2019年10月1日星期二

The tax cut that time forgot

OCTOBER 1, 2019

A White House worker preparing for an event marking the six-month anniversary of the passage of tax cut legislation.Tom Brenner/The New York Times

By Paul Krugman

opinion columnist

Traditionally, U.S. presidential elections were decided largely by the performance of the economy in the year or so before Election Day. If G.D.P. was growing fast, it was Morning in America, and the incumbent party won; if there was a recession (as in 2008) or growth too slow to create jobs (as in 1992), the White House changed hands.

But that's unlikely to be the story next year. True, a recession — brought on, say, by a widening trade war — could seal Donald Trump's fate; a boom (coming from where?) could conceivably offset the aura of scandal and possible treason that surrounds his administration. But right now the economy just seems to be bumbling along. True, unemployment is low, but what seems to matter for elections is the rate of change, and that's unimpressive, with growth running at around 2 percent per year.

This wasn't what was supposed to happen. Two years ago Republicans controlled both houses of Congress as well as the White House, and they used that unified control to enact a big tax cut, mainly aimed at businesses, that was supposed to usher in a prolonged economic boom. Reduced corporate taxes, the story went, would induce U.S. companies to bring back the money they've invested overseas, fueling a surge in business investment that would drive up productivity and wages.

Many economists, myself included, thought these claims were greatly exaggerated, that the actual payoff from the tax cuts would be much smaller than advocates claimed. But we were wrong. Almost two years have passed, and it looks as if that tax cut basically had no payoff at all. There hasn't been any visible return of capital from abroad, and business investment has if anything been weak.

How could such a big tax cut — corporate tax receipts have fallen roughly in half! — have had so little effect on business behavior? I see three stories.

First, there may have been some positive effect, but it was outweighed by Trump's trade wars, which have increased uncertainty and deterred investment.

Second, a lot of modern corporate profits probably consist of "rents" — returns to a company's monopoly position, not its past investments. Cutting taxes on these rents doesn't provide an incentive to invest, it just leaves companies with more cash.

Finally, much of what looked like overseas investment by U.S. companies may have been an illusion. Recent research shows that a lot of cross-border money flows are "phantom" investments that are just accounting tricks to take advantage of tax havens. The 2017 tax cut didn't bring a lot of money back home because the money never really left in the first place.

Whatever the mix of reasons, the amazing thing is the way the Trump tax cut has more or less disappeared from our discourse. It was, after all, Trump's only major legislative achievement, and seemed like a big deal. Yet nobody talks about it on the campaign trail, and it's barely mentioned in discussions of our economic prospects.

Remember, this thing is going to add around $2 trillion to our national debt. Yet it appears to have been a big case of money for nothing.

Quick Hits

What the 2017 tax cut's supporters claimed would happen.

The Congressional Research Service on the absence of evidence that the tax cut did much of anything.

The International Monetary Fund on "phantom" international investment.

Official growth numbers arrive with a lag, but you can get an early read from various "nowcasting" efforts, like those of the New York Fed.

Feedback

If you're enjoying what you're reading, please consider recommending it to friends. They can sign up here. If you want to share your thoughts on an item in this week's newsletter or on the newsletter in general, please email me at krugman-newsletter@nytimes.com.

Facing the Music

Josh Turner and Reina del CidYouTube

I discovered indie concerts late in life; there's a sheer level of joy in informal live performances that I really need in these grim times. This definitely not pro-shot performance by Reina del Cid, Josh Turner and associates gives you some of that feeling.

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Political drama seldom alters economic fundamentals. But it can influence presidential behavior, which in turn can affect economic policy.

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Global Trade Is Deteriorating Fast, Sapping the World's Economy

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by peter s. goodman

Read the full Opinion report here.

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On Politics: House Subpoenas Giuliani

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OCTOBER 1, 2019

Good Tuesday morning. Here are some of the stories making news in Washington and politics today.

House Democrats investigating whether to impeach President Trump issued a subpoena demanding that his private lawyer, Rudolph W. Giuliani, produce communications related to his attempts to pressure Ukraine to investigate one of the president's Democratic rivals, suggesting that Democrats are moving quickly in their investigation.
Part of the whistle-blower complaint about Mr. Trump's July 25 phone call with Ukraine's president said that the White House had locked down a rough record of the conversation by placing it in a system designed to limit access to top secret "code word" files. Here's how that system works.
Mr. Trump made another phone call, this time to the Australian prime minister, where he asked him to help Attorney General William P. Barr gather information for a Justice Department inquiry that Mr. Trump hopes will discredit the Mueller investigation.

On Monday, the president said that the White House was working to uncover the identity of the whistle-blower. He also questioned whether the chairman of the House Intelligence Committee should be arrested for treason for his description of the Ukraine phone call.

A dwindling group of Democrats still does not back an impeachment inquiry against Mr. Trump, though many have expressed concerns about the allegations against him.

The United States issued new economic sanctions on Monday against seven Russians linked to an internet troll factory. It served as a warning to foreigners who seek to interfere in American elections.

In his first public comments since leaving the White House, John Bolton, the former national security adviser, delivered a stark warning that the president's courtship approach to diplomacy with the North Korean leader, Kim Jong-un, was only increasing North Korea's power.
Former Vice President Joseph R. Biden Jr.'s presidential campaign has cut back spending on online advertising so severely that he is now investing only a fraction of what his top rivals are on Facebook and Google. Strategists say that this isn't a good sign for Mr. Biden.

Senator Bernie Sanders proposed a new corporate tax to address pay gaps. The plan would penalize some of the country's largest companies if they failed to narrow the pay gap between their top executives and their median worker.

Today's On Politics briefing was compiled by Isabella Grullón Paz in New York.

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Is there anything you think we're missing? Anything you want to see more of? We'd love to hear from you. Email us at onpolitics@nytimes.com.

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Special Briefing Edition: China's National Day

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OCTOBER 1, 2019

China's National Day: Fury in Hong Kong After Festivities in Beijing

By The New York Times

Hello, and welcome to a special edition of the Morning Briefing.

Protesters engulfed in tear gas in Hong Kong today.Lam Yik Fei for The New York Times

As China celebrated the 70th anniversary of the Communist Party's rule with a military parade and fireworks today, protesters in districts across Hong Kong engaged in some of the most violent and sustained clashes yet in their monthslong movement against Beijing's tightening grip.

Here's the latest:

In a significant escalation, the Hong Kong police shot a protester with a live bullet for the first time in months of clashes, three lawmakers said. The protester's condition was not immediately known.
The city was transformed into a battlefield as protesters clashed with riot police officers in nine districts, building bonfires and barricades and hurling firebombs.
Earlier in Hong Kong, tens of thousands of demonstrators thronged the streets in a peaceful march, hoping to overshadow the celebrations in mainland China.
In his opening speech before the morning parade in Beijing, China's leader, Xi Jinping, said that China would "maintain the lasting prosperity and stability" of Hong Kong — a clear indication that the turmoil there was on his mind.
In a tightly choreographed display of might, China showed off an arsenal of new high-powered weapons during its parade, including a missile that can strike anywhere in the U.S.

The protests are likely to continue late into the evening. Here's a look at the day's events so far.

Protesters in Hong Kong brawl with the police

Several working-class neighborhoods turned into pitched battle scenes shrouded in tear gas.

A vicious brawl erupted between protesters and the police in the Tuen Mun district in northwestern Hong Kong, close to the border with the Chinese mainland. The police used batons and pepper spray to fend off a crowd of hundreds but were momentarily overwhelmed by wave after wave of protesters throwing umbrellas and other projectiles
On Hong Kong Island, the police created a cordon and used a water-cannon truck to keep protesters away from the office of the Chinese central government's liaison to the territory. Elsewhere, they fired live rounds as warning shots and chased after protesters, pinning some of them down.
In the Jordan neighborhood in Kowloon, a group of men in masks used a Molotov cocktail to burn posters of Mr. Xi outside a Chinese Army barracks.

A float with a giant portrait of China's leader, Xi Jinping, during today's military parade in Beijing.Kevin Frayer/Getty Images

In Beijing, Xi shows China's military might

Early in the day, 15,000 soldiers goose-stepped along Chang An Avenue — the Street of Eternal Peace — to kick off one of the largest military parades in modern Chinese history.

Mr. Xi, in his speech, projected the enduring strength of the Communist Party and its future. "No force can shake the status of our great motherland; no force can obstruct the advance of the Chinese people and Chinese nation," he said.
The pageantry of the 70th anniversary revealed Mr. Xi's effort to rewrite Chinese history. His administration has molded textbooks, television shows, movies and museums to match his narrative of national unity and rejuvenation. The Communist Party has also promoted revolutionary nostalgia and played down the strife of the Mao era.
The military parade put China's shiniest new weapons on display, including the DF-41 missile, which can carry 10 nuclear warheads and strike anywhere in the U.S.
One of the guests of honor at the Beijing parade was Carrie Lam, Hong Kong's beleaguered chief executive.
The parade was more than just weapons. It featured colorful displays meant to bring to life China's achievements over the past 70 years and Mr. Xi's policies. Here are some pictures from the event.

Hong Kong is on lockdown

Dozens of subway stations remain shuttered, malls were closed all day and an eerie quiet hung over the main business districts.

The police set up roadblocks on a major highway that snakes past Causeway Bay, the starting point of one of the day's marches.
Traffic was snarled on some major thoroughfares.
The city's No. 2 leader, Chief Secretary Matthew Cheung, who presided over a morning flag-raising ceremony, said the Hong Kong government was sparing no effort to restore peace.

A bit of background

The protests that have shaken Hong Kong and worried Beijing began with huge demonstrations in early June against an unpopular extradition bill. In the months since, they have become a broader movement against Beijing's power in the semiautonomous territory.

Violent clashes between young protesters and the police have become more frequent, and the demonstrators' demands have only grown in number and scope.

In recent days, China's state-controlled news media has turned up the pressure on Hong Kong's property tycoons, blaming them for soaring housing costs that have contributed to the discontent. The campaign has singled out the billionaire developer Li Ka-shing, whom China's state news media once lauded as a "patriot" and then flipped to deride him for his ambivalence toward the antigovernment protesters.

Here's a guide to what prompted the protests, how they evolved and why it all matters.