Originally Published: 5/2/2015
TPP & the Trade Deficit: Robert Scott at the Economic Policy Institute noted that the U.S., “despite the fact that it is the second largest exporter in the world . . . is also the only major exporter that has consistently run overall goods trade deficits for more than 2 decades.” [Emphasis added.] He looked at the 4 major markets - the U.S., China, Japan, and Germany - and found that China is the most “closed” market, having the smallest “ratio of imports to exports.” Next is Japan and then Germany. The U.S. was “far and away” the most open of the 4 markets. “The U.S. trade deficit in its top 30 export industries is a consequence of its toleration of massive currency manipulation over many years by China, Japan, and about 20 other countries.” Failing to eliminate widespread tariff and non-tariff barriers to U.S. exports and failing to develop effective strategies for rebuilding U.S. manufacturing are the main causes. Scott’s graph of the exports, imports, and trade balance in the top 30 exporting industries for the U.S., China, Japan, and Germany in 2013 tells the story. And, as I’ve told you many, many times, TPP is another trade agreement even worse than NAFTA. If you want a very simple explanation of how the trade deficit is hurting us, go listen to Rep. Alan Grayson at Trade Treachery. The Senate has introduced its bill for fast track authority. According to the Congressional Budget Office (CBO), in addition to giving the president “authority to propose trade agreements” it will “reinstate a rarely used authority that would allow the President to reduce certain duty rates within specified limitations without further Congressional action. While this authority could result in a reduction in revenue, CBO has no basis for determining when or if the President would lower duty rates or the extent of such changes.” [Emphasis added.] If it “reduces revenue” who do you suppose is going to pick up the slack?
TPP & Currency Manipulation: In another piece, Scott reported that if the Trans-Pacific Partnership eliminated currency manipulation it could create jobs across the nation and “reduce the U.S. trade deficit by between $200 and $500 billion, adding 2.0% to 4.9% to the U.S. GDP and creating 2.3 to 5.8 million U.S. jobs, with about 40% (900,000) of those jobs gained in manufacturing.” He explained that currency manipulation “distorts trade flows by artificially lowering the cost of U.S. imports and raising the cost of U.S. exports, and is the leading cause of growing U.S. trade deficits.” Scott’s map of the U.S. shows the congressional districts and how many jobs would be created in each district if currency manipulation was eliminated. Look and see how many jobs could be created in your area. (Economic Policy Institute)
The Letter: Concern over the Trans-Pacific Partnership caused Senators Sherrod Brown (D, OH) and Elizabeth Warren (D, ME) to write President Obama a letter. They requested the president to “promptly declassify the latest bracketed negotiating text of the TPP and release it publicly before asking Congress to vote on ‘fast track’ authority to facilitate the TPP’s ratification.” They call him out for suggesting that “critics of the TPP are ‘dishonest’ when [they] claim that the TPP is a ‘secret deal’” and point out that his administration “has deemed the draft text of the agreement classified and kept it hidden from public view, thereby making it a secret deal.” They point out that it is illegal for the “press, experts, advocates, or the general public to review the text of this agreement” and while any member of Congress can read the text, they are “prohibited from discussing the specifics of that text in public.” But, they also noted, “executives of the country’s biggest corporations and their lobbyists already have had significant opportunities not only to read it, but to shape its terms.” Brown and Warren wrote “the American people should be allowed to weigh in on the facts of the TPP before Members of Congress are asked to voluntarily reduce our ability to amend, shape, or block any trade deal.” Finally, they bring to our attention that the fast track authority currently being proposed “would preclude Congress from amending or filibustering any trade agreement submitted to this Congress or any future Congress - potentially through 2021.” It’s an eye-opening letter and everyone should read it.
Vermont: U.S. District Judge Christina Reiss in Burlington ruled against the Grocery Manufacturers’ Association and “other industry groups” and denied their request for a preliminary order to block the law requiring genetically modified food to be labeled. She “partially granted and partially denied the state’s motion to dismiss the industry lawsuit, meaning the case is like to go to trial.” (AP)
GOP Budget: The House has approved a budget (226 to 197) which “promises to speed repeal” of the Affordable Care Act (ACA) and gives the Pentagon (read: defense contractors) an additional $38 billion next year. It seeks to “balance the budget” in 9 years with more than $5 trillion in spending cuts - which aren’t specified. The specifics will be ironed out with the Senate. (AP)
NFL: The National Football League is giving up its tax-exempt status. Since 1942 the NFL has qualified as a 501(c)(6) non-profit organization. Money from ticket sales, licensing agreements, sponsorships, television rights, etc. go to the 32 team clubs and are taxed at that level. So where does the NFL get its money? It charges “dues” to its member clubs, which must be a pretty hefty fee as the NFL had revenue of $327 million in 2013. They must be getting money somewhere else, too. So, having to cough up an estimated $10 million a year in taxes will do what for them? Well, they’ll no longer have to disclose things - like Commissioner Roger Goodell’s $44 million a year salary. I’m guessing there are some pretty nice perks in there too, all of which is tax deductible. (Washington Post)
Supreme Court: The Supremes ruled in a typical 5 to 4 decision that states can prohibit judicial candidates from soliciting campaign donations, rejecting arguments that such bans violate the free speech protections of the First Amendment. “In 39 states, judges are popularly elected (or at least voters must decide whether to retain them).” (Washington Post)
New Poll: This is a very interesting Reuters/Ipsos poll. “Among Republicans, 51% support abolishing the U.S. federal income tax versus 39% who disagree. By 60% to 28%, Republicans said they believe state governments should have more authority than the federal government. 56% of Republicans said the federal government should have very little authority over domestic affairs.” Not surprising, is it? However, almost 80% of Republicans oppose eliminating middle-class entitlement programs such as Social Security and Medicare. 64% of Republicans oppose getting rid of aid programs for the poor, such as food stamps and Medicaid. 47% of Republicans disagree with abolishing or significantly reducing the authority of regulators such as the Food and Drug Administration.” While adults 60 years old and older were the largest age group in the poll (28%), they also “tend to vote in higher numbers.” An interesting dilemma for Republican presidential candidates.
Unemployment: New claims for unemployment benefits “tumbled” to a 15-year low. (Reuters)
Gross Domestic Product: It grew only 0.2% in the first 3 months of this year, “grinding nearly to a halt.” (Washington Post) Not good. But “consumer spending rose in March” a sign that the economy is “regaining momentum after stumbling badly in the first quarter.” (Reuters)