Tom PaukenYesterday, DallasBlog reported that the federal budget deficit hit a record level in November with a $83.1 billion shortfall. Today, we learn that the U.S. trade deficit for October hit an all-time hit at $68.9 billion. If this rate continues through the 2006 fiscal year, our annual deficit for FY2006 will be in the range of $800 billion. Our resident economist, Carl Pellegrini tells me that he does not believe that higher interest rates will be able to stem the ongoing problems associated with the huge U.S. trade deficit. In Carl’s words, this will constrain the incoming Fed Chief Ben Bernanke "in fighting his deflation demons".
All of this bad news about the huge budget and trade deficits should be a warning shot to the Congressional and Executive branches of the federal government that they had better start addressing these issues before we have a major economic crisis on our hands.
One Texas businessman who has a plan to address the loss of manufacturing jobs in the United States and reduce the trade deficit by reforming our corporate tax system is David Hartman. Hartman’s proposal, which we will be talking more about in the weeks and months ahead here at DallasBlog, would replace the corporate income tax with a border adjusted tax which would level the playing field for American businesses seeking to compete in the U.S. and export their products overseas. The current tax system provides incentives for companies to ship jobs overseas which adds to our trade deficit and causes the loss of good middle-class jobs here at home. The Hartman plan would encourage savings and investment in the United States. We will provide the details of his plan in the upcoming weeks here at DallasBlog.