Posts Tagged ‘trade’
Posted in Broken Government, Economy and Trade, Election, Energy Policy, Government, oil, WP Political Blogger Alliance, tagged energy, leadership, oil, presidential candidates, statesmen, trade, were are the leaders, WP Political Blogger Alliance on May 18, 2008| 1 Comment »
If we look for leadership from the founding fathers of this nation, we have an abundance. These were people who would risk their own necks and personal wealth building to achieve a goal for the betterment of their, state, soon to be nation, and countrymen. These were people who could and would compromise to strengthen this country – they put the country and the goal of freedom and prosperity first over partisan rancor.
Where are the leaders with a true overarching future vision of where this country needs to be and the leadership and knowhow to make it happen, like Alexander Hamilton, rising from a poor and orphan like childhood to become the trusted compatriot of George Washington, to firmly set this fledgling country on a sound financial footing? Where are the Thomas Jefferson’s, who despite maintaining a very literal view of the Constitutional powers of the Presidency, took the opportunity, to acquire what became know as the Louisiana Purchase and worry about it later – the Constitution did not cover the acquisition of land for the United States? He did this because he knew it was the right move to better this nation and he had the leadership capability to pull it off. Where are the Teddy Roosevelt’s, who had a true vision of this nation as a great player among the great nations of the world? He saw the need to extend the growing power of this nation to influence world events, saw an opportunity, and initiated the great white fleet. He sent the U.S. Navy in modern formidable white ships around the globe as a means of demonstrating just how mighty the U.S. had become. Where are the Franklin Deleanor Roosevelt’s who had the vision and leadership to take on the national rebuilding to end the depression and then to lead this nation and the world through the largest coordination and assemblage of people and machinery in the history of mankind to defend the world against the tyranny of the Axis Powers? Where are the Ronald Reagan’s who had a vision of a world without the totalitarian iron curtain and who had the temerity to fight for and lead the world to the tearing down of the symbol of the iron curtain – the Berlin Wall? All these leaders did more for the country that the acts listed above – they were visionaries, leaders, and statesmen.
Today we are faced with three major choices and soon to be two major choices for the Presidency of the United States. Can we honestly say that any of these choices have a true vision of where this nation needs to be in 25 or 50 years? Or, more importantly, have the capability of leadership and understanding of the facets of the changes we need to make as a nation to retain the position as the nation with the greatest standard of living. Does any one of them understand that we may walk and talk like the world’s military super power and a nation possessing a consummate standard of living, but that the underpinnings of this strength and status are rapidly failing. The world knows this, but do we? Can we honestly say that we have the best and brightest in the Presidential race and in our Congressional and Senatorial races? Have any of them laid out where we should be, how we can get there for the second half of the twenty first century, and how they will lay the ground work to achieve the goal?
This country faces the combination of a complex and very dangerous foreign policy coupled with our ability to compete in the world to maintain our financial strength. Currently we operate like the rich playboy who spends his wealth, but has no means of replacing the wealth he spends.
Our populace is no longer being given heavy doses of history or civics in school. Without the preponderance of history and civics knowledge can we make good decisions about our legislators and Presidents? Can we fully understand the events that shape our world? The early childhood discipline coming from the schools and then from service in the military is gone. Today, discipline in schools is a dirty word – our children must be free to make their own choices as they have rights, despite solid scientific evidence that the brain is not fully developed in matters of judgment, until these children are will into their twenties. Without the discipline to expect what is right and to walk the tough walk, we seek the easy way – the short term solution to our problems. The mortgage crisis is an example of those seeking the short term solution to their problems without regard to the long term consequences.
Without the basics of understanding world events, we are more susceptible to undo influence by the media disguised as fair purveyors of truth, when they are making every effort to steer our thinking with selection of articles, selection of news items, and slanted interpretation of the happenings of the world, rather than just accurately and fairly presenting what has happened. The media disguises opinion commentators as news journalists to manipulate the populace. How are we to know the difference, unless we have the necessary background?
Our Congress is filled with people who are there, not for the public good, but for what they can get out of it. Why then would we have Congressman in office for many multiple terms, unless they are doing very well for themselves in office? If you do not believe me, just count the number of disgraced Congressman who have had to leave the Congress under sordid circumstances. We have political parties more concerned with the party than the country.
This country is facing challenges of the like that we have not faced before. We astoundingly have no comprehensive energy policy that factors in all sources of energy and the transformation over time from fossil fuels to renewable energy. Renewable energy is simply not ready to be the energy motor of this nation, so we need interim solutions. Energy is the motor that makes this country work. Without energy we will never achieve our objectives in this world today. We have allowed the world to dictate our cost of energy and yet we still will not start using our own resources on an interim basis. Our President recently went to Saudi Arabia to ask them to produce more. Had I been King Abdul, after I stopped laughing, I would have said “Let me get this right, you want me to produce more and you will not produce more in your own country – you will not drill in ANWR or on your east and west coast continental shelves, you will not build refineries, and you will not build nuclear reactors. You have the audacity to hope that we will deplete our reserves so you can retain yours. No! Go hug a tree!” We have no trade policy other than free trade, yet we are ill equipped to trade in a free market. What shall we trade with – do we produce for trade, do we make a guided national effort with leadership to determine what our national comparative advantage is and exploit it or improve it – No?
Without true nonpartisan leadership at all levels, we will not be and cannot continue as the nation with the world class standard of living and the ability to influence world events through both financial and military might. Are the candidates running for President the leaders with a true vision for not only what they will deliver to the country, but also how they will get it done. It is easy to promise much and deliver little – it is easy to limit your focus and promise on a few things, but it is another thing to size up a gargantuan task and have the vision to know where we should be, how to get us there, and the leadership and experience to pull it off.
Way back in the old days after the Republican debacle of Richard Nixon and Gerald Ford, the Country wanted a CHANGE. Coming forward was a candidate from Georgia, a Governor. Jimmy Carter appeared on the scene as a Democratic Party unknown running for President. He talked of changing Washington business as usual, changing foreign policy business as usual, and being an outsider.
The Country narrowly gave him a victory over more experienced people because his message was seen as a breadth of fresh air. In our haste to put Watergate, the beginnings of an inflation problem, and a gas shortage behind us we never stopped to look at the credentials of this candidate with a fresh outsider message. We just knew that Jimmy Carter represented a fresh start and that he was not of the beltway. Sounds like another candidate running today, doesn’t it?
Jimmy Carter was elected with 50.1% of the vote, but a clear majority of Electoral votes. His handling of the economy resulted in a 40% increase in prices over three years, the prime rate moving from 6.75% to 21.5%, and mortgage rates of 17.5%. Oil prices skyrocketed and Carter instituted an energy policy. This ill conceived energy policy was based on conservation and high prices to help reduce U.S. consumption. It was a policy that simply punished this nation for using oil. The Carter administration economy proved to be the catalyst that brought a “misery index” to the voters in the next Presidential election.
Jimmy Carter’s foreign policy, consisting of “we can talk with our enemies” and “work things out” was perceived as weak in many areas of the world. He did accomplish the Camp David Peace Accord. We lost respect among other Middle East nations, especially Iran. This unprepared, inexperienced administration run by a novice in international affairs may have fostered the Iranian Hostage Crisis. Iranian students seized our Embassy and took our State Department staff hostage. Fifty two State Department diplomats assigned to the Embassy were taken captive by Iranian students in support of the Iran Revolution. This was a violation of a long standing principle of international law, which granted diplomatic immunity to our representatives in Iran. These hostages were held for 444 days and were only released after it was clear that Ronald Reagan would be elected President and would take large scale overt military action against Iran.
Mahmūd Ahmadinejād, the current President of Iran, was a ring leader of this stain on our foreign affairs history. Yes that right, Mahmūd Ahmadinejād, was the Mayor of Tehran and was a ring leader of this reckless disregard of international diplomacy. He denies it was him, but many of the hostages and the former Iranian President Abholhassan Bani-Sadr have asserted that Ahmadinejād was a ring leader.
The lesson here is that our rush to make CHANGE for the sake of change caused this Country to suffer the naivety of a “Washington Outsider” President with no foreign policy experience. He did have Gubernatorial Executive experience – one term, and one term as a State Senator. Change we did receive, but it was an unpleasant change.
The populace sometimes in its ill informed zeal to start fresh and fix the ills of Washington fell for the smooth talking great message Washington Outsider called Jimmy Carter. This agent of change left this nation to be a veritable basket case on the domestic and international scenes.
Due to the reappearance of a misery index economy, we are now hurtling down this same path. The current candidate of CHANGE, Barack Obama, wants to sit down, right out of the chute, with Mahmūd Ahmadinejād. Senator Obama wants to raise taxes and spend heavily against the backdrop of a fragile economy. He wants to stop free trade rather than prepare us for free trade. This is a formula for an exponential increase in misery index.
While experience is not a formula for success, it is much better than uninformed good intentions. We have too much to lose to just blindly make change. We need to address change with a blend of judgment and experience – even a poor history of experience is a learning tool. The very limited experience of a local politician with just two years in the U.S. Senate, less experience then Jimmy Carter held, should be weighed very carefully.
In November we will have an election to fill 435 seats in the House of Representatives and 33 seats in the Senate. I have been compiling my wish list for the new Congress. Yes it is early, but since the current Congress has decided to accomplish nothing but continued earmark spending and the discussion of a misguided housing legislation, I thought I might as well get a start on what they will not accomplish in the 111th Congress.
Let’s see! This country needs a sound coherent energy policy that considers our exposed national security, with oil being our Achilles Heel and all. It is a shame that the current Congress does not want to attempt this, other than to tell oil companies they charge too much and to bring prices down or they will lose the tax benefits that helps to moderate prices – makes sense to me. Instead they gave us ethanol which is proving to burn as much carbon as oil after the growth cycle, transport cycle, the refining cycle, and the second transport cycle. It does not pack as much punch as oil and the MPG is not as high, but the farmers are happy since they get great subsidies to plant corn for ethanol. This has led to a shortage of corn to feed our cattle and a shortage of an assortment of other farm products raising food prices rapidly around the country – nice work there Congress!
Our trade deficit might be a good thing to address, after all, China represents an unfair, unrelenting trade behemoth with an artificially devalued Yuan. It ships any kind of quality or non-quality to our consumers, especially our kids. It has been trying to steal our industrial and technology secrets to boot. China is an unfair trade threat, but our Congress has not adjusted tariffs to compensate for China’s scurrilous unfair trade advantage. My wish list includes placing our domestic businesses on a competitive trade footing with other nation’s businesses. Perhaps we could try in the next Congress to change the tax structure and other impediments to our businesses so they can compete, grow, and develop new and good paying jobs. It is a shame the 110th Congress has ignored this problem.
It is depressing that they could not spend a substantial amount of time discussing health care and the current tax code in the 110th Congress – they must have had more important things to do! The illegal immigration resolution discussion must have taken up much of their time or did it? Remember, they could not find time to re-visit this tough issue after they slapped together a poor “comprehensive” bill and then when it fell apart, decided they could not spend anymore time on it. It is apparently not important to the American people, whom they represent.
The 110th Congress was elected to change business as usual in Washington, to stop the out of control spending of the Republicans, and to bring ethics back to Washington. Well, the now Democrat controlled 110th Congress has accomplished nothing, spent more via earmarks than the 109th Congress, and avoided every tough but immanently critical issue facing this country – they are good at finger pointing after the fact.
At the beginning of this piece, I asked “What do I want from Congress”? Well, I want a Congress that is more responsive to the decay in the underpinnings of this country’s economy and strength, and less interested in pandering, getting rich, being re-elected to consolidate power. I want patriots in Congress. I want leaders in Congress. I want neither Republicans nor Democrats in Congress. I want concerned citizens in Congress. In the fall, we can and should change 468 House and Senate Fannies in Congress – they might then get the message.
Posted in Economy and Trade, Government, tagged comparative advantage, consumption tax, corporate tax, corporations, fair tax, fundamentals, strong economy, taxes, trade, trade agreements on March 11, 2008| 6 Comments »
America needs to regain the fundamentals of a strong economy for a number of important reasons. National socio-economic health, political and diplomatic influence in the world for trade, defense, and standard of living all depend on a fundamentally strong economy. The fundamentals of a strong economy, from a non-economist’s view – mine, start with comparative advantage in world trade. This is something which our country and our leadership and labor unions have taken for granted over the last 20 years, letting this precious commodity dwindle away. We also have mistaken productivity and its usefulness toward comparative advantage with an effective trade economy. Remember, while productivity helps our trade advantage, it does little to help our trade related employment number or the quality of the trade related jobs. Simply put, the definition of comparative trade advantage is “what do we have to offer in the deal that makes us come out ahead of the other guy?”
We hear about free trade agreements and that trade is good – and it is! Entering into the world trade arena without a trade advantage or at least a trade equilibrium is just down right dumb and we have run headlong into this arena stark naked. We need to rediscover our comparative trade advantage or discover a new one, if we are to successfully compete in world trade.
Look around, the world has oil and we need it, the world has cheap goods and we need them to keep inflation down, the world has the capability to produce both quality goods and cheap goods that it could not produce 50 years ago, the world has cheap labor – shall I go on? What do we offer? Well we still have some bright minds, even though they may be heavily populated with foreigners, we still can grow food with the best of them, we still offer innovation, but we have no monopoly any longer on innovation. Our dollar is losing value which helps us produce relatively cheaper goods for the world market and thus lower the trade deficit.
A devalued dollar is a two edged sword as also it brings us a higher cost of living and a lower standard of living relative to the world. What do we plan to do about this obvious problem? Well Senators Obama and Clinton want to tax us more – mostly business and the rich – you know, tax the engines of investment and growth! Senator McCain wants to keep personal income taxes low and cut spending, but this will not bring us back to a fundamentally strong economy even though it is good start. It is how, when, and who we tax that is the problem. We are an economy that taxes income accumulation. We should be taxing the disposable money spent on “stuff” and not the money earned and used for growth re-investment.
Businesses pay a 35% Federal corporate tax rate and varying state corporate tax rates, bringing the total corporate income tax on profit to between 40% and 50% for the most part. Remember the corporations only collect the tax and anyone who buys their goods pays the taxes. If a corporation works on a 15% profit margin, and they make a set of golf clubs which they wholesale for $500, $65 is taxable profit of which the retailer pays $30 of the income taxes due on the item. When the item is resold at retail at $800, assuming a 15% profit margin, $105 is the taxable profit and $47 is the income tax due on the item paid by the end user, the consumer, you. Actually you pay a total of $77 of the corporation’s and reseller’s income taxes.
Granted, this example is clunky and probably filled with holes, but it does serve to demonstrate that when we tax corporations for manufacturing or reselling all we do is raise the price of the item. This works fine when all the competition is paying the same taxes. If does not work fine when world trade is involved, because our goods and services are then less competitive with the goods and services of other nations. We already start out with a disadvantage, in that we pay our workers more than the workers in far off lands receive, but this can be adjusted with productivity.
Unless we seriously look at our tax structure and make changes sooner rather than later – maybe move to a consumption tax or a fair tax and get away from inhibiting investment, growth, and production with income taxes, we can expect to have a lower dollar value, a lower standard of living, etc. Income taxes on domestic corporations foster a comparative trade disadvantage for us. Our government must find ways to domestically foster healthy manufacturing and servicing sectors so we can compete with the rest of the world without giving up good paying jobs. If the tax burden shifts from corporations to individuals, their will be no real change in who pays the taxes, except we will compete in the world trade markets effectively, create good jobs, and restore a fundamental of a good economy.
Posted in Economy and Trade, Government, tagged broken government, comparative advantage, fair trade, free trade, international, jobs, manufacturing jobs, trade, trade economics, world, World Trade on January 24, 2008| Leave a Comment »
In economics books it is called Comparative Advantage. It is the underlying key to successful trade among nations. In non-economist terms, it is what can I offer that the other guy can’t that will give me an advantage in trading so I come out on top.
When the United States was very young, we had unbelievable amounts of natural resources. As we approached the twentieth century we had a powerful work force achieved through the immigration of people looking for a better opportunity. These people were both adventurous and driven to succeed – they made a productive work force. Oh yes! we still had abundant natural resources. In the second half of the twentieth century, after the two world wars, Asia and Europe were devastated and without infrastructure, and they were in need of all things manufactured as they were rebuilding. The comparative advantage of the United States was its gargantuan manufacturing infrastructure resulting from the build up to produce for World War II, and the many technical achievements gleaned from the war arsenal. We had a customer – the world – ready to consume any and all that we could produce. In effect we not only had a comparative advantage, but also an absolute advantage – we could only prosper – we could literally phone it in. It was all about us!
By the close of the twentieth century both Asia and Europe, with the exception of the iron curtain countries and the Republic of China, had rebuilt their infrastructure, and in many cases with more up to date and productive manufacturing facilities than we had. The United States had fewer desirable / usable natural resources. Our coal reserves became unpopular and our desire to not spoil our planet kept us from fully developing our oil reserves. In the mean time, oil was becoming the key natural resource in the world for the later part of the twentieth century and the early part of the twenty first century.
In the second half of the twentieth century, we became oblivious to the world – remember it was all about us! We paid our people ever increasing wages in manufacturing, added many unproductive work rules, and taxed our companies to the point that all three events took away our comparative world trade advantage in manufacturing. We were now at a trade disadvantage – yet our appetite to consume was still feverish. During this period, it became more advantageous for our manufacturing companies to move manufacturing overseas. If they had not done so, they would not have been able to compete on the world stage and be profitable. During this period, one bright spot in our comparative advantage was our strength in technology and highly educated and well trained engineers. Our use of technology gave us a comparative advantage in productivity. We continued to utilize our comparative advantage in the trade of technology – we thought it up and it was manufactured overseas. Over the last quarter of the twentieth century and the beginning of the twenty first century, Asia caught up, only with a twist – same or better engineering with lower wages – the comparative advantage shifted in their favor. We also allowed our schools to lose their leadership in delivering a strong education from K through 12.
Today, what do we offer: restrained under utilized resources, a broken education system, uncompetitive costs on a world scale due to high wages on the remaining manufacturing jobs (auto industry), a declining infrastructure, comparatively high taxes on companies attempting world trade, and a voracious appetite to consume manufactured goods and oil from overseas? Yet our political leadership continues along as if we remained the pre-eminent holders of all things comparative trade. Our free trade agreements are good, yet we entered the trade arena with a handicap – we have no comparative advantage, so they are NOT good for us at this time. Protectionism will not work, because the nations of world can get along trading among themselves – they no longer need us.
What do we need to do?
- Business: stop taxing our domestic businesses engaged in manufacturing, give them a financial trade advantage as they will still be paying higher wages for manufacturing workers than their world competition; remove the health insurance financial burden from business and move it to a national health insurance system; move to a consumption tax and stop taxing the businesses that need to trade to grow so they can build and offer more good paying jobs – we need to put our domestic businesses on a level playing field with the rest of the world.
- Children: target our children by giving them all a top flight education and by challenging them with a tougher curriculum, and longer school years just as advantaged world trading nations do.
- Energy: drill for and refine our untouched domestic oil reserves in the short term; utilize nuclear, clean coal, and solar in the mid-term; develop wind, geo-thermal, advanced solar, tidal and hydrogen fuel in the long term. We need to lower the cost to produce and transport.
If we don’t rebuild our lost comparative advantage we will never hold a free trade advantage, we will continue to become a nation of past successes and a second tier nation at that. Remember it is a world economy now and the competition is fierce.