[Bhaalspawn]

Originally Posted by The Homogenizer

Why not blame poor people for buying imports?

Good question.

The problem is that if you spend more money to purchase a local product, you do not directly benefit from that. Your act might help to save another American's job but not yours directly. While you're doing that, other people will continue to purchase the less expensive foreign goods. So, you end up suffering for no gain; your job will not be saved.

Are you familiar with a scenario called "The Tragedy of the Commons?" This situation is almost exactly analogous to it. Everyone is better off if everyone treats the common land responsibly (buys only American-made products). However, individuals can benefit by despoiling the commons and abusing it and there's no authority to prevent them from doing it. So one day one person has his cattle herd overgraze the commons (or whatever), consuming and despoiling other people's share of it. Seeing this, the other people rush out to consume as much of the Commons as they can. Pretty soon it's ruined and no one can use the land anymore. Almost everyone ends up suffering a net loss as a result.

What's the solution to this problem? Obviously, some authority has to step up and regulate the use of the commons. In the case of foreign outsourcing, that authority is the U.S. federal government which can impose tariffs, etc.

You can't depend on individual consumers or businesses to cooperate for the benefit of society when they can benefit by breaking the unspoken rules.

[Bhaalspawn]

Originally Posted by The Homogenizer

I think that's a culture problem. If you're playing ball with a guy who's taller, you don't change the rules to accomodate your height. You figure out a way to get around it or you accept losing. However, when it's the economy, everyone wants to change the rules and who pays? The consumers because they have fewer choices and have to pay more for those choices. That's a sad thing to me.

You're assuming that the consumers end up enjoying a net benefit by being able to purchase foreign goods and services at the expense of their own jobs. What happens if, in reality, the price of goods and services decrease by 20% but wages and purchasing power decrease by 40%? Is it still beneficial?

Through foreign outsourcing, H-1B and L-1 visas, and mass immigration (collectively known as "Global Labor Arbitrage"), the prices of goods and services can be lowered--but at what expense? It's easy to mindlessly (and free market dogmatically) look at the costs on the front-end while ignoring all of the invisible and conveniently overlooked costs on the back-end. The prices of goods and services might decrease, but what if it comes at the expense of having huge amounts of unemployment, increasing population density, and an increased cost for resources resulting from having a higher population (immigration)?

Advocates of free trade seem to assume that we can somehow get something for nothing or that we can consume more wealth than we actually produce by engaging in free trade. In reality a society cannot consume more wealth than it produces, at least not long-term.

Are you familiar with the U.S. trade deficit? That trade deficit represents our attempt to consume more wealth than we are producing. Have you ever wondered how we are paying for it? We're paying for it by exchanging our hard assets--business ownership and land--for ephemeral consumer goods. In other words, we're impoverishing ourselves long-term. People in other countries aren't going to use their U.S. dollars to purchase expensive American goods and services; instead they'll purchase our land and our businesses.

What's happening today is that the upper classes are benefiting from higher profit margins (cheaper labor) and less expensive goods and services in the short term at the tremendous expense of the lower classes. As a result, our nation is becoming increasingly indebted and impoverished. It's good for the upper classes in the short term (which is why this is allowed to continue) and perhaps the long term (a huge underclass of slave labor to serve them in the future) and a disaster for the other 95% of the population in the long term.

There's no way to "change the rules". The economic math, in terms of supply-and-demand, is very simple. Billions of people in the world are poor and they are willing to work for much less compensation than Americans. Thus, by merging our nation's economy and labor market with those of the third world, the American standard of living must decrease. In terms of supply and demand, if the supply of labor increases almost infinitely overnight, the supply curve shifts out and intersects the demand curve at a much lower price point (wages, standard of living, purchasing power, etc.). There's no way around this problem other than trade protectionism and to insulate ourselves from the forces of Global Labor Arbitrage. Our "no-think" free market dogmatist economists and our mindless politicians can talk about how need more and better education (for non-existent job positions) and better technology all they want, but none of it will address the fundamental economic problem: Someone somewhere in the world will be willing to do the work for far less than an American middle class standard of living.

Capital is very mobile today; any new technology or innovation can be performed just as well, often by college-educated labor, in another nation for a far lower standard of living. We cannot "innovate" our way out this mess. "Next-Big-Thing" technology can be performed just as well in China as it can in the U.S. Furthermore, Americans do not have a racial monopoly on the ability to be innovative. The Chinese and Indians want to be innovators, too! (Surprise!) The only thing we can really do is to try to enact policies to insulate ourselves against global labor arbitrage. One way to do this might be with an "import credits system" or some other form of a zero-dollar trade deficit policy.

You should read Warren Buffet's classic essay:

Squanderville versus Thriftville by Warren Buffet

A perpetuation of this transfer will lead to major trouble. To understand why, take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squanderville and Thriftville. Land is the only capital asset on these islands, and their communities are primitive, needing only food and producing only food. Working eight hours a day, in fact, each inhabitant can produce enough food to sustain himself or herself. And for a long time that’s how things go along. On each island everybody works the prescribed eight hours a day, which means that each society is self-sufficient.

Eventually, though, the industrious citizens of Thriftville decide to do some serious saving and investing, and they start to work 16 hours a day. In this mode they continue to live off the food they produce in eight hours of work but begin exporting an equal amount to their one and only trading outlet, Squanderville.


The citizens of Squanderville are ecstatic about this turn of events, since they can now live their lives free from toil but eat as well as ever. Oh, yes, there’s a quid pro quo — but to the Squanders, it seems harmless: All that the Thrifts want in exchange for their food is Squanderbonds (which are denominated, naturally, in Squanderbucks).


Over time Thriftville accumulates an enormous amount of these bonds, which at their core represent claim checks on the future output of Squanderville. A few pundits in Squanderville smell trouble coming. They foresee that for the Squanders both to eat and to pay off — or simply service — the debt they’re piling up will eventually require them to work more than eight hours a day. But the residents of Squanderville are in no mood to listen to such doomsaying.


Meanwhile, the citizens of Thriftville begin to get nervous. Just how good, they ask, are the IOUs of a shiftless island? So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville.


At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat — they have nothing left to trade — but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold. In effect, Squanderville has been colonized by purchase rather than conquest.


It can be argued, of course, that the present value of the future production that Squanderville must forever ship to Thriftville only equates to the production Thriftville initially gave up and that therefore both have received a fair deal. But since one generation of Squanders gets the free ride and future generations pay in perpetuity for it, there are — in economist talk — some pretty dramatic “intergenerational inequities.”

[The Homogenizer]

Originally Posted by Bhaalspawn

At the state government level there's really not much Snyder or any governor could do about global labor arbitrage. What's he supposed to do? Encourage the Michigan legislature to impose tariffs on foreign goods? End the H-1B and L-1 visa programs? End mass immigration? The Michigan legislature doesn't have the power to do that; those are federal government issues!

I think you're completely wrong. Michiganders and Americans don't need to coerce their fellow citizens into buying products and services that aren't competetive in a fair market. They need to be shown why they (Michiganders and Americans) are not competitive.

One reason that Michigan isn't competitive is it's culture. A common misconception in the southeast is that as laborers, uneducated or unnecessarily educated, we should have a high standard of living in which we own two newer cars, one classic car, six dirt bikes, four snow mobiles, a cottage, three top of the line fishing poles, two high quality sporting arms and onnnnne big ol' house. Then, we want the pension.

What happens then? Your appliance repairman, your contractor and your barber all see you doing well by cranking screws so they want a piece of the action. They start charging more. Next, you have a 22yr old out of college with a degree in engineering who, despite the $60K education, enters the market making half as much as the laborer but has to pay inflated prices on everything.

What about your appliance repairman, contractor and barber? Why should they make an effort at their trades when they can wait for a job on the line? Your quality of services goes down, prices go up more and tax revenues suffer because nobody wants to work unless they're making college-grad wages.

The belief that someone is owed all that reward beyond the natural value of labor is the root of all evil in Michigan. You can disagree with that but the important question is do you want to end the destruction that has become a synonym of the state's name or do you want change?

Michigan is going to change. Michigan is about to start producing again. Snyder's going to open the road blocks so that it's easy for business to start. If you want those businesses to stay rather than cross the state or national borders, I suggest you rethink what you can do to compete with other world inhabitants because I guarantee, you've never seen people compete for work like they do in Colorado where a person with a good attitude is treated like family and a person with a small business is treated like royalty. I can't begin to imagine how great a business owner is treated in Mexico.

Your attitude is the problem.

Governors don't have the power to enact changes to economic policies on a national scale. All they can really do and all Snyder can attempt to do is to make Michigan more competitive for jobs relative to the other 49 states. He can attempt to help Michigan win a national race to the bottom. Now, surely Michigan can improve in those regards, but his power to fix the state's job market only goes so far.

There's considerable truth to that. I'd like to know what part you're going to play in Michigan's recovery against the other 49.

[The Homogenizer]

Originally Posted by Bhaalspawn

Good question.

The problem is that if you spend more money to purchase a local product, you do not directly benefit from that. Your act might help to save another American's job but not yours directly. While you're doing that, other people will continue to purchase the less expensive foreign goods. So, you end up suffering for no gain; your job will not be saved.

So, rather than allow communities to produce the goods they're able to bring to market for the best price/quality ratio, you would force them to produce things they're not good at? It's sort of a make-work scenario for the least competitive?

Are you familiar with a scenario called "The Tragedy of the Commons?" This situation is almost exactly analogous to it. Everyone is better off if everyone treats the common land responsibly (buys only American-made products). However, individuals can benefit by despoiling the commons and abusing it and there's no authority to prevent them from doing it. So one day one person has his cattle herd overgraze the commons (or whatever), consuming and despoiling other people's share of it. Seeing this, the other people rush out to consume as much of the Commons as they can. Pretty soon it's ruined and no one can use the land anymore. Almost everyone ends up suffering a net loss as a result.

Why would you stop at considering the U.S. the commons? Isn't the entire world a common? Therefore, a world without protectionism is the best care for the commons?

If you think the borders of the U.S. are the limit of the commons, why must it be so big? Why not make communities commons and support libertarian ideals of less involved feds?

You can't depend on individual consumers or businesses to cooperate for the benefit of society when they can benefit by breaking the unspoken rules.

So you think it's better to impose your values on the entire nation rather than change your belief that unspoken rules exist or that you "should" be able to depend on others?

Your problem is that you don't respect the rights of others to live their lives. People are greedy. Do you let the government impose that greed on fellow citizens or do you get out of the way and pit American greed against Chinese greed and let them duke it out while citizens of both countries enjoy higher and higher quality of life?

If you say yes, that's because you believe in freedom. If you say no, that's because you're imposing your greed on your fellow citizens by coercing them to pay the price tag of your beliefs and if such a situation develops more on a national level, then the country will eventually look like Michigan today.

Originally Posted by Bhaalspawn

You're assuming that the consumers end up enjoying a net benefit by being able to purchase foreign goods and services at the expense of their own jobs.

You're assuming that the consumer is not producing something that the foreign producer wishes to consume. You're shorting the circuit of goods. You're beginning the equation with a belief that the people being "protected" simply can't compete.

Americans and Michiganders can compete and without special benefits.

What happens if the price of goods and services decrease by 20% but wages and purchasing power decrease by 40%? Is it still beneficial?

Not immediately but yes. The softening market pressures a reduction in supply and pressures an increase in other forms of production. This results in products that are desired which results in higher quality of life.

It's easy to mindlessly (and free market dogmatically) look at the costs on the front-end while ignoring all of the invisible and conveniently overlooked costs on the back-end.

What is the difference between dogmatically ignoring market pressures and dogmatically ignoring back-end costs?

Advocates of free trade seem to assume that we can somehow get something for nothing or that we can consume more wealth than we actually produce by engaging in free trade. In reality a society cannot consume more wealth than it produces, at least not long-term.

Again you assume that society isn't producing. Wealth isn't created or destroyed. It's dispersed. The question I have as a free marketer is what can I do to gain more of the dispersement? If I spend another hour replying to your post, then my wealth (time) I have has been utilized in non-money producing ways. If I get off my butt and finish my current project, then my time has gone toward gaining some of the money out there.

Where do we not see eye-to-eye on this?

Are you familiar with the U.S. trade deficit? That trade deficit represents our attempt to consume more wealth than we are producing.

It's time to start producing.

[Bhaalspawn]

Originally Posted by The Homogenizer

I think you're completely wrong. Michiganders and Americans don't need to coerce their fellow citizens into buying products and services that aren't competetive in a fair market. They need to be shown why they (Michiganders and Americans) are not competitive.

It's hard to compete against fifty-cents-an-hour foreign labor with zero environmental and labor regulations. Americans could compete if they were willing to live in third world poverty. Is that what you're advocating? We can compete just as soon as we're willing to reduce our standard of living to third world levels. Is that what you're advocating?

For clarification, I never advocated that Michigan citizens should be coerced into purchasing Michigan-made products.

The belief that someone is owed all that reward beyond the natural value of labor is the root of all evil in Michigan. You can disagree with that but the important question is do you want to end the destruction that has become a synonym of the state's name or do you want change?

I don't disagree with you that Michigan's business climate and economic policies are bad relative to the other 49 states and that policy changes are needed.

[Bhaalspawn]

Originally Posted by The Homogenizer

So, rather than allow communities to produce the goods they're able to bring to market for the best price/quality ratio, you would force them to produce things they're not good at? It's sort of a make-work scenario for the least competitive?

When did I ever say or imply that?

America's problem with regards to foreign competition is NOT one of efficiency or productivity. It has nothing to do with our ability to actually produce goods and services. The problem is that American workers don't want to work for third world wages and without environmental and labor regulations; it's 100% price competition.

Why would you stop at considering the U.S. the commons? Isn't the entire world a common? Therefore, a world without protectionism is the best care for the commons?

I was referring to the tragedy of the commons as a metaphor for the U.S. economy.

The reason why Americans should be concerned with the American economy and not primarily the world economy is that Americans live in America and their well-being is based on the well-being of the U.S. economy, not the Chinese or Indian economy.

If you think the borders of the U.S. are the limit of the commons, why must it be so big? Why not make communities commons and support libertarian ideals of less involved feds?

Are you advocating that the U.S. break itself up into separate, smaller nations? I don't seen any reason to do that at all. The U.S. doesn't have huge geographical differences in its standard of living nor large cultural differences and it benefits by remaining a single nation from having a larger amount of national resources and geographic diversity.

Can you make a compelling argument for breaking the U.S. into separate nations?

So you think it's better to impose your values on the entire nation rather than change your belief that unspoken rules exist or that you "should" be able to depend on others?

What specific values are you talking about? What unspoken rules are you talking about? Who said anything about "being able to depend on others" and in what context?

I get the sense that you're a free market dogmatist and that you're responding with a scripted response to what you wish I had said and not what I've actually been saying.

Your problem is that you don't respect the rights of others to live their lives.

I don't? Where are you getting that from? I'm fully in favor of free speech, freedom of religion, assisted suicide, abortion, prostitution, alcohol, and legalizing most drugs.

People are greedy. Do you let the government impose that greed on fellow citizens or do you get out of the way and pit American greed against Chinese greed and let them duke it out while citizens of both countries enjoy higher and higher quality of life?

If the Chinese only had a population of 100 million this wouldn't be a problem. However, they have a population of about 1.3 billion people, most of whom are relatively impoverished. It's going to take decades for them to ever come close to our nation's standard of living. If we merge our economy and our labor market with the Chinese labor market (and the Mexican labor market and the Indian labor market), the U.S. standard of living must decrease. It will average out to an average level that is much lower than the current U.S. standard of living.

Instead of spouting off free trade dogma (which, as a former advocate of laissez-faire capitalism myself, I can say you're not even very good at doing), why not make an economic argument using concepts such as supply and demand to refute the logic of my last paragraph?

If you say yes, that's because you believe in freedom. If you say no, that's because you're imposing your greed on your fellow citizens by coercing them to pay the price tag of your beliefs and if such a situation develops more on a national level, then the country will eventually look like Michigan today.

You've missed my point completely. My point was that all Americans (other than the upper classes perhaps which are draining the lower classes like a vampire) would benefit from not merging themselves with the third world labor market. I don't see how other Americans would be forced to "pay the price tag for my beliefs" if the U.S. economy were strengthened, if middle class jobs were brought back to the United States, and if ladders of upward economic mobility were restored.

You're assuming that the consumer is not producing something that the foreign producer wishes to consume. You're shorting the circuit of goods. You're beginning the equation with a belief that the people being "protected" simply can't compete.

They cannot compete against fifty-cents-an-hour impoverished labor. They cannot compete on price competition without reducing themselves to a third world standard of living. I'd like to see you make an argument against that instead of just dogmatically spouting off free market bromides.

What is the difference between dogmatically ignoring market pressures and dogmatically ignoring back-end costs?

What market pressures do you think I've ignored?

Again you assume that society isn't producing. Wealth isn't created or destroyed. It's dispersed.

What do you mean that wealth isn't created or destroyed? Where do you think wealth comes from if it isn't created by human effort? Likewise, why do you think wealth cannot be destroyed?

The question I have as a free marketer is what can I do to gain more of the dispersement? If I spend another hour replying to your post, then my wealth (time) I have has been utilized in non-money producing ways. If I get off my butt and finish my current project, then my time has gone toward gaining some of the money out there.

If you really feel that way, you wouldn't waste your time reading discussion forums at all. But there's more to life than working 24/7.

Where do we not see eye-to-eye on this?

I think it's because you have latched onto free market ideas in a dogmatic fashion and haven't thought about them deeply and/or might not be a very good critical and analytical thinker. It almost seems like you're not even grasping the substance of my argument since you didn't really respond to it nor even show that you can acknowledge what it is.

What you're saying just sounds like dogma. I'm actually very sympathetic to free market arguments even though I advocate a mixed economy today. Years ago I was an advocate of laissez-faire capitalism and a huge fan of Ayn Rand and the Objectivist philosophy, so I used to argue these things all the time, but on the free market, laissez-faire capitalist side. I think you could do a much better job of presenting your side of the argument if you would spend more time thinking about the ideas and questioning your own thoughts and beliefs. Most of your responses seemed like they were pre-canned scripts.

[The Homogenizer]

Are you advocating that the U.S. break itself up into separate, smaller nations?

Sort of like a republic?

[michigan83]

What you're saying just sounds like dogma. I'm actually very sympathetic to free market arguments even though I advocate a mixed economy today. Years ago I was an advocate of laissez-faire capitalism and a huge fan of Ayn Rand and the Objectivist philosophy, so I used to argue these things all the time, but on the free market, laissez-faire capitalist side. I think you could do a much better job of presenting your side of the argument if you would spend more time thinking about the ideas and questioning your own thoughts and beliefs. Most of your responses seemed like they were pre-canned scripts.

I would like to point out that we don't really need advocates of a mixed economy. We've always had one, and always will (as long as the U.S. exists in its current form). We could elect a host of Libertarians to office and they wouldn't be able to "un-mix" the economy.

When conservatives are railing against big government, the real hope is only to scale back the current role of government. Not to remove the influence completely. A realist knows that this is not possible. Arguing for a mixed economy is basically a moot point.

[darstar]

Now , if Michigan would like to cut the U.P. loose, to save some coin....I would run for Governor of the new state , Superior. We up here are not well represented even in good times, I think I could make a difference...but then , they all do in the beginning.

[Sparrow_temp]

Clinton had a balanced budget for the following reasons: Republican Congress, Internet Bubble, and the peace dividend from the fall of the Soviet Union. It wasn't anything he did. In fact, one of his biggest accomplishments -- NAFTA -- is one of the reasons MI is in such big trouble. He was only fiscally conservative AFTER the Republicans took Congress and gave him no choice. He was trying for Hillary-care -- the failed predecessor of Obama-care.

You're right about the similar situations between Obama and Reagan. Reagan took the approach that works and Obama did just the opposite. It shouldn't be any surprise as to why the economy still stinks. We would have had surpluses under Reagan if it weren't for the Democratic Congress that spent every extra dollar that came in. He increased revenues by lowering taxes. Increasing taxes doesn't bring in the additional revenue desired -- it just crushes the economy.

Federal spending is about 23% Defense and amounts to about half of non-discretionary spending. It's not defense spending that's breaking this country -- it's entitlements. Defense spending is one of the few things mandated by the constitution; entitlements aren't. SS and Medicare/Medicaid are about 40% of our spending but neither party will ever cut there. Both parties stole from the excess SS revenue but unfortunately for us, there's no longer excess there and it's actually going to become a huge deficit from now to the foreseeable future. The Federal government has got to come to terms that spending has to be reduced.

Originally Posted by scolls

When your military and war spending far exceeds
non-defense spending, really doesn't do anything. Guess what administration last had a balanced budget? You guessed it, the fiscal conservative Bill Clinton. You can't spend billions and billions on military and war and then cut taxes and expect a balanced budget. This sounds familiar. Double digit unemployment, budget deficits, increased debt etc. Sounds like Obama and Reagan have more than one thing in common. At least Obama wanted to spend the money we don't have on health care for Americans than fight Arab countries.