Re: [ee_shoppahs] Andy Grove on outsourcing jobs
- From: James Coghlan <jcoghlan@xxxxxxxxx>
- To: ee_shoppahs@xxxxxxxxxxxxx
- Date: Mon, 5 Jul 2010 17:13:51 -0700 (PDT)
OK, time for another one of my soliloquies . . .
Ages ago I was impressed by a paper that came out of Japan entitled "A Japan
that can say No". I just finished reviewing the topic in Wikipedia and realized
I must be referring to a totally different paper or I my interpretation was
totally different.
My primary thoughts at the time was as follows:
(1) After the end of WWII the US was the sole manufacturing super power.
Everybody else had much of their homeland in shambles. The rise of US
manufacturing after the war was partially due to everybody else having their
factories reduced to rubble - this included all of Germany, much of France,
Italy, Russia and England. Anything rebuilt before the end of the war was
manufacturing war-specific items.
(2) With respect to trade and trade-wars. The US decided what was considered
fair. Basically, with the exception of a few items considered of high
importance to a country, it was fair if one taxed everything (imports and
exports) and unfair if one only taxed imports.
(3) Much of the federal, state and local tax systems in the US is either
indirect or after the fact. This makes money appear to be easier to earn.
However it ends up putting US manufacturing at a disadvantage.
The biggest example would be automobile manufacturing. If some politician
decided we would placed a 7.65% tax on every hour of labor associated with
imported automobiles (or imported parts and/or sub-assemblies). Everybody knows
that other countries would cry foul. This would be in violation of treaties we
signed in good faith.
Now consider we modify the FICA laws slightly . . . place a tax of 7.65% on
every hour of labor associated with all automobiles sold in the US and use this
tax in lieu of domestic manufacturers matching FICA contributions. What would
be the result? For US manufacturers, the net result would be a wash. Non-US
manufacturers would end up paying the tax. Off-shoring manufacturers would end
up supplementing social security. Under the rules of "what is fair and what is
not" since we are taxing everybody, then it is fair.
I am being specific to the automobile industry although the concept applies to
all forms of manufacturing. Just go one step further. Calculate all the
indirect taxes applied to US manufacturing. The real estate taxes, the school
taxes, the electric taxes, the water taxes, the sewer taxes, the
gasoline/diesel, and whatever other taxes. Heck even add on the income taxes.
If one calculated all those taxes and divided it into the cost of the end
product we could in theory have a system in which all the hidden taxes are
removed and replaced by a special sales tax. For the portion of the vehicle
manufactured in the US, the net result would be nada ... nothing ... no change.
For foreign goods, they would get to pay a share of water, sewer, electric,
school and whatever taxes. Actually, if one did change to that type of system
for manufactured products then we would approach the Japanese system. In Europe
this tax is referred to as VAT.
The realization that dawned on me when I read that paper was much of our
problem is due to way we collect taxes. We want to earn as much as possible -
cheap money. Therefore there are all these indirect taxes on corporations.
Taxing corporations used to be easy. They didn't vote, they invested to much in
their physical plants to relocate, and it was easy for politicians to pick on
them. Nowadays, corporations vote with their feet. If you tax it too much on
the local level, they move to the next state. If you tax too much on the
federal level, they move to the next country.
I am not proposing we move to a VAT type system. Our deficits are caused by too
much spending, not too much taxing. Unlike a sales tax in which one knows
exactly how much you are giving the government, the VAT ends up being increased
and hidden within the cost of whatever you are buying. In the long run,
however, decreasing the indirect taxes and replacing them with a sales tax will
decrease the advantage of overseas manufacturing
James
________________________________
From: don phillips <hdphillips@xxxxxxxxx>
To: ee_shoppahs@xxxxxxxxxxxxx
Cc: J Fields <j.email.fields@xxxxxxxxx>
Sent: Mon, July 5, 2010 6:27:55 PM
Subject: Re: [ee_shoppahs] Andy Grove on outsourcing jobs
Here is a followup on the semiconductor economy. It references Andy Grove's
comments.
http://danielnenni.com/2010/07/04/the-new-semiconductor-economy/
Don
On Sun, Jul 4, 2010 at 7:55 PM, <jheaven@xxxxxxxxx> wrote:
>Interesting article although I wonder if the reason for it is that
>>Andy realizes the same forces that have been eating everybody elses
>>lunch are going after his too. Has Intel not benefited from offshored
>>labor? The data under paragraph "The 10X Factor" is disappointing
>>for the most of the US but probably not possible without a lot of US
>>corporate help. Andys remark that US manufacturing is undervalued is
>>obvious; the real question is why that is happening. The answer is
>>probably in our economic policy; there is no incentive to manufacture
>>in the US now except patriotism. Some theorize this will all end in a
>>US dollar devaluation. While this may be beyond the scope of this BB,
>>most contractors have prided themselves in understanding their market
>>better than most everyone else and profited from it. Things are different
>>now and it is dangerous to think that things will come back because they
>>always did before(although I am hoping they will). So let the ideas flow.
>
>>John Heaven
>
>>for those with time: "Bad Samaritans" (H J Chang)
>
>
>
>>---- J Fields <j.email.fields@xxxxxxxxx> wrote:
>>> http://www.businessweek.com/magazine/content/10_28/b4186048358596_page_4.htm
>>>
>>> "The first task is to rebuild our industrial commons. We should
>>> develop a system of financial incentives: Levy an extra tax on the
>>> product of offshored labor. (If the result is a trade war, treat it
>>> like other wars—fight to win.) Keep that money separate. Deposit it in
>>> the coffers of what we might call the Scaling Bank of the U.S. and
>>> make these sums available to companies that will scale their American
>>> operations. "
>>>
>>> Kind of a long winded article, but says we need companies in
>>> USA. We tax US labor with income tax, property tax, etc.
>>> Goods manufactured outside USA, get not US income tax, property tax
>>> on the manufacturing plant, etc.
>>>
>
>
>
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