2016 Political Drama: Act I, Scene 4--the Comic Relief

The Stage is already crowded; biggest Clown Car of all enters in, honking furiously.  A masked figure dressed as a troll, with pursed lips and flaming bouffant hairdo, pops up, spewing invective in all directions.   The crowd laughs, groans, sighs--the Clown points in every direction, dishing out insults. The other clowns slink off to the corner of the stage, muttering angrily. 

Donald Trump is a showman, a media-savvy, wealthy blowhard with no scruples and no visible agenda. He has set a new standard for making a splashy entrance and gaining the short-term surge in the polls:  This is how it is done, amateurs. Several other Republican candidates have had their turns, this year as they did in 2012, but his was bigger. (He got me to say, "his was bigger"--Mission Accomplished!)  

Has he proved his point, or is there something left to do?  He will surely stick around through the first debate next month--will he use it to announce his new reality TV program?  It may be too big an ask to get actual voters or caucus-goers to select his name from among the list of more worthy candidates--those with actual governmental experience, some sort of political programs, a modicum of respectability. 

So far, though, he is hitting all the right notes to attract support from certain groups of Republicans: those who felt their last two Presidential candidates, John McCain and Mitt Romney, let them down by failing to be conservative enough.  Those who can blame the weakness of the job market on the undocumented Mexican migrants (or even on the legal immigrants).  Those who think the problem with government is insufficient business experience among politicians. Those who know nothing about the political issues but know that they are sick of professional politicians running the country. Those who despise the professional news media because of their elitism, their insider games and liberal tendencies.  Rush Limbaugh (who fits into most of those categories).

Every day Trump is a candidate, Hillary Clinton breathes easier because she can avoid the media circus and quietly move forward with her campaign.  Every day he remains in the race, the other Republican candidates who engage with him are subject to rude putdowns.  Every day he remains in the race, the Republicans' brand becomes more associated with his brand, which will not help them in the future with the 60 percent or more of American adults who disapprove of it.

The Republican establishment candidates are rightfully wary of the Trump effect; in the clever words of a Eugene Robinson column title (in the Washington Post), "Trump is a Farce to be Reckoned With" for them.  They need somehow to shun him without offending him too much.  The only thing worse for the Republicans in the Presidential general election than his effect on their ultimate candidate (who will not be Trump) would be if he pulls out and announces as a general election candidate running as an independent.  I am grateful for the poll by Langer Research for ABC News     which showed that Hillary Clinton's lead over Jeb Bush nationally went from 50-44 in a two-way matchup to 46-30 if Trump were to run as a third-party candidate (drawing 20% support).

My rough calculations off those figures:  2% don't know in all cases; 4% goes from Hillary to Trump, 12% from Bush to Trump, 2% from Bush to don't know (can't decide between Bush and Trump), and 4% goes from don't know to Trump (finally a non-politician they can support!)  That last 4% doesn't matter, as neither HRC nor the Jebster could get them, the 2% Republican don't knows end up going back to Bush (probably more). but the real point--something I think would be real--is the 8% net pickup in the margin that Hillary gets in those switching from the parties and wasting their vote. Even if it were only half that much, it would make the difference between a close race and a landslide win. So, we who are looking for the Democratic landslide win in 2016 (ever more likely, in my view) can only hope Trump and the Republican party regulars can't make peace and he goes out there to make them pay. He can do it, so he may.

For me, the most likely scenario is for Trump to pull out after "he's made his point"--whatever that is, probably after winning a primary somewhere, before he has actually to develop a set of meaningful policy positions--and there is one candidate who has already planned to be on the stage at that time: Ted Cruz.  Cruz has singularly come out in support of Trump's outrageous positions attacking Mexican immigrants, and while he disagreed on the blunt, insensitive assessment Trump made of McCain's Vietnam war experience as a POW, Cruz stands more with Trump than McCain.   Cruz is an opportunist, even more than Trump, who is just a shill and a

Deal...or No Deal?

I do miss the Howie Mandel gameshow (old episodes may be found on the GameShow channel), with the low-ball bids from the invisible Banker, the 30 gorgeous models with briefcases, the contestants buffeted by family, the crowd, the odds.  There is a show on the Italian TV network called "Affari Tuoi" (I'd translate it as "It's Your Affair", in the sense of "your business") which utilizes many of the same features, but with hand-picked folks from the various regions of the country (a sprinkling of the local beauties, but some quite the opposite) with lockboxes in place of the models with briefcases. 

This is the moment of the Big Deals, of reckoning with three cases of serious moral hazard.  Later will be the time when those deals fall apart.

First, the Iran nuclear weapons deal.  It seems that most of the red lines were overcome--I did not hear how the controversy on arms trading on conventional arms with Iran came out (one of the principal parties to the negotiation--Russia--was against continuing the ban); one way or the other, I figure it will happen, and it is probably exponentially harder to monitor successfully than nuclear arms development.

I see lots of reasons to support the agreement, and not many to oppose it.  For me, it is a starting point for encouraging Iran to be a positive contributor to the world community, and this is even more important than whether or not they want to complete a nuclear device.  We already have the worst state in the world--North Korea--as one of the nuclear club, and one in Iran's neighborhood--Israel--is an unacknowledged member. (Which makes Israel's hardline opposition somewhat hypocritical;  yes, they can argue that they should be the only country in the region to have nuclear weapons, that they are the most reliable--except when it comes to admitting their nuclear weapons program--that they are our allies, etc.  Doesn't mean the rest of the world has to agree with that argument.)

President Obama has said he will veto any attempt to block the deal, and that means something important, that Congress (or even the Senate) does not have to pass anything in a positive sense to approve the deal.  I wouldn't count on its occurring.   We can expect Iran to do everything in its power to work around the limits of the deal's reach, so the extra time setting up obstacles to that happening were well worth the time spent.  I would not expect Iran to renege on the deal, at least until Khamenei and the current President, Rouhani, are out of the picture.

Second, the Greece/Eurozone deal.  The 'no' on the the Greek referendum obviously didn't count for much with Greece's counterparties, who extracted a deal worse for the Greeks than the one the plebiscite rejected.  It is such a bad deal that Greek Prime Minister Tsipras has already disavowed the reforms which he is asking his Parliament to approve.  This is a deal that is doomed to fail; everyone tacitly sees that.  The Germans seem to have extracted some promises so that it will cost the Greeks when they fail; their policy has been a brutal, vindictive one that bodes ill for the Eurozone, and everyone else will notice that.  So, the discussion will probably move from the fate of Greece in the Euro to a restructuring of the deal to provide more sovereignty--probably in the form of some safety valves--for the rest of the members, who can see that what happened to Greece will eventually happen to them.

My short-term prediction:  Greece's Parliament does not have the votes to approve the package by the due date of midnight tonight (Europe time).  Tsipras will wait for a vote until he can count a sufficient number of 'yes' votes (many of which will have to come from outside his government coalition).  Then the Europeans will be in the position Greece was in--take it or leave it.  My guess is they will not take it, with the behavioral evidence being releasing funds to reopen the banks, and the discussion will resume again next week.  The shock to the markets (outside Greece) progressively becomes less, so the focus may turn back to what is best for Greece, which was certainly not the case in the marathon negotiations over the weekend.

Third deal--yet to be consummated--concerns Puerto Rico and a number of its state functions for which it can not pay the bills.  P.R. would like to declare Chapter 9 bankruptcy to reorganize its debts, but that action was specifically prohibited by the latest U.S. Bankruptcy Act a few years ago. The US government has stated firmly that there will be no "bailout", meaning appropriation of funds to cover the losses of the boricuan creditors.  The creditors refuse the idea of any new legislation to allow PR to declare bankruptcy--the applicability of which to debts created without that recourse would certainly be challenged in the courts.  They have a point; the pricing of the loans to Puerto Rico would have considered the fact that the territory could not resort to bankruptcy to discharge the debts, but there has always been the risk of default, and that has increased, to the creditors' detriment. The resolution I foresee would be a refinancing of the territory's debts, with higher interest rates, and some sort of guarantee on (at least some of) the new debts from the US government.

The one positive that seems to be emerging from this problem is that it will focus the US Congress on the economic issues of the territory and on consideration of its future.  I visited Puerto Rico frequently for business some 25 years ago, and it looks like very little has changed--except that there continues to be a talent drain of the best puertorriquenos to the US, one that is totally legal migration: it's not even immigration, and Donald Trump can do nothing about it (although I am sure he employs many of them in his enterprises).

I find it most interesting that Jeb Bush has come out  during his campaign in support of relief for Puerto Rico, up to and including statehood for the territory.   He alone of the Republican Presidential candidates (including nominal Hispanics Marco Rubio and Ted Cruz) has a strategy to try to gain Hispanic political support.  I  reviewed the somewhat paradoxical politics of the question of Puerto Rico statehood long ago:  the local party affiliated with the national Republican party is pro-statehood, while the one associated with the Democrats is in favor of continuing the status quo (indefinitely?) as a "commonwealth" territory, which is viewed by a plurality of Puerto Ricans as the best of both worlds, with regard to the US;  it gets tax benefits and investment money with less obligations.  This may be changing, though, as the current deal seems to be souring there.

The national Republicans might also reconsider their position if a vote on statehood actually approached, as it would seem unlikely that the state would go red in national elections just because of their support for statehood:  I would suspect the Puerto Rican statehood party would also suspect a trick.  One certain result if Puerto Rico became a state; Mississippi would be promoted out of  last place in most state tables of quality of life.  So that might be one state's delegation that could support the proposal.

'Europe' and 'Exit' are Words Invented by the Greeks....

...while "Grexit" and "Euro" are neologisms for which they bear no blame nor have any interest.

Explaining the referendum to be held tomorrow for the Greek voters is complicated, comparable to the games being played recently in Congress with the fast-track proposal for the trade deals.  On its surface, the Greeks are asked to approve (with a 'yes' vote) the final terms offered by the creditors to the Greek government, or (with a 'no' vote) to refuse them.  But a 'yes' is not quite a 'yes' to those terms, nor is a 'no' necessarily a refusal of an agreement to terms very much like them. The referendum itself is of questionable legality; it probably would not be binding on the Greek government, and certainly not on the creditors.  It should be viewed as a plebiscite, very much like a confidence vote on the Greek government's handling of the crisis.

Greek Prime Minister Tsipras has said he and his government would resign if the vote goes in favor of the proposition--that is, to accept the final offer of the creditors. Given that, I cannot agree with the argument, which I have heard, that Tsipras' best hope is for a 'yes' vote, which would (according to that logic) empower his government to agree to terms and settle the crisis. He, though, has been clear in his appeal to the Greek people:  vote 'no' if you are with us.

Despite the appeal to national pride in Tsipras' call for the referendum and the popular victory that his party won just a few months ago, it is by no means certain that Tsipras' side will prevail in the referendum.  For one thing, though it won a parliamentary victory as the leading party,  his Syriza party had less than 40% of the votes, and its unity has been strained by the turmoil.

A 'yes' vote would presumably lead to the fall of the government, though it is unclear what would replace it.  It is also unclear whether the terms offered by the creditors would still be on offer, as the Greek government has defaulted since then on a massive payment due to the International Monetary Fund.  The terms of surrender--acceptance of continued "austerity" in the government budget-- might be even more disadvantageous, and those on offer were bad enough for the prospects of the Greek economy.

Syriza's appeal, beyond its strong base among the youth, would be specifically to pensioners, or those near to retirement age.  The terms which ultimately caused the failure of the talks were on the restructuring of pensions:  Syriza sought to defend the pensions from further cuts, while agreeing to some reforms (such as eligibility criteria).  Like several other European societies, retirees are a large and growing portion of the Greek populace.

The Greek voters have only the choice between bad outcomes--to simplify, 'yes' would lead to depression, and 'no' to economic chaos, as Greece's continued participation in the Eurozone is now in serious doubt.  Withdrawal from the euro and reintroduction of the drachma would be painful in any case, but could be catastrophic if it were sudden and not properly planned.  In particular, those who have any wealth in Greek banks or investments would likely suffer huge losses from the revaluation of assets, while productive investment could be hampered for decades.

The Greek government insists that a 'no' vote will empower it to re-negotiate terms of refinancing its debts--its leaders do not have the declared intention, as yet, to withdraw from the euro or from the European Community.  I do not see this outcome as likely, though.  It should have been possible for an agreement to have been reached, considering the costs to either side of failure (presumably, continued Greek defaults will cost European creditors, which are now mostly governments, billions). The failure occurred because both sides considered their own positions to be strong, and thus they did not need to make the necessary concessions.  These conditions will still seem to be true (barring a majority vote for 'yes', i.e. surrender to the dictated terms), whether or not it will be the case. A 'no' vote is not going to change the creditors' minds; it would only convince them that the Greeks are not worthy of their forbearance and that economic divorce is inevitable.

My counsel, under the circumstances, would be for the Greek voter to vote 'no', accepting the possible exit from the Euro (which Greece should never have been allowed to enter, in the first place).  The Greek government would remain in place, and it would then have a series of tasks to work through: to plan a progressive exit from the Euro along with the reintroduction of the drachma in an orderly fashion, and to negotiate the terms of continuance within the European Union, on a basis similar to that enjoyed by several other countries in the EU that have retained their national currencies and a greater degree of control over their domestic economies (such as Great Britain and Sweden).  

I expect that will be possible, in spite of the fact that the Greek government will be sorely tempted to continue to come up short on payments to their European creditors, unless they are granted some relief. The longer-run issue will be whether the Greek disease will be contained, and not spread to other Southern European economies, and whether the stress on the Euro will have major downstream effects on the Eurozone and on the EU as a whole.  Meanwhile, Greece's message to Europe is that the Euro operation is being run for the benefit of the Germans (and possibly a few others), but not for the general benefit of Europeans, and that is a message that will resonate in a number of other countries.