Trade deficits destroy capital!
Trade, Deficits and Trade Deficits
Let’s begin with the basics.
Q. What is a “trade deficit”?
A. A “trade deficit” occurs when a country buys more of a country’s products than it sells to that country. What would be an example? The United States trades with China. The U.S. buys goods from China (check out Walmart). The U.S. also sells goods to China. It’s just that the U.S. spends more buying goods from China than it receives for goods sold to China. Is this a problem? I don’t know, let’s figure it out.
Let’s consider a simple household budget. What happens if you spend more than you receive (income)? What happens if your expenditures exceed your income. It’s not good. You first use your savings to finance your life style and then you go bankrupt. (Ask your neighbor who is maxed out on credit cards.) So, it is a good idea for your expenditures to not exceed your income. (Governments generally have trouble understanding this basic principle.)
Here is an everyday example for everyday folks.
Imagine two neighbors. One is an electrician. The other is a plumber. The plumber says to the electrician. “I will trade you a plumbing job for an electrical job”. The electrician agrees. Both are happy. Their trade is in balance. Each sells to the other but receives enough from that other to pay that other. The trade is in balance.
What happens when the trade is out of balance?
Imagine that the plumber now thinks that his work is worth $100 more than the electrical job. The electrician must now go out and find another $100 to pay the plumber. Perhaps he can get that out current revenues. In many cases he will just get the additional $100 from revenues from another job or from another revenue source. But, if he can’t get that additional $100 from another revenue source, he must get it from his savings. He has to erode his capital. This is a bad thing.
Trade deficits and the erosion of capital
What is bad for a small business is bad for a government. Governments cannot run deficits forever. In fact, it would be preferable to run surpluses. (Sell more than you buy) China is a trading nation. It trades with Germany, the U.S. and many other countries. What is the status of U.S. trade with China?
To quote from Roger Conklin:
“There was a 11.6% increase in the 2011 US trade deficit with China over 2010 while China’s world trade surplus decreased by 14.5%. Rather than the Obama Administration appointing a commission to “monitor Chinese trade practices” it would be much more productive to appoint a commission to determine why the US does so poorly selling our competitively priced agricultural and high tech products in China. If it were not for the US trade deficit with China, that country would have ended the year with a $47 billion world trade deficit. While the rest of the high-wage industrialized nations are going gangbusters in racking up trade surpluses with China, the second-largest import market in the world, the US trade deficit continues to skyrocket. If such a commission were appointed its report delineating the reasons for our massive trade deficit would take about 5 minutes to prepare. It is a direct result of our unique world-wide and citizenship-based tax policies. They punish companies that export and our citizens who live and work abroad. This is what has destroyed the export mentality of US industry and made it impossible for Americans to compete for overseas jobs. The real loser is the US economy. Our $700 billion world trade deficit represents 7 million destroyed American jobs and $130 billion in tax revenue that these destroyed jobs fail to generate. Every other nation practices Territorial taxation.”
By causing trade deficits, citizenship-based taxation destroys U.S. capital
Therefore, we can see that (unless there is another source of income to make up the difference) citizenship-based taxation is directly responsible for the destruction of U.S. capital.
Here is a question you should ask yourself? Would you adopt an economic policy that forced you to “eat your house” to pay your bills?
That is exactly what U.S. tax policies are doing.
This is another way that:
U.S. citizenship-based taxation is causing economic harm to the United States.
It’s the 11th hour! Do you know what your Congressman is thinking?