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Republicans Should Use Tax Reform to Pursue the Real Deficit Driver: Entitlements

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In the weeks preceding the holiday recess, GOP congressional leaders passed two sweeping tax reform bills, hoping to produce a final version for President Trump to sign before Christmas.

Taken together, the bills cut taxes by nearly $1.5 trillion- including lowering the corporate rate to 20%- and attempt to mitigate the impact on the deficit through economic growth.

This belief that lower taxes stimulate the economy- last put into practice during the second Bush administration- has encountered resistance from deficit-minded conservatives and Democrats who fear that reduced revenue will exacerbate the deficit crisis.

“I say to my colleagues, particularly the deficit hawks…” Senator Chuck Schumer (D-NY) said in a recent floor speech. “This bill is a deficit budget buster. We all know what will happen.”

Senator Schumer raised a valid point. Without accounting for economic growth, the Congressional Budget Office says the Senate bill would add $1.41 trillion to the deficit by 2027.

In the absence of sustained economic expansion, like the 3.3% growth rate in the recent third quarter, Republican tax reform will contribute to the national deficit. Adding to the deficit, ironically, is typically anathema to traditional conservative ideals.

But if tax reform leads to greater wage retention, and drives growth, Republicans should highlight the primary causes of the deficit, and fashion an argument for another GOP wish list item: entitlement reform.

By no means is the federal government strapped for cash. The Office of Management and Budget says that federal revenue for fiscal year 2018 will be $3.65 trillion.

This total, however, falls short of government spending of $4.09 trillion, creating a deficit of $440 billion. It is this figure, of course, that continues to drive federal debt toward $20 trillion.

But the annual deficit pales in comparison to the budget items that drive it: mandatory spending programs. These entitlements were established under so-called authorization laws, which require Congress to appropriate whatever funds are needed to keep the programs running.

Mandatory spending is currently estimated to be $2.535 trillion, or 62% of the federal budget, with the two largest items being Social Security and Medicare.

As the most expensive entitlement program, Social Security is estimated to cost $1.005 trillion in 2018. Funded through payroll taxes, Social Security collected more revenue than expenses until 2011 when 78 million baby boomers became eligible to draw from the program. Over the next 30 years, it is estimated that fewer workers will pay into Social Security, requiring 25% of its benefits to come from the federal government’s general fund.

Though smaller in total, Medicare is the second largest contributor to the deficit. In 2018, the healthcare program will cost $582 billion, and will derive 43% of its resources from the general fund.

To further exacerbate Medicare’s solvency issue, rising healthcare costs continue to make the program more expensive to administer, which will require future congressional leaders to allocate more funding for the program.

If taken together, Social Security and Medicare account for about $1.6 trillion in annual government spending. This total, however, would be inconsequential if these programs were self-sustaining. But they are, unfortunately, forecasted to fall short of their fiscal obligations, leaving taxpayers to pick up the tab through payroll and income taxes.

In comparison, the GOP tax bill is expected to add $1.4 trillion to the deficit over the next decade, or just over $100 billion per year by 2027. While this is a significant addition to the deficit, it is demonstrably less than the impact of entitlement spending, and may be partially offset by increased economic activity resulting from lower taxes.

Indeed, if tax cuts lead to economic expansion, Republicans have a convincing argument for entitlement reform. In such an instance, the GOP’s two-part rationalization should center on the efficacy of tax cuts, necessity of entitlement reform, and target young and middle-aged taxpayers who stand to lose the most from entitlement insolvency.

First, the GOP would provide Americans with a consistent reminder about the advantages of tax reform: increased take-home pay and (if present) economic growth. This message emphasizes the benefits of tax cuts and an expanding economy- two outcomes that quickly endear most voters to their congressional representative.

Republican’s second step is to a develop an engaging policy platform, aimed at the young and middle-aged, about the exigency of entitlement sustainability. While not the most enthralling topic, entitlement insolvency poses a threat to working Americans as they move toward retirement. By engaging their self-interest in the matter, a consistent GOP message on entitlement viability would create invaluable support for reforming public benefits.

So, if tax reform allows for greater retention of wages, and sustained economic growth, Republicans can harness their constituent’s interest in public retirement benefits through the lens of the looming deficit crisis. 

Such a strategy, if properly executed, could hand Republicans their greatest wish of all: entitlement reform.

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Americas

US diplomacy of re-engagement continues: From ‘intent’ to withdrawal from Paris Agreement to ‘COP23’

Abhishek Trivedi

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In a major setback decision taken by Trump administration on June 1, 2017, showing his intention to withdraw in future from the Paris accord has diplomatically pushed the world community one step back in climate negotiation regime as almost all major players in climate regime have registered their disappointment with this decision. Joint statement by France, Germany,and Italy says the deal can not be renegotiated, while other countries reaffirm commitment to carbon reduction. China sees the USA withdrawal as an unfortunate development, and implications of it will be global. In the words of UN Secretary-General that “The decision by the United States to withdraw from the Paris Agreement on climate change is a major disappointment for global efforts to reduce greenhouse gas emissions and promote global security.” However, Secretary-General has shown his confidence in the US including cities, states,and businesses within the US that will continue to demonstrate vision and leadership by working for the low-carbon, resilient economic growth that will create quality jobs and markets for21st-century prosperity.The Secretary-General also looks forward to engaging with the American government and all actors in the United States and around the world to build the sustainable future.

The letter sent to UN Secretary-General Antonio Guterres by the US representative to the UN Nikki Haley reads as:

“The is to inform the Secretary-General, in connection with the Paris Agreement, adopted on December 12, 2015 (“the Agreement”), that the United States intends to exercise its right to withdraw from the Agreement. Unless the US identifies suitable terms for reengagement, the US will submit to the Secretary-General, in accordance with Article 28, paragraph 1 of the Agreement, formal written notification of its withdrawal as soon as it is eligible to do so. Pending the submission of that notification, in the interest of transparency for parties to the Agreement, the United States requests that the Secretary-General inform the parties to the Agreement and the States entitled to become parties to the Agreement of this communication relating to the Agreement.”

Interestingly, it must be noted that Article 28, paragraph 1 of the Paris Agreement does nowhere suggest that a State party to the Agreement can circulate such type of ‘written notification showing its intent to withdraw from the Agreement.’ Article 28, Paragraph 1 reads as “At any time after three years from the date on which this Agreement has entered into force for a Party, that Party may withdraw from this Agreement by giving written notification to the Depositary.”

It is clear from the language of Article 28, paragraph 1, that under the terms of the accord, no State can withdraw until November 2020 and cannot even formally notify the UN of its intention to leave until 2019. So the communication serves only for Donald Trump to remind the world that he is seeking ‘suitable terms for re-engagement.’The United States accepted the Paris Agreement on 3 September 2016, and the Agreement entered into force for the United States on 4 November 2016. Therefore, according to Article 28, paragraph 1, US will not be eligible to withdraw from the Agreement till November 4, 2019.

The USA’ ‘suitable terms’ for re-engagement

The US in his written submission to the Secretary-General highlighted that,unless it identifies ‘suitable terms for reengagement,’ it will submit to the Secretary-General aformal written notification of its withdrawal as soon as it is eligible to do so. Now, it is far from theclarity that what would be the suitable terms for theUS to make it re-engage again in climate change negotiation regime. Till now, there is no explicit indication, neither from the USA official statement including press release nor its submission to the UN Secretary-General, that on what ‘suitable or most favourable’ terms Trump administration will agree for reengagement that will, perhaps, be more in tune with his popular political slogan ‘make America great again.’However, there might be four possible speculative ways in which theUSA could establish different terms for participation. These may include:

That US could seek to renegotiate few aspects of the Agreement itself. Though several countries have made it clear that the Agreement is ‘irreversible.’ In this background, this option would hardly work for the USA. However, theoffice of UN Secretary-General welcomes any effort to re-engage in the Paris Agreement by the United States.  Secretary-General has also shown his interest in engaging with the American government and all other actors in the US. Meanwhile, Secretary-General of the UNFCC (United Nations Framework Convention on Climate Change) said that the Paris Agreement remains a historic treaty signed by 194 and ratified by 147 countries. Therefore, it can not be renegotiated based on the request of single Party. However, Secretary-General (UNFCC) showed her interest in engaging in dialogue with the United States government regarding the implications of this decision of withdrawal.

That US could also seek to modify its ‘nationally determined contribution,’ i.e., the US emission target. The media-note also appears to be addressing this issue when it refers to the Administration’s support to “climate policy that lowers emissions while promoting economic growth and ensuring energy security.”The US further affirms that it will continue to reduce its greenhouse gas emissions through innovation and technology breakthroughs, given the importance of energy and security in many nationally determined contributions.

That, thirdly, US could seek ‘more favourable’ terms within the Paris-related guidelines that are still being negotiated for reporting and review. Such guidelines are due to be completed in 2018. It is perhaps this reason that the media note states that the US will continue to participate in the Paris-related negotiations, to protect US interests and ensure all future policy options remain open to the administration.” And possibly,for this reason, US has shown his intention to walk out only from the Paris accord, not also from the UNFCC convention.

That US might also seek improved terms of negotiation outside the framework of the agreement, such as bilateral or multilateral energy-related cooperation. As it is perhaps precisely indicated from the media-note that the US will “work with other countries to help them access and use fossil fuels more cleanly and efficiently, and deploy renewable and other clean energy sources.

Continuation of policy of re-engagement in COP23

COP23/CMP13 was decided to be hosted in Germany and presided over by Fiji from November 6 to November 17, 2017. In its opening joint plenary meeting held on November 6, US retreated its earlier position regarding withdrawal from the Paris accord unless it finds suitable terms for renegotiation. US said that “the US will withdraw from the Paris Agreement unless he can identify terms for reengagement that are more favourable to the American people.” “The Administration’s position remains unchanged.” Again, in the closing joint plenary session held on the last day of the conference,i.e., November 17, 2017, US said that U.S. participation in COP-23, including negotiations at this session relating to the Paris Agreement, does not indicate a change in the U.S. position.

One more political-cum-legal aspect to note here in COP23 that theUS has very smartly carried on its monetary diplomacy for future climate negotiation. The US has made it clear in very explicit terms that the financial pledges made under by the last administration are not legally binding. Moreover, with regard toeconomic matters, and in particular the $100 billion collective finance goal, the US has already taken a position that the finance goal is aspirational in nature, is not legally binding, and does not create rights or obligations.And it remains a domestic decision of the US or any other country for that matter.

As Trump administration said in media note that it will continue to reduce greenhouse gas emissions through innovation and technology, and enhance resilience activities where mutually beneficial to its broader foreign policy, economic development, and national security objectives, it reaffirms its endeavor to work closely with other countries to help them access to clean and efficient renewable energy sources. Here, US seems to be more in futuristic diplomatic engagement on climate issues, to bargain either bilaterally or multilaterally, perhaps outside of the UN Climate negotiation regime. From here, it would be not easy to assess which way US position will be tumbled precisely.

However, keeping in mind the dangerous multi-dimensional ramifications and impacts of climate change on the existence of human being and their future survival, it becomes imperative for the world community including USA to come together and address the multi-faceted issues of climate change taking place around the world. The USA must take the lead in tackling climate issue since it also emits world most substantial greenhouse gases. In addition to that, US also possesses themore financial capability, technological access, and infrastructure facilities along with thecapacity to mitigate greenhouse gases.

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Combating the Deep State Online

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Now that President Donald Trump has declared an outright and open war on international terrorism all around the world, joining forces with Russian President Putin and Chinese Premier Xi, and scores of other world leaders to combat this enemy of civilization, in order to absolutely decimate violent actors around the planet who use destructive and disruptive means and methods other than political discourse to settle their differences, so too must he begin to now do, with regards to internet terrorism, slander, libel, defamation, terrorist threats, incitement to violence, and targeted harassment online.

As President Trump knows only too well, as he is a prime target of the Deep State/Oligarch/Global Terrorist Network online, with their relentless attacks on him, his wife, his family and his administration, when he developed the term “Fake News,” he is also the only one who can finally find the balance between the U.S. Constitution First Amendment and terrorism carried out online.

Trump has repeatedly promised to “look at the libel laws,” but what he should specifically look at is how to hold websites, their hosts, and their advertisers responsible and liable for their egregious taking advantage of the broad based immunities and protections afforded by the Communications Decency Act of 1996 Section 230 (aka “CDA 230“), drafted and passed by U.S. legislators such as Ron Wyden and Christopher Cox, which literally opened the floodgates to trillions of dollars of damage to individuals, small and large business, domestic and global relationships, national security, and global cohesion.

True enough, freedom of speech is paramount, and essential to the American constitutional experiment – but after 20 years of this “wild west” of internet speech, we know and have learned many things.

Various organized criminal enterprises have sprung up all over the world, extorting and blackmailing innocent people and businesses to pay them exorbitant amounts of money to remove/challenge anonymous, cowardly, false, defamatory, slanderous, libelous, terroristic, and incitement to violent threats online, always hiding behind the immunity and protection afforded by CDA 230 to both their own mafia-like “reputation management” websites, their web hosts, and their advertisers.

Much has also been revealed about the “ties” by and between these “reputation management” websites, and the offending websites themselves, so that if one pays one of these extortionate websites for “arbitration” or “challenging offending posts,” one will suddenly find a dramatic increase in the exact same or similar postings on other offending websites, thus increasing damages, exposure, and of course, the “costs” attendant to getting these offensive and threatening posts off of the internet.

This is a classic racketeering enterprise, and each and every country has their own rules and laws governing such type of criminal activity, and in the United States, the most lax and forgiving of all of these types of crimes, it is called “RICO,” or the Racketeering Influenced Corrupt Organization act.

This RICO law is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization.

The RICO Act focuses specifically on racketeering, and it allows the leaders of a syndicate to be tried for the crimes which they ordered others to do or assisted them in doing, closing a perceived loophole that allowed a person who instructed someone else to, to be exempt from the trial because they did not actually commit the crime personally.

Under RICO, a person who has committed “at least two acts of racketeering activity” drawn from a list of 35 crimes – 27 federal crimes and 8 state crimes – within a 10 year period can be charged with racketeering if such acts are related to an “enterprise.”

Those found guilty of racketeering can be fined up to $25,000 and sentenced to 20 years in prison per racketeering count.

In addition, the racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of “racketeering activity.”

This statute could easily be used against most of the “reputation management” websites which, like the Mafia, literally aid and abet, if not “create” the online internet threats, targeting, harassment, incitement to violence, and terrorist threats in order to then charge a hefty “fee” to either “eradicate” or “combat” those self-created threats.

Indeed many business, banking, financial, communication, personal, and professional relationships can easily be discovered by and between these “reputation management” organized crime websites, and the other “offending websites” containing such illegal and unethical content.

The problem is that since at least 1996, the “Deep State” has successfully used the protections afforded by the CDA 230 to target their enemies online, discrediting and hobbling them at will, while simultaneously being able to weather the proverbial storm against themselves, because they are directly connected to the international central bankers with unlimited amounts of cash to survive personal or professional online destruction, while their targeted Deep State enemies are, by definition, “swimming upstream” against them, struggling barely to survive.

This is by no means a fair fight, and hundreds of millions of “dead” businesses and individuals have washed up on the shore in their wake, while Deep State connected individuals and businesses always seem to stay afloat.

So if President Donald Trump, arguably the greatest victim of the above referenced type of global online criminal activity on behalf of the Deep State, which is still relentlessly trying to destroy him, his family, his administration and his legacy, as well as average American individuals and businesses that he professes to care so much about, and if he is truly serious about “looking at the libel laws” as he has repeatedly stated/promised, then perhaps this is the best place for him to start.

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Americas

A Review of Last Week in Trump-ville: TPS, DACA, Immigration, And Excrement Metaphors

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On TPS …

On January 8, 2018, the Trump administration ordered the end of Temporary Protected Status (TPS) designation for El Salvador, putting the lives of 200,000 Salvadorans in the balance.

The incident didn’t spark much outrage, as the media was busy relishing and reporting the tidbits from Michael Wolff’s exposé of Trump team – ‘Fire and Fury.’

The Salvadorans were granted TPS in 2008 by president George W. Bush in the light of the disastrous earthquake that rocked the Central American nation in 2001. A review of the eligibility requirements for TPS pops up some questions. One of the requirement states that applicants must “have been continuously physically present (CPP) in the United States since the effective date of the most recent designation date of your country …” Note the ambiguity the statement leaves around the immigration status of the individual.

Indeed, both legal and illegal immigrants can apply for TPS. In fact, an illegal alien’s stay in the US becomes legal post acceptance into the TPS program. While the switching of statuses doesn’t do away the past immigration law violation, it certainly makes a mockery of the rule of law.

Also, it’s important to note that while TPS enrollees may seek employment and avail themselves of some benefits, there is no pathway to citizenship or green card under the program.

El Salvador’s infrastructural condition has improved since the earthquake devastated the nation at the start of the 21st century. And it is high time to put the ‘T’ in TPS into action and send the immigrants back, lest TPS comes to be construed as a means to prolong stay in the US until such time as a leftist legislature decides to amend the law to hand out citizenships and grow their voter base.

Critics of termination cite burgeoning gang violence as a justifiable reason to extend TPS to Salvadorians. But internal security issues, barring civil war, are not qualifying factors. After all, there isn’t a dearth of countries stricken with violence, gang crimes, and lawlessness. The US isn’t and cannot be the care center of the world.

Many news publications have used the word ‘deportation’ to describe Trump administration’s termination order. Deportations are applicable to unlawful immigrants/residents and are effective immediately. The Salvadorans have until September 2019 to get their papers in order and leave, post which they will be ‘deported.’ It’s important to call out the media spin.

Some more facts to be considered while developing an opinion on termination of TPS are encapsulated in this report by Center for Immigration Studies. Per the report, in 2014,

  • Educational Attainment:54 percent of Guatemalan immigrants (ages 25 to 65) have not graduated high school. The figure for Salvadorans is 53 percent, and for Hondurans, 44 percent. The corresponding figure for native-born Americans is 7 percent.
  • Welfare Use:57 percent of households headed by immigrants from El Salvador use at least one major welfare program, as do 54 percent of Honduran households, and 49 percent of Guatemalan immigrant households. Among native households it is 24 percent.3
  • Poverty:65 percent of Honduran immigrants and their young children (under 18) live in or near poverty (under 200 percent of the poverty threshold). For Guatemalan and Salvadoran immigrants and their children, it is 61 percent. The corresponding figure for natives and their children is 31 percent.4

The Salvadorans in the US, among other Central American populations in the US, compared to the natives performed poorly in schools, endured poverty at higher levels, and were more dependent on welfare programs.

In addition, around 70 percent of Salvadorans in the US lacked a degree of English proficiency that would enable them to pursue higher education and get better jobs.

Together the above factors produce a population employed predominantly in blue collar jobs that have been seeing a steady decline in wages not just for native born Americans, but also for recent immigrants.

While the crime rates among Salvadorians in the US might have been lower than native-born Americans, this cannot be a justification for an extended stay, when their chances of climbing up the socio-economic ladder are slim. Sun-setting the TPS is the right move, and while several people will be re-displaced, the TPS was temporary and was never supposed to provide a permanent home.

On DACA, Immigration, and The Wall …

Trump held a televised meeting with select senate and house members to discuss DACA, border security, and comprehensive immigration reform.

He seemed much more confident, composed, and coherent in his articulation. The last two descriptors are important because these are traits that he seems to miss out quite often, giving hatchet-job Internet news outlets fodder to ruminate on.

The meeting started with the sense that DACA and border security were inextricably tied and that a deal on DACA should come with assurances on border security in a quid-pro-quo fashion.

Trump seemed firm on his demand for funding for the border wall with Democrats trying to talk him into divorcing it from DACA bill. The inextricability seemed to change towards the end when the president settled on a step-by-step approach towards DACA and border security, handling them one at a time.

Notwithstanding his amenability to Democrat persuasion, when quizzed by a reporter in the room over whether he will be stubborn about the border wall, he responded with a firm ‘Yes!’ In the light of all this, ‘ambivalent’ is the best way to describe the fate of the border wall.

As for immigration reform, Trump seemed ardent on doing away with chain migration and the diversity lottery – two of the most counterintuitive and counterproductive channels of immigration.

The overall meeting had a cheery and sanguine note to it, although, the Democrats, given their recidivism towards obstructionism, cannot be counted on.

On ‘Shitholes’ …

Yes. Much of the third world is miserable, insufferable, and provides its residents with shockingly low standards of living and progress. The first world can’t be blamed for the quagmire the third world finds itself moored in.

Although, it wasn’t appropriate for the POTUS to be a plain-speaker in describing certain nations in an official setting with members of the opposition, the metaphorical epithet is fitting.

As expected, Trump went into full-defensive mode on twitter, lambasting the Democrats, and endangering the prospects of DACA and border security. I am not sure whether Democrats will use this as an excuse to throw their hands in the air and withdraw from negotiating on DACA. In any case, the deadline for DACA termination is arriving fast and if the Dems don’t do something now, it’s their hands that will be bloodied, as the president made it very clear at the meeting that he will sign into law whatever Congress places on his desk.

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