by DeusTrismegistus on Fri Nov 14, 2008 8:50 am
Darth,
I agree with your general sentiment.
However according to economists, which I really don't think economics is a very good science. I even told my Honors Macroeconomics prof in college that economics was useless and pointless. Somehow I still passed. But anyways, the reason the outsourcing occured is very simple. Businesses go wherever they can keep their costs the lowest. So its a tradeoff, they can manufacture here and pay higher wages but avoid other costs, or they can locate in another country and make things cheaply but be subject to those other costs, they do a cost benefit analysis and go wherever is cheaper.
The reason the govt allowed this is because the economists told everyone that outsourcing was in our best interests. This is because the economists model says that the dollars we used to inefficiently make those widgets, will be spent making something we are more efficient at; AND we will be able to get our widgets cheaper. In reality nothing gets cheaper, the dollars aren't spent more efficiently, and we suffer.
IMO this is really a flaw with economics. They do their best to model the way the world works but they cannot model 100% of human behavior, and on top of that it is impossible to have a true experiment. All economic models are based on observable phenomena.
So the best way for the govt to make these manufacturers stay in the US is not to make a law saying they have to, but to use tariffs to make it the cheapest option, or lower corporate taxes in the US to make it the best option. Most companies that outsourced predicted a 30% or so cost reduction but because of unforseen costs thay usually experiences only about a 10% cost reduction. That is easy enough to fix between tax cuts and increased tariffs.
I contend that for a nation to try to tax itself into prosperity is like a man standing in a
bucket and trying to lift himself up by the handle. -- Winston Churchill