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Who Stole Caldwell County?

GRANITE FALLS, NC (By Dan Rundquist – March 25, 2018)…Someone has committed a grand larceny and it is unlikely that anyone will ever be charged or ultimately brought to justice for it. It is quite obvious who the perpetrators were—we call them our Congress in Washington. But I’m getting ahead of myself.

The North American Free Trade Agreement (NAFTA) went into effect January 1, 1994. As it turns out, it was free for them, but very expensive for us here in Caldwell County. It would mean the demise of the furniture industry and nearly all the related support businesses over the following twenty years. We have watched a slow motion economic and cultural disaster take place right here.

I have often wondered what Caldwell County would look like today in a world without NAFTA. This county at one point “owned” the furniture industry since the Lenoir Furniture Company was formed in 1889. Prior to NAFTA, some 80% of all hardwood sold in the U.S. was destined for Caldwell County and the surrounding area for furniture production.

What might we have achieved by now if our future had not been robbed by NAFTA in the late 1990’s? If someone in 1990 was going to set out to purposely craft a policy specifically designed to destroy the economy of Caldwell County, you would be hard pressed to come up with anything more effective at doing so than NAFTA.

Mr. Jack Skinner is a Caldwell County native and is in the business in Granite Falls and has worked as a N.C. Forester before entering the furniture trade. He notes that it took a while for NAFTA to take hold in furniture because it took time for the infrastructures overseas to improve to the point where they could take the business. At the same time, the technology used in the furniture industry here was somewhat antiquated in 1994 and the local manufacturers were comfortable. But I would argue that we never had time to take advantage of the coming digital revolution (circa 2000 forward) and upgrade our industry before it was unjustly torn away. Today he says the furniture industry is fragmented and often completed piece-meal with companies specializing in smaller segments and assembly across a broad geography. And he shares my own belief in the people of Caldwell County stating: “If we could get industry back in Caldwell County it would be successful because the people here want to work.”

Mr. William McNeill works as a lumber broker also based in Granite Falls. He is one of the last remaining in his field here. When NAFTA took hold, many of the lumber brokers in the area simply retired. Today the bulk of his brokered lumber is for delivery outside North Carolina. He says a lot of lumber is going overseas now because of the decline in domestic demand. Of the people still in the lumber trade, he remarks, “They are good people, my kind of people.”

Those who crafted and passed NAFTA, however do not care about the good people in Caldwell County. By 1999, according to the U.S. Census bureau, Caldwell County had a median household income of $35,739, with 10.7% of our residents living in poverty. As of 2016, median household income was recorded at $37,118, with 17.1% living in poverty. This means that over the past 17 years alone, wages were essentially flat or declining when true inflation is factored, and poverty has increased by a deplorable 60%. This amounts to nothing short of a grand theft of our wealth, our economy, and our future.

When statistics began to clearly illustrate a change in the late 1990’s as the economic damage was being done—companies closing, joblessness rising and it became evident that NAFTA proved to be the cause, did our politicians end NAFTA? Nope. They instead offered some lame “job training” programs that imagined that they could convert our fine furniture industry folks into an army of unneeded customer service reps somewhere.

Not only was Caldwell County at “ground zero” for the NAFTA bomb, we have been suffering and surviving along ever since as a result. These outcomes—unemployment, underemployment, lower earnings and increased poverty—have put an enormous strain on our culture, our families, our members of law enforcement (because of increased crime), our tax base, our property values, and so many other related issues. Thank you, Washington politicians; some of us will always looking for ways to put you out of work, too—on Election Day.

In spite of the forced economic decline handed to us by our own federal government, local leaders and the citizens of this county have done quite an admirable job of rescuing our culture regardless of the betrayal. In 2008, our County Seat, Lenoir, was indeed awarded the All-American City designation. That is a significant cultural achievement given the circumstances.

Tariffs and Taxes

President Trump is reviewing NAFTA now, and has announced that he will be renegotiating its terms. We here in Caldwell County can only hope for better ones. This is long overdue for us. If it does come to adding more tariffs, we should be embracing that, too. Strategically applied tariffs are nothing to be afraid of despite what you may hear in the news or spouted by those pundits who never actually worked for a living. In our history there was a time in our nation when our primary tax revenue came from tariffs, not income taxes.

In his first State of the Union address on December 8th, 1801, the third President of the United States, Thomas Jefferson announced that the government was able to pay for itself and its debt on money raised from tariffs and that the “internal taxes” were going to be eliminated—along with the Internal Revenue Service:

“Other circumstances… have produced an augmentation of revenue arising from consumption in a ratio far beyond that of population alone; and though the changes in foreign relations now taking place so desirably for the whole world may for a season affect this branch of revenue, yet weighing all probabilities of expense as well as of income, there is reasonable ground of confidence that we may now safely dispense with all the internal taxes… and that the remaining sources of revenue will be sufficient to provide for the support of Government, to pay the interest of the public debts, and to discharge the principals within shorter periods than the laws or the general expectation had contemplated.”

A few years ago, writer Thomas R. Eddlem explained how this was possible in an article he wrote for The New American:

“Prior to ratification of the 16th (income tax) Amendment in February 1913, the federal government managed its few constitutional responsibilities without an income tax, except during the Civil War period. During peacetime, it did so largely — or even entirely — on import taxes called ‘tariffs.’ Congress could afford to run the federal government on tariffs alone because federal responsibilities did not include welfare programs, agricultural subsidies, or social insurance programs like Social Security or Medicare.i”

A hundred years later the government is almost wholly dependent upon income taxes to raises its revenue. In 2012, the federal government relied on individual income taxes, Social Security and Medicare payroll taxes, and corporate income taxes (ultimately paid by consumers), to provide 90% of its revenue. As an important side note, I’ll remind the reader here that no nation in all of world history has ever taxed itself into prosperity.

Of course, the United States government was quite a smaller thing to manage in Jefferson’s time; no unconstitutional entitlements like we have today. Now, the Trump Administration is attempting to “right the ship” with the increase and introduction of some tariffs. President Trump is not the first president who had to embark on a whirlwind effort to reign in the size, scope, and runaway expense of ever-expanding federal government during his first year in office while at the same time addressing unfair trade issues. Jefferson also faced similar circumstances which he noted:

“When we consider that this Government is charged with the external and mutual relations only of these States; that the States themselves have principal care of our persons, our property, and our reputation, constituting the great field of human concerns, we may well doubt whether our organization is not too complicated, too expensive; whether offices and officers have not been multiplied unnecessarily and sometimes injuriously to the service they were meant to promote.”

Jefferson saw, too, that government had to be kept small and manageable, and not be allowed to balloon itself into an unaffordable bureaucracy:

“Considering the general tendency to multiply offices and dependencies and to increase expense to the ultimate term of burthen which the citizen can bear, it behooves us to avail ourselves of every occasion which presents itself for taking off the surcharge, that it never may be seen here that after leaving to labor the smallest portion of its earnings on which it can subsist, Government shall itself consume the whole residue of what it was instituted to guard.”

Jefferson had formulated a plan of action:

“I will cause to be laid before you… a statement of those who, under public employment of various kinds, draw money from the Treasury or from our citizens…Among those who are dependent on Executive discretion I have begun the reduction of what was deemed unnecessary…The inspectors of internal revenue who were found to obstruct the accountability of the institution have been discontinued…Other reformations of the same kind will be pursued with that caution which is requisite in removing useless things…”

Recently, the U.S. raised sizable tariffs on both steel and aluminum in a long overdue effort to level the playing field on these industries against foreign competition that enjoyed a giveaway market for far too long. “Fair trade” should not come at the expense of Americans, or there is nothing “fair” about it. These other nations do not have the same industry standards, environmental restrictions, wage requirements and other expensive regulations as an input to their cost structure and so will always enjoy an unfair cost advantage here. The added tariffs account for this now and will help many American industries that relocated because of NAFTA to now begin the process of recovery.

Does this mean Americans might pay a little more for their steel and aluminum products? Of course, but we have been paying a far greater price for many years; a steep and hidden tax. That price was the loss of American jobs and industry, more unemployment benefits, higher taxes, higher crime rates, increased poverty, and the very highest price of all, lost American potential—exactly what we have been paying for in Caldwell County for far too long.

i “Before the Income Tax” by Thomas R. Eddlem Friday, 18 January 2013 The New American