Rick Santorum, duringlast week’s CNN candidates debate,attempted to make the case for a zero corporate tax for the manufacturing industry, and 17.5% for everybody else… He stated that the cost of doing business in the U.S. makes manufacturing goods more expensive, versus our overseas “competition”…
His intentions (noble as they are) notwithstanding, government picking winners (favoring one industry over another) is cronyism by definition… And that’s where we get into trouble… If you give preferential tax treatment to one industry, make no mistake, others will lobby hard to convince you that they are every bit as critical to the growth of jobs in this country(or, sinisterly speaking, that they will more strenuously promote your ambitions)… Net result; more companies devoting more resources to lobbying Washington and less to expansion (jobs), etc…
There’s forever an evolutionary process with regard to manufacturing; involving gains in technology and the movement of production to wherever cheap/efficient labor resides… And, trust me, that’s precisely how it should be… Take Hong Kong for example: After WWII, Hong Kong quickly became an export-driven manufacturing center… During the ensuing years however, it underwent a nearly 100% transition to a service-based economy (accounts for 90% of GDP)… And today boasts one of the most robust economies on the planet…
The following sentence taken from the Economic Freedom Index (ranks #1) website’s summary of the Hong Kong economy says it all:
“Regulatory efficiency and openness to global commerce strongly support entrepreneurial dynamism, while overall macroeconomic stability minimizes uncertainty.”
I suspect regulatory inefficiency (and its attendant uncertainty) has much to do with the U.S’s anything-but-robust economy (of late), as well as its plunge from #3 to #10 on the Economic Freedom Index…