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 Richmans' Trade and Taxes Blog

How to Cut Government Expenditures and Create Millions of Jobs Doing It
Raymond Richman, 7/23/2011

No doubt in coming days, the debt limit will be raised -- more’s the pity – but the country will be no better off as a result. Oh, raising the debt limit might prevent uncertainty in stock and bond markets but we do not suffer angst at the problems of investors in those markets. We are depressed by the fact that nothing – literally nothing of significance --is being done to create good jobs for the 26 million unemployed and underemployed (part-time)  workers who are without good full-time jobs.  We have two parties afraid to offend any significant block of voters. The Republicans to their credit are willing to make changes as the Cut, Cap, and Balance legislation passed in the Republican House and tabled in the Democratic Senate shows. There is no Democratic proposal to cut expenditures on the table, only proposals for increased taxes.

 We have two parties – except for the Tea Party supporters and libertarians  -- beholden to their corporate contributors which derive most of their profits from foreign subsidiaries and then add insult to injury by importing their foreign-made products.  We have one party dedicated to union leaders who have a Luddite mentality.  When was the last time you bought a costly advanced technological product made in the U.S.? Only the Tea Party, which is not beholden to any special group, are willing to do something serious about our problems. 

The Cut, Cap, and Balance Act of 2011 which passed the House and was tabled in the Senate reduces discretionary spending by $31 billion compared to last year, and reduces mandatory spending by $51 billion in fiscal year (FY) 2012. From FY 2013-2021, the legislation caps federal spending at the same levels (as a percentage of GDP) as the House-passed FY 2012 budget resolution. Ultimately the legislation will save $5.8 trillion over 10 years. And what has the President proposed? Nothing but higher taxes and growing deficits.

But there are many cuts that should be made outside of the entitlement programs. The Department of Education spends $36 billion per year. There is no evidence of improved educational outcomes as a result of federal spending of hundreds of billions of dollars. End the program; it is not a federal responsibility at all. Saving $36 billion per year.

End the War on Drugs. Wikipedia cites a 2008 study by Harvard economist Jeffrey A. Miron who estimated that legalizing drugs would inject $76.8 billion a year into the U.S. economy — $44.1 billion from law enforcement savings, and at least $32.7 billion in tax revenue ($6.7 billion from marijuana, $22.5 billion from cocaine and heroin, remainder from other drugs).. Savings $76.8 billion per year. And this does not include the social costs of imprisoning traffickers, the costs of our failed military expenditures in Afghanistan,Mexico, and Colombia and the  deaths of hundreds of public officials in those countries.

Terminate the foolish subsidies to wind and solar power.  Some $30 billion in grants and tax incentives plus $60 billion in loan guarantees all of which will become due as the evident lower costs per kwh, the costs of connecting to the electrical grid, etc. Annual savings not including state subsidies, we estimate at $30 billion per year.  (To make matters worse, preliminary data from the CLOUD experiment being conducted at CERN, the world’s foremost nuclear research center in Switzerland, and historical and geological and other scientific data of 6,000 years of periods of cooling and warming, corroborate the assertions of numerous scientists and political leaders that the notion of manmade global warming was a hoax from beginning to end.)

End the foolish restrictions on drilling for oil and gas on public lands, offsore, and in the Arctic. It is causing unbearable costs by requiring the importation of crude oil that we are capable of producing here. Raising the debt limit will not create a single job, whereas getting our trade into balance would create at least four to six million manufacturing jobs within three years. That estimate is based on the fact that every $100,000 of the trade deficit has cost us one job. That is what the average worker in manufacturing produces, about $100,000 of value-added. The  President in his speeches mentions the need to increase exports to create jobs, never mentioning imports, the loss of jobs caused by outsourcing. The very formula for calculating GDP includes Exports Minus Imports. In 2010, the trade deficit on goods and services amounted to $516.4 billion, a half trillion dollars, nearly five million jobs.

Suspend the environmental restrictions on the drilling and refining of oil which resulted in the banning of exploration and drilling for oil on all public lands and offshore in the Atlantic and Pacific. The result was the increasing dependence of the U.S. on imported oil and the loss of millions of productive jobs in exploring, drilling, processing, transporting, and marketing oil. These restrictions were imposed at the request of environments groups like the Sierra Club who claim they want pristine national parks but who raised no protest at the building of dozens of wind and solar plants on public lands. So what is their real agenda? By contrast, oil and gas wells occupy very little land, less that half an acre, and often are a thousand feet from one another.

Under World Trade Organization Rules, countries are permitted to take measures to balance trade with any of their trade partners with whom they have chronic trade deficits. We’ve done nothing because of what could be described as the ideological bias of economists who favor free trade. Like the President, economists talk about the jobs created by increased exports but never mention the job losses created by increased imports. That this is designed to deceive the public should be obvious to anyone who has taken an economics course in high school or college. (You will recall this GDP equation: GDP=C+I+G+(X-M). GDP is the sum of consumption goods produced, investment goods produced, government investment and consumption, and EXPORTS MINUS IMPORTS.) They are afraid they will arouse a demand for protective tariffs. We, too, oppose protective tariffs that  protect single industries. That is why we propose scaled tariffs that apply only to an offending countries and to all the goods imported from that country. We do not single out any product for protection.

The scaled tariff acts like a currency revaluation, it makes all the goods imported from an offending country higher in price to Americans but Americans will be compensated by the huge revenues the scaled tariff will produce and the jobs the scaled tariff will create. It is designed to increase in rate as our trade deficit with a country increase and to diminish as trade becomes better balanced.

The truth is we have an environmentalist-caused energy crisis. One has to be wary of any group that politicizes science. In the name of science, environmentalists claim global warming is man-made. They want immediate action to confront global warning. A sizable group of scientists, including a number of eminent physicists and Nobel Prize-winners, are skeptical and argue that global warming is not caused by carbon emissions but by periodic changes in emissions of energy from the sun. An experiment is actually under way at CERN, Europe’s great research institution to test this hypothesis and will soon publish its results. Early results confirm what everyone knows, there have been many periods of global warming and cooling before man had created a single motor vehicle or factory.

Moreover there is a third group, including the writer who argue that reducing carbon emissions by denying the use of coal and oil costs much more than the claimed benefits warrant. What improvement have the trillions of dollars spent by governments and private businesses and households accomplished?  We need a lot more research before we incur any additional costs. But our first priority should be to end the recession and prevent a depression. What would produce a recovery is getting our foreign trade in balance.

There is no reason not to exploit our huge reserves of natural gas, a relatively clean source of energy, and opening up public lands to drilling. They would give good jobs to millions of Americans. Unfortunately, President-elect Obama subscribes to the manmade global warming foolishness. The money would be better spent trying to control hurricanes, tsunamis, and tornados and avoid their disastrous effects. Let us get our priorities right.

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Comment by malcolm kyle, 7/25/2011:

Prohibition has decimated generations and criminalized millions for a behavior which is entwined in human existence, and for what other purpose than to uphold the defunct and corrupt thinking of a minority of misguided, self-righteous Neo-Puritans and degenerate demagogues who wish nothing but unadulterated destruction on the rest of us.

Based on the unalterable proviso that drug use among all echelons of society is essentially an unstoppable and ongoing human behavior which has been with us since the dawn of time, any serious reading on the subject of past attempts at any form of drug prohibition would point most normal thinking people in the direction of sensible regulation. 

By its very nature, prohibition cannot fail but create a vast increase in criminal activity, and rather than preventing society from descending into anarchy, it actually fosters an anarchic business model - the international Drug Trade. Any decisions concerning quality, quantity, distribution and availability are then left in the hands of unregulated, anonymous and ruthless drug dealers, who are interested only in the huge profits involved. Thus the allure of this reliable and lucrative industry, with it's enormous income potential that consistently outweighs the risks associated with the illegal operations that such a trade entails, will remain with us until we are collectively forced to admit the obvious. 

There is therefore an irrefutable connection between drug prohibition and the crime, corruption, disease and death it causes. Anybody 'halfway bright', and who's not psychologically challenged, should be capable of understanding that it is not simply the demand for drugs that creates the mayhem, it is our refusal to allow legal businesses to meet that demand. If you are not capable of understanding this connection then maybe you're using something far stronger than the rest of us. So put away your pipe, lock yourself away in a small room with some tinned soup and water, and try to crawl back into reality A.S.A.P. 

Because Drug cartels will always have an endless supply of ready cash for wages, bribery and equipment, no amount of tax money, police powers, weaponry, wishful thinking or pseudo-science will make our streets safe again. Only an end to prohibition can do that! How much longer are we willing to foolishly risk our own survival by continuing to ignore the obvious, historically confirmed solution?

If you support the Kool-Aid mass suicide cult of prohibition, and erroneously believe that you can win a war without logic and practical solutions, then prepare yourself for even more death, tortured corpses, corruption, terrorism, sickness, imprisonment, economic tribulation, unemployment and the complete loss of the rule of law.

The only thing prohibition successfully does is prohibit regulation & taxation while turning even our schools and prisons into black markets for drugs. Regulation would mean the opposite!

Prohibition is nothing less than a grotesque dystopian nightmare; if you support it you must be either ignorant, stupid, brainwashed, insane or corrupt.

"A man with conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point."

-- Leon Festinger

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]