Global development paid for by U.S. middle class

I'm not ready to say that  the global economy is zero-sum, where China's gains are always our losses. At the same time, nobody disputes that we're all interdependent.  What China or Taiwan produces, somebody must buy.  So if China is exporting and we're not, that would tend to be our loss.  If we're not buying then they're not producing that is China's loss.  

It's kind of a moral not an economic argument, nevertheless Paul reminds us that trade, not simple production, is what has lifted record millions out of poverty in the last 50 years, and the U.S. is largely responsible for allowing that trade to happen, not least by serving as the largest market/buyer of all the fastest-developing countries' exported goods.

Fairly, Paul also mentions the global companies like Apple and Google that are in fact without country and who benefit the most from increased global trade. Indeed, more than 60 percent of global trade takes place within multinational companies (MNCs).  

We can think of these as "great American" companies but we're kidding ourselves, we say so only to feed our vanity: it gives us a vague sense of self-worth to say we have a stake in a huge multinational company's success. (It's not unlike Americans who cheer on their local pro team which is probably a net drain on the local economy, yet it gives millions of local residents a great sense of pride that the privately owned sports franchise is "theirs.")

Unlike citizens and workers who are not so mobile, these MNCs go where the lowest cost of production and lowest taxes are.  Often they play off localities, regions and countries against each other -- who can offer them the cheapest labor, the lowest tax rates, the biggest subsidies, etc. -- in what has been called the "race to the bottom."  

Wrote Paul:

Companies such as Apple and Cisco Systems, and nations such as China, that have benefited from free trade are part of a closed system that has been built in large measure on the strength and confidence of the U.S. consumer. Yet those beneficiaries have been largely indifferent to the plight of the American middle class -- whose economic well-being and confidence in the future has been undermined by the expansion of free trade -- focusing instead on their own self-interest and entitlement to the benefits of trade. The leaders of Apple and Cisco gripe about tax rates, while the leaders of China disdain American concerns for their predatory trade practices.

Finally it's worth noting that no other major economy has adopted the U.S. approach, which is basically to open its markets to everybody and let domestic producers die.  

Beware the Global Consequences of Further Declines in the American Middle Class
By David Paul
May 11, 2013 | Huffington Post

URL: http://huff.to/19bTxE1

Tax holiday won't create jobs, won't cut deficit

A nonpartisan congressional committee found that this tax repatriation plan would actually cost the government $78.7 billion over ten years, as companies scored a great deal on cash they planned to bring back to the country eventually anyway.

"What's more, an April analysis from the Center on Budget and Policy Priorities found that 10 of the biggest players in the WinAmerica Coalition are sitting on a combined $47 billion in domestic cash. If the companies aren't using their excess U.S. cash to create jobs, they aren't very likely to spend any money they bring in from overseas on jobs, either."

"According to a 2008 report by the Government Accountability Office, 83 of the 100 largest American companies operate subsidiaries in nations identified by the GAO as tax havens. Of the 10 companies currently lobbying hardest for the tax holiday, four -- Apple, Cisco, Microsoft and Pfizer -- were noted in the GAO report. Those four companies operated a combined 572 sub-companies in tax shelter countries at the time the report was published."

So why does this bad idea have legs? Because the so-called WinAmerica Coalition has spent $13.7 million lobbying for it.

Small Businesses Bash 'Tax Holiday' Plan For Corporate Titans

By Zach Carter and Paul Blumenthal

June 22, 2011 | Huffington Post

URL: http://www.huffingtonpost.com/2011/06/22/small-business-tax-holiday_n_881597.html