If, “It’s the Economy, Stupid!” Where’s the Plan?

Is U.S. Business Overregulated?There is no more critical issue facing America than its ability to compete in the global economy. The loss of manufacturing jobs to countries with five to twenty times lower labor costs may be the most important economic problem of our times. The U.S. has become a service economy that is heavily dependent on the goodwill of two classes of market participants:

• Foreign holders of dollars who keep buying our stocks, bonds, real estate, and other assets

U.S. consumers whose spending drives some 70 percent of our gross domestic product

 

So, what do our Presidential candidates suggest? What structural changes would their administrations propose? Unfortunately, one of the problems in following the candidates’ economics positions is that they don’t have any specific long-term plan. The composite position is some kind of short-term economic stimulus package totaling about $100 billion. While economists never agree on much of anything, there seems to be a consensus that a $100 billion stimulus applied to a $13 trillion economy will accomplish almost nothing. (It would take a $130 billion stimulus just to equal one percent of the size of the U.S. Gross Domestic Product [GDP]!)

 

We need some real discussion among the candidates about the long-term: changing laws, eliminating regulations, stimulating job growth, reducing corporate tax rates, etc. The closest to this probably has been Mitt Romney in Michigan who promised to revitalize the auto industry and restore jobs … although, to no one’s, surprise … the details are vague. (Hint to Mitt: Those auto jobs are now in Japan, South Korea and other countries, and they aren’t coming back.)

 

The U.S. has to change its vision of the 21st century economy. We have to consider repealing laws that seemed reasonable as long ago more than 100 years ago (for example the Sherman Act of 1890 concerning antitrust), and as recently as 6 years ago (the Sarbanes-Oxley Act of 2002 concerning corporate governance). America has never developed a comprehensive public policy toward global competition. In fact, the Department of Commerce, the agency charged with the promotion of international business, did not begin to emphasize sales to foreign markets until the 1970s, some 300 years after countries like Great Britain and Holland were actively developing world trade relationships.

<>If foreign holders of dollars and/or U.S. consumers ever falter in their support, the result could be a decade-long recession. This is no idle threat; by 2007, housing was in a slump with prices likely to be down for the years 2007 – 2009. And in recent years housing “wealth” was what sustained the consumer and supported all those trips to Wal-Mart <>and to Orlando or Las Vegas. Although there are no quick fixes, the argument of my new book Is U.S. Business Overregulated? (York House Press, 2008) is for a new look at our regulation of business to level the playing field against foreign competitors. We may well be our own worst enemy in limiting America’s ability to compete in the global economy!

The theme of this book is that there are “positive” regulations … and “negative” regulations, where government officials substitute their judgment for that of the market in situations when such substitution is inappropriate and may result in the suboptimal allocation of the factors of production….society cannot survive without laws to protect individuals and the environment against the corrupt or criminal actions of business.

 

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