Nailed it.
Posted on 09/19/2012 10:53:03 AM PDT by zeestephen
Edited on 09/19/2012 12:00:43 PM PDT by Sidebar Moderator. [history]
The next Treasury secretary will confront problems so daunting that even Alexander Hamilton would have trouble preserving the full faith and credit of the United States.
(Excerpt) Read more at online.wsj.com ...
It seemed easiest to wrap up all my comments to my comment all at once (not singling you out, DannyTN!).
To answer your question: the consumers always pay all taxes. Period. Oh, you can try to play with the system through subsidies (and we all know how well that works) but all costs, including taxes, get passed on to the people consuming the goods. This works out to a big increase in costs to those who can least afford it and a huge inflationary bump as prices are jacked up.
The hard truth is that when we 'export' jobs (I hate that phrase but we are stuck with it), we create something like 1.2 jobs IN the country due to increased trade and worldwide efficiencies. Protectionism as a whole means we HAVE to do the tasks that have a low value added (e.g. making socks), instead of spending our efforts elsewhere.
Whether we care about our trading partners or not (and I do only in a very vague and diffuse sense), we are connected in a global economy. High tariffs make things more expensive, drives inflation, is a tool for politicians to pick winners and losers, kills our exports through retaliatory tariffs and decreases worker efficiency.
Someone pointed out that we had relatively high tariffs up until about the eighties... what else happened then? The longest peacetime expansion of our economy we have ever known. This was partly through reduced regulation, taxation and tariffs to allow the efficiencies of the market truly shine.
As I said, the answer is not more government interference but less. Get off the backs of the producers, cut up the Bank of China credit card, stop the 'quantitative easings' and let the natural urge of our workers (and entrepreneurs) create and invent a better future.
I don't believe that. I don't believe you can prove that number, and it doesn't make common sense. When you export jobs to overseas, you lose jobs period. If you created and paid for more American jobs than you lost, it wouldn't make sense to do in the first place. And if other Americans are paying for those jobs, it still doesn't make sense to do.
"Protectionism as a whole means we HAVE to do the tasks that have a low value added (e.g. making socks), instead of spending our efforts elsewhere."
Spending our efforts elsewhere? You mean like the unemployment line. Once Again
Not really, yeah it depressed international trade, but the net impact on the was 0.1% of GNP. And as you point out "In the last Great Depression". It wasn't implemented until we were already well into the last Great Depression, so it certainly wasn't the cause.
Going into the Great Depression exports were 5% of GNP. But GNP went down 46%. No way Tariffs were responsible and they weren't even implemented until the Depression was well underway.
Besides go back and read post 14. China has 30% tariffs against Catepillar equipment. Even if it made sense to take advantage of cheap chinese labor when our own people are unemployed, which it doesn't. China's not playing by the same rules.
You're afraid of starting a trade fight, so you're just going to stand there and let them punch us. I guess it's not a fight if you don't punch back. Mission accomplished.
Lots of economics doesn't make common sense... until you learn more about it. Here's a VERY off-the-cuff explanation of why NOT making something can enrich the economy as a whole:
When you do NOT spend effort on a low value-added activity (like making socks, as in my previous example), you benefit in two ways-One is that effort can be spent in higher value activities. Which factory is better for the economy as a whole: one that makes socks, or one that makes microchips? There is NOT a perfect one-to-one ratio between the inputs on the two products, but I believe the point is made.
The second big improvement for an economy is that if you are spending 50 cents for socks rather than $2, then the economy can 'spend' the $1.50 savings doing other, more productive things. Whether it's starting a new business, taking a vacation, buying new tools, or even just slapping a new coat of paint on the house... all that freed-up capital enriches the economy which helps everyone.
You are right that I can't prove that number... I don't have the studies and whatall in front of me and quoted from memory. But I hope the above 'napkin' explanations can show you at least the general mechanism where a missing job can actually be a benefit. If I can dig up that study, I'll post it here.
That example only applies at full employment. The situation we have is 25% UNEMPLOYMENT. Our people aren't spending their time on something better. How can you not see that your example doesn't apply at 25% UNEMPLOYMENT?!?
The question that is pertinent is, is it better for our economy to have a factories and people working or not to have factories and let people stay on unemployment.
And buy the way, China is making an awful lot of micro chips now. Remember the recent article about fake Chinese chips in U.S. military equipment? The argument that China only makes low value stuff is no longer applicable. They've moved up.
It's like y'all only attended the first week of economics. You only learned the general argument in favor of trade. Did you not study the special cases which dealt with trade policy when one country had large amounts of excess labor? or countries which didn't play by the same rules?
Yes, you can spend the $1.50 savings on unemployment for the people that are now out of work. That's is so much better. And since Probably $1.70 of the original $2 price was labor, government income tax revenues just fell $0.34. So now after you've paid for their unemployment, you can higher taxes to make up for the government shortfall. That's so much better!!!!
China is not the cause of our problems.
Our problems are from within.
And I don’t believe China is doing nearly as well as claimed. In fact I believe they are near the edge of collapse. There’s no transparency on anything financial. There’s only what some government official says the numbers are. Central planning never works and it won’t work for China and it won’t work for us.
You assume a static model that has only so much pie.
Wealth comes from making more pie. Not by how you divide some fixed amount of pie.
China wants you to believe they are near collapse. There are constant articles printed for years about how China is near collapse. Meanwhile they continue to grow fast and steal our technologies.
Our problems are within only to the extent that it’s us who have implemented stupid trade policies that have cost us jobs and industries.
You can eliminate all taxation and all regulations and you still are not going to compete with Chinese labor at $2/day.
We should only take advantage of cheap Chinese and other third world labor once our own people are fully employed.
25% UNEMPLOYMENT.
Elementary trade arguments about increasing pie don't apply when you are not at full employment.
If you want to increase pie, you do that buy employing your own people first, not by buying pie overseas when you don't have a enough jobs for your own people.
An example of free trade working is this:
An example of Free trade not working is this:
China is what Japan was in the 80’s... Everybody feared they were taking over the world...
And regarding taxation and regulation, you have no idea what you are talking about. My guess, and its just a guess, is that you have never operated a real business in this country and have no idea what it costs to comply with all the regulations/taxes.
Japan was communist and taxed their firms 90%? Reagan got tough on trade and made Japan produce their cars in the U.S.. You conveniently forgot that didn't you?
"My guess, and its just a guess, is that you have never operated a real business in this country and have no idea what it costs to comply with all the regulations/taxes."
Well that's the worst guess ever. Yes, I owned and operated a Medical firm for 3 years with over $1 million in revenues. And I was acting CFO for another firm. We had a lot more regulations that most firms.
The truth about most regulations is that while they are a pain, and everyone complains about them. They aren't that costly. And most of them aren't going away no matter what.
Once you have a procedure in place, software takes care of a lot of them.
Again, you could eliminate them all and eliminate all taxes and you aren't going to compete with $2/day labor.
How long ago did you operate this firm?
Great post!
Nailed it.
Was CFO for another firm 2004-2005.
Was corporate director of finance for a firm with $350 million of annual revenue for 10 years. Responsibilities included cost accounting. I know what an HR department costs. I know what legal costs.
So I've seen big and I've seen small. The fact is people complain about regulations because they are a pain, they aren't what people want to do, and sometimes they see them as unnecessary. But when you really sit down an analyze how much of your day you spend on them. It's not that much (Excepting medical firms).
I saw it in cost accounting all the time. I'd go ask a manager where his department spent their time. "Oh we spend 90% of our time on activity C. It's a pain!" Okay, well you handle 2000 activity C's a month, so if we eliminate activity C, you've got 20 staff, you can do the other 500,000 activities with just 2 people. "Well, no. Maybe I overstated the case for activity C. It just takes so much time!" Okay, well lets time a few C's and a few A's and B's and see what is really going on. and sure enough a C might take them 4 to 5 times as long as an A or B, but it was still only 3 or 4% of their department's time. But you would have thought that was all they did by the way they whined, when I first went in.
Let's say regulations really do add 40% more to your firm's labor costs. Which would be very high for most firms. Let's say your average person costs $40k a year. So you need another half person just to handle the regulations. So $60k/year. With 2000 work hours in a year, that's going to be a cost of $30/hr. If you eliminated the regulations you'd get that down to $20/hr. But you are competing against $2/hr + transportation costs. There is simply no way you can compete against that big of a wage differential.
If we were at full employment, it'd make perfect sense to take advantage of communist china's slave labor. But it doesn't when 25% of our people are unemployed.
What experience do you have running a firm?
Where are you getting the $5 trillion in generated revenue number from? Based on OECD numbers, counting ALL revenues from federal, state, county, local, etc, the total intake is around 25% of US GDP or $3.6 trillion.
Furthermore, no matter what the Federal tax rates have been, from the 90% top brackets under Eisenhower to the low water mark under Reagan, the US federal government’s % of GDP for intake has always been between 15% and 21%, over the last 65 plus years.
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