Tag: economy

bookmark_borderU.S.-Canada Softwood Lumber Tariffs: Rising Rates and Their Impact on Housing Costs

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The rise in lumber prices, exacerbated by the existing tariffs on Canadian lumber, is directly contributing to a decline in the supply of affordable housing. These tariffs increase the cost of importing essential materials, driving up construction expenses for builders. As a result, developers are less inclined to invest in affordable housing projects, which often have tighter profit margins compared to luxury or market-rate developments.

This issue creates a ripple effect throughout the housing market. Higher costs for construction materials translate into increased prices for new homes, making homeownership even more unattainable for many Americans. Additionally, the lack of affordable housing supply intensifies competition for existing lower-cost homes, further inflating prices and exacerbating housing insecurity. Addressing these tariffs and exploring ways to stabilize material costs could be key to ensuring a more robust and equitable housing market.

The U.S. currently imposes tariffs on Canadian softwood lumber under antidumping and countervailing duty rates. These tariffs are a result of long-standing disputes where the U.S. alleges that Canadian lumber is unfairly subsidized and sold below market value. As of August 2024, these tariffs were raised from 8.05% to 14.54%, following an annual review by the U.S. Department of Commerce. The increased rates apply across various Canadian softwood lumber products, exacerbating tensions in an ongoing trade dispute that has persisted for decades​.

Proponents of these tariffs argue they are necessary to protect U.S. lumber producers and workers from unfair competition, while opponents, including homebuilders, argue that they drive up housing costs and reduce the availability of affordable homes in the U.S.

Business and the Economy

bookmark_borderTrump’s Proposed Tariffs on Mexico and Canada: A Policy Analysis

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Former President Donald Trump recently announced that on the first day of a potential second term, he would impose 25% tariffs on both Mexico and Canada in response to issues surrounding fentanyl and migration. However, this approach is riddled with economic, legal, and diplomatic flaws.

Violation of Existing Trade Agreements

One of the most glaring contradictions in Trump’s proposal is that the United States already has a free-trade agreement with Mexico and Canada: the United States-Mexico-Canada Agreement (USMCA). This deal, which was implemented and widely touted as a signature achievement of Trump’s first term, replaced NAFTA and strengthened trade relations between the three nations. Imposing new tariffs would directly violate the terms of the USMCA, undermining the agreement and potentially sparking retaliation or trade disputes.

Circumventing Congressional Authority

Tariffs are a matter that traditionally requires Congressional approval under U.S. law. Trump’s plan to bypass this requirement involves declaring Mexico and Canada as security threats to justify the tariffs through executive action. While this approach exploits legal loopholes, it would almost certainly face challenges in court. Congress has constitutionally enshrined authority over trade, and using national security as a pretext for tariffs risks further eroding trust in executive restraint.

The Reality on Migration and Fentanyl

Mexico’s Role in Migration and Drug Enforcement

  • The Mexican government has already taken significant steps to curb both illegal migration and drug trafficking, often under pressure from the U.S. Over the past 18 months, illegal border crossings from Mexico into the U.S. have decreased by 75% due to tighter enforcement on both sides of the border.
  • Blaming Mexico for fentanyl production also ignores that much of the demand for illegal drugs stems from the United States itself. Moreover, the precursors for fentanyl largely originate from China, complicating the narrative that Mexico is solely responsible.

Canada’s Reality

  • Imposing tariffs on Canada is even more perplexing, as there is no significant immigration issue from Canada into the U.S. On the contrary, Canada has been dealing with illegal crossings from the U.S., particularly by asylum seekers seeking refuge.
  • Additionally, deporting millions of immigrants from the U.S., as Trump has promised, is expected to increase pressure on Canada’s borders as displaced individuals seek alternative destinations. Canadian officials have already expressed concerns about a potential surge in illegal migration stemming from U.S. policies.

Economic Ramifications of Tariffs

Tariffs are essentially taxes on imports, which are often passed down to consumers. A 25% tariff on goods from Mexico and Canada would:

  • Increase prices for U.S. consumers on everyday items, including food, vehicles, and electronics.
  • Disrupt supply chains for key industries such as automobiles and agriculture, where cross-border trade plays a vital role.
  • Hurt American exporters, as both Canada and Mexico are major buyers of U.S. goods and are likely to retaliate with their own tariffs.

Diplomatic Consequences

Tariffs against two of the U.S.’s closest allies and largest trading partners would strain diplomatic relations:

  • Mexico and Canada have been strong collaborators on security and trade issues. Alienating them could weaken North American unity at a time when global economic competition, particularly with China, requires stronger regional alliances.
  • The move risks creating a climate of mistrust, where future agreements with the U.S. are viewed as unreliable or subject to arbitrary reversals.

Conclusion

Trump’s proposed tariffs on Mexico and Canada are not only impractical but also damaging on multiple fronts. They would violate existing trade agreements, harm U.S. consumers and businesses, and strain diplomatic ties with two of America’s closest allies. Additionally, his justification for the tariffs—fentanyl and migration—does not align with current realities. While addressing issues like drug trafficking and immigration is important, these tariffs would likely do more harm than good, reflecting a misinformed and counterproductive approach to economic and foreign policy.

Business and the Economy

bookmark_borderInflation and the Fallacy of Price Gouging and Corporate Greed

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Question: Can you actually prove there was “no widespread corporate price gouging”? I’m having trouble wrapping my head around like, Kellogg’s, grocery prices quadrupling in some cases.

Overview
There wasn’t widespread corporate price gouging, which is illegal and has been prosecuted in isolated cases, mainly among small companies. Price rises primarily stemmed from supply and demand dynamics.

Supply issues started with the 2019 drought in Taiwan, which disrupted microchip production and affected various goods like cars and electronics. Climate events like Hurricane Ida caused further supply disruptions, driving up prices of materials like plywood and drywall. Meanwhile, pandemic-era stimulus fueled demand, shifting the demand curve itself. Increased consumer demand led to higher profits, especially in sectors like oil and gas. Government intervention in market pricing could worsen outcomes for both the environment and the economically vulnerable.

Speaking as an independent economist, it’s clear that the dynamics of corporate profits, consumer demand, and energy policy require a level-headed analysis. The trend in corporate profits has been especially pronounced in industries like energy, where high demand and constrained supply have allowed for increased profit margins. However, the deeper issue lies in mass consumption patterns and consumer demand. The reliance on energy and petroleum products not only drives up prices but also intensifies climate change, creating a feedback loop: as energy use increases, so do environmental impacts, which in turn amplify the demand for energy. This escalating cycle adds both economic and environmental challenges.

The solution, from a free-market perspective, is to reduce fossil fuel consumption rather than blaming suppliers. Boycotting fossil fuels is an effective personal strategy.

Macroeconomics
It is complex issue. Basically, price gauging is against the law and has been. I remember in the 70’s when companies were prosecuted for price gauging during the oil embargo. The most recent cases of price gauging occurred at the start of the pandemic and were related to masks and hand sanitizer. These cases were also prosecuted. What happened with Kellogg’s, eggs, and chickens was not price gauging. This was the law of supply and demand. Many farm products were severely impacted by climate and disease on the supply side. Millions of chickens were culled due to bird flu and that was just in Lancaster County resulting in a spike in prices as well as shrink inflation in the size of my rotisserie chickens. All grains were impacted by climate disasters worldwide as well as the war in Ukraine. The droughts and fires in Texas had a significant impact on beef prices. Chocolate prices went up 400% due to drought followed by floods in Africa. On the demand side, consumers spent massive amounts of borrowed money from the government. Not only did this push prices up in the short term, it also resulted in massive government deficits. This happened mostly under Trump. Then, Biden borrowed trillions of dollars for both personal stimulus and infrastructure pushing demand even higher. Both administrations led to massive government debt. This supply and demand worked opposite on interest rates. There was little demand for lending at low interest rates at the same time there was a massive amount of government debt added to the supply of bonds, bills, and notes. The rise in interest rates was passed through to consumers, as well. The end result is the free market behaving exactly as it should. Given the proposed Trump policies you should expect things to get worse, much worse. I’ve written a paper to help people prosper during our decline as this is the best you can do for yourself titled Economic Outlook 2025 – 2035.

Microeconomics

The inflationary pressure on Kellogg’s breakfast cereals can be attributed to a combination of rising costs across several factors:

  1. Grain Prices: Increased costs for grains like corn and wheat, driven by demand fluctuations and climate impacts like droughts, raised raw material expenses.
  2. Sugar Prices: Rising sugar costs, due in part to global supply chain issues and high demand, affected the cost of sweetened cereals.
  3. Energy Costs: Higher energy prices, including those for fuel and electricity, made production and distribution more expensive.
  4. Labor Costs: Wage increases, driven by inflation and labor shortages, affected both production and grocery store wages, adding further cost pressures.
  5. Climate Change: Extreme weather events disrupted supply chains and reduced crop yields, which tightened supply and raised costs for key ingredients.
  6. Global Supply Chain Disruptions: COVID-19 and other global events strained supply chains, leading to increased shipping and logistics costs.

Summary
These cost pressures have led companies like Kellogg’s to raise prices. Many wage contracts, which increase by 10-14% annually over 5-7 years, mean that certain goods and services will likely continue to face inflationary pressure, even as other prices stabilize. Additionally, insurance costs — particularly in areas prone to climate-related disasters — are expected to rise annually, impacting crop, property, real estate and transportation insurance premiums indefinitely. Since inflation can create a feedback loop—especially through factors like energy, wage increases, government spending, and rising interest rates—it is expected to remain a persistent, “sticky” issue in the long term.

Economic Outlook 2025 – 2035

The Age of Loss and Damage

Drill, Baby, Drill (Hate and Ignorance and the Economy)

The National Debt and the Printing of Money

The Trump Trade

The True Costs (and Benefitlessness) of a Trump Economy

Political Overview of Economics

The Decline of Economic Sensibility

bookmark_borderLong-COVID Persistent Virus With Long-Term Costs

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By Daniel Brouse
August 20, 2024

A new study in Australia has found about $9.6 billion was lost in economic productivity due to long COVID in 2022. Researchers say that represented about a quarter of Australia’s real gross domestic product growth for that year.

With the U.S. having about 90 million more cases than Australia, the economic cost is likely around $90 billion higher just from lost productivity. Unfortunately, we continue to incur billions more in costs and millions more in new infections. And this estimate doesn’t even account for the additional costs of hospitalizations, deaths, and other impacts, which likely bring the total to trillions. On top of that, the U.S. government borrowed and distributed about $5 trillion in COVID-19 stimulus funds, so these costs are in addition to that.

I’ve been conducting experiments on hate and violence, and there’s a marked increase in extremism on both the far-right and far-left. Although my research is still in the early stages, it appears that COVID has likely intensified mental illness, exacerbated pre-existing neurological conditions, and impacted brain function. In a recent interview, lead scientist Raina MacIntyre explained that COVID affects every organ, though the symptoms aren’t always associated with long-COVID. Many patients unknowingly harbor the virus long after the initial infection. She also noted that in Australia, as well as globally, cardiovascular disease remains the leading cause of death at 2%. However, long-COVID is estimated to affect 2-3% of the population at the low end, and up to 20% at the high end. The scale of this problem is massive and continues to grow.

In an interview with ABC Australia, Professor MacIntyre said, “It’s not a nothing burger in children. It is a serious infection.” She said there were simple ways to minimize risk when it came to COVID-19 infections. “Using an air purifier, which is not very expensive, or opening a window if there is a window that can be opened, or wearing a mask.”

The study: The public health and economic burden of long COVID in Australia, 2022–24

The Impact of Hate on Political Perspectives and Social Cohesion

COVID-19 / SARS-CoV-2 / Novel Coronavirus

bookmark_borderElection 2024: The Decline of Economic Sensibility

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I began writing this after listening to Harris’ recent speeches — first on drug prices and then on the broader economic policy of her campaign. My concerns arise from a general disappointment with the direction of the campaign’s economic strategy.

Unfortunately, the “deal to cut Medicare prices on popular drugs” is misleading. The claim of a 50% reduction in drug prices is based on the list price, which few people actually pay. Medicare already benefits from discounted rates, and this new legislation won’t have much impact on those prices. In truth, the new rule is unlikely to significantly affect pharmaceutical companies’ profits, which explains why their stock prices have remained stable. This legislation is more about political posturing than genuinely lowering drug costs for consumers.

Regarding the economic policy laid out in Harris’ second speech, blaming inflation on ‘corporate greed’ is a simplistic and misleading narrative that every serious investor and economist recognizes as nonsense. The real drivers of inflation are far more complex, with a significant portion—around 75%-85%—traceable to the Trump administration’s policies. Failing to accurately identify and address the true causes of inflation undermines the administration’s economic credibility. This misstep, coupled with the questionable drug price control regulations announced the day before, paints an increasingly concerning picture for the economy. Markets are already reacting negatively to these policy directions, which doesn’t bode well for the future. If possible, the campaign needs to adjust its messaging—because Trump’s policies would be even worse. After these two days of speeches, I’m seriously reconsidering my vote, and I’m not alone. Many others who prioritize the economy are having second thoughts as well.

When asked if I could ever vote for Trump, I replied: No, I would never vote for Trump. He stole money from our business ethics experiment back in the ’90s. If you read my papers on him, you’ll see that Trump is largely responsible for the current inflation due to his disastrous fiscal and monetary policies. However, I also can’t support Harris if she continues to advocate for policies that contradict basic economic principles. Protectionism, price controls, and tariffs are major red flags for the entire business community. My goal is to convey what the financial markets are signaling. Right now, they seem to prefer Trump’s lack of regulation over Harris’ market interventions. It’s troubling when markets lean towards Trump’s deregulation, despite the significant damage he’s caused.

A friend mentioned that Harris cited two major factors contributing to inflation: Trump’s mishandling of the pandemic and supply chain disruptions, along with ‘corporate greed’ and ‘price gouging.’ While Biden has supposedly addressed the first, Harris claims she’ll tackle the second. From an economist’s perspective, there are several issues with that viewpoint. My goal is to help Democrats win the election with solid economic facts, not alienate independents who were leaning towards supporting her. At the very least, it’s better to stay silent on certain points and ideally avoid catering to the base’s misguided notions. For example, avoid terms like ‘corporate greed,’ ‘price gouging,’ or discussions on ‘supply chain disruptions.’

My friend insisted that these issues are real and not up for debate. However, I replied that none of these things—’corporate greed,’ ‘price gouging,’ or ‘supply chain disruptions’ — are as straightforward as they’re often portrayed. Labeling them that way is misleading and oversimplifies the issues. Such terms are often used to incite the base rather than address the real, complex economic factors at play. I strongly suggest avoiding these simplistic labels as they risk alienating informed voters who recognize the deeper economic realities.

There is certainly a lack of economic understanding among Democrats, which is why I’m trying to provide some clarity. Corporate profit margins have remained relatively stable. The reason corporate profits seem to be at ‘record levels’ is due to inflation. As prices rise with inflation, the absolute dollar amount of profits increases, but the percentage of profits remains the same. As for prices coming down, that would indicate deflation, which is generally a sign of severe economic problems—not something we should hope for. Also, corporations are not capable of being ‘greedy’ by definition; attributing morals or ethics to non-human entities is nonsensical. Promoting these false and misleading ideas is detrimental to politicians, the economy, and only serves to sow division and hate.

Conclusion:
A friend asked me, “Okay, I hear you, but if you’re reconsidering your vote, who would you vote for?”

I replied that, as of now, I’m not planning to vote for either presidential or senatorial candidates. Both Harris and Casey have proposed highly detrimental economic policies, just as Trump and McCormick have. In my view, the Democrats have made a serious mistake in their messaging, turning these races into a battle of the bases.

Most importantly, neither party is addressing the most serious economic threat to humanity—climate change. While both sides sow division with false and misleading economic rhetoric, they are completely ignoring the accelerating impact of anthropogenic global warming. In fact, the policies proposed by both parties seem poised to exacerbate climate change, leading to a permanent decline in the U.S. economy and potentially rendering our planet mostly uninhabitable within a generation.

The Human Induced Climate Change Experiment

bookmark_borderClimate Science: Love and Hate

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by Daniel Brouse
August 9 ,2024

As an economist, I have spent my career studying risk management, and in the process, I have also become a climate scientist—because climate change is the greatest risk to humanity. Climate science is closely tied to our emotions, particularly hate and love. The hatred of scientists and intelligence is one of the most significant factors contributing to the potential demise of modern civilization. If you’re over 8 years old, you should NOT be reposting memes. Most memes are generated by foreign actors (e.g. Russia) attempting to sow division through hate. Memes promoting class warfare, taxing the rich, and criticizing philanthropy are prime examples, as are those demonizing immigrants. If you’re under 8 years old, you shouldn’t be on social media at all. STOP REPOSTING HATEFUL MEMES.

The solution lies in increased education and LOVE.

From a paper I coauthored: The government’s actions, or lack thereof, reflect a dangerous combination of arrogance and ignorance, making worst-case predictions for climate change seem like best-case scenarios. Revised climate models now suggest that global temperatures could rise by as much as 9°C within this century, compared to earlier projections of a 4°C increase over the next millennium. Such a dramatic temperature rise could push Earth toward a “wet-bulb” temperature threshold, where the combination of heat and humidity makes it impossible for the human body to cool itself through perspiration, leading to potentially fatal heat stress.

What Can I Do?
There are plenty of things you can do to help save the planet: stop using fossil fuels, consume less, and love more.

Love has the transformative power to save the world in numerous ways:

  1. Fostering Connection and Unity: Love brings people together, transcending boundaries of race, religion, nationality, and ideology. By fostering a sense of empathy, compassion, and understanding, love promotes unity and solidarity among diverse individuals and communities. When people come together in love, they can work collaboratively to address shared challenges and create positive change on a global scale.
  2. Promoting Peace and Harmony: Love is the antidote to hatred, conflict, and violence. By promoting forgiveness, reconciliation, and mutual respect, love can help heal deep-seated divisions and promote peace and harmony within and between societies. When individuals and nations choose love over fear and hostility, they pave the way for peaceful coexistence and cooperation.
  3. Inspiring Empathy and Altruism: Love cultivates a sense of empathy and concern for the well-being of others. When individuals act out of love, they are motivated to alleviate suffering, promote justice, and advance the common good. Love inspires acts of kindness, generosity, and selflessness, creating a ripple effect of positive change that spreads throughout communities and across borders.
  4. Protecting the Environment: Love for the natural world motivates individuals to protect and preserve the planet for future generations. When people recognize their interconnectedness with all living beings and the delicate balance of ecosystems, they are inspired to adopt sustainable lifestyles, promote conservation efforts, and advocate for environmental stewardship. Love for the Earth compels us to take action to address climate change, protect biodiversity, and ensure a healthy and sustainable future for all.
  5. Empowering Social Justice: Love is inherently egalitarian, valuing the inherent worth and dignity of every individual. When people act out of love, they are committed to promoting social justice, equality, and human rights for all. Love drives efforts to dismantle systems of oppression, combat discrimination, and create inclusive societies where everyone has the opportunity to thrive. By standing up for justice and advocating for marginalized communities, love can help create a more just and equitable world for future generations.

In summary, love has the power to save the world by fostering connection and unity, promoting peace and harmony, inspiring empathy and altruism, protecting the environment, and empowering social justice. When individuals and communities choose love as their guiding principle, they can create a world where compassion, understanding, and cooperation prevail, paving the way for a brighter and more sustainable future for all.

The Human Induced Climate Change Experiment

bookmark_borderEconomics: The Impact of Hate on Political Perspectives and Social Cohesion

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By Daniel Brouse
August 2, 2024

“Whereof one cannot speak, thereof one must be silent.” — Ludwig Wittgenstein

For decades, I have been actively involved in promoting the education of world economics. In recent years, I’ve observed a troubling phenomenon: certain segments of the population appear resistant to educational outreach, a condition that seems to split along political lines. While the majority of the population, approximately 60-80%, remains receptive to learning, there is a persistent bias of hate that obstructs rational thinking among the extremes — approximately 10-20% on both the far-right and the far-left.

On the far-right, this bias manifests as an “us against them” mentality, characterized by white supremacy and misogyny. This perspective often arises from fear, envy and jealousy, leading to a distorted worldview. For example:

  1. The invasion at the border: This issue is often framed in xenophobic terms, disregarding the complex socio-economic factors involved.
  2. Moral judgments on government: The government is seen as an inherently corrupt and amoral entity, rather than a system created to serve public needs.
  3. Attack on intellectual disciplines: There is a disdain for intelligence, science, and economics, driven by a lack of comprehension and a desire to undermine established knowledge. Climate change denial and inaction are the greatest threats to both the economy and the environment.

On the far-left, a similar bias of hate is expressed through class warfare rhetoric, such as the demonization of wealth and the desire to redistribute wealth aggressively. This bias also stems from fear, envy and jealousy, manifesting in ways such as:

  1. Tax wealth/eat the rich: This slogan captures the simplistic view that the wealthy should bear the brunt of societal costs, ignoring the complexities of economic systems.
  2. Moral judgments on corporate actions: Corporations are often labeled as inherently greedy or evil, rather than being seen as entities driven by market forces and shareholder interests.
  3. Attack on quantitative disciplines: Like their far-right counterparts, there is often a dismissal of complex subjects like mathematics and economics, which are perceived as tools of oppression.

Both extremes exhibit a resistance to rational thinking, hindered by deeply entrenched biases. These biases not only prevent understanding but also create a dangerous divide that hinders constructive dialogue and problem-solving in society. The challenge lies in finding ways to bridge these gaps and foster a more informed and rational public discourse.

Climate Science: The Influence of Love and Hate

Politicians Hinder Fight Against Climate Change

Business and Economics

The Human Induced Climate Change Experiment

bookmark_borderWealth Taxes Are Illogical

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By Daniel Brouse
July 30, 2024

There are numerous reasons why a wealth tax can be a self-defeating fiasco, and the case of taxing someone like Elon Musk vividly illustrates this. A wealth tax on high-net-worth individuals could create a complex and problematic feedback loop involving the sale of Tesla stock and the associated capital gains taxes. To meet his wealth tax obligations, Musk might be compelled to sell a significant portion of his Tesla shares. This large-scale sale could depress the stock price, particularly if the volume of shares sold is substantial, thereby reducing the value of his remaining holdings. As a result, Musk might need to sell even more shares to cover the same wealth tax amount.

Moreover, each sale of shares generates capital gains, which are subject to additional taxes. To pay these capital gains taxes, Musk would need to sell even more shares, perpetuating a cycle where each sale incurs further tax liabilities and necessitates additional sales. This continuous process could exacerbate the decline in Tesla’s stock price, compounding the need for further sales. Over time, this cycle could severely erode Musk’s holdings in Tesla and significantly diminish his overall wealth.

The ramifications of this feedback loop extend beyond Musk. The decline in Tesla’s stock price could adversely affect a wide range of stakeholders, including individual investors such as widows, orphans, and those with retirement accounts. Their investments could lose value as a result of the cascading effect of share sales driven by the wealth tax.

Furthermore, applying a wealth tax to other ventures like SpaceX and Neuralink could be even more detrimental. Such a tax could stifle innovation and growth in these groundbreaking companies, potentially leading to broader economic repercussions and undermining the very objectives the tax aims to achieve. Overall, the unintended consequences of a wealth tax could be far-reaching, affecting not just the wealthy but also impacting the broader economy and investment landscape.

The other impacts of such taxes on a larger portion of the population are likely to lead to even more devastating economic outcomes. Unlike any previous period of excessive taxation in the U.S., it is now much easier for capital to flee the country. The internet and technological advances make it simpler for wealth to move to less hostile environments. As a result, instead of creating more equity, these taxes could accelerate inequality.

Q: How much is Musk’s income, net worth, and projected wealth tax? Your scenario assumes that the wealth tax is onerous.

A: This scenario was based on a one-time net worth tax of 3.4%. It references a still circulating meme from 2021 that stated the $11 billion in income taxes Musk paid that year amounted to only 3.4% of his net wealth, suggesting that more should be paid. In any event, all wealth taxes, regardless of the rate, would present significant challenges. As soon as you tax wealth, it inherently declines. But even before that point, determining the value of assets is fraught with difficulties. For example, how do you accurately assess the value of companies like SpaceX or Neuralink? Their worth isn’t easily defined, especially given their potential for future growth and the speculative nature of their industries. If the wealth tax were applied annually, the challenges would be even greater. Yearly valuations would be required, and the volatility of asset prices could lead to significant fluctuations in tax liabilities, creating further complications for both the taxpayer and the tax authorities. Additionally, the administrative burden of assessing and enforcing such a tax could be substantial, potentially outweighing the benefits. More importantly, even if all their money were taken, it would do almost nothing to reduce the national debt. In fact, it could potentially have the opposite effect. This can be observed at the state level, with Tesla moving out of Delaware and California. Imposing a wealth tax could lead to wealth fleeing the U.S. A much better idea would be to tax pollution.

Q: What about a flat tax?

Actually, the US has a progressive income tax. In recent years, the top 10% of income earners in the United States have contributed significantly more to federal income tax revenues. Specifically, for the 2020 tax year, the top 10% paid 73.7% of all federal income taxes. This concentration of tax liability has increased over time, reflecting a greater share of total income and taxable income among the wealthiest individuals.

For comparison, the top 1% of taxpayers alone paid 42.3% of all federal income taxes in 2020, while the bottom 50% of earners contributed only 2.3%. Generally, progressive taxes on productivity can be detrimental to an economy and disproportionately affect the poorest individuals.

A Much, Much Better Approach
A more effective approach would be to tax negative externalities, similar to the taxation on cigarettes. For example, imposing a 100% tax on a barrel of oil and a 1,000% tax on a ton of coal could significantly disincentivize the use of fossil fuels. Such high taxes would make fossil fuels much more expensive, encouraging industries and consumers to transition to cleaner energy alternatives like wind, solar, and nuclear power. This shift would not only reduce greenhouse gas emissions but also mitigate the broader environmental harm caused by fossil fuel extraction and consumption, including air and water pollution.

Pollution from fossil fuels is the leading cause of death globally, contributing significantly to respiratory and cardiovascular diseases. The impact is disproportionately felt by the poorest and most disenfranchised populations, who often live in areas with higher pollution levels and have less access to healthcare. These communities are also more likely to suffer from the environmental and health consequences of fossil fuel extraction and burning, such as air and water contamination, leading to a cycle of poverty and illness. The burden of fossil fuel pollution is not evenly distributed; it exacerbates existing social and economic inequalities, making it a pressing issue for both public health and social justice. Addressing this challenge requires comprehensive policies that not only reduce emissions but also protect and uplift the most vulnerable populations.

Climate change will continue to exacerbate existing inequalities. As extreme weather events, rising sea levels, and other climate-related disruptions increase, those with fewer resources will struggle the most to adapt and recover. This growing inequality calls for a two-pronged approach: actively working to mitigate global warming and preparing for the socio-economic disparities it will inevitably deepen.

The Real Threat to Economic Security
Regrettably, the United States ranks among the least prepared countries globally, with the highest percentage of climate deniers. Politicians exacerbate the problem by hindering efforts against climate change. The Republican Party dismisses it as a manufactured crisis and plans to increase fossil fuel production. Political extremists asserting that the climate crisis is manufactured employ an ironic term, considering that human manufacturing activities are the primary driver of climate change.

Under President Biden, the United States continues to be the world’s largest producer of oil, including crude oil, natural gas liquids, and other petroleum products. Both political parties have concurred to allocate unlimited emergency funding for climate disasters instead of proactively preventing them. In 2023, the U.S. witnessed a record number of climate disasters exceeding one billion dollars each, totaling 28 separate weather and climate-related events.

In June 2024, the Supreme Court significantly expanded its authority and severely curtailed the Environmental Protection Agency’s (EPA) ability to enforce environmental protection laws. This ruling represents a dramatic shift in the balance of power, undermining decades of regulatory progress aimed at mitigating environmental damage and climate change. The court’s decision essentially nullifies the EPA’s mandate to regulate emissions and enforce compliance with existing environmental standards.

This judicial overreach is viewed by many as an act of arrogance and ignorance, resulting in a scenario where “worst-case” predictions for climate change have become the “best-case” expectations. The ramifications of this decision are dire, prompting a revision of climate models to reflect a much grimmer outlook. The new projections indicate a potential maximum global temperature increase of 9°C within this century, a stark rise from the previously estimated 4°C over the next millennium.

CONCLUSION
The national debt currently stands at $36 trillion. Even if we taxed 100% of the wealth of the top 1%, we would still owe more than $36 trillion at the end of the year. Additionally, this move would eliminate approximately 45.8% of all federal individual income tax revenue. The only viable solution is to address the existential crises we face, as failing to do so means risking widespread early deaths, poverty, and a lack of healthcare for everyone.

Balancing the Books: How Public-Private Healthcare Models Can Sustain Economic Growth

Taxation in a Changing World: Challenges, Inefficiencies, and Paths to Sustainability

Wealth Taxes Are Illogical

Business and Economics

The Human Induced Climate Change Experiment

bookmark_borderDrill, Baby, Drill (How Hate and Ignorance Distort Economic Perspectives)

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By Daniel Brouse
July 19, 2024

“Perhaps most importantly is the repeated use of the phrase ‘Drill, Baby, Drill’.”

Economic Update:
If Trump wins, great news for the very few people whose primary income comes from government securities interest! Unfortunately, very, very bad news for everyone else.

Tariffs, protectionism, lack of immigration, and nationalism are all detrimental to the economy. Tariffs and protectionist policies can lead to trade wars, higher consumer prices, and disruptions in the supply chain, which can stifle economic growth. Limiting immigration reduces the labor force and can slow down innovation and productivity, as immigrants often contribute significantly to economic dynamism. Nationalism can lead to isolationist policies that hinder international cooperation and trade, further damaging the economy. Over the last several years, approximately 80% of economic growth can be attributed to immigration.

Should Trump win, there is a concern that the U.S. may face economic decline similar to his six personal bankruptcies. His previous administration’s policies on tariffs, immigration restrictions, and nationalist rhetoric have already shown signs of economic strain. Continued implementation of such policies could exacerbate these issues, leading to a weakened economy and reduced global competitiveness for the U.S. It is crucial to adopt inclusive and cooperative economic strategies to foster sustainable growth and stability.

Interest rates are likely to spike and remain high for an extended period. In 2019, under the Trump administration, the Federal Reserve balance sheet saw a massive increase of $4 trillion in a very short period. This unprecedented expansion of the money supply, combined with the administration’s tax cuts and significant government spending, contributed to record inflation levels. The rapid increase in the money supply, aimed at stimulating the economy, led to an oversupply of currency, diminishing its value and driving prices up.

Federal Reserve's Balance Sheet / Assets
Federal Reserve’s Balance Sheet / Assets

The former President has also made claims that he will lower interest rates if he returns to office. The good news is that he doesn’t have the authority to directly lower rates, as this is the Federal Reserve’s responsibility. However, what used to be reassuring news is now less so. With the rollback of Chevron regulations, potential economic instability could lead to disastrous consequences, including further inflationary pressures and financial market disruptions.

Additionally, the tax cuts, while boosting short-term economic growth, significantly reduced federal revenue, leading to increased borrowing and higher national debt. The substantial government spending further exacerbated this issue, creating a fiscal environment prone to inflation. As a result, the Federal Reserve had to raise interest rates to combat inflation and stabilize the economy.

High interest rates can slow down economic growth by making borrowing more expensive for consumers and businesses, potentially leading to reduced investments and spending. This can create a challenging economic environment, underscoring the need for balanced fiscal policies that promote sustainable growth without leading to excessive inflation.

The former President recently stated that he wants a ‘weaker dollar.’ A devalued dollar on international markets can lead to numerous economic challenges, including significant impacts on inflation and interest rates. A weaker dollar makes U.S. exports cheaper and more competitive abroad, potentially boosting manufacturing and trade. However, it also increases the cost of imports, leading to higher prices for consumer goods and contributing to inflation.

Additionally, a weaker dollar can affect interest rates as the Federal Reserve may adjust monetary policy to manage inflationary pressures, impacting borrowing costs for consumers and businesses. Another concern is the impact on foreign investment. Treasury securities are popular among foreign investors because they are considered a safe investment. However, if the dollar devalues, the return on these investments may decrease when converted back to the investor’s local currency. To attract foreign investment despite the weaker dollar, the U.S. may need to offer higher interest rates on Treasury securities.

These economic landmines highlight the complexities and potential risks associated with currency devaluation.

Perhaps most importantly is the repeated use of the phrase ‘Drill, Baby, Drill’. The phrase encapsulates a harmful approach to energy policy that prioritizes fossil fuel extraction over sustainable practices. Climate change, exacerbated by such policies, poses the most severe threat not only to our environment but also to our economy.

In 2023, the U.S. experienced a record number of climate disasters, each exceeding one billion dollars in damages, with a total of 28 separate weather and climate-related events. Some of these individual events cost the U.S. economy hundreds of billions of dollars. The frequency and severity of these events are alarming, reflecting the accelerating pace of climate change.

The economic impact of climate change is expected to be staggering, with projections indicating it could cost the U.S. economy trillions of dollars. The financial burdens arise from various sources, including the destruction of infrastructure, increased healthcare costs due to climate-related illnesses, disruptions to agriculture and food supply, and the need for extensive disaster relief and recovery efforts. One of the primary drivers of the current inflation spike is the rising cost of homeowners insurance due to climate disaster-related claims. Short sellers anticipate that within ten years, 25% of U.S. properties will be uninsurable. These costs will continue to rise unless significant measures are taken to mitigate climate change and transition to a more sustainable energy system.

Moreover, the long-term economic effects of climate change can hinder economic growth, reduce productivity, and increase social inequalities. Proactive investments in renewable energy, climate resilience, and sustainable practices are essential to curtail the financial and environmental impacts of climate change. These measures are crucial to protect both the environment and the economy from the devastating impacts of climate change.

Trumpenomics: The Decline of the US

Economic Outlook 2025 – 2035

Protectionism 101: Trump Economics

The Human Induced Climate Change Experiment

bookmark_borderThe True Costs (and Benefitlessness) of a Trump Economy

Posted on by admin

January 23, 2020

What are the costs and benefits to the United States under a Trump economy?

Financial Analysis: Current State of Affairs
First, start with a financial analysis — a snapshot of the current economic health of the nation. What would a financial analysis that is similar to an individual applying for a bank loan, or a married couple visiting a financial planner for their retirement plan, look like? What are the assets and liabilities? What type of assets and liabilities are in your portfolio? What are your saving patterns? Did you get a large gift from your parents or have you been showing a strong pattern of saving over time? What is your income? Have you made dubious loans to yourself? Where does your income come from? What is your credit history?

A financial analysis of the U.S.A. results in a failing grade.

Impacts of Fiscal and Monetary Policy
After examining the current state of affairs, examine the fiscal policies of the Executive Branch and the monetary policies pushed onto the Federal Reserve. The Trump administration has taken extremely negative positions with free-trade, as well as, jeopardized the standing of the world reserve currency.

Tariffs
The Trump administration has destroyed the United States leadership in free-trade. Huge taxes were placed upon the American public through the use of tariffs. The tariffs were put on goods and services from around the world and paid for by the American consumer. The placement of tariffs have circumvented congress’ oversight and consumer protection considerations. Not only do tariffs introduce new taxes on the population, they also destroy trade relationships with other countries. That is to say, tariffs and retaliatory tariffs cause foreign countries to look elsewhere for their imports. For example, China’s retaliatory tariffs on agriculture resulted in China developing new trade partnerships that do not include the USA.

Here is a partial list of Trump Tariffs:
Solar panels: 15 – 30%
Washing machines: 16 – 50%
Steel and aluminum: 10 – 25%
Chinese products: 15 – 50%
South Korean products: 25%

More tariffs were placed on India, Canada, Mexico, the European Union and others.

Tariffs not only have a direct impact on U.S. current affairs, but they will leave everlasting damage.

Inflation
The overall Trump economic policy has put the economy at risk of high inflation and interest rates.

Inflation Update: Immigration and the Wage Inflation Spiral (June 12, 2022)
An important factor in the 2022 record inflation situation can be traced back to the Trump immigration policy.

The US has stagnant population growth (as does the UK, EU, etc. Japan has a declining population.)

During the Trump administration, the US drastically curtailed immigration. The Biden administration continues to do so today.

The result has been wage inflation. The wage inflation that started in 2018 began the overall inflation spiral that continues today. A wage inflation spiral happens when the initial wage inflation is canceled out by the price inflation requiring further wage inflation to keep up with the price inflation… the increase prices require more wage inflation for employees to keep pace with the cost of living… the subsequent rise in wages results in the need to raise prices to pay the workers… and round and round we go.

The solutions are to either increase our population (through immigration) and/or increase our productivity by eliminating the need for humans.

How the Inflation Spiral Started: Immigration
The Trump administration’s policy on immigration and building The Wall have a devastating impact on the economy. The U.S. economy is a capitalistic system based on population growth. The birth rate in America is close to zero percent. In order to maintain the standard of living, the country needs to gain millions of people through immigration. The Trump policies have attempted to eliminate immigration.
— Daniel Brouse (2020)

* “Over the course of four years, the Trump administration set an unprecedented pace for executive action on immigration, enacting 472 administrative changes that dismantled and reconstructed many elements of the U.S. immigration system. Humanitarian protections were severely diminished. The U.S.-Mexico border became more closed off. Immigration enforcement appeared more random. And legal immigration became out of reach for many. All of this was accomplished nearly exclusively by the executive branch, with sweeping presidential proclamations and executive orders, departmental policy guidance, and hundreds of small, technical adjustments.” — Migration Policy Institute’s Four Years of Profound Change (2022>

* “After years of wage stagnation, we are finally seeing rising wages,” Donald Trump (State of the Union 2018)
“The Employment Cost Index, a measure of salary and benefit costs, registered a 2.6 percent gain for the full year, tied for the best since 2007.” — CNBC (January 31, 2018)

* From December of 2020 through January of 2022, nominal wages and salaries were up 4.5 percent, the fastest increase since 1983. — Bureau of Labor Statistics (BLS)

World Reserve Currency
“A nation that prints its own currency, and that currency is the world reserve currency, is not threatened by deficits. Until that currency stops being the reserve currency,” said Sidd Mukherjee.

The U.S. dollar as the world reserve currency has given the United States an unfair economic advantage. The U.S. has been able to “print” and borrow money in ways that break the rules of economics; however, the Trump administration has jeopardized the standing of the dollar as the world reserve currency.

The major economic powers of the world entered into a nuclear arms deal with Iran called the Joint Comprehensive Plan of Action (JCPOA). In October of 2017, Trump began pulling out of the agreement. On May 8, 2018, Trump announced the United States withdrawal from JCPOA and declared economic warfare on Iran. The warfare included “tough new sanctions” on Iran. The other countries to the treaty attempted to maintain the JCPOA by developing a new system to by-pass the world reserve currency.

Germany, France and Britain officially set up a European mechanism to facilitate non-dollar trade with Iran, the Instrument in Support of Trade Exchanges (Instex). Russia and other countries have since joined Instex.

Risk Management
The future of the nation is dependent on current risk management. “On the High Risk List; the fragmentation, overlap, and duplication annual report; natural disasters and climate change; and other topics,” reports the General Accounting Office of the USA. Pollution, in particular air pollution, is also a substantial risk. CO2, methane and other greenhouse gases have all increased under the Trump plan. Trump has withdrawn from the Paris Agreement and has consistently called climate change a hoax.

It’s never a good idea to say “never”… but, risk-management-denial always increases the probability of a worse case scenario.

Not only is our nation’s current cash-flow severely hemorrhaging due to extreme weather events (and other costs associated with climate change), but this is just the tip of the iceberg. Climate change denial is risk-management-denial.

Pollution and Climate Change Costs Unsustainable

Trump recently stated, “We have the cleanest air.” This is a boldfaced lie. Air pollution in the form of particulates and ozone are a severe health emergency in the United States.

“According to a 2009 report, around ’60 percent of Americans live in areas where air pollution has reached unhealthy levels that can make people sick.’ Air pollution can cause a variety of health problems including, but not limited to infections, behavioral changes, cancer, organ failure, and even premature death.” (Wikipedia) Air pollution is the number one cause of illness in the world and the second leading cause of death. The cost of air pollution can not be contained by one country — pollution knows no borders. It is estimated 8 million people a year die from air pollution.

A report by Stanford and Carnegie Mellon University states, “Air pollution negatively impacts the U.S. economy, costing the U.S. roughly 5 percent of its yearly gross domestic product (GDP) in damages ($790 billion in 2014). The highest costs come from early deaths, attributable to exposure to fine particulate matter (PM2.5).” The number had been falling up to 2016, but Trump has dramatically undermined clean air laws. As of December 2019, Trump had rolled back 95 environmental protection laws.

Air pollution also contributes to the climate change crisis, and in an exponential feedback loop, climate change contributes to air pollution. For instance, the wildfires in California and Australia were made more severe due to human induced climate change. The wildfires resulted in air pollution that costs billions of dollars in damages, illness and death. The wildfires also contributed to greenhouse gases and climate change that will result in more wildfires.

Though a huge cost, the climate change / air pollution feedback loop is just a small cost of climate change. Not only has the Trump administration not properly assessed the risk of climate change, the administration has undermined efforts to mitigate climate change. Even more brazen, the administration has enacted policies that hasten the devastation of global warming.

The costs of climate change are huge. The Hamilton Project and the Stanford Institute for Economic Policy Research reports, “Damages to the U.S. economy grow with temperature change at an increasing rate.” The Washington Post reports, “Climate change could cost the U.S. economy up to 10.5% of GDP by 2100.” The cost of not adapting to climate change will likely cripple the American economy.

The current costs, the costs of not adapting, and the costs of not preventing climate change are overwhelming to calculate. Take flood insurance as an example. Sea level rise and extreme weather events have redrawn floodmaps and bankrupted the National Flood Insurance Program. What flood insurance that is still available has started a series of exponential increases in premiums. Real estate along the coasts and flood prone areas will become worthless in the coming years.

The other costs associated with the Trump administration’s climate change policy is too long to list.  Fossil fuel elimination and climate change mitigation our essential for risk management.

Immigration and the Acquisition Of Private Property
The Trump administration’s policy on immigration and building The Wall have a devastating impact on the economy. First, the U.S. economy is a capitalistic system based on population growth. The birth rate in America is close to zero percent. In order to maintain the standard of living, the country needs to gain millions of people through immigration. The Trump policies have attempted to eliminate immigration.

Also of a long-term negative impact is the building of The Wall. Funds to build the wall were diverted against the will of congress. The funds were then used to seize private land. The land seizures and The Wall have had a major impact on nature preserves and indigenous sacred grounds. Just as detrimental are the eminent domain acquisitions of individuals’ land. Socialization of private property is an attack on the economic system. The costs to the economy and freedom are not quantifiable.

Income Inequality
The Trump administration’s policies have widened the economic divide and income inequality in the United States.  Trump said, “inequality is down.” The next day federal data was released and the Washington Post reported, “The separation between rich and poor from 2017 and 2018 was greater than it has ever been.”

“Wages are up, and inequality is down. Something that people don’t like writing about.” Trump said during a press conference following the United Nations General Assembly meeting in New York. Again, this is not true. The Economic Policy Institute reports, “Slow wage growth is a key sign of how far the U.S. economy remains from a full recovery. Nominal wage growth since the recovery officially began in mid-2009 has been low and flat.”

BENEFITS
There have not been any real benefits from Trump policies. Some people try to point to employment and tax cuts.

Employment
Employment and unemployment numbers became irrelevant as an economic indicator in the 1990’s. The internet and the worldwide web transformed the definition of employment. In addition, you would need to deduct all the jobs lost through the elimination of most temporary work visas. Many of these jobs have not been filled, especially in agriculture, horticulture and hospitality. Billions of dollars in wages and taxes have been eliminated through the Trump immigration policy. These numbers are not included in employment figures.

During the fourth quarter of 2016, 7.6 million people were unemployed. At the end of 2018, 9.0 million people remained unemployed. Yet, Trump claims to have created 5 million new jobs. Do the math.

In January 2020, Trump boasted at a campaign rally in Wildwood, NJ that “factory jobs were the best ever in the history of the United States.” Reuters reported, U.S. factory sector in deepest slump in more than 10 years. “The U.S. manufacturing sector fell into its deepest slump in more than a decade in December as the U.S.-China trade war kept a lid on factory output, orders and employment…. The Institute for Supply Management (ISM) said its index of national factory activity fell to 47.2 last month from 48.1 in November. It was the lowest reading since June 2009 and, coupled with readings for both new orders and factory employment at multi-year lows, thwarted expectations for a leveling off in the pace of decline in a sector buffeted by trade tensions. ”

Tax Cuts
The only beneficial tax cut that has been made by the administration was to lower corporate taxes. Corporate profits are already taxed as income to shareholders. The corporate tax is double taxation. A fair tax policy would not have corporate taxation. However, the other Trump trade and tax policies’ negative impacts far outweigh the positive impact of a reduction in corporate tax rates.

But, What About Obama?
Obama increased the national debt by about $1 trillion/year. Trump is increasing the national debt by about $1 trillion/year. What makes Trump worse than Obama — Trump is suppose to be a fiscally conservative Republican. Obama wasn’t suppose to be. So, for that reason, Trump’s deceit makes it worse than Obama. Trump is not stopping the problem. Worse yet, he is contributing to the problem at the same rate as Obama, as well as, putting the future economy at risk through bad trade and environmental policies. Trump is trying to con the American public into a false narrative on the economy.  In fact, this is not “the best economy ever. Rather, it is the worst economy ever.

Morning Brew reported, U.S. Budget Deficit to Exceed $1 Trillion in 2020. “The U.S. budget deficit will top $1 trillion this year, according to a new report from the nonpartisan Congressional Budget Office (CBO). What that means: The government will spend $1.02 trillion more than it collects in 2020. The widening deficit is a result of the 2017 tax cuts and an increase in spending on federal programs.”

By 2020, the debt to GDP ratio hit its highest level ever at 125%.

Conclusion
The national debt is unsustainable. The debt, risk-management-denial, deceit, nationalism, and greed will sink our ship.

ABOUT THE AUTHOR
The responsibility an economist accepts is to determine the “costs and benefits of our actions on society.” Then, attempt to convert the difference into dollars. Is economics opinion? That depends on your value of the costs and benefits of your actions on society.