In tonight’s foreign policy debate, Mitt Romney will say that the way to get jobs back from China is with more free trade and lower taxes. But China’s Communist. It already has tougher trade restrictions and higher taxes than we do. How, exactly, will more tax cuts help us compete?
He’ll also push for an even more extreme version of “free trade” – one without workers’ rights requirements or any other guiding principles. But unrestrained free trade is a recipe for global slavery. It gives the world’s corporations the motive and the opportunity to locate their jobs wherever they can most easily exploit and abuse the workforce.
How can the loss of workers’ rights in China or anywhere else create good jobs in the United States? Short answer: It can’t. Throw in some even more exorbitant military spending, and you’re headed for … the RomneyZone.
The Definition of Insanity
Romney would slash individual tax rates for millionaires and billionaires to well below their already historically low levels. If that’s a recipe for job creation, why aren’t there any jobs right now? The individual tax rate for high earners is already much lower than it was the boom days of the 1950s and 1960s, when the top rate was 80 to 91 percent. Now it’s 35 percent or less, yet unemployment’s much higher.
Romney says we bring jobs back to this country from countries like China and India take by taking our tax rates for millionaires and billionaires, which are already lower than theirs, and making them even lower.
Insanity, according to one popular definition, is doing the same thing over and over and expecting a different result. If tax cuts for the wealthy haven’t created any jobs yet, how will even bigger tax cuts create them? That doesn’t make sense.
What would make sense is to tax wealthy people more reasonably – which is to say, at higher rates – and use the money to create jobs for teachers, firefighters, construction workers, and other people whose contributions are vital to our society.
Romney’s so-called “jobs plan” would even eliminate inheritance taxes – which Republicans call the “death tax,” even though the individual who dies is not taxed. He wouldn’t lower them, mind you, he’d eliminate them – supposedly in the name of job creation.
Ask yourself: How many machinists has Paris Hilton hired lately?
Romney has another illogical idea: cut the corporate tax rate. The President has a similar idea. It’s part of the right-wing “Simpson Bowles” proposal, based on the same austerity economics thinking currently devastating Europe, which centrist Dems keep pushing.
It’s true that the official top corporate tax rate in the United States is 35 percent, above that of most other developed countries. But the thousands of loopholes lobbyists have inserted into our laws make our country’s effective corporate tax rate – the amount companies actually pay – one of the lowest.
As the Congressional Budget Office noted recently, taxes on corporate earnings in this country fell to their lowest rate in forty years in 2011. Corporations only paid 12.1 percent on average for earnings inside the United States, down from approximately 25 percent in the years leading up to the 2008 (corporation-created) crisis. And this tax leniency was offered while they were taking in higher profits than ever before.
We’ve seen it before: High profits. Low taxes. And no jobs. Tell us again: Why will it work this time, Mr. Romney?
As for the President, his preferred solution is to eliminate all tax breaks and offer a flat corporate tax rate of 28 percent. But they were paying 25 percent on average before the last round of tax breaks. So his best-case scenario puts us more or less where we were – and that’s assuming that corporate loopholes really are removed.
That’s seems like an big assumption to make in Washington, the Land of the Lobbyist.
But at least the President says he’ll try to close those corporate tax loopholes. Not Romney. His “jobs plan” says he’ll “press for an immediate reduction of the corporate tax rate from 35 to 25 percent.” It says nothing about closing loopholes in return for that cut, just that Romney “will also explore the possibility of coupling further rate reductions with measures that broaden the income base.” (emphasis ours)
What Romney’s really saying is this: We’ll think about closing some loopholes – maybe – when we offer our next huge tax cuts for corporations. But right now they’re paying between 12.1 percent and 25 percent, on an official tax rate of 35 percent, thanks to those loopholes. This wholesale cut would bring their real contributions down to somewhere between 15 percent and … well, zero, more or less.
But then, a lot of giant corporations in this country are already paying nothing in Federal taxes – and giving away millions in corporate campaign contributions to make sure it stays that way. Even the high end of Romney’s new rates is far less than corporations pay in China or India.
And, as if all that’s not enough, Romney’s global “jobs plan” would also stop collecting any taxes for American corporations’ overseas earnings. That would do even more to discourage US hiring.
Free Trade Ain’t Free
Romney’s agenda is more radically “free-trade” than anything either party’s ever proposed before. He mocks the President for withholding his signature from three free-trade agreements which Obama basically (and unfortunately) supports, because (as Romney puts it) “he has been holding (them) hostage to an ill-considered piece of legislation called Trade Adjustment Assistance.”
As Romney’s “plan” explains, that legislation “aims to provide job training, relocation allowances, and unemployment pay for workers who lose their jobs because of foreign trade.” But Romney say that like it’s a bad thing.
Romney would rather have a “Trade Promotion Authority” that allows the President to “fast-track” a lot more of these disastrous free-trade agreements.
You’re traveling into another dimension …There’s the signpost up ahead: Your next stop, the RomneyZone.
But Romney’s strangest proposal involves an impractical concept he calls the “Reagan Economic Zone.” Call it the”RomneyZone” for short. It would basically place the United States outside the World Trade Organization, which is already too corporate-friendly in many cases, but which conservatives dislike because it’s not US-led.
Participants in the RomneyZone would foreswear workers’ rights, lift occupational safety protections and environmental safeguards, and leave both employees and consumers at the mercy of multinational corporations.
It’s unlikely that very many other countries will be willing to step into the “Zone” with Mr. Romney, except for the most extreme of them. But those that do will find that “Zone” easily enough.
All they’d need to do is follow the columns of belching pollutants rising from its unregulated smokestacks.
Death Star Economics
Then there’s military spending. The Pentagon’s annual “Base Structure Report” for 2011 says that “n 542,000 facilities (buildings, structures, and linear structures) located on nearly 5,000 sites worldwide covering over 28 million acres.” And, as author Nick Turse explains, even that probably doesn’t tell the whole story.
And yet they keep telling us we can’t afford Medicare benefits.
Neither candidate proposes to cut military spending, although the President’s budget slows the rate of its growth. But Romney would accelerate that growth radically. He’d spend $2.1 trillion more over the next ten yeas than is currently budgeted.
For perspective, consider the “Grand Bargain” proposals that would slash Medicaid, antipoverty programs, and even attack Social Security benefits that don’t contribute to the deficit – all to achieve $4 trillion in savings over the same time period.
The dirty secret – which isn’t so secret – is that there’s no good reason to force all this cash down the military’s gullet, except to make defense contractors even richer.
The Dirtiest Secret
But here’s the dirtiest secret behind the Romney agenda: It rewards totalitarianism and abuse across the political spectrum. China’s leaders and World dictators are undoubtedly looking forward to Romney’s trade agenda with a shared sense of eager anticipation.
The Chinese aren’t taking American jobs because of their tax policy. They’re taking them because Chinese workers like those who build iPhones and iPads live in servitude, housed in dormitories and awakened at all hours of the night to meet the latest Apple production quota. They’re taking jobs because they can cut costs by endangering the lives of their workers.
(See “Hell Is Cheaper,” our interview with law and economics professor William K. Black, Jr.; and this piece by Dave Johnson.)
The Romney vision of economic globalism isn’t designed to improve the lives of working people in other countries. But it will make them worse here in the United States. It won’t turn other countries into developed countries with a strong middle class. But it will turn ours into a Third World economy.
Thinking Like a Real Executive
We’ll lose millions more jobs, and any chance to rebuild American manufacturing, if Romney’s agenda becomes government policy. Our cash-strapped government will break its promises for Social Security and Medicare. And a world that’s become even more militarized will become even more hostile to American interests.
We don’t need to wander the globe to find a working model of the economy we need. We can find it right here at home, in the United States of decades past, a nation filled with good middle-class jobs and opportunities for a better life through study and hard work.
Romney likes to say he’d run the country like a business person. But a smart business person would use those decades as a model for success and ask: What did they do right?
Here’s what they did: They understood government’s vital role in building a growing economy and a stable society. They used government’s resources to educate the young, build our highways and bridges, and guarantee a life of financial security for the elderly.
And they asked the wealthiest among us to pay their fair share.
Who will defend government during the Presidential debates? Too often the President has chosen to embrace the rhetoric of misguided austerity, hurting both our national discourse and his own political prospects. Let’s hope he chooses a wiser path tonight.
Whatever our nation’s past mistakes, this country was a beacon of economic opportunity under Presidents like Roosevelt and Eisenhower and Kennedy. People came from all parts of the world in search of a better life. Millions of them found it, including my ancestors. Maybe yours did, too. And those that became wealthy paid much higher taxes than rich people do today – usually with a spirit of gratitude for the opportunities they’d been given.
While you’re watching the debate on television, remember the country we used to live in – and come home to it.