An improved pacific trade deal

But the White House is telling me that the agreement that officials reached this week is significantly different from the one we were hearing about before - and the angry reaction of industry representatives and Republican lawmakers seems to confirm that. What I know so far: The pharmaceuticals industry is mad because the extension of property rights in biologics is much shorter than it wanted; tobacco is mad because it has been carved out of the dispute settlement deal; and Republicans are mad because labor protections turned out to be stronger than they expected. All of these are good developments from my point of view, though I’ll need to do much more homework once the details are clearer.

It’s interesting that what we’re seeing so far is a harsh backlash from conservatives against these improvements. I find myself thinking of Gene Grossman and Elhanan Helpman’s work on the political economy of free trade agreements, in which the two economists conclude, based on a highly stylized, but nonetheless interesting model of special interest politics, that: “An F.T.A. is most likely to be politically viable exactly when it would be socially harmful.”

The T.P.P. looks better than it did, and that infuriates much of Congress.

Europe Has Learned Nothing

If you want to feel despair about Europe’s prospects, first look at a recent presentation from Peter Praet, the European Central Bank’s chief economist (here: bit.ly/1FV6AzQ), then read a recent Financial Times op-ed by Ludger Schuknecht, the chief economist of the German Finance Ministry.

Mr. Praet offers a portrait of a Continent crippled by inadequate demand, with a strong deflationary downdraft. Mr. Schuknecht, meanwhile, declares that we need to stop stimulus and reduce debt - in other words, every country should be like Germany and run a huge trade surplus.

If there’s one thing that we surely should have learned from the experience of the past seven years, it’s that adding up really matters. My spending is your income, and your spending is my income. If every nation slashes spending and tries to pay down its debts at the same time, incomes fall and debt problems probably get worse. Europe’s ratio of debt to gross domestic product isn’t rising because it’s spending more than it did during the good years; the eurozone’s overall structural deficit is now very small, much lower than it was in 2005-7. But low growth and inflation mean that G.D.P. is going nowhere.

German officials see this all as a tale of their virtue versus everyone else’s lack thereof.

This means that nobody will change course aside from officials at the E.C.B., who are in the process of finding out just how limited monetary policy really is when interest rates are very low and fiscal policy is pulling in the wrong direction.