Bushnomics

Bush is not a free trader. Like that's a surprise. But then, neither is Kerry: U.S. May Limit Chinese Imports: Restrictions Likely On Some Clothing By Peter S. Goodman

China asserts that these claims are unfair, maintaining that it is being made the scapegoat for the loss of U.S. manufacturing jobs. Bush's Democratic challenger, Sen. John F. Kerry (D-Mass.), has accused the White House of failing to champion the interests of American workers in the face of the Chinese juggernaut.

The Bush administration has already limited imports of some Chinese goods to stem surging volumes, capping shipments of bras, dressing gowns and knit fabrics. Last month the Commerce Department accepted a petition from textile producers seeking limits on socks from China. The next round of petitions will likely seek limits on knit shirts and twill trousers, Aldonas said.

At the center of the conflict is the lifting of the quota system that has limited the volumes of clothing that China can ship to the United States. The quotas have forced American buyers to import textiles and clothing from dozens of countries around the world. Once that system expires at the end of this year, buyers will be free to import as much as they like from wherever they choose.

Apparel industry executives say that will almost surely mean a dramatic reordering of global production, with huge volumes shifting to China, where labor is cheap, plentiful and productive. Raw materials are abundant. Trade groups in the United States assert that about 650,000 American textile jobs hang in the balance -- most of them in southern states that constitute key election battlegrounds such as North Carolina.

It's all about the votes, of course.

Then there's A boundless vision, alas, which argues "George Bush's economic agenda is full of bold ideas, but it does not add up"

Mr Bush's refusal to acknowledge any fiscal constraints means that, despite the bold ideas in his speech, it is hard to say what a second Bush term might really bring. Most policy wonks guess that tax reform will be a big issue, if only because the AMT mess will force more changes to the tax code. But what does Mr Bush mean by tax reform? Kevin Hassett of the American Enterprise Institute sees the possibility of "1986 Redux", when Mr Reagan pushed through a base-broadening, rate-reducing reform in his second term. Others worry that tax reform may involve no more than simplifying procedures so that millions of Americans no longer have to file tax returns. The truth is that no one—including Mr Bush—appears to know.

Meanwhile, Fred Bergsten writes on The risks ahead for the world economy. At least one of them will lose.

And finally there's Report Cited Drawbacks to Tax Reform: Treasury Study Examined Simplifying U.S. System By Jonathan Weisman

Treasury economists were unambiguous in calling for the reform of a tax system that they said has grown needlessly complex, economically inefficient, unpredictable and unfair.

But they identified serious drawbacks -- both economic and political -- with each of the five reform proposals they drafted, especially a "flat consumption" tax that shifts the tax burden from savings and investment to wages and spending.

"The transition accompanying any fundamental tax reform may be disruptive and produce windfall winners and losers," the report said, but "the economic benefits of any fundamental tax reform are uncertain."

Moreover, it added, "Any reform is likely to have vocal losers and largely silent winners. In other countries, adoption of a consumption tax has led to election losses for the incumbent party."

Finally, the study said, fundamental simplification of the tax code would "run counter" to Bush's other tax policy goals. The president doubled the child tax credit from $500 to $1,000 and has championed a significant expansion of tax credits for charitable donations, proposals he wants Congress to make permanent.

But such "social policy goals" are precisely what has complicated the tax code, the Treasury said. Recent studies have suggested three successive tax cuts signed by Bush have made the tax code significantly more complex. And with the political constituencies of such tax credits now firmly entrenched, "it is not clear that widely popular preferences in the current tax system . . . can be eliminated or even reduced," the Treasury found.

The Treasury report documents the trade-offs inherent in tax policy. A tax system can be progressive, for example, and tax the wealthy at a higher percentage than low-income families, or be used to encourage social objectives such as homeownership, affordable child care or charitable giving. But such policies run counter to other goals of tax policy, such as simplicity and economic efficiency.

For instance, the study examined the "flat tax," the long-held proposal of many economic conservatives to scrap the graduated income tax for a flat rate that is applied to earnings but exempts interest income, capital gains and dividends. According to the report, such a system would increase economic efficiency and would eliminate what Treasury economists see as a "disincentive to save and invest."

"But because it would effectively exempt most capital income from taxation, it would necessarily reduce the tax burden of high-income individuals," the study said.

Similarly, creating a "value added tax" -- a sales tax levied on business as well as consumer transactions -- could eliminate the need for most taxpayers to ever file a tax return, but it "would likely lead to an increase in the tax burden on lower-income taxpayers."