Sunday, May 20, 2018

"If getting China to pay what it owes for technology were the goal, you’d expect the U.S.... to make specific demands.....



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"If getting China to pay what it owes for technology were the goal, you'd expect the U.S.... to make specific demands..... // Grasping Reality with Both Hands: The Semi-Daily Journal Economist Brad DeLong
http://www.bradford-delong.com/2018/04/should-read-if-getting-china-to-pay-what-it-owes-for-technology-were-the-goal-youd-expect-the-us-to-make-speci.html

"If getting China to pay what it owes for technology were the goal, you'd expect the U.S.... to make specific demands... and... build a coalition", a Tran-Pacific Partnership, so to speak: Paul Krugman: The Art of the Flail: "Whenever investors suspect that Donald Trump will really go through with his threats of big tariff increases... stocks plunge...

...Incoherence rules: The administration lashes out, then tries to calm markets by saying that it might not carry through.... If getting better protection of patent rights and so on were the goal, America should be trying to build a coalition with other advanced countries to pressure the Chinese; instead, we've been alienating everyone in sight. Anyway, what seems to really bother Trump aren't China's genuine policy sins, but its trade surplus with the United States, which he has repeatedly said is $500 billion a year. (It's actually less than $340 billion, but who's counting?)... This is junk economics. Except at times of mass unemployment, trade deficits aren't a subtraction from the economies that run them, nor are trade surpluses an addition to the economies on the other side of the imbalance.....

Now, Trump himself might be O.K. with large-scale deglobalization. But as we've seen, his beloved stock market hates the idea, and with good reason: Businesses have invested heavily on the assumption that a closely integrated global economy is here to stay, and a trade war would leave many of those investments stranded. Oh, and a trade war would also devastate much of pro-Trump rural America, since a large share of our agricultural production—including almost two-thirds of food grains—is exported. And that's why things seem so incoherent...

#shouldread


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Economic Update - Another ‘Gilded Age - 05.20.18



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Economic Update - Another 'Gilded Age - 05.20.18 // Economic Update
http://economicupdate.podbean.com/e/economic-update-another-gilded-age-052018/

Updates on Theranos bankruptcy and workers' risks, our second "gilded age," mortgage lenders turn to rich borrowers, Trump on drug prices is just rhetoric, economic effects of breaking Iran treaty. Interview with Prof Miguel Robles-Duran on gentrification and crisis of cities.


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A Multitude of Lynx



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A Multitude of Lynx // Jared Bernstein | On the Economy
http://jaredbernsteinblog.com/a-multitude-of-lynx/

Various posts at WaPo for those interested:

Trump's creating all sorts of waves in the oceans of international trade, and that's led some analysts to worry that the reserve status of the US dollar could be under threat (63% of global reserve holdings are in dollars). While this isn't the path I'd take to get there, of course–I'm solidly against Trumpian chaos–at this point, the costs of printing the premier reserve currency outweigh the benefits.

This one generated a fair bit of interest. It's a local story with national implications about a head-tax on large businesses that the Seattle city council just passed to help them deal with their increasing homelessness problem. There are many levels to the story, including the basic revenue story, but also the costs engendered when large firms like Amazon come to town. Yes, they bring jobs, which is great, but they also raise housing prices and create more demand for city services. Yet, at least in this case, when you come to them for help, they stiff-arm you.

Dean Baker and I understand and support the motivation for a guaranteed jobs program.  But we're wary of the public sector's ability to create tens of millions of jobs to replace millions of lower quality jobs in the low-wage sector. That's why Sen. Booker's proposed 15-place pilot is a good idea to see how this works in practice before going national.

On a personal note, I'm sitting in a TV studio where my segment on the international trade fracas has been appropriately cancelled to report on the school shooting in Texas this morning. Of course, my cancellation is at should be–that's not my issue.

According to the WaPo, this is the 16th school shooting this year. What should be shocking is how familiar this is to me and everyone else at the station. We all just go with the flow, as the anchors haul in commentators from their bench of experts in school shootings, and producers cut to whatever real time information they can glean.

The extent to which our country has normalized these horrific occurrences is the latest sign that there are ways in which the US is a failed state. I do not say that lightly, but a system that consistently fails to protect students and their teachers from death by firearms–that instead of solutions, has experts in school shootings on speed dial–cannot be called anything else but a failure.


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HUD Secretary Ben Carson doubles down on dismantling Obama-era fair-housing policies



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HUD Secretary Ben Carson doubles down on dismantling Obama-era fair-housing policies // washingtonpost.com - Business
https://www.washingtonpost.com/news/wonk/wp/2018/05/19/hud-secretary-ben-carson-doubles-down-on-dismantling-obama-era-fair-housing-policies/

HUD announced that it is withdrawing a computer assessment tool that provides communities with demographic data and maps to help them gauge neighborhood segregation.
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Friday, May 18, 2018

The United States’ Hand in Undermining Democracy in Venezuela [feedly]

The United States' Hand in Undermining Democracy in Venezuela
http://cepr.net/publications/op-eds-columns/the-united-states-hand-in-undermining-democracy-in-venezuela

It used to be generally frowned upon to openly call for military coups and U.S. intervention in Latin America. Not anymore. At least not when it comes to Venezuela, a country where—according to the prevailing narrative—a brutal dictator is starving the population and quashing all opposition.

Last August, President Trump casually mentioned a "military option" for Venezuela from his golf course in New Jersey, provoking an uproar in Latin America but barely a peep in Washington. Similarly, Rex Tillerson, then-Secretary of State, spoke favorably about a possible military ouster of Venezuelan president Nicolás Maduro.

In recent months, opinion pieces suggesting that a coup or a foreign military intervention in Venezuela might be a good thing have dotted the U.S. media landscape: from the Washington Post to Project Syndicate to The New York Times. Occasionally a pundit argues that a coup d'état could have undesirable consequences, for instance if a hypothetical coup regime should decide to deepen relations with Russia or China.

Rarely does anyone point out that this is an insane debate to be having in the first place, particularly regarding a country, where elections occur frequently and are, with few exceptions, considered to be competitive and transparent. On Sunday, May 20th, Maduro will be up for reelection. Polls suggest that, if turnout is high, he could be voted out of office.

The fact that coups, not elections, are the hot topic is a sad reflection of the warped direction that the mainstream discussion on Venezuela has taken. For many years now, much of the analysis and reporting on the oil-rich but economically-floundering nation have offered a black-and-white, sensationalized depiction of a complex and nuanced internal situation. In addition, there has been little serious discussion of the Trump administration's policies toward Venezuela even as they wreak further damage to the country's economy, worsen shortages of life-saving medicines and food, and undermine peace and democracy.

Hardening Sides

Lest we forget, Maduro—often described by U.S. politicians and pundits as a dictator—was democratically elected in snap elections carried out a month after the death of his predecessor, Hugo Chávez, in early 2013. As a presidential term lasts six years in Venezuela, his current constitutional mandate will end in early 2019.

From the get-go, some sectors of the Venezuelan opposition rejected Maduro's legitimacy and called for his immediate departure from office. In 2014 and again in 2017, they endorsed protest movements explicitly aimed at generating major disruptions in key urban areas to try to force the removal of the government, for example through overwhelming popular pressure or via internal or external military intervention.

Though many of these protests were peaceful, others became violent and resulted in dozens of fatalities, some attributable to state security forces and others attributable to members of the protest movement, according to credible reports and documentary evidence. Hundreds of protesters were detained, and a few opposition figures, including former Chacao mayor Leopoldo López, were sentenced to jail for allegedly inciting violence. López is currently under house arrest after serving three years in prison.

Opposition supporters believe that the due process rights of López and others involved with the protests were violated, and there certainly are grounds for this argument. Meanwhile, some government supporters believe that these individuals deserved harsher penalties for having attempted to usurp the popular will through destabilization and violence, in a manner reminiscent of the lead-up to the short-lived 2002 military coup against Chávez that López and other opposition leaders were involved in.

In late 2015, Venezuela's opposition won a large majority of seats in National Assembly elections. But the country's executive and legislative branches were soon at loggerheads over alleged cases of electoral fraud that led Venezuela's Supreme Court, a body that is widely seen as loyal to the government, to disqualify three opposition legislators. The removal of these legislators meant the loss of the opposition alliance's two-thirds supermajority that gave it broad powers to intervene at the executive level.

The opposition cried foul and refused to abide by the court decision. In response, the court refused to recognize the legitimacy of the parliament. Venezuela's institutions ceased to interact according to the constitutional playbook and each side adopted increasingly radical tactics to try to gain the upper hand.

Opposition leaders supported a new series of protests that grew increasingly combative and violent, paralyzing key thoroughfares in Caracas and other cities for days at a time. Groups of protesters clashed frequently with security forces and dozens of people were killed, including protesters, state security agents, and bystanders.

The Maduro government responded to the growing chaos in the streets by convening elections for a National Constituent Assembly that would draft a new constitution and, according to Maduro, bring "order, justice, peace" to Venezuela.

The opposition, denouncing the initiative as a ploy designed to displace the National Assembly, boycotted the elections. Unsurprisingly, the new body is almost entirely pro-government and the U.S. and allied governments have refused to recognize it. Following the Constituent Assembly elections, the protest movement floundered and the opposition grew more divided, with hardliners calling for further boycotts of the subsequent regional and municipal elections. As a result of this and other factors, opposition voters failed to mobilize and the government won a majority of votes in both electoral contests in late 2017.

The Economy

The backdrop to Venezuela's prolonged political crisis has of course been the country's ever-worsening economic quagmire. Though plunging oil prices have certainly played a role, Maduro undoubtedly bears part of the responsibility for the deep depression and hyperinflation that has prompted hundreds of thousands of his countrymen to emigrate and caused his poll numbers to plummet.

While many ideologues blame "socialism" for the country's economic ills, most economists point to a set of policy errors that have little or nothing to do with socialism. Most devastating has been the dysfunctional exchange rate system, which has led to a worsening "inflation-depreciation" spiral over the past four years, and now hyperinflation. Free gasoline and price controls that didn't work also contributed to the crisis. The Trump administration's financial sanctions—more than all previous destabilization efforts, which were significant—have made it nearly impossible for the government to get out of the mess without outside help.

As if this profoundly distressing situation weren't enough, media outlets have frequently published exaggerated accounts of the conditions in Venezuela, depicting widespread starvation, for instance. To be sure, soaring food prices have contributed to increased undernourishment throughout the country, but this is a far cry from a large scale famine.

More importantly, there has been scant US media reporting on the further economic damage provoked by the Trump administration's financial sanctions, announced in late August last year (shortly after Trump's statement about a "military option" for Venezuela).

As my colleague Mark Weisbrot has explained, Trump's unilateral and illegal financial embargo – which cuts Venezuela off from most financial markets – has had two major consequences, both of which entail increased economic hardship for the Venezuelan people. First, it causes even greater shortages of essential goods, including food and medicine. Second, it makes economic recovery nearly impossible, since the government cannot borrow or restructure its foreign debt, and in some cases even carry out normal import transactions, including for medicines.

Aside from fomenting greater economic havoc in Venezuela, Trump and his coterie of advisors on Venezuela, including Republican Senator Marco Rubio, have supported opposition hardliners in their efforts to scuttle attempts at dialogue and undermine elections, even when these offer the possibility of a peaceful political transition.

Case in point: this Sunday's presidential elections. Opposition leader Henri Falcón— a former governor and campaign manager of the opposition's 2013 presidential candidate, Henrique Capriles—is running as an independent candidate against Maduro and three other candidates. Several major opposition parties are boycotting the election because, among other reasons, they object to the early date of the elections, which they say leaves them insufficient time to organize a strong campaign—the electoral authority did, however, agree to a one-month delay from the initial date. Two opposition parties, First Justice and Popular Will, were also unable to register candidates because they allegedly didn't meet the formal requirements to do so.

However, voter surveys carried out by Datanalisis, Venezuela's most frequently cited pollster, indicate that Falcón would win if there's a high turnout. Before confirming his candidacy, Falcón secured strong guarantees from the country's electoral authority, ensuring transparency, voter accessibility and vote secrecy, as in all contested prior elections since Chávez took office in 1999.

But the Trump administration, after unsuccessfully threatening Falcón with individual financial sanctions if he didn't give up his candidacy, has supported the election boycott by more hardline opposition sectors that see Falcón, who was a Chávez ally until 2010, as too willing to compromise with chavistas if elected. The U.S. administration has even threatened sanctions targeting Venezuelan oil if the elections are held. Sources indicate that when both Falcón and the Venezuelan government requested that the UN send an international observation team to monitor the elections, US officials intervened to ensure that no such monitoring effort would take place.

With the U.S. government and Venezuela's opposition doing their best to empower hard-liners' call for a boycott, there is a high probability that turnout from the opposition camp will be low and that Maduro will win the election by a strong margin. We can expect the administration to immediately denounce a "fraudulent" and "illegitimate" process and take further actions that will make life even more difficult for ordinary Venezuelans.

Regime Change in Venezuela: An Ongoing U.S. Policy

It's worth noting that Trump's Venezuela policy is mostly a continuation of President Obama's policy toward Venezuela, although the financial embargo and calls for a military coup are particularly outrageous and disdainful of international law and the norms of civilized nations. The Trump sanctions build on an Obama sanctions regime identifying Venezuela as an "extraordinary threat to national security." Around the time that Obama initiated a process of normalizing relations with Cuba, he began targeting assets of various senior officials and individuals associated with the Maduro government.

Under Obama, the U.S. government continued Bush-era funding to opposition political organizations in Venezuela and lobbied regional governments, again and again, to censure Venezuela in multilateral organizations, like the Organization of American States (OAS). It also refused to accept a Venezuelan ambassador to Washington—while inviting one from Cuba—and joined hard-liner opposition members in refusing to recognize Maduro's electoral win in April 2013.

Essentially, the Obama administration—like the Bush administration, which was involved in the short-lived 2002 coup against Hugo Chávez—had a policy of promoting "regime change" in Venezuela. That policy has taken a more aggressive, overt, and dangerous direction under Trump.

Sadly, there has been virtually no criticism of U.S. government efforts to topple the Venezuelan government anywhere in the major media. In the U.S. Congress, where a large number of legislators now oppose the embargo against Cuba, for instance, there is little outcry, with the important exception of a small group of progressive Democrats who have opposed sanctions against Venezuela, under both Obama and Trump. The majority of the political and media establishment appears to believe that Trump has the right policy agenda for Venezuela, with many liberals pointing to cases of corruption, human rights violations and other crimes allegedly involving Venezuelan officials as justification for harsh measures.

Yet none of these critics are calling for broad economic sanctions against Latin American countries with far more violent and repressive records. Against Honduras, for instance, where the military was recently deployed to violently repress peaceful demonstrations following fraudulent elections, which the U.S. government recognized. Or against Colombia and Mexico, where, over the last few months, dozens of political candidates and social leaders have been killed with impunity.

Venezuela is treated differently by the U.S., for obvious reasons: it has a government that seeks to be independent from Washington and it sits atop hundreds of billions of barrels of oil reserves, which—when the Venezuelan economy finally recovers— will enable the government to have far-reaching regional influence.

In fact, that is exactly what happened during the Chávez administration. Venezuela grew in popularity in Central America and the Caribbean thanks in great part to the government's generous Petrocaribe initiative, which brought tangible economic benefits to many countries in the region. It was also influential in building regional institutions such as the Community of Latin American and Caribbean States (CELAC) and the Union of South American Nations (UNASUR), which were much more independent of the U.S. than the Organization of American States, located in Washington, DC.

Regardless of how one feels about Venezuela's current government, it is time to acknowledge that U.S. policy towards that country is making things worse. It is generating greater economic pain, instability and political polarization in Venezuela and undermining the odds of reaching a peaceful solution to the country's political crisis.

Talk of coups and military intervention in Venezuela, or anywhere in Latin America, needs to return to its previous taboo status, particularly given the current U.S. leadership's receptiveness to absurd ideas. Instead, it's time for cooler heads from across the political spectrum to work together to change the direction of U.S. policy toward Venezuela. First, U.S. citizens who care about Venezuela must organize to force Trump to lift his financial embargo; then we must encourage efforts to build trust and dialogue across the political divide while marginalizing hardliners who oppose any form of compromise.


Alexander Main is senior associate for international policy at the Center for Economic and Policy Research in Washington, DC.



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Links [feedly]

New Estate Tax Cut Encourages More Wealthy Individuals to Skirt Capital Gains Tax [feedly]

New Estate Tax Cut Encourages More Wealthy Individuals to Skirt Capital Gains Tax
https://www.cbpp.org/blog/new-estate-tax-cut-encourages-more-wealthy-individuals-to-skirt-capital-gains-tax

The 2017 tax law not only delivers large, direct tax cuts to wealthy Americans but also creates myriad opportunities for them to push the boundaries of the tax code to reduce their tax bills further, which would make the law even costlier and more tilted to the top than current projections indicate. A prime example is its cut in the estate tax.

The 2017 law doubled the amount that a wealthy couple can pass tax-free to their heirs, from $11 million to $22 million. This eliminated the tax for many estates (less than one-tenth of 1 percent of estates now owe it, down from two-tenths of 1 percent previously) and gave the few estates large enough to still owe the tax a direct tax cut of $4.4 million apiece. The larger exemption has also increased interest in existing "upstream planning" techniques designed to help wealthy individuals avoid paying capital gains taxes on certain assets.

Here's the background. Under "stepped-up basis"— a tax break that the 2017 law retained — if someone holds an asset without selling it until death, neither she nor her heirs owes capital gains tax on the growth in its value during her lifetime. This enables parents with assets (such as stock or real estate) that have appreciated over time to pass them to their children free of the accumulated capital gains tax. But stepped-up basis is available only for an asset that is transferred after a parent's death, which can be many years away. Upstream planning enables parents to accelerate the transfer of assets to a child by funneling appreciated assets to the child's grandparents, who then pass those assets on to the child upon their death. On the assumption that the grandparents pass away before the parents, the child receives the asset — and the benefit of step-up basis — sooner.

The estate tax has generally been a barrier against upstream planning, underlying its role as a critical backstop to the income tax. Upstream planning isn't worthwhile if transferring assets to the grandparents pushes the value of their estate above the estate tax exemption limit, since a 40 percent tax would then be owed on the amount above the limit upon their death. But the 2017 tax law, by doubling the exemption, made upstream planning attractive for more wealthy families. As one tax lawyer quoted in Tax Notes put it: "Now that you've got $11 million [per individual, or $22 million per couple] to work with, there are a lot of things that all of a sudden start to be worth the trouble." It creates an "enormous opportunity" for upstream planning, another tax lawyer was quoted as saying.

Some of these upstream planning techniques are legally questionable. But some tax professionals expect the under-resourced IRS to be too busy to focus on the likely rush to use upstream techniques. The IRS isn't "likely to enact new regs or new laws to put the kibosh on it," tax lawyers discussing the tax reduction opportunity said, since its "hands are full right now," because "the IRS is already busy with the mammoth task" of implementing the new tax law.

Moreover, policymakers haven't given the IRS adequate resources; enforcement funding is 23 percent below the 2010 level in inflation-adjusted terms. As we've warned, the combination of an underfunded IRS and the 2017 tax law's new avoidance opportunities invites the wealthy and profitable corporations to push the law's boundaries to extract benefits that go even beyond the large, explicit tax cuts they receive from it.

Upstream planning will likely be just one of many examples of how the loopholes and gaming opportunities in the hastily drafted, poorly conceived tax law will deliver even larger tax cuts to the wealthiest Americans than its authors intended.



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