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Nevada, West Coast Face Risk Should China Relations Sour

Nevada could be hurt by the more confrontational approach to China promised by the Trump administration, but the state could benefit by increases in infrastructure spending, according to a pair of Brookings Institution scholars.

John Hudak, deputy director of Brookings’ Center for Effective Public Management, and Robert Lang of Brookings Mountain West at UNLV, said the West Coast would feel the effects of any trade war because of the area’s strong economic ties to China.

Nevada’s trade and tourism relationship with China, which includes billions of dollars invested in Macau by Las Vegas-based gaming companies, puts it at particular risk, Lang said.

However, the increased infrastructure spending promised by President Donald Trump might boost prospects for construction of Interstate 11, which is planned to run from Phoenix to Las Vegas to points north. Trump praised the I-11 proposal during the campaign.

Lang and Hudak will discuss what the new direction in Washington will mean to Nevada on Tuesday at the Preview Las Vegas forum put in by the Metro Las Vegas Chamber of Commerce. Nevada Public Radio is one of many sponsors of the event.

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DISCUSSION HIGHLIGHTS:

On the possible change in marijuana policy

 

Hudak: “No matter what a state or a municipality does marijuana is still a federal offense. The possession of it, the cultivation of it, the manufacture of it is a federal offense in all cases, no questions asked. But states have taken the steps to reform their laws and they’ve done so while the federal government as you said, ‘turned a blind eye’ but that is only as good as the paper the Obama administration wrote a directive on. If the Trump administration decides to reverse that, it would wreak havoc on the marijuana industry in the eight states with recreational marijuana and perhaps the 28 states with medical marijuana”

 

On the possible reopening of Yucca Mountain:

Lang: “I think it’s mostly dead. If you reopened it, it would be a fortune. It would be billions and billions of dollars in investment.”

Hudak: “I agree with Rob on this. I think the likelihood of it coming back on line is pretty slim… there is this question about how much authority is vested in the right people in Congress and in the president himself to move this forward.”

On the possible souring of relations with China:

Lang: “We have several Fortune 500 companies headquartered in our city, including Sands and Wynn, and they’re big players in Macau… When the money comes back from China and is repatriated into the U.S. some of it goes to shareholders but a decent share goes to the managers and the people who have created this gaming market abroad.”

“One, we’re invested. Two, the Chinese tourists come here and play high stakes games and if they lose, you see it register in our taxation. And finally if you just look at trade in goods, they are the largest trading partner of our region by far. They dwarf everyone else. They even dwarf Mexico and Canada. They’re more important to us in trade than Reno by far”

Hudak: “I think it is hard to predict whether Trump’s talk on China is going to be empty or whether he’s going to try harder than his predecessors did to follow through with that. I think in large part because there are a lot of question marks about what the president is serious about and what he is rhetorical about”

“If we start a trade war with China, it would devastate the western United States. It would not just devastate Las Vegas. It would not just devastate Nevada but California, Alaska, Washington, Oregon, Arizona, Colorado, these are all states that depend heavily not just on receiving things from China but also providing things to China.”

On the impact of repealing Obamacare:

Lang: The risk that the Trump administration has here, and it’s not just Nevada’s risk, is that there has been taxation for this. So, people who make more than $200,000 as individuals or $250,000 as families have been paying a kind of insurance premium surcharge in their taxation. It has produced over a $100 million a year in tax revenue and it has been applied to the subsidy of people who then come to these hospitals, come to these medical establishments with this resource they didn’t have previously. If you repeal all of the act and you don’t replace it immediately with the same level of taxation there will be no resources to do any of this. And in that case, you would see our medical establishment slide back.”

“There is a whole economic school of thought that even if you have a policy like mortgage tax deductions, which are not a terrific policy for really advancing the housing industry in the country, but once you put those policies in place businesses invest around it and people have an anticipation of it. And jerking it back from people is perhaps more disruptive than trying amend it and leave it in place”

Hudak: “When you look at a region like Southern Nevada, which is about to give the state a world-class medical facility, you need to think about how an ACA repeal would disrupt that. Will they serve fewer Nevadans – no. The question is – what will the costs be to serve those Nevadans? And it’s always easier for a medical facility to serve people with insurance than to serve people who are coming into an emergency room every time they get sick. That is something the ACA helps prevent and we have no idea what the other side of ACA is going to look like… because the Republicans in Congress have not put out a serious reform.”

On possible funding of infrastructure projects:

Lang: That is one of the more optimistic parts of the Trump administration as it relates to Nevada. Let’s hold them to their word that they want to invest. He’s going to have problems with his own Congress as he purposes a multi-billion dollar enhancement of infrastructure around the country and rebuilding America because that’s not been the Republican priority. In fact, they helped to defeat that with Pres. Obama. But I-11 is a meritorious project and it’s something that even Catherine Cortez Masto brought up when she was interviewing, grilling the incoming Transportation Secretary.”

On a possible crack down on undocumented workers: 

Hudak: I think a lot of people should look to the president’s rhetoric on immigration and take it very seriously. He has a lot of supporters from the campaign, during the election, who voted for him in the upper Midwest, who lost manufacturing jobs, and either believe they lost jobs because those facilities or factories got moved overseas or because they couldn’t find work because that work was going to undocumented individuals. Now, you might say that’s wrong and those ideas are incorrect, but those are the ideas that Trump supporters felt. And so, Trump needs to think about the political ramifications of going back on his word on immigration policy. Maybe he will, maybe he won’t. Again, this is another one of the questions we have about the seriousness of the president about his campaign rhetoric and transforming that rhetoric into policy.”

“If the president decides to take as aggressive of an approach to immigration policy as he trumpeted on the campaign trail, it is going to be something that will help him perhaps in places like Michigan and Wisconsin and Ohio and Pennsylvania but it is going to hurt him badly in the Mountain West”

Lang: There is risk in this policy. And the risk is that you run into the building trades. You’re going to get the National Association of Home Builders mad at you. You’re going to get the mortgage bankers mad at you. You’re going to get everyone who relies on that workforce mad and agriculture too. I would hate to be the Agriculture Secretary if you really pursue this because you’re going to be recipient of a lot of heat from these states” 

Guests

John Hudak, Brookings Center for Effective Public Management; Robert Lang, Brookings Mountain West

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