The Fiscal Diemma, by T.S.Khanna, 1-13-2013

Foundation for Better Government

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January 13, 2013..

The Fiscal Dilemma

By T.S.Khanna, January 13,2013.

The truth, rare as it is its supply is usually greater than its demand, especially in the power circles.  Our confusion is confounded by the conflicting truths (facts) given out by various “reliable sources”.

Assuming Rana Foroohar’s facts are correct in the January 14, 2013 issue of TIME, the solution to fiscal crisis is in sight, if personal and party interests are set aside for the sake of national interest.

The US corporations have 1.7 trillion dollars in foreign earnings kept abroad to avoid higher rate of taxation, 35%, in the US as compared to 12.5% in Ireland.  Competitive tax rate can certainly bring in the most needed capital in the US to create jobs and perk up the economy.

However, the apprehension expressed by Warren Buffet and Prof. Clausen is that if the corporations operate under lower tax rate, they will outsource the jobs.  There is an implied blame on the corporations without exploring the reasons.

The goal of every business is to maximize profit for the investors.  It is natural that corporations should seek out places with competitive taxes and wages.  With globalization of the economy, the US is no longer a world apart, but there is a lag in adjustment of its economic policies.

Instead of blaming the corporations, the government must adopt competitive tax rate and the unions, competitive wages.  The capital and the jobs will come back.  The corporations will flourish and the wealth producing workers will be encouraged.