Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Time to End the “Free Trade” Ideology and Substitute “Balanced Trade” Economics Instead
In his essay “The Consequences of Neglecting Manufacturing”(4/20/15), Robert E. Scott of the Economics Policy Institute, compares trade in goods exports, goods imports, and the ratio of imports to exports for the United States and its top three international competitors, China, Germany, and Japan in the year. The smallness of the ratio of imports to exports, the more likely the country is restricting imports and subsidizing exports, a practice called mercantilism. He writes, “Overall, the United States had a trade deficit of $67.4 billion in [the] top 30 exporting industries. The top 30 exporting industries in those other countries had sizeable trade surpluses that ranged from $223.2 billion in Japan to $285.3 billion in Germany to $647.7 billion in China.” The trade deficits the U.S. has been experiencing for the past two decades has caused the displacement of millions of U.S. workers in manufacturing and has contributed to the weakness of the U.S. economy and caused the U.S. becoming the world’s leading debtor nation.
Here are the facts as Scott details them.
Without exception, the top 30 export industries in China, Japan, and Germany were all manufacturing industries. Six of the top 30 U.S. export industries were primary commodity exporters including grains, seeds, and nuts. This commodities sector was responsible for a trade surplus of $69.7 billion. The United States also had a trade surplus in aircraft and parts (two sectors) of $76.2 billion. However, these surpluses were more than offset by trade deficits in two other sectors, motor vehicles and parts, with a trade deficit of $117.2 billion, and electronics, with a trade deficit of $110.2 billion, both important U.S. manufacturing industries. ...
What's actually in the Trans Pacific Partnership -- we were published today on the American Thinker website
On November 5, the White House released the text of the 5,544 page Trans Pacific Partnership (TPP) that President Obama had just finished negotiating under the FastTrack authority that Congress gave him. That trade pact can no longer be amended. The up-or-down votes in the House and Senate will take place as early as January 2016.
So what’s in the TPP? Here’s a quick summary:
That’s the summary. Here are the details.
To read the rest, go to: http://www.americanthinker.com/articles/2015/11/whats_actually_in_the_trans_pacific_partnership.html
Cracks in the Left-Right Political Alignment
The current political division is (roughly) between those who favor socially conservative and small government policies, and those who favor socially liberal and large government policies. An alternative alignment would pit those who see globalization as a threat to be confronted through national solidarity, and those who see globalization as an opportunity for inter-cultural and inter-economic collaboration...
A Summary of Modern Economic History
After Spain discovered the New World and started to ship lots of gold back from it, it became the most powerful country in the world. It could pay for new weapons with gold. It could pay for new ships with gold. It could outfit military expeditions with gold. So the other countries of Europe decided that they wanted to get Spain's gold and in the 16th and 17th centuries they invented mercantilism, the strategy of maximizing exports and minimizing imports in order to obtain Spanish gold....
In order to read the rest, go to:
Dick Morris calls for a redefinition of what is conservative trade policy
In his October 28 commentary, Dick Morris called for a redefinition of the word "conservative" as far as trade policy is concerned. He wrote (Redefining the Right):
Income inequality and the trade deficit
As shown in the chart below, which I just put together, there is a pretty good correlation between household income inequality and the U.S. trade deficits from 1954 to 2012:
The trade deficits began to grow in 1977 and so did household income inequality in the United States. The correlation looks pretty close, except that the trade deficits are much more volatile than income inequality. Due to trade deficits, the jobs lost to imports were not replaced by jobs producing exports. They were simply lost. This graph supports our contention in our 1988 book Trading Away the Future, that the growing trade deficits worsened the income distribution. We explained:...
Rep. Lynn Westmoreland, R-Ga, one of the candidates for House Speaker, opposed ObamaTrade
With the resignation of House Speaker Boehner and the decision of Rep. Kevin McCarthy not to seek the speakership, the race for House Speaker is wide open. Only one of the candidates currently being mentioned, Rep. Lynn Westmoreland of Georgia, voted against Obamatrade. Here is a selection from an local newspaper article about why he opposed it:
TPP Pressure Cooker is On
A deal has been struck -- The Trans Pacific Partnership is now awaiting Congressional legislation to enact its provisions (ratification is an inappropriate word as the Constitution's 2/3 majority to ratify a treaty is once again being bypassed). Now the time line for consideration kicks in. The Washington Post's Kelsey Snell lays out the steps that will lead up to a vote. Advocates may well try to push for a vote as quickly as possible in order to minimize electoral risks. Members of Congress, and their leaders, know that a TPP vote is a dangerous vote. Hence, the effort will be to get such a vote taken as soon as possible in order to give memories as much time as possible to fade before the election, or supporters may try to target the electoral sweet spot between primary and general elections.
It will be a month before members of the general public are able to view the TPP agreement. Hence, for some time yet we will all still have to work from leaks rather than final text. But given what is already known, it is hard to see how this deal can be a good one. Clyde Prestowitz makes a compelling case in the most recent issue of American Prospect that the deal is not only bad economics but bad politics...
The Last Time Europe Committed Suicide by Refugee -- Ray and I are published in today's American Thinker
Can We Trump the Record U.S. Trade Deficit with China? -- we were published in today's American Thinker
Here's how we begin:
To read the rest, go to:
Officially, the unemployment rate is 5.1 percent of the labor force, defined as those working or, if unemployed, actively seeking employment. Millions of Americans have given up looking for jobs, millions more are on welfare, and millions are working part-time involuntarily. The real unemployment rate is closer to 20% and the country’s malaise shows it. The BLS has just reported that the average wage actually fell in 2014. And the U.S. Bureau of the Census reported Wednesday that for the past three years the median household income stagnated following two years of declines. A dismal picture indeed.
The bankruptcy of both the Democratic and Republican Parties cannot be remedied by a single presidential candidate of either party, although the Trump candidacy for the Republican nomination offers a glimmer of Officially, the unemployment rate is 5.1 percent of the labor force, defined as those working or, if hope. The entrenched oligarchies that control both major parties are incapable of pursuing rational economic programs in the national interest as evidenced by the huge international trade deficits that converted the U.S. since 1970 from the world’s leading creditor nation to the world’s leading debtor nation. The same oligarchies seek the votes of every voting group in the country and thus are incapable of pursuing the national interest. Although the Republicans pretend to be against a big central government, when in power they failed to eliminate a single agency of government (except one—the Export-Import Bank, which they eliminated on ideological grounds. Not only did the Ex-Im Bank not cost the government a red cent but it was the only government agency that created export jobs!), supported every Democratic proposal to send government jobs overseas like the General Agreement on Tariffs and Trade, the World Trade Organization, and the TransPacific Trade Agreement, all of which caused or will cause U.S .international trade deficits and will continue to cause the movement of American factories overseas and the loss of millions of good-paying U.S. manufacturing jobs. It has nurtured the anti-global-warming movement which has caused the federal and state governments to waste hundreds of billions of dollars subsidizing crony capitalists with no, literally no, effect on climate change. Following is a program to change all that:
First, we should end our huge chronic trade deficits which have decimated our manufacturing sector and caused the loss of millions of good American manufacturing jobs....
Worldwide trade peaked in 2007
Up until 2007, global trade was expanding. The trade surplus countries were lending money to the trade deficit countries so that the trade deficit countries could buy their products. But imbalanced trade cannot grow forever. Eventually the trade deficit countries become bad credit risks, so the system falls apart. Most economists haven't yet figured this out even though we explained it in our 2008 book and again in our 2014 book. They think that all you need to do in order to enhance worldwide trade is to lower trade barriers. They don't understand the importance of balanced trade.
They are just starting to notice now that world trade has been in decline since 2007, but they can't explain why. In the September 14 Wall Street Journal, William Maudlin began (Worries Rise Over Global Trade Slump):...
China's Currency Devaluation in Perspective
This blog post is an exercise in the important art of pointing out the obvious. China's devaluation versus the dollar in August, which shook world markets, was very modest in comparison with the enormous rise of the dollar versus world currencies over the last year. China's devaluation is unlikely a sign of massive weakness. More likely a modest recognition that by staying tied to the dollar China was forcing its currency into an unreasonable stratosphere. As Europe, Japan, and much of the developing world have devalued massively against the dollar, CNY exchange rates were pulled into uncompetitive territory with us. An irony of China's insistence on pegging its currency to the dollar is that this has made China vulnerable to the same hugely out-of-whack exchange rates that continue to undermine U.S. economic competitiveness. Two maps from CNN show this...
Elected Kentucky county clerk Kim Davis refused to grant a marriage license to homosexuals. She did so on religious grounds but it is not the freedom of religion clause of the First Amendment that justified her refusal but the 10th Amendment which recites: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people.” What the US Supreme Court rules is not the “Law of the Land.” The Law of the Land is the Constitution of the United States. Relying on a single clause, the due process clause of the 14th Amendment which was designed to protect the rights of former slaves, the majority of the Court consisting of four political appointees and one “independent” made a decision “at odds not only with the Constitution but with the principles upon which our nation was built”, as Justice Thomas wrote in his dissent.
The majority decision held that all the states must give under the due process clause of the 14th Amendment the law of a single state declaring that homosexuals have the right to marry even when thirty states have laws that state that marriage can only be a union of a man and a woman. Nothing in the Constitution gives the Supreme Court the right to nullify a State’s law that marriage can only take place between a man and a woman. Kim Davis, the county clerk may refuse to marry homosexuals because the Supreme Court unconstitutionally exceeded its constitutional authority....
Bubbles are popping - a recession is coming!
An economic bubble occurs when people have been bidding up something because they think that the price will keep going up. Once the price starts heading down, it goes down fast. There have been several famous bubbles in history including:
1. The Tulip Bubble
2. The South See Company Bubble
3. The U.S. House Price Bubble
David Stockman, former budget director under President Reagan, writes (Bubbles Don't Correct, They Burst):...
How Trump could get the Economy Going -- we were published in the American Thinker this morning
Read the rest at:
GM and the Balance of Trade -- Ray was published in the American Thinker on Monday
Here's a selection:
Click here to read it.
An Economist's Plan to Increase Economic Growth And Create Jobs
Mortimer Zuckerman, Chairman and Editor-in-Chief of U.S. News and World Report asked in an opinion piece in the Wall St. Journal, 8/21/2015, “Who Will Get the Dreary Economy Going?” We face another recession on the horizon, he says. “Yet there is little urgency from the White House these days regarding the economy. And what is the focus of the current presidential candidates and the media covering them?” They are focused on Hillary’s email, on illegal immigration and immigration reform, overturning the Affordable Care Act, and a wide number of domestic issues none of which have anything to do with economic growth or increasing employment. Little has been accomplished since 2009. Millions are employed part time, millions have left the labor force and given up on finding a job. “..(W)hat we need is a public discussion of where, precisely, America is headed economically.”
The rest of this article is an attempt to show how economic growth can be stimulated, good jobs can be created, prosperity regained, and, as Donald Trump claims, America can be great again. This is what he and the other candidates can pledge to accomplish.
"Free trade" Is Not supported By Economic Treory. Balanced Trade Is.
General Motors is planning to import cars from China, Ford is planning to import cars from Mexico. What’s the beef? Mercedes, Volkswagens, and BMWs are being imported from Germany, Toyota and Nissan are being imported from Japan, Hyundai, Samsung, and Kia are being imported from Korea, Fiat, Maserati, and Lamborghini from Italy, Renault and Citroen from France. Why shouldn’t GM and Ford import autos they make abroad?
The problem is not with importing foreign cars. It is the fact that we have huge trade deficits with China, Germany, and Japan, trade deficits with Korea and Mexico. China, Germany and Japan sell to us but do not buy enough from us, resulting in huge trade deficits for the U.S.. Apple produces its major products in China and has closed its factories in the U.S. So has Hewlett-Packard and dozens of other American companies. Nothing wrong with that so long as the countries in which they produce their products buy as much from us as we import from them. The five countries mentioned above do not.
The problem can be easily dealt with without violating the rules of international trade. ...
Fed Official Says Fed's Quantitative Easing Policy Failed to Achieve Any of Its Recovery Objectives
Jeff Cox of CNBCcom reports that the Federal Reserve is putting some of its post-crisis actions under a magnifying glass and not liking everything it sees. Stephen D. Williamson, vice president of the St. Louis Fed, finds fault with three key policy tenets. Cox writes:
”Specifically, he believes the zero interest rates in place since 2008 that were designed to spark good inflation actually have resulted in just the opposite. And he believes the "forward guidance" the Fed has used to communicate its intentions has instead been a muddle of broken vows that has served only to confuse investors. Finally, he asserts that quantitative easing, or the monthly debt purchases that swelled the central bank's balance sheet past the $4.5 trillion mark, have at best a tenuous link to actual economic improvements.”
“Williamson is quick to acknowledge that then-Chairman Ben Bernanke's Fed, through liquidity programs like the Term Auction Facility that injected cash into banks, "helped to assure that the Fed's Great Depression errors were not repeated."
"There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed—inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation," Williamson wrote.
We all know that wages have not benefitted at all under the Fed’s policies and that the economy’s growth has been less that 2% per year and the growth in GNP for the 2nd quarter of 2015 is projected to be 1½ percent of less. We appear to be on the verge of another recession. ...
Property Taxes as a Percentage of Value by State
The Tax Foundation posted a cool info-graphic on their blog showing variation in property tax rates by state.
One of the striking things about this graphic is the extent of variation in property tax rates, with some states imposing property tax rates that are on average several times as large as those imposed by other states.
Globalization Has Been a Disaster for U.S. Manufacturing and U.S. Workers
It is time to end the globalization foolishness begun by Pres. Woodrow Wilson and executed by Pres. Franklin Roosevelt. The former created the League of Nations and the latter, the United Nations, a much more serous subversive entity. Globalization has reduced the United States from its status as the world’s leading creditor to the world’s leading debtor, reduced its status as the world’s leading manufacturer to second place to China, cost the US millions of manufacturing jobs, caused the loss of millions of American jobs, and caused real wages of American workers to stagnate. The latest trade statistics show that the trade deficit in July was $43.8 billion but the details are even worse for American workers. The trade deficit on goods was $63 billion, an annual equivalent of about 6 million manufacturing jobs. The burden borne by US workers who lost their jobs can be conservatively estimated at $300 billion.
We’ve created huge international bureaucracies that are expensive to the American taxpayer and what they do that is worth doing can be done by agencies of the US government at much lower cost. Here is how much some of them cost us:
In 2012, the US contributed $7.5 billion direct to international organizations. This does not include the Department of State’s own Agency for International Development. The principal beneficiary was the UN which received $637 million in support of the UN itself plus an additional $75 million to UN’s Capital Master Plan or 22% of the cost of administering the UN, plus contributions to dozens of UN entities. This does not include the dozens of UN programs, some of which are listed below. Where possible, the list includes the principal contributions of the US to all international agencies and in some cases the proportion of the budget of the organization financed by the US contribution. Where no percentage appears, one can assume that all or nearly all of the cost is borne by the U.S. ...
Gloabalization Has Been a Disaster for the U.S., Especially American Manufacturing Workers
It is time to end the globalization foolishness begun by an academic, Pres. Woodrow Wilson and executed by an effete politician, Pres. Franklin Roosevelt. The former created the League of Nations and the latter, the United Nations, a much more serous subversive entity. Globalization has reduced the United States from its status as the world’s leading creditor to the world’s leading debtor, reduced its status as the world’s leading manufacturer to second place to China, cost the US millions of manufacturing jobs, caused the loss of millions of American jobs, and caused real wages of American workers to stagnate. The latest trade statistics show that the trade deficit in July was $43.8 billion but the details are even worse for American workers. The trade deficit on goods was $63 billion, an annual equivalent of about 6 million manufacturing jobs. The burden borne by US workers who lost their jobs can be conservatively estimated at $300 billion.
We’ve created huge international bureaucracies that are expensive to the American taxpayer and what they do that is worth doing can be done by agencies of the US government at much lower cost. Here is how much some of them cost us.
UN programs, some of which are listed below. Where possible, the list includes some the principal contributions of the US to all international agencies and in some cases the proportion of the budget of the organization financed by the US contribution. ...
Nothing shows the incompetence of the Republican rank and file in Congress than their opposition to the Ex-Im Bank on purely ideological grounds. The Ex-Im Bank is an independent government agency that finances the purchase by foreign companies of American products. The Ex-Im Bank does not cost the American taxpayers a dime. Not a word of complaint against the World Bank, an international socialist bank that lends money to foreign businesses and governments to finance foolish global warming projects and costs American taxpayers billions of dollars. Not a word against the waste of billions of dollars supporting the U.N., a basically anti-American world government. No proposal to eliminate US Department of Education or the US Department of Housing and Urban Housing and ousing andHHDevelopment, or to reduce the subsidies to wind and solar plants, luxury hybrid electric autos, businesses that invest in solar panels, etc., etc. Education and urban housing are state and local responsibilities under the US Constitution and both departments have abysmal records of accomplishment. And taxpayers are forced to pay higher electric prices because utilities are required to overpay for wind and solar energy. but none of this comes in for criticism from Republican from the Republican candidates.
The Ex-Im bank states that by financing the export of American goods and services, it has supported 1.3 million private-sector, American jobs since 2009, supporting 164,000 jobs in FY 2014 alone. There is no reason to question its claim.
Here in Pittsburgh, PNC Bank has been using the Ex-Im Bank to ensure some of its loans to foreign importers of American goods from its American clients, supporting American jobs.
Nothing shows the incompetence of the Republican candidates for president all of whom pledge to reduce the size of the federal government. What federal expenditures would they cut? They offer no specifics. As for increasing private employment, only Donald Trump offered a specific proposal, balanced trade instead of free trade which has produced mushrooming trade deficits costing millions of private jobs.
Isn’t it time for the presidential candidates to indicate their priorities, what federal expenditures they propose to cut. ...
Journal of Economic Literature:
Atlantic Economic Journal: