Tag Archives: political economy

Little Compelling Evidence?

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Greg Ip, in his Monday Wall Street Journal piece on the matter of corporate tax cuts, says that

most of the US’ largest trading partners cut their corporate rates. But their experience offers a reality check. There is little compelling evidence any enjoyed substantially faster growth as a result, and certainly not on the scale of Mr Trump’s ambitions….

He offered some examples:

Britain reduced its corporate rate from 30% in 2007 to 19% now. A 2013 study by the British Treasury predicted the tax cuts since 2010 would eventually boost the level of gross domestic product by 0.6%. That is certainly worth having, but spread out over, say, six years, would boost the growth rate by a barely noticeable 0.1 percentage point.

British investment as a share of GDP is actually lower than before 2007….

But the EU, which included a full-throated Great Britain at the time, suffered even more deeply from the Panic of 2008 than the US, and its “recovery” has been even poorer than ours, albeit Great Britain was one of the nominal leaders of that sham recovery.  Not many of the EU member nations have recovered to their pre-Panic levels.

And

Canada cut its corporate rate from 28% in 2000 to 21% in 2004. While growth from 2000 to 2004 was about half a percentage point faster than the prior decade, it has since slowed.

A couple of other things contaminate Ip’s thesis that “[t]here is little compelling evidence” that corporate tax rates actually stimulate economic growth. In Great Britain’s and Canada’s cases in particular, and in the EU generally, the presence of VAT taxes (20% for Great Britain, 13% for Canada, similarly high rates for the continental nations of the EU) vastly dilute the impact of a mere corporate income tax cut.

Also, the existence of régimes of heavy regulation in Great Britain, Canada, and in continental EU add costs that heavily dampen the favorable impact of corporate tax cuts.

The small bumps in economic growth that followed those corporate tax cuts came despite those road blocks.

“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?