It is time for the federal government to step up and pursue a strategy that facilitates the return of the USA to manufacturing superpower status.  There is an unfair cost advantage for producing in foreign markets and importing to the US versus producing at home.  The reasons are simple.  It costs more in corporate taxes, regulations, and labor to produce in the US. 

Consumers have 2 choices, buy less expensive items imported from abroad or pay more for items made in the USA.  What is the government going to do to reduce our dependence on foreign nations for fuel, weapons, steel, and even toys?  (Is China trying to kill us slowly with lead toys?  Make sure you buy US EE bonds this Christmas for the kids.  They are lead free!)  Much of the talk for regaining a competitive advantage for US products is to enforce tariffs on imports and other protectionist policies.  I do not oppose a limited use of protectionist policies against nations that do not promote free and fair trade, but these policies are not the answer.  They only lead to price increases and economic warfare. 

Why not use such tactics as reducing regulations and eliminating corporate taxes to prime the US production pump?  Following the strategy of keeping it simple, I am a strong supporter of the Fair Tax plan.  This plan eliminates the corporate income and payroll taxes (among other taxes, read more at http://www.fairtax.org). 

Per the Fair tax plan by eliminating corporate taxes:

       “The 17 percent competitive advantage, on average, of foreign producers is eliminated, immediately boosting U.S. competitiveness overseas. American companies doing business internationally are able to sell their goods at lower prices but at similar margins, and this brings jobs to America.” 

       “Imports and domestic production are on a level playing field. Exported goods are not subject to the FairTax, since they are not consumed in the U.S.; but imported goods sold in the U.S. are subject to the FairTax because these products are consumed domestically.”

       By reducing the costs (payroll taxes and compliance costs) for workers, US companies would be more inclined to create more domestic jobs.

Everyone thinks that corporations pay income taxes out of their own pockets.  They are an easy target for politicians to sell their social programs.  “Just tax the evil corporations to pay for universal health care.”  However, corporations are made up of groups of people whose main goal is to increase stakeholder value.  These higher taxes are paid by charging higher prices, returning lower rates of returns, and/or paying lower wages.  The higher taxes are also avoided by moving operations to a foreign nation. 

Regulations are a little trickier to reduce.  We do not want a situation where our produce is grown in sewer water and our toys are coated with lead paint.  However, there are regulations that are obsolete or unrelated to safety that can be eliminated to reduce the costs of production. 

According to a report sponsored by the United States Small Business Administration’s Office of Advocacy (SBA’s Office of Advocacy), the annual cost of all federal regulations is estimated to be $843 billion.  The SBA’s report shows that the annual cost of all federal regulations is, on a per employee basis, $6,975 for firms with fewer than 20 employees–nearly 60% higher than the $4,463 for companies with 500 or more employees. http://www.uschamber.com/issues/testimony/2005/050428regulatoryburden.htm

Congress needs to quit spending its time conducting investigations and debating issues outside its realm of responsibility and start concentrating on protecting its citizens by putting us in a position to be self sufficient.  Quit creating an atmosphere that promotes the exportation of jobs and the importation of steel.

The US became a super-power because of our ability to out-produce other nations.  Now we outsource or sell our key industries to foreign interests.   Here are some statistics from an article by Thomas Heffner on the Economy in Crisis website (http://www.economyincrisis.org/articles/show/1119)

       Production: Japan was the largest producer of steel in 2005 behind only China. Japan outproduced the US by 22 million tons. Furthermore, at least 20% of the domestic US steel industry is foreign owned according to the IRS and we import nearly 30% of the steel that we consume. Nearly none of Japan’s key industries are foreign owned.

       Interest Expense: The US public debt is almost 50% financed by other countries whereas Japan’s public debt is nearly 100% financed by its own citizens. Japan’s government borrows money at rates as low as 0.6% percent (sixth tenths of one percent) whereas the US government short-term rate is almost 8 times higher.  The US government paid out over $405 billion to pay interest alone in 2006 (over $1 billion per day) on the nearly $9 trillion of government debt.

Take a look below at US production of military aircraft during World War II.  This type of production was possible because there were US companies already involved in the heavy manufacturing industry.  We will have a hard time flipping this switch again if our main industries are foreign owned or operating abroad.

Military aircraft of all types

1.       United States = 324,750

2.       Germany = 189,307

3.       Soviet Union = 157,261

4.       United Kingdom = 131,549

5.       Japan = 76,320

6.       Canada = 16,431

7.       Italy = 11,122