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Luetkemeyer: Democrats’ Reckless, out of Control Inflation is Crushing America’s Small Businesses

By Peter RoffAmerican Action News

Gage Skidmore via Wikimedia Commons

Missouri Congressman Blaine Luetkemeyer is taking on the Biden administration over policy moves that have caused higher prices and the return of noticeable inflation.

“Gas, milk, fruit, televisions, furniture, washing machines, car rentals, hotel rooms – what do all of these things have in common? Their prices have gone up under the Biden administration,” Luetkemeyer, the ranking Republican on the House Committee on Small Business wrote in an op-ed published Friday by Fox Business. 

Data published by the U.S. Bureau of Labor Statistics showed prices up 5.4 percent last month over June 2020, the highest jump since the economic difficulties that began when the market for sub-prime home mortgages collapsed in 2008. That’s higher than the interest rate setting U.S. Federal Reserve expected and marks the sixth straight month in which prices have risen.

“While Democrats in Washington bulldoze a path for reckless government spending, small businesses and middle class working American families alike are left to pay the bill,” Luetkemeyer wrote, singling out the damaging impact the newest round of inflation is having on family-owned business.

“Small businesses are the backbone of the United States economy, and they were making huge economic strides before the Biden administration took over. Now, small businesses nationwide are facing the consequences of the Democrats’ massive government spending agenda in all sectors,” he wrote. 

The U.S. says government nearly half the country’s small businesses were forced to increase prices in May, which Luetkemeyer said was “the largest percentage reported in 40 years.”

“From increased gas prices for delivering goods to rising food costs for restaurants, small business owners are bearing the brunt of Democrat-induced inflation,” he continued. “As more American consumers are spending and patronizing small businesses following the COVID pandemic shutdowns, this increased immediate spending has given our economy a bit of a shock. But rather than acknowledge this problem and correct the course, President Biden and Congressional Democrats are doubling down.”

“Make no mistake – inflation is taxation. Prices of the goods you buy go up, meaning the dollars in your pocket are worth less. It then takes more of those hard-earned dollars to purchase these goods. 

“The Democrats’ proposed $3.5 trillion package will severely exacerbate the inflation problem for middle-class families and further crush Main Street U.S.A. 

“Simply put, small businesses cannot afford the inflation tax that comes with the Democrats’ failed economic policies.

“As Republican Leader of the House Small Business Committee, my colleagues and I have worked tirelessly to provide much-needed relief for small businesses across the country as they regain their footing and reopen their doors to local communities. 

“Unfortunately, there is no single COVID relief package that can simply fix inflation – the Democrats must stop their spending spree. As if the pandemic didn’t create enough of an economic burden for American families and workers, they now face an increased cost of living and consumer prices across the board with no end in sight.”

Luetkemeyer’s criticisms are being echoed by economists and others concerned about the effects ongoing inflation will have on the post-pandemic recovery. 

Writing in mid-July for the Carsey School of Public Policy at the University of New Hampshire, Michael Ettlinger and Jordan Hensley observed that “As measured by Real Gross Domestic Product (GDP), 35 states and the District of Columbia have smaller economies, as of the first quarter of this year, than they did before COVID-19, while 14 states have seen a modicum of economic growth. Nationally, GDP remains 0.9 percent lower than it was before the pandemic struck.”

President Biden and others in his administration seem happy to claim credit for the good economic news but are rather cavalier about the impact the bad news is having, saying the spike in inflation is at worst temporary. 

Biden himself recently dismissed the issue, saying his multi-trillion-dollar spending initiatives will “reduce inflation, reduce inflation, reduce inflation.” Some economists and business leaders fear, however, it is that very spending that is driving the hike in prices and that they will not stabilize or return to the levels at which they were at before the pandemic struck any time soon. 


Coalition Warns Against Broadband Proposals

By Katie McAuliffeAmericans for Tax Reform

Photo Credit: Denny Müller

Americans for Tax Reform led a coalition with other center-right organizations flagging concerning developments in the infrastructure bill negotiations. Price controls and rate regulation; dramatic expansion of executive brand and agency authority; and government-controlled internet should never be on the table.

You can read the letter below or click HERE for a full version:

July 23, 2021

RE: Broadband Infrastructure Spending

Dear Senators:

We write to you today over some concerning developments in the bipartisan infrastructure negotiations on broadband. We are guided by the principles of limited government and believe that the flaws in the infrastructure framework go well beyond the issues discussed here. Nonetheless, our present aim is to advocate specifically against proposals that would enact price controls, dramatically expand agency authority, and prioritize government-controlled internet. 

The infrastructure plan should not include rate regulation of broadband services. Congress should not authorize any federal or governmental body to set the price of any broadband offering. Even steps that open the door to rate regulation of broadband services will prove harmful in the long run.  

Nor should Congress continue to abdicate its oversight responsibilities to executive branch agencies like the National Telecommunications and Information Administration. Giving NTIA unchecked authority to modify or waive requirements, renders all guardrails placed by Congress meaningless. There must be oversight of the programs to ensure that taxpayer dollars go toward connecting more Americans to broadband as opposed to wasteful pet projects. 

Historically, attempts by NTIA to close the digital divide through discretionary grants have failed, leading to wasteful overbuilds, corruption, and improper expenditures. The American Recovery and Reinvestment Act of 2009 created the $4 billion Broadband Technology Opportunities Program (BTOP) grant program administered by NTIA. From 2009, when BTOP was instituted, to 2017, at least one-third of all the reports made by the Inspector General for the Department of Commerce were related to the BTOP program, and census data showed that the BTOP program had no positive effect on broadband adoption. And this was with only $4 billion in taxpayer dollars. We cannot afford to make the same mistake with much greater sums.

Legislation must be clear and not create ambiguities that are left to the whims of regulators. While “digital redlining” is unacceptable, the FCC should not be allowed to define the term however it sees fit and promulgate any regulations it thinks will solve problems—real or imagined. Doing so would give the agency carte blanche to regulate and micromanage broadband in any way it desires. This would be an egregious expansion of FCC authority. Moreover, definitions and regulations could change whenever party control of the agency changes, leading to a back-and-forth that creates uncertainty for consumers and businesses. 

Legitimate desire to ensure that low-income Americans have access to broadband infrastructure should not be used as a smokescreen to codify aspects of the recent Executive Order on Competition, which should not be included in any bipartisan infrastructure agreement. Republicans fought hard to support the FCC’s Restoring Internet Freedom Order. Any legislating on the functions and deployment of Internet technologies must move as a standalone bill through regular order with committee review. These questions are far too important to shoehorn into a massive bill without rigorous debate.   

Any funding for broadband buildout must target locations without any broadband connection first, and this should be determined by the Congressionally mandated FCC broadband maps. Congress has oversight over the FCC and the FCC has already conducted several reverse auctions. Reverse auctions get the most out of each taxpayer dollar towards closing the digital divide. Areas where there is already a commitment from a carrier to build out a network, should not be considered for grants, and the NTIA should not be able to override the FCC’s map to redefine “unserved” and subsidize duplicative builds.  

Government-controlled Internet should not be prioritized in any grant program. With few exceptions, government-owned networks (GONs) have been abject failures. For example, KentuckyWired is a 3,000-mile GON that was sold to taxpayers as a $350 million project that would be complete by spring of 2016. Those projections could not have been more wrong.   More than five years past the supposed completion date, fiber construction for KentuckyWired is still “in progress” in some parts of the state and a report from the state auditor has concluded that taxpayers will end up wasting a whopping $1.5 billion on this redundant “government owned network” over its 30-year life. NTIA should certainly not encourage these failures to be replicated.

We appreciate your work to help close the digital divide and agree that access to reliable internet is a priority, however we should not use this need to serve as a cover for unnecessary

government expansion. Please feel free to reach out to any of the undersigned organizations or individuals should you have questions or comments. 

Regards

* individual signer; organization listed for identification purposes only


Yellen to Pelosi: Congress Must Raise the U.S. Debt Limit

By Peter RoffAmerican Action News

Gerald R. Ford School of Public Policy via Flickr

U.S. Treasury Secretary Janet Yellen told House Speaker Nancy Pelosi Friday that unless Congress acted quickly to raise the statutory limit on the amount of money the federal government can borrow, she would be forced to “start taking certain additional extraordinary measures” to prevent the United States government from defaulting on its financial obligations. 

In a letter sent to Pelosi and other members of the congressional leadership in both parties, Yellen asserted that an increase or continued suspension of the debt limit “does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures.”

With just days to go before the statuary suspension of the debt limit ends at noon on July 31, the need for congressional action has already become a political football. Both parties are trying to use the issue on Capitol Hill to gain leverage over the other to either stop or move through to final passage several pieces of legislation that are a top priority for the Biden Administration.

The full text of the letter is as follows:

Dear Madam Speaker:

As you know, the Bipartisan Budget Act of 2019 suspended the statutory debt limit through Saturday, July 31, 2021.  I am writing to inform you that beginning on Sunday, August 1, 2021, the outstanding debt of the United States will be at the statutory limit.  

Today, Treasury is announcing that it will suspend the sale of State and Local Government Series (SLGS) securities at 12:00 p.m. on July 30, 2021.  The suspension of SLGS sales will continue until the debt limit is suspended or raised.  If Congress has not acted to suspend or increase the debt limit by Monday, August 2, 2021, Treasury will need to start taking certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations.   

Increasing or suspending the debt limit does not increase government spending, nor does it authorize spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures.  The current level of debt reflects the cumulative effect of all prior spending and tax decisions, which have been made by Administrations and Congresses of both parties over time.  Failure to meet those obligations would cause irreparable harm to the U.S. economy and the livelihoods of all Americans.  Even the threat of failing to meet those obligations has caused detrimental impacts in the past, including the sole credit rating downgrade in the history of the nation in 2011.  This is why no President or Treasury Secretary of either party has ever countenanced even the suggestion of a default on any obligation of the United States.

The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future, exacerbated by the heightened uncertainty in payments and receipts related to the economic impact of the pandemic.  Given this, Treasury is not able to currently provide a specific estimate of how long extraordinary measures will last.  However, there are scenarios in which cash and extraordinary measures could be exhausted soon after Congress returns from recess.  For example, on October 1 alone, cash and extraordinary measures are expected to decrease by about $150 billion due to large mandatory payments, including a Department of Defense-related retirement and health care investment.

In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support.  I respectfully urge Congress to protect the full faith and credit of the United States by acting as soon as possible.

It is highly unlikely members in either party will allow the deadline to be reached without reaching some kind of compromise agreement to forestall the U.S. defaulting on its debt. Such a move would, most economists agree, that even a technical default would put in motion a disruption in the global financial markets of what one economist called “a global disruption of unknown and unknowable proportions.” 

Such a collapse, which would provide China an ample boost in their campaign urging the replacement of the dollar as the global reserve currency, would likely be blamed on the Republicans. Fear that it might in turn limits the ability of spending restraint advocates to argue the deadline should be allowed to come and go unless reforms are made.

This game of economic chicken has been tried before, with the first one to blink generally considered the loser.


China’s Attacks on Tech Are a Losing Strategy in Cold War II

Forcing DiDi and Alibaba to toe the Communist Party line may help Xi build a police state but will stall the nation’s dynamic industry.

By Niall FergusonBloomberg

Fiddle Didi.
Fiddle Didi. Source: AFP/Getty Images

“Investors have to rethink the entire China structure,” David Kotok of Cumberland Advisers said last week. For Hong Kong, the One Country, Two Systems principle was “dead.”  As for the crackdown on some of the nation’s tech giants, the Beijing government’s treatment of Alibaba “is not a one-off. Neither is DiDi. Everything China touches must be viewed with suspicion.”

Wait, you’re saying that investing in the other side in the early phase of Cold War II might have been a bad idea? You’re telling me that “long totalitarianism” was not a smart trade?

For the past three years, I have been trying to persuade anyone who would listen that “Chimerica” — the symbiotic economic relationship between the People’s Republic of China and the United States of America, which I first wrote about in 2007 — is dead. The experience has taught me how hard it can be for an author to kill one of his own ideas and replace it with a new one. The facts change, but people’s minds — not so much.

Chimerica was the dominant feature of the global economic landscape from China’s accession to the World Trade Organization in 2001 to the global financial crisis that began in 2008. (I never expected the relationship to last, which was why I and my co-author Moritz Schularick came up with the word: Chimerica was a pun on “chimera.”)  At some point after that, as I have argued in Bloomberg Opinionpreviously, Cold War II began.

Unlike with a “hot” war, it is hard to say exactly when a cold war breaks out. But I think Cold War II was already underway — at least as far as the Chinese leader Xi Jinping was concerned — even before former President Donald Trump started imposing tariffs on Chinese imports in 2018. By the end of that year, the U.S. and China were butting heads over so many issues that cold war began to look like a relatively good outcome, if the most likely alternative was hot war.

Ideological division? Check, as Xi Jinping explicitly prohibited Western ideas in Chinese education and reasserted the relevance of Marxism-Leninism. Economic competition? Check, as China’s high growth rate continued to narrow the gap between Chinese and U.S. gross domestic product.  A technological race? Check, as China systematically purloined intellectual property to challenge the U.S. in strategic areas such as artificial intelligence. Geopolitical rivalry? Check, as China brazenly built airbases and other military infrastructure in the South China Sea. Rewriting history? Check, as the new Chinese Academy of History ensures that the party’s official narrative appears everywhere from textbooks to museums to social media. Espionage? Check. Propaganda? Check. Arms race? Check.

A classic expression of the cold war atmosphere was provided on July 1 by Xi’s speech to mark the centenary of the Chinese Communist Party: The Chinese people “will never allow any foreign force to bully, oppress, or enslave us,” he told a large crowd in Beijing’s Tiananmen Square. “Anyone who tries to do so shall be battered and bloodied from colliding with a great wall of steel forged by more than 1.4 billion Chinese people using flesh and blood.” This is language the like of which we haven’t heard from a Chinese leader since Mao Zedong.

Most Americans could see this — public sentiment turned sharply negative, with three quarters of people expressing an unfavorable view of China in recent surveys. Many politicians saw it — containing China became just about the only bipartisan issue in Washington, with candidate Joe Biden seeking to present himself to voters as tougher on China than Trump. Yet somehow the very obvious trend toward cold war was ignored in the place that had most to lose from myopia. I am talking about Wall Street. Even as China was ground zero for a global pandemic, crushed political freedom in Hong Kong and incarcerated hundreds of thousands of its own citizens in Xinjiang, the money kept flowing from New York to Beijing, Hangzhou, Shanghai and Shenzhen.

According to the Rhodium Group, China’s gross flows of foreign domestic investment to the U.S. in 2019 totaled $4.8 billion. But gross U.S. FDI flows to China were $13.3 billion. The pandemic did not stop the influx of American money into China. Last November, JPMorgan Chase & Co. spent $1 billion buying full ownership of its Chinese joint venture. Goldman Sachs Group Inc. and Morgan Stanley became controlling owners of their Chinese securities ventures. Just about every major name in American finance did some kind of China deal last year.

And it wasn’t only Wall Street. PepsiCo Inc. spent $705 million on a Chinese snack brand. Tesla Inc. ramped up its Chinese production. There were also massive flows of U.S. capital into Chinese onshore bonds. Chinese equities, too, found American buyers. “From an AI chip designer whose founders worked at the Chinese Academy of Sciences, to Jack Ma’s fast-growing and highly lucrative fintech unicorn Ant Group and cash cow mineral-water bottler Nongfu Spring Co., President Xi Jinping’s China has plenty to offer global investors,” my  Bloomberg opinion colleague Shuli Ren wrote last September.

Recent months have brought a painful reality check. On July 2, Chinese regulators announced an investigation into data security concerns at DiDi Global Inc., a ride-hailing group, just two days after its initial public offering. DiDi had raised $4.4 billion in the biggest Chinese IPO in the U.S. since Alibaba Group Holding Ltd.’s in 2014. No sooner had investors snapped up the stock than the Chinese internet regulator, the Cyberspace Administration of China, said the company was suspected of “serious violations of laws and regulations in collecting and using personal information.”

The cyberspace agency then revealed that it was also investigating two other U.S.-listed Chinese companies: hiring app BossZhipin, which listed in New York as Kanzhun Ltd. on June 11, and Yunmanman and Huochebang, two logistics and truck-booking apps run by Full Truck Alliance Co., which listed on June 22. Inevitably, this nasty news triggered a selloff in Chinese tech stocks. It also led several other Chinese tech companies abruptly to abandon their plans for U.S. IPOs, including fitness app Keep, China’s biggest podcasting platform, Ximalaya, and the medical data company LinkDoc Technology Ltd.

To add to the maelstrom, on Thursday Senators Bill Hagerty, a Tennessee Republican,  and Chris Van Hollen, Democrat of Maryland, called on the Securities and Exchange Commission to investigate whether DiDi had misled U.S. investors ahead of its IPO. Also last week, U.S. tech companies such as Facebook, Twitter and Google came under increased pressure from Hong Kong and mainland officials over doxxing, the practice of publishing private or identifying information about an individual online.

For several years, I have been told by numerous supposed experts on U.S.-China relations a) that a cold war is impossible when two economies are as intertwined as China’s and America’s and b) that decoupling is not going to happen because it is in nobody’s interest. But strategic decoupling has been China’s official policy for some time now. Last year’s crackdown on financial technology firms, which led to the sudden shelving of the Ant Group Co. IPO, was just one of many harbingers of last week’s carnage. 

The proximate consequences are clear. U.S.-listed Chinese firms will face growing regulatory pressure from Beijing’s new rules on variable interest entities as well as from U.S. delisting rules.

The VIE structure has long been used by almost all China’s major tech companies to bypass China’s foreign investment restrictions. However, on Feb. 7, the State Council’s Anti-Monopoly Committee issued new guidelines covering variable interest entities for the first time. Recognizing them as legal entities subject to domestic anti-monopoly laws has allowed regulators to impose anticompetition penalties on major VIEs, including Alibaba, Tencent Holdings Ltd. and Meituan. This new framework substantially increases risks to foreign investors holding American deposit receipts in the tech companies’ wholly foreign-owned enterprises. For example, Beijing could conceivably force VIEs to breach their contracts with their foreign-owned entities. In one scenario, subsidiaries of a Chinese variable interest entity that are deemed by Beijing to be involved in processing and storing critical data could be spun out from the VIE — just as Alibaba was reportedly forced to spin out payments subsidiary Alipay in 2010.

The stakes are high. There are currently 244 U.S.-listed Chinese firms with a total market capitalization of around $1.8 trillion, equivalent to almost 4% of the capitalization of the U.S. stock market.


Dispelling Two Objections To Free Trade

By David R. HendersonHoover Institution

FTC

In my recent Defining Ideas article titled “A Refresher Course on Free Trade,” I made the case for free trade. A large part of the economic case is that free trade makes people in the country that adopts it better off than if their government hadn’t adopted it. It makes imports cheaper, allows consumers to get a more varied range of goods, and causes labor and capital to be allocated to areas of the economy where they are most productive.

In the United States in recent years, there have been two main objections to free trade. The first is that when free or freer trade is introduced into a particular sector, producers in that sector, both owners of capital and laborers, will be worse off. Therefore, argue some of the people who make this point, either trade shouldn’t be liberalized or, at least, introduction of trade should be accompanied by government spending to compensate the losers. The second objection is that free trade benefits mainly the wealthy and does little for the workers who are living on the economic edge. The first objection is often true in the short run but almost always false in the long run; it also applies to any economic change whether that change is caused by international trade or purely domestic economic interactions; in short, the objection proves too much. The second objection is simply false.

Winners, Losers, and Compensation

In my earlier article, I pointed out that if the market for sugar were opened to unrestricted imports from other countries, the price of sugar in the United States would fall and US sugar producers would be hurt. That’s all true in the short run. In the long run, say ten years from now, it’s not clear that those who produce sugar now would be worse off then. Owners of capital would have had ten years in which to find alternate industries in which to invest and workers would have had ten years in which to find other jobs.

Still, ten years is a long time. Those who lose jobs can find others at lower wages but they might be employed at these lower wages for at least a few years before they build their skills and earn wages comparable to the ones they lost because of free trade. So one can understand why people who see the benefits of free trade want a government policy to subsidize the losers for a few years. Those who want such subsidies tend to focus on workers who lose their jobs but the same thinking would presumably apply to business owners, including shareholders, who suffer a wealth loss due to free trade.

There are a number of problems with such proposals, though. First, government is notoriously bad at targeting help to groups sorted by their particular circumstances. When politicians sense a gravy train coming, they tend to lobby their colleagues to include other groups and causes. We saw this with the initial Biden proposal for infrastructure. It included a large amount of money for activities that have never been considered to be infrastructure, activities like day care.

Second, there is nothing special about free trade. Indeed, in a large economy like that of the United States, most trade is not across borders but is between people within the US borders. In 2019, imports were about 14.6 percent of gross domestic product. That sounds high, and is high, but that number confirms that most trade in the United States is between and among people in the United States. When a new technology or even a new way of running a business helps consumers, it also destroys many businesses and hurts workers who lose their jobs or who must work at a lower pay to keep their jobs.

We don’t need to go back far to see such examples. When I taught in the business school at the University of Rochester in the late 1970s, some of my evening MBA students who worked at Kodak called it the “big yellow money machine.” Kodak was riding high on the technology that innovator George Eastman and his successors had created and perfected. But digital cameras in the 1980s and 1990s and, later, cell phones that got better and better at taking still shots and movies, virtually destroyed the market for Kodak’s product. It’s true that part of the causes was international trade in cell phones. But even without cell phones from other countries, US cell phone producers were plenty capable of competing Kodak into bankruptcy. 

Few of those who advocate compensating those who lose due to expanded trade across borders advocate compensating those who lose due to increased trade within borders. I hasten to add that I’m glad that they don’t. But the principle is the same.

Are the Rich the Main Gainers from International Trade?

In early 2016, UCLA professor Mark Kleiman wrote:

But the bottom line is that all of the gains, not merely from trade but from economic growth, have been concentrated in the hands of a relative few.

I was surprised when I read that. Historically, the opposite has been the case. Before considering recent history, let us turn to the famous repeal of the British Corn Laws, which happened in June 1846. The Corn Laws disallowed the import of wheat (which the British called corn) unless the domestic price of wheat hit a very high level. In practice this meant that imports of wheat were effectively banned. Because lower-income people spent a much higher percent of their income on food than higher-income people did, repeal of the Corn Laws helped low-income people disproportionately. Those who lost were primarily rich owners of agricultural land who, after 1846, had to face competition from other countries.

In a recent discussion to celebrate the 175th anniversary of the repeal of the Corn Laws, British historian Steve Davies of the Institute of Economic Affairs in London put it well. The successful popular campaign to repeal the Corn Laws, he observed,

fixed in the minds of the British working class in particular, right up to the present day, the profound belief that free trade is good for the poor and the working man and woman and that protectionism is basically a conspiracy by the rich and special interests to screw over the working class.

Now let’s turn to recent history, which is quite consistent with the nineteenth-century British history.

Although trade may hurt various low-income people in their role as competing workers, it helps lower-income people, as consumers, proportionally more than high-income people. The reason is that the particular goods that are traded tend to be those that are a larger proportion of a lower-income household’s income. Think about who shops at Walmart and where Walmart buys many of the items it sells. Lower-income people are disproportionately represented among Walmart shoppers and many of the items, typically low-end, that Walmart sells are imported, especially from China. In an article in the Quarterly Journal of Economics, UCLA economist Pablo D. Fajgelbaum and Columbia University economist Amit K. Khandelwal lay out the facts about the gains from trade.

In correspondence with me about their findings, Professor Khandelwal considered the gains that would be captured by various income groups if prices for imports fell by 5 percent. For food, people at the 10th percentile—those whose income is below that of 90 percent of the population—would have an annual gain of 0.39 percent of income. People in the 90th percentile and 99th percentile, by contrast, would gain zero. Similarly, a 5 percent price cut for manufactured goods would raise real income for people at the 10th percentile by 0.81 percent and for people at the 90th and 99th percentile by only 0.22 percent and 0.10 percent, respectively.

In many cases, moreover, those who lost their jobs due to the opening of trade had had substantially higher incomes than the lower-income people who made out big from trade. Consider the case of clothing. The US economy lost 650,000 apparel jobs between 1997 and 2007, which was the period during which Chinese imports increased so rapidly. Not all of those people found jobs at a pay as high as they earned before. That’s the downside. The upside is that, with the increase in international trade, clothing became much cheaper. In his book The Rise and Fall of American Growth, Northwestern University economist Robert J. Gordon reports that between 1980 and 2013, clothing prices fell by an annual average of 2.6 percent. Compounded over the period from 1997 to 2007, that’s a 24 percent drop. The actual drop is probably even more because the opening to China brought down clothing prices annually even more quickly than the average annual drop from 1980 to 2013.

For 2019, the latest data available, households in the bottom two quintiles, which is about 53 million households, spent an average of $1,032 per year on clothing. That’s out of an average after-tax income of $22,591. So they spent 4.6 percent of their income on clothing. Because clothing prices fell over that time, they would have bought more clothing at the lower price. So we will understate their gain if we assume that they were insensitive to price and bought the same amount of clothing that they would have at the higher pre-expanded-trade price. Even assuming no further drop in clothing prices after 2103, the 24 percent drop in price was important for a household with such limited means. The clothing they would have bought in 1997 would have cost an inflation-adjusted amount of $1,358.  So the average family in the two bottom fifths of the income distribution saved $326 on clothing alone. Over 53 million households, that is a gain of about $17.3 billion. Assuming that the 650,000 people who lost their jobs lost as much as $10,000 each per year, which is probably an overestimate, their loss was $6.5 billion, which is less than 38 percent of the gain. Moreover, the average worker in a clothing factory in the United States, along with her or her family, almost certainly earned more than $22,591, the average income of the bottom two-fifths.

There may be other objections to free trade but two objections fail. First, even though some people lose in the short run when trade is made freer, almost everyone gains in the long run. Second, those who gain disproportionately from free trade are lower-income people, not higher-income people.


The Concierge of Decline

The Biden Administration serves up complacency in the face of deterioration.

By Paige WilleyThe American Mind

US-politics-economy-BIDEN

Joe Biden’s handlers and media friends continue to delude nobody but themselves that his legacy will land him in the history books alongside FDR and LBJ as a beloved, era-defining Progressive hero. His supposedly moderate priorities—infrastructure, family policy, and voting “rights”—have readily been exposed as deceitful partisanship and wasteful graft, and laden with power grabs so objectionable a senator of his own party had to distance himself to save face.

Further complicating his aspirational legacy, Biden is beholden to an eye-popping amount of dark money from leftist sources that propelled him to the White House in the first place. A careerist chameleon who knows the ultimate currency of the Washington favor economy is obedience to donors, he is obligated to indulge fringe priorities so repellent to the public that anti-police interest groups begged the White House to dial them back. Even with his public image plummeting from the self-made border crisis—now on pace to allow over 2 million illegal immigrants to enter and stay in the country every year—Biden acquiesced to bullying from activist groups (and NGOs whose lucrative business models depend on the public funding associated with high volumes of immigration) and raised the annual refugee cap.

As Biden’s early months lurched from one failure to stand up for our country to the next, it became clear that he is indeed era-defining, but not in the way his consiglieres would have hoped. Weak and negligent, derelict in the most basic duties a leader has to his people, licking ice cream to delight reporters as his homeland falls apart, Joe Biden is happily at your service as the concierge of decline.

The leader of the Free World routinely confounds with public with gibberish and outlandish assertions that the national press pretends not to notice. Last week, he attributed lower vaccination rates among black Americans to traumatic memories of “the Tuskegee Airmen,” apparently conflating the subjects of an infamous experiment conducted at the Tuskegee Institute with the squadron of World War II Army pilots. One day prior, he delivered a meandering disavowal of the Second Amendment, dismissing it as a gratuitous formality by insinuating the government could simply deploy “nuclear weapons” against rebellious armed citizens. The public, beseeched by the press to view Biden’s regime of managed decline as a return to normalcy, could be forgiven for wondering whether successful stewardship of a nation typically involves overt rationalizations for nuking one’s own citizens.

Essential elements of nationhood, including our borders, rule of law, energy pipelines, and food supply chains are disintegrating. Biden routinely appears apathetic, croaking “no comment” when a cyberattack took 45 percent of the East Coast’s energy supply offline—a response so lethargic it may have emboldened the cybercriminals who downed countless American facilities operated by the world’s largest beef supplier a few weeks later. With a resource as crucial as the food supply at risk, and minimal discussion on how to guarantee protection from such threats in the future, the White House again responded in almost ludicrously diffident fashion, weakly insisting they were “delivering a message” to Russia that if the hackers originated with them, that was very naughty indeed. The diplomatic decorum of managed decline forbids advocating too vociferously for our country’s interests. As its primary practitioner, Biden travelled halfway across the world to meet Vladimir Putin at the G7, handing over a list detailing our critical infrastructure sectors and politely requesting that he be kind enough not to hack those.

Back home, his staff obfuscates the fact that inflation is rising faster than nominal wages—meaning real wages are declining—and dismisses the higher prices burdening small businesses and families as a public relations inconvenience, even releasing a statement instructing the public to stop blaming them for high gas prices. Cities across the country are plagued with stomach-churning random assaults and open-air drug bazaars to such a degree the Democrats’ traditional media apologists are nervously signaling they cannot furnish effective propaganda to stave off a political backlash. Microchip shortages are roiling auto manufacturing and necessitating layoffs. In the face of record drug overdose deaths, his administration is offering subsidized drug paraphernalia to facilitate addicts’ injection of deadly narcotics. As the border crisis continues, the federal government rewards illegal border crossers with taxpayer-funded plane tickets to destinations across the country. Meanwhile, for citizens, the Biden administration is fixated on maximizing extractive, redistributive, and vengeful policies to “address” abstractions such as climate change, systemic racism, and the intelligence community’s latest absurd fiction designed to increase their budget, “terrorism from white supremacy.”

Despite his media portrayal as a great uniter, Biden cynically embraces talking points to divide Americans by race, encouraging citizens to blame each other for difficulties getting ahead instead of the destructive effects of policies he spent half a century voting for and now aims to revive. A long-time proponent of trade policies that dismantled our industrial base—sending millions of working-class jobs abroad—and of unfairly flooding the labor market with foreign workers, he appears committed to the belief that the inevitable decline in economic opportunity afflicting Americans of all races was in fact due to insufficient commitment to those policies instead of the other way around. Deploying theories of “systemic inequities” is a convenient pre-emptive strike for a man whose administration is officially forecasting economic decline.

In a demonstration of the sincerity of his administration’s commitment to black Americans’ success, his appointees congratulate themselves for frivolous interventions such as banning menthol cigarettes, but have little interest in addressing the fact that our public school system graduates a mere 7 percent of black 12th graders proficient in math. In fact, Biden’s most definitive contribution to the pitiful state of public education has been to assert in his State of the Union address that, when it comes to public education, “12 years is no longer enough” and “that’s why my American Families Plan guarantees four additional years of public education for every person in America.” Our concierge of decline does not demand higher-quality education—rather, he instructs Americans to spend four more years of their lives with the government’s educators, devoid of any obligation to the public to improve.

Such complacency in the face of deterioration is not only dysfunctional, but dangerous. Our adversaries are well aware: China’s delegation humiliated Biden’s Secretary of State and National Security Advisor to their faces on our own soil, asserting, “the United States does not have the qualification to say it wants to speak to China from a position of strength.”

To many Americans, the Biden Decline feels distinctly wrong. Do leaders who love their country typically stand idly by while so many urgent problems accumulate for their citizens? A president who supplants his obligations to the people with wildly impractical ideological fixations does not seem motivated to steward our country to success. He seems intent on ushering in an era of weakness that puts our country’s safety, prosperity, and future at risk. The American people are resilient, but the lengths to which our leaders have gone to subvert our country’s strength will require serious course-correction to return to fighting weight.


Recent Inflation Figures Should Not Be Ignored by Policymakers

Policymakers should be cautious about adding more to the national debt and the money supply.

By Marc JoffeReason Foundation

Recent Inflation Figures Should Not Be Ignored by Policymakers
Photo 214833715 © Andrei Sauko | Dreamstime.com

The sharp increase in consumer prices this spring may be a blip but may also be a sign that inflation is returning as a chronic problem. For those of us who can accurately recall the 1970s economy, it is a frightening prospect. Everyone else would benefit from reading contemporaneous news coverage.

Recent events call into question pronouncements of the leading Modern Monetary Theorists who thought that the U.S. could sustain much larger deficits without triggering major hikes in the cost of living. Instead, it appears that the traditional rules of public finance still hold: deficit spending financed by Federal Reserve money creation is inflationary.

Analogies between today’s situation and the 1970s are not quite on target. By the early 70s, inflation was well underway. Instead, we should be drawing lessons from the year 1965, when price inflation began to take off. Prior to that year, inflation seemed to be under control with annual CPI growth ranging from 1.1 percent to 1.5 percent annually between 1960 and 1964 — not unlike the years prior to this one.

Like 2021, the post-election year of 1965 saw the inauguration of an ambitious unified Democratic government. That year, Congress enacted Medicare and Medicaid, began providing federal aid to local school districts, and greatly expanded federal housing programs. At the same time, the Johnson administration was expanding U.S. involvement in Vietnam, increasing the defense budget. The federal budget deficit expanded from $1.6 billion in the 1965 fiscal year (which ended on June 30 in those days) to $27.7 billion, or 3% of GDP, in fiscal 1968.

Although the Federal Reserve made some attempts to ward off inflation, it generally accommodated the government’s fiscal policy according to Allan Meltzer’s detailed history of this period published by the St. Louis Fed. Between calendar years 1965 and 1969, annual CPI growth surged from 1.6 percent to 5.5 percent, setting the stage for the Nixon administration’s closure of the U.S. Treasury’s gold window and imposition of wage and price controls. Inflation reached double digits in 1974 and again between 1979 and 1981. Notably, these were also recession years, refuting the fallacy of the Phillips Curve, which depicted a supposed policy trade-off between inflation and unemployment. By the early 1980s, we had ample evidence that ill-considered policies could give us a combination of high inflation and unemployment, known back then as “stagflation.”

This policy mix was also not great for equity investors. The Dow Jones Industrial Average moved sideways during the inflationary period, closing at the same level in December 1982 as it did in January 1966. One lesson from that period was that high interest rates can be bad for stocks.

That may be one reason the Fed remains reluctant to allow interest rates to rise today. Although messaging from the latest Federal Open Market Committee meeting showed greater willingness to normalize interest rates, action is not expected until 2023.

Rate hikes may bring other worries for the Fed in today’s environment. Given the large volume of variable rate mortgages and corporate loans outstanding in the U.S. today, a rise in interest rates could push highly indebted homeowners and companies into bankruptcy, potentially triggering a recession. The federal government would have to roll over its record stock of short-term debt at higher interest rates, ballooning its interest expense and potentially crowding out more popular spending priorities.

But if private capital is to continue participating in debt capital markets, such as those for corporate bonds and bank loans, interest rates will have to rise to compensate them for the loss of purchasing power on their principal.

Although annual growth in CPI fell sharply after 1982, it is not strictly correct to say that inflation was defeated. Except for a few years around the turn of the century, the federal government continued to run deficits, a portion of which were monetized. Notably, the government began running trillion dollar deficits, and the Fed drove interest rates down to near zero during the Great Recession, but CPI growth remained muted.

But CPI does not tell the whole story. Some sectors of the economy have experienced substantial inflation, but they are not fully incorporated in the consumer price index. Home prices, healthcare costs and college tuition all soared in recent decades. Meanwhile, apparel and consumer electronics remained affordable due to globalization and improved technology.

Back in the 1970s, most of the world was not part of the global economy. Eastern Europe was in the Soviet bloc, while China, Vietnam and India had yet to become major exporters. As more low-cost producers of goods and services came online during the 1980s and 1990s, prices were pushed downward (often and regrettably at the expense of American manufacturing jobs). The trend toward developing countries joining the international trading system and producing inexpensive consumer goods is now over. Indeed, the recent increase in protectionism is, if anything, rolling back the wave of international price competition.

On the other hand, technological improvements may continue to shield us from inflation in certain sectors. For example, the displacement of human cashiers by automated check stands might restrain price hikes at the big box retailers, supermarkets, fast food chains and other establishments that can afford to invest in them. Smaller businesses, facing higher wages, may have to try to pass them through to consumers in the form of higher prices. Already in some parts of the country, restaurants are trying to recoup costs without raising prices on their menus by adding various surcharges ostensibly tied to specific costs.

It is possible that inflation is now moving from assets and human-intensive services to consumer products, but we will need several months of additional data to know for sure. Meanwhile, policymakers should be cautious about adding more to the national debt and the money supply.


How to Make China Pay

Engage Taiwan, boycott the 2022 Olympics, and impose a carbon tariff

By Matthew ContinettiThe Washington Free Beacon

Xi Jinping
Xi Jinping / Getty Images

The debate over the origins of the coronavirus—did it come from a wet market in Wuhan or from the virology lab nearby—has exposed the bias of media and technology companies and the potential danger of so-called gain of function research. But it also has led to something of an intellectual cul-de-sac. Barring a high-level defection from the Chinese Communist Party, we are unlikely ever to learn the answer. And even if we did have conclusive evidence one way or another, we still would have to decide what to do about it. The real question isn’t whether the pandemic is China’s fault. It’s whether China will pay a price for the catastrophic damage it caused the world.

Wherever the virus came from, we know that the Chinese government lied about it for weeks. Dr. Ai Fen shared information about a novel coronavirus with her colleagues on December 30, 2019. The next day, as Lawrence Wright recounts in The Plague Year, China removed social media posts that mentioned “unknown Wuhan pneumonia” or “Wuhan Seafood Market.” Dr. Li Wenliang, who warned the public that the virus could be transmitted from human to human, was arrested and forced to deliver a televised confession. He died of COVID-19 on February 6, 2020.

Beijing prevaricated for a month while the deadly pandemic spread. China did not allow the World Health Organization to visit Wuhan until January 20, 2020. The same day, one of China’s top doctors finally admitted the obvious: COVID-19 is a communicable disease. By the time the Communist leadership took action, it was too late. On January 21, the U.S. Centers for Disease Control confirmed the first case of coronavirus in America. China did not quarantine Wuhan until January 22. “By that time,” according to Wright, “nearly half the population of Wuhan had already left the city for Chinese New Year.”

The dishonesty and incompetence of the Chinese Communist Party turned a national crisis into a global one. A March 2020 study estimated that cases might have been reduced by anywhere from 66 percent to 95 percent if Chinese authorities had acted earlier. Why was Beijing slow to move? Because bureaucratic collectivist societies such as Communist China are especially prone to delays and coverups as underlings attempt to avoid punishment from above. The same powers of draconian coercion that China used to lock down its population inspired fear among the midlevel and regional officials who allowed the virus to leave China in the first place. The problem wasn’t scientific. It was political. And punishment is deserved.

What to do? Writing in the Washington Post, Mike Pompeo and Scooter Libby call on the “leading democracies” to “act together,” leveraging “their great economic power” to “persuade China to curb its dangerous viral research activities, cooperate with the investigation of the coronavirus’s origins, and, over time, pay some measure of the pandemic’s damages to other nations.” It’s a worthy strategy with a potentially fatal flaw: The other democracies might put economics ahead of accountability.

Another proposal in Congress would strip China of its sovereign immunity and make it liable for damages in U.S. courts. That plan would also leave American foreign policy dependent on outside actors—in this case, judges. And millions of potential claimants attempting to seize Chinese assets in the United States could make for a mess.

China never will volunteer to open its labs. Nor will it compensate either nations or individuals for the havoc it unleashed. Costs must be imposed that Beijing cannot avoid.

I have three suggestions. Each is more controversial than the last. But all of them would ensure that China paid some price for its lax hygiene and sanitation standards, loosey-goosey research protocols, and reckless attitude toward human freedom and human life.

Engage Taiwan. To its credit, the Biden administration has continued the stepped-up engagement with Taiwan that began under President Trump. In April, Biden sent an unofficial delegation to the island that included his close friend Chris Dodd. Most recently, U.S. Trade Representative Katherine Tai raised the prospect of new trade talks in a conversation with her Taiwanese counterpart. This pattern of contacts bothers mainland China to no end.

Keep it up. But also do more to train and equip Taiwanese military forces, as my American Enterprise Institute colleagues Gary Schmitt and Michael Mazza suggested last year in The Dispatch. Taiwan is a reminder that Chinese people can be free and that open societies can deal effectively with pandemics. The very existence of Chinese democracy in Taiwan is a threat to the legitimacy of Communist rule in the mainland. It’s an obstacle to Beijing’s ambitions in the Pacific. Taiwan’s defense is imperative.

Boycott the Olympics. One day before he left office, Secretary of State Mike Pompeo announced that the Chinese Communist Party “has committed genocide against the predominantly Muslim Uighurs and other ethnic and religious minority groups in Xinjiang.” Here, too, the Biden administration has not deviated from its predecessor’s course. The United States openly accuses its arch-rival of crimes against humanity. This is a pretty big deal, is it not?

Well, start acting like it. Why the participation of U.S. officials in the Beijing Olympics next year is even up for debate is a mystery. The White House has said that it is not exploring a boycott. That needs to change. On June 7 a bipartisan resolution was introduced in Congress demanding that the International Olympic Committee explore other venues. A declaration that no U.S. government personnel will participate because of China’s actions at home and abroad would embarrass Beijing. It would encourage other democracies to do the same. China deserves neither the honor of nor the revenue from the participation of U.S. officials. Let the athletes compete. But cheer them on from home.

Impose a carbon tariff. President Biden has also maintained the tariffs that President Trump levied against Chinese goods. Economist Irwin Stelzer of the Hudson Institute has a better plan. He would replace these tariffs with a border tax on the carbon content of Chinese exports. The strategy has appeal for environmentalists and China hawks alike. Everyone knows that China is the world’s largest emitter. Everyone knows that China’s promise of greenhouse gas reduction is worthless. Beijing won’t do anything that jeopardizes the economic growth on which it bases its claim to rule.

“In effect,” writes Stelzer, “by selling us ‘dirty’ products, China is adding to the competitive advantage it has from selling us stuff made by slave and other laborers paid wages with which we cannot decently compete, around $2 per hour in Beijing.” The EU already is at work on what it calls a “Carbon Border Adjustment Mechanism” on Chinese exports. By pushing for a carbon tariff of its own, the Biden administration would please not only hawks and greens, but also the European allies whose opinion it values so highly.

The problem with a “carbon border adjustment mechanism,” of course, is that the process of calculating a good’s carbon content might turn out to be overly complicated, bureaucratic, and subject to politicization. I’m not in the habit of taking economic advice from Brussels. But these problems must be weighed against the justice and potential benefits of such a tax. And the additional cost could be rebated to low-income U.S. consumers along the lines that Senator Tom Cotton proposed in a slightly different context in 2019.

In the end, whether or not the United States adopts a tax on Chinese carbon is less important than moving the debate from the pandemic’s origins to the pandemic’s endgame. The despotic regime whose malign indifference killed so many and cost so much cannot be allowed to pretend that nothing happened. We can hold China responsible. And we can make China pay.


With Louis DeJoy’s initiatives, Congress can keep the USPS from going postal

Ten-year program crafted will allow Postal Service to remain a self-sustaining entity

By Peter RoffThe Washington Times

Congress and the USPS (Postal Service) illustration by Linas Garsys / The Washington Times

Congress and the USPS (Postal Service) illustration by Linas Garsys / The Washington Times

Controversial U.S. Postmaster General Louis DeJoy’s initiatives to get the chronically mismanaged United States Postal Service back on sound financial footing are already bearing good fruit. His back-to-basics approach, which relies on strengthening core competencies and relying on increased efficiency, will likely keep U.S. taxpayers from having to spend billions to keep one of the world’s oldest postal systems in operation. 

A Trump appointee, Mr. DeJoy drew the ire of progressives during the 2020 campaign when they accused him of making changes that would interfere with the ability of voters who could not get to the polls because of pandemic restrictions from voting by mail. 

It would be a shame if partisan political concerns were allowed to derail his reform plans. The 10-year program Mr. DeJoy has pulled together will allow it to remain a self-sustaining entity funded by those who use the mail to send letters, catalogs, magazines, and packages for years going forward. The allegations against him have generally been disproven, at least as far as his leadership of the postal service is concerned. Some nonetheless would like to use them to block his initiatives from being enacted, even those Congress has endorsed in the bipartisan postal reform legislation currently under consideration.


The Postal Service Reform Act of 2021 (introduced in the U.S. Senate by Democrat Gary Peters of Michigan and Republican Rob Portman of Ohio) gives the Postal Service what it needs to eventually return to profitability.

Absent congressional approval for Mr. DeJoy’s plan, the USPS projects losses of more than $150 billion over the next 10 years. Mr. DeJoy and congressional postal leaders understand the problem — the decline in mail volume that’s taken place since the introduction of email and text messaging — and at least part of the solution, which lies in its e-tail driven package business.


It’s a strange turn of events. The last time Congress passed a piece of postal reform legislation, the primary concern was that the Postal Service might use earnings from its monopoly mail business to subsidize the cost of comprehensive package delivery — a globally competitive business. 

Instead, the opposite occurred. Package deliveries are keeping the Postal Service afloat. Last year they generated a net $11 billion for the USPS over and above what it costs to deliver packages to every address in the continental United States six days a week. 


Powering up America by giving consumers choice

By Peter RoffHavasuNews

America’s high national living standards lead us to consider things like abundant access to clean water, comprehensive cellular service, and a reliable electric grid commonplace. Much of the rest of the world regards them as luxuries unavailable to many people.

Consequently, we tend to think about these things only when they don’t work. Cloudy water creates a crisis. A cell phone outage leaves us stranded. Failures in the power market leave us, literally and figuratively, in the dark about what to do.

The critics of how the market allocates the distribution of electric power allege competition would lead to more brown- and blackouts. Despite abundant evidence they are wrong, they don’t trust the competitive market system to keep the lights on. Even now they’re waging a campaign to upend the market structure in places like my home state of Virginia, where competition has overall helped maintain reliable and affordable electricity.

Electricity generators in the United States operate under different structures, dictated by state and the federal governments. Historically, utilities have been integrated vertically, creating geographic monopolies on the production and sale of electric power. Unified ownership of the different parts of the supply chain – generation, transmission, and distribution of power – by a single producer/distributor creates exclusive service territories with captive customers.

Economics teaches that monopolies are bad, even at the state level. Dependence on a single source for anything leaves customers without the freedom to decide what’s best. Competition is the consumer’s friend. Just look at the explosion in services offered by the telephone companies thanks to the competition created by the breakup of Ma Bell.

The explosion in content creation driven by the internet is analogous to what might happen to power generation if competitive pressures were introduced to the generation of electricity in states currently lacking choice. There are nuances of course but, in general, the restructuring of power markets would end the distribution monopolies. Existing utilities would maintain control on distribution networks, but in most cases will be separated from the generation of power.

Currently, there are seven Regional Transmission Organizations (or RTOs) and Independent System Operators (or ISOs) in the United States that run competitive wholesale power markets. They facilitate open access to power transmission and operate the transmission system independently of, and foster competition for, electricity generation among wholesale market participants.

In short, they replace the cost-based regulatory model with a market-based competitive model, functioning as “power pools” from which multiple independent utilities can draw and share reserves to make power cheaper for you and me. Over time, they have evolved to optimize generator output over wide geographic regions – again, generally reducing consumer costs.

According to U.S Energy Information Administration data, between 1997 and 2017, increases in retail electricity prices in states with competitive electric markets and monopoly states were about the same, while customers in monopoly states saw a slightly higher percentage increase in rates. A Retail Energy Supply Association found that customers in states that still have monopoly utilities saw their average energy prices increase nearly 19 percent from 2008 to 2017, while prices fell 7 percent in competitive markets over the same period.

In competitive markets, electricity is purchased at market-determined wholesale prices. Customers, you and me, can choose a provider rather than be required to purchase our electricity from our local utility. The monopoly system, equally or more expensive from a price perspective, is often tainted by political corruption and scandal. In the last year or so, scandals involving utilities seeking to influence legislation or secure taxpayer bailouts led to the toppling of the top lawmaker in both the Ohio and Illinois House of Representatives.

“Pick a year, and you will find some scandal among monopoly utilities. The corruption shows no sign of slowing down. Instead, the breadth, depth, and cost of such scandals only seem to multiply,” the Conservative Energy Network notes.

It’s time to pull the plug on the old system. Competition in the electricity market produces cost savings for customers, improves service and reliability, and encourages innovations leading to environmental benefits. The drive to gain new customers that comes once a restructured, competitive wholesale market for electricity is introduced – and which several states are in the process of creating – empowers customers, reduces costs, and keeps the lights on.


Postal Bill Puts Big Government, Special Interests at Front of the Line

By George LandrithNewsmax

united states postal service emblem and logo

Possible changes to the U.S. Postal Service are gaining significant momentum as Congress continues its legislative deliberations this summer. The proposal vehicle in question, known as the Postal Service Reform Act (PSRA), received positive reviews in the House of Representatives, and a Senate version was also recently released.

Despite accumulating 63 pages of legislative text, the bill emphasizes fiscal sleight of hand to achieve short-term stabilization, while leaving a massive amount of the Postal Service’s future in doubt.

The hallmark of the package is a $46 billion bailout of healthcare benefit provisions. These unfunded liabilities have added up since the USPS began defaulting on payments for retiree benefits in 2012.

The depths of such blanket debt forgiveness should be enough to make fiscal conservatives cringe at the sight of more government intervention — especially when the federal government is more rightly looking to support key U.S. industries, small businesses and job creators who were badly affected over the past year due to no fault of their own.

Another cringe-worthy issue with the proposal is a bizarre element that would further reduce the Postal Service’s monitoring of its own costs and revenue inflows. As the agency’s multi-billion-dollar losses persist year after year, it hardly makes sense to dial back transparency and leave accounting managers off the hook.

The provision in question involves a statute that calls for the Postal Service to ”maintain an integrated network for the delivery of market-dominant and competitive products.” To be sure, it is sensible that the Postal Service carries both letter mail and packages together for the sake of delivery efficiency from one address to the next. In this sense the USPS already has an ”integrated network.” However, as a government-chartered operation, the Postal Service must be compelled to fully articulate the financial differences between its essential public service, and its products that are subject to the risks of the competitive market.

With this glaring understanding, lawmakers should be outraged by this ”integrated network” item that blurs the lines of the Postal Service’s finances. The chaotic nature of USPS fiscal management truly demands that we don’t throw away essential precautions. Instead, more analytical tools must be used to reinforce transparency about the separate impacts of every service — mail, packages and everything else.

With the PSRA, the Postal Service would benefit from major fiscal flexibilities, while it would also enjoy diminished responsibilities when it comes to delivery performance goals. This prospect of even more delayed mail delivery, coupled with all the irresponsibility of reform should be especially concerning to key Senate leaders.

Policymakers including Sen. James Lankford, R-Okla., Sen. Rand Paul, R-Ky., Sen. Rick Scott, R-Fla, Sen. Ron Johnson, R-Wis., Sen. Josh Hawley, R-Mo., and Sen. Mitt Romney R-Utah, must be especially concerned about the nature of deeply consequential bailouts and leaving millions of constituents who rely on the mail hanging out to dry.

Forcing American customers, especially those in harder to reach rural areas, to deal with more frequent mail slowdowns and higher stamps prices simply only adds insult to injury.

In parallel with the PSRA, Postmaster General Louis DeJoy has proposed a 10-year business plan for the Postal Service, which assumes that Congress will agree to the $46 billion liability bailout in order to kick-start systemic changes that would rebalance costs and revenues. However, these important plans may never see the light of day. Democrat leaders in Congress have spent JanuaryMarch, and June organizing campaigns to ensure that Postmaster General DeJoy is soon fired from his role.

Senate leaders must be wise to see how the grand Postal Service bargain is destined to burst at the seams and there is simply no reason to swallow this bitter legislative pill. The political ramifications of Postal Service reform demands all-inclusive measures, and it is entirely clear that the Postal Service Reform Act is incomplete and would be detrimental for Americans.


The ‘Endless Frontier Act’ Is Not Merely a Wasteful Boondoggle, It Will Likely Slow High Tech Innovation

By George LandrithTownhall

The ‘Endless Frontier Act’ Is Not Merely a Wasteful Boondoggle, It Will Likely Slow High Tech Innovation
Source: Yao Dawei/Xinhua via AP

The advertised purpose of the “Endless Frontier Act” is to increase high tech competition with China.  This, of course, is a goal that every American should be able to get behind.  However, the advertised purpose of the bill, as laudable as it may be, is not actually what the bill will do.  In other words, the “Endless Frontier Act” was sold under false pretenses and using fabricated promises. 

If the Senate were serious about helping America win the high tech competition with China, it would do a number of important things, including, but not limited to:  (1) protect our nation’s intellectual property from theft and abuse by the Chinese; (2) make our tax code more competitive; (3) allow research and development costs to be deducted more easily thus encouraging capital investment in high tech solutions; (4) review and reform our regulatory regime that in many cases is outdated and hindering the development of new technologies and making us less competitive. 

But the Senate isn’t considering any of that.  Instead, their so-called plan is to spend about $110 billion in taxpayer dollars via government grants to promote new technologies to be administered by the National Science Foundation.  In other words, a government agency with a horrific record of waste, fraud and abuse is going to decide what technologies look most promising and then hand out taxpayer dollars to give them a boost. This sounds like the Solyndra scandal on steroids. 

So in an era when our national debt has been rapidly increasing at unsustainable rates, we are going to borrow even more money from China and become even more indebted to China — all for the purpose of being more competitive with China. Let that sink in.

But the problem doesn’t end there. The truth is the National Science Foundation (NSF) has a horrible record of waste.  The NSF has funded a project to develop a robot that could fold a towel in 25 minutes. A child could fold a whole load of towels in 25 minutes, but for this stupidity you paid $1.5 million. They’ve funded studies of shrimp running on a miniature treadmill. That wasted $500,000 of your hard earned dollars.  They’ve spent millions studying what motivates individuals to make political donations.  They’ve spent millions studying if athlete’s perception that the basketball rim is as large as a hula-hoop, or that a baseball is as large as a grapefruit, or a golf hole appeared as big as a manhole cover impacts the athlete’s performance.

As Senator Rand Paul (R-KY) highlighted on the floor of the Senate,  the NSF spent $700,000 that had been allotted to study autism to listen to a tape of Neil Armstrong’s first moon walk. They wanted to determine if he said “one small step for man …” or “one small step for a man …” It took them a year and $700,000 of your money to determine that they couldn’t tell.  And that was money that was supposed to be spent on autism.  The NSF also spent half a million dollars developing a climate change themed video game to help children feel more alarmed. 

Government is inherently wasteful.  For example, our government spent over $40 million building a natural gas station to refuel cars that run on natural gas in Afghanistan to help them reduce their carbon footprint. Yet Afghanistan is a nation where the annual income is about $800 and often cook their food on open fires, and few drive any sort of car, much less a natural gas powered car.  Any high schooler could have told you that building a natural gas station in a nation that doesn’t have many cars is a dumb idea. 

Government has funded studying whether you and I are more or less likely to eat food that has been sneezed or coughed on by someone else. You and I could answer that question for free. We’d prefer food that hasn’t been sneezed on — even before the pandemic.  But government bureaucrats spent $2 million to get the same answer.  

So now we are going to rely on these same government bureaucrats to make sure we compete in the high tech arena with the Chinese and we will borrow the money that these bureaucrats decide to spend from the Chinese.  What could possibly go wrong?! 

I have grown to expect liberals to gladly fund such utter foolishness from our paychecks.  But it isn’t just them, there were 19 Republicans who voted for this insanity:  Blunt (MO), Capito (WV), Collins (ME), Cornyn (TX), Crapo (ID), Daines (MT), Graham (SC), Grassley (IA), McConnell (KY), Murkowski (AL), Portman (OH), Risch (ID), Romney (UT), Rounds (SD), Sasse (NE), Sullivan (AK), Tillis (NC), Wicker (MS), and Young (IN).

Those who voted for this bill will undoubtedly defend their vote telling you that they want America to compete and win against China in the high tech arena.  We all would like that!  But let’s try something novel. Let’s do things that would actually help our innovators innovate; and help our businesses and industries compete and win. Also let’s not put a wasteful and often silly government agency in charge of the program.  Instead, let’s unleash America’s entrepreneurial and innovative spirit. And let’s not borrow the money from the very nation we claim to be trying to out compete. 


Progressives Say Biden’s Campaign Tax Pledge Has Been Broken

By Peter RoffAmerican Action News

Gage Skidmore via Flickr

A leading liberal think tank analysis shows the Biden overall tax plan would shred the president’s 2020 campaign pledge that taxes would not be increased “by one thin dime” for anyone making less than $400,000 a year.

According to the Tax Policy Center, if Biden’s combined tax initiatives became law this year, 75 percent of middle-class families would see the amount they pay in taxes increase in 2022, and that 95 percent of middle-class families would pay more in taxes by 2031. At the same time, Biden Treasury Secretary Janet Yellin is refusing to rule out the restoration of special interest tax breaks that would disproportionately benefit the ultra-wealthy. 

Testifying recently before the House Committee on Ways & Means, Yellin refused to say whether the president and his advisers would move ahead on demands by Democratic governors like Andrew Cuomo (NY) and Phil Murphy (NJ) and members of Congress from the blue states that state and local tax payments be made fully deductible on federal returns once again. The provision known as SALT was capped from the tax code in the 2017 Tax Cuts and Jobs Acts as a “pay for” that made it possible for other rates to be reduced. 

When asked whether Biden would support eliminating the cap if it was included in any compromise infrastructure package. Yellen said, “I’m not going to negotiate here on behalf of the president.”

Biden policies, some lawmakers say, are forestalling the onset of a full-blown recovery caused by the pandemic-related lockdowns that plunged the U.S. closer to financial disaster than at any time since the so-called great recession of 2008.

“Through the first five months of this year, the Biden Administration added 500,000 fewer jobs than the last five months of 2020 – some of which were during the height of Covid cases and deaths. A half-million jobs short. And due to inflation, real wages have declined since President Biden took office,” Brady said in a statement.

The White House has repeatedly denied this is because the enhanced unemployment benefits authorized at the beginning of the lockdown period have been allowed to continue. A study recently published by the Committee to Unleash Prosperity’s Steve Moore, Casey Mulligan, and E.J. Antoni shows the relationship between the two to be direct and economically harmful, a view shared by Federal Reserve Chairman Jerome Powell who has made clear he believes these benefits have discouraged workers from returning to work and harmed recovery.

While Biden policies may be cooling job growth here at home, they’d incentivize job creation and fuel an expansion overseas – especially if the president’s agreed-upon among the G-7 plan for a global minimum corporate tax is eventually adopted

The 15 percent GMT, which must be approved by Congress before becoming law, would make it better to be a foreign worker or company than an American one. If it’s imposed, it would incentivize U.S. companies to move U.S. jobs overseas and to “offshore” themselves which, before the 2017 Tax Cuts and Jobs Act’s creation of a global intangible low tax income provision was a common occurrence in the American market. 

The proposal the Biden administration has endorsed holds out the prospect of a global tax code in which American companies operating overseas have to pay higher taxes than their foreign competitors. This would give foreign competitors an advantage to target American companies and jobs and erode the U.S. tax base. As Brady described it, The White House is “leading a global race to the bottom” for America’s competitiveness and our workers.


The ‘Endless Frontier Act’ Is Not Merely a Wasteful Boondoggle, It Will Likely Slow High Tech Innovation

By George LandrithTownhall

The ‘Endless Frontier Act’ Is Not Merely a Wasteful Boondoggle, It Will Likely Slow High Tech Innovation
Source: Yao Dawei/Xinhua via AP

The advertised purpose of the “Endless Frontier Act” is to increase high tech competition with China.  This, of course, is a goal that every American should be able to get behind.  However, the advertised purpose of the bill, as laudable as it may be, is not actually what the bill will do.  In other words, the “Endless Frontier Act” was sold under false pretenses and using fabricated promises. 

If the Senate were serious about helping America win the high tech competition with China, it would do a number of important things, including, but not limited to:  (1) protect our nation’s intellectual property from theft and abuse by the Chinese; (2) make our tax code more competitive; (3) allow research and development costs to be deducted more easily thus encouraging capital investment in high tech solutions; (4) review and reform our regulatory regime that in many cases is outdated and hindering the development of new technologies and making us less competitive. 

But the Senate isn’t considering any of that.  Instead, their so-called plan is to spend about $110 billion in taxpayer dollars via government grants to promote new technologies to be administered by the National Science Foundation.  In other words, a government agency with a horrific record of waste, fraud and abuse is going to decide what technologies look most promising and then hand out taxpayer dollars to give them a boost. This sounds like the Solyndra scandal on steroids. 

So in an era when our national debt has been rapidly increasing at unsustainable rates, we are going to borrow even more money from China and become even more indebted to China — all for the purpose of being more competitive with China. Let that sink in.

But the problem doesn’t end there. The truth is the National Science Foundation (NSF) has a horrible record of waste.  The NSF has funded a project to develop a robot that could fold a towel in 25 minutes. A child could fold a whole load of towels in 25 minutes, but for this stupidity you paid $1.5 million. They’ve funded studies of shrimp running on a miniature treadmill. That wasted $500,000 of your hard earned dollars.  They’ve spent millions studying what motivates individuals to make political donations.  They’ve spent millions studying if athlete’s perception that the basketball rim is as large as a hula-hoop, or that a baseball is as large as a grapefruit, or a golf hole appeared as big as a manhole cover impacts the athlete’s performance.

As Senator Rand Paul (R-KY) highlighted on the floor of the Senate,  the NSF spent $700,000 that had been allotted to study autism to listen to a tape of Neil Armstrong’s first moon walk. They wanted to determine if he said “one small step for man …” or “one small step for a man …” It took them a year and $700,000 of your money to determine that they couldn’t tell.  And that was money that was supposed to be spent on autism.  The NSF also spent half a million dollars developing a climate change themed video game to help children feel more alarmed. 

Government is inherently wasteful.  For example, our government spent over $40 million building a natural gas station to refuel cars that run on natural gas in Afghanistan to help them reduce their carbon footprint. Yet Afghanistan is a nation where the annual income is about $800 and often cook their food on open fires, and few drive any sort of car, much less a natural gas powered car.  Any high schooler could have told you that building a natural gas station in a nation that doesn’t have many cars is a dumb idea. 

Government has funded studying whether you and I are more or less likely to eat food that has been sneezed or coughed on by someone else. You and I could answer that question for free. We’d prefer food that hasn’t been sneezed on — even before the pandemic.  But government bureaucrats spent $2 million to get the same answer.  

So now we are going to rely on these same government bureaucrats to make sure we compete in the high tech arena with the Chinese and we will borrow the money that these bureaucrats decide to spend from the Chinese.  What could possibly go wrong?! 

I have grown to expect liberals to gladly fund such utter foolishness from our paychecks.  But it isn’t just them, there were 19 Republicans who voted for this insanity:  Blunt (MO), Capito (WV), Collins (ME), Cornyn (TX), Crapo (ID), Daines (MT), Graham (SC), Grassley (IA), McConnell (KY), Murkowski (AL), Portman (OH), Risch (ID), Romney (UT), Rounds (SD), Sasse (NE), Sullivan (AK), Tillis (NC), Wicker (MS), and Young (IN).

Those who voted for this bill will undoubtedly defend their vote telling you that they want America to compete and win against China in the high tech arena.  We all would like that!  But let’s try something novel. Let’s do things that would actually help our innovators innovate; and help our businesses and industries compete and win. Also let’s not put a wasteful and often silly government agency in charge of the program.  Instead, let’s unleash America’s entrepreneurial and innovative spirit. And let’s not borrow the money from the very nation we claim to be trying to out compete. 


Biden’s Tax Increases Will Send American Jobs Overseas and Help China Become the World’s Super Power

We defeated the Soviet Union during the Cold War because our economy was relatively strong and they could not keep up. We didn’t bomb them into submission. We didn’t invade them. We simply grew economically at a rate that they could not keep up with. China hopes to do that to us. The question is will we cooperate with their goals and place ourselves in their grasp? The answer is — only if we are stupid.

By George LandrithTownhall

Joe Biden’s and Congressional Democrat’s plan to give the United States the highest corporate tax rates in the developed world will harm America’s economy, kill American jobs, and give China a leg up in their quest for world domination.  If Biden and congressional Democrats get their way, our corporate tax rate would be substantially higher than Communist China’s rate. American workers would suffer the most as their jobs are exported abroad to lower taxes and lower cost nations. 

But it isn’t just corporate income taxes that the Democrats and Biden want to raise. They also want to raised taxes on Global Intangible Low Tax Income (GILTI) to 21 percent.  This has the effect of imposing a minimum tax and creates a stimulus program for workers around the globe, but not in the U.S.  Biden’s plan would penalize American companies with a massively higher minimum tax and at the same time exempt foreign competitors.  There is no good reason to hamstring American companies, kill off incentives for good paying jobs to remain in America, or make jobs our primary export.  But that is precisely what the Biden tax plan would do. 

Even the left-leaning Tax Policy Center agrees that Biden’s plan will make US companies easy targets for foreign companies — including those owned or controlled by the Chinese Communist Party.  They concluded that “Biden’s proposal would likely reignite corporate inversions — transactions where US multinationals become foreign multinationals, usually through acquisition by a foreign company.” 

The Tax Policy Center also acknowledges that “Biden’s platform argues that a greatly strengthened foreign minimum tax is needed to prevent US firms from investing and shifting profits offshore, where taxes are lower. These practices can lower US wages and tax revenue.” 

So it isn’t just right-leaning economists who see this policy as dangerous and harmful. Biden’s tax policy simply is harmful to both the US and American workers. The primary beneficiaries would be foreign competitors — China in particular.  China has to be rooting for this tax plan because it will play into their hands and make their plans of world dominance much more easily achieved. If you want to know what a world dominated by the Chinese Communist Party might look like, ask Hong Kong who is being brutally repressed or ask the Uyghurs and other ethnic minorities who are being held in concentration camps and raped and murdered because the regime doesn’t like them. 

It isn’t very often that people think of tax policy as a national security issue, but in this case it clearly is. Having a strong and robust economy isn’t just good for American workers or American investors, it’s good for America’s national security.  Exporting jobs and economic well-being only strengthen’s China’s hand and makes it easier for them to rule the world as is their stated goal. 

We defeated the Soviet Union during the Cold War because our economy was relatively strong and they could not keep up.  We didn’t bomb them into submission.  We didn’t invade them.  We simply grew economically at a rate that they could not keep up with.  China hopes to do that to us.  The question is will we cooperate with their goals and place ourselves in their grasp?  The answer is — only if we are stupid. 

The bottom line is the Democrat tax plan is to make American companies pay higher taxes than their foreign competitors.  To make matters worse, Biden wants every country to impose a minimum tax on foreign earnings of domestic companies. Why would they do this? Because Biden is promising to keep the US minimum tax higher than other nations.  What does that mean?  President Biden is promising that he will make American companies and workers uncompetitive in the world marketplace. He is promising to make our tax code advantageous to communist China. 

These are important questions:  Why do Democrats in Washington, DC, led by Joe Biden and Kamala Harris, think it is a good idea to push the US corporate tax rate higher than communist China’s tax rate?  Who will benefit from this policy?  Are Americans ready to return to an era where American firms are regularly downsizing and moving operations abroad? Or selling their operations to foreign companies or governments? 

America must maintain its strength — both militarily and economically — if it hopes to be the victor in the 21st Century.  If America thinks it would be better if China is the victor, then by all means, back the Biden-Harris tax plan. But if you think the world looks like a more free and prosperous world with America as the world’s primary power, opposing the Biden plan is a good start. 


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