The Heritage Foundation has a reason for the weak dollar ... and some people aren't going to be very happy to hear it. It's the U.S. tax code. Heritage says that there are two failings that are causing the long-term weakness of the dollar. First, Americans don't save enough to meet capital investment requirements. And the fact that we consume more than we produce. Both of these exist because of our complicated and asinine tax code.
Most politicians don't even want to consider scraping our current tax system. The current tax code puts a whole lot of power in their hands. When has the powerful EVER willingly relinquished power?
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Does he explain why he thinks this is the case? How does a complicated/asinine tax code induce more consumption than production?
This costs Americans $3 billion every year in lost income and jobs for every $1 billion of revenue yielded to the government.
Assuming that were true, I wonder if they consider if and how much that $1 billion "yielded" to the gov't SAVES the US citizenry. For instance (as I've noted before just because it's a figure I'm familiar with) investing $1 million in prison education programs tends to save taxpayers $2 million + in reduced recidivism rates (not to mention the additional money pouring into the economy from ex-cons gone straight).
In at least some cases, the "costs" are only upfront investments that save money down the road. Not that I disagree with you on gov't spending too much.
I wonder, for instance, how much of the nearly $1 trillion/year we're spending on the military could be returned to the taxpayers with no net loss? How many road/bridge jobs could be ended - how much in oil and auto company subsidies could be removed - and thereby encouraging citizens to drive less and thereby saving the economy even more in lost time due to mass-driving/sprawl ill effects?
I'm for smart gov't spending which at times may be smaller gov't spending, but at other times may be spending wisely now to save money later.
If the Heritage folk didn't factor in any savings along with the alleged costs, they are skewing the data.
Everyone. Because everyone has an agenda, especially when they bend over backward to convince you they don't. That may sound cynical, but that doesn't make it any less true.
Here's a relevant article from Bloomberg.com. [I'll only post the first few paragraphs or so. Follow the link to read it all.]
Dollar Falls to Record on China's Plans to Diversify Reserves
--By Min Zeng
The dollar fell to a record versus the euro and the lowest since 1981 against the pound after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.
The U.S. dollar also declined to the cheapest versus the Canadian dollar since the end of a fixed exchange rate in 1950 and a 23-year low against the Australian dollar. The New York Board of Trade's dollar index dropped to 75.077, the lowest since the gauge started in March 1973.
[...]
The dollar is "losing its status as the world currency," Xu Jian, a central bank vice director, told a conference in Beijing. "We will favor stronger currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of China's National People's Congress, said at the same meeting.
Chinese investors have reduced their holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to August. China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns. China is the second-largest holder of U.S. government debt after Japan.
"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, who manages $400 million as chief investment officer at Third Wave Global Investors Greenwich, Connecticut.
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The dollar, as far as foreign markets are concerned, has NOT been "amazingly strong" the last couple of decades. The dollar has declined. And with the rise of the European Union-- especially when they finally ratify a unifying treaty --will only weaken the US dollar more.
We can cling to the old ways; the ways that aren't truly helping us at present, or we can seek new, inventive means of strengthening our currency and turning around our economy.
And let's face it, the US tax code is both oppressive, and an affront to our founding documents.
I agree that I'm not the biggest fan of the current tax system.
I'm not so sure that it's an affront to our founding documents.
I'd suggest that if we started moving towards a more sustainable economy, not one based on infinite oil, as our current economy is based upon, that would be the single best thing we could do to strengthen our economy.
As it is now, we're living on borrowed time, seems to me, and on borrowed wealth from our children, their children and our common environment.
That whole 'sperience is a lot of what made me the Dem I am today! Familiarity bred contempt. :-)
You can't support this. It has been consistently true that whenever taxes are raised fewer people save for a rainy day. The Euro's gaining strength and popularity only exacerbates the faults inherent in our tax code.
Raising taxes always hurts the poor. Yeah, it hurts the rich too, but the poor lose out in many ways; fewer jobs, higher prices for necessities, less general opportunity. The rich merely hunker down and pass the burden to those who buy their (corporations) products. Democrats can't seem to get this. What will happen to the dollar if Hillary gets elected and even half of her proposed entitlement programs makes it her desk? What happens if more and more foreign nations divest themselves of our dollar in favor of a more attractive Euro? Will taxes get raised again to cover the economic loss? How many companies may relocate to Europe to avoid the economic decline here in America?
It's easy to say, "Oh, that'll never happen! We've done fine with things just the way they are for decades! You're just being too much of a worry wart!" But the truth is, our tax code has been adjusted and reworked several times, and never has it been good for the people. Taxes are never the answer. Freedom to expand and innovate are.
There may well come a time when scrapping the current system becomes not only desirable, but necessary.
I don't see the dangers of Capitalism in quite the same light as Dan, but I do recognize that something has to change... we cannot sustain our economy on increased taxation and a weakening dollar (and the cost of the war isn't helping either). And if Europe continues to grab more and more foreign bond investors away from US dollars, we will eventually feel the pinch here... perhaps sooner rather than later... and a truckload of new taxes and entitlements will only make it worse.
When Europe moves, it moves quickly. It took them only two years, roughly, to go from a dozen or more currencies to one unified currency. The United States on the other hand tends to wait until the crisis hits before doing anything substantive... CAFE Standards, alternative fuels, drilling in ANWAR or off the Florida coast... we wait until we're forced to change then we invariably choose the one course of action that provides the least benefit (corn for ethanol driving up the cost of everything from beef to cheese) and the most power and prestige to politicians.
The other issues you raised concerned general taxes and entitlement spending. We've discussed these issue before, so I'm just gonna recap the facts.
Corporations since the sixties have paid less and less in taxes. The have special people on staff devoted to minimizing tax payments. They also have lobbyists and funds to influence tax policy to craft loopholes for them.
Entitlement spending can reduce later expenses, and strengthen the homeland. Think Medicare, and WIC.
Since the seventies the U.S. Economy has grown almost exponentially. Because of our purchasing power we have imported lots of goods and grown foreign economies. Now the dollar is in decline and guess what? It is now a better deal for those foreign companies to buy U.S. exports. That's good news for American car manufacturers. As one sector of the economy declines (in this case stocks and financial sectors) another area has increased growth opportunities. America has a strong economy we aren't gonna become some backwater unless we have a major shift in out foreign relations.
Konw hope.