​President Herbert (Trump) Hoover has proven he’s not the genius he thinks he is.  After igniting a positive surge in growth with tax cuts, Trump’s tariffs will undermine the very growth the President is looking for. 
While President Trump’s business instincts are often positive, they are consistently negative when it comes to international trade.  He and his advisers use highly-flawed numbers for trade deficits as a guide to unfair behavior by others.  However, trade deficits can appear to show serious problems where none exist.  A trade deficit can as easily reflect a desire among foreigners to invest in the US, as they can some insidious behavior.   
Trump’s imposition of high tariffs on imports of solar panels, washing machines, steel and aluminum, provides certain industries and companies with government assistance.  The assistance comes at the expense of companies and individuals who pay higher prices for these items. 
It might appear the benefits to some companies are offset by the higher costs to others.  This isn’t the way trade works.  The efficiencies from the complex interactions of market forces overwhelm those from government dictates.  This is why countries promoting free trade tend to have higher productivity and higher wages than countries that protect industries with tariffs.
When Trump decides to reward some and harm others he is following in the footsteps of President Herbert Hoover.  Hoover encouraged Congress to place tariffs on foreign goods to protect American businesses and workers.   As the Smoot-Hawley Tariff moved through Congress in October, 1929, the stock market crashed.  It was a prelude to the Great Depression.
Blaming other countries for unfair trade is easier than to admit to our own weaknesses.  One self-inflicted weakness has been our high tax and regulatory burdens.  Trump has been removing these. 
Whatever trade complaints we might have had against foreign countries, Trump’s tax and regulatory reforms have leveled the playing field.  They have given US companies a major competitive advantage over businesses in other countries.  Instead of allowing this benefit to play out, the President’s imposition of tariffs is in the process of undermining his greatest policy achievement to date.  This is hardly the work of a genius. 

​​Many thanks to Kevin Short and @iHeart  radio for interviewing me about my book, #RichNationPoorNation listen to the interview here goo.gl/DJBFLX

Republican legislation to cut and reform taxes has the potential to be the most significant policy development of the past year.  If it passes Congress, it will not only boost productivity growth and incomes, it will spur further pro-growth legislation.
Key similarities in the House & Senate bills  
Here are similar provisions in each bill that will likely be in the final bill. 

1. Both bills cut corporate tax rate to 20% (House in 2018, Senate 2019).
2. Both House and Senate bills reduce tax rates by increasing the brackets that apply to current rates (the House bill has 4 tax brackets, the Senate 7).
3. Both bills double the standard deduction to $24,000 for married couples.  (Currently 30% (45 million people) itemize, by doubling the deduction only 10% (15 million) would itemize.  IRS would have 30 million fewer detailed returns to check meaning more scrutiny for those who itemize.
4. Both bills repeal the personal exemption for each family member (currently $4,150).
5. Both bills repeal the AMT (alternative minimum tax).
6. Both bills repeal the deduction of state and local (The House bill allows filers to deduct up to $10,000 of property taxes).
7. Both bills change a provision allowing for the exemption of $1/2 million in profits from the sale of a home (you must live in the house 5 out of 8 years instead of current 2 out of 3 years; House bill limits the deduction for high earners).
8. Both bills double the current estate tax exemption from $5 million per person to $10 million (adjusted for inflation).  For 2018 the exemption is $22.4 million for married couple.

Key differences in the House & Senate bills
 
The most important difference between the bills is the Senate bill repeals the mandate to buy health insurance.  The House bill does not.  In addition, the House bill limits deductions for some higher earners, raising the top marginal tax rate for certain payers.  The Senate bill slightly lowers the highest marginal tax rate.
 
How Senators will vote 
Predicting votes in the Senate can be hazardous, but here’s what I expect and why.
Sen. Ron Johnson (R. WI) says he opposes both the House and Senate bills because they fail to allow a tax cut for pass through businesses, such as limited liability companies and partnerships.  Johnson is a businessman who has identified a major shortcoming in both the Senate and House bills.  The flaw is a mistake that will be corrected in each bill.  Johnson will then vote yes.
Sens. Jeff Flake (R. AZ) and Bob Corker (R. TN) have expressed concerns about the budget deficits caused by the tax bill.  They already voted for the budget which included the $1.5 trillion loss in revenue.  There is no reason for them not to support the final bill.  They vote yes.
Sen. Rand Paul (R. KY) was the only Senate Republican to vote against the budget.  However, he has been instrumental in promoting many of the provisions in the Senate bill.  He will vote yes.
 
Sen. John McCain (R. AZ) was one of only three Republicans to vote against repealing Obamacare.  He said his vote against repeal was due to the lack of transparency regarding its replacement.  He agrees that the procedure for tax cuts and reform has been more transparent.  McCain will vote yes.
Sens. Susan Collins (R. ME) and Lisa Murkowski (R. AK) are the other two Republicans who voted not to repeal Obamacare.  They have expressed concern over repeal of the mandate to buy health insurance, saying it can increase the cost of health insurance premiums. 
The Senate tax bill includes Murkowski’s main objective of expanding oil drilling in ANWR (Arctic National Wildlife Refuge).  Murkowski will vote yes.  This leaves Susan Collins as the only no note.
If this analysis is correct (and no other Senators step up to block the bill), the Senate will approve the tax legislation with 51 votes. 
The Compromise
The final step will be the compromise between the House and Senate.  It is likely to repeal of the mandate requiring people to buy health
insurance.  Doing so not only counts for reducing the deficit, it also increases savings for those earning less than $50,000 a year.
The compromise will also eliminate most of the deductions associated with state and local taxes.  The House will probably get to keep their $10,000 allowance for state property taxes. 
Eliminating the state and local tax deduction will encourage high-tax states to reduce both their tax rates and their spending in an effort to stay competitive.  It will further boost real growth nationally and curtail the cycle of raising taxes to increase public employee benefits to fund contributions to liberal lawmakers.
Voting to prevent most individuals from a tax cut might seem to be a difficult decision for Democrats.  It isn’t.  Many recognize how this bill will lead to explosive growth and the demise of many of liberal assumptions.  All Democrats will oppose the legislation.
The final vote will be close.  However, with the jobs of so many Republicans depending on a victory, the odds favor passage of this important policy change.

The Congressional Budget Office (CBO) was created by Congress to provide a nonpartisan assessment of the impact of policy proposals.  All policy involves politics.  Hence, there is no such thing as a nonpartisan analysis.  As with every other agency, the CBO has an agenda.
In terms of the country’s two most pressing policy issues the CBO agenda includes opposition to free markets and tax cuts as well as an affinity for government-controlled healthcare.  To implement its agenda the CBO makes use of accounting principles rather than economic principles in assessing the impact of policies. 
Accounting principles involve the straightforward use of numbers.  In contrast, economic principles incorporate the impact of changes in individuals’ behavior when assessing policies.
By relying on accounting principles rather than economics, the CBO has been able to effectively wrestle control of policies from Congress.  This shift in power has had severe consequences for both political parties and for the public.
The current fiasco over healthcare legislation is the most recent example of how the CBO controls policy. 
When the Affordable Care Act (ACA) was proposed in 2009, Democrats wanted to know how much the new regulations would add to the cost of health insurance.  The CBO concluded that eventually premiums would increase by at most 10% to 13%.
A new detailed analysis from HHS shows the actual increase in insurance premiums due to the ACA regulations was 105%.  Had the CBO produced an accurate assessment of the impact of the ACA, it never would have passed.  Few politicians would knowingly vote to double the cost of insurance.
Last week, the CBO produced an equally flawed analysis when it was asked to assess the impact of repealing the ACA.  Since costly new regulations had doubled insurance premiums, simple logic (i.e. economics) suggests removing those regulations would lead to substantially lower premiums.
Incredibly, the CBO concluded that repealing the ACA would double insurance premiums from today’s already record high levels.  The CBO wasn’t through.  It followed this illogical conclusion by stating that doubling premiums would make insurance so expensive that 32 million people would become uninsured.
According to CBO reasoning, putting costly regulations on insurance wouldn’t raise premiums by much, but removing those regulations would double the cost.  Clearly, the CBO wants government-controlled healthcare.
After blindly accepting the CBO’s biased and inaccurate prediction of the impact of the ACA, Democrats went from a majority to a minority party.  A similar fate awaits Republicans who blindly accept CBO’s analysis on either healthcare or tax cuts.
The CBO also doesn’t like lowering tax rates.  As a result, when the agency assesses the impact of tax cuts it has a similar type of agenda-based analysis.   The only time the CBO finds a positive impact from major tax cuts is when Congress also raises taxes to offset any lost revenue.
My book, Rich Nation/Poor Nation, shows how almost all increases in US living standards since 1900 have come when tax rates were low or during periods of major tax cuts.  Don’t expect the CBO to consider any of this historical evidence.  It simply doesn’t conform to its agenda. 
Congress has the responsibility to use its own judgment in assessing the impact of its policies.  Allowing the CBO to usurp this power represents a dereliction of duty taking us deeper into the swamp. 
To reestablish control, Congress must abolish the CBO and use its own judgment to assess the impact of major policy changes.

In its May 13th issue The Economist magazine’s lead editorial trashes Trumponomics.  Although admitting Trump’s policies could raise productivity and create a mini-boom, the article suggests low and middle income workers will be worse off.  Here’s my response.
 
Dear Editor:
In your lead editorial for May 13, (the one where you compare President Trump to Henry VIII), you admit Trump’s policies “could stroke a mini-boom” but say it “offers no lasting remedy for America’s economic ills.”  You also claim the economic assumptions in Trump’s plan “are internally inconsistent” and “based on a picture of America’s economy that is decades out of date.”
Your criticisms of Trump’s economic program are remarkably similar to those leveled whenever Americans have attempted to reverse a series of failed progressive economic experiments.  Such criticisms involve opinions and references to orthodoxy rather than referring to any evidence.   
Trump’s economic plan is based on principles that have successfully guided America’s economy for over two centuries—substantially lower tax rates, slower growth in federal spending, fewer regulations and free markets.      
In my book Rich Nation Poor Nation there is extensive historical data on the performance of wages in America.  Since 1900, there have been only 50 years when America clearly pursued the type of economic policies Trump has proposed.  Almost all of the gains in real wages in America since 1900 occurred during those 50 years.     
You reference the left’s criticism of Trump’s policies for the “…poor distributional consequences, fiscal indiscipline and potential cronyism.”  There have been five periods totaling 52 years when America decided to heed these critiques.  In each of these periods policies shifted to higher tax rates, faster growth in federal spending, more regulations and restraints on free markets.  For the entire 52 years as America was pursuing this progressive economic agenda there was no increase in workers’ real wages.
America’s extraordinary success has not been achieved by what you refer to as “orthodox” policies agreed to by “most economists.”  Rather, it has been achieved by reducing the government’s power and control over individuals and enhancing their economic freedom.  This has been and always will be the key to providing the greatest amount of goods and services to the largest number of people.  Trumponomics is consistent with these principles.
Robert Genetski
ClassicalPrinciples.com
​Saugatuck, Michigan USA

​The House managed to cobble together just enough votes to resuscitate healthcare reform.  This bill is toxic to Democrats.  It allows states that favor government controls to retain much of Obamacare’s costly mandates.  States that prefer freer markets can opt out of many regulations and lower their costs.  Choice means liberals get to eat their own cooking and then pay for it.  

​The main reason Congress is having a difficult time with healthcare legislation is a failure to recognize the costs of our current healthcare system.  These costs have become so great that a move to free market healthcare can save Americans $2.3 trillion a year.  Data from the World Bank show the cost of healthcare in the US can be three times what it is where a country relies on the free market.
My own experience with healthcare in Mexico confirms the World Bank data.
Six years ago I had a first-hand opportunity to compare costs in Mexico’s private healthcare system to those in the US.  At the time I estimated healthcare costs in Mexico were approximately half the cost in the US.  A more recent experience suggests the cost difference has increased substantially.
My wife, who has asthma, recently contracted the flu while in the US.  For two days (Friday and Saturday) her doctors refused to see her due to an influx of other patients seeking appointments.  The office is closed on Sunday. 
In spite of a difficult Sunday night, she insisted on keeping our scheduled flight to Los Cabos, Mexico on Monday.  That afternoon we called a private sector Mexican doctor.  He saw her immediately at the hospital.  After several exams, an x-ray and blood tests, he said bronchitis had turned to a beginning case of pneumonia.
After three hours of intravenous feeding with antiviral medicine and antibiotics, her condition stabilized.  Before leaving, we received seven different medications to help her recover.  The total cost for doctors, assistants, x-rays, intravenous feedings, blood tests, medicines, and follow up visits was $403.  In the US, we would have felt fortunate to pay that amount for the x-rays alone.
The total amount was payable on demand with a credit card, as with all normal transactions in a free market system. Comparing healthcare costs elsewhere to those in the US are complicated by many factors.  The most significant factor is the lack of a free market in the US.  Without a market, it’s almost impossible to know the real cost of any item. 
The current US healthcare system resembles the old Soviet system.  Government dominates the decisions of who gets healthcare coverage, when, where, and at what price.  This is a highly inefficient system, which has been made even more inefficient by the “Affordable Care Act.”  The question is how much more?
Aside from my personal experiences, there are other indications we are paying three times the amount we could be paying for healthcare.  This conclusion is supported by data compiled by the World Bank.  It shows healthcare costs per capita in the US are three times what they are in Singapore.
Singapore’s healthcare system utilizes many of the efficiencies of a free market system.  Most routine healthcare expenses are paid by individuals out of their health saving accounts and prices are fully transparent.  There is also significant government involvement to make sure everyone has access to high-quality, inexpensive healthcare.
Current US healthcare costs are upward of $3.5 trillion a year.  The World Bank comparison suggests $2.3 trillion of this amount represents the waste due to our inefficient system. 
Eliminating such waste through a free market system would lower the cost of healthcare so dramatically there would be more than enough resources to provide high-quality healthcare to all.