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Richmans' Trade and Taxes Blog
Jason L. Riley, Please Stop Helping Us, How Liberals Make It Harder for Blacks to Succeed (NY:Encounter Books, 2014)
This book is a must read for everyone, white or black, just as another great book by a distinguished black economist, Thomas Sowell’s Black Rednecks and White Liberals (NY: Encounter Books, 2005) is also a must read.
Riley begins by noting that 90 percent of more of black voters continue to support Pres. Obama even though blacks have suffered more from his economic policies than any other ethnic group. He writes that the President and Attorney General Holder and the NAACP oppose voter ID laws as discriminating against blacks even though “in places like Georgia and Indiana minority turnout increased after the laws were passed.”
He contrasts the positions of black historical figures W. E. Du Bois and Booker T. Washington, the latter urging blacks to focus on independent black schools and businesses, on acquiring “property, industry, skill, economy, intelligence, and character” while the Du Bois “argued that civil rights are more important because political power is necessary to protect any economic gains.”
Du Bois’s strategy was achieved political success as indicated by the fact that the number of black officials grew between 1970 and 2001 from “fewer than 1,500 to more than 9,000.” Meanwhile, the poverty rate among blacks declined from 87 to 47 percent from 1940 to 1960 before the civil rights victory but grew not at all between 1972 and 2011 after the civil rights victories and black welfare dependency.
The author contrasts the economic success of Asians who have tended to avoid politics and the Irish, who achieved success in politics but it was only after the decline of the Irish political machines that their “average Irish incomes began to rise” relatively. He points out that black political leaders often voted for policies which denied jobs and benefits to the persistent black underclass....
Taxing Corporations As Partnerships Solves the Problems of Inversions and Outsourcing
Treasury Secretary Jacob Lew announced tightened tax rules to deter U.S. companies from moving their headquarters overseas to lower-tax countries, a practice called an inversion. Inversions sometimes take place to avoid paying taxes on the acquired company’s income which before the inversion paid taxes only to the country in which it has its headquarters. An inversion is not to be confused with outsourcing, the practice of closing factories and operations at home and manufacturing products and parts overseas. Outsourcing not only affects tax revenue but it also causes massive unemployment here at home, and worsens our balance of trade. Inversions do not. Hardly any jobs have been lost by inversions in contrast with the loss of hundreds of thousands of jobs lost by outsourcing. Oddly, the administration has taken no action on outsourcing.
Nearly all the leading American corporations engage in outsourcing, including Apple, Nike, Honeywell, Caterpillar, Hewlett-Packard, Motorola, IBM, NCR, Lev-Strauss, and many, many others. Most, like Apple, add insult to injury by importing the products they produce overseas, worsening the U.S. trade balance. Inversions have little effect on employment and no effect on the trade balance. Why the Administration’s silence about outsourcing? One might hazard a guess. The Treasury Secretary’s silence perhaps can be explained by domestic politics. Many of the corporations, their owners, and their trade associations contribute to the Democratic Party and the US chamber of Commerce and the National Association of Manufacturers officially espouse free trade.
As an illustrative case, take Burger King’s inversion with Jim Hortons of Canada. It does not reduce U.S. revenues at all from Burger King’s and Tim Hortons’ operations in the U.S. All the Burger Kings and Tim Hortons in the U.S. will continue to pay U.S. and state corporate income taxes. Admittedly, the movement of Burger King’s headquarters will cost the U.S. tax revenue and Canada will gain some. Canada’s top general corporate tax rate is 28 percent (but see below) compared with the U.S. 35 percent, so Burger King would stand to lose from the merger if Tim Hortons’ income were taxed at the U.S. 35 percent rate. The real culprit is a foolish U.S. income tax system.
Congress needs to seek out testimony from those not tainted by foreign donations
Jesse has already published two postings about the New York Times expose (Foreign Powers Buy Influence at Think Tanks). I especially found interesting an incident involving the Japanese government's use of a think tank called the Center for Strategic and International Studies.
The Japanese government contributed to that think tank, which organized an event promoting the Trans Pacific Partnership (a free trade agreement that would include both the United States and Japan). Then a scholar from that think tank testified before the Senate Foreign Relations Committee:
In our opinion, Goodman was completely wrong. We have predicted (Fast Track to a Bad Deal) the opposite of a "rebalancing" effect, as far as trade is concerned. The Trans Pacific Partnership, like its model the Korea-US Free Trade agreement, would enable Asian mercantilism and thus worsen the U.S. trade deficits.
Congress may be making its decisions based upon deluded testimony from think tanks that are bought and paid for by foreign interests. There are ways to avoid such errors:...
Who Is a Racist? A Conversation with Prof. Jack Anderson
I had a conversation with my friend Jack Anderson, a retired physics professor at the University of Pittsburgh. I am a retired Professor of Public and International Affairs at Pitt, an economist.. I described the wonderful book I was reading by Jason Riley, a black editorial page staff member of the Wall Street Journal, entitled Please Stop Helping Us, in which he writes, as I have done, about the racial impact of the federal and state minimum wage laws, I described the minimum wage laws as supporting the monopolistic practices of labor unions to restrict competition from employers who pay lower wages and that the first minimum wage was passed by Congress and signed by FDR at the request of the labor unions. I said it was a racist law. Jack asked, “Did the unions intentionally want to prevent the employment of blacks? If not, how can you describe them and the law as racist?.” By the effects, I replied. Until 1950, the unemployment rate of blacks was actually less than that of white workers. With each successive increase in the minimum wage, the rate of unemployment of blacks increased relative to whites. That is why I describe it as a racist law. Following are recent government figures:
Government Is Responsible for the Sluggish Economy; What to Do About It
To grow the U.S. economy is an imperative given the sluggish state of the economy which will soon end our world leadership. The U.S. has been for decades the world’s leading debtor nation. It has 21 percent of the labor force unemployed, underemployed, or not looking for a job since they were laid off. The wealthy have become wealthier thanks to the tax treatment of corporate income and the poor have become more numerous and dependent on government hand-outs. The blame for this malaise are a host of government policies that impede entrepreneurship and risk-taking and interferes with the efficient functioning of a free-enterprise economy.
It is time that we reduced the negative role of government in the economy. 1) We need to reform the tax system by eliminating the corporate income tax and taxing corporate earnings as the personal income of the shareholders. 2) We need to eliminate wasteful subsidies, including tax expenditures. 3) Our health care system is unnecessarily expensive and has undesirable economic effects. 4) Our trade deficits slow economic growth. We need to balance our international trade. The government’s failure to intervene to correct our chronic international trade deficits has cost millions of jobs. 5) The minimum wage should be abolished because it has created an army of unemploy, unskilled labor the value of whose services is less than the legal minimum wage. 6) Wasteful and unnecessary regulation of American business, Following are our reasons for making them.
First, tax corporate earnings as the personal income of shareholders under the more progressive personal income tax. ...
The Sell-Out by American 'Thinkers'
John B. Judis has an excellent follow-up in The New Republic to the New York Times' analysis of the role of foreign money in shaping the 'research' of Washington think tanks, the NYT investigation I discussed in my blog post yesterday.
Judis connects the dots on foreign influence concerning U.S. trade policy...
The Perils of Outsourcing Congressional Expertise
An under-appreciated but critical reason why Congress is less effective -- more polarized, more unproductive -- now than it was in the past is that Congressional committees are a shadow of their former selves. Committees are the intelligent heart of the lawmaking process. Woodrow Wilson, somewhat reluctantly, acknowledged that "Congress in committee is Congress at work." Today the committees know less, do less, and influence less. Congress has outsourced policy expertise to think tanks which, according to a recent NYT article are increasingly bought by foreign interests.
Congress is awash with information. Each member of Congress maintains a staff of legislative aides to help them write bills, negotiatiate legislative language, research issues, frame strategy. And there are hundreds of think tank 'scholars' in each of the major think tanks, thousands of lobbyists, and many many others outside of government who are happy to provide 'expertise'.
But all of this information can simply lead to polarization, idiocy, and a war of talking points without intelligent integration by people who are working for the public interest (as senior members of the committee see it), and have the long-term perspective to see through propaganda and spin to elucidate the best policies. Worse yet, this information stream can be bought and influenced by foreign interests interested in steering US policy in directions that serve themselves. From the New York Times:
More than a dozen prominent Washington research groups have received tens of millions of dollars from foreign governments in recent years while pushing United States government officials to adopt policies that often reflect the donors’ priorities, an investigation by The New York Times has found.
The money is increasingly transforming the once-staid think-tank world into a muscular arm of foreign governments’ lobbying in Washington. And it has set off troubling questions about intellectual freedom: Some scholars say they have been pressured to reach conclusions friendly to the government financing the research.
Over the last several decades, both chambers of Congress have systematically degraded their capacity to engage in this process. Much political science research suggests that an especially important source of expertise in making good policy is the expertise of committee staff. And the committee staff has been starved. The graph below shows the size of the committee staff in the House and Senate over time, based on data collected by the Brookings Institution....
Returning to the Roots of the Republican Party?
Heather Richardson has an insightful piece on the Republican Party in the September 4th New York Times. The title: "Bring Back the Party of Lincoln." She emphasizes a longstanding tension within the party between (1) centering the party's platform on the promotion of opportunity for the common man, and (2) centering the party's platform on promoting the interests of the wealthy. She argues that when the party has centered its platform on the first program it has won, when centered on the second program it has lost eventually as an emiserated populace turns away from the party, only to be won back by a return to the first principle.
This is a vast oversimplification of a complex political history that is surely sketched in more detail in the book on which her op-ed is based. But it does connect to important fundamental principles, and it offers an effective road forward for the Republican Party -- or some other party. In our present crisis the lack of opportunity for the common man is the problem. In some instances the solution is less government, in other instances the solution is more government, and in other instances, the solution is re-directing government. But our current political parties, fixated as they are on redistribution of the pie, seem quite unable to frame an effective and thoughtful national program that places opportunity at the center.
Let us turn for a moment to the Republican Platform of 1860...
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