Category Archives: economics

Will a cut-off in oil to China spark war?

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China is likely the largest economy in the world, 11% lager than the US calculated here based on food purchasing parity They also have a larger army and navy, 754 ships vs 440, with military ambitions for Taiwan and new, man-made islands in the China sea. They continue to add aircraft carriers and submarines (we’re still ahead there), but China fuels all this with oil. They use some 17 million barrels per day: 11.3 million imported by ship, and put another million bb//day per into reserve in case there is a shutoff.

A problem for China is that their internal production, 4.5million bbl/day, is far below their consumption, a big vulnerability. One of their main suppliers, Venezuela, just went off line, sending 800,000 bbl/day of oil to the US that would have gone to China. Two other of their major, sanctioned suppliers, Iran and Russia have had delivery issues too; a disruption in oil could cause a revolt in China. Perhaps this fear will drive China to war with us, similar to the way that a cut off in oil caused Japan went to go to war with us in WWII, see table below. Japan had the choice of war or shutting down their economy and ambitions. Perhaps China may choose the same if Iran and/or Russia goes off-line. That was my worry, I’m no longer that concerned.

This shows how dependent Japan was on foreign oil, before and during WWII. The cut off of imports sues them to attack Pearl Harbor, source = Sarah Paine, military historian

Currently, China buys most of its imported oil from four countries: Russia, Iran, Saudi Arabia, and Iraq; two of these are under sanction. China used to get another 0.8 million barrels per day from Venezuela, another country under sanction, but that route was closed by Trump last week. Buying from sanctioned countries saves them significantly, and supports the BRICS alliance, an alliance specifically against the US (NAFTA?) and the EU. The money they pay to Russia and Iran supports the war against Ukraine, plus ISIS’, war against us, and the mullahs oppression in Iran.

Oil production worldwide, 2024. How much China buys from each varies month to month.

China was buying, from Russia, some 2.2 million barrels of oil and refined products, plus natural gas and coal (China is a big coal user). The rest of Russia’s output goes to India, Turkey, and the EU. The EU buys more than half of eastern Russia’s natural gas output, shamefully it has likely kept Germany from collapsing. The problem for China is that Russian production is under attack from Ukraine. Ukraine sank or disabled several Russian tankers, and we took some more; they’ve blown up pumping stations, including three on the Caspian Sea, set fire, to a large liquid natural gas terminal and damaged the major off-load platform for Kazakh oil. According to the Foundation for Democracy report, here, by October 2025, China was down to getting only 800,000 bbl/day from Russia, a major blow, and Ukraine’s attacks continue.

Some dark fleet ships captured by the US navy off of Venezuela, on their way to China with sanctioned oil.

Iran is another major supplier under attack. Up until recently they provided nearly 2 million barrels of oil per day, 90% of Iran’s seaborne export. Much of that went indirectly, going to Indonesia, turkey, Iraq, and Kuwait where it was relabeled, blended or refined to avoid sanction penalties. Everyone makes a profit here, but Iran is in the midst of a revolution. Last week, Trump imposed an across-the board 25% additional tariff on counties that help Iran avoid the sanctions. My guess is that this tariff will be effective and that it will last until the revolution is over. His tariffs have been effective and profitable, it seems.

China has non-sanctioned suppliers. They buy some 1.6 million barrels per day from Saudi Arabia, about 1.2 million bbl/day, from Iraq, about 1.3 million bbl per day from Malaysia, about 700,000/ day from Brazil, and about 900,000/day from the USA. In principle, they could make up any losses by buying more here, but the price would be higher. Worse yet, Trump could cut China off. That would be devastating; it’s the reason China built up a reserve of 2.2 billion barrels amounting to 6 months of current use. Japan did something similar in 1941, building up a year’s worth. They then used all of it in the first year of the war, while conquering Indonesia, a new supplier. For all I know, Trump’s activities in Venezuela and Iran are meant to force a war decision on China before they are strong enough to defeat us. It seems to have been FDR’s logic.

China’s main way to address a possible oil disruption, as best I can tell, has been to push EVs development. They’ve financed some 500 new EV companies who now (late 2025) provide about 50% of new Chinese automobiles. Another 19% are hybrids. In the US, only 8% of new cars are EVs, and 16% hybrids. Large-scale use of EVs lessens the pressure on Chinese leaders to find oil sources, some 40% of oil imports can be assumed to go to fuel automobiles; if China were to go 80% EV, it would save 5.5 million barrels/day, more than it gets from Russia and Iran combined. For now, though, China has a big need for gasoline, and has a big excess in EV manufacturing. It has turned to Canada both as a customer for EVs and as a supplier for oil.

Last week, Canadian PM, Mark Carney visited China and announced a “Strategic Partnership” on Agriculture, energy, finance, and Global governance.” There’s no specific mention of oil, but it’s implied. China gets most favored nation status sending goods, including EVs to Canada at rates lower than on US goods. China will export some 50,000 EVs in 2026, rising to 70,000 by 2030 with tariffs set to 6.1%. US-made cars are tariffed at 25%. Canadians will get visa-free, tourist visits), plus a loan of $1B to be used buying Chinese ships. In Davos last week, “We are in the midst of a Rupture” away from the US. He urged the EU and other “middle powers” to band together. He talks like China is a good, reliable friend to Canada, and like the US isn’t. I would worry more about his comments and the “global governance” phrase, if the EU seemed to be going along, but it is not. Nor do I see a real move in China for war. I see positive effects of increased EV sales for China, Canada, and the world. Even if the quality isn’t great, Go Canada, go peace.

Robert Buxbaum, January 25, 2026. *The plan to attack Pearl Harbor was made in December 1940, a year before it happened and 9 months before we cut off oil shipments. We cut off oil shipments in September, following Japan’s invasion of Indonesia, done to take the oil there. While oil was not Japan’s only aim in WWII, it was an aim and a big participant at every step.

Tariffs raise $30 billion per month, but haven’t affected inflation

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Economic experts claimed the tariffs would raise no signifiant money, would bring in no jobs, and would be so inflationary that the damage would far exceed any benefit. President Trump instituted them anyway, claiming they would benefit workers, raising wages, returning manufacturing to the US, and serving as a tool of diplomacy. Based on data so far, it appears the experts were completely wrong, and that Trump was right on all counts.

As an average, for the last nine months, our tariff rate has been about 17%, as shown in the chart above, bringing in about $30 billion per month. That tariff rate is as high as it’s been since the 1940s, but far lower than it was in the early 20th century. Chinese products are taxed more, at 47.5% on average, while goods from Mexico and Canada are taxed less, about 5%. High or low the tariffs generate complaints all around. Strangely, those complaining, in the US and out, see nothing amiss with the tariffs that our trading partners have placed on US products. The money from these tariffs came in handy, for example during the recent government shutdown, when we could not borrow money. This tariff money allowed us to pay the military and has helped reduce the annual deficit.

Despite the dire inflation prediction, there has been no noticeable uptick. Inflation has held constant for the last year, at about 2.7%. This is the same as during the last months under Biden, see chart, and is far lower than the 4-8% we saw for most of the Biden term. Basic commodities, in particular, remain cheap, with the price of gasoline and beer lower than in 2024, and luxury imports somewhat more expensive. Lower and middle income Americans don’t seem to mind since most of us don’t buy these goods. This year of inflation data supports Milton Friedman’s claim that taxes are inflation neutral, and that the cause of inflation is government overspending, as he says here. Liberal experts disagree, but the data says otherwise. I suspect the experts are blinded by overly simple theory, of Keynes, that they refuse to abandon. Alternately, they may be willfully lying to promote the agenda of university heads and all others who fund them. I noticed this pattern with global warming experts too. They don’t change their models and dire predictions though it’s way past 2014, and the arctic isn’t ice free.

There has been some job growth, but less than hoped for. There was a decrease in the tech sector and in government employment, but an uptick in services and healthcare. Unemployment has changed little, remaining at 4.4%. Several foreign businesses have moved manufacturing to the US. These include BASF, Volkswagen, LG, and Hanwha to name a few. Hanwha just completed its purchase of the Philadelphia shipyard, and committed $5B to its modernization. I consider this very important. It provides jobs, but beyond this, improved shipbuilding will help us commercially and militarily.

The reason that employment has not gone up as much as hoped seems to be that we’re still buying the same amount from abroad as before, containerized are the same as in the pre-COVID years, see chart below. There’s been some switching of sources, with more coming from Mexico, Taiwan, and Vietnam, and less from Canada and India. Import volumes from China have hardly changed though, since last year, nor have the prices that Americans pay risen. This suggests that China is “eating the tariffs”. I suspect they’ve undervalued their currency to make this happen. We’re selling a little more too, causing the trade imbalance to narrow, but the sales increase are largely precious metals (gold) to China, about 1000 tons in 2025. I’m not sure what China achieves by this; they’ve raised the price of gold to $4,675/oz currently, about double in 1.5 years, and kept the price of Chinese currency low. Perhaps that’s the intent — to keep their currency devalued relative to the dollar. Maybe they have some other idea, like to switch to a gold-backed currency? Who knows? Their purchases increase the value of our gold in Ft. Knox.

Trump’s other justification for the tariffs was as a tool of diplomacy. Trump is using tariffs somewhat this way, as a non-military stick to encourage friendly nations to do what he wants. He got Mexico to stop immigrants and drugs, encouraged the same from Canada and Columbia. He got the EU to spend more in their defense, and got them deal a little less with Russia. They’re still the biggest buyer of Russian natural gas. He also used tariffs to nudge for peace in the Middle East, and between Cambodia and Thailand. Recently, he’s using them to support the Iranian rebels by threatening countries that buy from Iran, or that help the mullahs launder their money and oil. All in all, the tariffs seem to be working for us. The experts are not impressed.

Robert Buxbaum, January 19, 2026

Is China really a smaller economy than the US, but twice as efficient

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The Economist has run this burger-metric of currency valuation for 40 years or so. I find it instructive.

One can buy a new electric car in China for US $20,000, roughly half of what it would cost in the US. Similarly, a good phone is cheaper in China, or clothes, or a Big Mac. A McDonald’s Big Mac in China costs, effectively $3.55, 59% of what it costs in the US, slightly less than 3/5 the US price. The Chinese explanation is that China is nearly twice as efficient as the US at most every type of manufacturing. I don’t believe this explanation, though there is some truth to it: Their electricity is cheaper, in part because they burn mostly coal for electric power. Meanwhile we have shut-down our coal plants, and have hardly built nuclear since the 1970s.

Another source of efficiency is that China arranges its manufacturing into dedicated cities for different products, one city for toys, another for luggage, others for cars, planes, hair driers… This helps efficiency but I’m not sure how much, and I don’t see these advantages applying to McDonald’s. There is no way I believe their workers are 5/3 as efficient as US workers when it comes to making burgers. It’s not like they ship the burgers from a central factory, and they buy gain and meat from us. My sense, then, is that it’s not efficiency that keeps prices low, but that the Chinese currency, the yuan is undervalued.

It’s hard to estimate how much their currency is undervalued, but I will use the burger-metric, above and say the yuan selling for about 3/5 its true value, and that this explains most of why Chinese shoes, cars, and clothes are so cheap. The rest of the price difference is efficiency, I’d guess. China isn’t the only country with an under-valued currency; Japan’s currency seems even more undervalued. Similarly India, Taiwan… The China is a bigger economy, though, and correcting the Chinese GDP by 5/3, I find their economy is yet bigger, about 111% as big as ours. By a similar correction, European economies appear smaller than they are given credit for.

Chinese electricity is cheap, in part because they burn coal. Also, their currency is undervalued; ditto for India, Indonesia, Turkey.

China’s undervalued currency helps propel its growth, I think, and provides us with cheap goods, but our industry suffers. Also troubling, China will likely surpass us militarily in 3-5 years. One way of slowing this is through tariffs. Trump’s tariff formula, as I understand it, was designed to preserve some China trade, allowing US consumers to benefit, but also taxing the exchange. I think this is a good idea.

Another proposal is to lower the US interest rates. Currently our prime interest rate is 6.5% while China’s is 3%. This provides an incentive for the Chinese industry to invest in the US, maintaining its undervalued currency. The benefit isn’t quite as large as it might seem since we have a 2.7% inflation rate and China has a 0.7% inflation rate. Correcting for this, our bonds return an effective 3.8% and Chinese bonds return 2.3%. The difference is about 3/5 similar to the mismatch in our currencies. Trump has been pushing the Federal Reserve to lower our interest rates, and The Fed has grudgingly agreed, slowly. A lower interest rate would also spike US industry and inflation, and help reduce the government deficit. Trump has also proposed new ships for the navy. Too little, too late, I think. Things should get dicy in the next decade between the US and China.

Robert Buxbaum, December 30, 2025. I started this post not knowing where it would lead. As I research and write, I learn. Perhaps you will too,

Rich folks aren’t taxed because they have no income; you can do some of this too.

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Two tax questions: (1) How do the top rich people manage to pay such low taxes, e.g. Warren Buffett paying at 0.1%. and (2) why do these rich folks campaign for higher taxes. Warren Buffett has campaigned for higher taxes for 50 years. These questions seem perhaps related.

I got my tax data from a public tax advocacy group, ProPublica. In 2021 they received the tax filings for many important people including the 25 US richest from the years 2014 to 2018. They find that these individuals paid a total of $13.6 billion in federal income tax while their wealth rose a collective $401 billion, go here for more. Dividing the numbers, we see an average income tax rate of only 3.4%, with Warren Buffett paying the least, 0.1%. This is far less than the “half of the rate that my secretary pays,” that Buffett likes to claim.

The reason these people pay so little tax is that their taxable income is zero. They use a very wide variety techniques to do this. Among these are charitable foundations, including those that lobby for higher taxes and against climate change. The foundations buy private planes and send the founders (and their families) to climate change events in the South of France or Davos, Switzerland. “Pro-tax” foundations hire tax accountants to research ways that the rich avoid taxes, often the founders then use these methods while speaking out against others who do the same. Bezos was so successful at avoiding income that he got welfare payments in two of the five years, ProPublica found. Soros and his son got $2,400 in COVID payments. They had almost no income. The one tax all these folks hate is tariffs because it is almost impossible to buy new, expensive things from abroad while avoiding them. See my essay, “Tariffs are inflationary, but not on you.”

Another advantage of a charitable foundation is that 74% of your donation can offset capital gains. You have to itemize your donations, but If you give $1 million to your foundation, you can use it to offset $740,000 of stock appreciation earnings. Not a bad deal. You can also use any stock losses against gains. Thus, it’s a good idea, if you itemize, to sell some losing stocks when you sell gainers (while holding on to other gainers, of course.) All of this is only available to those who itemize, and it’s only the rich who benefit by itemizing.

Borrowing money against your assets is another popular tax avoidance scheme, one that ordinary folks could use (but don’t over-do it*). The scheme is often called “Borrow, Buy, Die.” You borrow a large sum against your assets (your home, your stocks, or options –Musk has lots of Tesla options, etc). You then use the borrowed money to purchase property, typically: a vacation home, rental properties, a hotel, or a car. If you structure the purchase right, the interest can be deducted from any other earnings you have including rents. You then have no taxable income, or a lower income while the property appreciates. You can often structure the purchase so that depreciation can be deducted against income as well. Meanwhile, you get to drive the car, live at the vacation home, or rent it as an Air B&B, or stay at the hotel for free.

You live this way until you die. When you die, your heirs get the asset, but they are not taxed on the appreciation. The asset is transferred at its value at the time of death. You’ve avoided paying all the income tax you’d have to pay if you were to sell before death. Most home-owners do this on a small scale: They borrow to buy their home or the building where their business is. Or borrow to buy a vacation home or income property. They use through their life-time, deducting the interest, then leave it to their kids. There is no inheritance tax on most homes or small businesses, and the asset appreciates year to year. Both Nixon and Obama proposed eliminating this loophole by taxing appreciation at death. This would be a lot fairer than the current inheritance tax that is full of loopholes, and unfair when it works. If your parent bought a $10,000,000 item with taxable income, and it remains at that value, why should it be taxed a second time at death?

For a small businessman like me, it made sense to borrow to buy the building that my business operates out of and pay myself a normal rent. It’s income, as real as salary, but taxed at a lower rate, Besides there is no payroll tax on rental income. Another advantage of renting to myself is I can be trusted to fix the building and pay the rent, and I will not throw myself out if there is a downturn, nor will I raise the rents exorbitantly. My car is owned by my business, another plus. I pay a fee for personal use, but this is cheaper than using my own taxed income. When I die, the building (and car) will go to my heirs, tax free.

One last change I’d like to see is in the payroll tax. I’d like to see it tax the entire taxable income, but at a lower percent than the current 15.2 or 7.6. Currently the first $150,000 of income is payroll taxed at 15.2% for a self-employed individual, a plumber or office cleane, even before he/she pays income tax. An office worker is taxes at half this rate, 7.6% before income tax, with the company making up the other 7.6%. A CEO making $10 million pays this rate too, but only on the first $150,000. This amounts to $11,400 in payroll tax, or less than 0.11% of salary. I consider this disparity a bigger scandal than the fact that the richest 25 Americans paid only 3.4% in income tax.

Robert Buxbaum, November 25, 2025. *Trump presents a cautionary tale about property investing; if you invest at the wrong time, you can lose your shirt. In the late 80s, the property market in NY collapsed briefly, and he really was less than penniless. Don’t over-extend. The property market doesn’t collapse often, but you don’t want to be wiped out if it does.

What causes innovation? is it worth it?

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Innovation is the special sauce that propels growth and allows a country to lead and prosper. The current Nobel prize believe that innovation powered the Industrial Revolution, causing England to become rich and powerful, while other nations remained poor, weak, and stagnant. Similarly, Innovation, they believe is why 19th century Japan rose to defeat China, and propelled China’s 21st century rise. But why did they succeed when others did not. What could the leader of a country do to bring power and wealth through innovation. Improved education seems to help; all of the innovation countries have it, but it is not the whole. Some educated countries (Germany, Russia) stagnate. An open economy is nice, but it isn’t sufficient or that necessary: (look at China). That was the topic of this year’s, 2025 Nobel prize in economics to Mokyr, Howitt, and Aghion, with half going to Joel Mokyr for his insights, historical and forward looking, the other half going for economic modeling. I give below my understanding of their insights, more technical than most, but not so mathematical as to be obtuse the normal reader..

The winners hold that innovation, as during the industrial revolution, is a non-continuous contribultion caused by a particular combination of education and market opportunity, of theoretical knowledge, and practical, and that a key aspect is depreciation (destruction) of other suppliers. Let’s start by creating a simple, continuous function model for economic growth where growth = capital growth, that is dK/dt. K, Capital, is understood to be the sum of money, equipment, and labor knowledge, and t is time with dK/dt, the change in K with time modeled as equal to the savings rate, s, times economic activity, Y minus a depreciation factor, δ, times capital, K.

growth = dK/dt = sY − δ K.

Innovation, in the Howett model, is discontinuous and accumulative. It builds on itself.

For the authors, Y = GDP + x, where x is the cost of outside goods used. They then claim that Y is a non-linear function of K, where K is now considered a product of capital goods and labor K = xL and,

dY/dK = AKα + γ where 0< α <1, and where γ is the contribution of innovation and/or depreciation. The power function, as I understand it, is a mathematical way of saying there are economies of scale. The authors assume a set of interacting enterprises (countries0 so that the innovation factor, γ for one country is the depreciation factor for the other. That is, growth and destruction are connected, with growth being a function of monopoly power — control of your innovation.

According to the Nobel winners, γ is built n previous γ as shown in the digram at right. It can not be predicted as such, but requires education and monopolistic power. The inventor-manufacturer of the typewriter has a monopolistic advantage over the makers of fountain pens. Innovation thus causes depreciation, δ K as one new innovation depreciates many old processes and products. If you add enough math, you can derive formulas for GDP and GDP growth, all based on factors like A and α, that are hard to measure.

GDP = α(2α/1−α) (1-α2)A L,

Thus, GDP is proportional to Labor, L and per-capita GDP is mostly an independent function related to economies of scale and the ability to use capital and labor which is related to general country-wide culture.

The above analysis, as I understand it, is in contrast to Kensyan models, where growth is unrelated to innovation, and where destruction is bad. In these Kenysean models, growth can be created by government spending, especial spending to maintain large industries with economies of scale and by spending to promote higher education. The culture preferred here, as I understand is one that rewards risk-taking, monopoly economics, and creative destruction. Howitt, and Aghion, importantly codify all this with formulas, as presented above that (to me) provide little specific. No great guidance to the head of a country. Nor does the math make the models more true, but it makes the statements somewhat clearer. Or perhaps the only real value of the math is to make things sound more scientific see the Tom Lehrer song, Sociology.

This insight from movie script by Grham Green suggests to me that progress may not be the greatest of advantages, perhaps not even worth it.

This work seems more realistic, to me, than the Keynesian models Both models are mathematically consistent, but if Keynes’s were true, Britain might still be on top, and Zambia would be a close competitor among the richest countries on earth. Besides these new fellows seem to agree with the views of Peter Cooper, my hero. See more here.

Writing all this reminds me that the fundamental assumption that progress is good, in not necessarily true. I quote above a line that Orson Wells, as Harry Lime, ad-libbed for the movie, “The Third Man.” Lime points out that innovation goes with suffering, and claims that Switzerland had little innovation because of its stability. Perhaps then, what you really want is the stability and peace of Switzerland, along with the lack of domination and innovation. On the same note, I’ve noticed that engineering innovators often ruin themselves dining in ruin, while the peaceable, stable civil engineers live long pleasant lives of honor.

Robert Buxbaum, November 16, 2025. A note about Switzerland is that was peaceful and stable because of a strong military. As Publius Vegetius wrote, Si vis pachim para bellum (if you wish of peace, prepare for war).

The shutdown will drag; we will win

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In theory, both US parties are committed to a balanced budget. Both claim they’ll tax as much as they spend, and we’ll pay our debts. In practice, both parties overspend wildly, year after year. The growth in non-defense spending (pork) is particularly egregious, see graph. For fiscal 2024, the 12 month period ending Sept. 30 2024, the government spent $6.75 trillion ($6750 billion), over 20% of GDP and 37% more than the $4.92 trillion we took in in taxes ($4,920 Billion). The difference, $1830 billion, was added to the national debt, already at $34 trillion, pushing it to $36 trillion, that’s more than 100% of our GDP. The interest cost alone is $1.22 trillion per year, 1/4 of our tax income.

Trump campaigned claiming he was going to balance the budget, but he has not (yet). There were some attempts via DOGE, saving about $214 billion, but the DOGE boys were outed, attacked, and gave up. And now the Democrats have forced a shutdown, using their power to prevent additional borrowing. This leaves Trump with a choice, either balance the budget or accept their spending demands. The expectation is that Trump will fold: there is no way he can find $1830 billion/year. Otherwise, many of the governments 4.2 million workers will go without pay, and many important services will stop.

So far, three weeks in, Trump seems fairly successful at keeping most things running while trying to balance the budget. Even if he fails, as seems likely, we will benefit from the attempt, I think.

Some government services are guaranteed to continue despite the shutdown: Social security and the post office because they are funded separately. Similarly, the patent office, the ports, and the airports. In the past some had to shut, but Trump has raised fees so they remain open and operating.

Essential workers, 800,000 people including customs agents and air traffic controllers continue working with most going unpaid. Trump committed to paying active duty military and for the WIC food program using money raised by new, 2025 tariffs. Tariffs are currently bringing in ~$300 Billion/ year, and so far tariffs mostly don’t affect ordinary folks, and help return manufacturing to the US. Some time soon we’ll have to pay the necessary workers and also some 750,000 non-necessary employees including: half the Dept. of Education, most of NASA and Energy.. They are not really useless, but are doing nothing essential to the day-to-day operation of the country.

Trump seems committed to removing many non-necessary workers in an effort to streamline and balance the budget. He fired 4200, bought out another 25,000 earlier this year, and has issued pre-termination notices to 75,000. A federal judge has blocked all firings as unlawful, but my sense is they are quite lawful and mostly beneficial. If you can’t fire non-working, un-necessary workers that you can’t afford to pay, who can you fire?

I suspect the shutdown will last well into November, well past the election, and that more folks will be fired or bought out. The key November crossroads will be food stamps, SNAP. These benefits are scheduled to end November 1 baring an end to the shutdown. Normally the bill is $110 billion/year, but Trump has eliminated benefits for illegal aliens and asylum seekers, and has instituted tougher work requirements. Democrats seem certain that Trump will fold. For the 11th time they scotched a bill to fund this and reopen the government and pay SNAP. I suspect that, at the last minute, Trump will find savings, or left-over funds and will keep SNAP funded through November.

Among the new savings, Trump ended the EV subsidy last month, saving about $7.5 billion/year ($7500 x 1 million EVs), and has negotiated some reductions in drug costs. He also increased the tariff on some Chinese and Canadian goods appropriate for rectifying trade imbalance, it’s been blocked by a federal judge. He’s also cancelled some rail work and research, saving $28 billion, and cancelled $20 billion for hydrogen hubs, and 83% of USAID. Also two navy ships that were years behind schedule and billions over budget. We need the ships, but don’t have the money. So far, this saved enough to pay all military servicemen.

Beyond this, I hope he cuts Biden’s high speed rail plans: $550 Billion for fast trains, Chicago to Seattle, Detroit to Toledo, San Francisco to LA, etc. The investment is $1,500 per person in the US. The eager thinkers overseeing this would never invest their own money, but are happy to invest everyone else’s. I also hope to see the end of NASA’s SLS rocket to the moon, nice but far more expensive than Falcon. We could also cancel some F35s ($0.1 Billion each to buy, and far more to maintain). Musk suggested replacing them with drones. I don’t know that these savings are enough. I don’t know how long we can continue, but each day shut, we move closer to a balanced budget, and that’s a good thing.

Robert Buxbaum, October 21, 2025

Thomas Kuhn, and why half of America loves/ hates Trump

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This post was inspired by articles like the one below asking how it was that some Americans, MAGAs think Trump is good when everyone of value sees him as a fat, bigoted, criminal clown. The Atlantic’s answer is they’re detached from classic ideals of good or moral, and are now fueled by “narcissism, fanaticism, and authoritarianism”. I thought a more helpful explanation was that we’re going through a paradigm shift, perhaps progressing in our thought of what it means to be good.

Consider Thomas Kuhn’s analysis of scientific progress. Tomas Kuhn was a major American Philosopher of the 1960s-70s who claimed that science progress was not uniform but included long periods of “normal science” punctuated by change. A “crisis” leading a “Revolution” resulting in big changes in language, outlook and thinking, a “paradigm shift”. In the midst of these scientific revolutions, the experts of the old system fight bitterly against the new while being confounded by the fact that it seems to work.

Consider the resistance to relativity and quantum mechanics. Before 1905 the experts were doing fine: Professors taught and students learned — formulas, tools and techniques were handed over. Educated had respect and money, and could communicate. There were some few contradictions, as in why the sun burned hot, or why the sky was blue, but one could ignore these. You knew who the experts were, and they didn’t include Einstein, Bohr, Pauli, Plank.

Democrats sell red hats and buttons with Fascist or Felon because Trump’s red MAGA (Make America Great Again) hats work for him.

But then came a few more problems, (inconsistencies in Kuhn-speak: radioactivity, photoelectrons, the speed of light… Einstein published on them in 1905, thoughts that few took seriously: imaginary time was a fourth dimension at right angles to the others, etc. The explantations seemed mad and for 14 years after he published, Einstein could not get a university job — anywhere. By 1919 detailed experiments suggested he might be right on a lot of things. It lead to the rise of a new group of experts plus a loss of esteem for the old, and a bunch of crank explainers who were neither but flourished in the confusion.

Hate abounded; new weapons and cures WWI removed aristocrats and beards. A popular book a lecture series of the time was “100 scientists against Einstein.” There followed a lost generation with no clear foundation. It took 50 years to resolve confusion, but there developed new thought leaders, a new language, new standard formulas and books were sold, and we were returned slowly to “normal science” in a new thought paradigm.

I see the conflict of opinion surrounding Mr Trump as a crisis in political thought similar to the crisis in science thought 100 years ago. Polite discourse if gone, replaced by stunts and insults. The government is currently shut, with 40% federal workers, those whose jobs are non-critical, on unpaid leave. It’s a collapse, not of morals, but of language. Trump hopes to use the shutdown, I think, to show that most of these 40%, are not needed. If they are not needed, it reflects a big lack in government — actually a big bloat in government. You can see why the opponents of cuts see Trump as a fascist who uses “dog whistles” to motivate “his base”, there is a lack of communication and a fear Trump may be right too, I think. The experiment in smaller government is being run as I write, and Trump seems confident that some 400,000 federal workers are not needed. Are they? Instead of debating, we’ve got to violence: two attempts on Trump’s life so far, the main college debater, Charlie Kirk, shot dead. Appropriate, I think, is Bob Dylan’s, “Times are a-changing” and “something is happening here, but you don’t know what it is, do you, Mr Jones.”

Other questions are being worked out as we speak -sending chills through the old order: Are China and Europe “ripping us off,” by free trade and stolen technology? Are tariffs an answer. Canadian and European leaders deride these thoughts openly, but I notice that both Canada and the EU have put heavy tariffs on Chinese goods.

Another issue is respect for experts. The Atlantic bemoaned that Trump supporters don’t respect experts on health, climate, and education, but perhaps they are lying. The seas have not risen as expected. Some warming may be good, or better than the remedies. Even if RFK Jr.’s ideas are wrong it seems that science has become unreliable (irreproducible), and that elite colleges aren’t fair in their assessment, nor do they provide great value.

Eventually things will settle down; we will some day have polite discourse. In 40-50 years, I suspect we’ll agree that some tariffs are good and that Trump’s tariffs are either to high or low, We’ll think that the climate push to no nuclear power, was a mistake, as was the giant, Ivanpah solar farm). And we’ll be able to discuss it civilly. I hope the change in thought takes less than 50 years.

Robert Buxbaum, October 3, 2025 – we are now entering another physics crisis too, I think.

Tariffs on German cars are inflationary, but not for you.

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As things stand, the major export of Germany to the US is high end cars: Mercedes, Audis, Porsches, BMWs, $100,000+ on average. The lower end models are made in the US, Mexico, and Canada. These high end cars are the biggest profit centers of their makers and of the German economy. Currently, they face an import tax (tariff) of 15%, the same as everything from Germany (or Italy or Japan). Liberal economists are furious at this; they claim it’s a tax and that it is inflationary. They are right on both counts except that this is only a tax and inflationary for the few Americans who buy new, high end cars.

The Americans who buy such cars are typically rich folks — poor and middle class folks can’t afford them. They are also folks with ‘taste’, folks who need a BMW, and would not be caught dead behind the wheel of a US car. Normally liberal economists would favor taxing such people, but these are often the who hire economists. They run the TV programs and newspapers, universities and hedge funds. They choose the economists and the economists are eager to see things their way.

Another high tariff item imported from Europe is art. Modern art for $1 million dollars that ends up in museums. For the average Americans the tariff on this, or on art is irrelevant or beneficial. The income it generates is used to offset other taxes, allowing Trump to remove the tax on tips, for example. That this tariff falls on rich people and replaces a tax that otherwise fell on poor workers. Liberal economists should favor of this, but their opinions are not their own.

A side benefit of these tariffs for ordinary folks, is that that they cause some buyers to switch to American-made products, cars and art. Perhaps not for themselves, but for for their children. They may buy a German car made in the US, rather than one made in Germany, or art from an American. This provides jobs for US workers — and an opportunity for Detroit to retool for the future. Detroit auto workers seem to understand this; they voted for Trump in 2016 and 2024. Detroit’s union leaders opposed tariffs. In Michigan, the union leaders get their power mostly from MI politicians, Democrats, who force union membership.

This is not to ignore the suffering of those who buy foreign products, the buyers of new BMWs, or French cheese, or high end art. As things stand, Columbian coffee is tariffed at 10%, and that may add 50¢/lb. Mexican coffee is not taxed, but many average Americans prefer Columbian. I hope they can be consoled by Trump’s tax breaks.

Some months ago, Trump showed off a tariff schedule that he considered ideal, with rates targeted to reduce our trade deficit by half. I derive here, Trump’s formula and rates, and give my opinions of the target. By the formula he presented, the EU tariff should be higher than it is, 20%. Trump has it at 15%, I think, for diplomatic leverage, to goad the EU into lowering their tariffs on us goods, now 15%. He’s also pushed them to spend more on defense, and pushed to end the war between Cambodia and Thailand. He threatened them with near 100% tariffs if they didn’t stop fighting.

Robert Buxbaum, September 2, 2025. Here’s a Bob Dylan song, union sundown, making a musical case against free trade. Once upon a time that was a liberal view. Now not. The NY appeals court ruled to block Trump’s tariffs to stop the horrible damage being done. My guess is the judges drink high-end coffee, eat French cheese, and drive new, German cars.

Deriving Trump’s tariff formula, and correcting it.

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We have a trade imbalance with many countries, it causes a loss of American jobs, and a transfer of currency abroad. This imbalance is not all negative, of course, it provides US consumers with cheaper consumer goods. Trump would like to eliminate the imbalance using tariffs. He hopes that this will create jobs, and that the money raised will help balance the US budget. He’s already moved to end income taxes on tips expecting to replace that tax with tariff income. Trump claims that the tariffs are not inflationary compared to current the tax system that he claims has been hacked by the elites. In past essays, I’ve discussed the pluses and minuses of tariffs here, and here. Now I’d now like to derive the formula Trump uses, see below. The proposed tariff for any country or region, i, he calls ∆τi.

In the equation at left, χi = our exports to country, i. Similarly, mi = our imports from that country. The difference between these two is our trade imbalance, something he’d like to set to zero. There are two other greek terms that I will discuss, ε and φ. These are the elasticity of elasticity of consumption to price, and the elasticity of price to tariffs. Trump uses an asterix here to indicate multiplication. I will use a, more normal, “dot” symbol, •, to the same purpose. For most countries, he takes the two elasticities to cancel to 2, and produces a chart.

Let’s say that the dollar amount we currently buy from some country, i, = mi  = ni • Pi, where ni is the number of items bought from this country, and Pi is the average price. The intended effect of tariffs is to reduce mi  by raising Pi, the price consumers pay for goods from that country. This increase is certainly inflationary in terms of the consumer: a consumer of French wine will pay more per bottle unless he/she switches to US wine. Typically this price rise is not inflationary in terms of the country as a whole, because the producer likely swallows some of the tariff, so for the country as a whole, we pay less per bottle of French wine. The customer does not see that, but it’s worth noting. Trump sees things this way.

Back to the formula, we need to figure out how much the price will go up and how much sales will change. Economists have elasticity numbers for both these relations, denoted φ and ε. We can say that, for any country, I, the rise in the price of the average product is ∆Pi = Pi•∆τi •φ. Where Pi is the original price, ∆τi is the tariff, and φ is the fraction of this tariff that gets passed on to the consumer. A typical value is φ= 1/2 though some claim less. Assuming φ= 1/2 , if we add a 20%=∆τi tariff, as on on French wine, the consumer price will rise by 10%, a change that will cause him/her to buy less.

How much less will the consumer buy? That’s determined by the elasticity of sales, ε. This is the fractional decrease in the number items bought per fractional rise in the price. In math terms, ∆ni /ni = -ε∆Pi/Pi where ε is the elasticity. Now, since ∆Pi = Pi•∆τi •φ, we find that:

∆ni = -ni•ε•∆τi •φ.

There is evidence to suggest that, for the average product, ε equals about 2, and also evidence that it’s 4. Trump prefers 4, and uses it for his calculations. I prefer 2, and will get nearly the same tariffs at the end. Whatever our preferred value for ε, our next step is to use the following approximation, accurate for small ∆(mi);

∆mi  = ∆(ni•Pi) = ∆ni•Pi, +  ni•∆Pi . 

Trump seems to ignore the second term. Perhaps because it can either be positive or negative, as I’d mentioned above, depending on whether you look at things in terms of the customer or of the US as a whole. I’ll keep it in, writing this term in lighter text. In the end I will calculate a fairly similar tariff to Trump:

∆mi = -ni•ε•∆τi •φ•Pi  + ni•Pi•∆τi •φ.

Rearranging the above, and recalling that ni•Pi• =mi, you can find the appropriate tariff to eliminate the trade imbalance.

∆τi =   -∆mi  /(ε • φ• mi  + φ•mi) .

To make the trade imbalance go away, you need -∆mi = χi-mi . Thus,

∆τi =   χi-mi   /(ε • φ • mi  + φ•mi)

This is the Trump formula with an extra term in light text. If you ignore that term and use the values Trump prefers, ε =4 and φ=1/2, you get the exact values of the tariffs he listed on the chart for most countries — those with positive trade imbalances.

∆τi =   χi-mi / 2 mi  

Now, I’d like to put back in the missing term, and use the (better) values, values I would trust, ε =2 and φ=1/2. Using those values, I find the tariff should be slightly higher.

∆τi =   χi-mi / 3/2 mi  .

I should note that some countries are creating to these trips by raising their own tariffs, and some are lowering theirs. This will cause a change in the imbalance of trade, and Trump will have to change the tariff schedule periodically to keep up.

Robert Buxbaum, April 10, 2025.

Coal and nuclear power, the secret to China’s cheap products

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We’ve become accustomed to buying cheap products from China: items made of glass, plastic, and metal come to the US by the ship-load, approximately $600 B worth last year, the highest from any country. Labor isn’t cheaper in China, certainly not when compared to Mexico or India, nor are the machines that make the products more advanced. What’s behind China’s ability to produce at their low prices is cheap energy—specifically, coal and nuclear-based electricity. While the US and most western countries have shut down coal plants to stop global warming, and have even shut working nuclear reactors for no obvious reason, China has aggressively expanded coal and nuclear energy production. The result? They are the largest single source of CO2, and have some of the lowest electricity prices in the world, Chinese electricity prices are about 1/4 of European, and 2/3 of U.S.

In recent years, the U.S. and Europe have increasingly relied on renewable energy sources like wind and solar. While these can work in certain areas, they require far more land than nuclear or coal, and expensive infrastructure because the power is intermittent, and generally not located close to the customer. The UK and Germany, countries with long periods of cloudy, windless conditions, have switched to solar and wind, leading to soaring electricity prices and a moribund industrial sector. Germany shut down all of its nuclear plants, 17 of them, largely to rely on electricity imported from its neighbors, and coal-fired sources that are far more polluting and unsafe than the nuclear plants they shut. The UK shut 5 nuclear reactors since 2012.

Meanwhile, China continues to build nuclear and coal plants. China is the largest user of coal power, and is planning to build 100 more coal-fired plants this year. Beyond this, China is building nuclear power rectors, including the world’s first 4th generation reactor (a pebble bed design). China has built 20 nuclear plants since 2016, and has 21 under construction. With this massive energy advantage, China produces things at low price for export: appliances, clothes, furniture, metal and plastic goods, all at a fraction of our cost. By selling us the things we used to make, China imports our jobs and exports pollution from their coal plants.

Many people instinctively understand that outsourcing production to China is harmful to both US employment and world pollution. Yet, until recently, US politicians encouraged this transfer through trade agreements like the TPP. Politicians bow to high-spending importers, and to environmental activists. It seems we prefer cheap goods to employment, and we’re OK with pollution so long as we don’t see the pollution being made. But, by outsourcing production, we’ve also outsourced control over critical industries, we’ve limited out ability to innovate, and we make ourselves dependent on China. Likely, that was part of China’s intent.

Russia has followed a similar path, keeping electricity costs mostly through low through coal, but also nuclear power, exporting their goods mostly to the EU. Before the Ukraine war, Germany in particular, relied on Russian gas, electricity, and fertilizer, products of Russian cheap power. By cutting off those energy, Germany has dealt a severe blow to its economy. Not everyone is happy.

Transfer of electricity, GWh, between European countries, 2023. Energy is most expensive in importer-nations, and GDP growth is slowest.

The incoming Trump administration has decide that, to compete with China’s manufacturing power, we need to develop our own through tariffs, and we need to increase our energy production. Tariffs can help balance the budget, and bring production back home, but without more energy, our industries will struggle to produce. I’m generally in support of this.

US production is more energy efficient than Chinese production, and thus less polluting. Besides, making things here saves on transport, provides jobs, and helps to build US technology for the future. I’m happy to see us start to build more nuclear power reactors, and restart some old plants. Solar and wind is good too, but is suited to only in some areas, windy and sunny ones, and even there, they need battery storage so that the power is available when needed.

Robert Buxbaum, January 21, 2025