I have been conversing on MN Publius again and it is going as well as usual. James in particular thinks that the government of the USA can in some way use tax policy to keep jobs in the USA, keep American products price competitive, keep American company profit levels that are acceptable to investors, and raise the income levels for American workers. He gave some rough concepts that made no sense to me. Check them out and share your thoughts.
He repeatedly alludes to some governmental changes that are at the heart of all our current problems.(during last 40 yrs) I replied per the following quote:
"I did some quick math. You apparently want things to go back to how it was in the 1950's and 1960's. A time when Europe/Asia were attempting to recover from being nearly destroyed during WWII, shipping was expensive, communications were slow, American baby boom was underway, etc. I am thinking you had better start hoping for WWIII, and praying it stays off American soil.
The Europeans are done fixing, the Asians want our standard of living and are willing to work for it, communications is cheap and nearly instantaneous, shipping is a bargain, America's growth is coming from lesser educated immigrants and Intellectual Property equals wealth. I hope you have a time machine, because Pandora's box is open and we had best work hard, adjust and learn."
And I didn't even mention the age and healthcare demographic and cost changes...
26 comments:
According to the Wall Street Journal, investment money is flowing into the United States. As problematic as our economy has been, it's been much more successful in relative terms than the the European economies, and regarded as a far safer investment. In effect, investors are fleeing from the policies in Europe that Republicans want to implement here.
--Hiram
I will say you have far more patience than I. Tell James that there is a government policy that will reverse this trend in an instant: eliminate all federal taxes and replace them with a tax on consumption, where the taxes on corporate profits and investment go to zero, and our exports gain an automatic 23% price advantage over imports. Then cut federal spending by 50% and you're there.
BTW, corporations don't "ship jobs overseas." They buy from the low cost supplier. When the cost of the product you make goes above the cost of making it elsewhere, the customer buys from elsewhere and you can't stop it except by tariffs, which hurts our exports. The US CAN compete, if our government gets out of the way.
J. Ewing
Hiram,
Which European policies do you think the Republicans are trying to implement here? I am missing something here.
J,
Yes, James definitely has a different perspective and manner. That is part of why I find it interesting to stop by once in awhile. If I only converse with people that think like me, I'll start to reinforce my own beliefs as the only truth. Which of course is usually incorrect. (ie self deception)
European countries are attempting to implement austerity policies, basically giving priority to debt issues over unemployment. What they are inevitably finding is that unemployed people can't pay their debts.
--Hiram
While I know little (nothing) about corporate tax policy it seems to me govt could tweak it to help slightly in encouraging business to keep jobs here vs off shoring them.
I think your whole debate has the wrong focus. The linked Reich column in the post that started the whole debate ends with this:
"We won’t get out of first gear until the middle class regains the bargaining power it had in the first three decades after World War II to claim a much larger share of the gains from productivity growth."
What post new deal America needs is unions. I'd also raise taxes on the wealthy and expand the earned income tax credit.
I somewhat agree, yet it seems to me they are also trying to prevent us from getting into Europe's somewhat Socialistic mess. Paying people more than a position is worth on the free market is definitely not going to help us compete globally. Neither is redistributing money to those that aren't providing an equivalent or greater value to our society.
America has been successful in part because our society rewards the people that learn, work hard, are responsible, make good choices, sacrifice, etc. Also, because we make it somewhat painful if you don't. Not sure we want to move to much further from that formula. The New Deal changes already are promoting behaviors that are not in alignment.
I keep thinking we will reach an equalization point with citizen's from other countries and then we we will be truly competitive. Unfortunately since our poorest are well off compared to many of their poor, and our middle class lives like kings compared to many of their middle class, it could be pretty painful.
If one wants a better than average quality of life. It seems they have to be more capable and effective than the average. How can America continue to be more effective the rest of the countries in the world?
Laurie,
Remember your thought to raise the minimum wage? I said if we pay $12/hr for flipping burgers, the meal price will increase significantly, automation will eliminate the need for as many employees or a bunch of burger joints will go out of business. It is the same thing here, only worse because the product or service can be offered from a remote lower cost location.
If American workers were to get paid even more relative to their foreign counterparts, the jobs have to move to reattain the Highest Quality & Lowest Cost goal. If you want employees to be paid more through empowered unions, someone has to pay the bill.
The only way to force service and production jobs into the USA is to create barriers. Unfortunately these also negatively impact the Highest Quality and Lowest Cost goal. And make our exports less desireable to the rest of the world. That is why my employer is a huge supporter of free trade agreements.
A simple example, if they double your Teacher salary what could need to happen? Your cost increased while your value stayed the same. Computer training is getting better and less expensive. At some point folks will start thinking that Computers or maybe Foreign based instructors may be more effective and cost efficient. Bummer.
John,
So what policies would you support to get the economy out of first gear if you were in charge. It seems the answer is none. You seem very accepting of our high rates of unemployment and inequality and our shrinking middle class.
Will you vote for Romey and other GOP candidates because their policies have proven to be so effective over the last 30 years?
I keep hoping that American citizens will finally understand that if they keep demanding the Highest Quality and Lowest Cost no matter what, the USA is in for some hard times.
Now I am not advising that people buy poor quality or outrageously priced American products, however they should be aware that the Hyundai or VW they buy is increasing our unemployment rate and lowering our standard of living. Even as they are saving some money, buying marginally better quality or being stylish. We are responsible for this situation, not some other person or government. We are the ones that are freely buying the product and sending that money overseas.
If American's stopped buying Apple products because of their business practices, Apple would about face ASAP... They have no choice if they want the American consumers dollars.
I have little hope for American Governmental policy fixing this global consumer driven issue, though maybe some Public Service Announcements would help. Kind of like in WWII when people were encouraged to buy war bonds.
Here is an interesting link... Not sure if it is legit. American's Working Maybe one of those many Gov't agencies could help with this type of work.
As for my vote... I will vote for who ever has the best plan for getting this National Debt under control. I owe it to my kids. Obama's first 4 years are not looking too good so far. And Romney's cut taxes platform makes little sense. (ie Paul Ryan Plan) However I will try to keep an open mind.
And what will win your vote? Spend liberally on the unfortunate today or set our financial house in order for our kids? Keep the illegals here and keep wages depressed?
On the upside for the "help all the unfortunate" folks, by us buying foreign designed and built products from foreign companies, we are doing an excellent job of improving their standard of living. Since they are also God's children, I can appreciate that.
On the upside for the "more for me" folks, you have had 30+ years of buying very low cost product. Imagine all the things you bought that you could not have afforded otherwise. Since my home is full of foreign product, I can appreciate that.
It definitely is complicated.
Laurie,
I read the Harold Meyerson article. I don't disagree with him that Unions could do good things for service workers. However, just remember that us customers will have to pay for it. Just another trade off.
I would rather buy American and support the creation of more better paying jobs. (ie less service and more product) Then there will be fewer candidates applying for the bottom end jobs.(shipping illegals home would help also) This will then drive up their incomes. (ie law of supply and demand) Also, much more efficient than Unions.
The US now has the highest corporate tax rates in the world, and unionized manufacturing industries (and government over-regulation) have reduced the productivity growth necessary to keep those jobs here. Simple government policy change: cut the corporate and investment tax rates to 10% or less (Romney plan) and we all get rich. Only hitch is we'll have to work in one of the millions of new jobs created.
J. Ewing
John,
If you want a reality based approach
to deficit reduction Obama looks a better choice than Romney.
Ten-to-one still isn't good enough for Romney
Romney and the GOP will increase the deficits with their tax cuts but will not follow through with their budget cuts because voters really don't want drastic cuts like have been proposed.
Americans want to cut the deficit, but they’re loath to give up much to do it
I will be voting for the party that has a real and balanced approach to deficit reduction that protects the safety net, retirement programs, and other necessary programs such as the EPA.
The corporate tax rate may be high, but really matters is that they don't actually pay very much in taxes.
==Hiram
Hiram,
Not sure where that came from, but these numbers look pretty substantial. Forbes Highest
Remember that just like us, companies only pay taxes when there is a net profit. Expenses are real and clearly defined in the tax code. So yes these will go up and down. And yes the companies are allowed and should use their deductions just like us.
Laurie,
3.5 yrs in and things are still headed the wrong way. The first 2 years he had significant influence and he spent it on healthcare. I am not sure... US Spending
I am sure I will post on this many times before Nov. Also, remember that I encourage guest posters.
hiram, yes, corporations DO pay a lot of taxes, compared to what they should be paying, or could be paying if they just move their factories offshore. In one sense you are correct, though, in that corporations pay no taxes at all. They simply pass on the costs to their customers. They must.
Laurie, perhaps you don't remember the history of the "grand bargains" on the budget in the past. Republicans agree to a tax increase in exchange for budget cuts and the tax increases happen, the cuts don't. Democrats are like Lucy with the football, and I'm happy to see that Romney is refusing to be Charlie Brown. The simple fact is that you can't decrease government spending unless you decrease government spending. And if you look at the budget carefully, you'll figure out that you could cut the budget drastically and nobody would notice, in their real lives. (liberals like Maddow would scream bloody murder, but it's all cheap Marxist theater.) Besides, it has to be done.
Tax cuts don't have to be "paid for." When taxes are cut, government revenue goes UP because of the increased [private] economic activity. When taxes go up, government revenue doesn't go up nearly as much because private economic activity is reduced. It's called "dynamic scoring" and liberals hate it because it is reality.
J. Ewing
They don't necessarily move their factories offshore, just their income. And that's why corporations don't really talk that much about corporate tax rates. They know that any discussion of cutting corporate tax rates invites an immediate inquiry into the elimination of corporate tax loopholes.
--Hiram
I assume by loophole, you mean the official tax laws. Like our mortgage interest deduction.
"assume by loophole, you mean the official tax laws. Like our mortgage interest deduction."
Lots of different things but mainly the ability of corporations in multiple jurisdictions to relocate income to low or non tax jurisdictions. This gives large corporations an incredible cost advantage over their smaller competitors.
--Hiram
Actually, because of the fact that corporate income can so easily be shifted to low tax jurisdictions is one reason why I am no big fan of corporate income taxes, and one big reason why their elimination isn't a high priority for corporations themselves. In many ways they prefer to have the issue than any change in policy, particularly a policy change which might work to their disadvantage. Corporate income taxes continue in their current form more as a matter of inertia, as much as anything else.
--Hiram
I believe the Liberal viewpoint is that by somehow strengthening American Unions and raising tax based barriers, jobs will be created in America and compensation will rise.
That may actually work if trade or natural barriers were in place. Without these, foreign firm costs will be lower and the USA firms will not be profitable enough to stay viable. Since investors will move their capital to where it earns an adequate return.
Whereas barriers will always increase cost, reduce choice and possibly reduce quality. And worse yet, the other countries will likely react in kind. I am going to try and study Germany, then post on it. The MN Pub folks think their system is something we should adopt. Though I am doubting it would work as well due to our diversity, individuality, culture, savings rate, etc.
I understand how raising tax rates on the wealthy would work to help pay our bills. However I don't see how it will keep jobs here when the Consumers keep buying Lowest Cost & Highest Quality no matter what.
Unions are a dying institution in America. I really don't think anything can bring them back. These days they mostly serve as a rationalization, sometimes as a scapegoat for the failure of Republican policies. I am not in possession of a comprehensive economic plan, but I do believe that American industry needs to be placed on more of an even playing field with our global competititors. It is, for example absurd that the private sector is responsible for health care, and that is a system that's failing. People who do business in the United States who benefit from U.S. markets, and the amenities we provide should help pay for them. And American workers should not be asked to compete with the slave labor conditions of our socialist competitors.
--Hiram
I am not certain Unions are dying, however I think they really need to change in order to be viable. Imagine if they negotiated pay and job security based on the employee's capability, knowledge and effectiveness rather than their age or years served.(ie like an agent) And they had stringent membership requirements. (ie tougher than employers) I am guessing employers would be happy to pay a little more for the quality and results.
As for competing against low cost countries and employees, it definitely has its downside. However we have definitely been the beneficiary of lower cost products for decades and a lot of needy people have a better life now.
The sad part is that we citizens can change things at anytime by boycotting foreign products and buying American. Yet how many are willingly going pay more of THEIR money for higher cost products that may be of similar value so that ANOTHER American can make more and have a job.
Here are some jeans I may try. All American $47.95 Though they cost somewhat more than my "on sale" Levi 550's.
I'll close with a positive thought. Many of these other countries are developing to the point where they are becoming very interested in our higher end products. And more importantly they can now afford them. (often need to manufacturer their to hit price point)
The American company I work for sells a lot of product in other countries, and China is a likely bright spot. They want better roads and infrastructure also. We just have to keep the value higher than what they can get from their domestic firms. Which will be harder as they learn and improve. I guess that is competition.
I am certain the labor movement is dying, and I see nothing that will replace it in terms of providing borrowing power to the American worker. This is why incomes are stagnating and in decline. This is why we have the disparity of incomes. American workers are just fine. They were never the ones who drove our economic system into near collapse, they are just the ones who suffer from it.
--Hiram
We'll need to disagree again.
In a closed system, the American workers were fine. We could be as inefficient as we wanted. (Comp and security by age vs results, Lots of inefficient work rules, Paying folks when there was no work, Paying above market wage, etc) Everyone had similar waste, things were good. Then technology / transportation advances and consumer / worker buying choices knocked down the walls around the closed system.
With walls down, those wastes are shown for what they are... Waste.
My hope is that workers in the low cost countries organize and start demanding more... Or American citizens start to understand that they can't have it both ways. Low cost products and high income jobs are at odds. And if we aren't willing to Buy American, why should anyone else?
The evil rich may have contributed, but we are the ones writing the checks and therefore we are mostly responsible. Now, are we willing to change our buying habits to support American workers? $50 jeans anyone?
One of the ways American workers were inefficient was that they insisted on a decent wage. Our socialist competitors have no such qualms.
--Hiram
That may have the makings of another post. Definition of Decent Wage and associated factors??? In fact I think it does !!!
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