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Economy

Free but Fair Trade – Is it Possible?

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Free but fair trade is an expression which we often hear today from President Trump; just as we hear that millionaires and billionaires must pay their fair share from Senator Sanders. When asked what percentage is fair; since these millionaire and billionaires are in the highest tax bracket and pay the most in taxes, we never seem to get an answer. All we hear is from the progressive left that they have too much and need to pay more.

Similarly, the expression free but fair trade sounds great, but the meaning of “fair” is utterly void of any substantive meaning. The idea of a 25% tariff may be fair, but it is by no means free. So the question is, how can we obtain free but fair trade?

The Reality

Before we can answer this question, we must first examine the deficiencies in our current trade policies. The first thing we must realize is that we do not currently have free trade. Think about it like this. If we did have free trade why would we need complex trade agreements? The fact is we have thousands of tariffs in the United States. Just like every other country, we seek to protect some industries over others.

Some are for supposed national security reasons, and others are simply to protect an industry in a member of Congress’ district.

The second and most significant reason we do not have free trade is that true free trade is optimal but not politically expedient. For instance, let us use China and the United States as examples and let us say we currently do not trade with each other.

Establishing trade with one another is beneficial for both countries regardless of tariffs. Since trade never existed, an unfavorable trade agreement is preferable over no trade at all. Reasons being both countries will benefit from trade. Industries may open, and some may close, but there will be a net positive for both countries. It is a mutually beneficial arrangement.

Now instead of unfavorable trade agreements, what if we had free trade. All products coming from China into the United States and vice versa are tax-free. In this situation, you will see the greatest mutually benefit as both countries will have positive net growth. If this situation exists for years, you will see a fluid economy as some industries will be created, grow, decline, or shut down.

The problem that arises is not the creating and growth of some industries but the decline or elimination portion.

If a software engineering firm which sells most of its software to China opens up in a congressional district, you will be sure to see that member of Congress at the ribbon cutting ceremony will a plethora of other politicians stating their policies fostered the creating of this software engineering firm.

On the other hand, you won’t see these same politicians at the factory down the street which is packing up and moving to China. The same policies that opened up the software engineering firm eliminated your manufacturing job. What is an elected official to do?

What they will try and do is give tax incentives and add tariffs to prevent the closure. If they succeed, they will once again take credit; even though the biggest net benefit to the economy as a whole is to allow the factory to shut down, though it isn’t politically expedient.

Back in China, they will also try and protect their software engineering firms by adding tariffs and regulations on the US-based company. The result of all this will be less than optimal, but a long-term net benefit is not politically expedient. So protectionism will inevitably begin.

Possible Solution?

Therefore, how do we create complete free and fair trade? The honest answer is you can’t; as we have demonstrated allowing complete laissez-faire trade policy will never occur because it isn’t politically expedient. Some may be for good reasons and some for bad reasons.

To achieve the most optimal outcome would be to eliminate tariffs. But how do you do that without cheating and allowing politically expedient policies?

Maybe this example trade policy below might help in this endeavor.

All products, goods, materials, and services, entering the United States and its territories shall be free of tariffs. Any fees, including but not limited to docking, storage, and inspection imposed at points of entry shall be uniform at each location regardless of country of origin. Likewise, all products, goods, materials, and services produced in the United States and its territories shall be free of tariffs. Any country that imposes a tax on any of said products shall immediately, have the highest equivalent tax impose on all their goods and services at the same rate plus 10%; until eliminated.

Likewise, any fees should not favor any other country over the United States and its territories. Fees must be uniform or to the benefit of the United States. If fees are to the disadvantage of the United States, those same rates shall be immediately imposed on said country plus 10% until eliminated.

How it works

I postulate this trade policy would allow greater free trade then we have ever seen.

For instance, if China has a combined 20% tariff on mid-sized trucks and 25% on sedans, then since 25% is the highest tax imposed on US products then 100% of all items coming into the United States from China will have a tariff of 27.5% immediately imposed on it. This scheme would also apply to any value added tax or border adjustment tax which would disadvantage the United States over other foreign or domestic products. Therefore, I believe the consequence would be so devastating to China they wouldn’t dare put a tax on American products, and likewise, the United States would not want to engage in a trade war just to protect one industry or factory.

Let us say that we just succeeded in creating Free Trade the vague notion of Fair Trade can never be quantified or defined.

For instance, if China is subsidizing its steel industry and shipping Chinese steel into the United States cheaper than the free market can produce it, is that still Fair Trade?

Is it Fair?

It’s still Free Trade because no taxes or tariffs are imposed but is it fair?

Some would argue that it is not fair for China to subsidize their steel industry because that puts the US steel industry at a disadvantage. The US could impose a tariff but as stated that would eliminate free trade. The only other option would be for the United States to subsidize the US steel industry or let it possibly collapse. Sidenote, we only receive 2% of our steel from China, and U.S. Steel production makes up 70% of the steel used in the United States.

Some might see this as unfair; others see this as a plus benefit to the United States.

American economist and Nobel Memorial Prize in Economic Sciences recipient Milton Friedman viewed this as reverse foreign aid. If China wants to tax their citizens to provide US citizens and companies with subsidized steel why not let them. In a Milton Friedman perspective, this might seem unfair to Chinese taxpayers and more than fair to US taxpayers.

Some may argue that US steel production is vital to US national security. Having enough steel is crucial to our national security, but that doesn’t mean that we can’t stockpile Chinese steel. Also, it neglects the fact that other countries like South Korea protect their steel industry by subsidizing steel in their country to prevent monopolization by Chinese firms. The US can also buy from South Korea or even Canada.

Countries may also put strict regulations on how steel is produced in their countries as well as impose those rules on foreign producers. These policies may not have a defined numerical value as a tariff but in a sense act as a protectionist trade barrier. Since there is no quantitative value to these types of regulations, having US laws automatically trigger countermeasures would be impossible.

So can we truly have Free but Fair Trade? As we have seen having Free Trade is possible, but Fair Trade is really in the eye of the beholder. Ultimately, the best interest of the United States and its continued success is by having a free trade policy, maybe something like I have spelled out in this article, as well as, limiting regulations and limiting government interference in the economy.

Nothing can be put in place to be completely fair and balanced, but the most reasonable thing to do for the overall benefit of America and Americans is to maximize laissez-faire economic policies void of politically expedient measures.


Konstantinos Roditis is a candidate for California State Controller. You can learn more about his campaign at cacontroller.com, and you can follow him on Twitter & Facebook.

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Economy

Why we won’t see Medicare-for-All legislation until after 2020

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Why we wont see Medicare-for-All legislation until after 2020

We won’t see Medicare-for-All legislation presented to the public or brought to the floor of the House for one politically expedient reason.

Here’s a spoiler for those who don’t want to read the whole thing. In its current state of ambiguity it’s growing more and more popular with the general public. Once the details are brought to light, even moderate Democrats will acknowledge it would implode the economy in a couple of years at best.

In a perfect world, all basic needs would be covered. Of course, that perfect world, often referred to as communism, could only work in the minds of fiction writers and hardcore leftists. In the real world, it’s not only impossible, but has proven to be counterproductive with its stated goals. This is a basic fact that has been demonstrated throughout modern history.

Facts don’t stop leftists. Anything that gets in the way of the leftist agenda or narrative is pushed aside in favor of new “facts.” My least favorite one that’s floating around lately is that socialized medicine has been a tremendous success in many nations around the world. This is questionable at best and when viewed on a longer scale than the last few years, it’s clearly impossible to sustain.

That’s the biggest problem with socialist ideas. They often DO work, but only until the money runs out. Leftists will say it’s unfair to point to Venezuela, a nation that should be the most prosperous in South America but that lies in economic ruins today. Any time Venezuela is brought up, proponents of socialism will say that they were practicing an invalid form of the failed political and economic system.

It’s through the pathways of reality surrounding socialism that Democrats do not want to travel. Not yet. They can’t risk heading into the 2020 elections allowing voters to have a clear understanding of what Medicare-for-All would mean to them. The more facts and figures are revealed about the proposals, the harder it will be to sell it to the people. Instead, they chant about Republicans not believing healthcare is a human right. Or something.

Take soon-to-be-Representative Alexandria Ocasio-Cortez, for example. For proposal for Medicare-for-All has a $32 trillion price tag over the next decade. Paying for it would require extreme tax increases, which is okay to most of her supporters. Why? Because the bulk of the cost would be paid by the “rich,” according to AOC. Or, as she puts it, “You just pay for it.”

When actual math is applied, it becomes clear it would be impossible to stick even most of the price tag on the “rich,” but that’s based on our definitions. If her definition of “rich” means anyone making middle-class incomes or above, then she MIGHT be able to pay for it by more than doubling current taxes.

There’d be no fiscal repercussions from that, right.

It’s imperative for Democrats to keep details surrounding Medicare-for-All hidden. The surface notion is appealing to some. If the details were examined, their base support would fall off. I’ll invoke a leftist tactic by saying Medicare-for-All would literally kill people.

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Economy

To those who don’t care about the national debt, consider this

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To those who dont care about the national debt consider this

The national debt has been growing dramatically for decades. It’s so great that most Americans seem to dismiss it altogether; if we haven’t been harmed by it already, it obviously can’t hurt us, right? This sort of “head in the sand” thinking is why lawmakers refuse to tackle it. As long as the people don’t seem to care, why should they?

It’s time to care. It’s been time to care for a while but the collective ignoring of it has brought it to the level that now, in 2018, we are nearing the point of no return.

Why? Because the astronomical interest is now going to noticeably affect how the government operates. We’ve spent years pretending like the interest isn’t a big deal even though it was growing to unsustainable levels during the Clinton administration. Now, we’re seeing it reach levels that are tangible. Why? Because the cost to cover it is now great enough that other areas are going to need to be cut.

In 2017, the interest on our debt was $263 billion. That’s 6.6% of federal government spending. We’re on track to spend more on interest than Medicaid in 2020 and more on interest than defense by 2023. Let me repeat that:

By 2023, we will spend more in interest on the national debt than we spend on national defense.

Normally, we can take CBO predictions with a grain of salt because they’re usually off (see Obamacare predictions for CBO’s epic failures) but this one relies on simple math. Even in a humming economy with the best case scenarios in play, you can’t overcome interest without paying down the debt.

Neither Democrats nor Republicans have any intention of paying off the debt. This is why candidate Trump went from promising to pay off the national debt in eight years, then ten years, then paying part of it off, then finally proclaiming himself the “king of debt” – all within the period of one month on the campaign trail.

To get the national debt in line will require an ironclad commitment backed by irrevocable legislation that spans two- to four-decades. It means entitlement reform, budget limits, cutting entire agencies and possibly even departments, and commitments to rein in all forms of discretionary spending.

In other words, the only way to get the national debt to a manageable level – not even getting it to zero but somewhere much lower than it is – would require commitments by politicians that none of them are willing to make. Oh, there might be a couple of Senators and a handful of Congressmen who would embrace such measures, but even those ones won’t buck the system to the point that they’d push hard for it without a mandate by voters.

We are the only hope for the very near future. If Americans don’t care that our tax dollars are being used to pay interest on the mountainous debt that has been accumulated in recent years, let alone the debt that preceded it, then we shouldn’t expect politicians to care, either. This can has been kicked down the road for decades, but the road is coming to a very abrupt end soon. It’s beyond unsustainable. We’re on the verge of collapsing under the weight of our own mistakes.

As long as voters ignore the national debt, neither party will pay attention to it, either. We will drown in our own ignorance if we don’t act soon. In the past, they said the debt will affect our children and grandchildren. Now, the debt is starting to affect us.

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Economy

Pacific Rim summit highlights strained China-US relations

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Pacific Rim summit highlights strained China-US relations

PORT MORESBY, Papua New Guinea (AP) — A meeting of world leaders in Papua New Guinea has highlighted divisions between global powers the U.S. and China and a growing competition for influence in the usually neglected South Pacific.

The 21 nations at the Asia-Pacific Economic Cooperation summit in Port Moresby struggled to bridge differences on issues such as trade protectionism and reforming the World Trade Organization, making it likely their final statement Sunday will be an anodyne document.

U.S. Vice President Mike Pence and China’s President Xi Jinping traded barbs in speeches on Saturday. Pence professed respect for Xi and China but also harshly criticized the world’s No. 2 economy for intellectual property theft, forced technology transfers and unfair trading practices.

In Port Moresby, the impact of China’s aid and loans is highly visible. But the U.S. and allies are countering with efforts to finance infrastructure in Papua New Guinea and other island states. The U.S. has also said it will be involved in ally Australia’s plan to develop a naval base with Papua New Guinea.

On Sunday, the U.S., New Zealand, Japan and Australia said they’d work with Papua New Guinea’s government to bring electricity to 70 percent of its people by 2030. Less than 20 percent have a reliable electricity supply.

“The commitment of the United States of America to this region of the world has never been stronger,” said Pence at a signing ceremony. A separate statement from his office said other countries are welcome to join the electrification initiative provided they support the U.S. vision of a free and open Pacific.

China, meanwhile, has promised $4 billion of finance to build the the first national road network in Papua New Guinea, among the least urbanised countries in the world.

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