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Richmans' Trade and Taxes Blog
AEA features Dismal Forcasts of America's Economic Future
Howard Richman, 1/10/2011
According to a Reuters report (Economists foretell of U.S. decline, China's ascension) about papers presented at the current meeting of the American Economic Association (AEA), many economists share our dim prognosis of America's economic future. Reuters began:
(Reuters) - To hear a number of prominent economists tell it, it doesn't look good for the U.S. economy, not this year, not in 10 years.
Leading thinkers in the dismal science speaking at an annual convention offered varying visions of U.S. economic decline, in the short, medium and long term. This year, the recovery may bog down as government stimulus measures dry up.
In the long run, the United States must face up to inevitably being overtaken by China as the world's largest economy...
Reuters doesn't mention whether economists at the AEA convention have any solutions. But my father, son and I do. We recommend balancing the federal budget while balancing trade with the WTO-legal scaled tariff. The benefits would be enormous, as we pointed out:
The two deficits -- budget and trade -- are easier to balance simultaneously than to balance separately. Balancing budgets reduces demand for American products, but balancing trade increases it. Balancing trade increases long-term interest rates, but balancing budgets reduces them. Moreover, the government revenue from tariffs that balance trade would help balance budgets!...
As revenue from the scaled tariff declines, income earned by U.S. producers would rise. Eventually, trade would come into balance, ending the revenue from the scaled tariff while producing income tax revenue from about 5.5 million new and highly productive American jobs.
The initial economic benefit of the tariff would be a surge in the building of highly efficient factories in the United States. International corporations would locate new factories here so that they would be on the right side of America's tariffs....
Many economic leaders now join us in realizing that our country is headed down a dismal path. Hopefully they will also join us in advocating a solution.