The Chairman’s Report October 23, 2020

  • by:
  • Source: FAIRtax
  • 04/09/2021
THE FAIRTAX WILL INCREASE U.S. MANUFACTURING JOBS—WHY IT MATTERS

Logically, most people see the increase in U.S. manufacturing jobs as a very good thing.  While there are some very vocal extremists in the environmental movement who believe manufacturing is harmful to the environment and cheer when manufacturers shut down, there is broad agreement that more American manufacturing jobs would be good for everyone.

Setting aside the environmental debate for now and simply focusing on the economic factors, increasing the number of U.S. manufacturing jobs would have many positive effects.

The Economic Policy Institute (EPI) published the Updated Employment Multipliers for the U.S. Economy written by Josh Bivens.  Mr. Bivens has a Ph.D. in Economics and is the director of research at EPI.   

Investopedia.com defines a multiplier this way: “In economics, a multiplier broadly refers to an economic factor that, when increased or changed, causes increases or changes in many other related economic variables.”

The EPI report states:
 
  • When it comes to the ripple effects that spread to the rest of the labor market, one lost dollar of economic output or one lost job is not the same as another.
  • Production in one industry depends on suppliers in other industries (backward linkages), while wages earned in the production and supplier sectors are spent in other economic sectors (forward linkages).
  • In the case of automobile production, there are backward linkages to industries that produce tires, glass for windshields, and steel for automobile frames (among many others).
  • Forward linkages occur when automobile workers (and suppliers’ employees) spend their income in restaurants and retail stores and at the doctor (to name just a few).
  • Therefore, in addition to the jobs directly supported by an industry, a large number of indirect jobs may also be supported by that industry.
  • The subtraction (or addition) of jobs and output in industries with strong backward and forward linkages to other economic sectors can cause large ripple effects.
  • For example, take the closing of a factory that manufactures durable goods and employs 1,000 people, compared to the closing of a retail shopping mall that employs 1,000 people.
  • The direct impacts (1,000 jobs lost) are the same. However, the number of indirect jobs lost for every 100 direct jobs lost are 744.1 for durable manufacturing and 122.1 for retail trade.
  • Therefore, the estimated total number of indirect jobs lost if the auto factory closed would be 7,441; the estimated indirect job loss if the shopping mall closed would be 1,221.
  • The direct jobs lost in durable manufacturing stemming from a $1 million reduction in final demand would be smaller—about two jobs in durable goods manufacturing compared with about 10 jobs in retail.
  • This impact on the economy of the loss of manufacturing jobs was a huge factor in why auto makers employing less than 200,000 workers were saved in 2008 while others were allowed to fail.
CONCLUSION

The FAIRtax will save the further loss of all types of jobs.  Every economic study shows that the FAIRtax will grow the economy significantly faster than the present income/payroll tax system.

This is particularly important if we want to retain manufacturing jobs that are moving overseas primarily for tax reasons.  The FAIRtax will:
 
  • Reduce the cost of U.S. exports by between 12% and 20% (the increase in cost attributable to the U.S. payroll/income tax system)
  • Would impose the same amount of tax, 23%, on both imported and domestic goods (thus taking away the 15% to 20% cost advantage currently enjoyed by the imports).
  • Effectively remove the tax incentive for a U.S. company to manufacture overseas and import back to the U.S.
According to a paper published by the Business Roundtable:
 
  • International trade, including exports and imports, supports 39.8 million U.S. jobs – more than 1 in 5.
  • These trade-related jobs grew three and a half times faster than total employment from 2004 to 2013.  These jobs are distributed throughout the economy—at large and small companies, on farms, in factories, and at the headquarters of globally-engaged U.S. firms.
  • Foreign-owned companies invest and build facilities and employ 5.8 million workers in the United States.
Jobs are important to Americans not only because they help fuel the economy but also because they allow us to hold our heads high and provide for ourselves and our families.  We have to remember that job loss is not some abstract thing.  Each lost job impacts all of us.

As Harry Truman said, It's a recession when your neighbor loses his job; it's a depression when you lose yours.

If you have friends who don’t know about the FAIRtax send them to FAIRtax.org.  Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.

Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.

Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:

“If you want a picture of the future, imagine a boot stamping on a human face—forever.”

Is it hopeless?  When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?”  But I dream things that never were; and I say “Why not?”

Isn’t it time for us to ask, “Why not?”
Thank you for staying FAIRtax strong!
 
Yours In Liberty!   Yours In Freedom!

Steve Hayes
Chairman, Americans For Fair Taxation


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