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We are Trading Away Our Future and most economists have been caught with their heads in the sand. They think that the trade deficits are the result of free market forces. But the trade deficits are caused by the foreign government mercantilist practices and the foolish subsidies that the US tax system gives to foreign savings. Here are some quotes from the book:
“By investing their trade surpluses in US assets, Japan, China, South Korea, and several other countries are preventing any correction to the trade imbalance. The result: chronic trade deficits in the United States.” - Chapter 1
“The loss of manufacturing jobs does not translate into unemployment in the US economy; it translates into lower median wages. The displaced workers eventually find jobs but at an average lower wage. When former Ford workers now flip burgers for much lower wages, good jobs were lost even though unemployment did not rise.” - Chapter 1
“Import Certificates, whether the Buffett plan or the Richman plan, may be the only way to solve the trade deficit problem without precipitating a crash in the value of the US dollar.” - Chapter 4
“We would also make it completely illegal for foreign governments to buy stock in US corporations, as they are currently doing through their Sovereign Wealth Funds. US capitalism should not be for sale!” - Chapter 4
“The FairTax stands up well to the criticisms leveled against it. Just as its advocates state, it would eliminate the high cost of complying with the income tax code and it would lead to increased investment and long-term economic growth.” - Chapter 8
“As foreigners continue to purchase US financial assets and the United States continues to lose industries, China will emerge as the dominant political and economic power in the world.” - Chapter 9
A more extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. "A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance."
Here's what the Journal of Economic Literature (Vol 46, p. 782) says about Trading Away Our Future:
Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America. Raymond Richman is Professor Emeritus of Public and International Affairs at the University of Pittsburgh and President of the Ideal Taxes Association. Howard Richman teaches economics on the Internet. Jesse Richman is Assistant Professor of Political Science at Old Dominion University. Index.
Here's what T.H. Cate wrote about Trading Away Our Future in the February 17, 2009, Atlantic Economic Journal:
In Trading Away Our Future Richman addresses the following issue: “… [the]
trade deficit is deindustrializing the United States...”. (Richman 2008, p.9) This
position dovetails neatly with the thesis developed by Chang in Bad Samaritans.
(Chang 2008) Chang argues that the neo-liberal agenda (free trade, freely floating
exchange rates, free flow of financial capital, advocating democratic institutions,
mission creep on the part of the IMF, WTO, and the World Bank, advocating
TRIMS, TRIPS) sponsored by a coalition of nations led by the United States is
designed to keep the LDCs poor by “kicking away the ladder” of economic growth
and development. These nations became high-income economies by a process of
selective protection of the domestic market and only advocated the neo-liberal
agenda after they had climbed up the ladder. Those nations that are willing and able
to fight against the imposition of the agenda—India, China, Japan, the Asian Tigers,
and selectively protect their domestic markets will climb the ladder. Other will not be
so lucky and may remain poor.
Richman examines the impact of the neo-liberal agenda on the United States and
conclude that selective protection of the domestic market must be enacted quickly. Their
review of the “hollowing out” and deindustrialization of the American economy has
been told many times: outsourcing, off-shoring, stagnating real wages, growing
disparity in the distribution of income and wealth, increasing dependency on foreign
savings, and rising tension among the economic, social, and political institutions. The
unintended economic, social, and political consequences of the neo-liberal agenda on
the United States can no longer be ignored. The time for change is at hand.
In particular, Richman advocates the immediate adoption of a set of public policy
proposal designed to reduce the trade deficit and increase domestic savings. To
reduce the trade deficit the United Sates must (1) restore the withholding tax on
foreign financial investments, (2) impose import certificates on nations practicing
“dollar mercantilism,” (3) tax foreign dollar reserves, and (4) accumulate a reserve of
foreign currencies. To increase domestic savings the United States must (1) tax
capital gains that are used for consumption, (2) enact a nation-wide Proposition 13
real estate tax with a homestead exemption, and (3) replace the corporate and
personal income taxes with a true consumption tax, for example the Fair Tax
advocated by Boortz and Linder. (Boortz and Linder 2005)
At least two problems are not addressed by Richman. The first problem is the lack
of regulation and oversight in the areas of investment banking and exotic derivatives,
surely one of the reasons for the collapse of the American economy in October 2008.
The second problem is the lack of attention paid to demographics: the aging of the
American population may pose problems for the adoption of tax reform proposal.
Finally, the set of public policy proposals is a wake-up cal: the United States must
prepare itself for a post-American world. [February 2009 review by T.H. Cate]
Here are some of the online reviews:
Click here to read the review of Trading Away Our Future on the World Net Daily website.
Click here to read the review of Trading Away Our Future by Elaine Meinel Supkis on the MoneyMatters.com blog.
Click here to read the review of Trading Away Our Future in the Pittsburgh Tribune Review.
[An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]
Journal of Economic Literature:
[Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....
Atlantic Economic Journal:
In Trading Away Our Future Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]