Where does Brexit stand today?

Here is the Financial Times:

Theresa May has been applauded by Brussels for her “constructive spirit” after she set out plans to keep Britain in the EU in all but name until 2021, five years after the country voted to leave the bloc.

In a conciliatory speech in Florence, Mrs May also said Britain would pay €20bn into the EU budget after Brexit and signalled the contribution was only a downpayment on what could be a considerably larger exit bill.

Although Britain will formally leave the EU in March 2019, under Mrs May’s model it would still be covered by all EU rules, European court judgments, the free movement of EU workers and budgetary contributions to Brussels until the transition ends. . . .

The speech delighted business leaders who believe Mrs May’s plan for a transition period of “around two years” after Brexit in March 2019 will avoid a cliff-edge and was welcomed by Michel Barnier, the EU’s chief negotiator.

Here are some comments:

1.  By now it should be clear why I distinguished between the economic effects of “Brexit uncertainty” and the economic effects of Brexit itself.  We now know that Brexit uncertainty had no noticeable impact on UK real GDP growth (which was about the same in the 12 months after Brexit as during the 12 months before.)  I still believe that Brexit itself will lead to somewhat slower growth, as do the currency markets.  But the delay in Brexit has allowed a partially recovery in the pound, which has bounced back to $1.35, after dropping from $1.46 to $1.23 after the vote (and subsequent “Brexit means Brexit” rhetoric.)

2.  I think it’s very unlikely that the UK will (de facto) leave the EU in March 2021 (if ever).  May is rumored to have favored an even longer delay, but worried about a leadership challenge from Boris Johnson.  Notice she said “around two years”, which could mean three years.  Britain really doesn’t want to leave; that’s obvious.

3.  And by 2021 or 2022, who knows what the political situation will look like in the UK?  What if the Tories need support from the Liberal Dems after the next election? Would the LDs demand further delays? What if Labour wins?  Every year that goes by, more older Brexit voters die off and more younger Brits who are comfortable with a cosmopolitan UK enter the voting rolls.  Like gay rights and pot legalization, globalization has massive momentum in the long run, as there are truly vast differences between the views of the young and the old.

PS.  So the Tories promised to do Brexit, but obviously don’t actually want to do so. In the US, the GOP has promised to get rid of Obamacare. When will that happen? When it comes to health care policy, is history on the side of the GOP?   And I’d say something similar about the Tories.  In 2040, the UK will be more tightly integrated into Europe than in 2010, even if they are not formally in the EU.  Bryan Caplan may lose his Brexit bet, but only on a technicality.

PPS.  I’m guessing that this was Obama’s expression earlier this afternoon, when he heard about McCain’s decision.

I think McCain made a defensible decision, but not Rand Paul.  Given Paul’s ideology, he really should have supported Graham-Cassidy.  It’s far more libertarian than any plausible alternative that Congress is likely to enact.



29 Responses to “Where does Brexit stand today?”

  1. Gravatar of E. Harding E. Harding
    22. September 2017 at 21:42

    “Every year that goes by, more older Brexit voters die off and more younger Brits who are comfortable with a cosmopolitan UK enter the voting rolls. Like gay rights and pot legalization, globalization has massive momentum in the long run, as there are truly vast differences between the views of the young and the old.”

    Sumner, this is a moronic argument. After WJC’s highly pro-LGBT 1992 campaign, support for homosexuality increased among all age groups (though it did increase most strongly among younger people, since they’re most prone to changing their opinions):

    McGovernism never had massive momentum (though a fool would conclude it did by looking at the age demo results in 1972); Americans who were born just after McGovern’s strongest age demographic became quite solidly Republican later on.

    Also, you do remember what the outcome of the 1975 EU Common Market referendum was, right? Shouldn’t the Remain vote have been even stronger in 2016 than 1975 if your views on generational replacement are even remotely correct? Organizations become corrupted; people reject what they formerly supported.

    The McCain-Obama race was one between two establishment candidates; glad Trump won, and not McCain or Rmoney.

    I have no clue about the future of the E.U., and I will not pretend to be an expert on the subject.

  2. Gravatar of Steve Steve
    23. September 2017 at 02:47

    I think McCain made a defensible decision

    Fact check: FALSE.


    By Sen. John McCain Published October 28, 2016

    Just in this current Congress, Senator David Perdue (R-Ga.) and Congressman Tom Price (R-Ga.) and I introduced the Empowering Patients First Act, which would replace ObamaCare with patient-centered policies that would actually lower costs and increase competition for consumers.

    We’d do this by establishing age-adjusted tax credits, providing economic incentives to purchase coverage, and allow people to purchase insurance across state lines. All of this and more can be accomplished while ensuring no one is priced-out of the market if they have a pre-existing condition.

    If we don’t change direction soon, we are likely to end up where we are headed – to even higher health care costs, less choices and decreased quality of care.

    The surest way to alter the dangerous course we are on would be at the ballot box by sending Republican majorities back to Congress who are committed to repealing and replacing this failed law.

    We need leaders who will fight for health care reform that works by putting patients first.

    Republican John McCain represents Arizona in the United States Senate.

  3. Gravatar of Matthew Moore Matthew Moore
    23. September 2017 at 03:29

    “I think it’s very unlikely that the UK will (de facto) leave the EU in March 2021 (if ever).”

    Do you mean the Single Market? If so, that’s possible. The transition period basically requires Single Market membership through the EEA. Happily it doesn’t require membership of either the Common Agricultural Policy or the Common Fisheries Policy. Permanent Single Market membership requires freedom of movement for EU citizens though, as well as regulatory alignment and continuing budget contributions. I don’t see this as a politically feasible long-term solution.

    “Britain really doesn’t want to leave; that’s obvious.”

    Let’s not collectivise political decision making. Polls indicate a continuing (very) narrow majority in support of Brexit. The political and bureaucratic class never wanted it and still don’t of course.

    “In 2040, the UK will be more tightly integrated into Europe than in 2010″. That might be true on a goods-and-services regulatory front, but it will be due to the effects of global standards efforts, like those of the World Forum for Harmonization of Vehicle Regulations, which are increasingly important, but where the UK is currently represented by the EU. However, I don’t think on matters of criminal law, taxation, social policy, military strategy, this will be true. These are the more contentious issues.

    ” And by 2021 or 2022, who knows what the political situation will look like in the UK?”. EU exit is legally inevitable once Art 50 is triggered, unless ALL member states agree otherwise (chance = slim, chance of agreeing to continue UK’s current opt-outs and budget rebate = zero). The absence of the “immediate” financial crash predicted by the Treasury has spiked one of the Remainers’ most powerful guns. Both the Conservative and Labour manifestos committed to Single Market exit. Corbyn has always been anti-EU (he sees it as a bosses’ union). Although if Corbyn gets in, Brexit will be the least of our worries…

    A more important question is, what will the political situation in the EU look like? Based on Junker’s most recent “State of the Union” (ha), it will have qualified majority voting for all issues, even on foreign policy; be on the way to military union; harmonisation of the tax system, etc. The UK could barely wear the previous level of integration. It just goes to show that the status quo was never on the table in the referendum.

  4. Gravatar of Steve F Steve F
    23. September 2017 at 08:11

    I once was a big Rand Paul fan, but I’ve been rethinking. Looks to me like he opposes this bill because Kentucky expanded Medicaid.

  5. Gravatar of Jordan Amdahl Jordan Amdahl
    23. September 2017 at 14:41

    There is absolutely nothing contradictory about wanting repeal but wanting it done right (i.e. CBO score, open amendments, floor debate, etc…).

    There is simply no excuse for the way the republican party has gone about this process. Health care/insurance is an absolutely GIGANTIC part of the economy. Health care bills are just about the most complicated thing that goes through congress. These steps are simply not optional.

    There was criticism at the time for how the ACA was passed, but it was actually done amazingly well compared with this. The ACA process very publicly sought feedback from a wide range of stakeholders, had a great deal of floor debate, amendments were taken from the republican party, and CBO scores were taken seriously. The main flaw was that, ultimately, it didn’t score any republican votes.

    However, given the state of partisanship, that was near an impossible goal anyway.

  6. Gravatar of c8to c8to
    23. September 2017 at 15:02

    how can you poke a pragmatic libertarian like Rand Paul!?

    Most ppl grow out of being libertarian zealouts in their mid 20s – Rand Paul seems like an eminently reasonable fellow.

    The US needs to take these steps:
    * Go to a german style multi-payer system (maybe not perfect but the easiest step from here to there)
    * expand medicare prices to all suppliers in the business (god forbid price controls – but it seems to work everywhere else)
    * allow US prescriptions to be filled in canada and mexico

  7. Gravatar of Steve Steve
    23. September 2017 at 16:29

    Steve F, you are right. Ted Cruz nailed it back in 2013 when he argued that Obamacare would become permanent unless it was defunded upfront.

    Fast forward to 2017, and a whole rafter of Republicans are against reform because they don’t want to give up Medicaid expansion, or even share the federal funds with states that haven’t expanded yet. Hence Rand Paul, John Kasich, Susan Collins, Chris Sununu, Charlie Baker, etc., all opposing Obamacare reform.

    It all proves once again, the Feds can dangle a carrot, and the states have no ability to resist permanent addiction.

  8. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. September 2017 at 17:13

    The dysfunction of the EU should not be underestimated — especially as it is clearly mainly the EU which drove the shift in UK vote outcomes from the 1973 referendum to the 2016 Brexit referendum.

    “These are not good times on Europe’s borderlands. In their different ways, the EU’s relations with the three great semi-continental powers – Britain, Russia and Turkey – now all look like case studies in failure.”

  9. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. September 2017 at 17:15

    On the matter of dysfunction: Cameron handled Scotland (and Trudeau et al Quebec) than Spain is managing to handle Catalonia.

  10. Gravatar of Benjamin Cole Benjamin Cole
    23. September 2017 at 17:16

    And then we have Tyler Cowen’s definition of the emerald isle:

    “The new Britain appears to be a nationalistic, job-protecting, quasi-mercantilist entity, as evidenced by the desire to preserve the work and pay of London’s traditional cabbies.”

  11. Gravatar of DonG DonG
    23. September 2017 at 19:00

    McCain made his decision because Democrats are united in resistance, ignoring any merits of the policy offered. I agree that Rand Paul should favor the legislation, because federalism is in the direction of Libertarianism. However this legislation does involve making permanent a huge expansion of government and does have some nasty payoffs to big insurance companies. There is lots to dislike in any legislation that can get by the rent seekers. Paul perhaps assumes that a better outcome can come after 2018 elections, where more Republicans are likely, and the status quo looks worse. That which cannot be sustained will not last forever.

  12. Gravatar of msgkings msgkings
    23. September 2017 at 20:53

    @DonG: “where more Republicans are likely”

    Say what? The party in power almost always loses a ton of seats in the midterms, and with Trump firing up the Dems the Reps are in real danger of losing the House (probably not the Senate as so many more Dem seats are up for reelection)

  13. Gravatar of AlecFahrin AlecFahrin
    23. September 2017 at 21:54

    Politics aside, what are we going to do about the ACA being a broken and dilapidated distortionary welfare program that will cost us tens of billions in efficiency costs over the next couple decades? The ACA already had massive issues last year before Trump was elected. Now it will face opposition from Republican hardliners who want repeal, Republican moderates who want reform, and Democrats who want a political skewer to roast Republicans with.
    I can’t help but see this turning into another Medicare behemoth, and young people like me paying the costs for the next 70 years. I know one group that is quite happy to see this reform die… medical care and pharmaceutical companies. And people wonder why we have such high medical care inflation…
    I wonder how the utilitarian Sumner would handle this issue. If I remember correctly, he opposed ACA in 2010-2011. Yet, I’m not completely sure.

  14. Gravatar of BC BC
    24. September 2017 at 02:39

    I agree that Rand Paul’s position on Graham-Cassidy has been the most puzzling. One could point to Kentucky’s Medicaid funding, but even the Kentucky governor supports Graham-Cassidy. Also, it would be extremely galling for Paul to say he opposes Graham-Cassidy because it doesn’t repeal Obamacare enough if the true reason is that he wants to preserve Kentucky’s Obamacare Medicaid expansion dollars. Maybe, per Bryan Caplan’s view that the Right is mainly anti-Left, perhaps Paul isn’t so much libertarian as anti-Republican and anti-Democrat??

  15. Gravatar of Scott Freelander Scott Freelander
    24. September 2017 at 05:49

    The Republican Party is so bankrupt policy-wise and morally, that there’s literally no one, or almost no one pushing for true free market healthcare. As a Democrat, I’d be willing to support total deregulation of the US healthcare market in exchange for something like a $10k GUI and up to $15k annually in the form of an hourly wage subsidy. I suspect total deregulation would bring many prices down dramatically, and I would allow people with large healthcare expenses to withdraw the present value of future GUI payments over the remaining average life expectancy, discounted at the government’s cost of borrowing.

    These two subsidies would replace all other social welfare programs, including Medicare and Medicaid, except for Social Security and disability.

    If the Republican Party were truly a free-market-oriented party, wouldn’t many Republicans support free market healthcare?

    Republicans scaring Americans on this issue while losing all credibly will lead us right to Medicare for all, which, without reforms, will be too expensive.

  16. Gravatar of Russ Abbott Russ Abbott
    24. September 2017 at 08:42

    Rand Paul and John McCain both made the right decision to oppose Graham-Cassidy (GC). They were both dishonest about their stated reasons.

    Paul said GC did not do enough to dismantle Obamacare. As Scott pointed out, this bill did more than any other. It virtually tossed Obamacare out the window. Paul opposes it because it would make life miserable for his Kentucky constituents. He was right to take that position, but wrong not to be honest about it.

    McCain said he didn’t want the Republicans to pass a health care bill without Democratic consultation and support. He said he didn’t want the Republicans to do the same thing that the Democrats did with Obamacare. But that’s not a true picture of what happened with Obamacare. Republicans had a lot to say in shaping Obamacare. The only reason they refused to vote for it was that they were doing their best to make Obama fail. There is absolutely no doubt that many Republicans could have voted for Obamacare — or proposed amendments that Democrats would support that would bring them to favor it. Republicans simply weren’t interested in developing a coherent healthcare plan. Making Obama fail was more important to them than the public good. McCain was dishonest in his stated reasons for opposing GC.

    Even though both McCain and Paul were dishonest in their stated reasons for opposing GC, they both did the right thing — and probably for the right actual reasons.

  17. Gravatar of Christian List Christian List
    24. September 2017 at 13:44

    I agree with Lorenzo.

    I don’t worry about the UK at all, I worry about the EU. The dysfunction of the EU is huge. Brexit was the one chance to undertake badly needed reforms. In fact the only thing the EU really needs is a common market. Nearly anything else could be left up to the states. Brexit was the one big chance to move in this direction, instead the EU moves to the opposite. This won’t end well at all.

    Most of the Brexit negotiations so far were about money. The EU administration badly needs billions and billions to pay for all the pensions they piled up for their thousands of useless but very well-payed officials.

  18. Gravatar of Christian List Christian List
    24. September 2017 at 13:52

    Rand Paul is a phrasemaker, luftmensch, and an imposter, who will never achieve anything relevant in his political career, like his father. I am tempted to say, he is a typical libertarian, but then again that might be a bit too harsh. Maybe there are reasonable libertarians somewhere, I don’t know.

  19. Gravatar of ssumner ssumner
    24. September 2017 at 19:08

    So I have three commenters who think Rand Paul supports ObamaCare, and another who thinks the GOP is likely to gain seats in 2018.

    Interesting . . .

  20. Gravatar of Steve Steve
    24. September 2017 at 20:04

    three commenters who think Rand Paul supports ObamaCare, and another who thinks the GOP is likely to gain seats in 2018.

    Individually, these two views seem moronic, but they can’t both be moronic. Either GOP has a chance of gaining seats in 2018, or Rand Paul is effectively voting on to make Obamacare permanent.

  21. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. September 2017 at 23:11

    Thanks Christian.

    Obviously, there should have been a “better” before the “than” in my comment on Catalonia.

    BTW, the EU does not represent globalisation — which is driven by falling transport and communication costs, which is why it didn’t begin until steamships and railways in the 1820s. It can be resisted (see 1914-1945) but only at considerable cost.

    The EU represents internationalisation (increasing use of international bodies as coordinating/authority centres). That is not the same as globalisation, though it interacts with it and tends to magnify resentments.

  22. Gravatar of ChrisA ChrisA
    25. September 2017 at 03:02

    Adding to Lorenzo’s point – the EU is explicitly a protectionist bloc, it literally has as its raison d’etre things like requiring its member countries coordinate on tariffs for instance. So I really struggle with those who see Brexit be anti-free trade. Of course the people arguing for Brexit were no monolithic, so some of them were looking for more protectionism, but I don’t see that as a big driver for the UK. An interesting twitter post on this with some survey data; https://twitter.com/MacaesBruno/status/910874730965676032

    We can see that French people for instance are much more anti-globalist than the UK, and the UK population is one of the leaders in favouring globalism in Europe.

    Like any cartel like arrangements there are a lot of people whose cosy life will be disrupted by the UK leaving the EU, but like any cartel the benefits will go to many and the losses concentrated to the few, so we have to be careful about over-weighting the noise from media. If this were solar power manufacturers in the US complaining about Chinese dumping you would quickly see through their arguments.

    On May’s policy on Brexit, of course she is a very cautious person, so she is trying to straddle both horses. I just don’t see this policy being stable for very long though. A reactivation of the UKIP sentiment will happen if she appears to be trying to have both worlds. If it turns out that the UK stays in the single market and has free movement of labor but is out of the EU commission and CAP, then I for one will be pretty happy with this result.

  23. Gravatar of Jeff Jeff
    25. September 2017 at 07:27

    The Republicans are likely to gain Senate seats in 2018, because so many of the seats up for election this time are held by Democrats in states that voted heavily for Trump.

    The House is a different story. There the Democrats will pick up some seats, but probably will still fall short of a majority. Democrat voters tend to be more geographically concentrated than Republican ones, so you can have a small majority of Democrat voters turn up at the polls and still end up with a Republican majority of House seats. And it’s not at all guaranteed that the Democrats will even get that small majority of votes cast. We shall see.

    Rand Paul’s vote makes sense if you think that the House Republican majority will still be strong enough to pass an Obamacare repeal after the 2018 election. Certainly a more Republican Senate than the one we have today will be needed to accomplish it.

  24. Gravatar of Sean Sean
    25. September 2017 at 11:54

    I don’t think its fair to compare the GOP with ObamaCare to Britain with Brexxit.

    It neglects how difficult it is to pass complex legislation. You need at a minimum the POTUS, 50 senate votes, and the House. And to pass anything groundbreaking that does more than shift money around you need 60 Senators. Its virtually impossible to gain that much political power unless its during a crisis (which the Dems could only maintain for a few months)

  25. Gravatar of Christian List Christian List
    25. September 2017 at 13:16


    Adding to Lorenzo’s point – the EU is explicitly a protectionist bloc, it literally has as its raison d’etre things like requiring its member countries coordinate on tariffs for instance. So I really struggle with those who see Brexit be anti-free trade.

    Exactly. It’s really funny with the EU. Poor countries from Africa or elsewhere complain that the EU is a huge protectionist bloc that prevents entry to their market unless you pay them billions of euros. The EU bureaucrats, the EU politicians and the media claim that this all a lie.

    And now in the face of Brexit they tell the UK exactly that: The EU is a huge protectionist bloc that prevents entry to the market at all costs. You can only be part of the common market when you are paying billions of dollars in bribe money.

  26. Gravatar of ssumner ssumner
    25. September 2017 at 20:32

    Sean, You miss the obvious point. The Dems had leadership from Obama, and got every single Democratic senator to support their bill. Trump provides zero leadership, indeed he throws cruel personal insults at one of the key vote he needed. He’s probably the most incompetent president in US history.

    Christian, Another idiotic comment:


    Please just go away.

  27. Gravatar of ChrisA ChrisA
    25. September 2017 at 22:37

    Scott – did you read what was in that “Free Trade Agreement” between Mexico and the EU?

    Customs duties on imports and exports and charges having equivalent effect.
    Quantitative restrictions on imports and exports and measures having equivalent effect.
    Anti-dumping/countervailing measurements.
    Safeguards and monitoring measurements.
    Origin regime and customs co-operation.
    Customs valuation.
    Standards and technical regulations, sanitary and phytosanitary legislation, mutual recognition of conformity assessment, certification.
    General exceptions justified on grounds of public morality, public order or public security, protection of life or health of humans, animals or plants, protection of industrial property, intellectual and commercial.
    Restrictions in case of difficulties in the balance of payments

    I am sorry but that list doesn’t seem very free trade to me, it sounds like a very regulated regime.

  28. Gravatar of Christian List Christian List
    26. September 2017 at 15:30

    Don’t try to argue with Scott when he’s in his ideology mode. It’s completely useless.

    I say the EU is a huge protectionist bloc. And he proves my theory by linking to an agreement that opens the gap one inch for one single country, if at all.

    Why does the EU needs those adhesion contracts, Scott, when it’s not an abhorrent protectionist bloc?

  29. Gravatar of ssumner ssumner
    27. September 2017 at 12:46

    ChrisA, i guess you’ve never read the NAFTA agreement. Or do you also consider America to be protectionist?

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