The Return of Trump, Part 1 of the interviews for the Celso Furtado Center

Interview with my old office mate at the New School Center for Economic Policy Analysis, now The Schwartz Center for Economic Policy Analysis (SCEPA), Carlos Bastos Pinkuslfeld, professor at the Federal University of Rio de Janeiro (UFRJ) and the Director of the Celso Furtado Center. In the interview, besides Carlinhos, Josh Mason from John Jay/CUNY. There are more clips, that I'll post as they come.

Tariffs or sales tax and corporate tax reduction?

The announcement, and backtracking, on a 20% tax on Mexican imports caused a lot of confusion yesterday. I assumed like most that this was a proposal for a tariff, which would both ditch NAFTA rules and run afoul of the WTO rules. The wall and the tariff led to a cancellation of the Mexican president's trip, and a souring of the diplomatic relations. But in all fairness, it seems that this had little to do with Mexico.

The Republican Tax Plan basically is to eliminate the corporate income tax, and to substitute if with a destination based cash flow tax (DBCFT, is the clumsy acronym of the beast; on this see Jared Bernstein). The idea is that this would reduce the incentive of US corporations to relocate abroad to scape the income tax, and to basically introduce a national sales tax. The tax is border adjusted, so to speak, since imports sold in the US would pay taxes, but exports wouldn't.

So it seems to me that Trump was trying to use the GOP tax plan, that already existed, and is still in place, as far as I understand, and use it to claim that as Mexican imports will be taxed, they will be paying for the wall, that it seems he really plans to build. They seem to at least temporarily backtracked on the proposal, mainly I think to avoid jeopardizing the tax plan, which seems to me to be regressive, sales taxes after all hit everybody, and solving the problem of corporate tax evasion, by making the US a tax haven, and shifting the burden to consumers (just a hunch, I'll wait for tax exports to do the hard work of calculating the effects).

The impact of such a policy, by the way, is less clear than one would think. Josh Mason wrote something about it here. Like him I'm skeptical that a sales tax on imports would bring a lot of manufacturing jobs back. But even if this reduces the trade deficit, with Mexico and other countries (China?), which again I doubt, the problem of the quality of jobs here (and manufacturing matters among other things because of the quality of jobs) in the US does not depend fundamentally on the trade deficit per se. On that front, what will be done with labor regulations, the minimum wage, and the overall macroeconomic picture seems to be more relevant, and there are reasons to be concerned.

Alternative Theories of Competition

New book by Cyrus Bina, Patrick Mason and Jamee Moudud has just been published. A few friends from the New School and elsewhere, and at least one alumnus from the University of Utah. From the jacket:

"The history of policymaking has been dominated by two rival assumptions about markets. Those who have advocated Keynesian-type policies have generally based their arguments on the claim that markets are imperfectly competitive. On the other hand laissez faire advocates have argued the opposite by claiming that in fact free market policies will eliminate "market imperfections" and reinvigorate perfect competition.

The goal of this book is to enter into this important debate by raising critical questions about the nature of market competition in both the neoclassical and Kaleckian traditions

By drawing on the insights of the classical political economists, Schumpeter, Hayek, the Oxford Economists' Research Group (OERG) and others, the authors in this book challenge this perfect versus imperfect competition dichotomy in both theoretical and empirical terms. There are important differences between the theoretical perspectives of several authors in the broad alternative theoretical tradition defined by this book; nevertheless, a unifying theme throughout this volume is that competition is conceptualized as a dynamic disequilibrium process rather than the static equilibrium state of conventional theory. For many of the authors the growth of the firm is consistent with a heightened degree of competitiveness, as the classical economists and Schumpeter emphasized, and not a lowered one as in the conventional 'monopoly capital' and imperfect competition perspectives."

Contributions by Rania Antonopoulos, Serdal Bahc¸e, Cyrus Bina, Scott Carter, Benan Eres, Jason Hecht, Jack High, William Lazonick, Andrés Lazzarini, Fred S. Lee, J. Stanley Metcalfe, Jamee Moudud, John Sarich, Anwar Shaikh, Persefoni Tsaliki, Lefteris Tsoulfidis, and John Weeks.