Why the Global Economy is Important

I have posted many blog posts about how El Paso’s economy is a failed economy that relies on taxes to keep the city solvent. The city’s economy basically recycles the same money around-and-around, with the local taxing entities taking out a chunk each time it comes around to them. Eventually the money will run out. I have also written how El Paso is a microcosm of the national issues.

The problem with El Paso’s economy is that it relies on the same bucket of money instead of growing the bucket. The politicos blame the commercial building owners for not contributing more to the tax base. The real problem is that the same money goes around-and-around from supplier to consumer unto the taxing entities, who take out a chunk and then return the balance to the consumer who puts it back into the endless circle of money grabbing.

Each time it cycles through the taxing entity the money supply gets smaller.

Eventually the money will run out.

The solution is simple, El Paso needs to bring in new money. It needs to grow the pot.

The city can do this by attracting outside investment into the city. New businesses from outside of the city that would come in and build or design products, or make widgets and export them to other communities outside of El Paso.

What happens then is that the other communities consuming the El Paso products or services and send their community’s money back into El Paso and thus growing the pot. When the politicos announce a slick new restaurant, or store they are just keeping the existing pot of money intact instead of bringing in new money.

What’s most poignant about this is that the cool new restaurant or shop takes your money and sends it out to their communities. Yes, McDonald’s and Whole Foods, among all the others pay local suppliers. But where do you think the franchise fees go to? Or, the accounting or IT services these franchisees consume? Not El Paso.

That is what El Paso should be doing, sending out its ideas or products and reaping the benefits. But no, instead, the politicos all gather around the Whole Foods of the world and after pleading “pretty, please” come to El Paso, they gleefully proclaim how wonderful they are, as they start sending out your money. The worst part is that not only do they send your money out, but the politicos offer them generous incentives to send your money out to their communities.

This is the classic example of a community that looks inward instead of outwards.

I realize that some of you are going to groan and demand examples of how El Paso can use other community’s money. I’ve given you many examples before and I won’t bore you with the details today.

However, I’m going to demonstrate to you how Donald Trump has taken this same failed economic model and is putting the US in the same predicament.

All of you have heard the rumblings about bringing the jobs back. You’ve heard the arguments that China and México are taking advantage of the US.

What you have not heard is that agreements like NAFTA use the money from other communities, i.e. China or Mexico to relieve the tax burdens upon US citizens. Who do you think buys the iPhones? Chinese and Mexicans buy them. Sure, the iPhone is made in Chinese factories. But do you know why California’s economy is the largest in the United States and probably the sixth largest in the world?

It is because they export the intellectual property that drives the iPhone. Imagine that, Chinese and Mexicans using their money to buy a US product.

Yes, it is a circular flow of money, US to US taxing entities, to Chinese factories, to Chinese taxing entities and back again to the US, where it trickles through the US money circle. The money may flow circularly but it flows through a much larger circle, each time growing just a little larger.

What Donald Trump has embarked upon is making the money circle smaller and thus creating an economy much like El Paso’s where no new money is introduced into the flow. Sure, the jobs may grow, but much to the chagrin of the Republicans the taxes will increase because of the government needs more money to enforce the US-first rules and to supplement the higher wages that results in higher consumer prices and, not to mention to fund the wall and the deportation force.

4 thoughts on “Why the Global Economy is Important

  1. Martin
    You left out the trade deficit the U.S has had for years with Mexico but can understand why you see this as a good thing. Well at least for Mexico!

  2. The first part of your argument is entirely correct. But part of El Paso’s problem is globalism. The guys that make widgets head to Juarez. If Trump’s policies make it advantageous to manufacture some widgets in the US, El Paso could benefit. Particularly in a twin plant scenario where high labor content stayed in Mexico but more automated work stayed in the US. Pre-NAFTA, that was a model that worked here.

    1. EXACTLY. what happened to Farah, Levis, Wrangler, Economy Laundry, Packard Electric, and all the other pre-washers ? They were here as twin plants, not after Nafta.

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