How to Save the American Economy

[Mr Khan]

mrstickball said:

McDonaldsGuy said:

Cause they don't have greedy companies shipping jobs overseas by the millions and millions of illegal immigrants. Canada is far better ran than America. Normally I'd actually be against tariffs, but this is a situation in which we need them the most.

So greed is only an American characteristic? Riiiight.

Canada is in a much better situation because their structure for businesses is vastly superior to ours. Businesses have less incentive to move overseas. Not because of tariffs, but the regulatory and tax environment makes it much cheaper and easier to do business there. America is (also) exporting jobs there - we're doing something seriously wrong if the Canadians can make a car cheaper than we can.

Again, what tariffs will do is that every country will respond in kind. Our exporters will suffer severely. Some companies will come back, but their goods will be incredibly expensive to buy. How do you think the average person will handle PCs being $2,000 again, while the iPhone is $1,000 and a pair of cheap, generic shoes are $50 instead of $10?

That is exactly what tariffs will do. Tariffs don't fix the endemic problems inside of an economy, let me give you two examples:

 

1) The US can produce a widget for $1,000 per unit. China can produce it for $500. We dislike the fact that China can produce a widget for $500, so we levy a 100% tariff on widgets. In response, China levies a 100% tariff on American-made bumpers, which we can make for $500 and sell to China.

In this scenario, the average person has to pay 100% more for a widget, but we gain the widget-maker's job. We however, lose a bumper-makers job, because of China's tariff. Therefore, the net effect is that widgets cost more, and no jobs are created.

2) Brazil employs a very similar scheme with electronics in the real world. They levy a 100%+ tax on all assembled goods that go into their country. What is the result? An Xbox 360 costs $800 to buy. How many jobs did that create? None. They still don't have Xbox manufacturing. Instead, they make Sega Genesis' in country. In Brazil's case, the tariffs don't promote indigenous designs, they simply discourage consumers from buying products.

 

Instead, the smart thing to do in scenario 1 is to figure out how to make widgets cheaper than China - through regulations, research, and investment. This is what happens in countries that take a serious look at tax reforms, like Canada. As it stands, America has one of the highest corporate taxes worldwide. It discourages jobs from coming here. If we drop the rate, we bring jobs back from China and from other countries. That is key. Trade doesn't exist in a vaccum. Therefore, if we make it easier to build factories here, we bring jobs from everywhere.

Part of the reason why i think a VAT would be better in lieu of a corporate tax. So long as the VAT rate hit slightly lower than existing corporate tax rates, but also caught everyone willing to do business in America in the net, likely increasing net revenue and not imposing the taxation burden on the corporations directly