Former British prime minister David Cameron probably did not recognize the can of worms he opened when he agreed to hold a referendum on U.K. membership in the European Union. Under pressure from Eurosceptic backbenchers and the threat of losing votes to the U.K. Independence Party (UKIP) during he 2015 general election, Cameron made the promise, fully convinced that British voters would elect to remain in the E.U.. To most everyone's surprise, when the referendum was held June 23, 2016, more that 30 million citizens voted by a 51.9% to 48.1% margin to support Britain's exit (Brexit) from the Union. Consequently, Cameron resigned, and was replaced by current PM Theresa May, who accepted what she considered to be the will of the people, and formally notified the European Council of Britain's intention. By doing so she invoked Article 50 of the Treaty on European Union, beginning the process of withdrawing the country from the E.U., and starting the clock on a two year negotiating period, slated to end March 29 of this year.
In addition to concerns over threatened British sovereignty, the emotional case for Brexit was always heavily influenced by immigration. In 2015 the U.K. absorbed 333,000 new people, many from Southern and Eastern Europe, argued to have depressed the wages of native-born British workers, and using scarce public services. (Although, according to 2017 estimates, 1.3 million people born in the U.K. live in other E.U. countries.) The intellectual case against leaving the E.U. focused on economics. More than 50% of exports go to E.U. countries. No tariffs are assessed on imports and exports between member states. Within the Union, Britain benefits from trade deals between the E.U. and other world powers. It was also feared that its status as one of the world's biggest financial centers would be diminished if it was no longer seen as a gateway to the E.U., especially if large companies were to decide to move their headquarters back onto the continent. "Remain" proponents estimated that about three million jobs related to trade with the E.U. would disappear if the country left he block.
Ms. May was tasked with the tedious process of negotiating an acceptable Brexit agreement, an agreement Parliament could endorse. The E.U. has a major say in how Britain is released from complex legal and economic bonds formed over more than forty years. Any agreement needs to be endorsed by all remaining 27 member states. One of these, the Republic of Ireland, shares a 310 mile border with Northern Ireland, which is part of the U.K.. As long as E.U. rules apply, billions of dollars worth of trade move unencumbered across this border. Under Brexit, border controls, involving tariffs and customs checks, would likely be reestablished, impeding the free flow of goods.
The agreement the prime minister negotiated was billed as the "best and last" offer the Europeans were willing to put on the table. British lawmakers considered it on December 11 of last year, and voted it down by a 432-202 margin. It included a backstop plan for Ireland, which provided a safety net to insure no hard border would reappear on the island. However, this "backstop" involved a temporary single customs territory, which would effectively keep all of the U.K. indefinitely in the E.U. customs union, forced to comply with E.U. rules and regulations. Brexiteers dislike the backstop for that specific reason. E.U. proponents hate it because it leaves Britain outside the E.U., but subject to its rules without a voice or a vote.
Thus far the prime minister has not been able to come up with an acceptable alternative. Options are few. If nothing else happens, the U.K. will leave the E.U. on Friday, March 29, without a deal. Hardcore Brexiteers alarmingly maintain that this "solution" is not only feasible, but perhaps desirable as a way for Britain to dramatically reaffirm its sovereignty. This group has voted against any attempt to take the option off the table. Theresa May could attempt to renegotiate the agreement, which may involve setting an end date to the backstop plan, most likely risking a veto from Irish premier Leo Varadkar, who opposes a hard border under any circumstances. Ms. May could also ask for an extension. European leaders might approve such a request until July1. The first session of the new European Parliament will be held in July. Britain would need to elect MEPs if it continued its membership for a prolonged period of time. To keep the pressure on her government, Theresa May appears to want to wait requesting an extension. A new referendum is opposed by many as being undemocratic and representing a betrayal of British popular will. And, finally, the U.K. could cancel the Article 50 Brexit process, which does not require permission of the other 27 E.U. members, and remain a member on its existing terms, provided the decision followed a "democratic process," requiring a vote in Parliament.
Brexit is important to the U.S., because, without a good outcome, one of our major trading partners could slip into significant economic instability. In 2016, our trade in goods and services with the E.U. totaled nearly $1.1 trillion. Britain's diminished influence would also be less able to support American interest on the international stage. Our hoped for trade deal with he E.U. may be less acceptable if Britain is left out to fend for its own. Besides, a volatile British economy risks the election of Labour Party leader Jeremy Corbyn as prime minister, someone who openly prefers centrally planned economies over free markets.
The process appears to be stuck. Few options are palatable to all stakeholders. Nobody is promoting a plan on how to move forward. Unless resolved satisfactorily, all sides are looking forward to protracted economic instability. To quote Donald Tusk, president of the European Council: "I've been wondering what that special place in hell looks like for those who promoted Brexit without even a sketch of a plan how to carry it out safely."
Wednesday, February 27, 2019
ARE BILLIONS OF DOLLARS WORTH TALKING ABOUT?
In 2017, 39.7 million Americans lived below the federally established poverty level of an annual income of $24,600 for a family or four. Of these, 19 million live in deep poverty, meaning that their total family income is less than one-half of the poverty threshold. These people don't have enough resources to secure basic life necessities. For most of them the inane discussion about the economics behind Donald Trump's $5.7 billion demand for support of his border wall, which forced 800,000 government employees to survive without a paycheck during the recent government shutdown, must have come across as incomprehensible and moronically insensitive.
Commerce Secretary Wilbur Ross, a wannabe billionaire (a contested $200 million shy of that goal), responding to reports that some government workers were relying on charity, homeless shelters and food banks, said: "I know they are, and I don't understand why." He suggested that those affected should be able to take out a loan, entirely missing the point when he rambled on: "We've had shutdowns, albeit for not such a long period as we've been thus far, but put it in the perspective: You're talking about 800,000 workers, if they never got their pay - which is not the case, they will eventually get it - but if they never got it, you're talking about a third of a percent on our GDP." (Quoted in "Real Clear Politics," Jan. 24, 2019.) Not to be outdone, Donald Trump, referencing an unsubstantiated annual price tag for illegal immigration of $250 billion, chimed in: "The $5 billion dollars ... is such a small amount compared to the level of the problem. It is insignificant compared to what we are talking about."
For the many wage earners who transitioned from viewing our national pastime of political infighting from the sidelines to confronting significant bread and butter issues for themselves and their families, this incredulously insensitive interchange between our national leaders must have come off as incomprehensible. Discounting the dollar value of the disputed wall, and reducing it to an "insignificant" percentage of GDP, should have disturbed everyone impacted by the shutdown. A billion dollars is $1,000 million dollars. If you have one billion, and spend $1,000 per day, you would be spending 2,740 years before going broke. You would need to pend $40 million per year - more than $3 million per month - to spend it all in 25 years. Considering that President Trump is demanding $5.7 billion as a down payment for a wall which ultimately is estimated to cost close to $25 billion, these number become difficult to make sense of for most of us.
Another way to understand the magnitude of the $5.7 billion price tag is to correlate it with more digestible expenditures. For instance, it equates to $17 per U.S. citizen, $40. per U.S. tax payer, about $18,750. for each one of the 304,000 apprehended undocumented immigrants during fiscal 2017, or $57,555. for each person requesting asylum in 2018. (The Wall Street Journal, Jan. 26, 2019). The eventual total estimated expenditure for this wall would virtually cover the cost of two of the navy's newest and most expensive "Gerald R. Ford-class" aircraft carriers, at $12.9 billion a piece.
Journalist and political commentator Nicholas Kristoff calculated that for $5.7 billion we could: "Send 100,000 at risk kids to a high quality pre-school for a year, AND provide Pell grants for 100,000 students to attend college for a full four years, PLUS provide comprehensive treatment to 115,000 Americans struggling with opioid addiction." (N.Y. Times, Jan. 15, 2019).
Our leaders may downplay the amount requested to erect this controversial monument to our president, reducing it to 0.03% of GDP, or, alternatively, discounting it to "only" 0.13% of our projected 2019 federal budget of $4.5 trillion, this is still a huge amount of money. We could probably use it more productively elsewhere.
Commerce Secretary Wilbur Ross, a wannabe billionaire (a contested $200 million shy of that goal), responding to reports that some government workers were relying on charity, homeless shelters and food banks, said: "I know they are, and I don't understand why." He suggested that those affected should be able to take out a loan, entirely missing the point when he rambled on: "We've had shutdowns, albeit for not such a long period as we've been thus far, but put it in the perspective: You're talking about 800,000 workers, if they never got their pay - which is not the case, they will eventually get it - but if they never got it, you're talking about a third of a percent on our GDP." (Quoted in "Real Clear Politics," Jan. 24, 2019.) Not to be outdone, Donald Trump, referencing an unsubstantiated annual price tag for illegal immigration of $250 billion, chimed in: "The $5 billion dollars ... is such a small amount compared to the level of the problem. It is insignificant compared to what we are talking about."
For the many wage earners who transitioned from viewing our national pastime of political infighting from the sidelines to confronting significant bread and butter issues for themselves and their families, this incredulously insensitive interchange between our national leaders must have come off as incomprehensible. Discounting the dollar value of the disputed wall, and reducing it to an "insignificant" percentage of GDP, should have disturbed everyone impacted by the shutdown. A billion dollars is $1,000 million dollars. If you have one billion, and spend $1,000 per day, you would be spending 2,740 years before going broke. You would need to pend $40 million per year - more than $3 million per month - to spend it all in 25 years. Considering that President Trump is demanding $5.7 billion as a down payment for a wall which ultimately is estimated to cost close to $25 billion, these number become difficult to make sense of for most of us.
Another way to understand the magnitude of the $5.7 billion price tag is to correlate it with more digestible expenditures. For instance, it equates to $17 per U.S. citizen, $40. per U.S. tax payer, about $18,750. for each one of the 304,000 apprehended undocumented immigrants during fiscal 2017, or $57,555. for each person requesting asylum in 2018. (The Wall Street Journal, Jan. 26, 2019). The eventual total estimated expenditure for this wall would virtually cover the cost of two of the navy's newest and most expensive "Gerald R. Ford-class" aircraft carriers, at $12.9 billion a piece.
Journalist and political commentator Nicholas Kristoff calculated that for $5.7 billion we could: "Send 100,000 at risk kids to a high quality pre-school for a year, AND provide Pell grants for 100,000 students to attend college for a full four years, PLUS provide comprehensive treatment to 115,000 Americans struggling with opioid addiction." (N.Y. Times, Jan. 15, 2019).
Our leaders may downplay the amount requested to erect this controversial monument to our president, reducing it to 0.03% of GDP, or, alternatively, discounting it to "only" 0.13% of our projected 2019 federal budget of $4.5 trillion, this is still a huge amount of money. We could probably use it more productively elsewhere.
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