For decades the United States had such a tremendous advantage in wealth, manufacturing power and technology that we could afford policies that push U.S. firms to locate their activities abroad. That time is gone. We now owe more than $9 trillion to foreign countries because we no longer sell enough things to be able to pay for the goods that we import. Our manufacturing operations have largely moved to other countries. We became a net importer of high tech goods for the first time in 2002, and our deficit has increased each year since. America’s dominance of technical publications and college degrees is fading quickly and surely.

Globalization was supposed to help our country by opening up foreign markets, but that presupposes that the U.S. produces things that other people want to buy. As foreign nations with low wage rates have improved their infrastructure,  companies have moved their manufacturing operations to locations where the wage rates are a fraction of what they are in America. Economists tell us that fact should not worry us, because of the theory of “comparative advantage”. Low value, labor intensive production will move to developing nations with low wage rates, but it will be replaced by the production of high value, high tech goods here in the U.S.

If the U.S. had sensible tax policies, that might be true. But we don’t. In our system, a corporation that earns a dollar from manufacturing high tech goods in certain countries will keep the full dollar. If they manufacture the same goods in the U.S., they will keep only about 60 cents after taxes. By locating their high value activities abroad, a company can earn over 50% more than if they performed the same activities in the U.S. Corporations are not stupid. They respond to these incentives, and the rapidly increasing number of well educated foreign workers enables corporations to shift activities to the most tax efficient location. Our “comparative advantage” thus dissolves. In consequence, the market power of American workers has been fading, leading to nearly 30 years of stagnant real income growth for the bottom 99% of our population.

The responses proposed by Congress and the I.R.S. so far have just made matters worse. The I.R.S. has been attacking U.S. based research operations. Chairman Rangel has proposed a measure that would encourage multinationals to fire their U.S. administrative personnel and move those activities abroad. Some in Congress have proposed subjecting U.S. multinationals to current world-wide taxation of all of their income, a move that would decrease the value of many companies by 25% or more and cause them to be acquired by foreigners with large reserves of cash in strong currencies. We cannot afford such policies any more.

There is a simple solution. The Shared Economic Growth proposal, explained at www.sharedeconomicgrowth.org , would provide a strong incentive for corporations to move their valuable operations back inside the U.S. borders, simply by allowing corporations a deduction for dividends that they pay out. At the same time, it would increase the earnings working people receive on their pension savings by over 50%. The proposal is largely self-funding (no voodoo economics here – the corporate tax savings are directly made up for by taxes on the shareholders receiving the dividends), with the balance made up by eliminating a couple of unnecessary and unfair distortions in our tax code, and by an extra 7.5% tax on individual income in excess of $500,000 per year. This is a small price for saving our economy, restoring our economic security, giving market power back to the middle class, and boosting pension savings. The proposal does not fit neatly into either party’s usual set of canned speaking points. Enacting it would require politicians to care more about policy than about politics. Does anyone out there care enough about America’s future to stop bickering and do something useful for a change?