So, how to increase profits and wages? Well, look at this simple equation. I call it the profit equation, because it allows one to calculate profits independently, from other measures of the economy.

P = K*(A*B*C)

Where:

P is corporate profits for domestic businesses

K is a constant

A is the ratio of exports to imports,

B is a factor dependent on the size and growth of the economy, and

C is a factor dependent on interest rates

And when I plot the actual corporate profits along with profits predicted by this equation, the match is very close.

It's a simple equation, and what it says about the economy is also simple.

It says that, to improve profits, you must increase one of these factors: A or B or C. That's all there is to it.

ABC.

Nowadays, the economy is managed by manipulating interest rates and tax rates. But interest rates are near zero, and can't be lowered much further. And lowering tax rates stimulates the economy, sure, but it also stimulate imports. So the only answer is to work directly on factor A--the ratio of exports to imports. And you do that by increasing tariff rates.

See below how that ratio improves with increasing average tariff rates:

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© 2002, 2003, 2004 by Louis Dischler

So, raise tariffs to ten or twelve percent--it's an easy fix, isn't it?

Well, as long as you're not one of the smart men Bill Clinton was referring to; as long as you don't have some higher agenda in mind, like sinking the economy to make way for a shining future where nation-states like America are a relic of the past.