America the uncompetitive
In the digital pages of the Economist, Michael Porter and Jan Rivkin unveil the results obtained from a survey of 10,000 Harvard Business School alumni, who were asked for ideas to make the United States more competitive. “Progress on these eight, or even some of them, would be transformational,” the authors declare.
The eight federal policies that would help America compete on the international stage are:
1. Ease the immigration of highly skilled individuals (the “staple a green card to every engineering degree” idea)
2. Simplify the corporate tax code
3. Tax overseas profits only where they are earned (the “territorial” tax system employed by most other developed countries)
4. Address trade distortions (which sounds like some combination of beating up China and opening their markets)
5. Simplify regulation
6. Enact a multi-year program to improve infrastructure
7. Agree on a framework for developing shale gas and oil
8. Create a sustainable federal budget
Of these eight ideas, only Number 6 has a chance of happening under Barack Obama, and his mania for “infrastructure” is more about pork-barrel payoffs and union featherbedding than “allocating funds based on what will most boost economic growth,” as the authors describe it.
As for Number 1, there are going to be all sorts of green cards flying around, but they won’t be exclusively stapled to math and engineering degrees. And shouldn’t we be asking why we can’t produce that kind of labor domestically, despite having the most fantastically expensive primary and secondary educational system on the planet, including a gigantic college population with a stunning dropout rate? Why isn’t that something we can make progress on in 3 or 4 years?
I suspect there will be sustained political resistance to the territorial tax system, for the very reason adduced by Porter and Rivkin: the current system is supposed to “discourage moving activities abroad in quest of lower taxes.” However, “in practice, its effect is to discourage firms from bringing their profits home: some $1.4 trillion in profits of American companies is ‘stranded’ abroad.” No policy that could be portrayed as letting fat cats slip off a tax hook is going to get far in Obama’s America, no matter how reasonable or globally popular it might be.
“Simplify regulation?” We’re doing the opposite of that, with gusto. The Hill had an article Monday about business leaders assuming a defensive crouch before the coming regulatory tidal wave:
Advocacy groups and liberal lawmakers are drawing up wish lists of new regulations that would cover everything from air pollution to vehicle safety to labor protections. And that doesn’t include a torrent of forthcoming rules required by the healthcare law and the Dodd-Frank financial reform act.
Congressional Republicans and industry groups, meanwhile, are marshaling forces to oppose a regulatory onslaught that they fear will bring the private sector to its knees.
“When you consider all the new rules now pouring through the regulatory pipeline, and those still to come, it is staggering,” U.S. Chamber of Commerce President Tom Donohue said this month during a speech on the state of American business.
There’s also a frank acknowledgement of something Obama and his fan club in the media used to strenuously deny:
Lobbyists who track federal regulations closely say rulemaking slowed to a crawl in the lead-up to the November election, and are expecting activity to ramp back up now that Obama’s second term is secure.
“The administration basically put the hammer down in July,” said Rich Gold, head of the public policy and regulation practice for Holland & Knight. “What that meant was that there were no major regulations.”
High-profile rules involving air quality and an Occupational Safety and Health Administration proposal to limit crystalline silica were kept on hold as Obama ran for reelection, as was a decision on whether to support the Keystone XL oil sands pipeline.
Any Harvard alumnus who seriously believes in tax simplification, rational development of energy resources, de-regulation, or federal budget restraint as the keys to renewed American competitiveness, and yet voted for Barack Obama, is deeply deluded. Or else a more competitive America really isn’t all that high on their list of priorities.