For decades the United States was economy was overwhelmingly dominant.
We had such a tremendous advantage in wealth, manufacturing power and
technology that we could afford to toss away resources, whether it be
on rebuilding Europe and Japan, on engaging in the expensive arms race
that broke the Soviet economy, or on misguided policies that
encouraged U.S. firms to locate their activities abroad. That time is
gone. We now owe more than $9,000,000,000,000 to foreign countries
because we no longer sell enough things that other countries want to
be able to pay for the goods that we import. Our manufacturing
operations have largely relocated to other countries - we became a net
importer of high technology goods for the first time in 2002, and our
deficit has increased each year since then. America's dominance of
technical publications and college degrees is fading quickly and
surely.

Globalization was supposed to help our country by opening up foreign
markets for our products, but that presupposes that the United States
produces things that other people want to buy. As foreign nations
with low wage rates have improved their infrastructure, though,
companies have naturally moved their manufacturing operations to
locations where the wage rates are a fraction of what they are in
America. The economists tell us that fact should not worry us, because
of the theory of "comparative advantage". Low value, labor intensive
production will move to developing nations with low wage rates, but it
will be replaced by the production of high value, high technology
goods here in the U.S., which will benefit everyone.

If the U.S. had sensible tax policies, that might be true. But we
don't. In our system, a corporation that earns a dollar from
manufacturing high technology goods in certain countries will keep the
full dollar. If they manufacture the same goods in the United States,
they will keep only about 60 cents after federal and state taxes. In
other words, simply by locating their high value activities abroad, a
company can earn more than 50% more than if they performed the same
activities in the U.S. Corporate managers are not stupid. They respond
to these incentives, and the rapidly increasing number of well
educated foreign workers enables corporations to shift activities to
the most tax efficient location. Our "comparative advantage" thus
dissolves. In direct consequence, the market power of middle class
American workers has been fading, leading to nearly 30 years of
stagnant real income growth for the bottom 99% of our population.

The responses proposed by Congress and the I.R.S. so far have just
made matters worse. The I.R.S. has been attacking U.S. research
operations in a way that just encourages corporations to move their
R&D to other countries. Chairman Rangel has recently proposed a
measure that would encourage multinationals to fire their U.S.
administrative personnel and move those activities abroad. Some in
Congress have proposed subjecting U.S. multinationals to current world-
wide taxation of all of their income, a move that would decrease the
value of many companies by 25% or more and cause them to be acquired
by foreigners with large reserves of cash in strong currencies. We
cannot afford such policies any more.

There is a simple solution. The Shared Economic Growth proposal,
explained in detail at www.sharedeconomicgrowth.org , would instead
provide a strong incentive for corporations to move their valuable
operations back inside the U.S. borders, simply by allowing
corporations a deduction for dividends that they pay out. At the same
time, it would increase the earnings working people receive on their
pension savings by over 50%. The proposal is largely self-funding (no
voodoo economics here - the corporate tax savings are directly made up
for by taxes on the shareholders receiving the dividends), with the
balance of the revenue made up by eliminating a couple of unnecessary
and unfair distortions in our tax code, and by an extra 7.5% tax on
individual income in excess of $500,000 per year. This is a small
price to pay for saving our economy, restoring our economic security,
giving market power back to the middle class, and boosting pension
savings. The problem with the proposal is that it does not fit neatly
into either party's usual set of canned speaking points. Enacting it
would require politicians to care more about policy than about
politics. Does anyone out there care enough about America's future to
stop bickering and do something useful for a change?

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