President Barack Obama touted a message of economic nationalism in his State of the Union address on Tuesday night, promising to rebuild American manufacturing and suggesting that it’s only because of other countries’ unfair trade practices that the United States suffer.
“Our workers are the most productive on Earth,” said the president, “and if the playing field is level, I promise you, America will always win.”
The playing field isn’t level and hasn’t been level in decades. America has, in part, itself to blame yet the president defended the most blatant of government interventions of recent years when he touted the success of the 2008 bailouts of Chrysler and General Motors.
The Detroit automakers are flourishing anew and the president said their revival could be mirrored in other cities. “It can happen in Cleveland and Pittsburgh and Raleigh,” he said, referring to cities in Rust Belt states that used to employ tens of thousands in factories but have seen many jobs outsourced to Asia and Mexico over the course of the last two decades.
“We can’t bring every job back that’s left our shore,” he admitted but with labor costs rising in China, the United States “have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it,” the president said.
We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it. So let’s change it.
The president didn’t advocate a lower corporate tax rate which, at 35 percent, is among the highest in the developed world, second only to Japan’s. Rather, he would raise taxes on businesses that want to outsource jobs. “That money should be used to cover moving expenses for companies […] that decide to bring jobs home.”
Multinational companies that are able to avoid paying a high tax rate by “moving jobs and profits overseas” should pay a basic minimum tax, said the president. Manufacturing companies should get a tax cut instead.
It is time to stop rewarding businesses that ship jobs overseas and start rewarding companies that create jobs right here in America.
If that isn’t the government picking winners and losers and deciding what the “playing field” should look like, what is?
The president doesn’t merely want to reward companies that follow his orders; he wants to help them with small business loans, programs that retrain workers and trade sanctions “when our competitors don’t play by the rules.” That’s China which (also) subsidizes its domestic industries and manipulates the value of its currency to keep exports cheap.
To crack down on “unfair” Chinese trade practices, the president announced the creation of a Trade Enforcement Unit to carry out “more inspections to prevent counterfeit or unsafe goods from crossing our borders.”
When it’s American companies that have an unfair advantage in the form of bailouts or subsidies or tax breaks, or when it’s American companies that “steal” other countries’ jobs by moving production back home, the president welcomed it though, promising to “go anywhere in the world to open new markets for American products.” He even took credit for trade agreements that were negotiated by his predecessor and took him more than two years to enact.
Tuesday’s State of the Union wasn’t a message of free trade. It wasn’t a message of America adjusting to the challenges of globalization nor of a country preparing to lead the world economy in the twenty-first century. It was a message of economic nationalism where the success of one nation necessarily comes at the expense of another and where government intervenes with trade barriers and bureaucratic obstructionism to protect domestic manufacturers from competition overseas. That’s not how America wins the future.