Free Trade

    Definition: Things get made where it's cheapest.

    Result. US workers don't make them.

    Long term effect: they starve.

    Well,the Government won't let that happen, you think.

    You're wrong. It will because it can't stop it.The reason you're wrong is your beliefs are inherited from a time when things were different. When if  "Engine"Charlie Wilson, or David Rockefeller or one of the Mad Men got paid more than ,say, $200 K , 85 % of the excess was taxed. And was available to pay for taking one giant step on the moon, Or re-employing workers when the things they used to make,here, were being made instead in Somewherekhan.

    You can't use the same dollar twice.If it's used to add one more greenback to Steve Jobs' pile it's not available to rehire  Joe Lunchpail to fix a dangerously  rusty bridge. Or rail track.

    Maximum incremental  tax rates:

    1950  over $400K   84%

    1970   over  $200K  72%

    2014   over  $460K   40%

     

    Comments

    This is going to be part of the Democratic party frame work called Fair Taxing.  You can't talk about poverty and wage inequality with out pointing out the free ride on the top.  They are both part of the same problem. Your point is one that we are going to hear a lot of in this campaign. 


    Things get made where costs and productivity and innovation/value-add maximize, along with costs of location/getting to market. Productivity is much greater in the US and many take a pass on lower IT offshoring in India because the transaction costs (risks, complications)of getting a project in on time and satisfactory are too high. As long as Americans only note 1 of 3 or 4 factors, they'll miss any possible solutions for increased competitiveness. BTW, our wars in the Mideast and Cheney's hike in oil price cost us dearly by raising our cost of delivery to markets around the world, thus the transfer price. Blame China or free trade for that one.

    Getting goods to market became less of an issue with containerships.

    " Productivity" improvement  doesn't result from Joe Lunchpail working a fraction of a second faster but from engineers improving the process e.g. via robotics so Joe produces more with the same amount of effort.

    Or someone in Bangalore does.

     

     


    Container ships made delivery cheaper, high oil prices made delivery more expensive. Productivity is improved by speaking the same kind of English, decent infrastructure, processes, agile programming, teamwork, high morale from good conditions and fun work, being healthy and well-rested, etc. Or you can produce more through fear and intimidation, but that has limited returns.

     

    To repeat myself. .When the incremental tax rate was 84% the IRS didn't collect that from Charlie Wilson on our behalf. Because he never  got it. The GM comp committee would have been voted out of office for using  $100K of shareholder funds to "incent" Charlie if his actual  incentive was   only $16K. 

    That potential increase in inequality was deferred to a later time. Like now..


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