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A modest observation about the Tea Party's economic 'thinking'

Everybody has worried about the trade deficit. Has the Tea Party come up with the answer: curing our national economic challenges by starving the middle and working classes?

Who's got the money?

Who's got the money?

While walking around Greenlake and observing the turtles sunning themselves on a log, I had a revelation. I may have been wrong all these years about how to solve our trade deficit. The Tea Party might have the solution.

The trade deficit is the single most important problem facing America, as we buy goods and services from overseas on credit. The countries holding our money then buy American companies, move the jobs offshore, and sell more products to Americans. The Tea Party has come up with a brilliant solution to this problem. Why waste hard earned tax dollars on government programs to support trade? Instead, cut off the ability to buy.

There are two courses of action open to Washington, D.C., policy makers. First, invest in making our country more competitive. Place our resources in education, research and infrastructure, and establish an aggressive role for government in assisting our companies abroad. This means copying the methods of other countries in using government as a sales force for trade and investment attraction. This government activism is of particular help to small and mid-size businesses. Generally, the bigger companies have the ability to take care of themselves. Still, even Boeing faces government-owned competitors and customers and Microsoft needs help with intellectual property protection.

The problem with examining what other countries do — assisting product development (such as Airbus), creating tax incentives to attract investment, providing government assistance in sales — is that those governments have made jobs and economic success a high priority. Such government activism removes the ability of individuals to make their own spending decisions.

The Tea Party has devised a second course of action. This approach recognizes that Americans want it both ways, ideally with no consequences. Or if there is a downside, it should not affect them.

Who buys products based on price? Who goes to Wal-Mart and other retailers that have good deals? It is middle- and lower-income Americans. Rich people don’t have to be price conscious. They can buy an American-made product that may be of equal or better quality and pay more. The key to the Tea Party’s solution is to get more money in the hands of rich people and to decrease the ability of the middle and lower classes to buy cheaper overseas products. This approach is against government activism.

The solution proposes tax cuts for the rich, less government subsidy to the poor, and, therefore, fewer resources among the spenders. This is called consumer squeezing. It supports the overarching policy of diminishing the role of government in your life and handing the policy choices to the people and to business leaders. The problem has been that the average American and business leader wants to get the best value for the dollar and this leads to buying products or services that are made by others. In fact, members of the Tea Party, with careful examination, might find in their philosophy that the overseas competitors are not playing fairly. The governments of these competitors often have a strong role in the economy and the competitor might even be a government-owned or government-controlled company.

No policy choice is perfect, so the best bet in this case is either refuse to learn or else ignore what others do, especially if it conflicts with your philosophy. This is the case when your goal is to solve the trade deficit by removing the ability of Americans to buy foreign products. Rather than stimulate sales, restrict demand. This will work.

In terms of the Tea Party's thinking, another beauty of this approach might be considered what it would do to immigration. How many people move to Greece looking for work?

So, how to proceed? We cut domestic programs. We have already starved the U.S. Foreign and Commercial Service. We can reap tax savings by eliminating this function. We can eliminate other tax dollars that go to export promotion such as the  ExIm Bank and U.S. Trade and Development Agency. There are many other areas that can be eliminated by the gang of 12 as we work to raise unemployment and lower the spending ability of the middle and lower classes.


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Comments:

Posted Mon, Aug 22, 7:02 a.m. Inappropriate

The author may have misunderstood those tea drinking Greenlake turtles. Maybe they were trying to say that we need to recalibrate the balance between the individual and the community. Maybe some of them believe that we should create (or recreate) a culture in which capable adult turtles are encouraged to be more self-reliant. Maybe those tea loving turtles don't really care whether some turtles have more resources than other turtles - as long as each turtle has enough sun, food and water to live a decent life. Maybe they and the author were just living in different stories.

Posted Mon, Aug 22, 7:36 a.m. Inappropriate

"Rich people don’t have to be price conscious. They can buy an American-made product that may be of equal or better quality and pay more."

But they don't. Some of the cheapest people I know are rich.

The best way to get businesses to return to the US is to reform the business tax system. The US is one of the few countries that taxes profits earned abroad, which have already been taxed in the country in which the profits were made. It's no wonder that companies move manufacturing offshore, when the US government stands ready to snatch away over a third of what they make in foreign lands. By keeping the money offshore, companies avoid the tax.

That said, the manufacture of extremely price-sensitive products like tube socks, ballpoint pens and batteries is unlikely to return to the US. Some products are simply by their nature bound to be manufactured by unskilled labor in areas with low incomes. Even the non-cheapskate rich would think twice about paying $50 for a pair of JC Penney boxer shorts made in the USA.

dbreneman

Posted Mon, Aug 22, 9:33 a.m. Inappropriate

From the Trade Development Alliance website:

The Trade Development Alliance of Greater Seattle is a collaboration of the City of Bellevue, City of Everett, City of Seattle, City of Tacoma, Greater Seattle Chamber of Commerce, Pierce County Government, Port of Everett, Port of Seattle, Port of Tacoma, Snohomish County Government, and union leadership....

Ah, union leadership....

hence the political propaganda.

BlueLight

Posted Mon, Aug 22, 9:37 a.m. Inappropriate

once the author demonstrates an understanding of the trade, energy and tax policy that extracts trillions from the US economy annually--enacted in concert by the republocrats--then perhaps he can proclaim a revelation. it was US companies who relocated jobs overseas under a policy of wage arbitrage. the result of this economic policy is that the so called middle class is being squeezed by dimishing purchasing and earning power and the mounting costs and obligations of such arrangements, while US Corporations restate overseas profits in a devalued currency, trumpet profits born of currency arbitrage, realize a gains in stock prices and dole out bonus. the author really shouldnt defend those who work for a living. he is doing them no favors.

Posted Mon, Aug 22, 11:27 a.m. Inappropriate

Jonathan Swift takes on Tea Party economics. Brilliant!

Posted Mon, Aug 22, 3:16 p.m. Inappropriate

The Tea Party that we all read about wants to reduce government spending (and, especially, borrowing). That issue will perhaps indirectly affect trade and imports but selecting the Tea Party as the villain (played by the Catholic Church in the original) for this clumsy and mean satire makes no sense. I have admired some of the author's photographs. Keep up with that.

kieth

Posted Mon, Aug 22, 3:24 p.m. Inappropriate

"The best way to get businesses to return to the US is to reform the business tax system. The US is one of the few countries that taxes profits earned abroad, which have already been taxed in the country in which the profits were made."

And how much tax did GE pay?

Steve E.

Posted Mon, Aug 22, 4:41 p.m. Inappropriate

Business taxes are an interesting example of disconnect with reality in the United States. Many Americans have strong ideas about business taxes without every actually having run or owned a business, so misconceptions are rampant.

For example, many Amerians mistakenly believe that business taxes are too high in this country, yet as Steve E. points out many corporations pay little to know tax (such as GE, among many others). The United States has among the very lowest business tax rates in the world.

The real engine of job creation in the U.S. is not large corporations anyway: it's microbusinesses: sole proprietorships and small S- and K-corporations with five or fewer members. These are businesses where innovative ideas are hatched everyday.

One of the highest business taxes in the U.S. proportionate to income is self-employment tax. What stands in the way of a sole prorietorship expanding and hiring a receptionist or a CPA or whatever other myriad jobs to grow that business? Self-employment tax. If we eliminated the self-employment tax, innovative microbusinesses would spring forth like wildfire, and many would grow into profitable, innovative small businesses (and create jobs).

If more Tea Party and other Republican types had first-hand knowledge of business and job creation, the self-employment tax would have been axed ages ago. It could be easily paid for by having companies like GE pay *some* tax at all, and it would create more jobs than GE and the like would.

smacgry

Posted Mon, Aug 22, 10:07 p.m. Inappropriate

smacgry,
I may be having a senior moment, but is not self-employment tax the counterpart to payroll taxes, the means to social security? If so, how would more taxes from GE compensate for sole proprietors rationalizing that they can kick retirement funds down the road independent of Uncle Sam? Even granting you that may be more or less true, would not you still be robbing Peter to pay Paul?

afreeman

Posted Wed, Aug 24, 8:17 p.m. Inappropriate

The question that the Republican party needs to answer, "Does the government = corporation?"

Namely is the purpose of government to merely enable the lowest prices possible, the lowest wages for workers by repealing all worker protections and destroying unions? This is clearly the agenda of the lobbyists who are elected to office as Republicans.

So if you carry this to the logical conclusion, what would be left of our country if every union was destroyed, minimum wage laws were repealed and all environmental laws were repealed?

Who wants to live in a country like that?

If you want smaller government, move to Iraq..... or Libya.

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