“Writing in The Wall Street Journal, the president outlined three policy choices to deal with an inflation caused, he seems to believe, largely by pandemic-related supply-chain obstructions and intensified by the war in Ukraine. His plan is simple: Continue to trust that one of the main architects of our current inflation, Federal Reserve Chairman Jerome Powell, will raise interest rates fast and high enough to tame inflation without crashing the economy, dispense more subsidies and tax credits, and let the deficit melt away—by some miracle—without cutting spending.
Absent from the piece is any acknowledgement of what readers of this column know all too well: that inflation was fueled by Biden’s own reckless spending policies, especially the $1.9 trillion American Rescue Plan passed in March 2021. Half a dozen or so studies have shown that fiscal policies implemented during COVID-19 are a main culprit behind today’s inflation. Biden also fails to mention the Fed’s overly accommodating monetary policy and its current slow response to inflation.
In other words, the president’s argument is amazing for its tone-deafness, inconsistent thinking, and sheer economic ignorance.”
“members of the infamous Blob, America’s foreign policy establishment, are urging Biden to do a full kowtow to Riyadh (and presumably Abu Dhabi as well), doing the royals’ bidding as before. After all, the relationship always has been about them. Years ago Defense Secretary Robert Gates observed that the Saudis were ever ready to “fight the Iranians to the last American.” Nothing has changed.
For example, Washington Post columnist Fareed Zakaria backed the idea of a “grand bargain,” which would trade security guarantees for Saudi concessions: “There is a way for Washington to forge a new security umbrella in the region that includes Israel, Egypt and the gulf states. It would stabilize the security environment, foreclose the prospects of a nuclear arms race in the region and provide access to energy for the industrialized world. But that path would have to include making up with Mohammed bin Salman.”
Bloomberg’s Bobby Ghosh views the problem as personal and political immaturity: “The most important partnership in the Middle East has been put in jeopardy by the peevishness of a prince and political opportunism of a president. Repairing the Saudi‐American relationship will require the first to behave like a grown‐up, the other like a statesman.”
Although Tufts University’s Daniel Drezner was more skeptical that a satisfactory accommodation could be reached, he intoned: “I hope the Biden administration is conducting internal deliberations about what concessions it would be willing to make to engage in some transactional diplomacy with Saudi Arabia. As bad as Saudi behavior has been, Russia’s bad behavior has been worse and merits a priority of focus.”
This approach, which treats murderous wars and grievous human rights violations as minor inconveniences, is a terrible idea. To start, fulfilling demands by dependent regimes would undermine Washington’s credibility. The Washington War Party has routinely insisted that the US should intervene militarily everywhere for the most spurious reasons to convince the world that it is prepared to go to war anywhere at any time for anything. Hence nonsensical claims that failing to bomb Syria over chemical weapons or stay in Afghanistan for a 21st year would trigger major power aggression around the globe. In fact, America’s adversaries distinguish between serious and peripheral issues, and act accordingly. (Which is why Moscow withdrew from Afghanistan after only ten years compared to America’s astounding two decades.)
However, US credibility really would be at stake if the administration submitted to Riyadh’s and Abu Dhabi’s demands, acting as if it was a weak Third World state rather than global superpower. Again, putting royal interests first would encourage other defense dependents to make similarly inflated and malign demands. Washington would be playing the supplicant and would be expected to do the same elsewhere.
Moreover, Saudi Arabia, in particular, and UAE are not normal countries, either liberal democratic or even moderately authoritarian allies. The Kingdom earned a rating of just seven out of 100 by Freedom House, making it one of the world’s baker’s dozen most repressive nations and territories, dwelling in the human rights cellar along with Equatorial Guinea, North Korea, Eritrea, Turkmenistan, and Tajikistan. Riyadh is much worse than Russia, at least prior to that latter’s internal crackdown to suppress any antiwar dissent, which made the latter much more like the KSA.
Those celebrating MbS’s recent social liberalization are merely highlighting how until recently the Kingdom was a true totalitarian state, in some ways more absolute than Mao Zedong’s China and Kim Il-sung’s North Korea. Thankfully, those who face prison for dissent now can attend a movie before being locked up! Alas, a free society that does not make.”
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“Riyadh is, despite Drezner’s claim, a more malign actor internationally than Russia. The royal regime’s alleged friendship with America never meant respecting America’s interests. Especially once MbS took effective control of the government. The regime tolerated substantial financial public support for al‐Qaeda until the group attacked the royals. Saudi Arabia also kidnapped a head of government (Lebanon), blockaded and made plans to invade another friendly state (Qatar), used money and troops to enforce brutal dictatorships (Bahrain, Egypt), and subsidized jihadist forces (Libya, Syria).
Worst was the invasion of Yemen. To reinstate a pliable regime in its desperately poor neighbor, Riyadh and Abu Dhabi joined in a “coalition,” hiring countries dependent on their financial largesse, such as Sudan, which deployed ground forces in the conflict. Total deaths are estimated at roughly 400,000, 60 percent of them young children, who are particularly vulnerable to disease and malnutrition. Human rights group report that coalition activity, both air attacks and de facto blockade, is responsible for the vast majority of civilian deaths.”
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“In short, rewarding Saudi Arabia to further punish Russia would be a bad trade‐off, for moral as well as practical reasons. Especially since the Saudis likely would undercut any promises to increase production — cheating by OPEC members always has been systemic and endemic. Nor would increasing the flow of Mideast oil necessarily significantly intensify pressure on Russia or affect Moscow’s behavior. US economic sanctions have rarely forced regimes to act against what they viewed as fundamental political interests. The costs of such a policy would be substantial and real. The benefits would be speculative at most.
The better strategy would be for the administration to demonstrate that US officials will no longer be docile retainers for the Saudi and Emirati royals. For instance, the administration should stop helping them slaughter their poor neighbors. The US sold the aircraft, for a time refueled them, and still services the planes, supplies the munitions, and provides the intelligence. Washington should effectively ground the royal fleets by ending support services and weapons resupply. That would encourage the Saudi king to take the president’s next call.
Moreover, the administration should indicate that the well‐armed Gulf regimes are vulnerable to attack mostly because they lack domestic political legitimacy — who wants to die defending Crown Prince “Slice n’ Dice” so can he murder another critic or build another palace? US military personnel should not be treated as mercenary bodyguards, the equivalent of the civilian expatriate labor used to do most of the “dirty work” in those societies. It is past time for the Saudis and Emiratis to earn their people’s support. The KSA’s uncertainty about America’s continuing military commitment already has spurred the regime’s talks with Iran, which could ease the region’s dangerous Sunni‐Shia split. Ultimately Riyadh and Abu Dhabi should take over responsibility for their security.”
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“Foreign policy sometimes requires difficult compromises. Thankfully, the Cold War is over. Russia is far less dangerous than the Soviet Union; today’s united Europe is far more able to contain Moscow than yesterday’s Western Europe. If Washington officials are going to confront Russia over domestic oppression and foreign aggression, they cannot excuse Saudi Arabia for the same.”
“Musk’s income puts him in the top federal income-tax bracket, where income is currently taxed at 37 percent.
According to ProPublica, Musk’s average effective federal income tax rate between 2013 and 2018 was 27 percent.
And the tax on exercising his Tesla stock options was much higher. “Since the options are taxed as an employee benefit or compensation, they will be taxed at top ordinary-income levels, or 37% plus the 3.8% net investment tax,” notes CNBC. “He will also have to pay the 13.3% top tax rate in California since the options were granted and mostly earned while he was a California tax resident. Combined, the state and federal tax rate will be 54.1%.”
Jayapal seems to have reached her “alternative facts” (to use a vintage Trump-administration term) by calculating Musk’s tax rate based on a system she wishes we used rather than the calculation system we actually use.
As it stands, Americans do not pay taxes on unrealized gains—that is, appreciations in investments that exist only on paper. If you own a stock worth $5 per share and its worth increases to $6 per share over the course of a tax year, you have an unrealized gain of $1 per share. You aren’t expected to pay taxes on that gain until you sell your shares—which makes sense, since 1) you don’t actually have that money yet and 2) the stock’s worth could drop again before you sell. Maybe next year the stock decreases to $4 per share.
Jayapal appears to have come up with the alleged 3.27 percent tax rate for Musk by including unrealized gains in the amount she thinks he owes taxes on (while using the standard method for calculating the average income tax rate). However, unrealized gains are, by definition, gains that Musk doesn’t yet have. When he actually realizes the gains, he will be required to pay taxes on them. That’s how it works.”
“Angell didn’t think that war was impossible, but that it was futile. It’s illogical and uneconomical, even from the invader’s perspective. In a modern, globalized economy, countries do not benefit from wars of conquest anymore. Countries don’t grow richer just because they have more land or a bigger military. In fact, small, peaceful countries like Switzerland and Norway were richer than mighty empires like Britain and Germany, Angell pointed out.
War would be costly even for the aggressor. Integrated financial markets would unleash chaos back home. If you lay your neighbor in ruins, you also destroy your own suppliers and markets. As Mises put it, if the tailor goes to war against the baker, he must henceforth bake his own bread. There’s a cheap way to satisfy the craving for another country’s natural resources: Buy them.
Angell did not deny irrational national passions and the madness of leaders. The fact that Europe’s leaders chose madness in 1914 did not refute his thesis. The fact that no one came out of the war in an improved state rather validates it.
What about the invasion of Ukraine? Does it refute this liberal peace theory? Well, the kind of exchanges in which Russia engages are not the types of free and open trade that enrich a broad segment of independent entrepreneurs. On the contrary, it is mostly trade in natural resources managed by monopolies, controlled by the government. The so-called oligarchs are not so much powerful business leaders as they are Putin’s poodles, safe in their positions only as long as they fall in step and line his pockets.
Despite this, it seems like most Russian oligarchs and businesses were opposed, and remain opposed, to the war, even though they don’t advertise it for obvious reasons. It doesn’t take independent entrepreneurs to understand that upending the relationship with the West would be an economic disaster. An energy system that makes Germany dependent on Russian energy might be terrible for Germany, but it would be self-immolation for Russia to end it.
It seems like the really enthusiastic pro-war constituency in Russia (before February 24) was limited to one man, give or take. And that’s precisely what Kant had in mind when he wrote that the spirit of commerce is not enough to deter the spirit of war, you also need republican institutions that channel that spirit and bind leaders.
In a despotic state, wrote Kant, thinking of all the Putin-like leaders of the late 18th century, the ruler is not affected by doux commerce. While the people suffer, “he goes on enjoying the delights of his table or sport, or of his pleasure palaces and gala days. He can therefore decide on war for the most trifling reasons, as if it were a kind of pleasure party.”
This is a reason why Thomas Friedman’s bastardized liberal peace theory—that countries with a McDonald’s don’t wage war on each other—has fared slightly less well. You can order a Big Mac without a side order of free markets and rule of law.”
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“We are in the longest stretch of peace between major powers for 1,800 years, the old archenemies France and Germany almost cozy up too much to one another, and Putin’s invasion is the first attempt to launch a major war of conquest since Saddam Hussein invaded Kuwait in 1990. In a world where peace used to be just a brief interlude while everybody rearmed, something has gone right in the post–World War II era. If you want the whole story, read Steven Pinker’s The Better Angels of Our Nature, but clearly doux commerce has something to do with it.
Proximity and interdependence are not always deterrents, especially if different groups share one pool of resources that they all want the largest share of. Additionally, not all cultures and communities are happily harmonious, and civil wars are often the most vicious. However, the general relationship between trade and peace is a strong one.”
“the Congressional Budget Office (CBO) attempted to attach some math to the difficult policy decisions that lie ahead. Regardless of when lawmakers decide to address the $30 trillion national debt, just stabilizing it (that is, implementing policies to stop it from growing relative to the nation’s economy as a whole) will require that “income tax receipts or benefit payments change substantially from their currently projected path.”
In short, taxes will have to go up and government services—including benefits from programs like Social Security and Medicare, the health insurance program for the elderly—will likely have to be reduced.
That’s hardly a new set of prescriptions. Debt-watchers have been warning for years that benefit cuts and tax increases will likely be needed to have any realistic shot at managing America’s long-term debt. (And, remember, we’re talking about what’s needed to merely stabilize the debt, not reduce or eliminate it).”
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“If policy makers wait until the end of the decade to raise taxes and cut spending, the best-case scenario would leave the debt hovering around 120 percent of GDP over the long term. Waiting longer means higher debt levels forever and more severe consequences.”
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“A larger amount of debt translates into reduced economic growth in the long run, as the cost of interest payments on the debt consumes dollars that could otherwise be put to productive use. As the CBO notes, persistently high levels of debt can also put upward pressure on interest rates and make it more difficult to combat inflation.”
“Trucks were re-routed through Santa Teresa when Abbott’s inspections snarled commercial traffic at Texas border crossings, and now Mexico has decided to move a long-planned trade railway connection worth billions of dollars from Texas to the New Mexico crossing, The Dallas Morning News reported Sunday. “We’re now not going to use Texas,” Mexican Economy Minister Tatiana Clouthier said. “We can’t leave all the eggs in one basket and be hostages to someone who wants to use trade as a political tool.””
“A tiny solar panel manufacturing firm with outsized political clout is poised to wreak havoc on the entire American solar energy industry.
And the White House, which at least theoretically supports expanding America’s green energy industries, might just go along with the madness. It’s a tricky situation for President Joe Biden to navigate, one that requires choosing between two of his top policy priorities: industrial protectionism and combatting climate change.
In February, the California-based company Auxin Solar submitted a petition to the U.S. Department of Commerce asking for a more expansive set of tariffs targeting imported solar panels and their component parts. The company alleges that American solar panel manufacturers are avoiding tariffs on Chinese-made solar panels and components—tariffs originally imposed in 2018 by the Trump administration but renewed earlier this year by Biden—by buying parts made in Cambodia, Malaysia, Thailand, and Vietnam that are sometimes made with Chinese parts.
That is, of course, pretty much exactly what you’d expect any company to do. But Auxin argues that the federal government now has a responsibility to stop what it calls attempts to “circumvent” those tariffs on Chinese imports by imposing new tariffs on imports from those four other countries as well. In March, the Commerce Department launched an investigation to determine whether those tariffs are to be added.
According to the Solar Energy Industries Association (SEIA), those prospective tariffs would target the source of about 80 percent of America’s supply of crystalline silicon photovoltaic cells, the fundamental building blocks of solar panels. In a letter to Commerce Secretary Gina Raimondo in March, dozens of the SEIA’s member companies warned that the tariffs would “stall both ongoing and planned U.S. solar projects and lead to the loss of over 45,000 American jobs, including 15,000 domestic solar manufacturing jobs.” It would also mean losing about 14 gigawatts of planned solar deployment—about two-thirds of the Energy Information Administration’s target for solar deployment this year
All that, the SEIA warned, “because a single company is seeking to inappropriately exploit the law for market advantage.”
It sounds like a typical story of big business using its political clout to shut smaller competitors out of the market. But the bizarre thing about this fight is that relatively unsuccessful businesses are holding the rest of the market hostage. Because they have friends in Washington”
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“this offers a lesson about how protectionism creates perverse incentives in markets and politics. Trump’s decision to impose tariffs on Chinese solar parts and Biden’s decision to extend those tariffs have created a bizarre situation where a bankrupt solar manufacturer and an “artisanal solar boutique” might get to dictate the future of an entire industry.”
“Biden isn’t calling his proposal a wealth tax, of course. It’s the “Billionaire Minimum Income Tax,” and it imposes a minimum 20 percent tax on the income of households with more than—oddly—$100 million in wealth. Biden’s proposal is smaller and more pragmatic than the earlier variants from Sens. Bernie Sanders (I–Vt.) and Elizabeth Warren (D–Mass.)—par for the course with Biden. Most notable is that even with implausibly optimistic estimates of the federal government’s ability to collect, the whole mess is supposed to raise an average of a mere $36 billion per year over the next 10 years.
The University of California, Berkeley, economist and Warren adviser Gabriel Zucman estimated what several billionaires would pay under the plan’s 20 percent tax on unrealized gains in illiquid assets, pinning Jeff Bezos’ bill at $35 billion, Warren Buffett’s at $26 billion, and Jim Walton’s at $7 billion.
Anyone who has been paying the slightest bit of attention to federal spending over the last several years knows that figures that begin with b instead of t are now considered rounding errors. The point of this wealth tax is not to raise revenue. It has two rather different aims.
The first is pure political calculus. A floundering, unpopular president seeks to demonstrate a willingness to punish a small, unpopular class of people. A Reuters/Ipsos poll last year found that nearly two-thirds of respondents agree that the very rich should pay more taxes: 64 percent either strongly or somewhat agreed that “the very rich should contribute an extra share of their total wealth each year to support public programs.””
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“The second aim, which has more far-reaching consequences, is to establish the principle that the U.S. government can tax based on wealth at all. If such a tax were to be put into law—and found constitutional by the Supreme Court, which would be no mean feat—it would be the thin end of a very large wedge. Biden’s proposal will spin up the huge bureaucratic, legal, and accounting support systems, public and private, necessary to support the formal tracking of wealth alongside income.
The utility of permitting individuals to accumulate large amounts of money varies from person to person, of course. There are many billionaires whose fortunes are extractive or confiscatory—that is, they have seized a larger slice of an unchanged pie. But in the U.S. in particular, we specialize in billionaires whose fortunes are clearly related to value creation—that is, they have taken a healthy slice of a pie that they also made much larger.
Sanders and others seem determined to conflate these two groups, applying the term oligarchs to, among others, people whose houses have an excessive number of bathrooms, people who build rockets, and people who own Major League Baseball teams.
People do not need to have been wholly self-made to somehow deserve to keep their money. No billionaire is an island, even if many of them own one. In fact, vanishingly few of us have fates that are wholly self-determined.
As a moral matter, if not a legal one, we might ask what the very rich do with their money as a way of evaluating whether they should keep it. As famously rich person Elon Musk recently tweeted: “Working hard to make useful products & services for your fellow humans is deeply morally good.” Many who support wealth taxes seem to hold the belief that the government would use the resources that the very wealthy command toward more valuable ends. Of course, most of the fortunes of billionaires such as the Waltons, or Musk, or Bezos are tied up in the large and extremely productive firms that made them rich in the first place.”
“The argument for bailing out restaurants is thus morphing from a need to save the industry during the pandemic to a desire to relieve it from persistent challenges that have less and less to do with COVID-19.
That’s hard to justify when the industry itself is on a steady track toward recovery, and federal spending is driving inflation to record levels.”