This factory is in China, but it doesn't have to be.
America faces its most serious economic crisis since the Great Depression. While the finance economy has improved somewhat since the bursting of the credit bubble in 2008, the labor market economy continues to languish with the national unemployment rate officially at 9.2 percent. The “solution” of the Obama administration has been a massive government stimulus program designed to get the consumer to spend us out of this nasty national recession. The president’s economic advisors claimed that its government stimulus program would result in unemployment coming down from 8.0 percent to 6.5 percent. Instead, unemployment is much higher today while our federal debt levels have risen significantly. Since the Obama stimulus plan began in February 2009 through May 2011, we have lost another 1.7 million jobs.
This Keynesian strategy of having the federal government spend its way out of this recession hasn’t worked, and it won’t work. As investment fund manager Mark Faber succinctly states, “The government continuously implemented policies to boost consumption when everyone should know that an economy will grow in a sustainable way through the implementation of policies that foster capital formation.”
This message is beginning to resonate across a broad range of opinion leaders. New York Times columnist David Leonhardt recently wrote a column entitled, “As a Nation, We’re Spent,” which notes that “the old consumer economy is gone and it doesn’t look as if it’s coming back.” Leonhardt points out: “We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.”
The solution to our high levels of unemployment, lack of private sector job creation, and the hollowing out of our U.S. manufacturing base is to change the way we tax business in the United States. We have the most onerous corporate tax system in the world with a 35 percent income tax rate and a 7.5 percent employer portion of the payroll tax. It rewards loading U.S.-based companies up with lots of debt – because debt is deductible – while punitively taxing employment, capital investment, and savings which are the engines of economic growth and job creation.
Leonhardt is on the right track in his column with his statement that the U.S. must “begin moving away from its consumer economy – toward more of an investment and production economy, with rising exports, expanding factories and more good-paying service jobs.” Rather than pass another stimulus bill, Leonhardt argues that “[a] more promising approach could instead offer a tax cut to businesses – but only to those expanding their payrolls and, in the process, helping to solve the jobs crisis.” Leonhardt is right, but he doesn’t go far enough. We should scrap our existing business tax system and replace it with a revenue-neutral, 8.0 percent business-consumption tax that would be border-adjusted.
Known as the Hartman Plan, this new approach to taxing business would raise just as much in revenue as, if not more than, the current system of taxation. All goods and services coming into the U.S. would pay the 8.0 percent tax while all exports would receive a comparable tax credit as an offset to its company’s business consumption tax.
Under a business consumption tax, we would immediately begin bringing outsourced jobs back to America as we transformed from a consumer economy, laden with debt, to an economy built on productivity.
Tom W. Pauken is Chairman of the Texas Workforce Commission and author of Bringing America Home.
Actually there are four points that desperately need addressing in terms of returning to a production oriented nation …
The first is what this article is about. That is, the tax structure on our corporations is undeniably hideous. We are now the #1 highest taxing nation in terms of businesses in general (in the “industrialized” world)
The second is our regulations on our businesses. These regulations are many and varied. While many of these regulations are of merit in that they prevent pollution and despoiling of our nation and natural resources, they have gone beyond the point of reasonable. I too enjoy clean air, clean water, a pristine environment, ultra safe working environments and the list of benefits goes on forever. The problem is that complying with all these regulations costs tremendous amounts of money. It is sad to think that due to our own zeal in keeping our environment pristine, that sooner or later, we will be pushed into having to turn over properties to our competitors who will then despoil them. We have lost hundreds of thousands of jobs to our “Trade Agreements” where the signatories have agreed to uphold “our” version of regulations … but never have even tried to do so (see Mexico/NAFTA). We have lost hundreds of thousands of jobs to places which have no interest whatsoever in protecting their environments or the world’s in general (see China and South East Asia in general)
The third is to get some control over Union Expansion. Unions have their place and are sometimes a required evil however, once unions get their teeth into a situation they never let go. Initially unions fight for the right of the common worker to receive a reasonable wage and benefit structure many times a “more than reasonable” structure. Unions then begin to regulate the output of their members in terms of actual production. I have many friends who went to work in union settings and were told repeatedly that “they were working too hard”, “they were working too fast”, “they were making the rest of them look bad”. This is only one of the problems with unions and I do not wish to get into a rant about them. Like it or not, unions are of some benefit but the benefits are almost always outweighed in the long run.
The fourth thing is our Education System. We need to leave the social “feel-good” aspect of our education behind. We need to remove the socialistic/communistic rhetoric by the wayside. Our children are growing up believing that things will just be “handed” to them, that they have the “Right” to receive anything that they want … or need without the requirement to “earn it”. Parents have got to stop catering to their children in a never ending smorgasboard of entitlements. Our Education System needs to start producing people who are ready to work, capable of doing work. We need to put more focus on our children’s mechanical and technical training and less on liberal arts and feel-good college courses. Today, even were you to open a producing factory, it is questionable whether you could find youthful employees with the basic abilities required to do the work or the work ethic required.
OK … My 2 Cents
Of course Government spending to boost consumption won’t work. That is because most of the products people buy comes from some other country. The money consumers spend does not go toward the ramping up of US manufacturing, but rather it only helps stimulate the manufacturing bases of such places as Mexico, China, South Korea, Tiwain, Japan, Philipines, Malaysia, Thiland, Vietnam, India and several other Asian countries. But not the United States.
If the Government wants to ramp up US manufacturing so that about 20 million out of work Americans can get a job, then something most drastic MUST BE DONE RIGHT NOW! The Government must make it so a business can manufacture their products in the US for lees cost than doing it in Mexico and overseas in Asian countries.
First the Government should make any business totally tax exempt on the condition that the business operates 100% in the United States and only hires legal US citizens.
Second, The Government needs to review regulations and eliminate those that stifle American business without any real gain in safety or improvement in enviornmental conditions. Most of these regulations have been made by Government agencies that make rules outside the realm of the normal Congress, Senate and Presidential loop and in this person’s opinion are unconstitutional.
Third, the Government must look into squeltching frivolous lawsuits against businesses and obscenely high dollar settelments.
Forth, the Government should GET THE HELL OUT OF THE WAY!!! It is not necessary for Government to control and micro-manage every damn thing!
Of course Obama and the Social*ist-Democrats do not want to do any of this because they are out to destroy America and it’s Capitalist free market economy so they can further their Socialist takeover agenda.
Of course Government spending to boost consumption won’t work. That is because most of the products people buy comes from some other country. The money consumers spend does not go toward the ramping up of US manufacturing, but rather it only helps stimulate the manufacturing bases of such places as Mexico, China, South Korea, Tiwain, Japan, Philipines, Malaysia, Thiland, Vietnam, India and several other Asian countries. But not the United States.
If the Government wants to ramp up US manufacturing so that about 20 million out of work Americans can get a job, then something most drastic MUST BE DONE RIGHT NOW! The Government must make it so a business can manufacture their products in the US for less cost than doing it in Mexico or overseas in Asian countries.
First the Government should make any business totally tax exempt on the condition that the business operates 100% in the United States and only hires legal US citizens.
Second, the US Government must impose a tarrif tax on imports from countries that engage in unfair labor practices like exploiting children to work in sweatshop factories for little or no pay.
Third, The Government needs to review regulations and eliminate those that stifle American business without any real gain in safety or improvement in enviornmental conditions. Most of these regulations have been made by Government agencies that make rules outside the realm of the normal Congress, Senate and Presidential loop and in this person’s opinion are unconstitutional.
Fourth, the Government must look into squeltching frivolous lawsuits against businesses and obscenely high dollar settelments.
Fifth, the Government should GET THE HELL OUT OF THE WAY!!! It is not necessary for Government to control and micro-manage every damn thing!
Of course Obama and the Social*ist-Democrats do not want to do any of this because they are out to destroy America and it’s Capitalist free market economy so they can further their Social*ist takeover agenda.
Finally some economic sense……but I believe the tax breaks should not be given to Any american companies that take jobs out of America and that those companies should be forced to pay the higher rates…such as GE which has taken jobs from our country to China and even Hershey who has taken many jobs to Mexico. Along with no tax breaks for these companies and making them pay a higher rate, they should also be hit with a high tarriff on any goods they bring back here to sell. This combo of tax breaks for companies that produce jobs here, high taxes and high tarriffs on those who take jobs elsewhere would make it unprofitable to these businesses to continue this practice and bring the much needed jobs back to our country……..and no company should be exempt…which means obamas buddies at GE would finally have to pay up!
This government has to stop with the tired old doesn t work free trade nonsense…if its free trade, why do we pay for it with American jobs!! The way to create true trade is to rewrite trade agreements which right now hurt us and benefit other countries. All trade agreements must be equal to stop the current destruction policies towards this country which allow other countries to export more to us, then they import to us……..and even then, each country must be written up separately to afford protection for us against their doing things such as currency manipulation ect. What we need is a strong president who knows economics and how to run a business instead of what we got,,,which is a weak president who knows nothing and spends his time trying to appease everyone in the world while the citizens of his country suffer because of his total ineffectiveness and inability or unwillingness to make the necessary changes to save Our Country!!!
America needs to get out of the W.T.O alltogether.Install high tariffs 50 %on all imported goods.If you do not bring back our industries thus creating jobs, we as a country can not servive.No more foreign aid,our foreign policy is america first.Our polititions have prostituted our industries away to slave wage countries,they should be tried for tresion and put in jail for a min of 20 years so nobody else gets the idea to take money from multinationals to pass trade agreements for their profit and our demise.amen.