Saturday, November 13, 2010

Economic Austerity

The debate regarding the American economy is talking about the wrong issues. The discussion should not be about additional fiscal stimulation versus radical budget cutting and fiscal austerity. These are merely short term issues.

The real issue is that all the good manufacturing jobs have been going overseas for years. This was mostly to help American companies evade rules regarding the environment, workplace safety, and providing decent livable wages for the workers. If you have children in China or Thailand doing the labor of making your tennis shoes, it allows you to increase your profits. Greed.

The jobs that have been created in America at the same time that we have been losing these good manufacturing jobs are in no way comparable. They are low pay, low benefits, low security jobs working at McDonalds, Wal-Mart, or in a bank or mortgage company.

I doubt that America will have the strength of character to solve this problem. Honest. My best assessment is that our decline will continue, and we will gradually go out with a whimper. I am quite sincere about this.

But if we are to solve the problem of the decline of America, then we have to: Stop worrying about Wall Street or Markets. The goal must be to be effective in having much of the manufacturing return to American soil. If we get all hung up about free trade or the WTO then we will just see more of the same. Free trade is what has caused our is the problem not the solution.

We must impose significant import duties on most manufactured items coming into the country. These import duties will be to balance the playing field, making things a bit more equal. What is the cost of requiring companies to not pollute the air and the water too much? Child labor, workplace safety, job security, decent livable wages and benefits like fully company-paid health insurance, and genuine pensions. Food safety, product safety, proper disposal of hazardous waste, and consumer protection in general.

I don't know what the amount of these import duties will need to be, but it certainly won't be something on the order of 5% or 10%. Just plucking a number out of the air, I think that we are probably looking at something more like 35% to 65% import duties, depending upon the item and the individual circumstances. If the country in question prevents our goods from entering their country, then maybe the number will have to be more like 85%.

The American tax regulations currently encourage companies to move overseas. This has to end immediately; no phase in. To reign in all the money we are sending to people who hate us in the middle east for oil, we need to significantly increase gasoline prices and taxes on vehicles averaging less than 40 miles per gallon.

Government spending on the military, intelligence, and everything that President Eisenhower called the “military industrial complex” needs to be cut deeply. On the order of 35% initially, with a 5 year plan of taking it down 50% to 65%. This foolish and wasteful spending on warfare is bankrupting America.

Of course large import duties can't just be imposed suddenly and overnight. This could possibly cause a world wide economic slow down. So these import duties need to be phased in over a two to three year period. This will give American companies the opportunity to ramp up domestic production.

This program is simple, and it will work. Will the America politicians and elected officials have the strength of character to implement this? No, of course not. Corruption will stop them. Too many of the powerful senators and congressmen (most actually) have simply been bought and paid for by big business. They call it campaign contributions, the proper words are bribery and corruption.

Unless and until genuine campaign finance reform happens (which it won't because all the bribery and corruption among elected officials will prevent reform) America is doomed to continue its decline.