Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Job Requirement for Federal Reserve Chair: The Vision to Balance the Dollar
Janet Yellen is nearing the end of her current term as Chair of the Federal Reserve. She may be reappointed. She may be replaced. But either way, whoever takes on the Federal Reserve job needs to work to develop the vision to include managing the value of the dollar as part of the Fed role. The US trade deficit is once again growing, driven by overvaluation of the dollar. Meanwhile, the Federal Reserve is contemplating how to 'unwind' the trillions in US bonds it acquired as a result of quantitative easing.
The solution to one problem should be used to address the other. As US bonds mature, the Fed should use the proceeds to purchase bonds and other assets as a sovereign wealth fund in countries that are running a large and persistent trade surplus with the US. These purchases will strengthen the US.
1. They will improve the US net international investment position, reducing the extent to which the US is a global debtor.
2. They will help bring about a readjustment in currency values that will help market forces correct the trade deficit.
It is past time to levy a large excise tax on prescription opiods
While many of the costs of opiod addiction are borne by the addicts themselves -- costs that range up to and including 183,000 deaths according to CDC estimates for the period from 1999 through 2015 -- these costs also spread to the broader society in terms of treatment expenses, emergency response, crime, lost productivity, and much more. Hence, opiod addiction creates negative externalities for society, which some estimates put at 80 billion dollars.
A basic principle of the economics of managing negative externalities is that one should seek to make those creating the externality -- those involved in the production and consumption of opiods in this case -- pay for the external costs they are creating through their market transaction. And one of the easiest ways to do this is to impose a tax upon those transactions.
There have been some scattered efforts to do so. For instance Senator...
Needed Corporate Tax Reform Is to Eliminate It
The principal cause of the anemic growth of the U.S. economy in recent decades has been the chronic trade deficits with the rest of the world which have cost millions of U.S. manufacturing jobs and converted the U.S. from the world’s leading creditor to the world’s leading debtor. There are many causes of trade deficits. Tax reform, contrary to the claims made for it, will not balance our trade at all. The US international trade deficits averaged about 3 percent of Gross Domestic Product in recent decades. If trade had been in balance, the growth of the GDP would have been 5.3 percent on the average since 2001 instead of 1.6 percent.
The principal causes of international trade deficits are the relative costs of producing goods and services in different countries, the foreign exchange rates, and the existence of barriers to trade imposed by trading partners. Wilbur Ross, the Secretary of Commerce, in an opinion piece in the Wall Street Journal 8/1/2017 states that the U.S. imposes fewer barriers on imports than the European Union and China with which we have huge trade deficits. Other countries with which we are experiencing large chronic trade deficits are Japan, Korea, and Mexico. Together with China and the EU, these countries accounted for 88.9 percent of our trade deficit in 2016. An unintended consequence of all of our trade agreements to date is that they enabled American corporations to invest in countries that have low corporate income tax rates and to export their products to the U.S. duty-free, exacerbating the trade imbalances. We would not be concerned about this practice if U.S. trade were in balance.
There is a simple solution to the trade deficits. We can impose single-country-variable-tariffs which are authorized by the world trade agreements which permit member countries to impose tariffs designed to balance trade. The tariff would apply to all imports from the trade surplus county including those of the multi-nationals formerly producing their products in the U.S. So long as trade remains unbalanced, the single-country-variable tariff would produce substantial revenues. Would it start a trade war? Countries with trade surpluses cannot win a trade war with countries they have trade surpluses with. The trade deficit country has the advantage in a trade war. If trade diminishes with the trade surplus partner, it will increase with the other trading partners with whom we have no trade deficit....
To read it go to:
Journal of Economic Literature:
Atlantic Economic Journal: