The Importance of Helping Ukraine Defend Itself II. Deterring Further Russian Aggression

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My last post explained why we should help Ukraine defend itself.  It shares the liberal ideals of the U.S. and other democracies.  It wants to be free and independent.  It is clearly willing to defend itself against foreign invasion.

 But there is also another big reason For Western support for Ukraine.  Russia, under Vladimir Putin, is a major threat to world order.  He wants to roll back the major gains which European countries have made since WWII, by joining together in the European Union, and supporting the spread of freedom and democracy into Eastern Europe.  The invasion of Ukraine has caused Europe to wake up and directly confront the Russian threat.

The whole world is now condemning Russia for this ruthless military action, including millions of Russian people themselves.  “Russia has suffered a crushing moral defeat.”

It is likely that Putin has ensured his own downfall.  “His hubris is predicated on a profound misunderstanding of the power of liberal democracies. He sees the West’s contention over key policy issues as weakness and harbors contempt for the democratic process.  He fails to understand that these inefficiencies are the result of a real strength – a political system responsive to the will of the people.”

So what the U.S. and the West need to do, besides providing weapons and other supplies to the Ukrainian military forces, is to keep up the pressure on the Russian economy:

  • The U.S. should stop buying Russian oil and gas, relying instead on other foreign sources as well as its own substantial domestic production. Also encourage Germany to stand by its exit from the Nord Stream 2 pipeline coming directly from Russia and develop alternate supplies from other sources.
  • Continue imposing strict financial sanctions on Russian banks. Of course, this will directly hurt the Russian people as well as the Russian government.  But this is what it will take to put strong pressure on Mr. Putin to reverse course.

  • Encourage major multinational companies to exit or at least suspend operations in Russia.

Conclusion.  By trying to restore the strength and dominance of the former Soviet Union, Vladimir Putin is a threat to the peaceful world order which has developed and spread since the end of the Cold War in the 1990s.  He needs to be firmly resisted by the free world and the military invasion of Ukraine is an excellent opportunity to defeat his grandiose ambitions.

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Can the U.S. Economy Do Better? IV. Let’s Try Tax Reform!

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After seven straight years of anemic, sub-par growth of 2.1% annual growth, one of the most important questions in public policy today is whether or not the U.S. economy can do better. I have devoted my last three posts, here, here, and here, to this question, presenting both positive and negative points of view.
Capture7There are very definitely strong headwinds slowing down growth but there are also specific strategies that are very likely to help speed up growth. One of these is tax reform.  The nonpartisan Tax Foundation (TF) has just issued an excellent report, “Options for Reforming America’s Tax Code” with many good ideas. Here are just three of the many different examples presented.  But they show the powerful effects that would be generated by significant tax reform.

  • Replace the Corporate Income Tax with a Value Added Tax (VAT) of 5%. This would be a huge change but it would also have a hugely positive impact. TF estimates that doing this would boost the economy by 5.5% in the long run as well as boosting tax revenue by a whopping $315 billion per year on average. Furthermore, all income groups from low to high would see equal gains in income.
  • Eliminate All Itemized Deductions Except for Charitable Contributions and Mortgage Interest and Lower the Top Individual Income Tax Rate to 27%. This change would grow the economy 1.1% in the long run and also create 496,000 new jobs. It would also increase tax revenues by $26 billion per year on average. It has the defect of raising incomes more for the affluent than for low- and middle-income groups. But this defect could easily be remedied by, for example, limiting the size of the mortgage interest deduction.
  • Cap the Total Value of Itemized Deductions at $25,000. This popular proposal would not help grow the economy but would bring in almost $200 billion a year in new tax revenue.

What is the better strategy? To be pessimistic and accept the point of view that faster growth is just too difficult or to adopt specific policies which are likely to help?

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