Friday, March 27, 2015

What's So Bad About 7% Growth in China?


At 7% annual growth, real output doubles in 10 years, quadruples in 20, and grows eight-fold in 30.

In marked contrast, it takes 36 years to double output at 2% growth.

At 3% growth, output doubles in 24 years, quadruples in 48, and increases eight-fold in 72.

U.S. annual growth is likely to remain in the 2-3% range.

Even if these respective rates vary somewhat, China will be the unquestioned dominant power in Asia and the largest economy in the world within a few decades.  The notion of the U.S. containing China or trying to remain the dominant military power in Asia is seriously misguided.

In this regard, why not outsource security for the Middle East and the Strait of Malacca to China, Japan, and Korea, three countries that rely on energy imports from the Middle East?  Let them pay for it.  Make them stakeholders in Middle East stability.

Saturday, March 7, 2015

Republican Senators Lee and Rubio Timidly Talk Tax Reform

In their Wall Street Journal article of March 3, 2015, Republican Senators Mike Lee and Marco Rubio throw their tax reform hat into the ring.

They are on the right track in proposing a lower corporate tax rate of 25 percent and unlimited first-year write-off (expensing) of all new investment.

But they timidly propose to replace the current seven personal income tax rates (10, 15, 25, 28, 33, 35, and 39.6 percent) with two of 15 and 35 percent.  President Reagan’s Tax Reform Act of 1986 replaced a bevy of marginal tax rates peaking at 50 percent with two rates of 15 and 28 percent.

After twenty-nine years the best these two pro-growth Republican senators can do is add seven percentage points on Reagan’s top marginal rate.   Even the Democrat Bradley-Gephardt plan of 1986, which proposed three rates of 14, 26, and 30 percent, was more audacious.