Thursday, 15 May 2008

The National Interest

We often hear politicians talk about doing what's in our "National Interest" but few of us actually understand what is meant by this. Not that I proclaim myself to be an expert, but as someone who has watch the news religiously for the past 25 years, has spent a great deal of time around politicians, military contractors, and diplomats, and as someone who devours political books/movies, I do feel I have developed a fairly accurate view of political speaking and thinking.

It is my impression that most of us (us being the average American) think the term "National Interest" refers to doing what is best for the American citizenry. It makes sense, right? The citizens make up the nation, so the National Interest is the citizen's interest. However, this is not always the way it is viewed in Washington DC.

To understand the term "National Interest" we first have to define it. It's most simply (and probably most accurately) defined as doing what is needed to help create, protect, and improve the major industries that provide the base needs of the population. These base needs/industries include Food, Housing, Energy, Money, Jobs, Security, Transportation, Health Care, and Communications. Why these? Well, let's see:

  • Food - You can't survive if you don't have food/water.

  • Housing - Shelter is needed for both survival and comfort.

  • Energy - While technically you could physically survive without it, it certainly has become a part of everyday life and allows you to live longer and more comfortably. It helps to keep you warm in the winter, cool in the summer, and to properly store and cook your food. It also assists transportation and many other luxuries.

  • Money/Banking - Once again, you may be able to survive without it but, I think we can all agree that the vast majority of people in the US need it to survive.

  • Jobs/Education - Most people do not have a trust fund or are able to be full-time investors so, we do need jobs in order to get the money that helps to ensure our survival and we could not obtain or perform these jobs without a certain amount of education.

  • Security - If you are constantly concerned about being injured or killed, you will not be very effective in the other areas of your life needed for your survival.

  • Transportation - You need this to get to work, the grocery store, hospital and other places which all help to ensure your survival.

  • Health Care - While like other areas, you may be able to survive without it, it definitely helps you to live longer and more comfortably.

  • Communications - Again, you may be able to survive without it, but without it, the other industries listed above would be severely hindered which would impact your life greatly.

So, if doing what is in the National Interest would be doing what is best for these industries then obviously, protecting these industries would also be in the interest of the American citizenry. This is the tact that I think Washington DC should take, but unfortunately at some point in the last 50 years many in Washington DC have confused protecting an industry with protecting corporations, and those company's bottom lines.

It is one thing to protect an overall industry through legislation/regulation, and it is something entirely different to pass legislation to bail out financially insolvent/inefficient companies, and to subsidize financially profitable companies.

Some in DC act as if one major company fails then that company's entire industry would fail. If a large company was to fail, trust me, there are many other companies that would love to fill in the gap that would be left behind in the market. I know that no elected official/politician would want to be associated with allowing a company to close (because of potential job loss), but they also need to understand that one specific company closing does not automatically mean that the employees of that company would not be employed by the businesses that step in to pick up the slack.

Example 1: If a major airline was to fail, then the other airlines would pick up the markets that the failed company was serving. The flights would still need to happen, those flights would still be US flights, and the planes and crews used for those flights would still be needed. Though an airline would not be required to pick up the existing planes/routes/staffs of these flights, it would make sense for the other airlines to purchase the planes and hire their crews to service these routes, rather than going out and trying to purchase all new planes, and hiring/training all new flight crews to cover routes that have been served for years.

Example 2: The US government has provided funding to banks so they can purchase other banks that were failing due to poor management or poor investment decisions. In one particular case recently the bank that was being given the loan made in the area of 4 Billion dollars days before the 29 Billion dollar loan was issued even though the bank they were purchasing was being sold for 236 Million and held assets of 30 Billion. All of this means that the purchasing bank received a loan for 29 Billion and assets of 30 Billion for the purchase of a bank for 236 Million. Did this loan really need to take place?

Now, I know that a lot of you will also want me to point out the "subsidies" that the Oil Companies get as another example of the government ruling in favor of specific companies, but I can not do this. In fact, it is an example of the right way to protect an industry that is necessary to our economy and general welfare. In the case of Oil Companies, the industry as a whole is given a break, not just specific companies. The Oil industry is allowed to reduce it's taxable earnings by 15% in exchange for continuing to produce oil & gas. Small companies and large companies are both allowed to take advantage of this benefit. This means that Oil & Gas companies pay a corporate tax of 20% rather than the standard rate of 35%. I am OK with this type of industry protection and wish it applied to more industries such as Farming, Transportation, and Health Care.

What I am not OK with, is that US Oil Companies that have subsidiaries overseas do not have to pay tax on the revenue born out of their overseas offices as long as the money stays overseas. In essence, if Exxon opens an office in Dubai, then they don't have to pay any tax on the money generated from their Dubai office as long as the money stays in a Dubai bank. I don't think Exxon cares what bank account their checks are drafted from, do you? This overseas tax exemption applies to more than just the oil industry and has been taken advantage of by many of the US's largest companies. In my opinion, this type of legislation is unfair because it unduly favors large Companies rather than protecting an industry. It is unfair because small companies are not able to open outlets in foreign lands just to receive this same benefit.

Additionally, we have offered tax credits to companies that have been shipping jobs overseas. This is different from the oil tax credits, which allow them to pay lower taxes, this tax credit is implemented as a way for companies with overseas workforces (like manufacturing) to use a different method to calculate their profit and allows them to bring their overseas profit back to the US at substantially reduced tax rates. By the way, oil companies also qualify for this because under the bill (HR 4520) oil production is now seen as manufacturing. This is crazy to me. We should be offering these benefits to companies that keep their manufacturing in the US not offering it to companies that sending manufacturing jobs away from us.

Do these things serve the National Interest? Do they help secure the US and it's people or do they serve Corporations instead? Many would argue that the workers, though pensions and 401Ks, are invested in these companies and so if the companies are protected then so are the workers and by default the economy, but since when will a pension or 401K pay for the mortgage and electric bill of a 40 year old worker that has been laid off?

I think we need to get back to looking out for the American people first and it's companies second.

1 comment:

Moops said...

Right on. If only the media would use the right terms and concepts instead of continuing to use what everyone expects to hear.