Taxes, jobs and economic prosperity

[alex_trebek]

SO punishing people for wanting to buy goods not available in the US (or at a better price) is representing "the People" better? Let me ask you: are you a union man? Your arguments sound familiar.

As you point out, America can't compete on cheap crap that sells for $1 at Walmart. We have much better products than China etc, but due to labour costs, punitive taxes, idiotic regulations etc the costs are so much higher as to be uncompetitive. Eliminate all the punitive taxes and regulations, and America can produce a product that is x2 as good as China without being x20 as expensive.

People often conveniently ignore the massive difference between US labor cost versus some foreign labor. I read that you didn't, just stating that many people like to be intentionally obtuse because they dont want a pay cut. Over regulation has its fair share of the blame, I just find it annoying.

The US already tried raising tariffs to help American business. It doesn't work, because if a company is efficient, then it doesn't need a handout. If it isn't efficient, it doesn't deserve one.

BTW raising import tariffs is a handout if it costs the government more in lost productivity that is gained by the tariff.

Look at the imported steel slab tariff increase of the early '00s. It was to help American steel companies modernize, and in place temporarily. Instead of modernizing (presumably to increase competitiveness) the major American steel companies gave put pay increases. They assumed the tariff was going to be perpetually renewed, and it wasn't.

Bottom line: free markets work. Tariffs are only good to replace income taxes with a consumption tax. 
 
Jimmy dean:

I don't think import differences would be necessarily a problem. If the Japanese/whatever manufacturers want to do business here they still have to compete. That means taking a loss here, and raising prices at home to make for the loss, or operating more efficiently than American companies. This forces others to be more efficient and will lower the price of all cars sold in America. Look at the changes Ford has made.

 To the OP:

It is human nature to assume that cause and effect relationships are linear. Unfortunately, this is hardly ever true. I admit a certain lack of expertise in macro economics; however I understand math. If something is good in small amount, we can rarely draw conclusions to it effect in a greater amount.

For example, IIRC cobalt is absolutely necessary for human survival. With out small amounts of it we can't make enzymes necessary for life.  However, it becomes very toxic in large amounts because of the equilibrium shift of a complex set of biochemical reaction mechanisms.

I often wonder if government spending is similar. Necessary for economic prosperity in small amounts, toxic in large amounts.
What do you define as small and large? I have no idea, but I am pretty sure spending 13/14 trillion is quite toxic in the long run.

[longeyes]

What America has to sell right now is the world's largest consumer market.  We need to maximize the  benefit of access to our markets and even the global playing field.  We had hgh tariffs in this country from The Civil War through 1913; that was also a period of by and large sustained high growth.  Who changed the approach?  Woodrow Wilson.  Hmmm.  And of course  we then used income and other domestic taxes to compensate for the lost revenues from dropping our tariffs.  Look at the big picture from 1913 on, economically and socially, and analyze the trend.  Had it not been for WW II, which lifted us out of the Depression and gave us a huge edge in world trade, where would we be today?  I think we need to ask ourselves who has really benefited most from the post-Wilson trade policies.  We keep pushing "free trade" and where exactly have we wound up on the world economic stage?

[longeyes]

There's more.

We've been giving away our domestic markets, inequitably, for decades.

We've permitted the rampant theft of intellectual property for decades.

We've been supplying a protective military umbrella, with little or no charge, for decades.

This isn't enlightened, it's stupid--or, rather, more likely, to the benefit of a comparatively small number of highly placed people with powerful government connections.  When was the last time the State Dept. prioritized America rather than
"abroad?"

[Headless Thompson Gunner]

It is the same with other American made products over there, our stuff cannot be sold over there off base.  But we allow them free access to the world's largest market over here.  imho, Time to even the playing field some.

Bad idea.  

We know from basic economics that tariffs and protectionism are harmful to the economy that uses them.  Tariffs are only beneficial to the small special interest that is being protected, and everyone else in the economy pays the price (literally).  Imposing tariffs on foreign goods amounts to shooting ourselves in the foot.

Now, if Japan or anyone else feels the need to shoot themselves in the foot with tariffs against our goods, should we get even with them by shooting ourselves in the foot too?

[Inor]

I agree with longeyes in principal, with one additional point.  For most of the 20th century, U.S. industry did not really compete with anybody.  We came out of WWI and we were the largest creditor nation in the world.  We owned most of England for all the debt they owed us, not unlike how Japan and China own us now.  On top of that, most of continental Europe's industrial capacity was destroyed in the war.  The U.S. was the only country in the west that was producing anything in sufficient volume to be useful.  At the time, we were also blessed with a huge number of innovations all hitting within a 20-30 years span: the assembly line, consumer electricity, the radio, the light bulb, etc.

Just about the time Europe was catching up with us (because Hoover and FDR piddled away our advantage by prolonging the depression with their stupid social programs), Europe decided to start WWII.  Again we came out of WWII as the only industrialized country in the world with the ability to produce.  Europe was completely destroyed, as was Japan.  China was in the middle of a civil war.  If you wanted stuff, the only place left to buy it was the United States.

Then, everything changed all at once.  Japan built themselves into an industrial power.  We normalized trade with China.  India came out of the dark ages and the Cold War ended.  All of a sudden, we were competing with EVERYBODY.  But in the meantime, the U.S. industry had changed.  The unions had forced employers into high dollar contracts, which previously did not matter.  When we were the only producers, industry could just pass the added expense onto foreign customers. 

We were boxed into a corner.  Until, the corporations discovered "the power of pull".  U.S. corporations realized they could make up the difference by extorting the government for their stupid decisions during the "fat" years.  The IT and computer revolution of the last 30 years should have been enough to pull us into another 50 year boom.  It has not because the government needs to tax money from the growth industries to pay for the excesses of “pull”.

The U.S. has the ability to be the greatest industrial power in the world again.  But we need to allow creative destruction to happen again.  It will be painful.  But, if we do not allow the economy to adjust itself, we are going to be the world’s largest manufacturer of buggy whips while the rest of the world is building Fords.

In short, we need to lower corporate income and personal taxes, and eliminate capital gains taxes entirely.  Beyond that, deregulate deregulate deregulate.

[Balog]

I like the cut of your jib Inor. Well said.

[longeyes]

If one is an adherent of Kenyanomics, buggy whips are the whips of the people, of the future.

[Inor]

If one is an adherent of Kenyanomics, buggy whips are the whips of the people, of the future.

J. M. Keynes = P. T. Barnum

[Paddy2010]

Import tariffs won't protect the American standard of living at this point for several reasons.  1) We've outsourced our manufacturing to third world countries (there are no jobs to protect).  2) We've gone from the world's largest creditor nation to the world's largest debtor nation in the last 30 years. 3) And finally, China OWNS us.  We've sold our debt to them so that we could a) consume; b) engage in foreign adventures-(which was just a cover to transfer more public wealth to the private sector.)

It doesn't matter what taxes are-spending and accumulated debt are the problem.  I predict that the generation behind us will simply disavow (default on) all national debt, wipe the slate clean and start all over again.

[De Selby]

Import tariffs won't protect the American standard of living at this point for several reasons.  1) We've outsourced our manufacturing to third world countries (there are no jobs to protect).  2) We've gone from the world's largest creditor nation to the world's largest debtor nation in the last 30 years. 3) And finally, China OWNS us.  We've sold our debt to them so that we could a) consume; b) engage in foreign adventures-(which was just a cover to transfer more public wealth to the private sector.)

It doesn't matter what taxes are-spending and accumulated debt are the problem.  I predict that the generation behind us will simply disavow (default on) all national debt, wipe the slate clean and start all over again.

They'll probably have to, but the effect will be to ruin the currency.  It will be a tough move.

[Paddy2010]

The dollar is already worthless and people are beginning to notice.  Between the artificial bouyancy of petro dollars and the increase of M1 by the printing press, we've reduced our currency to worthlessness. (and let's not forget the Chinese debt, either). The Federal Reserve is a completely anti American entity and needs to be dissolved.  We are no longer a soveriegn nation, we're owned lock stock and barrel by international corporatists.

[longeyes]

Import tariffs won't protect the American standard of living at this point for several reasons.  1) We've outsourced our manufacturing to third world countries (there are no jobs to protect).  2) We've gone from the world's largest creditor nation to the world's largest debtor nation in the last 30 years. 3) And finally, China OWNS us.  We've sold our debt to them so that we could a) consume; b) engage in foreign adventures-(which was just a cover to transfer more public wealth to the private sector.)

It doesn't matter what taxes are-spending and accumulated debt are the problem.  I predict that the generation behind us will simply disavow (default on) all national debt, wipe the slate clean and start all over again.

It's not quite that hopeless, but to right the capsized ship will take draconian action, doing the unthinkable, and we are still far from that because we don't yet recognize or want to recognize that our survival's at stake.  Ask yourself what lies behind our current overheated consumer (debt) culture, who benefits most--that is the basis of a more interesting dialogue.

I'm sure you realize that hitting the re-set button on our debts isn't quite as easy as re-setting the player scores on video games.  You may be correct that the phantasts of following generations will try to take "the easy way" out, but that would only lead to a plenary collapse of the global financial system and, if history's any guide, not only catastrophic economic dislocations but the application of military force on an unpleasant scale.  Those who have no problems with scruples will do what they see as necessary.

[makattak]

44% of U.S. government debt is held by foreign citizens or institutions (including governments).

Guess who holds the other 56%?

[longeyes]

You?

[makattak]

You?

Me, you, our banks, our 401ks, our mutual funds....

[Inor]

Me, you, our banks, our 401ks, our mutual funds....

Let us not forget the Federal Reserve Bank.  The last time I looked, they were sitting on about $3 Trillion (give or take).

[longeyes]

People often conveniently ignore the massive difference between US labor cost versus some foreign labor. I read that you didn't, just stating that many people like to be intentionally obtuse because they dont want a pay cut. Over regulation has its fair share of the blame, I just find it annoying.

The US already tried raising tariffs to help American business. It doesn't work, because if a company is efficient, then it doesn't need a handout. If it isn't efficient, it doesn't deserve one.

BTW raising import tariffs is a handout if it costs the government more in lost productivity that is gained by the tariff.

Look at the imported steel slab tariff increase of the early '00s. It was to help American steel companies modernize, and in place temporarily. Instead of modernizing (presumably to increase competitiveness) the major American steel companies gave put pay increases. They assumed the tariff was going to be perpetually renewed, and it wasn't.

Bottom line: free markets work. Tariffs are only good to replace income taxes with a consumption tax.  

No, we will never achieve the "efficiency" of nations that use slave or quasi-slave labor, have no health standards, and pollute at will.  That's true, but why are we importing their stuff and killing our own markets?  So that we can consume ourselves into massive unemployment and bankruptcy while simultaneously subverting labor and environmental standards elsewhere?  

Tariffs don't work?  Well, neither does "free trade" that turns out not to be very free.  What we need isn't "free" trade, it's America-advantaged trade, using whatever leverage we have.  Economics is war by other means, and some nations apparently understand this better than others.  Fact is, it's not the consumers of the smart and able nations that win, it's the producers; the consumers win by surviving better and longer in a nation that is a strong producer.  We won't have a big consumer economy too much longer if we don't do better on the production side.

[Headless Thompson Gunner]

No, we will never achieve the "efficiency" of nations that use slave or quasi-slave labor, have no health standards, and pollute at will.  That's true, but why are we importing their stuff and killing our own markets?  So that we can consume ourselves into massive unemployment and bankruptcy while simultaneously subverting labor and environmental standards elsewhere?  

I would argue that the US manufacturing sector has already achieved efficiencies that much of the world is envious of.  China and the like would love to have a manufacturing base as efficient and effective as ours.  American workers may cost more, but they tend to be better educated and more skilled.  Our manufacturers also have the benefits of better factories, with superior tooling and technology.

I think much of the problem lies in assuming that all modern manufacturing is difficult or skills-demanding.  If an uneducated Chinese peasant can perform a given manufacturing task, then you can rest assured that it the task is not too demanding.  

What some people seem to want is to be able to pay superior American workers superior American wages to perform generic unskilled work.  That just won't work.  It is natural, normal, and OK for generic, bulk unskilled labor jobs leave America and go to China.  That frees the superior American worker up to do more advanced work, thereby extending and maintaining America's superior manufacturing efficienceis.

[Inor]

What some people seem to want is to be able to pay superior American workers superior American wages to perform generic unskilled work.  That just won't work.  It is natural, normal, and OK for generic, bulk unskilled labor jobs leave America and go to China.  That frees the superior American worker up to do more advanced work, thereby extending and maintaining America's superior manufacturing efficienceis.

I agree with your statement in general, but question one premise.  Is the American worker really "superior" anymore?  Some are, certainly.  But for the last few years we have had an illiteracy rate approaching 25% in many of our inner-city high schools.  I wonder if the "drunk, lazy, and stupid" people have already consumed the economic benefits of our superior manufacturing efficiences?

[MicroBalrog]

China is prosperous?

[longeyes]

What some people seem to want is to be able to pay superior American workers superior American wages to perform generic unskilled work.  That just won't work.  It is natural, normal, and OK for generic, bulk unskilled labor jobs leave America and go to China.  That frees the superior American worker up to do more advanced work, thereby extending and maintaining America's superior manufacturing efficienceis.

Well, in a population that is now well over 300 million people, how many would you say are really able and tooled up enough to do "more advanced work?"  This is a fraction of our actual population at this point.  Yet we have spent half a century importing, legally and illegally, people who in the main offer no advantage and no likelihood of producing "more advanced work," while at the same time neglecting to modernize a large chunk of our manufacturing capability.  We have some superior workers and technology, but I don't see how we have enough to form the basis any more of a cutting edge world economy.  I guess we are counting on redistribution of wealth, huh?

[MicroBalrog]

Well, in a population that is now well over 300 million people, how many would you say are really able and tooled up enough to do "more advanced work?

Let me explain how superior the American worker is:

America has six million farmers.

China has 300 million farmers.

America produces 27% of the world's grain and rice. China produces 18%. (Meaning that the American grain/rice farmer is about 80 times more effective than the Chinese farmer).

America produces 3.6% of the world's root and tuber stock, and China 17%  (Meaning the American farmer is only 8 times more effective, per capita, than the Chinese farmer).

Same six million Americans produce 20% of the world's meat (China produces 25% of the world's meat).

The "superior" Chinese worker, produces vastly less product per capita than an American worker in the farm industry.

America's farm industry, comprising only 2% of the US workforce, is only one example.

[sanglant]

don't' forget to account for the illegal mexicans we're probably about even.


 

[Headless Thompson Gunner]

I'd wager that illegal Mexicans working on American farms, with American tools and equipment, under the direction of experienced American supervisors, are still much more effective than foreigners.

 

[longeyes]

Hey, Micro, you're proving my point.  Okay, let's take food production.  Six million farmers get it done.  Uh, what about the other 324 million?  I never said America lacked technology or technological superiority, I said that technological superiority was not spread over anything like the entire current population.