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Title: No Mr. Buchanan, Corporate Profits Are NOT The Problem
Source: Technology, Policy, Society
URL Source: http://technologypolicysociety.blog ... nan-corporate-profits-are.html
Published: Jan 31, 2014
Author: Eric Blankenburg
Post Date: 2014-01-31 22:43:36 by jwpegler
Keywords: None
Views: 1945
Comments: 3

Yesterday, Pat Buchanan wrote article stating that corporations pursuing profits during the first Bush Administration (1989-1992) was the root cause of the economic woes that middle America is facing today.

This is a pitifully shallow analysis.

After WWII, half of the world was in ruins and much of the other half descended into communism. The U.S. stood virtually alone as the only real credible economy in world. So, during the 1940's and 1950's, 50% of all manufactured goods in the world came from the U.S., even though we only had about 5% of the world's population.

But, the world wasn't standing still.

The Germans started to get back into the game in the 1960's, as did the Japanese in the 1970's. One of the first things that they both did was take market share away from the U.S. auto companies, who were producing shoddy, low quality products. The Japanese, along with the new players like South Korea, Taiwan, and Singapore also started to innovate in consumer electronics which helped them to quickly dominate that business.

American wages started stagnating in the 1970's because of competition from these countries and others.

But, that wasn't the end of it.

When Mao Zendong died in 1976, the Chinese started to move to a market economy. After the Berlin Wall fell in 1989, much of the rest of the world abandoned communism as well.

Then in the 1990's and 2000's, the Internet, including the wireless Internet, brought the world a whole lot closer. This opened up just about everything, except in-person services (e.g., barbers, auto mechanics, etc) to global competition.

The result of all of that change is that four billion new people have joined the global economy in the last few decades. That's more than a dozen times the population of the U.S.

America's economic might has always been based on our spirit of entrepreneurship, risk taking, ingenuity, and technological prowess. For a time, government was actually a positive part of this process. Think about all of the innovations that came out of Department of Defense and NASA programs during the Cold War.

Unfortunately, today government is the biggest hindrance to America's economic progress. There are many examples of why this is so, but here are some of the most damaging:

1.) We have the worst public education system in the developed world. We spend more per student than every other country (except Switzerland and Australia), but we get lousy results. Our kids are at or near the bottom in mathematics. They score in the bottom half in science. And we are the only country in the developed world whose high school graduates don't have a mastery of at least two languages. We can't innovate in a technological world without a deep understanding of math and science. We can't compete for customers around the world if we don't understand their languages and cultures.

2.) We have the most convoluted and complex tax system in the entire world. We spend over $500 billion a year just to figure what taxes we owe. That is enough money to run General Motors, Ford, Boeing, Apple, and Microsoft put together. We have the highest corporate tax rate in the world. The corporate tax rate in Canada (which is booming) is less than half of ours. We are also one of the only developed countries in world that taxes the overseas profits of domestic companies, thereby treating American companies worse than foreign companies that operate on U.S. soil.. So, U.S. companies don't bring their profits back home to invest in America.

3.) We have one of the most onerous regulatory environments in the world, especially with regards to the environment. No one wants the kind of polluted cities that exist in China, but some of the things the America government does or wants to do are just insane. It cost Intel $4 billion to build a new fab in America. They can do it for $3 billion in Asia. That's a whopping $1 billion difference per factory and most of the difference isn't because of labor -- it's because of regulations and taxes. Environmental extremists are chomping at the bit to ban hydraulic fracking, which has done more to reduce "greenhouse emissions" than any government regulation. Several state governments have already banned fracking and there is a growing chorus of uninformed politicians in D.C. that want to do the same nationally. The Obama administration has been "studying" the Keystone Pipeline for 5 years and won't make a decision because of political pressure from environmental extremists. Don't these people understand that the oil is not going to stay in the ground? If we don't want it, the Canadians are going to sell it to China. All of these anti-energy policies cost America good paying jobs.

4.) State and local governments are culpable too. State and local governments severely restrict people from opening businesses and becoming their own boss. The best example is that is costs $1 million to buy a cab medallion to open a taxi service in NYC. How can an unemployed factory worker afford this? He can't. In many cases, a minimum wage job or welfare becomes the only real alternatives for someone with limited skills. Yesterday, there was a story about regulators in Illinois shutting down a cupcake business being run by an 11 year old girl out of her family's house. Government bureaucrats demanded that her mom either build an entirely separate kitchen in the house to bake the cupcakes or shut the business down.

This is why Americans can't compete. This is why small business formation is at an all time low. This is why millions of people have dropped out of the labor force. This is why our wages are stagnating. It has nothing to do with the "profit motive" of corporations. It has everything to do with our hidebound government, which refuses to wake up to the reality of the world in the 21st century.

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#2. To: jwpegler (#0)

The above is not meant to say that the problems the author indicated in numbers 1-4 are not part of the problem as well.

Also lets just face it. Americans by in large are lazier then in the past.

Thank liberal give away programs for that. It zapped the will to work out of millions of people.

A K A Stone  posted on  2014-02-01   10:28:39 ET  Reply   Untrace   Trace   Private Reply  


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