Wednesday, November 20, 2024

Tariffs

Biden retained the tariffs that Trump placed on China plus the following changes. The tariff rate will go up to 100% on electric vehicles, to 50% on solar cells and to 25% on electrical vehicle batteries, critical minerals, steel, aluminum, face masks and ship-to-shore cranes beginning September 27, according to the US Trade Representative’s Office. Tariff hikes on other products, including semiconductor chips, are set to take effect over the next two years. President Trump will continue this policy plus he plans to install a blanket tariff of 10% to 20% on all imports, with additional tariffs of 60% to 100% on goods brought in from China. Trump's plan is at this point only a negotiating tool. The US currently has a negative balance of trade with Europe of $131 billion and a negative balance with China $195 billion. Much of this has to do with tariffs.

Monday, November 18, 2024

Reshoring

Over the past 50 years politicians from both parties have been co opted by a partnership between business and government. The result has been growth in government power and profits for business at he expense of factory workers. These workers, people who are paid by the hour, have watched their jobs disappear as globalization became the policy and the bureaucracy became the status quo. While the American elite talked about idealistic goals like climate change and freedom they worked to send jobs to China where coal was king and low wages and slave labor were the norm. That started to change ten years ago when Trump pointed out the unfairness of China's trade policies and it has gained momentum ever since. Globalization is out and reshoring is in as companies are bringing worker jobs back home to the US. This means a doubling of the US industrial base over the next ten years but these new facilities will combine workers with the latest technology including AI, which will increase productivity which means higher wages. The downside is wage\price inflation but if things balance it can be like the 1950's where wages increased slightly faster than prices.

Ukraine

The next mission creep. Biden allows Ukraine to make long-range missile strikes into Russia. November 18, 2024. Recall that the reason for NATO helping Ukraine was to keep Russia from winning but at the same time to keep Russia from losing since it could result in Russia using nukes. Has the original reason changed and if so what is the new strategy.

Sunday, November 17, 2024

Tax

The proposal to remove taxes on social security benefits should not stand alone but must include other changes to make up for the lost income. This will not affect 60% of recipients who do not pay any tax because their income in too low. This will cost the government about $50 billion per year and should be recovered with other changes. Currently people pay 6.2% of earned income into social security on the first $160,000 of income. If this income limit were removed it would bring in about $90 billion per which would more than offset the loss from not taxing benefits. This would also transfer money from high income earners to lower income groups which would help to reduce the income gap. It would also add more money to the social security fund something that is badly needed.

Saturday, November 16, 2024

China

As WW 2 came to an end, a civil war broke out in China and lasted until 1949 when forces led by Chaing Kai-shek rebelled against Mao Zedong. In the end Chaing's forces fled to Tiawan. Mao wanted to move China from an agrarian economy to a modern industrial society in what was called the Cultural Revolution. During the Mao years an estimated 50 million Chinese people died mostly from starvation as the country tried to survive under the communist government. In 1978 the new leader Deng Xiaoping allowed private individuals a kind of economic freedom called, Reform and Opening Up policy. This started a rapid growth period that was accelerated in 2000 when China was allowed into the World Trade Organization. In 2013 the current president Xi Jinping took over and started to restrict the free market and the country started on a down hill path that continues today. Because of tight government controls and a series of unforced errors China is in a downward spiral. The progress they made caused wages to rise above other countries like Vietnam, Indonesia and Mexico so investors looked to these new areas. China over invested in housing and infrastructure plus excess investments around the world in the Belt and Road policy and they are now unable to recover. Add to this the drastic decline in population and they don't have enough young people to work and consume. China's GDP rose steadily from $200 per capita in 1980 to $12,000 in 2021 but it is now on the decline. To make matters worse the US and other countries are now placing import taxes on Chinese exports and companies are leaving behind trillions in infrastructure as they move away from China. These companies are fearful of Xi's total power over the country as he has changed the constitution to allow him to remain in office for life. The rise and fall coincides with the change in government from communism to a type of free market and back to communism.

News

Now that the dust has settled on the election the furor will subside and people will begin to evaluate what happened. Many observers say the partisanship has never been this bad and the scars will last for years but that is only because people do not remember the past. In the 50's I would go to the library and read the day old issues of the St Louis Post Dispatch and the Chicago Tribune. The same event would seem like two completely separate happenings. The bias was overwhelming. In those times we had kooks who presented all types of what is called today mis or disinformation but not many people knew of these weirdos because the news for most people came from the local newspaper which didn't spend a lot of time on national news or from the 15 minute nightly TV news. The nightly TV news was from three networks and they got their news from the NY Times so everyone basically got the same news. Today things are much different. Those kooks that no one ever heard from are on social media and they have audiences of millions. The bias of people has not changed but the methods of spreading that bias have changed in a big way. This has resulted in many people becoming skeptical of any news and most people are relying on their own common sense to determine what is going on. Polls show a steady decline in trust in the media that was 75% in 1950 and down to 15% today. During this same time period the trust in government has dropped from 80% to 20%. The result is that people figure out what they believe and then search out news outlets that enforce their views. When factual results, such as election, prove the source to be wrong that source is dropped like a hot potato.

Pork

Back in the day Wisconsin Senator William Proxmire used to expose government wasteful pork but no one paid much attention because his audience was limited to a few newspapers. In 1975 he began to issue his Golden Fleece Award which outlined ridiculous spending projects by various congressmen. Others over the years have tried to reign in waste and abuse without much success but to quote Bob Dylan, times are a changin. This time there are two major differences. First off Vivek and Elon are outsiders not directly controlled by the government and second they have social media. Every Golden Fleece they expose will carry with it the name of the congressman who authored it, the money involved and description of the pork. Most pork projects involve smaller sums and can be easily lost in the trillion dollar budget but together can add up to significant amounts hitting $18 billion last year. As hundreds of millions of viewers see these odd expenditures it will bring the attention to how the budget process works. This will give impetus to overhaul the more major aspects of spending.