Monday, November 3, 2014

REPUBLICANS OR DEMOCRATS...ALL IN VAIN FOR U.S ECONOMY


Well I am no one to say about what’s going to be the election results of US but I find that Republicans has a strong point to come but that would not solve the economic problems of US. Since, the biggest debts in the history of the world have been created by joint share of the two.  We are back to the phase of listening promises but we failed to identify that these promises cost the economic growth in the long term.Who ever wins its a different ball game to run the economy.

Lest get into the details about the basic economic problems which have been created by the both of them over several decades. After the global economy took a rock bottom hit in 2008 the US federal debt swelled to $16.8 trillion growing up by $6-7 trillion.  The outflow of interest payments on that debt burden presents a formidable challenge for US taxpayers. Forget the principal, they have to pay $220 billion annually just in interest. According to the US National Debt Clock, the US government has a $16.8 trillion debt, which comes out to be over $53,000 for each US citizen.

 Aging population has swollen the government social pay packages which has no scope of being withdrawn in the future. Aging population also reduces the scope of inflow of funds for the government in form of individual taxes. Now let’s measure the volume of obligations of commitments and promises by the US governments over the decades.

According to the Boston University economics professor Laurence J. Kotlikoff, who served on President Ronald Reagan’s Council of Economic Advisers- spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. Don’t be shocked here. The US Department of Education approved $714 billion at the end of 2012, which is a significant jump from the $104 billion issued at the end of 2007.  But with the US economy failing to generate new jobs, many of these now college graduates lack the financial means to return their debt. 
Now lets come to the game of hopes used by Republicans to fight democrats where I find that democrats would find a win position either in this election or 2016. The social security bills and defense a bill which has been used historically by the US government has turned reverse on the economy itself that where Democrats have been cornered by the Republicans. Ebola and the late actions on ISIS have been one of the setbacks of the economy.  One of the biggest promises by the President directly and indirectly have been that he will get back the jobs of offshore into back in the country. In 2000, 30% of GE's business was overseas; today, 60% is. In 2000, 46% of GE employees were overseas; today, 54% are. Latest to the bandwagons- Boeing Coon  said it would move the majority of its defense services and support work out of Washington state to other U.S. cities, affecting the jobs of about 2,000 of its 5,200 defense employees in the Puget Sound region. Stringent labour laws forces the Americans to offshore the business and make their own business profitable. This proves that too much social security leads to a severe shock for the US economy. Further domestic taxation laws are so cruel that US offshore companies don’t want to pull back their funds into their own economy. Part time jobs don’t create employment but it indicates lag in policy reforms.  

The proof of the pudding is that the largest U.S.-based companies added $206 billion to their stockpiles of offshore profits last year. The multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier, according to securities filings from 307 corporations reviewed by Bloomberg News. Foreign profits held overseas by U.S. corporations to avoid taxes at home nearly doubled from 2008 to 2013 to top $2.1 trillion. Even as governments around the world cut tax rates and try to keep corporations from shifting profits to tax havens, the U.S. Congress remains paralyzed in its efforts. The response of U.S.-based companies over the past few years has been consistent: book profits offshore and leave them there. Well borrow at Zero and add numbers before the Zero. Hence Zero Interest rates were of less respite to the US economy and more to the offshore business. The corporate tax rate in the U.S. runs as high as 35 percent, but companies don’t pay U.S. taxes on profits earned abroad as long as that money remains offshore.  Another social benefit or an economic loss is the question of trillion dollars.

Congress hasn’t acted because of disagreements over whether to be tougher on U.S. companies operating abroad amid broader disputes over government spending and taxation. The stalemate has prevented the U.S. from tapping a pot of money that President Barack Obama and the top Republican tax writer in Congress have eyed for such projects as rebuilding highways.

Conclusion:
Whoever wins the most important decision to be taken by the government is not to hike interest rates and reduce the corporate tax so that circulation and flow of capital happens and there is no catastrophic affect on a sudden affect of economic factors. The government should not be biased for social benefits linking it with elections and powers. Stringent rules and regulations and simplifications in terms of labour and business laws are required so that US manufacturing gets back on its wheels. It has less to do with money and more with lenient policy reforms.   Whoever wins fiscal deficit, high outflow of interest cost and burden of social benefits are the legacy which will keep US economy to struggle over the decades. Part-time jobs don’t reduce unemployment as it’s the indication of the biggest instability of the policy reforms to create jobs and investments.

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