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Richmans' Trade and Taxes Blog
Peter Morici: Trump's Got It Right on Trade
U. of Maryland economist Peter Morici, former chief economist at the USTR, endorsed Trump's trade plans, in a commentary this week. Here's how he begins:
He estimates that just this year, the growth in the U.S. trade deficit with China cost by $25 billion cost an additional 200,000 U.S. jobs:...
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Climate change commitments to be added to NAFTA not TPP
An article from IBTimes quotes the top U.S. trade official saying that the Paris climate commitments would not be added to TPP, because doing so could kill TPP:
But it then quotes the top Canadian trade official saying that, instead, strong North American commitments on climate would be added to NAFTA:...
In one of National Review’s hit pieces against Republican presidential frontrunner Donald Trump (What Trump Doesn’t Understand – It’s a lot about our Trade with China), correspondent Kevin D. Williamson called Trump a “dangerous buffoon” because he would threaten tariffs upon China’s products, and thus risk a trade war with China. But it’s not Trump that is the buffoon on trade; it is the National Review!
Trump plans to take on the huge U.S. trade deficit with the world, and especially with China. He threatens to place upon Chinese products a tariff that is like the 45% tariff that China recently placed upon some U.S. cars. Such a threat could lead to negotiations between the U.S. and China about balancing trade, and Trump wrote the book on negotiations.
When an article tears into a candidate for having his facts wrong, the magazine that prints it probably should check to make sure that the candidate is actually wrong. But National Review failed to fact-check this piece. Its correspondent Kevin D. Williamson wrote:
But Chinese tariffs on big-engine American-made cars were in addition to China’s already existing 25% tariff on all U.S.-made vehicles. The Guardian, a British newspaper, got it right when the new tariff was announced. It reported on December 14, 2011:
Let’s add up the numbers. China’s base tariff on American vehicles is 25%. In 2011 it announced that it would add an extra 22% on some cars. If you add 22% to 25%, the total is 47%, which is much closer to the 45% that Trump stated than to the 12.9% claimed by the National Review.
The U.S.-China Trade Relationship
The unwritten rule of U.S.-China trade is simple. The U.S. buys Chinese products, but China won’t buy American products unless they can’t be produced in China. As a result, the U.S. trade deficit (goods and services) with China has been growing, ever since President Bill Clinton gave China “most favored-nation” status and WTO membership in 2001, in return for reductions in China’s tariff rates.
During the year from October 2014 to September 2015, as shown by the right-most line in the graph below, the U.S. trade deficit with China was a record $338 billion:
To read the rest, go to:
Sarah Palin to endorse Donald Trump at Iowa rally tonight
According to the New York Times, Sarah Palin is going to endorse Donald Trump at a rally in Iowa tonight. Palin, like Trump, advocates balanced trade. Here's what I wrote in a a post on this blog on June 7, 2011:
Had Pres. Bill Clilnton Banned Muslim Travel to the USA 9/11 Would Not Have Occurred
Candidate Donald Trump called for the United States to bar all Muslims from entering the country until the nation’s leaders can “figure out what is going on”. Saying that “hatred” among many Muslims for Americans is “beyond comprehension,” Mr. Trump said in a statement that the United States needed to confront “where this hatred comes from and why.” “Until we are able to determine and understand this problem and the dangerous threat it poses, our country cannot be the victims of horrendous attacks by people that believe only in jihad, and have no sense of reason or respect for human life,” Mr. Trump said.
According to the New York Times, “Repudiation of Mr. Trump’s remarks was swift and severe among religious groups and politicians from both parties. Mr. Trump is “unhinged,” said one Republican rival, former Gov. Jeb Bush of Florida, while another, Senator Marco Rubio of Florida, called the ban “offensive and outlandish.” Hillary Clinton said the idea was “reprehensible, prejudiced and divisive.” Organizations representing Jews, Christians and those of other faiths quickly joined Muslims in denouncing Mr. Trump’s proposal…Mr. Trump made his remarks a day after President Obama delivered a national address from the Oval Office urging Americans not to turn against Muslims in the wake of the terrorist attacks.”
All seem to have forgotten that Muslims from many Mid-east countries participated in terrorist attacks in the U.S., attacks on U.S. passenger airplanes, attacks in friendly countries like the Philippines and France. The Muslim terrorists involved in those attacks came from Saudi Arabia, Iran, Iraq, Syria, Jordan, Egypt, Lebanon, Kuwait, Pakistan, Chechenia, and others with Muslim populations.
Had the ban been imposed by Pres, Clinton after the first bombing of the Word Trade Center in 1993 and after the warnings he received from the Philippine Police after the attacks in the Philippines in 1995, we would have avoided the attacks of Muslims in the U.S. during the past two decades and saved thousands of American lives. According to Wikipedia, the following Muslim attacks took place in the U.S. since 1993:...
Only Modest Tax Reforms Are Needed to Get Domestic Industry Growing Again
John H. Cochrane, senior fellow of Stanford University’s Hoover Institution and formerly of the Booth School of Business at the University of Chicago, writing in and op-ed in the WSJ, 12-23-2015, entitled “Here’s What Genuine Tax Reform Looks Like” states that, “The first goal of taxation is to raise needed government revenue with minimum economic damage.” No, the first goal of taxation is to distribute the burden of taxation equitably, i.e., fairly. Minimizing economic damage is a very important goal.
Another important goal is adequacy to fund the functions of government without causing an undesirable level of inflation. Governments may impose fees and taxes based on the so-called benefit principle, such as court fees, charges to record transfers and ownership of property, and taxes on motor vehicles to finance the construction and maintenance of roads and bridges. Minimizing economic damage also includes avoiding excessive disincentives to work, invest, and save. There is nothing in Cochranes’ writing to indicate that he is an expert in the economics of public finance.
He prescribes a number of reforms, some of which I agree with. First and foremost is his proposal to abolish the corporate income tax. He is correct that “With no corporate tax, arguments disappear over investment expensing versus depreciation, repatriation of profits, too much tax deductible debt, R&D deductions, and the vast array of energy deductions and credits.” He does not conclude that corporate earnings should be taxed, instead, under the personal income tax, as I have proposed in recent publications.
Instead, he proposes that “government should tax consumption, not wages, income or wealth”, not inheritances, nor capital gains. Doing so, he argues, would eliminate the need for the “complex web of shelters”, including IRAs, health savings accounts, life insurance exemptions, and the “panoply of trusts that wealthy individuals use to shelter their wealth and escape the estate tax”. He would reduce the progressivity of the personal income tax, eliminate “All the various deductions, credits, and exclusions”....
Does Nike's stock price fall indicate that TPP is dead?
Why did Nike stock price just fall by 9.5%? According to zero hedge, Nike just released an earning report that was quite positive.
The explanation could come from this Market Realist article from back in March. Here's a selection:
The stocks of all the other companies that produce shoes in Vietnam are also down:...
In this commentary, we respond to a CATO Institute critique (that appeared in American Spectator) of two of the arguments that we had made in an earlier commentary. We begin:
Watson saw the part of the environmental chapter which enforces multilateral environmental agreements (such as the Paris Climate Agreement) as "hortitory fluff." He had written:
But we demonstrated, by quoting the agreement, that it is enforceable:
Click here to read the entire commentary.
Peter Navarro is a professor in the School of Business at the University of California. Irvine campus. He has written previous books about China including Death by China, Seeds of Destruction, Always a Winner, and The Coming China Wars. In the prologue he writes the “each chapter that follows will provide and important clue presented in the form of a key question leading off each chapter. Each question will then be followed by possible answers across the range of opinion and thought”.
Ch 1.” Based on the historical record, how likely is war between a rising power like China and an established superpower like the United State?” As Thucydides wrote in his History of the Polynesian War, “What made the war inevitable was the growth of Athenian power and the fear which this caused in Sparta.” The war destroyed both states. Citing the competition between England and Germany for hegemony as the cause of WWI, he concludes that war between China and the U.S.A. is likely but not inevitable.
Ch. 2. Which countries have invaded China over the past two hundred years? France, Germany, Britain,. Japan, Russia, and the USA, an “indelible history of humiliation”. “China’s military buildup is not the end of our detective story—it is simply the beginning.”
Ch.3. “Is China building up its military to guard the trading routes and global investments it needs for robust economic growth.” China embarked on a mercantilist “state capitalism” strategy, encouraging exports and restricting imports. China’s huge oil imports and its exports move through the Malacca Strait.
Ch. 4. “Should China truly fear an oil embargo by the United States and its allies?” The U.S. did that to Japan and it led to our war with Japan. The USA also imposed an embargo on U.S. trade will China which lasted twenty years after China invaded Korea. And more recently, it imposed sanctions on Russia for its annexation of the Crimea. Similarly, China has to fear the closing of the Suez Canal to Chinese shipping. And the U.S. maintains dozens of naval and air bases in the countries surrounding China.
Ch. 5. “Will China become a 'revisionist' power or a 'status quo' power?”...
How to make the presidential debates work better: make the clock a moderator (WAPO)
In my just-published piece "How to improve our presidential debates in one easy step: Make the clock a moderator" on the Washington Post website I begin:
Sessions slams talk of trade deal until after elections
On December 10, Republican Senate Majority Leader Mitch McConnell warned President Obama that the Trans Pacific Partnership (TPP) could be voted down if brought up before the elections. According to The Hill:
On December 11, The Hill reported Senator Sessions response to McConnell:
On December 12, I contributed my analysis in the American Thinker blog:
The Obama administration has claimed that the Paris climate agreement does not require ratification by Congress since there are no enforcement mechanisms within that agreement. This is nonsense. The Paris agreement requires that countries involved make commitments and strengthen those commitments periodically. They are never permitted to loosen those commitments. Whatever Obama promises will be binding on all future U.S. Presidents; any reduction to Obama's draconian CO2 cuts would violate the Paris agreement.
If the Paris agreement were meant to be non-binding, it would have been called a "Declaration." It called itself an "Agreement," which means that it is one of the multilateral environmental agreements that is supposed to be added to TPP by the TPP Commission, according to the TPP agreement itself....
Pat Buchanan: Will elites blow up the GDP?
Pat Buchanan had a great commentary yesterday called Will Elites Blow Up the GOP? about the discussions within the Republican establishment about how they could deny the nomination to Donald Trump. Here's how Buchanan concludes:
Lifezette.com includes a description of what Jesse and I said on the Laura Ingraham show yesterday. Here's how it begins:
To read the rest, go to:
Rick Manning: Obama's Paris Climate Treaty Spells Doom for TPP
Writing for The Hill (Obama's Paris Climate Treaty Spells Doom for TPP), Rick Manning of Americans for Limited Government argued that Obama's Paris treaty spells doom for the Trans Pacific Partnership (TPP).
He begins by noting that Obama plans to enforce the climate treaty without bringing it before the Senate. He asks how Obama plans to accomplish this:
His prediction of how things will play out is quite interesting:...
TPP supporters planning to postpone vote
According to DTN Washington Insider, supporters of TPP are planning to postpone the vote, which could have taken place as early as January. This could mean that TPP would go down to defeat if the vote were to be taken before the elections. Here's a selection:...
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....
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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):
Journal of Economic Literature:
Atlantic Economic Journal: