are uncompetitive but because of misguided government regulations.
Most people assume that foreign manufacturers’ biggest advantage is cheap labor. A study sponsored by the National Association of Manufacturers in 2003 attempted to quantify the competitive disadvantage of U.S. manufacturers against their top five competitors. The study considered all the major costs, including labor, energy, raw materials, taxes, regulations, and litigation. It determined that U.S. manufacturers had a 22 percent cost disadvantage excluding labor costs. 8 High wages are not costing us jobs. We’re losing jobs because of high corporate tax rates, excessive regulatory burdens, and other anti-business policies coming from Washington.
Our single largest disadvantage is our corporate tax rate, the highest in the industrialized world. It’s so high that even President Obama has considered trimming it. So let’s reduce the corporate tax to a flat rate of 20 percent with no fancy deductions, no loopholes—just a 20 percent net income tax. But reducing taxes isn’t enough; to create a boom in manufacturing jobs in the United States, we should eliminate the corporate tax for manufacturers. That will attract investmentcapital to American manufacturing plants, and capital creates jobs. If we could do only one thing to make our manufacturers more competitive, eliminating the corporate tax would be it.
Next should be regulatory reform. I have had small manufacturers from Missouri Valley, Iowa, to Tampa, Florida, tell me that the burden has gotten dramatically worse during the Obama years. The attitude of state and federal regulators is “We know best how to run your business.” The burden is particularly heavy for small businesses, which create the most manufacturing jobs. Large corporations have compliance departments that can handle these regulations, but many small businesses find it nearly impossible. Many actually shut down because they can’t bear the cost of compliance. In America, you shouldn’t need an army of lawyers just so you can run a small manufacturing business. But that’s what happens when we surrender power to the government and let it expand beyond its justifiable duty to set up and referee the ground rules that protect customers, employees, shareholders, and competition.
In its first two years, the Obama administration imposed seventy-five major regulations that cost businesses more than $38 billion. To that cost is added the additional taxpayer cost of paying for the ever-increasing army of regulators. It’s time that regulations were subject to a serious cost-benefit analysis. For example, a new regulation from the Environmental Protection Agency on emissions from commercial boilers is estimatedto add $1.8 billion in new annual compliance costs to companies and a one-time implementation fee of $5.2 billion—with negligible benefits. 9 Tell me: What’s the point of that, except to use the power of regulation to destroy private business?
This is not an uncommon situation. In pursuit of minuscule health benefits, the Obama administration has heaped enormous costs on manufacturers. Everyone loses. American plants can’t comply with all these new standards and still make a profit, so they close. We lose jobs and tax revenue, and government will likely have to pay unemployment and other benefits to laid-off workers, whose communities and families will suffer. And as for the environmental benefit—there is none. Because these products are now being made in countries with lax environmental laws and the goods will have to be transported long distances back to the United States, there will actually be more harmful pollutants released. This is insanity! We need to analyze real costs and real benefits, tailoring the regulations to minimize costs for the maximum achievable benefits.
Over the years, American manufacturers have opened up factories all over the world for a variety of different reasons. Some factories were opened
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