Should we penalize businesses that send jobs offshore? I'm embarrassed to admit that I'd forgotten about President Obama's persistent efforts to do just that. Jim Tankersley reminds us:

He called to end tax breaks for companies that outsource jobs, to cut taxes for domestic manufacturers and to levy a minimum tax on multinational corporations....Obama has included changes to the tax code, meant to penalize companies that move jobs overseas and boost those that invest in America, in every budget he submitted to Congress since 2009. Since 2012, he has repeatedly proposed an “insourcing” tax credit and eliminating deductions for moving expenses incurred in shipping jobs abroad.

Congress ignored nearly all those proposals....Since 2010, Obama has also proposed several steps meant to discourage so-called corporate inversions, which is the practice of companies moving their headquarters out of the United States in order to avoid corporate taxes. When his Treasury Department moved to crack down on that practice this year, Republicans howled.

But now things are different:

When Trump cajoled Indiana manufacturer Carrier into canceling part of its plans to ship jobs to Mexico last week, in part by offering a state tax incentive package to the company, House Speaker Paul Ryan dismissed criticism of Trump's efforts. “I'm pretty happy that we're keeping jobs in America, aren't you?” he said.

....Republicans and business lobbyists have long said the best way to end inversions and reduce outsourcing is to cut corporate taxes....Conservatives, business groups and even financial markets appear optimistic that Trump will deliver on that rate cut, then abandon the trade threats.

Will concern for the working class finally outweigh concern for put-upon American multinational corporations? It never did while Obama was president, and there's no special reason to think it will now.

It does make me wonder, though. Hindsight is 20/20 and all that, but why didn't Hillary Clinton make this stuff into a major campaign issue? It would have helped her against both Bernie Sanders and Donald Trump, but she barely ever mentioned these kinds of reforms. Odd.

The Washington Post has a big article up tonight about military waste:

Pentagon hid study exposing $125 billion in wasteful spending

The Pentagon has buried an internal study that exposed $125 billion in administrative waste in its business operations amid fears Congress would use the findings as an excuse to slash the defense budget, according to interviews and confidential memos obtained by The Washington Post....The report, issued in January 2015, identified “a clear path” for the Defense Department to save $125 billion over five years. The plan would not have required layoffs of civil servants or reductions in military personnel.

Hmmm. I have some doubts about this. For starters, that $125 billion is over five years. That comes to $25 billon per year, or about 4 percent of the defense budget. That's not peanuts, but it hardly seems big enough to represent "far more wasteful spending than expected," as the article says.

But that's not the main thing that makes me skeptical about this. My big problem is that this is a McKinsey report, and I have a fairly cynical view of McKinsey-driven "process improvement" blather. For example, the report suggests that the Pentagon can save loads of money by increasing its back-office productivity by 4-8 percent per year. "Private sector industries commonly show similar gains," they say merrily, so why not the Pentagon?

This is exactly the kind of thing that gives business consultants a bad name. Do private sector businesses really show routine annual productivity gains like this in their back-office operations? I doubt it very much. And even if they do, can the federal government do the same things that private industry does? Hard to say. In any case, it turns out that McKinsey's biggest finding is that the Pentagon is spending more on its contracts than it should. Here's how they propose to fix this:

The buzzword-to-reality ratio here is astronomical. I could have written this without knowing a thing about Pentagon procurement. Here's the McKinsey timeline:

Seriously? They think the Pentagon can massively transform its entire procurement process in eight months, at which point, they blandly say, it's time to "Validate savings and begin renegotiating contracts"? That's insane. I used to work for a pretty well-run private-sector company with 200 employees, and I don't think we could have done this in eight months. Hell, later on McKinsey even admits that "only about 17% of fundamental change projects deliver their full potential." But they blithely recommend full steam ahead anyway, because success will come with:

  • Strong, consistent top leadership
  • Clear vision, aligned with strategy and widely communicated
  • Effective governance structure with clear decision-making authority
  • Defined accountability at all levels with reward and enforcement mechanisms
  • Engaged workforce and supportive stakeholders

This is cribbed out of a book you can buy at Barnes & Noble for $29.95, and it basically describes the platonic ideal of a corporation. No one ever has all this stuff, and certainly not a gigantic federal bureaucracy. And that's not all. There's much, much more biz blather, but I won't bother trying to summarize it. I'll just show you a few slides:

McKinsey wants DoD to establish core IT as "a shared-services organization." This might be a good idea, or it might not. But it's straight out of a textbook, and it's something that takes years to do decently—assuming it's a good idea in the first place. Would it save money in the long run? Maybe, but I wouldn't bet on it.

And don't even get me started on the "Process Redesign Factory." Holy crap.

So why did the study get scrapped? Here is Deputy Defense Secretary Robert O. Work, who ordered it in the first place:

In an interview with The Post, he did not dispute the board’s findings about the size or scope of the bureaucracy. But he dismissed the $125 billion savings proposal as “unrealistic” and said the business executives had failed to grasp basic obstacles to restructuring the public sector....Work said the board fundamentally misunderstood how difficult it is to eliminate federal civil service jobs — members of Congress, he added, love having them in their districts — or to renegotiate defense contracts.

Normally this would sound like defensiveness from someone who was set in their ways and just didn't want anything to change. But this guy wanted McKinsey to come in. He simply concluded that their report was shallow and uninformed, and I can't say I disagree. The Powerpoint deck looks like it's little more than boilerplate that's lightly massaged by a 22-year-old "senior analyst" for each client.

I can sympathize with anyone who thinks the Pentagon could make its back-office operations more efficient, but can't do it thanks to bureaucratic inertia. I don't doubt for a second that this is true. But if you want to change this, you'd better do more than bring in a few McKinsey suits to provide you with the exact same recommendations they provide to everyone else, using the exact same swarm of buzzwords. This report sounds like dreck.

The #1 most popular article at the Wall Street Journal right now is "My Unhappy Life as a Climate Heretic," by Roger Pielke Jr. His piece is basically a complaint that he has been pilloried for years because he holds the view that climate change is real, but that it hasn't been responsible for a change in the number or intensity of hurricanes, floods, or drought. I can't comment much on that since I haven't followed Pielke's fights with climate scientists, but I did take notice of this bit from his article:

More is going on here than thin-skinned reporters responding petulantly to a vocal professor. In 2015 I was quoted in the Los Angeles Times, by Pulitzer Prize-winning reporter Paige St. John, making the rather obvious point that politicians use the weather-of-the-moment to make the case for action on climate change, even if the scientific basis is thin or contested.

Ms. St. John was pilloried by her peers in the media. Shortly thereafter, she emailed me what she had learned: “You should come with a warning label: Quoting Roger Pielke will bring a hailstorm down on your work from the London Guardian, Mother Jones, and Media Matters.”

Hey! I recognize one-third of that hailstorm: it's me.

I don't know what the other two-thirds of the hailstorm said, but my criticism was calm, factual, and straightforward. St. John's article was about wildfires, and my post noted that "Pielke doesn't actually say climate is unrelated to increased wildfire activity"—and then noted that practically no one else St. John quoted says that either:

Virtually everyone quoted in this article either (a) says nothing about climate change or (b) says climate change is an important factor in the rise of wildfires in California and the West. And yet, somehow all of this is written in a way that makes it sound as if climate change has nothing to do with wildfires, and it's topped by a headline that says in no uncertain terms, "Gov. Brown's link between climate change and wildfires is unsupported, fire experts say."

Very peculiar.

As near as I can tell, St. John pretty seriously misrepresented the evidence in her piece. The critiques of it deserved a response, not a cozy email to one of her sources. But as far as I know, they never got one.

The current hotness in Republican circles is "repeal and delay." That is, they want to pass legislation that repeals Obamacare in, say, 2019, but doesn't replace it with anything. Then they can spend the next couple of years figuring out what should take its place. There's only one problem with this:

Republicans. Can't. Repeal. Obamacare.

Oh, they can repeal big parts of it. Anything related to the budget, like taxes and subsidies, can be repealed via the Senate procedure called reconciliation, which needs only 51 votes to pass. But all the other parts can be filibustered, and it takes 60 votes to overcome a filibuster. Republicans don't have 60 votes in the Senate.1

This leaves quite a few elements of Obamacare that can't be repealed via reconciliation, but I think Democrats should focus on one: pre-existing conditions. This is the provision of Obamacare that bans insurers from turning down customers or charging them extra for coverage, no matter what kind of pre-existing conditions they have. I tell the whole story here, but there are several reasons this is the best provision to focus on:

  • It's an easy thing to understand.
  • It's very popular.
  • Republicans say they favor keeping it.
  • Donald Trump says he favors keeping it.
  • It's not a minor regulation. It is absolutely essential to any health care plan.
  • It's fairly easy to explain why repealing Obamacare but leaving in place the pre-existing-conditions ban2 would destroy the individual insurance market and leave tens of millions of people with no way to buy insurance.

The last point is the most important. Take me. I'm currently being kept alive by about $100,000 worth of prescriptions drugs each year. If I can go to any insurer and demand that they cover me for $10,000, that's a certain loss of $90,000. If millions of people like me do this, insurance companies will lose billions of dollars. In the employer market, which covers people who work for large companies, this is workable because insurers have lots and lots of healthy, profitable people at each company to make up these losses. In the individual market—after you've repealed the individual mandate and the subsidies—they don't. They will bear huge losses and they know it.

What this means is not just that Obamacare would collapse. It means the entire individual market would collapse. Every insurance company in America would simply stop selling individual policies. It would be political suicide to make this happen, and this means that Democrats have tremendous leverage if they're willing to use it. It all depends on how well they play their hand.

The current Republican hope is that they can repeal parts of Obamacare and then hold Democrats hostage: Vote for our replacement plan or else the individual insurance market dies. There's no reason Democrats should do anything but laugh at this. Republicans now control all three branches of government. They've been lying to their base about Obamacare repeal for years. Now the chickens have come home to roost, and they're responsible for whatever happens next. If the Democratic Party is even marginally competent, they can make this stick.

Plenty of Republicans already know this. Some have only recently figured it out. Some are still probably living in denial. It doesn't matter. Pre-existing conditions is the hammer Democrats can use to either save Obamacare or else demand that any replacement be equally generous. They just have to use it.

1Of course, Republicans do have the alternative of either (a) getting rid of the filibuster or (b) firing the Senate parliamentarian and hiring one who will let them do anything they want. If they do either of those things, then they can repeal all of Obamacare and replace it with anything they want. I don't think they'll do either one, but your mileage may vary on this question.

2Just for the record, it's worth noting that Republicans can't modify the pre-existing-conditions ban either. Democrats can filibuster that too.

Donald Trump, eight days ago:

Donald Trump, in a legal filing five days later, as reported by the Washington Post's Philip Bump:

Trump is a serial, compulsive liar. Soon he will be president of the United States.

You've probably heard that a gunman entered the Comet Ping Pong pizzeria in Washington DC yesterday and started shooting. He didn't hit anyone, though, and it's not clear if he was even trying. So why was he there? He says he was trying to "self investigate" an allegation that Bill and Hillary Clinton ran a pedophilia ring out of the restaurant.

No, this is not me being smug and elitist again this morning. This is an honest-to-goodness conspiracy theory known as Pizzagate, and it's been making the rounds for a while. Why? Because the owner of Comet Ping Pong is both gay and a longtime supporter of the Democratic Party. And that's not all!

It's known, for instance that Bill Clinton and Donald Trump flew on the private plane of convicted child abuser Jeffery Epstein. Tony Podesta, the brother of the Clinton aide whose emails were hacked, was a friend of Dennis Hastert, a Republican politician who earlier this year was sentenced to 15 months in prison, and has admitted abusing boys. The Jimmy Savile scandal in the UK has featured in speculation as an example of a serial child abuser getting away with his crimes.

So far this has no connection to Donald Trump, and perhaps you're thinking that's another silver lining, aside from the fact that no one was hurt in the attack. But I'm afraid you'll have to make do with only one silver lining today. You see, Gen. Michael Flynn, who will soon be Donald Trump's National Security Advisor, tweeted this a few days before the election:

And that's not all. Here is Michael Flynn Jr., who is not just Flynn's son. He is also Flynn's chief of staff and closest aide. Here he is yesterday, after the shooting:

There's much more in Flynn Jr's Twitter feed following this, all pointing in the same direction: he is a complete crackpot. And he is one of the closest confidantes of his father, who is also a crackpot. And Flynn Sr. is the top national security aide to Donald Trump, who is well known to have a weakness for conspiracy theories already.

Obviously Democrats have no influence over Donald Trump's White House. But presumably Republicans do. They need to figure out a way to get Flynn booted from the NSA position and as far away from Trump as possible. This isn't an amusing joke, and it's not just politics anymore. It's a serious national security weakness.

UPDATE: It's hard to keep up these days. In the tweet at the top of this post, Flynn Sr. isn't referring to Pizzagate. He's referring to a different pedophilia allegation involving Hillary Clinton. According to Truepundit.com, it linked "Clinton herself" and her "associates" to money laundering, child exploitation, sex crimes with children, perjury, obstruction of justice, and "other felony crimes."

I even wrote about it back when it happened. It's been a busy two weeks since then. Sigh.

Donald Trump has chosen Ben Carson as his Secretary of Housing and Urban Development. Why? He's not remotely qualified for the position and he's publicly (!) stated that he doesn't have the experience to lead a government agency. Still, Carson is black and the U in HUD stands for Urban, and that's probably enough for Trump.

Does this sound unbearably smug and elitist? Sure, I'll cop to that. But as near as I can tell, Trump has already picked a Defense Secretary solely on the strength of the fact that his nickname is "Mad Dog," and a UN ambassador because she looks kind of foreign. So it fits.

By the way, you'll notice that in my table below I've finally decided to label Mnuchin and Ross as part of the swamp. My original hesitation was because they weren't part of DC politics. Does Wall Street count as part of the swamp? Upon reflection, of course it does. Hell, Mnuchin even comes from Goldman Sachs. If that's not part of the swamp, what is?

After hinting around for weeks, president-elect Donald Trump finally released a detailed, 7-part (!) tweetstorm about his plans to reform America's mercantile policy:

The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies wanting to sell their product, cars, A.C. units etc., back across the border. This tax will make leaving financially difficult, but these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS.

Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn't tax them) or to build a massive military complex in the middle of the South China Sea? I don't think so!

At the risk of taking Trump literally, rather than seriously, I wonder if he actually thinks he can do this? It's not as if the president is allowed to unilaterally slap a 35 percent tariff on Carrier air conditioners or Ford Fiestas, after all. If Trump invokes the appropriate "national emergency" authority, he could impose a tariff on all air conditioners or all cars. Or he could impose a tariff on all goods from Mexico or all goods from China. But I think that's as far as his authority goes. He can't simply decide to punish one particular company.1

In the case of Mexico, of course, he can't do even this much unless he persuades Congress to exit NAFTA—and that has a snowball's chance of happening. He could, in theory, impose a 35 percent tariff on, say, telecom equipment made in China, but that would send up howls of protest from American businesses and almost certain retribution from China.

So...what's the plan here? The American business community, which would go ballistic over something like this, has been pretty quiet, which suggests they think it's just blather. That's my guess too. But I guess you never know. We overeducated elites like to say that stuff like this is just affinity politics—aka red meat for the rubes—but perhaps eventually we'll learn that we should have taken Trump literally after all.

1As far as I know, anyway. But I would certainly appreciate a detailed explainer on this from someone who's truly an expert.

So—about that call between Donald Trump and the president of Taiwan. First we have this:

A phone call between Donald Trump and Taiwan's leader that risks damaging relations between the U.S. and China was pre-arranged, a top Taiwanese official told NBC News on Saturday...."Maintaining good relations with the United States is as important as maintaining good relations across the Taiwan Strait," Taiwanese presidential spokesman Alex Huang told NBC News. "Both are in line with Taiwan's national interest."

And this:

The call was planned in advance with knowledge of Trump’s transition team and was the right thing to do, said Stephen Yates, a former U.S. national security official who served under President George W. Bush. Yates denied multiple media reports that he arranged the call, while adding that it doesn’t make sense for the U.S. to be “stuck” in a pattern of acquiescing to China over Taiwan.

Apparently several sources say that Yates was indeed the guy who helped arrange the call, but Yates denies it. You can decide for yourself who to believe. In any case, both sides claim it was done intentionally.

Was it a good idea? In Trump's defense, if you're going to do something like this, the only time to do it is right away. That's especially true if you want to use it as leverage. Who knows? Maybe Trump's team is planning to quietly pass along word that Trump is willing to maintain our status quo policy toward Taiwan (i.e., not formally recognizing the Taiwanese government), but only if China commits to doing something serious about North Korea.

Or maybe Trump has no bargain in mind at all, and just wants to change US policy toward China. It would be typically Trump to start out with a slap in the face so they know he means business, and then go from there.

Is this wise? I sort of doubt it, but I'm hardly an old China hand. And I have to admit that China hasn't gone ballistic, as many people predicted. Their response so far has been distinctly low-key:

China’s first official reaction, from Foreign Minister Wang Yi, was fairly benign — though it was firm in reiterating the One China policy, under which the United States formally recognized Beijing as China’s sole government....A follow-up statement from the Foreign Ministry on Saturday, noting that the ministry had filed a formal complaint with the United States government, was similar in tone. It urged “relevant parties in the U.S.” to “deal with the Taiwan issue in a prudent, proper manner.”

Whatever you think of all this, I'm pretty sure it was no accident. Whether it's meant just to shake up China; to act as leverage for a future bargain; or as a precursor to a policy change—well, that's hard to say. But there was something behind it. Stay tuned.

Steven Pearlstein suggests that Donald Trump's deal with Carrier is part of a larger strategy aimed at changing norms of behavior:

There was a time in America when there was an unwritten pact in the business world — workers were loyal to their companies and successful companies returned that loyalty....Then came the 1980s, and all that began to change as American industry began to falter because of foreign competition....So the social norm changed....Although the public never much liked the idea of closing plants and shipping jobs overseas, it no longer was socially unacceptable.

Now comes Donald Trump — in the public mind, a successful businessman — who as the new president, suddenly declares that the new norm is not longer acceptable, and he intends to do whatever he can to shame and punish companies that abandon their workers....He knows that he and his new commerce secretary will have to engage in a few more bouts of well-publicized arm twisting before the message finally sinks in in the C-Suite. He may even have to make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract. It won’t matter that, two years later, these highly publicized retaliations are thrown out by a federal judge somewhere. Most companies won’t want to risk such threats to their “brands.” They will find a way to conform to the new norm, somewhat comforted by the fact that their American competitors have been forced to do the same.

I mostly disagree with this. I think the "norm" Pearlstein is talking about here is actually just ordinary economic reality. During the postwar economic boom, American companies didn't need to offshore jobs, so they didn't. Nor did they need to lay off workers or downsize their companies frequently. America was the most efficient manufacturer around, and there was plenty of money sloshing around for everybody. So why invite trouble?

When the postwar boom came to an end, businesses changed. We learned that what we thought had been a permanent new norm, was no such thing. It was just a temporary, three-decade blip. Starting in the 80s, as economic growth leveled off, the business community returned to operating the same way businesses had operated ever since the beginning of the Industrial Revolution.

I suspect Pearlstein is right about what Trump is trying to do. He'll engage in some naming and shaming, and on a few occasions he'll try to set an example by going after companies in semi-legal or outright illegal ways. It might even work a little bit, and it will almost certainly work in a PR sense. But more generally, Trump can't keep the tide from coming in any more than any other president. It's not as if the offshoring phenomenon is peculiar to America, after all.

The good news, such as it is, revolves around automation. Within a decade or so, most manufacturing work will be so highly automated that it won't matter much where it's made. We're already starting to see signs of this. That will put an end to large-scale offshoring, but unfortunately, it will be even worse for blue-collar workers. We're on the cusp of an era when tens of millions of workers will be put out of jobs by automation, and we'd better figure out what we're going to do about that. But one thing is certain: whatever the answer is, it's not naming and shaming.