The Power and the Money

What’s the matter with Texas?

Nothing. Texas went purple … ish.  Joe Biden did better than previous Democrats, but still got beat by six points.  Texas is not quite red any more. Call it magenta, or rose. 

But why did it not not go purple, what with the massive turnout?

TLDR: the GOP got a boatload of new voters to turn out in the state’s big cities, suburbs, and exurbs. It wasn’t Mexican-Americans, it wasn’t rural voters.

Here are the basic numbers. Democrats turned out 5.2 million voters, up from 3.9 million in 2016. If Republican turnout had remained around the 4.5-4.7 million that it had been stuck at for most of the 21st century, then the state would have gone blue. Total turnout would have been around the 10.0 million that you would have expected from an exciting election like 2008 and the Democrats would have won. 

We here at TPTM did not expect a blue victory. We expected  the Democrats to up their turnout substantially, but the Republicans would nonetheless manage to get a few hundred thousand new votes and win the election with a bit over 5 million votes. 

But neither scenario is what happened. GOP votes came to 5.9 million. The Democrats turned out out 1.3 million new voters (net) but the GOP almost matched that with 1.2 million new voters. 

For the GOP to beat the super-high Democratic turnout they only needed 533,000 votes, not 1.2 million. They netted 356,000 new votes out of the central counties of Houston, Dallas, Fort Worth, San Antonio, and Austin.  The remainder came out of the northern exurbs of Dallas (100,000 in Collin and Denton counties), the exurbs of Houston (83,000 in Fort Bend and Montgomery), and the northern exurbs of Austin (34,000 in Williamson). Add in another 37,000 in other Houston exurbs and you’ve got more than enough to win the state. The 500,000 people that the GOP got out of smaller cities and rural areas was nice but it wasn’t what won it.

It wasn’t South Texas. There aren’t enough people! The GOP gained only 88,652 votes, against 8,175 for the Democrats.

And it wasn’t Mexican-Americans! The above-right chart graphs the Latino share of the country against the percentage swing towards the Republicans. Outside of South Texas, there wasn’t much of a correlation. This looks really different from Florida, by the way, where it really was Latinos what swung it, not just Cubans. But in Texas, the swingy Latino voter is a Río Grande Valley thing, not a Texan thing. 

I don’t know what the implications are for 2024. Turnout will swing back, but will it swing back more for Republicans or for Democrats? Is persuasion possible? Could Marco Rubio swing some blue voters or might Amy Klobuchar or Andrew Cuomo get some red ones? I have no idea. What I do know, though, is that the Trump campaign energized voters in the big cities and their exurbs. The GOP has to keep them turned out in 2024 and the Democrats have to keep them home.

But the Democratic Party of Texas should really not be tying itself in knots trying to figure out what happened in the Río Grande Valley. Please stop blaming the election outcome on Mexicans. There’s been enough of that going around the last five years. 

Academics need to stop believing that talking to rich people tells them anything

Back in September 2016, Ian Bremmer made a very silly post in an attempt to be contrarian. It boiled down to: “The CEOs I talk to say that they are not worried about Trump, therefore he won’t do anything radical.” 

I called him out then for making a very dumb statement. My decision seems to have withheld the test of time. That said ... 

I am not calling Bremmer out because I believe that he needs to own up to every wrong statement. (I have made enough of them! See the mark-to-market tag on the sidebar.)

I am calling him out because the methodology that lead him to make the argument is pervasive and INCREDIBLY stupid. (Albeit less so in France, in my experience)

And what is that methodology? Talking to rich people and thinking that you are learning something because they are rich. Anyone who knows rich people is going to be VERY tempted to believe that the tidbits they dole out are filled with wisdom.

Nope.

So, stop, please. 

Stating the obvious about the tariffs on Mexico

I am union-bound to say this, I suppose. The Mexican tariffs are stupid.

First, they will not achieve their stated goal, which is to get Mexico to stop Central Americans from arriving at the U.S. border. Consider what the Mexican government is currently doing:

1. Inviting Central Americans to stay in Mexico. The problem there has been that the Trump administration does not believe that Central Americans will stay in Mexico. Rather, it believes that legalizing their presence in Mexico only makes it easier to get to the border. Under pressure, the Mexican government suspended its visa program after 13,000 applied. But Mexico has allowed Central Americans to apply for asylum from Mexico, as the Trump administration wanted. 
2. Arresting and repatriating Central Americans: 29,660 in the first two months of 2019, about the same as the 29,239 average for those months in 2016, 2017, and 2018. President Trump actually thanked AMLO for this just last month. Through May, Mexico has detained 72,410 migrants and deported 53,371. That is less than the 340,944 Central Americans the CBP detained so far this year, but it is a substantial number. It is far from clear that Mexico could do better given the limited resources available to the Mexican government. 

Second, if the administration sticks to the plan, it will be an own-goal for President Trump. The tariffs on China are bad enough, but companies can adapt and the economy is strong enough to withstand them. Moreover, they are politically popular. Tariffs on Mexico are a different story. These are tariffs that will mess with supply chains. Alonso de Gortari (Princeton) recently calculated that 30% of the headline value of Mexican manufacturing exports to the U.S. consists American exports to Mexico. So they not only hits American consumers, they punch American producers as well. Plus, President Trump can kiss goodbye any chance of ratifying the USMCA. There are cheaper ways to keep immigration on the front burner for 2020, which I presume to be the political goal. 

Third, the tariffs benefit China by taking Mexico off the table as a potential site. Manufacturing has been moving to Mexico from China for years now. The trade war would have accelerated that, at least a little. It is a good thing for America to have industry move next door. But now, well, not so much.

Finally, here is something that is not a problem for this administration: the loss of any credibility as a negotiating partner. Yes, China and Europe will take notice of how the U.S. told Mexico that all it had to do was renegotiate NAFTA but then turned around and screwed it anyway. But that is a feature, not a bug. The current administration intends to impose tariffs forever. Sure, the President will tack back and forth according to political pressures, temporary advantages, and his own strange ego. But the goal is clear, as we reported back in October 2018. Blowing up your credibility just makes it all that much easier to insure that you cannot win the trade wars that you start. 

I have to admit, however, that I think the administration is going to back down on this one. The logic of point (2) above is pretty clear. So put that down as a prediction ... albeit not one that I am particularly confident in. 

CFK is lucky she lost the 2015 election

Back when she was president, Cristina Fernández (CFK), her chief of staff, Aníbal Fernández, claimed that Argentina had less poverty than Germany. A popular Argentine joke is that he forgot to say “east.”

In 2015, it was obvious that Argentina was going to take a while to recover from the mess CFK  left behind. I predicted it back in 2015: “Another commodity-price boom does not look probable. Inflation will have to be contained or run up to Venezuelan levels. In short, the new president is likely to be less-than-popular when the 2019 election rolls around.”

And I suggested that the best thing for CFK was for her allies to lose the 2015 election and come back in 2019 by running against the inevitably painful adjustment. Which is what she is trying to do! 

I still suspect she will fail, but she has a decent shot. The good news is that Axel Kiciloff has been telling people that a new CFK administration will cooperate with the IMF, so there is a chance that she will govern more responsibly than in the past. But that is not how I would bet. 

Lessons from day care for President Trump

Bloomberg reports that President Trump is moving towards making good on at least one of his campaign promises: making a profit off American overseas deployments. 

The story is that he plans to introduce “Cost plus 50” as the standard: i.e., basing costs plus 50%. Now, this won’t earn the United States a whole lot of money. Basing costs just aren’t very high. The U.S. could conceivably gross about $15 billion from our allies, including a $5 billion markup. We would net less than $15 billion, however, considering that Japan currently kicks in about $1.8 billion and South Korea and Germany add another $800 million each. (South Korea just agreed to up that last to $1 billion.) But hey, $11.4 billion is still $11.4 billion. 

The thing is, the administration also plans to reduce the charge for countries that align their foreign policies with the United States. In other words, the plan would give governments concrete incentives to follow American foreign policy.

Before you get too excised about that, note that the United States already does exactly this. In 1983, the U.S. passed a law requiring the State Department to report how closely countries voted with the U.S. in the U.N. General Assembly. Since then, study after study has turned up the same pattern: countries that vote with the U.S. get either more U.S. financial support or more support from U.S.-supported institutions, like the IMF. 

Wait, the IMF is a tool of American foreign policy? Who would have imagined? Besides everybody, that is. (Specifically: Barro and Lee (2005) found that IMF loans are associated with similarity to U.S. voting patterns in the UN and economic ties with the United States. Stone (2008) and Eichengreen et al. (2006) found that countries that receive substantial amounts of U.S. foreign aid are more likely to be eligible for IMF financing.)

And of course the U.S. trades favors in even subtler ways. Germany and France support the U.S. at times when they otherwise wouldn’t because they know that the U.S. will support them even especially if the Russians invade. 

So who cares if the Trump administration turns subtext into text? Or even supertext, a sort of neon-green megawatt Bat Signal of our intentions, with a specific price tag attached? Heck, economists always say that certainty is good and prices are good. Trump will certainly bring more of both. Maybe we will get a big bang for our $11.4 billion bucks. 

Or maybe not. Sometimes, you see, it is better for quos and quids to remain implicit.

Consider what happened when an Israeli day-care chain introduced late charges. The number of late parents went up. By a factor of two. And if you are wondering, this was a controlled study, in which only some centers introduced the charges. 

The lesson? Before the centers introduced fines parents tried hard to arrive on time because it was the right thing to do. After the fine was introduced, arriving late became simply another commodity that you could buy, even if that price was called a “fine.” Be late, pay the fine, cleanse your conscience, free of any worries that other parents will disapprove. 

In other words, right not countries cooperate with the U.S. in part because they consider it the right thing to do. The U.S. might reward them, but only as part of an unspoken system of mutual favors between friends.

But in a Trumpian world, well, now U.S. support becomes just another commodity with a price tag on it. If the cost is too high, then a foreign government may as well just pay the price. Keep U.S. bases on your soil but follow whatever bloody foreign policy suits you, plus a small check to Washington.

In short, for an additional $11.4 billion per year (or less) the Trump administration will likely get a whole lot less cooperation while preserving most of our overseas commitments. Nice job, I suppose.

Of course, we would bet that this will not ultimately happen, the same way we predicted that NAFTA would not be abolished.

Correction: Colombia does not have birthright citizenship and seems to be trying to avoid letting Venezuelans get it

 In the Western Hemisphere, birthright citizenship is close to universal. I thought that this included the Republic of Colombia, as did the author of this article in the Harvard Human Rights Journal. 

But it turns out that Colombia is an exception. But it is not clear-cut. Here is Article 96 of the 1991 Constitution:

Article 96. Colombian nationals are:

1. By birth: 

(a) Natural-born Colombians, under one of two conditions: that the father or mother were natural-born or nationalized Colombians or that, being children of foreigners, one of their parents were domiciled in the Republic at the moment of birth.

(2) The children of a Colombian father or mother who were born overseas and later domiciled in Colombian territory or registered in a consular office of the Republic.

So what is the definition of the word “domiciled”?

Colombian jurisprudence has held that “domiciled” does not mean “resident.” A 1993 law made it more specific: “Residence is understood as residence in Colombia accompanied with the intention to remain in the national territory according to the relevant stipulations of the civil code.”

Or, if that wasn’t clear: if you don’t have legal permission to reside in Colombia, then your Colombian-born children don’t automatically get Colombian citizenship.

Specifically, if you want your kids to be natural-born Colombians, then you need to have a type R resident visa; a type M work, marriage, partnership or business visa or a type TP3, TP4, TP5, TP7, TP9, TP10, or TP15 temporary visa. Now, in case you were wondering, it turns out that refugees qualify for a TP9 visa. (The link explains all the TP visa types.)

But here is the rub. Decree 1288 granted some sort of permanent status to 442,462 Venezuelan refugees, on top of the 380,000 who had already gotten legal status. Holders of the new status can work in Venezuela and access public services. 

The Venezuelans do not get TP-9 visas. Rather, according to Article 2 of the implementing regulation, they get a two-year renewable something “issued in order to authorize the stay of Venezuela nationals who find themselves in the national territory without the intent to settle permanently, which is why it is not equivalent to a visa.”

This strikes me as a bad idea. I understand why the Colombian authorities want to pretend that the Venezuelans will all go home soon. But that is a bad bet. It is hard to imagine that granting TP-9 visas instead of the temporary whatever-it-is would engender that big an outcry. But it would at least insure that you avoid creating an underclass should things not work out and the millions of Venezuelans wind up staying in your country.

Unless there is some legal requirement at work, Colombia really should change this policy. As insurance for their own future. Because some eggs cannot be unscrambled, and the great Venezuelan exodus is beginning to look like one of them. 

The incredible power of the Argentine president

Back in February, I noted that the Argentine president has too much power, which might be a cause of Argentina’s bad governance.

It turns out that I noted the same thing back in 2008. Cristina had just lost a Congressional vote on raising the soybean export tax from 35% to 44%. (Page 16.) I noted that this was a double-sign of political weakness, since her intention had been to bypass Congress altogether and impose the tax using the necessity and urgency clause in Article 99. Street protests forced her to go back to the legislature, where she lost 37-36 in the Senate. 

I interpreted the loss as a sign of her political weakness. I was wrong about that. Despite the export tax mess, and the pension nationalization mess, she managed to win re-election in 2011. Her administration would not collapse under its own weight until the 2015 election. But she would careen from self-inflicted disaster to self-inflicted disaster without the guardrails that keep American presidents from doing likewise, no matter how incompetent or mercurial they may be. (Mostly. In domestic policy, at least.)

But I was right about the danger of Argentine presidential power. I still fear for Argentina, especially in the current economic headwinds. 

Mexico’s amendable constitution

That’s “amendable,” not “amenable.”  

Too many observers have recently declared that Mexico’s energy reform is safe, because it was enshrined in the Mexican constitution as an amendment. And why would they be wrong? Amendments certainly look difficult to change. It takes a 2/3rds majority of both houses of Congress and a majority of the state legislatures to pass one. That certainly looks like a high bar!

Except that if the bar were really high, the Constitution of 1917 wouldn’t have been amended 232 times in 101 years. Or 64 times in the past dozen. That’s right, Mexico has been amending its constitution once every ten weeks.

For whatever reason, an amendment process that is on paper equivalent to the United States is in practice much much easier. How did that happen?

Let’s start by saying what did not happen. Many analysts, yours truly included, thought the high amendment rate of the Mexican constitution was a epiphenomenon. The phenomenon was that Mexico was a one-party state in which the written Constitution did not matter. Since the constitution did not matter and the ruling party controlled all branches of government, amendments could be passed for propaganda reasons and without consideration of their effects.

Sounds good, right? The problem with the above hypothesis is its converse corollary: If the Mexican constitution was amended all the time because the country was a one-party dictatorship, then the amendment rate should fall when it becomes a multiparty democracy.

Well, sometime around 1997 the country became a multiparty democracy. But the rate of amendment rose from 1.6 amendments per year to more than five. So much for that idea, then.

So what is the reason?

The first thing to keep in mind is that Mexican political parties are much more centralized than their American equivalents. When the party bosses say “jump,” (most of) the legislators ask “How high?” For example, once energy reform made it out of the Congress, it took only 83 hours for a majority of the state legislatures to ratify. Imagine that happening in the United States.

Second, the President can introduce amendments under his or her power to introduce legislation. Until 2012, they could introduce them straight to the relevant committee. In practice, that means that a Mexican president can almost always get their preferred amendments to the floor for a vote.

Third, Mexican parties are more transactional than ideological. The PRI can turn its positions on a dime for electoral (or other) advantage. The Green Party, despite its, name, is not particularly concerned about the environment. Rather, it is a family enterprise, winning seats in order to collect federal subsidies which it uses to maintain its seats, parceling out votes to the highest bidder.  The PAN and PRD are a little more ideological, but the PAN in particular has a long and successful history of logrolling and the PRD has split. 

Finally, Mexican politicians have no choice but to amend the constitution if they want to govern. Too many policies are enshrined in the Mexican constitution. The bloody thing is now 61,765 words long, up from 27,122 back in 1917. If Mexican politicians suddenly developed stronger norms about amendments, then the country would become ungovernable.

To put this in context, Mexico isn’t the only Latin American country with a flexible and overly-detailed constitution. The difference is that the other countries have amendment process that look easy. Colombia’s 1991 constitution runs 47,383 words and has been amended at almost as high a rate. But with a few exceptions, Colombia’s constitution can be amended by two consecutive majority votes of both houses. That is barely a bar at all.

The Brazilian  constitution is only a little bit harder to amend: you need 60% of both houses to vote twice. The Peruvian constitution (which is a paragon of brevity at 18,341 words) allows for amendments with either a majority vote plus referendum or a two-thirds vote of Congress twice. It’s no surprise that those countries alter their constitutions with regularity. What makes Mexico unique is that it has an amendment process that looks fairly onerous … but isn’t.

In other words, Mexico suffers from many many ills, but legislative gridlock is not one of them. That is a good thing, but it means that supporters of the energy reform shouldn’t get too complacent. It wouldn’t take the second coming of Lyndon Baines Johnson to undo the amendments. It would just take some political skill. Of which there is no short supply in Mexico right now.

Now, that is not to say that I think reform is about to be completely undone ...

Marking my Brexit (and 2016) predictions to market

Yeah, this post (and this one) do not look so good. Mark to market. Lesson: polls can shift, a lot.

But to defend my honor, Sam Wang’s latest projections are making this post look pretty good. If you take a two-percent uniform swing over current polling, both Michigan and Wisconsin turn into toss-ups, with Pennsylvania staying blue. No flipping Wisconsin before Michigan. 

Click the map to create your own at 270toWin.com

Of course, I feel I need to point out that the fact that the polls are so close means that most of the people on my Democratic email chains were entirely wrong in their models about American politics. Fat Crybaby is not bobbing dead in the water.

Say, where is our resident troll? You know, the one who got mad at me for telling someone in a Hitler costume to leave a children’s party? I keep expecting to show up and start chanting about the terrible things that will befall us when the Fat Crybaby wins. 

Mark to market #2

 Well, my Marco prediction was wrong. Not gonna be the nominee, not gonna be President.

But what further amazes me is how far the man is falling. He could keep his head low, not mention Trump at all. Instead, he looks to be accepting the dark side. OK, he eviscerated a good tax plan to please donors, hung Puerto Rico out to dry to please donors, and ran away from his own immigration bill. So I am not surprised. But I am amazed. 

On the other hand, Nikki Haley is still preserving her honor. This is strong stuff, when criticizing the Crybaby’s rhetoric: “I know what that rhetoric can do. I saw it happen.” We will see how long she holds out.

Mark to market

 I will now be amazed if there is a third-party True Republican run. Like many people, I was wrong at almost every turn about the ability of the GOP to organize in its own long-term interest.