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Guest Opinion: Ken Davis

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The following piece was written by K. N. Davis, Jr., former U.S. Assistant Secretary of Commerce.

         America’s Leaking Boat, And What to Do About It

Over the years, some of the most telling comments about the U.S. economy have been made by Warren Buffett, “The Oracle of Omaha”. Here are two of his best.

 American businessman and investor Warren Buffett was quoted in the Associated Press, Jan.20, 2006: “The U.S trade deficit is a bigger threat to the domestic economy than  the federal budget deficit or consumer debt and could lead to political turmoil”.

And recently in a CNN interview he said:

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks ,

Our trade deficits from a massive flow of imports replacing sales by U.S. domestic firms to our own huge market are without doubt America’s worst “leaking boat”. The impact on our own industries has been devastating – in the latest ten years more than 40.000 U.S.  manufacturers went out of business and at least 6 million workers lost their well-paying  jobs  If we continue at that rate, our  leaking boat will surely sink! Only about 11% of America’s workers are still employed in manufacturing. That’s where our largest  potential number of jobs exists. Under proposed balanced trade legislation an estimated 3 to 4 million jobs can be created  there within two years and without deficit spending.

Buffett warned us of trouble coming back as 2003 in a Fortune Magazine article  “Our trade deficits are selling America out from under us. We’ve got to stop it now, and here’s how to do it!” He outlined a plan for balanced trade with the rest of the world.  It would limit our annual imports each year to no more than our own exports. U.S. production would increase, but we’d still be the world’s biggest importer. We’d keep a fair share of our own market and manage it to prosper and grow for the benefit of all nations. But our leaders in business and government had little interest in any change in our wide open “free trade” policies. Buffett’s plan was ignored as was a proposed bill, “The Balanced Trade Restoration Act Of 2006” by then Senators Dorgan and Feingold”.

Now The latest trade news is that three new U.S. solar technology companies have filed for bankruptcy due to intense competition by Chinese government-subsidized companies, This is added bad news because it belies the idea that new high-tech companies can solve our import problems without changing our trade policies, Not so – those are the very industries that global competitors covet the most, especially China.

Let’s hope President Obama addresses this major problem and opportunity in hisbig speech on jobs this week. We must abandon our leaking trade policy boat and adopt strong balanced trade legislation. It’s a truly big idea whose time has come!

 

 

 

33 Responses to “Guest Opinion: Ken Davis”

  1. Bruce Bishop says:

    Mr. Davis,

    Excellent summary of our situation. I have been reading “Death by China,” by Peter Navarro and Greg Autry. It seems that things are even worse than I had thought.

    I don’t expect Obama to address the balance-of-trade issue. It seems that we are in a box — we are afraid to challenge China for fear of starting a trade war. But, we are already in a trade war and we are losing, badly.

    We need leadership. The only possible presidential candidate to come out in favor of “balanced trade,” is Sarah Palin. This is according to the website http://www.idealtaxes.com.

    I don’t expect Palin to run. I don’t think she could overcome three years of smearing by the liberal mainstream media, but she could make a huge difference by bringing this issue to the folks.

    I could see this as an issue for the Tea Party, but only after we have solved the budget crisis. I agree with Warren Buffett that this is a bigger “hole in the boat,” than our runaway spending, but I don’t think it would get any traction until after 2012. Many of the Tea Partiers are retired and are less concerned with “jobs” than they are with the watering down of their dollars.

    I have joined Tim Cox at http://www.goooh.com in his effort to select and run “citizen legislators” for every House seat in 2012. After that, I will start making noise with the Tea Party folks about pushing for “balanced trade.” I realize we don’t have much time, but that is how I see this playing out.

    In the meantime, I am doing what I can to promote “balanced trade.”

    Bruce Bishop

    • Ken Davis says:

      . Bishop:

      You must be the same man who exchnages messages
      with me on Economy In Crisis. We’re on the right
      track, but we need a breakthrough witM people at
      top In Washiungton or in some of our multinational
      companies whi still champion free trade. I’m on the
      case, but I can’t report real lrogress yet.
      Best!
      Ken Davis

  2. Hugh Campbell says:

    It’s unfathomable that a balance and sustainable model proposed by a sage like Warren Buffett could result in almost 8 years of virtual inaction. In all likelihood the puppet master(s) of the political elite realized that Buffett proposal would be both highly efficient and effective, reversing the economic destruction that was serving their self-interest so well.

    Considering the America’s leadership gap of the last several decades, Buffett’s worldview is consistent with the independent, objective and timeless advice of Charles Darwin and Albert Einstein:

    “It is not the strongest species that survives, or the most intelligent but the most responsive to change” – Charles Darwin

    “The specific problems we face cannot be solved using the same patterns of thought that were used to create them.” – Albert Einstein

  3. Joseph Brooks says:

    Mr Buffett’s video has been around for a while:

    http://www.youtube.com/watch?v=5DvuyvuHmJI

    • Ken Davis says:

      Mr. Brooks: Thanks very much for your e-mail. I
      collect edverything I can about Mr. Buffett and
      trade, but I had never seen this video. I’m
      delighted to have the link to it. All the
      best to you while we all keep pitching. There is
      an answer if we focus on rebuilding domestic industry
      and jobs and recover control of our American market,
      still the world’s biggest and richest by far, but
      badly neglected by our multinational companies in
      their sole emphasis on high growth globalism.

  4. China Watcher says:

    Leadership is THE issue. Candidates will say whatever it takes to get elected. Witness Obama getting on the currency bandwagon when the Indiana primary was impending.

    Scott Peck wrote that “life is difficult” and how you deal with that fact is the measure of your character. Character defines leadership. We have been fed a steady diet of weasel words, triangulated compromises, and existential excuses for a couple of decades now. It’s time for someone of character to step forward and lead.

  5. Hugh Campbell says:

    An American Industrial Policy, or lack of one, has been the subject of many tradereform.org blog postings. The following Buffett wisdom directed toward companies, also applies to nations, with their moat being their Industrial Policy. A balanced trade model can provide an excellence cornerstone for an American Industrial Policy.

    “In business, I look for economic castles protected by unbreachable ‘moats’.” -Warren Buffett

    According to Buffett, the wider a business’ moat, the more likely it is to stand the test of time.

    In days of old, a castle was protected by the moat that circled it. The wider the moat, the more easily a castle could be defended, as a wide moat made it very difficult for enemies to approach. A narrow moat did not offer much protection and allowed enemies easy access to the castle. To Buffett, the castle is the business and the moat is the competitive advantage the company has. He wants his managers to continually increase the size of the moats around their castles.

    When looking to purchase a business, Buffett pays careful attention to a business he understands not just in terms of what the business does but also of “what the economics of the industry will be 10 years down the road, and who will be making the money at that point.” He is “also looking for enduring competitive advantages.” This, in a nutshell, is what makes a company great: the width of the moat around the company’s core business

  6. Ken Davis says:

    I had tried one answer, but lost it, so I’ll be brief here. By making balanced trade the law of the land we’d be creating one
    kind of “impregnable moat”. No mercantilist tricks can create
    more Import Certificates when the allocated supply is used up.
    We estimate that in the first yesr of operation, $500 billion
    of sales would be shifted from imports back to U.S. production,
    and that 4 to 5 million jobs would be created during a 2 year
    phase-in period. No deficit spending would be needed. We’d still
    be the world’s biggest importer, but we’d eliminate trade deficits.
    It’s the kind of big idea at little cost that Obam has been seeking.
    But so far, his advisors refuse to even discuss it with him or outside advocates like CPA and myself. We’ll keep on trying!
    Ken Davis, Former U.S. Ass’t Secretary of Commerce, and
    Former IBM VP & CFO.

  7. W. Raymond Mills says:

    So many hills to climb and so little time.

    The Website ECONOMY IN CRISIS is still trying to get readers to take the first step – to agree that we must cease supporting current trade policy and practice.

    The second step, which Mr. Davis is pitching, is to get people to agree that balanced trade is to be substitued for free trade as the goal of U.S. trade policy and practice.

    The third step is to decide what specific change in U.S. policy and practice is the best way to move toward balanced trade.

    I focus on that third step. Not all ways are equal. I claim we should reduce imports from the 3 nations that are creating most of our trade deficit.

    The desired ratio of exported goods to imported goods, for the U.S. is .77. That was the ratio that existed in 1994 – 1997. During that period the number of people employed in manufacturing in the U.S. actually increased.

    Because we want to continue to sell more services to others than we buy from them and we want to continue to import raw materials necessary to domestic production (rare earth mineral and petroleum), we cannot expect to have completely balanced trade in goods.

    To get from the current ratio of .68 to the goal of .77, goods imports to the U.S. would need to be reduced by 12% (assuming exports remained constant). If we could magically increase the ratio of exports to imports from the three countries of China, Japan and Germany to our goal of .77, imports to the U.S. would be reduced more than 12% – to 14%.

    We have a solvable probem.

    The first step is a determination to reduce our trade deficit. The second step is to withdraw from the World Trade Oganization until they change the purpose of the organization (from encouraging the growth of world trade to encouraging every nation to seek balanced trade). The third step is to change U.S. laws so that U.S. trade becomes more balanced (by tariffs on those imports coming from nations that have a large trade surplus with us).

    Trade agreements aimed at increasing world trade are a mistake. We do not need more trade – we need better trade – goods exchanged for goods. First, we move toward balanced trade, then we can seek trade agreements that provide better trade.

    Source for above calculations: Census.gov; Business and Indusry; Foreign Trade; U.S. International Trade Data; Top Trading Partners; Year-t0-Date June 2011.

  8. Ken Davis says:

    Welcome Mr. Mills. We’ve talked nefore about whether tariffs or
    balanced trade are best for the U.S., and also about the WTO. The
    WTO encourages nations not to run trade deficits, so has indicated
    a positive attitude toward our balancded trsde proposal. As to tsariffs, and especially targeted tariffs against only a few nations, there’s little support at the WTO or GATT. They are viewed as protectionist and undesirable. I think we’d be better off not to take on a battle with the WTO or withdraw in anger while we’re
    solving our trade deficit problem. Even China is not likely to
    object if it mesans fewer sales in the U.S. for them. They always
    suggest swe solve our own problems rather than asking them for
    changes in the way they manage their currency. A final point is
    that other nations can always adoopt retaliatory tariffs and start
    a trsde war. But if othrr nations adopt a balancded trsde policy,
    that would be fine with us – the more who do, the bettedr for the
    whole world. Ken davis, Former U.S Ass’t Secretahry of Commerce

  9. W. Raymond Mills says:

    Balanced trade is the goal – Tariffs are the means.

    The two are compagtible – not contradictory.

    I realize most economists and international trade organizations have closed minds about tariffs because they insist that tariffs must be done the old way – that it is not possible to use tariffs in a new fashion.

    If tariffs against U.S. exports are limited to those nations with which we have a trade surplus, I say that is a good thing. It will move international trade towards balance.

    If one accepts balanced trade as a goal, a trade deficit is a flaw to be destroyed. If China, Japan and Germany accept balanced trade as a goal, how can they object to tariffs that will be eliminated as soon as they accept goods exports from us at a level that is equal to .77 of the goods they send to us?

    I have no fear of retailatory tariffs against my proposal. If these 3 nations want to cease trading with us, we will have the rest of the world to trade with. There is no reason to fear China, Japan and Germany. They will simply trade with other nations as we will be doing. The less imports they send to us, the better our economy and our financial position..

    Mr. Davkis – I enjoy conversing with you because you are on the right track – balanced trade must be the goal for U.S. trade.

    Warren Buffett’s plan has many problems. It provides subsidies for existing exporters but does nothing to encourage new export firms to emerge. The creation and selling of import certificates adds unnecessary complexity. Current agents can easily add collection of tariffs to their jobs. We should not discourage imports that come from nations that are in a near balanced trading relationship with the U.S. We should discriminate among nations if we are to reduce our trade deficit in goods. Mr. Buffett’s proposal removes government from the process. That is undesirable because the Federal Government should be the agent who manages foreign trade. I do not believe routine buracratic activities are better accomplished by the private sector. Entrepreurship is not needed to collect tariffs properly and fairly to all.

    • W. Raymond Mills says:

      Details. Any reduction of imports by tariffs must be phased in to allow time for production factilities to be relocated. My proposal is for a tariff level of 10% 4 months after the law is passed, with an increase to 15% 4 months later. A 5 precentage point increase each 4 months until a level of 40% is reached, at which point the tariff rate will be fixed until a ratio of .77 percent of sales from us (exports to them) to imports from them is experienced in the U.S. for each nation separately.

      The law should also grant the Federal Reserve Board the power to delay indefinitely any scheduled increase which, in their judgement, will result in unacceptable level of inflation in the U.S.

  10. Ken Davis says:

    HI, again Mr. Mills: I think I answered your broad point on the advantages of balanced trade vs, tariffs before. We need to makev some changes in the Biffett Plan to make it less like a tariff and
    where the goverrnment handles the administration of the Import
    Cerificates rather than the exporters. You are right that exporters
    would not be good at dealing with large numbers of importers to sell
    the certificates. I won’t go into all the details now, but we see
    the balanced trade concept as more of a market management system
    to be overseen by the government, probably as a Division of the
    Commerce Department. We like the idea of having some leverage with
    the big exporters- China, Japan, and Gerrmany in determining their
    Import Certificate allocations each year. We want others to see
    this as legitimate management of the world’s biggest and richest market, not a trade war or a tariff war at all. Best! Ken Davis

  11. Ken Davis says:

    Note: This is not a repeat of my first answer. Mr. Mills has
    opened anumber of new issues and I’ve answered tho ones I
    consider pertinent, while he has ignored the big negatives ]
    about tariffs as he always does. Ken Davis

  12. Ken Davis says:

    I am not going to answer this latest question about how
    tariffs might bed administered. WE are not proposing a
    tariff plan no matter how much Mr. Mills might like us
    to. It’s a “non-starter”. Ken Davis

  13. Joseph Brooks says:

    Gentlemen, has everyone seen this Federal site concerning other countries’ tariffs, duties and Value Added Taxes? It is very revealing.

    http://www.export.gov/logistics/eg_main_018142.asp

  14. Tom says:

    We are in a trade war with China because they manipulate their currency instead of having a floating currency and the government invests that money in the U.S. for politicians to be able to spend on the cheap. It is trading our economy for loans that are backed by the U.S. citizen.

    I have no problem with trade but I do have a problem with trade continual trade deficits. The Chinese government sells to our demand but by the government of China taking all the dollars and converting them to Yuan, the Chinese people will never have money to pay for the goods they would demand from our economy. It is all controlled by the communist Chinese government.

    Why we ever let politicians get away with doing this to our economy I will never know. They don’t even talk about it very much but they sure don’t mind borrowing dollars from China and putting the yoke on future generations of taxpayers while selling bits of the economy to China.

    The normal Keynesian solutions for a slow economy don’t work when most of the money in stimulus goes to stimulate the Chinese economy instead of our own.

    Tom

  15. W. Raymond Mills says:

    What is the big problem with tariffs that I am ignoring? Odious reputation? Based on past experience?

    I agree that tariffs as administered in the past have failed. But no reason to assume that I cannot invent a new way to use tariffs.

    We must overcome received assumptions to move from free trade to balanced trade as a goal. Received assumptions about tariffs must also be overcome. Focus on what is proposed, not on the word. Maybe I should invent a new word for a financial penalty to manufacture goods in 3 countries and sell them in the U.S. Instead of tariffs lets call them “Incentives”.

    All my ideas have been non-starters – up to now. That does not mean they will never be embraced. If they are sound, they will be used.

    One of the things I like about (tariffs (incentives) is that they are overt, established by law and not subject to administrative discretion. The U.S. should not put itself in a position to negotiate with anyone about the conditions under which imports will be allowed into the U.S. Instead, the conditions should be established by law.

    • Tom says:

      When China manipulates its currency, it is a form of tariff. It is a much more sophisticated way to get a trade barrier and puts all the cards in the hands of the Chinese government, not the people, so little non government demand occurs for U.S. goods.

      You are right that tariffs have a bad name, thanks mainly to political and corporate propaganda who want to buy goods from China even if it undermines our economy and helps them buy dollar denominated goods like oil and other resources. Corporations are in it for their profit, not the good of the country as a whole. Therein lies the problem with the word tariff.

      The Japanese never used tariffs to achieve their mercantile policy. They had other means to achieve their ends like slowing inspection of goods to their borders to where it just wasn’t profitable to ship goods to them. They avoided the simplistic tariff argument this way.

      We will have to do the same, I am afraid. Just how much we could slow down trade if we really inspected all containers —even under the name of anti terrorism. We could solve this trade problem in a jiffy and in the process make some of the companies pay who gained a competitive advantage in the market place by shafting the the U.S. economy for their own profit motive.

      All we really need is the will to change our trade around.

      I remember doing research in college on international trade and exchange rates. None of the exchange rates really mattered. What mattered wasn’t free market forces but instead government policy. We have had a government policy that has been selling the U.S. economy out in exchange for cheap money. All it has lead to is leveraging and bubbles and a reduction in the earning capacity of the the average worker—- and yes, a concentration of wealth.

      Tom

      • Joseph Brooks says:

        Tom, Ken

        China does much more than manipulate it’s currency, between their tariffs and VAT, taxes on imports ranges from 20% to 40%.

        •China
        TARIFF RESOURCES: Market Access and Compliance Tariff Schedule

        TAX: Consumption tax of 2 – 3 percent (varies according to provincial) applied on CIF. Also, there is a value added tax (VAT) of 17 percent for most items; necessities, such as agricultural products and utilities, are taxed at 13 percent. Small Businesses (annual production sales of less than RMB 1 million or annual wholesale or retail sales of less than RMB 1.8 million) are subject to VAT at the rate of 6 percent. VAT is applied on CIF + duty.

        I must say I am with Raymond, Warren Buffet, Trump, Alexander Hamilton, Henry Clay, Abraham Lincoln, JFK and Perot on the issue of tariffs.

        We are far beyond worrying about the political correctness of “free trade” or the free trade looting propaganda spewed by the folks benefitting from these unconstitutional policies.

        Why concern ourselves with complex, complicated retaliatory measures?

        The US government is supposed to be promoting the general welfare of, you guessed it, Americans.

        The Founders gave the congress all of the ammunition they needed:

        Since the “free traders” and and “libertarians” claim to be Constitutionalists, it is valid to point out that Article 1, Section 8 of the Constitution gives Congress the specific right to “regulate commerce with foreign nations”. America’s leaders did just that, until the 1970’s.

        Thanks, Joe Brooks

      • Joseph Brooks says:

        Tom, very good post. I have one suggestion; 140 other countries currently place tariffs on US manufactured goods.

        Tariffs have a long beneficial history in America, 180 years worth, and are a legitimate tool of most governments.

        We should not be dismiss this, the most powerful economic tool, no matter how much the free trade looters have demonized it.

        • Tom says:

          Oh, I agree totally. Just don’t call them tariffs and call the other guy’s things tariffs. Instead of a tariff, for instance, we could have homeland security call it a container inspection fee. After all, we should not be paying with U.S. taxpayer’s money the costs of inspecting these containers. Why shouldn’t foreign companies pay the inspection fee?

          The biggest problem is that we do not value demand in this country and will sell it against our own self interests to anyone. Business is there to serve demand and people who have money to satisfy their demand.

          Our borders are way too porous when and ANYTHING could (and has been) be shipped in through our trade. We need to close that loophole.

          When the answer comes back that we might get in a trade war we need to quickly answer that we have been in one and that we have been losing because we, the public, hasn’t recognized it. We have already lost the first 2 or 3 rounds in the fight. We need to call specifically on the companies who are benefiting when they start pulling their strings and ask for a national tax on their imported goods with a whole long list of other things we could be doing to them and their business model without Congressional action. They will try to buy their way out of it with Congress and they have to know that the costs while they do this will mount higher and higher if they want to play that game.

          We have been losing 40to 60 billion dollars per month in trade deficits which is hot dollars going into other countries, not our economy. We need to turn this around with or without permission from those benefiting. 40 to 50 billion and the president goes up and talks about a jobs program (stimulus) or 450 to 500 billion. That is only about 10 months of trade or so which is a part of our economy we are exporting continually.

          We could work with some of the big think tanks to get them on our side and should. When the backstab, put the largest companies on their list of donors on the first line of the new security inspection system. Do not tell them. Actions speak louder than words.

          I don’t ever want to kill trade, just to equalize it.

          Tom

          • Joseph Brooks says:

            The Stealth tariffs of the Japanese. I understand. A means to an end. Red China’s techniques are much more transparent.

            I need to spend some time studying how the Germans are maintaining their “tariffs”. I will do so ASAP.

            For an old guy with an engineering degree, these tactics are strange. When discussing the merits of this or that design, part or even manufacturer, engineers and technicians are pretty blunt.

    • Hugh Campbell says:

      One modification to the Buffett IC plan can be found at:

      http://democrats.waysandmeans.house.gov/media/pdf/111/2010Sept15_Campbell_Submission.pdf

      An Inflation-Neutral Balanced Trade System (BTS), inspired by Warren Buffett’s 2003 Import Certificate Plan is introduced at the top of page 4.

      The aforementioned BTS proposes a flexible consumption tax, the article The Scaled Tariff Would Resuscitate the U.S. Economy, which can be found at:

      http://seekingalpha.com/article/215204-the-scaled-tariff-would-resuscitate-the-u-s-economy

      proposes a flexible tariff with initial tariffs rates, based on 2009 trade numbers, as follow:
      • China – 36%
      • Russia – 35% (estimated from incomplete data)
      • Saudi Arabia – 26%
      • Singapore – 18%
      • India – 12%
      • Japan – 11%
      • Taiwan – 11%
      • Korea – 6%
      • Euro Area – 5%
      • Brazil – 0%

  16. Joseph Brooks says:

    Your history, as an American:

    The American School of economics represented the legacy of Alexander Hamilton, who in his Report on Manufactures, argued that the U.S. could not become fully independent until it was self-sufficient in all necessary economic products. Hamilton rooted this economic system, in part, in the successive regimes of Colbert’s France and Elizabeth I’s England, while rejecting the harsher aspects of mercantilism, such as seeking colonies for markets. As later defined by Senator Henry Clay who became known as the Father of the American System because of his impassioned support thereof, the American System was to unify the nation north to south, east to west, and city to farmer.[15]

    Leading proponents were economists Friedrich List (1789–1846) and Henry Carey (1793–1879). List was a leading 19th Century German and American economist who called it the “National System” and developed it further in his book The National System of Political Economy. Carey called this a Harmony of Interests in his book by the same name, a harmony between labor and management, and as well a harmony between agriculture, manufacturing, and merchants.

    The name, “American System,” was coined by Clay to distinguish it, as a school of thought, from the competing theory of economics at the time, the “British System” represented by Adam Smith in his work Wealth of Nations.[16]

    The American School included three cardinal policy points:

    1.Support industry: The advocacy of protectionism, and opposition to free trade – particularly for the protection of “infant industries” and those facing import competition from abroad. Examples: Tariff of 1816 and Morrill Tariff
    2.Create physical infrastructure: Government finance of internal improvements to speed commerce and develop industry. This involved the regulation of privately held infrastructure, to ensure that it meets the nation’s needs. Examples: Cumberland Road and Union Pacific Railroad
    3.Create financial infrastructure: A government sponsored National Bank to issue currency and encourage commerce. This involved the use of sovereign powers for the regulation of credit to encourage the development of the economy, and to deter speculation. Examples: First Bank of the United States, Second Bank of the United States, and National Banking Act[12]

    Henry C. Carey, a leading American economist and adviser to Abraham Lincoln, in his book Harmony of Interests, displays two additional points of this American School economic philosophy that distinguishes it from the systems of Adam Smith or Karl Marx:

    http://en.wikipedia.org/wiki/American_School_(economics)

  17. Hugh Campbell says:

    Congratulations Ken on the spirited discussion you sparked with:

    http://www.tradereform.org/2011/09/guest-opinion-ken-davis/

    I don’t recall another tradereform.org post that generated such large volume of responses.

  18. Ken Davis says:

    Thanks much to Ray Mills,Joseph Brooks and Tom for your comments.
    There were so many I couldn’t answar all separately. I’d just like
    to leave a closing thought. THe massive flow of imports is America’s
    biggest single economic problem and threat to our national strength
    and security. Yet in President Obama’s speech last evening the word
    “imports” was never mentioned as even one of the problems in solving
    our unemployment problem. Either he’s badly informed or too cautious
    to talk to the nstion about it. There won’t be any lasting recovery
    until we’ve conquered the import problem. THat’s what drives my efforts every day. I really appreciate the interest of CPA in having
    me as aguest opinion writer and you men in responding. Let’s keep on
    fighting as hard as we can. Cheers! Ken davis

  19. Ken Davis says:

    And thanks very much to Hugh Campbell too. You’ve added
    some interesting ideas such as a flexible consumption
    tax that could be part of a balanced trade plan or done.
    by themselves. The first hurdle we have to get over is
    the idea of reducing the flow of imports as national policy.
    To balance trsde would require about a 25% reduction from
    the current level of U.S. imports. That eliminates half-way
    measures like small dollar devaluations that wouldn’t
    achieve the required volume reductions. Once that decision
    is made there are procedural variations to be considered,
    such as how the quantity of IC’s will be allocated to importers
    and whether to IC’s will be sold or just charged a small processing
    fee as part of a market management system.We should not not be trying
    to reduce the total amount of trade with extra costs,, just shifting a fair portion back to U.S producers. There will still be plenty od
    competition with other nations for the remaining share of our market
    that’s open to all. We will not becoming “fortress America” but instead given a preferred position that’s only fair to the host
    nation and its worjers,

  20. W. Raymond Mills says:

    A courteous gentleman would allow Kan Davis the courtsey of the last response. I am only partly a gentleman.

    I am not going to disagree with him or anyone else. I just want the record show that I am determined to continue to push the idea that tariffs are the best response to our current situation. My stubborness grows out of a belief that the American way includes being direct and honest in what we do. Tariffs can be constuctive if used solely to achieve equal trade. That tariffs have long been used to achieve a trade surplus is irrelevant to analysis of what is possible and desirable today. A new rationale and form for tariffs is available and should be used.

    • Ken Davis says:

      Ray: I wouldn’t have expected anything different from you. You’ve alwys insisted on having the last word no matter what facts are
      presented to you. A tariff confrontation war with China is not a good idea, no matter how you package it. Balanced trade that will make itpossible to eliminate our trade deficits and put our people back to work is something they’ll understand and can accept with
      no loss of face. There are ways to package balanced trade, and I’m pefectly willingto discuss them with you, but without tariffs!
      All the best to you, Ray!
      Ken Davis

      • Tom says:

        Well, since we are not being 100% gentlemen here, I will chime in.

        Raymond, I think tariffs are what is called for but pretty much as Ken suggests, not gonna’ happen.

        That leaves us with a tariff by any other name or in this case, let us just name it something different.

        We have a real problem in this country with words and ideals that can have a lot of baggage. The term tariffs is one of them. I would never discourage anyone for calling for them but am more interested in getting the results desired.

        I do agree, Ken, that your proposal is very interesting and would fly faster and further. It is a darn good idea.

        When the premier or president or top official (I don’t know his official title or what that title means in our terms so I will call him “president”) was on the Charlie Rose show, Rose asked why the Chinese wouldn’t buy U.S. goods. The president said he was interested in buying war ships.

        We have to wake up in this country to what is happening. We have a communist China manipulating their currency and determining that their people can not have dollars and so determine their own demand. All demand that is initiated comes from the government of China. It is strategic and it is being used by corporations to make another buck at the expense of demand of our goods, unless of course, those goods are military weapons.

        We have to wake up and change this scenario. We are giving a totalitarian government dollars while allowing a few to make money off of selling our demand.

        We have to look at our demand in a different way. Corporations and businesses can only exist if there is demand they can meet and for demand to exist, the people have to have earned money to pay for it.

        Having a free trade policy may give us cheaper products in the short run but the long run is a disaster for our economy. It deflationary in all the worst ways. We have to balance our trade in some way or another. We don’t currently have this on politician’s radar because it is hard for them to take a cut out of it like they take their cut via lobbying and watching out for special or corporate interests who have an interest in decreasing their costs, even at the expense of the country. Let us face it, we have some of the worst politicians running the country who don’t really care about anyone but themselves (at least a majority of them).

        Ken, I think your idea is great but our politicians have to be sold on any idea. Yours is more likely to fly or at least it will get politicians to actually think about what they are doing when it comes to allowing anyone to sell to our demand (and the dollars we have to back it up).

        I wish I could be as idealistic as Ray but I don’t think that is a possibility at this time. I wish we could get China to change their ways and allow their citizens to earn the dollars and then be able to spend them on our goods but the Chinese are holding those dollars for strategic reasons and loaning them back to politicians which gives us cheap money.

        The fed and our president could devalue those dollars by printing money but China is also competing for world commodities like oil with the money they have. It really puts us in a pickle. Any devaluing will have to be done slowly but it is happening.

        The real answer for labor here is to stop allowing companies to profit with China’s strategy. They have found the weak underbelly of our democracy.

        Tom

        • Ken Davis says:

          Tom: Thanks much for wrapping things up so well. It’s always difficult when true believers on a problem differ
          on the solution. And it’s particularly tough when most
          other people won’t admit there’s a problem at all. They say “What are these people talking about? Why are they so angry?” Our Vice President has just come back from China
          and assured the nation that all is well – China isn’t a
          threat, it’s a partner!”. I’ll say once more. We need a
          leader who can get the nation’s attention on the destruction
          of our domestic industry and what’s causing it – very simply
          it’s a massive uncontrolled flow of imports. Period!!!
          I believe that leader has to come from business, not politics. I’m visiting one multinational company this week
          that may have such a man. If not, I’ll look elsewhere. All
          suggestions will be welcomed and pursued! My very best
          to all of you responders.

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