Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



The Insights and Outsights of Clyde Prestowitz -- A review of his 2010 book: The Betrayal of American Prosperity
Raymond Richman, 10/27/2011

Clyde Prestowitz, The Betrayal of American Prosperity: Free Market Delusions, America’s Decline, and How We Must Compete in the Post-Dollar Era  (NY: Free Press, 2010)

In some matters, Clyde Prestowitz displays a brilliant mind. His account of how we went from the world’s leading creditor to the world’s leading debtor is better than anything that we have read. But when it comes to finding a solution to our chronic trade deficits that our foolish domestic and foreign policies have caused, he suddenly becomes “politically correct” –lacking a single original thought.  The first eight chapters are must reading for the intelligent layman and economists could profit from them. His solutions are another story; they are worth less than nothing.

In the introduction, he writes of the contrast between the incoming and outgoing cargo at the port of Long Beach. “The imports.. include everything from shoes..to computers..and photo voltaic panels for generating solar energy. The exports, though are few, consisting mostly of scrap metal and waste paper—this millennium’s dung, you might say.”  Clearly U.S. government policies have been completely ineffectual and are Trading Away Our Future, the title of our 2008 book.

He notes the popular myth that the Smoot-Hawley tariff passed in 1930 exacerbated the recession.  He argues that it was not “the disaster of conventional mythology”. We agree with him and have so argued on this site. He notes that the nearly equally high Fordney-McCumber tariff of 1922 was followed by the boom of the 1920s.

Foolish domestic policies have been compounding the errors of our international trade policies. In the foolish domestic policy known as “cash for clunkers”, Prestowitz estimates that about half the cash paid went for imported autos or parts. Likewise the continuing subsidies for wind turbines in the green energy programs went largely for purchases of wind turbines from China, hardly a stimulus to domestic employment....

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Bernanke: China's currency policy is causing the slow growth in the advanced industrial countries
Howard Richman, 10/25/2011

Ben Bernanke said the following on October 4, when he testified before a joint congressional committee:

I do think that China's currency policy, besides creating problems for them -- in particular they've dealt with some inflation lately which is a result to a large extent of their currency policy -- has been to some extent preventing global adjustment. That is, we have a two-speed recovery, where emerging market economies have been growing very quickly and advanced industrial countries have been growing very slowly. A more balanced growth path could be achieved if there was greater flexibility in currencies. China's currency policy not only affects obviously U.S.-China relations, but it also affects third party currency policies as well." 

In a commentary on October 24, University of Maryland economist Peter Morici (The Fed Is Out of Tricks to Jump Start Housing and Economy) went just a bit further. He argued that the trade deficit must be addressed in order to jump start the U.S. economy. He wrote:

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Comments: 1


Gov. Perry is On Track to Create a Million Jobs -- We're published in this morning's American Thinker
Howard Richman, 10/22/2011

We begin:

Republican presidential candidate, Gov. Rick Perry, says his energy plan will "kick start economic growth: and create 1.2 million jobs," and he is correct. He revealed his "Energizing American Jobs and Security" plan in an October 14 speech at a U.S. Steel plant near Pittsburgh, saying, "We are standing atop the next American economic boom ... energy.... But we can only do that if environmental bureaucrats are told to stand down."

Follow the following link to read it:

http://www.americanthinker.com/2011/10/gov_perry_is_on_track_to_create_a_million_jobs.html

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Gov. Perry Is On Track to Create a Million Jobs. Could Be Several Million
Raymond Richman, 10/18/2011

Maria Recio reported in the McClatchy Newspapers on Friday, October 14 (my birthday! And it was a nice gift!) that Presidential candidate Gov. Rick Perry released an energy-centric program to expand offshore drilling and domestic oil and gas exploration that he claimed would create 1.2 million jobs. Perry, who spoke at a suburban Pittsburgh steel mill said he would move to open federal lands to drilling, including Alaska's Arctic National Wildlife Refuge, and curtail the Environmental Protection Agency's regulatory powers.

Perry calls the plan “Energizing American Jobs and Security” and claims that it will “kick-start economic growth and create 1.2 million jobs." Perry said, “We are standing atop the next American economic boom ... energy." “But we can only do that if environmental bureaucrats are told to stand down," he said. "America has proven but untapped supplies of natural gas, oil and coal. America is the Saudi Arabia of coal, with 25 percent of the world's supply. Our country contains up to 134 billion barrels of oil and nearly 1.2 quadrillion cubic feet of natural gas." We said the same on this site several times that removing the restrictions on the drilling of oil on public lands and offshore would create a million jobs. Together with the drilling of natural gas in our abundant shale deposits, it would create an economic boom and millions of additional jobs.

Perry's energy proposal drew fire from President Barack Obama's campaign and environmental groups. "Gov. Perry's energy policy isn't the way to win the future, it's straight out of the past -- doubling down on finite resources with no plan to promote innovation or to transition the nation to a clean energy economy," Obama campaign spokesman Ben LaBolt said. Daniel Weiss of the Center for American Progress Action Fund, said Perry's plan "ignores a clean tech future while returning to a fossil fuel past. ... The Perry plan should be stamped 'Made By Big Oil.” Texas Democratic Party spokeswoman Rebecca Acuna said Perry "wants to abolish the Environmental Protection Agency and run the federal government like he runs Texas." This is the kind of garbage the ultraleft uses to attack the ideas of opponents instead of debating the issues. ...

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Romney's position against China's intellectual property theft resonates at Microsoft
Howard Richman, 10/14/2011

China freely allows piracy of American CDs, DVDs and software. Potential Republican presidential candidate Governor Mitt Romney says he will do something about it. As a result, he got a "warm reception" at Microsoft. A Reuters' story states:

Romney received a warm reception from the audience of about 300 Microsoft employees. The world's largest software maker is especially interested in intellectual property issues, having lost billions of dollars in Chinese sales over the years due to piracy.

Unfortunately, what Romney says he would do about it would be ineffective:...

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Comments: 3


Romney Won! He would tackle trade, repeal Obamacare, stop throwing money away on green jobs, reduce bank regulation, and continue strong defense spending.
Howard Richman, 10/12/2011

Governor Mitt Romney won the October 11 debate on the economy in Hanover New Hampshire. Here are some selections from what he said:...

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Comments: 5


Senator Webb Introduces Bill to Combat Chinese Intellectual Property Grabs
Jesse Richman, 10/7/2011

Senator Webb recently introduced legislation aimed at combating China's intellectual property grabs, particularly when the technology being 'transfered' was developed with U.S. government support.  I've copied his press release below.  Note the examples of the massive technological transfers U.S. multinationals have been forced to make as a condition for doing business in China.

Examples of China profiting from U.S. taxpayer-funded technologies:

    • General Electric has transferred valuable aviation avionics technology to state-owned Aviation Industry Corporation of China.  The U.S. government has long supported the aviation industry through procurement initiatives and federal research projects.  The fruits of U.S. taxpayer support will now be incorporated into Chinese commercial airliners, in line with Beijing’s desire to develop an internationally competitive aircraft industry that could rival U.S.-based Boeing.  (Source: The Washington Post)

    • Westinghouse Electric has transferred more than 75,000 documents to Chinese counterparts as the initial phase of a technology transfer agreement in exchange for a share in China’s growing nuclear market. These documents relate to the construction of four third-generation AP1000 reactors that Westinghouse is building in China.  U.S. taxpayers supported the development of the AP1000 as well its predecessor, the AP600, through decades of nuclear energy research and development at the Department of Energy (DOE).  Moreover, the DOE Nuclear Power 2010 program provided years of government support for the design and licensing of this reactor. (Source: The Financial Times)

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American Production of the iPod? Setting the Record Straight
Jesse Richman, 10/4/2011

The iPod gets used as an example a lot in the discussion of global trade.  Those who defend the current system of one-way 'trade' like to emphasize that although China assembles the iPod, the components (some of them anyhow) come from elsewhere.  This is of course absolutely true.  I heard this argument made again today, but it was accompanied by the false claim that many of the components come from the US.  Perhaps a lot has changed in the last several years, but an article in 2007 by eminent economist Hal Varian in the New York Times sets the record straight on this, noting that at the time the U.S. produced portion of the iPod amounted to "$8 to various domestic component makers."  Thus, if the ratios have stayed the same as those Varian cites, the iPod is roughly 1/20 manufactured in the United States, with most of the remaining 19/20 of its manufacture conducted in Asia. 

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Two Great Economists Offer Solution to Restore U.S. Economic Growth
Raymond Richman, 10/4/2011

“Any considered examination of the prospects for a major economy is dependant, as never before, on that economy’s performance in the realm of international trade.” With that remarkable beginning, Profs. Ralph Gomory and William Baumol note that their fellow economists, “having been nurtured on the doctrine of mutual gains from trade, seem to resist serious consideration” of the possible negative effects of free trade  “and the threat they pose to the welfare of the United States and other countries.”  Their article entitled, “Trade, education, and innovation: Prospects for the U.S. economy” appeared in the Journal of Policy Modeling recently.This lack of awareness among economists was the principle reason for writing our own book, Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before It's Too Late (Pittsburgh: Ideal Taxes Assn, 2008). And as we have stated many times on this site, the so-called "free trade" ideology has been an unmitigated disaster for the U.S.

Profs. Gomory and Baumol in their seminal book Global Trade and Conflicting National Interests (MIT Press, 2001) challenged the centuries old doctrine of mutual gains from trade based on the Ricardian theory of comparative advantage. They showed in the book and summarize their argument in this paper that countries can, by employing mercantilist or protectionist policies, achieve a competitive advantage that is harmful to their trading partners.

They arrive at the remarkable conclusion that the invention of new products, like I-pad, laptop computers, and many others, without retaining the manufacture of those products in the U.S. is causing Americans a great deal of harm.  Citing China as an example, they note that China has no tradition of inventing new products but it has succeeded in inducing American inventors to outsource the production of their inventions to China. Andy Grove, a founder of Intel, recently pointed out that a large number of  high tech American product innovations are outsourced for production in China, with the effect that Apple, HP, Dell and dozens of  others have ten times as many employees in China than they have in the U.S.  Chinese workers gain good manufacturing jobs while U.S. manufacturing workers face a lower standard of living competing for fewer and relatively inferior jobs. ...

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An Economist's Look at Mythical Man-Made Global Warming(AGW)
Raymond Richman, 10/2/2011

As an economist and a former student of Prof. Milton Friedman at the University  of Chicago, I am by education skeptical about any theory of climate change that explains warming but not cooling. The anthropogenic theory of climate change (AGW) blames man-caused carbon emissions for global warming but cannot explain past periods of global warming and cooling when there were no human beings to blame for climate change. Another economist who shares this view is former Czech President and Prime Minister,Vaclav Klaus, who fought against Communism and recognized in the movement that blames man for causing global warming, a new threat to our freedom saying:

I feel threatened now, not by global warming — I don’t see any — (but) by the global warming doctrine, which I consider a new dangerous attempt to control and mastermind my life and our lives, in the name of controlling the climate or temperature. … I used to live in a similar world called communism. And I know it led to the worst environmental damage the world has ever experienced.” (As quoted in the Herald Sun of Melbourne , 7/28/11)

It not only cannot explain past periods of global warming and cooling, it cannot explain the most recent decade of global cooling. Just fifty years there were allegations that we were entering a period of global cooling. There are reasons to be skeptical.

But even if the AGW theory had some basis, economists have to ask , “What is the best policy to deal with global warming?” Whatever policy is selected should meet the standard economic criteria of economic benefit-cost analysis. World leaders have picked the worst policy --forcing businesses and households into the most costly and ineffective policy -- reducing man-made carbon emissions which has had the effect of lowering living standards of workers around the world. ...

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"What Would Keynes Do?" The Diagnosis is Right. The Solution?
Jesse Richman, 10/2/2011

Of course, others (even in the pages of this magazine) have pointed out that the US external trade debt is a bad thing, though it gets very little mention in our political debate. But it has a whopping big role in the current global crisis. The world filled up with foreigners holding dollars. They put the money back into the US economy in the form of loans—Treasury bonds, to be sure, but also corporate bonds, financial instruments, prime loans, subprime loans, payday loans and all manner of corporate debt. And the bloating of the financial sector—unregulated—led to the collapse.

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Obama contributing taxpayer money to global warming god
Howard Richman, 10/1/2011

At a California fundraiser, President Obama explained why his contributions of billions of taxpayer dollars to bankrupt and near-bankrupt solar power producers are worthwhile. According to Obama, if appeased, the global warming god will cause the rains to come in their season, and thus prevent droughts and fires like the ones currently occurring in Texas. Specifically, he said:

Some of you here may be folks who actually used to be Republicans but are puzzled by what’s happened to that party, are puzzled by what’s happening to that party. I mean, has anybody been watching the debates lately? You’ve got a governor whose state is on fire denying climate change...

But the high priests of global warming haven't proven to be a very successful in their prophesies:...

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    Wikipedia:

  • [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]