers and BillCutterz, now exist to help customers knock down their TV or phone bills. Videos on YouTube walk you through how to cancel a service. The web is full of advice on how to manipulate the customer service reps who are trying to manipulate you. One example: If the first rep isn’t proving tractable enough, hang up and dial again and try your luck with another.

The big difference here is that Wells Fargo was defrauding itself—via incentives it gave its own employees to treat Wells Fargo the way many companies treat their customers.

No, a solution to this latest banking scandal is not more regulation—as if making what’s already illegal more illegal will stop it from happening. (Notice, it doesn’t work with murder.) As numerous media reports make clear, the bank’s sales force consisted of workers making less than $12 an hour. Many were obviously there for a paycheck and benefits, not a career, which perhaps made cheating to meet a sales quota seem a reasonable trade-off.

All companies operate on incentives and systems that are not perfect. Comcast means for its “retention specialists” to win back irate customers, not bully them in ways that end up on YouTube. Yet it happens.

The media and politicians also operate on systems of incentives: See the pundits who, confronted with the Wells Fargo snafu and the need to fill space or airtime, run out formulaic demands for resignations and regulation that they run out with every corporate scandal. See Sen. Elizabeth Warren, in Tuesday’s hearing, in Trump-like fashion distorting the nature of the Wells Fargo scandal as if truth and logic don’t matter.

Mr. Stumpf, in his mea culpa on Capitol Hill, correctly apologized for not moving more quickly but also correctly insisted there was “no orchestrated effort or scheme” to encourage sales practices that only hurt the bank. Though two million possibly unauthorized accounts over five years sounds like a lot, remember, this is a company with 8,000-plus branches and 268,000 employees, whose customers hold hundreds of millions of accounts of various kinds.

Unfortunately the problem with any incentive system is that it can be gamed—people cheat. Wells Fargo is not the first and won’t be the last organization to struggle to patch the in-built cognitive biases in its systems that invite employees to act in ways that serve their interests but not Wells Fargo’s.

Article Link To The Wall Street Journal:

Oracle’s Larry Ellison Has A New Target: Amazon

Oracle still has long way to go in the cloud.

By Therese Poletti
September 21, 2016

Every year, Oracle Corp. co-founder Larry Ellison seems to pick a new rival to attack with sometimes lofty comparisons of Oracle’s technological prowess and superiority.

This year, at the company’s OpenWorld user conference in San Francisco, Oracle unleashed a slew of product announcements, and an attack on a new rival: The new products included an upgrade of its core relational database software. But the arena of cloud computing, Oracle’s new growth engine, was the big focus of all its announcements, and therefore so was the leading cloud infrastructure company, Amazon Web Services.

On Sunday, in his opening keynote, Ellison, now the company’s executive chairman and chief technology officer, set his sights on Amazon, saying that Oracle ORCL, -0.41% will become tough competition for Amazon in the cloud, with lower prices and faster technology. In a second keynote and demo on Tuesday afternoon, Ellison went even further, disparaging some of Amazon’s software applications offered by AWS, the closed nature of their applications and their shortfalls compared to Oracle.

“AWS is more closed than an IBM mainframe,” Ellison said. “People are saying that is ridiculous. How can that be,” he said, adding that when IBM’s mainframes were the dominant computing power, companies like Amdahl and Fujitsu developed IBM mainframe clones that you could run your workload on. Ellison also backed his hyperbole with some prices and other data. He said Oracle’s recently released Exadata Express costs customers $175 a month, compared with Amazon’s database offering, Aurora, at $245 a month, versus Oracle’s own database running on AWS at $327 a month.

Oracle has a long way to go before it can get close to Amazon AMZN, +0.66% in the cloud. A report by Forrester Research earlier this summer placed Amazon’s AWS as the leader in public cloud infrastructure, while Oracle placed sixth, behind Microsoft,, IBM and Alphabet. But anytime Ellison has a new rival to attack, it often leads to mud-slinging among billionaires, as seen in one round of jousting a few years ago at another OpenWorld between Ellison and his former protege, CEO Marc Benioff.

It may all be a bit distracting for investors, but at least Ellison is focused on the right goal. Oracle’s financials continue to reflect a slide in its core database business and far faster growth in the cloud. Oracle clearly wants to attract a new batch of corporate customers, while its older customers appear to be taking their time moving their on-premises software to the cloud. Amazon’s entrenched lead is going to make that a tough battle, no matter how much hype and energy Ellison brings to the fight.

Article Link To MarketWatch:

Brexit Prompts Some Jewish Britons To Reconcile With German Roots

By Tina Bellon
September 21, 2016

For London rabbi Julia Neuberger, Britain's vote to leave the European Union has had a very personal impact: she has decided to seek German citizenship, laying to rest her family's painful legacy of the Nazi era.

Neuberger is among a significant number of Jewish Britons whose dismay over Brexit has led them to invoke a German law allowing people stripped of German citizenship by the Nazis between 1933 and 1945, and their descendants, to have it restored.

"It was Brexit that tipped me off, but now in my mid-60s I feel like I've made my peace with Germany and this step will only take me closer," said Neuberger, whose mother left Germany for Britain in 1937 to escape Nazi persecution of the Jews.

Now, a German passport holds the promise of a future with full access to the EU and its practical benefits such as freedom to travel, live and work anywhere in a bloc that has 27 other nations - rights that Britons may no longer enjoy after Brexit is enacted.

Some of Britain's estimated 260,000 Jews remain implacably opposed to the idea, and for Neuberger too the decision to apply for German citizenship taps into deep emotional baggage due to the weight of history.

"My daughter asked 'why would you want to do this after all they did to us?'," said Neuberger, senior rabbi at the West London Synagogue and a member of the House of Lords, the upper chamber of the British parliament. "But there is some German in me after all and it goes very deep."

Neuberger, whose application is being processed, still has her maternal grandparents' old German passports. Their covers bear a black eagle with outstretched wings perched on a swastika, and the first inside pages are stamped with a red "J" for Jew.

It is a remarkable twist of history that Jews who lost family members in the Holocaust are now using such old documents to obtain modern Germany's maroon-colored passports.

Germany's Foreign Ministry said that since the Brexit referendum in June, the London embassy had received about 400 inquiries about how to apply for German citizenship under article 116 of the country's post-war Basic Law, and about 100 applications.

That compares with about 20 inquiries per year previously.

"Turn In Her Grave"

More than 17 million Britons voted on June 23 to leave the EU for a variety of reasons, including a desire to regain national control over immigration from the bloc.

However, a further 16 million voted to remain and many are anxious about the practical and symbolic consequences of leaving a union that was born out of a post-war determination to bring Europeans together.

Authorities in Dublin also reported a rush of citizenship inquiries from Britons of Irish descent after the referendum.

Like other British Jews seeking German citizenship, Neuberger intends to stay in Britain. She is one of a number of family members who have reached prominence in the nation's public life - her husband is a leading academic and her brothers-in-law include the president of the supreme court.

At a recent gathering of about 100 members of the Association of Jewish Refugees (AJR) in London, called to mark the organization's 75th anniversary, discussion was dominated by the issue of whether to make an article 116 claim.

"The idea shocked many at first," said Michael Newman, 41, chief executive of the AJR. "We all don't know what the future will hold and want to make sure that we, but also mainly our children, continue to have access to Europe."

While it may be a mostly practical step for younger people, the emotional toll is much higher for older people who have vivid memories of their own escape or grew up listening to their parents' painful memories.

"When my son told me after the vote he'd apply I was horrified and said my mother would turn in her grave," said Frank Harding, who is in his 70s. His parents fled to England in the 1930s.

He said his son's decision initially felt like a betrayal of his parents, who boycotted German products and never allowed them in their house.

But he said he now understood his son's decision and thought it important for the younger generations to keep the door to Europe open. "It certainly is also a form of reconciliation, but I still haven't decided if I will apply myself," said Harding.

The AJR estimates that around 70,000 Jews from Germany, Austria and Czechoslovakia arrived in Britain before World War Two.

Austria has a similar law to Germany's article 116 but authorities in Vienna did not respond to requests for information about applications from Britain since the Brexit vote.

Numbers of article 116 applications from Jewish Britons could increase further. Many of the people interviewed by Reuters at the AJR meeting said they were waiting for the terms of Brexit to become clear before taking a final decision. Negotiations have yet to start and when they do, they are expected to last two years.

"I'm not sure people would have done this at any point under regular circumstances," said Anthony Grenville, an author and the son of Austrian refugees. "It took Brexit to push British Jews to consider this option."

Article Link To Reuters:

Instant View: BOJ Overhauls Policy, Sets Yield Curve Target

September 21, 2016

The Bank of Japan added a long-term interest rate target to its massive asset-buying program on Wednesday, overhauling its policy framework and re-committing to reaching its 2 percent inflation target as quickly as possible.

The BOJ maintained the 0.1 percent negative interest rate it applies to some of the excess reserves that financial institutions park with the central bank. But it abandoned its base money target and instead adopted "yield curve control" under which it will buy long-term government bonds to keep 10-year bond yields at current levels around zero percent.




"Overall it’s relatively positive that they’re going to target the yield curve control because this can help improve some of the biggest issues that we’ve seen, negative earnings for banks and so forth. And you also see a nice little spike in 10-year yields. All in all, it’s probably as good as we could have hoped for this time.

"But the longer-term issues for Japan are still more or less unchanged, unfortunately. Those are issues that monetary policy alone can’t solve. They would need to work with Prime Minister (Shinzo) Abe’s administration to make sure that Abenomics is adjusted to the needs that Japan has.

"You had a slight dovish tilt from the message today from Japan. Even though the (Federal Reserve) likely won't move tonight, you might see a slight hawkish tilt to the Fed announcement. So dollar-yen could continue a bit higher."


"The dollar rose to around 102.50 yen after the BOJ policy announcement.

"It's not clear what specifically drove the dollar higher, but the timing of the move suggests the market initially hesitated after the BOJ kept its negative interest rate unchanged, then pushed the dollar higher when it suggested it could leave the door open to more easing.

"On the assumption that the FOMC will hold rates steady later today, we're expecting the dollar/yen to move around 100.50-103.50 yen. There appears to be a lot of resistance above 103 yen."


"They've given themselves more freedom in terms of which JGBs to buy. I would expect that the spread between the super long bond, the 30-year bond, and 10-year government bonds, is probably going to steepen over time. I'm not sure it's going to steepen significantly given that you've still got domestic investors in Japan who need to have some kind of yield.

"Certainly this is positive for the equity market too, especially bank stocks. Clearly, they've acknowledged the negative rate policy can hurt bank profits, and these measures they've announced today are in a way trying to offset some of that negative impact. So it's clearly positive for bank stocks and, over time, for the broader Japanese equity market too."


"The most important bit is commitment to overshoot the 2 percent inflation target. That's committing to continue easing for longer than previously expected. Also hinting that the balance sheet will remain large for a long time. We think that's dollar/yen positive. Also, markets are a bit relieved given no further cuts to interest rates."


"The central bank's decision to keep the 0.1 negative interest rate gave the impression that the BOJ gave full consideration to banks' businesses.

"There had been speculation in the market that the BOJ would buy TOPIX-linked exchange traded funds for a while. Now that the BOJ announced it, it means it understood the market's concern that its effort to buy Nikkei-linked ETFs was distorting valuations and liquidity in some individual stocks.

"Overall, the outcome was positive for the stock market."


The BOJ decision wasn't a big surprise as the markets were expecting some form of policy easing, though the latest bunch of measures may not be a big driver for the markets especially with a Fed decision close and the outcome of the U.S. elections looming.

Risk markets have been accustomed to more policy easing over the summer and the realization is gradually sinking in that may not be the case going into the year-end. We expect more choppiness and uncertainty in markets in the coming days.


"They seem to be determined to get the message to the market that they are going to stay on course and continue to buy bonds until they get the inflation rate above 2 percent.

"I don't think it's going to be easy to get the 2 percent. It's an Abenomics problem, not the Bank of Japan's problem. It may take helicopter money in Japan to get the 2 percent. But the authorities have said that 'we are not going to do that.'"


"It's reacting more to the desire to get a steeper yield curve.

"The steeper yield curve will benefit the financial sector and this is why the shares are up and therefore dollar/yen is up. So dollar/yen seems to be reacting to the stock market, which in turn is reacting to the steepening of the yield curve that the BOJ wants.

"The measures announced by the BOJ don't add a lot of stimulus into the system.

"I think it's not meant that way anyway. If you look at Japan we're in a situation where the economy itself seems to be doing okay relative to the growth potential, if especially you look at the labor market.

"So there isn't a lot of strong arguments as to why the Bank of Japan should be adding a lot of stimulus.

"The message is to address some of the side effects of the monetary easing that's been done in the past, and one of the side effects has been that negative rates as well as the flattening of the yield curve has hurt the financial sector. So I think today's move is to address this side effect."


"The BOJ seems to have done the minimal to satisfy the markets. There were worries they were running out of government bonds to buy and would cut back on that. Well, they haven't. There was all the talk that the bank had given up. Well, they've clearly shown they are ready to do more. They seem to be positioning for a long-term war on deflation, rather than a quick battle.

"In the end, I think they will have to do more, and that it will be some form of helicopter money. Either directly funding fiscal spending or forgiving the government debt it holds. That's the only way to get the cash into the economy where it can be spent."


"The main point for the BOJ's decision is that the bank set long-term yields as a target. The central bank is giving certain consideration to the financial industry by trying to work on the yield curve.

"The BOJ changed its policy framework significantly as the central bank previously did not show much attention to the yield curve.

"We can take the BOJ's decision positively as the bank is trying to find more effective ways.

"The BOJ has done what it could do and the onus now is on the government to push forward with its growth strategy."


"The impression is that the BOJ is starting to pull back some of its troops from the battlefront. The markets could now begin testing the BOJ's commitment to its price target in the next few months, just as the Bank of England and its commitment to the pound was challenged in the past."


"It will take some time for the markets to fully interpret all of the implications of the BOJ's changes.

"It does give somewhat of an impression of further easing, targeting the 10-year yield at zero and setting a yield curve target. Overall, that does seem like an easing, but we really don't know if it will have the actual impact of an easing on the market, and it will take some time to find out.

"I believe that if there weren't a Fed meeting later in the day, the yen might have weakened on the BOJ's announcement.

"As for today's stock market gains on the BOJ's news, the question is whether they're sustainable."


"First thoughts are credit to the BOJ for having put a lot of thought into a new approach; they do seem open to fresh ideas. But it is hard to see the initial gains in USD/JPY being sustained. Keeping the depo rate at -0.1 percent and not boosting asset purchases doesn't seem a recipe for yen depreciation. Moreover, the vagueness of the timetable to reach 2 percent inflation is not inspirational.

"And while the inflation-overshooting commitment is an interesting surprise, it relies on the public placing a lot more faith in the BOJ reaching its target than it has up till now. They failed to get to 2 percent, so why should we think they can get to 3 percent?"


"Clearly, there was a change in policy framework, which was a surprise. But that also suggests what they have been doing wasn't good after all.

"It's not clear what they think about an exit strategy. Will they keep the 10-year bond yield at zero percent even as prices go up?

"Since the BOJ is saying they want the 10-year yield at zero percent, the market will probably follow. It won't pick a fight with the BOJ for the time being.

"But there will be a problem when the BOJ needs an exit from the current framework. We could see big confusion in the market."

Article Link To Reuters:

Pitt Expresses Sadness Over Jolie Divorce Filing As Hollywood Power Couple Splits

By Alex Dobuzinskis and Piya Sinha-Roy 
September 21, 2016

Actress Angelina Jolie has filed for a divorce from actor Brad Pitt, her husband of two years and romantic partner since 2005, her attorney said on Tuesday, signaling the end of one of Hollywood's most glamorous and powerful couples.

"This decision was made for the health of the family. She will not be commenting, and asks that the family be given its privacy at this time," attorney Robert Offer said in a statement.

The Oscar-winning actress filed in Los Angeles Superior Court on Monday, citing irreconcilable differences, court documents showed. Jolie sought full physical custody of their six children ages 8 to 15 with visitation rights for Pitt but did not seek spousal support. Jolie cited their separation date as Sept. 15.

"I am very saddened by this but what matters most now is the well-being of our kids," Pitt told People magazine. "I kindly ask the press to give them the space they deserve during this challenging time."

Jolie and Pitt, known collectively as "Brangelina," were one of the entertainment world's most visible couples, due to their good looks, successful films and activism. They married in 2014 after a decade together.

Their relationship was steady fodder for tabloids with reports focusing on what role Jolie played in the breakup of Pitt's marriage to actress Jennifer Aniston and, more recently, possible trouble in the marriage.

Media commentators reacted with surprise and sadness to the news. "Today shall go down as the day love died," Vogue magazine said in an online report on the couple's split.

Social media buzzed with #brangelina mentioned roughly 720 times per minute on Twitter, more than triple mentions for the United Nations General Assembly, according to analytics firm Zoomph.

Jolie, 41, who won a best-supporting actress Oscar for "Girl, Interrupted" in 2000, was previously married to actors Jonny Lee Miller and Billy Bob Thornton.

Pitt, 52, was married to Aniston in 2003 when he and Jolie filmed "Mr. & Mrs. Smith," the story of assassins unknowingly assigned to kill each other. There were reports of an affair, but Jolie told Vogue they were only "very, very good friends" until Pitt and Aniston split in 2005.

Before their August 2014 wedding at their French estate, Jolie and Pitt had said they would not wed until same-sex couples were allowed to marry.

Movies Bookend The Relationship

While Pitt and Jolie won praise for their on-screen chemistry in "Mr. & Mrs. Smith," their most recent film collaboration, "By the Sea," last year was about a married couple drifting apart. Jolie wrote and directed the latter.

Jolie has been estranged from her father, actor Jon Voight, but he told "Inside Edition" he was concerned about the divorce filing. "It’s very sad," he said. "Something very serious must have happened for Angelina to make a decision like this.”

Peter Walzer, a California attorney who represented actress Katie Holmes in her divorce from superstar Tom Cruise, said in a phone interview it was unusual Jolie sought sole physical custody of the children and it was equivalent to saying Pitt was not competent to be a parent. “It’s an insult,” Walzer said.

Jolie had an offbeat reputation early in her career but has taken on humanitarian causes and was named a special envoy for the U.N. High Commissioner for Refugees.

She traveled to Afghanistan, Sudan, Tanzania, Iraq and Jordan to call attention to the plight of refugees and the underprivileged.

The couple started a foundation to finance reconstruction of homes in New Orleans after Hurricane Katrina. Together they started the Jolie-Pitt Foundation in 2006 to help charities worldwide.

Their children include sons adopted from Cambodia and Vietnam and a daughter adopted from Ethiopia, as well as three biological children.

To encourage other women, Jolie spoke out publicly about elective surgeries in 2013 and 2015 to remove her breasts, ovaries and fallopian tubes as a preventive measure due to a family history of cancer.

In addition to her Oscar win, Jolie was nominated for an Academy Award for "Changeling" in 2008. Pitt's breakout role came in a supporting part in "Thelma & Louise" in 1991. His other films include "The Curious Case of Benjamin Button," "Inglourious Basterds," "Moneyball," and the "Ocean's 11" films.

Article Link To Reuters:

Protest Erupts After Police Kill Black Man In North Carolina

By Greg Lacour
September 21, 2016

Tensions flared in Charlotte, North Carolina on Tuesday after police fatally shot a 43-year-old black man who they said was armed with a gun when officers approached him in the parking lot of an apartment complex.

Several hundred people gathered after dark near the shooting scene to protest the death of Keith Lamont Scott, with some throwing water bottles and wielding large sticks as they faced off against police in riot gear.

A few hours earlier, Charlotte-Mecklenburg police said officers were at the apartment complex searching for a suspect with an outstanding warrant when they saw Scott get out of his vehicle with a firearm.

Officer Brentley Vinson fired his weapon and struck Scott, who "posed an imminent deadly threat to the officers," the department said in a statement.

Vinson, who joined the Charlotte police force in July 2014, also is black, according to the department. He has been placed on paid administrative leave.

The fatal shooting came amid an intense national debate over the use of deadly force by police, particularly against black men.

Police did not immediately say if Scott was the suspect they had originally sought at the apartment complex. WSOC-TV reported that he was not.

Detectives recovered the gun Scott was holding at the time of the shooting and were interviewing witnesses, police said.

Protesters and Scott's family disputed that the dead man was armed. Some family members told local reporters that Scott had been holding a book and was waiting for his son to be dropped off from school.

Shakeala Baker, who lives in a neighboring apartment complex, said she had seen Scott in the parking lot on previous afternoons waiting for his child. But on Tuesday, she watched as medics tended to Scott after he was shot, she said.

"This is just sad," said Baker, 31. "I get tired of seeing another black person shot every time I turn on the television. But (police are) scared for their own lives. So if they’re scared for their lives, how are they going to protect us?"

Charlotte police said on Twitter that about a dozen officers were injured during Tuesday's night protest, with one getting hit in the face with a rock. The agency's "civil emergency unit" was deployed to disperse the crowd, and reporters saw tear gas being used.

Charlotte Mayor Jennifer Roberts urged for calm.

"The community deserves answers and (a) full investigation will ensue," she said on Twitter, adding in a subsequent post, "I want answers too."

About 200 people gathered earlier Tuesday night for a peaceful protest in Tulsa, Oklahoma, where a white officer killed an unarmed black man last week in an incident captured on police videos.

Lawyers for the family of Terence Crutcher, 40, disputed that he posed any threat before he was shot by Tulsa Officer Betty Shelby after his sport utility vehicle broke down on Friday.

Article Link To Reuters:

Only One Candidate Has A Plan For A Booming Economy

By Betsy McCaughey
The New York Post
September 21, 2016

The choice for voters is clear: a tax cut from Donald Trump or a pay cut courtesy of Hillary Clinton.

Trump is promising to slash income taxes to zero for millions of people currently paying them, and to reduce the tax bite on everyone else except the mega-rich.

Clinton, by contrast, isn’t cutting income tax rates for anyone. Instead, she’s campaigning to raise business taxes, despite warnings it will cause wages to plummet and the economy to tank.

No wonder Trump is moving up in the polls. Most Americans are still making less than they did in 2007. The mainstream media want to double down on “birthers” and other fabricated issues. But will voters really be fooled by such nonsense? Will they be so easily distracted? Trump is betting no — they’ll vote their wallets.

Trump proposes a zero income-tax rate for singles making $25,000 and couples making twice that. Instead of paying the government money, they’ll file a one-page tax form that says, in not so many words, “I win.”

Moving up the ladder, singles earning $35,000 will save about $1,000, according to tax experts at CNN Money. And singles earning $64,000 will get a $2,700 break, on average. Anyone earning $112,000 will save over $5,300. Sweet.

And that’s before applying Trump’s proposed deductions for child care, which will average $12,000 per child regardless of whether parents actually incur child-care expenses. That’s a boon for stay-at-home parents.

Bottom line: Working couples with two kids will pay no federal income tax on their first $60,000 to $70,000 in household income.

Clinton promises tax credits, too — but only to families that actually spend over 10 percent of their income on outside child care.

Disregard Clinton’s bogus claims that Trump wants “to give trillions in tax breaks to people like himself.” Nonsense. Trump caps deductions at $100,000 for singles and double that for couples, so some high rollers will end up paying more.

As for the misery of tax preparation, Trump simplifies it: only three brackets, all with lower rates than before. He jokes about putting H&R Block out of business. Clinton’s plan adds complexity: more brackets and additional rules.

Keeping more of what you earn is good. Earning more is even better. To give everyone a shot at a brighter economic future, the next president and Congress need to jump start the economy by slashing business taxes.

Right now, the economy is limping along at 1.2 percent growth — a third of the normal growth rate over the last century. Partly to blame for the stagnation are corporate taxes — the highest in the developed world. They’re driving companies to leave the United States and putting those who stay at a global disadvantage.

Trump proposes cutting taxes by over half for large and small businesses in order to encourage them to stay, expand and hire.

Meanwhile, Clinton preaches class warfare, vilifying businesses for not “paying their fair share” and pledging tax hikes on them. Recession, here we come. A Federal Reserve report warns that “increases in corporate tax rates lead to significant reductions in employment and income.”

Typically, Democrats bash business tax cuts as “trickle down economics” to benefit rich Republicans. But the inspiration for Trump’s tax reform came from a Democrat — John F. Kennedy — who faced a stagnant economy when he became president in 1961.

Kennedy understood tax cuts would cause businesses to invest, boosting worker productivity. More productive workers lead to higher wages as well as more goods and services to go around. A more prosperous nation.

Kennedy startled the nation by insisting that tax cuts would ultimately produce more tax revenue — not less — thereby reducing deficits. He was right, as Larry Kudlow explains in his new book “JFK and the Reagan Revolution.”

JFK slashed business taxes, and after his assassination, Congress enacted the rest of his tax program, igniting 5 percent annual growth for the next eight years.

Reagan repeated the formula in the 1980s, launching 20 years of 4 percent-plus growth.

It can happen again. Hillary has given up on growth. Voters can’t afford to.

Article Link To The New York Post:

Set Self-Driving Cars Free

By Editorial Board
The Bloomberg View
September 21, 2016

In publishing new guidelines for automated vehicles this week, the U.S. Transportation Department tacitly acknowledged two important truths: This technology will probably be great. And no one knows what will happen.

The regulators took a restrained approach, offering a safety checklist for manufacturers and better guidance for state officials but stopping short of issuing restrictive new rules. That's prudent: As President Barack Obama put it, with mild understatement, "Government sometimes gets it wrong when it comes to rapidly changing technologies."

Yet the new guidelines should still have some substantial benefits. They'll help states avoid creating conflicting rules that would require cars to turn off certain features when crossing borders. They should give companies and investors more confidence, as well as help clarify liability when things go wrong. Not least, they're likely to help the U.S. maintain its lead in a promising new field.

And that field is booming. In little more than a decade, self-driving cars have evolved from a futuristic dream to a near-prosaic reality. Ford and General Motors both say they're building fleets for ride-sharing services. Uber is using them to ferry passengers across Pittsburgh. Google's version has traversed more than 1.5 million miles, with an exemplary safety record. The Boston Consulting Group estimates that the market for such vehicles will reach $42 billion by 2025. Goldman Sachs is even more optimistic.

The companies competing in this market are pursuing very different approaches, and the driverless car is likely to evolve in unpredictable ways. That's all the more reason that regulation of the industry ought to be flexible.

In time, the technology could well prove revolutionary. Given that human error causes 94 percent of car crashes, it seems likely to save many lives. It could steeply reduce congestion and pollution. It may prove invaluable to the elderly and the disabled, and a boon to the poor. Urban landscapes may be transformed for the better. Commuting might become a delight, and jostling for parking a thing of the past.

It isn't all good news, of course. Some unsettling ethical dilemmas are on the horizon. The fatal crash of a Tesla in May, in which the car's owner had its Autopilot feature engaged, suggests that automation comes with risks of its own. Privacy concerns, legal conundrums and security flaws will all abound in the years ahead.

And plenty of businesses are likely to be upended. Insurers are quite concerned about their bottom lines. U.S. automakers may see sales decline by 40 percent over the next 25 years, reckons Barclays, erasing some 25,000 jobs in the process. Truckers, cabbies and delivery drivers should also be concerned: By one estimate, automation could put 2.6 million of them out of work.

None of that is reason to hold back driverless cars; the potential benefits are too great. And U.S. regulators have done the right thing by not unduly inhibiting them. But as always when pondering the wonders of Silicon Valley, it's important to remember who's losing out, too.

Article Link To The Bloomberg View:

Wednesday, September 21, Morning Global Market Roundup: Japanese Stocks Jump, Yen Weakens As BOJ Overhauls Policy

By Saikat Chatterjee 
September 21, 2016

Japanese stocks rallied and the yen weakened in a volatile session on Wednesday after the Bank of Japan decided to adopt a target for long-term interest rates in an overhaul of its massive monetary stimulus programme.

The BOJ maintained its 0.1 percent negative interest rate, but abandoned its base money target and instead set a "yield curve control" under which it will buy long-term government bonds to keep 10-year bond yields around current levels of zero percent.

Financial markets gave the announcement an initial thumbs up with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS extending its gains to be up 0.35 percent on the day compared to 0.23 percent earlier.

The Nikkei .N225 swerved in and out of the red soon after the BOJ policy decision was announced and was last up more than 1 percent, while the Topix .TOPX gained 1.7 percent after the central bank said 2.7 trillion of its ETF purchases will be linked to the index.

Volatility was especially acute in the currency markets with the Japanese yen JPY=weakening by as much as 1.2 percent against the dollar in choppy trade.

"Clearly, there was a change in policy framework, which was a surprise," said Yasutoshi Nagai, chief economist at Daiwa Securities. "It's not clear what they think about an exit strategy."

In bond markets, U.S. Treasury yields spiked higher immediately after the decision, as investors apparently seem to believe the BOJ's move to steepen the yield curve will have a ripple effect on other bond markets.

Benchmark 10-year Treasury notes US10YT=RR rose to 1.73 percent compared to 1.69 percent before the BOJ announcement, though investors were wary of driving them higher before a U.S. Federal Reserve policy decision later in the global day.

Both hawkish and dovish comments from Fed officials recently have stoked volatility in financial markets, although consensus is now centred on a U.S. rate hike by year-end.

In currency markets, dollar/yen spiked higher as investors rushed to cover their short positions with the yen extending its weakness against the dollar to trade at 102.45 JPY=

"Many people expected the BOJ not to take any action at all, and the yen to strengthen, so we now see many people buying the dollar back," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

Sean Callow, senior currency analyst at Westpac, expects the yen weakness might prove short-lived.

"They do seem open to fresh ideas. But it is hard to see the initial gains in USD/JPY being sustained. Keeping the depo rate at -0.1 percent and not boosting asset purchases doesn't seem a recipe for yen depreciation," he said.

The Australian dollar AUD=D3 slipped to $0.7545 as the demand outlook for industrial metals for China continued to improve along with favourable tailwinds from emerging markets and currencies. It is up 1.5 percent in a week.

Oil prices held early gains with U.S. crude oil futures CLc1 up 1.7 percent to $44.77 per barrel. [O/R]

Article Link To Reuters:

Full Hanjin Ship Can't Dock Without Plan To Leave

By Tom Hals and Jim Christie
September 21, 2016

Failed South Korean cargo line Hanjin Shipping Co Ltd found the money to unload a full container ship waiting outside a New York-area port. But before the vessel was allowed to dock, it faced another problem: a plan to get back out to sea.

The predicament of the Hanjin Miami, one of 10 U.S.-bound ships stranded by the Hanjin bankruptcy, illustrates one way that disputes over ships, ocean containers and even truck trailers to haul the shipping boxes have stranded at sea some $14 billion of goods around the world.

Since filing for court receivership on August 31, the world's seventh-largest container carrier has caused chaos for many retailers at a time when they are getting goods for the holiday shopping season.

The National Retail Federation on Tuesday urged U.S. Commerce Secretary Penny Pritzker to find a way to clear up the confusion. "The impact on small and medium-sized companies could be particularly devastating if this situation is not resolved in a timely manner," the group said in a letter.

Hanjin has the money to dock its Hanjin Miami, Federal Maritime Commissioner William Doyle, whose agency regulates international shipping, told an industry event on Friday.

But the Miami has not been allowed in port because of a dispute about empty Hanjin shipping containers, which the Miami normally would load up as ballast to exit port.

Without those empties, the ship "will not be able to depart the harbor because it would not have the air clearance to navigate under the Bayonne Bridge -- even at a dead low tide," said Doyle. Without a way to leave, the ship could tie up a berth.

"There are so many disputes right now attached to empty containers that the terminal is not going to load the empties back onto the ship," Doyle said.

By Tuesday evening, two sources familiar with negotiations said that the Miami had been scheduled to dock and that it would pick up empty containers to leave port. Shipping tracking site said it was due to arrive on Thursday and depart the next day.

An attorney for Maher Terminal, which operates the marine terminal in Newark where the Hanjin Miami is expected to dock, declined to comment.

The Hanjin Miami is currently off the U.S. East Coast, about 300 miles (480 km) from New York, according to Reuters Eikon data.

The Bayonne Bridge, which held the title of world's longest arch bridge for 45 years after it opened in 1931, presents a unique challenge to Hanjin.

But other ports also are struggling with questions of who pays for terminal charges and what to do with empty containers. The complexity increased on Monday after a South Korean judge told Hanjin to cancel its ship charter agreements and return empty vessels to their owners.

In the wake of the decision by the South Korean judge, an empty Hanjin Miami may become the responsibility of Reederei NSB, which manages the ship on behalf of its owner, an affiliate of Conti Holding of Munich, according to Reuters Eikon data.

A spokeswoman for Reederei and a U.S. lawyer for Hanjin did not respond to requests for comment.

Port terminals, meanwhile, have stopped accepting returns of empty shipping containers because they doubt Hanjin will pay to store them.

"The Hanjin boxes are radioactive. Nobody wants to take responsibility for them," said Mark Hirzel, chairman of the Los Angeles Customs Brokers & Freight Forwarders Association Inc.

As containers on chassis pile up in far-flung storage lots, it has created a shortage of the trailers used to transport containers on land.

Darren Azman, an attorney for Bermuda-based Textainer Group Holdings Ltd (TGH.N) said cargo owners and other Hanjin parties are working out an agreement that they hope will normalize the movement of shipping containers.

But U.S. retailers and manufacturers who own the cargo are caught in the confusion.

Alex Rasheed, president of Pacific Textile and Sourcing Inc, a Los Angeles-headquartered importer and wholesaler of apparel, is anxious to receive $300,000 worth of seasonal fall clothing in two containers on the Hanjin Jungil, which is waiting off the coast of Southern California.

"We're going to start feeling the pressure unless there is some kind of resolution," Rasheed said.

Hanjin's bankruptcy also has U.S. exporters that were relying on the company scrambling to find alternatives, including flying goods to foreign markets at a loss, said Hirzel.

"I've even heard about air transport of agriculture exports," Hirzel said. "Economically, it's a guaranteed loser ... The only reason you would do that is to meet an order to get a contract in the future."

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Apple's iPhone 7 More Expensive To Make

By Alan John Koshy
September 21, 2016

Apple Inc (AAPL.O) is spending more to manufacture its iPhone 7 smartphone than predecessor iPhone 6S due to features such as a bigger battery and larger storage capacity, according to a teardown by IHS Markit Ltd (INFO.O).

Including $5 in basic manufacturing costs, total cost to manufacture the iPhone 7 mobile rises to $224.80, $36.89 higher than the business research provider's estimates for the iPhone 6S.

Apple retails an unsubsidized 32GB iPhone 7 at $649.

The company unveiled the iPhone 7 with high-resolution cameras and no headphone jack at its annual launch on Sept. 7.

IHS Markit also said on Tuesday the iPhone 7's Bill Of Materials (BOM), a financial estimate of the raw materials used, was "in line" with flagship smartphones made by rival Samsung Electronics (005930.KS) but Apple ekes out better margins.

"All other things being equal, Apple still makes more margin from hardware than Samsung, but materials costs are higher than in the past," said Andrew Rassweiler, senior director of cost benchmarking services at IHS Markit.

IHS Markit has not yet performed a teardown analysis on the larger iPhone 7 Plus.

Supplies of Apple's iPhone 7 Plus have been exhausted in all shades, and the smaller iPhone 7 has also sold out in the new jet black color, the company said last week.

Yet, in some markets, such as China, interest in the new phone has been muted, as cheaper local brands amp up their design and marketing.

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Oil Prices Rise On Reported U.S. Crude Stock Draw, Firm Japan Imports

By Henning Gloystein 
September 21, 2016

Oil prices climbed on Wednesday, supported by a reported draw in U.S. crude inventories and by firm import data from Japan.

U.S. West Texas Intermediate (WTI) crude futures were up 1.8 percent, or 81 cents, at $44.86 a barrel at 0403 GMT. The October contract expired yesterday at $43.44 a barrel and the front-month has now rolled over to November delivery.

Traders said that the main WTI price driver had been American Petroleum Institute data showing a 7.5 million barrel draw to 507.2 million barrels in U.S. crude inventories, the third weekly stock draw.

Market participants had expected an increase of 3.4 million barrels, according to a Reuters poll.

Official storage data is due to be published by the U.S. Energy Information Administration (EIA) later on Wednesday, and traders said they were also eagerly anticipating a meeting by the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) which might influence U.S. interest rates.

"Wednesday has become 'Big Wednesday' for oil traders, with not only the FOMC but also the EIA crude inventory numbers out… Should they (EIA) follow the unexpected drawdown like the API and we get no FOMC rate hike, oil bulls may well have reason to be cheering after a tough couple of weeks," said Singapore-based brokerage Oanda.

International Brent crude futures were at $46.47 per barrel, up 59 cents, or 1.3 percent, from their last close.

Traders said that Brent was being supported by firm imports from Japan.

Japan's customs-cleared crude imports rose 0.5 percent in August from the same month a year earlier, the Ministry of Finance said on Wednesday.

Japan, the world's fourth-biggest oil buyer, imported 3.38 million barrels per day of crude last month, the data showed.

Overall, however, oil markets remain oversupplied as exporters around the world pump near record amounts.

Oil producers from the Organization of the Petroleum Exporting Countries (OPEC) and also Russia plan to meet in Algeria next week to discuss measures to rein in the oversupply, but analysts said they did not expect significant cuts to production.

"OPEC members will not agree on a production freeze at the end of September at the meeting in Algiers. Political tensions will prevent cohesion, and individual members will continue to protect market share from resilient non-OPEC producers," BMI Research said in a note to clients.

"Even if an agreement to freeze production is reached, this will change very little for the global oil market, given that most OPEC members are already producing close to their peak capacity," it added.

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Fed Expected To Keep Rates Unchanged, May Signal Year-End Hike

By Lindsay Dunsmuir
September 21, 2016

The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday amid tepid inflation and recent weak economic data, but could signal an increased likelihood of a hike by the end of the year.

The U.S. central bank raised its benchmark overnight interest rate to a range of 0.25 percent to 0.50 percent in December, the first hike in nearly a decade, but has held rates steady this year.

Economists polled by Reuters see a slim chance of a rate increase at the conclusion of the Fed's two-day policy meeting on Wednesday, with the majority expecting one at the meeting in December.

"The last thing the Fed wants is to disrupt financial markets with a big surprise," said Torsten Slok, chief international economist at Deutsche Bank.

The Bank of Japan on Wednesday added a long-term interest rate target to its massive asset-buying program in an overhaul of its policy framework aimed at accelerating achievement of its 2 percent inflation target.

The BOJ said it would continue to buy long-term government bonds, but abandoned its base money target and instead set a "yield curve control" under which it will buy long-term government bonds to keep 10-year bond yields at current levels around zero percent.

The Fed's rate-setting committee will release its policy statement at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is scheduled to hold her quarterly press conference half an hour later.

The 17 Fed policymakers will have to balance a strong labor market, marked by an unemployment rate of 4.9 percent and job gains that are outpacing population growth, with inflation that is still well below the central bank's 2 percent target and weak August readings for manufacturing and service industry activity.

They have appeared increasingly divided on the urgency for a rate increase.

Fed governors Lael Brainard and Daniel Tarullo both recently reiterated they want to see firm evidence of rising inflation before resuming monetary tightening.

The Fed's preferred measure of inflation remains low at 1.6 percent and has been below target for more than four years.

But recent comments from a number of moderate policymakers suggest a degree of impatience is building.

Atlanta Fed President Dennis Lockhart said last week there should be a "serious discussion" about a rate hike at this week's meeting, while San Francisco Fed President John Williams, seen as a close Yellen ally, said two weeks ago that he would prefer to raise rates "sooner rather than later."

Boston Fed President Eric Rosengren, usually seen as a policy dove, also noted earlier this month that the risks to the economy were "becoming increasingly two-sided." That remark initially led markets to start pricing in a September rate surprise, although those expectations have since receded.

With Yellen unlikely to tip the committee's hand forcefully either way, a compromise could assuage concerns.

"That's precisely what the outcome of the meeting is likely to be: No move at this meeting, but a relatively low bar for hiking in December," Roberto Perli, a partner at Cornerstone Macro LLC, said in a note to clients.

The Fed also holds a policy meeting in early November, but investors have all but ruled out a rate move just days before the U.S. election.

Rate Hike Path

Alongside the policy statement, Fed officials will also provide a new set of forecasts for economic growth, unemployment, inflation and the path of interest rates.

When these projections were last issued in June, the Fed still projected two rate hikes in 2016. That will likely on Wednesday be cut to one.

The policymakers are also likely to downgrade their estimates for how many rate rises the economy will need in the coming years given that output, productivity and inflation are growing slower than in past decades.

All of which means intense scrutiny on Yellen's comments in the press conference, coming on the heels of her assessment in late August that the case for a rate hike had strengthened in recent months.

"She's likely to convey that she sees the fundamentals consistent with a move in the relatively near term," said Randy Kroszner, a former Fed governor who is now an economics professor at the University of Chicago Booth School of Business.

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