Buffet's Trade Proposal
By Arnold Kling
A reader forwarded a proposal made by Warren Buffet in Fortune.
We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties–either exporters abroad or importers here–wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.
Of course, we already have Import Certificates. They are green, with the names of Presidents on them. What Buffet is proposing is really a form of import tariff plus export subsidy.
Buffet and I both are mystified by the fact that the dollar does not adjust downward to reflect our trade deficit. I agree that long-term speculation against the dollar seems appropriate.
I also agree that the U.S. ought to be a creditor nation, not a debtor nation.
However, I think that the solution is to increase national saving. That might mean relatively higher taxes on consumption and relatively lower taxes on saving.
For Discussion. Buffet famously opposes repealing the estate tax. Would repealing the estate tax tend to increase or decrease national saving?