LyrArc Article Gist
This report in WSJ looks at the impact of the 2018 Trump tariffs retained by president Biden as the US seeks to reduce its overdependence on Chinese imports and bring back American manufacturing. This followed misguided policies of previous administrations since Clinton that weakened American manufacturing strengths. Have the US tariffs on Chinese goods worked? The WSJ graph with information from US Census Bureau shows that imports from China in 2022 going down to the levels in 2007 of about 16-17% as a share of US imports, down from a high of 21% before the Trump tariffs halted a rapidly rising curve. Imports from Germany, South Korea and Japan in 2022 were down slightly hovering around 4.5%. Imports increased from Canada and Mexico, the US's traditional partners in North America, around 13.5% as a share of US imports for each country. Also increasing were imports from Vietnam. Some of the imports from Vietnam are Chinese products shipped through Vietnam to evade tariffs, and it is not clear whether the figures from Vietnam have been adjusted for this. President Biden is looking at different scenarios in an effort to tackle inflation. One supported by Janet Yellen, an economist at US Treasury is for the US to relax some of the China tariffs. Most economists in previous administrations including Yellen failed to understand what surrendering American manufacturing to China on the scale and speed that happened would do to communities across America that depended on factory jobs. The devastation of these communities has led to increased divisions in America, weakened American manufacturing, and led to outflow of technologies vital for national security and national well being.  Republican senators, US Trade Representative Katherine Tai and National Security Advisor Jake Sullivan are opposed to any relaxation of tariffs. Studies show the removal of the tariffs would have only a small impact on the consumer price inflation index reducing inflation by 0.26%. Lifting some tariffs on school supplies and summer bicycles as proposed by the US Chamber of Commerce would have little or no impact on the consumer price index for inflation. This is because the inflation is triggered by oil and gas price increases stemming from the Russian policies and invasion of Ukraine. This has also aggravated food and grocery costs  through blocking of agricultural imports from Ukraine. An additional factor was the increased demand after the pandemic easing in 2022, but that demand is already easing in July with glut in inventories at Walmart and Target, and excess warehouse capacity at Amazon. It would also send the wrong signal to China that the tariffs imposed by president Trump after a Section 301 trade investigation and based on improper loss of technologies to China are not being taken seriously by the US, says Republican Senator Hagerty of Tennessee. The Labor advisory committee to the US Trade Representative Katherine Tai also opposes any such move after the serious damage done to US workers and to US national well being and security. This happened under the Clinton, Bush and Obama administrations with failed trade policies that ceded manufacturing to China. ...

LyrArc Article Gist
David Brooks calls the agreement reached Jan 1, 2013 on the fiscal cliff inadequate. He puts the blame on voters. On the Medicare couple that takes out more in benefits than it puts in, taking $343,000 out in benefits, while putting in $109,000, according to the Urban Insitute. The politicians are simply following the voter preferences of deferring the hard decisions. Taxes have to go up at a lower threshold than $400,000 says Brooks, and spending cuts need to be made.

LyrArc Article Gist
The U.S. Senate passes a motion that allows the chamber to proceed with a debate on a health care bill. The motion passed 51-50 with Vice President Mike Pence casting the deciding vote. Republican Senators Collins and Murkowski voted against the motion. This report in the WSJ says this sets in motion a process in which debate will take place and amendments will be made. It is not clear what shape the bill will take. Under the process used only a simple majority is needed in the Senate, yet this allows for many amendments to be made.  Only hours after this motion passed by one vote, a bill replacing major parts of the Affordable Care Act failed to pass 57 votes against and 43 in favor. Senator John McCain who arrived in Washington from Arizona following brain tumor surgery, delivered strong criticism of the way the Republican healthcare bill was rushed through allowing very little debate. Experts have commented on the way the bill was rushed through with a thin majority for passage, with very little debate, first by Democrats in 2009 and now in the House by Republicans. With the same pattern now followed in the Senate by Mitch McConnell, the Republican leader in the Senate. A backup bill would remove just the individual and employer mandates and a tax on medical devices- the elements Republicans agree on, if no majority can be put together for the healthcare bill. ...

LyrArc Article Gist
Norris quotes Senator John McCain who said that when corporations such as Apple and Google do not pay their share of taxes, other companies in the U.S. and ordinary taxpayers have to make up the difference.

LyrArc Article Gist
Japan's acute shortage of labor has even spread to the government sector says this report in DW.com. Japan's aging population means a growing need for immigrants from Vietnam and other countries. Nursing, elderly care had shortages which have spread to construction and delivery business, taxis, forestry companies and train operators. Many jobs remain unfilled. It is a situation the US may also experience in a few years as it is feeling the effects of shortages of workers in industries such as hospitality. NK Logisitics Research estimate is that 34% of goods will remain undelivered by 2030 because of lack of transport workers, that is 940 million tons of goods undelivered every year. Already taxi drivers have shrunk by 40% from the peak in 2009. Japan's immigration policy planned for an influx of 345,000 skilled workers over 5 years in 2019 but this came a bit late as the pandemic delayed the influx. Now it has a new urgency. Even with the influx of new immigrants Germany has 1.6 million jobs unfilled according to DW.com citing research in an accompanying article on German workers in today's Lyrarc.com. The US needs an organized program of immigration to attract foreign workers yet the influx from Venezuela of mostly middle class educated people into the US through  events no one had foreseen or expected may years from now be seen as meeting the needs of sectors in the American economy that needs good workers, in the same way that Japan and Germany see their economies and worker shortages. ...

LyrArc Article Gist
Peter Orszag's role in the healthcare debate and the formulation of health care policy proposals. One proposal of Orszag, who heads the Congressional Budget Office, is to set up a new agency with powers to cut spending and implement changes in Medicare. Says Orszag, "one of the reasons we have such disjointed and skewed incentives is that we have an excessively political process." At a recent meeting with House Democrats, one Congresswoman said her top priority is winning higher payments for oxygen suppliers, and Orszag was taken aback. For years officials have been trying to cut payments to oxygen and medical equipment suppliers, which are said to be inflated. When a new competitive bidding process was set to take effect last year, industry supporters in Congress were able to delay the plan, and these supporters are still fighting to block changes says the WSJ. Here is a 40 year old Orszag, with degrees from Princeton and London School of Economics, who got his early experience in the Clinton adminstration at age 24. He then followed this with a number of policy oriented jobs, ending with appointment to head CBO in 2007. And he faces the whole system of Congressmen from both parties beholden to interests in the healthcare industry, who provide the donations for them to finance their election campaigns. Dan Eggen describes this in the Washington Post, 7/21/2009. Max Baucus of Montana, and to some extent Grassley of Iowa, are senators from both parties who Eggen points out are beholden to the healthcare industry because of large donations they receive from the interests in the healthcare industry. These interests want to see their payments system protected. The further escalation in health care costs, which would make the whole healthcare system unaffordable even as it delivers poor results, can only be prevented by making cost control an exercize that is not influenced by healthcare industry donations. Jackie Calmes describes the huge hurdles in achieving a deficit neutral move to universal health care in the U.S. in the NYT 6/26/2009. See the link. The exchange between Grassley and Orszag on the issue of the $177 billion in savings needed from the payments to health insurers under the Medicare managed care plans- which allow seniors to obtain Medicare coverage outside the government run program -went as follows. These are dubbed overpayments by outside experts and efforts have been made to cut them in Congress. When Mr Grassley raised concerns about the impact of such cuts in a hearing, -and Grassley has opposed the cut for this overpayment to insurers- Orszag responded saying: "I very firmly believe that capitalism is not founded on excessively high subsidies to private firms. This is what this system delivers right now." ...

LyrArc Article Gist
Prof. Mohammad Ayoob of Michigan State University looks at the tit for tat military responses of India and Pakistan and tries to interpret the mixed signals of the Pakistan military and civilian president Imran Khan. He says Imran Khan had the difficult task of being in line with the top generals of the Pakistan military and at the same time responding to international pressures to de-escalate the crisis. Imran Khan asked India not to take the confrontation further or Pakistan would have to retaliate, and at the same time emphasized de-escalation as the goal with pressure from Saudi Arabia, the U.S. and China. The nuclear doctrines of the two countries which differ from the manner in which the U.S. and Soviets operated during the Cold War, also make escalation dangerous. Prof. Mohammad points out that the military in Pakistan plays a different role in the state since it was created in 1947. With military control of nuclear weapons any danger of losing control of the state and its position in the state since 1947 could lead to reckless strategies, says Prof. Mohammad. Mr. Imran Khan had to speak in different terms to different audiences in a kind of double speak in this situation. Mr. Khan spoke in terms of development and the need for Pakistan to fund the needed infrastructure always at the back of the mind in the current situation at the outset of the crisis. Much of this was lost in the ensuing hours of the crisis. Yet this remains the dominant need in South Asia as Mr. Imran Khan faces the challenge of meeting his promises for development as much as Mr. Modi faces the challenges of development to catchup with Asian neighbors South Korea and China who have shown how this can be done. A longer memory does show China and South Korea falling behind in the fifties and sixties before making great progress in the last 3 decades by pursuing peaceful cooperation with earlier adversary Japan,  and in the case of China the U.S.  Anyone familiar with the role played by the U.S. in China's civil war, and the Japanese invasions of Korea and China, during four decades of conflict,  followed by the cooperation offered by Japan and the U.S. to first South Korea and then China can see that progress is possible and lays the foundation for development. A recent article in The Guardian reports that China now lays more concrete every 2 years than the U.S. did for the entire twentieth century. None of this would be possible had Chinese leaders in their wisdom and passion for development not pursued development first and foremost, setting aside historic wounds. ...

LyrArc Article Gist
Pearlstein raises the question, are there business leaders who believe that what's good for America, is good for business, rather than the other way around. Google, like other technology companies, pays much less in taxes than the corporate tax rate suggests. Research by the Washington Post shows this to be 18%, not 35%, for 2009.

LyrArc Article Gist
EU leaders and proposals to limit tax avoidance by digital companies by requiring the companies to show the profits in the countries where they are made. This would require changing bilateral treaties. France is looking at proposals to tax companies by the number of clicks or user data. Large digital companies, including Apple and Google declare most of their European revenue in Ireland using legal loopholes in that country to shift profits to lower tax locations. A Senate report in the U.S. in May 2013 shows Apple using technicalities in Irish and U.S. laws to pay only a small amount in corporate taxes in four years 2009-2012 on $74 billion. Fredrik Reinfeldt, the prime minister of Sweden stated the argument for fairness in tax policy- "These companies ask for a lot of investment in infrastructure, in research and development, they want to have well educated staff members. Well, let's keep that together: Pay your taxes so we can afford all of these investments."

LyrArc Article Gist
Krauthammer says there is reason for optimism that the super committee of the August 2 Debt Ceiling and Deficit bill can achieve major results. The reason he says is that much of the work in key areas has already been worked out by the Simpson-Bowles Commission. This has also received extensive public scrutiny and discussion. Its now upto the committe to make some choices for tax reform. For the sake of efficiency and fairness this needs to be done. Efficiency is gained by closing the loopholes and the tax exemptions for mortgage interest deductions, health-care exclusion, and subsidies such as the one for ethanol. And in its place moving to lower tax rates, the 23% envisaged by Simpson-Bowles, or the 28% from the Reagan days, down from the 35% today. Fairness is gained by removing tax breaks for special interest groups that do much of the lobbying. The mortgage interest deduction can be phased out starting at $500,000 in the inital phase or using the plan for tax expenditures proposed by Martin Feldstein. Feldstein's proposal outlined in the New York Times on May 4, 2011, (see group for Feldstein) was to limit the reduction in taxes from deductions and exclusions to 2% of the person's AGI or adjusted gross income. The other part of the Committee's focus would be the structural changes to Social Security and Medicare- raising the Social Security and Medicare ages and changing the inflation formula, and means testing Social Security. Obama has already considered the raising of the age for Social Security and changing the cost of living formula....

LyrArc Article Gist
The Blinken Wang Yi meeting at the G-2- in Indonesia is the first high level meeting between US and China since March when the Ukraine war started. In the press briefing after the meeting Blinken said "more than four months into this brutal invasion the PRC stands by Russia." He pointed to Beijing support of Russia at the United Nations, dissemination of Russian talking points through Chinese state media and joint military exercizes with Moscow. One aspect of the relations that is beyond the control or good intentions of the two countries top diplomats is the tit for tat response that began with the presidency of Donald Trump. Trump may have seen this as a way to talk to the voter base fed up with two decades of one sided trade with China with manufacturing shipped out to China and local communities of families and workers in regions across the US losing jobs and in decline. Much of this shift was done by US companies during the Clinton, Bush and Obama administrations over two decades. The strident tone adopted by Trump was met by tit for tat responses in Chinese media till the pandemic when it assumed a new aspect of Chinese origins of the coronavirus. The result is that Sinophobia in the US is met by a response in Chinese media and in the thinking of the Chinese leadership under Jinping that now sees the relationship as having already shifted during the pandemic. The paradox in this is that the US in its effort to get other countries on its side is only beginning to make an effort of get America's own companies and large business investors on its side. Most American companies are still continuing trade and business with China as before.  The same situation exists with the shift of manufacturing from Japan and the European Union to China, with the loss of jobs and decline of local communities that depended on manufacturing. Japanese and European companies are acting in ways that are similar to American companies. Having managed the shift of manufacturing from European Union and Japan to China these companies have done little to change this business situation in 2022 carrying on as before. This is the paradox of the current situation that business both in the US and EU, and Japan is not on the side of their governments, even as their governments attitude to China, particularly now after the pandemic and the Ukraine war has shifted drastically. Alongside this is the popular opinion that has shifted gradually over the last 10 years in the US and EU, first in these very local communities that lost manufacturing to China, and then across broader sections of the public, and now across whole regions of America, Britain, the EU and Japan. This shift in popular opinion has little interest in the way business conducts business overseas or governments conduct diplomacy in nuanced statements. As a result neither the governments of the US, EU and Japan or the business of the US, EU and Japan are in control of this shifting situation that has its momentum and pace operating quite independently of governments and business. And public opinion across America, Europe, Japan, and also in India is moving in an entirely new direction.     ...

LyrArc Article Gist
See the important link to Keith Johnson, 7/9/2007, WSJ, on the economics of wind energy, suppliers, and the industry in the US and Europe, and the shortage of turbines because of some 800 parts that go into the turbines and blades making it a complicated supplier issue to get more turbines. We can make only more turbines as fast as we can access the last of some 8000 components says a Vestas executive. Windmill generated electricity was only 0.4% of the electricity generated in the US compared to 0.1% for solar and 0.4% for geothermal but of the new energy added in the US in 2007 it was 30% of the new energy generating capacity added. So it has a disproportionate share of the increase in generating capacity starting from an insignificant base. Its a new industry but with many companies the largest being Vestas of Denmark, GE Energy, Nordex of Germany and Accoiona of Spain. Germany, the US, Spain India, and China are countries at the forefron of the wind energy business. Because the business is relatively new manufacturers were not providing the installation and maintenance required in emerging market countries in 1995 when Suzlon which had powered its yarn business in Surat, Gujarat with 2 wind energy turbines from Vestas entered the business seeing an opportunity. Mr Tanti of Rajkot, Gujarat, Suzlon's founder saw the opportunity and used European firms to design his turbines and blades and provided energy to Bajaj Auto and large Indian companies that have an erratic supply of electricity because of chronic electricity shortages. Starting with a tax break which allowed Suzlon to deduct windmill costs against its sales tax bill enacted in 1999 and retracted in 2002 Suzlon took advantage of lower manufacturing costs in India. Its main plant is in Pondicherry, India. By 2002 sales had increased to $131 million in India from $32 million in 2000. The company entered the US market in 2003 and in 2004 with the boomin stock market in India Citigroup took a 9% stake in Suzlon for $22 million. By 2005 Suzlon because of lower manufacturing costs had margns of20% compared to 8% for European companies and Suzlon raised $340 million in an IPO. With loans from Barclays and Deutsche Bank Suzlon bought European parts makers Hansen Transmission in 2006 and set up a factory in Tianjin, India. Early on in the 1990's it had set up an R&D center using engineers in Germany of a supplier company in wind energy Sudwind that had exited the business, this R&D center now designed its largest turbine for US and European markets of 2.1 megawatts and blades 50 yards in length. Today Tanti and Suzlon are faced with problems accessing the world class technology of the western companies as its technology has not kept up with the technological advances especially in addressing the needs of western markets. It has about 8% of the US market and about $1.8 billion in global sales. Its pricing to Edison Energy in 2006 for 1.2 megawatt turbines was 20% below European and American manufacturers. Its latest designs have flaws because Edison Energy of Irvine , California, has seen cracks in the blades at 3 windmill sites in the midwest USA and Suzlon has withdrawn 1251 blades, the majority of the ones sold in the US. Deere and Company another customer has experienced the same problem. And even though it has moved to acquire technology by taking over 33.6% of REpower which has advanced technology and makes 5 megawatt turbines. its mired in its efforts to get the blueprints of advanced designs from REpower because German law considers minority shareholders like Suzlon as competitors, other shareholders Areva of France and Martifer of Portugal have to be bought out and minority shareholders also bought out before Suzlon can access the designs. Speed, funding, tax breaks, and timing to attract capital, and most of all insight and courage to see a growing opportunity from its own experience of using two 2.1 megawatt turbines from Denmark's Vestas, and looking deeper into problems with maintenance and support in Asia and lack of technology for homegrown development that hamstrung development of energy alternatives in dire and chronic electricity short Indian companies, this has helped bring windpower to India and a new company in a new industry from scratch. ...

LyrArc Article Gist
The Economist view is that the USA, the Euro-zone, and the emerging markets, are all moving in different directions. The US has failed to address deficit concerns in the recent Bush tax cuts deal between Obama and the Republicans. The Euro-zone faces the prospect propping up its weaker members facing a debt crisis. and slowing growth from spending cuts.The monetary conditions are too loose and the flow of capital into emerging markets risks increasing inflation. This increases the chances of a macroeconomic shock if the govenments and central banks in emerging markets don't get the adjustments right- either doing too much or too little. The US faces the prospect of problems in the bond market with current management of public finances.The Economist views the risks compounding as a result of these divergences between these three regions, with the prospect of 2011 becoming a year of damaging shocks.

LyrArc Article Gist
Twenty years after Japanese prime minister Koizumi visited Pyongyang in 2004, Japan's PM Kishida plans to talk to North Korean leader Kim. Koizumi had talks with Kim's father in 2004. The effort is to reduce tensions in the region with elections approaching in Japan, India, and the US in 2024, and to bolster the sense that Japan can manage its role in the region. The Europeans are doing the same as the French and the British are taking a bigger role in Europe during Ukraine conflict. After the Gaza conflict, the Houthis in Red Sea maritime channels, there is a sense that reducing tensions proactively is a better approach rather than wait for things to take their own course in directions that are not good for the world, or taking rigid ideological or other motivated positions that serve no constructive purpose and exacerbate tensions. Gandhiji used to say "tit for tat makes the whole world blind." It is not idealistic to say that but very practical and useful because if you do that you end up with situations where you lose leverage and ability to take positive action and come up with better outcomes, than if you let some unforeseen event or some events by other actors without proper motives to intervene to your serious and the world's detriment. ...

LyrArc Article Gist
Glenn Hubbard, Professor at Columbia University and Bush adviser who helped design the Bush tax cuts, has an uneasy sense about the tax cuts today. He says the tax cuts have been undermined by years of deficit spending. The Bush tax cuts expire Dec 31st 2010 in the USA if Congress does not act. Macroeconomic Advisors estimates that letting the tax cuts expire will take 0.9% off the growth rate. Nobel Prize winning economist Paul Krugman prefers to let the tax cuts expire and provide more help to state and local governments to preserve jobs that are being lost due to budget shortfalls. But becuase of the political climate he prefers to let the tax cuts go on for a limited period. The Obama administration may decide to continue with the tax cuts rather than fight the serious battles for deficit reduction, after spending much of its political capital on health care reform. Hubbard also thinks in the current situation its best to keep the tax cuts even with the concern for the deficits. He says the spending during the Bush administration, especially the Medicare prescription drug benefit, which is estimated to cost $400 billion from 2004-2013, was a major problem. The incentives to business and investors for productive effort in the Bush tax cuts is uncertain, if it becomes clear that the price for these cuts is higher taxes later on to cover growing deficit spending. Hubbard does not see any serious action on the deficit till the next Presidential term and sees it better to keep the tax cuts till then, when some serious discussion can take place....

LyrArc Article Gist
In this report November 29, 2019 Jeanna Smialek in the NYT raises the cautionary flag on the Randy Quarles  period as Fed's vice chair of supervision. The Fed and FDIC report issued April 29th 2023, puts the fault for the lax supervision of Silicon Valley Bank on the culture that sees the less regulation the better.  Smialek shows the meetings Randy Quarles had including with a former employer Davis Polk Wardwell- Republican Senators 29, Democratic Senators 17  Davis Polk  law firm 22,                     Daniel Tarullo his predecessor 0 Goldman Sachs 24, JP Morgan Chase 22                   Daniel Tarullo his predecessor had this to say about Quarles role at Fed- It is he said "A kind of low intensity deregulation, consisting of an accumulation of non-headline grabbing changes and an opaque relaxation of regulatory vigor." To which Quarles reply is- "The argument that it is a drip-by-drip erosion: the quantification of that, they can't really demonstrate any quantifiable reduction in the overall resilience of the industry." The Silicon Valley Bank and Signature Bank crisis could have damaged the US banking system, and the capacity of the US to make the huge needed investments in the country, without the strong action of the Biden administration. It showed the very erosion of banking supervision that Smialek pointed out in the NYT in 2019. The costs of a weakening of the banking system and the US capacity to invest in the country are borne by the American people, by workers and families in the US. Which is why the Biden administration acted quickly and decisively to limit the ripples from this crisis.       ...

LyrArc Article Gist
The southern U.S. states may be losing their advantage with midwestern states as costs come down in the midwest. An index developed by Moody's Analytics which shows a mix of labor, energy, taxes and real estate, is at 96% of the national average for the midwest compared to 95% for the southern states. Costs in the western states have declined the from 107% of the national average in 2004 to 101% in 2011, according to Moody's, but still remain high compared to the midwest. The northeastern region still has the highest costs. The 2007-2009 recession was severe in the midwestern states and helped keep wages down in Michigan, Indiana and Ohio. The costs for employers for wages and benefits was $27.66 in these midwestern states compared to $31.00, the gap once $7.00 is now down to $3.34. One of the factors helping the midwest is that energy costs are lower there than in the south and other parts of the country. Another factor working in favor of midwestern states is the increased tax incentives offered in these states to compete for manufacturing investment....

LyrArc Article Gist
As in the US with Harris investment in America vs Trump cuts there is a distinct difference between the Tory spending plans that allowed capital spending investment in the economic future of Britain to decline from 2.5% to 1.7% of GDP over 5 years to 2030. Rachel Reeves, Britain's finance minister, says the government will adopt a new rule that changes the way it measures debt- public sector net liabilities as a percentage of GDP is the new fiscal rule. What it does is free up 50 billion pounds Britain badly needs to invest in things like climate change action, education, and other needs of the economy that will brighten Britain's prospects in the future.  “If we continued on that path, we would be embracing a path of decline. The real debate now in British politics is whether you are on the side of investment or on the side of decline. I don’t want to see public sector net investment as a share of our economy decline in a way that is currently set out. Under our current fiscal rules, we would not be able to reverse that path.” The stability rule goes with this that says strictly this money will not be used for tax giveaways, and not for public sector pay deals or the day to day functioning of government. In addition th government will borrow 25 billion pounds to  keep 30 billion pounds of headroom so that debt will keep falling over the first term of this Labour government.   ...