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President Barack Obama meets with the student finalists of the NFTE National Youth Entrepreneurship Challenge in the Oval Office. These students - - four of who are still in high school - - have all started new businesses and competed against 24,000 other young people in the competition, October 12, 2010.
Dr. Peter Morici says tax China and bankers pay to bring back US jobs.
Despair grips the nation, as nearly 15m are counted as jobless and many more
languish in part-time employment.
Free trade with China, flawed energy policies and pandering to Wall Street are
destroying American prosperity.
China and Oil
Retail sales are up and businesses are replacing trucks, computers and critical
equipment but too much is spent on imports.
In the second quarter, imports grew so much more rapidly than exports that the
trade gap subtracted 3.5% from the demand for U.S. made goods and services. But
for the trade deficit, GDP would have been up 5.2% instead of a paltry 1.7%. At
the former pace, unemployment would fall to 5% by 2014.
Oil and China account for nearly the entire trade deficit, and without dramatic
changes in policy, unemployment will stay near or above 10% indefinitely.
President Obama’s efforts to halt offshore drilling and otherwise curtail
conventional energy supplies—premised on false assumptions about the immediate
potential of electric cars and alternative energy sources—are making United
States even more dependent on imported oil and more indebted to China and other
Detroit could build many more attractive and efficient gasoline-powered vehicles
now, and a national policy to accelerate fleet replacement would reduce imports,
spur growth and create jobs much more rapidly than investments in battery and
To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing
undervalues the yuan by 40%. It accomplishes this by printing yuan and selling
those for dollars other currencies in foreign exchange markets. Annually, those
purchases exceed $450 billion or 10 about% of China’s GDP 35% of its exports.
President Obama has pleaded with China to stop manipulating its currency, but
Beijing shrewdly recognizes he lacks the will to act against Chinese
mercantilism; hence, Beijing offers token gestures and cultivates political
support among U.S. businesses like General Electric and Caterpillar who lead in
outsourcing jobs to China and profit from Chinese protectionism at the expense
of American working families.
President Obama should impose a tax on dollar-yuan conversions in an amount
equal to China’s currency market intervention divided by its exports—currently,
about 35%. That would neutralize China’s currency subsidies that steal U.S.
factories and jobs. The tax could be imposed on other currencies whose
governments manipulate currencies to enjoy large trade surpluses.
Even with effective responses to oil import dependence and Chinese mercantilism,
most small businesses need credit from the 8000 regional banks to expand.
Unfortunately, the Treasury used the TARP to recapitalize Wall Street banks and
trading houses, like Goldman Sachs, which then recorded big record profits in
2009 and paid record bonuses with taxpayer money in 2010.
Treasury did not create a “Bad Bank”—an analog to the Savings and Loan Crisis
Resolution Trust—to rehabilitate the Main Street banks. Many of those banks were
blindsided by Wall Street trading and the credit crisis, and are now stuck with
bad commercial mortgages and securities backed by those loans.
While Citigroup Chairman Vikram Pandit pays new bank executives 5 and 10m
dollars a year with its share of the $2 trillion in taxpayer money ploughed into
Wall Street by the Federal Reserve and TARP, as many as 3000 of the 8000
regional banks may disappear through failure or acquisition by larger brethren.
Washington provided Wall Street with taxpayer cash to monopolize banking. Now
those banks are pushing down CD rates the elderly receive on savings, jacking up
credit card fees, and setting aside credit for big multinationals that outsource
more jobs than they create. Meanwhile, disappearing small banks have no cash to
lend the small businesses President Obama say he favors to create jobs.
To fix small banks, Congress should use repaid TARP money and impose a 50% tax
on bank compensation over $2m a year—paid now or deferred—to create a Resolution
Trust to purchase loans and securities from regional banks. That trust could
work out the loans and securities over several years and return a profit to the
taxpayers. Smaller banks would then have the funds to lend and stay in business.
Taxes on currency manipulators and bankers and a national policy to build fuel
efficient cars are radical departures from free market principals but the nation
is in crisis.
Deindustrialization is rapidly reaching the point of no return, and the ascent
of China threatens western democratic values globally.
Do Americans really want Beijing making the rules on human rights—forget about
trade—in this century. If so, let China continue as banker to American decline.
Athens was a much more civilized place than Rome but in end the Greeks were
enslaved by their more practical neighbors to the West.
Professor, Robert H. Smith School of Business, University of Maryland,