Posted by Howard Richman on March 18 2008 at 13:24:20:
Sunday´s Pittsburgh Tribune-Review has a great review by Jack Markowitz of Trading Away Our Future, the just-published book about the trade deficit written by my father, my homeschooled son Jesse and me. Here is what he wrote:
It´s all in the family to hate what´s happening to the factories of America. Three generations -- veteran Pittsburgh economist Raymond L. Richman and his son and grandson -- have issued a very tough book on U.S. "de-industrialization." And what our wimpy leaders in Washington and on Wall Street should do about it.You can purchase our book from Amazon.com or by entering the store at this PA Homeschoolers website.They argue that foreign countries, especially and most worryingly China, are practicing a form of dirty tricks in global trade. They scoop up the billions of dollars the consumers in our shopping aisles send over for their goods. But they don´t import from us anything like a reasonable proportion. Now that would be fair. It´s what "free trade" is supposed to imply.
Instead, they turn our buying sprees right around and plow the proceeds back into U.S. Treasury bonds and increasingly hefty shares in American businesses.
This keeps U.S. interest rates low, which is not an unmixed blessing. It discourages our own saving. We keep spending on the produce of their low-wage industries, so we´ve effectively helped wipe out 7 million U.S. manufacturing jobs. And that in turn widens the income gap here. As high-pay employment shrinks, the displaced factory hands have to compete for unskilled jobs. Result: more suppression of wages and benefits at the lower end.
And the U.S. government has aided and abetted this "dollar mercantilism" for nearly a quarter-century.
So say the Richmans in their 230-page indictment, "Trading Away Our Future" (Ideal Taxes Assn., Pittsburgh, $12.95).
In 1984, they say -- during Ronald Reagan´s Republican presidency -- the treasury pushed through "one of the most foolish tax loopholes of all time." It exempted the interest earned by foreigners on U.S. savings.
That should be stopped right now, say the authors. Congress should reinstate the 30 percent withholding tax that prevailed before 1984 on interest earned in the U.S.A. Americans pay it, so should foreigners.
Other recommendations include forcing overseas markets to open up to U.S. goods. The goal ought to be mutually beneficial "balanced trade" instead of the "free trade" that´s religion to most economists. "Import certificates" would compel countries that sell to us to buy from us. (Warren Buffett, the eminent investor, has prescribed similarly for years.)
Unless current trends change, the Richmans foresee long-term Chinese economic domination and a "hard landing" for America. Meaning, a crashing dollar, runaway inflation and reduced living standards. They advise buying gold mining stocks and shunning the U.S. financial sector, but in public policy a series of gradual rather than panicky correctives. A rescued economy and manufacturing base are "within our reach today," the say. "It is not yet too late."
At a hale and hearty age 89, Raymond Richman is a retired professor at the University of Pittsburgh. Son Howard, 57, teaches economics on the Internet and grandson Jesse, 30, is a political scientist at Old Dominion University in Virginia.
Howard