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November 06, 2009

Why not let Wal-Mart fix the economy (chad)

Edited - OK, I removed the offensive tariff. Now the only government interference is allowing manufacturers to write off the cost differential between a foreign manufacturer and a domestic one. Does that change anyone's position. In essence it is a tax cut, and tax cuts are good right? They stimulate the economy and lead to increased revenues as well as economic growth. So if American workers really are the most productive in the world and we are competing on a level playing field then there should be a net gain not a net cost to us. end

Recently I entered a contest to write an op-ed for the Washington Post. I called my submission The Wal-Mart Solution and suggested that with the right application of tax incentives and penalties Wal-Mart (and other retailers) could be persuaded to begin buying American manufactured goods again which would lead to an increase in manufacturing jobs and help alleviate unemployment:

Why Wal-Mart? As the world’s largest publicly traded corporation, with annual revenues that would verge on qualifying it for membership in the G-20 if it were a country, Wal-Mart is in a unique position to drive economic activity in the United States. In fact it has done so in the past.

In the 1990’s Chinese imports made up 6% of Wal-Mart’s stock. Between 1995 and 2005 those imports increased to 60% and made Wal-Mart China’s 8th largest trade partner, accounting for 10% of all Chinese exports. It is estimated that this has resulted in a loss of 1,500,000 American jobs to China.

What if those jobs were brought back on-shore?

Employment would increase assuredly. Not only because of the recovered manufacturing jobs but because in general every manufacturing job in a community creates other jobs to support it. In addition because manufacturing jobs are traditionally well paid the middle class should see an expansion. This should lead to increased tax revenues for the government which should help decrease the national debt and arrest the decline of the dollar. As a side benefit our trade deficit goes down and China’s ability to threaten America economically, politically or militarily is greatly diminished. A win all the way around.

So, how do we get the jobs back onshore? The old stand-by TAX INCENTIVES.

My proposal has two parts, a carrot and a stick. Part one, we allow manufacturers to write off the difference between wages paid to foreign workers and American workers. This should go a long way to eliminating the competitive advantage that Chinese industries currently have. That’s the carrot. Part two, we add a tax on foreign made products assessed on the retailer. This tax would be 105% of the sales price and would be assessed after the sale. That way the retailer can’t simply pass the price on to the customer. The more he charges the more he pays. (Some products would have to be exempt of course but that list should be strictly limited.) That’s the stick.

Between those two changes we should be able to drag a good number of manufacturing jobs back onshore and get America back to what it does best. Build things .

I was limited to 400 words so the ideas sound kind of simplistic, and a lot of background material got cut so it's a little choppy, but it seems to me this type of approach could work. It certainly can't do much worse that the current plans.

I don't know - what do you guys think.

To make my stupid ideas more palatable I also present the gift of weird Russian pop music.

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posted by xgenghisx at 08:30 PM

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