Many economists have estimated that if China’s Gross Domestic Product, or GDP, continues to grow at approximately 10 percent annually, and the United States continues to grow at its anemic rate of 2.5 percent or less, then China’s GDP will be bigger than ours in 15 to 20 years.
Last week, the International Monetary Fund released an analysis showing that if the differences in exchange rates between the two countries are factored out (purchasing power parity), then China will surpass the U.S. in economic strength in less than five years!
Neither of these observations sets well with the American psyche, and losing our economic dominance in the world is not who we are. But more importantly, China’s economic dominance would represent a national security threat to the U.S., and possibly to the rest of the world.
Look at the facts. China has a billion more people than we do. It aspires to have a greater military might than we do. It currently holds more than 25 percent of our national debt. And it has a different view of human rights and how to maintain peace in the world.
It would be naïve to think that China would not be tempted to flex its worldly might if it were bigger than us economically and militarily. And it would be equally naïve to think we could influence their actions on currency or anything else with diplomacy or two verses of “Kumbaya.”
Appeasement is not a strategy. As Ronald Reagan proved, strength is the strategy. Both the Bush and Obama administrations have shown that appeasement just buys the Chinese more time to talk until they can equal us in size and might.
Our China strategy should be two simple words: Outgrow them!
There is no doubt that we can outgrow China, but right now we lack the leadership with the courage to propose and implement aggressive economic growth strategies.
Liberals would have the public believe that lower taxes on workers and businesses are a bad thing, and that they only reward the rich and the fat corporate cats. They also have the public duped into believing that somehow reducing the tax burden on the earners and the producers of income doesn’t pay for itself.
Both assumptions are dead wrong. It’s just Class Warfare 101, and the class warfare warriors are winning for now. But I believe the public is smart enough to understand some Economics 101 to get us out of this stalled economic uncertainty.
We need to lower corporate tax rates, starting with dropping the top rate from 35 percent to 25 percent. We are the only nation on the planet that has not lowered its corporate tax rates in more than 15 years. And people wonder why so many jobs have left the U.S. It’s not just cheaper labor in more business-friendly nations. It’s also taxes!
We must lower the capital gains tax rate to zero. Suspend taxes on repatriated foreign profits. Give every worker in America a 6.2 percent raise and every business a cost break by suspending the payroll tax for a year. Then make the tax rates permanent until they are lowered again in the future to remove this veil of uncertainty hanging over our economy.
Yes, these are aggressive proposals. It’s going to take aggressive leadership in the White House to get it done. It won’t be easy. But I don’t avoid doing what’s right just because it’s going to be difficult to achieve. That’s not in my DNA.
We can outgrow China because the U.S. is not a loser nation. We just need a winner in the White House. It can happen in 2012.
When the people understand it, they will demand it.
Class is in session!