Posted on 09/28/2015 4:28:47 AM PDT by Cringing Negativism Network
David McIntosh, president of the conservative Club for Growth, never imagined that he’d be spending $1 million to knock down Donald Trump.
http://www.tribstar.com/news/indiana_news/club-for-growth-s-prez-says-he-misjudged-trump-s/article_ca0de02f-da7e-53d9-96f2-f820b79cc337.html
(Excerpt) Read more at tribstar.com ...
“Conservative” has been bandied about and bastardized by disingenuous people with ulterior motives. Just like “Born Again” was hijacked by that fraudulent, dictator-loving Jimmy Carter.
For instance, most of the R candidates claim to be Conservative. I don’t believe ANY of them are, including Ted Cruz or Donald Trump. It’s been so everused it’s lost its meaning, anyhow.
I’ve chosen Trump and Cruz, in that order, because Trump has the chops and the wherewithal to go all the way to the White House, and to CLEAN house when he gets there. And Cruz is the ideal Christian, Constitutionalist, Attorney, Ballast to be a good influence on Trump and the GoTo man on Constitutional issues.
In much of the 90s I was in manufacturing.
We had some large machines in the die-casting department that used a small amount of glycol. Glycol is made from steeric acid. Steeric acid is rendered from the stomach acids of cows. It's mildly toxic in the sense that it will burn you if it is on your skin and you don't get it washed off for twenty minutes. It is also purely organic and if you pour it out on ordinary leaves it will compost into ordinary everyday dirt fairly quickly.
Nonetheless... mandated waste disposal costs for a small amount something that breaks down harmlessly all by itself exceeded the labor costs, and we paid a good wage.
I wouldn't manufacturer here.
Sounds like in the “Seven Stages of Grief” CFG is moving from anger, and denial, to bargaining.
“Serious question ... why does the American management of American companies send some jobs overseas?”
This perspective may be helpful:
1) Pre 1970, most CEO’s came up through manufacturing or sales/marketing and understood product, production, and customers. They also worked with employees in the operations. They were producers, not beancounters. In the 1970’s the financial MBA’s and lawyers took over the executive suite. Their experience was not producing things or serving customers, it was analysis and financial manipulation. To the beancounter CEO, workers are an expense, not an asset. From their perspective eliminating people through outsourcing simplifies the management process. Cost reduction, not craftsmanship, creativity, and quality is the goal.
2) Well into the 1950’s US businesses and manufacturing were primarily local or regional in scope. CEO’s lived in the communities where the operations were located. Their children went to the same schools as the children of workers, their wives shopped in the same stores as the wives of workers, and their families worshipped in church alongside the families of workers. These corporate leaders were members of the community and personally invested in the success of the community. With the mergers and aggregation of business on a national and global scale, corporations emerged with headquarters in large metropolitan areas far distant from the operations of the company. CEO’s and executives were no longer invested in the workers and communities. A factory or field office became a simply a line on the profit and loss statement.
3) In the 19th and early 20th centuries, the purpose of the stock market and Wall Street was to provide a marketplace where companies could raise equity capital (i.e. exchange partial ownership in the company for large sums of money) to finance major corporate investments which would deliver income streams over decades (factories, railroad lines, aircraft, mining equipment, ships for example). Both investors and managers took a long range view with respect to the investment. In the 1980’s the speculators class took over Wall Street aided with technology facilitating trading by computer and the management of millions of transactions in a short period of time. Large pools of money from the pensions and savings of the middle class were managed by investment firms with a short term horizon. Investors buying and selling stocks were no longer interested in the payout of a factory over 30 years, they became focused on management’s ability to increase earnings quarter over quarter. As a result, executives became short term focused in decision making. In many instances the payoff was quick for offshoring production while the payoff for modernizing an older factory, or building a new factory domestically might take several years.
4) The lowering of tariffs and quotas through the free trade agreements of the 1990’s and 2000’s reduced the cost of imports by as much as 30% (the amount of the tariff). Most companies did not lower prices commensurate with the lower costs of production. Instead the elimination of tariffs resulted in higher profits which in turn resulted in higher increases in quarterly profits and higher stock prices.
5) Until about 1980, senior executive pay packages were much more modest than today and were heavily weighted toward salary plus a much smaller bonus. The pay incentive was to look at the long run prosperity of the company. In the 1980’s lucrative incentive stock options became major components of executive pay. By taking short term actions to boost profits (i.e. outsourcing jobs) the value of executive stock options increased exponentially. As a result, the focus of management shifted from long term growth of companies to short term cost reduction and financial engineering. Eliminating people from the payroll was a major contributor to cost reduction. Hence waves of corporate downsizing and consolidation in the 1990’s and 2000’s.
6) China targeted entire industries during the 1990’s offering incentives for US companies to move production to Chinese owned factories. Chinese factories involved in capturing foreign production received tax abatement and generous export rebates from the Chinese government. In addition, the Chinese government owned banks often fully subsidized the construction of new modern factories. A US executive in 1995, faced with the cost of modernizing or replacing a US factory built in 1965 to make US workers cost competitive would have to raise capital to finance the replacement at a cost of say 12% when the cost of capital in China was zero. In addition, the Chinese production would be effectively subsidized by the Chinese government through export rebates and tax abatement. In many instances the incentives were strong enough to shift the production to China, even if US workers were more productive and could be cost competitive with updated equipment.
7) Government regulation in the US was becoming more strict. In China the regulatory environment was very loose. In some industries, regulation can have a significant impact of cost.
8) Taxes. Foreign factories do not pay taxes to the US government. US factories are heavily taxed at the federal, state and local level. Often foreign factories are not taxed by their home government on profits earned through exporting.
9) Unions. High cost, and work rule restrictive collective bargaining agreements may have provided some incentive for jobs to be outsourced. However, it should be noted US corporations closed many factories in the southern US where wages were low and there were no union contracts.
To summarize there were many factors, all of which together made it easier for executives to send jobs overseas.
Fixing the problem is simple:
1) Exit the free trade agreements of the last 25 years. Slap a 30% tariff on all imported goods. Call this an access fee to the US market as well as an offset for the export subsidies of foreign governments.
2) Lower the US corporate tax rate to 0% on profits made by US factories producing goods made 100% from US sourced components and raw materials.
3) Real regulatory and tort reform. Have a 3 year sunset on all regulations. Require Congress to vote to extend regulations. Institute a “loser pays” rule for tort litigation. This will reduce frivolous lawsuits and shakedowns.
4) Education reform. Focus community colleges on vocational education. Create local training partnerships where community colleges provide skilled and certified workers for modern manufacturing.
5) Strict country of origin labeling requirements for all goods sold in the US. Make it easy for the consumer to determine where a product is made so she/he can make an informed purchase decision. The Chamber of Commerce should then promote “buy American”.
Yes. Trump posted their letter to him on Twitter. So they have a major ax to grind.
Very good question and I will try and give you an answer.
It began almost 30 years ago when the general opinion in the business community thought Japan was going to be the next financial superpower.
The feeling was to compete with Japan, the USA needed to reduce its cost of doing business by sending non-technical assembly overseas.
Japan then did the same thing moving much of its electronics/cars to Taiwan or South Korea.
Now it is taught at US business schools that the USA can’t make a profit building anything here.
The .com boom was taking the off shore manufacturing to the next level.
Lots of jobs and key managers originally from China/India/Taiwan began to actively hire ONLY people from their home country.
First it was friends/family but then it morphed into something much bigger.
You could easily see it.
A manager from India would give poor reviews to USA employees and then next open req cycle, suddenly he would have 10 new employees from India and none from the USA.
This is the BIG secret Apple, Intel, Microsoft and the rest refuse to look at. High tech companies are becoming LESS diverse and they are only hiring people on approved lists by managers from approved lists.
Nice summation of American business history. The only missing element that I see is company ownership. Most large companies started in the early 1900s and were family owned for generations. Many of the heirs sold out from the 50s to the 70s. The resultant large corporations were initially conglomerates of similar companies where the CEOs were captains of industry. They focused on long-term growth and capital investment.
In the 80s, your MBA and bean counters also viewed the capital investment as a liability, and divested of real property and excess capacity to increase “shareholder profit.” They essentially mortgaged everyone’s future, but at least you have your 401-K. It’s all part of the Esau generation mentality. I will have my pottage now—to hell with my children.
“It’s time to give the entire paycheck to the employee and make them responsible for paying their own taxes, Social Security and every other cost the employer incurs due to hire them.”
That will work with law abiding citizens.
Unfortunately, in Californicator land for decades, when illegals are paid cash, they contribute nothing tax wise. They hide their income, send money to Mexico, go on welfare,
get EBT cards, WIC cards and free health care.
Your suggestion works with the rest of us. After, I took early retirement, I got a high paying consultant gig as an independent contractor, and I had to pay the taxes, social security on both sides.
My wife didn’t understand where our money was going, until I had her write the checks for the various taxes/SS each quarter. Also, she had to contribute to a separate savings account to have the necessary quarterly funds. She figured out that we need to deposit every other check of mine, in that account to have the necessary money each quarter. After 6 months, she knew where our money was going, and she became a tax hawk.
Flash forward a couple of decades, one of our younger male relatives’s wife started her own business when their youngest kid started K school. She made good money and was spending all of it. He had her sit down with my wife and the CPA used by both families. After the first quarter, his wife saw the light, deposited every other week’s income into an escrow savings acct and paid the quarterly taxes. She, like my wife became a tax hawk, and went from mushy lib/mod to conservative.
Your article is absolutely correct. Thank you.
As I read your Bio I noticed this statement: “I’ve come to conclusion the deindustrialization of the US as a result of the “free trade” movement of the 1990’s and 2000’s has been an economic and national security disaster for the United States and is contributing significantly to the rapid decline of the nation.”
There is something even more sinister when thinking about our industrial weakness: WAR!
During WWI and especially in WWII we had the most powerful industrial strength in the world. Immediately upon being attacked at Pearl Harbor we were able to shift from a commercial industrial situation to a full-fledged military manufacturing situation. It was our ability to manufacture the products needed to fight the war that won the war.
Now (for all practical purposes) our heavy industrial base has been gutted and to shift overnight to a military manufacturing environment is impossible on short notice. Worse yet! Some parts for our military equipment are being manufactured by our potential enemies in China and other countries. How stupid is that?
We can save all of the purple spotted flying 8 legged lizards we want but how will we save ourselves when the need to MAKE THINGS here at home cannot be accomplished?
The answer is: We can’t! For we have closed and idled our manufacturing industries in the name of Global Warming and Ghia.
Another mea culpa after seeing the number of small donors crash?
My thoughts, exactly.
Bwahahaha, CFG.
Do this first only if you want the store shelves to look like Venezuela. Your 2) though 4) (the really necessary fixes) would have to be in place for a decade before attempting 1) - since so much domestic manufacturing know-how has been lost. There just isn't a large enough skilled employment base left to do mass manufacturing work on the necessary scale...unless you want bring millions of Chinese workers back along with the factories. :)
“Do this first only if you want the store shelves to look like Venezuela.”
I disagree. Chinese factories work on a margin of at least 20%. They can’t afford to lose the volume and will cut prices to be competitive. The Chinese government will also provide or increase export credits to keep the factories operating. Plus the importers and resellers in the US work on margins from 50% to 80%. They will reduce margins to sustain volume while looking for new suppliers. Importers and factories will also squeeze their suppliers. The impact of a 30% tariff will be less than 10% to the end user but it will put significant pricing pressure throughout supply chains and provide ample incentive for each supply chain participant to seek alternative sources of supply. It will also provide the financial incentive to invest in US manufacturing.
Not only do we not have the skilled labor, we’ve lost much of the management and engineering knowhow to operate factories. It will take a decade or more to build new factories and train people. So be it. If we don’t start soon it will be too late.
Suppliers, retailers, transporters, and other supply chain participants deal with wide swings in the cost of components and raw materials everyday. Over 80% of the retail price of many imported products is profit extracted at various points in the supply chain. For example a widget costing $10.00 at Home Depot will have a factory cost of $2.00. The factory sells it to the importer for $2.40 (20% markup). Apply a 30% tariff to the $2.40. The landed cost is now $3.12 for an item that retails for $10.00. Even if Home Depot and the importer act to preserve margins, the new retail price will be $11.00. Hardly enough to turn US store shelves into Venezuela.
Remember, US consumers did not see massive price reductions when manufacturers moved production offshore. The real economic driver in the decision to outsource versus produce domestically was avoidance of capital spending. Many private equity owned companies, as well as multinationals, viewed outsourcing as a way to turn capital into cash. The elimination of tariffs, while having a small impact on retail prices, had a sufficient cost impact to swing a make versus buy decision. Executives whose incentive compensation was highly based on short term performance did not consider the long term risks, impact on workers, or long term negative impact on innovation. They certainly didn’t consider the long term economic impact of their collective decisions or the national security implications of moving the US industrial base out of the homeland.
A tariff adjustment is essential to providing the economic incentive to invest the trillions of dollars of capital in the US market necessary to rebuild domestic supply chains. It is also critical to funding the government, particularly if business taxes are to be eliminated.
With respect to capital spending, the cost of capital today is very low in an era with interest rates virtually 0%.
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