What other steps can the United States take that will reduce both the trade deficit and federal budget deficit?
In a column last Thursday, I said that the best idea I had heard for cutting the trade deficit was to tie imports to exports. For example, if a country sold the United States $100 million worth of goods, we might require that they buy $80 million in return. If enacted, even on a phased-in basis over five years, this "fair trade" proposal could have a tremendous positive impact.But there are other steps that can be taken that likewise don't entail the creation of huge tariff walls that would cripple the fragile world economy.
First of all, this country has got to "think exports." That means strong leadership starting at the White House and filtering through to virtually all of this nation's business leadership.
It also means producing quality products that are competitive around the world. If West Germany can do it with its relatively high wage base there is no reason why this country can't.
The best way to encourage exports is to create some form of tax incentive for selling products overseas. Look what special tax treatment did for commercial real estate. It helped create a huge oversupply of office space. Fortunately, the new tax bill has eliminated that incentive. But with an expected $170 million trade deficit this year, the same principle would surely help exports. Put the money up for grabs and our free enterprise system will rise to the challenge.
Trade has become so crucial I think we also need to establish a new cabinet-level position, a secretary of trade, if you will, to provide strong, central leadership. Right now trade-related matters are handled all over the lot.
My choice for that job would be Lee Iacocca or some other hard-nosed business person. Iacocca might be controversial but I'd bet the ranch he'd get results and in a way that would not discombobulate world trade.
Two of Iacocca's great strengths are his ability to cut through to the nub of critical issues and the fact he surrounds himself with good people, a number of whom I had a chance to watch first hand during my five years in Detroit (1980-84).
One of Iacocca's ideas is to put a 25-cents-a-gallon tax on gasoline at the pump. That would net approximately $26 billion, which could only be used to reduce the federal budget deficit.
While we are at it, why not put a $5-a-barrel duty on imported oil? That could yield another $10.7 billion to apply against the deficit, unless, of course, it caused a reduction in imports in which case it would help the trade deficit.
You'll hear predictable howls on the above two initiatives, but the fact is the near- and long-term benefits would be substantial.
One of the issues of the 1990s is that we will be right back in the clutches of OPEC if we don't do something now to curtail our use of foreign oil.
Incidentally, somewhere along the line we have to quell the hysteria over nuclear power, which, as far as I know, has only cost one life in this country since being introduced more than two decades ago. It is a necessary part of the mix to reduce our reliance on foreign oil.
One of the frequently mentioned suggestions to improve the business climate in the United States is to establish product and other liability limits. This country has become a lawyer's paradise with run-away court awards that have significantly increased the cost of doing business.
Antitrust laws have been an impediment to developing effective strategies to compete overseas. I believe that in selected cases the federal government would act as a catalyst to bring competing companies together to develop world-wide product and marketing plans. The Japanese have been extremely successful at this.
I'd like to see the establishment of a national task force composed of top brains from private industry and have them dissect the entire list of imports and exports and make recommendations to the new secretary of trade.
The worst part of the new tax bill is the elimination of the investment tax credit. We need to encourage capital outlays if we are to be competitive. Let's retore the credit.
Rep. Jack Kemp believes our economy would be helped if we returned to the gold standard. That proposal merits close study.
Sen. Bill Bradley proposes we let the deeply indebted developing countries off the hook for part of their debt, thus allowing them to purchase more U.S. exports. Sen. Bradley's proposal and other variations are getting serious attention.
While the Japanese yen and West German mark have risen significantly in value, the same thing needs to happen with the currencies of Taiwan, South Korea, Hong Kong and possibly even Canada, all of whom have substantial trade surpluses with the United States.
There were thousands of factors that got the U.S. into the current mess. No one thing is going to get us out of it. The above outlined suggestions merely touch the surface of what can and should be done. The important point is that we need to get moving soon to resolve the twin deficits. And we should also keep in mind that, if we listen to all of the nay sayers and nervous Nellies who fear this and fear that, you can guarantee that nothing will be done.
Courage and leadership in Washington and elsewhere are essential ingredients to making something happen.