The Morning Jolt


China May Cry ‘Uncle’ Sooner Than We Think

President Donald Trump and China’s President Xi Jinping shake hands in Beijing, China, November 9, 2017. (Damir Sagolj/Reuters)

Making the click-through worthwhile: Some signs that China is starting to feel the pain from Trump’s trade war; a special House election in North Carolina and what it could tell us about 2020; and Beto O’Rourke declares that living close to work is “a right for everyone.”

Is China Starting to Feel the Pain from the Trade War?

Yesterday’s Wall Street Journal had a fascinating front-page article that could have deep political ramifications.

Right now, Trump’s trade war with China looks like slamming our collective foreheads against a brick wall, hoping we do more damage to the wall than the wall does to our skulls. We institute tariffs, China gets mad and responds with their own tariffs, Trump gets mad and responds with more tariffs, and the cycle goes on and on. The escalating battle hurts our farmers and exporters, while the leaders of Beijing just sit and wait for either a new president with a different attitude or for political pressures to convince Trump to change course.

There’s an argument to be made that extensive trade ties with China have empowered them, while making us more dependent upon a country that is hostile to our national security interests, values, and human rights. The president would be wise to go beyond the familiar complaints about intellectual property — a fairly abstract issue — and discuss China’s inhumane working conditions, military aggressiveness, artificial island construction, and persecution of religious minorities on a massive scale. A lot of people groaned or rolled their eyes when Senator Lindsey Graham said that Americans needed to “accept the pain” that comes from a trade war with China, but I thought he deserved an “attaboy” for his honesty. When’s the last time an American political leader admitted his preferred policy was going to mean pain for some people?

The trade war is a giant bet that we can get China to do what we want through economic pressure and that they need access to our markets more than we need access to theirs. They’re betting that they can endure more economic pain than we can.

As you may have noticed, the Chinese government lies a lot. When the government in Beijing puts out economic numbers, investors, businesses, and people who need to know are left wondering whether those are accurate numbers, or whether they’ve been airbrushed to assure the world that the Chinese economic engine is humming along as it should.

Mike Bird and Lucy Cramer of the Wall Street Journal reported:

Beneath China’s stable headline economic numbers, there is a growing belief among economists, companies, and investors around the world that the real picture is worse than the official data. That has analysts and researchers crunching an array of alternative data — from energy consumption to photos taken from space — for a more accurate reading.

Their conclusion: China’s economy isn’t tanking, but it is almost certainly weaker than advertised. Some economists who have dissected China’s GDP numbers say more accurate figures could be up to 3 percentage points lower, based on their analysis of corporate profits, tax revenue, rail freight, property sales and other measures of activity that they believe are harder for the government to fudge.

Meanwhile, China’s central bank decided to add another $126 billion into the economy, and the country is facing a crisis in its pork supply:

The price of pork has been rising for months and is now nearly 50 percent higher than a year ago, data published on Tuesday showed. Consumers are frustrated, and officials are quietly expressing alarm as they fight the outbreak of a disease that is devastating the country’s pork supply.

And in the middle of all this are the Hong Kong protests, which are effectively shutting down one of the cities most important to China’s economy.

The Chinese government is authoritarian and can force its people to endure economic pain for the sake of national competitiveness for quite a while — right up to the point where it can’t. No one knows exactly where that point is and when enough important people in China look at the price of pork and other imported goods and decide it’s time to say “uncle” and offer a deal with better terms to the United States. But perhaps that moment isn’t quite as far away as the Chinese government wants the world to think.

A Special Election in North Carolina and the Outlook for 2020

Today is Election Day for two congressional districts in North Carolina. The GOP really doesn’t need to worry much about the third congressional district, where Republican state representative Greg Murphy is expected to beat former Greenville mayor Allen Thomas. The one they’re sweating is in the ninth congressional district, where the little polling that exists shows Republican Dan Bishop just barely ahead of Democrat Dan McCready. This is the district where the election in 2018 was super close, and then the results were not certified due to irregularities involving requests for absentee ballots, unreturned absentee ballots, and individuals who illegally collected absentee ballots. On paper, the GOP should hold this seat, but nobody really knows what happens in these low-turnout special elections; every once in a while, the party that usually loses by a large margin can eke out a victory, like when Charles Djou won in Hawaii or when Robert Turner won in the special election to replace Anthony Weiner in New York City.

If McCready the Democrat wins in traditionally GOP territory, does it mean something? If you’re the North Carolina Republican party, yeah, you start to worry about your canary in the coal mine suddenly coughing terribly. It would mean that Republicans either aren’t tuned in or aren’t motivated, and Democrats are. Trump needs to keep the Tarheel State in his column the next time around.

There are a few indicators that suggest 2020 could be catastrophic for the Republican party. Democrats gained 41 seats in the House last year, and so far this year, 14 incumbent House Republicans announced their intention to retire. Most of them are from relatively safe seats, but each open seat is a little bit tougher to keep than an incumbent running for reelection. In the Senate, Democrats are getting the candidates they want — John Hickenlooper in Colorado, Mark Kelly in Arizona. Some non-incumbent appointee has to keep the Georgia seat. Roy Moore, having learned nothing, wants to mess up the GOP’s hopes in Alabama again. Trump’s former campaign manager, Corey Lewandowski, currently leads the race to be the GOP Senate nominee in New Hampshire.

Trump’s approval is not good, particularly in the states he needs to keep.

The news isn’t all bad. A lot of first-term presidents would love to run for reelection under these conditions. Those who have openly hoped for a recession continue to be disappointed. Private payrolls continue to climb healthily. For all that Trump publicly fumes about fed chairman Jay Powell, the chairman said Friday, “We are not forecasting or expecting a recession.” The Democratic nominee is certain to be flawed in one way or another — either aging and gaffe-prone (Joe Biden), a lecture-prone, dishonest “woman of color” (Elizabeth Warren), or an outright socialist (Bernie Sanders).

Is ‘Living Close to Work’ Really ‘a Right for Everyone’?

Remember yesterday’s point about the Democratic presidential candidates offering wild, implausible promises that ignore the difficult realities of making even modest improvements in existing federal programs, never mind enacting new ones?

Late last night, Beto O’Rourke invented a new right for Americans: “Living close to work shouldn’t be a luxury for the rich. It’s a right for everyone.”

The federal government is not a genie that can grant you three wishes.

Home prices and rent prices are always going to be primarily driven by supply and demand. If you want more people to be able to live closer to work, you need to increase the supply of housing near workplaces. Policymakers can set this as a goal, but you still will inevitably run into difficult obstacles. People who live in homes with high real estate markets are not eager to see new high-rises aimed at demographics that want to spend less on rent or mortgages. NIMBY-ism thrives in all kinds of communities, but particularly in urban progressive ones. You need to find land near the workplace that can be redeveloped into housing units. For obvious reasons, people like their old charming neighborhoods with small and historic three-level brownstones, townhouses, or apartments and aren’t eager to see high-rise units replace them. And even people who want to live close to work may not love the idea of living in an apartment or condo or some other shared building — they want lawns and backyards and the extra bedroom and a basketball hoop in the driveway and all the other things that come with suburban life.

Living close to work shouldn’t be a luxury for the rich. It’s a right for everyone,” inevitably means telling people, “you cannot keep your neighborhood, where you have lived for many years, the way you like it. You have to allow outsiders to come in and change things.”

Give O’Rourke a little credit for acknowledging a truth that wealthy Democrats would prefer to avoid: “Rich people are going to have to be forced to allow lower-income people to live near them.” I just hope he is willing to emphasize this point at his next $500-per-plate fundraiser in Manhattan.

ADDENDA: In case you missed it yesterday, Washington Post columnist Max Boot offers the shocking news that he does not support Donald Trump, will not vote for him, and will not vote for Republicans; doubting that Joe Biden’s lead is as fragile as some Democrats think; and Valerie Plame’s new ad tries to get everyone to forget her anti-Semitism.


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