What really causes America’s chronic deficit in international trade

October 29, 2018

A fundamental error that seems to motivate the Trump administration’s policy on international trade was starkly articulated on Firing Line recently by Peter Navarro, the President’s assistant for trade and manufacturing policy. The Firing Line host Margaret Hoover asked Navarro to explain the Trump administration’s actions against trade with Germany. He responded: “If you look at our trade deficit with Europe, it’s $150 billion, right? Just rough rule of thumb is $1 billion of trade deficit is 6,000 jobs you ship offshore, okay? So it’s a big number. And the only reason why we have that deficit is because of a whole range of unfair trade practices that Europe engages in.”

One may question Navarro’s assertion about how a trade deficit affects employment, but let us focus here on his expressed assumption that America’s trade deficit with other countries is caused by their unfair trade practices against American exports. This sounds so logical that few people bother to question it, but it is wrong.

America’s trade deficit is the difference between the total value of the goods and services that Americans buy from other countries (our imports) and the total value of the goods and services that Americans sell to other countries (our exports). These are big aggregates, and they are affected by many factors. But the primary factor that ultimately drives America’s total trade deficit is the desire of foreigners to invest in America.

When Americans buy goods and services from foreigners, we pay them in US dollars. But there is just one basic reason for anybody to want US dollars: because they can be used to buy things in America. US dollars can be used to buy goods and services in America, or they can be used to buy investments in America. Foreign purchases of American goods and services are counted as exports in America’s trade balance, but foreign purchases of American stocks and bonds are not, and that is the key to understanding what causes imbalances in international trade.

If foreigners had no desire to invest in America, then they would use all the dollars that they got from us to purchase American goods and services, which would be counted as exports in America’s international-trade accounts. Even if foreign governments “unfairly” imposed taxes and quotas on American exports, foreigners would still want to use their American money as well as possible to buy things from America. Foreigners who do not want to invest in America would certainly have no motivation to simply hoard the dollars that we paid them for our imports.*

So in a world where foreigners did not want to acquire investments in America, America’s international trade in goods and services would be generally balanced, as all the dollars that Americans spend on imports would return promptly in demand for American exports. In this world, unfair trade barriers could reduce the volume of trade and could affect the exchange rate between the US dollar and other currencies, and trade barriers could affect the distribution of deficits and surpluses in America’s bilateral trade relationships with individual countries; but trade barriers could not affect the overall balance between the total global values of America’s exports and imports.

If we really want to understand America’s deficit in the international trade of goods and services, we must recognize that this trade deficit is just equal to the net investment that is flowing from the rest of the world into America. When foreigners want to invest their savings in safe bonds from the US government or in securities from well-managed US corporations, the dollars that are needed to buy such investments can only come from the excess of the dollars that Americans send abroad, in payment for US imports, over the dollars that foreigners send back to pay for US exports.

In effect, investments in American stocks and bonds and other assets may be viewed as America’s “stealth exports” that balance the international trade accounts. If foreigners want to acquire these investments from America then they must sell more goods and services to America, and that is the force that drives the trade deficit. When we count the jobs that are lost or gained because of international trade, we should remember to include the gain of jobs from corporate and government spending that are funded from global investments in American stocks and bonds. We may doubt that Peter Navarro was considering these jobs in his estimate of the effects of a trade deficit on employment, even though a substantial portion of the $150 billion deficit with Europe has surely been invested in US Treasury bills which helped to fund Mr Navarro’s own salary.

Among the investments that America is selling to the world, none are more important than the debt of the US federal government. The US Treasury sells its bills, notes, and bonds to investors all over the world. So it may be appropriate to look for a link between the two famous deficits, the US government’s fiscal deficit and America’s international-trade deficit. These two deficits fluctuate differently from year to year, but both have averaged around $500 billion per year since 2000. Thus, in recent decades, America’s trade deficit has effectively brought in enough foreign savings to finance the fiscal deficit of the US federal government. Of course, much US federal debt is still held by Americans, and foreigners have also purchased other assets in America. But we should understand that America’s trade deficit has been driven more by global demand for US federal debt than by any unfair foreign trade practices.

If there is something to worry about in this picture, it is the increasing debt of the US government, which will be a real burden on American taxpayers in coming generations. Trade barriers in any country can harm its domestic consumers and its foreign suppliers, but trade barriers are not the root cause of America’s chronic overall trade deficit. As long as America is generally considered the safest and most reliable country in the world, global economic growth will cause a chronic deficit in America’s international trade, so that people throughout the world can get the dollars that they need to acquire the investments that they want in America.


*Note: Dollars are issued by the US Federal Reserve as a form of US government debt that does not pay interest, and so a hoard of US dollars can also be considered an investment in America.


Senators should abolish the filibuster

February 22, 2018

The Senate filibuster has done much harm and little good in the history of our country. It was long used to defend local policies of racial injustice, and in recent years it has contributed to a legislative paralysis which has eroded public confidence in the traditional rules of our political system. We need to understand more clearly why the filibuster has persisted, and how it should be reformed.

Senators have regularly tried to justify the filibuster with noble arguments about the value of deliberation and the importance of protecting minority rights. But each party can also find noble arguments to support its legislative program, and it is hard to see how one set of arguments could have prevailed so consistently over the other without some force of vested interest in the Senate. Under the Constitution, a majority in the Senate can determine the rules of its proceedings, and the same majority that wants to pass today’s legislation could also vote to eliminate the filibuster if they did not expect to benefit from it in the future.

Thus, the institution of filibustering could not have survived in the Senate unless most senators generally expected that, in the long run, they could benefit from maintaining this institution. In a long career, each senator must expect to be in the minority some fraction of the time, and then the senator may benefit greatly from the power to block legislation, even though such minority obstruction may seem inconvenient when the senator’s party has a majority in the Senate. If senators expect these minority benefits to be worth more than the corresponding majority costs, then they should prefer to maintain the filibuster.

So we need to understand why the prospective benefits of filibustering for the minority can be worth more to senators than the costs of obstructing the majority’s legislative program. The basic economic reason is that the benefits of increased minority influence from filibustering accrue entirely to members of the Senate, whereas the political costs of failing to pass the majority’s legislative program are shared by the President and members of the House of Representatives. For evidence that the Senate’s incentive for preserving the filibuster is derived primarily from its rivalry with the House, notice that the Senate has been willing to give up the filibuster in its confirmations of executive appointments, in which the House is not involved.

To put it starkly, the filibuster has survived because it tends to make the Senate more important than the House, and senators can benefit from such importance. When there are more groups that can block legislation in the Senate, the result is that lobbyists for new legislation must allocate more of their resources to winning support in the Senate than in the House. Thus, the possibility of filibusters in the Senate tends to increase the total contributions that interest groups give to senators, and so the average senator can expect to gain from maintaining the filibuster.

But these benefits in the Senate are largely at the expense of the House, and there is no compelling reason why such a transfer of power from one legislative chamber to the other should be considered beneficial for Americans in general. In the long history of bills that have been blocked by Senate filibusters, we can find many cases where most Americans today would regret the results of the filibuster, most notably including the anti-lynching bills which otherwise might have prevented the public racially-motivated murders of thousands of Americans in the early twentieth century. It is hard to identify any historical cases where a Senate filibuster prevented the passage of a bill that most Americans today would consider detrimental.

However, a broader reading of the history may reveal a public benefit of the filibuster that might be worth preserving. Throughout history, there have been filibusters that were intended, not to block a bill, but to demand consideration of some other bill which had broad popular support but was not approved by the Senate leadership. We have had a recent example this year, when Senate Democrats filibustered against a general spending bill, not because they opposed any particular provision in the bill, but because they wanted to force the Senate’s Republican leadership to permit a vote on a DACA immigration bill.

The long history of filibustering should remind us that any procedural rule which allows individual senators to claim the Senate’s attention for any period of time can also be used to reduce the amount of time that the Senate can devote to other essential business. The simplest way to prevent filibustering is to let the Senate’s majority leader exercise full centralized control over the allocation of time in the agenda for the Senate whenever it is in session. But such centralized agenda control creates the possibility that some legislative initiatives which might have been supported by a bipartisan majority could be blocked if the Senate majority leader refuses to schedule any time for them in the Senate’s agenda. Thus, to prevent the majority leader from having an effective veto against popular legislation, it might be better if the filibuster were replaced by some rule which would still allow a minority party to raise serious alternatives for consideration on the Senate floor.

For example, a reform that enables the Senate majority to limit procedural delays against its legislative agenda could still include a guarantee that, whenever the majority leader schedules a bill for a final vote in the Senate, time must be allowed also for a vote on one final amendment to substitute an alternative minority version of the bill, provided that this alternative version has been endorsed by more than one-third of all senators. (When the majority and minority alternatives each have support from more than one-third of the Senate, it is mathematically impossible for any other alternatives to have such support.) By eliminating the institutionalized requirement for 60% super-majority support to prevent a filibuster, such a reform would have opened the way to Senate approval for a bill like the recent Democratic proposal on DACA which could attract some Republican votes.

But senators’ inherent interest in maintaining the filibuster makes them unlikely to eliminate it unless such a reform is demanded by the voters who elect them. In the early history of our country, filibustering tactics could be even more obstructive in the House of Representatives until, in the 1890s, voters’ outrage at the resulting legislative paralysis induced both parties to support procedural reforms that centralized agenda control in the House (see Gregory Koger’s excellent book on the history of filibustering). Today, public frustration with legislative gridlock has caused many voters to prefer a President who has minimal interest in maintaining traditional rules of our political system. We cannot afford to undermine the foundations of our constitutional democracy in this way. Senators of both parties should show now that they place the country’s interests above their chamber’s interests by abolishing the filibuster.

[The central ideas in this note have been developed formally by Daniel Diermeier and Roger B. Myerson, “Bicameralism and its consequences for the internal organization of legislatures,” American Economic Review 89(5):1182-1196 (December 1999).]

Geopolitical impact of the America-first presidency: a perspective for 2018

December 3, 2017

President Trump’s 2018 budget blueprint includes plans to increase military spending, while cutting the State Department’s budget. But the proposed new investments in military hardware are not likely to make any difference for America’s geopolitical power. Recent frustrations of US foreign policy have not been due to any lack of military capability, but instead have been due to a weakness of diplomatic capabilities for turning battlefield successes into positive political developments. In both Iraq and Afghanistan, America’s policy-makers continue to focus more on winning battles than on cultivating local political leaders, and so America’s influence in the Middle East has continued to decline in spite of costly military efforts. There is no indication of any plan to invest in state-building capabilities that could reverse this trend.

A nation’s power in international affairs depends as much on its ability to make credible long-term commitments as on its military might. In this regard, President Trump’s shift to an opportunistic America-first policy could actually weaken America’s ability to achieve foreign-policy goals. For example (as discussed here), sanctions against North Korea cannot be effective without China’s full support, and such support cannot be expected as long as China fears that any political change in North Korea might open the way for American forces in Korea to advance toward China’s border; so diplomatic success in Korea would depend on credible assurances against such an advance. America’s withdrawal from major international agreements will make it harder to build confidence in any newly negotiated promises. In this environment, the best hope for effective containment of North Korean militarism may be found in security agreements directly between China and South Korea, even though such agreements could be interpreted as evidence of a weakening of America’s alliances in Asia.

Meanwhile, the North American Free Trade Agreement is at risk after being blamed by the President for contributing to America’s longstanding trade deficit. But this trade deficit has been primarily driven by strong international demand for US debt, based on global confidence in the stability and reliability of the United States government. America-first policies could erode this confidence and weaken global demand for US debt, making US federal deficits harder to finance under President Trump than they were under Presidents Obama or Reagan. The result could be substantially higher US interest rates after tax cuts in 2018.

On the problem of commitment in Korea

October 19, 2017

I have argued that the key to achieving America’s long-term goals of security and peace in Korea could be a credible long-term commitment to keep American forces out of North Korea, because of China’s special security concerns in this area. Sanctions against North Korea cannot be effective without China’s full support, and such support cannot be expected as long as China fears that any political change in North Korea could open the way for American forces in Korea to advance toward China’s border. Thus, America could increase its ability to achieve its goals in Korea by conceding the priority of Chinese security concerns in the northern part of the Korean peninsula. Such a concession could benefit American interests, even if China offered no specific promises in return, because the reassuring nature of this concession would help to bring China’s interests into closer alignment with America’s interests in this region.

However, these benefits of such a commitment could be realized only if China considered the commitment to be credible. Several commentators have expressed doubts that the American government could make a credible commitment not to expand its military alliance with South Korea over the entire Korean peninsula, if such an expansion were to become possible after a change of regime in the North. Certainly, when the President has withdrawn from major international agreements that had been negotiated by his predecessors, it becomes more difficult for the international community to have confidence in the future credibility of his own long-term promises.

But even when an ability to make credible commitments seems questionable, it is still important for us to consider what such a commitment could achieve. If we do not recognize how a reputation for maintaining commitments could be beneficially applied in international relations, then we will not understand how shifting to an opportunistic America-first policy may actually weaken America’s ability to achieve its foreign policy goals today. Furthermore, once we realize that credibility is at the core of the problem, then we can look for other ways to achieve it.

In this case, there is another option. If America’s credibility is weak, then it could be better for South Korea to take more leadership in these strategic questions. After all, American forces are stationed in the Korean peninsula only as allies of South Korea. The South Korean government could stipulate that these allied forces are permitted on its territory only for the limited purpose of repelling or retaliating proportionately against an attack by North Korea. South Korea could further promise that it would never allow its foreign allies to undertake the extended occupation of any territory in North Korea, unless China jointly agreed to such an intervention. Of course the exact terms of such a statement should be the subject of diplomatic discussions with both China and America. My main point is that it could actually be in America’s interest to encourage discussions between South Korea and China about how to craft a mutually acceptable agreement that could be credible and reassuring to China.

Solving the Korean crisis with game theory

October 2, 2017

People have asked me whether game theory can offer any insights for finding a solution of the North Korean nuclear crisis. Let me suggest that the answer may be Yes, as I will try to explain here in a nontechnical note without mathematical analysis. Based on a few general points that one can learn from game-theoretic analysis, I will explain why an effective strategy for encouraging moderation and political change in North Korea may be possible only with a long-term American commitment to recognize and respect China’s vital security interest in North Korea.

The first lesson that students learn from game theory is that we should try to think about any conflict situation from the perspectives of all the parties involved. Game theory also teaches us that a strategy for inducing others to behave better should include, not only a threat to punish their bad behavior, but also a promise to reward their good behavior. If we have a problem in making such threats and promises credible, then it may be necessary to stake our reputation on them, so that we would lose our ability to influence others in the future if we did not act as promised in this situation. But game-theoretic analysis often finds that a party can increase its current power to influence others by accepting such commitments that could reduce its own freedom of action in the future.

Several years ago, I argued that American military threats against Iran only tended to increase Iran’s motivation to acquire its own nuclear deterrent; and so an effective strategy for deterring Iran from acquiring nuclear weapons had to include an offer of better relations between America and Iran if Iran complied with international standards of nuclear nonproliferation. But I would be less optimistic that North Korea’s nuclear ambitions could be deterred by such an offer of detente. The rulers of North Korea must fear that their grip on power may require perpetual military tension with South Korea and its American ally, because peaceful relations could enable the people of North Korea to discover the vastly greater prosperity and freedom that Koreans enjoy in the South.

As a result, North Korea has become a perennial source of international tensions, and it has invested heavily in destructive military capabilities, so that any military operation against North Korea would be extremely dangerous for its neighbors. Economic sanctions have remained as the primary instrument for deterring North Korean provocations, but such sanctions cannot be effective without China’s full cooperation. In the past, a lack of such cooperation has undermined America’s efforts to use sanctions for inducing better behavior by North Korea.

Thus, an effective American strategy for managing the Korean crisis depends on finding a way to induce better Chinese cooperation with international sanctions against North Korea. Threats to extend trade sanctions against China are unlikely to induce full cooperation, and such a trade war would be at least as harmful to America as to China. But it is a mistake to think only about threats when searching for strategies to induce others to cooperate. Americans need to think also about promises that America could offer to make China prefer full cooperation with sanctions against North Korean violations of nuclear nonproliferation agreements.

It might seem surprising that China has not been a stronger supporter of sanctions against North Korea’s nuclear program. After all, no country would want an unreliable neighbor to acquire nuclear weapons. So what has limited China’s willingness to cooperate with America against North Korea? We must look at the situation from China’s perspective to understand what kind of promises could elicit the Chinese cooperation that is essential for solving the Korean crisis.

When we ask how the Korean situation looks from China’s perspective, we should recognize, first and foremost, that Korea was the starting point of the Japanese invasion of China in the early 20th century. Once Japan had achieved military dominance of Korea in 1905, Korea served as Japan’s base for invading China until the end of World War II in 1945. Of course the leaders of China know that their country is one of the most powerful nations in the world today, but people in China cannot forget the devastating Japanese invasion that entered China through Korea. We must understand that the people of China remember this history and demand that their leaders, who are responsible for their country’s security, must never permit the conditions for such an invasion to happen ever again.

But any threat that can effectively deter the rulers of North Korea must entail some risk of causing them to lose their grip on power. And any process of political change in North Korea, once it begins, could naturally open the way to a reunification of the peninsula under the government of South Korea, which already hosts American military forces. In that case, what would prevent American forces from moving north to the Chinese border? Such a possibility was intolerable to China in 1950, and we should understand that it is still intolerable for China today. This fear has made China resist any threat that could destabilize the North Korean regime.

Thus, to get China’s effective cooperation against North Korean militarism, America needs to provide some assurance that political change in North Korea would not expose China to any risk of foreign military forces on the Chinese border there. Indeed, one could argue that an American failure to recognize Chinese security concerns has been a factor in the Korean crisis since 1950, when America first tried to settle the crisis by moving its forces north to the border with China. Since then, China has seen only one clear way to ensure that powerful foreign forces should never return to its Korean border, and that is by maintaining the xenophobic regime of Kim Il Sung and his heirs as a buffer against all other powers. So any possibility of political change in North Korea will be strongly resisted by China unless it gets some credible assurance that its vital long-term security interests there would be respected even in the event of a regime change.

The fact that America and its NATO allies actually did move their forces eastward toward Russia after the end of Communism in Eastern Europe constitutes an unhelpful precedent which must be addressed. But there is nothing in North Korean history to resemble America’s long historical connection with Poland and other parts of Eastern Europe. Strong statements by American diplomats and leaders of both parties could give China some confidence that America would not use regime change to expand its power into northern Korea.

In the old language of 19th-century realpolitik, the key is for America to recognize the northern half of the Korean peninsula as being in China’s sphere of influence. Today, of course, agreements among great powers to recognize each others’ spheres of influence would be generally viewed as inconsistent with the principle of political self-determination for the people of every country. But in this case, a promise by America and its allies to respect a long-term Chinese sphere of influence in northern Korea could be actually the essential key to creating some possibility for the people of North Korea to change the political course of their country.

Thus, a credible commitment to keep American forces out of northern Korea could be the basis for a strategy to achieve long-term American policy objectives in Korea with Chinese cooperation. Some observers might consider such a commitment as a concession by America, but a game theorist would recognize it as a concession which could actually strengthen America’s ability to influence the situation.

See also the sequel “On the problem of commitment in Korea.”

Linking the best and worst of global trends

January 6, 2017

In a panel that is asked to focus on a few trends that are truly important for the world today, I want to note a connection between two great developments in recent years. One is among the greatest positive developments in human history: the miracle of declining global poverty rates even as population of the world grows. The other is a disturbing political development which became strikingly clear in the past year: a strong xenophobic discontent in America and other rich nations. We should see a fundamental connection between these two phenomena.

The greatest discovery of modern times has been the amazingly high long-run elasticity of national output with respect to the protection of property rights for citizens at large. Throughout most of history, states and empires kept peace between villages but protected property rights mainly for the benefit of an exclusive ruling class or oligarchy, whose members had responsibility for supporting and maintaining the state. In modern times, however, it was discovered that, when a nation extends reliable protection of property rights to millions of ordinary citizens without special political connections, the result can be to unleash widespread competitive entrepreneurial activity that can increase the national GDP and tax base so much that even members of the ruling elite may be better off without the exclusivity of their privileges.

The benefits of this discovery were at first confined to a small fraction of humanity in Europe and America. I have argued elsewhere that the successful development of the United States depended particularly on the long history of decentralized federal democracy here, going back to colonial times. But over the past 70 years, nations on every continent have gradually learned how to distribute political power and protection of law more broadly, to bring real benefits of modern economic development to more people everywhere.

By any moral standard, this is a good and great development.

This great global transformation since the early 20th century has vastly increased what we might call the effective global labor supply, that is, the world’s supply of people who live in communities where they can be employed by local firms that have competitive access to global markets. In the 70 years since 1947, the population of the world has increased by a factor of about 3. But the fraction of the world’s population who live in nations that can produce modern goods competitively for global markets has also increased by almost the same factor, from less than a third of humanity to a large global majority. So over the past 70 years, our planet has become about 8 times richer in globally employable labor, corresponding to an average annual growth rate of about 3%. This enormous growth of the effective global labor supply should be expected to have historic significance on a planetary scale.

Since the time of Malthus 200 years ago, pessimists who predicted diminishing returns in aggregate economic growth have been proven wrong. So by the late 20th century we became accustomed to thinking in terms of growth models with positive steady-state growth rates, even though everybody has always understood the impossibility of any physical quantity growing forever at a positive exponential rate on a planet that has a fixed finite size. But planetary limits may have been easier to ignore because, until recent decades, most benefits of modern economic growth were concentrated in a small fraction of the world. The material requirements for each 1% increase in per-capita consumption become vastly larger when people throughout the whole world are all involved.

The vast increase in the effective global labor supply, which is large relative to every other resource on our planet, must have an adverse effect on the real wages for unskilled workers in the countries where local firms have long had the ability to produce modern goods with globally trusted quality. A decline in real wages could be partially countered by technological change, but Robert Gordon has found that US productivity growth rates peaked during the years 1920-1970. Since then, much of global growth has come from poorer countries catching up with the great technological advances that America achieved previously.

Now a failure to meet expectations of continuing growth of real wages has led to mass discontent in the old developed nations in America and Europe. Many understand that something has changed in the relationship with the poorer nations of the world, but there is broad misunderstanding of how this change could be problematic for people in America. We economists have not adequately communicated the simple fact that aggregate living standards in America cannot be harmed by the availability of cheap imported goods from poor countries. But Americans’ comparative advantages and terms of trade can be adversely affected when people in the traditionally poor countries are no longer totally dependent on America and Europe for their supply of modern manufactured goods. Even if America erected trade barriers to block imports from foreign manufacturers, people in the rest of the world could not be compelled to buy American goods that they can now make more cheaply themselves.

But America’s new President-elect has promised to restore the past terms of trade which benefitted Americans a generation or two ago. We need to explain that such a promise could never be achieved by any renegotiation of international trade agreements, but only by reversing the political and legal changes in formerly poor countries which have enabled their people to participate in modern technological investment. Surely nobody should want to do that! We need to explain that the changes in trade which stir such discontent in America today are directly connected with global developments which have also generated historically unprecedented increases in aggregate human welfare across the globe.

How might our basic assumptions in economics change to better fit a world where people everywhere can participate in economic advances and investment?

  • It may be time to back off from models which suggest that good economic policies can promote infinite unbounded exponential growth in the broad global economy.
  • The global scope of modern production implies that limits on the planet’s ability to recycle waste products, which we used to consider freely disposable, may now require more active regulation or taxation by governments, to accommodate global ecological constraints.
  • Benefits of economic productivity may accrue relatively more to those who have positions of trust and power in global economic networks, less to the marginal product of unskilled labor, and so problems of income inequality may become more acute.
  • The whole global development miracle depends on the spread of good government, and trust in these expanding global economic networks can be maintained only with legal protection and regulation from governments and their international agreements. From this perspective, it may be appropriate for governments to tax those who benefit most from the global economy, to fund a safety net for those who benefit least. Indeed, social safety nets have been essential for modern development since the beginning of the industrial revolution, because efficiency-enhancing economic changes can be politically blocked by people whose existing livelihoods would be destroyed, unless they get some hope of benefiting from the increased productivity.

But the most important point goes beyond economic efficiency to a fundamentally ethical observation. Economists usually try to avoid ethical statements, but let me offer this one which, I think, we can defend by any ethical standards that value all human beings in any reasonably balanced way: If admitting all of humanity to participate in the benefits of modern economic development implies that we must forfeit hope for further exponential growth in our time, this is a price that we should be morally willing to accept.

[Text prepared for delivery at a session on “Where is the world economy headed?” at the Allied Social Science Associations meeting in Chicago, January 6, 2017.]

Memo to Democrats: Strengthen Congress

November 22, 2016

Many countries have had presidents who manipulated the great powers of their office to nullify constitutional constraints and establish a permanent grip on political power. But from George Washington’s first election until now, Americans always elected presidents who, in prior public service, had demonstrated their commitment to exercise power responsibly within legal and constitutional limits. In January 2017, however, America will for the first time have a President who has never held any public office and who, as a businessman, has a long record of manipulating laws to his personal advantage.

Throughout the presidential campaign, many consistently underestimated Donald Trump’s ability to market himself and denigrate his opponents in a relentless drive for power. Now his perplexing mixture of extreme and moderate policy statements must not distract us from the fundamental constitutional issues which may be at stake in the next four years if the new President continues on this trajectory: bending rules to augment his wealth and power, and undermining people’s trust in anyone who can oppose him.

Under the Constitution, Congress has the ultimate responsibility for enforcing legal limits on the presidency. Among all the challenges that Democrats must face as the loyal opposition under a Trump presidency, the highest priority should be to preserve and protect Congress’s ability to fulfill this vital constitutional role.

The President might try to weaken Congress by posing as a moderate who can play off Democrats against Republicans on contentious policy issues. But Democrats should recognize that defending the authority of Congress is more important today than any of the policy issues that they have debated with mainstream Republicans in the past. It would be better to make the President work with the majority leaders in Congress than to accept a few policy concessions from the hand of this President.

Filibusters to block Republican legislation could also be counterproductive. Obstructive filibusters would force Republicans to set policies less by legislation but more by executive orders, which would make the majority leaders more dependent on the President. After an election in which the Republicans won majorities in both houses of Congress as well as the White House, people have a right to expect that Republican congressional leaders should take responsibility for setting new directions in public policy. Democrats should believe in their own message and have confidence that, if they do not interfere with this responsibility, the results will turn many voters back toward the Democratic party.

The President-elect won the recent election by making extreme promises to millions of voters which he cannot fulfill. When his performance in office disappoints his supporters, he will try to divert them by blaming others. Any effort to pin the blame on Congress as an institution must be countered.

The President could have a substantial incentive to campaign against Congress. When the President can undermine people’s trust in their congressmen, Congress can be deterred from considering any evidence for impeaching him.

In this regard, the President-elect’s call for term limits in Congress should be recognized as a particularly dangerous distraction. Term limits sound good, but they can actually reduce democratic accountability in a legislature, as experience in California has shown. Congressmen who cannot be re-elected must look elsewhere for their next job, and then they would have a greater incentive to serve someone other than their constituents. A better proposal for strengthening electoral accountability of Congress would be to reform the seniority system, which has served largely to reward voters for re-electing incumbents.

Term limits are a particularly dangerous idea today because their effect would be to weaken Congress. Simplistic comparisons between presidential term limits and congressional term limits are invalidated by the fundamental need to maintain Congress as an effective check on the nation’s most powerful official. Now more than ever, America needs leaders who can expect a long and successful career in Congress if they serve their country well.

America’s constitutional system depends fundamentally on a balanced distribution of power between the separate branches of government. Over the past century, a long expansion in the size and scope of federal agencies has entailed a steady growth of presidential power. Now, with a President-elect who has never exercised public power within constitutional limits, our best hope is that the next four years should be a time for strengthening the effective authority of Congress. For this vital goal, Democrats today should support the constitutional right of congressional majorities to legally direct the policies and actions of the federal government, even when those majorities happen to be Republican.

Postscript (Dec 2016): It is hard to predict how the next President might test the limits of his office, but I expect that one big constitutional question for America in 2017 will be whether the President of the United States should be able to develop his own cable TV news network while in office. We may shudder at the possibility that a private channel for influencing political perceptions in millions of households could be acquired with revenue from advertisers who desire favorable treatment from public agencies. But I fear that an act of Congress may be needed to prevent it.

Thoughts in the frenzied final month of the 2016 Presidential campaign

October 13, 2016

I was shocked this week to see that the Trump campaign is boasting about their candidate’s threat to send his opponent to jail if elected.  Every American who values constitutional democracy should be extremely concerned when a top contender for President openly threatens that he will use the powers of government against his political opponents.

Of course, nobody can be above the law, but judgments of the law need to be kept separate from politics.

In a political debate and in political rallies, Donald Trump has flaunted his plan to use the power of the Presidency to launch a publicly funded prosecution with the goal of sending Hillary Clinton to jail.  Does he expect her to respond by threatening that her White House would order a federal criminal investigation of his possible abuse of women or evasion of taxes?  Given a choice, Americans should reject the candidate who would use the Justice Department as a political weapon against his enemies.

Please pause and consider the consequences after a President’s discretionary political decision has led to the imprisonment of someone who recently won the votes of millions of Americans.  Thereafter, any other public figure who might be thinking about crossing the President on any matter would understand that such opposition could raise a very serious possibility of being put on the President’s next list of politically motivated federal prosecutions.  If Trump could to it to Clinton after some sixty million Americans voted for her, you have to worry that he could do it to you, unless you can prove that you are innocent of everything.  It would be prudent to avoid being put on the top of his political enemies list.

When everybody in American politics reaches this understanding, our Constitution will be effectively neutered.  People who believe that Donald Trump would then use his supreme power to implement policies that they favor might hope for some short-term benefits from this outcome, but I hope that all voters would agree that we share a vastly greater long-term interest in preserving America’s constitutional system of government.

Perhaps some might think that my fears have run on too far, in this frenzied final month of our presidential election campaign.  One could argue, however, that we should all have such fears in every presidential election.  The powers of the Presidency are enormous, and it is extremely difficult to remove a President from those powers once he or she is elected; and so we have to be concerned about the possibility that a President could abuse these powers to undermine the limits on that our parchment Constitution has defined for this most powerful executive office.  Perhaps it would be better to have a parliamentary system where the chief executive can be replaced any time, but for better or worse we Americans elect a President to hold the highest power in our country for four years.

The ultimate defense against the persistent danger of presidential dictatorship is to choose people whom we can trust to respect constitutional constraints.  When a candidate has spent years exercising public power with clear respect for constitutional constraints, then we can have some confidence that he or she will continue to do so in the highest office of national power.  For this fundamental reason, Americans usually elect presidents who have been governors or generals or influential senators.

The fact that Donald Trump has blamed Hillary Clinton for failing to change laws when she was a Senator (one among a hundred senators in a bicameral legislature subject to a presidential veto) certainly suggests some failure to appreciate the constitutional limits on what an elected official can do.  On the other hand, we know that when Hillary Clinton was in the White House as First Lady, her husband never appointed a special prosecutor to imprison political opponents; he only appointed a special prosecutor to scrutinize his own compliance with the law.

In fact, any public official who can accomplish anything in our constitutional system must do so by working cooperatively with others who are potential political rivals.  So electing presidents who have good track records in public service means electing people who are willing and able to reach across the aisle with respect for the rules of our constitutional political game.  That is how we have kept our parchment Constitution in business all these years.

So let me suggest that Americans should resolve together to make this a general rule for the future:  We should never support anyone for the Presidency who has not served responsibly in some other important public office.  Enthusiasts for Donald Trump could urge him to run for governor somewhere before offering himself for President again, so that we can see what he would do with real power in government.  It is not enough to be a genius in business.  To maintain the integrity of our constitutional system, we must see what a candidate would do with the power of some lesser public office before we entrust the candidate with the highest office in the land.

Remarks for a Conference on Decentralization in Ukraine (16 May 2014)

May 18, 2014

A decentralization reform that can earn broad support from popularly elected local leaders in all parts of Ukraine may be the vital key to reducing regional tensions and building a stronger democratic system. Uniquely among parliamentary democracies, the constitution of Ukraine has given the President the power to appoint and dismiss heads of local and regional governments. Such centralized control of local government has exacerbated regional tensions and hindered the development of trusted democratic leadership in Ukraine.

Democracy is about voters having a choice among alternative candidates who are trusted to exercise power responsibly. When such trusted leadership is lacking, democracy is disappointing and fragile. This essential supply of trusted democratic leadership can develop best in responsible institutions of local government where successful local leaders can prove their qualifications to become strong competitive candidates for higher office. But when the president picks the local-government heads, we should expect them to be regularly chosen from among the president’s loyal supporters who are unlikely to develop any independent reputations of trust with the voters. Thus, presidential control of local government in Ukraine has tended to block the development of new leadership trusted by the people.

With presidential appointment of local-government heads, a President may be tempted to allocate powerful positions in local government as patronage rewards for major supporters who want to enrich themselves. This temptation will be greatest in those regions where the President would expect few votes even if his appointees provided good local government. But then everyone in such regions may fear bad exploitative local government from a President whose popular support is based elsewhere. So Ukraine’s centralized political system has increased political tensions between regions.

Thus, a decentralization reform can be the key for reducing regional tensions and developing trusted democratic leadership for Ukraine.

Most importantly, democratic decentralization can guarantee that every region will have popularly elected local leaders who have real power to serve their communities and who have a real stake in the national political system. So decentralization can strengthen Ukraine by developing, in every part of the country, a broad base of popularly trusted local leaders who are willing and able to mobilize local political support for the nation. In this time of crisis, such empowered local leadership has been greatly needed.

Ukraine already has popularly elected regional and local councils, but presidential appointment of local-government heads leaves these councils with little real power. The simplest and most effective way to decentralize power is to allow these councils to choose their own local-government heads, with clear administrative responsibilities and budgetary authority.

National law must be supreme in all parts of the country, and no region should have any special privileges that are not enjoyed by other regions. But supremacy of national law should not mean that one national official could block local government actions without independent judicial authorization. No single national official should have the power to prevent locally elected officials from serving their communities.

Under the constitution of Ukraine, a majority of the Verkhovna Rada could vote to call new elections for a local or regional government at any time. This power of a majority of national legislators to send local governmental officials back to face their voters’ judgment is a good way to guarantee supremacy of national law.

Even without a constitutional amendment, a candidate for President could promise, if elected, to appoint as local-government head whoever is designated by a majority of the locally elected council. Surely millions might want to vote for a candidate who promised that people in every region should have local government run by their own elected representatives, and that popular local leaders throughout Ukraine should have opportunities to show how well they can serve their communities. But such a promise would mean giving away an important presidential power, which is hard for any candidate to do.

It is very good that decentralization reforms are now being discussed in the Verkhovna Rada. However, the discussion should not be limited to people who hold national offices which give them a vested interest in the power of the national government. Ideally, all citizens of Ukraine should participate in the debate on decentralization. But the most important people who need to be included in a detailed discussion of decentralization proposals are elected members of the local and regional councils.

A successful decentralization plan should be one that can win the active enthusiastic support of as many local and regional councilors as possible. Support from such local leaders throughout Ukraine will be vital for the nation in these difficult times. The nation needs local leaders who can mobilize popular political support in every part of Ukraine, and such local leaders must be motivated by a credible promise of some real power to serve their communities.

In particular, against an insurgency, the local leaders who can re-establish government authority in their community will need protection. National security forces should help maintain order in a crisis, but local leaders cannot rely on them indefinitely. In a democratic society, secure rule of law can be assured only with local political support. Allowing democratic local governments to take some responsibility for local policing is the most straightforward way to ensure that elected local leaders can be confident of the basic protection that they and their constituents need.

Decentralization may seem risky or inconvenient to those near the center of national power. But if national leaders in Ukraine today can recognize the need for some constitutional sharing of power with locally elected officials, then popular local leaders should actively prefer inclusion in Ukraine to any alternative. The result should be a stronger and more democratic Ukraine that can better serve all its people.

[This is the latest in a series of notes in which I have tried to offer some perspective on questions of political decentralization that are being debated in Ukraine this year.  This note was written for a conference in Kyiv on 16 May 2014.  As in the previous notes, I have tried to provide a short coherent perspective on some of the major issues.  Over the past several months,  the privilege of participating in discussions about the challenges facing Ukraine has helped to deepen my own understanding of fundamental political problems of centralized democratic systems. In particular, I have learned much from discussions with my colleague Tymofiy Mylovanov.  This note summarizes the most important issues as I understand them now, in mid-May 2014.]

[See also a subsequent perspective on the situation in Ukraine published on VoxUkraine in August 2014.]

What is Putin’s secret weapon?

April 18, 2014

Does Russia’s President Vladimir Putin have some secret weapon? It seems that, with a wave of his hand in the Kremlin, he can cause crowds of secessionists to gather on the streets of eastern Ukraine, crowds that somehow have enough local authority even to stop and disarm Ukrainian army units that confront them. One might wonder whether Putin has developed some mysterious ability to cause such crowds to materialize at his command from afar, while the leadership in Kyiv seems helpless to respond.

Some have argued that Putin may be applying dark arts of espionage that he learned in his years as a KGB officer in East Germany before 1990. However instructive that experience may have been, let me suggest that it may be a distraction from understanding the real secret to Putin’s tactical mastery in the eastern provinces of Ukraine today. Secret agents and commandos cannot accomplish much without local political support.

Putin’s ability to manage people in local government developed when he worked for the Mayor of Saint Petersburg between 1991 and 1996. Then in 1997, most significantly, Vladimir Putin became President Boris Yeltsin’s deputy in charge of relations with Russia’s 89 regional governments. According to Andrew Jack (Inside Putin’s Russia, 2006, p. 79), Putin has described this position of presidential deputy for regional-government relations as perhaps the most interesting job in his career.

For the better part of a year, it was Putin’s job to negotiate political deals with locally elected leaders in all the provinces of Russia. Surely he then spent much time on the phone with local leaders, making promises and threats to win their cooperation in managing politics and public policy throughout Russia. In this work, he developed sinews of power that reached out from Moscow to every part of Russia.

Ukraine’s provinces today have locally elected councils but, under Ukraine’s constitution, a presidentially-appointed governor actually supervises the state administration in each province. Thus, without much effective power under the constitution, these provincial councilors have little stake in the political system of Ukraine. In a province where local voters did not support the current president or prime minister, nobody with popular support in the province may have any real stake in Ukraine’s government at any level, local or national.

But in winning their local elections, the provincial councilors have proven their ability to mobilize thousands of local residents for political action. However minor their role may seem under the constitution of Ukraine, these locally elected councilors have power to make crowds materialize in their communities.

Surely Putin has long understood, better than anyone else, how a few calls and promises from the Kremlin could readily recruit many of these local leaders in eastern Ukraine, to win their cooperation in organizing local residents for pro-Russian demonstrations. To an unappreciated provincial councilor who has gotten words of assurance that he or she would be warmly welcomed into Putin’s party of power, the idea of secession from Ukraine into Russia could become quite appealing. No bags of cash would be needed.

We may wonder, did Putin leave these calls to his presidential deputies, or did he personally call many of these local leaders in Ukraine? We must also wonder, how many provincial councilors in eastern Ukraine have gotten any competing calls from any high-ranking leader of the current Kyiv government?

Ukraine is considering constitutional reform proposals to decentralize power. A decentralization reform can strengthen Ukraine against the current threats to its sovereign integrity only if the reform can convince elected local leaders throughout the country that they will have some real power to serve their communities under the new decentralized system. National leaders of Ukraine should be actively discussing the details of such reform proposals with sympathetic members of the provincial councils in disaffected regions, to formulate a reform plan that can win the loyalty of popularly elected local leaders in every part of Ukraine.

Thus, Putin’s secret weapon should not seem so mysterious. The deep question now is whether leaders in Kyiv have realized the vital importance of negotiating with these locally elected leaders, to get their support for preserving the sovereign integrity of Ukraine within its current recognized boundaries. Surely there are still some of these local councilors who would welcome such a call from Kyiv.