Nearly 100 Days in, Trump’s Near-180 on Trade Good for US

Simon Lester

Last week, President Trump went back on his campaign promise

to name China a “currency manipulator.”
When he did so, most
economists breathed a sigh of relief.
China is not currently trying to keep its currency undervalued
,
and an aggressive approach to this issue could have inflamed trade
tensions. Whatever the president’s actual reasons for this change,
the outcome was a good one.

On the other hand, the Trump administration also signaled last
week that it would take every opportunity to be creative in the
calculation of anti-dumping duties, as it used a new methodology

to set higher tariffs on imports
of certain steel imports from
South Korea.

While we have learned a
bit about Trump’s trade policies over the past couple months, there
is still a great deal of uncertainty.

If this pattern holds, what we may get out of Trump’s trade
policies is a more nuanced and targeted approach than was hinted at
during the campaign. Threats of withdrawal from the World Trade
Organization (WTO) or the North American Free Trade Agreement
(NAFTA) are unlikely to be carried out.

Instead, there will simply be tougher enforcement of domestic
trade rules in relation to specific imported products. If that is
the case, the degree of the shift in U.S. trade policy toward
protectionism may be much less than has been feared. While it may
not be the 180-degree reversal of policy we have seen from Trump on
other issues, it does come close.

Trump supporters may push back on this narrative and point out
that Trump has taken some aggressive actions on trade, such as
immediately
withdrawing from Obama’s Pacific trade deal
, the Trans-Pacific
Partnership (TPP).

While that is true, there are indications that the substantive
rules developed in TPP
will be brought over to NAFTA
as part of the renegotiation of
that agreement and also into bilateral trade agreements to be
negotiated between the United States and TPP parties, such as
Japan. In this way, Trump’s trade policy may be, to a great extent,
a continuation of Obama’s trade policy.

But of course, we are less than 100 days into Trump’s
presidency, so we cannot reach any firm conclusions yet. While we
have learned a bit about Trump’s trade policies over the past
couple months, there is still a great deal of uncertainty.

The key player, Robert Lighthizer, Trump’s nominee for U.S.
trade representative, has not yet been confirmed. There are some
crucial issues for which we need to know more about what the Trump
administration has in mind.

Perhaps most importantly, we must know whether the Trump
administration will base its decisions about specific trade actions
on the existence of bilateral trade deficits with particular
countries.
Most economists agree
that such an approach is misguided, but,
nevertheless,
some leading trade officials
in the administration appear to be
driven by the overarching goal of reducing bilateral deficits.

There has even been talk of using such deficits as a
“trigger” to renegotiate
the agreements. If they pursue this,
it is hard to imagine any trade agreements being completed, as our
trading partners would strongly object.

Another big issue is how the Trump administration will approach
the issue of “border-adjustment taxes”. In response to complaints
that the border taxes imposed by foreign governments in conjunction
with their value-added taxes are “unfair,” some members of the
House of Representatives have
supported changes to the U.S. tax system and a border tax of our
own
(it is unclear at this point what the administration thinks
of this idea).

However, if this border tax is not crafted carefully, it could
lead to violations of our trade agreements.

How the Trump administration takes on these two issues will
influence whether trade negotiations can be successful at all.
There has been lots of talk from Trump trade officials about
negotiating
“better” trade deals
. But if these controversial issues are
included, we may not see any new deals at all.

Beyond trade negotiations, there is also the question of whether
the Trump administration will impose unilateral trade restrictions
that violate trade obligations so egregiously that they threaten
the trading system. While a recalculation of anti-dumping
methodologies might have some justification under existing trade
rules, across the board tariffs on particular countries, or tariffs
imposed on companies who move abroad, almost certainly would
not.

After almost 100 days of trade policy, there are reasons to be
cautiously hopeful that the Trump administration will not blow up
the system after all. While much of their early talk indicated a
comprehensive redesign of U.S. trade policy, more recent actions
suggest a much more limited revision, which makes tweaks within the
existing system. That is good news for the businesses and consumers
who benefit from that system.

Simon Lester
is a trade policy analyst with Cato Institute’s Herbert A. Stiefel
Center for Trade Policy Studies.

Trump Takes a Smarter Approach on Immigration with ‘Hire American’

David Bier

President Trump signed yet another executive order impacting
immigration this week. His “Buy American, Hire American” order
is much more measured in its effects on immigration than initially reported. It only vaguely requires
agencies to propose new rules to “protect the interests of
United States workers” and to “suggest reforms to help
ensure that H-1B visas are awarded to the most-skilled or
highest-paid petition beneficiaries.”

No one knows how the agencies will implement this instruction.
But this administration’s track record thus far suggests that
these rules may end up as heavy-handed regulation, designed to keep
workers out, not improve the H-1B program. The president took this
approach with the security vetting executive order — shutting
down the entire system — when less draconian approaches were
available (namely, enforcing existing law on the standards for
evidence for visas).

His prior order also stretched the immigration laws to the limit
and, according to at least one federal court, broke the laws Congress wrote. The president should
avoid these mistakes this go-round. He is already off on the right
foot by leaving the substance of the issue to the agencies
responsible for the programs, instead of the White House lawyers
who bungled both the legalities and the rollout of the vetting
order.

High-skilled immigrants
are a massive boon to the economy and to U.S. Workers.

In general, companies demand more H-1Bs when they are hiring
workers of all types. The H-1B quota is filled quickly only in years when the unemployment rate in the
top H-1B occupations is already low, and foreign-born employment in
these fields moves in the same direction as native-born employment.
H-1Bs don’t increase overall unemployment in these
fields.

But the problem with the H-1B is that the free market does not
decide who hires the workers. Companies enter a visa lottery, and
the winners are those who bought the most tickets (i.e.
applications), not the ones who will pay the workers the most.
Large technology companies pay far more than is required, while some IT staffing firms pay the bare minimum.
This means that employers with low bids can compete for workers in
a way that they cannot in a market.

After the workers come, the government still prevents the market
from operating. H-1Bs cannot quit their job if their employer
underpays them or they will lose their status and be deported. If
they have a green card (or permanent residency) application
pending, as many do, they cannot leave at all without losing their
place in line. This is the only reason why H-1Bs can be paid
below-market wages: they cannot access the market.

President Trump cannot end the visa lottery or force companies
to pay more because Congress created those rules. But he does not
need to. The one thing that he can legally do is allow H-1Bs to
easily quit or change employers. Low-paying employers would not
even bother to apply if they knew that higher paying employers
could easily poach their workers. This would also attract even more
talented workers to come to the United States, which is exactly
what the president said he wants.

Overall, the H-1B visa has been a huge benefit to the United
States. The program allows employers to fill important positions
quickly. Every month that the 85,000 high skilled positions for
H-1B workers go unfilled costs the U.S. economy millions of dollars
in lost productivity. That lost output means lost jobs, wages, and
taxes that directly benefit American workers. This is why Congress

rejected
requiring a recruitment waiting period for H-1Bs.

Importantly, almost 95 percent of all high-skilled
immigrants who live in the United States start off initially in the
United States on temporary work visas — mostly the H-1B.
Shutting down the H-1B would effectively eliminate high-skilled
immigrants as well, and highly educated foreign-born workers were
responsible for at least 30 percent of all aggregate productivity
growth in the United States in recent years. This is due to their
entrepreneurship and inventiveness.

High-skilled immigrants are a massive boon to the economy and to
U.S. workers. President Trump has adopted a deliberative process on
amending the rules. Hopefully this leads agencies to adopt a policy
that is both legal and benefits the economy.

David Bier is
an immigration policy analyst at the Cato Institute’s Center for
Global Liberty and Prosperity.

The Cost of Free-Riding

Ted Galen Carpenter

As Vice President Mike Pence arrived in Seoul this week, he
called the U.S. commitment to South Korea “iron-clad and
immutable.” That might sound good to South Koreans, but their
dependence on the American military is something they may come to
regret.

South Korea has long been a notorious
free-rider
on U.S. security efforts. Although the country has
an economy by most estimates 40 times larger than North Korea’s,
Seoul persists in underinvesting in its own security. Despite
Pyongyang’s repeated menacing behavior over the years, South Korea
still spends an anemic 2.5 percent of its GDP on defense. While the
South Korean military has some significant capabilities, it remains
heavily dependent on the United States in crucial areas, especially
air and naval power.

Such free-riding has saved South Korean taxpayers a great deal
of money, and a succession of governments have resisted U.S. calls
to adopt a more robust military effort. Instead, Korean officials
have made economic development and other domestic programs a higher
priority. One South Korean security expert candidly conveyed the
thinking of his country’s political and policy elites at a security
conference in Seoul when he rejected an American participant’s call
for South Korea to take more responsibility for its defense. “We
have domestic needs,” the South Korean
responded
.

Beyond the obvious financial benefits in having another country
subsidize Korea’s defense, it is diplomatically and psychologically
reassuring to have a superpower as a protector. But there is also a
major downside to such dependence. The principal drawback is that
crucial decisions about national security are not in the hands of
the protectorate’s political leadership. In the case of the
U.S.-South Korean alliance, Washington has always dominated the
decision-making process. That should be especially worrisome to
Korean leaders and the public when, as in the current environment,
a military crisis surfaces.

Why South Korea may come
to regret its dependence on the U.S.

The underlying danger of dependence should have become evident
decades ago. The most telling case occurred in 1994 when Washington
saw growing evidence that Pyongyang was processing plutonium for a
nuclear-weapons program. Bill Clinton’s administration reacted in a
thoroughly militant manner. In his
memoirs
, Clinton stated that “I was determined to prevent North
Korea from developing a nuclear arsenal, even at the risk of war.”
He had Secretary of Defense William Perry convey that message in
the strongest terms to various audiences on multiple occasions,
“even saying we would not rule out a preemptive military
strike.”

It was not just bluster. Perry later conceded that the
administration seriously considered conducting “surgical
strikes
” against North Korea’s embryonic nuclear installations.
Fortunately, former President Jimmy Carter enticed Clinton to let
him approach Pyongyang and conduct talks to resolve the crisis
peacefully. But it was a close call. And at no time during the
episode did Clinton or his advisers even hint that South Korea’s
wishes would have a major influence on Washington’s decision about
launching air strikes. Seoul certainly would not have had a veto
over U.S. policy.

The same problem arising from South Korea’s security dependence
exists with the current crisis. The Trump administration has

stressed
on several occasions that
all options
, including military force, are on the table.
Washington has escalated tensions by sending an aircraft carrier
strike group
to waters
off the Korean Peninsula. Once again, there is no
indication that even vociferous South Korean objections would
dissuade the administration from launching attacks on North Korea,
if it decided to do so.

Yet if North Korea retaliates for a U.S. attack, South Korea
would be the primary victim. Pyongyang has no capability to strike
the American homeland, but Seoul, South Korea’s largest city and
its economic heart, is located barely 30 miles south of the
Demilitarized Zone separating the two Koreas, and it is highly
vulnerable to a North Korean artillery barrage. Civilian fatalities
would number in the thousands or tens of thousands.

Every sensible person hopes that the current crisis will be
resolved peacefully, but even if it is, South Koreans ought to
reconsider whether their alliance with the United States is such a
bargain after all. The financial savings and other benefits from
free-riding won’t mean much if Washington’s rash actions entangle
South Korea in a catastrophic war. Free-riding is not necessarily
free. It may come at a horrific price in both treasure and
blood.

Ted Galen Carpenter, a senior fellow in defense and foreign policy studies at the Cato Institute, is the author or coauthor of 10 books on international affairs, including The Korean Conundrum: America’s Troubled Relations with North and South Korea.

How Corporations and Internal Trade Bind India Together

Swaminathan S. Anklesaria Aiyar

In 1947, many foreigners expected India to break up into
fragments. Cleavages of language, region and religion seemed enough
to doom unity. India’s greatest achievement—owing a
great debt to Nehru- has been to survive and thrive as a unified
country (notwithstanding breakaway movements in Kashmir and
Nagaland).

Bollywood was another great unifier. Hindi films and songsters
like Lata Mangeshkar found ready audiences in non-Hindi states.
Tamil Nadu had a violent anti-Hindi agitation in 1965, but later
Tamil stars like Rajnikant and Kamalahasan became big Hindi film
names. Western (Nana Patekar) and Bengali stars (Uttam Kumar,
Sharmila Tagore) rose high in Bollywood, creating a unifying
pan-Indian culture.

A Trade Called Unity

Discourses on Indian unity generally leave out transport and
trade. But this year’s Economic Survey reveals that both
internal travel and internal trade are much higher than believed
earlier, high by global standards, and will rise further after the
implementation of GST (Goods and Services Tax). Thus migrants,
manufacturers and traders have bound India together too.

These laws must be
amended if India is truly to become one market, and reap the full
economic and political gains of a single market.

A decade ago, Ejaz Haider, a top Pakistani editor, asserted
while conversing with me that India’s unity was not a
political but economic success, thanks to its huge single market.
Wrong, I replied- India had a thousand inter-state and inter-city
barriers, and was not a single market at all. Goods from Delhi paid
entry tax to enter Maharashtra and octroi to enter Mumbai, and the
combined tax incidence could be 15%, as high as customs duty on
some imported goods. India was a grieviously splintered market, not
a unified one.

With the introduction of GST, politicians claim we will at last
have “One India, one market, one tax rate.”
That’s not quite right: GST excludes real estate, alcohol,
tobacco and petroleum products, so a big chunk of the economy will
face state tax barriers. More important, states often invoke the
Essential Commodities Act to ban the movement of politically
sensitive goods. Still, GST will be a game changer.

The Economic Survey reveals that India enjoyed high inter-state
movement of goods and people even before GST. New estimates using
railway data show that annual work-related migration is 9 million,
almost double the earlier estimate.

Farmers in the north-west and south complain that migrant
agricultural labour has plummeted. Despite this, overall migration
(especially to urban areas) is vibrant. Rural-urban migration
within states has accelerated. North-easterners, once mistaken for
Chinese, are now a visible part of the workforce in big cities. A
pan-Indian workforce has emerged.

New data from the Goods and Services Tax Network suggest that
inter-state exchanges of manufactured goods amount to at least 54%
of GDP. Almost half of this is the exchange within branches of the
same firms, an astonishingly high figure.

It shows that corporations have help bind India together through
manufacturing and trading linkages that were minimal at
independence. This has boosted both economic growth and political
unity.

India’s internal trade/GDP ratio of 54% leaves out agricultural
goods, which are also massively transported across India. So 54% is
a gross under-estimate. Even this underestimate implies that
India’s internal trade is 1.7 times its foreign trade. That
compares well with other countries at the same economic stage.

A Fuel Called Trimurti

Large countries naturally have a higher ratio of internal trade
to GDP than small ones. India’s 54% ratio (remember, this estimate
excludes farm products) is much less than the USA’s 78% or China’s
74%. But is far more than the 20% of the European Union, which was
formed specifically to create single market. Indonesia, another
large developing country, has internal trade of only 12% of GDP.
Canada, bigger in area than the USA, has a 20% ratio.

However, a caveat is in order. India has a crazy patchwork of
area-based tax breaks that induce corporate to move to Sikkim or
Himachal Pradesh, not for commercial reasons but tax arbitrage.
This artificially increases inter-state trade. Finance Minister
Jaitley has promised to phase out area-based tax breaks,
eliminating this distortion.

Economists sing praises of gains from international trade.
Similar gains flow from internal trade in a large country like
India, such as specialisation, scale economies, de-risking and
experimentation in different states to create innovative solutions.
Improved connectivity is an important reason for India’s faster
growth since 2000.

Rural roads have expanded enormously, as have the arterial
national highways. Telecom has penetrated most rural areas (though
broadband still lags behind). Finally, rural electrification has
now reached all but a few parts of the country, even though its
quality is spotty.

Roads, telecom and electricity constitute a Trimurti of
connectivity that has accelerated India’s GDP growth since 2000.
The Trimurti has facilitated the creation of new production
centres, and the transport of that production across India.

Yet much more needs to be done. The Essential Commodities is a
serious barrier to internal trade, especially of agricultural
commodities. So the Agricultural Produce Marketing Committee Act
that obliges farmers to sell only through local mandis. These laws
must be amended if India is truly to become one market, and reap
the full economic and political gains of a single market.

Swaminathan
S. Anklesaria Aiyar
is a research fellow at the Cato Institute.

The Real Factions of Trumpland and u.s. Foreign Policy

Emma Ashford

A civil war rumbles on, driven by ancient hatreds and more
recent grudges. From the outside, concerned observers note the
carnage and damage to state institutions. They worry about who will
govern once the conflict is over. With the exception of Russia,
external actors mostly favor the conflict’s moderate
factions, and fret about growing extremism among the combatants.
Whichever side triumphs, the consequences for regional and global
security could be severe.

I’m talking, of course, about the Trump
administration.

Three months into Donald Trump’s presidency, top
administration officials contradict one another with regularity,
and both friendly and less friendly states openly wonder who is
calling the shots on America’s role in the world. The
administration seems united in a desire to expand U.S. involvement
in the fight against terrorism, sending thousands more troops to the Middle East. Yet some of Trump’s
other foreign policy decisions have proved more contentious: The
President apparently resisted Steve Bannon’s pleas not to strike Syria
last week, siding instead with his son-in-law, Jared Kushner.

Some have portrayed Trump’s foreign policy as a Jekyll-and-Hyde problem, with a coterie of
seasoned advisors trying to persuade the new president to adopt
“good” policies — typically the foreign policy
status quo — while reining in his darker, Jekyll-like
impulses. But the good vs. evil frame is an oversimplification of a
more complicated internal struggle: The Trump administration
isn’t made up of two factions but several, each fighting for
a distinct foreign policy worldview.

The Trump administration
isn’t made up of two factions but several, each fighting for a
distinct foreign policy worldview.

Steve Bannon’s recent fall from grace is one battle in
this internal conflict. And like complex civil wars in Syria and
elsewhere, if you want to understand Trump’s foreign policy,
you need to understand the factions, their disagreements, and what
the eventual ceasefire may look like.

The Factions of Trumpland

Let’s start with everyone’s favorite civil war
faction, the “moderate rebels.” Here, this term is best
applied to scholars and academics who favor moderating the goals of
U.S. foreign policy. During the campaign, numerous articles suggested that Trump would provide an opening
for these realist and restraint-oriented scholars to challenge the
status quo.

Of course, like most moderate rebels, this group doesn’t
really exist, at least not inside this administration. Aside from a
few realist-sounding Trumpian pronouncements and a shared
propensity for transactional foreign policy, there is little evidence of any realist influence on
Trump’s foreign policy.

Even Secretary of State Rex Tillerson’s advocacy of
realist ideas was limited to a few statements in his confirmation hearings, most notably the idea
that America “must see the world for what it is … and
understand that our power is considerable but not infinite.”
His tenure has thus far been spent dodging the press and rattling
around the State Department’s empty seventh floor.

Moving to groups that actually exist within the administration,
we find a faction that is often similarly described as moderates,
though perhaps it is better to describe them simply as
“grown-ups.” They have prior experience in foreign
policy and supposedly have the ability to constrain Trump’s
wilder foreign policy ideas. But just like Syria’s moderate
Islamists, this group is only moderate in comparison to its
peers.

In reality, this group — all card-carrying members of the
blob – differ widely in their stances on U.S.
foreign policy, and all have some views that might be cause for
concern in another administration. Take Trump’s hawkish Vice
President Mike Pence. Pence dealt with foreign policy as a
congressman, especially during a stint on the House Foreign Affairs
Committee. He supported the Iraq surge, once voted for a congressional bill that would have barred
George W. Bush from setting any timeline to withdraw U.S. troops
from Iraq, and has argued that the United States should confront Russia in Syria.

Or take Secretary of Defense James Mattis, who, despite his
well-deserved reputation as a strategic thinker, has described Iran as “the single most
enduring threat to stability and peace” in the Middle East.
That proposition is debatable: Iran has undoubtedly been a
destabilizing regional force, but other factors such as Saudi
financing for extremism, the U.S. invasion of Iraq, and the
legacies of the Arab Spring have all contributed to today’s
Middle East turmoil. Yet Mattis dislike of Iran colors his approach
to the region. In April last year, Mattis openly argued, “What is the one
country in the Middle East that has not been attacked by ISIS? One.
That is Iran. That is more than happenstance, I’m
sure.”

Thanks to Trump’s penchant for a well-pressed uniform,
many of the grown-ups are former or current military officers. This
makes it harder to discern their true views on foreign policy,
though all share some commitment to maintaining and perpetuating
America’s global network of security commitments. Some
— such as National Security Advisor H.R. McMaster —
have pushed back against Trump’s wilder policy proposals,
while others — most notably Secretary of Homeland Security
John Kelly — seem to have bought into Trump’s ideas on immigration, trade, and
foreign policy.

In doing so, Kelly forms a temporary battlefield alliance with
another group, best known as the “Jacksonians.” They
have fairly conventional views on U.S. military power, but not on
trade, immigration, and alliances. The militaristic, Jacksonian-bent of
Trump’s foreign policy pronouncements — a strand of
American thinking first identified by the historian Walter Russell
Mead — has been widely noted, suggesting that this might be
how Trump himself understands foreign relations.

Indeed, Trump’s speeches never fail to emphasize military
power, brash nationalism, and American greatness — all ideas
typical of a Jacksonian approach to foreign policy. His antipathy
towards alliances, insistence that other countries pay their own
way, and hostility to the decades-old open liberal trading order
that the U.S. has built likewise fit into this framework. Trump’s budget proposal, boosting
military spending at the cost of diplomacy and foreign aid, also
emphasizes these priorities.

The Jacksonians are a small group within the administration:
Michael Anton, a former Bush administration official, has attempted
to articulate the intellectual case for a Trumpian foreign policy,
arguing that the United States should focus on global prestige, peace, and prosperity. The
president’s initial insistence on keeping K.T. MacFarland as
his deputy national security advisor, typically attributed to his
fondness for cable news stars, could also be related to her Jacksonian bent.

Yet, while Jacksonians are often hostile to multilateral and
multinational cooperation, they are generally content to remain at
home, with little desire to go abroad in search of monsters to
destroy. They are certainly not antiwar, but oppose nation-building
and global campaigns, a stance which contrasts strongly with the
final faction within the administration, Steve Bannon’s
civilizational crusaders, or “Trumpian jihadis.”

This group draws implicitly on the ideas of Samuel Huntington. While Huntington himself
argued that the clash of civilizations was in many ways regrettable
and should be vigorously avoided if possible, his work has often
been favored by those who seek a civilizational war against Islam.
Bannon, the president’s chief strategist, has described Islam
as worse than communism and fascism. To extend an analogy, if
Trump’s Jacksonians are like Syria’s domestic extremist
groups — focusing largely on domestic issues — then
Trumpian jihadis may be more akin to the self-proclaimed Islamic
State, with broader aspirations to reshape the globe in their
image.

One key member of this group has already been eliminated: Mike
Flynn. He had argued that “we’re in a world
war against a messianic mass movement of evil people, most of them
inspired by a totalitarian ideology: Radical Islam.” But
others with similar views remain, including Sebastian Gorka, a self-proclaimed terrorism
expert with questionable expertise, and Stephen
Miller, formerly of Breitbart, who was reportedly the architect of the Trump
administration’s Muslim travel ban.

These individuals, centered around the Strategic Initiatives
Group, were initially expected to act as a counterweight to
McMaster’s National Security Council in intra-administration
struggles. But with last week’s surprise removal of Bannon as a formal member
of the National Security Council, the White House downplaying the importance of the
Strategic Initiatives Group, and growing rumors that Trump is dissatisfied with Bannon, it remains
to be seen how much influence they will have.

Finally, as in all conflicts, there are some wildcards:
individuals who move between groups based on issue or short-term
advantage. These wildcards are largely foreign policy neophytes,
from Trump’s U.N. ambassador Nikki Haley to Jared Kushner to
Ivanka Trump. Kushner has no real foreign policy experience and
little is known about his views. Yet it may be this lack of
alignment with any major administration faction that has resulted
in an impressive laundry list of foreign policy problems
-Mexico,China, Iraq and Israel — that Kushner has been
assigned by his father-in-law. In recent weeks, Trump seems have
somewhat reverted to his nepotistic roots, relying more heavily on
family members than on advisors such as Bannon.

The Battles

Every administration has to contend with internal splits on
foreign policy at some point in its tenure. Indeed, the Obama
administration often faced criticisms for insufficiently consulting
with the Defense and State Departments prior to making decisions,
while a variety of memoirs describe the administration’s internal disagreements
over whether or not to intervene in Libya in 2011. Yet the scope of
today’s discord inside the Trump administration is
impressive.

For starters, there is little agreement inside the
administration on America’s role in the world, and on whether
the United States should commit to maintaining the postwar liberal
international order. The Jacksonians and jihadis tend to view
America’s security commitments as a bad deal, pointing to
NATO’s free-rider problem, and the wealth and prosperity of
many allies for whom the United States essentially foots the
bill.

There is a grain of truth to this criticism of U.S. alliance
spending: Only four other NATO member states spend at least 2
percent of GDP on defense as called for by NATO guidelines, and
the alliance is heavily reliant on the United
States for essential military capabilities. Yet Bannon and Trump
also seem to carry an impressive level of antagonism towards any
form of international cooperation Both have been notably hostile to the European Union, and both supported the
Brexit vote. Indeed, Trump has described the trading bloc as a “vehicle for
Germany” and has repeatedly questioned which country will
leave the European Union next.

For many critics, this dispute implies a battle between good and
evil, with the administration’s grown-ups valiantly trying to
restrain Trump’s willingness to destroy key components of the
liberal international order. This battle is primarily one of public
relations: From Secretary Mattis’ trip to Japan and South
Korea
to reassure them of U.S. defense commitments, to Mike
Pence’s comments at the Munich Security Conference, traditional
Republican elites continue to push back publicly against
Trump’s reflexive hostility to U.S. alliances.

This conflict over America’s role in the world is not
limited to security issues. Trump’s proposed budget bolsters
military spending but cuts diplomacy and foreign aid. Such an
approach to foreign policy is fundamentally Jacksonian in nature,
but will be problematic for others, even former military leaders
like Mattis, who once told a congressional committee, “If you
don’t fully fund the State Department, then I need to buy
more ammunition.”

Running parallel to this conflict, however, we also find a
multisided struggle over how America should be fighting the War on
Terror. For the Jacksonians, the focus is on more military might,
particularly building up the campaign against the Islamic State in
Iraq and the Levant (ISIL) as Trump promised during the campaign.
Many of the former military men are in favor of such troop increases, and regard
the Obama administration as having been too cautious, particularly in the fight
against ISIL.

At the same time, there is no agreement between the two groups
on how to proceed after ISIL is defeated. While the grown-ups
increasingly suggest that a long-term troop presence is necessary
in Iraq and Syria for stabilization and peacekeeping, Trump’s
Jacksonians are far less likely to favor a nation-building strategy
so similar to the one they disparaged in Iraq after the 2003
invasion. Nor is there agreement on how to deal with the Assad
regime, despite last week’s airstrikes.

The two groups also disagree strongly about how to label the
problem of terrorism more broadly. Trump’s inaugural address
referenced the problem of “radical Islamic terrorism,” a description
previous administrations have hesitated to use because it risks
antagonizing and demonizing Muslims more broadly. Trump’s
campaign promise to institute a “Muslim ban” on entry to the United States
has come to at least partial fruition, with the
administration’s attempt to implement executive orders
suspending travel from some Muslim-majority countries.

Bannon’s cohort seek to link Islam to
terrorism even more explicitly. Before his White House job,
Bannon’s films argued that the United
States was at risk of losing its identity to “radical
Islamism.” The administration’s more radical elements
have been tied to Islamophobic groups like Frank Gaffney’s
Center for Security Policy, and have apparently considered
designating the Muslim Brotherhood as a terrorist group.

Certainly, this approach has met with strong pushback from many
of the grown-ups, not least for the logistical difficulties created
by alienating the Muslim nations who support the War on Terror.
Thus far, however, their impact has been minimal, with H.R.
McMaster apparently failing to prevent Trump from using the phrase
“radical Islamic terrorism” in his speech to Congress,
and obtaining only a partial modification to the travel ban —
the removal of Iraq.

The Ceasefire

The conflicts in the administration thus deal with some of the
key questions in U.S. foreign policy: the extent of America’s
role in the world and the roots of the War on Terror. And just like
the core issues at the heart of many civil wars, these disputes
will be difficult, perhaps impossible, to resolve. Of the two
possible outcomes in the administration’s civil war —
victory or a negotiated settlement — the latter is more
likely.

Though most civil wars end in decisive military victory for one
side or the other, it seems unlikely that any of the groups engaged
in the foreign policy infighting will triumph. The struggle may
certainly claim the heads of faction members, such as Mike Flynn or
perhaps Steve Bannon. Yet neither Jihadis nor Jacksonians can fully
triumph, for the simple reason that they lack sufficient
governmental experience. Indeed, the addition of more status quo
thinkers to the administration was in itself a tacit admission that
Trump needed to draw from existing foreign policy elites simply to
staff a bare minimum of appointed positions.

At the same time, widespread hopes that more traditional GOP
foreign policy elites would mold Trump’s foreign policy has
not been borne out. Non-traditional advisors like Jared Kushner
continue to have substantial input on key foreign policy decisions,
and Trump’s apparent unwillingness to appoint any sub-cabinet level foreign policy
experts limits the size and reach of Washington’s typical
foreign policy elite. It remains unlikely that they will be able to
disabuse Trump of his long-held personal antipathies in foreign
affairs.

As a result, the future course of U.S. foreign policy is likely
to deemphasize areas of disagreement between the groups, and focus
on limited areas of agreement. Rather than seek to substantively
alter the U.S. relationship with NATO, for example, Trump is likely
to increase U.S. commitments to the fight against ISIL. Instead of
seeking to improve U.S.-Russian relations, the administration will
probably opt to dial up the pressure on Iran.

Yet, with no overarching agreement on U.S. strategic goals, such
policies will also be short-term and tactical in nature. Indeed,
the steps that the Trump administration has already taken in the
Middle East — adding several thousand troops to Iraq and Syria,
missile strikes on the Assad regime, loosening the rules of engagement, stepping up support
for the Saudi-led war in Yemen – are all fundamentally
short-sighted.

Increasing the pace of the fight against ISIL may be satisfying,
but the White House appears to have no plan for post-conflict
stabilization, or any mechanism for preventing America’s
fractious allies from fighting each other. Adding to the carnage in
Yemen will likely strengthen al-Qaeda in the long-term. Meanwhile,
loosening the rules of engagement will increase civilian casualties
in Middle Eastern conflicts, making it harder for local governments
to cooperate with the United States.

Ultimately, the disparate Trump administration factions are most
likely to form temporary alliances on foreign policy problems where
short-term escalation is popular, easy, and painless. But there is
little hope of actually resolving any of America’s foreign
policy challenges. Their infighting is a recipe for escalation, and
the creation of a four- or eight-year military quagmire with no
clear endgame. A civil war indeed.

Emma Ashford
is a Research Fellow in Defense and Foreign Policy Studies at the
Cato Institute.

Don’t Start a New Cold War over Syria

Ted Galen Carpenter

Secretary of State Rex Tillerson arrived in Moscow this week for
his previously scheduled official visit with Russian officials. His
journey came at a time when the chill in bilateral relations is
especially acute following the U.S. missile strikes on Syria in
response to the Assad government’s alleged use of chemical
weapons. Kremlin leaders were extremely annoyed at
Washington’s action, and they hintedthat Tillerson’s expected meeting
with President Vladimir Putin might have to be canceled. Instead,
his talks would be confined to sessions with his counterpart,
Foreign Minister Sergei Lavrov.

The Russians relented at the 11th hour, but to describe the
Tillerson-Putin meeting as tense and contentious would be an
understatement. The same was true of his interaction with Lavrov.
Not surprisingly, Syria policy was the main irritant. Lavrov set
the tone at the welcoming ceremony, which usually is a polite,
vacuous ceremony. Instead, he used the occasion to direct pointed criticism at the Trump administration.
Not only did he express concern about “ambiguous and
contradictory ideas” coming out of Washington regarding
international affairs generally, but he added, “apart from
words, we saw some very alarming actions regarding the unlawful
attack in Syria.”

The Trump administration
needs to return to its original course and seek to improve
relations with Moscow. Tillerson’s abrasive performance is a
textbook example of what to avoid.

Tillerson did not retreat from the administration’s newly
adopted hardline policy regarding that country. Indeed, he insisted
that Russia sever its alliance with Bashar al-Assad’s
government. Even before arriving in Moscow, Tillerson stated that
Russian leaders needed to face the reality that the Assad
family’s rule had reached an end. Both Putin and Lavrov flatly
rejected that demand. Foreign Ministry spokesperson Maria Zakharova
stated bluntly that “there is no use giving us ultimatums.
This is simply counterproductive.”

Beyond resentment at Washington’s brusque behavior, the
Putin government’s stance reflects major policy differences
between the two countries. Russian officials warn that ousting
Assad would risk making Syria yet another playground for ISIS and other radical
Islamist factions. That fear is well-founded. Despite
Washington’s longstanding search for “moderate”
Syrian rebels, fighters with that orientation are few on the ground
and, with the exception of the Kurdish units in the Syrian
Democratic Forces, they lack meaningful military capabilities. And
the Kurds are pursuing their own agenda—securing a de facto
independent state in northern Syria, just as they achieved in Iraqi
Kurdistan following the U.S.-led overthrow of Saddam Hussein.

The Russians are right. Although Assad is a brutal dictator,
removing him would create a dangerous power vacuum in Syria. Even
if ISIS did not succeed in filling that vacuum, most of the U.S.-backed rebels (with the exception of
the secular Kurds) are nearly as radical. The leading, most
powerful, non-ISIS faction is Tahrir al-Sham, formerly the Nusra
Front, al-Qaeda’s affiliate in Syria. Together with its
smaller, equally Islamist allies operating under the umbrella
organization Ahrar al-Sham, the Nusra militants would likely
dominate any post-Assad government. The only way to prevent such an
outcome would be to send a large contingent of U.S. forces to
occupy the country, and no sane American should embrace that
option.

Although the Syria issue was the greatest source of animosity in
Tillerson’s meetings, it was not the only one. Frictions also
resurfaced regarding Crimea, Moscow’s alleged cyber espionage
against the United States, the Kremlin’s reported flirtation
with the Taliban in Afghanistan, and NATO’s new military
deployments in Poland and the Baltic republics. Although the joint
closing press conference sought to portray the discussions as a
constructive, albeit candid, exchange of views, it was difficult to
hide the reality that U.S.-Russian relations appear to be at their
worst level since the end of the Cold War. Even Tillerson conceded that the relationship was “at a
low point” and needed to be improved in the interests of both
countries.

The ongoing chill should deeply disappoint all Americans. Given
Donald Trump’s conciliatory comments regarding Russia during
the 2016 presidential election campaign, there was the widespread
expectation of a U.S.-Russia rapprochement. Indeed, Trump and his
foreign-policy team have had to fight off a concerted campaign by
both neoconservative Republicans and hawkish Democrats who accuse
them of being Putin’s puppets. Perhaps the
administration’s new confrontational stance toward Moscow is
an attempt to erect a defense against that assault. If so, it is
likely to be a futile effort. Trump haters are not going to be
placated by belated hawkish posturing against the Kremlin.

Even more worrisome is the substantive damage to an already
troubled bilateral relationship. The last thing that Americans need
is another cold war with the one nation that has the military
capability to eradicate American civilization if that confrontation
ever turned hot. We were fortunate to have survived the initial
cold war without it erupting into a horrifying conflagration. We
might not be so lucky this time around. The Trump administration
needs to return to its original course and seek to improve
relations with Moscow. Tillerson’s abrasive performance is a
textbook example of what to avoid.

Ted Galen
Carpenter
, a senior fellow in defense and foreign policy
studies at the Cato Institute, is the author of 10 books and more
than 650 articles on international affairs.

5 Bad Arguments for Public Infrastructure Spending

Ryan Bourne

With healthcare reform stalling, President Trump’s
administration seems ready to shift focus onto infrastructure.

Good infrastructure, especially highways, bridges, and airports,
can certainly improve economic mobility and lower costs by reducing
travel time between locations. This, however, says nothing about
the kinds of institutions most likely to produce good
infrastructure or who should fund it.

Here’s a handy guide to some of the bad economic reasoning
you will likely hear as the debate about infrastructure spending
heats up.

1. Past benefits don’t mean future benefits

A handy guide to some of
the bad economic reasoning you will likely hear as the debate about
infrastructure spending heats up.

In his joint address to Congress, President Trump declared that
“the time has come for a new program of national
rebuilding.” The implication was clear: building new
infrastructure was a success in the past, so it would be good for
the economy today.

Past experience and the experience of other countries lead to
mixed conclusions about the value of public infrastructure project.
Highway construction can substantially boost productivity for industries
associated with road use, but the same research finds those
benefits to be largely one-offs. More recent research has found that too many
new highways were built between 1983 and 2003. It has also found
that marginal extensions to the highway system are unlikely to
increase social welfare because the cost savings from reduced
travel times are relatively small.

We should judge new projects on their own merits, not against
old examples or countries in different circumstances.

2. Don’t ignore opportunity costs

“Traffic Congestion Costs Americans $124 Billion A
Year” is a headline from 2014. As legislation for
infrastructure is pushed, we will hear plenty about the costs of
delays to the economy.

These costs are undoubtedly very real, but so are the costs of
building new infrastructure, and that money can’t then be spent on
other things that we might have preferred to spend them on. Without
the aid of clear market signals, it’s very difficult and maybe
impossible for governments to determine the optimal amount and
nature of infrastructure spending. It would obviously be
prohibitively expensive to eliminate all congestion by expanding
every freeway to 15 lanes but building no new highways would also
be problematic. How far should a road expansion go? How often
should it be repaired? How much transportation should go by train?
How much money should be spent on research and development for
completely new ways of meeting transportation demand? Markets are
good at finding the optimal mix over time and rewarding those who
are better at satisfying demand. Governments, even with the best of
intentions, lack the necessary knowledge about each of our
individual opportunity costs to find that mix. They certainly lack
the incentive structure to improve over time.

3. But what about that one bridge…?

Individual catastrophic events can lead to concern about the
physical conditions of infrastructure. The I-35W bridge collapse in
Mississippi in 2007 is a recent example. Even more recently,
commentators have used the I-85 bridge fire and collapse in Georgia
as justification for more infrastructure
investment
. But these are rarities that tell us little about
the quality of infrastructure overall.

You often hear that 58,791 bridges are structurally deficient,
for example, which sounds kinda scary. Less often will you hear
that, according to the Federal Highways Agency, “structurally
deficient does not mean that it is likely to collapse or that it is
unsafe.” You also won’t hear that the proportion of bridges
labeled structurally deficient has fallen from 24.1 percent in 1990
to 9.6 percent in 2015.

When you hear individual statistics on the dire state of U.S.
infrastructure, ask questions like, “compared to
what?,” “how has this changed over time?,” and
“is there a demand for this to be replaced?”

4. Cheap debt doesn’t make everything a
bargain

In 2015, Nobel Laureate Robert Shiller argued that “the
government should be borrowing, it would seem, heavily and
investing in anything that yields a positive return.” The Brookings
Institution recently spelled out similar logic, suggesting that low
interest rates should also be inducing private sector
investment.

The mistake here is to conflate a less costly time to invest
with a “good time” to invest. Take the example of a
toll road. If the long-term growth and population outlook for an
area has seriously slowed, then the expected use of that toll road
would fall, as would demand for investment opportunities. This
would cause lower interest rates, all else being equal.

Those lower interest rates, however, would not indicate that it
was a good time to invest. They would be signalling lower expected
future revenues.

Similar logic applies to government investment in transport
infrastructure without user fees — if there are structural
reasons why demand for transportation use is falling, then any
investment would yield far fewer economic benefits.

Infrastructure decisions should be judged by robust estimates of
costs and expected benefits, not just how cheap it is to
borrow.

5. How stimulus actually works

Leaked documents show that the Trump
administration is likely to prioritize “shovel ready”
projects and those that are “direct job creators.” But
previously on his campaign website Trump’s team had
suggested the goal of infrastructure development was “more
rapid productivity gains.”

This conflates two well-known arguments for infrastructure
investment. The first is that government investment spending can be
used to “stimulate” the economy and put people back to
work. The second is that smart, efficient investments can help
enhance long-term productivity growth.

These two ambitions often conflict. Attempts to stimulate
quickly and get people back to work will likely result in sloppy
project selection and the hiring of more labor than would be most
efficient. And since government is, well, government, it’s a pretty
good bet that infrastructure funds will go preferentially to the
well-connected.

Ryan Bourne,
former head of public policy at IEA, occupies the R. Evan Scharf
chair in the Public Understanding of Economics at the Cato
Institute.

Donald Trump Channels Hillary Clinton, Attacks Syria: From America First to America Last

Doug Bandow

Donald Trump spent the presidential campaign insisting that
Washington’s first duty was to protect the American people.
His vision was inconsistent and incomplete, but still sensible
enough to horrify Washington’s bipartisan war party.

Almost exactly a year ago he gave a major address to the Center
for the National Interest in which he criticized nation-building
and especially the disastrous Iraq and Libya interventions:
“After losing thousands of lives and spending trillions of
dollars, we are in far worst shape in the Middle East than ever,
ever before.”

He also promised to step back from confrontation from Russia.
“I believe an easing of tensions, and improved relations with
Russia from a position of strength [not] only is possible, [but]
absolutely possible. Common sense says this cycle, this horrible
cycle of hostility must end and ideally will end soon,” he
explained.

He applied both principles to Syria. He insisted that the
Islamic State was America’s primary objective in Syria. He
said President Barack Obama should not intervene even if Damascus
crossed the latter’s chemical weapons “red line.”
And candidate Trump urged cooperation with Moscow in Syria. He
offered a radical but welcome departure from Obama administration
policy. Until last week he and his appointees followed this line.
For instance, on March 30 UN Ambassador Nikki Haley declared:
“Our priority is not to focus on getting Assad
out.”

Candidate Trump went on to make a promise extraordinary for
Washington, that “unlike other candidates for the presidency,
war and aggression will not be my first instinct.” Warrior
wannabe Republican and Democratic leaders sniffed their
disapproval, but he well captured the frustrations of the American
people who do the paying and dying in America’s many
conflicts. Just last week he declared that “I’m not,
and I don’t want to be, the president of the
world.”

Alas, less than three months after taking office for President
Trump has begun channeling Hillary Clinton on foreign policy.
Despite almost six years of war and the deaths of several hundred
thousand people in Syria, he apparently was not aware that the
conflict had resulted in extraordinary human hardship. So after
seeing what he called “horrible” photos of some of the
scores of dead from an apparent Syrian chemical attack the
president ordered strikes on a Syrian military base. And that may
not be all: his aides talked about taking further military
action.

Candidate Donald Trump
got Syria right. Nothing in the conflict warrants Washington’s
involvement.

Secretary of State Rex Tillerson initially said “steps are
under way” to develop a new international coalition to oust
Assad: “it would seem that there would be no role for him to
govern the Syrian people,” he announced last Thursday. Over
the weekend, however, he backpedaled, insisting that the
administration’s focus on the Islamic State was unchanged,
since a political resolution would require “participation of
the regime and the support of their allies.” He also
expressed his hope “that we can work with Russia and use
their influence to achieve areas of stabilization throughout
Syria.”

In contrast, Ambassador Haley spewed fire and brimstone while
seeming to push aside her nominal boss. Peace is impossible
“as long as Assad remains in power,” she insisted:
“we’ve got to go and make sure that we actually see a
leader that will protect his people.” She allowed that
“Getting Assad out is not the only priority”: The U.S.
also has “to get out the Iranian influence,” which is
necessary “for peace and stability in the area.”

Moreover, Haley insisted that Moscow and Tehran “now have
to answer for” their support for the Assad regime. When it
comes to sanctions against the two states nothing “is off the
table.” She promised that the president “won’t
stop here.” Indeed, if “he needs to do more, he will do
more.” The administration will exercise “strong
leadership,” whatever that means, she insisted.

National Security Adviser H.R. McMaster implausibly contended
that there was no difference between the positions taken by
Tillerson and Haley: “There has to be a degree of
simultaneous activity, as well as sequencing the defeat of ISIS
first.” He added: “the resolution of the conflict will
entail both of the elements that you’re talking about.”
In short, the U.S. must both destroy the Islamic state and
overthrow Assad, but do so in the right order.

Critics of Donald Trump exhibited a strange new respect for him
after he launched the missiles. He had acted
“presidential,” said one. Apparently nothing wins
acclaim in Washington like killing foreigners in the name of doing
good. No matter the disastrous consequences of Washington’s
oft-attempted global social engineering.

The war lobby also pushed back against Secretary
Tillerson’s apparent retreat. For instance, the irrepressible
Sen. Lindsey Graham, who has yet to find a war that he
doesn’t want others to fight, claimed “regime change is
now the policy of the Trump administration. That’s at least
what I’ve heard.” The equally war-happy Sen. Marco
Rubio criticized the secretary of state for focusing on ISIS.
“You cannot have a stable Syria without jihadist elements on
the ground with Bashar al-Assad in power.”

The ivory tower commentariat, too, went into full war cry. Its
members are never so eloquent as when demanding that others go to
war. Argued Briton Piers Morgan: Assad will “keep doing this
until somone stops him. WHO will stop him?” Certainly not
Morgan. That obviously is the American military’s job. But
journalists and policy analysts will enthusiastically cheer on the
sacrifice by U.S. personnel.

Candidate Donald Trump got Syria right. Nothing in the conflict
warrants Washington’s involvement. Last week he declared that
as president he now has “responsibility” for Syria.
Actually, he is responsible for America, the liberty, security, and
prosperity of its people. And that requires staying out of
unnecessary wars, like Syria.

Syria’s fate has little impact on U.S. security. During
the Cold War the regime, headed by Assad’s father, was allied
with the Soviet Union. After being defeated by Israel in the 1973
Yom Kippur War, Damascus retreated to a cold war with Israel. Syria
meddled in neighboring Lebanon, but with little impact on anyone
else. Despite Syria’s friendship with Iran, the latter
remained well behind the military capabilities of Saudi Arabia and
its Sunni coalition.

Even if Syria mattered more it would not justify intervention by
the U.S. Policymakers have turned military action into a first
resort, but war is different in kind and not just in degree from
other policy options. It should be reserved to protect America,
which is not threatened by the Syrian civil war.

Today Syria is a wreck and has international significance
primarily as a battlefield. Even if Iran and Russia are able to
“save” Assad fils, the regime will be a ghost,
a remnant of what it once was. Indeed, the Assad government is a
costly investment: it is wasting its allies’ lives and
materiel while generating international hostility toward them.
There’s no reason for Washington to join the fight.

War advocates tend to stretch the concept of “vital”
interests to nothingness. For instance, President Trump said it is
in the “vital national security interest of the United States
to prevent and deter the spread and use of deadly chemical
weapons,” even though they weren’t going anywhere. In
contrast to nuclear and biological weapons, chemical agents
typically are not mass killers.

President Trump declared that “These heinous actions by
the Assad regime cannot be tolerated.” Chemical weapons are
awful, but not obviously worse than bombs or even well-aimed
bullets. Treating death by chemicals as so much worse than death by
other weapons makes a moral mountain out of a policy molehill. The
difference does not justify Washington joining the war.

Secretary Tillerson argued that the potential of insurgents
grabbing chemical weapons posed an “existential” threat
to America, but ISIS already is believed to possess them. Anyway,
Tillerson’s scenario is implausible at best: smuggling them
in and using them would be extraordinarily difficult. Rep. Trent
Franks declared “making it clear that innocent victims of
terrorism and evil do have at least one friend in this world”
is a “vital American interest,” which, if true, means
both nothing and everything are vital interests.

Of course, Syria is a humanitarian tragedy. But it is a civil
war, not genocide. Most of the casualties have been combatants, not
civilians. The regime may kill more prodigiously, but primarily as
a result of its greater capability rather than lesser morality.
While there undoubtedly are liberal, democratic insurgents, there
is a surplus of bad guys on both sides.

Indeed, the conflict features a who’s who of
America’s dubious friends, frenemies, adversaries, and
enemies all at each other’s throats: Assad government, Sunni
jihadists and terrorists, Iranian-supported militias, Russian,
Saudi, Qatari, and Turkish forces, Kurdish fighters, immoderate
“moderates,” and more. Last month Washington deployed
U.S. forces to separate Turkish-backed and Kurdish forces, which
had clashed. The most important difference among them for
Washington is that many of Assad’s opponents are interested
in killing Americans and other people outside of Syria, most
notably the Islamic State and other jihadist groups.

And there should be no illusions about who would do the fighting
if Washington jumped into the Syrian war. Noted Aaron David Miller
and Richard Sokolsky of the Woodrow Wilson International Center and
Carnegie Endowment for International Peace, respectively:
“one of the more stubborn realities of the Syrian conflict is
that America’s Sunni Arab partners—with the exception
of small Jordan and vulnerable Lebanon—have talked tough but
done little in the way of absorbing refugees or contributing forces
to the actual fight against ISIS.”

The desire to end the suffering is laudable, but impractical.
The U.S. has no simple means to bring liberal order out of brutal
chaos. Air power alone is unlikely to defeat Assad: “boots on
the ground,” as the saying goes, would be necessary. And
ousting Assad would not end the fighting. Instead, it would just
set off a new combat round in a situation dramatically, even
exponentially, more complicated than previous conflicts.

Moreover, given the debacles in Iraq and Libya, Washington could
not simply walk away after defenestrating Assad. Imagine the ISIS
flag rising over Damascus and angry victors slaughtering Alawites,
Christians, and other religious minorities. Even in
“victory” Washington would find a host of new tasks to
perform: defeat radical forces, protect victimized minorities,
create stable governance, eliminate Iranian and Russian influence,
mediate between Turks and Kurds, and whatever other fantasies
filled the minds of Washington’s social engineers. The
likelihood that the Trump administration could create stable democratic rule Syria is even less than the chance it could do so
in Afghanistan, Iraq, and Libya.

Washington’s humanitarian record is a bit threadbare. Its
Mideast allies include Egypt, Bahrain, Saudi Arabia, and Turkey,
all of which have dubious human rights records. America’s
support for Riyadh’s horrid war in Yemen makes Washington
complicit in the death of thousands of civilians who have done
nothing against the U.S. or its people. Consistency may be the
hobgoblin of small minds, but it still matters in foreign policy,
especially when the president of the United States reportedly is
basing his decisions on casualty photos.

While there’s no good reason for Washington to jump into
the Syrian imbroglio, there are several powerful reasons to stay
out. To start, the president has no legal authority to attack
Syria—the post-9/11 congressional authorization obviously
doesn’t apply and Damascus has not attacked or threatened
America or even an American ally. The Constitution places the
decision to initiate hostilities with Congress, not the president.
Indeed, candidate Trump urged President Barack Obama to get
legislative authority before bombing Syria. In 2013 the former
declared: “Obama needs Congressional approval.”

War advocates ignore the obvious, that attacking Assad
inevitably empowers the Islamic State and other radical Islamists.
Many so-called moderates do not appear to be very moderate, and
they have not demonstrated the ability to defeat Assad as well as
assorted jihadist movements. Ironically, they have been targeted by
Damascus because the prospect of Western support made them
particularly dangerous to the Assad regime.

Moreover, moving toward war in Syria sets up a great power
confrontation with Russia, the one nation with a nuclear force
which allows it to go head-to-head against America. Sen. John
McCain, perhaps the Senate’s most belligerent member,
dismissed the danger of such a clash: they “will not want a
confrontation with the United States of America. And if they do,
they will lose, because we are superior to them
militarily.”

However, with far more at stake, Moscow is willing to spend and
risk far more. Last October candidate Trump warned against starting
“a shooting war in Syria, in conflict with a nuclear-armed
Russia that could very well lead to World War III.”
Additionally, the Putin government can help advance or hinder U.S.
policy objectives in Europe, Afghanistan, Iran, and North Korea.
One need not like Vladimir Putin to realize the importance of
having a working relationship with its government, which, despite
its aggressiveness on Europe’s periphery, nowhere threatens
fundamental American security interests.

Confronting Tehran in Syria undercuts the possibility of
liberalization in Iran. Along with discouraging the Islamic
republic from developing nuclear weapons, the Joint Comprehensive
Plan of Action, or nuclear accord, increased the likelihood of
internal political change. Expanding economic opportunities for
younger Iranians gives them a greater incentive to fight for
political change. Unfortunately, continuing U.S. restrictions have
impeded such a transformation. Creating a security crisis would
make positive change even less likely. Having a friendly regime in
Damascus matters far more to neighboring Tehran than distant
America, so the clerical regime is willing to sacrifice much more
than Washington to “win” in Syria.

Finally, the president’s potential diversion back into the
Middle East likely is causing high-fives all over Beijing.
President Trump came into office challenging the People’s
Republic of China on a range of issues. He’s already appeared
to back down and move toward a more normal relationship. But
Chinese President Xi Jinping probably never imagined even in his
fondest dreams that yet another Washington administration would
rush toward into yet another no-win Mideast war—and so early
after taking office.

President Trump seems to know better than to entangle America
another Middle Eastern imbroglio. After being criticized for his
newly discovered militarist instincts, he proclaimed: “We are
not going into Syria.” Three years ago he opposed demands
that President Barack Obama bomb the same regime for the use of the
same weapons. But after seeing “horrible” photos, he
launched a barrage of cruise missiles. On that basis, the president
easily could end up taking America into even more wars in coming
years.

Syria is a human tragedy of extraordinary proportions. But
normally the U.S. “goes not abroad in search of monsters to
destroy,” proclaimed Secretary of State John Quincy Adams a
century ago. Sometimes war is necessary. But only very rarely.
Washington’s overriding duty is to safeguard America, not
remake the world. That principle is only likely to grow more
important over time.

Doug Bandow is
a senior fellow at the Cato Institute and a former special
assistant to President Ronald Reagan.

The Budget Battles to Come

Michael D. Tanner

Don’t look now, but the next big legislative battles of the
Trump presidency may be just a few weeks away. Republicans must
pass a budget by April 28 to avoid a partial government shutdown.
Yet, as was the case during the recent failed effort to repeal and
replace Obamacare, Democrats are united in opposition while
Republicans are badly split.

The looming battle doesn’t concern the 2018 budget that
President Trump purported to unveil a few weeks ago, which will
spark a fight of its own down the road. Rather, it concerns budget
business left over from last year when, unable to pass budget
bills, a lame-duck Congress kicked the can down the road, passing a
continuing resolution to fund the government through the end of
this month. The time on that CR is now almost up, and Republicans
are planning to offer an omnibus budget bill to fund the government
for the rest of the year. To further complicate measures, this
massive omnibus will likely be offered as an amendment to the 2017
defense-appropriations bill.

If Trump thought his
first few months were tough, he’s in for a rude awakening: The next
few will be even tougher.

Perhaps unsurprisingly, given the direction of this Congress and
administration, the most contentious issues are not likely to be
the bill’s massive levels of government spending (it proposes a $15
billion increase from last year) nor the inevitable billions of
hidden pork. Instead, it is smaller side issues that threaten to
derail the effort to keep the government running. For instance, the
Trump administration is insisting on funding to start construction
of — or at least planning for — the wall it wants to
build on our Mexican border, and Democrats, Republican moderates,
and deficit hawks alike are balking. There will also be the usual
face-offs over issues such as defunding Planned Parenthood.

While the actual impact of government shutdowns is always vastly
exaggerated by the media, the optics of a shutdown would only
contribute to the image of an administration in disarray. Yet a
retreat by the administration from its key priorities, especially
in the wake of the health-care-reform debacle, will make it look
weak, imperiling the rest of its agenda.

And if Republicans do manage to paper over their
differences long enough to get through this fight, they will almost
immediately have to face up to another budget issue — the
debt ceiling. The federal government actually exceeded its $18.15
trillion borrowing limit some time ago. But, in a bipartisan
pre-election ducking of responsibility last October, Congress
“suspended” the limit until March of this year. Since then, the
Treasury Department has been engaging in a variety of bookkeeping
gimmicks to avoid default, such as postponing contributions to
government pension funds and borrowing from a pool of funds that
the government sets aside to manage exchange-rate fluctuations.
While the government can probably keep using such “extraordinary
measures” through summer, Congress will eventually have to deal
with the issue. Expect Democrats to suddenly rediscover concern
over the national debt, while the Freedom Caucus has already
indicated that it will want concessions in exchange for agreeing to
raise the ceiling.

After that comes the battle over Trump’s 2018 budget, with its
big increase in defense spending and offsetting cuts to domestic
programs. Almost nobody is enthused by that plan. There’s also the
president’s $1 trillion infrastructure plan to consider. Oh, and
tax reform.

All of this budget maneuvering comes shortly after the
Congressional Budget Office released an alarming new report warning
that the national debt will double as a share of the national
economy by mid-century. Interest payments on the debt will rise
from $270 billion in 2017 to $768 billion in 2027, with
catastrophic consequences for President Trump’s agenda of economic
and job growth. According to the CBO, the rising tide of red ink
will shrink economic growth by 3 percent from the current baseline.
As a result, the average American will be $4,000 poorer by
2047.

Trump has had a tough first few weeks in office; if he thinks
it’s about to get easier, he’s in for a rude awakening.

Michael
Tanner
is a senior fellow at the Cato Institute and the author
of Going for Broke: Deficits, Debt, and the Entitlement
Crisis
.

Trade Deficit: Ask the Wrong Questions, Get the Wrong Answers

Daniel R. Pearson

President Trump signed an executive order on March 31 requesting
an “Omnibus Report on Significant Trade Deficits.” This
report “shall identify those foreign trading partners with
which the United States had a significant trade deficit in goods in
2016.” The policies of those countries are to be examined,
including among others: tariff and non-tariff barriers, dumping,
government subsidization, intellectual property theft, and
“other factors contributing to the deficit.”

Thank heavens for that final clause, “other factors
contributing to the deficit.” Looking at other
countries’ policies may tell us something about bilateral
trade flows, but it will tell us very little about the overall U.S.
trade deficit. With the exception of “other factors,”
the executive order is asking the wrong questions, so the report
almost certainly will provide the wrong answers.

Trump’s executive order
seems premised on the mistaken notion that fixing trade-distorting
policies of other countries would reduce the U.S. trade
deficit.

The trade deficit is driven by U.S. government policies that
influence domestic savings and investment, not by the policies of
governments overseas. The United States simply doesn’t save
as much as it invests. This leaves America with a massive
financial/capital account surplus — people in other nations
send a lot of money to this country every year to build factories,
buy stocks, and fund the federal budget deficit. By definition, the
balance of payments must balance, so the United States runs a
current account deficit equal to the financial/capital account
surplus. The trade deficit is the largest component of the current
account, so the trade deficit also is large — $502 billion in
2016.

If the United States really was serious about reducing its trade
deficit, it would curtail its demand for borrowed money by
eliminating the federal budget deficit. The Congressional Budget
Office reports that the 2016 budget deficit rose to $587 billion
— even larger than the trade deficit. For good measure, the
U.S. government also would reform the tax code to stop the taxation
of interest earned on deposits, as well as ending the deductibility
of mortgage interest. That would shift the policy bias away from
borrowing, and instead would favor saving.

Unfortunately, the executive order seems premised on the
mistaken notion that fixing trade-distorting policies of other
countries would reduce the U.S. trade deficit. True, there are an
abundance of government policies — both overseas and in the
United States — that distort the flow of goods and services.
Seeking their reform is entirely appropriate. However, those
distortions largely have the effect of rearranging trade flows
among countries, not increasing the size of the U.S. trade
deficit.

As a hypothetical example, If China was to end a policy that
subsidized the production of T-shirts, it might lead to higher
prices. That price signal could cause a reduction in U.S. T-shirt
imports from China. However, U.S. demand for affordable T-shirts
would remain unchanged, so importers likely would increase
purchases from Bangladesh. Reform of a trade-distorting policy
easily could shift the origin of T-shirts entering the United
States from one country to another, but the effect on the overall
U.S. trade balance would be nil.

Many trade flows have very little to do with policies and much
to do with economics. Comparative advantage still works in the 21st
century — countries simply are better at producing some
things than others. Even most protectionists recognize that America
is better off importing coffee from efficient producers such as
Colombia rather than trying to grow it here. Imports raise living
standards; we shouldn’t be afraid of them.

So what will the executive order accomplish? By identifying
troubling policies overseas, it might help to determine future
negotiating priorities. More likely, though, its built-in emphasis
on other countries will tend to misinform the public and the White
House itself regarding the root causes of the trade deficit.

Perhaps there is yet a glimmer of hope. Knowledgeable economists
are employed at Commerce and USTR, as well as other departments
involved in preparing the report. They may face pressure to produce
a study consistent with the biases expressed in the executive
order. Will those professionals stand aside and allow the real
causes of the trade deficit to be swept under the rug? They would
do a great service to the United States and to the global trading
economy by looking beyond the wrong questions, focusing on
“other factors contributing to the deficit,” and
striving to provide the right answers.

Daniel R.
Pearson
is a senior fellow in trade policy studies at the Cato
Institute. He served a two-year term as chairman of the U.S.
International Trade Commission during the George W. Bush
administration.