by | BLOG
In the economic nightmare we are in, it was refreshing to open up the pages of the Wall Street Journal and find an Op-Ed that championed free trade over tariffs as a means to fight inflation. What’s more, the piece was written by two Democrat members of Congress: Jake Auchincloss and Stephanie Murphy. Tariffs clearly and consistently hurt the consumer and taxpayer by driving costs up to everybody in amounts far in excess than any benefits given to beneficiary companies. In fact, tariffs are cronyism of the highest order.
You can read the article, which is reproduced below:
Free Trade Can Fight Inflation
And other reasons Biden should reduce or lift Trump-era tariffs
“To fight inflation, President Biden should repeal or reduce Trump-era tariffs. Economists across the political spectrum agree that trade lowers prices and expands choice for consumers, and trade deals open markets for American businesses. Smart trading pacts forge deeper ties with allies, and they serve as a counterweight to Beijing’s aggressive efforts to buy global influence.
The official Congressional scorekeeper finds the bill would raise taxes on nearly everyone. Will Arizona Sen. Kyrsten Sinema go along? Plus, moderate House Democrats might vote for a bill that doesn’t have the state and local tax deductions they were insisting on.
That’s why the Trump tariffs should go. And instead of being defensive about the decision, the Biden administration—and both parties in Congress—should pivot toward an unapologetically pro-trade agenda.
Despite the known benefits, both parties have grown more hostile to trade in recent years. For too many U.S. politicians, trade has become anathema. And as a result, the U.S. has missed opportunities to move forward through economic statecraft. In some cases, we’ve instead taken steps backward.
The Trump administration’s decision to pull out of the 12-country Trans-Pacific Partnership was a gift from Washington to Beijing in the contest for influence in the Indo-Pacific region. It was met with disappointing silence from both parties in Congress.
Section 232 tariffs on aluminum and steel imports, imposed on friend and foe alike, raise production costs and consumer prices. Even worse, Section 301 tariffs levied on an array of Chinese products have done little to change China’s abusive trade practices. These tariffs contribute to inflation and impede our commitment to clean-energy independence. They also place American companies at a competitive disadvantage, because China (predictably) slapped retaliatory tariffs on our exports. National Security Council spokesman John Kirby recently acknowledged that tariffs have “increased costs of American families and small businesses” without “addressing some of China’s harmful trade practices.”
The failure of U.S. policy makers to reauthorize the Generalized System of Preferences program is another error. The GSP waives tariffs on certain goods from about 120 lower-income countries. It encourages U.S. firms to get products from a diverse set of emerging partners, promotes international development through trade (not only aid), and lowers prices for U.S. consumers. It’s a tool of soft power that we have removed from our toolbox.
Congress must step up. Tariffs are taxes, and the Constitution confers the taxing power on Congress. We must not yield this prerogative to the executive, regardless of who occupies the White House.
This administration has pledged that its foreign policy, including trade, will benefit the middle class. That’s a laudable goal, but actions need to match the rhetoric. Congress should insist that U.S. trade policy actually address the most vexing challenge that working families face: the decline of their purchasing power.
Trade liberalization policies, such as removing 301 and 232 tariffs, could save the average American household almost $800 annually—far more than the president’s proposed gas-tax holiday. It’s no cure-all, but for struggling American families and businesses, every dollar in price relief counts.
Congress should also extend and modernize GSP.
In addition, Congress should update the Trade Adjustment Assistance law, which supports American workers hurt by foreign trade. Workers should be compensated if they are harmed by restrictive measures such as tariffs, not only by liberalization policies such as trade agreements. This would be a more balanced approach, rooted in the recognition that protectionism comes at a cost.
Finally, the president and Congress must understand that expanding trade relations, including by reconsideration of our withdrawal from the Trans-Pacific Partnership, is crucial to outcompeting China. American policy makers can’t claim to be tough on China if they aren’t willing to promote a muscular trade policy.
Opponents will contend that trade liberalization drives a race to the regulatory bottom. But we know how to prevent that. The trading system should be rules-based. Trade deals should impel U.S. companies to innovate, not force them to compete against foreign firms unrestrained by labor, environmental and intellectual-property standards. U.S. officials have these templates at hand, but they can’t enact them if elected leaders don’t start negotiations.
Detractors sometimes blame trade liberalization for hollowing out communities. The evidence is clear, however. Trade creates jobs and lowers costs. Automation has been far more disruptive to local economies than trade has. Where dislocation does occur, adjustment assistance should help smooth it out.
American families and businesses are grappling with high prices. Lowering tariffs can provide immediate relief. The president and Congress should act now.”
Mr. Auchincloss and Ms. Murphy, both Democrats, represent, respectively, Massachusetts’ Fourth and Florida’s Seventh congressional districts.
by | BLOG, ECONOMY, POLITICS, POTUS
The Committee to Unleash Prosperity recently reminded folks that the prospect of inflation was raised and rejected by a plethora of Nobel prize winning economists as early as last September. As Congress was debating Biden’s $5 Trillion Build Back Better plan, 17 economists signed an open letter urging passage of this atrocious spending bill (coming on top of an extra $3 trillion in spending, mind you).
The letter opened and closed with these two absurd statements: “The American economy appears set for a robust recovery in part due to active government interventions over the past year and a half” and “[the agenda] will ease longer-term inflationary pressures.” At the time of their writing, inflation was at (only) 6% and now we are past 8%. How much more egregious would things be had Congress actually passed this spending behemoth? And even more critically, how is it that 17 prize-winning economists managed to get their economic forecast so wrong?
Readers would be wise to steer clear of the following economists:
- George A. Akerlof, Professor, Georgetown University
- Sir Angus Deaton, Professor, Princeton University
- Peter Diamond, Professor, Massachusetts Institute of Technology
- Robert Engle, Professor Emeritus and Co-Director of the Volatility and Risk Institute, New York University
- Oliver Hart, Professor, Harvard University
- Daniel Kahneman, Professor, Princeton University
- Eric S. Maskin, Professor, Harvard University
- Daniel McFadden, Professor, University of California, Berkley
- Paul Milgrom, Professor, Stanford University
- Roger Myerson, Professor, University of Chicago
- Edmund S. Phelps, Professor and Director of the Center on Capitalism and Society, Columbia University
- Paul Romer, Professor, New York University
- William Sharpe, Professor Emeritus, Stanford University
- Robert Shiller, Professor, Yale University
- Christopher Sims, Professor, Princeton University
- Robert Solow, Professor Emeritus, Massachusetts Institute of Technology
- Joseph Stiglitz, Professor, Columbia University
It must also be noted that Paul Krugman, another Nobel winner, did not sign the letter but did actively discuss it in his NYTimes column.
These economists had exactly one job: to tell the truth about spending and inflationary policies, namely that increased government spending as a means of intervention will typically result in higher inflation. But they didn’t do that. They would rather tell Congress what it wants to hear, instead of what it needs to hear, and they ought to be ashamed.
by | ARTICLES, BLOG, EDUCATION, FREEDOM, HYPOCRISY
The continued maltreatment of Amy Wax at UPenn is egregious and unacceptable. Ted Ruger, Dean of the UPenn Carey Law School, has consistently mismanaged the entire affair; his recent change in policy effectively abandoned his prior stance that upheld the right for faculty to express their views buckling under pressure from students who clearly do not understand the concept of freedom of expression. UPenn certainly doesn’t seem to be doing its job these days.
Wax’s “crime” of expressing unfavorable views to some on the topic of immigration — off-campus and unaffiliated with UPenn, by the way — has resulted in a barrage of unrelenting criticism among her colleagues; Ruger went so far as to issue an official statement distancing the law school from her and then penned an op-ed in an act of pure posturing while thinly conceding that free speech is still a thing.
Not so anymore. Ruger bowed to student demands that Wax be sanctioned and that tenure be reformed to “ensure that tenure be consistent with the principles of social equity.” Ruger has now announced that he will indeed take action against Amy Way, a tenured professor who may face termination. This change in policy undermines the right of faculty to speak freely and UPenn’s commitment to safeguard those rights. This chilling change will undoubtedly affect anyone who espouses an unpopular idea that might be found offensive at some point. One would think that UPenn faculty would be aghast at such a prospect — for they too could be next.
UPenn has proven to be rather un-collegial in this entire sordid affair which makes me recoil at the thought of supporting such an institution any longer. Clearly gone are the days by which the highest goals of a university are the pursuit of knowledge through the debate and discussion of ideas and the defense of the free expression of those ideas.
by | BIDEN, BLOG, COVID, ECONOMY, POTUS
As Biden’s presidency continues, it’s become increasingly apparent that he is wholly . unconcerned about the economic wellbeing of our citizens. But what’s less apparent to most people is that he’s taking his cues straight from China’s president, Xi Jinping.
Over the last year, Xi has been targeting wealthy Chinese billionaires, such as Alibaba, for being too successful or not being as aligned with his Communist platform. Using tactics such as increasing regulation or restricting their abilities to do certain things, the value of many successful Chinese companies declined rapidly. Xi claimed that the billionaire businessmen were getting out of control and too powerful, and it was worth it to him to tank their companies to show that communism and being a good citizen was more important than their good fortune or the economic well-being of all individuals.
Biden is doing the same thing. What Xi did unilaterally, Biden needs to get passed in Congress. He is going after the billionaires even if it screws the little guy too. This is why he has consistently pushed to raise corporate rates, implement a global minimum tax, double GILTI taxes, and raise individual rates (which impacts millions of small businesses, by the way). Now this “Billionaire Minimum Income Tax” proposal is just another scheme to punish wealthy Americans to fund absurd government programs. Nevermind that it is purposefully misnamed — it affects more than just billionaires and taxes more than just income — in an effort to sell the idea to legislators and the general public.
Xi took down the economically successful men and women in his country to bolster communism and Joe Biden is following his playbook. He’s happy to punish the wealthy in order to make them more responsible citizens. Biden has repeatedly stated that his goal is a more equitable economy by ensuring corporations and high-income earners pay their fair share (though they are already paying far more than their fair share). Xi would certainly approve.
by | ARTICLES, BLOG, ECONOMY, IRS, TAXES
Mike Hiltzik’ s article, “Proof the IRS targets the poor for tax audits while leaving millionaires alone” is either economically ignorant or intentionally misleading. He asserts that the IRS disproportionately audits lower income households for some biased reason, but that is simply not the case. Hiltzik takes his data from a non-profit called TRAC which reviews IRS reports that are generated as part of an ongoing FOIA request.
Hiltzik ignores the fact that the IRS audits taxpayers based upon sophisticated analyses that tell them where the taxpayer errors are. It is simply the case that low income taxpayers claiming the complex earned income and other credits have a huge error rate – leaving the IRS no alternative but to go after them. He even complains that 82% of those audited claimed the Earned Income Tax Credit (EITC) – ignoring that error rates on these tax returns are around 50%, and improper refunds involving EITC claims is more than $17 billion each year. Hiltzik goes so far to state that “pursuing low-income taxpayers won’t do anything to close the tax gap,” nearly suggesting that low-income earners shouldn’t be audited at all – though anyone can see that the combination of erroneous credit claims, and the also quite common situation of people claiming low income because of work in the underground economy are significant contributors to the tax gap.
Even though higher-income tax returns would seem to have more money to go after, they are most often either 1) relatively straightforward, with full statutory tax rates being paid, or 2) complex requiring services of qualified tax professionals who are quite competent to see that the letter of the law is being followed. It’s egregious that Hiltzik claims, with no evidence whatsoever, “the rich keep more of the money they owe to the federal government.” He misconstrues this audit data as part of his screed against millionaires and billionaires by offering the tired old trope about them not paying their fair share; in reality, roughly 57% of U.S. households paid no federal income taxes for 2021. How is that actually fair?
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT
Katherine Blunt’s WSJ article, “Why Your Electric Bill is Soaring — And Likely To Go Higher” absolutely ignores (or just possibly misses) that soaring gas prices are caused as much by Biden production restriction policies nationally. They are further exacerbated by policies like the New York State pipeline and fracking prohibitions just as much as they are by recent Ukraine issues. She should know that gas prices (unlike oil) are a local, not global market. Furthermore, most of New York increases are from a vast push into incredibly more expensive wind and solar mandates. Her own editorial board writes about this all the time, and she would do well to read it.
by | ARTICLES, BLOG, EDUCATION, FED, GOVERNMENT
Recently, a young PhD student came to terms with the fact that academia was no longer based on merit. Rather, as a scientific researcher interested in procuring grant funding, he was dismayed to learn that certain terms such as “equity,” “diversity,” and “inclusion” were not only social goals, but now also scientific ones; in other words, they were increasingly being used in descriptions of actual scientific work.
The National Science Foundation (NSF) awards millions in grants each year and the agency which renders their decision does so on two accounts: intellectual merit and broader impact. It is within the broader impact realm that the aforementioned social terms, among others, were being applied and interpreted. The appearance of particular terms related to identity politics in award abstracts, including “equity,” “diversity,” “inclusion,” “gender,” “marginalize,” “underrepresented,” and “disparity” increased substantially over the last thirty years.
In 1990, only 3 percent of award abstracts contained one of the terms, while in 2020, 30 percent of all award abstracts included at least one of those terms. Notably, the category which changed the most was Education and Human Resources, which went from 4% to 54% during that time span.
The problem with scientific research playing politics means that social causes as a scientific end are being elevated while intellectual merit and other similar criteria are being diminished.
This reminds me of the observation Rasmussen made, that “the more that scientific institutions are viewed as conduits for promulgating ideology, the less capable they will be of swaying public opinion on important issues.” Science and science funding should stick to being concerned with searching for truth among empirical evidence, not social activism.
by | BLOG, ECONOMY, FED, GOVERNMENT, POLITICS, TAXES
It’s kind of disgusting that when Congress talks about raising tax revenue, all the CBO thinks about and includes in their analyses is gross revenue. They don’t think about the costs of what the IRS, agencies, businesses, and taxpayers need to do to implement the policies that were created in order to raise that revenue. Those costs should always be factored in the computation and subsequently deducted to arrive at net revenue raised..
What’s happening now is that the compliance costs are not being considered. Congress says, for instance, that something will raise “$50 billion dollars” but then ignores that the complications, regulation issuance costs, compliance and other implementation expenses that will arise may cost $30 billion. So only $20 billion is actually raised. These hidden but true costs have to be included and come out of the CBO revenue forecast if we are to craft realistic, equitable, and efficient tax policy
by | BLOG, BUSINESS, ECONOMY, GOVERNMENT, POLITICS, TAXES
Have you ever heard any progressive who claims that the wealthy are not paying their “fair share” actually say what fair share is? Neither have I. It is probably because the wealthy in the US already pay a far higher percentage of income taxes than in any other developed country. Therefore, anyone who says the wealthy are not paying their fair share is either being a hypocrite or lying.
However, there is a group that is absolutely not paying their fair share. These are the vast number of the taxpayers who actually pay nothing. The Tax Policy Center’s newest report released in August 2021 found that in 2020, about 60.6 percent of households did not pay income tax, up from 43.6 percent of households in 2019; This closely mirrors the IRS preliminary estimate of 61.1 percent of households not paying income tax in 2020. It should be noted that much of the 2020 increase was due to pandemic-related factors, but the growing share of households paying no income tax should be kept in mind when evaluating the progressivity of the federal income tax system and proposed tax hikes on higher earners. There is virtually no other developed country in the world where this is the case.
This scenario reminds me of a true story from many years ago. When I was getting divorced, I was making about 75% of the money that my ex and I earned together. As part of our agreement, I asked her to pay 10% of the costs when our two kids went to college. At first she agreed; later on, however, she began to protest on the premise that if she got remarried and stopped working, she didn’t want to have to be responsible for having to pay the 10%! The fact that my ex had a responsibility to contribute toward college costs for her own children was totally lost on her. That’s what’s going on here. If the lower income earners don’t have any skin in the game, how can they be a responsible member of society? When they vote for new programs are they assuming that they have no obligation to pay any part of it?
The wealthy already pay a disproportionately high proportion of taxes. And yet Congress wants to fleece them more. They just assume that gullible taxpayers (I mean constituents) will just continue to vote for free stuff that others will pay for.
by | ARTICLES, BLOG, CONSTITUTION, ECONOMY, GOVERNMENT, TAXES
Capital gains are the profits realized from the sale of an asset and are included as part of taxable income. A handful of states have favorable rates toward capital gains (or don’t tax them at all because they do not have an income tax).
Other states tax capital gains as ordinary income. Among the most offensive states are NY, NJ, and CA. These states have concentrations of high income individuals and businesses who pay tax at high state tax rates. And they give no rate reduction for capital gains.Such tax policy discourages the sale of less productive assets and thereby reduces investment opportunities and economic growth.
Furthermore, taxes on capital gains (just like dividends) are subject to double taxation. This means every dollar of capital gains taxed to an individual has already been taxed at the entity level. No other major country double taxes this income. And for states to not even give a rate break for this double-taxed income is as mean-spirited as it is egregious.
High capital gains taxes are inequitable, destructive, and detrimental to the economy. They should be lower, not higher.
