How Do We Get Manufacturing Jobs Back?

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Originally posted by JuanHunt:
One example.

A worldwide manufacturing company in Huntsville is moving all their non-DoD manufacturing to China. The reasons are labor costs are 1/10, materials are cheaper, and the infrastructure costs are being subsidized by the Chinese government. This compnay is in an industry that China has a long term interest in gaoning marketshare, partly because of demand in China.

China is the new world market leader with their GDP expected to grow 8-10% in 2010. The Chinese will buy more new cars this year than Americans.

The auto companies have all gone to China and taught the Chinese how to make cars. So, expect them to dominate the new car market in 10 years. Taxation and finance may not be a large part of the answer to the loss of man. jobs.

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Originally posted by JuanHunt:
Taxez are not the problem. Tax loopholes that allow complete avoidance of tax liability may cause jobs and profits to move offshore.

Tax Report

The report covered 275 profitable Fortune 500 corporations, with total U.S.
profits of $1.1 trillion over the three-year period.

Eighty-two of the 275 companies, almost a third of the total, paid zero or less in
federal income taxes in at least one year from 2001 to 2003. Many of them enjoyed
multiple no-tax years. In the years they paid no income tax, these companies earned
$102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as
the statutory 35 percent corporate tax rate seems to require, these companies
generated so many excess tax breaks that they received outright tax rebate checks from
the U.S. Treasury, totaling $12.6 billion. These companies’ “negative tax rates” meant
that they made more after taxes than before taxes in those no-tax years.

Twenty-eight corporations enjoyed negative federal income tax rates over the entire
2001-03 period. These companies, whose pretax U.S. profits totaled $44.9 billion over
the three years, included, among others: Pepco Holdings (–59.6% tax rate), Prudential
Financial (–46.2%), ITT Industries (–22.3%), Boeing (–18.8%), Unisys (–16.0%), Fluor
(–9.2%) and CSX (–7.5%)

Aerospace and defense companies enjoyed the lowest effective tax rate over the three
years, paying only 1.6 percent of their profits in federal income taxes. This industry’s
taxes declined sharply over the three years, falling to –30.0 percent of profits in 2003.

quote:

Originally posted by JuanHunt:
Taxez are not the problem. Tax loopholes that allow complete avoidance of tax liability may cause jobs and profits to move offshore.

Tax Report

The report covered 275 profitable Fortune 500 corporations, with total U.S.
profits of $1.1 trillion over the three-year period.

Eighty-two of the 275 companies, almost a third of the total, paid zero or less in
federal income taxes in at least one year from 2001 to 2003. Many of them enjoyed
multiple no-tax years. In the years they paid no income tax, these companies earned
$102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as
the statutory 35 percent corporate tax rate seems to require, these companies
generated so many excess tax breaks that they received outright tax rebate checks from
the U.S. Treasury, totaling $12.6 billion. These companies’ “negative tax rates” meant
that they made more after taxes than before taxes in those no-tax years.

Twenty-eight corporations enjoyed negative federal income tax rates over the entire
2001-03 period. These companies, whose pretax U.S. profits totaled $44.9 billion over
the three years, included, among others: Pepco Holdings (–59.6% tax rate), Prudential
Financial (–46.2%), ITT Industries (–22.3%), Boeing (–18.8%), Unisys (–16.0%), Fluor
(–9.2%) and CSX (–7.5%)

Aerospace and defense companies enjoyed the lowest effective tax rate over the three
years, paying only 1.6 percent of their profits in federal income taxes. This industry’s
taxes declined sharply over the three years, falling to –30.0 percent of profits in 2003.

quote:

Originally posted by JuanHunt:
The standard meme that cutting taxez will cure all our problems is false. Corps dont pay much in tax now, despite the 35% number that Heritage and Cato like to throw around. I will say that a corp that claims a multi-billion dollar profit in their shareholders report, and then is able to get a tax rebate of hundreds of millions is a sure indicator of a system that has become a clusterfack. Part of the same meme, as a percentage of their income the rich pay much less in taxez than the middle class. My boss makes 66X more than I, and last year(2008) he paid 13% in income tax while my effective federal rate was 29%.

Jobs are leaving the USA because it makes economic sense to do so. If you want to make mousetraps here, you will have to make them cheaper.

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So why does it "makes economic sense" to leave the US? Has our labor priced themselves out of the market?

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The relationship between the U.S. GDP and government tax revenues was discovered by economist Kurt Hauser [1]. Hauser’s 1993 analysis of federal revenue data showed that total federal revenue since WWII had remained at ~19.5% of GDP – i.e., that tax receipts are independent of marginal tax rates. This result is striking given the fluctuation of marginal rates from 1952 to 2009 – individual federal top marginal rates have declined from ~91% to ~35% and corporate federal top marginal rates have declined from ~52% to ~35%.

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Originally posted by dolemitejb:
I just want to throw something out there with regard to "taxing the rich." We hear the left decry "tax cuts for the rich" and "tax cuts for the top 2%." If anyone has a better estimate than I've come up with, please share it, but doing some back of the envelope math shows that "the rich"/"top 2%" is in the range of 3-4 million people.

Last estimate I heard was over 700 Billion Dollars borrowed from China if these 2% would don't go back up to where they were during the Clinton admin when we had a budget that worked.

How's that for an estimate?

What does this have to do with manufacturing? Nothing really, but it's something to consider.

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I believe we should only give tax breaks to corps that produce goods in this country, as opposed to the way we now do it which is to give these giant corps tax breaks regardless of where their production lines are located.
Yes, raise taxes to make it less profitable for companies to produce overseas.

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Some call the practice of moving a company abroad to avoid taxes "corporate inversion," while others deem these businesses “expatriate corporations.” Whichever term you prefer, the fact is that several successful American companies have moved their headquarters overseas in recent years to avoid hefty U.S. taxes.

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Last estimate I heard was over 700 Billion Dollars borrowed from China if these 2% would don't go back up to where they were during the Clinton admin when we had a budget that worked.

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Originally posted by RAN:
We have lost more than 7 million jobs in the last two years. We would need to create 200,000 net new jobs each month for the next seven years to get unemployment back to what was once considered normal at 5 percent. High-tech, bio and green technologies markets are too small to create jobs at the rates that we require right away. The semiconductor and biotech industries each employ less than one-half of 1 percent of U.S. workers; clean technology workers, wind turbines and solar panels, account for 0.6 percent of the work force.

Increasing exports will not revive manufacturing employment. Increased exports will benefit those industries that export but its impact of our overall economy and job creation will be negligible.

The rhetoric that our economic salvation is hidden within the folds of entrepreneurship is a fairy ring of magic mushrooms propagated by already stoned politicians in the hope that we can somehow pull their proverbial bacon out of the fire. The facts are is that most garage inventions don’t make it out of the garage. Secondly, job creation for those that do make it out, occur when production for the product is “scaled-up”. Today the scale-up phase occurs off-shore.

The solution to creating millions of jobs is to again manufacture consumable products, the stuff we use and consume everyday. However, the margins currently enjoyed by these colossal corporations and their hold on the markets make it a difficult journey to travel. Example: In times not in the too distant past, an entrepreneur could approach Harley-Davidson with a tee-shirt that they had designed. If the product was of acceptable quality and helped HD maintain their image, this person couldsell their shirt to each franchise store. Not so today. The franchise owner must purchase all products form the corporate office then mark it up for resale. Currently, their $20 retail tees made in China, are marked up from about $3 and sold to the store for $11. If corporate would take a fair royalty fee, these garments could be produced in the US, corporate makes their 15% royalty, the retailer does a keystone markup and these same garments retail for $12.

Taxes: At the end of WWII, federal taxes were evenly split between the worker and corporations at 50% each. Now it is about 95% for the wage earner and 5% for the corporations. Contrary to popular rhetoric, corporations are the biggest consumer of welfare tax dollars. Case in point, Wal-Mart received a $36 million grant to expand its private driveway leading to its main distribution facility in Bentonville. The road commissioner of Arkansas did not approve of this expenditure and said this money could have fixed many public roads in his state. We give federal money to corporations via the State Department, Commerce Department and the Better Business Bureau for these firms to move production offshore.

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However, the margins currently enjoyed by these colossal corporations and their hold on the markets make it a difficult journey to travel.

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Originally posted by Jugflier:

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However, the margins currently enjoyed by these colossal corporations and their hold on the markets make it a difficult journey to travel.

This is the crux of the problem. Wall Street and it's henchmen have been enjoying obscene profits at minimal risks. They will never go back to modest profits without kicking and screaming. Now we people like Warren Buffet telling us to get over ourselves, allow filthy rich profits or they will put us in a depression.
The bottom line is we are dead whichever way we go. If we do nothing, this country will be completely sucked dry, and then they will go somewhere else. if we fight, raise their taxes, they threaten to pull out their money and go somewhere else anyway.
The tax code was used to let this get out of hand, it can be used to reign it in. 50 years ago, when this country was a country of savers, the wealth of this country was spread around among the people, the wealthy counld not hold us hostage. Today we are a nation of debtors, as such, the wealth of this country is concentrated in to the hands of a few, this my friends is our national death.

This thing vcan be fixed very simply, you tell Wall Street; if you want to sell it here, you make it here, or we tax the heck outta you.

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You do understand that punitive tariffs would cause other nations to obtain a ruling against the US. From there, they could retaliate.

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Originally posted by RAN:

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You do understand that punitive tariffs would cause other nations to obtain a ruling against the US. From there, they could retaliate.

Let them retaliate...... the U.S. is still the largest consumer market in the world.... until our money runs out

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Originally posted by Jugflier:

quote:

However, the margins currently enjoyed by these colossal corporations and their hold on the markets make it a difficult journey to travel.

This is the crux of the problem. Wall Street and it's henchmen have been enjoying obscene profits at minimal risks. They will never go back to modest profits without kicking and screaming. Now we people like Warren Buffet telling us to get over ourselves, allow filthy rich profits or they will put us in a depression.
The bottom line is we are dead whichever way we go. If we do nothing, this country will be completely sucked dry, and then they will go somewhere else. if we fight, raise their taxes, they threaten to pull out their money and go somewhere else anyway.
The tax code was used to let this get out of hand, it can be used to reign it in. 50 years ago, when this country was a country of savers, the wealth of this country was spread around among the people, the wealthy counld not hold us hostage. Today we are a nation of debtors, as such, the wealth of this country is concentrated in to the hands of a few, this my friends is our national death.

This thing vcan be fixed very simply, you tell Wall Street; if you want to sell it here, you make it here, or we tax the heck outta you.

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Originally posted by Jugflier:

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Originally posted by RAN:

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You do understand that punitive tariffs would cause other nations to obtain a ruling against the US. From there, they could retaliate.

Let them retaliate...... the U.S. is still the largest consumer market in the world.... until our money runs out

That's the whole point, as the largest consumer market in the world, foreign businesses are clamoring to get in here. Any retalitory tarriffs can be met with the total banning of imports from the offending country.

These trade treaties are never negotiated with American interests in mind, they are negotiated with Wall Street in mind.