Beyond the Cusp

March 27, 2012

Can the United States Debt be Conquered?

Most commentary pertaining to the exploding national debt of the United States at all levels of government; Cities, Counties, Townships, States, and the Federal Government, talk about managing the debt, slowing the increases in the debt or bringing the debt under control. The usual bromide proposed is that it is necessary to slow spending or, in the most radical solutions, actually cutting spending, actual cuts and not simply reducing the increases. Almost every study and proposal simply addresses the debt side of the problem and ignores what is actually an even bigger side of the problem, increasing the GDP of the United States. Much of the problem with government spending also lies with the flight of production overseas which has transformed our economy into a service oriented economy with little production of hard goods. No matter how much one provides in services and how much paper and data is managed, when push comes to shove it will be what we produce that will be the measure of the United States worth and will serve as real backing for the dollar. On the plus side is a small fact that has been ignored, namely that manufacturing in the United States has been slowly growing throughout American history including right into the present. The problem is that the increase has slowed when we could easily turn that around and bring much of the world’s newest manufacturing into the United States instead of overseas. The question we need to address is exactly how we can manage to make manufacturing more attractive to companies seeking to build new factories.

Currently the United States has one of the highest tax rates on manufacturing if not the absolute highest taxes. When taking this along with the plans to raise the taxes on capital gains, the suggesting that we need to incorporate a Value Added Tax (VAT) on top of the myriad of taxes we currently have, even suggestions of reducing or eliminating what are often referred to as tax loopholes including claiming depreciation of equipment which is a vital deduction for manufacturers to upgrade their factories, and generally high tax rates compared to other countries with whom we compete with in attracting businesses of all sorts to open their offices and manufacturing here, we are crippling our ability to compete in the world market of the modern global economy. What should be enacted is a straight across the board tax which treats all forms of businesses; manufacturing, service, retail, or any for profit operation with complete equality. We should grant equal deductions for both depreciation of equipment over a set period for newly purchased equipment and an equivalent deduction for research and development, both of which encourage upgrading facilities and exploring new products and methods of production which encourage companies to remain in the United States and upgrade facilities, keeping all future development and innovation within our borders. This is how a country builds their manufacturing base and makes a business friendly environment promoting growth and full employment. This is also the best and most assured avenue to increasing revenues through taxation as opposed to raising taxes which actually tends to chase businesses from our shores thus actually destroying revenue not enhancing it.

On another level, it would also be advantageous to improve our crumbling infrastructure. This should be accomplished in as efficient a manner as conceivable. What might be a good formula would be to allow the local governments at the city, county and state levels to set the priorities and simply have the Federal Government provide assistance where the majority of the improvements are to be performed on Federal infrastructure, thus allowing for the initial upgrades to serve larger areas and hopefully prompt inter-state cooperation. Some may claim that making infrastructure repairs is a luxury which is currently unaffordable. The argument against that view is most of the infrastructure in this country is in dire need of attention and the repairs will only cost more and the inconvenience will be greater the longer we delay. Also, should any of these infrastructures fail, the costs to repair and replace those items on an emergency situation will always come at a premium price. Planned upgrades would actually save money over time and would also cause the minimal inconvenience for the people living near the construction or using the infrastructure under repair. Let’s face it, repairing a bridge half of the lanes at a time are less of an interruption to traffic than having the same bridge collapse and need to be completely out of service while being replaced before allowing any traffic utilizing that crossing. Highway construction is never a joyous interruption if it is on your way to and from work, but it is still better than the route to and from work being completely impassable.

Our best solution to the debt comes from doing whatever we find is doable to slow or, better yet, reduce government spending in conjunction with growing business, commerce, industry, manufacturing, and maximizing employment by creating a tax and regulatory friendly environment. We cannot solve the economic problems which are partially a result of policies, regulations, taxations, and an unfriendly counter-business attitudes simply by reducing spending because without economic growth there will be little future revenues for spending at any level. Like it or not, the economy controls how much spending is even possible and thus economic growth is vital to the future every bit as much as reducing spending. It will take a combination of spending less and growing the economy through responsible budgets, taxes, regulations, and investment in infrastructure. It will take something that is seldom found in government and some would doubt that the politicians even know the word exists to bring the United States back from the cusp, back from the brink, it will take a balanced approach, a balance between regulation and independence, a balance between the different businesses such that we include manufacturing, service, retail, processing, large corporations, and small Mom and Pop shops, every stripe of enterprise. What we need is responsible leadership facilitating smart growth through business and people friendly attitudes and actions in government.

Beyond the Cusp

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