The US-China trading relationship will be fraught for years to come

China is happy to buy more American goods, including soyabeans and shale gas, in an effort to cut the bilateral trade deficit, a goal which is economically pointless but close to Mr Trump’s heart. It is willing to relax rules that prevent American firms from controlling their operations in China and to crack down on Chinese firms’ rampant theft of intellectual property. Any deal will also include promises to limit the government’s role in the economy.

The trouble is that it is unlikely—whatever the Oval Office claims—that a signed piece of paper will do much to shift China’s model away from state capitalism. Its vast subsidies for producers will survive. Promises that state-owned companies will be curbed should be taken with a pinch of salt. In any case the government will continue to allocate capital through a state-run banking system with $38trn of assets. Attempts to bind China by requiring it to enact market-friendly legislation are unlikely to work given that the Communist Party is above the law. Almost all companies, including the privately owned tech stars, will continue to have party cells that wield back-room influence. And as China Inc becomes even more technologically sophisticated and expands abroad, tensions over its motives will intensify.

At some point this year Mr Trump and Xi Jinping, his Chinese counterpart, could well proclaim a new era in superpower relations from the White House lawn. If so, don’t believe what you hear. The lesson of the past decade is that stable trade relations between countries require them to have much in common—including a shared sense of how commerce should work and a commitment to enforcing rules. The world now features two superpowers with opposing economic visions, growing geopolitical rivalry and deep mutual suspicion. Regardless of whether today’s trade war is settled, that is not about to change.

Source: The Economist Magazine.

Is Donald Trump above the law?

For the first time, President Donald Trump faces a formal accusation that he personally broke the law to further his candidacy.

His longtime lawyer Mr Cohen told a court under oath that the money was paid “at the direction of a candidate for federal office”. In other words, that Mr Trump told Mr Cohen to break the law, then lied to cover it up.

This week’s events mean that Mr Mueller now stands on firmer ground. It will be harder for the president to dismiss him without it looking as though he is obstructing justice. And in such cases, convictions often lead to more convictions as those found guilty look for ways to save themselves. The question now is whether, and how far, Mr Manafort and Mr Cohen will turn against their former boss in return for leniency.

When voters elect someone who has bent the rules, it sets up a conflict between the courts and the electorate that is hard to resolve cleanly.

Mr Trump does not stand accused of getting his paperwork wrong, however, but of paying bribes to scotch a damaging story. That is a far more serious offense, and one that was enough to end the career of John Edwards, an aspirant Democratic presidential candidate, when he was caught doing something similar in 2008. There is no way of knowing if Mr Trump would still have won had the story come out. Even so, the possibility that he might not have done raises questions about his legitimacy, not just his observance of campaign-finance laws.

The authors of the constitution wanted to allow the president to get on with his job without unnecessary distractions. But, fresh from a war against King George III, they were very clear that the presidency should not be an elected monarchy. If a president does it, that does not make it legal. The constitutional problem that America is heading towards is that the Justice Department’s protocol not to prosecute sitting presidents dates from another age, when a president could be expected to resign with a modicum of honour before any charges were drawn up, as Nixon did. That norm no longer applies. The unwritten convention now says in effect that, if his skin is thick enough, a president is indeed above the law.

Thus far Republicans in Congress have stood by the president. The only thing likely to change that is a performance in the mid-terms so bad that enough of them come to see the president as an electoral liability.

Mr Cohen’s plea has made the president of the United States an unindicted co-conspirator in a pair of federal crimes. That makes this a sad week for America. But it is a shameful one for the Republican Party, whose members remain more dedicated to minimising Mr Trump’s malfeasance than to the ideal that nobody, not even the president, is above the law.

Read the complete article on The Economist.

As the U.S. Retreats, Canada Doubles Down on Net Neutrality

As the U.S. Federal Communications Commission prepares to rollback net neutrality protections, the Canadian government has used the controversy to double down on its support for net neutrality safeguards, linking it to democracy, equality, and freedom of expression.

As the U.S. heads toward a period of uncertainty – the net neutrality rollback is likely to be challenged in court and the political pressure to affirm support in Congress is mounting – the Canadian landscape offers a sharp contrast with strong political and regulatory support for net neutrality rules.

Hon. Navdeep Bains (Minister of Innovation, Science and Economic Development, Lib.):

Bains tweet,

Spinning Hillary: a history of America and Russia’s mutual meddling

A mural in Vilnius depicting Donald Trump and Russian President Vladimir Putin. Photograph: Petras Malukas/AFP/Getty Images

A mural in Vilnius depicting Donald Trump and Russian President Vladimir Putin. Photograph: Petras Malukas/AFP/Getty Images

A Guardian article writes – Donald Trump once again shocked Americans when he appeared to call on Russia to hack and release Hillary Clinton’s emails from the personal server she used while she was secretary of state.

His comments came as allegations swirled that Russian authorities had hacked the Democratic National Committee’s emails in an attempt to sabotage Clinton.

This isn’t even the first time the US and Russia have interfered in each other’s presidential campaigns. In a little-known quirk of post-cold war history, the 1996 re-election campaign of Putin’s mentor, Boris Yeltsin, was secretly managed by three American political consultants who on more than one occasion allegedly received direct assistance from Bill Clinton’s White House.

There’s even a movie about it.

The 2003 comedy film Spinning Boris dramatises the true story of three American consultants who were hired to manage Yeltsin’s 1996 re-election campaign. The film stars Liev Schreiber as Joe Shumate, a Republican data analysis expert, Jeff Goldblum as George Gorton (who later became the campaign manager for Arnold Schwarzenegger), and Anthony LaPaglia as Richard “Dick” Dresner, a highly skilled political consultant who in the early 1980s helped elect Bill Clinton governor of Arkansas.

Indeed, Spinning Boris, while ostensibly a film about the Russian presidential election, is actually about how in a globalised world, unshielded by Iron curtains, it should come as no surprise that Russia and the United States have a vested interest in one another’s political elections and, to quote a Russian expression, dirty politics “has no nationality”.

For this reason, the continued outrage over Donald Trump’s ties to Russia rings hollow to anyone willing to recognise some fundamental truths about the way foreign policy really works. Outside intervention in domestic politics is as old as politics itself. Maybe Putin does want Trump to be President, maybe he doesn’t. The only real question is – who’s going to play them in the movie?

Read the complete article on The Guardian web site here.

Statue of Liberty about to be changed?

The Statue of Liberty is famous for the quote upon it, “Give me your tired, your poor, your huddled masses yearning to breathe free.”

The quote may have to be revised after Republican members raised concerns about some refugees entering the United States following the Paris attacks.

statue of liberty conditions

U.S. political debate stuck in the past.

Excerpts from an article by Chrystia Freeland in the Globe & Mail.

In choosing Paul Ryan as his running mate, Republican presidential contender Mitt Romney swapped his Massachusetts pragmatism for a proudly ideological commitment to limited government. The Democrats, by contrast, believe in the essential role government plays, and are willing to raise taxes, at least on the rich, to pay for it.

Thanks to smart machines and global trade, the well-paying, middle-class jobs that were the backbone of Western democracies are vanishing. The paradoxical driver of this middle-class squeeze is not some villainous force – it is, rather, the success of the world’s best companies, many of them American.

It took more than the spinning jenny or the steam engine to transform local, agrarian, family-based communities into national, urban, individualistic ones. New political and social institutions will be needed to midwife the latest shift into global and virtual communities. Inventing those institutions is difficult, and talking about them can be frightening, but that is the political conversation the Western world should be having.

Read the full article here.

Republicans screwing ordinary citizens by supporting massive tax breaks for big business

Majority Leader Eric Cantor said Thursday that the Republican-dominated House simply won’t support tax increases and that he won’t be participating in a meeting scheduled for Thursday. Mr. Cantor said that it’s time for President Barack Obama to weigh in directly on the budget because Democrats insist on negotiating some tax increases.

Crafty Cantor implies that it is the ordinary citizen the Republican Party is protecting against tax increases, when it is really big business and the massive government subsidies to big businesses the Republican Party is protecting.

Cutting roughly four billion dollars a year in oil and gas sector subsidies would be a good start, so too is tightening manufacturing deductions that are used well beyond the sector.

How about overseas tax shelters? Ones like those that help GE, which earned a $14 billion profit in 2010, pay ZERO taxes.

Under current rules US firms pay tax on foreign subsidiaries only when profits are sent back to the United States.

Treating subsidiaries as domestic businesses for tax purposes could spell vastly higher tax bills for firms like GE.

While the company says much of this year’s tax savings come from losses at GE Capital, even before other write-offs its effective US tax rate was just over seven percent — thanks in part to some profits being kept overseas.

So even if the ‘other write-offs’ were eliminated GE would still only pay just over 7% in taxes.

Republicans argue that big business already has big taxes. Well, yes and no. “If you just look at our statutory rate, it’s high,” said Annette Nellen, an accounting professor at San Jose State University, but “the effective tax rate for many companies is a lot lower.”

In cases like GE, that rate is ZERO!

In 2008 the Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.

More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.

During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.

The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.

The Republican Party should stop supporting massive tax breaks and subsidies for big businesses and start working towards a fair and balance tax system for everyone.

Governments, lotteries, hypocrisy.

dunce-punzhu puzzles

Does the government think we're stupid?

Politicians must think the voting public is either stupid or gullible. Each election the opposition party promises to give the voters everything under the sun, and blame the current governing party for everything wrong.

Let’s look at budgets, whether here in Canada, the United States, or anywhere else.

Let’s look at voters as a lottery group, who each year elect a group to buy lottery tickets and manage the voters money.

Okay, so the people who manage a lottery group usually don’t get fat pensions, fat paychecks and fat perks, don’t often get arrested or thrown in jail, and don’t usually make promises they know they can’t keep. But other than that, let’s say for this instance only, the managers of a lottery group act somewhat like a group of elected politicians running a government in that they take your money and spend it then ask for more money because they lost it all.

If you are breathing then you probably have or soon will have a budget. A budget helps you plan, and explain, how and where your money comes from and how and where your money is spent.

If you spend more than you bring in, as many people do and almost all governments do, then you have a budget problem and you are in debt.

Governments are often comprised of people who have been elected through some voting process. This means that those who are elected want to be re-elected so they may continue to serve “the public good”, which in most governments means getting fat paychecks and pensions and doing things which all too often get them in the newspapers and sometimes in jail.

Let’s compare a country to a group of 100 lottery ticket holders which, like most lottery groups, seldom wins a lottery or wins enough to recover what they have spent over the months and years of buying lottery tickets.

Let’s call these lottery ticket holders “voters” and have them elect three people who’ll buy the lottery tickets for one year. This “elected” group will have the ultimate right to decide how the lottery ticket money is spent, but the “elected” group promises to do so wisely and with all the good intentions of any politician.

As is wont with lotteries, there are occasions where a particular lottery has a very large payout and the elected group decides to roll most of the bundle on that particular lottery. Let’s call one of these lotteries “war”, wherein you try to get seven oil wells in seven countries out of a total of 149 countries. Win the lottery and your group gets oil and gas for free for life.

Unfortunately, no one wins the lottery this time around, and so the lottery is run again. This time the group gets 3 oil wells in 3 countries and wins a chance to keep those oil wells if no one wins the same three oil wells in the same three countries during the next three lotteries. The group loses everything on the next “war” lottery.

But the elected official spent all the groups money on the “war” lottery and some other lotteries, and now has to go to the group and ask for more money just like a government does at times when it plans its budget.

So the lottery group gives the elected  group more money to spend on lotteries, and what do you know, a new lottery comes up where you can win a car a year for life and all the gas you need and never ever have to pay a parking ticket or speeding ticket again. Let’s call this lottery the “transportation” lottery. They group loses on both the “transportation” lottery and the “war” lottery.

During the whole year the “elected” group buys lottery tickets every day and they never win once. The lottery group decides to throw the bums out and holds another election to choose a group to win the jackpot this time and to spend their money wisely.

The first thing the “elected” group does is ask the lottery members to cough up more money. The elected group argues it needs to buy additional lottery tickets in order to not only try and recover the original amount lost by the first “elected” group, but to spread the chance of winning across a wider field by buying more and different lottery tickets and putting some of the lottery money into something safer like bonds or in banks to earn interest or health insurance policies for the group.

But the lottery members object, claiming this is irresponsible budget management. The main objectors to this request for new funds are the same 3 people who were voted out because they spent too much and won nothing.

The three former “elected” lottery members stir up the other lottery members, using lies and denials and false accusations, and the lottery group decides not to use any funds for safe keeping or safe investments or health insurance.

The newly elected group, shackled by the lack of funds to provide a safety-net in the form of safer investments or health insurance for its members, is forced to do with less than their budget requires. The newly elected group is forced to cut back on the lotteries it can invest it and forced to forgo any alternative forms of investment.

The newly elected group of managers fails to do any better than the previous group, due to the former elected members bad management while in office and their behavior once pushed out of office, and the lottery group losses again.

The former management group, having proof now that the present group has failed to live up to its promises, gets the present group thrown out and themselves elected back in solely by reiterating over and over and over that the present group failed to deliver what it promised.

In the U.S. the Republicans and the “Tea Party” people seem to forget it was their group that created all the problems and failed to ever have a balanced budget in the last sixty years.

The hypocrisy with many politicians is that they create the problems then blame the opposition for the very same problems they themselves created.

It’s sort of like children answering a mother when asked who stole the cookie from the cookie jar. The guilty one often is first to point to the other child.