Tuesday, September 20, 2011
Towards A Sounder Domestic Economy
There are a number of things that need to be fixed before the U.S. economy will move in the direction of full employment. But, with politics as a backdrop, the reality is quite different than what a group of economists could agree upon. Our domestic economy buys too much outside the United States. You can start with oil and work down from there. I have written about our dependency upon foreign oil and how oil is priced around the world in U.S. dollars and that coupled with the amount of merchandise we buy from countries like China, India etc., creates the economic situation where the United States is importing way more than it is exporting, and this has a negative effect on the value of the U.S. dollar. The "weaker" U.S. dollar is good for U.S. companies exporting their products or services, but a "weaker" U.S. dollar also means that oil prices will go up. While a barrel of oil is priced in U.S. dollars, oil exporting countries are not going to accept less for their oil when they convert those U.S. dollars into other stronger currencies. As a result, oil prices in U.S. dollars will continue to rise because the U.S. will not break its dependency on foreign oil. If the United States could convert to natural gas more, make affordable electric cars and produce more oil, perhaps the United States could begin to reduce the number of barrels of oil it is importing each year.
The policies of the last 66 years with regards to oil and our national security was never taken seriously and as a result, we find ourselves 66 years later using more foreign oil and importing far too many goods given the total dollar value of the goods that we export. Raising taxes for the wealthiest people in the United States may bring in more revenue, but it will not do anything to lower our dependency on foreign oil. Eliminating tax loopholes for corporations will not reduce the vast quantities of imported oil, but it may bring in more revenue.
The situation we find ourselves in, and given the political backdrop, will only make it more difficult for Americans to move towards full employment and a sounder domestic economy. These are the kind of big changes that need to be made to correct the weaknesses in our domestic economy.