EP-131: Biden’s $2.25T stimulus package raises Corp tax to 28%/ 21%; Tax havens to go? H-1 B back?

Biden proposes a corporate tax hike to 28% and 21% on profits earned abroad; will this get rid of Tax havens for good? Seeks to restore H1-B visas (good for India) and uncontrolled rise of COVID across the world.

Sree Iyer: Hello, and welcome to Daily Global Insights with Sri and Sree. Today is the 1st of April 2021, and this is episode number 131. Sridhar Chityalaji is back and because of some technical difficulties, we can only hear him, welcome back Sridharji.

Sridhar Chityala: Namaskar and very happy to be back on the show and looking forward to exciting days ahead and thanks for all your support and best wishes during this brief period.

Sree Iyer: Thank you Sridharji and here are the main points:

The much-awaited 2.25 trillion Biden infra bill has been announced.

In US News: The much-awaited disaster quoting to 2.25 trillion Biden infra bill has been announced, this consists of Infra, Caregiving and Manufacturing your initial thoughts Sridharji.

Sridhar Chityala: My initial thoughts are it is the unmitigated disaster staring down the pipe of the United States, when we go through the numbers we will make the case as to why none of this is going to work and this is going to be most precious money thrown away.

Sree Iyer: And corporate tax-funded programs are often unmitigated disasters dislocations with spend and earn accountability, which is what you are hinting and we’ll have to wait and see. In fact viewers, we have a separate segment today where we are going to discuss a little bit about the big expenditure items in this new 2.2 trillion dollar package that we call it Biden stimulus package and team Biden tuned out Trump’s warnings modelling on Trump’s migrant surge. So, now the surge is going out of control. We’ve shown you some videos a couple of days back about how people can essentially walk across and then they’ll have to wait for three years before they come in front of a judge at which point he may rule to go back but then for three years, you know, they are going to be housed somewhere in the US and it is just another unmitigated disaster Sridharji. What are your numbers? What information do you have further to what’s been happening in the last couple of days, sir?

Sridhar Chityala: The numbers that I have is that this has now grown to more than 1.4 to 1.5 million. It’s not even a small number in terms of the people who have come in. In some of the places, it’s 125 to 200 thousand people have come in. They have all been asked to let go there is no testing. There is nothing. There is no oversight. Even media has been barred from access to any of the information that is flowing through that specific system. Schools, even army bases have been organized to accommodate these kinds of people, children are overcrowded there is a pandemic plus there are also cases of rape and abuse and all the kinds of things that one can think of are going on. It is creating great socio-economic pressure and societal pressure in some of the cities like San Diego.

Sree Iyer: Yes and Texas asks SCOTUS to review Trump’s self-sufficiency immigration policy. So this is something that Trump had initiated a while back so, is this a new lawsuit, sir or is there an existing lawsuit?

Sridhar Chityala: It is basically a result of this outpour of activity that is taking place unmitigated. You remember the border have been decriminalized, the borders have been made Porus. There are no restrictions, CBP has been removed. ICE is no longer at play. So therefore there is no question of Retain and hold. It’s all release, everybody is getting through you just alluded to the fact even the court appearance is deferred for three years. So, Texas is saying please come down allow the states to determine what it can absorb because after all, it is its economy.

Sree Iyer: Yes indeed and Biden is going to allow Trump’s H-1B visas ban to expire, would that be big for big tech, sir? What are your thoughts on that?

Sridhar Chityala: Big Win, Indians are saying thumbs up, thumbs up, thumbs up. So, we have seen companies like Infosys, Tatas and they throw their stock price going up by 1 percentage, it’s a big win, which is effectively to say that they are restricted because the restrictions were placed on the back of the pandemic and employment here at 14.9% that’s been removed. So, therefore now there is free flow.

Sree Iyer:  Now, Parent groups are fighting left-wing indoctrination in schools. Now, this is something that has now started as a trickle but it will soon become a flood especially if this flow of illegal immigrants isn’t stopped. What are your thoughts are where is this headed?

Sridhar Chityala: I think that there is a big headline that I read in the newspapers today, which is to say that the liberalization of the US has commenced under Biden. So, we are now moving into the liberal or bi-quasi communist-socialist model and that’s what this is. What’s disconcerting about schools is beside the justification of this lawlessness in terms of the grabbing. There is also that is going on it’s almost like self-guilty. People are saying you’re guilty, you are in someone else’s land. You are guilty, you are someone else’s land, so, this indoctrination.

Number two, I have told in some of the San Diego schools, this is anecdotal evidence based on the Press reports being corroborated says that the local kids are not being taken to the school. But some of these all these fellows who are coming in are being, the illegal no, no, no illegal anymore. They’re not called him are illegal aliens, nothing. They are normal human beings coming into the city awaiting their turn to be normalized or citizens, whatever you want to call. So these kids are being taken into the schools at the expense and the parents are fighting.

Sree Iyer: And I am curious has Sridharji. why isn’t the quad from the squad welcoming all these people on the borders of the United States with open arms and then fight it out and say wow!! We welcome a hundred thousand people when we did not get covid, perhaps AOC and Pramila Jaipal and Ro Khanna, Rashida Tlaib and Ilhan Omar and their boss Bernie Sanders they all can go and stand there and welcome them with open arms. See how many days they can survive without catching covid themselves.

Sridhar Chityala: They are what I call the cuckoo land warriors, they are cuckoo land warriors which means they indulge in all luxuries while they preach to the Troops. They are never front end soldiers. They preach, the great preachers, but they, are never at the front end. I will start with this let Bernie Sanders Say by the wealth is 5 million. 1 million is the limit that you have put. Here’s my 4 billion to the fund. Where is he? All his left-liberal rag tags kind of stand-up for him. Now, they were said 1 million, beyond 1 million you pay capital gains. So, let him give his beyond 1 million and Janet Yellen charges 500,000. Let us give 400,000 dollars towards the fund. Let them lead the way John Kelly doesn’t fly by planes. Let him go by bullock carts. And say I am showing the green energy. I’m going by bullock cart. I’m going to be in horse carriages. He sits in first class, Donald Trump Jr. sits in economy class. He doesn’t even wear a mask. Donald Trump wears his mask. This is the hypocrisy of the Democratic Party, these fascists, undemocratic passé they preach but they do not follow. How is he trying to India? Private jet. Why is it going on a private jet, let him go on a ship, it is very safe.

Sree Iyer: Yes, and I think what we are saying is put your money where your mouth is and let’s see how much of your generosity comes into play here. Georgia replaces valid signature verification with checking ID numbers. If this is the new voter ID registration bill, I don’t see anything wrong with it, sir. After all, we have been saying that the unique identification of a citizen of the United States is essential in order for that person to cast their vote. So why is there so much, brouhaha?

Sridhar Chityala: Brouhaha is basically because the reason is every fellow who is coming into town according to the Democratic Party principles every fellow who is coming in. He’s a human being so he doesn’t need an ID. He doesn’t need anything. He is here. So therefore just accept his word and give him a vote. So, register him and give him a vote. And that is why many people can have the same address. That’s what happened in quite a few States many people at the same address in Michigan, We got some 400 calls on the same number and it’s one vote. So the story is that this is where they do not want validation. They do not want. They want a cart branch voting system very similar to what used to be in Russian elections. You have one candidate and you have everybody and one candidate wins that is the Democratic Party model.

Sree Iyer: And now let’s take a quick look at Biden’s stimulus proposal. Sir, the first one is 621 billion into Transportation infrastructures such as Bridges, roads, public transit ports and EV develop and I’m assuming that is an electric vehicle, sir

Sridhar Chityala: Yes, Electric Vehicle points, charging Points. If you recall in 2008, we had jobs act one trillion dollars of money was spent in is called the jobs act. What did I achieve? Nothing, it delayed the recovery by two and a half years. We have given charts to prove that. We’re now going to put 621 billion into Transportation, infrastructure, bridges, roads, transits, ports. I can understand the electronic vehicle charging points that I can understand as we try to move towards green energy, so I think we are well on way. But  621 billion dollars to be spent over four years. Where’s the money coming from? The money is actually coming from the corporate taxes. So, if you talk about 2.25 trillion dollars over four years, you are really talking about an average tax collection of 500 billion dollars to be sunk into the various programs. What is the economic come out of this? Has anybody quantify. A 621 billion, what does it generate by way of an economic outcome? None. Austan Goolsbee will say, Oh, you know, we can do this and we can do that. You can prepay, What you can prepay? you have taken good money. You have taken 2.25 billions of corporate money, which can be used for creating jobs by the private enterprise. The private enterprises create jobs, the government doesn’t. Many of these programs have no mechanism, no funding mechanism that is why I say there is a dis-location between spend and earn. There is no accountability. When you give somebody the money and say, here is 620 billion, no need to worry about it. So, who is paying for it?

Sree Iyer: And the package directs about 400 billion dollars to elderly and disabled Americans. So this is sort of like a universal basic income. What are your thoughts, sir?

Sridhar Chityala: The universal basic income and basically to say elderly in this how much of this money is going to go into this elderly how many of this is going to disabled? How many of this is going to be pilfered right through the middle?  We don’t know the astonishing number of 400 billion. This is over and above already the billions and billions of dollars of direct payments that are already gone.

Sree Iyer: And there is a further 300 billion being injected into improving drinking water infrastructure expanding broadband access and improving electric grids. So this is essentially infrastructure development, Isn’t it?

Sridhar Chityala: it’s actually infrastructure Development. Infrastructure development today has involved, gone are the days when we used to use tax as a vehicle to fund because taxes as a vehicle is money gone. You are far better off using a public-private partnership model very similar to what China has done very similar to what Japan has done.  Very similar to what India is doing in terms of the PPP. So there is a government incentive to augment plus there is money coming in and the money is being spent with an intent to generate some returns so that there is an economic outcome.  In this, there is no economic outcome. I want to give money, money, money, money. Take the money, give it. Take the money, give it. What is this improving drinking water? You mean, we don’t have drinking water infrastructure in the United States, expanding Broadband access. You mean we don’t have Broadband. Wi-Fi is all over the place and 300 billion dollars all this money is going into what you call as you know, special purpose grants for many of the Democratic Party members who are all in borderline States for the 2022 elections, money to be thrown away. So they can win the election, that’s all it is.

Sree Iyer: And 300 billion dollars are going into the building and retrofitting, affordable housing along with constructing and upgrading schools and I just add one more thing because it is similar, 580 billion into American manufacturing, research and development and job training efforts. This is you know, it would be nice if you can do that, but I’m a little bit not sure about what’s going to happen because you need a lot of the basic material that you need to manufacture are no longer in America, isn’t it? You have to start from there.

Sridhar Chityala: They are no longer in America and creating manufacturing jobs is by giving tax incentive, not by tax penalties. You give Mitsubishi, you give Hitachi, you give TSMC I’ll give you tax incentive very similar to production link incentive programs that the Indian government has given very similar to the grants that China has given for the industry to come and set up, very similar to touch Koreans and Japanese who are giving incentive to the companies. I’m giving you a 10 billion grant, you don’t have tax. An Enterprise and basically say create a job, you do not. Okay. This is exactly the contrarian view. So to me, this whole number is on businesses divided of this business is divided. Mind you there are two consequences, the two consequences of this are going to take this tax from 21% to 28% plus there is going be an alternative minimum tax for companies doing business overseas. They are telling the company’s acting overseas. Even if Dubai gives you zero per cent even if India gives you ten per cent, you India collect 21% Otherwise the balance of net difference between 21 and 10 per cent we will collect and charge and collect that money to fund this. So therefore this is why I feel that this is a trained rick running down and there is no funding mechanism established. They have to only borrow which is going to put this 2021 budget completely out of kilter. By the way, this is not the end, another two more trillion is coming.

Sree Iyer: So I have one quick thought that comes to my mind. So if you make sure that those businesses, I mean the businesses of the United States making money outside of the US, have to minimum pay 21% and if they’re located in the US. They are going to pay 28%. So, the difference is 7% either way. But this does not stop somebody who is an American citizen such as yourself, myself, anyone from uprooting ourselves from here and going and settling down in a tax haven like Dubai and saying that, ‘hey I have a million bucks. I’ll bring that million bucks into an investment into Dubai. If you give me citizenship in Dubai, the US allows dual-citizenship, I will take citizenship in Dubai. I might keep token citizenship for the US just in case if my kith and kin want to invite me for a Christmas or something like that. So what’s to stop them from doing these? I am trying to say is, this might slow this but I don’t see this as a solution, sir. What are your thoughts?

Sridhar Chityala: This is just the beginning of the journey that we are seeing. We haven’t seen the personal taxes as yet. They have not seen the capital gains. We have not seen the wealth. What we are seeing is very well in captioned on the; I go back, I put fairly and squarely the responsibility on Mr Obama and his kind of coterie of supporters who are now this. Remember the email that was written, we will repost that same email that he sent to the Georgia electorate, Senate electorate and that two came in. This is the decisive moment for us. Much of our agenda is at-risk. People have to come and vote if we have, this is our way, so, therefore, please vote for the Democratic candidate. So we regain the Senate. The progressive agenda has to be set in this term. That, in a nutshell, sets the context as to what is being unleashed with such intense fury.

These are like all executive orders. It’s not discussed, debated, analyzed in both chambers. It’s all predetermined and being passed. I think that’s what you’re witnessing. What you’re witnessing is the deconstruction of the United States. So otherwise how would you see many of those programs that you saw? Discriminatory treatment for loans, discriminatory treatment for allocation of capital, Universal child tax credits, all these kinds of programs that you are being unleashed with the money that you don’t have.

Sree Iyer: Sir, Chuck Schumer is looking at using the reconciliation process to bypass the filibuster. One for the 2021 fiscal budget and the other for 2022. Only one bill per year is the norm so again some rule-breaking happening?

Sridhar Chityala: Basically, there is an implicit kind of Senate rule where you can use this filibuster, the reconciliation process. You can use the reconciliation process to levy any budget, increase the debt limits, rollout fiscal programs; all you can embed. So they wanted to do two because of the backlog. So now they’re going to use it for the 2021 budget. So probably, that’s the next number that’s coming. And then for 2022. 2022 is the decisive year for Senate and the House. There will be a pitch-dark battle. So they’re going to use this reconciliation process judiciously. They do not need any Republican votes. They can just steal.

Sree Iyer: In India news, the Indian Air Force is going to get more French Rafale Jets and these fighters will be landing at Ambala airbase. Indian government announces rupees 10,900 crores production linked incentive scheme for the food processing industry. That’s a good move, isn’t it, sir?

Sridhar Chityala: Excellent move. It has been long neglected. Food is a big thing and I think India can be, on occasion excess producer. It really can benefit and help the industry. All these agitations and stuff that is going on can be stalled and it brings a far more efficient system. So this is the example that I was referring to which is namely, you don’t tax one industry so that you can put the money into the other industry. But on the contrary, you bring capital with an incentive and then you augmented it with supplementary capital so that, as they are step-up, the industry gets absorbed and then the money kind of comes back, the economic outcome is realized. There is a beneficiary on the producers and there is a beneficiary on the buyers. So both benefit in an economic system with a capital allocated according to the merits of the business case.

Sree Iyer: World Bank says that India has bounced in a big way out of the Pandemic Woods. It is still not yet in the clear with a projected growth of 7.5% to 12.5%. So that’s a fairly wide range. Do you think that could be narrowed perhaps a little bit?

Sridhar Chityala: This is a headline report from the World Bank today. I think that, basically, they’re trying to recalibrate to some extent the deficit. The deficit seems to have come even much closer. So the question, therefore, is what is the cash that is going to be available at the end that can help to push this thing forward. The second reason, there is a little bit of calibration. There are some attempted shutdowns, I’m told, in India that is being contemplated in some of the states like MP, Maharashtra, Karnataka and so on and whether that can slow the economies is something that people are contemplating. But what I also hear is that the tax receipts are likely to be very high. And on the negative side, some of the six core sectors in manufacturing has not taken off as much as they want which could probably be the delayed effects of this pandemic stuff. So, the situation is that it could turn out that India could finish with 10 – 12.5% with a surprise in terms of accelerated vaccine programs. Now, they have deaccelerated the export of the vaccine to some extent,  so that they can maximize the consumption. Also, I think the cut-off age is around 40 years old now. I think vaccinations are a must. It is a preventive recourse that will help the economy. It will make people a lot healthier to deal with the issues.

Sree Iyer: In global news, Taiwan is going to buy new Air Defence Missile systems to guard against China. Now China is targeting Taiwan more than even India, right?

Sridhar Chityala: Yes, Taiwan is the target. They’ve got plans to go forward. Depending on who you speak and when you speak, somebody thinks that this thing can happen in 2022. They broke the air defence systems, we discussed it last time and so now Taiwan is really being ramped up. What is quite amazing in the Taiwan situation is that there is very close proximity and very close coordinated activity taking place between India, Japan, and of course Australia. Clearly, the player who is stepping up as QUAD+1, believe it or not, is not Britain, but it is France. France is stepping in big time as an unknown…

Sree Iyer: Definitely, they know something that I think the rest of Europe doesn’t know yet and it’s good that at least one country has swelled and woken up and smelled the coffee.

The five things in the latest Hong Kong election overhaul shows that the fascist police democracy is in place with the Xi Jinping rule. So they don’t want to consider Hong Kong as a special entity anymore. That begs the question, sir, then why have a Hong Kong dollar?

Sridhar Chityala: I think that the Chinese would like to have butter on both sides of the bread. So they will say we will put dual listing. This side of the bread is brown, that is Xi Jinping. The other side of the bread is creamy. That is the world. I want the world you come here, slowly he will turn the cream into brown. He will say, let me give incentive for you to come in. So they are contemplating dualistic; one for the overseas investors, one for the Brown.

Sree Iyer: One thought, sir. I’m sorry, I went back to the taxation rate. If the US is going to charge 21% regardless of where the company is incorporated, then won’t the tax Havens take a beating?

Sridhar Chityala: Tax Havens are going to be banned. Glad that you asked that point.

Sree Iyer: Yeah, that’s good though. Mr Chidambaram will be sweating, fretting, really bad now. So far, he has been one step ahead of the law in India.

Sridhar Chityala: Well, Mr Chidambaram has many Rahasyas. So he will dig his grave in many many places, which you can’t find. He is very unique.

Sree Iyer: There’s a saying, sir, the worst punishment you can inflict on a rich man is to make him poor. So we’ll see how it plays out.

China has lost its ore access from Australia. So, now it is trying to build a new Iron over hub in Africa. Poor Africa what did they do?

Sridhar Chityala: Well, they basically got tempted by offers from China when they said, We will give you 2 billion dollars to develop your thing, only we need a little bit of land. Okay, so then you give. Then, you can’t pay interest for those $2 billion. Eventually, China will own all the mining resources you have to sign to us. Remember, we discussed that math at length around the African strategy of China and why they are building that. So they’re trying to, the same place the US is there, the same place Japan is there, the same place France is there, the same place India is there. A whole swag of people is going to come in.

One of the things that we are witnessing right now, which the world has not taken cognizance of. The United Nations as an institution to impose sanctions is dead. Africa is an example. The 25-year deal struck between China and Iran right under the nose of the United Nations to buy oil and resources using an alternate currency, which is the Renminbi means the United Nations is dead. There are no sanctions.

Sree Iyer: Brazil army leaders quit as Bolsonaro seeks greater support. We will explain this in the next section. So hold on to your horses.

Sridharji, if I could go on to covid because we are running out of time. In the global covid news, AstraZeneca continues to face challenges in Europe and the Brazilian Health regulator declines Covaxin by Bharat biotech. So this is something very unusual. Nobody to date had declined Covaxin by Bharat Biotech. Is there any relationship between this and the previous news item that I read, sir?

Sridhar Chityala: I think there seems to be some kind of tremors under Bolsonaro. They say that they investigated the Puna factory and they found that there are some procedural issues and lapses and so on. That is the reason. So I think Bolsonaro is saying that some of these people are kind of giving me problems. He needs a far more stable and supportive Administration to get his agenda through. In fact, if you remember Bolsonaro called the vaccines given by India as Sanjeevani – lifesaver. So, therefore, I think that there is a correlation in terms of the consolidation of the power that is going on. Remember, historically, Brazil is again a left-liberal state. Bolsonaro is an exception to the rule. Yes, to a great extent there is a correlation between this.

Sree Iyer: India could easily be the largest hub for QUAD with a billion vaccines soon. That’s an impressive target, sir.

Sridhar Chityala: I think that that license has been given to India. QUAD with combat China and there was a huge hue and cry raised by Xi Jinping and Scott Morrison are a befitting reply to Xi Jinping, which is effectively to say, we are a historical Democracy-aligned power. Japan, Australia, the US and India have a legacy of relationship. It is incumbent upon us to meet the needs of our community. You have no business and no role to play in this. You do what you want to do. But don’t come and tell us what we need to do. That’s the message Scott Morrison gave. I’m very impressed with Scott Morrison’s dealership on how Australia has taken the lead in this is quite amazing.

Sree Iyer: In markets, Goldman is close to offering digital assets and Bitcoin currency offering to its wealth management clients. So Bitcoin finally is anointed in the United States too, sir.

Sridhar Chityala: Bitcoin is going to be here, sir, and it is not going to go away. It is an alternate currency. It is ahead currency. It’s a commodity like gold. You can’t wear it but you can keep it. You can hold it, you can store in value who knows if I want to buy five Tesla cars, I’ll give 5 coins to Mr Elon Musk and even give me five cars. It has a Marketplace. So this bogus notion by the so-called old economists that it is dead. I can tell all this is bullshit, nonsense. Bitcoin is here. Digital assets are here. Electric Vehicles are here. EV checkpoints are here. We’re not going to be putting credit cards and debit cards a hundred years later. The fact is that you have a dedicated group set up, two more Banks very soon we will be announcing it trading around this.

Coinex is going to set up its Bitcoin data centre in Hyderabad, their back office in India and India wants to ban Bitcoin. They are setting up their IT infrastructure. There are setting up a software shop. They have got very good brilliant engineers there.

Sree Iyer: Investors are saying that higher interest rates are the biggest threat to stocks meaning 10-year yields. How high do you think the 10-year yields may go?

Sridhar Chityala: Before the end of the year, we are at 2%. We already at 1.746 where it will be 2% before the end of the year. But the good news is that with two more trillion dollars of stimulus coming in there’s more money. S&P projection is around 42 hundred. We are already around 39 hundred and we are not too far from reaching that end of the year goal of 42 hundred which is quite a remarkable number. So to me, I think that the markets will rise not in a bubble, but excess cash, excess cash-generating the income. With normal gyrations. And these are not the tech stocks, but these are the value stocks that will raise when there is an economy raising cash in the system. So I think we will finish the year quite well in the United States. We already know that we are around the 6% growth trajectory from a GDP point of view, but long-term damage would’ve been done.

Sree Iyer: In Markets today, we had a down day and Crude finished at $59 and 18 cents, ten-year yield at 1.746% and Bitcoin, perhaps because of the Goldman Sachs announcement, is again on its way up to $59,083, sir.

Sridhar Chityala: There you go, sir. 59,000 to zero dollars is a long way to go, sir.

Sree Iyer: Yes. Yes indeed. Yes indeed and Sridharji is poking fun at me for having published an opinion article about Bitcoins value with it, 1 million or dollar zero and we have this banter back and forth, but it’s nice to have you back sir, and we’ll be back at full strength tomorrow, and thanks for joining. Please do subscribe to our Channel. Consider joining our membership, and as always, Sridharji, Namaskaram and see you tomorrow.

Sridhar Chityala: Namaskar, and thank you. I’m so glad to be back and I can speak with some energy sir. Thank you so much.



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