• Font Size
  • A
  • A
  • A
Print Images Print

On Monday, Bret Stephens wrote an article in the Wall Street Journal called “Doomed to Stagnate.” The article was predicated on a little-known annual survey by the World Bank known as “Doing Business,” a document that ranks the business climate of nearly every nation around the world.

Most Americans might expect the largest capitalist economy in the world, the United States, to lead the pack — but they’d be wrong. In fact, most Americans might be surprised to learn that not only are we not on top, but we have become less economically competitive in the world since Obama took office.  

How bad has it become in the U.S? Stephens writes,

When President Obama took office in 2009, the U.S. ranked third in the overall index, just behind Singapore and New Zealand. It has since fallen to eighth place. Eight years ago, 40 days were needed to get a construction permit. Now it’s 81. When President Bush left office, it took 300 days to enforce a contract. Today: 420. As for registering property, the cost has nearly quintupled since 2009, to 2.4 percent of property value from 0.5 percent.

When you look at the data compiled by the World Bank, the cause for this trend is obvious: the rest of the world is improving the ease of doing business through regulatory and tax reform, while the U.S. is moving in the opposite direction.

To figure out what was at the heart of the problem for American businesses, Stephens explored the issues faced by various industries. The problems, he was told, are all too familiar: Sarbanes-Oxley’s auditing requirement is punishingly expensive. The new Wall Street law, the Dodd-Frank Reform Act, has been a regulatory nightmare; and the Obamacare employer mandate hasn’t made the cost of doing business much easier, either. The list goes on.

Although the United States remains among the top 10 countries regarding ease of doing business, various indicators suggest a more dire picture. For example, the U.S. pathetically ranks 51st in the world when it comes to ease of starting a business, and 36th in the world when it comes to the burden of business taxes.

Let’s be honest, when the country of Mongolia has a simpler and fairer tax code, perhaps it’s time to take tax reform a bit more seriously.

The byzantine U.S. tax code is not just a web of complexity and confusion, but the overall tax burden — or the overall corporate tax rate — is one of the highest in the developed world. With a top corporate income tax rate of 39.1 percent, the U.S. is well above most countries in Europe; According to the Tax Foundation, the U.S. tax rate is higher than that of our largest trading partners — Canada, Japan, and the United Kingdom.

In fact, the average tax rate of countries that make up the Organization for Economic Cooperation and Development (OECD) is only 25 percent.  And we wonder why American businesses are interested in leaving our shores…

But although the U.S. is losing the battle to offer a competitive tax code, the World Bank’s assessment includes much more than just taxes; it looks at the entire regulatory regime. The U.S., in particular, is home to one of the most costly regulatory environments in the world, costing the economy over $2 trillion per year, according to the National Association of Manufacturers.  That equates to a cost of nearly $10,000 for every employee in the U.S.

Overall, the World Bank assessment proves just how important it was to elect a Republican president. 

And as Stephens points out, the problem has only increased under Obama.

A Heritage Foundation study found that since Obama was elected to office, his administration has added 229 major federal regulations with an added annual cost of more than $108 billion per year.

Sure, the cost of some regulations is necessary. But a federal regulatory of bureaucracy of more than 175,000 pages is certain to be excessive, and many of these de facto laws designed by unelected bureaucrats are often nonsense.

Take for example, the Occupational Safety and Health Administration (OSHA), a regulatory agency with authority over more than eight million businesses. In 2009, the agency decided to issue a regulation to adopt the United Nation’s 2003 Globally Harmonized System of Classification and Labeling of Chemicals (GHS). The change forced companies to relabel and reclassify products at a cost of more than $2.1 billion.

It gets worse.

Charles Murray highlights other absurd regulations in a Wall Street Journal article titled, “Regulation Run Amok — And How to Fight Back.” He writes,

But too often a sensible idea behind a set of regulations – for example, that exposed stairway floor openings with precipitous drops should have railings – is made ridiculous by their detail: If said railings are not 42 inches high, you can be fined, as per OSHA regulation 1910.23(e)(3)(v)(a).

Overall, the World Bank assessment proves just how important it was to elect a Republican president. After all, we know Clinton would have simply expanded on the tax and regulatory calamity that has taken place under Obama. But the report is also useful as a guide for the Trump Administration; it is obvious —  and Trump understands this well — that the tax code needs to be reformed, and the regulatory system needs to be checked. If Trump can whittle away at these barriers that prevent a healthy business environment, then not only will Trump make American Great Again — but he’ll also make American businesses great again too.

Don’t Miss:

Ideas Factory with John Gray