End the trade deficit, and fiscal issues will go away

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With the election over and status quo in Congress, many see the “fiscal cliff” as an artifice intended to cause unwilling politicians and party leaders to do something in the national interest.

It’s also understood that what Congress did, Congress can undo, and that we are not likely to see solutions — just more can-kicking.

We still have an economy that is too weak to support values, and too structurally unbalanced to sustain recovery. No fiddling at the margin can be projected to bring the economy back, to restore prosperity or budget balance. Even the Ryan budget does not achieve balance for 20 years, and that tabulation is on a cash basis — while our liabilities including Social Security increase each year at a rate $4 trillion higher than the “official” deficit.

Discouraged? Don’t be. There is a much faster way to earn our way back to balance. Consider where we were in the late 1930s, a decade into a downward economic spiral. Through the first half of the 1940s, we invested in ourselves, borrowed from ourselves to do it, and doubled GDP in five years.

Through public / private partnerships we innovated, created infrastructure and productive assets that would carry the country for two generations. Government was the catalyst; private enterprise responded. Outcomes included an extremely competitive economic framework, and a strong middle class.

The difference between then and now? It’s an intertwined political and economic class with interests different from those of the nation. Yes: campaign finance; massive lobbying; revolving doors between government and industry. Foreign governments have a plan, utilizing 700 different subsidies. Our government has no plan and reacts infrequently.

As President Reagan said in 1985, “For the international trading system to work, everyone must play by the rules.” We have no policy, no plan, and others play by different rules.

What do we need to do? This is straightforward if you believe in markets and competitive balance. We need to make much more of what we consume: eliminate the $600 billion annual trade deficit, providing a natural stimulus. Doing so will put 4 to 5 million people back to work in good manufacturing jobs, and another 8 to 10 million back in supply chain and service work. Restart the virtuous cycle of income and wealth creation, restore our own economy by spending our dollars here rather than with offshore suppliers.

First, the Republican House should act on candidate Romney’s platform plank to countervail Chinese currency manipulation — government intervention that artificially depresses currency values. Fully half of our annual trade deficit is attributable to predatory Chinese trade practices. Don’t worry about a trade war; we’ve been in one for 20 years and are losing. As Romney said during the debates, the Chinese have a lot more to lose than we do.

Second, instead of jiggling the tax structure, change the system to match what others do. Everyone agrees that our system is way too complex, unfair, and doesn’t generate the revenue needed even for basic services. Other countries use consumption taxes that can be applied efficiently and progressively. But most importantly, such taxes are rebated to exporters and added to imports.

Closing loopholes and applying higher rates won’t do the job. Alternately, there is no data to support the position that lower rates stimulate growth; it doesn’t matter how low rates are if you’re taxing the wrong things.

It’s also crucial to reduce health care spending to 10 percent of the economy. We simply cannot be distracted by arguments over who pays while ignoring overhead (4 times what competitors pay), drug costs, emphasis on intervention (fee-for-service) vs. prevention, and our unhealthy diet.

These are the fundamental changes needed to restore economic security — the foundation for national security. Americans respond to goals: Balance trade, put our people to work, borrow and spend here. Don’t let our money leak away. This was how we enjoyed 150 years of growth and prosperity; it is how our competitors operate today.

Perhaps 6,000 new jobs a year here? Fiscal balance in government? All achievable, but only with structural change. Congress is responsible and voters have a right to make Congress accountable.

It’s only our future that is at risk.

Dave Anderson, a business consultant and former manufacturing executive, ran for Congress in the November election as an unaffiliated candidate against Rep. Doug Lamborn.