How Can We Increase Domestic Capital Investment?

Question

Please answer from the perspective of a free trade supporter.

Buildup; American firms are investing their capital in the production of goods and services in India, Mexico and China because labor costs are lower, and importing their products back to the United States duty free. As a result, these nations are seeing tremendous, double digit economic growth, and the United States is in stagflation (per a CNBC economist on Friday, certainly in recession at any rate).

This growth is to be expected, as free market theorists teach that capital investment leads to growth.

Now, under free trade, when and how would domestic holders of capital begin to invest it in the United States so that there could be growth here? (besides of course employing a tariff, which free market apologists would not allow).

I'm looking for a free trade explanation of how we can possibly create additional capital investment. please try to stay on topic.

Answer 1

How about supporting the middle class a little more- what's good for them is good for the economy too. More tarifs on import items,more thoughtful trade agreements, fewer illegals who actually do take middle class jobs away,i.e. Construction among others, fill our schools and jails and generally lower the standard of living for many of us. Encourage savings,larger individual contributions toward retirement,etc.What is the point of increasing domestic capitol investment if we give the wealthy more tax breaks only to make them wealthier  while the majority of American's continually face higher prescription costs,less and less buying power,etc- You will only wind up with a few more jobs and a lot lower wages. Shouldn't the economy to serve everybody's needs? A lot more protectionism is what's needed. If we make more things here more efficiently and we buy those things that's a strong economy in my book. Over sea's salaries and wages will be lower for several generations yet and so will their standard of living- why should this dictate our standards for the most part to benefit the wealthy? "Trickle down" was even exposed as largely a fraud by Reagan's own economists. Sorry for the rant but this form of strong economy does not benefit most of us which is precisely what is wrong with it. We are not a nation of money only. If Government continues to "pander" to the wealthy only this Government will not last long and that should fall into the equation too.

Answer 2

And who says we NEED to increase domestic capital investment?  :)

Seriously though, with population aging the way it is, a progressively larger share of workforce is going to be tied in healthcare (broadly defined, including at-home care giving), which is not that capital-intensive...

Answer 3

The best thing to do is actually two fold: 1. Lower taxes on the rich, upper middle class, and business. I know that this idea is not wildly popular amongst liberals and democrats, but regardless of your ideological stance the fact remains that if yo free up the rich and business (who have a lot of money) to invest then it will "trickle down" through the rest of the economy. I know some are against the "trickle down" theory for various reasons, but it has been proven correct over time.

The second thing to do would be to abolish the raising of the minimum wage, again this makes firms less competitive because every year by federal law they are having to shell out  up to a dollar more per employee. This actually leads to higher unemployment as the firm will just begin to lay off workers rather than pay them the increased wage.

In short: taxing and raising costs on business and the rich does not help the US in creating additional capital.

Unfortunately, a lot of people are blinded by ill feelings, or hatred for the rich or corporate America because they are told that these two are responsible for all their problems, and when you get politicians whose sole purpose is to pander to one group at the expense of the nation's economic well being then it becomes dangerous.