By Donald Trump

I’d like to basically provide you with an update as to how we’re doing for the American people, and we’re doing a lot of great things. The unemployment rate is at a almost 17-year low. The stock market is soaring to record levels. We just hit a new high on Friday, and I think we’re hitting another new high today because there’s tremendous optimism having do with business in our country.

The GDP growth has reached more 3 percent last quarter, and other than the hurricanes, it would have done phenomenally on this. And I think we’ll still do very well, but something will have to be taken off because of the tremendous problems of the massive hurricanes that we’ve had to endure. And now, I guess, you can probably add the wildfires in California.

But the economy cannot take off like it really has the potential to do unless we reduce the tax burden on the families, businesses, and workers of our country. And we’ll be able to do that. I think we’re getting tremendous receptivity from the people. I hope we get the same receptivity from Congress. But we are getting tremendous accolades for what we’re doing having to do with both reform and with the massive tax cuts; it will be the largest tax cuts in the history of our country.

We’re one of the highest-taxed nations in the world right now, costing us millions of jobs and trillions and trillions of dollars. It’s time to restore America’s competitive edge and pass historic tax cuts for the American people. One point in GDP would be $2.5 trillion. Think of that — revenues. One point — if we go up from three to four. And when I began, we were in the ones, and now the last quarter we were at 3.2 percent. And we’re going up higher.

But if we went, as an example, from two to three or from three to four — talking about $2.5 trillion. And we’re also talking about many millions of jobs.

So we want to also reduce excessive government spending, and that’s what we’re working on at our Cabinet meeting today. As we head into next year’s budget season, I’ve asked Director Mulvaney to come up and find various savings in all of the departments that are gathered around the table, which is everybody. I need my Cabinet to work with Director Mulvaney to fight these spending cuts — fight for them — and make sure that they happen. And we want to make the departments as lean and efficient as possible, but at the same time, we’re going to need departments with lots of heart, lots of heart.

One thing we’re going to be looking at very strongly is welfare reform. That’s becoming a very, very big subject, and people are taking advantage of the system. And then other people aren’t receiving what they really need to live, and we think it’s very unfair to them. But some people are really taking advantage of our system from that standpoint, and we are going to be looking very, very strongly there for welfare reform. It’s going to be a very big topic under this administration, and it started already. And we have a lot of recommendations that we’re going to be making, and you’ll be hearing about them very shortly.

The other thing we’re doing that relates to people’s lives is the prescription drug prices are out of control. The drug prices have gone through the roof. And if you look at the same exact drug by the same exact company, made in the same exact box and sold someplace else, sometimes it’s a fraction of what we pay in this country — meaning, as usual, the world is taking advantage of the United States. They’re setting prices in other countries and we’re not.

The drug companies, frankly, are getting away with murder, and we want to bring our prices down to what other countries are paying, or at least close and let the other countries pay more. Because they’re setting such low prices that we’re actually subsidizing other countries, and that’s just not going to happen anymore.

This has been going on for years where our people are paying so much more for it. And I don’t mean they’re paying 2 percent more; I mean they’re paying double, triple, quadruple. They’re paying so much more that it’s very unfair to the United States, as usual.

Last week, I also sent a letter to Congress outlining my administration’s top priorities for immigration reform. This was a bottom-up effort driven by dedicated law enforcement professionals, and they took a big oath to protect our nation.

The Justice Department is doing a fantastic job on the border and with regard to immigration — more than anyone has ever seen before from a Justice Department. Thank you very much, Jeff. It’s really had an impact and a very positive impact, and now we’re going to take it to five steps further.

Our proposal closes dangerous loopholes and vulnerabilities that enable illegal immigration, asylum fraud, and visa overstays. The visa overstays are just — you’re talking about numbers that nobody even knows what they are, they’re so out of control. And we’re going to take care of that.

When you look at what’s going on in Mexico — Mexico is having a tough time right now in terms of crime. More than ever, we need the wall. We have drugs pouring through on the southern border; they’re literally pouring through. And we have to have the wall, and we’re going to have the wall. But if you look at just what’s happening on the other side of the border with the tremendous crime and the tremendous problems going on — we have a very good relationship with Mexico but there are a lot of problems, and we don’t want the drugs and we don’t want the crime, but we need the wall.

Recently, we’ve asked Congress to ensure that any proposed immigration reform ends chain migration; one person comes in and then brings everybody in his family in with him or her. And we have to end chain migration, which — it’s critical for creating a system that puts American workers and the American taxpayer first.

Last Thursday, I proudly nominated Kirstjen Nielsen to serve as Secretary of the Department of Homeland Security. I urge the Senate to quickly confirm this really tremendously qualified nominee, and I also ask for my other nominees.

We have approximately half the number of nominees confirmed by the Senate because, frankly, the Democrats have terrible policy — terrible — and they’re very good at, really, obstruction, the one thing they do well. Their policy is no good, and I’m not even sure they’re very good politicians because they don’t seem to be doing too well. That could be because of their bad policy. But they’re great at obstruction, and we have half the nominees that President Obama had at this time.

It’s very unfair. They’re taking everybody right after the final moment, in many cases confirming them with tremendous majorities. But they’re bringing them out purposefully. They’re bringing them right down to the final. We have people that are totally qualified, they’re going to pass, but they’re going to have to wait a long time because it’s total obstruction.

I can say the same thing with our judicial nominees, our judges. We have some of the most qualified people. The Wall Street Journal wrote a story about it the other day, that this is some of the most qualified people ever, and they’re waiting forever on line. And it shouldn’t happen that way. It’s not right, and it’s not fair.

I want to thank Acting Secretary Elaine Duke for her leadership in responding to the catastrophic storms that have struck our nation and our territories.

We’ve also issued a disaster declaration in California in response to the devastating wildfires like we’ve never seen. And we mourn the terrible loss of life. We have FEMA and first responders there. We have our military helping. It’s very sad to watch how fast — how rapidly they move and how people are caught in their houses. It’s an incredible thing — caught in their houses.

So we have a lot of people helping — the government in California — and we’ve made a lot of progress in the last couple of days. But we’re a little subject to winds and what happens with nature, but it’s been a — it’s a very sad thing to watch.

We also continue to pray for the victims of the mass shooting in Las Vegas. We cannot erase the pain of those who lost their loved ones but we pledge to never leave their side. We’re working with them very much so, with the FBI and law enforcement, Department of Justice. And it’s — I guess a lot of people think they understand what happened, but he was a demented, sick individual. The wires were crossed pretty badly in his brain — extremely badly in his brain — and it’s a very sad event.

In each of these tragedies, we’ve witnessed, however, a tremendous strength and heroism of our people. Each one of these tragedies that we’ve had, we have witnessed such strength and such heroism. When Americans are unified, no destructive force on Earth can even come close to breaking us apart. We have a lot of work to do on behalf of our magnificent country and our extraordinary citizens.

A great trust has been placed upon each member of our Cabinet. We have a Cabinet that — there are those that are saying it’s one of the finest group of people ever assembled as a candidate — as a Cabinet. And I happen to agree with that. Of course, I should agree with that. But I think we have an extraordinary group of people around this table.

This is a tremendous amount of talent, and I wouldn’t say I was necessarily looking to be politically correct, although I ended up being politically correct because that was the right thing to do, in every sense of the word. However, we have just gotten really, really great people. I’m very proud of them.

So we’re going to work with all of those things I just outlined and many more. You know we have the Iran Deal that right now is being studied, and I think a lot of people agreed with what I did. I feel strongly about what I did. I’m tired of being taken advantage of as a nation. This nation has been taken advantage of for many, many years — for many decades, frankly — and I’m tired of watching it.

But the Iran Deal was something that I felt had to be done, and we’ll see what phase two is. Phase two might be positive, and it might be very negative. It might be a total termination. That’s a very real possibility; some would say that’s a greater possibility. But it could also could turn out to be very positive. We’ll see what happens.

I thought the tone of the Iranian leaders was very modified, and I was happy to see that, but I don’t know if that means anything. They’re great negotiators. They negotiated a phenomenal deal for themselves but a horrible deal for the United States, and we’re going to see what happens.

The healthcare, as you know, is moving along. I knocked out the CSRs; that was a subsidy to the insurance companies. That was a gift that was, frankly, what they gave the insurance companies. Just take a look at their stocks. Take a look at where their stock was when Obamacare was originally approved and what it is today. You’ll see numbers that anybody — if you invested in those stocks, you’d be extremely happy.

And they have given them, you could almost call it, a payoff. And it’s a disgrace. And that money goes to the insurance companies. We want to take care of poor people, we want to take care of people that need help with healthcare. And that’s what I’m here to do. And I’m never going to get campaign contributions, I guarantee you that, from the insurance companies. But a lot of other people got them. If you look at the Democrats, take a look at that. Take a look at how much money has been spent by the Democrats and by the health companies on politicians generally. But take a look at the coffers of the Democrats.

So the CSR payments has actually brought Republicans and Democrats together, because we got calls — emergency calls from the Democrats, and I think probably the Republicans were also calling them, saying, let’s come up with at least a short-term fix of healthcare in this country. And the gravy train ended the day I knocked out the insurance companies’ money, which was last week. Hundreds of millions of dollars a month handed to the insurance companies for very little reason, believe me. I want the money to go to the people. I want the money to go to poor people that need it. I want the money to go to people that need proper healthcare, not to insurance companies, which is where it’s going as of last week. I ended that.

Steve Bannon is very committed. He’s a friend of mine, and he’s very committed to getting things passed. I mean, look, I have — despite what the press writes, I have great relationships with actually many senators, but in particular with most Republican senators. But we’re not getting the job done.

And I’m not going to blame myself, I’ll be honest. They are not getting the job done. We’ve had healthcare approved, and then you had the surprise vote by John McCain. We’ve had other things happen, and they’re not getting the job done. And I can understand where Steve Bannon is coming from. And I can understand — to be honest with you, Jon, I can understand where a lot of people are coming from because I’m not happy about it and a lot of people aren’t happy about it.

We need tax cuts. We need healthcare. Now, we’re going to get the healthcare done. In my opinion, what’s happening is, as we meet — Republicans are meeting with Democrats because of what I did with the CSR, because I cut off the gravy train. If I didn’t cut the CSRs, they wouldn’t be meeting. They’d be having lunch and enjoying themselves, all right?

They’re right now having emergency meetings to get a short-term fix of healthcare where premiums don’t have to double and triple every year like they’ve been doing under Obamacare. Because Obamacare is finished. It’s dead. It’s gone. It’s no longer — you shouldn’t even mention. It’s gone. There is no such thing as Obamacare anymore. It is — and I said this years ago: It’s a concept that couldn’t have worked. In its best days it couldn’t have worked.

But we’re working on some kind of a short-term fix prior to the Republicans getting together, maybe with some Democrats — again, it’s obstruction — but maybe with some Democrats, to fix healthcare permanently.

So I think we’ll have a short-term fix with Republicans and Democrats getting together. And after that, we’re going to have a successful vote because, as you know, we were one vote short, and I think we have the votes right now. Whether it’s through block grants or something else — block-granting the money back to the states, which does seem to make sense where the states run it because it’s a smaller form of government that can be more individually sensitive. So that will happen fairly shortly. As soon as we have the next reconciliation, I think we’ll get the vote for healthcare. I feel very confident about that. I think we already have the vote for healthcare.

Sadly, the Democrats can’t join us on that, which will be the long-term fix. But I do believe we’ll have a short-term fix because I think the Democrats will be blamed for the mess. This is an Obamacare mess.

When the premiums go up, that has nothing to do with anything other than the fact that we had poor healthcare — delivered poorly, written poorly, approved by the Democrats. It was called Obamacare.

But I think we’ll have a short-term fix and then we’ll have a long-term fix, and that will take place probably in March or April. We will have a very solid vote. It will be probably 100 percent Republican — no Democrats. But most people know that that’s going to be a very form of health insurance.

Bannon is campaigning against some Republicans running for reelection. I know how he feels. Depends on who you’re talking about. There are some Republicans, frankly, that should be ashamed of themselves. But most of them — I tell you what, I know the Republican senators; most of them are really, really great people that want to work hard, and they want to do a great thing for the American public. But you had a few people that really disappointed us. They really, really disappointed us. So I can understand fully how Steve Bannon feels. 




Trump will travel to Japan, the Republic of Korea, China, Vietnam, the Philippines, and Hawaii, from November 3-14, 2017. This update provides further details about the President’s itinerary.

The President’s travel will underscore his commitment to longstanding United States alliances and partnerships, and reaffirm United States leadership in promoting a free and open Indo-Pacific region.

On November 3, the President will visit Hawaii and receive a briefing from the U.S. Pacific Command. He will visit Pearl Harbor and the USS ARIZONA Memorial.

The President will commence his visit to Asia beginning with Japan on November 5. While in Japan, President Trump will meet with American and Japanese service members, and participate in bilateral meetings with Prime Minister Shinzo Abe, who will also host the President for a meeting with the families of Japanese citizens abducted by the North Korean regime.

During his visit to the Republic of Korea on November 7, the President will participate in a bilateral meeting with President Moon Jae-in and visit American and South Korean service members. The President will speak at the National Assembly, where he will celebrate the enduring alliance and friendship between the United States and the Republic of Korea, and call on the international community to join together in maximizing pressure on North Korea.

It’s very difficult to understand what exactly is going on with China-North Korea relations. So far, the central government in China has been accepting a lot of exports from North Korea and most of the money that comes in from selling those exports into China is probably fueling the military activities of North Korea. If this is something that the central Chinese government can control, it will be rather difficult, because they want the status quo.

China wants things to continue like they are, because North Korea is a buffer state and maintaining status quo prevents a lot of possible internal problems in China. The kind of regions in which China borders on North Korea are largely Korean-speaking, inside China. And those people may not be following exactly what the central government says. So, it could be that the U.S. is expecting the central government to do something that internal to China is more difficult than you think.

The Chinese concern is about not wanting chaos in North Korea. A disorderly collapse is a bad thing for China. The refugee flows are real. The good news, however, is that North Korea is increasingly becoming an embarrassment to China and this may result in China taking some hard steps. China’s fed up a little bit with Kim. It may actually follow the sanctions this time a little better.

It’s going to be really difficult to get the North Koreans to cease building their nuclear capacity. Kim is using the whole nuclear situation to tighten his control over the country. Kim has used standing up to the Americans as a way of showing that they have national pride. In some ways, the real bellicose nature of this back-and-forth language has been a godsend. It’s made him look as prominent and statesmanlike as anybody else in the world. Getting denuclearization is going to be well-nigh impossible without regime change. And regime change is awfully risky. A possible solution is to offer to reduce some sanctions in exchange for North Korea’s reducing its nuclear capabilities.

The nuclear threat from North Korea is destabilizing the whole region. The uncertainty in the U.S. is encouraging Japan to deal with its defense issues more on its own. The current Prime Minister, Shinzo Abe, would really love to change the constitution, to codify their ability to have an army again. But, this situation is not going to make the rest of East Asia happy, to see Japan become even more strong, more militaristic.

On November 8, President Trump will arrive in Beijing, China for a series of bilateral, commercial, and cultural events, including meetings with President Xi Jinping. China’s outlook this year assumes increased trade friction with the United States, with tariffs raised on specific product categories (such as steel and some agricultural goods), and, while we don’t expect across-the-board disruptions, a few high-profile companies will be forced to choose between accommodating the demands of the Chinese or US government.

Of course, if recent statements from US politicians translate into sweeping action on trade, 2017 could develop very differently. Tit-for-tat moves on specific companies and sectors could easily escalate, with many multinationals’ global supply chains caught in the middle and consumers around the world facing product shortages and, when products are available, material price increases. China’s government could implement sweeping actions to sustain employment, restrict further capital outflows, and stimulate the domestic economy. Market-oriented restructuring and reform would be off the table. Economic nationalism, food and energy security, and social stability would be paramount.


Matching 2016’s economic growth will be a struggle … especially if exports and consumer spending are flat.
Watch out if steel prices drop … which could happen if construction slows and overcapacity spikes.
New laws create new risks … and more are likely if (when!) a major cybersecurity breach occurs.
Where has the money gone? Despite the government’s efforts, currency keeps finding its way overseas.
Where are the children? Their grandparents are lonely. The fertility rate is historically low, stifling economic activity.
Depressed regions become more so … as urban migration continues, taking economic activity with it.
Will commodities be the next hot asset class? Retail investors and hedge funds are flooding the sector.
Auto industry accelerates into the future … and China become a global leader.
Cheers turn to boos in European soccer stadiums … as investors realize it’s easier to buy a team than win championships.

But if globally we continue with something recognizably close to current trade arrangements, how will China fare this year? And, most important for a country that regards economic growth as of paramount importance (the centerpiece of China’s 13th five-year plan remains to double GDP and household income in the decade to 2020), can 2016’s GDP growth in the ballpark of 6.5 percent be replicated?
Where will China’s growth come from this year? It is unlikely to come from exports—even ignoring potential protectionist moves in major export markets, there’s nothing that would significantly increase the world’s demand for Chinese goods. What about currency depreciation to make exports more competitive? That will be quickly offset by rising wages. Could growth come from consumers? Will they feel good enough to increase spending another 8 to 10 percent this year? They will likely spend a lot less on buying property and fitting it out (because of government action to restrain prices and restrict access to mortgage financing) and less on cars if the current tax break expires. Moreover, real salary increases are likely to be the lowest since the Lehman crisis, and with house prices expected to be flat, there won’t be a repeat of last year’s wealth effect. The stimulation of e-commerce making goods available in smaller cities for the first time may help, but technology displacing jobs in services, not just manufacturing, certainly won’t. In fact, its impact is becoming more and more visible, leading more and more consumers to not only worry about losing their jobs but also actually see them eliminated. The impact of technology on creating jobs in fields such as medical and education services will benefit the privileged few with the skills to take advantage, but it will not offset the near-term job losses.

Will investment-driven growth, in sectors beyond property, take up the slack again? To some extent, absolutely yes. Private-sector corporate investment will accelerate this year, recovering from the low levels of 2016. Lower real interest rates will stimulate investment in productivity-enhancing technologies, such as robots and cloud-based services. And the government hasn’t run out of good (or bad) infrastructure projects to spend on—everything from urban transit (such as the $36 billion project to create a megacity by improving transport links among Beijing, Tianjin, and the neighboring province of Hebei) to intercity rail, water treatment, and 5G projects. Collectively, these projects could deliver several percentage points of growth in a manner similar to a decade ago, but not without debt levels reaching 300 percent of GDP by the end of the year.

All of this still seems unlikely to get China’s economy to 6.5 percent growth this year, so look in the second half for constraints on property development to be rolled back. In sum, I see 2017 as a year of running faster and using more effort in traditional ways, to, in the end, travel more slowly.

Last year began with much fanfare over promised government-enforced reductions in coal and steel capacity, and by November the government had declared success. In reality, it would have been embarrassing if the goals had not been reached, considering how modest they were. Taking out the promised 250 million tons of coal capacity was less than the capacity added in the prior year, mostly illegally (and much of this capacity could still reemerge). The more significant impact came as a result of restricting production by limiting the number of days that (mostly state-owned) mines could operate. Coal production fell around 12 percent, but prices are up 80 percent. Great for mine owners, not so great for coal users.

In the steel sector, a reduction of 45 million tons of capacity still left an excess of several hundred million tons. At the time of writing, steel production is actually up for 2016 (as are steel prices) on growing demand from the construction and automotive sectors. The few announcements of industry consolidation have largely been the big merging with the big to get even bigger. The deals aren’t leading to reduced capacity or higher productivity, and unless steel plants are dismantled, there remains the possibility that latent capacity could return to the market.

New goals for capacity reduction will be set and met this year, just as they were in 2016—on paper. A slowdown in construction could see steel demand drop and actual overcapacity grow. Steel prices could fall back quickly, pushing the cash flow of many producers—whose balance sheets last year improved enough to stave off bankruptcy—into the negative again, depressing the confidence of consumers in cities dependent on these industries (especially in parts of northeast and northwest China) and creating a vicious cycle of lower consumer spending leading to declining local-business performance and redundancies. In these cities, property prices will be restrained by lack of demand. Homeowners will also be frustrated by their inability to sell and decreases in their paper wealth. As local governments in these cities raise concerns with Beijing, the pressure on banks to keep funding the insolvent (and for the solvent to merge with the insolvent) will rise. It may not happen this year, but eventually jobs will be lost as many companies are simply too unproductive to compete. But that may only be after billions of dollars have been spent keeping them open for a few more years.

China’s lawmakers and regulators were active in 2016, with multiple new laws affecting businesses. Ensuring compliance will be a significant headache, especially for multinationals, as what the laws mean in practice will only be defined over time. Take one example: the Anti-Unfair Competition Law, which overlaps with the Anti-Monopoly Law, had significant changes proposed in 2016 to prohibit the “abuse of a relative advantageous position.” This is open to a wide interpretation, potentially allowing small retailers and suppliers to pursue claims against larger businesses that they deal with. The law also means employers become liable for bribes and inducements offered by their employees, even if they didn’t know bribes were being offered. Multinationals will complain, but these standards are little different from those they are required to follow in many other countries and which are part of corporate ethics commitments.

In November of 2016, a new cybersecurity law was published, with implementation due in mid-2017. Requirements on data localization, reporting cyber incidents to the government, the usage and sharing of personal information, and constraints on the publishing of any content online mean almost every multinational operating in China will have to change aspects of its operating model. Maybe companies will need a network architecture that no longer backs up data outside China or a team within IT that simply reports network events to the Ministry, as required. Enterprises that publish content online in China may need to meet new local ownership requirements and understand the review and monitoring obligations that ensure content is deemed acceptable by the government. The law is creating lots of uncertainty and work, and even some larger enterprises will find themselves inadequately prepared and made examples of. Rather than simply being deported, last year saw more cases of foreign business executives being detained (most recently Australian casino employees)—and we’ll likely see more this year.

China is likely to soon suffer a massive public breach of consumer data. Many corporations are lax with regard to cybersecurity: for example, the China Banking Regulatory Commission recently criticized several banks for allowing their employees to sell personal information without any corporate oversight. Chinese consumers tend to be quite relaxed about how their personal information is shared and used, partly because a large-scale leak has not yet happened. Yet it’s easy to imagine global hackers entering the systems of a bank or an Internet company that handles payments and making the obtained data public. Public opinion could then change very quickly, leading to a heavy-handed government reaction and a major clampdown on how data is protected or sold. The impact on many leading Chinese companies could be that they invest much, much, more in cybersecurity. And some Chinese business leaders may be prosecuted for failing to protect their customer’s information sufficiently well.

This year will see a continuation of the great game of chicken between those in government trying to manage down China’s exchange rate and investors who want to diversify and protect the US dollar value of at least part of their asset base. After a lull through mid-2016, we are back in a situation where the government has created in the mind of investors the expectation of continuous slow depreciation—and now feels it has to act aggressively to stop investors from taking advantage of what they see as a one-way bet.

China’s government is constantly looking to shut down leakage points, but is often challenged by its own conflicting objectives. Well over $100 billion has left China this year for international acquisitions by Chinese businesses, with many acquirers paying over the odds in order to get their money out of the country. This is despite the State Administration of Foreign Exchange frequently declining to approve renminbi conversions for deals in a timely fashion. As a further step, the Ministry of Commerce and the National Development and Reform Commission announced plans in late November to implement stricter controls on any overseas investment above $10 billion, on state-owned enterprises (SOEs) that invest more than $1 billion in real estate, and on any companies investing more than $1 billion in noncore businesses. This makes transactions harder, but not insurmountably harder for private industrial investors as most transactions are below $10 billion and in their core businesses. Turning off the tap entirely would be totally inconsistent with major government initiatives such as One Belt One Road and China Going Global.

Further restricting the use of credit cards on the estimated 140 million overseas trips made by Chinese travelers in 2015 is possible, but it would annoy these middle-class travelers (a large number of whom are also Party members) and have them looking for another mechanism to spend abroad (travelers checks remain alive and well). As an example, it’s been very popular in 2016 to visit Hong Kong, buy single-premium life-insurance policies (with a value of up to $100 million!) using renminbi, and then use a variety of means to monetize the policy in US dollars. The credit-card squeeze has clamped down on this and, in case that wasn’t enough, so has a quiet word with insurers to suggest they don’t prioritize these products anymore. In business, the government is investigating over-invoicing as a means of turning local currency into dollars, clamping down on the use of free-trade zones to move money out of China, and investigating transfer-pricing arrangements between the domestic and overseas arms of corporations. Some large and midsize multinationals who have never reported profits in China have recently been asked for up to ten years of transfer-pricing data. Yet in an economy as large and as open to trade and travel as China is today, there will always be new methods emerging.

What else may change in 2017? Every calendar year, Chinese citizens are theoretically allowed to convert the equivalent of $50,000 from renminbi into foreign currency. Many people did this early in 2016, and I expect many will try to do so again this month to take advantage of the perceived one-way bet. The scale of flows this would create means this allowance is going to be severely restricted in 2017—either it will be officially revoked or simply made infeasible to execute. The “stock connects” that allow Chinese investors (up to a daily quota limit) to invest abroad—currently in Hong Kong, but likely also London this year—will become more popular, as will a “bond connect” if it is launched. Investors have so far held back because of unfamiliarity with the investments on offer, but this year it will be a route for getting capital out of China that, through creative means, can be monetized abroad. Multinationals with surplus cash in China should work out what to do with it domestically, as it’s going to be very hard to get it out of the country in the coming year.

The net result is China’s foreign-exchange reserves will continue to decline despite the trade balance remaining in surplus, perhaps by 20 percent over the course of this year, despite the best efforts of regulators. In the end, regulators are likely to resort to their old tactic of making an example of a few to encourage the many to behave—expect a number of high-profile investigations of wealthy individuals who have rather too visibly taken money abroad.

Long-term demographic trends, for the old and the young, will have more visible impact in China this year, creating additional headwinds for growth. China’s official government statistics bureau published data in 2016 from its mini-census that showed China’s total fertility rate—the expected number of children a woman has in her lifetime—had fallen to 1.05. This is one of the world’s lowest rates, and far below the 2.1 needed to sustain current population levels (actually, due to the skew of births of boys, even 2.1 would not be sufficient). Some 11.3 million children were born in China in 2015, down from more than 13 million in 2012, because of a decline in the number of women of child-bearing age, a trend that will continue. This compares with more than 25 million births in India and more than 5 million in Nigeria, a country with less than 20 percent of China’s population. Will China’s relaxation of its one-child policy help? It won’t make a big difference—under the old policy, almost half of all births were second or third children anyway. Moreover, China’s family-planning infrastructure, employing hundreds of thousands, has not disappeared. It continues to pursue and fine those they believe have too many children. The bottom line is that this trend means there will be fewer children for parents to spend money on, to be educated, and to become future consumers. In rural areas, for example, more than 50 percent of schools have already closed because of the impact of the declining birth rate and urban migration.

Meanwhile, if you people-watch in Shanghai or Nanjing today, you’ll notice a stark difference from 20 years ago. China’s urban population over age 50 now totals 250 million and is growing at 30-percent-plus a year, and over-60s are growing even faster.3 China still sets a retirement age of 50 for women (55 for civil servants and employees of state enterprises) and 60 for men, so these numbers are a good proxy for the growth rate of retirees, whose income levels typically drop precipitously to less than 50 percent of pre-retirement levels. Even those with significant savings are likely to pull back on consumption to insure against uncertain future costs such as healthcare, and they are more likely to hold on to the property they own than seek to buy more. At the same time, the rural population of over 50s is shrinking, as people in the past 20 years have moved into urban areas to become part of this urban retirement demographic.

Liaoning earned the dubious honor among Chinese provinces of reporting that its economy shrank in 2016. It is a heavily SOE-dependent region. Of its ten largest companies, three are in basic materials, three in oil and gas, two in automotive, and one in infrastructure—only one is a consumer-facing company. Not one of China’s leading Internet companies is based in the province, and private investment fell more than 50 percent year on year in the first half of 2016. The average age of farmers is over 55,4 and many graduates from the region’s universities leave to get jobs—part of the two million people that left northeast China between 2000 and 2010.5 Even the property market that stimulated the local economies of so many cities in 2016 can’t turn Liaoning around. Many homes bought only 15 years ago cannot be sold because of their low construction quality and scarcity of buyers. And few have the confidence to buy property in an economy with declining job security and downward pressure on property prices.

Rising coal and steel prices in 2016 may have temporarily hidden similar problems in other parts of the country. Yet the challenges faced by several of Liaoning’s largest cities will be seen more clearly this year in cities not just in the northeast but also in the northwest and even the south—in fact, in any Chinese city dependent on a single industry where employment is under pressure. Breaking cities out of this developing cycle of decline has been on the central government’s to-do list since 2003. Last year saw multiple initiatives announced by Premier Li Keqiang, calling for the northeast to become a hub of entrepreneurial innovation and tourist-service-based consumption. But without a robust local tax base, with young talent that moves to opportunities elsewhere, and with a rapidly aging population whose skills are best suited to a heavy-industry era, the challenge is almost impossibly hard. This year will see more initiatives announced to fix struggling cities, including money given to bail out their key enterprises and to support their property markets. Despite this, I expect more vocal complaints from local citizens who see little prospect of improvement in the quality of their lives, and some smaller cities may have so exhausted their supply of assets to sell that they de facto become bankrupt.

China’s investors will this year hunt for the next hot asset class to put their capital into. After a spectacular year for property valuations in 2016, it’s likely to be flat for property prices (certainly that is the government’s intention), and the middle class is already very overweight in real estate. Wealth-management products (WMPs), such as off-balance-sheet debt-like products from banks, have become less attractive to investors as nominal returns decline and courts redefine these investments as equity products (and so, last in line if a bankruptcy occurs). They’ve also become less appealing to banks, as they are forced to put balance-sheet capital against WMPs. Investors do want to get back into the stock market, but they view it as either a momentum play or one for insiders, hence the growing interest in investing in hedge funds (and the need to regulate them better).

As 2017 begins, commodities look like the next asset class to welcome Chinese investor exuberance. Millions of retail investors and as many as 5,000 hedge funds have entered the sector, and this year will likely see a couple of large hedge funds collapse as they overpromise and underdeliver. Regulators will react by seeking to raise trust in the stock market, launching a number of initiatives to improve corporate governance and potentially taking action in court against directors and auditors who are clearly seen to have failed to deliver on their responsibilities.

Investment management will be one of the bright spots of foreign participation in China’s economy. Many majority and fully foreign-owned investment companies are in the final stages of launch. If they build channels and brands effectively, foreign managers should be able to develop trusted relationships with local individual investors with domestic and international investment options. International asset managers already receive a significant share of the growing numbers of mandates from Chinese institutions—such as pension funds and insurance companies—to manage money on their behalf. For the government, the role of these international fund managers is more than just providing returns to investors—it’s to professionalize the industry, bring in best practices, develop talent, and make money for themselves while they are at it. As we have seen in many other sectors, local competitors will adapt quickly by building their own international reach and adopting international operating practices.

Finally, this year we’ll see much greater investment in Chinese stocks by foreign investors, despite the governance risks just mentioned. With November’s opening of the Shenzhen–Hong Kong Stock Connect, foreign investors now have much easier access to many of China’s highest-growth companies. Even though many are trading at price-equity ratios of more than 50—if not more than 80—foreign investors will be excited to be able to invest at all and will do so at scale.

China’s auto industry has grown at more than 15 percent annually for a decade. In late 2015, when it looked like demand might stagnate, a tax break was introduced that kept the market expanding at 14 percent in 2016, at the time of writing. Of course, adding more than 20 million new vehicles a year to a fleet of more than 190 million has its downsides, starting with very visible air pollution, congestion seemingly everywhere, and less than one parking space for every two cars in some cities. And for individuals, the cost of owning a car has never been higher, from paying as much as $15,000 for a license plate (if you are one of the lucky 1 in 20 who wins the lottery for a license) to paying even more for a parking space and insurance. In cities, owning a car is actually increasingly seen as a costly hassle, and the pressure is on the government to improve the situation. There is some good news. Despite the growth in vehicles, deaths on Chinese roads declined 3 percent annually for the past five years to below 60,000, and reported injuries declined even faster. The average car on the road is today much safer than ten years ago, congestion means that most driving in cities is at a very low speed, and I believe driving is, at the margin, getting better.

The government is focused on a medium-term solution of clean cars, self-driving cars, and shared cars. In each category, it wants China Inc. to seize the opportunity to be the global scale leader. It’s more than hypothetical: the government can put in place the entire ecosystem of laws and regulation, build shared infrastructure for charging and more, and provide investment and consumer subsidies to accelerate a drive to scale. There will be a big increase in the amount of money made available to this sector this year, perhaps reaching the level of capital made available to the domestic semiconductor industry and to lots of high-profile pilots involving China’s leading companies from the auto and tech sectors. What could go wrong? If the subsidies are skewed to SOEs, if competing tax breaks for buying traditional vehicles remain in place, or if foreign companies are heavily disadvantaged, then we will end up with the same outcome or if as in semiconductors—lots of government spending for very limited return—rather than the outcomes in solar energy or mass public transit, where China Inc. is now a global leader.

Chinese investors have plunged into European soccer teams, demonstrating support for Xi Jinping’s desire for China to improve its national performance in soccer. (On that front, there’s not much progress to report—the national team’s lowlight was losing to Syria.) This year will see some of those investors start to seriously regret their decision. Not only is there a high likelihood that some of the teams they have acquired will be relegated (therefore, losing access to the large streams of revenue top divisions receive from broadcasters), but I also expect at least one set of fans to turn on the team’s new owners, with demonstrations at the games, on social media, to the press, and more.

There is a long tradition, especially in England, of blaming owners for a team’s poor performance, for failing to spend enough of their own money to buy the best players and manager, and for extracting money from the club. Just ask Assem Allam (Hull City), the Oystons (Blackpool), Venky’s (Blackburn), or even the Glazers (Manchester United) how uncomfortable such a wave of criticism can be. No Chinese entrepreneur has ever faced anything similar at home and will likely react naively when these protests develop. Leading PR firms should be on standby. Some investors will come to realize that while owning a team brings headlines and prestige at the outset, it can be a very volatile, very risky investment, possibly leading to a semi-forced low-price sale. Expect a Chinese investor to cut and run from a soccer investment in 2017.

Investing in adjacent sports businesses (such as Fosun’s investment in soccer agents) is often lower risk and provides higher returns. I expect it will not be long before Chinese investors turn their attention to the UK gambling industry, acquiring some of the main players, seeking to bring some of the key elements of their success back to China (or at least Asia, if regulators balk).

With the caveat that everything is subject to change when it comes to geopolitics, we expect China’s government priorities this year to largely be domestic. Ensuring smooth government leadership transitions will take precedence over economic reform perceived as potentially risky. Actions to increase the control of the economy by the Party take precedence over market-based reforms. We will see incremental policy change, largely pushing on the same levers that worked for the government in 2016. But by the second half of 2017, we will see that consumer spending is not growing at the pace needed to deliver the promised GDP growth, leading to a further boost in debt-funded infrastructure spending and property construction and a bumpier second half of the year.

The President will travel to Danang, Vietnam, on November 10. There, he will participate in the Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting and deliver a speech at the APEC CEO Summit. In the speech, the President will present the United States’ vision for a free and open Indo-Pacific region and underscore the important role the region plays in advancing America’s economic prosperity. On November 11, the President will travel to Hanoi, Vietnam for an official visit and bilateral engagements with President Tran Dai Quang and other senior Vietnamese leaders.

President Trump will arrive in Manila, Philippines, on November 12 to participate in the Special Gala Celebration Dinner for the 50th Anniversary of the Association of Southeast Asian Nations (ASEAN). On November 13, the President will celebrate the 40th anniversary of U.S.-ASEAN relations at the U.S.-ASEAN Summit and participate in bilateral meetings with President Rodrigo Duterte of the Philippines and other leaders.




Wage growth in America has stagnated. Over the past eight years, the real median wage in the U.S. rose by an average of six-tenths of a percent per year. But even as Americans’ real wages stagnated, real corporate profits soared, increasing by an average of 11 percent per year. The relationship between corporate profits and worker compensation broke down in the late 1980s. Prior to 1990, worker wages rose by more than 1 percent for every 1 percent increase in corporate profits. From 1990-2016, the pass-through to workers was only 0.6 percent, and looking most recently, from 2008-2016, only 0.3 percent. The profits of U.S. multinationals are still American profits, but, increasingly, the benefits of those profits do not accrue to U.S. workers.

It makes no sense to tax corporations at all, because only people pay taxes, not legal entities. The corporate tax is paid by customers in terms of higher prices, by suppliers in terms of lower volumes of business, by employees in terms of lower wages, and by stockholders in terms of lower returns.

According to Arthur Laffer, the low-tax states belong to a different genus entirely. It’s like comparing Hong Kong with Greece or King Kong with fleas!  Occident must minimize taxes to single digits, abolish sales taxes and VAT, and not even think about financial transactions tax. Starve the beast by fighting taxes. 

Atlas upon seeing that the greater his effort, the heavier the world bores down on his shoulders, he simply shrugs. We have a dystopian Occident, where capitalists refuse to be exploited by increasing taxation and regulations and disappear offshore. Yes, capitalists are on strike!  They are stopping the motor of the world by withdrawing their minds that drive growth and productivity. Capitalists demonstrate that a world in which the individual is not free to create is doomed, civilization cannot exist where capitalists are slaves of kleptocrats, and the destruction of the profit motive leads to the collapse of society.  Atlas shrugged!

Taxes, especially VAT, feed the underground economy. It is your patriotic duty to evade taxes, especially VAT, all the way!  Taxation causes an enormous and unnecessary dead-weight loss to the economic system. The sheer cost and time burden of businesses and individuals trying to comply with the tax system, let alone the cost of myriad bureaucrats who claim to be administrating it, waste trillions of euros. This waste of resources unnecessarily reduces economic growth and job creation. A major reason this obscenity persists is that few kleptocrats think seriously about the consequences of what they have done and are doing, or just don’t care.

America mourns more than a century of enslavement to Washington through taxation.  In 1913, the 16th Amendment was established, which reads: The Congress shall have the power to lay and collect taxes on incomes from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.

The Law That Never Was: The Fraud of the 16th Amendment and Personal Income Tax is a 1985 book by William J. Benson and Martin J. “Red” Beckman which claims that the Sixteenth Amendment to the United States Constitution, commonly known as the income tax amendment, was never properly ratified.

Benson found variations in wording, punctuation, capitalization, and pluralization in the language of the Amendment as ratified by many states.  Those states did not properly ratified the Amendment.  Benson further found documents suggesting that some states that had been certified as having ratified the Amendment never voted to ratify it, or voted against ratification. Benson found that only four states had properly ratified the Amendment!

The deteriorating relationship between wages of American workers and U.S. corporate profits reflects the state of international tax competition. The problem is not unique to America; countries around the world have responded to the international flow of capital by cutting their corporate tax rates to attract capital back from other countries. They have doubled down on such policies as they have seen business-friendly policies benefit workers.

This analysis from the Council of Economic Advisers reviews the evidence that has driven other developed countries to pursue the path of lower corporate tax rates and estimates how business tax reform in the Unified Framework for Fixing Our Broken Tax Code (hereafter, the “Unified Framework”) is expected to affect wages for American workers.

President Woodrow Wilson signed into law later that year the first income tax permitted by the new amendment. Tax due was to be calculated and reported on Form 1040 (form numbers were assigned sequentially by the Bureau of Internal Revenue). The form contained four pages—one each for instructions, gross income, deductions, and the income worksheet. The tax was progressive in nature. Taxable income was gross income less deductions and either a $3,000 (single) or $4,000 (married) exemption.


1913 Tax Schedule


Taxable Income Tax Rate
Over $20,000 up to $50,000 1% plus
Over $50,000 up to $75,000 2% plus
Over $75,000 up to $100,000 3% plus
Over $100,000 up to $250,000 4% plus
Over $250,000 up to $500,000 5% plus
Over $500,000 6%


The income tax has become much more progressive in the past thirty years, resulting in a situation in which a relatively small minority of taxpayers pay the bulk of the taxes, while most citizens pay little or any income tax. This is causing an increasing disconnect between benefits from government and what most citizens pay for. One result is a greater polarization in the political realm where a majority of citizens increasingly demand more government benefits for which they want others to pay.

All other persons and groups in society, except for acknowledged and sporadic criminals such as thieves and bank robbers, obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift. Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as taxation. Taxation is theft, purely and simply, even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.

There was no permanent income tax in the United States for 125 years. Can anyone possibly say that the government didn’t have enough revenue to function during that time? It wasn’t until the adoption of the Sixteenth Amendment in 1913 that the redistributionist road was paved for an income tax. And what benefits has the increased government revenue from the income tax given us? It is the income tax that has made possible World War I, the New Deal, World War II, the Great Society, the Vietnam War, and our current welfare-warfare state.

Every penny of our money that the government allows us to keep is a good thing, whether it results from a decrease in the tax rates, the lowering of tax brackets, or an increase in deductions, loopholes, exemptions, and credits.

The income tax system is a vast income redistribution and social engineering scheme. The income tax code doesn’t need to be simplified, shortened, fairer, or less intrusive. The income tax rates don’t need to be made lower, flatter, equal, or less progressive. The income tax doesn’t need more or larger deductions, loopholes, credits, or exemptions. The whole rotten system needs to be eliminated if we are to starve the beast that is the state leviathan and strictly limit government spending to only what is constitutionally authorized.

When an economy suffers from erectile dysfunction, via-grab does not work, but only via-cut. The via recommended is to cut taxes, not grab more taxes. There are limits to how much government can tax before it kills the host. Even worse, when government attempts to subsidize prices, it has the net effect of inflating them instead. The economic reality is that you cannot distort natural market pressures without unintended consequences. Market forces would drive prices down. Government meddling negates these pressures, adds regulatory compliance costs and layers of bureaucracy, and in the end, drives prices up.

Millions of innocent people have died of hypertension caused by agony on taxes. Millions of concerned citizens are joining modern day tea parties of the Global Tax Revolt, named after the Boston Tea Party of 1773. They are protesting  governments that, in the wake of today’s financial crisis, are rapidly strangling their freedom, with endless bailouts, mounting regulations, reckless spending, and the promise of a crippling tax burden. Correctly sensing that freedom is being discarded, they seek to battle this trend by taking to the streets to register their outrage.

Government does not trickle the money down or up. Government simply spends it, almost always wastefully. There’s a simple moral and psychological explanation for this. When you’re given money, or seize money by force, in the case of taxes it’s legalized plunder, then you don’t handle that money as responsibly as you would if it were your own.

There’s no way to control wasteful government spending because government spending will always, by its nature, be largely wasteful and irresponsible. The only solution to this is to severely limit the role of government as much as possible. Lower taxes are a good thing not only because they leave wealth in the hands of the more productive; low taxes are also good, because the government has less to do.

If you think the West has been productive and prosperous up to now, just imagine how it would be if most of government as we know it went away. It’s bad enough that government takes income from the private sector and squanders it. Government is making decisions that people should be making for themselves. If something isn’t going to happen without government funds, then it quite likely should not happen in the first place. When people make decisions for themselves, they generally do a better job. And when they make a mistake, or perhaps act with deliberate irrationality, at least there are consequences for their actions. When government does something badly, it gets rewarded with more power, subsidies and control.

While everyone needs revenue, only criminals and politicians insist that they have to get it through violence. The criminals, however, do not pretend they’re doing it in order to serve the public, and taxes make politicians public masters rather than public servants.

The present size of government at all levels depends on taxation – not only the explicit kind, but the invisible kind that a central bank imposes through inflation of the money supply. People probably wouldn’t voluntarily pay to bomb, invade, and occupy other countries, bail out large banks and other corporations, and try to dictate the personal choices of others. Good riddance!

Government-monopolized services such as education and health care could be provided for less than half the cost if they could be returned to the voluntary sector of society with cost-raising regulations abolished and incentives restored. Both mutual aid groups and charitable donations filled gaps prior to the rise of the Welfare State for those in need with an efficiency that is impossible when those in charge of aid get more money and power for themselves the worse the job they perform. We’ll have to take some personal responsibility for our own lives and stop using the excuse Ebenezer Scrooge made that his taxes supported institutions for the poor so he could ignore them.

It is obscene for those claiming to protect life, liberty, and property to obtain their revenue by violating life, liberty, and property. There are plenty of ways to obtain revenue without force: insurance, user fees, advertising, lotteries, and donations are already used by many local and state governments for a good portion of their revenue. Let them be true public servants and live within the means that these sources provide. People might even pay more voluntarily once they’re no longer forced to turn over 1/3 to 1/2 of their wealth to governments.

Ultimately, it is about the type of society we want to have.  We can accomplish a lot voluntarily when we mutually respect each other’s lives and property. It begins by respecting the right of people to keep the fruits of their labor. A good start would be the abolition of the personal income tax, which only adds insult to the injury of theft by invading every part of the taxpayer’s privacy as well as making April a month of misery instead of a time to enjoy the spring.

With the average worker at the time earning about $1,000 a year, it was considered a reflection of being somewhat well off if you had to pay a tax. Reportedly, some 350,000 individuals were entitled to such bragging rights.

Reducing the statutory federal corporate tax rate from 35 to 20 percent would, the analysis below suggests, increase average household income in the United States by, very conservatively, $4,000 annually. The increases recur each year, and the estimated total value of corporate tax reform for the average U.S. household is therefore substantially higher than $4,000. Moreover, the broad range of results in the literature suggest that over a decade, this effect could be much larger.

These conclusions are driven by empirical patterns that are highly visible in the data, in addition to an extensive peer-reviewed research. While much of the academic literature predates the latest data, the covariation between the trajectory of inflation-adjusted wages and statutory corporate tax rates (Federal and sub-Federal) between the most-taxed and least-taxed developed countries (OECD) over recent years, visible in Figure 1, is indicative of these papers’ findings. Between 2012 and 2016, the 10 lowest corporate tax countries of the OECD had corporate tax rates 13.9 percentage points lower than the 10 highest corporate tax countries, about the same scale as the reduction currently under consideration in the U.S. The average wage growth in the low tax countries has been dramatically higher, as would have been predicted by a consumer of the academic literature, which looks at much longer time periods and explores the relationship with modern econometric techniques.

This sizable empirical literature measures the relationship between wages and corporate taxes, controlling for other variables that may affect wage growth across countries and over time. The literature suggests the relationship between corporate taxes and wages is more than observational and is econometrically robust. The remainder of this report explains the theory and the empirical regularities that relate lower business tax rates – such as those in the Unified Framework – to higher wages and uses these estimates to measure the likely wage effects of the business tax reforms of the Unified Framework.


France is well known for its food – but did you realize just how many alcoholic drinks come from this country? This will make you want to have an early apéro.
There are dozens of good maps of France, but have you ever seen a good booze map?

Alcohol harms the liver, and it also causes brain fog. Brain fog refers to a feeling of mental confusion, it acts like a cloud that impacts your ability to think clearly, as well as your memory. Have you ever noticed that you cannot remember common item names, or you cannot recall certain events or you are not sure whether they were dreams or they actually happened? This might be influenced by the high alcohol intake which impacts the balance of the brain. Fortunately, these symptoms are reversible provided that you stop consuming alcohol, or you limit your intake to one or two drinks per week.


Alcohol causes harm partly as a result of direct damage to DNA caused by its metabolites. Drinking enough to cause a blood alcohol concentration (BAC) of 0.03%-0.12% typically causes a flushed red appearance in the face and impaired judgment. A BAC of 0.09% to 0.25% causes lethargy, sedation, balance problems and blurred vision. A BAC from 0.18% to 0.30% causes profound confusion, impaired speech, e.g., slurred speech, staggering, dizziness and vomiting. A BAC from 0.25% to 0.40% causes stupor, unconsciousness, anterograde amnesia, vomiting (death may occur due to inhalation of vomit (pulmonary aspiration) while unconscious) and respiratory depression (potentially life-threatening). A BAC from 0.35% to 0.80% causes a coma (unconsciousness), life-threatening respiratory depression and possibly fatal alcohol poisoning. As with all alcoholic drinks, drinking while driving, operating an aircraft or heavy machinery increases the risk of an accident; many countries have penalties against drunk driving.

Drinking more than two drinks per day increases the risk of heart disease, high blood pressure, atrial fibrillation, and stroke. The risk is greater in younger people due to binge drinking which may result in violence or accidents. 6% of all deaths are due to alcohol each year. Alcoholism reduces a person’s life expectancy by around ten years and alcohol use is the third leading cause of early death in the United States. Another long-term effect of alcohol usage, when also used with tobacco products, is alcohol acting as a solvent, which allows harmful chemicals in tobacco to get inside the cells that line the digestive tract. Alcohol slows these cells’ healing ability to repair the damage to their DNA caused by the harmful chemicals in tobacco. Alcohol contributes to cancer through this process.

Excessive consumption of alcohol can cause liver cirrhosis and alcoholism. Alcohol’s toxicity is largely caused by its primary metabolite, acetaldehyde, and secondary metabolite acetic acid. A meta-analysis of thousand studies have shown increased cancer risk from consumption of alcohol.



A closer look at the west and north west


A popular addition to sweeten Champagne, the raspberry and blackberry liqueur is said to have been created when Louis XIV visited Chambord castle in 1685.


Similar to Calvados, the apple brandy is also known in Brittany as “fine Bretagne”. The cider is distilled in an alembic, which is from where the name originated.

Amorik Whisky

The Armorik range of whisky offers single malts and blends, made in what one distillery says are the perfect conditions of Brittany: “Our whisky has found a coastal heathland environment perfect for ageing under the best possible conditions. The sea, wind and rain have forged its character that is second to none.”


Similar to mead, this drink is a simple mix of water, honey, and yeast. “The recipe has not changed since the Celts introduced chouchen to Brittany,” one distillery says.

Breton cider

Breton cider needs no introduction. If you’re a real fan, take on the route de cidre – a tour of the region’s cider makers.

Pommeau and Calvados

Over in Normandy, enjoy apple-based drinks like Calvados apple brandy, or try it mixed with apple juice in Pommeau.

Poire d’olivet

The clear pear brandy from the town of Olivet near Orléans often comes with a whole pear in the bottle.


Here’s another Normandy specialty made with apples. The drink is said to have been created by the Benedictine monk Dom Bernado Vincelli in Fécamp Abbey in 1510. The “elixir” recipe was lost for 350 years and re-disovered by Alexander the Great, who named it Bénédictine.

A closer look at the north and north east

Grey Goose vodka

The famous Grey Goose vodka is distilled in Picardy. Although the drink was created by an American Sidney Frank, it uses the soft wheat from the Picardy area and is fermented and distilled in the area before being sent to the Cognac region for bottling.

Grand Marnier

One of France’s most successful alcoholic exports, the orange-flavoured liqueur Grand Marnier is made with a blend of Cognac and bitter oranges, coming from from Neauphle-le-Château near Versailles.


This beer, which comes in blonde and brown varieties, originated from Lille and now belongs to the Heineken group.


No surprises for guessing where Champagne comes from. All “official” Champagne still comes from the Champagne region of France.


Ratafia refers to fortified wines or liqueurs or citrus-peel flavoured liquers. The ratafia from Champagne is the most famous and is of the fortified wine category. It’s made with the same grapes as for champagne, but they’re allowed to ripen to maturity, dried, and re-hydrated.

Mirabelle liquer

Yellow “mirabelle” plums are a specialty of the Lorraine region and appear in many local recipes, the plum liqueur is sweet and slightly honey-flavoured.

Burgundy wine

The mineral taste of Burgundy wines owes to the limestone soils from a time when Burgundy was part of a tropical sea. The two main Burgundy grapes are Pinot Noir and Chardonnay. Obviously there are too many Burgundy wines to get on this map.

Fischer beer

Ficher beer, in its distinctive corked bottle, is native to Alsace. The Fischer brewery was founded in Strasbourg and moved to Schiltigheim.


Another Alsacian beer, Kronenbourg was created in Strasbourg and its 1664 variety is now the most sold French beer in the world.


Pernod aniseed liqueur, created around 80 years ago, is one of the hallmarks of French drinking. When served with ice and water the clear liquid turns a cloudy cream colour – and is perfect for a summer’s day. Although it’s technically not a Pastis.

Vieux Pontarlier

The French absinthe from Pontarlier, close to the Swiss border, is still made using the original recipe. It’s made from local wormwood, green anise seeds and fennel seed along with a secret blend of herbs and spices.

And the south east


Often referred to as both a French and Swiss invention, the liqueur is flavoured with the root of genetian plants and is typically enjoyed as an aperitif.

Crème de cassis

The sweet blackcurrant liqueur is a specialty of Burgundy and Dijon in particular. It’s normally mixed with white wine to make a Kir.


Chartreuse boasts that its herbal liqueur is the only one in the world with a completely natural green colour.

The history of Chartreuse is a bit of a mystery, in 1605 a Chartreuse monastery received a gift of an ancient manuscript containing the recipe for the drink.

It was sent to the order’s main monastery near Grenoble where it was deciphered, recreated and sold as a medicine called “The Elixir of Long Life”.


The Provencal drink is made with peaches, autumnal peach tree leaves, cane sugar and Lubéron white wine.

You can drink it as an aperitif with tonic, neat or with ice cubes.

Provence Rosé wine

Many types of wine are made in Provence, but the region is particularly well known for its rosés and is the only wine region to focus on rosé, there’s even a rosé research institute.

Ricard and Pastis

Ricard and Pastis 51 are the leading brands of the Marseille-born star anise and licorice flavoured liqueurs.

Traditionally pastis should be enjoyed one part to five parts water, but as part of a recent re-branding effort to shake off the fusty image of pastis you can ask for a more diluted version with eight parts water called “piscine”.

Orange Columbo

The Provencal drink is made with Lubéron rosé, sweet and bitter oranges, bitter bark infusions, curaçao and other flavours.

Frontignan premier muscat

Muscat wines are produced in various regions of France, but Frontignan on the south coast has been famous for its varieties for centuries and it was the first naturally sweet wine label to be officially recognized.


The liqueur from Auvergne is made from the root of the gentian plant, sweetened with white wine and botanical flavourings.


The natural sweet wines known as Banyuls come from four towns on the Côte Vermeille close to the Spanish border: Banyuls itself, Cerbère, Collioure and Port-Vendres.

And the south/south west


The Cointreau brothers found success blending sweet and bitter orange peels and pure alcohol from sugar beets, with around 13 million of the iconic bottles sold a year. As for how they make it? It’s still a family secret.

Guignolet Kirsch

The deep red aperitif from Anjou is made by marinating cherries in alcohol with kirsch, a clear cherry liqueur. It owes its name to the guigne cherry, one of the varieties used in preparation.

The drink was created by brothers Adolphe and Edouard Cointreau, who then went on to make the eponymous orange liqueur (see below).


The brandy, named after the town where it originates in Charente, is one of France’s biggest drink exports, with Hennessy being the most well known brand. When in town you can visit Hennessy’s headquarters for tours and tasting.

Pineau des Charentes

Often referred to as Cognac’s little brother Pineau is a fortified wine, hugely popular in the west and works great as an aperitif.

Bordeaux wine

Along with Burgundy this is France’s other key wine producing region. Bordeaux wines are made up of a blend of grape varieties rather than just one per wine.

Bordeaux varieties include Cabernet Sauvignon, Merlot and Sauvignon Blanc.


Raymond and Paul Lillet concocted the Lillet aperitif in Podensac, near Bordeaux. Called Kina Lillet until the 1970’s it’s a blend of wine and fruit syrups and comes in red, white and rosé.

Marie Brizard anisette

The Marie Brizard brand now produces a variety of different drinks, but the original anisette liqueur from Bordeaux is the iconic label.

The recipe for the green anise flavoured drink is a closely guarded secret and remains unchanged since Marie Brizard herself finalised the recipe in 1763.

Floc de Gascogne

A light and fruity aperitif from Gascony, Floc de Gascony is made with grape juices and Armagnac. You can find it in white or red varieties.


Now brewed in Alsace, the Tequila flavoured beer is said to have been first created in France’s Basque county in 1995.


This drink from the Basque country is mainly associated with Spain, but can be found in the French part of the Pays Basque too.


Produced in the Armagnac region of Gascony the white wine grape-based brandy is similar to the more well known Cognac.

To detect all the flavours in Armagnac, it’s sometimes advised to dab a drop on the back of your hand, wait for it to dry and sniff for notes of dried fruits, butterscotch and licorice.


The French vermouth was created in Thuir, close to the Spanish border. Based on red wine, it’s a mild apéritif flavoured with quinine, coffee and bitter orange among other flavours.


Produced in Riom-ès-Montagnes in Cantal, Auvergne, the liqueur is flavoured with wild yellow gentian plant from the area.

by Rose Trigg

If you can still read the screen and are not seeing double by now then send us the names of any Gallic tipples we have missed.

And after all that booze you are probably hungry. Click on image below to soak up everything you need to know about regional Gallic grub.





  • Posted workers to get equal pay for equal work in the same workplace
  • All of the host country’s labour rules apply for postings longer than 24 months
  • Equal treatment also for posted temporary agency workers

Workers posted in another EU country have to get the same remuneration, including bonuses, as local workers.

New draft rules to ensure that posted workers are better protected and fair competition for companies were adopted by the Employment and Social Affairs Committee with 32 votes to 8 and 13 abstentions on Monday.

The main changes agreed by MEPs concern remuneration, duration of the posting and temporary agencies.

Making pay fairer

  • All of the host country’s rules on remuneration, set by law or collective agreements, should apply to posted workers.
  • Member states should be obliged to publish all elements of their national remuneration policy, as well as information on collective agreements, on a special website.

Improving workers’ conditions

  • Travel and accommodation costs must be reimbursed or be part of the wage.
  • Hosting member states could opt to apply regional or sectorial collective agreements, instead of national ones, if they offer more favourable conditions for posted workers. 


  • If the posting is longer than 24 months, all of the host country’s labour conditions would apply to posted workers.
  • 24-month limit can be extended if a company needs more time to complete the service it was required to provide.

Temporary work agencies and subcontracting

  • To prevent “chain postings”, aimed at circumventing obligations, the new rules would also apply to posted workers sent by a temporary agency from another member state.
  • Member states may oblige the subcontractor to pay their posted workers the same amount as the main contractor.

International road transport will be dealt with by sector-specific legislation, included in the Mobility Package. Until that has been adopted, and to prevent legal loopholes, the posting of workers’ directive remains applicable to road transport.

Elisabeth Morin-Chartier (EPP, FR) said: “The agreement we have is politically clear: improve the protection of workers and ensure a level playing field for companies in the internal market. Today the Parliament has shown once again that it will always respond to national divisions with European political strength and unity. Now it is time for the Council to step forward: no one can afford to hang about while we are building up a Social Europe!”

Agnes Jongerius (S&D, NL) said: “This is an important step to create a social Europe that protects workers and makes sure there is fair competition. With this proposal we will fight inequality and take good care of workers. Collective agreements which benefit local workers must also apply to posted workers in the future. We must stop the race to the bottom in the European labour market, to reach the goal of equal pay for equal work at the same workplace.”

The full House is expected to vote on this draft mandate to enter into informal negotiations with the Council at the next week’s plenary session. EU Ministers (Council) have yet to adopt their position.

Posting occurs when services are provided across borders. Posted workers have an employment contract in their home country, but are sent by their employer temporarily to another member state to carry out a task.

The growth of the single market has led to increased wage differences, thereby creating incentives for posting. Posted workers often earn considerably less than local workers, which can lead to unfair competition between posting and domestic companies, social dumping and exploitation of posted workers.

  • A posted worker is an employee who is sent by his employer to carry out a service in another EU Member State on a temporary basis. 
  • In 2015 there were 2.05 million posted workers in the EU. Posting has increased by 41,3% between 2010 and 2015.  
  • Poland, Germany and France send the highest number of posted workers, while Germany, France and Belgium receive the highest number of posted workers.  
  • More than half of the postings occur between neighbouring member states, with an average duration of 98 days. 
  • Posting is particularly frequent in key sectors, such as the construction sector, the manufacturing industry, education, health and social services and business services. 

As the income gap between rich and poor widens, there’s a growing suspicion that the game in our frantic modern economy is tilted against working people. The widely shared prosperity of the 1950s, when the American Dream seemed open to all, is beginning to look like a historical anomaly.

Thomas Piketty caused a sensation in 2014 when he published a book titled Capital in the Twenty-First Century, updating Karl Marx’s claim that rising inequality is inherent to capitalism, because the capitalists — investors who supply financial capital to businesses in exchange for equity — take an ever-larger slice of the economic pie. In other words, those who own the means of production — the factories and offices and machines and so on, which economists call capital inputs — get richer while working stiffs get, well, stiffed.

The common explanation for that trend is that U.S. companies have invested heavily in technology and automation — essentially replacing human workers in the production process with more and more capital. And industries that still require a lot of manual labor have outsourced much of their production to countries with lower wages. But thinking in terms of risk/return tradeoffs, the amount of risk faced by firms had risen over the same period. As you’d expect, workers are more risk-averse than investors, and that fact is contributing to the shift in income shares.

All companies face some economy-wide risk from business cycles and things like energy price shocks. But that’s a tiny fraction of the uncertainty that firms are exposed to. Most of the risk is particular to a company or an industry. It could be anything, like a supply problem or a new entrant or a competing innovation, that cuts into their margins. Firm-specific risk is huge, and there’s much more of it now than there used to be.

So at any given company, no one knows in advance how much money will actually be available to divvy up between investors and employees each year. But the suppliers of capital are much better able to cope with that uncertainty. Equity owners have an advantage in bearing risk. They can diversify by holding a portfolio of stocks. Labor income is usually tied to the performance of a single company.

As a result, you’d expect workers to trade off some of their earning potential for income security — a tacit understanding that their pay will remain constant even if the company’s fortunes decline. Of course, fixed wages and salaries are precisely what we see, and take for granted, in the real world. But there’s no reason it has to be that way.

You can think of it as if companies are providing insurance to their employees, with the insurance premium being implicitly deducted from each paycheck. There’s a ton of evidence that firms really do try to insulate their employees from the ups and downs of business. And it makes sense. What happens, then, when firm-specific risk increases over time? The insurance premiums go up. And that shows up as stagnant wages that fail to keep pace with productivity. Multiply that across the entire economy, and labor’s share of national income shrinks.

But it doesn’t necessarily mean workers are worse off. It looks like they’re being taken to the cleaners. But remember, they benefit by being protected from market forces. In a way, that income insurance is part of an employee’s compensation package, and it rises in value when the company’s prospects become more uncertain. We are sympathetic to a lot of things Piketty says. But he ignores all this idiosyncratic risk, and that’s too simplistic. At a minimum, this tells us we need to be cautious in linking the declining labor share to rising inequality.

One can’t help wondering why firm-specific risk has gone up. The rise of investment managers, ironically, has played a role. Fifty years ago, it wasn’t that simple for an individual to diversify their stock portfolio — you had to go out and buy 30 stocks. Transaction costs were substantial. So to attract capital, firms often tried to lower their own risk exposure by diversifying into unrelated businesses. It was the age of conglomerates.

The emergence of mutual funds made it easy for investors to diversify. As a result, companies may now be more inclined to pursue high-risk/high-reward strategies. They know their shareholders can hedge that risk at virtually no cost.

Whatever the cause, greater risk means greater disparity in outcomes. In this volatile environment, some firms are spectacularly successful and grow rapidly. Many others lose money and remain small — and many of those hang on for years, hoping to break through. Under high uncertainty, the turnaround really might be just around the corner!

As a result, when we look at the size distribution of all public companies, we find that it grew at both the upper and lower ends. In a sense, inequality had increased among corporations. And because wages are relatively constant, you’d expect that variance to be reflected in the return on equity. Struggling firms would still try to make payroll, with little left over in profit for investors, the contributors of capital. At the small number of immense, highly profitable firms — the Apples and Alphabets of the world — the bonanza would go almost entirely to investors.

The bigger the company, the larger the capital share — and the lower the labor share. What’s more, this is a new phenomenon. In 1970 there was almost no relation between income shares and size. Forty years later there’s a strong relation, and the slope of that line is very steep.

What this means is that the declining labor share at the economy level is driven by the growth of large firms. It’s a consequence of rising market concentration, which in turn has been driven by increased risk. Firm-specific risk accounts for a large share of the decline in labor income at the national level, more than half.

And because of their size, these corporate giants dominate the national income figures, even though the typical firm falls closer to the other end of the spectrum. Hence that surprising empirical pattern of a declining aggregate labor share and an increasing average labor share. That divergence between aggregate and average shares is the signature of the risk-insurance effect.

There’s no question that workers are taking home a smaller piece of the economic pie. Considering public companies as a whole, labor’s share of value added has declined from 60% in 1980 to 40% today — a stunning drop — with the difference going to capitalists.

But that’s not simply a result of exploitation by those with greater market power. There’s at least a tacit agreement, manifested in the customary arrangement of fixed wages, that prevents workers from sharing in the bounty from the most prosperous ventures.

The owners of capital are bearing most of the risk in increasingly volatile markets. That arrangement has value for workers that is not reflected in measures of labor income. Likewise, uncounted are the losses by investors in companies that fail, which would lower net capital income. If income inequality is worsening, that’s a serious concern and one we should address in public policy. But the role of risk in all of this has been ignored, so we have an accurate picture of the problem at this point.

The use of independent contracting has grown dramatically over the past decade, with one estimate suggesting it has increased by almost 40%, going from 6.9% of employment in 2005 to 9.6% in 2015. According to a 2009 report issued by the United States Government Accountability Office, a significant portion of independent contracting doesn’t pass the smell test and in fact represents misclassification of workers. For example, about one-third of construction workers in the U.S. South, an industry where the problem has been long entrenched, were estimated to be misclassified. This number isn’t exceptional, as state-level data shows that anywhere from 10% to 20% of employers misclassify at least one employee.

In many sectors and parts of Occident, we saw long-standing practices of employment undermined as misclassification spread quickly across sectors like restaurants, residential construction, and trucking and logistics. So what, exactly, constitutes worker misclassification? It stems from a basic but decisive distinction in labor and workplace laws. Most people who work for an organization are employees under federal and state statutes. The definition of who is an employee varies between federal and state laws, which admittedly raises complexities for employers and workers alike. In broad strokes, however, the distinction is meant to delineate responsibility in situations where one person hires another to create something of value.

Further, laws define independent contracting as the case where the hired party exercises independence in determining basic features of the relationship like rates of pay, how and where tasks are done, and the opportunities for expanding or contracting that work based on the individual’s own skills, abilities, and enterprise. Of particular importance — and an appealing guide for me as someone who has taught managerial economics to MBAs — an independent contractor’s decisions and actions have significant impacts on opportunities for profits or losses. In contrast, under employment, the hiring party basically calls all the shots: what the individual does, how they do their work and when they do it, what they are permitted to do and not do, what performance is deemed acceptable, and of course the rate of pay.

These distinctions matter. A person who is considered an independent contractor is not covered by our most basic labor standards minimum wage, overtime, and the fundamental proposition that one should be compensated for the hours they work. An independent contractor is also not covered by social safety net protections like workers compensation and unemployment insurance — and they fall outside of other protective legislation like the requirements of the Occupational Safety and Health Act and the opportunity to be represented by a labor organization under the National Labor Relations Act. Finally, an independent contractor is responsible for paying all federal (e.g. Social Security, Medicare) and state payroll taxes, making the appropriate contributions as both an employer and employee. Failure to do so exposes the individual to significant penalties (and also deprives state and federal government tax contributions—more on that later).

When workers have little control over their work, but are misclassified as independent contractors, their losses can be huge. In a fairly typical Wage and Hour Division case involving a cleaning services company in Chicago, for example, 55 workers were deprived $185,000 in wages because of misclassification. This equated to an average of more than 8.5 weeks of earnings.

Sometimes, workers’ losses go far beyond wages. A recent investigative report on short haul truckers working in the busy ports of Southern California illustrates this in stark terms.  These truck drivers, misclassified as independent owner-operators, were forced by companies whom they worked to purchase new vehicles to comply with more stringent emission restrictions. Lacking capital, truckers purchased new vehicles through financing provided by these very same trucking companies. Payments for the vehicles were then deducted from pay, leaving little in compensation for the workers. In many instances, the drivers not only suffered huge wage losses (some in the hundreds of thousands of dollars) but also loss of their trucks because of medical or family emergencies requiring them to miss work. All of this because they were beholden to the companies they worked for — without technically being employees. Provocatively, and correctly, the report refers to these workers, the majority of whom are poor immigrants, as modern-day indentured servants.

But it would be a mistake to think that the negative impacts of misclassification simply are limited to the workers they directly affect. Society at large pays a price, too. For starters, a person who should be considered an employee but is misclassified as an independent contractor does not contribute to unemployment insurance or workers compensation. As a result, the practice reduces funding to those social insurance systems. Often, misclassified workers do not pay required payroll taxes, affecting federal and state taxes. This greatly concerns local government agencies, which helps explain why, during the time I served as Wage and Hour Administrator, 36 different states (both red and blue) joined us in working together to address misclassification. This involved information sharing, training, and in some cases cooperative investigations focused on the misclassification problem. Similarly, we created cooperative efforts with employers who were deeply troubled by the threat that competitors who misclassified their workforce posed to businesses that were correctly designating their workforce as employees.

Of course, the debate about workplace classification inevitably gets complex and nuanced depending on the situation. There is no question that the differences across federal and state statutes about how to weigh different factors in classifying workers — whether using the “economic realities” tests associated with the Fair Labor Standards Act or using common law distinctions built around “master / servant” relationships drawn upon by many state statutes — leads to confusion. Hence the issuing of our now-retracted guidance in 2015.

But that problem is hardly limited to the realm of employment law. Legal principles always rub up against the realities of the real world. While it’s vital to understand some of the highly technical legal distinctions around employment classification, we can’t forget the problem underlying the misuse of it. Classification, really, is about protecting people in what is inevitably an unequal bargaining relationship: employment.

The assumption that the mere presence of an app as a managerial intermediary somehow eliminates the longstanding protections established by our laws is troubling. And it’s vitally important we pay attention to this shift in mindset because the use of platforms to help consumers perform tasks and make purchases is likely to increase as brick and mortar retail and service jobs disappear. Even products like groceries, once thought to face limited threat from e-commerce, are fair game, as Amazon’s acquisition of Whole Foods demonstrates. Sure, a shift in delivery method can increase jobs in distribution centers and companies like FedEx and UPS. But as McDonalds recent announcement of a partnership with Uber for home delivery of Big Macs and fries makes clear, it also can be done via independent contractors. Thinking about the nature of these jobs and the responsibilities of the companies involved is as important now as it was in an economy where work was done within the four walls of a duly-designated employer.

Of course, new technologies, the changing expectations of employees, and the dynamic nature of business will always affect the nature of work. This has been true throughout economic history. But this doesn’t mean we should forget or dismiss the underlying reason for our workplace laws going back to the turn of the last century: the recognition that workers need protections because the power to bargain is almost always skewed toward the employer. This imbalance has not evaporated in the flexible work environment of today, nor will it in the foreseeable future. Although we may need to assess whether the ways we provide protections are effective, the underlying commitment to workers should remain.

In the end, it was a landslide. The United Auto Workers (UAW) pulled out all the stops to unionize a Nissan Motors automobile assembly plant in Canton, Mississippi. Yet after a bitter campaign, it lost convincingly, by a 62-to-38 percent margin, with 2,244 employees voting against and 1,307 for unionization. Prior to the vote, the UAW had rolled out the heavy artillery, enlisting the support of Senator Bernie Sanders and Democratic National Committee Chairman Tom Perez, as well as a raft of left-leaning Hollywood stars and a large cadre of skilled union organizers. Their expensive and well-orchestrated campaign hammered home this familiar union theme: workers will only receive fair treatment on the job if they join forces to resist management, which seeks to wring every last cent out of its captive workers.

The UAW hoped that success in Canton would give it an entry point in the union-resistant American South, where it might augment its membership rolls, which have plunged from about 1,528,000 workers in 1980 to about 409,000 workers in 2015. And if the UAW could make a comeback, perhaps other unions could rebound as well and reverse the long-term trend: Union membership in all market sectors, public and private, has dropped from about 35 percent of the work force in 1954 to about 11 percent today—all with no major change in the statutory framework governing labor relations.

Ultimately, the UAW in Canton was outgunned by two forces. The first was the Nissan management team, which pressed the workers hard on a simple theme: why rock the boat when the wages and working conditions at the Canton Nissan plant are far better than anything else available to the employees?

The second was the workers themselves. Nissan workers earn on average $25 per hour, far higher wages than they could garner from alternative local employment. Those wages are stable because they rest on productivity gains, which endure, and not on monopoly power, which can be cut down by more efficient rival firms. Getting this message across requires staying on the right side of a fine legal line. The national labor law’s guidelines for elections require employers, including supervisory employees, to bring a grammarian’s touch to their political messaging. Statements of fact and predictions of future affairs are fair game for union elections, but threats of retaliation against employees, whether express or implied, count as unfair labor practices, which could expose an employer to a reelection even after winning. Indeed, in Nissan’s case, there may yet be a second round, given that UAW Secretary-Treasurer Gary Casteel railed that “Nissan waged one of the most illegal and unethical anti-union campaigns that I’ve seen in my lifetime.”

The magnitude of the union’s loss suggests that employers like Nissan are in a good bargaining position. They have potent rejoinders to union promises of higher wages, greater benefits, and greater job security. Management can tell the workers in plain language that the issues they face are structural, not personal. Gone are the days when a tariff wall protected American auto workers against foreign imports like a fortress. Once the Japanese, Korean, and German firms gained access to American markets, the bargaining landscape was transformed. Raising wages raises production costs, which could price Nissan cars out of the market, with catastrophic losses for workers, their local managers, and Nissan shareholders.

These trade-offs were not lost on the astute Nissan employees. On the positive side, the union could gain somewhat better terms for union members at the bargaining table. But on the negative side, the union takes a cut of worker salaries in the form of substantial union dues. Nor do unions run on pure oxygen, for their operations require at least some level of uncompensated employee participation. Winning short-term gains also increases the risk of workplace disruption from strikes, plant closings, and lost work, all of which can happen if the contract is too favorable to employees. It is no wonder that Nissan management had the vocal support of a strong cadre of pro-management workers who foresaw too much risk from unionization. All economic alliances are uneasy, but the Nissan workers concluded that management, not union leaders, would better enable them to secure their long-term survival and success in a global marketplace.

And the unions know all this too. This is why they pushed so hard in the early Obama years for the misnamed (and temporarily shelved) Employee Free Choice Act (EFCA), which would have allowed unions to circumvent secret ballots in elections. The unions know that many workers are reluctant to object to unionization publicly but will vote against unionization in a secret ballot of the sort that happened in Canton. EFCA’s proposed card-check arrangement would spare unions from the dangers of elections, and it would also force employers to accept an initial two-year contract through compulsory arbitration on a bargaining field tilted heavily in the favor of the unions. The current legal arrangements under the National Labor Relations Act generally allow a well-run management team to beat back a well-run unionization effort. There is a larger pie for management and labor to divide if the union does not get to play a role.

To be sure, the current legal rules are a tangled mass. I have long argued that the pre-New Deal labor law that allowed employers to enter into “yellow-dog” contracts under which individual workers agreed not to join (or promise to join) a union while on the job gets rid of most of this clutter. The employer knows that it faces competitive pressures, so it has to keep workers from quitting. But freed of union shackles, it can expand its workplace without having to negotiate a costly administrative apparatus under which the National Labor Relations Board oversees virtually every aspect of management, union, and worker relationships.

But whatever the defects of the American labor, they pale in comparison to the situation in France and other European countries. The key difference in the two systems is that most of the elaborate French code on employment is embedded in a huge work code, the Code du Travail, which, from its inception in the early years of the 20th century, was a socialist document treating all employers as enemies of the working class whose conduct had to be checked every step of the way. The current tome contains 3,324 pages, with detailed rules for every aspect of the employment relationship, from hiring to firing. These dense, general rules are then compounded by detailed rules for each specific industry. Squeezing the entire employer-employee relationship into a nationwide omnibus code makes it impossible for individual firms like Nissan to finesse the brunt of the labor law by beating back a union’s organizing drive. In France, the only path forward is to tackle the entire code through reform legislation. But current law produces enough winners among current workers that strong unions—most notably the militant left-wing CGT (translated as “the general confederation of labor”)—take to the streets to preserve the status quo.

The 2016 French national elections vaulted former investment banker Emmanuel Macron into the presidency on a promise to make significant modifications to the labor code. The question is whether his early crest in popularity can survive the rigors of confrontational politics, in which entrenched unions hold a lot of high cards. The current conceit is that the Code has become obsolete over time, but the more accurate view is that it was always a huge political and economic mistake, whose costs have only increased as labor markets evolved from mass assemblages of workers on hourly wages to a protean workforce filled with gig workers and moonlighters.

Ideally, Macron should propose that France allow contracts at will—any worker can be fired or quit at will—knowing that the overall flexibility of labor markets will ensure a safe landing for both able firms and competent workers. That at-will regime largely survives in the United States apart from the labor and the antidiscrimination laws, and it has helped fuel the creation of innovative firms like Amazon, Facebook, Microsoft, and Uber. But the need for legislative approval has forced Macron to seek out much more modest proposals that will reduce the costs of dismissal either for poor conduct or economic downturns.

The stakes are enormous, but unless and until France loosens the legislative labor noose, it can expect to retain its persistent 10 percent unemployment rate and a two-tier labor market in which the ins have huge protections, leaving the outs to fight over the crumbs. France would do far better with an American regime under which workers in Paris could emulate those in Canton, Mississippi by saying no to a union and working directly with management.



President Trump announced his plan for tax reform last month, stirring a fresh debate among economists and policymakers. Most of the critical details will be hashed out in Congress, but the plan’s broad outline calls for sweeping, controversial reforms, such as lowering the corporate rate by 15 percent, cutting tax rates for the highest earners, and eliminating a host of deductions.

Jan Eberly, a professor of finance at the Kellogg School and former chief economist of the U.S. Treasury, sat down with Donald Marron, director of economic policy initiatives at the Urban Institute and former acting director of the Congressional Budget Office, to discuss what the new tax plan includes, what it doesn’t, and who may end up paying more.

Jan Eberly: Let’s start with the tax plan that just came out, which is more of a framework than a plan. What features in it do you think are most likely to become law, if any?

Donald Marron: First, I think you’re right—it’s a framework. Calling it a plan would be generous. There’s a lot to be filled in.

I expect, for example, that lowering the corporate tax rate will be part of the final plan. But lowering it to 20 percent, as the current framework proposes? It’s hard to see how you make the math work in terms of budgetary effects. Twenty-five to 28 percent has been where most polite conversation has been.

Jan Eberly: Based on the desire for the reform to stay revenue-neutral?

Donald Marron: Revenue-neutral with an asterisk. In Washington, we tend to focus on a 10- year budget window. And there are potential reforms that might increase revenue in the first 10 years, making it easier to achieve revenue neutrality within those years, but might not continue to deliver money later on.

For example, there’s about two and a half trillion dollars of corporate profits sitting in foreign bank accounts that hasn’t been taxed yet because it hasn’t been repatriated to the United States. Almost any fundamental reform would attempt to remedy this, perhaps allowing the taxes to be paid over several years. That would provide a chunk of revenue that would help smooth the first 10 years.

Jan Eberly: And what about on the personal side? There’s lots of discussion about lowering the top rate from 39.6 percent to 35 percent, and raising the bottom rate from 10 to 12 percent, which I think surprised a lot of people because it’s such a terrible sound bite.

Donald Marron: Well, we currently have seven tax rates, and this proposal wants to take the seven and collapse them into three, with a top rate of 35 percent.

There was also some interesting language in the framework about possibly adding a fourth tax bracket for higher-income folks. This idea of a fourth bracket might be a lever for Congressional committees to offset some of the tax cuts that would otherwise go to the high end.

Jan Eberly: What are the other ways in which taxes are being cut at the high end? What about the issue of “pass-through income”?

Donald Marron: Pass-through income applies to partnerships, LLCs, and other kinds of businesses that don’t pay taxes directly themselves. They’re currently taxed at the personal income rate—which is at most 35 percent in the new proposal. The new framework proposes that pass-through income be taxed at a maximum rate of just 25 percent.

Jan Eberly: This wouldn’t help anyone who’s not already in that high-income category.

Donald Marron: That’s right. In order for you to benefit from this, you have to be in a high enough tax bracket that a maximum of 25 percent matters.

The net effect is that 90 percent of the benefits go to the people at the top of the income distribution. It’s very, very tilted.

And there are two other big issues here. One is, what counts as business income? Drawing those lines drives tax geeks nuts.

The other issue is, if you actually did this, would you create a giant incentive for people who are currently salaried employees to turn themselves into LLCs? Would lots of professionals “LLC themselves” and contract back with their current organizations? How should the rules be written so that doesn’t happen?

Jan Eberly: And what about at the low end? It seems like there are a lot of changes there, too.

Donald Marron: The president says he wants to double the standard deduction—the amount of income you can earn without being subject to tax. However, the plan also eliminates personal exemptions. So it’s not as though you are going to have twice as much income that isn’t taxed; I’ve seen numbers closer to a 15 percent increase in the amount of income that isn’t taxed. But then if you earn more than that, you are starting off at the 12 percent rate rather than 10 percent.

In addition, there’s an interesting group of people who are high-income but not super high, who could see a tax increase, because they lose itemized deductions, including state and local deductions.

Jan Eberly: That’s a very politically powerful constituency.

Donald Marron: Yes. I suspect they will be shaping what actually comes out of Congress.

Jan Eberly: The deductions are interesting. One can think of eliminating state and local deductions as a “blue state” tax. But another big piece of this is deductions for real estate taxes, which are spread across states more uniformly than state income taxes. And it doesn’t look as if all the red states are going to think this is a great idea.

Donald Marron: Right. As you say, it isn’t just income taxes, it’s property taxes, too. And it’s worth noting that even in blue states, there are red districts. So in terms of building a coalition, there are Republicans from New York and California who may have concerns.

Jan Eberly: In terms of increasing the deficit: Whatever the number turns out to be—one and a half, two trillion—this plan paves the way for a 1.5 trillion dollar tax cut, which is far from revenue neutral. How big an issue is that?

Donald Marron: On our current trajectory, according to the Congressional Budget Office, our debt will rise from about 75 percent of GDP to about 90 percent. So we already have huge deficits forecast, and a trillion and a half dollar tax cut would add significantly to those. Eventually—given the demands brought on by an aging population and healthcare costs—we’re going to have to find more revenue for the United States, rather than less. A big tax cut now would move us away from where we need to go.

Jan Eberly: What changes would you propose to the tax code to address the challenges in the economy?

Donald Marron: We have this strange corporate tax code, which has a high statutory rate of 35 percent, and then lots of deductions and exceptions. It’s a system where being cognizant of tax policy is incredibly important for businesses. And that just can’t be the right system to have. What you really want is a system where the corporations spend most of their time thinking about how to run good, profitable, socially responsible businesses, and spend much less time thinking about tax.

I also think we can remove distortions in the code that favor certain kinds of investment over others. If you’re investing your money in a single-family home, the tax code basically subsidizes you to do that. Whereas if you’re investing in a business, it varies. In general, it would be beneficial to equal it out so that the tax code was more agnostic about an investment—though you can make a good argument for a tax code that encourages research and development, or discourages some types of polluting.

Finally, I think there are good arguments for the Earned Income Tax Credit, which is in essence a subsidy for low- and moderate-income workers. It has some design issues, but expanding the EITC would be beneficial for labor supply and for getting people on the career-path ladder.

Jan Eberly: Those all sound like common-sense solutions. Why has there been so little action on tax reform, especially on issues that seem to generate bipartisan support?

Donald Marron:. It’s fun to talk about reducing the corporate tax rate, and it’s fun to talk about expanding the EITC. But then you have to discuss which tax breaks to get rid of in order to pay for these things. The challenge with doing revenue-neutral tax reform is that for every winner, there’s a loser. And the losers really notice.

Jan Eberly: Right. The 1986 tax reform is an interesting example where policymakers kept it all behind closed doors. They didn’t want to give the losers too much input.

Donald Marron: It’s hard to do this stuff in sunshine.

Jan Eberly: Is there anything you wish the broader public understood about tax reform?

Donald Marron: I wish there were a broader appreciation of using a carbon tax as a way to raise revenue for the reforms we want to make to the tax code and also to discourage the emissions driving climate change.

If you made polluting expensive, companies would do less of it. At the same time, it can raise revenue in a way that is not as harmful for the economy as many of the other ways we raise money. I would love for carbon tax to be a larger part of the conversation.


A simulation of the gravitational waves detected by LIGO on Aug. 17. Gravitational waves are ripples in space-time caused by the accelerated motion of massive celestial objects, such as merging neutron stars.

Marking the beginning of a new era in astrophysics, scientists for the first time have detected gravitational waves and electromagnetic radiation, or light, from the same event. This historic discovery reveals the merger of two neutron stars, the dense cores of dead stars, and resolves debate over the origins of heavy elements such as platinum and gold.

To achieve the result, thousands of scientists around the world used data from telescopes on the ground and in space. Researchers at the Harvard-Smithsonian Center for Astrophysics (CfA) played a pivotal role in the work. A series of eight papers led by CfA astronomers and their colleagues details the aftermath of the event and examines clues about its origin.

“It’s hard to describe our sense of excitement and historical purpose over the past couple of months,” said the leader of the team, Harvard’s Edo Berger. “This is a once-in-a-career moment — we have fulfilled a dream of scientists that has existed for decades.”

Hours after astronomers detected gravitational waves from neutron stars colliding on Aug. 17, the Harvard CfA team searched the sky as night fell in Chile using the Dark Energy Camera on the Blanco telescope, and within an hour located a new source of light in the host galaxy at a distance of about 130 million light years. The image above shows the source of light, between the yellow lines, dimming over 10 days.

Gravitational waves, first predicted by Einstein’s general theory of relativity, are ripples in space-time caused by the accelerated motion of massive celestial objects. The Advanced Laser Interferometer Gravitational-Wave Observatory (LIGO) made the first direct detection of gravitational waves in September 2015, when the merger of two stellar-mass black holes was discovered. That work was honored earlier this month with the Nobel Prize in physics.

At 8:41 a.m. this past Aug. 17, LIGO scientists detected a new gravitational wave source, naming it GW170817 to mark the discovery date. Just two seconds later, NASA’s Fermi satellite detected a weak pulse of gamma rays from the same location in the sky. Later that morning, LIGO announced that two merging neutron stars produced the gravitational waves from GW170817.

“Imagine that gravitational waves are like thunder. We’ve heard this thunder before, but this is the first time we’ve also been able to see the lightning that goes with it,” said Philip Cowperthwaite of CfA. “The difference is that in this cosmic thunderstorm, we hear the thunder first and then get the light show afterwards.”

A few hours after the announcement, as night set in Chile, Berger’s team used the powerful Dark Energy Camera on the Blanco telescope to search the region of sky from which the gravitational waves emanated. In less than an hour they located a new source of visible light in the galaxy NGC 4993 at a distance of about 130 million light-years.

“One of the first giant galaxies we looked at had an obvious new source of light popping right out at us, and this was an incredible moment,” said CfA’s Matt Nicholl. “We thought it would take days to locate the source, but this was like X marks the spot.”


Another view of the galaxy where the neutron stars collided, captured by the Hubble Space Telescope. 

The CfA team and collaborators then launched a series of observations that spanned the electromagnetic spectrum from X-rays to radio waves to study the aftermath of the neutron star merger.

In their set of papers, the CfA scientists describe their studies of the brightness and spectrum of the optical and infrared light and how it changed over time. They show that the light is caused by the radioactive glow when heavy elements in the material ejected by the neutron star merger are produced in a process called a kilonova. 

“We’ve shown that the heaviest elements in the periodic table, whose origin was shrouded in mystery until today, are made in the mergers of neutron stars,” said Berger. “Each merger can produce more than an Earth’s mass of precious metals like gold and platinum and many of the rare elements found in our cellphones.”

The material observed in the kilonova is moving at high speeds, suggesting that it was expelled during a head-on collision of two neutron stars. This information, independent of the gravitational wave signature, suggests that two neutron stars were involved in GW170817, rather than a black hole and a neutron star.

Radio observations with the Very Large Array in New Mexico helped confirm that the merger of the two neutron stars triggered a short gamma-ray burst (GRB), a brief burst of gamma rays in a jet of high-energy particles. The properties match those predicted by theoretical models of a short GRB that was viewed with the jet initially pointing at a large angle away from Earth. Combining the radio data with observations from NASA’s Chandra X-ray Observatory shows that the jet pointed about 30 degrees away from the planet.


The Blanco 4m telescope located at the Cerro Tololo Inter-American Observatory, Chile. 

“This object looks far more like the theories than we had any right to expect,” said CfA’s Kate Alexander, who led the Very Large Array observations. “We will continue to track the radio emission for years to come as the material ejected from the collision slams into the surrounding medium.”

An analysis of NGC 4993 and the environment of the cataclysmic merger shows that the neutron star binary most likely formed more than 11 billion years ago.

“The two neutron stars formed in supernova explosions when the universe was only 2 billion years old, and have spent the rest of cosmic history getting closer and closer to each other until they finally smashed together,” said Peter Blanchard of the CfA.

Many observatories were used to study the kilonova, including the SOAR and Magellan telescopes, the Hubble Space Telescope, the Dark Energy Camera on the Blanco, and the Gemini-South telescope.

The series of eight papers describing the results will appear in The Astrophysical Journal Letters on Monday. The four papers with first authors from CfA are on the changes with time of light from the kilonova (Cowperthwaite); the changes with time of the kilonova’s spectrum (Nicholl); the Very Large Array observations (Alexander); and how long the merger took to unfold and the properties of the host galaxy (Blanchard).

Also, Marcelle Soares-Santos of Brandeis University led a paper about the discovery of the optical counterpart; Ryan Chornock from Ohio University led a paper about the kilonova’s infrared spectra; Raffaella Margutti from Northwestern University led a paper about the Chandra observations of the jet; and Wen-fai Fong, also from Northwestern, led a paper about the comparison between GW170817 and previous short GRBs.