March 31, 2023

Thought of the Week

Earlier this week, my father was inducted, posthumously, into the George Washington University Hall of Fame; I accepted the award on his behalf and said a few words about his love of family, “dad jokes,” and being a professor. My father began as an industrial psychologist, and with his mentor, Dr. Fred Herzberg, developed the Two Factor Motivation-Hygiene Theory of business management at Case Western Reserve University. A professor at GWU for more than 44 years, he taught courses on Management Science, Organizational Behavior, and Entrepreneurship. His specialties focused on small group communication and motivation, and his clients included GE, IBM, and Ernst and Young as well as the CIA, U.S. Navy, and FBI. Beyond GW and business consulting, my father was a visiting professor at Beijing University and the University of Tel Aviv Israel, and served as Pennsylvania’s Director of Policy, Planning, and Organizational Development where he employed his own management theories involving the notions of Limited Growth Potential, Malicious Obedience, and Groupthink. Hobnobbing before and after the ceremony, it was striking how many current GW professors and administrators and former students confided in me their distaste for the university dropping its longtime “Colonials” moniker. While a new mascot hasn’t been announced, the choices range from the supremely mundane (Ambassadors) to the ridiculous (Fireworks or Blue Fog) to the serviceable but what’s the point (Revolutionaries). Who knows why they felt compelled to divulge their opinions to me—because I was a former GW student athlete, my father’s son, or their third glass of wine had kicked in. On the drive home, I was a bit saddened. The truth is the change of moniker stems from a student petition signed by less than 2% of the student body—500 in a school of more than 26,000. What pained me was not the effort by 500 students who sought change, good for them, but the reaction by these adults who were afraid to speak their opinion openly for fear of being labeled, to put it lightly, out of touch. There’s a lesson here for business: encouraging speech isn’t simply a matter of removing obvious barriers, such as a volatile leader or the threat of a summary dismissal. Nor is it a matter of putting formal systems in place, like hotlines and suggestion boxes. Making employees feel safe enough to contribute fully requires deep cultural change that alters how they understand the likely costs (personal and immediate) versus benefits (organizational and future) of speaking up. To reduce costs, leaders must explicitly invite and acknowledge others’ ideas (this does not mean they must always implement them), and executives must actively challenge the myths and assumptions that reinforce silence. They might point out publicly that, contrary to common belief, suggestions should not be offered privately —that ideas are most helpful when they’re openly discussed and others can help develop them.

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

(The following was written prior to President Trump’s Indictment; look for commentary on this late breaking news story in next week’s The Washington Connection.)

AEI’s Take: “The Shrinking 2024 Election.” Although Election 2024 is more than a year and a half away, at this point in the cycle, the race for the presidency seems static and fixed. An election with the potential to reshape American politics has drawn few polling leaders and opened no new battlegrounds. While the stakes of the election expand, the field, the number of swing states, and the pool of persuadable voters all contract. This should be the moment when our choices grow; they’re not. The incumbent president is unpopular. Most people don’t want President Biden to run for a second term, but he’s expected to do so anyway. A Democratic primary remains an option, although an unlikely one due to the lack of a plausible alternative. As president, Biden is the leader of his party, the nomination is his if he wants it, and he clearly does. What’s atypical is the situation in the GOP. A defeated president hasn’t tried to retake the White House since the 19th century. Former President Trump’s presence has turned a potential free for all into a slow-rolling campaign for a party that has lost five of the past eight presidential elections. The GOP race resembles an incumbent president facing down a significant primary challenger—except Trump isn’t an incumbent and his rival, Florida Governor DeSantis, hasn’t announced his candidacy. For months, DeSantis has been the sole non-Trump Republican to enjoy double-digit support in the polls; no other declared or potential candidate comes close.  Unless another candidate emerges by the end of summer, the primary will continue to be a fight to the finish between two Florida men. While the presidential field is smaller than anticipated, the map is too. Analysts believe control of the White House is in the hands of a small number of states that themselves are divided almost in half between the parties. Ohio, Iowa, and Florida were once swing states, no more, these three have veered right, and are not realistic targets for Democrats in 2024. At the same time, Pennsylvania and Michigan are back in the Democrats’ column, with Arizona and Georgia tossups. The 2024 election will be decided in four states: Arizona, Georgia, Wisconsin, and Nevada. The Republican path to the White House runs through Arizona, Georgia, and Wisconsin. If the GOP nominee adds these to the states Trump won in 2020, he or she will win—simple in theory, difficult in practice.

Eurasia Group Believes the U.S.-Japan Trade Deal Offers a Fig Leaf for Loosened EV Restrictions. The U.S. and Japan announced a trade deal on critical minerals, part of a larger push by the Biden administration to make it easier for partner nations to meet content requirements included in the Inflation Reduction Act (IRA). For EVs, content requirements come in two layers: first, to receive any credit benefits, the vehicle must be assembled in North America. Once that requirement has been met, vehicles must then meet two separate domestic content requirements—one for battery components and one for critical minerals—to receive the full $7500; if a vehicle only meets one of these, it is eligible for half of the total amount. The U.S.-Japan deal was struck quickly and is relatively limited in scope but should make it possible for Japanese-sourced critical minerals to meet content requirements; this will not impact the rule dictating that only North American assembled vehicles are eligible, however; Japanese auto makers will still need to expand North American production to be eligible. The Treasury Department is set to release guidance on the battery and critical mineral requirements of the IRA this week and is expected to take as flexible an approach as possible to open the door to partner nations. The idea being to bolster efforts to build non-China dependent battery and critical mineral supply chains, while, at the same time, advancing the administration’s larger goal of expanding U.S. auto manufacturing. 

Global Policy Group (GPG): Hearings Highlight Differences on Trade. Members of the House Ways and Means and Senate Finance Committees used hearings on the Biden administration’s annual trade agenda to tell USTR Tai that lawmakers from both parties want the administration to negotiate traditional free-trade agreements with tariff-liberalization provisions—something the administration has avoided. Tai responded by calling on lawmakers to “meet me with recognition around the kind of world we’re living in right now,” arguing that “we need to do things differently” when it comes to trade policy. Tai told the lawmakers she is open to working with Congress to expand market access for U.S. exporters, but that she was opposed to “pursuing failed trade policies.” Tai argued that while tariff cuts and other traditional policies have proven beneficial, especially to U.S. agriculture and textile exporters, they have also led to “deindustrialization and an erosion of capabilities” in industrial sectors. Republicans criticized the Biden administration for not requesting new Trade Promotion Authority, through which Congress authorizes free-trade negotiations, arguing that China has been the beneficiary of the administration’s failure to pursue traditional trade deals. While lawmakers from both parties expressed concern that the administration has not engaged with Congress on trade policy as required by law, the hearings made clear that the White House is unlikely to abandon its focus on negotiating broad framework deals, like the Indo-Pacific Economic Framework for Prosperity, despite calls for a return to traditional free-trade talks.

“Off the Record”

Debt-Limit Dynamics. Punchbowl News reports that House Speaker McCarthy has had no direct contact with the White House about the debt limit since Feb. 1. In fact, the Speaker hasn’t spoken to President Biden, new White House Chief of Staff Zients, or any other senior aide on the issue. There’s also been radio silence from Treasury Secretary Yellen. Over the next few weeks, expect the Speaker’s office to ratchet up their rhetoric on the issue in an effort to jumpstart negotiations. Although senior Democrats are certain they can beat the GOP down and force passage of a clean debt-limit hike, there are a few dynamics at play. First, the Speaker is considering passage of a short-term debt limit increase—with modest budgetary savings provisions attached—to put the ball in Senate Democrats’ court. Second, House Republicans recognize that they are unlikely to pass a FY2024 budget resolution before the Treasury Department hits the default deadline, and GOP leadership is concerned that any fight over the budget resolution would be a distraction from the need to pass a debt limit increase. Third, House Financial Services Chairman McHenry (R-NC) delivered a McCarthy approved message on the debt limit saying, “I don’t see how we get there…I don’t even see a path [to a debt ceiling agreement].” This should be read as McHenry trying to shock the political establishment a bit. Last, Federal Reserve Chair Powell recently spoke to the Republican Study Committee, House Republicans’ largest caucus. The message: Congress needs to act on the debt limit in a timely manner.

In Other Words

“It’s very concerning that the CEO of TikTok can’t be honest and admit what we already know—China has access to TikTok user data. The House will be moving forward with legislation to protect Americans from the technological tentacles of the Chinese Communist Party,” House Speaker McCarthy (R-CA).

Did You Know

The National Cherry Blossom Festival is a spring celebration commemorating the March 27, 1912, gift of Japanese cherry trees from Tokyo Mayor Yukio Ozaki to the city of Washington, D.C. The gift of 3,020 cherry trees were comprised of the following varieties:

“Somei-Yoshino” ……………………………    1,800
“Ari ake”………………………………………..    100
“Fugen-zo”……………………………………..    120
“Fuku-roku-ju”………………………………..    50
“Gyo-i-ko”………………………………………   20

“Ichiyo”………………………………………….    160
“Jo­nioi”………………………………………….    80
“Kwan-zan”……………………………………     350
“Mikuruma­gayeshi”…………………………    20
“Shira-yuki”……………………………………    130
“Surugadai­nioi”………………………………     50
“Taki­nioi”………………………………………    140

Total……………………………………………..    3,020

Graph of the Week

If there ever was a honeymoon for the Biden administration’s “worker centered” trade policy, it’s over, at least in the eyes of prominent economists in Washington like Peterson Institute for International Economics President Adam Posen. Posen has leveled a scathing review of White House trade policies, saying “We have to confront that these views, even if popular and widespread, are wrong.” According to Posen,   White House efforts to take production from others in a zero-sum way will backfire and leave America worse off in the end. Among his key takeaways:

  • Decoupling from China will raise costs for U.S. consumers and businesses;
  • Disregarding the interests of American allies will erode U.S. influence abroad;
  • Made in America policies raise costs and make U.S. exports less competitive;
  • Subsidy races breed corruption and stifle innovation;
  • Friend-shoring increases the fragility of global supply chains; and
  • Industrial planning will not significantly reduce income inequality.


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