January 29, 1987

January 29, 1987 | Backgrounder on Energy and Environment

The Secret of Increased Competitiveness: Higher Productivity


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561 January 29, 1987 I HE I SECRET OF INCREASED COMPETITIVENESS HIGHER PRODU CTIVI~Y INTRODUCTION The buzzword for today is "competitiveness American businesses are unable to hold their own against foreign firms, the argument goes because they have lost their competitive edge. For this reason, it is said, U.S. exports are flat, wh ile imports take a growing share of the U.S. market.

Interest in U.S. competitiveness is not new. In December 1984 the President's Commission On Industrial Competitiveness, chaired by Hewlett-Packard Prfsident John A. Young, issued the two volume report Gl obal ComDetition and several supplements that focused on productivity and entrepreneurship. These reports, largely ignored at the time of their release, are now.receiv.ing considerable public attention Manufacturers, Young has created a Council On Competi t iveness to further the Commission's recommendations. Another group looking into this is the Congressional Caucus On Competitiveness, a bipartisan group that includes Senator John Chafee, the Rhode Island Republican and Senator Max Baucus, the Montana Demo c rat. Competitiveness also is high on the agenda of the Democratic Leadership Council, a group that In conjunction with the National Association of 1. Global Comoetition: The New Realitv. Volumes I and 11, The Report of the President's Commission on Indust r ial Competitiveness (Washington, D.C.: U.S. Government Printing Office, January 1985). Also see supplements: Edward V. Regan and Bruno J. Mauer International, December 1984) and Regan and Mauer, Entrebreneursh io and Its Imoact o n the U.S. Economv (Cente r for Entrepreneurial Studies at New York University, December 1984. co-chairs h v (SRI 1includes former Virginia governor Charles Robb, Florida Senator Lawton Chiles, and Missour'i Representative Richard Gephardt.

Despite the growing faschation with competitiveness, there is much confusion concerning the meaning of the concept economy is not simply one'that outsells its foreign competitors in various manufactured products. The objective of a competitive economy and of U.S. economic policy in general should be to secure a rising standard of living for all Americans, the most possible choices for consumers, and maximum employment opportunities. If a proposed policy meant to increase America's competitiveness is detrim ental to these goals, it should be rejected as contrary to the national interest.

The only way to reach these goals is by increasing American productivity A competitive Many mistakenly see a trade deficit and an increased number of service jobs as signs of slipping competitiveness. In fact, neither trend necessarily indicates weakness. Admittedly, over the last several decades, productivity has grown more slowly,in America than in most other countries. And various industries, such as autos and steel, have been slow to modernize. Foreign firms, producing for less cost, now compete successfully in markets once dominated by U.S goods.

But in recent years this disturbing trend has begun to reverse.

Partly because of the challenge of foreign competition as well as tax cuts and deregulation, overall U.S. productivity is rising as many U.S. firms cut their costs of production. Even without government action, this improvement in productivity probably will continue. Yet an understanding of the various factors that h ave hindered U.S productivity growth in the past can help national leaders formulate policies that.would hasten this trend and avoid policies that would reverse it Labor-management relations, for instance, often have been contentious, in the long run harm ing both labor and business.

Excessive wage demands have undermined productivity in many sectors.

Business is also to blame. Many U.S. firms have been shortsighted complacent, and too inattentive to the improvements in marketing and technology needed to m aintain a competitive edge regulations and tax policies often have fostered and reinforced these bad habits, discouraging innovation while driving up the cost of doing business nothing to change the basics of American competitiveness policies would be cou n terproductive actions, however, that would be helpful. First, labor laws that prohibit certain kinds of labor-management cooperation should be repealed. Second, business deregulation should should be accelerated. For example, antitrust laws that prohibit A merican And government I Trade protectionism and national industrial planning will do There are federal government Such I 2business cooperation in the face of foreign !competition should be repealed federal spending to free up funds for productive uses, a nd by eliminating the double taxation of corporations And third, the cost of capital should be lowered by cutting WHAT IS COMPETITIVENESS?

Although the subject of much public discussion, the terra competitiveness is not readily understood., It is often def ined too narrowly, simply as the ability of particular U.S. goods to sell in the market when competing with foreign goods important aspect of competitiveness, any reform suggested to aid American businesses through improved competitiveness must be judged in terms of the three ultimate goals of U.S. economic policy.

First, as the Young Commission on Industrial Competitiveness notes Competitiveness means a high standard of living and growing wealth With a competitive economy, Americans are able to purchase m ore in real terms with their money, and purchasing power is on the rise. Policies that might help certain industries but lower the overall American standard of living only weaken the economy While this is an Second, a competitive economy produces a compar a tively wide choice of goods and services to satisfy consumer demands variety is available, such as a very broad selection of automobiles or refrigerators. The quality and durability of goods increases to meet consumer demands. New products, such as video c assette recorders or home computers, quickly become available at prices that many consumers can afford. And new services, be they 24-hour automatic banking services or advanced medical techniques for organ transplants expand consumer choice and the qualit y of life increasing levels of employment at increasing real wage levels. Some people mistakenly see high wages as a competitive disadvantage for the U.S. But in fact, wages ;in the U.S. traditionally have been high because American business'has been very p roductive, in that it has employed American labor more efficiently than have businesses in other countries productivity gains might put some industries at a disadvantage compared with firms that spend more money on capital improvements, in a competitive e c onomy, labor is in strong demand, and workers enjoy high living standards. Thus, policies that rsavell jobs in certain industries but sacrifice far more jobs in the rest of the economy defeat a major U.S. economic goal status must be judged in terms of th e se thre'e goals: to increase the standard of living for Americans, to lead to; expanded consumer More 1 I Third, a competitive' economy offers more job opportunities and While wage increases that are out of proportion with Any policy recommendation meant t o impqove America's competitive i -3choices, and to increase employment opportunities. These goals can be met in a number of ways. First, and most important, businesses and industries can improve their productivity, that is, produce more goods and service s at less cost. More efficient production techniques can be achieved through the introduction of new technology better methods of industrial organization, cheaper sources of capital goods, or more efficient labor. These steps lower the costs of goods and s e rvices and boost quality. Second inventions bring new products on the market for consumers and increase manufacturing efficiency. Third the quick and efficient reallocation of capital and labor helps meet changing consumer and business needs at the lowest cost and in the most timely manner.

FALLACIES ABOUT U.S. COMPETITIVENESS Competitiveness and the Trade Deficit Much of the attention focused on competitiveness centers on the trade deficit indicate that U.S. businesses cannot sell their products overseas and cannot compete with foreign imports. Yet the trade deficit does not of itself, mean that the U.S. economy is becoming less competitive.

Steps designed to reduce the trade deficit artificially, such as protectionism or export slibsidies, will do nothin g to improve competitiveness mainly of U.S. economic strengths, including a high growth rate rising employment, and the promising future of the U.S. economy compared with other world economies. During periods of economic expansion, a country often attract s more imports, which often produces trade deficits. During the Depression of the 1930s, by contrast, the U.S. ran a trade surplus. Further, a strong economy attracts foreign capital, which among other things, makes it easier to purchase imports. A trade d e ficit, in other words is not a sign of competitive weakness, as such Many policy makers believe that trade deficits The recent high value of the dollar was a result U.S. Share of International Trade Many policy makers also assume a country's competitive p o sition is linked to the percentage of world exports] the country's industries supply. Yet America's share of world exports is not a good indicator of its competitive status. After World War :II, the U.S. stood alone as the great global exporFing manufactu r er while other-industrial nations were rebuilding kheir economies. It' was to be expected that as other countries began 0 produce and trade, the U.S. share of world trade would decrease. But as total world trade expanded in absolute volume, U.S. exports i n real terms also continued to expand. The entry of new producers into the world market was not a threat to American prosperity. Quite the contrary. Increased production meant that foreigners had more to offer in exchange for U.S. goods, and I 4American co nsumers benefited from the availability of new, imported foreign products.

The U.S. share of world manufacturing trade in fact has declined very slowly in the past two decades, dropping from 14.8 percent in 1962 to 12.3 percent in 19

82. The U.S. is still a world leader in many exports, such as aerospace products, computer systems, office equipment, and food. During the same period, the share of world exports produced by the major European countries fell from 44.5 percent to 40.7 percent, while Japan's2sh are of manufacturing exports rose from 5.6 percent to 12.2 percent.

Admittedly U.S. exports in constant dollar terms have been weak over the last few years recessionary slump from $201.8 billion in 1983 to $21gJ9 billion in 19

84. But in 1985, exports slipped to $214.4 billion. The 1986 figure is likely to be only slightly higher than that. Yet these stagnant exports have been caused in large part by the previous high value of the dollar againpt other major currencies and by th e slow growth rates in other countries. Low growth in foreign countries means less demand for U.S. goods. The continuing debt crisis in Latin America has robbed the U.S. of an especially important market necessary to look more closely at U.S. industry to d e termine whether U.S. competitiveness problems have contributed to the export problems I I Merchandise exports rose out of the It is Import Penetration Import penetration is offered by some as a sign of a country's competitive standing. It is assumed that, if a larger share of a country's goods are purchased abroad, that country must be growing less competitive. This is questionable. If American businesses acquire such capital goods and production materials as steel, lumber or computer chips more cheaply fr o m overseas they can produce goods for less and offer their goods and services at lower prices to Americans and to overseas.customers. And ifiU.S. consumers can purchase less expensive foreign goods, American capital and labor are freed for the production o f other goods and services, meaning a higher standard of living for Americans can mean greater productivity, prosperity, employment, and competitiveness Thus increased import penetration 2. U.S. International ComDetitiveness: PerceDtion and Realitv (New Y o rk: New York Stock Exchange, Office of Economic Research, August 1984 p. 12 3. Joint Economic Committee, Economic Indica tors. December 1986 (Washington, D.C U.S Government Printing Office, 1986 p 36. Calculation includes civilian and non-civilian employe e s I 5Manufacturinu versus Service Jobs Job creation in the U.S. in recent years has been stronger than in any other developed country. Since 1981 the U.S. economy has generated 10 million net new jobs employment level has increased by nearly 25 pillion. D u ring this same period, the European Community created no net new jobs are in the service sector, the U.S. is slipping in competitive status. They fear that employment will grow only because Americans once working at high paying jobs in auto or steel plant s are forced to work at low-wage service jobs, such as retailing and since 1975 tQe real Some policy makers contend that, because many of these new jobs The service sector includes a wide variety of jobs, from hamburger stand employees to lawyers service s e ctor jobs, such as computer technicians and software specialists, accountants, and health care workers. Further, as services become a more important part of the employment picture, wages and real purchasing power) in this sector will increase. And already , wages in some manufacturing jobs have declined. For example wages for many steel workers, kept artificially high in the 1970s due to trade barriers, are going down 1 Because a great proportion of new jobs are in services, certain areas of the service sec t or might appear to have lower wages because new workers in any sector begin at lower rates. Over time, salaries in these areas of the service sector should 'improve sector also includes the majority of part-time workers, such as teenagers working after sb h ool or mothers with children. These factors make wages in the] service sector as a whole appear lower than in manufacturing, which has fewer part-time workers. But for year-round, full-time service sector workers, the average annual salary in 1984 was $21 , 731, comparedswith $22,184 for all industries and $23,668 for manufacturing firms There are many higher paying The service It is also said that a service-oriented U.S. economy could pose serious trade problems. To purchase goods from abroad, Americans mus t offer something in exchange. Some critics fear that increased exports of such services as banking, accounting, marketing, and data processing will not make up for losses in manufacturing exports; they 4. Ibid p. 11. i 5. Council of Economic Advisers, Eco n omic ReDort of the Prehdent (Washington, D.C U.S. Government Printing Office, sebruary 1986), Table B-31, pp. 288-289 6. Lynn E. Brown Taking In Each, Other's Laundry--The Service Economy, New Enpland Economic Review, July/August 1946, Table 3, p. 23 5 I 6maintain that the dollar value of trade in services will never equal the dollar value of manufacturing trade.

The evidence does not support these concerns. While employment in the manufacturing sector has declined as a percentage of Gross National Product (GNP from 24.8 percent in 1960 to 16.2 percent in 1984, manufacturing production as a share of GNP has remained steady at around 20 percent. This has happened because of the productivity gains that enable fewer worker8 to produce a greater quantity of go ods.

American GNP has gained slightly over the last few years that a smaller percentage of the work force produces the same percentage of manufactured goods indicates that the U.S. economy has grown more efficient, not less competitive As the Table below i ndicates, manufacturing as a percentage of The fact Manufacturing Employment and GNP Year 1960 1965 1970 1975 1980 1981 1982 1983 1984 Manufacturing as 24.8 24.7 23.9 20.9 20.1 19.8 18.6 18.0 16.2 as a percentage of total employment i GNP produced by I ma nufacturing as a percentage of total GNP 20.3 22.2 21.0 20.3 20.9 20.8 20.0 20.7 21.8 Source: Calculations for employment based on Economic Report of the President, Table B-31 and B-

40. Calculations for manufacturing as a percentage of GNP based on Table B-11, in 1982 dollars LEGITIMATE PRODUCTIVITY CONCERNS productivity. the more they can produce either to consume at home or to trade for goods from other countries about U.S. shares of given international markets, or about manufacturing versus service job s are inappropriate competitiveness policy should be to improve.standards of living consumer choice, and job opportunities through increased productivity Concern for Americas competitive status should focus on U.S.

The more efficient American business and labor become Concerns about the trade deficit as such The goal of 71 While there have bgen improvements in the last few years, over he last several decades, the U.S. has lagged behind other major industrial powers in productivity gains, in terms of increa s ed output per hour woFked. This is a real cause for concern. Between 1960 and 1983, the U.S. annual increase in productivity averaged only 1.2 percent, compared yith annual gains of 3.4 percent for Germany and 5.9 percent for Japan. Foreign competitors ha v e become more efficient than their U.S. counterparts. For example, the Japanese auto' industry has enjoyed real production cost advantages absolute terms in goods in 1981, for instance, compared with $23,790 that year for each Japanese worker and $24,900 p er German worker. And in recent years, because of the threat of foreign competition as well as tax cuts and less government regulation, the trend toward low productivity growth has reversed. Recently U.S. productivity has been accelerating, rising to a 19 82 and 1983 average of 2.5 percent comparpd with 3.4 percent for Germany and only 1.4 percent for Japan.

In terms of overall industrial production, the U.S. has realized increases since 1977 that are greater than any of its major industrialized competitors except Japan. In 1984 U.S. industrial production stood at 121.8 percent of its 1977 level. Japan, reaching 138.9 percent, bettered its own 1977 level and the U.S. rate of growth. In 1984 Canada reached only 111.8 perc8nt of its 1977 level and the Europea n Community, only 106.8 percent Yet U.S. manufacturing output per worker is still high in Each American worker produced approximately $31,500 Even without federal' government action, this trend will probably continue. Yet to ensure .future growth, politica l leaders must understand the factors that have hindered productivity gains in the past, and formulate new competitiveness policies accordingly. Among past problems Labor-Manaaement Relations Because labor is a key and indispensable part of the production p rocess, labor-management relations have an important effect on a country's productivity. In the U.S., these :relations have tended to 7. Global ComDetition. Volume I, p 11. I I 8. Organization for Economic Cooperation-and Development (OECD), Labor Force S tatistic 1983; OECD Historical Statistics, 19

83. Cited in Global ComDetition. Volume 11, p. 46 9. Cited in Global ComDetition. Volume 11, p. 1

11. I 10. Economic Indicators, OD. cit, pi 35. i c I I be adversarial. In Germany and Japan, on the other hand, a more cooperative relationship has boosted productivity. An Organization for Economic Cooperation and Development study found that, for each 1,000 workers, 813 days in the U.S. are 1ost.each year due to labor unrest and in Germany, only 6 days lost for this reason.

In many U.S. industries, management has attempted to purchase labor peace with wages not justified by productivity gains. Such wage increases in the 19708, for example, made steel workers among America's highest paid industrial employees. But failure to invest in technological improvements during this period meant that steel-making productivity declined. As a result, by the 19808, the U.S. steel industry has become more uncompzetitive and has been forced to lay off thousands of overpaid worker s In Japan, only 31 days are lost each yea5 per 1,000 workers Another general problem in the U.S. is that wages cannot easily be reduced in difficult economic-times costs to boost efficiency, it can only cut jobs, not wages. The Japanese approach to this p r oblem is very different workers receive a substantial portion of their wages as bonuses tied to the productivity and profitability of their companies. Thus Japanese wages are flexible. When profits are down, bonuses drop layoffs, however, are avoided. Thi s system gives incentives to employees to work hard and efficiently. The'more profitable the company, the larger their'bonuses Thus if a firm must cut labor Many Japanese U.S. Business Culture It is often said, correctly, that many American firms pursue na r row and shortsighted business strategies, preferring immediate profits to long-term gains.and paying insufficient attention to foreign markets. This attitude derives in part from past U.S successes. In the decades after World War 11, American industry was the most efficient in the world, with few foreign countries able to match it. In addition, most American produc,ts were sold exclusively in the huge U.S. market. Both exports and imports were on average only about 6 percent of GNP, much smaller tqan in ot her countries.

Little attention, therefore, had to be paid Bo the specific needs of foreign customers 1 id i 1

1. European Management Forum, from OECD Historical Statistics, 1983; International Labor Organization; Bulletin of Labor Statistics, 1983; JaDan Labor Bulletin, November 1982.

Cited in Global ComDetition. Volume 11, p. 47 12. See Kent Jones, "Saving the Steel Industry," Heritage Foundation Backnrounder No 354, May 21, 1984.

I 9I Today the situation is changed. Trade accounts for twice as much o f America's GNP as it did two decades ago,131 and foreigners challenge American firms worldwite slow to meet this new challenge, often because they tend to seek quick profits rather than to concentrate on the long term. Japanese firms, on the other hand, w ill often lose money for years in a foreign market but will persevere and eventually dominate the market. In addition, American business representatives tend to have poor, language skills, often relying on their customers to learn English. Many are ignora nt of the culture and customs in their overseas markets.

Therefore, even with the falling value of the dollar, they often fail to seize opportunities to expand their sales Many U.S. industries have been Government Reuulations U.S. laws and regulations also tend to hold back American productivity. Business costs climb, for example, when the government mandates new worker benefits beyond what profits and productivity gains otherwise would allow marginal 6 e ductions in pollution while adding to the cost of doing business. Moreover, environmental and other regulations often force efficient and responsible businesses to shoulder the costs imposed by irresponsible firms. The new Superfund law, for instance levi es a tax on many businesses to pay for hazards resulting from the activities of a very few firms.

Antitrust laws, too, can discourage businesp6 cooperation and penalize U.S. firms for honest business success. Foreign firms generally do not face such restrictions from their own governments.

Some policy makers fear that, if U.S. businesses are too large, or if they cooperate too closely with one another, they will be able to take advantage of the consumer. But since 70 percent of U.S. goods are subject to fo reign competition, American firms that raise prices beyond what the public is(wi1ling to pay will fL nd their customers turning to overseas suppliers. On the other hand, cooperation among U.S. firms could help them to compete more effectively with firms i n other countries Many environmental regulations make only I 13. Calculation based on Economic ReDort of the President Table B-1 and B-99 14. As an example, see the review of auto industry problems in David Halberstam, The Reckonine New York: William Morro w and Co., 1986 15. See, Richard B. McKenzie, ed. A Blueorint for Jobs and Indust rial Growth Washington, D.C The Heritage Foundation, 1983) for examples, pp. 63-69 16. See Edward L.

Backarounder No ti Hudgins 36 Ways to Narrow the U.S. Trahe Deficit Herit age Foundation 457, September 24, 1985, pp. 8-11 I 10 Uncertainty concerning U.S. business regulations also harms U.S competitiveness by making planning difficult and by discouraging risk taking and innovation. In the 1970s, for example, regulations in th e auto industry often changed from year to year U.S. car manufacturers thus were reluctant to invest in long-term improvements, not knowing what actions would be forthcoming from Washington.

The Cost of CaBital Capital investment is essential to a country's productivity.

Capital allows new machines and technologies to be introduced and new products developed. Yet the cost of capital in the U.S. is higher than in other advanced countries. One calculation finds that between 1961 and 1983, real, inflation-adj usted capital costs varied between 13 and 20 percent# the U.S., compared with a range of 6 to 10 percent in Japan. In the 19708, the high cost of capital was caused in large part by high tax rates and by the inflationary policies of the Federal Reserve Bo ard, which boosted interest rates.

Today, the attractiveness of U.S. business investments in part accounts for the greater demand for capital, and thus its higher costs productive private sector and raises capital costs well above what they would be otherw ise. While U.S. interest rates have dropped recently, real capital costs still are higher than in most other industrialized countries But massive federal spending diverts,capital from the The supply of capital in the U.S. also is lower than in many compet i ng countries. Savings in the U.S. has averaged 5 percent of GNP over the last decade.' In Japan, savings has averbged nearly 18 percent, meaning a larger'capital pool for investors lags behind other countries. Capital formation in the U.S., that is fixed i nvestment as a share of GNP, averaged only 18.1 percent between 1960 and 1983, lower than any industrialized country save Britain which averaged 18 percent. In Germany, capital formation during the same period averagged 23.4 percent of GNP, while in Japan , the share was 32.3 percent. The low savings and investment in the U.S. have been caused in part by U.S. tax policies that penalize businesses with double taxation--once when profits are posted at the corporate level The volume of funds used by U.S. busin e sses for investment also I 17. George N. Hatsopoulos High Cost of Capital: Handicap of American Industry American Business Conference and Thermo Electron Co 1983, with January 17, 1984 update. Cited in Global ComDetition. Volume 11, p. 113 18. Global ComD etition. Volume 11, p. 114 19. rbid p. 112 11 - I and again, when the same profits are distributed to owners and shareholders.

The high cost and relatively low volume of capital investment in the U.S. is a direct result of U.S. government economic and fisc al policies. The federal government consumes nearly 24 percent of the GNP, and this must be paid for either through borrowing or higher taxes. Both take capital away from the productive sector.

CONCLUSION An acceleration in productivity is the key to impr oving the competitiveness of the U.S. economy. In past decades, U.S productivity growth has lagged behind growth in other countries recent years, this trend has reversed and American businesses have realized important gains in efficiency In The current pu blic dialogue on competitiveness is useful, for it focuses attention on the need for freer markets and warns against repeating past policy mistakes Two counterproductive l

solutionsIl are frequently put forward to'deal with America's competitive difficulti es. The first is trade protectionism. By erecting a shield against competition, it reduces the best incentive for improved productivity. Protectionism would lower America's standard of living create net unemployment, and hinder innovation and efficiency g ains.

There is no indication that government bureaucrats are better able to make efficient economic decisions than are businessmen and consumers.

And special incentives to exporters, paid for by other firms, confuse apparent symptoms with real causes, which would only dampen productivity further. In fact, government attempts to regulate business are in large part responsible for current problems.

The best approach to.AmericaIs competitiveness problems is to create an economic environment that encourages a nd rewards innovation and risk taking and cuts unnecessary business costs. Among the steps needed 20 The second flawed solution is national industrial planning I I 20. See Don Lavoie, National Industrial Planninp: What Is 'Left Washington, D.C.: The Cat0 I nstitute, 1985 for a good overview i j 1 I I 12 I I 1) Rex>eal laws that cont avoid new laws that add markets less flexible te to labor-manaaement tensions and abor costs while makina labor The Labor Management Relations Act of 1947 prohibits employers fr om contributing financial or other support to labor organizations.

This ban on company unions is an example of the sort of law that often creates labor-management tension and deprives many workers, the majority of whom are nonunion, of the benefits of a worker organization. In Japan, allowing businesses to contribute to l abor organizations has led to greater cooperation between labor and management and benefited both parties. The U.S. law prohibiting such cooperation should be repealed retraining or reemployment services, to be paid for in all likelihood by higher taxes o n businesses and workers, also would make U.S companies less competitive to notify the government and to obtain approval for plant closings using government-labor-management tripartite councils to direct the process, would create rigidity in the labor mark et and lead to massive unemployment and skyrocketing inefficiency. Such solutions should be avoided Recent suggestions to create so-called worker rights to Suggestions that businesses be required 2) Accelerate business deresulation.

There are several regul atory changes that would allow American businesses to compete better in world markets be amended, for instance to encourage efficient restructuring and research cooperation. Enpironmental laws that add huge costs to businesses while achieving only margina l reductions in pollution levels should be modif Led Antitrust laws should 3) Lower the cost of capital bv further budaet cuts and tax reform.

Capital is the foundation of a competitive, free enterprise system. Government transfers of hundreds of billions of dollars from one interest group to another harm everyone in the long run.

Politicians must recognize that their own spending policies are a major cause of America s economic difficulties must pay closer attention to the impact of taxes on business deci sion making. The new tax law helps, but more reforms are needed. In particular, the double taxation of corporate, profits should be stopped and corporate tax rates cut further.

But other countries are gaining on the U.S., not simply because of their own e conomic growthjbut because of American default. Economic growth in other countries,does not threaten America. Indeed, a more Similarly, .Congress The U.S. is still thb freest and richest country in the world 13 - prosperous world offers U. S businesses an d consumers greater opportunities. But the federal government must remove the barriers to economic growth. Then the U.S. can continue.to realize higher standards of living, greater consumer choice; and more employment opportunities.

Edward L. Hudgins, Ph.D.

Walker Fellow in Economics I 14

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