Once More, With Feeling
Yes, I know, I know, another post about economics…but trade policy is shaping up to be a major (perhaps THE major) theme of the 2008 election (a sign of how much better things are in Iraq these days, and how bad the current economic picture is). I’ve made my stance on unfettered free trade abundantly clear, so none of you will be surprised when I tell you of the waves of nausea that swept over me upon reading this:
Flexing their new power to determine the Democratic presidential nomination, a bloc of Ohio superdelegates is withholding endorsements from Barack Obama and Hillary Rodham Clinton until one or the other offers a concrete proposal to protect American jobs, two Ohio Democrats told Politico Wednesday.
‘A concrete proposal to protect American jobs’? Could the protectionist angle be made any clearer? Well, perhaps a tiny bit clearer:
Ohio Democratic Rep. Marcy Kaptur, one of the leading protectionists in Congress, said Ohioans have many suggestions on economic and trade issues they hoped the candidates would address.
Okay, that’s the article’s author speaking, but still – to be known as one of the leading protectionists in Congress is hardly a badge of honor.
Look, let’s be crystal clear about this – there is NO proposal that anyone can offer that will ‘protect’ American jobs. If NAFTA never existed, we would still be losing manufacturing jobs to China, and technology jobs to India. Even if we threw up a total wall and instituted capital controls that forbade American companies from expenditures abroad and kept dollars confined to our own borders, we would initiate a slowdown that would make the Great Depression look like the good ol’ days as the enormous amounts of foreign investment in both our industries and our government, in the form of Treasury bills, fled to more hospitable climates.
The whole frame of reference is wrong – you can’t ‘protect’ ANY job…but you can create a climate where investment is welcome, productivity is high, specialization is abundant, and economic growth ensures that more jobs are created than are lost. In fact, such a climate is what free trade is all about, by definition. ‘Fair trade’ can’t hide under its euphemistic mask – we are all smart enough to know protectionism when it rears its ugly head.
The Democratic candidates are not stupid, either – they KNOW protectionism is anti-growth and economic poison (as the Canadian incident that hurt Obama so badly in Ohio revealed). But they are pandering to their union constituency and their blue collar voters in the Rust Belt in the worst possible way – by exploiting economic ignorance, insecurity, and fear. It’s a trade-off they may yet regret…
If the US wants to increase domestic employment, scrap the current federal tax system to include social security and Medicare withholding and replace it with the Fair Tax. For all of you that say I am crazy, please read the 2 books on the subject and then post a comment.
Well, I can name a set of superdelegates I wouldn’t be winning…
MikeM-
For those of us who aren’t going to go off and read four hundred pages of argument, can you briefly summarize why you think a sales tax would be so much better for employment than an income tax?
Here is one of the differences cited by the architects of the Fair Tax:
a. income taxes are involuntary in the sense that the only ways the individual can control how much tax he pays are by taking a lower paying job or working less.
b. sales taxes are voluntary in the sense that the individual has control over the goods and services he chooses to purchase and, therefore, pay tax upon.
I’m not buyin’ it because purchasing goods and services is a survival necessity, but that’s my understanding of the basic premise of what makes the Fair Tax fair.
I would think that if a policy were likely to lead to growth, it would be most ardently supported by the Wall Street Journal Editorial writers. However, the WSJ despises the Fair Tax so much that they wrote a 2-part editorial on how bad an idea it is.
Sorry, I have been traveling for the past couple of days. It is hard to boil it down to a short answer, but here goes.
1. The US will be more competitive because manufactures can sell goods outside of the US without any embedded taxes.
2. The tax base will widen because all people that consume goods above around $25,000 will pay taxes to the federal government.
3. It will also increase compliance. Instead of an IRS that is trying to ensure all businesses and individuals comply with a very complicated system, it can focus on businesses that sell retail goods – a much smaller pool.
This is just some of the highlights.
… and everyone who paid a premium for a home because it made sense due to the mortgage deduction, and everyone who funnelled a significant portion of their retirement into Roth IRAs instead of 401Ks — indeed, anyone who saved a significant chunk of money in order to have a large enough nest egg to retire early — is going to hate, hate, hate the “fair” tax and will punish anyone who proposes it.
Sorry, but too many people have made financial decisions in reliance on the tax code we have. There is NO WAY that group is going to sit still if a national sales tax is implemented.
Sean P: Do you think a “FairTax” would work if they had different levels of tax for different age groups? Of course, then you would have to give your birthday to the cashier every time you buy something…
There is pretty much no way you can go from what we have to FairTax and not screw some large portion of the populace in the process. There WILL be “double-taxes” on those that have retired and paid their taxes already. And then varying degrees depending on age, etc.