Tag: brazil

Is Hillary Clinton Ignorant about Geography, Fiscal Policy, or Both?

Hillary Clinton recently opined that Brazil was a great role model for the idea of soaking the rich with higher tax rates. She didn’t really offer evidence for that specific assertion, but Politico reports that she did say that “Brazil has the highest tax-to-GDP rate in the Western Hemisphere and guess what — they’re growing like crazy.”

I’m not sure if “growing like crazy” is an accurate description, particularly since poor nations normally have decent growth rates because they start from such a low baseline.

But let’s excuse that bit of rhetorical excess and focus on the really flawed portion of her remarks.

Contrary to her direct quote, Brazil does not have the “highest tax-to-GDP rate in the Western Hemisphere.” It may have the highest tax burden in South America. And it may even have the highest tax burden in all of Latin America, but its overall tax burden of about 24 percent of GDP is slightly below the aggregate tax burden in the United States.

I suppose I should issue a caveat and say there’s a very slight chance that the recession has temporarily pushed U.S. tax receipts as a share of GDP below the Brazilian level, but that isn’t apparent from the IMF data. Moreover, there’s no doubt that the tax burden in Canada is significantly higher than the Brazilian burden.

So Secretary Clinton either was unaware that the United States and Canada are in the Western Hemisphere, or has no clue how to read fiscal statistics.

But let’s suspend reality and assume that Brazil has a higher tax-to-GDP ratio. Would that somehow be proof that Brazil is a role model for class-warfare taxation? There is no precise definition of that term, to be sure, but high tax rates on the rich presumably are a necessary component of any class-warfare system. Yet Brazil’s top tax rate is 27.5 percent. That’s not exactly a low-rate system such as Hong Kong, and it’s 27.5 percentage points higher than the zero-percent rate in the Cayman Islands, but it also happens to be significantly lower than the 35 percent (soon to be 39.6 percent) rate in the United States. If that’s class warfare, sign me up for the Brazilian approach.

I suppose it’s possible that Brazil’s top tax rate recently has been boosted, but that didn’t show up in a Google search. And even if the rate was just increased, that would hardly be proof of Secretary Clinton’s strange hypothesis that high tax rates and/or high tax-to-GDP rates are a magical formula for growth. That would require looking at future economic performance with the higher top tax rate, not the recent growth rates with the 27.5 percent top tax rate.

But pointing out Secretary Clinton’s mistakes seems a bit rude and I do like to be a gentleman, so let’s at least give her points for consistency. Earlier this year, she urged higher tax rates on the so-called rich in Pakistan, so at least she doesn’t discriminate in her desire to punish success.

The Four Congressmen of the Cotton Subsidy Apocalypse?

Yet another show of that rare commodity, bipartisan efforts to reduce the size of government today. Four members of the House—two Republican and two Democrat—have sent a letter to President Obama, calling on him to reverse the insane policy of bribing Brazilian farmers with subsidies in an attempt to correct, in accordance with the perverse two-wrongs-make-a-right school of logic, for  illegal U.S. subsidies. (There were other questionable parts of the deal with Brazil).

Barney Frank (D, MA), Ron Kind (D, WI), Paul Ryan (R, WI) and Jeff Flake (R, AZ) make compelling arguments for finding a better and more permanent  solution to the dispute than the current (dodgy) deal with Brazil, including arguments about fiscal responsibility, the adverse effects of distorting markets in this way, and the implications for the U.S. economy of continuing to operate the cotton program in its current form.

They also cleverly allude to President Obama’s emphasis on enforcement in his trade policy, pointing out that enforcement runs two ways:

Should we fail to effectively reform [the cotton] program now, American businesses and workers wil pay the price because we refused to write a law that complies with our international obligations. We cannot expect our trading partners to play by the rules if we are not willing to do the same. [emphasis added]

The press release from Rep. Flake’s office contains some great quotes, too. Flake, for example, says, “This proposal takes our federal farm subsidy policy from the impractical to the absurd.” 

But I’ll give the last word to Rep. Frank, who has this gem to offer:

[T]he Obama administration apparently feels compelled to preserve our right to subsidize American cotton farmers by extending that subsidy to Brazilian cotton farmers.  People looking for an illustration of the meaning of the phrase, ‘from bad to worse,’ need look no further.

Ms. Weaver Goes to Washington

Today in Washington: actress Sigourney Weaver testifies before the  Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard of the Senate Committee on Commerce, Science and Transportation Committee on the topic of ocean acidification. Because, you know, she played an environmental scientist in Avatar. It’s the best fit since Jane Fonda, Jessica Lange, and Sissy Spacek – all of whom had played farm women – testified on America’s agricultural crisis.

Congress doesn’t have time to vote on presidential nominations. It doesn’t bother engaging in serious oversight of presidential power and civil liberties abuses. It looks at the ceiling and whistles as the national debt approaches Greek levels. But members of Congress have time to listen to an actress discuss the topic of ocean acidification.

This seems like a topic for “Really!?! with Seth and Amy” on Saturday Night Live. Really, Senate Commerce Committee? You think Sigourney Weaver has important information that you need to know? Really? And you’re not just doing this to get yourselves on television? Really!?! And you think the most important thing members of Congress could be doing today is getting their pictures taken with Sigourney Weaver? Really!?!

Of course, this is not just a one-day thing for Sigourney Weaver. She also traveled this month to Brazil to try to stop the construction of a dam. Because who would know better than a Hollywood-Manhattan actress how to make tradeoffs between energy needs and environmental risks in Brazil?

Now let me just say that I’m not arguing that ocean acidification isn’t an important topic. And I’m not criticizing Avatar or its defense of property rights. I’m just questioning whether Sigourney Weaver, Sissy Spacek, Jeff Daniels, Nick Jonas, and the Backstreet Boys have the kind of expertise that Congress ought to draw on in deciding how to run my life. Or then again, maybe planning the economy and running other people’s lives is farce at best, and Congress should just hold hearings with Will Ferrell and John Cleese.

Peterson (Finally) Changes His Tune

I’ve written before about Rep. Collin Peterson’s (D, MN) disdain for the World Trade Organization, and its rulings against U.S. farm programs. However, in launching his 2012 Farm Bill listening tour, the Brownfield blog reports that he sees that perhaps some changes might be necessary after all. And, lo and behold, he cites the WTO rulings as the reason:

One of the key issues [in the 2012 Farm Bill] will be what to do about the way that cotton farmers are subsidized. The committee’s chairman, Rep. Collin Peterson, D-Minn., said today that the cotton program will have to be overhauled in the wake of Brazil’s successful challenge to the subsidies at the World Trade Organization. The Obama administration agreed to change the program in a deal to avert retaliation against U.S. exports to Brazil. [link added]

Subsidies for cotton currently mirror those for corn, soybeans, wheat and other commodities, but there’s no reason why they have to be the same for each crop in the future, said Peterson. “In the past we’ve tried to have a one-size-fits-all approach, but maybe that’s not the case in the future. I’m willing to consider that,” he said. “If we don’t address it, we may be back in the soup again with potential retaliation issues.” [emphasis mine]

Finally, the penny drops.

Deal or No Deal?

It appears that the United States has reached a temporary deal with Brazil over U.S. cotton subsidies, which were deemed illegal under world trade rules many years ago. (Here’s Cato adjunct scholar Dan Sumner on the case and its implications. Bloomberg’s Mark Drajem and the New York Times’ Sewell Chan have more details on the deal.)

This comes not a minute too soon from the U.S. perspective: the deal was reached just one day before Brazil was to begin imposing over $800 million worth of tariffs and WTO-approved intellectual property rights violations against American firms in retaliation for U.S. intransigence in complying. (Snarky aside: where’s your commitment to ”trade enforcement” now, Mr. Obama?)

What’s in the deal, you ask? Well, it is certainly not, as might have been hoped, an end to all cotton subsidies immediately. What it does include are some “interesting” sweeteners to Brazil. First, over $147 million in “technical assistance” to Brazilian cotton growers. In an excellent blog post at SFGate, Carolyn Lochhead makes the obvious-to-everyone-except-policymakers point that now taxpayers are paying for support to Brazilian farmers as well as American ones. 

Second, the United States will make some changes to the export subsidy-esque parts of the cotton program, and promise to address some of the broader issues in contention as part of the next farm bill. (I’ll believe that when I see it.)

The third element, though, is pretty worrying. Apparently the United States has also agreed to evaluate whether a certain area of Brazil is “disease free,” so that farmers from that area can export their beef to the United States.  The reason why I find that a concern is that under the terms of the WTO Agreement on Sanitary and Phytosanitary Measures, recognizing disease-free areas on a scientific basis is an obligation the United States has to WTO members.  The area is either disease free or it is not, and the United States should not be using it as a compensatory tool (nor should Brazil accept it as such) . The International Food and Agricultural Trade Policy Council’s Carlo Perez del Castillo (a former Uruguayan trade minister) put it well, if subtly: “[P]ublically linking what should really be a scientific issue of whether a specific state in Brazil is or is not free of certain animal diseases, to a more political agreement such as this one on cotton, is rather unusual.”

I’m not a trade lawyer, and I have no inside knowledge of Brazil’s long-term legal strategy here. But I sure hope this isn’t the end of the saga. If they have caved in to (1) a bribe that puts money in the hands of U.S. farming consultants, and out of the hands of U.S. taxpayers, (2) a good dose of ”your cheque is in the mail,” and (3) a final insult of “OK, as a special favour to you, we’ll do what we were supposed to have been doing all along,” then it’s a sad day for the WTO’s dispute settlement system.

My good friend, ex-Catoite, trade lawyer, and all around smart fellow Scott Lincicome offers his excellent-as-usual perspective on the deal here.

Eat, Pray, Love, Marry—as Long as You’re Heterosexual

Elizabeth Gilbert, the bestselling author of the memoir Eat, Pray, Love, is back with a new book, Committed: A Skeptic Makes Peace With Marriage. In her earlier book Gilbert reflected on her broken marriage, her travels around the world “looking for joy and God and love and the meaning of life,” and her determination never to marry again. In the new book we learn that she surprised herself by meeting a man worth settling down with, a Brazilian living in Indonesia. So they became a couple and settled near Philadelphia, with Jose Nunes regularly leaving the country to renew his visitor’s visa.

But then came a legal shock:

She was in the early stages of research for that book when Nunes was detained, after a visa-renewing jaunt out of the country, by Homeland Security Department officials at the Dallas-Fort Worth International Airport. Popping in and out of the country as he’d been doing was not legal, Nunes was told, and if he wanted to stay permanently they would have to marry.

Gilbert didn’t want to marry. She and Nunes spent 10 months traveling in Asia. But then, reading about marriage, writing about her aversion to marriage, getting closer to her new partner, she decided to marry. And so they did. And they lived happily ever after in the New Jersey suburbs.

A happy ending all around. As long as you’re heterosexual. Because, of course, if you’re gay, the U.S. government will tell you that your life partner from Brazil may be allowed to visit the United States, but he won’t be allowed to stay. And guess what? He could stay if you were married, but you can’t get married. Catch-22. And even though you could now marry in some foreign countries and some American states and the District of Columbia, the Defense of Marriage Act still prevents the federal government – including its immigration enforcers – from recognizing valid marriages between same-sex partners.

Is this just a theoretical complaint? As a matter of fact, not at all. At least two well-known writers have recently faced exactly the same situation Gilbert did: a Brazilian life partner who couldn’t live in the United States. Glenn Greenwald, a blogger, author of bestselling books, and author of a Cato Institute study on drug reform in Portugal, has written about his own situation and that of others. Like Greenwald, Chris Crain, former editor of the Washington Blade, has also moved to Brazil to be with his partner.

Carolyn See, reviewing Gilbert’s book in the Washington Post, wrote, “The U.S. government, like a stern father, proposed a shotgun marriage of sorts: If you want to be with him in this country, this Brazilian we don’t know all that much about, you’ll have to marry him.” A shotgun marriage, sort of. But at least the government gave Gilbert a choice. It just told Greenwald and Crain no.

This unfairness could be solved, of course, if the government would have the good sense to listen to Cato chairman Bob Levy, who wrote last week in the New York Daily News on “the moral and constitutional case for gay marriage.” And it may be solved by the lawsuit seeking to overturn California’s Proposition 8 that is being spearheaded by liberal lawyer David Boies and conservative lawyer Ted Olson, writes Newsweek’s cover story this week, “The Conservative Case for Gay Marriage.” Until then: eat, pray, love, marry – as long as you’re heterosexual.

Lula’s Diplomatic Embarrassment in Honduras

One of the big losers from yesterday’s successful election in Honduras has been Brazil’s president Luiz Inácio Lula da Silva, who demonstrated that under his presidency, Brazil is not ready to play a positive leadership role in the hemisphere.

Not only did Lula seem to be complicit in smuggling deposed Honduran president Manuel Zelaya into the Brazilian Embassy in Tegucigalpa—an irresponsible move that risked the possibility of major confrontations and bloodshed in that country—but he stubbornly refuses to recognize yesterday’s election as legitimate.

Lula’s grandstanding has nothing to do with a supposed commitment to democracy, of course. After all he continues to lavish praise on the Castro brothers’ dictatorship in Cuba, has said that Hugo Chávez is the best president Venezuela has had “in one hundred years” and was one of the first world leaders in congratulating Mahmoud Ahmadinejad’s blatant rigged election in Iran. Indeed, the same week he announced his refusal to recognize the elections in Honduras, he gave Ahmadinejad a warm welcoming in Brasilia.

Some had hoped that due to its size and recent assertiveness in world affairs, Brazil could play a constructive role in Latin American affairs. It’s quite clear that this won’t happen under Lula’s watch.

Instead, Lula continues to be much more responsible on domestic matters—supporting market democracy in Brazil—and reckless in foreign affairs. Or, as Cuban writer Carlos Alberto Montaner says, a sort of Dr. Jekyll y Mr. Hyde.