Gloomy Dems doubt Americans’ ability to produce, compete
Why are Democrats so pessimistic about the United States? As tax reform looms, liberals pan the idea that business tax cuts will add jobs and stimulate investment. Leftist economists challenge projections that U.S. growth can return to historical norms and ridicule those who see a future in domestic manufacturing.
In place of the optimism propelling the GOP tax plan, Democrats offer “secular stagnation” and schemes to provide a subsistence wage to the millions who will soon be out of work. Message sent: The U.S. should put down its machine tools and go home.
Paul Krugman wrote that the proposed GOP tax plan is entirely built on lies and that lower corporate tax rates will not benefit workers. Then again, Krugman also promised that electing Trump would usher in a “global recession, with no end in sight.”
Why is the left so negative? Could it be because for the past eight years, “Obamanomics” failed to generate a pay hike for working Americans and that this failure elected Donald Trump?
Perhaps they are horrified that President Trump and a GOP Congress might push through a tax package that is already celebrated by investors for providing much-needed relief to employers big and small and that growth might accelerate.
The big debate among economists today is over how much of a corporate tax cut flows to workers, as opposed to shareholders or consumers. Some think as much as 70 percent will go to boost worker wages; proponents come armed with studies and real-life examples to make their case. Others say only 20 percent will go to labor, and they have data to further their argument.
No one can be sure, but common sense suggests that inflicting tax schemes that make our companies uncompetitive is foolish. Let the economists have their spats. Congress should focus on the obvious: For many reasons, the United States is one of the best places in the world to manufacture, and we have to ensure that regulatory and tax roadblocks do not impede our progress.
We have a host of advantages over our rivals:
We are the world’s largest consumer market. Yes, China is gaining ground and may eventually overtake the U.S., but for now, we are the biggest game in town, more than three times the size of China.
Setting up shop next door to an $11-trillion market, nearly one-third of the world’s total consumer spending, saves money and time as businesses cater to today’s thirst for immediate gratification.
We speak English, which is helpful in carrying out work orders and facilitating customer communications, and we have an educated labor pool. We rank third among OECD countries in worker productivity, behind Luxembourg and Norway. Our workforce can compete.
U.S. labor costs and rules compare favorably with those in Europe. Meanwhile, as China has boomed, so have average wage levels, tripling from 2005-2016. While Chinese hourly wages are still only about 10-15 percent of those in the U.S., the gap is narrowing as pay growth accelerates.
Demographics will also play a role, as the aging of China’s population has already ushered in a decline in the number of workers, which will push incomes even higher.
We have an almost unlimited amount of low-cost energy. Our natural gas supplies alone are estimated to last for the next 86 years at the current rate of consumption. With oil prices hovering around $50 per barrel, plentiful energy may not appear critical today, but as companies assess the best places to invest in the future, our energy policies and availability will prove a determining factor.
That’s especially true in energy-intensive or fossil fuel-dependent industries. It is also why foreign entities plowed $65 billion into U.S. chemicals operations last year. Due to a love affair with green energy, Germany, which has decided not to exploit their domestic natural gas supplies and has closed its nuclear facilities, is paying more than 50 percent more than the U.S. for electricity.
We are a nation that adheres to the rule of law, which includes protection of intellectual property. This is a concern in China and other countries notorious for intellectual property theft. We are also the No. 1 innovator on the planet; global CEOs in a recent survey ranked innovation far and away the most critical element in future success.
In its 20th annual survey of 1,379 global CEOs, PWC asked: “Which three countries, excluding their base country, do CEOs consider most important for their organization’s overall growth prospects over the next 12 months?”
The U.S. led the pack, with 43 percent of respondents, up from 39 percent last year and better than China’s 33 percent and Germany’s 17 percent, respectively.
In the same survey, company chiefs projected that the rise of the automation would continue, but CEOs still expect to add to headcounts, and more than three quarters are worried about finding enough skilled workers.
Democrats weren’t always so pessimistic. In 2013, President Obama announced a new federal initiative aimed at turning around the slide in foreign direct investment into the U.S.
He told a conference of global business leaders, “There are a whole lot of reasons you ought to come here,” citing some of the points noted above, including inexpensive energy and the rule of law.
One issue he did not address was over-regulation, which in the PWC global CEO survey emerged as the leaders’ top concern — above taxes.
In short, the United States has plenty of potential, to compete and to grow. It’s time we unleashed that potential, and tax reform is a good place to start.
Liz Peek is a former partner of Wall Street firm Wertheim & Company. For 15 years, she has been a columnist for The Fiscal Times, Fox News, the New York Sun and numerous other organizations.
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