Homeland Security Just Revealed the Trump Administration’s Roadmap for Cracking Down on Undocumented Immigrants
On Tuesday, the Department of Homeland Security officially released two memos, first reported by McClatchy and others on Saturday, that outline the Trump administration’s strategy for deporting undocumented immigrants and other aliens with criminal records.
To a large extent, the memos detail how the department will enforce Trump’s omnibus executive order on immigration, signed on January 25, that promised to defund sanctuary cities, deputize local law enforcement as immigration police, and hire thousands of new agents for Border Patrol and Immigration and Customs Enforcement. While there are only 6,000 ICE agents, there are more than 700,000 local police around the country. Together, those actions may create an effective “deportation force,” with or without the participation of the National Guard.
The memos also cement the broadened enforcement priorities that Trump outlined in his order. Under Obama, ICE had moved to limit its deportation focus to only convicted criminals, terrorist threats, and very recent arrivals. (Though many criminal aliens are guilty of nonviolent offenses like working with a false social security number, driving without a license, or marijuana possession.) The new DHS rules make all aliens without valid visas a priority for removal, though a DHS official told reporters on Tuesday the department would still focus its limited resources on those who have committed “serious crimes.”
Trump Visited the Smithsonian African American History Museum. What Might He Have Learned?
President Donald Trump spent Tuesday morning touring the National Museum of African American History and Culture, a makeup visit for the trip he was supposed to have made on Martin Luther King Jr. Day. One of Trump’s companions was Ben Carson, his pick for secretary of housing and urban development, whose career as a neurosurgeon is commemorated in one of the upstairs exhibits.
It would have been a good opportunity for the developer-president to update his notion of the “inner city” as a stand-in for black America, and perhaps even examine his own role in creating that stereotype.
Fittingly, there is nothing in the museum about Donald Trump’s own brush with fair housing law. In 1973, Trump was sued by the Department of Justice for refusing to rent or negotiate rentals with black tenants in the buildings his father had built in outer-borough New York City. The 27-year-old Trump vehemently denied the accusation. The standout detail from the case, which Trump settled in 1975 without admission of guilt but with a formal structure to help black tenants find apartments in Trump buildings, was that applications from blacks were marked with a C for colored. A review of some related documents released last week by the FBI reveals a blunter approach at some of the buildings in the Trump Management Co.: A black prospective tenant would be told there were no vacancies, despite a newspaper listing; a white prospective tenant would be shown an empty apartment immediately.
Tucked away on the third level of the underground history galleries at the NMAAHC is a room called “Cities and Suburbs” that to some extent tells the other side of this story: the diverse but largely segregated set of black communities that emerged after 1968. Like the rest of the museum, its focus is on black agency—on places like Soul City, the utopian black community that the Washington Post called “perhaps the most vital experiment yet in this country’s halting struggle against the cancer of hectic urbanization.” The endeavor got a $14 million grant from President Nixon’s Department of Housing and Urban Development.
The Republican “Plan” to Replace Obamacare Includes a Huge Assault on Abortion Access
In an attempt to project some semblance of party unity and momentum, House Speaker Paul Ryan unveiled the latest Republican road map for replacing the Affordable Care Act this week. It is not the most detailed document—more a collection of broad-stroke ideas than a concrete policy plan—and it's unclear how much support it would find in Congress. But at least one thing is obvious from this outline: Republicans are looking to turn Obamacare repeal into an assault on abortion access.
Here's how they'd go about it: To make health insurance (somewhat) affordable, Ryan's plan would offer tax credits to all Americans purchasing coverage on the individual market. However, women would not be allowed to use those subsidies to buy plans that paid for abortion. Given that the vast majority of customers would want to use their tax credits, most carriers would likely drop abortion coverage from their offerings.
“It seems pretty clear that this would drastically scale back or possibly eliminate abortion coverage in the individual market,” Adam Sonfield, a senior policy manager at the Guttmacher Institute, told me. He added that the rule could also have “spillover effects” on employer-based insurance, because of the way the Republican idea could affect COBRA coverage.
Reproductive health advocates faced down a similar threat when Congress was crafting Obamacare in 2010. Back then, the House of Representatives passed the notorious Stupak amendment, which would have banned Americans from using the ACA's tax credits to buy coverage that included abortion benefits. The worry then was that if insurers couldn't sell subsidized plans that covered abortion, they wouldn't bother selling any. One analysis from the George Washington University School of Public Health suggested that would spark an industrywide change in standards that would end coverage of medically necessary abortions “for all women, not only those whose coverage is derived through a health insurance exchange.” Before Obamacare became law, however, the Stupak amendment was subbed out for a watered-down replacement proposed by Florida Sen. Bill Nelson.
The map of abortion coverage under the ACA is complicated. Thanks to the Hyde amendment, which prevents federal money from being used to fund abortions, Medicaid can't cover abortion anywhere. Meanwhile, 25 states currently restrict or ban insurance plans sold on Obamacare's insurance exchanges from covering abortion, according to Guttmacher. Ten states limit it on all private insurance plans. But in others there are no restrictions on abortion benefits in the private market at all.
The new Republican plan is a bit like the Stupak amendment on steroids. After all, Obamacare's subsidies are only eligible to those with incomes up to 400 percent of the poverty line. The Republican tax credit would be available to anybody in the individual market, meaning insurers would likely expect pretty much everyone to use one, and tailor their offerings accordingly. (For those wondering: No, Ryan has not said how much the credits would be worth, and since they'd be universal, they'd also likely be pretty small.) You would expect abortion coverage to disappear from the whole individual market rapidly. Like the GW team argued years ago, it's possible that the change in industry norms would lead insurers to drop the benefits from the plans they sell to employers. Some might suggest that women could purchase special riders to cover abortion, but those sorts of add-ons haven't worked particularly well in health insurance, since they tend to be extremely expensive.
It's hard to quantify how deeply the GOP plan would damage abortion access. “Even when women do have private insurance coverage, most of them end up paying out of pocket [for abortions]. What is not clear is why,” Sonfield told me. However, driving abortion coverage out of the individual market would certainly make the procedure less affordable for many, while further stigmatizing a procedure that should be considered a standard part of reproductive care.
Of course, that might be the only part of health reform every Republican will be able to get behind.
Even in 2016, Democrats Carried Rust Belt Town Centers. Why?
Back in early November (such a simple time!), I wrote a piece for Slate on political scientist Jonathan Rodden’s analysis of precinct-level voting patterns. Rodden, a professor at Stanford, showed that the familiar pattern of high-density Democratic areas and low-density Republican areas had been re-created, fractal-like, in the small towns and cities of the Rust Belt during Barack Obama’s presidential election in 2008.
These little-downtown voters, who helped Obama carry several swing states, were supposed to be irrelevant to the Democratic Party in 2016, as Chuck Schumer infamously said in July: “For every blue-collar Democrat we lose in western Pennsylvania, we will pick up two moderate Republicans in the suburbs in Philadelphia, and you can repeat that in Ohio and Illinois and Wisconsin.” After Wisconsin, Michigan, and Pennsylvania flipped for Trump on November 8, it was easy to think that small-town Democrats had abandoned the party wholesale.
But it turns out Democrats didn’t lose those town cores in Pennsylvania and Ohio; in fact, as Rodden showed with new data this week, the correlation between living downtown and voting Democrat was (relative to nearby rural areas) just as strong in this presidential election as in its predecessors. Red counties weren’t homogenous before, and they’re not homogenous now.
Rodden thinks this trend rebuts a common cultural trope about small-town America: "A popular claim is that Trump’s populist anti-trade rhetoric resonated most in postindustrial towns with severe job losses,” he writes in the Post. "If so, we might expect that these towns suddenly started to vote more like their neighboring Republican precincts, with the graphs flattening in 2016.”
Trump’s New Labor Secretary Nominee Seems Boring, Professional, and Conservative
Here are a few words that immediately come mind when considering President Trump's new nominee to be secretary of labor, R. Alexander Acosta: Dull. Accomplished. Conservative. Dull.
Perhaps this was to be expected. Trump's first pick for the job, fast food CEO Andrew Puzder, was a fascinating train wreck who had to withdraw his name Wednesday after alienating liberals, conservatives, and anybody who thought using bikini models to sell burgers was kind of crass.
Acosta is pretty much the opposite—a textbook product of the Republican legal and political establishment. Currently the dean of Florida International University's College of Law, he's a double Harvard grad who clerked for Supreme Court Justice Samuel Alito while the judge served on the 3rd U.S. Circuit Court of Appeals. He sat on the National Labor Relations Board under President George W. Bush for a couple of years before moving to the Justice Department to head the Civil Rights Division. He later became the U.S. attorney in Miami, where he prosecuted the corrupt lobbyist Jack Abramoff, among others. He likes to give talks at the Federalist Society, which is pretty much the Rotary Club for deeply conservative lawyers.
He was also born in Cuba, meaning he would be the only Hispanic member of Trump's Cabinet. And he spoke out against anti-Muslim discrimination in testimony before Congress in 2011, emphasizing how federal prosecutors aggressively investigated anti-Islam backlash crimes after the Sept. 11 attacks.
Labor groups haven't had much time to dig into Acosta's record, and they'll be sure to scrutinize the opinions he authored or joined while on the NLRB, which decides cases on union organizing and unfair labor practices. But so far, there seems to be some cautious optimism that he'll be an improvement over Puzder, who had never worked in government and many feared would be deeply hostile to the agency's core mission of policing and enforcing labor law.
“He was in the Civil Rights Division,” the National Employment Law Project's Deborah Berkowitz said of Acosta. “He did uphold the law there. He did prosecute Jack Abramoff and others. He has a history of public service. And gets what public service is about. And I think that’s important. Because in the end, the Department of Labor is a law enforcement agency.”
Wilma Liebman, one of Acosta's Democratic colleagues on the NLRB, also had flattering things to say about the nominee in an interview with Politico:
“Even though we often came out differently on policy conclusions or the outcome of a case, he was a good colleague and he was always willing to talk and bounce around ideas,” Liebman said. “I would say he’s very smart and he’s an independent thinker.”
Liebman said that while unions may not “be thrilled with every decision he’ll make...they’ll get a good hearing.”
Is there anything controversial that Democrats might latch onto? Sort of. For starters, Bush's Civil Rights Division was marred by a scandal over politicized hiring practices thanks to an official named Bradley Schlozman, who (illegally) tried to hire Republicans and had a habit of calling Democrats “libs” and “commies” and “pinkos.” Of his HR philosophy, Schlozman once mused: “I just want to make sure we don’t start confining ourselves to, you know, politburo members because they happen to be a member of some, you know, psychopathic left-wing organization designed to overthrow the government.” Swell guy!
Acosta, who ran the Civil Rights Division from 2003 to 2005, wasn't directly implicated in any wrongdoing. But he did leave hiring to Schlozman. And a January 2009 report by the Justice Department's Office of the Inspector General concluded that Acosta had failed to take any action despite some obvious red flags concerning Schlozman's activity.
Bush's Civil Rights Division was also accused by critics of backing away from traditional voting rights cases involving black and Hispanic victims, and of seeking to protect whites against reverse-discrimination instead. However, a March 2013 inspector general report couldn't find evidence that was really the case. Meanwhile, Acosta substantially increased the number of voting rights cases on behalf of Spanish and other foreign language speakers.
What about his time as a U.S. attorney? It's possible that Democrats will bring up Acosta's decision not to file federal charges against Jeffrey Epstein, the billionaire pedophile financier who, as the New York Post summed it up, has been “accused of recruiting dozens of underage girls into a sex-slave network, buying their silence and moving along.” After a ferocious battle with federal and Florida prosecutors, Epstein pleaded guilty to state charges of soliciting an underage prostitute in 2008 and served a fairly cushy 18-month jail sentence. Many have questioned Acosta's choice to, quite literally, not make a federal case of it, which led to an unusual lawsuit by some of Epstein's alleged victims. Acosta has defended his choice, however, essentially saying it was necessary to win a plea that would send Epstein to prison.
Are Democrats going to try and claim Acosta purposefully gave a sweetheart deal to a rich sex offender? It seems unlikely. Again, this is the same guy whose office prosecuted Abramoff. It would be a bit dissonant to argue that he's soft on wealthy, politically connected types.
There's no reason to think Acosta will be particularly friendly to unions or workers. Nobody should expect any new pro-labor regulations to emerge from his department. But at this very early stage, it at least seems like he might bring a dose of professionalism and civic-mindedness to the Trump administration.
So I might have to take back what I said Wednesday about how Puzder's defeat wasn't much of a victory for liberals. If so, that's actually a relief.
If Elaine Chao Axes This Bay Area Rail Funding, We’ll Know She’s Politicizing Transportation
For the past 20 years, as Bay Area workers have invented the apps and devices that define this young century, system engineers have sought to bring the Caltrain rail corridor up to date with the last one.
Transforming the Caltrain into an electric railway would be expensive, they knew, but it would bring benefits like cleaner, quieter trains (compared with today’s diesel locomotives), more efficient schedules, and increased passenger capacity. The last piece has come to seem especially necessary: The system’s ridership, which now tallies 65,000 riders a day, has doubled since 2005.
The $2 billion modernization project draws its funding from local, regional, and state revenues, plus a federal grant, two years in the making, that planners thought was all but approved. On Friday, Caltrain’s Core Capacity grant becomes eligible for a signature from U.S. Transportation Secretary Elaine Chao. It’s supposed to be a formality capping a long period of review at the Federal Transit Administration; contractors are in place to start work on electrification on March 1.
Why Sinking Andrew Puzder’s Nomination Isn’t the Victory Democrats Think
Andrew Puzder, Donald Trump's embattled pick for secretary of labor, has tapped out. As it became increasingly obvious Wednesday that his nomination would die on the Senate floor, the fast food CEO withdrew himself from consideration, making him the administration's only cabinet selection to collapse in Congress so far.
Progressives are celebrating. Activists have badly wanted to derail Trump's nominees, and Puzder's public profile was especially detestable. (You almost had to wonder if our Twitter troll of a president had picked him just to antagonize fast food workers, organized labor, and feminists.) As the the chief executive of CKE Restaurants—parent of burger chains Hardee's and Carl's Jr.—Puzder argued against minimum wage increases and talked eagerly about replacing workers with kiosks. (“They're always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex, or race discrimination case,” he once said of the machines. Classy!) A Huffington Post investigation found that Hardee's franchises were rife with wage-theft violations, which, while common in the fast food business, suggested that Puzder might not be a stickler about enforcing labor law. His company ran fratty, sexist TV spots featuring models chowing down on burgers while wearing bikinis. (“I like our ads. I like beautiful women eating burgers in bikinis. I think it’s very American.” he explained.) During their divorce in the 1980s, his ex-wife accused him of domestic abuse and appeared in disguise on Oprah to talk about her experience. (She recently recanted the allegations).
And now lefty groups are doing their version of a sack dance. My inbox is full of celebratory emails from organizations like Public Citizen, declaring “Puzder’s Withdrawal a Win for Working Families.” Even NARAL—the pro-choice group—felt compelled to tweet, showing that this isn't merely being interpreted as a win for labor, but for the broader anti-Trump #resistance.
Symbolically, that may be true. But substantively, Puzder's demise may turn out to be a subtle defeat for the left.
Despite his business credentials, many conservatives have been uncomfortable with Puzder because they viewed him as soft on immigration. This is because he was, in fact, extremely soft on immigration. A vocal advocate of comprehensive reform—he loved the old Gang of 8 bill that went nowhere during the Obama administration—he was prone to waxing rhapsodical about America as the land of opportunity for those brave and determined enough to journey here. He also liked that immigrant workers at his restaurants were just thankful for “the fact that they have a job,” and weren't prone to cause trouble. He wasn't an ideal voice for America's undocumented workers by any means; advocating for immigrants so you can exploit their labor doesn't make one a great ally. But in an administration dominated by white nativists, Puzder was poised to be the only notable dove on this issue. Best yet, it was conceivable that he might exert some influence on the president, whom he had advised and fundraised for during the campaign. Both men are wealthy, outspoken businessmen with a habit of objectifying women and a love of fast food, not to mention a record of hiring immigrants. They spoke the same language.
This irked immigration hard-liners, since the Department of Labor is responsible for administering and overseeing various controversial guest worker programs. Slate's own Reihan Salam argued that Puzder was the one Cabinet nominee Republicans should absolutely vote against. Puzder ultimately tried to push back against his image as the administration's potential open-borders advocate. “My job as a business person is to maximize profits for my company, employees and shareholders,” he said in a statement. “My job as the Secretary of Labor, if confirmed, is to serve U.S. citizen workers—that is my moral and constitutional duty.“ But it didn't help matters when reports broke that Puzder had hired an undocumented maid—even though he wasn't the only Trump Cabinet pick possessing that particular trait.
In the end, Puzder's nomination seems to have been sunk by the combined weight of his flaws, but it's hard to shake the sense that immigration was the decisive issue. Two of the first Republican senators to back off of him were, notably, women—Susan Collins of Maine and Lisa Murkowski of Alaska—who had watched footage of his ex-wife's appearance on Oprah. But other GOP members voiced concerns about his housekeeper. Meanwhile, Republicans are still standing pretty much in lockstep behind the alleged sexual predator whose ex-wife once accused him of abuse during a divorce who currently occupies the Oval Office. Given that, it seems Puzder might have survived had he hired a different cleaning lady.
Looking forward, whomever Trump picks to replace Puzder will almost certainly be just as bad on labor rights and worse on issues like immigration. One likely contender right now is Peter Kirsanow, who as a member of the National Labor Relations Board under George W. Bush had a habit of siding against workers. Kirsanow, who is black, testified before Congress that, “Not only do illegal immigrants compete for jobs with African-Americans, but that competition drives down wages for the jobs that are available.” He has other opinions that are sure to enrage the left—among them, he's a critic of affirmative action and seems to think there should be religious exemptions to rules barring discrimination against gays and lesbians. “In our constitutional order, the first reason that religious liberty takes precedence over sexual liberty is that this is enshrined in our Constitution,” he wrote last year while sitting on the U.S. Civil Rights Commission.
Kirsanow may not turn out to be the nominee, but chances are whomever Trump picks will fit his profile more closely than that of an immigration-loving burger exec. Puzder's public attitudes toward workers and his alleged history of marital violence may have been loathsome. But the man still might have been the best we could expect from this administration.
Ironically, he might not have even been the nightmare on workers' rights progressives imagined. As one key Labor Department official told me: “If the staff he brought in are a reflection of the kind of Secretary he would have been, he would have been someone who could be open to reasonable labor policies.”
“Democrats needed a win and they got one,” the official added. “Now we'll get worse, I'm sure.”
Andrew Cuomo’s Bizarre Logic for Killing New York City’s Plastic Bag Fee
On Tuesday, New York Gov. Andrew Cuomo found himself in a familiar predicament: how to reconcile his progressive self-image with a pattern of governing that generates more opposition on the left than on the right.
Confronted with the state Legislature’s pre-emption of a New York City rule to reduce plastic bag use, Cuomo signed away the city’s regulation. In doing so he joined a group of Republican governors—Arizona’s Doug Ducey, Idaho’s Butch Otter, Wisconsin’s Scott Walker, Vice President and former Indiana Gov. Mike Pence, to name a few—who have approved bans on well, bag bans. It’s a model law incubated by the right-wing American Legislative Exchange Council, and a favored method of the plastics industry, which correctly sees local action against plastic bags as a precursor to wider prohibitions.
Most of those governors are happy to align themselves with the business interests of plastic bag manufacturers. But Cuomo has a reputation to uphold. And so he offered a long statement that, with the acrobatics of a plastic bag darting down a windy Manhattan avenue, argued that the city’s now-gutted law was actually too pro-business.
This Japanese CEO Pledged to Trump That He’d Invest in U.S. Jobs. Then He Bought a Hedge-Fund Firm.
In December, Masayoshi Son, the founder of Japanese telecommunications giant SoftBank, met with then-President-elect Donald Trump and pledged to invest $50 billion in the United States and create 50,000 new jobs in the process—an announcement that, on the surface, was of a piece with Trump’s heartland-baiting, job-saving pageantry throughout the presidential transition.
On Tuesday, Son made a start on at least one part of his pledge. He bought … a faded hedge-fund operator?
SoftBank’s plan to buy Fortress Investment Group, a giant, once-mighty, publicly traded firm, for $3.3 billion won’t do anything for factory workers in the Midwest, obviously. Instead, it will provide some balm to the bruised egos of financial operators in midtown Manhattan. It couldn’t be a more perfect symbol of what the Trump era means for doing business.
Almost precisely a decade ago, Fortress Investment Group made a big splash by becoming the first hedge-fund management company to sell shares to the public. Fortress was a darling of the Bush-era credit boom. Thanks to its sharp elbows and smart performance, the firm had amassed $35 billion in assets. The stock offering was priced at $18.50. But such was the enthusiasm among investors—here was a chance to own a piece of a remarkably successful business!—that the stock opened at $35. Fortress’ principals, Wesley Edens and Michael Novogratz, a hard-charging, former helicopter pilot and a Goldman Sachs alum, became billionaires. The entire company was worth about $14 billion.
And then they piloted their high-flying aircraft into a wall.
In theory, hedge funds are supposed to provide noncorrelated performance—when markets crash, they’re supposed to break even, or even gain. Fortress turned out to be a leveraged play on a highly leveraged financial system. The typical way hedge funds get paid—a fixed, 1 percentage fee on the value of assets under management, and performance fees of 20 percent on the gains they manage to produce—magnifies both gains and losses. When the rolling crashes came in 2008, Fortress’ investment returns faltered, driving down the management fees it collected on a proportional basis, and wiping out the performance fees entirely.
As a result, from February 2007 to January 2009 Fortress’ stock lost a stunning 97 percent of its value—hitting a low of about $1.25. In the years since, Fortress has recovered along with the broader markets. But neither the company nor its stock has recovered its swagger. On Tuesday, before the SoftBank deal was announced, the stock was trading at $5.82. In its 10 years as a public company, Fortress’ shares fell about 80 percent, while the S&P 500 has risen more than 60 percent.
During this bull market, the company successfully raised new funds and posted some decent results. But in an age of low volatility and crowded trades, it has been hard for many hedge funds to post returns better than an investor can get by buying an index fund. Fortress looked for new angles by diversifying into private equity, bonds, real estate—all the major food groups. But the mashup has led to poor performance. And when the principals tried to make big bets, they often faltered. Novogratz, who personally oversaw $2 billion in assets, left the firm last year after getting caught on the wrong side of bets on Brazil and the Swiss Franc. As he noted: “But we have had an extremely challenging two years, and I do not believe the current environment is conducive to achieving our best results."
And while the firm manages some $70 billion in assets, it has been plagued by redemption and stagnant performance. In the 2016 third quarter, Fortress said the assets it managed on which it earned fees were down 6 percent from the year before—this at a time when markets were broadly rallying.
So why is Son interested in Fortress? Well, it does allow him to make a down payment on that commitment to invest $50 billion. But there may be deeper motives at work. Son is in the process of creating a gigantic $100 billion investment fund. SoftBank Vision Fund, backed in large part by Saudi Arabia, will be investing in technology, startups, and big companies. So in addition to gaining $70 billion in assets to manage (a business that should be profitable), Son is acquiring the services of a large number of investment professionals who could theoretically help with the new endeavor. It’s not unlike the acquihires that Silicon Valley companies often do—buying small startups for big prices so they can get access to the engineering talent. Here SoftBank is getting financial engineering talent.
One thing the deal won’t do, however, is create new jobs in the U.S. And in many ways it’s a perfect metaphor for the Trump era, a bold stroke that nevertheless does not deliver on a huge public promise. In an era in which we’re supposed to be focusing on the travails of the working class, the major beneficiaries are a bunch of people who are already insanely rich, and who exploit a loophole in the tax code to avoid paying their fair share of taxes. They’ve been failing the public stockholders who put their faith and money in their hands—and now they’re getting bailed out by a powerful foreigner.
An Important New Sign That the White House Doesn’t Want a Trade War With China
Donald Trump's presidency already appears to be spiraling into an anarchic blur of leaks, lies, and Russian intrigue (Gen. Flynn, we hardly knew thee). But amid all the chaos, the White House's economic team seems to be inching toward sanity on one very important issue: how to deal with China without starting a trade war.
During his presidential campaign, Trump frequently promised he would label the People's Republic a currency manipulator as retaliation for its predatory trade practices. This didn't make much sense, since China stopped pushing down the value of the yuan in order to boost exports a long time ago. Recently, Beijing has been busy doing the exact opposite, burning through its foreign exchange reserves in order to prevent its currency from collapsing as the economy slows and wealthy investors spirit money out of the country. As with so many things, Trump's aggrieved, jingoistic view of the world was stuck in a time warp.
Tagging China as a currency manipulator, which Trump said he would do on the first day of his term, wouldn't have had many practical consequences. But the largely symbolic gesture would still have increased tensions between the world's two most important economic powers, who will need to cooperate on matters like containing North Korea's nuclear ambitions. It would have been, you know, suboptimal.
Trump backed off his Day 1 vow shortly before inauguration. And happily, it now seems we may not be heading down that route at all. According to the Wall Street Journal, the White House's National Trade Council is eyeing a plan that would address currency manipulation generally without aiming at China specifically by deeming the practice an unfair subsidy. That will allow individual companies that feel they've been hurt as a result of currency manipulation by China, or by any other country, to bring complaints before the Commerce Department and ask for countervailing tariffs. So, if steelmaker Nucor one day decided Beijing's currency practices were giving its competition in Shenzhen an unfair edge, it could go to Washington and ask the government to slap a tariff on imported rebar and sheet metal.*
This idea has been kicking around mainstream policy circles for a while. C. Fred Bergsten and Joseph Gagnon proposed it back during 2012, for instance, in a report published by the Petersen Institute for International Economics, an old pillar of D.C.'s free trade–loving establishment. There are at least a couple reasons to like the concept.
First, it doesn't just target China. Four years ago, Bergsten and Gagnon identified more than 20 different countries they believed were guilty of currency manipulation, from European exporters like Switzerland, petro-states, and a bevy of Asian nations including South Korea and Japan. There was no reason to let them off the hook while singling out Beijing.
Second, the move wouldn't penalize China, or anybody else, for crimes that exist purely in the mind of Donald Trump. In order to win countervailing duties, companies would need to show that currency manipulation was actually happening and that their business had been harmed by it. That means, given the realities of 2017, it won't cause any pointless conflict.
“On my reading,—and I’m a hawk—there’s not much manipulation right now, and certainly not in China,” Bergsten told me, adding that it was still a worth trying to deter the practice from coming back. “It’s a good thing to put this remedy in place. But it might not lead to many actionable cases, at least in the near future.”
There are also downsides to the idea. For starters, it might not be legal. According to Bergsten, U.S. law doesn't explicitly say whether the Commerce Department is allowed to treat currency manipulation as an illegal subsidy. The World Trade Organization's rules are also murky on that point, he says, meaning the administration's new approach would likely be challenged. “If the U.S. starts doing cases of this type, it will undoubtedly be contested in front of the WTO,” Bergsten told me. At that point, the administration will have to decide whether to back off its plan or defend it.
Finally, if China ever did start manipulating the value of its currency down again, letting companies complain about it to the Commerce Department might be an inadequate response. As the 2012 report put it:
Countervailing duties offer sector-specific or microeconomic response to the across-the-board macroeconomic problem of currency manipulation. All CVDs now in force in the United States cover only $7 billion of imports, a tiny share of total trade. Hence they are less than an ideal solution.
At the moment, though, the actual modesty of this proposal is kind of comforting. Team Trump is looking for a way to make good on the president's vow to get tough on currency manipulation, real or imagined, without causing needless havoc. It's a faint and welcome sign of sanity.
*Correction, Feb. 15, 2017: This post originally misspelled Shenzhen.