Americans are a silly people.
The tragedy is that not many Americans acknowledge their silliness nor how their silliness may affect the future of their country and the free world, possibly within their lifetime.
Government
The US political system is designed to provide checks and balances. However, the result is sometimes an almost dysfunctional government that spends lots of time trying to get the required majority in the House of Representatives and the Senate to agree to pass certain legislation; sometimes the job is done after provisions are added or taken away to satisfy the personal agenda of individual congressmen or women but at other times, nothing gets done.
Even when the official U-3 unemployment rate is 9.1 per cent and the U-6 unemployment and under-employment rate is 16.5 per cent — meaning that almost one in ten people are unemployed and almost one in six people are unemployed or under-employed — President Obama's jobs proposal is languishing in Congress because the Republicans are adamant that they will not allow any increase in taxation and will not allow any increase in the national deficit or the national debt. On their own, these are sound and prudent principles. But what is more important — create jobs for the unemployed or financial prudence. Will the creation of jobs not lead to a vibrant economy which will lead to higher tax revenues, lower national deficit and lower national debt? Urgency has been displaced by party politics.
The Republicans have a point too — expenditure has to be reduced. Wasteful expenditure needs to be weeded out. Entitlements probably have to be reduced.
Nevertheless, it seems that nothing is more important to the Republicans than protecting corporations and the wealthy from tax increases — not defence, homeland security, education, essential infrastructure nor the economy.
Many billionaires are taxed at a rate lower than their employees. Many profitable corporations pay little or no tax because of the complex tax codes and loopholes. When the country has a budget deficit that causes its national debt to increase year after year, isn't it time for businesses and individuals who can most afford it to pay more taxes?
Occupy Wall Street was born out of the frustration felt by many people (and others who believed that they should not wait until something was affecting them personally to get out and do something about it) that inequality had gone on for too long.
Not surprisingly, the latest New York Times/CBS News poll showed Americans' deep distrust of their government. 89 per cent distrust the government to do the right thing, 74 per cent say the US is on the wrong track and 84 per cent disapprove of Congress. 86 per cent think the economy is fairly bad or very bad. 69 per cent think that that the policies of the Republicans in Congress favour the rich while 28 per cent think that the policies of the Obama administration favour the rich. 67 per cent disagree with cutting taxes for large corporations and 65 per cent think that taxes on the rich should be increased.
What is Congress doing?
Businesses
Businesses are investing overseas because it is cheaper for them to produce overseas. Other businesses are simply buying from overseas suppliers. It may be cheaper because of a myriad of factors. The workers overseas may be working under conditions that may appall many Americans. The factories may be operating under conditions that fail US environmental standards. The companies may be using stolen American intellectual property or using inferior substitutes that may endanger the lives of consumers and others. The foreign governments may be subsidising their companies by giving them cheap loans or tax concessions or turning a blind eye to the dishonesty of, or non-compliance by, corporations and individuals.
It makes economic common sense for a single US business to relocate or source overseas but when too many businesses do this, hundreds of thousands of jobs are exported and tax revenues fall and the country suffers.
American businesses don't seem to care because their respective bottom line is protected.
American consumers don't seem to care because they get to buy products that are cheaper.
Some economists argue that getting China to let the yuan appreciate significantly will not change things because American wages and other costs are too high compared to Chinese wages and other costs. That may be true, but only to some extent. It may be viable for some production to relocate back to the US. Germany and Japan operate huge trade surpluses despite higher domestic costs.
National Debt
The result is a loss of production capacity, budget deficits and a ballooning national debt.
The flip side is that foreign governments have ended up holding US government securities, making them in effect the central banker to the US. Chief among these countries is China.
US businesses and consumers are doing their part to enable China to grow economically.
China's growing economic clout has enabled it to develop its political influence and military power to challenge the US and the free world. But many Americans do not believe, or do not want to believe, that China will one day overtake it as the largest economy and the number one military superpower.
The rest of the world sees it, although not many of its friends will say it. China certainly believes that its time will come soon, economically and militarily. But few Americans see or acknowledge it. Many are preoccupied with making million dollar bonuses or making ends meet. Some are focused on short-term politics. Others believe they are helpless to change things.
It is a grave mistake.
02 November 2011
