Duhhh! No-Brainer Economic Solutions

The U.S. has some of the highest labor costs in the world and now, Obama and the Dems want to increase the minimum wage to $10.10 per hour.  Surely, this will discourage middle and lower class employment.   

In addition, American businesses provide relatively high-cost fringe benefits.  Never-the-less, the President now wants to increase these costs by requiring every company to provide ObamaCare to its workers.   

In our expanding, free-trade environment, how can America hope to compete with low cost foreign providers of labor-intensive goods and services?

One way is to make sure that other business-cost factors are competitive.  For example, energy costs could be considerably reduced if the U.S. would fully exploit its superabundance of energy in the ground and below the sea.  This means developing our coastal energy, reopening the Gulf, exploiting the Alaskan fields, approving the Keystone Pipeline, and opening government owned land for development.  It is reported that the U.S. has more energy in the ground than any area of the world.  So why don’t we get it?  Why is Obama standing in the way?

In addition, to be competitive, the U.S. should lower taxes on industry to an absolute minimum.  For example, the first $10 million of sales could be exempted from taxation.  Thus, small companies doing less than ten million dollars in sales would be exempt.  This would encourage small business development and liberate the entrepreneurial creativity of our people. 

Business taxes are, in fact, passed on to their customers in the form of higher prices.  By reducing taxes, we could help American industry compete with foreign competitors.

There are, of course, other remedies.  For example, the U.S. could reduce the negative balance of trade destroying American industry.  One solution would be to curtail the GROWTH of imports until exports and full employment are achieved.  Clearly, this is a no-brainer solution and one that could be implemented in months rather than years.  (It would, however, require the United States to modify some trade agreements; but this would be well worth renegotiating to achieve balanced trade and to put Americans back to work, producing the goods and services that our people require.)

Most macro economists agree that everything we invent and develop – American know-how – should be for sale?  They say this will bring the rest of the world up.  True.  However, I say it will bring our comparative technological advantage down.  Clearly, this has been happening since the 1950s. 

In centuries past, during periods of America’s greatest growth, importation was inhibited by large oceans, slow deliveries, high transportation costs, language differences, limited communications, national customs, government regulations, currency differences, wars, and direct tariffs (the most undesirable approach).  Many of these inhibitions have declined over the decades, leaving American workers, enterprises, and the U.S. economy more and more vulnerable to low cost foreign producers and currency manipulators.

The U.S. could replace these now defunct inhibitions by limiting the GROWTH of imports (not exports) until trade balance and full employment are achieved.  This could be accomplished quite simply by the government mandating a limit to the GROWTH of purchases of foreign goods and services by American companies—based on year-over-year GROWTH percentages. 

This approach could be self regulating.  The cost of purchasing imported goods and services exceeding the government mandated limit could be disallowed as a gross profit deduction for tax calculation purposes.  Furthermore, year-over-year import allowances could be traded (bought and sold) in a free market.  Thus, businesses most in need of imports could buy additional “importation-rights” from other companies. 

Obviously, this proposal would encourage domestic sourcing of goods and services.  It would stimulate U.S. providers, U.S. job growth, and U.S. tax revenues.  And foreign suppliers would have to compete more aggressively than ever for the more limited U.S. market available to them, thus holding down the price of foreign and domestic goods and services.

Undoubtedly, the absence of economic leadership by the Obama Administration is deplorable.  The President’s de facto Fabian-Socialistic approach doesn’t work and is outdated.  History has demonstrated that the American-Way — competitive, free-market, constitutional, free-enterprise will produce the highest level of prosperity for the greatest number. 

But the Administration must get out of the way to let it happen. 

Image: Courtesy of: http://narcissista.me/2013/05/26/how-to-take-the-perfect-selfie/

About the author: William Pauwels

William A. Pauwels, Sr. was born in Jackson Michigan to a Belgian, immigrant, entrepreneurial family. Bill is a graduate of the University of Notre Dame and served in executive and/or leadership positions at Thomson Industries, Inc., Dow Corning, Loctite and Sherwin-Williams. He is currently CIO of Pauwels Private Investment Practice. He's been commenting on matters political/economic/philosophical since 1980.

View all articles by William Pauwels

Like Clash? Like Clash.

Leave a comment

Please disable your Ad Blocker to leave a comment.

Trending Now on Clash Daily