Is America still the land of economic freedom?
The race for the White House in 2012 has boiled down to a single issue. The economy.
That includes a lot of ramifications: Consistent high unemployment, failed job growth, a rising tide of poverty, increased dependence on government “entitlements” and a diminishing middle class.
Both President Obama and challenger Mitt Romney swear they’ll help to pull the middle class out of its financial peril. Many hope Romney will become the new president in 2012. Others want to stick with Obama despite his unfulfilled promises.
It is ironic that Obama would classify the economy as “fine” in one speech, yet said in a “60 Minutes” interview that the nation lost nine million jobs during the recession, but he has only replaced about 4.5 million.
That, Mr. President, is not an economy that is fine, and he has no definitive steps to improve it. So, in the meantime, empty storefronts remain empty; small business owners keep their finances close to the vest as they face an uncertain future and job opportunities remain few. Hundreds of thousands of unemployed people have just given up.
This isn’t just a personal and unsupported opinion. Economist Tim Kane, in a study by Hudson Institute, said few startup companies are launching in this troubled time. “Job creation at new firms was at an all-time low in 2009 of 2.8 million, then fell again a year later by 250,000 jobs,” wrote Kane.
He concludes that “entrepreneurs are having a harder time starting a company today than at any time since the government began collecting data.”
What makes this recovery different for startups? Kane thinks it’s an environment more “hostile to entrepreneurial employment.” He writes:
“At the federal level, high taxes and higher uncertainty about taxes are undoubtedly inhibiting entrepreneurship, but to what degree is unknown.”
“The dominant factor may be new regulations on labor. The passage of the Affordable Care Act is creating a sweeping alteration of the regulatory environment that directly changes how employers engage their workforces, and it will be some time until those changes are understood by employers or scholars.”
Separately, he said, there has been a federal crackdown since 2009 by the Internal Revenue Service on U.S. employers that hire U.S. workers as independent contractors rather than employees, raising the question of mandatory benefits. New firms tend to use part-time and contract staffing rather than full-time employees during the startup stage.
According to Labor Department data, Kane said, the typical American today only takes home 70 percent of compensation as pay, while the rest is absorbed by the spiraling cost of benefits (e.g., health insurance). The dilemma for U.S. policy is that an American entrepreneur has zero tax or regulatory burden when hiring a consultant/contractor who resides abroad. But that same employer is subject to paperwork, taxation, and possible IRS harassment if employing U.S.-based contractors.
Some of those fears are reflected in the most-recent U.S. Chamber Small Business Outlook Survey that found that 72 percent think the health care law will make it harder to hire more people.
Based on these data, it appears America is on its way to becoming a European-style socialist nation, with the government as the kingpin. President Obama seems bent on bringing socialism to US shores. He boasted in his “60 Minutes” speech that he saved General Motors as well as the banks. What he didn’t say is that the US Government invested billions to prop them up, and GM still owes plenty, meaning Obama is actually the automaker’s “owner.”
As to the banks, they took the money, gave a big chunk to its executives as bonuses, yet still hold back cash intended for new mortgages. This is a bailout that certainly favored the banks and slapped consumers in the face.
Even now, the president is sending billions in assistance to nations like Libya and Egypt; nations that have allowed protestors to wreck US embassies and kill American personnel.
Where is America now? An “Economic Freedom of the World (EFW)” report published by Canada’s Fraser Institute and the Cato Institute says the United States ranks 18th in the global marketplace. The country is just behind Denmark and Qatar and ahead of Kuwait.
Economists James Gwartney, Robert Lawson, and Joshua Hall write that studies using this data have concluded “that countries with institutions and policies more consistent with economic freedom have higher investment rates, more rapid economic growth, higher income levels and more rapid reductions in poverty rates.”
This report is another indication that the U.S. is falling behind globally. It is clear that whoever is in the White House after the November election must unleash free enterprise to make the US more competitive, improve economic growth and create more jobs.
