The Corporate Tax Cut Bonanza [feedly]

The Corporate Tax Cut Bonanza
http://cepr.net/publications/op-eds-columns/the-corporate-tax-cut-bonanza

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The Corporate Tax Cut Bonanza

Dean Baker
Truthout, January 22, 2018

See article on original site

There have been numerous news stories in the past few weeks about corporations doing the right thing with their big tax cuts. These stories tell us how they are giving higher pay to workers and have ambitious plans for new investment. The Trump administration has been crowing over these announcements as proving the success of their tax cut. There is much less here than meets the eye.

To start, we can look at the latest and biggest announcement in this category, Apple's plan to bring back $252 billion in cash that it held overseas. Apple announced it would make a one-time $38 billion tax payment on the repatriated money.

Before anyone starts celebrating, we should be clear what bringing back this cash means. Previously, this $252 billion had been credited to Apple's foreign subsidiaries. These subsidiaries had immediate legal claim to the money, which could in fact be anywhere in the world, including the United States.

What Apple did in repatriating this money was transfer the ownership claim from its subsidiaries to the parent company. It is entirely possible that this meant simply shifting money in an account at Citigroup owned by Apple's Irish subsidiary to an account at Citigroup owned by the parent company. This means essentially nothing to the US economy.

There is the one-time tax payment of $38 billion, but this is a savings of $43 billion against Apple's tax liability under the former system, according to the Institute for Taxation and Economic Policy. So it's hard to see the cause for celebration here.

Apple did announce that it was giving a one-time bonus of $2,500, in the form of stock. If all of the company's 84,000 workers get this bonus, it is equal to a bit less than 0.5 percent of the tax liability Apple saved on its foreign profits.

Apart from this one-time windfall on foreign earnings, we don't know how much of Apple's ongoing tax savings will show up in worker's wages. As it stands, Apple is looking a bit stingy compared to other big winners from the tax cut.

Verizon announced that it would give bonuses of $1,000 to each of its 200,000 workers. This $200,000 million expenditure comes to almost 10 percent of its $2 billion-plus in annual savings from the tax cut. Similarly, Walmart announced pay increases that came to around $300 million annually. This would be close to 15 percent of the $2 billion that it would save annually from the tax cut. 

Many of these companies are also announcing plans for expansion, which they are attributing to the incentives provided by the tax cut. While that is possible, it is also likely that many of these plans for expansion were in the works long before the tax cut was even introduced in Congress.

After all, Walmart also just announced that it was closing 63 Sam's Clubs stores. Should we attribute these closing and the resulting layoffs to the tax cut as well?

Corporate America is clearly putting on a public relations show to thank the Republicans who pushed through the tax cut. They are trying to convince people that the Republicans in Congress were doing something that was good for the country, not just rewarding big donors to their campaigns.

But this is not the sort of stuff that the public should take seriously. We know how to evaluate the tax cut. The question is whether it truly does lead to a big upturn in investment. We will find the answer in the government's data on investment, not the tall tales from corporate chieftains.

Thankfully, we shouldn't have to wait long to get the preliminary results. If the tax cut really is the huge spur to investment that the Republicans claim, it should be showing up very quickly in new orders for capital goods. The Commerce Department will release the data for December this week. While this is early, fast-moving companies surely were following the debate and were prepared to jump once passage became certain.

In late February we will have the data on capital goods orders for January. If corporate America sees the tax cut as the boon the Republicans promised, surely they will have some of their new orders in by the end of this month.

These Commerce Department reports will provide the real test of the Republican claims that the tax cuts will boost growth and provide substantial benefits for workers. Until we have these data, all the announcements of corporate generosity should be recognized as nothing more than self-serving propaganda.

Food-Insecure Households Likelier to Have Chronic Diseases, Higher Health Costs [feedly]

Food-Insecure Households Likelier to Have Chronic Diseases, Higher Health Costs
https://www.cbpp.org/blog/food-insecure-households-likelier-to-have-chronic-diseases-higher-health-costs

One reason why the emerging research, which we summarized in our new paper, increasingly links SNAP (food stamps) with improved health outcomes is that SNAP reduces "food insecurity" — i.e., insufficient access to enough food to live a healthy life over the course of a year.

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China Has Plenty of Options to Retaliate Against US Tariffs [feedly]

China Has Plenty of Options to Retaliate Against US Tariffs
https://www.bloomberg.com/news/articles/2018-01-23/china-has-targets-aplenty-to-retaliate-against-u-s-trade-action

The first time the United States tried to protect solar industry manufacturing jobs from foreign competition, things did not go exactly as planned.

Chinese solar panel makers evaded U.S. tariffs by relocating to Taiwan, and the Chinese government retaliated with its own duties on U.S. exports of the raw material used in making the panels — leading American manufacturers to lay off more than 1,000 workers and scrap a new $1.2 billion factory.

Now, the United States is trying again. President Trump on Monday imposed a new round of tariffs on imported solar panels in response to fresh pleas from two bankrupt manufacturers, Suniva and SolarWorld. The companies — U.S.-based but foreign-owned — complain that Chinese rivals, backed by generous state subsidies, have flooded the U.S. market with solar panels at prices they can't match.

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Breaking news about economic and business issues.

For the president, the solar decision, and a similar move against imported washing machines, represent a big step toward fulfilling his campaign promises to get tough on trading partners like China. Additional decisions loom on trade secrets, steel and aluminum, raising the prospect of a more confrontational trade stance that might cheer Trump's supporters in the industrial heartland while unnerving investors and multinational corporations.

The polysilicon industryserves as a cautionary tale of what can happen when trade officials take actions designed to protect workers in one corner of the economy only to see them boomerang elsewhere.

Production operator John White checks a panel at the SolarWorld solar panel factory in Hillsboro, Ore. (Natalie Behring/Reuters)

"There's always a risk of tit-for-tat retaliation, particularly with China. . . . It's a warning shot: Don't do this too often," says economist Douglas Irwin, author of "Clashing Over Commerce: A History of U.S. Trade Policy."

Three global firms — Wacker, REC Silicon and Hemlock Semiconductor — account for the vast majority of U.S. polysilicon production. The material is used to produce semiconductors for computers as well as the solar components that turn sunlight into electricity.

The Tennessee factory that Hemlock leveled in 2015 before it had produced anything was not the only collateral damage from the initial U.S. trade action. REC Silicon took refuge in a joint venture with a state-owned Chinese company, gaining a foothold in China but surrendering access to its proprietary technology in the bargain.

Polysilicon executives fear that the president's action will leave in place the Chinese trade barriers, which imperil their existing U.S. operations.

Industry representatives in recent weeks met with officials such as Robert E. Lighthizer, the president's chief trade negotiator, and Commerce Secretary Wilbur Ross to plead for an alternative that would resolve all solar-related disputes between the United States and China.

Polysilicon producers say that the United States should negotiate a comprehensive settlement with China to resolve both the old and new solar issues. Such a deal could divide the estimated $1.5 billion in customs duties that importers paid in the original trade case among the panel makers, polysilicon producers and rebates importers.

Trump's tariffs could pave the way for such a negotiated bargain. Lighthizer's formal tariff announcement promised to open "discussions among interested parties" toward that goal.

Still, the idea remains a long shot. The European Union resolved a similar spat with China through talks, butObama administration efforts to settle its solar differences with Beijing at the negotiating table stalled.

Most analysts say that Trump has long been fixated on imposing tariffs as a demonstration of the muscular new course in trade policy that he is charting.

"Politicians like to say they're going to bat for a particular group of people and like to look tough," said Daniel Ikenson, trade policy analyst at the nonpartisan Cato Institute. "What's harder to see is there are costs . . . and they are real."

It may be too late to prevent further erosion in the U.S. polysilicon industry, given the dramatic expansion in Chinese production since the tariff war erupted. In 2010, the United States topped China 62,000 tons to 55,000 tons, according to Ethan Zindler, head of Americas for Bloomberg New Energy Finance. But by 2016, after a flurry of new plant construction, China produced 208,250 tons, nearly triple total U.S. production.

"There was a moment when the U.S. was the global leader. But China just basically blew by them," Zindler said. "If tariffs disappeared immediately, they would still have trouble finding customers in China."

The Chinese tariffs effectively barred U.S. suppliers from a market that accounts for 80 percent of global sales. U.S. exports of polysilicon to China plunged to less than $200 million in 2016, the most recent year available, from more than $1 billion before the tariffs were imposed, even as overall Chinese demand more than doubled.

Hemlock laid off roughly 500 workers in Michigan and Tennessee, including 100 who will leave the payroll this quarter. REC Silicon dropped 450 workers in Washington state, cut production capacity in half and mothballed a new $150 million facility.

"We're probably the victim that's been hit the hardest in this trade war," said Francine Sullivan, vice president for business development at REC Silicon.

If the Chinese tariffs remain in place, further layoffs are likely, industry officials have warned.

Wacker Polysilicon North America produces polysilicon at a $2.5 billion polysilicon plant in Charleston, Tenn., that was designed as an answer to China's surging needs, a company executive told a U.S. Trade Representative Office hearing last month. The "health" of the facility and prospects for future expansion depend upon lifting the Chinese tariffs, said Mary Beth Hudson, the Charleston site manager.

Polysilicon factories are mammoth, multibillion-dollar facilities that in scale and appearance resemble oil refineries. Inside, workers use a chemical process to convert silane gas or quartz into polysilicon. Industry jobs pay well, with total compensation often exceeding $100,000, executives say.

The dispute that reached Trump's desk saw panel makers Suniva and SolarWorld, two bankrupt foreign-owned manufacturers, face off against a growing U.S. workforce of solar installers, engineers, project managers and sales executives.

The International Trade Commission concluded that rising imports are hurting the domestic industry and recommended to the president potential remedies including quotas and tariffs of up to 35 percent. Tariff opponents say that more than one-third of industry's 260,000 jobs are at risk of disappearing following the president's action to discourage imports.

Suniva petitioned the government for protection in April, taking advantage of a clause in U.S. trade law that allows the president to impose sweeping global tariffs without any evidence that foreign trading partners acted unfairly. SolarWorld joined the fight for such "safeguard" measures one month later.

"More than 30 U.S. companies have been forced out of business. A strong remedy will revive and strengthen U.S. manufacturing," Timothy Brightbill, an attorney who represents SolarWorld, said before the decision.

When the United States has imposed such safeguard measures in the past, its trading partners have inevitably complained to the World Trade Organization. And the multilateral trading body's dispute settlement board has repeatedly found the specific U.S. actions in violation of Washington's international commitments.

No U.S. industry has sought safeguard protection since 2001, when the steel industry appealed for help to the Bush White House. President George W. Bush imposed tariffs of up to 30 percent, drawing applause from domestic manufacturers but leading to steep job losses at companies that used steel.

Estimates of the jobs lost ranged from 26,000 to 200,000, dwarfing the steel jobs temporarily saved. Bush lifted the tariffs in 2003 after the WTO authorized the European Union to retaliate for the improper duties with more than $2 billion in levies on U.S. imports.

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Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe is NOT shutdown

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Blog: Enlighten Radio Podcasts
Post: Podcast: The Moose Turd Cafe is NOT shutdown
Link: http://podcasts.enlightenradio.org/2018/01/podcast-moose-turd-cafe-is-not-shutdown.html

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Dean Baker: Republicans Don't Understand: Tax Cuts Don't Spur Economic Growth [feedly]

Republicans Don't Understand: Tax Cuts Don't Spur Economic Growth
http://cepr.net/publications/op-eds-columns/republicans-don-t-understand-tax-cuts-don-t-spur-economic-growth

Republicans Don't Understand: Tax Cuts Don't Spur Economic Growth

Dean Baker
NBC News, January 21, 2018

See article on original site

In decades past, there was bipartisan support for policies that laid the basis for a long period of broadly shared prosperity. Unfortunately, this consensus seems to have been replaced by the narrow-minded greed of the very rich and, insofar as they can continue to get their way, the story is not likely to end well.

Take, for instance, the Republican tax plan, which passed in December and contained a potpourri of tax breaks for special interest groups and high-income households. Its centerpiece was a large cut in the corporate income tax; the plan lowered the rate from 35 percent to 21 percent.

The Trump administration claimed that this cut, coupled with various sweeteners like full expensing of new investments, would set off an investment boom. According to the administration, U.S. companies would bring back factories from overseas and foreign companies would rush to take advantage of low U.S. taxes, and this surge in investment would lead to more jobs and higher productivity growth, eventually translating into higher wages for workers.

It's a nice story, but there is little reason to believe that things will pan out as advertised.

The 1986 tax cut did not lead to an investment boom. In fact, investment actually fell relative to the size of the economy in the next two years.

First, we tried cutting corporate taxes to stimulate the economy before: Although it received little attention during this most recent debate, the corporate rate was lowered from 46 percent to 35 percent in 1986, roughly comparable to the current cut. If we consider the share of profits that firms get to keep, the 1986 cut meant that the share kept increased from 54 percent to 65 percent, a 20 percent increase. The latest tax cut increased the share of profits that companies get to keep by 22 percent, going from 65 percent to 79 percent.

The 1986 tax cut did not, however, lead to an investment boom. In fact, investment actually fell relative to the size of the economy in the next two years. So, it's hard to believe that the slightly larger tax cut in the new bill will have a more positive impact on investment.

Besides which, as a practical matter, tax rates have been shown to be a relatively minor factor in determining where companies invest – but they do affect where companies have their profits appear. For example, Apple reports that a huge share of its profits were earned in Ireland, where the corporate tax rate is just 12.5 percent, and Google claims to earn billions in the Cayman Islands, where the tax rate is even lower.

Tax rates have been shown to be a relatively minor factor in determining where companies invest, but they do affect where companies have their profits appear.

These companies do not invest vast sums nor create enormous numbers of jobs in these tax havens; they are just playing accounting games to minimize their tax liability. That can earn those countries some additional tax revenue, but it does not create the sort of jobs and growth for which most policymakers are looking.

In any case, even the new U.S. corporate tax rate is too high to qualify us for tax haven status, so we are not going to see European and Japanese corporations setting up fake operations in the U.S. in order to claim this country provides the basis for all of their profits. At best, we will see some more repatriation of income from companies, like Apple, that have been using tax havens – which, based on past history, will end up in the pockets of shareholders.

But what is perhaps most disturbing about the Republican tax plan is that it seems to steer the United States in the opposite direction of proven paths to growth. Looking back in the past, whether across states or across countries, low tax rates have never been the spur to growth. The spur to growth has been a well-trained and well-educated workforce, coupled with the infrastructure needed to support growth.

Today, the booming areas are not low-tax states like Arkansas and Mississippi, but relatively high-tax states like New York, Massachusetts and California.

For example, the long boom that followed World War II was associated with a huge increase in college enrollment and high school graduation rates, not tax cuts. We built the national highway system, which was the basis for the suburbanization of this period and was associated with the explosion of the automobile sector and a wide variety of related industries. In addition, publicly-funded research had massive spinoffs in everything from aerospace to the internet.

If we look across states today, the booming areas are not low-tax states like Arkansas and Mississippi. Rather, we see the greatest prosperity in relatively high-tax states like New York, Massachusetts and California. Businesses are attracted by the highly skilled workers in these states. And, while some of these workers are educated in these states, workers come from around the country and around the world because these are considered desirable places for highly educated people to both work and live.

The same is true comparing countries across the globe; in fact, the countries in which workers are most prosperous all have much larger government sectors than the United States. In Germany, whose workers enjoy high pay and long vacations, government spending accounts for 43.8 percent of GDP compared to just 37.6 percent in the United States, according to the OECD.

Instead of focusing on tax cuts, it would be good if the Republicans can look to the economic success stories of the present and recent past.

In France, where workers have enjoyed substantial wage gains over the last four decades and rank near the top in productivity per hour, the government accounts for 56.6 percent of the economy. There is a similar story for the prosperous Scandinavian countries: In Norway, President Trump's apparent preferred country of origin for new immigrants, government spending accounts for 48.8 percent of the economy.

Instead of focusing on tax cuts, it would be good if the Republicans can look to the economic success stories of the present and recent past. Spending more to promote clean technologies can help keep U.S. companies among the world leaders in the area. Additional support for installing solar or wind energy and buying electric cars would also help. And, new funding to make college tuition free and reduce the student loan debt of recent grads would also help to expand the supply of skilled labor, as would more support for community colleges and other forms of training.

This route might not be the current orthodoxy among Republicans, but, unlike tax cuts, it is a proven path to broadly shared prosperity, and not just short-term profits.

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Enlighten Radio:Back on the air! Moose Turd Cafe -- recognizing ESSENTIAL DIFFERENCES

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Blog: Enlighten Radio
Post: Back on the air! Moose Turd Cafe -- recognizing ESSENTIAL DIFFERENCES
Link: http://www.enlightenradio.org/2018/01/back-on-air-moose-turd-cafe-recognizing_22.html

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Dan Little: Actors in historical epochs [feedly]

Actors in historical epochs
http://understandingsociety.blogspot.com/2018/01/actors-in-historical-epochs.html

I've argued often for the idea that social science and historical explanations need to be "actor-centered" -- we need to ground our hypotheses about social and historical causation in theories of the pathways through which actors embody those causal processes. Actors in relation to each other constitute the "substrate" of social causation. Actors make up the microfoundations of social causes and processes. Actors constitute the causal necessity of social mechanisms.

In its abstract formulation this is little more than an expression of ontological individualism (link). But in application it represents a highly substantive research challenge. In order to provide concrete accounts of social processes in various cultural and historical settings, we need to have fairly specific theories of the actor in those settings (link): what motivates actors, what knowledge do they have of their environment, what cognitive and practical frameworks do they bring to their experiences of the world, what do they want, how do they reason, how do they relate to other actors, what norms and values are embedded in their action principles?

Rational choice theory and its cousins (desire-belief-opportunity theory, for example) provide what is intended to be a universal framework for understanding action. But as has been argued frequently here, these schemes are reductive and inadequate as a general basis for understanding action (link). It has also been argued here that the recent efforts to formulate a "new pragmatist" theory of the actor represent useful steps forward (link).

A very specific concern arises when we think carefully about the variety of actors found in diverse historical and cultural settings. It is obvious that actors in specific cultures have different belief systems and different cognitive frameworks; it is equally apparent that there are important and culture-specific differences across actors when it comes to normative and value commitments. So what is needed in order to investigate social causation in significantly different cultural and historical settings? Suppose we want to conduct research on social contention along the lines of work by Charles Tilly, with respect to communities with widely different cultural assumptions and frameworks. How should we attempt to understand basic elements of contention such as resistance, mobilization, and passivity if we accept the premise that French artisans in Paris in 1760, Vietnamese villagers in 1950, and Iranian professionals in 2018 have very substantial differences in their action principles and cognitive-practical frameworks?

There seem to be several different approaches we might take. One is to minimize the impact of cultural differences when it comes to material deprivation and oppression. Whatever else human actors want, they want material wellbeing and security. And when political or social conditions place great pressure on those goods, human actors will experience "grievance" and will have motives leading them to mobilize together in support of collective efforts to ameliorate the causes of those grievances.

Another possibility is to conclude that collective action and group behavior are substantially underdetermined by material factors, and that we should expect as much diversity in collective behavior as we observe in individual motivation and mental frameworks. So the study of contention is still about conflicts among individuals and groups; but the conflicts that motivate individuals to collective action may be ideological, religious, culinary, symbolic, moral -- or material. Moreover, differences in the ways that actors frame their understandings of their situation may lead to very different patterns of the dynamics of contention -- the outbreak and pace of mobilization, the resolution of conflict, the possibility of compromise.

Putting the point in terms of models and simulations, we might think of the actors as a set of cognitive and practical processing algorithms and who decide what to do based on their beliefs and these decision algorithms. It seems unavoidable that tweaking the parameters of the algorithms and beliefs will lead to very different patterns of behavior within the simulation. Putting the point the other way around, the successful mobilization of Vietnamese peasants in resistance to the French and the US depended on a particular setting of the cognitive-practical variables in these individual actors. Change those settings and, perhaps, you change the dynamics of the process and you change history.

*         *         *

Clifford Geertz is one of the people who has taken a fairly radical view on the topic of the constituents of the actor. In "Person, Time, and Conduct in Bali" in The Interpretation Of Cultures he argues that Balinese culture conceives of the individual person in radically unfamiliar ways:

One of these pervasive orientational necessities is surely the charac­terization of individual human beings. Peoples everywhere have devel­oped symbolic structures in terms of which persons are perceived not baldly as such, as mere unadorned members of the human race, but as representatives of certain distinct categories of persons, specific sorts of individuals. In any given case, there are inevitably a plurality of such structures. Some, for example kinship terminologies, are ego entered: that is, they denote the status of an individual in terms of his relation­ ship to a specific social actor. Others are centered on one or another subsystem or aspect of society and are invariant with respect to the perspectives of individual actors: noble ranks, age-group statuses, occu­pational categories. Some-personal names and sobriquets-are infor­mal and particularizing; others-bureaucratic titles and caste desig­nations-are formal and standardizing. The everyday world in which the members of any community move, their taken-for-granted field of social action, is populated not by anonymous, faceless men with­ out qualities, but by somebodies, concrete classes of determinate per­sons positively characterized and appropriately labeled. And the symbol systems which denote these classes are not given in the nature of things --they are historically constructed, socially maintained, and individu­ally applied. (363-364)

In Bali, there are six sorts of labels which one person can apply to an­other in order to identify him as a unique individual and which I want to consider against this general conceptual background: ( I ) personal names; (2) birth order names; (3) kinship terms; (4) teknonyms; (5) sta­tus titles (usually called "caste names" in the literature on Bali); and (6) public titles, by which I mean quasi-occupational titles borne by chiefs, rulers, priests, and gods. These various labels are not, in most cases, employed simultaneously, but alternatively, depending upon the situa­tion and sometimes the individual. They are not, also, all the sorts of such labels ever used; but they are the only ones which are generally recognized and regularly applied. And as each sort consists not of a mere collection of useful tags but of a distinct and bounded terminologi­cal system, I shall refer to them as "symbolic orders of person-defini­tion" and consider them first serially, only later as a more or less coher­ent cluster. (368)

Also outstanding in this field is Robert Darnton's effort to reconstruct the forms of agency underlying the "great cat massacre" in The Great Cat Massacre: And Other Episodes in French Cultural History; link.

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