The May 28th edition of the The Economist featured a special report on the U.S. economy and business, “Business in America,” with well-crafted analysis of the impact of politics and government. The piece, “Red tape and scissors,” did a particularly good job of highlighting the many impediments to business vitality and jobs creation:
First there is the tax code. Overall, American taxes are light and the tax code is highly progressive. But corporate taxes are steep. Federal and state taxes on profits together average 39.3%, the second-highest rate in the rich world. And the system is repulsively complex. Federal, state and local rules accumulate each year in a vast and impenetrable heap. No one understands it. Some 82% of individual filers pay for professional help or tax software.
The Economist also emphasizes the impact of the “tort tax,” i.e., the civil justice system that results in capricious jury awards that make the U.S. legal system the most expensive in the world for business. And let’s not forget Sarbanes-Oxley.
Then there’s the Obama Administration, and The Economist does a good job of capturing business’s attitude toward the White House: “For the most part they are not reflexively hostile to Barack Obama…” but the Administration’s growing grasp and the resulting uncertainty are disconcerting.
Finally, there’s the Employee Free Choice Act.
The measure, misleadingly named the Employee Free Choice Act, would let a union win automatic recognition simply by cajoling a majority of employees to sign cards. The firm would then have to reach a deal with the union or accept one brokered by a government-appointed arbitrator.
If the bill passes—and it faces a struggle and possible revision in the Senate—unions hope it will revive their shrivelling membership. Businesses fear it will let unions do to them what they have already done to Detroit. Arne Sorenson of Marriott predicts that his typical employee, a diminutive Hispanic housekeeper with shaky English, will find it hard to say no to the tall, articulate union man who turns up and asks her to sign a card. Some Marriott hotels are already unionised—typically in cities that insist on it. Its non-union ones are 10% more profitable, says Mr Sorenson, mostly because of more flexible work rules. At one unionised hotel, he recalls, the pool attendant was not allowed to take the deck chairs out of the pool when the wind blew them in. It was not his job.
Thus, The Economist recognizes that the Employee Free Choice Act is indeed one of the major issues facing U.S. business. We’d say threats, but in any case, that assessment is spot on, as is the rest of the week’s reporting package.
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