POLITICAL ISSUE #401: DIMINISHING HIGH VALUE JOB BASE

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ISSUE STATEMENT AND OPTIONS FOR ISSUE #401

SOLUTION DEFINITIONS AND OPTIONS FOR:

401.1 Hourly Wage Assistance Program
401.2 Foreign Production Standards
401.3 Surtax on Foreign Investments
401.4 Balanced Trade Import Limits
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ISSUE STATEMENT FOR #401: DIMINISHING HIGH VALUE JOB BASE

PRESENT CONDITION: America is loosing her high value manufacturing job base. While some high value jobs are being created based on exceptional professional skills, many workers now find only service jobs whose reduced skill requirements and lower capitalization per worker result in substantially lower wages.

DIRECTION OF IMPROVEMENT: America needs to recover her manufacturing job base both to enhance the overall American GNP and to ensure that the opportunity to earn a high standard of living is boardly available to the American people.

ISSUE JUSTIFICATION: Industrial production amplifies human ability through the teamwork of man and machine. The economic base of industrial production both provides a good income to skilled workers of average ability and supports a professional job base for workers capable of mastering professional skills. Unfortunately the world is capital poor and awash in the supply of human labor. While gradual world industrialization will be beneficial for all the world's people, the rapid change that is now occurring is distorting the distribution of wealth and opportunity in America. Both the overall prosperity of America (as measured by GNP) and the social unity of American society require policies that preserve a sound American industrial job base.

AUTHOR: UWSA SANTA CLARA CO EMAIL:humphrey@aimnet.com

OPTIONS FOR ISSUE # 401: DIMINISHING HIGH VALUE JOB BASE

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SOLUTION DEFINITION STATEMENT
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SOLUTION # 401.1 HOURLY WAGE ASSISTANCE PROGRAM

BRIEF DESCRIPTION: Rather than having people unable to find jobs or unwilling to work at the wages their skills can command in the free market, the United States shall offer an hourly wage assistance program for low income workers.

An objective of this program shall be to expand the market for domestic manufacturing operations that also employ higher skill (and higher paid workers) by lowering the wage paid by employers for low skill jobs while at the same time maintaining the wage received by low skill employees above the minimum wage to encourage people to work. The following is an example of the implimentation of this program.

The minimum employer wage would be set at $2/hr. However the American people would supplement this by an additional $4/hr for a total of $6/hr minimum employee wage. For each $1/hr in employer wage, the "helping hand subsidy" would decrease by 50.

Employeer paid wage . . $2 . . $4 . .$6 . .$8 . .$10
Helping Hand Subsidy . .$4 . . .$3 . .$2 . .$1 . . $0
Employee wage . . . . . . . $6 . . $7 . .$8 . .$9 . .$10
Reducing the employer wage will make many more jobs available that currently do not justify the present minimum wage. Paying low income workers a living wage, especially when most of that wage is a helping hand from their fellow citizens to supplement the wages that the worker's skills really command in a free market will (along with the termination of welfare) motivate people to work.

JUSTIFICATION: While the primary thrust of this solution is to provide low skill American workers with jobs and a living wage to help resolve the issues of unemployment, welfare and illegal immigration, this solution also promotes the retention of higher skill jobs for American workers. Every manufacturing operation requires a range of job skills including many low skill jobs that would be subsidized by the "helping hand wage subsidy payments" of this program. While there would be no direct incentives for higher skill workers, the total cost of a domestic manufacturing operation would be reduced.

AUTHOR: UWSA SANTA CLARA CO EMAIL:humphrey@aimnet.com

OPTIONS FOR SOLUTION # 401.1 HOURLY WAGE ASSISTANCE PROGRAM

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SOLUTION DEFINITION STATEMENT
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SOLUTION # 401.2 FOREIGN PRODUCTION STANDARDS

BRIEF DESCRIPTION: In recognition of both American sovereignty and the sovereignty of other nations, all goods applying for import into the United States shall meet minimum production standards. These standards shall include fair minimum wage ( and other labor provisions) deemed appropriate for that country, minimum environmental standards and other standards deemed appropriate by the United States.

JUSTIFICATION: There are many advantages of world trade for everyone based on comparative advantage (e.g. grow bananas in the tropics and mine for diamonds in South Africa) in both natural and human resources. However the emerging world market requires Americans to face the fundamental issue that the world is capital poor and labor rich. Therefore even the free market division of wealth between capital and labor on the world market is much more skewed against labor than is a US domestic free market. This situation is accentuated by the power imbalance between large corporations and the human resouces of developing countries which leads to exploitation. American political unity will not tolerate a minimum wage service job work force catering to a small affluent elite earning their wealth from foreign investments. Since individual corporations must follow minimum cost strategies to survive in a competitive marketplace, national laws are needed to maintain a politically viable balance that provides American workers with high wage manufacturing jobs.

The first step is to remove exploitation of foreign workers and their environment by requiring reasonable labor and environmental standards. While these will be less demanding than US standards, they will both protect developing countries from exploitation and shift the balance back toward domestic investment which provides high value jobs for US workers.

AUTHOR: UWSA SANTA CLARA CO EMAIL:humphrey@aimnet.com

OPTIONS FOR SOLUTION # 401.2 FOREIGN PRODUCTION STANDARDS

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SOLUTION DEFINITION STATEMENT
FOR
SOLUTION # 401.3 SURTAX ON FOREIGN INVESTMENTS

BRIEF DESCRIPTION: The Congress shall define a list of foreign investment activities that reduce the employment of US workers and assign a criticality factor ( from 0 to 1.0) to each. US companies with overseas earnings from these activies shall pay a higher corporate tax on these earnings with the surtax proportional to the criticality factor. US citizens receiving earnings from foreign companies not subject to US taxes shall also pay a higher tax rate on both dividends and capital gains based on the amount of return on US imports from these investments.

JUSTIFICATION: There are many advantages of world-wide investment and trade for everyone based on comparative advantage (e.g. grow bananas in the tropics and mine for diamonds in South Africa) in both natural and human resources. However the emerging world market requires Americans to face the fundamental issue that the world is capital poor and labor rich. Therefore even the free market division of wealth between capital and labor on the world market is much more skewed against labor than is a US domestic free market. This situation is accentuated by the power imbalance between large corporations and the human resouces of developing countries which leads to exploitation. American political unity will not tolerate a minimum wage service job work force catering to a small affluent elite earning their wealth from foreign investments. Since individual corporations must follow minimum cost strategies to survive in a competitive marketplace, national laws are needed to maintain a politically viable balance that provides American workers with high wage manufacturing jobs.

This solution seeks to promote America's high value job base by reducing the foreign investment incentive caused by the vast pool of low wage foreign labor in areas that most directly compete with US jobs. The foreign surtax would be proportional to the impact on US jobs as measured by the congressionally defined criticality factor.

AUTHOR: UWSA SANTA CLARA CO EMAIL:humphrey@aimnet.com

OPTIONS FOR SOLUTION # 401.3 SURTAX ON FOREIGN INVESTMENTS

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SOLUTION DEFINITION STATEMENT
FOR
SOLUTION # 401.4 BALANCED TRADE IMPORT LIMITS

BRIEF DESCRIPTION: The United States shall maintain balanced trade through import limits as follows:

1) The imports from any individual country in a calendar quarter shall not exceed the average quarterly U.S. exports to that country over the prior year designated as IQmax for that country.

2) Once imports from any country in any quarter exceed IQmax for that country, imports shall cease until the beginning of the next quarter except for the following remedies:

a) Any quarterly trade surplus from the prior 3 quarters may be applied to increase the value of IQmax for the current quarter. This provision accounts for seasonal variations in trade. The amount applied reduces the surplus for that prior quarter.

b) Any nation about to exceed their IQmax may negotiate with another country running a trade surplus with the United States to purchase some of that surplus and apply it to their IQmax. This is totally a paper transaction; the goods do not have to be shipped through the third country. This exchange of trade credits rewards countries who are in trade surplus with the United States while allowing trade deficit countries to exceed their normal IQmax as long as the total US world trade is in balance.

3) In recognition of the substantial trade imbalance that currently exists, this import limited balanced trade plan shall be phased in over a period of three years. Using the current year as a reference, in the first year each trade deficit country shall be allowed to have a trade deficit equal to 75% of their deficit for the reference year. This shall drop to 50% in the second year, 25% in the third year and to 0% in the fourth and all subsequent years. These trade deficit countries may further mitigate this transition by purchase of trade credits from trade surplus countries, but a US/world trade balance would be achieved starting in the fourth year.

4) Once US world trade has been brought into balance, the Commerce Department my apply a multiplier not to exceed 110% to the past year's US exports to that country as the limit for the current year's imports to account for anticipated annual growth in trade.

JUSTIFICATION: The U.S. trade imbalance has been a problem for many years. When foreign countries sell American citizens goods in exchange for U.S. currency, they obtain a claim on American assets (including real estate and American capital) that they may redeem whenever they choose. This "selling of America" to feed current consumption has been reprehensible.

American company investment in productive capacity "off shore' to supply goods to the U.S. domestic economy has been one of the major causes of the devestation of the U.S. domestic "High Value" job base over the last generation.

In a recent speech, the CEO of UTC explained why his corporation needed to employ 8,000 Chinese workers to make air conditioners and elevators in China. Naturally we would prefer that UTC made the capital investment for this production in the U.S. and employed US workers. However if the competitive nature of world markets including restrictions that other countries place on trade require U.S. businesses to invest overseas to supply world markets, then we must be open minded and allow US corporations to compete on world markets.

However a "Balanced Trade Import Limit" policy sends the message loud and clear that American companies should not invest their productive capacity in China and expect to ship their air conditioners and elevators to the United States unless China also imports an equivalent amount of US goods or purchases import credits from countries with which the US has a trade surplus.

For years through our trade deficits we have been selling our assets to the citizens of foreign nations so that as a nation we could live beyond our means. Continuation of this practice threatens the social fabric of American society by exporting middle class jobs abroad. The UTC speech referenced above cited government statistics that predict a continued loss of manufacturing jobs and further predict that occupations like "prison guards" will be the high demand careers of the future. We must not let this trend continue.

Author: John M. Humphrey Email: Humphrey@aimnet.com

OPTIONS FOR SOLUTION # 401.4 BALANCED TRADE IMPORT LIMITS

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