Posted by kmooneyham in Tax Plans (Part 2)

One question that maybe I missed in your post. How much would the company LOSE in the higher (though non-union) wages they would have to pay to American workers? That requires some sort of "real-world" thought because it is wages that drives the companies to produce overseas. Well, wages and over-regulation which costs them a lot in overhead. I like where you go with things, at least your are THINKING instead of spouting some Krugmanish stuff like so many do these days.
Good question, and thank you for the input. I agree with your statement that American wages (non-union and especially union) tend to drive companies overseas where workers are much more plentiful and cheap. With this being said and acknowledged by most Americans, I'll explain myself as best I can.
A knee-jerk reaction would be to institute such a large import tax on these American based, foreign produced goods that it would be cheaper to stay in the US, it simply won't work. Please understand that the percentages used in my blog entry are NOT the final percentage I would implement nor are they the percentages that are currently being used by our government, but rather they are "easy math" numbers. I personally don't fancy myself as a "math whiz" so I keep it simple, but I digress.
Part of what needs to change in this country, that would ultimately support this "American Made" initiative, is the attitude of Americans in general. It is a factual statement that if I don't make X dollars per hour, I won't be able to afford (insert need/want). For most workers the basics are the priority, food, shelter, transportation, etc. This cost is what drives the prices, and the prices we pay for goods and services ultimately drive our wages. American products cost more to produce due to the higher wages of American workers, which have to be higher due to the price of goods and services the workers pay, which are higher because of the cost to produce the goods which are higher because of....well, you get the idea. This shows the cycle of capitalism in all its glory. Please do not misunderstand me on this point. I LOVE capitalism. I LOVE the belief that hard work and determination can move you farther up the chain and closer to the "American Dream".
The wage/production cost/price cycle has to be broken somewhere. I am confident that no successful company will start selling their goods at deeply discounted prices in order to reduce one aspect of the cycle. Our Federal government has taken steps to attempt to keep American wages at a level that an individual can "live off of", i.e. the Federal Minimum Wage (FMW). Unfortunately, the FMW makes many employers turn to either illegal (not necessarily immigrants but "under the table" employees as well) employees or foreign employees. Hence the lack of income tax revenue our government cites as one of the issues in our current fiscal crisis.
In a direct response to your question, American companies WOULD lose money by utilizing an all-American work force. I see two ways to minimize this loss. The first is that by lowering profit margins and employing an American workforce, sales SHOULD increase. Example:
Acme Pot Company (cookware not herbal) sells a pot for $10 that results in a profit of $6 per pot. By lowering the price of the pot to say $9, the profit is reduced, but with the additional jobs created by the "American Made" initiative, more Americans have jobs and they are now able to buy the pot that is locally made. If Acme Pot Company sold 10,000 pots last year at $10 a pot (with the $6 profit), the company received $60,000 in profit. After lowering the price and employing Americans, they now sell 15,000 pots at $9 per pot, resulting in a profit of $75,000 in profit. Did they sell more, absolutely. Are they able to offset the drop in price by increased sales, absolutely. It's a basic economic premise that most Americans would agree with, if you have money you are more likely to spend it. If you employ more people, more people have more money.
The second premise, much less desireable, is to simplify and increase the import tax on foreign goods which essentially forces American's to buy locally, thus increasing the probablity that companies would would remain local and join the "American Made" initiative. It is easy to see why this plan of action would be detrimental to our world trading abilities and would hamper our access to world markets, not to mention the increase in black-market activities for basic goods (remember the Soviet Union breadlines?)

Another possibility to offset profit loss is an increase in production of American goods. For many years, America was a nation of producers. We sent our products all over the world, but as time has progressed and our society has changed, we have become a nation of consumers. We can no longer support ourselves and have become dependent upon imports from other nations. If we as a nation lost all contact with the rest of the world, could we support ourselves? I say the answer is a resounding "NO". We paid our farmers to not farm for so long, we have lost much of our agricultural capability. Are we regretting that now? Sure we are. We now import agricultural products from all over because we don't grow it here. With the advent of bio-fuels, we are starting to wish we had more agricultural products to use not only for domestic food consumption, but for domestic fuel production as well, which in turn reduces dependence on foreign oil (that's the buzz-phrase right now I believe).
In summation, yes, companies would lose money, at least initially, but the loss could be offset by increased sales, and would eventually return to the pre "American Made" levels. As for over-regulation, I whole-heartedly support a certain level of deregulation by the Federal government. At least reform the regulation so as to encourage growth while maintaining levels of quality and fairness in manufacturing.

I hope I have answered your questions, if not, please feel free to let me know. Thanks for stopping by!