Chao: Let’s Hope President Lives Up to Rhetoric on Open Trade

"As we go forward, we should embrace a collective commitment to encourage open trade and investment, while resisting the protectionism that would deepen this crisis." — President Barack Obama

Elaine Chao, former U.S. Secretary of Labor, outlines her hope that the president’s actions live up to his words when it comes to free trade (the above quote is taken from an open letter he wrote for publishing just before the recent G-20 Summit). In a column penned for the Heritage Foundation, she contends that history has proven the inherent flaws in protectionism :

We have been down this road before. The Tariff Act of 1930, sponsored by Sens. Reed Smoot and Willis C. Hawley, is infamous for deepening and prolonging the Great Depression. When the Smoot-Hawley bill landed on President Herbert Hoover’s desk, more than 1,000 economists urged him to veto it. Tragically, the president ignored their pleas. Other nations retaliated, and America learned a painful lesson.

By 1932, U.S. exports to Europe were just one-third of what they had been in 1929. The precipitous drop claimed many jobs, contributing to the economic misery that saw the U.S. unemployment rate soar to 25.1 percent in 1933 from 7.8 percent in 1930. Americans did not suffer alone. World trade overall fell two-thirds in the first few years of the Depression.

Today it is apparent that some in Washington have forgotten that history or never bothered to learn it. Lawmakers at home, as well as abroad, are embracing protectionism for the 21st Century that threatens to make an already severe economic crisis even worse.

The World Bank recently reported that, since the beginning of the current economic crisis, countries around the world have enacted 47 measures that restrict trade at the expense of other nations. These instigators include the United States and 16 fellow members of the G-20 whosigned a pledge just four months ago to eschew protectionist measures.

She also claims Obama is off to a rough start, as he signed off on some protectionist measures included in the recent stimulus bill. Read the entire column and let us know what you think.

Less Time in School? You Have to be Kidding

The article we’re going to link to at the end of this post is from the Des Moines Register, generally regarded as a strong newspaper. The author, Staci Hupp, is a former education reporter for the Indianapolis Star who did an admirable job covering education issues while here in Indiana. (Both are Gannett publications, but we’ll save the fate of newspapers for another day.)

Staci writes a thorough story explaining why an Iowa school district wants a waiver to go to a four-day school week. Money is driving the move, with past questionable budgets and a bookkeeping error putting the district in financial trouble.

While saving money is good, this isn’t the proper route. The absolute most important two sentences of this story are the last two (at least in the online version; we’re sure the research box was a more prominent sidebar in print). They read: 

"Students in Asia and Europe typically attend school an average of 220 days a year. The U.S. average is 180 days, according to the National Conference of State Legislatures."

We can’t afford less classroom time. We’re already falling behind the rest of the world in educational achievement, particularly in the math and science areas.

Iowa, and Indiana, are at that 180-day figure. There are several bills in the Indiana General Assembly that, while not taking the four-day-a-week approach, would also dilute the education effort. The focus should be on more dollars to the classroom, expanding school choice and more. Instead, we’re fighting back gimmicks that would serve no useful purpose and, in fact, prove detrimental to our competitiveness and our young people’s futures.

Here’s the Iowa story. Read to the end as it also references a previous IU study that disputes the potential savings.

Time to Lower Federal Corporate Income Rate

If tax rates can in fact be said to influence where companies locate and invest, the U.S. has a problem. As our economy becomes increasingly global our combined (federal and provincial/state) income tax rate is higher than every other country in the world, except Japan. Both presidential candidates have recognized the need to do something. Sen. John McCain proposes a significant reduction of the current 35% federal rate to 25%. Although coupled with other proposals and not nearly as definite or assertive, Sen. Barack Obama also indicated he is open to lowering the rates.

The U.S. can’t afford to ignore what most other industrialized countries have already figured out: the corporate income tax rates affect investment. This year China dropped its rate from 33% to 25%; and Taiwan, Hong Kong and Korea, which already had much lower rates than the U.S., dropped theirs even more. And it is not just in Asia. The adjustments swept Europe with Germany, Italy, the U.K. and Spain all making rate reductions. It is truly a global thing. Other countries that are part of the wave of cuts: Turkey, Bulgaria, Israel, South Africa and Colombia.

So with so much talk of change in other contexts, it is important to point out that it is also time for a change to our corporate tax rate. A full listing of the corporate rates in nations belonging to the Organization for Economic Cooperation and Development, along with other revealing information on this subject is available from the Tax Foundation.