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What has been the single most important reason causing slow economic growth in the United States? If after reading this informative piece you still trust the GOP to lead us out, then you need to take the blue pill.

Ira 2011/12/12 02:30:55
Over regulation of financial infrastructure?
Too high taxes?
Neither.
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Zakaria: The real burden on the U.S. economy

By Fareed Zakaria, CNN


President Obama gave an important speech in Kansas last week. Whether you agree with all of it or not, he has begun a national conversation about the economy and the role of government. That's what this election should be about. And in presenting his view, Obama shifted the economic conversation from deficits alone to the crucial issue of growth. After all, deficits matter because they could have a harmful effect on growth.

So the question we should all ask is: What would make this economy grow? What has stopped it from growing much over the last few years - indeed over much of the last decade?

One theory heard a lot these days is that the economy is burdened by excessive government regulation, interference and taxes. Cut them, the Republican candidates all say, and the economy will be unleashed.

It's a compelling picture, but the data simply do not support it.

The Organization for Economic Cooperation and Development (OECD) released a study last week measuring tax revenue as a percentage of GDP. Of the 30 countries studied, the United States came in 27th. Taxes are low in historical terms as well - the lowest since the early 1950s.

The Kauffman Foundation, which looks at the level of U.S. entre pre neur ship, found that in 2010, 340 out of every 100,000 Americans started a business each month. That rate hasn’t changed much in the past few years; it is only slightly higher than in 2007, before the recession. Regarding regulations, Bloomberg News has crunched the numbers and found that the Obama administration has not reviewed or issued significantly more rules than its predecessors.

Or look at competitiveness. The World Bank publishes a report that looks at "Doing Business" across the globe. The U.S. ranks 4th in the world. The World Economic Forum does an annual ranking of overall economic competitiveness. The U.S. ranked fifth. In both these rankings, the countries that score higher are tiny places like Singapore and Finland, with populations often at 5% that of the United States.

And these rankings have not slipped much over the last decade. So where has there been change? Where have we slipped?

The answer is pretty clear. Only five years ago, American infrastructure used to be ranked in the top 10 by the World Economic Forum. Now we're 24th. U.S. air infrastructure has gone from 12th in the world to 31st - roads from eighth to 20th.

The drop in human capital is even greater than the drop in physical capital. The United States used to have the world's largest percentage of college graduates. We're now number 14, according to the most recent OECD data, and American students routinely rank toward the bottom of the developed world in international tests.

The situation in science education is more drastic. Even with the increase in college attendance over the past two decades, there were fewer engineering and engineering technologies graduates in 2009 (84,636) than in 1989 (85,002). Research and development spending has risen under Obama, but the basic trend has been downward for two decades. In percentage terms, the federal share of research spending - which funds basic science - is half of what it was in the 1950s.

In other words, the big shift in the United States over the past two decades is not a rise in regulations and taxation but a decline in investment - in physical and human capital. And investment is the crucial locomotive of long-term growth. In our interview, Michael Spence, the Nobel Prize-winning economist, pointed out that the United States got out of the Great Depression because of the spending associated with World War II but also because during the war, the U.S. dramatically reduced its consumption and expanded investments. People spent less; they saved more and bought war bonds. That surge in investment - by people and government - produced a generation of growth after the war.

If we want the next generation of growth, we need a similarly serious strategy of investment.


Read More: http://globalpublicsquare.blogs.cnn.com/2011/12/11...

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  • Z 2011/12/12 09:57:17
    Over regulation of financial infrastructure?
    Z
    +1
    "Or look at competitiveness. The World Bank publishes a report that looks at "Doing Business" across the globe. The U.S. ranks 4th in the world. The World Economic Forum does an annual ranking of overall economic competitiveness. The U.S. ranked fifth. In both these rankings, the countries that score higher are tiny places like Singapore and Finland, with populations often at 5% that of the United States."

    This line is one of the most important in this post. Our taxes on corporations is the highest in the world, which completely prevents any chance of a competitive market. Our infrastructure, one of the few things I think the government is responsible, is doing very poorly, and we need to start rebuilding. But Obama doesn't know how to do that, and it isn't something republicans are opposed to. Also, the Organization for Economic Cooperation and Development is about as unbiased as the heritage foundation. A better example of how our taxes is related is a study done by the IRS, which found that we actually lean on our higher income earners more than Europe, and that they pay a higher percentage of the taxes than they make of the income.

    "The Kauffman Foundation, which looks at the level of U.S. entre pre neur ship, found that in 2010, 340 out of every 100,000 Americans starte...







    "Or look at competitiveness. The World Bank publishes a report that looks at "Doing Business" across the globe. The U.S. ranks 4th in the world. The World Economic Forum does an annual ranking of overall economic competitiveness. The U.S. ranked fifth. In both these rankings, the countries that score higher are tiny places like Singapore and Finland, with populations often at 5% that of the United States."

    This line is one of the most important in this post. Our taxes on corporations is the highest in the world, which completely prevents any chance of a competitive market. Our infrastructure, one of the few things I think the government is responsible, is doing very poorly, and we need to start rebuilding. But Obama doesn't know how to do that, and it isn't something republicans are opposed to. Also, the Organization for Economic Cooperation and Development is about as unbiased as the heritage foundation. A better example of how our taxes is related is a study done by the IRS, which found that we actually lean on our higher income earners more than Europe, and that they pay a higher percentage of the taxes than they make of the income.

    "The Kauffman Foundation, which looks at the level of U.S. entre pre neur ship, found that in 2010, 340 out of every 100,000 Americans started a business each month. That rate hasn’t changed much in the past few years; it is only slightly higher than in 2007, before the recession. Regarding regulations, Bloomberg News has crunched the numbers and found that the Obama administration has not reviewed or issued significantly more rules than its predecessors."

    True, however we are in the middle of a recession, this is neither sides fault.

    "In other words, the big shift in the United States over the past two decades is not a rise in regulations and taxation but a decline in investment - in physical and human capital. And investment is the crucial locomotive of long-term growth. In our interview, Michael Spence, the Nobel Prize-winning economist, pointed out that the United States got out of the Great Depression because of the spending associated with World War II but also because during the war, the U.S. dramatically reduced its consumption and expanded investments. People spent less; they saved more and bought war bonds. That surge in investment - by people and government - produced a generation of growth after the war."

    True, however this is something we encourage by lowering taxes and creating tax breaks for those that invest in companies and create new businesses. We should also create a tax break for any company that increases its employment by 2% over the year, and keep the Payroll tax. The federal government can do almost nothing to spur growth, but they can stop hindering it, which are two different things. Regulation and high taxes hinder it. Lowering them does not actually create growth (that is an absurd assumption that the political left places on the political right, and that a few very unintelligent righties [I'm looking at you Rick Perry and Mitt Romney] believe.) but it does encourage it by removing road blocks.

    I do agree that we need to have a national conversation about this, but it needs to be one that both sides can be heard on, and our media will not allow that, our politicians will not, and most people will not be willing to look at the facts and change their opinion if the facts do not support it.
    (more)
  • Ira Z 2011/12/12 18:06:17
    Ira
    +1
    "True, however this is something we encourage by lowering taxes and creating tax breaks for those that invest in companies and create new businesses. We should also create a tax break for any company that increases its employment by 2% over the year, and keep the Payroll tax."

    How does this apply if the corporate tax rate has been stable since 1992? The only taxes to come down have been personal income and capitol gains, both great revenue sources for the government. Yet the jobs market remains flat. I do not see advancing any more tax breaks as a real solution since they are already at historical lows since the 40's.
  • Z Ira 2011/12/12 19:14:09
    Z
    +1
    Where they are has nothing to do with it. A tax cut is not something that creates constant growth, the same way that exercise does not create constant weight loss. You have to increase one to increase the other. That aside, we have had the continued crippling debt, which can not be solved by greater taxes since taxing every rich person and corporation 100% of their income would only get us about 50% through this years deficit, let alone any other time. More than that, our capital gains tax has remained the same, and yet every other developed country has lowered theirs. That is a major reason we are not seeing growth in the economy. The Clinton era boom started under Bush Sr. and was a result of the drastically lower taxes that brought us out of the Carter/Reagan recession, and was pushed further along by the removal of unimportant and stifling regulations. The Two wars, patriot act, massive defense budget, non-solvency of Medicare, medicaid and Social security, and the complete lack of competitiveness of our industrial complex makes economic growth impossible.
  • kevjon 2011/12/12 06:28:48
    Neither.
    kevjon
    +2
    This sounds like propaganda for Obama's next stimulus and re-election campaign. Under Bush Businesses were doing much better, I for one hit record sales. I will admit that under Bush in his last two years fell far to the left and encouraged government growth.
    Think about a company building more and more overhead while not investing back into the company and you have America in a nut shell. Add all the ultra negativity of Obama's entire campaign along with 3 years and you will find instability in the markets. On top of that he increased our debt by leaps and bounds while not reinvesting a dime back into our economy. Class warfare and attacks on wall street and corporate America didn't help much either. Not to say that previous leaders didn't help push us into this mess but currently we are catastrophically out of control not only with weak leadership but what seems to be deliberate acts of self destruction.
    At some point one has to set aside party and realize that if we keep drilling holes in the ship eventually it will sink and all of us will go down with it......together.
  • Matt 2011/12/12 04:35:45
    Neither.
    Matt
    +2
    The playing field was unlevel before our globalist, treasonous politicians, from BOTH parties passed "free trade" agreements. They have favored multinationals who pay little or no taxes and punished domestic entities with burdensome taxes and over regulation. Obamacare is the nail in the coffin !
  • MichaelJ 2011/12/12 02:53:37
    Neither.
    MichaelJ
    +2
    I chose neither as all of the data I'm sure can be refuted by economic reports that will show the exact opposite, That isn't even why it doesn't matter. President Obama is incapable of compromising on what is essentually a belief in socialism.

    He is a divider and that isn't what the country needs.

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