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Friday, April 29, 2011

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Bipartisan Complacency is Destroying U.S. Economy!

In Chapter 19 of the 1817 classic On the Principles of Political Economy, and Taxation, David Ricardo mentions , in addition to war, removal of capital and a new tax as destroyers of the comparative advantage which a country before possessed in manufacturing.

Deferral of tax on foreign earnings by multinationals, as long as those earnings are not returned to the U. S. results not only the loss of U.S. tax revenue but it incentivizes the remove jobs and capital, which feeds upon itself to reinforce a downward spiral for our economy.

China’s pegging its currency to the U.S. Dollar, in form this is not a tax, but in substance acts as a tax on all U.S. exports to all U.S. Trading partners, not just exports to China.

The unresponsiveness of U.S. Political leaders to these changes that David Ricardo, the father of classical political economics, warned; has subject U.S. businesses and workers to a similar plight as the frog in the boiling water parable.

“The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to ‘political turmoil.’ Pretty soon, I think there will be a big adjustment.” — Warren Buffett, January 2006

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