Our Current Account Deficit Is Killing Our Competitiveness

[Rog]

Hi Ez,

I also agree with many of your sentiments. What is 'fair' is a very difficult question. Making profit not your sole motivator does not inhibit progress. In fact I would argue that it enhances it. Making profit your sole motivator does set you on a different path.

I would say that it is unfair to limit someone else from raising their standard of living (which also needs to be defined) but it is equally unfair to excessively raise one's standard of living to the detriment of another, even if that other has yet to be born.

Make no mistake we are not suffering from our success. We are suffering from our excess and inability to face a growing reality. We find ourselves apparently wealthy but racking up a huge debt to give to future generations. One can never be a victim of one's success only of one's inability to plan for the possibility of becoming successful.

There are many emotive words and it seems that any with a potential link to politics or religion carry a great deal of emotion. The word I would use that would drive us to 'share the planet' is compassion. It is the center of all good human activity. To be compassionate is to care fervently about the well being of others. The other phrase I would profer is that the solutions are 'both/and' solutions not 'either/or' solutions. Put away pre-conceived notions of right and wrong and look at the problem.

By the way the main western religions are based on the notion that we are all less than perfect and that perfection and paradise await us in another world. American Indian beliefs are grounded in us currently living in the paradise that must be preserved and honored for those generations to come. I cannot help but think that our belief systems spill over into our political and economic thinking too.

Rog

[wesdavidson]

You guys are all thinking. That is what we need, ideas.

As for mine, well, they are worth what they cost you.

The difference (b) and (c) to other countries, trade agreements etc, is the difference between raising the gas tax, or raising license plate registration fees for, or, banning non commercial pickups... Both increase revenue, both could reduce driving, one leaves most of the decisions up to the individual.

It is a little progressive, by taxing profit, it hits profitable companies like Walmart harder than unprofitable ones like it GM. It kicks companies, importers etc. when they are up, not down. Profitable companies have the most choices. It would also take a lot of the incentive away for ViseGrip etc to have gone overseas. Or dodge trucks going to Saltillo Mexico. It would be about impossible to not make money with visegrip. People pay what they have to to get them. The whole move was predicated on even higher profits and greed. IMHO.

In the end, it doesn't matter what tool is used, but we have to quit digging deeper. We can backfill a trench with a hand shovel. a teaspoon, a dozer, or a backhoe, or bare hands. The direction of the trend is what matters.

The problem right now, is that if you envision the balance of payments and the negative results, like a dike, we have a bunch of rats digging nice comfortable burrows in it. Some are going in for heavy equipment at this point. (picture that, an army of rats with mining gear, what a picture) one day the little burrows get bigger, leaks will get bigger, when the leaks get too big, it will carry the dike away. rats, burrows, and all. And all downstream.

As for our quality of life. Just look at Zimbabwe, they chased away the productive farmers, and buisiness men, scrapped the tractors and combines. Gave the land to the poor folks, and have nearly starved to death. I think that people need to vote, preferably more than once in their life, preferably with more than one name on the ballot, and not get shot for it. ("One man, One vote, One bullet". As it was told to me by a black Rhodesian in Jo'berg a couple decades ago) But the people that won didn't value people.. The key was they lost the productive folks. It would be like asking you to cast up and roll out the steel and iron for car in your back yard starting with a charcoal grill, a claw hammer and a chunk of rail road rail, not much productivity there. (but for the people reading this, a challenge that maybe could be met if the local zoning got out of the way!)

Maybe it would have worked better to scrap the Zim army and build better roads, and schools, employ a few folks, make a market for the food that could be produced.

My grandfather's first house was a 1 room log cabin. Luckily he was able to find credit in January of '41 for a mortgage ($5,000) on a couple hundred acre farm. He built it up then traded to a larger place, my grandmother by his side all the way. . My dad was orphaned at 12, he taught high school for 37 years, and earned 2 masters degrees and a doctorate, he and mom paid off their house and retired, busier now than ever. I don't think that it would be fair to knock them back just because they had more than a poor unfortunate Zimbabwean. I would be more for firing Mugabe, the president of Zimbabwe, and few thousand other rats, and raising them up to meet us. .

[Rog]

I had another thought. How about taxing income based on the necesseity of the service provided.

Those organizations that take a raw material, shape it into something and sell it for profit could pay the least because they bring actual cash into the economy. (Agriculture, manufacturing, catering etc).

Those that provide future benefit and required skills should pay a slightly higher level. The first sectors pay for them but receive benefit from them. Education and Healthcare (those that do it not the insurers) would fall into this category.

The highest rate should be reserved for those organizations that consume without producing products, enhanced skills or necessary health care.

Okay it's not well thought out and there would be many loopholes to close but would this not address the fact that real cash has to come from somewhere?

By relying on the stock market to provide for retirement we are feeding the wrong end of our system. What other options are there for security in retirement?

Rog

[Abogle]

I like the idea pegging the corporate and upper income tax rates to the unemployment rates

the higher the unemployment the higher the tax on the top, the lower the unemployment the lower the tax

[bradintx]

So my company has done a good job of staying competitive and we grow and add employees as we grow. Maybe many other companies do the same. However because we still have companies like the Big 3 auto makers, that could not adequately manage a lemonaide stand, unemployment still goes up. In this case I still get taxed a higher rate and therefore punished for the acts of others.

On the other side the big 3 would also be taxed at a higher rate, so they would have less money for R&D and less money to get new equipement and less money to keep the employees that they have. So to cut costs maybe they move some operations to Mexico (or further away) and unemployment goes up again. And then I get to pay more taxes again!

Corporations do not pay taxes - consumers pay taxes.

[Abogle]

Yep thats right

corps don't pay taxes - they hire accountants and lawyers to set up offshore accounts to avoid paying their fair share - pushing the tax burden off on everyone else while at the s same time shipping their opportunites (and tax base) offshore

the problem, with your tired scenario Brad - is that for all the tax cutting fo the top it has not benefitted the population as a whole - hence the high jobless and underemployment

that is why my idea is the better one - it provides a great incentive to create jobs - the carrot-stick approach

As one of the last truly great presidents, TR, was famous for saying - the wealthy benefit greatly from the privileges of a free society and therefore have a moral obligation to contribute back into that society. Of course the Roosevelts were quite wealthy themselves lending even more credibility to that statement

The funny thing was US businesses thrived during times of higher taxation - the 50s-70s for example. Under Eisenhower (R) the top tax rate was 90% most would agree this was the heyday for US mfg. Job creation under Clinton was greater than under both Bushes or reagan for that matter - Bush II tax cuts failed to produce any new jobs and encoruaged offhsore investment

Higher taxes encourtage long term investment in productive activities, low taxes the opposite and encoruages boom bust and short term schemes

[Rog]

Before we get carried away here a word of caution.

Economies and societies are complex, dynamic, living organizations. They do not respond predictably to external stimuli. If they did we would be able to control them and avoid the regular crashes that we have. As such we cannot use simple cause and effect ideas to explain their behavior. They are not subject to Newtonian mechanics. We must not fall into a trap of drawing cause and effect conclusions that might not be there. All we can do is create an environment more conducive to the betterment of everyone. That's not done by arguing about tax rates. It's done by those in prominent positions setting good examples and acting appropriately.

Your point about the economy thriving with a higher tax rate may be a false cause and effect. After WWII most of the manufacturing economies that we now compete with were decimated and it took them 20 - 30 years to rebuild. China was a closed economy and communications and transport to the far east were limited. We are in a different context now.


There are much wider issue as that need a coherent approach. Way down at a very basic level there needs to be agreement on what is a social issue and what is a business issue. Being clever with accounting is avoiding one's social responsibility. Wasteful government is no different. Federal tax should go only to federal programs. If Alaska wants a bridge that's fine as long as Alaska or the peolpe who use it pay for it.


Any economy/society without checks and balances, whether capitalist, communist or anywhere in between ultimately places power in the hands of a relative few. What we need is a model where those few are engaged with and dependent upon their constituents. I do not know what all those checks and balances are. Some is a necessary level of taxation, some are stronger regulations that are enforced, some maybe alternative retirement options that do not require dependence on the stock market, some may be less expensive health care.

There is no one sector, no one factor that is to blame. We all buy cheap goods from China if we can't get them from America because we are 'educated' to be needy. Our stock brokers invest some money in China rather than in America because we only measure their success by financial gain. Our manufacturing leaders work from a lowest cost basis and slowly strangle the home manufacturing and innovation base. Consumers run up credit that can never be paid back and the credit companies encourage it.

What we need is a change of thought process from 'mine' to 'ours' ,from short term to long term, from partisan to collaborative, from 'or' to 'and'. We have been set a very poor example over the last 10 - 20 years by politicians, lobbyists and executives. Yes you'll be able to find instances that refute that but you will also find at least as much to support it. At least as much poor example is way too much.

Rog

[bradintx]

My point was that corporations do not pay taxes because they pass on the costs to the consumer. Yes they find ways to hide profits and use our convoluted tax code to find loop holes. But the taxes that they do pay get passed on in the price of the product or in cuts in other costs (the easy cost to cut is jobs on the production floor).

I am not saying this right, just that it is.

As a point of reference about who pays taxes (according to the dept of treasury):
The top 1% of wage earners pay 33.7% of all taxes collected, this was 32.3% BEFORE Bush 2 tax cuts.
The top 5% of wage earners pay 54% of all taxes collected, this was 50% BEFORE Bush 2 tax cuts.
The top 50% of wage earners pay 95% of all taxes collected, this is virtually unchanged by Bush 2 tax cuts.

Not a big fan of Bush 2, but that does suggest that those tax cuts were not just a benefit to the "rich". I have nothing to show what negative affects this might have had on business and did it encourage the "rich" to invest their money locally or in distant lands.

All that having been said I do agree with Rog that we can learn from history as long as we are willing to see the big picture and not cut little snipets and extrapolate grand conclusions (like I might have just done above?).

However that was then and this is now. I agree that the short term approach and the push for short term gains at the expense of looking at the long term is a bigger problem and I am not sure how to solve this on a macro level?? I think that the Japanese, Chinese and Russians tend to do a better job of looking long that we do.