Monthly Archives: October 2018

Trade and the People’s Republic of China

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The Wall Street Journal wrote in its Thursday edition that the US was “refusing” to resume trade negotiations with the PRC until the latter made a formal offer to us.  That’s a bit of a misnomer, though, since there’s nothing about which to negotiate until the PRC makes an offer.  Absent that, any discussion about trade would be just idle musings over an afternoon tea, a whiling away of some time between more important things.

A couple of other things jumped out at me in that article, too.

For Beijing, making a formal offer presents a number of risks, according to individuals briefed by the Chinese. First, it would reveal their negotiating position. Second, Beijing fears that Mr Trump could make any offer public in a tweet or statement as a way to lock in any concessions by China.

First, honest negotiating requires positions being known to both participants.  If the PRC wants to keep its position hidden, it could only be to keep moving its demands, keep adjusting its goals as we make offers more and more in its direction.

Second, if the PRC doesn’t want to commit to this or that concession—or to any other aspect of its negotiating position—it doesn’t matter whether any of that is public.  The nation wants to be able to walk away from any of its negotiating commitments at its convenience, and that makes the PRC untrustworthy.

As the WSJ noted,

There is history behind Beijing’s concerns. During negotiations over China’s entry to the World Trade Organization in 1999, President Clinton turned down an offer by China’s premier at the time, Zhu Rongji, that included deep concessions and a reorganization of the Chinese economy. The Clinton administration made Mr Zhu’s offer public, hoping to prevent the Chinese from backsliding. Instead, Mr Zhu was pilloried at home by hard-liners, and it took months of negotiations to finally convince China to accept a deal similar to the one it initially offered.

There are two lessons from this bit of history that we still need to learn.  The first is that the PRC’s intent of walking away from its commitments even as they’re made—that hardliner pillorying—is a long-standing policy of dishonesty.  The second lesson is that, in the realization, the PRC walked away from that “similar deal;” it has no concessions from the deal extant and no serious reorganization of its economy even tried.

The Trump administration is wise to waste no time on empty negotiations over a chimera.  It’s chancy enough to negotiate a hard proposal with them, but that’s still infinitely preferable to negotiating PRC fog.

Somebody Wants a UBI

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This is a Progressive-Democrat dream, but Andy Kessler centered it on Silicon Valley in his op-ed in Sunday’s Wall Street Journal.  He’s not far wrong, but aside from limiting the idea’s core constituency, he also only described part of the reason why a Universal Basic Income is a bad idea.

He did a good job of laying out the costs of paying for a UBI—the charges to those with earned income or profit—and how those costs cap what the earners and producers can do, but there’s the outcome of the demand side, too, that must be factored in.

What determines the price of any good or service? Of course, one component is the cost of its production. If the price doesn’t cover the cost, it won’t get produced. But that’s only a floor; the driver of cost is the demand for the good or service. That demand, though, isn’t measured by the number of folks wanting the thing, it’s the amount of money available to pay for the thing. More money means more demand, and more demand means rising price if the demand rises faster than production.

Now give everyone a UBI. Demand just inflated by the amount of the UBI, and the price of goods and services just went up to absorb that demand—every single dollar of it.

But wait—rising demand means rising production. Yep. And rising production means rising demand for labor—and rising labor costs. Rising production means rising demand for production input materials—and rising prices for those inputs.  And so rising threshold prices for the output good or service to cover those rising costs.  The minimum price for producing the good or service is above the income available, even after the UBI; the range of goods and services available is at least as limited from the perspective of the impoverished as it ever was.

The buying power of the UBI was just driven to zero, and the value of a person’s total income in real terms is just the same as it was before the UBI was instituted.

But it’s not just a zero-sum outcome; it’s a negative-sum matter.  Recall Kessler’s thesis that the cost to the earners/profit-makers of providing the UBI limited their output.  There’s a net reduction for everybody of goods and services to be had.

That’s a net reduction in the real value of income for everyone.

Raising Stakes

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The EU-Italy kerfuffle over Italy’s effronting budget is getting serious.

The mandarins of Brussels on Tuesday issued an unprecedented demand that Italy rewrite its bad budget in line with Brussels’ bad fiscal principles.

As the WSJ predicts,

[t]he two sides will now descend into political and bureaucratic wrangling. The main risks are that Brussels imposes a fine of 0.2% of GDP or that Rome is forced to abandon the pro-growth flat tax.

There’s no need for this, though. Italy should simply refuse to debate the matter—their budget, for good or ill, is a national thing, a matter of sovereignty. Along those lines, Italy also should refuse to pay the Brussels vig.

Brussels is amply demonstrating the utility of Italy leaving the EU, even though the Italians aren’t, yet, ready to contemplate such a move.  Here’s hoping they come to the realization sooner rather than later.

Vast Right Wing Conspiracy

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In the wake of a series of explosive devices being sent to or received by Progressive-Democrats and others of the Left like George Soros, ex-President Barack Obama (D), ex-Progressive-Democrat Presidential candidate Hillary Clinton, Congresswoman Maxine Waters (D, CA), Congresswoman Debbie Wasserman Schultz (D, FL), CNN offices, and others we get this:

Senate Democratic Leader Charles Schumer and House Democratic Leader Nancy Pelosi issued a joint statement…”Time and time again, the President has condoned physical violence and divided Americans with his words and his actions….”

This comes against the backdrop of Obama’s ex-Attorney General Eric Holder encouraging Leftists to kick Republicans and Conservatives when “they go low,” Waters encouraging Leftists to harass Republicans wherever they might be, Senator Spartacus encouraging Leftists to “get up in the faces of some Congresspeople,” Progressive-Democrat supporters attacking two Republican candidates in Minnesota (one got a concussion), the Left sending allegedly ricin-laced letters and other death threats to Senator Susan Collins (R, ME), the Left’s Antifa attacking anyone in Portland, Clinton calling 63 million Americans irredeemably deplorable racists, and on and on and on.

And: lots of bombs, and all of them intercepted.  Does anyone really think that’s plausible?  Most of them being intercepted, certainly; our guys are that good.  But 100% success?  None of them went off, too.  Does anyone think the bomber or bombers really are that incompetent?  Most not detonating, perhaps.  But 100% failure?

Maybe Schumer and Pelosi have given the game away.  At the very least, they’re demonstrating breathtaking and despicable cynicism with their jumping on the chance to make personal political hay out of all of this.

A Health Care Coverage Step

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Alexander Acosta, Steven Mnuchin, and Alex Azar, respectively Secretaries of Labor, Treasury, and Health and Human Services, are in the process of offering one.  They’re putting together a rule that would expand HRAs, Health Reimbursement Arrangements.  These are plans that allow employers to reimburse employees for certain qualified health expenses.  Their expansion consists of two parts:

  • permit[ting] employers to offer HRAs to reimburse employees for health insurance purchased in the individual market—allowing employers to provide a contribution as significant as they would have made for the premiums of a traditional employer-sponsored plan.
  • allow[ing] employers that offer a traditional group plan to offer an HRA of up to $1,800 a year to reimburse an employee for certain qualified medical expenses such as stand-alone dental benefits.

Both of these parts would be done on an income tax-free basis for the employee.

Of course, this would compete against Obamacare, and that’s anathema for the Progressive-Democrats in the House and Senate.

Their ire notwithstanding, the rule would be that step toward competition, and competition is one of the ways of making health care and health care coverage less economically onerous to a family.