"The Recovery Act has worked."
- House Speaker Nancy Pelosi, (SFGate, June 5, 2010)
Last week the World Economic Forum released the Global Competitiveness Report 2010-2011, ranking 139 countries based on 12 pillars of competitiveness such as strength of institutions, higher education and training, and business sophistication. Not surprisingly, Democrat policies of deficit spending and increasing taxes are the areas that have negatively impacted U.S. competitiveness in recent years, according to the report. The United States ranked fourth, falling two spots since last year’s report. Just three years ago, the United States was the number one country for business competitiveness.
Created in 2004, the rankings are calculated from publicly available data and an opinion survey of executives around the world. This year’s report polled over 13,500 business leaders in 139 economies and contains comprehensive rankings and data tables for over 110 indicators—everything from property rights to restrictions on capital flows to capacity for innovation.
Issues of Concern
Fiscal Failures: By far the weakest score in the 2010-2011 Competitiveness Profile for the U.S. was the basic requirement of a strong macroeconomic environment. The U.S. ranked 87th out of 139 economies this year. Of the elements in this category, two of the most glaringly negative items were “Government Budget Balance” and “Government Debt” coming in at 117th and 122nd respectively. Only a handful of countries in the world have a fiscal picture worse than the U.S. Democrats’ fiscal strategy of deficit spending led the Congressional Budget Office to project 2011 as the third straight year of $1 trillion deficits. Moreover, total government debt now stands at $13 trillion, over 90% of GDP, threatening to dwarf economic growth and thereby lessen the prosperity of future generations. Democrats show no intention of reversing this trend.
Incentivizing Stagnation: In the Goods Market Efficiency category, the U.S. ranked 89th in “Total tax rate” and 71st in “Extent and effect of taxation.” The latter was calculated from survey data asking: “On balance, do taxes limit incentives to work or invest?” With a $3.8 trillion tax increase looming on January 1, 2011, many small business owners who file at individual income tax rates will be affected. Further skewing progressive tax policies against productive individuals will not improve the environment for entrepreneurs to grow their businesses and create jobs. Already in the bottom-half of the global rankings, U.S. competitiveness will deteriorate further if Democrats raise taxes on anyone during the current recession.
Raising the Costs of Business: In a section of the report titled “The Most Problematic Factors for Doing Business,” U.S. respondents identified “Tax rates” and “Tax regulations” as the 3rd and 4th most pressing concerns of the 15 factors presented. Democrat policies such as Obamacare and financial regulatory reform are already on a path to exacerbate these challenges. The most blatant example of this abuse is Obamacare’s requirement that small employers file an IRS Form 1099 for all vendors with which it has more than $600 in transactions in a year. In July, the Internal Revenue Service’s National Taxpayer Advocate reported, “[T]he new reporting burden…may turn out to be disproportionate as compared with any resulting improvement in tax compliance.” With additional federal rule writing in progress and tax provisions set to take effect in the coming years, U.S. competitiveness will undoubtedly continue to suffer from Democrats’ agenda.