China chips away at U.S. dominance

We are about half way through President Trump’s twelve day visit to Asia. The main event, another meeting between Trump and President Xi Jinping, underscores the importance of how both nations view China-U.S. relations. There is a high probability that China will gain as much as the U.S. in these talks. So far, it has been a year of “wins” for China. And much of these winnings are a result of Donald Trump’s “America First” policies. Trump’s proposed cuts to the United Nations, to foreign aid, to the rejection of the climate control accord, his withdrawal (both real and threatened) to various trade deals like NAFTA and the Trans-Pacific Partnership (TPP) a 12-nation trade deal that had excluded China, have all left an economic and political vacuum. As the U.S. turns inward, China is stepping in to replace the U.S. wherever possible. This year a 300-mile railway in Africa will hopefully revive trade and tourism. The rail line opens between the Kenyan capital of Nairobi and Mombasa, one of East Africa’s largest ports. The $13.8 billion project was financed by the Export-Import Bank of China. It is only one of a series of direct Chinese foreign investments worth over $200 billion. While we threaten to abandon our two largest trading partners (Mexico and Canada) unless the North American Free Trade Agreement (NAFTA) is renegotiated, China is busily rebuilding an ancient East-West trade route from the days of Marco Polo. Begun in 2014, with a $40 billion investment, a spider web of railways, ports and roads linking all the trading centers and key cities between London and Beijing is spreading...

Cracks in the House of Saud

Over the weekend, the government of Saudi Arabia announced multiple arrests of royal family members as well as other governmental officials. The official explanation was a new campaign to root out corruption, but many believe the raid was a power grab by the reigning Crown Prince Mohammed bin Salman. Corruption in Saudi Arabia is as common as sand. It is what makes the wheels run so global observers discounted that excuse. The assumptions ranged from a thwarted coup against the reigning family to a consolidation of power orchestrated by the heir apparent. As a result, gold jumped over $10/ounce, oil spiked 3% and investors held their breath expecting another shoe might fall in the days ahead. Police arrested 49 people, 11 princes, four ministers and dozens of former ministers in the pre-dawn hours of Sunday. There was a fatal shootout between police and one now-dead, Saudi prince, while a mysterious helicopter crash killed several other ministers and a high-ranking member of the royal house. As the smoke clears, it appears that the 32-year-old crown prince, Mohammed bin Salman, is cleaning house, consolidating power, and eliminating any real or imagined rivals within the country. One of those arrested, billionaire Alwaleed Bin Talal, is a well-known global investor with large holdings in American companies. King Salman elevated Prince Mohammed to heir apparent over other, more senior, princes in the royal line of succession, less than three years ago. That didn’t sit well among numerous cliques or factions within and outside of the family. The grumbling grew louder when the young prince announced his “Vision 2030.” A far-reaching economic policy which is...

Taketh care of your workers, and they will taketh care of you

  Employers have had it all their own way for a decade or more. They have been able to freeze wages, cut benefits, force overtime and even deny vacations with impunity. Now, for many, it’s time to pay the piper. There is a saying, “what goes around, comes around,” which means in this case that if you have spent years abusing your employees, the first company that offers them even the slightest uptick in benefits or salary will pick off your best workers in the time it takes to sign on the dotted line. I can walk into a company and tell you within seconds whether or not its employees are well treated and happy. I’m sure you can too. It shows on their faces, in their body language. Spend a little time talking to them, and you can easily measure a worker’s engagement, warmth and sense of shared purpose. As unemployment declines, wages rise, and good workers become critical to your bottom line, you might want to consider that happy employees are critical to on-going productivity and talent retention. It has been shown over and over again that the better the corporate culture, the more a company will earn. Don’t just take my word for it. The 100 best companies to work for, according to Fortune Magazine, consistently outperform their competitors in sales and profits. They also add new employees at five times the rate of the national average. Fortune uses a “Trust Index” which measures employees’ workplaces, including the honesty and quality of communication by managers, degree of support for employees’ personal and professional lives, and the...

The price tag of disaster

Over the past four weeks, just two hurricanes have cost the country upwards of $300 billion. This has easily surpassed the 2005 hurricane cost of $200 billion, which included Katrina, Wilma and Rita combined. The cumulative cost of weather continues to escalate and with good reason. Before you leap to the conclusion that global warming is the culprit, let me lay out some facts. Coastal storms are no more (or less) frequent an event now than they have been throughout our history. So what gives? The answer lies in population growth and demographics within our own society. A few years ago, a study funded by the National Oceanic and Atmospheric Administration, found that although hurricane intensity varied decade to decade, there has not been a spike in either the number or intensity of hurricanes, nor is there any evidence that global warming is the culprit. The study pinned the blame for the elevated level of property damage and deaths on the growing concentration of people and property in coastal hurricane areas. Today, well over 55% of the nation’s population lives in roughly 673 coastal counties. That’s over a 30% increase since 1980. The Southeast had the largest rate of change, with a 58% increase during that time. The Pacific region and the Northeast are also seeing the same phenomena. At this point, over half of us are crowded together on only 17% of America’s land mass (excluding Alaska). As a result, some catastrophe modeling companies predict that losses due to coastal storms will double every decade or so due to this trend. Where there are people, there is also...

America, the battered

Extreme weather and other climate disasters appear to be occurring far more frequently than we would like. The loss of life and economic damage also seem to be increasing. But does the data support those opinions, and if it does, what price do we pay for all of these perfect storms? Long-time readers may recall my columns of four and five years ago, where I examined the price tag the world (and the U.S.) pays for weather-related disasters. Given the fact that we are between hurricanes (Harvey has departed Texas, while Irma bears down on Florida); it may be a good time to educate new readers on the economic cost; not to mention the loss of life. In 2016, the U.S. suffered twice the amount of weather-related economic damage versus the prior year, according to the National Oceanic and Atmospheric Administration (NOAA). Weather and climate were responsible for 297 deaths and $53.5 billion in damage in 2016. Fifteen of these events cost at least $1 billion and covered 38 states. In 2015, the costs were $21.5 billion. If you look back even further, over the past six years, there were at least 66 extreme weather events in the U.S. with a price tag of $1billion or more. Weather-related events caused 1,628 fatalities and $297.6 billion in economic losses throughout 44 states. And now let’s see what has happened so far in 2017. As of July 7, there have been 9 weather events of $1 billion or more across the country, which caused 57 people’s lives. And then came Harvey. Estimates so far put the price tag at $190 billion...

How real is tax reform?

Amid hurricanes, floods and missiles, President Trump is trying to ramp up public support for a massive overhaul of the American tax system. However, it is not the public that needs convincing, it is Congress. The president is right about one thing; it has been over thirty years since the last tinkering with our tax system occurred. Back then, it took President Ronald Reagan and Tip O’Neil, the then Democratic Speaker of the House, over two years to implement the first changes. The most substantial change was in the tax code, where the top marginal individual income tax rate fell from 70.1% to 28.4%. There was also a major reversal in the tax treatment of business income. Over the Reagan’ years, the composition of federal tax receipts changed from higher income earners and capital gains to more payroll taxes and new investment taxes. What many conveniently ignore is that while taxes were cut for some, they were raised for others. In any event, nothing happened to taxes until August of Reagan’s second year (1981) when he lowered the windfall profits tax. It took two years before he rolled back corporate taxes and cut individual rates modestly. Later in the year, he also increased payroll taxes for Social Security and Medicare (undoing about a third of the former tax cut). It took even more time (the Tax Reform Act of 1986) before the substantive work of eliminating deductions, changing tax brackets, etc. actually occurred. That was in Reagan’s second term. Readers should take away two key points: the political horse-trading took time and was a bi-partisan effort. Do we really...