The Lesson Of The Special Elections

This week featured two “special elections” to the United States House of representatives. In both cases Democrats lost. The defeat was especially humiliating in the race in Georgia, since Trump only won it last year by only a percentage point. The Republican winning marging was slightly larger this time even though the Democratic candidate “should” have won. It was an epic fail.

So why Democrats lose? Well, there are probably several reasons, but the most important is that the Democratic campaign kept focusing on the Russia issue. Almost noone outside the establishment i DC and the media cares about that. Ted Cruz said in an interview that in DC all people talked about was Russia, but back home home in Texas people talked about the issues.

These elections illustrate that this is the broader sentiment in America. DC is out of touch with the American people.

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What’s So Bad About “Climate Change”?

So President Trump rightly decided to pull the US out of the so-called “Paris Agreement” on climate change. Predictably, the political- and media establisment were outraged.

What is missing here is a discussion of the real issue: What’s so bad about climate change?

I don’t deny that there’s climate change. Climat change has happened ever since this planet was created and will continue until the  sun blows up and takes this planet with it.

Nor do I deny that human activity hasn’t had any effect on this planet’s climate. That seems to be the view of almost every scientist in this area.

But what climate hysterics have yet to explain is: why is a bad thing? Why is it assumed that the “pre-industrial era” temperatures are optimal? I’ve asked climate hysterics this question dozens of times, but I’ve never gotten an answer.

Sure, one degree difference in temperature could have negative effects, but it could also have positive effects. The fact that warmer weather can have positive effects is illustrated by the fact that no one wants to live in Antarctica.

So the real issue here isn’t if “man-made climate change” exists, the issue is why it is assumed that it would only be a bad thing.

Why Wilders Didn’t Win As Much As Expected

The Netherlands has just had elections, which the media describes as a “loss” for right-wing populist Geert Wilders’ party PVV

Actually, Wilders didn’t really lose as his party won a greater percentage than in the last election.Still, he didn’t win as much as some had expected and his success certainly isn’t comparable to those of the Brexit campaign or Donald Trump.

Why? Because while there is great popular support for restricting the inflow of asylum seekers, most other parties already supports that. And Wilder’s rhetoric, and proposals (like banning the Quran) is viewed by many as too extreme.

But perhaps most importantly, his anti-EU views don’t resonate in the Netherland. The Netherlands is one of the most export dependant countries in the world, and leaving the EU would risk hurting exports.

That would be much more devasting than trade barriers for Britain would be, which is a key reason why “Nexit” has far less support than “Brexit”

Why Not Move Embassy To Jerusalem?

Donald Trump, disappointgly but not surprisingly, seems to partially backtracking from the pro-Israel stance he had during the election campaign.

Leaving, for the moment, aside the issue of how it can be justified that Jews are ethnically discriminated against regarded housing construction in East Jerusalem and the so-called “West Bank”, it is unjustifiable that Trump violates his election pledge to move the U.S. empassy from Tel Aviv to Israel’s real, de facto, capital during the last 7 decades.

What is puzzling is why this hasn’t happened already. For nearly 7 decades Jerusalem has been the de facto capital of Israel. Tel Aviv has never been Israel’s capital. Yet nearly all countries, including the United States, keep having their embassies in Tel Aviv.

It would be partly understandable if this was about moving it to the “disputed” Eastern parts of Jerusalem. But there’s plenty of parts in Western Jerusalem where it could be used. And the understanding has been that any “two part solution” would mean a partition of Jerusalem where the Western parts would remain Israeli. So why object to an embassy in Western Jerusalem?

The only possible reason is opposition to Israel itself (or pandering to those that oppose Israel’s very existence).

Who Would Pay The Wall With Tariffs?

Lately, headlines has been dominated by issues relating to fake outrage about the Trump administration doing for 3 months to certain Muslim countries what they are doing permanently to Israelis (and non-Israelis who has visited Israel).

As the absurdity and hypocricy of this is so obvious I’m not going to elaborate on that issue. Instead I will focus on one issue were you really should be critical of Trump: trade.

One of the recurring campaign slogan from Trump was “We’re gonna build a wall, and Mexico is gonna pay for it”.

Mexico, who thinks that the wall would be a very bad thing even if they don’t pay for it, has said that there is no way they’re gonna pay for it. When asked then, how he’s gonna make Mexico pay for it, Trump and his officials have suggested a 20% tariff on imported Mexican goods.

To that some free traders have suggested that this would only hurt American consumers, not Mexican producers, and so it would be the American consumers that would pay for the wall.

Actually, they’re both partly right and both partly wrong.

When you have a tax wedge between what the seller gains and the buyer pays, it will almost always lead to a lower price for the seller and a higher price for the buyer. To what extent the seller and the buyer is hurt depends on the specific market conditions and price sensitivity.

As I haven’t done any empirical research on the subject, I can’t tell you to what extent tariffs would lower seller’s prices or raise buyer’s prices. But sound economic theory tells us it would be a combination.

Meaning that both Mexico and the United States would suffer, or in other words “pay for the wall”.

Proctectonism will weaken the economy

American President-elect Donald Trump’s arguably worst quality is his protectionist trade policy. He has promised to “bring jobs back to America” by slapping punitive tariffs on imports, or at least imports from China and Mexico.

Recently, a few manufacturing companies like Carrier, Ford and Fiat Chrysler, have announced that they would refrain from investments in Mexico or even make new investments in the United States. Trump and his supporters have used this as anecdotal evidence that the trade policies he has pledged to implement works are successful.

Wrong. Such policies will probably reduce the trade deficit, though not by much as Trump supporters think, as the dollar will rise in value. Furthermore, a lower trade deficit means a lower inflow of capital (a rule of national accounting any serious economist is aware of), raising the cost of capital, something which in turn will lower investments in domestic industries.

So while there will be some workers who will benefit from such policies, the nation as a whole won’t benefit. Quite to the contrary, by not benefiting from the benefits of the comparative advantage effect that trade brings, the economy will be weaker.