A Case for Lower Import Taxes
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by One Eye
If you wish to see the US as the most powerful nation it can be, I suggest you support lowering import taxes.
Imagine the US is a bucket. It has a hole in the bottom that represents food. This hole leaks at about the same rate regardless of what goes in the top. There is a pump in the bucket that represents war spending. The pump operates when we spend to make damage. There is a siphon that drains water - this represents exports. There are also two hoses that fill the bucket, the big one is domestic production, and the little one is imports.
Right now everything is flowing at a certain rate. If we increase the flow of the import hose what can happen?
1. We operate the war pump more.
2. We send more water through the siphon
3. Water builds up in the bucket.
In case 1, the US becomes much more powerful. Spending money on weapons is the most efficient way to make damage. Weapons spending is about 5x as efficient as tanking is when it comes to making damage.
In case 2, the US becomes incrementally more powerful. In this case citizens switch from cheap over-supplied markets to more expensive, under supplied ones. This increase in market efficiency makes the US economy incrementally more efficient. With a more efficient economy, we become more powerful.
Case 3 is an unstable state. The bucket can not continue to fill forever. This case represents people adding product to the market that never ever sells. We all know that only the most irrational business owner will continue to pour money into a company and never get anything in return. Case 3 invariably changes into case 1 or case 2.
Congress has already passed a new budget with even more military spending. The military is making a switch to more weapons consumption and less tanking. The policies have been laid to take advantage of more consumption. Now is the time to lower import taxes to help feed the beast we are creating.
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This metaphor is just confusing. If anything the import taxes need to be raised. We let them go any lower and then it will start taxing domestic companies more then foreign companies.
So water = import taxes.
Like any analogy, your bucket analogy is imperfect. You fail to mention that by lowering the import tax, we have already caused prices and wages to drop in the US. The US companies are hurt, the US workers are hurt. And this reduces US income tax revenue, which damages the military budget.
Case 1 only applies to weapons. The recent import tax "experiment" affected other unrelated RMs and tickets. This case does not apply to the debate.
Case 2 is a dream. There are no "under-supplied" markets in the US. Before the recent "experiment", we were already gorged on oil, wood, and grain. It was hard enough in those industries, and by opening the freeway for foreign goods, it's only become more dismal. Basically, you're saying that you support the 1% import tax rate to intentionally torpedo US businesses that were already struggling in an over-supplied market. Thanks man. I hope the voters here that.
Case 3 is close to what we have. It does not "change into case 1 or case 2". What it leads to is wages falling, failing domestic companies, and people closing up shop and starting businesses in other countries that have more sensible economic policies.
Please all voters and congressional candidates - reverse the recent import tax "experiment" and lets get America competitive again. This is not a playground for pet economic theories. It's a game, it has simple mechanics that we cannot afford to ignore.
Import taxes have to be higher. As you say, the water goes through the bucket at the same rate. Whether the people making the water stay in business in america, or whether the companies not in the US stay in business depends on the import taxes. At 1%, the markets flooded, putting dozens out of business in the eUS. Don't you support America? because if you did, you would raise import taxes, not lower.
Quanah Parker, I don't believe that raising import taxes is a sensible economic policy.
If eRepublik has simple mechanics, it is the simple model of a marketplace that microeconomists propose. Under this model, the free market is the most efficient way to allocate resources. Hence, I believe low import taxes are the sensible economic policy - if eRepublik truly has simple mechanics as you say they do.
Furthermore, there is no economic model that clearly shows gains under a protectionist agenda. Even if you reject the market paradigm, what better model do you have?
@Phyrexia - this is the problem. People bring RL economic ideas and pet ideologies into the game. It doesn't work like that. This is not RL. The game does not respond exactly like RL markets. There are big differences, for example, in changes to consumption rates. I appreciate that you may know something about RL economics (I assume), but that does not always carry over into eRepublik and we are paying for the "experiment" of those who think it does apply here.
The better model I have is to 1) put the import tax rates back where they were three weeks ago, and 2) even better, study the policies of the HIGHLY successful countries in the e-world and perhaps adopt similar tactics. These people laugh at us and our "experimentation" - and they cash in big time, while we pay for it. I can't stress enough - this is a game, with hostile countries that conduct economic warfare, and "friendly" countries that do not reciprocate "free trade". We are only being suckers, when we drop our import taxes down to 1% (in the game).
Please explain how low import taxes hurt us.
We get cheap goods. Yay!
We can spend our labor force on something we need more. Yay!
My "RL economic ideas" do not involve anything of the sort you are talking about. You mentioned "changes to consumption rates", which is a complication.
I am talking about an idealisation - a simple mechanism of trade called the marketplace. This is exactly what eRepublik emulates - and it does it better than the real world.
Yes we get cheap goods but we also get lower wages. Lowering ALL import taxes is a mistake. Each item on the market needs to be looked at separately. Iron and diamonds are things we need so we encourage those goods to be imported. We can supply our own grain, wood, and oil so we have no reason to lower those import taxes. A strong economy does not mean lower prices and lower wages.
"RL economic theories" cover what you're talking about. It's called perfectly inelastic demand. Such 'quantity-targeting' markets are still dominated by marketplace rules though.
Every consumer still wishes to buy the lowest priced good. That's not affected.
Elastic demand is not critical for marketplaces to work.
Understood, of course there are some rules that apply, but the rules are not the same.
Does every consumer also wish for their wages to drop through the floor along with prices, and for the local industries to close up and move to Europe and South America, and for the military funding to drop because income taxes aren't bringing in as much anymore?
We need to play the game here, and not stroke RL economic ideologies. Learn from the countries that dominate this game. How many weeks, Phyrexia, have you been managing companies, paying wages, and selling on the US market?
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Historically speaking, whenever we raise import taxes, the cost of goods rapidly rise (i.e. Q1 gifts for $4). There is a healthy balance to find in the import tax, and we rarely find it. IMHO, if we want to be a war beast but have virtually no iron, we have to lower import taxes or citizens will use their organizations to spend all of their money elsewhere.