Outside View: Fixing inequality

By PETER MORICI, UPI Outside View Commentator
U.S. President Barack Obama delivers remarks on the challenges of the growing income inequality and shrinking economic mobility at the Center for American Progress at THEARC in Washington, DC, on December 4, 2013. UPI/Aude Guerrucci/Pool
U.S. President Barack Obama delivers remarks on the challenges of the growing income inequality and shrinking economic mobility at the Center for American Progress at THEARC in Washington, DC, on December 4, 2013. UPI/Aude Guerrucci/Pool | License Photo

COLLEGE PARK, Md., Jan. 16 (UPI) -- Inequality is replacing the American dream because the U.S. economy -- thanks to Washington's mismanagement -- is underperforming.

The United States still produces one-fifth of the world's goods and services but accounts for a much smaller share of global growth. Many U.S. products are no longer the best in class.


Consequently, the U.S. economy can't adequately employ many of its college graduates and wages are stagnant or falling for ordinary folks.

The United States still has great strengths. High labor productivity, coupled with rising wages in Asia, make U.S. workers a good value for global investors. Along with cheaper energy, thanks to the onshore oil boom, that should attract new factories but the promised flood of new jobs has only been a trickle.

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Simply, the bureaucratic quagmire created by complex and ineffective business regulations makes it easier to produce in Asia than in the United States. The highest corporate tax rates among major industrialized countries make the cost of investing in the country too high.


It is increasingly difficult to refine and efficiently move oil to California and the Northeast -- gasoline costs too much in Monterrey, Calif., and heating oil in Massachusetts.

Whether businesses are taxed or directly pay for healthcare, higher costs than in Europe or Japan require radical reforms in delivery and pricing that Obamacare won't accomplish and Republicans refuse to discuss.

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Germany punches above its weight. Whether in aerospace or Web-based businesses, its companies compete effectively for customers in rapidly growing developing country markets by emphasizing proven technologies, execution and patience.

Cities from Bangkok to Lagos are too congested and cluttered with street vendors to support U.S. middle-class, drive-to-the-mall retailing. German firms like Rocket Internet are recruiting suppliers and sending young women with tablets into marketplaces and workplaces to demonstrate their websites.

U.S. companies eschew such boring approaches in search of big profits to pay for Uncle Sam's terribly burdened regulations and taxes.

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Apple will only sell the very best for the highest price, while Microsoft ties up personal computer customers with awkward software. Now, too few Americans can afford an iPhone and even fewer want a Windows smart phone. Korea's Samsung offers state-of-the-art handheld devices and gives U.S. companies fits.


In a globalized economy, the United States must play its strengths. It can't continue to permit China and other Asian nations to rig their currencies and otherwise lock out competitive U.S. exports with subsidies and protectionist regulations. In Asia, the Bush and Obama administrations placed higher priority on other goals.

The United States shouldn't import 6 million barrels a day of oil and pay the cost of policing the Persian Gulf, when opening offshore drilling and smart conservation could eliminate foreign purchases.

Together, the trade deficit on otherwise competitive manufactures and oil is costing Americans 5 million good-paying jobs -- many that would go to struggling working-class families.

America's best and brightest can earn big bucks by heading for Wall Street, the Silicon Valley and industries that innovate and sell in global markets. Meanwhile, the army of more ordinary workers remains underemployed and underpaid.

A slow-growing economy is the cause of increasing inequality and the best way to reverse those is to clear a path for investment and entrepreneurs. The ticket is to streamline regulations, simplify and cut taxes, open offshore energy production, radically reform healthcare and make exports and jobs the United States' No. 1 foreign policy priority.


With lower taxes how would Washington pay for entitlements and a big defense budget? Simply, a U.S. economy growing at 5 percent and producing its own energy would need less of both, and generate a bounty of government resources for good purposes like the world has never seen.


(Peter Morici is an economist and professor at the University of Maryland Robert H. Smith School of Business, and a widely published columnist. Follow him on Twitter: @pmorici1)


(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

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