Monday, September 12, 2011

Taxes, Tourists, Kias, Socialism and Stuff

For a large society to function properly, long-term, people must be able to earn an income to live on which is independent of the government. Or, conversely, a government must be able to get an income from outside sources other than it's own people.

Government cannot really solve unemployment by simply hiring everyone to work for the government. To avoid stagnation and the eventual gridlock that is pure socialism, there must be an influx of actual "new" capital into the system.

There are two groups of people who are working for the government. First, there are actual workers who go to work each day doing the business of the government. Second are the people who are receiving monthly checks from the government as benefits or help of some kind.

Mostly, a government gets the money to meet these various "payrolls" by (1) making some of it's citizens pay certain taxes, and ALL of it's citizens pay other types of taxes; and (2) by taxing everyone indirectly through the back door by making their money worth less.
We certainly have socialism, to a degree, a large degree, in the United States. That is as it should be, I believe (except I think the proportion is too large right now.) Certainly, some things can only be done by government, and, just as certainly, our more unfortunate brothers and sisters need us to help them get by. We help these fellow citizens by each of us giving some money to the government, and then having the government pass out that money in proportion to need. (Like Karl Marx said.) That's socialism pure and simple, and there is nothing wrong with it unless and until it gets totally out of hand.

Where the danger comes in is when the government tries to take too much upon itself and forgets that "fresh" capital - that which is not simply being recirculated by the government - is necessary for the survival of the system. The second thing that must happen in order for the system to survive is for the government to keep the money supply reasonably finite and not expand it until it is worthless.

What is "fresh" capital? Fresh capital is "outside" capital. It is money a person earns or receives from sources other than the government. And it is money received by governments that they get from sources other than their own citizens - for example by selling natural resources it owns. Examples? When tourists from Japan and Germany visit the U.S. and spend money to eat and sleep and travel and to get into our national parks, that's fresh capital. When Saudi Arabia sells oil to the world that it gets from under it's ground, that's fresh capital for Saudi Arabia. Saudi Arabia doesn't have to tax its citizens highly (or even at all, probably) because it has this fresh source of income. Saudi Arabia also, one assumes, does not have to make it's money worth less and less every day by "creating" more and more of it on the printing presses. [Incidentally, pure socialism would probably work in Saudi Arabia since the government is making enough money - now, at least - from the outside. Unfortunately a "royal" few are keeping most of it.] When a Canadian farmer sells wheat to some country elsewhere in the world, that's fresh capital for Canada. When China sells plastic toys to the world, that's fresh capital for China. When South Korea sells Kias in the U.S. (as President Obama noted in his recent jobs speech) that's fresh capital for South Korea. I might add that when a country agrees to protect South Korea or Canada so they don't have to pay for the size of army they would normally have to pay for, that is also fresh income for South Korea and Canada (or whatever countries do that.) North Korea could probably cut the size of its military by about 80% and use that money to buy food for its people, and all it would take is for North Korea to start being nice to the rest of the world. There are all kinds of possibilities for "fresh" capital generation. Don't buy U.S. Savings bonds - that's silly to lend yourself money and then pay yourself interest. Invest in British municipal bonds and make Londoners pay you interest instead. See? Fresh, non-governmental, capital for you and me.

Any money you get from sources outside your government is fresh capital. Any money your government gets from sources besides its own citizens is fresh capital. Fresh capital is an object of desire. Fresh capital creates "real" jobs and makes you pay less taxes and makes your money worth something.

In my opinion, one major goal of a government should be to facilitate the influx of fresh (non-tax) income. In my opinion, when the government "borrows" more money and uses that money to hire people (even through private companies) to build bridges and roads, those are fake jobs. They are fake because the workers are getting paid by the government (by proxy) and because the contractors are getting paid by the government (directly.) Good has happened but nothing fresh has really been produced. All this is just another example of the government "churning" tax money.
In order for socialism to work (we have already agreed - at least I've said it - we need some socialism) there must also be some capitalism, some incoming of NEW money. How do we do this? Well, tourism was a good example. Work it more. The government should facilitate tourism more, and it should also encourage private travel companies to aggressively seek out tourists from overseas. Each state has unique attractions. Each state should be working hard to get foreign tourists to come there, not only American tourists. Some already are, of course, but all could probably do more. And food. We need to go back to selling food to the world. We need to stop paving over farmland and start growing crops that other people in other countries want to buy.

And we need to start manufacturing goods for sale again. Somehow we (and most of the rest of the Western World) have got this complex in our heads that cheap is the answer and only China can do that. Well, cheap is NOT the only thing! Innovative quality products are the thing. We can sell farm tractors to the world even if they may be more expensive than China's tractors, if they last longer or if they can do things China's tractors can't do. Inventive countries can always stay ahead of, and beat, copycat countries.
The other night, President Obama made a speech to the nation about how to create jobs. One of the good points he made is that our goal should not be to see who can get to the bottom by making things cheaper than everyone else, but by aspiring to get to the top by making things that are better and and more innovative and thus more valuable to buyers around the world.


  1. I have only once been to the USA and so my knowledge of the tourist industry is naturally limited. To attract tourists you need unique selling points - and promote them. If I went by the postcards I receive I'd think the USA was made up mainly of remarkably similar skyscrapers. Oh and Disney places. However I do admit to a recent compelling desire to visit the shores of Lake Michigan and search for Petoskey stones.

    As for your suggestion that we should manufacture more, it's true, but whatever we manufacture must offer more than the existing - quality or customer service or something unique. Or somehow instil the buying public with some sense of patriotism that will make them at least consider the home grown item first. The French seem to have that one worked out. It's a matter of comment to see a French person drive non-French manufactured car.

    This is an issue on a smaller scale than national too, with small towns losing their shopping centres to out of town malls. I'm happy to support local shops even at a cost because I can offset that against fuel costs. But without a doubt it is time consuming so I need something else on offer, ideally something I can't easily buy anywhere else.

    So you see, I'm not entirely on strike.

  2. I would love to see us move into innovative technology. We, of course, had that opportunity with green technology, but now everyone is now ahead of us. Oh, there are still some, like the folks who design and build solar array factories, but they build them in other countries (though they're based in California) because no one wants to build one here. They just built three in China.

    Look, fresh income.

  3. I read Dave Barry because he cracks me up. Every once in a while he does something more. You might like his post today.

    On Hallowed Ground

  4. @A. - Thank you for not being entirely on strike. And for liking French cars. I think your comments are very insightful. Most of us have no skyscrapers. Or Petoskey stones. I know you've also seen cactus and neon. :)

    I think Obama's point was that we should try to go back to being more inventive and people will buy our stuff because they want it - even if it isn't cheap. Seems to work for Mercedes. :)

    Woops. German car. My bad.

    @Stephanie Barr - I'm not getting my comment notifications so I'm glad I checked here for comments. I also like Dave Barry. I'll read it.

  5. I'm pretty much in agreement with you here. I never studied economics at school, because the timetables clashed with one of my other chosen subjects. I've often regretted it, because I think I might have a better understanding of what's going on in the world.

    You don't need to be a trained economist, though, to see that a nation of people who buy all their goods from another country, is a nation which is exporting its money in return.
    We seem to have exported most of our money to China in the last few years.

    Companies, speculators, buy up our long established businesses, then they announce that they're closing the factory, and centralising production in a new modern facility in some country where land and labour are far cheaper. Maybe that country will sweeten the deal, with an 'incentive' paid out of money OUR governments gave them in 'foreign aid'.
    we're told 'the product' will remain the same, as good as ever.
    A few thousand more people in our country are unemployed, the local economy of their towns now misses a few thousand wages, the small businesses of those towns struggle to cope with declining trade, and our tax money is needed to support the unemployed, who now have no hope left.
    Meanwhile, when we buy 'the product', a little bit of our money goes to the local retailer, the distant wholesaler, but most goes out of our country altogether, to pay foreign wages and gladden foreign retailers and service industry workers. The rest goes into offshore tax-haven bank accounts. Little of it ever comes back.

    Your example car, the Kia, well, it's maybe not all bad news. On the way to Newnan, in Georgia, we passed a very large Kia manufacturing facility at West Point, georgia.
    I just looked it up, and it's now fully operational, and had made its thee-hundred-thousandth car in the U.S. in July of this year.

    They presumably employ american workers and, hopefull, use american-made components, and some of the money remains circulating in the local economy.

    Kia's Optima hybrid, made there, just set a record, having driven through all 48 contiguous states of the U.S., and returning an overall fuel over 7,900miles of 64.55 mpg.
    Over here in Europe, the Kia Rio has just started production, with an incredible 88mpg tag.

  6. @Soubriquet - Toyota is one of the largest employers in the U.S. In fact, most if not all foreign car companies (including even Mercedes, I think) make a lot of their cars here, at least the cars they mostly intend to sell in this country. This came after much government pressure on foreign automakers many years ago. VW is another that comes to mind. I'm not so sure parts are made here, only assembly in most cases. At least that used to be the case. But it does create jobs (lots of jobs) for Americans and it does mean a portion of the money these companies make stays here in this country.

    Georgia? Are you sure? :) :) But I think Toyota is in Kentucky and Indiana. Remember Yugos?

    I was born and raised in Michigan. We make a few cars there too. More before, but still some now.

  7. I do remember Yugos... They were yugoslavia's versions of obsolete Fiats. My friend had an Audi as his company car, but the company fell on hard times, and the Audi had to go back to the leasing company, but the boss said, in the interim, between the Audi and a humbler family-sized car, he could use the office runabout... a Yugo....
    He was, of course, disgusted by his boss's generosity, so that weekend he came round, and he, me, and my brother, resolved to torture the yugo into an early grave. We took it out and experimented with things like.... how slow can you go uphill in top gear? How fast can you go in first gear. How fast can a yugo go? (117mph indicated)... we sneaked up behind a stationary bus, contacted the front end to the bus's rear.... and pushed. yes, a Yugo clutch can emit a lot of smoke, but eventually the bus will move... Actually, I think the bus driver just didn't notice us. Probably got a bit worried at the cloud of stinky smoke though.
    A few evenings of abuse.... how fast can a yugo go across a field.... how deep water can it drive through...
    One morning, on the way to work, it just couldn't take it any more, couldn't go on... it just sat there, sobbing, wetting the road with its tears.
    And it never recovered. I think it's probably in the asylum still, sobbing and weeping.

    I was amused to see Mercedes Sprinter vans badged as Dodges in your country. Over here, Daewoo, another korean car firm, had a very poor reputation. So they rebadged them as Chevrolets, hoping that us brits would think they were american, not rice eaters.

  8. Figured I should stop by and say 'hi' being that you stopped by to say 'hi' at my blog - I'm a big proponent of being polite!

    In the process of stopping by I read your post and I definitely agree with you said about government "borrowing" more money to create jobs that are essentially government jobs in private industry clothing.

    This country most definitely needs more jobs but I just don't see how it's the government's job to get those jobs. You can't force people to create positions and then hire for those positions if there is no reason for those positions other than that the President and the Congress said they need to be there. And we sure the heck can't afford to have the government "buying" jobs for people either.

    Here in the State of Connecticut our new governor has been cutting jobs left, right, and center because the state government is broke and they can no longer afford to pay as many employees as they have. So, how on earth could we expect the State of Connecticut to create more jobs when they can't keep the ones that they've got? We can't.

    I have two teenage daughters that have both reached the age where they want and need jobs but they can't even get hired at McDonald's because all of the older people who have lost their jobs due to the economic downturn are taking whatever jobs open up including flipping burgers and asking "Do you want fries with that?" It's a scary, scary time to be entering - or trying to enter - the job market.

    And as for tourism, you are so right on that one, too. There are some absolutely gorgeous places to see in this country that don't involve skyscrapers or Disney and those are the places that need to be promoted to tourists from overseas. As a wish-I-could-someday-be-a-real-travel-writer, I've been seeking out and finding some of those places so I know they're out there and I know they are places that other tourists would probably like to see also.

    So, let's cook up some homegrown American food and serve it up to some freshly imported tourists from other countries at Niagara Falls, the Grand Canyon, Lake Tahoe, or even on the shores of Lake Michigan. And while we're at it, let's sell some nice postcards so that people can send them home showing others what a great vacation spot the United States can be while helping out the ailing postal service at the same time!

    Now, I'll hope I made at least a small amount of sense as I bid you a fond adieu! Not to be confused with fondue of course!

  9. Some things I agree with, others I do not. I enjoy the thought provoking and discussion. Socialism doesn't work, because eventually you run out of someone else's money. Jobs are created when there's work to do, and there's work to do when a good or service is is the brainchild of an innovator aka business owner. A big step to keeping jobs here is to reduce taxes on businesses. Incentivize businesses to remain in the USA by not forcing them to pay that much in taxes. The more money they retain, the more their business can expand, and the more people they can hire.
    For a large-scale society to work, you eliminate the mammoth bureaucracy and unnecessary things that aren't practical to a government's function, nor its job. It is not the government's responsibility to do anything than to insure domestic tranquility, provide for the common defense, and promote the general welfare. Everything else that the government does is superfluous and immaterial.



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