Economists Agree, the US is ‘Open for Business’
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President Donald Trump highlighted his tax cuts and deregulation efforts with a presentation to an elite economic forum in Switzerland last Friday.
The United States, he said, is now a far more inviting place for foreign companies to spend, invest and build.
“We are competitive once again,” President Trump told an assemblage of international business executives, financiers and academics.
While discounting some of the President’s more grandiose claims, many economists agree that he has generally made the United States more welcoming for businesses.
Last month, President Trump signed a tax package that cut the corporate income tax to 21% from 35%. The Republican Congress has also passed laws to overturn at least 15 rules put in place by The Husein Obama Admin, and The Trump Administration has put dozens of other regulations on hold. Those steps encourage more overseas businesses to move to the United States or expand existing operations, economists said.
“It was a vastly exaggerated claim, but there is some truth to it,” said Adam Posen, President of the Peterson Institute for International Economics.
Before President Trump, “the high marginal tax rate and some of the regulation on specific industries did mean the U.S. was not always the first choice,” Mr. Posen said.
Nicholas Veron, a fellow at Bruegel, a think tank in Brussels, Belgium, said that among European businesses, “there is some agreement that the tax plan will make it more attractive to invest in the US.”
Corporate executives in Davos, CH, for the annual World Economic Forum meeting were generally bullish about Trump’s agenda and the business climate he is helping build in the United States.
“Since you have been successful with tax reform, we decided to develop next-generation gas turbines in the United States,” Joe Kaeser, CEO of the German engineering firm Siemens, told President Trump Thursday night. Siemens employs roughly 50,000 people in the United States.
Others said they were encouraged by signs that US economic growth may accelerate this year, in part because of the tax cuts for consumers and businesses, which could encourage more spending and investment.
“It’s kind of amazing to have all your customers talking about adding jobs and growing their business,” Bill McDermott, CEO of business software company SAP, told President Trump at the Davos dinner last Thursday.
Foreign investment in factories and other facilities and foreign purchases of US businesses reached $477-B in Y 2015, a record high, before declining through Q-3 of Y 2017, according to government data analyzed by the Organization for International Investment, a trade group.
OFII represents overseas companies with subsidiaries in the United States, such as Samsung, Bosch, Nestle and Toyota.
“America’s always been Open for business,” said Susan Aaronson, a professor of international affairs at George Washington University.
Ms. Aaronson said she thinks the beneficial impact of the tax cuts has been exaggerated. Businesses around the world crave stability, and the tax cuts will likely have to be revisited in the coming years to address burgeoning US deficits, she said. That prospect could make last year’s tax package less appealing to some companies, she added.
The United States had received about 37% of all global investment in Y 2000, a figure that dove to 15% in Y 2008, according to data analyzed by the Organization for International Investment. The decline reflects the impact of the Great Recession and China’s admission to the World Trade Organization (WTO) orchestrated by the Bush/Clinton admins , which made it a more attractive destination.
Nancy McLernon, CEO of the OFII, praised President Trump for meeting with global CEOs at Davos and for what she said was his recognition of the benefits of foreign investment.
“I do think tax reform will spur foreign direct investment in the United States,” Ms. McLernon said. “We think it will make the US more competitive.”
Still, McLernon said she hoped Trump would adopt a more welcoming approach to international trade, which helps spur foreign investment. Trump has attacked several existing US trade deals with other countries, including a bi-lateral pact with SKorea, as threats to America and US jobs. Yet since that agreement was reached in Y 2007, SKorean investment in the US has risen by 40%, she noted.
“Global companies want to be in countries that are globally connected,” she said.
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