Heads I win, tails you lose.
It would be a neat trick in any enterprise. If you only have to count income and not expenses, your balance sheets will look pretty good.
You want to get a loan? You tell the bank about all the income generated. Doesn’t much matter what the level is. The income/expense ratio will be out of this world.
“Income looks okay,” says the smiling bank analyst. “What is the level of expense?”
“No expenses,” you say.
If you can do the reverse, your taxes will be easy to pay. Report all your expenses, and tell them there was no income.
So no taxes. Wow.
Just try it.
If the bank is run by insane people, they might believe what you say and give you a loan. The government tax agent might laugh for a second or two before the friendly authorities put on the cuffs. There might be a brief tussle with the bank when they want their money back. But the government will win that one, they always do.
Counting only one side of the spreadsheet? Doesn’t quite work that way in the real world. But they’re about to try just that in the strange Schrödinger world of conservative bookkeeping.
Globalization is an uncontrollable force, in many respects. Your cell phone, your flat screen television, probably your computer would all be impossible without international trade. Even your automobile runs on trade. It may be proudly assembled in America, but important parts are made elsewhere.
Most of that is okay with the Trump administration. Has to be. For all the talk about jobs being exported, they won’t worry about trade with Canada, Europe, Russia, and much of Asia. Why other countries are targeted is open for discussion.
Costing us as much as $60 billion dollars a year with Mexico alone in trade deficits.
President Donald Trump, January 26, 2017
Mr. Trump and his top advisors do have a fixation on Mexico, Mexicans, and those Americans who have any Mexican ancestry. The alt right is a euphemism for something on the dark side of the force.
Countries whose citizens have been responsible for death from terrorism in the United States have many things in common. One important thing is that none, none at all, zero, are on Mr. Trump’s list of immigrants to be banned from entry.
The exactitude with which Trump business interests seem to overlay new definitions of national interest includes, but extends beyond, immigration.
Fact is, a substantial part of trade flowing in and out of the United States is layover and service work. “Value added,” they call it. Kind of like the storage facilities you see along the highway, except with a service department in the back. Trade everywhere has always involved safe harbors, even in ancient times. That’s why stopovers on trade routes were the parts of geography where wealth accumulated.
So, much of the American economy involves trade between other countries, with the United States as middleman. The US provides established pathways, infrastructure for travel and storage, and the technology to add value.
Still, a disproportionate amount of that value-added, in-and-out, sort of trade originates in countries toward which Trump and company have a transparent hostility.
They’re bringing drugs. They’re bringing crime. They’re rapists.
– Donald Trump, June 16, 2015
It is not simply undocumented workers who are to be hated. Illegal immigration doesn’t happen because of those fleeing violence or those obeying the eternal desire for a better life of economic opportunity. It is because those who remain in those countries have chosen their worst to send, actually send, to us.
When Mexico sends its people, they’re not sending their best. They’re not sending you. They’re not sending you. They’re sending people that have lots of problems, and they’re bringing those problems with us.
– June 16, 2015
So the ongoing Trump campaign to eliminate commerce with select countries is justified by the two types of trade: the criminals Mr. Trump informs us are being sent to us by those countries, and the goods and services they are transporting to us in exchange for jobs that rightfully belong here.
But ethnic justification goes only so far. Something has to be done about the economic argument. A lot of trade creates jobs in the United States. The data that measures that is produced by the very government the Trump administration has taken over.
So a new way of calculating trade balance is being considered.
The way it would work is simple. When Mexico produces goods to send to Canada or Europe or pretty much anywhere, and sends it through the United States, the new slight of hand would apply. The imports into the United States would be counted. When they are then exported out of the United States, to their final destination, they would not be counted.
Coming in, they count. Going out, they don’t count.
So the trade deficit with Mexico would suddenly look like it doubled overnight. If it looks scary enough, the administration can tax, inhibit, or prohibit the re-exports, and also other sorts of trade.
It all might actually cost jobs, but jobs don’t seem to be the real aim, except for presentation to the base. The motivation seems to be to hurt countries Trump and his alt right advisors don’t like for ideological and ethnic reasons.
Whatever the reasons for the hostility, changing the calculation is a hidden way of cooking the books. They propose to take a large amount of the import and re-export trade with Mexico and only count one side of the ledger.
If you and I cook the books that way, we’ll get into some serious trouble.
But, the new administration is bringing in new methods of accountability.
It’s heads they win, tails everyone else loses.
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