Category Archives: Economics

Miscellaneous economy stuff

“We pay a lot to feed the civil servants”

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That’s what Zhou Dewen, Zhejiang Private Investment Enterprise Association Director, a business lobbying group in the People’s Republic of China has said.  He, like business representatives anywhere—including here in the US—is right to be concerned.  That concern is compounded by President Donald Trump’s tax proposal.

Now, Chinese officials and executives worry that the tax proposal Mr Trump announced last week will set back China’s global competitiveness and spur companies to invest in America instead of China.

Which is one of the points of Trump’s proposal that, among other things, seeks to drastically lower our usurious business tax rates.

Trump’s proposal also is a much more intelligent, much more moral, response to American companies moving overseas than the iron curtain that ex-President Barack Obama (D) and his Treasury Secretary Jack Lew (D) tried to erect with their punishing (in every sense) taxes that they tried to impose on companies in order to trap them here.  If we’ve got one of the lowest tax rates going, it no longer would make business sense to relocate out of the US.  And, such a decision would be that of the companies’ owners; it would not be driven by Government watchdogs.

Speaking of relocating businesses for tax-based reasons,

Chinese windshield maker Fuyao Glass opened a $600 million factory last October near Dayton, Ohio, and plans other facilities in Illinois and Michigan, creating 4,500 jobs. CEO Cao Dewang caused a stir in December when he told a reporter the decision was driven by tax differences: “Overall taxation for manufacturers in China is 35% higher than that in the US.”

The PRC government is getting involved, too.

In anticipation of the US tax move, the State Council, China’s cabinet, said earlier this month the government will reduce corporate taxes by over $55 billion to “improve business conditions.” The Communist Party’s newspaper, People’s Daily, warned on Friday that the new US plan could trigger a “tax war” if countries start competing to offer the lowest rates.

Such a race to the lowest tax rates would benefit the folks of all nations involved.  Pop Quiz: which type of economy will prosper the most from such a contest?

“We pay a lot to feed the civil servants.”  Don’t we all.

EU Bad Faith

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The European Union now says that any trade deal discussions with Great Britain must come after the terms of Great Britain’s going out from the EU have been agreed.  Fair enough; it’s tough to negotiate a trade deal before the nature of the relationship between the two has been identified.

But now there’s this, too.

…EU courts must continue to have a role in Britain after Britain’s exit from the bloc.

And

They [the EU leadership] emphasize the importance of ensuring no hard border is re-established between Northern Ireland and the Republic of Ireland and even touch on issues like the future legal status of Gibraltar….

Say, what?  The internal territories of a nation are the business of that nation, and no one else’s.  Gibraltar’s “future legal status” is the same as it has been; Great Britain’s going out has no more effect on the place than it does on Wales.  The borders of a nation are the business of that nation, and no one else’s.  Great Britain’s outward-facing border along Northern Ireland is the business of Great Britain; the EU has nothing to say about this domestic matter.  The courts of a nation are the business of that nation, and no one else’s.  British courts consist of the British court system.

One of the reasons the Brits decided to leave was to regain British sovereignty over their own nation.  Either the EU peerage inhabiting Brussels haven’t been listening, or they’re being entirely disingenuous in their affront over the Brits’ impertinence in rejecting these persons’ superior abilities to govern.

Hard to Tell

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…which is worse: the Left’s hypocrisy about decrying Wall Street and then requiring a ton of money in return for talking to them, or the Left’s demand that “you’ve made enough money.”

Ex-President Barack Obama (D) required, and got, 400 stacks for giving a 20-minute speech to a Cantor Fitzgerald healthcare conference, and he required, and got, another 400 large for being asked questions at an A&E Networks do.  This, after spending eight years squawking about Wall Street fat cats and their…large…incomes.

Then, there’s this, from Bill Maher, protesting Obama’s paydays.

[I]sn’t the best thing to do to take your $10 million book deal?  Can’t you live off that?

Hasn’t the time come when Obama has made enough money?

The Freedom Caucus of No

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Daniel Henninger had some thoughts in Wednesday’s Wall Street Journal on this group’s first 100 days; read the whole thing.  I’m interested in one aspect of the No-ers’ first 100 days that Henninger was too polite to say out loud.  Henninger pointed out

Back in 2016, Speaker Paul Ryan and the House leadership held public hearings, conducted negotiations inside the House conference, and published texts of the proposed legislation to repeal and reform ObamaCare. The American Health Care Act that emerged from this process had both a political and policy purpose.

Its political purpose was to create a bill that could survive the House, survive the Senate, survive a conference and make it to Mr Trump’s desk to fulfill one of his and the party’s biggest political promises.

The policy purpose was to lay a foundation on which Health and Human Services Secretary Tom Price and his SWAT team of reformers, such as Indiana Medicaid specialist Seema Verma, could help Congress clean up the rest of ObamaCare over the next two years—moving away from the 2010 law’s 2,000 pages of legal babel and toward a market-based system.

But no (to coin a phrase).

The Freedom Caucus rose to say none of these pieces of the president’s legislative agenda could move forward until it got what it wanted: elimination of ObamaCare’s 10 essential health benefits.

The No-ers didn’t hold out for this sort of thing during those prior negotiations.  No, they waited until the American Health Care Act was before the public, hoping to extort concessions from President Trump and/or from their supposed fellow Republicans in the House.

The No-ers, with their behavior, have betrayed their own constituents by sticking them with continued Obamacare, a steaming swamp these persons have been pretending to want to get rid of.

If the Freedom Caucus of No welched on their 2016 agreement regarding health care, how can they be trusted with anything today?

A Tax Code Proposal

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Below is the handout given to the NLMSM at Wednesday’s White House daily press briefing, this time hosted by Chief Economic Advisor Gary Cohn and Treasury Secretary Steve Mnuchin for the purpose of discussing President Donald Trump’s tax reform proposal, which was released today via that handout and press briefing.

Also included, as mentioned during the briefing though not on the handout, is a proposed reduction of the peak capital gains tax to 20%, which Cohn and Mnuchin said will stimulate investment—and, I add, stimulate both productivity and new job creation via that increased investment.

About that doubled standard deduction: it increases from $6,300 to $12,600 for single filers and from $12,700 to approximately $24,000 for joint filers.  That’s a jump of $6,300 and (approximately) $11,300, respectively.  For folks with incomes of $50,000, $80,000, and $500,000, these represent reductions in taxable income of 12.6%/22.6% (single filers/joint filers), 7.9%/14.1%, and 1.3%/2.3%, respectively.  This doesn’t particularly favor the rich.

Then Mnuchin had this to say:

This is about massive reductions in business rates for corporations and for small businesses, and many studies show that 70% of the tax burden falls on American workers.  So, by cutting business taxes, this will increase wages for American workers and create more jobs.

It’ll do more than that.  Business taxes are cost centers for those businesses, which costs are passed, in large part, to their customers, just as all other costs are passed, in large part, to their customers.  This tax reduction, if enacted, will greatly shrink that tax cost center, and so it will tend to lower prices for buyers of the business’ goods and services.

As predicted, this is a major tax reform.  Congress needs to get behind it.  The Trump administration is making a large bet on this (although they and the Republican Congress also are working on the flip side,  reducing spending (not just slowing its rate of growth)) in that, in response to a question during the briefing, Cohn and Mnuchen said that this reform would stimulate sufficient economic growth that the Federal revenue reduction nominally resulting from these tax rate reductions would generally not occur in the realization.

Of course, the Progressive-Democrats in Congress immediately started protesting.

Senator Chuck Schumer of New York, the chamber’s Democratic leader, said the proposal to cut tax rates for pass-through businesses would just benefit high-income people like the president himself.

Never mind that the bulk of American pass-through businesses are mom-and-pop businesses and small- to medium-sized businesses, not the large, wealthy ones.  Never mind that these mom-and-pop and small- to medium-sized businesses produce the bulk of the economic activity in the US.  This is the same objection Congressional Progressive-Democrats have to eliminating the death tax: even though the death tax forces children to sell their parents’ small businesses or farms in order to pay the inheritance tax, that tax is necessary because some rich folks might benefit from its elimination.

And there’s this:

Among the biggest changes is the repeal of the state and local tax deduction; the effect of that would be to shift the tax burden from low-tax states such as Texas and Florida to high-tax states such as New York and New Jersey.

And California, and Illinois.  Democrat-controlled states, every one.  Congressional Progressive-Democrats will squall about this, too.

And this:

Senate Finance Committee Ranking Member Ron Wyden (D, OR) issued a statement calling it an “unprincipled tax plan that will result in cuts for the one percent, conflicts for the President, crippling debt for America, and crumbs for the working people.”

What the Progressive-Democrats in Congress have yet to offer is any reason why our middle class and poor should be denied this tax code improvement with its attendant increased opportunity to become wealthy themselves just because it might also benefit the wealthy.

What the Progressive-Democrats in Congress have yet to explain is why they insist on singling out particular groups of Americans for punishment via our tax code just because they’ve been more successful than the rest of us.

And, of course, there was ABC News Chief White House Correspondent Jonathan Karl and his permanent question, apparently because he can only hold one concept in his head: “Will the President release his tax returns?”  Never mind that President Donald Trump, and several of his spokesmen have answered this question quite clearly for the last year—both during the campaign and since Trump’s swearing in.