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 Richmans' Trade and Taxes Blog



Only Modest Tax Reforms Are Needed to Get Domestic Industry Growing Again
Raymond Richman, 12/24/2015

John H. Cochrane, senior fellow of Stanford University’s Hoover Institution and formerly of the Booth School of Business at the University of Chicago, writing in and op-ed in the WSJ, 12-23-2015, entitled “Here’s What Genuine Tax Reform Looks Like” states that,  “The first goal of taxation is to raise needed government revenue with minimum economic damage.”  No, the first goal of taxation is to distribute the burden of taxation equitably, i.e., fairly. Minimizing economic damage is a very important goal.

Another important goal is adequacy to fund the functions of government without causing an undesirable level of inflation. Governments may impose fees and taxes based on the so-called benefit principle, such as court fees, charges to record transfers and ownership of property, and taxes on motor vehicles to finance the construction and maintenance of roads and bridges. Minimizing economic damage also includes avoiding excessive disincentives to work, invest, and save. There is nothing in Cochranes’ writing to indicate that he is an expert in the economics of public finance.

He prescribes a number of reforms, some of which I agree with. First and foremost is his proposal to abolish the corporate income tax. He is correct that “With no corporate tax, arguments disappear over investment expensing versus depreciation, repatriation of profits, too much tax deductible debt, R&D deductions, and the vast array of energy deductions and credits.” He does not conclude that corporate earnings should be taxed, instead, under the personal income tax, as I have proposed in recent publications.

Instead, he proposes that “government should tax consumption, not wages, income or wealth”, not inheritances, nor capital gains. Doing so, he argues, would eliminate the need for the “complex web of shelters”, including IRAs, health savings accounts, life insurance exemptions, and the “panoply of trusts that wealthy individuals use to shelter their wealth and escape the estate tax”. He would reduce the progressivity of the personal income tax, eliminate “All the various deductions, credits, and exclusions”....

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Does Nike's stock price fall indicate that TPP is dead?
Howard Richman, 12/24/2015

Why did Nike stock price just fall by 9.5%? According to zero hedge, Nike just released an earning report that was quite positive.

The explanation could come from this Market Realist article from back in March. Here's a selection:

Nike (NKE) is the world’s number one athletic footwear brand. It clocked $16.2 billion in global footwear sales. Nike’s footwear is manufactured abroad. This includes factories located in Vietnam and Malaysia—members of the TPP. It’s important to note that ~68% of Nike’s footwear is manufactured in these countries. Nike has 67 factories in Vietnam, including 26 footwear factories.

Other companies in footwear and sportswear include Skechers (SKX), Under Armour (UA), and Timberland (VFC). They also have factories in Vietnam. They would be affected by the TPP.

The stocks of all the other companies that produce shoes in Vietnam are also down:...

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Will the Trans-Pacific Partnership Force Us to Fund the Paris Climate Agreement? -- we're published in American Thinker this morning
Howard Richman, 12/20/2015

In this commentary, we respond to a CATO Institute critique (that appeared in American Spectator) of two of the arguments that we had made in an earlier commentary. We begin:

In a commentary in the American Spectator on December 16, "No one is Going to Enforce The Paris Climate Treaty through TPP," K. William Watson of the Cato Institute contributed to the ongoing discussion of the Trans Pacific Partnership (TPP).  Watson addressed two of the arguments that we had made in our American Thinker commentary "What's Actually in the Trans Pacific Partnership?"  Although Watson made some useful points that highlight important nuances, at best, he defeated a straw man that was not our argument....

Watson saw the part of the environmental chapter which enforces multilateral environmental agreements (such as the Paris Climate Agreement) as "hortitory fluff."  He had written:

Article 20.4 in the Environment Chapter does not require the United States to abide by any international environmental agreements. It merely states that each party "affirms" its commitments under such agreements. The provision is legally meaningless hortatory fluff. In fact, one of the biggest complaints about the TPP from environmental activists is that it does not do what this theory claims. The last four U.S. free trade agreements before the TPP did require parties to abide by their environment commitments under other treaties subject to dispute settlement. The TPP intentionally does not.

But we demonstrated, by quoting the agreement, that it is enforceable:

The Commission could issue an interpretation that this provision of TPP includes the Paris Agreement.  The Environment Chapter of TPP begins with a definition that explicitly includes regulations promulgated pursuant to an international agreement as part of the environmental law that this chapter of TPP focused on enforcing.  Specifically, Article 20.1 states:

For purposes of this Chapter: environmental law means a statute or regulation of a Party, or provision thereof, including any that implements the Party's obligations under a multilateral environmental agreement, the primary purpose of which is the protection of the environment, or the prevention of a danger to human life or health[.]

And Article 20.23 of the Environment Chapter explicitly provides for dispute resolution:

If the consulting Parties have failed to resolve the matter under Article 20.20 (Environmental Consultations), Article 20.21 (Senior Representative Consultations) and Article 20.22 (Ministerial Consultations) within 60 days after the date of receipt of a request under Article 20.20 (Environmental Consultations), or any other period as the consulting Parties may agree, the requesting Party may request consultations under Article 28.5 (Consultations) or request the establishment of a panel under Article 28.7 (Establishment of a Panel).

Any country that is a party to TPP can charge any other country with violating TPP.  After evidence is presented to an arbitration panel and after due deliberations, the panel would issue a final report, which would determine whether the charged country was out of compliance.  Article 28.18 specifies:

If in its final report the panel determines that:  (a) a measure at issue is inconsistent with a Party's obligations under this Agreement; (b) a Party has otherwise failed to carry out its obligations under this Agreement; or (c) a Party's measure is causing nullification or impairment in the sense of Article 28.3(c) (Scope); the responding Party shall, whenever possible, eliminate the non-conformity or the nullification or impairment.

If the charged party fails to come into compliance with TPP, Article 28.19 specifies that the panel can levy fines.  Specifically:

If a monetary assessment is to be paid to the complaining Party, then it shall be paid in U.S. currency, or in an equivalent amount of the currency of the responding Party or in another currency agreed to by the disputing Parties in equal, quarterly installments[.]

Click here to read the entire commentary.

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Book Review: Peter Navarro, Crouching Tiger, What CHINA’S MILITARISM Means for the World,(Amherst, NY, Prometheus Books, 2015)  
Raymond Richman, 12/19/2015

Peter Navarro is a professor in the School of Business at the University of California. Irvine campus. He has written previous books about China including Death by China, Seeds of Destruction, Always a Winner, and The Coming China  Wars. In the prologue he writes the “each chapter that follows will provide and important clue presented in the form of a key question leading off each chapter. Each question will then be followed by possible answers across the range of opinion and thought”.

Ch 1.” Based on the historical record, how likely is war between a rising power like China and an established superpower like the United State?” As Thucydides wrote in his History of the Polynesian War, “What made the war inevitable was the growth of Athenian power and the fear which this caused in Sparta.” The war destroyed both states. Citing the competition between England and  Germany for hegemony as the cause of WWI, he concludes that war between China and the U.S.A. is likely but not inevitable.

Ch. 2. Which countries have invaded China over the past two hundred years? France, Germany, Britain,. Japan, Russia, and the USA, an “indelible history of humiliation”. “China’s military buildup is not the end of our detective story—it is simply the beginning.”

Ch.3. “Is China building up its military to guard the trading routes and global investments it needs for robust economic growth.” China embarked on a mercantilist “state capitalism” strategy, encouraging exports and restricting imports. China’s huge oil imports and its exports move through the Malacca Strait.

Ch. 4. “Should China truly fear an oil embargo by the United States and its allies?” The U.S. did that to Japan and it led to our war with Japan. The USA also imposed an embargo on U.S. trade will China which lasted twenty years after China invaded Korea. And more recently, it imposed sanctions on Russia for its annexation of the Crimea. Similarly, China has to fear the closing of the Suez Canal to Chinese shipping. And the U.S. maintains dozens of naval and air bases in the countries surrounding China.

Ch. 5. “Will China become a 'revisionist' power or a 'status quo' power?”...

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How to make the presidential debates work better: make the clock a moderator (WAPO)
Jesse Richman, 12/16/2015

In my just-published piece "How to improve our presidential debates in one easy step: Make the clock a moderator" on the Washington Post website I begin:

At their best, debates serve democracy: They highlight candidates’ strengths and flaws and provide a forum for candidates to explain their positions or debunk the claims of others.  Unfortunately, in the minds of many Americans, debates fall short of these ideals.

Last night’s Republican debate was likely no exception, as it encountered many of the same problems as those of previous debates.  Candidates talked over each other and the moderators in pursuit of precious camera time.

So it’s time we gave debate rules and technology some closer thought. I propose creating a market or auction for debate time that makes the clock a moderator.

Here’s how it works. Each candidate will enter the debate with a known and finite amount of time to speak.  The choice of when to utilize that time to speak will be at the discretion of the candidate.  As a result, candidates will have an incentive to use their time more wisely, knowing that it could run out.

To read the rest, go to https://www.washingtonpost.com/news/monkey-cage/wp/2015/12/16/how-to-improve-our-presidential-debates-in-one-easy-step-make-the-clock-a-moderator/ 

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Sessions slams talk of trade deal until after elections
Howard Richman, 12/16/2015

On December 10, Republican Senate Majority Leader Mitch McConnell warned President Obama that the Trans Pacific Partnership (TPP) could be voted down if brought up before the elections. According to  The Hill:

President Obama is risking defeat of his signature trade deal if he tries to push for passage before a lame-duck session next year.

“It certainly shouldn’t come before the election," McConnell told The Washington Post in an interview

"I think the president would be making a big mistake to try to have that voted on during the election. There’s significant pushback all over the place," he said.

On December 11,  The Hill reported Senator Sessions response to McConnell:

Sen. Jeff Sessions (R-Ala.) on Friday slammed suggestions that Congress wouldn't take up President Obama's signature trade deal before the 2016 elections, calling a lame-duck vote an attempt to sidestep voters. 

"It seems clear the goal of [Trans-Pacific Partnership] supporters is to hold the vote when the public will be least able to hold their representatives accountable, because the pact’s boosters know that it is deeply unpopular," Sessions said in a statement, adding that its not Congress's job to "help the president to bypass voters."

On December 12, I contributed my analysis in the American Thinker blog:

Senator McConnell and the rest of the Republican establishment in Washington have a huge problem. They have to sneak in their anti-American votes after elections, or they would get turned out of office. The donor class that they serve can't marshal votes, since most of their employees are foreigners who work in factories abroad.

Obama may or may not go along with McConnell's request to put off the TPP vote until after the election. An early vote on TPP would give him enough time to add the Paris climate agreement to TPP before he leaves office and would help him suppress Republican voter turnout.

The Obama administration has claimed that the Paris climate agreement does not require ratification by Congress since there are no enforcement mechanisms within that agreement. This is nonsense. The Paris  agreement requires that countries involved make commitments and strengthen those commitments periodically. They are never permitted to loosen those commitments. Whatever Obama promises will be binding on all future U.S. Presidents; any reduction to Obama's draconian CO2 cuts would violate the Paris agreement. 

If the Paris agreement were meant to be non-binding, it would have been called a "Declaration." It called itself an "Agreement," which means that it is one of the multilateral environmental agreements that is supposed to be added to TPP by the TPP Commission, according to the TPP agreement itself....

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Pat Buchanan: Will elites blow up the GDP?
Howard Richman, 12/15/2015

Pat Buchanan had a great commentary yesterday called Will Elites Blow Up the GOP? about the discussions within the Republican establishment about how they could deny the nomination to Donald Trump. Here's how Buchanan concludes:

What the Republican collectivity has to realize is that it is they and the policies they produced that are the reason Trump, Carson and Cruz currently hold an overwhelming majority of Republican votes.

It was the elites of both parties who failed to secure our borders and brokered the trade deals that have de-industrialized America and eviscerated our middle class....

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Pacific Trade Deal would Bind Congress -- an account of Jesse and my appearance on Laura Ingraham show yesterday at 10:30am
Howard Richman, 12/11/2015

Lifezette.com includes a description of what Jesse and I said on the Laura Ingraham show yesterday. Here's how it begins:

As detrimental as the text of the Trans-Pacific Partnership may be for American workers, what many might not realize is that it could get worse over time.

Jesse Richman, a political science professor at Old Dominion University in Norfolk, Virginia, said Thursday on “The Laura Ingraham Show” that the 12-nation trade pact gives unelected international bureaucrats the ability to make changes to the trade rules.

“This is a living treaty in the sense that the commission for the TPP can modify it any way it chooses over time,” he said.

Jesse Richman and Howard Richman, the latter an economist with the Ideal Taxes Association, co-wrote the 2014 book, “Balanced Trade: Ending the Unbearable Costs of America’s Trade Deficits.” They have done something that few Americans have — they’ve read the 5,444-page trade deal. Congress must accept or reject that pact in whole and cannot make changes.

Howard Richman said the agreement goes far beyond other trade deals in giving foreign governments the right to sue one another over trade disputes, and it grants a commission authority to impose billions of dollars in fines.

“It’s unprecedented as far as we can tell,” he said. “Congress would be forced to do whatever (President) Obama agreed to do.”...

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Obama will use TPP to Enforce his Climate Agreement -- we're published in the American Thinker this morning
Howard Richman, 12/5/2015

We begin:

Little appreciated in the current debate on the Trans Pacific Partnership (TPP) is the dramatic way the TPP will abrogate legislative authority permanently from the U.S. Congress to the president. TPP creates a commission with full power to amend the agreement, and an arbitration mechanism with the strength to enforce such amendments. The House and Senate gave up their rights to amend TPP, but they can still vote it down when it comes up for up-or-down votes in both chambers next year.

Although many people still labor under the delusion that TPP is a free trade agreement, the 5,544 page TPP regulates trade, the environment, immigration, patents, copyrights, and labor laws among the 12 countries that are participants and the additional countries that are expected to join. Consequently, in a post-TPP world, U.S. presidents could force almost any alteration in U.S. law simply by achieving support in the TPP commission for a U.S. specific modification to the TPP. Case in point today, Obama’s climate ambitions.

Environmentalists are not happy. Republicans are not happy. Only Obama seems happy. Why is he the only one happy with the climate change agreement that he is currently negotiating in Paris? Because that agreement, when combined with the already-negotiated Trans Pacific Partnership (TPP), would complete his fundamental transformation of U.S. politics and the U.S. economy.

We don’t yet know the terms of the climate change agreement, but we do know that each country will be held to different carbon emission standards. President Obama released the likely U.S. and Chinese standards in a November 11, 2014, White House press release:

To read the rest, go to:

http://www.americanthinker.com/articles/2015/12/obama_will_use_tpp_to_enforce_his_climate_agreement.html

 

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Rick Manning: Obama's Paris Climate Treaty Spells Doom for TPP
Howard Richman, 12/1/2015

Writing for The Hill (Obama's Paris Climate Treaty Spells Doom for TPP), Rick Manning of Americans for Limited Government argued that Obama's Paris treaty spells doom for the Trans Pacific Partnership (TPP).

He begins by noting that Obama plans to enforce the climate treaty without bringing it before the Senate. He asks how Obama plans to accomplish this:

Why is the lame-duck Obama emboldened to flout the Constitution on this landmark treaty?

The answer lies in Congress's attempt to force the president to bring his Iran deal to the Senate for ratification. When Republicans decided to "assert their authority" by passing legislation requiring that Obama submit the nuclear deal to Congress in a form that could only be rejected if a two-thirds majority in both chambers were willing to override his veto, the seeds were sown for Obama's complete disregard for constitutional treaty powers.

His prediction of how things will play out is quite interesting:...

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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]