Making America more competitive again is a huge winner.
Were the 2016 elections governed by anything remotely approaching “conventional wisdom,” a candidate like Donald Trump should have done abysmally in America’s most-rural communities. While Sen. Ted Cruz (R-TX) achieved stunning victories in states where the economy is dominated by agriculture, Trump has defied logic by racking up wins in states like Georgia, Missouri, and clinching the GOP nomination in, of all places, Indiana!
One understands urban centers, and one understands states whose manufacturing base has been eviscerated over the last half-century. But the reason Trump has done so well in these states and the reason Trump remains popular with rural voters who might have otherwise been attracted to Sen. Cruz’s untarnished conservative bona fides are very much intertwined: Trump has tapped into the popular zeitgeist of Americans who perceive that not only has America become less-competitive over the last four decades, but that the ruling political elites have taken advantage of this decline in competitiveness and put into place deals that have put our economy at an even greater disadvantage.
The former is entirely clear. As shown in a just-released study by the Mercatus Center at George Mason University, the cumulative cost of America’s regulatory state is somewhere in the vicinity of $4 trillion annually. Two years ago, in a study released by economists from North Carolina State University and Appalachian State, they found that these direct regulatory costs produce a lost “opportunity cost” (i.e., when a government mandate forces a business to spend its resources [time, money, manpower], that mandate creates lost opportunities for that business) cost the economy tens of trillions of dollars annually. The concluded that were we to exist in a regulatory environment such as the one we had in the 1940s, our economy would be roughtly $50 trillion in size!
As the Mercatus study demonstrates, it’s not just so-called “major regulations” (each such regulation costs the American economy $100 million per year or more) that have an impact — it is the small mandates that harm it as well. We have had a massive uptick in sweeping, stunningly-expensive regulations in recent years (the cost of regulations was up 35% between 2005 and 2010, according to the U.S. Small Business Administration), but for every reform to America’s wetlands rules that brings a sweeping change to federal involvement with local land-use policy, for every “off road diesel” rule that mandates new investment in farming equipment, there are thousands of picayune regulations that eat away, bit by bit, at America’s small businesses and entrepreneurs.
It’s like death by a thousand pinpricks — and in order to make America more competitive again, something has to be done.
Now, nobody is seriously suggesting that we take our regulatory state back to where it was just after the Second World War. But what both of these studies demonstrate is that we could make modest changes to our regulatory state and produce tremendous results — and that doing so could both jumpstart the economy and have lasting effects over the long term, spurring growth in both the agricultural and manufacturing sectors, and making those sectors competitive on the international stage once again.
Other nations are keenly aware of the self-inflicted hobbling that America faces, and they have taken great advantage of it. Not only are their costs of doing business (when it comes to labor, regulation, etc.) far lower, these nations also massively subsidize much of their industries (especially their agricultural sectors), so that they can both sharply undercut American firms, and drive them out of business.
Last month, for instance, the World Trade Organization received complaints from Brazil regarding the unfair practices of Indonesia when it comes to trade in beef, and the massive subsidization of Thailand of its sugar sector. Ironically, Brazil also massively subsidized its sugar industry for years, massively distorting the market itself. China, India, Vietnam… all these nations have taken advantage of lower regulatory and labor costs and massively underwritten their agricultural firms, all with a goal of destroying other nations’ agro-economy sectors, the United States especially.
Worse, nations like India, clearly defying WTO conventions, refuse to change those practices.
The U.S. has its own awful subsidy policies, too. But as one might expect, those subsidies are greatly overshadowed by the costs American firms face.
Trump’s popularity is in no small measure because he wants to “level the playing field” in order to boost America’s competitiveness once again. It’s a multi-pronged strategy (at least, it ought to be) in which we focus on the factors that have made America less competitive, as well as the tools that are used in trade warfare. Zero-for-Zero, Rep. Ted Yoho’s (R-FL) proposal to ensure that America only de-escalates when our world-stage competitors do the same, is one area where candidate Trump ought to look.
American businesses are hurting — from both our own policies and those of our competitors. American voters are bearing the brunt of that hurt, and are demanding change. Hopefully, 2016 will be the year in which that change comes.