Real Change

Lawrence Mishel of the EPI testified before the Ways and Mean Committee today, and the EPI investigation of American labor losses due to Trade probably are the best so far (with least axe to grind in favor of Trade). I wonder, though, about the curative proscriptions. Most who read my blog know that I don’t favor Trade that much, and like Trade agreements even less (they are simply instruments to destroy Trade Advantage in the first place). My position is basically bolstered by the knowledge that none of the World’s individual economies can afford the Transport Costs of massive Trade volumes. The shift from Rail traffic to Semi-Tractors of Transport volume over the last 50 years probably accounts for a 50% increase in Diesel fuel consumption in this Country. Gasoline Costs have probably risen by 15% as a result. Commercial Air Transport of Goods assuredly has increased total Aircraft traffic by at least 20%, and Aircraft fuel Costs by at least 30%. Trade must account for at least 40% of all total Transport Costs in this Country, without consideration of the Transport Costs of transferring Import or Exports Goods across the oceans. The fact is $50/barrel of Oil will strangle Trade; it will simply take a little time. What We do as We wait, though, can affect the final Outcome.

The EPI, itself, has been captured by the mystique of the Free Traders. Their first proscription for improvement is entirely wrong, as they advocate a devaluation of the Dollar. The Standard of Living of Americans will never be improved, by a devaluation of the value of their production. The real solution remains a complete opposite of this Proposal; i.e., concentrated efforts to increase the value of the Dollar. Why is this the Answer? It resolves almost all of the problems afflicting the American economy. It requires bringing the Federal Budget into balance, and more importantly, return to a program to pay off the Public Debt. It raises the Cost of American Exports in foreign markets, inciting a counter-cyclical rise in the Price of Imported Goods in the United States; the best spur to American manufacturing to be found. It forces return of American Capital Investment to domestic enterprise, especially if Tax Credits are removed from foreign investments by Americans.

Repayment of the Federal Debt will generate deep deflationary pressures (I estimate by the ratio of Debt Service/TM) until the Federal Debt is repaid in entirety (Al Greenspan is most decidedly wrong to imagine We need Debt to regulate the Money Supply; all We need is a consistent Interest rate of 4.25% on the Overnight rate). We need restructuring of the Tax system, both to pay off the National Debt, and to pay for essential Government Services; I could endure a Flat Rate Income Tax of 24%, if it was a Flat Rate, meaning that Local, State, and Entitlement taxes are taken off the Top with the Federal Government receiving the remainder. This form of Taxation requires and insists on literally not Tax Exemptions, Tax Credits, or Tax remissions. I have not did the Bean-Counting on this (being a Theorist), but seriously estimate it will triple federal Tax revenues if Local and State assessments can be restrained. People become defeated by the total mess, but there are rational lines to adopt to resolve these issues. lgl