It's Even Worse Than You Think

by David Cay Johnston

  Japan enjoyed some significant advantages over America. A big one was that 60 percent of working-age Japanese had a tertiary or college education, compared to only 48 percent of Americans. The share of the population with a four-year college degree or equivalent, a narrower measure of educational credentials, was more than a third higher in Japan, though Japan trailed America badly in people with doctoral degrees.

  In a world of rapidly expanding knowledge, with science and technology the main drivers of economic growth, Trump was proposing major cuts to higher education, as detailed in another chapter.

  An America that cuts its investment in its most valuable asset, young minds, combined with a president who pulls back from trade is an America that will have fewer jobs and especially fewer very good paying jobs in the future. That is even more true when comparing America to countries led by people with a forward-looking view and a desire to make the future better than the present, like Japan’s Abe and China’s Xi Jinping. They were busy making successful trade deals while Trump diverted attention with ominous talk of the pending doom of Western Civilization.

  Unlike Trump, China acted not with an eye on tomorrow’s television news, but with enduring improvements that would be of great economic value years, decades, and even centuries into the future.

  China, roughly the same geographic size as the United States, was lacing its cities together with high-speed railroads while America’s trains ran late and rough on tracks beaten down by freight trains. The Chinese built magnificent new airports with spacious terminals and plenty of wide runways for jumbo jets while America’s airports were often overcrowded and sometimes crumbling.

  China laid deeper beds for its expanding highways than the German Autobahn and especially America’s Interstates, battered by heavy trucks above and supported by too little ballast below.

  Not seeing global warming as a hoax, as Trump does, China built the Three Gorges Dam project, which made it possible for cargo ships to go hundreds of miles upriver. Should Shanghai disappear one day beneath the liquid remains of ancient polar ice, the Chinese government was prepared to move millions of people inland while America was not even building adequate catch basins for torrential rainfalls in low-lying areas like Houston.

  Donald Trump promised a massive American infrastructure renewal. But after eight months no one had seen a plan or how to pay for fixing the nation’s multi-trillion-dollar deficits in roads, bridges, dams, and other infrastructure. And that was just for what was falling apart, not new needs for a growing population.

  When hurricanes Harvey and Irma flooded Houston and Florida, Trump flew there, but he stayed so far from the flooding that his wife’s white canvas shoes were still spotless when they flew home. Trump boasted about the size of the crowd that turned out to see him. And on another trip, he offered not a massive rebuilding program that would create jobs and reduce future flooding, only a smile and an admonition to those at one shelter to “have a good time.”

  * * *

  When Trump got to Hamburg for the G20 meeting the day after his Warsaw speech, he was, other world leaders said later, standoffish.

  He arrived having behaved like an oaf a month earlier at a meeting of North Atlantic Treaty Organization presidents and prime ministers. When the heads of government gathered for the obligatory photo, Trump pushed aside Prime Minister Duško Marković of Montenegro so he could be front and center for the cameras. With that shove, Trump made himself in the eyes of many Europeans a new version of the Ugly American.

  The bad impression from Trump’s barging was reinforced at the G20 when he left his chair during a meeting in which the world leaders sit at a table, their subordinates seated behind them. Ivanka took her father’s chair. At the time, she was not even on the White House payroll. To the democratically elected leaders at the table, this was at best amateurish and at worst monarchist.

  That and other breaches of protocol, along with Trump’s solitary position on climate change, effectively turned the annual gathering into the G19 plus one.

  The nineteen negotiated what became the G20 Climate and Energy Action Plan for Growth. The plan declared the Paris climate accord, which Trump had withdrawn America from, to be irreversible. The plan also called for something that would be anathema to the political termites Trump had placed into the structure of America’s environmental, interior, energy, and other agencies to promote the interests of fossil fuel industries.

  The plan statement urged “all G20 members that have not yet done so to initiate a peer review of inefficient fossil fuel subsidies that encourage wasteful consumption as soon as feasible.”

  Trump also talked often of imposing tariffs not just to pay for the wall with Mexico but also to discourage imports. In some speeches, he suggested tariffs as high as 45 percent. Tariffs, especially at such high rates, would surely touch off a trade war that would be bad for the world economy and that of every country, including the United States, with goods and services to trade.

  Trump got some support for limited use of tariffs from the liberal economist Dean Baker, who writes about the follies of politicians and reporters who get textbook economics wrong. Used strategically, tariffs could be good for American workers and investors, Baker said. President Obama did just this with China several times to subtly coerce China into abandoning unfair trade practices.

  “China almost certainly is violating trade rules in many areas, most obviously by subsidizing exports,” Baker said. “Tariffs can be a way to force China to change the policy.”

  If Trump imposed tariffs on imported steel, that would force Americans to pay more for steel whether imported or made in America. That’s because domestic makers would raise their prices to the amount of the tariff, or a bit less, to enhance their profits without losing sales. Using tariffs strategically for short periods could help steelmakers get through downturns in the economy or other turbulence beyond their control much the way the Obama stimulus package rescued the American auto industry, allowing it to revive and prosper.

  The smart use of steel tariffs in the past, Baker said, “bought the American steel industry some breathing space at a time when most of the old-line producers were facing bankruptcy. As a result, the companies were able to reorganize and are now profitable. This has likely preserved tens of thousands of jobs in steel in Pennsylvania, Ohio, and other Rust Belt states.”

  Trump, by the way, had some experience with importing steel when tariffs were not an issue. For his high-rise hotel in Chicago and his hotel without a casino in Las Vegas, Trump imported cheap steel from China, costing American workers their jobs. He went to great lengths to hide where the steel came from.

  The Chinese sourcing for the steel was “hidden within a chain of various corporate entities, including holding companies registered in the British Virgin Islands,” investigative reporter Kurt Eichenwald wrote in Newsweek. Eichenwald detailed how Trump used “obscure off-shore entities that exist only on legal documents, limiting the potential liability of real businesses while obscuring their true owners” to make it hard for anyone to suss out where the steel was made.

  America has run an overall trade deficit of 2 percent to 3 percent for years. Had it been whittled down to one percent, the country would have enjoyed near full employment some time ago instead of only in the last year of the Obama administration.

  There’s a better tool than tariffs for reducing America’s chronic trade defecits. It’s making the dollar worth less against the euro, China’s renminbi, Canada’s dollar, Mexico’s peso and other currencies. Trump claimed China was artificially reducing the value of the renminbi against the dollar, but he never suggested the U.S. do the same to spur American exports and discourage imports.

  “The normal mechanism for reducing a trade deficit is an adjustment in currency values,” Dean Baker said. A so-called strong dollar makes American exports expensive and imports cheap so Americans sell fewer Chevys abroad and buy more BMWs. But a so-called weak dollar would have the reverse effect: A
mericans would not import as much and other countries would buy more American products and services. The policy goal is to get a long-term balance between exports and imports.

  “During the campaign, Trump pledged to declare China a currency manipulator,” Baker observed. But after becoming president “Trump quickly abandoned doing anything on currency with China,” a switch that occurred after he and his daughter got a basketful of trademarks on Trump-branded products that the family could sell in China.

  Trump had one more not-ready-for-prime-time idea about trade policy. In September, after one of North Korea’s missile launches, Trump tweeted, “The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea.”

  That would mean, of course, ending all trade with China, which imports from America as well as exports to it on a grand scale. And it would mean American companies would no longer be able to buy or sell goods and services to India, Pakistan, the Philippines, Russia, Thailand, and even Burkina Faso, because they also trade with Pyongyang.

  David Frum, a conservative Republican who was a George W. Bush speechwriter before becoming a senior editor at The Atlantic magazine, had the smart response to Trump’s less than half-baked tweet: “If you proudly publish unworkable options, you advertise your lack of better ones.”

  Digital Delusions

  On his forty-second day in office, Trump stepped off the Marine One helicopter and onto the deck of the most expensive ship ever built, the Gerald R. Ford, the first in a new class of American aircraft carriers. The giant ship, eleven hundred feet long and twenty-five stories from keel to the top of its superstructure, served as a prop for Trump to promote his plan to add $54 billion in the coming year to what was already by far the world’s largest military budget. Trump also asserted, yet again, that his prowess as a negotiator would drive down the costs of military equipment, which he promised soon would be bought with abundance.

  The shipboard imagery was smart television. Even though it rehashed the dramatic landing fourteen years earlier of President George W. Bush on the deck of the aircraft carrier Abraham Lincoln, it helped Trump create the impression of a capable commander in chief.

  The most important shipboard news from Trump’s visit that second day of March would not emerge for more than two months. Trump broke that news in statements showing how he reacts instinctively, often without advice or knowing basic facts, and revealing how his ignorance of science and the technology of modern warfare blocks his ability to understand issues when they are explained to him.

  Aboard the Gerald R. Ford, Trump began his remarks, as he often does, with self-centered comments. “They just gave me this beautiful jacket,” he said, grinning, about a Navy flight jacket like the one that Bush wore in 2003 as a banner behind him declared, very prematurely as it turned out, “mission accomplished” in Iraq.

  Trump, wearing his jacket, continued. “They said, here, Mr. President, please take this home. I said, let me wear it. [The sailors laughed.] And then they gave me the beautiful hat, and I said, you know, maybe I’ll do that. We have a great Make America Great Again hat, but I said, this is a special day, we’re wearing this. Right? [The sailors applauded as he put on the ship’s baseball cap.] I have no idea how it looks, but I think it looks good. It’s a great-looking hat—just like this is a great-looking ship. . . . What a place. It really feels like a place.”

  Trump told the sailors under his command that “we will give our military the tools you need to prevent war and if required, to fight war and only do one thing, you know what that is?”

  “Win!” the sailors shouted as one.

  “Win, Win. We’re going to start winning again,” Trump said, reiterating one of his themes.

  As with Trump campaign rallies, this was an exercise with no substance, its purpose to work up the crowd and create images for television, a variation on the faux reality show that made Trump a household name. Then Trump turned to military spending, which he asserted must rise sharply to support warfighting capability.

  “We are going to have very soon the finest equipment in the world,” Trump declared. That did not square with numerous statements by Navy brass that the United States already had the best Navy with by far the best equipment.

  Trump said the Gerald R. Ford “provides essential capabilities to keep us safe from terrorism and take the fight to the enemy for many years in the future.” Aircraft carriers have little to do with combating terrorism, and some military strategists have argued that they are weapons from a bygone era. They are useful in positioning jet fighters and helicopters with limited range close to military targets, but acts of terrorism are often committed in places where dropping bombs or strafing the ground with cannon fire would kill and wound more civilians than combatants. Carriers are useless against many kinds of terrorist attacks such as those using backpack bombs or driving trucks and cars into crowds. Ships like the Gerald R. Ford are primarily weapons of conventional mechanized warfare, useless against small-bore attacks committed by small teams of suicidal ideologues and lone wolves.

  Trump vowed to grow the Navy from ten aircraft carriers to twelve. That was, at best, misleading. Congress in 2006 required a minimum of eleven aircraft carriers, though the Navy had only ten in service at the time because the Gerald R. Ford had not yet been commissioned. Navy brass had long planned for twelve floating airports. Once again, Trump was taking credit where he deserved none.

  Aircraft carriers may be outmoded in the modern world because of advances in torpedoes, missiles, and smart bombs, one of which could cripple and perhaps sink an aircraft carrier. Consider the firepower of relatively small South Korean attack ships, the Sejong the Great–class of guided missile destroyers. They displace about 11,000 tons of water, not much more than America’s Arleigh Burke–class destroyers. The South Korean warships come with 128 missile silos (the Burke-class have 96), more than enough to rain down hell on an aircraft carrier and the small armada of support ships surrounding it for protection. That a million-dollar or less missile could disable or even sink the Ford is among the reasons that Chinese plan for only three aircraft carriers and the British, French, and Russians each own one. Keeping friends around the world who will allow land-based airports for fighter jets, bombers, refueling tankers, and other aircraft is an option.

  Trump also implied that he was fighting for military spending increases in the face of shrinking Pentagon budgets. That’s not true. The Pentagon calculated that Congress increased the basic military budget by 14.3 percent or $41 billion in 2002, by another 11.3 percent or $37 billion in 2003, and by 10.9 percent or $47 billion in 2008. Spending in 2015 and 2016 declined because the level of warfare in the Middle East declined. The Pentagon is just part of the national security budget. There is also the cost of the Central Intelligence Agency (human intelligence), the National Security Agency (telecommunications surveillance), and other security operations that add mightily to the total cost.

  The $54 billion spending increase Trump proposed is, by itself, a meaningless figure to most people. One way to put it in perspective is to examine the cost per American worker at the median wage, the midpoint where half of the workers make more, half make less. Divvied up this way the annual cost of the proposed increase in spending equals more than half of a week’s gross pay for the median wage worker.

  America spent $611.2 billion on its military in 2016, the Stockholm International Peace Research Institute calculated, while the Trump White House cited a figure of $585 billion. The peace institute calculated that the United States spent 36 percent of all global military budgets. The American figure came to more than the spending of the next eight countries combined: China, Russia, Saudi Arabia, India, France, Britain, Japan, and Germany. Indeed, the proposed increase alone was equal to what Russia spends each year on its military from January to mid-September.

  Those figures are not simple comparisons based on currency exchange rates. Rather they are what economists call
purchasing power parity comparisons that consider such facts as the low cost of Chinese labor, and therefore Chinese soldiers and sailors, compared to the cost of military labor in America and Western Europe.

  “Our Navy is now the smallest it’s been since, believe it or not, World War I,” Trump said. “Don’t worry, it’s going to soon be the largest it’s been. Don’t worry. [Applause.] Think of that. Think of that.”

  Indeed, the 2017 fleet of 274 ships was not much larger than the 245 at the end of World War I almost a century earlier. By 1930 the Navy floated just 130 ships, while to prosecute World War II America launched 6,768 fighting ships. Fulfilling Trump’s promise of the largest fleet ever would require a 24-fold increase in the number of ships. No need for such a fleet exists. Even if a third mechanized global war, like the first two world wars, were to erupt, the weaponry needed to fight would be much different from that in the first half of the twentieth century. Advances in engineering, science, and technology reduce the need for both ships and sailors, just as tanks and armored personnel carriers mean the Army buys few of the horses and bayonets it relied on in the nineteenth century.

  The costs of adding more than six thousand ships to create a naval force larger than in 1944 would cost many times the $54 billion of extra Pentagon spending Trump was pushing. The Ford alone cost $13 billion, with the next two aircraft carriers projected at about the same figure. And that huge sum does not count the ninety warplanes for each carrier or the battle carrier group—the surface ships plus submarines that must escort the carrier lest it be taken out with a missile or three that cost less than a million dollars each or even a modern torpedo costing much less than that.

  John Richardson, the Navy’s top admiral, had long promoted improved training and a change in the way of thinking about war rather than just throwing money at the Pentagon. “We will not be able to ‘buy’ our way out of the challenges that we face,” he wrote in a 2016 plan for maintaining U.S. naval superiority. The admiral favored a larger Navy, but with 355 ships, not nearly 6,800.