Simple Solutions to Complex Problems

The multitude of problems desecrating the economy and the national debt seem to be a hopelessly complicated mess. At least, this is the perspective that most Americans have adopted. But there are actually some very basic solutions to the various obstacles we are currently facing.

The United States originally developed into a wealthy and productive nation by protecting its domestic industries and jobs. Americans bought American-made products, and foreign countries were taxed if they wanted to peddle their goods here. As the U.S. is still the largest consumer nation in the world, we should not be giving away the rights to do business here for free. Despite the perceived ideal of globalization, no other country on the planet is doing this.

The most direct way to maximize profits through trade would be to initiate a tariff – but most politicians are in opposition to this proposal. The concern of creating a trade war and a quest for global diplomacy have left modern leaders in a very vulnerable position. Ironically, the very trade war they fear is already taking place, and the United States is not faring well at all. Every free trading nation employs a tax that protects their home economy, except for the U.S. This tax is called a Value Added Tax, or a VAT.

A VAT is a consumption tax that is placed on a product whenever value is added during any stage of production up until the final sale. The amount of tax that the user pays is the cost of the product, minus any of the costs of materials used in the product that have already been taxed. This system works as tariff when goods are shipped into a new country and taxed accordingly. The money the U.S. could accumulate with a VAT could go a long way toward paying off foreign debt and keeping home grown industries strong. Foreign products continue to flood the unrestricted U.S. market, while foreign nations are using a VAT to restrict American exports.

The American people are told that protectionism is wrong and that it stymies growth overall. Yet every other nation in the world – including virtually every one of our trading partners – practices protectionism in some way, shape or form. Meanwhile, the U.S. is not fighting to protect itself at all, and these countries are not hesitating to take advantage. We must engage in the same protectionist practices that are working elsewhere, or the United States will continue to have major a disadvantage in the world market.

 

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