BRAC to Go Global?

Most Hoosiers are familiar with the BRAC — Base Realingment and Closure — process that the military executed several times over the past few decades. Hoosier installations, vital parts of local communities, were sometimes directly impacted and other times spared.

Military cutbacks are expected to come again in the effort to trim defense spending, but the targets could be overseas this time. I was unaware that the U.S. has 702 bases or other facilities in 63 countries. Also unknown was the fact that 80% of the international forces are stationed in Germany and South Korea.

Politically, it will easier to save dollars by trimming overseas bases than cutting domestic weapons programs.

Possible closure targets, according to the Kiplinger report: Kadena Air Base, Torii Army Station and Camp Butler Marine Corps Base, all in Okinawa, Japan; Army stations in Stuttgart and Schweinfurt, Germany; an airfield in Heidelberg, Germany; Aviano Air Base in Italy; and an Army garrison in Schinnes, the Netherlands.

If the effort goes toward somehow reducing the massive federal deficit and shifts some of the world’s peacekeeping responsibilities to other countries without jeopardizing our safety, it sounds like a sensible plan. 

Turnaround on International Trade

The Small Business & Entrepreneurship Council contends recent developments in international trade are actually promising for the U.S., despite a decline in recent years:

Two stories are to be found in the latest trade numbers issued by the U.S. Bureau of Economic Analysis. One is bad. The other offers hope.

The first story is about a historic decline in trade for 2009 overall. U.S. exports decline by 15 percent – from $1.83 trillion in 2008 to $1.55 trillion in 2009. The story on imports was even more striking – a 23 percent decline from $2.52 trillion in 2008 to $1.93 trillion in 2009.

These trade numbers go along with the reality that the U.S. economy in 2009 experienced its sharpest one-year decline in more than six decades.

The second story is that this dramatic decline in trade, which specifically ran from July 2008 through May 2009, has since reversed course. Exports hit bottom in April, and subsequently climbed for eight straight months. Meanwhile, imports bottomed in May, and have increased in six of the past seven months, including for four consecutive months.

Export and import levels have still not climbed back to where they were in mid-2008, but exports (seasonally adjusted) were up by 17 percent in December 2009 versus April 2009, and imports were up by 23 percent from May to December.

Again, it is important to understand that rising imports mean expanded sales by and opportunities for U.S. firms, while increasing imports signals at least some life in the domestic economy, that is, consumers and businesses are buying more imported consumer and capital goods and services.

If you’re an optimist seeking hopeful signs in this tough economy and harsh policy climate, then trade is the place to look. Now all we need is for the President to follow up with his pro-trade rhetoric in the State of the Union with pro-trade policy actions.

Drowning in Overseas Tax Proposals

The Indiana Chamber of Commerce is asking federal legislators to oppose the recent proposal to increase taxes on overseas profits. U.S. companies, including many in Indiana, will find it increasingly difficult to compete with their foreign competitors should these tax code changes be enacted.

American companies already pay the second-highest corporate tax rate in the world. During these difficult economic times, we believe economic development should be promoted to give our companies the tools they need to succeed in the global marketplace instead of burdening them with higher taxes. These tax proposals would add $200 billion to the tax burden of affected companies, putting them at a competitive disadvantage with their foreign counterparts who don’t have to pay or can defer taxes in their home countries.

Overseas investments by domestic companies strengthen our overall economy.  By adding overseas operations, U.S. companies create more opportunities for American companies to grow back home.  For every worker employed overseas by U.S. companies, 2.3 workers are employed in the U.S.