President Obama’s visit with the Chamber of Commerce this week has infuriated the anti‐business Left. But short of expropriation and nationalization, what doesn’t?
Robert Reich and NPR and the scribes at the Huffington Post just don’t get it. Their man may be in the White House, but business holds the keys to the kingdom. Whether the president’s priority is job creation or reelection, nothing matters more than sustained economic growth. And without business having confidence that policy in the United States will become more hospitable and predictable, investment and job creation will remain tepid.
The president doesn’t have nearly the leverage assumed in the delusions of groups like Public Citizen, which wrote: “What America needs is not olive branches to giant corporations but controls over the companies that sank the economy.” Back here in reality, businesses have options. Many can choose to produce and operate in other countries, where the economic environment may be more favorable. In that regard, globalization has produced a veritable Galt’s Gulch, which serves as an important check on bad economic policy. Governments are now competing with each other to attract the financial, physical, and human capital necessary to nourish high value‐added, innovation‐driven, 21st century economies. Gratuitously punitive anti‐business policies will only chase away the companies that the president exhorts to invest and hire.
According to a survey of 13,000 business executives worldwide, conducted by the World Economic Forum, 52 countries have less burdensome regulations than the United States. Add to that the fact that the United States has the highest corporate tax rate among all OECD countries and it becomes less mysterious why U.S. businesses shift more operations abroad.
As I wrote in a December 2009 Cato paper:
Governments are competing for investment and talent, which both tend to flow to jurisdictions where the rule of law is clear and abided; where there is greater certainty to the business and political climate; where the specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where there are limited physical, political, and administrative frictions.
This global competition in policy is a positive development. But we are kidding ourselves if we think that we don’t have to compete and earn our share with good policies. The decisions we make now with respect to our policies on immigration, education, energy, trade, entitlements, taxes, and the role of government in managing the economy will determine the health, competitiveness, and relative significance of the U.S. economy in the decades ahead.
The president is beginning to get it – though grudgingly. He acknowledges the burdens of excessive and superfluous regulations and bureaucracy (remember his SOTU story about the jurisdictions entangled in the salmon’s journey from salt water to fresh water to the smoker?). The president has hinted that he would like to see the corporate tax rate lowered. He knows that businesses have options to invest, produce, and hire abroad—and that oftentimes U.S. policy chases them there. But, so far, rather than push policies to encourage domestic investment, production, and hiring, the president has done the opposite, while demonizing businesses that follow the incentives to go abroad.
The president’s position during his exchange at the Chamber of Commerce was that he has made concessions to business by moving toward the center on tax and trade policy, and that now it is time for business to show good faith by investing and hiring. But Obama’s small steps toward the center come after two years of sprinting to the left on economic policy. After ObamaCare, Dodd‐Frank, taxpayer bailouts, unorthodox and legally‐questionable bankruptcy procedures, subsidies for select industries, Buy American and other regulations governing how and with whom “stimulus” dollars could be spent, and the administration’s tightening embrace of industrial policy, businesses want a more quiet, less intrusive, less antagonistic, predictable policy environment before they will feel comfortable playing the role Obama wants them to play.
Until that happens, the president shouldn’t expect torrents of investment and hiring from the business community.