Tuesday, December 20, 2016

Snowden

If a picture is worth a thousand words, then how many words are moving pictures worth? Add in a script and you have actual words—potentially quite substantive words—grounding all that pictorial worth. Moving pictures, or movies for short, are capable of conveying substantial meaning to audiences. In the case of the film, Snowden (2016), the meaning is heavy in political theory. In particular, democratic theory. The film’s value lies in depicting how far short the U.S. Government has slipped from the theory, and, indeed, the People to which that government is in theory accountable.

The full essay is at "Snowden."

Monday, December 12, 2016

How American Presidents Are Selected: Beyond Russian Interference

Most delegates in the U.S. Constitutional Convention in 1787 recognized the value of constitutional safeguards against excess democracy, or mob rule. The U.S. House of Representatives was to be the only democratically elected federal institution—the U.S. Senate, the U.S. Supreme Court, and even the U.S. Presidency were to be filled by the state legislatures, the U.S. President and U.S. Senate, and electors elected by citizens, respectively. The people were to be represented in the U.S. House and the State governments in the U.S. Senate. The Constitutional Amendment in the early twentieth century that made U.S. senators selected by the people rather than the governments of the States materially unbalanced the original design. In terms of the selection of the U.S. president by electors, the political parties captured them such that whichever party’s candidate wins a State, the electors there are those of the winning party. Even if the electors could vote contrary to the popular vote in a State, such voting could only be a rare exception given the party-control. Hence the electors have not been able to function as intended—as a check against excess democracy. The case of Russian interference in the presidential election of 2016 presents an additional use for the Electoral College, were it to function as designed and intended. Of course, this is a huge assumption to make, even just in taking into account the American mentality regarding self-governance.

Suppose, for example, that a presidential election were to take place only months after an attack by another country, such as the one at Pearl Harbor on December 7, 1941. The American people might be inclined to vote for whichever candidate has promised to nuke the belligerent power off the face of the Earth. Clearly, such a knee-jerk reaction would not be in the best interest of the American people. Were the electors in the Electoral College free of party-affiliation as well as any law requiring them to vote according to their State’s popular vote in the “presidential election” (i.e., actually for the electors), the electors of the College could elect another candidate—one not so inclined to beat the war drum to capitalize on the momentary passions of the people.

In short, American voters elect electors by state, and said electors in turn then meet in their respective state capitols to cast votes for president roughly a month later—that being the actual presidential election. This system reflects the delegates' fear that the masses voting directly would be risky because people have difficulty resisting their immediate passions. Demagogues running for office can too easily take advantage of the ignorance and inattention of the electorate, especially when the “campaign season” lasts 14 months!

That a population even as large as 7 million in the U.S. in 1789, and even more one of 310 million in 2016, must depend on the media for information on candidates—it being extremely unlikely that all but a tiny fraction of the people could meet the candidates—adds merit to the value of having electors whose task it is to act as a check on deficiencies in a democratic election on such a scale. As for the number of electors in the Electoral College, each State has as many as the total number of its U.S. senators and U.S. House representatives. The number is few enough that the electors could actually meet the candidates in person and question them. Additionally, the electors could more feasibly have access to information on the candidates and even U.S. intel. In voting for these electors, the American people would be voting for people whose judgment is deemed to be up to the task.

So it is fitting, given the purpose and design of the Electoral College, that the electors could receive U.S. intel on Russia’s interference in the 2016 presidential election. Hillary Clinton’s presidential campaign chairman, John Podesta, supported a proposal that electors be given “an intelligence briefing on alleged political interference by Russia.”[1] A group of 10 electors had written to the Director of National Intelligence to request a briefing. Those electors cited their role as a “deliberative body” designed in part to prevent foreign powers from trying to influence elections.[2] Although I am not aware of any direct reference to foreign interference as an explicit reason for the Electoral College in the Constitutional Convention (via Madison’s Notes), the rationale can fall within the broader one of the College serving as a check on deficiencies in the presidential election (i.e., the election of electors by the American people).

As the American people themselves selected the electors to in turn select the federal president, the extant federal officials, as agents of the People, were duty-bound to defer to the electors for such a purpose bearing on the task of electing the next president. It is up to the electors to decide whether any new information gained after the presidential election warrants the selection of someone other than the candidate whose party controls the majority of the electors (i.e., “won” the Electoral College). It does not necessarily follow that the electors should select the candidate who came in second.

Hypothetically, events taking place between the “presidential election” and the electors’ own vote could warrant the election of another candidate than the one who “won” the electoral college. New information on either of the major candidates could also justify such an outcome. The overall point, or aim, is that the best possible selection is made for the United States and its people. Holding to popular vote, whether by State or nationwide, pales in comparison, and is not necessarily optimal. One delegate, for instance, argued at the Convention that “the people at large . . . will never be sufficiently informed of characters.”[3] Another delegate said, “The people are uninformed and would be misled by a few designing men.”[4] That delegate felt this problem so grave that “the popular mode of electing the [president] would certainly be worst of all.”[5] Still another delegate argued that the selection of the president should be “by those who know most of the eminent characters & qualifications,” not “by those who know least”—meaning millions of people across an empire.[6] Such delegates were not themselves government officials, so the recognition of the limitations of a popular election by people like themselves is itself awe-inspiringly humble. For a people to recognize its own deficiencies and design safeguards even at the expense of their own future electoral preferences renders such a people worthy of self-government. Maturity, in addition to being educated and virtuous as Jefferson and Adams insisted, is requisite for self-governance.

I submit that Americans in 2016 were overwhelmingly—and conveniently—deficient in governmental maturity. Instead of a willingness to face their own complicity in standing by or enabling as presidential campaigns had become so sordid and devoid of policy or even debate, a blind charge could be heard immediately after the election toward a new system based on an unprotected, and thus vulnerable, (nationwide) popular vote. Legitimacy supposedly hung in the balance, and the People could not be wrong. So it is ironic that the need for safeguards against the electorate itself were so easily dismissed. In other words, it is nothing short of astonishing that such an electorate would assume that an overhaul was not necessary on how presidents are selected and, moreover, that no safeguards would be needed for going by a nationwide majority vote. The underlying problem can be put as a question: Does a people that refuses to recognize the need for safeguards on itself, even for its own protection (i.e., in its own best interest) deserve self-government? Can such government function for long without the electorate being willing and able to keep their system of government in good condition? What if a people cannot recognize brokenness, whether in itself or in how its president is selected? Can such a people self-govern for long?

It is much easier to focus on foreign interference than to be willing to recognize deficiencies much closer to home. Taking the most comfortable route, rather than making difficult choices, is lethal for a viable republic especially when the lack of character is combined with ignorance as to what constitutes good and bad public-governance systems. It is particularly revealing that a people most in need of safeguards is most apt to make the convenient assumption that they are not necessary. The rise and fall of mammoth empires is the stuff of history. Every empire in history has come and gone. The fall of even a modern-day empire can come from within, as from a squalid mentality that absolves itself of even the possibility of being wrong about itself. This, I submit, is the American blight, and plight.

 


[1] Cody Derespina, “Clinton Campaign Backs Call for Electors to Get Trump-Russia Intel Briefing,” Fox News, December 12, 2016.
[2] Ibid.
[3] James Madison, Notes of Debates in the Federal Convention of 1787 Reported by James Madison (New York: W. W. Norton, 1966): 306.
[4] Ibid., 327.
[5] Ibid.
[6] Ibid., 405.

Wednesday, December 7, 2016

A Business Surtax on Income Inequality: Target the Proceeds


The medium compensation in 2015 for the 200 highest-paid executives at publicly-held companies in the U.S. was $19.3 million; five years earlier, the figure was $9.6 million.[1] CEO pay compared with the earnings of average workers surged from a multiple of 20 in 1965 to almost 300 in 2013.[2] “Income inequality is real, it is a national problem and the federal government isn’t doing anything about it,” said Charlie Hales, the mayor of Portland, Oregon in 2016 when that city passed a surtax on companies whose CEO’s earn more than 100 times the medium pay of their rank-and-file workers.[3] According to the law, set to take effect in 2017, companies whose ratios are between 100 and 249 would pay an additional 10 percent in taxes; companies with higher ratios would face a 25 percent surtax on the city’s business-license tax. Whether the new law would make a dent in reversing the increasing income-inequality was less than clear.
The most direct route to reversing the trend of growing inequality would be to use the proceeds from the surtax to increase the average incomes of the poor. Cash assistance to city residents below the poverty line, for instance, or increased rent subsidies would qualify. Alternatively, the city council could pass and fund a minimal-income level for local residents. As still another option, the financial assistance could be meted out more specifically to workers in the companies subject to the surtax, or local companies more generally. Unfortunately, the proceeds were set to go into city’s general fund, only part of which increases the incomes of the poor. “City officials in Portland estimated that the new tax would generate $2.5 million to $3.5 million a year for the city’s general fund, which pays for basic public services such as housing and police and firefighter salaries.”[4] If rental assistance is included and expanded, then the inequality of effective income could be impacted locally, though adding more police and firefighters and perhaps even buying more police cars and firetrucks would not affect the ratio.
In short, for the surtax to address the matter of income inequality most directly, the use of the tax revenue would have to be targeted to increasing the effective incomes of the poor (and middle class). Simply increasing the city’s budget dilutes the impact substantially.
On the CEO-pay end, the assumption that the surtax would result in lower CEO compensation figures is also subject to critique. What a board offers a prospective CEO must contend with what that particular labor market will bear. Furthermore, it is not clear that even 25% of a local license tax is enough money to motivate a board to reduce top executive salaries. It is also not clear that $2.5 to $3.5 million would appreciably raise income levels in a city the size of Portland—Oregon’s largest city. Were the city to increase the tax to motivate companies to bring down CEO pay and/or make a dent in the incomes of the city’s poor, companies could simply move; they could even stay in Oregon.
To be sure, Portland’s mayor at the time admitted that the surtax is “an imperfect instrument” with which to tackle the momentous problem of increasing income-inequality in the U.S.[5] A better instrument would be at the State or federal level, with the proceeds going to fund a minimum income for all citizens. Lest such a “Robin Hood” approach be too stark, proceeds could be targeted more closely to the worker-CEO ratio by increasing the incomes or disposable incomes of workers.



[1] Gretchen Morgenson, “Portland Adopts Surcharge on C.E.O. Pay in Move vs. Income Inequality,” The New York Times, December 7, 2016.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.

Monday, December 5, 2016

Analysis of Italy’s 2016 Referendum: Beyond the Euro and the E.U.


The predominate axis of analysis in the wake of the Italian referendum in early December, 2016 centered on the euro, the federal currency of the European Union. 

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Young Japanese: An Early Verdict on Climate Change

Is the verdict in, and have we, mankind, lost our own self-inflicted climate battle? Is this what Japanese millennials were saying in 2016 when, according to a government survey, only 75 percent expressed interest in climate change, whereas close to 90 percent of the same age group (18-29) had expressed interest just a few years earlier?[1] Their intuition may have been the proverbial canary in the coal mine.
Midori Aoyagi, a principal researcher at the National Institute for Environmental Studies in Japan, reports that the young people in her focus groups “always felt a kind of hopelessness” toward their daily lives, their jobs, and social issues.[2] She suggests the pessimism might be “a result of having grown up during a prolonged period of economic stagnation known as the lost decades,” but this would not account for the drop from 90% to 75% in just a few years.[3] Interviews with Japanese aged 22 to 26 elicited a similar attitude. “These young people cited the huge scale and timeline of the problem, a feeling of powerlessness, silence from the media and preoccupation with more important issues.”[4] I want to unpack this revealing piece of evidence.
The huge scale and silence of the media, combined with the political power of the extant energy sector, whose financial benefits are grounded in the status quo, suggests that nothing short of sustained effort aimed at transitioning to clean energy could possibly suffice to obviate the worst of climate change in the decades to come. Not sensing such effort, as per the silence of the media, the young people may have intuited that their time would be more usefully spent on other societal problems, which still had a chance of being solved. To be sure, unforeseen technological developments could at least in theory still redeem the species in spite of its self-destructive urge for instant gratification. Yet without a hint of promise from the species' unique tool-making ability, the young people could not but sense a slipping away of the window for solving the climate-change problem. Indeed, because they could live to see the worst of climate change as it unfolds, the sense of hopelessness makes sense. So it is particularly telling for the rest of us that more of them were moving on to tackle other, more solvable societal problems.



[1] Tatiana Schlossberg, “Japan Is Obsessed with Climate Change. Young People Don’t Get It,” The New York Times, December 5, 2016.
[2] Ibid.
[3] Ibid.
[4] Ibid.

Friday, December 2, 2016

Business CEO’s Overstating Political Uncertainty in the United States


The impact on business of political uncertainty in countries that are seized by revolution can be substantial—so much so in fact that CEO’s and board directors are motivated to avoid the uncertainty itself. I submit that business analysts of political risk tend unwittingly to routinely overstate the uncertainty arising from incoming U.S. presidential administrations. If I am correct in this claim, CEO’s and board directors pay too much heed to political uncertainty itself in the making of major strategic decisions involving operations in the American context.
Although American culture welcomes and even encourages leaps in technological development capable of transforming daily life, another sort of change—one more subject to societal control—is tolerated only if made incrementally. Otherwise, the change is dubbed as radical, which is a charge made more out of fear than according to any objective measure. Clutching at the status quo unduly translates politically into the tyranny of the status quo as powers both in business and government that profit as things are hold back all but incremental change that does not threaten the current basis of benefits. The many points of access into the federal legislative and executive machinery enable the stultifying influence a virtual veto over proposals of serious, or “real,” change. Such change tends to be pulled back until only the tolerated incremental change remains.
A few examples reveal the pattern. In 1986, amid large budget deficits caused in part by the tax cuts of the early 80’s, Ronald Reagan pushed for a wholesale change in the federal income tax, ridding it of its myriad of deductions. Yet as the U.S. Senate debated the tax code, individual senators came forward with rationales for all of the major deductions. The “powers that be” were exercising their prerogatives to continue their respective benefits, which Reagan’s vision for change would put at risk. Business practitioners anxiously pointing to the political uncertainty of a revised tax code were in retrospect overreacting, and thus putting too much emphasis on the uncertainty itself.
In 2008, Barak Obama campaigned under the slogan of “real change.” After his election, political risk analysts were doubtlessly impressed with the sheer uncertainty latent in the very notion of real change. Yet when Congress was considering the Affordable Care Act, Obama dropped his proposal for a public option, which would be useful should private insurers leave the planned exchanges. The president gave into pressure from the insurance industry lobby, the members of which stood to lose benefits should Obama’s healthcare plan instantiate real change even just in terms of there being a public health-insurance option. The resulting law was incremental because the private health-insurance companies were still to be relied on. The anticipated uncertainty regarding the American health insurance system turned out to be much less. The analyses of CEO’s making strategic decisions based in part on avoiding the American context due to the uncertainty would have been distorted, and thus not optimal.
In 2016, when Donald Trump was elected president, the uncertainty in terms of political risk must have been palpable in corporate boardrooms. Trump’s proposal of a substantial tax, or tariff, on American companies that take advantage of lower labor-cost countries and import the resulting products back into the large U.S. domestic market undoubtedly stocked the uncertainty without much thinking-through of how political compromise could take its toll on the proposal as it moves through Congress. Similarly, fears of trade wars resulting from the proposed tariff may have been overblown. That American companies would be subject to the penalty means that foreign companies manufacturing outside of the U.S. and importing into the large domestic market would have a competitive advantage. Pressure from Chinese companies could mitigate the likelihood of a Chinese-stoked trade war even though the pulling out of American companies (i.e., the loss of some manufacturing plants) would have a detrimental impact on the Chinese economy. Of course, such a scenario assumes that the actual tariff is enough to motivate American CEO’s to return their manufacturing to America; the political compromise that may be needed to pass such a tariff might reduce it to an insufficient level and thus effectively discredit the very idea of using public policy to alter the financial calculus of American companies such that they have a financial incentive to return voluntarily in line with maximizing profit.
The American preference for incremental over systemic change puts any genuinely new political proposal at risk of being shrunk to fit through the contours of the status quo, which is so dear to the vested interests. The uncertainty typically thought to exist in the advent of a new presidential administration tends to be overblown in retrospect. The American economy suffers from this bloated condition to the extent that CEO’s and corporate board directors move operations away from the geographically delimited hyper-uncertainty.

Modern Day Mercantilism: Donald Trump Intervenes at Carrier


The tension between the free-market philosophy and mercantilism (e.g., an industrial policy) has been longstanding. I contend that the philosophy of international business (or international economics) is flawed terms of how far comparative advantage is applied, even at the expense of full employment at the city or country level. The case of Carrier in Indiana points to the legitimacy of government intervention even at the expense of comparative advantage.
A mix of ominous threats from Donald Trump as U.S. President-Elect, and enticing financial incentives worth $7 million from Indiana kept roughly 1000 out of 2000 jobs at Carrier, a unit of United Technologies, from being transferred to Mexico. The company had expected to save $65 million by relocating not only the fan coil manufacturing lines, which would still go, but also the lines that build medium- and high-efficiency gas furnaces, which would now stay in Indiana.[1] Carrier’s management must have factored in the likelihood of the upcoming Trump Administration and Republican Congress imposing steep tariffs on imports entering the United States from American companies that have moved production to other countries in order to take advantage of lower wages and comparatively lax regulations. In fact, Trump’s intervention with Carrier undoubtedly had the benefit of reminding other such company managements of the possible additional cost to manufacturing abroad and yet still having access to the huge American domestic market via importing (a tariff would make specific-company interventions unnecessary). So, the single-minded maximizing-profit calculus notwithstanding, we can understand why Carrier’s management agreed to take a bit—albeit just a bit—of a financial hit. “Every penny counts, but if we step back and I’m looking at earnings of $6.60 per share this year, 2 cents is an easy concession if the president-elect listens to some of the company’s bigger concerns,” noted Howard Rubel, a senior equity analyst at Jefferies.[2] The 2 cent per share reduction could in fact be offset (and more) by the possible redressing of such “bigger concerns,” especially if the company and its workers make politically strategic campaign contributions.
Unfortunately, pressures on company managements to focus on quarterly stock prices mean that assuming even a long-term profit-metric can be difficult. The allure of producing abroad and importing products back into the U.S. would likely continue; hence the rationale for a tariff. Lest it be feared that trade wars might be triggered, the companies subject to the tariff would be American rather than Chinese or European. Regarding the free-market alternative, the comparative-advantage philosophy of international business omits the practical need for manufacturing and low-skilled jobs in virtually any geographical area. Not everyone in a given population can be retrained to work in computer-tech industries, or educated to become CPAs, physicians, and lawyers. To say the U.S. (or E.U.) is a knowledge economy leaves a lot of people out—people who could be expected to be dependent on government benefits to live. Therefore, a mercantile government policy oriented to retaining a manufacturing sector makes sense for any government. The free-market logic applied to international economics is flawed because a sizable proportion of a country’s workforce cannot (or will not) be part of a “knowledge economy,” for instance. It also follows that not everyone is going to participate in a “manufacturing economy.” Geographically, economic diversity reflects the diverse makeup of the labor force. Put academically, the logic of international economics has its limits, or drawbacks, and so international political economy is a better, more realistic, approach.



[1] Nelson Schwartz, “Trump Sealed Carrier Deal with Mix of Threat and Incentives,” The New York Times, December 1, 2016.
[2] Ibid.

Wednesday, November 30, 2016

Springtime for China's Coal Industry: Is China Too Big to Swerve Enough to Avoid the Climatic Iceberg Ahead?


Even as Chinese government officials “called on the United States to recognize established science and to work with other countries to reduce dependence on dirty fuels like coal and oil,” China was “scrambling to mine and burn more coal.”[1] Notably, short-terms concerns were dominant. “A lack of stockpiles and worries about electricity blackouts” were “spurring Chinese officials to reverse curbs that [had] once helped reduce coal production.”[2] By December, 2016, coal mines were reopening, and with them coal miners were returning to work. The renewed activity would of course make it more difficult for China and the world to meet CO2 emissions targets, “as Chinese coal is the world’s largest single source of carbon emissions from human activities.”[3] In fact, China’s use of coal results in more emissions “than all the oil, coal, and gas consumed in the United States.”[4] The implications for being able to contain the global rise in temperature within 2 degrees C are not bright from this real-life scenario. It is important, therefore, to grasp the underlying dynamics behind China’s plight.
Even as 2014 had brought “the autumn of coal,” and 2015 and early 2016 instantiated the winter, the new spring later in 2016 came during what would be the hottest year for the planet since record-keeping began. The cyclical pattern evinced here does not fit with the maximizing nature of global warming.
The Chinese government was not adjusting fast enough, given the climatic toll even by the closing months of 2016. The sheer scale involved is likely the main culprit—China’s population being over a billion. Despite ambitious hydroelectric-dam projects and “the world’s largest program to install solar panels and build wind turbines,” coal still produced almost three-quarters of the country’s electricity.[5] Even with conservation measures on the use of electricity—which, by the way, are practically non-existent in sunbelt republics like Florida and Arizona—a billion people must necessarily consume a lot of energy cumulatively. Even with the one-child policy, the sheer size of China’s population was something the government could not ignore.
The dynamic I have in mind is that of the Titanic, the largest ship of its day (1912) and yet with a rudder that was too small, given the size of the ship, to turn it sufficiently in time to avoid the upcoming iceberg. By analogy, a climatic “iceberg” was approaching Earth so fast and was so close even by the end of 2016 that the governments of large, empire-scale, countries like China and India would need larger rudders in order to steer close enough to alternative energy sources to have even a chance of avoiding a collision with full-blown climate change. The culprit, in other words, lies not only in the proclivity of human nature to privilege instant gratification backed up by short-term politics and thinking; our ships of state are outmoded, given how large we’ve allowed our species to become. The problem is thus not in China’s rough transition from central-planning to a government-regulated free market.



[1] Keith Bradsher, “Despite Climate Vow, China Scrambles for Coal,” The New York Times, November 30, 2016.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.

Tuesday, November 22, 2016

The Courts Go After Gerrymandering: Deconstructing a Conflict-of-Interest


In the U.S., the boundaries of both federal (e.g., U.S. House of Representatives) and state legislative districts are redrawn every ten years after the census to “ensure that each district contains roughly the same number of people.”[1] Both major political parties in state legislatures “often remap districts to favor themselves, either by cramming opposition voters into a single district or by dividing them so they are the majority in fewer districts.”[2] I contend that a simple majority vote is problematic, given the irresistible temptation to redraw the districts for partisan advantage rather than merely to take account of changes in population.
By a 2-to-1 ruling, the U.S. District Court for the Western District of Wisconsin found in November, 2016 that the Wisconsin Assembly’s redrawing the legislative chamber’s districts was an unconstitutional partisan gerrymander favoring the Republican Party. U.S. courts had struck down gerrymandering on racial grounds, but never on “grounds that they unfairly give advantage to a political party.”[3] For the first time, a court offered a clear mathematical formula for measuring partisanship in a district. The Court found that the legislature’s redrawing of its districts violated both the First Amendment and the Equal Protection Clause of the 14th Amendment because the remapping “aimed to deprive Democratic voters of their right to be represented.”[4] The motive here is problematic, for it puts partisan advantage above the duty to act for the public good by fairly adjusting for changes in population.
In other words, the ability of the party that controls a legislature to use the census-adjustment responsibility for private (i.e., party) ends puts the party in a conflict of interest. The party being in the majority of a state legislative chamber is sorely tempted to put partisan goals above the democratic aim of achieving fair districts. Democracy itself suffers so a majority can remain in the majority.
One solution to this conflict of interest is to require a 2/3rd majority (or majorities in both parties) to approve changes in the districts. The latter pertain to the entire legislative chamber, as part of its basis in representative democracy, so it is only fair that at least some of the minority party approves.
My main point here is that going by simple majority enables, or sets up, the conflict of interest. Given the overwhelming force of the partisan temptation, the conflict should be deconstructed. In fact, all institutional conflicts of interest that can reasonably be taken apart should be, due to how ongoing temptation plays out in human psychology/nature.



1. Michael Wines, “Judges Find Wisconsin Redistricting Unfairly Favored Republicans,” The New York Times, November 21, 2016.
2. Ibid.
3.  Ibid.
4. Ibid.

Tuesday, November 15, 2016

The Trump Organization and a President Trump: Minimizing the Exploitation of Conflicts of Interest

In a matter of days after his being elected as President of the United States, Donald Trump decided to put his business empire in the hands of his adult children. Roughly a month later, in recognition of the intractable conflicts-of-interest problem even were his three eldest children to run his roughly 500 companies, he announced that he would sever his ties with his empire; after all, he would have his hands full as the federal president of another sort of empire: The United States of America. Even so, he did not mean to divest, suggesting that conflicts of interest involving his brand could be salient through his tenure as U.S. President. It is important to remember that nothing in federal law prohibits the President from continuing to run his own business; the conflict-of-interest rules that apply to other federal officials do not apply to the office of the president. Even so, enormous external pressure was being brought to bear on the president-elect to divest completely from his businesses.

The Trump Organization’s vice president of marketing pointed to the “transfer of management of the Trump Organization and its portfolio of businesses” to the children.[1] As laudable as it is for a father to have such pride in his offspring, the conflicts of interest cannot be ignored. “The inclusion of the kids on the transition team makes it clear that there is no real separation between their politics and their family,” said Lisa Gilbert of Public Citizen.[2] With Trump’s children running the Trump Organization, it could hardly be pretended that it’s assets would be in a blind trust.

Turning operations over to Donald Jr. and Eric would not qualify as a blind trust because the U.S. President would have knowledge of the company’s major assets and be in contact with the people running the business. “To say that his children running his businesses is the equivalent of a blind trust—there is simply no credibility in that claim,” said Matthew Sanderson, a Washington (Republican) lawyer.[3] “It’s not a blind trust when you know what’s in it,” Richard Painter, who oversaw White House ethics policies under President George W. Bush.[4] Accordingly, the Office of Government and Ethics informed Trump’s lawyers that only a divestiture would result ethical concerns.[5] Trump could object that selling his brand could risk its impairment. As the Trump brand is his name, he could be expected to continue to have a vested interest in how well the business does. At the very least, he would not want to see it fail.

While a president’s business should not have to take a major hit, the notion that assuming public office is a duty should be sufficient to justify costs—even in terms of opportunities lost (i.e., opportunity cost)—arising as a result of the business being put in a blind trust. Yet in the case of a business empire of real estate, whose properties would of course be known to the future president, expunging, or deconstructing, the conflicts of interest would be impracticable. So the task, I submit, is to do what can realistically be done while still recognizing that conflicts of interest are inherently unethical because human nature, being what it is, cannot be expected to stand up to the temptation, even if a latent one.

In Donald Trump’s case, at least four possible conflicts of interest stood out in the wake of the election. Firstly, the Trump International Hotel was already operating out of the Old Post Office Building, which is owned by the U.S. Government, when he was elected president. The institutional conflict of interest lies in Donald Trump as U.S. President appointing the head of the General Services Administration, the agency that manages the building, while Trump’s children run the hotel (even as they were advisors in their father’s transition team). A personal conflict of interest lies in his enrichment from officials including of foreign governments staying in the hotel when visiting Washington even if just to make a good impression on the president. Even while Trump was the president-elect, foreign diplomats were booking stays so they could comment on what a nice luxury hotel the president has.

Secondly, the U.S. President oversees the National Labor Relations Board, which, a week before the 2016 election, ruled against Trump’s hotel in Las Vegas. Being a major employer while being the U.S. President, Trump would naturally feel tempted to exploit the latter role in favor of the former. The same sort of conflict of interest would apply to the IRS and the EPA—two other federal agencies highly relevant to business.

Thirdly, roughly half of Trump’s 30 properties in the U.S. had debt as of the time of the election. As President of the United States, Donald Trump could put in his own Chair of the Federal Reserve in 2018. He would have a personal financial interest in keeping interest rates low. Additionally, he would be tempted to use is role as president to put pressure on his banks should any of his properties (again) be in financial trouble.

Fourthly, the need to adequately protect Trump’s New York home in Trump Tower set up the conflict of interest whereby Trump would profit by renting several floors to the U.S. Secret Service. The operative question is whether a president should profit monetarily from his own protection.

Trump’s own modus operendi of using publicity to sell his brand should also be considered. Selling his brand had been so very salient in his business persona (and even in his role on The Apprentice) and the pattern continued with VP-elect Mike Pence giving a prominent speech at Trump’s hotel near the White House that Trump could hardly be expected to stop advancing the financial-political synergies after taking the oath of office. That he explicitly extolled his brand of steak during an acceptance speech after winning a primary (or caucus)—even furnishing some of the steaks on display—suggests that he would at the very least make references to his brands on the “bully pulpit” of the presidency. What he might do behind the scenes in the White House to further his business empire is anyone’s guess.

Yet disentangling Trump from his business empire may be unrealistic, given the man, his brand, and the nature of a large and prominent business. “It is unprecedented in modern history to have the level of complexity of global substantial business relationships that the president-elect has, and the litigation that inevitably follows any complex business venture,” said Norman Eisen, a former special counsel for ethics and government reform.[6] The presidency has so much power that the possible points of contact are too numerous to deconstruct on a case by case basis. “Since he has the power to affect all policies in this country, there are bound to be almost daily potential conflicts of interests between his business holdings and his decisions as president,” said Fred Wertheimer of Democracy 21.[7]

Jimmy Carter put his peanut farm in a blind trust. Ronald Reagan and both Bush presidents used blind trusts as well. Trump’s case is not so simple. “The layers of potential conflicts [of interest] he faces are in many ways as complex as his far-flung business empire.”[8] At the time of the 2016 election, that empire included more than a dozen hotels and golf courses, commercial real-estate including Trump Tower, and marketing deals.[9] Even were Trump to place the Trump Organization in a blind trust (i.e., not run by his children), he would undoubtedly know the major assets—many of which literally have “Trump” emblazoned on them far above street level. So even divestiture—selling the business to outsiders—would not obviate possible conflicts of interest.

Pressuring Trump to liquidate the business he founded may be asking too much of the man, especially if public service is considered a duty. Should he be pressured to take such a hit to his family business simply because he decided to step up to the plate for the good of his country? I’m by no means suggesting that this was his only motivation, but it should be asked whether it is in the national interest to put large stumbling blocks in front of accomplished, successful people who would otherwise undergo public service.  Fourteen-months of campaigning could be enough of a repellant for would-be presidents of excellent caliber; having to sell or liquidate “your baby” could be asking too much.

In short, ridding the future president of any possibility of conflicts of interest concerning his business-role and his role as U.S. President could be so detrimental to Trump’s private affairs that doing so would be asking too much of his public duty. Moreover, the message sent out to future well-qualified candidates for the office would be that being president would cost them dearly.

I am not suggesting that we should throw our hands in the air and not attempt to curb Trump’s opportunity to get even richer from being president. Rudy Giuliani, former mayor of New York City and one of Donald Trump’s advisors during the campaign, advocated trusting the future president. “You have to have some confidence in the integrity of the president. . . . The man is an enormously wealthy man. I don’t think there’s any real fear or suspicion that he’s seeking to enrich himself by being president. If he wanted to enrich himself, he wouldn’t have run for president.”[10] Yet he sold his steak-brand during his speech after a primary.

Moreover, given the level of temptation that is in a conflict-of-interest situation, I submit that trusting Trump is not a wise option. Furthermore, although he undoubtedly believed after the election that having his children run his business-empire would ensure its survival—not to mention profitability—the business would hardly suffer from the hiring of a seasoned CEO along with an independent monitor. Such an arrangement would be fitting, given the extraordinary nature of the situation of a president being the founder and head of a business empire. However, such an arrangement would fall well short of staving off potential conflicts of interest.

Given how oriented Donald Trump has been to selling his brand, he should at the very least divest financially from his businesses and licensing agreements. Owing to the nature of a family business, he could transfer his ownership interest to his children, who would hold off from running the Trump Organization until their father has left the presidency. The management during Trump’s term of office would essentially be in a blind trust even though the business itself would not be. It asks too much of the man to sell off his family business to be owned and run by outsiders, for his family might not get the business back after Trump leaves office. The use of the Trump International Hotel in Washington even when Trump was president-elect suggests that even this arrangement would not forestall conflicts of interest, but at least the public would have some deserved solace in knowing that some distance has been placed between the president and his business empire while he is in office.





1.  Fredreka Schouten, “Watchdogs Warn Trump on “Blind Trust,” USA Today, November 16, 2016.


2.  Fredreka Schouten, “Watchdogs Warn Trump on “Blind Trust,” USA Today, November 16, 2016.


3.  Eric Lipton and Susanne Craig, “Trump’s Far-Flung Holdings Raise High Risk for Conflicts,” The New York Times, November 15, 2016.


4.  Fredreka Schouten, “Watchdogs Warn Trump on “Blind Trust,” USA Today, November 16, 2016.


5. Maggie Haberman and Jo Becker, “Donald Trump Is Said to Intend to Keep a Stake in His Business,” The New York Times, December 7, 2016.


6.  Steve Eder, “How Federal Ethics Laws Will Apply to a Trump Presidency,” The New York Times, November 11, 2016.


7. Fredreka Schouten, “Watchdogs Warn Trump on “Blind Trust,” USA Today, November 16, 2016.


8. Lipton and Craig, “Trump’s Far-Flung Holdings Raise High Risk for Conflicts,” The New York Times, November 15, 2016.


9. Ibid.


10. Ibid.


Friday, November 11, 2016

Getting an Election So Wrong: The American Media and Pollsters in 2016

“After projecting a relatively easy victory for Hillary Clinton with all the certainty of a calculus solution, news outlets like The New York Times, The Huffington Post and the major networks scrambled to provide candid answers.”[1] The dynamics likely went beyond even candid answers from the media, with major implications for how much reliance Americans should place on their media-establishment for political information.

“You were in a bubble and weren’t paying attention to your fellow Americans,” filmmaker Michael Moore wrote.[2] To be sure, “all the number-crunching of state polls pointed to resounding success” for Hillary Clinton in the Electoral College.[3] The journalists could simply insist that they were reporting those polls. “Virtually all the major vote forecasters, including Nate Silver’s FiveThirtyEight site, The New York Times Upshot and the Princeton Election Consortium, put [Hillary] Clinton’s chances of winning in the 70 to 99 percent range.”[4] Even so, Chris Wallace, an anchor at Fox News, make the following observation on election day. “A lot of media outlets made a decision sometime after the convention that Donald Trump was beyond the pale and they no longer had to observe the normal rules of journalism and objectivity.”[5] Clearly this was true of The Huffington Post, which declared Hillary Clinton “cleared” by the FBI on the Sunday before election day in spite of the fact that the agency was still investigating the Clinton Foundation, whose fundraising may have involved quid pro quos involving Hillary Clinton’s role as U.S. Secretary of State.

At the very least, groupthink was in the mix, meaning that the mainstream media was “on the same page” concerning assumptions regarding the upcoming election. Besides their being just plain wrong, their narrowness was such that society itself could hardly break free of the force of the narrative. Moreover, the narrowness suggests that the power of the American media was at the time too concentrated, such that alternative views, which can provide a check on groupthink, could not get through. In a representative democracy, a narrow conduit by which information is not only conveyed, but also interpreted and subject to ideology, represents a major flaw. Put another way, that the mainstream media outlets were all singing the same song suggests that societal debate on matters of public policy was also very likely too narrow, and subject to everybody being wrong in a major assumption.

Yet Wallace’s assumption that merely reporting the polls would be objective is vulnerable. Polls can only contribute so much. The “failed election predictions suggest that the rush to exploit data may have outstripped the ability to recognize its limits.”[6] Such limitations include “the potentially flawed assumptions of the people who build predictive models.”[7] Additionally, polling can offer only probabilities that cannot fully capture whether the motivation to vote will actualize at the proverbial ballot-box. For one thing, social desirability may spur poll respondents to say they will vote only because it is a societally recognized duty. Lastly, polls prior to an election cannot account for voters who change their decision at the time of voting.

So even the media’s common assumption that polls can and should receive such overwhelming emphasis was faulty, and the groupthink on this point left the electorate vulnerable to going to vote with a flawed understanding of how Americans had been reacting to the candidates. Just as political campaigns are not objective, journalists (and especially those who serve as commentators) are not merely conduits for facts. Given the subjectivity all around, a certain wideness of narrative (and assumptions) made more likely by a less concentrated mainstream media would enhance the American democracy.




[1] Jim Rutenberg, “News Outlets Wonder Where the Predictions Went Wrong,” The New York Times, November 9, 2016.
[2] Ibid.
[3] Ibid.
[4] Steve Lohr and Natasha Singer, “How Data Failed Us in Calling an Election,” The New York Times, November 10, 2016.
[5] Jim Rutenberg, “News Outlets Wonder Where the Predictions Went Wrong,” The New York Times, November 9, 2016.
[6] Steve Lohr and Natasha Singer, “How Data Failed Us in Calling an Election,” The New York Times, November 10, 2016.
[7] Ibid.