China has so much money it can buy important magnet technology that we use for our smart bombs. They did so in 1995 when General Motors sold Magnequench to Chinese investors(Huan New Material High Tech Inc.and the China National Nonferrous Metals).Beijing has a policy to acquire high technology industries with military significance.They comb the international community for new technology to buy and bring home like a bee to the hive. Magnequench eventually bought out GA Powders who received a taxpayer subsidy to develop the powerful new magnets.Eventually,China bought and closed all of the American companies producing this new technology and now the USA is dependent on them for these magnets,including the ones needed for the smart bombs.Many Democrats expressed concern during the Bush years but they issued blanket statements asserting it has taken all appropriate steps to safeguard Americans from foreign threats.(I'm sure Clinton also did nothing to stop this problem). The Committee on Foreign Investment,a review panel for foreign companies that want to acquire American companies with national security products,does little to stop the spread of this disease.Only 12 of 1,500 reviews were sent to the White House since 1988 for review.
Since 1972,oil companies sought to explore China.They also told China they wanted to pay a corporate tax to China for the exploration work.Why? This tax could save the company millions by avoiding U.S. taxes which are higher.The U.S. allows American companies to reduce their taxes paid to foreign governments by a higher rate($1 for $1credit).The usual rate is $.35 on each dollar credit.The other reason is that our government allows American companies to pay no tax on money that stays offshore.Numerous companies,including large banks,hide their money in subsidiaries in foreign countries to avoid the U.S tax code.
A company with operations in the USA and another country can borrow money at home,deducting the interest and thus lowering its American taxes.At the same time it can earn interest on untaxed cash it keeps overseas.So when an American company closes a factory here and moves to China,provided it meets some technical rules,it can deduct interest charges on its U.S. tax return while building up profits offshore that may never be taxed.All along legislators are writing tax laws to encourage this stealing from the public.
As recent as 1985 trade between China and the U.S. was balanced.In 2006 the trade deficit with China reached $232 billion.That equaled more than $60 per month for every man, woman, and child in America.Today that number has tripled. Trade is imbalanced with Mexico and Canada($136 billion in 2006)Most of that number is from imported oil. China, Japan,Canada and Mexico account for 60% of our worldwide trade deficit.($764 billion in 2006).We don't make anything here anymore but financial instruments that make some people rich and the majority poor.(Debt Crash of 2008)
In the next decade or two,as many as 40 million American jobs will be at risk of moving overseas.One in four jobs might evaporate.That loss would be an economic catastrophe worse than the Great Depression.As America is losing jobs overseas,taxpayers are providing comfort to the George Steinbrenners of the world.The public share of building the new Yankee Stadium is well over $600 million. George also stole a beautiful park away from the citizens to create luxury seating for companies that segregate themselves from the common citizen who financed the bulk of the shrine.
Enough for today..more from "Free Lunch" tomorrow.
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