By WELDON PAYNE
One key to Germany’s success: “The social contract, the willingness of business, labor, and political leaders to put aside some of their differences and make agreements in the national interest.” —Klaus Kleinfield, Alcoa CEO
Author Hedrick Smith, focusing on reclaiming the American dream, insists that there is “no such thing as a free market without government influence.”
After nearly 400 pages dealing with theft of the dream, Smith focuses on 10 ways to reclaim it, emphasizing that this will be neither quick nor simple. The first step, he says, is to form a new public-private partnership to “modernize America’s outdated transportation networks and create five million (maybe more) jobs with major investments over the next 10 years.”
He quotes the U.S. Chamber of Commerce that “faltering infrastructure” costs the U.S. a trillion dollars in economic growth.
He questions whether the U.S. can “move fast enough” to ensure that technologies invented in the U.S. are produced here, not in Asia. Washington’s help, he insists, is vital for funding new U.S. energy plants and other domestic manufacturing — “and to do it before fragile American start-up firms are driven out of business by government-subsidized com- petitors in China, Korea, Singapore and Hong Kong.”
One step Smith recommends is rebalancing the U.S. income tax code to “reduce its heavy tilt in favor of the super-rich.”
Non-partisan economists have noted that Reagan tax cuts in the 1980s and even larger Bush cuts in 2001-2003 “contributed greatly to the vast economic inequality in America … by
by generating more than $1 trillion in tax savings for America’s super class every decade, with only modest benefits to the middle class.”
Another helpful move, Smith writes, would be to “close the exemption in the payroll tax now enjoyed by the rich.” While U.S. business leaders complain about the U.S. corporate tax rate (one of the highest in the world), Smith says in practice “most U.S. multinationals pay far less than the official 35 percent rate.”
Examining records of 280 major firms, Smith notes, Citizens for Tax Justice “found that from 2008 to 2010 their true federal tax rate averaged 18.5 percent.” He lists numerous multinationals that receive large tax credits.
For instance, he reports that General Electric “made nearly $10.5 billion in profits from 2008 through 2010, but instead of paying taxes, got a federal tax rebate of $4.7 billion by claiming tax credits and using loopholes while various retailers pay about 35 percent in taxes.
When U.S. multinationals in 2005 got a special 5.25 percent tax rate on repatriated profits, they said this money would create jobs, Smith reported, but economists found that “92 percent of this money went to investors and corporate executives through stock buybacks and dividends.
Smith says it is essential for Congress to fund retraining of Americans whose jobs were wiped out by trade with China and other low-cost countries. But, he wrote, the Tea Party “budget deficit hawks” in 2011 blocked all such funding.” Only after the Obama administration refused to send Washington’s new trade agreements with Panama, South Korea, and Columbia until the worker benefits were guaranteed, GOP leaders agreed to restore modest funds for retraining workers.
The author found that the U.S. would gain another 2.1 million in full- time jobs if the Chinese “stopped violating international copyright laws and international property protection.”
In late 2011, in a major national intelligence report informed Congress that “Chinese actors are the world’s most active and persistent perpetrators of economic espionage.” Sen. Charles Schumer says China’s currency manipulation is like “a boot on the throat of our economic recovery.”
American businesses, according to Hedrick Smith’s interesting book, also accuse the Chinese of “widespread intellectual piracy – stealing copyrighted intellectual property, patents, and inventions…” Do we care?
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