I despise protectionism. Mostly because it is bad economic policy, but also because politicians often use protectionism as a way of diverting attention from their own failures.
So when I appeared on Neil Cavuto’s show to comment on President Obama’s criticism of “outsourcing,” I was a tad bit critical.
I think my opening comments were effective. I wanted to help viewers understand that cross-border investment is a big net plus for the American economy. Indeed, this is why I’m so critical of laws such as FATCA that discourage foreigners from making job-creating investments in the United States.
And I hope people understood the moral point I made about how it’s not our business what private citizens do with their own money, but it is our business when politicians squander taxpayer money.
Though perhaps I should have asked the folks at Fox to put this cartoon on the screen.
I also got to take a jab at the failed Keynesian stimulus. And I explained that big government facilitates corruption and that excessive government spending undermines growth, so I’m generally happy with my remarks.
But not completely happy. I should have said that the average corporate tax rate around the world is 15 to 17 percentage points below the American level, not 15 to 17 percent, but hopefully people understood the point I was trying to make.
P.S. Romney’s been engaging in some China bashing, so he also deserves some criticism.
The case against protectionism is that it is wrong at its base : An illusionary temporary respite to a privileged subgroup, which temporary respite must be paid with high interest down the line.
Protectionism will temporarily shield you from the price signals necessary to compete in the world marketplace. Once that temporary respite is over, then you have to pay it all back and some.
Going against fundamentals with gimmicks is a recipe for crises and disasters. Protectionism only protects some industries by burdening other industries and decreasing overall economic efficiency and triggering a vicious cycle of more systemic decline.
You/We, Americans, cannot maintain a six fold multiple on standard of living over the average world citizen if our/your energy is distracted into such ultimately futile and economic efficiency distorting gimmicks. Not a chance…
The world as a whole is on a five percent annual growth trendline (and that includes averaging in the moribund near-zero growth continent of Europe – and now seems like the continent that is in line to mimic it, North America). If you are not growing at that rate, your relative standing in the world is DE-CLI-NING. Your children (or you yourself in twenty years) will no longer be a citizen of the priviledged western world. Without the five percent growth, you are entering the irreversible destiny of decline, whether decline by a series of crises separated by relative calm, or decline by limping on to gradual immiseration, or, more likely, a combination thereof.
There is simply no way to growth under sub-par effort-reward curves and the energy constraining mandates of central planning, whether democratically imposed by majorities or authoritatively imposed by autocracies. But many one cultures have been bamboozled to the same delusion. Different flags, different slogans, different hopes, different changes, but the same result: mandatory collectivism and decline. The movie plays again, this time for America…
I wish you would discuss the “effective” corporate tax rate, rather than the nominal corp tax rate. Deductions and perfectly legal compliance somewhat change the tax rate picture. Certainly, the best corp tax rate would be zero (not likely). In absence of that, apples to apples comparison involves a little adjustment, no?
Lol, I had the same thought about percentages, but I’m a pedant. I wish you had said a word or two about how wrong Romney is about his own protectionist rhetoric vis-a-vis China. How depressing is it that they’re fighting over who is the most protectionist? I mean, economists have agreed for hundreds of years that free trade is the best policy, even Paul Krugman!
Dan, your comment was understood by informed listeners. Fortunately, most uninfromed listeners would not bother tuning in a serious and thoughtful program segment.