To Quote the Joker, ‘It’s Simple… We Kill the BAT.’

April 04, 2017

To Quote the Joker, 'It's Simple… We Kill the BAT.'

Remember that talk that compared to repeal-and-replace, tax reform was going to be easy? Yeah, not if you include the "border-adjustment tax." Under the proposal, U.S. companies that import goods from foreign suppliers would no longer be allowed to deduct those purchases, so a new tax would be effectively implemented on all imported goods, including crude oil.

A group of businesses opposed to the tax, Americans for Affordable Products, gathers comments from just about every big-name conservative economic thinker criticizing the BAT proposal:

Americans For Prosperity's Tim Phillips:

We are against this approach because in the end, it is making life more expensive for all Americans, especially low and fixed-income families. Instead of picking winners and losers, Congress should pursue a simple, pro-growth approach that lowers rates, eliminates loopholes, simplifies the tax code, and above all, protects consumers from new tax increases. ("AFP Issues Letter Opposing Border Adjustability Tax," Americans For Prosperity, 1/27/17)

Koch Industries' Mark Holden:

"[The Border Adjustment Tax is] just a tax that's going to be passed on to people who shouldn't be taxed," said Mark Holden, who is now co-chairman of the Koch Seminar Network. He indicated the issue could be a key one for evaluating how strongly to support lawmakers in future elections. "It will be one of the things we look at," Holden said. "Sure, there aren't elections for a few years, but we're hopeful that we can get with leadership and get them to think of better ways to do this, and not pass on a huge new burden to consumers." (Jim Geraghty, "Koch Network Ready For A Fight On The Border Adjustment Tax," National Review, 1/28/17.

I hear that piece was really good.

CATO's Daniel Mitchell:

I don't like [the Border Adjustment Tax] because I worry it sets the stage for a value-added tax. I don't like it because it is designed to undermine tax competition. I don't like it because it has a protectionist stench and presumably violates America's trade commitments. I don't like it because that part of the plan only exists because politicians aren't willing to engage in more spending restraint. And I don't like it because politicians should not try to reinvent the wheel when we already know the right way to do tax reform … My advice is that Republicans abandon the border-adjustable provision and focus on lowering tax rates, reducing double taxation, and cutting back on loopholes. Such ideas are economically sounder and politically safer. (Daniel J. Mitchell, "Don't Ruin A Chance For Tax Reform With 'Border Adjustments,'"Foundation For Economic Education, 2/22/17)

CNBC's Larry Kudlow:

At this moment I am completely unconvinced about a Border Adjustability Tax. I don't want a planned economy where we're going to tax imports, which is going to blow the middle class, you know, Walmart shoppers and so forth, and subsidize exports. I want a market economy. We've lived this way for so many years. I don't want to emulate Europe. I don't want to emulate Asia, for example. I do agree with my friend Andy Busch that basically if we have the kind of business tax reform for large and small companies as Steve Moore and I wrote in the Journal today, that's going to fix a lot of these issues. We will become the most hospitable investment environment in the world for our own companies and for international companies. So, that's the way to fix it. (CNBC, 1/27/17)

Club For Growth President David McIntosh:

On the other side is the Club for Growth, a free markets advocacy group, which said the losers under a border tax will be average Americans. Former Rep. David McIntosh, the club's president, said the House GOP was wrong to chase after the goal of revenue-neutral tax policy. "Instead of trading one tax for another, the GOP needs to focus on cutting rates, and cutting spending and the size of government to match," he said. (Stephen Dinan, "GOP's Border Adjustment Tax Divides Conservatives, Pits House Against Trump," The Washington Times, 1/24/17)

Forbes Media's Steve Forbes:

In fact, an outbreak of Beltway-itis seems to be the only reasonable explanation for the Border Adjustment Tax fanatically being pushed by establishment Republicans in the House of Representatives. Make no mistake, the BAT will inflict American working families – the very people critical for Donald Trump's election – a whole lot of hurt … The BAT is absolutely unnecessary to attract businesses and capital to our shores. Cutting the profits tax to 15 percent and minimally taxing – or not taxing at all – overseas earnings would lead to a flood of money pouring into the U.S. Countless foreign companies would be eager to set up shop here … But on the BAT, Republicans have to cure themselves of this ailment if they want to rev up the economy – and avoid having to pursue other opportunities after next year's elections. (Steve Forbes, "Will Washington Republicans Succumb To Beltway-Itis?," FOX News, 2/22/17)

Former Reagan Economic Advisor Arthur Laffer:

I think the border tax adjustment is a major mistake to put into legislation. It's a huge bureaucratic mess to be honest with you. If it's done ideally, Maria, which would be a tax on imports matched by a subsidy on exports of the equal size, it would have the same effect as devaluing the currency which would lead to domestic inflation. But if you look at it, there will be all sorts of nuances, all sorts of political grab bags going in the process and I just think they should just do tax rate reductions, get rid of this pay-for notion and don't touch a border tax adjustment. It just makes no sense. (FOX Business, 2/9/16)

Any big-name conservative economic thinkers left?

The Overlooked Menace of 'Gangster Islam'

The one-year anniversary of a fairly significant terror attack came and went without much acknowledgement here in the United States. On March 22 of last year, three suicide bombers allegedly loyal to ISIS struck in in Belgium: two at Brussels Airport in Zaventem, and one at Maalbeek metro station in central Brussels. It was the deadliest terrorist attack in Belgium's history, killing 32 and injuring more than 300 people. The perpetrators were part of a cell that had perpetrated the November 2015 Paris attacks.

In British GQ, Robert Chalmers offers some fantastic investigative journalism about the intertwined and criminal jihadist undergrounds in that neighborhood of Molenbeek. (This article isn't online in an easily readable form, but you can see scans of the pages at the above link.) The sections I found most eye-opening were how the jihadist movement is flourishing not among the particularly religious but among the angry young men who are looking for a justification for their preexisting violent and aggressive impulses.

Belgium has produced more jihadist fighters, per capita, than any other Western European nation and is estimated to have dispatched around 520 recruits to the Islamic State cause in Syria.

Historically, Belgian jihadists have been more interested in [ISIS] than in religion. (Les Beguines, the café owned by the Abdeslam brothers, was closed on account of drug dealing.)

[Former Brussels Mayor Philippe} Moureaux told me, "we never had any evidence that the trouble eminates from the mosques." Geraldine, mother of Anis, said that her son never attended mosques but was radicalized by people "on the street." Her opinion was echoed by almost everybody I met in Molenbeek. "The people that do this," one source told me, "are more familiar with a bar stool than a prayer mat."

It is ten years since the journalist Hind Fraihi wrote her outstanding book Undercover in Little Morocco. Fraihi was one of the first to describe what she terms Molenbeek's 'synergy between crime and jihad" and has come to be called "Gangster Islam," practiced by small, secretive gangs who drew inspiration from marginal figures, such has Khalid Zerkani. Zerkani, a major organizer of radicalization in Brussels, was imprisoned for 12 years in July 2015. The case for the defense wasn't helped by the fact that Zerkani's laptop contained tracts with titles including: "Thirty-Eight Ways to Engage in Jihad" and "Sixteen Must-Have Items If You're Heading for Syria."

At Zerkani's trial, witnesses testified that he had taught small street gangs that "stealing from infidels is permitted by Allah."

Anecdotal accounts concerning such groups aren't hard to obtain, although, as ever in Molenbeek, people are understandably reluctant to speak on the record. One source told me that he knew of bounties of as little as 300 Euro being paid for the enlistment of naïve recruits like Olivier's son Sean. The networks responsible, he said, are dominated by a Tunisian mafia. (Zerkani has close links with activists in that country.) The funds, my source insisted, originate from what he would only describe as "a very wealthy gulf state."

Such organized gangs, Philippe Moureaux acknowledges, do exist. Could he have done more to prosecute them?

"When I was mayor," he says, "we recognized the beginnings of fundamentalism. What we didn't have were these organized networks."

Last month, a confidential Belgian government report declared that out of "more than 1,600 organizations and NGOs registered in the neighborhood, 102 were suspected of having links with crime, and another 51 were linked to terrorism."

I Can Remember When Chemical-Weapons Attacks Were a Big Deal

Speaking of Syria, yet another report of a serious chemical-weapons attack:

Dozens of people, including at least ten children, have been killed and more than 200 injured in a suspected chemical attack in northern Syria, multiple activist groups claim.

Airstrikes hit the city of Khan Sheikhoun in Idlib province at 6:30 a.m. Tuesday, giving off a "poisonous gas," according to Anas al-Diab, an activist with the Aleppo Media Center.

The casualties reportedly came as a result of asphyxiation caused by exposure to an unknown gas or chemical agent.

Longtime readers of this newsletter know that I find the world's nonchalance about the use of chemical weapons to be one of the darkest and most disturbing developments of the age. It is not exaggerating to say that within our lifetime, the position of the U.S. government was that any use of chemical weapons against our forces would be met with a nuclear response:

After the Persian Gulf war, General Avihu Ben-Nun, commander of the Israeli Air Force, concluded that "the fact that [Saddam Hussein] didn't launch chemical weapons against us was only because he feared our retaliatory response."

The threat of Israeli retaliation was not the only deterrent to Saddam's use of chemical-armed rockets. On 14 August 1991, Defense Secretary Cheney stated that "[i]t should be clear to Saddam Hussein that we have a wide range of military capabilities that will let us respond with overwhelming force and extract a very high price should he be foolish enough to use chemical weapons on United States forces." The American government reportedly used third-party channels to privately warn Iraq that "in the event of a first use of a weapon of mass destruction by Iraq, the United States reserved the right to use any form of retaliation (presumably up to and including nuclear weapons)."

If you hit us non-conventionally, we'll hit you non-conventionally, and our non-conventional weapons will leave your neighborhood a pile of radioactive rubble. This was the philosophy of deterrence; this was, before the phrase became a bitter punch line, a "red line."

The Syrian Civil War just entered its sixth year. Roughly 465,000 people are dead; the war has generated 5 million refugees.

ADDENDA: Over on the home page, a look at why our politicians are so divided: they can't work together to address the problem because they've concluded the opposition party is the problem.