There is an old saying, “Follow the Money.” The current stimulus package is going to provide tax credits to everyone, even those who pay no taxes. What happens when you give people money? They buy stuff, which is good for the economy, right? Well we have a huge trade deficit and most of the consumer goods that will be purchased with this money are made in China and other countries. So, following the money, if we give it away our population will spend it on goods from China, thus saving that economy and doing very little for ours over the long haul.
How can the government use its billions to actually fix this problem? I am quite certain our new President has the brightest minds available working on this. What I have gleaned from the conversation, however, and I find this typical when people are panicked, treat some of the symptoms but are not bold enough to craft an actual cure. One thing is clear, we have got to get back to making things.
For years, at least 40, the US has become increasingly uncompetitive in world business. We like to blame it on low wages, and that certainly plays a part. In addition, we have the cleanest, safest plants in the world. Of course they are all closed or closing. It makes no sense to provide funds to people who will buy foreign-made goods or to businesses if there is no real way for them to compete in the global environment. They will both spend the money overseas and there will be no advantage to the US economy.
What to do? Here are some ideas. (See my prior posts for more details at http://lipspeak.blogspot.com/)
1. Pollution Tax: Create a Pollution Tax that everyone who sells anything in the US has to pay. This will raise the costs of imported goods that are manufactured in countries with little regard to pollution of the water, air and ground in their countries. Balance the international playing field a bit.
2. Increase Loan Guarantees: Dramatically increase SBA and other guaranteed loans. Guarantee loans are made by banks. Banks will loan money again and the government is not out the cash now. Make the borrower use the money in the US to hire people and create facilities.
3. No Minimum Wage: THIS IS GOOD FOR THE HARD WORKING MIDDLE CLASS! The minimum wage forces hard-working middle class Americans to pay, out of their own pockets, extra wages to the worst workers in the company, or of course the company moves the whole plant to China. When a company moves overseas, the US loses the higher-paying supervisory and management jobs as well as the hourly workforce. Make all workers, even the lousy ones, earn their wages and there will be MORE jobs that pay higher wages.
4. Reduce Immigration Restrictions: Let immigrants in, let them work at below minimum wage and allow American industry to grow again, bringing higher paying supervisory and management jobs back to this country.
5. Flat Corporate Tax: Create a flat corporate tax on gross revenues over one million dollars that all businesses pay. Eliminate all of the complex tax rules that allow some profitable companies to avoid paying any income taxes, and all the complex tax requirements and credits that have been laid on the system throughout the years. Then the government can start over if necessary.
6. Eliminate the Payroll Tax: It discourages American workers. Roll the required tax revenues into the flat corporate tax.
7. Fund High-Tech and Clean Fuel R&D and New Businesses: As the President has pointed out, this has a great future to drive new higher paying jobs.
8. National Competition-based Health Insurance: Pass a national, competition based health insurance plan, with catastrophic coverage for all. Take health insurance benefits out of the province of business. They do not know how to do this very well. Put it in the hands of professionals and let people get creative.
9. Balance the International Playing Field: Regulations are important, but use them to balance the international playing field. If US companies have to do something, foreign companies that import into the US should have to do so as well, or pay a commensurate tariff that balances the playing field for US manufacturers.
If we do not correct the problems with US manufacturing this is all a waste of time. Countries that make things will grow. Countries that provide services and buy things from other countries gradually shrink.
If you are an environmentalist, who do you want manufacturing goods – the US or the Chinese?
If you care about the poor, where do you want workers to work, in the US or in China?
If you care about safety to workers and consumers, where to you want things made, in the US or China?
We have no choice but to find ways to compete in the global economy. Level the international playing field.
The only saving grace is that really wealthy people invest their money in foreign lands and, since they prefer to live in the US, they bring the profits back here. How long will that last? Only so long as Americans have money to spend to buy foreign goods. That is slowly slipping away. Open your eyes and see the real, hard problem.
Give away money = save China’s economy.
Invest money in business and level the international playing field = save the US economy.
We are all rooting for you, Mr. President. Good luck, but please do not save China.
Author of five novels available on Amazon, numerous articles and other commentary.