From: orville%weyrich@uunet.uu.net (Orville R. Weyrich)
Subject: Re: Cash Prizes for Ideas on Saving U.S. Jobs
Reply-To: uunet.uu.net!weyrich!orville
Organization: Weyrich Computer Consulting
Date: Thu, 1 Oct 92 10:24:33 GMT

Executive summary of this long followup to a long post:

The United States must maintain equilibrium with the rest of the world
across its borders. Protectionist import taxes are not a good idea, but taxes
that are generally applied to all imports while we have a trade deficit are
a good idea, as long as the procedes are re-invested in domestic programs.

In article <BvBL93.6tI@world.std.com> ttraub@world.std.com (Terry Traub) writes:
>In article <112@cnmhnet.UUCP> keithg@cnmhnet.UUCP (keith garrard) writes:
>>In article <1992Sep23.203652.22217@srg.srg.af.mil> akerson@deimos.srg.af.mil (Pete Akerson - akerson%srg@uunet.uucp) writes:
>>> [[Someone wrote:]]
>>>(2) highly tax imported cars, electronic goods, and electronic parts; use
>>>that tax revenue as capital to (re?)-invest in those industries.
>>
>>OK, Let's see who is going to suffer if this is implemented.  I go
>>down to the Electronics Superstore to buy a VCR.  Because of this
>>additional tax, I now have to pay several dollars more for the VCR, 
>>because no American company makes one.  Then, if they do start making
>>VCR's, I will have to pay more for them, because the American company
>>is not going to price them lower than Japan's VCR's including the tax.
>>So I put out several more dollars for the VCR.  I hate to even think
>>about buying the car then.  But let's look at it.  We tax the hell out
>>of "foreign cars" [by the way, can you define foreign cars nowadays???]
>>and who is going to pay for this?  We are!  Let's face it, America can't
>>build a car as good as the Germans or the Japanese.  I don't care what
>>Iacocca says, dollar for dollar, the japanese have america beat.  In
>>quality, the Germans and Japanese have America beat by far.  Why is it
>>that foreign cars sell so well?  It isn't only the price.  Have you 
>>priced the Honda Civic lately??? It isn't really cheap.  However, even
>>though I don't like Hondas personally, I have to admit that the Honda
>>Civic is a fairly nice car, although it is overpriced.  Yet, people
>>are buying them in droves.  Why?  It is a good car.  So who would
>>be hurt by increasing the tax on "foreign" cars?  We would!  By
>>the way, what is a foreign car?  Is a foreign car one that has the name
>>Toyota on it?  If so, then what about the cars Toyota builds in 
>>California and Tennessee?  Are they foreign?  Is the Volkswagen a
>>foreign car?  Well yes it is, but does anyone realize how many of
>>the parts in a Volkswagen actually come from America? A few years
>>ago, over half of the parts in a Volkswagen came from America.  So,
>>if we as Americans don't support VW, then we ourselves will be hurt
>>by putting more Americans out of work who supply VW with their parts.
>>No, I still say that we should let the market decide what is a god
>>product and what is not.  Although the phrase "Buy American" is great
>>politically, it doesn't hold water when one looks in depth at our
>>world based economy.
>
>I believe that we should in fact lower trade barriers.  The schmuck
>who is afraid we're going to "give away" the $20/hour American jobs to
>$5/day Mexicans needs to get a brain overhaul.  Those people making
>$5/day (probably more, in fact; $5/day is the **minimum** wage in
>Mexico) are going to produce products that cost a lot less and so
>benefit the American consumer.  So who loses--the millions of
>consumers who buy the product?  Surely not.
>
>Protecting US industries doesn't work, as has been shown with the car
>and steel industries.  The people running these companies in the U.S.
>couldn't produce a quality product if we nuked the rest of the world.
>Not if we put a gun to their head.  They're incompetent and deserve to
>be Darwinianally selected out of their jobs.  The gentleman who
>brought up the example of the minimills was right on the mark.  They
>made it by being entrepreneurial and working hard and supplying a
>product that the big producers could not or would not provide.  That's
>the way the free market is supposed to work, so let's not protect the
>idiots and tax the winners--let the idiots lose and let the winners
>collect their winnings, and eventually we'll get to prosperity again.

Well, yes. I somewhat agree with both of the above posters. BUT:

1) Import taxes that are paid for  DON'T just dissapear  into a black hole --
Congress has that much more money to reinvest into the nation's economy.
They  can  use the money to lower other  taxes. They  can use the money to
reduce the  national debt.  They can use the money to increase spending on
domestic programs. As long as they don't use the procedes from the tax to
build kibutzim or grow Irish potatoes, etc., the money stays  in the U.S.
and benefits people in this country. While  we might  [for example] be 
driving lower quality cars and  watching inferior TV's, we might  have
better  education, better roads, lower unemployment, or whatever other
improvement that we choose to have. [It's all a series of tradeoffs]

2) While you might argue that the law of
comparative advantage would predict a decline in our overall standard of
living, it is also necessary to consider what return on investment the
foreigners are earning on the banance of the trade deficit. I suspect that
the interest payments on the trade deficit greatly outweigh the loss of
comparative advantage.
 
3) There is no doubt that SOME taxes are necessary in this country.
But we have  a choice about what to tax.  Many of the present taxes are
stupid and counter-productive. The best taxes are those that tax undesirable
behavior and encourage desirable behavior. Tax tobacco, alcohol, and 
recreational drugs. Don't tax students trying to earn a graduate degree.
Tax gasoline and natural resources. Don't tax capital gains except
after adjustment for  inflation.  Tax capital leaving the country. Don't
tax capital entering the country. Tax whores and pimps. Don't sur-tax 
husbands and wives that choose to raise a family jointly.

4) Blind protectionist taxation or other import restrictions can often
lead to  poorer quality  and higher prices, and is a BAD THING [tm]. But it
is just as  clear that this country cannot afford to sustain a trade
imbalance forever. It is surely in  the best interest of the country to
enact a sliding import tax on ALL imports, which increases gradually  as
long as we have a trade deficit,  and decreases gradually  as we  eliminate
the trade deficit. As long as the procedes are re-invested within the country,
we lose little and gain a more stable economy.

5) Although some loss of comparative advantage will occur if trade is 
impeded in any way, the loss can be minimized if the impedement is made as
flexible as possible. For example, if you decide that the steel industry is
really  in sad shape in this country and decide to prop it up by humongous
import taxes on foreign steel, you would be protecting from Darwinian selection 
one of the most disadvantageous segments of the economy [as pointed out by
a previous poster]. On the other hand, if you generally tax ALL imports 
equally, you  leave the free market the maximum amount of flexibility to 
achieve the  best comparative advantage, while still achieving the goal
of equilibrium of trade across our borders.

6) One of the advantages and disadvantages of taxing undesirable behavior
is that such behavior will tend to be reduced. This must be taken into 
account when predicting tax revenues. The recent bondoogle over taxing luxury
cars and yachts is an example -- people just simply  declined to buy them
and pay the tax; but meanwhile Congress had committed to spend all the 
money  that was predicted without [adequate] consideration of the price-demand
elasticity.  The net result was that spending increased more than tax 
revenues -- and this was part of an emergency  bill to cut the deficit. :-(

7) I can see no justifcation for our elected representatives in Washington
to spend  the taxpayer's money  outside the country on foreign kibutzim and
potato farmers, or on any other "needy" foreigners.  I expect to pay  taxes
to provide whatever government services are necessary  to assure a stable
society  within the borders of the tax base.  If Americans feel strongly
about helping people outside our own borders, they  are free to take out
their personal check books. [Yes, I do. I presently support two children
through Children International]. Having the governemt do it smacks more of
buying votes than it does of concern  for the welfare  of the world's 
"poor and down-trodden." The Congress-critters might be able to buy votes
this way, but they can't buy friends in other countries this way  --  at
best it just allows the rest of the world to say "nice doggy" to the U.S.
until  they can find  a big enough rock.

orville

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Orville R. Weyrich, Jr.                        Weyrich Computer Consulting
Certified Data Processor                     POB 5782, Scottsdale, AZ 85261
Certified Systems Professional                   Voice: (602) 391-0821
Certified Computer Programmer            Internet: orville%weyrich@uunet.uu.net
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Newsgroups: misc.jobs.misc