Thursday, August 04, 2005

What About the Economy?

Have you noticed that almost no one in the news is talking about the economy? We've heard about CAFTA - or have you? It's the Cetral America Free Trade Agreement - the functional equivalent of NAFTA. It's on the table and will likely go through without much political hay being made about it. Why?

Simple answer: the economy is doing well right now despite high fuel prices. George Bush's opponents don't want to draw attentionto the fact that the tax cuts are paying off in spades. The Republicans are spending on pork like they're Democrats because revenues have increased while taxes have decreased. The conservative commentators have only briefly mentioned that the economy is doing well because they are still new at the media game and are still reactionary to the bad spin put out by the liberal media. They haven't learned to take the initiative and report the news that liberals aren't.

I'll take this moment to mention the benefits of CAFTA. Like the notion of lowering taxes in order to increase revenues, it's almost counterintuitive to think that helping the economies of our neigbors will help our own economy. Think about it: if I want to produce wealth, I need someone who values my product with whom to trade. The more people who value my product, the more wealth I can create. Agriculture, textiles and construction (food, clothing and housing - the necessities) only take you so far. To go beyond these industries, you must raise the standard of living. To raise the standard of living, you must improve the economy for all classes of people. In order to produce even more wealth, I need more people with whom to trade: and expanded customer base. International trade had been desirable since the beginning. It was one of the primary issues that led up to the war between the states. In order to trade internationally, it behooves us to strengthen the economies of lesser nations

I call this concept "Big Tent" economics. each economy is like a tent pole in a big tent. The poles closest to each other are the ones that trade with each other. If all the surrounding poles are bigger than yours, you can increase your pole easily to reach the top of the tent as the surrounding poles bear the weight of it. You have the tallest pole, you bear the greatest weight. In order to increase the size of your pole, you need to increase the size of the poles around you. As they strengthen and assume more of the burden, you can increase the size of your own pole. The US has one of the biggest poles (strongest economies) around. In order to keep it strong under the weight of international trade, we need to increase the poles (strengthen the economies) of the nations we trade with.To help bear the burdern of a "Big Tent" it helps to have all the poles fairly strong and to have as many poles as we can fit under the tent. Therefore, it's a good thing to improve the economies of Central American countries.

There's a further benefit. As we improve trade with them, we will have the leverage to encourage them to clean up the corruption that imports illegal aliens, drugs and terrorists into the US. That's seems like a good thing to me.

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