The United States appears to be losing steam to China, but tax code fixes can make America's engine roar again.
Today: China's growth
CAL: As if we needed more depressing news with the social upheaval, foreign policy failures and a crushing national debt that has just topped $18 trillion, the International Monetary Fund has noticed that the U.S. is no longer the world's No. 1 economy. We have slipped to No. 2, behind China, a Communist dictatorship.
BOB: China becoming the world's largest economy comes as no surprise. In the past two decades, as China moved away from a centralized economy to a communist version of free-market capitalism, it was no longer if China would become the world's largest economy but when. China's population is 1.35 billion; ours is 320 million, which means China has a 4-to-1 advantage over the U.S. in consumers. We were lucky to have bragging rights as the world's largest economy for as long as we did.
CAL: This isn't about bragging rights; this is serious. This holiday season, as throughout the year, it is almost impossible to buy anything that isn't stamped "Made in China." The Chinese government is using our money in part to pay for their expanding military, which is already challenging U.S. interests in the Pacific and around the world and threatening to become even more aggressive.
BOB: "Our money" is now "their money" because American consumers and businesses buy lots of Chinese products and pay for them in dollars, leaving China with trillions in our currency. They use our money not just for military purposes but also to buy U.S. bonds to underwrite our annual deficits. That is a dangerous combination, which is why I have said the greatest threat long term to U.S. security is China, not radical Muslims.
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CAL: I don't think it's either-or. Both China and radical Islam pose clear and present (and future) dangers. As recently as 14 years ago, reportsMarketWatch, the U.S. was producing nearly three times as much as the Chinese. It also says, "For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet."
BOB: What a surprise! Many U.S. companies have their products produced on the cheap by low-paid Chinese workers. That's the capitalism you and your fellow conservative friends are forever promoting, often telling the government to free U.S. companies from regulations so they can make their own choices. Many of them have chosen China. You got your wish, old buddy.
CAL: Who are you calling old? Your party has some r
esponsibility for the tax laws, which have caused so many businesses to flee overseas. The incoming Republican Congress should make bringing American businesses home a top priority. The U.S. competes with Japan for the dubious distinction of the highest corporate tax rate in the world and is one of only two countries — Eritrea is the other — that tax their citizens on their foreign income and not just where they live. Bringing businesses back to America with a friendlier tax policy means more jobs at home, more products made in America — a phrase that was once a source of pride — more income for working Americans and, yes, more tax revenue for the government. It's a win-win for Republicans, for Democrats and, most important, for the country.
BOB: The U.S. corporate tax code also includes some of the world's most generous deductions for corporations, making the actual corporate tax rate much lower. That said, I agree with you that the corporate tax code should be changed in a way that encourages corporations to bring home the trillions of dollars they have left overseas. As long as that money is used to hire U.S. workers and buy American products, I would even be open to giving corporations lower tax rates on reinvested overseas profits. Does that make me a good capitalist, Cal?
CAL: It might, but regardless of what you choose to call yourself, it makes perfectly good sense. We ought to have long ago ended this debate about corporations and wealth. Corporations aren't evil. Corporations create jobs that allow people to care for themselves and their families. Corporations pay taxes, as do their employees. Maybe we could haul out an old slogan the late South Dakota Democratic senator George McGovern used in a different context during the Vietnam War. This time, it could apply to businesses that have fled overseas because of an unfriendly tax code and overregulation: "Come home, America." Promoting one's self as No. 2 might be OK for a rental car company, but it's not good for America, especially when the No. 1 economy is China. We need to try harder to entice companies to come home.
BOB: It's not economic statistics like who is No. l and who is No. 2 that matter, but the economy's strength and durability. The United States' economy has proved time and again over decades and centuries to be durable and strong. The Chinese economy has no similar track record. Changes in the tax code, which would encourage U.S. companies to bring overseas profits home, will contribute to our economic strength and durability. Once again, young man, we have found common ground.
Cal Thomas is a conservative columnist. Bob Beckel is a liberal Democratic strategist. But as longtime friends, they can often find common ground on issues that lawmakers in Washington cannot.