When Patriotism Clashes With Capitalism

by Michael Keane

In the United States of America, it is generally accepted that there is a high level of both patriotism and capitalism flowing through its citizenry. With the China trade issues like forced tech transfer taking more of a center stage, how to answer the question of what to do when patriotism and capitalism clash has been laid open and the country's business leaders are not stepping up, but are selling out.While there are many layers to the issue, corporate behavior has been less than stellar if you have a lens of citizen first, investor second.

There is an informative Frontline episode by Laura Sullivan on the China trade issues (link here). A central theme of the piece is how corporations have found themselves having trouble explaining the issues while also not wanting the solutions (aka tariffs and other action items) taken because of ramifications to profits, products and services from China. A recent letter from the shoe retailers industry (here) conveys this behavior. Granted, not all of the retailers are based in the US.

This is continuing a trend where corporations are willingly choosing capitalistic desires over the patriotic requirements necessary. This is likely because billions of bonus dollars and stock appreciation is at stake. The tax cuts was another item of corporate misbehavior. The Trump administration were all but assured that corporations would repatriate more revenue when they received their tax cut. That did not happen to any extent the administration was expecting and now our deficits are much higher because of it.

The China tariff standoff will not end until the government of the United States does some honorable, but profit costing actions. Our future competitive advantages are being monetized and sold by the current generation of business leaders in this country. If corporations are allowed to continue to influence government officials to create policy for profits over patriotism, we all will be in trouble. 

Two Tax Cut Views From The Wall Street Journal

by Michael Keane


As we continue to analyze the results of the tax cut, a curious thing happened. The Wall Street Journal put out conflicting articles on the subject. In one recent article this week written by Richard Rubin and Theo Francis (link here), the amount of money that has been repatriated by US corporations due to the changing tax law is currently at about 20% of the Trump Administration's expectations. This is presenting (or compounding) a higher risk for the US deficit in the next few years. But in an Opinion piece (link here) by Stephen Moore, the analysis is that the corporate tax cut is quickly and assuredly going to pay for itself and then some through GDP growth.

One of the areas that the US government expected to help nullify the hike in the deficit was corporate profit repatriation. If you follow the evidence presented in the first article, and current levels of repatriation continue, the government will not be able to deal with the deficit.If you follow the second article, the rise in GDP will do more than enough to cover the deficit initially created by the cut and overtake the issue of repatriation.  

Because the opinion piece came after the repatriation article, and filled with scattered non-evidence based data points, it might lead one to believe it was written as a rebut. But as always, time will tell where the Trump administration's economic decisions lead. In a thankful way, the decisions and moves have been big, so the results continue to be clearer.

KeaneVCC continues to follow this topic. Previous posts can be found here. 



  ** This blog is used for opinions and ideas and should not be used as a direction to act without doing your due diligence.**