Is Free Trade The Issue? Or Is It Tax Policy, Health Care and Income Disparity?

By Big Tent Democrat, Section Legislation
Posted on Mon May 14, 2007 at 07:59:14 AM EST
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Paul Krugman tell some hard truths about trade policy and income inequality in the United States and the world. Some bloggers like David Sirota and the folks at MYDD are closely aligned with labor unions and have a fairly narrow way of looking at the issues - international labor standards, the right to organize, etc. From the US perspective, I think Krugman states an essential truth:

Realistically, however, labor standards won’t do all that much for American workers. No matter how free third-world workers are to organize, they’re still going to be paid very little, and trade will continue to place pressure on U.S. wages.
So what’s the answer? I don’t think there is one, as long as the discussion is restricted to trade policy: all-out protectionism isn’t acceptable, and labor standards in trade agreements will help only a little.
By all means, let’s have strong labor standards in our pending trade agreements, and let’s approach proposals for new agreements with an appropriate degree of skepticism. But if Democrats really want to help American workers, they’ll have to do it with a pro-labor policy that relies on better tools than trade policy. Universal health care, paid for by taxing the economy’s winners, would be a good place to start.

Tax policy and health care policy can do more for our country's workers than trade policy. That is not the labor union mindset, but it should be the Democratic mindset.

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Is Free Trade The Issue? Or Is It Tax Policy, Health Care and Income Disparity? | 36 comments (36 topical)

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The problem.... (5.00 / 3) (#1)
by kdog on Mon May 14, 2007 at 08:19:13 AM EST

paid for by taxing the economy's winners

The problem would be getting the govt. to pay for healthcare, they prefer buying bombs.

The government taxes winning gamblers, they took about half of a 5k trifecta I hit at Belomont last year. The guy who hits for 500k on a stock ain't paying half...doesn't seem fair. Gambling winnings are gambling winnings...whether by stock market or race track.

Capital gains tax (5.00 / 1) (#2)
by Big Tent Democrat on Mon May 14, 2007 at 08:26:57 AM EST

Why better treatment of such income? So much for free market Adam Smithism.


Speculation versus gambling (none / 0) (#6)
by roy on Mon May 14, 2007 at 09:15:15 AM EST

Successful speculation benefits society by directing capital to effective businesses. Speculation also helps calculate the correct value for the stock, explained here:

Despite their horrible reputation, stock speculators perform a crucial service in the market economy. Their attempts to buy low and sell high quickly eliminate mispricings in the stock market. Although not at first obvious, accurate stock prices are crucial to an efficient use of society's resources.

It works because speculators' success is tied to picking good companies. Gamblers' success is tied to chance or maybe skill at an otherwise pointless game. The only societal benefit in gambling is the gamblers' enjoyment and enrichment, which is nice for them, but doesn't make the economy move any smoother.

Some short-term speculation strategies can be more like gambling, like day traders who speculate on other investors' behavior rather than on the value of the stock, but short-term gains are taxed like regular income. I think that's the same taxation as is used for gambling income, although I've literally done only five minutes of reading on gambling taxation.

(Disclosure: I've been living off investment income for several months, and going out of my way to avoid the short-term taxes)


Horse racing (5.00 / 1) (#8)
by squeaky on Mon May 14, 2007 at 10:30:18 AM EST

Gamblers' success is tied to chance or maybe skill at an otherwise pointless game.

The horses have to eat, as do the jockeys as do the ticket sellers, all the way up the ladder to the owners.

Is a gambling on a bomb making company somehow more legitimate because they are listed on NYSE?

No it is because the ones passing legisaltion on captiol gains tax are making their money from stocks while the less fortunate are losing their money on a dream of their horse coming in.

The game is rigged where the less powerful pay more because they do not make the rules.


Thanks squeaky.... (none / 0) (#29)
by kdog on Tue May 15, 2007 at 08:51:16 AM EST

But I don't always lose, I'm pretty good at reading fractions and breeding:)I prefer to speculate on horses because I understand them better than the markets, and it's fun.

Horseplayers like myself support a whole industry, employing lots of people.

If I'm not mistaken, anything over 600 bucks on a dollar bet gets taxed at a 50% rate, though you can claim your losses. Capital gains tax ain't 50%.

I'm not arguing for more taxation, I think we all should pay less and shrink the federal war machine government. But since that will never happen, and the massive government will never switch their priorities to healthcare from war, I'd like to at least not get shafted for speculating on the outcome of a race instead the outcome of a new weapon in development.


kdog (none / 0) (#30)
by jimakaPPJ on Tue May 15, 2007 at 09:18:55 AM EST

kdog..

If you do your own taxes and paid 50%....

Get a tax preparer..

The maximum tax for single people is 35% for the amount over $336,550....28%


: I didn't pay.... (none / 0) (#32)
by kdog on Tue May 15, 2007 at 09:35:31 AM EST

they took:) Over a certain amount and the tax is withheld. Smaller scores you get the full amount and owe the feds.
Oh well, I dodged the tax on the wsop seat I won last year, so I guess we're even:)

Capital Gains (none / 0) (#33)
by squeaky on Tue May 15, 2007 at 10:03:55 AM EST

On stocks is 15%.. As should be gambling, and selling fine art/collectables.


roy (none / 0) (#11)
by jimakaPPJ on Mon May 14, 2007 at 12:20:30 PM EST

Gambling is part of the economy and should be taxed as the rest of the economy.

Having said that, many people who are in the markets understand Blackjack better than the markets and would be better off taking their money to Vegas...

At least there they could get free drinks and maybe a free meal...

Poker however is a game of skill and played only by mature gentlemen and gentlewomen of the highest caliber in morals and societal obligations..

;-)


if mr. krugman (5.00 / 1) (#3)
by cpinva on Mon May 14, 2007 at 08:29:04 AM EST

thinks that the inability to organize is the primary reason for the disparity in costs between the third-world countries, and the U.S., his analysis is seriously, fatally flawed.

that is but one part of the overall problem, which creates an uneven playing field for both U.S. workers and companies. frankly, i'm not even convinced it's the major part.

if you fail to take into account the various rules and regulations that u.s. based companies are required to comply with, for everything from labor practices to environmental standards, then you're ignoring the bulk of the difference.

i'm not at all suggesting we should do away with these standards; they give us cleaner water and air than mexico city, and a higher standard of living for our labor force. what i'm suggesting is that, in the interests of truly competitive "free trade", those other countries should be required to ratchet up to our standards, not us go down to their's.

that accomplished, i submit the differences in cost of production/services will practically disappear. the difference presently is an artificial construct, based on the predatory practices allowed by non-representative governments in those third world countries.

clearly not what adam smith envisioned.

: Could you not click through? (none / 0) (#4)
by Big Tent Democrat on Mon May 14, 2007 at 08:30:52 AM EST

I apologize, it is in Times Select. Bevause when you write:

if mr. krugman thinks that the inability to organize is the primary reason for the disparity in costs between the third-world countries, and the U.S., his analysis is seriously, fatally flawed. . . .
HE does NOT think that. He argues against that thinking.

Krugman candy coats it (5.00 / 1) (#10)
by Che's Lounge on Mon May 14, 2007 at 11:08:44 AM EST

What he (and most gringos) cannot come to grips with is that free market capitalism is a failure. Unless you are in that top 3%.

Organized workers are better paid on average, have better benefits, are more environmentally dilligent and have more leisure time. They retire more securely. These are all the goals of every working society. Unions are not managed to perfection. Neither is our government. Both of those problems are caused by a corrupt, elite fraction of the population that refuses to relinquish one bit of their money and power for the betterment of our society as a whole. As long as these people maintain that power, things will not change. Krugman can dance and sing all he wants. But under the BS, he knows the truth. The power to effect progressive change and the money to accomplish it (as if money should even be a factor) are being obstructed by a wealthy few who like things just the way they are. They will tell you that those who stand to benefit from progressive change are freeloaders, while most of the rich in this country are rich because they inherited their money.

"Property is theft"

Jack Reed

based on what he wrote (none / 0) (#5)
by cpinva on Mon May 14, 2007 at 08:43:23 AM EST

HE does NOT think that. He argues against that thinking.

i realize that. however, for it to be even brought up as a serious issue, at this juncture, shows just how far down this discussion has come. this was discounted, years ago, where has mr. krugman been?

in fact, if i'm not mistaken, this is essentially a re-hash of a previous column, by dr. krugman, several years ago. if his target audience still hasn't figured it out, they're a lost cause.

frankly, if you're going to quote from a column, at least have the decency to make sure it's one we can all access, or copy/paste it here.

: Lighten up! (none / 0) (#20)
by Demi Moaned on Mon May 14, 2007 at 10:28:30 PM EST

The quote presented makes an interesting and intelligible argument. I'm sure it represents the gist of the article and I'm the more grateful to BTD for presenting it precisely because I don't have access to the full text.
The argument may not be brand new (few are). But that doesn't mean it doesn't bear repeating. Important ideas only enter the general awareness through repetition-- one of the chief values of the 'blogosphere' in my mind.
And what is presented here is certainly not a commonplace of public discussion.

My father was a union carpenter (none / 0) (#7)
by Militarytracy on Mon May 14, 2007 at 10:19:48 AM EST

during his career. I think the unions are important but when it comes to dealing with national income inequality the tax policy and health care are where the real focus must be to honestly help America's workers! Trade policy will not help the single mother without family resources working at Walmart in her lifetime and not even her children's lifetimes the way things are going right now.

More Govt is the Answer? (none / 0) (#9)
by jarober on Mon May 14, 2007 at 10:45:26 AM EST

Without getting into the merits of government run health care, I'd ask you to look at Europe and Canada: in both places you have government run (taxpayer funded) health care, and in Europe you have much stronger unions.

Now look at the outsourcing trends, and you'll see that they aren't much different from what we see here in the US. If you want to argue in favor of a governmentally run health care system, I don't think this argument helps you much - work is leaving those shores at least as rapidly as it's leaving ours (and in the case of Europe, probably faster).

Let's use the Auto industry as an example. (none / 0) (#12)
by kindness on Mon May 14, 2007 at 01:26:03 PM EST

Here in the US, the auto industry is getting creamed. They say the cost of Health Insurance for both current workers and retiree's adds over $5,000 to the sticker price of each and every new car produced here in the states.

Compare that to our trading partners and the auto competition out of Japan & Europe. There, the government is responsible for the cost of Health Care of all retiree's and most of the cost of current workers. Companies there apparently pay some money for current workers. None the less, strictly on an economic basis, the US policy on Healthcare costs is sinking out own manufacturing.

If you want to argue that single payer healthcare isn't as good as US healthcare, I'll tell you that a) that's a separate argument all together & b) you are probably one of the lucky ones who has a decent Healthcare plan through work.

Now why our Corporate interests aren't more involved in getting government to act like their competitors governments.....it's probably a manifest fantasy of republican politics. The leaders think they'd be taxed more to cover it, even though their companies would start reaping huge benefits from it. Reverse enlightened self interest.


Did "they" mention that (5.00 / 1) (#13)
by sarcastic unnamed one on Mon May 14, 2007 at 01:38:53 PM EST

the US auto industry is getting "creamed" by foreign-owned auto makers who make the cars in the US that they sell in the US?

iow, American-made Hondas, Toyotas, BMWs, etc. all have that same $5K added to their sticker prices as well (assuming $5K is accurate), but they're still "creaming" GM/Ford/Chrysler.

It ain't a lack of nat'l health care that's designing and building cars that too few people want to buy...


Are the auto workers making Camrys in (none / 0) (#14)
by oculus on Mon May 14, 2007 at 01:40:40 PM EST

Kentucky unionized?


Dunno (none / 0) (#15)
by sarcastic unnamed one on Mon May 14, 2007 at 01:42:53 PM EST

What's your point?


Toyota and Honda may not be incurring that (none / 0) (#16)
by oculus on Mon May 14, 2007 at 01:45:39 PM EST

$5000/vehicle cost for pensions and health care costs for non-unionized labor in the U.S.


: Good point about (none / 0) (#17)
by sarcastic unnamed one on Mon May 14, 2007 at 02:09:07 PM EST

pension. I would imagine the GM et al have many, many more retired workers than relative newbies at manufacturing cars in the US like Honda, Toyota, BMW, etc. Higher health care costs for retired workers/pentioners, probably, as well.
I might as well do some googling instead of guessing...

GM spends about $1,500 per car on employee health benefits. Toyota spends about $300. GM has about 400,000 retirees and Toyota has about 1,000 in North America.
That's a huge cost gap, but it's only part of the problem. Somewhere along the line, bigness became more important to U.S. automakers than "bestness."
This helps keep health costs down for Toyota:

General Motors once may have viewed competition from Toyota Motor mainly in terms of vehicle style, cost and quality. GM would be well advised to keep an eye on the falling cost of Toyota pharmaceuticals.
Toyota has just opened pharmacies in four of its U.S. manufacturing sites to stem rising health care costs. The move follows a successful 18-month pilot program in Toyota's biggest U.S. manufacturing complex in Georgetown, Kentucky.

Talk about an uninformed comment. (none / 0) (#25)
by dkmich on Tue May 15, 2007 at 05:11:20 AM EST

Ignorance is bliss my friend, enjoy it while you can.

Cerberus to pay $7.4B to DaimlerChrysler for 80.1 pct of Chrysler
It's a huge risk for Cerberus because it has agreed to take on Chrysler's estimated $19 billion in retiree health care costs. Chrysler's U.S. pension obligation is overfunded at present, the company has said.

That's just retirees and not current worker health care costs. How many retirees do you think Toyota or Honda have in the US? ZIP! Now that Toyota thinks the backs of the unions have been broken in autos, they are lowering their wages, step by step.


Sigh (none / 0) (#34)
by sarcastic unnamed one on Tue May 15, 2007 at 11:43:09 AM EST

Uh, you did read the rest of the convo, didn't you? Pretty sure whatever it is you think you're talking about that's got your knickers in a knot's been covered...


It is what is making them more expensive. (none / 0) (#35)
by dkmich on Tue May 15, 2007 at 04:03:48 PM EST

It ain't a lack of nat'l health care that's designing and building cars that too few people want to buy...

: Well (none / 0) (#36)
by sarcastic unnamed one on Tue May 15, 2007 at 04:51:21 PM EST

It is what is making them more expensive.
I will give you that it's part of why they're more expensive, however it's a lot more complicated than that.
Regardless, GM is building cars that too few people want to buy. That is the core problem.

"protectionism isn't acceptable" WTHN? (none / 0) (#18)
by fairleft on Mon May 14, 2007 at 03:04:22 PM EST

Why the hell not?

THE problem is that even 'progressives' like Krugman have bought into free trade ideology completely. 'Protectionism' built the U.S. economy, it built the Europoean and East Asian economies. But we're supposed to just accept an ahistorical assertion that "protectionism isn't acceptable."

Because we'd like to export our goods, too (none / 0) (#21)
by Demi Moaned on Mon May 14, 2007 at 10:32:55 PM EST

If we protect, others will protect, too.

Protectionism can play a valid role (e.g., when trying to build up a new industry), but as a general strategy it's not likely to increase prosperity.


actually, that was tried (none / 0) (#23)
by cpinva on Mon May 14, 2007 at 11:16:58 PM EST

and precipitated the worst economic depression in world history. you may remember it from history class: the smoot-hawley act

protective tarrifs never work, precisely because everyone else then puts them in place, resulting in pretty much the status quo.

with respect to taxes, we already have tax treaties with most of the countries in question, so i'm not convinced that's the answer either.

however, i go back to the basics: all of the rules and regulations, deemed good public policy, in the U.S., that the countries outsourced to don't require of their companies. this represents the largest single gap in cost, labor is a distant second.

take out the compliance costs, from U.S. sourced businesses, and outsourcing loses its luster. conversely, add those costs to the foreign producer/service provider, and their costs begin to appear suspiciously similar to those of U.S. companies.

that's the issue we should be discussing, because that's where the crux of the marginal increase in cost lies.


cpinva (none / 0) (#24)
by jimakaPPJ on Tue May 15, 2007 at 12:00:30 AM EST

You have a lot right, but I would add that currency valuation has a lot to do with it. As long as China is allowed to keep its currency cheap as compared to the dollar, its products will be cheap.


Wrong, (none / 0) (#26)
by dkmich on Tue May 15, 2007 at 05:15:27 AM EST

Tariffs were created by our founding fathers and totally funded this country for over its first 100 years. If they want our stuff (not that we make anything anymore), they'll trade. Tariffs are free to maintain their standard of living and ours. Seriously, if corporations have to pay tariffs to get stuff in, it is just the cost of doing business. Why are we paying for their business costs? No, consumers and laborers in this country need to ban together and make some demands. If not met, they need to quit shopping. Who needs more Chinese crap anyway?


: It's more complicated than that (none / 0) (#28)
by Big Tent Democrat on Tue May 15, 2007 at 07:15:25 AM EST

Greed (none / 0) (#19)
by Dadler on Mon May 14, 2007 at 03:21:28 PM EST

Is the largest factor underlying this entire discussion. And no one wants to discuss it because almost all of us benefit from it. I hate to risk being called touchy-feely, but it's an obvious and basic truth here.

Share, treat others like you want others to treat you, don't judge others until you've walked a mile in their shoes...all that stuff your parents teach you.

All other elements of this discussion are merely symptoms of the larger problem. Despite its indisputable complexity, certain things are pretty simple in life. One of them is this: Be kind and generous to others, even when you don't have to, and good things will follow.

A though or two on health care (none / 0) (#22)
by jimakaPPJ on Mon May 14, 2007 at 11:04:24 PM EST

Folks, quit trying to justify health care based on the cost of it to GM or any other company.

It doesn't make any difference. The pros will poopoo it and the cons will yell about it.

Don't try to justify it on not having it based on results of Canada or England. "Some" is better than "none." Anyone who doesn't have it can figure that out. Those that don't can also figure that out, but don't want to admit it. Besides. We are smarter/better/quicker than either one of these.

The issue is, and should be "fairness." And for it to be fair, everyone should pay. Period. Forget the nonsense about "soaking the rich." Just step up and say: "Everybody has it, and everyone pays."

That puts everyone in the same lifeboat, and maybe, just maybe, we can get everyone to grab an oar.

If you don't do that, forgetaboutit. The tax payers will see it as just another raid on their pocketbook, which it is if you don't go to a consumpation tax... That's right. Federal sales tax on all purchases except unprocessed food and utility bills. I suggest 6%.

In addition to the obvious, people making less than X now ($38K approx) for a family of 4, there is untold billions out there in the gray economy. Drug dealers should pay for their health costs when they're shot up, just like the illegals we worry about and people like me and roy who are living off our investments..

Figure out someway to expand the Medicare template. Let people keep on seeing their regular doctors, etc. Control costs, not choice.

Finally, understand that your biggest foes will be the insurance companies, and those who do the billing within the current system. You think the Repubs tough?? You aint seen nuttin yet.

I don't think anybody is. n/t (none / 0) (#27)
by dkmich on Tue May 15, 2007 at 05:16:34 AM EST

: dkmich (none / 0) (#31)
by jimakaPPJ on Tue May 15, 2007 at 09:35:00 AM EST

And your point??