Obama may be enjoying himself on Richard Branson’s private island, but the new White House administration has taken a sledgehammer to the foundations of Obama’s legacy in the Middle East. With the future of the Iran deal in the balance and a renewed fervour of support for Israel, Trump’s America does not bode well for peace in the Middle East. Even ignoring Trump’s controversial travel ban to seven majority Muslim countries, many Arabs fear what the brash billionaire will do next to a region where simplistic solutions have never really panned out too well.
In the Middle
Trump’s dealings with Iran are a case in point. Russia has been a long-standing rival of the US, but despite this Trump has been keen to defend his new friend Putin to almost absurd lengths. The ultimate justification of this is always the help that Russia can offer in defeating IS.
Iran has been just as committed to defeating IS in Syria, yet Trump has not reached out one of his ‘huge’ hands with an olive branch. There seem to be two major reasons as to why this could be the case. Either Trump is sticking to one of his past criticisms of anything under Obama that was vaguely ‘deal’-like, or he is seeking to alienate Iran from Russia.
No in-depth analysis is required to show that the latter is highly unlikely and a foreign policy based on anything but core strategic objectives would be worrying, but perhaps not beyond the new commander in chief.
The Unforeseen Consequences
What is ironic here is that if anything, Trump is drawing Russia and Iran closer together. The hardliner anti-Americans in Iran were on the back foot in the upcoming election, yet with developments in the past few weeks, the architect of the Iran deal, President Hassan Rouhani, will find his position increasingly untenable.
He is left a lame duck in the face of no American reciprocity for his efforts. The moderates are not only a better option for human rights within Iran’s borders but the only sustainable pathway to peace in the Middle East.
The Breaking Point
While the world’s eyes were goggling at the fact that Trump was, in fact, delivering on the promises he made on the campaign trail, Israel took the chance to advance plans for 6000 new settler homes in the West Bank. Comments that Trump made about Israel needing to ‘act reasonably’ pale in comparison to the extremely controversial support that Trump seemed to show for moving the American embassy in Israel to Jerusalem.
This kind of attitude from an Israel that now sees no reason to pursue the two-state pushes the possibility of peace between Palestinians and Israelis even further beyond the horizon.
It has only been a few weeks, but Trump has brought his usual ‘shoot from the hip’ attitude to the Middle East. Cracks are already forming in his administration. Now more than ever the fragile network that holds together Arabic nations will be strained, and one should hope it does not break.
Suspect Detained in New York
Following an explosion in midtown Manhattan, a male suspect has been arrested in New York.
The blast occurred on Monday morning near 42nd Street and Eighth Avenue, just one block from Times Square, in one of the busiest parts of New York. Eyewitnesses have said that a man entered the train station with a pipe bomb attached to him before detonating it on a platform. The suspect, Akayed Ullah, suffered burns after the device failed to explode properly and three others sustained minor injuries. New York’s mayor Bill de Blasio confirmed that the incident was a terror attack, making it the second in less than two months. Back on October 29th, a terrorist killed eight people by driving a truck into a busy Manhattan park.
Trump Attacks the WTO
Argentina joined Latin American leaders to strengthen the WTO system in the wake of Trump’s recent comments.
Over the past several months, President Trump has accused the WTO of an anti-American bias and his government is actively blocking the appointment of new judges to site on the WTO’s body. Other WTO nations view this as an attempt to fundamentally alter the system, which has for decades prevented trade wars among its 164 members. Yesterday, at the WTO meeting in Buenos Aires, WTO nations urged the US to re-commit to the organisation’s principles and strengthen the existing relationships within the current system.
Republicans Without Principles: Roy Moore and the Tax Bill
The Republican National Committee (RNC) joined with Mitch McConnell and approximately 18 Republican Senators in urging Roy Moore to resign. They pulled campaign funding and took the moral high ground…until the Senate voted on the tax reform legislation and they discovered that they only had one vote to spare.
The Alabama election takes place on December 12, 2017, before the date of a final vote on the reconciled tax bill that Republicans hope to place on the President’s desk before year end. And so, following the lead of the President, who is satisfied that Roy Moore not only denies but “totally denies” all allegations against him, the RNC changed direction and agreed to re-dedicate its support for the alleged perpetrator of over eight sexual assaults, four of which were on minors.
The Senate Tax Bill
Analysis of the Senate Bill has been extensive in the past few days. It has highlighted several problems arising from the hasty way it was passed.
Firstly, the alternative minimum tax (AMT) has not been repealed. Under current law, AMT is 20% compared to a regular tax rate of 35%. The bill passed by the Senate has both at 20%. Because certain deductions permitted against the regular tax liability are added back for AMT purposes, most corporations will, unless this is fixed in conference, now pay AMT rather than regular tax.
Additionally, the base erosion anti-abuse tax (BEAT) is a problem. It’s complicated. It’s intended to protect the tax base from US parent companies making payments to overseas affiliates whose earnings will be subject to a lower tax rate. But it will have negative consequences for the US taxpayer who reduces its US tax bill by any number of legitimate tax credits available to investors in renewable energy or low-income housing.
It’s not clear if these problems are oversights or intended features. It’s hard to admit the truth – that this was passed too quickly and without due consideration – because that is the point made by the Democratic Senators. Perhaps, as Nancy Pelosi said in respect of the Affordable Care Act, “We have to pass the [healthcare] bill to know what’s in it”. It was a terrible argument then; it’s a terrible argument now.
Christmas for the 1%
The 1% wealth bracket in the so-called Blue states of California and New York will be negatively impacted by the elimination of deductions for state and local tax and the limitation of the property tax deduction to $10,000. Overall, however, it is clear where the benefits of the Senate Bill flow, state, local and property taxes notwithstanding: to those making over $1,000,000.
The reduction in the corporate tax rate that has been approved will, according to many the CEOs interviewed, result not in additional investment in human or other capital but rather in share buybacks and increased dividends.
Why is the 1% Angry?
Senator Charles Grassley observed that the importance of repealing the estate tax was to ensure that those productive members of society would not be punished for a lifetime of thrift and hard work:
“I think not having the estate tax recognises the people that are investing, as opposed to those that are just spending every penny they have, whether it’s on booze or women or movies.”
The quote from Grassley raises a great point: fundamental attribution error. People are comfortable attributing outcomes to others based on their character and disposition: the poor are lazy; that’s why they are poor; the rich are rich because of hard work and intelligence. When explaining their own misfortunes, however, people are inclined to attribute causation to external circumstances. Gressley reinforces this fundamental error by his tactless comment.
The last ten years have been extremely rewarding for the top wealth slice of US society. Corporate earnings have been strong, and the financial markets have delivered robust returns to those who have been able to participate. It is not clear why either corporations or the wealthy have any reason to complain.
The middle and lower classes, on the other hand, have struggled with wages that have been essentially flat over the same period and with health, education and housing costs that have been climbing. It was this constituency that Donald Trump appealed to in his bid to be elected.
One of the unfortunate features of this tax bill is that, while everyone will enjoy tax cuts for the next ten years, the benefits will flow disproportionately to those with incomes over $500,000 after ten years. Individual tax cuts will phase out unless extended, whereas corporate taxes will remain at the same level. Consequently, the benefits of the corporate rate cut – increased dividends and share buybacks – will continue to flow to those with incomes over $1mn.
There is hypocrisy on both sides of the political divide, but the Republicans are running the show at the moment and the ‘house’ is beginning to look very crooked indeed.
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