At least when it suits him, President Barack Obama proves himself more than willing to welcome international business to the United States. In late October, for example, he launched a major effort intended to increase foreign investment in the United States.
While Obama’s efforts to help international businesses cut through red tape in order to establish new facilities in the U.S., make sense, they aren’t enough. Indeed, his administration has presided over a precipitous decline in the nation’s ability to attract capital from elsewhere in the world. In 2008, foreign companies invested $310 billion in the United States; last year, that fell to barely over $160 billion. Changing that is going to require much more than speeches; we need real changes in policy in order to truly welcome foreign business, change burdensome laws and avoid creating outright disincentives.
More foreign investment in the United States would bring huge benefits. Today, companies with headquarters outside the country have nearly $4 trillion invested here, employ about one out of 20 workers, and pay wages that are about $20,000 per year higher than U.S. companies. These are just the types of high-wage jobs that the nation needs.
But getting them will take work.
First, the president and others need to continue efforts to make it clear to the public that investment helps the United States. Xenophobic and nativist arguments may win votes from time to time—both Obama himself and Mitt Romney made them on the campaign trail—but they’re terribly damaging to the nation’s economy.
Second, the American government needs to bring its tax and regulatory policies in line with world standards. America currently has the highest statutory marginal corporate tax rates of its peers and the highest tax compliance costs anywhere. This provides a huge disincentive for companies to create jobs here. President Obama and members of Congress from both parties have expressed willingness to do exactly this but the progress to date has been slow. Things need to move faster. In addition, the overgrown American regulatory state also needs to be reigned in so that companies can, at least, be certain what regulations they’ll face when trying to set up shop in the United States.
Doing all of the right things, however, won’t make much difference if the president continues to do so many things wrong. And he does lots of things wrong. One example stands out. While claiming to welcome investment from around the world, for example, Obama has also joined with Rep. Richard Neal, D-Mass., and several other members of Congress to propose a massive new tariff on insurance business. The proposed new tax wouldn’t raise much revenue, but it would imperil many of the more than 120,000 jobs that international insurers create in the United States. Meanwhile, insurance consumers, the Cambridge, Massachusetts-based Brattle Group finds, would see their premiums rise by as much as $130 billion over the course of a decade. And the list of bad policies the administration is pursuing in areas ranging from health care to energy only add to these burdens.
Nice words, new orders and boasts about the country’s significant advantages as a place to do business aren’t enough if President Obama wants to bring more foreign investment into America. The country needs to change some policies and avoid implementing bad ones. For all its nice words, the Obama administration’s record on attracting foreign investment leaves a lot to be desired.