Quote of the Day
I love those who yearn for the impossible.
Johann Wolfgang von Goethe
House Bill 554 (Raising Tariffs on Chinese Goods) Passes 348-79: BOTH Thumbs Way DOWN!
I swear. Sometimes I think after we grow up, we find the world is more like an elementary schoolyard. We have seen both sides playing a game of chicken. Literally. The US decision to limit Chinese cooked chicken items for health concerns was rejected by the World Trade Organization yesterday. The Chinese have doubled duties on imported US chicken, charging the US of dumping products in an unfair manner hurting domestic producers. Am I going to have to separate you two? Now go stand in your respective corners until you can learn to play nice....
So now, mostly in terms of a show vote (because the bill likely will not survive the Senate), the House decided to empower Obama with the power to greatly increase tariffs on Chinese goods, in retaliation for what they see as Chinese manipulation of currency to protect their markets.
There are so many things wrong with this approach, it's difficult to know where to start. For one thing, the American economy benefits from heavy Chinese investment in US Treasury notes. With a more limited market, the US might have to raise interest rates to attract buyers. Higher rates, higher interest expenses, lower profits, stock price slips and businesses look for ways to cut expenses--and for many businesses, the cost of labor is material and relevant. So, congratulations--in the effort to "save" American jobs, you throw the country into a job-killing recession. Second, China has been diversifying its customer base, particularly in the Asian region, which affects America's influence. Third, China is one of the largest importers of American goods and services; retaliatory strikes affect American businesses and jobs.
But there are other compelling arguments as well. Let me illustrate the point using the heavily protected sugar industry. Stephen Haley notes that the government supports artificially high prices, relative to global products, through tariff-rate import quotas and gimmick government loans where the USDA assumes the risk of declining sugar prices. But more importantly, producers of sugar-based products are captive buyers of sky-high sugar, while, say, their foreign competitors are at a competitive advantage. The food operations, of course, attempt to compete by opening foreign facilities, so they can gain access to sugar at globally competitive prices. (Can you hear the protectionists now?) But this is typical Big Government Knows Best; what's important, in the eyes of these misguided politicians and bureaucrats, is the relative small number of domestic producers and their workers whom cannot compete outside the US--not the millions of sugar-based product consumers whom find themselves taxed by the sugar price premium relative to the globally competitive price, with less money to save or purchase other goods and services.
The faithful reader knows I sometimes mark up text to convey the "real meaning" of some pretentious bill title or government office; Mark Perry does the same thing, making an argument analogous to the one I just made, suitably entitled "Why the Hell Do We Care If China Manipulates Its Currency in Our Favor?"
Scott Grannis makes a compelling argument, noting that if the yuan was pegged artificially low, the result would almost certainly be inflationary; he notes, in fact, that the yuan has appreciated by nearly 25% over the last 16 years while maintaining an even lower inflation rate than the US.
Finally, China shows that it is capable of playing hardball when it wants to, the most prominent example being China's recent response to a territorial dispute with Japan by halting shipments of rare earth minerals, a devastating blow to Japan's high tech industry. Rare earths are used in products like fighter jets, computers, wind turbines, etc. More importantly, China produces 97%; the last American producer, Molycorp, shuttered its operations 8 years ago. There seems to be a conscious decision to use its dominant supply of rare earth minerals as incentives for foreign producers to open facilities in China in order to get access.
I understand why populist politicians want to make China a whipping boy given a current tough economic environment. But there's also widespread ignorance about the economy in the Democrats' ill-considered pitch to focus on manufacturing, thinking that the private sector can't possibly make as efficient decisions as professional politicians whom have never met a payroll. What has changed is the nature and extent of manufacturing; maybe we no longer produce commodity shoes but we produce higher-profit, more advanced products with fewer workers. And you have to wonder why, when Democrats complain about household income stagnating, why the Democrats are pushing manufacturing instead of the service industries, where wages are actually higher...
Washington State I-1098: Income Tax Initiative: Thumbs DOWN!
Bill Gates' daddy is behind an initiative to introduce an income tax for Obama's vision of rich people (i.e., the job creator class). Washington is one of the minority of states (like Texas and Florida) which do not have a state income tax. What is utterly amazing is the clueless nature of progressives whom think they are morally entitled to someone else's money to spend on their own agenda. For example, you will always find some audacious liberal whom will try to shame another for his hard-won income, arguing that he or she will never feel it. It reminds me of during the Democratic race to the Presidential nomination in 2008 when all the candidates were nearly giddy with excitement over how they would spend the new Clintonian tax hike on the wealthy. There is something intrinsically dishonorable about demanding sacrifice of another person or family...
My position is that the tax burden should be shared; the Politics of Envy is never a foundation for sound public policy.
In the meanwhile, I leave it to progressives to contemplate the meaning of the phrase "grow some funk of your own":
Political Humor
"President Obama said he plans on training 10,000 new math and science teachers. How about teaching math to that economic team of his?" –Jay Leno
[Albert Einstein once said, "The hardest thing in the world to understand is the income tax." Obama has a qualification requirement for prospective teachers: they must complete their own tax return. It's a tough test; just ask Tim Geithner.]
Quote from the IRS website: “People who complain about taxes can be divided into two classes: men and women.”— Unknown.
[I see I need to educate the IRS about class warfare. The two classes are: the top 2% whom pay taxes, and the liberal Democrats whom demand that they pay more.]
Musical Interlude: The "British Invasion" 1960's Series
The Searchers, "Needles and Pins"
