Economy

What Can Be Done to Curtail The Deficit

November 26, 2005 ⋅  E-Mail Article ⋅  Print Article ⋅ Post a comment

“How can we compete?” I have heard this statement from many of my fellow Americans lately. I will advise you of how we can, and must compete, in a global economy. The first issue that must be addressed is the corporate taxation of domestic businesses inside the United States. We must repeal the current tax laws to allow domestic corporations the ability to be competitive in the global marketplace.

The United States currently has the second high corporate tax rate in the world, second only to Japan. This issue of corporate taxation creates a significant competitive disadvantage for U.S.-based companies. Congress must address this situation and alleviate the taxation burden on companies maintaining their presence here on American soil. Secondly we must stress education, not education of the workers but education of the management. The first rule you learn of in Business 101 is the rule of supply and demand. However, it appears that many corporations have forgotten this rule. If they do not pay individuals to build their product then whom do they expect to buy it.

By looking for a cheaper source of creation we have effectively eliminated the consumer base for our product. It is a fact that the U.S. corporate tax rate is very high. The federal government imposes a 35 percent tax on corporate income, and states on average grab another 5 percent. This cumulative 40 percent tax rate is significantly higher than the 30 percent average corporate tax burden in other developed nations. We must create a competitive environment domestically if we hope to stay competitive in a global marketplace environment. By adjusting the tax rate for domestic American companies we will encourage domestic growth, this will actually create more real revenue tax dollars for our country and this will help us alleviate our national debt as well as improve our gross domestic product numbers.

Many do not pay attention to the trade deficit with China but they should. As the exports total into America grows many jobs in Asia are created. In the short term we give them our work and in return American consumers get decent quality, cheap goods which include clothing, cars and appliances. America is also receiving a short term benefit by receiving investment capital from Asia because the dollars that Asians earn for their exports often end up invested in the bonds of the U.S. Treasury and mortgage-finance companies. While these acquisitions of U.S. securities help keep interest rate low, which in turn temporarily helps fuel the housing explosion.

However, we are really only creating new U.S. jobs in the housing area and we are not replacing the jobs lost because of importing. The biggest consequence of this is that the large amount of U.S. bonds accumulated by foreign investment means the United States is going deeper into debt to fund its import bender; we are at a level that is approaching $3 trillion. Eventually the rest of the world will decide that the United States is a credit risk and that we are no longer a secure place to lend money to. When this occurs the housing market will be disrupted and the true face of our economy may rear its head. It is not too late but action must be taken soon to resolve this issue. To ignore off-shoring any longer, while our trade deficit continues to grow, is a calamity that must not occur.

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