Wednesday, July 27, 2022

Bringing Manufacturing Back To The United States

Both Republicans and Socialists have supported Free Trade for many decades opening up our country to products manufactured all over the world with little or no tariffs even though many countries have made it difficult for American products to enter their countries.  The result has been lower prices for many goods.  However, in the process about 70,000 factories in the US have been closed and 5 million jobs have been shipped overseas mostly to China.  Most important, the United States is now dependent on other countries, mostly China for critical goods like electronics, semiconductors, pharmaceuticals, solar panels, wind turbines, batteries etc as well as minerals needed to produce many of these products.  As a result, our country experiences a trade deficit each year exceeding $800 billion, which means that we import way more than we export to other countries.  This is wealth leaving our country every year.  

Today, only 12% of semiconductors that go into cars and most electronics are made in the US when years ago, it used to be more than 40%.  There is a shortage of semiconductors so it is causing all sorts of problems with the supply chain.  Of course, Congress always throws money at a problem.  Congress is about to enact a $52 billion bail out program to encourage companies to produce more semiconductors in the US.   We do need to bring manufacturing of critical products back to the US, but there is a smarter way to do it. 

Instead of giving these multi-billion companies taxpayer monies with no guarantees, it would be better to impose tariffs on critical goods coming into the United States and provide companies significant tax incentives to manufacture products in the United States.  And, there would be a long list not just semiconductors.  It would be smarter to use the tax code to incent business behaviors.  Over a ten year period, we will start to see critical industries brought back to the United States.  As usual, the brainiacs in the DC Swamp of both political parties are taking the wrong approach to get the job done.  This is Econ 101, which apparently most of them never took and passed.  

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