It is a sign of how wacko things have gotten that the truly most important event of the past week has simply been buried in the news by all the huffing and puffing over Trump’s shutdown ending and these revelations about VA Governor Northam. This would be decision by the US on Feb. 1 to withdraw from the Intermediate Nuclear Force (INF) treaty with Russia, followed by Russia’s doing so as well shortly thereafter. This is both historic and very serious, far more so than Trump’s wall or Northam’s photographs.

The treaty was signed in 1987 between then US President Reagan and then Soviet President Gorbachev, culminating several years of negotiations. It led to the destruction of around 3600 short and intermediate range nuclear missiles, including most importantly all of those in Europe that threatened the potential outbreak of a war on that continent between NATO and the USSR. It was one of the most important moments on the way to bringing about the end of the Cold War, and indeed it is unfortunately accurate to describe the ending of this treaty as the end of that end.

I have seen a number of people speculating that this action somehow shows Trump “standing up” to V.V. Putin, being a tough guy and all that. But the nearly immediate acceptance with virtually no complaint by Putin of this move suggests otherwise. US and also western European officials have argued that Russia has been in effective violation of the INF since 2014 when it developed a new cruise missile, 97M925, that can be easily modified to make it fly in the forbidden distance ranges. Russian leaders have argued that they were not in violation given that this missile also had as its main range adjusted and therefore are not in violation and none violating the limits had been deployed. Putting such missiles with the violating ranges in deployment would directly threaten western Europe. As it is, Putin is in a position now to rapidly deploy them in a way to threaten western Europe while the US has nothing to put in place to reply to this. So, Putin gets to gain a major military edge and threaten the western Europeans while getting to blame Trump for having ended the treaty by withdrawing and allowing him to do this. The Europeans in question had opposed Trump ending the treaty, with indeed this probably being one of those things Merkel was trying to maintain influence with Trump over by not complaining too loudly about the US pressuring German companies to stop dealing with Iran.

Another factor in this matter emphasized by US leaders is that China was never a part of the agreement, and I gather has been developing such intermediate range missiles. But those were unlikely to be deployed in Europe, where the removal of such missiles 32 years ago was a triumphant movement towards the reduction of mutual tensions and towards peace.

All the way around, there is nothing good at all about this development, and it most definitely doesn’t show Trump doing something that is against the interests or desires of V.V. Putin. The outcome may well be a new arms race, which will please the military-industrial complexes in both the US and Russia, and maybe China as well. No, this is not a good development at all

Barkley Rosser

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Accompanied by an almost $4.8 billion subsidy package as estimated by Good Jobs First (follow the link to the spreadsheet), the project was heavily criticized even before it was announced in 2017 (my take here and here). The massive subsidy helped normalize the idea of multi-billion investment incentives and gave Amazon a handy benchmark for its own effort to break the bank.

As I analyzed a year and a half ago, it didn’t make sense to manufacture electronics in the United States when everything was cheaper in China, unless you were worried about access to the U.S. market. The illegitimate Trump regime had already created an unpredictable and protectionist trade climate, and this was long before the trade war with China really took off. If Foxconn felt it had to locate in the United States, the country was in a strong bargaining position, but by playing the states off against each other, it was still possible for a foreign company to score huge subsidies.

What happens next? As noted, Foxconn still says it will build a huge facility and hire 13,000 workers. But in 2018, it failed to meet its job creation target and forfeited what would have been a $9.5 million subsidy. I predict we will see more such failures from Foxconn until it finally pulls the plug. Indeed, on January 31, Good Jobs First called for the immediate cancellation of the deal, with the company financially responsible for expenses made by the state and by Racine County in connection with the project. This would be a fair resolution of the situation, appropriately leaving egg on the faces of the deal’s promoters, the recently defeated Governor Scott Walker and the head of the illegitimate Trump regime.

As you see, I have managed to steer clear of the obvious puns. Instead, I invite you to insert your joke here.

Cross-posted at Middle Class Political Economist

The NAR reported that pending home sales declined -2.2% m/m in December. Since this is based on contract signings, it suggests that *existing* home sales will continue to decline for the next month or two.

A few commentators have expressed surprise at the negative number, since mortgage rates declined in December. The problem with this reasoning is that mortgage rates only declined to where they were in September, and were higher than at any previous point during last year. Just as in purchase mortgage applications, the continued decline in rates for most of January might be more positive.

In short, the shallow downturn in housing that we saw since the beginning of last year isn’t over yet.

In the meantime, Friday’s employment report will give us a look at construction employment, and since that usually turns down before a recession begins, it will bear heightened notice. I have an extended post on this pending at Seeking Alpha, and will link to it once it is posted.

Robert H. Nelson of the University of Maryland Public Policy Department died at age 74 on Dec. 15 while attending a conference in Helsinki, Finland.  He was the leading economist writing about the relationship between religion and economics, notably in three books: Reaching for Heaven on Earth: The Theological Meaning of Economics (1991), Economics as Religion: From Samuelson to Chicago and Beyond (2001), and The New Holy Wars: Economic Religion vs. Enviornmental Religion  (2010).  I spent several days with him some years ago at a conference on forestry issues where he was presenting his views on environmentalism as religion.  In any case, his death has me thinking about the broader issues he wrote about.  I shall note the arguments in these books along with some further observations.

His first book was essentially a history of economic thought that put a certain theological perspectve on thnkers mostly from the fairly distant past. A basic theme in all of his books is that economics is a form of secular religion that posits a material salvation in some distant future as a result of economic  growth and redistribution, a material heaven on earth.  In that book he posed two competing theological strands in the history of economic thought: a Roman (Catholic) “rationalism” and a Protestant “revelationism.”  The former started with Aristotle and included such figures as Aquinas, Adam Smith, Saint-Simon, and Keynes.  The latter started with Plato and Augustine, Calvin, Darwin, Spencer, and Marx.  A number of observers criticized this pair of categories, noting particularly that virtually the only economist in the second list is Marx (although Spencer did write on economics somewhat).  I happen to share the criticisms that it is not clear how useful or meaningful this pair of lists is, although the tradition of lining up historiccal intellectual figures as being Aristotelian or Platonic has a long history in philosophy.

Wait long enough, and great ideas come back around, although not necessarily wearing the same garb.  Elizabeth Warren has just come out for a 2% wealth tax (above $50 million).*  But this is simply an annualized version of my lump sum stochastic jubilee.  What’s the advantage of redistributing the whole thing every 50 years (on average) vs a steady trickle?  A periodic reset would interrupt long run processes of wealth inequality more fully than a tax, so long as the rate of return on financial assets is high enough to compensate for the extra annual pinch, which it most likely would be, since wealth holders would demand a higher rate of return.  It would also be a lot more fun.  On the other hand, it would be more complicated to administer and might be resisted by force.

On balance, I’d go for the jubilee, but I’ll take Warren’s version as a close second.

*There’s also an extra 1% on wealth in excess of $1 billion, but this is largely symbolic.