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 Richmans' Trade and Taxes Blog

Does Fast-Track lead to Better Deals, or just More Bad Deals?
Jesse Richman, 2/27/2015

One oft repeated argument for granting the President fast-track authority to propose a take-it-or-leave-it offer to Congress on 'trade' deals is that if the president has such authority he or she will be able to negotiate a better deal for the US. 

This is a curious argument, since a little bit of elementary logic suggests that in fact the opposite is sometimes true.  A common negotiating strategy is to play "good cop - bad cop" -- one of the negotiators is constrained by an ally in a way that prevents major concessions, but can leverage the fact that he or she is constrained to bond with the opponent in the negotiations -- "I wish I could give you a better deal, but the "bad cop" won't let me." More generally, a fundamental principle of bargaining models is that having less room to make concessions can lead you to be better off in a negotiation because if a deal is to be struck the other side will have to make most of the concessions. 

Indeed, although Fast-Track may lead to more deals taking place, the gain in the number of deals is likely to be at least partially offset by the tendency of those deals to be worse deals for the United States relative to the deals that would have been struck in the absence of Fast-Track authority. 

Here I develop an example of a simple bargaining situation in which not granting fast track authority makes both Congress and the President better off.  I use the political science equivalent of the supply and demand graph -- the one-dimensional spatial model.

Basic assumptions of the model...


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Do Authoritarians Use Trade Openness to Preserve their Power?
Jesse Richman, 2/26/2015

Wen-Chin Wu of National Taiwan University recently published a paper entitled "When Do Dictators Decide to Open Trade Regimes?—Inequality and Trade Openness in Authoritarian Countries" in the journal International Studies Quarterly (2014, pp 1-12)  It's results suggest it may be a mistake for democracies to support or encourage open trade with autocratic regimes in the belief that trade openness will promote democratic change in those regimes.  Indeed, trade may well strengthen autocratic regimes. 


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How the Federal Reserve and Government Policies Make the Rich Richer and the Poor Poorer
Raymond Richman, 2/25/2015

The Federal Reserve Board and the Obama Administration are chiefly responsible for the creation of two economies in the US, one for the rich and upper middle class and one for the poor and lower middle class. The Fed by its quantitative easing widened the unequal distribution of wealth by causing the prices of corporate stock and commercial real estate to rise to unprecedented levels. Obama’s countercyclical policies gave us the $18 trillion federal government debt which only hyper-inflation will pay-off. Obama’s support of the minimum wage have denied lower-class blacks jobs keeping them poor and dependent on government handouts. And Obama’s and the Republicans’ free trade policies and his permitting US corporations to our-source factories abroad and import their goods free of tariffs have cost American workers millions of jobs and the manufacturing sector of the economy to stagnate.

The Fed is largely responsible for the real estate bubble and its bursting and the ensuing financial crises that engulfed the world in 2008. It was put in charge of   administering the Community Investment Act which told the Fed to keep mortgage standards high but it did nothing to prevent unqualified persons from obtaining mortgages. ...


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News stories you may have missed in today’s news and blogs
Raymond Richman, 2/23/2015

I.In our blogs in the past, we dealt with the fact that the wage causes unemployment among unskilled workers, particularly blacks, and more particularly black teenagers. In today’s Wall Street Journal (2/23/2015), Prof. Thomas MaCurdy, professor of economics at Stanford university has an op-ed entitled “The Minimum-Wage Stealth Tax on the Poor” describes how, the minimum wage, in addition to causing unemployment, amounts to a sale tax, raising prices of goods consumed by low-income families and falls with greater weight on low-income families. Here is a quote: “But will low-income families earn more from an increase in the minimum wage that they will pay as consumers of the now higher-priced goods? My research strongly suggests that they won‘t.” And “My analysis, using the Bureau of Labor Statistics Consumer Expenditure showed that the 1996 minimum-wage hike raised prices on a broad variety of goods and services. …My analysis concludes that more poor families were losers than winners from the 1996 hike in the minimum wage.”

II. The David Horwitz Freedom Center today listed the “Ten Most anti-semitic campuses in the U.S. 

  1. Columbia University, New York, NY
  2. Cornell University, Ithaca, NY
  3. George Mason Universityk, Fairfax, Va
  4. Loyola University, Chicago, IL
  5. Portland State University, Portland, OR
  6. San Francisco State,  San Francisco, CA
  7. Temple University, Philadelphis, PA
  8. San Diego State University, San Diego, CA
  9. University of California Los Angeles, CA
  10. Vassar College, Poughkeepsie, NY

Reference was made to the following site:, which listed incidents at Vanderbilt University, Northwestern University, Stanford University, and UC Davis. ...




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Online Video Synopsis of our Balanced Trade book
Jesse Richman, 2/23/2015

It's little more than a slide show of our introduction,but this does do a good job of covering our key arguments.


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Is James Webb the Best Candidate in the Democratic Field?
Jesse Richman, 2/19/2015

The Democratic and Republican primary electoral campaigns are as yet in their early stages as candidates maneuver for early voter support and initial financial backing.  The field remains fluid in both parties. 

On the Democratic side, Clinton is clearly the dominant candidate, with a majority of Democrats polled backing her candidacy in recent polling.  But Clinton's lead is eroding as voters begin to consider the broader field.  

In that broader field one of the more quixotic candidates, James Webb, deserves a close look by Democratic primary voters....

The failures of the Clinton policy toward China were significant and continue to cost millions of American jobs, along with significant foreign policy costs around the world.  Hopefully a strong Webb candidacy could help push Clinton to take forceful positions on trade. If Webb comes out strongly for balanced trade with China he will deserve support in the Democratic primaries. 


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The Short-run and the Long-run in Economics and Politics
Raymond Richman, 2/15/2015


“In the long-run we are all dead” said the late great economist John Maynard Keynes who revolutionized economic thinking. He recommended fiscal stimulation to increase aggregate demand which would increase production and employment. He was responding to the dominant view of free market economists that the free market would create full employment if wages were flexible. Because wage levels are very slow to respond to changes in the demand for labor, government intervention is required to increase aggregate demand in the short-run. Keynes’s ideas have dominated economic thinking since the 1930s. Accordingly, Pres. Obama’s administration pursued Keynesian fiscal and monetary policies which included an $800 billion stimulus program beginning in 2009 and authorized a $200 billion rescue of two private mortgage insurance companies, Fannie Mae and Freddie Mac. The preceding administration of Pres. George W. Bush began fiscal policy stimulus with a lump sum rebate of $300 per person plus dependents to all income taxpaying households. This was an application of Keynesian economics. He also enacted TARP which authorized the Treasury to buy the troubled assets of banks, investment companies, and insurance companies. This accorded with all schools of economics.

The federal debt in 2009 was $11.9 trillion and 83% of GDP while five years later it reached $18 trillion, exceeding the total production of goods and services in 2014. As for monetary policy, the Federal Reserve adopted a policy of monetary expansion and low-interest rates, buying government bonds and other assets with newly printed money. The most often used aggregate of the money stock, M2, increased from $1.6 trillion in 2009 to $10.9 trillion in 2014. The combination of a huge   federal debt and money supply threatens serious budgetary and another financial crisis inflation in the not too distant future. We may have solved a short-term problem but in the process inaugurated serious long-term problems. ...


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Government Interference in the Economy Has Been an Unmitigated Disaster
Raymond Richman, 2/11/2015

Few Americans know the economic harm that government mismanagement of the economy has caused. And government intervention in the economy continues to cause untold economic harm. The mere growth of government slows down the rate of economic growth. But the trend is exacerbated by numerous government interventions in the economy such as bad taxes, subsidies to favored businesses, fixing prices, levying tariffs that favor those businesses, fixing prices as in the case of the minimum wage law, building low rental but high cost housing for the poor, and encouraging loans to unqualified home buyers, ineffective projects to delay global warming, tuition loans to students whose studies do not prepare them for high-paying jobs. The list goes on and on. Here are some of the major government prograns that adversely affect the economy:. ...


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Tax Corporate Income as Personal Income -- we're published in today's American Thinker
Howard Richman, 2/10/2015

Here's how we begin:

Countries around the word have been gradually reducing their corporate income tax rates in order to gain a competitive advantage over their trading partners. Those with lower tax rates attract factories and corporate headquarters, while those with higher rates send factories and headquarters abroad. This trend has been gradually reducing the percentage of income paid by the rich while shifting the tax burden to the middle class.

Both Democrats and Republicans in Washington have put proposals on the table that would reduce the U.S. federal corporate income tax rate. Neither proposal is very good. Both proposals would leave the U.S. tax rate relatively high and would come with riders that would actively destroy U.S. jobs.

To read the rest, go to:


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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]