This post has been contributed by DJ and is a response to our recently published article Middle Class Becoming the New Poor as Job Losses Mount.
I’ll start by saying…our US media, our fifth estate, is a failure. They’ve earned the comment: “they’re part of the problem…not the solutionâ€. When ratings and advertisers matter more than digging and reporting facts, should anyone be surprised how lame they’ve become?
Today’s media has become tainted and their jobs are more based on themselves and the opinions of on-air personalities. We don’t get facts, good research, and effective news. We used to rely on newspapers and broadcast media to help us understand matters that are and will affect us, but this no longer occurs. But [we,] the citizens of this country, are part of the bigger problem. We, a majority, prefer entertainment over insight, so this is what we’re fed. We also have little understanding of how government works, so we remain confused or uninterested. The news media has responded in turn by offering-up dysfunctional Hollywood matters as being worthy news. Ratings provide the proof they need to keep us dumbed-down. It sad, it’s happening, and it’s happening for a reason. It’s also a sign of why we’re losing our liberties and the right to choose. The American public is being placated…because we continue to accept it.
This comment concerns a matter which has hit every family. Our media has failed to report this tidbit. It concerns “why†jobs have disappeared from this country and the reason for it…is hardly complicated. It concerns certain laws which are never discussed, never reported.
Given that the media is owned and operated by entities with vested interests including paying advertisers, it’s not that hard to understand why the news is tainted. The following is never identified by our politicians, for obvious reasons. But the media chooses to steer clear of this topic as well. Follow the money!
There exists laws in this country that are the “taproot†as to why jobs have left  the US. Congress, both houses, both parties, passed these laws. NAFTA was just the tip of the bigger berg! These laws, for lack of better expression, represent a “hole in the bucket†by which US production of consumer goods [and jobs] have been moved “offshoreâ€.  â€Offshore†is not literal in it’s meaning, since Mexico is considered “offshoreâ€.
The media chooses to not report this tidbit. What’s more, our politicians focus on putting more “in the bucketâ€. Job training, re-educating workers, etc. This means spending more money we don’t have, but worse, it ignores the bottom of the bucket, where the hole is.
Under our laws, there exists a “provisoâ€, which is not permitted to any other country but our own. This is a 90/10 provision. This law permits any US company to move 90% of itself offshore, provided that the move is not placed within any country or state that is a threat to the US or US interests. Homeland Security requires this restriction. This law then has one more requirement. 10% of the company must remain within a US territory. Consider this formula? Consider then how this law has held the door wide open for jobs to leave the US. This was made “legal†and US companies were behind lobbying this act. While considering this non-reported proviso, consider one more thing. Under this law, why would good, high-paying, production jobs root here again [when] our laws permits companies to move jobs where they choose, when they choose, and if they choose…even after retraining. It’s a lose-lose, thanks to the law granted to US corporations. This law then, is “the hole in the bucket!â€
China, has benefitted from this decision, this law. They applaud it. Their middle class is building, while ours is dying. China is also building a new Navy, thanks to the short-sighted, quarterly thinking, and our stupidity. This is treasonous. The massive default of our consumer product production and lost jobs wasn’t caused by Martian death rays! The culprit is this 90/10 law. It is legal to behave as a foreign company, yet enjoy all the may benefits that US citizenship offers. What a deal?
Any company that has moved 90% of itself offshore is “foreign†and deserves to be taxed and tariffed accordingly for what it truly is. 10% hardly construes as vested in the US.  Justifiably, no other country adheres to this off-balanced formula because the impact on their economy would sink them. They know this, but then they don’t have our congress. The economy of any country is based on what it produces. This is fact. Creating investments (called “paperâ€) and providing services is not conducive to “production of anythingâ€. This 90/10 benefits just Wall Street, not the country. The US ceased producing…why? The law allows it.
Who listens to Wall Street? Follow the money. Notice which doors the lobbyists are knocking on. If this wasn’t enough, there’s more. The IRS is encouraging US companies to move risk-based “departments†offshore. Since Research & Development (R&D) is 100% deductible, it’s urged that such groups be based elsewhere, offshore. This means more job loss, as well as losing creative thinking. But unlike sales or marketing, R&D is risk. R-I-S-K is a four letter word for Wall Street, so they will hardly resist this IRS encouragement. The point here is that what is occurring is doing-so from within. Our government’s charter is based on protecting the citizenship, not selling it.
The 90/10 matter is huge. Try giving your marriage 10%. You won’t have a marriage. You won’t even have a relationship. If you’re fortunate to have one, give your employer just 10%. You’ll be unemployed. So why did congress permit this 90/10 law? It was obvious that granting this law would permit companies to drain our economy when it moved jobs from the US. So what were they smoking?
Any corporation or company that has placed upwards of  90% of it’s work force offshore is not behaving as a citizen-company of the US. Paying corporate taxes is not an end-all to gain citizenship when it gives nothing back. Appreciating and enjoying all the benefits that this country offers (education, protection, etc.) should never be made available for any entity that is sucking the economy out from under us.
The president has roped this one, so he has to ride it!  But the president does not make or write our laws, regardless of  any urging. Congress writes and passes our laws, including both houses, including both parties. But both parties play good cop bad cop, then do as they choose. Congress listens to lobbyists, listens to Wall Street, congress is the source of why jobs have vacated this country. 90/10!
Imagine if this formula were made 50/50? An effective new mandatory requirement that hits home! If you’re 90% in China…you’re a Chinese company!!!! Imagine the revenue that would be gleaned from taxes and tariffs on those that choose to remain 90%ers?  Imagine how jobs would come back to the US from these “foreign companies?†But who will congress listen to…you the voter, or Wall Street. Who has the money?
It’s a mid-term election year. We have what’s necessary to vote out ALL INCUMBENTS, those who were directly an indirectly involved with satisfying Wall Streets needs over the needs of this country. VOTE THEM OUT…or…learn to enjoy the way things are going.
Will the last one out…turn out that [Chinese] light bulb?
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When in doubt, vote them out!
(borrowed from Mish)
Who signed into law this 90/10 law?
Who ran Congress when such a law came into effect?
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And why are these jobs being sent over sees? It is the quest for profits. Our country has lost its competative edge because we require a higher standard of living. Our standard of living is so high compared to the rest of the world that the cost to produce goods for export is prohibative. So we don’t produce them here, we send them over seas to cheaper labor markets. One company in India that pays it’s workers say $3 a day to make widgets, can sell them to just about any market in the world. Those same workers live in what we consider squaller, but they are surviving. The company that makes the same widget but pays it’s workers $20 per hour plus pensions, plus healthcare can’t sell those same widgets to anyone! We live in relative splendor compared to these countries and we are barely scrapeing by. It is not sustainable. That is why unemployement is going to stay high for as far as the eye can see. It is the truth and yes it sucks.
Dave
Dave , Add to that the prohibitive regulations that prevent a company from prospering , absorbant taxes that suck a company dry . An un caring selfish union that will not budge on its demands for more than the company can provide . Not one company was ever started so that it would fail , companys want to make money , that in its self is not evil but if you follow what this goverment is doing thay say that it is evil . So what is a company to do ? Stay at home and fail ? or go over seas and prosper ? In that light I cannot blame them . When a city Goverment learns that a company wants to build a factory in its city what is the first thing the city does ? It contacts the company and offers incentives to come and build there . Tax breaks , easy building permits , in some cases Free Land ! Why is it that cannot be done for those companys that are allready there? Let me end with this , If I had the funds to start a company, I would not do it . Not in the current business environment of this country.  Or any where else for that matter.
“NAFTA was just the tip of the bigger berg! These laws, for lack of better expression, represent a “hole in the bucket†by which US production of consumer goods [and jobs] have been moved “offshore—
Why do you reject Ricardo’s Law of Comparative Advantage?
“The IRS is encouraging US companies to move risk-based “departments†offshore.”
Yes, routinely stealing people’s money will encourage them to leave.
“Any company that has moved 90% of itself offshore is “foreign†and deserves to be taxed and tariffed accordingly for what it truly is.”
So what you are saying is that your wealth is being robbed, and it will make you feel better if these companies have their wealth robbed too.
““why†jobs have disappeared from this country” – The why is government interference in a free market. Say’s Law shows that, in a free market, if you supply labor, there will be demand for it.
I suggest you pick up a decent book on economics. Like Human Action by Ludwig von Mises.
Comments…..
Ah yes, the debate goes on. If what you’re doing is working for you…keep doing it! If it isn’t [working] your plan is failing! What we’re doing IS NOT WORKING. Good time for a new plan.
Dr.A: Economics 101. The economy of any country is based on what it produces [so if any country is not producing…hence no economy.] The plan is broken. Â Do I need a book to tell me this? Nope.
Business schools in this country generated  “the new breed!” This particular group has taken the reins of US corporations. Not all, but “some” of this group have provided incredible profits, but “just for themselves”. The cost has been extreme to our country.
Profiting surely isn’t evil, it’s capitalism. I like profit. But extremism within capitalism is corruption. Checks & balances are for a reason. Our system is corrupted, plainly put. When profiting surpasses all reason, then you can’t get enough of it. Greed grows like weeds. The proof of this has been in many headlines…and it sure is ugly. Profit became the new drug and with it, lack of all responsibility for any destruction it might cause. Take no prisoners.
Some of those “business leaders” who followed this methodology are in prison, but not before they destroyed many people’s lives. Now we, the American workers, feel the effects of this business model. It was for similar exploitation of the American worker…that formed unions. Chicken or the egg? Â Then this too became corrupted. Unions were intended to keep workers “in work”, but when that union decided to keep that worker “out of work”…then it stopped representing that worker. The paradigm shifted. The union then represents itself, while the worker thinks it’s working for them. Business responded and the American worker, typically, is caught between the extremes.
Predatory capitalism, run-a-muck CEO’s, Wall Street corruption, corrupted unions. Where [within any book of economics] do these scenarios provide the US with positive economic advancement? CEO’s who aren’t held to the rule by their boards of directors, “you fail, you’re out!” Fail-safe contracts for CEO’s, written so to provide sure-bet windfalls for abject failure? This form of corruption has crippled us and has destroyed our spirit. No checks, no balances. A dead fish rots from the head!
The corrupted CEO. This new breed taints everything. Instead of responsibility, this breed of leadership gleans seven figure salaries, seven figure perks, seven figure bonuses. All this yet time proved they were abject failures. I’ve worked for a few, including one’s that had portfolios of nothing short of pure failure at each post. I’ve seen the company warehouse roofs bulging with unsold inventory and with this, layoffs! Layoffs in the many hundreds over many quarters. Workers whose children won’t be going to college. Yet these same CEO’s still received  their financial benefits, they kept their jobs, they kept their bonuses, their children went to the best schools in the country. Doubtful that von Mises covered this phenomenon, nor did “the market figure it out”.
Look around, notice anything? ENRON, Bear Stearns, Merrill Lynch, Lehman Bros., AIG, Freddie Mac, Frannie Mae? Notice the common threading? These were just a few businesses at the top. These were the icons of US success. I’d relabel them as “icons of excess!” What occurred within these companies was not caused by non-performing employees. This behavior represents our new business model? This is surely a sign of a stigma, but it’s always those at the bottom however, that will pay for the piss-poor decisions made from above. Â When the body jumps from a cliff, blame the feet?
When the US business model shifted into an accounting driven mode, it  opened the door to why…”greed is a good thing!” Gordon Gecko didn’t invent greed, he used it.
The US business model moved away from “making” to instead “investing” and the best bet:”take-overs”. Buy the company, strip away the excess (jobs) and the overlap, then resell it. Remove all risk is a nice motive, but when this plan removed US jobs, so went the robust economy. But hey…no laws were broken. The market will always readjust…it always has, right?
While recommending books, here’s mine: “A Book Of Five Rings”  by Miyamoto Mushashi. Read it, Dr, A, it will inform. Add it to your library on economics. Every Japanese exec worth his pension has this little book..and for valid reasons. Though Musashi was true samurai and the greatest swordsman in Japan, he through down his katana (long sword) and then chose…a stick (actually…a broken oar!) He defeated every opponent numbering in the hundreds. His expertise earned him the title, “the greatest!” This book is “the bible” of strategy, not sword play. The essence of Mushashi’s strategy is literally applied to every business step used in both martial arts…and Japanese business. Musashi’s strategy: “Watch for your opponents mistake…then capitalize on it!”  The skill is in knowing what an opponent’s mistake is.  The US, being so young compared to Eastern cultures, is making huge mistakes. They know it, we don’t.
Factoid: Japan, not China, owns more US Treasury Bonds than any other country. Things that make you go “hmmmm!”
Our mistake: Understanding and knowing what “real” leadership looks like and feels like. How many followers did Bernie Madoff  have? Short term profit = long term loss, if we stay with this model.
The “LOVE” of money is the root of all evil