The California Legislature is back from its summer recess and has frantically resumed its quest for new revenue sources.
One of the latest ideas is Assembly Bill 1253. This proposed legislation would add new income tax brackets for high earners on top of the existing ones.
Income between $1 million and $2 million would receive a one percentage point surcharge, bringing the marginal rate to 14.3 percent. Those earning between $2 million and $5 million would pay an additional three percentage points, and those earning over $5 million would pay an additional 3.5 percentage points, bringing their marginal rates to 16.3 percent and 16.8 percent respectively.
This plan constitutes a continuation of California’s soak-the-rich approach to raising revenues.
While some seem to believe that high earners can provide unlimited resources, the evidence from prior tax hikes suggests that the introduction of these tax rates is not even likely to raise revenue for the state. At the same time, it will hammer job creation.
The problem is that high earners do not simply sit there and take it when the state goes after their income.
In a detailed study of the 2012 California ballot measure that raised the top state rate to 13.3 percent, Ryan Shyu and I found that just two years later, the state was only collecting 40 cents of every dollar that it had hoped to raise from the tax increase.
High income taxpayers affected by the 2012 tax increase suddenly began to flee the state at higher rates, especially to zero tax states like Nevada, Texas, and Florida.
Even more importantly for the state budget, those that stayed began declaring considerably less taxable income than they would have otherwise, apparently either scaling back their productive activities or engaging in tax avoidance.
The economist Arthur Laffer has famously argued that there is a tax rate beyond which a government’s revenue will decline if it raises taxes further, due to the disincentive effects of high taxes.
While the federal government may be helped by limits on what American citizens can do to escape federal taxation, state governments tread on much thinner ice when faced with the ability of taxpayers to move their residences and their earnings generation to other states.
In 2012, California was at least still at the point where raising top income tax rates led to some increase in near-term revenue, albeit with grave long-term consequences.
Today, however, the state is starting from a 13.3 percent tax rate that is the highest in the nation.
Furthermore, Congress has since moved to protect federal taxpayers against bloated state spending by placing a $10,000 cap on state and local tax deductions as part of the 2017 Tax Cut and Jobs Act.
So while the blow of a 3 percentage point tax increase in 2012 was strongly cushioned by deductibility against top-bracket federal rates, California taxpayers today would feel the full force of this proposed round of increases.
Once taxpayers have responded by voting with their feet, reducing their business activities, and re-upping with their tax attorneys, the state will likely lose revenue if it attempts to increase rates.
To make matters worse, Sacramento’s narrow focus on tax revenues ignores that fact that this tax avoidance behavior will lead to job losses. These rates also apply to business income to non-corporate entities (such as partnerships and LLCs) which account for over half of all employment in the US.
In another study, Xavier Giroud and I found that each percentage point increase in individual tax rates that the average state implements leads to losses of up to 0.4 percent of all non-corporate jobs in the state.
Starting from California’s already astronomical top rate, the impact would be expected to be even larger.
These job losses will negatively impact the well-being of Californians and further reduce state tax revenues.
California’s approach to relying on the taxation of top earners has sown the seeds of its own destruction. The top 0.5 percent of taxpayers pay over 40 percent of individual income taxes in the state.
Officials are blaming COVID-19 for the budgetary havoc, but this structure means that in any downturn, California revenues will tank due to the excessive reliance on both the ordinary income and capital gains of top earners.
If the Legislature is interested in promoting economic growth and prosperity in the California, and securing the state’s own fiscal future, it should reject further top income tax rate increases.
Instead, it should work towards putting the state back on a path towards being a competitive place for high-income individuals and businesses to locate their economic activity.
Project chairman: 'We have certainly hit a snag with all the difficulties of the coronavirus.'
By D Magazine•
Construction for a high-speed train that will zip between Dallas and Houston at more than 200 miles per hour is still in the works. But with costs estimating almost $20 billion more than initially planned, Texas Central might need the help of stimulus money.
In a recent letter to Texas State Sen. Robert Nichols, Texas Central’s Chairman (and an investor), Drayton McLane, Jr. said the project is seeking funds outside of private equity, saying, “we have certainly hit a snag with all the difficulties of the coronavirus.” The letter was obtained by the Dallas Business Journal.
The company laid off 28 employees in March, and the Global Financial Markets hit a low, too, leaving its upcoming recovery—or lack thereof— to determine the verdict: Will the train need a stimulus fund?
Aside from exploring funding from government loan vehicles—including Railroad Rehabilitation & Improvement Financing and Transportation Infrastructure Finance and Innovation Act—Texas Central may tap into government loans. According to Texas Central CEO Carlos Aguilar, the company has not applied for funding through the CARES Act.
“We feel that between Japanese government funding and the monies we hope to receive from President Trump’s infrastructure stimulus through the Department of Transportation, along with private equity that the project still has a great opportunity, is viable and can be construction-ready this year,” McLane added in his letter.
The project will create an estimated $36 billion in economic benefits statewide over the next 25 years, according to a news release. Texas Central anticipated it also would create 10,000 direct jobs per year during peak construction and 1,500 permanent jobs when fully operational.
Early on, Texas Central said the bullet train would be privately funded—an idea that has drawn skepticism since inception, along with its ability to be profitable.
In 2017, Peter Simek wrote a D Magazine article titled Has the Texas Central Bullet Train Gone Off the Rails? In it, he points to Travis Korson, a senior fellow with Frontiers of Freedom, a conservative Washington think tank, who didn’t believe then that the numbers made sense and that its growing budget and inflated ridership projects suggest the privately funded rail project may not be profitable. (Click here to read it)
At the time, proposed construction costs had ballooned from $10 billion to $16 billion. Currently, on Texas Central’s website, it says the system will cost more than $12 billion to construct.
In response to recent news about the potential need for stimulus money, State Representative Ben Leman, District 13, issued the following statement:
“We also were told the project would be privately financed, yet now it is revealed Texas Central is seeking taxpayer stimulus money to build it. To publicly promote to the media, to elected officials, and worst of all to the citizens of Texas the cost of the project as $20 billion when they know it to be more than $30 billion and that the project would be privately financed while they ‘hope to receive from President Trump’s infrastructure stimulus through the Department of Transportation’ to build it just reveals their true character and intentions about this project”
Aguilar told the DBJ that the $30 billion figure was “a conservative estimate of ‘all in’ numbers.”
The train’s still on the tracks toward its construction, though, as the company hit a breakthrough in an essential legal ruling just one month ago: The Thirteenth Court of Appeals ruled Texas Central and its subsidiary Integrated Texas Logistics as legal railroads.
The decision reversed a previous one made in the 87th district of Leon County. Designating the project as a legal railroad is almost as powerful as what happens next. All railroads have the right of eminent domain, which means that Texas Central can acquire all the land it needs. Project opponents are appealing the decision to the Texas Supreme Court.
In response, Aquilar said the “decision confirms our status as an operating railroad and allows us to continue moving forward with our permitting process and all of our other design, engineering, and land acquisition efforts.”
By Havasu News•
The coronavirus crisis has likely changed American business forever, as politicians use the deadly pandemic to push for changes that will have a major impact on how corporations operate.
How business respond will determine the future of American commerce for years. Important business leaders like Black Rock’s Larry Fink are pushing companies to expand their mission beyond maximizing value for shareholders into things that are on progressives’ political wish list.
What Fink and others are advocating for drifts harmfully towards what progressives promote as they seek to control the business sector and move to a centrally planned economy.
If the American economy is to survive, let alone thrive, we need corporate leaders to step up in defense of the free market. They need to eschew the insider deals and crony capitalism that have caused many Americans, especially the young, to lose faith in what, as Churchill might have quipped, is the worst of all possible economic systems except for all the others.
There are heroes out there like Tesla’s Elon Musk, who recently stood up to Gov. Gavin Newsome and other officials who would not permit his California manufacturing plant to reopen and get people back to work. To Musk’s credit, even though his empire is built on questionable tax breaks, credits, and subsidies, he pushed back where other business leaders have sheepishly complied. He announced he’d be taking his company and the jobs he created to Texas or Nevada, where they would be welcomed. Faced with that, Newsome and company seem to have backed down.
For every hero, there are goats like Alan Armstrong, the CEO of Williams Co., an energy pipeline company. According to recent allegations made in a Delaware court, he secretly worked to undermine a 2016 board-approved merger between his firm and Energy Transfer, a Texas-based pipeline company, that would have paid shareholders a significant premium over the then-market value of their shares.
Nearly four years since it fell through, Williams continues to seek more than a billion dollars in breakup fees, despite Armstrong’s recently alleged involvement in the deal’s demise. According to court documents, he even worked behind the scenes with a former Williams senior vice president by using a personal account and leaking inside information to assist a lawsuit filed to block the proposed and ultimately unconsummated merger. As a result, half of his board of directors resigned days after the deal was called off, citing a lack of confidence in his ability to lead the company.
The reason he acted as he did, the court was told, was out of a desire to maintain his position as CEO even if his continued leadership of the company was detrimental to shareholder interests.
Actions like these in the corporate community have regular Americans – more and more of whom join the investor class every day through their 401Ks, Roth IRAs, and by trading stocks online – wondering if their money is safe, or if they’re just feeding corporate cats growing fat off their investments.
Warren Buffet, one of the country’s most respected financial leaders, argued in a recent interview that not enough attention is paid to corporate leadership and governance. “Almost all of the directors I have met over the years have been decent, likable and intelligent,” he said. “Nevertheless, many of these good souls are people whom I would never have chosen to handle money or business matters. It simply was not their game.”
If the CEOs and boards of America’s companies don’t step up to restore public confidence in who they are and what they do, then the politicians will – as House Speaker Nancy Pelosi tried to do in the first coronavirus relief bill. Other than the privileged few that would have been picked to serve on boards if her proposed amendment requiring diversity on corporate boards had been adopted, it would have been bad for business and everyone else.
The clock is running.
There are free market solutions for these issues waiting for GOP support
On most of the issues highlighting the 2020 campaign, the Republicans have a great story, especially the economy, law enforcement, foreign policy (including trade), national security, energy, and job creation. The Democrats have concentrated on three critical issues, however, which are nearly ignored by most Republicans: the wealth gap, health care, and climate change
These issues are currently owned by the Democrat candidates; they have not even been addressed directly by the Republicans. This silence is a tragic mistake because current polls show that these three issues are of critical importance to significant numbers of the American electorate. If Republican candidates continue to ignore these two issues, they will suffer in the only polls that really count – the votes in November.
Today’s topic is the wealth gap, with discussions of health care and climate change to follow in succeeding columns. I use the term, “wealth gap” in preference to “wage gap” and “income inequality” because “wealth” includes assets which are relatively long range as opposed to “wages” or “income” which may fluctuate from time to time.
The Republican response to the wealth gap is the “trickle-down” economic theory: prosperity for the wealthy means incremental income to the entire workforce because the wealthy will of necessity invest in an expanding economy thus benefiting the workers who actually produce new goods and services by which the economy is actually expanded. This is the argument prominently featured by President Trump in his famous rallies.
And, measured by present and past metrics, it is true. A flourishing economy does indeed raise wages and job opportunities. When applied to a stagnant employment environment, the chief beneficiaries on a percentage basis are the lower wage workers – i.e. when a person goes from unemployed to employed, the percentage of improvement is 100%. This is, of course, a valuable trend.
The next step, however, poses an altogether different problem: in a tight labor market – which America is rapidly approaching – how does an employer retain an experienced worker? And an ancillary problem: how does the country avoid a steady inflation, as wages rise, and senior employees can seek and find ever higher wages?
There are free market solutions to both these questions. My answer may be considered by traditional economics a radical solution, namely profit-sharing. There are various ways to implement the concept of profit-sharing – e.g. stock grants or options, profit-based bonuses, or employee stock option plans (ESOP), among others.
The basic hedge against inflation is the fact that increases in income to the workers comes from profits rather than expenses, so prices do not have to increase. The operational result is that workers who have a stake in the performance of the company tend to work harder and more efficiently, and greater income leads to higher job satisfaction and loyalty.
There are other reasons to advocate profit-sharing, namely, redressing the imbalance in asset ownership in America, which currently shows that at least 80% of America’s wealth is controlled by 1% of the population. This is a frightening situation for a democracy which is founded on a prosperous middle class. Oligarchs are waiting to rule the nation (e.g. already three billionaires are running for president).
There is also a moral reason for profit-sharing which can be summarized as follows:
1) The increase in national wealth over the past 200 years is due primarily to increases in productivity, which in turn is due to new technologies.
2) The implementation of technological innovations involves a number of stakeholders – inventors, investors, managers, implementers and buyers.
3) The benefits of the new technologies are currently heavily weighted toward all the stakeholders expect the implementers – the workers who bring into actual being the ideas of the inventor – i.e. they design and build the machinery which produces the product, fabricate it, market and sell it, repair it and teach users. Without the implementors, there would be no technology – only ideas on paper.
4) All of the stakeholders should be rewarded when the product is sold; it is only fair, therefore, that each be rewarded in proportion to the value of their contribution to the success (or failure) of the product. This is called “profit-sharing”.
This idea is not as novel nor as radical as it may seem to traditionalists. In the first place, the entire history of free-market capitalism shows it ever evolving towards more and more recognition of the value of labor in the forward march of progress.
It is also true that the chief proponents of this march have historically been the organized labor movement – at least until the 1970’s. Since then American unions have shifted from ever advancing workers’ rights in the marketplace to attempting to achieve progress through government intervention, which has meant in practice an alliance with the Democrat Party and a slippery slope toward socialism.
The results have not been encouraging. We have seen the denuding of America’s manufacturing base, the disheartening imbalance of income between management and labor, and the gradual slipping of much of America’s middle class into poverty and desperation. The bureaucracy of American Labor has failed miserably in protecting and advancing the cause of America’s workers.
The most impressive advocacy for profit-sharing in today’s marketplace is called “Conscious Capitalism”. This is a rapidly growing group of companies who represent a new generation of free market businesses. It is both a movement and an organization.
As an organization, Conscious Capitalism, Inc. now numbers thousands of companies, millions of employees, with chapters in 41 countries, and a number of large firms including Federal Express, Southwest Airlines and Costco among others. (For more information, see www.ConsciousCapitalism.org).
As a movement, it counts Amazon as one of its colleagues along with many other companies, both large and small. While this group is not particularly fond of organized labor, I believe there is a place for Labor in this movement, unions which work with and not against management and represent workers who are both employees and recipients of prorated profits from their work.
The time for advancing workers’ rights is now – in the 2020 election campaign. To win back the workers of America, the GOP must move “Onward and Upward!”
A bipartisan plan to erase barriers to equity ownership would be productive and beautiful.
It’s an article of liberal faith: Thanks to President Donald Trump’s $1.5 trillion Tax Cuts and Jobs Act, the prosecco is popping on Wall Street, while the unsold Pepsi gathers dust on Main Street, where Americans are too poor to buy soft drinks.
“Workers are delivering more, and they’re getting a lot less,” former vice president Joe Biden told the Brookings Institution last summer. “There’s no correlation now between productivity and wages.”
Americans “are sick and tired of the income and wealth inequality that sees the rich getting much richer,” Senator Bernie Sanders (I., Vt.) told CapitalAndMain.com last month.
“Wages have largely stagnated,” the campaign website of Senator Elizabeth Warren (D., Mass.) complains, while “fundamental changes in our economy have left millions of working families hanging on by their fingernails.”
These grim, lachrymose myths cannot mask this incredibly upbeat fact: The sparkling wine is flowing on Wall and Main streets, and it’s running more rapidly on Main, where take-home pay is expanding the most among those with the least.
Never mind the liberal lies. Hard data reveal this reality. The Atlanta Federal Reserve Bank’s monthly Wage Growth Tracker shows that Americans are making more money, particularly those who have been forgotten for decades.
Between November 2018 and November 2019, overall median wage growth climbed 3.6 percent, a healthy pace that should lift spirits, too. Those in the bottom 25 percent saw wages advance 4.5 percent, while the top 25 percent lagged, with pay rising just 2.9 percent. This is the 180-degree exact opposite of what Democrats relentlessly bellow. They have equal access to the Atlanta Fed’s website. This confirms their rank dishonesty.
For further sanguine results of Trumponomics, see Sentier Research’s analysis of the Census Bureau’s Current Population Survey. Sentier clocked U.S. median household income last November at $66,043 — $5,070 higher than this key metric’s position when President Trump was inaugurated on January 20, 2017: $60,973. This 8.3 percent increase in middle-class income in less than three years crushes the two-term, eight-year performances of Obama ($1,043, up 1.7 percent) and G. W. Bush (an emaciated $401, or a paltry 0.7 percent boost).
Today’s Employment Situation also is encouraging. As the Bureau of Labor Statistics reported at 8:30 a.m., the unemployment rate remains steady at 3.5 percent, maintaining the lowest joblessness level since 1969 — Richard Nixon’s first year in office. Employers created 145,000 new jobs last month, a healthy, if not breathtaking, number. And 2.9 percent wage growth, from December 2018 to December 2019, lags the Atlanta Fed’s figures but still approximates the 3 percent mark that seems to trigger warmth and toastiness. Scarlett O’Hara’s words should soothe any naysayers here: “Tomorrow is another day.”
Democrats should stop loathing Trump long enough to show some love for the poor people they claim to represent. Democrats should stop lying to themselves and the country about low-income wages lagging those of the affluent. This is not happening. Democrats should acknowledge the wonders that Trump and Republicans have done via tax reduction, regulatory relief, and a pro-business tone in Washington.
Then, Democrats should make this challenge to Republicans. The 55 percent of Americans who are in the stock markets, per Gallup, are seeing their portfolios soar, as the S&P 500, Dow Jones Industrial Average, and Nasdaq break records. Since Trump’s victory, these markets have rocketed 53 percent, 58 percent, and 77 percent, respectively, as of Thursday’s highest-ever closing bells.
But the 45 percent of Americans who own no stocks — directly or as part of 401(k)s or IRA accounts — are missing this bonanza.
Democrats should ask Republicans to work with them to make it as easy as possible for those not invested in the stock market to buy in. A bipartisan plan to erase barriers to equity ownership would be productive and beautiful.
Conversely, Democrats can keep weeping among themselves as their have-not base actually grows richer more swiftly than the haves the Democrats love to hate.
Something’s happening to wages that neither Democrats nor Republicans care to acknowledge.
By The Atlantic•
Stop me if this sounds familiar: For most American workers, real wages have barely budged in decades. Inequality has skyrocketed. The richest workers are making all the money. Earnings for low-income workers have been pathetic this entire century.
These claims help drive the interpretation of breaking economic news. For example, the Labor Department yesterday reported that the unemployment rate fell to a 50-year low, while wage growth stalled. “The wage numbers here are INSANE,” the MSNBC host Chris Hayes tweeted. “The tightest labor market in decades and decades and ordinary working people are barely seeing gains.”
So, let’s play a game of wish-casting.
It turns out that all three of those things are happening right now.
According to analysis by Nick Bunker, an economist with the jobs site Indeed, wage growth is currently strongest for workers in low-wage industries, such as clothing stores, supermarkets, amusement parks, and casinos. And earnings are growing most slowly in higher-wage industries, such as medical labs, law firms, and broadcasting and telecom companies.
Bunker’s analysis is not an outlier. A Goldman Sachs look at data from the Bureau of Labor Statistics found growth for the bottom half of earners at its highest rate of the cycle. And even among that bottom half, the biggest gains are going to workers earning the least. A New York Times analysis of data from the Federal Reserve Bank of Atlanta found that wage growth among the lowest 25 percent of earners had exceeded the growth in every other quartile.
In fact, according to Bunker’s research, wages for low-income workers may be growing at their highest rate in 20 years.
What’s happening here? Donald Trump hasn’t sprinkled MAGA pixie dust over the U.S. economy. In fact, his trade war has clearly diminished employment growth in industries, that are sensitive to foreign markets, such as manufacturing. Rather, a tight labor market and state-by-state minimum wage hikes have combined to push up wage growth for the poorest workers. The sluggishness of overall wage growth is concealing the fact that the labor market has done wonderful things for wages at the low end.
One reason you haven’t heard this economic narrative may be that it’s inconvenient for members of both political parties to talk about, especially at a time when economic analysis has, like everything else, become a proxy for political orientation. For Democrats, the idea that low-income workers could be benefiting from a 2019 economy feels dangerously close to giving the president credit for something. This isn’t just poor motivated reasoning; it also attributes way too much power to the American president, who exerts very little control over the domestic economy. Meanwhile, corporate-friendly outlets, such as The Wall Street Journal’s editorial pages, have reported on this phenomenon. But they’ve used it as an opportunity to take a shot at “the slow-growth Obama years” rather than a way to argue for the extraordinary benefits of tight labor markets for the poor, much less for the virtues of minimum-wage laws.
Democrats don’t want to talk about low-income wage growth, because it feels too close to saying, “Good things can happen while Trump is president”; and Republicans don’t want to talk about the reason behind it, because it’s dangerously close to saying, “Our singular fixation with corporate-tax rates is foolish and Keynes was right.”
But good things can happen while Trump is president, and Keynes was right. “Tighter labor markets sure are good for workers who work in low-wage industries,” Bunker told me. “This recovery has not been spectacular. But if we let the labor market get stronger for a long time, you will see these results.”
President Donald Trump planned on seeking a second term based largely on the strength of the economy. Unemployment is down to a 50-year low. The Bureau of Labor Statistics reports the creation of nearly 6 million new jobs since he came into office. Wages and profits and revenues to the federal Treasury are up. The stock market is generally surging, and economic growth is once again the order of the day.
It’s an enviable economic record, especially when compared with his two most recent predecessors. Things are going so well, some of the president’s bitterest foes predict it’s strong enough to carry him across the 2020 finish line first.
The naysayers—those who’ve never liked Trump—point to a few statistics to suggest the fundamentals of the economy are softer than they appear. The inverted yield curve that appeared this week, now that the yield on 10-year U.S. government bonds is lower than that for two-year notes, has some people saying a recession sometime in the next two years is possible.
The U.S. economy is the world’s strongest right now but, says the president, would be even stronger had the Federal Reserve not raised interest rates too high too fast. Others say if things head south, it will be because of the ongoing trade war with China.
“I think we’re going to have a very long period of wealth and success,” Trump told reporters on Thursday. “Other countries are doing very poorly, as you know. China is doing very, very poorly. The tariffs have really bitten into China. They haven’t bitten into us at all.”
In response to the U.S. imposition of tariffs on its exports, Beijing weakened the yuan, effectively blunting their effect. Trump countered by delaying until December the next round of tariffs, mostly on consumer goods, scheduled to take effect on September 1 until mid-December.
That’s right in the middle of U.S. retailers’ most profitable period and could cause trouble at home. These and other moves have caused dramatic fluctuations in the stock market. The U.S. Trade Representative says everything’s just “next steps” in the process of getting China to do a deal.
Whether that’s true is a subject for debate. Capital Alpha Partners’ James Lucier counseled investors to view the delay of the tariff imposition as being as advertised and not as “backtracking in policy or a ‘blink’ by the U.S.” and “a case of the White House and President Trump, in particular, getting ahead of his own administrative machinery.”
If the economics are sound, the politics are shaky. A second Trump term depends on Midwestern farmers and industrial workers and others whom the tariffs potentially affect adversely in critical states like Florida, Michigan, and Ohio.
These are places where the economy is always issue No. 1, where the three things voters care about most are jobs, jobs and more jobs. And, as of now, the tariffs are not working to the president’s advantage. As much as the China-bashing rhetoric may excite his base, it’s not helping them make ends meet.
Florida’s exports to China total about $1.6 billion annually. That includes $533 million in gold because Miami is now the leading hub for refiners and processors who then sell to China for use in manufacturing. Civil aircraft parts, the state’s second-biggest export, brings in $126 million now and more in the future as China becomes, over the next 20 years, the world’s largest single market for civilian aircraft sales.
The Miami Customs District alone did $7 billion worth of business with China in 2017. In South Florida, manufacturers are suffering because of the steel and aluminum tariffs.
Michigan has a $3.6 billion export relationship with China, with $1.2 billion comprising car parts. The Wolverine State contains 75 percent of North America’s auto R&D, and China is, by volume, the world’s largest automaker. The Alliance of Automobile Manufacturers says higher-priced cars resulting from the tariffs could potentially lead to the loss of 700,000 American jobs.
It’s not just cars. Over half of all U.S. soybeans are exported, with 60 percent of them going to China and $700 million coming from Michigan. “The noose is getting tighter,” Jim Byrum, president of the Michigan Agri-Business Association, told the Detroit Free Press in May. “We have lost market opportunities. We’re not shipping soybeans around the world like we normally would. We’re not shipping them to China. China was our biggest soybean consumer, and they’re not moving.”
Ohio’s exports to China total $3.9 billion, with more than $691 million worth of soybeans—the state’s top agricultural export—shipped to China in 2017. “This will be tough to take. China takes one out of every three rows [of soybeans],” Bret Davis, a Delaware County farmer and governing board member of the American Soybean Association of China, told The Columbus Dispatch about proposed tariffs in 2018. An Ohio Manufacturing Extension Partnership survey of 457 Ohio manufacturers conducted in January found that 14 companies were hurt by tariffs for each it helped.
The Trump tariffs have already impacted negatively states that were key to him winning the presidency in 2016 and will be just as important in 2020. If the president wants to continue his record of economic success, he should focus on ending the trade war before Florida, Michigan and Ohio swing in the other direction.
Donald Trump is many things. But one thing he is not is a defender of the 2009-2016 status quo and accepted progressive convention. Since 2017, everything has been in flux. Lots of past conventional assumptions of the Obama-Clinton-Romney-Bush generation were as unquestioned as they were suspect. No longer.
Everyone knew the Iran deal was a way for the mullahs to buy time and hoard their oil profits, to purchase or steal nuclear technology, to feign moderation, and to trade some hostages for millions in terrorist-seeding cash, and then in a few years spring an announcement that it had the bomb.
No one wished to say that. Trump did. He canceled the flawed deal without a second thought.
Iran is furious, but in a far weaker—and eroding—strategic position with no serious means of escaping devastating sanctions, general impoverishment, and social unrest. So a desperate Tehran knows that it must make some show of defiance. Yet it accepts that if it were to launch a missile at a U.S. ship, hijack an American boat, or shoot down an American plane, the ensuing tit-for-tat retaliation might target the point of Iranian origin (the port that launched the ship, the airbase from which the plane took off, the silo from which the missile was launched) rather than the mere point of contact—and signal a serial stand-off 10-1 disproportionate response to every Iranian attack without ever causing a Persian Gulf war.
Everyone realized the Paris Climate Accord was a way for elites to virtue signal their green bona fides while making no adjustments in their global managerial lifestyles—at best. At worst, it was a shake-down both to transfer assets from the industrialized West to the “developing world” and to dull Western competitiveness with ascending rivals like India and China. Not now. Trump withdrew from the agreement, met or exceeded the carbon emissions reductions of the deal anyway, and has never looked back at the flawed convention. The remaining signatories have little response to the U.S. departure, and none at all to de facto American compliance to their own targeted goals.
Rich NATO allies either could not or would not pay their promised defense commitments to the alliance. To embarrass them into doing so was seen as heretical. No more.
Trump jawboned and ranted about the asymmetries. And more nations are increasing rather than decreasing their defense budgets. The private consensus is that the NATO allies knew all along that they were exactly what Barack Obama once called “free riders” and justified that subsidization by ankle-biting the foreign policies of the United States—as if an uncouth America was lucky to underwrite such principled members. Again, no more fantasies.
China was fated to rule the world. Period. Whining about its systematic commercial cheating was supposedly merely delaying the inevitable or would have bad repercussions later on. Progressives knew the Communists put tens of thousands of people in camps, rounded up Muslims, and destroyed civil liberties, and yet in “woke” fashion tip-toed around criticizing the Other. Trump then destroyed the mirage of China as a Westernizing aspirant to the family of nations. In a protracted tariff struggle, there are lots of countries in Asia that could produce cheap goods as readily as China, but far fewer countries like the United States that have money to be siphoned off in mercantilist trade deals, or the technology to steal, or the preferred homes and universities in which to invest.
The Palestinians were canonized as permanent refugees. The U.S. embassy could never safely move to the Israeli capital in Jerusalem. The Golan Heights were Syrian. Only a two-state solution requiring Israel to give back all the strategic border land it inherited when its defeated enemies sought to destroy it in five prior losing wars would bring peace. Not now.
The Palestinians for the last 50 years were always about as much refugees as the East Prussian Germans or the Egyptian Jews and Greeks that were cleansed from their ancestral homelands in the Middle East in the same period of turbulence as the birth of Israel. “Occupied” land more likely conjures up Tibet and Cyprus not the West Bank, and persecuted Muslims are not found in Israel, but in China.
An aging population, the veritable end to U.S. manufacturing and heavy industry, and an opioid epidemic meant that America needed to get used to stagnant 1 percent growth, a declining standard of living, a permanent large pool of the unemployed, an annual increasing labor non-participation rate, and a lasting rust belt of deplorables, irredeemables, clingers and “crazies” who needed to be analyzed by Barack Obama and Hillary Clinton. At best, a middle-aged deplorable was supposed to learn to code or relocate to the Texas fracking fields. Perhaps not now.
In the last 30 months, the question of the Rust Belt has been reframed to why, with a great workforce, cheap energy, good administrative talent, and a business-friendly administration, cannot the United States make more of what it needs? Why, if trade deficits are irrelevant, do Germany, China, Japan, and Mexico find them so unpleasant? If unfettered trade is so essential, why do so many of our enemies and friends insist that we almost alone trade “fairly,” while they trade freely and unfairly? Why do not Germany and China argue that their vast global account surpluses are largely irrelevant?
Representative Alexandria Ocasio-Cortez (D-N.Y.) assured us that the world would be suffocating under greenhouse gases within 12 years. Doom-and-gloom prophecies of “peak” oil warned us that our oil reserves would dry up by the early 21st century. Former Vice President Al Gore warned us that our port cities would soon be underwater. Economists claimed Saudi Arabia or Russia would one day control the world by opening and closing their oil spigots. Not now.
Three million more barrels of American oil are being produced per day just since Trump took office. New pipelines will ensure that the United States is not just the world’s greatest producer of natural gas but perhaps its largest exporter as well.
Trump blew up those prognostications and replaced them with an optimistic agenda that the working- and middle classes deserve affordable energy, that the United States could produce fossil fuels more cleanly, wisely, and efficiently than the Middle East, and that ensuring increased energy could revive places in the United States that were supposedly fossilized and irrelevant. Normal is utilizing to the fullest extent a resource that can discourage military adventurism in the Middle East, provide jobs to the unemployed, and reduce the cost of living for the middle class; abnormal is listening to the progressive elite for whom spiking gasoline and power bills were a very minor nuisance.
Open borders were our unspoken future. The best of the Chamber of Commerce Republicans felt that millions of illegal aliens might eventually break faith with the progressive party of entitlements; the worst of the open borders lot argued that cheap labor was more important than sovereignty and certainly more in their interests than any worry over the poor working classes of their own country. And so Republicans for the last 40 years joined progressives in ensuring that illegal immigration was mostly not measured, meritocratic, diverse, or lawful, but instead a means to serve a number of political agendas.
Most Americans demurred, but kept silent given the barrage of “racist,” “xenophobe,” and “nativist” cries that met any measured objection. Not so much now. Few any longer claim that the southern border is not being overrun, much less that allowing a non-diverse million illegal aliens in six months to flood into the United States without audit is proof that “diversity is our strength.”
The Republican Party’s prior role was to slow down the inevitable trajectory to European socialism, the end of American exceptionalism, and homogenized globalized culture. Losing nobly in national elections was one way of keeping one’s dignity, weepy wounded-fawn style, while the progressive historical arc kept bending to our collective future. Rolling one’s eyes on Sunday talk shows as a progressive outlined the next unhinged agenda was proof of tough resistance.
Like it or not, now lines are drawn. Trump so unhinged the Left that it finally tore off its occasional veneer of moderation, and showed us what progressives had in store for America.
On one side in 2020 is socialism, “Medicare for All,” wealth taxes, top income tax rates of 70 or 80 or 90 percent, a desire for a Supreme Court of full of “wise Latinas” like Sonia Sotomayor, insidious curtailment of the First and Second Amendments, open borders, blanket amnesties, reparations, judges as progressive legislators, permissible infanticide, abolition of student debt, elimination of the Immigration and Customs Enforcement bureau and the Electoral College, voting rights for 16-year-olds and felons, and free college tuition.
On the other side is free-market capitalism but within a framework of fair rather than unfettered international trade, a smaller administrative state, less taxation and regulation, constitutionalist judges, more gas and oil, record low unemployment, 3-4 percent economic growth, and pressure on colleges to honor the Bill of Rights.
The New, New Normal
The choices are at least starker now. The strategy is not, as in 2008 and 2012, to offer a moderate slow-down of progressivism, but rather a complete repudiation of it.
One way is to see this as a collision between Trump, the proverbial bull, and the administrative state as a targeted precious china shop—with all the inevitable nihilistic mix-up of horns, hooves, and flying porcelain shards. But quite another is to conclude that what we recently used to think was abjectly abnormal twenty years ago had become not just “normal,” but so orthodoxly normal that even suggesting it was not was judged to be heretical and deserving of censure and worse.
The current normal correctives were denounced as abnormal—as if living in a sovereign state with secure borders, assuming that the law was enforced equally among all Americans, demanding that citizenship was something more than mere residence, and remembering that successful Americans, not their government, built their own businesses and lives is now somehow aberrant or perverse.
Trump’s political problem, then, may be that the accelerating aberration of 2009-2016 was of such magnitude that normalcy is now seen as sacrilege.
Weaponizing the IRS, unleashing the FBI to spy on political enemies and to plot the removal of an elected president, politicizing the CIA to help to warp U.S. politics, allying the Justice Department with the Democratic National Committee, and reducing FISA courts to rubber stamps for pursuing administration enemies became the new normal. Calling all that a near coup was abnormal.
Let us hope that most Americans still prefer the abnormal remedy to the normal pathology.
Bull Market: Amid all the political noise in Washington, a milestone was passed Wednesday, one you may not have noticed. The bull market for stocks has now become the longest since World War II. Can it continue? That depends on federal policies.
We’re grateful to CNBC for actually counting the days: 3,453, starting on March 9, 2009. That’s a long time — 9.46 years to be exact.
Yes, it’s been a bull for the record books. Even so, we would note that the bull hasn’t been without tests to its longevity. And some might even deny it’s been a bull market all this time.
One common definition of a bear market is a decline of a major stock index by 20% or more from its previous all-time high, or 52-week high. Well, way back in 2011, the market was actually off more than 20% from its previous high, but on an intraday basis. So, technically, some think the bull ended. But it snapped back by the end of the day’s trading, so others say no.
But however you look at it, the fact is that the market has been on a long-term tear. The bull run began Continue reading
Change: A just-released IBD/TIPP Poll shows big gains in key sentiment indicators. Given the pervasive negativity in the media these days, you might doubt these positive polling numbers. If so, have you looked at the economy lately?
When it comes to President Trump and the national mood, something seems to have happened in recent weeks, as shown by our IBD/TIPP Poll of 900 people taken from July 26 to August 2. Keep in mind that anything over 50 is optimistic; under 50, pessimistic.
Start with our Presidential Leadership Index, which jumped 3.2% in August to 45.7, the highest level since President Trump’s first full month in office.
Equally important, the Direction of the Country Index, which gauges how Americans feel about our nation’s current course, surged 13% to 50.1 in August. That’s the highest level since 2005.
By Adam Mill • The Federalist
Recently, Jesse Kelly wrote a worthy article forecasting the United States’ decline and eventual suffocation in the quicksand of socialism. He correctly notes that as government gets bigger, freedom must get smaller.
Kelly clearly fears a socialist America will follow the failures of Greece, Venezuela, and every other country that has followed a welfare state model to its logical conclusion. While he is absolutely right that economic failure and socialism are inexorably related, he is not correct that the United States is on an unstoppable path to this oblivion.
Take cheer, Kelly: we have reason to be optimistic as a result of President Trump’s brief but dazzling experiment with cutting taxes and regulation. While government is growing, it’s not growing fast enough to crowd-out all freedom. One byproduct of the Trump boom is that economic growth is actually outpacing growth in government spending. The government’s share of gross domestic product has fallen to Continue reading
1,000,000 new jobs. You’d think you’d hear a lot about such an impressive number. So far, it’s made little splash in the media. Nonetheless, since the Republican tax cuts were signed into the law the U.S. economy has created one million new jobs. And that’s just the beginning of the good news.
In May 2018 alone, defying the expectations of many economists, 223,000 jobs were created. The unemployment rate has dropped to 3.8 percent, its lowest point since April 2000. Unemployment among black people and Hispanics is at the lowest point since the numbers were first broken out by race during the Nixon Administration.
The American economy is surging, even before the new, lower corporate and personal tax rates go into effect. The promise that companies and most individuals will soon be able to keep more of what they earn has, alongside the Trump Administration’s successful effort to deregulate vital sectors of the economy, Continue reading
The economy is booming. Even the New York Times, no fan of the president, decided that “splendid” and “excellent” were appropriate adjectives to describe Friday’s jobs report from the Bureau of Labor Statistics.
These showed the nationwide unemployment rate falling to 3.8 percent. If it improves yet further, it will hit lows not seen since the 1960s. The unemployment rate among black people fell to 5.9 percent, an all-time low, which makes one wonder how many African-American voters might think twice about voting against the incumbent Republicans in the midterm elections. The Hispanic or Latino unemployment rate ticked up a tenth of a point, but remains below 5 percent. Before President Trump took office, that stat could only be said of one month since the statistics bureau began tracking it in the 1970s.
The good news is not confined to the fact that there is an abundance of jobs. Wages are rising, too. For the first time Continue reading
By Stephen Moore • Investor’s Business Daily
T.S. Eliot famously wrote that “April is the cruelest month,” but when it comes to America’s fiscal picture, nothing could be further from the truth about this April. The latest government numbers confirm that last month was a blockbuster for growth, federal revenues, and deficit reduction.
One of the key principles of Trumponomics is that faster economic growth can help solve a multitude of other social and economic problems – from poverty, to inner-city decline, to lowering the national debt.
We’re not quite at a sustained elevated growth rate of 3% yet, but the latest economy snapshot tells us we are knocking on the door. The growth rate over the last four quarters came in at 2.9% — which Continue reading