Federal Triangle: Spread The Word
Get it straight and spread the word. Political and media demigods who talk about the President being responsible for employment and economic performance are liars. Government does not create jobs. It can create environments favorable to private sector success. Holding Bill Clinton or George Bush responsible for job creation and prosperity of Everyman is an absurd notion, said by politicians and media selling social philosophy to a population too ill-informed to know the difference. Only Congress sets tax rules and spends money. So when you hear lies about jobs and how your money is collected and spent, keep it straight. You will hear talk this political season on "outsourcing" and "offshoring," mostly lies and leftist crisis mongering. Following are some facts on these issues that define American manufacturing industry competitiveness in a world economy and are relevant to at-home politics.
Whining about downsized U.S. manufacturing fortifies untruths; output grew 5.3% a year from 1992 through 2000, fell 4.1% during 2001 and 2002, then rose 6.1% in the first three quarters of 2003. While the unemployment rate held steady at 5.6% into the end of first quarter 2004 and 8.2 million people were unemployed nationally; I contend that over half are unemployable with insufficient education to hold a job. U.S. manufacturing jobs have not declined but accelerated in growth, not in traditional areas of steel or textiles but in new categories where statistics are insufficient and union advocates are not entrenched. Gross domestic product (GDP is "domestic" because it only counts value added within the U.S. after subtracting imported components, services and materials) soared 7.8% annually from 1994 to 2000, fell 6% in 2001, rose 1.8% in 2002, and by November 2003 was at its highest rate since December 1983. Rhetoric in the liberal press is that jobs were lost but in truth, loss is based on a trick of "imputing," using illogic that increases in imports result in fewer U.S. jobs. Nonsense. A decade ago it was Japan and Germany who were ogres stealing American jobs and today it is China and India. In fact, U.S. manufacturing employment has grown consistently over the last dozen years, at a rate four to twelve times greater than in Japan and Germany; job growth in China especially has been at the expense of yesterday's ogres, not America.
An important reason that American industry is not in jeopardy is that the U.S. is a leader in unit labor cost, where U.S. hourly compensation rose 41% in the 1992 to 2002 period but labor costs fell by 7.2% due to productivity increase of 51.9%. Productivity in China and India is so low (< 3% compared to the U.S.) that it makes economic sense to do some work there instead of here, certainly not most work. So if China has pushed U.S. workers into lower paying jobs, why has manufacturing real compensation risen from 99.4 in 1995 to 113.4 by third quarter 2003? The U.S. is still the world's largest exporter. Further, U.S. foreign direct investment in China is small (9.9% of their total) and mostly directed to the services sector.
What causes structural problems that have led to "offshoring" has been studied by MAPI as sponsored by National Association of Manufacturers. Domestically imposed costs by federal, state and local governments damages manufacturing more than any foreign competition, adding 22.4% to cost of doing business, distorting that U.S. unit labor cost (defined as the ratio of employee wage compensation to value added) almost to a point where productivity improvements that can be implemented will not be enough; it actually declined 0.1% in the period 1990 through 2002. These external overhead costs are almost as large as total manufacturing cost in China and encompass corporate taxes, fringe benefits, cost for regulatory compliance and rising energy cost. These government imposed or mandated costs are the sole reasons why American industry goes offshore and anybody who claims "Benedict Arnold" is a self serving liar.
- U.S. corporate tax rates are 40%, allowing 35% for federal plus 5% state and local, the highest in the industrial world (except Japan at 42%). Even China has an 18% private business tax rate but will soon consolidate to a 25% rate across the board. Use "effective tax rates" and results do not change significantly.
- Benefits are 20.6% of total U.S. earned income and only France, Germany and South Korea exceed America among industrial nations in this category of worker largess. Businesses now pay 73% of U.S. family coverage policies.
- Costs for the U.S. industrial tort process was $205 billion in 2001 or over 2% of GDP. U.S. manufacturer's outlay for regulatory costs in 1997 was $147 billion or $7,904 per manufacturing employee.
- Since U.S. industry meets 85% of (gas) energy consumption via domestic production (and 40% of total energy use) it bears the brunt of politically motivated limitations on new source development - which contributes to that jobs problem.
How does a nation get its industrial backbone to lobby and overcome a tidal wave of ignorance to help itself? Reader... you tell me. IH