by Respectfully - Supposn

Created on: July 13, 2008

Governments have identified specific species of contracts or activities as possibly advantageous to their participating parties but contrary to the community's best interests. Governments have declared these identified such contracts or activities as illegal and/or unenforceable; That is legislator's justification for regulating for examples building and zoning or banking and security trading. That would also be the U.S. Congress's justification for preventing USA's trade deficit of goods.

(Often those who complain loudest of government intervention within their own industries derive the greatest benefit from such regulations that uphold their industries integrity and reputation. Their incomes would significantly be decreased, and their business expenses would increase if the general public lost confidence of those industries).

Labor is not as portable as capital. It can not itself be stored as a commodity until its market price has sufficiently risen. It has been argued that the displacement of labor due to trade deficits is too often the cause of drastic financial disaster for many families. These drastic and real reductions of family incomes too often seriously affect wage earners' life time incomes.

Contributors to a community's production induce additional contributions. A final producer induces other producers to provide production supporting materials, components, and services. They also often affect producers of completely unrelated products; (e.g. factory production affecting beauty parlor production). This modification of the community's gross production also affects numbers of employees and wage rates. This phenomenon is quite obvious when a producer significantly increases their production within a local community. It is much less obvious but no less real when that same phenomenon is dispersed across an entire nation.

A nation's annual trade deficit indicates some foreign production was substituted for potential domestic production. The nation's gross domestic production; (the GDP) was less than otherwise.

It logically follows that anything inducing initial decreases of the GDP, (e.g. trade deficits) will induce gross decreases of the GDP that exceeds the initial amount. Trade deficits certainly indicate that the GDP is less than other wise. The extent of the detriment to the GDP exceeds the amount of the deficit itself.

Anything that induces a decrease of the GDP also induces a decrease of the median wage.

Proponents of pure unrestricted free trade correctly argue that due to the economic concept of "comparative advantage" the nation benefits from global trade.

Advocates of Warren Buffett's trade proposal accept the concept that a trade deficit's detriment is always a net detriment.

Buffett's proposal would significantly decrease USA's trade deficit of goods. It is market rather than government driven. It grants government no discretion of policy. Its self funding, not a tax and would increase the aggregate sum of USA's imports and exports of goods.

Buffett's proposal is a restriction upon pure free trade but it is certainly pure free enterprise. The USA can continue to enjoy cheap (but not the absolute cheapest) imports and annual median wages that are (after adjustment for inflation) still significantly greater. I'm aware of no existing or proposed trade policy that could accomplish this with less government intervention or less increased prices of imported goods.

For more information regarding Warren Buffett's proposal do a Helium.com search
using the key words: trade deficit, buffett

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