Friday, October 28, 2011
Both articles convince me that Keynes would state that the fundamental problem the United States has is an unfavorable balance of trade. We buy more than we export. Hence, foreigners, particularly the Chinese, have an excess of dollars that they can't spend right away. Where do they put those dollars? They buy US Treasury bonds, the safest investment in the world at present. Hence, we accumulate debt to foreigners. Eventually that debt is going to ruin us and probably the rest of the world as well.
What should we do? One reason for our trade unbalance is that American firms have closed domestic production plants and opened plants in foreign countries, particularly Mexico, the rest of Central America, and China. The American firms that do this save money in taxes as well as labor costs. Corporate tax rates are about half of the American corporate tax rate in many countries. In foreign countries the owner or operator of a manufacturing plant does not have to provide subsidized health insurance for the employees. The governments provide that in many cases. In other cases it is not the practice for anyone to pay for the employees' health care, certainly not the employers.
Keynes would recommend that we encourage investors to put money into starting new industries that provide goods that can be sold to foreigners as well as to Americans. These investors further have to be persuaded to keep successful enterprises in this country and not to move production overseas.
Two proposals would provide incentives. First, adjust the corporate tax rate to match that of most other countries. That is, reduce it from the present rate of about 28 percent to about 15 percent. (That's a Republican proposal.) Second, relieve the domestic enterprises from the burden of providing health insurance for the workers. Instead, provide, for example, a single-payer health care plan. (That's a Democratic proposal.) These two plans would go a long way toward encouraging firms to keep the production facilities here in the United States and also keep jobs here.
If we can do this, the additional workers would pay taxes and help reduce the federal deficit. The additional production would reduce the trade deficit. Ideally, we would achieve equality between imports and exports. The multiplying effect of the extra workers would get us out of recession.
I believe this is the advice that Mr. Keynes would give us. I think it is good advice. The present practice of simply trying to reduce federal expenditures will not do anything to correct the balance of trade problem.
Saturday, October 08, 2011
- Renaming the estate tax to "death tax," implying that one has to pay a tax if one dies. The polite response is that the tax is not paid by the decedent but by his or her heirs. They pay a tax on the money they receive as their inheritances. The total amount of tax collected depends on how the estate is split up. If one person inherits the whole thing, he or she pays a whopping tax. If the estate is split evenly among several heirs, the total tax paid is less because of the graduated scale on which the tax is calculated. I have not yet seen an earthy response.
- Proposals to raise the marginal tax rates on persons with large incomes has been called both "class warfare" and "job killers." One liberal response is to label conservative attempts to do away with Social Security as an entitlement and replace it with some form of individual savings account as class warfare against the elderly and the poor. Attempts at weakening or destroying labor unions by placing severe restrictions on collective bargaining or strikes by public service employees are examples of class warfare against the workers. As far as such an increase could be a "job killer," we should remember that most enterprisers don't start businesses with their own money. Instead, they look for a bank loan and later for investors. We read that today banks are awash with money they they aren't lending out. Instead, they deposit it with interest in federal reserve banks. Besides, some of us are old enough to remember the good times of the Eisenhower Administration, when the marginal income tax rates were as high as 90 percent.
Tuesday, October 04, 2011
Moving Prisoners to County Jails
Really? Why do you suppose the State is unloading its non-violent offenders on the local governments? The State doesn't have the money to enlarge the prisons and staff to care properly for them. If the State had the money, there would be no problem.
This is just another consequence of the foolishness of California voters who, a few decades ago, voted to limit the ability of the State Legislature and the voters in local elections to raise taxes by requiring a 2/3 vote to do so. The voters later modified the rule so that a local tax to support public education could be passed by by a 3/5 vote.
It is another example of Benjamin Disraeli's rule that "a people gets the government it deserves, not the kind it wants."
Regarding the prisoner swap, we're getting what we deserve.