Fixing Our Other Deficit 4

Requiring Trade Vouchers to send money overseas, fixes several problems.

We've all heard jokes describing how rich Bill Gates is - how it isn't worth his while to bend over and pick up a thousand-dollar bill lying on the ground, because he makes more than $1000 in the two seconds that would take.  It's also not worth his bother to count a stack of hundred-dollar bills, because he makes money faster than a human being can count it.

Mr Gates is a member of that elite class of people who literally have more money than they could possibly spend.  Anything he wants - he can have.  It's a credit to his personal character that he isn't famous for outlandish spending - of course he has a massive mansion, private jets, and every reasonable toy, but he doesn't have private zoos or yachts filled with party girls from around the world.

Most of us are not so lucky; we have to restrict our spending to some degree.  Even entire nations ought to keep an eye on the balance sheet and spend less more than they take in.

As we all know, America has lost the habits of thrift and economy; we are continually borrowing to maintain our spending because we do not sell as many goods and services to other countries as we'd like to buy from them.  In the previous article in this series, we examined a way to help solve this problem: for the government to issue Trade Vouchers for every dollar of goods or services exported, while requiring a Trade Voucher to be turned in for every dollar of goods or services purchased from overseas.

By definition, this would fix the trade deficit - America as a whole would only be able to import as much as it exports.  This alone would go a long way to helping our current problem with unemployment and loss of entire industries.

But there are several other benefits this policy would produce as well.  Let's take a look:

The Proceeds of Theft

We have explored the dire consequences of illegal immigration from many different angles over the years, so there's no need to rehash them all here.  One particularly relevant point of view, though, is that of theft.  By definition, illegal immigrants have no right to be present in the United States; thus, if they are working and earning money, those earnings are the proceeds of fraud.  Yes they may be doing work in exchange, but it's work they have no right to do - they are stealing that job, and thus that salary, from an American citizen who is unemployed because an illegal immigrant was hired instead.

What do illegals do with the money they fraudulently earn?  Obviously they spend some of it on their own needs - they've gotta eat and sleep somewhere.

Most illegals, however, send a large portion of their earnings to relatives back in their home country.  This is perfectly understandable and admirable - it's honorable to be loyal to your relatives even when you are far away from them.

Unfortunately, from the perspective of America, it's still fraud - and the sums involved are not small, estimated as in the neighborhood of $25 billion per year.

Right now, it's easy to send money overseas - just go to a bank or Western Union and do it.  But with the Trade Voucher system, overseas financial transfers would require a matching number of Trade Vouchers.

A genuine importer or financial institution won't have any trouble operating in the Trade Voucher market and obtaining what they need.  An illegal immigrant will have a much harder time - or, more likely, they'll just buy the required vouchers from the bank doing their transfer.  The effect will be to make remittances more costly, thus to reduce them, which benefits the United States.

Evading Tax Avoidance

Another current economic problem we have is caused by our outlandishly complex and greedy tax system.  America's corporate tax rate is the highest in the rich world; what's more, unlike virtually every other country, we levy taxes on an American corporation's worldwide earnings.

There is an exeption: if foreign earnings are never brought back to the United States, they aren't taxed.  That's right: Congress' infinite stupidity has created a tax incentive for keeping the money out of our country.  What idiocy!

This means that, for multinational corporations, it's very much in their interest for their American operations to "break even" and for all the profits to be booked in other countries, generally ones with far lower tax rates.  There are all manner of amusing names for schemes to accomplish this, like the "Double Irish" and the "Dutch Sandwich."

Normally we're all in favor of anything that reduces taxes.  However, in this case only very large companies can play this game, leaving small businesses stuck paying our egregious levies.  This is yet another illustration of crony capitalism at work, where the very wealthiest corporations have bought and paid for politicians to provide legal tax loopholes only they can benefit by.

How do Trade Vouchers help with this problem?  Simple: since the money is really being made in the United States, it has to be moved out of the United States in order to avoid the taxes.  One very common and perfectly legal way to accomplish this is by making thecompany's foreign branch the legal owner of all the company's intellectual property, which the American branch must pay licensing fees in order to use - fees that, somehow, work out to be just about exactly each year's profit.  Magic!

But paying those fees to a foreign company, even a subsidiary, counts as international trade requiring Trade Vouchers which the company would first have to obtain.  Would it be worthwhile to pay the cost of the vouchers when there aren't enough available to buy actual goods we really do need in the United States?  Maybe not - or at least, not nearly so often.

Thus it would become worthwhile to the multinational corporations to leave their American profits in America and pay American taxes on them, just as smaller businesses and individuals have to do.  Maybe they'd decide to use their political clout in efforts to lower taxes for everyone.

A Good Idea - For Both Sides

It often seems like we are facing such monumental problems that there's no hope and no solution.  Maybe we can't fix everything, but our trade deficit is one problem that we can fix, and pretty easily too.

Indeed, it's a problem that can actually be fixed by government action, the first love of the Left and of this administration in particular.

So hey, how about some bipartisanship, Mr. Obama?

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Business.
Reader Comments

There is an answer to the deficit and that is a stronger dollar. We can achieve that by opening up our vast energy reserves to exploration everywhere. We should lower taxes or in my opinion as you all have heard, the Fair Tax would cause an economic boom. The voucher system is not for me, just another government program which they will screw up no matter how well meaning it is meant to be. It would be a bureaucrat's dream. Look for a free capitalistic system if you want an answer to our deficit, not more hinderances.

May 28, 2014 1:35 PM

Great Job with this article. However I do agree with Bassboat; the red tape would be a nightmare and it wouldn't be long before the lobbyists free the multinationals. BUT, I like how you think. I often sell our goods to overseas companies, but sourcing from overseas would put my pricing out of reach, so the voucher system wouldn't work well for me. Good job, Petrarch. I waited every day for the next installment.

May 28, 2014 2:36 PM

This absurd proposal would do nothing but shut down a huge proportion of America's trade. It would result in massive job losses and plunge America into a depression.


May 30, 2014 6:18 PM

Scragged calling for gov't action. Interesting.

An actually workable solution is just to weaken the dollar, which will automatically reduce the deficit (imports become more expensive and exports less expensive). Why the extra overhead and costs of a voucher system?

Actually, the deficit is arguably a direct result of the fact that the dollar is a global reserve currency, which props up it's value and has the opposite effect of a weaker dollar.

July 8, 2014 7:34 AM
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