Posted on 05/12/2014 6:32:20 AM PDT by SeekAndFind
It’s “Pomp and Circumstance” time for 1.6 million US college graduates.
While members of the class of 2014 have some cause to celebrate, they also know they are a few short months away from starting to pay down their share of the $1 trillion-plus student-loan debt.
The most shocking number of all is that only 17 percent of these soon-to-be grads have a job lined up, according to AfterCollege Inc., which crunches these numbers and also tries to help match employers with recent graduates. Despite our being a year further along on the road to economic recovery, this year’s 17 percent is actually down from the class of 2013’s 20 percent who had a job lined up before graduating.
(Excerpt) Read more at nypost.com ...
RE: I didn’t provide any such policy recommendations. You are creating phony strawmen.
I am writing those policy “recommendations” to draw out YOUR PERSONAL policy proposals. Since, those two proposals are not your personal proposals, how do you propose to prevent our businesses from moving overseas?
You did mention regulatory and tax changes to make our country more business friendly, well, I already said that I FAVOR SUCH POLICIES and even cited states that DO have such policies that are creating jobs as opposed to states that make it burdensome to do business ( e.g California, Illinois ).
If such business friendly policies are what you recommend to encourage businesses to create jobs HERE, I don’t have any arguments with you.
“Here is how I see tariffs on the other hand...”
I’m talking about long term tariff strategy, executed over decades, not a one time short term punitive action like Bush took for steel, or one off protective tariffs targeted to benefit a specific industry.
When you look at the broad sweep of US history, the US economy has prospered, and experienced its highest growth rates, during periods of sustained broad based tariffs of approximately 30%. In the 19th century, the tariff was used to fund the federal government, there were no income taxes.
Consider from a free market perspective the tariff as a fee for foreign factories to have access to the domestic market. Domestic companies pay a corporate tax rate of 32% or in the case of small companies pay the marginal tax rate of the owner which is likely at least 25%. These taxes pay for the public infrastructure (roads, waterways, bridges), the protection of the US Coast Guard and US Navy, the legal system which protects contracts and intellectual property, as well as the scale benefits which accrue to companies selling in a large homogeneous open national market instead of individual state regulated markets. To charge domestic producers taxes for participating in this market and not charging foreign factories and producers for access to the same market puts the domestic factories at a significant disadvantage and is effectively an economic subsidy for foreign producers. A 30% tariff puts domestic and foreign manufacturers accessing the US market on an equal footing from the perspective of government taxation and regulation. Both taxes and tariffs are an externally imposed government fee for participation in the marketplace.
Tariffs also serve a national security interest to the extent they discourage foreign nations from targeting specific industries (as China has done overtly) and through government subsidies underprices domestic producers in an effort to drive them out of business and capture the market. During the “free market” market heyday of the 1990’s and early 2000’s I ran a domestic division of a large US corporation competing in a China targeted industry. Our Chinese competitors received interest free loans for capital from Chinese government controlled banks while my company had an effective 13% cost of capital (blended bank and equity). In addition the Chinese government paid a 15% rebate to the competing factories on the value of products exported. In addition, the Chinese factories enjoyed a lower effective tax rate, less regulatory intrusion (environmental, labor rules, health and safety) before we even get to the labor cost differential. Had we been on a level, unsubsidized playing field, we could have stayed in business despite the labor cost differences. However, we could not compete with subsidized industries and the US government would do nothing since we were not considered a “strategic industry”. That industry, which did employ 2 million domestic manufacturing and manufacturing support workers is now virtually gone. The remaining high value R&D jobs associated with that industry are now being exported as well. A 30% tariff would have ensured those jobs stayed in the US. In fact, those jobs would have stayed with a 15% tariff.
Lost factories and supply chains make the US more vulnerable from a national security perspective. The US was almost fully self sufficient at the beginning of WWII. Its consumer goods factories were quickly converted to war production, allowing the nation to defend itself and defeat its enemies before they could develop weapons of mass destruction and delivery systems to attack the US civilian population directly. Today, if this nation were engage in a conflict of this magnitude, the domestic factories do not exist to convert to war production.
You stated, “Tariff policy beneficiaries are always visible, but its victims are mostly invisible.” I disagree. Visit rural towns throughout the US that lost textile, apparel, furniture, and consumer products assembly plants to heavily subsidized Asian factories. Once vibrant towns with middle class jobs are littered with boarded up deteriorating buildings. Counties which once enjoyed low unemployment rates, with a mix of agriculture and light manufacturing, now have high unemployment rates and the associated issues of drug abuse, alcoholism, and crime that go with large populations of idle people. The higher social costs are paid for by US citizens, and domestic producers through taxes, not the foreign factories who pay no taxes or tariffs.
Returning to the historical perspective, the current experiment with negligible tariff rates (today the US realizes an average 1.3% tariff rate on imports compared to 7.3% for China) has been underway for 25 years. During that time period the nation lost millions of middle class jobs and a significant portion of its manufacturing infrastructure. During that time period the average income of the American household has declined for the first time in US history.
In addition the shifting of investment from US industry to China has resulted in the buildup of a major economic and military competitor which daily engages in direct cyberwarfare, economic warfare, and intellectual property theft. That nation’s leaders have from time to time openly communicated a desire to defeat and humiliate the US militarily. The emergence of this threat was 100% due to a US trade policy which favors Chinese imports, as well as investment in building Chinese factories, at the expense of American industry and workers.
I challenge you to show me the benefits to the American economy and American citizen of the last 25 years of free trade. I see declining standards of living, fewer middle class jobs, high social costs for government programs supporting the unemployed and underemployed, and loss of economic power which over time will equate to loss of military power and weakened national security. Certainly the members of the 1%, the bankers at Goldman Sachs, the private equity firms, and the other Wall Street players who looted American industry and helped fund the building of Asian factories benefited. However, the American middle class of today, as well as future generations, were hurt immensely.
Your proof consists of allegories, academic theories, and one short term retaliatory measure by the Bush administration in one industry in response to subsidized dumping by foreign companies. In fact I view the claims of the pro free trade Institute of International Economics you cite as no different than our own government’s propaganda that there is no inflation today even though they selectively and purposefully eliminate rising food and energy prices from the inflation statistics. Or the government unemployment rate statistics which conveniently count as unemployed only those people the government claims are looking for work, not the millions of people without jobs.
Open your eyes and look at nearly 250 years of American history. Our country, with its abundant resources and entrepreneurial spirit thrived economically during periods of high tariffs which promoted a self sustaining domestic market. During the past 25 years of open markets, foreign government subsidized imports, and zero costs imposed on foreign factories in return for access to the US market, we’ve seen deindustrialization, economic decline, a shrinking middle class, and a declining standard of living. Academic theories don’t employ people. Government capitalized foreign factories exporting subsidized goods don’t provide good middle class jobs to American workers in anywhere near the quantity of domestic factories producing the same goods. Foreign companies paying no fees for access to the US market are at a tremendous competitive advantage when competing in our domestic market with domestic companies paying 30% + tax rates, not to mention abiding by costly regulations the foreign factories do not have to meet.
The free market solution is simple. Apply a flat tariff on all foreign goods equal to the corporate tax rate. A flat across the board tariff does not favor any industry. Call it a market access fee. Foreign producers should pay for access to the market if domestic producers are charged for the same privilege.
Levy a 30% to 35% tariff on all imports and you’ll see investment in US manufacturing skyrocket and the middle class manufacturing jobs return. Certainly in the short term there will be some retaliation. However, what is China going to do to retaliate against an across the board tariff. It can’t stop shipping goods. If it chooses to selectively punish some US industries, the US government can take the same action against specific Chinese industries. As new efficient US factories are built and come on line, Chinese factories will be forced to lower prices to compete (just as US factories had to compete with subsidized Chinese factories). This will squeeze margins and reduce tax revenue the Chinese government uses to subsidize industries and pay for its military buildup. It is a win win proposition for the US.
The free trade alternative we are pursuing is the path to third world status for this nation and ultimately loss of our freedom to other nations. I vote for returning to the successful tariff policies adopted by those far sighted individuals who build the US into the greatest industrial power on the planet in the 19th century than the progressive academic free market theories that are leading us to our ruin.
RE: In the 19th century, the tariff was used to fund the federal government, there were no income taxes.
Ahhh there’s the rub — NO INCOME TAXES.
I’d like to see how you can implement that today. A 30% tariff with ZERO INCOME TAXES ( that means the total elimination of the IRS )?
A very lovely thought. Wake me up when we see Obamacare repealed first.
First, let's look at what you said,
Or, imagine I were a politician and told you that the Russian, Chinese, Korean, Brazilian and German governments were ripping off their citizens by, on the one hand, taxing them to provide subsidies to their domestic steel industries and, on the other, erecting tariff barriers forcing them to pay higher prices for products made with or containing steel.
Would you deem it responsible or intelligent of me to propose retaliatory tariff policy, whereby Americans are ripped off until Russia, China, Korea, Brazilian and German governments stop ripping off their citizens?
What should the US do, sit back and allow these countries to subsidize their steel industry so they can undercut US steel prices domestically and for export? This is not fair competition or open markets. It destroys the US steel industry. It demands some sort of retaliation or adjudication by the WTO. Only a fool would advocate doing nothing.
After the stock market crash of 1929, The Hawley-Smoot bill raised American tariffs to record high levels, in an attempt to protect existing jobs and in hopes of helping the unemployed find work producing things that the United States had previously been importing from other countries.
Time to set up another one of your strawmen. We no longer live the time of the Great Depression. Many things have changed including international trade agreements and controls. No one is proposing another Hawley-Smoot tariff bill.
General Agreement On Tariffs And Trade (GATT)-- A treaty created following the conclusion of World War II. The General Agreement on Tariffs and Trade (GATT) was implemented to further regulate world trade to aide in the economic recovery following the war. GATT's main objective was to reduce the barriers of international trade through the reduction of tariffs, quotas and subsidies.
Formed in 1947 and signed into international law on January 1, 1948, GATT remained one of the focal features of international trade agreements until it was replaced by the creation of the World Trade Organization on January 1, 1995. The original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 199
World Trade Organization (WTO)-- The World Trade Organization (WTO) is an organization that intends to supervise and liberalize international trade. The organization officially commenced on 1 January 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organization deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994).
The organization is attempting to complete negotiations on the Doha Development Round, which was launched in 2001 with an explicit focus on addressing the needs of developing countries. As of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21 subjects in which the original deadline of 1 January 2005 was missed, and the round is still incomplete. The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector (requested by developed countries) and the substantiation of the international liberalization of fair trade on agricultural products (requested by developing countries) remain the major obstacles. These points of contention have hindered any progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this impasse, there has been an increasing number of bilateral free trade agreements signed. As of July 2012, there were various negotiation groups in the WTO system for the current agricultural trade negotiation which is in the condition of stalemate.
The US was a signatory to GATT and is a member of the WTO. The principal functions of the WTO are:
It oversees the implementation, administration and operation of the covered agreements.
It provides a forum for negotiations and for settling disputes.
We have a forum to address unfair tariffs. WTO members have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. Unfortunately, the US has not been aggressive enough in pursuing unfair trade policies.
Many factors, of course, affected the Great Depression of the 1930s. But later economists looking back have seen the Hawley-Smoot tariff as one of the factors needlessly prolonging the economic disaster.
There is no consensus that this was indeed the case. Some economists have suggested it made little or no difference to the prolonging of the Great Depression.
The academic claims the Smooth Hawley tariff caused or greatly contributed to the great depression in the United States is a lie that has been perpetuated for decades. Look at the facts.
1) The stock market crash occurred in 1929 before the Smoot Hawley tariff was enacted in 1930.
2) In 1929 US exports comprised 5% of GDP, half were agricultural and half were manufacturing. In 1933, at the bottom of the Great Depression exports comprised 3.3% of GDP. Only 1.7% of GDP was lost due to declining exports.
3) GDP contracted by 46% from 1929 to the bottom point of the Depression in 1933. US exports declined by 70% from 1929 to 1933 and some of that value loss was due to significant price deflation, not unit volume loss. This equates to at most 3.5 percentage points of GDP the remaining 42.5 percentage points of GDP loss were due to other factors.
4) With respect to “retaliatory tariffs”, other major economic powers, such as Great Britain, were imposing tariffs before Smoot Hawley was passed by Congress.
While free trade theorists in the academic community love to talk about Smoot Hawley causing the Depression, economic statistics show its impact on the economic decline was negligible.
“Leading economists” of today also failed to call the 2008 collapse and all most certainly contributed to it with the low interest rate policies of “leading economists” Mr. Greenspan and Mr. Bernanke. We have been following the economic prescription of one “leading economist” and Great Depression academic, “Ben Bernanke” since the 2008 collapse and we see the results - high unemployment/underemployment, staggering government debt, unprecedented money printing, declining real incomes, zero interest rates saving insolvent banks at the expense of average American savers, etc, etc, etc.
What we do know is the 35 years from 1865 to 1900 were the highest economic growth years in US history. During that period GNP increased 600% and the US became the world’s largest economic power. Throughout those 35 years, the average tariff applied to imports never dropped below 27%. Today, during a period of economic malaise the average tariff rate applied to imports is 1.3%. Looking at historical experience it is difficult to attribute high tariffs to economic disaster, no matter what “leading economists” claim.
I also advocated greater domestic energy production and reducing significantly the importation of foreign workers to take American jobs and depress wages. We have 21 million underemployed or unemployed Americans.
RE: What we do know is the 35 years from 1865 to 1900 were the highest economic growth years in US history.
You just said — the USA had ZERO INCOME TAX then.
The USA already had an income tax ( and increasing at that ) during the Smoot Hawley period, so how do you compare the 1930’s to the turn of the 20th century?
I’d wholeheartedly have a flat tariff on imported goods in exchange for ZERO income tax.
A very nice thought as I said, but let’s see if we can get rid of Obamacare first. If you can’t even do that, getting rid of the income tax is a pipe dream.
“A very lovely thought. Wake me up when we see Obamacare repealed first.”
Nice dismissal. I’m still waiting for you to show me the benefits to the US economy and the average US worker of the free trade policies of the past 25years. As with Obamacare, simply declaring the policy a success doesn’t make it so.
Well stated.
RE: I’m still waiting for you to show me the benefits to the US economy and the average US worker of the free trade policies of the past 25years.
The USA economy GREW for nearly 20 years before the turn of the 21st century with low unemployment to boot.
I’m willing to bet that if we simplified our tax code and decreased the regulatory burden on business AND made all states right-to-work, we’d be creating jobs right now EVEN with our present tariff system in place.
But no, I am not dismissing your proposal, i.e. a simple tariff with ZERO income tax. The latter ( including the elimination of that hostile organization called the IRS ) appeals to me.
But they have to COME TOGETHER. I don’t want one being put in without the other being eliminated.
From 1865 to 1900, the average tariff paid (not the posted tariff, the tariff paid) on imported goods into the US exceeded 27% in every year. In 1990 the average tariff paid was 2.8% and today the average tariff paid is 1.3%. Today foreign factories pay less (as a percentage of product value) for access to the US market than the American consumer pays in sales taxes to purchase those same products.
The US enjoyed unprecedented industrial growth and economic expansion in the 35 years following the Civil War and became the largest industrial power on the planet. From 1865 to 1900 the average income of non farm workers grew by 75% and grew another 33% by 1918. The number of farms tripled in the nation from 1860 to 1905. GNP grew 600% from 1865-1900. In 1865 there were 35,000 miles of railroad track in the US, by 1900 193,000 miles. US entrepreneurs and inventors created entire industries and innovations — petroleum, electric lighting, camera, typewriter, phonograph, motion pictures, telephone, the department store, national discount store chains (Woolworth), mail order catalogs (Sears), prepackaged foods (Kellogg, Post), refrigeration, and the corporate organization structure. Manned flight would follow in 1903.
I suggest the 35 year period of record economic growth from 1865-1900 is proof high protective tariffs can facilitate a period of rapid economic expansion and high innovation. I would also suggest the past 25 years of virtually zero tariffs, with the resulting deindustrialization, have been a disaster for the US economy and the average working American who has seen a decline in his/her standard of living for the first time in US history.
—Son Of The south
The Import-Export portion of the GDP was 5% in 1930’s. So any “disruption” of trade, even a complete embargo, could only affect GDP by 5%. That is because we MADE OR OWN THINGS in the 1930’s. Smoot-Hawley only had a very marginal effect on the Great Depression. Neither lengthening it or making it deeper.
Would you be willing to completely replace the income tax with tariffs and sales taxes?
RE: I suggest the 35 year period of record economic growth from 1865-1900 is proof high protective tariffs can facilitate a period of rapid economic expansion and high innovation.
Again, let’s not forget that at the time of unprecedented growth we had : ZERO INCOME TAX, NO IRS, LITTLE REGULATION, NO FORCED UNION PARTICIPATION.
I said to Son of the South, I’d be willing to have those tariffs in place with one proviso — ELIMINATION OF THE INCOME TAX AND THE IRS.
It is has to be A BOTH/AND condition, not one without the other.
RE: Would you be willing to completely replace the income tax with tariffs and sales taxes?
YES. It must be a BOTH/AND condition. I don’t want one existing without the other eliminated.
The elimination of the IRS would be the best thing for the US economy.
Then we can replicate history in the 19th century but not until.
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