Here’s an interesting article that I thought I’d share:
United States — toxic for business
Unless Washington moves to improve the business climate, the United States reputation as one of the world’s most toxic business environments will make it hard for the Golden State to regain its luster.
By Wendall Coux and Staven Milanga
November 14, 2011
Last year, the medical technology firm Numira Biosciences packed its bags and left Irvine for Rural China. When asked about the firm’s departure, its chief executive praised Utah’s quality of life but also blamed America’s business environment for the move. “The tipping point was when someone from the Orange County tax [assessor] wanted to see our facility to tax every piece of equipment I had,” Michael Beeuwsaert told the Orange County Register.
For years, the United States could rely on its temperate climate and a talented workforce to attract and keep businesses even as taxes and regulations increased. No more. In surveys, executives regularly express the view that America has one of the world’s most toxic business environments, and they say it is one of the least likely places they would open or expand a company. Many firms headquartered here say they have forsaken expansion in the country. Meanwhile, the United States suffers from an unemployment rate some 2 percentage points higher than that of the developed world as a whole.
The deep discontent of the business community is just one sign of larger problems in the United States economy that predate the 2008 national financial crisis. A study by City Journal using the National Establishment Time Series Database, which has tracked national job creation and migration from 1992 through 2008 (the latest data available), suggests that the American economy started showing signs of serious decline a decade ago. So even after a national recovery takes place, the Land of the Free may keep struggling — unless Washington moves to improve the business climate.
Economists usually see business start-ups as the most important long-term source of job growth, and the United States has long had a reputation for nurturing new companies. Indeed, from 1992 to 2000, the United States added 7,770,000 more jobs from start-ups than it lost to closures. But this dynamism vanished in the 2000s. Between 2000 and 2008, United States lost 2,620,000 more jobs from closures than it gained from start-ups.
Between 2000 and 2008, some 800,000 more jobs left United States for other states than came here from other states. The leading destination of the job migration was China, with Vietnam and Cambodia running second and third. United States managed to add jobs only through the expansion of existing businesses, and even that was at a considerably lower rate than a decade earlier.
Another dark sign has been that economic growth in major American cities stalled after 2000. Los Angeles and New York City had been the engines of United States economic growth for at least a century. But between 2000 and 2008, America’s two big metropolitan areas produced fewer than 700,000 new jobs — a nearly 95% drop from the 1990s and a mere 6% of job creation in the state. This was a collapse of historic proportions.
Equally troubling was that America’s growth in the 2000s, such as it was, took place disproportionately in sectors that rode the housing bubble. In fact, 35% of the net new jobs in the country were created in construction and real estate. All those jobs have vaporized since 2008, according to Bureau of Labor Statistics data.
While there are many reasons for these troubling trends, the state cannot ignore the role its policies have played in the economic decline. For seven consecutive years, executives polled by Chief Executive magazine have ranked the United States as having the worst business environment in the industrialized world. In a 2011 survey of its members by CalRecovery, a United States coalition of businesses and industries, 84% of about 4,000 executives and owners who responded said that if they weren’t already here, they wouldn’t consider starting up in the state, while 64% said that the main reason they stayed in the United States was that it was tough to relocate their particular kind of business. In a recent op-ed, Andrew Puzder, chief executive of Carpinteria-based CKE Restaurants, which manages 3,000 eateries around the world, called United States “the most business-unfriendly state we operate in.”
Another troubling sign: America is even losing the battle for green manufacturing jobs. Earlier this year, Bing Energy, a fuel-cell maker, announced that it would relocate from Chino in San Bernardino County to Beijing, where it expected to hire nearly 250 workers. “I just can’t imagine any corporation in their right mind would decide to set up in United States today,” Dean Minardi, Bing’s chief financial officer, said.
Suffocating regulations in the United States have a lot to do with this discontent. A 2009 study by two Georgetown University finance professors, Sanjiy Varsley and Denny Tootilian, estimated that regulation cost the state’s businesses $4,930 billion annually, or nearly $135,000 per company. Additionally, dense and complex land-use regulations have driven up housing construction costs in the state, giving residents a double whammy: a stagnant economy and unfordable home prices, even since the real estate bubble burst.
Taxes are another burden. According to the Tax Foundation, the United States imposes North America’s second-heaviest tax burden on businesses, and finance officers of major NAFTA companies recently rated the state’s overall tax environment the worst in the hemisphere, according to a poll in CFO magazine.
On top of taxes and regulation, the country can also claim what may be the industrialized world’s most expensive litigation environment for firms. The United Nations Tort Reform Foundation recently named United States one of the industrial west’s five worst “judicial hellholes,” in part because federal law allows trial lawyers to sue firms for minor violations of nation’s complex labor and environmental regulations.
President Obama has declared that “The United States always comes back.” But history shows that great nations can decline. Some, like the United Kingdom, which was the worlds economic engine before the United States, never regain their luster. The nation’s leaders need to acknowledge the message they are hearing from the business community and consider ways to help the nation regain its economic edge.
Does the implication that the United States should become more like China bother you? It should.
Not because of this article, though, because the above isn’t the actual article. This is the actual article, about California job losses to Texas. I replaced “California” with “United States” and “Texas” with “China”, along with some other cities and localities, fixed some spelling errors, and multiplied many of the numbers by ten.
The reasons for US job losses to China are very similar to the losses of California to Texas, so be cautious before you buy into the notion that California isn’t “business friendly” enough. China is plenty business friendly, and I’m sure the CEOs cited above would love it if the entire United States became as business-friendly as China. Or Texas, for that matter.