Dr Peter Morici: Inequality is replacing the American dream, because the
economy—thanks to Washington’s mismanagement—is underperforming.
America still produces one fifth of the world’s goods and services, but accounts
for a much smaller share of global growth. Many US products are no longer the
best in class. Consequently, the economy can’t adequately employ many of its
college graduates, and wages are stagnant or falling for ordinary folks.
America still has great strengths. High labor productivity, coupled with rising
wages in Asia, make American workers a good value for global investors. Along
with cheaper energy, thanks to the onshore oil boom, that should attract new
factories, but the promised flood of new jobs has only been a trickle.
Simply, the bureaucratic quagmire created by complex and ineffective business
regulations makes it easier to produce in Asia than in America. The highest
corporate tax rates among major industrialized countries make the cost of
investing here too high.
It is increasingly difficult to refine and efficiently move oil to California
and the Northeast—gasoline costs too much in Monterrey and heating oil in
Whether businesses are taxed or directly pay for health care, higher costs than
in Europe or Japan require radical reforms in delivery and pricing that
ObamaCare will not accomplish and Republicans refuse to discuss.
Germany punches above its weight. Whether in aerospace or web-based businesses,
its companies compete effectively for customers in rapidly growing developing
country markets by emphasizing proven technologies, execution and patience.
Cities from Bangkok to Lagos are too congested and cluttered with street vendors
to support American middle-class drive to the mall retailing. German firms like
Rocket Internet are recruiting suppliers and sending young women with tablets
into marketplaces and workplaces to demonstrate their websites.
American companies eschew such boring approaches in search of big profits to pay
for Uncle Sam’s terribly burdened regulations and taxes.
Apple will only sell the very best for the highest price, while Microsoft ties
up PC customers with awkward software. Now, too few Americans can afford an
iPhone and even fewer want a Windows smart phone. Korea’s Samsung offers state
of the art handheld devices and gives American companies fits.
In a globalized economy, America must play its strengths. It can’t continue to
permit China and other Asian nations to rig their currencies, and otherwise lock
out competitive US exports with subsidies and protectionist regulations. In
Asia, the Bush and Obama Administrations have placed higher priority on other
America shouldn’t import 6 million barrels a day of oil and pay the cost of
policing the Persian Gulf, when opening up offshore drilling and smart
conservation could eliminate foreign purchases.
Together, the trade deficit on otherwise competitive manufactures and oil is
costing Americans 5 million good-paying jobs—many that would go to struggling
working class families.
America’s best and brightest can earn big bucks by heading for Wall Street, the
Silicon Valley and industries that innovate and sell in global markets.
Meanwhile, the army of more ordinary workers remains underemployed and
A slow growing economy is the cause of increasing inequality, and the best way
to reverse those is to clear a path for investment and entrepreneurs. The ticket
is to streamline regulations, simplify and cut taxes, open up offshore energy
production, radically reform health care, and make exports and jobs America’s
number one foreign policy priority.
With lower taxes how would Washington pay for entitlements and a big defense
budget? Simply, an American economy growing at 5% and producing its own
energy would need less of both, and generate a bounty of government resources
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone
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