Michelle Bachmann's Repatriation Initiative

According to Michelle Bachmann, more than 1.2 trillion United States dollars could be brought back to America in days as an immediate “stimulus” if the government would implement an overseas corporate profit repatriation tax holiday, and then permanently keep it here in the U.S. The New America Foundation study notes firms that will spend their repatriated cash face two choices, either return it to shareholders or spend in internally. However, according to Reuters, when companies return money to shareholders, the benefactors will likely be wealthy Americans who will benefit and start spending. Despite the repatriation benefitting the wealthy, it will, nonetheless, help stimulate aggregate demand, but in many ways Bachmann’s approach seems shortsighted. At a time when the federal government needs to increase revenue and American businesses operating overseas impede the survival and growth of American jobs, Bachmann proposes that when she enters the White House she would encourage long-term repatriation tax reductions. While well intended Bachmann would therein encourage multinational corporations to move operations outside of the United States. Cutting the corporate tax rate may encourage businesses to bring operations back to America, but cutting repatriation taxes ultimately only encourage foreign investment. Though Bachmann’s plan holds some benefits for the wealthy, ultimately it discourages job growth and therefore the costs outweigh the minimal benefits.  

Plights of the Euro-Zone

According to the Wall Street Journal, decreasing exports, diminished business profits, and low consumer confidence are acting to worsen the euro-zone debt crisis. The decrease in exports can likely be attributed to decreasing demand across Europe and the rest of the world as consumer confidence sinks. This can be linked to the principal of changing expectations shift the demand curve. Currently, as consumers across the globe anticipate the crisis will worsen, they become less willing to spend their money. Despite Europe’s woes, the article notes one nation’s current economic uptake. Contrary to overwhelming decreases in consumer confidence, the opposite has occurred in Italy reflecting enthusiasm and optimism in the appointment of a new leader, Mario Monti following the resignation of unpopular Silvio Berlusconi. Overall, however, the reduction of money in the economy compounds the problems of the Euro Zone, as governments tax revenue decreases. Further, WSJ notes the decreasing demand for Europe’s products decreases the willingness of companies to hire workers, due to perceived high opportunity cost of hiring at the present. The diminished business profits mentioned by the WSJ also threatens to exacerbate the troubles of the Euro Zone, as “an expected slow-down in future activity” may prompt firms to temporarily shut down and adjust variable costs in an attempt to save themselves by adjusting variable costs.