Category: Politics

High Interest Rates Are Hobbling Growth – WSJ

High Interest Rates Are Hobbling Growth – WSJ

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The problem with growth in the US economy will be immediately be solved the day that we stop the trade war with China. We don’t need the Fed to counter-balance a political battle between China and the US. Mark my words, when this trade war is over, the economy will almost immediately overheat.

Also, you can guarantee that POTUS will turn off the trade war by the first quarter of 2020 so that the economy is running at top speed for the November election. The Chinese know this and they know they just have to hold on 6 more months and our political will for the trade war will vanish.

Source: High Interest Rates Are Hobbling Growth – WSJ

There’s an increasingly strong case that the Federal Reserve should cut interest rates to weaken the U.S. dollar and encourage greater exports—and that it should do it soon.

A strong dollar makes it cheaper for Americans to purchase foreign goods and more expensive for those using a foreign currency to purchase American goods. The dollar has strengthened relative to foreign currencies since the second quarter of 2018, and U.S. exports have essentially stagnated. While the U.S. economy surged in 2018 thanks to tax cuts, deregulation and a declining oil price, gross domestic product could have grown faster. Preliminary GDP growth over the past three quarters has been a strong 2.9%, but had real exports grown at a 3% annualized rate—which they did from 2009 to 2018—GDP would have grown by 3.2%.

The Fed’s tightening of the money supply contributed to this decline in export growth by making the U.S. dollar more valuable. The Fed has increased the federal-funds rate nine times since beginning the rate increases at the end of 2015, which boosted the demand for greenbacks. The greater the federal-funds rate, the greater the return on investments made in dollars. The Fed also ended its expansive monetary policy as the economy improved, constraining the money supply and further enhancing the dollar’s value.
Why should a teenager in America be afraid of a Congresswoman?

Why should a teenager in America be afraid of a Congresswoman?

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Some people are very nice and helpful to others…and some people are not. Congresswoman Nydia Velázquez seems to be firmly in the latter camp.

Check out this interaction on Twitter. Why in the world should this young man be afraid of Congresswoman Nydia Velázquez? Isn’t she an elected member of Congress that is charged with the responsibility to serve America and protect its Constitution?

Here is the young man’s response.

And then

For me, maybe Congresswoman Nydia Velázquez should leave Congress and CJ Pearson should replace her.

I have not seen a statement from the Congresswoman as to why she should be feared by this young man. Is it because CJ Pearson appears to be African American (at least according to his Twitter image)? Is she racist? Or, is it because he is a male? Or, is it because he is young? Or, is it because he appears to be a conservative? Or, is it a combination of all four, a young, male, conservative African American?

Regardless, the oath of office of a Congressperson would mean that no citizen of the US should ever fear an elected official.

So if the Congresswoman is that power-hungry then maybe we should all be afraid.
Assad’s homes and his inner circle’s homes should be blown to pieces

Assad’s homes and his inner circle’s homes should be blown to pieces

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There is a lot of talk about what is an appropriate response to Syria’s mass killing of its citizens with chemical weapons. I think the solution is quite simple. The US doesn’t want to kill innocent life so we should simply give a list of 24 locations that will be destroyed sometime in the next 7 days. We encourage the residents of Syria to evacuate those locations and an area at least 1-mile perimeter around each location and explain that some but not all of the locations will be obliterated in the next 7 days.

I don’t care about 15 of those locations – they can be decoys for all I care about. The first location needs to be Bashar al-Assad’s palace in Damascus on Mount Mazzeh. It is his primary residence and the place that his family lives. Level it. The second location needs to be the old palace that Assad still sometimes lives in – Tishreen Palace. Once again it should be leveled to dust. The 3rd location(s) should be the home(s) of his brother Maher al-Assad. After that we should level the home(s) of Assad’s first cousin Rami Makhlouf. Then the homes of Ali Mamluk, Abdul Fatah Qudsiya, Rafiq Shahada, and Jamil Hassan (all part of his inner circle).

We should list those locations so that families and children (and workers and slaves) can be evacuated and not be killed because they had the unfortunate reality to be related to a tyrant. After that evacuation, just level their homes. Make this personal. No military targets after the tyrants killed innocent lives with horrible weapons.

You might disagree. That is my opinion.
A tax plan that would promote economic growth

A tax plan that would promote economic growth

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Both halves of Congress are trying to create a more fair tax plan that will promote growth and simplify the code. I am skeptical that anything will get done though as it appears that this Congress is incapable of doing anything significant.

Since Congress will almost certainly fail, I thought I would put my suggestion on the table. As I analyze it, it is probably the most likely plan that I have ever seen to encourage employment growth.

The first step is to not change anything for individuals except to increase the amount of money saved in long-term savings without tax penalty. This should be doubled from its present rate. The government is in the retirement business, and it isn’t doing a sufficient job of managing it. The government needs to get out of the retirement business because the government can rarely do something well. Social Security is a broken plan, and we all know it – we just need to transition out of the retirement business slowly so that we do not screw up the American workers that depend on Social Security.

Currently, the government taxes employees directly via the FICA tax on each dollar earned. The government increases this tax by assessing the employer an equal amount. This direct tax exceeds 15% and is used to fund Social Security. While it is essential to finance Social Security for today’s seniors, we need to get away from this transfer of cash from working Americans to retired Americans. We need to make it financially affordable for working Americans to save for retirement so that they can live off of their own money and not their children’s and grandchildren’s money. The fact that Social Security will be insolvent between 2025 and 2034 (depending on analyst assumptions) points to the fact that the system is systematically flawed. I have ranted on this in the past.

The biggest change in the tax plan is to change the way we tax our employers. Not just big companies but every employer – be they big or small. We need to reward companies for investing in their business and investing in their employees.

Currently, the corporate tax rate is around 35%. This tax burden is massive. Unfortunately, it is unevenly allocated and most directly hurts companies based in the US, primarily employs US workers, and principally sells to US customers. This is preposterous! Why is the federal government trying to hurt the best companies, but reward those companies that have substantial foreign investments?

My suggestion is to eliminate all tax loopholes in the corporate plan except for the ones that I itemize here. Yes, that means that Congress will never go along with me since every special interest lobbyist will argue and bribe vehemently to fight my simple and easy ideas. Here are the highlights of the plan:

  • Corporate income tax is 35% for all income.
  • Income taxed in a foreign country returned to the US corporate parent is the difference between the original tax paid and 35%. This balance of tax is still available for the following discounts (as well as all US based income).
  • For every dollar that is paid to train employees plus one additional dollar, there is no US corporate tax. Corporations should be encouraged to train their employees so that money shouldn’t be taxed and additionally they should be rewarded by claiming 200% of that investment up to 35% of corporate income. This reduction in taxes is good for the company, great for the employees, and magnificent for the US economy. In the 21st century, only smart workers are valuable, and we need to increase that pool of people.
  • Today, wages and benefits to employees are already written off and not counted toward income. This expense will remain the same (as with all business expenses) however if the employer hires more workers in the US and its territories from the previous year then the company should be rewarded. The company will be able to write off that new employee’s wages plus an additional 300% up to 35% of corporate income. Please note that this is ONLY for the growth of full-time employees from the previous year to the current year. The employer doesn’t get to deduct this cost for perpetuity but only for the first year. Also, note that this doesn’t allow the employer to increase foreign-based workers, the workers have to be reporting to work in the US and its territories.
  • Any improvements in facilities are already written off, and that will continue. However, this will be accelerated in my plan as the company can write off 200% of all INCREASES in facilities, marketing costs, sales costs, etc. as long as they are spent in the US and up to the 35% cap that already exists. They will be able to write this off in the year that the expense occurs. Note that this is only for increases in those costs over the previous year. If the company doesn’t grow those costs, then it is simply held at the standard 35% deduction, but if the company increases those investments in US-based assets, then the company can accelerate those year-over-year savings.

So how is this good for the US economy and the US worker? Simple, it is all about the economic growth, the growth of employment, and improving the lives of US workers. Companies that are unable to grow their business will not get this benefit, but companies that can employ more US-based people, create more US assets, and improve their ability to market to US-based customers will thrive. It puts America first in our corporate tax policy. It rewards companies that invest in America and it doesn’t help any company that chooses to invest internationally at the expense of America.

This plan will accelerate the return of money from foreign lands back to the US. This plan will encourage companies to hire more US-based workers and will significantly increase the quality of life of Americans.

This isn’t a giveaway to the corporations or a supply-side “hope for the trickle-down plan.” It only rewards companies that truly make the trickle-down (in the form of a gusher rather than a trickle) happen. No company will be able to take advantage of this plan unless they truly change that “trickle” to a firehose of economic prosperity.

This plan will never pass. Too many lobbyists will be hurt. Too many special interest groups will not have their interest served. However, this is one plan that would almost guarantee massive prosperity for the American middle class and therefore massively increased tax revenue for the Federal government.

It just makes sense which is why it will never be adopted by Congress. Simple things that make sense never seem to get done by Washington DC.

Photo by 401(K) 2013

Democrats want lower corporate taxes just not under Trump

Democrats want lower corporate taxes just not under Trump

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Don’t let the current partisan bickering on corporate taxes make it seem like both sides of the aisle don’t want this. It is good for America and everyone that understands economics understands this. The issue is that when the Democrats held power, they couldn’t effectively do this because their liberal wing (i.e. the people that do not understand economics) would crucify them in the election booth.

Suddenly, an idea that has been accepted by economists and by policymakers on both sides of the political aisle—that high taxes on business hurt investment, workers, and the economy—is considered “absurd.”

In 2012, President Obama and his advisers proposed lowering the corporate tax rate because it “creates good jobs with good wages for the middle-class folks who work at those businesses.” In 2013, Lawrence Summers, President Clinton’s Treasury secretary and chairman of Mr. Obama’s Economic Council, argued that the tax on corporate profits creates a burden without commensurate revenues for the government and that changing it “is as close to a free lunch as tax reformers will ever get.”

In 2015, Democrat Chuck Schumer and Republican Rob Portman co-sponsored a Senate bill to reduce the top corporate tax rate, which is the highest of any of the 35 countries in the Organization for Economic Cooperation and Development. “Our international tax system,” Mr. Schumer argued back then, “creates incentives to send jobs and stash profits overseas, rather than creating jobs and economic growth here in the United States.” Bill Clinton in 2016 said he regretted raising the corporate rate to its current level.

Yet President Trump’s Council of Economic Advisers is now being accused of partisanship and unscientific analysis.

This is politics for the sake of politics. Not for making America stronger or helping our citizens.

Source: A Turnabout on Corporate Taxes
23 Minutes of Trump

23 Minutes of Trump

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Does anyone remember why President Trump held a press conference on Tuesday?

I almost 100% agree with this editorial by James Freeman. Trump really needs to shut up and just work on stuff that helps people. He has these moments of brilliance but then for every moment of brilliance, he tends to surround it with about 100 moments of pure incompetence.

For the assembled members of President Trump’s economic team who stood behind him at Trump Tower on Tuesday, the first six minutes of his press conference must have seemed like a promising start. Here was the President describing a significant government-created problem and offering the beginning of a sensible solution.

In any case, Tuesday’s press conference became even more interesting over the next 17 minutes. That’s when Mr. Trump took questions from reporters and decided to largely abandon his hopeful message on liberating Americans from red tape. Many of his assembled advisors were suddenly fascinated by various spots on the floor of the Trump Tower lobby as the President offered further analysis of last weekend’s violence in Charlottesville, Virginia.

As he had on Monday, the President condemned the white supremacists who organized a rally tied to the planned removal of a statue of Confederate Civil War General Robert E. Lee. Mr. Trump also condemned the man who allegedly drove his car into the crowd of counter-protesters as a “murderer.” Mr. Trump then annoyed the media by correctly pointing out that there were violent people on both sides.

But Mr. Trump also said that there were “very fine people on both sides.” Certainly there were very fine people on the side that was protesting the white supremacists, but this column has seen no evidence of very fine people on the other side. Some people who oppose statue removal do so for reasons of historical or artistic preservation. But would any of them have decided to make common cause with neo-Nazis and join in last week’s demonstration? It’s possible that some people showed up to oppose the removal of landmarks without realizing they had joined a parade of bigots. But if that were the case, they would likely have left immediately.

A source with knowledge of the Monument Fund, Inc., one of the plaintiffs which obtained a temporary injunction against removing monuments in Charlottesville, tells this column:

Nobody from our group attended the protests or counter-protests. We all stayed away. As everybody should have done. As President Sullivan of U Va urged people to do. Just stay home. But City Councillors and a coalition of leftist groups invited their followers to show up for counter protests. And show up they did, angry and spoiling for a fight.

If City Council had just said: let the Nazis shout idiot slogans at empty air, ignore them, stay home — no violence would have happened. The police are unfairly criticized for not stopping the fighting. How could they? These two groups wanted to fight. They found ways to get at each other. These are public streets, they could not all be locked down and cleared of belligerents.

This was a tragic event, it will scar the city. It will take a long time for the anger to subside.

Mr. Trump appears to have been peddling fake news here, and he’ll no doubt have the chance to amend his remarks yet again because it seems unlikely he can resist further comment and the issue is not going away.

Source: 23 Minutes of Trump

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