Trump fumes over NYT op-ed; top officials swiftly deny role
By ZEKE MILLER, CATHERINE LUCEY and JONATHAN LEMIRE
Thursday, September 6
WASHINGTON (AP) — Pushing back against explosive reports his own administration is conspiring against him, President Donald Trump lashed out against the anonymous senior official who wrote a New York Times opinion piece claiming to be part of a “resistance” working “from within” to thwart his most dangerous impulses.
Washington was consumed by a wild guessing game as to the identity of the author, and swift denials of involvement in the op-ed came Thursday from top administration officials, including from Vice President Mike Pence’s office, Secretary of State Mike Pompeo and Dan Coats, director of national intelligence.
Trump was furious, tweeting Thursday morning that “The Deep State and the Left, and their vehicle, the Fake News Media, are going Crazy – & they don’t know what to do.”
On Wednesday night, Trump tweeted a demand that if “the GUTLESS anonymous person does indeed exist, the Times must, for National Security purposes, turn him/her over to government at once!” White House press secretary Sarah Huckabee Sanders called on the “coward” who wrote the piece to “do the right thing and resign.”
White House officials did not immediately respond to a request to elaborate on Trump’s call for the writer to be turned over to the government or the unsupported national security ground of his demand.
To some observers, the ultimatum appeared to play into the very concerns about the president’s impulses raised by the essay’s author. Trump has demanded that aides identify the leaker, according to two people familiar with the matter, though it was unclear how they might go about doing so. The two were not authorized to speak publicly and spoke on the condition of anonymity.
In a “House of Cards”-style plot twist in an already over-the-top administration, Trump allies and political insiders scrambled to unmask the writer. But the op-ed also brought to light questions that have been whispered in Washington for more than a year: Is Trump truly in charge? And could a divided executive branch pose a danger to the country?
Former CIA Director John Brennan, a fierce Trump critic, called the op-ed “active insubordination … born out of loyalty to the country.”
“This is not sustainable to have an executive branch where individuals are not following the orders of the chief executive,” Brennan told NBC’s “Today” show. “I do think things will get worse before they get better. I don’t know how Donald Trump is going to react to this. A wounded lion is a very dangerous animal, and I think Donald Trump is wounded.”
The anonymous author, claiming to be part of the “resistance” to Trump “working diligently from within” his administration, said, “Many Trump appointees have vowed to do what we can to preserve our democratic institutions while thwarting Mr. Trump’s more misguided impulses until he is out of office.”
“It may be cold comfort in this chaotic era, but Americans should know that there are adults in the room,” the author continued. “We fully recognize what is happening. And we are trying to do what’s right even when Donald Trump won’t.”
Trump raged about the piece in the White House, calling around to confidants to vent about the disloyalty of the author and fuming that the so-called Deep State within the federal government had conspired against him, according to a person familiar with the president’s views but not authorized to discuss them publicly.
The text of the op-ed was pulled apart for clues: The writer is identified as an “administration official”; does that mean a person who works outside the White House? The references to Russia and the late Sen. John McCain — do they suggest someone working in national security? Does the writing style sound like someone who worked at a think tank? In a tweet, the Times used the pronoun “he” to refer to the writer; does that rule out all women?
The newspaper later said the tweet referring to “he” had been “drafted by someone who is not aware of the author’s identity, including the gender, so the use of ‘he’ was an error.”
The Beltway guessing game seeped into the White House, as current and former staffers alike traded calls and texts trying to figure out who could have written the piece, some turning to reporters and asking them for clues. For many in Trump’s orbit, it was stunning to realize just how many people could have been the op-ed’s author. And some of the most senior members of the Trump administration were forced to deny they were the author of the attack on their boss.
Hotly debated on Twitter was the author’s use of the word “lodestar,” which pops up frequently in speeches by Pence. Could the anonymous figure be someone in Pence’s orbit? Others argued that the word “lodestar” could have been included to throw people off.
In a rare step, Pence’s communications director Jarrod Agen tweeted early Thursday that “The Vice President puts his name on his Op-Eds. The nytimes should be ashamed and so should the person who wrote the false, illogical, and gutless op-ed. Our office is above such amateur acts.”
Pompeo, who was in India, denied writing the anonymous opinion piece, saying, “It’s not mine.” He accused the media of trying to undermine the Trump administration and said he found that “incredibly disturbing.”
Coats later issued his own denial; and with three prominent administration members delivering on-the-record denials, the focus could now fall on other senior aides to do the same, with questions raised about those who stay silent.
Trump, appearing at an unrelated event Wednesday at the White House, lashed out at the Times for publishing the op-ed.
“They don’t like Donald Trump and I don’t like them,” he said of the newspaper. The op-ed pages of the newspaper are managed separately from its news department.
Early Thursday, Trump followed up with a tweet that touted his administration’s accomplishments. His other morning tweets — one on North Korea, the other on the economy — seemed to be an effort to change the subject.
The anonymous author wrote in the Times that where Trump has had successes, they have come “despite — not because of — the president’s leadership style, which is impetuous, adversarial, petty and ineffective.”
The assertions in the column were largely in line with complaints about Trump’s behavior that have repeatedly been raised by various administration officials, often speaking on the condition of anonymity. And they were published a day after the release of details from an explosive new book by longtime journalist Bob Woodward that laid bare concerns among the highest echelon of Trump aides about the president’s judgment.
The writer of the Times op-ed said Trump aides are aware of the president’s faults and “many of the senior officials in his own administration are working diligently from within to frustrate parts of his agenda and his worst inclinations. I would know. I am one of them.”
The writer also alleged “there were early whispers within the cabinet of invoking the 25th Amendment” because of the “instability” witnessed in the president.
The 25th Amendment allows the vice president to take over if the commander in chief is “unable to discharge the powers and duties of his office.” It requires that the vice president and a majority of the Cabinet back relieving the president.
Follow Miller on Twitter at http://twitter.com/zekejmiller , Lucey at http://twitter.com/catherine_lucey and Lemire at http://twitter.com/JonLemire
FactCheck: have the Trump tax cuts led to lower unemployment and higher wages?
September 2, 2018
Professor, Griffith Business School, Griffith University
Vice-Chancellor’s Fellow, University of Tasmania
Fabrizio Carmignani has received funding from the Australian Research Council for a project on the estimation of the piecewise continuous linear model and its macroeconomic applications.
Saul Eslake does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
Griffith University provides funding as a member of The Conversation AU.
The evidence on the ground is very clear. The Trump tax cuts have led to stronger investment, stronger growth, lower unemployment rate and higher wages.
– Minister for Finance Mathias Cormann, interview on RN Breakfast, August 13, 2018
After two years of debate and months of intense negotiation, the government’s proposal to cut the corporate tax rate from 30% to 25% for companies with turnover of more than A$50 million was voted down in the Senate.
But while the government’s attempts to pass tax cuts in Australia were not fruitful, tax reform remains a significant international issue.
In arguing for a tax reduction for big business, Minister for Finance Mathias Cormann pointed to economic outcomes in the United States, where corporate tax rates were cut from 35% to 21% in January this year.
“If you look at the economic data in the US in the second quarter, of course post the Trump tax cuts, the US is recording in excess of 4% growth on an annualised basis, the unemployment rate now has a ‘three’ in front of it, and wages growth is the strongest it’s been in a very long time,” Cormann said.
“Massive, massive capital investment has been returned to the United States.”
Is that right? And if yes, are the tax cuts to thank? Let’s take a closer look.
Checking the source
In response to The Conversation’s request for sources and comment, a spokesperson for Cormann provided GDP and capital investment data from the US Bureau of Economic Analysis, employment data from the US Bureau of Labor Statistics, a Bloomberg article, and a January 2018 World Economic Outlook from the International Monetary Fund.
Minister for Finance Mathias Cormann’s statement that corporate tax cuts in the US had “led to stronger investment, stronger growth, lower unemployment rate and higher wages” is not supported by evidence.
Cormann pointed to US economic data from the second quarter of 2018 (shortly after the US corporate tax cuts were enacted) to support his statement.
Cormann correctly quoted the figures about GDP growth and the unemployment rate. His statement on wage growth is debatable, and there are qualifications to be made about his interpretation of the capital investment data.
But the simple observation that some US economic indicators improved in the second quarter of 2018 does not imply that those improvements were caused by the tax cuts.
Even if causation could be established, one quarter of data tells us very little about the effect of tax reform. It takes time for companies and workers to adjust to changed taxation environments. These adjustments happen progressively over time, and this can lead to significant differences in the short term and long term responses.
It’s worth noting that the improvement in economic conditions in the US started in mid-2016, around 18 months before the tax reform.
The fundamental issues with the claim
Can we really look to US economic data from the second quarter of 2018 to support (or for that matter, reject) the argument that corporate tax cuts would benefit Australia?
My answer is no, for two reasons.
There is not evidence of causation
The simple observation that some US economic indicators improved in the second quarter of 2018 (after the introduction of the corporate tax cuts) does not imply that those improvements were caused by the tax cuts.
Several other factors will determine economic dynamics in any given quarter. A sophisticated statistical analysis based on a longer string of data after the second quarter of 2018 would be needed to determine the causal contribution of corporate tax cuts.
The assessment of causality is further complicated by the fact that there is a lag effect of corporate tax cuts on the economy.
It takes time for companies and workers to adjust to changed taxation environments. These adjustments happen progressively over time, and this can lead to significant differences in the short term and long term responses.
It’s also important to note that the improvement in US economic conditions started in mid-2016, around 18 months before the tax reform.
One quarter of data is not enough
Even if we neglected the causality issue, data from the second quarter of 2018 only gives us a limited idea of the very short term effects of the corporate tax cuts.
When it comes to tax reform, long term effects are what really matters. The important difference between short term and long term effects is evident from the preliminary economic projections published by the International Monetary Fund (IMF) in August 2018.
According to the authors of the IMF working paper, the US corporate tax cuts are projected to have a modest impact on long term growth, but will also cause an increase in the US federal debt to GDP ratio by approximately five percentage points by 2023.
Therefore, the corporate tax cuts may, in the end, fail to sustain long term growth, and make it harder to reduce government deficits and debt.
Rather than focusing on what happened in the second quarter of 2018 in the US, those debating corporate tax cuts should look at the economic theory and evidence drawn from countries where tax reforms have been implemented for a longer period of time (for example, Canada and Germany).
In general, this body of research does not provide any solid theoretical or empirical evidence backing the argument that corporate tax cuts will lead to a more prosperous economy.
A closer look at the economic figures
As outlined above, we cannot say that the Trump tax cuts “led to” the economic outcomes quoted by Cormann. But we can take a look at the numbers, for interest’s sake.
Cormann pointed to four macroeconomic benchmarks:
- Gross domestic product (GDP)
- wages, and
- capital investment.
- US GDP growth
Cormann said the US is “recording in excess of 4% growth on an annualised basis”.
Based on GDP data from US Bureau of Economic Analysis, and with the growth rate calculated as annualised change over the previous quarter, Cormann was correct: GDP growth hit 4.1% in the second quarter of 2018.
The GDP growth rate can also be calculated as the change compared to the same quarter of the previous year.
On that measure, the growth rate was 2.8%, compared to 2.1% in the second quarter of 2017, following a steady increase from 1.3% in the second quarter of 2016.
US unemployment rate
In July 2018, the US unemployment rate was 3.9%, as Cormann correctly stated.
The chart below shows both the employment rate at the end of each quarter (for example, June 2018 for the second quarter of 2018) and the average rate across the three months in each quarter.
US wages growth
To support his statement about US wages growth, Cormann pointed to a Bloomberg article which drew on data from the US Bureau of Labour and Statistics Employment Cost Index. In the second quarter of 2018, this particular index did record its highest growth since mid-2008.
However, measures of “wages” differ depending on which parts of employees’ salaries are included, and which are excluded.
Another, and perhaps more useful, definition of wages is employees’ average hourly earnings, also reported in the table.
The picture emerging from this measure quite different. These figures show that employees’ average hourly earnings actually fell in the year to the second quarter of 2018.
This doesn’t support the conclusion that wage growth in the second quarter of 2018 was the “strongest it’s been in a very long time”.
US capital investment
We can measure capital investment by looking at Nonresidential Gross Private Domestic Investment data, sourced from the US Bureau of Economic Analysis. These figures show a pick up in investment in the first and, to a lesser extent, second quarters of 2018.
These figures are not, however, necessarily evidence of “massive capital investment” being “returned” to the US, as Cormann stated.
The figures Cormann quoted in his response to The Conversation measure capital expenditure on commercial real estate, factories, tools and machineries in the US – not where the investment comes from.
The term “nonresidential” doesn’t refer to foreign investment, but to investments in commercial (rather than residential) assets.
The chart below, based on data from US Bureau of Economic analysis, shows there was an increase in capital investment in the first quarter of 2018 (when the tax cuts were implemented).
Again, this follows a trend of increases in capital investment, with peaks and troughs, since the first quarter of 2016.
The continuation of an existing trend
Overall, the data paint a rather favourable picture for the US in the second quarter of 2018.
However, it also seems that these macroeconomic indicators began to improve in mid-2016. This is particularly the case for GDP growth and unemployment.
Therefore, the positive outlook for the US in the second quarter seems to be the continuation of a positive cyclical phase that started before the enactment of the corporate tax cuts. – Fabrizio Carmignani
I concur with the verdict.
Senator Cormann’s assertion that the growth in business investment and wages and the decline in unemployment observed in the US over the first half of this year can be attributed, either wholly or in part, to the Trump administration’s corporate tax cuts is not supported by the evidence.
As this FactCheck points out, all of these trends were under way well before the corporate tax cuts took effect, and one or two quarters worth of data is not sufficient to establish that the tax cuts have made any significant or sustained change to those trends.
I disagree that average hourly earnings is a ‘better’ measure of US wages growth than the employment cost index (for the same reasons that most Australian economists regard the ABS wage price index as a better measure of Australian wages growth than average weekly earnings).
But that doesn’t undermine the conclusion that the gradual upward trend in US wages growth was well established before the Trump administration’s corporate tax cuts came into effect, and owes far more to the gradual tightening in the US labour market (which has been underway for a long time before those tax cuts came into effect) than it does to those tax cuts.
Indeed, over the first two quarters of 2018, the employment cost index rose by just 0.1 of a percentage point more than it did over the first two quarters of 2017, which is hardly compelling evidence of a significant impact of the corporate tax cuts.
It is worth noting that one-fifth of the 21% annualised rate of growth in US real private non-residential fixed investment over the first half of this year was due to a 156% (annualised) increase in investment in “mining exploration, shafts and wells”.
This category that accounts for less than 4% of the level of private non-residential fixed investment, and the spurt in this category of business investment would have owed far more to the rise in oil prices since the middle of last year than it would have to the cut in corporate tax rates.
Finally, it is also worth noting that the one component of the Trump administration’s corporate tax reforms which the IMF and others have acknowledged would likely have some temporary positive impact on business investment – the immediate expensing for tax purposes of capital expenditures incurred before 2023 (what we in Australia call an “instant asset write off”) – isn’t part of the measures which Senator Cormann had been asking the Senate to pass. –Saul Eslake
The Conversation FactCheck is accredited by the International Fact-Checking Network.
The Conversation’s FactCheck unit was the first fact-checking team in Australia and one of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. Read more here.
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