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 Richmans' Trade and Taxes Blog

Currency Manipulation Costs and Solutions
Jesse Richman, 9/30/2013

Peterson Institute Policy Brief 12-25 has a series of important proposals related to fighting currency manipulation. Some key quotes.  

"More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1 trillion in recent years. This buildup—mainly through intervention in the foreign exchange markets—keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding trade deficits are spread around the world, but the largest share of the loss centers on the United States, whose trade deficit has increased by $200 billion to $500 billion per year. The United States has lost 1 million to 5 million jobs as a result of this foreign currency manipulation."

The report names names of currency manipulators.  

"China, Denmark, Hong Kong, Korea, Malaysia, Singapore, Switzerland, and Taiwan. Japan may need to be added if it pursues new Prime Minister Abe's stated intention to force a sharply weaker yen through dollar purchases." 

It also identifies several good proposals for targeting them, including two (1 and 2) that we made in Trading Away Our Future back in 2008.  

"(1) undertake countervailing currency intervention (CCI) against countries with convertible currencies by buying amounts of their currencies equal to the amounts of dollars they are buying themselves, to neutralize the impact on exchange rates, (2) tax the earnings on, or restrict further purchases of, dollar assets acquired by intervening countries with inconvertible currencies (where CCI could therefore not be fully effective) to penalize them for building up these positions...


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Trade deficits and stagnation
Jesse Richman, 9/28/2013

Dean Baker rightly takes Krugman to task for not focusing on trade deficits as one source of US stagnation.




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Switching a city bus fleet to CNG is a no-brainer!
Howard Richman, 9/26/2013

When I travel to Philadelphia or Harrisburg from Western PA in my Compressed Natural Gas (CNG) pick-up truck, I stop at a Uni-Mart in State College PA which gets its CNG from the adjacent Centre Area Transit Authority's filling facility. City buses are the fastest growing sector of the growing CNG market. HE System Technologies expects that 12.7% of U.S. buses will be powered by CNG by 2018. 

The conversion of buses to CNG just got a shot in the arm. A cost-benefit analysis by Purdue University economists was just published in Energy Science & Engineering. It holds that the transit authority in Lafayette Indiana could save money by gradually replacing its diesel buses, as they wear out, with CNG buses.  The switch to CNG would also greatly reduce the particulate emissions that are breathed in by bus passengers and other residents....


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EPA Foils Clean Fuel -- we're published today in the American Thinker
Howard Richman, 9/23/2013

We begin:

By slowing the conversion of vehicles to CNG (Compressed Natural Gas) fuel The Environmental Protection Agency is causing needless nitrogen oxide, sulfur dioxide, particulate, and mercury air pollution. It might just as well be renamed the Environmental Destruction Agency.

The EPA has set up a system that adds thousands of dollars to the cost of converting a vehicle from gasoline or diesel oil to CNG, thus sapping a large proportion of the possible fuel cost savings (CNG costs about half as much at the pump) from those who are thinking of switching.

The EPA has done so through a complex set of regulations which apply differently to older and younger vehicles. Those converting an older vehicle must perform tests, pay fees and complete EPA paperwork which add about $4 to $5 thousand to the cost of the conversion. Those converting a newer vehicle must use an EPA certified kit, else the EPA cost is prohibitive.

To read the rest of the article, click on the following link:


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Eliminate the Minimum Wage; Substitute a Revised Earned Income Tax Credit
Raymond Richman, 9/20/2013

Most economists believe that the minimum wage increases unemployment among unskilled and young workers. Unions and their economists are strong backers, even though none of their members earns less than the minimum wage. Their reasons are Machiavellian; they don’t want competition from persons earning less than their members earn.

As the following table shows, unemployment rates among workers between the ages of 16 to 19, black and white, have three times the unemployment rates of whites and blacks in the labor force. The rate of unemployment of black teenagers is a staggering 38.4 percent. The Obama administration’s monetary and fiscal policies have created enormous benefits for shareholders as the booming stock markets show. They have benefited blacks, particularly black teenagers very little or not at all. The rich have benefited and so have businesses catering to the rich, but the poor have gotten poorer. Only today, as we write this, the US Bureau of the Census confirmed that there are more Americans with incomes at the poverty level than before the recession.

The minimum wage is part of the problem. It has prevented the employment of teenagers and the unskilled particularly....


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Non-Balanced Trade Agreements Cost Jobs
Jesse Richman, 9/20/2013

In a recent posting on the Campaign for America's Future website, Dave Johnson reviews the poor record of three recent trade agreements. The critical issue he raises is that many of these agreements have been followed by rapidly deteriorating balances of trade, and as a result they have cost jobs.

As Dave Johnson recognizes, the fundamental flaw with the analysis that free trade increases the number of jobs for both trading partners is that it assumes balanced trade. If the increased trade after a trade agreement is in the following form: Country A borrows from Country B to buy more of Country B's products, no new jobs will be created in Country A because there will be no new production in Country A. Just new debt.


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China's Attacks on Trade Reform Website
Jesse Richman, 9/17/2013

One of the important facts of international politics today is that international borders are permeable. States with an interest in shaping the domestic politics of competitors have both the incentive to do so, and a wide range of opportunities and tools with which to engage that political process. Democratic countries, because of their greater openness, are particularly vulnerable to such intrusions.

Recent Chinese-origin attacks on the website are in this light both encouraging and discouraging....


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How the Corporate Income Tax Creates Billionaires and Punishes the Middle Class
Raymond Richman, 9/11/2013

The U.S. corporate income tax violates nearly every criterion of a good tax. It is expensive to administer and to comply with. It violates the principle that persons with equal incomes and circumstances should  bear an equal burden. It causes corporations to engage in uneconomic practices, including relying too heavily on debt financing and too little on equity financing. It encourages corporations to buy-back their shares instead of paying dividends. It encourages the corporation’s principal shareholders to retain earnings and pay little or no dividends that would be subject to high personal income tax rates. Corporate earnings are taxed twice, once by the tax on corporate earnings and again by the personal income tax when paid out in dividends. Because the rates of tax differ widely among countries, the high rates of the U.S. tax puts American corporations at a competitive disadvantage in foreign trade. And, importantly, the corporate income tax is not as progressive as it is believed to be and may not be progressive at all.  In fact, it worsens the distribution of income; probably the principal reason we have so many billionaires.

In effect, the corporate income tax enables the controlling shareholders to reinvest their corporate income free of personal income tax. And it may even be free of corporate income tax! Economists widely believe that the tax is passed forward to consumers or backward to employees; they reason that corporate investors must at the margin earn the same return as unincorporated businesses or they would not invest in corporations which are subject to a corporation income tax.

Prof. Arnold Harberger, an eminent economist, argues that corporations that sell their products domestically are able to pass the tax forward to consumers or backward to their employees but corporations that export much of what they produce cannot pass the tax forward to consumers because of international competition. But corporations with earnings abroad have an advantage in that they pay no tax until their foreign earnings are repatriated so they can reinvest their earnings abroad without paying any personal income tax.

Corporate shares are widely believed to be owned preponderantly by the wealthy. This may be true but pension funds, whose beneficiaries are workers, and mutual funds that are widely held by the middle class, own a substantial portion of corporate wealth. Many of the beneficiaries are in brackets below the basic rate of the corporate income tax. Their earning are thus taxed at the high rate of corporate tax and taxed again when they receive the pensions and dividends. ...


Comments: 1

Defining Away the Trade Deficit?
Jesse Richman, 9/6/2013 flags a counter-intuitive change in regulations that seems on its face to make no sense. The reclassification of products produced abroad by U.S. multi-national companies so that these products are counted as U.S. manufacturing production and not imports....


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Cost of trying to prevent global warming is 50 times higher than the possible benefit
Howard Richman, 9/4/2013

For a summary of a cost-benefit analysis of climate change efforts, watch this video from the 50:1 project:

They calculate, using the IPCC's own exaggerated estimates of the effect of carbon emissions on climate change, that the costs of trying to prevent climate change is 50 times higher than the possible benefit.

For more, including all of the information about how this cost-benefit analysis was computed, go to the 50 to 1 project's website:


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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]