Why Do Some Politicians Still Not Get It?

March 4 2008 by Chief Executive


THE PEOPLE WHO WANT TO FORCE THEIR IDEAS on you are generally the people with the ideas most divorced from common sense. The populist zeitgeist throughout the Presidential primaries couldn’t be clearer: business is the skunk at the garden party. With John McCain bashing the pharmaceutical industry, Hillary Clinton taking aim at outsourcing companies like GE, and Barack Obama using “corporate special interests” as his favorite punching bag, we can understand if business leaders think it best to keep one’s head down. The fact that Senator Clinton was castigated during a primary debate for once having served as a board director of Wal-Mart, which, when we last checked, is not a felony, tells a lot about the current mood. (The Bentonville retailer has now eclipsed ExxonMobil as the poster child for corporate malevolence.)

Yet these same people claim to be champions of job creation! But who will create these jobs? As we have seen from our annual survey of best and worst states (CE, January/ February 2008), business is attracted to states where the tax and regulatory burdens are lower. Furthermore, what’s true internally is even truer internationally. Corporate tax rates are declining everywhere except the U.S., which ironically launched supply-side economics when President Reagan’s tax cuts went into effect in 1983. Countries like Germany, and even socialist Sweden, are shedding their confiscatory tax rates in order to generate investment and new jobs. Yet the U.S., with an almost 40 percent corporate tax rate, is just behind Japan with the highest rate among all OECD countries (see INbox, p. 9). Once famous for being reflexively dirigiste, France now has a born-again supplysider in Nicolas Sarkozy who wants to offer tax incentives that reward employees for work and businesses to invest.

What’s driving this is globalization and free trade. In a world where capital is free to go anywhere, it generally goes to places as former Citibank chief Walter Wriston used to say, where it is best treated. Why would a Samsung, Siemens or Sanofi want to expand here if they can do better elsewhere? For that matter, what confidence would foreign investors have in a country whose elected leaders continually assault wealth and capital? Given the importance our politicians assign to the task of creating employment, it is surprising how little they acquaint themselves with how jobs are actually generated. Perhaps CEOs should ask their favorite candidate to spend a little time in Ireland, which has the lowest corporate rate-12.5 percent-and yet collects 3.6 percent of GDP from corporate revenues. By contrast, the U.S. collects 2.5 percent.The change in air along with a change in mind-set might do them good. 

Watermelon Politics 

NOW WE KNOW. IT’S ALL CAPITALISM’S FAULT.

In a new book The Climate Change and the Failure of Democracy, two enviro-activist authors go well beyond the usual end-of-days predictions of eco-doom. The only way to reverse global warming and environmental destruction is to rid ourselves of liberal democracy and capitalism for being too slow to act to save the planet. It’s time for stiffer measures even if that means an authoritarian approach. And besides, what do dithering elected officials know in contrast to experts (such as themselves no doubt) in order to make life on earth “sustainable.”

“Views like this reveal an ugly and ominous aspect of the political frenzy surrounding global warming,” said Dr. Keith Lockitch, a Ph.D. in physics from the University of Wisconsin at Milwaukee and a resident fellow of the Ayn Rand Institute. Though easy to dismiss as overwrought, such views expose the watermelon politics of the true believing green shirts-green on the outside, but Marxist red on the inside.