During the most recent Republican presidential debate, I sat watching to see if a frontrunner or serious candidate might emerge among the clowns and the scandals waiting to happen. Ron Paul, the libertarian standard-bearer and stalwart champion of deregulation, whose name rarely fails to surface when election time draws near, was the only candidate to answer the questions asked of him. Not only that, he answered them in very concrete terms, avoiding the escapism so prevalent in many of his opponents’ answers.
It should have been no surprise to long-time political enthusiasts that in his answers, Paul trotted out many of his most well-known (and least popular) political ideas. He demanded that other candidates take a stand on whether the Fed ought to stick around or be shut down, he lectured on free market values versus overregulated government, etc. Of particular interest to me (primarily since it runs against common sense) was Paul’s call to end the Repatriation Tax.
Now, at this point in our development as a nation, it should never be surprising to hear a Republican candidate rattle the tax-cutting sabre every election period. No one, bleeding heart liberal or right-wing conservative, enjoys seeing his or her hard-earned money shoot straight from the paycheck to Federal coffers. Nevertheless, as with any political policy, the implications of cutting taxes ought to be examined carefully. I’d like to take a look at exactly what the Repatriation Tax is, how it stands now, and how removing it would not only result in the opposite of what Paul and his supporters want, but would also be devastating to Federal revenue and to any efforts to curb the excesses of multinationals.
Simply put, failing to tax income made outside the U.S. that comes into the U.S. would only spur multinational corporations to invest more heavily in non-regulated countries which offer no minimum wage or regulated working conditions.
Article comments
— go to most recent comments1 - DF Sayers
"Simply put, failing to tax income made outside the U.S. that comes into the U.S. would only spur multinational corporations to invest more heavily in non-regulated countries which offer no minimum wage or regulated working conditions."
I've made this argument for some time - indeed, all of the "non-competitive" criticism of US economy misses this point. Allowing companies more power to hold referendums on national profitability will only drive standards down. Coupled with a nuanced understanding of just how well nations like Germany have done in the context of heavily controlled industry, its hard to honestly argue that "freeing capital" will help anyone but capitalists.
2 - Jared N. Smith
I agree. While regulation itself might not be a desirable political policy, an examination of the way large companies past and present behave when there is no regulation ought to demonstrate that, moral evil or not, regulation is required.
During the Republican Presidential Debate, one candidate said that this nation's railroad system was build without Federal aid. However, he failed to mention that it was built by monopolistic tycoons who were bleeding the market dry and destroying competitors right out of the gate using overwhelming capital and profit gains. How can any startup fight a war of attrition without a little bit of regulation on their side?
3 - Leroy
Really? And no one pointed out how dead wrong that candidate was when he said the railroads were not subsidized?
Of course they were immensely subsidized, both before and during development and afterwards with favorable shipping contracts. There is NO form of transportation that hasn't gotten tremendous government subsidies, except maybe hot air balloons, and I'm not so sure about that.
The 19th century was rife with government backed and subsidized transportation projects, including all the canals.
I'm astounded that someone could say something so wrong and not be confronted immediately. Is our education so bad that students learn no history? Or is the role of government in American business development suppressed for partisan political purposes?
4 - Jared N. Smith
I may have painted too general of a picture. I looked back at the CNN transcript and Gingrich said in response to a comment about defunding NASA: "GINGRICH: John, you mischaracterized me. I didn't say end the space program. We built the transcontinental railroads without a national department of railroads. I said you could get into space faster, better, more effectively, more creatively if you decentralized it, got it out of Washington, and cut out the bureaucracy. It's not about getting rid of the space program; it's about getting to a real space program that works."
So, while Gingrich certainly did not say that there was no government aid at all, I fear that many of the viewers (myself included) took his statement to mean that he was claiming the Free Market is responsible for building transportation infrastructure and that all the government does is hamper the free flow of a natural and fluid market. He seems to think the same thing for spaceflight, by the way...
5 - Clavos
Is our education so bad that students learn no history?
Actually, it's worse than that.
They learn nothing...
6 - Jared N. Smith
"Over all, 20 percent of fourth graders, 17 percent of eighth graders and 12 percent of high school seniors demonstrated proficiency on the exam, the National Assessment of Educational Progress. Federal officials said they were encouraged by a slight increase in eighth-grade scores since the last history test, in 2006. But even those gains offered little to celebrate because, for example, fewer than a third of eighth graders could answer even a “seemingly easy question” asking them to identify an important advantage American forces had over the British during the Revolution, the government’s statement on the results said." NY Times.
7 - zingzing
"Actually, it's worse than that. They learn nothing..."
that ain't true. why, i was learned how ta reed and rat in one of them what buildings that all the ejucating go on in with the teacher lady with the dopey eyes. if i ain't learnt nothing, how's it i can express ma consternation what with what you scribbled up yonder? huh?
8 - Glenn Contrarian
Hey - the Republicans have the answer on how to fix our abysmal education system - cut the funding! Get rid of Head Start, get rid of full-day kindergarten, slash teacher pay, increase class sizes...guess what? Our educational system will be magically fixed!
9 - Clavos
"consternation," zing?
Whut dew hit meen???
10 - Arch Conservative
"Hey - the Republicans have the answer on how to fix our abysmal education system - cut the funding!"
You've got a point Glenn. The solution can only be to leave the liberals who've controlled the education system for the last 40 years in charge and throw more money at the problem.
11 - Glenn Contrarian
Right, Arch - have 40 or 50 kids per classroom and the kids will learn more since they have less attention from the teacher. Force teachers to get second jobs to support their families so they won't have time to grade homework and tests. And since when have four- and five-year-old kids needed to learn?
12 - Jared N. Smith
...Or we could elect and support only those representatives, regardless of party affiliation, who understand that belt-tightening across the board is the only way to fix our mistakes. That's right - OUR mistakes. A former President of a certain party might have racked up our current deficit, and our current President of the other party might have topped it off as well, but ultimately we have tolerated and continued to support a society that deifies conspicuous consumption, all the while labeling it "The American Dream." Pointing fingers at one party or another, one side of the political spectrum or the other, only serves to draw attention away from the problem.
13 - Glenn Contrarian
OR we could bear in mind that we're paying LESS in taxes now than we have in the past fifty years! Wanting to pay less in taxes is one thing - but there IS a point where paying less taxes actually HURTS the nation as a whole...and we've long since passed that point.
I find it REAL interesting that it's under the OBAMA administration that we're paying less in taxes than at any time in the past half century...but the Republicans are waaaaay up in the air claiming that the Democrats are somehow taxing America to death....
14 - Clavos
but the Republicans are waaaaay up in the air claiming that the Democrats are somehow taxing America to death....
Actually, they're not.
They're claiming (correctly) the Dems (actually the administration Dems, not all of 'em) are spending Amurrica to death -- yes, even more than GWB, who, until Obie, was the biggest spender to date. This, of course, will result in future generations (can you say grandchildren?) will be taxed to death -- assuming of course, that the country actually lasts that long; by no means a sure bet.
15 - Dave Nalle
Jared seems not to grasp the real problem with the repatriation tax, which is that - putting aside the minor details he mentions - it causes multinational corporations to keep their profits out of the US entirely, not spending them here, not investing them here, not using them to finance new operations here. The money just stays in other countries, benefits them and does nothing to help anyone in the US.
It's a policy as idiotic as the corporate taxes which drove those companies overseas in the first place.
Dave
16 - Jared N. Smith
Dave,
Contrary to having failed to grasp the problem with the Repatriation Tax, I have outlined it. It is a ghost tax - Ron Paul and yourself claim that it is the force which prevents multinationals from repatriating their profits and investing in the domestic economy. However, as the Jared Bernstein article I linked to demonstrates, when there was a Repatriation Tax Holiday in 2004 there were very few corporations willing to repatriate a fraction of the mountains of profits they were sitting on overseas. I suppose you could say the subtext of my article is that removing the Repatriation Tax is more a gesture than a policy. It puts Paul in the "Tax Slashers" camp rather than just the "End the Fed" and "Free Market Or Death" camps.
Further, most repatriation occurs at a currency-trading level. Corporations will abuse currency fluctuations to their favor in order to gain a profit which is then invested in the way it has normally been, which is to say, not at all. Since this is a CURRENT practice, why on earth should we cut the tax that prevents multinational corporations from manipulating currency markets to artificially enlarge their profits?
If you are trying to get me to say that it is a broken system then by all means, it is a broken system. But the fault lies not with our attempts to regulate but rather with the nature of profit-seeking corporations and their behavior. I see nothing in your comment that does not toe the Ron Paul Repatriation line that taxes are disincentives and abusive to the market and therefore must be cut regardless of what the practical applications of those taxes might be.
17 - Leroy
There should be a repatriation tax. There is NO need to create an incentive to repatriate profits to the USA because there is an ocean of available capital domestically. Banks are sitting on $2trillion of cash available for capital and businesses are sitting on another $2trillion of ready cash. Plus, credit has never been cheaper or more available than today.
Businesses have successfully employed the power from the Great Deregulation to create the Efficient Markets beloved of the Supply-siders. They have no worlds left to conquer.
Unfortunately, there is no market demand. We have a Demand Drouth. There is nothing in supply-side econ to produce consumers or markets. Oops! All the supply-side theories just assume the magical appearance of consumers, as if there is a never-ending fountain of them. So that makes it OK to undermine the finances of the middleclass. Oops! They shot themselves in the foot.
18 - Evan
"First, repatriation itself usually only benefits a company or an individual when transferring funds from a higher-valued currency to a lower-valued currency. If I run a Mexican-owned company operating in the U.S. and trade $10 for 100 pesos, my spending power goes up and therefore I might be willing to pay a 10 peso tax in order to increase my spending power. While plenty of American companies might be based in economies utilizing the euro (and therefore would benefit from repealing the Repatriation Tax) many more are situated in countries where currency is valued far below that of the country of origin. So, there is little economic gain to be had in repatriating lower-valued currency into higher-valued currency, since holdings in a high-value currency will be much smaller. In such instances, a company is better off investing in the country where the lower-valued currency is earned. This would mean that, repatriation tax or not, for a multinational corporation earning money in Indonesia, it is far better to continue to invest in Indonesia and make use of Indonesian currency rather than repatriate into USD and essentially lose profits."
Notwithstanding the rest of this very flawed and poorly reasoned article, for which I'd rather not waste even more of my time just to debunk its many absurd notions, the quote above is particularly revealing, while at the same time being hard to believe as well as just plain hilarious. Now, you are of course aware that the quoted nominal value of a currency in relation to another currency's respective spot price, does not inherently, in any way, indicate that currency's relative purchasing power, right? Again, to put it simply, a 100:1 ratio of currency X to currency Y does not mean that currency Y is worth 100 times more than currency X. The fact that this author would apparently misunderstand such a fundamental monetary concept (not to mention cite Jared Bernstein as credible for anything important or relevant) should have been clear and convincing evidence enough that he had no clue when it came to an analysis and proper understanding of macroeconomic theory.
Unfortunately, as also evidenced by a number of the above comments, this kind of ignorance and general lack of logic is endemic in "these united States" and the vast majority of the rest of the world, and is just a small part of the reason why I don't place much hope in the prosperous and enlightened future of this human race. Likewise, this also happens to be a prime example as to why someone of Ron Paul's caliber will never be elected president (besides not having enough fellow contributors make the maximum donation this time around), at least not until it's already too late, which, in part due to the global debt crisis and impending fiscal and fiat currency collapses, it probably is. I, for one, won't be able to flee this once inspiring country until early next year, and not a moment too soon, though the tentacles of this leviathan stretch to all corners of the globe (and speaking of Southeast Asia, Thailand seems pretty nice, for now anyway). I'd very much recommend the same for anyone who is able, and who values their life, liberty, and/or pursuit of property, i.e. "happyness".
In any case, have a nice day!
19 - Leroy
So, Evan, are you equating property with happiness?
20 - Arch Conservative
Glenn:
Numerous studies have shown that private Catholic schools spend less money per pupil than the public school counterparts yet produce pupils that routinely score better on standardized test and other measures of learning.
You can try to spin our pathetic education system any way you want to blame conservatives but that just doesn't jibe with reality.
It is the liberal left that has dominated the faculty and administration of our education system for the past forty years. That's not even to mention the teacher's unions and the harm they have done. It is the left and their policies and ideas that have failed our education system but please don't let that FACT stop you from spinning your delusions about it all being the fault of conservatives Glenn,
That is the generic, one sized fits all, bread and butter solution coming from the left in response to everything thought. Throw more money at the problem and more government intervention. the left believes that answer is the answer too all of mankind's problems..............There is nothing that can't be solved by the state if you would just give it more of your money.
Right Glenn?
21 - Jared N. Smith
Evan,
Thank you for taking the time to read my piece. I am glad it brought you mirth and I welcome any criticisms you might have. I am certainly no expert in economics - that would be why this is labeled an Opinion piece.
You are correct that I oversimplified the example of dollars to pesos, and you are also correct that my depiction of purchasing power is not as clear as it ought to be. That being said, clearly I do not believe that the relationship between currencies in trade reflects purchasing power. However, this does not change the point of the section you quoted, a point which I reiterated in an above comment: corporations utilize repatriation to manipulate currency fluctuations in order to increase profits. History shows that they do not use it to invest in the country to which they are repatriating. And so while I admit my USD/Peso example is simplified and does not best represent the example of the use of repatriation to increase profits, your comment in itself does not offer any counterpoint against which I can reply.
You say my article is poorly reasoned and flawed but offer no examples other than the one I have just addressed, which again has more to do with my example and not my argument itself. You also attack Jared Bernstein as a source but offer none of your own or any reason to question his credibility. It is easy to say an argument is poorly reasoned and flawed, but much more difficult to actually demonstrate that claim. I am more than happy to address any more criticisms you might have about my piece or the opinion expressed therein. I only ask that you frame your future critiques respectfully and in the spirit of academic discussion rather than acrimonious polemic.
22 - Clavos
"drouth?"
How quaintly Shakespearean...
23 - Evan
Leroy,
No, I was just referencing an earlier draft of the Declaration before, if I recall correctly, Ben Franklin suggested to Jefferson to go with "happyness" instead. This does however give an indication of the original intent and, at least in their own minds, the similarity between the two concepts, whereby happiness is the more all-encompassing term. The point, though, is that being able to pursue private property, in other words to keep the fruits of one's own labor (ignoring any potential hypocrisy regarding slavery and the similar concept of self-ownership) should be an, and in fact is, one of the mentioned inalienable rights. The alternative would be a monarch or state, etc. having a claim to you and your labor (or any other form of trade) and dictating what you can and can't do with what is rightfully yours and yours alone, which was part of the reason the framers of the Constitution disallowed direct federal taxation, reversed of course unfortunately with the 16th Amendment in 1913.
So, obviously the idea of being able to pursue property free of the shackles of government fiat, does not in anyway equate to materialism or "consumerism" or what have you. Actually, on the subject of self-ownership, there is a relatively simple but quite compelling case that is made in the well-known (among some anyway) "The Philosophy of Liberty" animation that I'll link to here: http://www.jonathangullible.com/philosophy-of-liberty
Good luck with your intellectual pursuits regardless of whether they lead to happiness.
24 - Glenn Contrarian
Arch -
Numerous studies have shown that private Catholic schools spend less money per pupil than the public school counterparts yet produce pupils that routinely score better on standardized test and other measures of learning.
That's a false dichotomy, a false comparison. Why? Because very, very few private schools are MANDATED not only to accept ALL pupils regardless of ability (or lack of ability), background, or religion...and ZERO private schools are MANDATED to provide transportation for ALL students (including wheelchair-bound) within their areas of responsibility.
For instance, Arch - this very moment downstairs I've got one child who is permanently wheelchair-bound, has a trach and a g-tube and requires sixteen hours of licensed nursing care every day, 365days/yr. The other child is 18 y.o., has a g-tube, and has a mental age of maybe 12-18 months (he's a low-functioning autistic).
Tell me, Arch - how many private schools would not only accept my Foster kids, but also be MANDATED to provide transportation and be MANDATED to provide licensed nursing care for one and one-on-one caregiving for the other? Not too many.
Get the point? There are very, very, VERY few private schools out there who even optionally do everything that a public school is required to do. If a private school did everything that a public school does, I strongly suspect you'd find the prices of a private school MUCH higher.
25 - Leroy
Catholic schools get to employ the cheapest labor: nuns and the religiously highly committed. IMO they are taken advantage of.
You?e out-of-date Arch: school administrations have been stridently rightist for several years, although there remains the occasional leftist teacher now and then.