A general environment of cooperation takes years or decades to build between major countries, especially between superpowers competing for influence so we better further cooperative efforts with China now.
Economically, China is heavily invested in the U.S. They want to be sure our country remains stable to protect their investments. Where we fail, they hurt, too. Currently we’re failing our working and middle classes. This is where the U.S. loses and China wins, but only to a point. A struggling American working & middle class means more Chinese products are bought, and it keeps costs low for Chinese to further invest in the U.S. (less competition from American investors). However, a crashing middle class will eventually lead to the total crash of the American economy and the value of American investments.
If the U.S. invests in its middle-class, who are more likely to buy domestic products than European-made cars and boats or the cheapest products made elsewhere, we’ll begin to buy back Chinese investment in our country. Chinese enjoy profits as we buy back, and then they will invest in some other profitable economy. When Americans reinvest in the U.S. and overseas, more profits remain in this country. The working and middle class was the hallmark of the 1950’s (Eisenhower’s well taxed) American economy.
The Chinese have a burgeoning middle class. Marvel at their domestic and international investment power and profits. That could be the U.S. again if we listen to David Stockman, the architect of Reaganomics, as he refutes the entire theory of Reaganomics. In Stockman’s book from 1986, The Triumph of Politics: Why the Reagan Revolution Failed, he will tell you his former theory didn’t work. In preparation for a book he plans to publish next year, Stockman explains the further perversion of Reaganomics by Republicans burst the economy, and Reagan would never approve of extending the Bush tax cuts demanded by the current Republican Party.
David Stockman recently stated:
The Republicans abandoned their old-time fiscal religion in favor of two theories, which I think are now proving to be both wrong and highly counterproductive and damaging.One was monetarism, which said let the dollar float on the international markets. Let 12 men and women at the Fed decide whether to raise or lower interest rates, and use the Fed to try to run this massive economy. What they’ve done instead is run the printing press; they’ve flooded the world with dollars. The whole monetarist policy has been a mistake.
The second thing was the perversion of supply side. Yes, there was a good idea that in certain circumstances, lower tax rates will encourage economic activity and savings. But when you make it a religion, when you make it a catechism and you say you cut taxes no matter what the circumstance, what the season, what the condition, then I think the whole idea has been perverted.
European financial support of cooperative international efforts leaves the U.S. footing a disproportionate amount of the bill. China’s emergence as a superpower the means U.S. should find common ground for American-Chinese cooperation. Chinese financial backing in international efforts, such as Afghanistan, could help keep more of our tax dollars at home.
Again, the Chinese have an interest in keeping us from over-stretching our pocketbook, and for better or worse, they have an increasing interest in the stability in the Middle East and oil-producing countries. Both countries will be better served by reinvesting in America’s working and middle class by abandoning current Republican and Tea Party perversions of former Republican policies. The republican Eisenhower era used increased taxes to invest in America’s infrastructure and education to raise the country to greatness. This infrastructure is now in disrepair, and education spending is in decline. A domestically stronger U.S. makes Chinese-American cooperation more attractive to China.
Republicans are fighting Obama’s efforts to reinvest in our infrastructure. Some republican governors declined funding for revitalization projects in their states. Instead, other states will get the repairs, and the jobs required to complete those projects. This throws in the face all that republicans used to stand for such as Eisenhower, Barry Goldwater, and even Reagan.
I’m willing to bet two of the topics discussed by President Obama and President Hu Jintao this week will be reinvestment in America’s infrastructure and how both countries could cooperate financially on the international stage all in the name of protecting investments and political interests of both countries.