A Phone Man's Point of View™

Yes, the budget deficit can be fixed within months with little pain to Americans.

It will take the approval of the Senate and House. It will help if you tell your Congressmen that you’d like them to look into it…

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President Barack Obama
The White House
Washington, D.C.

March 19, 2010

Dear President Obama:

There is only one way the United States can begin to reduce the budget deficits that are out of control. The following plan is literally the only solution. It can be adopted now, or down the road when things get much more economically painful for all of us.

As background to my solution, please remember that about a decade ago, when a lot of stuff was still manufactured in the US, things that were manufactured outside the US were primarily commodity items requiring a lot of labor… which will always be cheaper in a third world country. Depending on the cost of transportation (oil), it may or may not be cheaper in the future.

While it’s swell that outsourcing has brought up the living conditions for many countries in the world since the end of World War II, and it was certainly logical to outsource in the past, our country has taken the outsourcing of products (not jobs) beyond the point of logic. Outsourcing of goods has been abused just like the real estate market and the mortgage mess, which occurred at the same time.

After the Internet bubble broke, and the recession after 9/11, the management of just about every publicly traded company in the US found their profits dropping – and their jobs at risk. The easy solution to bring profit levels back up was to outsource manufacturing to a third world country. This allowed for reducing costs (jobs and facilities) and increasing margins, while allowing their products to be sold at the same price.

This just happened to come at a time when the political climate in China allowed the country to embrace capitalism (sort of). The managers of the public companies kept their jobs, and made have since made even higher salaries (and bonuses). China became a major world power. A small percentage of China’s citizens are no longer living in third world conditions.

Fed Chief Alan Greenspan, along with most economists, thought that outsourcing manufacturing was a great idea, even though it was obvious that many jobs would be lost in the US. Most of those jobs were higher paid. About the same time, most economists embraced the real estate/mortgage bubble as good for the country.

The United States’ “service economy” was born. Logistics, a term most Americans never heard of and was never used in conversation, became arguably the biggest business in America. Transporting goods from the manufacturer in another country to a port in the US, transporting them to a warehouse, transporting them to a distributor with another warehouse, and then to a store or end-user, became very big business.

There are not many manufacturing buildings left in the US, but there are lots of warehouses to store the items coming in from other countries.

Unfortunately, the real estate/mortgage bubble burst and a lot of Americans have been hurt. Hindsight is always 20/20.

When we began the outsourcing of almost everything, we didn’t have a lot of experience with the side effects of outsourcing manufacturing. It’s become obvious that there are problems with outsourcing that weren’t immediately apparent as the whole country went speeding into importing almost everything.

The bottom line is that the US and state governments aren’t collecting anywhere near the taxes that they used to, when there were tax generating physical buildings and tax paying people making stuff here.

Outsourcing of goods is a trickle down situation. All those factories used to have phones, machinery, manufacturing supplies, office equipment, office supplies, the people to support the workers manufacturing the stuff… and of course the manufacturing workers themselves.

Outsourcing of goods is here to stay, no matter what anybody does at this point.

The only way for the US to recover economically is to put a small import tax on every item imported into the country, from any and every country.

While the US used to be able to fund government services through income taxes on both profitable businesses and citizens, it can’t do it now (or in the future) because there are fewer companies making a profit (at least they don’t claim profits), and there are fewer citizens working. The citizens who are working are making less money so they pay less tax.  The rest are collecting money from the government… not necessarily because they want to.

January 2010 imports to the US from all countries were about $180 billion dollars. Putting a flat tax of 2.5% on all those imports would have brought the US government $4.5 billion dollars in January, pretty painlessly.

If imports stayed at that level for 2010, with a flat import tax in place the government would have $54 billion dollars to use against the deficit.

The loudest cries against tariffs on imports in the last decade have been that other countries will retaliate, and exports from the US will decrease. That may have been true eight years ago, but at this point tariffs on everything is a survival move for the US, correcting past policies.

Traditionally, tariffs have been used to correct trade imbalances. Our country has gone so far beyond any logical trade imbalances that this should be thought of as an import tax to help the US government survive – not a tariff.  All current tariffs should remain in-place, with no real relation to the import tax.

An import tax shouldn’t affect any agreements with the WTO, saving a lot of international political arguments.

We’ve painfully acquired hindsight. Now we can make corrections to past policies based on that hindsight. We all learn my making mistakes.

The biggest problem with taxes is that there are always loopholes, which allow them to be avoided by many. In this case, the import tax is a flat X% import tax on every item brought into the country, period. Nothing will be exempt, including items destined for the US government and non-profits. It’s just a small part of the cost of doing business, and it’s good for the country.

Penalties for evading the tax should be very simple. One year in prison for the CEO of the company, as well as one year for the executive/worker whose job it is to sign/verify the importation/tax documents (if nobody is willing to sign, the item just won’t get into the country). There would also be a $25,000 plus 50% fine on the value of the imported shipment levied against the US company importing the goods, or an additional year in jail for the CEO and person signing the import document if the company is proven unable to pay the fine. An error will not be an excuse. A good samaritan / whistleblower, either inside or outside the US, would get 10% of any fine collected.

While a 2.5% import tax won’t even dent the current US deficit, it could go a significant ways towards reducing the deficit when the economy returns to something more normal.

The key to this plan is a small percentage tax that will make it fairly painless for most Americans and the companies they work for, and the fact that it’s applied equally to everything imported to the US.

Will a small import tax be inflationary? Certainly less inflationary than the constantly rising cost of oil.

By comparison, a 2.5% rise in gasoline at the pumps is about six cents when gas is at $2.50. Probably immeasurable in terms of inflation, although the 100% increase in the cost of oil over the last year is measurable, inflationary, and is seriously hurting the economy right now.

Will there be retaliation by other countries buying our products? Probably, but most likely every government will adopt the same model of a low import tax just to survive – not in retaliation.

How will the tax be collected? Tarrifs are already collected. Customs and Customs brokers track every package coming into the country. There are already methods in-place to track all these packages, so expanding the paperwork and paying for the collection / enforcement of the taxes with the X% import tax will be relatively easy and inexpensive (not that anything done by the government could be considered easy or inexpensive?).

Making every company importing goods into the US submit a check for X%, like they currently do if there are tariffs on the goods, is certainly going to be a low-cost way of collecting taxes (compared to the collections costs of the IRS).

If a side effect of a flat import tax is that some manufacturing comes back to the US, that will help the budget even more in the long run – if  the tax is guaranteed to be at least X% for X years.

Few companies will even think about setting up manufacturing in the US if it seems like this tax could be repealed quickly by another congress, making the resumption of manufacturing in the US a losing proposition (literally).

Sincerely,

Mike Sandman

CC: Earth

By Mike Sandman
Chicago, IL

Phone system sales and MACs (Moves and Changes, or Moves-Adds-Changes) are about to increase dramatically. Any time large numbers of workers are laid off, companies move to smaller quarters. Their phone system is going to get moved, or they’re going to get a new system.

If you’re selling something, you pray for an impending event. Layoffs are an impending event, leading to moving to smaller quarters, which is another impending event. Floods, fires, lightning storms, hurricaines… they’re all impending events where the prospect has to do something – it’s not an option.

Nobody likes the idea of making money from other people’s problems, but that’s what makes the world go around. Y2K was an impending event that caused a huge spike in the phone and computer business. Another one of those would be really nice!

After the Internet bubble burst and 9/11, a lot of people were laid off in the US (a lot of off-shoring went on). Although the phone business slowed for a while at the time, there was a definite upswing as companies moved to smaller offices – right up to the start of the Iraq war. Things got pretty bad in the Interconnect business after the war started, but the home automation/entertainment business went nuts as home sales skyrocketed.

For an Interconnect, moving a phone system and doing the network and phone wiring is profitable. Maybe not as profitable as ten years ago, since most spaces are already wired for both phone and network today.

MACs have traditionally kept Interconnects going through economic downturns. For whatever reason, the management of many companies love moving people around (even when they can’t afford to?). They love moving the phone room or server room, and they love moving desks to a different side of a room from where the existing cable is. All that requires new cabling.

Today, IT guys do a lot of phone MACs. It’s unlikely IT will have the time to handle the wiring and phone system move, in addition to all their other responsibilities keeping IT going.

Huge numbers of phone systems were sold in the US through 2001. They’re pretty good systems with just about any feature a company needs (compared to older models from the early to mid 1990s, which weren’t so hot), and most of those systems are still working fine today. There are lots of parts available on the secondary market for most systems, at reasonable prices.

These installed systems are getting older, so a company who’s moving is going to have to make a decision about moving the old system, or buying a new system. The reasons for buying a new system are:

1. The customer needs or may need the ability to have remote workers, or the boss wants to work from home (or the beach). This is pretty easy with a legacy phone system that has an IP add-on option, or an IP phone system. Not easy with a legacy system with no IP add-on capabilities. Maybe the old phones will work with the new system?

2. The customer’s phones are dirty, discolored and ugly – and they have the money/credit to buy a new system – even though the old one works fine (nothing a little Telephone Polish and some new desis wouldn’t fix!).

3. The old system is so much larger than needed that it would be cheaper to buy a new system, than move the old system – and they have the money/credit to do it.

Whether companies can get the money/credit/lease they need to do the move is a good question? In the past, companies could borrow money pretty easily in an economic downturn. Leasing phone systems has been easy since the 1980s. This is the first time since it became legal to own a phone system that it’s been really difficult to borrow money. If your leasing company won’t approve your credit worthy customers (because the leasing company can’t find money), all bets are off.

This is the time to get your leasing company ducks in a row!

Another concern is whether a phone system manufacturer will make it through this credit squeeze? Everybody is having a tough time borrowing money, including phone system manufacturers.

During the last downturn in the economy, hosted phone systems weren’t an option. It is now. Your customer may opt to just get network wiring installed, buy or rent some IP phones, and do the move.

Depending on the network infrastructure and Internet connection, a hosted phone system can sound pretty good – or pretty crummy. Customers will accept crummy sounding calls these days. A large percentage of the calls coming into a business are from a cell or VoIP phone. It’s not a pretty picture when the customer’s phone sounds crummy to begin with, and then you add crummy sounding incoming calls.

Another consideration is whether a hosted phone service go out of business? Will a CLEC go out of business? Maybe. There’s a zero percent chance a LEC will go out of business.

If a CLEC or hosted VoIP company goes out of business, porting the company’s phone numbers to another provider, even the LEC, can be difficult to impossible. Certainly not a quick process, and in the meantime the company is dead in the water. This isn’t theoretical. Norvergence and Sunrocket left tens of thousands of businesses without phone service when they suddenly went out of business a few years back (in a better economy than this).

Until the economy improves, it’s probably safer to rely on a LEC for phone lines. CLECs and VoIP providers can’t find money, either.

Companies who survive this will be the ones who can reduce overhead to the point where they can make money again. Some companies can do this easier than others. Both Interconnects and phone system manufacturers have gotten a lot of experience reducing overhead and controlling overhead in the last eight years, so they’re some of the most likely companies to survive.

Besides quality and reliability, a hosted VoIP system has is the same problem you’ll have with many of the phone systems you sell… Lack of features. What? You’ve been selling systems from XYZ company for decades, and they have all the features! No. Not quite.

Legacy phone system manufacturers have gotten rid of the old (experienced) guys in sales, marketing, engineering, design and management who “grew up” with the phone business. The phone business as we know it has only existed since the early 1980s – maybe 25 years of electronic phone system sales.

The initial batch of electronic phone systems from the 80s had a lot of problems, just like the initial batch of any technology. By 2000, traditional phone system manufacturers had really perfected electronic phone systems.

In the early 2000s when the economy turned down, most phone system manufacturers brought in new design and engineering teams from third world countries (to save money). New generations of phone systems were total redesigns, but they were still pretty reliable compared to 80s systems.

The biggest problem with these newer systems? The firmware isn’t great. Third world engineers try to translate how features are supposed to work, but since they had never actually used a phone system in their county, they didn’t read or understand English, and there was nobody to ask, a lot of features don’t work as expected. Slowly, these problems are getting ironed out.

If you’re going to sell a phone system and you’ve determined which features your customer needs, make sure those features are present and work as expected in the new system. Even though a feature is listed in a brochure, it might work differently that what you or your customer expects.

If the customer who buys a new system has been using a feature for years, and expects it to work the same in the new system (because you told him it would, or the feature was listed in the brochure), there are gong to be problems getting paid if a needed feature doesn’t work. You might even be told to take the system out, which can get very expensive for everybody.

It’s a good idea to get out your copy of the Installation Checklist and use it to make a needs analysis to determine how the customer uses their current system, how the customer’s company has changed or is changing, and what they’re expecting from a new system.

A consultative sell, where you use your experience to make sure your customer gets the most value and the best productivity for their phone system dollar, will make you a hero for years to come. Take your time. Sales you make today are going to be the basis for future growth at your company. The extra effort today will mean great referrals tomorrow.

Some modern phone system manufacturers and hosted VoIP providers have decided to leave features out of their systems both to save money, and bring their system to market faster.

Why put in a feature if it’s only going to be used by a very small percentage of buyers?

Legacy phone system manufacturers didn’t put in all those features because they had nothing better to do… They put them in because the Interconnects were telling them they were losing sales because the system was missing a particular feature. It only takes one missing feature to blow a sale. The fewer features a system has, the fewer prospects there are to buy the system.

Some of the most desired features missing from hosted VoIP systems and some modern phone systems:

1. Square key system features, where each line has its own button and light on each phone (to see which line is idle, on-hold or ringing).

2. Handsfree intercom, which allows one employee to call another employee on the intercom, and the called employee to answer handsfree.

3. A BLF (Busy Light Field) on the phone to indicate whether an employee is on the phone, or not.

4. Internal paging where an employee’s voice can come over the speaker in all, or just a group of phones.

Why would these important features be left out of a real or hosted phone system? Mainly because the people who design the systems don’t know anything about phone systems. They’re getting better, but it’s at the Interconnect’s, customer’s, and phone system manufacturer’s expense. It’s costing everybody right now, and I’m not just talking about IP phone systems.

As an Interconnect selling a phone system to a company, it’s in your interest to be absolutely sure the system you’re selling is both dependable and has the features your customer needs to be able to operate their business as efficiently as possible (with the reduced staff, which prompted the purchase of the new system).

One aspect of new IP phone systems that’s going to be a tough sell to owners of legacy phone systems, are licensing fees. Legacy systems sold since the late 90s have been incredibly dependable.

Most of these customers were used to paying for a maintenance contract – because they needed it for their older system. Today, customers rarely call for service on the newer generations of legacy systems. It’s about impossible to sell a maintenance contract. Not many T&M service calls, either. MACs are about the only recurring revenue.

In the past, legacy phone system manufacturers had recurring revenue when they sold phones, station cards, and trunk cards for MACs, and well as software to expand or upgrade a system.

An IP phone system usually doesn’t have trunk cards (or not many). No station cards either. It can probably even use IP phones from a different manufacturer, so after the phone system manufacturer sells the system, there may be no recurring revenue. What’s worse, in the initial sale they don’t sell a trunk card per 4 or 8 trunks, or a station card for per 8 or 16 stations. Other than limitations written onto the software that can be unlocked with a license key, the cost of the IP system’s hardware and software is the same whether the customer has 10 or 1,000 phones – but the IP phone system manufacturer had to pay for the development of the system that would support 1,000 phones, even if the customer is only using 10.

It’s unlikely an IP phone system manufacturer will stay in business long without licensing fees. The good thing for the Interconnect is that they make the markup on the licensing fee (unless the manufacturer cuts out the selling dealer). While license fees are going to be a tough sell to older customers used to legacy phone systems, they’re going to make sure both the manufacturer and Interconnect survive – and that there will be someone to service and add on to the customer’s phone system in the future.

The real dollar and cents questions are:

1. The size of current licensing fees, and how high they’ll go in the future.

2. What licensing fees will do to the secondary market for phone systems and equipment, which is currently an important part of the Interconnect’s business (even though The-Mart and Gear are gone).

Get ready for the wildest ride the Interconnect business has had in almost a decade!

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Is it important for your small business customers to sound like a big business? See our Implementation Tech Bulletin on “Making Your Small Company Seem Like a Big Company”

By Mike Sandman

A phone repairman gets to see really interesting stuff on service calls. Most phone men don’t care, they just want to get out of there. Some phone men, like me, learn stuff on every call.

Through the years, I’ve categorized what I’ve learned into two categories – WHAT TO DO and WHAT NOT TO DO in business. They’re both very important!

When I started my first business, I was an idiot. I didn’t know anything. I was willing to work, I learned pretty quickly, and I constantly had new ideas, but I was still an idiot. I learned the way most business owners learn… By screwing up and doing better next time. Only a small percentage of business owners have the resources to screw up much.

When I closed my first telephone business and started working as a telephone repairman for a couple of companies with phone systems in both large and small companies, my education really started.

I got to see lots of management styles at lots of types of companies. Offices, warehouses, manufacturers, hotels, hospitals, doctor’s offices, truck and heavy equipment repair companies, food processing companies, and the unbelievable suburban Chicago locomotive manufacturer. The attitudes of the employees were usually the real indicator of a successful company.

The owners/managers of these companies were pretty strange guys or gals (as I am), but how strange they were didn’t seem to have a correlation to the success of a company. It was rather a common thread of what I saw. There needed to be that strange guy or gal – or the company would never have existed.

After leaving most really big corporation’s offices (not their factories), I wondered why they’re still in business? They seemed to survive on pure momentum. Crazy managers and crazy employees, doing crazy stuff. Common sense seemed to be prohibited from entering the building.

A good percentage of the companies I called on were factories. Big or small, they had posts every 50 or 100 feet between the various machines or assembly areas, with a phone hanging on it. There was a paging speaker at the top of some of the posts. There were workers hustling and bustling. Tables full of workers assembling and maybe soldering stuff. You could see that one area of the factory might be empty, waiting for the products from another area of the factory. If they were working on metal stuff, there was scrap metal or turnings near every machine.

The warehouse area was where raw and finished products were kept, with docks where trucks delivered and picked up stuff.

I did find myself wondering if I could do what the workers there were doing. Could I operate one or two types of machines, all day, every day, until I retired? Could I assemble the same little gizmo by the thousands? I had a lot of respect for the workers. By comparison, being a phone repairman was an incredibly interesting and easy job, with something new happening every hour.

Then there was the nicely air-conditioned and heated office with the trail of dirt on the carpet leading from the door to the factory floor, where there were lots of office workers supporting the factory:

• Executive Management
• Middle Management
• Management / Secretarial
• Purchasing
• Sales
• Service / Support
• Maintenance
• Payroll and Accounting (usually a bunch of ladies smoking like fiends)
• Engineering / R&D or a Lab, with some CAD computers and printers (and a bunch of draftsman’s tables mainly holding stacks of papers after 1985 or so)
• Quality Control
• Shipping / Receiving / Warehousing (who would have ever thought that it would now be called Logistics?)

I was really impressed. Every service call was like going to a toy store for me. No two companies were the same. The manufacturing companies were my favorite because I got to see how those gizmos were actually made and all the neat equipment that made them. What I learned over the last 35 years is still rolling around in my head today (maybe a little foggy nowadays).

Hospitals were the scariest places, especially when I got hepatitis after eating at a Chicago hospital’s cafeteria only once while working there. When I told the hospital, they said “Yea, a lot of the doctors and nurses have hepatitis here.” This was the kind of place where I would open up the house box (a box on the wall with the wires for a particular part of the hospital) and find roaches fried between the wires (a lot of restaurants were in the same condition). The hepatitis wore me out for over six months. When I woke up in the morning I felt like I had never gone to sleep. I don’t think I ever got the same level of energy back.

After the Internet bubble burst in 2000, things started to change in our economy. The Iraq war really slowed the economy down. Big companies were having a hard time selling more stuff than the previous year, which is what it takes for the head of the company to keep his job (and huge salary).

In business, you either:

• Sell more stuff
• Raise prices to make the same amount of money selling less stuff
• Cut costs

There are no other choices, except going out of business or being acquired. Just about every single company in the US had the same idea at the same time: Make the stuff in China to cut costs.

It took a few years, but there are now very few factories in the US. The same companies are selling the same products, but it’s made overseas. The cost of buying raw materials and making the products overseas was incredibly low, and the companies could get rid of a lot of overhead in the US since there were no factories to support. These companies were making incredible profits. Enough to buy lots of private business jets, buy more companies, and build new headquarters buildings.

For perspective, a popular business jet costs over $25 million to buy and over $4,000 an hour to fly. Every time I hear about a company owning a business jet, I wonder how much extra I’m paying for that tube of toothpaste or pair of socks? Obviously way too much. Maybe it’s just me, but I try not to buy stuff from companies that I know are wasting money like pigs (usually the ones with lots of lobbyists).

There are very few factories left in the US. Most of the stuff we buy is made overseas. Business in the US is now just warehousing the stuff before it’s distributed.

The factory workers are out of jobs, the maintenance people are out of jobs, all the office workers who supported the factories are out of jobs. As a phone man, since 2001 we’ve seen companies with a closet full of spare phones that belonged to all the people who were laid off. They don’t need a phone repairman to fix phones because of all the spares from the laid off workers. If a phone breaks, they just grab another one out of the pile in the closet. It’s not looking like those phones are ever going to be needed again.

So what does that same manufacturing company look like now:

• Factory
• Executive Management
• Middle Management
• Management / Secretarial (a lot fewer people to manage!)
• Purchasing (a lot less stuff to purchase since the factory in China acquires it!)
• Sales
• Service / Support (a lot fewer people since it’s outsourced to another country!)
• Maintenance
• Payroll and Accounting (a lot fewer people to pay!)
• Engineering / R&D or a Lab (a lot fewer people since most R&D is now done in China or India!)
• Quality Control (so a few pets or people die… keep letting the Chinese check our food out for us)
• Shipping / Receiving / Warehousing (who would have ever thought that it would now be called Logistics?)

Why is the US economy looking pretty weak?

• All these factories are gone
• China is making all the stuff we used to make here
• We’re sending all our money to China and India

This scheme worked OK until now. So what’s different?

1. They can’t sell more stuff because there are fewer US humans who can afford it
2. They’ve wrung all they can out of raising prices
3. They can’t cut costs any more because China is raising their prices, and the cost of oil to get it here by boat or plane is way up

That doesn’t leave the management of these companies with any ways to make more money than last year. The stock prices will go into the toilet, and the head honchos will be out of a job.

Almost anybody could have anticipated what’s happening now after outsourcing everything, so how did this happen? We’re all living for the moment. Screw the future, lets make more money now (and I get to keep my high paid executive corporate management job).

The people who did anticipate the results were labeled as “protectionists.” Filthy scum protectionists who hate all the poor people in the third word countries who are just trying to survive.

Protectionism is the idea of restricting trade between countries to make sure that stuff made in a low labor wage country doesn’t flood a country who’s producing the same stuff with more expensive local labor. The cheap stuff coming into the country is usually restricted by putting tariffs on the that cheap stuff coming in, to make it more competitive with stuff made with local labor.

That worked just fine for decades, including on stuff made from the first low cost labor country – Japan. But now, there are now almost no tariffs on anything, and just about everything is made in low labor rate countries. Free trade is great, apparently for everyone else – not us.

There were tariffs on all this stuff to “protect” our US jobs for maybe 100 years. The Dingley tariff law was the first protective tariff law from 1897, which was titled “An Act to Provide Revenue for the Government, and to Encourage the Industries of the United States.” Now the industries are gone. If tariffs worked pretty well for 90 years, what happened to them? Two words: Corporate Lobbyists

It takes a lot of money to win an election as a Senator or Congressman. Corporations donate a lot of the money Senators and Congressmen use to win their elections. When Senators and Congressmen are no longer Senators or Congressmen, they need something to do to make money. Many become lobbyists for the same corporations who made contributions to their campaigns, and who they passed laws for while they were in the Senate or Congress. Oh yea, they also collect a pension from the US government (us) at the same time.

The corporations went to congress and as many politicians as they could find, and gave them a couple of examples where protectionism really did cause problems. Suddenly, you were un-American if you didn’t want totally free trade. Nobody wanted to look un-American, and everybody wanted to make as much money as possible at the moment, so here we are. A country that doesn’t make anything. We buy most of the stuff for our Military from other countries. We buy a large percentage of our food from other countries. Common sense seems dead.

Besides protecting US industry, the other purpose of tariffs is to collect money to support the government. If there are no tariffs, the US isn’t getting taxes on those imports. If we don’t get the taxes, the individual citizens and corporations have to pay for all the government services. Since it’s widely known that corporations don’t pay much in taxes, that leaves the burden of paying for just about everything on the ordinary working stiff.

Federal, state and local governments are working under incredible deficits. Money that used to go to the states and local governments from the Federal government has pretty much dried up. We all know that Federal, state and local governments waste a huge percentage of the money they get, but in the “old days” when we collected taxes on imports, they had the money to waste. Now they don’t have the money, but they’re still wasting it.

The manufacturers who are left in the US are pretty busy. While a lot of the things we buy are produced by the thousands or millions, some things aren’t made for consumers, and are only made in ten or hundred quantities.

China isn’t geared up to make hundreds of anything. A factory sets up a production line to make a particular item, and they want to run the line as long as possible before tearing it down, reprogramming the equipment, and retraining the workers to make the next item. If they make $1 per item, they really can’t make money making 1,000 of them if it costs $500 to setup the line. They want to make thousands.

In the US, manufacturers have learned to make things in smaller quantities. It’s not that hard, just a different mindset than what’s used in Chinese manufacturing. Each item a US manufacturer makes is more expensive than if it was made in large quantities in China, but at least these items are available. If US manufacturers weren’t here making this stuff, it just plain wouldn’t exist today.

It’s not just Democrats or Republicans. They’re both equally responsible for this bad situation, and they seem totally paralyzed to do anything to fix it. I can’t blame them, since saying anything is a no-win situation after the various news organizations chew up whatever they say and spit it out so the politician sounds like an idiot. Maybe they are an idiot for becoming a politician under those no-win circumstances?

Unfortunately, we’ve reached the point where paralysis is no longer an option if Americans want to retain our lowered standard of living (even if a lot of Americans don’t want to work as hard as our parents). The longer we wait, the more painful it’s going to be for all of us (except for the politicians who retire with a nice pension).

It makes sense to make some stuff in other countries. It makes no sense to make everything in other countries. It makes no sense to get a large part of the food we eat from other countries. It makes no sense to sell off important parts of the US to foreign countries.

It’s time to stop politicians and corporate lobbyists from using Protectionist as a dirty word… It’s currently used a lot like the word Racist. If someone labels you that, you’re a bad guy no matter what you say or do (similar to Joe McCarthy’s use of the word Communist in the 1950’s). In sales, if you say something enough times it becomes fact, even if it’s not true.

I’m not sure what happened to the “Made in the USA” big deal from the 1980’s? The 1980’s Made in the USA big deal was the result of the near collapse of Chrysler, one of the big three US automakers. Chrysler is now owned by Canadians, who bought it from the Germans, so there are really only the big two US automakers left – and they aren’t doing great!

There were “Made in the USA” labels on lots of stuff in the 80’s. Since we all have to live here in the USA, and the economy needs some help, maybe it’s a good time to rethink our approach to Made in the USA?

Is Made in the USA dead?

Our company puts a Made in the USA label on every product we make here, even though it costs about a penny for the label and even more for the labor to put it on. We make a little less profit by putting these labels on, but it sure feels good having done it for the last 10 years.

We can start making stuff in this country again. It’s going to be hard to compete after literally giving away all of the R&D we’ve done in the last 50 years to China, and the fact that nobody is doing R&D here (it’s all done in China or India). The hardest part is going to be for Americans to learn to work hard, like our parents and grandparents did. No matter how hard it is, it’s going to be fun… The same kind of fun our parents and grandparents had building the US to be the country it is today.

One small problem is that along with the expertise, we also exported most of the equipment for making the stuff to China. The Chinese aren’t going to give it back (even if Americans still own it), so we’re going to have to make it here ourselves. No small task.

I really don’t know exactly how we’ll get the equipment, R&D or manufacturing expertise back into the US, but if we don’t start now America is going to look very different in as little as five years.

In a magazine article I wrote back during the SARS scare in Asia in 2003, I jokingly stated that “China has coated plastic packaging with the SARS virus, since it’s impossible to open one of these packages without cutting yourself. The SARS virus will slowly kill all the Americans, after which all of the homes in the US will be taken over by Chinese – sitting around on our furniture, taking care of our pets.” It might not be SARS or plastic packaging that kills off Americans. It’s probably the greed and stupidity of our politicians and big corporations.

Probably the most amazing thing that the US has ever done was to ramp up production for World War II. Planes, ships, equipment and munitions were being manufactured here in huge quantities even before the US officially entered the war. If we did it then, we could do it again. It’s either us or the Chinese who are going to survive. I know the direction I want it to go!

Just to be accurate, the Chinese are way more screwed than we are. When we stop buying as much stuff from them as we do now, either because we decide to make it ourselves or because our economy has gone in the toilet and we can’t afford to buy the stuff, China is going to be in pretty big trouble. To their credit, they actually held back on industrializing most of their country. They’ll survive, but in a very similar way to the way we look back on the 50’s here in the US, the Chinese will look at 2000 through 2008 as the “golden years” of modern China.

Probably the biggest threat to China is someone stopping their shipping. If they can’t get the raw materials in by boat, and they can’t ship finished goods out of the country by boat, they’re out of business. In the same scenario, if we can’t get the finished goods from China because our ports are blocked or the container ships are sunk trying to get to our ports, our economy grinds to a halt – not just a slowdown.

China has been developing submarines for some time. They have some of the best submarines made today. They’re not to go to war, but to protect their biggest vulnerability. If someone finds a way to destroy the ports in China, the US or Europe, or to sink the hundreds of container ships crossing the oceans at any one time, we’re all in big trouble.

In business a bottleneck that slows production can seriously harm a company, or even put it out of business. We’re all exposed to this potential bottleneck that could leave the US with nothing to sell in its stores, and very little to eat. It will make the great depression look like a picnic. Sure, it’s not likely that the Chinese container ships won’t get here, but it’s certainly a possibility that nobody has a contingency plan for (maybe eating pet dogs and cats is the government’s current plan?).

To put things in perspective, 240 years ago there wasn’t even a United States. 100 years ago we were riding around in wagons and plowing the fields with horses. Henry Ford made the first Model T in 1908. In 1908 we didn’t have air-conditioning, heating, refrigerators to keep our food, or even natural gas or electricity in a lot of areas to run lamps / lights or the few electric devices available. The earth is 4.5 billion years old. Out of those billions of years only the last 100 have seen anything like industry. Only the last 50 have seen electronics. Only the last 10 years have seen most of our stuff made in China.

It wasn’t that long ago that the tiny island of England controlled a large part of the planet. They were industrialized, they had the best military and civilian schools, they controlled the oceans, and they had colonies everywhere. England is a shadow of their former greatness. It can happen to us. It’s our choice to sit back and let it happen, or do something about it.

It’s time for common sense to come back to the United States, and for corporate lobbyists to become a thing of the past. We’ve got to do what’s best for America, not the corporations. We either have to find new politicians who aren’t afraid of making mistakes to get our country moving, or give our current politicians a dose of courage to cure their paralysis (copious amounts of whiskey?). The current President and presidential candidates are paralyzed along with Congress. If they make a mistake, their careers are ruined by the media – so they do nothing.

Mistakes are a natural way to learn. It’s been that way since the dawn of time (that darn apple), and it will be that was until the last human takes his last breath. Mistakes makes us stronger if they don’t kill us. It’s unnatural to crucify someone for making a mistake, but we do it every day – and not just to politicians. That must be why we have more people in jail, and more lawyers than any other nation on earth.

The first step? Put reasonable tariffs on the stuff we import so we can get rid of the deficit, and make US manufacturing and food production economically feasible. Yes, everything will cost a little more, but it’s a matter of pay me now or pay me later. Adding even a tiny percentage to everything that’s imported will get our country back into the black. This isn’t rocket science, it’s common sense. We can control it. We can’t control fires, floods or the weather, but we sure as heck can control our economy and taxes – and the American lifestyle.