Censorship as a Non-Tariff Barrier to Trade

Finance, Subcommittee on International Trade, Customs, and Global Competitiveness; Censorship as a Non-Tariff Barrier to Trade, June 30, 2020

Limiting information is the most important element of restraining free markets and competition. When western capitalists do this, it is called public relations. When Chinese state capitalists and the Communist Party of China does it, it is called censorship. In both environments, it is a difference in intensity, but not in kind.

Product faults, wage and salary conditions, internal security matters (both whether law enforcement is involved or a part of the conspiracy) product pricing and other “trade secrets.” Show that Capitalism is toxic everywhere it is tried.

The question of Tibet and the Yugurs, the treatment of families on our southern border, workers in the fields and food plants (and their children) whether documented or not,  in congressional offices and on the casting couch all show how rampant censoring reality can be.

The sad fact of the matter is that while there are some owners and executives who are not aware of what is behind the veil, it is more common that executives and co-workers know what is happening in their organizations, companies and societies, as well as those of their competition (both corporate and international). It is only the public that is in the dark, or worse, who look the other way.

What keeps all of this in play is shame. It is cultural in China and Asia, but it is also so in all parts of America. With shame as a societal agreement, censorship is self-enforcing. This is why progressives embrace diversity and openness. With these, shame and censorship are impossible.

Economic empowerment makes shame easier to defeat, although workers and their organizers can be coopted. It is part of the human condition.

The best disinfectant is empowering the individual, from whistleblowers in the Intelligence Community to a protestor challenging a tank in Tiananmen Square. Individuals change cultures. With the conviction of Harvey Weinstein, we know that the darkness can never win.

Another inevitable development is more democracy and ownership in the American workplace. Mutual empowerment leads to open information, the end of both shame and the cover that shame brings. What starts here must spread.

To protect themselves from job loss from their own supply chain and subsidiaries, employee-owned firms and cooperatives will assure that overseas workers have the same standard of living and workplace democracy that they enjoy, thus subverting authoritarianism in the Global South and East. Change in American companies cannot come from governmental action.

While there will always be organizations that hide their dirty linen, this usually comes from less democracy, not more.

American workers must seek the change they want but are afraid to ask for. The existing cooperative and employee owned sector is the best place to start, but it will only come from below. Management never likes change. As Frederick Douglass once said, power concedes nothing without a struggle. It is courage which ends both shame and censorship.

Tax filing and COVID

Senate Finance, 2020 Filing Season and IRS COVID-19 Recovery, June 30, 2020
Please ask Mr. Rettig two questions.

First, what is the income profile of returns expected v. returns received. We would assume that almost all lower income filers (those making under $145,000 per year) have already filed. If this is the case, the filing deadline should not be extended, as it would primarily benefit higher income households. Giving such households a later filing date deprives the United States of much needed interest revenue from late filers.

The second question should be where are the President’s tax returns as requested by the Chairman of the Ways and Means Committee, preceded by the statement “You have the right to remain silent…. Do you understand these rights as I have explained them to you?” The Sergeant at Arms should then take him into custody, detain him at the Marriott and release him only when the tax returns arrive.

Examining the COVID-19 Nursing Home Crisis

WM Subcommittee on Health, Examining the COVID-19 Nursing Home Crisis, June 25, 2020

I will not pull any punches.

There is no tax reform attachment, although tax reform could allow employers to operate or co-own nursing homes, which would likely provide better care, in lieu of paying for Medicaid expenses to do so.

This crisis is worse than you think. For whatever reason, the Coronavirus Task Force has ignored the first round of symptoms of this ailment. In my experience, it begins as a cold with heavy product. Bad timing made many sufferers believe that they had merely suffering from hay fever. There is then a week of dormancy. If you assume that exposure occurs two weeks prior to the first symptoms, there are four weeks, rather than two, before SARS symptoms are manifested, including fever, fatigue from low oxygen levels and fatigue from the manufacture of immunity (which feels like a gut punch over a two-week period).

This realization destroys the paradigm behind social distancing, which did not catch the first two weeks of the pandemic. Also, because of the regional spread of the disease, distancing and closure occurred earlier than necessary and is ending just when it is most needed. 22 states should be closing now rather than starting phases one or two of recovery.

On the positive side, our experience is that once one has marked symptoms (other than simply a cold – which is the only symptom younger people likely experience), full immunity is most likely. All of my associates who have been tested after being sick have antibodies and test negative on the RNA virus screen. Neither I, nor they, need to wear protection except for reasons of solidarity. The desire for solidarity, however, is getting a bit thin, especially as those living in fear tend to shun people who admit to having had the virus.

This realization will also allow people who work in hospitals and nursing homes who have been sick to work without personal protective gear (even a mask). The best thing for their patients and residents is to actually be sick or exposed, quarantined for one month, and then return to work at no risk.
Social transmission of the disease is as likely among peers than across generations. Snowbirds are returning and visiting their older friends. One sneeze by one old friend could kill a nursing home.  Snowbirds that quarantined in their winter homes likely believe they are not a danger. Disease rates in the Midwest will prove that assumption to be deadly.

For those outside nursing homes, and likely within, the diagnosis of COVID is seen by many as a death sentence. This has become a self-fulfilling prophesy because care is not sought until it is too late. Asthma sufferers actually have an advantage here, because we know and can manage SARS2 symptoms with our current medications. For me, Hydoxyzine, fever reducers and an inhaler were adequate.

Likewise, because heart disease is common among older patients, it may be that cardiac history is not a complicating factor. We will see how high COVID deaths reach in comparison to heart attack death for the year. I suspect the latter will be down and the former may be second to cancer, if not the number one cause of death this year.

If social distancing to date has not worked, it is probably too late for re-imposing it to prevent the rest of the nation from experiencing levels of disease, especially in nursing homes, on the order of those experienced in the State of New York. The death rate there is 150 per 100,00 – or 0.15% of the population. Our calculations are a bit more optimistic at 120 per 100,00 – or 0.12% of the population, with most or all states currently in the exposure phase. If this is the case, the virus should burn itself out by October, with many older citizens, both in and out of nursing homes, being infected.

We predict approximately 400,000 deaths nationwide. We have attached a state by state breakdown based on population. We believe that using the word doomed is essential, given that it is too late to correct the current course. This death rate converts, based on the case to death ratio of 5.6%, to 7 million recorded cases in the next few months. (and many more for those who are never tested but who become ill). The good news, however, is that late distancing makes a rebound unlikely. Everyone who will be infected have likely been exposed, or soon will be.

CDC guidance is inadequate to protect seniors and middle aged adults. It is almost impossible to stop a disease that begins in the same manner as a bad cold. CDC guidance (and proposed guidance for after the pandemic) will make the situation worse, not better.

This virus does not seem to hurt most children and teens, and likely most young adults, because they have colds and are constantly fighting them off. Older citizens are farther away from having colds and being exposed to them. Current precautions also degrade immunity because it is not challenged. This is also why Influenza is so dangerous to nursing home residents. Older citizens who are not in a nursing home, especially those in a multi-generational household, are less likely to become sick, primarily because their immune systems are challenged by their snot-nosed grandchildren.

Any parent will confirm that their younger children are constantly sick and that they share the pain – much to the horror of co-workers – although having sick parents come to work also spreads manageable illness. Being shielded, however, leaves on vulnerable to symptoms. My daughter is with her mother in Knoxville. I got sick. My ex-wife probably will not.

Witnesses should be presented with questions based on our comments. These matters need testing and analysis. Currently, the call for solidarity is social policy, not science. Science looks at what the organization does not want to hear – especially when errors have been made.

Health and Wealth Inequality in America

House Budget, Health and Wealth Inequality in America: How COVID-19 Makes Clear the Need for Change, June 23, 2020

Ways and Means, Disproportionate Impact of COVID-19 on Communities of Color, May 27, 2020

There are two factors of concern on minority health care: the general health of the population and access to primary care.

The general health of communities of color among the working and beneficiary classes is sub-optimal, often by design. Diets provided by low wages or inadequate benefits lead to health conditions which include obesity, hypertension and diabetes. Urban air is more polluted, so asthma may be a factor, especially in children. Emergency room-based care means less of a long-term relationship than available to patients with primary care physicians. I mention these factors because they are well covered and likely will be mentioned by the scheduled witnesses.

The second factor shows that the work of healthcare reform is not yet complete. Communities of color have had higher reported cases because they still must seek care in hospitals. Those who work in low-end jobs with no sick leave must seek care outside of normal business hours.

They are often called “essential workers” but are not paid a wage that reflects how essential they really are. Because primary care physicians generally have offices outside their neighborhoods and during normal business hours, they have no choice but to go to the emergency room. Higher exposure may be an artifact of the availability of testing at hospitals compared to doctor’s offices available to upper-middle class populations.

Media coverage of emergency rooms makes it less likely that patients who are sick rely on them will seek care until it is almost too late (which may be the case with the all populations). In the beginning of the pandemic, people who were not badly ill were sent home. Many were likely not anxious to go back.

This may be the second round for minority patients. If they brought their children for care at the beginning of their local outbreak, crowded conditions may have led to exposure they would not otherwise have received. Again, they come back very sick.

The question is, how do we fix these problems?

The most obvious solution is mandatory sick leave, especially for essential workers. Higher minimum wages are necessary because this will increase wages for all but the very wealthy. The CEO class, because they are under-taxed, have an incentive to seek economic rent by cutting worker wages. Higher taxes marginally decrease these incentives. A return to the tax rates of the fifties and early sixties would eliminate them, but the political will to go that far is not there. Too many donors on both sides assure that it will not be any time soon.

The benefit of more money, especially for people of color, is economic advancement and a generally better lifestyle. Workers with more money seek more education. Paid education for displaced workers at higher minimum wage level to meet their opportunity costs will enable career advancement. Those essential, lower wage workers, will benefit from having a smaller labor pool, forcing employers to raise wages even higher. Evidence shows that more money is the answer to poverty.

The contention that giving people more money will cause indolence. The truth is that social policies that assume that workers will not spend money well have their origins in the reactionary desire to maintain a pool of low wage workers to do the jobs that others would not due, save for poverty and racism.

The tax reform advanced by the Center (see the attached plan), particularly the high salary surtax and the asset value added tax will decrease incentives to rent seek by keeping wages lower (some would call that stealing – we certainly do). The subtraction VAT will raise more money for human services, such as Medicare for All.

The SVAT will also give employers the incentive to pay families a higher wage via an increased child tax credit at median income levels, to offer superior quality health insurance or direct care in the workplace, as well as both healthy and sick daycare and to provide an additional credit for paid training for employees from ESL and GED to Associates degrees and beyond.

Improving the lives of the working class, particularly for families of color, will lead to a healthier population that is more resistant to disease outbreaks in the future. We only need to abandon the notion that keeping people poor will make them seek a better life through work. This is a sick joke designed to guarantee a supply of low wage labor, particularly by people of color, so that they will be forced to work jobs that no one else wants.

Immigration reform is also part of the equation. Our illegal economy (not the workers, but the working conditions, lack of union representation and low pay) forces undocumented workers to come to work sick or face a call to the Department of Homeland Security. The government is actively engaged in what amounts to human trafficking. Reform will end this.
 
Attachment  - Tax Reform, Center for Fiscal Equity, February 21, 2020

COVID Paid Leave Proposals/Childcare Crisis

Finance, Round Table on Paid Leave Proposals in the COVID Era, Thursday, June 18, 2020

Subcommittee on Worker and Family Support, Combating Child Poverty in America,- March 11, 2020
Subcommittee on Worker and Family Support, The Child Care Crisis and the Coronavirus Pandemic, June 23, 2020

Childcare:
We believe that childcare is best provided by the employer or the employee-owned or cooperative firm. In the long run, capitalist firms will have to provide this benefit to stay competitive.

On-site care, with separate spaces for well and sick children, as well as an on-site medical site for sick employees, will uncomplicate the morning and evening routine. Making yet another stop in an already busy schedule adds to the stress of the day. Knowing that, if problems arise, parents can be right there, will help workers focus on work.

Larger firms and government agencies can more easily provide such facilities. Indeed, in the Reeves Center of the District Government, such a site already exists. When the crisis is over, a staff visit would prove illuminating.

Smaller firms could make arrangements with the landlord of the building where offices or stores are located, including retail districts and shopping malls. For security reasons, these would only serve local workers, but not retail customers.

WM1: None of this is new. The Old Testament prophets and Jesus himself laid the blame for Israel's troubles on those who ignored the cry of the poor and the call to reform. The reality probably has as much to do with location (and no, this is not an invitation to the acolytes of Henry George to weigh in). 

WM: Poverty is a state of mind as much as an economic condition. It is hard to be poor. If you are working, you most likely have to pick and ACA Silver policy, which means deductibles that cannot be paid and premiums that are harder to afford than a working poor budget can managed. Such stress ends marriages, which only leads to worse financial stress when child support must be paid (leaving both parties at subsistence) and the establishment of a second household.

F: Poverty is a state of mind as much as an economic condition. It is hard to be poor. Sick leave is a rarity for the working poor, now called essential workers. When you are sick, you must chose between working and eating, regardless of consequences for other workers. You must also use the emergency room rather than private doctors, thus increasing transmission risk. Insurance is often inadequate (especially for undocumented workers). Unless the family qualifies for Medicaid, they most likely have to pick an ACA Silver policy, which means deductibles that cannot be paid and premiums that are harder to afford than a working poor budget can managed. Such stress ends marriages, which only leads to worse financial stress when child support must be paid (leaving both parties at subsistence) and the establishment of a second household.

WM/F: My marriage ended for such pressures (especially since working became harder with a disability). My wife must now contend with my daughter’s disabilities in learning and expression – with much of that treatment outside of what her insurance covers. While Social Security pays an income for my daughter, it is not enough to meet her needs nor does it include Medicare. It would if she were with me, but a young lady is better off with her mother.

We are still better off. Emergency room visits at night are necessary to really understand what the Affordable Act did not cover. On any weeknight, families fill the waiting rooms because they cannot see a primary care physician during the day. If they don’t work, they are not paid, whether for the illness of their child or themselves.

In January, we commented that sick leave is especially essential to prevent the spread of disease. Unless one argues that it is ultimately good for the population to catch minor illness to build immunity, once a worker or their child falls ill, having to work while ill can be torture. With Covad 19, the lack of suck leave can be a death sentence, although more likely for care givers than children.

Conditions have been worse and have been justified by the reactionary same nonsense that claims that in the end, the market will sort everything out. Keynes would respond that in the long run, we are all dead. Let me add that one should not have to wait to die for a day off. Marx would agree. For the market to work, there must be both perfect information and no barriers to entry or exit, no black lists, no private salary information. No such luck.

WM: Increasing the general wage level, through higher minimum wages, will remove workers from poverty. $15 was so 2000s. The new ask should be $20. The concept of being a member of the working poor should be banished from the national conversation with an eventual $20 minimum wage for both employment and training program participation, starting with $15 immediately. This wage level should adjust for inflation automatically. The best support for state budgets is to make sure that everyone is trained up to their potential.

WM/F/C: The perception that doing the right thing makes a business non-competitive is the reason we enact minimum wage laws. Because the labor product is almost always well above wages paid, few jobs are lost when this occurs. Higher wages simply reduce what is called surplus value, and not only by Marx. Any CFO who cannot calculate the current productive surplus will soon be seeking a job with adequate wages and sick leave.

The requirement that this be provided ends the calculation of whether doing so makes a firm non-competitive because all competitors must provide the same benefit. This applies to businesses of all sizes. If a firm is so precarious that it cannot survive this change, it is probably not viable without it.

WM: The low wage economy does benefit from the lower prices that may result from them, but a two-tier economy is abhorrent in modern society. Indeed, higher wages, benefits and subsidies provide a bigger bang for the buck than is lost to the donor class. Indeed, the rich will likely see higher profits when more people have more money, although they may find it harder to obtain cheap household labor.

WM/F/C: We have included as our usual attachment the latest version of our tax reform proposals. Please refer to the provisions for a Subtraction VAT regarding the remainder of these comments, as well as our treatment of individual payroll taxes, which explain why a child tax credit is better than an EITC. Applying for an EITC is part of why it is expensive to be poor. For most, outside help is needed to calculate it. Paying it is a cost of poverty.

Our main proposed employer-paid subtraction value added tax. This levy would be used more to channel tax expenditures to employees rather than through categorical or block grants. The most important feature is an expanded refundable child tax credit, which would be distributed with pay and set to provide income at median income levels.

WM/F/C: The S-VAT could be levied at both the state and federal levels with a common base and tax benefits differing between the states based on their cost of living (which would be paid with the state levy). The federal tax would be the floor of support so that no state could keep any part of its population poor, including migrants. It is time to end the race to the bottom and its associated war on the poor.

C: Like sick leave, these costs could be an offset to the employer paid S-VAT. In the interim, the benefit could be funded as a tax credit for corporate, pass through and self-employment taxes.

WM: Poverty becomes multi-generational when parents are not functionally literate in standard English. The only way to get children out of poverty is to educate the parents while meeting their opportunity costs (paying them to attend class). The S-VAT will facilitate such human capital expenditures, with credits to support tuition, wages and benefits for low-skill workers from ESL and remedial education to apprenticeship. These benefits can be used in cooperation with existing workforce investment boards, community colleges and economic development agencies.

Private education providers should also be included in the mix, including and especially the Catholic education system. Blaine Amendments need repeal, opposition to unions ended and a focus on non-college bound students encouraged.

Going back to healthcare, dealing with seniors is absolutely necessary for states to get out of their perception of poverty so that they can fully commit to doing so for Children. Medicaid for senior citizens and the disabled is a huge contingent liability for some states. In his New Federalism proposals, President Reagan offered to assume these costs in exchange for state funding of all other federal support. The first half of this proposal should be implemented in the form of a new Medicare Part E with no requirement for local funding.

The remainder of health costs would be paid through employer subsidies to low-wage trainees, as described above through an S-VAT, with state goods and services taxes (invoice VAT) covering cash, food and health benefits for unattached non-workers until they can be placed in the appropriate employment or disability program (including substance abuse intervention).


Attachment – Tax Reform, Center for Fiscal Equity, February 21, 2020 

Tax Relief to Support Workers and Families during the COVID-19 Recession

House Budget, Addressing the Economic Impacts of COVID-19: Views from Two Former CBO Directors, June 3, 2020
WM Subcommittee on Special Revenue Measures, Tax Relief to Support Workers and Families during the COVID-19 Recession, June 18, 2020 

In general, the current economy is more medical furlough than recession. Increasing and adding benefits for many turns it into paid sick leave funded by government, which is entirely appropriate. The danger is that if benefits are extended for too long a period, people will desire to stay unemployed, leading to a situation where more money is chasing a decreasing supply of goods and labor. If this turns into an upward cycle of more benefits and less economy, not just stagflation, but Hyper-Stagflation is possible.

This crisis shows some of the systemic weakness in the economy. Too many people are paid too little. This creates a second-tier economy of low wages and subpar products. More pay through a higher minimum will mean better products and more people working. If layoffs result from a higher wage, a paid training program (to meet opportunity costs of trainees) from ESL to Associates degrees will add to a push for higher wages. A higher minimum wage could also be used to recalculate benefits for retirees and the disabled. The increased economic activity and higher revenues would pay for themselves.

Low wages do not benefit shareholders, who receive a normal profit. Other workers benefit because their wages rise with the minimum. Only the CEO-Donor class are made worse off. Their wage theft is natural, given their low marginal tax rate in comparison to the time of Eisenhower and Kennedy (whose tax cuts only took effect in 1965), The differential between productivity and wages started about a year after the tax cuts took effect. The effect was multiplied in 1982.

Low family wages are also a problem exposed by the current medical furlough. The EITC and Child Tax Credit were enacted on a bipartisan basis, with Republicans in the lead. Sadly, benefits are inadequate and non-refundable. This could and should be fixed. Permanent tax reform with a Subtraction Value Added Tax levied on employers with a credit for a median income for each child of $1000 a month, with pay and with no income cap will solve this problem permanently and needs no pay-for to offset it.

Attachment One: Disproportionate Impact of COVID-19 on Communities of Color, Ways and Means, May 27, 2020

Attachment Two - Tax Reform, Center for Fiscal Equity, February 21, 2020

2020 Trade Policy Agenda

Finance/WM, June 17, 2020
Senate Finance, USMCA, July 30, 2019
House W&M, Trade, Mexican Labor Reform June 25, 2019
Senate Finance, President's 2019 Trade Policy Agenda and the United States-Mexico-Canada Agreement, June 18, 2019
House Ways & Means, 2019 Trade Policy Agenda: Negotiations with China, Japan, the EU, and UK; new NAFTA/USMCA, U.S. Participation in the WTO and other matters, June 19, 2019

2020:
The comments on the incompetence of this President are more obvious this year, when trade was put in front of a pandemic, leading to domestic disaster. He then reversed his comments and is inciting more retaliation from this authoritarian opposite in China. Sadly, in the impeachment trial earlier this year, the House did not cite this incompetence nor did the Senate consider it, so here we are again. More’s the pity.

Trade Policy only 2019, 2020 attachment:
Trade negotiations with China, Japan, the EU, and the UK threatening tariffs have taken on the character of economic gunboat diplomacy, but without the Navy. These occur because the President is ill equipped by his background as a businessman to work cooperatively, which is the essence of governance in a free society. He has a freer hand in trade negotiations. Sadly, his experience as a CEO has not served the nation well. The modus operandi of most executives is to break things in order to be seen fixing them.  This must stop. The public is not amused, including the Chamber of Commerce, farmers and the stock and commodity markets.

The solution to these problems lies not with oversight of trade policy but through using criminal contempt proceedings against the leadership if the Internal Revenue Service, the Secretary of the Treasury and anyone in the White House, possibly, if not probably, including the President for not releasing the tax information requested by the Chairman. The penalties for refusing to do so are quite clear and the opinion that a sitting President cannot be indicted can no way apply to this matter.

Today's witness is not likely to say his boss is a vainglorious idiot, so allow me to. It is well known that in this Administration, professional diplomatic expertise is not valued. Mr. Trump prefers to shoot from the lip. The incompetence of this president is tragic for our ongoing trade policy, which relies on a high degree of professionalism and careful work over a period of several administrations. NAFTA negotiations and it's successor, as well as similar free trade agreements are an example of this. The Trans-Pacific Partnership was one such effort, but it was derailed by presidential politics on both sides. In trade, what is good politics is often not good economic policy.

Trade Policy, 2019 only:
This is not to say that there are not fundamental issues that need to be addressed in current and future agreements. We have reservations in matters having to do with the U.S.-Mexico-Canada Agreement.  Material stating our reservations (which should be yours as well, but more formally) on both Enforcement and who is allowed to migrate are brought forward from our testimony on May 22nd of this year and July 2017 on the modernization of NAFTA. There are two other issues we would like to address as it relates to NAFTA and to all subsequent trade agreement.

All 2019:
The first is Chapter 19 Tribunals. These tribunals put national and state sovereignty at the mercy of the interests of multinational enterprise. If such enterprise were employee-owned, we would see no problem. That, however, is not the case. Local workers and the environment are put at the mercy of the wealthy few.

The second is visas. Canadian (including refugees from Hong Kong) and American citizens can immigrate for one year (renewable) on a NAFTA visa. Mexican workers cannot. This is purely racism. If the Congress believes there are too many Mexican workers in American fields and factories, repeal right to work laws and immigration restrictions. Most employers will prefer American workers if they have to pay a union wage and operate under safety standards set in collective bargaining. Until then, make visa rules uniform and apply them to workers already here. If this does not happen, someone may yet raise an equal protection case in our courts, which will also give us a test of the constitutionality of the Chapter 19 tribunals.

Mexican Labor and USMCA 2019:
Labor reform will take the pressure off of migration, although that is now the case already. Mexican workers who can join a Union in Mexico and not in so called right-to-work states will face an easier choice to stay home. We hope that this will lead manufacturers in such states to rethink their positions on organized labor and American labor unions to seek expansion into these states and to link with Mexican unions in solidarity. This may increase prices for some goods, particularly food, but it will increase wages even more, particularly among lower wage workers. We have suffered under a two-tier economy for too long, with undocumented workers suffering the most of all. As a more union-based economy progresses on both sides of the border, the desire for more workplace democracy through employee ownership. Tax reform can certainly facilitate expanding ownership when actual worker control, rather than simply a change in management at the top, evolves.

Trade Policy only 2019:
WTO participation, like NAFTA/USMCA, have issues regarding extra-territorial regulation of American business interest. The interesting question is who is regulating who? We explored this in comments to the Senate Finance Committee on March 22nd of this year. You can find these comments in Attachment One. The interaction of tax and trade is worthy of mention. Attachment Two contains our revised tax reform proposals. Two elements of these proposals are discussed below.

Trade Policy and USMCA 2019:
Consumption taxes could have a big impact on workers, industry and consumers.  Canada as a Goods and Services or Value Added Tax (VAT), as does Mexico. In our tax reform proposal, we refer to such taxes as an Invoice or I-VAT.  Such taxes are zero rated at the border, so American consumers benefit while our lack of these taxes means that Canadian and Mexican consumers pay our taxes indirectly while getting none of the associated benefits. This essentially means they often shop elsewhere, which is not good for our workers or industry.

Trade Policy 2019, 2020 attachment:
Enacting an I-VAT is far superior to a tariff. The more government costs are loaded onto an I-VAT the better. Indeed, if the employer potion of Old Age and Survivor’s Insurance, as well as all of disability and hospital insurance are decoupled from income and credited equally and personal retirement accounts are not used, Then there is no reason not to load them onto an I-VAT. This tax is zero rated at export and fully burdens imports.  Seen another way, to not put as much taxation into VAT as possible is to enact an unconstitutional export tax. Adopting an I-VAT is superior to it’s week sister, the Destination Based Cash Flow Tax that was contemplated for inclusion in the TCJA. It would have run afoul of WTO rules on taxing corporate income. I-VAT, which taxes both labor and profit, does not.

The second tax applicable to trade is a Subtraction VAT or S-VAT. This tax is designed to benefit the families of workers through direct subsidies, such as an enlarged child tax credit, or indirect subsidies used by employers to provide health insurance or tuition reimbursement, even including direct medical care and elementary school tuition. As such, S-VAT cannot be border adjustable. Doing so would take away needed family benefits. As such, it is really part of compensation.  While we could run all compensation through the public sector.

The S-VAT could have a huge impact on long term trade policy, probably much more than trade treaties, if one of the deductions from the tax is purchase of employer voting stock (in equal dollar amounts for each worker).  Over a fairly short period of time, much of American industry, if not employee-owned outright  (and there are other policies to accelerate this, like ESOP conversion) will give workers enough of a share to greatly impact wages, management hiring and compensation and dealing with overseas subsidiaries and the supply chain – as well as impacting certain legal provisions that limit the fiduciary impact of management decision to improving short-term profitability (at least that is the excuse managers give for not privileging job retention).

Employee-owners will find it in their own interest to give their overseas subsidiaries and their supply chain’s employees the same deal that they get as far as employee-ownership plus an equivalent standard of living.  The same pay is not necessary, currency markets will adjust once worker standards of living rise.  Attachment Three further discusses employee ownership.

Over time, ownership will change the economies of the nations we trade with, as working in employee-owned companies will become the market preference and force other firms to adopt similar policies (in much the same way that, even without a tax benefit for purchasing stock, employee-owned companies that become more democratic or even more socialistic, will force all other employers to adopt similar measures to compete for the best workers and professionals).

In the long run, trade will no longer be an issue.  Internal company dynamics will replace the need for trade agreements as capitalists lose the ability to pit the interest of one nation’s workers against the other’s.  This approach is also the most effective way to deal with the advance of robotics.  If the workers own the robots, wages are swapped for profits with the profits going where they will enhance consumption without such devices as a guaranteed income.

Attachment: Tax Reform, February 21, 2020
Attachment: Employee Ownership from Improving Retirement Security for America’s Workers, June 6, 2018

Unemployment Insurance During COVID-19

Committee on Finance, Unemployment Insurance During COVID-19: The CARES Act and the Role of Unemployment Insurance During the Pandemic
Tuesday, June 9, 2020, 2:30 PM

Earlier this year, I predicted a recession due to bubbles in Cryptocurrency and in mortgage backed securities holding rental housing assets, which I communicated to the House Budget Committee in January. A world-wide pandemic was the furthest thing from my mind. I reiterated these points to the Senate Budget Committee as I was suffering from a bad cold. Five days later, that cold turned out to be SARSCoV2.

In general, the current economy is more medical furlough than recession. Increasing and adding benefits for many turns it into paid sick leave funded by government, which is entirely appropriate. It is also dangerous. The implementation of CARES, particularly the Unemployment Insurance relief, is fraught with problems.

The States have not been able to absorb the money. There are simply too many people in need of assistance. The lump sum payments, which were negotiated by Secretary of the Treasury, Steve Mnuchin, made sure that landlords who had leveraged their properties into mortgaged backed securities would get paid. 

This is convenient for the Secretary, as he helped set up these securities to extract the equity from the limited liability companies that he and his partners own. Aaron Glantz, who documented the establishment of these firms and securities should be called to testify before another round of stimulus checks are routed through renters to the Secretary and his partners.

The immediate danger, which no one is talking about (call me Cassandra) is that in short order, a large percentage of the unemployed are about to get large back payments from their state governments. This is occurring as some workers have recovered, but many in America’s Heartland are about to need that paid sick leave as SARSCov2 reaches their states. Recent reports indicate that food prices are inflating as the economy continues to stagnate.

This is what is known as a perfect storm. Economic historians will likely call this period of time HYPERSTAGFLATION. Sadly, the genie cannot be put back in the bottle, although the best course for now is not to panic if (and when) the storm breaks.
 
Attachment – Addressing the Economic Impacts of COVID-19, House Budget Committee, June 3, 2020

Attachment – Why Federal Investments Matter: Human Services, January 2020