Carnage of the Middle Class

By Michael Pento – Re-Blogged From http://www.PentoPort.com

In President Donald J. Trump’s inaugural address he promised, “This American carnage stops right here and stops right now.” And immediately liberals and the MSM took umbrage to his use of the word carnage, which means the slaughter of a large number of people, claiming it was just too dark a description for America. Maybe so. However, in a recent Bloomberg commentary, Justin Fox cites some sobering statistics that support Trump’s statement.

While the overall murder rate for the nation should end up increasing about 8% year-over-year, the surge within U.S. cities is absolutely staggering. Chicago suffered a 59% increase in homicides during 2016. Murders were up 56% in Memphis, 61% in San Antonio, 44% in Louisville, 36% in Phoenix and 31% in Las Vegas.

There were also 44,193 suicides in the US in 2015, with the percent increase in suicides rising the most for females aged 10–14, and for males aged 45–64. The suicide rate has risen 24% over the past 15 years and is the highest recorded rate in 28 years.

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A Trade Policy that Puts Americans First

By Bryan Riley – Re-Blogged From Heritage Foundation

Congress should eliminate all tariffs on inputs used by U.S. manufacturers to compete in the global economy.

In 2015, 45 percent of all U.S. imports were “intermediate goods” ranging from aircraft parts to oil to zinc. U.S. manufacturers rely on these imports to create American jobs and compete in the global marketplace. Another 20 percent of imports were capital goods like machinery and manufacturing equipment. Americans imported three times as many intermediate and capital goods as they did consumer goods like T-shirts and cell phones.

U.S. tariffs on intermediate goods drive up the cost of manufacturing. The government should permanently eliminate all of these self-destructive tariffs.

History

Cutting tariffs on inputs is not a new idea. In 1887, President Grover Cleveland observed: “The radical reduction of the duties imposed upon raw material used in manufactures, or its free importation, is of course an important factor in any effort to reduce the price of these necessaries.”[1] Although the U.S. never took President Cleveland’s advice to eliminate tariffs on inputs, other countries have done so.

For example, China does not impose tariffs on intermediate goods used to produce products for export markets. In 2015, Canada eliminated all remaining tariffs on machinery and inputs for industrial manufacturers. According the president of the Canada Manufacturers and Exporters, “The elimination of all tariffs on imported goods and equipment, along with other tax measures, is providing Canadian manufacturers with a significant competitive advantage. Manufacturers across the country are using these tax savings to invest in innovation, growth and jobs.”[2]

On April 22, Canada’s Department of Finance announced plans to pursue additional tariff cuts to boost agricultural producers:

Manufacturers need a wide range of inputs to produce their products. Some of these inputs are imported and may face tariffs when entering Canada. Such tariffs are a non-recoverable charge that increases the production costs for Canadian manufacturers, affecting their competitiveness at home and abroad. Eliminating tariffs on imported food manufacturing inputs will support both investment and job creation in Canada’s agri-food processing sector—the country’s largest manufacturing employer and an important contributor to the economy. It will also make the sector more competitive in domestic and foreign markets.[3]

What the Experts Say

Many studies have documented the potential benefits of removing tariffs on inputs.

According to a report from the Organisation for Economic Co-operation and Development, “Import barriers can deny firms access to the goods and services they need to compete internationally. Rather than protecting domestic jobs, trade restrictive policies can produce plant closures and job losses. On the other hand, more liberal trade policies allow firms to fully benefit from international production networks.”[4]

An American Economic Review study of Indonesia by Mary Amiti and Jozef Konings concluded that “a 10 percentage point fall in input tariffs leads to a productivity gain of 12 percent for firms that import their inputs.”

Shimelse Ali and Uri Dadush at VoxEU observed: “Because imports increasingly feed into exports, an import tariff on parts and raw materials has a big impact on exports. Tariffs on intermediates may also discourage inward bound foreign direct investment and encourage outward bound instead.”[5]

Pierre-Louis Vézina explained the importance of cutting tariffs on inputs in order to attract foreign direct investment (FDI): “[T]he two decades of unilateral tariff cutting in Asia’s emerging economies may indeed have been driven, at least in part, by a competition for FDI. Racing governments were cutting tariffs on inputs to obtain marginal locational advantages in attracting multinationals that relied on imports of parts and components for local processing.”[6]

Current Efforts to Cut Tariffs on Inputs

Congress is considering the American Manufacturing Competitiveness Act, which would allow for small temporary tariff cuts of up to $500,000 per year for three years on imported inputs that are not produced in the U.S. This legislation has received broad support.

“Amid rising costs and a tough global economy, manufacturers are paying and will continue to pay a heavy price if Congress does not move on this legislation,” the National Association of Manufacturers argues. “These distortions are particularly severe for those manufacturers that must pay tariffs on necessary inputs not produced domestically, while the competing foreign finished product comes in duty-free.”[7]

According to Kevin Brady (R–TX), Chairman of the House Ways and Means Committee:

[O]ur bill will create an effective process for the House to consider manufacturing tax cuts that will help our job creators compete in the global market. Under the new process, our manufacturers will regain their competitive edge over manufacturers from other countries. Soon, it will be easier for our manufacturers to lower costs, create new jobs, increase U.S. production, reduce prices, and help grow our economy.[8]

PING golf equipment’s parent company has noted the urgency of “fixing the tariffs that penalize U.S. manufacturing, limit our ability to make products and provide jobs here while competing on the global playing field.”[9] U.S. tariffs on golf club parts are actually higher than tariffs on full golf clubs, which discourages the production of golf clubs in the United States: “PING is required to pay a higher tariff rate for importing component parts of golf clubs—and providing jobs to U.S. workers assembling golf clubs at PING—than the tariff rate we would pay to import a golf club wholly manufactured overseas. Why does our federal government penalize us in this way?”[10]

“To me,” says House Speaker Paul Ryan (R–WI), “this is just common sense. This bill would eliminate duties on hundreds of products that we don’t even make in this country—and that our manufacturers need to make their own products.”[11]

Think Big

If small temporary cuts on tariffs applied to inputs are beneficial, surely large, permanent cuts would be even better. Manufacturers should not have to worry about whether their temporary tariff cuts might be suspended in future years. Eliminating tariffs on big-ticket imported inputs like auto parts would encourage more jobs in the car manufacturing industry. To help companies like PING, in addition to a small temporary cut in tariffs on golf club parts containing titanium, the government should eliminate the 14.8 percent ($37.9 million) tariff on imported titanium.

Permanently eliminating all tariffs on inputs is a trade policy that would be guaranteed to encourage more job-creating investment in the U.S.

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How Trump Can Realign American Politics

By David Stockman – Re-Blogged From Stockmans Contra Corner

It’s actually pretty easy. At an apt moment very soon, Trump should offer Governor Kasich the VP slot and Senator Cruz the vacant Supreme Court seat.

Such a grand bargain would not only clear the primary field and quash any backroom hijacking of the nomination by the Washington GOP establishment; it would also permit each man to play his highest and best role at this great inflection point in the nation’s history.

That is, Donald Trump’s job is to destroy the Republican/Neocon establishment and bring working class America back into a modern version of a McKinley-style Republican Party. Ted Cruz’ task is to spend a lifetime bringing strict constructionism back to the high court, thereby helping to restore constitutional restraints on a leviathan state that fundamentally threatens personal liberty and economic freedom and prosperity in America.

And, yes, there really isn’t much for a washed-out, me-too Republican pol like Kasich to do at all. Except to get out of the way and exercise his apparent talent for preacherly uplift as America’s eulogist-in-chief at foreign state funerals.

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Peddling Fiction, Ignoring Fact

By Peter Schiff – Re-Blogged From Euro Pacific Capital

In his seventh, and final, State of the Union address this January, President Obama, clearly looking to bolster his legacy as the president who vanquished the Great Recession, boldly asserted that “Anyone claiming that America’s economy is in decline is peddling fiction.”  Unfortunately for the President, more and more Americans seem to believe (with an adequate basis in proof) that the fiction is emanating from the White House.
It’s hard to imagine how anyone can really assert with a straight face that the economy is currently “strong.” The most recent Gross Domestic Product (GDP), from 4th Quarter 2015, shows us barely inching along at a 1% annualized growth rate (Bureau of Economic Analysis, 2/26/16). Given that moderate growth used to be measured in the 3%-4% range, and that recent declines in the trade balance could further subtract from both 4th (2015) and 1st quarter GDP, we could be forgiven for raising an eyebrow or two in reaction to Obama’s boast. Continue reading

Why The Bulls Will Get Slaughtered

By David Stockman – Re-Blogged From http://davidstockmanscontracorner.com

Well, they got that right. Detecting that “parts of the U.S. jobs report for January seem fishy”, MarketWatch offered this pictorial summary:

Needless to say, none of that stink was detected by Steve Liesman and his band of Jobs Friday half-wits who bloviate on bubblevision after each release. This time the BLS report actually showed the US economy lost 2.989 million jobs between December and January. Yet Moody’s Keynesian pitchman, Mark Zandi described it as “perfect”

Yes, the BLS always uses a big seasonal adjustment (SA) in January——so that’s how they got the positive headline number. But the point is that the seasonal adjustment factor for the month is so huge that the resulting month-over-month delta is inherently just plain noise.

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Death Throes Of The Bull

By David Stockman – Re-Blogged From http://davidstockmanscontracorner.com

The fast money and robo-machines keep trying to ignite stock rallies, but they all fizzle because bad karma is beginning to infect the casino. That is, apprehension is growing among whatever adults are left on Wall Street that 84 months of ZIRP and $3.5 trillion of Fed balance sheet expansion, aka money printing, didn’t do the trick.

Not only is the specter of recession growing more visible, but it is also attached to a truth that cannot be gainsaid. Namely, having stranded itself at the zero bound for an entire business cycle, the Fed is bereft of dry powder. Its only available tools are a massive new round of QE and negative interest rates.

But these are absolutely non-starters. The former would provoke riots in the financial markets because it would be an admission of total failure; and the latter would provoke a riot in the American body politic because the Fed’s seven year war on savers and retirees has already generated electoral revulsion. Bernie and The Donald are not expressions of public confidence in the economic status quo.

So the dip buying brigades have been reduced to reading the tea leaves for signs that the Fed’s four in store for 2016 are no more. Yet even if the prospect of delayed rate hikes is good for a 50-handle face ripping rally on the S&P 500 index from time to time, here’s what it can’t do. The Fed’s last card—-deferring one or more of the tiny interest rate increases scheduled for this year——cannot stop the on-coming recession.

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Shift the Manufacturing Jobs Away From China

By – Re-Blogged From China IQ

It seems as though everyone is complaining that China has all our manufacturing (zhìzàoyè 制造业) jobs these days, that all these “wonderful” jobs could be brought back to us.  This simply isn’t true.  All the important manufacturing jobs like engineering and welding

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 (please read these two sources to learn more: market research and employment increase) still remain in the US and in the West, in general.  The truth is that we are giving all the jobs we really don’t want to foreign countries like China.  With the high emphasis on the service industry in the developed nations, I have a hard time believing the masses in the West would be willing to slave away in a sweat shop.

The real issue is that we give almost all of these textile and low-level manufacturing jobs exclusively to China.  that means a lot of capital is being handed over directly to the Chinese.  For some odd reason, it is almost like we think that it is only the Chinese that is capable of these jobs or that it is only economically feasible to pay the Chinese.  What we really need to start doing is giving these jobs to other countries, like the Philippines and Indonesia.  It is a plausible solution, since hundreds of thousands of Southeast Asian people migrate to places like Hong Kong to land very low wage and unstable work in often unsuitable working conditions:

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Hong Kong alone has over 300,000 domestic helpers.  Every Sunday, these domestic helpers flood the streets of Hong Kong on their day off.  With nowhere else to go, they lay down blankets in the street, play musical instruments and card games, and call their children and family back home.

Although these domestic helpers are given a place to sleep and food to eat, they are typically only payed about US$500 a month.  As an alternative to this kind of work, I think they may find working in a factory closer to home for comparable wages as a feasible alternative.

To provide these nations with the opportunity to work in the manufacturing industry would lift their living conditions and would prevent China from receiving all the capital.  I’m not saying it is bad that the developed world pour all their money into the Chinese economy, but it isn’t really a good thing to put all eggs into one basket, especially since ties between the West and China haven’t exactly been the best these days.

Final Thoughts

I want to finish by saying that I am not really a fan of the way the developed world puts its demands upon the developing nations, forcing these people to go underpaid and essentially slaving away, performing menial tasks day-in and day-out.  This can be further extended by saying that those that are rich–from any nation–has the privilege to practically bath in money while others may be working twelve-hour shifts manufacturing things like Christmas ornaments, breathing in toxic chemicals the entire time, just to feed their families and pay the bills.

The world order under capitalism may be considered as being cruel, but at least it does provide a means for the developing countries; if the citizens of these nations are creative enough to find a niche for their economy, these countries can dominate a market, providing a opportunity for that nation to make progress.  An example of this being China and its manufacturing base or Argentina with its wines.  In the case of the low-level manufacturing industry, it might be about time to start sharing the jobs with even less developed countries than China.

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