Posts Tagged ‘offshoring


Harley Davidson Closing Down Kansas City Plant

Harley Davidson Closing Down Kansas City Plant

President Trump, right, and Vice President Mike Pence check out Harley-Davidson motorcycles at the White House in February 2017. | Photo courtesy Wikimedia Commons

The company once promoted its American manufacturing footprint at the White House.

Oh, what a difference a year makes.

Almost exactly one year ago, executives from Harley-Davidson visited the White House as part of an effort by newly inaugurated President Donald Trump to promote American manufacturing. Trump thanked the Wisconsin-based company for building its iconic motorcycles in America and pledged to rebalance trade to drive more U.S. manufacturing.

On Tuesday, Trump gave his first State of the Union address to Congress, in which he continued to promise to act on trade to strengthen manufacturing (he hasn’t actually done much, but more on that over here).

Meanwhile, Trump’s big speech overshadowed an announcement by Harley-Davidson that also happened on Tuesday: The company said on a call to its investors that it will shut down its factory in Kansas City in 2019, leading to 800 layoffs:

“Tuesday’s announcement to investors was a complete surprise to employees, three fourths of whom are represented by one of two unions.

‘They didn’t even give us a call ahead of time,’ said Joe Capra, directing business agent for Local 778 of the International Association of Machinists & Aerospace Workers. ‘It is real devastation for these people who work here and work hard in the Kansas City area.’”

Harley-Davidson cited sluggish motorcycle sales as the reason for the closure; its worldwide sales fell 6.7 percent in 2017 compared to 2016, and U.S. sales specifically were down 8.5 percent. The company will shift some of the production at the Kansas City plant to its facility in Erie, Pa., which will create about 450 jobs there.

Analysts say the company faces an uphill battle in terms of sales, as motorcycle-loving baby boomers are getting older and millennials aren’t as interested in motorcycles.

But it’s also worth noting that while Harley-Davidson is shuttering an American factory, it is expanding its manufacturing footprint overseas – the company is building a factory in Thailand that is expected to open this year.

United Steelworkers President Leo Gerard, whose union represents some Harley-Davidson workers, called that decision “a slap in the face to the American worker.” The USW ended its two-decade partnership agreement with Harley-Davidson in September.

“This decision puts in jeopardy one of the few remaining genuine U.S. brands,” Gerard said. “Our members have been true partners with this company, working in good times and bad to make great products that fostered its growth and success. We remember the U.S. government stepping up in the 1980s to save Harley-Davidson and contributing to its revival.

“Harley owners and prospective buyers across the globe want to continue to enjoy machines made in America that provide quality rides and unique experiences. Harley’s potential outsourcing of production puts all of this at risk.”

Emil Ramirez, who represents USW District 11 that includes Kansas City, referenced the new Thailand factory in a statement about the factory closure, according to the Star.

“We cannot speculate about how the company plans to replace this production or to what extent these good-paying, family-supporting, American jobs will be outsourced to facilities the company has opened in Asia and other parts of the world,” Ramirez said.

There’s no doubt that Harley-Davidson’s decision is disappointing, to put it mildly. Not only will 800 people lose their jobs, but the closure of that factory will be a major blow to many others in Kansas City who depend on it for their own business.

Harley-Davidson also announced Tuesday that it expects to launch its first electric motorcycle within 18 months, part of an effort to attract new consumers.

Here’s hoping the company makes those motorcycles in the United States.



New Tax Law May Boost Jobs – But Overseas

New Tax Law May Boost Jobs – But Overseas

Tax Law may Boost Jobs – but overseas by Natalie Kitroeff

Updated 3:32 pm, Wednesday, January 10, 2018

In Indiana, Missouri and Pennsylvania, President Trump used the same promise to sell the tax bill: It would bring jobs streaming back to struggling cities and towns.

“Factories will be pouring into this country,” Trump told a crowd in St. Charles, Mo., in November. “The tax cut will mean more companies moving to America, staying in America and hiring American workers right here.”

The bill that Trump signed, however, could actually make it attractive for companies to put more assembly lines on foreign soil.

Under the new law, income made by U.S. companies’ overseas subsidiaries will face U.S. taxes that are half the rate applied to their domestic income, 10.5 percent compared with the new top corporate rate of 21 percent.


“It’s sort of an America-last tax policy,” said Kimberly Clausing, an economist at Reed College in Portland, Ore., who studies tax policy. “We are basically saying that if you earn in the U.S. you pay X, and if you earn abroad, you pay X divided by two.”

What could be more dangerous for U.S. workers, economists said, is that the bill ends up creating a tax break for manufacturers with foreign operations. Under the new rules, beyond the lower rate, companies will not have to pay U.S. taxes on the money they earn from plants or equipment located abroad, if those earnings amount to 10 percent or less of the total investment.

The Republican vision for the tax plan was to make the United States a more competitive place to do business. Supporters contend that the new rules do not encourage companies to locate overseas. Rather, they say, slashing the corporate rate will make it more attractive to set up shop at home, since many other advanced economies have higher taxes.

And manufacturers do not simply follow accountants’ advice. They consider taxes, but they also look at an array of other factors when deciding where to build a new plant.

Before the tax overhaul, companies had to pay the standard corporate tax on money earned abroad, with a top rate of 35 percent, but only when they brought that income back into the U.S.

Many corporations responded by keeping their profit abroad indefinitely. A record $2.6 trillion was in offshore accounts as of 2015, according to the Joint Committee on Taxation, a congressional panel. Republicans argued that the system deprived the U.S. economy of investments that could have financed new ventures and hiring at home.

It also meant that many multinationals effectively paid no U.S. tax on their overseas earnings. The new bill, supporters point out, will prevent that from happening on such a large scale in the future.

“It’s a vast improvement from what was on the books,” said Ray Beeman, a tax lawyer at Ernst & Young who worked on a tax reform proposal that was a precursor to the current law when he was counsel to the House Ways and Means Committee, under Republican leadership, from 2011 to 2014.

To prevent an exodus of businesses from the United States, the law establishes a minimum tax rate of 10.5 percent every year.

Companies will get credit for up to 80 percent of the taxes they pay to foreign governments. But if the total still comes to less than 10.5 percent of the income they earn abroad, they have to make up the difference with a check to the U.S. government.

So while companies will now have to pay some tax in most cases, wherever they operate, they will pay much less on what they make abroad than at home.

“Having such a low rate on foreign income is outrageous,” said Stephen Shay, a senior lecturer at Harvard Law School and a Treasury Department official during the Reagan and Obama administrations. “It creates terrible incentives.”

Shay said the new rule could make a big difference for small and medium-size companies, which make up a vast majority of U.S. businesses. When those companies used to ask him whether to open offices abroad, he advised against it if they needed to bring their cash home.

Such companies, Shay said, now have no reason to resist the temptation to shift some of their operations abroad, since they would end up paying half the rate they would pay in the United States.

Some companies may not want to leave the comforts of home for a cut in their tax bill. Plants are expensive — they can cost more than $1 billion to buy and to outfit with the necessary machinery. Manufacturers also gravitate toward stable, affordable locales where they can reach their customers easily and hire skilled workers.

“You may prefer to stay in the U.S., with the protections of our legal system, our infrastructure and our labor force,” said Steven Rosenthal of the nonpartisan Tax Policy Center.

Natalie Kitroeff is a New York Times writer.

Editor’s Note

Major Point: Trump Tax Scam – If you make stuff in the USA, you pay 21%, if you make stuff in foreign lands, you pay 10.5% in taxes. This is an incentive for companies to leave the U.S.



Trump Factories Made in China

Trump Factories Made in China

Trump Factories Made in China

From Raw Story and The Ring of Fire

For someone who claims that he wants to bring production back to the United States in order to create jobs, Donald Trump doesn’t seem to understand that he has to lead by example. A new report shows that a new line of Trump-branded goods are being manufactured in China and Bangladesh, proving that the President really doesn’t care about American jobs, as Ring of Fire’s Farron Cousins explains.


Donald Trump, since day one of coming into office, has told us that he’s going to bring back American jobs, that we need to buy American, that we need all production done here in the United States. America, America, America, wrapping himself in the flag, saying he’s a friend of the American worker. Yet once again, given an opportunity to make his own stuff made here in the United States, he decided to have it made overseas with virtual slave labor. According to a new report in the Daily Beast, Donald Trump’s latest line of gear, including more of those Make America Great Again hats, instead of being made in the United States are once again being made in China and Bangladesh.

These are being made by the Trump Organization. They’re the ones funding this, the ones overseeing it, the one that approved this deal, and the Trump Organization at the moment is being run by Donald Trump, Jr., and Eric Trump. Those two guys, knowing that their father is in the White House saying that, “We’re going to make America great again by making things here,” decided to ignore their father’s campaign promise that he made to hundreds of millions of American citizens. They want to make his goofy campaign crap overseas and then bring it back here and sell it for $32 a hat.

Don’t worry, because on the website where you can go order this garbage, it says that these items were decorated in the United States. They weren’t manufactured, but they brought them over here so that they could decorate them. If you’re like me, you’re probably picturing Eric and Donald, Jr., sitting in a room with some glue and macaroni decorating their little Make America Great Again hats, because that’s about the only thing those two dimwits are capable of doing.

Here’s the point. You can’t go around saying you’re the Make America Great Again president or saying that you want companies to bring jobs back to America if you’re not going to do the same thing. You are, Mr. Trump, the worst president in my entire lifetime, because you’re the only one that doesn’t seem to understand that you have to lead by example. If you want everybody else to make their goods here in the United States, you need to be the first one to bring production back here of all your crap, all your horrible little goods that you have cheaply made overseas because you don’t want to pay living wages, you don’t want to pay workers’ health insurance, you don’t want to give them paid time off and maternity leave. You want to pay anonymous people in sweatshop-like conditions overseas minimum dollars per day so that your profit lines can be bigger, and that is exactly what corporations all across this country are trying to do, outsource the labor, bring the goods back, sell them at an inflated rate, and you make all the money while you screw over everyone else. That is Donald Trump’s MO.

Editorial’s Comments

The verdict of the first year of the tRump administration on Make America Great has been a big goose egg. Maybe, one could say it is in negative numbers. Even Barack Obama and Mitt Romney when running for the Presidency in 2012 had all their official election signs, hats, T-shirts made in the USA. But Donald tRump, the one who stole the phrase “Make America Great Again” has his hats made in China and Bangladesh. What a douche! How many times have we placed items into the Hall of Shame like numerous American Flags emblazoned on T-shirts that are made in China? The same goes for Chinese/Vietnamese shirts that say “USA” or the U.S. Constitution, Declaration of Independence, the American eagle, etc.

Hall of Shame

But this seems to be the true peak of hypocrisy – hats that say “Make America Great Again” that are made in China and Bangladesh. And let us not mention that his tRump clothing line is still made in China and for years had been searching the cheapest places.

Hall of Shame – Trump Factory

By hiring slave labor from third world countries, you are firing American workers. tRump is new to this Made in the USA movement and evidently is only using it for political gain.

Made in China

In the first year, tRump passed only one law. And what a law, It gives 82% of the money to the top 1% and kicks 13 million of Health Insurance and puts the US in an additional $1.5 Trillion debt during a economic boom. Wait until the Obama economy starts to peter out, then the deficit will skyrocket. So, much for infrastructure. Get ready to see devastating cuts to Medicare, Social Security and Medcaid in the coming months – all so tRump and the corrupt Republicans can loot the Treasury and line their own pockets.


Chinese cars coming to America in 2019

GUANGZHOU, China — The cars are called Trumpchi (though their Chinese maker insists the name is just a coincidence).

Various models of Trumpchi cars have been motoring down Chinese roads for the past seven years. But even after the United States elected a real estate tycoon with a similar name as president, the world ignored them.

Now the company that makes Trumpchis hopes that will change — and China appears to believe the rest of its auto industry is ready to go global, too.

GAC Motor said on Friday that it would begin selling Trumpchis in the United States by the end of 2019. The company hopes it will be the first Chinese car brand to take off in a market that has eluded the country’s manufacturers.

Trumpchis have gained a devoted following in China. The brand’s burly GS8 midsize sport utility vehicle, the first model that the company plans to sell in the United States, and its spacious new GM8 minivan have sleek lines and levels of fit and finish close to those of Japanese automakers.

Top executives and their advisers are agonizing, however, over whether, and how, to change the name for the American market.

“There’s no Obama-mobile, that’s a cultural thing, there’s no Clinton car,” said Robert C. Maling Jr., a retired Lexus executive who is now an adviser to GAC. “It would be confusing to the American public to have the Trumpchi name.”

The Chinese government broadly appears to be gearing up for large-scale exports.

China’s auto industry has grown into the world’s largest, producing more cars each year than the United States and Japan combined, while shielded from imports by the highest trade barriers by far of any major car market. Those policies forced multinationals to move factories and their latest technology to China.

But Beijing is now discussing slight reductions in those restrictions. It is largely to prevent foreign governments from citing them as a reason to apply their own limits on Chinese automotive exports.

Unlike any other carmaking power, China requires multinationals to produce cars in 50-50 joint ventures with local companies, to help its domestic businesses learn the latest manufacturing techniques. But in statements over the past two weeks, the government has said that it may relax that rule somewhat for electric cars made in foreign trade zones.

China also said right after President Trump left Beijing a week ago that it would consider a gradual cut in its import tariffs. China charges a 25 percent tax on imported cars, compared with 2.5 percent in the United States.

Cars made in free trade zones must still pay the 25 percent tariff if they are shipped to Chinese dealers instead of being exported. But those rules also appear to be softening. In recent discussions with Tesla, the American electric car company that wants to build a wholly owned factory in a Shanghai free trade zone, Chinese officials have been looking into possibly reducing the tariff as well, two people familiar with the discussions said.

A formula being considered would apply the 25 percent tariff only to imported components in each Tesla car, said one of these people, who insisted on anonymity because the discussions were continuing. That would cut Tesla’s financial burden, while also putting heavy pressure on it to shift as much production as possible to Chinese suppliers.

Tesla declined to comment, except to repeat that it is in talks to set up a factory to supply the Chinese market.

Starting in 2013, Commerce Ministry officials have suggested they might lower China’s own automotive trade barriers once Chinese manufacturers were ready to sell abroad, to prevent them from being used as justification by other countries for reciprocal trade barriers. Indeed, carmakers from China that export electric vehicles to the United States could even find advantages.

Yu Jun, the president of GAC Motor, said in an interview on Friday that the company planned to export electric cars to the United States and Europe as well as gasoline-powered vehicles. If it does so, it could benefit from the United States’ $7,500 tax credit for electric car buyers.

Only the first 200,000 electric cars from each manufacturer qualify for the credit. Tesla and other American companies, like General Motors, are close to exhausting the credits for their customers. But GAC and other Chinese companies would each have the full 200,000 credits available.

The tax credit’s future, though, is uncertain. As Congress considers a tax overhaul, some lawmakers are considering eliminating it.

Here in China, the government has barred people who buy Teslas from collecting subsidies of $10,000 or more per electric car because such benefits are available only to buyers of Chinese-built cars. The American tax credits, by contrast, can be used for imports.

Despite the changing environment, GAC Group, GAC Motor’s parent company, has a lot of marketing work to do before it enters the American market.

At the Guangzhou auto show on Friday, Feng Xingya, the group’s president, emphasized that GAC is a state-owned enterprise seeking to faithfully carry out the goals of the Chinese government. That message might not go over as well next year at the Detroit and Chicago auto shows, where the company plans to announce more details of its American sales offensive.

And then there’s the name. GAC officials, for their part, say Trumpchi sounds in Chinese a little like “passing on happiness.” Any decision on whether to change the brand’s name would be announced at the Detroit auto show in January, Mr. Yu said.

Whatever it is called on arrival at American docks, Trumpchi may have the best shot of any Chinese competitor at international acceptance.

The Chinese government has long been leery of letting its automakers start exporting, for fear that they might embarrass the country and damage their brands by having shoddy quality. But Trumpchi has done much better than most Chinese brands, and better than some multinational brands’ China subsidiaries, in surveys of initial quality by J. D. Power and Associates, the global quality consulting company.

China is already ramping up trans-Pacific exports of multinational-brand cars. Volvo, now owned by a Chinese company, and G.M. have already started shipping cars from China to the United States. Ford announced in June that it would move production of its popular Focus compact car from Michigan to China.

China would be following the example of Japan and South Korea by jumping into the American market, but might face geopolitical obstacles. Beijing has been viewed warily in the United States for, among other things, building an archipelago of artificial islands with military-grade runways in the South China Sea.

Car dealers, however, may not be as concerned. “I’m not into the geopolitical nature of it,” said Bob Shuman, a Detroit-area Chrysler dealer who attended Trumpchi’s introduction of a new minivan in Guangzhou. “I’m just interested in selling cars.”


The Oaf of Office – More USA Jobs or Less?

This is written specifically for Inauguration Day. With Donald Trump being sworn in as the 45th President, the question is whether his administration will be good for the American worker and the Made in USA movement which ultimately means more jobs for Americans.

What Can We Expect for Made in USA jobs under the Trump Administration?

Will the Trump administration increase Made in USA jobs or will the Trump administration continue the Republican doctrine and do the opposite: to decrease good paying jobs in the USA? To predict these two outcomes, we have to know what Trump believes by what he has said (which is sometimes difficult as sometimes he is on both sides of the same issue). We know that he agrees with the ultra-right of the Republican Party on all issues except possibly two: first, the GOP has always been wary of Communism and Russia. Interestingly enough, Trump has expressed the exact opposite of this wariness. Second, the GOP are in full support of Free Trade, exporting US jobs and maximizing profits for the company’s CEOs. While Trump had previously offshored jobs and has his Trump clothing line (and his family’s products) made outside of the U.S, suddenly, in mid-campaign, Trump said that he is against Free Trade treaties.

Policies of the Republicans and Therefore, Trump and its effect on the USA.

So let us quickly look at some of the policies of the Republicans (and therefore, Trump) and see how it would effect US jobs. These include minimum wage, income taxes, Immigration, Free Trade, Energy, Mergers, Economic Growth, Free Press.

Wages and the Minimum Wage

For the past 100 years, the traditional view of Republicans towards business has always been on the side of owners of businesses.  This has not changed. Republicans have always been against all issues that would make the bosses pay more: minimum wage, vacations, 40 hour work week, overtime pay, social security, unions, pensions, employee health care, disability, child labor, worker’s compensation,  and workplace laws that outlaw discrimination or harassment. These issues were fine when the United States was an overwhelmingly run by small businesses. But, since 1980, the USA has become the Mega company capital of the world and many of these giant companies are multi-nationally owned. In fact, large corporations (since 2007) employ more Americans than small businesses (small business being defined as less than 500 employees). The US is so top-heavy (big corporations dominate) that just 6 companies made 50% of all profit in the US in 2015 (according to USA Today) and 28 companies made 50% of the profit to the S & P. So, sometimes it seems ludicrous that the Republicans go to great lengths to protect the mega-Rich, who already have their own lobbyists, but very little for small business owners. So, what about the workers? Workers compensation has been stagnant especially when compared to corporate profits and CEO pay. Workers wages are just starting to go up over the past two years, but many workers depend on the Federal Minimum Wage to make a living. The Minimum Wage has been unchanged since 2007 (as passed by a Democratic Congress), it is still $7.25 per hour (Louisiana and Tennessee do not follow the federal minimum wage). It has been shown by many economists that the minimum wage has not kept up with inflation. And at the present time, an employee working a forty hour week at minimum wage would still put one at the poverty level. Critics (mainly Republicans) have charged that the raising of the minimum wage kills jobs. This has never been proven, in fact, there evidence to the contrary (Business Insider) and (US News).

History of US Federal Minimum wage to Nominal Dollars

History of US Federal Minimum wage to Nominal Dollars

What is the opinion of Trump? He wants to repeal the minimum wage. But, of course, he has flip-flopped on this issue multiple times (see Washington Post Flip-flops on minimum wage). But if Trump follows standard Republican orthodoxy, and many expect that he will, Trump will try to repeal the minimum wage. What does this mean for American workers? The prospects don’t look good. It is assured that the Federal Minimum Wage will not be raised. However, some Democratic states have, on their own, voted to increase their own state minimum wage. These states have shown the greatest economic growth. Growth in these states will be great, because they are innovative, and despite the efforts of the Trump administration.

Income Taxes

Trump has promised to change the tax code. It has always been hard to pin down Trump, especially when what he says does not match what he says on paper. But the written Trump Plan is a basic Republican plan, First, it gets rid of the Inheritance Estate Tax which would help only the top 1%. Second, it decreases the corporate tax rate from 35% to 15%. Third,  it would decrease the rate of the top income makers from 37% to 33%. The group of $91,150 – $110,000 per year  would also get a small tax break from 28% to 25%. There is no change from $37,500 – $91,150. In fact, most may be paying more. (You can see more on the Trump Tax Plan/NPR analysis). The final verdict: This is classic trickledown economics, giving more money to the top 1%. It didn’t work with Reagan did it, it won’t work now. When you give more money to the rich ,they do not spend it (there is no trickledown), they invest it. Additionally with substantially less income coming to the government, the cost to the government is $62 Trillion per year (greatly increasing the deficit). Final Cost to the worker: more taxes paid by the middle class, less money from the corporations, less money from the top 1%, less money for the government to finance infrastructure. In fact, this is the exact same policy that caused the middle class to disappear in the first place.



Historically, there have always been groups that have hated immigrants: at first, it was directed at the Irish, and then the Germans, then the Chinese and Japanese and then later, the Hispanics. The Republicans haven’t always been about deporting immigrants. For Republicans, this is a relatively new phenomenon. I mean there were always a sub-group of Republicans – the KKK, the John Birch society, the segregationists, and other White Supremistist groups (they had been Democrats until the Civil Rights Acts of 1965, then they became Republicans) whose voices have always been minimal until recently. Now they are quite vocal. The cause of this movement? It happened after President Reagan repealed the Fairness Doctrine in journalism and Media. This is when Right Wing Media went into action. It encouraged prejudiced people who were previously silent to speak out publicly. And this is where Trump has made his connection. Trump loved to inflame this crowd with hatred towards immigrants: He said he would build a wall. And then he said Mexico would pay for it. Of course, it was talk, just saying outrageous things to get people to listen.


The Wall Between the US and Mexico

So, how serious is the possibility of building the wall between the US and Mexico? Even Trump supporters didn’t take this idea seriously, but they loved the hateful rhetoric anyways. Let us look at the 119 mile wall between Mexico and the United States. The Washington Post said that building just the wall would cost $25 Billion (not million- and it doesn’t consider surveillance). But, we know the actual costs are always more than estimated by three to four times. So, that would make it approximately $100 Billion. And Mexico is sure not going to pay for it. So, guess who is going to pay for a wall that won’t keep immigrants out? You are, the American tax payer. Estimated cost per person $308.

trump-wall                                                                                                    The Trump Wall

Republicans know that immigrants are a vital source of labor for certain business especially the farming community. In fact, the Senate had passed a Comprehensive Immigration bill in 2013 (that is right – both Democrats and Republicans worked together). However, some Republican Tea Party members scuttled the bill in the House and now, we are in the same state as before. Final decision: I can’t see Trump getting enough Republican votes to build the wall. Some Republicans are thinking about the future of their party. They know they can’t stay in power as the all-white Party about increasing their chances of getting Hispanics to vote for them. The Republican can’t stay the all-white Party, not without a lot of tricks anyways (like the ones they are already employing – gerrymandering, voter suppression), so they will need to lure some Hispanic voters. Theoretically, what if Trump built the wall , and deports all the ones he said he would (11 million), many industries would be hit hard: agriculture, construction, Home Health, Hotels, Motels, restaurants, landscaping, wine growers, etc. Some anti-immigrants say that this will “free up jobs for Americans.” My experience, Americans don’t take those jobs. When the Great Recession hit in 2009, how many Americans did you see working on the farm or Home Health? Practically none. Americans would rather collect unemployment than do the heavy manual labor that the immigrants do.

Free Trade

Free Trade is a Republican creation, taking root under the Reagan administration. It undermines what our Founding Fathers had started which was, in order to protect fledgling U.S. businesses, the government would levy tariffs on products coming from other countries. The first Free Trade Agreement passed was the North American Free Trade Agreement (NAFTA) which was an agreement between the US, Canada and Mexico. The next Free Trade agreement was a whopper. It was the World Trade Organization (WTO) which brought in tons of more countries, including China. And guess what happened, just as previous President contender, Ross Perot predicted, this created “a giant sucking sound” of American jobs to other countries. By eliminating import tariffs, it made imports much cheaper, American products suffered, businesses closed, and, then, American business owners joined the foreign competition by closing down American factories and sending the jobs to China, Mexico, Vietnam, India, Bangladesh, etc. (where labor is cheap and regulations minimal). Multiple industries in the USA have been hurt, severely injured and many are on life-support. A lot of good paying manufacturing jobs had been eliminated in the United States, which has created a giant vacuum in the US economy – that vacuum is from the loss of the middle class.

Trump had always been a Free Trader, in fact, he has offshored his Trump clothing to places like China and Mexico. He was never against Free Trade until, during his campaign, he had read a survey where people felt it was important that jobs be kept in the USA. During the campaign to whip up this anti-trade talk, Trump had made insinuations that he would raise the tariffs on China.

Buick Envision made in China

Buick Envision made in China

It is interesting that Trump has targeted companies auto companies that have planned to off-shore to Mexico, but does he say anything about China bringing cars into the USA? No. How about the Buick, Chinese – made, Envision? Nope, not a word. Then, there is the new all-electric car, Atieva which just changed its name to Lucid, to make it look like it is American, which is totally financed by Chinese businesses, will Trump comment on this? Nope. Trump will only comment once there is enough publicity to make it worth commenting on it. It is not like he really cares whether it is US made or not.

Will Trump raise tariffs on Imports from China?

So, the question is whether Trump will levy tariffs of 35 or 45% like he threatened. My prediction is No. Trump has too many ties to China (from Time Magazine). He has plans to build 20 Hotels in China over the next 10-15 years and not to mention that the Bank of China is his biggest tenant in Trump Towers. If Trump really infuriates the Chinese government, the Chinese could impound his company that makes Trump clothing and they could jail all of his employees and managers as spies, because totalitarian governments are like that. This is called conflict of interest. Federal policy is being influenced on how it effects hid business personally. Another potential conflict of Interest: The Obama administration has filed a suit against Fiat-Chrysler . Fiat is hoping that can make a deal with the Trump administration. Fiat might be thinking instead of being sued or paying a fine, maybe we could just make a contribution to some Trump business?

So How Will Trump Save American Jobs?

If  import tariffs on Chinese products are not raised, then, how will Trump save American jobs? My prediction is he won’t. What he will do, is what he has been doing since being elected? He will tweet and threaten a company who have had thoughts about building factories in Mexico. (See Ford and Toyota – Washingon Post). Also, see Fiat-Chrysler. In all cases, Trump took credit where no credit was due. He did not change the course of their company. Think about it, do you think corporations make millions of dollars in investment just because of a tweet? This is not a charity auction. (“I bid 30 milllion dolllars to bring jobs back to the USA!”) These corporation have been formulating these plans for years. (In reality, Trump should be thanking Obama for all these actions, but Obama is not one to be a credit hog.) Will he truly go after NAFTA which would hurt his most loyal constituents, the Farmers? Maybe, but Trump has no loyalty and no interest in agriculture.

Will there be serious reforms towards Free Trade? I truly doubt it. Trump will give the outward appearance that he cares. In the meantime, American companies will continue to off-shore, and companies that come back (re-shore of jobs), instead of being little noticed (like the present time), it will be crowed about by Trump who will take all the credit where none was due. One good thing to come out of this is that traditional Republicans like Paul Ryan are looking to decrease taxes on American products that are to be exported, they haven’t gone so far as to say that they will increase tariffs on foreign imports or getting rid of tax exemptions for moving expenses for companies as they move their company from the USA to another country. At least, the Republicans are entertaining some Democratic ideas, but don’t let them hear that.

Other Issues That May effect the Economy

Health Care

Health Care can strongly influence consumer’s pocket book. At the present, Trump and the Republicans are ready to repeal The Affordable Care Act (ACA). If the Republicans do replace the Affordable Care Act with a comprehensive Health Plan that covers everyone, providing good health care at less cost, this would be one of the greatest breakthroughs in the history of American government. But will the GOP take that giant and brave step. Not a chance.

The Evaluation of the Affordable Care Act (ACA)

The ACA did many great things, it insured an additional 20 million Americans, the highest percentage of insured Americans ever in the history of the nation. It controlled expenses, brought down the price of healthcare, paid for preventive health and eliminated exclusion based on pre-existing conditions. But, the ACA wasn’t close to a perfect system. One of the main problems with the ACA was that is was based on the obsolete notion that companies wanted to give their employees health insurance. Today, companies bend over backwards to make sure employees are not full-time and, therefore, does not have to pay benefits). In fact, companies like Macys keeps track to the minute any employee that comes close to qualifying for benefits, and makes sure that it does not happen. My belief was that the ACA was a band-aid to the health care system, to decrease its expenses – to delay the eventual bankruptcy of the nation from health care for several more years.


The Cost of Repealing The Affordable Care Act

There are a couple of problems with the idea of repealing the ACA. One is the Republicans have no replacement policy. Even though Trump says they have a plan and it is close and Everyone will be covered, better care, less cost. This is definitely a case of over-promise and under-deliver. (Especially if Medicare for everybody is off the table.) The other problem with the Affordable Care Act is that it is a Republican idea from the Heritage Foundation. The only “real” thing that the Republicans don’t like about the ACA is that President Barack Obama takes all the credit for it and therefore, for political expediency, it had to be demonized. The idea behind the ACA was to add more competition between the insurance companies (health insurance exchanges) and, therefore, decreases costs. The only wrinkle from the GOP brain trust, thus far, is that the insurance companies can compete across state lines. Wow, what a change. (Oh yeah, Health Savings Accounts which are available in the ACA, great idea). The problem with the ACA and the GOP wrinkle is that insurance companies can drop out of the competition at any time (because many times there are “agreements” between oligopolies) which raises the price of insurance premiums. The fact is the Republicans want to repeal only the name of Obamacare and leave the rest of the system untouched. They don’t want to go back to the extremely expensive  and dysfunctional old system. But that is the only way. So, what the GOP did under the dark of night was to hide the fact that repealing the ACA will cost the nation trillions of dollars, the GOP wrote a resolution that repealed a mandate that The Congressional Budget Office keep track of how much repealing the Affordable Care Act would cost. In the same article, it highlighted:The result of repeal is estimate that $140 billion of federal funding would be cut to states by 2019, resulting in the loss of 3 million jobs by 2021, loss of $1.5 trillion in gross state products and a $2.6 trillion reduction in business output. State and local tax revenues will fall by $48 billion. Obviously, the repeal of the ACA will be very costly, and it is very probable that the average American will be paying a lot more for Health Care. And expect a lot more Americans to declare bankruptcy due to medical expenses. The AP reported than premiums will increase by 25%, that 18 million more people will be uninsured one year after enactment and 32 million more uninsured by 2026. Look at it another way, the Trumpcare model will be so expensive and exclude so many people that it would rapidly drive the nation and individuals into bankruptcy, that the electorate would be willing to give the model of Medicare-for-all model a very serious look many years sooner. (But, the Republicans are very serious of getting rid of Medicare by privatizing it based on a model like Obamacare).



Trump has nominated Rex Tillerson, CEO of Exxon, as Secretary of State. What does this mean? Well, detente with Russia, of course. But, with regards to oil, we should expect to see more widespread drilling everywhere including the Oceans, the Arctic and National Parks. Expect more pipeline projects across the United States. And, you will definitely be spending a lot more for gasoline. The price of gasoline is not actually based on supply and demand (as people traditionally think) but rather on speculation (see my blog entry: Wall Street and the price of Oil). The price of oil hit a low in January 20, 2016 at $27 a barrel. Now, with the election of oil friendly politicians, the price of oil has increased to close to $54 per barrel (this is definitely not due to increased demand or decreased supply). It is estimated that in 2017 the cost of oil per barrel will be in the $60s, however, I believe this is severely underestimated and that speculators will push this up much higher. Remember it wasn’t all that long ago when a barrel of oil was $114 (in June, 2014). So, expect to pay a lot more at the pump.



Trump and the GOP believe in the government staying out of the way when it comes to businesses. We know from history that the natural outcome of unfettered capitalism is monopolies. But since this was outlawed by Theodore Roosevelt, the natural end point is oligopolies (a few companies that own everything). By collusion (oligopolies say instead “a gentleman’s agreement), a few companies can drive prices up without actually competing. For 2017, one can expect many new giant mergers to pass without fight from the Federal government. AT&T with Time-Warner will merger as will Monsanto and Bayer. Even Fortune Magazine has made this prediction with their headline A Trump Presidency Could Unleash a Pharma Merger Boom. So, maybe Pfizer and Allergan could try a try another merger (it was thwarted by the Obama administration). The effect for consumers: Pay More for Less Choice.


Economic Growth

One thing that people forget is that the United States is at near maximal employment, the US economy is very strong (all economist believe this, maybe not political pundits). The economic growth has been steady at 2% per year. Yet, enough people (not a majority) still wanted a change. Here is what Goldman-Sachs predicts for 2017:

Donald Trump promised economic growth of 5-6%. No other economist is coming close to predicting this. It is another case of over-promising and under-delivering. In fact, some are thinking that Trump may slow the economy and Citi group thinks that it is a 50% probability that Trump will not even finish out his term. The next year – there will be growth and it will be all due to the Obama administration. Plus, there is no evidence of weakness in the economy, unlike years previous to The Great Recession. However, after that, it will be Trump’s baby. Sometimes, growth and recession have nothing to do with the President and there are swings that naturally occur or sometimes things occur can effect the economy (9/11). I predict based on the cycles of the economy, that we are due for a “slowing” as we have never seen this many consecutive years of positive growth ever. Certainly, President’s do make a difference. Sometimes it takes several years to really see the effect – but is plain when you evaluate Reagan’s legacy both on the United States and on California, (back when he was governor). The United States and California have never recovered. There is distrust in government, the government tax base is shrinking, infrastructure has almost collapsed. Are there any great infrastructure projects in the USA anymore? (Just compare the USA to China’s incredible growth, we look like Ancient Rome).


Trump’s policies are like Reagan’s. It is Voodoo economics. Bad for everybody except for the 1%. There will be more large corporation mergers, Health Care will become much more expensive, the middle class will have to pay more in income taxes, the Federal deficit will explode, oil prices will increase, the rich get richer and no real change in jobs coming back to the USA. The only potential bright lights for the economy are: Republicans working on adjusting their Free Trade policies and a “big” infrastructure project. The infrastructure project could be done right, but I severely have my doubts with this group of Republicans. As Trump takes the oath of office, he becomes the oaf in office. This inauguration is like scene from a parallel universe, like what if Hitler didn’t attack Russia, or what if we didn’t discover Penicillin. The American public have not grasped that we are living in a great time, but have decided that we needed a “change”. People for some reason can’t grasp the concept that change can be for the worse, sometimes much worse. So, for the people who to vote for a temper-“mental” man without one day of public service, “You reap what you sow”. If the economy goes south, you go bankrupt, you lose your health insurance, well you brought it upon yourself. 70 million Americans voted against your choice. As far as bringing jobs back into the USA, Trump will bring none, not even his Trump clothing line from China.


Free Press

This last issue does not have to do with economic issues, but there has been a disturbing trend. With the rise of right-wing news groups, Breitbart, Fox News, Alex Jones, it is getting difficult for Republicans to know what is real news and what is fake news. Trump only reads the most extreme right wing news, so he does not know what is real news versus fake news. And if Trump is confronted by the real truth, he belittles the Press. Trump is kicking the Press out of the White House to limit access. He didn’t allow the regular Press to ask questions during his so-called “Press Conference”.He has threatened to sue the Press or jail them like other dictators. In the meantime, they have hired KellyAnne Conway as the Reich Minister of Propaganda (ala Joseph Goebbels). I believe that if he can intimidate the Press, then he can intimidate any Americans who disagree with him. My idea is that all networks should fact-check in real time – which means while a political participant or President speaks, at the same time, in close captioning – it says whether the person is lying. It would be easy because almost all of these TV shows are tape-delayed.

free-pressWe need to support the Free Press and they should be free from the intimidation of a dictatorial President. And we need to stay strong against the Trump and his trolls who threaten violence and vitriol on all who disagree with Don the Con.



Following Up: More on Why Tariffs Can Bring Back Much U.S. Manufacturing

What a shame that David Barboza’s New York Times article on all the help from government in China that powerfully shaped Apple’s investment decisions was published during the holiday. So starts the follow up story by Alan Tonelson. Barboza’s article shows exactly how China’s hands-on approach to economic policy has been a major success to uplifting China’s status to the number one economy in the world. Tonelson opines that it is tariffs than can bring U.S. manufacturing back.

Source: Following Up: More on Why Tariffs Can Bring Back Much U.S. Manufacturing

Following Up: More on Why Tariffs Can Bring Back Much U.S. Manufacturing

What a shame that David Barboza’s New York Times article on all the help from government in China that powerfully shaped Apple’s investment decisions was published during the holiday week – when so many Americans are paying so little attention to the news . A Pulitzer-worthy piece of reporting, it also adds to the abundant evidence debunking two critical claims often made about the globalization of manufacturing.

First, the article makes clear how much offshoring of American industry has taken place due to foreign government decisions that clash violently with the idea of “free trade.” And second, it exposes further weaknesses in a related, though more recent, claim that most offshoring during the 21st century has stemmed not from foreign tariffs and similar interventionist economic policies, but from technological innovations that enable effective management over far-flung international manufacturing operations. This second claim is especially important, since it’s also been used to demonstrate that American tariffs will be unable to reverse this offshoring significantly.


Apple’s chief manufacturing partner in China, Foxconn, claims that the government supports it receives in the PRC are “no different than similar tax breaks all companies get in locations around the world for major investments.” And Barboza mistakenly seems to confirm this argument, characterizing China’s various market-distorting practices as “not unlike” those “in other countries, “including the United States, where states and cities vie for companies” – except that they are much greater in scale and much more secretive.

But the author himself provides key examples to the contrary. For instance, the Chinese province in which Apple’s manufacturing is concentrated is actively encouraging Foxconn to export. And when the company meets these targets, it gets hefty bonuses. Exports were also fostered via rebates for the value-added tax Foxconn would otherwise pay for at least the first five years of its operation.

Nor was China’s central government simply a bystander. Of course, the value of its currency was manipulated – which artificially lowered the price of goods China exported (including those from factories affiliated with foreign companies like Apple) and raised the price of imports for Chinese individual and certain business consumers. But there was also this scheme described by Barboza:

“Since China began opening its economy to the outside world in the 1980s, the government’s policies have encouraged manufacturing and exports with the creation of special economic zones. But those same policies have discouraged domestic consumption of overseas brands.

“Most products made in China by big multinationals had to be physically shipped out of the country and then brought back so that they could be taxed as imports — hence, the U-turn employed by many companies.”

Revealingly, these arrangements stayed in place well into the 21st century, and similar export-focused zones can still be found all over China.

Barboza’s reporting also bears out arguments I made in a post last week on this subject – that technological change has been a necessary, but not sufficient, condition for the export of advanced manufacturing capacity, and that much offshoring was encouraged by the guarantees of wide-open access to the U.S. market provided by trade policy decisions like backing China’s entry into the World Trade Organization.

As the author notes, “When Apple first moved into China, the country was largely a low-cost production site.” That was in the late-1990s. He also quotes a former long-time executive for Wal-Mart and other multinationals as stating that most of these firms’ China investments represented “supply chains good at making things in the East and selling them in the West.”

China’s domestic market has of course developed impressively since then. But as I observed last week, the continuing importance of exports to these firms’ business models has been spotlighted by their loud protests of Donald Trump’s plans to erect trade barriers against production they aim at American customers.

But it’s also crucial to point out that this initial offshoring of production set in motion a dynamic with huge future implications for America’s economy and for today’s claims about “knowledge-based” offshoring of scientific and technical knowhow – and jobs – that supposedly are immune to trade policy overhaul. Simply put, the offshoring of production made the export of manufacturing’s more knowledge-based activity inevitable in case after case.

The two main reasons: First, super low-cost developing countries are full of smart, people that are highly educable, and trainable by multinational corporations; and second, manufacturing production and innovation rarely exist in isolation. Their relationship is typically interactive, and fueled by continuing and close contact between the researchers and engineers and product designers etc who come up with new products and processes, and the production supervisors and other workers who need to translate their ideas into real world products.

And don’t take my word for it. Listen instead to the late Andrew Grove, founder of Intel. Or Hank Nothhaft, retired Chairman and CEO of Tessera Technologies. Or former Allegheny Technologies executive Jack Schilling. Or the Defense Science Board (both quoted in this 2010 study).

In other words, Apple has found success in locating its manufacturing “brain work” thousands of miles from its production work.  But that formula appears to be the exception, not the rule, in manufacturing, including in advanced manufacturing.  And interestingly, this tech giant has recently announced it’s building its first two research and development centers in China.

So the United States has a fundamental choice ahead of it.  It can keep listening to multinational companies and their hired guns, pretend that the keys to long-term prosperity move around the world purely or even largely due to market forces, and run ever greater risks of sliding into second-class status.  Or it can finally recognize Washington’s immense potential power over globalization, and use it to make sure this process works for its own citizens and domestic producers as well.

Editor’s Note

Most economists are still Free-Trade advocates even though almost all economists have seen the devastating effect of NAFTA and the World Trade Organization which has caused havoc on the US economy: severe losses in US manufacturing, a decreasing middle class, an exploding Trade deficit and crippling effects to the many small towns across the US who had their manufacturing plants offshored to China and Vietnam. These economists love to use the derogatory term “Protectionism” if anybody interfered with the do-no-wrong plan of Free Trade. Even if any policy saved American jobs, improved the economy, made America a great manufacturing power again – all of these great things would be belittled by the term “protectionism”. It is these same economists who are also skeptical that raising tariffs would indeed create more jobs, more manufacturing and a better US economy. But, of course, these tariffs would do this. It has been proven over and over again for centuries. That is why our Founding Fathers imposed tariffs on imports, so nations like England and the Netherlands wouldn’t swamp our businesses with products that would damage our fledgling US businesses. If the U.S. government increased import tariffs, it would greatly reduce companies wanting to offshore. And if we could get rid of the tax breaks that make it easier for US companies to offshore, this would also keep businesses here. Like it or not, import tariffs are the only way to level the playing field for American businesses and the only way to forever stop businesses from abandoning the United States. Don’t use the derogatory word “Protectionism” use the term ABSP – American Business Survival Policy.


Lessons From the 2016 Election

It is Deja Vu except With Lots of Heartburn

This is Deja Vu except with lots of heart burn.  There was a popular President who had ushered in great economic growth yet his Party lost in a disputed electoral college loss (while winning the popular vote) and lost to an unqualified opponent. In 1992, George W. Bush brought in an immediate recession, dismissed warnings from the Clinton administration about a character named Osama Bin Laden, who, then, brought down the Twin Towers, which accelerated the Recession. Then, Bush committed the ultimate blunder (by consensus) by unilaterally attacking Iraq for no reason, allowing ousted Iraqi Sunni soldiers to become ISIS. If all that wasn’t bad enough, Bush brought in The Great Recession – (don’t kid yourself, 2008-2010 was a Great Depression) – causing millions to lose their homes, their life savings and their jobs. Then, came the election of  Barack Obama. This was followed by seven years of solid  and uninterrupted economic growth (you can’t turn around a Depression in less than a year), he brought unemployment down from 10% to 4.9%. Wages were going up, jobs were plentiful. And then came the 2016 Election. And now here we go again. Get ready for the Republican Party to make us slide into another Recession.


Lessons From the 2016 Election

  1. Hate Trumps Love
  2. Lies Trumps Truth
  3. The Electoral College is obsolete
  4. Cheating (Voter Suppression, Election Rigging) always beats the ones that play by the rules.
  5. Bigotry always beats Tolerance and Acceptance
  6. Outside agencies (The Russians, the FBI) in the Presidential election will never have to pay the consequences.
  7. Fake campaign promises always beat realistic solutions.
  8. Going low always beats going high.
  9. No transparency beats high transparency.
  10. Timing of scandals just prior to the election is the key to winning.
  11. The gullibility of the American people knows no bounds.
  12. Fake scandals trump real scandals.
  13. For a so-called “Christian” country, a candidate who possessed the least amount (ever) of Christian values was elected, I guess the lesson from this fact, is that “Hypocrisy” is King in the United States.
  14. The strategy of total obstruction, government shutdowns, never compromising, lying, and opposing everything the President wants is the blueprint to take over the Presidency in the next election cycle.
  15. The Media normalized Donald Trump, and were guilty of carrying out a double standard.
  16. The American Dream is a myth.

I would say the Republicans have shown the way to take over the topple the Presidency. I would recommend the Democrats from Day One do the same thing that the Republicans did – to never work with Trump and show no respect towards him as he has never shown any respect to anybody else.


The Issue that Galvanized the Populace: The Rejection of Free Trade

Let me stress one important fact. Free Trade is the bedrock of the Republican Party ever since Ronald Reagan and his financial guru Alan Greenspan introduced it to Washington, DC in the 1980s. It is ridiculous to think that the continuation of Free Trade was part of the Democratic platform (somehow, low information voters thought it was). After the Economic Depression caused by Deregulation and the Big Bank/Housing crash, people started rethinking whether Free Trade is good or bad. Free Trade is where we stop charging import taxes on products from other countries. The premise was: by decreasing the cost of imports, the US can buy more stuff which pumps up the US economy. Just a little hitch, as the cost of import products went down, it made American products comparatively more expensive, ultimately costing American jobs. And then larger corporations started taking advantage of lower costs of living (plus no import taxes) in other countries, by moving US jobs directly to the other countries (offshoring).

The Democratic Party has always been the political party against Free Trade. Backed by Unions who felt that Free Trade jobs would take away American jobs – the unions were correct. Today, unions within private businesses comprise only 7% of companies where it used to run about 45-50% in the 1950s. The Democrats who have been for Free Trade are the so-called “Business Friendly” Democrats. During the 1990s, when Free Trade was the most popular, the split was 60% against Free Trade and 40% for Free Trade. Today, the Democratic Party is 80% against Free Trade and 20% for Free Trade. The Republicans are 85% for Free Trade.

For example, let us look at the vote on the recent controversial Free Trade treaty, the Trans-Pacific Partnership (TPP) – an agreement between the USA and 13 other countries. In 2016, the vote in the Senate: passed 60-38 (Yeas: 47 GOP, 13 Dems; Nays: 7 GOP, 31 Dems & Ind.). The House vote: The vote was 218-208 (Yeas: 190 GOP, 28 Dems, Nays: 50 GOP, 158 Dems). This vote allowed the treaty to be brought up for vote without allowing any amendments. This bill still sits in Congress. It is feared that the GOP will try and secretly pass the TPP bill during the lame duck session.

The Candidates Remedies for Free Trade

Donald Trump rallied against Free Trade yet his policy was lacking of any substance. Many times, even during the campaign, Trump would say: “I am the biggest Free Trader”, yet he was ready to impose a tax of up to 45% (as a threat), which makes it the exact opposite of Free Trade. Realistically, Trump could not by Executive Order impose a 45% tariff on a country. Trump also said that we need to renogotiate the Free Trade Treaties, but what does he really mean? Would Republicans go along with Trumps popular sentiment of being against Free Trade? Highly unlikely – the GOP is the party of the 1%, big banks and multi-national corporations. Now, that Heir Trump is President, I believe that the Free Trade issue will be untouched and Trump will continue to make his clothing in China, Vietnam and Mexico. There will be no new jobs from “changing” Free Trade. I predict a recession within the next two years. Trump voters deserve what they get.



March 2018
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