Monday, February 20, 2017

EXPANDING THE RECOVERY

The perception of the economy is highly dependent upon where one lives. Residing in one of the coastal cities, residents see more positive view of the economy, as size of market, economic diversity, and public spending offset weaknesses. In rural America, the perception may be lackluster, given the reliance on a single major industry or employer. Furthermore, the public policy implemented to halt losses following the financial crisis and stimulate growth did much to improve the condition for one set of communities, while the other is still in need.

Outside the coastal cities, dominated by finance, entertainment, tourism, and other industries, main street communities heavily rely on industries like agriculture, manufacturing, and energy to fill non-government employment. All labor intensive industries in a national economy that is becoming less `attractive to labor intensive businesses. Under the public policy currently in place, hiring and operations is restricted from its full potential, keeping many Americans on the sideline. In order to expand the recovery across the entire nation, public policy needs to focus on improving our economic competitiveness and attraction for growth, while balancing quality of life and environmental concerns.

Image result for manufacturingThe United States cannot afford to lose economic sectors like manufacturing, agriculture, or energy. Not only for the impact on employment, but for our economy’s collective skill set. To protect these fields, public policy approaches need to focus on reducing the cost of operations and clearing obstacles that drives these fields to other markets. There is opportunity in order to make our economic more financially viable for producers and reduce bureaucratic hurdles that only promotes corporatism, hurting small business growth.

The most practical step forward would be enacting reasonable corporate tax reform, reducing the corporate rates to a more competitive global position. Currently, corporations domiciled in the United States pay the highest tax rate in the industrialized world. Bringing the United States toward the middle of the rankings eliminates input costs, making domestic production more attractive. Furthermore, the growth in tax inversions will subside on tax basis. The United States possesses a highly skilled workforce, vibrant private sector, and strong innovation. Taxes should not force global producers to settle for less.

The concern for some is the potential impact on our national debt and government revenues. Considering the stimulating effect of tax cuts, economic growth can lead to higher revenue and greater ability to reduce debt. Reducing costs stimulates corporate investments in growth, labor, and infrastructure, which positively grows revenues and profitability. Since corporate profits serve as taxable income, greater profits leads to higher revenue. Also, growth tends to lead to greater employment, lessening dependency on government programs that bloat the budget. The focus should be on ensuring cuts are reasonable or done over time.

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Another opportunity to make progress would be to streamline regulations and reduce impact. Consumer protection is important in our economy, but many regulations are politically focused and harm consumers in the long run. Consider regulatory reform enacted in financial services, energy, and health care, as efforts to protect consumers created other harms to consumers. Many of these regulations increased cost, reduced competition, and grew corporatism, all of which supporters aimed to avoid.

Image result for regulationsThe cost of compliance is burden that undoubtedly makes its way to the consumer. In the aforementioned industries, the cost of compliance led to consolidation of providers, elimination of popular offerings, and reduced competition, leading to higher cost. Facing the higher operating costs, many providers sought mergers to achieve profitability through scale, reducing the ability for small non-corporate providers to compete. In energy, regulations inhibited production, without a scalable viable alternative, reducing employment and increasing energy costs.

Regulations are important, but so is the consideration of market impact and long term impact on consumers. The United States does not operate in isolation. Creating a toxic regulatory environment combined with heavy tax burdens, leads producers to look elsewhere to drive growth and profitability. Consumers are not protected in economies with low employment and high cost markets. Policymakers need to balance economic competitiveness and outcomes in rule creation.


The United States is shifting towards more service focused economy, but can continue to be a global provider as well. In reality, our quality, innovation, and productivity is among the best in the world. But, cost of operation is an issue. Policymakers need to enact market policies that ensures our ability to attract capital, grow exports, and utilize labor. Investors and producers should not have to settle for lower quality due to factors that are in our control. Proper public policy can change this.