Tuesday, January 31, 2017

Trump May Create a Welfare Wall

I am highly suspicious of Donald Trump. I believe he would love to deport most recent immigrants, regardless of whether they have jobs here or in some other way are supporting themselves in the private sector without any drain on the state.

That said, it appears that Trump may implement a welfare wall. Something I have called for often here at EPJ.

Vox reports:
The Washington Post obtained two draft executive orders the Trump administration is reportedly considering, both of which (in title and content) resemble documents Vox wrote about and published last week...

The draft dealing with legal immigrants’ use of social services could have further-reaching implications for legal immigrants currently in the US than anything the president’s already signed...

Legal immigrants currently get access to some public benefits in some circumstances. But the federal government — already, under existing law — can bar someone from coming to the US, or from becoming a permanent resident, if there’s any evidence he or she will become a “public charge.”

Currently, the federal government looks at use of cash benefits (like Temporary Assistance for Needy Families) when it’s making “public charge” decisions, but not in-kind benefits like Medicaid and the Children’s Health Insurance Program.

This executive action, though — according to the draft obtained by Vox, which seems consistent with the Post’s reporting — would ask the Department of Homeland Security to issue a rule saying that an immigrant can’t be admitted to the US if he’s likely to get any benefit “determined in any way on the basis of income, resources, or financial need.”...

People who use any of those benefits and are in the US on visas would be subject to deportation. And the order would even require the person who sponsored an immigrant into the US to reimburse the federal government for any benefits the immigrant used...

Whether or not this particular executive order is signed, “walling off the welfare state” from immigrants in the US may well remain in the White House’s sights.
I would support Trump on such an order though I repeat, I am suspicious of his attitude toward immigrants in general. A welfare wall, yes, but only a welfare wall.


WARNING Trump Mulls Switch to New (and Higher) U.S. Unemployment Rate

Reports Jeffrey Bartash:
If President Donald Trump gets his way, the U.S. unemployment rate could jump to 5.7% from 4.7% overnight.
No, it’s not because the president plans to throw a bunch of people out of work. The White House reportedly might designate a different unemployment rate as the official one instead of the figure that’s been in use since World War Two. That’s according to a report in the Washington Examiner.
Switching to a different and higher unemployment rate would suggest the labor market is not as sound as it appears, ostensibly putting more pressure on Washington to take action to improve job creation. At least that’s the theory.


Such a change would not be hard technically. The Labor Department already calculates six unemployment rates, known by the designations U1 through U6.

The U3 measure of unemployment.

The official unemployment rate that’s widely reported in the media, known as U3, includes people out of work as well as those actively looking for jobs. The U3 rate stood near a nine-year low of 4.7% in December.
Yet the official rate excludes Americans who’ve gotten so discouraged trying to find a job that they’ve given up. A person is lumped into that category if they’ve looked for a job in the past 12 months but not in the past four weeks.
Known as discouraged workers, these people are included in a different jobless rate called U5 that registered 5.7% in December — a full percentage point higher than the official unemployment rate. That’s the rate the Trump White House could re-designate as the official figure.

The U5 unemployment rate.

This is really goofy stuff. I am much more interested in the unemployment trend rather than the difference in calculations between U3 and U5. And the trend is clear with both measures, we are in the boom phase of the Fed created boom-bust cycle/

Both numbers are published and can be looked up. but Trump's thinking about shifting reporting suggests the potential for a slippery slope where changes in all kinds of data calculations may not be far behind.


Top Trump Adviser Takes Aim at Germany

Germany is using a “grossly undervalued” euro to “exploit” the US and its EU partners, Donald Trump’s top trade adviser has said in comments likely to trigger alarm in Europe’s largest economy, writes the Financial Times.

Peter Navarro, the head of  Trump’s new National Trade Council, told the Financial Times the euro was like an “implicit Deutsche Mark” whose low valuation gave Germany an advantage over its main trading partners. His views suggest the new administration is focusing on currency as part of its hard-charging approach on trade ties.

In a departure from past US policy, Navarro also called Germany one of the main hurdles to a US trade deal with the EU and declared talks with the bloc over a US-EU agreement, known as the Transatlantic Trade and Investment Partnership, dead.

“A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche Mark’ that is grossly undervalued,” Navarro said. “The German structural imbalance in trade with the rest of the EU and the US underscores the economic heterogeneity [diversity] within the EU — ergo, this is a multilateral deal in bilateral dress.”

Navarro said one of the administration’s trade priorities was unwinding and repatriating the international supply chains on which many US multinational companies rely, taking aim at one of the pillars of the modern global economy, FT correctly observed.

Bottom line, Navarro has no understanding of basic international trade theory.

The country is being run by people who wouldn't get a passing grade in International Trade 101.


(ht Benn Steil)

Trump is Never More Certain Than When He is Completely Clueless

Steve Chapman writes:
Trump is never more certain than when he is completely clueless. The truth is that protection against foreign trade leads away from prosperity and strength. A country that deprives itself of foreign goods is doing to itself what an enemy might try to do in wartime—cut it off from outside commerce. It is volunteering to impoverish itself.

Countries don't "ravage" us when they make "our" products; they help us. At the risk of belaboring the obvious, the essence of trade—foreign or domestic—is that it makes both buyer and seller better off. Otherwise, they wouldn't bother.

But preventing such mutually agreeable transactions is Trump's dream. Already he has announced he will renegotiate NAFTA and walked away from the Trans-Pacific Partnership, a 12-nation deal that Barack Obama signed but Congress had yet to approve.

Trump may promise "great deals," but he is likely to get—and would probably be content with—no deals. What foreign government will rush to sign an agreement stipulating that our companies will only "buy American and hire American"?

His belief that international commerce is bad for Americans and protection is good for us is not a theory but an ancient superstition. One of the most irrefutable insights of economics is that if a country can buy something abroad for less than the cost of making it at home, it's better off buying it. That transaction allows citizens to consume more for each dollar spent. It makes them richer.

Warren Buffett's Life Chronicled in New HBO Documentary

It doesn't sound like the crony Buffett is covered but it still might be interesting.

Monday, January 30, 2017

Hundreds Gather at Google to Protest Trump's Travel Ban

Hundreds of people have gathered at the Google campus in Mountain View on Monday to protest President Donald Trump's travel ban, reports NBC Bay Area.

Federal Reserve Employee Gets $5000 Fine for Doing Bitcoin Mining On a Fed Server

Posted without comment.

A former Federal Reserve employee was sentenced Friday to 12 months probation and a $5,000 fine after pleading guilty in October to installing unauthorized software on a computer server at the Federal Reserve,

Nicholas Berthaume, who as a communications analyst had access to computer servers at the Fed’s Board of Governors in Washington, installed software that connected to an online bitcoin network in order to earn units of the digital currency, according to a statement Monday from the central bank’s Office of Inspector General.

Berthaume also “modified certain security safeguards so that he could remotely access the server from home,” the statement said. When confronted, he tried to cover up his actions by deleting the software; eventually he was fired and admitted guilt, the office said.


(via Bloomberg)

The Economic Nationalism of Donald Trump

Richard Ebeling emails:

Dear Bob,

I have a new article on the website of the Future of Freedom Foundation on, “The Economic Nationalism of Donald Trump.”

Barely in the office of the presidency, and Donald Trump has used a series of “executive orders” to put a stamp on the general direction of his planned policies: toward strong dose of political and economic nationalism.

What is political and economic nationalism? It is a view that places the nation-state above all other values:  The individual, the family, the local community are all subservient to the needs and purposes of “the nation.”

Economic nationalism is dedicated the material strength and economic independence of the nation-state. Toward this end, “national” production, “national” employment,” and “national “greatness” in terms of influence and power supersede the personal and economic goals and purposes of the respective individuals in that society. All are confined within and all are expected to conform to the needs and purposes of the nation-state.

In Donald Trump’s case this is seen is his obsession with other nations “destroying” American industry or “stealing” American jobs, or using trade deals to make America “weak.”

Conservatives (and some libertarians) have hailed his call for less regulation, or lower taxes, or fostering energy independence in the form of completing the Keystone Pipeline. But what is not fully appreciated is that his advocacies of these are not based on any underlying philosophical belief in individual liberty, property rights, free markets or far more limited government.

Trump endorses and advocates these types of policies as means to that end of restoring American “greatness.” He is willing to use governmental power and pressure to make others bow to this goal, as has been demonstrated before and after his inauguration by his calls to or meetings with American business executives to basically tell them that he expects their enterprises to produce goods in America and create jobs for American workers; and any business that tries to produce abroad and bring back their finished product to be sold in America will be hit with special and heavy taxes.

And as the voice of “the people,” Trump knows what should be produced, where and with which workers for the good of the national collective. His is for an economic nationalism that easily could transform into a type of economic fascism. Friends of freedom need to be vigilant in the face of the darkening political and economic clouds over America.



Why The Cold War Between Tech CEOs and Trump Is About To Go Nuclear

By Tyler Durden

Over the weekend, openly defiant CEOs, particularly among the tech sector, expressed their displeasure with Trump's Friday executive order temporarily banning refugees and limiting travel from seven Muslim countries, with both words and deeds, among which the following (summary courtesy of Axios):
  • VCs funding the ACLU: Several venture capitalists, as well as a few entrepreneurs, took turns soliciting donations to the American Civil Liberties Union through social media and personally matching those donations.
  • Airbnb volunteers to help provide housing for impacted immigrants: The home-sharing company said that it will work with travelers and organizations to provide housing for those impacted by the executive order, whether through volunteer hosts or by funding housing.
  • Lyft and Uber commit millions of dollars to legal aid: On Sunday, Lyft said it will donate $1 million to the ACLU over the next four years. Later in the day, Uber said it will create a $3 million legal defense fund for impacted drivers, as well as provide legal assistance and compensate their lost wages.
  • Google is setting up a $2 million crisis fund: The search giant has set up a fund that will donate to the American Civil Liberties Union, Immigrant Legal Resource Center, International Rescue Committee, and UNHCR.
On Monday morning, former US Treasury Secretary Larry Summers, speaking in an interview with Bloomberg Television, said that he is “gratified” by what he heard from the tech community.  “As global businesses, they have a huge stake in the United States being a nation of the Statue of Liberty rather than being a nation of refugee camps.” He added that “they have a huge stake in the United States supporting an open and tolerant global system, they have that stake for their employees, their customers, they have it for the reputation of the United States and they have spoken out.”
That may be, but the biggest reason for the anger by tech CEOs at the Trump administration is a simple, and a more selfish one. The reason for the simmering cold war between tech CEOs and Trump can be summarized in just three letters: H1-BThe bottom line is that tech CEOs fear Trump will single them out for outsourcing jobs or shut down the so-called H-1B visa program they use to hire high-skilled foreign employees for crucial engineering and technical jobs.
And, as Axios adds, White House officials say they are right to be nervous, especially about changes to the visa program. Chief strategist Steve Bannon and policy chief Stephen Miller are known to be deeply skeptical of the program, and will have a strong, vocal ally when Jeff Sessions gets confirmed as Attorney General. Some further observations:
  • Trump's mixed messages: On the campaign trail, he promised to "end forever the use of H-1B as a cheap labor program." He later signaled in a meeting with tech leaders that he's most concerned about companies misusing the visas to displace lower-wage American workers.
  • How it works: Visas are capped at 65,000 a year, with 20,000 additional visas for foreign workers with master's degrees. The demand for the visas is so high that the cap is usually exceeded within a few days of the application window opening. The visas are distributed to companies through a lottery system.
Tech companies such as Microsoft, Google, IBM, Cisco, Apple, Intel and Facebook say the visas are crucial for specialized jobs they can't fill domestically because of a shortage of American graduates with the right technical skills. When CEOs spoke out over the weekend about the ban, they pointed out the importance of allowing the "best and brightest" to work in the U.S.
Which is why if a news report about Trump's next imminent executive order is accurate, the simmering cold war between the tech CEOs and Trump is about to nuclear.
Bloomberg reports that the Trump administration has drafted an executive order aimed at overhauling the work-visa programs technology companies depend on to hire tens of thousands of employees each year.  If implemented, the reforms could force wholesale changes at India companies such as Infosys Ltd. and Wipro Ltd., and shift the way American companies like Microsoft Corp., Amazon.com Inc. and Apple Inc. recruit talent. Companies would have to try to hire American first and if they recruit foreign workers, priority would be given to the most highly paid.
The draft of Trump’s executive order covers an alphabet soup of visa programs, including H-1B, L-1, E-2 and B1. The first is a popular program with technology companies and is aimed at allowing them to bring in high-skill workers when they can’t find local hires with the appropriate skills. The legislation caps the number of people who can enter the U.S. annually at 85,000, including those with undergrad and master’s degrees.  
The average salary of an H-1B worker at Apple is reportedly more than $100k.
“Our country’s immigration policies should be designed and implemented to serve, first and foremost, the U.S. national interest,” the draft proposal reads, according to a copy reviewed by Bloomberg. “Visa programs for foreign workers … should be administered in a manner that protects the civil rights of American workers and current lawful residents, and that prioritizes the protection of American workers -- our forgotten working people -- and the jobs they hold.”

The foreign work visas were originally established to help U.S. companies recruit from abroad when they couldn’t find qualified local workers. But in recent years, there have been allegations the programs have been abused to bring in cheaper workers from overseas to fill jobs that otherwise may go to Americans. The top recipients of the H-1B visas are outsourcers, primarily from India, who run the technology departments of large corporations with largely imported staff. 
“If firms are using the program for cheap labor, I think it will affect them and they will have to pay workers more,” said Ron Hira, an associate professor at Howard University. “If tech firms are using the program for specialized labor, they may find there are more visas available.”

The Trump administration did not respond to a request for comment on the draft. The proposal is consistent with the president’s public comments on pushing companies to add more jobs to the U.S., from auto manufacturing to technology.
It’s not clear how much force the executive order would have if it is signed by the president. Congress is also working on visa reforms and the parties will have to cooperate to pass new laws. Zoe Lofgren, a Democratic congresswoman from California, introduced a bill last week to tighten requirements for the H-1B work visa program.
"My legislation refocuses the H-1B program to its original intent – to seek out and find the best and brightest from around the world, and to supplement the U.S. workforce with talented, highly-paid, and highly-skilled workers,” Lofgren said in a statement.
Meanwhile, as Bloomberg adds, India’s technology companies, led by Tata Consultancy Services Ltd, Infosys and Wipro, have argued they are helping corporations become more competitive by handling their technology operations with specialized staff. They also contend the visa programs allow them to keep jobs in the U.S. and that if they have to pay more for staff, they will handle more of the work remotely from less expensive markets like India. Trump, however, see things differently.
“Inspections and investigations in the past have shown no cases of wrongdoing by Indian IT services companies, which have always been fully compliant with the law,” said R Chandrashekhar, president of Nasscom, the trade group for India’s information technology sector. “The industry is open to any kind of checks in the system, but they should not cause any hindrance to the smooth operation of companies.

The proposed Trump order is also aimed at bringing more transparency to the program. It calls for publishing reports with basic statistics on who uses the immigration programs within one month of the end of the government’s fiscal year. The Obama Administration had scaled back the information available on the programs and required Freedom of Information Act requests for some data.

Whatever specific changes are implemented, they are likely to add to the expenses for India’s technology companies. That may accelerate a shift to new kinds of services, such as cloud computing and artificial intelligence, said Raja Lahiri, partner at the Mumbai-based partner at consultancy Grant Thornton India
“The visa challenges are not going to go away easily,” he said. “They will continue to be a challenge for Indian IT companies.”
But while the pain for India will be acute, it will be Silicon Valley that may be most impacted, as suddenly its favorite source of cheap, skilled labor is eliminated. How it will responds remains to be seen.
The above originally appeared at ZeroHedge.

Fighting Minimum Wage Laws in San Francisco; Robotic Cafe

Customers visiting Cafe X’s first US location at the AMC Metreon in San Francisco will be able to order espresso drinks involving milk and flavorings from on-site kiosks and a dedicated app. Visitors have their choice of beans from AKA Coffee, Verve Roasters and Peet’s Coffee.


Trump Eyes Border Tax on Mexico, China and Germany

The Trump White House favors a "flexible" border adjustment tax targeting countries with which the United States runs big trade deficits, including Mexico, China and Germany, the President's top trade and industry adviser, Peter Navarro, said on Saturday.

"There is no question we need a border adjustable tax of some kind," Navarro said on Saturday at the White House.

Navarro said Germany was "one of the worst actors" on strategically increasing the VAT to 20 per cent.

"They're sticking it to us when they send a BMW or a Porsche into our market they rebate the VAT to those manufacturers and it's like a subsidy."

"But when we try to sell them a Ford or Chevy they slap on the VAT."

Two weeks ago in the EPJ Daily Alert, discussing the possibility of some type of import tax, I told subscribers:
What is likely to occur is that some plants will be built in higher cost US instead, whereas other autos just won't be built. This will mean higher car costs---and will impact, to various degrees, all automakers. But it will be particularly damaging to German automakers. If you have been thinking of buying a Mercedes, BMW, etc...  Now is the time.

Prices are very likely to climb and your purchase will likely prove to be a wise investment. At times, it may make sense to lease rather than own but not now. You want to keep hold of ownership since the rising costs are not yet calculated into these cars. What's more, interest rates on auto loans continue to remain very low at 3% or lower for 72 month loans. So buy, take a loan out for as long as possible (even if you don't need to take out a loan), the latter years of your payments will look very cheap as price inflation heats up.

This strategy will work for almost any car but especially for German cars, new or used.


EPJ Daily Alert

Austrailian Financial Review

Things Just Got Serious in Europe’s War on Cash

Don Quijones writes:
The central authorities in Europe just launched their most important offensive to date in their multiyear War on Cash. The new move comes directly from the European Union’s executive branch, the European Commission, which just announced its intention to “explore the relevance of potential upper limits to cash payments,” with a view to implementing cross-regional measures in 2018.

Maximum limits on cash transactions already exist in most European countries, and the general trend is downward. Last year, Spain joined France in placing a €1,000 maximum on cash payments. Greece went one better, dropping its cap for cash transactions from €1,500 to €500. In simple terms, any legal purchase of a good or service over €500 will need to be done with plastic or mobile money.
The German people are the heroic fighters here, though:
In some countries, the maximum cash limit is significantly higher. For example, in Europe’s biggest economy, Germany, recent attempts by the government to set a threshold of €5,000 triggered a fierce public backlash. The German tabloid Bild published a scathing open letter titled “Hands Off Our Cash,” while a broad spectrum of political parties condemned the proposed measures as an attack on data protection and privacy.
“Cash allows us to remain anonymous during day-to-day transactions. In a constitutional democracy, that is a freedom that has to be defended,” tweeted the Green MP Konstantin von Notz. Even Bunderbank President Jens Weidmann criticized the government’s proposals, telling Bild (emphasis added): “It would be fatal if citizens got the impression that cash is being gradually taken away from them.”

The 900 Pound Gorilla in the Debate

Robert Higgs writes:
Why is a guy from, say, Texas, so pushed out of shape that an illegal immigrant from Sonora or Oaxaca will receive emergency medical care and schooling for his kids, but makes not a squeak about the millions of native-born deadbeats in New York, New Jersey, and Illinois who will receive not only those two benefits but potentially hundreds of others from the welfare state, also at his expense? Really, how hard can it be to see that the welfare state is the 900 pound gorilla in this debate, and the undocumented migrants are responsible for only a relatively very small part of the imposition being laid on Americans? I frankly have great difficulty in accepting this excuse for anti-immigration sentiment as genuine when it so blithely treats the stray dog that wandered into the house as the problem while totally ignoring that gorilla or, worse, accepting that the gorilla is okay, but the dog is intolerable.
 RW note:

Of course, the first step in the solution is a Welfare Wall that prevents illegal immigrants from government benefits. Step 2 is the total end to welfare. Or alternatively, combine steps 1 and 2.

Always move in the direction of shrinking the state, not expanding it.

Sunday, January 29, 2017

Why Hasn’t Obamacare Been Repealed?

By Laurence M. Vance

The Republicans have talked about repealing it since the day it was passed. They voted many times in Congress to repeal it. They now have absolute control of the government. They could have had a bill already drafted to repeal Obamacare and put it on Trump’s desk his first day in office. Oh, people say, but they need more time; give them a chance. We have given them a thousand chances too many already. They have failed again. Remember the 11th commandment: Never trust the Republicans.

The above originally appeared at LewRockwell.com.

Apple, Google and Facebook Condemn Trump’s Immigration Ban

Leaders of top Silicon Valley companies including Apple, Google and Facebook sent emails to their workforces attacking the move to ban temporarily immigrants and refugees from seven Muslim-majority countries.

Tim Cook, Apple chief executive, said the company had told the White House the company did not support the policy. Cook said “Apple would not exist without immigration”.

Tech companies say that Trump’s immigration policies will undercut their ability to recruit and retain engineering talent from overseas. Amit Kumar, chief executive of software company Trimian, told the Financial Times that many start-ups  will increase the size of their branch offices outside the US as a result.

“The shift was immediate, it was dramatic. People are thinking what is the right country to base their operations in,” Kumar said. “I see that across the board.”

Twitter leader Jack Dorsey said it was “real and upsetting” while Slack chief executive Stewart Butterfield wrote that almost every one of President Trump’s actions was “gratuitously . . . evil”.


(via FT)


Via The Washinton Post:
The country’s leading technology companies are recalling overseas employees and sharply criticizing President Trump after he signed an executive order Friday barring for 90 days immigrants and visitors from seven Muslim countries from entering the United States.

The companies warned the action — which affects foreign-born immigrants with legal permanent residence status in the United States and also includes suspending the acceptance of refu­gees for 120 days — could impair the ability of America’s top companies to compete.

Google chief executive Sundar Pichai late on Friday ordered scores of staffers traveling overseas to return to the United States immediately. Pichai sent out a company-wide memo that was highly critical of Trump's action, saying it could prevent at least 187 foreign-born Google employees from entering the United States.

“It's painful to see the personal cost of this executive order on our colleagues," wrote Pichai. "We’re upset about the impact of this order and any proposals that could impose restrictions on Googlers and their families, or that could create barriers to bringing great talent to the US."

How Did 17 Billion Dollars Disappear Overnight?

Gregory Shepelev emails:
Movie "Gold" just had its opening weekend . With the name like that and Matthew McConaughey playing the main character, this sounds like a must-see movie.

It's loosely based on infamous 1990's Bre-X mining scandal that you can read about here - Infographic: The Bre-X Scandal, A History Timeline.

It Only Looks Easy

Whether you are a teacher, salesperson, or a businessman presenting to potential investors, it is all about thinking everything out in advance and having every step mastered.


Saturday, January 28, 2017

When I Plan to Stop Harping on Trump's Trade Policies

A Don Boudreaux letter to a first-time correspondent:

Mr. Harry Collins
Mr. Collins:
Frustrated with what you describe as my “interminable and tiresome” letters and blog-posts on trade, you e-mail to ask me when will I “stop incessantly harping on trade matters.”
My answer is straightforward: I’ll stop harping on trade matters when prominent and powerful politicians, including the current president of the United States, stop not only insulting my and other sensible people’s intelligence with their ridiculously stupid babblings about trade, but also – and more importantly – stop their destructive, officious, obnoxious, and immoral efforts to intervene into my and other people’s peaceful commercial affairs.
I am no more likely to fall silent under the assaults and batterings of Mr. Trump than I would be to fall silent were my next-door neighbor to persist in threatening me with violence if I refused to conduct my economic affairs according to my neighbor’s unethical and absurd commands.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek.

Hey Trump: Don't Threaten Business with a "Border Tax"

By John Sulzer

They’re going to have to pay a border tax — a substantial border tax,” President Trump pledged Monday morning during a White House meeting with twelve CEOs including the heads of Dow Chemical, Proctor and Gamble, and Ford. He went on to make thinly veiled threats against the businessmen, saying, “All you have to do is stay. Don’t leave. Don’t fire your people in the United States.”

The President also discussed a 75 percent regulation cut and tax cuts for both the middle class and for corporations and a “big border tax.”

This is troubling for several salient reasons, primarily because the public image of President Trump holding White House meetings with businessmen just doesn’t wash. This meeting, at least, was open to the media. However, previous meetings with high-level executives have not been. What was discussed during these back-room meetings? We don’t know. Did the president offer incentives or threats? We don’t know.

What we do know is that the president working directly with CEOs produces at least the perception of secret deal-making.

Additionally, the narrative that all outsourcing is bad is patently incorrect. Outsourcing factors of production can allow businesses to free up money and hire more workers in the US at higher wages. Another benefit is that those foreign firms who are paid by US companies have to spend the dollars they receive back in the US or trade them in so someone else can. This results in more investment and capital at home.

Also, dumbing down the causes of the decline in manufacturing jobs, as Trump is doing, doesn’t help anyone. New technology facilitated the decline arguably more than outsourcing as US manufacturing output has risen in recent years while jobs have declined. The decline isn’t because of “crooked” or “cucked” trade deals like NAFTA. These deals don’t force firms to outsource or to automate. What forces firms to do so is overbearing tax rates and regulation.

By announcing tax cuts for corporations and a 75 percent regulation cut in the same meeting, the president has signaled he intends to implement pro-growth business policies. The “big border tax” and “renegotiation” of NAFTA won’t help. The tax cuts and deregulation, on the other hand, would.

Finally, President Trump’s reference to “fair trade” was naive and deceptive: “So I don’t call that free trade, what we want is fair trade, fair trade, and we’re going to treat other countries fairly but they have to treat us fairly,” he claimed. This seemingly was his second-worst stray into the Bernie Sanders level of economic illiteracy, after calling the free market, “the dumb market.”

In recent decades, “fair trade” has usually denoted the practice of those in wealthy countries paying inflated prices for goods in order to supposedly pay higher wages to those workers in less-developed countries who produce said product. In reality, this results in unemployment for many of the workers and those who keep their job aren’t paid all that much more. The bureaucracy involved in the deal is the primary beneficiary. It turns out folks could do a lot more good for less by buying the cheaper alternative to fair-trade boondoggles and donating the difference to charity.

The same goes for President Trump’s border tax plan. Just like proposals such as the minimum wage, this sounds altruistic, but it helps no one. The best way to bring jobs back is to make America the friendliest place in the world for innovators and job creators, not punish them for looking elsewhere for an alternative to business-killing taxation and regulation of the Obama years.

The above originally appeared at Mises.org.

John Sulzer is a student and a contributor at The Liberty Conservative. John has been writing on politics, culture, and public policy since 2015 from a conservative perspective.

Yellen To Testify Before Congress: Watch the Trump Team Reaction

Federal Reserve Chair Janet Yellen will deliver her semiannual monetary policy report to the Senate Banking Committee on Feb. 14, a panel spokeswoman has confirmed, according to the Wall Street Journal.

Yellen will also testify before the House Financial Services Committee on Feb. 15, a spokesman for that committee said.

The reaction of Trump economic advisers to Yellen's testimony, at what is known as the Humphrey-Hawkins hearings, will be required observation for monetary policy analysts. There have been some early indications that Trump's people want to pressure her to keep interest rates low.


Bankster Plotting at the White House Friday

The major league bankster, Jamie Dimon, chief executive of JPMorgan Chase, was spotted Friday at the White House, according to The Hill.

Dimon was seen leaving the West Wing by reporters Friday afternoon. He told the press that he had been meeting with Gary Cohn, who had just become head of President Trump’s National Economic Council after leaving Goldman Sachs, where he had been the firm’s president.


NEW CRISIS: IMF Warns Greece Faces Explosive Surge in Public Debt

Here we go again on Greece, but the crisis is super serious this time.

Greece faces what is likely to be an “explosive” surge in its public debt levels that within decades will mean it will owe almost three times the country’s annual economic output unless given significant debt relief, the International Monetary Fund has warned in a confidential report, according to the Financial Times.

The report warns that the debt load is “highly unsustainable” and would not improve even if it implemented further reforms recommended by the fund.

“Even with these ambitious polices in place, Greece cannot grow out of its debt problem,” the analysis reads. “Greece requires substantial debt relief from its European partners to restore debt sustainability.”

The fund calculated that Greece’s debt load would reach 170 per cent of gross domestic product by 2020 and 164 per cent by 2022, “but become explosive thereafter” and grow to 275 per cent of GDP by 2060.

It's time for Greece to default on its debt and use an expression of Victoria Nuland's when it comes to the EU, "Fuck the EU".


Friday, January 27, 2017

The Cultural Background of Ludwig von Mises

By Erik Ritter von Kuehnelt-Leddihn

Writing for Americans about the cultural background of Ludwig von Mises, an eminent former compatriot of mine, poses some difficulties: how to present you with a world radically different from yours, a world far away, which in many ways no longer exists. For example, the birthplace of this eminent economist was for nearly fifty years within the confines of the Soviet Union. Who was this great man and scholar? In what ambiance did he live before he came to the United States, where he continued to publish his crucially important works and to inspire new generations of economists? We have to go back to the old Austro-Hungarian Empire, then the second-largest political unit in Europe. Only Russia was bigger, although Germany's population was slightly larger. Mises was born in 1881 in Lwów, the capital of what was known as Galicia. A kingdom and crownland of Austria, Galacia was called "Lesser Poland." At the time, the majority of the city was Polish; more than a quarter was Jewish; a small minority was Ukrainian; and a tiny percentage was Austro-German officials. However, the upper classes were distinctly Polish.

Trump’s Wall—an Attempt to Insult and Humiliate Mexicans

By Robert Higgs 

Suppose the Canadians were to build a wall to keep Americans out of their country, making it clear that Americans are simply not decent, productive, peaceful people and therefore the fewer of them who enter Canada the better. Might Americans take justifiable offense at such treatment?
Why does anyone imagine that Mexicans feel any differently?
I spent more than a decade of my career largely engaged in studying the history and economics of U.S. racial differences and race relations. (See, for example, my book Competition and Coercion.) In the USA and its colonial precursors, racial oppression took many forms, including after the War Between the States a widespread state-enforced system of racial segregation in which the “separate but equal” public facilities provided for the use of blacks were almost invariably inferior. But the system also took many seemingly pointless forms, not of any evident value to any group of white rent-seekers or to whites in general. The “point” of these restrictions, however, was always simply to insult and humiliate black people, so that even the most “no account cracker” could see that he was superior, and recognized as such, even to the most polished and accomplished black. This institutionalized humiliation of people was always the part that, aside from the ongoing, unpunished assaults and murders, rubbed me the rawest about the system.
What sort of person seeks to humiliate an entire group of people simply on grounds of race or nationality? Well, at present, the sort of person who supports the wall between Mexico and the USA. Yes, it may give some groups of rent-seekers a feeling of enhanced security in the ability to accrue their ill-gotten gains. But above all, it gives the American yahoo class the feeling that they—the self-supposed better people—have shut out Mexicans in the most brutal possible fashion, by physically fencing them out as if they were dangerous wild animals.

The above originally appeared at the Independent Institute.

What You Need to Know About Trump's Wall

Among many other factors, it could mean the taking by eminent domain of land of US citizens on the border so that the wall can be built.


Krugman Blasts Trump's Fundamental Ignorance of Basic Trade Theory

New York Times Keynesian economist Paul Krugman is correct when he writes:
[Trump]sees international trade the way he sees everything else: as a struggle for dominance, in which you only win at somebody else’s expense.

His Inaugural Address made that perfectly clear: “For many decades we’ve enriched foreign industry at the expense of American industry.” And he sees punitive tariffs as a way to stop foreigners from selling us stuff, and thereby revive the “rusted-out factories scattered like tombstones across the landscape.”

Unfortunately, as just about any economist could tell him — but probably not within his three-minute attention span — it doesn’t work that way. Even if tariffs lead to a partial reversal of the long decline in manufacturing employment, they won’t add jobs on net, just shift employment around...Taken together, the new regime’s policies will probably lead to a faster, not slower, decline in American manufacturing.

Banging My Head Against a Wall

A Don Boudreaux letter to the Washington Post:

The Trump administration now says that the border wall will be paid for by a 20 percent tax on Mexican imports (“White House press secretary says border wall will be funded by 20 percent import tax on Mexican goods,” Jan. 26).
Because only people, not imports, pay taxes on imports – and because the people who pay the bulk of the taxes on imports are the people who buy the imports – and because the people who will buy the Mexican imports that the Trump administration will tax are Americans – the Trump administration’s plan will result in the bulk of the bill for the border wall being paid by Americans.
It’s true, of course, that this tariff will also harm Mexican producers by reducing their market share; many might go out of business as a result.  But make no mistake: if this scheme does manage to raise the billions of dollars necessary to pay for this wall, those dollars will overwhelmingly be extracted from the purses and pockets of Americans.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030 
The above originally appeared at Cafe Hayek

Trump Says Military More Important Than Balanced Budget

President Donald Trump said Thursday night that he is willing to subordinate balancing the federal budget in favor of strengthening the military.

"Our military is more important to me than a balanced budget," the president during an interview with Sean Hannity on Fox News.

"I want a balanced budget eventually.But I want to have a strong military," he said. "To me, that's much more important than anything."

(via NBCnews)

Thursday, January 26, 2017

Hey Trump, Don't Fear the Trade Deficit

BREAKING: Trump Will Call for 20 Percent Tax on Imports from Mexico to Pay for Border Wall

Trump spokesman Sean Spicer said this afternoon that rewPrewsident Donald Trump intends to pay for for the wall he is planning to build between the United States and Mexico by imposing a 20-percent tax on all imports from Mexico.

It was not clear exactly how the Trump administration would impose the new tax on Mexican exports. But Spicer said it would be part of a broader plan to tax imports from countries with which the United States has a trade deficit, like Mexico.

“If you tax that $50 billion at 20 percent of imports – which is by the way a practice that 160 other countries do – right now our country’s policy is to tax exports and let imports flow freely in, which is ridiculous,” Spicer told reporters. “By doing it that we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding.”

(via The Washington Post)


Here is How I Evaluate Trade Agreements (and ‘Sovereignty’)

By Don Boudreaux

Here’s my quick take on so-called trade agreements, such as NAFTA.

Such agreements of course do not result in completely free trade; therefore, such agreements aren’t optimal or ideal.  But we do not live in a world in which the ideal is always plausibly enough obtainable such that it should block attainable good.

So I ask two questions about each trade agreement:

(1) Will it make trade freer than trade would be in the absence of the agreement?

(2) Will it not reduce the prospects of achieving even freer trade in the future?

If the answer to each of these questions is “yes,” then I support the agreement, for if the “yes” answers are correct, trade will be freer than otherwise.  Better that trade become more free than not.  We can celebrate the increased freedom to trade even as we lament the remaining restrictions and as we fight to get rid of as many of those as possible.

Here’s an analogy: I support (I really do) abolishing all taxes on capital gains.  That is, my ideal capital-gains tax rate is zero.  But if I judge that eliminating this tax is not likely, should I oppose proposed cuts in the capital-gains tax rate?  I think not.  Unless I judge that a proposed cut (say a five-percentage-point reduction) in the capital-gains-tax rate today is likely enough to block what would otherwise be a good chance for a larger cut in the near future, I support today’s proposed cut.  I don’t call the result “ideal.”  But this result is better than not cutting this tax rate at all, or cutting it by a lesser amount.

And note: it would be a cheap shot for someone to accuse me of hypocrisy, of selling-out, or of not really supporting tax cuts if I endorse this tax cut rather than hold out for complete elimination of the capital-gains tax.

I support trade agreements that fail to make trade as free as I’d like trade to be for the same reason that I support tax cuts that fail to tax rates as far as I’d like them to be cut.


By the way, one of the most ludicrous arguments that is routinely trotted out in opposition to trade agreements is that they infringe on U.S. sovereignty.  If a trade agreement makes trade freer, the only sovereignty that matters to me is not at all infringed; in fact, it is expanded and better secured.  That sovereignty is of each of us to spend our incomes as we choose.  If trade truly is made freer by U.S. participation in the agreement, I don’t give a damn if Uncle Sam’s sovereignty shrinks (whatever that might mean), for consumer sovereignty and the sovereignty of each individual person expands.  And that’s the only sovereignty that is worthwhile and worthy of protection in a free society.

The above originally appeared at Cafe Hayek.