Obama absent as China scolds U.S. for debt addiction

AP via CBC News ^ | Aug 6, 2011 | AP

[Qbert]

U.S. President Barack Obama remained largely silent as China, the largest foreign holder of U.S. debt, demanded Saturday that America confront its "addiction to debts" in the wake of Standard & Poor's decision to downgrade the U.S. credit rating.

The president, spending the weekend at Camp David, left it to press secretary Jay Carney to say it's clear Washington "must do better" in tackling soaring deficits and other economic woes.

A statement from Carney said talks that produced Tuesday's $2 trillion US compromise on raising the country's borrowing limit had been too drawn-out and "divisive." But the statement didn't directly address Friday's move by Standard & Poor's to drop U.S. government debt to AA+ from triple-A.

[tsowellfan]

If we were to have a trade-war with every nation to which American countries have moved, we’d be in a trade war with many countries. Not just China.

[Cringing Negativism Network]

Gotta start somewhere.

What we’re doing now is clearly FUBAR.

One generation ago, America was the single richest, most productive, most innovative, most technologically advanced nation in human history.

Now what are we?

In debt to a country which that same generation ago, was riding bicycles.

[tsowellfan]

Gotta start somewhere.

Yup, and I say start at the source of the problem. It is WE who owe the money. The problem is here and that's what needs to be fixed.

[Cringing Negativism Network]

That’s hardly a trade war.

That’s surrender.

[Chgogal]

ObaMao

or

One

Big

A$$

Mistake

America

[oblomov]

I don’t think the market will perform too poorly tomorrow. Obama made sure that his cronies at Goldman Sachs and Bank of America knew about the downgrade on Thursday.

[tsowellfan]

Washington DC recently passed an economic stimulus package (to create jobs). In my state our electric company was bought out by a spanish company. They received economic stimulus money. They used the economic stimulus money to put in electric meter readers and layed-off all their meter readers because now the electronic readers do it all. Whose at fault? Washington DC or the company in Spain?

How do we have a trade war with an electric company?

Live like the Amish?

[Cringing Negativism Network]

That’s all well and good. You go right on debating your “free trade” theories and ivory tower beliefs.

I’m saying America is about to collapse.

I’m saying we do WHATEVER IS NECESSARY to prevent that.

I don’t care about debating. I care about America. No more, no less. We are facing the end of our nation, if we do not start getting serious about turning this around. NOW.

[tsowellfan]

I’m saying America is about to collapse.

We are facing the end of our nation, if we do not start getting serious about turning this around. NOW.

I agree. I just disagree where the problem is. I say it's the "enemy within". We destroyed ourselves. That's shameful.

You are not wrong with your feelings about China. They are far from perfect. And there needs to be more balance in trade.

When I was in Vietnam a friend of mine took me to the market in Saigon. He said "you're American so you will be able to help me know what's real and what's not".

At first I didn't understand what he meant until he showed me some products at a market. He explained that China floods southeast Asia with fakes and the Vietnamese government has been trying to clamp down on fake products from China.

He picked up a backpack and asked "Is this real or fake?"

The backpack read "LL BEEN"

I told him it's fake. it should read "LL Bean"

I looked around and saw all kinds of similar fakes from "NIKEE"shoes to American movies on DVDs that were still paying in our theaters. China's flooding the world with fakes.

That's a problem I have with China.

[tsowellfan]

Another thing, China is known for allowing foreign companies to open in their country, they learn how to make the product then kick out the company and start their own. They've done that with a major Japanese Motorbike company that had opened in China. China finally kicked them out. Now China manufactures the same product and use a very similar name to the Japanese company. The quality very low.

Any American company that goes to China, goes at their own peril.

[Cringing Negativism Network]

We will *never* have balance in trade, until we insist.

Insist.

That will only happen with a trade war. Negotiations by blockade, if necessary. That is exactly what I am saying.

We are not it seems, in fundamental disagreement, you and I. Though we are in different universes about how that balance you mention can be attained.

In my (not so uninformed) view, the only way we will have balance, is with a real, knock down trade war.

Not one bit less.

A lot of “American” companies which sold their souls, will be demolished in the process. They would do well to start correcting their mistakes and do their own rebalancing immediately. Cut their losses. Disaster recovery mode - because China will not let them leave.

Repatriating factories and jobs, to start.
The choice is rapidly approaching. America, or companies with no loyalty to America.

That’s not a difficult choice for anyone.

If they choose wrong, let them. Time to choose.

[rabidralph]

[Hoodat]

Don’t you get it? Obama doesn’t want to calm investors. He wants those rich people to take a hit since they weren’t willing to pay more taxes. He wants it to hurt. He wants another crisis that he can exploit for political gain.

[dfwgator]

Obama is Hu’s little bitch.

[no-to-illegals]

Yes, declaring a Jubilee would be a solution ... imho

Thank You for your reply.

[FromTheSidelines]

We will *never* have balance in trade, until we insist.

What drives "balance in trade" is selling as much as you buy. We buy a LOT more than we sell - thus the trade deficit and our massive national debt.

The problem is we consume much more than we produce. It's not a matter of where it's produced, it's that the US - as a people and as a Government - are addicted to spending and borrowing as a means to pay for that spending.

You can own an entire factory of people, and make 100% of the world's production of widgets, but if you end up buying even more dollar's worth of product from a competitor - you go bankrupt. Out of cash.

That's the problem. It's not where it's built, it's that we insist on buying it in the first place.

As far as where things are made, it's because it's cheaper to make them overseas. Not from labor, but from taxes. Typical labor costs in the US aren't much higher than in China, on an actual per-dollar-value created (that's what productivity brings you - lots of output for little wage input).

Where the big difference is, is that we tax the crap out of earnings. We start with 39.6% of profits for the corporate income tax. Then we add another 25% capital gains tax when those profits are handed out to the owners.

Compare that with the rest of the OECD that is at 22% for corporate income tax, and 12% for capital gains. Or places like Hong Kong and China and Malaysia that are between 0% and 10% for corporate income tax. Or even a place like Germany with 0% capital gains taxes on equities held for more than 1 year.

So which would you rather do - pay ~60% of your profits back out as tax, or pay 10%? Pretty simple choice - and easy to see where the costs are involved, and why a company would choose to relocate overseas.

It's not just manufacturing in China. There's a reason the bulk of Microsoft's profits worldwide go to their Irish operations (12% income tax). Why Google's vast earnings are predominantly made in the Cayman Islands (10% income tax). Why Apple keeps the majority of its earnings in Hong Kong (0%).

Labor costs are a small portion of the entire cost of doing business, and as tsowellfan points out - the bulk of these costs are because of the US Government and its redistributionist, anti-GDP-growth policies.

You want jobs back in the US? Here's a real easy way to get them back in a hurry - not just jobs lost, but actually gain even more by having companies who never had a presence in the US suddenly rush here:

1. Eliminate the corporate income tax - take it to zero.
2. Eliminate the capital gains tax - take it to zero.
3. Roll back every business regulation implemented since 2000.
4. Mandate that an foreign company operating in the US (foreign company being defined as a company with more than 10% foreign ownership) must have 50% of its US work force consists of US citizens and legal residents.

That's it. Businesses would flood back because of the tax structure, easier regulatory regime, and they would repatriate literally TRILLIONS of dollars back to the US for investment here.

Additionally we'd see a massive rush of foreign investment and corporate formation here in the US as companies look to shelter their own income. And because they have to employ at least 50% US citizens and legal residents, there would be an even larger spike in hiring.

The boon from income and social security/FICA taxes from the greatly increased work force would easily offset any losses from the corporate income tax and capital gains tax (about $180 billion total).

Or, we could start a trade war, watch inflation spike up a solid 30%, watch more companies say 'screw it' and leave the US market for the markets that are actually growing (in particular SE Asia, South America, and Africa), and watch our unemployment continue to climb ever-higher...