According to The Atlantic’s Jill Lawrence, reducing costs and streamlining regulatory processes to promote a competitive economy is akin to “sucking jobs” away from other states.
In her September 12th piece, “Rick Perry’s Job Strategy: Raiding Other States,” Lawrence claims that Texas has pursued “a growth agenda that would be impossible to replicate on the national stage”. She doesn’t recognize the fact that if businesses can be attracted to less burdensome states, they might also be attracted to less burdensome countries.
Lawrence is further mistaken by the common assumption among statists that economics is a zero-sum idea: squeeze one side of the balloon and the other side bulges. But the fact is, wealth and opportunity are in no way zero-sum. Capital and labor are freely mobile, and their shifting from one place in the world to another expands the whole rather than takes from it. One state “taking” a job from another does not mean the other state will forever be deprived of that job, just as one individual earning a million dollars doesn’t make the rest of the world a million dollars poorer.
By this logic, because some states lack adequate resources and have trouble attracting businesses, no amount of business-friendly policies – no matter the scale or how far-reaching they are – can increase the competitiveness of the United States’ economy.
“Where are states like Michigan and Nevada going to poach jobs from? Mexico? Ireland? China?” she asks. Yes, they will. Due to a variety of factors, companies like Master Lock and Boeing have moved production operations back to the U.S. in recent years from typically low-cost Asian countries.
At 35%, the United States’ corporate tax rate is the second-highest in the world. It makes perfect sense that businesses would be attracted to Ireland’s 12.5% rate. But if U.S. rates were lowered, Michigan and Nevada might take back businesses that have gone to Ireland or retain those considering a move to China.
“You can’t undercut [workers’] wages”, Lawrence says. Well, don’t. Instead, why not drive down the price of doing business by lowering personal and corporate income taxes, reducing bureaucracy, lessening redundant and onerous regulations, and removing barriers to entry – things Texas has done to attract businesses?
There’s a reason Texas is consistently named the number one state in which to do business.
When states raise taxes or expand the reach of government into to the economy, businesses leave. We saw this earlier this year when Illinois increased income taxes by 66%. Predictably, businesses responded by packing up and moving to less-taxing states.
I do find one agreement with Lawrence: her view that incentives are unfair is something any proponent of limited government would agree with. Tax and other monetary temptations, given to certain privileged businesses, are based on arbitrary factors and distort the market. But of the myriad jobs created and businesses that have sprung up in Texas as a result of the state’s low tax and regulatory approach, a small minority were because of such motivation.
Lawrence concludes that a national economy can’t grow when some states employ less-cumbersome economic policies than others. But instead of hindering opportunity at the state level, the logical solution is a nation-wide application of Texas-like economic freedoms.