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 Richmans' Trade and Taxes Blog

Against the High Tech Luddites
Jesse Richman, 2/24/2017

Several of the United States' high technology billionaires have apparently recently fallen prey to the foolish arguments of neo-luddites.  For instance, Bill Gates has recently proposed a tax on robotic automation. Economists have rightly rejected these claims. Indeed, if we want to have rising incomes the best thing is for robots to take more jobs.  That's how we become more productive.  And ultimately how living standards can rise.  It is this kind of ingenuity which has kept Malthus' grim prognostications at bay in much of the world for the last two centuries.  

At the present moment, indeed, the US is facing a crisis of low productivity growth.  The robots are not being invested in rapidly enough.  The graph below shows the BLS estimate of non-farm productivity growth over time.  The last several years have been ones of low productivity growth.  The five year average rate of productivity increase is among the lowest in the time series....  


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The Border Tax and the Value-Added Tax Are Bad Proposals
Raymond Richman, 2/17/2017

All kinds of foolish tax ideas are being promoted since Trump proposed corporate and individual tax reforms. One is converting the corporate income tax to a tax on revenues from production and sales in the U.S. plus a 20% tax on imported inputs.  This in effect amounts to a border tax of 20% on imports with exports free of tax. Our analysis of this proposal indicates that the border tax will have no lasting effect on the trade deficits. Indeed our State sales taxes are a border tax;  exports are exempt from sales taxes. Another proposal is adding a value-added tax, equivalent to a retail sales tax at the federal government level. The value-added will add to the bloated federal bureaucracy. Its justification is to compensate for the loss of revenue resulting from the proposed reduction in the rate of the corporate income tax. A third proposal is to repeal the estate tax, the only measure we have that reduces wealth inequality. Wealth inequality has been increasing for decades; there is no justification for making it more unequal. None of these proposals is necessary or called for. All that we need is the Scaled Tariff, a single-country-variable-tariff which rises and falls with trade deficits, which will bring in lots of revenue until economic growth escalates as a result of trade being balanced. We do not need trade agreements or jaw-boning. ...


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Border Adjustable Tax
Jesse Richman, 2/17/2017

The Tax Foundation has put out an analysis of the House Border Adjustable Tax plan.  This highlights some of the key elements of the plan, but may be incomplete in particular ways.  The full analysis is available here: 

They make a number of valuable points about the plan.  However, some of the arguments made depend upon assumptions which may not necessarily be relevant in the current situation. 

One key assumption is that trade is balanced (at least in the longish run).

"Both an origin-based tax and a destination-based tax are trade-neutral and switching from one to another does not impact the trade balance. This is because exports and imports are two sides of the same coin. Exports are needed to pay for imports and imports are the returns to exports. As such, taxing exports ends up reducing imports and taxing imports ends up reducing exports."

If trade is balanced, then of course this is right.  On the other hand, the US has run a remarkably robust trade deficit since the Carter administration -- four decades.  In the context of a situation in which trade is not balanced, it is worth thinking about the effects of the particular proposal.  The current corporate tax system taxes exports but not imports.  This will tend to discourage exports.  The proposed change will tax imports but not exports.  This will tend to discourage imports.  If one assumes that trade is balanced, then of course a border adjustable tax will have no effect on the trade balance.  But if in fact a country is running a trade deficit, switching the incidence of corporate taxation in a way that taxes imports instead of exports is a prudential measure likely to improve the trade balance.  It switches from a tax code that taxes exports to a tax code that taxes imports.  This is a VERY GOOD IDEA likely to improve the trade balance.

The paper makes a number of good points about the benefits of the proposal.  

"There are actually some non-economic advantages that may make the switch to a destination-based tax worthwhile. Paired with other aspects of a DBCFT, the border adjustment would make many strategies of profit shifting under current law impossible. It would also be possible to lift some of the complex anti-base erosion provisions that typically come with origin-based tax systems. Lastly, a border adjustment in a DBCFT raises a significant amount of revenue in the budget window, which can be used to finance other important reforms such as full expensing and lower marginal tax rates."

Under the current tax system, multinational corporations engage in extensive tax shifting and tax shelter strategies.  I would argue that the presence of these strategies is bad for the economy in multiple ways...


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Paul Ryan’s Border Adjustment Tax vs. Donald Trump’s Targeted Tariffs -- we're published in American Thinker this morning
Howard Richman, 2/10/2017

In this morning's American Thinker, we compare Paul Ryan's Border Adjustment Tax vs. Donald Trump's Targeted Tariffs.

President Trump's proposed tariffs ("targeted" upon just the countries with which the U.S. has huge trade deficits) would balance trade and bring back American manufacturing jobs and economic growth. Paul Ryan's "Border Adjustment Tax" would not.


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Socialism Causes Slow Growth and Is Prone to Violence
Raymond Richman, 2/7/2017

During the recent presidential election, candidates for the Democratic Party nomination included a self-styled “democratic socialist”, Sen. Bernie Sanders. The adjective democratic is used by him to distinguish himself from totalitarian socialists like Adolf Hitler and Joseph Stalin, both noted for the number of their citizens they killed. Violence was a trademark of the Nazis, the National Socialist party of Germany, but our mixed-economy, defined as partially socialist, is not without violence from socialists. Sanders’ followers used violence to prevent a Trump rally in Chicago during the recent Republican primary for President and they organized protests at most of his rallies. Even post-election the violence continues. The violence at our Universities aimed to prevent conservatives from speaking is a manifestation of socialist intolerance for anti-socialist ideas.

Socialists seem unable to accept the reality of Trump’s election and anti-Trump protests continue. The reader may argue that many protestors are Democrats who do not consider themselves to be socialists.  But to be a Democrat you have to believe in government intervention in the economy, in the mixed economy, an economy with increasing socialist  tendencies.

Socialist are utopian and a world free of competition has always been attractive to young people. I believed in a cooperative commonwealth as a young man. But when I observed the co-op movement in England that created the first supermarket but failed to expand and that co-ops in the U.S. refused to branch out, I realized that co-ops and socialist governments lacked the incentives necessary to grow and develop, lacked the dynamism of a free market economy....


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Comments on the news 2/5/2017
Raymond Richman, 2/5/2017

1) The big news was that the Federal Appeals Court of San Francisco temporarily at least supported the lower court judge’s  ruling staying the administration’s 90 day ban on immigration from seven countries with Moslem majority populations. What was surprising to me as a lawyer is that they allowed the ban while they considered the arguments. Normally, the practice is to stay the judge’s ruling while it considers the arguments. The Appeals Court gives the impression that political considerations determined their ruling. An anti-Trump judiciary? If so, shame on them.

2) A very interesting article appeared in the Feb.  3,  2017 issue of Quartz magazine, entitled “What Steve Bannon really wants” by Gwyn Guilford.

Following is a quote from the article:

“Bannon’s political philosophy boils down to three things that a Western country, and America in particular, needs to be successful: Capitalism, nationalism, and “Judeo-Christian values.” These are all deeply related, and essential. ...


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The Scaled Tariff, a Single Country Variable Tariff, Is All That Is Needed to Balance Trade
Raymond Richman, 1/25/2017

Trump is being importuned to impose a border tax. A border tax is foolish and unnecessary. In the first place, it applies to all our trading partners even those with whom we enjoy a chronic trade surplus. The problem that needs correction are our chronic trade deficits with a handful of countries that has impoverished millions of American manufacturing workers. That is easily corrected by scaled tariffs which rise and fall automatically as the trade deficit widens or contracts. The scaled tariff is a single country variable tariff which has the virtue of raising huge amounts of revenue so long as the trade deficit remains substantial.

The scaled tariff requires no new bureaucracy because tariffs already exist and are administered by an existing revenue authority.  A border tariff is a new tax and will require a new bureaucracy to determine how large it should be and to administer it.  A border tax imposed on imports from countries with whom we have a trade surplus is an undesirable mercantilist policy on our part, something we oppose when others do it. International law recognizes the right of nations to impose tariffs for the purpose of correcting a trade deficit.

 Trade deficits have a number of causes ranging from difference in countries’ savings rates, unjustified wage differences, unjustified barriers to imports and subsidies to exports, and exchange rate manipulation, inter alia.  Regardless of their cause, countries have the right to impose tariffs so long as the trade deficits continue.

The U.S. government  has the obligation to ensure balanced trade with every major trading partner over the long-run. Balanced trade is always beneficial to all trading partners in the long-run. Unbalanced trade is often beneficial to countries importing capital goods to produce more goods or new goods for their own residents. Many of the countries with which we have a favorable balance of trade are in this category. ...


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Soros Finances anti-Trump Women's March
Raymond Richman, 1/22/2017

Ex-WSJ Reporter Finds George Soros Has Ties To More Than 50 "Partners" Of The Women’s March | Zero Hedge

Ex-WSJ Reporter Finds George Soros Has Ties To More Than 50 "Partners" Of The Women’s March

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Former WSJ reporter Asra Nomani asks in the NYT's "Women In the World" section what is the link between one of Hillary Clinton’s largest donors and the Women’s March? Her answer: "as it turns out, it’s quite significant."


Here is what else she discovered.

Billionaire George Soros has ties to more than 50 ‘partners’ of the Women’s March on Washington

In the pre-dawn darkness of today’s presidential inauguration day, I faced a choice, as a lifelong liberal feminist who voted for Donald Trump for president: lace up my pink Nike sneakers to step forward and take the DC Metro into the nation’s capital for the inauguration of America’s new president, or wait and go tomorrow to the after-party, dubbed the “Women’s March on Washington”?

 The Guardian has touted the “Women’s March on Washington” as a “spontaneous” action for women’s rights. Another liberal media outlet, Vox, talks about the “huge, spontaneous groundswell” behind the march. On its website, organizers of the march are promoting their work as “a grassroots effort” with “independent” organizers. Even my local yoga studio, Beloved Yoga, is renting a bus and offering seats for $35. The march’s manifesto says magnificently, “The Rise of the Woman = The Rise of the Nation.”

It’s an idea that I, a liberal feminist, would embrace. But I know — and most of America knows — that the organizers of the march haven’t put into their manifesto: the march really isn’t a “women’s march.” It’s a march for women who are anti-Trump. ...



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The Myth of a Global Manufacturing Employment Decline
Jesse Richman, 1/21/2017


...The graph rather speaks for itself.  It is immediately obvious that total manufacturing employment including the USA, the Rest of the West, and China has been on the increase rather than the decline.... 


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Keep the Focus on Net Exports
Jesse Richman, 1/19/2017

The favorite line or political strategy for those who favor trade deals that end up weakening the US economically is that the deal will increase US exports.  President Obama bought this line.  Many Republicans in Congress have too.  The problem is that a focus on exports alone can be deeply misleading. 

To think about why, let's start with one of the jokes my father tells periodically about why he quit vegetable and sheep farming in favor of other pursuits.

The hardware store owner sees a man come in to the store one week.  He buys twenty pitchforks for $20 each. 

The next week the same man comes back, and buys twelve pitch forks for the same price.

The next week the same man purchases another eight pitchforks. 

Finally the shopkeeper cannot suppress his curiosity.  "Why are you buying all of these pitchforks?  What are you doing with them?"

"Well," said the man, "I buy them from you for $20, and then I resell them for $15."

"But you lose at least five dollars for every fork you sell!"..

"Yup," said the man, "But it beats farming!"

Exports are a good thing.  Exports create jobs for those who work to produce the exports.  And they provide countries with the means to purchase imports.  

But just as selling pitchforks for less than one paid for them is a recipe for losses and debt, so too is making a deal that raises exports while raising imports much more.  The jobs displaced in the import-competing sectors will not be offset by the jobs created by the much smaller gains in the export-competing sector. 

Thus, when politicians speak of exports alone without also discussing imports, they ought to be taken to account.  How will their proposed policies influence the overall picture of US trade?  

Here are some other metrics to keep in mind....



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Walll Street Journal's Recent Bias Against Trump Revealed By Its Editor
Raymond Richman, 1/5/2017

Wall Street Journal editor-in-chief Gerard Baker on 1-5-2017 wrote an opinion piece entitled “Trump, ‘Lies’ and Honest Journalism” in which he argues that when he defended his advice to  the press to “be careful about using the word ‘lie’. ‘Lie’ implies much more than just saying something that’s false. It implies a deliberate intent to mislead.”  “Mr. Trump certainly has a penchant for saying things whose truthful is, shall we say for now, challengeable” and “Given the number of times Mr. Trumps seems [sic!] to have uttered falsehoods” and “Mr. Trump has a record of saying things that are, as far as the available evidence tells us, untruthful: thousands of Muslims celebrating 9/11 on the rooftops of New Jersey, millions of votes cast illegally in the presidential election, President Obama’s supposed foreign birth” and “When Mr. Trump claimed that millions of votes were cast illegally, we noted, high up in our report, that there was no evidence for such a claim. No fair-minded or intelligent persons was left in any doubt whether this was a truthful statement.” He writes further, “Now, I may (sic!) believe that many of the things Mr. Trump has said in the past year are whoppers of the first order. But there is a difference of believing that, with reason (sic!)—my induction from knowledge of the fact—and reporting it as a fact. The latter demands a very high standard of reporting.” And finally, he concludes, “What matters if that we report the story and that we find the truth. It’s our job also to point out when candidates, presidents, chief executives, public officials or other s in the news say things that are untrue. But I’m content for the most part to leave the judgment about motive—and mendacity—to our readers, who are more than capable of making up their own minds about what constitutes a lie.”...


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George Washington’s Farewell Address Had More to Say Than Avoid Entangling Alliances
Raymond Richman, 12/27/2016

 In Washington’s Farewell Address 1796, the most frequently quoted passage is his admonition that the USA should avoid entangling alliances. On entangling alliances, he wrote,  “It is our true policy to steer clear of permanent alliances with any portion of the foreign world…Taking care always to keep ourselves by suitable establishments on a respectable defensive posture, we may safely trust to temporary alliances for extraordinary emergencies.”  He wrote: “Observe good faith and justice towards all nations; cultivate peace and harmony with all.  ..In the execution of such a plan, nothing is more essential than that permanent, inveterate antipathies against particular nations, and passionate attachments for others, should be excluded.” What would he think of NATO and our bringing countries bordering Russia into a military alliance directed against Russia? Any NATO country could conceivably force us into a war with Russia.

Another area of concern to Pres. Washington was foreign trade. Regarding trade with nations, he wrote, “The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible… constantly keeping in view that it is folly in one nation to look for disinterested favors from another; that it must pay with a portion of its independence for whatever it may accept under that character; that, by such acceptance, it may place itself in the condition of having given equivalents for nominal favors, and yet of being reproached with ingratitude for not giving more. ...


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The Corporate IncomeTax Is the Worst Tax Ever Invented
Raymond Richman, 12/24/2016

The corporate income tax is the worst tax ever invented. Economists who have studied and written about its incidence, that is who actually pays the tax, agree that it varies from industry to industry. Monopolists pass the tax on to consumers so that although they appear to be paying the tax they do not bear the burden of the tax. It even varies among monopolists depending upon how much competition they have from competing products. It even varies among firms in highly competitive industries like supermarkets. Some have some monopoly power depending on their location and the number of supermarkets in their vicinity. The corporate income tax violates every principle of taxation. Not only does much of it fall on consumers, but the tax penalizes workers who depend on pensions and IRAs, etc. for their retirement. The income from the wages invested in their retirement schemes is taxed at the maximum rate of corporate tax, currently 35% so their pensions and retirement income is much less than it would be if the tax were 15 or 20% as would be if it is were taxed under the personal income tax. The rich shareholders pay no personal income tax on their corporate income except dividends, and they escape the highest rates by buying back shares rather than pay dividends, a practice that is increasing.

So why don’t we tax corporation as partnerships are taxed. Partners pay personal income taxes on their shares of the partnership’s income. The reason given historically is that corporations have the privilege of limited liability for their shareholders. If the corporation fails, shareholders have no additional liability to what they have already invested in the corporation. But even this argument no longer holds. In most States, perhaps all, partnerships and proprietor ships may elect to be treated as limited liability companies. Increasingly one see the letters LL.C. indicating that only the assets of the company are liable for its debts.

So what is the excuse for a separate corporate income tax with all its inequities and bad economic practices that the corporate income tax encourages. No excuse at all  As for the abuses, we’ve written about them in articles on this blog in the past.

An essential companion reform is changing the rules for depreciation under the corporate and the personal income tax as well. ...


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Four Ways to Balance the Budget and Boost the Economy by Taxing Foreigners - we're published in American Thinker this morning
Howard Richman, 12/22/2016

In the American Thinker this morning, we suggest four tax changes that Congress could enact to balance the budget and boost the economy at the same time by taxing foreigners:

  1. Close the foreign savings tax loophole.
  2. Tax foreign dollar reserves.
  3. Integrate the corporate and personal income taxes.
  4. Impose trade balancing tariffs.

Our ballpark estimate is that these four proposals would bring the government $465 billion in tax revenue the first year. To read our commentary, go to:


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Trump Is Right That the Trade Deficits Have Crippled the U.S. Economy
Raymond Richman, 12/20/2016

In its issue of December 19, Barron’s magazine published an article entitled “Tackling Trump’s Trade Plan” written by a member of its staff, Gene Epstein, who holds an M.A. in Economics from the New School. Judging from his article, Epstein appears to know little about the theory of international trade.  He begins by writing how awful the Smoot-Hawley Tariff Act of 1930 was. He writes that “U.S foreign trade plunged by 40%, which helped drag the economy into the Great Depression.” That is nonsense. Net Exports, which is the net effect of foreign trade on Gross Domestic Product, was 0.3 billion in 1930, 0 billion in 1931 and 1932 and did not become negative until Pres. Roosevelt’s New Deal policies made it -0.2 and -0.3 in 1935 and 1936. The Snoot-Hawley tariff, contrary to widespread belief by economists and journalists, not only had no effect on the Great Depression which began three years before the tariffs became effective. It has been used falsely to attack anyone who is for balanced trade and opposes free trade. Of course, trade does not need to be balanced with every nation but over time needs to balanced against the rest of the world. A look at the Bureau of Economic Analysis’ Gross Domestic Product accounts shows that the U.S. has been suffering chronic trade deficits for decades, which has converted the U.S. from the world’s leading creditor to the world’s leading debtor since about 1985, halved the economic growth rate,  and caused the loss of millions of good-paying U.S. manufacturing jobs. Our principal trading partners pursued a trade surplus policy to promote their economic growth at our expense.

When trade is balanced, all trading partners gain from trade, obtaining goods they value more by trading for goods they value less. When trade is unbalanced the trade surplus country trades some of its goods for an IOU of the other. Japan used those IOU’s to buy productive assets already in existence in the U.S., the Rockefeller Center. China and others have been buying U.S. businesses. Buying U.S. real estate and existing businesses does not create demand for U.S. labor. The U.S. by running chronic trade deficits with the rest of the world is not exchanging  goods it values less for goods it values more. It is increasing employment abroad while decreasing employment at home. ...


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Raymond Richman, 12/15/2016

Two items dominate the news today. The first and occupying the most time on television and space in the printed media are the “leaks” from the CIA that it believes Russian hacked the DNC and provided WikiLeaks with the emails that embarrassed Hillary Clinton’s campaign and caused so many voters to support Trump. Presumably the Russians got the FBI to call attention to Hillary’s posting classified information on her internet servers which also influenced many voters. And no doubt the Russians were responsible for the turnout of more than 60 million voters who voted for Trump. My own view as a person who served as Executive Officer of a B-17 Bomb Squadron which conducted nearly 200 missions over Germany during World War II, is that Russian intelligence if it did not try to help defeat an American administration that got its Baltic neighbors to join in a military pact aimed at Russia and which helped overthrow a government in the Ukraine, Russia’s neighbor. a nation to whom Russia had granted territory housing Russia’s major naval base on its Southwestern, would be derelict in its duty to defend Russia’s interests. Russia has no reason to believe that Trump will change U.S. policy other than the fact that Trump has indicated a willingness to treat Russia civilly as Presidents G.W. Bush and Barack Obama did not.

The CIA has a history of intrusions in domestic politics and in the internal affairs of other independent nations to affect elections and overthrow governments. One could argue that is its duty to promote the interests of the U.S. abroad whatever the means. The CIA brought down a Republican President once before by leaking information that forced Richard Nixon to resign the presidency. ...


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Raymond Richman, 12/14/2016

Democrats and Never-Trump Republicans want an investigation into Russian hacking of the Democratic National Committee’s emails, believing, probably falsely, that the Russians were responsible for the leaks that may have influenced the election in favor of Trump. But the leaks especially Wiki-leaks only revealed e-mails that were never denied. They contained news that the American people were entitled to know. Trump’s victory was a populist, i.e., popular, event similar to Brexit  in the U.K. and the recent elections in Italy. If the leaks were the result of Russian hacks, Russia should be thanked by the U.S. Congress on behalf of the American people for revealing the corruption within the Democratic Party, extending up to its chairwoman. Let’s hope we have more hacks that reveal corruption in Washington and anywhere else. If our intelligence is not hacking Russian emails, it should. U.S. intervention around the world is clear to see. We and NATO, our creation and principal supporter,  supplied weapons to rebels in Yugoslavia, Libya, Syria, and others, organized the overthrow of the legally elected pro-Russian government of the Ukraine, recruited into NATO countries neighboring Russia. Imagine what they would be saying if Russia were join Cuba, Mexico, and Venezuela into a military pact. Revealing the results of hacking may be a sin only when it does not reveal public corruption.


Democrats and the Never-Trump Republicans and most of the media are saying how awful it is that Trump is appointing qualified skeptics civilians and former generals to cabinet posts. In their view, he should be appointing politicians, who as a group organized the decline of America from its former greatness, promoted the fallacious ideas that global-warming is man-made, that carbon dioxide in the atmosphere causes global warming, and the idea that raising the minimum wage is good economics, etc. That these are fallacious ideas has been pointed out on this blog repeatedly.   ...



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Policies President-Elect Trump Needs to Reconsider
Raymond Richman, 12/13/2016

There are several policies that President-Elect Donald Trump appears to have failed to think through. The following are some of those that we believe he has given insufficient thought to. These need to be brought to his and his advisors' attention.

First, the U.S. trade deficits need to be reduced, not by deals with each country or threats to American manufacturers re-locating their factories abroad but by the simple expedient of single-country-trade-balancing tariffs. China and all other countries want to grow their economies. It is not up to the U.S. or the World Trade Organization to mandate the policies they should pursue. Free trade is nonsense except where there is a common currency, no impediments to the flow of capital and labor, and no barriers to trade. Governments, even international agencies have no right to force independent nations into a single mold. Countries may adopt mercantilist policies such as tariffs and artificial barriers to imports, subsidies to exports, and currency manipulation but the remedy is not to go to great expense of time and money to prove and litigate such practices and mandate their elimination as the WTO was created to do or to negotiate their elimination as the president-elect wants to do. Every country has the right which is authorized by all multi-lateral international trade agreements to impose a trade-deficit-balancing- tariff. The tariff should be on all goods coming from the trade-surplus country not merely on imports of U.S. companies that have re-located factories there. The mechanism is simple as described in our book Balanced Trade (Lexington Books, 2014). Trade deficit countries have little to fear from such trade-balancing; trade- surplus countries are at an extreme disadvantage and their threats of a trade war hardly worth considering. An argument frequently made is that consumers will suffer which is hardly worth considering given that American workers suffer unemployment from the trade deficits as we have shown time and time again in our publications.

Second, President-elect Trump has proposed lowering the rates of the corporate income tax to make U.S. corporations more competitive. Unfortunately, the ownership of the shares of corporations is highly concentrated so cutting the corporate income tax will worsen the distribution of income and wealth. There is a simple solution. Eliminate the corporate income tax entirely and tax corporate earnings as personal income. Even with a cut in personal income tax rates, proposed by Mr. Trump, total revenues will be unaffected. ...


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Trump's First Priority Should Be to Balance Trade
Raymond Richman, 12/10/2016

The real drag on the American economy since the 1970s has been the foreign trade deficits and the multilateral trade agreements which caused the loss of millions of American manufacturing jobs, the movement of thousands of American companies overseas, and converted the U.S. from the world’s leading creditor to the world’s leading debtor. Balancing U.S. trade with the rest of the world is the only economic policy capable of restoring the U.S. economy and making the U.S. really great again. All the other Trump initiatives will do some good but cannot arrest the decline of the American economy and the stagnation and reduction in the American standard of living.  These facts are concealed by the booming stock market which is based on unrealistic expectations. Without balancing trade, the decline in American power and economic well-being will end in a political Armageddon. ...


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Are Trade Agreements Necessary?
Raymond Richman, 11/29/2016

Most economists are believers in free trade but there is nothing in economic theory that justifies a free trade policy. There is plenty of international trade theory that shows that balanced trade is beneficial to trading partners but there is no economic theory that justifies free trade and then only when special conditions apply. Chronic trade deficits are to be avoided because they usually involve loss of jobs and growth in the trade deficit country in favor or gains in jobs and growth in the trade surplus country. Free trade between countries is justified only when the countries have the same monetary unit, labor and capital are freely mobile between the countries, and none of the countries impose barriers to the free movement of goods. In effect, all the countries involved are in a common market. This is the case in the U.S. where the Constitution imposes these obligations on the States.

U.S. economists have always favored increased trade between nations. When the U.S. experienced     chronic trade surpluses, American economists opposed protective tariffs arguing for free trade. But they failed to distinguish between free trade and balanced trade. Prof. Milton Friedman is often quoted as favoring free trade but that was when the U.S. enjoyed chronic trade surpluses. Another great economist, Prof. John Maynard Keynes was an advocate of free trade but when the U.K. experienced chronic deficits, he stated that Britain should not tolerate being the victim of beggar-one’s neighbor policies pursued by countries to gain chronic trade surpluses at the U.K.’s expense.

The movement toward freer trade gained impetus with the inauguration of the series of General Agreements  on Tariffs and Trade in 1947 culminating in the conclusion of the Uruguay round in 1994, and the creation of  a new international agency, the World Trade Organization in 1995. What characterized these agreements is that they were all called “free trade” agreements even though countries continued to levy tariffs and impose non-tariff barriers on imports and to subsidize exports. As a result of the trade agreements, the U.S. in particular began to experience chronic trade deficits. In a paper written in 1995, I wrote:

The log-rolling negotiations that accompanied the revision of the GATT treaty gave substantial benefits to some American firms but sacrificed others. Owners of intellectual property and American companies that have established manufacturing facilities abroad are clearly the big winners. …The big losers are the employees of companies that do their manufacturing in the U.S. and the U.S. taxpayers who will have to make up the billions in lost tariff revenues and smaller taxes paid by displaced U.S. workers. Nor will these costs be compensated by benefits to the American consumers of imported goods. ...



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It's Morning in America 2.0 -- Peter Navarro in SF Chronicle
Howard Richman, 11/13/2016

Peter Navarro, Trump's chief economic advisor, had a commentary about Trump's election victory (It's Morning in America 2.0) in which he made the case that the Trump administration will lead to an economic resurgence. He states that the Trump program will create a stimulus to the economy in four ways:

President Trump will hit four points of the stimulus policy compass: tax cuts, streamlining regulation, reducing restrictions on fossil fuels production, and, above all, eliminating a chronic trade deficit that shaves at least a full point of GDP growth off the American economy each year.

Regarding Trump's trade policy he wrote:


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Joseph Wharton is smiling down on Donald Trump
Howard Richman, 11/10/2016

Joseph Wharton founded the Wharton School of Business at the University of Pennsylvania in order to insure that America would protect its industries from the economic attacks of other nations. Michael Lind pointed this out in a 2011 commentary:

In 1881, in order to promote protectionism, a Philadelphia industrialist named Joseph Wharton founded the first business school in the U.S. Wharton viewed free trade as a “fungus … which healthy political organisms can hardly afford to tolerate.” In his deed of gift to the Wharton School of Finance and Economy at the University of Pennsylvania, the industrialist specified that the school should teach “how by craft in commerce one nation may take the substance of a rival and maintain for itself virtual monopoly of the most profitable and civilizing industries; how by suitable tariff legislation a nation may thwart such designs.” He made his gift conditional: “The right and duty of national self-protection must be firmly asserted and demonstrated.”

Recent presidential candidates of the Democrat Party have promised, when running, to protect American industries from foreign attacks, but once elected, they have failed to do so. As Lind noted humorously:...


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How the Media Show Their Anti-Trump Bias and Why I Favor Trump  
Raymond Richman, 11/7/2016

You may believe that the media is anti-Trump because they believe he is unqualified to be President. Nothing is further than the truth. The real issue is his position on foreign trade. Free trade has become a Republican and Democratic ideology. There is nothing in economic trade theory that suggests free trade is an appropriate public policy unless the following conditions exist: the trading partners have a common currency, there is free movement of capital and labor, and no trading partner can impose artificial barriers to trade on imports from the other. The only place where these conditions hold is between the States of the USA because the U.S. constitution mandates them. Of course, multi-nationals are for free trade; it is the source of great profits.

And they favor globalization because it reduces the sovereign power of national governments. You did not hear a peep from any of them when the World Trade Organization ordered the U.S. government to rescind a law that the U.S. congress enacted requiring meat products to be labeled to show the country of origin. Can you believe that the U.S. Congress complied? And the U.S. media with the exception of Fox News, the Washington Times, and a few others fall in line with the desires of the multi-nationals as does the pre-Trump leadership of the Republican Party and the current leadership of the Democratic Party. Take as an example of media bias the following analysis of a single edition of a formerly conservative newspaper.

I read the Tribune Review, Pittsburgh edition, published on November 6, 2016, two days before the national presidential and Congressional elections, and what did I read? No news at all about the positions of either Donald Trump or Hillary Clinton. ...


Comments: 1

CERN Study Casts Doubt on Man-made Global Warming
Raymond Richman, 10/18/2016

The following article appeared in London's Sunday Express in May, 2016. I came across it while browsing on Google. I found no reference to the study referred to in any American news source. The study casts doubt on the validity of the belief that the use of man-made fossil fuel is the major contributor to global warming much of which occurred before man began using fossil fuels. The assertion that scientists are in agreement with the notion that man-made global warming is principally responsible for global warming appears to be utter nonsense. The study has not been publicized in any American journal or news source that I have been able to find. A leading study of the negative effects of global warming world-wide showed that the U.S. would be one of countries least affected by global warming in the next century.  Until more research is done and it is reasonably certain that man-made fossil fuel emissions are the major or a significant cause of global warming, it is foolish to spend hundreds of billions of dollars world-wide measures to reduce fossil fuel emissions. The U.S. and the States give subsidies and tax benefits to the wealthy producers of so-called "clean fuel" a number of whom are not even American-owned and forces utilities to pay high prices for the electricity they produce.  And it gives tax credits to the wealthy consumers of Tesla and other electric and hybrid motor vehicles.

CERN is the largest nuclear research institution in, the world. The leading CERN researcher on the cause of climate change is a British scientist Jasper Kirkby. The article follows:

Has climate change been disproved? Large Hadron boffins cast shock DOUBT on global warming

MANKIND'S burning of fossil fuels may not be the primary cause of global warming, according to the shock results of a new study by scientists behind the Large Hadron Collider (LCH).



Comments: 3

Real Income Tax Reform Is Taxing Corporate Earnings As Personal Income
Raymond Richman, 10/11/2016

Although tax reforms have been proposed by all candidates for President in the primaries, they all fall far short of what most economists would propose. It is not tax reform to impose a flat tax as Sen. Cruz and others have proposed or to eliminate the estate tax as a number of Republicans have recommended. The proposals would simply eliminate all progressivity from the tax system. The personal income tax and the estate tax are the only taxes that reduce income inequality and wealth inequality in a free market system. It is not tax reform to propose a value-added tax as Pres. Obama once briefly suggested and his rival Romney said he was considering it. The VA tax, widely used in the Euro community and promoted by the IMF for every country in the world is not appropriate for countries with a federal system of government. It is a sales tax and nearly every one of the States in the U.S. imposes a sales tax. Sales taxes should be left to the States.

Real reform must call for abolition of the corporate income tax and taxing corporate earnings as personal income under the personal income tax. None of the candidates for President have proposed doing so. Instead they propose reforms that are not real reforms at all. ...


Comments: 1

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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]