The reason why Obama could not see a way to stop American business from fleeing the country and going overseas is that any incentives to keep American business here he deems to be concessions and subsidies to the rich who do not need such inducements. Operating out of a Marxist-Socialist ideology, Obama and the rest of the Left are all about “Fairness” and economic equality. But it isn’t fair to punish business nor to call corporations evil. American business is the one who provides the Working Class with jobs. So when you resort to Class Warfare you hurt the average American worker.
When you say that our government can never give anything to the “rich,” but must instead punish the rich by burdening them with strangling regulations and tax them until it hurts then you are responsible for 1% GDP growth, wage stagnation, low employment, and poor paying jobs. And when you are responsible for that you are responsible for a lot of American workers being out of work or underemployed.
Obama couldn’t see any way to stop Carrier, Ford, Apple and others from leaving because his ideology will not allow the business incentives necessary to spur economic growth and to keep us competitive with the Global Economy. And believe me, the way out of this economic morass is 4%+ economic growth which by the way would increase tax revenues significantly. Reagan understood this and his Supply Side Economics or Reaganomics provide the longest peacetime economic boom in the history of this nation. When we traded Supply Side Economics for Marxist-Socialist Economics we sealed our fate to mediocrity and stagnation.
Trump offering a new social contract — and industrial policy
The scope of the vision of America presented by President-elect Trump yesterday is breathtaking. In both social and industrial policy he is changing direction and challenging the consensus fashioned and maintained by business, financial, academic and political elites. He is rewriting the social contract binding Americans, and challenging trade and industrial policy orthodoxy head-on.
Charles Krauthammer of Fox News now gets it about Trump, after over a year of dismissing him as unserious. Kudos to the good doctor for discovering that facts invalidated his conceptual framework and then fundamentally re-thinking how he understands Trump and the political phenomenon he has created, or taken advantage of. Yesterday on Special Report, he explained Trump’s new social contract concisely:
“These conservatives have to accept the fact that you have to sacrifice economic efficiency accept for equity. If you don’t you’re going to lose the country. And in the end it’s worth it to create social peace. That’s what the model is here.”
But what is emerging as the Trump industrial policy may find a way to minimize or even eliminate the economic cost of this new deal (sooner or later, Trump will come up with his own catch-phrase, because FDR already appropriated “new deal”). He has announced that, reigning globalist economic theory to the contrary notwithstanding, the United States must maintain a manufacturing sector. The shift of manufacturing to low wage countries is not a law of nature, not an inevitability, and not a path that America will take in the future. We cannot abandon the regions of our country that have devoted themselves to manufacturing. He has not mentioned the national security dimension of such a policy, but it is obvious to all but a few theorists that you cannot maintain a strong nation if you depend on others to do your manufacturing.
While the Rust Belt is the heart of this phenomenon, in fact manufacturing has been devastated nationwide. California used to be a major manufacturer of automobiles with multiple assembly plants in Northern and Southern California, but all that’s left now is heavily subsidized Tesla, occupying a small portion of the former General Motors Assembly Plant in Fremont, California that once employed over 5000 highly paid workers who needed only a high school diploma or GED to support a middle class life. That lifestyle has all but vanished all over America, not just in the Rust Belt.
The combination of information technology, robotics, new materials, and many other advances (including management advances such as lean manufacturing and continuous improvement organizational disciplines) has squeezed low value labor out of manufacturing. Global companies that locate within their most important market are able to create serious competitive advantages over companies assembling products in low wage companies through flexibility and rapid response time.
There are many factors that affect the attractiveness of such strategies to companies. Too many to enumerate here completely. But two near the top of the list are already changing thanks to policy changes President-elect Trump has announced.
The cost of capital
Depending on the cost of capital, investment decisions change. There is well over a trillion dollars in corporate wealth sequestered from the American economy by our highest-in-the-world corporate profits tax that will be enthusiastically repatriated under the new tax regime being promised.
Starting with environmental impact statements that delay projects – a serious negative factor, aside from the cost of the consultants and executive manpower consumed – American environmental regulations are serious obstacles. But there are many other regulatory burdens that are expensive and unnecessary. Trump has promised sweeping reform, and yesterday emphasize how he had learned from executives at Carrier that regulations are even more expensive than the wage differential, in costing out the option of the Monterrey factory versus investing in next-gen manufacturing in the USA.