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 Richmans' Trade and Taxes Blog

Congress busts the budget to create 90,000 manufacturing jobs
Howard Richman, 7/22/2010

Some people do things the hard way, and some people do them the easy way. Right now Congress is doing things the hard way. They are spending money that they don't have, in order to create thousands of manufacturing jobs. They don't even seem to know that there is an easy way that would raise money that they need while creating millions of manufacturing jobs.

Reuters reports that on July 21, the U.S. House of Representatives passed a bill that will bust the budget in order to create 90,000 manufacturing jobs. The bill eliminates duties paid by U.S. manufacturers on raw materials when the raw materials are inputs into final products. Democrats voted 245 to 1 in favor. Republicans voted 129 to 42 in favor. But the Republican leadership opposed the bill because eliminating tariff revenue on raw materials would expand the already sky-high U.S. government budget deficits.

According to Reuters, House Democrats plan other measures to help U.S. manufacturing. If this bill is any indication, the other measures will also bust the budget in order to create some tens of thousands of manufacturing jobs.

But saving manufacturing jobs need not require any budget-busting expense. In fact, doing so the easy way would greatly reduce the budget deficit. Congress would take in tens of billions of dollars of tariff revenue while producing millions of new manufacturing jobs simply by balancing trade through the scaled tariff that my father, son and I proposed in our July 19 commentary, we wrote (The Scaled Tariff would Resuscitate the U.S. Economy):

Even if the scaled tariff would not affect trade, it would collect about $170 billion of revenue per year, enough to seriously dent our budget deficit. But of course it will affect trade. It will reduce American imports from the mercantilist countries. Instead, Americans will buy more from American producers and from non-mercantilist countries, such as Mexico, which buy more from the United States as they get richer. The result will be higher American incomes, more than making up for the higher cost of products imported from countries that  artificially limit imports from us.

The scaled tariff would also enhance American exports. Because it is scaled to our trade deficits with each mercantilist country, it would give mercantilist countries an incentive to take down their barriers to American products. The more they import from us, the lower would be our tariff on their products.

We are not the only ones who have recommended that Congress adopt balanced trade as American policy. Many businessmen have made the same recommendation, including Warren Buffett, Ralph Gomory, Lee Iacocca,Tallahassee businessman Devoe L. Moore, Milwaukee businessman John Torinus, Buffalo businessman Jack Davis, and Texas businessman Dick Alexander.

Congress can't afford to keep borrowing from our future in order to employ workers today. If Congress passes the scaled tariff, they would be reducing our budget deficits while at the same time putting manufacturing workers to work.

Comment by Larry Walker, 7/24/2010:

Do they have any idea what we will be manufacuring? Or is this just a theory? Seems like Congress' errant parth will wind up creating 10 manuafacturing jobs overseas for every American manufacturing job, while your proposal will favor the US over foreigners. Why can't they see this?

Comment by Larry Walker, 7/24/2010:

Redux: Do they have any idea what we will be manufacturing? Or is this just a theory? Seems like Congress' errant path will wind up creating 10 manufacturing jobs overseas for every American manufacturing job, while your proposal will favor the US over foreigners. Why can't they see this?

Response to this comment by Howard Richman, 7/25/2010:
Larry, Thank you for your comment. I think that they are sincere in trying to help manufacturing, but they are unable to come up with anything effective. Howard

Comment by Charles Martin, 11/3/2010:

Seems to make sense.  The only way to create good jobs in America is to make it too costly for the American and foreign capitalists selling to the US to make these products off shore and ship them into the US to be sold.  US businessmen are not "patriots", they are simply looking at their "bottom line" as are their investors.