Job-killing mad­ness

Chas­ing for­eign in­vest­ment out of the U.S. is

The Washington Times Daily - - Opinion - By Richard W. Rahn

Most peo­ple in­tu­itively un­der­stand that job cre­ation re­quires cap­i­tal in­vest­ment, but many in the Obama ad­min­is­tra­tion and in Congress seem to have missed this ba­sic fact of eco­nomic life. As the late Jack Kemp used to say, “How many truck driv­ers would you have if no­body had money to buy trucks?” There are nu­mer­ous stud­ies that try to mea­sure the cost of the av­er­age job, but a fig­ure of $225,000 on av­er­age is in the ball­park.

There has been much dis­cus­sion in the press about all of the new jobkilling en­vi­ron­men­tal reg­u­la­tions com­ing out of the ad­min­is­tra­tion, such as the re­stric­tions on coal plants and oil and gas drilling. The press has been less fo­cused on the job killing that stems from all of the new fi­nan­cial reg­u­la­tions, which may end up elim­i­nat­ing tens of mil­lions of jobs. An ex­ag­ger­a­tion you may say, but think about the fol­low­ing: The Dodd-frank bank reg­u­la­tion bill was more than 2,000 pages long, with tens of thou­sands of im­pend­ing reg­u­la­tions in the pipe­line.

As­sume for mo­ment you are the head of a small com­mu­nity bank. You have two-dozen em­ploy­ees. The gov­ern­ment then sends you many thou­sands of pages of new reg­u­la­tions. Who in your bank is go­ing to be able to read and un­der­stand all of this and then set up the pro­ce­dures for com­ply­ing with all the new reg­u­la­tions? The gov­ern­ment says hire lawyers and ac­coun­tants to give the nec­es­sary in­for­ma­tion and set up the com­pli­ance sys­tems. But lawyers and ac­coun­tants are very ex­pen­sive, and your bank may not be able to af­ford them and still make a profit. So the bank is left with the choice of go­ing out of busi­ness or sell­ing out to a larger bank. This, in turn, leads to more con­cen­tra­tion and less com­pe­ti­tion in the bank­ing in­dus­try and adds to the prob­lem of “too big to fail.” As the costs of reg­u­la­tion grow, banks are forced to charge higher and higher fees in or­der to stay in busi­ness, and they make fewer loans, which means fewer trucks and truck driv­ers, and less of ev­ery­thing else, in­clud­ing jobs.

But it only gets worse. In a mind­lessly stupid at­tempt to try to get a few bil­lion more dol­lars in tax rev­enue, the gov­ern­ment has put a large share of for­eign in­vest­ment that comes into the U.S. and mil­lions of the re­sult­ing jobs at risk. The new rules (in­clud­ing the For­eign Ac­counts Tax Com­pli­ance Act) are so vague, com­plex and costly to ad­min­is­ter that for­eign fi­nan­cial in­sti­tu­tions are ceas­ing to al­low Amer­i­cans to open ac­counts and are re­fus­ing to in­vest in the United States. Amer­i­cans liv­ing abroad are par­tic­u­larly hard hit and have come to­gether un­der a vol­un­teer or­ga­ni­za­tion, Amer­i­can Cit­i­zens Abroad, which cor­rectly notes: “For­eign in­vest­ment in the U.S. amounts to $21 tril­lion, and $11 tril­lion of this is in­vested in U.S. se­cu­ri­ties. A KPMG sur­vey in­di­cates only 36 per­cent of fi­nan­cial in­sti­tu­tions will com­ply with [the tax com­pli­ance act], leav­ing 64 per­cent still con­sid­er­ing di­vest­ing out of U.S. se­cu­ri­ties. If even a frac­tion of those for­eign in­vestors di­vest, the loss to the U.S. would be in the tril­lions of dol­lars. This, at a time when the U.S. econ­omy des­per­ately needs more for­eign in­vest­ment, not less.”

As a rough rule of thumb, each $1 tril­lion of in­vest­ment might well ac­count for 5 mil­lion new jobs. Most coun­tries, in­clud­ing the United States in the past, do ev­ery­thing they can to at­tract for­eign in­vest­ment. But now the folks at the Jus­tice Depart­ment and the In­ter­nal Rev­enue Ser­vice are do­ing ev­ery­thing they can to drive for­eign in­vest­ment out of the U.S. For in­stance, the Jus­tice Depart­ment is at­tack­ing banks in Switzer­land where some of their Amer­i­can clients are ac­cused of not declar­ing all of their in­come. Rather than fo­cus­ing on the tax­pay­ers who may not have paid the tax due, Jus­tice de­cided to go af­ter the for­eign banks and their ex­ec­u­tives with both civil and crim­i­nal charges — even though these banks were to­tally com­pli­ant with their own coun­try’s laws and have no U.S op­er­a­tions. As a re­sult, for­eign fi­nan­cial in­sti­tu­tions are in­creas­ingly fear­ful of hav­ing any­thing to do with the United States, in­clud­ing in­vest­ing.

Ex­tend­ing U.S. law to for­eign coun­tries and in­sti­tu­tions is dan­ger­ous be­cause it puts all U.S. cit­i­zens and busi­nesses at risk. For­eign gov­ern­ments can now ar­gue that their laws should ap­ply in the United States. If some­one pub­lishes an ar­ti­cle or car­toon in the U.S. that a Mus­lim gov­ern­ment finds of­fen­sive, should that gov­ern­ment be able to ar­rest that per­son in this coun­try or when that per­son trav­els out­side the U.S.? If a for­eign vis­i­tor from a coun­try with strict gun laws legally pur­chases a gun in the United States but does not take it back to his home coun­try, should his coun­try be able to ar­rest him and the U.S. re­tailer who sold the gun? The point is that sov­er­eign coun­tries quite rightly have dif­fer­ent laws, in­clud­ing tax and bank­ing laws. If the U.S. con­tin­ues to try to ex­tend our laws be­yond our borders, we are ask­ing for trou­ble. It is al­ready caus­ing great re­sent­ment to­ward the United States and will re­sult in mil­lions of lost jobs.

The For­eign Ac­counts Tax Com­pli­ance Act and re­lated reg­u­la­tions are passed, pro­mul­gated and im­ple­mented by de­struc­tive, small-minded peo­ple who can­not think be­yond Stage One and have lit­tle ap­pre­ci­a­tion for eco­nomic lib­erty, op­por­tu­nity and growth. Their ac­tions are caus­ing all of the rest of us to suf­fer.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.