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By A. Trevor Thrall

A. Trevor Thrall

Republicans should dominate the 2016 presidential foreign policy debate, but only if they can avoid shooting themselves in the foot. Winning this debate could be crucial given the recent Huff Post/YouGov poll that found more Americans think the 2016 presidential election will focus on foreign policy issues than domestic issues. Historically speaking this is unlikely; elections almost always turn on the economy and domestic issues. But if the polls prove prophetic, it gives the GOP the advantage. Maybe.

Why Republicans Should Win the Foreign Policy Debate

Though it’s too early to know which Republican will win the party’s nomination, the general arguments don’t change much for any of the current frontrunners.

First, Republicans will benefit from the fact that Obama’s foreign policy approval ratings have not broken 50% during his second term; they sat at 37% a January 2015 NBC News/Wall Street Journal poll. Since 2012, after seven years of favoring Democrats in the wake of the Iraq War, Americans again have more trust in Republicans to handle foreign policy. In short, Obama’s incumbency will be a liability for any Democratic nominee no matter how much he or she tries to separate from the administration.

“Republicans have a cornucopia of legitimate criticisms to fuel the attack.”

Moreover, Republicans have a cornucopia of legitimate criticisms to fuel the attack. The public, though not in agreement about what should happen, clearly believes that Obama should have been doing more to manage the turmoil in Iraq, Syria, Ukraine„ Iran, Nigeria…the list goes on. With so much to be unhappy about, Republican contenders should have little trouble making the general case that it is time for a change.

As a bonus, the Huff Post/YouGov poll also found that Obama’s handling of foreign policy is tied with immigration for what upsets Republicans most about his presidency. Coupled with the Republican Congress’ ability to keep Clinton’s email and Benghazi role in the voters’ minds, this means foreign policy should be useful for motivating the Republican base in 2016 and generating donations even if it doesn’t woo any swing votes.

Why It Might Not Be So Easy…

Hillary Clinton, almost certain to be the Democratic nominee, is no Barack Obama when it comes to foreign policy. When she left her post as Secretary of State, Clintonenjoyed a 69% approval rating for her performance; just 25% disapproved. Republican frothing about Benghazi and private emails aside, most …read more

Source: OP-EDS

By Alan Reynolds

Alan Reynolds

The European Central Bank has ballooned its “quantitative easing” bond-buying spree to about 60 billion euros a month, as announced in late January. Judged by a key rationale for QE — namely, to raise inflation to 2% — world markets have already given the plan a resounding vote of “no confidence.”

On the first day of QE, 10-year debt was about 0.33% in Germany and below 1.3% even on dodgy Italian and Spanish bonds. The 5-year German yield was below zero. Global investors would surely not settle for such meager yields if they expected 2% inflation.

It is true that eurobonds offered the prospect of capital gains while yields fell (aside from foreign exchange losses for American investors). With the least risky euro yields approaching zero, however, the ECB is risking big capital losses if it ever succeeded in raising inflation, real growth or both. In that sense, the ECB is betting heavily on its own failure.

With long-term rates so low, the euro yield curve has also become dangerously flat. Banks make money by borrowing short and lending long, so the flattened yield curve discourages lending and thus threatens small companies that depend on bank loans.

A Raw Deal

Many point to the falling euro as proof that the ECB policies are a “stimulus.” Since last May, the euro has fallen by nearly one-fourth against the dollar — to a 12-year low. But that has had unintended consequences.

In fact, the one unmistakable impact of the lower euro has been to raise the cost of production for European industry and the cost of living for European consumers — largely because key commodities are priced in dollars.

By March, the Economist index of commodity prices was down 18.4% in dollars but up 5.7% in euros. Europeans have seen only a fraction of the benefit of falling oil prices, because oil is priced in dollars but paid for with shrinking euros. Costs of raw materials have gone up for European manufacturers and consumers, but down for their U.S. counterparts.

“What Europe desperately needs is to slash the marginal cost of government.”

Proponents of a weaker euro tell us a lower exchange rate will (1) raise inflation, yet (2) make exports cheaper to those paying in dollars. The goal is somehow to raise prices at home while lowering them abroad.

Pricey Inputs = Cheap Exports?

How are higher costs of energy, metals, fabrics and agricultural raw …read more

Source: OP-EDS

By Daniel J. Ikenson

Daniel J. Ikenson

For those hoping the Republican congress will allow the charter of the Export-Import Bank to expire on June 30, two recent House reauthorization bills and an imminent bipartisan Senate bill to accomplish the same are not particularly reassuring.

What’s not to like about the Export-Import Bank? The U.S. government’s official export credit agency finances sales of American companies to foreign customers, increasing exports, stimulating output, and creating jobs. Only the most cynical, anti-government zealots could have a problem with this vital engine of economic growth and global engagement. Well…not so fast.

Ex-Im supporters — mostly corporate beneficiaries and politicians — work hard to sculpt the Bank’s image as an institution of costless necessity. But closer examinations have revealed corruption, corporate welfare, and hidden taxation on thousands of U.S. businesses. Victims abound across the country.

“For all the praise Ex-Im heaps upon itself for its role as a costless pillar of the economy, it is difficult to make sense of the collateral damage left in its wake.”

Despite the Bank’s claims that it primarily serves small and medium enterprises and that it provides financing for transactions that the private sector won’t service, in 2013 about 75 percent of Ex-Im largesse was dispensed to the benefit of ten large, creditworthy companies, including Boeing, General Electric, Bechtel, Dow Chemical, and Caterpillar. But another large company, Delta Airlines, raised objections last year over Ex-Im’s financing of Boeing aircraft sales to foreign carriers, such as Air India. Delta’s complaint was that the U.S. government, as a matter of policy, was subsidizing Delta’s foreign competition by reducing Air India’s cost of acquiring airplanes. Those lower capital costs enabled Air India to offer lower prices than it otherwise could, which had an obvious, adverse impact on Delta’s bottom line. In essence, Ex-Im forces taxpayers to underwrite the success of some U.S. companies at the expense of others.

This same dynamic has been playing out across the U.S. manufacturing sector, where American companies are put at similar disadvantages because their suppliers are getting Ex-Im to subsidize sales to their foreign competitors. In other words, Ex-Im’s transactions benefit two parties: the U.S. exporter and the foreign customer. And, accordingly, those transactions tax two sets of parties: the U.S. competitors of the lucky U.S. exporter (the intra-industry cost) and the U.S. competitors of the lucky foreign customer (the downstream industry cost). So, for Ex-Im subsidies that allegedly …read more

Source: OP-EDS