Liberal spending always gets blamed for enormous debt we are leaving for the next generations to pay but conservative spending is never looked at as part of the problem. The wars we fight are always "off budget" but have to paid for at some point. The Iraq wars were about a trillion a piece and cost actually continues each day. Yet no one really talks about the cost and how it added to the debt. When a hurricane hits the United States the taxpayers send millions to help out and this happens regardless of which party controls the White House or the Congress.
The concept of "writing the check now" is very interesting and one that actually makes sense. But I wonder how much aid to the hurricane Katrina victims would have been approved had our paycheck withholding taxes increased the following week when congress and the president approved the aid. And how about the wars we fight? The cost of Iraq war #2 was over 100 billion each year and I wonder if the president went on national television to discuss the need to invade Iraq but each taxpayer would expect to pay another $1,000 in taxes and pain starts with the next paycheck. I wonder if a few of the "hawks" would have turned a little more "dove" had each of us had to write a check to fight wars in the middle east.
I'm all for restraining military spending on foreign adventures, but then using that savings to draw down our debt. Obviously, we have other problems that need to be addressed. Consider the currency exchange problem our domestic manufacturers face in a quick case study.
The video shows us what "see ya" looks like when an American company cannot remain competitive against competition in America.
Moving operations to Canada and Mexico lowers medical costs, and the cost of manufacturing due to the currency difference between the dollar, the loonie, and the peso allowing competitive pricing with Chinese OEMs.
In the hopes that people can begin to understand the exchange rate headwind America faces manufacturing anything in dollars, I'll try to explain the currency exchange-rate problem our domestic manufacturers face: If we build something in dollars and and the dollar is expensive compared to the Chinese yuan, then things that are manufactured in the Chinese yuan will be really cheap compared to something built in dollars (just look at the cost difference between a MillerMactic 200 and an Everlast 211, for example). But if we build something in pesos, the peso is cheap against the dollar allowing us to get more built for our dollar, thereby making our manufactured products more competitive on a global market because they are less expensive.
This is the problem that Trump has been repeatedly highlighting, and to their credit, both Sanders and John Kasich have independently spoken about the problem.
The currency exchange rate problem is expected to get worse because the Chinese banking system is potentially facing a default up to four times the size of our subprime crisis. For this reason America investors are shorting the Chinese yuan hoping to break the Chinese central bank and forcing China to devalue the yuan in order to recapitalize what is expected to be a failing Chinese banking system. The trouble is that a devalued yuan will make Chinese goods even cheaper against American-made goods, stressing American manufacturers even more on a global stage.
Just about everybody in business sees the devalued yuan as a massive hurdle to doing international business in the manufacturing space.
The generally agreed plan to spin up the economy is to
1) Lower the corporate tax on repatriated money. This issue here is when American companies earn money abroad, they pay tax in the country they earned it. But then we tax them again if that same money is repatriated. No other nation does this, just us. If a Japanese company makes money in America, they pay their taxes here but get a tax credit for the same amount if they bring their earnings home to Japan. Thus money earned abroad gets reinvested domestically.
But domestic reinvestment doesn't take place in America. Due to our high taxes and lack of tax credit, foreign money that is earned abroad winds up staying abroad or getting reinvested abroad. Over time, our domestic companies find themselves with more foreign assets than domestic assets causing many of them to simply move their world headquarters out of the nation.
The solution is to allow companies doing business on foreign shores domestic tax credits on foreign taxes they paid to foreign nations where they earned their money against their domestic taxes if they repatriate moneys earned on foreign shores. Our Government thinks there is at least $2T in cash that could come home, Trump suggested it may be as much as $5T last night during ABC's Republican debate.
2) Lower taxes on everybody. Traditionally, as proven by the Austrian school of economics, the fastest way to spin up an economy is the spend money. Money can be spent by government or by private parties. Private parties spending is more efficient and so there is a bigger "bang" on private money getting spent than government money. The idea behind this is that if more money is getting spent, taxes actually increase because all boats tend to lift up. Our bull markets have typically started with a decrease in income taxes and then as the bull market continued, those income taxes incrementally went up.
3) Decrease regulation. Decreased regulation is definitely a policy wonk discussion which is so vast in so many areas, that we must first discuss and weigh regulation theory with economic theory. In other words, some regulation is good, but too much begins to drag on the economy. Economic drag isn't all bad if the good that results more than offsets the bad from less economic velocity. To get into some of this, consider the discussion on pages 15 and 25 at the following link:
http://www.oecd.org/regreform/policyconference/46270065.pdf
