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 Richmans' Trade and Taxes Blog

Trade Agreements Have Been an Economic Disaster for the USA
Raymond Richman, 3/29/2016

When the U.S. began negotiating the General Agreement on Tariffs and Trade (GATT) in 1947, it was the world’s leading creditor. By the time the ninth round of negotiations was concluded in 1994, it had become the world’s leading debtor nation, millions of well-paid manufacturing workers lost their jobs, and the U.S. suffered two recessions in less than ten years, in 2000-01 and 2008-09. No wonder the malaise that led to what is clearly a popular revolt in the 2016 primaries. If there is a single statistic that shows the cause of the malaise—and surely it has many causes all associated with government intervention in the economy!—it is the growth of our international trade deficit in the following table.

The  table shows that U.S. Gross National Product, GDP, the total output of goods and services, which equals C+I+G+(X-M), ie., total private consumption expenditures, C,  plus gross private domestic investment expenditures, I, plus government consumption and investment expenditures, G, plus exports minus imports (X-M). It shows the GDP for selected years 1960 to 2015. It shows that the U.S. had a trade surplus of $4 billion in 1960, which made a contribution to GDP of 0.74 percent, less than one percent but at least positive.  As a result of GATT trade agreements from 1947 to 1994 and subsequent agreements with China, Korea, and Mexico, the U.S. experienced growing trade deficits which exploded after 1994.

In 1980 the trade deficit was $13 billion or about 0.45 percent of GDP, less than one-half of one percent. As a result of the successive GATT trade agreements, it grew enormously reaching $376 billion in the year 2000, diminishing GDP by 3.7 percent and contributing to the 2000-01 recession. The U.S. trade deficit grew to a record level reaching $723 billion in 2008 diminishing GDP by a record 4.9 percent and helping to precipitate the Great Recession of 2008-09. As a result of the Great Recession, the trade deficit fell, recovering to $530 billion in 2015, reducing  GDP by about 3 percent. In other words, had our trade been in balance in 2015, our GDP would have been $18.5 trillion instead of $17.9 trillion. ...


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Cruz' tax plan -- analysis by Tax Policy Center
Howard Richman, 3/17/2016

Tax Policy Center has put together an analysis of Senator Cruz' tax plan. Here are some quotes from an article about it that appeared in Dow Jones Business News:...



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An Analysis of the Proposals of the Republican Candidates for President
Raymond Richman, 3/15/2016

Following are the proposals and views of the Donald Trump. Sen Cruz, Sen. Rubio, and Gov. Kasich and my comments on their proposals:

Donald Trump, a businessman and graduate of the Wharton School at the University of Pennsylvania, makes the following proposals. Trump

  1. would deport illegal immigrants. No other candidate approves this suggestion.
  2. build a fence between the U.S. and Mexico. No other candidate makes this suggestion.
  3. believes that marriage is a state not a federal concern. All the candidates except Kasich agree.
  4. proposes to cut income taxes, corporate and personal. Cruz and Rubio suggest changes in corporate and personal income taxes. (See below.) We have our own proposals which differ from those of all the candidates.
  5. suggests there is little man-made global warning and measures to reduce global warming are ineffective, costly, and damaging to the economy. Cruz is the only one who agrees.
  6. urges balancing trade with China, Japan, Mexico, and other large trading partners. No other candidate appears to agree.
  7. wants to prevent American firms from moving their factories abroad. None of the others mention this.
  8. would impose a ban on travel of Muslims to the U.S. No other candidates agree.
  9. opposes government financing abortions but otherwise approves Planned Parenthood. Cruz and Rubio have similar but not identical views.
  10. Promises to reduce the national debt. All the candidates promise the same.

 Ted Cruz, a lawyer, graduate of Princeton University, received a law degree from Harvard University makes the following proposals: ...



Comments: 1

Rubio, Cruz and Kasich pretended they hadn't backed Obamatrade in yesterday's debate
Howard Richman, 3/11/2016

Julia Hahn of Breitbart is on the story (Rubio, Cruz, Kasich All Backed Obamatrade, Pretend They Didn’t at Miami Debate). Here are some selections. First, Marco Rubio:...


Comments: 1

Would Trump's Trade Policy Really Cause a Recession? -- Ray and I are published in American Thinker this morning
Howard Richman, 3/8/2016

Here's a selection:

In short, Romney doesn't appear to understand the economics of trade. Economic research about the "tariff-growth paradox," including one of our own academic papers, has found that tariffs hurt economic growth only when trade is relatively balanced.  But periods of history during which world trade has been relatively balanced (such as 1840-1865 and 1950-1973) have been followed by periods during which world trade became more and more unbalanced.  The world is once again experiencing a period of high trade imbalances (like the 1890s and the 1930s) in which trade-deficit countries can grow more rapidly simply by increasing their tariff rates.  Anything that Trump does to balance the enormous U.S. trade deficits will be economically beneficial. 

Follow the following link to read it:


Comments: 2

Memo to Media: Stop the Idiocy -- Focus on the Delegate Counts
Jesse Richman, 3/3/2016

The vast majority of the media coverage of the March 1st Super Tuesday primaries had a fundamentally mistaken focus.  Most journalistic coverage obsessed about absolutely the WRONG facts and stats.  In both parties, all of the states voting on Super Tuesday used some form of proportional allocation of the delegates, with subtly and very importantly different formulas across the states.  Because the delegates are allocated semi-proportionately, the right statistics to focus on are not how many states a particular candidate has 'won' but how many delegates.  

A close second place finish can net the same number of delegates as a weak first-place finish.  For instance, Trump and Kasich tied in the delegate count in Vermont.  On the other hand, a blow-out first place finish can yield a very large delegate lead.  Sanders ran the table on Clinton in Vermont, taking every single delegate despite proportional rules.  The delegate math doesn't conflate these two.  Simple-minded coverage that highlights states won does...


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Peter Morici: Trump's Edge over Clinton
Howard Richman, 3/2/2016

Morici had a another great column a few days ago: Trump's Edge over Clinton. He laid out the economic case, citing economic statistics, that a Trump economy would be much better than a Hillary Clinton economy. After pointing to the decline in median family income during Obama's presidency, the recession in U.S. manufacturing, currency manipulations by China, and other similar factors. Here's his comparison between the candidates:


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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]