Among certain folks it is received wisdom that businesses have been going overseas because the United States (and other Western countries) imposes onerous taxes and environmental regulations. Some folks even note that American workers are paid more than workers in certain other countries, such as China.
To remedy this problem a standard proposal (endorsed, for example, by Michelle Bachmann) is to lower taxes and reduce (or eliminate) regulations. Politicians, including Bachmann, generally do not talk about lowering American wages. After all, “if I am elected I will see to it that you make less money” is hardly winning rhetoric. In contrast, claiming that Americans are losing jobs to other countries because “the government” is driving away companies with regulations and taxes is a smart approach from a rhetorical standpoint. After all, Americans tend to think poorly of their government (which is made up, ironically, of people we picked) and Americans often look at taxes and regulations in a negative light, seeing them as impositions on freedom.
This proposal does, obviously enough, have some merit. If corporations could get the same conditions here that they enjoy elsewhere, they would probably be more inclined to stay here. It is, however, important to dig a bit deeper here.
In general, it would seem that corporation are not sending jobs overseas because they would go out of business if these jobs remained here. After all, there are business that do quite well despite operating entirely or largely in the United States. This is hardly shocking since corporations are generally adept at reducing their taxes (see, for example, GE) and circumventing even the rather limited regulations that exist (see, for example, how “constrained” coal mining companies are in West Virginia). While they do have to pay a minimum wage, this wage is fairly, well, minimum.
The main reason that corporations go overseas would not seem to be survival or even because they cannot make a profit in the United States. Rather, they go overseas because they think they can make even more of a profit than they can here. Given that some other countries have lower taxes, laxer regulations and far lower wages, it is easy to see why other countries can be more appealing. However, it is important to note that these corporations re not having their jobs forcible driven from the United States. Rather, the decision makers are electing to send jobs overseas so as to increase profits. While this might seem to be a minor point, it is actually rather significant.
To use an analogy, imagine that Bill is telling a sob story about how he was “driven out” by his wife, Sally, cruelly limiting his freedom and now he is “forced” to hang out with a girlfriend because she allows him to do what he wants. You ask Bill about her cruelty and he lists her crimes: she made him pay some of the household bills, she would not let him dump the oil from his truck in the flower garden, she made him pay for some of the expenses relating to the children and so on. Inquiring about his new girlfriend, you learn that she lets him dump his truck oil in her yard and while she does expect some gifts, he doesn’t have to do anything for her kids and so on. In this case, one should be inclined to think that Bill was not driven out. Rather, he chose to leave because he wanted to get away with more and do less. Now imagine that Bill’s buddy Sam goes to Sally and says that Bill will come back if she stops “taxing and regulating” him. Otherwise, Sam says, Bill will have no choice but to stay with his current girlfriend (at least until she wises up and “drives him away”). Sally, it would seem, would be foolish to take Bill back under those conditions. After all, he just wants to get away with things at her expense while pretending that it is her fault. The same would seem to apply to corporations.
In essence, corporations and their allies who argue that taxes must be lowered and regulations reduced so that jobs will remain here (or return) are arguing that the rest of us need to bear the cost of ensuring that corporations get the profits that they want. After all, if corporations pay less taxes then the rest of us need to pay more to make up for that shortfall. Alternatively, there would have to be spending cuts-and it is rather obvious who would bear the burden of those cuts. Also, if the regulations are reduced (Bachmann wants to eliminate the EPA, for example), then the rest of us would be harmed by what those regulations were intended to prevent. For example, allowing more pollution means that we would probably suffer more health problems and would thus be paying more in medical expenses. To preempt a possible attack, I am not saying that all taxes are fair or that all regulations are good. Rather, my view is that corporations (like Sally’s husband) should contribute to the society in which they exist (and benefit from) and that at least some regulations do protect us from harms.
In sum, the proposals to lower taxes and reduce regulations so as to keep jobs here seems to be largely an attempt to shift costs to the rest of us so that corporations can make more profits. I have no objections against corporations making money. I do, however, object against being forced to bear the costs of their profits. They need to carry their own weight and act in responsible ways. That is, pay taxes and live within the laws as the rest of us do.
But maybe there is some merit to this approach and I should give it a try: “Buy my latest book or I’ll be forced to go to some other country.”