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Old 01-22-2008, 08:12 AM
 
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As an economic newbie, I'll pose this question: if the GDP is imbalanced by a prevalence of consumption, why doesn't the government offer incentives to manufacturers?

I'd be interested to hear especially from small manufacturers: Do you feel wanted or supported - by local and federal government?
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Old 01-22-2008, 08:27 AM
 
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Quote:
Originally Posted by aaauger View Post
As an economic newbie, I'll pose this question: if the GDP is imbalanced by a prevalence of consumption, why doesn't the government offer incentives to manufacturers?

I'd be interested to hear especially from small manufacturers: Do you feel wanted or supported - by local and federal government?
I would say this is the lesser of all government intervention evils, and I agree that if you have to micromanage something, this would be it.

Not a manfuacturer but intrigued by the idea
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Old 01-22-2008, 09:18 AM
 
Location: western East Roman Empire
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It's not all bleak.

I'm not a manufacturer, but my understanding is that a fiscal stimulus package may contain investment incentives, mainly accelerated depreciation on new investment (significantly reducing taxable profit for the year).

I know that some solar energy companies did well in 2007. One aspect of a vision for a better future is US manufacturers, including basic manufacturing, powered by solar energy, giving them at least one competitive advantage, maybe, over low labor-cost producers powered by coal and other fossil fuels.

Just fuel for thought at the moment, maybe some policymakers and businesses are working on it, but it will take time - years - to restructure basic US manufacturing. But, eventually, it will happen, or at least it should.

I would be happy to invest, even through direct investments, in small/medium-sized US manufacturers that actually produce useful products rather than playing Russian roulette, so to speak, in the far-flung global financial markets.
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Old 01-22-2008, 11:44 AM
 
Location: WA
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The biggest segment of the economy is consumer spending and that is what drives all other segments so the theory is that it will help grow all other segments including manufacturing; also giving consumers incentives to spend is considered the most fair and least biased stimulus.
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Old 01-22-2008, 12:52 PM
 
Location: Heartland Florida
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Cut our taxes and let us invest in our businesses! Just simplifying the tax system would save immense amounts of unneeded paperwork and allow us to be more productive. Unfair licensing and other regulations limit who can go in business. Make it easier for entrepeneurs to start and run a business and watch the American economy grow and become #1 again! We need more freedom to compete with slave wages and lax environmental laws abroad. I believe that with the right Government the United States will once again be the world's #1 manufacturer.
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Old 01-23-2008, 08:28 AM
 
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If consumers are incentivized, they are mostly limited to buying imports - which really doesn't help the economy. If US businesses are incentivized, more American products will be available to consumers which, in turn, helps the economy as a whole. Incentivizing US businesses will also encourage the creativity that made this country great - and prevent the resulting knowledge and technology from being exported.

The idea of allowing individuals to invest directly in small/mid size manufacturing is interesting. How would individual investors reach such business (or vice versa)? Is there an existing venue? Bank loans, venture capital and stock market listings are inaccessible to much of small business.
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Old 01-23-2008, 10:14 AM
 
Location: western East Roman Empire
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Quote:
Originally Posted by aaauger View Post
If consumers are incentivized, they are mostly limited to buying imports - which really doesn't help the economy. If US businesses are incentivized, more American products will be available to consumers which, in turn, helps the economy as a whole. Incentivizing US businesses will also encourage the creativity that made this country great - and prevent the resulting knowledge and technology from being exported.

The idea of allowing individuals to invest directly in small/mid size manufacturing is interesting. How would individual investors reach such business (or vice versa)? Is there an existing venue? Bank loans, venture capital and stock market listings are inaccessible to much of small business.
I had responded a few hours ago, but the system did not pass it through. I´ll try again.

All good points. By the way, some members of the World Economic Forum meeting in Davos, Switzerland just blasted the Fed for the short-sightedness of its monetary foolery, sorry, I mean policy.

As for the question, indeed it is difficult for small investors to have access to certain kind of investments. One possibility may be private equity, but even in that case a "small" investor usually needs at least $1 million to participate. So it's a question that we'll have to investigate further.
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Old 01-23-2008, 09:52 PM
 
Location: Boise, ID
1,356 posts, read 5,710,652 times
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Quote:
Originally Posted by aaauger View Post
As an economic newbie, I'll pose this question: if the GDP is imbalanced by a prevalence of consumption, why doesn't the government offer incentives to manufacturers?

I'd be interested to hear especially from small manufacturers: Do you feel wanted or supported - by local and federal government?
I own a small manufacturing company, about 35 employees. I don't feel particularly supported by the federal government. My business is in dietary supplements. It is mostly the Democrats in Congress who are constantly trying to add more and more regulations on us. They really lack a basic understanding of how the economy works. The see corporations as greedy and ripe for the taxing.

The local government where I am is okay. The state government in horrible. We are in California so enough said on that.

I don't understand what you mean by offering incentives to manufacturers. If you give breaks to encourage production then you might end up with more supply than demand. That seems like the wrong way to go. Marxism involves the state determining what should be produced.

I agree with the previous posts - cut taxes and let the invisible hand do its job. The invisible hand is wiser than all the collective wisdom in DC. With the tax breaks I could afford to buy more equipment and spend more on marketing to expand my business. That, in turns, create more tax revenues (albeit at a lower tax rate) and creates more jobs.
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Old 01-24-2008, 08:01 AM
 
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Your last two paragraphs are really the same thing, right? Tax breaks will initially create a supply surplus but create more jobs at the same time. This in turn will presumably create more demand - at least within the US. The government might also consider tax breaks for exporters.

Another form of incentive (or disincentive) could be to restrict manufacturing jobs from being shipped overseas - again, creating more supply and more jobs.
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Old 01-24-2008, 08:34 AM
 
Location: western East Roman Empire
8,067 posts, read 11,870,383 times
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Quote:
Originally Posted by aaauger View Post
Your last two paragraphs are really the same thing, right? Tax breaks will initially create a supply surplus but create more jobs at the same time. This in turn will presumably create more demand - at least within the US. The government might also consider tax breaks for exporters.

Another form of incentive (or disincentive) could be to restrict manufacturing jobs from being shipped overseas - again, creating more supply and more jobs.
The advantage of tax breaks, especially if for investment, is that manufactures can invest, not necessarily in increasing production, but in improving efficiency, thus meeting whatever level of demand at a higher surplus.

I don't see how domestic policy can keep manufacturing jobs from being lost overseas, except indirectly through higher tariffs.

I would prefer to see higher interest rates: US consumers would not be subsidized to buy cheap imports and US manufactures would have another incentive to come up with cost-reducing, quality-improving technology in order to compete better, setting a higher bar for worthwhile investment.

So, in my view, the best policy mix would be tax incentives for investment and higher interest rates.

As it stands, policy is more geared towards subsidizing consumption.

Last edited by bale002; 01-24-2008 at 08:54 AM..
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