Friday, August 16, 2019

Want To Halt The Spread Of Socialist Ideas On American Campuses? Send All First-Year Students To Hong Kong For Orientation Week.

Let’s send the Class of 2023 to Hong Kong for Orientation Week instead of the university to which they have been admitted.  Let American students meet with their Hong Kong counterparts to see why Hong Kong youngsters are on the front line risking life and limb for Liberty and standing up against socialist Tyranny in China.

For Hong Kong, Liberty is not an abstract ideal.  It is life itself.  Socialism is not an abstract ideal needing only good men and women to achieve its noble goals. It is Tyranny.

There is no greater struggle going on in the world today between Liberty and Tyranny than in the streets of Hong Kong.

Tuesday, August 13, 2019

Hong Kong Residents Are Writing Their Chapter In The Annals Of Freedom

Against impossible odds, Hong Kong youngsters and their supporters among the population, are making a remarkable stand for Liberty.  Ten weeks and counting, they are resisting a proposed law permitting extradition of Hong Kong residents to China and demanding  the right to elect their leaders, not having them picked by China.

All four Chief Executives of Hong Kong, ostensibly legitimized through controlled elections, have been dismal failures.  The first, Tung Chee-hwa (1997-2005), resigned during his second term following a futile attempt to impose an anti-subversion law.  Tung now blames America for inciting and supporting the resistance.  The second, Donald Tsang (2005-2012), spent time in jail on corruption charges after finishing up the balance of Tung’s term and completing his five-year term as Chief Executive.  The third, C.Y. Leung (2012-2017), got caught up in the Umbrella Revolution, was tagged with financial hanky-panky, and declined to run for a second term.  Now Carrie Lam, by far the worst, could not leave well enough alone.  She forgot Mao Zedong’s great essay:  A Single Spark Can Start A Prairie Fire.”  She lit the match, poured gasoline on the fire, refuses to withdraw the proposed extradition law, and reiterates she will do a better job of listening to the people of Hong Kong in the future to help restore stability and prosperity. Credibility gap, anyone?  Carrie Lam, her government, the Hong Kong Police, and China have all lost face.  If this all ends badly, as happened in Tiananmen, Lam will go down in history as the woman who destroyed Hong Kong.  Lam should have retired to Britain with her family in 2012 as she then hinted she might.

Hong Kong residents are risking life and limb to maintain their civil liberties (echoing Patrick Henry).  Indeed, were a referendum held with two options, (1) restore British rule or (2) continue as a Special Administrative Region of China, Hong Kong residents would doubtless choose Britain.  Must be a bitter pill for Chinese President Xi Jinping to swallow.  Too bad he didn’t learn from China’s great leader Deng Xiaoping, who invented the “One Country, Two Systems” formula.

Monday, August 5, 2019

Waiting For Godot With American Characteristics For The Modern Era

The Inspector General’s report on the origins of the Russian Collusion story (e.g., the FISA court warrants) was imminent last spring, definitely in June, for sure in July, well past due in August, now unquestionably due in September. Ditto for Attorney General Barr and other Justice Department investigations.  Or maybe not!  Increasingly probably not.  I would not be surprised if AG Barr’s investigations, like former FBI Director James Comey’s description of Hillary’s emails, result in “no reasonable prosecutor would bring a case.”  So, for conservatives or Trump supporters out there, don’t get your hopes up.

Is there a Chinese trade deal anywhere in our future?  Maybe.  Maybe not.  An intensifying trade war with China will likely further depress equities and slow global growth,    An agreement would be good for equities and growth.  But a trade agreement will not change the underlying trends.  China will not honor any promise to stop intellectual property theft or halt cyberattacks against U.S. firms.  The merchandise trade deficit with China will not decline.  Perhaps, deep down, Trump knows this, or maybe his economic advisers have failed to explain the balance of payments to him.  In either case, so long as he stands strong, or appears to stand strong, on supporting manufacturing jobs in swing Midwestern states, he should win reelection.  It worked in 2016.

Will budget deficits decline in our near-term future?  President Trump is delighted with the Defense Department increases and Democrats with social spending increases in the two-year budget agreement.  Trump says there will be plenty of time to make cuts in his second term, except that cuts won’t happen.  There will be more overseas military contingencies that require more defense spending.  In return, Democrats will get dollar-for-dollar increases in social programs.  Budget deficits and public debt, like old man river, will just keep rolling along.  Low interest rates make current debt financing manageable, but wait until the next recession hits.  Two trillion dollar deficits will suddenly appear.  Investors may begin to worry.  Who knows how markets will handle two trillion dollar deficits?

Will conservative ideas make a comeback in our leading citadels of higher learning?  Not for at least another 20-30 years, if then!  As the few remaining conservative elderly White males retire, they will be replaced by younger women and under-represented minorities, who are 10-15 percentage points to the left of the already overwhelmingly left-liberal faculties.  The left keeps marching on, growing stronger by the day.

Lots of other mid-summer musings in my briefcase, but let’s try to enjoy the rest of the summer before the new school year begins and the political silly season intensifies.

Monday, July 29, 2019

Why Are Americans Much Richer Than Mexicans?

According to the International Monetary Fund, per capita gross domestic product (GDP) in purchasing power parity (PPP) in the United States in 2017 was $59,495.  In Mexico, it was $19,480, 32.7% of that in the U.S.

The income of the average American is three times that of a Mexican, a ratio that has been relatively constant since 1990.  Mexicans have not narrowed the gap in purchasing power in close to three decades.

“Why” is a subject for serious research.  Answers lie in economic, political, cultural, and historical factors for later posts.  Here I want to ask a related question.

The conclusion of the Mexican-American War resulted in the 1848 Treaty of Guadalupe Hidalgo (the Mexican Cession).  The United States government paid Mexico $15 million for 529,000 square miles of territory that included the current states of California, Nevada, Utah, Arizona, one-half of New Mexico, one-quarter of Colorado, and a small sliver of Wyoming.

The U.S. paid another $10 million for the Gadsden Purchase of 1853, an 29,670 square miles region along Southern Arizona and Southwestern New Mexico.

Does anyone believe that the income of the residents in these 558,670 square miles of land would be higher if the territories had remained part of Mexico rather than being ceded to the United States? 

No reasonable person could possibly say yes.

Does anyone believe that Mexico will significantly close the gap in the next few decades?  What would it take?  Will the United States have to coexist with much poorer neighbors south of its border for years to come?  If so, what does that portend for the future of American politics and society? 

Wednesday, July 24, 2019

Trump Could Lose His Trade Dispute With China But Win Reelection

Chinese purchases of U.S. soybeans could influence President Trump’s reelection prospects in 2020.

In 2016, Trump won the Midwestern agricultural states of Iowa, Nebraska, Indiana, Ohio, South Dakota, North Dakota, Missouri, Arkansas, and Kansas.  These 9 states are among the top 11 soybean producing states; the other two are Illinois and Minnesota, both heavily Democrat states.  Without the support of the agricultural Midwest, Trump could be a one-term president.

Since 2000, U.S. agricultural exports to China rose from $3.0 billion to peak at $29.4 billion in 2014, but stayed strong at $23.8 billion in 2017.  Indeed, China is the top market for U.S. agricultural exports (followed by Canada and Mexico).  Then the bottom fell out of China’s imports of U.S. farm products to $9.3 billion in 2018.  Soybeans make up 52% of U.S. agricultural exports to China.  In Trump’s words, “Not Good.”

What happened?  Following Trump’s first wave of tariffs on certain imports from China, China levied retaliatory tariffs on almost all U.S. agricultural and food exports; in particular, 25% tariffs on U.S. soybeans.  Prior to the tariffs, almost half of all soybeans produced in the U.S. was exported to China.  After the tariffs were imposed, U.S. soybean exports to China dropped precipitously.  U.S. producers were not able to replace lost sales to China with increases to other countries.  Prices fell and unsold soybeans piled up.  If producers of soybeans and other agricultural products blame Trump’s tariffs on Chinese goods for their problems, Trump could risk losing their votes in 2020 and perhaps some of the agricultural states he won in 2016.

It’s no accident that China imposed retaliatory tariff on agricultural products, especially soybeans.  China knows that Trump is vulnerable to reduced agricultural exports to China.  Trump tweets that he is waiting for China to fulfill its promise to buy more U.S. farm products, but the Chinese government has not yet rolled back its tariffs and Chinese importers have been slow to act.  As part of a trade deal, China will likely reduce its agricultural tariffs and Chinese importers will likely resume buying soybeans.

If a trade deal is signed, both parties will claim victory for themselves and global trade.  A trade deal that maximizes economic freedom for consumers and producers who rely on imports in the production of goods is a good thing.  Trump is unlikely to get a genuinely enforceable intellectual property rights agreement or an end to Chinese subsidies.  But if Chinese orders for U.S. agricultural products ramp up, Trump will claim both an economic and political victory.

Will a trade deal reduce Chinese exports to America?  Probably not.  Will a deal substantially increase U.S. exports to China?  Probably not.  Trump will have ranted and raved about China “ripping off the United States” with nothing concrete to show for it.  But if the Midwestern industrial and farm states vote for him in 2020, not much harm will have been done, and things will go back to “normal.”

Monday, July 22, 2019

The Pros and Cons of Trump’s Tariffs On Chinese Products

In July-August 2018, President Trump imposed 25% tariffs on $50 billion of Chinese high-tech goods imported into the United States.  He followed in September with 10% tariffs on another $200 billion of Chinese products, which he subsequently raised to 25% on May 10, 2019.  The additional $200 billion of Chinese imports included lamps, air conditioners, vacuums, personal grooming items, handbags, raincoats, knitted hats, baseball gloves, headgear, bicycles, tuna, halibut, salmon, pears, dog leashes, collars, harnesses, diaries, toilet paper, tobacco, hammers, faucets, screwdrivers, and other consumer goods.

If the two sides fail to reach a deal by some unspecified date, President Trump has threatened to impose 25% tariffs on an additional $300 billion of Chinese products.

Here are some numbers to assess the impact of Trump’s current and threated tariffs.  In calendar year 2018, the U.S. imported $540 billion of Chinese goods, exported $120 billion of goods to China, resulting in a merchandise trade gap of $420 billion.  (The corresponding numbers for 2017 are $505 billion [his oft repeated number], $130 billion, and $375 billion.)

President Trump refers only to merchandise trade, not the current account, which includes services and factor payments.  The U.S. runs a positive balance on services with China, thus reducing the overall trade gap.

During September-December 2018, U.S. imports of Chinese goods amounted to $195 billion, a small increase of $9 billion over $186 billion for the comparable September-December of 2017.  Trump’s tariffs of 25% on $250 billion of Chinese goods seems to have had no perceptible impact on the dollar value of Chinese products imported  into the U.S in the last four months of 2018.

The pattern changed in January 2019.  During January-May 2019, U.S imports from China fell $25 billion to $180 billion compared with the same five months of 2018.  Since U.S. GDP in Q1 of 2019 grew 3.1%, it’s hard to blame the decline of $17 billion in January-March 2019 year-over-year on slowing growth.

President Trump talks of billions of dollars collected in tariffs.  If fully collected, a 25% tariff on $250 billion in goods from China will yield $62.5 billion in annual revenue.  If Trump were to impose a 25% tariff on all imported Chinese goods (assume $500 billion in value), annual revenue would total $125 billion.

Some of the $125 billion would be borne by Chinese producers who lower their prices and some by American importers who reduce their prices to maintain a competitive edge.  Some would be borne by workers who lose their jobs and some by consumers in higher prices.  The precise percentages borne in each category are statistical guesswork based on various economic assumptions about elasticities (never mind that here), but Americans will pay some of the tariffs, a transfer from U.S. producers, retailers, workers, and consumers to the U.S. Treasury.  

Let’s put tariffs on Chinese goods in perspective.  July 2019 federal budget estimates for Fiscal Year 2019 (October 1, 2018 through September 30, 2019) are $4.529 trillion in spending, $3.438 trillion in revenue, with a deficit of $1.092 trillion.

Tariffs of $62.5 billion, the current level, amount to 21 days of the federal deficit, 7 days of revenue (non-borrowed), and 5 days of expenditure.

If Trump applies 25% tariffs on all Chinese imports, $125 billion in revenue amounts to 42 days of the deficit, 13 days of revenue, and 10 days of spending.

Billions are big numbers, but tariffs on Chinese imports are a small percentage of federal borrowing, revenue, and spending.  Worse, from these billions must be subtracted slower growth, less business activity, and lost jobs, resulting in less revenue from income, corporate, and social insurance taxes.  Trump’s tariffs could be fully offset or more in lost revenue from other taxes.

So, why impose them?  Maybe Trump’s economic advisors failed in explaining the balance of payments to him, or the impact of tariffs on economic activity, or gave up trying given his obsession with bilateral merchandise trade.

Perhaps President Trump believes that tariffs will force China to agree to more favorable trade practices, maybe necessary for U.S. national security and protection of next generation technology, and preservation of jobs in key political battleground states to enhance his reelection prospects.

Where do I come out on Trump’s trade policy?  The idea of any of the current Democrat candidates taking over the White House is too painful to bear.  If jobs in the battleground states are enhanced by tariffs on Chinese goods, so be it.  Apart from that and national security, there is little, if any, case to be made for U.S. benefits of tariffs on Chinese goods.  Preserving economic freedom, with a few caveats, is a high priority.

Monday, July 15, 2019

Summer Reading For The College Class of 2023

Most colleges and universities have a summer reading program.  A faculty member or high-ranking administrator typically selects three books (or more) and sends them to every first-year and transfer student.  When they arrive on campus for orientation week, they discuss the readings with fellow students, faculty, and sometimes the authors of the books.

The books that follow are one prominent university’s selections for the past 16 years:

2019:  Tommy Orange, There There; Cary McClelland, Silicon City: San Francisco in the Long Shadow of the Valley; Multiple authors, edited by Toni L Griffin, Ariella Cohen, David Maddox, The Just City Essays: 26 Visions for Urban Equity, Inclusion and Opportunity,

2018:  Chang-rae Lee, Native Speaker; Edwidge Danticat, Brother, I'm Dying; Yuri Herrera, Signs Preceding the End of the World

2017:  Yaa Gyasi, Homegoing; Elizabeth Kolbert, The Sixth Extinction: An Unnatural History; Jesmyn Ward, Salvage the Bones

2016:  NoViolet Bulawayo, We Need New Names; Rebecca Solnit, A Paradise Built in Hell; Justin Torres, We the Animals

2015:  Walter Isaacson, The Innovators; Tobias Wolff, This Boy’s Life; Lalita Tademy, Cane River

2014:  Ruth Ozeki, My Year of Meats; Richard A. Muller, Physics for Future Presidents: The Science Behind the Headlines; Lauren Redniss, Radioactive: Marie & Pierre Curie: A Tale of Love and Fallout

2013:  Arlie Russell Hochschild, The Outsourced Self; Chad Harbach, The Art of Fielding; Loung Ung, First They Killed My Father

2012:  Michael Kimmelman, “My Kid Could Paint That” video; Chuck Klosterman, Fargo Rock City: A Heavy Metal Odyssey in Rural North Dakota; Ge Wang, Smule app

2011:  Geraldine Brooks, March; Stephen Carter, The Violence of Peace: America’s Wars in the Age of Obama; Nathaniel Fick, One Bullet Away: The Making of a Marine Officer

2010:  Anne Fadiman, The Spirit Catches You and You Fall Down; Tracy Kidder, Strength in What Remains; Joyce Carol Oates, The Undesirable Table (From the collection “Will You Always Love Me?”)

2009:  Lan Samantha Chang, Hunger; Malcolm Gladwell, Outlier; Abraham Verghese, My Own Country: A Doctor’s Story

2008:  Lynda Barry, One Hundred Demons; Junot Diaz, The Brief Wondrous Life of Oscar Wao; ZZ Packer, Drinking Coffee Elsewhere

2007:  Lucille Clifton, Good Woman; N. Scott Momaday, The Way to Rainy Mountain; Nancy Packer, Jealous Hearted Me

2006:  Tracy Kidder, Mountains Beyond Mountains; Julie Orringer, How to Breathe Underwater; Khaled Hosseini, The Kite Runner

2005:  David Henry Hwang, M Butterfly; Jamaica Kincaid, Annie John; Tobias Wolff, Old School

2004:  Jeffrey Eugenides, Middlesex; Richard Rodriguez, Brown; Danzy Senna, Caucasia

Is there a pattern in the selection of books for summer reading.  To find out, I read the description of each book on Amazon.com.  Ten books were a politically or ideologically neutral presentation of a specific topic.  Four books were an individual or family story bereft of ideology or politics.

The other 34 books were politically and/or ideologically left-liberal in outlook.  Not a single one of the 34 books was politically or ideologically right-conservative in outlook.

Let me repeat that.  Not a single book was politically or ideologically conservative in 16 years of summer reading at this prominent university.  Not one.  First-year student orientation is really student indoctrination.

The highest officials at this university claim that diversity of political beliefs is as important as diversity of skin color, gender, sex, religion, etc. in achieving a wide expression of values and ideas in higher education.

I’m from Missouri, the “show me” state.  It’s easy to talk the talk of diversity of political belief.  So far, it’s hard to see any.  Sixteen orientations have not included a conservative book for discussion during orientation week.

PS.  I encourage interested readers to examine reviews and summaries of the 48 books to find one with an explicitly conservative theme.  Please post any you find in the comments section.

PSS.  I did not name the university or its faculty and administrators that selected the books for reading.  An analysis of most elite schools would yield similar results.  Please post in the comments any conservative books you found in an any elite university’s summer reading program.

Tuesday, June 18, 2019

Why More Than A Million Hong Kong Residents Are Demonstrating Against A Proposed Law That Would Allow Hong Kong Government Officials To Extradite Them To China For Prosecution.

On June 12, 2019, over a million Hong Kong residents took to the streets to protest a proposed law that would permit the Hong Kong Government to extradite residents, tourists, and foreign businessmen to China for prosecution (which could mean confiscation of wealth, torture, forced confessions, imprisonment, or worse), if mainland officials charge them with breaking a mainland law.  Hong Kong Chief Executive Carrie Lam, after meeting with mainland officials across the border in Shenzhen on June 14, 2019, announced the next day an indefinite suspension of moving forward with passage of the law.  Opponents of the extradition measure continued demonstrating on June 16-17, demanding that the Hong Kong Government withdraw, not just suspend, the proposed law  (a Google search on Hong Kong provides hundreds of articles, essays and videos explaining why Hong Kong residents fear extradition to China).

Let’s be clear.  This was not a demonstration in support of democracy as was the Umbrella Revolution of 2014, although Hong Kong people would like to have democracy.  Rather, it was a demonstration in support of Hong Kong’s British colonial heritage--the rule of law, an independent judiciary, civil liberties, and free markets--as against China’s Communist Party directed judicial system.  Some demonstrators even waved the British flag and held portraits of Queen Elizabeth II.

I have written two books on Hong Kong’s history as a British colony, Value For Money:  The Hong Kong Budgetary Process (1976) and Hong Kong: A Study in Economic Freedom (1979), and co-authored two books on Hong Kong’s future, Forecasting Political Events: The Future of Hong Kong (1985) and Red Flag Over Hong Kong (1996).  The latter two predicted what would happen to the economic and political liberties enjoyed by Hong Kong people after the transfer of sovereignty from Britain to China on June 30, 1997.  All four books are available for free download at my website, alvinrabushka.com.  They help explain why Hong Kong people have been engaging in the greatest mass demonstrations in the territory’s history.

Under Deng Xiaoping’s “One Country, Two Systems” formula, Hong Kong people were promised a high degree of autonomy, that they could keep their social, economic, and political systems free from mainland control for 50 years until June 30, 2047.  China’s National People’s Congress enacted a mini-constitution, the Basic Law, for Hong Kong, which on paper guaranteed Deng’s promise.  But Deng is long since gone and Xi Jinping is no Deng Xiaoping.  China has already reneged on some of its promises to Hong Kong people.  But the proposed extradition law is by far the most dangerous encroachment, putting every resident at risk of the midnight knock on the door.  Its passage would mean the end of the most basic liberty of all, the right to life, 28 years before 2047.

We’ll see if the demonstrations can continue long enough to force the withdrawal of the proposed law.  June in Hong Kong is beastly hot and humid and people still have to earn a living.  But as Mao Zedong wrote, “ASingle Spark Can Start A Prairie Fire.”

Tuesday, April 9, 2019

Why Students Attending Elite Universities and Colleges Are Attracted To Socialism

The newest categories of students receiving preferential admission at elite universities and colleges are First Generation (households in which one or both parents did not attend college) and Low Income (households that cannot afford the cost of tuition and fees).  FG students make up as much as 20% of admissions and LI up to 27%.

Elite schools can offer many slots to low-income households because endowment income, annual gifts, and grants and scholarships from states and the federal government offset much of the cost of attendance.

The U.S. Department of Education (IPEDS) collects data from four-year colleges and universities and presents their full cost and after-aid cost in a standard format.

Average cost before aid:  tuition, other costs (books and on-campus room and board)

Average cost after aid

Average cost after aid by Household Income:

            Less Than $30,000
            $30,001 - $48,000
            $48,001 - $75,000
            $75,001- $110,000
            $110,001 or above

The most exclusive schools with the largest endowments and annual gifts are very generous, waving most or all expenses for families with household income below $75,000 and waiving tuition for those with income up to $125,000.

The table that follows shows the average cost before aid and the average after-aid cost for households with income below $30,000, between $30,001-$48,000, and $48,001-$75,000,


Average Cost Before And After Aid For HouseholdsBelow $75,000 in Annual Income ($)
Average Average Cost Average Cost
Cost for HI HI 30,001- HI 48,001-
School Full Cost 30,000 48,000 75,000
Princeton 61,860 1,348 1,771 6,224
Harvard 64,400 -230 632 3,392
MIT 63,250 7,432 4,727 5,247
Columbia 69,084 10,917 6,596 7,648
Chicago 70,100 3,620 2,289 4,672
Yale 66,445 4,978 4,392 6,896
Stanford 64,477 2,548 3,047
Duke 67,005 -1,070 827 7,805
Penn 66,800 7,755 5,323 12,968
Northwestern 68,060 6,416 9,054 11,480
JHU 65,496 14,236 9,384 13,448
Caltech 63,471 874 10,227 10,864
Dartmouth 67,044 15,604 7,316 18,324
Brown 65,380 5,335 5,459 12,181
Vanderbilt 63,532 1,168 6,043 11,146
Cornell 65,494 14,028 10,652 15,413
Rice 58,253 7,206 6,988 9,595
Notre Dame 64,665 8,838 13,451 13,979
UCLA 33,391 8,233 9,559 12,593
Wash.U. 67,751 5,716 6,580 9,528
Williams 66,340 2,780 3,795 8,188
Amherst 66,572 5,311 10,383 11,372
Swarthmore 64,363 6,120 4,422 16,603
Wellesley 63,390 8,204 9,948 12,150
Bowdoin 63,440 5,866 9,246 15,195
Carleton 64,420 16,366 11,408 15,350
Middlebury 63,456 5,141 9,505 11,186
Pomona 64,870 5,832 8,153 7,183
ClareMcKenna 66,325 7,089 9,083 7,182
Davidson 62,894 6,643 8,468 13,225

Students from families with income less than $30,000 can attend Princeton for an annual cost of $1,348 and only $6,224 up to an income of $75,000.  (A minus number means that the school is paying a student to attend.)  And so on in varying degrees for the other 29 elite universities and colleges.   No household with annual income below $75,000 pays over $16,000.  The cost of attending an elite school is lower than most state universities.

Why are students in elite schools attracted to socialism?  Socialism is redistribution of income directed by a government.  (Redistribution can be voluntary through charity.)  Many students attending elite schools are beneficiaries of redistribution.  It’s reasonable for them to believe that if America is rich enough to redistribute income to them to attend elite schools, it should be rich enough to redistribute income to everyone to bring about an equitable distribution of income for all.

In addition, almost every university has a Center for the Study of Inequality.  Faculty in these centers strive to identify the degree of inequality that exists in the U.S. and recommend  government policies to produce a more even distribution of income.

The growth in endowment and investment income, gifts, and federal and state aid that markedly reduces the cost of attending an elite school provides support for redistribution.  No amount of socialist failures around the world will change students’ minds.

How many students understand that gifts for endowment, gifts for annual expenditure, and government grants come from those who succeed in business in a market economy.  The top 10% of income earners pay 71% of federal income taxes and a comparably large share of state income taxes, which finances government grants to students.  Without the income and profits earned in America’s market economy and the disproportionately high share of taxes they pay, there would be much less money to redistribute.

Sadly, the well-to-do serving as university trustees are at the forefront of supporting the programs of redistribution that make elite education available to students from low-income households.  In so doing, they reinforce student demands for more redistribution (more socialism).  This situation will intensify in the coming years.