Statement Of Licensing Policy - Us Department Of The Treasury: Fill & Download for Free

The trade deficit is high because our economy has gotten more advanced over time.At first glance, this may sound counter-intuitive, but hear me out:The “stuff” we produce today is more sophisticated than before. Generally, this means that it is by nature less physical and more intangible (i.e. software, services and intellectual property). Instead of producing physical things with our hands and physical labor, the value has shifted to producing intangible things with our minds and creativity.Our economy has gotten more specialized over time. Instead of handling every single piece of the manufacturing process, we have broken it up into a series of discrete steps and analyzed each step to decide whether certain activities are worth more of our time to handle than others. As above, this typically means activities where we use more of our brains vs. our hands. To free up resources on the higher value-add activities (which includes living more comfortable lives), we have diverted some of the more labor-intensive activity to our trading partners.As our economy has become more sophisticated, traditional metrics like “trade deficits” are less representative of how real economic value flows in international trade. To gain a more holistic view of it, we need to understand something called “Balance of Payments” or “BoP”.Even BoP is unable to fully capture all of the economic value flows. The increasingly intangible nature of the products and services we produce has led to a rise in the artificial shifting of trade offshore for tax purposes, to the point where goods and services created by Americans and sold to our trading partners do not even show up in our international trade accounting.After accounting for all of these points — which I will explain in greater detail below — it is important to note that we do still run a fairly large deficit with the rest of the world. However, this number is much smaller than the headline figures that are often bandied about.Also significant is the concept that we need to run some level of deficit with the rest of the world as part of the U.S. Dollar’s role as the global reserve currency, which turns out to be a very powerful and highly advantageous tool at our disposal.International trade is complicated and not the easiest thing to understand but I will try my best to explain using real-world examples. I believe it is worth taking the time to think about this topic so we can be better equipped (as a society) to make smart decisions when it comes to trade policy, especially at this critical juncture in history. The decisions that we make today will have long-lasting ramifications that will impact us for decades to come.To start, we will examine why the traditional “trade deficit” is really just one piece — that is becoming less significant over time — of international trade. To understand why, we need to get a little smarter on the intricacies of international trade and Balance of Payments accounting.Then, we will take a look at how the increasing sophistication of our economy has shifted value flows within BoP from “trade deficits” to other categories. We will also take a look at how certain trade flows aren’t even captured due to tax tricks that multi-national corporations utilize to minimize taxes. Finally, we will look at how this impacts our thinking on trade policy.Specifically, we will examine this question through the lens of the U.S.-China bilateral relationship, as it is one of the most important economic relationships in the world today and one that has been dominating news headlines in recent months.Welcome to class, my friends. It’s time to put on your learning caps. There might be a pop quiz at the end.BONUS: There will be guest appearances by Alec Baldwin and Emily Ratajkowski. And to spice things up even further, you are encouraged to channel the voice of Ben Stein, who plays an economics teacher in Ferris Bueller's Day Off:“Balance of Payments” 101: The Current Account“Balance of Payments” represents … anyone? anyone? … money flows coming in and out of a country for things like international trade and cross-border investment.At a very high level level, one can think of this as all of the various cashflows going in and out of your banking and investment accounts, perhaps as captured in an online personal finance service such as Mint.One difference is that most of the money flows for a household take place externally whereas for a country — especially a large one like the United States — most economic activity takes place internally, i.e. within the borders.BoP does not measure activity that does not cross the border. So if the foreign subsidiary of an American company sells in that foreign country, and decides for whatever reason not to send the profits back to headquarters, this activity is not captured in the BoP (at least not directly).In other words, BoP represents only a small percentage[1] of the economic activity of a large country like the United States — and it only measures the economic activity that officially crosses the borders. This is a really important idea that will become more evident as you read further.Within the Balance of Payments, there are two major types of money flows:Current Account — regular, ongoing economic activity like trade and income from foreign investments. In the household example, this is analogous to your salary, business income and income on passive investments/assets like dividends and interest income.Capital/Financial Account — investment-related economic activity like investing in foreign subsidiaries, issuing debt, etc. This is analogous to investing in stocks, or buying a house (both the equity down-payment as well as the mortgage you take out).We will first go through the Current Account. In 2017, the U.S. ran a $449 billion deficit on its Current Account — this is the number in the bottom-right corner of the table below. (Note: This is an important table; I will refer back to it a number of times throughout the discussion.)Source: U.S. Bureau of Economy Analysis (BEA)Outside of the trade in goods and services, the other big components are “Primary Income” (Line 2) and “Secondary Income” (Line 3). These categories represent, among other things, income generated by foreign subsidiaries, investment income generated on holdings of foreign securities, salaries paid to expatriates, remittances from foreign labor, etc.The other side of the BoP equation is the Capital/Financial account. We will get to this later but for now, let’s look at how the value flows from international trade are captured by the BoP. Specifically we will take a look at how our evolving economy has shifted certain values within the various Current Account line items.Economic Trend #1: Paper to SoftwareIn 1992 cult classic Glengarry Glen Ross (adapted from the 1983 Pulitzer Prize-winning play), Alec Baldwin plays the role of an experienced salesman who is tasked with motivating a few low-energy brokers in a sleepy branch office of a real estate firm. In one of the most electric single-scene performances in modern film history, he delivers a masterful and vicious monologue on the art of selling. He is our first guest lecturer.As you watch the monologue, pay attention to all the various selling tools of the day — index cards with the sales leads, spinning Rolodexes, poster advertisements on the walls, office supplies, landline telephones, and motivational prizes like cars and steak knives. (Note: You may have to watch a couple of times because Baldwin really does deliver a captivating performance.)Seven years after the film was released, software executive Marc Benioff left Oracle to start a new type of software company, one that delivered its services through the browser on an on-demand basis instead of having to be purchased up-front and delivered as an application on a PC or workstation. The first business department that it targeted was the sales department and was named, aptly, salesforce.com.Today, its software powers everything from selling, marketing, customer service to communications for thousands of businesses with operations spanning the globe.In just a few decades, the shift from the “pen and paper” era of Glengarry Glen Ross to sales automation software delivered as a service represented a shift from the physical world to the intangible. And the same shift can be seen in countless other industries and businesses across the globe.On the BoP, trade of physical goods is accounted for differently than trade of intangible goods. This is rooted in history.When modern nation-states started to keep detailed records of their international trading activity, essentially all trade was comprised of physical goods. Physical goods would cross borders and money would be exchanged. Nation-states were particularly interested in keeping detailed records of international trade because it was one of the most popular ways to raise money to fund governments and armies. For example, in 1915, approximately 30% of U.S. Federal Government revenue was funded through customs duties compared to 6% from the newly instituted income tax[2].As the economies and technology advanced, it became possible to start trading non-physical things. For example, let’s think about leisure travel. Back in 19th-century America, round-trip international tickets were not common. Usually international travel was a one-way ticket, i.e. permanent immigration and settlement. But improvements in the speed and cost of new transportation options opened the door to leisure travel. Today, leisure travel is one of the larger intangible services that is traded between countries. On the BoP statement, international travel is accounted for under Line 1.B.iii “Net Exports of Services / Travel” and contributed a $76 billion surplus to the American economy in 2017. Living in Lower Manhattan, which draws over 14 million visitors a year, many of them international, I witness this on a firsthand basis every day.Going back to our Glengarry Glen Ross example, whereas Rolodexes (or is it Rolodices?[3]) and steak knives would show up on Line 1.A. on the table above (“Net exports of Goods”), software and intellectual property would show up elsewhere, possibly under Line 1.B “Net exports of Services”.The good news is that when most people refer to the overall “U.S. trade deficit”, they refer properly to “Net exports of Goods and Services”. (Unfortunately, “most people” does not include the Leader of the Free World as we will see down below.)For example, from a February 2018 Wall Street Journal article[4]:The U.S. trade deficit in goods and services grew 12% last year to $566 billion, its widest mark since 2008 and a challenge for President Donald Trump, who has pledged to re-balance the nation’s books with the rest of the world.However, I have seen issues arise when when we start talking about bilateral trade surpluses/deficits — such as the one between the U.S. and China — where they only focus on the goods portion. For example, from the very next paragraph in that article (emphasis mine):The goods deficit with China alone rose 8% during Mr. Trump’s first year in office to a record $375.2 billion, or nearly half the total global gap between U.S. imports and exports, the Commerce Department said Tuesday.By including services in the first paragraph and ignoring it in the second, this presents a misleading picture of the U.S.-China trade relationship. Specifically, it overstates the “true” deficit we have with China. The slightly better figure to use would be $336 billion[5], which nets out the positive surplus that the U.S. gets from the trade of services with China.Further, since much intermediate trade goes to China via Hong Kong, an even better figure to use would be $301 billion, which factors in the trade surplus the United States has with Hong Kong — which is accounted for separately from Mainland China[6].But as I will explain in the next section, due to the increasing specialization in global supply chains, even this $301 billion figure over-states the “true” value deficit between China and the United States.Economic Trend #2: Global/Special-ization of Supply ChainsGlenn Luk's answer to Where does the money I pay for an iPhone go?In this earlier answer, I took the reader on a journey around the world, from the initial purchase of an iPhone in London, to its manufacture in China, to its original design in California. At the end, I summarized by showing how the economic value of a £999 iPhone is split up between the various contributing economies.One of the key takeaways in the answer — which should be fairly evident after all of the frequent flier miles accumulated on the journey — is that the global supply chain today has gotten really complicated. Components are designed in one place, manufactured somewhere else and shipped to a third place to be assembled by machine-assisted hand. IP is invented in one region, domiciled in another (for tax purposes) and monetized in an increasing number of creative ways.This was, of course, very different two centuries ago, when “goods” were largely manufactured from start to finish in a single economic zone or region. Think back to the Triangular Trade of the 18th and 19th centuries when manufactured goods would flow from industrialized England to the Americas, raw commodities would flow from the Americas to Europe and, of course, the despicable trade of humans from Africa to the Americas[7]:Because of this, trade surpluses and deficits back then were pretty accurate reflections of the true economic value flows between nation-states. But as supply chains specialized over time — driven by a massive reduction in friction costs, primarily in the form of lower tariffs and lower transportation costs — international trade accounting has had a tough time keeping up with the changes. This is especially true when applied to measuring bilateral trade relationships such as the one between the U.S. and China.The particular issue here is that China captures only a fraction of the economic value of the (primarily) physical goods that it exports to the United States. But from an international trade accounting and BoP perspective, “Made in China” gets full credit.For example, I showed in the iPhone example how China captures at most one-eighth of the production value (BOM) of an iPhone … and an even smaller amount of the retail value:It needs to import dozens of expensive components from places like South Korea, Taiwan, Germany, Japan as well as the United States.It needs to import crude oil from Saudi Arabia to power the trucks and ships that ferry the components and finished goods back and forth.It needs to import advanced industrial equipment to perform many of the intricate manufacturing steps needed to produce hundreds of millions of iOS devices every year.Despite all of the impressive advances the Chinese economy has made over the years, it is still really only capturing a thin layer of value-add of the iPhone, as well as many other common export categories.This shows up in international trade accounting in the large trade deficits that China runs with many of the upstream component and intermediate goods manufacturers. It imports sophisticated capital equipment from places like Japan and Germany to build out its factories. It imports energy and commodities from places like Australia and the Middle East to power its manufacturing operations. It imports the high-value components that make up the innards of the finished products that it assembles.In other words, much of its bilateral trade surplus with the United States is merely passed along to other countries. We can see this in some of the large bilateral trade deficits China has with other countries:Sources: China Statistical Yearbook, MIT Observatory of Economic ComplexityOne quick way to gauge how much pass-through trade surplus China takes on from the United States is to look at Balance of Payments data from its perspective. In 2017, China generated a Current Account surplus of $165 billion, or around 1.4% of GDP. This was down from a peak of $421 billion in 2008 on the eve of the Global Financial Crisis, which represented almost one-tenth of China’s (much-smaller) GDP at the time.The difference between the $336 billion and the $165 billion is a rough approximation of the “pass-through” trade surplus to other countries and $165 billion is a much more accurate reflection of the true economic value flows.(Note: One side takeaway from the chart below is that China is far, far less reliant on a mercantilist, export-centric economic development strategy today compared to a decade ago.)Source: State Administration of Foreign Exchange (中国国际收支平衡表_国家外汇管理局门户网站), TheGlobalEconomy: China Current Account (% of GDP)On top of this, we also need to remember that the United States is not the only trading counter-party that China runs a large trade surplus with. In particular, it runs large trading surpluses with the U.K., India and much of Europe (ex-Germany). In other words, perhaps only 60–70% of its Current Account surplus is actually attributable to the United States.But even the more holistic Current Account metric fails to capture all of the international flows of economic value. This because in many cases, the money flows from U.S.-produced IP never even directly crosses the U.S. border. Value is still captured by Americans but mostly indirectly and spread out over a long period of time. To see why, we need to look into international tax accounting and the Capital/Financial Account portion of Balance of Payments ledger.Economic Trend #3: The Absurdity of International TaxationGlenn Luk's answer to How will the race to 5G dominance play out between Qualcomm and Huawei?In another recent answer, I discuss how Qualcomm built up a massive patent portfolio over the years and monetized it largely by collecting licensing fees from smartphone and network equipment OEMs. Like Apple in the earlier example, much of this IP sits offshore for tax reasons.If the end customer is American, the money flow will show up through the importation of what is typically a physical hardware device, like an iPhone. Because of some of the quirks in BoP accounting I described above, even though most of the iPhone’s IP originates from the U.S., it still ends up contributing to our bilateral trade deficit with China.This absurdity can be seen in an example from an earlier answer[8] that shows how this might work for an iPhone:Things get even more non-sensical when the end sale takes place outside the United States.For tax reasons, the IP is domiciled offshore, in a tax-friendly jurisdiction like Ireland. When Apple sells an iPhone to an end customer in London, the profits are collected offshore. None of the money ever flows back “onshore” to the United States, lest it be subject to something called a “repatriation tax”. (Note: this may change with the new 2017 tax laws but is relevant for all of the data we are looking at here; see Explanatory Note i)As such, even though this is clearly an export of American IP, much of it is not even captured in any of the BoP line items.To be fair, a small portion of it would show up in Line 1.B. “Exports of services”, likely under the “charges for the use of intellectual property” sub-category. This is because there are rules around something called transfer pricing[9] that govern intra-company asset transfers:For example, say Qualcomm engineers in San Diego come up with a new invention and patent it. The company’s tax accountants want the IP to sit in a tax-friendly place like Ireland so it needs to arrange the transfer of IP. It must follow some transfer pricing rules, which means selling the IP at some nominal “cost-plus” markup. It would recognize a nominal amount of onshore U.S. profit, on which it would pay a small amount of tax. From Ireland, Qualcomm can sell the IP globally and pay a much lower tax on profits than it would have if it had sold it from the United States.(Note: I am not an international tax accounting expert and I might be missing some steps and/or jurisdictions but this should be directionally correct based on discussions I’ve had with actual experts.)The net effect is that international sales of this IP do not generate any onshore money flows and, accordingly, are not calculated in the U.S. BoP accounts. But this does not mean that we are missing out on the benefits of the trade. It just shows up in different line items and is spread out over time. To find out how, we now have to learn about the Capital/Financial Account section of the BoP.“Balance of Payments” 102: The Capital/Financial AccountWe’re back in the classroom, students. Kudos to all of you who decided to come back for second semester.I’ve been writing this darn thing so long that I’ve aged quite a bit since we last met:As you might guess from the name, Balance of Payments ultimately needs to … anyone? anyone? … balance.So if you run a large Current Account deficit, the deficit will need to be funded somehow. If you run a large Current Account surplus, you will need to send the surplus capital outside the country. These transactions are captured in the Capital/Financial Account.As we have been running large trade deficits for most of the last three decades, as Warren Buffett likes to say, we have been issuing “claims checks” to our foreign trading partners to pay for all of the extra stuff that they send us[10].These claims checks generally come in two forms: debt and equity. The debt is primarily made up of U.S. government bonds, debt backed by various forms of real estate, and debt issued by our corporations. The equity is made up of publicly traded equity as well as private (non-traded) investment, also known as “direct foreign investment”.Over the years, our foreign trading partners have accumulated quite a large stash of claims checks. But how much exactly?The U.S. Treasury releases monthly data on the market value of traded securities held by foreigners and the number is around $19.0 trillion as of September 30, 2018[11]. This figure is comprised of:$6.6 trillion in U.S. Treasuries and Agency bonds$3.8 trillion in U.S. corporate bonds$8.6 trillion in U.S. equities$19 trillion is a whole lotta skrilla.But this figure needs to be reduced, or netted off, by foreign assets held by Americans of around $11.8 trillion[12], comprised of:$2.9 trillion in government and corporate bonds$8.9 trillion in other securities (e.g. corporate debt, equities)These figures exclude foreign direct investment (FDI) but the good news here (for those of us who are less mathematically inclined) is that outbound FDI stock is almost exactly equal at $6.4 trillion each[13].So, netting everything out, foreigners own about $7.2 trillion more of America than Americans own of the rest of the world. As a sanity check, this number ties (roughly) to the accumulated Current Account deficits that we have generated since 1999 (which was about the time we started to generate large deficits) of $9.3 trillion[14]. (Note: it will not be exact because there are other line items in the Capital/Financial Account like straight-up currency and direct loans, as well as a plug account “statistical discrepancy”).Also, remember all of that cash that never made it onshore because American multi-nationals (“MNCs”) were trying to avoid taxes? This cash (and re-invested foreign profits) — some $2.6 trillion[15] of it sitting in foreign subsidiaries of the MNCs — is part of this $7.2 trillion net figure.If MNCs had been repatriating their overseas profits as it was earned, it would likely reduce our Current Account deficit by at least $150 billion per year. It supports the market/intrinsic valuation of the companies, and the mostly American shareholders of these MNCs benefit from this value, but from an international accounting perspective it does not show up directly.Over the very long run, the benefit will show up in the Balance of Payments accounts, via foreign purchases of equity and securities that have increased in value value over time. But the key point here is that the BoP effect will show up over a long period of time and also be subject to fluctuations in market sentiment (affecting valuation multiples).Phew! That was a lot of math and big numbers. The good news is that our final guest lecturer has arrived!Photo Credit: Sports IllustratedJust kidding, we are are not going to talk about Emily Ratajkowski. I just noticed some of you in the back falling asleep and I needed to get your attention because the next point is an important one.(Note: Yes, I know, that was quite shameless. But before I get inundated with #MeToo hashtags, remember y’all got young Alec Baldwin earlier in the lecture. Not to mention a young-ish Ben Stein.)Economic Trend #4: The Almighty U.S. DollarSo … $7.2 trillion is still a lotta skrilla. As a country, you would rather have a net positive international investment position than a negative one. But America has another trick up its sleeve: Our currency is the global reserve currency.Without getting too much into the details, one of the advantages you get by controlling the global reserve currency is that you end up owning a much more productive pool of foreign assets than foreigners own of you. To illustrate this point, we will make our last reference to Balance of Payments.Here’s the important table repeated from up above. Line 2 is something called “Primary Income”. Most of this line item is made up of investment income earned on bonds (interest income), stocks (dividends) and foreign direct investment (repatriated earnings).Despite the fact that foreigners own over $7 trillion more in American assets than Americans own of theirs, the United States generated $222 billion more Primary Income than it exported in 2017. In other words, the mix of overseas assets that we hold is significantly more productive than the U.S. assets held by foreigners.The main reason for this is that a large portion of the $19.0 trillion in liquid assets held by foreigners is made up of low-yielding U.S. Treasury government bonds. Whereas the majority of liquid foreign assets held by Americans are higher-upside (and often higher-yielding) equities — and even the bonds that they hold typically generate higher yields than U.S. Treasuries. Moreover, American outbound FDI tends to be comprised of more productive business assets while inbound FDI from foreigners includes more passive investments like real estate.It’s not that foreigners like holding low-yielding American assets. It’s that they are effectively forced to because of the U.S. Dollar’s status as the main global reserve currency. As the de facto global store of value, it becomes the standard place to “park” assets. So when countries like China run massive trade surpluses year after year, they are essentially forced to acquire low-yielding U.S. Treasury assets. As long as the U.S. Dollar dominates global trade, we get to set the rules.Having your currency as the dominant reserve currency gives you the world’s Most Amazing Credit Card: One that comes with unlimited credit, low borrowing rates and the general right to “not give a f—” when it comes to monetary policy.Like this, but made out of an Adamantium-Vibranium alloy.It also has no expiration date — provided you remain the dominant reserve currency. And to remain the dominant reserve currency, you need to be willing to take a leadership role in trade, not turn your back on the world. I do very much hope that we are doing our very best to make sure this card is in our wallet for decades to come.The Bottom Line: What Needs to be Fixed and How Do We Fix it?To fix things, we first need to get the facts straight. The problem with our trade policy decision-making today is that we are using the wrong numbers … and this will inevitably lead to the wrong prescription.During the 2016 Presidential Debate, Donald Trump said that America had an “almost $800 billion trade deficit”[16]. After becoming President, he has continued to repeat this $800 billion figure[17] ad nauseum.As I have described above, this number is completely misleading. Our economy is not a goods-based economy, it is a knowledge-based economy and if we account for this, the true deficit is much closer to $300 billion than $800 billion:The other problem is that President Trump appears to be almost singularly focused on China for taking our jobs, attributing “$500 billion” of the trade deficit to them. But again, to ground ourselves with the right facts and reality, we need to look at how other countries stack up:What’s really going on here is that the Anglophone (English-speaking) countries as a group are importing capital (and exporting jobs) to two major economic regions: East Asia and Northern Europe.China is only part of the issue — it makes up less than one-third of the aggregate “East Asia” surplus. Even more importantly, the labor-intensive jobs that we have lost to China are probably not the ones we want. It’s the high value-add, highly paid knowledge worker jobs that we should aspire to and those are more likely found in places like Japan, Germany, South Korea and Taiwan, not China.If we look at things on a per capita basis, the contrast is even more stark. At least from the traditional definition of mercantilism, China barely registers.Note: Data may not sync up exactly with previous table; data was pulled from an older answer[18].If we put all of our trade policy focus on China, we are going to have a tough time solving the real economic realities that we face.Now there may be other strategic and geopolitical reasons to focus on China these days and that might very well be the right course of action. But if that’s the case, let’s be up front with ourselves about call a spade a spade. Moreover, enacting trade policy that leads to us pulling back global trade is probably exactly opposite action we should be taking from a geopolitical perspective.Let’s make decisions based on facts and reality, not falsehoods and blind populism.Anyone Left? Anyone?For the few remaining readers who have made it to the end, I have a special bonus for you. Pop quiz time!! (Chill … they are all true-false questions. Plus you were warned at the beginning of class.)True or False?The modern evolution of our global economy has meant that the goods we trade are less physical and more intangible.Traditional ways of measuring international trade flows like “trade deficits” are having a hard time keeping up and accurately representing modern trade.Using more holistic measures of trade, the U.S. trade imbalance is much smaller than the headline numbers.In particular, the “true” bilateral deficit with China is significantly lower than the headline numbers once you account for “pass-through” surpluses and the crazy things that companies do to avoid paying taxes.Running a manageable deficit is not actually a bad thing, especially if it is part of controlling the world’s dominant reserve currency.It’s important to get smarter on trade so we can avoid enacting stupid trade policy.Alec Baldwin was pretty awesome in Glengarry Glen Ross.The U.S. trade deficit is high in large part because our economy is more advanced and sophisticated than ever.(Answer Key: All TRUE)Class dismissed.Explanatory note[Note i] With the passage of the Tax Cuts and Jobs Act of 2017, changes in the tax system have reduced the disincentive for companies to repatriate taxes back to the United States[19]. While it seems likely that this will change the onshore/offshore cash dynamic, history has shown how the amazing creativity of investment bankers and accountants when it comes to creating new and sophisticated tax structures.Footnotes[1] Glenn Luk's answer to Why is the USA so rich if its trade balance is negative?[2] How Has Federal Revenue Changed Over Time? | Tax Foundation[3] Is the plural of "Rolodex" called "Rolodexes" or "Rolodices"?[4] U.S. Trade Deficit Grew to $566 Billion in 2017, Its Widest Mark in Nine Years[5] Glenn Luk's answer to What is the cause of our trade imbalance with China?[6] Hong Kong - International Trade and Investment Country Facts[7] Triangular trade - Wikipedia[8] Glenn Luk's answer to Do any countries have a trade surplus with China?[9] Transfer pricing - Wikipedia[10] America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It Now.[11] http://ticdata.treasury.gov/Publish/slt2d.txt[12] http://ticdata.treasury.gov/Publish/slt2f.txt[13] https://fas.org/sgp/crs/misc/RS21118.pdf[14] Balance on current account[15] Apple Leads These Companies With Massive Overseas Cash Repatriation Tax Bills[16] Read the Transcript of the Second Presidential Debate[17] Trump Hates the Trade Deficit. Most Economists Don’t.[18] Glenn Luk's answer to What is the cause of our trade imbalance with China?[19] Evaluating the Changed Incentives for Repatriating Foreign Earnings

In terms of defining the word "worst," I'm going to take literary license and define "worst" as "least effective." I am also going make a few caveats to set the stage:1. It is common practice for presidential staffers and political appointees to implement their president's policies & plans, watch out for his better interest, and mitigate potentially damaging information from "going public." After all is said and done, however, the actions and inactions of anyone serving at the pleasure of the president is ultimately laid at the chief executive's feet. This means that in the discussions below, a given president may not have been the worst or least effective on a personal level; but, failure and misdeeds by his Administration ended up tainting his time in office. In a nutshell, an ineffective administration seen through the eyes of future generations is interpreted as an ineffective president.2. In judging ineffectiveness, I have given a "pass" to several presidents who died in office after only a brief stint. James Garfield served only six months in 1881 until he was assassinated. Zachary Taylor died in 1850 of a stomach ailment after 16 months of service. William Henry Harrison died of pneumonia in 1841 after serving just a month. His death was not in vain, however. He wisely chose an able vice presidential running mate, John Tyler. Tyler became the first V.P. to exercise the Constitutional provision for a vice president to become the president if the elected one is unable to discharge his duties as the president. Tyler and Congressional leaders realized the Constitution's wording left a lot up to interpretation. Once Tyler was sworn-in, there was a collective, "now what?" Numerous politicians felt the founding father's intent was to merely use the V.P. as a presidential "fill-in" until a special election was called to elect a new one. Tyler set an important precedent by pointing out the Constitution's silence on what to do next. Wisely, Tyler saw the situation akin to the old adage, "possession is nine tenths of the law." He notified the House Speaker and Senate President Pro Tempore that he would faithfully serve-out Harrison's term, and not run for reelection. Tyler's actions were critical in setting the tone for future vice presidents having to step-in to the presidency.3. Lastly, I have not attempted to put them in a certain order to avoid quibbling over trivial things.A. Franklin Pierce. 1853-1857. Pierce had a good record as a military officer. In that era, military officers, diplomats, senators & governors tended to be perceived as men who were a cut above the rest in education, wealth, life experiences with important people, and adept in maneuvering in the halls of power. The 1850s was a politically polarized and perilous time due to slavery issues. Political leaders from the non-slavery northern states and their counterparts from the pro-slavery southern states were finding it increasingly difficult to identify candidates that could equally satisfy both factions at the same time. Pierce was a northerner who was willing to somewhat look the other way on slavery issues; this included signing some pro-slavery legislation into law. Pierce became politically ineffective rather quickly. It did not help matters that on the way to Washington, D.C. to prepare for his inauguration, his son was killed in a horse n' buggy accident. Both Pierce and his wife spiraled into despondency, and he slowly became an alcoholic.B. Warren G. Harding. 1921-1923. Harding had previously been a Republican U.S. senator. The 1920 presidential election had a strong undercurrent of sentiment in the country that World War I should only be seen in the rear-view mirror. The War was presided over by a Democratic president, Woodrow Wilson, who basically worked himself to the point of exhaustion & suffered a stroke while trying to launch his "League of Nations" idea to prevent future conflict. Instead of Americans seeing the League as a good thing, it kept reminding everyone of something they were ready to forget.The political end result of Wilson's power vacuum in his final 18 months created a huge albatross around the Democratic Party leader's necks, and became a windfall for the Republican Party. Party leadership was looking for a presidential candidate who was not a fire brand, but, someone who could go along to get along...a political "good guy" not prone to rocking the boat; Harding became the good guy poster boy for the Republican Party.Two and a half years into his presidency, Warren Harding suffered a cerebral hemorrhage and died. At the time of his death, he was an extremely popular president. During his truncated term he actually showed some positive results from his goals and leadership. He at least showed the electorate (and party leaders) that he was no patsy. In general, anything negative later said about President Harding, was not so much an indictment of him personally, as it was for some of his Cabinet members.In terms of anything less than positive directly attributable to Harding, it would have to be his long-running affair with one woman, and a second woman who became pregnant as a result of her own affair with Harding. The affairs first came to light when the Republican Party Chairman and his lieutenants found out about the pregnant mistress. It could not have surfaced at a time much worse than it did...right in the middle of the presidential election after the nominating convention, but, before election day. In order to keep a lid on the whole thing, party leaders paid hush money, and continued to do so for many years after Harding died.After Harding died, the public gradually became aware of certain Cabinet members who were indicted for malfeasance and fraud of the 1st order. No evidence surfaced after Harding's death to directly implicate him in the various scandals. Instead of Harding demonstrating his lack of culpability and leading the charge to politically & legally clean house of his cabinet's bad apples, he became the convenient patsy and lightning rod for the public, the Congress, and the court's ire. Even though members of the Harding Cabinet went to jail, Harding's death prevented him from putting distance between himself and the scandal. Many of the pundits claimed it was implausible for Harding to be unaware of the crimes; or, if he truly knew nothing about it, then he was a fool for not seeing what was right under his nose.C. Andrew Johnson. 1865-1869. Johnson became the Vice Presidential running mate for Lincoln's second term election and victory. Lincoln chose Johnson as V.P. for his extremely tough and successful effort during the War as the military governor over the slave-owning border state of Tennessee. Tennessee was the first state to not remain with the confederacy after secession.Throughout President Lincoln's term in office, he made numerous decisions and took a lot of heat over them. Examples included:1. Suspending the Writ of Habeas Corpus during the Civil War;2. Promulgating the Emancipation Proclamation;3. Allowing African-Americans to enlist in the Union Army;4. Dismissing under-performing Army generals;5. Meddling in the duties and affairs of the War Dept run by Edwin M. Stanton;Lincoln brought several prominent, well-to-do politicians into his Cabinet who all had presidential aspirations, too. Besides Stanton he tapped Senator William H. Seward as Secretary of State, and Salmon P. Chase as head of the Treasury Dept. Only a master in interpersonal relations & communication could pull-off a feat of critical success with this kind of leadership horsepower and egos all under one roof. Lincoln was the man to do it. In 1860 none of these men even thought Lincoln could be elected, let alone save the country and win the Civil War. In due time all of them quietly tipped their hat to Abe, acknowledging that if ever there was exactly the right man in the right time and place in history, Lincoln was it.I am discussing all of this because these were the shoes Vice President Johnson was left to fill. As masterful and charismatic as Lincoln was to save the country in his first term, it would take another masterful four years to put the country back together again. This effort became known in history as, "Reconstructing the South." Even by his own, self-biased standard, Johnson knew he was no Abraham Lincoln.The whole concept of Southern Reconstruction was a hotbed of controversy. Many influential northerners had the attitude that the Confederates lost, and now it was time to be treated like losers. Johnson understood Lincoln's rationale behind Reconstruction, but no firm plan of who, what, when, where or how had been fleshed-out and presented as proposed legislation to Congress. Johnson lacked the people skills and finesse to pull it all together. Furthermore, the northern politicians and businessmen he needed on his side were suspicious of Johnson who came from a nominal, slave-holding state (Tennessee) and owned slaves himself at one point. When it came to southern leaders, they perceived Johnson to be an early "sell-out" of the southern cause, as seen with his military governorship appointment, and then being Lincoln's second in the 1864 presidential election. No doubt, Johnson was on a precarious, political knife edge, and under Lincoln he likely would have been Abe's envisioned best tool in helping carryout Reconstruction. Being thrust into such a presidential hotbed in 1865 was practically a no-win situation for Johnson, or any other politician.The end result was Congressional gridlock, Cabinet member infighting, and so forth. Andrew Johnson became the first President to be impeached, and came within one vote of being bounced out-of-office. If Lincoln was the right man, for the right time, President Johnson was the wrong man, for the wrong time. For his inability, partially his own fault, to successfully follow, arguably, one of America's best presidents of all time, Johnson's presidency surely fits the category of least effective.D. Jimmy Carter. 1977-1981. The country was coming out of the turbulent 1960s and early 1970s with major news items such as:A. The Vietnam War and all of its homefront ramifications;B. The space race to the moon;C. The Kennedy assassination;D. The Watergate Scandal;E. The energy crisis & oil embargo;F. A major recession, double digit unemployment and rampant inflation;G. Civil rights unrest.All of these issues were connected in some way with the Washington, D.C. establishment. Anything connected with Washington during this era became tainted in the public's eye. This pervasive sentiment became a direct carryover to the 1976 presidential election. This is the political power vacuum in which Jimmy Carter intended to exploit as a "Washington outsider." Carter's political experience included one, four-year term in the Georgia Senate, and four years as Georgia's governor. Carter never worked in Washington, D.C. in or out of government.After Carter prevailed in the 1976 general election, his transition team went about the process of setting-up-shop in the White House prior to his January 1977 inauguration. Thinking his election victory was a vote of confidence in his philosophy that the American presidency was becoming too "imperial," and the key to getting things done by an administration was based on what you know, not who you know, Carter began to dismantle some of the presidential "imperial trappings." He reduced the appointed White House staff by nearly 35%; directed his staff to arrange for the sale of the presidential yacht, Sequoia, and decided the White House staff needed to be managed differently.Carter was an Annapolis engineering graduate and became a nuclear engineering officer aboard submarines; he served six years in the Navy. Carter's Naval service revealed the then practice of each service branch's top commander being his own chief-of-staff. Carter was influenced by this leadership concept, thinking it was a much better way to lead a team by making yourself the central hub with all communications routed, unfiltered, unprioritized, directly into the Oval Office. So, his first two years were conducted sans appointing an actual chief-of-staff.Carter was an intelligent man. At times, however, Carter felt his superior intelligence meant that others were not quite as smart. When you coupled the lack of a White House Chief of Staff with Carter frequently trusting his own judgment over that of his staff experts, it created sticky problems that could not always be smoothed over in short order. After two years of the White House flailing without solid direction, Carter acquiesced and promoted Hamilton Jordan to Chief of Staff.Even though House Speaker, Tip O'Neill, was a Democrat like Carter, O'Neill was seen by the President as a prototype Washington insider; so, relations were strained. Not having good relations with a House Speaker from your own political party can seriously stymie a presidential agenda - and it did for Carter.President Carter's greatest success as President was his negotiation with Israeli Prime Minister Menachem Begin and Anwar Sadat of Egypt. The positive outcome was the Camp David Peace Accords. Unfortunately, Carter's efforts at Camp David had no direct benefit to the United States internationally or domestically. The country was in a deep recession with double digit unemployment and the same for inflation; but, Carter was unable to make improvements.Even though Carter's first two years were problematic, he may have been able to improve things during the second half of his term; but, it did not happen. Instead of success, it was more inaction and disappointment when his presidency came to a grinding halt over the 444 day long Iran Hostage Crisis at the U.S. Embassy in Tehran. The hostages were released unharmed shortly after President Reagan took his oath of office. Whether it was deliberate or not, it was hard to ignore that the Carter Administration failed to get the hostages released; yet, the moment Reagan took office the hostages were free to go. It was as if the militant Iranian students who took the hostages were mostly intent on embarrassing the Carter Presidency. Regardless the kidnapper's intent, it guaranteed Carter's walk into presidential history to be a negative one.E. Ulysses Grant. 1869-1877.Americans love heroes, and they had one in General Ulysses S. Grant. The U.S. Presidency has had no less than nine Army generals grace the White House; the list includes: George Washington, Andrew Jackson, William Henry Harrison, Zachary Taylor, Grant, Franklin Pierce, James Garfield, Benjamin Harrison, and Dwight Eisenhower. Aside from the fact the Union Army won the Civil War, it also dominated presidential elections, starting with Grant in 1868. For the next 32 years (1868-1900) no one was elected President of the United States except those who served as Union Army officers during the Civil War. When the War ended in 1865, 80 years would pass before a president took office from a former slave-holding state – Harry S. Truman of Missouri. A total of 22 presidents served in the military. And, just like society in general, there is no certain formula for career success; nor does an Army general or any other service member increase the odds of a successful presidency. Ulysses Grant’s two-term Administration would bear out the foregoing statement; even a popular hero cannot win all-the-time.President Grant graduated from the U.S. Military Academy at West Point. Grant’s academic record was merely average; but, his military science skills ranked him near the top of his class. Upon graduation in 1844 he reported to his first duty station in Texas and served in the Mexican-American War. Grant’s commanding general in this campaign was Zachary Taylor; he would become the next president in the 1848 election.After 10 years of service he resigned his commission to begin a civilian career. Speculation has it that he was asked to resign due to alcohol problems. Grant spent the next seven years as a civilian trying to make a living farming, selling real estate, and working as a landlord over several large buildings. He was never successful in private business before or after the Civil War. After two terms in the White House he returned to civilian life and was bankrupt in less than a year.Although Grant’s leadership skills were well-honed from his military service, he had never held an elected or appointed political office and had shown little interest in running for office. Simply put, Grant was a political novice when he became president in 1869. Critics later blamed his lack of experience for the economic panic of 1873 and scandals that dogged his administration.Though scrupulously honest, Grant became known for political appointees of poor character. Grant struggled to spot corruption in others. While he had some success during his presidency, like pushing through the 15th Amendment and creating the National Parks Service, his Administration's scandalous behavior was a constant distraction throughout his two terms. In the court-of-public-opinion Grant faced charges of misconduct in nearly all federal departments, engaging his Administration in constant conflict between corrupt associates and reformers. He protected colleagues and appointees, unless evidence of misconduct was overwhelming. No one implicated Grant in the scandals; nor did proof surface of an Administration-wide conspiracy. As more one-off scandals became public, Congress began corruption investigations in many of the Cabinet departments. High profile appointees, such as the Attorney General, Secretary of War, Treasury Secretary, and Interior Secretary resigned when evidence of wrongdoing was blatantly obvious.In President Grant’s final address to Congress before leaving office, he kept his personal integrity intact by solemnly acknowledging his failure to choose Cabinet members who brought honor to their fellow citizens, and the Grant Administration. Indeed, for all the turmoil wrought upon the country that stemmed from his poor staffing choices, he could only feel shame for not doing a better job. The President was not obligated to say anything to Congress about his troubled Administration; but, he knew that good leaders delegated duties, and responsibility always comes back to the boss, good or bad.Steve Miller, Copyright (c) 2008

A good president. Adding on to Michael Platt ,The Tax Cuts and Jobs Act was published, and passed. It was the first major one in thirty years. (The Economic Tax Recovery Act of 1981)The Congressional Budget Office reported a $281 billion surplus in April of this year, a record high.According to Homepage, the Secretary of Commerce Wilbur Ross announced $482 billion of investments in new American projects.CNBC, a ‘slightly liberal’ news network according to Media Bias/Fact Check reports a list of massive companies from Walmart to JPMorgan all giving bonuses (50 total) due to tax savings.According to the National Public Radio Service, $1.5 trillion was saved from being payed for single households.Fortune Magazine and the Wall Street Journal and Bloomberg and the Washington Post published similar articles about the extension of individual tax cuts, also known as $1.5 entire trillion.$2.6 billion is going to be given to the Education Department, and unlike Obama, not in a massive recession, reports Education Week.According to the Los Angeles-yes, the Los Angeles f*cking Times, a provision in his tax bill has finally rolled back some of the dreaded red tape on Obamacare. It required Americans to pay for healthcare they don’t want or need. He also states that block grants may be an option for states, cutting back on government-regulated healthcare.Trump has finally lowered the 31% corporate tax rate, the second highest in the world, to a more reasonable 21%.The lowest we’ve gotten in July 2018 growth is higher than every other GDP growth rate than Obama’s. In fact, when Trump took office, in January 2016, the growth rate was 0.6%. Now we’re at 3.5%.Actually, if we add the growth for all of 2017, we come to the total that it’s actually 9/4 percent of the entire American economy.If we see the graph provided by Trading Economics for 10 years, we’ll notice that Obama’s eight years saw unemployment spike, and Trump lowered it to a 49-year-low of 3.7 percent.The manufacturing industry had 293,000 new jobs.337,000 construction jobs were introduced and the standards have rose dramatically.Fourteen states have record low unemployment rates.African-Americans have the lowest unemployment rates in their entire existence in America.Job openings reached 6.6 million, the highest number in history.Those dependent on food stamps fell 6.2%.The Dow Jones hit record highs no less than 80 times under President Trump, including closing at 26,000 points for the first time in history.$5 trillion in wealth has been accumulated.Economic confidence rebounded to record highs.The Conference Board Consumer Confidence Index rose in November 2017 to a 17-year high of 129.5.The National Association of Manufacturers’ Outlook Index had the highest annual average in its history.Small business optimism has sustained record-high levels under President Trump according to the National Federation of Independent Business.Trump signed an executive order expanding apprenticeships.Trump signed a Presidential Memorandum to prioritise STEM and computer science education. $300 million has been raised.Trump prioritised the economic development of women, lending $500 million to women-owned businesses.Since taking office, President Trump has advanced trade deals that protect American workers.Days after taking office, the President withdrew the United States from the Trans-Pacific Partnership negotiations and agreement.President Trump's Administration is working to defend American intellectual property from China's practices through a range of actions.The President improved the KORUS trade agreement with the The Republic of Korea, which will allow more U.S. automobile exports to South Korea with lower tariffs and increase U.S. pharmaceutical access to South Korea.American agriculture has gained access to new markets under President Trump.The Longest Consecutive Positive Monthly Job Growth on Record - Total payroll employment grew by 213,000 in June 2018 (18,000 over forecasts) led by gains in professional and business services, education and health services, and, once again, manufacturing.This is the longest consecutive, positive monthly job growth period on record (93 months).Wage growth soared at its fastest pace since the Great Recession” and the unemployment rate held “near a generational low” of 3.9 percent.Whether you like it or hate it, President Trump called on a Southern border wall, closed legal loopholes, ended chain migration, and ended visa lotteries.He also pulled us out of the Global Compact on Migration.President Trump rescinded the Deterred Action for Parents of America.Under President Trump, the Department of Homeland Security announced the Victims of Immigration Crime Engagement.110,568 illegal, undocumented immigrants, which were not applying for citizenship or making an effort were detained.$98 million was spent on law enforcement for cities across America. Said law enforcement also can now use surplus defence equipment to further help law.4,000 MS-13 gang members were arrested.President Trump signed three executive orders to crack down on international crime organisations.$1.6 billion was spent on border control.ICE also got funded 10% more.Federal agents seized a million pounds’ worth of narcotics…one million. Say illegals aren’t bad?He took action to protect America’s steel, harmed by unfair trade.The President exercised his authority to impose a 25 percent global tariff on steel imports and a 10 percent global tariff on aluminium imports in order to protect our national security.The tariffs on steel and aluminium are anticipated to reduce imports to levels needed for domestic industries to achieve long-term viability.As a result, these industries will be able to re-open closed mills, sustain a skilled workforce, and maintain or increase production.The strengthening of our domestic steel and aluminium industries reduces our reliance on foreign producers.President Trump is helping us to withdraw from the unfair Trans-Pacific Partnership.Re-negotiations of the North American Free Trade Agreement are still underway to modernise the deal so that all countries benefit.South Korean companies announced 64 projects that will invest more than $17 billion in the U.S. over four years and will purchase $58 billion in goods and services.Foxconn announced its investment of $10 billion in Wisconsin to build a factory that will employ thousands of workers directly, and up to 22,000 workers indirectly.Toyota and Mazda announced a $1.6 billion investment that will go toward a new manufacturing plant in the U.S., creating an estimated 4,000 jobs.At the White House, Broadcom Limited announced they were moving their headquarters back to the United States, bringing potentially $20 billion in annual revenue.President Trump and King Salman of Saudi Arabia oversaw the signing of a historic $400 billion in deals between U.S. and Saudi companies.To defend U.S. national security interests, President Trump blocked a foreign company from acquiring a U.S. business for only the fourth time in history.Since President Trump was sworn into office, the Department of Commerce has initiated 79 antidumping and countervailing duties (AD/CVD) investigations.The U.S. Trade Representative (USTR) self-initiated a Section 301 investigation into whether Chinese policies, acts, and practices related to technology transfer, licensing, and intellectual property are unreasonable or discriminatory. This is the first use of Section 301 since 2001.The Treasury Department and State Department put new sanction rules to channel economic activity away from the Cuban government, particularly the military, and towards the people of Cuba.Mortgage applications at 7-year highReduced white house payrollChanged rules of engagement against ISIS to allow for greater US effortWorked to reduce cost of the F-35Enacted 5-year ban on lobbying same department for Executive branch officials leaving governmentSanctioned Iran for material breach of Obama's Iran dealRemoved the US from the Paris Climate AccordAuthorized construction of Keystone pipelineCreated commission on opioid addictionThe Administration actually eliminated 22 regulations for every new regulatory action.The Administration issued 67 deregulatory actions while only imposing three new regulatory actions.According to a study by NERA Economic Consulting, implementing the Obama Administration’s plan under the Paris Climate Agreement could have cost the United States economy nearly $3 trillion and 6.5 million industrial sector jobs by 2040.President Trump has signed a record-breaking 15 CRA bills to roll back regulations.President Trump created the Interagency Task Force on Agriculture and Rural Prosperity that Secretary Sonny Perdue chairs and developed suggestions.Suggestions include focusing on broadband access, improving the lives of rural Americans, developing methods to support a rural workforce, harness technological innovation for rural communities, and focusing on economic development in rural areas.Criminals charged with unlawful possession of a firearm has increased 23 percent.Attorney General Sessions expanded Project Safe Neighborhoods to encourage U.S. Attorney’s to work with communities to develop customized crime reduction strategies.The President signed an Executive Order that placed a five-year ban on lobbying and a lifetime ban on lobbying for foreign countries.President Trump called for a comprehensive plan to reorganize the executive branch.President Trump began a comprehensive overhaul of digitally-delivered government services.President Trump called for a “full audit of the Pentagon.” The Department of Defense (DOD) responded to the President’s call to action, and began its full financial statement audit.Defense Secretary Jim Mattis called for business reform in the DOD to instill budget discipline and effective resource management.In October 2017, President Trump directed The Department of Health And Human Services to declare the opioid crisis a public health emergency, allowing grant money to be used to combat abuse.President Trump signed the International Narcotics Trafficking Emergency Response By Detecting Incoming Contraband With Technology (INTERDICT Act) that would give customs agents $9 million for screening tools on the border.President Trump appropriated more money to the cause. In April 2017, HHS announced it would provide $485 million in grants to states and territories to combat the opioid crisis. In fiscal year 2017, HHS invested nearly $900 million in opioid-specific funding.President Trump proposed changes to Medicaid to combat the opioid crisis.The President’s infrastructure plan will establish a Rural Infrastructure programme to invest in rebuilding and modernizing rural infrastructure. The Rural Infrastructure programme will seek to:Use outcomes-driven planning efforts and capital improvements to rebuild and modernize rural infrastructure.Grow business revenues and personal incomes in rural areas by expanding access to markets, customers, and employment opportunities.Enhance regional connectivity for rural communities through interregional and interstate projects developed by the public and private sectors.Spur economic growth and competitiveness by closing infrastructure gaps to attract more development and manufacturing investments in rural America.President Trump and his Administration allocated $50 billion to empower rural America to address the infrastructure needs of their communities. The $50 billion dedicated to rural America represented 25 percent of all Federal funds in the President’s plan.80 percent of the Rural Infrastructure programme funds will go directly to the governor of each State as determined by a formula.20 percent of the Rural Infrastructure programme funds will be provided to selected States that apply for Rural Performance Grants.The Department of Education has overseen the first year of the Every Student Succeeds Act (ESSA) to empower States with the flexibility they need to educate their students.35 States and the District of Columbia have had their ESSA plans approved and the Department of Education is reviewing the plans for the remaining states.The Department of Education is urging states to embrace the opportunity provided by ESSA to end top-down mandates from Washington, D.C.After it passed unanimously in August 2017, President Trump signed the Veterans Appeals Improvement and Modernization Act.This streamlined the lengthy process that veterans undergo when appealing disability benefits claims with the Veterans Affairs.The President signed the V.A. Choice and Quality Employment Act of 2017 to authorize $2.1 billion in additional funds for the Veterans Choice programme (VCP).The President signed the Harry W. Colmery Veterans Educational Assistance Act, an important step in providing our nation’s heroes the support they have earned.This funded the post-9/11 GI Bill, which provided educational benefits to veterans, service members, and their family members, including tuition, fees, books, housing, and additional costs.This is written in 2018, before the midterm elections, meaning the following was happened before his two years, half of his first term ended.