The battle of the economic giants rages on.

Today, James Galbraith wrote an open letter to Alan Krueger, Austan Goolsbee, Christina Romer, and Laura D’Andrea Tyson in response to their open letter earlier this week warning against the less well-known economist Gerald Friedman. Friedman had the temerity to project that Bernie Sanders’s policies would result in a 5.3 percent growth rate, which the four economists—all former chairs of the Council of Economic Advisers—deemed “extreme.”

One of Galbraith’s main problems is that the CEA letter does not provide any detailed explanations.

It is not fair or honest to claim that Professor Friedman’s methods are extreme. On the contrary, with respect to forecasting method, they are largely mainstream. Nor is it fair or honest to imply that you have given Professor Friedman’s paper a rigorous review. You have not.

He also accuses them of having “lit a fire” under Paul Krugman, who has used his platform at the New York Times to denounce the Friedman paper as “deep voodoo” and “fairy dust,” without providing the aforementioned careful economic assessments. David Dayen made a similar argument today in an excellent New Republic article, stating, “Instead of going point by point on those agenda items, the CEA chairs decided to argue from authority,” resulting in a “‘do you know who I am?’ style of argument.”  

If this all seems a little like the Real Housewives of Economic Wonkery, it’s because it is. I, for one, am excited for the next open letter installment. 

December 12, 2018


Theresa May has her party’s confidence—sort of.

British Prime Minister Theresa May won a confidence vote taken among Conservative members of parliament Wednesday evening, London time. She received 200 yes votes (or 63 percent) as against 117 no votes. While this victory allows her to remain head of the Conservatives for another year, it also reveals the existence of a sizable opposition within her own party. Normally, in a parliamentary democracy, a leader needs not just the majority of his or her party but a supermajority. For point of reference, Margaret Thatcher resigned as Prime Minister in 1990 when she got the support of 204 Conservative members of parliament (or about 55 percent) in a no-confidence vote.

With May having more than a third of her own party against, the Brexit agreement she has forged looks dead in the water. The deal involves too many ties to Europe to please hard-core Brexit advocates while it severs too many ties to please European Union supporters. Nor is May in a position to negotiate a new deal, since the EU has taken a  take-it-or-leave-it position. May’s one path forward might be to push for another Brexit referendum.

May continues to be attacked by figures across the spectrum. Jacob Rees-Mogg, a Conservative Member of Parliament on the right-wing of his party, said in an interview, “The prime minister must realize that under all constitutional norms she ought to go and see the Queen and resign.” Jeremy Corbyn, head of the Labour Party, tweeted a similar comment:


Michael Cohen gets three years; the National Enquirer got a deal.

On Wednesday, Michael Cohen, President Donald Trump’s former lawyer and longtime fixer, was sentenced to three years in prison in a case that also implicates the president. The heart of the case is the secret payment of hush money to alleged former lovers of the president in violation of campaign finance laws. Cohen blamed his fate on “blind loyalty” to Trump. “Time and time again, I felt it was my duty to cover up his dirty deeds, rather than listen to my own inner voice,” Cohen said in packed courtroom. “My departure as a loyal soldier to the president bears a very hefty price.”

In a related case, Manhattan federal prosecutors made public for the first time the fact that they have a non-prosecution agreement with American Media Inc. (AMI), which owns the National Enquirer. The tabloid paid $150,000 to Karen McDougal, an alleged former lover of Trump, and then buried the story she sold them.

In a statement, prosecutors said, “As a part of the agreement, AMI admitted that it made the $150,000 payment in concert with a candidate’s presidential campaign, and in order to ensure that the woman did not publicize damaging allegations about the candidate before the 2016 presidential election.” Prosecutors said that AMI provided “substantial” assistance to the government. The co-operation of AMI will make it harder for President Trump to argue that Cohen was acting as a rogue operator. The president has longstanding ties to David Pecker, the chief executive of AMI.

Scott Olson/Getty Images

The secretary of state has accused China of hacking the Marriott.

Appearing on Fox and Friends on Wednesday morning, Secretary of State Mike Pompeo accused the Chinese government of being the perpetrators of one of the biggest known computer hacks in history: the theft of the reservation database of the Marriott hotel chain, which could have compromised the information of up to 500 million people. Pompeo claimed that hackers supported by the Chinese government have “have committed cyberattacks across the world.”

Pompeo’s words are the highest-level American accusations against China on this issue. Previously, The New York Times and other outlets had quoted lower level and sometimes unnamed government sources blaming China.

“The cyberattack on the Marriott hotel chain that collected personal details of roughly 500 million guests was part of a Chinese intelligence-gathering effort that also hacked health insurers and the security clearance files of millions more Americans, according to two people briefed on the investigation,” the Times reported on Tuesday. “The hackers, they said, are suspected of working on behalf of the Ministry of State Security, the country’s Communist-controlled civilian spy agency.”

The decision to highlight the Marriott hacking might be connected with the ongoing trade war the Trump administration has initiated against China. Hostility has increased on a host of issues in past weeks: from the attempted extradition of Huawei executive Meng Wanzhou to increased military tensions on the South China Sea.

President Trump has suggested that he could intervene to release Meng, and that her arrest in Canada was a political act.

Alex Wong/Getty

Trump believes the public will “revolt” if he is impeached.

In an interview with Reuters conducted in the Oval Office, President Donald Trump dismissed the possibility of impeachment. “It’s hard to impeach somebody who hasn’t done anything wrong and who’s created the greatest economy in the history of our country,” Trump said. “I’m not concerned, no. I think that the people would revolt if that happened.”

Trump also blamed the payment he made to Stormy Daniels on his former attorney Michael Cohen. The president further disputed that the payment was a criminal offense, and indeed argued it was not a violation of any sort.

Democrats, Trump insisted, had a choice to either work with him or to fight him. “We’re going to go down one of two tracks. We’re either going to start the campaign and they’re going to do presidential harassment. Or we’re going to get tremendous amounts of legislation passed working together. There’s not a third track,” he told Reuters. “Look, they’ve been looking for two years about collusion. There’s no collusion.”

As often in the past, he tried to deflect attention from his own scandals by calling attention to the alleged misdeeds of Bill and Hillary Clinton. “Why doesn’t somebody talk about that?” he wanted to know.

December 11, 2018

Greg Baker/AFP/Getty Images

Did China just detain a former Canadian diplomat to retaliate for the arrest of a Chinese executive?

Michael Kovrig, once a Canadian diplomat stationed in Beijing, has been missing for two days in China. He currently works as a consultant to the think tank International Crisis Group, which provides security consulting.

“International Crisis Group is aware of reports that its North East Asia Senior Adviser, Michael Kovrig, has been detained in China,” a statement from the organization states. “We are doing everything possible to secure additional information on Michael’s whereabouts as well as his prompt and safe release.”

On Saturday, Canada had arrested Meng Wanzhou, an executive in the Chinese telecommunication firm Huawei. Meng faces possible extradition to the United States for breaking a sanction against trade with Iran.

The Chinese government has strenuously objected to this arrest and there were fears of reprisals against Canadians in China. In a statement, the Chinese government said, “China strongly urges the Canadian side to immediately release the detained person, and earnestly protect their lawful, legitimate rights, otherwise Canada must accept full responsibility for the serious consequences caused.”

It’s unclear whether the Kovrig’s detention is an attempt to punish Canada for Meng’s arrest. However, some observers, like Kenneth Roth of Human Rights Watch, are drawing the possible connection.


“I am proud to shut down the government for border security,” says Trump.

In an awkward meeting with incoming House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer, President Donald Trump said that he was willing to shut down the government if he didn’t get funding for his border wall. Going further, the president said he would take full responsibility for such an eventuality. 

“If we don’t get what we want, one way or the other, whether it’s through you, through military, through anything you want to call, I will shut down the government,” Trump said. “And I am proud. I’ll tell you what. I am proud to shut down the government for border security, Chuck. Because the people of this country don’t want criminals and peoples that have lots of problems and drugs pouring into the country. So I will take the mantle. I will be the one to shut it down. I’m not going to blame your for it.  The last time you shut it down, it didn’t work. I will the mantle of shutting down. I’m going to shut it down for border security.”

During the exchange, Schumer was smiling, as well he might since the president handed the Democrats a powerful sound bite they can replay if a shutdown occurs. Vice President Mike Pence, also present at the meeting, looked uncomfortable.

Josh Marshall of Talking Points Memo sees a few notable takeaways from this exchange: “One is Schumer at the very end baiting Trump into defiantly insisting he’ll be ‘proud’ to shut down the government,” Marshall notes. “Another is Pelosi, steel without bluster, formidable in any circumstance but particularly for Trump who couldn’t seem to find either weakness or escalation. He would switch over to Schumer for a break.” 


A bipartisan group of 44 former Senators publish a banal, poorly written statement.

The Washington Post has published a curious op-ed written by 44 former Senators who vaguely warn of an impending threat to American democracy. “As former members of the U.S. Senate, Democrats and Republicans, it is our shared view that we are entering a dangerous period, and we feel an obligation to speak up about serious challenges to the rule of law, the Constitution, our governing institutions and our national security,” the statement reads.

The signatories are bipartisan: 32 are Democrats, ten are Republicans, and two are independents. The Republicans tend to skew towards the more moderate wing of the GOP, including figures known for working with Democrats such as Chuck Hagel and Richard Lugar.

The bipartisan authorship might explain why the statement is so anodyne, with no clarity about what exactly the former senators want. The Mueller investigation is mentioned but President Donald Trump goes unnamed.

The statement asks that the Senate defend democracy but that could mean anything. Supporters of Trump could believe they are defending democracy by protecting the president from what they see as Mueller’s witch hunt.

As Susan Hennessey of the Brookings Institution notes:

Because the statement amounts to a nothing more than a collection of patriotic bromides, it is also ineptly composed. Consider this sentence: “It is a time, like other critical junctures in our history, when our nation must engage at every level with strategic precision and the hand of both the president and the Senate.” It’s difficult to figure out what this might mean. Jello has more solidity and fog more clarity of shape.

Equally vacuous is this line: “We are at an inflection point in which the foundational principles of our democracy and our national security interests are at stake, and the rule of law and the ability of our institutions to function freely and independently must be upheld.”

It’s true that America is facing a constitutional crisis that will test its institutions. But that nature of the crisis can only be confronted if it is named: There is accumulating evidence that President Donald Trump has committed crimes that warrant impeachment.

The fact that many members of the political elite, including even former senators, can’t bring themselves to be blunt about this matter is itself part of the problem.


Trump’s cronies are raking in large sums lobbying for regimes that want sanction relief.

The New York Times is reporting that former Trump advisors and campaign officials are carving out a lucrative niche as lobbyists to governments that want to avoid sanctions. A key conduit for this activity is the Israeli security consulting firm Mer Security and Communication Systems, which was paid $8 million by the Democratic Republic of Congo to lobby against sanctions. Congo is facing sanctions because of the human rights abuses of the nation’s president, Joseph Kabila.

Mer dispersed large payments to many Trump cronies and associates. As The New York Times reports: 

Lobbying filings show $360,000 paid by Mer to Adnan Jalil, a former congressional liaison for Mr. Trump’s campaign; $250,000 to the firm of Nancye Miller, the wife of the Trump campaign adviser and former C.I.A. chief R. James Woolsey Jr.; $680,000 to the firm of former Representative Robert L. Livingston, an early Trump endorser; and $598,000 to the firm of Brian Glicklich, who has represented Trump allies such as Breitbart News and Rush Limbaugh.

One of Mer’s great successes was an event promoting Congo at the Hay-Adams hotel in July, which was attended by Donald Trump’s lawyer Rudy Giuliani. As the Times notes, “Mer also agreed to pay $1.25 million to the firm of Robert Stryk, who had worked with Trump campaign officials, to organize the Hay-Adams event and meetings around it for Mr. Kabila’s special envoy to the United States.” During the event, “Trump administration officials and allies, including the president’s personal lawyer, Rudolph W. Giuliani, gathered with investors atop the Hay-Adams hotel overlooking the White House for a cocktail reception featuring a short presentation by the Democratic Republic of Congo’s special envoy to the United States.”

Giuliani denies he’s acted as a lobbyist for Congo but has also given conflicting accounted the Hay-Adams event. He first said he went there to impress a woman, because the hotel has a great view. Later, Giuliani said he thought there could be business opportunities at the event. “We’ve always wanted to see what’s Africa all about,” the former New York mayor claimed.

The New York Times notes that Giuliani’s business has been discussing providing security consulting to Congo “possibly through Mer.” Giuliani himself seems to think that security consulting is distinct from lobbying. In a text message to the newspaper, Giuliani said if he did business for Congo  “it would only be security consulting.” He added that, “Beyond that, I can’t say anything other than you can assume if we are working in a foreign country, we are doing security — physical and cyber, antiterrorism, emergency management.” 

December 10, 2018

Sean Gallup/Getty

Macron apologizes and offers French protestors grudging concessions.

Speaking on television, French President Emmanuel Macron made some concessions to the so-called Yellow Vest protestors whose rioting has disrupted his country for weeks. The Yellow Vests, he admitted, were people who “had not been listened to”—over the last four decades “malaise” has gripped  “villages and neighborhoods where public services have been diminishing, where living conditions had deteriorated.” Going further, he said “I feel in many ways that the anger of the Yellow Vests is right.” France, he acknowledged, is facing “a state of social and economic emergency.”

“I assume my share of the situation,” Macron said. “I may have given you the feeling I have other concerns and priorities. I know some of you have been hurt by my words.” Macron had been widely criticized in France for being aloof and for policies favoring the rich. 

In redress, he promised an increase of the minimum wage by 100 Euros a month (to be instituted in 2019). He also said a planned increase in taxation on pensioners would be canceled. Finally, he called on businesses to increase their bonuses to workers and to pay overtime. 

In comparison to his talk of “emergency,” these remedies seem minor, if welcome. It’s unlikely that they will be enough to satisfy protestors. 

pencer Platt/Getty

Wall Street is getting jittery after finally paying attention to the news.

Until a few months ago, the stock market seemed to respond to the tumultuous news of the Trump era with blissful equanimity. It didn’t matter what Trump tweeted, what investigations were underway, or which countries he threatened with trade war or even nuclear destruction. Stocks kept going up and down of their own accord. But this period of Wall Street being kept separate from politics seems to be ending.

As The New York Times reports, news that had previously been shrugged off by Wall Street (notably trade war, rising interest rates, and the slowdown of other large economies) is suddenly making investors nervous.

Last week, elements of all of those combined to drive the S&P 500-stock index down by 4.6 percent, its worst weekly drop since March and one marked by stomach-churning price swings. Stocks are now down 1.5 percent this year,” the newspaper notes. “More volatility could be in store, as investors assess the allegations by prosecutors that President Trump directed illegal payments to ward off a potential sex scandal, and the possibility that he sought to secretly do business in Russia during his 2016 campaign for the White House.”

The Washington Post also sees signs that the stock market is taking stock of a storm global landscape. “U.S. markets deepened their losses Monday as Britain’s political crisis around Brexit clouded investors’ outlook. British Prime Minister Theresa May put off a key parliamentary vote on her country’s exit from the European Union,” the Post notes. “Investors are also on edge about developments in the U.S.-China trade dispute.”

Investment strategist Julian Emanuel argues the sway of the news cycle on politics is out of the ordinary. “The fact is that politics is driving the economy to an extent that is very atypical,” he told The New York Times. “We would say probably to the greatest extent that we’ve seen in our investing lifetime.”

While the stock market is not the same as the economy as a whole, the current nervousness on Wall Street could presage a recession. If so, there is a real possibility of a feedback effect. President Donald Trump has taken comfort in the success of the stock market under his watch. But once that source of boasting is gone, Trump could become even more erratic. This would create a situation where the president and Wall Street are egging each other on in a downward spiral.