Why Trump’s tax bill won’t work

Hafsah

Hafsah

Writer. A Caffeine dependent life-form. Original Hopeful Rational Inquisitive IngeniousPhotographer Sailor Philosopher Happy. Serial Chips and Salsa Eater.Curious and ambitious. In-between sofa cushions.
Hafsah

Latest posts by Hafsah (see all)

“Massive tax cuts for working families across America,” was how Donald Trump described the tax bill, which passed the Senate on Saturday, in the first legislative success of his Presidency.

Trump’s main promise in his campaign was to ensure that middle class families can make ends meet. President Trump claimed that:

  1. Tax relief for Americans (especially the middle class) would help people achieve the American dream and let them keep more money instead of paying it in taxes.
  2. President Trump wanted to simplify the tax code and let everyone keep more of their money. Because lets face it doing taxes is a huge headache.
  3. President Trump also has a main aim of increasing jobs for Americans. It’s a basic economic principle: if tax rates are cut for businesses they would be more likely to invest because they get to keep more of their profits. This will make America globally competitive again.
  4. However Trump claims that it will not add to the American debt. This is something that I do not agree with economically speaking.

What is this tax reform package?

The Senate’s bill lowers the top individual income tax rate from 39.6 per cent to 38.5 per cent and slashes the rates for most lower income tax brackets too.

Other major changes are a doubling in the exemption of the US version of inheritance tax and increasing access to a child tax credit.

For firms, the bill cuts the headline US corporation tax from 35 per cent to 20 per cent.

There’s also a tax cut for businesses structured as “pass through” entities, which means their income “passes through” to their owners and is taxed at personal income tax rates. The top tax rate on income earned from these entities is due to fall from 39.6 per cent to 15 per cent.

The tax cut for “pass through” companies is also likely to benefit wealthy individuals most of all. One major user of these structures is Donald Trump himself.

What about the impact on the US economy?

A group of economists wrote an open letter in the Wall Street Journal last month supporting the President’s tax cutting efforts and suggesting that the package could boost the US economy by 3 to 4 per cent in the long term.

A larger group of economists (137 in all) wrote an open letter making similar assertions.

What about the US deficit?

The Treasury Secretary Steven Mnuchin, a former Goldman Sachs banker and Hollywood financier, claimed in September that the tax cutting legislation would raise US GDP so much that it would not increase the country’s deficit (the gap between tax revenues and public spending) over the long term. Indeed, he even claimed it would ultimately reduce the US national debt.

The Byrd rule

The Byrd rule limits the types of legislation that can be moved through Congress under what’s known as budget reconciliation. Normally 60 votes are required in the 100-member Senate to bring debate to a close. The Senate’s reconciliation process, which allows for budget-related bills to be passed with a simple majority, was originally designed to pass difficult deficit-reducing bills that raised taxes and cut spending.

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To meet the conditions of budget reconciliation, the bill would have to produce no revenue losses, beginning in 2028. Thus, Republicans ostensibly hoped that the JCT would find their bill producing smaller and smaller deficits over time. Instead, the committee found that the GOP plan would produce its largest deficit — $216.7 billion — in 2027.

You can’t erase $200 billion in annual deficits through budget gimmicks, alone. You can’t do it through giving the existing bill a nip and tuck. Heck, you can’t even do it by ripping out the heart of the GOP plan: Republicans could leave the current corporate tax rate at 35 percent, and their bill would still be too expensive to pass.

What’s more, the Senate legislation relies on the repeal of the state and local tax deduction for more than $1 trillion of its new revenues. But House Republicans have already signaled that they don’t have the votes to repeal that benefit. So, in all probability, Mitch McConnell has far more than $200 billion a year to make up, if he wishes to pass Trump’s tax plan into law.

A Global Convergence: My First Book

David McDonald

David McDonald

David is a 19-year-old Canadian student currently attending the University of Guelph. He currently studies Public Management and economics with hopes of one day becoming an accomplished journalist. David enjoys reporting on global events and actively try to make a difference in the world.
David McDonald

I am very excited to announce the release of my first book, A Global Convergence!

After a year and a half of writing on The Global Millennial, I’ve written almost 300 economics-based pieces that have culminated in my first book. I started writing because I felt that uni courses, especially at the undergrad level, only expose you to a fraction of any subject and I really wanted to know if economics was right for me before pursuing an expensive major.

My works have been published in Forbes, The Huffington Post, and Apple News, but nothing compares to creating something tangible that will stand the test of time. I can safely say that although I am still very new to the world of economic thought, I feel that this book can serve as a great introductory read to anyone that is interested in exploring economics, politics, environmentalism, societal trends, and how to foster a more sustainable future for all of humanity.

The book dives into the globalization discussion with a particular focus on how economic theory and history can help answer one pressing question: Has globalization been helpful or detrimental to the sustainability of our planet, and advancement of our species?

The discussion begins with a brief, yet detailed summary of the history of global trade. Although it is difficult to say when true globalization began, I argue that the framework for international trade was established much sooner than some may expect.

A majority of the book focuses on globalization in the 21st century. I discuss the impact of internationalism on various regions and their subsequent powers; Asia, Europe, Africa, and North America are all discussed in detail throughout the book with reference to many notable events that continue to be important points of discussion to this day. Brexit, climate change, the financial collapse of 2008, China’s role in the global economy, and the threat of nuclear war are all notable topics strung throughout this work. Authentic, controversial, and rigorously documented, A Global Convergence delivers an indispensable discernment of today’s central issues in a way that anyone can enjoy.

I am running a 5-day promotional period where the book will be FREE starting tomorrow. If anyone can spare a few moments to download the book and give a good review it will really help the book get ranked in search engines!

Thank you to my family and friends who have been supportive of my writing thus far, and of course, all of the readers who continue to visit The Global Millennial. you guys are awesome!

Regards,

The Real Reason Why Latin America And Africa Have Failed To Develop Adequately

David McDonald

David McDonald

David is a 19-year-old Canadian student currently attending the University of Guelph. He currently studies Public Management and economics with hopes of one day becoming an accomplished journalist. David enjoys reporting on global events and actively try to make a difference in the world.
David McDonald

Latin and Africa as an entirety aren’t necessarily struggling to develop, but there are definitely countries within these regions that aren’t developing at all for a number of reasons.

Latin America

To start with Latin America, the region seems to be entering a period of growth again after six years of slowdown, including two years of recession. Unfortunately, these years of economic stagnation have hindered social progress as well as heightened social animosity towards certain governments.

Latin America is expected to expand by 1.2% in 2017, followed by 2.1% in 2018. Argentina and Brazil are climbing out of a recession, while Mexico will keep growing, and Central America and the Caribbean will grow faster. But the six years of slowdown had adverse effects on jobs and household incomes: inequality is no longer dropping, the growth of the middle class has slowed, and nearly 39% of Latin Americans remain vulnerable to falling back into poverty.

The region is focusing on boosting investment, savings and exports and fostering private sector development. Countries in Latin America need to address external and fiscal imbalances, strengthen regional economic integration to become more competitive globally, and avoid unduly sacrificing investment in the adjustment process. Current gaps in logistics and infrastructure are important obstacles for intra-regional trade; the average logistics costs are 3 to 4 times higher than OECD countries.

Latin America and the Caribbean are poised to see a new wave of economic expansion as the region focuses on social stability.

Crime and violence plague Latin America, this is not surprising news. A large reason for the lack of economic and social development is the lack of law enforcement authority across the entire continent. Why is this? Officers continue to be paid off by cartels because the simply barely make enough money to live off of to begin with.

Economic growth alone won’t be enough to continue recent social gains and the reduction of Latin America’s persistent inequality. To do so, the region needs to invest in people, particularly the poor. South America as a region, continues to underperform in education: around one out of every three youth doesn’t finish high school. Investment in education quality will play an important role in allowing the poor to contribute to and benefit from future economic growth.

Africa

When you think poverty, you likely think of Africa. Faulty government policy, corruption, crime, lack of industrialization and inadequate social systems have all played a role in Africa’s lack of economic and social development through history.

It’s quite interesting to think about Africa’s failure to properly industrialize when you consider our roots as a species date back to ancient Africa. In hindsight, Africa as a continent, was once the richest areas on Earth during the rule of Mansa Musa in the 14th century.

Aside from social instability, why has Africa failed to industrialize?

One of the main reasons for Africa’s slow industrialization is that its leaders have failed to pursue bold economic policies out of fear of antagonizing donors. As it were, the strongest criticism of this policy vacuum came not from the debate in Addis Ababa, but from the op-ed pages of The Financial Times, a British daily.

“Africa stands on the cusp of a lost opportunity because its leaders—and those who assess its progress in London, Paris and Washington—are wrongly fixated on the rise and fall of GDP and foreign investment flows, mostly into resource extraction industries and modern shopping malls,” said Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria. In a forcefully argued op-ed, he implored African countries to “reject the misleading notion that they can join the West by becoming post-industrial societies without having first been industrial ones.”

While many countries may deindustrialize as they grow richer, many African countries are deindustrializing while they are still poor…partly because technology is reducing the demand for low-skilled workers.

Despite the negatives, Africa is poised to grow in the next decades, they just need to focus on industrializing as well as implementing new-technology sectors that can compete globally. Although some areas are growing, Africa cannot sustain any level of growth if they don’t consistently develop.

Another reason for Africa’s lack of development is due to the continent’s weak infrastructure. Lack of electricity, poor roads and congested ports all make transporting goods across the land much more difficult, and drive up the cost of moving raw materials.

African governments face the problem of having to invest in infrastructure while maintaining some form of social institutions – the issue is that these governments simply aren’t collecting enough money through tax revenue to be able to fund such projects.

Almost half of the 10 million graduates churned out of the over 668 universities in Africa yearly do not get job, Kelvin Balogun – President of Coca-Cola, Central, East and West Africa – has said. Unemployment in Africa: no jobs for 50% of graduates

African industries are not expanding at the rate they should be, which is creating a sinkhole of money invested in university educations across the continent.

African countries are doing a great job of shifting resources to where they need to go. And African agriculture, which still employs the bulk of the population, has been getting more productive. So African workers have been leaving the land as farming techniques improve, and moving to the city where they can do other stuff.

The problem for Africa is that the other components of their economy haven’t been getting more productive. African manufacturing and services industries are still extremely bad at what they do. This means as workers move from the countryside to the cities, they push productivity and wages down. In order for Africans to get richer, they’re going to have to figure out how to get better at things other than farming, which means implementing production methods popularized by the West and in Asia.

Why Haven’t These Regions Developed As Fast As Asia?

Asia as a region has experienced rapid economic growth due to a number of reasons, but most notably, most Asian countries battle against poverty, corruption, and slow economic growth, all while trying to maintain a sturdy method of self-governance.

So why has Asia expanded so rapidly, while regions like Latin America and Africa fail to do so?

Asian countries have low corruption, good government regulation, low crime, and most of all, have collectively focused on prioritizing the expansion of export-based manufacturing industries.

Asia is home to almost 60% of the world population, with a huge proportion in the “employable” phase, which is an enormous advantage for growing GDP.

The newly formed governments in Asia were successful in framing policies and proper procedures to facilitate development of business and trade, as well as simultaneously grabbing the right opportunities to ensure that their huge populations become a stimulant for further growth rather than a hindrance. For example, China became the manufacturer for the world while India became the service provider to the West. This commendable progress did not happen all at once.

Judging by the diagram above, Newly industrialized Asia has grown more rapidly than almost anywhere else on the planet. Africa and Latin America seem to be on decline.

In just a span of mere 50-60 years, Asia has emerged as a global economic and political power, and the region, boasts the highest Gross Domestic Product in the World in terms of Purchasing Power Parity. How did Asia, that once was a struggling region, achieve this phenomenal progress in a few years time?

Historically, most Asian countries have had an abundance of natural resources,which was the main reason why most Asian countries were attacked and ruled by other more formidable countries in the past. However, having natural resources does not in any way translate into economic growth and stability. Just take Africa for example, Africa dominates the global diamond market, but has some of the highest political instability and crime rates on the globe. In 2008, the continent produced 55 percent of the world’s diamonds. Botswana, Angola, South Africa, the Democratic Republic of the Congo, and Namibia are Africa’s largest producers of diamonds, but all have greater levels of crime than are experienced in China.

In terms of Asia, most of these governments have still not been able to fully utilize these natural resources to its hilt, due to lack of funds to sustain research and innovation to preserve and exploitation taking place to these natural resources.

Asia Has Capitalized On Opportunities To Grow

China began unprecedented economic and social expansion under the Peoples Republic of China regime which was implemented in the 1980;s. During this time, China started opening its doors to foreign companies. Over time, due to their cost advantage, they became the factory of the world. They also focused a lot on ameliorating farm productivity, which was imperative to their then primarily agrarian economy.

India on the other hand, capitalized on the birth of the Information Technology revolution. The availability of English-speaking skilled workers resulted India to be the outsourcing hub of the world. Similarly, economies of Indonesia and Malaysia have also advanced. Of the 48 Asian nations, few others including mineral rich countries in the Central Asia such as Kazakhstan are making good progress in today’s age.

Asia’s investments in exporting industries helped alleviate poverty, which raised millions of people up to the middle class, and created massive amounts of tax revenue for their governments. Asian governments spent years rebuilding infrastructure as well as social institutions such as schools and hospitals. Their investments in education have created a good quality, capable workforce.

But most importantly, Asia’s students had a place to work when they came out of school, unlike those living in Africa.

Because Asia focused on their strengths (population, natural resources, technology) they were able to lay an economic framework that has rewarded them for decades, and has granted them the ability to work on every level of their social and economic frameworks.

Africa and Latin America on the other hand, have yet to capitalize on any major industries. They have little to offer the global market other than natural resources. In fact, over-reliance on such a thing will inevitably cause economic collapse, as experienced in Venezuela.

To briefly explain the situation, the Socialist government led by Hugo Chavez relied too much on oil exports to fund government expenditures. Venezuela has the largest oil reserves on the planet, but once oil prices rose, they could no longer export as much as they used to. Because Venezuela’s economy was built around oil exports, the government had to begin printing and importing money in order to pay for social institutions. This inevitably led to immense immense hyperinflation. The country is now on the brink of utter economic and social collapse.

What lesson can Latin American and African nations take from this? Diversify your economy and offer something to the global market that no other country can do as good as you, in other words, capitalize on your comparative advantage.

Many African and Latin American nations have had some difficulty in making the transition from low-end manufacturing toward more sophisticated and technology-intensive goods—relative to the rest of the continent they are the “leopards” of industry. Perhaps it is time to think again about investment climate reform.

Digging Deep: Chinese Extraction in Latin America

Christina La Fleur
Check out

Christina La Fleur

Researcher interested in political economy, public policy, international relations, and...pretty much everything in that ballpark.You can find more of my work at christinalafleur.wordpress.com.
Christina La Fleur
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China’s investment in extractive industry in Latin America illustrates the strength of China’s economic and diplomatic reach, and the extensive implications it may have for Latin America.  China has the opportunity to lead in extractive industry and in international governance.  For Latin America, the exchange highlights global debates: between foreign investment and local empowerment, national government and local consequences, international opinion and national choice, indigenous rights and land ownership, legal and illegal protest…all fueled and complicated by foreign mining industry.

57.53% of Chinese Latin American investments are in energy.  Reflecting on the opening of Mexico’s energy sector to foreign investment, ICIS China energy research director Li Li said, “…foreign companies, including the Chinese State-owned companies…will have more development opportunities and a more comprehensive strategic layout in South America….” Latin Americans see the potential, but also the risks.  On a stakeholder survey, 75% Latin Americans were “very familiar” with the mining industry.   As for benefits, Latin Americans were most likely to point to contributions to the host’s national economy.  43% called it a “significant economic actor with impacts that can be minimized and/or mitigated.” But Latin America was second most likely, among 6 regions, to see mining as low value to society.  Their chief concerns were water usage (31%), governance/regulations (26%), environmental concerns (24%),  social concerns/legacy issues/public image (22%), and community engagement (17%).

In 2014 the countries with the most active mining disputes were Mexico, Peru, and Chile, with around 35 each, and the Catholic Church has played a role.  The Churches and Mining Network brings together church leaders from 15 countries looking for mega-mining alternatives.  The Canadian Conference of Catholic Bishops wrote a letter to the prime minister seeking more regulation for Canadian mining companies abroad, especially Latin America.  The Pope himself, in his encyclical letter “Laudato Si:  On Care for Our Common Home,” brought up the issues of indigenous rights, water, and inequality with regards to mining projects.

The true economic impacts of extractive industry are hard to determine.  The ICMM Mining Contribution Index tries.  The measure ranked 5 Western Hemisphere countries in the top 25 most impacted by mining in 2016: Guyana, Jamaica, Dominican Republic, Nicaragua, and Chile. 5 Latin American countries make the top 20 list by production values: Chile, Brazil, Peru, Mexico, and Colombia, between $47.1 and $6.6 billion.

February 2017 IMF working paper evaluates the impact of hydrocarbon extraction on Latin American economies:  GDP grows 3-5 years after discovery, and the current and fiscal balance are positive after a few years.  In Bolivia 2001-2012, poverty fell and manufacturing/construction employment increased in mining and gas municipalities. Chinese business has generated at least 1.8 million jobs in Latin America and the Caribbean  (LAC) between 1990 and 2016, 4% of jobs created.

In addition, Chinese loans have been parceled out to almost a dozen LAC countries, 70.82% in energy. While that investment can be used for national advancement, the inability to repay debts is a risk to the economic and political infrastructure of the country in question.

At the same time, emerging American isolationism, exemplified by the President’s threat to end North American Free Trade Agreement, pushes economic competitors like China and Mexico together. At the BRICS summit, Mexican President Nieto looked forward to contributing to the dialogue on South-South cooperation, development, trade, and the eradication of poverty.  Those priorities illustrate the scope of the Chinese vision, the marketed intellectual, cooperative product if you come to the Chinese side of the table.

The US also withdrew from the Paris Climate Accord.  On the other hand, the Chinese 13th Five Year Plan prioritizes higher value-added industry but makes room for “green mining,” intended to reduce the environmental impact of extraction and part of a general push towards investment in green projects and financing.  Critics, however, point out the country’s lackluster history with labor and environmental rights and standards.

Promisingly, the 2016 EITI Secretariat report found Chinese companies generally cooperative with EITI countries around the world.  At home, the Chinese government has begun to target mine safety by improving legislation, inspections, and closing small mines.  These could indicate coming changes for all Chinese extraction corporations.

Better regulations could help address the problem of protests in Latin America. “Socio-political and community risks” delays cost mining companies up to $20 billion a week.  Decisions to limit investment can have consequences.  They could scare off new investors in other industries. While the recent El Salvador ban on mining is intended to protect citizens and their water, native artisanal miners are now on the way out of a way of life.  An alternative to a ban could be strict penalties for violating regulations, it would require strong political infrastructure.

Latin American citizens may not trust their governments to make those decisions.  On the annual Global Shapers Survey, the 6,699 Latin American and Caribbean youth distrusted institutions to a generational extreme.  78% said the most frustrating thing about government leaders was corruption- versus 51.6% globally.  65.3% said government accountability/corruption was the biggest problem facing their country.

For Latin America, the rhetorical push towards green mining, international safety standards, and internal regulations could mark the start of Chinese government pressure on Chinese industry to adhere to higher standards, addressing the root of many protests against mining projects in the region.  However, it will all depend on enforcement and continued reform, and China isn’t the only player in the region.  For the region to fully reap the benefits of investment, it will need to better regulate, supervise, and enforce.

Regardless, China is in Latin America to stay. Latin American countries and China have forged solid, multilayered trans-Pacific bonds, and extractive industry plays a major role in how they interact and hope to achieve their goals.

For further sources and a more extensive report, you can check out “Chinese Extractive Industry in Latin America Today: An Update” at christinalafleur.wordpress.com

Technology is going too far

Hafsah

Hafsah

Writer. A Caffeine dependent life-form. Original Hopeful Rational Inquisitive IngeniousPhotographer Sailor Philosopher Happy. Serial Chips and Salsa Eater.Curious and ambitious. In-between sofa cushions.
Hafsah

Latest posts by Hafsah (see all)

In the wake of Alex Garland’s much-distinguished ‘Ex Machina’, the critic’s mind has been fixed on the delicate intersection between Law, ethics and technology. The movie has raised concerns about artificial intelligence.

Artificial intelligence has developed fast. It’s everywhere from Siri too Alexa. It’s even in our Android recommendations.

Robots and bionic technologies that improve or turn out to be a portion of humans raise many prickly legal and ethical questions. They will be programmed by humans to carry out tasks that many people can only dream of doing.

For example if a brain-computer interface is used to communicate for someone in a vegetative state, are these messages legally binding?

If a robotic body part (made for humans)  is implicated in a murder, who is at fault? If a human with a prosthesis is still subject to the ordinary laws of human governance, should machines be entitled to the same legal rights and punishments, or does the very fact that their autonomy is at the discretion of human designers thwart the question of independent rights altogether?

Drawing up any kind of regulatory framework is a tricky issue, and not simply because policy-makers are faced with a haze of perpetual obfuscation – the kind of questions that tend only to inspire further questions, rather than conclusive answers – but because they find themselves entrusted with the punishing responsibility of preserving ethical norms without hampering the potential for technological innovation. Philosophy students should consider the advance of artificial intelligence in light of ‘existential risk’ – a department in Cambridge, the Centre for the Study of Existential Risk, was set up for the explicit  purpose of studying the threat of risks which have the capacity to destroy mankind.

Tesla and SpaceX CEO Elon Musk has repeatedly said society needs to be more concerned about safety with the increased use of artificial intelligence.

“If you’re not concerned about AI safety, you should be,” Musk recently tweeted. He claimed it was worser than North Korea.

Musk agrees: “AI is a fundamental risk to the existence of human civilization in a way that car accidents, airplane crashes, faulty drugs or bad food were not — they were harmful to a set of individuals within society, of course, but they were not harmful to society as a whole.”

Google has been experimenting with self-driving cars. But what if a self-driving car is about to crash and it has to make a mathematical decision between saving the driver and crashing into a crowd, or avoiding a crowd and crashing the car with the driver in it?

The billionaire’s views on the risks of artificial intelligence are well-documented over here at Fortune and elsewhere. But last month when he described artificial intelligence as “the greatest risk we face as a civilization” at the National Governor’s Association, the reaction sparked criticism from Facebook founder Mark Zuckerberg as well as other tech magnates and roboticists.

No word on how Musk will encourage government to take up this charge. Perhaps the governors who heard him speak have already been prompted to take action.