Unleashing the Global Competitiveness of the U.S. (US 51 OF 140 IN REGULATIONS]

Real Clear Markets ^ | February 5, 2016 | Pinar Cebi Wilber

[expat_panama]

Following the World Economic Forum's wrap up of its recent annual meeting in Davos, Switzerland, U.S. policymakers should return with strategies for strengthening America's economic growth and augmenting our global competitiveness. A pessimism for global economic growth was a pervasive mood among CEOs at Davos, and the U.S. can demonstrate leadership by adopting some critical policy prescriptions to accelerate growth. They should begin with lowering America's corporate tax rate - currently the highest among the OECD and BRIC countries at 39 percent (combined federal and state) - and reducing the excessive regulations that hamper innovation, stifle productivity, and exhaust capital resources. America's global standing in competitiveness could diminish, unless policymakers seriously commit to comprehensive tax reform that refrains from picking winners and losers in today's economy.

High taxes and excessive regulation serve as America's twin hurdles to capital formation, the essential expenditure necessary to preserve and increase the stock of our nation's wealth. Entrepreneurship and commerce have suffered in recent years, but so too, has American competitiveness. This should be unsurprising as U.S. tax laws contain an inherent bias against saving, investment, and work effort. Our high tax rates actually reduce after-tax returns to work effort, thus decreasing both the amount of labor supplied and also productivity-enhancing investment.

Economists agree that taxes should be designed so that the relative prices of work effort and leisure, and of consumption and saving - in other words, investment - are not disturbed after their imposition. One way to increase rates of capital formation in the U.S. is to reduce the existing tax bias against saving and investment. The development of these "neutral" tax policies should be a major goal of comprehensive tax reform so that all industries are treated equally. Such policies would not differentially alter the prices of the necessary ingredients of production: work effort, saving, and investment.

In addition to our growth-retarding tax structure, the rapid expansion of government regulation in recent years has also resulted in high compliance costs to firms, ultimately impacting their competitiveness. For example, as firms devote greater portions of their resources to meeting regulatory requirements, new product development is delayed, increasing the final cost of bringing a new product to the market. If a firm is already operating efficiently, the increased costs caused by these government regulations may well result in either lower profit margins, which result in even fewer resources being devoted to production innovation, or higher prices to the public.

When we look at the data, we see how federal tax, spending, and regulatory policies undermine capital formation and diminish economic growth by altering the level and distribution of capital goods. In fact, such policies have interfered with the necessary expansion of capital formation in recent years.

America's domestic capital formation has declined over time, and in marked contrast to our top ten trading partners. We now lag behind all countries except the U.K. in gross fixed capital formation as a percentage of GDP for the period 2007-2014. This record reflects poorly on America's ability to replace and expand the capital stock with new and innovative equipment, which is essential to our ability to improve the productivity of our work force.

In its annual Global Competitiveness Report, the World Economic Forum ranked the U.S. 51 out of 140 countries based on its government-imposed regulatory burden. And, a 2012 study conducted by Nicole V. Crain and W. Mark Crain determined that the average U.S. company paid $9,991 per employee per year to comply with federal regulations, with the total annual burden estimated to be over $2 trillion.

Our elected officials are fortunately paying attention to these tax and regulatory burdens. Presidential candidates and lawmakers alike have advocated for comprehensive tax reform to be on this year's legislative agenda. President Obama's 2015 Economic Report identified many of the problems associated with the current business tax system and set reform goals to, "improve the quantity and quality of U.S. investment and thus productivity and output." And in his recent State of the Union address, he emphasized the need to fix our regulatory system.

America's economic engine remains the envy of the world; yet, we have the power to innovate even more advanced technologies, and produce more goods, faster, and at a lesser expenditure. Our stagnant growth, on account of an outdated tax structure, is entirely of our own making. So, too, will be the remedy: lower, fairer, tax system that treats all investments the same coupled with an updated, regulations based on cost/benefit analysis.

Pinar Cebi Wilber, Ph.D., is a senior economist at the American Council for Capital Formation, a non-profit, non-partisan organization advocating tax, energy and regulatory policies that facilitate saving and investment, economic growth and job creation.

[expat_panama]

That 51/140 link: Global Competitiveness Report,

[expat_panama]

Whoa, FRIDAY already!  Stock futures traders are edgy, they see indexes flat/down right now (like they've been for weeks) w/ metals leaping (again) +1.30%!   Labor Dept. splurge today:

8:30 AM Nonfarm Payrolls
8:30 AM Nonfarm Private Payrolls
8:30 AM Unemployment Rate
8:30 AM Hourly Earnings
8:30 AM Average Workweek
8:30 AM Trade Balance
3:00 PM Consumer Credit

-and even the pundits who don't know about the participation rate are expecting "bad" news (Unemployment Numbers Will Be Off to a Rocky Start - John Crudele, NYP).  Speaking about dumb pundits, there's a "Dems are great for stocks" meme going around:   The Myths About Elections & Stock Market - William Watts, MarketWatch.  Yeah, it's goofy, but we'll probably be hearing it more and more...

[griswold3]

Just overheard someone from American Progress lament that the US isn’t building the necessary factories and other infrastructure for jobs.
Didn’t they hear Obama say, “You didn’t build that!”? The political paradigm shift occurring among the citizens in this nation will take it’s toll. There’s a reason that leftist policies in other parts of the world work...They got rid of the opposition. (Through concentration camps, gulags, and methods used during the Cultural Revolution) What methods will the “Progressives” resort to here? (See Ayers statement about killing Capitalists)
Oblivious.

[expat_panama]

the US isn't building the necessary factories and other infrastructure for jobs.  Didn't they hear Obama say, "You didn't build that!"?

Hmmm, wait a sec, I just noticed that the concern is that it's the "US" that isn't doing the building, not 'Americans' or 'Businessmen' building factories...

[griswold3]

Nice catch. That makes sense coming from a ‘Progressive’, doesn’t it?

[pa_dweller]

It’s moot. Kris Anne Hall https://www.youtube.com/watch?v=sX6NllqKHWM&list=TLPT78945r6BkwNTAyMjAxNg

[expat_panama]

Just in:

Seasonally adjusted unemployment rate is down but w/o the "seasoning" and it's up...

[AllAmericanGirl44]

bkmk

[citizen]

Red across the board.....

I got tired of sitting in cash so bought into two funds structured for dividends. Unfortunately I did this shortly before COB Dec. 31. The absolutely worst time to buy in. Wait one more day to get to the holiday weekend and I don’t lose thousands b/c I don’t get in.

It was quickly apparent that this run downward was likely to be more serious than the bumps down of the last few years. I was prepared for the occasional 1000 point loss week but not several consecutive weeks of bad news and bad performance everywhere. My timeline is not such that I can stand to lose 20-30% while figuring to make it back with some profit over the next five years.

So today we’re down again and Citi has cut their US 2016 forecast again along with their considerable expectation for worldwide recession.

Happy Friday, everyone!