It’s common to receive a charity promotion that says “Donate now because someone has offered a matching gift.” For every dollar you send, they’ll send a dollar. It apparently gets people giving more. People like to see their money multiplied that way. Such a donation magnifies what you give, often by 100%, depending on the terms of the match.
People like the tax deduction for charities, too. It also offers what you can think of as a matching gift. Let’s suppose, just for illustration, that you pay that you pay 20% tax on the high end of your income, the so-called “marginal rate” at which new dollars of income are taxed if you make more money. Deductions are taken off the top, so every dollar you deduct means you don’t get taxed 20% on that dollar. So if you give a dollar, you pay $0.20 back on your taxes. It’s like you gave only 80% because you got 20% back. That means it’s like a 25% matching gift—$20 from the government for every $80 you spend means the government gives one dollar every time you give four. A lot of people are motivated by that.
So what if I told you that you could get a 1000% match on your gift? That is, for every dollar you give, $11 would be given to your charity. No tax deduction on this charity, but who cares? This is way better than the 25% match that you get from taxes. How would I manage this amazing feat?
Well, first, let me tell you who this deserving charity is: companies with products Made in America. OK, it’s not even an official charity, certainly nothing you can deduct on your taxes. And it’s not even just one company. But is it deserving your support? You bet. They’re working hard for those dollars.
“How does it work?” I hear some of you asking. “Does it require filling out a lot of forms?” Nope. No forms. The donation is instantaneously managed. You just buy something and all the paperwork takes care of itself. You just buy American.
“But I’m not rich. I can’t always afford to buy American. The ‘other brand’ is often cheaper, and I need to make every dollar count. The advertisements on TV tell me that they’ll always undersell the competition.” That’s right. But by how much? Let’s look at the difference. Suppose you can buy an American-made item but it costs a little more. Let’s say it costs $1.10 but the foreign item costs $1.00. You’d probably say you were just throwing away that extra dime, right? Not at all. The effect of that one thin dime could be way more powerful than you imagine. It’s hard to find a more powerful way to kickstart the economy, and it’s something you can personally do.
Let’s suppose you choose to think of that dime as a charity. It’s money you think you’re just giving away, that you didn’t have to. You can’t write it off on your taxes—it’s not that kind of charity. But it’s money you didn’t have to spend. What would happen if you did this? Well, it gets magnified by what amounts to a matching gift, or you can think of it that way. So you buy something at $1.10 and you think of it as paying the $1.00 you’d wanted to spend and $0.10 to charity. But the company sees the full $1.10 as income. That’s $1.10 that went to your chosen charity, American industry. That’s a multiplier of 11x. $0.10 from you and $1.00 from a matching contribution, which supplied for free by the marketplace. A 1000% match, or $10 on every $1 that you put in as your “charity contribution.”
If you have to pay $1.50 rather than $1.00, it might seem like the fifty cents is just being given away. But $1.50 goes to American industry. So from the $1.50 you pay, $0.50 is your share of the “charity” contribution but $1.50 gets sent to the deserving recipient. That’s a 200% match. Even if you have to pay $2.00 rather than $1.00, you’re still getting a 100% match on your money. (I’ll save you the trouble of computing it: It has to get to $5 for American goods instead of $1 for foreign goods before you’re getting “only” the 25% match that you got on a tax deduction, where the government contributed $1 for every $4 you contributed.)
Please note, too, that these people you’re sending to by buying American are not just people with their hands out on a street corner. Such people may need help, too, but often that they need is jobs, not cash handouts. American industry isn’t just standing around idly. They’re working hard day in and day out to make quality products that you’d like to buy. They just can’t always hit the price point that foreign countries can. Many foreign countries get that price point either because they manipulate currency or because they don’t pay for a living wage or because they don’t pay for important benefits like health care and retirement. We in the US can either compete with those countries by insisting that our country lower its prices (and its employment standards) until we match up with them, or by insisting that we’ll pay for higher priced products here because we know we’re investing in a living standard that we want the whole world to match. If we say that getting the absolute lowest price is always the most important thing, we are saying that those other things—decent wages, health care, etc.—don’t matter.
Mostly we’re talking about stuff we have to buy anyway. So when there’s a choice, why not send your hard-earned money to companies that make things in America? Those companies can then succeed and even expand, hiring new employees, which may help those people on the street corner even more than a handout would anyway.
And don’t forget the money you pay will be taxed as income by companies you’re buying from, which means the US government will see revenue that can pay for teachers, fire fighters, policeman, public infrastructure like roads and bridges, social security, and health care—even as we also pay down the national debt. The better our national revenues, the less pain all around for everyone as we work through a balanced approach to resolving our economic issues.
Buying American-made products is a real win-win-win-win... And it starts with the simple act of knowing what you really want to invest in, and putting your money where you really want that money to go—a prosperous American economy.
Now how much would you pay?
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Today, at the Dickens Festival in Skaneateles, we ate lunch at a restaurant, and purchased two artisan-made pieces of jewelry. I felt better about those purchases than if I had bought some piece of crap at Wal-Mart.
Sometimes I think we are our own worst enemy. We complain about no jobs here and yet we love to buy foreign.
rated with love
Poetess, thanks. Yes, I think it is a challenge and something one has to just keep working at. Investment is about more than just making a return on a dollar, it's about putting your money in endeavors you want to see succeed so you can feel good saying “I helped that happen.”
Now, when you buy foreign -- you still have a multiplier effect with middlemen and shippers, but its effect is much less. Purchasing things from China at Wal-Mart is "good" for the global economy. After all, Wal-Mart and the Chinese don't complain one bit. But it's infinitely bad for the local economy. All you have to do to prove this statement is to see the hundreds of abandoned Main Streets all over America where the big box stores have settled.
More than that, by subsidizing the global economy at the expense of the local, you're also subsidizing global warming, financialization, and the hollowing out of the American economy.
Also, you didn't mention, it's not just subsidizing that's an issue. Buying local improves the local supply chain. It makes the world less fragile. If there are wars or floods or other events in the future that disrupt global supply, it's good for local areas to be more self-reliant.
Buying American is not just a good idea. I think it also may turn out to be key to our survival. We are currently losing entire industries. We are now at the point at which we couldn't manufacture some things even if we wanted to because we no longer manufacture certain necessary components here.
In addition, centralizing the manufacture of certain items in overseas plants puts the supply chain at risk. There already have been situations in which a flood or earthquake or other natural disaster has destroyed the only plant making certain critical items. I recently read that TV production was almost halted due to a shortage of videotape, as some overseas natural disaster destroyed the only plant making it.
In a Nation article titled "How America Could Collapse," author Matt Stoler noted that "Worryingly, there’s been very little consideration of how systemic collapses can happen in another, perhaps more dangerous realm—the industrial supply system that keeps us in everything from medicine to food to cars to, yes, videotape. In 2004, for instance, England closed one single factory, which caused the United States to lose half of its flu vaccine supply.
"Barry Lynn of the New America Foundation has been studying industrial supply shocks since 1999, when he noticed that global computer chip production was concentrated in Taiwan. After a severe earthquake in that country, the global computer industry nearly shut down, crashing the stocks of large computer makers. This level of concentration of the production of key components in a globalized economy is a new phenomenon. Lynn’s work points to the highly dangerous side of globalization, the flip side of a hyper-efficient global supply chain. When one link in that chain is broken, there is no fallback."
The worst of it is that those companies KNOW that what they are doing is unsustainable in the long run but do it anyway because their CEOs want the bonuses paid for short term profits. This is worse than mere "greed capitalism" this is "stupid capitalism".
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Ideally we need to get rid of all these "proprietary information" laws that enable them to hide all their scams in trade secret files and we need to globalize workers right and environmental protection. Half measures often fall apart as soon as they find a way to get around them; which usually doesn't take long.
We, in North America, are already, in world terms, in the top 5% in wealth and income. I'd like to see us change our system of inheritance so that ALL citizens share in our prosperity by means of owning shares in our corporations and other successful enterprises. In fact I'd like to see us all, collectively (bad word, I know), become, in the world economy, "the 1%."
It's time ALL of our citizens earned a large portion of their incomes from share earnings instead of labour. Hey if it's good enough for the wealthy, I think I could suffer it!
Our problems have so often been described as being due to a lack of good-paying jobs. They're not. They're due to a lack of adequate income by the majority of our population. We have, for so very long, equated jobs with income when we speak of the large majority of our people. We don't necessarily do that when we speak of the wealthy. We know that their wealth, usually in the form of ownership of stocks, shares, bonds, etc., "works" for them and earns them huge incomes - sometimes truly excessive incomes.
I'm not some silly socialist who wants to "hang-'em-high" and grab what they have or force them into labouring at shit jobs. I'm much more interested in seeing us all move on up to their level. With North Americans as the world's 1%, we could stabilize world economies and not be at their mercy.
Just a thought.
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Kenny, I've been careful not to frame this as “you must do this or you're a bad person.” I understand well that the choices are complex. My point is mainly to alert people to the fact that these are choices that really matter, and that can help us all. Giving up $0.01 to buy a US product for $2.01 instead of a foreign one for $2.00 is not just a 20,000% matching gift to the US economy, it can make the difference between whether the US product succeeds or fails. It can make the difference between whether more people go on unemployment. That can ultimately raise taxes by more than the $0.01 that would have been saved. One still must live in the world and make many hard choices, so I'm not villifying anyone, just urging people to think about how the product price tag might not tell the whole story.
Skypixie0, I'd even go farther than saying it's not socialist—it's outright capitalist to claim you want some decent competition. See my remarks about “many minds” in my 2009 article Rethinking Mega-Corporations. I often think what alleged capitalists of today want (perhaps I should call them neocapitalists to distinguish from what I think of a true capitalism) is market lock-in so they don't have to compete. The uncertainty they want to get rid of is, when you strip the other stuff away, really “competition at all.” They want to be able to do multi-year planning, but planning is really the essence of socialism, or so they tell us. They're really supposed to be responding more dynamically to things, but they just want that to be a fiction and not really something they can predict. Can't have it both ways. Anyway, thanks for chiming in with interesting thoughts.
I presume that your sentence.......""The uncertainty they want to get rid of is, when you strip the other stuff away, really “competition at all.”" was meant to contain the word "no" between "really and competition.
I agree with you absolutely. Real capitalism is always open for all to enter the competition on a relatively even playing field. The present situation, which Dennis Loo refers to as "neo-liberalism", is definitely NOT a competitive system open to all to participate. I have long held the thought that proper capitalism is the Rolls Royce of economic systems with the caveat that "proper capitalism" be defined as very different from oligarchy.
We brought forward with us, from our feudalist days, direct line inheritance. This allows massive amounts of wealth to become stagnant in the hands of too few people. For a capitalist system to work a it should, the wealth needs to keep moving. I'm told that every dollar needs to move 16 times per year for a capitalist system to be healthy. Since about half of all wealth is not liquid enough to do that, the liquid part must move about 32 times per year. It ain't doin' it.
I'd drop direct line inheritance and substitute generational inheritance. All the wealth of those who die in (for example) a 3 year period ought to become a shared inheritance for all the new citizens born in that period of time. Let it gather as much interest, dividends, etc., as it can until those new citizens become about 2o years of age, then given to them as their citizens share of the wealth of their society.
From that inheritance let them finance their further education, training, and so forth. Their would be no need of welfare of any sort. Free medical or education of any sort. Each citizen would have in his hands the means of taking care of his own needs without asking his fellow citizens to pay his bills for him.
Imagine the tax savings if we didn't have to support a large chunk of the population because they were "poor"!! Imagine how healthy the economy would be with so much of the wealth of that nation in hands that can, and will, spend it. Imagine all the businesses that can successfully compete for a share of half the wealth instead of only for the 10% that is presently in the hands of 90% of the population. Imagine the dividends paid by those successful business to their owners - the population - and the following generation's inheritance!
Let's make capitalism work! Let's introduce Citizens' Capitalism!
(Oh, how I can rant on about this!)
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Skypixie0, you're right on the missing “no.” Sorry, that happens. It sounds indeed like you have a lot to say. Perhaps you should blog it so there's more room for the discussion it warrants since we're drifting a bit far afield here. I have more to say on topics of citizen participation, of inherited wealth, etc. Probably I should write my own blog as well. But for now I'll just hold my tongue, before I blather on at even more length, and I'll try to keep to just thanking you for the comments, which are appreciated.
I have already posted a number of blogs on this subject. I would be honoured to have you read and comment on any - or all - of them!
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Being a cautious consumer and a pro Made in America shopper, is quite a challenge but a worthy one when it is certain to provide income within our borders. Sadly, most folks don't have enough expendable income to boost the economy that much, when purchasing products made here. I heard on some TV news show today, that it is equally important to buy products that were conceived, created and marketed here, as there are numerous workers, inventors, designers, etc., on this side of the product inception and development process as well. That being said, I think of Apple and all our Macs, iPhones, etc...that are made in China, though thousands are employed here and helping the US economy; one of many high tech companies among myriads of others that do the same. But...and it's a big but...I am 100% for buying American and especially the smaller industries down to the mom and pop stores, cottage industries, etc., that need all the fiscal support they can get to survive in this economy. Very cogent and vital discussion all the way around.
Cathy, you're right it's difficult and quite a tangle to navigate. I'm not here suggesting it has to be all or none, right or wrong. I trust people to make good judgments when they take the time to think at all. I think too often we've just been on autopilot and the mere fact of having discussions will help us a lot.
Kent, thank you so very much for this post. ["Long time no hear-ie" ;-)].
I was fully engrossed in this discussion while reading it and was about to start a blog of my own in hopes it could maybe be a place for some follow up on the many threads of the comments here, but then we had a power failure here. Looking forward to continuing discussions here and many thanks!
Abrawang, I think it's trivially true that some things cannot be made locally, so clearly the answer is no if you wanted me to be literal. More generally, though, if you mean even just “to round numbers” I'm not sure. I tend to distrust absolutes. Sign me up for Aristotle's virtue ethics: the mean between unreasonable extremes. I think we're way out there on the unreasonable extreme of too much globalization, but that doesn't mean I'm against globalization. There are a number of ill effects that going local would take care of, including keeping people employed and limiting wasted fuel for transport. But I'm not one to say there's any great single answer, just a need to monitor causes and effects. There are some very good things that come of globalization, but I think at the point, as now, where it's gutting the US economy to save a few pennies, it ends up penny-wise and pound-foolish. Note, too, I don't think the issue is protectionism; that's just the scare spectre that people raise. I think the issue is fair trade. If I'm paying for health care and you're not, you're going to undercut me—and not for the reason markets are supposed to win. The fact that you can make a cheaper toaster by paying less for health care says nothing about your ability to make a toaster. I want to compete with you on toaster-making and I want us both to agree that people should have health care, environments should be treated well, etc. Those should be out of reach of markets, IMO. That's not an issue of nationalism, per se, but it is an issue that happens to stop at national walls if the other country by law allows or encourages lack of health care and, let's say, we don't. I perceive a desire by industry to fix this by lowering our standards instead of raising those of others, and that bothers me. So it's not an easy answer and I'm not really answering as fully as I'd like. But hopefully that gives you at least the sense that I'm not trying to push a dogma but rather trying to tweak an out-of-balance system. I have a lot more thoughts on this and related issues, but I don't want to lay them all out in a comment box. Not enough room. :)
Actually, globalization as it was theorized was a wonderful idea -- we were told and sold the idea that nations with economic ties don't go to war with each other, and that rising wages in the third-world would be not only humanitarian, it would promote democracy.
Globalization was sold as the rising tide that lifts all boats. Ralph Nader quipped that it was the rising tide that lifts all yachts. I say it's far worse -- it's the tsunami that sinks all life rafts.
So much for another neocon politico-economic theory.
Small shop manufacturing gauged toward niche markets.