Mike Leven is the President and Chief Operating Officer of the Las Vegas Sands Corporation and Job Creators Alliance member.
It's a great scene from the movie Sunset Boulevard. William Holden, playing an unemployed screenwriter, stumbles into a woman's mansion while attempting to avoid some bill collectors. They make some small talk, and Holden realizes he's seen the woman before.
"You're Norma Desmond. You used to be in silent pictures. You used to be big," he says.
"I am big. It's the pictures that got small," replied the old star.
And that's how I feel these days when I hear politicians and pundits whine about the decline of America and the rise of China.
America is still big. It's our leadership class that got small.
That leadership class—political, cultural, and intellectual—impacts what we think about ourselves. They also impact the ability of our most important dreamers to keep America vibrant and growing: our entrepreneurs.
America, we are being told by many of them, has seen its best days and should get comfortable being a second rate economic power. They don't bother to point out that our GDP, at $14.6 trillion, is nearly as big as China's ($5.7 trillion), Japan's ($5.3 trillion), Germany's ($3.3 trillion) and France's ($2.5 trillion) combined.
We've been here before. Many so called thought leaders in the past predicted that our best days were behind us. Remember how some predicted the success of the Soviet Central planners in the 1950s? Remember the predictions of America's decline and Japan's ascent in the 1980s?
Today, the rage is China. China, we are being told, is the inevitable heir to world super power status. Some conclude that we should become more like them. If only America would rely more on central planning, and less on the vagaries of the free markets, we'd all be better off.
Others see the rise of China as a threat. They see the bad things that China does—from its one child policy to its shabby treatment of intellectual property—and want to punish China, or worse, create protectionist policies: build a great wall around America and keep to ourselves.
The fact is that over the past decade, China has become more like America, while America has become more like Western Europe.
Like China or hate China, the country has moved the equivalent of the population of the United States from rural poverty to urban prosperity in the space of a single generation. It is the largest and most successful migration in world history.
So I would like to propose a few bold ideas not generally heard by our leadership class regarding China, and America's decline.
First, let's not imitate China or treat China as an emerging threat. Let's see China as an opportunity. An opportunity to sell things to that growing middle class of theirs, to educate them, feed them, and entertain them. Let's sell them our cars, cell phones, jeans, franchises, oil, coal, and our natural gas.
Instead of whining about China, and beating up on China, let's do what we do best: make stuff and sell it to them. Let's treat them like the potential customers they are, while holding their feet to the fire on human rights abuses and other important issues.
Second, let's not try and be more like China; let's learn to be America again. And promote progrowth policies that engender innovation and job creation.
"I have seen the enemy, and he is us," Pogo once famously opined. And regrettably, how we tax corporations and capital in this country—and how we talk about both—is hurting our ability to compete in the global marketplace.
Right now, we have the highest corporate tax rate in the industrialized world at 35 percent. A recent article in Harvard Business Review by Mihir Desai explained the effects of that rate on businesses and workers:
High corporate taxes divert capital away from the US corporate sector and towards non corporate uses and to other countries. They therefore limit investments that would raise the productivity of American workers and would increase real wages. This is the cruel logic of a corporate tax in a global economy—that its burden falls most heavily on the workers.
The high rates also hurt America itself, Dinai explained:
The flow of capital out of the United States only accelerates as opportunities in the rest of the world increase.
To attract capital to our shores rather than chase it away, we need to lower corporate tax rates quickly to the average rate—or less than average rate—of other developed nations.
There is one other tax code change that can have an immediate impact. Come January 1, the Bush tax cuts are set to expire, and capital gains taxes will rise from the present 15 percent to 23.8 percent. That would be bad news for investors and businesses owners.
Let me explain why. Millions of America have money invested in retirement accounts, and a sharp increase in capital gains taxes will prompt them to move their money out of the stock market and to safe havens like U.S. Treasuries. When that happens, entrepreneurs will be denied the thing they need most to grow their businesses: capital.
Taking away capital from entrepreneurs is like taking away oxygen from a scuba diver.
Another negative side effect of a capital gains tax hike: There will be less investment in the markets, which means lower stock prices and valuations of U.S. companies. And less money in the average American's retirement portfolio.
Capital gains taxes must not be raised; if anything, they need to be lowered, and lowered permanently.
Which leads me to my third and final wish.
What America needs more than anything is to believe in America again. We need more narratives from our thought leaders that reinforce the American Dream, not reinvent it. We need to hear more stories about what made us great and why, and less chatter about America's decline. We need to beat up on the rich and corporations less, and talk more about the barriers they face from our own government. Most important, we need to hear that our best days are ahead of us. That our future is filled with enterprises not yet started, inventions not yet invented, and jobs not yet created.
In short, we need leaders that will inspire us, not depress us. Trust us, not pander to us.
Leaders that believe in America enough to stop protecting us from ourselves, and let us be the nation we have been and will be again.
- James Rickards: How China Is Driving Federal Reserve Policy
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