Friday, February 3, 2012

Union State


Good Ideas

A gentleman I met on twitter (I have unfortunately misplaced my record of his name) has a great idea.  He says we should have a new official day: "Manufacturing Day".  The object is to emphasize the importance of manufacturing in America.  It would not be a holiday where we don't work.  It would be a day where the American manufacturing workforce would be in the normal working mode, enriching America through manufacturing.

Another gentleman (@mitch_goldberg) also has a brilliant idea.  He observes that investors are running around the world looking for third world economies that are growing.  Example:  BRIC.  Brazil, Russia, India, China.

America's ordinary working men and women know America has been brought to its knees by the insane 50-year policy of sending our manufacturing jobs away.  America is now almost a third world country.  Mitch's idea is that investors should look right here in America.  It is probably the best place to invest, because, despite the bumbling of most of our "leaders", American manufacturing is slowly recovering.  I predict that this recovery will feed on itself and the rate of recovery will increase, making America a very good place to invest.

Another good idea

No one can deny that America is in bad shape.  25 million people unemployed.  Foreclosures on millions of homes.  Neighborhoods of empty homes deteriorating rapidly.  Paved roads allowed to return to gravel.  Shuttered factories rusting away.  Portions of cities abandoned.  Schools and bridges falling apart.  All levels of government facing impossible deficits.

It is almost an episode of the TV show After People!

There is only one way to solve the problem: cut imports and increase domestic manufacturing.  The wealth needed to have a viable economy and a liveable country comes from manufacturing and manufacturing employment.  Many reactionary and stupid commentators and analysts don't accept these plain facts.  One thing they do in the face of the above comments is start screaming about free trade and how we don`t dare interfere with free trade. 

Free trade is great until it becomes EXPLOITATION.  Here is an example of EXPLOITATION in trade:

Trade in manufactured goods between America and China, 2010. 
U.S. exports to China.  $93 billion
U.S. imports from China.  $366 billion
Note the ratio of almost 4 to 1.
Trade deficit with China $273 billion

In contrast, here is the situation that would exist in balanced, reasonable and constructive free trade:

Trade in manufactured goods between America and China, 2010.
U.S. exports to China. $93 billion
U.S. imports from China.  $93 billion
Note the ratio of  1 to 1.
Trade deficit with China ZERO

Now here is my good idea, if I say so myself!

On a country by country basis we have to control imports following the above pattern.  Let's say country XYZ purchased manufactured goods from America in 2011, valued at $35 billion.  We then say to country XYZ that we will allow entry of your manufactured goods into America in 2012, absolutely free of tariffs, duty, tax, etc., up to a limit of $35 billion.  Once that amount of  imports in 2012 has been reached, no further imports will be allowed.

We do this with each and every country we deal with, in this way eliminating our present devastating hemorrhage of wealth to foreign countries of over $500 billion per year.  And in addition giving our domestic manufacturing breathing space to survive and grow. 

One commentator has said that it is mathematically impossible for every country to achieve the status of net exporter.  He is absolutely correct in saying this.  My proposal herein is not that we try to achieve net exporter status.  All we are trying to do is have balanced trade with other countries. 

If my plan requires abrogation of World Trade Organization treaties and regulations so be it.  If China gets furious and starts blustering, so be it.  No nation can accept a $500 billion trade deficit hemorrhage year in and year out, into the indefinite future, ultimately leading to the complete destruction of that nation!

State of the Union Address

Now let's look at the State of the Union Address of January 24, 2012.

Here are some excerpts from the Address:

"We should start with our tax code.  No company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas.  From now on, every multinational company should have to pay a basic minimum tax.  And every penny (of this new tax revenue) should go toward lowering taxes for companies that choose to stay here and hire here in America."

"If (a manufacturer) wants to relocate to a hard-hit community, (the manufacturer) should get help financing a new plant, equipment, or training for new workers."

"It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.  Send me these tax reforms, and I will sign them right away."

"Expand tax relief to small businesses that are raising wages and creating jobs.  So put them in a bill, and get it on my desk this year."

What is wrong?

Superficially, these statements from the State of the Union Address sound good.  But there is a huge flaw.  What is the flaw?  The word "should" appears five times in these brief excerpts. 

I am an ordinary private citizen.  Out of 312 million people in America, only my loyal twitter followers, 100 or so, know about me and pay any attention to what I am saying.  So I have no power to get anything done.  When I propose some action, I have to use the word "should".

President Obama is THE PRESIDENT OF THE UNITED STATES OF AMERICA.  We have all grown up regarding the president as the most powerful man in America.  The president should not be saying "should".  The president can get things done!  He can say "we will do this" or "we will do that", or "I have ordered this" or "I have ordered that", while little no-account Ed Farkas can only say "should"!

I was an Obama supporter.  But Mr. Obama has lost my support, due to his inaction and passivity.

Mr. Obama has been president for three full years and he is only now saying we "should" remove tax provisions that reward companies for moving jobs overseas?


He should have issued an executive order on day ONE of his presidency, suspending those tax provisions, as just one example of desperately needed actions that never happened.

What else is wrong?

In his State of the Union Address, Mr. Obama repeated a behavior pattern seen during the debate about budget cuts.  He invites Senate/House members to come up with a solution to a problem, write a bill reflecting the solution, and send the bill to his desk for signature.  This method is absolute nonsense.  How are 535 disparate and squabbling Senate/House members going to suddenly join in concerted action and go through all these steps? 

What are we paying Mr. Obama for?  He is supposed to be leading, not waiting for other people to do everything.

Mr. Obama has hundreds of advisors, including economists and lawyers.  He should order these advisors to write the bill he wants, and then present it to Senate and House for approval.  Sure, it won't necessarily get immediate approval, but if it is a good bill in the eyes of the ordinary working men and women of America, Senate/House members will feel tremendous pressure to act, pass the bill, and send it to the president.

Can anyone provide leadership?

Currently we are not getting leadership from President Obama, or, with a few exceptions, from any other politicians in Washington. 

Looking past the November 2012 elections, regardless of who becomes president, whether Mr. Obama or one of the Republican candidates, I doubt very much that we will get the leadership we need.  All we can hope for is that the immutable principles of economics will solve our problem little by little, encouraging manufacturing in America to increase.  Meanwhile our politicians will continue to dither and argue over trivial issues, unwilling to deal with THE key issue, manufacturing in America.

No comments:

Post a Comment