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America’s Tariffs All In Strategy Overlooks U.S. Debt

 

The current 2018 White House administration has been imposing tariffs on China like a tourist in Las Vegas playing a hand of poker, who fails to appreciate that even with a pair of aces, there’s a long way from the opening bet to the final round. The initial consequence of U.S. imposed tariffs may seem appealing at first glance; charging more for imports does realize revenue to the government. The long term results of tariffs, however, as the effects of tariffs cycle through the economy, are adverse in several regards. Tariffs obviously raise the cost of imports for goods and material, increase prices to consumers and slow economic growth. Only industries covered by the tariffs benefit, while the rest of Americans pay for the programs that subsidize the tariffs. Multinational corporations, unlike U.S. based companies and individual Americans, have options to avoid the impacts of tariffs, such as by relocating operations globally so as to minimize impacts. Tariffs also cause layoffs in the workforce, as local employers contract in size as the economy slows due to rising costs for imported goods and materials.

A mutual question for both America and China to answer may be to what extreme is either side willing to go before reaching terms for a trade agreement. Americans are the biggest consumer of exports from China, while China holds almost as much U.S. debt as the 32% held by U.S. investors. America and China could benefit from cooperation, or cause substantial economic damage to both countries. The length to which America and China would go to harm the opposition before attempting to reach an agreement is uncharted. Questions for the White House administration to answer include whether a target goal in tariffs exists, where do the tariffs on China end, and how will the White House Administration support the U.S. economy in response to the negative impacts of the tariffs.

Lowering imports into America will not necessarily result in a corresponding raising of U.S. exports. Consider what happens if the rest of the world, including China’s economy, have no interest or capacity for more U.S. exports. Even if U.S. exports maintain a steady rate of growth, the world’s capacity to absorb U.S. exports is limited, regardless of U.S. tariffs on imports. Finding a reasonable level for tariffs, if any, accordingly, is delicate. A country with a steady rate of exports but low imports, which is where the White House appears to be heading America, reflects a textbook declining economy. Given that the U.S. Administration cannot expect China to match the U.S. in trade, China has a practical limit to negotiations on U.S. trade.

An increase in import costs for goods and materials will undoubtedly increase U.S. debt. America, however, already holds the greatest amount of debt of any country in the world, at $21.5 trillion as of 2018. Some will callously proclaim, what’s a little more U.S. debt to the American economy, American’s will continue to out pace the world in consumption for the foreseeable future, by just amassing more debt. China, interestingly to note, has amounted a total debt well above 250% of China’s gross domestic product (GDP), while the U.S. debt is about 105% of U.S. GDP.  Although China has been charged with currency manipulation of China’s yuan, the U.S. Treasury, unfortunately, has also maintained initiatives to weaken the U.S. dollar to just above where investors would walk away, in order to stimulate the world’s interest to purchase more U.S. debt through U.S. Treasury bonds. With China holding more than 5.5 % of U.S. debt, the largest holder of U.S. debt, the U.S. Treasury may not want to test whether the U.S. dollar can be further weakened with additional rate adjustments.

The U.S. dollar, weakened to a point, may cause U.S. exports to be appetizing to China. China, ironically, has maintained U.S. debt in the form of U.S. Treasury bonds for years, as a part of a strategy to assist America to buy China’s imports. However, China may find a further weakened U.S. dollar, more specifically, the U.S. Treasury bond rate adjusted in response to a weakened U.S. dollar, unappealing for investment. If China plays an all in strategy, dumping U.S. debt, in response to continued American tariffs, the U.S. economy might spiral into another recession, or at best hit a major bump. Whether China will walk away from U.S. Treasury bonds, accordingly, although remote due to the possible self inflicted harm to China that might result, is a real concern for the U.S. economy.

Anticipating the storm that accompanies trade wars, U.S. trade groups that stand to gain in the short term may do well to look toward long term actions that benefit all Americans. U.S. trade groups may lobby to limit tariffs to avoid further harm to the American economy. American consumers, as well, may actively push for legislative representatives to support limited tariffs on China imports to avoid the hardship certain to be suffered by all Americans.

 

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Corporate Money – Foreign Influence in American Politics

 

With the world of politics clamoring about foreigners using social media to influence American politics, what’s interesting is the absence of any discussion about foreign influence through U.S. corporations. In a globalized economy, undoubtedly foreigners allowed to invest do so with enthusiasm in U.S. corporations. Ownership in a U.S. Corporation is clearly a backdoor way to America’s political system, and thereby, opportunity to influence those with the right to participate in the political system. The U.S. Supreme Court, in the Citizens United case of 2010, pronounced corporate money as speech protected under the 1st Amendment. Foreign shareholders of U.S. Corporations, through the Citizens United ruling, gained 1st Amendment rights to participate in the American political system.

Any amount of foreign ownership in a corporation allowed to participate in the American political system should raise concern, one would think. Interestingly, however, only foreign individuals or foreign companies with at least 25% ownership interest must be reported to the IRS. Currently, a corporation may be held by any number of foreign shareholders without being disclosed, where none of the foreign shareholders individually hold 25% or more interest. U.S. communications and media corporations are increasingly being owned by foreigners, strengthened by the Federal Communications Commission (FCC) approval in 2017 of 100% foreign ownership in U.S. broadcast stations, and as a specific example, allowing up to 49% foreign ownership in Pandora, which through ownership in another company, holds a U.S. radio station.

Consider a possible strategy of a supply company or media company that has foreign shareholders. A supply company would most likely lobby for, and support legislators willing to grant concessions, to the detriment of citizens, local businesses and economies. For example, lowering barriers for imports, and driving down wages, by dominating the local labor market, such as might be done by Amazon, Walmart and Home Depot, benefit corporate interests to the detriment of local services, trades and crafts people.

Foreign ownership in media companies, including television, journalism, as well as, technology companies like Facebook, Google, Netflix, and Microsoft, may strategize to influence the type of coverage provided on any number of issues to the benefit of foreign shareholders over the interest of American citizens. The corporate media has been known to miss the mark on unbiased reporting, deliberately withholding unflattering information about a politician or other party in the favor or control of the media company.

Shareholder influence on the lobbying and political support made by a corporation, even with just a single foreign shareholder, allows foreign influence, through a foreigner’s vote as shareholder in a U.S. corporation, and thereby, participation in America’s political system. To preserve America’s Democracy, eliminating corporate money in politics, in order to remove any foreign influence would seem logical. Unlike human citizens, corporations, and multinational corporations in particular, have no national allegiance, and often lobby interests counter to human citizens in industries effecting such areas as human development and quality of life; for example, the prisons and health insurance industries.

Whether the Supreme Court got it wrong with Citizens United is clear. The 1st Amendment rights of all corporations should not extend to political speech, noting that corporations are a legal fiction granted certain rights in order to operate, not the inalienable rights of human citizens. In the case of corporations with foreign shareholders, so as to avoid any possible foreign influence, the “one-drop rule” should apply to exclude corporations with any foreign ownership from political speech. The one-drop rule, from the Plessy vs. Ferguson Supreme Court case in 1895, held that any person with even one ancestor of African ancestry is considered Black. A corporation with any foreign shareholders, similarly, can be considered to be influenced by foreign interests, and thereby, directed to influence the lobbying and political activities of those corporations in which foreign ownership is held.

The transparency of ownership of a corporation would seem reasonable, at least where the corporation, through lobbying and political activities, adversely effects the lives of human citizens. Attempting to obtain corporate ownership information, however, is next to impossible unless one is a shareholder or a rare public disclosure is discovered. Corporations unwilling to make readily available to the public ownership by shareholder nationality, lobbying and political activities information should be excluded from lobbying and participating in any political efforts. Corporations with at least one foreign shareholder, moreover, may be reasonably excluded from political speech in any form in America.

Fix Capitalism for the betterment of human development and quality of life.

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America’s Market Driven Democracy

 

For many of us, not until our declining years, if at all, do we ever contemplate a better world to be inherited by future generations. Ample solutions abound to the essential areas of human development and quality of life, including healthcare, affordable housing, education and a living wage. America’s market driven democracy, however, misdirects priorities, not for the lack of resources, but for profit, preventing any possibility of success to escape to implementation.

An obvious conflict often overlooked is not the tension between conservative and liberal ideas, but the competing interests of human citizens and corporations. Corporations have one main objective, namely, to maximize profit in perpetuity without end. While human citizens have a limited lifespan in which to endure hopefully with all or some portion of our inalienable rights intact, such as “Life, Liberty and the Pursuit of Happiness.” Intuitively, one would think that our democracy was intended to provide a way for human citizens to realize their inalienable rights, while corporations would only be granted certain rights to operate in our system, but most certainly not a mechanism to dominate over masses of humans.

Oddly though, individual human citizens compete to be heard in our democracy, silenced by corporations and money allowed into the political system. The legal fiction that a corporation is a ‘person’ for the purpose of contracts with the rights of a person under the U.S. Constitution has been ruled on by the Supreme Court to extend protection under at least the 1st Amendment, which provides freedom of religion, speech and the press, and the 14th Amendment, which provides equal protection under the law. Corporations have at least two conservative Supreme Court rulings to thank for control over our democracy, San Mateo County v. Southern Pacific Rail Road (“San Mateo County”) from 1882, and Citizens United v. Federal Election Commission (“Citizens United”) from 2010.

In 1882, former U.S. Senator Roscoe Conkling, who had helped draft the 14th Amendment and left Congress to practice law, argued before the Supreme court for the Southern Pacific Rail Road that the drafters of the 14th Amendment used the word ‘person’ instead of ‘citizen’ to include corporations, the notion of which some allege was “a deliberate, brazen forgery.” A former Senator had cooped a law designed to assist the newly emancipated African Americans for the benefit and advantage of corporations. The money interests of railroads, a dominate corporate interest at that time in history, capitalized on a conservative Supreme Court and former U.S. Senator, who was also a drafter of the 14th Amendment, to extend the 14th Amendment to corporations.

In 2010, the Citizens United Supreme Court held that campaign funding by corporations is a form of speech protected by the U.S. Constitution under the 1st Amendment. The conservative nonprofit corporation named Citizens United was granted the right to air political advertisement during primary season, effectively permitting corporate money into politics as a form of protected speech. Subsequent Supreme Court decisions and Congressional legislation have continued to expand corporate rights in opposition to the rights of human citizens.

What the life cycle for an American politician at work, such as former U.S. Senator Roscoe Conkling, where politicians and corporations run like water to every crevasse seeking opportunity to profit from government in favor of wealth over the People. The apparent invisibility of conflicts of interest from the revolving door between politicians and corporations, the regulated and regulator, perpetuate the corporate market interest over human support services.

Human support services, by nature need non-market driven profit-less structures in order to deliver even moderately adequate services. Curing sick people in the U.S., for example, should not be profit driven, no more than anyone question a single dollar of the U.S. military budget approaching ten times any other country in the world. The fact that the U.S. Government is already a single payer for millions of Americans, by way of the Veterans Administration and Medicaid / Medicare, however, does not cease the opposition lead by corporate interests operating to profit from healthcare at the expense of providing healthcare to all Americans. The argument opposing single payer, would of course be voiced by those threatened with elimination, namely, the heath insurance industry. Consider how different our democracy would work by excluding money from politics, and realize that satisfying basic needs for human development and quality of life is possible with restraint on for-profit corporate interests in the areas of politics, media, healthcare, housing, and education.

Yes, our political system has been bought by special interest money of corporations. However, more alarming, in a globalized economy, special interest money is often backed by multinational companies, and by way of shareholder interest, non-citizen foreigners. Currently, only corporations with at least 25% foreign ownership interest held directly or indirectly by an individual or foreign company must be reported to the IRS. However, many U.S. corporations are owned by foreigners who individually do not hold at least 25% ownership although in the aggregate do meet or exceed 25% ownership in a U.S. corporation. With corporate media often funded by multinational corporations, interestingly the silence is deafening in the debate as to why our political system would allow any possibility of foreign influence, directly or indirectly, through corporate participation in politics. Our U.S. communications and media corporations are increasingly being owned by foreigners, strengthened by the Federal Communications Commission (FCC), in 2017, approval of 100% foreign ownership in U.S. broadcast stations, and as a specific example, the FCC allowing up to 49% foreign ownership in Pandora, which through ownership in another company, holds a U.S. radio station.

Placing politics aside between conservatives and liberals, human citizens hopefully will recognize that corporations, in the goal to maximize profit, cannot be expected to voluntarily support profitless markets in healthcare, affordable housing, and education, let alone promote a livable wage. To the contrary, with unbridled rights to dominate our economic and political systems, corporations can be expected to maximize profits to the detriment of human development and quality of life, by:

preventing single payer healthcare from being implemented that would leverage the power of collective bargaining to limit and/or eliminate profit in healthcare;

failing to deliver affordable housing and fighting the enactment of laws directed to strict enforcement for developers to build affordable housing;

limiting and privatizing education to the few human citizens who can either afford to pay or willing to amass debt; and

suppressing wages well below a livable wage while automating to eliminate the need for human labor altogether.

Efforts may be directed to safeguard human citizens from our cohabitants in this market driven democracy, namely, corporations. Human citizens can support and vote for politicians that do not take corporate money, that do support campaign finance reform, single payer healthcare, strict mandatory affordable housing minimum ratio to market rate housing development, public education k-12 through the university level, and a living wage dynamically adjusted to a market index. Speak out against and divest from corporations opposed to any one or more of the essential areas of human development and quality of life, including healthcare, housing, education and a living wage. Expose corporations with foreign ownership interests involved in our political system, in particular those companies in media, healthcare, housing, and education.

Simply because wealth and corporate interest have dominated our democracy does not mean the trend need continue. Ask why not a different way, a more human citizen centric democracy, and be deliberate in your support of human citizens over corporations.  Consider your purchases and business dealings with corporations, excluding corporations with poor records of support for single payer healthcare, affordable housing, education and a living wage. Consider the possibilities of a market driven democracy with safeguards for human citizens to enjoy Life, Liberty and the Pursuit of Happiness.  Fix Capitalism for the betterment of human development and quality of life.