Back to Work - Bill Clinton [52]
In 2011, Andrew Liveris, CEO of Dow Chemical, a U.S. company with global operations that has maintained 40 percent of its workforce in America while two-thirds of its sales are in other countries, released a book titled Make It in America. It has several suggestions for increasing companies’ investment in the United States. Some of them would require congressional action, but this is one area in which we might be able to get bipartisan agreement.
As Liveris points out, the cost of labor is not preventing good jobs in advanced manufacturing and related research and development activities from being created in America. Labor is increasingly a smaller percentage of overall costs in sophisticated manufacturing, and our labor costs are already competitive with Germany’s, the world’s most successful exporter of high-end manufactured products. Also, our workers are highly productive, reducing the disparity in costs with countries in which employees earn less but are also less efficient. The United States is having trouble in manufacturing because other countries are outcompeting us with lower tax rates, more tax breaks, loans, and some outright grants to offset start-up costs. Other countries’ governments also often pledge to buy a new factory’s products to minimize the risks of losing money in the early years. Why would countries like Germany and Singapore do this? Because they know every new high-quality manufacturing job creates on average 2.5 other jobs as long as the plant is running.
The United States doesn’t do this enough. A couple of years ago, Los Angeles was trying to recruit a foreign company to build fast trains for a planned high-speed-rail network to connect California’s most populous areas. Both the company and its major competitor for the federally funded project were based in Europe. The big difference was that one company planned to make all the railcars in Los Angeles, creating several thousand high-paying jobs, while the other planned to import them from its home country. Eventually, the Los Angeles proposal fell apart for other reasons, but it is relevant to this discussion. Why? Because the federal government told Los Angeles that since federal money would pay for the fast trains, the very different impacts on the local economy of the two proposals could not be considered in awarding the bid! In other words, if the performance, safety, and customer-comfort qualities of the two products were identical and the bid of the company committed to manufacture railcars in America was $100 higher than the importer’s bid, the importer should win the contract paid for with your tax dollars. This is nuts.
In 1993, when I supported an increase in the corporate tax rate on income above $10 million from 34 to 36 percent to reduce the deficit, it made sense because our rates were still highly competitive with those of other countries. That’s not true anymore. When companies like Intel, HP, Microsoft, and Dell opened manufacturing plants in Ireland, they did so in part because the Irish cut corporate taxes to 12.5 percent.1 The average European tax rate is 23 percent.
Among wealthy nations, we now have the second-highest corporate tax rate in the world, and because of recent changes in other countries we’re now the only wealthy nation that taxes income earned overseas when it’s brought back home. We’ve also fallen to seventeenth in the level of our research and development tax incentives. We have to become more competitive. Big corporations don’t get hurt by the current system. They just put plants