The Federal Debt Matters.

Over the last 40 years our national debt has been increased by BOTH parties, starting big time with Ronald Reagan in the 1980’s. At 20 trillion dollars our debt is not sustainable.

When I watched the first presidential debate between Clinton and Trump this past Monday night I was excited to hear Trump mention (several times) the 20 TRILLION dollars in federal debt that our country is currently saddled with.

Clinton did not mention the debt at all, not even once. She knows that the current administration increased the debt like crazy, and I suspect that Hillary will do nothing about this issue if she wins the election this fall. Chances are she’ll increase our national debt, after all, Hillary Clinton is the “status quo” candidate.

If Clinton had a plan for balancing the budget and reducing our federal debt she would have mentioned this, at least once.

Trump carries a ton of business debt, but he also looks at that debt in balance to the value of the real estate holdings in his portfolio. This was one of the things he mentioned in the debates. Just the fact that Trump is talking about our debt is a good thing, and if he gains the White House he might even do something about it.

If you had a to wager a hundred bucks on which candidate is more likely to lower our national debt would you put your crisp Ben Franklin on Trump or Clinton?

It would be great if our national debt went down, even just a little bit. It would be good for my kids, and my future grandkids.

Any action taken to reduce our national debt would increase the confidence of global investors who want to invest funds in our country.

I don’t agree with Trump on many OTHER issues, his crazy statements, hatred of women, creepy sexual admiration of his own daughter and his clear bias against minorities, but at the end of the day none of these things will collapse the macro-economy of the United States.

But what about 25 or 30 trillion dollars in national debt by 2025?

That’s what will happen if we maintain the current holding pattern.

Something, or someone, has to change the course. If not we will all have to live through another recession that makes 2008 look like nothing.

Just my 2 cents.

Benjamin T. Alexander

September 2016

Advertisements

#USA as a #WEALTH MAGNET.

Companies that manufacture a product have always chased the lowest labor rate around the globe. This is why your t-shirt is made in Honduras, your Chevy in Mexico, and your iphone in China.

This has been the main reason that the United States has been bleeding manufacturing jobs by the millions. Consider Honduras, where the mandated minimum wage is less than $1 per hour. If you make underwear in the United States you have to pay a federally mandated minimum wage of $7 per hour, plus workmen’s comp premiums, plus 7% wage taxes per employee. Even if you make a great product you can’t compete with the factory owner in Honduras who pays each worker $8 per day.

We’ve lost over 5 million jobs in manufacturing since 2000:

http://money.cnn.com/2016/03/29/news/economy/us-manufacturing-jobs/

There are huge changes coming in manufacturing, mainly because robotics are eliminating the wage issue. Robots cost the same no matter where you set up your factory, here is a factory in China that has embraced robotics:

http://www.techrepublic.com/article/chinese-factory-replaces-90-of-humans-with-robots-production-soars/

Another factor in manufacturing costs is logistics, or the costs of shipping. Your labor rates have to be low enough to make your widget in Mexico, then ship it back to the United States while still holding a profit.

Local robot manufacturing eliminates international tariffs and reduces shipping rates.

Of course, it costs money to convert a factory from human labor to robots, but it makes sense to eliminate labor costs from your overhead, even if this requires a large investment in technology.

Eventually all factories will convert to robotics, with just a handful of workers onsite in case of emergencies. As robotics get better and better there will be fewer employees, until the only human left in the equation will be the owner of the factory.

This is great news for factory owners in the United States, this means that all manufacturing will come back to America, right?

Perhaps not. The last factor here is the long term capital gains tax rate levied on the owner of our robotic factory. The United States has the sixth highest capital gains reat in the world:

Here in the USA we’re at 28.6%, while the same tax rate in Mexico is only 10%.

http://taxfoundation.org/blog/us-taxpayers-face-6th-highest-top-marginal-capital-gains-tax-rate-oecd

On a pure cost analysis it makes more sense to build your robot factory in the country with the lowest capital gains rate. Even though the factory might not create jobs it still uses the water and electricity wherever it’s located, the rent or mortgage is still going to the local municipality.

Do we want to “Make America Great Again?”

Let’s lower our capital gains tax rate to 5% for any manufacturer who wants to put up a factory anywhere in the United States. Let’s make the United States the most attractive place in the world to invent, create and manufacture new technology.

Sergey Brin came here from Russia and created Google, Elon Musk came here from South Africa and started PayPal, Tesla, SpaceX and Solar City.

We can create policies that make the United States the largest incubator in the world for technology and robotic manufacturing. We can create a culture that grows tech entrepreneurs from within but also attracts them here from the rest of the planet.

Imagine 10,000 factories building tech widgets HERE and paying a modest capital gains tax, versus 10,000 factories in other countries drawing talent away from our shores.

How many people like Elon Musk are out there, willing to grow a business, with an idea that can change the world… but they live in an environment that makes it harder to start a business?

Let’s find the entrepreneurs of the future and bring them here!

That’s my idea for the day…

Benjamin T. Alexander

September 28, 2016