Clinton/McCain gas tax plan – dumbest idea yet

Michael Bloomberg chimes in on the latest pander from Clinton and McCain.

Tom Friedman is even tougher on these lame politicians.

It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

Slowdown in China’s factories

Costs of manuafacturing in China are going up, and that’s taking a big toll on some Chinese companies. The days of cheap labor and little regulation are going away.

Now many of China’s manufacturers—including Shan Hsing—are undergoing the kind of restructuring that tore through America’s heartland a generation ago. The U.S. housing market, which generated demand for everything from Chinese-made bedroom sets to bathroom fixtures, has plummeted. A new Chinese labor law that took effect on Jan. 1 has significantly raised costs in an already tight labor market. Soaring commodity and energy prices, as well as Beijing’s cancellation of preferential policies for exporters, have hammered manufacturers. The appreciation of the Chinese currency has shrunk already razor-thin margins, pushed thousands of manufacturers to the edge of bankruptcy, and threatened China’s role as the preeminent exporter of low-priced goods.

Hsu’s new factory, it turns out, is running at just 60% of capacity, and he predicts that half of China’s lighting factories—almost all based in Guangdong—will have to close their doors this year. “Shoe factories, clothing, toys, furniture, everyone is shutting down,” he says. Hsu’s not alone in his alarm. “We spent 20 years building up our industry from nothing to one of the biggest in the world,” says Philip Cheng, chairman of Strategic Sports, which produces half the global supply of motorcycle, bicycle, and snowboarding helmets out of 17 plants in the Pearl River Delta. “Now we are dying.” Cheng says he once earned 8% margins. His margins now? Almost zero.

Comprehensive statistics on shutdowns are hard to come by. But the Federation of Hong Kong Industries predicts that 10% of an estimated 60,000 to 70,000 Hong Kong-run factories in the Pearl River Delta will close this year. In the past 12 months, 150 factories making shoes or supplying shoemakers have closed in Dongguan, says the Asia Footwear Assn. More plants will disappear as demand slows: UBS (UBS) analyst Jonathan Anderson expects overall export growth of just 5% or less for China this year.

John McCain on the mortgage mess

McCain’s lame attempt to offer something about the mortgage mess just two weeks after saying he would do nothing to bail out homeowners shows he will say anything and propose anything to get elected. Conservatives are not happy.

Once the general election starts, McCain’s inability to articulate and defend clear positions on the issues in a consistent manner will be his undoing.

Sensible economic policies

Barack Obama talks about the economy and taxes with Maria Bartiromo. His proposals make sense. Some taxes will go back to the rates during the Clinton years, while many middle class Americans will get a tax cut. When asked about some of the tax increases, Obama has a great response:

Why raise taxes in a slowdown? Isn’t that going to put a further strain on people?

There’s no doubt that anything I do is going to be premised on what the economic situation is when I take office next January. The thing you can be assured of is that I’m not going to make these decisions based on ideology. I’m not a dogmatist. My opponents to the right would like to paint me as this wild-eyed liberal, but I believe in the market. I believe in entrepreneurship. I believe in capitalism, and I want to do what works. One of the problems with the Bush Administration has been its rigidness when it comes to economic policy. It doesn’t matter what the problem is, they’ll say tax cuts. Trade deficit? Tax cuts. Slowdown in manufacturing? Tax cuts. At a certain point, if you’ve only got one arrow in the quiver, you’re going to have problems.

Immigration mess

Bill Gates explains why the H1-B visa program needs to be reformed and how it results in more tech jobs going overseas.

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