President Clinton’s former cabinet member, now professor, Robert Reich hosts a regular “Market Place” commentary on National Public Radio. (Yet another unfortunate use of my tax dollars.) He recently explained to the audience that federal oversight and expenditures were essential for returning quality jobs to the United States.
Reich claimed that American business cannot lead the way to economic recovery because businesses are globally focused, not US focused. Reich explained that their objective is profit, not jobs. Businesses are cutting jobs. CEOs are beholden to shareholders, not employees. Apple employs eight times more employees overseas than they do here. Reich stated that all of “Asia” now spends more on R&D than does the USA, however, US firms have doubled their R&D investments in China. Finally, Reich claimed that too many workers are not competitive in the global marketplace. In short, Reich blamed, decaying schools, not enough R&D, and suffering infrastructure. Reich finished with a rhetorical flourish, claiming that businesses petition DC for less taxes and regulations, however, no one in America is petitioning for Americans.
What drivel. I thought Americans owned and operated American businesses. More importantly, more and more federal government is why we have less and less of a manufacturing and high skilled production (or even trade skill production) in the US.
Businesses are screaming to Washington why they’re leaving, but their explanations only make for the chattering class’s rhetorical fodder. In dissecting the collapsing manufacturing and production capacity of the US, Reich ignores the giant white elephant, just like most the rest of his ilk on the political and journalistic ilk. This despite the fact businesses are pleading with our elected federal officials to remedy the cause for US companies fleeing. When producing for a global marketplace, the US is one of the least attractive countries in which to manufacture, primarily for two reasons: high taxes and a byzantine network of onerous federal regulations.
Our spending on education is not the problem. Researchers at USC report that although the US significantly outspends leading industrial nations on education expenditures, we lag toward last place on math and science competency results. See here and graph below. The OCLC reported,
The United States spent the most on education in 2001 at roughly $500 billion, followed by Japan, Germany and France at $139 billion, $89 billion and $82 billion respectively. While the U.S. spent the most in absolute dollars, it ranked tenth in education spending as a percent of GDP at 4.8 percent.
See full article here. As of 2008, we are spending on average over $10,000 per student per year on primary school education. See here. We spend close to 5% of our gross national income on education; the Chinese spend less than 2%. See here. While we spend close to $15,000 per student, China spends a little more than one-tenth that amount according to the OECD:
In 2008, China spends USD 1 593 per student from primary to tertiary education – the lowest amount of annual expenditure per student among the countries surveyed. In comparison, Brazil spends USD 2 416, Argentina spends USD 3 204 and the Russian Federation spends USD 4 878, all far below the average for OECD countries (USD 8 831) or for EU21 countries (USD 8 702). These figures relate to public institutions only. At the other end of the spectrum, the United States spends USD 14 923 and Switzerland USD 14 977 on public institutions
The Heritage Foundation conducted a study demonstrating that spending on education has increased dramatically over the past several decades in the United States as compared to our historical trends, however, this has not led to similarly improved student performance. See full report here.
In contrast, the United States competes with Japan for the highest corporate tax rate in the developed world – approaching 40%. The corporate tax rate on technology companies in China: 15% .
There are approximately 50 federal agencies that regulate every aspect of existence in this country, particularly nearly all aspects of commercial activity. The laws from these unelected agencies are contained in the Code of Federal Regulations (“CFR”) over 51 titles. At last printing, the federal regulations ran 200,000 pages. That’s separate and apart from the thousands of pages of federal statutory law and separate and apart from State statutes and regulation. The US tax code (Title 26) alone is reported to take up over 2,500 pages containing over 5 million words. It takes hundreds of thousands of highly educated and trained corporate attorneys and accountants for businesses to comply with just the tax code.
The federal register in 2010 (where presidential orders, official agency actions, and new and proposed federal regulations are published) hit over 81,000 pages in 2010. Think about what that means. Incidentally, that wasn’t a record. President Carter’s executive branch published 83,000 pages in his final term. See here.
Exceedingly high taxes and more regulations than any people in the history of humanity – that’s why businesses are fleeing. Not surprisingly, those that make their living promulgating, lobbying, and enforcing these laws and earning their living off those tax receipts don’t see it that way. The problem is those greedy companies, according to taxpayer-funded Reich on his taxpayer-funded radio station.
If you want to see real jobs – high technology manufacturing jobs in the USA – it will take time. If you want to see those cool Apple products built-in the USA again, our tax and regulate culture must change. Lower the corporate tax rate to a simple 15%, or lower, abolish capitol gains tax, and take an ax to the impenetrable (and grossly unconstitutional) regulatory regime that employs hundreds of thousands of attorneys, lobbyists, accountants, and bureaucrats, but stifles US business and meaningful job creation. Our federal leviathan could live on more modest means if we had the courage to scale the beast back to something at least faintly resembling our Constitutional parameters.
Compare this incredible legal burden to what businesses in China have to deal with. Not only is there no such overbearing government intrusion into every nook and cranny of your business, there are no unions, no patent trolls, no regular stream of largely frivolous lawsuits from your workers and anyone else who might be disguntled, there is effectively no army of administrative overlords. Is it a panacea there? Hardly. But it’s far easier to do business there and in most places of the world not located in Europe.
Oh yeah, don’t forget the substantially lower taxes, per above. Would you prefer to keep 80% or 85% of your earnings, or 50% to 60%?
Companies worldwide would once again seek to open business here if we leveled the playing field. Americans are still the hardest working, cohesive, and spirited work force in the world. We work, pray, and play hard. We practically invented the middle class. We still have the best infrastructure and are richly blessed with natural resources. We’ve invented the lions share of the greatest technology of the past century. Moreover, investors worldwide will look to invest here if the government doesn’t gouge their returns. Substantially less federal intervention, the opposite of what taxpayer-funded Reich claims, will lead to a robust job and technology growth for another generation. Real jobs, not baristas and mowing each other’s lawns.
image from the MAT@USC -University of Southern California