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|I Am Skooter|
So here's us, on the raggedy edge.
I really can’t find any other way to read this month’s editorial at Harpers as advocating anything other than a return to good old fashion protectionism. It all just seems a bit weird.
Notebook: Up from Globalism
by Alan Tonelson
“…the full potential of the Buy American approach has been limited by U.S. treaty obligations under NAFTA, and by our membership in the World Trade Organization. Hence, at the very least, the United States should declare these obligations suspended until the economic crisis has been vanquished.” Harpers, January 2010, pp. 9
Oddly, they go on to argue against consumption taxes arguing that they give other countries a competitive advantage.
“Another gigantic but barely recognized barrier to balancing America’s manufacturing dominated trade flows is the use of value-added taxes (VATs) by virtually all U.S. trade partners. VATs are applied only to goods consumed domestically, and since the United States lacks such measures, foreign VATs clandestinely subsidize exports to the United States by subtracting the cost of foreign governments for everything that is not consumed locally.” ibid.
On the first point, it seems clear that there’s nothing inherently wrong with a globalized economy. In theory it promotes a level playing field amongst the world’s citizens and is responsible for the rising (albeit slowly) quality of life of many citizens of traditionally third world nations.
The notion that the United States can create a walled community in which all of its needs are met seems just patently ridiculous. The American economy can’t even provide its own food. As Harpers itself has pointed out
America’s biggest crop, grain corn, is completely unpalatable. It is raw material for an industry that manufactures food substitutes. Likewise, you can’t eat unprocessed wheat. You certainly can’t eat hay. You can eat unprocessed soybeans, but mostly we don’t. These four crops cover 82 percent of American cropland.
On the second I have difficulty seeing consumption taxes as a bad thing. As with any method of taxation the taxes need to be allocated and used effectively by governments. At heart a consumption tax means that those who consume more pay more tax, and its quite difficult to hide from them. Put simply: the guy who buys a BMW pays more taxes than the guy who buys a Honda Civic.
Given the sheer size of the U.S. deficit, and the enormous levels of household debt involved it seems clear that the current strategy of American taxation isn’t sustainable.
Something has to give, and perhaps a consumption tax would help to balance the equation a bit.