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 Richmans' Trade and Taxes Blog

Real house prices will probably keep falling
Howard Richman, 12/31/2011

On December 29, S&P Case-Shiller published its October estimate of average house prices using sales and resales of the same houses to make their estimate. The latest data shows the continuing fall in real house prices since June 2010 shown in the graph below:


The latest data agrees with our prediction of how fast house prices would fall. Specifically, in the April 14, 2011, American Thinker (House Prices in Free Fall) we wrote:

If current trends continue, real house prices (house prices after subtracting inflation) will likely lose about a quarter of their real value over the next 4 years....


Comments: 3

Payroll tax cut -- a new entitlement?
Raymond Richman, 12/22/2011

The cut in payroll taxes proposed for 2011 was greeted by economists as a powerful contribution to economic recovery. There is no evidence that it contributed to recovery at all in 2011. The federal Bureau of Economic Analysis reported that the U.S. Gross National Product, the total amount of goods and services produced in the U.S., increased at a rate of only 1.3 percent in the second quarter of 2011 and 1.8 percent in the third quarter. Economists of Deutshe Bank in 2000, predicted that the economy would grow at a rate of 3 percent by the 3rd quarter of 2011 without the 2011 tax cut and 4 percent with the tax cut. They were obvously using a clouded crystal ball. We are now warned by the same economists that failure to pass the tax cuit would cause a downturn in the economy, presumably of 1 percent. They were wrong then and are wrong now. We believe the economy would do quite well if we had a government that was not hostile to private enterprise.

There is also little evidence that any growth at all resulted from the Recovery Act of 2009 which allocated nearly $800 billion dollars to be spent between 2009 and 2011 inclusive. We predicted its failure to induce economic growth because the projected government spending was concentrated on transfers to states, school districts, and local governments to finance their budget deficits (most of them have constitutions which limit their borrowing), wasteful expenditures on environmental projects none of which would be undertaken without major federal and state subsidies, and wasteful subsidies to hybrid and electric vehicles and biofuels, etc. The President’s proposed $500 billion stimulus package for 2012 is characterized by similar defects as we pointed out in a recent article of this site.

The hostility of this regime to private enterprise is also evidenced by the President’s refusal to allow the building of a pipeline from Canada to the Gulf, his ban on drilling in the Gulf, and by the so-called Environmental Protection Agency’s rulings apparently intended to destroy the productive coal industry. Private investment was also affected negatively by increased business regulations. Given that the payroll tax reductions were expected to be temporary anyway, the first effective for only 2011 and the recent Senate-passed recent two-month extension to February 28, 2012, it is unlikely to promote private investment. To make it permanent would be at the expense of the Social Security System unless the payroll tax cut were made up by other taxes or borrowed funds that add to the national debt and have to be paid by taxpayers in the future. Borrowing to finance the tax cut has international economic repercussions because it weakens the dollar which is the standard for international trade. There are already calls for a new world standard by China, which is beginning to promote its yuan, by the IMF which is promoting its drawing rights, and by the Eurozone at least until the recent collapse of sovereign debt in the eurozone....


Comments: 2

China raises their 25% tariff on American-made cars
Howard Richman, 12/15/2011

President Hu of China said this week that China is persuing a balanced trade policy. If you believe that one, I've got a bridge in Brooklyn that I want to sell you.


The graph above shows the US trade deficit with China in goods as reported by the Commerce Department on Friday. At $291.8 billion for the twelve months ending in October, it was the highest trade deficit for a 12 month period ever recorded with China.

Meanwhile, the Chinese government is upset that despite its already high 25% tariff upon American-made vehicles, a few American-made cars are still being purchased by Chinese consumers, so they just raised their tariff. The Guardian reports:...


Comments: 0

Canada Abandons Kyoto Treaty. The U.S.( Not a Member!) Should Abandon It Also.
Raymond Richman, 12/14/2011

Canada withdrew as a party to the Kyoto treaty on December 12, 2011, a few days ago. It appears likely that other countries will soon follow. The U.S., which is not a party to the Kyoto treaty has been behaving under Clinton, Bush, and Obama as though it were. Although the Senate of the United States refused to approve becoming a party of the treaty, the U.S. government has been cooperating and acting as a full party to the treaty without authorization from the American people. It has been foolishly wasting billions of dollars—no, hundreds of billions—costing American workers hundreds of thousands of jobs and delaying the recovery of the U.S. economy from the recession. Moreover, the billions spent by the federal and state governments have had no effect on climate change. The money spent was completely wasted and succeeded only in reducing the living standards of American worker.

The actions taken under the treaty, the huge subsidies to inefficient wind and solar power, and biofuels have cost American workers hundreds of thousands of jobs and reduced their standards of living all in the name of a doubtful theory of man-made global warming (AGW). Dissenting scientists are convinced that global warming is a natural phenomenon and that man-made emissions play a very small role. But even if the theory were valid, the costs of the measures taken in its name were totally unjustified because they exceeded any possible benefits. And it is a fact, acknowledged by every responsible authority, that the expenditures have not contributed anything of benefit to humanity. The vast sums spent would have been better spent on weather problems we can do something about: hurricanes, tornadoes, cyclones, droughts, and a myriad of other climate problems needing our attention.

China calls Canada's decision 'preposterous'. It is only a coincidence that China is the leading exporter of solar panels and parts for windmills and is the world’s largest emitter of carbon gases. It was exempted by the Kyoto treaty from its obligations as an emerging country! Canadian Greenpeace joined China’s criticism and a spokesman said the country is protecting polluters instead of people. To the contrary, the windmills are noisy, unreliable, and kill migrating birds. They have to be shut down when the winds are too strong and do not generate enough electricity when there are no winds. So fossil fuel plants must be built to back them up. When not built on public lands, neighboring farmers have to be paid thousands of dollars to accept the noise. And they all need to be subsidized because they cannot compete on their own. They require huge subsidies from both the states and the federal government for any entrepreneur to undertake their construction. In addition, the federal government obliges the electric utilities to buy electricity from them and they are permitted to pass the higher cost on to consumers in the form of higher prices. Not only do they not contribute to economic growth but they hamper economic growth.

The Canadian environment minister, Peter Kent, said meeting the country's Kyoto treaty obligations would cost each family $1,600. In our view that is a gross understatement. But he is right that it would impose on Canadian workers and on Canadian companies an intolerable burden. More than that, economic studies have shown that Canada would benefit and the U.S. would suffer little harm from global warming.

Larry Bell in a Forbes article, August 23, 2011, entitled “The Alarming Cost Of Climate Change Hysteria” calculated some of the costs. These do not include the billions in subsidies granted by the states and the burdens borne by workers and consumers. He writes: “ The U.S. Government Accounting Office (GAO) can't figure out what benefits, if any, taxpayers are getting from the many billions of dollars spent each year on policies that are purportedly aimed at addressing climate change.” Neither can we. Here are some of the costs he reported :...


Comments: 1

Romney's Theory about Why Companies and Countries Decline - We're published in today's American Thinker
Howard Richman, 12/13/2011

Follow the following link to read it:


Comments: 13

The Economists' Liberal Agenda, a review of: Roubini, Nouriel and Stephen Mihm, Crisis Economics: A Crash Course in the Future of Finance (NY: The Penguin Press, 2010.
Raymond Richman, 12/12/2011

One of Nouriel Roubini’s genuine claims to fame was his prediction on September 7, 2006 in a talk at the International Monetary Fund in Washington, D.C. that the nation’s economy would soon suffer a once-in-a-lifetime housing bust that would be followed  inevitably by a deep recession. Roubini was not alone. Distinguished Yale Professor Robert Shiller, whose name appears in the authors’ acknowledgements, called the stock market bubble in 2000 and the housing bubble in 2005. Roubini has developed a reputation as a contrarian and I was looking forward with great anticipation to this book which I expected to be full of new and creative ideas.

Unfortuinately, I found the book very disappointing. There is very little in the book that does not represent conventional liberal ideas. He exhibits little faith in the free market, ignores the huge costs of environmental policies, has no solution to the jobs lost to outsourcing abroad. etc

In their book, the authors could not bring themselves to blame the government or the FED for the housing bubble although the FED’s failure to contain the bubble before it became such a threat does come in for criticism. But they downplay the role of the Community Reinvestment Act of 1977, one of whose administrators was the FED itself. The FED should have rejected the appointment to maintain its freedom of action vis-a-vis the banks. We agree that it was not the act itself that caused the bubble; it was the actors who implemented the act over the decades of the bubble. Pres. George H.W. Bush, for example, made it possible for ACORN and other leftist neighborhood organizations to “blackmail” the major banks by requiring an annual open meeting at which consumers could complain about the inadequacy of the banks response. ACORN and other leftist organizations succeeded in actually gaining contracts with the banks to initiate and process mortgages, in the process earning millions of dollars and strengthening their political power. And the left in Congress, Barney Frank, et. al., pressed Fannie Mae and Freddie Mac to buy mortgages made to unqualified borrowers. ...


Comments: 2

Listen to Ray on the Ron Morris (The American Entrepreneur) Radio Show
Howard Richman, 12/9/2011

Ray was on Ron Morris' show on November 26. If you want to listen, click on the following link:



Comments: 0

Romney’s Theory about Why Companies and Countries Decline
Howard Richman, 12/6/2011

When Republican presidential candidate Gov. Mitt Romney was growing up, his father was rescuing American Motors Corporation by focusing upon a new type of car, the compact, putting his company’s resources into the Rambler. When his father took over, American Motors stock was selling for $5 per share. After the success of the Rambler, it rose to $95.

How did American Motors succeed when it was competing with General Motors, which had all the advantages that experience, size and wealth confer? In his 2010 book No Apologies, Romney writes:

When I was about ten, I asked my dad how he thought the company’s Rambler automobile could ever compete with General Motors; they were so far ahead that catching up appeared impossible. He said something that has since been widely attributed to him: “There is nothing as vulnerable as entrenched success.” (p. 34)

Romney is a student of why companies and countries go into decline. After graduate school, he went to work for the Boston Consulting Group where his boss did a study of the advantages of leadership:

His analysis demonstrated that a company with twice as much experience as another should enjoy a 20% to 30% cost advantage. That’s why, he concluded at the time, IBM should be more profitable than Burroughs, GM more than Chrysler, Owens-Illinois more than Anchor Hocking. Sears more than JCPenney, Goodyear more than Firestone, and Xerox more than AB Dick. His predictions were borne out, at least for a time, But one by one, great leading companies, like leading nations, found that their potential for advantage was not a guarantee for success. (p. 36)

According to Romney, companies and businesses decline for the same reasons. They ignore challenges and threats. They squander their advantages. Due to easy money, they stop doing the things which made them great in the first place. According to Romney, the following made America great and should be part of our revival:...


Comments: 3

Required Reading, Michael Lind's "The Cost of Free Trade"
Raymond Richman, 12/4/2011

Every once in a while, we read an article or a commentary that we believe should be called to everyone’s attention. If you want to know why the U.S. went from being the world’s leading creditor to leading debtor in three decades, we are unable to recommend anything better that Michael Lind’s superb article in The American Prospect on December 1, 2011( entitled The Cost of Free Trade. Mr. Lind is policy director of the Economic Growth Program at the New America Foundation. He describes the politics of free trade and protectionism from the founding of the republic, how politicians in both the Democratic and Republican parties not only allowed but encouraged the deindustrialization of the U.S., and how all the presidents since WWII, Republican and Democrat, sacrificed American industry and American workers to achieve international political objectives and continue to do so to this day.

Every citizen should be aware of this history. But knowing how it all came about and developing policies to correct the situation requires more than one article. We disagree with the policies the author recommends. We believe we have proposed on this site the correct policies to balance our trade and restore our manufacturing sector.  But his assessment of how and why we became the world’s leading debtor and how much it cost us is a pre-requisite for doing anything about it.

Lind argues that our international trade policies need to be reversed “both in general and in particular toward China.” We would include Japan and Germany as well. “Over the past two decades, leading U.S. manufacturers, both the venerable (like General Electric) and the new (like Apple), have offshored millions of jobs—by one recent estimate, 2.9 million—to China to take advantage of the cheap labor, generous state subsidies, and low currency valuation that are linchpins of China’s mercantilist development strategy.” In our view, China has been implementing a number of mercantilist (promoting exports and discouraging imports) policies in addition to those mentioned....


Comments: 2

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]