This post is a little on the late side. However, the recent commercial of a Asian class learning of the fall of America is still being played here in Texas. Again, the lack of logical arguments is amazing.
According to conservatives, China will dominate the world because the United States high taxes and high debt will crumble America. Okay the federal debt and deficit are at all time highs. I would venture, though I haven’t done it, that even including inflation, that the level of deficit and debt is unprecedented. So its true that it is possible that the debt level will get so high such that a spiraling effect occurs: credit rating goes down, interest rates go up, increasing budget portion giving to interest, federal bankruptcy and very high taxes.By many forecasts, China will be the largest economy of the world overtaking the US sometime this century.
Here’s where the logic is so stupid. China’s tax rates are higher than the US. China’s government is much larger than the US. China’s gov’t spends so much more than the US. How can China’s dominance over the US be caused by US’s high taxes and large government when China has higher tax rates and larger governments? Can someone explain that to me.
Not only that, China’s capital gains tax is higher than the US’s. Yet companies are flocking to do business there.
China’s economy has the potential to be larger than the US for one good reason: people. China has a larger population of people. It’s the reason why China surpassed Japan recently to be the 2nd largest economy. Yet, the 2nd largest economy in the world is not even a developed country. Yes, China’s economy is still considered developing. A quick look at China’s GDP clearly shows its #2. However, you take GDP/capital and suddenly its slightly below average, about #93 according to IMF. Developed economies like Japans , US, Germany are all above average. OF course US isn’t #1 in GDP/capital so Americans don’t like this measure.
ASIDE: While China does have higher tax rates than US, its personal income tax rates are roughly equal. In fact, the current tax rates in China mirror the tax rates in the early Reagan years. I guess socialist gov’t does not necessarily equal higher taxes. Of course the majority of the revenue for the Chinese government is VAT (sales tax for us in the US) and business related taxes. Only natural since its a socialist country. (Yes it is still socialist).