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On Trade, Taxes and the Economy, a Steady Hand Is Best

On Trade, Taxes and the Economy, a Steady Hand Is Best

U.S. President Donald Trump gestures during a press conference in Biarritz, south-west France on August 26, 2019, on the third day of the annual G7 Summit attended by the leaders of the world's seven richest democracies, Britain, Canada, France, Germany, Italy, Japan and the United States. (Nicholas Kamm/AFP/Getty Images)

Alfonse M. D'Amato By Thursday, 29 August 2019 04:33 PM EDT Current | Bio | Archive

A half century ago, as President Richard Nixon sought to end the Vietnam war, he propounded a “madman theory” based on the idea that if the war didn’t end on terms acceptable to the U.S., Secretary of State Henry Kissinger should let North Vietnam’s negotiators know that Nixon just might be mad enough to bomb North Vietnam with nuclear weapons. Unfortunately, the risky gambit did not work, the war dragged on for years, and the U.S. suffered an ignominious defeat.

Notwithstanding these shortcomings, it’s said that President Trump admires President Nixon’s madman theory and that a variant of it underlies his approach to negotiating with both foreign adversaries and domestic opponents as well. If so, this may help explain Mr. Trump’s zig-zag negotiations on a number of trade, tax, and economic related issues, and the head-spinning it’s causing.

On trade, the president has been right to vigorously protest China’s patently unfair trade practices towards the United States. For many years China aggressively manipulated its currency to keep its value artificially low, thereby making exports from China cheaper and imports to China more expensive. China’s authoritarian leadership and its command economy has a long history of dumping products here at below cost; heavily subsidizing its favored domestic industries; stealing intellectual property; and doing nothing to stem the flow of the dangerous opioid Fentanyl that has poured into America from Chinese sources.

One American industry after another has been battered by unfair Chinese trade practices. And in truth almost all previous efforts by U.S. Presidents of both parties have lacked the teeth and the tenacity to make a dent in China’s unfair trade policies. President Trump has shown a readiness to fight hard and long for a change in this situation, and he deserves credit for sticking to his guns versus China. He has been willing to aggressively use all the tools in his arsenal — including tariffs — to bring China to the table for serious trade negotiations with the U.S.

It may be that these hard-nosed tactics are the only thing that will move the Chinese Communist Party plutocrats off the dime on trade issues and the Fentanyl crisis. But there also may be limits to the effectiveness of swinging between tough and tender with Chinese leader Xi Jinping, who like his Vietnamese counterparts decades ago, may just try to outwait the U.S. until our will runs out. That’s what North Korea’s Kim Jung Un has been doing with his foot-dragging on nuclear disarmament, and it’s what Xi seems to be doing on trade.

In the meantime, this uncertainly in the international trading system is dragging down worldwide economic growth. Every bit of bad economic news raises the specter of recession, with fear feeding on fear, and full-fledged, old fashioned panic just a few short steps away. Media commentators hyperventilating on every hint of recession doesn’t help. Nor do the thinly veiled wishes by President Trump's opponents that his signature economic successes will fade in time for next year’s elections.

This may be a time when a steady hand on the tiller is more effective than sailing headlong into the economic winds. It’s not the time to tinker with the tax code. Reactively cutting payroll taxes or capital gains taxes as has been bandied about by the administration is counterproductive. Facing a trillion-dollar federal deficit this year, adding more red ink to the budget may do more harm than good.

And while another cut in interest rates by the Federal Reserve might juice up the economy in the short term, it’s no panacea either. Interest rates are already low, with loans readily available for businesses and home buyers. What the CEO’s of major American corporations say they need to plan for future economic growth is more certainty and predictability from Washington, not more knee-jerk reactions.

I have counselled before that our national leaders need to deal with our country’s major challenges. We must address the looming shortfalls in both Social Security and Medicare that threaten the financial stability of both those critical safety net programs. And we should fix our broken immigration system.

It’s important to remember that our economy is still remarkably strong. Businesses — including those here in Long Island — are generally doing well. What may be helpful to recall is the admonition of another wily New York politician who made it to the White House and counseled "the only thing we have to fear is fear itself!"

This column was originally published in the Long Island Herald Community Newspapers.

Former Senator D’Amato served a distinguished 18-year career in the U.S. Senate, where he chaired the Senate Banking Committee and was a member of the Senate Appropriations and Finance Committees. While in the Senate, Mr. D’Amato also Chaired of the U.S. Commission on Cooperation and Security in Europe (CSCE), and served on the Senate Intelligence Committee. The former Senator is considered an expert in the legislative and political process, who maintains close relationships with Members of Congress on both sides of the aisle. He is regularly called upon for his advice and counsel, and is recognized for his incisive analysis of national and international political affairs. The former Senator will share insights gained from his years in Washington “with a clear-eyed view of the political forces that shape the world we live in today.” To read more of his reports — Click Here Now.

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It’s important to remember that our economy is still remarkably strong.
trade, taxes, trump
Thursday, 29 August 2019 04:33 PM
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